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On Skipping Brunch, Service, and the Pursuit of 10 People

Posted on September 13, 2020. Filed under: Uncategorized |

Chris and I spent Saturday morning on Zoom with a founder who is in the last stages of a pretty intentional fundraise process. There’s something I love about a founder who validates an investor’s level of interest and commitment by their willingness to speak early on a Saturday morning. In times like these, where lazy, momentum oriented investors will throw money at anything that’s “working,“ conviction means something different. I love a founder who says “i’ve got plenty of people asking to invest, but are you willing to skip your brunch this weekend because that’s what my company needs in this pivotal moment?”

For Pace, it’s a no brainer. Service and support for founders is at the core of what we do. It’s a philosophy that extends to our prospective partners the same as it does founders with whom we already work. Pace, by design, makes very few investments each year. It allows us to concentrate on relationships that matter. We love that board seats don’t scale. We take a drop everything, full resource of our team at the moment of need, approach to serving founders, and we’ve organized our firm in a way that allows that practice to be sustainable in perpetuity. There are a lot of different ways that VC firms try to scale GP time: large platform efforts, function specific services, junior investment professionals filling in at board meetings…all levers to pull so that the incremental GP at Megafirm X can hold 22 board seats while slinging another 10 “small checks” per year. Those approaches just aren’t us. We don’t want to scale. We’re optimizing for fewer deeper relationships and there’s nothing I would rather be doing on Saturday morning than developing depth with someone who inspires me.

I recently internalized a pretty clarifying framework around partnering with founders in these frenzied times. I’ve come to believe that there are about 10 professional relationships that will define the next decade of my life. When I’m thinking about making an investment and committing to serve on a company’s board, I ask myself “is this person(s) one of those 10 people?” Of course the product matters a ton, the mission matters a ton, the market matters, the economic opportunity matters, etc…but at the end of the day we are the aggregate of those with whom we spend our time, and distilling complex decisions down to something as simple as “who are this decade’s 10 people?” has proven to be a useful lens.

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Pace x Mulberry

Posted on September 3, 2020. Filed under: Uncategorized |

Today one of our portfolio companies at Pace announced their Series A financing. I’ve been waiting to talk about Mulberry since we invested in March, and now I finally can! Currently, Mulberry delivers product insurance and warranty coverage via an API at the point of sale through e-commerce and D2C channels. Whereas a company like Affirm distributes credit through these channels at the point of sale, Mulberry similarly distributes insurance. For E-Commerce sites, Mulberry empowers them to offer an Apple Care-like experience to their end customers, while simultaneously dropping meaningful margin to their own bottom line. For consumers, Mulberry lets you protect the purchases you value, whether it be your Mirror fitness equipment or your Breville espresso maker, both of whom are amongst a wide set of brands with whom Mulberry has partnered. There is a real elegance to Mulberry’s model and the company has clearly found product/market fit, but the real story with Mulberry is the team. At the helm is one of the strongest CEOs I’ve ever worked with in my decade plus in venture. Chinedu’s story is kind of nuts. He grew up in Nigeria, his parents won the visa lottery and they moved here when he was 11. At 16 he went to Cornell, where he graduated early and immediately cofounded a fintech company called Zibby. He scaled into the CTO role there despite not having focused on computer science in school. Zibby has built 9 figures worth of enterprise value and is still going strong. I’ve had the pleasure in serving on Mulberry’s board since March and have been blown away by the quality and character of Chinedu, his three co-founders (Lee, Ashley, and Ali), and the broader leadership team at the company. We’ve recently leveled up leadership across a number of key functions within the company, and I’d say the unifying theme amongst the entire leadership team is a deep motivation to practice their respective crafts at the highest level. Mulberry has executed through COVID beautifully, experiencing tailwinds on a number of fronts while addressing headwinds confidently and thoughtfully. The company has grown meaningfully since we made our initial investment, and is on track to have a great year. This is not a company you join for the quick flip. The team is extremely long term in their orientation, and I believe Mulberry will be a public company one day, albeit not for quite some time. We’re actively looking to bring on a VP Marketing, as well as some consumer product DNA to lead an exciting new business line that has the potential to transform the company. I’m in it for the long haul here, and would love to work closely with you if you’re interested in joining this special organization and team. Pace led Mulberry’s Series A alongside returning investors like Founder Collective and Quiet Capital and we were fortunate to bring in a few amazing strategic angels like Jack Chou (Former CPO at Affirm and Pinterest) and Jeff Weinstein (Product at Stripe). If you’d like to learn more about Mulberry, hit me up: jordan@pacecapital.com.

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The Rent is Too Damn High

Posted on August 14, 2020. Filed under: Uncategorized |

I’ve started to develop a thesis around what I perceive to be one of the most fundamental breaks to come out of the pandemic. I’m by no means an expert in real estate, but what I do know is that when residential, commercial, and retail tenants stop paying rent en mass, that is a break at a pretty low level in our societal stack. In aggregate, unpaid rent is a massive amount of value that is not flowing in the historically prescribed pattern within our broader system. I’ve started to think about the implications of this break from a few different perspectives. I like to begin thinking about a market by defining all of the key stakeholders within it, and then starting to isolate their distinct incentives and likely future decisions. In this case, I think the key stakeholders are 1) Property Owners/Landlords 2) Tenants 3) Lenders.

Across the country, but especially in urban centers, the same conversation is playing out over and over again. Whether it’s a person renting an apartment, a business renting an office, or a retailer renting a storefront, either out of necessity or opportunism, tenants are not paying their rent or paying partial rent or renegotiating their agreement with landlords. It’s contentious and landlord’s are in a position of less leverage than they have been in a long time. Demand is so low, that tenants collectively can turn the screws in a way that they haven’t been able to in recent times.

On the other side, landlord’s have obligations. Most physical buildings are highly levered. Developers borrowed heavily to build their buildings with the expectation that rental income would be used to amortize the debt over time. Nobody’s models contemplated such a uniform break in cash flows, and as a result landlord balance sheets are starting to get stressed. Property owners typically don’t enjoy much societal empathy, and going back thousands of years, tend to be the “haves” that can afford to lose money, but the “haves” balance sheets can only last so long when they have levered up their assets as they have. So just as tenants are coming to them and saying “we can’t pay,” they are going to their lenders, which might be banks, credit funds, mezzanine lenders, etc…and they’re saying “I need a new deal or I’m not gonna be able to meet my obligation.”

Lenders are listening and have a choice to make, whether they want to float their borrowers or become equity owners in the case of default on secured loans…and at some point of exposure, especially if liquidation of the equity doesn’t cover the outlay, banks are gonna start knocking on the governments door and saying “bail us out.”

This is a grim picture that harkens back to 2008, albeit in a different shape. Without the data to back it up, the exposure feels as great, if not greater.

So anyway, questions/observations that are on my mind that I would be interested in investing around to the extent there are Series A stage companies tackling or addressing them:

1) In the case of unpaid rent by necessity, the capital that was flowing from tenant to landlord has evaporated and won’t be reallocated. But in the case of opportunism, tenants of all types can and will reallocate unpaid rent to new channels. What are they and why?

  • Interestingly, I see opportunity for thin margin businesses where rent is a high percentage of the overall cost structure to thrive on the other side of a reset. For example, the beta on the restaurant industry may be more attractive today/tomorrow than it has been in a long time.

2) Where there’s pain it’s good to be a pain killer: Who’s aiding the landlords in meeting their obligations. Ironically, it’s an optimal time to buy lease exposure in bulk across property types. If there were ever a good time to build Wework, the residential version of Wework, whatever…it is coming. It’s a tricky timing question, but I’m a buyer of long term exposure here, especially in an asset light way.

