Today I'm talking with Packy McCormick, the founder of the Not Boring Newsletter and Not Boring Capital. Not Boring Capital is a VC fund that, quote from the website, invests in early-stage companies that combine sci-fi technology with a viable business model. So what the heck does that mean? Well, I get into that a little bit with Packy in this conversation. But what prompted me to reach out to him originally was not too long ago he put out a four-part series around this concept of vertical integrators that's highly relevant for the theme around decentralized production. And as you all know, my goal at Going Direct is really to help build a community of the entrepreneurs, builders, and creators that are building this future of decentralized production. So in this conversation, we really break down what Packy means by vertical integrators, and his work of both writing and investing in these types of companies, I think you'll find extremely insightful and interesting. Now, Packy's mission is to make the world more optimistic about technology. He's thoughtful, well-read, and full of positive energy. The conversation was a lot of fun for me and highly relevant for the themes that we're going to be talking about at Going Direct. I hope you enjoy it and always remember, go direct.
All right, PY, how you doing, man?
Doing great, Jordan. Thanks for having me.
Sure. Thanks for coming on. Well, listen, there was, there's kind of like three reasons why, or three, many reasons, but three specific ones where I was like super jazzed to get connected with you through Apps over at QB. And kind of, I'll start by kind of the mission of Not Boring, which is to make the world more optimistic. And it's, it's interesting, and I, you know, discovered your writing a few years ago, is kind of my big aim with Going Direct is how do we take a much more optimistic lens and how we can make commerce more human. And I'm actually super excited for the future. And if applied the right way, I think it's just like so exciting. It's very actually intoxicating for me. So anyways, I, I felt like a very kindred spirit as it relates to kind of what you're doing with at Not Boring. The second, I guess more practical, is, and we'll get into this, but kind of your thesis and themes on the investment side highly align with my angel investment activity, and I have a few investments across a few of the similar, same investments. So obviously there's a lot to talk about there. And thirdly, yeah, for sure. And then thirdly, and we're going to run into some, through some of your concepts, your recent memo on human-to-human, a human strategy memo. Yeah, just like kind of put me over the top. I'm like, 'Okay, we got to talk.' That one.
It's funny. I like put the weirdest stuff I can out there and like that's the stuff that people respond to the most. And so I'm like, 'All right, cool. I'll just keep getting weirder. This is great.'
It was, no, it was great. It was a great read and I've recommended it around a bunch of people. So, thank you. Okay, cool. So, I'm going to start with this. Okay. Cuz I'm going to kind of dive into some of your, some of the topics that you write about. Can you explain to the audience, because I want the audience who might not come from this world to kind of have a better understanding of kind of what you mean by this. But what, what do you mean by the techno-industrial revolution? What does that mean?
Yeah. I guess if you like look back through history, like there's, there's a bunch of ways to view I guess the moment that we're at in history. One of them, and I think it's ending, but Tyler Cowen calls kind of the past 50 years the great stagnation. And there's this idea of like what the f happened in 1971 to 73, somewhere in that range. What the f happened in the early kind of 1970s where you have total factor productivity, it's like climbing like this, falls off like this. You also have like coincidentally or not kind of per capita energy consumption per capita also kind of falls off a cliff at that same point. But there's a million different graphs that kind of fall off at that same point. But really, I think the way that, to me the simplest framing of the history of the world from a tech perspective is like all of the innovation that humans did was in the physical world, in the world of atoms, up until right around that point. And then we had 50 years where like let's run as hard as we possibly can at software and we picked a lot of the low-hanging fruit in software. Obviously, there's a bunch of interesting stuff happening in AI right now, but it really feels like we're at this moment now where a lot of entrepreneurs, you know, one because we have the software tools, two because people have seen kind of SpaceX and Anduril and realize that you can build these really big companies that kind of combine the bits and atoms. I just think that we're in the spot now where people are like, 'All right, cool. There's a lot of crumbling stuff around us. How do we rebuild all of that infused with software and like kind of these other bunch of other things?' Like I think, you know, bio is in a much more interesting spot now than it was before. Materials are in an interesting, like batteries I think and electrification generally have huge implications for kind of the types of products that you can build. And so we're at this moment now where there's really an opportunity to rebuild kind of everything that we've built in the past in a more modern kind of electrified and software-powered way. And so that to me is kind of the techno-industrial revolution.
