Personally, I don’t have a hard take on remote or in office work. I think it’s a personal and nuanced topic, and the only correct take is that it depends. Acknowledging that either choice has real tradeoffs, and sometimes the “right” choice is a function of happening at the “right” time. This post isn’t about one approach vs. the other. I’m trying to write every week, so I can save that for another time. Rather, I wanted to talk about a new issue that’s emerging as we’re seeing some companies, particularly larger ones insisting that their teams be back in the office at least a few days a week. This is happening while many startups are trying to preserve precious runway, while trying to recruit the best talent from anywhere are still staying distributed. This is all fine and good, until it comes time for a smaller startup looking to be acquired by a bigger company that is pushing to have their team back into the office.

It’s complicated enough for any acquisition to get completed. Throw in a challenging economic environment and the complexity increases. Now mix in the fact that a startup Founder can’t make real guarantees to a potential acquirer that most members of the team would be willing to relocate in order for a deal to go through. Startup employees, particularly the most talented, always have an abundance of employment opportunities, which allows them to prioritize their desired work setup, which often can be remaining remote. If enough key employees at a company aren’t willing to relocate, it can make doing a deal incredibly difficult. I’m curious to see how this dynamic will continue to evolve as the market continues to get tighter, and more startups will be trying to engineer landings for their teams, while their teams might be the impediment to getting a deal done.

In my own life, I’m always focused on creating conditions that are going to produce more collisions way beyond a work context. One of the ideas I’ve been obsessed with is how to engineer more serendipity across my life. There are many ways this takes shape for me. One part is just trying to allow more new people into my life. This takes the shape of sending a lot of cold DMs and emails to people I come across who share something interesting or fun. This has led to friendships, valuable introductions, formative book recommendations, and investment opportunities. Being more leaned in on this kind of behavior is critical for me, since I work on a distributed team, and spend the majority of my time working from home. Not being in an office, or shuffling through a city from meeting to meeting limits the in-person serendipity opportunities, so I’ve had to start manufacturing my own. Getting different people together in small groups is also another way to manufacture interesting collisions. Other people will ask different questions or have different perspectives than your own. It’s valuable to bring more people into conversations.

Collision conditions extend beyond people and startup ideas. They are also important to cultivate in what you consume. There’s a lot of value in being obsessed by one thing and going incredibly deep, but I’ve always found more fun and value in exploring a lot of different things that likely don’t seem connected on the surface, but end up leading to interesting connections when the moment is right. You need to have a diverse set of inputs if you’re going to make original non-consensus bets. Steve Jobs hammered this idea home in his famous Stanford Commencement speech. He shared how he dropped out of school, but would drop in on a calligraphy class. Learning about fonts informed his work years later on the Mac. Another example I love is Fred Wilson explaining how he made an early bet on Kickstarter, long before crowdfunding on the internet was a mainstream idea like it is today. Because of his involvement with the crowdfunding education non-profit, DonorsChoose, he had a prepared mind when the idea of crowdfunding for creative projects was brought to him. Quality inputs over a long enough period of time should produce quality outputs.

Optimizing for collisions isn’t in tension with focus. But it helps you find non-obvious unlocks when you are focusing on something. As an early stage investor, a lot of my time is spent trying to get smart about the various areas we’re excited about finding potential investment opportunities. But anyone can get smart. Where I have to differentiate in my decision making process is if I can see something different and earlier, and build high conviction around it before it’s obvious to others. Having a diverse set of experiences, ideas, and inputs helps here. I’ve always been curious about the world. I love asking questions. I want to know what everyone I meet is reading, watching, and listening to. If you find yourself spending time with smart people, it feels foolish not to ask what has their curiosity piqued, and see where it might lead you.

I’ll keep reading all the papers, blogs, and group chats. But I’ll also be spending time talking to people outside of the tech bubble, studying history, and being inspired by creatives. It’s definitely more fun, and I think in the long run, it will help me make some great investments.

I saw a tweet last week from a Dad saying his son put a prompt in GPT-3 about a character he made up, and a bedtime story was generated, and it was exciting that now they could create an entire series, with a new story to read every night. It was cool, and it got me thinking about a new age for fan fiction. I was going to write a post about that, but when I sat down to write it, and tried to find the tweet, instead I found a bunch of tweets about other parents doing the same with their kids.

There was a parent who went a step further, and leveraged Dall-E to help animate the story they were creating. They weren’t alone in that idea. My search quickly yielded an engineer who spun up a GPT-3 bedtime story generator with Dall-E illustrations. This feels small and huge all at once. My gears are turning.

Many people talk about creativity as the ability to hold onto the perspective and uninhibited imagination you have as a kid. Kids are constantly making up stories. They are constantly living in the impossible, because when you’re a kid, everything feels possible. I don’t know many kids who are going to sit down to write and illustrate a book that would be published. Things mostly live in their head. When they learn to write, in the early years they often lack the vocabulary to fully communicate everything in their minds. But these new primitives challenge all of what was once possible. New tools that allow people often in their most creative phase of life, to also begin to create with little to no friction. Could the next best selling children’s book author be a child? It doesn’t sound that crazy. It sounds possible. Maybe even inevitable.

Beyond children’s books, the idea of high quality personally created media is fascinating to imagine. What if I have some rough ideas for a fantasy sci-fi thriller. I probably won’t sit down to write the next great fantasy novel, but I will plug some stuff into GPT-3. Based on the trend line of how powerful these AI tools are becoming, and how high quality the outputs are, it begins to push our traditional thinking on what it means to produce creative work. What kind of creative talent gets unlocked when starting, and seeing the results of your ideas feels easy and almost instant. Momentum can be powerful. 

There’s a lot more to unpack around this shift, but I have to write another post soon, and these posts are 100% human brain generated (for now), so I need to keep some insights for the next one. Stay tuned.

The transition from silent to sound films is one I never really thought about before, but it’s fascinating. Being successful in one medium, definitely doesn’t guarantee crossover success in another. Memorizing and delivering lines. Having the right kind of voice. The ability to sing. It’s a different kind of acting. There’s a scene in the film, where the star actress continues to miss her mark on the stage while shooting a scene. In the past, during silent films, this wasn’t the biggest deal, but in the sound film era, the marks were meticulously placed in accordance to where microphones had been rigged above. The skills required to succeed in these new kinds of films were different. What it meant to be good was quickly redefined.

