I honestly think the idea that $5-10m is the minimum valuation for any software/tech-related business is wreaking havoc on entrepreneurs. I have actually seen this one decision effectively kill companies that, in my opinion, would have otherwise succeeded. Here's what happens...

https://twitter.com/Jason/status/1719324875666653333?s=20

A founder gets some very early initial traction. Through personal connections, an accelerator, past track record, raw hustle, or pure charisma, the founder gets interest from angels/small funds. They hear on Twitter that $5-10m is a reasonable valuation and pick a number in there

With initial interest from 1 investor, its usually not too hard to get others to follow, and since the valuation is high, they raise quite a bit more than they need for this stage of the business. Once the money is in the bank, two very strong forces come into play

Force #1: The 12 month runway. It’s early days, you’re resourced constrained with many great ways to plausibly spend money. You’re optimistic about future growth so why keep multiple years of runway sitting in the bank? Costs ramp up quickly to {capital_raised}/12 months.

But since you raised $500k instead of say $250k, your monthly burn goes up to $40k+/mo in stead of $20k/mo.
You make solid progress over the next 6 months and MRR is growing steadily. You’ve added a ton more customers, so you’ve also added 1-2 more support staff to support them.

But because you set your monthly burn higher, unless you hit rocket ship compounding growth, you’re probably not on track to get profitable before the capital you raised runs out, so now you’re looking at <6 months runway.

You’re sure you’ll kill your company’s momentum if you cut staff, that you literally just hired, in order to get to break-even. So you go back to the market to raise more capital.

Force #2: raising more and at a higher valuation. You’ve raised money from angels and investors you respect, you want to do right by them and show momentum to your team and the market. The new barometer for momentum is not MRR growth, since MRR won’t get you to break-even.

Once you've raised, momentum = fundraising. Once you raise capital one time, there’s a strong incentive to make every successive fundraise be more capital raised at a higher valuation.

You raised $500k at $7m to start, so now you need to raise $1m at $10m or $1.5m at $12m, but even though this is just a transaction, founders feel very strongly that both numbers definitely need to be bigger each and every time.

But as those numbers get bigger, you can't rely on $25k - $150k from angels/micro-funds, you need funds writing $500k-$1m. Those that can lead/invest shrinks to (mostly) more professionalized investors who judge more on the reality, than the potential of the business.

Maybe its the very next round, or maybe you squeeze one more round in, but eventually the reality catches up that even though the business has revenue and is growing, its just not (yet) doing enough revenue or growing fast enough to justify another More-At-Higher round.

Now you’re in a very tough spot as a founder. You’re still a small team and everybody plays an essential role, there’s no fat to cut, but your monthly payroll is burning through a short runway.

The feedback loop on fundraising is terrible, so you never get clear indications whether its time to cut costs to break-even, or if you’re one pitch away from the round that avoids layoffs. So you keep pitching, right up until the business runs off its runway.

I saw this dozens times over the past few years, and I honestly think many of the businesses that failed would have survived if they’d raised less-at-lower in the first round, or waited for more traction before raising the first round.

Heck, my own firm @calmfund almost ran into this exact issue until we bit the bullet and cut our staff early this year, so its more of a hard lesson-learned than abstract advice.

None of this is set in stone.
Maybe you'll catch that rocketship growth.
Maybe you'll keep burn low despite having a pile of cash in the bank.
Maybe you'll confidently go back to the market at a flat/down valuation without losing momentum.
It's possible, but tough to do.

I know that as an investor “raise at a lower valuation” sounds an awful lot like I’m just talking my book, but I really do think that for founders looking to maximize their chances at a life-changing exit, raising less-at-lower for their very first round is a smart move.

