Some reflections on turning 40

Last week, I celebrated my 40th birthday with my family (which is pretty amusing since my birthday was last November).

When I think back about the last few decades, a few stories from my professional life come to mind that I thought I would share here.

1) Serendipity and luck trump everything.

Certainly hard work and skills are important, but luck and being at the right place at the right time is so critical.

I wasn’t born into a family of entrepreneurs or even tech. I got into startups, because of a couple of key events that happened to me. One event that got me into startups happened in 1996 growing up in the SF Bay Area during my freshman year of high school. My best friend Jennifer told me one day that her cousin Tony was building an internet startup. And she asked me if I wanted to help him and their startup over winter break. I didn’t know what a startup was, but I also had nothing major going on during winter break. So, we took the Caltrain up to San Francisco to “help” Tony. When we showed up, the place was honestly a bit of a mess and chaotic. But it was exciting! Tony and his friends were working together on all kinds of projects. They didn’t have to dress up in “grownup-work-clothing”. And they could eat all the pizza they wanted. It was the dream.

I wasn’t any help to their company. But I knew from that day on, *that* was what I wanted to do when I grew up. I didn’t even know how they made money or that there was even money to be made. But, even from that early day, it was inspiring to see a group of friends come together to build something bigger than themselves. A couple years later that company LinkExchange was acquired by Microsoft for a reported ~$200m. Tony — who was Tony Hsieh — would go on to become an active angel investor in many startups and become CEO of Zappos. And while I didn’t know it that day, he would also later have a bigger impact on my life as well as my startup LaunchBit and Hustle Fund, as I’ve written about before here. I’m incredibly grateful for the path he set me on, and that was entirely serendipitous.

2) Failure leads to success.

One of the things I’ve noticed is that most successful people have had *a lot* of failures as well. But people only talk about the successes.

For me, failure and success are oddly connected. When I was nearing the end of college, I thought I wanted to go to business school, and I applied to a few business schools in the fall of my senior year. Throughout this process, I had wanted to visit a couple of business schools I was applying to in Boston, but my money was tight, and I didn’t want to pay for a plane ticket to Boston from California.

Coincidentally, around that time, I saw an ad for a contest, in which the prize was a free trip to Boston from anywhere in the US. I immediately entered the contest on a whim, and amazingly, I won!

The contest was sponsored by the DISCO career forum, which was/is one of the largest job fairs for jobs in Japan. And oddly enough, it was and still is held in Boston every year. In fact, at the job fair, I met tons of people from Japan who flew to Boston just to apply for jobs back home!

I didn’t care about the job fair. I was merely excited to fly to Boston, see my friends, and visit a couple of schools for a couple of days. But, in order to get my reimbursement for my plane ticket, I had to attend the DISCO career forum for 2 days. While there, I met a ton of companies and even interviewed on the spot for various jobs. Although I wasn’t actually looking for a job, by the end of the weekend, I got a job offer!

I soon learned that I didn’t get accepted into any business school, but at this point, I was very excited about the job offer I received and accepted it.

About a year later, I packed my bags and moved to Tokyo. But, a month into it, I was told that I couldn’t stay in that role, because my Japanese was not good enough. Wow, was I getting fired? After just a month into my first job?? That night, I sobbed my eyes out.

To their credit, my former employer was extremely helpful in this situation. They gave me a few choices and told me that I could still stay at the company for about a year if I moved into marketing (so that I wouldn’t have to talk with customers with my poor Japanese 🙂 ). But they didn’t have budget to pay for me much beyond that, so I had to find something else to do.

I decided to re-apply to business school. But this time, I only had time to apply to one school – so I chose to re-apply to MIT which was the school I liked best after visiting. And, fortunately, the entire application was the same except for one question: “What have you done in the last year?” a topic on which I had a lot to say from my experiences in working in Japan. A mere few weeks later, I received an email saying there was a decision ready. I had not even received an opportunity interview this time, so I was pretty certain it was a fast rejection, but it turns out, I had gotten in!

Looking back, failure and success were so well coupled together. I failed to get into business school so I got a job. I failed to keep the job, so I went to business school.

3) Frugality and portfolio construction are keys to wealth. Wealth is freedom. 

I am a huge fan of the FIRE (Financial Independence, Retire Early) movement and was an avid reader of Mr. Money Mustache. I think when most people aspire to become wealthy, they think they need to be super successful with building a hit company or something like that so that they can buy all the stuff they want.

In truth, when you get there, many people realize that the stuff isn’t interesting. Wealth is about the ability to be free. Free from ever having to work at a job or on a project you don’t like again. Free from feeling pressure to work with bad people. Free to work on the things you do actually like or find worthwhile. Free to spend your time however you like. 

And it actually doesn’t take a life-changing event to become wealthy. Even if you never have a hit company, you can still become wealthy — with frugality and strategic investing. 

In my 20s, I quit my job to start a company. My husband was a post-doc (read: paid pretty much nothing). I took odd and end gigs to make ends meet and scrimped like crazy. This was pre-gig-economy, so random jobs I did included being followed around by a researcher from Xerox Parc, categorizing whiskeys, and critiquing MBA resumes for international students. I remember on the rare occasion we would go out to eat, I would get very nervous if we exceeded spending $25 in total. 

