📶 Pre-Weekend Update (reactions, results, and frameworks from the week)

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Good morning 👋

It’s my birthday, so we’re trying something new this week in an attempt to give more original thoughts and (hopefully) provide clarity on the biggest things that have happened since Monday.

We read hundreds of articles each week so that we can curate the ~5% of headlines that actually matter in the grand scheme of things.

This takes it a step further by giving our reactions to some of those headlines along with your reactions to some of the poll results from the week.

The goal is to create more signal and less noise.

Let us know at the bottom if we should keep doing this or just stick with the original programming.

P.S. 💰 We’re starting to collect data for our fourth annual VC compensation report.

If you work in venture, growth equity, private equity, or at a family office, fill out your info so we can share the latest comp results in a few weeks.

TL;DR:

• 📰 Headline Reactions

• 🗳 Poll Results

• 🔗 Frameworks

NEWS
Initial reactions to the biggest headlines of the week

• LPs are still choosing known > novel. Insight’s latest $10b fund is the latest example of this.

• DPI is the barometer of success today. If you don’t have a track record of being able to distribute cash back to your LPs, you’ll have much harder time raising the next fund.

• Miami is not dead. a16z leaving doesn’t mean anything and is a huge media overreaction. Did anybody even know they had an office in South Beach?

• I would never invest in China. If America is the land of opportunity, China is the opposite of that, and smart investors have finally realized that.

• Startups buying startups changes venture math. Less emphasis on larger outcomes (like an IPO) will improve loss rate for venture funds. This is a downstream effect of a larger focus on distributed capital by LPs.

• AI coding assistants are hot right now. So is selling to developers.

• Remote work is only dead at the corporate level. Good companies operate in-person in the beginning and past a certain level of scale, but there are more remote opportunities when a company is between those two levels.

• Corporate software VCs are placing massive bets on AI to protect their moat. Software at the world and now AI is eating software. The companies with the fattest pockets will spend enormous sums to delay this.

• Crypto has some optimism. Accolade raised $135m for a dedicated blockchain fund of funds. That means more capital for crypto funds which means more capital for crypto startups.

• In AI, young money goes after the application layer; old money goes after the infrastructure layer. So much money has already been and will continue to be burned chasing AI-first products that nobody needs. The larger checks are riding a different wave and that is betting on the core infrastructure powering broad AI adoption.

POLLS
Surprising poll results

Have any of your portfolio companies bought other startups before?

🟩🟩🟩🟩🟩🟩 Yes (13)

🟨🟨🟨⬜️⬜️⬜️ No (8)

🟨🟨🟨⬜️⬜️⬜️ Not yet - but expect them to (6)

Note: I expected some startup M&A from subscribers’ portfolio companies but not this much.

Would you invest in China right now?

🟩🟩🟩🟩🟩🟩 Not a chance (13)

🟨🟨🟨🟨⬜️⬜️ Not right now - but maybe in the future (10)

🟨🟨🟨🟨⬜️⬜️ Yes (9)

Note: Seems like most of you all agree with our earlier take on investing in China.

Where is the most money to be made in AI investing?

🟨🟨🟨⬜️⬜️⬜️ Application layer: The top layer that interacts with customers and end-users. (6)

🟨🟨🟨⬜️⬜️⬜️ Model layer: The layer that contains open-source checkpoints or proprietary APIs that power AI products. (8)

🟩🟩🟩🟩🟩🟩 Infrastructure layer: The basic layer of the AI stack that ensures the setup of a common data controller. (13)

Note: We feel the same way.

FRAMEWORKS
Other things learned to help with better judgement

• Anchoring works. Have something extremely expensive to sell that you never plan to sell.

• Consistency is the 8th wonder of the world. Nobody talks about this.

• The best investors aren’t investors; they’re entrepreneurs who never sold.

• Media is so hard that even Jeff Bezos lost money (down ~$100m on his Washington Post investment).

• There is a human premium in today’s content world. People HATE AI content. Maybe you can get away with using AI to help create some stuff for you, but never let it run your creation process (unless you’re creating content to be ignored).

POLL

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