How Writing Led To Investing In Ramp, Scale AI, Replit, Varda | Packy McCormick, Not Boring

Here's a spicy take for the podcast. When YC puts out their request for startups, I'm like, I can't imagine that anything good is going to be built. You said AI will not become God or Satan because it's software—it will become an incredibly profitable super SAS. There hasn't been any leap that I've seen that I've been like, yeah, that thing is alive. You get to talk to some of the smartest people and most driven people in the world who have dedicated every fiber of their being and all of their financial well-being to thinking about this particular problem. I really love this and I want to do this for a very long time, and so that's kind of what I knew—that this is what I want to do for a while.

Thanks for having me. Like, we have these swivel chairs—I'm just going to be like awkwardly sitting this whole time.

Yeah, shout out to the folks at ElevenLabs. I worked with them, fed them a bunch of—they're like, 'send us like 30 minutes worth of stuff and we'll make you a professional voice.' And they nailed it. It like actually sounds like me.

You're one of the ten. Even though I did know you before, but you know it's a different kind. That is wild. Yeah, there's like a couple things that aren't me, but even my parents heard that and they're like, 'oh cool, you did like a podcast.' I was like, 'no no, this is like all AI generated.'

Yeah, so it was—I guess, quit my job at the end of 2019. I was going to start something physical space based, and didn't. So COVID hit. And so I started writing the newsletter and not making a single dollar. There were like 400 subscribers. So I asked my wife for three months to start trying to do something with it and see if it would grow. At three months, I think we'd gotten to like 5,000 subscribers, which is like my annual subscriber goal, but still making zero dollars. We were pregnant, and so needed to do something at some point. But I was like, I think we can actually just turn this into a business if we get to X number of people and I turn on subscriptions. And I think it was like nine months in that I made my first dollar. But I made like a shitty ad deck and tweeted it after I made it because somebody asked me for an ad deck. And I was like, if I had this, I'll tweet it. And I think Public and a couple others kind of came in and were like, we'll pay you like a thousand bucks or something. I was like, that sounds great, that's amazing. And so that's how the business side of it started. And then just kind of kept growing a little bit for a couple of years. And so it just kind of felt more and more like there was something there. And then it led to a venture fund. So I've been doing SPVs. I feel like in some ways I want to be an investor for the rest of my life. In some ways, it's like the most 2021, 2020 story of all time. I was doing some SPVs as I was writing about companies and raised my first fund. And when I raised Fund One, I had like no idea that I wanted to do this for a while. I was like, this is very cool, I have no idea if I want to be an investor, but I'm seeing a bunch of interesting companies. And I do think that it's much more fascinating to put skin in the game than just to write and snipe from the sidelines. And then kind of halfway through Fund Two, I was like, I really want to do this. And then as the market crashed and tried to raise the third fund in like the worst environment ever and just did such a shitty job fundraising, that's when I was like, oh, this is awful, and I really love this and I want to do this for a very long time. And so that's kind of what I knew—that this is what I want to do for a while.

Like 50 total.

Yeah, so doing kind of this barbell where it's mostly these vertically integrated companies. I've written a bunch about these, we can talk about them. But kind of thesis being companies that use both hardware and software, build vertically integrated systems, can build better, faster, cheaper products than incumbents and beat incumbents. And so the shorter way of saying it is like SpaceX and Anduril for everything. And I think a lot of that SpaceX and Anduril thesis has turned into like, let's invest in space and defense, and I think those are super interesting. But I think what's more interesting is that in every other big category where there are incumbents that are beatable. And then there's like 20% of the fund that's just like, I'm not smart enough to know what really smart people are going to build. That's mostly crypto, but it's mostly just meant to be—people are going to come in and tell me something that I didn't know was true but that I believe after I hear it from them. And so I want to keep a piece of it open for those kinds of opportunities.

Totally. Yeah, the writing fueled the investments in the beginning. It was mostly just because the writing meant that people would give me money to invest, but it also meant that founders would talk to me and take my money and all of that. Over time, I think it's helped me develop my thesis more and more. So I really started to understand crypto through writing, came to this vertically integrated thesis through writing. Kind of started because we had done a small investment in Repet, I was seeing more crypto companies and like little apps kind of being built on top of protocols and just seeing software development get easier and easier. And I was like, well, I don't think we can actually really invest in that much pure software anymore. This is like 2022, until I kind of started thinking about what comes next. And then it became like a hard startup thesis, but that was kind of too vague. And so this vertical integrators is I think the best expression of how I'm thinking about it now. But I just think like we did atoms development for all of human history and then we had 50 years of software development and caught up. And I think that's amazing. Tyler Cowen calls it the great stagnation, but I think it's awesome that we had 50 years we're just going hard on software now. Software is maybe pulling ahead a little bit. And so now we're trying to combine hardware and software, bits and atoms, and just kind of build all new infrastructure for the country and the world. And so that to me is the most exciting opportunity now.

