Tremendous

An angel investor's take on life and business

  • How Important Are Co-Investors?

    “A lot of VC’s just want to give us money because we’re in YC. They don’t care about what we’re building.” That was a great founder I spoke with yesterday who’s currently in YC.

    It seems insane to me, but a lot of investors operate like this. Team, product, traction, who cares? The only question is, “Who else is investing?”

    That is a terrible approach. Let me tell you why…

    You Can’t Ask Sequoia for a Refund

    Let’s say Sequoia is in the seed round of a company you invest in. You couldn’t possibly get a stronger co-investor.

    Two years later, the company goes to zero.

    You can’t come to Sequoia and ask them for your money back. So you better make your own decision!

    One Data Point Among Many

    If a company went to YC or a top firm is leading their seed, that’s great. I don’t discount that information completely.

    But it’s just one data point among many. And there are others that are a lot more important.

    How good is this team? How fast are they growing? Those factors matter more than any co-investor.

    At seed, the big firms make very few investments anyway. I consider the lead more carefully at Series A, an area where the big funds are more active.

    When the Co-Investors Are a Little Too Good

    If a seed round is really star studded, I actually get a bit nervous. In my experience, early rounds filled with blue chip investors correlate with poor performance. Many top investors have said the same.

    How on earth could this be?

    Maybe if everyone thinks a startup will succeed, the future that startup is proposing is too easy to imagine. It’s not a radical enough departure from today.

    A startup has to bring about radical change in order to make big money. Think staying in strangers’ spare rooms on Airbnb, something I never would’ve done in 1,000 years otherwise.

    A Peak Inside My Portfolio

    Let’s take a look at the most successful companies in my portfolio so far. How good were the co-investors?

    1. $17 million ARR. Party round, lower tier accelerator, one prominent angel and the founder of a unicorn startup. Good co-investors, but it’s not exactly YC and Sequoia.
    2. $12 million ARR. A good early stage VC firm, a prominent angel, and a solid accelerator. Good co-investors, but doesn’t knock your socks off.
    3. $7 million ARR. Strong accelerator, no one else notable.
    4. $6 million ARR. One prominent angel, no one else notable.

    What you see here is that the really successful companies may have one or two good investors. But they don’t have a round filled with famous names. And none of these companies went to YC.

    One startup in my portfolio had a particularly star studded cap table. One of the best early stage funds in the world led its seed round.

    That company is about to go out of business. Out of 31 investments I have, it’s one of the 2 least successful.

    Go figure.

    Wrap-Up

    It’s easy to be wowed by YC, Sequoia, or whoever. But here’s my advice: take it as one data point among many, and make your own decision.

    We investors have one mission: turn a dollar into two. If we back strong teams with great products, we can do it.

    The rest is noise.

    How much value do you place on co-investors?

    There will be no blog on Monday for Labor Day. Have a great holiday weekend, everyone!

    More on tech:

    Small Investors Lead to Big Investors

    Charge More!

    What Happens in an Acquihire?

    Save Money on Stuff I Use:

    Fundrise

    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!

    Misfits Market

    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.

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

  • Charge More!

    You’re not charging enough for your product. Charging too little, or nothing at all, is the most common mistake I see founders make.

    Why do founders do this? And how much should you charge? Let me break it down…

    A Common Problem

    I cannot tell you how many founders I meet that have an awesome product but charge little or nothing for it.

    They have 1000 excuses. “We need to make the product better first.” Or the classic, “We just want to get our foot in the door.”

    The bottom line is this is a business. If you’re providing value to someone, you should capture some of that value.

    We are not doing charity work here.

    This problem is especially common among female founders, from what I’ve seen. Perhaps influenced by our gender mores, they are often reluctant to put value on what they’ve created.

    How Much to Charge

    When founders do charge, the price is often absurdly low. A product that saves a white collar worker 20 hours a month might cost $20/month.

    That worker’s total comp including benefits is probably $75/hour. This means you created $1500 worth of value ($75 x 20).

    And you’re only charging $20?

    Here’s a rule to determine what to charge: charge at least 10% of the value you create. In this example, you would charge $150/mo.