Cool. And then you have this, you make this comment that I'm just going to read it. I have a couple notes here. So you say, 'Just as aggregators built some of the biggest companies in the internet era, vertical integrators will be the biggest winners of the techno-industrial revolution.' And so can you kind of explain to me what is a vertical integrator in its most basic sense?
Yeah, the name, the name I like, it's essentially just like a vertically integrated startup. And I was playing with the Ben Thompson's kind of aggregator, vertical integrator. I don't know if it's like the perfect, perfect name. It's not the catchiest name, but it does describe kind of what it is. So, aggregators were like, you know, Uber, Google, Facebook, whatever. You like put a software layer on top of this thing that happens already. You have zero cost of, you know, the good ones, zero cost of demand, zero cost of supply, and you're like in the middle aggregating eyeballs. And because you have all the eyeballs, you have power kind of over all the sides of the marketplace. And I think, you know, there's been a million Uber for X's and, you know, you've tried to build new social networks and like all this stuff. And I think like really the categories that were like best suited to be aggregated have been aggregated already. And there are things like really where information is kind of like the currency. And that's, you know, Uber is physical cars, but like matching a rider and a driver is like actually the thing that is like the kind of core transaction there. And so a lot of those have been taken. I think the opportunity now for vertical integrators is kind of what we're talking about before. You have the ability to combine kind of new physical technology, software, intelligence, all of this in the products that are better, faster, cheaper at higher margin than the incumbents. And I think if you can get those characteristics, you win. And you do that by kind of vertically integrating. I think there's, you know, there's a lot of excitement around deep tech, which I view kind of more as like a science and like really taking a risk of like this new capability that humanity's never had like may or may not happen. Take a kind of a step beyond that is the Spicer company where there's things that are like very cutting edge but proven, like there's no science risk. It's really like how do you design the best system taking the kind of building blocks that we have right now, put them together in a system that does produce those things that are better, faster, cheaper, higher margin.
And is that, so that part about, you know, this multiple cutting edge but kind of proven technology, is that really come down to this fact at this time where now we actually have the software tools and now increasingly the automation tools to actually start making, to start actually integrating these things into the physical world. Is that kind of where that comes from or?
Yeah, I think that's, software is a huge piece of it. Like I can't think of any in the portfolio that don't have software involved. But I will say like it is different for different things. So I'm like, you know, think about Astranis, which I read about, which is building, you know, supersonic planes using turbo-electric adaptive jet engines, and software is like certainly important there. But I would say the big breakthrough is that batteries have gotten cheaper and smaller and more compact and just like pack more punch. And so you can fit, you know, more battery for less mass on a plane and then you can make this engine that never would have worked before in any practical way work. And so like that's the big thing there. You know, I think on the biotech side, certainly CompBio helps, certainly AI for drug design and all that helps, but like there's also just a bunch of different things that Elliot, who's our biotech partner, talks about. You know, the four S's of synthesis, sequencing, software, and scale. And so software is one of those pieces, but there's just a bunch of interesting stuff happening there. I think that is what makes this moment so exciting for me is that if you're an entrepreneur, you don't just have like how do we apply software to a thing that we already do. There's like a hundred, I mean probably six like major categories, but like six major categories of building blocks that you can choose from and mix and match. And we haven't even gotten like super, super wild where, you know, are you building, Elliot's talked about this idea of like atoms are local and you can, you know, to your point, if you're building factories, like do you do that with atoms, these things that are like, with biology, it's like, you know, trees grow everywhere by themselves, like how do you do that for everything else? And we haven't gotten that wild yet, but I do think it's a little bit software, but really just that there's a lot of these puzzle pieces that we just haven't played with for 50 years. You know, a lot of the, I've written about this before, too, but a lot of the ideas that people are talking about now, like if you ask like where it came from enough times, it's from like either a Russian or American paper from the '90s or 1960s. So, like these ideas have been around for a while and we've just kind of let them sit there and now people are kind of picking them up and applying modern technology to them. And so it just seems like there's a ton of space here.
