I recently had a conversation with an entrepreneur who’s started several successful businesses in various industries. He was telling me about the latest company he’s working on. It’s a waste management space, and the company will remove trash from residential homes. He doesn’t have experience in this industry, so how did he decide to start this, I wondered. The story was that he heard from a friend about the opportunity to obtain a contract (i.e., recurring revenue), investigated it, and decided it could be profitable. He went to work finding a cofounder and developing a strategy to execute the work.

During our chat, I realized a few things:

• This isn’t a space this founder is passionate about; he just saw an opportunity he couldn’t pass up. 
• He isn’t planning to scale this company. He just wants to have a few reliable customers and build a small, reliable team to execute the work.
• This is a small (and tough) market, so there isn’t an opportunity to create large amounts of value for others and recognize that value through appreciation of the company's value. Rather, it’s an opportunity to create a steady stream of cash flow by providing a service that people don’t want to do, but also don’t highly value.

During my conversation with this entrepreneur, I realized something. Some entrepreneurs are gifted at creating small companies that essentially exist to generate cash flow for the owner. And they do this repeatedly. They’re great at taking a company from zero to one—to getting the machine started—but rarely think about the problem’s market size or how big the company could be. They focus on getting the company to the point where it can distribute a certain amount of cash to them, and when it does, they’re happy. The idea of reinvesting cash into growth opportunities to scale the company doesn’t cross their mind and doesn’t interest them when it’s brought to their attention. 

I think of these gifted people as serial cash-flow entrepreneurs.

This week I had the opportunity to attend a holiday party. As I mingled and chatted, I noticed that no one was talking about work. I heard conversations about life, family, fun experiences, and funny stories. After the party, a group of us went to dinner, where we learned more about each other and our significant others.

The party was wildly successful. I watched people enhance existing work relationships, making them deeper and more personal. And I watched people establish new relationships with others they didn’t know they had things in common with. 

My takeaway is that I’m a fan of holiday parties. It’s a great time for people to connect outside work and build deeper relationships based on who they are, not the work they do.

I chatted with an aspiring founder recently. He’s a senior software engineer at a start-up valued at a few billion dollars. He’s been there for several years. He joined when they were a team of one hundred—it’s now one thousand. His equity is fully vested, and he’s excited about leaving to start his own company.

He’s currently in search of the problem he wants to solve. He’s investigated a few problems and done discovery, but none panned out. He’s also looking for someone to join him. Specifically, he’s been looking for someone technical. This stuck out to me, and I asked why. His response was simple: I want to be CEO and need someone to build the product.

As we chatted, I shared my learnings as (1) a nontechnical founder who regretted not having a technical cofounder and (2) an investor who’s talked with countless aspiring nontechnical founders who deeply understand a problem and have an idea of how to solve it but lack the technical skills necessary to build a solution:

• The problem is where it all starts. The more painful it is and the more people who experience the pain, the better. If you haven’t found the problem you want to solve, there’s nothing wrong with listening to the problems other aspiring founders want to solve. Nontechnical aspiring founders with deep understanding of a problem (i.e., founder–market fit) are always looking to connect with aspiring technical founders.
• Building a team best suited to solve a particular problem is the goal. Great team members have complementary, not overlapping, skills. Hiring people to do what you don’t want to do will likely lead to overlapping skills and team gaps (in his situation, great technical abilities but no deep understanding of a problem—or no problem at all).
• Titles don’t mean much in early-stage companies and often change. Having the CEO title is great for the ego, but it isn’t worth missing out on solving a great problem or working with a strong team.

These points resonated with this aspiring founder. He’d recently realized he was limiting his cofounder prospects by focusing only on people with technical skills and had been thinking about changing his approach. What I said about my experience confirmed some of what he was already thinking. 

This founder is super smart and has the drive to build an amazing business. I can’t wait to see where his entrepreneurial journey takes him!

This is my one-hundred-ninety-second weekly reflection. Here are my takeaways from this week:

• Home stretch – It’s December. We’re in the last leg of the year. I want to make these last few weeks count. My intention is to focus on only the highest-priority things for the rest of the year. 
• Daily habit – I’ve been intentional this year about learning something new every day. This week I noticed that I felt unsettled one day when I hadn’t learned anything new. It was a welcome feeling because it meant this habit had been formed and my mind was expecting something new. Before the day was over, I cracked open a book on a topic I’m interested in.

Week one hundred ninety-two was another week of learning. Looking forward to next week!

This week, I caught up with an emerging venture capital manager who’d held the first close on his $100 million fund, which is the firm’s second fund. They closed on $33 million and are actively working on closing the remainder—they have a line of sight to the full $100 million. As expected, he said fundraising has been harder than anticipated, but he did share a few things that have helped him get to the fund’s first close:

• Exits – His first fund has had three portfolio companies exit. Another pending exit of a portfolio company to a large publicly traded technology company is closing soon. These exits have demonstrated to potential LPs that he can find promising companies early and return cash to LPs.
• Thesis – Fund I was a generalist fund. He realized his team is best suited to invest in specific areas given their backgrounds—and that other funds generally struggle to invest successfully in those areas because they lack the relationships and deep understanding to properly do their due diligence. Fund II now has a thesis around these areas, which has resonated well with potential LPs. 
• Team – The team he put together has a stellar track record in the roles they held before joining his firm. They have deep domain expertise and relationships in the areas they invest in.
• Hustle – He leaves no stone unturned and stays hungry. He’s diligent about follow-up, asking for intros, and delivering what he committed to on time.