    Some products help you make more money, rather than save you time. In that case, the same math applies.

    Let’s say a product boosts my sales from $10,000 a month to $20,000. You want to charge at least $1,000 a month for that.

    This 10% rule of thumb is a floor, not a ceiling. Keep upping the price for new customers until you get serious resistance!

    Charging based on value creation works for B2B and B2C. Some B2C companies rely on ads, but this only works at enormous scale — see Facebook, Instagram, etc.

    Finding Out Who Your Customers Are

    People value what they pay for. If someone isn’t willing to pay you for your product, they’re not the customer you’re looking for.

    The people who will pay are getting the most value from your product. They will be the most engaged users.

    That’s who you want to build for!

    Don’t let cheapskates send you off on wild goose chases building X, Y and Z. Those features might be useless to your real customers!

    Instead, build for the folks who are most engaged — the folks who are paying.

    Building a Sustainable Business

    Every business has to make money. Otherwise, you’re dependent on fundraising.

    Fundraising is harder these days. And it’s especially hard for startups with little or no revenue.

    Your company exists to accomplish an important mission. But you can’t do that without money coming in the door.

    So you have to charge, and you have to charge commensurate with the value you create. That’s the only path to success.

    Wrap-Up

    My grandpa used to run a machine repair shop. He did wonderful work, but he charged practically nothing. And he never pushed customers to pay past due bills.

    One day, my grandma took him aside and said, “Jim, you’re not being fair to yourself.” She was right.

    Be fair to yourself. Don’t be afraid to put value on what you’ve built.

    Have you struggled with pricing your product?

    More on tech:

    Small Investors Lead to Big Investors

    What Happens in an Acquihire?

    Why I Only Invest in a Handful of Countries

    Save Money on Stuff I Use:

    Fundrise

    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!

    Misfits Market

    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.

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

  • How AI Will Gut Call Centers

    Two million people in the Philippines work in call centers. Soon, they may be replaced by AI.

    AI has impacted call centers more than just about any sector of the economy so far. AI systems are already answering most inquiries at some major companies.

    How long until these workers will be out of a job?

    The AI Wave

    There are few countries more dependent on call centers than the Philippines.

    At 2:00 am, Manila’s streets are full of workers on their “lunch break”. Huge sections of the population set their clocks to America.

    The call center industry has been good to the Philippines. Millions of workers have found higher wages and job security.

    But now, AI is threatening that progress.

    Call centers are rapidly installing AI systems. And the layoffs have already begun.

    AI could decimate the Philippines’ call center industry.

    Klarna already has an AI system answering 2/3rds of customer service inquiries. If that becomes the norm, call centers could be a thing of the past.

    Specializing for Superior Performance

    Today’s general purpose customer service bots are only the beginning. I’m meeting tons of startups that are building specialized agents that will outperform today’s generalist tools.

    I’ve seen products for car dealerships, dentist’s offices, and more. These products are attuned to the exact questions that come up in these businesses.

    That will allow them to blow away today’s AI bots. That means even more job losses in customer service.

    The Limitations of AI

    To replace humans, AI needs to do more than just answer questions. It needs to take actions.

    I need AI to rebook my flight, send me a new credit card when I lose mine, or close my account. This will require AI agents, not just chatbots.

    Today’s AI customer service tools mostly just answer questions. But tons of startups are building AI agents.

    I expect to see powerful agentic systems within the next couple of years.

    This leaves only the most extreme edge cases for humans to handle. Companies may keep 5-10% of their existing customer service staff to handle those.

    Wrap-Up

    AI is killing jobs in customer service. But it’s also creating new opportunities for workers in places like the Phillipines.

    Some are training AI models. Others are becoming virtual assistants. Many of these jobs pay better than customer service.

    For workers that improve their skills, AI is an opportunity. But those that don’t will soon be out of a job.

    What’s happening in the Philippines today will be happening in the US soon. As AI tools get better, more complex jobs in developed nations will be at risk.

    The best protection for workers is upping their skills.

    How do you think AI will affect jobs?

    More on tech:
    Small Investors Lead to Big Investors

    What Happens in an Acquihire?

    Why I Only Invest in a Handful of Countries

    Save Money on Stuff I Use:

    Fundrise

    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!