The back half of the film gets dark, as the former star actress struggles to remain relevant, as we see the film industry evolving quickly, and many former stars unable to keep pace. Of course, if you follow startups and the history of technology, this story probably sounds familiar. It is what defines the rise and fall of companies across industries. Technological shifts create opportunities for new winners to emerge, while simultaneously forcing incumbents to adapt or risk becoming irrelevant. At least this used to be popular wisdom. It’s why founders create startups. It’s why venture investors deploy dollars. Everyone is trying to start or back the next big thing. And to become the next big thing, you often have to disrupt one of the existing big things. In recent years, many have questioned if that popular wisdom of disruption still held true. The big dominant tech players seemed to only become bigger and more entrenched with each passing year. With fewer startups able to directly compete and take market share. People claimed that this generation of big company leaders had learned from past shifts, and were trained in the art of disruption. Now many are left wondering what’s possible for new entrants today.

The rise of crypto into the mainstream, followed by a renewed interest and excitement from the broader ecosystem in AI on the heels of exciting progress from OpenAI and others has people in the space imagining what the future might look like, who will get to define it, and where value will be captured. These are questions we are constantly asking ourselves, and conversations we are having as a team, and with Founders who are trying to be a part of shaping the future. We’re still trying to wrap our heads around where value will accrue with these new shifts. Who is best poised to capture it? What conditions need to exist for startups to have a path to becoming category creators/winners against very capable incumbents? It’s an exciting time to be building and investing at the edges, carving new paths, and trying hard things. If you’re building something new, that you believe can be huge, I’d love to hear from you and learn more.

Introducing El Cap

Collision theory states that when suitable particles hit each other, only a certain percentage of them will result in a change. These collisions are the ones with enough energy at the moment of impact to break existing connections and form new bonds. In many ways, El Cap’s story is one of collisions, where people, companies, and technologies collide with enough energy to form powerful new bonds. This is how our partnership came to be, and it’s a core concept of our investment philosophy.

Before starting El Cap together, we took wildly different career paths. Stew, a Salt Lake City native, spent the first seven years of his career as an NFL linebacker. After retiring from professional football, he joined Goldman Sachs’ investment banking division on the TMT team. His experience there led him to Steadfast, a Tiger Cub hedge fund in NYC, where he invested in technology companies.

Coming out of undergrad, Kunal, an Indian immigrant raised in New York, joined his family’s international logistics business to help modernize operations, grow revenue, and ultimately exit the business. As a lifelong early adopter of technology, his curiosity led him to Collaborative Fund, where he explored early-stage investments and worked closely with existing portfolio companies. Recognizing that there was real value in being on the other side of the table, he later joined Core Labs, a 500 Startups-backed product studio that was focused on building tools around the future of work.

Forming new bonds

While we are incredibly different people, we do share some similarities. We are both men in our 30s, who enjoy Harry Potter, fantasy shopping on Zillow, and eating Mexican food. We are also drawn to technology, and passionate about its potential as a transformative force and engine of progress. When we collided for a coffee in mid-2018, these shared interests became evident early in our conversation and we quickly formed a strong bond.

Energy alone is not enough for a successful collision. Particles must also be of a suitable type. When we were introduced through a mutual friend—and a forty-five-minute chat turned into a wide-ranging, several-hour discussion—it was evident that despite our differences in experience and as people, we shared a common set of beliefs, priorities, and attributes. Some of these were apparent in that first conversation, others surfaced gradually, in the hours we’ve spent learning, debating, and building together.

In computing, primitives are the simplest elements available. They are the building blocks used to construct everything else. At El Cap, our primitives—teamwork, curiosity, tenacity, and independent-thinking—are the foundation of our partnership; the common ground that enables our constructive and open dialogue. They also underpin the relationships we have with founders and will be the basis for new bonds that we form. While many aspects of our job are focused on identifying and embracing change, our primitives should be immutable. Constants to keep us grounded and stalwart amid the ever-shifting technology landscape.

Technology collisions

Another of our similarities is an enthusiasm for the history and evolution of technology. In the early days of our partnership, as we mapped the disruptive path of technology across different industries, business models, and market types, a common theme emerged. In each major disruption, the collision of new technologies and changing behaviors played a vital role—creating reinforcing feedback loops that intensify adoption and accelerate change. A phenomenon with the power to disrupt old models and form new bonds. Despite this common thread, technology’s chronicle has been one of contingencies—a meandering path of switchbacks, dead ends, and missed opportunities, rather than a linear progression from one breakthrough to the next. Meaningful change doesn’t happen on the back of a single innovation, but when a constellation of technologies—some old, some new—reacts to each other in novel and unexpected ways. It is this interplay between seemingly disparate parts that gives technological progress its haphazard nature as well as its potency.

Why are these collisions so impactful? And what makes them exciting from an investment perspective? A collision is effectively a web of interlocking technologies with emergent properties. A combination that creates the potential for new business models, market opportunities, and even entire industries to blossom. Not only do they unlock latent market demand, they provide structural advantages for new entrants as well. In most markets, customer preferences are static and well-defined, thus it is typically advantageous to be an incumbent. In stable conditions, there are few opportunities for new entrants to successfully enter a market. And while it’s not impossible to break in by brute force, it’s certainly hard—like turning the proverbial difficulty setting to insanity mode. But collisions upend the status quo, and customer preferences are no exception. When the customer’s needs rapidly change, the advantage of being an incumbent quickly erodes. All of the corporate sprawl, the root of incumbent power, becomes an anchor hindering their ability to respond. Leaving legacy companies with the operational inertia, and the associated overhead, of a product that fewer customers want.

Collisions can have a powerful impact on customer preferences—a vital ingredient for upstarts looking to successfully enter a market. But they also enable new entrants to build around unique core concepts, fundamental ideas of the job to be done that materially differ from incumbents. By creating solutions with distinct primitive elements that are also more highly attuned to the evolving needs of customers, upstarts in a new market can gain a structural advantage that is difficult for incumbents to counter. It’s these low-level conceptual differences that turn an incumbent’s advantage of an established product and existing user base into a weakness that impedes their ability to counter upstarts.

