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I can’t make angel investments in tech companies anymore because of my Foundry Group fund agreements. So I’ve been making angel investments in food companies. Justin’s Nut Butter, Rick’s Picks, Blue Bottle Coffee, and Quinn Popcorn are some recent examples. I figure if things don’t work out at least I can eat some of the inventory.
I ran into the guys from Barnana at an event in San Diego a few months ago. Matt and Nikk came up to me with a Box of Barnanas and said Brad we’re in the banana business, and we think you’ll like our banana snacks. They literally handed me a box of bananas, filled with these delicious organic banana snacks called Barnana. They have since vanished into my stomach. They are insanely good.
I’ve stayed in touch with Barnana guys as they have continued to grow into new channels and regions. They are now launching the Rocky Mountain region with Wholefoods and Natural Grocers Vitamin Cottage. More Barnanas for me.
Interestingly, a majority of the Barnana team is comprised of tech guys. It seems more and more people are entering the fast growing natural foods space from other high growth industries like tech. I asked Matt why he feels natural foods world is so appealing to techies.
“We are transitioning from a price based economy to a meaning based economy. Not only meaning for your customers, but meaning soup to nuts throughout the entire organization. The notion of meaning is supported across multiple verticals, from the maker revolution to local and organic foods, to the various kickstarter campaigns. It’s simple – people want meaning. And bananas.”
The Barnana guys passion for bananas is beyond belief, and their story is just as good. And – as a runner – I’d rather eat chocolate covered bananas as a snack instead of Hammer gels on a medium run.
Once a quarter my partners (Seth, Ryan, Jason) and I spend 48 hours together. Unlike a typical offsite that ten zillion organizations have, we tend to spend less time on formalities and more time on wider ranging, forward looking discussions about what we are doing, both professionally and personally.
Last night, over an amazing meal, we ended up talking about what we’ve been investing in over the past four years. When we reflect on the 37 companies we’ve invested in since we raised our first Foundry Group fund in 2007, we’re delighted with the mix of companies and entrepreneurs we are working with. We have a very clear thematic strategy that we’ve discussed openly, along with a few other key principles such as being willing to invest anywhere in the US and being syndication agnostic.
At dinner we zoned in on all of the current activity in early stage tech. There’s an awesome amount of exciting stuff going on right now and a real entrepreneurial revival throughout the US. Sure, there’s all the inevitable bubble talk going on which I’ve encouraged entrepreneurs to simply ignore and play a long term game instead, and once again many VC firms are spreading themselves wide and chasing after whatever the latest interesting thing is. But entrepreneurship, especially throughout the US, is vigorous, exciting, and creating many really interesting companies, some of which will be important in the future.
When we think about what has driven the success of some of our investments, we realize that we’ve chose the macro environments to invest in really well. Our HCI, Adhesive, and Distribution themes are all great examples of this. With HCI, we are at the very beginning of a massive shift over the next 20 years around how humans and computers interact. Adhesive plays the macros of digital advertising – every year meaningful ad spend is shifting annually from offline to online and that will continue for quite some time. And with distribution we’ve benefitted from the application of the concept of social to extremely large existing online markets where innovation had stagnated.
Our conversation shifted to 2015. While we still believe there are many exciting opportunities within our existing themes, we think that given the velocity of technology innovation and the way we use technology, things will shift dramatically over the next four years. Completely new and unexpected innovations are emerging and entrepreneurs who are obsessed with transforming existing industries, creating radical new technologies, or dramatically changing the use case of existing technology are starting to work in 2011 on things that will matter immensely in 2015.
We have one new investment coming up that reflects this and, when we start talking about it, you’ll see the kind of entrepreneur and company we are searching for. We decided last night to look for a lot more of it. While our deeply held beliefs about what we invest in and how we invest are the same, we’ve decided to open up our intellectual aperture and make sure we’ve incorporated a stronger view of “what is 2015 going to be like” into our thinking.
As I read the Berkshire Hathaway 2008 Annual Report, a thought kept popping into my mind that had also come up over and over again while reading Bogle’s Enough: True Measures of Money, Business, and Life. “Be an investor, not a speculator.”
As a venture capital investor, I have a long term time horizon on my investments. Since I’m investing very early in the life of a company, I’m usually an investor for five or more years. Sometimes I’m an investor for over ten years. I’m rarely an investor for less than a year, although it happens occasionally.
I don’t invest directly in the public markets and I haven’t for a long time. Periodically I end up with a public company stock as the result of the sale of a company I’m an investor in to a public company, or via that mythical thing called an “IPO”. In these cases, I have a very specific strategy for exiting my position in the public company over time.
I do have public market exposure, primarily through a combination of index funds (and equivalents) and some hedge fund investments with friends. However, I pay zero attention to this on a daily, weekly, or monthly basis. When I look at the aggregate performance over any meaningful period of time, it is irrelevant when compared to my performance as a VC and angel investor.
When I reflect on this, I realize that I spend 99.9% of my time as an investor and 0.01% of my time as a speculator. Whenever I realize that I’m in a speculative thought process (such as noticing the Dow on CNN on the ubiquitous airport TVs), I immediately try to stop. My goal is to spend 100% of my time as an investor.
Not surprisingly, there’s a huge amount of noise going around the system about speculation that is masquerading as investment. Worst, the two get conflated on a regular basis in the context of what the government should be doing (e.g. incenting “investment” when they are merely either "incenting speculation” or “encouraging speculation”). Of course, the endless stream of talking heads in the media don’t help this distinction.
When I read Buffett or Bogle, the distinction between investment and speculation is painfully clear to me. I believe that much of the pain the global financial markets are feeling right now is a direct result of speculation. As a result, I’m trying to come up with some simple parables for “investment vs. speculation.” For example, “if you don’t understand what you are investing in, it’s speculation.” Or, “if your time horizon is less than two years, it’s speculation.”
One of values I’ve always adhered to is that “I’m an investor, not a speculator.” Now that the government is deeply in the mix, I think we need to spend a lot more “system time” thinking about how to incent and motivate investment, and how to avoid speculation.