    Misfits Market

    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.

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

  • Why I Only Invest in a Handful of Countries

    A while back, I met a really interesting fintech startup. Revenue was growing like crazy, 30% MoM. So why did I pass?

    Because I stick with what I know. The company was in Nigeria, and the market is just too unfamiliar.

    Like a lot of US investors, I only invest in a handful of countries: the US, Canada, the UK, Ireland, Australia and New Zealand. Out of 31 investments, only two are abroad, in London and Toronto.

    But why not just seize the best opportunities wherever they are? Let me explain…

    Languages I Can Speak

    I need to see a product in action before I invest. And it needs to be in a language I speak.

    You could have the best product ever. But if it’s in Hindi, I can’t understand what’s going on.

    This is why I stick to products that are in English. Investing is hard enough without a language barrier.

    Boots on the Ground

    I know people in NYC and SF. Good deals come to me early.

    The same isn’t true in Germany, Brazil or Kenya.

    The best companies in those countries will be picked off by investors who live there. I’ll get the scraps.

    Predictable Legal Environment

    Countries where I invest have a similar, common law framework. All are pretty friendly to startups, especially the US.

    Contrast that with Germany. Over there, it can take months and tens of thousands of euros just to get incorporated.

    That puts a German startup at a huge disadvantage.

    And if you think the German environment is unfamiliar, try India, China or the Ivory Coast.

    Political and Economic Stability

    The countries where I invest are all politically and economically stable. Unfortunately, much of the world isn’t.

    Let’s use Ethiopia as an example. I’m sure there are some incredible Ethiopian entrepreneurs. But good luck investing there.

    If we invest in Ethiopia and our customers are there, they’re paying us in the Ethiopian currency, the birr. The birr’s value has dropped by half in just the last month.

    Even if we make a fortune in birr, it won’t add up to much in dollars. Throw in the risk of war with Somalia, and the country is not investable.

    Tiptoeing Onto the Continent

    I’m wary of investing outside the markets I know best. But I’m also doing something a lot of American investors are doing right now: carefully tiptoeing onto the continent.

    Two of the most exciting startups I’ve seen this year were in the Netherlands and France.

    These countries have incredible AI talent. The products are in English and the customers are mostly in America anyhow.

    Best of all, the valuations are a lot more reasonable than in the US.

    I haven’t made any investments on the continent yet. But later this year, I probably will.

    Even then, they’ll need to incorporate as a Delaware C Corp. Predictability matters.

    Wrap-Up

    Making money investing in startups is really hard. Even if we stick to our own backyard, the odds suck.

    Add in unfamiliar markets, unstable currencies or shaky governments, and the difficult becomes nearly impossible.

    So I’m sticking to what I know: a handful of developed, Western markets. There’s more than enough here to keep me busy.

    Where do you invest?

    More on tech:

    Small Investors Lead to Big Investors

    What Happens in an Acquihire?

    When Co-Founders Divorce

    Save Money on Stuff I Use:

    Fundrise

    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!

    Misfits Market

    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.

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

  • How Kamala’s Unrealized Gains Tax Will Destroy the Economy

    Kamala Harris has announced a plan to tax unrealized capital gains. This bizarre and unprecedented plan will hit the US economy like a sledgehammer.

    How It Works

    Harris plans to tax unrealized capital gains at 25%. This would only apply to tax payers with assets of over $100 million — for now.

    If you’re illiquid and can’t pay the tax today, you can defer it. But then you’ll have to pay an even higher rate.

    Expect this tax to affect a lot more people over time. When income taxes were introduced in 1913, they covered only the ultra-rich.

    Why It’s Unworkable

    Let’s say you own a building. You picked a good location, and the value goes from $100 million to $150 million.

    You now owe $12.5 million in tax, or 25% of $50 million. But you didn’t sell the building, so you don’t have the money to pay the tax!

    Looks like you’ll have to defer. But what happens if you sell the building and you can only get $95 million for it?

    No one seems to know.

    Startup founders will face the same problem. A founder could be worth $200 million on paper but have almost no liquid assets.

    Under Kamala’s regime, he’d be piling up giant tax bills on money he does not have.

