Batch brew #7

Stocked up on caffeine again, 2023 is here, news layout & more

Welcome back to the Caffeine Capitalist! β˜•

After taking a brief break to recharge and refresh, we are excited to unveil our new layout and continue bringing you the latest and greatest in the VC & Boring business spaces. We've been busy brewing up new ideas and can't wait to share them with you. As we kick off the new year, let's raise our cups of coffee to a successful and prosperous 2023. Cheers!

Estimated read time: 4 minutes and 23 seconds

For the refreshed 2023 format we decided to split the newsletter into 4 main topics:

  1. Tiny Thoughts: mental models & inspiration helping us in the daily hustle of VC & Micro PE

  2. Insights: both VC and Boring biz ideas ranging from markets stats to operation model suggestions

  3. Twitter Threads: yes we do spend a lot of time there, here you find out best catch

  4. Visuals: our most popular meme section has made it again to this year's format

With CC's rework, our aim was to make the sections sharper and giving you possibility to dig deeper if you wish to. The results is that we also made it faster to read & extract key ideas. Let us know what you think!

Before we kick-off, special thanks to 55 new subscribers since last issue πŸ™πŸ»

Dept. of Tiny Thoughts

Is it a vitamin or an aspirin?

- Ben Horowitz

In VC, we always look for 10x better, not exactly 10x, but something that significantly improves the current state. The though above helps us articulate the idea of "10x" better. Vitamins are nice to have, they might have some long term benefits, but you won't return back home in the morning if you forgot to take them before leaving to work. Whereas if you have a headache, you would do much more to get your hands on one.

We as VCs want to back solutions that solve the problem & act fast.

Dept. of Insights:

1/ Snow, it's a giant cake!

Who would have though or snow as a multiple billion dollar industry. Well, it is, almost every year.

Key ingredients to fight effects of snow and harsh winters:

  • Snowplows

  • Drivers

  • Brine

  • Salt

Interestingly, study of IHC from 2014 calculated that in Canada, a major snow-storm which leads to impassable roads can cost up to 300-700mil. USD per day per in direct and indirect costs for businesses and government. In this number is not for whole Canada, but on average just for one of it's 16 states and 2 provinces.

The big question mark is, what about global warming? Won't that make it disappear?

Same discussion as with investments into Oil & Gas in the era of electric vehicles, everything will in the end come down to the actual EBITDA multiples.

Dive deeper > "The Hustle"

2/ Market Annealing for early stage startups

Annealing is a technical term for changing the properties of two metals when you are trying to join them. Not only is it super important in the industry of metallurgy, it can also be applied to early stage startups attacking non-existent markets.

All startups strive for product-market fit, yet there might be alternative approaches. One of them is proposed by A16Z and that is the concept of "market annealing," which is different from finding product-market fit (PMF) and category creation. It refers to the process of a startup shaping both itself and an early market, rather than assuming there is an existing product-market combination that just needs to be found. The focus is on the tactical steps a startup needs to take to muscle its vision into the market before either are ready.

How is market annealing strategy different from new category creation?

In short: "Market annealing strategy is when the company has a better idea than the market for what the market needs, and so has to work hard to overcome the inherent shape of the market. And it can take years of struggling for relatively modest progress. It's a multi-year-long battle of hammering the shit out of the company and the market simultaneously, trying to get the two to hold together".

So different from category creation, where the start-up creates a new market with new buyers, budget, category and also market size.

Dive deeper > A16Z

Dept. of Twitter Thread Research:

1/ Looking for 50%+ margins? The businesses in this thread are well hidden within the economy yet are banging out unbelievable margins. Most of them totally boring tbh:

2/ Nick Huber at his best. Pretty much self explanatory.

Dept. of Visual Research:

All major departments of one company happily presenting their workπŸ‘‡

News from our portfolios & where to shake hands:

  • Looking back at last year, it was a busy year at, 22 pre-seed and seed investments in DACH, Baltics, CEE and UK. Explore their LinkedIn post here.

  • One of our portfolio companies, Kiuub has pivoted into no-code development taking part in the global market growing at 30% yearly, learn more here.

  • Slavo will be in Israel from 13th to 19th of February, meeting startups and catching sun while enjoying good coffee, Andrej will be in Tel-Aviv with Slovak business mission visiting university, startup and Innovation centres from 30th January to 2nd February. If you are there, let's connect!

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Enjoy your coffee fresh, allocate capital, repeat! See you in 2 weeks πŸ‘‹

The Caffeine Capitalist is a bimonthly newsletter written by Slavo Tuleya, Andrej Petrus & Martin Nemecek. It is written in partnership & in support from ZAKA.VC and Chop Chop Ventures.

What do you think of this issue? Let us know how you like the next layout, suggestions welcome!

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.