Transition Complete - Week in Review 05/03

Accel in London, David Sacks on what not to do and a review of High Maintenance's newest installment

As many of you may have seen on Twitter and/or LinkedIn, I have officially begun the next phase of my career. Starting Monday the 9th, I will be working as a Growth Manager at a Berlin-based startup seeking to dramatically alter the food industry. At this time, the firm does not wish to attract attention, so I unfortunately can’t expound on why I’m so excited to join and the opportunities I see for myself and other stakeholders moving forward.

One thing is certain: after spending quite a lot of time on the investment side of things, I’m very ready to build new skills and engage with different areas of my capabilities. I would still like to be a venture investor but right now, building something of significance is far more interesting.

With my new role, you should expect this newsletter to change a bit. I still would like to publish weekly (that could change to bi-monthly) but it will definitely be less long than, say, last week’s. Going forward, I’ll focus on 2 or 3 cool articles I find over the week and write 2-3 paragraphs about my takeaways. More so, I hope to transition the subject matter away from exclusively VC topics to things more relevant to the operational side.

Before I begin, want to deeply thank all the supporters of this newsletter. You all have inspired me to continue when I sometimes lost faith in my mission. Muchas gracias.

Onwards!

Moving to Europe from America

On Accel Partners European Launch - Harvard Business School Case Study

This is truly an awesome case. Written in 2003, it details how Accel expanded to London only a few years before, along with tracing, in my opinion, one of the best articulated and densest histories of VC in Europe from the 1980s to the mid 00s.

What struck me most from this excellent article was this one straightforward paragraph:

"U.S.-style venture capital (VC) had made an appearance in Europe in the mid-1980s, due in part to a hot venture market across the Atlantic. European banks also drove this activity, seeing it as a chance to found new companies that would be customers for their banking services. As a result, one expert commented, “the industry was staffed in completely the wrong way…with bankers and accountants. They were fine in terms of structuring the deals, but lacked the expertise to assess trends and technologies and to add value.”

Few important things to takeaway from this paragraph. First, the oft-cited reasons for why now is the time American funds should turn their gaze towards Europe are, more or less, the exact same justifications used in the past during the big boom times (mid 80s and late 90s before dot-com crash). The article cites “a hot venture market” during the 80s and then for the 90s, “to avoid the competition that was bidding up deal prices at home, or to get a bargain on seed investments” because salaries were lower in Europe than in the US.

No doubt, this time is different. There is way more capital allocated to the asset class in both geographies and Europe has, since the publication of the study, proven that it can produce companies (I’m thinking of Zendesk, Adyen, Elastic,and TransferWise) worth many billions of Euro dollars and relevant on both sides of the Atlantic.

However, the legacy of European tech, originally being driven by financial institutions seeking more customers, not, as was the case with Silicon Valley, by the pursuit of innovative technologies that could then go on to create an entire new class of companies, remains a potent force today. It is still the case that European investors, as a share of the total relative to that of America, are disproportionately likelier to have financial backgrounds rather than operational ones (this gap is only growing by the way as successful operators in California increasingly set up small, single GP vehicles). This has a hard to quantify but significant effect on who and what gets funded and even more crucial, what ideas are initially created. The psychology of this is what’s most important, in my opinion. American investors, with operational backgrounds and “the right mindset” can come to European shores, but they can only invest in what is put in front of them. Cheerily, European seed stage capital is evolving quickly to drive this crucial ideological and psychological ambition.

It appears that Europe is still not quite free from its unfortunate origin story. More time (and a greater embrace of remote work and its enabling technologies) will continue to move the needle but, as an admonishment to American investors, critical mass has not quite been reached, yet, and investment approaches from the US should not be expected to be imported wholesale effectively. I am, nonetheless, extremely optimistic!

David Sacks Droppin’ Knowledge

On Blitzfail: How Not to Go Off the Rails by David Sacks @ Craft Ventures

I personally think David Sacks is one of the most underrated California VCs. A member of the PayPal mafia (he was COO), he went on to found enterprise social network Yammer, which raised $142m in funding before being snapped up by Microsoft for ~$1b in 2012. David, after a well deserved respite, founded Craft Ventures in 2017 and has been building an excellent portfolio ever since.

A few weeks ago, David and team announced a $6m round in a company called Pipe. Pipe is providing a platform for companies with predictable ARR to securitize their revenues and thus receive upfront payments usable for R&D to customer acquisition and everything in between. The timing of the announcement was excellent, as Sir Alex Danco had just published his polemical and brilliant ‘Debt is Coming’ which galvanized a weeks-long Twitter discussion on alternatives to traditional cash-for-equity growth financing (seriously, read Danco’s piece if you haven’t).

Anyways, Sacks’ recent article is a great read for entrepreneurs and investors alike. Particularly impressive is how clearly he articulates how one unhealthy facet of a business (say a shortermist sales strategy or sticking with blended CAC as a metric for too long ) affects other relevant parts of the business. Really a must-read.

Return to Form!

On High Maintenance Season 4 Episode 4: “Backflash”

For many of you who know me well, you know how much I love the HBO series High Maintenance. Originally a web series published on Vimeo, High Maintenance follows an unnamed protagonist known simply as The Guy as he pedals his way around New York City delivering weed to his quirky and eccentric customers.

Image result for high maintenance

The show is structured as an anthology, meaning each episode tends to take on the story (often two) of a whole new set of characters linked thematically and also in the show’s reality by having interacted with The Guy (often as customers). Some hallmarks of the show include an incredible soundtrack, hyper-real surrealistic storytelling (idk what else to call it) and heightened social awareness.

This season, the show’s 4th, had been rather plodding through its initial three episodes. It returned to its original formula of two narratives, cunningly weaved together, after Season 3 saw some innovations by introducing The Guy as an actual character rather than a conduit for the wider narrative (I really enjoyed the spin FWIW). Alas, the initial three installments lacked the characteristic thematic heft of earlier seasons while not bringing anything innovative to the storytelling method. Things changed this week.

For one, with a curt nod to Season 1 Episode 3 “Grandpa”, in which the story is told from two feet high through the eyes of a charismatic dog living with a depressed and overworked millennial man, the characters (and they definitely are characters alright!) we encounter in this week’s episode are in possession of/approximate to a lighter with a Buffy the Vampire Slayer sticker on it. The viewer travels through both time and space as the narrative begins sometime in the early 00s at Christian summer camp and ends in the present back in New York, bookended on both sides by the Christian rock classic “What if God was One of Us”. In between, we are confronted with a young black boy’s heartbreaking natural reaction to a policeman’s benign urging and a bright young girl (off to UChicago on a full ride!) as she readies herself mentally for an abortion, alongside quite a few other quirky participants.

While it’s quite clear there was significant effort put into this particular episode, I’m really pleased to see the show get back what made it great: capturing that incredible diversity that is the true essence of what defines New York City.

See you on the 16th,

Max

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