Take Adobe and Figma as an example. How was a startup, like Figma, able to successfully enter and scale in a design market that Adobe had owned for decades? Adobe had built its design tools for editing photos and images, creating a powerful toolset for isolated design work. Adobe solutions were primarily built with a single user in mind, collaboration was never a native part of their products. As internet adoption became pervasive the demand for digital products sky-rocketed. Projects became bigger and more complex, requiring larger teams of both designers and non-designers to complete. Collaboration became a vital part of the design process for these bigger projects, and with more participants working together on a project version control became a nightmare. The job to be done for design tools had evolved. By leveraging technologies like WebGL and CRDT, Figma built a solution—based on a different set of fundamental concepts—that did this new job well. As a browser-based design tool tailored to help teams collaborate on complex digital projects, Figma can serve new use cases in a way that Adobe structurally can not.

Collisions come in various forms, sometimes they are subtle events, perceptible only by natives of a niche industry. Other times they are violent, deeply impactful tectonic shifts—market entropy incarnate, disrupting the status quo and helping to diffuse new best practices throughout an industry. Collisions are also often interconnected, forming a self-organized meshwork of markets and hierarchies. This co-mingling is key to unearthing new utility from existing technologies through combinations with recent breakthroughs—like microorganisms of the technology ecosystem, reinjecting nutrients vital to future growth.

One of the larger and more exciting collisions today is occurring at the intersection of cloud, connectivity, and data. A collision that encompasses both our investment focus looking forward and all the investments we have made to date. The ramifications of this collision will be tectonic and we are excited to continue partnering with companies leveraging this opportunity.

As monikers for massive trends, cloud, connectivity, and data are loosely defined and widely used. As we think about them: cloud refers to software, databases, and services that are accessed over the Internet, and powered by computers in data centers all over the world. Connectivity is the capacity for different platforms, systems, and applications to interconnect. And, data is information captured, processed, and/or stored by a computer.

By using the cloud, companies don’t have to manage physical servers or run applications on their own machines. Because the cloud allows resources to be shared across many users, it has dramatically lowered the cost of access, allowing companies to leverage computing power they otherwise wouldn’t be able to afford.

Increased connectivity doesn’t just mean more businesses building websites or consumers transacting online, it also signifies the growing appetite for direct connections between businesses; a willingness to leverage things like peer-to-peer networks, APIs, and web applications in core business functions. As connectivity grows, it’s unlocking exciting opportunities and new business cases in nearly every market. The impact of increased connectivity has already been wide-ranging and deeply impactful and it is still early.

As businesses and consumers have moved online, each action they take creates new event data to be captured and analyzed. As a society, we’ll create more data in the next three years than in all of human history. The numbers here are mind-boggling. But not all data is equally valuable, and siphoning through the mountains of potential insights from it can be difficult. As businesses better understand how to interpret and learn from the data available to them, they are able to move faster and more decisively. Efficiently using data to inform business decisions can create material advantages for companies. As data helps define new best practices for building a business, it is also unlocking new market opportunities for businesses to serve.

Cloud, connectivity, and data form a positive feedback loop that is characteristic of a powerful collision. Cheaper access to computing leads to greater capacity for interconnection, which creates more data to store and analyze, and in turn, grows the demand for compute and storage. This flywheel is playing a transformative role across industries and unlocking opportunities that wouldn’t otherwise exist. New frontiers enabled by this collision—like blockchain and machine learning—are already proving disruptive to the status quo and will create trillions of dollars in value.

While the opportunity set is massive, it is critical to avoid the facile conclusion that strong tailwinds will make building a company easier. In fact, the opposite is often true. Collisions are turbulent for markets, a time of transition when the competitive landscape can change quickly. Making even a rough sketch of competitors and partners can be a challenge. Plus, the operational best practices for building in these evolving markets are typically not established. Without the proverbial guidebooks that founders in more stable industries have at their disposal, navigating a business in these conditions can be treacherous.

New best practices

The fluid aspects of building near collisions are not limited to operations and competition. Often the customers themselves are still learning precisely what they want. A dynamic that brings challenges, but also gives companies the opportunity to change how customers think about their own workflows. Successful companies will introduce better fundamental concepts that meet user needs in a way that pushes their customers forward, spurns greater adoption, and enables new ecosystems to form. The best companies don’t stop there but take an active role in fostering and directing the growth of these ecosystems in ways that further empower participants. Taking a staid approach to building a business is insufficient in today’s rapidly evolving world. Companies have greater visibility into customer usage than ever before, and winners and losers in a given market will be decided by which teams can more efficiently experiment, iterate, and learn. In this paradigm, customer experience is the new logistics, integrations and data are the new suppliers, and rapid learning and iteration are the new operations.

As best practices for building a company evolve, the approaches that investors take must adapt in kind. Finding the proper balance of opportunism and forbearance is the enduring struggle of any investor. Too often, those who have had success doing things a certain way become sclerotic in their approach—rigid and unwilling to adapt. Continued self-assessment is one of the ways we hope to hone our balance and avoid common pitfalls. And as we take stock of the funding landscape, new business formation, and tectonic shifts in how businesses are built, we are more enthusiastic than ever about our positioning and approach. It is an incredibly exciting time to be investing at the earliest stages of innovation.

The other half

An investment framework is a formalized and structured method to help with decision-making, serving as a guidepost for decomposing a problem and focusing attention on the most critical factors. It is an important part of the investment process. But in Venture, particularly at the earliest stages, deciding to write a check is only half the battle. We don’t believe that venture investing should be a passive activity, and while we are aware and respect that it is ultimately the team's job to build the business, too many investors use this as air-cover to not get involved at all.

Our approach with a company post-investment is a little different and can be summarized with this simple axiom: add value, don’t just capture it. Capital is abundant, focus and engagement are not. We don’t view an investment as a ticket to ride, but rather as an invitation to roll up our sleeves and get to work. We never want to simply be a check for entrepreneurs. Building is hard, and we believe involved investors can have a material positive impact on the outcome of a business. Taking on project-level work is a defining part of our approach and our willingness to do so is often a differentiator that founders value when evaluating whom to work with. It also enhances the working relationship post-investment, and we can’t imagine doing this job in a more passive way.

