Author: Charlie O'Donnell

Grow Fast, Breakeven, or Die: How Moderate Cuts Will Kill Startups in 2023

“Extend your runway.”

That’s what every VC is telling their portfolio companies these days. The very important part they’re leaving out, however, is, “But keep growing at the same pace before the cuts.”

In other words, they’re telling companies that, in order to get next round funding, they’re somehow supposed to stay the same fast growers they were before the tech downturn, but just do that longer and get to higher aggregate revenue and performance numbers.

If you don’t realize that, just imagine you’re a VC fund with some dry powder in the second half of 2023. Some companies will have been able to achieve that feat—and those companies will be the first ones to generate real post-crash FOMO.

Everyone else—why would they bother? The one question every VC needs to be able to answer on the way to getting to a “yes” is, “Can this return a big chunk of my fund one day?”

If you grew 15% year over year, how are they ever going to imagine that happening, especially when you know there will be a handful of companies that have seemingly done the impossible with less resources?

I’m very worried about any company that has moderate growth plans for 2023 that expects to get another round of financing based on that result. To me, that has a high chance of putting off the inevitable—running out of money during a fundraising process.

It might work against all your instincts, but I can’t help but wonder if the (Read more...)

NYC Public Schools’ Move to Ban ChatGPT Exposes Adults’ Failures to Teach Healthy and Responsible Technology Usage

Prompt: “A Cartoon Teacher being crushed by the weight of society’s problems” - Stable Diffusion 2.1

This past Tuesday, New York City's Department of Education announced a ban on the popular chatbot ChatGPT from its schools' devices and networks. It’s easy to understand why. The bot can write essays instantaneously, opening up a pandora’s box of ways to cheat, right?

I asked ChatCPT, “What were the keys to the Allies winning World War II?” and here’s what it gave me:

There were several key factors that contributed to the Allies' victory in World War II. One of the most important was the superiority of the Allies' military forces and tactics, which allowed them to gain the upper hand over the Axis powers. The Allies also had a significant advantage in terms of industrial production, which allowed them to outproduce the Axis powers in terms of weapons, ammunition, and other supplies. Additionally, the Allies benefited from the fact that they were able to coordinate their efforts more effectively than the Axis powers, thanks in part to strong leadership from figures such as Franklin D. Roosevelt and Winston Churchill. Finally, the Allies were able to secure the support of key countries such as the Soviet Union, which helped to turn the tide of the war in their favor.

That’s a pretty good answer.

The question is whether using this tool to get the answer is harmful to a student’s education. Is technology making it “too easy” and therefore getting in the way (Read more...)

How Generative AI is Going to Change Your Life and Mess Everything Up in the Process

These are the first marketing images of an upcoming movie that I star in with my daughter Mirren about an aging superhero that is absolutely too old for this shit that winds up having to save some mystical star child.

Or, it’s just what “generative AI” does with a series of uploaded images of the two of us if given some creative prompting. Enthusiasts will tell you that this is the beginning of being able to insert yourself into video games, recreate scenes of things that happen to you in the past, or things that didn’t happen at all. Meta has started beta testing its “Make a Video” software, no doubt trained on all the videos we’ve ever uploaded to Facebook.

Maybe this is the gateway technology that allows the metaverse to take a leap forward and for us to finally get holodecks like in Star Trek.

Critics pose a ton of ethical and legal questions.

They range from what we should actually define as art (which may not seem important, unless you’ve entered an art competition and lost to a bot) to whether or not this will put creative people out of work to who owns the rights to styles of things and how artists should be compensated if their work is used in learning algorithms to create new works. Should the Warhol foundation, owners of Andy Warhol’s IP be paid out if you decide to “paint” a bottle of Scope in the AI-trained style of (Read more...)

I’ll Fund a Startup n00b But Here’s How Not to Look Like One

Years ago, I got invited by Steven Messer to join him and his co-founder (and brother-in-law) Tad Martin, two very successful NYC founders, out on a bike ride up the West Side Highway and up 9W over the Palisades. It’s a pretty standard route for hundreds of experienced road cyclists every weekend morning.

