Good morning 👋
Changing venture dynamics is one of my favorite topics, and I could talk to a tree about what is going on in VC at a 30k-foot level.
At a deeper level, I love talking to other people with non-obvious and non-consensus opinions about where the puck is going.
Bryce is one of those people, and I talked to him for an hour yesterday about some things we’re both seeing.
That full talk will come out soon, but today I’m breaking down one his best pieces of writing on escaping the venture treadmill.
Let’s get into it.
Today’s highlights
Escaping the venture treadmill
Megafunds and the great re-risking
The year of the $1b secondary
Some VC returns data
TOP
WHY DIDN’T ANYBODY TELL ME I COULD RAISE LESS?
He’s one of the first people I started following when I was first learning about venture, he’s still one of the smartest people I follow today, and I sprayed him with questions for ~an hour.
That full conversation will be released soon, but this is one of my favorite pieces from his blog he wrote eight years ago.
The idea of “seedstrapping” or raising one round then exiting the venture race was a controversial idea then, but now it’s more popular than ever.
Just as we’re running out of derivatives for “seed” and letters in the alphabet there’s a new funding trend emerging.
Call it Bootstrap+, Fundstrapping or Series 1 and done, there seems to be a move towards simplifying the various funding schemes and getting down to the business of building a real business.
In their funding announcement last week, the Text IQ team was careful to note their profitability. And not just a token “ramen” level of profitability:
The startup is profitable, with January revenue of 10x its burn rate and sales expected to be in the millions for the quarter.
Interestingly, and relevant to this trend, they’re viewing this as a strategic round of funding and possibly the only round they’ll raise:
Text IQ is profitable. And for its first outside funding, it’s taking only about $3 million from top investors and veteran legal counsels in a seed round its founders say could be the only money it ever needs.
Funny thing is, they didn’t appear to “need” the money. Unlike many startups who will go out of business if they aren’t able to raise another round, Text IQ seems to have a more specific need with this raise; namely, to get certain skills, expertise and networks around the table and invested at different level as they build their business.
Through our work with Indie.vc we are seeing this trend at an increasing rate.
It’s an appealing path.
Founders can trade the fundraising treadmill for the freedom, control and ownership that comes with managing your cap table closely.
Reliance on revenue keeps them close to their customers. And it rewards that early, and often painful, focus on revenue and sustainability with less dilution and more optionality.
I’d wager that we’ll see an increasing number of the best and brightest founders choosing this route in the near future.
In fact, we’re betting our business on it.
This was eight years ago, the world has changed since then, and even more signs to this trend continuing:
Development costs going down with the adoption of developer co-pilots like Replit and Cursor
More back office functions being replaced with vertical software / API calls
The death of headcount as a vanity metric
More horror stories about messy cap tables ruining otherwise good venture-backed businesses
And the secondary effects of this change are even more interesting to think through (assuming a growing number of venture firms encourage this approach vs. pursuing the path of continual growth capital):
Venture math changes
Lower loss ratio + more cash-flowing assets + less venture dollars wasted
Smaller risk of dilution
More emphasis on investors getting involved as early as possible (the definition of “too early” will remain subjective)
Less reliance on outlier outcomes = less reliance on exit timing (IPO windows, M&A appetite, etc.)
Investors need to rethink how they support after the check (less of a need for downstream capital intros)
COMMUNITY
The OS for private investors 🕹
Good venture investors need to have:
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
That’s why we built this.
2,500 other investors from places like Bessemer, Insight, Accel, and Founders Fund already use it, and we think you should too.
TWEET
HEADLINES
The year of the $1B+ secondary (Pitchbook)
Daphni secures $215M for its third fund (TechCrunch)
Tech Jobs In 2025: Goodbye Lavish Perks, Hello Flexibility (Crunchbase)
VC RETURNS REVEALED: See IRR Performance for 50+ Venture Funds in 2024 (Newcomer)
MEME
LINKS
🗣️ The Third UI—The Rise & Fall of the Keyboard: Will voice become the dominant user interface for humans with computers?
🤫 It’s Time for Apple to End Its Culture of Secrecy: Big Technology calls for a cultural reset and the end of silos in Cupertino
📈 Stubhub IPO—S1 Breakdown: Mostly Metrics breaks down all the metrics from StubHub which is showing scaled, sustainable growth
🎙️ 5 Steps to Prepare Your Next Talk: Tips on how to deliver the talk and make it come alive for the audience
✳ The $32B Lesson About Putting Yourself Out There: The algorithms on social media make the results in the cost of failure almost zero, but the potential upside is unlimited
MEMOS
Chima: Interoperability for AI agents
Superpower: The all-in-one health membership for elite performers
Documenso: The DocuSign killer
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)
