I read this post called “How to get a job in Venture Capital” and I wanted to share it here. Pedro Sorrentino is a super nice guy and is promoting a culture of Venture Capital that I truly believe in.
Most of the content on this blog was written pre-covid and before the protests associated with the extrajudicial killing of George Floyd. I think it’s important to simply say the words Black Lives Matter. And to also acknowledge that we as a firm strive to support a more just and equitable future including the support of women and under represented minorities in startup entrepreneurship and venture capital. We also categorically denounce and abhor the kinds of sexual misconduct that has become evident as the result of the MeToo movement.
This has always been true of our fund and there hasn’t been any particular incident that precipitated this writing. It’s just become clear that unless people are explicitly and categorically announcing their intentions about equal treatment publicly, they may be inadvertently contributing to the broader culture of inequality and unfair treatment.
As with any human endeavor, we may produce errors in our judgement or conduct. But we maintain a strong intention to continue to provide leadership with regards to issues related to equality.
To clarify, Venture Capital is indeed a capitalist endeavor, and it is our professional duty to pick winners. As professional fund managers it doesn’t matter who we want to win, it only matters who actually wins. And we are aware of the ways in which society stacks the decks against the underrepresented minorities in startup entrepreneurship and venture capital. But on the other hand we are also aware of how overcoming such obstacles can make such entrepreneurs stronger and more resilient. We have to maintain our sensitivity and our willingness to learn and our respect for entrepreneurs from many different backgrounds.
This is an evolving conversation and by no means concluded. But we wanted to make a public statement about what we stand for because we strive to keep pace with advancements in our society and we don’t want to miss the opportunity to invest in the best teams in the world.
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The featured image here is me crossing the finish line of the 2008 San Francisco Marathon.
In the Japanese language and culture, there is a unique word, gambaru which I translate to mean “bravely producing effort”. This word captures something deeply essential in Japanese culture, and is a deep value held in Japanese society.
The variant I placed in the title is Gambarō or “let’s (together) bravely produce effort”, which is where the magic starts to happen. When we do this together, we can each inspire one another to more greatness.
There is a range of human experiences between discomfort and pain. For, me, the idea of pain is the body telling you that it’s being harmed. When you see high performing athletes, they will be exploring this range of experience. They need to go far beyond discomfort in order to compete, but they should not exceed their physical capacity or they will become injured.
The ability to spend time in that range between discomfort and pain is where all growth comes from, and all competitive advantage. This is the reason why “Gambaru” becomes meaningful in life, because when we strive to go beyond, we advance human understanding and we inspire others to do the same.
How do we achieve this? I think of course courage is the foremost characteristic that enables us to do this. But we need more than just courage. We also need discernment. If you simply do it from courage, it’s very likely that you will just use brute force to exceed all thresholds and begin harming yourself and possibly harming others. But perhaps the most important thing you will need is to be de-traumatized.
Why is that? Because the single greatest thing that clouds are judgement around whether we are in discomfort or in pain is trauma. Trauma will make discomfort seem like pain and can even invade comfort and make comfort seem like pain. If you push yourself and your organization too hard, you will cause more trauma which will in turn be harder and harder to recover from.
I’ve been contemplating the relationship between “Gambaru” culture and that of “Kaizen” which essentially means “continuous improvement”.
The relationship is that it seems to me that without the courage to experience discomfort, we will not get the opportunity to grow and improve exponentially.
At gumi Cryptos Capital, we value and aspire to bravely produce effort together. We associate the value in doing so to go beyond just economic benefits but in the advancement of human culture and technology.
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Warren Buffett is quoted as having said “Be bold when others are fearful and be fearful when others are bold.” We educate ourselves by reading and learning from excellent investors and entrepreneurs–here is our reading list.
This quote summarizes one important dimension across which a person or a firm can maintain a contrarian view and generate outsized returns.
A great source of inspiration for me in working on the gumi Cryptos Capital fund is my Partner, Hironao, Kunimitsu who is CEO of gumi Inc, but also General Partner of gumi Cryptos Capital. He is able to provide bold leadership in the mobile gaming business which is a notoriously fickle and challenging industry, and has time and again generated successful game hits from gumi.
Through his actions it becomes clear the source of his success, which is that he knows when to be patient, and when to be impatient.
In reflecting on the blog’s title and theme, I would like to assert that this characteristic of Mr. Kunimitsu is a deep part of the philosophy that gumi Cryptos Capital aspires to.
We benefit from a perspective of history, which is that what the dotcom crash taught us is that the survivors of the downturn became the leading companies for decades, and that building during downturns results in deeper investment into better products and infrastructure that leads to higher market returns–for the survivors.
