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.

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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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How we tripled our first VC fund to raise a $33.6M Fund 2

I cannot be more excited to officially announce Hustle Fund 2.

So many of the tactics we used to raise our first VC fund we applied to Fund 2. I won’t rehash what I wrote in How I raised my $11.5m VC fund. In this post, I’ll just cover our new learnings and new tactics that we used in our Fund 2 process. Onwards!

Raising a Fund 2 took longer

If I thought raising Fund 1 was daunting, I braced myself for raising Fund 2. Many emerging fund managers ahead of me warned me that Fund 2 would be one of the hardest raises because you’ve already exhausted your closest contacts for Fund 1 and still have no real results to show for Fund 2. 

In addition, like many other emerging managers, we also wanted to raise a larger fund than our first, which was $11.5m. Because VC funds are only allowed 99 accredited investors, the average check size for Fund 2 needed also to be MUCH BIGGER. 

This meant that even if people wanted to invest, we would not be able to accept as many small investors unlike in our Fund 1, which further added to the challenge. 

In the end, we turned down A LOT of $100k-$250k checks from MANY wonderful people, and I am so bummed that we had to do that. Let that sink in for a moment. We were not able to accept all 6 figure checks, because they were not large enough!?!

Here are some new tactics that we used for this fundraise.

1) We started raising right after Fund 1

Knowing that this raise would be harder or at least a longer process, we started raising our Fund 2 about 3 months after we raised our Fund 1. While we didn’t get the paperwork started right away, we started building relationships with new potential LPs right away. 

In fact, we timed our Fund 1 announcement in Sept 2018 to help us build momentum while we were actively engaging potential LPs for Fund 2. We started pulling together the legal paperwork for our Fund 2 in Q1 2019 and did our first close in Q2 2019. 

Fund 2 is essentially a continuation of the fundraise process from Fund 1. Even if there is nothing to sign, you are always raising.

2) We used scarcity as a forcing function

Although I am opposed to the SEC’s 99 investor slot limit / rule, we turned this into a forcing function. We used it to generate momentum with smaller investors. We told all of our smaller investor friends / acquaintances that we would only take a certain number of small checks, so if people were sure they wanted to invest, they had to move quickly. 

This worked really well. This encouraged smaller investors to decide within days instead of weeks or months. People often overlook small checks, but I’ve personally found over the years that my smallest check writers (angels) have tended to be really helpful beyond money (connections / advice / etc) and help generate momentum on a raise. Often it’s the smaller checks that create momentum to encourage larger investors to prioritize your fundraise. 

The combination of these smaller checks plus our anchors from Fund 1 (Thank you LINE and Shanda for your continued support!) was what drove our first close in Q2 2019. 

The flip side to all of this is that if people are considering becoming a small LP in a fund, the best time to broach this is at the beginning or even before a fundraise happens, because that’s when a fund has the most number of investor slots available. If you approach a fund manager when 70 slots are already accounted for, then you are literally competing for a slot against larger check writers. 

3) We expanded our investor search into Asia

I am so grateful to SO MANY people who helped connect us with potential investors. Raising these funds really does take a village. But, I’m particularly grateful to my friend Cjin Cheng who agreed to join our Hustle Fund team after we had raised Fund 1. 

One of the things that we had noticed in raising our Fund 1 was that we were able to bring in a lot of amazing US entrepreneur-investors as LPs into our fund. But the appetite for venture in Asia was 10x stronger, because a lot of potential investors there wanted access into the US startup scene. Cjin had been both a past successful founder and had previously done fundraising in Asia for a VC fund and was the perfect complement to our team in helping us expand our network there. 

This also made a lot of sense strategically, as we expanded our fund’s mandate to include Southeast Asian investments as well.  

We were able to raise a good chunk of our Fund 2 from amazing investors – including our anchor for Fund 2 – we would never have met without Cjin. Taking a page from the Strength of Weak Ties, adding people to your team with a different network from yours can help a lot. 

4) We continued to build brand

One of my biggest takeaways from raising Fund 1 is that LPs don’t really care about your past track record (unless you are coming from a Sequoia or someplace like that). They *do* want to know how you’ll pick well, and even more importantly, why founders will come to you first. 

Translation: they want to know how you will build up your new brand with your new fund. Anything you’ve accomplished before gets discounted, because whatever you were doing before was with a different brand. 