Getting closely involved with companies also creates a virtuous cycle for us. Taking on project-level work grows our institutional knowledge by giving us hands-on experience solving problems. This new learning informs future interactions with all companies, deepens our understanding of the challenges that founders face, and makes us better investment partners for the founders we work with. Our goal at El Cap is to be as closely aligned with founders as possible. Regular communication and collaboration help to remove the performative dynamic that invariably exists between founders and investors.

Investing is not an abstract exercise, we are bound to specific companies, full of people with unique imperatives and personal histories. At its core, early-stage investing is a people business, and it is that aspect of our job that gives us the most pleasure: the part that doesn’t fit on a spreadsheet, that resists structure and design. The way in which, when it works, a partnership between investor and operator—and by extension, a company—proves to be a chorus rather than a string of solo acts. When disparate ideas, experiences, and desires are harmonized into something greater than the individual parts. When faced with inevitable adversity, it is the human connections, the bonds formed in joint effort, that fortify an organization and ultimately determine its fate.

This letter is published on our website for two reasons. The first is for you, the founder who is searching for a partner in your journey to build a business. We want you to better understand who we are, what we’re excited about, which values drive us, and how we think about working with people. If a lot of what you just read resonates, then at the very least, we imagine we’d have a great conversation. The second reason is for both of us. We composed this letter at a period in time when we’re scaling our firm and laying a foundation that will allow us to do this work for many years to come. Time and progress have a way of sometimes clouding one’s perspective on what’s truly important. This document serves as a totem for us, something to revisit from time to time, ensuring that we are being true to our past selves, who had all the excitement and clarity of building something new.

Stew & Kunal

At El Cap, we think and talk a lot about what work is going to look like for millions of people in the not too distant future. Even before Covid, we believed the tide was shifting towards more flexible work, teams working asynchronously, and a significant number of employees working from different places, rather than in a single office. A global pandemic that forced all of us into our homes only accelerated this shift.

We’ve seen this sudden shift playout in our portfolio, as leadership adjusts workflows to keep their teams connected, motivated, and informed—all while trying to develop and maintain a strong culture. Understanding that where people work from isn’t the only thing changing, but also how they work is being transformed is critical. This insight informed our investment in Friday, a team that is building the command center for remote work.

An exciting part of the rise of more flexible work situations is that it should hypothetically give people more freedom to do personal things at times and in ways that weren’t easy or acceptable in many work environments in the past. Want to travel to another part of the world for two weeks, and work outside the office? For most of us, that would previously have proved difficult, but with more teams working asynchronously, time zones become less of a factor. Want to go run errands in the middle of the day, or get a workout in before lunch? You can now build your day in a way that lets you optimize both for productivity at work and happiness outside of it.

Until recently, El Cap was a two-person operation and we didn’t have to give a lot of thought to how we communicate and how we work. We take notes in Notion, communicate real time on Discord, and for anything more complex or nuanced, we’d simply ping each other on Zoom. Now that our team has two additional people, and each of us is focused on different things at any given time, we’ve been forced to build more processes and structure in how we work and communicate. At first, the trade for more structure and process might seemingly mean less freedom and flexibility, but in fact it is very much the opposite.

What I’ve learned in recent weeks is that building more processes around how we work enables us all to be more productive, and have more flexibility in our day to day lives, not less. On our team, the concern is never if people are meeting their responsibilities, rather it is always making sure we are collectively working together towards our common goals, even if we are focused on different parts of a larger shared mission. Building processes sets clear expectations across our team. It allows us to focus more time on executing and doing our best work, while also enjoying the benefits of a job that allows for greater flexibility.

Our internal processes are a work in progress, but I’m already excited about the direction we’re moving. I don’t know what our team will look like in ten years, but my goal is to make sure—whether we are four people or forty—that we will always be able to make room for everyone to do the things they care about outside of El Cap, while still doing the best work of their lives with us.

@KunalTandon

I recently got my first car at the age of thirty-five this past October when I made the move to Austin, Texas. I also spent very little time in Austin before deciding to pick up my life in the middle of a global pandemic. Needless to say, but Google Maps has been a lifesaver. Fun question - how much would you pay per month for Google Maps if they decided to charge for it? I don’t know the answer, but it would be an incredibly high number for me. Ok, I digress. I’ve driven more in the past seven months than I probably have in the past five years, maybe even ten years.

One of the things that feels like magic with turn by turn directions is that it’s not simply a map, but it’s an intelligent map. The route I’m being guided on is being informed by what’s happening around me. If there is traffic building up ahead, the app will offer an option to take a different route that will save me a few minutes. Sometimes an accident, road closure, construction, or other unforeseen event will prompt the guidance to provide a temporary detour that will ultimately still get me to my desired destination. The navigation is adaptable. It’s reacting to what’s happening in the world, while never losing sight of the end goal. Getting me to where I need to go.

Working closely with founders at the early stage, a lot of conversation is centered on reaching different milestones and achieving set goals. Growing the number of customers. Reducing the churn rate. Expanding the team in a certain way. Improving conversion. Optimizing the go-to-market. All of these milestones are hopefully steps along the way to getting to the ultimate goal, building a large and meaningful company. It’s a CEO’s job to construct a plan, on a quarterly and yearly basis. The budget, the hiring plan, the product roadmap all flow from this forward planning. This is an important exercise, but at times CEO’s can become prisoners of their own plans. Plans work well on paper, but they are often tested when implemented. A good plan should serve as a guide, but when new information or demands present themselves, it’s crucial to be adaptable, and adjust accordingly. Being able to adjust when the path ahead presents obstacles is critical. When the market is changing around you, it’s on leadership to figure out a better alternative path. Rerouting mid-trip can be anxiety inducing, but it’s helpful to take comfort in the fact that you’re still driving towards the same ultimate destination, the twists and turns might just help you get there faster, and in a maybe slightly different looking car than you started the journey in.