You can read the unrolled version of this thread here: https://typefully.com/tylertringas/9P3LzhN

How Raising More-At-Higher Could Kill Your Business

Ok folks, Feb marks 4 years since we started investing at @calmfund and it's time for a big update thread. It's been a challenging but insightful few quarters but I'm absolutely fired up about the road ahead. I'll cover what we've been up to, our strategy & the game plan for 2023

If you're new here, @calmfund is a fund built to support founders of calm companies that are capital efficient, grow sustainably, & built for the long term. Here is an overview of our high level investment thesis (we used to be called @earnestcapital btw): https://twitter.com/tylertringas/status/1213183926849527808

"Calm company" is both an investing strategy and a mindset for founders looking to build a company in a manner that I call "being long-term ambitious" ... here are some of the key principles to give you a sense of what it means: https://twitter.com/tylertringas/status/1595840682958106624?s=20

I'm about to send our 2023 Outlook—a deep dive with 1hr+ of content and strategy—to our mailing list this week. If you like this stuff you should subscribe: https://calmfund.com/newsletter

For years we've been preaching the value of investing in great companies, at reasonable valuations, and helping them build companies that aren't dependent on constant infusions of new capital, in sharp contrast to the VC model that went a little off the rails recently

When the music stopped last year, and the free money train stopped rolling, our portfolio of ~70 companies largely just kept chugging along, building their businesses off steady customer revenue that exceeded their costs.

However, to keep investing in more calm companies, our fund does have to keep raising new funds. We got hit hard by the massive volatility and uncertainty in tech stocks, crypto, and the economy at large. Our investors still loved us, but suddenly had much less money to invest 😳

With a rock solid thesis, a strong track record, and market conditions that hugely favored our strategy, we decided it was time to raise our next fund from Institutional LPs: foundations, endowments, and fund of funds that manage $billions

I'd been having some conversations like this all along, but we refined our pitch for a $50m Fund 4 (https://calmfund.com/for-investors) and I started pounding the pavement, connecting with as many of these folks as I could.

Our strategy is so well-positioned for this market that doors opened everywhere. I was able to speak with just about any LP that anyone thought might have some interest in our fund. Lots of nice chats, no tough question, but just absolutely no movement on their part.

Institutional LPs are just not at all incentivized to fund any kind of new or novel strategy. Group-think and "nobody ever got fired for investing in {name brand VC firm}" mindsets totally dominate and lock out virtually anything that questions established strategies

By the way, this is a problem for us but I also think it's a gigantic drag on entrepreneurship and innovation in the economy writ large that there is seemingly no way for funds with novel strategies to scale up the traditional path. https://twitter.com/tylertringas/status/1595199034481942529?s=20

I spent about 8 months pouring energy into conversations that largely went nowhere. Maybe they'll pay dividends down the road, but for now we just can't wait around any longer. We have an opportunity to build a generationally great portfolio of calm companies and it's time to go!

I think any time is great for our strategy, but here's a few reasons I'm particularly fired up to invest in calm companies in 2023.

1/ We are about to see an avalanche of great founders looking to the build calm companies
https://twitter.com/tylertringas/status/1621935955165777920?s=20

2/ A core principle of Calm is "don't be dependent on follow-on funding"... yesterday I laid out the challenges a16z faces, but they will ripple thru the whole venture industry. Not being dependent on a Series A-Z is going to be a superpower for a while https://twitter.com/tylertringas/status/1627449217294958592?s=20

We've refined our core strategy, the market conditions are perfect, and there's still practically nobody investing in this absolutely massive opportunity. I feel I'm going to be able to do the best investing of my life this year and I and the entire @calmfund team are ready 💪

So here's what this all means...

1/ Applications for funding are open again. We took a pause while I focused on, *gestures at everything,* all this other stuff, but we're diving back in this week. No warm intros needed, just come introduce yourself: https://calmfund.com/for-founders

2/ Our Fund IV is open to new investors effectively immediately. We're sticking with our strategy that we know works of smaller  funds every year with a subscription fund structure designed for individual investors. Learn more here: https://calmfund.com/for-investors

Candidly I found trying to turn ourselves into something that institutional investors would approve of to be a very draining process. The second I switched the focus back to what we're truly good at, working w/ individual investors who get it, all the energy came roaring back 🔥

✨ The universe rewards authenticity ✨ and I've been so happy with the response from our existing investors and community 🙏

2/ The most important new tool in our investing toolkit this year is going to be Special Purpose Vehicles (SPVs, sometimes called "syndicates") that we will use to bring individual investing opportunities directly to our investor community

In our funds, I am the sole decision-maker, so it makes sense for me to focus just on the area that I feel I can make the best possible decisions: early stage calm companies with a heavy emphasis on B2B SaaS. There's no reason to stray far from that with our smaller funds

But we constantly see great opportunities to invest in calm companies that map very well to our broader thesis, but fall outside of the narrow focus of our funds. Historically we've turned these away, but this year, we're going to vet the best ones and bring them direct via SPV

This SPV strategy has two huge benefits for us.

