The New Funding Landscape

This post is by from Paul Graham: Essays

Externalities: Calculating the Hidden Costs of Products

Podcast: Apple · Spotify · Overcast · Download

Externalities let you account for the true cost of products by including hidden costs like environmental damage.

Nivi: What’s a mispriced externality? You mentioned it on a previous episode.

Naval: An externality is where there’s an additional cost imposed by whatever product is being produced or consumed, that’s not accounted for in the price of the product. This can happen for many reasons. Sometimes you can fix it by putting the cost back into the price.

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Play Long-term Games With Long-term People

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  • Pick an industry where you can play long-term games with long-term people. Long-term players make each other rich. Short-term players make themselves rich.
  • All returns in life come from compound interest over many turns of long-term games—and they usually come at the end.
  • People do right by each other when they know they’ll be around for the next turn of the game. And friction goes down, so you can do bigger and bigger things together.


Play long-term games with long-term people

Nivi: Talk a little bit about what industries you should think about working in. What kind of job you should have? And who you might want to work with? So, you said, “One should pick an industry where you can play long-term games with long-term people.” Why?

Naval: Yeah, this is an insight into what makes Silicon Valley Continue reading “Play Long-term Games With Long-term People”

How Can Startups Scale Up?

The above is a great discussion. Michael Alter and Jai Shekhawat scaled companies and sold them. Amanda Lannert is CEO of Jellyvision, and is scaling. Jellyvision is consistently touted as one of the best companies to work at in Chicago. They all know the chapters and verses of the journey from two people with an idea to scaling and selling the company to a major acquirer. They have accumulated bumps and bruises along the way, but survived.

You can do it too!

Chicago Booth Review has some great research on their site. Hal Weitzman has done a very good job with it since starting at Chicago Booth awhile ago. It really causes you to think about things differently. I read it all the time.

Finding Purpose in the Pursuit of Profits

What is a Company’s purpose? To be profitable, and self sustaining, while providing a product or service.

But can it make a difference, not just make money?

The answer is yes, and this has been the key question in my mind for the past few years. Both personally and professionally, I’ve gone through a process where I’ve evaluated how I work and what I work on, and how I might be able to make a difference within my sphere of influence.

This isn’t a navel-gazing or self promotion post, so I’m not listing the things I’ve done or am doing, but rather posting this in case you are thinking the same thing. Maybe my process can help with your thinking. Or maybe you’re way ahead of me on this, and you write back with some tips for me. Both would be super.

See, I was deeply unhappy with work. I


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Fixing things and building people – why we invested in Fixer

We recently announced our investment in Fixer, led by Founder Collective and including Chicago’s Impact Engine. Fixer is a service that fixes anything in your home reliably, on-time and at a fair price – founded by a contingent of Grubhub’s early employees, including Grubhub co-founder and long-time exec, Mike Evans. Fixer is also our first … Continue reading Fixing things and building people – why we invested in Fixer

Metrics: A double edged sword

Let me start by saying that I’m a massive believer in the power of metrics. There’s an old adage that if you don’t measure something it doesn’t happen and I think there’s a tonne of truth in that. As a result we advise our companies to build KPI trees so employees in each department know what to do and there can be confidence that if everyone delivers the company will hit its overall growth and profitability targets.

However, it’s also true that metrics are not a panacea, with difficulties typically arising when a focus on metrics eclipses the big picture. This happens for two related reasons:

  • Bad implementation
  • Over focus on metrics at the expense of meaning, culture and innovation

Bad implementation is a surprisingly easy trap to fall into. In startups things move fast, and once you get beyond the high level metrics like sales it is often difficult

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Uncertainty Wednesday: The Problem with P-Values (Incentives)

Last Uncertainty Wednesday, I introduced the concept of p-values. We looked at the example of a null hypothesis (explanation) that a coin is fair, observing heads (H) or tails (T) six times in a row and rejecting that the coin is fair because the probability of that happening with a fair coin is only 0.03125 which is less than 0.05 (a commonly used cutoff). I ended the post by asking readers to consider the following scenario:

You are a researcher who gets paid only if you reject the explanation of equal probability with a p-value cutoff of 0.05. How much work do you have to do to come up with a sequence of observations that gets you the desired result?

As a naive first reaction we might be tempted to say that this looks like a lot of work. After all, if there is only a 0.


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Grey Hair In the C-Suite: Experience, Age, And IPOs In Biotech

Biotech venture investors often prefer to back executives and entrepreneurs with a bit of grey hair. Seasoned industry veterans that possess leadership charisma along with years of experience, and the oft-accompanying learned judgement, are highly sought-after in biopharma’s seemingly endless war for talent.