Yeah, it's, there's a lot to unpack there, but I want to go to this next thing. So, you have this, I'm just going through the number, like you have this kind of five-point thing on vertical integrators, right? And the second thing you say is they, these vertical integrators develop significant in-house capabilities across the stack, right?
And so that's like counterintuitive to where it's like focus on one really small piece of something, do it really well or focus in this really specific niche versus like you're essentially building multiple companies in one company. Yep. So let's talk to me a little bit about that.
Yeah, it's the hard part and the hard to catch part. I think like both, you know, it's the moat and the difficulty and I think those two are often two sides of the same coin. I think like one of the comments that I got from somebody in the first vertical integrator piece that I wrote, and I wrote it as a four-part series, was really about like, you know, it's not this static thing that like vertically integrated companies are good and like these modularized components and like, you know, specific products are bad. It's like really where are you in the cycle? And so the second piece I focused on was kind of like the Carlota Perez's older idea, the long waves, and then Carlota Perez's techno-economic paradigms which kind of say the same thing which is like every 50 or 60 years everything is up for grabs again and we like enter the new world whether it's like, you know, steel or oil or electricity or information technology. There's these like whole new paradigms which give you the opportunity to like really kind of rethink the kind of companies and systems that the world runs on. And in the beginning of those, I think the big ones are the ones who are like, 'All right, this world is crazy. What do we do here? We have to like totally rethink things.' And so it takes a company that's willing to like play with all the different permutations and figure out what the right new kind of structure is for the whole 50 or 60 years. Those end up being I think the biggest companies and a lot, if you look at a lot of the techno-economic paradigms. So like if you get that timing right, it's almost more important than like almost anything else.
But give me, can you give an example of that?
For the, Standard Oil in the beginning of the oil age did everything right. Like, you know, so they did refining, but then they went upstream to do the drilling, they went downstream to refining, they, whether or not they actually, you know, owned the transportation themselves in some cases on the pipeline side, but like they had enough muscle that they just made transportation do whatever they wanted. They're like, 'All right, we have this new thing, oil, we don't actually really know quite what it's good for yet. It replaces whale oil and candles and it does all this stuff. Like let's refine it and like see kind of like where the different markets are.' And so like they did a bunch of stuff and like took advantage of this new opportunity. Did a bunch of stuff and then like brought the cost down by vertical integrating, by exerting their muscle which broadens the market for the product but also just kind of figured out themselves like what are the different uses for this new thing that we have here. And I think it takes some of that like you have to kind of do everything and you can't be like really specific cuz you don't even know what you're being specific on yet in the beginning of one of these.
And so, yeah, I think we're kind of in one of those same spots now. And then over time, you know, like as the new systems are in place, you'll notice that certain components in the system aren't as good as other ones or, you know, like there's opportunities to improve particular pieces. And so then over time whether it's the company themselves or new companies come in and try to like improve those specific components. But I think that can lead in the specific company case to the sclerosis that creates the opportunity at the beginning of the next techno-economic paradigm for somebody new to come in. And it's like one of the challenges of being a big company is how do you avoid being the company that's just gotten too stuck in trying to like optimize as opposed to like building the best possible system.