Although we expect ourselves to be bold, we also expect our Entrepreneurs to be realistic. We want portfolio companies to value runway, to raise sufficient capital and to pursue runway-extending revenue strategies.
gumi Cryptos Capital has written about 18 checks between $250k to $1M so far in the past 18 months, and we continue to deploy capital from our $30M fund in our measured pace without skipping a beat. We expect to be considerably diversified in the blockchain sector across a great many areas (as to which areas, please read our blog post on our thesis).
We are investors who have patience. I won’t say that we “are patient” because we take pride in our ability to understand when we should be patient and when we should be impatient. We understand the limits of our knowledge and perspective, but we assert what we believe and want all of our entrepreneurs and partners to push back with their honest and frank views.
If you are an early stage entrepreneur who fits our funding requirements please reach out to us by applying for funding from gumi Cryptos Capital.
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I know people have been talking about crypto spring and enjoying the warm weather and rise in the price of Bitcoin. None of this blog post should be considered investment advice.
There is even talk of a “V” shaped recovery, or sharp rebound.
I think we have seen a recent lift, as a superwhale blasted through resistance levels and in fact liquidated 500M dollars worth of short positions. Those positions are likely blown out never to return.
Good thing about a wipeout like that is that we had an overhang of short sellers who will probably never return to this space… these were the “Bitcoin Zero” crowd who were convinced they could short Bitcoin all the way to zero.
Having cleared away the ghosts of “Bitcoin zero” we are still not in smooth sailing territory. We are still being lifted and lowered by speculation and by pump and dump. We wont see sustainable recovery for some time, and we will continue to see resistance levels as people previously burned try to get out at various price levels.
There are certainly major potential upside “dark horses” such as increased volume from areas like Brazil, Argentina, Venezuela and other countries where the local currencies are experiencing hyperinflation.
But the long awaited institutional adoption is slow in coming, there’s no sizable liquidity in “Security Token” and major crypto companies like CoinBase and Kraken have lost their heads of institutional product, suggesting that their businesses in those areas are not growing like gangbusters.
One of the hopes on the horizon for mass consumer adoption is the appearance of crypto payment associated messaging products such as Facebook, Telegram, Kik Messenger, Line, Kakao, Signal and others, all who have been written about as having significant blockchain projects in the works. When the messengers become wallet providers, significant volumes can be attained and new platforms will be formed.
Another promising area that may be combined with messengers (and wallets and exchanges) will be gaming (including but not limited to gambling). We will see the convergence of messengers which will bring users, platforms which will bring cryptographic assets and wallets and games which will bring functioning in-game economics. At the moment we principally have currencies that are looking for economies, but no real robust economies. In gaming we have lots of in-game economies but not enough currency. We will see the rise of game platforms that combine cryptographic assets with messengers within 2019 and many more larger ones in 2020.
Until we see some fundamental growth in volume, whether driven by nations, institutional adoption or by messengers and game platforms, we will continue to be in a purely speculative pattern, and we may see what I call the “Elmer Fudd” W shaped recovery which looks like WWWWWWWWWW (Wabbit).
The “V” shaped recovery I call the “Crypto Winter” thesis, because after winter there’s spring.
The “W” shaped recovery I call the “Nuclear Winter” theory. I think we may have many W shapes in a row because even with the “Ghost” of Bitcoin Zero banished, we still have ghosts like for example the ghost of Tether. We are still weeding through all of the scam ICOs.
One vector that may contribute to the rise of fundamental value in the cryptographic asset space is the rise of the IEO or Initial Exchange Offering. While at first I was skeptical about such offerings, speaking with the CEO of a major exchange and the CEO of a company that successfully completed an IEO actually got me to thinking that this might be a positive thing. Unlike ICO where there was virtually no diligence and no discernment, the diligence is now being outsourced to Exchanges. While historically exchanges have no track record doing diligence on companies, in the long run, exchanges that launch lots of shitcoins will impoverish their user base, which will eventually run out of money or realize they are being scammed over and over. Exchanges that exclusively list very good companies that add value to the economy will enrich their user base and eventually will increase their assets under management.
The last shape of recovery which we can theorize is what I call the “L shaped recovery” which is the thesis that it stays flat and simply doesn’t ever recover, at least for a long time. This scenario I call “Ice Age”, where winter goes on and on for years until the entire planetary biosphere is changed and the fate of species on earth is forever altered.
At the moment, I am favoring the W shaped thesis, with a possible multiple W time until we see the rise of mass adoption through messengers, gaming and the like.