In looking back on that, most people – especially in my peer group of tech friends – think about $25 as “Oh, it’s just $25.” I have many friends who believe that saving $6 here and there on SBUX lattes and avocado toast is meaningless. It’s just $6. And as a millennial, I do believe there are systemic issues with our financial system and incentives, I also do believe that investing the equivalent of one latte a day can make you a millionaire.

The right way to think about spending decisions is in its compounded value. You take $6 a day and throw on a 7% annual interest rate in the public stock market or 12% annual rate or higher(!) in the private markets. That $6 daily latte is actually worth over $350k+ in your 40s if you take the money and invest it. Just from *investing* your latte money daily, your average person who invests in standard index funds available to everyone and lives an average lifespan *will become a millionaire*.

That’s pretty remarkable. 

But I think the topic of portfolio construction for investments is incredibly confusing. And frankly speaking, I think most people find the topic boring and honestly scary – you could lose all your money! Loss aversion is probably one of the biggest roadblocks to more people investing – even in index funds.

I, too, have thought for many years that investing was scary. But I read somewhere when I was very young that putting your money in a savings account actually *loses* you money due to inflation (which today stands at 8%+ annually!). And, I have been investing in index funds ever since my first job in high school. In other words, I was motivated to invest by the idea that I was losing money by merely saving it!

Now at 40, and having seen even some of the meager earnings I had in my teens compound, I still believe index funds are a fantastic place to put your money. You can passively compound and grow it reliably, because it’s diversified and rides on the economic growth of the world.

But, the one thing I do regret about my investment choices was not investing earlier in *private markets*. I didn’t know anything about investing in startups until the last few years. In fact, for many years, the thought had never even crossed my mind to become an angel investor. I always thought you needed to be super loaded to do that.

And then when I was in my 30s, one of my entrepreneur-friends, who at the time had not yet had an exit, told me that he had been angel-investing into friends’ startups with $1k each. This surprised me. How could you invest $1k checks into startups? Why would anyone take that kind of money? I also didn’t understand how he was accredited to be able to do this (I have since learned that his own startup was valued above a certain amount, and his net worth on paper made him accredited). The world of startup investing was utterly unfamiliar to me even though I was a founder myself at the time!

And, it was very inaccessible — there was no information online anywhere on how to get into any of this. Friends learned from friends how to angel invest. I had wished there were an accessible way to get into small check startup investing once I had some level of a portfolio with my index fund investing. I wanted to be able to add some additional risk/higher reward to my portfolio in an educated and balanced way.

And, this is why my colleague Brian Nichols started a program called Angel Squad at Hustle Fund – to empower small angel investors to learn, invest alongside us for even as small as $1k checks, and network with each other as they start and further their angel investing endeavors. We now have almost 1000 angel investors in this community and the next cohort beings soon if you want to apply to join Angel Squad.

4) Family balance is challenging. Take all the help you can get. 

Being an entrepreneur is about doing a lot of sprints while running a marathon. I think the only way I’ve made things work is to rely a lot on help and to not attempt or even care about perfection.

How my child perceives me. I would love a gravity-defying computer like that.

Throughout the pandemic, things were tough for just about everyone. I remember this one day that summed up my life: my husband was working at his lab. I had tons of back-to-back meetings as sh*t hit the fan with everything. My older child who didn’t know how to use a computer needed help logging on to an online class. And my younger one wasn’t quite potty trained and had just pooped on the floor and then stepped in it and ran around from room to room. All at the same time. 

After that happened, my parents who live a few miles away from me, so graciously offered to take the kids to live with them for the *next several months*. That was huge. And I’m incredibly grateful. I don’t know how we would’ve pulled through without that help.

I recently listened to Indra Nooyi’s memoir My Life in Full: Work, Family, and Our Future about how her career progressed through Pepsi, and the multi-generational help she received from family resonated with me. As much as we’ve progressed and moved forward with society, there’s still a lot of burdens or asks that fall on the mom. Don’t get me wrong, I think my husband is a phenomenal dad, and many of my friends are amazing dads as well. Many dads do so much for their kids and childcare these days.

But society still puts a lot of little burdens on moms in unsuspecting ways. And, it’s the little things that add up. For example, during the pandemic, some of the moms in my kid’s class sent out emails asking folks to submit a page for the school yearbook. Thinking those were mass emails, I just completely ignored them. Eventually, those emails turned into a personal one sent directly to me.

You can bet my husband never received those emails even though he is on the parent list and certainly didn’t receive the direct personal one. I politely responded that unfortunately I didn’t have the bandwidth to do a class yearbook page for my first grader. (I mean…who does a yearbook page for first grade??) You might think, “well, it’s just someone asking you to do a yearbook page – sheesh. No biggie.” But it’s all the hundreds of little requests that happen everyday that compound and particularly on moms.

