Tremendous

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High Energy Founders

April 23, 2025

“This guy is like caffeine personified,” I thought to myself as I nibbled from the cheese plate. “I’ve never met anyone like him.” Two years later, he’s the most successful founder I’ve ever invested in.

As soon as we sat down at the table in the restaurant in Hudson Yards, the information torrent began. Most people pause occasionally, try to remember something — not this guy.

“First we were going to use downloaded YouTube videos, but there wasn’t enough data,” he explained in a rapid fire staccato. “So we started creating our own synthetically.”

I like to think I’m a reasonably smart guy. But I had trouble keeping up. I had to listen intently just to avoid being left in the dust.

I racked my brain. Had I ever met someone like this before?

Nope.

“Can I ask you something?” I inquired at a rare break in the conversation.

“Sure,” he responded.

“How do you have so much energy? Are you on a special diet or something? Some kind of vitamins?”

“I think I was just born this way.”

There goes my hope of taking some pills and becoming Superman. Darn it!

Fast forward two years, and this fella’s company has grown faster than anything I’ve ever invested in. Revenue is up 60x in just over 2 years.

Some people just move at a different speed. They have a higher energy level.

Why? Who knows?

But they do. And they can make great entrepreneurs. After all, a founder’s work is never done.

Not every great founder is like this guy. I’ve met some billion dollar founders that are more reserved, cool, collected.

But the high energy founder is one type I’m looking for. I haven’t met another quite like this one — yet. But I’m scouring the country trying to find one.

If you invest in startups, keep an eye out for extremely energetic entrepreneurs. If they can move that fast, they can make their whole company move fast too.

There will be no blog tomorrow. I’ll be at ERA Demo Day in NYC. If you’re there, stop by and say hello!

More on tech:

Why a $20 Billion Fund Can’t Work

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Why a $20 Billion Fund Can’t Work

April 22, 2025

Andreessen Horowitz is raising a $20 billion fund. Getting a decent return on this money will be almost impossible. To understand why, we have to look at how venture funds make their money.

How VC’s Make Money

Big funds like a16z lead rounds in a startup, typically from Series A onward.

In a Series A, the lead will usually buy 10-20% of the company. In a later stage round, it’s likely to be less.

At exit, the VC is likely to see 50% dilution. This is because the company continues to raise money throughout its life, which dilutes the prior shareholders.

So at exit, that 20% becomes 10%. And this is a best case scenario — a VC firm often owns less than that.

With those proceeds, the VC’s pay themselves, taking around 20%.

The bare minimum acceptable return on that $20 billion fund is a 3x. That would get them to an 11.6% annual return, which just barely beats the 10.6% average return on the NASDAQ over the last 40 years.

To be clear, this is a crappy return.

Venture funds are illiquid for 10-15 years. They take enormous risks on early stage companies. You should see a lot more than a 1% performance bump.

But 3x is the bare minimum. So, can a16z get there?

Too Much Capital, Too Few Exits

VC’s usually invest a fund over a 2-4 year period. We’ll assume 3 years. They’re likely to exit around 10 yrs later.

The problem is, there aren’t enough exits in any 3 year period to get a return on a $20 billion fund.

Looking at the years from 2014-24, the most cumulative exits in a 3 year period was $1.3 trillion. That was between 2019-21, at the peak of the market.

Remember, a16z owns 10%. So to get that $60 billion in returns, they need to participate in $600 billion of exits!

They’d have to be major investors in half the companies that exit, consistently through a 3 year period. And the 3 year period would need to be a historic bull market like none we’ve ever seen.

Realistically, this is never going to happen.

A16z is very good, but they’re not in every great company. Sequoia, Benchmark, Kleiner and many others are fighting it out, grabbing off quite a few for themselves.

And if we look at more normal 3 year periods, the picture gets a lot worse.

From 2014-24, the average 3 year period produces just $559 billion in exits. Even if a16z were a major investor in every single successful startup, they still wouldn’t be able to get an acceptable return on their $20 billion megafund!

They could wait longer for more exits, sure. But that increases the amount of exits they need to get. Otherwise, their IRR drops.

So Why Is a16z Doing It?

If they can’t make a decent return on this $20 billion monster, why is a16z doing it? Well, that comes down to the other way VC’s make money…

The 20% performance fee is just part of their business model. The other part, perhaps the more important part, is the management fees.