3) Similarly, who’s aiding tenants in meeting their obligations? Income smoothing, lending, gig economy, etc…all speak to assisting consumers and businesses in meeting rent and other obligations, but there are likely more targeted products that speak to rent as a specific expense. My sense on the retail and commercial side, is that there’s a class of more equity like financial products that will have fit in today’s world, and those that are able to underwrite said products effectively will be well rewarded. Revenue shares, novel payment terms, non-traditional forms of security, etc…

4) Both of the above speak to a more general opportunity: negotiation between tenants/landlords and landlords/lenders is happening in a very one-off way without standardization or uniformity. This type of one-off negotiation doesn’t scale. There’s an incredibly ripe opportunity for 3rd parties to either facilitate or even obviate the need for parties on either side of said negotiations to come to an agreement. That could take the form of buying one side’s exposure, but also at the ornizational level, concepts of collective bargaining, standardized structures that are proposable by either side in volume, or even something as simple as arbitration as a service could find fit quickly.

5) Unleased retail space: Even before the pandemic, and especially at today’s volume it’s hard to walk by empty storefronts without thinking about what could be done with all the empty space. Companies like Spacious or whatever marketplace facilitates “pop-up” agreements play with the idea of unrealized value here. What else can go into these spaces with selling goods or food don’t make near term sense?

  • Related: I’ve been thinking about how screwed scaled fitness companies like Equinox must be, not collecting membership fees for the past 6 months. Even when gyms do open back up, demand for working out in shared space is gonna be a small fraction of what it was pre-pandemic. That said, demand for exercise will remain constant if not higher than it was pre-pandemic. I kind of like the idea of turning empty storefronts into on-demand private gyms. The model in my head looks like Breather. Can you buy up a ton of cheap storefront leases, put a standard set of exercise equipment in them (treadmill, free weights, mat, bench, elliptical, bike) without any or much additional buildout), and then let people book 30/60/90 minute slots 24 hours a day, 7 days a week? Most people in urban centers don’t have the space for at-home workout equipment and I believe would pay either their unused gym dollars, or even likely a premium, to “go the gym” without sharing space.

6) The distributed fitness idea touches on a broader insight that I’ve felt recently, which is around personal space. In a world where we are trying to figure out what does and doesn’t persist post pandemic, I find myself believing that personal space will evolve from a necessity to a preference, but that preference will be larger and more widespread than it was prepandemic. Willingness to pay for personal space will be high amongst those with disposable income, while those spending on necessity will revert back to pre-pandemic level of space per service or product. A perfect example of this will be expressed in relative marketshare of Uber and Via post-pandemic. Even when there’s a vaccine and virus levels/risk are low, Via is undoubtedly gonna lose marketshare to “private rides.” I’m interested in services and products that deliver familiar value to consumers with evolved personal space profiles. Hyperloop, for example, is well positioned to take more marketshare from other forms of public transport than they would have on the value prop of speed alone, because they happen to contemplate individual/private pods as a form factor.

7) Affordable/low income housing: I’d like to have exposure to affordable housing in urban centers. I believe there is a high volume of people who won’t trade the urban experience for affordability, and therefore demand for the most affordable housing that can keep them in cities will grow. If you looked at vacancy rates amongst all bands of price in New York over the next five years, a like the cheap band the most. Who is building products/services here? Coliving would have been an interesting answer except for the unique safety/health issues of the moment, but there must be other people asking “how can i serve the furloughed waiter/actor in NY to help them stick around?

8) The exchange position: ownership of real estate assets is going to change hands in high volume. As a result, the exchange layer between old and new owners is valuable. Brokerage is the most obvious beneficiary, but in the case of forced transfer, there are other positions that might accrue more value. Chris had the thought that liquidation and foreclosure marketplaces stand to benefit, as would 3rd party property management in the case where lenders become equity owners en masse. One of the most interesting architectures I see at the exchange layer is in pairing a balance sheet with the exchange function. If an exchange can afford to take possession of the asset in order to protract the liquidity window in which a transaction must clear, that’d be a very compelling path to volume.

9) Lastly, the value of an incremental tenant across real estate types is higher now than it’s been in my memory. Owners (and by proxy brokers) stand willing to pay a higher CAC today then they have historically. Zillow spiked hard this quarter, not surprisingly, but any channel that catches tenant acquisition dollars is well positioned for the foreseeable future. I could even see standard broker commissions increase from industrywide norms as the leverage dynamics btwn landlords and brokers tilt toward the demand side.

So yea, if you are building around any of these themes, I’d love to lead your Series A: jordan@pacecapital.com

P.S. I apologize for any blind spots or misperceptions I have in this market, i’m learning…smart people, please correct me on anything that’s wrong.

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Deconstructing the Fortune Teller

Posted on August 13, 2020. Filed under: Uncategorized |

I’ve been thinking more about seeing the present clearly vs predicting the future as venture investment frameworks (after writing about it yesterday), and it occurs to me that they are more related than I initially considered. To me, “seeing the future” is just an exercise in game theory. Even a basic product-centric approach to investing can be reduced down to a simple game, which is “if this is the best product today, then people will buy it tomorrow.” My supposition is that fortune teller investors who “predict the future” tend to spike in game theory, whether that be conscious or subconscious. In seeing the future, everything can be reduced to if/then statements, and the further out you see, the more consecutive or parallel if/then statements you have strung together. The interesting thing about fortune telling, is that there are many confounding and intertwined variables that influence one’s confidence level in the “ifs” upon which they rely and orient. I think great fortune tellers can hold a bunch of different, and not necessarily obviously related, lines of game theory concurrently in state, and in doing so, experience unusual confidence in the set of ifs they consider true en route to the terminal state. So back to the two frameworks, even though they appear at odds, in addition to game theoretic superpowers, fortune tellers are actually heavily dependent on seeing the present clearly. If they get the present wrong, they begin their game at the incorrect starting point (they fuck up the first if)…and even if all subsequent moves/logic are sound, they’ll end somewhere off the mark. Maybe these two approaches to venture investing aren’t such odd bedfellows after all…

 

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Snipers and Fortune Tellers

Posted on August 12, 2020. Filed under: Uncategorized |

I think it was Matt Cohler at Benchmark who said “our job is not to see the future, it’s to see the present very clearly.” I’ve never really identified with that perspective on venture, but I certainly see its merits and how one could build a very successful venture practice by internalizing and adhering to it. This morning I found myself wondering if the value of seeing the present clearly was as actionable in this moment as it has been historically. It feels like core to the premise of the above framework is an assumption that the near future looks more like the present than not, and that a company that is well positioned for the present will therefore thrive in the near future. Investing behind this clear view of the present presumes that one sees it before it is more broadly recognized, and eventually consensus catches up to reality.

So fast forward to today. It’s hard to see this present clearly. We’re dealing in very dynamic information and a state that feels more fluid than static. The present is always fluid, but I’d argue that it’s more fluid now. So many of the assumptions that shape behavior and people’s way of being on have been challenged…so many of the inputs to the systems that we’ve designed to organize/govern society and behavior have been upended. We are rewriting the way things are in a very compressed and abrupt way, and it’s happening with frequent real-time edits and little uniformity. There is definitely a true version of today’s present, but that version feels uniquely defined by motion.

It’s harder to see something clearly when it’s moving, especially if it’s moving faster and more erratically than usual. Nonetheless, a sniper level of vision can catch a glimpse of that truth, and then the question is…what do you do with it? If your investment horizon is short like some hedge funds, you trade on it. But if you are investing on a venture time horizon (10+ years), that is less obvious. The near future may look much more different than the present than it typically would. The value of seeing the present today decays outside the seeming microbubble that is pandemic times…we can extrapolate out and bet on what persists and what doesn’t, but that feels like a practice in seeing the future, which breaks the initial framework.

