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. 

Want to join my newsletter to receive more posts like this?

Success! You're on the list.

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

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

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.

Success! You're on the list.

5 startup opportunities that will be big in 2019

Happy new year!. Lunar new year!  (a month has gone by while I’ve been sitting on this post)

Here are some other 2019 VC predictions that I’ve enjoyed reading:

Here are some things that I think will be big in 2019:

1) Furthering vocational education

I think traditionally, a lot of investors have been shy to invest in education. In US, let’s be honest — we don’t really care about education! Here’s a good post that my friend Avichal Garg wrote on the education landscape several years ago which I think still applies today in the US.

But the tide is changing a bit. Specifically, what we’re seeing in the US is massive student debt. And new college graduates are not able to get a job or a high paying job. For so many people in the US, if you are not majoring in a STEM subject, it probably does not make sense anymore to go to college. Period. The economics of college are just terrible.

So while we don’t care about education in the US, we do care about business and return on investment! And it does make sense now to provide education of “useful” topics for the workplace — for a job, for livelihood. This is why we see the rise of Lambda School which ties your livelihood outcomes to your cost of education.  And there are many other schools that are cropping up such as Make School and Kenzie Academy (we are investors at Hustle Fund) that are trying to teach useful topics that you can actually use and are willing to pay for, because you can use those skills to make money.

I think we will see a lot of new businesses stemming off of this trend.

We’ll certainly see more schools — both in-person and online covering more topics. Everything from coding to digital marketing to sales to even entrepreneurship. But also vocational categories as well. Can you teach medical skills or plumbing skills using VR headsets remotely?

Additionally, I think there will be businesses stemming off of these. Lots of new ways to loan money to students. New ways to provide socialization and networking for remote students. New real estate opportunities for these students.

2) Improving commutes

Commutes are terrible! (and a big waste of time). This year, we will see a lot of businesses built around making your commute better. Commutes can get better in two ways: A) By actually reducing your door-to-door time and B) by making the experience while commuting better. We’ll see opportunities in both.

A) There will be new ways of commuting in less time.

This is really what the rise of Bird and Lime is all about. When it’s faster and cheaper to go from say SOMA to the Financial District of San Francisco by scooter vs car AND is accessible to everyone, people will do it. In contrast, not everyone can ride a bicycle or a skateboard (e.g. more expensive, need balance or skills – not accessible to all)

But scooters really only work in warm-ish places where there are bike lanes / wide enough roads. E.g. places where it snows / places that don’t have bike lanes won’t be great markets in the long run. So there’s an opportunity to come up with a mode of transportation and model that can withstand weather / lack of bike lanes. My guess is that we will just see further advancement of ridesharing combined with autonomous vehicles. An early version of this might be effectively new autonomous bus lines that just go up and down streets continuously.  This is already starting to happen in some cities.


Photo credit: Giphy

B) As people drive less, they will have more time during their commute

This is a big opportunity for people to do more work, shop, and play more too. For example, we’ll likely continue to see growth in podcasts and tools for podcasts this year. Spotify made clear that they believe in this opportunity by announcing two acquisitions in podcasting this week.

But we might also see the emergence of new commuting activities. Such as new commerce models. In Asia, for example, lots of people shop while waiting for public transportation like this:


Photo credit: Tech In Asia

Perhaps we will see shopping happen in rideshares — this is already happening — some startups are going after this opportunity.

We may even see new fitness activities. Peloton allows you to exercise at home in a social way. Can you do this on the road? Can you take a stretch class in an Uber? Can you run from Zombies or have a coach yelling in your ear while you run to work?

A general trend we’ve been seeing over the years is the ability to entertain yourself in a retail location, and later this entertainment was brought into the home and then later yet, taken anywhere, especially while commuting.  For example:

Before, you shopped at the mall -> Later you shopped on your Desktop browser at home -> Now shop on your mobile device while commuting

Before, you played video games at the mall -> Played video games on your Desktop -> Now play video games on your phone while commuting

Before, you watched shows at the theater -> Watched shows at home -> Now, you watch shows on your phone while commuting

Before, you went to the gym to workout -> Now, you work out at home -> Later, will you work out while commuting?

