This VC’s first exit was a Naruto fansite
Tom Chen on 40x & 5000x investing returns, what artists & the finance community have in common, and more
Each week on The Cap Table (TCT) we highlight investors, operators, founders, and industry leaders in the private markets to share their tribal knowledge of how to get onto “the cap table.” Know someone we should feature? Let us know here!
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We’re thrilled to announce this week’s exclusive with Tom Chen, Co-founder, Operator, GP and angel investor! At the age of 13, he created a fan page that had nearly 1m registered users before being purchased in 2008, which catapulted his investing & entrepreneurial career. After serving in a variety of technical roles, Tom Co-founded Stitchroom in 2018, a D2C home furnishing company, and is also an active investor across a variety of assets (angel investing, crypto, GP at Magic Fund).
We sat down to talk all things cap tabled related, including:
Building a top 1k visited website at the age of 13 📈
The investing opportunity behind D2C customization 💰
Why he’s bullish on DeFi and NFT’s 🐂
Cap table tips and insights ⼏
The state of Venture Capital in 2030 🔮
TCT: At the age of 13, you founded Naruto Central, a fan website for Naruto, the popular Japanese manga series, that was later sold in 2008. Can you tell us more about this experience?
I was obsessed with Dragonball Z when I was 10 years old, but we didn’t have cable television so I couldn’t watch it on Cartoon Network. We had a computer at home with dial-up internet (remember that?), so one day I decided to go online and search for DBZ (Dragonball Z). To my surprise, I was shocked at the number of DBZ fansites. I got super into the online anime community, was posting in a lot of forums, and then took a shot at creating my own anime sites for fun on Geocities PageBuilder. Funny enough, I found out about Naruto through a torrent site for anime and the number of leechers around Naruto caught my eye. After that, I really got into the show and decided to make a website about it to capitalize on the momentum from the community and the need for a fan page.
At this point, I had been learning to make websites for about 3 years and felt like I was pretty competent at that point. I knew how to use Photoshop and code everything in HTML/CSS, so I went for it. I posted the site on a forum I frequented and the first day it had 300+ visitors. A couple months later, momentum picked up and it started averaging 3,000 visitors a day. At its peak, we were getting 250K+ visitors a day and was the #2 organic search result on Google for ‘Naruto’. Meanwhile, my parents had no idea what I was up to and thought I was just playing on the computer. Everyday, I would have to finish most of my schoolwork before I could work on the site in the evenings. I was approached a couple months before I turned 18 about purchasing the site. It was a pretty easy decision for me to sell because I was about to go to college and the timing was perfect. My parents were obviously shocked because the whole time they thought I was just playing around on the computer :) The sale allowed me to pay off my parents house mortgage, pay for my college, and have a better head start financially than most people who’ve worked 4-5 years after college.
After the sale of the company, how did you invest that money at such a young age?
I knew I needed to do something with the money from an investing standpoint but wasn’t sure what to do. I was young and we were also in the middle of the 2008 financial crisis, so timing wasn’t great to enter the public markets.
Instead of making any decisions, I decided it was better off to learn more about finance and investing, which I didn’t have much exposure to (I was studying Computer Science major). I ended up interning 2 summers at Goldman Sachs in NY and also a summer at Lightbank, a VC started by the Groupon founders in Chicago. Between those experiences, I felt like I had a solid understanding of how some pretty big components of the investing world worked. It was in 2010 when I first started buying some stocks (I think I bought Google, eBay, and Apple). It was around that time when I started dabbling into BTC in the late 2010’s or early 2011’s.
As you mentioned, you were an early Bitcoin and also Etherum. What crypto projects are poised for similar growth and adoption in the near future?
I’m not going to give you anything groundbreaking here, but there are a couple things I see.
A lot of institutions are buying BTC and just holding it on their balance sheet as a reserve. I think that trend will continue for other public companies, and this gives BTC the opportunity to keep appreciating in value.
On the Ethereum side, DeFi and NFT’s will keep growing. It’s kind of cool to think about but in the real world, finance people and artists are like opposites yet with DeFi and NFT’s, both ecosystems exist on Ethereum. I really think Ethereum is doing something powerful here, a lot more interesting than BTC. In terms of projects, I really like SushiSwap on the DeFi side and Zora on the NFT side.
After serving in a variety of technical roles, you founded Stitchroom in 2018, a platform that allows you to buy custom pillows, cushions, curtains, and other home furnishings. What was your inspiration behind launching this, and what opportunities do you see for investors in the D2C & E-commerce industry?
