Money Out of No Where: How Blockchain Infrastructure is Unlocking Economic Value

In 2019, Bill Gurley wrote a blog post on how internet marketplaces can unlock latent and previously unseen value in the world

In the post, Gurley applies concepts from Adam Smith’s “Wealth of Nations” to discuss internet marketplaces – his conclusion being that by “connecting economic traders that would otherwise not be connected” – internet marketplaces “unlock economic wealth that otherwise would not exist“

Or – more simply – these marketplaces create “money out of nowhere.”

Building on the ideas in his post, I think we’re experiencing a similar unlock in economic value via blockchain infrastructure by:

  • Providing strong ownerships right for digital goods
  • Creating a financial incentives for creating and supporting public goods

Strong Ownership Rights for Digital Goods

In March 2007, economist Hernando De Soto published a book “The Mystery of Capital”

In the book, DeSoto argues for the importance of property rights for economic growth – with the core premise that turning assets into capital will allow them flow to their most productive use and unlock further value

While De Soto focuses on emerging market countries in his book, I’d argue the same framework could be applied to emerging digital markets – where we haven’t had a low cost, low friction method for strong ownership rights to exist online

With strong ownership rights, users can more efficiently and transparently transact in digital goods – in the same type of global marketplaces that Gurley highlights in his post – allowing for better price discovery + value creation


As a first example, I’d highlight Art Blocks + Generative Art

Generative art has existed since the 1950s, but it didn’t really have a business model until Art Blocks – which allows creators to sell a limited-edition of a digital object – launched in November 2020

Using Art Blocks, artists are able to sell a limited number of their works – with collectors receiving their own unique visual output created by the artist’s algorithm and a record of their ownership of that object – backed by the security of the Ethereum blockchain

With strong ownership rights, collectors feel safer makes transactions – price discovery happens in open NFT marketplaces like OpenSea and Universe XYZ – and previously unseen value is unlocked


As a second example, I’d highlight the emergent ecosystem around IP-NFTs

Even prior to the Decentralized Science (or DeSci) movement, research + discovery for pharmaceutical development had become increasingly decentralized – with large companies often partnering with small startups or academic research universities to source new drug candidate

And while this system has generated incredible impact, is everything that could be funded getting funded? The existing system has human biases and includes a limited number of capital sources – does lowering the barriers for capital enter the market allow for more impact to happen long-term?

At their best, IP-NFTs create a lower cost and more efficient system to fund potentially promising experiments – and creates a path for more money to flow into the scientific research ecosystem – funding experiments + ideas that wouldn’t have been supported otherwise.  

To be successful, those assets eventually need to be licensed by a large existing pharmaceutical company or emerging startup – but as a friend that I shared an draft of this post with pointed out – this is no different from the commodities market – where speculators and investors who fund early discovery and exploration activities – which – when successful – sell their end product to large existing companies for industrial and other applications

DAOs as a Coordination Mechanism to Better Fund and Support Public Goods

In Fall 2019, Eric Beinhocker gave a talk at the Santa Fe Institute on a concept called “Market Humanism” where he describes cooperation as “the dark matter of the economy” 

He goes further to describe:

You know, it’s ninety-eight percent of the mass, but markets are kind of like the bright lights, the visible stars that are, like, two percent of the mass, just like in physics. By having such a narrow focus on markets, we’ve forgotten about the other ninety-eight percent of what enables cooperative societies to do things like build very complicated products and services, have complex social organizations, and solve very complex problems. 

To have large-scale cooperation, you need a whole set of social and cultural norms and institutional structures. There’s a lot of infrastructure around large-scale cooperation that needs to be built. 

What markets are good at is creating evolutionary competitions between those structures of cooperation. But markets can be harmful when they actually reduce that cooperation and crowd it out.

In my prior post, I outlined the potential symbiotic relationship between corporations and DAOs (or decentralized autonomous organizations) – also discussing how DAOs could create incentives for developing and managing public goods

In that post, I mainly focused on the use of DAOs in supporting open source software protocol development – however, I think it is even more exciting is to start think about his structure beyond that initial use case


As a first example – I’d highlight Songcamp DAO

Over the past year, it has emerged as one of the leading creative communities – where individuals can learn, find future colleagues, and collaborate on projects together

It isn’t a company – and it isn’t just community – but has some of the features of both – generating revenue from projects its members work on together – but also being a fertile ground for members to launch their next company or project

I think the closest comparison is 1970’s Los Angeles – which had an abundance of new, emerging talent – and those individuals found different ways to help each other + value was created

And while I think it’d be hard to point to a specific economic benefit of being a member of the LA community in 1970 – I’d argue its participants felt (and benefited from) being there