I’m sure I have a more blunt and unnuanced understanding of this philosophy than its creator and disciples, but it is interesting to overlay the volume of financing activity in today’s venture market on top of this approach. Perhaps there’s a disconnect? Perhaps this environment favors the fortune tellers…

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A Mindshift

Posted on July 14, 2020. Filed under: Uncategorized |

After 4 months of pretty remote isolation in the Adirondack Mountains, our family has returned to New York City. We expected the move back to be an adjustment, and it has been. We’re back to making 10x the number of decisions in a day as we figure out our new flow and protocol for living in this denser and quite distinct environment. Something I realized today, that seems to be making things easier, is that “success” in this moment is not just a function of how you act, but also how you think.

The first week of being back, I’d walk around looking at every stranger as an attack vector. I’d keep my distance, cross streets, and generally have a very defensive posture with anyone around me. From a physical safety standpoint, these actions made sense, but this morning I realized that I was turning one of the most beautiful and rich parts of New York City into something very negative. Part of what makes New York special is the interaction with strangers. It’s the texture to a day, which has been unfortunately sanded down in the name of self-preservation and fear.

I didn’t trade open space and mountains for a sterile and isolated city experience. It’s that very interaction and energy that makes the trade worth it, so I’m committed to finding a way to participate. My first shift, which has been very positive has been saying good morning to people I pass on the street. My sense is that when people collide in NY right now, there’s a micro-standoff, as each looks at the other as risk. Rather than lean back, I make eye contact, say good morning, and all fo the sudden that standoff becomes something else much closer to why we are all here.

I think you can lean in at a distance, and so that’s what I’ll be doing from now on.

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A letter to my son from the depths of isolation

Posted on May 17, 2020. Filed under: Uncategorized |

Dear Odysseus,

When you were 1 year old the world changed. Your mom and I packed up our shit into the car and drove you away from home to a place where we could be without being around others. We chased you around the house for 13 hours a day, splitting the duties of your development and learning and our respective professional lives. We were able to plant seeds, hang a humming bird feeder, set up a swing, import books and toys, but you developed thinking that mom and me were the only two people in the world who you could hug. Your grandparents got to know you through the pane of an iphone and you had but two physical witnesses of each great milestone that came to be. It was winter when we left, and stayed winter way longer than would have been ideal. Caring for you without any help was simultaneously the most amazing and impossible pursuit imaginable. We figured out a routine that worked for you and came up short for each of us, which of course was the correct optimization. You’d get up in the morning, I’d scoop you from your crib, and drop you down into the covers surrounding mom in the big bed. We’d cuddle as a family, forgetting for 10 minutes that the world, and we, were suffering. That may sound strange for you, given that we had food to eat, health, money, and a place to stay away from the epicenter, but it was a time where everyone suffered, irregardless of their security or context. Many suffered much more deeply than us, but all suffering was valid nonetheless.

When our isolation started, your mom and I had a sobering conversation, where we agreed that she would pause some of her professional pursuits to care for you while I worked. The virus came at a time where my job supported us financially and hers did not. It was a crude heuristic, that certainly did not capture the nuance of the sacrifice, but it was the best one we had. From 9AM to 4PM every day, your mom committed deeply to helping you understand the world, your voice, your physicality, and life. You walked in nature every single day. Your mom talks to trees, and she taught you to do the same. You cried when you saw a tree get trimmed, and learned to point out the trail markers before we could even find them. We built a world for you where our friends were birds and bugs and deer and chipmunks…but we couldn’t give you time with other kids. We felt so sad about that, and it was hard to know if and when and why that might change.

At 4PM, my last meeting would end, and your mom would come and drop you in my lap for the evening. She did the best she could to keep up with her work in the 3 hours a day she had before your bedtime. Something we learned quickly was that neither of us would feel satisfied with the time we had to pursue our work. I tried my best to be present with you during our time together. I read you every book in our house at least 500 times. We crawled and walked and wrestled and built…it felt repetitive to me, but you never seemed to notice. There were moments where I snuck an email here and there while you picnicked with Bear and Superman, but I always felt bad doing so. Your mom was better about that than me. She found a plane of perfect presence with you…and I admired her for it. Most nights I had the honor of feeding and bathing you. While the bathtub filled, I’d throw you down on the big bed and let you jump around and laugh. This tended to be my favorite time of day with you.

With pajamas on, I’d take you downstairs to do sing along with mom before bed. We’d turn down the lights in the living room and sing Blackbird by the Beatles. Once you were down for the night, mom and I would do our best to cook something for ourselves and be with each other…that was easier some days than others. We’d oscillate between connectedness and disconnectedness…doing our best to reset together when the stress and strain got to one of us. We were lucky…we had the kind of love that gets your through a time like this…but it was still harder than normal to maintain appreciation for it.

Some nights, we just gave in and allowed ourselves to retreat back into our brightly lit screens…catching up where we left off in work or grasping at social connection in the only form it was available. I learned after about a month not to read about the virus right before bed. We carved out date nights, to escape the screens. Of course, we had nowhere to go, but your mom liked dressing up anyway, and we’d cook and talk to each other and maybe drink a beer or two.

Life became something between treading water and living. Days were long and weeks were short and largely blurred together. For the most part we were happy…we had you, and each other, and that was so much. I kept waiting for tears to come…but they never did. And then one day…something happened and we got in the car and went home and you made friends, and we hugged our parents, and our city awoke from its prolonged coma. I can’t tell you what happened or when, because it hasn’t happened yet, but you will learn that your dad is an optimist, and I know you are reading this from a better moment.

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On Board Service

Posted on May 5, 2020. Filed under: Uncategorized |

One of the things I’ve enjoyed most about the past 10 or so months at Pace has been my service on the board of an unannounced company in our portfolio. The vast majority of my board experience over my career has been in the CEO seat with institutional investors from firms like General Catalyst and Softbank serving on my boards. Although I probably led 50+ investments during my time at Lerer, in most cases, as seed investors, we did not take board seats with an investment. Now sitting in the institutional investor seat and serving on someone else’s board, I have a different level of empathy for the job. I think one of the absolute privileges of board service is profound alignment. I don’t want anything except what’s best for the company. There’s nothing for myself outside of that desire. I think I’d be there philosophically regardless, but it doesn’t hurt that what’s best for the company is best for me…i’ve internalized deeply that my success is hitched to the wagon of a CEO and group of people I believe in.

Service as I see it is not directive. I sync with the CEO every 2 weeks and I never come with an agenda of things I think should happen. I do way more listening than talking and my only goal is to help the CEO make the best decision possible on any given topic. When I have product or tactical ideas, I am sure to preface with “feel free to throw this away or tell me it’s stupid.” When I interview a candidate on the company’s behalf, I debrief with inputs not conclusions. The CEO of this company is a better CEO than I ever was. I expect that to be the case for every founder I support. The best decisions and best outcomes for the company are going to come from him and his leadership team…I want to be a foil, inspiration, food for thought, emotional support, ethical support, but decidedly not a decision maker. Sure in the realm of governance and management team construction, there are moments that will call for more assertion, but almost every other decision that might float up to the board, I tend to redirect back through the eyes and mind of the CEO. I don’t want to be persuasive, I want to be illuminating. Success is listening and widening the aperture of the team’s thinking, if only to discard and zoom back in narrowly.

I was very clear with the CEO prior to our investment: “You don’t pick me on your board to tell you how to do it. If you want that level of applied contribution there are better people. You can hire for applied value. You pick me for trusted counsel, and that is something you can’t hire for.” I believe that in my role as a board member, if I can help world class founders be and decide at their best, everything else in our model at Pace falls into place. So far so good.

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What the world might look like

Posted on April 19, 2020. Filed under: Uncategorized |

One of the hardest mindfucks of isolating at home through this pandemic is not knowing what the world will look like when we can finally go out and explore it again. Most everyone is asking themselves “when can we stop isolating at home?” I find myself more interested in “what will it be like in the months and years after?” Here are a few guesses in the spirit of provocation/inspiration more than prediction:

1) Payment at the point of sale will go completely contactless. Tailwinds for Apple Pay for sure, but I think an even more likely architecture will be a customer paying in store via an app on their own phone. “Venmo whole foods $78” feels safer than touch my phone to the same pad/sensor as everyone else who shopped here today.