Maybe.  I can’t predict the future, but I can tell you that people will have more time with their commutes.

3) Furthering entrepreneurship

When I grew up in the Silicon Valley in the 1990s, entrepreneurship was a ridiculous idea. You were a maverick if you were an entrepreneur. This is no longer the case. You’re pretty mainstream if you’re an entrepreneur today. Even outside of Silicon Valley, so many people have side businesses.

I think entrepreneurship as a category has gotten so big that it needs to be segmented. There are fast growth tech startups — these are the ones that VCs like to find and back. There are brick and mortar retail businesses. Like cafes and restaurants. And there’s a new emerging but fast growing category that I call the “micropreneur”. Micropreneurs are < 10 person companies that are supported largely by existing web platforms and online distribution. With just a handful of people, these founders can generate as much as $100k-$1m per employee because they can leverage a lot of existing infrastructure — online payments, website builders or online store platforms, and even easy-to-use “pseudo-developer tools” such as Zapier. Micropreneurs are fueled by the rise in platforms that help people get a business off the ground — such as Shopify or Webflow (we are investors at Hustle Fund) or Stripe or Udemy. Or even YouTube and Instagram! They are often bootstrapped and often start as side businesses that sometimes become full-time businesses. And unlike tech unicorns, there are tons and tons of them.

I think 2019 is the year where we see products, platforms, and content for the micropreneur.

  • Entrepreneurship education platforms (could be schools / bootcamps / etc of sorts) especially in areas of customer acquisition
  • Loans / financial solutions to provide non-VC funding for these businesses
  • Unique platforms and tools that can make it easy to start a “scalable” micro business
  • networking platforms and clubs (like a YPO for this segment)

In general, I believe that if you can help people make more money, that is the easiest sale, and microentrepreneurs are hungry to buy things that will fuel their businesses that are already doing well.

4) Crypto tools and crypto platforms

Although we’re in the bear markets with crypto, I am bullish on the long term use of cryptocurrency. Why? Fiat works fine in many places.  But, I think what we are increasingly seeing is monopolistic behavior on the internet.

I applaud CEO of CloudFlare Matthew Prince for writing this post a couple of years ago about free speech on the internet.  In this post, he talks about how CloudFlare came to the conclusion they should terminate The Daily Stormer as a client.  It was a difficult decision, not because he agreed with the Daily Stormer’s ideology, but rather because he didn’t believe that internet companies should be policing the internet for people who hold opposing ideologies.

But this is happening.  We’ve seen a lot of large internet companies terminate relationships with people they don’t agree with.  As a response to that, I believe we’ll see new sites crop up to try to bring back a “free internet”.  Payments are usually at the front of new waves of trends, so I suspect, we’ll see decentralized payment options pop up as a response to PayPal / Stripe / et al kicking people off their services.  Technology tends to start off with illicit use cases (such as the VHS tape used for pornography) but then ends up becoming mainstream.

In order for people to pay each other with cryptocurrency, we need reliable and easy-to-use infrastructure that mainstream consumers can use. This includes digital wallets for storing cryptocurrency, easy-to-use exchanges for moving money from currencies to fiat, accounting solutions for cryptocurrency, etc.  Entrepreneurs are currently building in all of these areas, and I’m bullish on innovation in all of these.

In this space – I think the winners will have to be incredible product designers who can build great user experiences.
5) Verticalization of B2B SaaS

In North America, B2B horizontal SaaS business ideas are largely saturated. Not 100%, of course, but for the most part, we have marketing software, sales software, HR software, customer service software, and communications software that largely works. Some of these tools may be clunky archaic experiences, but they are here to stay — at least for a while, in my opinion.

So I think the B2B SaaS opportunities that people will focus on are verticalized use cases.  E.g. Marketo for XYZ industry. Software built around particular sales cycles and workflows for industries like real estate, construction, farming, retail, etc. We already see this happening, but I think there will be a lot more of these types of businesses built around verticals in 2019.

I could be completely wrong on any and all of these predictions! And, even if I’m right, outside of these 5 categories, there will be, of course, many more businesses built.