My child created this sign for my office

As it turned out, the mother who emailed me ended up taking on the task to do the yearbook page *herself* for my first grader. I never saw the yearbook page, because I didn’t order the school yearbook (see #3 on frugality). (Also, did anything interesting even happen during the remote school year?)  

Family balance continues to be a struggle, and honestly, I think this is an area that is still being pioneered. After years of getting unhelpful advice from people who have never been in a similar situation before, I think I’ve learned to just embrace the situation. You do the best you can. And that’s ok. Say yes to help. It will work out.

5) Adventures spark inspiration. Routine makes you better. There’s a balance.

Because I grew up the SF Bay Area my whole life, after college graduation, I decided I would go far far away. Even though I knew I wanted to start a company someday, I first wanted to see the world (on someone else’s dime of course — see point #3 on frugality).

So, I left the Bay Area in 2004. I interned at CERN in Switzerland. I worked in Japan in the middle of nowhere (in a town called Suwa in the Nagano prefecture) and also in downtown Tokyo (see point #2 on basically getting fired). I interned in India at Infosys. I briefly worked on a project in New Zealand. I did everything I could to not come back to the Bay Area (until I had my first kid). 

Although none of these trips were for the purpose of entrepreneurship or starting a business, oddly enough, I ended up meeting so many people who would end up becoming successful entrepreneurs. For example, in my intern group in India, one person noticed that a lot of food was served on leaves there. He later started a company in the US to make high end disposable plates made out of leaves, and that company is doing really well. 

I often hear that one of the best ways to figure out how to start a company is by working at other startups or by trying lots of different business ideas. That certainly is one path. But, sometimes, I think the most off-the-beaten path ideas — the ones with most opportunity — are where others are not looking. And that means also exploring or being an adventurer in paths that others are not taking. 

That could mean pursuing an unusual career path. Or living somewhere others are not.

I have been investing in global companies for the past several years now, and while I’m no expert in any and all problems, many of the problems that international entrepreneurs describe to me — at least on some level — are familiar because of my time abroad.

At the same time, running around from place to place and going from one new project to another has its limits. Entrepreneurial skills are honed by doing the same boring thing day in and day out. Just like practicing a sport or a musical instrument, it’s the repetitive mundane that makes you get better. And of course your role changes as your company grows — going from individual contributor to manager to CEO of a large company. But, working on the same problem day in and day out is mundane to many people. And to grow something big is work across a decade or more by doing the same mundane thing better and better everyday.

My thinking about entrepreneurship changed after my company LaunchBit was acquired by BuySellAds in 2014. The CEO and co-founder Todd Garland bootstrapped BuySellAds, and they have quietly become a behemoth. They have grown their ad network tremendously, and they answer to no one. Approaching 15 years, they just continue to hone their supply side and demand side, and that’s how you grow — there are no shortcuts to honing your skills year in and year out. 

Most people, including my younger self, don’t have the discipline to do that. But after many years of doing the same thing over and over, eventually you get really good, and a business does well enough to become really exciting. And BuySellAds has been able to push into new initiatives while keeping their cash cow afloat. They’ve gone into other areas beyond ads, building out a portfolio of other businesses, working with great people. This is the kind of stuff you can do when you own your own destiny and don’t need to answer to investors. And it’s the kind of thing you can do when you’ve got a flywheel going. I’m convinced Todd will be one of the first bootstrapped billionaires — AND most people probably won’t ever know it. 

I think too many entrepreneurs, including my younger myself, are enamored with getting acquired, because they don’t have the patience and the fortitude to do the same thing day in and day out. (And as a VC, of course, I like exits too). But, as trite as this may sound — my lesson from BuySellAds is that the journey is the reward. Getting better at honing your skills everyday is the goal. Being able to do cool stuff with cool people, work on interesting problems, and make money *is* the dream. 

I probably have about 30 — if I’m lucky 40 — good working years left. And, Hustle Fund is my last job. Our mission at Hustle Fund is to democratize wealth via startups by increasing capital, knowledge, and networks in startup ecosystems everywhere. It’s a company I won’t ever sell, because it’s what I want to work on forever. And though not everyday is easy in building Hustle Fund, over the years, I’ve learned to thoroughly enjoy the entrepreneurial journey of embracing all the ups and downs. It’s a joy and a privilege to be able to work on this problem with an amazing team. 

These are just a handful of learnings I’ve had over the last couple of decades. I look forward to learning so much more between now and age 50. 

What if everything goes right with crypto?

I was in middle school when I first started getting excited about the internet. It’s hard to describe just how clunky the internet was back then. My parents had a 9600 baud dial-up modem that would hog our only phone line and would connect to the internet. It took minutes to log on, and it would drop every 3 minutes or so. Not to mention, I drove up their phone bill so high quite frequently, they got super mad.

And there were all these scams you could easily fall into — especially if you were using the internet for transactions. In fact, the word “phishing” developed during this era. And it was common for people to actually physically mail dollar bills to purchase things on eBay. Adults were buying tech stocks. My neighbors in Silicon Valley were talking about taking jobs with stock options. And finally, in late 2000, the stock market came crashing down, and everyone thought the internet was dead. What an insane era!