No, it's a good, this is an interesting kind of transition to the incumbent side, right? So, like it's something I think a lot about which is really hard obviously what we're all searching for as funders of the early stage enterprise and the builders and people looking to disrupt the incumbents. But it's really hard in the physical world like they have so much market power, right? Especially around distribution, right? So, that's kind of a big piece of mind that I really like to unpack. What's interesting is you kind of have another point here which you mentioned which is obviously another aspect of this vertical and a greater piece is like they have to directly compete with incumbents and this kind of, this is what's like fascinating I think intellectually about kind of how you've broken this down which is typically you're like, well you need to have a, typically you have to need to have a common thinking is a traditional scientific or technological innovation that allows you to produce something at a lower cost than the incumbent.
And you kind of make the case for like it doesn't necessarily need to be like the actual innovation is the integration.
So like that's like, I don't know, is there, have you been able to kind of identify when that magic happens like or the features around when the integration being the innovation is enough to compete with the incumbents?
Hm. I mean, I think it shows up in the techno-economic analysis, I guess, and I read about this a little bit, but like whether it's a total scientific breakthrough that you've made yourself or whether it's you just like building a system that ends up being cheaper. I think like that has to show up even though there's a lot to be proven, it has to show up in, you know, if we do this, this is what the numbers look like and here's why we operate at, you know, in the case of one of our companies, like $2 per unit versus $7 per unit. And I don't want to give away too much of what the company is, but two versus seven and at higher margins in this industry that is like super competitive and low margin. And so if you can get that and it like takes a while to build the thing and like there's engineering challenges galore and all of that, but like if you get to that point, it's almost kind of like checkmate because the thing is just so much cheaper and you have a business buyer and like at some point if the company that you're competing with like just structurally because it's a completely different product can't respond, you kind of win that. It's a kind of checkmate if you get the thing built. That one's maybe like a little more, there's certainly existing relationships that the incumbents have, although I think the buyers are still pretty price sensitive across the incumbents. And so it's a bit of a different situation. I think in a lot of cases that distribution advantage is like incredibly, incredibly real. And you think that the hard part of these companies is like, oh my god they're doing these crazy engineering things and what they're really doing is, and that is true, but like what the real challenge and where the rubber hits the road is like how do you actually sell this thing and prove to people that that is an advantage. About a company called Meter which is competing with, I guess Cisco is probably the most direct competitor and that's like, I mean Cisco is a distribution company, they have like, you know, 90% of their revenue comes through partners and enterprises just kind of trust Cisco and the kind of MSPs that sell them and manage them and they have that whole kind of system built up. Or, you know, I was a Slack, I was a big Slack bull and the thing that I got wrong on that, and luckily Salesforce saved me, but the thing I got wrong on that was like Microsoft, Microsoft's distribution even with the worst product, I still don't like using Teams, but it doesn't matter, like Microsoft's distribution is just insane. And so you can get killed by that. Meter actually just announced a partnership after I wrote the piece, two weeks later announced a partnership with Microsoft. And so I think like you have to be really smart about what you own and they own kind of vertically integrated end to end the hardware, the software, the operations on this kind of, you know, the network as a service or networking kind of hardware and software. And so because they have that then you can go partner with a Microsoft and work on distribution that way and team up with somebody who's really good at distribution is probably not going to go do the vertically integrated networking hardware play. But you have to be thinking about distribution because that will after all this hard work like that could be the thing that ends up killing you.
Yeah, it's funny. I always, I'm always, because I'm non-technical from background wise. So, a lot of, I just, I learn, I was a constant learner especially in the scientific, on the science side, but I'm chirping in their ear from day one, distribution, distribution, distribution, especially in these spaces because it has kind of has to be part of your product design process.
Because it's like otherwise I've seen so many, especially a lot of folks in like the material space or even the chemical space like they all play the same playbook where they're trying to get these co-development deals from corporates and it's just like those, I mean those are more like to me almost deep techy like where you really depends like that one's tough where like you have specific buyers for your product and I think your buyers like if you do the Porter's Five Forces analysis probably have more power over you and like they can, it's a monopsony for sure.
