2025-03-21 00:16:00
In 2015, Collaborative Fund made an unusually bold bet—investing $5 million—20% of a $25 million fund—into a single startup. Less than five years later, that one investment returned over $100 million, singlehandedly quadrupling the entire fund.
Was this risk justified? Should a fund spread $25 million across twenty-five $1 million bets or five $5 million ones?
This wasn’t only a lucky outcome; it was also a deliberate choice rooted in conviction. Venture capital returns famously follow a power law—a tiny fraction of investments often generate the majority of returns, both for a given fund and the entire industry each year. The challenge is structuring a portfolio to catch at least one of these breakout outcomes without over-diversifying and diluting returns.
This post examines the math behind portfolio construction, the trade-offs between concentration and diversification, and why exceptional outcomes often come from high-conviction positions.
Venture investing is often called an art, but that doesn’t stop people from trying to turn it into a science. Many funds use math to guide portfolio construction, helping to estimate how many bets to place and how much to allocate per investment in a given fund. These range from probability-driven frameworks like the Kelly Criterion to simulation-based modeling like Monte Carlo.
No model perfectly captures the reality of venture capital. Each has flaws, assumptions, and blind spots. Some fail to account for the extreme variance in startup outcomes, while others assume investors can accurately predict success rates—something historical data suggests is extraordinarily difficult.
Still, these frameworks can help ballpark an approach. Below are some of the more common ones and their limitations.
Kelly criterion
Originally developed for gamblers, the Kelly Criterion calculates the optimal bet size to maximize long-term returns. In VC, it can be used to help determine the proportion of a fund to allocate per startup.
Why it isn’t a perfect fit for VC:
Back of the envelope power law math
Some VCs take a probability-driven approach to ensure their portfolio includes at least one breakout winner. The basic logic goes like this:
From here, one can set a threshold for failure—say, wanting a 20% or lower chance of having zero breakout winners—and backsolve to determine how many investments to make (32 in this case).
Why it isn’t a perfect fit for VC:
Monte Carlo simulations
This method runs thousands—sometimes millions—of randomized scenarios based on assumed success rates and exits, testing different allocation strategies to identify the best.
Why it isn’t a perfect fit for VC:
Each of these methods has flaws, but together, they offer a rough picture of effective venture portfolio construction.
They suggest that early-stage funds should aim for 25-40 investments per fund. This range balances the potential for capturing breakout winners while avoiding excessive dilution.
However, portfolio construction isn’t just math—it’s strategy. Models can give a broad range of appropriate portfolio concentrations, but they can’t tell you exactly how many bets to make or when to make a single more concentrated bet. Our decision to allocate $5M—20% of our fund—into a single company wasn’t model-driven. In fact, most models would have cautioned against it.
Below are some strategic reasons for varying degrees of portfolio concentration.
Arguments for less concentration
Arguments for more concentration
Our $5M bet wasn’t one of five evenly sized investments within our $25M fund—it was an outlier. The fund made 20 investments, keeping it relatively concentrated, but this check was unusually large. It was placed with conviction, and in hindsight, it paid off.
Had this bet failed, we would have reassessed our approach to concentration. Big swings carry big risks, and a miss would have been a tough reminder of the balance between focus and diversification.
While we haven’t committed 20% of a fund to one company since, this experience reinforced conviction’s role in our portfolio construction. Since then, we’ve leaned on it more heavily, ensuring we’re positioned to bet big when the right opportunity presents itself.
Venture capital is as much an art as a science. The real challenge isn’t just portfolio sizing—it’s knowing when to take a concentrated risk and having the discipline to live with the outcome, whether it’s a hard-earned lesson or a $100M success.
2025-03-19 01:38:00
I heard a phrase recently: “Magazine architect.”
It’s a derisive term architects use for their colleagues who design buildings that look beautiful, grace magazine covers, and win awards, but lack functionality for the tenants.
Intricate roofs look amazing – and are notorious nightmares for leaking.
Oddly shaped buildings win awards – and offer little flexibility to remodel interior layouts.
Fancy materials glisten—but good luck finding someone skilled enough to maintain or replace them.
Ornate lobbies take up tremendous space – and are often not used by occupants, who enter through the garage.
The book How Buildings Learn writes that architects fancy themselves as artists, but people who occupy buildings do not want art; they want a building to work in:
Art must experiment to do its job. Most experiments fail. Art costs extra. How much extra are you willing to pay to live in a failed experiment? Art flouts convention. Convention became conventional because it works. Aspiring to art means aspiring to a building that almost certainly cannot work, because the old good solutions are thrown away. The roof has a dramatic new look, and it leaks dramatically.
