Where the Other Chapters Go

A reader asked us: in this volume of essays, which piece do you start with?

Our position first: any of them will do. This volume is not a system of its own; the system sits in the main text. The essays are offcuts that fell from the four layers — the same grade of material, an irregular shape. Why irregular? They were never written to be bound into a book.

The main text has four layers: who we are, why we can be believed, how we do it, where we are going. Pieces about origins and coordinates belong to the first layer. Pieces about proof and the cards we hold belong to the second. Pieces about method and craft belong to the third. Pieces about direction and tempo belong to the fourth. That one sentence is the whole filing rule.

The second layer puts the account on the table. Twenty to thirty mandates a year, half new and half existing clients coming back for the next round. The third layer puts the schedule on the table: sixty days, eight nodes, from building the fact base to closing, seven and a half days per node on average. In other words, once the account and the schedule are on the table, nothing has to be overstated.

The third layer is the thickest, because that is where the craft lives

In the Archive, the core business is written as five things: restoring the fact base, translating value, designing the transaction, running the process end to end, aligning the parties. Those five come down to three words: arithmetic, trend, people. Arithmetic — turn every piece of technology into a cost curve and a revenue structure. Trend — work out where that curve converges five years from now. People — work out whether the team can turn a curve on paper into numbers on a statement. It sounds neatly divided. But one essay is usually only enough to get one of them across. Three words, and it takes dozens of pieces to grind them down.

Take translating value. Translation here means putting your words into the other side's words. Technical founders make two mistakes. First, they speak in their own language system. Second, they hold back, and then assume they have made themselves clear. An investor's language is built out of comparables, multiples and metrics. Facts that are never carried into that system stay noise, however accurate they are. Holding back is usually a matter of decorum. But in a one-hour meeting where information is scarce, modesty reads as a lack of conviction. Failing to get it across is not the same as saying nothing. It is saying it, but not where the other side stands.

Or take designing the transaction. It shows up in these essays more than anything else. Why? Because it is the easiest thing to mistake for permutation and combination. Our position: the first duty in investing is safety, not odds. Before there is a price setter, everyone watches, and whoever moves first carries the pricing error alone. So the real first step in a raise is to find the one party willing and able to price it. Once that party fires, everyone else's question changes: from "is it worth it" to "is there still allocation." Half the cost of deciding drops on the spot.

So what does the fourth layer cover? Without your own money in, your eye on a deal comes up short. Once you have to put money in, you look properly. We will say this one plainly: stand only in the deal's point of view and you see less, and you think shorter.

So this volume has no order, only belonging. Enter from any piece and you can find your way back to its layer in the main text. More pieces will be added. The four layers hold.