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Announcing the launch of Contrarian Thinking Capital
In the future, all small businesses will be tech-enabled. We invest in the startups that will power the evolution of small businesses and investing.
Investing in boring business for a not-so-boring return, or in sweaty startups for a sexy return.
That is our goal.
On March 2, 2020, I sent out the first-ever Contrarian Thinking newsletter with a goal to:
“ We will challenge the status quo to achieve what most believe is impossible. ALL the best opportunity is found in the disconnect between our common narrative and the truth.”
For more than two years since then, we’ve been trying to do just that. To help people question everything and build your bank account as financial freedom leads to all freedom.
Fast forward and we have:
- 50 million views a month
- 1.5 million followers across our social media and newsletter
- Invested and built 100’s of companies as an ecosystem
- Invested in 33 companies individually
And we’ve all made a lot of money together. There’s been one thing ya’ll have said to me time and time again, “Can we invest in your deals, Codie?” Today the answer is finally… maybe.
Contrarian Thinking Capital.
We invest in the startups that turn fax machine using companies into... auto text when your service is done companies.
Contrarian Thinking Capital is a small venture fund that invests in companies with the potential for outsize returns that many use but never think about.
We don’t want to just own the laundromats, cleaning companies, and car washes of the world. We want to own the companies that take them from writing your invoice on a sticky note, to auto-billing you.
We’ve invested in 100s of small businesses and noticed one trend, as the next-gen takes over: tech is coming.
While everyone is focused on Web3, metaverse etc we obsess on traditional businesses making it big with tech. We’re not competing with Silicon Valley, we’re doing boring business investing on steroids.
Tech + boring + 30.2 million small businesses = MASSIVE opportunities
Venture investing allows us to own a piece of the underlying platforms and technology that will power the future of our world. Our goal with this fund:
- Own the entire small business ecosystem.
- Invest in the tech that powers it.
- Strive for VC-like returns in boring businesses.
We’re looking for boring businesses that can scale to billions. Especially when the market pulls back. Making small businesses faster, cheaper, and better operating.
Quick notes for investors:
- You must be accredited
- 20% net carry: carry earned only if the fund is profitable
- The minimum Commitment is $50k over 2 years but you will be prompted for 25% of your investment upfront ($12,500)
- We’re looking to close over the next 3 weeks but will close as soon as fund target is met (don’t want to exceed it)
Venture capital is a potentially rewarding long term game. We’re looking for long term people.
If you want to learn more about it:
But in order for this to be useful to everyone who wants to invest or not I thought I’d give you the way longer version.
So if you’re super detail oriented read on, if you want to get right to specifics click above.
Ya’ll know I've been building, investing, buying, and selling companies for 15 years. I’ve done billion-dollar deals and deals for $10k, the through-line is finding companies that solve long-term problems at reasonable valuations with an eye toward tech evolution.
This time we are doing something a little different.
- For the people, not the institutions - All my past funds were institutional. I mostly invested for pensions, sovereign wealth funds, and the uber-wealthy family offices around the world. Now it looks like a few of my former hedge fund managers, family offices, and pension managers are on this list and investing so let me first say LOVE ya’ll but this fund is open to a wider net.
- Not private, built in public - In the past, I did qualified investor-only funds or what’s called 506(b) aka private deals. This fund is listed as a 506(c) which means I can talk about it.
- Small and nimble - My other funds were 100’s of millions of dollars or billions of assets. This will be a small fund.
- Putting my $ where my mouth is - I’m going to put anywhere from 2% to 10% of my own capital into this vehicle. For comparison, most managers I’ve seen on AngelList do 1%.
What does this mean for you?
I reserved LP spots for Contrarian members, if you’re an accredited investor interested in investing.
Now the question you should be asking yourself is, what is different about this fund?
Investment Thesis: Peek into my memo
First, there is a reason why we haven't done any public deals in 2 years. Early-stage investing markets were incredibly overvalued in my humble opinion. THAT is about to change. We are already seeing late-stage venture companies do down rounds and decrease their valuations. That is why we are raising right now. For every fund you invest in you should think about three things:
- Why now?
- Why this asset class?
- Why this team?
