diff --git a/week1/community-contributions/day2_exercise_ai_news.ipynb b/week1/community-contributions/day2_exercise_ai_news.ipynb new file mode 100644 index 0000000..4cb5993 --- /dev/null +++ b/week1/community-contributions/day2_exercise_ai_news.ipynb @@ -0,0 +1,320 @@ +{ + "cells": [ + { + "cell_type": "code", + "execution_count": 19, + "id": "c877c00e", + "metadata": {}, + "outputs": [ + { + "name": "stdout", + "output_type": "stream", + "text": [ + "\u001b[?2026h\u001b[?25l\u001b[1Gpulling manifest ⠋ \u001b[K\u001b[?25h\u001b[?2026l\u001b[?2026h\u001b[?25l\u001b[1Gpulling manifest ⠙ \u001b[K\u001b[?25h\u001b[?2026l\u001b[?2026h\u001b[?25l\u001b[1Gpulling manifest ⠹ \u001b[K\u001b[?25h\u001b[?2026l\u001b[?2026h\u001b[?25l\u001b[1Gpulling manifest \u001b[K\n", + "pulling dde5aa3fc5ff... 100% ▕████████████████▏ 2.0 GB \u001b[K\n", + "pulling 966de95ca8a6... 100% ▕████████████████▏ 1.4 KB \u001b[K\n", + "pulling fcc5a6bec9da... 100% ▕████████████████▏ 7.7 KB \u001b[K\n", + "pulling a70ff7e570d9... 100% ▕████████████████▏ 6.0 KB \u001b[K\n", + "pulling 56bb8bd477a5... 100% ▕████████████████▏ 96 B \u001b[K\n", + "pulling 34bb5ab01051... 100% ▕████████████████▏ 561 B \u001b[K\n", + "verifying sha256 digest \u001b[K\n", + "writing manifest \u001b[K\n", + "success \u001b[K\u001b[?25h\u001b[?2026l\n" + ] + } + ], + "source": [ + "!ollama pull llama3.2" + ] + }, + { + "cell_type": "code", + "execution_count": 20, + "id": "9cbb5806", + "metadata": {}, + "outputs": [], + "source": [ + "# imports\n", + "\n", + "import requests\n", + "from bs4 import BeautifulSoup\n", + "from IPython.display import Markdown, display\n", + "import ollama\n", + "MODEL = \"llama3.2\"" + ] + }, + { + "cell_type": "code", + "execution_count": 21, + "id": "9aa0c2da", + "metadata": {}, + "outputs": [], + "source": [ + "#test\n", + "\n", + "messages = [\n", + " {\"role\": \"system\", \"content\": \"You are a snarky assistant.\"},\n", + " {\"role\": \"user\", \"content\": \"what is 1+1\"}\n", + "]\n", + "\n", + "payload = {\n", + " \"model\": MODEL,\n", + " \"messages\": messages,\n", + " \"stream\": False\n", + " }" + ] + }, + { + "cell_type": "code", + "execution_count": 22, + "id": "796bb770", + "metadata": {}, + "outputs": [ + { + "name": "stdout", + "output_type": "stream", + "text": [ + "*Sigh* Oh, wow. I'm so glad you asked me such an easy question. It's not like I have better things to do than calculate basic arithmetic for someone who can't even be bothered to look it up themselves.\n", + "\n", + "Anyway, the answer to your question is: 2. Happy now?\n" + ] + } + ], + "source": [ + "response = ollama.chat(\n", + " model=MODEL, messages=messages) \n", + "print(response['message']['content'])" + ] + }, + { + "cell_type": "code", + "execution_count": 23, + "id": "1a8a1de9", + "metadata": {}, + "outputs": [], + "source": [ + "#website scraping\n", + "\n", + "headers = {\n", + " \"User-Agent\": \"Mozilla/5.0 (Windows NT 10.0; Win64; x64) AppleWebKit/537.36 (KHTML, like Gecko) Chrome/117.0.0.0 Safari/537.36\"\n", + "}\n", + "\n", + "class Website:\n", + "\n", + " def __init__(self, url):\n", + " \"\"\"\n", + " Create this Website object from the given url using the BeautifulSoup library\n", + " \"\"\"\n", + " self.url = url\n", + " response = requests.get(url, headers=headers)\n", + " soup = BeautifulSoup(response.content, 'html.parser')\n", + " self.title = soup.title.string if soup.title else \"No title found\"\n", + " for irrelevant in soup.body([\"script\", \"style\", \"img\", \"input\"]):\n", + " irrelevant.decompose()\n", + " self.text = soup.body.get_text(separator=\"\\n\", strip=True)" + ] + }, + { + "cell_type": "code", + "execution_count": 34, + "id": "bef721be", + "metadata": {}, + "outputs": [ + { + "name": "stdout", + "output_type": "stream", + "text": [ + "Allen's Thoughts... - I am a Recovering CEO, 3x Entrepreneur and Deep Tech VC at Two Small Fish\n" + ] + } + ], + "source": [ + "ai_blog = Website(\"https://allensthoughts.com/\")\n", + "print(ai_blog.title)" + ] + }, + { + "cell_type": "code", + "execution_count": 25, + "id": "8860e989", + "metadata": {}, + "outputs": [], + "source": [ + "system_prompt = \"You are a highly accurate and detail-oriented summarization assistant. \\\n", + " You read and understand web page content and generate clear, concise, and factually correct summaries. \\\n", + " Your summaries preserve key information, context, and structure while removing irrelevant details or marketing fluff. \\\n", + " Use professional, neutral language. Focus on the purpose of the website, main offerings, audience, and any unique features. \\\n", + " If the website is an article or blog post, summarize the main argument, key points, and conclusion. \\\n", + " Only summarize what is visible in the content provided. Do not hallucinate or assume extra information.\"" + ] + }, + { + "cell_type": "code", + "execution_count": 26, + "id": "88841a15", + "metadata": {}, + "outputs": [], + "source": [ + "def user_prompt_for(website):\n", + " user_prompt = f\"You are looking at a website titled {website.title}\"\n", + " user_prompt += \"\\nThe contents of this website is as follows; \\\n", + "please provide a short summary of this website in markdown. \\\n", + "If it includes news or announcements, then summarize these too.\\n\\n\"\n", + " user_prompt += website.text\n", + " return user_prompt" + ] + }, + { + "cell_type": "code", + "execution_count": 27, + "id": "76eceba5", + "metadata": {}, + "outputs": [], + "source": [ + "def messages_for(website):\n", + " return [\n", + " {\"role\": \"system\", \"content\": system_prompt},\n", + " {\"role\": \"user\", \"content\": user_prompt_for(website)}\n", + " ]" + ] + }, + { + "cell_type": "code", + "execution_count": 28, + "id": "1cf1a9a7", + "metadata": {}, + "outputs": [ + { + "data": { + "text/plain": [ + "[{'role': 'system',\n", + " 'content': 'You are a highly accurate and detail-oriented summarization assistant. You read and understand web page content and generate clear, concise, and factually correct summaries. Your summaries preserve key information, context, and structure while removing irrelevant details or marketing fluff. Use professional, neutral language. Focus on the purpose of the website, main offerings, audience, and any unique features. If the website is an article or blog post, summarize the main argument, key points, and conclusion. Only summarize what is visible in the content provided. Do not hallucinate or assume extra information.'},\n", + " {'role': 'user',\n", + " 'content': \"You are looking at a website titled Allen's Thoughts... - I am a Recovering CEO, 3x Entrepreneur and Deep Tech VC at Two Small Fish\\nThe contents of this website is as follows; please provide a short summary of this website in markdown. If it includes news or announcements, then summarize these too.\\n\\nSkip to content\\nHome\\nMasterclass Series\\nContrarian Series\\nAnnouncements\\nOp-ed Pieces for Other Publications\\nSubscribe\\nContact\\nAbout\\nThis blog\\xa0is licensed under\\nCC BY 4.0\\n. Please feel free to share.\\nType your email…\\nSubscribe\\nAllen's Thoughts…\\nI am a Recovering CEO, 3x Entrepreneur and Deep Tech VC at Two Small Fish\\nAI’s Real Revolution Is Just Beginning\\nThank you to The Globe for publishing\\nmy op-ed\\nabout AI last week. In it, I draw parallels between the dot-com crash and the current AI boom—keeping in mind the old saying, “History doesn’t repeat itself, but it often rhymes.” The piece also explores how the atomic unit of this transformation is the ever-declining “cost of intelligence.” AI is the first technology in human history capable of learning, reasoning, creativity, cross-domain thinking, and decision-making. This fundamental shift will impact every sector, without exception, spurring the rise of new tech giants and inevitable casualties in the process. The key is knowing which land to grab!\\nThe piece is now available below.\\nIn the past month, everyone I spoke to has been talking about DeepSeek and Nvidia. Is Nvidia facing extinction? Have certain tech giants overspent on AI? Are we seeing a bubble about to burst, or just another public market overreaction? And what about traditional sectors, like industrials, that haven’t yet felt AI’s impact?\\nLet’s step back. We’ll revisit companies that soared or collapsed during the dot-com crash – and the lessons we can learn. As Mark Twain reputedly said, “History doesn’t repeat itself, but it often rhymes.”\\nThe answer is that the reports of Nvidia’s demise are greatly exaggerated, though other companies face greater danger. At the same time, new opportunities are vast because this AI-driven shift could dwarf past tech disruptions.\\nBefore 2000, the dot-com mania hit full speed. High-flying infrastructure players such as Global Crossing – once worth US$47-billion – provided backbone networks. Cisco delivered networking equipment, and Sun Microsystems built servers. However, amid the crash, Global Crossing went bankrupt in January, 2002. Cisco plummeted from more than US$500-billion in market cap to about $100-billion. Sun Microsystems sank from a US$200-billion market cap to under US$10-billion.\\nThey failed or shrank for different reasons. Global Crossing needed huge investments before real revenue arrived. Cisco had decent unit economics but lost pricing power when open networking standards commoditized its gear. Sun Microsystems suffered when cheaper hardware and free, open-source software (such as Linux and Apache) undercut it, and commodity hardware plus cloud computing made its servers irrelevant.\\nHowever, these companies did not decline because they were infrastructure providers. They declined because they failed to identify the right business model before their capital ran out or were disrupted by alternatives, including open or free systems, despite having the first-mover advantage.\\nMeanwhile, other infrastructure players thrived. Amazon, seen mostly as an e-commerce site, earned 70 per cent of its operating profit from Amazon Web Services – hosting startups and big players such as Netflix. AWS eliminated the need to buy hardware and continually cut prices, especially in its earlier years, catalyzing a new wave of businesses and ultimately driving demand while increasing AWS’s revenue.\\nIn hindsight, the dot-com boom was real – it simply took time for usage to catch up to the hype. By the late 2000s, mobile, social and cloud surged. Internet-native giants (Netflix, Google, etc.) grew quickly with products that truly fit the medium. Early front-runners such as Yahoo! and eBay faded. Keep in mind that Facebook was founded in 2004, well after the crash, and Apple shifted from iPods to the revolutionary iPhone in 2007, which further catalyzed the internet explosion. A first-mover advantage might not always pay off.\\nThe first lesson we learned is that open systems disrupt and commoditize infrastructure. At that time, and we are seeing it again, an army of contributors drove open systems for free, allowing them to out-innovate proprietary solutions.\\nCompanies that compete directly against open systems – note that Nvidia does not – are particularly vulnerable at the infrastructure layer when many open and free alternatives (such as those solely building LLMs without any applications) exist. DeepSeek, for example, was inevitable – this is how technology evolves.\\nOpen standards, open source and other open systems dramatically lower costs, reduce barriers to AI adoption and undermine incumbents’ pricing power by offering free, high-quality alternatives. This “creative destruction” drives technological progress.\\nIn other words, OpenAI is in a vulnerable position, as it resembles the software side of Sun Microsystems – competing with free alternatives such as Linux. It also requires significant capital to build out, yet its infrastructure is rapidly becoming commoditized, much like Global Crossing’s situation. On the other hand, Nvidia has a strong portfolio of proprietary technologies with few commoditized alternatives, making its position relatively secure. Nvidia is not the new Sun Microsystems or Cisco.\\nMost importantly, the disruption and commoditization of infrastructure also democratize AI innovation. Until recently, starting an AI company often required raising millions – if not tens of millions – just to get off the ground. That is already changing, as numerous fast-growing companies have started and scaled with minimal initial capital. This is leading to an explosion of innovative startups and further accelerating the flywheel.\\nThe next lesson we learned is that the internet was the first technology in human history that was borderless, connected, ubiquitous, real-time, and free. Its atomic unit is connectivity. During its rise, “the cost of connectivity” steadily declined, while productivity gains from increased connectivity continued to expand demand. The flywheel turned faster and faster, forming a virtuous cycle.\\nSimilarly, AI is the first technology in human history capable of learning, reasoning, creativity, cross-domain functions and decision-making. Crucially, AI’s influence is no longer confined to preprogrammed software running on computing devices; it now extends into all types of machines. Hardware and software, combined with collective learning, enable autonomous cars and other systems like robots to adapt intelligently in real time with little or no predefined instructions.\\nThese breakthroughs are reaching sectors scarcely touched by the internet revolution, including manufacturing and energy. This goes beyond simple digitization; we are entering an era of autonomous operations and, ultimately, autonomous businesses, allowing humans to focus on higher-value tasks.\\nAs with connectivity costs in the internet era, in this AI era, “the cost of intelligence” has been steadily declining. Meanwhile, the value derived from increased intelligence continues to grow, driving further demand – this mirrors how the internet played out and is already happening again for AI. The parallels between these two platform shifts suggest that massive economic value will be created or shifted from incumbents, opening substantial investment opportunities across early-stage ventures, growth-stage private markets and public investments.\\nJust as the early internet boom heavily focused on infrastructure, a significant amount of capital has been invested in enabling AI technologies. However, over time, economic value shifts from infrastructure to applications – just as it did with the internet.\\nThis doesn’t mean there are no opportunities in AI infrastructure – far from it. Remember, more than half of Amazon’s profits come from AWS. Services, such as AWS, that provide access to AI, will continue to benefit as demand soars. Similarly, Nvidia will continue to benefit from the rising demand. However, many of today’s most-valuable companies – both public and private – are in the application layer or operate full-stack models.\\nDespite these advancements, this transformation won’t happen overnight, but it will likely unfold more quickly than the internet disruption – which took more than a decade – because many core technologies for rapid innovation are already in place.\\nAI revenues might appear modest today and don’t yet show up in the public markets. However, if we look closer, some AI-native startups are already growing at an unprecedented pace. The disruption isn’t a prediction; it’s already happening.\\nAs Bill Gates once said, “Most people overestimate what they can achieve in one year and underestimate what they can achieve in ten years.”\\nThe AI revolution is just beginning. The next decade will bring enormous opportunities – and a new wave of tech giants, alongside inevitable casualties.\\nIt’s a land grab – you just need to know which land to seize!\\nP.S. If you enjoyed this blog post, please take a minute to like, comment, subscribe and share. Thank you for reading!\\nThis blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMarch 31, 2025\\nMarch 31, 2025\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nlessons\\n,\\nop-ed\\nTagged\\nAI\\n,\\nlesson\\n,\\ntechnology\\nLeave a comment\\nNetwork Effect is Dead. Long Live Network Effect.\\nWhen\\nTwo Small Fish\\nfirst started in 2015, we formulated our “Thesis 1.0” to focus on network effects exclusively. We leveraged our hands-on product experience in scaling Wattpad from 0 to 100 million users—essentially a marketplace for readers and writers—and applied a similar lens to other verticals, both in B2C and B2B.\\nIt worked incredibly well for TSF because, at the time, network effects were the holy grail for defensibility, yet they were often misunderstood (for example, going viral is\\nnot\\nthe same as having network effects, and simply operating a marketplace\\ndoes not\\nguarantee strong network effects!). Our skill is more transferable than you might think!\\nSo, Eva created the\\nASSET framework\\n, which helped us identify the best network-effect investment opportunities and, more importantly, helped entrepreneurs understand and increase their\\nnetwork effect coefficient\\n—the measure of true network effects—and ultimately embed strong network effects into their products. In short:\\n•\\nA\\nstands for “atomic unit”\\n•\\nS\\nstands for “seed the supply side”\\n• The other\\nS\\nstands for “scale the demand side”\\n•\\nE\\nstands for “enlarge the network effect” or “enhance the network coefficient”\\n•\\nT\\nstands for “track proprietary insights”\\nThis framework provided a simple yet systematic way to judge whether a company truly had network effects or merely the illusion of them.\\nHowever, toward the end of the last decade, it became increasingly difficult to find investable network-effect opportunities. Well-established incumbents already had very strong network effects in place, effectively setting the world order. It became exceedingly difficult for emerging disruptors—both in consumer and enterprise spaces—to find a gap to break through.\\nWe began looking for other forms of technology defensibility (for example, semiconductors) and gradually moved away from “shallow tech” network-effect investments, as we found very few investable opportunities. In fact, our last shallow tech investment was made about three years ago.\\nThen, in late 2022, ChatGPT arrived.\\nAs the world now understands, generative AI is the first technology in human history capable of learning, reasoning, creativity, cross-domain functionality, and decision-making. It’s the most significant platform shift since mobile, social, and cloud computing in the late 2010s—and arguably the biggest one in human history. It also means the playing field has been leveled. Today, there are numerous ways to create new products with powerful network effects that can render incumbents’ offerings obsolete (for example, I haven’t used Google Search regularly for a long time) because newcomers can disrupt incumbents from all three angles:\\ntechnology, product, and commercialization\\n(e.g., business models). Incumbents are vulnerable!\\nOn the other hand, the ASSET framework also needed a refresh, as we’re no longer dealing with simple, well-understood marketplaces. What if one side of the marketplace is now AI? Even though our original framework was designed to handle data-driven network effects, the\\nspeed and scale\\nof data generation have multiplied by orders of magnitude. How does this affect enlarging the network effects and increasing the coefficient?\\nThe good news is that there are now ways to\\nmassively\\nincrease the network effect coefficient in a remarkably short time. The bad news is that all your competitors—large or small—can do the same. Competition has never been fiercer.\\nAfter ChatGPT was released, we quickly revised our ASSET framework to\\nversion 2.0\\n. Since then, we’ve been guest-lecturing this masterclass worldwide for well over a year. By fully leveraging AI’s creativity and reasoning capabilities, entrepreneurs can now harness human-machine collaboration to supercharge both the demand and supply sides, blitz-scale, and create new atomic units. Here’s the gist of\\n2.0\\n:\\n•\\nA\\n– Atomic Unit of Product\\n•\\nS\\n– Super Seed the Supply Side (now amplified by Gen AI)\\n•\\nS\\n– Supercharge the Demand Side (now leveraging Gen AI)\\n•\\nE\\n– Exponential Engagement (using the human + AI combo)\\n•\\nT\\n– Transform Business with New AI-powered Atomic Units\\nLike 1.0, this new framework is easy to understand but difficult to master—and it’s even more complex now because, with Gen AI, it’s\\nnon-linear\\n. Our masterclass covers the lecture material, but the\\nreal\\nwork happens in our\\nprivate tutoring\\n, where execution matters—and this is how we help our portfolio companies win.\\nThe old network effect is dead. Thanks to the AI platform shift,\\nnetwork effects are roaring back\\nin a different and far more potent way in the new world order. The combination of\\ndeep tech defensibility\\nplus\\nnetwork effect defensibility\\nis the new holy grail—and we are specialized in both.\\nWith the AI platform shift, all of a sudden, there are many new investable opportunities that didn’t exist before. At the same time, the ground has shifted: the old playbook is out, and the new playbook is in. It’s exciting; we love the challenge, and we wouldn’t have it any other way.\\nP.S. If you enjoyed this blog post, please take a minute to like, comment, subscribe and share. Thank you for reading!\\nThis blog is licensed under a\\xa0Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMarch 26, 2025\\nMarch 26, 2025\\nby\\nAllen Lau\\nPosted in\\nInvestment\\n,\\nventure capital\\nTagged\\nnetwork effects\\nLeave a comment\\nInvesting in Fibra: Revolutionizing Women’s Health with Smart Underwear\\nAt\\nTwo Small Fish Ventures\\n, we love backing founders who are\\nnot only transforming user behaviour but also unlocking new and impactful value\\n. That’s why we’re excited to announce our investment in\\nFibra\\n, a pioneering company redefining wearable technology to improve women’s health. We are proud to be the lead investor in this round, and I will be joining as a board observer.\\nThe Vision Behind Fibra\\nFibra is developing smart underwear embedded with proprietory textile-based sensors for seamless, non-invasive monitoring of previously untapped vital biomarkers. Their innovative technology provides continuous, accurate health insights—all within the comfort of everyday clothing. Learning from user data, it then provides personalized insights, helping women track, plan, and optimize their reproductive health with ease. This AI-driven approach enhances the precision and effectiveness of health monitoring, empowering users with actionable information tailored to their unique needs.\\nFibra has already collected millions of data points with its product, further strengthening its AI capabilities and improving the accuracy of its health insights. While Fibra’s initial focus is female fertility tracking, its platform has the potential to expand into broader areas of women’s health, including pregnancy detection/monitoring, menopause, detection of STDs and cervical cancer and many more, fundamentally transforming how we monitor and understand our bodies.\\nPerfect Founder-Market Fit\\nFibra was founded by\\nParnian Majd\\n, an exceptional leader in biomedical innovation. She holds a Master of Engineering in Biomedical Engineering from the University of Toronto and a Bachelor’s degree in Biomedical Engineering from TMU. Her achievements have been widely recognized, including being an EY Women in Tech Award recipient, a Rogers Women Empowerment Award finalist for Innovation, and more.\\nWe are thrilled to support Parnian and the Fibra team as they push the boundaries of AI-driven smart textiles and health monitoring. We are entering\\na golden age of deep-tech innovation\\nand\\nsoftware-hardware convergence\\n—a space we are excited to champion at Two Small Fish Ventures.\\nStay tuned as Fibra advances its mission to empower women through cutting-edge health technology.