TLDR

If I were to summarize this semi-philosophical text so that someone who was lured in by the vision of investment advice could quickly glance at it and then leave, I would say:

1. Life has a lot in common with investing and vice versa.

2. Investing (especially with good results) can easily make one arrogant and rude, lose focus, and get lost.

3. The remedy could be contemplation - constantly better understanding oneself and the reasons & consequences of one's actions. This allows setting true (to oneself) goals and, on the path to achieving them, continuously improve one's plan.

4. Curiosity about the world, obscured by profits and leveling up in the social hierarchy, can disappear and be replaced by a grift. It's worth not allowing this to happen, to contemplate and follow what led us to take up crypto/investing/.

   • If we don't have a goal and strict discipline, we can be almost certain that fortune will not favor us. The world is too big to comprehend, and as a society, we have achieved so much thanks to specialization. Instead of spreading our energy over dozens of actions, focusing on specific ones and pursuing results in one area is better.

   • Life is more colorful in a group than alone. It is even better when we can choose our group well, knowing what we need from it and what we can give. It's not worth chasing every business, every idea, and every opinion. It's worth living in a society with humility and an open mind. If we give others good energy, there's a chance it will come back to us. Investing is largely about relationships, and it's worth focusing on quality rather than quantity here.

   • Finally, if you want to invest, then you should invest. The worst thing you can do is not make any decisions and stay on the sideline.

5. The Grifty Investoor

   In 2023, my web3 foray felt much different than in the previous years. The allure? A mix of social acclaim, status, and the elusive promise of asymmetric returns. The quest for badges, once the scout’s one, now desired as startup logos, feeds my ego wonderfully, making me not just an investor but a central figure in the unfolding drama in my mind. This pursuit of recognition, though seemingly fulfilling, loses its sheen upon closer scrutiny.

   My past life as an athlete taught me that respect (for oneself as well as from others) came not from the title but from the toils in the arena. Similarly, in investing, the facade of greatness and influence conceals the emptiness beneath if it lacks substance. True merit comes from being at the forefront of action and making bold, non-consensus-driven decisions that bear fruit.

   Reflecting on this journey allows me to recognize my own place and admit that I've lost my way a bit. Embracing slow learning, I look forward to shedding the superficial layers and seeking a more meaningful and influential path in 2024.

   And how can I do it? I think a few areas will allow me to do so.

   Pause and Reflect

   In conversations with founders, I often highlight the value of monthly investor updates as a prime medium for communication between founders and investors. This format, to be effectively prepared, requires founders to develop a spectrum of key metrics to track, gather them regularly, and most importantly, reflect on their situation. It's about giving oneself the time to understand the current dynamics within and around the company, discerning the reasons behind these developments, and attempting to outline a vision for future actions. This process is far from easy and becomes even more challenging when undertaken consistently.

   It's one thing to declare a desire to invest or to chase financial success with stubborn determination. However, it's inevitable that challenges will arise, and without proper diagnosis and solutions (deciding what to do with the current state of affairs), they will firmly hold us in their grasp until we act. Much of my life could resonate with Einstein's famous quote:

   Insanity: doing the same thing over and over again and expecting different results.

   Just as in life, so in investing, I wish to allow myself more often to pause and coolly assess what's happening around me as well as within me (even though it's much harder!). So that a year from now, I could describe my approach to life with Abraham Lincoln’s quote:

   Give me six hours to chop down a tree and I will spend the first four sharpening the axe.

   Ray Dalio’s "Principles" beautifully illustrates how to act to keep our heads firmly on our shoulders:

   

   I believe that much of what surrounds us and what we encounter stems from within. Thus, to excel in our profession, we must not only plunge into our work, however intelligent that work may be, but also focus on self-improvement. Understanding our needs and desires can transform and enrich our lives. The more self-understanding we possess, the more love and goodness we can offer to the world. Through our attitudes and actions, we construct our world and impact others, spending most of our time working on various projects. The energy we bring to these endeavors radiates into the world. I aim to build my world on solid foundations and to feel authentic in it. Therefore, I strive to understand myself better, seeing how it aids in navigating both my personal and professional lives, which are inevitably intertwined.

   Embrace What Brought You Here - Curiosity

   My path to crypto was paved by two forces - the pursuit of profit and curiosity. While the pursuit of profit has undoubtedly improved the quality of my life, allowing me to experience more, it hasn't necessarily made me happier. Thus, the mere desire for wealth for its own sake seems futile to me and can easily blind. When we focus solely on one tree, we lose sight of the forest. This distraction leads to shallow thinking, tossing us from one trend to another without a deep understanding of the field.

   Curiosity, on the other hand, compels us to ask new questions and continuously opens new doors in the rabbit hole we've fallen into. It allows us to peek beneath the surface and motivates us to question the status quo. I'm not sure if it's possible to find truth in life, but I'm certain that curiosity and an open mind make it easier to sift through falsehoods and simply have more fun.

   Despite observing more manipulation, deceit, and shortsightedness now than when I first discovered this market, I want to remember what brought me here. The vision of something new, something better, something intriguing; the remarkable people who decided to change our world, despite it seeming like madness. If our goal is to change the internet and people’s life, it's worth getting our hands dirty. This year, I want to focus more on the wonders of this industry, expanding my knowledge and following what intrigues and fascinates me to avoid becoming a grifter whose only goal is money.

   It's also worth mentioning that fortune favors the prepared. The more we know, the better we can seize opportunities and make decisions - and then, well... maybe we'll find the profit anyway.

   Know Your Target - Because

   If you aim at nothing, you will hit it every time.

