ACQ2 by Acquired

We're joined by Posterous co-founder, former YC partner and current Managing Partner of Initialized Capital Garry Tan to go deep on how YC changed the game for company creation and seed investing, how they thought about building the "cult" of startups, and what lies ahead as the early-stage world continues to globalize and evolve more quickly than ever.

Sponsors:

• Sierra: https://bit.ly/acquiredsierra

Topics Covered (among others):

1. How the recruiting challenge for early-stage startups led to outside-the-box thinking 
   • Peter Thiel’s “crazy” (but not actually crazy) offer to Garry to join Palantir
   • Leveraging “cult” startup culture into a magnet for specific types of people
2. Y Combinator’s path from fringe to mainstream 
   • Insight that those same cult recruiting techniques could be applied at a meta-level to recruiting company founders themselves
   • Initial strong reactions to YC, and knowing they were on to something
   • The beginning of “influencer investing” with Paul Graham’s essays + Hacker News
3. The blooming of Seed as an asset class alongside and around YC 
   • The landmark deal with SV Angel and DST / Yuri Milner to “auto-fund” every YC company starting in 2011
   • YC scaling from ~10-12 companies per batch to 70-80 and now 200+ per batch
   • Starting Initialized Capital within YC, and then spinning it out into one of the largest independent seed funds
4. Influencer investing and startup evangelism going mainstream 
   • The impact of The Social Network movie
   • Exporting the ~”YC message” to the entire world: you can start a startup
   • The power of direct, bi-directional access to people via the internet

Links:

• Paul Graham’s Essays: http://www.paulgraham.com/articles.html
• Hackers and Painters:  https://www.amazon.com/Hackers-Painters-Big-Ideas-Computer/dp/1449389554/
• Hacker News: https://news.ycombinator.com
• Garry's (great) YouTube Channel: https://www.youtube.com/channel/UCIBgYfDjtWlbJhg--Z4sOgQ

We continue our VC Fundamentals series with Company Building — everything that happens after you write the check. We catalog the different categories, strategies and tactics for VCs to "add value" to their portfolio companies, from direct involvement to portfolio services to simply doing nothing (often better than many alternatives!). For both of us, this is the best and most fun part of being an investor, and we hope that shines through in this episode. Here's to building great companies!

Sponsors:

• Sierra: https://bit.ly/acquiredsierra

Topics Covered:

• The goals of Company Building: 
  1. (Obviously) add value to your investments
  2. (Less obviously) increase your odds of finding/winning your next investments
• The four categories of company building: 
  1. "Direct" work by the GPs
  2. "Active" platform and portfolio services teams
  3. "Passive" brand halo effect
  4. Simply "doing nothing"
• Activities you actually do: 
  • Board work (both governance and strategic/operational planning)
  • Planning and orchestrating future financings and exits
  • Recruiting, closing deals and "selling"
  • Cofounder/executive disputes and departures
  • Pivots and company shutdowns
• And perhaps the most important company-building advice of all: Don't Freak Out.

Links:

• Our interview on the main show with Doug Leone:  https://www.acquired.fm/episodes/sequoia-capital-part-ii-with-doug-leone
• Fred Wilson's great post on pivots vs. shutdowns: https://avc.com/2018/11/pivot-or-fail/

Hello ACQ2! Posting the audio recording of our Book Club Zoom session with Will Thorndike from The Outsiders in digestible podcast form. Big thank you to Will and to all of you who made this a really special experience. For those of you who weren't able to attend, we hope you get as much out of the recording as we did live!

Sponsors:

• Sierra: https://bit.ly/acquiredsierra

Book notes public post:  https://medium.com/@AcquiredFM/book-club-notes-the-outsiders-569175957ab4

GDoc version of book notes:  https://docs.google.com/document/d/1gipiBGB_xnuQkPFVJVZ-XxSVjy6DSxwEloEN3qnloyA/edit

Outsiders Book Notes

• This fantastic book consists of eight case studies of “Outsider” CEOs who, borrowing the words of Warren Buffett’s quote on the cover, “excelled at capital allocation” and created enormous shareholder returns during their tenures.
• Btw, how crazy is it that Warren Buffett gave the cover quote? That rivals Reed Hastings writing the forward for 7 Powers. 😀
• All of the CEOs profiled (with the exception of Buffett himself) operated in the pre-internet and, in most cases, pre-private equity eras. 

Thanks as always for being on this journey with us,

- Ben & David

We dive into everything you need to know about SPACs — what they are, why they're a compelling alternative to IPO/DPOs, and how they might play an even more important role in startup financing going forward — with two of the very best people to teach us: Kevin Hartz and Troy "SPAC Professor" Steckenrider of the newly-minted $200m SPAC, AONE.

Sponsors:

• Sierra: https://bit.ly/acquiredsierra

TLDR:

• SPACs are an alternative path for companies to go public, however until recently they were mostly obscure and little-known/used.
• Meanwhile, the traditional IPO process has become onerous and broken: it takes 9+ months of company time, yet investors get only 15 minutes of management access and must make a decision in

Links:

• A* and ONE: https://www.a-star.co
• John Luttig's great Medium piece on SPACs: https://luttig.substack.com/p/spac-attack-everything-a-founder
• Bill Gurley on SPACs as an attractive alternative to IPOs/DPOs (posted after recording):  https://abovethecrowd.com/2020/08/23/going-public-circa-2020-door-3-the-spac/

Hello ACQ2! We heard from several of you that Book Club recordings were hard to digest as Zoom recordings. So we stripped out the audio and are posting it here in podcast form.
 

