The search for the next Chris Sacca

Lowercase Fund I was the best performing venture fund in history. What are the ingredients for Sacca 2.0?

Last Sunday evening, after getting our son to bed, I hurriedly wrote about my first VC investment.

Writing words on the internet about investing is a recently found hobby that selfishly helps me clarify my thinking. I’ve only been at it a short while and am appreciative and mildly surprised that anyone would read these words or find them interesting. With that context, imagine my shock when Naval liked my tweet about last week’s post.

The internet is a most surprising place.

More VC thoughts… how to not be a dumb money LP

“If you can’t spot the sucker in the first half hour at the table, then you are the sucker.”
- Quote from Rounders

I used to play a lot of poker. There is a multitude of less-than-flattering names for weak or inexperienced players. Dead money. Donkey. Fish.

In some ways private investing seems analogous to poker. Shark GPs reel low information LP fish into fee heavy funds that the LPs don’t really understand. The best opportunities will often be quickly oversubscribed while the less-than-awesome ones will trickle down to the unsophisticated masses (I’m looking at you crowdfunded real estate).

That’s why, until now, I’ve steered clear of VC. My thinking was any VC fund that wanted me as an LP is probably giving me a strong signal I should run the other direction. I was the poker equivalent of dead money. Living in Minneapolis and having few Silicon Valley connections effectively eliminated the LP opportunity for me.

The exciting thing is that the internet is changing the game. Twitter and podcasts allow one to learn and build a network. And rolling funds may help unlock diversification of GPs, LPs, and companies funded. Here’s a good quote from Sahil Lavingia on the topic:

"I'm pretty connected, but unless you are in the right sort of conversations and WhatsApp groups, you just don't hear about this stuff," he said. "And I hope that this 'new model' of being super public and raising in public leads to a more diverse LP base. That's gonna hopefully lead to more diverse GPs from different backgrounds, and then I hope that leads to more diverse investments and more diverse founders, which will hopefully lead to more diverse employees. I think there is kind of this waterfall effect." -Sahil Lavingia in Protocol

VC as we know it may be on the verge of getting disrupted. And as a result, the game may now be playable by a wider group of people. Rolling funds fall under 506(c) which allows a GP to generally solicit and reach a more diverse LP base.

So, if I can play the game, I figure I should study up. See what success looks like. See who might be able to do extraordinary things. One good case study is Chris Sacca’s first fund.

Lowercase Fund I - a $100k LP check returns $25 mil

As best I can tell, Chris Sacca’s Lowercase Fund I is the best performing venture capital fund of all time. It was a tiny fund (raised under $10 mil) and focused on early stage investments. I’m not privy to any info not available on the internet but Sacca said on the Tim Ferriss show they were at 250x. Said differently, a $100k LP check would have returned $25 million. Dang.

Sacca hit on multiple unicorns at an early stage. And then he was able to follow-on as well as scoop up secondary. The most notable names in Sacca’s fund were Uber, Instagram, and Twitter. Not a bad roster.

Maybe Sacca was an outlier and no big conclusions can be drawn. But I suspect there were elements present that may play out again (albeit updated for 2020). History rhymes but doesn’t repeat.

A few notable characteristics of Chris Sacca and his Lowercase Fund I:

• Micro fund (<$10 mil)

• Very well connected in the valley

• Builder and businessperson at heart

• Had great mentors to teach him about the VC game

• Possessed unicorn radar; seemed to see the future

• Went from being an angel to raising a small fund

• Only got involved in deals where he could personally impact the outcome

Sacca 2.0 | Ingredients for the next superstar GP

“Skate to where the puck is going, not where it has been.”
- Wayne Gretsky

I can’t think of a more overused or cliched aphorism but here we are. As an LP I might as well aim high and try to find the next Sacca right? But the next Sacca probably won’t be wearing western shirts or running the exact same play that Sacca did. Instead we must head to where the metaphorical puck is going!

Here’s my rough sketch of Sacca 2.0:

• Has an audience and is phenomenal on Twitter and/or podcasts

• Fast moving solo GP with a micro fund (<$15 mil); track record as an angel

• Well networked, well liked, and truly helpful (high helpfulness to check size ratio)

• Built something before

• Backed by high signal investors

• Strips away much of the nonsense of traditional VC

• Increased transparency and openness around thesis and track record

• Twitter handle is three characters long (only partially joking)

What’s different?

In my view the big difference from a decade ago is Twitter. Twitter changes the game in many ways. Having a strong personal brand plus a large audience is like possessing a cheat code. Twitter can help with deal flow, it can help generate buzz for portfolio companies, it can help raise capital, etc. What founder won’t reply to my DM when I have 100k+ followers, have built something meaningful before, and can wire you funds in the next few days? Podcasts can play a similarly powerful role.

What’s the same?

A lot probably remains the same. Lived experience building something helps sharpen one’s judgement. People judgement and ‘seeing the future’ judgement seem like eternally important drivers of success in the early stage venture game.

Exceptional judgement paired with a strong personal brand (with Twitter being a big part of that) feels like the type of profile we may see for the next superstar GP. Being truly helpful and helping impact outcomes will never go out of style either.

The search for the next Sacca | Who fits this profile?

Finding ‘the next Sacca’ is my gimmicky shorthand for finding an early stage GP that has a chance to do something big while still being accessible to solo LPs.

Against my better judgement I’m going to name a few names I find interesting that check many of the boxes noted above. There are probably 50+ other investors that fit this loose and unscientific criteria as well. Any omissions are attributable to my own ignorance and not malice! These are simply a few investors that have popped on my radar. It’s a non-comprehensive list of people I’ve come across on Twitter/podcasts/YouTube/newsletters that sparked something. All have an audience and put out high signal info.

Here they are in no particular order:

Sahil Lavingia
Ryan Hoover
Harry Stebbings
Brianne Kimmel
Nikhil Basu Trivedi
Jeff Morris Jr
Li Jin

To be clear, this is definitely not investment advice. I’m not even certain who from this group has raised, is raising, or will ever raise. It’s just my personal watch list of interesting and smart early-stage investors.

Why are these folks interesting to me?

Sahil has built a great business, is awesome on Twitter, and is trailblazing with his rolling fund. Ryan built an amazing product that naturally connects him to founders (Product Hunt) and seems incredibly kind. Harry’s story is so inspirational and he seems destined for big things. Brianne appears to have her pulse on the future and be truly helpful to founders. Nikhil is an incredible writer and thinker. Jeff Morris Jr seems to truly understand product and growth. Li seems extraordinarily bright and well versed in a space that appears primed to boom.

Above all, each of these investors seem like someone a founder would be happy to have as an ally on his or her cap table.

The internet is magic

I’ve learned a lot from all of these people via the magic of the internet. It’s a pretty cool thing that LPs, GPs, and founders can come together online to help fund and build the future. Give these investors a follow on Twitter and support their journey. You never know, maybe in ten years one of them will be a judge on Shark Tank :-)

Have a good week!
-Paul

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🧍 Who are you again? Hey my name is Paul. “The Curious Investor” is a newsletter where I write about investing and personal finance. In addition to investing, I spend a lot of time in the ecom world. I started and sold an ecom business and now help brands grow big on Amazon. Previously I was a CPA and spent a decade in corporate finance. Learn more about how I invest here. Nothing herein should be considered investment advice.