   Zig Ziglar

   The abundance of information on Twitter is endless, with one thread potentially leading to ten more, each somewhat related. I doubt the human mind is capable of comprehending everything happening globally, let alone in crypto. Humanity has progressed incredibly through the specialization of individuals in specific fields. Hence, both in personal and professional life, focusing on a narrow area yields greater rewards. Crypto has become too broad to know everything. Concentrating on a few, ideally one or two verticals, allows for developing true expertise rather than superficial knowledge.

   As Chris Burniske (echoing a sentiment originally attributed to David Allen) recently tweeted:

   You can do anything you want, not everything you want.

   Superficial knowledge and acquaintances across various market areas enable quick connections with almost any entity. However, deep knowledge allows us to truly understand intentions, consequences, and whether a project or person is worth our attention and fascination, or if we're merely following the crowd blindly.

   It's easy for me to dilute myself by scattering my focus, chasing the latest trend, oversubscribed funding rounds, my friends' opinions, constantly monitoring the market and my liquid portfolio, and aping in every available opportunity. The difference between adults and children is the ability to leave Neverland. Facing the truth - this approach can't work for me (or probably anyone). Maximizing results is possible when you know what you want and pursue it. Although pure degening can be lucrative and thrilling, I currently see more value in long-term investing, especially early on before a token goes live. This approach affords me time for reflection and decision-making without rush in exiting positions. It also allows for a better understanding of the market, establishing a position within it, supporting founders, and backing solutions I find interesting and worthy of financial commitment. Maintaining a clear mind is challenging when constantly switching between investing (long-term) and trading (short-term). Specialization and focus bring out our best.

   This idea extends to the notion that me, and only me, are solely responsible for every decision (not just investment-related) I make. Blindly following others hinders achieving personal goals and developing critical thinking, leading to stagnation. Only I know "what I aim for," and primarily my opinion should lead me to pull the trigger. While it's beneficial to seek others' opinions, engage in discussions, and ask questions, this should not be the foundation of one’s strategy. Moreover, we should consider the track record of those we listen to, understand their sources and motivations. Mediocrity is not worth our time. Time is limited, so when we give someone our attention, we must be sure it makes sense - especially in web3, where filtering is a skill that everyone should cultivate to avoid being led astray.

   Help Others Win

   It's easy to remain at a superficial level of interaction with our surroundings, primarily expecting assistance and results from others. I believe that to live well, we must follow in the footsteps of Copernicus and overturn the geocentric theory within ourselves. When we no longer see ourselves as the main characters in a movie, surrounded by a sea of NPCs, we can create conditions for collective action and victory. By proceeding in this manner throughout life, I've noticed it becomes easier to collaboratively forge paths to solve problems, enabling all parties to achieve their objectives. Once we understand ourselves and our goals, we'll have more capacity to understand others, making it easier to decide if such relationships serve both sides and what they can gain from them. In such conditions, instead of frustration, we can quickly find support and assistance.

   Being honest with oneself is liberating. It allows us to avoid relationships that gradually degrade us and make us mediocre, as staying in them leads to a loss of self-respect—these relationships often revolve around satisfying basic needs. In the world of investing, this could be access to deal flow or alpha, however you name it. Often, not only are we in a relationship for profit, but the other party is too—it's good to know this, to understand what and to whom we can say and what to expect. It's also wise to devote our energy to people with whom we genuinely want to spend time, whom we admire and feel good around. If we seek such synergies and strive to be better, it's rational to expect the same from others—and in this way, we can achieve our aims, this time feeling good about it.

   This requires work and humility, shifting focus from ourselves and to prioritizing quality over quantity when it comes to relationships. I believe it's worthwhile.

   Making a Wrong Decision is Better Than Making No Decision at All

   When we make a wrong decision, we can gather data and analyze what went wrong. I regret some of my investment decisions, but I regret even more those moments when I failed to make any decision and remained passively on the sidelines, despite wanting to take action. It might seem like a logical fallacy because by not making an investment decision, I'm simply not investing. However, the taste of failure in both scenarios is distinctly different.

   Especially with the thrill of what's happening in the market lately, it might often be more beneficial to take a position on either side of the chart, rather than staying in the mid-curve.

   It’s probably better not to be a nocoiner.

   End Note

   In all of this thinking, there's actually little about investing itself - yet I believe it's these very things that will allow me (or maybe somebody else) to flourish more in the coming year also on the investment side. Life, like investing, appears not to be black and white.

   I would also like to thank everyone who was there for me in 2023, especially in the context of investing:

   Founders I’m close with - to push this industry ahead

   Maja - for helping me on the path to self-discovery

   Antoni - for your trust

   Filip, Jakub, and Alan - for the opportunity to lose magical internet moni in various ponzi schemes with you

   Gleb - for speaking his mind, allowing me to ask him questions

It’s “that” easy

If you find yourself on the hunt for the "perfect investor CRM" or asking "how important is an investor CRM?", you can expect The Great Wave off Kanagawa coming from software providers who will persuade you that it’s the product doing the main work here, but sorry mate - it’s you.

Certainly, having a system to communicate with and build relationships with your stakeholders can be a game-changer when it comes to raising capital. And, while it might not seem vital at the fundraising stage, believe me, it's an investment that yields serious returns down the line. Remember, investors are people too, and they value good relationships and consistent communication - that's where your CRM swoops in to save the day.

So, what are the key benefits of a solid CRM system?

1. It provides clear visibility of existing relationships and future prospects

2. It nurtures existing relationships

3. It tracks the progress of your fundraising round

Mix it with easiness to use, and the ability to do group activities (so more than one person would be able to work with it) and you got what you need to do your work.