Thanks to all of you who made this a really special experience with Hamilton, and for those of you who weren't able to attend we hope you're able to get as much out of the recording as we did live!

Sponsors:

• Sierra: https://bit.ly/acquiredsierra

-Ben & David

Despite many advances in industry transparency over the past ~10 years, much about the actual "jobs of a VC" remains locked inside firm/institutional knowledge and venture's apprenticeship model. With this series, we aim to change that. Our goal is to draw back the curtain on what the actual tasks are that VCs do day-to-day, how you can learn them, and ultimately what's required to succeed. We hope this series will be helpful both to anyone looking to break into the industry and to those who are already practicing and also for entrepreneurs and consumers of venture capital to understand more about the motivations and activities of those across the table!

We continue in this episode with (initial) investment decision-making: how it's done in practice across the industry, who within firms makes the decisions, and -- most importantly -- the incentives and behavioral finance elements that shape people's actions. Our goal on this one was to explain and hopefully bring to light a process that impacts nearly everyone in our industry, but few people are ever exposed to (and even then only rarely).

Sponsors:

• Sierra: https://bit.ly/acquiredsierra

We’re joined by Tock CEO Nick Kokonas to discuss how they’re “arming the restaurateur rebels” versus DoorDash / Uber Eats, in much the same way Shopify has done so for e-commerce merchants versus Amazon. This episode is full of lessons on how to execute a counter-positioning playbook to disrupt entrenched incumbents, including the influence of Nick’s friend / Tock investor and Nobel prize-winning economist Richard Thaler. Whether you’re an entrepreneur who’s also building a “picks & shovels” type business or an investor interested in the future of the food industry or disruption in general, this is not one to miss.

See Ben's original Tweet that spurred the episode here: https://twitter.com/gilbert/status/1277740701246083072

There are lots of great replies to help understand the restaurant tech ecosystem, and of course, Nick chimed in with a tweet that led to him coming on the show. (Thanks to Matt Shobe for connecting us!) You can read distilled observations from all the replies here.

“Even if you’re long on Tesla, don’t buy Tesla Options.” – Nick Kokonas (Instagram: @nkokonas, Twitter: @NickKokonas)

Sponsors:

• Sierra: https://bit.ly/acquiredsierra

Be sure to follow the Acquired Podcast:

Acquired.fm

@AcquiredFM

Show Links:

Tuesday is Not Saturday

Tim Ferriss Interview w/ Nick: 

VCs Congratulating Themselves

Benchmark General Partner Sarah Tavel joins us for a master class on consumer investing. We start with why invest in consumer at all (given the inherent risks of its "hit-driven nature"), then deep dive on marketplace investing and wrap up with social, gaming and consumer transactional businesses. Big thank you to Sarah for sharing her immense knowledge on this topic, and to her partner (and fellow Acquired "master class lecturer" on enterprise investing) Chetan Puttagunta for introducing us and for making it happen!

Sponsors:

• Sierra: https://bit.ly/acquiredsierra

Links to Sarah's consumer investing blog posts:

• "Hierarchy of Marketplaces" posts:  https://medium.com/@sarahtavel/the-hierarchy-of-marketplaces-introduction-and-level-1-983995aa218e
• "Hierarchy of Engagement" post:  https://medium.com/@sarahtavel/the-hierarchy-of-engagement-expanded-648329d60804
• Rocks, Sand, and Water Framework for Consumer Attention:  https://medium.com/@sarahtavel/the-opportunity-and-risks-for-consumer-startups-in-a-social-distancing-world-a-framework-for-15f65e2fbdff

Despite many advances in industry transparency over the past ~10 years, much about the actual "jobs of a VC" remains locked inside firm/institutional knowledge and venture's apprenticeship model. With this new series, we aim to change that. Our goal is to draw back the curtain on what the actual tasks are that VCs do day-to-day, how you can learn them, and ultimately what's required to succeed. We hope this series will be helpful both to anyone looking to break into the industry and to those who are already practicing and also for entrepreneurs and consumers of venture capital to understand more about the motivations and activities of those across the table!

In this episode we start with sourcing: what it is, why it's important, who does it and when, and -- most importantly -- the brass tacks of where to look and how to do it.

Sponsors:

• Sierra: https://bit.ly/acquiredsierra

Show Links:

SpaceX Launch

Emergence Capital Investment Themes

M-Hacks (Univ of Michigan Hackathon)

Startup Weekend

We're joined by Patrick Campbell, founder & CEO of the world's leading SaaS profit-optimization service ProfitWell, to dive deep on all things pricing and monetization. Patrick began bootstrapping ProfitWell 8 years ago, and has since grown the business into a massive success with customers like Notion, Lyft, Masterclass, Atlassian, Help Scout, HubSpot, Cisco, Autodesk and many more. Patrick gives us a masterclass in how to think with a profit-maximization lens about pricing, feature development, growth and retention. And, as a special bonus at the end of the episode, he talks about his own entrepreneurial journey, bootstrapping the company without any venture funding, along with challenges overcome along the way. This episode has something for everyone to learn about company building — and is not one to miss!

Sponsors:

• Sierra: https://bit.ly/acquiredsierra

Links:

• Patrick's 2x2 matrix of product features: https://i.imgur.com/J3AAilr.png
• Max Diff analysis:  https://learn.profitwell.com/article/tFfVQbtRnT-quantified-buyer-personas
• Van Westendorp's Price Sensitivity Meter:  https://www.priceintelligently.com/blog/bid/190607/unlock-price-sensitivity-s-profitable-surprise
• Transitioning Customers to your Current Pricing:  https://www.priceintelligently.com/blog/grandfathering-discounting-prices-terrible-subscription-business