When I was in college in the 1980s, David Byrne and the Talking Heads were in regular rotation in my room along with Pink Floyd, except for the one semester where the only thing I listed to was Dark Side of the Moon (ah – the joy of discovering repeat on an early CD player.)
Once in a Lifetime was one of my favorites. Looking back, it was a Gen X anthem.
Mark Goldstein sent me an email this morning titled your blog, an article i was in last week and yep in response to my post What Just Happened. It included the phrase “same as it ever was…same as it ever was.” and a link to The Internet Is Kmart Now from The Atlantic.
Amy had texted me the article mid-December when it came out. It starts strong.
The 1990s hadn’t gone as expected. A bad recession kicked off Gen X’s adulthood, along with a war in the Middle East and the fall of communism. Boomers came to power in earnest in America, and then the lead Boomer got impeached for lying about getting a blow job from an intern in the Oval Office. Grunge had come and gone, along with clove cigarettes and bangs. The taste of the ’90s still lingers, for those of us who lived it as young adults rather than as Kenny G listeners or Pokémon-card collectors, but the decade also ingrained a sense that expressing that taste would be banal, a fate that the writer David Foster Wallace had made worse than death (I swear he was cool once, along with U2).
yep. Thankfully SiriusXM has Channel 34: Lithium.
The article uses the Kmart / Bluelight.com / Spinway story to set up the conclusion. We were in the middle of it (Softbank Venture Capital/Mobius invested in Bluelight.com and Spinway.) Ian Bogost mostly gets the story right. And then, he ends the article as strongly as he started.
Today, the collapse of a big technology or retail company is almost unthinkable. Just look at the pearl-clutching over Twitter’s recent shambles: The public can’t fathom the idea that it might decline, let alone possibly die, for real. But the certainty of death, rather than the hubris of assumed eternity, was the salient cosmic feeling of the 1990s internet. Its creators had learned that sentiment from the Cold War, tapping out time on Atari games about the apocalypse while awaiting its real-world counterpart. Of course Kmart died, and Yahoo too. What else could have happened? “We’re all going to be absorbed; we’re all going to be consolidated,” Goldstein said. “At the end of the day, we just hope to end up as a button that survives.”
Yep. Same as it ever was.
For those of you older than 40, it sort of felt like 2000.
If you are younger than 40, a massive tech bubble just burst. I expect you know that. For the past six months, many VCs have been podcasting, tweeting, publicly writing, … and generally prognosticating about what you should do and what’s going to happen next.
I think the best VCs didn’t prognosticate. They knew what was going to happen next. Instead, they worked with each company to help them deal with reality as it unfolded. Each company is different, and the dynamics of the bubble bursting were not generic.
For example, one of the companies I’m on the board of grew by over 30% last year. Its revenue grew by 30%+. Its gross margin grew by 30%+. Its EBITDA grew by 30%+. Its FCF, before debt service, grew by 30%+.
Another company had a revenue decline of 25%. However, their GM% increased, and their GM$ stayed roughly the same as the prior year. Their EBITDA loss decreased by 50%, and FCF was close to $0 in Q422.
I have 14 other stories from the companies in our portfolio that I’m responsible for. My partners have another 50+. Each one is different. Each one took a ton of work from the leadership team. Many of these teams took on a set of intense challenges as early as Q122 when it was clear that whatever was unfolding was not what they had just finished planning at the end of 2021 when they came up with their 2022 plans.
Almost all of the prognosticating I heard in 2022 was similar to what I heard and often said in 2000. I was 35 at the time and rationalized continually that things would magically and suddenly change for the better. I was wrong, and then 9/11 happened, and then Enron and Worldcom happened, and business kept getting worse. 2001 was a dreadful year for me. 2002 sucked, but it wasn’t as dreadful. But it still sucked. 2003 was hard. 2004 was the beginning of what I now refer to as “the grind,” which ended for me around 2007.
Nothing is going to magically and suddenly change for the better. No one is going to raise a $100 billion VC fund and start spraying money around at fantastical valuations, followed by everyone else suspending disbelief and believing companies, regardless of their businesses, are worth 50x next year’s revenue. No one will value a company with a GM% of 10% at the same as a company with a GM% of 80% just because they are growing revenue at the same rate. Boxes full of magic beans are going to result in jail time. Interest rates aren’t suddenly going back to 0%.
If you are a fan of Harry Potter, think of 2022 as the sorting ceremony. When you put the 2022 hat on your head, did you end up in Gryffindor, Hufflepuff, Ravenclaw, or Slytherin? Did you address reality early in 2022? Are you just now addressing reality? Are you considering what reality might be and hoping it doesn’t happen? Or are you looking around saying, “Huh, what?”
Whatever it is, there’s no looking back and hoping something different happens.
Eleven days ago, I got the following email from David.
Since you’ve enjoyed my books in the past (e.g. Superposition), I’m letting you know I have a new one out. No worries if you’re not interested; just letting you know. Hope all is well with you and yours.