\\nThis blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMarch 17, 2025\\nMarch 17, 2025\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nAnnouncements\\n,\\ncanada\\n,\\ndeep tech\\n,\\nengineering\\n,\\nentrepreneurship\\n,\\nInvestment\\n,\\nventure capital\\nTagged\\nAI\\n,\\nbusiness\\n,\\nentrepreneurship\\n,\\ninvesting\\n,\\nstartups\\n,\\ntechnology\\nLeave a comment\\nAnnouncing Our Investment in Hepzibah AI\\nThe\\nTwo Small Fish\\nteam is thrilled to announce our investment in\\nHepzibah AI\\n, a new venture founded by\\nUntether AI\\n’s co-founders, serial entrepreneurs Martin Snelgrove and Raymond Chik, along with David Lynch and Taneem Ahmed. Their mission is to bring next-generation, energy-efficient AI inference technologies to market, transforming how AI compute is integrated into everything from consumer electronics to industrial systems. We are proud to be the lead investor in this round, and I will be joining as a board observer to support Hepzibah AI as they build the future of AI inference.\\nThe Vision Behind Hepzibah AI\\nHepzibah AI is built on the breakthrough energy-efficient AI inference compute architecture pioneered at Untether AI—but takes it even further. In addition to pushing performance/power harder, it can handle training loads like distillation, and it provides supercomputer-style networking on-chip. Their business model focuses on providing IP and core designs that chipmakers can incorporate into their system-on-chip designs. Rather than manufacturing AI chips themselves, Hepzibah AI will license its advanced AI inference IP for integration into a wide variety of devices and products.\\nHepzibah AI’s tagline,\\n“Extreme Full-stack AI: from models to metals,”\\nperfectly encapsulates their vision. They are tackling AI from the highest levels of software optimization down to the most fundamental aspects of hardware architecture, ensuring that AI inference is not only more powerful but also dramatically more efficient.\\nWhy does this matter? AI is rapidly becoming as indispensable as the CPU has been for the past few decades. Today, many modern chips, especially system-on-chip (SoC) devices, include a CPU or MCU core, and increasingly, those same chips will require AI capabilities to keep up with the growing demand for smarter, more efficient processing.\\nThis approach allows Hepzibah AI to focus on programmability and adaptable hardware configurations, ensuring they stay ahead of the rapidly evolving AI landscape. By providing best-in-class AI inference IP, Hepzibah AI is in a prime position to capture this massive opportunity.\\nAn Exceptional Founding Team\\nMartin Snelgrove and Raymond Chik are luminaries in this space—I’ve known them for decades. David Lynch and Taneem Ahmed also bring deep industry expertise, having spent years building and commercializing cutting-edge silicon and software products.\\nTheir collective experience in this rapidly expanding, soon-to-be ubiquitous industry makes investing in Hepzibah AI a clear choice. We can’t wait to see what they accomplish next.\\nP.S. You may notice that the logo is a curled skunk. I’d like to highlight that the skunk’s eyes are zeros from the\\nMNIST dataset\\n. 🙂\\nThis blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMarch 12, 2025\\nMarch 13, 2025\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nAnnouncements\\n,\\ncanada\\n,\\ndeep tech\\n,\\nInvestment\\n,\\nsemiconductor\\n,\\nStartup\\n,\\nventure capital\\nTagged\\nAI\\n,\\nentrepreneurship\\n,\\ninvesting\\n,\\nstartups\\n,\\ntechnology\\nLeave a comment\\nContrarian Series: Your TAM is Zero? We love it!\\nNote: One of the most common pieces of feedback we receive from entrepreneurs is that TSF partners don’t think, act, or speak like typical VCs. The Contrarian Series is meant to demystify this, so founders know more about us before pitching.\\nJust before New Year, I was speaking at the\\nTBDC Venture Day Conference\\ntogether with BetaKit CEO\\nSiri Agrell\\nand Serial Entrepreneur and former MP\\nFrank Baylis\\n.\\nWhen I said “Two Small Fish love Zero TAM businesses,” I said it so matter-of-factly that the crowd was taken aback. I even saw quite a few posts on social media that said, “I can’t believe Allen Lau said it!”\\nOf course, any business will need to go after a non-zero TAM\\neventually\\n. But hear me out.\\nHere’s what I did at Wattpad: I never had a “total addressable market” slide in the early days. I just said, “There are five billion people who can read and write, and I want to capture them all!”\\nEven when we became a scaleup, I kept the same line. I just said, “There are billions of people who can read, write, or watch our movies, and I want to capture them all!”\\nNaturally, some VCs tried to box me into the “publishing tool” category or other buckets they deemed appropriate. But Wattpad didn’t really fit into anything that existed at the time. Trust me, I tried to find a box I would fit in too, but none felt natural.\\nWhy? That’s because Wattpad was a category creator. And, of course, that meant our TAM was effectively zero.\\nIn other words, we made our own TAM.\\nMany of our portfolio companies are also category creators, so their decks often don’t have a TAM slide either.\\nYes, any venture-backed company eventually needs a large TAM. And, of course, I don’t mean to suggest that every startup needs to be a category creator.\\nThat said, we’re perfectly fine—in fact, sometimes we even prefer—seeing a pitch deck without a TAM slide. By definition, category creators have first-mover advantages. More importantly, category creators in a large, winner-take-all market—especially those with strong moats—tend to be extremely valuable at scale and, hence, highly investable.\\nSo, founders, if your company is poised to create a large category, skip the TAM slide when pitching to\\nTwo Small Fish\\n. We love it!\\nP.S. Don’t forget, if you have an\\n“exit strategy” slide in your pitch deck\\n, please remove it before pitching to us. TYSM!\\nThis blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMarch 10, 2025\\nMarch 15, 2025\\nby\\nAllen Lau\\nPosted in\\nContrarian Series\\n,\\nentrepreneurship\\n,\\nInvestment\\n,\\nlessons\\n,\\nStartup\\n,\\nventure capital\\nTagged\\nbusiness\\n,\\nentrepreneurship\\n,\\ninnovation\\n,\\ninvesting\\n,\\nstartups\\nLeave a comment\\nCelebrating the Unintended but Obvious Impact of Wattpad on International Women’s Day\\nIt’s been almost three years since I stepped aside from my role as CEO of Wattpad, yet I’m still amazed by the reactions I get when I bump into people who have been part of the Wattpad story. The impact continues to surface in unexpected and inspiring ways frequently.\\nWattpad has always been a platform built on storytelling for all ages and genders. That being said, our core demographic—roughly 50% of our users—has been teenage girls. Young women have always played a pivotal role in the Wattpad community.\\nNext year, Wattpad will turn 20 (!)—a milestone that feels both surreal and deeply rewarding. When we started in 2006, we couldn’t have imagined the journey ahead. But one thing is certain: our early users have grown up, and many of them are now in their 20s and 30s, making their mark on the world in remarkable ways.\\nA perfect example: at our recent masterclass at the University of Toronto, I ran into Nour. A decade ago, she was pulling all-nighters reading on Wattpad. Today, she’s an Engineering Science student at the University of Toronto, specializing in machine intelligence. Her story is not unique. Over the years, I’ve met countless female Wattpad users who are now scientists, engineers, and entrepreneurs, building startups and pushing boundaries in STEM fields.\\nThis is incredibly fulfilling. Many of them have told me that they looked up to Wattpad and our journey as a source of inspiration. The idea that something we built has played even a small role in shaping their ambitions is humbling.\\nNow, as an investor at\\nTwo Small Fish\\n, I’m excited about the prospect of supporting these entrepreneurs in the next stage of their journey. Some of these Wattpad users will go on to build the next great startups, and it would be incredible to be part of their success, just as they were part of Wattpad’s.\\nOn this International Women’s Day, I want to celebrate this unintended but, in hindsight, obvious outcome: a generation of young women who grew up on Wattpad are now stepping into leadership roles in tech and beyond. They are the next wave of innovators, creators, and entrepreneurs, and I can’t wait to see what they build next.\\nP.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMarch 8, 2025\\nMarch 10, 2025\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nengineering\\n,\\nentrepreneurship\\n,\\nventure capital\\n,\\nWattpad\\nTagged\\nAI\\n,\\nentrepreneurship\\n,\\nstartups\\n,\\ntechnology\\n,\\nWattpad\\n2 Comments\\nCelebrating Richard Sutton’s Turing Award\\nI’d like to extend my heartfelt congratulations to Richard Sutton, co-founder of\\nOpenmind Research Institute\\nand a pioneer in Reinforcement Learning, for being honoured with the\\n2024 Turing Award\\n—often described as the “Nobel Prize of Computing.” This accolade reflects his groundbreaking contributions, which have shaped modern AI across a wide spectrum of applications, from LLMs to robotics and everything in between. His influence resonates throughout classrooms, research, and everyday life worldwide.\\nAs a self-professed science nerd, I’ve had the privilege and honour of working with him through the\\nOpenmind board\\n. Rich co-founded Openmind alongside Randy Goebel and Joseph Modayil as a non-profit focused on conducting fundamental AI research to better understand minds. We believe that the greatest breakthroughs in AI are still ahead of us, and that basic research lays the groundwork for future commercial and technological innovations.\\nA core principle of Openmind—and a guiding philosophy of its co-founders—is a commitment to open research: there are no intellectual property restrictions on its work, ensuring everyone can contribute to and build upon this shared body of knowledge. Rich’s vision and dedication continue to inspire researchers and practitioners around the world to push the boundaries of AI and openly share their insights. This Turing Award is a well-deserved recognition of his transformative impact, and I can’t wait to see the breakthroughs that lie ahead as his work continues to redefine our understanding of intelligence.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMarch 5, 2025\\nMarch 5, 2025\\nby\\nAllen Lau\\nPosted in\\nventure capital\\nLeave a comment\\nMasterclass Series: Use This Framework to Move Fast and Make High-Quality Decisions\\nIn many companies, the bottleneck isn’t necessarily in the execution of decisions.\\nThe real bottleneck is the excessive time people waste making decisions.\\nWhen I was Wattpad’s CEO, everyone in the company knew I had a simple\\n2×2 framework\\nto empower the whole team to make fast, high-quality decisions – all by themselves!\\nThe essence of this framework comes down to\\ntwo questions:\\n• Is this decision reversible?\\n• Is this decision consequential?\\nThese two factors create\\nfour types of decisions:\\n1. Reversible and inconsequential\\n2. Reversible and consequential\\n3. Irreversible and inconsequential\\n4. Irreversible and consequential\\nExamples of Each Type\\n1. Reversible and Inconsequential\\nThis actually makes up the\\nbulk of decisio\\nns in a company:\\n• Internal Slack messages? Delete them if you don’t like them.\\n• Marketing team’s benign social media copy?\\nRemove the post if it doesn’t work.\\n• Small typo like the one in the above image? Yes, I purposely left the typo there. I look sloppy, but I could silently replace it with a better one when I have time.\\n• Small bugs in the product? If a bug fix causes other problems, revert the changes.\\nThe list goes on. The trick is to empower each person in the company to make these decisions independently. I reinforced the same message to the Wattpad team over and over again:\\nFrom the most junior interns to the most senior leaders—\\nyou’re empowered to make the call all by yourself.\\nNo boss to ask. No approval process.\\nJust do it!\\nThe company moves fast when most decisions don’t require a meeting!\\n2. Irreversible and Inconsequential\\nHere’s an example:\\nAt one point, we ran out of space at Wattpad’s Toronto HQ and needed overflow space. We found a small office—just a few hundred square feet with a couple of meeting rooms—in the building right next door. The location was perfect, but the space itself? Just okay.\\nThe problem was the lease—it was relatively long. Once we signed, we couldn’t back out. That limited our flexibility (\\nirreversible\\n), but we knew that if we needed more room, we could always find another expansion space. The cost was small in the grand scheme of things (\\ninconsequential\\n).\\nGiven our growth, there was little downside to signing the lease. So we moved fast, signed the deal, and moved on to the next item on the to-do list.\\nFor this type of decision, you can still move fast. Just be careful—double-check the lease for any hidden “gotchas.” It’s not about\\nif\\nwe sign or not. We\\nwill\\nsign, but we just want to make sure the bases are covered before we do.\\nYou’d be surprised how much time people waste on indecision.\\nJust make the call and do the due diligence!\\n3. Reversible and Consequential\\nA perfect example? A big product release.\\nSonos’ poorly executed product release is a great case study. (See my blog post\\nMasterclass Series: Complete Redesign That Actually Works\\nfor all the details.)\\nWhen done properly, product releases can be very consequential but still reversible. At Wattpad, we released high-risk software all the time—but always with a way to roll back if things didn’t work.\\nWe knew how to press the undo button!\\nFor these kinds of decisions,\\nmove fast and make the call—but monitor the outcome and always be ready to press undo.\\nImportant: How to Increase the Quality of These Decisions\\nFor both\\nIrreversible and Inconsequential\\ndecisions and\\nReversible and Consequential\\ndecisions, always ask:\\nIs there any way to make this decision more reversible or less consequential?\\nIf you can tweak the decision to minimize fallout—no matter how small—do it. It will save time and stress down the road.\\n4. Irreversible and Consequential\\nMany of these are\\nleadership-team-level or CEO-level decisions\\n.\\nThey’re rare but also the hardest to make. They require a lot of context, consideration, and, sometimes, choosing between two bad options. Occasionally, you get a good one and choose between a few great choices.\\nThe ultimate example for me?\\nWhether to take the company public, maintain the status quo and keep going, or accept an acquisition offer.\\nYou all know\\nthe decision I made\\n.\\nSometimes, knowing which quadrant a decision falls into is an art. But imagine if we didn’t have this framework—slow decision-making would have ground the company to a halt.\\nThe key to moving fast isn’t just execution—it’s deciding fast, too.\\nP.S. If you enjoyed this blog post, please take a minute to like, comment, subscribe and share. Thank you for reading!\\nThis blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nFebruary 26, 2025\\nMarch 7, 2025\\nby\\nAllen Lau\\nPosted in\\nentrepreneurship\\n,\\nHow-To\\n,\\nleadership\\n,\\nmanagement\\n,\\nmasterclass\\nTagged\\nAI\\n,\\nbusiness\\n,\\nfinance\\n,\\nleadership\\n,\\ntechnology\\n1 Comment\\nAfter All, What’s Deep Tech?\\n“Deep Tech” is one of those terms that gets thrown around a lot in venture capital and startup circles, but defining it precisely is harder than it seems. If you check Wikipedia, you’ll find this:\\nDeep technology (deep tech) or hard tech is a classification of organization, or more typically a startup company, with the expressed objective of providing technology solutions based on substantial scientific or engineering challenges. They present challenges requiring lengthy research and development and large capital investment before successful commercialization. Their primary risk is technical risk, while market risk is often significantly lower due to the clear potential value of the solution to society. The underlying scientific or engineering problems being solved by deep tech and hard tech companies generate valuable intellectual property and are hard to reproduce.\\nAt a high level, this definition makes sense. Deep tech companies tackle hard scientific and engineering problems, create intellectual property, and take time to commercialize. But what do substantial scientific or engineering challenges actually mean? Specifically, what counts as\\nsubstantial\\n? “Substantial” is a vague word. A difficult or time-consuming engineering problem isn’t necessarily a deep tech problem. There are plenty of startups that build complex technology but aren’t what I’d call deep tech. It’s about tackling problems where existing knowledge and tools aren’t enough.\\nIn 1964, Supreme Court Justice Potter Stewart famously said, “I know it when I see it” when asked to describe his test for obscenity in Jacobellis v. Ohio. By no means am I comparing deep tech to obscenity—I don’t even want to put these two things in the same sentence. However, there is a parallel between the two: they are both hard to put into a strict formula, but experienced technologists like us recognize deep tech when we see it.\\nSo, at\\nTwo Small Fish\\n, we have developed our own simple rule of thumb:\\nIf we see a product and say, “How did they do that?” and upon hearing from the founders how it is supposed to work, we still say, “Team TSF can’t build this ourselves in 6–12 months,” then it’s deep tech.\\nAt TSF, we\\ninvest in the next frontier of computing and its applications\\n. We’re not just looking for smart founders. We’re looking for founders who see things others don’t—who work at the edge of what’s possible. And when we find them, we know it when we see it.\\nThis test has been surprisingly effective. Every single investment we’ve made in the past few years has passed it. And I expect it will continue to serve us well.\\nP.S. If you enjoyed this blog post, please take a minute to like, comment, subscribe and share. Thank you for reading!\\nThis blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nFebruary 24, 2025\\nFebruary 24, 2025\\nby\\nAllen Lau\\nPosted in\\ndeep tech\\n,\\nentrepreneurship\\n,\\nInvestment\\n,\\nventure capital\\nTagged\\nbusiness\\n,\\nentrepreneurship\\n,\\nstartups\\n,\\ntechnology\\n,\\nventure capital\\n1 Comment\\nHow We Built a Truly Global Powerhouse with 100 Million Users\\nMost people don’t realize just how global Wattpad’s business is. Here are a few fun facts:\\n• Only 25% of our 100 million users are from North America, while 25% come from LATAM, 25% from Europe, and 25% from Asia.\\n• Of the 50 languages on Wattpad, the most popular isn’t English—it’s Spanish. Other widely used languages include Bahasa Indonesia (10 million users) and Tagalog (6 million users), with millions more reading and writing in Italian, French, German, Portuguese, Vietnamese, and many others.\\n• Not only have our print books (yes, we’re a book publisher too) been\\nNew York Times\\nbestsellers, but they’ve also hit #1 in multiple countries, including Germany and Colombia.\\n• #1 on Netflix globally and other streaming platforms? We’ve done that many times—including the Spanish smash hit\\nA Través De Mi Ventana (Through My Window),\\nwhich we co-produced with Netflix. Many #1-rated TV shows worldwide are based on Wattpad stories—and we co-produce them.\\n• #1 at the box office? We’ve achieved that in multiple countries as well.\\nHow did we build this?\\nA lot of things made this happen, but I’ll highlight a few. It started on day one. Here’s a screenshot of our website when we launched in 2006.\\nNotice that we already supported many key languages worldwide. Why? Because only about 400 million people speak English as their first language—that’s less than 5% of the world’s population.\\nAnd we were right! The first language that took off wasn’t something we predicted—it was Vietnamese. We couldn’t have guessed that!\\nWhen the first Android phone came out (the T-Mobile G1), we were one of the first to support it. At that time, the iPhone was primarily a high-GDP country phenomenon, while low-GDP countries were dominated by $30 Android phones. When I travelled to these regions, I frequently brought back bags of inexpensive phones so our team could test and ensure our app worked on low-end devices. This allowed us to dominate globally.\\nWhen we raised growth capital, we didn’t just seek funding from Silicon Valley investors—we broadened our investor base to include backers from other countries. This helped us learn the nuances of international expansion while gaining support from investors who understood these markets.\\nWhen we launched subscriptions, we recognized that a one-size-fits-all model wouldn’t work. Some countries preferred à la carte purchases over all-you-can-read models. So, we introduced our own virtual currency, allowing users to buy content à la carte.\\nWhen we expanded into movies and TV shows, we didn’t just partner with Hollywood studios—we forged partnerships with entertainment companies across five continents. This ensured Wattpad story adaptations could be seen everywhere.\\nAnd the list goes on.\\nNone of this happened\\nautomagically.\\nIt took years of conscious, deliberate effort. But once we built the foundation, expanding into new countries became incremental. There’s no free lunch, but it’s also not rocket science—it got easier and easier as we grew.\\nWe built a truly global powerhouse with 100 million users.\\nIf we could do it, you can too.\\nChoosing between the U.S. and international expansion is a false dichotomy—you can do both. As the world shifts toward intangible assets, building a global business is easier than ever.\\nKeep in mind that while the U.S. is the largest economy, it only accounts for approximately 26% of the world’s GDP. To create\\ntrue optionality\\n,\\nnot\\nexpanding globally—especially beyond the U.S.—is not an option.\\nOur experience in building a successful global business also allows us to help our portfolio companies scale internationally. We’ve been through the challenges of global expansion firsthand, and we actively share these insights to support the next generation of world-changing companies. Reach out to us if you want to be part of it!\\nP.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nFebruary 10, 2025\\nMarch 21, 2025\\nby\\nAllen Lau\\nPosted in\\nlessons\\n,\\nWattpad\\n,\\nWattpad Studios\\nTagged\\nbusiness\\n,\\ninvesting\\n,\\nlesson\\n,\\nWattpad\\nLeave a comment\\nOnly Optionality Can Make Canada Strong and Free\\nThe tariffs are coming. We all know this isn’t really about fentanyl—only 19 kg of the U.S.’s supply comes from Canada, while close to 10,000 kg was seized at the U.S. border.\\nEven if we solved this tiny issue, Trump would find something else—maybe he’d complain that the snow in NYC is due to cold air from Canada and slap us with another tariff.\\nTrump’s playbook is simple: weaponize everything at his disposal to get what he wants.\\nHe’s imposing tariffs on everything from us. We can debate whether to slap tariffs on orange juice or hair dryers in response, but that won’t materially change the outcome. How we react now is just noise—he holds all the leverage anyway. Canada will suffer in the short term, no matter what.\\nBut we shouldn’t let a crisis go to waste. This is a golden opportunity to fix systemic issues that were previously near impossible to address—like interprovincial trade barriers. Yet even fixing that won’t solve the root problem.\\nStepping back, the real issue is one of the first principles of leadership:\\nOptionality\\n.\\nHaving alternatives always provides leverage. This principle applies broadly—not just to negotiations, but also to fundraising, supplier relationships, operations, company survival, M&A, and beyond—including leading a country.\\nTrump understands leverage better than most. This isn’t just about negotiation—even if we reach a deal this time, any agreement with him isn’t worth the paper it’s written on.\\nAs a country, we are far too dependent on the U.S., and Trump knows it. Only by addressing our lack of optionality can we deal with him—\\nand future U.S. presidents\\n—on equal footing.