I think members of Songcamp would tell you a similar thing today about the benefits of being a member – to a degree where projects being incubated by the DAO or started by its members – will share part of the potential economic upside back with the collective


As a second example – I want to re-highlight Biotech DAOs (or specifically Vita DAO)

Vita DAO is a group that came together to focus on funding biotech projects in longevity 

Longevity is an area of research that has historically been underfunded by venture capital investors and traditional corporate biotechs

But starting as a DAO – and aligning member incentives through collective ownership the DAO’s native token VITA – this global group of previously unaffiliated individuals were able to come together to trustlessly collaborate on their shared goal of financing longevity research

This – combined with the lower friction of funding research via IP-NFTs – has enabled this group to start funding projects that would not have been funded otherwise

Vita DAO is less than a year old, so I can’t say if will have an impact long-term – but I’m excited by the interest in researchers being open to working with a group like this for funding and large institutions like Pfizer (who is pushing into Longevity) requesting to become a full member of the organization 


Zooming out –

I think large innovations in social technology (how humans coordinate activity) are relatively rare – and when combined with innovations in financial technology (how we finance those activities) have been shown to lead to tremendous value creation

One specific example is the modern venture capital industry – which – at its most basic – was the combination of a social technology from the 1600s (the corporations) and a financial technology from the 1800s (the limited partnership structure)

Accelerated by the Prudent Man Rule of the Pension Reform Act of 1974, this combination of social technology + financial technology has funded 57% of US stock market value was attributed to venture-backed companies by 2015 (though I think it is likely even higher today) 


So looking forward, what if this structure results in the next great unlock?

It doesn’t take away from anything that exists today – but instead, grows to the pie – and adds so much value that it represents more than 50% of global GDP over the next 50 years

Even if that outcome is highly unlikely, I think all the experiments being run now would be worth running – and excited to see where creative founders and leaders take us over the next period of time

The Symbiotic Relationships between Corporations and DAOs

Long-term, I think there will be both open source protocols managed as decentralized autonomous organizations – and corporations building products for consumer + enterprise users on top of these ecosystems


My current working mental model is WordPress + its ecosystem

WordPress – the open source CMS – powers more than 40% of the open web

And using WordPress is a wide array of customers – from large enterprises down to individuals

Automattic, WP Engine are two companies valued at more than $1 billion that are solely focused on enabling customers to have success using the WordPress platform

But beyond that – there is a medium + long-tail of other software and services firms which focus on supporting the full spectrum of customers building on top of the platform

In total, according to a study by WP Engine, the value of the WordPress ecosystem was estimated at $596.7 billion in 2020, and is expected to reach $635.5 billion by the end of 2021.


In crypto – one example I’d highlight is THORchain + Nine Realms Capital

Nine Realms is focused on making it easier for institutions to use THORchain

It does that providing an API, which makes it easier for wallets + exchanges to tap into THORchain’s liquidity – as well acting as an institutional frontend – making it easier for institutions to deposit assets in THORchain’s pools

Similar to WordPress + WordPress VIP – companies could interact with the open source protocol directly – but most (if not almost all) – will choose to work with a trusted third party – who will make the software easier to use + provide a higher level of support


In general, I think most end users (both consumer + enterprise) will not use open source protocols directly – but will interact through products built by companies – which give the users the benefit of the protocol while abstracting away the complexity


As such – to be successful – open source protocols will need at least one (if not multiple) companies building products and services for end users on top of them over time


While I think the analogy for open source software as a public good – with most users interacting through a product or service run by a company – isn’t a huge jump from projects built on cloud infrastructure to projects built on blockchain infrastructure – where I get excited is about thinking about this mental model with other types of emerging DAO structures


One example I’d highlight is drug development DAOs

With drug development DAOs (like Vita DAO or Hair DAO) – individuals come together with a shared common goal (eg longevity or hair growth) – with the idea that collectively – this group can help find + finance the best new emerging research (in a field that has likely been under funded historically)

Long-term – for the IP to have an impact on patients – it will need to be used in the development of a drug – and I think that is more likely to happen via a corporation (either a large existing company like Pfizer or a new startup focused on the individual asset) than by members in a DAO


Because while the community and its treasury (both of IP + monetary value) is aligned for the early research goals – corporations (with its command control structure + equity incentives) are likely better set up to take the final steps from late stage IP to drug development


As an aside – I think the opposite is also true – or more specifically – I think reading Pfizer’s application for Vita DAO is interesting – because even with all the resources of a large public company – I think it would be challenging for them to set up a similarly motivated community of principal investigators


I think WordPress is relatively unique as an open source project

In that the company that started the project – I think lets it operate as a public good