When paleontologists Samira and Kit uncover dinosaur skeletons in northern Thailand, they find the remains of an ancient genetic technology that nations will kill to control. Catapulted into a web of murder and intrigue involving the Chinese Ministry of State Security, a powerful Asian crime syndicate, the CIA, and a beautiful Thai princess, Samira and Kit don’t know who they can trust. Torn apart by competing factions and stranded on opposite sides of the world, they race to discover the truth before the world goes to war. Can they bring the past to life before it kills them all?
“Walton has brought hard sci-fi roaring back to life.” –Wall Street Journal
I started the The Genius Plague on Saturday morning and finished Three Laws Lethal last night. They were both spectacular.
It’s easy to relate to The Genius Plague since we just experienced a pandemic that is trying to shift from epidemic to endemic and failing (according to some) while being a non-issue (according to others). But what if the first order impact of the disease was something other than death and the second order impact could go in multiple directions, depending on … Ok, I won’t spoil it for you.
Three Laws Lethal was even more delicious. I expect many readers of this blog know Asimov’s Three Laws of Robotics. But do you know the Three Laws of Warfighting AIs? Mikes played a central role and I kept waiting for a Mike and Ike reference, but it never appeared. Maybe there will be a sequel.
David – well done. Your newest book Living Memory is on my Kindle and I’m starting it tonight after Life Dinner with Amy.
NH Marathon (#26): The Ferocious Battle for Not Last Place
I made my move at mile 22.
I’d been trailing my nemesis for a dozen miles. The half-mile cutoff was 2:50, and I rolled through at 2:43, so I had plenty of room to spare, although, by this point, I’d given up on my goal of 5:30.
My nemesis was wearing a red shirt. I could see them a quarter to a half-mile ahead of me for several hours. I’d get a little closer, and then they’d pull away.
At mile 14.5, a timing device was set up, presumably to ensure the marathoners were on the second loop. I noticed the guy monitoring it (who later I learned was named Nate) picking up the cones after I went through.
I asked, “Am I in last place?”
“That’s a new experience for me. I guess I have a goal besides finishing.”
“Not coming in last.”
I knew I had several hours to catch the person in the red shirt. There was no rush. I took it easy and just cruised through miles 14 to 22. My new friend Nate the Great was at each water stop, packing things into his U-Haul after I passed. Since Red Shirt wasn’t really pulling away much, I’d stop, fill up my water bottle, and chat with Nate.
At mile 22, I picked up the pace. The last three miles of the course were on the Rail Trail. The nice people in New Hampshire considerately paint all the rocks and tree roots on the trail white, so it was a particularly delightful place to pass Red Shirt. As I went by, Red Shirt kind of groaned, and I said, “You got this,” which seemed to be the mantra for this race.
Nate was waiting for me at mile 23, ensuring I was still on the trail.
He said, “Looks like you did it.”
“Yup. Second to last place is more fun than last, but I’ve still got a few miles to go.”
“You got this.”
Yup. I sure did. New Hampshire is State #26 on my quest to run a marathon in every state. I haven’t done many in the past few years, and I’m getting slower as I get older. But I know how to get 26.2 miles done, no matter what the pace (I haven’t had a single DNF in all my efforts.)
The small marathons are my favorites. Other than looking at Red Shirt’s back for a long time, I was alone for most of the marathon, which is one of my favorite ways to exist on your planet.
Book: Burn Rate: Launching a Startup and Losing My Mind
Since Matt Levine is so effectively covering anything interesting in the world of the Twitter deal (and all kinds of bizarre, random, and complicated crypto, fraud, debt, and other financial stuff), I think I’ll stick with book reviews for the time being.
Andy Dunn, who I only know indirectly, wrote an important book titled Burn Rate: Launching a Startup and Losing My Mind. While it covers the story of Andy’s company, Bonobos, it’s really about mental health and entrepreneurship.
While there might be other entrepreneur autobiographies like Burn Rate, I can’t think of any. The closest is Tracy Kidder’s awesome book titled A Truck Full of Money about Paul English, an entrepreneur I do happen to know.
Tracy’s book is a mix of Paul’s entrepreneurial story combined with his experience being bipolar. Andy’s book is his entrepreneurial story combined with his experience of being bipolar. Both are remarkably brave books. Andy’s autobiography is particularly powerful since he is extremely detailed about several of the manic experiences that he had while running Bonobos.
While I don’t know Andy, I know several of his investors. His description of how they handled the situation of discovering Andy’s mental health diagnosis made me proud to know them. Andy decided to proactively hold a board meeting to describe what had happened that resulted in him ending up in the hospital and jail. One of his board members, Joel Peterson (who I don’t know), is remarkable.
“When I got out of the hospital, I walked straight into handcuffs. The City of New York charged me with misdemeanor assault and felony assault of a senior citizen.”
“Has there been a diagnosis?” Joel Peterson asked.
“The diagnosis is bipolar disorder type I. I was originally diagnosed when I was twenty, and I’ve been in denial about it for sixteen years.” A brief silence.
“I know a few folks who have dealt with what you’re dealing with, Andy,” Joel said calmly, holding true to his role as my professional father figure, “including more than a couple of entrepreneurs. It’s entirely manageable. I have full faith in you to take care of yourself, and I have full confidence in you as our CEO.”