The book cites renowned architects like I.M. Pei and Frank Lloyd Wright for designing buildings admired by everyone except their occupants, whose feelings tend towards frustration and disgust. Frank Lloyd Wright once said of his infamously leaky roofs: “If the roof doesn’t leak, the architect hasn’t been creative enough” – an amusing comment to everyone but those living in his homes.
The flip side is that office buildings with happy tenants tend to be big, boring, rectangles built with classic materials. They will win no awards and grace no magazines. But the roof is tight, the layout is flexible, and the HVAC system is located where it should be. The true purpose of a building – a place that helps you do your best work – is achieved.
I like art and can appreciate architecture. But the idea that there is a time and place for beautiful vs. practical should be recognized. And the idea that if you are looking for practical advice, beware hiring an artist whose goal is to be praised should be, too.
Is that true for many things in life?
Jason Zweig once wrote about investing:
While people need good advice, what they want is advice that sounds good.
The advice that sounds the best in the short run is always the most dangerous in the long run. Everyone wants the secret, the key, the roadmap to the primrose path that leads to El Dorado: the magical low-risk, high-return investment that can double your money in no time. Everyone wants to chase the returns of whatever has been hottest and to shun whatever has gone cold.
A lot of financial advice is beautiful and intelligent but has no practical purpose for the person receiving it.
It happens for a couple reasons.
One is that, like architects, financial professionals may want to further their career more than they want to help their clients. I think this is usually innocent: It’s easy to be blind to what your clients need when your business is so profitable and you’re gaining so much attention.
“Look how much money I’m making and how often I’m asked to come on TV” can be interpreted as “I am adding so much value.” Sometimes that’s true; often it’s not. An intense and complex derivatives strategy can make you sound brilliant and bring in buckets of fees, and also be the opposite of what a client actually needs. It’s telling that the company that figured out how to provide low-cost index funds – Vanguard – could only do it as a non-profit. There’s a mile-wide gap between what many clients need and what generates the most fees. A lot of people need the financial equivalent of a rectangle building but are sold a gorgeous geodesic dome with a leaky roof and no garage.
The other reason is that no two people are alike, and financial advice that’s useful for you could be disastrous for me and vice versa. There is no one-size-fits-all financial plan – a fact that’s easy to overlook because people want to think of finance like it’s physics, with clean formulas and absolute answers. When advice needs to be personal but you think it’s universal, it’s common to default to what sounds the best, the most intelligent, and the most complex. People drift from practical towards beautiful.
I watch financial markets every day because I think they’re a window into culture and behavior. They’re so fascinating, so beautiful, like art. But my personal finances are simple and boring. They will win no awards. But they’re practical for me and my family. They provide what I need them to do. Isn’t there beauty in that?
2025-02-28 05:14:00
A simple formula for a pretty nice life is independence plus purpose.
Purpose is different for everyone. Sometimes it’s family, sometimes it’s community, religion, work, whatever.
But independence is more universal. Our desire to be independent, why we want it, what prevents us from achieving it, and why some people sabotage their ability to have it, is such a common story across cultures and generations.
I have a parenting story.
My son has always been shy. Painfully shy. At times it’s adorable; at times my wife and I worry. Pre-school teachers gave up trying to get him to participate in group activities – he would sit by himself in the corner watching other kids play. He wouldn’t trick-or-treat one year because the thought of knocking on a stranger’s door could bring him to tears. We almost didn’t make it through airport security once because he refused to tell the TSA agent his age (he was eight).
But we had confidence he’d improve. And like most kids, he has.
Last week we were at a pool and he asked if he could get ice cream. I said yes, but you have to do it by yourself. You have to order it yourself, hand her the money, take the change – all of it. I’m not even going to be nearby.
“I can’t do it,” he said.
“That’s OK, you don’t have to” I said.
He paused.
“But can I still get ice cream?”
“Yes, but you have to do it yourself,” I said.
Another pause.
“What if I get in trouble?” he asked.
“For what?”
“What if they tell me no because I’m a kid?”
“They won’t. But even if they do, it’s fine,” I said. “You won’t be in trouble.”
I could see the gears turning in his head. He wanted to do it so badly.
“I don’t know,” he said. “I’m so scared.”