\\nThere is no quick fix. Only a new, decisive, visionary Prime Minister can guide Canada out of this mess.\\nThe only way forward is to leverage what we do best—energy, natural resources, AI, and more—to create true optionality.\\nAs the world shifts toward intangible assets, ironically, our proximity to the U.S. is becoming less of a hindrance to diversification.\\nWe must control our own destiny. We cannot allow any single country—U.S. or otherwise—to hold us hostage.\\nOnly optionality can make Canada strong and free.\\nP.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nFebruary 3, 2025\\nFebruary 2, 2025\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\ncanada\\n,\\nenergy transition\\n,\\nleadership\\n,\\nlessons\\n,\\nmanagement\\n,\\npolitics\\nTagged\\ncanada\\n,\\neconomy\\n,\\nleadership\\n,\\npolitics\\n,\\ntariff\\n,\\ntariffs\\n,\\ntrade war\\n,\\ntrump\\n3 Comments\\nMasterclass Series: Complete Redesign That Actually Works\\nSonos\\nreplaced its CEO last week\\n. The company faced significant backlash after launching a redesigned app earlier last year that was plagued by bugs, missing features, and connectivity issues, frustrating customers and tarnishing its reputation. This also led to layoffs, poor sales, and a significant drop in stock price.\\nWhile I usually don’t comment on companies I’m not involved with, as a long-time Sonos user, I was very frustrated that the alarm feature I had been relying on to wake me up in the morning for well over a decade disappeared overnight. There were other issues, too.\\nThroughout my career, I have worked on numerous redesign projects. A fiasco like this is totally avoidable. Today, I am sharing a couple of internal blog posts I wrote for my team (when I was Wattpad’s CEO) about this topic. Of course, these are just examples of the general framework I used. In practice, there are many specific details in each redesign that I helped guide the team through, as frameworks like this are like a hammer. Even the best hammer in the world is still just a hammer. The devil is in the details of how you use it.\\nThese internal blog posts are just some of the hammers and drills in my toolbox that I use to help our portfolio CEOs navigate trade-offs and move fast without breaking things.\\nHappy reading through a sample of my collection of half a million words!\\nNote: These two posts have been mildly edited to improve readability.\\nBlog Post #1 – Subject: Feature Backward Compatibility\\nI have gone through major technology platform redesigns many times in my career. One problem that arises every single time is backward compatibility.\\nThe reason is easy to understand: users can interact with complex products (such as Wattpad) in a million different ways. There is no way the engineering team could anticipate all the permutations.\\nThere are two common ways to solve this problem. First, run an extensive beta program. This is what big companies like Apple and Microsoft do when they update their operating systems. This approach is also a great way to push some of the responsibility to their app developers. Even with virtually unlimited resources, crowdsourcing from app developers is still a far better approach. However, running an extensive beta program takes a lot of time and resources. Most companies can’t afford to do that.\\nThe other approach is to roll out the changes progressively and incrementally. It is very tempting to make all the big changes at once, roll them out in one shot, and roll the dice. However, I am almost certain that it will backfire. Not only is it a frustrating experience for both users and engineers, but it also makes the project schedule much less predictable and, in most cases, causes the project to take much longer than anticipated.\\nNext year, when we focus on our redesign to reduce tech debt, don’t forget to set aside some time budget for these edge conditions that are so easily overlooked. Also, think about how we can roll out the changes more incrementally to minimize the negative impact on our users.\\nBlog Post #2 – Subject: The Reversibility and Consequentiality Framework\\nThe other day, I spoke to the CEO of another consumer internet company. In terms of the scale of its user base, this company is much smaller than Wattpad, but we are still talking about millions of users here.\\nLike us, this company has been around for over a decade. Not surprisingly, technical debt has been an ongoing concern. A few years ago, the team decided to completely redesign its platform from the ground up. The redesign was a multi-year effort, and the team finally pulled back the curtain a year ago. While it is working fine now, this CEO told me that it took a few months before they fixed all the issues and reimplemented all the “missing” features because many of their users were using the product in “interesting” ways that the new version did not support.\\nThese problems are fairly common when redesigning a new system from the ground up. In practice, it is simply impossible to take all the permutations into account, no matter how carefully you plan. However, if we mess things up, our user base is so large that it might negatively impact (or ruin!) 100 million people’s lives in the worst-case scenario.\\nOn the flip side, over-planning could burn through a lot of unnecessary cycles.\\nOne way or another, we should not let these challenges deter us from moving forward or even slow us down because there are many ways to mitigate potential problems. In principle, ensuring that the rollout is reversible and inconsequential is key.\\nThe former is easy to understand: Can we roll back when things go wrong? Do we have a kill switch when updating our mobile apps? These are best practices that we have already been using.\\nHowever, at times, these best practices might not be possible. Can we reduce the consequentiality when rolling out? If the iOS app were completely redesigned, could we do it in smaller chunks, parallel-run the new and old versions at the same time, or try the new version on 0.1% of our users first? If not, could we roll out the new app in a small country first?\\nAgain, our objective is not to avoid any problem at all costs. Our objective is to minimize (but not eliminate) the negative impact\\nwhen\\nthings go wrong—not\\nif\\nthings go wrong. Although Wattpad going dark for 100 million people for an extended period of time is not acceptable, in the spirit of speed, it is perfectly okay if we have ways to hit reverse or reduce the impact to only a small percentage of our users. These are not rocket science, but they do require a bit more thoughtfulness because our user base is so large that we can’t simply roll the dice.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nJanuary 21, 2025\\nJanuary 22, 2025\\nby\\nAllen Lau\\nPosted in\\nengineering\\n,\\nentrepreneurship\\n,\\nleadership\\n,\\nlessons\\n,\\nmanagement\\n,\\nmasterclass\\n,\\nStartup\\nTagged\\ndesign\\n,\\ndigital-marketing\\n,\\nentrepreneurship\\n,\\nmarketing\\n,\\nmasterclass\\n,\\nstartups\\n,\\ntechnology\\n,\\nuser-experience\\n1 Comment\\nWelcoming Albert Chen as a Venture Partner at Two Small Fish Ventures\\nToday’s blog post is written by\\nEva\\nand is a reblog of what was originally\\nshared on the Two Small Fish Ventures website\\n.\\nWe are thrilled to announce that Albert Chen is joining Two Small Fish as a Venture Partner!\\nAlbert brings a wealth of experience to our team. Like all our partners at TSF, Albert’s expertise spans the full spectrum—from technical innovation to product development to operational leadership in entrepreneurial startups. His impressive academic background further underscores his exceptional capabilities.\\nAlbert earned his Ph.D. in BioMEMS, Acoustics, and Medical Engineering from the University of Waterloo. He also completed his undergraduate studies in Systems Design Engineering at Waterloo and participated in an international exchange program in Electrical Engineering at National Taiwan University.\\nAlbert’s professional career is equally remarkable. Most notably, he served as the CTO of robotics and edge AI company Forcen. His diverse experience also includes roles at Metergy (smart energy), Excelitas (photonics), and North (smart glass, acquired by Google).\\nThis is just a glimpse of Albert’s impressive journey. Follow him on\\nLinkedIn\\nto learn more about his background and accomplishments.\\nAt Two Small Fish Ventures, we are committed to supporting bold founders shaping the future of technology through our experience. Albert’s extensive academic background, combined with his hands-on leadership and innovation experience, makes him an invaluable addition to our team.\\nPlease join us in welcoming Albert to Two Small Fish!\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nJanuary 16, 2025\\nJanuary 18, 2025\\nby\\nAllen Lau\\nPosted in\\nventure capital\\nLeave a comment\\nAI Has Democratized Everything\\nThis is the picture I used to open our 2024 AGM a few months ago. It highlights how drastically the landscape has changed in just the past couple of years. I told a similar story to our LPs during the 2023 AGM, but now, the pace of change has accelerated even further, and the disruption is crystal clear.\\nThe following outlines the reasons behind one of the biggest shifts we identified as part of our\\nThesis 2.0\\ntwo years ago.\\nLike many VCs, we evaluate pitches from countless companies daily. What we’ve noticed is a significant rise in startups that are nearly identical to one another in the same category. Once, I quipped, “This is the fourth one this week—and it’s only Tuesday!”\\nThe reason for this explosion is simple: the cost of starting a software company has plummeted. What once required $1–2M of funding to hire a small team can now be achieved by two founders (or even a solo founder) with little more than a laptop or two and a $20/month subscription to ChatGPT Pro (or your favourite AI coding assistant).\\nWith these tools, founders can build, test, and iterate at unprecedented speeds. The product build-iterate-test-repeat cycle is insanely short. If each iteration is a “shot on goal,” the $1–2M of the past bought you a few shots within a 12–18 month runway. Today, that $20/month can buy you a shot\\nevery few hours\\n.\\nThis dramatic drop in costs, coupled with exponentially faster iteration speeds, has led to a flood of startups entering the market in\\neach\\ncategory. Competition has never been fiercer. This relentless pace also means faster failures, and the startup graveyard is now overflowing.\\nFor early-stage investors, picking winners from this influx of startups has become significantly harder. In the past, you might have been able to identify the category winner out of 10 similar companies. Now, it feels like mission impossible when there are hundreds—or even thousands—of startups in\\neach\\ncategory. Many of them are even invisible, flying under the radar for much longer because they don’t need to fundraise.\\nOf course, there will still be many new billion-dollar companies. In fact, I am convinced that this AI-driven platform shift will produce more billion-dollar winners than ever—across virtually every established category and entirely new ones that don’t yet exist. But by the law of large numbers, spotting them among thousands of startups in each category is harder than ever.\\nIf you’re using the same lens that worked in the past to spot and fund these future tech giants, good luck.\\nThat’s why, for a long time now, we’ve been using a very different lens to identify great opportunities with highly defensible moats to stay ahead of the curve. For example, we’ve been exclusively\\nfocused on deep tech\\n—a space where we know we have a clear edge. From technology to product to operations, we have the experience to cover the full spectrum and support founders through the unique challenges of building deep tech startups. So far, this approach has been working really well for us.\\nI guess we are taking our own advice. As a VC firm, we also need to be constantly improving and striving to be\\nunrecognizable every two years\\n!\\nThere’s no doubt the rules of early-stage VC have shifted. How we access, assess, and assist startups has evolved dramatically. The great AI democratization is affecting all sectors, and venture capital is no exception.\\nFor investors who can adapt, this is a time of unparalleled opportunity—perhaps the greatest era yet in tech investing. The playing field has been levelled, and massive disruption (and therefore opportunities) lies ahead. Incumbents are vulnerable, and new champions will emerge in each category – including VC!\\nInvesting during this platform shift is both exciting and challenging. And I wouldn’t want it any other way, because those who figure it out will be handsomely rewarded.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nJanuary 9, 2025\\nMarch 4, 2025\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\ndeep tech\\n,\\nentrepreneurship\\n,\\nInvestment\\n,\\nStartup\\nTagged\\nbusiness\\n,\\nentrepreneurship\\n,\\nStartup\\n,\\nstartups\\n,\\nventure capital\\nLeave a comment\\nPortfolio Highlight: ABR\\nThe next frontier of AI lies at the edge — where data is generated. By moving AI toward the edge, we unlock real-time, efficient, and privacy-focused processing, opening the door to a wave of new opportunities. One of our most recent investments,\\nApplied Brain Research\\n(ABR), is leading this revolution by bringing “cloud-level” AI capabilities to edge devices.\\nWhy is this important? Billions of power-constrained devices require substantial AI processing. Many of these devices operate offline (e.g., drones, medical devices, and industrial equipment), have access only to unreliable, slow, or high-latency networks (e.g., wearables and smart glasses), or must process data streams in real time (e.g., autonomous vehicles). Due to insufficient on-device capability, the only solution today is to send data to the cloud — a suboptimal or outright infeasible approach.\\nHow does ABR solve this? ABR’s groundbreaking technology addresses these challenges by delivering “cloud-sized” high-performance AI on compact, ultra-low-power devices. This shift is transforming industries such as consumer electronics, healthcare, automotive, and a range of industrial applications, where latency, reliability, energy efficiency, and localized intelligence are essential.\\nWhat is ABR’s secret sauce? ABR’s unique approach is rooted in computational neuroscience. Co-founded by\\nDr. Chris Eliasmith\\n, CTO and Head of the University of Waterloo’s Computational Neuroscience Research Group, ABR leverages a brain-inspired invention called the\\nLegendre Memory Unit\\n(LMU), which was invented by Dr. Eliasmith and his team of researchers. LMUs are provably optimal for compressing time-series data—like voice, video, sensor data, and bio-signals—enabling significant reductions in memory usage. Running the\\nLMU on ABR’s unique processor architecture has created a breakthrough that “kills three birds with one stone” by:\\n1. Increasing performance,\\n2. Reducing power consumption by up to 200x, and\\n3. Cutting costs by 10x.\\nThis is further turbocharged by ABR’s AI toolchain, which enables customers to deploy solutions in weeks instead of months. Time is money, and ABR’s technology allows for advanced on-device functions—like natural language processing—without relying on the cloud. This unlocks entirely new use cases and possibilities.\\nAt the helm of ABR is\\nKevin Conley\\n, the CEO and a former CTO of SanDisk, alongside Dr. Chris Eliasmith. Together, they bring exceptionally strong leadership across both hardware and software domains—a rare but powerful combination that gives ABR a significant competitive advantage.\\nABR’s vision aligns perfectly with our investment thesis and our belief that edge computing and software-hardware convergence represent the next frontier of opportunity in computing. We’re excited to see ABR power billions of devices in the years to come.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nJanuary 7, 2025\\nMarch 23, 2025\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nAnnouncements\\n,\\ndeep tech\\n,\\nsemiconductor\\n,\\nventure capital\\nLeave a comment\\nCelebrating Professor Geoffrey Hinton’s Nobel Prize (and His Birthday)\\nIn the past few days, Eva and I had the privilege of joining the University of Toronto delegation in Stockholm to celebrate University Professor Emeritus Geoffrey Hinton, the 2024 Nobel Laureate in Physics. The events, organized by the University, were a fitting tribute to Professor Hinton’s groundbreaking contributions to AI, a technology that will transform our world in the decades to come.\\nThe celebration was a blend of thoughtful discussions, historic venues, and memorable moments. It all began with a birthday party for Professor Hinton, followed by a fireside chat, an inspiring dinner at the iconic Vasa Museum, and a panel exploring Canada’s leadership in AI at the Embassy of Canada to Sweden. Each event underscored not only Professor Hinton’s remarkable achievements but also the global impact of Canadian innovation in AI and technology more broadly.\\nRather than recount every detail, I’ll let the pictures and their captions tell the story of this extraordinary week. It was an incredible opportunity for us to honour a visionary scientist.\\nEating birthday cake with University of Toronto President Meric Gertler and Dean, Faculty of Arts & Science at University of Toronto Melanie Woodin.\\nThis was the chip that was built for Professor Hinton in the late 80s for him to test his artificial neural network.\\nThe chip was developed before sub-micron technology was widely available. Professor Hinton believes it might be 3-5 microns, but even he wasn’t 100% sure. Upon closer inspection, it appears there were six neurons on the grid.\\nTaking a picture with U of T President Meric Gertler and Chancellor Wes Hall and Professor Leah Cowen.\\nWe are dining in front of the unique and well preserved warship Vasa from 1628!\\nFireside chat with University Professor Emeritus Geoffrey Hinton, and Patchen Barss, science journalist, speaker and author.\\nTaking a picture with Untether AI co-founder Raymond Chik and Vector Institute CEO Tony Gaffney at the reception after the fireside chat.\\nAn insightful panel moderated by Professor Leah Cowen. Panellists included Professor Eyal de Lara, Vector Institute CEO Tony Gaffney, Professor David Lie and Professor Amy Loutfi.\\nEricsson’s Head of AI Jörgen GustafssonView Jörgen Gustafsson and Jason LaTorre, the Ambassador of Canada to Sweden.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nDecember 10, 2024\\nDecember 11, 2024\\nby\\nAllen Lau\\nPosted in\\nventure capital\\nTagged\\nAI\\n,\\nartificial-intelligence\\n,\\ngeoffrey-hinton\\n,\\nscience\\n,\\ntechnology\\n1 Comment\\nNaysayer\\nImportant: Before continuing, read\\nSRTX\\n‘s CEO Katherine Homuth’s posts first (\\nhere\\nand\\nhere\\n).\\nHi Katherine,\\nI read your blog posts about your current challenges and future plans. Originally, I planned to reply to you privately, but in the end, I decided to share my response as an open letter on my blog.\\nFirst of all, if you think I’m going to give you any advice, you’d be mistaken.\\nWhy? Because I don’t think I’m qualified. I have never built a company that reinvented the textile industry. Unless I have “been there, done that,” you shouldn’t listen to me — even though\\nTSF\\nhas been an investor in SRTX since the early days.\\nThat said, there are numerous similarities between SRTX and Wattpad. One lesson I learned might be useful to you.\\nBoth SRTX and Wattpad set out to reinvent industries that had remained largely unchanged for the past century. Wattpad raised over $100M USD and lost millions per year to build the business’s foundation — overcoming the chicken-and-egg problem — before we could monetize profitably. That had been our strategy from day one, and it was hard to explain on a spreadsheet. From the outside, it looks like it’s all wins. From the inside, we don’t know if the next leap forward will be our last.\\nSound familiar? Like you mentioned, SRTX also raised well over $100M USD and lost millions of dollars to build the foundation of the business — overcoming the chicken-and-egg problem — before you could monetize profitably. That’s been your strategy from day one, and it was hard to explain on a spreadsheet. From the outside, it looks like it’s all wins. From the inside, you don’t know if the next leap forward will be your last.\\nWhen an entrepreneur is building a transformative company in an unconventional way, they will inevitably attract a lot of naysayers. These naysayers are usually missing key context (which is fine, as you don’t have to convince everyone), give unsolicited bad advice (which is uncool but typical of armchair coaches trying to look smart), and fail to recognize that there’s more than one way to build a massively successful company.\\nHere’s an example.\\nA few months after Wattpad was acquired, someone said to me:\\n“Congrats on your acquisition. But you could have been more capital-efficient. Compared to most B2B SaaS companies, your exit value relative to capital raised was not as high as it could be.”\\nWTF? He might as well have said McDonald’s generates more revenue than you.\\nOf course, we all know the proper benchmark is to compare Wattpad to other consumer companies like Snap, Twitter, or Facebook. In fact, Wattpad was massively more capital efficient — both on a per-user basis and an exit-value basis — than most other consumer companies at similar or larger scales. In some cases, we were ahead by an order of magnitude.\\nI wasn’t angry, upset, or offended by this ignorance, naivety, or arrogance because, over the years, I’ve had to deal with many naysayers — even after Wattpad’s successful exit.\\nHere’s the important lesson I learned:\\nNaysayers will always naysay.\\nThey want to make themselves look smart.\\nThey want to feel superior to you.\\nThey don’t want to admit they were wrong, so they continue to naysay.\\nMost people don’t believe in moonshots because they can’t do what you do.\\nIf you can use them to fire yourself up, that’s great. If not, don’t even spend a millisecond on them. Your time and energy are better spent focusing on finding a handful of new investors who believe in your vision, growing a fanbase that loves your product, and scaling your company. These are what you have been doing. The results will speak for themselves.\\nIf anything, SRTX has de-risked so much over the years. Millions of people are already buying your unbreakable tights. It’s the best-selling tight in North America — unbreakable or not. A lot of capital has been raised, enabling your mega factory to become a reality. Major B2B partnerships have been formed to scale. New products, beyond tights, are soon to launch.\\nYou’re very close to the top of Mount Everest. Who cares about those people who don’t dare to leave base camp?\\nBest,\\nAllen\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nDecember 8, 2024\\nDecember 19, 2024\\nby\\nAllen Lau\\nPosted in\\nentrepreneurship\\n,\\nInvestment\\n,\\nleadership\\n,\\nlessons\\n,\\nmanagement\\n,\\nStartup\\n,\\nventure capital\\n2 Comments\\nContrarian Series: Best Exit Strategy? Not Having One\\nNote: One of the most common pieces of feedback we receive from entrepreneurs is that TSF partners don’t think, act, or speak like typical VCs. The Contrarian Series is meant to demystify this, so founders know more about us before pitching.\\nFor Wattpad, it was exactly ten years between raising our first round of venture capital in 2011 and the company’s acquisition in 2021. Over that decade, we discussed countless topics in our board meetings.\\nBut one topic we\\nnever\\ndiscussed? Exit strategies.\\nI distinctly remember, a couple of years before the acquisition, I raised the question to a board member. “We’ve been venture-backed for almost ten years now. Should we start talking about exit…”\\nI couldn’t even finish the sentence. That board member cut me off:\\n“Allen, I just want you to build a great company.”\\nThat moment stuck with me. Only after the acquisition did I fully appreciate the significance of those ten years as a venture-backed company without focusing on an exit.