And yet it was amazing. The first era of the web was about connecting people. And over the next 10-20 years, people made the web better. We moved past the clunkiness. Interfaces and UX got better. It wasn’t as slow. People figured out how to get wiser about security. We now have mobility — you can get on the internet just about anywhere and even with devices that fit in your pocket. You can transact in your local country.

That said, despite the open nature of the internet, you still cannot undertake large projects. Heck, it’s often hard to undertake even “small projects”. If you’ve ever tried fundraising for a startup, you’ll know exactly what I mean. It’s hard to find people who want to work with you (for near free / cheap) and hard to raise money from investors.

For centuries, people funded their companies or projects either by raising money from rich people / institutions or from pre-selling their product to customers. Both paths can get you only so far. For many years, there were not enough rich people or rich institutions to fund businesses. In the 90s, if you struck out with the 20 or so VCs on Sand Hill Road, you were kinda out of luck. Even though the world is immensely better now with many more financing options, it still gets limited especially when you get to the series A level. There are only so many people or funds that can invest $10m+ at a time, and it’s still not legal to crowdfund this level of capital.

Moreover, even if you can address funding and even hire a couple of people, customers and partners are still not incentivized to work with fledgling startups. If you are selling software to another business, they are generally not looking to take risk with a startup that can go out of business tomorrow. There is no motivation or reason to be an early customer.

Despite all these problems, entrepreneurs have persevered. But it’s slow. You bring in one customer at a time. You bring in one investor at a time. You hit milestones – slowly but surely. And there are lots of reasons to move slowly in the beginning — you don’t know yet what your customers want and how the business model will work. So validating slowly makes sense. But even once you hit product-market fit, your financing woes, hiring woes, and customer woes don’t go away for most companies.

So how do you solve for this? You need a way to align everyone to help you earlier and faster.

In many ways, we see this mechanism now with how startups raise money on SAFEs. Part of the reason fundraising rounds move a lot quicker now than when I was raising money as an entrepreneur myself, is that startups now typically raise money using a tranched strategy with SAFEs. If investors come in now, they’ll be rewarded with a special valuation. Otherwise, the valuation goes up for the next tranche which may even be only weeks or months later. 10 years ago, when everyone was doing only priced rounds, it would take months to cobble together enough funds to do a round. And guess what — all the investors would get the same valuation, which was pretty unfair to the investors who committed 6 months ago. So why would anyone move quickly and be a first mover? This SAFE-based tranched strategy is an example of how people can move faster with the right incentives.

So what if you apply this mechanism to literally everyone — not just investors but also people who work with you? I’m talking about contractors, employees, partners and customers.

Enter crypto. If we cut through the noise of all the scams and poor UX and tooling of crypto, which is reminiscent to the Web 1.0 days in the ’90s, crypto enables the world to work on big projects. It gets everyone to be bought-in sooner.

Some people label crypto as “programmable money”. But, I think it’s more aptly at the intersection of programmable money and programmable equity. And that’s good for the world.

With the way things currently work, there isn’t enough of a “glue” to quickly bring together enough resources to help solve big problems like carbon emissions or compiling health datasets for drug discovery. E.g. you might be cobbling together people here and there to drive 5 miles less each week, which really doesn’t make a dent in the world of carbon emissions. You can’t solve big lofty problems in this manner.

In contrast, let’s take the Helium project, as an example, to illustrate the power of crypto. They have a lofty goal — to create a global decentralized wireless network. When I think about my own home wifi provider, they’re horrible. (And I imagine many of you also have horrible wifi providers!) But why are they horrible? It’s because they basically have no competition. It is extremely hard to create a new startup to compete against these incumbents – it takes a TON of capital and a lot of building resources.

top view photo of people near wooden table
Photo by fauxels on Pexels.com

So Helium created an open source design for a hardware node that is produced by many manufacturers. And, as a consumer, you can buy one of these boxes and simply turn it on at your home, and now you are providing wifi to anyone who is near where you live. This network becomes extremely valuable and can have extensive coverage if many people buy these boxes. Why would anyone buy these boxes? Helium will give you helium tokens to set up a node. In the beginning, these tokens are basically worthless, but the hope is that over time, if many customers start paying for this wifi service using their helium tokens, the value of the helium token appreciates against the USD, because there is a fixed supply of helium tokens. So if you believe in the project, you are incentivized to buy a node and set one up as quickly as possible, so that you can start earning tokens earlier than later. As of this writing, there are nearly 130m beacons for their wifi network that have been set up globally!

This mechanism can apply to so many projects. Suppose you want to build the next WeWork. One of the issues with WeWork was their insane financial losses. This honestly shouldn’t be surprising to anyone — it’s incredibly capital intensive to set up a global network of office spaces. But imagine for a moment you did this with a token. What if you gave out $WORK to anyone who wants to covert their extra apartment or office space into a workspace? $WORK wouldn’t be worth anything in the beginning, so you could afford to give hosts $WORK tokens before there were even renters. Eventually, as nomadic workers start renting space using the $WORK token to pay for rent, then the value of $WORK against USD would appreciate, and early supporters would be handsomely rewarded for participating early.

