Turning Content into Competitive Advantage with Packy McCormick | Founding the Fund 3

Welcome back to another episode of the Room Podcast. Claudia, I'm curious. Do you know who the first venture capitalist was?

No, I don't actually, Matt.

I know. It's kind of one of those questions that I think a lot of people take the claim for. I think people believe it was Arthur Rock who famously actually was an HBS alum. So, shout out. But he was the first check, if you can even call it that, into Fairchild Semiconductor.

Wow, that is a throwback for sure.

I feel like he wasn't even sure he was starting a fund at the time. He literally just said, "These are eight really smart people and I probably should put some capital against this." And what was it, the 1960s? Maybe even the '50s. And really that became what we call today venture capital.

I mean it's so funny you say that because the company that he first backed sounds like a story we would tell. I mean we've been telling so many incredible founding stories of raising capital, building a team, building a business, becoming a unicorn, but there's so many parallels to that when you start a fund if you think about it.

Yeah. Honestly, it's been an opportunity of a lifetime to tell over 140 founding stories of zero to IPO companies, but we haven't taken a keen look at the investment vehicles and ultimately the startups themselves, which are the venture firms that have taken many of these companies through that journey. I mean, the way that AI is changing the companies that are being built, it's fundamentally changing the strategies and thesis of incredible funds. When I was back as the founder of Prime, I always found it so interesting that the questions were always on us, but I had questions about how my VC that I've built a multi-year relationship with got started. It's like quite crazy bringing billions of dollars together to put their faith into the next generation of iconic founders. I couldn't agree more. I take for granted that I understand what things like an LPAC is, right? A limited partner advisory committee and how these decisions get made and oh my gosh VCs have bosses too. So in this season we're going to sit down with respected venture capitalists to talk not only about the companies that they've backed but the firms they've built. So with that I'm excited to open the door.

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As we continue with our Founding the Fund miniseries, we sat down with an emerging manager whose origin story as a fund founder sits at the heart of our thesis for the future of media distribution and alpha. Packy McCormick is the founder of Not Boring, the widely read Substack that tells the stories of the most ambitious and complex startups as early as possible to give readers a glimpse into the future that they're working to build. He is also the founder and general partner of Not Boring Capital, now investing out of its third fund. Today, his Not Boring platform reaches over 270,000 subscribers on Substack and over 220,000 followers on X. Packy's path to venture mirrors what we at the Room podcast like to call people as a platform. He grew up outside of Philadelphia in a household of consultants and entrepreneurs, studied at Duke and started his career in finance at Bank of America before joining an early stage startup Breather as its first US employee. There he rose to VP of experience and a stint in the office of the CEO. However, when COVID hit, working at a co-working space startup did hit the brakes. Therefore, he turned to writing as an experiment and Not Boring was born. Six years later, that same instinct for going deep on an industry's history, economics, and competitive dynamics has become the engine behind his fund. Not Boring Capital's thesis is built on backing vertically integrated businesses quietly taking down sometimes considered stodgy incumbents with companies like Base Power to Astromechanica and Standard Nuclear. In this episode, Packy sat down with me on a trip live to New York to share about his unique approach of content as an edge and evaluating founders by watching how they reason through their industry's idea. He also shares how he's experimenting with co-writing essays alongside the founders themselves and ultimately what he's looking for in companies that are built to compound as the underlying technologies such as AI keep getting better. Let's open the door.

Thank you so much for joining us today in the room.

We're thrilled to have you here. We'd love to start at the beginning and we do this with all of our guests. So, tell me a little bit more about where you grew up and how that shaped your view of the world.

So we're also Birds fans, of course, for the Seahawks from being from Seattle. You for the Eagles presumably. Thank you so much. We're recording this right before the Super Bowl. So we'll see how it goes.

I actually so I worked in finance then went to a startup. I was our first US employee so it was as close as I got. Quit at the end of 2019 and was kind of found something physical space based COVID. I think what I realized is I think like maybe the biggest learning of doing venture for six years has been how good the very best founders are and like how much better they are at it than I would be. And so I thought that I would be a founder but like not with the same kind of intensity that these people do. And so now I think my best and highest calling is like trying to help them bend their trajectories like a tiny bit.