Another pause.
“I can’t do it.”
It’s difficult as a parent to, on one hand, want to shower your kids with protection and help while, on the other, know how important it is to teach them independence. “Teach” is probably the wrong word, because you know they’ll figure it out on their own. Sometimes you provide the most help with the assistance you withhold.
My son walked off. I had no idea what he was going to do.
A few minutes later he came back – absolutely beaming – with a bowl of ice cream.
This story might seem benign to other parents – or even bizarre if you’re used to a gregarious kid. But in the context of his past, it’s hard to describe its impact. He was so proud of himself.
If I had gone with him and held his hand through the process, the ice cream would have given him a small happiness boost. When he did it on his own terms, with a sense of independence, the psychological rewards were off the charts.
I’ll tell you the takeaway: If you’re used to being assisted, supervised, mandated, or dictated, and then suddenly you experience the glory of independence, the feeling is sensational. Doing something on your own terms can feel better than doing the exact same thing when someone else is peering over your shoulder, telling you what to do, guiding you along.
And that’s as true for adults as it is for kids getting ice cream.
Independence is the best financial goal for most people. But independence is more than just financial – moral, cultural, and intellectual independence – is one of the highest levels you can reach in life. “There is only one success,” says poet Christopher Morley, “to be able to spend your life in your own way.”
Derek Sivers once put it a different way:
All misery comes from dependency. If you weren’t dependent on income, people, or technology, you would be truly free. The only way to be deeply happy is to break all dependencies.
That’s why independence – financially, intellectually, morally – is one of the highest goals you can achieve.
Here are a few things I’ve thought about with independence.
1. Independence is the only way to recognize individuality.
I read this great quote recently from an early Amazon employee:
Jeff [Bezos] said many times that if we wanted Amazon to be a place where builders can build, we needed to eliminate communication, not encourage it.
The idea is that if you want to do something great, you cannot have a group of people constantly telling you what you’re doing wrong and why it doesn’t mesh with their own goals. That’s not because those other people might be wrong; it’s because they might be playing a different game than you are.
In business, finance, and everyday life, a great decision for me might be a terrible decision for you and vice versa. If everyone had the same goals, the same family dynamics, and the same personalities, we could make finance a hard science and say, “Here’s how everyone should save and invest.” But it’s not like that. The difference in how you and I want to live our lives – what our own definition of success might be – can be 10 miles wide. A potato farmer and a hedge fund manager might be equally happy, all while looking at the other as if from a different planet.
A lot of financial mistakes come from decisions that would be right for someone else but wrong for you. They are the most dangerous, because smart people around you say, “This worked for me. It changed my life. You should do it too.”
Here’s another thing I read recently, from G. K. Chesterton:
Ideas are dangerous, but the man to whom they are least dangerous is the man of ideas. He is acquainted with ideas, and moves among them like a lion-tamer. Ideas are dangerous, but the man to whom they are most dangerous is the man of no ideas. The man of no ideas will find the first idea fly to his head like wine to the head of a teetotaller.
If you have no strong views on what kind of life you want to live – who are you, what you desire, what makes you happy and what doesn’t – you’re likely to want to mimic the most visually appealing person you come across (often the person with the biggest house, fastest car, or nicest clothes). That may work, it may not.
And so it’s vital to constantly reflect on who you want to be, what kind of life you want to live, and ask if you’re on an independent path versus chasing someone else’s dream.
2. Independence in thought, philosophy, morals, and culture are as important as financial independence.
Charlie Munger once listed three practical rules for success:
Don’t sell something you wouldn’t buy.
Work for people you admire.
Partner with people you enjoy.
So simple.
I have seen many people achieve some level of financial independence only to be sucked into a new kind of dependence: the culture of their tribe. Financial freedom is achieved, but it’s replaced with sycophancy to a new boss, or a blind adherence to tribal views you might disagree with deep down.
It’s a unique form of poverty: rather than needing to work for money, you are indebted to needing to think a certain way.
I once heard a good litmus test: If I can predict your views on one topic by hearing your views about another, unrelated topic, you are not thinking independently. Example: If your views on immigration allow someone to accurately predict your views on abortion and gun control, there’s a good chance you’re not thinking independently.
There are so many different versions of this: The salesman who doesn’t believe in his products, the worker who secretly thinks her boss is crazy, the employee who can’t stand his highest-paying client, the voter who nods along while wincing inside.