2) New protocols for social interaction will emerge. For example, maybe as we start to socialize in groups again, we will do so only once every 14 days. As the fear thaws, every person will make their own underwriting decisions about with whom they feel safe interacting. I know which of my friends are being as careful as me and which are not and I trust certain of them, but it’s not fair to expect that trust has a transitive property with all others that trust me. Underwriting the risk of social interactions will be easier to do if we don’t have to also underwrite our friends/family’s underwriting ability. Socializing once every 14 days would be a way for people to take their desired level of risk, either get sick or not in those 14 days, and then socialize again with pretty high confidence that they aren’t putting others at risk. I think leveraging social trust obviates the need to authenticate any individuals adherence to a protocol like this. This is just an example of how we might transition back into social behavior…i’m sure it won’t be this, but I do see transitional protocols emerging before all out social butterflying returns.

3) Full service gas stations will make a comeback. You’ll pump your own gas less, and pay the gas station via an app without rolling your window down to interact with the attendant.

4) Telemedicine will become a regular part of your overall care protocol with your primary care physician. Tons of reluctant doctors were forced to embrace this style of care over the past few months. They’ll find leverage in these tools. A 10 minute Zoom screen will be the default first step in most patient journeys. I think you’ll still go see the physician post Zoom in many cases, but even in those cases, the basics of intake and fact finding will be done prior via Zoom.

5) High attention applications and interaction paradigms will fall from grace. I’ve seen it posited that video calls/conferencing is the new platform, or that such functionality will spread across applications with the same prevalence as messaging. I’m not so sure. People are going to get busy again. Fitting interactions into micromoments or multitasking moments once time gets competitive is a very different design challenge than fitting them into a gaping abyss of idle boredom. I think audio with modern interaction mechanics might emerge as a better happy medium for many momentarily growing live video use cases.

6) Antibodies will be a new status symbol. It will be a very bizarre instantiation of the haves and have nots. New labor models will emerge to reflect this dynamic. It’s hard to see our most vulnerable populations bearing the brunt of the virus. Perhaps an inadequate silver lining is there will be better paying work on the other side for those that make it through and attain immunity. (note: i understand the jury is still out on testing methodology here and the correlation btwn presence of antibodies and immunity)

7) Real estate and retail operations will vertically integrate. Property owners will own the retail in their buildings and rent ops as a service as opposed to retail ops renting property. I know this one is weird…not fully baked, but I could squint and see landlords needing to become their own retailers to monetize empty space. It will just be different cash flow and liability dynamics…same SMBs and business operators will be running the day to day, to the consumer retail will feel the same.

8) Grocery stores will start to sell memberships. You’ll pay $100 a month for priority rights and desirable delivery windows. Every grocery store will offer their own version of Prime and enjoy a new revenue line item. As we ebb and flow in and out of social isolation waves, members will feel an increased ease and sense of security that they’ll have access to provisions without needing to keep 30 days of food on hand in perpetuity.

9) Some new company will emerge that offers emergency provisions in the cloud. rather than sending all the stuff to your home, for $400 a month, they’ll maintain a storage facility for you that is perpetually stocked with all of the food and supplies you’ll need if the country locks down or the world melts again. They’ll rotate out expiring goods, and guarantee delivery of your stash within 3 days of request. Think Makespace for crises…

10) Work from home won’t be viewed as the luxury it once was. Will there be more remote work than before? Sure. But when given the option, I think most will prefer to “go to work.” Sweatpants ain’t all they’re cracked up to be.

11) Actually, perhaps the most controversial take of all: I think the world is gonna look a lot like it did before.

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Silver Lining

Posted on March 15, 2020. Filed under: Uncategorized |

We’ve been on isolation protocol for 9 days. I could cover all the challenges and stresses associated with such an abrupt change to daily life, but you can read about those everywhere. As we settle in to an unknown amount of time in this new reality, I have moved beyond lamenting about the points of friction where something is not as good or easy or comfortable as I am used to. This period is it’s own thing and I’ve accepted a new baseline. With that acceptance comes the opportunity to improve and optimize and build up new behaviors and routines that are for this moment specifically.

Call it a silver lining, but I’ve had more intimate conversations with friends and family in the past week than I have in the preceding year or so. Life gets busy, we have a little dude who is about to turn 1…there’s work, and relationship, and kid, and surface area with that wider set of folks who I deeply care about had gotten smaller. Even time spent and conversations with parents and siblings have spaced out as everyone builds up their own lives and families.

With all of the context that gets in the way of nurturing valued relationships shed, and most everyone I know holed up in their apartments or homes with nothing to do and a lot on their minds, I’ve started Facetiming a pretty wide set of friends and family, many of whom I don’t talk to that much in normal life. Everyone is available, all the time, and that’s an opportunity to reconnect, check in, get support, give support, and frankly pass the time. Nobody has important things to do. Everyone picks up. If we were living in Gchat days, my entire graph is green. It’s really really nice.

Don’t get me wrong, when I zoom out at what’s going on, which I do quite a bit…it’s very, very hard. But there are moments of warmth and connection available solely because of this fucked up context, and for those I am grateful.

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Hack Idea: ~Waze for Coronavirus

Posted on March 11, 2020. Filed under: Uncategorized |

I think I’m through the initial shock of coronavirus. I’ve taken steps at home and work to best mitigate my role in the transmission of this virus and have encouraged everyone around me to do the same. With immediate/reactive efforts in as good a shape as they can be, I’ve started to think about how our industry can contribute to the overall challenge our country, and the world, currently faces. I think history will look back on those that looked out for themselves with understanding, and those that looked our for others with reverence. It would be nice if we, as an industry, could use our considerable resource and skill to do more than simply analyze public data and amplify warning or concern on social media.

Is tech going to start building test kits which are sorely needed? Ulikely. Are we going to increase hospital capacity in the near term? Probably not. So what are the assets we have or could develop to do our part?

One asset that I find particularly interesting is location based data. I would guess that 70% of infected people in the US allow at least one application to track their location persistently. That line through space of where a patient traveled, how long they spent time in different locations, and on what dates/times feels like a very valuable input to both identification of potential infected persons as well as prevention of further infection. I’m guessing most of these apps don’t store historical logs of such a history, but I wouldn’t be surprised if Google Maps and Waze, for example, have this data. Findmyiphone and Life360 feel like interesting assets to explore for the same use. AT&T and Verizon probably have pretty darn good visibility at scale as to where their customers have moved through space and when. Whether or not these data assets are being used by disease detectives in current workflow is unknown to me, but now feels like a moment where people would be willing to trade privacy for safety of themselves and others…so there’s one question, which is “can we access existing/historical location data and redefine the terms of how it can be used?”