1/ Dumb regulations mean we can only allow 99-249 LPs into our funds, but with SPVs we can leverage capital from the 1,000s of accredited investors in our community. We'll use these to do even more investing than with a $50m fund.

2/ We will use one-off SPVs to explore many new strategies that I and our investors are really excited about. Here are a few:

a/ Our Founder Liquidity Fund was a casualty of market volatility last year. We're bringing back the strategy via SPVs https://twitter.com/tylertringas/status/1487456751020646400?s=20

b/ Financing acquisitions of calm companies. We constantly meet great entrepreneurs looking to acquire one or a small portfolio of unique calm companies. We'll bring the opportunity to invest in the equity of these acquirers via SPV.

c/ Non-SaaS calm companies: I've always agreed that our thesis applies to much much more than just pure software companies, but it's the area I know best. A huge re-vamp of our scout program is coming including the ability to "co-GP" non-software opportunities that we'll SPV

All the info on theses opportunities will go out to our mailing list, so if this sounds interesting, subscribe here: https://calmfund.com/newsletter

The one challenge with this strategy is that it is operationally very intensive and difficult to build our fund around doing mostly a ton of SPVs. And here's where I think we have an elegant solution by merging the core fund and the SPV opportunities

Large investors in our core fund will gain "Premium LP" status which entitles them to priority access and much much better fees/economics on our SPV deals. It's like a premium membership to our SPV dealflow that pays for itself many times over. More here: https://calmfund.com/for-investors

So that's the update on the investing side. Please reach out to us if any of that resonates.

PS - even if you can't invest in us or we can't invest in you, you can absorb some calm company vibes and meet like-minded founders at our summit series! https://twitter.com/tylertringas/status/1604935185425801217?s=20

You can read the unrolled version of this thread here: https://typefully.com/tylertringas/Brkwpa8

2023 is the year of Calm Companies

Good morning, AI-based tools will be a massive opportunity for calm companies, but a dud for VC. Here's my thesis:

1/ this market map will become an iconic case study of "was a feature not a product" with all of the value ultimately being split between the actual core AI platforms in the top left corner and incumbent software tools with distribution (mostly not shown) who will add AI features

2/ It's almost a meme/joke at this point, but the vast majority of these products are just (a) an API call to GPT-3 or similar platforms and (b) a thin layer of "prompt engineering"

This is the most nonexistent moat in the history of tech waves with no clear way to improve

3/ "prompt engineering" is a self-draining moat where you are quite literally teaching the underlying model how to directly deliver the value via future API calls. All margin will inevitably flow to the platforms or be competed away by infinite competition

4/ In the short run there is a shiny object syndrome to try new AI wizardry, but in the long run consumers don't care whether or not a tool uses AI to deliver the best value. Cloud incumbents will scorch the Earth of each market bucket with integrated AI https://twitter.com/tylertringas/status/1623694422612365313?s=20&t=Q6e-pVFAuZxFufmBGApCxw

5/
Adobe will own the AI-based image editing market
Office & Google Docs will own the AI-based writing market
Salesforce will be the best AI-enabled CRM
Shopify the best AI optimization and customer support
Zoom the best AI meeting summaries
... all with a few API calls

6/ The ONLY thing creating a short-term moat protecting companies from incumbents right now? The user bases of incumbents are too large, and the cost of AI tools is too high to roll out across them all. They are simply waiting for us to traverse down the cost curve

7/ That's one big reason this space will be a dud for the VC model. There simply won't be opportunities to absorb $100m of capital and generate $10B of long-term value on the other side. (except for OpenAI or true platform-level competitors)

8/ So how can entrepreneurs and investors win in this market? You simply must structure your company, strategy, and fund such that a $20m, $50m, or $100m outcome is a home run. Mega incumbents will win these categories, but they may do so via acquisitions at that scale.

9/ If you've raised $50m and either choose or are forced to turn down that $50m acquisition to "go big or go home"... you're gonna go home.