Yeah I mean I think finance was kind of the default. Most of my friends particularly graduated in 2005. Yeah. Most of my friends wanted to go into finance. Most of my friends did go into finance. And I did that for a few years. And I realized that I was like good at it, but that my friends who are really good at it were like really really good at it. And loved it. And like on the weekends, the thing they wanted to do was like read the economist and like think through like you know it's all they thought about and it's not all that I thought about on the side a little bit. I like started a party bus company that took people from New York down to Avalon where I got to New Jersey and like it just wasn't my passion and so knew that that was not going to be the thing. Almost went to business school and then found this company Breather on Angelist and applied to work there, was unemployed for four months because I quit my job to go to school. And literally just interviewed at the one company. We did on demand meeting and workspace and it felt like the right place for someone who had like no real skills coming from finance other than like the ability to work really hard and kind of figure stuff out. And so like that experience was in the beginning just me here running around the city begging landlords to let these like weirdos from Canada put small little office spaces in their building and let strangers in all day did design and operations and clean spaces myself like the full kind of ownership of the market. Which was awesome. Like I love anything where I can just kind of like hustle my way into doing a good job. And just like work hard my way into doing a good job. And that felt like one of those opportunities. Company grew, raised a bunch of money, hired a team, ended up being CEO for a little bit after in the office of the CEO after we hired our CEO and VP of experience which oversaw all of our design, construction operations, blah blah blah across our 10 different markets. We raised like $120 million. I left and then COVID hit and then we sold for $3 million. So, it also gave me a bit of that up and down. Luckily, I hadn't bought my equity. So, it ended up, you know, it was a great six-year learning experience. I'm so close with a lot of people that I worked with and learned a ton but started writing in that process and so that kind of became

Absolutely. Yeah, some things when things don't go up and to the right you learn more than you would otherwise say.

Totally.

Yeah. I mean my you know my investment banking was I got hired into Bank of America interned there 2008 and then BofA and Merrill merged and so we came back and they're like by the way you're doing public equities. Yeah. So or sorry you're doing you're doing not public you're doing munis thinking equities in Dallas from the book but and doing munis and I was like well my career is like completely done but like you know nobody's ever going to hire somebody from munis. Turns out like it was a lot of the same stuff. And then my current job has nothing to do with it. So it doesn't matter.

Yeah. So in 2019, while I was still at Breather, we had hired a new exec team. It was like our strategy had gotten dumbed down. The whole thing was boring. And so I had started writing, took a writing course, David Pearl's Write a Passage, started writing on the side, just to kind of keep my brain going. Yeah. And then left there and was kind of writing to think through the idea and like put it out there a little bit about the thing that I wanted to start. And then during COVID, like the very beginning, I got COVID and was sitting on the couch at one point, like this was an in-person like almost co-working space for nerds. I'm so glad it didn't work out because I'd be miserable if I actually ran it. But was sitting on the couch in our little apartment in Brooklyn doing like putting together slides for like a trivia night or something. And my wife came into the room and like looked at me like, "What are you doing with your life?" And I was like, "That's a totally Yeah, that's totally a good thing."

Yeah. And so I killed that thing because we had tried to take it online and it was not, you know,

I was a member of the Wing like RIP and I was really excited. I got accepted in 2019. I was early in my career. I thought that was like the place, right? So I get it. It was hot.

Totally.

That's amazing. I resonate just with the like what else are you going to do with your time? You know, it was COVID when I started my job in venture and everyone had told me the best way to meet people was in person. That's how I was going to source the next generation of founders. And then COVID happened six weeks into my role. I was like, "Oh like how do I meet people?" And so yapping online ended up being like a viable way to like meet founders. The barrier to entry was a little bit lower. People were down to do the recording virtually. Totally. And I got, you know, we got a few big names like Sridhar Ramaswamy who's now the CEO of Snowflake when he was at Neeva, which was his company at the time. And they were just kind, you know, they were willing to chat with us. But sometimes in life when you capture those moments of like weird disruption and opportunity, it can compound.

Well, I mean, not to ruin the punchline, but you're at over 258,000 subscribers today. So, congratulations to that. And you've also launched Not Boring Capital, which we're going to get to. But I'm curious, going back to those early days, what was that first viral piece that you were like, we have something here?

No, toot your horn. We want to hear.

Yeah. Absolutely. I often say the best time to start a content platform is yesterday.