    But it gets worse. How do we even know what these private assets are worth?

    Well, unless you have a financing event that prices them, the government will just pick a valuation. That valuation will determine how much tax you owe.

    Those valuations may have nothing to do with reality. After all, the government will want to maximize its revenue.

    Business Grinds to a Halt

    If there’s one thing that kills business, it’s uncertainty. And this Rube Goldberg tax plan is loaded with it.

    How much are my private assets really worth? And with all the complex rules, how much am I really supposed to pay?

    Businesses won’t know what to do. So business activity will slow down.

    Meanwhile, the tax will suck money out of the economy. That means less money to build housing or start a business.

    The tax may fall on the rich to start. But when we slide into recession and unemployment spikes, this cockamamie tax plan will affect everyone.

    Unstable Government Finances, Shrinking Capital Markets

    Let’s say that I have $200 million in stocks. In 2025, their value goes up to $300 million.

    I owe $25 million in tax, and I pay it. But in 2026, the market takes a nosedive.

    Now my stocks are only worth $150 million, less than when I started. Is the government going to give me a refund?

    Providing refunds would place enormous stress on the government during recessions. But if it doesn’t provide refunds, the government will starve the economy of capital.

    When the feds take a piece of your winnings but never share the losses, sooner or later you have nothing left.

    Hello, Dubai!

    Facing punitive taxation and a weak economy, Americans will begin to move abroad. After all, Dubai has no capital gains tax at all.

    Investors and entrepreneurs are the most mobile people in America. They’ll be the first ones off the sinking ship.

    Average Americans will stay. But they’ll face an economy starved of investment.

    Expect fewer jobs, lower pay, and little or no growth.

    Wrap Up

    Harris’ tax plan is insane. It will starve the economy of the money it needs to grow.

    Kamala Harris’ America is a very different country. It’s a place of low growth, minimal innovation, and high unemployment.

    It’s a place that anyone with options will leave.

    We already pay enough. Let’s get the government’s hand out of our pockets.

    What do you think of Harris’ tax plan?

    More on the election:

    Kamala’s Price Controls = Empty Shelves

    Kamala’s Extreme Agenda

    Sacks at the RNC

    Save Money on Stuff I Use:

    Fundrise

    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!

    Misfits Market

    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.

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

  • The Fertility Crisis

    By 2054, South Korea could lose two thirds of its population. The scenario is not a war or pandemic. It is a collapse in fertility.

    South Korea’s fertility rate stands at 0.72, the lowest in the world. At current rates, South Korea could cease to exist within 500 years. And fertility is expected to fall even further this year.

    What’s happening in South Korea is a preview of a worldwide crisis. In America, in Europe, even in developing countries like India, fertility is collapsing.

    Are we facing a future without humans? And what the heck do we do about it?

    Baby Bonuses — A Failed Experiment

    Facing a declining population, many countries have tried to encourage families to have more kids. Few have been more generous than Hungary.

    Hungary spends over 5% of its GDP on subsidies to families. Parents are eligible for loans and grants from the state. And if you’re a woman with four or more children, you never have to pay taxes again!

    Hungary’s fertility jumped for a few years. But it has now settled back down almost as low as it was before, at 1.36 births per woman.

    At this rate, rapid population decline is assured.

    In America today, both parties are falling all over themselves promising to subsidize families. But these payments won’t do much to increase our fertility rate, which currently sits at 1.67.

    Promoting Religion

    Even in a world of declining fertility, some people are still having lots of children. And they tend to have one thing in common: religious faith.

    In a fascinating new book called Hannah’s Children, sociologist Catherine Pakaluk studies families with 5 or more children. She found that nearly all of them are religious.

    Many religions encourage childbearing. And religious faith can help people believe that even with more mouths to feed, everything will turn out all right.

    Extending Fertility

    Our modern world encourages us to delay childbearing. There’s college, grad school, and career building to do.

    By the time many women are ready to start a family, they’re already well into their 30’s or even 40’s. This means they may not be able to have as many children as they’d like.

    Technologies that could extend fertility could change that.

    What if we had improved IVF methods that allowed women in their 40’s and 50’s to easily have children? And what if those procedures cost 10x less?