VC’s typically take 2% of the entire fund every year as a management fee. Whether the fund does well or not, they get that money.

With a $20 billion fund, they’ll pull in $400 million in fees every year, guaranteed.

Pretty sweet right? Well, it gets better…

A16z will probably stack these funds. If they deploy the $20 billion monster in 2-3 years, they’ll raise another. And another after that.

In a decade, they could have 4 of these funds running at once. That’s a cool $1.6 billion in management fees every year, whether the funds do well or not.

Starting to make sense?

A16z isn’t the only firm that does this. Most of the multistage funds have raised multibillion dollar vehicles that will struggle to get returns.

But because a16z is one of the biggest names, they’re able to hoard assets on a larger scale.

Wrap-Up

This is no reflection on the skills of the folks at a16z. By all accounts, they work really hard to help founders. Some of the best people in the business work there.

But nobody, not Don Valentine or Don Rickles, can get a return on a $20 billion fund. The math don’t math.

That’s why some funds prefer to stay small. Benchmark has kept its funds in the hundreds of millions.

These guys are legends. They could raise billions of dollars with a couple of phone calls. But they know that getting a return on that money is impossible.

So they don’t do it. I respect that discipline.

As an angel, I’m happy not to have to worry about these problems. That’s part of the joy of being small — you have an opportunity to score giant returns.

“Anyone who says that size does not hurt investment performance is selling.”
Warren Buffett

More on tech:

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I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

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Everything I Bought From China in a Week

April 21, 2025

$1.57 for a lighter. That’s the only thing I bought from China last week.

With a trade war going on, I started to wonder: how much do I actually buy from China? So I decided to track all my purchases for a week and find out.

A Week Inside the Santora Household

I made no effort not to buy from China or to buy American in general. I only looked at the “made in” after I bought each item.

Turns out, I don’t buy much from the Middle Kingdom.

That barbecue lighter was my only purchase. Even if tariffs went to 500%, it would make very little difference to me.

In fact, I was surprised how little I buy from abroad.

I spent about a dollar each on some chips from Canada and a bar of German chocolate with almonds (yum). But the grand prize went to India — $50 for vitamins.

Every other cent I spent was on an American product or service.

What I Actually Spent Money On

When you consider where my money goes, this makes a lot of sense. Almost all my spending goes to two things: housing and food (both groceries and eating out).

Housing doesn’t come from abroad (although some construction materials may). Very little food comes from abroad either, and almost none of it from China.

China mostly sells us manufactured products. And because I already have the goods I need, I seldom buy any new ones.

Moving Away from China

For many years, China was our biggest trading partner. But now, they’ve been supplanted by Mexico. Canada is close behind China, and has actually passed China at certain points in recent years.

My spending is a lot like most Americans.

The biggest expense for Americans is housing, followed by transportation, food and insurance. Almost none of that money goes to China.

For the odd manufactured item like a lighter, we can go elsewhere. It’s a pretty simple object — I’m sure Mexico can make them.

Electronics are a little harder. But already, India and Vietnam are muscling in on China’s business.

Wrap-Up

This trade war could be a lot less important to Americans than the media says. Most of us don’t actually buy much from abroad in the context of our total budgets.

Our purchases from China are an even smaller fraction of our spending. In a $30 trillion economy, Chinese imports count for just 1.5%.

In time, we’ll probably make a deal with China. But until then, the average American isn’t likely to suffer much financially.

Most of what we need, we make ourselves.

How much have you bought from China recently? Leave a comment and let us know!

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

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I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

Why We Must Ban Chinese Robots

April 17, 2025

Chinese robotics startup Unitree has been caught embedding a backdoor in their robots that lets them spy on people. This shows why we must ban all Chinese robots.

Whether it’s a robot dog, android, autonomous EV or drone, all these products are the same. They have chips, cameras, a battery and means of locomotion. For the robots, it’s legs. For an EV, it’s wheels. For a drone, it’s propellers. But fundamentally, these are all the same product.

And in the hands of a belligerent Communist dictatorship, they’re all dangerous.

Robots — Since robots are a fringe product today, they’ll be easy to ban.

We have no dependence on Chinese robots because we have no dependence on any robots, aside from the common industrial ones we use today. Those are mostly made in Japan and Europe.

If we allow Chinese robots out in our streets, we’re in incredible danger. They could attack people or sabotage facilities. They could also surveil targets for humans to attack.

