[HN Gopher] Calm Company Fund Is Taking a Break
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Calm Company Fund Is Taking a Break
Author : philip1209
Score : 79 points
Date : 2024-06-12 16:01 UTC (7 hours ago)
(HTM) web link (calmfund.com)
(TXT) w3m dump (calmfund.com)
| MatthiasPortzel wrote:
| This is the first I've heard of Calm. It seems very similar to
| Slow, which I recently heard of.
|
| https://slow.co/about/
| sulemanali wrote:
| Not at all like Slow Ventures. Slow Ventures is a traditional
| VC firm!
| frankfrank13 wrote:
| TLDR; they couldn't raise enough money to scale and keep going
| Angostura wrote:
| If any of you like me had no idea what a Calm company was:
| https://www.outseta.com/posts/calm seems to explain.
|
| In summary - it's about how the company is run - not that they
| make apps to help you meditate.
| mvdtnz wrote:
| Yes this is covered quite clearly in paragraph three of the
| article we're discussing.
| DevX101 wrote:
| Indie.vc, which had a similar model, also shut down shop for a
| while due to capital constraints. They've since restarted the
| fund though.
| philip1209 wrote:
| I think that's an interesting observation.
|
| Indie.vc is as started as a fund in O'Reilly Alpha Tech
| Ventures, a traditional VC fund.
|
| VC funds typically run on their 2% management fee. Have $10m in
| assets under management, and get $200k a year to run the fund
| on (including paying GPs and employees). To increase this
| operating budget, you raise more money from LPs.
|
| When indie.vc had trouble raising more money, it returned to
| traditional VC. When Calm Company Fund had trouble raising more
| money, it started conferences and a low-code agency -
| ostensibly to get more operating budget.
|
| Now that the markets care about profitable businesses, indie.vc
| has reopened. But, Calm Company Fund has had to deal with
| fallout from their non-investing activities - and I'm sure they
| have to disclose the lawsuit to all potential investors which
| probably scares them away.
|
| So, there's a lesson here about how VC funds should invest in
| businesses, not try to create additional revenue lines.
|
| I have utmost respect for Tyler and what he's been trying to
| build. He's excellent at brand building.
|
| (Disclosure: I have a small stake in Calm Company Fund).
| sokoloff wrote:
| > Imagine trying to run a startup where you knew you were going
| to be stuck at a low-six-figure revenue for 10+ years, meanwhile
| your customer base, feature requests and support tickets just
| kept growing every year. That's what running Calm Fund on the
| fixed management fees of our fund sizes looks like. You can
| operate a business for a few years like this, but you need a
| pathway to growing out of it and right now I don't see that.
|
| It seems as if the Calm Fund could not be run calmly at the scale
| it was.
| fidrelity wrote:
| I've followed Calm closely when I was in the startup game and I
| think they deserve recognition for trying to find a different
| way. One that benefits founders (primarily bootstrappers) and
| investors alike.
|
| Seems like the third party in the mix has taken the hit in this
| constellation.
|
| Thanks for your work and sharing openly!
| ensignavenger wrote:
| I've always thought that the Calm Company Fund should have been a
| Equity Crowdfunding Platform instead of an investment fund. They
| should have created a platform to connect investors who want to
| invest in Calm Companies with founders looking to found (or grow)
| Calm Companies.
|
| Its been fun following them, I think they had a lot of good
| ideas. Too bad they were unable to execute on their vision.
| nextworddev wrote:
| Just shows that VC is a hit driven business - again. VCs
| shouldn't try to be PEs
| jack_riminton wrote:
| The litigation comment in there was the "ah there's the elephant
| in the room" moment for me
| soneca wrote:
| Yep. I was curious about what that mitigation was about. Anyone
| knows?
| atto wrote:
| I'm an LP in both Calm and the fund, SureSwift, that's suing
| them, so I suspect I know as much as anyone external.
| Weirdly, the only information I've been able to glean is from
| Calm, but I did participate in the events personally that are
| part of the litigation.
|
| The other fund, SureSwift, had some drama (founding GP left,
| replaced with a hired CEO who seems entirely competent), and
| SureSwift shortly after sued Calm and the former GP. I never
| got a good picture what happened internally, but there
| certainly was a falling out.
|
| Speaking personally, the lawsuit seems like a giant waste of
| time and I haven't heard anything that makes me think Calm
| actually did anything wrong. I've asked, and got very
| confusing empty responses from SureSwift. I wish I knew more,
| since I love this space (calm companies, micro PE, etc) and
| am personally invested on both sides.
| mvdtnz wrote:
| What's an LP?
| swyx wrote:
| limited partner. aka investor
| corry wrote:
| I skimmed the suit itself [1] - apparently Calm put on some
| events together with a PE fund in a joint venture, then a guy
| left the PE fund... and Calm and the exited person continued
| to put on events under the same name while preventing the PE
| from participating. The PE then sued them since they feel
| entitled since they co-created the event.
|
| I'm sure there's more to the story, this is just from the
| suit itself (so obviously from the POV of the plaintiff).
|
| But ya, the impact of a PE lawsuit on a very small startup
| fund that's already trying something new/risky is going to be
| disastrous for their morale and future plans.