There’s a difference between the practical need to accept different views and pretending to agree with different views, especially if you’re just doing it for more money.
Investor Ed Thorp once said: “It is vastly less stressful to be independent—and one is never independent when involved in a large structure with powerful clients.”
Less stress is a good point. It’s mentally exhausting to pretend to be someone you’re not. It’s part of why so many people look forward to retirement: it may be the first time in their professional lives they can truly be themselves.
Financial independence is easy to grasp – you no longer rely on others for income. Intellectual and moral independence is more nuanced, but not having it is a unique form of debt.
3. When you’re independent you feel less desire to impress strangers, which can be an enormous financial and psychological cost.
Speaking of hidden forms of debts: How much of what takes place in our modern economy is done purely for signaling reasons? It’s impossible to quantify, but you know it when you see it. And taking an action to impress other people is a direct form of dependence. It happens in many different ways:
Physical signaling (clothes, cars, homes, jewelry)
Clout-chasing (desperate for social media engagement)
Tribal signaling (political battles, status superiority, election bumper stickers)
Moral signaling (everything is us-versus-them)
Each of these is about measuring your own value through the opinions of others. Sometimes it’s direct (your net worth versus mine) and other times it’s more subtle (do you like me?). The person who is desperate for attention and acceptance from a group of strangers is hardly different from the person begging for money on the street.
The wild thing about all this effort is how easy it is to overestimate how much other people are thinking about you. No one is thinking about you as much as you are. They are too busy thinking about themselves.
Even when people are thinking about you, they often do it just to contextualize their own life. When someone looks at you and thinks, “I like her sweater,” what they actually may be thinking is, “That sweater would look nice on me.” I once called this the man-in-the-car-paradox: When you see someone driving a nice car, rarely do you think, “Wow, that driver is cool.” What you think is, “If I drove that car, people would think I’m cool.” Do you see the irony?
When you’re truly independent you rid yourself of this silly burden. It can be such a relief when you do. Only when you stop caring what strangers might think of you do you realize how much effort you may have previously put into their validation.
But let me make an equally important point:
4. Independence does not mean you don’t care what anyone thinks of you. It means that you strategically decide whose attention you seek.
I need the love and admiration of my wife, kids, and parents. I enjoy the presence and camaraderie of about five friends. I want to foster relationships with a small group of people I admire in my professional orbit.
But you can see how this funnel keeps tapering off from there.
When you independently choose who you want to include in your small circle of life, the actions you take, the work you pursue, and even the values you hold can completely flip. Rather than trying to appease everyone (foolish, impossible) you select the life you want to live and focus your attention on a smaller group of people whose love and support you deeply desire.
It’s the opposite of when business leaders and politicians pander for the support of the masses. On one hand you can say they are doing something that gets them what they want (power). On the other, how independent are you if the words you say and the actions you take are dictated by the beliefs of a group of people you’ve never met?
A related point here is that loyalty to those who deserve your loyalty is a wonderful thing. Family, genuine friends, companies who you deeply respect and admire – it can be so satisfying to offer your loyalty to someone who deserves it. But it’s rare, and only when you’re independent can you be honest about whether you’re being appropriately loyal or attached to the attention and money of people you secretly don’t admire.
5. Financial independence doesn’t mean you stop working.
This idea is related to the previous one: Financial independence is a wonderful goal. But achieving it doesn’t necessarily mean you stop working – just that you choose the work you do, when you do it, for how long, and whom you do it with.
Those who retire early tend to come from one of two camps:
They hated their work but kept doing it to make as much money as they could.
They enjoyed their work but quit when they had enough money.
To each their own, but both look like situations where money controls your decisions. The irony is that some people who think they’re financially independent are actually completely dependent on money, so much so that they spend their days doing things they’d rather not because money tells them they should. Rather than using money as a tool, the money used them.
6. Being independent doesn’t mean you’re accountable to no one. You become accountable to yourself, which is often when you do your best work.
Study any great creator – scientists, artists, entrepreneurs – and you’ll find an independent drive. They weren’t working to appease a boss or earn a paycheck; they were driven solely by their own curiosity and expectations.
When you’re working for someone else’s expectations, the path of least resistance is to put in the minimum required effort – or, worse, to give off the appearance of effort while not actually being productive.
I think almost everyone is creative. But it’s often hard to dredge up creativity when you’re doing it for someone else. In my profession: Writing for yourself is fun, and it shows. Writing for other people is work, and it shows. You do your best work when you’re doing it on your own terms.
