Frank Rotman Profile picture
27+ year fintech veteran. 3X Midas List. Investments include: @creditkarma, @joincommonstock, @roofstock, @lendeavor, @sundaeHQ, @easyknock, @signifyd.
Sumeet Pillai Profile picture Rajiv Pathak Profile picture Alexander Hagerup Profile picture Harshita Profile picture 4 added to My Authors
27 Nov
1/30: There’s a supply/demand imbalance in the startup world (too much capital/not enough great companies). This means it’s a great time to be a Founder if you have an epic idea, but how do you know if your idea is any good? I asked some amazing VCs and here’s their advice:
2/30: Put a prototype in users' hands. When you try to take it away from them, do they kick and scream and tell you to get lost? If so, you've got a good idea. If not, keep iterating. (@Mark_Goldberg)
3/30: Can you can describe it in 30 seconds or less to a tech-illiterate relative at Thanksgiving? Great ideas are simple, but non-obvious. (@Mark_Goldberg)
Read 30 tweets
19 Nov
1/30: Many #Startup CEOs struggle to redefine their own role as their company scales. I’ve been asked by startup CEOs many times: “What should my job be?” What follows is a framework I’ve used to guide various CEOs through the evolution from a “Small Team CEO” to a “Proper CEO”:
2/30: But, before I share the framework I almost universally have to re-set their expectations because most first time CEOs think that their primary function is to “make all critical decisions”. Breaking them out of a “control everything” mentality is uncomfortable but essential.
3/30: What’s disappointing is that many CEOs can’t wrap their heads around the thought that they won’t be directly involved in everything happening at their company and in the middle of all critical decisions. Only when they’re ready to deal with this they can evolve.
Read 30 tweets
10 Nov
1/32: Building a #StartUp business has similarities to a spacecraft crashing down on an unknown planet. I talk to Founders about this all the time. Unpacked:
2/32: We’ve all seen blockbuster “how the heck are we going to survive” SciFi movies. The one commonality is that there’s an obvious prioritization of what has to be solved and in what order.
3/32: This is because all human beings need 3 things to survive: Oxygen, Water and Food. Without any of them we can’t survive. But, bad things start to happen if we don’t have oxygen for 3 minutes, water for 3 days or food for 3 weeks.
Read 32 tweets
3 Nov
1/29: Have you ever had a concept explained to you that helps frame complex issues you’ve been wrestling with and opens your eyes to new possibilities? A concept that I share that seems to resonate well with Entrepreneurs and Investors is what I call “Truth Files”. Unpacked:
2/29: So what is a “Truth File?” Simple definition: “A truth file contains data that without need of additional confirmation can be considered factual.” Not all truth files are 100% accurate and not all are valuable, but the best ones can be transformational.
3/29: The operative question that defines how valuable a truth file is: “What does the truth file reveal that can be used as a substitute for investigative work or help make more accurate decisions?” The first reduces friction and the second improves outcomes.
Read 29 tweets
26 Oct
1/15: Of all the questions I’m being asked on recent diligence calls about our companies, the most common is “What are the skills/gaps of the Founder(s)?” Given COVID, this has become an important topic so I thought it would be worth sharing how I think about the issue. Unpacked:
2/15: In every conversation I try to level-set the outsider and speak in “truisms” before diving into specifics. The first truism is that the skill set needed to run a high growth, disruptive start-up is multi-dimensional and that it’s about tradeoffs vs. insisting on completism.
3/15: We’d love if our Founders were world class on dimensions that include: Action orientation, ability to make decisions with limited/changing data, magnet for talent, ability to frame a business vision, and fundraising skills. These are just a few of the many important skills.
Read 15 tweets
16 Oct
1/42: What the heck is going on with the #fintech ecosystem’s obsession with Neo-Banks? Do they actually make sense in the US? Traditional Bankers say “absolutely not”. I say “they can”. Unpacked:
2/42: Because there’s so much confusion about the topic, it’s worth starting with a definitional statement about what a Neo-Bank is. One definition: A Neo-Bank is a COMPANY that offers a LIMITED SUITE OF BANKING PRODUCTS with NO OWNERSHIP OF BRANCH LOCATIONS.
3/42: COMPANY does not mean Bank. There are many forms and fashions of Neo-Banks but not many of them are actually Banks. It’s possible with today’s technological solutions for a non-Bank to offer Banking products.