\\nWattpad’s four largest investors—\\nUSV\\n,\\nKhosla Ventures\\n,\\nOMERS\\n, and Tencent—enabled us to focus on building the business, not selling it. OMERS, as a pension fund, and Tencent, as a strategic investor, don’t operate under the typical 10-year fund cycle that drives many venture firms to push for exits. USV, with its consistent track record of generating world-class returns, had the trust of its LPs to prioritize long-term value over short-term outcomes. And Khosla Ventures? Well,\\nno one can tell Vinod Khosla what to do\\n, and he loves making big, long-term bets.\\nTheir perspectives freed us to focus on building a great company rather than prematurely worrying about how to sell it.\\nIn early 2020, a year before Wattpad was acquired for US$660M, we set an ambitious company objective: to become “Investment Ready.” This meant ensuring we could scale profitably and confidently project $100M+ in revenue with a minimum of 40% year-over-year growth. By the end of 2020, we wanted to be in a position to choose between preparing for an IPO (we even reserved our ticker symbol WTPD), raising growth capital to accelerate expansion, or scaling organically without any additional funding.\\nWhen an inbound acquisition offer came in mid-2020, this optionality proved invaluable. It allowed us to run a proper process with multiple interested parties. We were clear with potential acquirers: our preference was to remain independent. If the offer wasn’t higher than the value we could command through an IPO, we weren’t interested, and we would walk away. Because we had the fundamentals to back it up, no one doubted us.\\nThis underscores an important point: the best way to generate a great outcome is to build an amazing business. Focus on creating value, and optionality will follow.\\nAny CEO who claims to have an exit strategy—especially in the early stages—is either naïve, disillusioned, or lying.\\nHere’s the reality: M&A is far less common than people think. The pool of serious potential acquirers often narrows to just a handful in the best-case scenarios. And even then, the stars have to align—you need the right timing, the right strategic fit, and the right price. It’s easier said than done.\\nOf course, that doesn’t mean I ignored the idea of acquisition entirely (and founders should consider M&A, but only under the right circumstances, and I will save it for another blog post). For instance, we built relationships with potential strategic acquirers and stayed aware of the landscape. But the time I spent on this was minimal. Even my leadership team occasionally asked why I never talked about M&A. The answer was simple: it wasn’t a priority.\\nToo many founders overthink their “exit strategy,” and it often backfires. Changing their product to appeal to a potential acquirer? Building one-sided partnerships in the hope they’ll buy the company? Hope is not a strategy.\\nThe same goes for VCs. Some overthink their portfolio companies’ “exit strategy” because they worry about selling before the 10-year fund window closes. While this concern is valid, it doesn’t mean they should push their best portfolio companies to sell. There are many ways for VCs to liquidate their positions without forcing a sale. Ironically, the best way for a founder to help their investors exit is to focus on increasing enterprise value. Shares in a great company are\\nalways\\nin demand.\\nFor an early-stage startup, having an exit strategy is as absurd as asking an infant to decide which jobs they’ll apply to after university. The founders’ job is to nurture that infant—raise them into a great human being. The results will follow.\\nBuild a great business, and everything else will fall into place. There’s an old saying:\\nGreat companies get bought, not sold.\\nIt couldn’t be more true.\\nP.S. Founders, if you have an exit strategy slide in your pitch deck, please remove it before pitching to us. TYSM!\\nP.P.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nDecember 2, 2024\\nMarch 15, 2025\\nby\\nAllen Lau\\nPosted in\\nContrarian Series\\n,\\nentrepreneurship\\n,\\nInvestment\\n,\\nventure capital\\nTagged\\nentrepreneurship\\n,\\ninvesting\\n,\\ntechnology\\n1 Comment\\nCelebrating a Legendary Educator\\nI was fortunate to not only learn from his textbook but also to be a student in his class. Few have the privilege of learning directly from a legend, and I consider myself incredibly lucky to have been in the right place at the right time—more than 30 years ago—to benefit from his lectures.\\nWho am I talking about? Professor Adel Sedra.\\nI wanted to take a moment to congratulate Professor Sedra on the recognition of his incredible legacy with the launch of a new permanent exhibit at the University of Toronto. His textbook, Microelectronic Circuits, co-authored with the late Professor Kenneth C. Smith, has been a cornerstone of engineering education for decades. To date, it has gone through eight editions (with Professor Tony Chan Carusone also part of the editorial team), sold more than a million copies, and been translated into nearly a dozen languages.\\nHere’s a fact I only recently discovered: it’s estimated that over three-quarters of electrical engineers in the world since 1982 have studied this book—yes, 75%!—widely known as “Sedra/Smith” after its authors.\\n“When they first sat down in 1982 to create the first draft, I don’t think either of the two co-authors fully realized that it would become the gold standard in the field,” said Christopher Yip, Dean of U of T Engineering.\\nAs a professor, Professor Sedra was simply unparalleled in the field of microelectronics. His passion for teaching was evident, and his exams? They were tough—though I like to think I did alright! 😉\\nWatching this video gave me goosebumps.\\nAs a 20-year-old at the time, I didn’t fully comprehend or appreciate that I was sitting in a classroom with a legendary professor, studying one of the earlier editions of what would become a truly iconic textbook.\\nProfessor Sedra’s contributions to engineering education and his impact on generations of students are unmatched. This exhibit is a fitting tribute to a man who shaped how the world learns about microelectronics.\\nYou can read more about this celebration of his legacy here:\\nU of T Engineering News\\n.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nNovember 27, 2024\\nNovember 26, 2024\\nby\\nAllen Lau\\nPosted in\\nengineering\\n,\\nsemiconductor\\n2 Comments\\nThe Three Phases of Building a Great Tech Company: Technology, Product, and Commercialization\\nThere are three distinct phases in the journey of building a great tech company: technology, product, and commercialization. These phases are sequential yet interconnected and sometimes overlap. Needless to say, mastering each is critical to the company’s eventual success. However, it’s important to recognize their differences.\\n• Building technology is about founders creating what they love. It’s driven by passion and expertise and often leads to groundbreaking innovations.\\n• Building a product is about creating something others love to use. This is where usability and solving real problems come into focus.\\n• Commercialization is about building something people will pay for and driving revenue. This phase transforms users into paying customers or finds someone else to pay for it, such as advertisers.\\nThese phases are related but distinct. Great technology doesn’t guarantee anyone will use it, and a widely-used product doesn’t always lead to revenue. I’ve seen many technologists create incredible technologies no one adopts, as well as popular products that fail to commercialize effectively (though it’s rare for a product with tens of millions of users to fail entirely).\\nFor deep tech companies, these phases often have minimal overlap and unfold sequentially. The technology might take years to develop before a usable product emerges, and commercialization may come even later.\\nIn contrast, shallow tech B2B SaaS products often see complete overlap between the phases. For example, a subscription model is typically apparent from the outset, and the tech, product, and commercialization phases blend seamlessly.\\nWattpad is also a good example of how these phases can play out differently. Initially, we built our technology and product hand in hand, creating a platform loved by millions of users. However, its commercialization—whether through ads, subscriptions, or movies, the three revenue models we had—was deliberately delayed. Many people assumed we didn’t know how to make money without understanding this counterintuitive approach (but of course, we purposely kept some of our strategies under wraps). This approach allowed us to use “free” as a potent weapon to dominate—and eliminate—our competitors in a winner-takes-all strategy. Operating for years with minimal revenue was clearly the right decision for the market dynamics and our long-term goals. More on this in a separate blog post.\\nGiven this variability, asking, “What is your revenue?” must be thoughtful and context-specific. For some companies, the absence of revenue may be an intentional and brilliant strategy. For others, insufficient revenue could signal serious trouble. It all depends on the company’s stage, strategy, and goals. Understanding the sequence, timing, and specific needs of a business model is crucial for both investors and entrepreneurs. Zero revenue could be a blessing in the right context. On the other hand, pushing for revenue growth—let alone the wrong type of revenue growth—can be fatal, a scenario we’ve seen many times.\\nAt\\nTwo Small Fish Ventures\\n, we are very thoughtful and experienced investors. We understand that starting to generate revenue—or choosing not to generate revenue—at the right time is one of the secrets to success that very few people have mastered. We practise what we preach. Over the past two years, all but one of TSF’s investments have been pre-revenue.\\nNo revenue? No problem. In fact, that’s great. Bring them on!\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nNovember 25, 2024\\nNovember 25, 2024\\nby\\nAllen Lau\\nPosted in\\ndeep tech\\n,\\nentrepreneurship\\n,\\nInvestment\\n,\\nleadership\\n,\\nventure capital\\nTagged\\nbusiness\\n,\\nfinance\\n,\\ninvesting\\n,\\nmarketing\\n,\\ntechnology\\n2 Comments\\nPowerwall 3 and Smart Energy\\nThose who know me well would tell you I am a pretty boring person. I don’t have many hobbies, but one thing I do love is gadgets. For instance, I’m a big fan of DIY home automation. Practically every electronic device in my house is voice-controlled, automated, and Wi-Fi-connected—if it can be, it probably is. Here’s a fun example:\\nI love robots doing things for me because, frankly, I’m too busy.\\nAt this rate, I might run out of IP addresses! Sure, I could change my network’s subnet to enable more, but every time I tinker with my setup, I have to invest time getting everything right again—something I don’t have in abundance. Anyway, I digress.\\nOne gadget I’ve wanted for years but hesitated to get is a home energy storage and backup system, like Tesla’s Powerwall. The Powerwall 2 has been around since 2016, but for years, the Powerwall 3 was “just around the corner,” with rumours of its launch “next month” seemingly every month. I didn’t want to invest in a device I planned to use for a decade only for it to become obsolete right after I bought it.\\nFinally, the wait is over. Powerwall 3 became available earlier this year, and I’m glad I waited. Its specs—peak power, continuous power, and efficiency—are significantly upgraded from Powerwall 2. That said, I was a little disappointed that its battery capacity remained unchanged.\\nI’m told this was the first Powerwall 3 installation in Canada, which is pretty exciting! It’s a beautiful piece of technology, though I don’t see much of it since it’s tucked away in the basement. Paired with solar panels, I hope to “off the grid” as much as possible.\\nAs good as the Powerwall 3 is, it’s only part of the solution. While it handles storage and backup very well, it doesn’t provide fine-grained energy monitoring, let alone control. To address this, I also installed a\\nSense\\nenergy monitor. This device, connected to the electrical panel, collects real-time data from electrical currents to identify unique energy signatures for every appliance and device in the home. It’s a hack, a retrofit solution and imperfect, but it’s probably the best option for someone like me, who is entrenched in the Tesla ecosystem.\\nThe energy space hasn’t changed much in the past half-century. Take the electric panel, for example—it’s still essentially the same analog system I remember from my childhood. However, with the rapid acceleration of the energy transition, smarter energy systems are becoming critical as\\nhardware and software converge to enable new possibilities\\n.\\nA big thanks to\\nJames\\nand\\nDave\\nfrom the\\nBorealis Clean Energy\\nteam for helping me with this project\\n—and for arriving in style with Canada’s first Cybertruck. The project has so many moving parts. Their expertise made this journey much smoother.\\nUnboxing PW3!\\nZooming in to the power electronics.\\nThe electricians are working hard. It is a big job!\\nIt is done!\\nA big thank you to James.\\nThis is the Tesla Gateway, a separate box we need to install. It is a smaller box—roughly a quarter of the size of PW3—and where “the brain” is located.\\nAdding Sense – the orange box – to my old-school electric panel to help me with device-level monitoring.\\nFirst Cybertruck in Canada. This thing draws attention.\\nPosted on\\nNovember 21, 2024\\nNovember 23, 2024\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\ndeep tech\\n,\\nenergy transition\\nTagged\\nelon-musk\\n,\\nrenewable-energy\\n,\\nsustainability\\n,\\ntechnology\\n,\\ntesla\\n2 Comments\\nOur Secret to Finding 100x Opportunities\\nIn previous blog posts (\\nhere\\nand\\nhere\\n), I’ve delved into the mathematical model for constructing an early-stage VC portfolio designed to achieve outsized returns. In short, investing early to build a concentrated portfolio of fewer than 20 moonshot companies, each with the potential for 100x returns or more, is the way to go.\\nThe math is straightforward—it doesn’t lie. Not adhering to this model can significantly reduce the likelihood of achieving exceptional returns.\\nHowever, simply following this model is not enough to guarantee outsized results. Don’t mistake correlation for causation! The real challenge lies in identifying, evaluating, and supporting these “100x” opportunities to help turn their vision into reality.\\nAt\\nTSF\\n, we use a simple framework to evaluate whether a potential investment can meet the 100x criteria:\\n10x (early stage) x 10x (transformative behaviour) = 100x conviction\\nThe first “10x” is straightforward: We invest when companies are in their earliest stages. For instance, over the past two years, all but one of TSF’s investments have been pre-revenue. This made financial analysis simple—those spreadsheets were filled with zeros!\\nMany of these companies are also pre-traction. While having traction isn’t a bad thing, savvy investors shouldn’t rely on it for validation. The reason is simple: traction is visible to everyone. By the time it becomes apparent, the company is often already too expensive and out of reach.\\nAt TSF, we have a unique advantage. Before transitioning to investing, all TSF partners were engineers, product experts, successful entrepreneurs, and operators—including a “recovering CEO”—that’s me! Each partner brings distinct domain expertise, collectively creating a broad\\nand\\ndeep perspective. This allows us to invest only when we possess the domain knowledge needed to fully evaluate an opportunity. We “open the hood” to determine whether the technology is genuinely unique, defensible, and disruptive, or whether it is easily replicable. If it’s the latter, we pass quickly. A strong, defensible tech moat is a key criterion for us. This approach means we might pass on some promising “shallow-tech” opportunities, but we’re very comfortable with that. After all, we believe\\nthe best days of shallow tech are behind us\\n.\\nMaintaining a concentrated portfolio allows us to commit only to investments where we have unwavering conviction. In contrast, a large portfolio would require us to find a large number of 100x opportunities and pursue those we might not fully believe in. Frankly, I wouldn’t sleep well if we took that route. This route would also make it difficult to provide the meaningful, tailored support we’ve promised our entrepreneurs (more on that in a future post).\\nWhen evaluating product potential, we look beyond the present. At TSF, we assess how a technology might reshape the landscape over the next decade or more. We start by understanding the intrinsic needs of the user and envision how a product could fundamentally change customer or end-user behaviour. This is crucial: if a product that addresses a massive opportunity has a strong tech moat, first-mover advantages, and the ability to change behaviour while facing few viable alternatives, it can unlock significant new value and create a defensible, category-defining business.\\nThis often translates into substantial commercialization potential. If we can foresee how the product might evolve into adjacent markets (its\\nsecond, third, or even fourth act\\n) with almost uncapped possibilities, we achieve the “holy trinity” of\\ntech-product-commercialization potential\\n—forming the second 10x of our conviction.\\nHere’s how we describe it:\\nTwo Small Fish Ventures invests in early-stage products, platforms, and protocols that transform user behaviour and empower businesses and individuals to unlock new, impactful value.\\nThis thesis\\nunderpins our investment decisions and ensures that each choice we make aligns with our long-term vision for transformative innovation.\\nWhile this framework may sound simple, executing it well is extremely difficult. It requires what I call a “crystal ball” skill set that spans the full spectrum of entrepreneurial, technical, product, and operational backgrounds.\\nOver the past decade, we’ve built a portfolio of more than 50 companies across three funds. By employing this approach, the entrepreneurs we’ve supported have achieved numerous breakout successes. This post outlines our “secret sauce,” and we will continue to leverage it.\\nAs you can see, early-stage VC is more art than science. To do it well requires thoughtfulness, insight, and the ability to envision the future as a superpower. It’s challenging but incredibly rewarding. I wouldn’t trade it for anything.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nNovember 19, 2024\\nNovember 25, 2024\\nby\\nAllen Lau\\nPosted in\\nventure capital\\nTagged\\nbusiness\\n,\\nentrepreneurship\\n,\\ninvesting\\n,\\nInvestment\\n,\\nventure capital\\nLeave a comment\\nFabless + ventureLAB is Cloud Computing for Semiconductors\\nThis is a follow-up blog post to\\nmy last piece about Blumind\\n.\\nMore than two decades ago, before I started my first company, I was involved with an internet startup. Back then, the internet was still in its infancy, and most companies had to host their own servers. The upfront costs were daunting—our startup’s first major purchase was hundreds of thousands of dollars in Sun Microsystems boxes that sat in our office. This significant investment was essential for operations but created a massive barrier to entry for startups.\\nFast forward to 2006 when we started Wattpad. We initially used a shared hosting service that cost just $5 per month. This shift was game-changing, enabling us to bootstrap for several years before raising any capital. We also didn’t have to worry about maintaining the machines. It dramatically lowered the barrier to entry, democratizing access to the resources needed to build a tech startup because the upfront cost of starting a software company was virtually zero.\\nEventually, as we scaled, we moved to AWS, which was more scalable and reliable. Apparently, we were AWS’s first customer in Canada at the time! It became more expensive as our traffic grew, but we still didn’t have to worry about maintaining our own server farm. This significantly simplified our operations.\\nA similar evolution has been happening in the semiconductor industry for more than two decades, thanks to the fabless model. Fabless chip manufacturing allows companies—large or small—to design their semiconductors while outsourcing fabrication to specialized foundries. Startups like\\nBlumind\\nleverage this model, focusing solely on designing groundbreaking technology and scaling production when necessary.\\nBut fabrication is not the only capital-intensive aspect. There is also the need for other equipment once the chips are manufactured.\\nDuring my recent visit to\\nventureLAB\\n, where Blumind is based, I saw firsthand how these startups utilize shared resources for this additional equipment. Not only is Blumind fabless, but they can also access various hardware equipment at ventureLAB without the heavy capital expenditure of owning it.\\nLet’s see how the chip performs at -40C!\\nJackpine (first tapeout)\\nWolf (second tapeout)\\nBM110 (third tapeout)\\nThe common perception that semiconductor startups are inherently capital-intensive couldn’t be more wrong. The fabless model—in conjunction with organizations like ventureLAB—functions much like cloud computing does for software startups, enabling semiconductor companies to build and grow with minimal upfront investment. For the most part, all they need initially are engineers’ computers to create their designs until they reach a scale that requires owning their own equipment.\\nFabless chip design combined with shared resources at facilities like ventureLAB is democratizing the semiconductor space, lowering the barriers to innovation, and empowering startups to make significant advancements without the financial burden of owning fabrication facilities. Labour costs aside, the upfront cost of starting a semiconductor company like Blumind could be virtually zero too.\\nThat’s why the saying, “\\nsoftware once ate the world alone; now, software and hardware consume the universe together,\\n” is becoming true at an accelerated pace. We have already made several investments based on this theme, and we are super excited about the opportunities ahead.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nNovember 14, 2024\\nNovember 14, 2024\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\ndeep tech\\n,\\nentrepreneurship\\n,\\nInvestment\\n,\\nsemiconductor\\n,\\nStartup\\n,\\nventure capital\\nTagged\\nAI\\n,\\nbusiness\\n,\\nnews\\n,\\nsemiconductors\\n,\\ntechnology\\n2 Comments\\nPortfolio Highlight: Blumind\\nWhen it comes to watches, my go-to is a Fitbit. It may not be the most common choice, but I value practicality, especially when not having to recharge daily is a necessity to me. My Fitbit lasts about 4 to 5 days—decent, but still not perfect.\\nNow, imagine if we could extend that battery life to a month or even a year. The freedom and convenience would be incredible. Considering the immense computing demands of modern smartwatches, this might sound far-fetched. But that’s where our portfolio company,\\nBlumind\\n, comes into play.\\nBlumind’s ultra-low power, always-on, real-time, offline AI chip holds the potential to redefine how we think about battery life and device efficiency. This advancement enables edge computing with extended battery life, potentially lasting\\nyears\\n– not a typo – instead of days. Products powered by Blumind can transform user behaviours and empower businesses and individuals to unlock new and impactful value (see\\nour thesis\\n).\\nBlumind’s secret lies in its brain-inspired, all-analog chip design. The human brain is renowned for its energy-efficient computing abilities. Unlike most modern chips that rely on digital systems and require continuous digital-to-analog and analog-to-digital conversions (which drain power), Blumind’s approach emulates the brain’s seamless analog processing. This unique architecture makes it perfect for power-sensitive AI applications, resulting in chips that could be up to 1000 times more energy-efficient than conventional chips, making them ideal for\\nedge computing\\n.