My big takeaway from our chat was that his success has been driven by his tenacity, reflection, and willingness to continually learn and evolve throughout the fundraising process. I’m excited for this manager and looking forward to following his journey.

I love talking shop with entrepreneurs. Today I was at a social gathering where an established entrepreneur told me about his approach to acquiring new customers. He runs his business out of Atlanta, but there’s heavy competition (i.e., low margins) in Atlanta. He’s from a smaller city three hours from Atlanta. The people in that community don’t have access to the caliber of products his company sells. They’re used to paying top dollar for low to medium quality and driving an hour to do so.

He devised a simple marketing strategy. He’s an alum and former athlete at the local high, so he sponsors the football and basketball teams. His company logo is painted on the football field, and every time the home team scores, the announcer reminds the fans that his company backs the team. He bought the scoreboard for the basketball team with his logo displayed front and center. His goal is to stay top of mind with the people in the community, and it works. When they’re ready to buy, they think of him. He makes the sales process electronic, simple, and smooth. He arranges for purchases to be delivered to their door. They get a better product at a fair price and support a business that supports the community. This strategy is highly effective. He gets a steady stream of customers from this low-tech approach, and his average cost to acquire a customer is ridiculously low.   

What this entrepreneur realized was that there’s an underserved customer niche that he understands better than most. He focuses narrowly on them. He markets to them in a way that resonates with them and that has the dual benefit of doing good in the community. He made the sales process something they could do from their home, which they weren’t used to. The end result is that he’s built a thriving business and is the market leader in that city using a very low-tech and inexpensive marketing and sales strategy.

Charlie Munger died today at the age of 99. Most people know him as Warren Buffett’s right-hand man, but he was an accomplished investor before he joined Berkshire Hathaway. As I’ve learned more about public-market companies this year, I’ve also learned about the investors who’ve generated outsize returns in public markets. Munger was one of them. I’ve enjoyed learning about his investing philosophy, mental models, and unique way of viewing the world. He was a gifted person and investor who lived life by his own rules.

RIP Charlie Munger.

Small-parcel shipping is an industry I learned about as a founder. We spent over a million dollars on shipping in some years, which forced me to learn the industry. I saw a duopoly firsthand and navigated its impacts on our operations. I’ve continued to keep tabs on this space. A few years ago, I predicted that Amazon’s shipping service would be bigger than FedEx and UPS. I didn’t know when it would happen, but I was sure it would, given the trajectory at the time and the need for a more innovative player in the space.  

Today, the Wall Street Journal reported that Amazon’s parcel volumes surpassed those of FedEx and UPS for the first time. This year, through Thanksgiving, Amazon has delivered over 4.8 billion packages, a figure that’s projected to reach roughly 5.9 billion by year-end. Through the first nine months of this year, UPS has processed 3.4 billion parcels. FedEx processed right at 3 billion parcels in the fiscal year ending May 31, 2023. Amazon started this service less than a decade ago and is now a formidable competitor (and one of UPS’s largest customers).

I saw this coming years ago when I was a founder, but FedEx and UPS were less worried because they thought it inconceivable that Amazon could create a competing logistics network in less than a few decades. FedEx’s CEO and chairman, in 2016, even called the idea of Amazon competing “fantastical.”

Amazon’s ability to become a leader in a space dominated by a duopoly for decades is a clear example of why companies shouldn’t get complacent. They should keep innovating and take growing competitors seriously, even if they’re small now. 

The small-parcel industry hasn’t kept up with changing consumer needs. I think Amazon becoming a formidable player in this space will ultimately lead to more innovation and a better consumer experience. I can’t wait to see how the industry evolves in the coming years.

In 2022, I realized the power of a foundational habit. Identifying and committing to a daily foundational habit greatly increased the probability of my sticking with other daily habits. When I consistently complete all the things that I decided need to be daily habits, my chances of reaching a desired destination or objective increase drastically. I like focusing on habits and systems over results and goals.

With the new year approaching, I want to start working on my 2024 habits. Before the new year begins, I want to crystallize where I’d like to be by the end of 2024, identify the new habits that align with that destination, and identify the foundational habit that I need to focus on.

I’ve been spending more time researching public-market companies this year—specifically, technology companies that offer solutions I’m familiar with whose founder is still CEO. I’ve noticed that a lot of the public companies that fit these criteria were backed by venture capitalists (VCs) before they went public.

I’ve found a hack for researching these CEOs and companies. The VC firms that backed these companies often have a deeper understanding of them and their CEOs than most because of the duration and closeness of their relationship. (They’ve been close to the companies since well before going public was a possibility.) Companies that go public are often high priority for the VC investors who back them, so some investors will speak and write about them extensively. Much of this content is available online, and I’ve found it often contains golden nuggets about these companies or their CEOs that aren’t in any public filings. In combination with public filings, I’ve found this content helpful in evaluating whether a CEO and company are good or the company might be one of the rare great ones.