So, like hiring is a strong word for any of these people? My brother, I guess, was the most full-time. He came on as like a chief of staffy type role. He had been in consulting and then he went to a company called Parade and he knew he wanted to start something but he wasn't sure what and he'd been editing all of my pieces for free and they're long and I was like get over here like you know we'll figure something out and like in the meantime you can help me out over here. And then he now started a company called Create that's like doing unbelievably well. And so he formally like officially kind of rolled off of Not Boring. He was writing our we do this weekly dose of optimism where we write like just kind of five interesting optimistic stories that happen every week. He'd been writing that that's now back on my plate because his company is crushing it and so he's doing that full-time. So I guess newsletter first but he did a little bit on both sides. And then have had a couple of kind of part-time but exceptional people work with me on the fund side as well. Guy named Elliot Hersburg who just had a kid. Congratulations Elliot. And now works at Amplify. Sil recruited him and introduced us. And then Rahul Rana, who I spoke to this morning, was a college student. My conceit with the fund and with hiring people in general is they're like really excellent people who probably wouldn't work for me full-time, but while they're doing something else. So Elliot was getting his PhD at Stanford. Rahul was a senior at Rutgers and had written a bunch of stuff that I liked and so they came on part-time, I borrowed their genius for a little bit and then now they're off doing kind of bigger and better things which is amazing.

Exactly.

Yeah. So I guess the thesis on the firm itself is that there's this one thing that I've been able to do well which is tell the stories of kind of complex businesses that otherwise might not be understood or like go super super deep on this type of company and that's valuable to a bunch of companies that are not legible to the market and so really it's you know write Jackson to these companies help them tell their stories make them more legible to talent to downstream capital to all those types of things. So that is kind of like why we exist. The thesis of the types of companies that we invest in are these kind of complex vertically integrated businesses that are trying to take down the incumbents in you know name the industry they're in. So prime example would be like a Base Power company that yeah you know over time right now is doing residential batteries becomes the like the kind of modern utility or Astromechanica which is doing supersonic planes. I think there is a path in 15 years, whatever it takes for them to kind of like be the new the new way that we fly around the country. Like clearly the current system is breaking and crumbling in a way that like it's not obvious that any one intervention fixes it. You kind of actually need to just like change the way that air travel works and I think speed is a really interesting vector to play with there. And so like that's the type of companies that we're backing.

Yeah. Thrive Capital actually gave me the idea. I've been doing some SPVs and Garve who was at Thrive and now runs Timeless Partners reached out and was like, "Hey." Yeah. If you want to start a fund, like we would write a check. And they kind of kicked it off.

Totally. But we talked last week has that conviction. Yeah.

If I could figure out how to say this concisely, I think we have this true. I'd be a genius. I think like more and more like the biggest thing that has improved in my investing is just the ability to like figure out who might be like one of the top 0.1% versus just like really really smart. Like I think in the beginning the first time I started investing at a fund one everybody I met I was like this person's a genius this person's genius and like some of them a lot of them are very smart. Yes. And then there's like something else about these other folks. And so I think it depends on the company that you're running and the situation that you're in like different attributes will be valuable, but I don't know like I really love talking through somebody's industry and their strategy and like why you know some investors are product-led. I like really love think about how they have decided to construct their business and why and how they think about the competitors in their industry and like all of the nitty-gritty. If they can walk you through that idea and like walk you through the history of their industry, walk you through like the economics of their competitors and what their strategy is. Like I just think that says a lot about how comprehensive they've been. And then there's like the normal stuff like they have to go fast, they have to be super smart, they have to be spiky in some dimension or another. But I think that that is a like just that watching them reason through things I think is a valuable signal.

Totally. And I haven't done very much AI investing at all. And you know, I think people are probably kicking my ass returns-wise because they've gotten marked up. But I do think there's a lot of just like speed and not necessarily strategy. And like a lot of AI founders I've spoken to, certainly not true of all of them. Whereas if you talk to somebody who's building in the physical world, like the mistakes are so expensive that if you haven't thought through it and if you haven't put together the very best team that you possibly can to go after that particular thing like mistakes are more costly. So I think people are more thoughtful upfront. There are certainly exceptions to that like you can certainly still iterate your way to a good solution. I read about this company recently that we invested in called Somos Internet down in Colombia doing fully vertically integrated

Yeah, you're really digging deep on these different thesis areas and again that's a part of your DNA. And when you started Not Boring as a newsletter, you know, you ultimately became a platform that is something other people can reach and find and get to know. We like to call this the people as a platform thesis which has really popped up and emerging managers go to market with LPs. I'm curious to hear a little bit more about how you thought about telling that story on the LP side of things.

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Yeah. Plenty of LPs who read Not Boring. They're like, 'Oh yeah, totally. Totally get the thesis.'