What startup opportunities do you think will be big in 2019?

Featured Photo credit: World Economic Forum

The state of Q2 2018 pre-seed/seed-stage fundraising: Part 1 – Crypto version

This year has been crazy in the fundraising landscape.  The fundraising landscape in 2018 for pre-seed and seed-stage companies has changed a lot, even in just the first few months of this year.

This is what I wrote in Q1 2018 about the fundraising landscape.

Now in Q2, things are a bit different.  I’m breaking this down into two blog posts. Part 1 (this one) is about the token-based fundraising landscape.  Part 2 will be for pre-seed/seed companies raising traditional equity, debt, and convertible security rounds.

Even though most of my audience is probably more interested in Part 2, it’s important to cover what is happening in the crypto fundraising landscape first because investor behavior in this world affects the pre-seed/seed landscape.


  • A boatload of VCs are trying to get exposure to cryptocurrencies.  (Sorta)
    • Some VCs are doing token buys.
    • Some VCs are not set up to do token buys per their legal docs for their funds.  Or their investors in their funds (their LPs) are not keen on their doing token buys.
    • Some VCs who were not set up to do token buys before per their legal docs are now making amendments in their legal docs to be able to do so.
  • Some VCs are less interested in token buys now than a few weeks ago, as alt cryptocurrencies are down in value.

Trends and Takeaways

1) Investors who are able to do token buys are active, but they are not “the usual suspects” (mostly).

In some cases, you see well known Sand Hill VC firms doing token buys – Sequoia, for example. In most cases, however, traditional VCs are not participating (much) for the reasons above.

There are new VCs who are specialized and focused solely on cryptocurrency buys.  Some of these are pulling away and building brands in the crypto space.  My hypothesis is that there will be a real shake up in how deals are done in startups, and you’ll see turnover as some of these new brands overtake older, well-established VC firms (this is an aside for another blogpost).

And then there are also syndicates.  These are groups of angel investors, individuals who are pooling their money together to purchase tokens.  These syndicates are often a bit “underground,” so you won’t be able to find them by researching via Google. One good place to find these groups is actually at tech companies.  Just about every tech company has a club of cryptocurrency enthusiasts.  From there, you can find various syndicates.  Syndicates also know other syndicates.  Even though syndicates are comprised of angels, you’d be surprised how much money a syndicate call pull together. It’s not uncommon for some of these syndicates to pull together a few million dollars in a given deal and do deals regularly (perhaps less so now that it’s crypto winter).

2. These cryptoinvestors are not buying tokens at the ICO

Most cryptoinvestors I know are trying to buy tokens pre-ICO and often in companies who are doing token sales discreetly.

I think there’s an assumption that VCs are participating in ICOs.  They aren’t.  They want to buy tokens before the public does at a better price.  Moreover, most companies I’m seeing these days who are doing token sales are not even doing ICOs.  They are just doing private sales directly to various investors and/or investor groups.

This is because it’s pretty involved to do an ICO. You have to worry about SEC compliance A LOT as well as any potential hacking or fraud issues that could arise.  These companies are publicly announcing their upcoming token sale (without committing to dates) and are using those announcements to generate interest, which is then converted into private direct sales of tokens.

3. You now need some “traction” to successfully do a token sale (sorta)

Unlike last year when you could raise $50m on more or less just an idea, the “traction bar” has increased for doing a token sale.  We’re still not talking about loads of traction – and it depends on whether you are launching a protocol or an app – but there is a bar.

The bar for protocols is basically a solid idea with some development and a really reputable team (even if it will take a long time to fully build).  In contrast, the bar is incredibly high to build an app (decentralized or not).  In many cases, you need a community of users already (in addition to a product) to have a successful token sale.  These days, many investors are very much leaning towards funding protocols with potential strong tech over apps.  Here’s a good paper on why this is (though I don’t entirely agree with his conclusions; that is also for another blog post).

4. Larger established companies are doing token sales

Interestingly enough, part of the reason the bar for apps is increasing is that I’m now seeing centralized apps, existing startups that are at the series A through enterprise level prepare their token sales.  If given the choice to buy into a token of a company that is already thriving vs a new app, many investors would choose the former, right?  A series C marketplace that has millions of users is a lot more de-risked than an idea-stage marketplace.