But, raise less than $1m, stay lean, build fast, and exit in a few years for a life-changing $10-20m/founder is a winning bet.

10/ We will probably do some investing in the space, but the big problem is that VCs are salivating over AI and will offer you more money at an eye-popping valuation. Those who get on that one-way train are toast. It's hard to turn down, but those who stay calm will win big.

11/ But, it gets even worse for VC and better for calm companies 🤩
What's the one area where professionals are actually using AI every day right now to become substantially more productive: writing code. Everyone is a 10x engineer overnight!

12/ AI-assisted software development is a *massive* boost to the Peace Dividend of the SaaS Wars and will make the last wave of "Micro-SaaS" pale in comparison. Individuals and small teams can now take on enormous incumbents at a fraction of the cost/time https://twitter.com/tylertringas/status/1213183939382087680?s=20&t=Q6e-pVFAuZxFufmBGApCxw

13/ Founders of calm companies, it's time to start setting our sights *very* high. What massive bloated incumbent tech companies still frustrate you to use? The odds are increasingly good you could take a small team and a little capital and build a fully-fledged competitor

14/ This is a disaster for VC mega funds because the next wave of great software companies simply won't bother with the alphabet soup of raising a Series B,C,D,E... They'll build IPO-worthy businesses with dozens of people and less than a few million of outside capital

15/ All this happening rights on the heels of a bursting bubble showing the risks of foie gras'ing companies with way too much capital means we are heading into an absolutely gargantuan wave of incredible calm companies https://twitter.com/tylertringas/status/1621935955165777920?s=20&t=Q6e-pVFAuZxFufmBGApCxw

16/ I can't wait to roll up our sleeves and support as many of them as we possibly can at @calmfund

You can read the unrolled version of this thread here: https://typefully.com/tylertringas/5D9Vr6v

AI tools will be a boon for calm companies, dud for VC

✨ Cultivating a Calm Company ✨
A running thread of the most important things I have learned about building a calm company and being long-term ambitious as an entrepreneur. Let's go 🙏👇

Note: I plan to expand on each of these in short essay form. Subscribe to the @calmfund email list to receive them: https://tyler-tringas.ck.page/94b41c3e91

Chaos inevitably happens in business. Sometimes the answer is taming the chaos, sometimes you just need to get comfortable in the chaos.

There's value in aspiring to calmness, even when things are definitely not calm. It's the equilibrium we strive for, not a description of every moment.

The whole job of an entrepreneur is prioritizing the right things to do from an un-finishable todo list. Choose carefully.

Always look for the “lead domino”… the thing you can do that will make all the other things you have to do easier to accomplish. Credit @tferriss


Find your community, then lean on them. Everybody wants to see entrepreneurs win.

The Ben Franklin paradox: people who have already helped you are more eager to help more than those you have helped. Especially true for entrepreneurs. Keep asking.

Entrepreneurship is inherently an act of creative destruction, there is *no* safe well-worn path to success.

If the way was easy, the opportunity probably wouldn’t exist.

Escape competition through authenticity. credit  @naval

Find your unfair advantage and lean into it relentlessly. When you feel lost, come back to this.

The way to get the best result in your Plan A is to keep investing in your Plan B.


Founders have signed up for a life of uncertainty. The only counter-move is creating optionality. Guard yours carefully and give it up reluctantly.


The most important life skill: use meditation to create space between external stimulus and your response.


Plan for the worst to reduce anxiety: visualize the worst outcome, write down your plan for what you would do, put that plan in a “break in case of emergencies” case, get back to work.


Don’t cling to the idea of your current business too tightly. It might fail. You’ll be fine.


Don’t set fixed goalposts. Set an ambitious pace, on a steep trajectory, that you can keep up indefinitely.


Everything compounds. Do whatever you need to stay in the game for as long as possible.


Burn out is constantly stalking founders and will kill your business faster than anything else. Be vigilant against it.

A fit body yields a calm mind. Exercise you enjoy and can stick to is better than anything else.


Your email inbox is other peoples' todo list. You have no obligation to it.

Time is your scarcest resource. Use your calendar to allocate what you’ll do for the day, not a todo list.


Energy and attention are actually scarcer. Allocate them carefully.


The ultimate productivity hack is remembering nothing you’re facing is actually that hard.