Another question is can we hack together a new piece of software to help people navigate these uncertain times. I’m interested in the idea of an app who’s sole purpose is to continuously track your location and alert you when you are entering high risk places and contexts. I think people would trade their privacy for a service that helped them and their loved ones stay virus-free. You could start by using non-network contributed data to provide these notifications/intelligence. Inputs like people density, popularity at certain times, proximity to publicly reported cases, etc…would be enough to help people make decisions on where to go and when. The more interesting part to me is if you could harness a collective mindset, where everyone using the app was trying to help others not get sick, that could be really powerful. What if the app enabled users to anonymously self report when they have symptoms or a positive diagnosis? That type of input, paired with the self reporter’s historical movement through space and time (which we’d have been capturing already), transposed on everyone else’s movement through space and time, could be a recipe for hyper-personal, hyper-actionable warnings of potential exposure. I think we’ve seen globally what top down govt surveillance can do to assist in the fight, but I’d like to believe that there’s a bottoms up answer for us to fight within the context of our civil liberties and norms. So yea, can we build Waze for coronavirus and try to help each other out in staying safe? What if instead of reporting cops to help others avoid speeding tickets, we reported symptoms and diagnoses alongside our historical movement in order to help others avoid the coronavirus. That’d be a dope hack. Single player mode: “use this app to avoid the virus,” multiplayer/network dense mode: “use this app to help others too.” Happy to throw some (personal) financial resources against that or someone else’s better idea if that’d help something get built and distributed. jordan@pacecapital.com

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Processing risk and response

Posted on March 6, 2020. Filed under: Uncategorized |

It has been a very tough month or so. Typically, I write this blog to organize my own thoughts. It’s been hard to wrap my head around what is going on at the moment…maybe if I start writing it will help. I am typically pretty cool, calm, and collected. However…when it comes to matters of health, I can thank my mother for giving me a heightened sense of anxiety relative to the average bear. Something that’s been hard to figure out for me is what % of mindshare is appropriate to spend on the potential pandemic we have on our hands. I’m not sure that’s answerable. Lately it has felt like watching the world burn could be a full time job. I continue to take meetings, support our companies, look at new investments, read, etc…but that idle moment when my mind is not occupied has been claimed by the coronavirus. Whether it’s monitoring, preparing, communicating with colleagues, communicating with family and friends, or frankly just worrying…it’s a lot of time and energy. That effort and mindshare feels both productive and afflictive at the same time. There is undoubtedly an optimal point of information consumption and corresponding action, but damned if anyone knows where that is.

I see people around me approaching these questions in very different ways. It’s hard to process such divergent paths from people I equally respect, none of whom are particularly better equipped to make decisions than me. I find myself conversing with other folks who’s job it is to process risk and probability (and bet on it), but is that a good input in this context? I talk to folks who are uniquely tuned to detecting and understanding the shape of growth…do they qualify as authority? I see large corporations like Coinbase, Microsoft, and Twitter, as well as smaller companies and other venture firms like ours, implementing work from home protocols, while others go on conducting business as usual. Is anybody doing it right?

To me, these questions all come down to calibrating risk, reward, and consequence. Despite feeling like that practice, in the abstract, is a power lane for me, I don’t feel particularly well equipped to do so in this context. Information is sparse and conflicting, emotion and survival instinct are obfuscating, and decision making must be made not in a vacuum, but in the context of friends, family, colleagues, and strangers. This is an extremely hard problem to navigate.

So yea, there’s no takeaway or insight that I have to share, but I figure if i’m experiencing this level of anxiety and uncertainty, many others are as well, and perhaps it’s helpful to know that you aren’t the only one who’s having a hard time with it.

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A Counterintuitive Proposal for How AR Will Unfold…

Posted on February 4, 2020. Filed under: Uncategorized |

You are walking down Bleecker street in New York City. You pass by a store with a cool jacket in the window. You say “Hey camera, how much is that jacket? And a voice replies into your Airpods, ”It’s $400:“ I think that’s gonna be the way it goes down.

There have been many proposals for how augmented reality (AR) will solve this use case and ones like it. Most demos you see today, a person takes her phone out of her pocket, opens an app that invokes the video camera, and then metadata about whatever is in the frame appears on the screen. I don’t think that’s the way it’s gonna go down.

More futuristic versions of this use case contemplate heads-up displays, where the metadata about the jacket is written visually to a lens on your glasses or even a contact lens. I don’t think that’s the way it’s gonna go down either (at least not this decade).

I think the insight that we will use computer vision to augment the way we process our physical surroundings is more or less a given. Car’s are perhaps further along than people in this regard. It seems implausible that this assistive capability will not follow us into all realms of our mobility (i.e. when we get out of our car and walk). What I don’t think is a given is a) that the camera we use to capture our surroundings will be on our phone, or b) that the response to a camera based query will be displayed visually.

Most read/write situations don’t traverse disparate medium. If you capture visual information, it tends to be displayed visually. If you capture audio information, it tends to be displayed acoustically. Even if you capture tactile information, it tends to be displayed/processed tactilely.

But in the case of AR, I see the capture/write function and the read function decoupling as it relates to media type. I think will use a wearable, voice activated camera to capture and query, and I think we’ll listen to the response or results that come from that query.

Ring and other always on camera have desensitized us to the reality that we might be recorded when in public. There is definitely a societal learning curve that Snapchat Spectacles began to climb, around wearing cameras in social settings. But I think consumers have learned what a “wake word” is thanks to Siri and Alexa, and have gotten comfortable with always on sensors that are known to be asleep unless awoken. My instinct is that voice and audio is paving the way for visual sensors to do the same.

It’s not just a privacy issue that will need to be solved, but also a fashion issue. Snapchat Spectacles came close but not close enough to solving the fashion challenge of wearing sensors on your face. Airpods solved it completely. Whatever camera wins will have to thread this same fashion needle. I could actually see a not too distant world where your Airpods have a camera(s) on them. If not, I guarantee you Apple is working on a Siri controlled wearable camera that is meant for everyday use (as opposed to gopro use cases, etc). Interestingly, I see these cameras as being utilitarian as opposed to creative in the near term. Spectacles captured media that was meant for human consumption, and in that way, kind of fell short of the production quality we’ve come to expect from our smartphone camera. But if the consumer of an image is a machine, the image doesn’t have to be pretty, or compelling, or even particularly high fidelity in order to be valuable…and in that way a hardware manufacturer can bend the typical constraints around size, form factor, cost, battery life, etc to optimize for the fashion and form over image quality.

I think the promise of AR is that we can look up at the world and not down at or even into a screen, and this camera/earbud architecture feels like the closest we can come to an invisible read/write interface that marries our surroundings to machine assisted computation and the internet.

If you are working on any piece of this future, be it hardware, software, or other, I’d be up to jam and maybe even lead your Series A round: jordan@pacecapital.com

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Blockchain Based Gift Tax Hack

Posted on January 21, 2020. Filed under: Uncategorized |

I was reading something this morning about gift tax exemption and had a weird idea. I’ll premise this idea with the acknowledgement that this solves a problem that I’m not sure I philosophically want solved, but regardless, thought it was kind of a cool architecture.

The IRS taxes gifts of a certain size. Generally the giver pays said taxes, and the rate ranges from 18-40% depending on the context. Every year, every person can take advantage of a “gift tax exclusion” which allows the giver to give AS MANY people as she desires a $15K tax exempt gift. You could give a million sub-$15K gifts and not pay any gift tax, but you can’t give a single $20K gift without paying tax on the extra $5K. If you are trying to transfer wealth from one generation to the next, the gift tax exemption is like the first thing an accountant or tax adviser will guide you to take advantage of every year.

If you have $100M that you want to pass down, the exemption ain’t gonna get you very far, and there’s a nice 40% Estate tax waiting for you if you transfer your wealth at death.

But I had this weird idea that you could create a network of proxy recipients, and make exempt gifts in parallel to thousands of them, who in turn would be incentivized but not obligated to pass the gift along to an intended recipient via their own exemption. Interestingly, you could authenticate this flow of funds and identify an intended recipient without needing to expose the ultimate recipients identity or bank credentials.

You’d incentivize people playing the role of proxy to pass along the gift via a take rate that is meaningfully lower than the gift tax rate (i.e. 10% cut), and design the network to make the income generation opportunity of continuing to perform the role for many givers more lucrative than maliciously keeping the money from any one giver.

There are many crypto protocols that create roles or jobs within a system, where the right to an income generation opportunity is bestowed only upon the best actors in the system. Livepeer’s transcoder nodes are a good example.

I wonder if you could create a crypto based gift tax proxy protocol to allow for untaxed giving at scale between generations. You’d be able to both incentivize proxies, transfer funds in network, and authenticate that the proxy did their job / the intended recipient ended up with the money.

As I right this post, a) I hate this idea, and would prefer if wealth wasn’t easily transferred between generations, and b) may have just designed a money laundering scheme by a different name.