Originally posted by trapstrblog

5. Centralized apps are doing token sales

Continuing from point 4, companies that are doing token sales today are not necessarily decentralized.  Rather, their projects may technically be decentralized, but the tokens will be used in a very centralized use case.  A lot of blockchain enthusiasts may find this appalling.  After all, one of the drivers of blockchain is this notion that large, centralized companies should NOT hold your data (technically they are not, but their blockchains are for the purpose of furthering a centralized, for-profit company).

This is an interesting concept.  I think moving forward, we will see many companies do token sales, even companies where blockchain is not at the core of the business.  My prediction – and I could be totally wrong – is that we will see a new type of crowdfunding of utility tokens for centralized apps.  Basically, early customers buy into a new startup’s token at a special price, and those customers benefit from that price if the company does well.  This is just my prediction of where I think the market is headed.

6. Because the bar for token sales has increased, blockchain companies are raising equity-based pre-seed rounds

Funnily enough, in 2017, a number of companies who could not raise from VC did successful ICOs.  Now in 2018 (Q2 specifically), a number of companies who cannot raise on a token sale are running to VCs to do pre-seed raises!

What I’m seeing here is that a lot of VCs who are not able to get into token sales (i.e. are not able to legally do token buys or their investors don’t want them to) are investing in blockchain companies on a convertible note or convertible security and then are receiving promises of X number of tokens during a later token sale.

This has become a common way for pre-seed blockchain companies to raise money.

7. Token-sale raises are becoming smaller

Investors are becoming more wary of large raises.  Startups are doing much smaller token sales (and I’m glad)!  I think that discipline in a startup is important.  If you are basically at the beginning of your startup, and someone gives you infinite resources, you still would not be able to increase your progress substantially.  The adage that 9 women cannot incubate a baby in 1 month is apt here.

That being said, raises still have to be substantial in the crypto world because there are a lot of additional considerations that don’t apply to the equity world.

  1. It takes millions of dollars to get your token listed on an exchange, which people need for liquidity.  For top exchanges, it could be as much as $2m-$5m per exchange.
  2. Operations costs more.  More legal, accounting, and other service providers related to tokens means your bill will be substantially higher.

Even if the net you want to raise is, say $5m, you’re probably looking at raising $10-$15m to cover your other costs.

8. It’s crypto-winter, so investors are a little more shy to move forward even if you have some progress

There’s still a lot of crypto money floating around, but investors are a little more shy to move forward since alts are not doing well right now (and you now have competing token sales from larger companies – see #4).

9. Companies raising on a token need a concrete liquidity and currency plan

In 2017, investors were willing to take a flyer on projects that had built some semblance of a community.  In 2018, liquidity had proven to be very important.  It’s important to have exchange-connections, money to get on an exchange (or if you are really good friends with people at exchanges, you can get prioritized for free), and a plan or timeline for when your token will become liquid.  In addition, thinking through the offering (number of tokens, release of tokens, etc.) is also really important.

In some sense, your success here will be based on whether you can play mini-fed.  It’s not about your white paper.

This is something we’ve been talking about with a number of companies – both big and small.  How you run your token sale is something that isn’t core to people’s businesses but is really important!  I’m happy to chat with more companies thinking about doing this if they want (time permitting).

If I were starting a blockchain startup today, I would at a minimum get a prototype or early version of my tech working (for a protocol idea). For an app, I would get a full v1 product and start pulling together a community.  For the former, you can probably raise if the tech is strong.  For the latter, you may need to do a pre-seed round with traditional investors and give investors future tokens if you cannot jump straight to a token sale.  I would plan for any token sale to take months, partly to raise but partly to make sure that you are fully in compliance. It is also important to have strong legal counsel and think through the costs of this legal counsel (plus the cost of getting on exchanges) as part of planning a fundraise.

This is just my $0.02, and I’m sure my thoughts will change as we move towards Q3 of this year.