We invest at the intersection of 4 trends. Here’s the idea:
- Small business acquisitions boom. Going back 20 years, real estate was transformed through the retail investor’s ability to invest and access the asset class. We believe small businesses are about to transform. From Mr. Carwash IPO-ing for billions, to Pipe (fastest co to $1B) monetizing inventories, to Nayax ($1.89B market cap) allowing for credit card processing on cash businesses the boring biz world is evolving. There are currently millions of small businesses for sale, millions changing hands, and we are positioned to capitalize on their infrastructure.
- Alternative investments will be normalized in the future. We’ve already seen this begin with companies like Fundrise ($5B valuation) allowing access for retail investors to real estate. In the future fractionalized alt ownership will be normalized and the infrastructure needed will balloon.
- Small businesses are the lifeblood of America. There are more than 31 million small businesses. I’ve spent my life investing, buying, and building such businesses, with a current vested interest in 33+ companies. There is an opportunity to build the infrastructure from fintech to adtech, to SaaS. These businesses are passing from the last generation to the tech-enabled generation creating new offerings throughout traditionally “boring” industries.
- Service-based businesses moving online. Whether it’s a doctor's practice that adds an educational online component, a landscaping company that changes to subscriptions and 3D models, or a software taking storage centers customer service online we’re looking for businesses that take humans and 10x their effect through technology.
Our Contrarian Flywheel?
We do three things differently than other early-stage investors:
First, we’ve built one of the largest and most popular independent media companies in investing and small business. Our audience creates an unfair advantage. We get into deals because we are more than capital, we are the audience, top-of-funnel, employee hiring, influencer connecting, and investor accelerating. Our money is a multiplier in a world of capital as a commodity. We de-risk investments because we can vet them by our audience to see firsthand the churn, LTV, and traction. We get sent 100’s of deals weekly and do our fundraising with a few clicks as opposed to long roadshows.
Second, while everyone else looks for the sexy and the new, we find the beauty in the boring. We get our hands dirty looking at the opposite of social apps, NFTs, and the next tulip bubble. We aren’t looking for flashy PR stunts or the illusion of progress, we’re looking for companies that refine, processize, and commit.
Third, we think like owners, not venture capitalists. When we structure deals we attempt to coordinate with the companies for additional warrants, options, distributions, and upside on the value we deliver. We do not prescribe to the 'grow at all costs while unprofitable' model. Growth is paramount but not at all costs.
Investment stage and check size?
We invest and back founders raising equity at pre-seed, seed, and Series A . Our check sizes will vary but range from $25,000 to $200,000.
We will reserve up to 20% of the fund for secondary investments in private companies that have product-market fit. This would have included opportunities like (Pipe, Robinhood, Homebase, etc). Ps yes, I am still kicking myself for not investing because they were too late stage.
Contrarian Thinking Capital Company Examples:
Here are a few of companies I invested in before that could fit our thesis:
Unsplash - (Series A - now acquired by Getty Images) A free photo-sharing app that leverages real-world photographers instead of stock photos. They solved the “ugh that looks stock,” issue to create the world's largest collection of photos online.
LIT - (Seed) If you have a financial advisor you know, they have terrible product offerings. LIT is trying to fix this, building a platform for the independent financial advisor to access private market investments and alternatives, easily and quickly. This company is founded by Joe Lonsdale (Founder of Addepar- $2.7B valuation, Palantir - $23.4B).
Kushki- (Seed stage - now $600M valuation) Imagine none of your banks talk to each other, you travel from one state to another and your credit cards don’t work, and the big businesses have the same problem state to state. That was payments in LatAm. Kushki solved this issue.
Kin Insurance - (Series A - now $500M valuation) A home insurance startup, to solve that getting home insurance sucks, it’s confusing and overly complicated. They started in states with volatile weather, where data can be a real advantage. Maybe that’s why they’ve surpassed a $100 million run rate and grown 300% YOY.
Investing In Contrarian Thinking Capital
First, if I had to pick a target of what we are going after it would probably look like this here list where you can even send us deals.