I bet that applies to most fields.
And actually most of life.
2025-01-31 21:55:00
If I told you a company was on track for $500M in sales in 2024 — up from $200M in 2023 and $70M in 2022 — and thriving thanks to massive secular tailwinds, what kind of business would you imagine? A cutting-edge AI company? What if I told you it was a soda company founded just five years ago in Oakland, California?
The flashiest companies don’t always deliver the highest returns for early investors. Let’s explore a comparison between two vastly different businesses: OpenAI and OLIPOP.
OpenAI is among the most influential and widely discussed companies in the world, and for good reason. It ushered in a golden age of LLMs, with staggering ripple effects: skyrocketing AI-related CapEx among tech giants, NVIDIA’s ascent to the world’s most valuable company by market cap (though it now ranks #3), and a dramatic resurgence in U.S. power demand growth.
Then there’s OLIPOP – a soda company. But not just any soda. OLIPOP makes a healthier alternative with gut-friendly prebiotics and plant fiber. Its nostalgic flavors, like Classic Root Beer and Vintage Cola, feel indulgent but deliver a BFY experience. It’s also delicious. Simple as that.
To compare the investment performance of OpenAI and OLIPOP’s first investors, we’ll use a simple returns multiple: the current value of their ownership divided by their initial investment. Since both companies raised their first rounds in 2019, this approach allows for a direct comparison, even though it doesn’t factor in timing (e.g., IRR).
For simplicity, we assume early investors did not participate in later rounds and were diluted. To calculate these returns, we need to determine:
Founded in 2015 as a nonprofit focused on advancing AI safely, OpenAI restructured in 2019 to fund its expensive pursuit of AGI. It created OpenAI LP, a “capped-profit” entity governed by the original nonprofit (renamed OpenAI Nonprofit). This structure allowed OpenAI to raise private capital while capping early investor returns at 100x, with any excess profits flowing back to the nonprofit.
At the time of this change, OpenAI also announced its first institutional funding round, led by Khosla Ventures. Let’s call this their Series A. Details remain unclear: PitchBook lists it as a $10M raise at an undisclosed valuation, while other sources suggest Khosla’s stake alone was $50M at a post-money valuation of $1B. We’ll assume a round size of $50M for 5% ownership.
Estimating dilution is tricky. Most of OpenAI’s funding post-Series A has been from Microsoft, which has poured in ~$14B through a mix of equity, Azure credits, and unique profit-sharing agreements. Sources disagree on the details, but key reported investments include $2B in 2021 and $10B in 2023. Adding to the complexity, OpenAI is now transitioning to a for-profit public benefit corporation, which could eliminate the 100x cap on early investor returns.
To simplify, we’ll assume:
Beyond Microsoft, OpenAI raised a $300M round in 2023 at ~$29B (Series B) and a $6.6B round in 2024 at $157B (Series C). Just yesterday, WSJ reported that OpenAI is in talks for a $40B round at a whopping $300B valuation (Series D). If this round closes as reported, Series A investors will be diluted from 5% to 3.2%, as shown in the table below.
At a $300B valuation, that 3.2% stake is now worth $9.5B – a 189x return on their initial $50M. Not bad!
OLIPOP’s story is far more straightforward. PitchBook shows its major funding rounds below:
OLIPOP’s seed investors have been diluted from an initial 28% ownership to roughly 13% today. The last disclosed valuation was during its 2022 Series B, but OLIPOP has grown significantly since then. To estimate its current valuation, we apply a forward revenue multiple from a public comparable to its projected next-twelve-months (NTM) revenue.
OLIPOP’s revenue growth has been remarkable, with several sources indicating it was on track for $500M in 2024 sales, up from $200M in 2023, and $73.4M in 2022. Extrapolating this 2022-2024 CAGR, we estimate NTM revenue of $1.3B. This projection seems reasonable, as revenue growth has shown little sign of slowing, and OLIPOP has significant room to expand distribution and retail presence.
Celsius Holdings (CELH), the maker of CELSIUS energy drinks, offers one of the only relevant public comparables. Applying their 3.8x forward revenue multiple to OLIPOP’s estimated NTM revenue yields an implied valuation of $5.0B.
At this valuation, seed investors’ 13% stake would be worth $639M – an astonishing 256x return on their $2.5M investment, outperforming even the 189x return estimated for OpenAI’s Series A investors.