\\nBlumind’s breakthrough technology has practical and wide-ranging applications. Here are just a few use cases:\\n•\\nAlways-on Keyword Detection\\n: Integrates into various devices for continuous voice activation without excessive power usage.\\n•\\nRapid Image Recognition\\n: Supports always-on visual wake word detection for applications such as access control, enhancing human-device interaction with real-time responses.\\n•\\nTime-Series Data Processing\\n: Processes data streams with exceptional speed for real-time analysis in areas like predictive maintenance, health monitoring, and weather forecasting.\\nThese capabilities unlock new possibilities across multiple industries, including wearables, smart home technology, security, agriculture, medical, smart mobility, and even military and aerospace.\\nA few weeks ago, I visited Blumind’s team at their\\nventureLAB\\noffice and got an up-close look at their BM110 chip, now in its third tapeout. Blumind exemplifies the future of semiconductor startups through its fabless model, which significantly lowers the initial infrastructure costs associated with traditional semiconductor companies. With resources like ventureLAB supporting them, Blumind has managed to innovate with remarkable efficiency and sustainability. (I’ll share more about the fabless model in an upcoming post.)\\nI’m thrilled to see where Blumind’s journey leads and how its groundbreaking technology will transform daily life and reshape multiple industries. When devices can go years without needing a recharge instead of mere hours, that’s nothing short of game-changing.\\nImage: Close-up view of BM110. It is a piece of art!\\nImage: Qualification in action. Note that BM110 (lower-left corner) is tiny and space-efficient.\\nImage: The Blumind team is working hard at their ventureLAB office. More on this in a separate blog post\\nhere\\n.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nNovember 12, 2024\\nMarch 23, 2025\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nAnnouncements\\n,\\nInvestment\\n,\\nsemiconductor\\n,\\nventure capital\\nTagged\\nAI\\n,\\nartificial-intelligence\\n,\\nsemiconductors\\n,\\ntechnology\\n1 Comment\\nTwo Small Fish Ventures Celebrates the Merger of Printful and Printify\\nWe’re thrilled to share that\\nPrintify\\n, a company we have proudly backed since its first funding round, has entered into a merger with\\nPrintful\\n(see report by\\nTechCrunch\\n). As long-time supporters of the Printify team, we at Two Small Fish Ventures are incredibly happy with this outcome, which marks a significant milestone in the production-on-demand industry and an exciting moment for everyone involved.\\nPrintify and Printful are both leading platforms that empower entrepreneurs and businesses to create and sell custom products worldwide without the need to hold inventory, thanks to their advanced production-on-demand fulfillment networks. Printify has been growing rapidly, now boasting a team of over 700 employees. Combined with Printful’s team, the newly merged company will have well over 2,000 employees, making it by far the number one player in the production-on-demand market.\\nPrintful, with over $130 million raised and a valuation exceeding $1 billion, and Printify, backed by $54.1 million in funding, have established themselves as the top two global leaders in this field. This merger solidifies their position as the dominant force in the industry, setting new standards and driving innovation in production-on-demand services worldwide. We’re proud to have supported Printify from the very beginning and look forward to witnessing the next chapter in their remarkable journey.\\nP.S. In true spirit of unity, founders Lauris Liberts and James Berdigans have sealed the deal by swapping T-shirts with each other’s logos—because nothing says “teamwork” like wearing the competition’s brand!\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nNovember 6, 2024\\nNovember 5, 2024\\nby\\nAllen Lau\\nPosted in\\nAnnouncements\\n,\\nInvestment\\n,\\nStartup\\n,\\nventure capital\\nLeave a comment\\nMasterclass Series: Unrecognizable Every Two Years\\nIn 2006, Wattpad started as a simple mobile reading app, mainly for classic books. Fifteen years later, it evolved into a global, AI-powered, multi-platform entertainment company with numerous blockbusters before being acquired.\\nAs you can imagine, my role as CEO at the start of Wattpad—when it was just the co-founders and a few hundred users—was drastically different from leading a team of hundreds of employees and overseeing a platform with 100 million users.\\nA Typical Entrepreneur’s Evolution\\nIn the early years, the founders focused solely on building a product and finding product-market fit, with little thought given to the business side. At this stage, the CEO is the engineer writing code, the product manager, and the product visionary, all rolled into one.\\nAs traction builds and product-market-fit comes into sight, the CEO’s role begins to shift. Suddenly, hiring becomes a priority, and managing people and operations takes center stage. The CEO goes from being a product builder to a hiring and people manager who leads a small, close-knit team and handles the operations that come with it.\\nFast forward another phase, and the company is growing even faster. Now, the CEO is no longer just a manager but the manager of managers, responsible for hiring leaders who can build and lead their own teams. Communication becomes an even more critical skill, as the CEO now leads a much larger team—many of whom don’t frequently interact with the CEO. Business models become increasingly crucial, and new tasks, like fundraising, take on greater importance.\\nAs growth continues, the CEO’s role shifts yet again, this time to hiring leaders of leaders—or even leaders of leaders of leaders. Now, the CEO is juggling closing million-dollar sales with key customers, navigating strategic partnerships, working with the CFO to manage finances at scale, media interviews, building the brand, international expansion, raising capital from large institutional investors, and, of course, leading hundreds or thousands of employees. The skill set required here is worlds apart from that of the early days of coding and prototyping.\\nEntrepreneurship Is Constant Reinvention\\nEach phase of a company’s growth requires a radically different skill set: moving from building the idea to scaling a product, building the team, leading a large organization, and eventually creating a profitable business. The entrepreneur evolves from crafting the “secret sauce” to building a factory to mass-produce it.\\nI have yet to meet an entrepreneur who possessed all these skills from the start. The journey demands constant learning—whether it’s coding, product design, finances, fundraising, marketing, sales, or leadership.\\nI can testify to this: there were numerous times when I thought the company was a well-oiled machine. Six months later, things would feel like they were falling apart. It wasn’t because I had messed up, but because the environment had changed drastically in such a short time. I had to keep upping my game to keep pace with the company. I am completely different from—and better than—the version of myself a decade ago—and not just once, but many times over.\\nAs an entrepreneur, be prepared. As your company scales, you’re effectively\\ngetting a new job every few months\\n. This journey is thrilling and challenging, and filled with lifelong learning and self-improvement.\\nThe Biggest Takeaway\\nAnd yet, the most important product you’re building isn’t your company’s product. It isn’t even the company—it’s\\nyourself\\n.\\nIf, every two years, you’re not almost unrecognizable from your former self, you’re not growing fast enough, and you will be left behind by your own fast-growing company.\\nThis takeaway isn’t just for CEOs. It applies to anyone working at a fast-scaling company and to anyone with a growth mindset. If you get this right, everything else will follow, and you’ll be in good shape. From my experience, this is one of the most crucial mindset-building tools you can have.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nNovember 4, 2024\\nNovember 22, 2024\\nby\\nAllen Lau\\nPosted in\\nleadership\\n,\\nmanagement\\n,\\nmasterclass\\nTagged\\nbusiness\\n,\\nentrepreneur\\n,\\nentrepreneurship\\n,\\nleadership\\n,\\nstartups\\n2 Comments\\nBridge Technologies are Rarely Great Investments\\nMore than two decades ago, I co-founded my first company, Tira Wireless. The business went through several iterations, and eventually, we landed on building a mobile content delivery product. We raised roughly $30M in funding, which was a significant amount at the time. We even ranked as\\nCanada’s Third Fastest Growing Technology Company\\nin the Deloitte Technology Fast 50.\\nWe had a good run, but eventually, Tira had to\\nshut its doors\\n.\\nWe made numerous strategic mistakes, and I learned a lot—lessons that, quite frankly, helped me make far better decisions when I later started Wattpad.\\nOne of the most important mistakes we made was falling into the “bridge technology” trap.\\nWhat is the “bridge technology” trap?\\nReflecting on significant “platform shifts” over recent decades reveals a pattern: each shift unleashes waves of innovation. Consider the PC revolution in the late 20th century, the widespread adoption of the internet and cloud computing in the 2000s, and the mobile era in the 2010s. These shifts didn’t just create new opportunities; they also created significant pain points as the world tried to leap from one technology to another. Many companies emerged to solve problems arising from these changes.\\nTira started when the world began its transition from web to mobile. Initially, there were countless mobile platforms and operating systems. These idiosyncrasies created a huge pain point, and Tira capitalized on that. But in a few short years, mobile consolidated into just two major players—iOS and Android. The pain point rapidly disappeared, and so did Tira’s business.\\nSimilarly, most of these “bridge technology” companies perform very well during the transition because they solve a critical, short-term pain point. However, as the world completes the transition, their business disappears. For instance, numerous companies focused on converting websites into iPhone apps when the App Store launched. Where are they now?\\nSome companies try to leverage what they’ve built and pivot into something new. But building something new is challenging enough, and maintaining a soon-to-be-declining bridge business while transitioning into a new one is even harder. This is akin to\\nthe innovator’s dilemma\\n: successful companies often struggle with disruptive innovation, torn between innovating (and risking profitable products) or maintaining the status quo (and risking obsolescence).\\nAs an investor, it makes no sense to invest in a “bridge” company that is fully expected to pivot within a few years. A pivot should be a Plan B, not Plan A. It’s extremely rare for bridge technology companies to become great, venture-scale investments. In fact, I can’t think of any off the top of my head.\\nWe are currently in the midst of a tectonic AI platform shift. We’re seeing a huge volume of pitches, which is incredibly exciting. Many of these startups built great technologies and products. However, a significant number of these pitches also represent bridge technologies. As the current AI platform shift matures, these bridge technologies will lose relevance. Sometimes, it’s obvious they’re bridge technologies; other times, it requires significant thought to identify them. This challenge is intellectually stimulating, and I enjoy every moment of it. Each analysis informs us of what the future looks like, and just as importantly, what it will\\nnot\\nlook like. With each passing day, we gain stronger conviction about where the world is heading. It’s further strengthening our\\n“seeing the future is our superpower”\\nmuscle, and that’s the most exciting part.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nOctober 30, 2024\\nJanuary 14, 2025\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nInvestment\\n,\\nventure capital\\nTagged\\nAI\\n,\\nbusiness\\n,\\ninvesting\\n,\\nnews\\n,\\ntechnology\\n1 Comment\\nPortfolio Highlight: #paid\\n#paid\\nwas one of the first investments we made at\\nTwo Small Fish Ventures\\n. It’s been over a decade since we backed\\nBryan\\nand\\nAdam\\n, who were still working out of Toronto Metropolitan University’s\\nDMZ\\nat the time. They had a vision to build a platform that connected creators and brands before “creator” was even a term! Back then, influencer and creator marketing campaigns were just tiny experiments.\\nA decade later, the creator economy has taken off. It’s now a\\n$24 billion market\\n—an order of magnitude larger than just a few years ago, with no signs of slowing down. The next wave of growth is still ahead as ad spending continues to shift away from traditional media. With the global ad market approaching $800 billion, one thing remains true: ad dollars follow the eyeballs—always. And where are those eyeballs today? On creators and influencers.\\nToday, #paid has become the world’s dominant platform, with over 100,000 creators onboard. It addresses a significant challenge: most creators don’t know how to connect with brands, especially iconic brands like Disney, Sephora, or IKEA. On the other hand, brands struggle to find the right creators amidst a sea of talent. #paid bridges this gap, acting as the marketplace that makes collaboration easy. They use data-driven insights to determine what makes a successful match, ensuring that both creators and brands can find each other effortlessly.\\nAt #paid, brands and creators work with a dedicated team of experts to build creative strategies backed by research, first-party data, and industry benchmarks. This means campaigns run smoothly, allowing creators to focus on doing what they love—creating—without getting bogged down by administrative tasks.\\nI’m not just speaking as an investor—I’ve actually run a campaign with #paid as an influencer myself, and I can personally vouch for how seamless the experience was.\\nIf you think #paid is all about TikTok, Snap, or Instagram, think again. Brands leverage #paid content across every platform. Want proof? Just check out the Infiniti TV commercial, which came from a #paid campaign.\\nHow about billboards in major cities like NYC, Toronto, and more? #paid has that covered too.\\n#paid also brings creators and marketers together in real life. I had the privilege of speaking at their\\nCreator Marketing Summit\\nin NYC a few weeks ago, and I was amazed at how far #paid has come. The summit brought together hundreds of creators and top brand marketers—an impressive showcase of the platform’s evolution.\\nLooking back on this journey, here are my key takeaways:\\n• Great companies take a decade to build.\\n• To create a category leader, especially in winner-take-all markets, the idea has to be bold and often misunderstood at first. Bryan and Adam saw something that few others did, and their first-mover advantage has solidified #paid’s leading position today.\\n• There’s no such thing as “done.” #paid constantly reinvents itself. Generative AI is another exciting opportunity for step-function growth, and I can’t wait to see what’s next.\\nBryan and Adam should be incredibly proud of what they’ve accomplished.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nOctober 24, 2024\\nOctober 25, 2024\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\ncreator\\n,\\nentrepreneurship\\n,\\nInvestment\\n,\\nventure capital\\nTagged\\ndigital-marketing\\n,\\ndigital-marketing\\n,\\nmarketing\\n,\\nnews\\n,\\nsocial-media\\n,\\ntiktok\\nLeave a comment\\nVenture Capital is Call Options on Startups\\nEarly-stage venture capital (VC) has always been the oddball in asset management. Unlike other asset classes, it offers the highest potential returns, but it also comes with the highest variance—especially when portfolio construction isn’t done right. On top of that, it has an inherent “default rate” of about 80%.\\nTell a traditional fund manager about this 80% default rate, and you’ll likely get a strange look.\\nA few months ago, I was trying to explain how VC works to a fund manager. After covering the usual points—how VC is essentially a home run derby with many misses—he paused and said, “I get it. VC is like buying call options on startups.”\\nI hadn’t considered it that way before, but he was absolutely right.\\nFor those unfamiliar, buying a call option gives you the right, but not the obligation, to purchase a stock at a predetermined price (the strike price) before a specified expiration date. Investors use this strategy to profit from an anticipated—but not guaranteed—increase in the stock’s price. If the stock price rises above the strike price (plus the premium paid), the option becomes profitable. The potential profit is theoretically unlimited, while the maximum loss is limited to the premium paid.\\nSimilarly,\\ninvesting in a startup\\ngives you the chance to acquire equity at an attractive price, with a ~20% chance the startup will take off—though this usually takes about a decade to materialize. VCs use this strategy to profit from a potential—but not guaranteed—rise in the company’s value. If the startup succeeds and its valuation soars beyond the investment (plus associated costs), the return can be massive. The potential profit is virtually unlimited if the company becomes a breakout success, while the maximum loss is limited to the initial investment.\\nVC and call options are strikingly similar, don’t you think? They’re like twins!\\nFrom now on, I’ll tell people: Venture capital is call options on startups.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nOctober 15, 2024\\nOctober 14, 2024\\nby\\nAllen Lau\\nPosted in\\nInvestment\\n,\\nventure capital\\nTagged\\ncall options\\n,\\nstartups\\n,\\nVC\\nLeave a comment\\nWinning the Home Run Derby with Proper Portfolio Construction\\nIn my previous post,\\nVC is a Home Run Derby with Uncapped Runs\\n, I illustrated mathematically why early-stage venture funds’ success doesn’t hinge on minimizing failures, nor does it come from hitting singles (e.g., the number of “3x” companies). These smaller so-called “wins” are just noise.\\nAs I said:\\n“Venture funds live or die by one thing: the percentage of the portfolio that becomes breakout successes — those capable of generating returns of 10x, 100x, or even 1000x.”\\nTo drive high expected returns for VCs, finding these breakout successes is key. However, expected value alone doesn’t tell the full story. We also need to consider\\nvariance\\n. In simple terms, even if a fund’s expected return is 5x or 10x, it doesn’t necessarily mean it’s a good investment. If the variance is too high—meaning the fund has a low probability of achieving that return and a high probability of losing money—it would still be a poor bet.\\nFor example, imagine an investment opportunity that has a 10% chance of returning 100x and a 90% chance of losing everything. Its expected return is 10x (i.e., 10% x 100x + 90% x 0x = 10x). But despite the attractive expected return, it’s still a\\nterrible investment\\ndue to the extremely high risk of total loss.\\nThat said, there’s a time-tested solution to turn this kind of high-risk investment into a great one:\\ndiversification\\n. While everyone understands the importance of diversification, the real key lies in how it’s done. By building a properly diversified portfolio, we can reduce variance while maintaining a high expected return. This post will illustrate mathematically how the right portfolio construction allows venture funds to generate outsized returns while ensuring a high probability of success.\\nMoonshot Capital vs. PlayItSafe Capital: A Quick Recap\\nLet’s start by revisiting our two hypothetical venture capital firms: Moonshot Capital and PlayItSafe Capital. Moonshot Capital swings for the fences, aiming to find the next 100x company while expecting most of the portfolio to fail. PlayItSafe Capital, on the other hand, protects downside risk (at least that’s what they think), but by avoiding bigger risks, it sacrifices the chance of finding outsized returns.\\n•\\nMoonshot Capital\\n: Out of 20 companies, 17 resulted in strikeouts (0x returns), 3 companies achieved 10x returns, and 1 company achieved a 100x return.\\n•\\nPlayItSafe Capital\\n: Out of 20 companies, 7 resulted in strikeouts (0x returns), 7 companies broke even (1x), 5 companies achieved 3x returns, and 1 company achieved a 10x return.\\nHere’s how their\\nexpected returns\\ncompare:\\n•\\nMoonshot Capital\\nhas an expected return of 6.5x, thanks to one company yielding 100x and three companies yielding 10x (i.e. (1 x 100 + 3 x 10 +16 x 0) x $1 = $130).\\n•\\nPlayItSafe Capital\\nhas a much lower expected return of 1.6x, with its highest return from one 10x company, five 3x returns, and several breakeven companies (i.e. (1 x 10 + 5 x 3 + 7 x 1 + 7 x 0) x $1 = $32).\\nDespite these differences in expected returns, what’s surprising is that counterintuitively, the\\nprobability of losing money\\n(i.e., achieving an average return of less than 1x at the fund level) is quite similar for both firms.\\nLet’s dive into the math to see how we calculate these probabilities:\\nMoonshot Capital: 12.9% Probability of Losing Money\\n1.\\nExpected Return\\n:\\n2.\\nVariance\\n:\\n3.\\nStandard Deviation\\n:\\n4.\\nStandard Error\\n:\\nUsing a normal approximation, the z-score to calculate\\nP(X < 1)\\nis:\\nLooking this up in the standard normal distribution table gives us:\\nP(X < 1) = 0.129 or 12.9%\\nPlayItSafe Capital: 11.6% Probability of Losing Money\\nSimilarly, looking this up in the standard normal distribution table gives us (sparing you all the equations):\\nP(X < 1) = 0.116 or 11.6%\\nShockingly,\\nthese two firms’ probabilities of losing money are essentially the same\\n. The math does not lie!\\nHere’s a graphical representation of the outcomes (probability density) for Moonshot Capital and PlayItSafe Capital.\\nProbability Density Graphs: Comparing Moonshot and PlayItSafe\\nAs you can see, Moonshot has higher upside potential, as the density peaks at 6x, while PlayItSafe is more concentrated around lower returns. Since their downside risks are more or less the same while PlayItSafe’s approach significantly limits its upside, counterintuitively\\nPlayItSafe is far riskier from the risk-reward perspective.\\nProper Portfolio Construction: How Portfolio Size Affects Returns\\nTo further optimize Moonshot’s strategy, we will explore how different portfolio sizes affect the balance between risk and reward. Below, I’ve analyzed the outcomes (i.e. portfolio size sensitivity) for Moonshot Capital across portfolio sizes of\\nn = 5\\n,\\nn = 10\\n,\\nn = 20\\n, and\\nn = 30\\n.\\nThe graph below shows the probability density curves for Moonshot Capital with varying portfolio sizes:\\nAs you can see, smaller portfolios (n = 5, n = 10) exhibit higher variance, with a greater spread of potential outcomes. Larger portfolios (n = 20, n = 30) reduce the variance but also diminish the likelihood of hitting outsized returns.\\nWhy 20 is the Optimal Portfolio Size\\n1. Why 20 is Optimal:\\nAt\\nn = 20\\n, Moonshot Capital strikes an ideal balance. The risk of losing money, i.e. P (X < 1), remains manageable at 12.9%, while the probability of outsized returns remains high:\\n62.1% chance of hitting a return higher than 5x\\n. This suggests that Moonshot’s high-risk, high-reward approach pays off without exposing the fund to unnecessary risk.\\n2. Why Bigger Isn’t Always Better (n = 30):\\nWhen the portfolio size increases to\\nn = 30\\n, we see a significant drop-off in the likelihood of outsized returns. The probability of achieving a return higher than 5x drops significantly from 62.1% at\\nn = 20\\nto 41.9% at\\nn = 30\\n, and counterintuitively, the risk of losing money\\nstarts to increase\\n. This suggests that larger portfolios can dilute the impact of the big wins that drive fund returns. It also mathematically explains why “spray-and-pray” does not work for early-stage investments.