Anatomy of a (Good) Investor Update

Now that I’m an investor, I am on the receiving end of a lot of investor update emails from startups. Some are clear, consistent and excellent. Some are confusing, some are sporadic, many are bad.

As an investor, the quality of a startup’s communications post-investment is a big part of how you judge the quality of management and their execution. It makes sense, right?

But the thing is… as a startup founder, no one tells you how to communicate effectively to investors. The investor perspective is not obvious. And it’s a different skill than operating a business.

I’m still learning, but here’s the advice I find myself giving over and over again to my portfolio CEOs:

Investor updates should be quick & easy for you to write, and easy for investors to read, understand and share. Here’s what I like too see…

– 1-3 bullets

Key Metrics
– 1-4 bullets, including Monthly Revenue & MoM Growth

Management Discussion & Strategic Musings
– 1-3 paragraphs
– Be very candid here

– 1-3 bullets

– 1-3 bullets

– 1-3 bullets

Company Elevator Pitch & Strategy
– this helps investors remember wtf it is you actually do, which is shockingly easy to forget when you’ve got a big portfolio. It also makes updates easy to forward to prospective investors, which––generally speaking––you want. This content does not need to change month-to-month

That’s it!

Do you have a great investor update example or format to share? Link to it in the comments.

The Challenge of Rolling Solo

Being a solo founder is hard.

It’s almost trite to say, but I’m in it and it’s real.

I’m not sure if it’s just the fact that I’m a solo founder or the solo person employee.

Even though I’ve started 3 companies before and had my fair share of success and failure, I’m still struggling with anxiety and fear and this damn feature that I was supposed to ship 2 weeks ago and that is still sitting in my task list, 20% done.

Humans are social creatures, and I am human.

It’s hard being alone.

Do I need a co-founder? Or maybe just another person? These are the issues I’m wrestling with right now.

Once upon a time, I thought money would solve all this stuff. That the struggle was only for people who didn’t have money. I didn’t really believe it, but the tohught would buzz around my head, a bias––almost like racism––that I didn’t consciously acknowledge or believe to be true, but that was there in my heart.

Now I have money and I’m still in the struggle. Funny how life works.

I’m lucky though. And privileged. And stoked about what I’m doing.

But still, I was supposed to this damn feature 12 days ago and it’s still just 20% done. Something isn’t working.

Maybe I’m being too hard on myself. Maybe this is all just normal and I need to power through.  Or maybe I just need another human being to work with.

I had an intern living with me over the summer, sleeping in my garage. He was awesome and I had a blast! He was young and had a lot to learn, but he had the work ethic and mindset of a founder. Effing brilliant too. It was so much fun working with him! He felt like a younger brother. Smarter than me in some ways, less experienced in others.

Funny enough, my best work relationships feel that way: like siblings of different ages, each with our own strengths and weaknesses.

I made Mourtallah an offer for after he graduates in December. He accepted. His start date is 6 weeks away. 

But in the meantime, I’m struggling. Feeling in a rut. I hate that feeling.

I want to be going at warp speed again. I need to be going at warp speed again.

But maybe that’s not always possible when you’re human.

Does this ever happen to you? How do you deal with these slow downs in productivity?

P.S. Talking through it like this really helps. Maybe that’s step one?

Thanksgiving Letter to My Portfolio CEOs

Matt Mireles
From: Matt Mireles
Date: Fri, Nov 23rd, 2018 at 9:56 AM
Subject: Thankful
To: Founders


Hi Folks,
On this Thanksgiving holiday, I am thankful for… you.
You are my tribe.
A lot of you are the people I talk to most and have become some of my closest friends.
Most people don’t get to work with people they admire so deeply. Most people don’t get to be as real with the people they work with. Most people do not get to be part of work that is so important.
I feel very lucky and privileged to be a part of your lives, and to have you a part of mine.
And for this, I am very, very thankful.
Happy Thanksgiving to you. I hope it’s an awesome one!

Moral Courage: Not Taught at Harvard

  Harvard doesn’t teach moral courage. It can’t––at least not without breaking its model. No university can. Like anything else you might want to learn, to master moral courage, you have to practice doing it, and universities have no mechanism for this. A university can teach you to master reading or writing or even discounted cash-flow analysis. You’ll read some theory, maybe get a lecture, then be forced to do lots and lots of practice. And it’s through practice that you will develop mastery. When a university like Harvard claims to “teach” moral courage, what they really mean is that they tell students about the subject without forcing or even giving them an opportunity to practice it. Imagine if Harvard offered a lecture-only course on how to read, then claimed they actually taught reading. They would be laughed at. When Harvard Business Schools says they teach students moral courage and that, as my friend Michelle claims, that moral courage is *central* to the curriculum, it is only at this most superficial, shallow level of teaching. Traditional schools––Harvard is not alone––are unable to teach moral courage in a meaningful way. They might talk about it and expose it’s existence to them, but they don’t actually teach it to students Teaching requires practice, and schools have no good mechanism for this. They could change this. They should change this. But I’m afraid they probably see it as out-of-scope for their institution. To teach moral courage to the elite, now that would be a radical change.