This was a mind-blowing revelation to me during our Fund 1 process. But it makes sense. AKA how will you market your new firm? 

For this reason, between Fund 1 and Fund 2, I continued to blog and tweet like crazy about how I think and also about who we are. LPs want to make sure they are fully aligned with a firm — everything from how a firm treats people to how they think. 

And in doing all this tweeting and blogging, we received cold emails from potential LPs and messages from people I hadn’t heard from in years asking to invest. In fact, so many of our LPs read every tweet of ours. Blogging and tweeting really does work. 

In addition, all this writing helped build rapport with a lot of people. One of our LPs mentioned that she saw me in a photo and noticed that I wasn’t wearing any makeup. She said that she knew she wanted to invest in Hustle Fund, because she felt that since I didn’t spend any time on my appearance that I’d spend more time stewarding her money well. 🙂 

Another LP I met told me in the first meeting that she was an avid reader of my blog and she, too, didn’t fold her laundry (which she learned that I do not do in one of my blog posts!). I remember thinking “Wow, here is someone I’m meeting for the first time who lives 5000 miles away from me, and we can bond over not folding our clothes. Cool!” 

What you read in my/our tweets and blog posts is real – it is a true reflection (for better or worse – I guess everyone now knows that I don’t fold my clothes) of who we are. And that helps people decide whether they want to join our journey. 

5) Your Fund 1 sets the stage for Fund 2

One of the temptations in setting up a Fund 1 is to agree to a number of things just to raise your fund. Things like sharing GP carry. I feel fortunate that we didn’t do anything non-standard in our Fund 1 (though we thought about it!), because by Fund 2, investors primarily just look at the redline changes between your Fund 1 and Fund 2 legal docs. So if you try to edit things in your docs for Fund 2, investors will ask about them and may want them back. You set a precedent in your Fund 1. 

6) We increased the number of LP-founders

It gives me absolute joy in bringing in past founders whom we’ve backed into our LP community. It’s not a strategy that scales, but to me, it’s one of the best validations that we’ve received. And we were so lucky to be able to do that as soon as Fund 2 with founders we backed in Fund 1 as well past founders we’ve backed through other vehicles is a pretty awesome feeling.

We wrapped up our fundraise when COVID-19 hit…or so we thought.

My last fundraising trips were in Jan / Feb of 2020. We were just completing our final paperwork to wrap everything up with our last potential LP conversations in mid March 2020. We all know what happened after that. Some very warm potential LPs had decided they needed to pause and see what was happening in the world and couldn’t commit to this fund. And everything in the San Francisco Bay Area had shut down. 

And, it turns out sometimes, wet signatures and notarization are still required for paperwork. And so we needed to mail paperwork to Japan in order to finalize one of our anchor LPs during this time. DHL and UPS branches had limited hours during this time period and very few of their planes were flying to Asia at the time. The stock market had been tanking. It felt the whole world had just shut down. 

I felt a mix of emotions — relief that we had closed most of the fund already even if we couldn’t get the last investors over the line. Disbelief around the state of the world. Confusion of what was yet to come. 

And then we received an email from our Japanese counsel stating that we had completed our paperwork incorrectly putting the date in a place where we shouldn’t have and that we would need to do this all over again – wet signature, notarization, and rush shipping. We spent over $400 on this process alone, and we were able to submit our paperwork just 1 day before Tokyo implemented its stay-at-home policy. It’s hard to describe the level of urgency we had in trying to push this over the line in a global transaction during the uncertainty of the pandemic. It felt like such doom and gloom — it was unclear to me whether mail was even working at that time. We take so many systems we rely on for granted, and that was a big test for us. 

We did it – we had raised a $30m fund! And we were done! (or so we thought) 

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A no isn’t a no forever – Our first institutional investor

Throughout our Fund 1 and Fund 2 fundraises, we didn’t spend a lot of time speaking with institutional investors. We had heard from emerging managers ahead of us that no institution would be interested in coming into an emerging managers’ fund, so we primarily focused on working with angel-operators and family offices. 

But, we did meet with about a dozen or so institutional investors we had heard amazing things about over the course of the last few years in hopes that maybe someday we could work with them. 