Cover photo by Thought Catalog on Unsplash

The downfall of middlemen businesses

I think we’re at a really interesting time with technology.  We are going to see a lot of software “middle(wo)men businesses” be replaced.  Payment processing companies.  A lot of marketplaces.  Businesses where there are two sides and some company sitting in the middle who doesn’t provide much value – these are the kinds of companies that are going to be disrupted soon.  On the flip side, this is a great time for entrepreneurs who are just starting out and thinking about new opportunities.

Let’s take a step back for a moment to run through a quick history of the web.

History of web businesses

Since the 90s, software companies have moved away from desktop software (CD ROMs, floppy disks, and whatever else we use to rely on that we cannot even remember anymore).  Software moved online, and data is now stored in the cloud, not on a local server in your office.  This is and was a good thing.  It’s incredibly convenient to be able to access software anywhere in the world with any computer or mobile device. Now, it’s also become a bad thing.  We’ve seen the rise of hacking databases (thanks Equifax for leaking everyone’s SSNs!)  We’ve seen some companies become so big and have all of your data.  Some of these companies are selling or giving away your data to other people without you knowing about it.  Maybe it’s OK that Yahoo! mail got hacked, and those hackers can have fun with all of my Groupon daily coupons and other newsletters. It’s become clear that this model isn’t perfect for everything.

Originally posted by justalittletumblweed


This is where blockchain technology comes in.  What if instead of one company holding all of your data in a central database you flip the model around?  Instead, why don’t we make data available and open to the public with privacy settings that you, as the consumer, own and control? Every transaction could be made public with redundancy so that there are no disputes about what records have happened.  What if to accomplish this, we rope in a lot of people who can be these nodes of information in this distributed ledger instead of one party?

In the beginning, blockchain sounded like it could only apply to niche use cases that required a lot of security and privacy.  Actually, I think this can be applied to a lot of use cases for other reasons – to connect two sides in transactions.

For example: take ad networks.  Ad networks have advertisers who want to buy ads and publishers who want to make money by serving ads.  The ad networks who sit in between the two parties will often take a 20-70% cut.  In other words, if I’m a marketer buying an ad at $100, the publisher might receive anywhere between $30-$80.  Some ad networks are incredibly valuable; they provide useful targeting and ad serving technology.  Others are not and just take a massive cut in between.


Now, imagine a world where someone built ad tech and offered it for free to match advertisers and publishers?  They take no fee in between.  I guarantee you that the ad networks who provide no value will be wiped out quickly because marketers will all flock to buy ads that are significantly cheaper. Publishers would prefer to make more money.

So let’s say we start this company – call it Hippo Ads.  With blockchain, we can do this with Hippo Ads.  We will rely on others to be information nodes; we won’t need a central database.  We will provide the software to keep track of the ad buys and who gets what payments.  We also provide software to match advertisers and publishers.  AND, we take no fee for this.


Here’s how we make money: we offer a currency called Hippo Coin.  You can only buy ads and get paid with hippo coin. Plus, there’s a limited supply of Hippo Coin. We at Hippo Ads will hold some of the coins that we’ll vest upon hitting certain milestones.  Since there is a limited supply of Hippo Coin, if this ad network gets to be so valuable  (i.e. everyone wants to buy and sell ads), the value of Hippo Coin against the dollar goes up, and the employees and founders at Hippo Ads will make money by holding some of that currency and making a good product and service.

Now we take this train of thought a step further.  Any two-sided platform or marketplace that charges a fee in-between the two sides could potentially be disrupted by applying the same model.  Right?

Not every marketplace or two-sided platform will be disrupted.  Let’s say you have a marketplace, and you are charging a 15% fee between the two sides.  If your customers are finding your service valuable and are happy to pay you that fee because you provide great service or product, then you likely won’t be disrupted. If you find that people are trying to skirt you to save money, then this could be a better model and something to either adopt or watch out for from would-be competitors.  In addition, there are other criteria to consider:

1. Old industries won’t adopt this model in the near term.

Because utility tokens are so new and hard for most people to work with, the industries that will be disrupted first will be the ones where the two sides are quite tech savvy.

