Hi all, quick note from me: as some of you probably anticipated, I’m foreseeing in the not too distant future I may have to stray from the “Every Sunday” promise of the newsletter. (Lots going on at Shopify, as you probably know!) So until I figure out what the right schedule ought to look like, assume “Most Sundays” but that I may skip weeks as necessary. Thanks as always for reading!
Last year I wrote a post called The Audio Revolution which I hope you’ve read; I’m quite proud of it and I enjoyed writing it a lot. Although it was far from my most widely read post (I don’t think it hits top ten), it’s probably the post I get the most questions about. (We talked about it for a good while on my recent podcast with David Perell.)
One question I hear a lot is that people still have a hard time wrapping their head around the famous Marshall McLuhan line, The medium is the message. It’s a genuinely hard concept! You can’t explain it in a few easy sound bites. In The Audio Revolution I went through the idea in depth, but today I want to share another quick illustrative example from a world that I imagine many of you know well: the VC scene. VC content marketing has evolved from hot towards cool media formats (and the rise of VC meme twitter), particularly in early stage and micro-VC funding, and it makes sense.
Hot versus cool: a quick refresher
As a background, here’s the basic primer on Hot versus Cool media formats. Go back and read The Audio Revolution for a real explanation, but the main two variables you need to remember when you think about Hot and Cool are Engagement and Participation. Whenever we process incoming information, our brain doesn’t always grab and decode the entire sample: sometimes we process the whole blast in high resolution, but other times we “scan” it, and fill in gaps with our own context and genre conventions.
Cool media are low in engagement (we’re only pulling in a low-resolution sample) and high in participation (we’re actively completing the picture). Cool media formats are often multi-sensory, and make a good stage for messages and messengers that invite the audience to fill in context: think “Yes We Can” on the Obama campaign, for instance. A good litmus test for cool media (e.g. Twitter jokes or group chats that are all punchline and no context) is “Do you have to know the genre conventions to effectively participate?”
Hot media are the reverse: are high in engagement (we take in the entire dose of what’s being communicated) and low in participation (we don’t do a lot of filling in gaps). Hot media formats typically saturate one single sense, and make a good stage for messages where you know exactly what’s being communicated, even if it’s not expressed literally in words; think Make America Great Again. Hot media doesn’t require any genre fluency: it just yells at you, like a Facebook post or a Youtube feed.
Ok, now what does any of this have to do with venture capital?
Communicating Knowledge versus Fluency
In the market for startup fundraising, where founders and VCs go through a kind of dance to evaluate each other and choose one another as partners, a lot of things have to get communicated in a short period of time. Some of these things are essentially knowledge. You have to communicate vision, product, traction, strategy, tactics, and questions: all as a way of working out whether this is an investment that makes sense. Hot media formats, like a business plan written in text, are a good way to communicate this stuff. They’re direct, high-intensity, and they saturate the reader with information. They convey engagement.
But there’s something else you have to communicate too, and that’s something I call fluency. Fluency is a much cooler concept: something closer to “we know how this works.” It doesn’t mean “here are a bunch of facts”, it’s more like “I know how to fill in gaps." You’re demonstrating your familiarity and ability to find the lowest-energy path through a process, whether it’s fundraising or company-building. They convey participation.
Fluency isn’t communicated best with hot media, it’s communicated with cooler media, like a powerpoint slide deck. The point isn’t to communicate high-intensity information; it’s to invite the audience to participate, fill in contextual gaps, and demonstrate; we both know this dance. Let’s dance.
Which is more important? It’s a matter of opinion, but it’s probably also varied across the last several decades of startup history, and by stage as well. In the old days (30+ years ago), you had to build a lot of stuff yourself. There was no AWS, and no wealth of open source software infrastructure to leverage: in the old days you needed deep knowledge of this stuff, whereas now there’s a premium on simply knowing what leverage is out there for you, and how to fluently put it to work.
On the other hand, you could probably argue the reverse has happened for go-to-market effort and business development. In the old days, startups faced so much inertia just trying to get anything started that “business fluency”, relationships, and dealmaking ease mattered a lot - so much so that it was standard practice for VCs to kick out the founder upon investment and replace them with a mature executive.
Today, it’s not like those skills or networks are less valuable, but they’re not such a hard barrier as they used to be. Fluency used to be seen as a hard prerequisite to get anything done at all, whereas now it’s still valuable, but for a different reason. There are so many startups now, and there’s so much leverage available to anyone who wants it, that fluency matters simply as a way of outcompeting the swarm of hopeful competitors trying to outrace you for a seed investor’s attention. In contrast, by the time you’ve made it to Series A or B, then you’ve already made it past the selection barrier - the literal stuff matters again.
VC content marketing, from podcasts to memes
In the old days (20+ years ago), VCs didn’t really need to market themselves much at all. Dealflow happened behind closed doors, via close personal introductions. But these days, VCs put effort into their acquisition funnels just like every other business.