As an entrepreneur, you have no cash outlay to pay people to set up offices, but the $WORK token would incentivize your office hosts to help you earlier and get rewarded later. You would also not be able to give out a couple of shares of your equity to each of your hosts. This would be a logistical nightmare, and their liquidity options — even later — would be limited. $WORK, in this case, would effectively help with this coordination problem to build something big.

You can imagine applying this same train of thought to other projects. Like a new Uber model. Or a new healthy-food franchise. Things where the project is more valuable if it has a larger network-reach and where it’s too capital intensive to address with traditional capital. And with the world becoming more global, there are many projects where having a global network is more valuable than not. These are the best uses for crypto.

This incentive mechanism can also be applied to solving the earth’s problems. Carbon emissions is a problem that everyone needs to participate in. But, you need everyone to be bought in quickly and all at once. Traditional financing is too small to help with this. But, there are now a number of carbon emissions-related crypto projects that are aiming to solve for this.

So if we can get past the scams, the poor UX, the speculation of this first inning of crypto, I think we can solve some very big problems in the next 10-20 years. But to get there, we will need better tooling, infrastructure, and UX. And to do that, we will need more builders and operators. We need more designers, engineers, marketers, salespeople, PMs, and community managers in crypto.

This is why my company launched Hustleverse last week – an initiative to help bring more builders and operators into Web3 in an inclusive way. How does one get a job or a part-time role in a cool Web3 project or company? What tooling does one need to know to work in this space?

But even ahead of that, there are so many weird terms that people use in crypto. What is important and what is not? And what do things mean? We are holding a session tomorrow (it will be recorded) that is free and open to the public that goes through many of the terms and concepts in crypto that we think are important.

Sign up and join us here to get your questions answered or to see the recording.

And, if everything goes right with crypto, I think we’ll be able to solve some of the biggest problems plaguing the planet at a faster pace. Crypto will allow us to incentivize people globally to help on goals more lofty that we have ever imagined.

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The New Era of Media Companies

For many years now, VCs have absolutely “hated” investing in media companies. If you were starting a blog or a newsletter, it would be very challenging to raise money from traditional VCs unless you had proven out a ton of traction (with a fast growth trajectory).

But I think it’s important to understand why, because we’re starting to see an inflection point that will shift the entire industry.

Side note: my view on this topic is fairly strong and comes from working with a lot of newsletter companies over the years in running my startup, which was an email ad network.

What’s wrong with media companies?

VCs typically have not liked these criteria about media companies:

Low exit multiples on ad revenue (often 1-2x on annual revenue)
Hard to acquire users quickly & scalably (CAC is too high at scale)
In a recession, companies reduce ad spend – especially brand advertising

All of these things have been traditionally true — especially if you’re looking to sell your business in 5 years.

But what if you thought more long-term? Not a 5 year horizon but 10-20 years or even 20-30 years out? How would you think about your business differently? What would your strategy be?

Regardless of your business, you might do something like:

Gather an audience – maybe start a newsletter to get loyal fans
Launch a product to that audience
Launch many products to that audience to upsell them etc..

And maybe you sell ads or event tickets in the beginning to provide cash flow and keep your company afloat, but eventually you start selling other products and services to a loyal group of people… Maybe you even start a fund that gets layered on top of that.

people having a concert
Photo by Wendy Wei on Pexels.com

Oddly enough, that playbook looks like starting a media company!! This is what is happening now — you see creators and influencers starting media companies with long-term goals in mind.

People like Mario Gabriele with The Generalist and Packy Mccormick with Not Boring (full disclosure: am a small investor in his fund) are layering on lots of programs and monetization mechanisms that all work in tandem. E.g. content about companies can also be investments and vice versa. When you align community engagement with monetization, this allows for incredible scale. I would bet that Alexis Grant’s new company They Got Acquired could very easily follow the same playbook with a similar audience.

Why now?

Now you may be saying, “Well media companies have always tried to mesh together different monetization methods to try to increase value. Why is now any different?” For example, Thrillist acquired e-commerce company JackThreads to try to increase monetization.

I think now there is just so much more infrastructure available to media companies to enable them to quickly plug into new monetization methods and tools. For example, Angellist’s rolling fund allows creators such as Packy to quickly spin up a fund without doing the time-consuming backops work and fundraising required for a traditional fund. This didn’t exist even 2 years ago.

Or other wildcards — like crypto. Mario created NFTs — without third party tools to do that quickly and without hassle would make this near-impossible for a media company with limited resources to do at scale. You can envision community tokens coming in a big way to incentivize audience members to get more engaged and contribute.

various cryptocurrency on table
Photo by Roger Brown on Pexels.com

In other words, there are now many ways to monetize quickly that have much lower COGs than creating new physical products to sell.

I think there has never been a better time to start building a media company and we will see many billion dollar media companies coming out of this era — perhaps even run by just a handful of people. Long gone are the days of just ads and events — the bigger monetization mechanisms are just getting started.

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The Rise of the Decentralized Startup

I think we’re seeing a very big shift right now in how startups are created and operate. But before we dig into that, I want to spend some time talking about work.