In September 2020, Jaclyn Hester, Partner at Foundry Group emailed my business partner Eric out of the blue asking to catch up. We thought we had closed our fund already, but since we still had time on our fund’s timeline to raise, it was technically still open. Foundry had told us no twice already — for Fund 1 and Fund 2. Despite that, we LOVED Jaclyn and Lindel and team — they just struck us as genuinely kind and wonderful people who are phenomenal at their fund-of-fund craft. 

On the founder side, I often say that a no isn’t forever. At Hustle Fund, there have been something like 10 startups we initially said no to but then later invested in. And this happens time and again. And the same applies to GP/LP relationships as well. In addition to Foundry Group, we were also rejected by potential LPs in our Fund 1 process who came in for Fund 2. 

We caught up with Jaclyn and what I love is that she just leveled with us. They’d already rejected us twice, and she just put that out there, stating something along the lines of we’ve already rejected you twice, and I want to be extra sure that we are definitely going to invest if we ask you for diligence materials, so let me just double check on some things. And this is the process and timeline. I really admire that. Investors – whether it’s on the LP side or the GP side — sometimes tend to dance around things, but Jaclyn was crystal clear and transparent around what was happening. Something that we believe in too and strive to do. We all ended up taking the next step together. I’m grateful to our founders who spent time speaking with Foundry, and I’m so thrilled and honored that Foundry joined our journey on Fund 2

In the end, we also brought in some additional investors in the same close — some angels committed and signed docs all within 24 hours to meet that final close (for reals). 

All-in-all, we applied the same lessons and tactics from Fund 1 to raise our Fund 2 with a few adjustments and surprises in the last year or so. We continue to be open for business looking to invest in pre-seed software startups in the US, Canada, and Southeast Asia.

Like in Fund 1, there were literally hundreds of people who helped us get this thing up and running (and we are still just at the beginning).  And I’m so very thankful to all of them — especially our LPs in both our Fund 1 and Fund 2 for their generosity and kind introductions to their friends and network and for hosting us in your respective cities.

Fundraising is hard.  And it takes a long time.  But don’t give up.  

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Thank you, Tony

Coincidentally enough, I had decided that I wanted to write a letter to my mentor Tony this weekend, thanking him for the huge impact he’s had on my life. But I suppose that has now morphed into a more public letter.

Being in a zombie, half blurry-eyed state, it’s a little tough to articulate well what Tony has meant to me. We go through life, and a lot of people have an impact on us, and it’s often hard to say that a particular person caused you to take a particular path. But, Tony is one of the few people whom I can definitely say my life would not at all be what it is without him.

I first met him many years ago in Dec 1996 when I was just starting high school. My best friend Jennifer asked me what I was doing for winter break and if I wanted to help out her cousin Tony with his new internet startup. I had no idea what an internet startup was, but I had nothing going on, so I agreed to go.

On the first day of our holiday break, Jennifer and I hopped on the Caltrain from the peninsula (Silicon Valley) to head to his office in SOMA (San Francisco). It was exciting! We couldn’t drive, but we could go to a startup office all by ourselves! I followed Jennifer to the address. I think their office was actually someone’s apartment. And when we got there, there seemingly was no one there. We hung around for a while, and maybe about 10am or so some people started to trickle in – this was my introduction to startup life.

Tony had more or less just graduated from Harvard, as he had spent a few short months at Oracle after graduation, and then decided to quit to build his own company LinkExchange. Leaving a big employer so quickly was highly unusual back then, and he would go on to do many non-conforming things that he was right about.

LinkExchange was an ad network. If you had a website and hosted LinkExchange ad banners, for every 2 impressions you generated, you received 1 free impression of your banner. Back then because the internet was still new, people paid attention to banners and clicked on them like crazy, so this was incredibly effective in helping generate traffic for people. LinkExchange would then sell the remaining ad impressions. They had launched the service earlier that year, and by that December, they were already growing like crazy.

I definitely was *not helpful*. We put together some tables and chairs. And made ethernet cables from scratch. Yes, from scratch. We had to cut cables, splice the individual wires, and insert them into plastic tips and crimp them. I was terrible at this, and Jennifer largely fixed all of my mistakes (as always). Since I was so bad at the ethernet cable making process, they asked me to help them put together an internal webpage to keep all their meetings / schedule together. Great! I could put my basic HTML skills to use. I don’t think they liked the amateurish turquoise background that I chose, so someone at LinkExchange quickly fixed it.