We have excellent robotics companies here in America, such as Figure, Tesla and Boston Dynamics. We should never allow Chinese robots into our country.

Cars — In today’s world, cars are becoming robots. They’re autonomous and driven by computers.

Chinese cars have no presence in the United States today. We have to keep it that way.

Allowing autonomous vehicles from China into this country would be a huge mistake. In the event of a war, they could be used to run people over or ram into key infrastructure. Even as surveillance tools, they’d be a formidable weapon.

Tesla is already producing tons of autonomous EV’s in the US. In the future, we should only allow cars from friendly countries into the United States.

Drones — This will be the hardest one to ban. Chinese company DJI makes almost 80% of America’s drones.

I would phase in a ban, starting with the military. In 3 years, we should be able to stand up drone manufacturing capabilities.

Chinese drones represent a serious threat to the United States.

They’re incredible surveillance tools, able to go anywhere, hover, and transmit information. They could also ram into a target, although their small size limits the potential damage.

I’m confident that like cars, we can produce drones at scale in the US at a reasonable price. Whoever figures it out first will make a fortune.

Wrap-Up

China is becoming our enemy. And there’s no way we can let robots, cars or drones from an enemy country into the United States.

They could be used to surveil us. In fact, it’s probably already happening.

But it gets worse. China could tell its robots and cars to attack humans or sabotage critical infrastructure like bridges and powerplants.

It’s fine to bring in t-shirts and sneakers. But robots can too easily become a weapon.

Robots are the future. But that future must be built here in the United States.

There will be no blog tomorrow for Good Friday. Have a great Easter everyone!

More on tech:

Unit X

Is Your Vision Big Enough?

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This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

More on Fundrise in this post.

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I wrote a detailed review of Misfits here.

Is Selling to the Feds About to Get a Lot Easier?

April 16, 2025

President Trump just issued a new executive order to streamline federal procurement. Will this finally make it easy to sell to the Feds?

What the Executive Order Does

The executive order, Restoring Common Sense to Federal Procurement, came out yesterday. It gives federal agencies 180 days to simplify the Federal Acquisition Regulation (FAR) that governs federal contracts.

I read up a little on the FAR rules this morning. They’re way nuttier than I ever thought.

The FAR goes on for over 2,000 pages. It weighs 5 pounds.

Contractors have to submit every paper document on double-sided paper with “at least 30% postconsumer fiber.” Every federal contractor has to do employee training on why texting and driving is dangerous.

Why in the Sam hell does Anduril have to tell it’s employees that texting and driving is dangerous in order to sell a drone to the Army?

Procurement Reform Could Be a Godsend for Startups

These complex regulations are the best thing that ever happened to the Primes. They have armies of lawyers and lobbyists.

Their core competency isn’t developing new technology. It’s navigating these byzantine requirements.

The folks at a disadvantage are startups. They have the most motivated people and a lot of the best tech. But they don’t have the manpower to wade through these endless regulations.

If we can cut this 2,000 pages down to a few hundred, it would make a huge difference for startups. Defense tech startups in particular would benefit.

Defense tech is an area I’m getting more and more excited about. We’re in a dangerous world, and we need to defend the country.

Procurement reform could be a huge tailwind for defense tech startups, along with anyone selling to the Feds. Combined with a growing defense budget, this could be the best time ever to invest in defense tech.

Wrap-Up

The more rules we pile on, the less flexible procurement will be. This means we’ll wind up with out of date weapons and won’t be able to defend ourselves.

We have to stop micromanaging everything with a thousand rules. Instead, let’s put smart people in charge, give them a goal, and let them use their best judgement.

When you trust people to use their judgment, their IQ seems to 10x. They’re finally being allowed to think for themselves!

No set of regs can ever stop fraud or ensure fairness. Your best protection against that is good people.

I hope the Trump Administration can make a huge dent in these ridiculous regs. That will go a long way to protecting our country.

More on tech:

Unit X

Save Money on Stuff I Use:

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

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If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

Use this link to sign up and you’ll save $15 on your first order.

I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

When Can You Quit Your Job?

April 15, 2025

I recently met an amazing founder. His company had incredible potential. But he was afraid to quit his job and pursue it full time. So, when is the right time to go all in?

Just like a startup, people have runway. Your runway is the amount of time until you run out of cash at your current burn rate.