If you were to say USD you would be partially correct. The deeper view is that Venture Capital is an exchange between relatively stable fiat currencies into monetary instruments that can return significant multiples on invested capital, most often equity in startups.
What is the basis for that exchange? Simply put it’s a transfer of durable conviction from the entrepreneur to the investor.
What are things the investor needs to be convinced of?
This team and leader can lead this organization through significant growth including fundraising subsequent rounds, sales and channel growth, operational scaling, recruiting and investor exit. All of those processes involve the entrepreneur being a person of high conviction themselves.
The leader will maintain loyalty and integrity in how they deal with any ambiguities that may arise in the future.
The product has or will have significant traction in a significant and fast-growing market. That this traction is based on a competitively differentiated product with significant entry barriers.
Early stage deals may not have traction or product/market fit. In such cases we need conviction in the team’s ability to deliver product market fit. This may require significant domain expertise, a 10x better product and/or sufficient runway. Many companies are lost in the chasm between early stage financing and product/market fit. Thanks to Paul Walsh who pointed this out.
There is a network or data effect at scale
The team will be able to deliver product on schedule.
I refer to what I am looking for as durable conviction because I find as a technology and human optimist, I get excited when I meet entrepreneurs who describe constructive solutions for real problems in society and industry. But what I mean by “durable conviction” is that it’s not enough to get me excited. Excitement gets weaker when confronted with the day to day challenges of execution.
I don’t only want the entrepreneur to have durable conviction for their own project–I want to see the ability of that entrepreneur to transfer that conviction durably to me and my fund management team. Paul Walsh also pointed out that the ability to “tell the story” is the ability to transfer conviction. I tend to agree.
In fact, the ability to be accountable to numbers and to explain numbers and tell stories about those numbers is the heart of building trust, so as such it is the key to being a good CEO.
The sure hallmark of durable conviction is not how excited I am during the meeting, it’s how convinced I am the next day after sleeping on it.
If you want financing from gumi Cryptos, you should consider both how durable your own conviction is, and how best to communicate and transfer that conviction to others.
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Here are the books I would recommend that would help you understand how we think.
Required Reading about Early Stage Investment
This book explains the power law distribution of venture returns which is powerfully instructive about how VCs behave and why, and what job they do on behalf of their partnerships. It describes phenomena like contrarianism, “secrets” and the last mover advantage. A distinct and innovative set of thought processes from an original person.
Another classic, Jason Calcanis is instructive about the math associated with early stage investment and the kinds of questions you will face when raising money from this class of investor. Very seminal treatise on how to navigate this complex asset class, early stage venture startup equity and convertibles.
Another all time classic, this book is essential for understanding the mechanics of technology adoption and provides a foundational set of metaphors that technology entrepreneurs must understand in order to navigate most efficiently across this divide.
Required Reading about Blockchain
This is on the required reading list if you want to do business with gumi Cryptos. For anyone interested in the emergence of a new fundamental internet protocol and the mindset of its creator in his or her own words. As an industry, the so-called “blockchain industry” has been bad at reasoning based on fundamentals, and this book will take you through a tour-de-force whirlwind tour through the considerations that went into one of the greatest inventions of this century.
Required Reading about Entrepreneurship
Another all-time classic, Guy Kawasaki lays it all out there. In a prescient way he lays out the groundwork for the lean startup manifesto with the quotable quote “Eat like a bird, Shit like an Elephant”.
The CEO Topic: Brilliant and entertaining read, instructive about the concept of “Wartime” and “Peacetime” CEOs and a great way to understand what experiences shaped a great venture capitalist.
The CEO topic, but mostly instructive on company culture and brand, but also on execution. Reads like an adventure novel, so fun and worthwhile.
The Sales Topic: One of the great classics that ushered in the period of modern sales automation.
The Product Topic: This book is instructive on the product market fit process and how emotionally and intellectually challenging it is. Not for the faint of heart and for people who have been there and continue to choose to go there. The true entrepreneurs.
This one is yet another classic, Brad Feld presents a very entrepreneur friendly way of looking at deal structuring and legal terms. Required reading.
I like Ori Brafman and this is a good book that will help business people reason about the concept of “leaderless” organizations and it provides useful case studies of such organizations like “Alcoholics Anonymous” which is essentially based on an “open source protocol” approach, simply publishing openly the values and allowing decentralized organizations to take advantage of these intellectual advances.
An important and in some ways cautionary tale of a man who is inseparable from the culture of Silicon Valley. Worth reading.