Earlier this month, I tweeted about how talent was the biggest constraint in biotech. I highlighted that the number of VC-backed startups in biotech remained constrained (relatively flat for years) despite huge increases in aggregate funding flows, and that this was caused by talent bottlenecks rather than limits on ideas or capital. The pool of executives/entrepreneurs with both demonstrated leadership skills and bona fide R&D/BD expertise is very limited.

This observation unleashed a storm on Twitter: I was apparently exhibiting rampant age-ism and ignoring the return-generating exuberance of youth; it was evidence that a biotech VC cartel actively keeps young people out; hedge funds apparently try to

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Ledger and the Fundamental Need for a Security Infrastructure in Crypto

  2017 was an extraordinary and crazy year in the world of cryptocurrencies. Prices skyrocketed (Bitcoin: +1,400%; Litecoin: +5,400%, Ethereum: +8,700%; Ripple +35,000%).  ICOs raised over $3 billion.  Crypto hedge funds emerged all over the map and a handful of blockchain startups reached unicorn-level valuations. Almost inevitably, the price of individual cryptocurrencies will experience substantial … Continue reading Ledger and the Fundamental Need for a Security Infrastructure in Crypto

How to Fire an Employee the Right Way

The beginning of the year is the traditional time for annual performance reviews at most startups (if you don’t do them, check out Homebrew’s guide to Performance Management at Startups). And sometimes, the outcome of that review process is the decision to fire someone who hasn’t been performing or doesn’t work well with others on your team. While there’s no shortage of advice on hiring at startups, including my own, there doesn’t seem to be as much attention paid to how to fire someone correctly. Doing this well is critical because you’re dealing with a human being, someone who is likely to experience pain and disappointment when fired. And handling firing people well is also important for the remaining team’s morale and sentiments about the company. Here are some tips for making an already difficult conversation a bit more tolerable.

Own it: Sure the person you’re firing isn’t Continue reading “How to Fire an Employee the Right Way”

Before the Startup

Why I’m long the US economy (and millennials will buy cars and houses)

I’ve spent the last year scratching my head over the continued (and rapid) stock market rise amidst government uncertainty at home, geopolitical threats abroad and an increasing and ominous distance from our last recession. Large tax cuts for corporations certainly explain the recent run-up, but what of a near doubling over the last five years … Continue reading Why I’m long the US economy (and millennials will buy cars and houses)

An investor’s view of AI in 2018

GUEST: Artificial Intelligence has become a buzzword for investors of late, many of whom recognize its enormous potential to become the most game-changing technology since the industrial revolution. Indeed, the projected impact of AI is likely to be greater than all prior tech trends combined, and savvy investors would be wise not to miss out. From…Read More

First Round Review’s 6 Must Reads to Run Fast, Efficient Meetings

We’ve featured advice from some pretty smart, successful people about how to run better meetings that don’t sap energy or waste time. Here’s everything they’ve shared.

Continue reading at First Round Review »

How Office Politics Corrupt the Search for High-Potential Employees


Garry Gay/Getty Images

Few topics have captivated talent management discussions more intensely than potential. The obsession with predicting who may be a future star or the next top leader has influenced academic research and human resources practices alike. But how good are we at evaluating human potential? The answer is, it’s mixed. On the one hand, science has given us robust tools and powerful theories to quantify the key indicators of future career success, job performance, and leadership effectiveness. On the other hand, in the real world of work, organizational practices lag behind, with 40% of designated “HiPos” — high-potential employees — not doing well in the future and at least one in two leaders disappointing, derailing, or failing to drive high levels of engagement and team performance.

The main reason underlying this bleak state of affairs is that HiPo nominations are contaminated by organizational politics. To be more precise,

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NationBuilder’s New CEO: Lea Endres

Mind the Clap

Mind the Clap

Marathon #25: Run Crazy Horse in South Dakota

I finished marathon #25 today and checked South Dakota off the list. I ran it with ten friends (nine of us did the marathon, two did the half) who were all part of my Chorus team that I started in June.

While this was one of the most enjoyable marathon weekends that I’ve had, it was a rough marathon for me. I finished it in a personal worst of 5:58:26 (gun time right at 6:00:00 – the clock said 5:59:59, but the website says 6:00:00.)

Things went wrong almost from the beginning. The weather was in the low 30s so I couldn’t decide whether to wear pants or just run in shorts. I was hot in the first mile and my stomach was rumbling. At mile three, we looped back around to the start so I went into the Crazy Horse Visitor Center, took my pants off, and took

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The Unknown Path to a Decentralized Future

Today’s post is over at on “The Unknown Path to a Decentralized Future.” Here is the opening:

Some companies with currently centralized services have been criticized for issuing tokens and raising money in ICOs. There are even allegations that venture investors are pushing companies to do so as a ploy for liquidity. I suspect that some situations like that do actually exist, but I know from first hand conversations that many of the entrepreneurs pursuing this route are doing so out of a genuine conviction that it is the right path to a decentralized future.