For startups and for individuals, I recommend 18 months runway. 12 months is the bare minimum.

When to Quit Your Job

Let’s say you spend $8,000 a month. 18 months runway is $144,000. Save up $144,000, and you have enough runway to go full time on your own business.

That may sound like a lot of money. But many of the folks who start tech startups work in FAANG companies making huge salaries. At those rates, you can save up $144,000 pretty quickly.

But there’s another trick that can get you your freedom sooner: cut your spending!

What if you could get that $8,000/month down to $5,000? Maybe you cut some trips and eating out. Perhaps you move to a cheaper place.

Now, you only need $90,000. That could mean pursuing your dreams a year sooner!

And of course, if you can raise an accelerator check of perhaps $125,000, you may not need any personal savings at all.

How to Handle Your Finances as an Entrepreneur

Here’s how these 18 months will work…

For the first year, just go all-in on your business. Do everything you can to make it a success.

The hours will be long, but you’re working for yourself on your own dream. That helps a lot.

After 1 year, assess where you’re at financially. Are you making enough to cover your personal burn? If not, can you cut the burn further?

Let’s say that after the first year, you’re not making anywhere near enough. Perhaps your business is paying you $2,000 a month and you need $5,000.

In that case, it’s time to start looking for a job. You’ll still have at least 6 months to do that, which should be enough time.

My Experience Quitting My Job

In 2019, I quit a great job in tech. I wanted to invest full time.

Those 6 years have been some of the best of my life!

I was lucky to have that job and my co-workers were great. But to tell you the truth, I never missed that office for a day. I don’t think I’ll ever forget the moment I walked out for the last time.

I maintain my freedom by keeping my spending reasonable. I live very comfortably, but I don’t live in a huge mansion or cruise down the Hudson on a yacht.

That freedom makes me way happier than fancy stuff ever could. And every morning, as I see folks at the bus stop headed to New York City to work for someone else, I’m grateful that I can do what I want.

Wrap-Up

You may be terrified to quit your job. Society tells you that you have to work for someone and bring home a paycheck.

But in reality, you don’t.

If you have a business you want to pursue, save your pennies and get yourself in a position to quit your 9-5. If that involves cutting your spending, so be it.

Having the freedom to pursue what you love beats a Mercedes any day.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

Use this link to sign up and you’ll save $15 on your first order.

I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

How to Diligence VC’s

April 14, 2025

VC’s will diligence the heck out of you. But you should be diligencing them too. Here’s how to do it…

Don’t ask the VC for references. He can just cherry pick the founders in his portfolio that are the most likely to say something nice about him.

Instead, go to his portfolio on the firm’s website or on Crunchbase. Pick a few companies and contact the founders yourself.

Don’t pick companies that are a big success. Instead, pick obscure ones that haven’t caught on. And if you can find a few that failed, even better!

It’s easier for everyone to get along when a startup is crushing it. It’s when things aren’t going well that tempers are likely to flare.

Once you’ve found perhaps 5 startups, send the founders a short message:

“Hi Mike! I see that Jim at ABC Ventures led your seed round. I’m considering having him lead mine. Do you have 5 min to discuss your experience working w/ Jim?”

Founders like helping other founders. If you ask politely and make it clear it won’t take long, you should be able to get plenty of references.

No reputable investor will mind you diligencing them. In fact, they’ll respect you for being smart and thoughtful.

I hope every founder I’m planning to invest in talks to other founders I’ve worked with!

I’m pretty sure they’ll hear something positive. That will improve my odds of getting into the deal.

I recommend getting references for anyone you let onto your cap table. But at a minimum, you have to diligence your lead investor.

As a founder, you’re extremely busy. It would be easy to let references slide, especially if someone is dangling $1 million over your head.

Don’t. Getting rid of an investor is practically impossible.

You could be stuck with this guy for 10 years or more. You want to make sure he’s someone you can work with without tearing your hair out.

A few minutes of diligence now could save you untold painful hours in the near future! Do yourself a favor: get those references.

More on tech:

The Best Service Providers for Startups

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This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

Use this link to sign up and you’ll save $15 on your first order.

I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

The Best Service Providers for Startups

April 11, 2025

Most lawyers and accountants have no idea how to work with tech startups. So where should founders go? Here are my favorites…

Incorporation: Capbase. Capbase can get you properly incorporated in minutes for less money than others. It’s just $999/year.

