Legible and illegible risk
Our job at seed, AI is flattening competition, how to beat megafires, articles from friends
Startups can be either legible (clear, easily understood) or illegible (hard to read). This distinction matters more than stage; it’s more comprehensive and useful for categorizing companies and matching them to the right capital.
Companies are either extrinsically legible (founder came from Stripe/Anduril/OpenAI, did YC, sold a company before, etc.) or intrinsically legible (the business is turning over cards and crushing).
Extrinsic legibility relies on social proof and reputational protection (you won’t look dumb if you’re wrong) while intrinsic legibility relies on judgement.
Big funds operate at scale. So they need legibility and credibility; they are in the business of winning, not parsing. Moreover, the investors there have increasingly little tolerance of even potentially looking stupid. This is especially true at seed where they’re building/buying a basket of call options rather than backing specific companies independently. There just isn’t time for them to really parse and judge for a sub-scale investment. After all it’s just lead gen and cookie licking for them.
Multistage firms will always back companies at the first sign of legibility. So the job of seed specialists is to invest early and help illegible founders/companies become undeniable.
At Slow, we specifically look for illegible opportunities that reject easy categorization either because of challenging to underwrite, out there teams, markets, business models or a combination thereof. We want to fund illegible, irrational businesses to legibility and definitive card flips off of our money.
Read more on this idea here (possible futures for venture) and here (the end of Series A).
I Wrote
All that matters now in a world of increased competition and AI is distribution, market depth, operational excellence, and network effects.
I Read
My boy Nat is finally getting into shipping regular takes, which I love to see. Nat is a dear friend and a logical thinker who I really respect. I’m glad he’s gonna be sharing more. Go subscribe and we can collectively hold him accountable to his posting schedule.
Blake Robbins on Alignment. Just a very salient thinker about investing in/partnering with founders
Eva Joan, a Clothing Repair Shop That Gives Moth Holes a Makeover - my good friend Emma made an appearance (her debut?) in the New York Times writing about a cool new practice of embroidery and repair.
General Catalyst Stretches the Definition of Venture Capital. GC now has a wealth management group.This has been coming for a long time. Sequoia has had wealth management for a while and I think a16z does as well. The final piece of the puzzle will be for one of the true mega funds to launch an RE arm (complete the circuit) and go public (become a true institution). FWIW I think GC is doing the most interesting approach to low-teens-IRR-private-tech-but-call-it-venture by doing things like buying the hospital, building operating companies, etc. vs just doing software at bigger and bigger check sizes.
Abundance
How to beat megafires. A little bit of a departure from what usually goes here but this interview Santi Ruiz did with the CEO of Megafire Action Matt Weiner touches on state capacity, climate change, and urban planning. Worth a read.
We're looking at climate change combined with years of mismanagement and poor community design creating a perfect storm here.
For a long time, we got really good at suppressing fires. We took fire out of landscapes that needed to thrive. And what we're seeing is climate change and years of fire exclusion in these areas have made it so that we're pushing the bounds of what we're capable of suppressing here. It's overwhelming all of our systems.
We had good fire on the land before Westerners essentially came here and took it out, right? Indigenous tribes have known how to manage these landscapes for millennia. We made a conscious decision over the last 150-plus years to take that fire out.
While that has been changing, there are challenges to us doing it. Those challenges are workforce related, they're regulatory, and also the fact that we built in places where it's hard to get good fire on the ground now in certain areas. It's hard for us to do what we need to do from a landscape level.
You’re Invited
Our NY SMB dinner booked up super fast so I'm going out to SF to host a private dinner for founders and operators building for SMBs and the real economy. To join us, submit your info and we’ll be in touch soon. No one is too early.