How to Size a Market in 5 Minutes or Less

My basic approach to market sizing is this:

# of potential customers x average selling price = Total Addressable Market

Don’t know average selling price (aka ASP)? No problem. Then use economic value creation instead as an upper threshold for price.

Economic value creation is what it sounds like: amount of economic value that product crates for the customer vis-à-vis time savings, cost savings, new sales, productivity increases or whatever.

For example: Assuming the product actually works, Widget X should save the average customer $1,000/year due to feature A and boost revenue by $500/year through feature B. Ergot, the economic value of Widget X to a customer is $1,500/year.*

How much value you capture––ie the market value––of the value you create will depend on the business, but especially in the early days of fleshing out a startup idea, I find this to be a very useful proxy and upper threshold.

For back of the envelope calculations, I typically assume that I’ll be able to capture 1/2 of the value I create at the absolute maximum.

In my experience, customers are more willing to let you capture a higher proportion of new revenue (especially high margin revenue!) as opposed to cost savings. New revenue “feels” free whereas cost savings does not.

*If you’re really sophisticated, you might argue that value creation = incremental profit, but I find that most customers & business have a really hard time actually calculating incremental profit.

Poor. Hungry. Driven.

In hiring and investing, we are all biased. My bias? I bias toward and pattern match on PHDs:

Poor. Hungry. Driven. 

I look for people who’ve taken it on the chin in life and come back determined to win.

I look for hustlers who’ve risen beyond their station in life. 

I look for champions. 

These are my people. We all have biases in this life, and this is who I am biased towards hiring and funding. 

If that’s you, say hello. We should know each other. 

Why Generic Outsourced Assistant Services like Exec, Operator, Etc. Failed

High-frequency tasks: Better to hire an expert
High-value tasks: Better to hire an expert
What’s left: low-frequency, low-value tasks

That and anyone good churns out of the system, gets a real job.

It’s that simple. 

(Because Sam Gerstenzang asked…)

Context: In 2011, I launched Humanoid, a crowdsourced virtual assistant service. And yeah, it had all these problems. 

For more context, check out Panos Ipeirotis’ writings on The Market for Lemons.

14 Lessons Learned from Year #1 as a Startup Investor

Lessons I’ve learned investing so far:

1) FOMO is real. You have to make a conscious effort to not let it affect your thinking and maintain your own intellectual independence.

2) Investing downstream of YC at Demo day is both awesome and terrible. Awesome because the companies are amazing. Terrible because you have no time to decide and the entire dynamic encourages you to be viewed basically as a commodity.

3) If it doesn’t feel right, don’t do it. For me personally, I often have accurate gut feelings that I am not able to articulate until later. I am getting better at articulating the source of my feelings faster, but not in real time.

4) Be decisive. If I’m on the fence, just pass. Don’t string yourself or the entrepreneur along.

5) The best entrepreneurs learn really effing fast and will get better before your eyes. If something doesn’t feel right, ask yourself “is this founder learning fast?” If the answer is no, pass.

6) Have a clear investment thesis and criteria. This makes life soooo much easier for you and the entrepreneurs. It took me a while to get here, but now I have a simple pitch: I invest in outsiders doing crazy shit that, if it works, will solve an important social problem. Awesome people is #1. World changing is #2. Crazy is #3 and something I’m willing to flex on, whereas #1 and #2 are “must haves.”

7) Life is easier when you commit to saying what you actually believe, even if the message hurts. I still always try to be kind, but now that I’ve committed to being truly honest, I feel better and freer. It’s great!

8) Slow down. Have a process. This helps build deep rather than shallow conviction.

9) Investing is about feelings. How does the company make you feel in your gut? Listen to that feeling. Numbers matter, but it’s all fucking guesswork and no one really know. While there is value in fundamental analysis, there’s no value in false precision.

10) Truth > fact. Facts you can prove. But there’s a lot that is true that is not provable.

11) My best decisions come from when I listen to my gut.

12) Leave everything on the field. Act with decisiveness, passion and conviction. Hold nothing back. Regret nothing.

14) Don’t doubt yourself. Fight for what you believe, even when other people think you’re wrong or stupid. Just because you might sound stupid doesn’t mean you’re wrong.

Looking Back: Startup Investing Year #1

I wrote my first check to a startup on April 11, 2017. Since then, I’ve invested in 16 startups via my personal money and a small fund I manage backed by Social Capital. I’m having blast!

TLDR: I bet on outsiders using capitalism to solve society’s most important problems. 

Here’s what the last year & change has looked like…

Investment Pace

  • 16 investments total
  • 11 personal investments
  • 6 fund investments
  • 7 advisor positions

Thoughts: In the future, I want to increase my investment pace to ~20 per year.