    Wrap-Up

    As an investor, I view my job like this: find the central problems and fix them. If I can do that, the money end of it will take care of itself.

    In most of the world, the baby bust is a key issue. The technologies to fix it aren’t obvious.

    Apps that promote prayer and religious community could prove surprisingly powerful. And anything we can do to extend fertility could help families have those extra children so many want.

    I look forward to a future with smiling babies everywhere. And if a few are sitting next to me on the plane, so be it.

    How do you think we can encourage fertility?

    Have a great weekend, everyone!

    More from the blog:

    Request for Startups

    One Trillion Scientists

    Why AI + Humans Wins

    Save Money on Stuff I Use:

    Fundrise

    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!

    Misfits Market

    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.

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

  • Small Investors Lead to Big Investors

    I’m a $5,000 first check. But this week, I introduced a founder to a VC who offered him $800,000. This is why you should meet with small investors.

    Let’s say you’re raising a $2 million seed round. At first glance, talking to a guy who writes $5,000 checks seems like a waste of time. I’d need about a billion of those to fill my round, right?

    But this ignores how fundraising actually works. Networks are everything, and the small investors help you penetrate that network.

    Small Investors Get You Intros

    When I meet an awesome founder, I always ask him for the same thing:

    “Can you send me a blurb and a link to your deck? I want you to meet some people.”

    I send that blurb and deck to some VC’s I know. I tell them why I liked the company, and offer to introduce them to the founder.

    They take me up on that all the time. One meeting with me could lead to a founder meeting half a dozen VC’s.

    Let’s consider “Jim,” the fella who got an offer for $800,000 this week. I introduced Jim to the Managing Partner at a fund in Silicon Valley with around $200 million under management.

    That VC liked Jim just as much as I did. And he’s writing checks from a much bigger pot. Hence, the monster offer.

    But none of this would’ve happened if Jim hadn’t taken a meeting with me in the first place.

    A Case Study from OpenVC

    I’m not the only small investor helping founders raise big bucks. Take this fascinating case study, brought to my attention by Steph Nass of OpenVC.

    A YC company called Freshpaint showed how its fundraise came together. One angel who wrote a $5,000 check introduced the founder to 5 more investors who wrote checks.

    In turn, those 5 new investors made even more intros…

    In the end, meeting that one $5k angel resulted in raising $700,000!

    This is how fundraising works. One meeting leads to another, and eventually the checks start to roll in.

    Honing Your Pitch

    Do you want to flub your pitch with me, or with Roelof at Sequoia?

    Talking with smaller investors first is a great way to hone your pitch. You can work on your delivery and address common questions.

    Work out those kinks in an environment where there’s less at stake. By the time you pitch the big boys, you’ll sound terrific.

    Big Minimum Investments Are a Mistake

    I recently met with a company that had a $300,000 minimum investment. This is very unusual. It’s also a huge mistake.

    The company was actually pretty cool. But since I can’t invest, I’m not going to spin up a bunch of intros for them.

    They’re left trying to meet the big investors on their own. And as any founder can tell you, that’s not easy.

    Never have a minimum investment. Instead, always include angels that are helpful, regardless of check size.

    Those small investors will do more for you than most of the big funds.

    Wrap-Up

    The key thing in fundraising is to penetrate the network. The easiest way to do that is to start at the periphery of the network — the smaller investors.

    We’re used to meeting really early stage companies. And when we see something we like, we send it on to the big boys.

    The big VC’s listen to us because we’ve sent them great things before. Your odds of getting a fat check are much higher with that warm intro.

    So always take a meeting with a small investor. You never know where it could lead!

    Do you meet with small investors?

    More on tech:

    What Happens in an Acquihire?

    When Co-Founders Divorce

    Why I Don’t Invest in Vice Startups

    Save Money on Stuff I Use:

    Fundrise

    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!

    Misfits Market

    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.

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

  • Why I Don’t Invest in Vice Startups

    “This startup is going to make a fortune. I’m out.” That was me reading a deal memo recently. And no, I haven’t lost my mind. Let me explain…

    I was looking at an app that lets you buy lottery tickets on your phone. Right away, I knew this was going to be huge.