|
| No VC fund wants to be sued, I imagine, but for the one that
| has a razor-thin business model and no expectations of a big
| exit for 10+ years I imagine the suit is a high-probability
| death-blow regardless of right and wrong.
|
| [1] https://drive.google.com/file/d/1fauBdZ3Zm5m4VC9YQdyvDiIk
| llC...
| Aurornis wrote:
| > but for the one that has a razor-thin business model and
| no expectations of a big exit for 10+ years
|
| This is the confusing part for me. Why were they trying to
| run an annual event like this to begin with? It's a lot of
| work, and they admitted it was even running at a loss.
|
| I never understood how they squared that with their "calm"
| thesis.
| Aurornis wrote:
| Twitter post where they explain their side:
| https://x.com/tylertringas/status/1716592486460629132
|
| TL;DR: They were trying to run annual Founder Summit
| destination events with a partner fund. They cancelled the
| joint agreement with the partners and expressed their intent to
| run them alone. Partners are suing for, as I understand it,
| trying to "cancel" a joint business venture that was co-
| developed and but continue to run the co-developed venture as
| if the partnership never existed.
|
| To be honest, I never understood why the Calm Company Fund was
| trying to run annual destination Founder Summits at all. It
| seemed so antithetical to their thesis of funding calm, profit-
| focused founders.
| Aurornis wrote:
| I was a fan of Calm Company Fund's thesis from the start, but
| I've been puzzled by some of their choices.
|
| Their thesis is to invest in capital-efficient, profit-focused
| companies. Contrast that with the Calm Company Fund itself, which
| appeared to have invested a lot of time and money into putting on
| destination Founder Summits - https://calmfund.com/writing/how-
| we-built-founder-summit
|
| Running annual summits is a lot of work, and I couldn't reconcile
| the contrast between asking founders to be profit-focused and
| "calm" while also running destination events that founders were
| supposed to travel internationally to attend. They posted a lot
| of fun photos and had a lot of branding around it, but it felt
| like quite a distraction for a small fund and team to be
| operating.
|
| Calm posted something about the events being a small net loss,
| but the real tragedy was the ensuing litigation with their
| partner for the events. You can find Calm Fund's full story on
| Twitter ( https://x.com/tylertringas/status/1716592486460629132
| ), but the TLDR is that they partnered with a PE fund for the
| events, then later cancelled the partnership with the intention
| of running the events on their own. The other fund is now suing
| them for trying to take over running the events.
|
| This is mentioned in the blog post:
|
| > Compounding the difficulty through this period is the fact that
| a private equity firm, SureSwift Capital, that we co-hosted the
| successful Founder Summit events with, has persisted in
| litigation against us. That process has been an eye-opening
| realization that someone who is committed to wasting their own
| money in a pointless legal process can force you to do the same
| and it has been a massive drain on our already strained bandwidth
| and budget.
|
| From the outside, running the Summits felt like a distraction
| from the start. When it spiraled into legal battles with ongoing
| costs, it only got worse. I wonder how they would have done if
| they hadn't tried to run vacation-style events every year and
| instead just focused on being a "calm" VC fund that focused on
| being profitable itself.
|
| The letter somewhat acknowledges this contrast. However, their
| excuse makes it feel even stranger that they thought being "un-
| calm" was the key to success as the Calm fund.
|
| > The irony is not lost on me how "un-calm" these past five years
| have been. I told myself that "we are doing the un-calm things to
| help 1,000s of founders build actually calm companies." The jury
| is still out on whether that was a good plan.
| pech0rin wrote:
| Shutting down without trying to spook their investors or current
| portfolio companies. Couching it as taking a break seems clever
| but I'm guessing any seasoned investors will read between the
| lines and see that this isn't working.
|
| The problem with thinking everyone else is wrong (ie how VCs
| operate) is that usually it turns out they are not. I'm guessing
| it wasn't the story telling prowess of lack of deep connections
| (the common scapegoat for failing) but rather an unappealing
| offer for investors. Huge risks need huge returns. Bootstrapped
| companies may be slightly less risky but definitely less upside
| for investors. If there is no huge payday then investors know
| that capital will be used better elsewhere.
|
| Im not hating on the thesis. Personally I like bootstrapped
| businesses much better but there is a reason they don't attract
| investors.
| atto wrote:
| FWIW: I'm an investor in all of Calm's funds (I think I was one
| of the earliest investors in Fund 1), and have been quite happy
| with the funds themselves. They've done great -- outperforming
| my own expectations.
|
| As indie.vc also found, it's just hard to make these styles of
| funds work on the business side.
| burutthrow1234 wrote:
| > The problem with thinking everyone else is wrong is that
| usually it turns out they are not.
|
| I don't know that this is objectively true. The more accurate
| thing to say is that sometimes it's better to be wrong in the
| same way as everyone else. VC investing seems to be mostly
| based on chasing trends and "pattern matching", so trying to do
| anything heterodox is going to be an uphill battle.
| pier25 wrote:
| Shame. It's probably the only fund I would have liked to work
| with to get some investment.
| jp57 wrote:
| Another LIRP down the tubes?
|
| Something like Calm Company Fund would presumably offer lower
| risk and lower returns (per company) than a typical VC fund
| targeting high-risk high-growth. But with the advent of high
| interest rates, the fund is now competing with a lot of low risk
| alternatives.
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