It's a monopsony for sure. They can squeeze you out.
Yep. And then like that is where you get the valley of death where you're like, 'Wait, like I think a lot of yucky stuff happens when you have to like rely on like a couple of buyers.' Whereas these other ones, it's kind of just like Astranis can build a supersonic plane that is like cheaper than, you know, it's the same price as flying private now and then goes up to like, they build that. People are going to want the supersonic plane for the same price. Like that there is a market for that. And so like, you know, who they buy the battery from that they use to power the turbo-electric adaptive jet engine, like that's a real competition and like, you know, then they have the power over some of those. But if you build like this fully integrated thing that just delivers a better, faster, cheaper product at higher margin, like I do think that ends up being a real advantage. But there, each case, like the thing I love about this is like each case is completely, like each market is completely different and that's why I love doing this and like getting to explore and learn about these new markets. And maybe I'm, you know, I'll wake up in a decade and I'll be like, damn, I like really actually didn't learn about these markets and I underestimated them. But that is a fun part to me is like trying to figure out like just what is the bottleneck in a market or like what is the thing that if you solve it like that actually does change the game versus like, oh this would be cool if this were a little bit better.
Sure. Well, it's funny, you know, I think the modern day capitalist society, right? It purposefully disconnects the consumer from the producer, right? Like, and we even saw it in this last wave of internet with e-commerce, right? So these basically it's a middleman economy, intermediates standing between the buyer and the supplier. That's like really, really hard, that's really, really hard to disintermediate because it's based upon like being opaque, right? The system is opaque on purpose. The systems around production, right? And so I think what's fascinating is one aspect that I don't hear a lot of people speak about is I think which is part of what I gather from your vertical integrator kind of component which is if you own the means of production of the thing you have the ability to remove that opaque nature.
And that's kind of like what consumers, like that's the direction that everything's going, right? That's what consumers want and ultimately businesses are going to do what consumers want, you know.
Totally. Yeah. Yeah. I mean, it's funny, right? Like you, our mutual friend Alex who introduced us, like you look at QB. They're like, you know, it's not a factory. It's not like Caterer where there's a factory somewhere in the middle of nowhere and like they're making pieces and then shipping them out. Like the factory itself is going out into the community. It's like right there and it's shipping, you know, shipping containers on site and you can see kind of how the whole thing works right now. You know, that partnership is through the local developer. And so there's, you know, and then maybe over time like you just have a relationship with QB and like you see there are factories in your community and you just buy directly from them and it's like kind of all transparent. I mean another favorite example of mine that, and I think this is true and maybe something that I kind of try to get at by saying that compete directly but is like also just a more direct consumer play. I think in a lot of these where like if you actually do all the hard stuff in the background like you should take as much of the value as you possibly can. Like Base Power Company I think is another one that I've written about that I think is like brilliant from this perspective.
Oh my gosh. Base Power Company is like absolutely one of my favorites here. They do residential batteries starting in Texas, completely full stack. So, except for, you know, and I think another piece of this is you have to figure out the right level of integration. You're not doing everything, like certainly day one you're not mining your own materials at the very least. And then like where up that stack do you start your integration? Theirs starts at the battery pack assembly and manufacturing level where there, the cell chemistry, you can take whatever the best cell chemistry that happens to be on the market at any given time, you like plug it in and good to go. And so you're not taking that risk that like you're competing with BYD and China and they're just going to undercut your battery costs. You're a beneficiary of those prices coming down. But then they do everything from, you know, like installing the battery in your home. They're your retail electric provider. You don't buy the battery from them. You pay for the install cost, but then they become your electric provider and you and they trade the power and work with the utility. So, they do kind of full stack from that perspective and they're integrating a bunch of different stuff. And I wrote a piece on them which if anybody listening is interested in the topic, I think is like a really good, not because of me but because like they just thought so much through kind of each step of the strategy, like how if you move one thing something else shifts and like that keeps happening and you have to build the system while the different pieces are kind of shifting. And I think they've gotten to a spot where like the system that they build is like integrated just a level that makes a whole lot of sense. But they're like, to me when I wrote the piece it was before they had actually put a battery in any house. And the big risk is not like can you build these batteries and like actually trade the electricity and all that. It's like can you sell to retail essentially and like can you get them to put their battery in the house and that they've gotten a resounding yes on.