2. Tackling tech savvy, fast-moving incumbents is not a good strategy.

I see blockchain companies trying to use this distributed ledger model to take on their “centralized” counterparts who are also still very mobile, well-funded tech companies and who will be able to either counter by offering a token themselves or will outpace building both sides of the marketplace faster.

3. Latency is a strong consideration.

Although a lot of two-sided marketplaces and platforms don’t need information transmitted in real-time, some use cases have serious latency considerations.  Programmatic ad-serving, for example, has to be super fast.  Consumers won’t wait around for 5sec for a banner ad to show up.  Blockchain won’t serve these use cases well.

Just some things to think about as you either pursue your next opportunity or look at who is chasing you.

Welcome to the Era of Decentralization

This is an exciting time to be a software entrepreneur and investor.  We’re living in a time when there’s about to be massive disruption in tech infrastructure that will affect almost every industry.  I haven’t felt this level of excitement since the late 90s.

Let’s first take a step back in time.  When most people think back to the late 90s, they think the dot com era was exciting because it put tech entrepreneurship on the map in a big way. Lots of entrepreneurs made a ton of money.  As a high school student growing up in Silicon Valley at the time, my perspective was different.  The 90s were impactful for so many reasons.

1. There was just so much opportunity.

The 90s were about moving just about every piece of software from isolated desktops to online.  This wasn’t an incremental change.  This was a big change.  It was a big change in how software and infrastructure was written.  And it was also a big change in business models.

2. As a result, it was easier for newcomers (such as myself) to break into the industry.

Existing software engineers and tech entrepreneurs needed to retool both their skills as well as their way thinking about how software should be set up and about software business models.  As a student, I didn’t really know anything; in some sense, not having been in the software industry was actually an advantage.  The 90s were about wrapping your head around the shift from working with isolated box software to writing software for connected boxes coupled with changes in business models.  This was not an easy thing to wrap one’s head around. As a student, my mind hadn’t been influenced by the prior desktop software era, and so it was fairly straightforward to jump into the industry and learn.  During this era, anyone who could write basic Javascript and had half a brain could be in business – either for yourself or at someone else’s internet company.  Frankly, no one really knew anything about anything.  It was all uncharted territory.

3. There were many winners and many losers.

Anyone who had been in software forever and who did not retool their skills and way of thinking about software got left behind.  There were also many entrepreneurs who got caught up in the frenzy of starting new internet business ideas that didn’t actually solve problems.  In general, the nature of entrepreneurship means there is a lot of failure, even for “good ideas.”  But this era had many, many terrible ideas.  Because it was such a gold rush, there were a lot of ideas that people pursued just for kicks.  I was not an investor at that time or even in the industry full-time, but I heard about more bad ideas during this era than I do today as an investor.  Because it was a gold rush, lots of people thought they could just come up with some dumb idea and would be able to make lots of money… just because.

Since the late 90s, these three characteristics have largely vanished…until now.  When you think about what happened after the 90s, software business changes have been largely incremental:

  • 80s: Desktop era
  • 90s: WWW era
  • 00s: Cloud / mobile era
  • 10s: Decentralization era

Going from the 90s to the 00s was about using cloud platforms.  No longer did you, as an entrepreneur, need to spend $1m on your own servers that you stored in your office closet to host your web applications.  You could use Amazon Web Services (AWS) to easily scale up (or scale down) your storage needs, and you could get up and running in a day.  Then, SaaS companies built their companies on AWS and offered basic services to other companies for just $x per month.  These SaaS companies got you up and running with useful applications and stored all your data for you so that you, as a business owner, didn’t need to worry.

Going from the 90s to the 00s was just an incremental change.  We still used the same web technologies (more optimized but still the same) and the same way of thinking  (everything done online).  Even the business models were still the same.  (pay $x per month or per year).

During this era, we also went from using the internet on your laptop to on your mobile device when the iPhone came out.  Everyone thought that this was the next big transformative era – after all, writing native apps required new software skills and ways of thinking, and the business models were different.  But, it wasn’t transformative.  Because mobile app distribution has proven to be difficult, legacy companies have largely resorted to focusing on improvements to their native mobile websites as opposed to distributing their native apps.  These mobile sites are based on the same web technologies people have been using forever, and the legacy businesses themselves haven’t had to change their business models as a result of the rise of mobile devices.