This is before I ever did a triathlon and before I ever even had a proper road bike. I had an aluminum commuter bike and I’m pretty sure I was wearing jean shorts at the time. I’m not going to argue whether or not jean shorts were ever in fashion, at that time or at any other time, but I’ll at least concede that they weren’t appropriate cycling gear for a 60mi ride with experienced riders.

But how was I to know? I didn’t have any friends that were into this kind of cycling at the time—and for whatever reason it’s something that people in their 20’s really don’t do that often. Maybe it’s because they’re not making enough money to fall down the rabbit hole of expensive carbon fiber road bikes and all the various gear that you can end up purchasing. Whatever the reason, I had no one who could warn me about how goofy I was about to look.

To my credit, I did actually keep up with those guys on the way up—but on the way back I just let them go ahead, leaving me to amble home, sweaty, sore and very uncomfortable (Read more...)

Pro-Choice is a Fiduciary Responsibility

The other day, I dialed into a meeting of VCs for Repro, a coalition of investors that support access to abortion. I was stunned. The room was 90% female.

We all know the statistics about gender representation among venture capital investors—it’s unfortunately pretty hard to gather a roomful of female investors unless the meeting is specifically about being a female investor.

To me, abortion isn’t just a women’s issue, so I really didn’t expect this lack of representation from my male colleagues.

We had a conversation about why this might be the case—why more venture firms weren’t signing up.

There are 75 firms that have attached themselves to this list but lots of notable exceptions. It’s great to see a whale like Insight Partners up there, but there are only a couple of other more established names and they’re mostly smaller, like Eniac, Anthemis, and Bloomberg Beta.

A lot of the firms are either new or focused on female founders, like BBG and Female Founders Fund.

Someone had surmised that maybe big firms were worried about LP fallout—that if your LPs were Catholic Charities or the Notre Dame endowment, your investors might walk. That didn’t really make much sense to me, because I don’t really think that Benchmark, Sequoia, First Round Capital or Union Square Ventures are hurting for LPs—and once those guys sign on, then it becomes a list you kind of have to be on.

I would argue that this is a list VCs need to be (Read more...)

Want to Recruit Top Talent? Start Thinking of Work as a Product That You Sell.

So many times, I’ve heard founders ask me, “How do I find great engineers?” or “Do you know any awesome marketers?”

That always struck me as the wrong way of looking at the problem—but I couldn’t quite figure out why. I realized that you’d never ask this question if you had built a consumer app and you were trying to do customer acquisition.

No one ever asks, “Where do you find users for my dating app?”

That would be weird—because they’re kind of all over the place, but “finding” isn’t the challenge. The challenge is converting them.

Instead, you start with the value proposition of the product itself and you make sure it’s clear why someone would want to use it in the first place compared to all the other dating apps. You would make sure it’s clear to someone who winds up in your conversion funnel through message testing and user interviews.

Once you had that squared away, you’d start testing various acquisition channels, optimizing them regularly for cost effective conversion.

To me, that’s the way you need to think about your recruiting process—and to do that, you need to start thinking about work as a product that you are selling.

You sell “work” to your customers—i.e. the talent. Talent pays for work with their time and expertise. Work is very expensive because they’re forking over a lot of time to buy the work that you’re selling—so it’s going to be a very thoughtfully considered purchase.

The value proposition (Read more...)

An Early Investor’s Postmortem of The Wing

a Dall-e variation on a variation on a variation of an image of The Wing, warped with the canva wobble filter

“I remember you mentioning The Wing before it opened, and I am right now enjoying my first morning working there (I never want to work anywhere else). It makes me feel productive, self-assured, and feminine all in a way I didn't expect. Thought I'd share...”

That was a note that I got from a friend back in September of 2018. She knew I was a seed investor in the company.

For a good long while, it seemed like a fund-returning investment. I wasn’t privy to the financials at the time, but by the end of 2019, I had penciled out a guess that they were at a $50 million run rate—or at least on a clear path to it. Audrey Gelman was on the cover of Inc magazine, visibly pregnant. Sequoia, the top venture capital firm on the face of the earth, put in a growth round that valued the company at close to half a unicorn.