The idea actually came from my Co-founder, Ella, whom I met through a mutual friend. She also happened to live in the building next door to me when I was interning in New York so we quickly became friends. She stumbled upon this idea while she was at an interior design startup where a lot of her day was managing interior designers who would complain about the bad experiences they had trying to get custom products made. She told me about an idea she had around how to solve this, and I just so happened to be in between jobs so I decided to help her out a bit. A few months later, I went all in on this idea with her and came on as a Co-founder. Very few people can outwork me, and she was one of them, so I knew we would do well as Co-founders.
The industry is very archaic and we opted to take a more tech forward approach to improve it. It’s pretty hard to build a software company and a manufacturing company at the same time so we knew we wouldn’t be facing a lot of competition. The biggest challenge is having to build both sides of the business at once. We can’t outsource the manufacturing because of the delicacy / preciseness of doing custom, especially when you have to develop these processes within a small space and not a huge factory. I think (and hope) that custom or customization as a trend continues to grow as that bodes well for Stitchroom.
I’m really interested in the personalized health space from an investing standpoint. There are a lot of digital first consumer health companies popping up. I think we could see some really cool stuff in this space.
You’re now an active angel investor with investments in companies like Lob, Bolt, Akido Labs, and CoinDCX. How did you get into angel investing and how would you describe your investing thesis?
Lob was my first investment in 2013. I met the founders at a Hackathon (they were wearing some YC sweaters so I went to talk to them), and we hit it off and became friends right off the bat. I thought their company was super boring (ha!) but had a great chance to generate a lot of revenue and poised for growth, so I asked if I could get in to their (funding) round. I’m the lowest person on their cap table (I think my seed check was $5K and I wrote “Seed $” for the memo on the check I gave them) but let me come on. I did get pro-rata right, so I’ve invested in every round since.
I started taking angel investing more seriously in 2018 after some of my early crypto investments gave me good returns. I’ve done over 20 investments now and honestly, I don’t have a “thesis”, per say. However, I am interested in a lot of things, including: alternative assets, sustainability, space, biotech, dev tools, remote work, etc and my investments reflect that. As long as it’s in an area that I’m interested in and I like the company idea and can get behind the founders, I will invest. I’m not really coming in there with a mentality of trying to hunt for these big winners. If so, my portfolio would look a lot different.
I feel like I’m more of a boutique angel investor.
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How often do you work with founders on technical aspects of building their companies, and what are some of the newer tech stacks companies are building on top of?
I actually work with a lot of founders before they start their companies and haven’t even raised yet.
As an engineer, you’re always trying to find ways to work faster and be more efficient. There’s a lot more opportunities today to get startups launched without having to be an engineer and that’s great for engineers and non-engineers because engineering is hard and time consuming. When I work with founders, a lot of the discussions are around figuring out ways to reduce their overall engineering costs so they can spend more time trying to grow the business. Otherwise it’s just intro’s to other potential investors or helping with recruiting.
In terms of building companies today, I really like using Next.js/React on the frontend but on the backend not much has really changed for me for many years, it’s still just building backends with Node.js or some Python framework. There’s been a lot more advancements on the DevOps/infrastructure to make it easier to deploy and scale your applications. These things are really important because there are way less DevOps engineers than web engineers. Also, from an operations standpoint, there is a lot of software now for building internal tooling, data pipelines, and analytics tracking that solve needs that engineers would previously have to build from scratch. I do tend to try to shy away from using the very new, shiny things because you have to find the right balance between using things that are battle tested and you’re familiar and can move fast with vs newer things that may be buggy or lack the developer ecosystem where you may not be able to rely on it long term. Honestly, I’m afraid to use new services because I don’t know if their VC money will run dry and shut down in a year since there are so many tools and services out there now.
You’re a GP at Magic Fund. Can you tell us a bit more about how you got involved with them?
After getting more serious into angel investing in 2018, my friend Goke was investing through Magic Fund. Over the course of the last three years, Magic has invested in over 60 companies (including Retool, Novo, Payfazz), with the thesis that at the earliest levels, founders have access to some of the best quality startups and also can be some of the most valuable investors on the cap table. They have an incredible group of GP’s and I’m excited to join and contribute.
What changes would you like to see across early stage investing?
Overall, I hope it becomes easier for less prominent angel investors to have better opportunities to invest in the same quality deals that big name investors get access to. As a general theme, I’m hoping there’s more decentralization across the early investing ecosystem and less barriers for these lesser known angels to get access to dealflow.