*But here’s the thing - fundraising CRMs don't have to be as complicated as understanding quantum physics or explaining blockchain to your grandma. In fact, the simpler, the better. You'd be surprised how a humble spreadsheet (Google Sheets or Airtable) can work wonders (and save you $$$).*

Providing visibility into relations you made and want to make & Supporting existing relationship management

In another way - helping you remember who, where, why, and when you need to go on the next lunch with them. From my perspective, those are the most important things you should know when it comes to your investors:

• Name, Website: Kind of a no-brainer. Who's the firm, and where can you snoop about them online?

• Location: Is your investor sunbathing in Silicon Valley or freezing in Sweden? Keep track, 'cause investors from different geographies behave differently (just like your in-laws at Christmas dinner!)

• Target Partner: You're not just eyeing firms; you need the perfect partner in each one (the person who actually is taking the decision). Consider this your investor match-making homework (and prospecting the investors before reaching out is another game you need to play, but we will cover it next time).

• Similar Investments: Know thy competition. If they've invested in your market segment (infra, consumer-facing apps…), you've got a foot in the door for your outreach emails and talking points.

• Competitive Investments: Pitching to an investor with a competitive investment (who is investing in direct competitors) is a no-go (unless that company has already packed up and left). Make a list, and check it twice.

• Investment Stage: Understanding their favorite investment stages can give you insights into their motivations and potential value-add.

• Typical Check Size: Fill this in post-meeting (great ice-breaker, by the way!) to help you gauge potential investors for your round.

• Assets Under Management (AUM) / Fund Size: A firm's financial power can dictate its behavior and future investments (will they be able to invest in the next round as well, do they invest in tens of companies or hundreds?).

• Tier / Preference: How badly do you want this investor? Tiering helps plan your outreach strategy.

• Prior Relationship: Had a coffee chat or attended a conference with someone from the firm? Jot it down, it could come in handy (if it’s good or on a path towards that, help it! Stay in touch with investors and grab a coffee with them from time to time when possible).

• Who Can/Will Make the Intro? List out your network heroes who can introduce you to the firm. Then, pick your top gunslinger for the job.

• Pipeline Stage: Keep tabs on where you are with each investor. This is like the Candyland board of your fundraising journey!

• Notes: Jot down anything else that doesn't fit above. This can be your free-for-all column!

Track the progress of your fundraising round

That’s the pipeline stage - is it backlog (warm intro one or cold intro one?), had you met them already once, or twice? Is the firm doing the DD or you are about to finalize the deal? It’s up to you how you play it, but good to keep it simple.

And there you have it - a snappy guide to CRM for your investor relations. Get out there and fundraise like you mean it! And remember, in the wild west of fundraising, your CRM is your trusty steed. Happy riding!

Resources

https://chrisneumann.com/blog/how-to-setup-the-perfect-fundraising-crm

Ouch…I encountered a sect

Last winter, I had the chance to spend time in Madeira, affectionately known as the "digital nomads" island, in the Ponta do Sol, a small city full of tech people - or at least that was what the internet told me (and wasn’t true). My stay presented me with not much of a unique opportunity: attending a Bitcoin meetup. I've been to countless hackathons, workshops, and conferences, but this one stood out in unexpected ways.

Picture this: a Bitcoin meetup with an agenda that seemed like any other tech event - two workshops & networking afterward. Being onsite already, what caught my attention was the sight of parents bringing their young children, eager to expand their worldview with the fascinating concept of Bitcoin (pretty cool I thought). There was even an independent publisher's bookstore stand, showcasing writings solely dedicated to BTC, what was special - some geared towards children and travelers - all aligned with one universe. I could somehow feel the intriguing atmosphere.

The workshops began, and to my surprise, they didn't focus on the usual tech or economic aspects of Bitcoin. Instead, the first speech was given by a conditioning coach from a tier 1 football team. He spoke passionately about a holistic approach to training, emphasizing that no part of the body should be treated in isolation. The information he shared was undeniably valuable, but it wasn't exactly what I had expected from a Bitcoin meetup.

As in half of the presentation he transitioned to discuss foundations, my curiosity peaked. I half-expected him now to pitch a workout plan I could buy, but to my bewilderment, he claimed that Bitcoin itself was the foundation we all needed. He spoke about the importance of having faith in something immutable, something that would never betray my trust - and in his eyes, Bitcoin was that guiding force. He even shared how he was teaching his children to believe in Bitcoin as a way to shape their worldview and navigate life's challenges. Wow - it was an unexpected spiritual angle, and I couldn't help but feel “a bit” perplexed.

The second workshop, delivered by a woman with a compelling personal story, made a profound impact on the audience. She recounted her struggles with debt, stress, and an unhealthy lifestyle while living in a big city. But her life took a transformative turn when she discovered Bitcoin. Selling off her possessions, she embarked on an adventurous journey, exploring the world by sleeping in cargo trains and traveling in Asia. Bitcoin had revealed to her the importance of living life to the fullest, embracing the "you only live once" mentality. Her tale resonated deeply with the audience, which once again responded with heartfelt applause.

Witnessing the fervor and conviction some people treat Bitcoin with, I started to see a lot of similarities with religion, nation, etc. Reflecting on my past, growing up with a Christian mother, attending church every Sunday, and dreaming of serving my country - in the end, being completely lost in the world, I find myself drawing parallels between the "real world" and the world of Bitcoin.

Let’s pretend we know what life is

The Buddha dropped some serious wisdom. He laid down three fundamental truths about the universe. First, everything's in constant flux; nothing stays the same. Second, there's no enduring essence to anything. And third, nothing can bring us complete and lasting satisfaction. It's all like chasing a rainbow.

Suffering creeps in because people can't grasp these truths. They get all caught up in the idea of finding something eternal that'll make everything perfect - whether it's God, nation, capitalism, or Bitcoin. But here's the thing, that search just leads to disappointment and misery. The more people cling to it, the more they resent anything that gets in their way and the more they fight with those who don’t agree (shitcoiners).