For centuries, work has been incredibly inefficient. In the “barter era”, one person would do work in exchange for someone else’s work. E.g. I’ll make you a silver fork in exchange for salt and spices. There were many things challenging about this type of economy. 1) There was no common currency to transact and understand value, and 2) on a macro level, it was hard to know whether your good or service was really needed and whether it was going up or down in value. E.g. Is there a surplus of spices? Should I be spending time in spices or something else this year?

Money came along and solved the first part of that problem. Tribes and groups of people adopted currencies that are the predecessors to modern day money. You could carry around some form of fiat and use it to buy things. You could sell your goods and services for fiat. This helped standardize commerce.

Eventually, the Medici family in Europe established ledger-based banking so that you could take your goods and services to one location in Europe and it would be good for a credit that could be used at another Medici bank. Coincidentally, around the same era, the Yap money system in Polynesia had similarities where money was actually represented by large stones, and there was a record of who paid with which stones. The large stones were too heavy to be moved, so the pointers of who owned those stones did were written down on a similar ledger-based system.

Money solved fungibility issues. But it never really solved the latter problem of understanding where your good or service fit into the broader landscape of what is actually needed in society and how it was valued.

And for centuries after establishing complex monetary and lending systems, this problem still came to a head often. In 2000, during the dot com bust, it became clear that tons of people built out companies and products that no one wanted. Overnight, many of these companies went to zero and many people in the internet industry were laid off. Time and again, we’ve seen companies hire up the wazoo only to do massive layoffs of employees who gave their whole lives to a given company.

In fact, as an individual worker, you often don’t know if a layoff is coming. You often don’t know if things are going well / not going well within your own company. Management typically doesn’t tell you. As an individual, you also don’t know if you should be taking this job or this other job, because beyond the salary, you don’t really know what it’s like to work at a given company until you start working there. And traditionally, you’ve only really been able to work at one company at a given time.

This brings us to today. As of writing this in 2021, mobilizing money isn’t the number 1 issue for companies. It’s attracting and retaining talent. Now you may be thinking, “Well that’s nice and all but I’m still having trouble raising money for my startup.” I have 300+ portfolio companies at Hustle Fund – all with varying degrees of fundraising troubles. But all of them — even once they have the money — are in a war for talent. Even the most well-funded companies who are no longer startups are having trouble finding and retaining talent.

Folks, the current way that startups are being created is starting to break. Under the current way of building startups, you have to figure out what potential users want and will pay for by doing customer development, pitch investors who are not your customers / don’t get it / are traditionally slow, fight in this war for talent against Google, and lastly, as a founder, get burnt out and combat personal mental health issues in the process. Does that sound like the best way to deploy resources for our society?

But what if we flipped startup-creation on its head? What if you start with a mission and values — not founders? For example, at my company Hustle Fund, our mission is to democratize wealth through startups. And to that end, we are furthering capital, networks, and knowledge in startup ecosystems. Even though I’m a founder of the company, it doesn’t matter if I personally work at Hustle Fund or not. It’s the mission that’s important and the people who want to work on that mission. And if no one cares about the mission, then the organization shouldn’t exist regardless of what I, as a founder, think about it.

And if you start companies with missions instead of with founders, then you start to attract people who have lived and breathed that mission before. Those people really get it. And those people are also would-be customers or users. And maybe these same people are not only working on this problem together in a cooperative way but are also investors in the problem — both through work and capital.

When you start with organizations that are centered on missions, then you start to chip away at existing startup problems. Such as understanding whether you’re building something people want – your colleagues are also your customers. They are also your investors and are more value-add through their feedback and network. You also solve for mental health issues. Founders often feel like they *have* to stay at their own company because there is often no one else to lead in the early days.

For all of these reasons, this is why I think we’ll see the rise in the decentralized startup. In fact, we already see many Decentralized Autonomous Organizations (DAOs) in play — this is not a new concept and DAOs are precisely what I described above.

Magdalena Kala tweeted a few articles on DAOs that I think are really good and are all worth reading if you’re not that familiar with DAOs:

DAOs, of course, are not immune to the fight-for-talent problem. But, unlike at a traditional company, often you’ll see various people working on goals or milestones for DAOs in a part-time way. Traditional companies often require their workers to sell their soul to their organizations. But, DAOs mostly just care about getting stuff done. And the transparency around what is happening in the organization gives everyone a clear picture of where a project stands, what is happening, and who is doing what (and getting paid what). In a traditional company, most of this is opaque. You can see if a DAO is going well, but in contrast, you really don’t have a clue with a traditional company.

A DAO that I think is really interesting is the Friends with Benefits DAO (h/t to my business partner Shiyan Koh for showing me this). It’s basically a membership club of inclusive thinkers and creators. They list their values upfront, and people who resonate with the mission can pay (invest) to join the group. This in turn becomes a community that funds the mission, and over time, as they build and monetize, the community who is also their customer base, will benefit. This is the ultimate — having your investors and customers wrapped up as one.