Honestly, in the beginning it was like my friends have companies and they want me to write about them, so I'll write about my friends' companies. One—I think the first one that we did also in an SPV was a friend's company kind of doing something in real estate who had read something that I wrote kind of pre-Not Boring when it was just like pm.com or something. And I was like, actually, we're basing a lot of our strategy off of that. That company has since shut down, so maybe shouldn't have based strategy off of that. The other one, Composer, was another early one—another friend's company from Breather. They're doing very, very well. It's my favorite investing product. But in the beginning it was kind of friends I wrote about. Ramp actually was one of the earliest companies that I wrote about. I've now written about Ramp four times, and the fun thing about that is there's something new every time I write about them or a new way to talk about the company. Like now, Saquon—I was actually shooting a video with them last week, or literally like a week and a half ago. And Kendall on their team was like, 'I'm so sorry for not getting back to you. It's been like a really chaotic day. Yesterday we got word that we got a Super Bowl slot and we've been spending the whole past day trying to coordinate with Saquon and his people to get this thing done.' And they filmed it in like three or four days. The Eagles are my team, so go Birds. Huge Super Bowl win.

Thank you. And so the combination of Saquon and Ramp is just like, dream come true.

They've gotten longer and longer over time. I just did a 99 or 100-page piece on a company called Meter. And I've been thinking a little bit about this. I've been reading more Robert Caro, which is very cliché. I just read his book. And it comes from the fact that I'm not smart enough to just be like, here's the beautiful three-sentence thing on this company and why everybody should be excited about this. For me, it's kind of like everything that I write, I'm just dumb enough that I have to rederive everything from the beginning whenever I write about a new topic. I also go across a bunch of different categories. I'm really trying to learn. So I'm like, oh, that's cool, the mining industry—let's talk about the mining industry and what makes that interesting and what makes now an interesting time for a company to go attack that. These companies should be stories that are a combination of who the founder is, how the market has evolved over time, what the levers are in a particular market, how the company's strategically thinking about what they want to do to play the situation that they see. It's just a million factors. And anybody who boils it down to a market map or a one-sentence thesis on a company, I think, is just a very tough way to invest. And maybe if I were smarter I'd be able to do that, but for me it's kind of just like, I don't know, here's me trying to figure it out and here's me putting it on the page and here's what I think is really exciting. I'm writing about this now, trying to figure out how to work this in. It's either deep dives on companies or these thought pieces—which I hate that word—but writing about how much I think we realize we actually don't care about answers at all. I think AI will make us see that answers are really not important. But you want to read Robert Caro because you want to read thousands and thousands of pages that really make you feel and understand what it was like to be in the room with Lyndon Johnson. You don't want a sentence. It's like, political power comes down to—are you able to get money allocated to this thing? You just want the stories and the experience and to be in that room. So if anything, my pieces might get longer and deeper now, and maybe I'll have an audience of 10 people. But really, I think that Jim Simons at RenTech versus Robert Caro—who would be a better early-stage investor? And I think it's actually Robert Caro. I think literary nonfiction done really, really well, or journalism done really, really well, should actually be the best way to understand an early-stage company. If you talk to everybody around it, you really try to put yourself in the shoes in this moment in time, and why now works—I think you can write a piece that is the best underwriting that you could possibly do. And so more and more I want to figure out how to get that kind of richness in the pieces to understand companies.

Yeah, for sure. There's definitely been companies that I've—I don't think I've ever gotten halfway through. I think I've started doing research and—

A lot of research. So I don't outline. It'll be like a lot of conversations, a lot of reading to get up to speed on the industry, talking to the team, then talking to people around the team—maybe they're investors, maybe customers, maybe a competitor ideally telling me why I shouldn't be as excited about this company. So talking to a bunch of people around the company, doing a bunch of research, and then I just kind of start writing. And then I'll realize when I'm writing what other questions I have because I get to a certain point where I need more information on something else. And then I'll go back and do more research and kind of go from there. So I've certainly written pieces and not invested for whatever reason—often because I'm writing about a company that's later stage than we would invest or something. But I will get through that first round of conversations and just be like, this doesn't seem like it's the one. I think there's also probably a fair amount of, you know, pretty quickly. And then there's a lot of explaining to the world what feeling you got and why. But I think I can kind of tell in the first few conversations. And then a bunch of it is checking, like, does this all make sense? I do think—and people say this and it's cheesy and it's also true—is that the founder really matters. And there's definitely a Midwit curve on that that I've written about before, which is like you think founders really matter, and then you're like, no, no, market and strategy and whatever else, and the founders. And it's true for an interesting reason, which is that if this person is actually really good, every question that you've had, they've thought about, they've answered really well, and they're willing to commit their life to it—where you're talking about one of your however many checks in a given fund. And so I think the right founder is the shortcut for everything else that you would research. Is they've thought about it and is right. But then a lot of that research is figuring out, like, actually, are they good? So it's definitely circular, but if you can figure that out, it is a compression algorithm for the rest of it.