We probably shouldn’t get too caught up in these "true" ideas - but guess what - we rather always do. We start turning them into elaborate stories, trying to convince others, arguing with skeptics, and the whole nine yards.

The Madeira meetup wasn’t the first time I encountered Bitcoin maxis - and too often I saw hate while they spoke about anything related to crypto, but not related to BTC. Treating users of some other chains like unworthy subhumans if they didn’t want to listen to their learnings, and even treating people who build some solutions around Bitcoin, which is “not aligned with Satoshi's vision” as most second-class citizens. Not to add such people are always not open to discussion about their problems, only about my problems (looking at me always as an ETH community member, never just a human who would like this tech to do something good).

Example based on the system we live in - capitalism - I'm not saying it’s flawless, but it's kinda working for now. Still, we need to stay sharp and not blindly trust the market's invisible hand and let everything be as it is, no matter what are the circumstances. Regulations are a must, and we gotta keep an eye out for monopolies (and here I would love crypto to flourish and help with some aspects of what is broken), we need to be open to dialogue and just always look for a way of improvement.

Some folks out there think Bitcoin's the holy grail that'll end all suffering, just like how capitalism was sold to us. But I'm not sold on it, considering history's track record.

We feel alone

Humans are social beings by nature. We have this inherent ability to form connections with one another, and these bonds play a crucial role in how we coexist within and across different groups.

Just like individuals, larger communities thrive when there are strong social bonds. Effective communication and emotional well-being within the community contribute to its overall harmony and success.

We feel bad and miserable alone, and we need a community to thrive.

So, the bottom line is that acknowledging and nurturing our social instincts is key to building stronger and healthier communities, no matter the size. It's about understanding how human beings function as complex social and emotional beings and using that knowledge to improve our lives and the world around us.

Bitcoin (and other cryptos too, don’t be fooled) do exactly that - it builds a strong community (would be funny to see such one around SP500, but wait…) and below I will paint some parallels between how Bitcoin doing it in comparison to Civilisation, Nation, Religion, and God.

Civilization

The clash of civilizations theory tells us that in the long run, only one civilization can survive the test of natural selection. So, it's crucial to fight for "our" civilization, whether it's Polish, European, or Bitcoin. But hold up, from where I'm standing, this whole idea seems misleading and flawed.

According to this theory, humankind has always been divided into different civilizations with irreconcilable world views, making conflicts inevitable. And Bitcoin seems to be going down that path too. The Bitcoin maxis are like warriors, fighting for survival against the "barbarians" (the altcoiners), and they're not even willing to have a dialogue - it's all or nothing.

But let's take a step back and look at this from a different angle. Altcoins may pose a radical challenge, but they're challenging the whole society and tech, not just the crypto market. Society's like a game of coordination, and the better we play it, the bigger the pie we get to eat, then it seems worth being open enough to grab the best ideas, iterate and eat more bread in the end.

Remember the "blocksize war" back in the day? It seemed like a simple technical debate, but it went way deeper into questions of governance, politics, and the nature of the protocol itself. It was a big deal, costing tons of money and developer focus. And now, we've got this Wild Hunt heralding crap around Taproot. Let's see how much noise it's gonna make this time.

Bitcoin's constantly evolving. What was meant to be Bitcoin in 2015 is not what it means in 2019 or today, It's brand new every year, and we can't stop it. People are resistant to change, especially when it comes to core political or religious beliefs. We hold on to these values, claiming they're precious legacies from our ancestors, but those values are coming from us, we everyday change them and forget about them.

Nation(alism)

Globalization has brought us all together as a single civilization, sharing common challenges and opportunities. But, despite this, some groups still choose isolation. Take Russia, the UK with its Brexit, or Bitcoin.

As a species, we've learned to use culture, myths, and imagination for large-scale cooperation, which has been crucial to our success. We're constantly evolving our behaviors and stories to fit the circumstances and our needs. We can identify with larger groups than ever before, but it's not always easy to feel connected to millions of people we don't personally know. We need something tangible to confirm we're on the same page, like anthems, flags, and ceremonies for nations. In the case of Bitcoin, it's the code and rules incorporated into its network. Any change to that could lead to a sense of betrayal and distrust among "Bitcoiners."

But there's even no physical "Bitcoiner" entity - there is Bitcoin, which is code out there in the digital space, but there is no Bitcoiner as a separate organism. It's us, Homo Sapiens, who use and change it, supporting or trying to crash it. It’s once again some story we told ourselves and hold tight to it.

Nationalism can be a force for good, benefiting various communities. The trouble arises when it morphs into chauvinistic ultra-nationalism, where one nation feels superior to others, leading to a lack of obligations to anyone else.

Nationalism often has great ideas for managing a specific community, but it falls short when it comes to running the entire world. We need global cooperation and trade networks to thrive, and Bitcoin can play a role in that, however at its core it seems it would like to stay as a separate tree instead of growing into a forest, moreover, it would like everybody else to hide in its shade instead of taking advantage of cozy grove.

But here's the kicker: educating people to make a complete shift in the monetary system won’t happen ever. How many of the 8 billion people on this planet will truly educate themselves enough to consider Bitcoin as the currency of choice over the US dollar and will let Bitcoiners catch their dreams?

Extreme isolationism won't work in our interconnected world. We need coordination, discussion, and open-mindedness to tackle global problems together instead of resorting to crusades.

In the end, we need to strike a balance between our individual identities and our collective global responsibility. Embracing change, communicating openly, and working together to build a better world, including a role for Bitcoin in our global economic landscape would probably bring much more benefits than incite to a holy war.

Religion

Let's dive into the role of religion and how it addresses different aspects of life (by Harari):

1. Technical problems: Religion helps guide us on how to perform specific tasks, like how to do X and Y in our daily lives. However, in modern times, we tend to rely on science for technical solutions, like setting up proper agriculture.