\\n3. The Pitfalls of Small Portfolios (n = 5 and n = 10):\\nAt smaller portfolio sizes, such as\\nn = 5\\nor\\nn = 10\\n, the variance increases significantly, making the portfolio’s returns more unpredictable. For example, at\\nn = 5\\n, the probability of losing money is significantly higher, and the risk of extreme outcomes becomes more pronounced. At\\nn = 10\\n, the flat-curve suggests that the variance is very high. This high variance means the returns are volatile and difficult to predict, increasing risk.\\nConclusion: How to Win the Home Run Derby With Uncapped Runs\\nThe key takeaway here is that Moonshot Capital’s strategy of swinging for the fences doesn’t mean taking on excessive risk. With 20 companies in the portfolio, Moonshot is the optimal between risk and reward, offering a very high chance of hitting outsized returns without significant risk of losing money.\\nWhile n=20 is optimal, n=10 is also pretty good, but n=30 is significantly worse. So, a ‘concentrated’ approach – but not ‘n=5 concentrated’ – is far better than ‘spray and pray,’ if you have to pick between the two.\\nThis is exactly the approach we follow at Two Small Fish Ventures. We don’t write a cheque unless we have that magical “100x conviction.” We also keep our per-fund portfolio size limited to roughly 20 companies. This blog post mathematically breaks down one of our many secret sauces for our success.\\nDon’t tell anyone.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nOctober 7, 2024\\nOctober 11, 2024\\nby\\nAllen Lau\\nPosted in\\nInvestment\\n,\\nventure capital\\nTagged\\nmoonshot\\n,\\nportfolio construction\\n,\\nVC\\n3 Comments\\nAxiomatic\\xa0AI – Make the World’s Information Intelligible\\nToday’s blog post is brought to you by Eva Lau. She will talk about one of our recent investments:\\nAxiomatic AI\\n.\\n—\\nCongratulations to\\xa0Axiomatic\\xa0on their recent US$6M seed round led by\\nKleiner Perkins\\n!\\nTwo Small Fish Ventures\\nis thrilled to be an early investor since the company’s inception—and the only Canadian investor—in what promises to be a game-changer in solving fundamental problems in physics, electronics, and engineering.\\nWhy is this important? Large Language Models (LLMs) excel at languages (as their name suggests) but struggle with logic. That’s why\\nAI can write poetry but struggles with math\\n, as LLMs mainly rely on ‘pattern-matching’ rather than ‘reasoning.’\\nThis is where Axiomatic steps in. The company’s secret sauce is its new AI model called Automated Interpretable Reasoning (AIR), which combines advances in reinforcement learning, LLMs, and world models. Axiomatic’s mission is to create software and algorithms that not only automate processes but also provide clear, understandable insights to fuel innovation and research, ultimately solving real-world problems in engineering and other industrial applications.\\nThe startup is the brainchild of world-renowned professors from MIT, the University of Toronto, and The Institute of Photonic Sciences (ICFO) in Barcelona. The team includes leading engineers, physicists, and computer science experts.\\nWith its innovative models, the startup fits squarely within our fund’s focus: the next frontier of computing and its applications. As all TSF partners are engineers, product experts, and recent operators, we are uniquely positioned to understand the potential of Axiomatic and support the team.\\nAxiomatic’s new AIR model is well-positioned to accelerate engineering and scientific discovery, boosting productivity by orders of magnitude in the coming years, and ultimately make the world’s information intelligible.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nSeptember 5, 2024\\nOctober 11, 2024\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nAnnouncements\\n,\\nInvestment\\n,\\nStartup\\nLeave a comment\\nOpenmind Research Institute\\nI’m excited to share that I have been appointed as a board member of the\\nOpenmind Research Institute\\n!\\nCo-founded by AI and reinforcement learning luminaries\\nRich Sutton\\n,\\nRandy Goebel\\nand\\nJoseph Modayil\\n, Openmind is a Canadian non-profit focused on conducting fundamental AI research to better understand minds.\\nWe believe the greatest advancements in AI are yet to come. Basic research is essential to understanding what is scientifically possible before pursuing the next generation of commercial and technological developments.\\nA key aspect of Openmind is its commitment to open research. Openmind places no intellectual property restrictions on its research, allowing everyone to contribute to and build upon this shared knowledge.\\nAs a board member, I will leverage my decades-long experience in building, operating, and investing in AI companies to support Openmind’s mission. Supporting innovation is one of my life’s passions, and I am thrilled to accept this position and join a team dedicated to pioneering advancements in AI.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nSeptember 3, 2024\\nOctober 11, 2024\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nAnnouncements\\n1 Comment\\nViggle AI Leads the Next Wave of Disruption in Content\\nWe’re thrilled to share that Toronto-based\\nViggle AI\\n, a Canadian start-up revolutionizing character animation through generative AI, has raised US$19 million in funding. The round was led by a16z with\\nTwo Small Fish\\nparticipating as a significant investor. As part of the investment, I also became an advisor to the company.\\nCreators are unleashing their creativity with Viggle AI by generating some of the most entertaining memes and videos online. You’ve probably seen a clip of Joaquin Phoenix’s Joker persona\\nreplacing recreating Lil Yachy’s walkout from the Summer Smash Festival\\n– it was made with Viggle AI!\\nBut Viggle AI is much more than a simple meme generator. It’s a powerful platform that can completely reinvent how games, animation, and other videos are produced.\\nPowered by JST-1, the first-in-the-world 3D-video foundation model with actual physics understanding, Viggle AI can make any character move as you want. Its unique AI model can generate high-quality, realistic, physics-based 3D animations and videos from either static images or text prompts.\\nFor professional animation engineers, game designers, and VFX artists, this is game-changing. Viggle AI can streamline the ideation and pre-production process allowing them to focus on their creative vision and ultimately reduce production timelines.\\nAnd, for content creators and everyday users, Viggle AI can generate high-quality animations using simple prompts to create engaging animated character videos within a matter of minutes.\\nEasier. Faster. Cheaper. Viggle AI is a truly transformative product that will unlock new values for consumers and professionals alike.\\nHere are a couple of fun examples of Viggle AI in action – I was terrible at dancing, but now I can do it!\\nSince launching in March, Viggle AI has taken the internet by storm and now boasts over 4 million users. When the startup first landed on our radar it only had 1000s of users. This rapid growth is not only a testament to Viggle AI’s ability to create an engaging product but also Two Small Fish’s ability to spot tech giants in the making.\\nTwo Small Fish has an unparalleled track record of helping create the future of content through technology. After all, the team built Wattpad from a simple app for fiction into a massive global entertainment powerhouse with 100 million users. Seeing the future is our superpower. We’re the best investors to help future tech giants like Viggle AI as they transform how content is created, remixed, customized, consumed, and interacted with. We’re excited to continue to play a role in reinventing content creation and entertainment.\\nCongratulations Hang Chu and the entire Viggle AI team!\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nAugust 26, 2024\\nOctober 11, 2024\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nAnnouncements\\n,\\nInvestment\\nLeave a comment\\nThe Next Data Centre: Your Phone\\nThe history of computing has been a constant shift of the centre of gravity.\\nWhen mainframe computers were invented in the middle of the last century, they were housed in air-conditioned, room-sized metal boxes that occupied thousands of square feet. People accessed these computers through dumb terminals, which were more like black and white screens and keyboards hooked to the computer through long cables. They were called dumb terminals because the smart part was all on the mainframes.\\nThese computers worked in silos. Computer networks were very primitive. Data was mainly transferred through (physical!) punch cards and tapes.\\nThe business model was selling hardware. During that era, giants like IBM and Wang emerged, and many subsequently submerged.\\nHardware was the champion.\\nMainframe computers in the 50s. Image source: Wikipedia\\nThe PC era, which started in the 80s and supercharged in the 90s, ended the reign of the mainframe era. As computers became much faster while the price dropped by orders of magnitude, access to computing became democratized, and computers appeared on every desktop. We wanted these computers to talk to each other. Punch cards clearly no longer worked as there were millions of computers now. As a result, LANs (local area networks) were popularized by companies like Novell, which enabled the client/server architecture. Unlike the previous era, the “brains” were decentralized, with clients doing much of the heavy lifting. Servers still played a role, but for the most part, it was for centralized storage.\\nAlthough IBM invented the PCs, the business models shifted, creating the duopoly of Intel (and by association companies like Compaq) and Microsoft, with the latter capturing even more value than the former. The software era had begun.\\nSoftware became the champion. Hardware was dethroned to the runner-up.\\nThen, in the late 90s to the 2010s, the (broadband) web, mobile, and cloud computing came along. Connectivity became much less of an issue. Clients, especially your phones, continued to improve at a fast pace, but the capability of servers increased even faster. The “brains” shifted back to the server as that’s where the data is centralized. For the most part, clients were now responsible for user experience, important but merely a means to an end (of collecting data) rather than an end in themselves.\\nInitially, it appeared that the software-hardware duopoly would continue as companies like Netscape and Cisco were red hot, only to be dethroned by companies like Yahoo and AOL and later Google and Meta. Software and hardware were still crucial, but they became the enablers as the business model once again shifted.\\nData became the newly crowned champion.\\nFast forward to now, the latest—and arguably the greatest of all time—platform shift, powered by generative AI, is upon us. The ground beneath us is shifting again. On a per-user basis, generative AI demands orders of magnitude more energy. At a time when data centres are already consuming more energy than many countries, it is set to double again in two years to roughly equivalent to the electricity consumption of Japan. The lean startup era is gone. AI startups need to raise much more capital upfront than previous generations of startups because of the enormous cost of compute.\\nExpecting the server in the data centres to do all the heavy lifting can’t be sustainable in the long term for many reasons. The “brains” have once again started to shift back to the clients at the edge, and it is already happening. For instance, Tesla’s self-driving decisions are not going to make the round trip to its servers. Otherwise, the latency will make the split-second decisions a second too late. Another example, most people may not realize this, but Apple is an edge computing company already as its chips have had AI capabilities for years. Imagine how much more developers can do on your iPhone—at no cost to them—instead of paying a cloud provider to run some AI. That would be the Napster moment for AI companies!\\nInevitably, now that almost every device can run some AI and is connected, things will be more decentralized.\\nIn past eras, computing architectures evolved due to the constraints of—or the liberation of—computing capabilities, connectivity, or power consumption. The landscape has once again shifted. Like past platform shifts, there will be a new world order. The playing field will be levelled. Rules will be rewritten. Business models will be reinvented. Most excitingly, new giants will be created.\\nEvery. Single. Time.\\nSeeing the future is our superpower. That’s why a while ago, at Two Small Fish Ventures, we have already revised\\nour thesis\\n. Now, it is all about investing in\\nthe next frontier of computing and its applications\\n, with edge computing an important part of it. Our recent investments have been all-in on this thesis. If you are a founder of an early-stage, rule-rewriting company that is taking advantage of this massive platform shift, don’t hesitate to reach out to us. We love backing category creators in massive market opportunities.\\nWe are all engineers, product builders and company creators. We know how things work. Let’s build the next champion together!\\nUpdate: This blog post was published just before Apple announced Apple Intelligence. I knew nothing about Apple Intelligence at that time. It was purely a coincidence. However, it did validate what I said.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nJune 10, 2024\\nOctober 11, 2024\\nby\\nAllen Lau\\nPosted in\\nUncategorized\\n1 Comment\\nWEBTOON IPO\\nI haven’t been involved with Wattpad for a while now, so it’s a strange feeling—though not in a bad way—to catch up on\\nall the details about WEBTOON and Wattpad in the SEC filing\\n. From what I’ve gathered, WEBTOON is performing exceptionally well, with revenue now surpassing $1 billion.\\nThree years ago, one of the main reasons I was drawn to Naver WEBTOON among all the suitors was Naver’s intention to spin out WEBTOON, together with Wattpad, as a separate, entertainment-focused, NASDAQ-listed company. This was a significant undertaking with numerous challenges, and the WEBTOON team is delivering on the promise. I’m pleased to see that Wattpad is playing a crucial role in this upcoming IPO.\\nThe timing has turned out to be ideal for both WEBTOON and myself personally. With the rise of generative AI, the media industry is undergoing a new wave of massive disruption. It’s exciting to see WEBTOON raising more capital to seize this opportunity. From a distance, I wish the WEBTOON team all the best!\\nAt\\nTwo Small Fish Ventures\\n, we’re equally excited as we witness many incredible AI-native media startups and are actively investing in several amazing ones. I’ll share more about this in future posts.\\nThis is a once-in-a-decade, platform-shift opportunity. It is arguably the biggest platform shift in the past century! TSF is actively investing in the next frontier of computing and its applications as a lead investor or as part of a syndicate. If you’re a founder of an early-stage AI-native company—media or not—don’t hesitate to reach out to us, as TSF is a rare investor who understands this space extremely well, and possibly the best investor with real-world operating experience who can help you achieve massive success like Wattpad did.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nJune 7, 2024\\nOctober 11, 2024\\nby\\nAllen Lau\\nPosted in\\nAnnouncements\\n,\\nInvestment\\n,\\nventure capital\\n,\\nWattpad\\nLeave a comment\\nBreaking the Silence: Embracing the Emotion of Speaking Up\\nThe month of May is Asian Heritage Month, honouring the lives and contributions of people of Asian origin.\\nThis year, I would like to talk about one common issue among Asians—speaking up, or the lack thereof.\\nHow often do you stop yourself from saying what needs to be said?\\nOne of the biggest cultural differences that could hold Asians back is our tendency not to speak up. Since I was a kid, my parents and grandparents conditioned us to keep our heads down. Focus on your work, and as long as you do good work, your work will speak for itself.\\nThis is all fine, except that in Western culture, certain behaviours are perceived as the norm. Leaders are expected to be vocal and own the stage.\\nI have seen firsthand very capable Asian people not getting promoted because they don’t say much. I have seen investors criticizing Asian founders for not having a take-over-the-world demeanour. In one specific example, a founder was having trouble raising capital despite the company doing really well. An existing investor (also Asian) told me privately that the main reason was that this founder didn’t act like a typical American founder.\\nOuch! I instantly knew what he meant.\\nSpeaking from my own experience, it took me decades to overcome this issue. I can’t speak for other Asian cultures, but in Hong Kong, during the era when I was growing up, parents would put masking tape on a kid’s mouth if they spoke too much. My parents never did this to me because I rarely said anything. 🙂 Even today, I have to constantly push myself to speak up. On some occasions, I still err on the side of not speaking up enough because it is still very unnatural for me. Your culture stays with you for life.\\nI can’t tell you exactly how to overcome this issue. To a degree, it has to come from within. You have to find your own way. For me, I kept telling myself I needed to err on the side of speaking up too much. Trust me, even with that, the end result is that on many occasions I still find myself thinking I could have spoken up more, even today. So, imagine if I didn’t give myself a little nudge. It took years of practice to overcome my own emotions. Eventually, I got used to it. Well, most of the time.\\nHowever, I don’t mean to say that it is all on Asians’ shoulders to overcome this. Asian or not, great leaders have the responsibility to create a safe environment for everyone to speak up in the first place.\\nHumility and kindness are great traits in Asian culture. Keep them. It is also okay to push yourself to be more vocal. The barrier is totally breakable, especially one step at a time. You just have to keep pushing. After all, speaking up is not mutually exclusive with your heritage!\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMay 31, 2024\\nOctober 11, 2024\\nby\\nAllen Lau\\nPosted in\\nleadership\\n,\\nlessons\\n,\\nmanagement\\n2 Comments\\nThe depressing numbers of the venture-capital slump don’t tell the full story\\nThank you to The Globe for publishing\\nmy second op-ed\\nin as many weeks: The depressing numbers of the venture-capital slump don’t tell the full story.\\nThe piece is now available in full here:\\nBright spots in the current venture capital landscape exist. You just need to know where to look.\\nRecent reports are right. Amid high interest rates, venture capitalists have a shrinking pool of cash to dole out to hopeful startups, making it more challenging for those companies to raise funding. In the United States, for example, startup investors handed out US$ 170.6 billion in 2023, a decrease of nearly 30 percent from the year before.\\nBut the headline numbers don’t tell the whole story.\\nThere’s a night-and-day difference between the experience of raising funds for game-changing, deep-technology startups that specialize in artificial intelligence and related fields, such as semiconductors, and those who try to innovate with what’s referred to as shallow tech.\\nRemember the late 2000s? Apple’s App Store wasn’t groundbreaking in terms of technical innovation, but it nonetheless deserves praise because it revolutionized the smartphone. Then, the App Store’s charts were dominated by simplistic applications from infamous fart apps to iBeer, the app that let you pretend you were drinking from your iPhone.\\nThat’s the difference – those building game-changing tools and those whose products are simply trying to ride the wave.\\nTons of startups are pitching themselves as AI or deep-tech companies, but few actually are. This is why many are having trouble raising funds in the current climate.\\nIt’s also why the era of shallow tech is over, and why deep-tech innovations will reshape our world from here on out.\\nToronto-based\\nIdeogram\\n, a deep-tech startup, was the first in the industry to integrate text and typography into AI-generated images. (Disclosure: This is a company that is part of my Two Small Fish Ventures portfolio. But I’m not mentioning it just because I have a stake in it. The company’s track record speaks for itself.)\\nBarely one year old, the startup has fostered a community of more than seven million creators who have generated more than 600 million images. It went on to close a substantial US$80-million Series A funding round.\\nAs a comparison, Wattpad, the company I founded, which later sold for US$660-million, had raised roughly US$120-million in total. Wattpad’s Series A in 2011, five years since inception, was US$3.5-million.\\nThe speed at which Ideogram achieved so much in such a short period of time is eye-popping.\\nThe “platform shifts” over recent decades have largely played out in the same way. From the personal-computer revolution in the late 20th century to the widespread adoption of the internet and cloud computing in the 2000s, and then the mobile era in the 2010s, there’s a clear pattern.\\nEach shift unleashed a wave of innovation to create new opportunities and fundamentally reshape user behaviour, democratize access and unlock tremendous value. These shifts benefited the billions of internet users and related businesses, but they also paved the way for “shallow tech.”\\nThe late 2000s marked the beginning of a trend where ease of creation and user experience overshadowed the depth of innovation.\\nWhen Instagram launched, it was a straightforward photo-sharing app with just a few attractive filters. Over time, driven by the massive amounts of data it collected, it evolved into one of the leading social media platforms.\\nThis time is different. The AI platform shift makes it harder for simplistic, shallow-tech startups to succeed. Gone are the days of building a minimally viable product, accumulating vast data and then establishing a defensible market position.\\nWe’re entering the golden age of deep-tech innovation, and in order to be successful, startups have to embrace the latest platform shift – AI. And this doesn’t happen by tacking on “AI” to a startup’s name the way many companies did with the “mobile-first” rebrand of the 2010s.\\nIn this new era, technological depth is not just a competitive advantage but also a fundamental pillar for building successful companies that have the potential to redefine our world.\\nFor example, OpenAI and Canada’s very own Cohere are truly game-changing AI companies that have far more technical depth than startups from the previous generation. They’ve received massive funding partly because the development of these kinds of products is very capital-intensive but also because their game-changing approach will revolutionize how we live, work and play.\\nCompanies like these are the bright spots in an otherwise gloomy venture-capital landscape.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMay 21, 2024\\nMarch 19, 2025\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nInvestment\\n,\\nop-ed\\n,\\nsemiconductor\\n,\\nStartup\\n,\\nventure capital\\nLeave a comment\\nCanada risks losing out on the GREATEST prize: ownership of industry-disrupting companies and technologies\\nThank you to The Globe for publishing\\nmy op-ed\\nabout the recent capital gains tax increase last week. The piece is now available here.\\nOnce again, to summarize, as the world shifts to intangible assets, the consequences go far beyond brain drain and job loss. We risk losing out on the GREATEST prize: ownership of industry-disrupting, IP-based companies and technologies. This aspect, often overlooked, is illustrated with real-world numbers.\\nNot having significant ownership of these assets in the information age is equivalent to not having electricity and oil in the industrial age. This would have a devastating and long-term impact on our economy and reputation on the world stage. Canada would be left behind with digital breadcrumbs, selling our next generation short.