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stochastic · 6 years

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Crowds - Groups - Identity

There’s a natural progression and necessity to the layers of interaction we seek. As the title suggests, this can be broken down to crowds - groups - identity. Each increasing in intimacy. Each with a different core function. Each pushing us to certain feelings.

Crowds must be realized. They cannot exist in the abstract. If I sit in my apartment alone, the thought of a crowd in Washington Square Park has no affect on me. That same crowd can be realized by me seeing it on some device. Crowds are kinetic. They are rhythmic. It comes together and releases. The energy of the crowd is measurable and we are aware of the impact. There is a catalyst. A reaction. There is always a kill. Even if the result is simply the catharsis of the action itself. That kill then turns inward.

We see the crowd of Twitter by the number of users. A number that fluctuates every quarter. The crowd comes together in mutual reaction, this rhythm and catharsis as the trends build and die. On a smaller scale. This is a vitriolic tweet. Descended on by the masses. The writer is killed by a mob. The mob dissipates.

We look to crowds when we feel the limitations of our identity. And need to feel connected to something larger than our group. To have a sense of elevation. Yet grounded in the knowledge that what we call living is best served through concurrency. As concurrency is, ultimately, the only way we know that others are having as close to an experience as we are having. And this, typically, gives us a deeper sense of comfort in living itself.

Groups have a pervading layer of abstraction. That out there, somewhere, are my people. My people know that I am also here, and can be put in motion. Groups are a subset of the crowd. And the connection between groups, the shared values and consistent frustrations, often forms the larger kinetic force that mobilizes crowds to action.

We search through the crowd, to find our groups. That search is part of the value of the group itself. Relief. That knowing what we feel, what we value, particularly the smaller things, are not in isolation. And not only heard, but felt and appreciated. Through this we are able to search for guidance. To help us navigate through, not only the more complex, but even the lighter daily decisions of life.

The knitting of our groups allow us to embrace a consistent back and forth, building and allowing a deeper shared history, that push us to concurrent moments. What we share within groups are different than what holds a crowd together. Where crowds are geared to kill, an idea - person - institution. Groups are meant to nurture and, ideally, refine. A sense of comfort, yes, but more importantly our best sense of reality. The act of belonging as an act of refinement, we selfishly but still out of necessity acquire, have a deeper sense of self.

Identity is delicate. It is the well from which our expression flows. By definition, our very being. Our participation in crowds and groups is an extended sense of this identity. The understanding of whether or not we belong is an extension of this. The most important ideas resonate at the center of this. Others we admire feel a closeness to this.

Our ability to express our sense of identity is one of the things we all hold sacred. It is complex. Robust. Impressionable. A compounding history of action and reaction and internalization. And it continues, spiritually, eternally.

This is evolving. Particularly in contemporary representation of such ideas. It feels misunderstood. Particularly in contemporary discussions of such ideas. I believe, that we are all in need of better answers. Contemporary answers. Answers that look to the core of identity, before it looks to the appeal of the crowd.

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stochastic · 6 years

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You The Sun

We live in a world where we are constantly in the shower. Continuously at the center of it all. And we emerge to understand that we are living a perpetually refocused American life. Eternally in pursuit of happiness, which is to say that we are constantly in the pursuit of self-satisfaction.

We believe that if we can arrive at “x”, then “y” will fall into place. This search for answers is what drives plenty of social benefit. There is always something to prove, and our affectionate embrace with the idea of capitalism has placed us in the arena of industrial pursuit that can be egotistically rewarded. But has it come at the cost of utterly destroying one’s own psyche? Where the freedom to pursue, is simply the promise of near arrival. Can we question how comfortable the collective industrial we, are with that.

When we come to realize that results are non-linear, the psychological weight of embracing chaos becomes too much. And so we retreat. We retreat to never ending feeds. We retreat to Netflix asking if we are still there. We retreat to working at Facebook. And even the serious challenges of the day have lost their effect. It all flows into the media mix.