@kunaltandon

My partner, Stew has previously written about how busy we’ve become busier as more time has passed in our journey building El Cap. It has become common for us to feel nostalgic for our youth, where we had more free time, and the ability to get lost down any rabbit hole that piqued our interest. I’m a believer that college is wasted on the youth. Instead, I wish I had the ability to spend four years in my thirties taking interesting courses, having time to spend in the library, all while being surrounded by others on their own intellectual pursuits. But I, like most humans, make the mistake of romanticizing the past. When I step back, I remember that I grew up tolerating school, doing just enough to be a “good student.” No more. No less. But I do love learning. It’s why I feel incredibly fortunate to do this job. When I think about this seeming contradiction, I think I finally have figured out where the disconnect for my love of learning and my contempt for school comes from. In most schools around the country we are taught things, forced to memorize them, and then regurgitate what we remember on exams to demonstrate how well we understand the material. I’m skeptical that this is the most effective way to gauge understanding. I’m even more confident that this system is not the best way to encourage children to fall in love with the act of learning.

Most kids are curious. They are often discovering things for the first time. They ask why. A lot. Somewhere along the way, many have this curiosity slowly chipped away at. When learning is not guided by curiosity and it’s not intrinsically motivated it is harder so sustain. The pursuit of some other goal, whether it is a good grade on an exam or nailing a job interview might motivate someone to learn, but it will never be an equal substitute for genuine curiosity. Wanting to learn because you’re interested in something will always be the best driver, because you will always want to go deeper to really understand something new.

As a generalist investment firm, we’re not deep experts on any particular area. We have frameworks, ideas, and theses on what we think the future might look like, and how different products can play a role in building that future. We are always looking to get smarter. Our curiosity leads us to whitepapers, blog posts, podcasts, books, and conversations with smarter people than us who are kind enough to give us some of their time. Some of this pursuit of learning is reactive. We are diving into a particular area for potential investment, or trying to get smarter around a particular business topic. Often, our curiosity is proactive. We’re learning about things not directly related to our jobs. I believe this learning is what actually makes us better investors. We’re able to connect dots, develop new ways of thinking about problems, and have a unique prism to look at the world.

Curiosity drives a lot of our work at El Cap. It’s also one of the most important qualities we look for when evaluating founding teams. So much of building a company and being an effective leader is how much can you learn, and how quickly can you learn it. You need to be driven by the pursuit of getting a grasp on new concepts and building new skills, and doing both quickly. This is especially true for first time founders. In my experience, the highest performing founders are learning machines. They aren’t deterred by not knowing, rather they are energized by the challenge of getting smart about something new. Understanding what people are excited about and how they are learning new things outside of work, unrelated to their jobs is often a great signal to how effective they will be out being learning machines on the job.

In a world that is being rapidly shaped at an unprecedented rate, the half-life of knowledge has never been shorter. The only way to remain relevant is to commit to a life of learning, exposing oneself to new ideas, and fresh ways of thinking. I believe the best learners are not those who engage in learning because of obligation, rather, people who are driven by curiosity that leads them down the next rabbit hole.

@kunaltandon

Often, by the time El Cap invests in a company, we’re the first institutional capital a company receives. They are often bootstrapped or have previously raised sub-one million dollars through Angel investors. That first chunk of capital they are able to get from early believers is precious, and they are expected to do a lot with it. Run experiments, get something built, make a key hire or two, and be able to prove out enough to go raise a larger subsequent round of capital. That initial mindset, that the founders have to do everything to create something is valuable, especially in those early days. It’s not only valuable, it’s critical to buy more time to bring the team’s vision to life.

I’ve previously written about the shift founders have to make from a scarcity mindset to an abundance mindset when they make the transition from bootstrapping to raising outside capital. This shift with outside capital also provokes another change that founders have to make for the company to keep executing efficiently and to continue growing. Founders have to become comfortable with firing themselves from some of the jobs they’ve been doing alone for an extended period of time. Having more resources means that you’re now able to hire more people, and you need to empower those people to do what you were previously doing, with 100% focus and a higher level than you ever could have, while performing all the other responsibilities of a founder and leader.

Making this transition from doing everything, to giving up more responsibilities to your growing team is essential for any founding team that is making the transition from testing an idea to building a company, but isn’t always easy. It’s natural to feel protective of everything you’ve achieved to date, and feeling like you’re the best person to do everything. Most founders eventually realize that to achieve their ultimate goals, they cannot do it alone. The best founders understand this sooner rather than later.

When we meet founding teams early in the pitch process, we’re evaluating them for a number of different things, including self-awareness and the ability to adapt when presented with new information. In that context, it was incredibly refreshing to drop in on this back and forth between two different CEOs in our portfolio.

@kunaltandon

The ability to learn new things quickly. This is a critical skill for founders, employees, companies, and investors to be successful in their respective roles. If you work at an organization that is being transformed by growth, chances are your role will be transformed too. The skills that got you the job may no longer be sufficient as the demands of the organization evolve. Even organizations themselves need to be adaptable and able to learn quickly. This is how you battle incumbents, but also how the best incumbents stave off disruption from startups. The demand for learning doesn’t slow down as a company grows, it increases as time goes by. In our work with founders, it is clear to me that their unique positions are the most demanding of change, and the ability to learn quickly. Leaders of companies are so important to getting things done at a company, so as the organization grows and changes, so must the leaders and their skill sets.

As investors, we are no exception to the requirement of being able to learn new things quickly. We’ve written about how we are generalists, and part of our process is learning from entrepreneurs about problems that plague different industries and the potential opportunities to solve them. So learning quickly is an essential part of our job. If we’re doing our jobs properly, we’ll continue to be lifelong learners. So it’s not crazy to think that as we continue our jobs as investors, that the longer we do the job, the better we should become over time. We often talk about how our primary goal is staying alive long enough to get really good at what we do. On a recent episode of the Invest Like The Best podcast, distinguished investor Charlie Songhurst explained the idea of the experience curve, stating:

Don't study greatness, study failure, and work out how not to be that. If you're sort of thinking of history, trying to be as good an Emperor as Augustus would be really difficult, but not being as incompetent as Caligula seems really easy. And so as a practical advice, not making the catastrophic mistakes and just surviving long enough feels like a good strategy. There was some military general somewhere that said: “it's not that good soldiers become veterans. It's the lucky soldiers become veterans, but veterans are good soldiers.” Meaning just the luck of surviving the first few hours put you up an experience curve. And I see entrepreneurs transform in those first 36 months of leadership and management. And half of it is just stay alive till you get good.