One of the logical ways you can do that is by content marketing. If you have a bunch of smart partners at your firm and you want to broadcast that fact, you can publish smart content that advertises those brains, as a way of communicating to entrepreneurs: Here are all our great ideas. Here is a blast of brainpower. Here is a firehose of content. You’re communicating hot information here, so you’ll probably be well-suited by hot media formats: text writing (blog posts), or maybe audio (podcasts).
The firm that most of you probably thought of here is Andreessen Horowitz, who really established the “VC as content marketing factory” model. Sure enough, the two media formats that they use most of all are writing (their extensive collection of blog posts) and audio (the excellent a16z podcast), and the messages they communicate came from people like Marc Andreessen or Benedict Evans, who are super smart and blast you with fast, high-intensity, uncompressed information.
A16Z’s website looks like this:
In 2020, we kind of take for granted that this is what VC content marketing often looks like. But it represented a shift that’s more radical than you might initially appreciate. The Old Guard VCs that a16z sought to disrupt, although not “cool” in the trendy sense, certainly espoused cool values and signalling. Relationships and experience mattered, and the VC replacing the founder at Series A with a mature CEO codified this priority set: we care about fluency.
A16z rejected this aesthetic in a lot of ways, notably in their insistence that technical founders could become great CEOs with training. Hot media, like text blog posts and podcasts, are a great way to communicate this point of view - in fact, the choice of media itself communicates a lot more than any individual post. “Fluency is something you can learn; technical talent and vision is rare and valuable.”
A16z won in a lot of ways; particularly in mainstreaming acceptance for technical founder-CEOs. But meanwhile, for a whole variety of reasons (particularly the growing importance of social capital as an early-stage subsidy for startups), the super-early stage funding landscape evolved a reaction back the other way, towards cool, and towards fluency.
Contrast the a16z approach with an early stage VC firm you may have heard of called Shrug Capital. Shrug is walks a fine line between “this is an outright parody of venture capital” and “sure, but you know what, it’s working.” Niv Dror, who runs Shrug, does not explicitly broadcast how brainy he is, or what his in-depth theses on anything are. Nobody at Shrug writes long Medium posts, saturated with information.
Instead, Shrug has a desktop calendar of funny venture tweets, encourages potential founders to communicate over iMessage (their slogan is “text us, it’s easier”) and charmingly makes fun of the VC establishment in a way that’s genuine and hilarious.
Shrug Capital’s website looks like this:
Memes may look un-serious, but they're a great Cool Media format. They’re a joke template where you’re already familiar with the setup; the punchline varies. So our brain has to do a lot of “filling in” in order to assemble the full picture. Our brain is in feed-forward mode; we're filling in 90+% of the message with our own expectations of what's there. It's all punchline; we provide the context. Fluency is the main currency.
A16z’s main marketing currency is Hot Media like writing and audio; Shrug’s is definitely cooler media: images, inside jokes, and especially memes. The first is obviously more “serious” than the second. But the Shrug strategy isn’t stupid. It selects for fluency really well, and at really early stage, that’s probably the right call again.
Here’s where we can actually get to what we mean by The Medium is the Message, illustrated by these contrasting VC content marketing approaches. Engaging with a16z block text writing or fast, wordy podcasts means engaging with Hot media, where your brain gets activated in a high engagement, low participation mode. The message that this media communicates, independently of whatever the content was about, is: Are you smart? Brains matter.
Whereas Shrug Capital and its kind, and to be honest a lot of early-stage funding (and even some established VCs!) communicates something that’s actually closer to the old guard VCs in a lot of ways: relationships, ease, and fluency matter. Cool media don’t ask Are you smart? They don’t care about your densely written business plan, or your saturated podcast. Cool media asks: Are you fluent? Knowing the genre conventions matter.
It’s frustrating, but there’s some established wisdom here. If you asked me to invest in one of two founders - one is a super smart genius, the other is super fluent in how startups work - look, I’d pick the second founder every time, and honestly, so would you. Your ability to leverage what’s out there, and exploit the processes and infrastructure that already exist for launching startups, is more important than the originality or sophistication of your ideas at early stage.
This doesn’t mean “being smart doesn’t matter”; it just reflects that building a startup means standing on the shoulders of giants. Founders who can demonstrate fluency can show they appreciate this, and will proceed accordingly, even in ways they may not even understand. A founder who engages with a VC firm through memes is probably going to get this, oddly enough.
As a take-home message here: the specifics of an a16z podcast, or of a Shrug Capital meme, are of much less importance than the choice of media format used to communicate them. The podcast itself communicates something different than what the meme format communicates. They both convey different meaning, and they convey it so well that they actual content probably matters less than the media format does.
Things to read: a Thought provoking thread on the unbundling of equity, the blog post on Pizza Arbitrage everyone read, a new pre-print journal article in Cell that might explain how a lot of people have “Silent Covid” with few symptoms.
And finally, in this week’s comics section: we had a pretty fun game this past week of “Ruin an X by changing one letter”, including in startup land - here’s my favourite reply I’ve seen for “Ruin a startup by changing one letter”:
Good luck funding that.
Have a great week,