Thoughts from Brooklyn, NY

by Nicholas Chirls

Partner at Notation Capital

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The Investor Trough of Sorrow

The startup trough of sorrow has been well documented in recent years, so I won’t repeat the concept in great length. As a generalization, it’s the difficult period at every startup when the novelty of the initial idea and maybe a bit of traction have worn off, and the founders must find the will to build a company with long-term sustainable growth and value. Many companies do not make it through the trough of sorrow. Some special ones do.

I’ve experienced the trough of sorrow myself at two previous startups. One was my own and it didn’t work out. It’s still painful to this day, many years later. I was employee #1 at the second, and after several years it seems to be emerging on the other side.

I realized recently that I’ve experienced a similar sensation as a seed investor at betaworks. We seed invest in companies and people that we’re obsessed with, products that we think are solving

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Native Money

Native advertising is all the rage these days as an emerging form of startup monetization. If you can marry advertising with content, the thought goes, then the user experience won’t suffer much and the ad is just as (or more) effective. As native advertising matures, the web will get better for users. But an ad is still an ad.

Instead, what If you could monetize in such a way that the user experience doesn’t simply avoid harm, but in many cases is improved? What if you could truly align the business model with the product and its users?

I’m beginning to see nascent signs of what I’m calling Native Money everywhere. This is a movement away from the traditional checkout experience on the web. Near invisible purchasing experiences, like one-click buying on Fab or Uber are a step in the right direction, but native money is something even deeper than that. You can feel native money when

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Conviction Investing

Conviction, n., a strong persuasion or belief.

Many early-stage seed investors and venture capitalists invest alongside one another as part of investment syndicates.

Investment syndicates exist for good reason. Most investors at this stage don’t control large amounts of capital, many of them are individuals or angel investors, and so they’re unable to fund the capital needs of a company on their own. By pooling capital with other investors, companies are seed funded with $500k or more. Syndicates also increase access to information. Many investors will tell one another about the amazing companies and entrepreneurs they find. On the balance, access to larger pools of capital and more transparent information exchange are positives for entrepreneurs. AngelList is the best example right now of the benefits of investment syndicates at scale.

But investment syndicates can also have

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My Time at Lehman

I started at Lehman Brothers on June 1st, 2007 as a first year analyst. It was my first job out of college. Dick Fuld, the CEO at the time, publicly discussed “the road to two-hundred,” in which he would not retire until the stock reached $200 per share, almost three times the price when I arrived. Everyone at the firm believed this as though it were a fact – that there was something special about Lehman Brothers stock – it always went up.

I joined Lehman for a few reasons. The first was personal. My mother worked on Wall Street and passed away when I was a teenager. I felt, somewhat misguidedly, as though following in her footsteps would bring me closer to her. The other reasons were simpler. I had been interested in the stock market as a kid (though I went to work trading bonds and credit derivatives), I wanted to make good money, and I thought maybe, just maybe, it would be a bit of

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Humans are Underrated

If you’re reading this, you probably work for a tech startup. Your incentives are aligned with a theory that software will eat the world. Mine certainly are. We’re inclined to believe that machines will replace many of the common tasks performed by humans today (but not us), and that sophisticated algorithms will make the data around us more useful. I believe that over time these trends will play out with dramatic force. But not yet.

In fact, over the past year, I’ve come to believe that humans are more important for product development than ever before. This may seem glaringly obvious and of course The Times is On it. But I’m talking about humans as part of the product and community building process itself, something that goes way beyond enhancing algorithms. What I’m positing is that the most successful consumer Internet companies have to themselves be human, they have to have a soul

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The 2013 Startup

I’m seeing a new type of startup emerge. This startup is not yet a company, but an experiment in its purest form. The founding team is very small, often one technical person. In some cases, the founding person is recently self-taught and is hacking something together because she needs this thing to exist.

I’m seeing a few of these new startups achieve early signs of traction and engagement. They are slowly and deliberately building small communities or early customers. Some are even making money. In fact, a few of these startups are profitable (in the ramen sense).

Not surprisingly, VCs, seed funds, and angel investors are circling around these companies. But here’s the reason I’m calling them the 2013 startups: the founders are saying NO to the money. This is a fundamentally different strategy than the one I witnessed with many of the most sought after 2012 startups. The 2012 startup

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What I Learned from Ding Dong

I’ve been at betaworks for over a year now. With Josh and John’s guidance, I oversee our seed investing activity, where I’ve gone from complete noob to moderate noob. Since I started we’ve made 21 investments in new companies. The transition from builder to investor has been fascinating, damn fun, and at times downright bizarre. For the first six months, for all sorts of reasons and biases, I basically had to dismantle how I have traditionally viewed products and people (another post). Only recently have I begun to rebuild a more productive process through which to formulate opinions on the products, companies and entrepreneurs we meet. My goal is to share these views more often, mostly so that we may have constructive discussions, which I hope will continue to force my learning process.

As you might have guessed, this post is about what I learned from Ding Dong and other products like

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