You want to study failure, make mistakes quickly, and move up the experience curve as rapidly as possible. More simply, you want to survive long enough to get good. If getting good is the goal, survival is a requirement.

In a few months, Stew and I will have been working on El Cap for two years. With each passing day, we feel better about our approach, more confident in what we’re building, and encouraged by the feedback we’re getting from the founders we work with, the people we connect with, and the other investors we work with. We are excited by our personal progress to date, which has been rooted in our commitment to learn quickly. But we’re also cognizant of the fact that we both still have so much to learn, and more room to grow. Our improvement over these almost two years doesn’t make us complacent, instead it reemphasizes the potential benefits of time spent in our role, and refocuses us on finding ways we can continue to improve over time. We think we are getting good at this job, and with more time, a lot of hard work, and a healthy sprinkling of luck, I believe we could become great. We’ll let the results take care of themselves though. Our focus will continue to be on the process of learning and improving every single day, because without that we might not survive long enough to continue climbing the experience curve.

@kunaltandon

There is a lot to love about living in Los Angeles, but how you get from one place to another is not one of them. In a very car-centric city, people are often commuting over tens of miles each way to/from work every single day. Most of these miles are traveled in brutal bumper to bumper traffic. Traffic defines so much of life in LA.

Moving around NYC is in stark contrast to getting around in Los Angeles. It is common to walk to places in NY. That is part of the appeal of living in the city. Almost everything you need is usually just a short walk away. For slightly longer distances a bike will do the trick. Biking and walking to get around are great, but NYC’s real superpower is the NYC Subway. It’s far from perfect. I’ve definitely quietly (and sometimes not so quietly) cursed at it while being delayed, or stopped for train traffic (not convinced this is even a thing) but it is still one of the most impressive feats I’ve ever experienced. An intricate system that allows anyone to access any part of the city for $2.75, no matter how far of a distance they need to travel. It runs 24 hours a day, 7 days a week, 365 days a year. As a New Yorker, it’s easy to take this for granted. I certainly did.

The NYC Subway is great because it provides access to everything the city has to offer. But it is truly special because it simultaneously offers access to everyone the city has to offer. Rich or poor. Young or old. Upper East Side Mom with two toddlers. East Village skater. Williamsburg Hipster. Jackson Heights shopkeeper. Staten Island construction worker. They all need to hop on the same train, and for some amount of time day after day, week after week, year after year, they are forced to be aware of one another. I believe this is the real underappreciated part of NYC’s Subway, it’s an empathy engine. Hopping on any train provides the likely possibility that you will spend some amount of time with people whose lives are radically different from your own, and that you might rarely cross paths with in other parts of your life. It forces you to see the humanity in everyone that you’re sharing a space with. It shows you the stark differences between you and many of the people who call the same city home. But more importantly, it also constantly serves as a reminder for how similar all of us really are. New York City, and particularly the subway system, throws together a bunch of people, in a space that often feels too small. It reminds us that everyone is facing their own challenges, trying to do their best, and more often than not, will step up to help one another.

Why am I here writing about NYC’s Subway System as an empathy engine? At El Cap we talk a lot about obvious secrets. I described this idea previously as entrepreneurs come to us and share a secret about something that is broken in an industry, and why they believe the product they have built can repair it for so many people. The problem they are solving is not a secret to those who encounter it regularly, and if the solution they are building is compelling, it inevitably feels obvious to everyone who intimately understands the problem. If the product is successful, it becomes obvious to everyone else eventually. While new tools and services have made starting something easier, we need future builders to push themselves to increase their exposure to different kinds of people, and step outside of their own world to learn about different kinds of problems. To better understand what real opportunities exist to create value for others. Exposure is the first step to understanding. Only once we understand challenges faced by others can we even begin to think of how to build solutions.

@kunaltandon

At El Cap we’re often in conversations with founders who have been building a business with little to no outside capital for years. They have been focused on building a product, talking to customers, iterating as they learn more, and trying to grow in a continuous cycle. Bootstrappers. Much of their time to date is spent thinking about how to accomplish the most with the least. By the time we’ve connected with this kind of leader, it’s likely they’ve had time to form some strong habits. And these habits are often the source of early challenges if we invest.

We aim to invest in businesses that have reached an inflection point. Things are working, product-market fit exists, and more capital can help the business grow more quickly in concrete ways. This can take many forms. More money to experiment with marketing strategies, to ramp up hiring, to add product verticals, to expand into new markets, etc. In simpler terms, most founders we talk to have already affirmitavley answered the question of “Can this be a business?” Chances are by the time you’re talking to me; a new question has popped up. “What would more money enable you to do for your business that you can’t do today?” Founders fundraising usually have great prepared answers for this question.

Yet simply taking capital for the first time doesn’t flip a switch in the minds of every entrepreneur. Bootstrappers are often forced to operate from a limited resource mindset in the earliest stages of a company. I call this a scarcity mindset. Shifting to a more abundance driven mindset can prove challenging at first. I believe an abundance mindset enables founders to think bigger. It empowers them to ask “what can we do, try, and learn now that there is more capital to support our goals?” Surviving is no longer the most important consideration, rather optimizing to thrive should become the primary focus.

I see it as part of my job to help the leaders in our portfolio make this transition from scarcity thinking to an abundance mindset. This responsibility is an important one, but not a difficult one in my experience to date. We’re fortunate that we’re backing founders where the biggest challenge is to encourage them to use the capital we’re investing as a tool to expand upon, and accelerate the great work they’ve done to date, rather than having to caution them to rein in their spending habits. That feels like a tougher challenge, and a more volatile mindset shift from my perspective.

We focus on discipline, fundamentals, and data driven decision making in our work at El Cap. By extension of what we look for, the founders we partner are focused on the same things, which is always a great starting point from which to evolve.

@kunaltandon

I’d argue that the most powerful force unleashed by the internet is the idea of permissionless innovation. Founders have created many new products and services that make it easier for aspiring entrepreneurs to get started with fewer barriers to entry than at any other time in history. In the past, starting any kind of business typically required a large sum of starting capital, access to expensive distribution channels, and long feedback loops for product development. Where you lived, who you knew, and how much experience you had, combined with your ability to access capital didn’t determine if you’d be successful, but if you could even attempt to build anything in first place. The internet has rapidly shifted this reality for all of us. Almost anyone can get started today.

