Jeff Morris Jr. is the founder and Managing Partner of Chapter One, an early-stage seed fund backed by Sequoia, Marc Andreessen, Kleiner Perkins and many other LPs. Jeff has invested in companies like Lyft, Dapper Labs, Pipe, Superhuman and many more. He was previously the VP of Product, Revenue at Tinder.
We talk about his learning from deploying a fund, investing in crypto, how he determined his value add and more!
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NA: I would love to start with a little bit about your background in terms of what led to you leaving your product role at Tinder and going to start your own fund?
JMJ: Yeah, definitely. It was definitely a long transition. The quick story is I was always investing. Pre-Tinder, I was doing a lot of angel investing and when Angel List came out I was a syndicate lead.
And then while at Tinder, I was a scout for Next Ventures. So, investing just became everything I thought about in the morning and at night. I would go to Tinder and of course, I was still interested in what we were doing at work, but it was just so obvious that my passion was becoming more and more focused on investing.
The course of doing seed deals, being an SPV lead, and a scout for Next Ventures, that progression just gave me a lot of repetition in terms of knowing how to source deals, how to win deals, and then also support companies. So, I was really confident by the time I raised fund one that I could go do this full-time.
I raised the fund towards the end of my Tinder career and ended up not knowing if I wanted to do the fund full-time and ended up actually going to another operating role for a bit. So I went to Lambda School where I was the Director of Growth, but again, I just found as I did this through a fund vehicle and I had LPs, it became increasingly difficult to do both operating and investing.
I noticed the quality of my deals was starting to go down a little bit because I just didn't have any time. There was a fork in the road where I needed to choose between the two, and it was pretty obvious that investing for me was what I was more passionate about, and really haven't looked back.
It's been I guess since I raised fund one, it's been about two years and I wake up every day, just loving what I do.
NA: I love that. I'd love to dig into the part where you mentioned learning how to best source and win deals. I understand that's probably one of the most important parts of venture. What would you say are, I guess the key insights that you've learned over these past few years of sourcing and then actually winning an allocation in the deal?
JMJ: Yeah, it's a great question. I think the thing that I was just unclear of when I was early in my investing career was why founders would want to work with me.
So it was kind of knowing what my value was on a cap table. We live in an era where there's an abundance of capital and no shortage of choices for founders. So you really have to be clear and self-aware with what you bring to that relationship. So, I just started asking more and more founders why they wanted to work with me.
And the answer I kept hearing was they didn't have a product person on their cap tables. So, operating at Tinder, a lot of people were just generally impressed by what we were doing on monetization, which is what I was focused on. And so it was pretty clear, like my role on a cap table would be helping with product.
I think the sooner you can become self-aware, I truly believe that everybody has something they can add to a company. Even if it's just like pure energy, like going in and helping advocate for the company and finding new customers. So, that's part of it and then I think another part of it was just understanding what made me happy as an investor in terms of what I want to do.
And, it turns out that what I was good at and what makes me happy are directly aligned. It's like the perfect intersection of my interests is investing in products. So it was just a really natural way to position my fund, in terms of what services we wanted to provide the founder.
NA: Got it. That makes a lot of sense. I think your fund has a great portfolio. What would you say is the key thing you look for in the teams and companies you invest in?
JMJ: Yeah, I'm constantly reevaluating what that is, but most of what I do is really early. So it's pre-seed and seed investing, and really at that stage, it just comes down to the team and people.
So increasingly I care a lot about the team dynamics, what motivated the team to form to solve a problem. Has this been like a passion for that founder or founding team for a long period of time? So it's kind of like the idea maze analogy. Have they gone through the idea maze and really validated that whatever market and whatever problem they're bringing to solve that solve some problem, at market actually, is something they want to do for the rest of their careers.
Have they done kind of the upfront work that it's easier than ever to start a company right now, there's just so many tools that founders have at their disposal, whether it's Webflow or no-code tools. So it's really easy to actually form a company, but I find that the founders I tend to work with have been obsessed with some problem just for a long period of time in their lives.
It kind of feels like it's their destiny to be the single team to solve that problem. You kind of know it's a feeling you can't really describe when you meet a founder, but you just sort of know, it's like founder market fit or that authenticity of why they want to actually go build that business is really clear during, during those early pitches.
NA: Yeah. Got it. And is there a key characteristic that you've seen across your portfolio founders?
JMJ: I think for the founders that have succeeded, it's this grit it's like, I won't back down from anything type of attitude. And there's just kind of a force of nature element to how they approach solving problems.
It's not a personality type, some are introverts, some are extroverts, but it's like every time you hop on a call with them, they've made so much progress since the previous call, it's like, they're constantly learning something new and applying it to their business.
I talked to a lot of founders that haven't even left their company. Like they have some idea they're thinking about building and you can tell based on the time between calls, whether they're actually going to go solve that problem because it's just like they can't stop thinking about it, and every time they talk to you it's a new lesson or new learning.