A Target Company:
- launched product with at least 12 months of data (not just an idea)
- well-rounded technology and business team
- half of your round committed (we can be first money in, but I’d rather not)
- 6-months of growing at least 10%+ MOM (or a solid metric to show traction aka Franshares having a 20k person waitlist we helped them grow - wink)
- 18-months+ of Runway. Clearly defined plan to deploy the capital over at least 18 months i.e. if your burn rate is $50,000 a month, you are raising at least $900,000, giving you 18 months of "runway"
- $100K to $5M in ARR
- We participate in later rounds, ie series B or Series C, if with a known lead (i.e. Founders Fund, Sequoia, Benchmark) or more established business
Our framework for investing?
Here’s the investment memo we fill out for each company. This is more of a mental exercise, why are we doing this investment? Have we thought about all the segments of the deal? We aren’t trying to write a novel but make a case for or against it.
Then we have a varying set of matrices for 9 important aspects of each deal. We rank the team and the company on each of these varying segments. A “perfect” company could have 45, a disaster company could have “0” although the middle is more common.
The scorecard is also an insurance that when we go through due diligence we’re thoughtful. Do we only ask about the product? Do we invest in a deal that can only really ever be a $30Million company and we’re investing at a $20Million valuation?
Outcome Calculator
We like to use a portfolio company outcome calculator to project. This one is courtesy of another VC fund I helped with Magma Partners in LatAm. Numbers below are made up.
None of that forward-looking guesswork really matters if we pick the wrong companies.
- Strategy: If we have a $5million fund, we’d need to do about 40 deals at $100k and leave the rest for add-ons, which leaves us with $1million or 20%.
- At that rate, we’d need 1 to do 250x to 5x returns, or 1 at 50x to return the fund, or 10 at 10x to 2x the fund, etc.
We are not looking for base hits here. That means we’ll be early stage and wide.
Boring but Kinda Not Boring
The sneaky truth in startup investing (aka sexy) is that most of what they do is actually kinda boring. Legal tech doesn’t exactly get your toes wiggling, big data isn’t going to get you the girls but when you pair them with the everyday, it turns out that is all VC really is anyway.
Contrarian Thinking => Contrarian Thinking Capital
The truth about all this above is Contrarian Thinking Capital isn’t really my fund. It’s ours. 1.5 million of us Contrarians, 100k plus of you on this here newsletter. If I believe one thing it’s that this will be the future. More and more solo-GP’s will exist and will win, which it turns out is no longer a contrarian viewpoint. But the one thing they’re missing is that I’m not really a solo GP with a small team, I’m a conduit to all of your best ideas.
Invest in Contrarian Thinking Capital
I am not reserving seats for all of you… I AM STARTING WITH ALL OF YOU. If you take all the seats then I won’t even send to my institutional investor list. If you don’t I will. So here's where you can get started.
Deal Partners
AngelList has a neat feature… Deal Partners. It means I am now able to share carry with the people who introduce me to deals I invest in and don’t previously have a relationship with. How it works: if you introduce me to a founder and I invest in the company based on your intro, I’ll share some of the carry on that deal with you. SUBMIT HERE.
THE ADULT SECTION
Before you go any further this is the adult section. I unfortunately or perhaps, fortunately, have no control over these companies after we invest in them. That means any and all investments can go to zero, and surely some of them will. It also means we are making bets on the future of SMB over the long term, there will be ups, there will be downs, there will be lockup periods, and this all could not work. That’s not my goal but every manager should always say it. We cannot control the outcome, so never invest what you cannot afford to invest, don’t overextend, and don’t expect unicorns and cash flow to rain down on you. Instead expect to learn and do everything we can to pick companies we think will win. That’s all I can promise anyone.
The Long Term Game w/ Long Term People
I structured this in a way where I know that in 5,10, 15, and 20 years from now I’ll still want to be betting on the future of business owners to make our world better. This selfishly is where I want to put my money.
After all, ownership is the key to wealth, I hope to open the doors to becoming an owner to more humans. I hope to help bring more companies we want to exist to our audience and to the world, one tiny little check at a time. :)
And for our founders, I hope to beat you up if you get ridiculous on your valuations or terms. Stick with the Silicon Valley VC's for blank checks. Let's do this.
Codie
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