Everything is entertainment. Everything is to be watched. It is death by entertainment and influence and the dark corners of the digital age. Although, I then ask myself if killing a sedated self even counts as murder? Or have we silently drifted away long ago?

The subject of American Consumerism has been plenty exhausted, but something I’ve been meditating on is, what I will dub, “American Voyeurism”. Although the subject is not explicitly sexual, I believe that we have found ourselves silently seeking a perverse pleasure from our black mirrors. I have also come to believe that the subject is ourselves.

We live utterly self-importantly. We only have a singular point of view. We only hear ourselves. And although some of us are aware of our own awareness. Our technology is organized around the profile, allowing us to indulge in whatever we have done prior to that moment we have just tuned in for. Transcendence, or what was once called transcendence before many words lost the weight of themselves, is almost impossible. I think this is partially why we have a never ending attraction to certain drugs. The only other way is through faith, and that’s the importance of our belief and truth in God’s existence.

I don’t have any answers to what I believe is a new sense of American Voyeurism. Perhaps it is simply a more invigorated part of our technologically soaked existence. But I do know that I have become more aware of it. I witness it in when I talk to people I’m not particularly close with. It is a sensation that reminds me how acutely concerned I am about how that other person is perceiving me in that moment. Is my profile in tact. Or can they view me as the same ever changing self I know that I am.

I think some may call this paranoia. But I think if we were honest with ourselves we would all say that there is something very true about this feeling. This isolation that is, maybe, just a fact of living within our own heads because that is how God confined us. And that as I even type this I wonder about the second order effects of you reading it, if you’ve gotten this far. And what does that mean to our relationship, and if the right person comes across this sparkly corner of the internet and feels what I feel do I then become, what a lot of want to be, which is considered intelligent with the capital means to assert that title that is based on the history of previous actions. Now under a new lens.

What lens am I under right now, and am I contributing more to your pleasure of seeing me.

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stochastic · 6 years

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on monday’s staff announcement

[disclaimer: i no longer work at tumblr. the views expressed here are mine and don’t represent oath or tumblr.]

i love tumblr. i love seeing the endless creativity from this community and the sense of belonging that i and others like me find here every single day. i’ve been a tumblr user since high school, and i feel like i grew up on this website based on how much it helped me learn and develop my understanding of the world, society, and myself. it’s part of the reason i moved across the country to new york to work there in 2016.

as someone who loves this place so much and contributed to its development over the last 2 years, monday’s announcement by leadership to remove adult content from the site was deeply disappointing to me. it’s also part of why i left the company in september.

first, i want to establish that explicit content involving children, as well as the people who share and consume it, have absolutely no place on tumblr, anywhere else on the internet, or anywhere else in general. apple’s policies on the app store and other content are absolutely puritanical in many other senses, but i believe in this specific context their actions were fully justifiable.

as a platform that prides itself on freedom of expression (this is one of tumblr’s core mission statement values), the move to censor such a large swath of legal and consensual adult content from it is a direct contradiction. the ability to share, explore and connect across the full spectrum of human expression is a core part of what made tumblr into the unique and nuanced website that it is today. it’s also something that david karp fought strongly to preserve.

this change will, without a doubt, also remove a critical platform from countless sex workers who already increasingly struggle to find a safe and secure way to make a living, connect with others, and simply be seen as human beings online. in the wake of SESTA/FOSTA and the subsequent closure of sites like backpage, tumblr has become a place that many sex workers rely on, and removing their presence on tumblr will likely have a highly negative impact on their livelihoods and wellbeing.

removing adult content from tumblr will also remove a safe space that so many LGBT users (including myself) call home. our community is fundamentally based on interactions that span the SFW/NSFW spectrum as an extension of self-discovery and identity (also core tumblr mission statement values), and in many cases for resources that LGBT folks don’t receive IRL, such as LGBT-specific augmentations of sexual health education. tumblr was many of these things for me. growing up in a small town without access to many LGBT peers my age, tumblr was a place i could go to find my community when it sometimes felt like i didn’t have one in the real world. it was a support network when i needed it, and the place where i met some of my best friends that i still remain in touch with today. removing adult content will remove this sense of community and will remove what so many rely on as a safe space for self-discovery and exploration.