... and more to come. What do y'all think? Reminder: I'll be expanding on each of these here: https://tyler-tringas.ck.page/94b41c3e91

You can read the unrolled version of this thread here: https://typefully.com/tylertringas/d3mm8Bl

A running guide to cultivating calm

It's been a minute since I laid out the @calmfund strategy for y'all so let's buckle up and talk about why now is the best time to build and invest in profitable capital-efficient calm companies that grow at a sustainable pace...

What are calm companies?
They are lean and capital-efficient.
They go after niche markets and build a micro-monopoly.
They maximize optionality for founders and all stakeholders.
They raise capital opportunistically but aren't dependent on it.

We've invested in ~70 calm companies, which you can view in our portfolio, but there are actually 100,000s of calm companies everywhere. In fact, it's pretty much the default approach of almost all entrepreneurs everywhere. https://calmfund.com/portfolio

If you give entrepreneurs a choice between (a) solid shot at generational wealth (7-8 figs per founder) and (b) 0.0006% chance of being a billionaire, ~almost all~ entrepreneurs are going to pick (a) unless they've already had a life-changing exit. https://review.firstround.com/Theres-a-00006-Chance-of-Building-a-Billion-Dollar-Company-How-This-Man-Did-It

So why is it that almost nobody is listening to these entrepreneurs, building investment tools and other products to help them succeed at their actual goals. Why are we trying to fit every single founder into the extremely narrow box that VCs want to fund?

That's where our thesis comes in. As recently as 10 years ago, almost all software businesses were a great fit for venture capital. They had high upfront costs (it used to cost several million to ship a decent v1 app) & wide open markets for winner-take-all opportunities. 

But we're now shifting into the Deployment Phase of software and software-enabled companies. Big markets are saturating and highly competitive without winner-take-all dynamics. The true frontier is in bringing the fruits of software innovation into every niche of the economy. 

Why can you build software for tiny niches now? The Peace Dividend of the SaaS Wars: tons of improvements and building blocks that have brought down the cost to ship a real software business by a factor of at least 10. 

When it's that much cheaper to ship & validate, you don't *have* to go after huge markets any more to generate a great return for investors. 
But almost nobody in the investor/allocator community has caught on to this yet... why? https://calmfund.com/thesis

Funding for entrepreneurs is still culturally and intellectually dominated by venture capital, despite the fact that it only funds 0.1% of businesses. 

A fundamental tenant of the VC mindset, so much that many consider it practically a law of physics, is the idea that startup outcomes follow a "power law" where most companies will fail & almost all your returns come from a few grand slam winners. 

How did they arrive at this conclusion? Well historically the best performing venture funds have all followed this strategy, so it makes sense for new funds to try to optimize for those same kinds of outcomes: tons of failures, but we got into Uber/Airbnb/etc so the fund did well

The fundamentally heretical question we are asking at @calmfund is "is this the only way or just one way to invest in entrepreneurs?"
We think the answer is obvious. VCs who think the power law is immutable are in a self-fulfilling prophecy...

The failure rate of any given company is not static. Things like raising tons of capital, hiring very aggressively, spending heavily on growth, pushing out break-even, etc... they all might increase your chances of being a unicorn, but they also increase your chance of failing.

We believe that you can dial some of those back with a more calm approach to building companies. Yes you'll grow at a more sustainable rate than "hyper growth" but you'll also dramatically increase your chances of success. That's how we win and the founders we back win.

For founders, there's never been a better time to be building a calm company. The funding markets are in chaos, so not being dependent on raising more capital is a massive asset that will hugely increase your chances of success as well as your optionality: https://twitter.com/tylertringas/status/1527450430644666368?s=20&t=LV4WrE1O5F9jtOqj162k2Q

At our fund, we do everything we can to give the founders we back an unfair advantage in the form of mentorship and community. We have 200+ mentors, almost all of them very successful software founders, who provide support and advice along the way: https://calmfund.com/mentorship

If that sounds like a great fit for your company, you can start the conversation here (no warm intros needed). We are working through a huge spike/backlog of applications right now though so bear with us 🙏 https://calmfund.com/for-founders

For investors, now is the best moment in history to be investing in calm companies. They will thrive, grow faster, gain market share from flailing companies struggling to raise more, and come out of this phase with some monster successes. More here: https://calmfund.com/for-investors