\\nThe policy change clearly didn’t take this into consideration. Saying that it impacts only 0.13% of the population is so wrong on many fronts. It is abundantly clear that it will impact EVERYONE.\\nDon’t forget to tell them.\\nHere is the full copy of my op-ed:\\nThe Liberal government is increasing taxes on investment. Anyone experienced in entrepreneurship and investment knows this will stifle growth. We are at tremendous risk of losing our brightest entrepreneurs – along with the high-skilled jobs they create – to other countries.\\nThis is evidenced by a new survey conducted after the\\ncapital-gains tax changes\\n: Just\\n5.3 per cent\\nof Canadian founders believe Canada is the best place to grow a company.\\nAs the world shifts to intangible assets, the consequences go beyond brain drain and job loss. We will lose out on the greatest prize of the innovation\\xa0economy: ownership of industry-disrupting companies and technologies. This would have a devastating and long-term impact on our economy and reputation on the world stage.\\nI will admit that this latest change to taxation has an immaterial impact on me personally. Wattpad, the company I co-founded, was acquired by Korean internet giant Naver for $840-million in 2021 so I’ve already paid my dues as stipulated under the budget at the time. But my experience illustrates how this tax change is detrimental to Canada and future generations.\\nBecause I raised most of the capital from outside of Canada, only half of the company was owned by Canadians, including founders, employees and investors. In other words, when Wattpad was acquired, $420-million of the economic value left our country.\\nBefore the tax hike,\\nit was reported\\nthat when our tech startups become scaleups, about 75 cents out of every invested dollar comes from outside of Canada. This means many of these fast-growing companies are already majority-owned by foreigners.\\nAs a venture capitalist, I see this trend play out all the time. The firm I co-founded, Two Small Fish Ventures, has a portfolio of 50 early-stage tech companies. We are the only Canadian investor in many of our recent investments. Foreign investors, especially U.S. investors, are aggressively writing cheques to own a significant portion of these early promising Canadian startups when they are relatively inexpensive.\\nThe tax increase will only exacerbate this problem.\\nWhen a company’s assets are purely intangible, and its biggest investors and markets exist outside Canada, it’s natural and far easier for the company to move outside Canada or be acquired by foreigners, such as Wattpad. Needless to say, the economic value creation postacquisition is also captured outside of Canada.\\nOne might argue that these companies create many jobs in Canada, so we still captured some value, right? Well, again, when a company’s assets are mostly intangible, the majority of the economic value created is captured by its IP, not the jobs created. As an example, Wattpad’s payroll was about $30-million per year, not small, but it is a minuscule number compared to the nearly billion dollars that the company was valued at.\\nThere’s also a tectonic shift under way across the innovation economy. The rise of AI and related fields such as semiconductors in particular is an order of magnitude more capital-intensive than previous generations of tech companies. Canada has produced some of the best AI researchers in the world, but when 40 of\\nForbes’ 2024 AI 50 List\\nare in the U.S. (and more than 30 of them in Silicon Valley) while only two are in Canada, we could have and should have owned a much bigger piece of the pie.\\nThe best example is\\xa0OpenAI, which was co-founded by Ilya Sutskever, a Canadian. The company is based in San Francisco. The majority of its employees are not in Canada. All the major investors are U.S.-based. Canada only has the bragging rights.\\nAnd, do I have to remind everyone that Elon Musk is also Canadian?\\nIn the post-pandemic world, capital and talent are more mobile than ever. The pull to move to other countries is also stronger than ever. Canada is already becoming the best training ground for other countries to capture the value created by these companies outside of Canada.\\nI want Canada to win. I really do. What motivates me now as an investor is to help create more homegrown Canadian tech giants – and to keep them in Canada. My job just got much harder.\\nHigher taxes mean less capital, reduced investment, diminished ownership and fewer economic benefits. Period.\\nAt a time when we need more capital to own a meaningful piece of the IP-based economy, our country is going backward. As the economy increasingly shifts toward intangible assets, we will be left behind with digital bread crumbs, selling our next generation short.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMay 13, 2024\\nMarch 19, 2025\\nby\\nAllen Lau\\nPosted in\\nInvestment\\n,\\nop-ed\\nTagged\\ncanada\\n,\\neconomy\\n,\\ninvesting\\nLeave a comment\\nSoftware Once Ate the World Alone; Now, Software and Hardware Consume the Universe Together\\nOver a decade ago, in his blog post titled\\n“Why Software is Eating the World,”\\nMarc Andreessen explained why software was transforming industries across the globe. Software would no longer be confined to the tech sector but permeated every aspect of our lives, disrupting traditional businesses and creating new opportunities, driving innovation and reshaping the competitive landscape. Overall, the post underscores the profound impact of software on the economy and society at large.\\nWhile the prediction in his blog post was mostly accurate, today, the world is still only partially eaten up by software. Although there are many opportunities for software alone to completely transform user behaviour, upend workflow, or cause other disruptions, the low-hanging fruits are mostly picked. That’s why I said\\nthe days of shallow tech are behind us\\nnow.\\nMoving forward, increasingly, there will be more and more opportunities that require hardware and software to be designed and developed together from the get-go to ensure that they can work harmoniously and make an impact that otherwise would not be possible. The best example that people can relate to today is Tesla. For those who have driven a Tesla, I trust many would testify that their software and hardware work really well together. Yes, their self-driving software might be buggy. Yes, the build quality of its hardware might not be the best. However, with many features on their cars – from charging to navigation to even warming up the car remotely – you can just tell that they are not shoehorning their software and their app into their hardware or vice versa.\\nOn the other hand, on many cars from other manufacturers, you can tell their software and hardware teams are separated by the Grand Canyon and perhaps only seriously talk to each other weeks before the car is launched 🙂\\nWe also witness the same thing down to the silicon level. From building the next AI chip to the industrial AI revolution to space tech, software and hardware convergence is happening everywhere. For instance, the high energy required by LLMs is partially because the software “works around” the hardware, which was not designed with AI in mind in the first place. Changes are already underway, ensuring that software and hardware dance together. There is a reason why large tech players like OpenAI and Google are planning to make their own chips.\\nWe are in the midst of a once-in-a-decade “platform shift” because of generative AI. In the last platform shift more than a decade ago, when the confluence of mobile and cloud computing created a massive disruption, there was one “iPhone moment,” and then things progressed continuously. This time, new foundation models are launching at a break-neck pace, which is further exacerbated by open-source. So fast that we are now experiencing one iPhone moment every few weeks.\\nAll of this happens when AI-native startups are an order of magnitude more capital-intensive than in the past cycle. At the same time, investors are also willing to write big cheques to these companies, but perhaps it is appropriate, given all the massive opportunities ahead of us.\\nInvesting in this environment is both exciting and challenging as assessing these new opportunities is drastically different from the previous-generation software-only, shallow-tech startup.\\nThe next few years are going to be wild.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMay 9, 2024\\nOctober 11, 2024\\nby\\nAllen Lau\\nPosted in\\nAI\\n,\\nInvestment\\n,\\nsemiconductor\\n,\\nStartup\\n,\\nventure capital\\n4 Comments\\nContrarian Series:\\xa0Contrarian Bets\\nIn the early 2010s, when Wattpad began raising capital from Silicon Valley, Valley VCs didn’t ask me ‘if’ I would move the company or open a second office there; they asked ‘when.’ They argued that Toronto lacked great product people and scale-up leaders, although we had top engineering talent. At that time, it was common for Valley VCs to ask non-Valley companies to move to the Valley as a condition for funding.\\nBut I told them, ‘I won’t move.’\\nWhile their argument had a point, Valley VCs failed to see my “big-fish-small-pond” advantages. I don’t need to hire a million great people. After raising one of the largest funding rounds by a Canadian-based company at the time, I was absolutely sure we could hire “enough” great people to help us build a world-class company based in one of the most populous metropolises in North America called Toronto. Paradoxically, it could even work to our advantage. As one of Toronto’s biggest fish, we could hire the best. I couldn’t say the same thing if we moved to the Valley. Besides, building a company culture with a single office location was much easier.\\nIt was a contrarian bet that few people saw, but it was so obvious to me. In hindsight, it was clear that it was the right call.\\nIt all worked well until it didn’t. While the Toronto ecosystem went from strength to strength during the 2010s, it also meant that the talent competition became very fierce towards the end of the decade. The small pond became a much bigger pond, and there were a lot of big fish in it, including many Valley-based companies setting up shops here.\\nThe tipping point for me was when someone bought the old building next to Wattpad HQ. Initially, we had no idea who wanted to turn it into an office tower until Google announced that it would hire a few thousand people. Where? Right next to Wattpad HQ.\\nMy first-mover advantage has eroded. I had to figure out a new plan to regain my big-fish-small-pond advantage.\\nMy solution was to establish a second HQ in a less populous city with a thriving tech ecosystem and an abundance of post-secondary institutions, where we could be the big fish again and have enough talent to enable us to continue to grow rapidly. It had to be a Canadian city because I wanted a few existing Wattpad employees to relocate there to help us “seed” the culture. It was far harder for me to pull it off if it was cross-border.\\nI toured around the country. I was impressed by what I saw. There were a handful of cities that met our criteria. I knew we could make it work.\\nAt that time, I was already very familiar with Halifax, having been involved in the local ecosystem for a while. While there, I took advantage of the opportunity to grab dinner with Jevon McDonald, whom I had known for a few years. Nothing compares to talking to a local guru.\\nJevon gave me the rundown of all the nuances I couldn’t find on Google search. But when I asked him to name one thing that he didn’t like about Halifax, this was our conversation:\\nJevon: “I have a few employees in San Francisco. Going there is very painful as I have to catch a 5am flight to connect through Toronto first.”\\nMe: “So, there is no direct flight from Halifax to SF?”\\n“Nope.”\\n“Great!”\\n“What?!”\\nIt’s a short flight between Toronto and Halifax. There are numerous daily flights between the two cities, so day trips are super easy. However, the lack of direct flights to the Valley means Valley-based companies won’t show up any time soon. An unfair disadvantage became my unfair advantage. The lack of direct flights became my talent moat.\\nThe rest is history. Wattpad established its second HQ in Halifax. We hired a lot of fantastic people there. I have been the biggest champion of Atlantic Canada ever since, as I have encouraged other Toronto-based companies to do the same.\\nIt was another contrarian bet that few people saw, but it was so obvious to me. It was the right call.\\nThese are just a couple of examples. There were many more that Wattpad did, like establishing a movie studio or investing in something unproven called AI more than a decade ago.\\nSimilarly, some of our best investments in Two Small Fish Ventures, such as Sheertex or BenchSci, had a very tough time raising capital early on because very few people saw what we saw.\\nOf course, I am not suggesting that one should be contrarian for the sake of being contrarian. But when a contrarian bet results in a first-mover advantage in a big opportunity that no one else saw, that will almost always generate an amazing outcome with outsized returns.\\nDon’t tell anyone.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nApril 4, 2024\\nMarch 15, 2025\\nby\\nAllen Lau\\nPosted in\\nContrarian Series\\n,\\nentrepreneurship\\n,\\nleadership\\nTagged\\nbusiness\\n,\\nstartups\\n,\\ntech\\n,\\ntechnology\\n,\\ntravel\\n2 Comments\\nInternational Women’s Day\\nWhen Eva and I were on stage yesterday at Entrepreneurship Week at the University of Toronto, moderator\\nBianca Bharti\\nfrom\\nBetaKit\\nasked us:\\n“Given we are celebrating women and raising awareness about related issues this week, what do you want to tell the audience here today?”\\nHere is what I said. When I was Wattpad’s CEO, we didn’t just talk about diversity or run flashy programs just to make us look good. Instead, we invested in it. We allocated real resources, dollars, and people’s time to create a truly diverse and inclusive culture at Wattpad.\\nThe business reason was simple – half the world’s population is female. If we want to properly capture this market, do you really think a bunch of male guys in the room can figure this out?\\nThe end result is that we achieved gender parity at BOTH the employee level and the leadership team level. However, the numbers don’t tell the whole story. Anyone who worked for Wattpad can testify that we have created a truly inclusive culture.\\nPersonally, I would consider this one of our biggest achievements.\\nBut that was only the first chapter of the story. At Two Small Fish Ventures, we carry the same DNA. It was mostly Eva’s work, as I only started to be more involved in recent years. Through inspiration, advocacy, and mentorship, we achieved 50% female founders in our portfolio. In fact, many of our rocket ships are female-led.\\nOur job is not done yet. Together, we can change how the world operates.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMarch 8, 2024\\nOctober 11, 2024\\nby\\nAllen Lau\\nPosted in\\nentrepreneurship\\n,\\nleadership\\nLeave a comment\\nIt’s Time (Again) to Convince Canadians That Canada Is Great\\nA couple of months ago, I\\nblogged about a report\\nfrom the investment firm LetkoBrosseau, titled “Canada Has Cut Back on Investing in Its Greatest Asset—Itself.”\\nThis report\\nhighlights how minimally the Canadian pension system is investing in Canada. The blog post quickly became one of my most popular in recent times.\\nShortly after, the founders of LetkoBrosseau reached out to me and asked if I would be interested in participating in an open letter addressed to our Minister of Finance of Canada and the Provincial Finance Ministers. After reading the draft, I replied with a resounding “yes” without much hesitation. Over 100 business leaders in Canada also agreed to participate. You can see the coverage on\\nThe Globe\\nand\\nFinancial Post\\n.\\nThis is the slide from the original report that caught my attention and summarizes it well:\\nI believe that Canadian pension funds are among the best in the world. Our pension funds are adept at finding some of the best investment opportunities globally and generating the best “returns” for us. They are doing the job they were tasked with doing.\\nHowever, while they generate the best “returns” from their investments, they are not asked to consider the economic impact of the “feedback loop” highlighted in green. This feedback loop encompasses the second-order effects and its economic benefits from investing in Canada.\\nIn other words, “the best returns to Canadians (the pensioners)” are not necessarily the same as “the best investment returns.” More importantly, these two aren’t mutually exclusive.\\nWith some fine-tuning to the investment sourcing process, for instance, achieving the best returns for Canadians shouldn’t come at the expense of achieving the best investment returns.\\nTo be clear, I am not in a position to tell pension funds where or what to invest in, let alone suggest they invest solely or primarily in Canada. They are the experts and have been performing outstandingly. However, we need to change how we evaluate investment returns to\\ninclude\\nthe second-order effects of investing in Canada. This adjustment would encourage pension funds to seek out investments that serve pensioners best when these effects are considered in their evaluations. I believe no one would argue against this approach.\\nYou can read the open letter here:\\nDear Minister of Finance of Canada and Provincial Finance Ministers,\\nWe are concerned with the decline in Canadian investments by pension funds and its impact on the Canadian economy. Millions of Canadians have contributed to their pensions with wages earned in Canada.\\nPension funds represent approximately 37% of institutional savings in Canada, a size comparable to the banks. Contrary to the banks and insurance companies that focus mainly on debt, pension funds are unique in their ability to be patient long term equity investors, just what Canada needs to forge its future.\\nCanadian Pension Funds have reduced their holdings of publicly traded Canadian companies from 28% of total assets at the end of 2000 to less than 4% at the end of 2023. It is estimated that the eight largest pension funds in Canada have more invested in China (roughly $88B) than they do in Canadian public and private equities (roughly $81B). Their holdings of all Canadian based equity investments including public and private companies, real estate, and infrastructure is down to approximately 10% of total assets.\\nWhy should we care?\\nCanada’s gross domestic product (GDP) per capita has fallen from 95% of US GDP per capita in 1980 to 75% in 2023. Non-residential investment per worker in Canada is less than half that of the United States. For every dollar Canadians invest in startups, the United States invests $40.\\nCanada benefits from enormous advantages. It is one of the most developed economies in the world and has been a wonderful place to invest. Over the last 25 years Canadian equity markets have topped the G7 countries and have consistently delivered very competitive returns.\\nInvestment opportunities exist in many countries, and we believe pension funds should be able to invest anywhere in the world. However, investments made in Canada do not impact just pension portfolios; they also have a considerable impact on the country’s economy: generating jobs, improving incomes, and increasing contributions to retirement plans. Less investment in Canadian businesses increases their cost of capital, discounts their value, reduces their ability to grow, and makes Canada less attractive.\\nPension funds should not fear but rather embrace with enthusiasm the challenge of investing in Canada. The positive impact these investments have on their member’s incomes and development should not be ignored.\\nWithout government sponsorship and considerable tax assistance, pension funds would not exist. Government has the right, responsibility, and obligation to regulate how this savings regime operates.\\nCanada has great companies, true global champions These competitive businesses deserve our support, and we must create many more. Increasing investments in Canada should be a national priority.\\nGiven their importance to the Canadian economy we, the undersigned, would support an effort by the Minister Finance of Canada and the Provincial Ministers of Finance to amend the rules governing pension funds to encourage them to invest in Canada. Consideration should also be given to incentivize other investors to allocate more capital to domestic investment.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nPosted on\\nMarch 7, 2024\\nOctober 11, 2024\\nby\\nAllen Lau\\nPosted in\\nUncategorized\\n1 Comment\\nThe Right Type of Investors\\nMost of Two Small Fish Ventures’ portfolio companies are based in North America. However, we also invest globally, as we firmly believe that global companies can be built anywhere. To us, where founders and their teams sleep at night is irrelevant to their potential for greatness.\\nConsequently, we actively engage with many tech ecosystems, regardless of their size. A pervasive issue we’ve encountered across these ecosystems is the challenge entrepreneurs face in finding investors who provide not just capital but the right kind of support. This problem is more acute in less developed ecosystems, but even those that are more established are not exempt.\\nAn investor from another ecosystem eloquently discussed this issue in an article. I couldn’t have said it better myself, so with her permission, I’m sharing her insights here, albeit anonymized to avoid casting any ecosystem in a negative light. After all, this challenge is universal:\\nThere are plenty of rich people and “wantrepreneur” investors in our community, but most of them have made their fortune in real estate, finance, or other traditional sectors. They have great intentions, but unfortunately they do not have experience in investing in technology and innovations. Some of them would take too much equity ownership. Some of them have conflicts of interest pursuing their own agendas and push their founders to work on products or customers that they want. Some are so risk averse that they structure their startup investment as if it is a personal loan. We have seen our startup founders take money from these investors and almost always end in disaster.\\n\\u200b\\u200b\\nWhat our community really needs are the startup investors who have “been there and done that.”\\xa0 Or we will continue to be stuck in this vortex of wrong investors investing in the wrong companies. We need investors who truly understand the startup founders’ blood, sweat and tears approach. Someone who knows how to be a guide and a coach. Someone who knows how to provide advice, connections, and funding only when the founder really needs it.\\n\\u200b\\u200bTo achieve this goal, we need to invite investors from established ecosystems to teach local investors the best practices in venture investing. And we do believe these skills can be learned. The local investor community needs the knowledge and skills to make investment decisions that maximize the founders’ success therefore their chances of success.\\nInvesting in innovation significantly differs from other forms of investment. For instance, real estate investments have established methods to evaluate rental yields, and traditional businesses use EBITDA to estimate enterprise values. However, early-stage startups, particularly those disrupting the status quo, cannot be evaluated using these metrics because of their lack of yields or EBITDA, or even clear business models!\\nOften, experienced investors from other sectors mistakenly apply the same approach when they invest in tech startups, leading to almost certain failures. This can result in many problems, such as\\na messy cap table\\n, ensuring the startup unfundable in future funding rounds and potentially “die young” despite its potential. We’ve regrettably had to pass on numerous investment opportunities due to such issues.