Which creates a ton of value for the world – and captures only a portion of overall revenue

Because for most enterprise startups built around open source software – there tends is a natural tension between how much value to give away + how much value to capture in revenue


At best, I think DAOs with tokens have the potential to create incentive for the creation + management of new valuable open source protocols + other types of public goods


Because the best token models will have a way to capture value back to the protocol (ETH, RUNE) and if applications are building on to of a protocol, they’re highly incentivized to hold the token (YFI, Forta)


So long-term

Value will continue be created + captured by both protocols + products

Where DAOs (with tokens) are a new structure for managing public goods

And venture-backed startups are still used to build products + services for end users

And each structure used when best – with value shared back + forth between the two

Reading Recommendations for a New VC

I recently caught up with someone who is moving into an investing role at a venture capital firm – she asked me for any book recommendations that could help her get up to speed faster

I’ve shared versions of this list a few times prior in emails and thought it may be interesting to share more broadly.

At core, I think the best investors are learning machines – they are curious about new things + people and have an internal hunger + drive which that has them focus on the process versus outcome

Through that lens, I think the best reading resources provide a base layer of knowledge on how technology impacts markets + the related business theory – to set a foundation to understand new opportunities more quickly and deeply


First, three books on financing innovation + technology market cycles


Bill Janeway – Doing Capitalism in the Innovation Economy


Carlota Perez – Technological Revolutions and Financial Capital


Eric Beinhocker – The Origins of Wealth


The next set of books focus on understanding business strategy + corporate finance for high growth companies


William Thorndike – The Outsiders


Michael Porter – Competitive Strategy


Hamilton Helner – 7 Powers


On top of the theory – the last set of books is all around history – of the industry + specific companies


Elad Gil – High Growth Handbook


Tom Nichols – VC


Jessica Livingston – Founders at Work


As a bonus, I recommend reading S-1 filings of recent IPOs – these documents often offer amazing insights into what great businesses look like at scale


And Bill Gurley’s blog

It is filled with great analysis – like this post on elements of the 10x revenue club:

All Revenue is Not Created Equal: The Keys to the 10X Revenue Club

And this post on important elements in marketplace startups:

All Markets Are Not Created Equal: 10 Factors To Consider When Evaluating Digital Marketplaces


Lastly, there are a bunch of good books on the day-to-day mechanics of the business of venture capital – I think you’ll able to pick up on the job, so I would prioritize the list above – but more if you’re curious:


Brad Feld, Jason Mendelson – Venture Deals



Jeff Bussgang – Mastering the VC Game


If you ever have any questions about these types of topics – I’d highly recommend Mark Suster’s blog

When I have a very specific question, I’ll often it google it + “Mark Suster” – and I normally find that he has written something thoughtful on the topic

BIOS Podcast on Founder Focused Investing in Human Health and Biology

I recently had a conversation with Chas Pulido and Dennis Gong of Alix Ventures for the BIOS Podcast where we discussed how scientists thinking about starting companies can appeal to investors, including how we think about it at True.

I also shared how True started investing in startups tackling problems in human health and biology, as well as our founder-focused investment model that’s guided us since day one.

The conversation was fun and hopefully provides some context for scientist-founders and investors looking to spend more time in this space.

Listen here:

Opportunities at the Intersection of Software, Automation, and Biology

This was originally posted on the main True Ventures blog

Over the past two decades, we’ve seen hundreds of billions of dollars of market capitalization created by new software and infrastructure companies built at the intersection of mobile, data, and cloud computing. 

Now, we’re in the middle of an even larger shift at the intersection of biology, software, and automation as old industries are reimagined and entirely new ones are created. These new products that are inspired by nature and built with biology are better for consumers, better for the environment, and higher performing than what their predecessors developed with harsh chemicals and petroleum.

The first wave of companies at the intersection of biology, software, and automation focused on the known markets of diagnostics and therapeutics. In the True portfolio, this includes companies such as Deep GenomicsPendulum Therapeutics, and InterVenn Biosciences

Looking forward, we’re excited to see what comes next as the technologies these companies are building lead to the creation of new and better products in even more markets, including food, B2B materials, consumer goods, healthcare, and agriculture.

As our population grows in size and income, we will increasingly need access to larger amounts of high quality, healthy food, especially protein. One way this will happen is through the creation of new, great-tasting plant-based alternatives to meat.  

Prime Roots started with a plant-based salmon burger, which Fast Company said “tastes like the real thing” and The Wall Street Journal’s food writer Alison Roman described as having the “flaky texture of America’s favorite fish.” Since then, the company has used its technology to develop products that resemble other protein types too, including chicken, beef, and pork.