Many are now familiar with the narrative around how the rise of cloud computing dramatically reduced the cost of starting a technology company. This shift enabled founders to build MVPs, raise less money, begin testing their products, and continue iterating towards product-market fit. This trend has largely defined the last decade-plus of technological innovation.

This shift to cloud computing enabled a cambrian explosion of online products and services, which in turn have enabled future founders to start something new even more easily than before. The trend of fewer barriers to beginning is promising for anyone who is excited about innovation, progress, and democratizing entrepreneurship.

Have something to say or sell? Build an audience on Twitter, LinkedIn, Facebook, Instagram, YouTube, TikTok, etc. Have them support your work by using Patreon, Kickstarter, Shopify, Stripe, Substack or a host of other options. You’re no longer dependent on traditional gatekeepers in industries to decide if you’re worthy of time on their platforms. You no longer have to audition. You just have to perform. The market will choose whether or not to support you. The other big shift? You don’t need to scale a business to millions of people to build a massive company. The market of potential customers is anyone with an internet connection and the ability to transact online.

As it became cheaper to start technology and technology-enabled businesses, a huge barrier still existed for people who weren’t technically proficient. Building websites, accepting payments, ensuring security, capturing and protecting data, setting up analytics, the ability to design, are just some of the barriers that still existed for many people who wanted to bring their businesses into the modern digital age.

An exciting trend in more recent years is how overcoming a lack of technical proficiency has become easier for a greater number of people, simply because of all the new products and services that have been created as a result of the reduced barriers to entry enabled by cheaper cloud computing. No-code and low code tools like Webflow, Zapier, Parabola, Airtable, and countless others are reducing the barriers to building for even more people.

Powerful API’s that are more simple to deploy have also been an incredible new tool for this emerging class of not traditionally technical builders. Products like Stripe, Twilio, Plaid, Checkr are a few of the products that have made deploying previously expensive and cumbersome technology/processes increasingly straightforward and affordable. With cost becoming less of a factor, now technical ability is also becoming increasingly less important at the earliest stages of starting something.

As an investor, I'm excited by the rise of more tools and services that enable domain experts from non-technical industries to bring their insights and ideas into the digital world with fewer barriers. I believe every industry will be reshaped by technology. It’s not a question of if, but when, and when might be much sooner as starting continues to become simpler.

@kunaltandon

As an immigrant, and child of immigrants, my life has been spent watching my parents figure things out. Then, as an adult, having to figure many things out for myself that my parents never experienced. The life of an immigrant is a journey of constantly running into new obstacles that need to be understood and then overcome. Many of the obstacles are increasingly challenging because we lack sufficient context, experience, or simply haven’t figured out where to find the solution. Immigrants often lack the social support systems that many others can easily turn to. When someone chooses to uproot their life along with their family in the search of opportunity, they are entering into a bargain. In return for a chance, much of their life might just prove to be a series of things that they don’t know yet, but will be required to figure out.

The mindset of an immigrant can’t be “I don’t know English.” The mindset is “I don’t know English yet.” "We aren't living in a neighborhood with good schools yet." "We haven't found a way to balance our heritage with trying to assimilate into our new community yet." "This doesn't feel like home yet." Every challenge is appended with yet, because immigrants inherently recognize the deal they have opted into.

I think about how the yet mindset applies to all of us, not just immigrants. In today’s world, to stay competitive and current, learning and growth don’t just end the day you graduate from school. Personal development is a never ending journey. We are all required to be forever students now. This idea is most apparent to me when connecting with operators who are building companies. They are often doing things for the first time. A CEO’s job demands constant evolution, the learning curve is steep, and the journey along that curve is often lonely. The earlier in the journey that a leader can adopt the yet mindset the better it is for them and for their company. By simply framing your challenges as things you haven’t overcome yet, they no longer seem like ambiguous insurmountable mountains. Instead, you can begin to focus on the incremental steps that will make up your climb to the other side.

When we evaluate operators to partner with, I'm always trying to understand if they have a yet mindset. Are they intimidated or invigorated by the challenge of doing things for the first time? Does not knowing how to do something lead them towards action or inaction? Are they quick to acknowledge when they need to ask for help and leverage others around them, or do they turn inwards and shut down? None of us are perfect at this, but there are certainly people who are more inclined to meet new challenges head on, not just because it is the best option, but because it is the only option.

Problem solving, managing one’s own psychology, and continuous learning are critical skills for all of us to develop. I’m always looking to learn more and do better, both for myself and for the teams in our portfolio. I’d love to hear from any of you on ways that you dive into learning about new topics and overcoming challenges. Please feel free to reach out, even if we don’t know each other...yet.

@kunaltandon

While we can make a lot of progress on our own to understand the unique opportunities of a new industry, the operators who are native to these industries are the best source of educating us about the present and the future.

Many successful businesses have been built by people who experienced a pain point in their personal or professional life, searched for a solution, didn't find what they were looking for, and decided to build it. Chances are if you're experiencing a problem and are searching for a solution, you're not the only one. And, if it turns out that there are many people who have the same problem, and are willing to pay for a solution, you might have discovered an interesting business to build.

Each job and industry has its own quirks, workflows, and requirements. As a small investment team, we can't be experts on everything. Instead, we focus on having a prepared and open mind, so we can quickly learn from, and empathize with, operators who teach us about the problems they are solving. As generalists, when we speak with domain experts we often feel like they are sharing a secret with us. A secret about something that is broken in an industry, and why they believe the product they have built can repair it for so many people. The problem they are solving is not a secret to those who encounter it regularly, and if the solution they are building is compelling, it inevitably feels obvious to everyone who intimately understands the problem. If the product is successful, it becomes obvious to everyone else eventually.

As investors, we are in pursuit of learning these secrets from operators. In our minds, a good investment is something that becomes obvious to us when we learn about the problem, feels like it should already exist but doesn't for the intended customer, and once it is successful, will feel like an obvious solution to a big problem that many people don't have knowledge about. Obvious secrets are everywhere, and we're excited to hear more of them, and help bring some of them to the people who already understand why they are obviously needed.