2. Policy problems: Religion used to have a say in governing and what measures to use for doing or preventing certain actions. Nowadays, we lean more towards ideologies like democracy and capitalism for policy matters.

3. Identity problems: Here's where religion steps in to help us understand who we are and what we should care about. It defines the "us" versus "them" and shapes our sense of belonging.

In the 21st century, religion may not bring rain or cure illnesses as it did in the past, but it remains a powerful force in shaping identity and group affiliations. Bitcoin is to me a fascinating concept with the potential to fill some of the gaps left by religion. It can provide a sense of identity and belonging while also offering solutions to technical and policy problems. It's like having a new kind of faith, where Bitcoin can answer multiple questions, not just about identity but also about the practical aspects of life. We see it as a form of science or math, which gives it even more credibility.

As some anon once said, “Crypto needs religion and crypto needs cults”.

God

Everything we know about Satoshi, his beliefs, and his vision is confined to the Bitcoin whitepaper, emails, and any other writings he left behind. That's the extent of our knowledge, and there's no way to hear directly from him now. This creates a unique situation where some Bitcoin leaders claim to understand his original vision better than anyone else (sounds familiar?). Since Satoshi can't speak for himself, it becomes a convenient situation for demagogues to exploit.

But let's be real here, my friends. Satoshi's identity may remain shrouded in mystery, but that doesn't mean we should blindly follow those who claim to know his intentions, or even him. It's important to engage in critical thinking, healthy skepticism, and open discussions about the future of Bitcoin and its development. Just because we can't ask Satoshi directly doesn't mean we should neglect the importance of constructive debates and the diverse voices within the BTC community.

So, let's embrace a culture of open dialogue and respect differing opinions while staying grounded in the fundamental principles laid out in the whitepaper and other writings (or make a fork if we like). It's through collective collaboration, not blind adherence, that we can ensure the best path for Bitcoin's evolution and continued success.

Few last words

Bitcoin undoubtedly possesses great power, and while looking at human needs, desires, and patterns of behavior, we should not be surprised by current actions. Maybe Bitcoin maxis took all of the bad (worst) from a how-to build a community playbook, however, it’s only a small part of what Bitcoin is. And in the end - it’s us who decide what it is, so let’s just try to use it for good and always be open for debate.

Inspirations

I've been influenced by impactful writers, which lead me to such conclusions, especially Yuval Noah Harari, whose works have shaped my understanding of various aspects of life.

https://www.ynharari.com/book/21-lessons-book/

Additionally, I believe I got some sense of the Bitcoin community after reading online and book writings on it, talking to people, etc. - but especially I would like to highlight one title here.

https://www.amazon.de/-/en/Jonathan-Bier/dp/B08YQMC2WM

In a time when the internet was as thrilling as watching paint dry, equity was the only path to securing venture capital. Now, as we dance with SAFT agreements, equity has mostly been sidelined in our deals (a claim as true as a three-dollar bill, but let's table that discussion). Due to this shift, board meetings - a prime opportunity to hobnob with key stakeholders and investors, have largely fallen by the wayside. Due to that, we must double down on our second-best bet for keeping investors in the loop: monthly investor updates (by email, not carrier pigeon).

Sure, as a founder, your primary mission is to steer your venture toward the sunlit uplands of success. But remember, your investors' ultimate aim is to see their portfolio hit the jackpot, and they know only some positions from it will do that. Then no other way to get their attention and help when needed, other than letting them know that you are the chosen one, your venture gains traction, and things go generally well. Once you've got their money in your pocket, as a founder, one of your key duties is to keep vying for your investors' attention. This ensures you stay front and center in their minds for future funding rounds, thereby sending out a flashy neon sign to other investors that your venture is gaining momentum. It's a glowing testament that you're not just all talk, but can walk the walk too. But to achieve this, you need more than a sparkling idea and a handful of success stories to parade in front of your current investors by the time more money is needed (you raise the next round). You need to cultivate a solid relationship rooted in trust, and monthly investor updates are your trusty trowel.

Some founders may opt to give out information like it's a rare, precious metal, letting the ROI do all the talking. While there's a certain merit to this approach, I'm a fervent believer in the almighty triad of frequency, consistency, and transparency in investor communications. It's akin to nurturing a garden; the more you tend to it, the more it flourishes. Regular investor updates not only foster an atmosphere of transparency but also instill a sense of accountability within your ranks. The dividends of this approach are bountiful:

• It keeps investors engaged in your business, allowing them to lend their expertise where needed, and effectively addressing any explicit challenges or requirements.

• It provides investors a front-row seat to witness how their investment is fueling your venture.

• It enables investors to track your progress on critical goals and milestones, thereby providing an assurance of growth.

• It gives investors valuable insights that can help determine future investments and plan for cash reserves, for potential follow-on funding in your company.

• It broadcasts a clear message to investors that you are a go-getter entrepreneur who not only values their investment but also cherishes their expertise (by asking for help when needed).

• It nurtures a bond of trust between you and your investors, strengthening the bedrock of your professional relationship.

• Lastly, it ensures that you have your nose to the grindstone, and provides a moment for some good old introspection about your business and its journey to the stars.

Touching base with your investors isn't just about keeping them in the loop. It's akin to weaving a sturdy fabric of trust, mutual respect, and shared ambitions. The magic of these investor updates lies as much in the meat of the content as in the act of reaching out and embracing those who have placed their trust (and their treasure) in your venture.

In my observations, companies that frequently top the charts are often those delivering detailed monthly investor updates. Now, this doesn't mean dazzling updates magically transform into extraordinary companies, but the regular crafting of these updates can stir up a pot of clarity and contemplation about the business. And for many, particularly first-time founders, this can be a valuable masterclass in strategic thinking and pausing to gauge the direction of their venture.