I was more of a nuisance than help, but what I saw that day was super inspiring. Here were a bunch of friends who were getting together to build things. They could wear whatever they wanted, saunter in whenever they wanted, and eat all the pizza they wanted. And they all had varied tasks and were taking business meetings in what looked like a kitchen? There was never a dull moment. It was the dream. Neither of my parents worked in tech and certainly not startups, so this was incredibly eye-opening, and immediately, I knew that this was what I was going to do when I grew up – become an entrepreneur and start companies. Without this exposure to startups in 1996, I don’t think I would have made this realization (if at all) for many years.

Fast forward a few years later. Microsoft bought LinkExchange just 2 years later for a reported $265m. Tony and his college friend Alfred (who also was at LinkExchange) decided to start a startup incubator with their own money. (As a side note, the food at their restaurant in this incubator was fantastic!) This was bold and unique, because Idealab was really the only one doing something somewhat similar at the time. The concept of accelerators or incubators would not come in a big way until years later.

I don’t think Tony knew this, but while in high school, I cold-emailed almost every single one of his portfolio companies to ask them for an internship. I was determined to work at a startup as soon as possible in high school and start my startup career. I ended up working at one of his portfolio companies (probably unbeknownst to him) in the summer of 2000 which really help set me on my path to a career in startups. Often that first opportunity is the hardest to land, and each subsequent opportunity opens more and more doors.

By late 2000, the stock market had crashed and everyone was fleeing startups. Newspapers ran headlines saying that tech was dead and that all programming jobs would be outsourced. They couldn’t have been more wrong, but most people panicked and stopped investing in startups. Tony, was always a first-principles thinker, and he leaned into this and ended up co-leading one of his portfolio companies Zappos. As an e-commerce company that provided free shipping and free returns, Zappos’ margins were razor thin. This scared most VCs. (This would certainly scare me.) But, he believed that it could work if customers had a great experience and would become repeat customers. So, he poured a lot of his own capital into the business when no VC at the time would touch this company. While many VCs pontificate about high level things, he looked at problems from a bottom’s up approach which made his thinking often unique from others.

In order to make the Zappos model work, he needed customer service to be top notch, reliable, and have a lower cost. It was clear to him that this model wouldn’t work in pricey San Francisco. So, he made another bold decision to move the company to Henderson, NV, which could provide all of those things. This was at a time when certainly most people believed you can only build an internet business in the San Francisco Bay Area. In hindsight, when they ended up needing to hire tons of people, being the BEST internet company in the Las Vegas area allowed them to swoop up talent that would have been a huge war to win in San Francisco. The other thing that was apparent to me, is that the Zappos family was incredibly diverse — and free to be themselves. Tony’s attention to culture and cultivating an open and welcoming work family left a lasting impact on me, and he started doing this well before it became a trend. Like so many of you, his book Delivering Happiness has affected my own thinking.

Fast forward many years, Jennifer and I were working on our own startup, and we were grappling with a particular challenge. We decided to consult Tony and get his advice. In a very Tony-like way, he basically told us to do what we thought was best. I remember feeling frustrated at the time, because…I didn’t know what was best! I had wanted him to tell me what he thought was best! But a good mentor helps you find your own answer – he/she doesn’t tell you the answer.

In that meeting, he also pulled out a book and told me to read it. The book was Start with Why by Simon Sinek. So I read it. The gist of the book is that to build a great company, you need to go back to first principles. Most people start building a company by trying to sell their product details. “Buy my shoes! They are grey with stripes.” But customers, employees, and everyone want to rally around something much bigger — something inspirational that the company stands for. It actually took me many years to process this and actually figure out how to implement this — I didn’t get this right for LaunchBit, but after marinating on this advice for years, this is what we’ve been striving to do at Hustle Fund. We aren’t just capital deployers. We are trying to create a movement and a philosophy. That particular meeting with Tony is one that I play in my head over and over – I feel like I finally understand what he was getting at and that is what I most wanted to tell him this weekend.

If cynics believe that it’s impossible to get ahead in life without being an asshole, Tony Hsieh is a good example of someone who defies the norm. He was never flashy and always kind and generous to all. I could go on and on in writing this, but thank you, Tony, for helping me in so many ways that you may not have been aware. For your kindness, generosity, and inspiration.

Sending big hugs to the entire Hsieh family whom I consider to be my second family and who took me in during my formative years and had a huge impact on who I am today.

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