Fortunately it's really hard to do. It's really hard to do. Really hard.
It's really hard to do and they've gotten a resounding yes on that. And I think it's just better, faster, cheaper. And like there are some of these where that's a different situation actually. Like if you're in Texas getting, there's 50 different, 100 different retail electric providers that you can choose from. And so there's some that are bigger than others, but like it actually is a bit more of a fragmented market. And so if you can say like, hey actually, and this is like part of the, and story differently but you'll see the point I'm making here is like if you can be this talent aggregator, like this cutting edge talent aggregator in industries that don't have the cutting edge talent, you can say like, all right great, we're going to apply like the best marketing and the most cutting edge marketing in a category where people don't do the most cutting edge marketing, that actually can be an advantage and kind of solve that distribution problem. And I think Base does that well and does that more on like the engineering level where you collect talent that otherwise wouldn't go work in defense. So, I don't know. There are a bunch of disadvantages, but there's also a lot of advantages that you can play when you're a startup.
Sure. Well, it's interesting this, you know, that this is, you know, what I really, I mean, obviously I'm biased cuz for many reasons, but the concept to me that always stood out about the vertical integration and I think with Base, is it Base Power? That's the name you were just saying, which is really, really, what when you're aggregating these different, you're integrating these technologies, what you actually want is all those pieces to be commoditized, right? You want the cheap, it's cheaper, cheaper, cheaper, cheaper, just for the reasons you said. And then you're integrating all this stuff and you want that to be more pervasive. And then because if you're the integrator and then you can figure out distribution, then it's, that's a moat to me, that's a moat.
I agree. Like that is, I think one of the things that prompted me to write the piece was like that tension between like you want things to go really well for humanity, like you don't, you probably don't want to be like the solar panel producer but you'd love to be somebody who benefits from solar panels becoming really, really cheap and pervasive. And I think that's true in like, I mean that most human wins piece and like all, like I think this is just like the general law of business and, you know, this is the Joel Spolsky thing, commoditize your compliments, but it's also that, that's more active, it's also just like find out what's getting commoditized and be a complement to that. But like make sure that you're not that thing that is being commoditized unless you have like a really good plan to build a business that can make thin margins at huge volume as a commodity. But otherwise like mostly trying to figure out what's being commoditized and get above that.
Yeah. You wrote that, that was part of the human strategy letter which we'll get to. But all right so let's step back for a second because how did you get into this? How did you get into the writing? Like give us the background a little bit and.