While current valuations provide a snapshot, returns are realized at the point of liquidity. OLIPOP not only appears likely to deliver higher returns than OpenAI based on current valuations, but is also likely to experience less dilution – and the resulting erosion of returns multiples – before exit. To assess dilution risk, we must evaluate how much additional capital each will need to reach self-sufficiency, where revenues consistently cover operating and capital expenses. Ultimately, this hinges on the strength of each company’s unit economics.
OpenAI’s two primary revenue streams — ChatGPT subscriptions and API usage — present distinct unit economic profiles and associated challenges.
OpenAI offers several subscription tiers, from a free plan with limited features to a $200/month “Pro” plan. While paid tiers generate predictable monthly revenue, inference compute costs scale with user activity, which can be unpredictable. This means new users don’t always equate to profit growth. This challenge is exemplified by recent reports that OpenAI is losing money on GPT Pro users due to unexpectedly high inference costs, despite the $200/month price point, which Altman set with profitability in mind.
This issue is further exacerbated by the overwhelming proportion of free-tier users – estimated at 95% – who incur inference costs without generating revenue. As a result, paying users effectively subsidize these expenses. Inference compute costs for 2024 were projected at $2B, compared to an estimated $4B in total revenue.
The API’s pay-per-token model better aligns revenue with costs, but rising competition has eroded OpenAI’s pricing power. Token prices have plunged 89% in just 17 months, dropping from $36 per million tokens at GPT-4’s launch in March 2023 to $4 by August 2024. DeepSeek, which recently demonstrated that training and inference can be far less compute-intensive, has only accelerated this price collapse. Its reasoning and chat models are currently priced over 95% lower than OpenAI’s.
Training, while not directly tied to unit economics since it doesn’t scale with usage, remains a significant and growing financial burden. Costs are projected to reach $9.5B annually by 2026, with R&D expenses climbing from $1B in 2024 to over $5B in 2026. Though these projections predate DeepSeek’s breakthroughs in cost-efficient training, training will undoubtedly remain a massive and essential expense for sustaining AI leadership.
The following chart illustrates how high inference and training costs, a large base of free-tier users, and pricing pressures combine to create significant profitability challenges.
Training compute costs for 2024 were projected at $3B, with inference costs adding another $2B. Combined with Microsoft’s $700M revenue share and substantial operational expenses, these factors contribute to an estimated $5B loss for 2024, excluding stock-based compensation. These losses are expected to continue, with OpenAI projecting $44B in cumulative losses from 2023 to 2028. Profitability is targeted by 2029, with a revenue goal of $100B.
Covering these massive losses has required successive capital raises, most recently the $40B round, further diluting investors. If OpenAI’s $44B in projected losses through 2028 proves accurate, this latest capital infusion would have brought it close to self-sufficiency. However, a substantial portion of this round is reportedly allocated to OpenAI’s $19B commitment to President Trump’s $500B Stargate initiative, leaving a funding gap. As a result, more funding rounds and investor dilution are likely.
OLIPOP benefits from straightforward unit economics, driven by predictable production and distribution costs in the established soda industry. Key variable costs include raw ingredients, packaging, co-packing fees, and freight, while fixed costs cover overhead, staff, brand marketing, and R&D. Unlike OpenAI, OLIPOP doesn’t require massive upfront capital or speculative R&D. Its differentiated formulation, brand identity, and consumer positioning also help shield it from commoditization risks despite competition from peers like POPPI.
Regarding future dilution, OLIPOP is already fully profitable. While the company is likely to raise additional capital to accelerate growth, they don’t need to. This gives a more flexible path to exit – OLIPOP could sell to a strategic buyer or IPO without the pressure of hitting complex, multi-year milestones. Fewer funding rounds, less dilution, and a profitable business model mean early OLIPOP investors are far less exposed to the risk of a delayed exit and ownership erosion over time.
These returns underscore an important lesson: less flashy businesses can sometimes outperform even the most hyped tech companies. This is largely driven by the importance of entry price – achieving a 256x return is far more feasible from a $2.5M starting valuation than from $1B – as well as the path to profitability and the unit economics that pave the way.
While OpenAI is revolutionizing industries, OLIPOP is quietly dominating its category, proving that exceptional returns don’t always come from the highest-profile companies. For investors, the takeaway is clear – entry price and timing are critical, but so is recognizing opportunity in unexpected places.