Things looked more than great. It looked like I had invested in a company making a generational impact. I imagined a future Wing media arm with a TV channel, a venture capital fund…

…and then it all came crashing down.

So, what happened? And why am I writing about it?

I’m writing because a lot of how the story played out obscures real lessons to be learned here, oversimplifies the issues, and (Read more...)

You’re Not Taking Recruiting Seriously

Recruiting is hard.

Good candidates are hard to find.

What tells you this? Well, you can see it. Out of all the candidates that applied to your job post, very few are what you’re looking for and those that are seem to be falling down in the interview.

I hear it all the time—and when I hear it, I hear a red flag. Did you hear it?

“Applying to our job post.”

I mean, sure you need to put up some job posts so that those who are looking know that you’re hiring—and you need to write up the job anyway to get your team on the same page about what it is that you’re even looking for, but this isn’t how your next hire is going to come in.

You don’t just put up a few job posts and hope employee number four or six or eight walks through the door.

In the words of Billy Madison, “If your dog is lost, you don't look for an hour then call it quits. You get your ass out there, and you find that fucking dog!”

There is absolutely no substitute for a consistent outbound effort by your own team—not a recruiter. You can hire recruiters—that’s fine. You just also need to be actively seeking out the very best candidate by including those that aren’t searching.

When I started a company fifteen years ago, I put up job posts everywhere I could, but the volume of interviewable candidates just wasn’t there. (Read more...)

The Pre-Board Board: How to Create Accountability Before You Give Away a Board Seat

Typically, investors don’t take a board seat until you raise your first equity round—which means that it could be *years* before you have a real board meeting:

  • A year of nights/weekends work researching, prototyping, and fundraising.

  • You raise your pre-seed round and if you're lucky and good, you can get to an equity round in 12-18 months. Many people extend this round and don’t get there for two years.

Until that point, how do you create the accountability necessary to stay on track and achieve your goals?

First off, many founders don't really feel the need to have external accountability. It makes sense—to be a sounder in the first place means having a strong sense of agency and believing in your ability to manifest something out of nothing without a lot of help.

Not only that, founders get a lot of warnings from other founders about “losing control” and to be careful about ceding too much power to investors.

I’ll let you in on a little secret. Investors don’t actually like to do more work than necessary—and replacing a founding team is a lot of work. In an ideal world, we check in every now and then and the founder is completely on top of everything they’re doing, shares enough reporting to indicate that, and is totally self-sufficient.

That’s the founder we want you to be so we’re able to spend more time kitesurfing, microdosing, or tweeting our misguided libertarian leanings in the face of a crypto market losing billions (Read more...)

The Philosophy that Underpins the Right: It’s Not What You Think

After the Supreme Court decision overturning Roe vs. Wade, I was chatting with someone who grew up in another country and hadn’t spent a lot of time in and around American politics. They were trying to understand the inherent contradictions between a theoretically conservative right that expands the government to legislate over personal decisions like the healthcare around a pregnancy.

It’s an interesting question—because when you examine the positions of the current Republican Party, they don’t seem to line up under any single philosophical framework. They might say that they’re pro-”life” but at almost every turn, when it comes to doing things that actually improve the health and welfare of people post-birth, they don’t want to spend the money on it. They consistently vote to take away healthcare benefits. They want to remove the tax credit for children. They don’t even want parents to have the ability to take extended leave from work to be with their newborns. They don’t want to provide education to these kids and they actively support the proliferation of weapons whose sole purpose is to take life away—even after school shootings kill multiple kids.

So, yeah… “Life” doesn’t seem to be the guiding principal—certainly not for a party that supports capital punishment.

It’s certainly not small government. They want to legislate pregnancy, marriage and there’s no end to which they’re willing to fund police forces and the military. A modern Republican government certainly isn’t a small one with a small reach into people’s lives.

How (Read more...)