audiences and AUM

Fund | Community | Sponsor | Careers | Archive

Good morning.

I forget who I heard that from originally, but that is a sentence that has changed my worldview more than almost anything else I have heard.

At their core, investment vehicles are all the same.

People invest in different assets, they sell a vision that they can do it better than the next guy, and that story attracts other people with money to join the partnership.

You can make money for yourself? Great - now go make money for me.

But what actually drives returns? Code drives companies, so what drives funds?

The answer is intellectual property.

Writing gives poor thinking nowhere to hide, and many of the best investors in the world have given people a first-person view into how their mind works.

This writing can be used to explain investment decisions, make predictions about where the world is going, and establish credibility in an industry where the natural thoughts are skepticism.

Bill Gurley (Benchmark) understood this a while ago. So did Fred Wilson (USV), Mark Suster (Upfront), Tomasz Tunguz (Theory), and now each of these OG “bloggers” manages hundreds of millions in AUM, and their writing still works as a catalyst for a load of their investment work.

Writing helps investors shortcut the waiting game by building trust with the right people, and that is why I believe many of the top-performing funds over the next decade will be built on top of an existing media presence.

I have talked to dozens of LPs and GPs about this concept, and I have found that visuals have been the most useful.

So without further ado, here is how I am thinking about media flywheels, compounding advantages for their associated funds, and how I am running this playbook for myself.

P.S. This is long and will clipped by Gmail and other email providers. If you want to read the full article, click into the link above.

Flywheel

Media

Wealth is built through leverage, and of the forms of leverage (capital, labor, code, media), media is the most attainable for those of us who cannot code.

If you have something interesting to say, you have a platform to say it.

If those ideas are worth something, the marketplace will reward you with views and followers.

The marginal cost to produce these ideas does not change, the attention generated grows as the audience grows.

That’s media leverage.

If you go under the hood on the media side of the house, here’s how one piece of content compounds and creates a flywheel.

This is the straw that stirs the drink, and everything else is a ripple effect.

Content needs to be created for a unique persona. Given that our business started as a private community for venture and growth investors, we had a pretty good idea of what types of content resonated most with our audience.

All of these have worked well for us.

That content then acts like a magnet, and it attracts more and more people looking for that type of content.

For us that includes GPs, other private investors, LPs, and operators (all primarily in the US). In an ideal world, we can work with our audience members for the next several decades, and we have built ways to do that for each core persona.

We capture more about each person who subscribes to the newsletter right after they sign up, and this shows the aggregated view of our audience.

Trust and reputation compound just like money.

I have spent the past five years creating for this audience, and in that time I have put out 550+ newsletters.

I have shared how I think, macro thoughts on the future of venture, things I like / hate about venture, how I look at companies, and a million other things. The newsletter is a UX for my brain, and everybody following along has gotten a front row seat to that.

To give you more context on the level of transparency we have provided to our audience, these are some of the best articles that have been shared throughout the years:

As that trust has grown, it has given me more authority, and I tell everybody that this newsletter has gotten me in rooms I otherwise I have no business being in.

Deal flow and access to unique and interesting companies is the lifeblood of any good investor, and that is what I am optimizing for.

Given that the majority of my audience are investors, a lot of their work is centered around the same pursuit.

So the way I view my content funnel is different than most. Most traditional creator funnels create zero-sum games where the majority of the value is captured by the creator.

I am not building an audience to sell to them; I am building an audience so that I can invest with a very select few of them.

I realized early into my venture career that outbound sourcing alone is not how you win. The best opportunities I have seen have come through a small group of highly-curated investors who I plan to co-invest with for the next several decades.

This has already created looks into companies like beehiiv, Superpower, Letterhead, Builtfirst, and others, and as long as we execute on building trust with the right audience, there will be no shortage of opportunities for the fund.

This could be a post itself, and I think every content engine becomes an ideas machine. (You think all of these ideas come without any help?)

Outlaw is built using borrowed concepts from others - nothing novel, but piecing all of the different ideas together would be impossible without access to a highly-curated audience who could present new opportunities to me and improve my processing ability.

Some other ideas I have stolen from other investors I have gotten the chance to meet and learn from:

Most of these ideas present themselves through conversations, phone calls, texts, and emails I have with hard-to-reach people after we have built a relationship, they trust me, and they feel comfortable enough to share the most interesting things they are working on.

These ideas not only sharpen my own thinking, but it becomes content fuel that I can then write about and share with a larger audience, thus completing the flywheel.

Fund

Tying this flywheel in with a fund flywheel is under-discussed, but this hopefully gives a better framework to visualize how they are intertwined. 

At their core, venture funds have five functions: finding, picking, winning, helping, and exiting.

Each of these functions improves as the media flywheel improves. 

Here’s how: 

If sourcing is the lifeblood of any good venture firm, having an engaged audience of fans massively helps with that process. 

Better judgement comes from better thinking.

The media flywheel gives me a creative outlet to explore and flesh out different ideas. It gives me a mental playground where I can test different theories, get qualified opinions, and capture new information in order to think more clearly.

New opportunities also present new relationships and conversations, and the learned insights from these touch points do three things well:

While investors are fighting the “capital is commoditized” mantra, every investor is figuring out how to add “value” beyond the check.

Being a founder helps win over some founders, but it’s hard to differentiate without some other type of material support.

At the same time, traditional PR is dead, communication is the founder’s job, and every founder wants needs to go direct. The best founders are choosing their investors on the basis of their distribution.

As that has played out, the value of having a valuable, highly-curated, engaged audience has become a major ingredient to winning as an investor.

Need help crafting a narrative and putting your company on the map for people you want to know about you? We can help with that.

Need help attracting new business? We can help with that.

Looking for an investor who can actually help generate a pipeline of new talent? We can help with that.

We’re making a bet that a high helpfulness-to-check-size ratio wins allocations over bigger names who aren’t capable of offering the same amount of tangible support.

If done right, the audience becomes a network that can be used in a variety of ways to help portfolio companies.

Acting as a router is underpriced, and as the media flywheel compounds, it increases our ability to act as a router.

Need an introduction to another founder looking to replace some of their legacy systems? We have a few you should talk to.

Looking for talented people who are hungry, smart, and can help right away? We have lots of folks you should meet with.

Ready to start talking to other investors who can write larger checks into your next round? We can have a shortlist of names and thoughts on each in a few minutes.

I won’t lie and say that this flywheel will directly translate into more exits for the complimentary fund. It would be naive to assume that some luck doesn’t have to occur, and the goal of this flywheel is to manufacture some of that luck for the founders we work with.

If we have learned anything about venture it is that the right partners are valuable because they give the company better odds of success.

Exiting is the output of all of the other inputs of this flywheel.

More from me

I believe that world-class investment funds will be built by executing on this flywheel, and this is the bet that I am making with Outlaw.

Overview:

More on the full thesis and execution plan can be found below:

Thanks for reading this far and giving us a little bit of your attention this week. Feel free to unsubscribe whenever this stops becoming valuable to you.