I think we will see many more DAOs formed in the coming years, and reiterating what I mentioned in 2018, I do think that some form of crypto will disrupt traditional VCs over time. But I also think decentralized startups will start to appear even without “typical crypto components”. There will be startups formed around missions that don’t start with founders nor involve crypto but have radical transparency. There may also be decentralized startups formed without Discord channels (personally, I’m unclear how anyone, myself included, can do deep work anymore with so many Discord channels) and just rely on wikis / Notion pages / Mirror / etc to document what work is being done without minute-by-minute chatter. I think we will see startups formed with people who work at multiple places simultaneously or are all contractors – such as how Gumroad is set up. And in that scenario, the need to raise so much money for the company actually becomes *less important*, because you don’t always need funds to cover someone full time and compete with much crazier full-time offers from FAANG companies. This mitigates the fight for talent issue.

At my own company Hustle Fund, some of these concepts are things we’ve thought about and have experimented with a bit. We’re not quite a DAO, but we are a bit DAO-like. We have a number of talented people who are part-time because they believe in our mission, and we are excited to be able to work with them in any capacity. Our GMs also have a ton of autonomy with their business lines that align with our mission — I often don’t have the foggiest clue what is happening with the day-to-day on their businesses, and that’s ok. In fact, that’s great. So at Hustle Fund, which is completely distributed, we have leaders of different facets of our mission who reap strong upside when their particular projects go well. In many ways, a structure like this requires working solely with entrepreneurial people – people who enjoy running with things without centralized instruction or authority.

Ultimately, the most ideal working environment for an individual is to be able to work on a mission (or many missions) you love with people you enjoy. You’re happy with your compensation and feel like you have strong autonomy to be able to have an impact. You get crystal clear transparency get be able to make good decisions for both the organization you work for as well as for yourself personally. This is what I think most people want for themselves and their families, and why I think we’ll see the rise in decentralized startups in the years to come.

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A reflection on our mission

It’s hard to believe that we’ve been in the pandemic for almost 1.5 years now! But the silver lining of a pandemic is it really forces you to question what is important. One of the thoughts I keep coming back to is around mission and purpose, which I wrote about last year at the start of the pandemic. AKA, what are you doing with your life and why?

When we started Hustle Fund a few years ago, setting out to make a boatload of money was not the (sole) purpose of the organization. Prior to Hustle Fund, I could have worked at a number of top VC funds that could have set me on a clear lucrative path. But I wanted to do something bigger and more impactful — something that would also help a lot of entrepreneurs. In mapping out Hustle Fund almost four years ago, we decided that core tenets to our mission at Hustle Fund was to further capital, knowledge, and networks in startup ecosystems.

Recently, we had a chance to reflect on how we’re doing against these tenets at our Hustle Fund team offsite.

Mapping out the future of Hustle Fund

At Hustle Fund, we believe that great founders look like anyone and come from anywhere. In the last four years of Hustle Fund, we’ve built scalable processes to fund nearly 300 pre-seed companies globally! Even pre-pandemic, we made almost all of our funding decisions online through video conference calls. We’ve invested in approximately 50 companies off of cold-application forms.

We’ve also spun up Angel Squad led by Brian Nichols, which in its first year alone has deployed ~$10m into startups of all sizes! Both our pre-seed VC fund and Angel Squad are on their respective ways and continue to build momentum everyday.

And beyond Hustle Fund, a lot of our peer VC funds now do the same. While it’s never easy to raise money, entrepreneurs who are not well-connected can now raise at least some capital remotely from connections built entirely online. And it doesn’t have to be from VCs. In the last few years, we’ve seen the rise of crowdfunding, roll-up vehicles, angel-operator syndicates, debt and revenue-based financing options. Startup capital is what made Silicon Valley special for so many decades, but these days, the capital markets for startups has largely opened up and continues to move towards a free-market dynamic — which makes capital more accessible.

But, Silicon Valley is still a special place for knowledge and networks. Successful entrepreneurs here have long shared advice to the next generation of new entrepreneurs behind closed doors. Tactical advice on things like customer acquisition, hiring, fundraising, testing quickly, building teams and keeping morale up have been passed on from one founder to the next.

At our offsite, we realized there’s a lot of work to be done in opening up knowledge and networks. In this next chapter of Hustle Fund, just as we’ve pushed hard (in a small way) to open startup capital markets, we are going to start pushing to make startup knowledge and networks accessible globally. Unlocking the secrets of startup tactics and inspiring stories is the beginning of what you’ll see from us.

To kick this off and give you a taste, my business partner Eric Bahn will be doing a fireside chat with Vlad Magdalin, CEO/founder of Webflow. In this fireside chat, the two will share stories of what happened in the very beginning, before Webflow became a unicorn.

If you read the funding stories of Webflow, on the surface, it looks like it was a walk in the park. But the Webflow story could not have been further from that.

Vlad exemplifies what the American Dream looks like at its best. As a refugee to the United States from the USSR, he cleaned offices at night with his family to make ends meet while growing up. He also started Webflow in 2005 but had to stop many times along the way to take jobs to earn a living. Eric and Vlad will talk about those tough early days of the company in a way that most startup stories are not portrayed.