Andy covers the rest of the board meeting discussion, including questions from board members about whether he was getting appropriate treatment, his legal situation, and the game plan for addressing any publicity around the situation.
A while ago, I was at a dinner with a bunch of VCs and entrepreneurs, including several very famous ones. One of the entrepreneurs stated clearly that if he ever talked openly about his struggle with depression, his board would immediately fire him. Fortunately, this was not the response of Andy’s board, as they took in the situation, asked questions about it, and made rational and deliberate decisions about what to do going forward. It’s worth noting that Andy was still the CEO of Bonobos when Walmart acquired it several years later.
I’m hopeful that Andy’s book will continue to help destigmatize mental health in entrepreneurship. Thanks, Andy, for being willing to write such an intimate story about your experience.
Steve Case’s new book, The Rise of the Rest: How Entrepreneurs in Surprising Places are Building the New American Dream, is out. I read it on Sunday, and it is outstanding. If you are interested in understanding how high-tech entrepreneurship has evolved from a primarily coastal phenomenon to one that covers the entire US in the past decade, grab this book now.
Steve is a great storyteller. While he tells the entrepreneurs’ stories, he has been part of helping create them. He created Rise of Rest and did the first of many bus tours in 2014. I was part of the one in Denver, and my partner Chris Moody was part of the one in Birmingham. They were each awesome experiences.
This is the story of what happened on those bus tours, people who were connected, companies that were amplified, financings that happened, and cities that were energized around entrepreneurship.
For the past dozen years, I’ve spent plenty of energy on democratizing entrepreneurship. I’ve worked with Steve and his team on multiple initiatives, including Startup America and Up Global. Steve’s supported me on several things I’ve done, including writing the foreword to Startup Communities: Building an Entrepreneurial Ecosystem in Your City.
When I was a young entrepreneur in my 20s, Steve was a hero of mine. My AOL username was bfeld, which was where my Twitter handle (and everything else I signed up for on the web came from.) Now that I’m a middle-aged something or other at 56, Steve’s still a hero of mine. I expect this is true for many other entrepreneurs.
Talking About Entrepreneurship and Mental Health With David Cohen
David Cohen and I have co-hosted the Give First podcast for 71 episodes. I think our host ratio is 80/20 David/Brad, and he’s covered everything in 2021 because I was burned out on all things public-facing and needed a break.
He figured a good way to get me back in the mix would be to interview me about entrepreneurship and mental health, so that’s what Episode 71 is about.
I got the following email from Barry Schuler this morning. We’ve known each other for many years, and he’s one of my favorite VCs to work with.
He described exactly how I feel this morning. The fall is my favorite season of the year. By labor day, I’m ready for summer to end. The stretch until Thanksgiving is my most productive time of year.
I finally feel like writing again after a summer off (most of my books come out in the late spring / early summer, so I’m fried and uninterested in writing during the summer.)
My running is almost always great in the fall. I end the summer in solid shape and usually ramp up a lot in the fall. I like shorter days, later sunrises, and early sunsets. I like the colors of the leaves. The cool, crisp Colorado mornings.
Amy and I had a good summer, but I’m ready for cooler weather and a different pace.
There have been many different approaches to ranking VC Firms over the years I’ve been an entrepreneur and a VC. Each approach I’ve seen has issues. Most are easily gamed or have statistical bias issues.
We and a few other firms sponsored a “founders choice” version of the Midas List, with a legit (IMHO) rating methodology, built by two Penn students. No vitriol possible (unlike The Funded, etc.). We’ve wanted this to exist for a long time — NPS of us as a firm is too forgiving a metric, everyone scores well.
My first question was:
How are they dealing with sampling bias on this one? For example, we send to all our founders and say “please fill this out and give us high scores.” Mostly just curious on methodology.
Roy had a thoughtful answer that made me a believer after a few more questions.
You are literally the only one (and I’m relieved someone did) to ask on sampling bias. For context, the general way it works is founders auth with LinkedIn and then the product tosses away their identity (or, more accurately, only keeps a hash and disconnects it from their ratings). Then the founders get asked for pairwise comparisons of only the VC firms who have backed them (so this is about who founders like as investors, not who has sour grapes from a pitch). How this addresses, to a degree, sampling bias:
1. Dampens outliers: because it only asks for pairwise comparisons between firms (like an ELO rating in chess, if you’re familiar), one very un/happy respondent can only affect so much, and same for a sample. (As opposed to giving one firm a 10 and everyone else 2’s or something.)
2. At the same time, it forces comparisons. A firm can ask founders to rate them highly, but ultimately founders have to choose who gave them more value. Can’t rate everyone a 10.
3. This is why we’re looking for as broad participation as possible, because the sampling bias will actually probably most show up in which firms even have enough ratings to count. (Like ELO in chess, more ratings doesn’t necessarily help you — you get more “points” if a founder rates you as better than a highly-rated firm. More ratings can just as easily hurt as help.)
If you are a founder, go spend five minutes and anonymously rank your VCs on Founder’s Choice.