    Every time I go to a convenience store, I’m stuck in line behind someone buying a dozen lottery tickets. Who wouldn’t rather buy them from home?

    But I didn’t want to be any part of it. That’s because like alcohol, tobacco and other vice startups, gambling is a category I don’t touch.

    Gambling

    Among vice startups, gambling apps is the biggest category by far.

    I see every conceivable variation. Straight up betting, “fantasy” apps that involve betting actual cash, you name it.

    And I pass on all of them.

    I think people should be free to gamble. In general, I think more human freedom is good.

    But I also think gambling is absolutely terrible for people. It becomes addictive behavior, and the addiction is especially strong when it’s inside your pocket, available any time.

    Gambling apps use gamification and other hooks common in social media platforms. But while a social app might waste your time, a gambling app can bankrupt you.

    I picture families ruined, homes lost. And I want nothing to do with it.

    Tobacco

    Ahh, tobacco. Easiest money there is! I love the Warren Buffett quote on this:

    “I’ll tell you why I like the cigarette business,” he said. “It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty.”

    And yet, Berkshire Hathaway doesn’t invest in tobacco, and neither do I. It’s a terrible, ghoulish business.

    You’re making money off of killing people. Only the most absolutely unethical person could be involved in such a thing.

    If you meet anybody like that, don’t do business with them. If they’re that unethical, they’re probably willing to steal from you too.

    What’s more, I have a personal history with tobacco. I quit smoking in January of 2015.

    It was one of the best decisions of my life. And I certainly would not want to encourage others to smoke.

    I also don’t invest in any other form of nicotine…Zyn, vapes, etc. All nicotine is vasoconstrictive and very bad for you.

    Alcohol, Marijuana, and Other Drugs

    I think people should be free to use alcohol, marijuana, and perhaps other drugs as well. However, I also think that they can be disastrous to a person’s health and general course in life.

    So I never invest in any of these areas. I don’t want to profit from ruining people’s livers, lungs and brains. It’s a dirty business.

    Some drugs like ketamine may have some therapeutic uses. But they can also have serious dangers.

    Out of an abundance of caution, I steer clear of this entire category.

    Porn

    I actually don’t have a problem with this one. But the issue is, companies involved with porn cannot be financed.

    No institutional VC will touch it. After all, they can’t turn around and tell the Harvard Endowment, “Hey, we put your money in a porn company.”

    I can’t be the only one investing in a startup. Any successful company needs to raise many rounds of funding.

    So although I don’t have an issue with it myself, I don’t invest in companies involved with porn.

    Wrap-Up

    Gambling, tobacco, and other vice startups can make a fortune. But I’m lucky to be well off enough that I don’t need to do this kind of business.

    I didn’t get into angel investing to addict people to drugs, alcohol and gambling. I got into it to be a part of creating an awesome future.

    The minute this all becomes a meaningless cash grab, I’d rather hang it up.

    What categories do you invest in, and what do you avoid?

    More on tech:

    What Happens in an Acquihire?

    Request for Startups

    When Co-Founders Divorce

    Save Money on Stuff I Use:

    Fundrise

    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!

    Misfits Market

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  • What Happens in an Acquihire?

    A company you invested in got acquired. Time to buy that mansion, right? Not so fast.

    Most acquisitions in startupland are nothing like Salesforce’s $28 billion purchase of Slack. The more common scenario is what’s called an “acquihire.”

    I’ve had this happen a few times in my portfolio. Let me explain how it works…

    What Is an Acquihire?

    An acquihire is an acquisition of a startup for a modest sum. The acquirer usually just wants to hire the startup’s employees, rather than keep the startup’s business going. Hence the “hire”.

    Let’s say ABC Corp. buys a startup. The startup’s founders and employees get job offers at ABC Corp. Meanwhile, ABC Corp. probably shuts down the startup’s product.

    How Much Do Investors Make?

    Usually, investors just get their money back. That’s been the case with the acquihires I’ve been involved with.

    If the acquirer is a public company, you’ll usually get cash or liquid stock. If it’s a private company (usually a late stage startup), you’ll get stock in that company. Once the acquirer goes public, you’ll have liquidity.