Prime Roots Bacon

In February 2020, Prime Roots released a limited run of plant-based bacon and sold out within days.

The company grew out of a passionate community the founders developed online. This allowed them to better understand what types of products the consumer really wants and develop proprietary recipes that taste great, in addition to being healthy and better for the environment. While their earliest adopters were mostly individuals who were already vegan or vegetarian, most of their newest customers are individuals who just want to eat less meat.

Another way we’ll be able to increase access to nutritious, sustainably produced food is by using cellular agriculture to complement conventional livestock farming. Companies in this space, such as pork producer Fork & Goode, are reinventing the full supply chain to not only make real meat that people want, but also food that is safer to eat, is nutritionally equivalent to farm-raised livestock, and has a far lower environmental footprint.

The last century was dominated by the use of harsh chemical processes that manipulate petroleum in order to create new products. The next 100 years will be about innovating with biology to bring never-before-imagined products and materials to market. Nature has always provided a much broader resource set than chemicals, but we were unable to develop great, high-performing products without recent developments in software and automation, which let us better harness its insights. 

Zymergen combines biology, machine learning, and automation to bio-manufacture products for Fortune 1,000 partners in electronics, agriculture, personal care, and other industries. For example, the team developed adhesives using biological derivatives that are similar to those made naturally by mussels, with significantly better bonding strength than other adhesives on the market today. 

Another early entrant in this space is Modern Meadow, which developed a replacement for leather and sells it to partners in fashion, automotive, and more. In addition to the positive environmental impact of companies like these, they let brands better react to shifts in consumer preferences and build products previously not thought possible.

To take advantage of this innovation in materials science, more and more emerging brands are developing new, innovative products they sell directly to consumers. These products could have never been built prior, without business models designed from the ground up for modern consumers. 

Hair color and care brand Madison Reed did the hard work of creating incredibly high-quality Italian-grade hair color, but without the harsh chemicals found in similar products. Moreover, Madison Reed compounded that by creating a business model that supports their customers with a lively community of peer reviews and body-positive messaging. 

Another example is Symbiome, which is developing products inspired by this team’s unique understanding of ancestral human health. The core data asset that drives Symbiome’s approach to skincare is a proprietary map of ancestral bacterial diversity and ancestral plant foliage that used to exist but was lost due to stress and environmental factors over time.

In addition to building effective products, the company is committed to building clean products with as few ingredients as possible. In Symbiome’s initial collection, no product has more than five ingredients. Long term, the company is striving to keep the number of ingredients in any single product to eight or less, with zero use of harsh chemicals.

We’re also seeing early examples of how these trends can spur the creation of new product categories with a material impact on the global healthcare system. 

Membio is developing a method to produce red blood cells outside of the human body for health and therapeutic applications. In the short-term, this company can provide a novel delivery mechanism for specific types of gene therapy products. Long-term, Membio can provide an alternative source of red blood cells for patients that would reduce the risk of potential issues with donor blood and other supply chain issues.

We’re in the earliest days of this convergence of biology, software, and automation and think the intersection of these technology trends will be compounded by a shift in consumer demographics and new business models. 

Just the categories here (food, B2B materials, consumer products, and healthcare) create great potential. This doesn’t even include other potential markets including non-food agriculture (such as Hyasynth BioAntheia, and Geltor), clothing (such as Bolt ThreadsKestrel Materials, and MycoWorks), and more. 

As we’ve shared these ideas with others, we’ve heard this space called “deep technology” or “frontier technology.” We’d instead argue that this convergence is merely a reflection of what venture capital was intended to do: combine the best of multiple disciplines to create new markets and reshape existing markets, while ultimately leading to high-margin businesses with predictable revenue, highly differentiated product, and real defensibility.

As discussed in a previous post, we think bridging the two worlds between what we consider to be “life science VCs” and “technology VCs” — and bringing together validated technology and validated business models in new ways — is where the most interesting new companies will emerge. 

It isn’t new discovery or research; it is engineering and business model iteration. Individuals who are willing to learn more about this convergence are best positioned as these next-wave companies come to life.

Counterparty Risk in Venture Capital

In a recent blog post, I discussed the importance of trust amongst investor syndicates and how a good group working together can reduce financing risk for a company.

This post expands on some of those ideas and further discusses the concept of counterparty risk in venture capital

Counterparty risk is the likelihood or probability that one of those involved in a transaction might default on its contractual obligation.