And then beyond that, I think I tend to work with a lot of founders who care deeply about product and product has obviously many pieces, but the actual kind of go to market building piece is important. And then, look increasingly for founders who have some distribution advantage.
Whether they've, maybe they've worked in SaaS and they've been in the market, so they know all the customers. Or on consumer, maybe one of the founders has some just like a large following in a certain vertical that allows them to just reach escape velocity before their competition. So yeah, I do look for kind of product expertise and also just a unique point of view on distribution.
NA: Interesting. I'd love to hear the story of what happened with the Page Zero Fund, and then also why you have decided to focus a bit more on crypto again?
JMJ: Yeah. So in 2017, Index Ventures ran a scout program, and this was my first pool of capital that I managed. The explicit charter of the fund was to invest in digital assets and web three projects.
I guess the reason I was so excited about that fund was because I was investing a lot of my personal money in crypto projects. I'd done the seed rounds of projects like Dapper Labs, which became an NBA Top Shot. I did the seed round of Compound Finance and a bunch of others, but I became just generally obsessed with the market.
Page Zero, ended up investing in projects like The Graph which was kind of the standout, but the fund itself ended up on paper, it's like a 25 X fund and the more, so I was just curious about digital assets.
I worked on subscriptions at Tinder and all we were selling were digital goods. So I was pretty in love with digital goods. When I saw Crypto Kitties, as an example, it just kind of clicked where, it seemed pretty silly on the surface, but people were spending money on these digital goods that had zero marginal costs. There were real marketplace dynamics that were starting to develop around the CryptoKitties ecosystem.
And then beyond that, I became just interested in DeFi and I went to raise my first fund in 2019. At that time my crypto portfolio wasn't looking that good because Compound Finance had not kind of gone to market yet. The Graph was still not released. Dapper Labs had not hit its inflection, Blockfolio had not been acquired by FTX.
And so there was actually, zero chance I was going to go raise an institutional fund from the investors that I raised from, with crypto as the focus. I was still very focused on crypto from just an intellectual point of view and then luckily with DeFi summer and then also with NBA Top Shot, doing so well, in Q1 2021, suddenly LPs were asking me based on my track record to spend more time investing crypto.
Not that you ever need any kind of LP permission to invest in any given space, but it was just the reality of the fact that I wasn't going to be able to raise a crypto fund, and so now I think the products are much more mature. There are real use cases for different crypto ideas. And it's just something I love and I'm passionate about doing for the rest of my career.
NA: For sure. you invested in Dapper Labs and obviously talked about, non-fungible tokens. How do you feel about the current market and seeing that play out and did you think it would come the way it has come now when you first invested in Dapper Labs?
JMJ: I had no idea that the market was going to explode so quickly. And it was also really it kind of all happened at once. And so January, I think caught a lot of folks off guard, but the NFT market, beyond NBA Top Shot has so many exciting projects happening.
And I think that the public narrative right now is that NFTs, have like there was a bubble and suddenly the assets aren't valuable. But if you look at the Opensea transaction volume, they actually have the best month in their existence in June. And so the market is just getting started. I think there was a period in February, March, where everybody was trying to figure out every creator, every musician, every entertainer was trying to figure out how they could be a part of the NFT market. I think a little bit of the initial excitement, it's just been tempered a little bit in a good way where we're now back to kind of reality, but there's definitely a new baseline for NFTs and the projects that I'm seeing right now are just really exciting.
Especially the kind of social token NFTs where it's unlocking community access and real-life events. Friends With Benefits ($FWB) is a good example. It's just such a cool community that could it have existed without NFTs? Potentially, but the crypto native nature of the groups and also the fact that an NFTs exists has just unlocked, so many new use cases for community building.
NA: Yeah, no doubt. You've been investing in some great companies. Do you have an anti-portfolio that you can talk about and is there's anything you've learned from those mistakes?
JMJ: Yeah, I have a ton.
I mean, I think probably my worst crypto mistake was Filecoin. I talked to the team in 2014. I was driving to a wedding, I was on the five freeway, which if you live in California, you know, it's like really spotty cell phone reception. Honestly, it was like one of the worst calls at the end of my career.
I just wasn't prepared and probably sounded remarkably uninspiring to the team. So I didn't end up investing in Filecoin at that time. Since then there's been, especially in fund one that I've deployed, I think there's been a lot. I had a chance to ... I had known Paul Davidson at Clubhouse for years and, and saw Clubhouse really early in its life cycle all the way back to the seed round.
You know, there's been other companies that have raised at high valuations, you know, Mainstreets raised at a high valuation, Public. I mean, there's just like this huge long list and it grows, it grows every day. I've learned, not to, you know, I think, I think the kind of lesson that I'd love to live by is to not to be mad if you pass, but to me be mad at yourself if you didn't see it.
So I at least know I'm fishing in the right ponds, but obviously, I'm always trying to question how I can improve my decision-making process. There's like no end to that self-evaluation process and trying to become a better investor is for me, probably going to be a lifelong journey.
