Torstensson's Notes - Issue #9
It is simple but not easy
Doing venture investing well
Be so good they cannot ignore you
Five good reads
1. Doing venture investing well
Doing venture investing well over long periods of time doesn’t require doing one thing well. It requires getting multiple things right.
It is about seeing what is unique and potentially world-changing in every startup and founding team, and at the same time build a portfolio where you get paid for the risks you take.
Building a startup (and hence investing in them) is risky across several dimensions: building a great product that solves an important problem, getting the product to market, recruiting a great team and not running out of money. None of those things are easy to solve, so they all create real risks.
A startup raising venture capital rarely gets more than 24 months of cash. Which means the company needs to solve enough problems in that time to either be profitable or be able to raise more capital, otherwise it will run out of money and die.
When investing in startups, thinking about how different risks can be addressed and eliminated (even if that is mainly done by the founders and the team) becomes as important as seeing the future.
2. Be so good they can’t ignore you
Be so good they can’t ignore you – Steve Martin
In the discussion about the challenges of building startups in Europe (see: EU Inc, eu/acc, Not Optional, higher taxes in the UK and the Norwegian exit tax on unrealized capital gains etc), I believe that for 99 % of startups it is not national tax laws or European business regulation that decide if that startup becomes a global winner.
It is about assembling great teams than can build and sell world-class products that solve important problems for customers.
That is very difficult to do. But there are multiple great examples of such startups both in Sweden and across Europe. The conditions to build a very large technology company in Europe is significantly better today than 15-20 years ago across every dimension (with the exception of GDPR).
Founders should spend some time on tax planning and regulatory setup, but to succeed the most important thing is to be so good they can’t ignore you.
3. Five good reads
Anton Johansson: The Courage to Be Disliked. Anton is a good friend who has started to write a regular Substack.
Andrew Chen: Revenge of the GPT Wrappers: Defensibility in a world of commoditized AI models.
@dharmesh (CTO/co-founder Hubspot): Work-Life Balance
@gregisenberg: They call it ARR, but it's more like "hey I'll try this product revenue".
TechCrunch: Tana snaps up $25M as its AI-powered knowledge graph for work racks up a 160K+ waitlist. Alliance VC has invested in Tana.