Finally, full disclosure – Collaborative Fund is a Seed investor in OLIPOP – an investment made before I joined the team. Credit goes to my colleagues for identifying the opportunity early, and even more to the OLIPOP team for consistently exceeding expectations.
If this has left you craving OLIPOP or curious to learn more, you can check them out here. My favorite flavor is Vintage Cola.
2025-01-14 06:26:00
A day after the September 11th terrorist attacks, every member of Congress stood on the steps of the U.S. Capitol and sang God Bless America.
Could you imagine that happening today? It’s easy to say no, given how nasty politics has become. But if America faced an existential crisis like 9/11 again, I think you’d see the same kind of unity return. There’s a long history of enemies putting their differences aside when facing a big, devastating threat. People get serious when shit gets real.
If that sounds like wishful thinking to you, let me propose a reason why: Part of the reason today’s world is so petty and angry is because life is currently pretty good for a lot of people.
There are no domestic wars.
Unemployment is low.
Household wealth is at an all-time high.
Innovation is astounding.
It’s far from perfect, and even an optimist could list hundreds of problems and injustices. A pessimist could do worse.
But let me put it this way: As the world improves, our threshold for complaining drops.
In the absence of big problems, people shift their worries to smaller ones. In the absence of small problems, they focus on petty or even imaginary ones.
Most people – and definitely society as a whole – seem to have a minimum level of stress. They will never be fully at ease because after solving every problem the gaze of their anxiety shifts to the next problem, no matter how trivial it is relative to previous ones.
Free from stressing about where their next meal will come from, worry shifts to, say, a politician being rude. Relieved of the trauma of war, stress shifts to whether someone’s language is offensive, or whether the stock market is overvalued.
Imagine a fictional society that has unlimited wealth, unlimited health, and permanent peace. Would they be overflowing with joy? Probably not. I think their defining characteristic would be how trivial and absurd their grievances would be. They’d be enraged that their maid was 10 minutes late, stressed about whether their lawn was green enough, or despondent that their child didn’t get into Harvard.
Psychologist Nick Haslam once described what he called Concept Creep. It’s when the definition of a problem expands beyond its original boundaries. It often gives the impression that the world is getting worse when what’s changed is our definition of what counts as a problem. It happens two ways:
- Things previously considered normal are redefined as risks. Like a child being bullied at school, or mild anxiety being diagnosed as mental illness.
- Less severe instances of a risk are recast as major risks. Like having to delay retirement from age 65 to age 67.
In each case, the world can get better but people don’t feel it – they can even feel like they’re going backwards – because once a problem is solved it’s replaced by a new one, often with the same level of anxiety, fear, and anger.
A few things I keep in mind:
In a way, the best definition of progress is when you’ve knocked out the major issues and are left dealing with lower, less-severe ones.
Stress is an innovator. Nothing incentivizes like worry, so we should never want a world where people see everything as perfect.
People are problem solvers. It’s a great characteristic and the source of all progress. But when solving problems is core to your identity, you occasionally see trouble where none exists.
Being angry can be an intoxicating feeling. It offers a sense of moral superiority, because when you accuse others of causing problems, you’re implying that you are better than them. It feels great, and in a strange way some people love being pissed off.
The dumber the disagreements, the better the world actually is.
2024-12-16 18:27:00
They’re relevant to everyone, and apply to lots of things:
Who has the right answers but I ignore because they’re not articulate?
What haven’t I experienced firsthand that leaves me naive to how something works? As Jeff Immelt said, “Every job looks easy when you’re not the one doing it.”
Which of my current views would I disagree with if I were born in a different country or generation?
What do I desperately want to be true, so much that I think it’s true when it’s clearly not?
What is a problem that I think only applies to other countries/industries/careers that will eventually hit me?
What do I think is true but is actually just good marketing?
What looks unsustainable but is actually a new trend we haven’t accepted yet?
What has been true for decades that will stop working, but will drag along stubborn adherents because it had such a long track record of success?
Who do I think is smart but is actually full of it?
What do I ignore because it’s too painful to accept?
How would my views change if I had 10,000 years of good, apples-to-apples data on things I only have recent history to study?
Which of my current views would change if my incentives were different?
What are we ignoring today that will seem shockingly obvious in a year?
What events very nearly happened that would have fundamentally changed the world I know if they had occurred?
How much have things outside of my control contributed to things I take credit for?
How do I know if I’m being patient (a skill) or stubborn (a flaw)? They’re hard to tell apart without hindsight.
Who do I look up to that is secretly miserable?