I use it more broadly here to describe any actions taken by one of the investors involved in a company that would adversely impact a company or its team

Success in a company is never a straight line – and good investment partners can increase the likelihood a business makes it through a difficult time – and bad behavior can have just as much negative impact on a company’s potential outcome


It starts with a firm’s limited partners

At True, we screen our investors for mission alignment

Our second set of screens is around their sources of capital + their historical track record of investing in the venture capital asset class

We bias towards investors who have large, stable capital bases – and who have a long history of investing in venture capital with a track record of continuing to back the same managers they’ve selected over long periods to time

Within our current LPs, we also prioritize length of relationship – many of our investors have been with us since Fund I

These long-term relationships give us more stability in our operations and planning – which ultimately lets us be better partners to the Founders that we work with at True


Next, it applies to our co-investors

One of my partners likes to say that “people like to invest with people they’ve already invested with” *

I didn’t fully understand it until later in my venture experience – it happens naturally, but has the added benefit of creating more trusted relationships which ultimately benefits the companies we invest in together


At True, one of our most common co-investors is Indie Bio

We have done team strategy sessions together – we share information on what we see is working in each of our portfolios – and most importantly, we’ve been through a meaningful number of good and bad experiences together – so we know how the other thinks + will act

It turns a one turn game into a multi-turn game


This applies more broadly for other investors we work with

There are 5 individual investors who I sit on more than one board with today

And 8 firms that I have worked on more than investment on together

Many of these people I’ve worked with for a number of years, met their family, gone on trips together

The degree of trust is high and behavior of the individual (and their firm) is more predictable

This creates more stability for the company – which makes us better co-investors


And the fact that we will work together again encourages a positive feedback loop

Founders will usually only will raise a few rounds of capital during their companies life

As investors, we will work with many different groups, many times

Helping guide companies to investors who behave better (or are generally more stable) is more than something we should do – it will likely drive better returns for us long-term


First example

Post seed company that has made tremendous product progress, but is early

Needs to raise a small A round to launch and prove their business model

It was too weird (or risky) for a new lead investor to lean in

The syndicate of 3 investors came together to underwrite the entire amount

This caused a number of other new investors to want to jump in and participate

The first part of this story is more normal than you might think

The second part where weird counterparty risk issues can emerge

And for each partner at each firm – it is a very complicated model to predict behavior

Except if you have real world data – from an individual’s behavior in previous complicated financings


Second example

Another post seed company that has made tremendous product progress, but is early

Different set of three investors – but two of the investors have limited capital to allocate to follow-on rounds

Syndicate breaks – so if they can’t find additional new capital – it would be up to the one investor to support the company alone – or the company would end up going out of business


A weird twist – one of the funds without additional capital in example 2 is actually a known multi turn player with the group – but due to a series of compounding internal issues – they weren’t in a position to participate in a way we’d seen in other similar situations

Working with known actors should reduce some risk – but it can’t reduce all risk and there remain volatility in an business that involves so many different human layers


I used to think you should choose investors based only how much they can help

Over time, my thinking has evolved to also include thinking about which groups may have the lowest likelihood of causing issues downstream

Similar to how we approach raising money at True – our advice to Founders is to focus on groups that have large, stable capital bases that have a long track record of investing in companies like you at your stage

If you don’t already know them – spend time getting to know them.  And ask them for as many references as you can handle – no one will have a perfect track record – but the more you know – the better aware you’ll be for the moment things get weird

In a world where we’re all already taking incredible amounts of the right risk – product, market, timing – you shouldn’t compound it by adding all sorts of additional (and discoverable) risk around people

Shelter in Place at True (May 2020 Edition)

There’s been a lot of discussion on whether investors are “open for business” during the current Shelter in Place environment and I wanted to share some observations based on my experience at True:


Since the start of Shelter in Place, our firm has made two new investments where the investment lead on our team wasn’t able to meet the company’s Founder in person

In one case, we had started discussions with the company prior to Shelter in Place, but travel restrictions had started before they could meet in person

In the other case, we were introduced to the Founder after the start of Shelter in Place and they ran an entirely virtual process


Both companies were introduced to us by Founders in the current True Portfolio – each person had known the person they were introducing for a number of years and the referrals were very positive

Both companies were in categories where we had deep experience – so we were more easily able to diligence the opportunity through existing Founders in the True portfolio


In both cases, the True deal lead spent more time talking with the Founder than they probably would have normally – text messages + phone calls in addition to Zoom meetings with others on our team.