Investor updates serve as a reliable beacon, keeping all investors abreast of company progress, not just the ones you frequently break bread with. The beauty of it all is that with this distribution list, everyone feels equally valued—your smallest angel investors (who are usually much more eager to bring more to the table than just their checkbook) receive the same intel as your lead investor. This shows you're not just focused on the big fish but care about every fish in your investor’s sea.

Even when the storm clouds gather, communication should remain your North Star. These are the times when investor support can be a lighthouse in the dark. Good investors will remain in your corner, even when the news might make others squirm. So, don't be shy, and always reach out for a helping hand!

Additionally, monthly updates act like a magical potion for founders, helping distill convoluted information into its core essence. Founders, often neck-deep in the daily grind of their company, can utilize these updates to take a step back and behold the bigger picture. Many have discovered that regularly penning these updates has honed their ability to structure thoughts and communicate with greater clarity.

Who should receive investor updates?

• Current Investors: Your current investors should receive your investor updates.

• Potential Investors: If you are preparing to or are actively fundraising, you may send potential investors your update (just ensure you’re not sharing any privileged information reserved only for your current investors - maybe by sending some short form of the official one).

• Advisors: Formal or informal advisors to the company should receive your investor updates (however, I am a big fan of advisors who loves your idea so much they put skin in the game and become angels).

• The Company’s Leadership Team: Even more to say, you can ask your key peers to help you writing it.

Proposed structure

Stolen from Patrick Mayr here.

1. TLDR - summarise the most important developments

2. Metrics - update the core metrics you’re tracking and optimizing for. Always include monthly burn and projected runway

3. Accomplishments - what’s going well? (ex. key hires)

4. Setbacks - what’s not going well? Be honest here, there’s no point in sugarcoating

5. What’s next - the main focus for the coming month

6. Specific asks - what do you need from your investors?

7. Bonus: Previous investor contributions - highlight previous contributions from investors. Appeal to their competitive nature and get them to work for you

Tips

• If you announce a soft commitment to your upcoming round - you need to have the money on the day you open this round (meaning asap). I see this brag often, but when the round is finally open, not all or neither of the soft committed money is there - and this is an extremely bearish sign for other investors, so be aware of this!

• I like to see what competitors are doing and know you like it too - then I like to see a short competitor paragraph.

• It’s not 2010 - you can include images in your email.

• Once you slip for a month or two, you are already gone from your investor’s minds. Lack of consistency makes you look worse as an operator.

• Don’t be scared to ask for help and show what is going bad

• Even if you got no board you can utilize some meetings - like quarterly reviews over Zoom or during some major event where most of your investors will appear

• I saw founders making common group chats on telegram for all of the investors - and it usually worked well.

• If you got your investors around - ask them to grab lunch together - they are just people so build your relationship just as you would do with your office buddy.

• Tapping into the investor network can be an easy way to find introductions to investors, partners, potential hires, and mentors - to do that, you need to make good friends with them.

• Some think that emails are boring and you should use video format.

Bibliography

https://legalnodes.com/template/simple-agreement-for-future-tokens

https://www.pmayr.xyz/untitled-2/

https://mathventurepartners.com/blog/2022/3/14/the-most-effective-way-to-do-investor-updates/

1. Peter Pan and VC Neverland

2. The mirage of dry powder

3. Bonus: what I want to remember for the next bull run

Originally posted here 02.02.2023

TLDR;

• The last decade in venture capital has been favorable with cheap money and clear trends, creating a wide open field for investors to do well as long as they are investing in similar areas as their friends.

• Investing appears to have become an exercise in optimizing dollars at work in the “best” companies and management fees than optimizing returns from carry, but the industry and its returns have been too long playing main characters in a Peter Pan movie and some things just have to crack.

• VC investing became a very strange competition. If VCs should be investing in things that are crazy and unlikely to work, it would make sense if founders would find it more challenging to encourage investors to put money into their idea instead of investors kindly approaching founders to take their money into the round.

• The bigger the fund, the higher the management fees, and the less incentive to actually do deals because the fee income is just too good. Doing deals and making returns is a lot more work and risk.

• Life revealed that a lot of the great investments have been just numbers in excel.

• Successful seed investors are planning to invest as usual, just looking for lower valuations. Established growth investors are mostly sitting on their hands (and this is already visible in charts).

• All of this happens slowly because while public markets trade daily and prices then adjust instantly, private markets don’t get reset until follow-on financing rounds happen which can take 6–24 months.

  Ok, then let’s begin the journey!

Peter Pan and VC Neverland

The last decade in venture capital was incredibly favorable with cheap money and clear trends. This created a wide-open field for investors, as long as they were investing in similar areas, they were likely to do well given the favorable conditions. Many individuals did extremely well, becoming wealthy and generating wealth for those around them. However, some may have confused their luck for success. Venture capital was seen as an attractive industry due to the potential for high returns and limited risk. In the end, everybody is winning in Neverland, right?

In the older days, the takeaway for investors was that the best returns come from betting on things that seem unlikely to work and then turn out to be right in doing so. Did you put your money into crypto early? You are good now. Have you done that with the cloud? You made it. But it doesn’t take to be very deep into the topic to make a conclusion that recent investing appears to have become an exercise in optimizing dollars at work in the “best” companies & management fees than optimizing returns from carry. I believe it will all change soon. The industry and its returns have been too long playing main characters in the Peter Pan movie and some things just have to crack.

Even though I entered this space quite recently I was able to realize some things are just looking wrong. I believe we are at the point when everyone understands the trends in the space and develops a conviction that due to his high intelligence, great gut feeling, and deep understanding of underlying tech & masses behavior, is able to ride those trends. The problem is that everybody around also got such conviction and then the only thing to do is to somehow rip out a share of the pie.