I firmly believe a portfolio of calm companies will hugely out-perform almost any other asset class from here for the next 10+ years with top tier returns and far less volatility & risk. 
If you'd like to join us, our Fund IV is now open to new LPs here: https://calmfund.com/writing/fund-4

Although with this fund we're opening up a vehicle for larger institutional investors, we're committed to keep our quarterly subscription fund structure with a low minimum that is approachable for individuals and entrepreneurs: https://calmfund.com/writing/for-investors-introducing-quarterly-subscriptions-to-the-calm-company-fund

Despite all the winds in our favor, it's still a tough fundraising environment for funds just as it is for startups. We're lucky to have a solid base of supportive LPs, but I would love to ramp up aggressively to meet this huge opportunity. I'd love it if you shared this widely.

Thanks for reading! If this piques your interest, we are radically transparent and there's tons more you can read at calmfund.com. Also follow @tylertringas & @calmfund and shoot us a DM with any questions, comments or ideas.

You can read the unrolled version of this thread here: https://typefully.com/tylertringas/zlKn2NL

Founders, let me tell you a bit about the next @FounderSummit coming up this October 17-20 in Asheville, NC. Hosted by the @calmfund community and our friends at @SureSwiftCap 
https://foundersummit.co/


We're all huge fans of running remote companies & communities that support people all over the world, but there's just something magical about getting together IRL to connect with other founders, make friends, and find ways to collaborate. 

So last year, we brought 150 founders to Mexico City for the first Founder Summit. 4 days of interactive workshops, small group discussions, fireside chats, and plenty of time to actually meet the other founders who came. Oh and incredible food, venues & beverages

Here's a recap of Mexico City event. It was honestly a blast. https://calmfund.wistia.com/medias/mz27ujoslc?wvideo=mz27ujoslc

I told the team "we are not an events company, we're going to take risks and do this the way *we* want conferences to be run, if people like that, we'll do more, if not, we can just not do conferences"... well, people freaking loved it.

For this year we're bringing the same vibe but totally different context. We rented out an entire lakeside retreat outside of Asheville in the foothills of the Blue Ridge mountains. Lakes, kayaks, actual fireside chats, and delicious bbq are all on offer. 

The event is invite-only to ensure it's 1) all founders and 2) a great mix of folks you actually want to meet and hang out with. Our KPI is that you have a blast and come away with 2-3 new founder friends.

I hate it when conferences make you sit for hours listening to speakers and keynotes that would be better as a podcast. We do very little speakers and put a much heavier emphasis on interactive workshops and time/space to meet other attendees. My rules: https://twitter.com/tylertringas/status/1528765902702796800?s=20&t=Dkad3FwzKxLqxCtIkw7hfg

A fair few folks pre-bought tickets for 2022 before we had even announced the dates/location, but there's still plenty of space right now for new folks. We also have scholarships and sponsored tickets for under-represented founders available. 

Highly recommend applying for an invite here ASAP if you want to join. Once we start announcing the actual workshops (soon) we're expecting to sell out quickly: https://foundersummit.co/

You can read the unrolled version of this thread here: https://typefully.com/tylertringas/M3EFUSY

Founder Summit 2022 Camp Edition

Ok, here is the short version of the argument on why the "power law outcomes" is probably not the *only* way to invest in early stage tech companies these days https://twitter.com/tylertringas/status/1513333150457421828?s=20&t=fFf09zxBACFbZPsTjuU-gQ

First what do we mean by power law? Over time most successful VC portfolios end up looking like this, lots of failures + almost all the returns coming from a very few tiny % of the investments. So these days, VCs optimize for these extreme outlier power law outcomes

In many ways this is awesome. Venture Capital, when done well, making big bets on breakthrough technology, can afford to back a lot of things that fail if they get 1-2 grand slam outliers. This distribution is how VC can invest in all kinds of crazy tech, some of which works!