I think this change will continue going forward – there is no substitute for working through problems with someone to understand how they think, how they handle feedback, and how you will ultimately work together


We already tap into the ecosystem of existing True Founders to find additional potential references for Founders of new potential investments – in both cases here, we did additional work to find as many other points of mutual connection as possible

One company was based outside the Bay Area – in a market where we have a number of other investments – and a number of those existing Founders knew this company and its team – and were able to provide additional background on them


We’re excited about a new opportunity now

This is a Founder that we’ve previously backed and know very well

He’s been an active member of the Founder Community for years and he’s in the process of starting a new company at the intersection of two spaces we know very well

Our lessons from 3 + 4 above are already impacting our process in a positive way – we’re spending more time thinking through some of the early opportunities and digging in on some of the thorny questions around the go-to market plan. 

We’re tapping into our network to help vet others on the team and potentially find others to fill the gaps they’ve identified.

We’ve already met in person prior to Shelter in Place – so this is less of a concern here – but I like that our recent experience is helping evolve our investment process and will hopefully make us better investors over time


Going into Shelter in Place – I think our group was mixed on whether we’d be able to make an investment without meeting a Founder in person first

The second investment described above really broke the glass on our thinking – it felt right and you can now see us developing the muscle on how to do it well

I don’t think we’re going to rush out and double investment pace – but when we find high quality founders working on ambitious projects in markets raising our type of money at our type of price – I think we will continue to be aggressive 


As I talk to other investors – I think this reflects the broader market – things have slowed down to give investment teams the time to figure out their new process – which I think may be the new normal for a while

Because even if Shelter in Place ends tomorrow, I think the process of returning to the office will be complicated – so more nimble groups and newer firms may have an edge for a period of time here


For follow on rounds in our existing portfolio – we have 4 teams in a fundraising process – 3 of which have signed or received term sheets

The process has become more bespoke – smaller target investor lists, more introductions via phone conversations to confirm the company is potentially a fit and the new potential investors firm is in the mental space to lead new investments

This process has been most successful with companies that have cash on their balance sheet and want to go faster or companies where the tailwinds from the current market conditions are very positive and they are being pulled to go faster


If a company is running out of money, the most likely source of capital is its existing investors.

Syndicate and co-investors always matter – these types of moments make that clear

This will work for some companies that do just need one more turn and could see success on the other side. We are also likely to see a high number of companies not make it – some number of which could have made it in a different environment 


Inside our portfolio, certain markets have been negatively impacted – but certain markets have definitely seen an acceleration in customer interest and commercial traction

These companies were riding existing trends in consumer + enterprise buyer behavior – this dislocation has dramatically accelerated these shifts and pulled demand in far sooner than I think anyone could have predicted

The revenue or business growth will likely be more volatile over the next period on our way to a new normal (TBD) – but people who never bought groceries online or would have been the last to start collaborating on music virtually can only use these services right now – and I think a lot of them never go back


In closing – the startup and venture capital market is built up of different players, with different business models, and different team bias – so I think it’d be difficult to make any sweeping statement about this market – this is simply data from one partner at one firm

One thing I think about a lot is a quote from my partner who says “work with people you know, always know more people” 

In times of high uncertainty – reducing risk on things you can control (Ie working with high quality people you know and trust) – is the even more important than usual

Another thing I think about is True Ventures in 2008 + 2009 – the firm had just closed their second fund and decided to accelerate new investment pace (by deal count) and doubled down on its best investments in Fund 1 

The first investment in Fund 2 was 1.75m stake in a pre product company called Fitbit (which as an aside – had been introduced to us by a founder we had known for a long time – and despite involving a device, touched a lot of the things my partners had worked on previously in the social web – ie Goodreads and Meebo)

Fund 2 is still a top performing fund in that vintage and I believe that work set up the firm to be a leader in the seed + early-stage venture capital market

I don’t know which new Series A firms will be most successful on the other side – I do know that a number are being more aggressive with our portfolio today – and thinking about how they could win investments and take market share in this current moment

Investing in Startups (Lessons from 10 Years at True)

I shared this post with our team last summer while reflecting on a number of different investments at True and after reviewing it at the beginning of this year, thought it’d be interesting to share more broadly:


Don’t fund tools or diagnostics

Businesses focused on tools or diagonstic often cost as much to build, but often aren’t able to capture as much value as therapeutics


I think this is generally true in other markets beyond healthcare (B2B, B2C) – the most value is captured in helping solve problems for end users (ie marketing automation software versus simple analytics software or sleeping pills versus sleep tracking devices)


The exception for diagnostics is for big markets where the information is incredibly valuable in being able to take an intervention (ie cancer diagnostics)

It is important to ask 1) is it actionable? 2) And how valuable is that action to the end user if they make the change (relative to how hard the change is and compared to the status quo)


Spend time understanding how much of the remaining product work is research versus development.  More importantly, work with a team that understands the difference and how it will affect their timeline


Startups are working within a fixed timeline on imperfect information. 

Urgency + ability to make decisions without complete information are important skills. Does the Founder have that mentality and can they build that culture within the team? 