NA: Yeah. Fair enough. You also recently mentioned that fund one has been, you know, officially deployed. Could you share some of your biggest learnings from deploying that fund?
JMJ: Yeah, I think I wanna write articles about this because I learned a ton. But I guess starting with the fundraising process was when I raised the fund, I was still at Tinder and I had expected the fund to be about 3 or $4 million and that ended up being nine and a half million dollars, which again, isn't a huge fund, but it does change, some of the decisions I made in terms of sizing of my checks. Perhaps they should have been a little bit bigger. You know, I think I, as a solo GP or a smaller fund, you have time constraints.
And so the portfolio size ended up being 50 plus companies and obviously, we are in the service business, you have to provide a great service to founders. And once you invest in that many companies your service level can, can be challenged. And so you know, probably the power of concentration doing a little bit less companies in future funds would be a learning.
I think part of, part of the evolution of any fund manager is becoming confident in your own picking abilities. At the beginning of the fund life cycle, I was really, I think, relying on other people's signal to inform my investment decision-making process. There was some turning point in the fund where, and I haven't quite pinpointed that exact moment where I just kind of became disenchanted with that form of investing in wanting to become the signal.
I think a part of it was my peers and my LPs and other people that just began to trust my tastes more. And that helped me trust my tastes more as a result that I think you have to eventually make the transition to thinking for yourself and having your own reasons for investing or not investing. If you pass on a bunch of companies where they've ended up raising money from tier one funds, you have to live with those decisions and just be confident that you actually went through your own process to come up with your own decisions.
So I don't think there's enough original thought in investing right now because there's just so much activity in the rounds happening so quickly, but slowing down and making your own decisions is a huge part of what I keep telling myself to do more.
NA: Yeah. That's incredibly insightful. Are there any investors that you would say are your role models or who you look up to?
JMJ: Yeah, I think that's a great question. There's kind of a long list, but one of the early people who helped me at the start of this fund was Mike Maples at Floodgate. What I love about Mike is he really doesn't change a lot of his strategy over the years.
He's been consistently focused on being a great seed manager, and for me, having a stage focus has been, it just kind of put me at peace, like knowing where I sit in the ecosystem and what makes me happy. So I'm also a seed manager and that's where I love investing. Beyond that, you know, I'd say I don't have a ton of role models in investing.
I do have people that I really respect and whose opinions I value, but there's not a ton of people who I point to and say, like, that's my role model. And yeah, I should have a better answer to that though. But yeah, I would say Mike's definitely one of them.
NA: Yeah. Fair enough. What's a secret obsession of yours that not many people know about?
JMJ: That's a good question. I think for me, I've always just been really attracted to finding new things before everybody else. So in college, as an example, I ran a music blog where it's kind of like a Pitchfork type blog where I was trying to find new musicians before everybody else.
And I maintained that music blog through college and it became like, I've always loved being a taste-maker. And so, from that, I worked at UTA, which is a talent agency in Los Angeles in their digital department for less than a year and my whole job was trying to discover YouTube talent before everybody else and transition them to become, either TV or film stars. And so I was scouring YouTube to find those folks, and that was again a lot of digging, you know, kind of like hanging out on the deep ends of the internet, trying to find things that nobody else is identifying.
I think that's extended to how I invest is that I try to find communities or people that before, before anybody else. And probably like the canonical example from fund one is Roam Research. You know, I got really involved in the diligence process with the Roam Research community. And I didn't feel like they were, I was in the slack room, so I knew that there weren't a ton of other investors in there hanging out.
And so I find the more you can authentically immerse yourself within subcultures, as an investor, that's where you tend to find the most alpha just because you're able to discover things before anybody else and actually understand market dynamics before before other folks do.
NA: That's pretty cool. What's the latest, publicly announced investment you've made and why did you make it?
JMJ: That's a great question. Let me see publicly, publicly announced. I guess a deal that I led pretty recently was a company called Fanhouse, which is a creator economy platform. They're basically enabling subscriptions for TikTok influencers and also Twitch influencers. But the kind of group of creators they've targeted is female creators who have really big personalities who want to monetize just like that.
It's a combination of shit posting, but also just kind of like thoughts that you'd send your close friends, but won’t share on the internet and I just found that it was a really interesting group to build. I see a lot of creator economy pitches, and it's pretty generic in terms of how they qualify like their group of creators. They just kind of use the word and it's a catch-all for many different things.
I really appreciate how Fanhouse have identified this specific niche. Beyond that, the team was just insanely talented. Two of the top Stanford CS grads of 2020 started the company with an amazing founder from Wharton who left finance to solve this problem for herself.
So yeah, Fanhouse was a recent investment that I'm really proud of. We did that deal in the pre-seed and they've just been kicking butt. So I am really fortunate to be working with them.
NA: Exciting. Yeah, I did see you tweet about them. Jeff, really appreciate you joining me and taking out the time.
JMJ: Yeah. Thank you. And look forward to the episode and appreciate your time.
Jeff Morris Jr. - Chapter One