Founder Diversity

  • 7 immigrant CEOs
  • 5 female CEOs, including 2 all-female founding teams
  • 3 Hispanic CEOs
  • 2 South Asian CEOs (does this count as diversity? I’m not sure.)
  • 1 African-American CEO

Thoughts: I think there’s a lot of money to be made by investing in people overlooked by the typical old rich white guy VCs, especially when I can mentor & develop the founders to the point where they can pitch & raise from anyone. While I am doing much better than the typical startup investor on the diversity front, a lot of this has been luck and personal relationships. I don’t have a repeatable process for sourcing diverse talent just yet. More work to be done here.

Investment Ideas that Excite Me

Frontier Technologies with Obvious Applications

  • Artificial Intelligence
  • Industrial robotics
  • Energy storage
  • Brain-Computer Interface

Structurally Underserved Markets

  • Women
  • Ethnic Minorities
  • Unsexy non-tech industries

Consumer Products with a Cult-Like Following

  • Direct-to-Consumer brands
  • Emerging social networks
  • Vertical marketplaces

Highly-Regulated Industries 

  • Healthcare
  • Financial Services

Thoughts: This is a work-in-progress. I didn’t start off as a thesis-driven investor, but I’ve quickly become one. I’ve steadily sharpened my focus to the companies doing things that that matter to the future of humanity AND have the potential to make craploads of money. I expect this focus to continue into the future.

Investment Stages

  • Seed: 75%
  • Pre-Seed: 25%

Thoughts: I want to flip this ratio. Ideally, I’d be investing in roughly 60% pre-seed and 40% seed stage companies. Not only is the potential for return greater when you’re investing insanely early, but it’s also more fun and less competitive. There are a ton of seed funds out there, yet raising <$500k is still pretty hard! Besides, being the first check into a company is way more meaningful and personally gratifying to me than being the 20th. I can help more, which gives me a ton of personal satisfaction.

Investment Sectors

Consumer: 40%

  • Social App: 2
  • Healthcare & biotech: 2
  • Direct-to-Consumer CPG Brand: 1
  • Marketplaces: 1
  • Financial Services: 1

Business-to-Business: 60%

  • Hardware: 5
    • Commodity Sensor + Deep Learning applied to Medicine: 2
    • Industrial Robotics: 1
    • Brain-Computer Interface: 1
    • Energy Storage: 1
  • Marketplaces: 4

Thoughts: I like this mix. If anything, I’d like to invest in more consumer products. But overall, I’m pretty happy with how this has played out.

Investment Geography

  • San Francisco Bay Area: 6
  • New York: 4
  • London: 3
  • Canada: 1
  • Atlanta: 1
  • San Diego: 1

Thoughts: Wow, I didn’t realize that so many of my investments are outside of the Bay Area! In truth, the majority of these companies were in the Bay Area when I met them, then later moved somewhere else (often back to wherever they were from). My model is to build high-touch, high-trust relationships with founders, and it’s really hard to do this without spending time together in person. Skype is decent for traditional pitch meetings, but I don’t do traditional pitch meetings, so that’s an issue. I’m sure there’s lots of great companies not near me that I’m missing, but I’m not sure how I could invest successfully in such companies, especially as I move more of my focus into the earliest, riskiest, most people-dependent stage of company. If anyone has ideas on how to build high trust relationships with people remotely, I’d love to hear from you!

Next: Lessons learned.

Matt Mireles
Are you an outsider building a company that’s solving an important social problem and/or creating a better future for humanity? Pls email me. I know what it’s like to not have a network––I was driving an ambulance for a living when I started my first company––and I’m happy to receive your pitch cold & take you seriously. 

To the Dreamers: a Thank You

Excellent Sheep

The only people for me are the mad ones, the ones who are mad to live, mad to talk, mad to be saved, desirous of everything at the same time, the ones who never yawn or say a commonplace thing, but burn, burn, burn like fabulous yellow roman candles exploding like spiders across the stars and in the middle you see the blue centerlight pop and everybody goes “Awww!” ― Jack Kerouac, On the Road

One of my favorite things about being and working with entrepreneurs all day is how empowered, how self-directed they are. Entrepreneurs, the good ones at least, pursue their dreams and no one else’s. They are leaders.

The energy, the passion rubs off on you. I love it.

I recently befriended a senior executive at large, elite tech company. She was brilliant and talented, could jump through any hoop you threw at her, had a sterling resume. Her purpose, her goal in life? To win… and then retire.

To win… at what, I asked? At the game, she said. At the competition. Whatever it was.

She had such a big brain, but such a poorly developed internal guidance system.

She had no why.

I’m so spoiled from hanging out with all these entrepreneurs that I was shocked. I know people like this exist, but rarely do I include them in my life.

Yes, I live in a bubble. It’s a luxury I afford myself. A true luxury.

But man, what a waste! To be so talented, so prepared, so wealthy and strong and still… to have no fundamental system of values, no goal, no agenda for life other than to win a competition as defined by others.

It’s good to be reminded of this from time to time. It makes me look at my life––I have the freedom to hand-pick my peers!––and be grateful. Very, very grateful.

To all who strive, who struggle, who hurt and cry for their dreams: thank you. Thank you for inspiring me, for reminding me how to live. I appreciate you always, but especially today, especially right now.