For me seems all folks in the game just want to bet on the same things. If Uniswap became a great success, let’s fund all of the DEXes around there, even if there is no real product improvement (and for sure not 10x better, so users will jump to a new tool). You don’t need to even take care of the UX, not many people at the fund actually gonna check how hard it is to use your product — crypto users behave like a religious cult and will use it anyway, and if AnumberZ is investing we want it in the portfolio too!

Then while everybody “knows” what is the next hot thing in space and where the money can be made, competition begins, but a very strange one. As if VCs should be investing in things that are crazy and unlikely to work, as stated before, it would make sense if founders would find it challenging to encourage investors to put money into their idea. However, we ended up with investors kindly approaching founders to take their money into the round. At this point it was very easy for me to think that investing is just building a network, so your friends will let you put money into their endeavors, growing the economy seemed to be so easy!

Before the flood, I very often heard things like “damn, you know, we didn’t make it. As always whole allocation went to <put big US fund name with “rockstar” lineup [whatever it means] here>”. I realized that the game I see is based on taking consensus-driven takes (most of the VCs investing in products similar to those which proved to have traction and aren’t any breath of the fresh air) than taking risks and trying to make non-consensus bets with asymmetric payouts (which could be investing in Uniswap before it popped-out or anything looking like a crazy idea).

What I have seen was all chasing the same opportunities. Then the only way to make it, I found in becoming an incredibly large firm to drive out alpha. But this didn’t sound like investing in risk! I wanted to become a new Columbus entering VC and what I saw was a landscape where it makes more sense to optimize fund size and try to index the market. Even worse I realized it’s not just crypto, everything becomes consensus driven very quickly (check out current AI mania).

I think what happened is that over the last decade or even more, the winners in tech (for seed investors) got enormously huge, and basis points put into the right deal could make an investor a billionaire. So even placing plenty of seed bets wrongly, one winner could still turn the portfolio into a massive success. That has led to attracting tons of rational money into playing at casinos and took away the requirements to have nearly any judgment or skill when it came to evaluating early-stage businesses while investing. All it took was being close enough to the “disruptive tech” and getting a good enough network to get into “the good deals”. Even more, the fire has been stoked by startup factories called incubators (starting with Y combinator success — not surprisingly actually, while the survival rate of Y companies is slightly bigger than 50% which is a great, great success) which pomped out a big amount of reasonable looking “shots on goal” regardless of the actual traction of the business and product market fit.

Entrepreneurs also got better at building companies and showing them as a great opportunity. During boom years in tech, we could have seen a large number of entrepreneurs who had “been there and done that”, and that also gave them and their new ideas a lot of credibilities. Along the way, they realized they could raise capital at increasingly higher valuations because of the rising VC competition and leveraging their experience.

And in the end…life revealed that a lot of the sure bets just have been numbers in Excel. But more on that I will be able to write when I spend more time thinking about how companies are evaluated. But Chamath Palihapitiya can provide you with a pretty funny introduction to the topic.

The incentives are driving the outcome. As most of the funds are operating in 2% management fee (over up to 10 years, but in crypto it can be a much shorter period of time) and 20% carry (which means a 20% cut for money managers on profit made by VC firm) while the market became much more competitive VCs found a new way to make a good living (valuable to add here is that money in VCs hands is coming from LPs — other investors, much wealthier then actual rockstars operating the funds in most of the times. This money is coming from family offices mostly [in the EU] and mutual/pension funds [in the US]). So while more and more LPs found it interesting to put their money into the VC game, bigger and bigger funds were raised around the globe. But looking at the power law in venture capital — the incentive rather couldn’t be driving bigger outcomes, as it’s hard to scale a VC firm and it’s much harder to return with a good % billion dollar fund than the few million one.

Another narrative that appeals to me very much is that money managers (GPs) due to the great success of winners in cloud/crypto and any other seed-investing sphere changed their incentive from getting money from driving market-outstanding outcomes (so placing not-consensus-driven, crazy bets which somehow will happen to be right and get their cut on the profit of the investments) to living from big management fees and launching several new funds.

Good visualization of what I found in this article, which has been great food for my thought process and I encourage you to read it as is just a more clear (and focused on broad tech) version of my article.

Above you can see an example of how much GPs can earn in two scenarios. Within small funds, they have to make 3x return on their investment, and in the end, it will pay them out $250m. In the large fund however, they have to return only 1.5x on the investment (which will be much easier than 3x and with great circumstances can be made by indexing the market) to get the same carry, but due to much more money they operate, they will take four times bigger management fees, less risk but more reward (but not for the LPs). The large fund seems like a good business then.

Here you can see leading funds in software and how much money they raised from LPs to manage in two recent periods. The last one (2020–2022) seems like they would new that the top of the market is near and the best way to secure themselves is to raise bigger funds...but who knows.

As most of the funds in the second graph are from the US, here you can see a graphic representing a similar approach taken by European VCs.

Although the above structure is a simplified version, many companies are operating in this manner. For example, if a firm has a $100 million fund, and one of its 20 portfolio companies is sold for $1.5 billion, the firm’s 20% stake in that company would be worth $300 million. However, after accounting for management fees and carry, the firm would still not be able to return 3 times the investment to its investors. With a $1 billion fund, it would be even more difficult to reach that level of return, as one or several of the 20 portfolio companies would need to have a very large exit. But after all, by definition of their size, large funds have convinced other investors regarding their skill and that they are capable of making great returns, this is social proof (with not a lot of math involved).

It’s great to add here for the defense of very large funds that small funds may lack the necessary capital to increase their stake in successful companies as they bring on additional shareholders. This is why some early-stage funds are now raising capital specifically for follow-on investments.