to be clear, i understand the reality that it’s difficult to monetize on a network that contains such a mixed range of content, and how cutthroat this can be in the social media space. i still fully believe, though, that there are better, more balanced solutions to this problem that respect the needs of the community while also providing a stable source of revenue to build and grow the platform with.

additional hiring investment in human moderators to aid existing policy enforcement, for example, would be a great start. while they’re very promising, i believe the software tools and algorithms the industry uses to enforce policies like these instead of humans just aren’t ready yet. i’ve seen it in the countless false positives that have already been flagged here under this change, and i’ve seen it in the waves of spambots that wash over this and other similar sites on a regular basis. to be clear, others in this space also grapple with the same issues just as much – tools like machine learning are still new and rapidly developing. however, their relatively higher usage of human moderators as counterbalance is apparent in the relative lack of these problems that end up reaching users. a renewed investment in human moderation, along with anti-spam experts and the other human beings needed to fix these issues, in addition to addressing the growing epidemic of harassment seen across this and other networks, would be a more sensible alternative to relying so heavily on software to enforce such a far-reaching policy.

i love tumblr, and i love my staff family that i had the privilege to work with and get to know over the last 2 years. the people i worked with at tumblr continue to be some of the most passionate and empathetic human beings i know. the things i’ve written here aren’t intended to be an attack on them; i’m writing this because i love tumblr so much, and because i truly care about what happens to it in the future. tumblr played a fundamental part in shaping who i am today, as an LGBT individual, and as a citizen of the internet and the world. it’s important to me that those today who are finding themselves in the same place i was so many years ago when i found this community are able to make a home here the same way that i made mine.

-hunter

p.s. – in the wake of this announcement, please consider donating to the EFF, who work to defend privacy and free expression across the internet, and also to SWOP, who work to defend the rights of, and end stigma and violence against, sex workers. both of these causes will help those who find themselves displaced by this change.

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stochastic · 6 years

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She so fancy.

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stochastic · 6 years

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11 Things I've learned from running a micro VC in the last year

It’s been about a year since I started working on Hustle Fund with my business partner Eric Bahn. People often ask me what it’s like to start a micro VC and whether they should do one too. (Hunter Walk just wrote his perspectives here)

Here are some of my learnings from the last year.

1) It is absolutely the best job in the world for me.

I enjoy learning about new technologies and ideas – and you get to see a lot of them in this business especially in early stage investing. And I enjoy working with founders immensely. But most importantly, I love fundraising. I know – that isn’t what you thought I was going to say. (more on this later)

Much like running a product-startup, you’re your own boss, so you sometimes end up working really hard and at all hours depending on where you are in your fund life cycle. But, if it’s work you enjoy, then it doesn’t feel like work. And, there’s also a lot of flexibility, and I’ve definitely taken advantage of that. You can whimsically pick the most powdery day of the winter and go up to Tahoe to ski. Or go to the beach or lake mid week in the summer and no one will be there. It’s great.

2) Starting a micro VC is just like starting a product company. Except harder.

Probably 10x harder. If you go in knowing that with eyes-wide-open, then it’s totally fine, but most people don’t do enough homework before deciding to start their funds. I would talk with at least 10 micro VCs before deciding to do this.

3) In particular, there is no money in micro VC!

Hah - this seems ironic, but I’ll explain.

Most people think VCs have a lot of money. That’s if you work for an existing large established VC. But if you are starting a VC, this is definitely not true. I’ll break this down across a few points, but the gist is that you have to be willing to make no money for 5-10 years.

If you are not in a solid financial situation to do that, this business can be terrible for your personal life.