    Believe it or not, this is an incredible outcome!

    Investing at pre-seed and seed, I expect 70-80% of my bets to go to 0. Getting my money back is a well above average outcome.

    What Happens to the Founders and Team?

    The founders and team usually get little if any cash for their stock. However, the acquirer does offer them jobs.

    There are usually offers for the founders and most, if not all, of the employees. The job offers tend to be plum positions. The seniority and pay is often higher than most other people would get with the same experience.

    The catch is that the equity portion of that pay usually vests over a couple of years. So, the founders and employees need to stay at the acquirer for 2-4 years to get maximum value.

    This works out nicely for stressed out entrepreneurs. They rest and vest for a couple of years at Megacorp, then go start another company.

    There can be some other great benefits for the team. One startup I invested in got acquihired and the Latin American team got EU visas in the bargain — a wonderful outcome for them!

    Wrap-Up

    When a founder starts a company or an investor writes a check, no one is hoping for an acquihire. We want to go all the way to IPO.

    But an acquihire is a good outcome for a startup that’s struggling. The founders and team get a good home, and in a couple of years they can try again.

    And when they do, I’ll be waiting, checkbook in hand.

    What have you seen in acquihires?

    More on tech:

    Request for Startups

    Paying the Cost to be the Boss

    When Co-Founders Divorce

    Save Money on Stuff I Use:

    Fundrise

    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!

    Misfits Market

    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.

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

  • Kamala’s Price Controls = Empty Shelves

    Kamala Harris announced plans to stop “price gouging” on groceries at a speech on Friday. This plan could lead to price controls for groceries for the first time since the 1970’s.

    Every time I go to the store, I’m shocked at the total. Harris isn’t wrong that there’s a problem.

    But her solution will destroy this country. Price controls will result in empty shelves and hunger.

    How It’s Working in Venezuela
    “Come on Francis, you’re exaggerating, right?” Well, let’s take a little trip southward to Venezuela and see how their price controls are working.

    Prices at government-run stores in Venezuela are really low. But the problem is, there’s nothing to buy.

    Venezuelans stand in line for hours. When they’re finally let inside, the shelves are bare.

    If they’re lucky, they get to take a couple cans of sardines and a few diapers. One mother NPR met in Caracas had to put back one of her cans of sardines — you’re only allowed two.

    I cannot imagine the heartbreak she felt at putting back that little can of food.

    With no food in the stores, most Venezuelans go hungry. For millions, the solution has been emigration.

    Where will Americans go?

    No Bread Today, Comrade

    Maybe it’s just Venezuela. Has anyone else tried this?

    In fact, one of the world’s largest countries had price controls on just about everything. And it kept them for generations.

    The Soviet Union controlled prices throughout its history. Soviet workers would get paid and try to go shopping — only to find the stores had nothing to buy.

    The picture was a lot like Venezuela today: long lines and empty shelves.

    Price Controls Here at Home

    But hey, this is America! We can get price controls right…right?
    Well as a matter of fact, America has tried price controls before. President Nixon imposed them in 1971.

    The result was predictable: lines and shortages. People struggled to buy gas, heating oil, and many other necessities.

    Nixon wound up abandoning price controls after a couple of years. It turns out, being able to buy at a high price is better than being unable to buy at all.

    The Real Source of Inflation

    Back to Kamala Harris. She’s blaming grocery stores for inflation. But the real blame lies in Washington.

    The government has increased the money supply by 40% since the beginning of 2020. That’s more money chasing every loaf of bread, every stick of butter.

    The result: higher prices.

    Meanwhile, grocery margins remain razor thin: usually around 1-3%

    Wrap-Up

    Harris seems to think that corporations somehow got greedy around 2020. Newsflash: people have been greedy since the dawn of time.

    Corporate greed isn’t the cause of high prices. The real cause is government incompetence.

    We can’t afford any more “help” from Washington.

    What do you think of Harris’ price control plan?

    More on politics:

    Kamala’s Extreme Agenda

    Sacks at the RNC

    114 Days

    Save Money on Stuff I Use:

    Fundrise

    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!

    Misfits Market

    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.

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