Yeah. So I started my career in finance. Ended up going to a startup called Breather. Worked there for six years. We did on-demand kind of meeting and work space. So like take a WeWork, chop it up, throw it throughout the city. I'm actually, the office that I'm in now was the smallest space on Breather's whole network. We had like 500 spaces in 10 different markets and then this one just kind of came up for lease and I'm in it now. But it was like kind of vertically integrated but not vertically integrated enough where like you should probably actually if you want to change the way the real estate and office space works like really go for it and just buy the buildings and, you know, like there's just too many middlemen in the transaction I think if you're leasing the space and like everybody needs to make a little bit of margin. So one, like learned how to do hard things. I ran essentially kind of like all of our operations at the end. So all of our real estate, design, construction, like great team. I think we did a really good job and, you know, we ended up being in a market where WeWork and, and Knotel just spent like drunken sailors and like, you know, it was a tough enough business as it was without that happening and then that happened. So like learned a lot about one how you do the hard thing but then like also how important it is to pick the right hard thing to do and like how important strategy is to all of that. But one, I had kind of like one formative experience there which was we in the beginning we just had a bunch of really small spaces. We had an investor who was also an investor in Uber who was like you just have to go out and get as much density and get as many spaces as you possibly can. And the difference of course with Uber is that if like a driver is sitting there without getting a ride like you're not paying that driver. If a space is sitting there empty you've put capex into the space to do construction and then you're sitting on a 5-year lease and so like you're in real trouble. And so we ended up in a spot after that. And we like literally launched a space a day for an entire year, like an office space that we like designed, did construction on, furnished, like it was an intense space with a fairly small team. And where we ended up was just like a total supply glut. And so like we had negative 25% gross margins. We booked these things hourly. So we just had like a team of, you know, cleaners like running around the city cleaning these things and like just like actually not a good business at all. And so one winter break me and a guy named Ben Rollert who runs a company called Composer now, genius, we just, and ran kind of data science for us then, we just locked ourselves in our office over a winter break and like came up with a plan and then like I wrote a, you know, the two of us wrote a long kind of like strategy memo that we sent out to first the exec team and then to the whole company on like why this other way that we should do things was actually better and like mathematically and structurally just like everything competitively all made sense. And we did it and it worked and within like, you know, 6 months we had positive 25% gross margins and like trending in the right direction and we like rallied the company around it. It was like one, strategy actually does matter. Two, being able to write in a way that you can get people, like everyone in the whole company's job changed and got harder in that period because of the plan that we came up with. And so I was like that's very cool that you can like have a plan, strategy matters and then you write it and then you like send it to people and then they just like do things differently. So I left Breather at the end of 2019 after we brought a CEO but had started kind of writing, took a writing course, David Perell's Right of Passage, started writing and then when
COVID hit right after I quit, so I couldn't start the physical space thing that I wanted to. Fortunately, I just started writing and one thing led to another and investing kind of after that.
Cool. All right. So let's talk about because I think you represent really the future of where a lot of capital allocation is going to go, which is kind of this people sometimes call it like the creator VC. So talk just talk a little bit about this transition. You start writing about things that you're interested in and then how you kind of got into I think you're on fund three, is that right?
Yeah. So I started doing had a few friends who were starting companies and asked me if I could like kind of write about their company and like break down the strategy and all of that. Did that and then for one of them a friend put an SPV together and I was like oh I could do that and so I started doing SPVs for some of the companies that we wrote about. That became kind of a pain just on both sides like kind of herding cats in an SPV each time, not being able to go to a founder and say I commit to this amount and it's like I don't know trust me like I'll get some amount of money. And it was the most interesting companies I could find at the time which are nowhere near as interesting in a lot of cases as the most interesting companies that I'm able to work with now just having done this for five years. And so started a fund. Fund One was just kind of Fund One and Fund Two were both 100 companies like let's go wide and not miss anyone.
Yeah. A lot of companies, kind of intentional strategy.
A lot of companies, fast deploy. You know, in hindsight, it looks like a very 2020-2021 strategy and certainly it was, but at the same time I think the 2021 fund is actually doing really well. And so there is something to the don't miss winners thing and there's definitely investments in there that I wouldn't make now that are doing really well. So there's pluses and minuses to everything, but I think for fund three and the future, really limiting it down both on the thesis and the number of companies that we work with is as much a kind of investor product fit as anything else. One, I feel really confident in this thesis and I think it's kind of underappreciated and there's a lot more hard tech now, but I think a lot of that ends up being space and defense as opposed to like what if you did that for everything. And so I think there's this opportunity that just is flashing lights to me. So focusing down on that, but then two, I just want to work really closely and write these kind of as deep a piece on the companies that I work with as anybody has. And so really kind of finding good fit there. And I think it just feels right being able to do these fewer, hopefully like 10 investments a year, but really going deep with the company and providing hopefully something that other investors can't, something beyond capital.