My take is that the venture capital industry is evolving into an indexing strategy unless it starts taking on new risks and exploring new sectors. Sad to say, a big part of crypto VCs also have to update. Some firms are doing this by managing fund size growth, but many are not. This is leading to a situation where venture capital firms are having too much access to capital, which can lead to poor allocation decisions and lower returns. The industry is subject to capital cycles like any other, so the question is about which firms can adapt, evolve, and deploy capital responsibly, rather than relying on past success until it no longer works.

The (increasingly false) truism and guiding principle that “you simply had to invest in the best companies in software / internet to generate great, outsized returns” has passed. Returns won’t come as easily as they did these past 12+ years and, as it turns out, entry price DOES matter. Alpha in traditional VC is turning to beta. Barring a few trillion dollar outcomes in AI, Neverland may never be the same.

source: https://bullfight.substack.com/p/peter-pan-and-neverland-vc-returns

The mirage of dry powder

And this way we come to the place where there is an enormous amount of money, waiting in the hands of VCs to be deployed. But is it so sure that this dry powder has to be used right now?

As the market cools down, investors will become more selective, focusing on the most successful and in-demand companies. With large amounts of capital to invest, investors will compete to put money into a limited number of top-performing businesses, leaving many lower-tier companies without funding. This will maintain artificially high valuations and lower returns for investors, as they are forced to invest in a small pool of highly sought-after companies. This mismatch between the amount of capital available and the limited number of successful outcomes will likely lead to a decline in returns.

Even more, to say this dry powder doesn’t belong to VCs, it belongs to LPs (actual investors in venture capital firms as I stated before), and in such market circumstances they won’t necessarily put pressure on VCs to invest. It can be even quite the opposite.

2022 was marked by stark contrast — it began with a continuation of the thriving startup scene and crazy pace of minting unicorns from the previous year, but by the end of Q1, this optimism came to a halt. As the year progressed, opportunities for growth and funding became scarce. The situation has not improved much in 2023, but there is a sense (and seems like a need, as well as hope stoked by chatGPT) of stabilization.

This can lead to:

• successful seed investors planning to invest, as usual, just looking for lower valuations,

• successful, established growth investors are mostly sitting on their hands (and this is already visible in charts),

• new/average seed investors can’t raise another fund,

• all strange creations like random SPVs, Tiger’s deal-of-the-day, “Softbank mega fund pouring money into what” will disappear.

So in 2023, it seems that while there is a significant amount of available capital in venture, there is currently no pressure to invest it. This is because venture capital firms have their own investors who have already committed a lot of capital to venture and are now suggesting that VCs slow down their investments. Additionally, LPs are concerned about the amount of cash that will be called by VCs and want the pace of investment to slow down. This means that while the availability of capital may seem promising, it may not result in increased investment opportunities for startups in the short term. It is likely that this trend will change in the future, but not until later in 2023 at the earliest.

All of this happens slowly because while public markets trade daily and prices then adjust instantly, private markets don’t get reset until follow-on financing rounds happen which can take 6–24 months.

P.S.

Overall the businesses that won’t achieve immediate success but instead will take the time to develop proprietary technology and attract only a few strong competitors will probably have the potential to deliver more value in the long run. By raising less capital, the investors and founders will be able to avoid excessive dilution. The investors plan to remain patient and hold onto their ownership in such businesses, as they believe the potential for greater returns is higher. However, it should be noted that some founders may prioritize their own gains over the long-term success of the company, potentially leaving other shareholders with worthless stock (Adam N. case, wdyt reader?).

Bonus: what I want to remember for the next bull run

As a bonus for those who made it so far and for me as a reminder to not lose my head in the next crazy ride, which someday will for sure come I prepared short lists of things I want to remember to stay sober, while all others will be opening champagne bottles.

1. When a company is trading >100x revenue and beyond, it’s probably a pretty good time to exit (if your crypto is 100x and there is actually no revenue IT’S FOR SURE A GOOD TIME TO EXIT BRO).

2. When (investing will become fun) investing will be seen as risk-free again when I can see “investors” on Tik-Tok when my Twitter feed will be much more about the “great opportunity” than memes and thoughts of my friends and great thinkers when most people won’t bother to ask why things are this way when I’ll feel like significant wealth is just one good trade away when the prices can only go up. When more folks like me will like to try to become a VC, THIS IS A GOOD TIME TO EXIT.

3. When private deals will become priced, not valued, THIS IS A GOOD TIME TO EXIT.

4. When “who” will matter more than “what”, “how” or “why”, THIS IS A GOOD TIME TO EXIT.

5. When some firms will outsource their dd, THIS IS A GOOD TIME TO EXIT.

6. When corporate finance will go out the window, THIS IS A GOOD TIME TO EXIT.

   Thank you for reading!

If you’ve come this far — thank you! I assume it means you found this article interesting. I would really appreciate it if you can share it and let me know your thoughts on the topic in the comment.

Also, there are more things I share online and you can find them here:

1. Twitter, is the main source of my brain dump.

2. Lightnode Podcast, where I talk to web3 people (mostly VCs). Apple Podcast link here, and Spotify link here.

3. saczukpiotr.xyz

Bibliography

Sources I mentioned in the article:

https://bullfight.substack.com/p/peter-pan-and-neverland-vc-returns

https://bullfight.substack.com/p/10-things-to-remember-for-the-next?utm_source=profile&utm_medium=reader2

https://sifted.eu/articles/vc-fund-size-too-big

There was much more on the way to make me write this, but I haven’t saved them. However, I would feel guilty if I would not mention the reads above and you can find the most alpha right there.

Also highly encourage you to read:

https://foundersfund.com/the-future/

And to start learning how to evaluate a business you can try this (and later on actually start to study):