3b) Micro VC’s have no budgets.

This is surprising to a lot of people. Even if you have say, a $10m fund, most of that money needs to be used for investing – not for your livelihood or for other things.

In fact, the standard annual budget that VC funds have is 2% of the fund size for the life of the fund (typically 10 years). If your fund is say $10m, then that means you have a yearly budget of $200k. To be clear, this isn’t your salary – this is your budget to run your company. Your salary does come from this number, but you also need to cover salaries of everyone else on your team (if there are others on your team). And, if you travel, those costs come from this number too. If you have an office, that cost fits in here too. Health care and benefits also fit under this. Marketing – if you have t-shirts / watches / swag, parties – all of this fits under this budget. There are also fund ops costs that need to be factored into this number too. As it would turn out when you factor in all these costs, $200k actually doesn’t go far. To give you some perspective, my salary today is less than what I made at my first job out of college…in 2004.

You need to be willing to bootstrap for about 5-10 years. In contrast to building a product company, where most people bootstrap for maybe 2-3 years and then either raise some money or build off of profits or throw in the towel, when you sign up to do your own VC, you are committed for 10 years (the standard life of a fund). You can’t throw in the towel. And if your fund does well – i.e. your companies either raise more money or they grow their revenues a lot – you also don’t make more money, because your salary is based on a percentage of your fund size. So your salary (or lack of salary) is stuck for years – until you raise your next fund when you will have new budget from that fund.

Some Micro VCs write into their legal docs that they will frontload all of their budget in the first few years. Under this model, instead of taking say a $200k budget per year for 10 years, some funds will do something like frontload the budget – say $400k per year for 5 years. This can help increase your budget, though there are still fund ops costs every year for 10 years, so I’m not sure how these funds end up paying for those costs in years 6-10 if they are taking the full budget up front. This is not something we do at Hustle Fund.

Other micro VCs will try to make money in other ways by selling event tickets or whatnot. In many cases, depending on how your legal docs are written, consulting is discouraged. So it actually is very hard to bootstrap a micro VC, because on one hand, you get virtually no salary but are also mostly prohibited from making money outside of your work.

3c) You also will make General Partner contributions to your fund.

At most funds, you will also invest in your fund as well. This allows you to align with your investors and have skin in the game, and this is standard practice. In many cases, fund managers invest 1-5% of the fund size. So if you have a $10m fund, you’d be expected to invest at least $100k to the fund.

So, not only are you not making money on salary, you are also expected to contribute your own money to the fund.

There are some funds that don’t write this requirement into their legal docs, but it’s something that a number of would-be investors always ask about (in my experience). They want you as a fund manager to be incentivized to make good investments, because you are staking your own cash too. And this makes sense.

3d) Sometimes you need to loan money to your fund.

There have been several cases over the course of the last year, where either Eric or myself have had to loan Hustle Fund money interest-free to do a deal that needed to be done now (before we had the fund fully together).

One thing that is different about raising money for a fund (vs a product-company) is that when investors sign their commitment, they don’t actually send you the money right away. So, let’s say we raise $10m, we don’t actually have the $10m sitting around in a bank account. This surprises a lot of people – VCs don’t actually have cash on hand!

The way investors invest in a fund is they sign a paper committing to invest in the fund. And then later, when the fund needs money, the fund does a capital call. Typically, capital calls are done over the course of 3 years. So, if let’s say an investor commits to investing $300k into a fund, then on average, that fund will call 1/3 of the money each year over the course of 3 years. In this case, that would be roughly a $100k investment each year from this individual. The capital calls are not done on a perfectly regular cadence, because sometimes a fund will need money sooner than later. But most funds try as best as they can to do regular capital calls.