So I just read about Meter—we didn't invest, this is an example of one that is later stage than we invest in—but I love Meter and I thought they were a really good device for exposing one thing that is really hard to put into words, but it's essentially that they make great people want to do great work for them. And it's this really subtle thing that I don't know how they do it really, but you just don't want to mess up for them. And that goes to employees, that goes to investors, that goes to me certainly writing this piece—wanting to make sure that I got it as right as I possibly could, and I took like a year to write this piece. I think that is a really valuable thing. It all comes down to people and the team that you build and what you get out of your people in the end. So if you have this magnetism or this almost like people have a fear of disappointing you and they really want to do their best work for you—I don't know how to—you can tell I think when you talk to somebody, but that's a hard thing to put into words. That's a big one that I think is maybe not discussed enough. And then I think there are just curiosity, walking through the idea maze with somebody. I really love when they just know absolutely everything about the history of their industry and why the individual personality tick of a founder who tried it before actually was the reason for their downfall. Just the more nuance and specific information, the more they know why people—I love when people have failed. There's industries where people have tried to do something and failed and the time just wasn't right, and now someone's going to come in and do it right. And so an understanding of what was wrong then and why it might work now—I think those are really good. But yeah, the one that I'm trying to get more clarity on is can they get great people to try to do their absolute best work for them.

It is a really interesting view on it, because I do think there's just so much venture theater where you just have to do a bunch of stuff because your GP expects it or their LPs expect it. There's just a bunch of shit that you have to produce to talk yourself into a decision. I view a lot of my writing—one of the most recent decisions I made was over a three-hour coffee. I didn't write a single word. I met the guy and read the deck and loved him and invested. I think a lot of it's like prepared, almost like each piece that I write is preparing for the next one. It's explaining them to future investors, because instead of having to go through the data room, just to be like, here's kind of what this company's going for in a simple way, I prepare that thing for the world. And then it prepares me to get a better intuition for the next one.

Yeah, it's a good question. I think the way that I do it is exactly right and the way that everybody else over-intellectualizes is totally wrong. Okay, I'm kidding. No, I think actually some of the biggest mistakes that I made early on—and sometimes you can be a junior person at a bigger VC and make your mistakes that way, mine was kind of making them as I go running a fund—a lot of it was I would be like, oh cool, I can see if this happens and then this happens and then this happens and then things go just right here, this could be a really big company. And it never works. You can't—the compounding miracles or whatever that you don't want to bet on, and that is totally true. And I think I can oversell myself into something being the case.

The way that I think about it now is hopefully one of the things that has certainly changed and that I've gotten better at is I've just gotten to spend a lot more time with great founders. As I've gotten to write about a bunch of companies and spent a lot of time studying and writing about and just working with these companies, my sense for what's great is getting a little bit better. And I think that is just literally time spent. And some of that is writing and reading and seeing how they think and all of that. And so when I write, sometimes it's me really thinking through does this make sense or does this not make sense, and let me pick apart the strategy. But I think to your point, a lot of the time the decision is made before I start writing the piece, because it is a big investment of time before I write the piece. And so I try to do the basic research that I need to. But often, like we just invested in a company called SOS Internet, based in Colombia, the founder is named Forest—he's absolutely unbelievable. And we had coffee and like within 30 minutes I knew, and then at the end of three hours I was like, all right, just take my money before the Series A comes together. Let me put in a SAFE please and we'll go from there. And so that was not over-intellectualizing, but because I'd been writing about Meter, almost as a telco because I'd been writing about Meter, which is a networking company, I became a lot more familiar with the space. Because I did an Age of Miracles podcast on nuclear energy and went super deep there, and I could see the way that he thought about a topic that I knew really well. And I knew a little bit about networking but not a ton, but I knew enough to know that he thought about that in the same way. And because I kind of thought about this vertical integrator thesis—there definitely could have been some overfitting because he'd also read my stuff—but just the way that he thought through the whole system is something that I don't think I would have been prepared to judge had I not done all of that other stuff.

And I wouldn't have been prepared to judge in the moment and developed my intuition that way. Now will I write a piece on them eventually? Absolutely. But a lot of that is explaining to the rest of the world why this crazy internet company in Colombia—where you don't think, I thought vertical integration maybe a level too deep would be trying to compete with the Comcast and the AT&T of the world, because it's just so expensive to lay fiber and build out a network. And what they are is just capital machines that spend a bunch of money on capex, and how could a young startup ever compete? And then he goes out and totally proves me wrong. And so there'll be a really interesting story there to tell, and hopefully can explain it in a way that future investors—no one should ever make a decision based on what I write, but it's a good way to say like, oh, here's kind of what this company does that maybe I wouldn't have looked at before. And so I'll write the story and then kind of back into that initial feeling and explain it. But really a lot of it comes down to developing enough knowledge that I can get that kind of gut feeling when I meet somebody.

Yeah, so I mean, like, there's a bunch. The first couple of funds were kind of broader, different stages, different categories. And there's a bunch of great ones in there. We have, you know, RM, we did Scale AI, we did Repet, we did Chroma, Vaa, Hadrian, Pipe Dream—I'm going to forget like a million companies. But a bunch of really good companies I got to know. Along with a bunch of companies that I did that thing where I like ping-ponged my way into thinking that they might be one of those one day. I'm like, I definitely have seen this thing where a lot of my smaller checks are the ones that have failed already, where it's the ones where I'm like, I don't fully, but maybe if it does, it'd be really huge, and it's a pretty cheap price, and so you can write it to zero.