Customer specifications should drive product.  The company needs to answer the question what do we need to build + why – this end result should drive the research + development roadmap.  


Meet customers where they are today.  The initial product may involve only some of the science, but greatly improve workflow.  Once you have the customer, you can slowly move them to a more and more advanced product over time


On each team, someone needs to define what to build and someone needs to know how to build it.  They are often different people. 


It is difficult to take a team that has been bootstrapping and have them accelerate as a venture backed company. The challenge is shifting company culture from a mentality of preservation to one of more risk taking

Don’t build one business to get to another business long-term – risk compounds 


Watch how people discuss those they previously worked with – if everyone isn’t up to their standards – it is probably a “them” thing versus an “everyone else” thing 


Be mindful about giving the co-Founder title to later additions at the company

It can be used as a short-term fix to get someone more engaged, but may create a number of issues in the future around compensation (equity), role (how senior), and external perception (if they leave) 


Have aligned co-investors with access to capital  


Understand the incentives of the different market participants and how the market is structured.

The buyer, the end users, and the decider aren’t always the same person and understanding what is important for all parties is essential for success

Best product or technology doesn’t always win. 


Bet bold

The best Founders with the biggest ideas will find access to downstream capital  

Investors want to fund exciting new ideas that have the potential to make a big impact

20 Minute VC with Harry Stebbings

I recently had a conversation with Harry Stebbings on his 20 Minute VC Podcast

My partners Jon, Phil, Tony, Kevin, and Puneet were all earlier guests of the show – so I was excited to cover a different part of the True Ventures story – diving deep on True’s model, portfolio construction, and how we think about risk internally

I really enjoyed interacting with Harry and hope the content is helpful for anyone who is interested in the business of venture capital

You can listen to it here:

Would love to hear your feedback in the comments or via Twitter

Important Attributes of Modern Consumer Brands

(This post was originally posted on the main True Ventures blog

We’ve been fortunate to work closely with a number of teams that have built and scaled modern consumer brands. These include Blue Bottle Coffee, Fitbit, Madison Reed, Peloton, Ring, and more.

Over time, we’ve compiled a list of attributes we think are most important to evaluate when investing in next-generation consumer brands and products.

This list shares some of those qualities and how we think about them in the context of building a scalable, durable business and consumer brand that lasts.

1. Lead Hero Product

Many of the great consumer brands we see today started out by doing one thing exceptionally well. A lead hero product helps companies create relationships with new customers and build a foundation of trust. From there, they can grow the relationship.

At True, we think a hero product should be able to generate more than $100 million in annual revenue. Examples include the Ring Video Doorbell, Lululemon yoga pants, and Tory Burch ballet flats.

In our portfolio, Madison Reed started with hair color, but gradually expanded its business to offer other products that further enhance the customer experience. These include Root Touch Up, color-safe shampoo, and a full suite of high quality, safe hair products.

From a financial perspective, this should result in increased average order value, increased customer lifetime value, and greater customer loyalty as a brand becomes a more important part of an individual’s everyday life.

An exception to this rule exists for some food and beverage companies. These businesses can look more like platforms in their early days in that they start with a single product, but with the intention of expanding to similar or adjacent categories.

An example is KIND, which started with bars, but now sells granola, cookies, and more. Similarly, True-backed Prime Roots started with a fungi-based salmon burger but has since expanded to sell chicken, beef, and other meat alternatives.

2. Third-Party Retail as Marketing

Third-party retail can eventually be an accelerant to drive revenue but can overwhelm a new startup in its earliest phases by impairing gross margin, creating costly operational complexities, and making the brand overly dependent on its initial retail partners.

Instead, we like companies that are strategic when selecting initial retail partners, deciding which products the partner sells, and when it becomes part of the business model.

Madison Reed partners exclusively with Ulta Beauty, while Ring sold its product via a number of big-box electronics stores early in its life cycle to increase the company’s number of potential software subscribers.

Long term, we think the strongest modern consumer brands will have omnichannel strategies that consider using third-party retail as an acquisition channel to give consumers a chance to sample product in person before purchasing direct.

3. Direct Customer Relationships

The relationship with the end customer is no longer owned by the retail store, but rather the brand. At the very least, modern consumer brands must be successful in securing the customer’s email address and phone number. At best, their product will have a natural purchase pattern that could lend itself to a subscription business model, which – in addition to enabling the brand to build a deeper understanding of its customer’s profile – creates a stream of predictable, recurring revenue.