But going from the 00s to 10s is and will be a big shift.  Today, we see that business owners and consumers are increasingly concerned with privacy, security, and hacking and with large companies consolidating data and power.  Should we be concerned that Google knows everything about you?  They track what you write to people, what you browse on the internet, and even where you go as you walk around with your Android phone.  Facebook, too, knows so much about you.  In fact, some even suggest that they monitor so much data that they know which startups are up and coming and try to copy them.  B2B companies are also consolidating.  Salesforce and Oracle are both acquiring companies like crazy and will soon know everything about how you run your business on all fronts.

Even if you’re not concerned about the powerful companies who are consolidating your data, there’s also been a rise in concern about whether they can even keep your data safe.  The rise in hacking and data exposure has both consumers and businesses nervous.  It’s clear that many companies are not able to keep your information safe.  Even companies whose job is security are not able to store your information well!

What we’ll see in the next few years is the decentralization of information.  FileCoin, which “launched” a couple of weeks ago, is a great example of this.  You’ll see more of your information distributed across multiple sources.  The premise for FileCoin is that many people in the world have extra bits of storage.  These people will store pieces of your data instead of storing your data all in one place with one service. Then, through a new protocol, you can grab all those bits and pieces of data and reassemble it to make sense.  No single entity will have all your data.  The business model for this storage will also be different.  Instead of paying a subscription fee to one player, you’ll use FileCoin, which is the currency on this platform, to pay a little bit of money to different people storing your data.

But it doesn’t stop there.  I’m seeing new companies crop up for other business services that involve powering an application but storing data needed for that application either in a decentralized way OR in a semi-local way.  For example, today, Marketo stores all of your marketing content – emails, landing page information, customer contacts, etc.  –themselves.  In this new model, tomorrow, they would still power the service, but your data may be decentralized or partly stored on your own servers so that Marketo cannot access and mine your information. Hackers would also not try to break into their systems to get this information.  From a business model perspective, this means you may or may not pay a single subscription to Marketo – you may potentially also end up paying other players through some currency for storing your data or even powering some of Marketo’s functionality.  I predict that almost every piece of business software that has these privacy concerns (or that have customers who have these concerns) will move away from the traditional SaaS model that we’ve come to love to this new decentralized model.

Some say there will be latency concerns in this new model.  Pulling information stored across many sources and re-piecing them together will be a slower process.  Real-time applications, such as website analytics, may not move to this new framework.  The first applications to move to this model will be software that serves customers who are really, really, really concerned about privacy and who have less concern for real-time information.  But over time, I believe that, since most software isn’t truly real-time, with more clever forms of caching, more software will move in this direction.

This is a total mindshift.  The way software is written will be completely changed.  Business models, too, will change.  In fact, how this will all play out is extremely fuzzy in my mind.  But that’s what makes this exciting.  There are so many new possibilities – something will change, but we just don’t know what.  There is so much opportunity, and we’ll see so many entrepreneurs enter the tech industry as a result.

There will be many winners.  But also many losers.  The losers will be the legacy companies who cannot make this jump and will get disrupted by startups who will take the customers who are concerned about privacy.  There are a lot of legacy companies who are obsessed with storing as much data as possible and are stuck in the rut of thinking that data consolidation is the only way to make lots of money.  This is why it may be difficult for some of these legacy companies to change to this new paradigm if a startup comes in.

There will also be many losers in other ways.  I didn’t use the word “blockchain” or “tokens” in this entire blog post, which is largely what will power this new paradigm.  I wanted to focus this post on the reasons why blockchain and tokens are so widely talked about.  But so many tech investors and entrepreneurs today are not thinking about the fundamental problems that blockchain and tokens are solving.  And much like the 90s, I’m now seeing so many ideas involving both blockchain and new tokens just for the sake of using them but not to solve actual problems.

These, of course, are my predictions (and I could be completely wrong!), but I think the Era of Decentralization is here to stay for a while and will have big impact on so many industries.  Comments and thoughts very welcome!