Although the data is still somewhat messy, I don't think it's in dispute that "successful venture funds have almost always had this kind of distribution"

The question is whether this is the only way that works, or the only way that the small number of people who do VC have tried

If you zoom back out to the level of "investing in entrepreneurs at the early stage" you can see pretty quickly it's not always going to be power law. Back 100 entrepreneurs starting McDonalds franchises, you're not gonna see any grand slams. Returns will be drive by % successful

So "grand slam hunting" can't be the only viable way to invest in entrepreneurs. Now we need some tools to analyze a market or set of opportunities to determine if we should be optimizing for outliers or optimizing for hit rate.

I'd argue you need 3 factors for a market to warrant the traditional VC model:
1/ High startups costs
2/ High technical risk
3/ Winner-take-all market dynamics (network effects, green field first-mover advantage, economies of scale, etc)

So the crux is, does the market for software businesses have these three factors. I'd argue that 10-20 years ago it absolutely did:
1/ It cost like $2m to ship a basic iOS app
2/ Many underlying software technologies were still nascent
3/ Many opportunities had zero incumbents

But in each of these factors I believe the software market has changed radically in the last 10 years such that none of these factors are currently true:

1/ are startup costs high? No! They're down by at least 10x. A single indie hacker can ship a feature-complete competitive SaaS product in their spare time. The driving force is the Peace Dividend of the SaaS Wars https://twitter.com/tylertringas/status/1213183939382087680?s=20&t=7md8rmLcZEEGkm74tnJYsQ

2/ Is there high technical risk? Largely no. Most software businesses leverage a patchwork of existing frameworks, tools, open source modules, and blank-as-a-service products to reduce the risk of "can they actually build this?" to near zero. 

3/ is the market winner-take-all? It used to be but it ain't any more. There are now many massive publicly traded incumbents in almost all major verticals (CRM, e-commerce, CMS). Companies can still be successful, but are far less likely to run away with the whole market

So I would argue that, while it has been true in the past that the market opportunity in software mapped well to the power law distribution approach to investing, it's simply no longer true as the market for software is entering an entirely new phase

The good news is that this unlocks a huge new opportunity: to invest in software companies without having to be a "grand slam hunter." But it requires a fundamentally different fund strategy, re-built from the group up to back, what we call "calm companies"

So what makes a calm company successful? Well it's complicated and it's a skill we're developing and honing ourselves, but here are the key questions I ask myself before any investment as a starting point https://calmfund.com/writing/investment-questions

You can read the unrolled version of this thread here: https://typefully.com/tylertringas/TSBuyH4

Is power law investing the only way?

We just shipped a big re-structuring of how we organize and use @notionHQ across our team. Curious if any of this resonates, is useful, or if you do things differently. More notes in thread below. https://www.loom.com/share/65f77fcdd84d4c6b8d010b3ed7f571b9

A key part of the process was establishing what we actually wanted to use Notion for. We identified 3 key Jobs To Be Done:

1/ Create a record of how and why previous decisions were made when similar questions arise in the future or from new teammates who were not around when the first decision was made.

2/ Moving a complex threaded discussion from Slack/Asana/Other Tools to Notion where it can be stored, refined, and collaborated on asynchronously.

3/ Have a searchable, shareable record of all long form content for future record (our internal Library)

And here are the core patterns and sections we created to accomplish those:

1/ Company and Team-level Wikis. No special sauce here, just a repository of useful knowledge in directory format. Anything cool your company does with these in particular?

2/ The Memo Database. We're trying to build a better habit of doing long-form, asynchronous decision-making in Notion. Memos are action-oriented (not just documentation) and can be either for Decisions (with a clear decider) or Brainstorms

2a/ We have 3 copies of the Memo Database: 1) the entire team has access 2) just the Leadership Team has access 3) Just me and the Chief of Staff have access. Default heavily to 1 but the other two are useful for sensitive topics.

3/ The Logbook. Originally we had decision-focused memos and records of meetings in the same database, but we decided to break them apart and clearly file meeting notes and other record-keeping in a Logbook

4/ Project Briefs. We use Asana, which is great for managing tasks and bundling those tasks into projects, but not great for storing the project brief (original goals of the project) and any resources relevant to the Project. So all Asana projects get an associated brief here

5/ Back Catalog: our published content is housed in a bunch of different places (Convertkit newsletters, Google Docs blog drafts, investor updates in Visible, etc) so we wanted one searchable, shareable, taggable database of all our published content here.

What do you think? Would love to see a similar demo of other companies' setups.