A number of DTC brands such as Madison Reed have seen great success with SMS. When customers run low on the company’s hair care products, they receive a helpful text message encouraging them to restock. In addition to re-marketing, this direct relationship can help build a better product experience and tighten the feedback loop between the customer and brand — potentially leading to ideas for future product innovation and solving problems before they happen.

We believe this change in relationship with brands is the most disruptive part of the modern consumer brand model. Predictable, repeatable revenue via direct customer relationships ultimately leads to greater enterprise value.

4. First-Party Retail as Part of Strategy

Peloton Showroom in FLA

Self-owned retail, in addition to third-party retail as marketing, is an important part of any next-generation consumer brand’s strategy. The customer relationship will likely move online, but most new customers want a way to experience a brand and sample their products before committing to a long-term relationship.

If successful, physical storefronts drive initial purchases (which ideally turn into subscriptions) and send customers to the brand’s main website.

This may not work the same for all business types; ultimately, it needs to make sense in the broader financial profile of the company in terms of gross margin, average order volume, and real estate cost. But even in food and beverage, we’re seeing a growing number of interesting experiments with pop-ups as a channel for customer acquisition. Daily Harvest, Hungry Root, and Recess are all recent examples.

5. Amazon as Its Own Unique Channel

Amazon is an increasingly important retail channel for all omnichannel brands. And given its scale and relative share of wallet of potential customers, it justifies the time and energy required for a brand to develop its own unique strategy on the platform. For most consumables, it is a required channel today. Over time, this may become increasingly true for prestige products too.

For most brands, Amazon is an underinvested opportunity, similar to how Google SEO and SEM were 20 years ago. As more and more commerce moves online, it will continue to be a leader in e-commerce and continue to be an important channel for brands long term.

A caveat may be businesses in fashion and high-end jewelry, which have historically had a different relationship with Amazon and have a number of unique characteristics (fashion risk, size and IT challenges, and exit landscape) that may make them different than other types of products discussed here.

6. Community as Part of Strategy

Community commerce is the number-one trait we look for when considering investing in new consumer brands. People buy products that make them feel good. If your customers are excited to be associated with your brand in front of their peers and in public forums, you’ve achieved a watershed moment, which many brands strive for yet rarely attain.

When customers are genuinely excited to share your products with friends, community-driven commerce kicks in. This can drive down CAC, increase retention, create loyalty, and fuel product innovation. This is in great opposition to CPG incumbents that have limited access to customers’ wants, needs, and psyches.

The Ring User Group was a meaningful driver of product sales and provided important feedback and input on new and current products. Similarly, Madison Reed’s Facebook page is filled with pictures and feedback from customers who love the products.

From day one, these companies have been focused on understanding their customers. They want to know who those customers are and build authentic relationships with them. This gives them the opportunity to retain those users as well as upsell and cross-sell new and better products.

7. Awareness of Substitute and Alternative Goods

The best founders we work within this space take an expansive view of competitors. Not only do they consider products that compete with them directly, but they also consider other types of substitute goods that, while inferior or indirectly competitive, could sway a potential customer against them when making a purchasing decision.

In addition to great product differentiation, the best consumer businesses today need significant innovation with go-to-market strategies. They need to be able to stand out against a bunch of competitors who will make similar product claims, whether or not those claims are actually true.

Community, branding, and building direct customer relationships can help, but this concept of awareness around substitute goods is often built into the DNA of modern consumer companies from day one.

8. An Authentic Brand Story That Resonates

Most importantly, brands need to have a human face for customers to trust them. Customers want to have a relationship with the people behind the brand.

Jamie Siminoff of Ring appeared on QVC multiple times so he could tell the world about the company’s mission to reduce crime in neighborhoods. Amy Errett of Madison Reed takes the time to visit local Color Bars to tell employees and customers about why she started the company, her mission to make hair color with “ingredients you can feel good about,” and the real impact she wants to see in the world.

The traditional consumer brands of the past struggle to compete with these authentic personal stories. They matter in a big way to today’s consumer who wants more than colorful labels in their medicine cabinets, closets, and pantries.

This ultimately drives business value seen in measures of repeat purchases or customer retention, organic engagement on social platforms, and word of mouth/virality in terms of customer acquisition.

We are in a golden age for innovation with consumer brands and products, and we believe there will be many new, independent and public companies built over the next decade that will better cater to the consumer than the conglomerates of the past.

If you’re creating a set of consumer products in a category that stands to be disrupted to the benefit of the consumer, we’d love to connect and learn more.

View the checklist below for more of a window into what we look for in consumer brand business models. Also, thank you to Amy Errett of Madison Reed and Brian Nicholson of Sonoma Brands for reviewing early drafts of this post and greatly expanding on a number of the ideas featured here.

Consumer Brands Business Model Checklist