@kunaltandon

A lot is currently being written about work from home and all the things that will be better about it. The pessimist in me can’t help but wonder about what we’re losing. Technology and behavior change will offer some good enough substitutes to a lot of in-office culture, but the one that I struggle to understand translating to distributed teams is how you engineer serendipity. The conversations that happen over lunch, the small talk while waiting for the elevator, being able to walk over to someone’s desk to quickly chat through an issue which leads to a broader conversation that you likely wouldn’t have had otherwise, time to talk through a news story or piece of content without it directly relating to anything you’re working on. For some jobs this kind of serendipity might not be essential, but for many jobs and companies it is critical.

Thinking about our own work together at El Cap, Stew and I are often working on different things at different times. Pre-Covid we spent most of our working hours together, with headphones on, but often breaking to share something on our computer screens, launch into a conversation on a topic, or chat through an issue related to an existing or potential investment. These things were never explicitly put on our calendars, they happened organically, and we are still figuring out how to recreate this space in our Zoom-focused workflow.

Steve Jobs understood the value of serendipitous interactions among colleagues. He valued it so much that when he was designing Pixar’s office, Jobs took great care in designing the atrium and where he placed the bathrooms so the design would lead to serendipitous interactions between people across the company. Sometimes these conversations would just be casual chatter, but in some instances an employee might be heading back to her desk with a new idea. What is the virtual equivalent of office design for serendipity?

Many of the products and services that are popping up for distributed teams and remote work are rightfully focused on collaboration, communication, and productivity. At the same time, I believe we need more products focused on encouraging and preserving the humanity, fun, and randomness of life and work, even as life and work look different than they did in the past.

I’m not sure what the future of work holds for this specific idea, but I believe it's important that we try to figure it out. There are many different kinds of jobs and workplaces, chances are that the market will need and support more than a single solution. I’m excited to see what the future holds for the engineering of serendipity, so if you believe you’re building it, please reach out to me.

@kunaltandon

Until last year, you likely thought of Spotify as a music company. Spotify is the place you go and listen to almost any song you can think of. 90’s Kunal, who was constantly putting his family’s shared computer in harm’s way by searching for high quality MP3’s on Kazaa, Limewire, and Napster definitely wouldn’t believe today’s music consumption reality. How easy, legal, and affordable accessing music is today was unfathomable to most of us back then.

Spotify is a great product for listening to music, but it wants to be more. In Feb 2019 Spotify announced two acquisitions. The first was Anchor, a company that makes it easy for anyone to record and publish podcasts. The second was Gimlet, an award winning narrative podcasting company. Spending an estimated $340 million dollars for both companies was a very clear way of announcing that Spotify has ambitions beyond being a music streaming service. More recently, Spotify announced its acquisition of The Ringer, a media company that has built a robust podcast network. Spotify is a listening company.

If we look at Spotify through a listening company's lens, aggressively moving into podcasting makes a ton of sense. If users already come to your service to listen to music, it's not crazy to think they might also enjoy listening to podcasts in the same space. Podcasting is still an emerging category and has the potential to have much more favorable economics for Spotify than working with the music industry ever will. Maybe Spotify has studied how Netflix leveraged the film studios to build a customer base before pouring billions of dollars into creating original content that they wholly owned. It would be impossible for Spotify to do this with music, but podcasting might provide a path towards more independence and greater leverage with music labels.

When I think about Spotify building a listening company, I can’t help but wonder what Apple thinks about all of this. Apple still has the incumbent advantage with the Podcast app installed on every Apple device. Apple also had a dominant position in music with iTunes, but has ceded dominance, and was late to streaming with Apple Music. Spotify should continue to move quickly, and execute well, because it’s only a matter of time before Apple takes listening as a serious opportunity, and begins paying closer attention on how best to dominate the market. This will be an interesting space to watch develop over the next few years.

@kunaltandon

Doing my duty as a citizen of the world, I’m writing this while self-quarantining. In this time of physical isolation, rather than dive into one of the countless highly recommended new TV shows or movies, I found myself revisiting one of my old favorites, Lost.

Lost tells the story of a group of strangers who survive a plane crash, and find themselves stranded on a mysterious island. Early in the series, one of the leads of the show, Dr. Jack Shepherd emerges as the leader of the group. He explains “It’s time to start organizing, we need to figure out how we’re going to survive here...last week most of us were strangers, but we’re all here now, and God knows how long we’re going to be here. But if we can’t live together, we’re going to die alone.” Live together, die alone. It’s a theme that the show comes back to several times throughout the run of the series. It’s also a line that I’ve been thinking about before beginning my rewatch of Lost, as around the world we are told that in order to survive, we must all separate. The irony is not lost on me. The pun is not intended either.

While we are required to be physically apart to fight the spread of COVID-19, our effort will only be as successful as our ability to do it together. If people don’t cooperate, we cannot achieve our goals. Cooperation on a total global scale is difficult, many would say impossible, but it is necessary. It’s necessary in the present, and it will remain necessary. We will get through the COVID-19 pandemic, but other global challenges will still persist.

What has been encouraging in a time where things seem awful, has been seeing how people are responding in a positive way by leveraging the tools that are available to them. Zoom has become a tool that’s just not enabling remote work, but homeschooling, and social “gatherings.” Companies like Square and Shopify have stepped up to support small businesses and online merchants. Food delivery services like DoorDash and UberEats have removed delivery fees to encourage more ordering from local restaurants, which have been forced to close their dining rooms. Online communities have coordinated donations of masks, meals, and other supplies for medical workers in hospitals across the country. On NextDoor you can see younger neighbors offering to run errands and deliver groceries for their elderly and immunocompromised neighbors. Musicians are doing livestream concerts from their homes to entertain everyone who is doing their part by staying at home. Google docs with lists of people looking for work, and companies that are hiring are being put together for millions who have lost their jobs. This list goes on and on. Technology has been the target of a lot of criticism over the past few years, much of it earned, but in this difficult global crisis where we physically have to separate, it is helping us stay connected.

As a collective people, we have all been challenged. We will get through this. We will face new challenges in the future, and I hope we continue to find ways to work as a team, and continue to live together.

@kunaltandon