Full disclosure: I have a small investment in this one. I invested in it because I think it’s a fantastic service.

How you incorporate is really important. If you choose the wrong corporate form, like an LLC, you’re cutting yourself off from funding.

All Capbase does is work with startups, so you can be sure they’ll do it right.

Bookkeeping and Tax: Kruze Consulting. Kruze specializes in bookkeeping and taxes for startups. This makes them a much better choice than a typical accounting firm, which will not understand your business.

Because startups are all they do, they’re on the lookout for tax provisions that could help you, like R&D credits. You won’t get that from the accountants down the street.

Many of my investments have worked with Kruze and they’ve always been happy with the service.

Legal: Goodwin. Goodwin works with startups all the time. They understand your needs: things like funding rounds, IP issues, and more.

They’re also really good about giving free or discounted work to early stage startups. They want to build a relationship for the long term.

Shutting Down: Simple Closure. Hopefully, you’ll never have to use this. But let’s be honest: most startups fail.

If you do fail, you need to shut the company down correctly. Simple Closure makes it really easy.

I recently had a startup fail and SimpleClosure handled the process beautifully. I just got the final K-1, an important tax form. It came before most of my other investments, which shows you how efficient SimpleClosure is.

Wrap-Up

Having the right service providers to help you makes your life so much easier. This is true for individuals and it’s true for startups too.

Startups are weird creatures. They incorporate differently than most companies, face different legal issues, and have unique tax considerations.

That’s why these providers are the best — they work with startups every day. You’ll sleep better at night knowing your taxes, legal and accounting are being done right.

Have a great weekend everybody!

More on tech:

Five Things Founders Should Never Pay For

Save Money on Stuff I Use:

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

Use this link to sign up and you’ll save $15 on your first order.

I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

When an Investor Pulls Your Term Sheet

April 10, 2025

This $750,000 term sheet was going to save the company. The founder was elated. And then, a phone call. The investor was pulling out.

Investors can pull a term sheet for any reason. It’s rare, but when it happens it can leave a company crippled.

Worst of all, it can have nothing to do with the startup.

Losing Your Lead

In a great post on Reddit’s r/entrepreneur sub, a founder describes how an investor gave them a $750,000 term sheet. This term sheet was a lifeline. The startup had practically nothing left in the bank. The founder had drained his personal funds as well.

But in due diligence, the investor said the customer references were negative and gave that as their reason for pulling the term sheet. Many of the commenters say there could be more to the story, and I agree.

The founder probably chose his happiest customers as references. I doubt they’d give such poor feedback.

My suspicion is the lead may not have had the cash to begin with.

Some funds commit to a round before they’ve actually raised the money from LP’s. This is a rotten thing to do, but it happens.

My Experience With a Lead Pulling Out

I’ve only seen this once in my 4 years investing. The lead was a syndicate that didn’t raise what it expected from its members. So, they couldn’t fulfill their commitment to the startup.

The startup had been counting on that money. Now they were left with a dwindling bank account and no money on the way.

Since the round was no longer happening, I didn’t invest either. I’m not sure what happened to the startup, but Crunchbase has no data on them raising further cash.

I’m guessing the company probably folded. This failed round probably contributed to that.

How to Protect Yourself

Legally, investors can pull out for any reason or no reason. But there are ways to avoid this situation and to limit the damage if a round does fall apart.

VC’s that pull out of rounds tend to be no-name investors. They probably didn’t have the cash to make the investment to begin with.

It’s fine to include some obscure names in your round. But having one as the lead is risky.

Similarly, having a syndicate lead your round is a crapshoot. Maybe they can raise the money for the deal, but maybe they can’t.

When the round I was in fell apart, the lead had both these red flags. They were an obscure syndicate based in Europe.

That’s definitely not a good choice for a lead investor.

But there’s an even better way to protect yourself than choosing a good lead: getting to break even.

If you’re at break even when you raise money, you’re in a position of strength. You can dictate the terms. And if the round doesn’t happen, it’s no big deal.

Wrap-Up

Losing a lead investor can devastate a company. And unfortunately, it often has more to do with the investor than it does with the startup.

Protect yourself! Choose a lead with a track record and a good reputation. And get to break even before you start fundraising.

This way, whatever happens, you will survive.

More on tech:

Is Your Vision Big Enough?

Five Things Founders Should Never Pay For

Save Money on Stuff I Use:

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!