How do you stay organized with your investments (managing notes and SAFEs pipeline, etc)?
I keep it simple and stick to Google Drive and Google Sheets and don’t over complicate things.
What was your first 100x/10x and how did you get into that deal?
I don’t believe I have a 100x from an angel investment (yet!), but Lob is somewhere around a 40X with a good chance of getting to 100X. I did the ICO of Ethereum and that’s been like a 5000X, but I’m not sure if you can count that as an angel investment :)
What’s your secret for getting on the cap table?
Giving crypto tips… jk :)
In all honesty, most of the investments I’ve done have come from an introduction so it’s really more about if I can get excited about the problem. When I do get excited about something, the founders will see it very evidently and usually that excitement is enough to get into the round. I have some friends in a handful of VC funds and they do tap me when they need some additional opinions on companies, so some of the deal flow comes through that otherwise it’s just other founders who make the intro’s. In both cases, I’m not really fighting to get into the deal, but rather, just being upfront around challenges and areas I want to help solve and can help with.
What’s your biggest cap table “mistake”?
I’ve already had an angel investment go under, and this is the nature of angel investing and something everyone should be prepared for once they write a check. For this particular investment, the market didn’t shape up to what we all thought it would get to and the company ran out of money.
What are you passionate about outside of work?
I love tennis and play 4-5 times a week. I played in high school but then pretty much dropped off until the pandemic hit and now getting back into it has been great and it’s a huge part of my life.
What’s the state of Venture Capital in 2030?
VC as an asset class will increase by a sizeable amount. I can’t give an exact number but it will increase considerably. Access to capital will be less centralized than ever and we’re going to start seeing VC’s really change form to adjust to this. I think we’re going to see a lot of digital only groups with specific missions start investing, kind of like what’s going on in WallStreetBets.
I think cryptocurrencies will play a big part in that story.
Follow Tom (@datboitom) for more insights into angel investing, crypto, and startups!
Flink Food: $52,000,000 led by Target Global. Flink Food GmbH is building an online grocery and food e-commerce operation.
TripleBlind: $8,200,000 led by Dolby Family Ventures. TripleBlind offers digital privacy as a service and enables companies to safely provide and consume data in an encrypted environment.
Looped: $7,700,000 led by Will Ventures. Virtual events platform
Reperio Health: $6,000,000 led by Caduceus Capital Partners, Rogue Venture Partners. Reperio is the only at-home health assessment that provides comprehensive results immediately.
Unchained Capital: $5,500,000 led by NYDIG. Unchained Capital is a blockchain financial services company that lends cash to long-term crypto holders.
Airbyte: $5,200,000 led by Accel. Airbyte is an open-source data integration platform that syncs data from applications, APIs, and databases to data warehouses.
Humaans: $5,000,000 led by Frontline Ventures. The fastest way to onboard and manage your staff
OpenComp: $4,600,000 led by Evan Williams, Time Ventures. OpenComp is a compensation solution combining software, market data, and consultation in one easy-to-use tool.
Trubify: $4,000,000 led by Cove Fund. Trubify is an award-winning, disruptive live music streaming technology platform that offers innovative revenue streams and artist services
Spark Advisors: $3,600,000 led by Primary Venture Partners. Spark Advisors is a technology-enabled brokerage that partners with independent agents to deliver a concierge service.
PayGround: $3,500,000 led by Triventures. PayGround makes healthcare bill-pay simple by getting providers and patients on the same payment platform.
Dooly: $3,300,000 led by Boldstart Ventures. Dooly is a sales enablement platform that collects information and insights essential to close business sales.
Fluid Truck: $63,000,000 led by Bison Capital Asset Management. Fluid Truck provides a platform for businesses and consumers to rent trucks on-demand via web or mobile app
Theorycraft Games: $37,500,000 led by NetEase. Theorycraft Games operates as an independent game studio.
Bionaut Labs: $20,000,000 led by Khosla Ventures. Bionaut Labs revolutionizes the treatment of central nervous system disorders with its precision medicine treatment modality.
Whatnot: $20,000,000 led by Andreessen Horowitz. Whatnot is a live stream platform and marketplace that enables collectors and enthusiasts to connect, buy, and sell verified products.
Dooly: $17,000,000 led by Addition. Dooly is a sales enablement platform that collects information and insights essential to close business sales.
FutureFuel.io: $10,000,000 led by UBS. FutureFuel.io empowers employers and financial institutions serving the workplace and consumers to deploy digital solutions designed to crush student debt.
