The Future of Investing: Why Money Alone Won’t Cut It

Capital is everywhere. What is getting harder is finding a partner who does anything after the wire clears. The rest of my night at Lumos House went out as a second episode. The AI playbook panel came first, and then I sat down with Bogdan Savonea and Matei Psatta of Blindspot for a longer conversation about what a fund is actually for. We got into how Codie found them, why I think audience is the most underpriced asset in venture, and how a founder should run diligence on the people writing the check.

In this article is a summary of the core ideas from that talk. Keep reading below for more.

Listen To The Talk

Listen to the full episode on Lumos House Talks.

The Thesis In One Line

We are an early stage fund focused on the digitization of small business.

Small business in the US means under $50 million and, by my read, under 100 employees. That segment makes up roughly 45% of US GDP. It is the economic backbone. Enterprise software has crawled across most of B2B and B2C and almost none of it has trickled down here, which is why so many of our companies are competing against a pen and paper or a fax machine.

Then there is the Silver Tsunami. The youngest baby boomers become eligible for retirement next year and they own over 65% of small businesses in the US. A lot of them do not know they have an exit at all. Gen X, millennial and Gen Z buyers are walking into those businesses with completely different expectations about tooling. That gap is the entire trade. I laid the fund out in more detail in Contrarian Thinking Capital.

The Twelve Dollar Billboard

We were not fundraising when Codie found Blindspot on X.

She ran an ad on a digital billboard in downtown Miami. It cost twelve dollars. Her first reaction was that it could not possibly be real, and then it was. We shot a video about it, the video went up on YouTube, and Blindspot is still fielding inbound from it two years later. Small businesses in Arkansas. A guy in Canada with three digital screens who wanted them listed. People in Asia and the Middle East who watched the video and wanted to buy billboards outright.

That is what owning distribution buys you. A rented audience stops working the day you stop paying for it.

Audience As A Flywheel

Contrarian Thinking is a media company before it is a fund. Roughly 9 million subscribers across channels and about 120 million monthly views across short, medium and long form.

We A/B tested writing small checks out of Fund I and the deal flow that came back was different from what we expected. Founders who wanted into the SMB market and needed someone who already understood it. Then the second order effect showed up: the companies we invest in feed our content, and the content feeds them. We backed into that flywheel. It is now most of the reason a founder picks us over a bigger check.

Conviction Over Reach

Two newsletters, two very different outcomes. HubSpot bought The Hustle. Business Insider bought Morning Brew at a higher multiple.

I would argue The Hustle was the better buy by a wide margin. HubSpot found an avatar. They used that list to sell existing product and to A/B test new product, so it doubled as a product development tool. The number I have heard is that they made back roughly $30 million inside 21 months. Treat that as rumor rather than a filing.

Raw subscriber count is the wrong metric. I would take 5 million people at an 80% click through rate over 10 million at 30% or 40%, every time. Growth trajectory tells you what the attachment looks like, and attachment is not the same thing as lifetime value.

The extreme version of this math, and these are numbers I heard second hand and never verified myself, so community notes on me: Kim Kardashian has something like 300 million followers on Instagram, with a conversion rate assessed around 1%. Sell a one dollar widget and a single post is three million dollars.

Avatars With Names

We give them names. Kevin. Kristen. Bobby. Janelle.

Age bracket, region, industry, whether they own a pet, what kind of university they went to. Then we reverse engineer where that person actually spends time and help the portfolio company go meet them there. One of our home services companies works farmers markets to find renovation clients while everyone else buys Google SEO and Facebook ads and wonders why the mark keeps moving.

Walk down South Congress in Austin and you can spot one. That looks like a Kevin. Probably dressed like me, thinks of himself as blue collar, and is building a real business in a niche nobody has bothered to name.

Bundling And Unbundling

Most of the durable software wins in these industries do one of two things.

• Unbundling = pulling a step out of a workflow that a large institution keeps vertically integrated, so an individual can control it themselves. Fintech is full of these. Think Mac versus PC. The Mac handles everything for you. The PC lets an experienced person modify what they want.
• Bundling = aggregating a fragmented workflow into one tool that carries someone from start to finish.

I am not going to hand you an engine and congratulate myself on my contribution. You still need a chassis, a steering wheel, wheels, a body and windows. Deliver vehicles.

Blindspot is the bundled version of out of home advertising. They ran Codie's book launch in Times Square: digital boards across New York for the day, the NASDAQ tower, and a digital truck we used to troll Blackstone and BlackRock on its way past. Doing that yourself means finding a broker, finding whoever owns that specific display, then six people signing off on the design so it does not conflict with something else. They handled the timing, the payments, the design and the coordination.

No Pre Product, No Pre Revenue

We do not do pre product and we do not do pre revenue.

If you have no revenue you are worried about your product. You are not worried about your customer. That is the whole reason for the rule, and I could be proven wrong on it later.

Throwing technology at an industry because no technology exists there yet is not a customer acquisition strategy. Good luck with lifetime value. We look for purpose driven products where the founder can name the person they are serving, someone they could recognize on the street, and describe how that person actually lives their day.

Diligence Runs Both Ways

A term sheet is a legally binding agreement that outlasts 30 to 40 percent of American marriages.

Back of a napkin, on a Sunday, community notes again. But if you are underwriting a ten year relationship, look hard at what your investor has actually lived. Do they have a sales leader on the team. Does anyone there obsess over go to market, or over the LTV to CAC ratio. If you are hard tech, has a single person in that firm ever untangled a supply chain.

The sharpest filter came from the other side of the table. Watch the questions an investor asks you. A fund once told the Blindspot guys it did not care about their customer acquisition cost, and that was the red flag. If the thing at the center of your business does not register as important to them, that is a values mismatch, and it will not improve after the money lands.

Media for equity gets a bad name and I do not think it deserves a blanket one. Do the math. If ten percent of a ten million dollar company buys you distribution that drives two and a half million in revenue in year one, and seed to Series A revenue is trading somewhere around a 10x multiple, that is a twenty five million dollar addition to enterprise value. The structure was never the problem. The question is whether that audience is genuinely your avatar, or whether you just bought yourself a billboard at a circus.

Conclusion

Make sure you have a problem. Then make sure there is a customer and a real need sitting behind it.

Ideas are cheap the way philosophy is cheap. Enormous impact, no revenue. What decides whether you have a business is whether you change someone's day enough that they will enter an economic exchange over it. Are you touching their workflow, their family, their peace of mind? Serve that person and the product builds itself. If you are building for Main Street and you want a partner who does more than wire the money, contact me today.