But, without a contractual obligation to pass the gift along, and rather simply a strong network based incentive to do so, I kind of think this hack would work.

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A Depressing Startup Opportunity

Posted on January 17, 2020. Filed under: Uncategorized |

“Be fearful when others are greedy and greedy when others are fearful.” – Warren Buffet

I live downtown on the Hudson River in NYC (Flood Zone 1). During Hurricane Sandy, the Hudson enveloped my building and I spent the evening bailing water out of our entranceway, trying to protect the mechanical room from flooding. We live in a Co-Op and everyone who stayed, even the late Lou Reed, took turns both witnessing the craziness of our street becoming the river, and trying to protect the building, which is a Co-Op (we are all on the hook for the buildings health economically), from serious damage.

I sit on the board of our building, and after that event, we implemented a new flood protocol, made some tweaks to our physical infrastructure, and upped our investment in flood insurance. Securing additional flood insurance wasn’t easy, and my understanding is that in areas of high risk, it’s getting harder and harder by the day to find an insurance company who will underwrite the risk.

Generally speaking, the entire carrier market is fearful, as it should be. At the same time, demand for flood insurance is going to keep growing. In such a situation, it feels like the way underwriters approach this type of risk, the inputs to their actuarial models, and their economic agreement with customers needs an overhaul. I am far from an insurance expert, but it feels like there’s an opportunity for a new entrant to shake things up in this segment of the market.

I am inspired by USV’s commitment to investing in solutions to our climate problem. I think that’s the first order need. As bleak as it sounds, after reading Alberts post, I couldn’t help but ask “well what is investable if we don’t fix this fast enough or well enough?” There’s an entire class of businesses that will be built over the next 50 years not only to fight climate change, but to help us adapt as it inevitably progresses.

There’s a tinge of heartless capitalism in asking how companies will profit from such a destructive and existential challenge, but the reality is we have a responsibility to our planet AND also to maintaining or improving quality of life for those most affected by these changes. What services will be built to help people adapt to new reality? I think modern flood insurance fits that bill, but it’s a much broader question. Holler if you are working on something like this and thinking about raising capital: jordan@pacecapital.com

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You Gotta Know When to Hold Em’

Posted on November 26, 2019. Filed under: Uncategorized |

I used to play a lot of poker when I was younger. If you read about underground card rooms in New York City in the early 2000’s, or have seen the film Rounders, it wasn’t quite like that…but it wasn’t unlike that. At the time, poker wasn’t televised yet, and at least in the places I played, people weren’t doing the math the same way they are today. As a result, it was easier to win. My approach at the time was a few fold:

1) I’d commit to very long blocks of time when I’d sit down to play (which is actually quire exhausting). When you know that you are going to grind it out for 6 or 8 hours, it makes it much easier to exercise patience and wait for the right hands. I’d play very “tight,“ which means I’d fold down all but the best hands, and I trusted in the discipline of my approach irregardless of what else was happening at the table or to my stack of chips.

2) I spent more time watching the people at the table than I did calculating the pot odds of a given hand. 8 hours is a lot of surface area to observe people’s behavior. Generally, I was looking for people who were “on tilt,” which is a phrase to describe someone who was prone to making emotional or irrational decisions as a result of a previous hand or event at the table. You could put a person on tilt by winning a big hand, but you could also achieve the same end simply by talking to them at the table. I talked a lot…nowadays, you see the people on TV totally stoic, sunglasses, hat pulled down, trying not to reveal anything with body language. That wasn’t me. I’d talk and talk and talk and try to shape the energy at the table.

This week, and generally speaking over the past few months of Pace Capital being in business, I find myself exercising muscles that I definitely built at the poker table. As a general statement, the early stage venture markets are VERY fully priced at the moment. Many have commented that we are at the end of a cycle…it’s not my job to predict if or when the tides shift, but it is my job to stay true to our strategy through all market environments, exercise discipline, and not get caught up in a specific moment in time from a capital markets perspective. We’ve been in business for almost 5 months and I have folded down every hand I’ve seen. I’ve been at or near conviction on two companies so far. The first raised money at ~2x the price I felt comfortable investing at. While I wasn’t happy with the outcome of not getting to go on that journey, I am happy with the process we ran and the discipline we exercised to stay rational in irrational markets. The second company I absolutely loved and price was not the issue. I spent a ton of time and energy and so hoped that it would be my first investment at Pace. Despite loving the founders, loving the market and thesis, and seeing a path to a positive outcome, in diligence it became clear that the risk I would be buying at the Series A was actually closer to Seed risk. Things are all moving the right direction and the vision is spot on, but I recognized that the risk/reward didn’t fit Pace’s investment thesis as a Series A firm. We strive to eschew outcome oriented thinking at Pace in the name of finding either alignment or misalignment on any potential partnership, but I am human and I am disappointed with the discovery of misalignment.

A flaw in my approach to poker, was that on a day good cards weren’t coming, if you keep folding down hands for 8 hours, eventually the blinds (which is the ante you must put in to sit at the table) will eventually kill you. I’m not sure there is an exact corollary in venture investing, but the closest thing might actually be the management fees you are taking while not deploying capital. Drawing fees adversely impacts net-IRR, which is a core metric your LPs use to measure your performance.

The second, and perhaps more interesting poker analog, is that venture investors are not immune to emotional decision making. As a founder raising money, you don’t walk into a venture capital firm’s office thinking about what the GP you’re meeting experienced yesterday or last week. Your instinct is to believe that your company and opportunity will be evaluated in a perfectly logical vacuum, but in practice that’s not the case. That GP might be on “tilt,” which may either bode positively or negatively for your pitch, but a no or a yes may result from events over which you have zero control or knowledge. As I wind down a pretty intense sprint on the second company I mentioned, I am pushing myself to be aware of how that disappointment influences the next pitch I see. Writing this post is perhaps even an exercise in recentering. There are countless startups calling on machines to make more rational decisions in markets were human emotion costs margin…I don’t think venture investing is well suited for that approach, but there is something to modulating the peaks and valleys of a deal driven practice when trying to make consistent great decisions. Who would have thought that playing cards would be such good preparation for my ultimate vocation??

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Associate with me @ Pace Capital

Posted on September 6, 2019. Filed under: Uncategorized |

Associate means a lot of different things at different venture capital firms. I started my venture career as an Associate at General Catalyst Partners in 2006. I was hired by a guy who came out of Summit Partners. For those that don’t know, Summit is one of the original practitioners of the “outbound associate sourcing model.” At least when I joined GC, they had an army of associates, working through pipelines, calling 100s of companies a week, looking for the diamond in the rough that was bootstrapped, with $xx Million in revenue, growing at 100% a year, and associates were measured by how many deals they sourced for the firm. Something like that. Anyway, he had left Summit to build a similar, but scaled down sourcing program at General Catalyst, and I was the 3rd Associate he’d hired to the team. When I got to GC, I was told I’d be measured by the volume of companies I spoke to, and I’d have weekly checkins where we’d talk about “getting my numbers up, etc.” The surest way to get your numbers up was to indiscriminately call down lists of companies or conference attendees, but to me that felt dumb. In my own head, I measured my progress by the bottom of my funnel, not the top. Was I brining high quality companies into the firm and were the General Partners interested in the work I was doing? As I got a bit more comfortable with the landscape, and observed how the Partners at the firm spent their time, and with whom the partners at the firm spent time (as opposed to how the other associates did), I decided that I would be independent, essentially breaking out of the program for which my boss had hired me. The guy who hired me stopped managing me, a few GPs tried to take over that role, and eventually it became clear to everyone that I was not manageable (I’m not proud of that, it was a weakness that I only saw years later). This was a huge pain in the ass for the firm, but I was doing good work and from there I just kind of carved my own path, collaborating with many people at the firm, and trying to contribute first principals thinking to our collective understanding of what the fuck was going on in the world, and what might happen in the future.