But, this also means that there’s a lot of strategy and thinking that needs to go into capital calls. For example, when you’re first starting out to raise money and have very little money committed – say $1m, it can be tempting to call 50% of the money right away to start investing $500k into a couple of deals. However, as you continue to raise, subsequent investors, will be required to catch up to that 50% called amount. And let’s say you round up another $6m in capital, this means that all of a sudden you have $3m that you’re automatically calling to catch up to the proportionate amount that the first set of investors contributed. And if you’re writing small checks out of your fund, much of that $3m will then just sit around in your bank account not earning interest and will negatively affect your rate of return. So instead of doing a capital call, loaning your fund money is a way to ensure that you don’t have capital just sitting around in your bank counting against your rate of return.

There are bank loans you can get once you are fully closed and up and running, but very few banks will loan you money in the very beginning when you have raised nothing - hah.

3e) And even if your fund does well, you still make very little money at the end of 10 years!

First, most VC funds are failures. In fact, much like startups, I’ve heard that 9 in 10 VCs will not even get to 1x returns!

But, if you happen to be in the lucky 10%, there’s even a range here. The “gold standard” for profitable VCs is a “3x return” benchmark. If you’re above it, you’re considered excellent. And this is very hard to do. Just getting into the profitable category is an accomplishment in itself. But, let’s suppose for a moment that your fund is excellent (because we all believe that our funds are excellent). And let’s say that we return 5x on our fund.

On a $10m fund, a 5x fund return means the fund will return $50m. Using a standard 20% carry formula, and after returning most of the gains to the fund’s investors, it means that the team will receive $8m. If you have 2 managing partners, that’s $4m per person – but 10 years later. Considering that you’ll make no salary for much of that time, there are many other professional / tech / established VC jobs at big Sand Hill firms that will make you more money or the same amount of money on salary alone (not including benefits or stock) with greater certainty. You don’t have to be a 90%+ performer as a Director of Product at Google to accomplish the same outcome as an exceptional micro VC manager. Think about that – you risk so much, much like a startup, but your upside is equivalent to working a steady job at Google for 10 years!

For all of these reasons, this is why microfund managers who are able to raise more money on subsequent funds end up doing so, because for the same amount of work and risk, you’d much rather be paid more in salary and in carried interest later.

4) You should love fundraising.

I think most people think that as a VC you spend most of your time looking at deals. The breakdown of a given week for me is something like:

50% fundraising-related (preparation of materials / meeting potential future investors / networking / etc)

20% marketing-related (content / speaking / etc)

5% ops (legal / audit / accounting / deal docs / etc)

15% looking at deals (talking w/ co-investors & referrers / emailing with founders / looking at decks / talking with founders)

10% working with portfolio companies

Of course, it varies a bit depending on if you’re at the beginning of a raise or if you have closed your fund. But, the point is, you will spend a solid chunk of your time as a micro VC on fundraising activities. Even if your fund is closed and you don’t have a deck to pitch, you are always in fundraise-mode.

If you have never fundraised for anything before, you will probably think that this process is horrible. Having raised money before for my startup and having coached a lot founders on fundraising over the last few years, I’ve grown to love it. And part of that is just lots of practice – the more you practice, the better you get, the more you like something.

5) Fundraising for a micro vc is exactly like fundraising as a product-startup. Except more involved.

Prior to raising a fund, it never occurred to me where fund managers raise their funds. That was just not something I had thought about before. For the big Sand Hill VCs, most of them raise money from institutionals. These are retirement / pension funds at goverment entities. Or endowments at universities. Etc. But as you can imagine, these entities are pretty conservative. And rightly so, the pension check that granny is counting on for her retirement shouldn’t be frivalously thrown away on a fund that invests in virtual hippos recorded on some blockchain.

So as a first time manager, often it can be difficult to convince these types of institutional funds to invest. It can be done if you have a strong brand already. But even if you are an experienced angel investor or worked at a well-known VC fund, you’re still starting a new fund with a new brand, and there are still questions about whether you can repeat your past success on this new brand.

