Good morning 👋
And happy hump day.
Yesterday was one of those days where I stared at my computer for 12 hours and contemplated all of the ways to make money that don’t involve typing on a keyboard, and I’m going to run it back and have the same type of day today.
Wish me luck.
In other news … equity-for-services is in (according to Bradley Tusk).
He announced last month he wouldn’t be raising another fund, I thought that was surprising, so I listened to his latest talks to get a sense on how he’s looking at venture investing.
Here’s what he had to say …
Today’s highlights
Bradley Tusk’s latest bet
AI jobs are eating traditional AI
A fintech comeback
$40b for OpenAI
TOP
Tusk and the equity-for-services model 🤝
Bradley Tusk announced last month that he was not raising another fund for Tusk Ventures.
Tusk has one of the better track records (Coinbase, Uber, Lemonade, etc.), so this news was a little shocking.
I decided to break down some of his recent conversations on his thinking, and this is what I learned:
Equity for services is the future. Founders pick investors based on what they can do for them. Every investor can wire capital; very few can actual deliver value (navigating regulation, taking the lead on finding new hires, visibility through media, etc.). If you are one of the few who CAN deliver value, startups want you on the cap table, and you can often trade your value for equity in the company (without the need for large checkbooks).
Winning equity is the good part; managing LPs, compliance, portfolio construction, and a host of other things are the bad part of venture.
Giant fund math doesn’t work on either side. The larger you get, the more the fund gets comped regardless of performance.
“How can you make customers your political advocates?” Overwhelming with real people is a winning strategy.
The vast majority of tech regulation runs through local and state government. That’s bad because you have to go through tons of different people in order to operate. It’s good because you don’t have a single choke point.
Local elected officials don’t get that much attention. If you can get a passionate customer base and tell that rep that they like your product, that rep will typically fall in line.
“Maybe there’s some VC that I’ve never heard of that’s awash with liquidity the last couple of years, but we haven’t returned $1 in capital to our LPs in four years.” Tusk is one of the better funds in the world. If they aren’t returning capital, not many others are returing capital either.
“I actually made more money when I was in equity-for-services because even though there’s less leverage than there is on a venture check, you keep 100% of the proceeds. Whereas in traditional venture, I’ve got to return the investment capital to investors. I’ve got to repay the fees, then I’ve got to give them 80 cents on the dollar.”
COMMUNITY
Asymmetric upside ⬆️
Here’s a list of things tier-one investors have access to:
Good background knowledge and an understanding of how venture dynamics work
A source of good deal flow so that you see founders first
An elite investor network that you can share notes, deals, and other information with
Mental frameworks to understand company building, scale, and what makes a good vs. great investment
Connections to other high-quality people that become future co-workers or portfolio company employees
Usually that takes 5 years minimum (at least for us), but usually it takes even longer.
That’s why we built this - to speed up the onramp for private investors serious about giving themselves an advantage in the venture game.
2,500 other investors from places like Bessemer, Insight, Accel, and Founders Fund already use it, and we think you should too.
TWEET
HEADLINES
Fintech is showing early signs of a potential comeback (Pitchbook)
OpenAI shatters VC records with $40B funding round (Pitchbook)
Larry Fink Calls for ‘Democratization of Investing’ (CIO)
Construct Capital raises $300M fund for defense and manufacturing tech (TechCrunch)
REFER
LINKS
🌱 Seed Strapping—The Smarter Startup Funding Strategy Founders Are Turning To: The VC Corner explores the trend in startup funding that could reduce founders’ dependency on venture capital
🤫 The Secret to Storytelling? Hint—It’s Not About You: How to create a framework to unlock the power of storytelling
💲 Marc Andreessen, Sam Altman and Peter Thiel on How to Raise Venture Capital: Advice from 3 of the top entrepreneurs/investors
🚨 Key Metrics VCs Care About—How to Track, Improve & Use Them to Raise Capital: Here are the most important startup metrics that signal to VCs if your business is scalable, investable, and built to last
🤔 Joining a Startup Valued at 60x Revenue—Smart Move or Sucker’s Bet?: Mostly Metrics provides the questions, including the most important one…”Do I believe this company is the company?”
RECS
beehiiv: Future-proof yourself by owning (not renting) your audience so that you can tell your story on your own terms
Harmonic: The startup discovery engine we use to see things early before they become household names
Apollo: Find any contact data on any prospect (without wasting a day to pull together a list)
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.
- Clay
(Founder @ Confluence.VC | GP @ Outlaw)