Since that experience, I’ve hired a number of Associates and in doing so, gravitated toward collaborating with people who could confidently work alongside me, as opposed to beneath me, irregardless of title or experience level. I hate paint by numbers, rigid, formulaic, contrived management frameworks or styles. I like self starting, independent thinking, self-motivated, figure-it-out minded, sponge brained, curious, hungry, self aware, authentic teammates (who just happen to have been born 10-15 years after me). I have the deepest faith that someone’s age or level of experience does not mandate the quality of her thinking, and I expect to learn as much from any Associate I’d hire as she would learn from me. I don’t measure the Associates with whom I work by how many deals they source, how much leverage they give me in diligence or investment memos, or the number of meetings I can pass off to them that I don’t want to take. I measure Associates by how quickly and creatively they are advancing our collective thinking within the context of any thesis or area of interest that’s in focus.

I don’t want to represent the job as completely autonomous because it’s not. One of the things you are signing up for is allowing me to route your attention toward questions and problem spaces that I choose. That’s a bit of the trade you make for getting to do one of the best jobs in the world without the natural ceilings or constraints that most analogous jobs would present at larger firms. Of course, I expect and want you to take us in new directions, into new problem spaces, etc…but at the end of the day, you kind of have to persuade me to care about what you care about, or it’d be hard to justify a lot of time spent there. I think this is one of the biggest differences between an Associate and a Principal…I initially thought I might hire either at Pace, but I realized through a few conversations that a Principal can and should define their own focus and time. An Associate, at least in my view, gives that up in the name of learning and mentorship and experience.

If I haven’t stated it explicitly yet, it might be obvious that I’m starting an Associate search to come work with me at Pace. I think it’s a unique role for someone interested in practicing a very bottoms up, Series A, first principals approach to venture investing. You’ll be working primarily with me, but we’re a (VERY) small team at the moment, and you’ll get to enjoy plenty of time with Chris and players to be named at a later date. I’ll write another thing with more of what I’m looking for and more about Pace, but I’m very open minded to different backgrounds and past experiences. Beyond the character stuff, I have a bias but not dogmatic attachment to at least semi-technical if not technical backgrounds. I work well with extroverts partly because I skew introvert. And investing experience of some kind would be nice, but entrepreneurial, product, academic, or engineering experience is all relevant.

If you are interested or know someone who might be, please get in touch. I would especially love to hear from you if you come from a background that is not yet well represented in the venture capital world: jordan@pacecapital.com

About Pace
Pace is an early stage venture capital firm primarily focussed on Series A investments. We are generalist and are investing in any market at any layer in the stack. Previously Chris was a founding partner & GP at Thrive Capital where he invested in companies like Twitch (acq. by Amazon, Patreon, Unity, ClassPass, Grailed, MM LaFleur, and Flatiron School (acq. by WeWork). Previously I was a founding partner & GP at Lerer Hippeau where I invested in comapnies like Seatgeek, Sunrise (acq by MSFT), Moat (acq by Oracle), Soylent, Smartthings (acq by Samsung), Groupme (acq by MSFT), Cue (acq by AAPL), MongoHQ (acq by IBM), Tapad (acq by Telenor), Adaptly (acq by Accenture), Floored (acq by CBRE) and a number of others. Concurrent with my investing role at Lerer, I also started and served as CEO of two venture backed technology companies, one of which (Hyperpublic) was successfully acquired by Groupon (GRPN) shortly after they went public.

We closed our first fund, Pace I, at the end of June. It’s $150M (more than half of which comes from leading university endowments who we are very proud to work in service of). While we invest across the United States, this job is sitting next to us in our New York office.

P.S. Sorry, I had no idea when the A in associate does and does not get capitalized…obviously

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Technical CEOs

Posted on August 15, 2019. Filed under: Uncategorized |

This summer has been a lot of catch ups and time spent with angel and seed investors. For the first time since leaving General Catalyst a while ago, I find myself 100% focussed on Series A, slightly further downstream in the capital markets than “first to believe.” The bottoms up, catalyst driven work I do to find early stage companies I want to invest in is exactly the same as it’s always been, but my dynamic with friends who are seed and angel investors has changed in the sense that Pace Capital now represents follow on capital, as opposed to the coinvestment, to their early stage portfolios. When they ask me what types of companies I like, so they can send me relevant opportunities, my answer doesn’t fit into a clean box like “networks and marketplaces” or “SaaS and enterprise.” My default is simply to share the 4 or 5 theses that I’m developing at any given time (currently in the spheres of airpods/voice, blockchain, distributed labor & credentialing, contactless payment, media forensics, and a few less developed things), all of which I think make for interesting conversation, but I know people don’t leave remembering a simple commonality that they can then use to place me in their schematic of relevant Series A investors.

My approach to investing is and always has been entirely bottoms up. I look for catalysts in a few key spheres: 1) technology 2) capital markets 3) regulatory environment or 4) a societal change, where it’s clear that enterprise value is going to shift from incumbents to new entrants, and then specifically, I look for companies that are “native” to that underlying change. So the thing that wasn’t possible prior to the change tends to be the most valuable thing. Within that set I am most tuned to technical catalysts, and most of my thesis development comes from studying and understanding the new primitives that a technical change exposes, and then I start to think about what types of systems people can and will design against those primitives. This framework is, I believe, the best approach to proactively identify companies you want to invest in (at least for me), but I am still left with the reality that lot’s of deals are referrals, especially at the Series A, and I’d like a cleaner way of helping my network know what to send.

I recently looked back at all of the investments I’ve made at Lerer Hippeau and as an Angel over the last 10 years and tried to deduce some more simple tangible commonality between them. The first observation, which I’m not sure is so helpful in this context, is that I tend to invest in companies that express elegant system design (technical or otherwise). I don’t think most angels or seed investors know how to transpose that filter onto their portfolios, but maybe some do. Perhaps more actionable, but more limited and less expressive of what I actually look for, is that it turns out I overwhelmingly gravitate toward technical CEOs. I guess that’s not a surprise given the system design thing, but I actually didn’t realize what a strong bias I’ve had toward technical leaders. This is true as measured not only by volume, but also by depth. By far my deepest and most fruitful investor/founder relationships have been with technical CEOs.

I like the communication plane i have with technical thinkers, so in the absence of a paint by numbers description of the companies I’d like to spend time with, “technical CEOs” feels as close as I’m gonna get to a 30 second sound byte. If that’s you: Jordan@pacecapital.com

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33 Questions We Asked Ourselves Before Starting Pace Capital

Posted on July 12, 2019. Filed under: Uncategorized |

The first 10 months of Pace Capital we didn’t pitch a single LP for investment. The effort was entirely inward as we attempted to assemble a partnership and lay sound foundation. A mantra that originated during that time and persists today is, “Don’t optimize for outcomes, optimize for alignment.” Health willing, forming Pace at this stage in our careers is a 30+ year commitment. For such a long range decision, it was essential that we get to a more granular understanding of each other, our fundamental values, our communication plane, our relative investment frameworks, what we wanted to build, and perhaps most importantly, what we valued in future partners. Because the cost of a false positive in partnership is so high, we didn’t want to form the partnership via probabilistic decision making, but rather we committed to setting the bar at certainty. With a goal of getting to 4-5 perfectly equal GPs at Pace, we saw real advantages to beginning in a formation that most closely resembled our steady state (i.e. a team of 3 or even 4), so we explored those configurations very actively. A LOT of time was spent in different combinations and permutations. It’s a totally non-linear path to conviction around partnership (venture or otherwise). At its most basic level, there is no substitute for time spent, and getting a requisite number of reps in together is simply a requirement. But not all time spent is equal. We found tremendous value in unstructured group meals and coffees, etc., but also went through a series of much more structured exercises in order to accelerate our understanding of how any combination of GPs would impact the ecology of the firm as a whole. One tool that was born from that process of particle collision was a structured set of discussion topics. After some number of more informal discussions, we’d all get in a room together, often over multiple sessions, and each of us would speak to every point on this outline. It was designed to surface conversation around topics that might be difficult or not likely to occur organically, and the only goal was to surface alignment or misalignment within that group. After hundreds of conversations with potential partners, and thousands of hours spent, we learned that the best thing we could do for the future of the firm was to stand it up. So 5 months ago, Chris and I decided to begin our fundraise for Pace Capital as the first 2 customers of a platform that will decidedly come to service additional GPs over time. We don’t have any attachment as to when that might happen, but it’s a priority for us. Recently, a number of people have asked how we conducted those early conversations, so I thought I’d share the discussion topics. Below is our Structured Discussion Topic Outline. Hopefully others going through something similar might find it helpful 🙂

GP structured discussion topics

1) Work style

  • how do you spend time and decide where to spend time
  • where on spectrum of collaborative vs independent?

