bulls, bears, and moths
Q3.24 LP update excerpt
Below are some objections I’ve heard against Moth over the past few years and my thinking. Not solicitation in any way.
#1: Moth’s fund size isn’t big enough to get meaningful ownership in companies.
My checks are small and I write a lot of them — my portfolio construction is designed for a straightforward power law distribution where one or a few breakout companies will 10x+ the fund without needing to own a big chunk of any one company. These incentives allow Moth to be highly collaborative with basically all other investors. Over time I plan to prove my right to more ownership but for now, I play where I can punch above my check size’s weight and optimize each fund for outsized returns.
#2: I don’t have the makings of a VC.
It’s a fact that I don’t have a long angel investing track record or pedigree from a top firm. I didn’t found a company and don’t even have aggressive finance girl traits. I went to film school, did a variety of product/design/marketing roles, and discovered a love for investing by becoming a Sequoia scout. What I look for in founders is based on what I’ve observed about the exceptional people I found myself surrounded by — primarily observations about the founders I worked with, consulted for, and became embedded in networks alongside. I became obsessed with understanding and serving these outlier people. Sharing my writing on the subject over the past four years demonstrated that I speak their language — attracting and continuing to build trust with the kind of ambitious future founders I aim to back.
#3: Moth won’t become known for anything if I don’t specialize in a sector.
I want Moth to be known for taste, thoughtfulness, and putting people first. While hot sectors change and business ideas pivot, people continue to be the core atomic unit of this industry. I’d rather get fewer high-quality deals from people who know my taste and can attest to my value as an investor than lots of deals of questionable quality that ask me to x-ray the future and pick the ideas that will win. Focusing on the founders instead means I have very different relationships with/perspective on the ones I do end up backing — I’ve generally known them for longer, understand their strengths/weaknesses, and am considered a peer, confidante, and thought partner.
#4: My access to the best founders in my cohort isn’t a durable edge on which to build a firm.
This is true, but fortunately a fruitful source of dealflow at present and also not all I invest in. I view my proximity to the best founders of my generation as long-term relationships that will prove my ability to pick well over time. I’ve observed how the incentives of this industry reward VCs for optimizing for optionality constantly, translating into noncommittal flaky behavior that creates a terrible experience for founders. The best way to avoid this trap is by aligning myself with long time horizons as a sole decision-maker dedicated to making investing my career. This industry is changing and my approach will evolve with where I have founder PMF.
Your writings are a breath of fresh air. Thank you for sharing and for being stubbornly independent in your thinking.
That ARD article is like a time machine.