I'm like I don't know if I'm bullish on creator VCs generally and maybe that's a hot take. I think it has to be specific. And I think in 2021 there were a lot of people who had big audiences who could show the product to a bunch of people and I think that's valuable. But I'm hoping that it's not just like oh you back invest because he has 200,000 people on his newsletter. It's really like he can explain our company better than anybody else can and that's valuable in attracting talent, investors, and all of that kind of stuff. I guess there's a pair trade in there where I think Patrick is another example of someone who does this so well. He is a creator, but in the category that he's talking about and investing. And so I think that is a big distinction is like are you a general creator? Are you obsessed with this thing that you do?
So it's actually I have a whole thing. Oh man, you're gonna get me on my soapbox here for a minute because I have a whole thing on this because there's no such thing as the creator economy. It's just becoming the economy. And so there's a fundamental difference which is kind of where I wanted to talk to you about this piece which is the bucket that I put someone like your work in which is creators that are focused on kind of high value industries that actually command but have real authority in those spaces because of the knowledge and the work that they're doing. It's not someone aspiring to be a celebrity or aspiring to just have an audience to have an audience. These are two very different things and that second piece has just come crashing down.
So anyways, authority is probably too strong of a word and not what I'm going for. It's just an obsession, right? It's a thing that if I were not getting paid a dollar to do this, I would still be writing about this stuff and trying to meet the same people and spend time studying the same companies. And so maybe in 20 years I'll be an authority on this stuff, but for now it's just I can be the most obsessed with this.
No, I totally agree. Yeah. It's just your work, just what you do. I get it. How so? Okay. So on this just so kind of the folks know just kind of if they're building in the space and stuff that's relevant for what your thesis is. So can you just kind of drill down a little bit on that? So kind of what you are focused on, general check size, and currently if you're changing.
Yeah. So it's funny. The thesis is like I'd say 80% vertical integrators and then 20% crypto and I think it can maybe fit your decentralization theme a bit here and I've written a piece on decentralization a while back kind of talking about just I think a lot of things are decentralizing and so there's some overlap there. But I do just generally as a way being you either I want you to be decentralized or I want you to be vertically integrated and I don't like the middle stuff. But focusing for the purposes of this on the vertical integrated ones, really looking for and I'm doing kind of more closer to series A because I think I'd rather just be in the one and I think you can kind of tell a little bit better by the series A. But looking for a company that's doing all the things that we've described in an industry that is dominated by a sclerotic incumbent or multiple sclerotic incumbents and really bringing together the best possible talent, being clear-eyed about the capital that you'll need to raise, having the right system level integration and not deep tech as much as really just a vertically integrated solution using the best technology that's kind of proven out.
And that can be in I was talking to somebody about this the other day I don't know what category I'm looking at actually. There are plenty of examples in the portfolio where QB again, what I've looked at housing and that's a market I'd love to go and do something like Katera did that seemed like a fun adventure for investors like not at all. But then you talk to Olegen and Alex and you're like actually this makes a lot of sense. Or we have a telco in Colombia which is clearly I'm not looking for telcos in Colombia. I thought telcos might be the wrong kind of layer of the stack but they had a plan to really actually just deliver a better, faster, cheaper product at higher margin than incumbents and so absolutely. And it's a just killer founder. So category I'm open but it's really are you going for the thing like do you want to sit on top of the industry that you're in as opposed to like you found this niche where you can sell a particular product and make something. I want the whole thing, the whole enchilada.
Okay. So just to kind of wrap that piece so and then you're typically you said are you typically leading or are you co-investing not leading?
Typically co-investing not leading.
Cool. And hopefully going up soon. But I think on the not lead thing there has to be an alignment with the value you deliver and I don't think a deep dive is worth your lead spot at the series A but I think it's certainly worth having on your cap table and so I can make that argument very compellingly.