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I am a General Partner with gumi Cryptos. We are one of few providers of early stage crypto funding for startups (we fund in USD but the projects we fund are crypto related), and we would like to help entrepreneurs understand the process and how to work with gumi Cryptos to get funding for your startup.
Therefore we want to provide a step-by-step overview of our process so we can set expectations and do business according to our values.
gumi Cryptos is rapidly becoming a standout funding source for early stage crypto projects. Many of the bigger funds have retreated to later stages and plan to write bigger checks. We tend to write checks of $250,000 to $1,000,000 USD.
Because of the large flow of deals we are experiencing, please be patient with us and please give us feedback on the process of working with us. Thank you.
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This blog post is supposed to be a guide on how do your job as a Venture Capitalist and yet not to act like an entitled jackass.
The problem is, I am not sure how to do that.
After 30 years of entrepreneurship, I have seen many VCs act like Ivy League wank-shifter*. I don’t wake up in the morning and see an asshat looking at me in the bathroom mirror. However, I do see how doing the job makes you look and act like an A-class F-Tard.
gumi Cryptos is my first time as a General Partner with a Venture Capital fund. It is also my induction into VC twatwaffledom.
I’m sincerely trying. But I need your help to avoid becoming a complete tool.
I won’t hold it against anyone for calling me in (or even call me out) and feel free to throw the words from this blog post back in my face. If I agree that the behavior you point out is troubling, I will apologize to anyone affected and make an effort to do better.
Things I’ve seen myself do already:
Parking Asshattery. Yesterday I pulled my car up in front of an entrepreneur’s office and parked my car directly across their driveway. Why did I do that? It was San Francisco and I wanted to avoid being late to the meeting. Just the kind of good intentions that the road to hell is paved with.
“California no”. Instead of simply saying “no” to an opportunity, just saying vague things and letting the conversation trail off.
Short email replies. When faced with the passion and lifes’ mission of an entrepreneur, I have sent emails essentially saying something like “thank you for showing us this opportunity, after careful study I do not feel that it is a good fit for our fund at this time.”
Not “getting it”. Of course I am going to not get it. Travis Kalanick of Uber and Joe and Brian from AirBnB had the hardest time getting anyone to invest in their concept of “strangers will pay to jump into your car” and “people will allow strangers to stay at their houses for money”. Most huge companies have a contrarian thesis and most VCs including myself have their own views of what the future will look like.
“Ghosting”. Not getting back to entrepreneurs for extended amounts of time. Or ever.
Looking at your phone or laptop during a pitch meeting. That’s what those douchey bound half sized notebooks are for. Tip of the nib to Jason Calcanis for pointing this out, and to Pantera for supplying me with many such notebooks.
I’m sure the list goes on.
Without excusing it, I can see how easy it is to become a walking cliche simply by valuing doing a good job as a VC and not trying to do a better job being a human being.
VCs face a lot of investing deadlines in parallel, and get a deluge of thousands of requests for financing. They also have to manage high pressure situations with existing portfolio CEOs and their own partnerships. It doesn’t help that anyone in a position of power or authority is a target for people’s projections and unresolved parental issues.
But it doesn’t excuse bro-baggery.
I’m happy to be held accountable to this, so if you’re read this far, feel free to use this to your advantage. If you can share this or indirectly point other VCs to this, feel free to do that also.
*I use the term “Ivy League Wank Shifter” to imply both that many VCs went to ivy league schools (Yale in my case–wanker points for mentioning it here) but also in the spirit of “World Class Wank Shifter” as if there were a top grade A5 level of wank shifting that one can get pedigreed for.
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We have a rather large and complex thesis, but broadly speaking we believe that blockchain technologies enable a transformation of the Internet, the Economy and Society. We believe that we are in the early days of this transformation. Imagine that we are in the year 1989 before the Hypertext Transfer Protocol (http) was introduced by Tim Berners-Lee. So we have TCP/IP and FTP and some of the extremely basic protocols that define the Internet.
We believe that the Internet of Value is being created, and that we are in the early part of this.
Because we believe we are early, we are focusing our investments on early segments such as infrastructure platforms, novel consensus algorithms, developer platforms, middleware protocols, compute resource sharing, programming models and frameworks, ecosystems components such as exchanges and wallets. These are all relatively low level components and horizontal (industry neutral). We believe that primitive applications in certain vertical industries, namely financial services and gaming will also be feasible.
As far as investing outside of our core areas, I would hesitate to encourage entrepreneurs to apply. We do believe that VCs are “pattern matchers” and we think successful entrepreneurs are “pattern breakers”. So because of this we are willing to entertain ideas outside of our core thesis. But in such cases it would have to be an exceptional entrepreneur.
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