Around: $10,000,000. Around provides an AI-based camera framing designed for high-impact video calls.
Karbon: $10,000,000 led by Five Elms Capital. Karbon is workstream collaboration platform for growing teams and enterprises to combine emails, discussions, tasks, and powerful workflows.
Hepster: $10,000,000 led by Element Ventures. Hepster is aiming to become Europe’s leading embedded insurance player. Its B2B model is complimented by a B2C webshop.
VEIR: $10,000,000 led by Breakthrough Energy Ventures. VEIR is a company developing a new approach to using High-Temperature Superconductors (HTS) for electricity transmission.
Snapcommerce: $85,000,000 led by Inovia Capital, Lion Capital. Snapcommerce is a commerce platform that connects price-conscious consumers to the right product deals.
Stream: $38,000,000 led by Felicis Ventures. Stream builds chat and feeds for applications at scale in a fraction of the time and cost of developing in-house.
Cutover: $35,000,000 led by Eldridge. Cutover is an orchestration and observability platform that optimizes the planning of complex workflows.
Postscript: $35,000,000 led by Greylock. Postscript is an SMS platform that enables brands to communicate and engage with customers through text message marketing.
PocketPills: $30,000,000 led by TELUS Ventures. PocketPills is a tech-driven pharmacy that delivers medication by the dose straight to customer's door.
nextmarkets: $30,000,000 led by Alan Howard, Cryptology Asset Group. nextmarkets is Europe's commission-free online broker
Retail Zipline: $30,000,000 led by Fifth Wall. Retail Zipline is a SaaS internal communication and workflow solution that helps retailers optimize profitability and store performance.
ChurnZero: $25,000,000 led by JMI Equity. ChurnZero is customer success software for growing SaaS and subscription businesses.
Fuzzy: $18,000,000 led by Greycroft. Fuzzy is a subscription-based pet healthcare startup making pet care accessible and affordable.
Hopin: $400,000,000 led by Andreessen Horowitz, General Catalyst, IVP. Hopin is a live virtual events platform that enables attendees to connect, learn, and interact with people anywhere.
Papaya Global: $100,000,000 led by Greenoaks Capital. Papaya Global provides a cloud-based HR and payroll platform for global workforce management.
Yugabyte: $48,000,000 led by Lightspeed Venture Partners. Yugabyte is an open-source distributed SQL database for customers in industries such as cybersecurity, financial markets, and IoT.
Exscientia: $40,000,000 led by BlackRock Innovation Capital. Exscientia is applying AI and big data processing to accelerate drug discovery and development.
Nuvolo: $31,000,000 led by Insight Partners. Nuvolo is an integrated workplace management system that allows customers to manage their operations through a single platform.
Webscale: $26,000,000 led by Benhamou Global Ventures, Mohr Davidow Ventures, Stereo Capital. Webscale is a multi-cloud SaaS tool that provides access to technology enabling e-commerce businesses to automate their processes.
DispatchHealth: $200,000,000 led by Tiger Global Management. DispatchHealth is a provider of in-home and virtual healthcare.
Skydio: $170,000,000 led by Andreessen Horowitz. Skydio uses artificial intelligence to create flying drones that are used by consumer, enterprise, and government customers.
ATAI Life Sciences: $157,000,000 led by Apeiron Investment Group, Thiel Capital, Woodline Partners. ATAI Life Sciences develops innovative mental health treatments that address significant unmet medical needs.
Deliverr: $135,000,000 led by Coatue. Deliverr is a startup company that provides shipping services for e-commerce businesses.
Axonius: $100,000,000 led by Lightspeed Venture Partners, Stripes. Axonius is an asset inventory management platform that focuses on cybersecurity solutions and policies.
TytoCare: $50,000,000 led by Insight Partners. TytoCare is a telehealth platform for AI-powered and on-demand remote medical examinations.
RefleXion Medical: $40,000,000 led by Ally Bridge Group. RefleXion Medical is a developer of biologically-guided radiotherapy systems for patients with cancer.
Clari: $150,000,000 led by Silver Lake. Clari enables revenue operations to be more connected, predictable, and efficient.
Beam Dental: $80,000,000 led by Traverse Fund. Beam Dental is a digital provider of dental benefits that focuses on preventative care and rewards for oral hygiene practices.
Flywire: $60,000,000. Flywire develops a vertical payments platform designed to simplify the global payment and receivables process.
Sources: Crunchbase, LinkedIn, Twitter.
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