Announcing the launch of Contrarian Thinking Capital

Investing in boring business for a not-so-boring return, or in sweaty startups for a sexy return.

However you want to say it, that is our goal.

On March 2, 2020, I sent out the first-ever Contrarian Thinking newsletter, History Doesn’t Repeat but It Rhymes.

I started it with this:

“If I have learned one thing as a former journalist, turned pundit, turned public markets investor, turned "Gasp" private equity investor, it is that your life and your bank account are largely tied to your questions. Questions reveal if you, my friend, are a critical thinker... or an instant believer. Unfortunately in this world of ours replete with fake news, narrative, spin, information inundation, and social stigma programming, the worst thing you can be is an instant believer."

So I decided to re-start my old newsletter to help you "Think Like A Contrarian."

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, find the truth amongst the noise. To help people question everything and build your bank account as financial freedom leads to all freedom.

Fast forward a year, 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, although I kinda think we’re still just getting started. There’s been one thing ya’ll have said to me time and time again, “Can we invest in your deals, Codie?”

To which I’ve replied man I wish the SEC would make that easier and the markets were not at all-time highs. Then an idea came to me, and today it’s become a reality we’re sharing with you:

Contrarian Thinking Capital.

Contrarian Thinking Capital is a target $5 million venture fund that invests in companies with the potential for outsize returns that most people use but never think about.

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 ignoring the hype and finding companies that solve long-term problems at reasonable valuations with an eye toward tech evolution. Here’s the cool part:

This time we are doing something a little different.

1. For the people, not the institutions - All my past funds were institutional aka never for the everyday human. 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. And also - I know you also believe in more access to ownership for all of us so this is gonna be fun.
2. 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 to ya’ll about it. Now I am actually going to bring this fund to Contrarians first and ideally, ya’ll and a few friends will be the only ones we talk to about this bad boy.
3. Small and nimble - My other funds were 100’s of millions of dollars or billions of assets. This will be a small fund, so I am going to cap the total amount investors can give.
4. 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?

1. I reserved LP spots for Contrarian members. If you’re an accredited investor interested in investing, there are more details below.
2. I’ll split carry with any Contrarian reader who introduces me to great companies that I end up backing.

Now the question you should be asking yourself is, what is different about this fund?

What is your investment thesis, Codie? Why should we even think about this? Well I’ll show you what I wrote late one night about where I wanted to put my money. I always write out an investment thesis before I start allocating capital. Here’s how I decided to put my own money to work here.

Investment Thesis: Peek into my memo

First, there is a reason why we haven't raised any money or 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 now. For every fund you invest in you should think about three things in my humble opinion:

• Why now?
• Why this asset class?
• Why this team?

The why now is because we are going to invest as companies' valuations start to pull back and focus on profitability. Now let me tell you why this asset class and strategy.

We invest at the intersection of 4 trends. Here’s the idea:

1. Small business M&A 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.
2. Alternative investments will become non-alternative 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 to support it will balloon.
3. We believe 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.
4. 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:

Contrarian Thinking Flywheel

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. That’s why we invested in OpenFortune, a fortune cookie ads company you’ve never heard of that we exited for 12x. 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. We’re patient with a long time horizon and think in decades.

Investment stage and check size?

We invest and back founders raising equity at pre-seed, seed, and Series A in the US and Latin America. 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 the companies I’m excited about as examples of what we’d invest in together given what I’ve invested in before.

​Unsplash - (Series A- now acquired by Getty Images) A free photo-sharing app that leverages real-world photographers and their photos 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. It’s all stocks, ETFs, mutual funds, or nothing. LIT is trying to fix this, building a platform for the independent financial advisor to access private market investments and alternatives, easily, quickly, and with a dashboard. 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 is solving this, to provide standardized and scalable infrastructure across the region so that Latin America's digital economy can run on Kushki.

​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.

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Investing In Contrarian Thinking Capital

Here’s how my mind is working inside of deployment. First, if I had to pick a target, a lovely little bullseye of what we are going after it would probably look like this here list where you can even send us deals you think we’d like.

A Target Company Looks like This:

1. launched product with at least 12 months of data (not just an idea)
2. well-rounded technology and business team
3. half of your round committed (we can be first money in, but I’d rather not)
4. 6-months of growing at least 10%+ month-over-month (or a solid metric to show traction aka Franshares having a 20k person waitlist we helped them grow - wink)
5. 18-months+ of Runway. You have a clearly defined plan to deploy the capital from this round over at least 18 months. i.e. if your burn rate is $50,000 a month, you are raising at least $900,000 in this round, giving you 18 months of "runway."
6. $100K to $5M in ARR
7. We participate in later rounds, ie series B or Series C, if it's with a known lead investor (i.e. Founders Fund, Sequoia, Benchmark) or more established business

Our thesis - during hype cycles we want boring-ish sectors, not hype machines.

Our framework for investing?

I’m a sucker for a good scorecard. I helped us build out and tweak this version through quite a few of my investment co’s now. 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 forget to see into their vision? Do we invest in a deal that can only really ever be a $30Million company and we’re investing at a $20Million valuation? That’s probably not the best upside. Thinking with an eye towards winning AND towards winning the right game.

Outcome Calculator

We like to use a portfolio company outcome calculator to play around with future projections. This one is courtesy of another VC fund I helped with Magma Partners in Latam. We tweaked the model to run through all of our deals (numbers below are made up*)

As you can see I got a thing for models and numbers. HOWEVER, none of that fancy 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 and later-stage opportunities, 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. You can play games.

We are not looking for base hits here. We need to believe companies can 10x at least and we need to take big swings with companies that can 50-200x. That means we’ll be early stage and we’ll spread a wide net with an eye to matching valuations without going cheap.

Boring but Kinda Not Boring

I love to give a hard time to the hypebeasts in the cutting edge industries but the truth is actually that I find beauty in the boring. This portfolio will most likely have a slant toward fintech because most companies that are unicorns have some finance component to them. When everyone is trying to get TikTok famous the real money is in the platform not in the face.

After all 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.

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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, pushback, and deals.

So if you want to get involved?

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. (You can login with your social account or AngelList account to view the fund page then follow prompts to apply). How will it be allocated? You have to be accredited or qualified. I am going to slant it to people who have been long-time readers, who open our emails, who have engaged with our stuff, come to our conference, etc. Also - strict no a-hole policy. If you are wondering if this isn’t for you, it’s probably not. I’m not the best hand-holder.

Deal Partners

AngelList has a neat feature… Deal Partners. It means I am now able to share carry in specific deals 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 for a long time, and this all could not work. Now 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. I think that’s irrational. 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 started investing because I believe financial freedom is critical to all freedom. I started building in Latin America to create financial freedom for other Latinos, I started sharing content to free more humans. I started this Contrarian Thinking Capital fund to help more people who haven’t historically had access to deals and the opportunity to change that. I also did it 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

PS. When you click the button, it'll prompt you to login. If you don't already have an AngelList account, set one up, and log back in to see the prospectus.

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