Read 42 tweets
11 Oct
1/28: The most commonly debated and IMHO the least grounded topic in early stage VC is “how do you determine what a company is worth?” Recent early stage #fintech and #venturecapital valuations seem to defy gravity but are they justified?
2/28: Answering this question requires breaking down the problem into a framework that’s easier to analyze. One framework: A business is “worth” a combination of the intrinsic value of what it can produce and the option value of what it might be able to produce in the future.
3/28: When a company has cracked the code on turning a dollar of investment into a multiple of the dollar in the future it can be categorized as a money making machine.
Read 28 tweets
3 Oct
1/25: I’ve been told that some of the simple concepts I routinely share with Founders get adopted by their firms as “truths” (which is flattering). I was asked to outline a few of them in Tweet form. Unpacked:
2/25: One of my favorites is a concept called “0.8 to the 5th”. It’s an acknowledgment that contingent probabilities suck. If a business plan has many “ands” joining process steps to create outcomes then its stuck in the world of contingent probabilities.
3/25: Most businesses are complex with strings of three, four, and sometimes five or more dependencies linked together. The best Operator in the world only has in the ballpark of an 80% chance of hitting an aggressive goal if it’s one of many complex priorities on his/her plate.
Read 26 tweets
28 Sep
1/31: The biggest question coming out of my recent tweet thread about the evaluation of startups is: “How important is the startup’s distribution strategy in your diligence work?” The answer is: “Damn important because the business needs customers to exist!” Unpacked:
2/31: This may sound backwards to some investors but my diligence process around a company’s marketing strategy starts with the unit economics of their product/offering. The greater the contribution margin (in absolute dollars) the more options a company has to scale.
3/31: If a product can only throw off a few dollars of contribution margin a year then the channels the company should be testing will be very different than if the product can throw off a few hundred or a few thousand dollars of contribution margin.
Read 31 tweets
23 Sep
1/21: Every early stage startup pitch looks the same at a foundational level. This means that the analysis of every early stage startup also looks similar (especially true in #venturecapital and #fintech). Unpacked:
2/21: Every pitch has four main high-level asserted statements: A problem statement, a solution statement, a financial statement and a team statement.
3/21: The problem statement is the Founder’s way of helping his/her audience internalize a problem they’ve discovered in their target market and an articulation of why it’s a gigantic and profoundly painful problem to a defined group of customers.
Read 22 tweets
20 Sep
I grew up here Image
And here Image
And here Image
Read 4 tweets
11 Sep
1/21: There’s been a lot of talk about how difficult it is to produce great returns in the VC space, and while this is true it suffers from over-simplification. Unpacked:
2/21: First, while the analysis of Fund performance is vaguely interesting it doesn’t reflect the fact that different Funds are chasing different objective functions as are their LPs.
3/21: A bigger fund might be targeting a lower volatility 2.5X portfolio while a smaller fund might be targeting a higher risk 5.0X portfolio. Results need to be measured against goals.
Read 21 tweets
10 Sep
1/21: I pulled a thread together a few weeks ago about how the early stage fintech ecosystem has gotten a bit crazy and overheated. . Since then I was asked to comment on the later stage madness. Unpacked:
2/21: The first thing to understand is that venture capital as an asset class is actually quite small. In 2019 about $136B of capital was deployed in the US with exits of about $256B.
3/21: Massive individual wealth can be generated for LPs and GPs if great investments are made and fortunes can be amassed for the Founders of break-out companies. But as an asset class the total money at work is quite small.
Read 21 tweets
2 Sep
1/23: The debate rages on about whether @RobinhoodApp is “doing good” or “doing harm”. There is no simple answer to this question so it’s best to frame the conceptual issue and then return to the specifics.
2/23: My generalization of the question being asked is: “If a company creates a new business model which shifts consumer behavior is the company accountable for both the good and the bad resulting behaviors?”
3/23: The scientific community debates this question continuously. Increased knowledge about our world doesn’t inherently do good or harm. The application of scientific breakthroughs is where societal and individual good and harm occurs. Two examples:
Read 24 tweets
28 Aug
1/19: The most disturbing trend I’m seeing in the early stage fintech ecosystem is the raising of 2-3 back-to-back rounds with minimal progress in-between. Unpacked:
2/19: I think of venture investing as a very simple thing. VCs invest in Founders who are building businesses that solve big problems.
3/19: Founders pitches describe a large profound problem, their solution to the problem, and the financials the business will generate over time
Read 19 tweets