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): 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: 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: 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 (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. 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
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 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: 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: 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 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: 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: 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! twitter.com/tylertringas/status/1604935185425801217?s=20