2) Team

  • What do you want and need in a partner(s)?
  • What can’t you tolerate? Pet peeves?
  • How big a group do you want to be a part of?
  • What does a team look like in year 1, fund 1, fund 2, etc. How would you staff?

3) Budget

  • where do you spend the money?
  • What’s worth investing in? (office, admin, research, contractors, software development, platform, press, events/programming

4) Economics

  • beyond an equal partnership, how do you think about sharing carry with staff
  • what kind of salary will make you happy/comfortable?
  • what are your economic goals over what time frame?

5) Superpowers and strengths

  • what are yours, and how can we accentuate and build around them?
  • what are our strengths as a team?

6) Brand

  • what brand do you want to build?
  • How do you want to be understood by founders, other firms, lps, etc?
  • What channels do you like to communicate through to build and reenforce a brand?
  • What type of behavior is decidely on brand vs off brand in this context

7) Absolutes

  • what will you never do and never tolerate from anyone on your team
  • what will you always do and demand from everyone on your team

8) People

  • who are your closest thought partners and collaborators and why?
  • mentors?
  • who doesn’t like you and why? who would you consider adversaries?

9) Ethics and Behavior

  • Have you ever had any issues in the realm of sexual harassment, inappropriate work behavior, legal issues, or has anyone ever challenged or questioned your integrity in a way that might come into focus in the future?
  • What if any policies or infrastructure would you want to create to ensure a healthy and ethical work environment?

10) Fund size / structure / strategy

  • What stages and shape of assets do you think it’s important to be setup for in the early days and the end state?
  • Multistage vs Early Stage vs Growth vs Crypto
  • Generalist vs Thesis Driven vs Vertically focussed and how does this change from fund 1 to say fund 4 or 5 if at all?
  • What size fund do you feel most comfortable managing in fund 1, 2, 3, 4. What does this arc look like. AUM goals if any and why?

11) Decision making

  • Consensus vs Single sponsor or something in between and why?
  • Ideal process of a deal from investment thesis through firm decision?

12) Values

  • What are the values that you want to define your firm?
  • Things the firm and everyone in it will live by and stand for?

13) Concerns / worries

  • what do you think is going to be hard both initially and down the line?
  • Where do you think you are weak and where do you think we are weak as a team?

14) First 365 days

  • what are the most important things for us to do?
  • is it make great investments? engage the right supporters?
  • if we do x, y, and z what will be a great first year in business?

15) Motivations

  • why are you doing this vs joining another firm vs some other career option?
  • what gets you out of bed each morning?
  • is winning important to you?
  • what role does money play in your ambitions?
  • how do you measure the impact of your work?
  • Who’s opinions of you matter and why?

16) What’s the ideal relationship between a firm and it’s limited partners?
17) What’s the relationship you want founders to feel to you personally and your firm?
18) How do you win a deal? along what axis?
19) What is the balance between crypto narrative and the rest of the startup and venture world and how should it be reflected in our strategy?

  • is this a moment in time vs the new reality?
  • What is the venture landscape going to look like in 5 years. more like today or more like 3 years ago, or nothing like either?
  • how does crypto strategy differ from overall early stage firm strategy. Seed vs A mentality, support, investment cadence, size and concentration, etc.

20) Structure

  • Do you think we need to innovate structurally to reflect post crypto world or any other market/technology dynamics that might call for structural innovation?
  • Ideas on how if yes?
  • How do you feel about registering with the SEC?
  • Are these decisions that need to be made now vs later?
  • tradeoffs between enabling functions of structural changes vs challenge/ease of raising capital and large amounts of capital?

21) LP relationships

  • who are your strongest?
  • who would you most value and why?
  • Do you have strong preferences around sources of capital: endowments vs. pension funds vs. hedge funds vs rich people vs family offices vs china etc.

22) Geography

  • Is it 100% requirement to all be in the same place/office?
    • for how long?
  • What if any remote strategy would we run to cover other coast?
    • scouts/venture partners/college programs, etc.
  • Life updates, spousal considerations, etc.

23) Pace and portfolio construction

  • how many deals per year?
  • how many companies in a fund?
  • ownership minimums or no?
  • Home run swings vs. batting average?
  • When do you pay up and when do you stay disciplined on valuation?

24) What’s your process for learning?

  • are you a certain type of learner? (audio/visual/textual/collaborative/independant?)

25) Roles and Responsibilities

  • What do you want responsibility over and what do you actively not want to own?
  • What responsibilities do you think should be shared?
  • (marketing & brand building, public relations, programming, LP management, team management, support, admin & ops, finance, reporting and communication, recruiting, etc.)

26) Without referencing what other people are doing, what do you want to create?
27) What is the relationship we have with the entrepreneurs we work with?

  • Spectrum of investor-friendly to entrepreneur-friendly
  • What are examples of conduct that you use as theses / antitheses?

28) Life timeline

  • What major life events do you envision over the next 10 years?
  • How do you imagine your frame of mind evolving over the next 10 years?

29) Personality type

  • Enneagram / Myers-Briggs?
  • What kinds of founder personalities do you find yourself most drawn towards?
  • What kinds of founder personalities do you resonant most well with?

30) Investment methodology

  • overall what’s your process beginning to end?
  • collective portfolio review: let’s look at everyone’s deals historically and talk through them
  • dive into how you get to investment decisions, thinking behind them, etc
  • what turned out to be right and wrong and why?

31) how does rising early stage round sizes and large fund dynamics at multistage firms impact our strategy, fund size, etc?
32) Roughly how much do you envision allocating or reserving for follow-on investments?
33) Are there markets you are morally opposed to investing in (e.g. tobacco, guns)?

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Pace Capital

Posted on June 27, 2019. Filed under: Uncategorized |

Today we are stepping out a bit with a new venture capital firm called Pace Capital. We closed our first fund, Pace I, which is a $150 Million vehicle focused on Series A investments. As we were raising the money, investors would ask us, “What’s the brand? How are you going to position the firm?” Our answer, which we deeply believe, is that a venture firm’s brand is the aggregate of the community it builds. Everything else is just hype. Right now our community is small: two GPs (Chris Paik and I) and about a dozen institutional LPs. But so much of what Pace will become is dependent on our future partners, be they the founders we back or the GPs and staff we assemble. To define Pace today would be premature. We have a clear idea of what we want to be, and we’ve laid the groundwork and foundation for that to occur, but ultimately it’s Pace founders who will come to speak for us and define us. They’ll let you know if we are their most valued investor. They’ll let you know the degree of our integrity, whether we help them consistently make good decisions, and if they like spending time with us and each other. They’ll show you what a Pace founder is and what a Pace company is, and you’ll see that Pace is a collection of generation defining entrepreneurs and investors. Until then, we’d love to lead your Series A: jordan@pacecapital.com and chris@pacecapital.com.

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    I’m a NYC based investor and entrepreneur. I've started a few companies and a venture capital firm. You can email me at Jordan.Cooper@gmail.com (p.s. i don’t use spell check…deal with it)

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