This means that much like product-startups, you end up raising from individuals, family offices, and corporates primarily. But much like with raising money from angels and corporates for a product-startup, angels and corporates don’t have website announcing that they are funding vc funds. You have to hunt for these folks. Often these “angels” whom you can access are folks you know or folks who are 2-3 degrees away from you whom you don’t know yet (see my post on raising from friends and family).

And much like a product-startup, the check sizes are going to be smaller if they are from individuals (unless you know lots of very very wealthy individuals). When we first started fund 1, our minimum check size was $25k – much like the minimum investment amount for a typical product-startup. Except that we were raising tens of millions of dollars not $1m. So, $25k doesn’t go far on say a $10m fund.

This means you need to be doing lots of meetings. And this takes time. The average time for a microfund manager to raise a fund is ~2 years. We felt fortunate and incredibly thankful to our investors to be able to raise our fund in < 1 year. But, when you think about it, that’s still months of actively fundraising. (see point #4)

6) And you have a limited number of investors you can accept.

Per SEC rules, you can only accept 99 accredited investors into your fund. This means that if you want to raise a $10m fund, you need the average check size to be above $100k.

When product-startups set a minimum check size, it’s usually arbitrary. If you’re raising $1m for your product-startup, it won’t hurt you to take some investors at $1k or $5k checks here and there, especially if they are value-add. With a fund, every slot counts.

So when we started with $25k as a minimum check size for some friends, we knew we needed to quickly raise that bar in order to raise a significant enough fund and still maintain 99 investors. We ended up having to turn away a lot of great value-add would-be investors who could not do a higher investment. I would have absolutely loved to have brought in more investors if I didn’t have this restriction.

In other words, you cannot just accept $5k here and there from friends and claw your way to momentum.

To get around this, some funds set up a “1b” fund. E.g. Hustle Fund 1a and Hustle Fund 1b and split startup investments equally between the two. That would be one way to get bring in more investors, but the costs of this setup start to go up, so we decided not to do this.

7) Ok, so there’s no money. You also cannot change the world on fund 1.

If you can get past all of the above, and you’re still “yay yay yay – I want a life of making no money and want to fundraise all day and night for whatever cause I am trying to support,” the last piece is that you should know that you cannot change the world overnight.

I know so many aspiring micro VCs who go into this, because they want to fund more women or minorities or geographies or some vertical that is underfunded. And I think those are all awesome worthy causes. And me too – the reason I’m doing this is that I don’t believe the early stage fundraising landscape is a meritocracy, and I want the future of funding to be much more about speed of execution rather than about what you look like or how you talk.

But you absolutely need to go into this with a 20-30 year plan. And the reason is that you’re a small little microfund with say $5m, you won’t be able to change the numbers in any of these demographics, because impact happens at the late stages when VCs pour tens of millions of dollars into companies – not $100k here and there. What does effect change is having lots of money under management. And that happens by knocking fund 1 out of the park. And then fund 2. And then fund 3. And growing your fund each step of the way. And growing your believers who start to hop onboard your strategy – not only your investor base but other VCs. And that is a 20+ year plan.

Moreover, you need to be contrarian to have a good fund. But at the same time, you cannot be too contrarian either on fund 1, because you need to work with other VCs in the ecosystem. You need your founders to get downstream capital. So to a good extent, I do care a lot about what downstream investors think and how they think about things. You can only start to be very contrarian once you have more money under management (i.e. have proven out the last couple of funds) and follow on into your companies yourself.

So in short, you will not make any money on fund 1. You might need to loan money to your fund. You will need to have money to invest into your fund. You will constantly be selling your fund as an awesome investment opportunity for this fund and the next fund and the fund after that, etc… And you will not change the world on fund 1. But, if you still love all of this and go in with eyes-wide-open on all of these things, and if you believe you want to do this for the next 20-30 years, then I would highly encourage you to go for it. I think it is the best job in the world.

Fundraising is a nebulous process that I aim to make more transparent. To learn more secrets and tips, subscribe to my newsletter.

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