This event is free to all and will be next Tuesday evening PT – I highly encourage you to attend and stay tuned for much more!

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Introducing Angel Squad: enabling the next 10k angel investors

Most people know that Hustle Fund is a VC firm. But, it’s really a lot bigger than that. Hustle Fund is about democratizing wealth through startup creation. 

In 2017, when we launched our VC fund, we designed an inclusive model to support founders of all types. We believe that great founders come from anywhere and can look like anyone. 

Today, we are announcing a Hustle Fund initiative called Angel Squad led by Brian Nichols (prev led On Deck Angels and the Lyft angel syndicate) to build an inclusive model to support angel investors of all types. Just like we believe great founders come from anywhere and can look like anyone, we believe the same applies to angel investors.

Traditionally, angel investing has been an opaque asset class that has required investors to have a lot of personal money and have special connections. But, with Angel Squad — neither is required.

Angel Squad is a modern day angel group: it’s angel investing education & networking and socialization & dealflow all wrapped together. We think angel investing is naturally social but also needs to have strong infrastructure to make people successful with BOTH knowledge AND  dealflow. 

Over the years, so many friends have asked me how they, too, can get into angel investing profitably? And is it possible to do so without a lot of money? 

And the answer is yes and yes. But it’s really hard to figure out on your own. It took me several years to really learn the ropes, and after looking at more than 30k companies and funding 450+ startups, here are some interesting things that have surprised me along the way.

  1. Most angels in Silicon Valley are not investing with very much money. 

Previously, when I thought about angel investing, I thought you needed to be super rich – plunking down $25k checks at a minimum into each company. The truth is there are so many Silicon Valley angels — micro-angels as I like to call them — who are investing $1k here and there. 

If you do a handful of these investments a year, angel investing actually becomes very accessible to many more people. If you can afford to invest $5k+ across a handful of startups each year, you can start to build a nice portfolio over the next few years.

In addition, a lot of people cite the net assets or salary required to become an accredited investor as a blocking point for getting into angel investing. But one recent change in the law is that those who can pass the exam for the Series 65 license are also classified as accredited investors, which opens up angel investing to all who are motivated. In fact, to make Angel Squad very accessible, we are also deducting the cost of the Series 65 test for those who are accepted into Angel Squad. 

With Angel Squad, our minimum check size per deal is just $1k to enable investors to have enough capital to continue investing in many companies as they grow their portfolios and learn. 

  1. High risk, high reward investments are how so many people in Silicon Valley make a LOT of money

When you think about financial strategy, the first rung of the ladder is just being able to survive – save enough money to cover, food, housing, and clothes. The second rung of the ladder is to start saving for a rainy day and potentially even start to invest in low-risk assets that will appreciate slowly over time. The third rung of the ladder – once you can afford to take serious risk – is to invest some money into high risk-high returning assets — such as startups. 

A couple years ago, I read that a number of people invested $5000 into Uber’s seed round. If they held their shares until the IPO, they would have made ~$25m from that 1 investment. Wow.

What a lot of people miss about startup investing is that the returns are not linear — the returns are outliers. So if you can take a lot of small at-bats that will completely miss but hit one out of the park, you will more than cover your losses and potentially much much more.

  1. To get into angel investing successfully, it helps to have a guide and lots of practice

I consider angel investing to be akin to a sport. You have to do a lot of it in order to practice. And you have to practice methodically — what did you miss in an investment that didn’t go well? What questions would you ask differently to a startup founder? What risks are ok for you to take and ok to dismiss? The best startup investors are constantly re-evaluating their approach and thesis — I certainly have evolved my own thinking over the past years. 

It’s helpful to practice alongside someone else who has been investing for years to learn from their learnings. In addition, if you can tag along with someone who has great deal flow, that will increase your chances of winning even as you are evolving your own thesis. Just being in the flow and picking a lot of companies is enough to win even if your thesis isn’t great yet. 

With the rise in microfunds and angel-operators, there are a LOT of startup investors with great deal flow who are incredibly collaborative. With Angel Squad we enable new angels to invest alongside our own fund (Hustle Fund), and soon we’ll make it easy for Squad members to invest alongside other great investors as well. 

We have run two Angel Squad cohorts so far this year and here are some quick stats:

  • 163 members to date
    • 46% female
    • 67% of members live outside of Silicon Valley
    • Most of our members are new to angel investing
    • 100% are kind — we have a NO ASSHOLE rule at Angel Squad

And Brian and team are just getting started…If we can help thousands or tens of thousands of new angels get underway, I think the impact will be huge. 

The tech industry often talks about how to increase funding for overlooked founders (geography, race, gender, age, industry, etc). One way to solve this is to have a LOT more investors. Our hope for Angel Squad is that we can bring in a plethora of new investors who have diverse voices, backgrounds, and geographies into Angel Squad to get more startups funded.

I am so excited about the product that Brian Nichols has built in just the first few months, and there is so much more he has in store. 

With Angel Squad, we are all excited to make angel investing more accessible, inclusive, and fun – we welcome all with an interest to apply. 

Learn more here and apply here.

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