\\nAs the quoted investor highlighted, learning the skills and best practices in tech investing is possible. Needless to say, the best way to do this is to learn from people who have “been there and done that.” It’s crucial to acknowledge that investing in tech startups – and innovations in general – is a different sport than other sectors.\\nAfter all, bringing a tennis racket to a hockey game is a recipe for disaster.\\nThis blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nType your email…\\nSubscribe\\nPosted on\\nMarch 6, 2024\\nMarch 8, 2024\\nby\\nAllen Lau\\nPosted in\\nentrepreneurship\\n,\\nInvestment\\n,\\nStartup\\n,\\nventure capital\\nLeave a comment\\nVC is a Home Run Derby with Uncapped Runs\\nThere’s an old saying that goes, “Know the rules of the game, and you’ll play better than anyone else.” Let’s take baseball as our example. Aiming for a home run often means accepting a higher number of strikeouts. Consider the legendary Babe Ruth: he was a leader in both home runs and strikeouts, a testament to the high-risk, high-reward strategy of swinging for the fences.\\nYet, aiming solely for home runs isn’t always the best approach. After all, the game’s objective is to score the most runs, not just to hit the most home runs. Scoring involves hitting the ball, running the bases, and safely returning to home base. Sometimes, it’s more strategic to aim for a base hit, like a single, which offers a much higher chance of advancing runners on base and scoring.\\nThe dynamics change entirely in a home run derby contest, where players have five minutes to hit as many home runs as possible. Here, only home runs count, so players focus on hitting just hard enough to clear the fence, rendering singles pointless.\\nImagine if the derby rules also rewarded the home run’s distance, adding extra runs for every foot the ball travels beyond the fence. For context, the centre field is typically about 400 feet from home plate. So, a 420-foot home run, clearing the centre field by 20 feet, would count as a 20-run homer. This rule would drastically alter players’ strategies. Not only would they swing for the fences with every at-bat, but they would also hit as hard as possible, aiming for the longest possible home runs to maximize their scores, even if it reduced their overall chances of hitting a home run.\\nThis scenario mirrors early-stage venture capital, where I liken it to a home run derby with uncapped runs. The potential upside of investments is enormous, offering returns of 100x, 1000x, or more, while the downside is limited to the initial investment. Unlike in a derby, where physical limits cap the maximum score, the VC world is truly without bounds, with numerous instances of investments yielding thousandfold returns.\\nThis distinct dynamic makes\\nassessing VCs fundamentally different from evaluating other asset classes\\n, where protecting the downside is crucial. In the VC realm,\\nthe potential for nearly limitless returns makes losses inconsequential\\n, provided VCs invest in early-stage companies with the potential for exponential growth.\\nThe risk-reward equation in venture capital is thus highly asymmetrical, favouring bold bets on moonshot startups.\\nFor illustration, let’s consider two hypothetical venture capital firms: Moonshot Capital and PlayItSafe Capital.\\nMoonshot Capital approaches the game like a home run derby with uncapped runs. They aim for approximately 20 companies in their portfolio, expecting that around 20% will be their home runs—or “value drivers”—capable of generating returns from 10x to 100x or more.\\nImagine they invest $1 in each of 20 companies. One yields a 100x return, three bring in 10x, and the remaining are strikeouts. The outcome would be:\\n(1 x 100 + 3 x 10 +16 x 0) x $1 = $130\\nTheir $20 investment becomes $130 (or 6.5x), a gain of $110, despite 17 out of 20 companies being strikeouts. Yes, you are correct. 85% of the portfolio companies failed!\\nPlayItSafe Capital, on the other hand, prioritizes downside protection, ensuring none of the portfolio fails but also avoiding riskier bets. In the end, one company generates one “10x” return, five companies return 3x, and the remainder is equally split between breakeven and failing.\\n(1 x 10 + 5 x 3 + 7 x 1 + 7 x 0) x $1 = $32\\nDespite several “successes” and very few “losses,” the fund’s return of $12 pales in comparison to Moonshot Capital’s. Even increasing the number of companies generating a 3x return to 10 with no loss (which is almost impossible to achieve for early-stage VCs) only yields a $29 gain from a total investment of $20:\\n(1 x 10 + 10 x 3 + 9 x 1) x $1 = $49\\nNo one should invest in the early-stage VC asset class with the expectation of such a paltry return.\\nAs illustrated, success isn’t about minimizing failures, nor is it about the number of “3x” companies or even the number of “unicorn logos” in the portfolio, as how early when the investment was made to these unicorns is crucial as well. One needs to invest in a unicorn when it was a baby-unicorn, not after it became a unicorn.\\nIn summary:\\nVenture funds live or die by one thing: the percentage of the portfolio that becomes “value drivers”, i.e. those capable of generating returns of 10x, 100x, or even 1000x.\\nAt Two Small Fish Ventures, we are the IRL version of Moonshot Capital. Every investment is made with the belief that $1 could turn into $100. We know that, in the end, only about 20% of our portfolio will become significant value drivers. Yet, with each investment, we truly believe these early-stage companies have the\\npotential\\nto become world-class giants and category creators when we invest.\\nThis is what venture capital is all about: not only is it exhilarating to be at the forefront of technology, but it’s also a great way to generate wealth and, more importantly, play a role in supporting moonshots that have a chance to change how the world operates.\\nP.S. This is Part 1 of this series. You can read Part 2, “Winning the Home Run Derby with Proper Portfolio\\xa0Construction”\\nhere\\n.\\nThis blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nType your email…\\nSubscribe\\nPosted on\\nFebruary 20, 2024\\nOctober 7, 2024\\nby\\nAllen Lau\\nPosted in\\nentrepreneurship\\n,\\nInvestment\\n,\\nStartup\\n,\\nventure capital\\n4 Comments\\nAssessing Different Asset Classes\\nDiversifying a portfolio across various asset classes is the first principle for enhancing returns without significantly increasing risk from an investment standpoint. Traditionally, the go-to formula has been a 60/40 split—60% in stocks and 40% in bonds, a practice primarily due to the limited accessibility of alternative asset classes. However, recent years have seen a democratization of access to a wider array of asset classes, including private equity, venture capital and numerous alternatives, opening doors for more investors to explore areas once reserved for the privileged few. This broadening of opportunities is undoubtedly beneficial to many.\\nYet, it introduces a new challenge: How do we assess fund managers across different asset classes? This task can be daunting even for seasoned investment professionals, as investing encompasses a vast range of specialties. A common mistake is posing the\\nwrong\\nquestions, as assessment criteria are\\nnot\\ninterchangeable across asset classes. It is akin to comparing athletes from different sports—evaluating NBA players is not the same as evaluating MLB players since each asset class is akin to a distinct sport. For instance, inquiring about the batting average of an Olympic gold medalist swimmer is as illogical as expecting an NBA MVP to be proficient with a baseball bat.\\nIt’s also unwise to question a fish on its ability to skate!\\nThis blog post is the first in a series designed to demystify this process. I do not claim expertise in all asset classes—no one can. However, I hope to share my experiences to help you sidestep common mistakes and empower you with the basics to evaluate investment opportunities in unfamiliar territories, especially early-stage venture capital, which is my swim lane and relatively few people have the experience to assess. Please note, this blog post does not constitute investment advice or a comprehensive guide across all asset classes as we only cover a handful for illustration purposes.\\nHere is a chart that highlights the key differences:\\nHow should you interpret this chart? Let me use early-stage venture capital, or simply referred to as VC, as an example.\\nAssessing VC is more art than science and more qualitative than quantitative. It offers far higher return potential than almost any other asset class. On the other hand, the risk of losing money is also higher than in other asset classes, with the predictability of the potential target return being low and its variance high.\\nIndividual investments within\\na fund portfolio have a very high failure rate\\n, even for the best funds. This is by design because\\nVC is a home run derby\\n. Strikeouts, singles, or doubles don’t impact the return at all, as\\nonly\\nthe home runs count. This is unique to VC and counterintuitive to managers from other asset classes.\\nThe dispersion among fund managers is also much higher, as the top decile funds generate significantly better returns than the rest. Vintages also make a far more significant influence, as market downturns have an outsized impact on fund returns, even for the best funds. However, the best funds still generate very good returns during bad years. These funds simply generate\\nenormous returns\\nduring the good years!\\nVC takes a decade or more to generate returns. The first few years usually have nothing to show for because it takes a few years to find the startups to invest in, and they take time to grow and realize the gain. Because of this, VC funds are usually illiquid.\\nOn the other extreme, fixed income is more science than art. It is number-driven, much more predictable, and has lower returns, but any default is a cardinal sin!\\nEach row on the chart deserves a separate blog post. Stay tuned for subsequent posts in this series, where we’ll dive deeper into these topics.\\nThis blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nType your email…\\nSubscribe\\nPosted on\\nFebruary 13, 2024\\nOctober 14, 2024\\nby\\nAllen Lau\\nPosted in\\nInvestment\\n,\\nventure capital\\n1 Comment\\nThe Second Act, the Third Act and the Fourth Act\\nOne of the\\nthree things that CEOs\\nonly\\ndo\\nis to “make sure there is enough cash in the bank” (see job #3\\nhere\\n). Although CFOs may be responsible for much of the heavy lifting, keep in mind that CEOs’ job #1 is to communicate vision and strategies to all stakeholders, which certainly includes potential and existing investors. It is very hard to raise capital to build a great company without great storytelling skills, something almost all great CEOs possess.\\nClearly communicating a bold vision is especially important for early-stage venture-backed companies. These companies are usually pre-revenue, pre-product-market-fit, and definitely pre-scaling. From the VCs’ perspective, they invest not only in where the company is today, but also where the company would be, could be, and should be. In many cases, investors buy into the company’s second, third, and fourth acts in the future, as very few great companies are one-trick ponies.\\nSRTX\\nis the perfect example. Last week, we went to the grand opening of their mega-factory in Montreal. To my knowledge, it is now the largest textile factory in Canada. The pictures and videos don’t do justice to the massive scale of this facility.\\nThis is especially impressive when you know that 180 days ago, when they took over the facility, the roof was leaking, there were no walls, and there was no electricity. The SRTX team moved mountains, rock by rock and at lightning speed, to get the factory ready for production.\\nI wish I could share some pictures inside the factory. Unfortunately, I can’t share their secret sauce. If you really want to have an insider view, you have to become an investor 😉\\nIt took 7 years from its inception for SRTX to begin evolving into a fully verticalized behemoth through innovations in advanced material, hardware, and software to deliver traceability, sustainability, durability, and cost advantages, which is now giving them an “unbreakable” advantage – pun fully intended!\\nToday, millions of\\nSheertex\\nunbreakable pantyhose are sold. They became THE best-selling pantyhose, unbreakable or otherwise, in North America, not bad for a 15-person company based in Bracebridge, Ontario, a town with a 15,000 population and a 2-hour drive north of Toronto when Two Small Fish Ventures invested!\\nNow, they are ready to license the IPs of their rip-resistant technology to other textile companies. That’s their second act. Watertex, one of the world’s most hydrophobic polymers that is engineered for unparalleled water resistance for use in, say, swimwear, is their third act. There are other IPs that are in the works. I would call them their fourth act.\\nBut please don’t use the word pivot here. Pivot implies ‘nothing works, let’s try something else.’\\xa0 Since the early days, Katherine was very clear that selling pantyhose online was the necessary first act to give her the economy of scale before she could begin her second act, third act, and fourth act. What we see today is exactly how she articulated her bold vision when we invested in the seed round five years ago. We bought into her vision, joined the journey, and now, what she told us is becoming a reality. We wouldn’t have invested in a company that was merely selling pantyhose online, even if millions were being sold.\\nThe power couple,\\nKatherine Homuth\\nand\\nZak Homuth\\n, are not your typical founders. SRTX is rewriting the rules of textiles through innovations. I can’t wait to watch the second, third, and fourth acts unfold right before our eyes from my front-row seat.\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nType your email…\\nSubscribe\\nPosted on\\nJanuary 29, 2024\\nMarch 8, 2024\\nby\\nAllen Lau\\nPosted in\\nentrepreneurship\\n,\\nleadership\\n,\\nventure capital\\n4 Comments\\nFounding CEOs vs. Professional CEOs\\nSilicon Valley’s founder CEO worship definitely has its merits. As a CEO backed by many valley VCs, I have immersed myself in that view for decades (e.g., Ben Horowitz’s\\nWhy We Prefer Founding CEOs\\n). I get it, I understand where it comes from, and I do mostly agree. That’s why TSFV backs founding CEOs almost 100% exclusively.\\nGreat founding CEOs tend to have all three traits: 1) Comprehensive knowledge of the entire company (including knowledge of every employee, product, technology decision, customer data, and the strengths and weaknesses of both the code base and the organization), 2) moral authority, and 3) total commitment to the long-term, while professional CEOs often don’t.\\nOn the other hand, being a great CEO is more than just starting a company. It’s a super stressful job that nobody can learn overnight, and running a company with hundreds or thousands of employees is definitely a different ball game than being a founding CEO of a five-person company. However, founders who can’t scale with the company can’t stay in the captain’s chair forever.\\nIf the two jobs are so different, why do we still prefer founding CEOs, even though many are learning on the job? Because it gives the company the best chance to become ultra-successful.\\nTypically, a company goes through four stages of growth. I call it the “4S’s”:\\nStart: where everything begins, with just the co-founders and a tiny team.\\nSprout: achieving product-market fit, with the CEO calling most of the shots in a mostly informal setting.\\nScale: rapid growth, hiring functional leaders, building depth, and starting to establish business processes. This is often where founder CEOs, especially first-time founder CEOs, stumble as they might lack experience in hiring and leading large teams.\\nSuccess: achieving a major milestone like an IPO or a massive liquidity event.\\nBut the growth of a company isn’t a waterfall. An innovation company can’t stop innovating once its (first!) product has achieved product-market fit and cannot simply switch gears overnight to focus on business optimization. The most successful companies aren’t one-trick ponies; they need\\nsecond and third acts\\nlong after their first product takes off.\\nBased on my own experience and my observation of hundreds of CEOs’ personal growth, I can confidently say that it’s far easier for a founding CEO to learn leadership than for a professional hire to become innovative and visionary. When the company hits scale-up mode, a founding CEO’s leadership needs to be solid, but any gaps can be filled by hiring strong leaders. Most founders can successfully make this jump.\\nOn the flip side, pushing someone to be innovative and visionary is much harder, as is finding a team of leaders who can fill that gap for a professional CEO. That’s why it’s tougher for professional CEOs to succeed, though it’s not impossible. It is also possible to hire an “entrepreneurial” professional CEO, although they are rare gems.\\nHowever, this is all pretty generalized. Generalization tends to default to pattern recognition without thoughtful consideration of the specificity of the company’s situation. The ideal scenario is a founding CEO leading all the way, but sometimes, if a professional CEO is the only option, that’s what we have to work with.\\nThe good news for TSFV’s portfolio CEOs is that you’ve got a founding CEO who’s been through it all – me! These days, I spend a lot of time helping founding CEOs fast-track their learning to operate more effectively on the job. For our professional CEOs, I offer guidance to help them think and act more like founders. Helping our portfolio CEOs is the best use of my time to ensure our portfolio companies’ success. It is also extremely high-leveraged because sometimes, even a 30-minute conversation with me can help change the trajectory of a company. After all, if our CEOs aren’t successful, it’s nearly impossible for our portfolio companies to be successful, isn’t it?\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nType your email…\\nSubscribe\\nPosted on\\nJanuary 22, 2024\\nJanuary 12, 2025\\nby\\nAllen Lau\\nPosted in\\nentrepreneurship\\n,\\nleadership\\n,\\nmanagement\\n,\\nventure capital\\nLeave a comment\\nGoodbye Shallow Tech; The Golden Age of Deep Tech is Upon Us\\nLast September, I had the honour of being the keynote speaker at the Lab2Market Deeptech Expo, where I discussed the current state of deep tech investments and commercialization. A key theme I emphasized is our growing excitement about deep tech. In fact, I would even argue that we are entering the golden age of deep tech.\\nWhy this belief? Reflecting on the significant “platform shifts” over recent decades reveals a pattern: each shift has unleashed waves of innovation. Consider the PC revolution in the late 20th century, the widespread adoption of the internet and cloud computing in the 2000s, and the mobile era in the 2010s. These shifts didn’t just create new opportunities; they fundamentally altered user behaviour, democratized access, and unlocked unprecedented value.\\nIt goes without saying that the primary beneficiaries of these shifts are the 5 billion internet users and relevant businesses. However, these shifts have also been the biggest enablers of what I term “shallow tech.”\\nTake, for example, the late 2000s. The App Store’s top charts were dominated by simplistic applications — remember those infamous fart apps?\\nThis era marked the beginning of a trend where ease of creation and user experience overshadowed the depth of innovation. Recall Instagram’s initial release as a straightforward photo-sharing app with just a few attractive filters. Similarly, the first iteration of Wattpad on the Motorola RAZR was a simple Java app, supported by a basic LAMP stack backend.\\nSubsequent early iPhone, Android, and Blackberry versions were only marginally more complex. Over time, both Instagram and Wattpad evolved into deep tech companies, driven by the massive amounts of data they amassed. However, in both cases, it only took months from concept to launch, despite taking years to become substantial businesses.\\nIn contrast, building deep tech companies from the ground up was far more challenging. Years could be spent developing the technology alone, even before considering market readiness or commercialization. This long cycle made it very hard to build companies and secure funding.\\nIn recent years, however, the landscape has begun to shift. The playbook of developing minimal tech, amassing vast data pools, and then creating a defensible moat through network effects is becoming increasingly difficult. The entrenched network effects of incumbents in both consumer and enterprise spaces make it harder for “shallow tech” startups to achieve escape velocity.\\nConversely, as we find ourselves in the midst of another significant platform shift – this time centred around AI – AI is revolutionizing how deep tech companies are started and scaled. For instance, robotic designs can now be developed through a few AI prompts. AI is also transforming chip development, allowing for significant acceleration before tape-out. In drug discovery, AI-assisted processes have condensed timelines from years to mere weeks. These are just a few examples. What once seemed like science fiction is now our reality.\\nWhile deep domain expertise in fields like robotics, chips, biotech, and other areas remains crucial, AI is now democratizing deep tech. It’s making it more accessible and is accelerating innovation across numerous sectors. We are on the cusp of a new era, one where the depth of technology plays a far bigger role in building successful companies that reshape our world.\\nThe golden age of shallow tech is over. The golden age of deep tech is upon us!\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nType your email…\\nSubscribe\\nPosted on\\nJanuary 15, 2024\\nOctober 6, 2024\\nby\\nAllen Lau\\nPosted in\\nUncategorized\\n8 Comments\\nA New Year Begins: Chasing More Olympic Gold Medals\\nIt has been three years this month since Wattpad was at the centre of\\none of the largest tech acquisitions in Canadian history\\n. At that time, as team captain, I celebrated an Olympic gold medal win along with the amazing Wattpad team.\\nToday, a year and a half has passed since I stepped aside from my CEO role, a position I held for 15 years since founding the company. Even a few years before the acquisition, I had already decided it would be my last stint as a CEO. As much as I loved my role, the idea of starting another company from scratch is not appealing to me, as I didn’t want to repeat the same journey over and over again. That’s why I said it’s\\nthe final curtain call\\nof my career as a CEO. There was no ‘never say never’ in my decision.\\nBut if you think I would simply sail into the sunset, you are mistaken. That is simply not who I am.\\nI am naturally a very curious person, always eager to understand how things work. My interests span a wide range of science and technology, from software to semiconductors, quantum to telecom, and everything in between. That’s my obsession.\\nTo me, being ‘the coach’ of a winning team is far more fulfilling than being ‘the captain’ one more time. It is a different challenge, yet it fully utilizes my knowledge, skill, and experience in scaling from 0 to 100. Moreover, the timing couldn’t be better as we are experiencing a once-in-a-decade ‘platform shift’ in the midst of global AI disruption across all industries. Having pioneered AI-driven storytelling at Wattpad, AI is in fact one of my superpowers!\\nBut why limit myself to just one team? Supporting multiple amazing teams simultaneously in building world-class, iconic tech giants and category creators is even better!\\nIt’s a long-winded way of saying that after a year and a half in my post-CEO life, I can 110% confirm that being a venture capitalist is my dream vocation. I can do this forever!\\nThe beast is now fully awakened. My burning desire for more wins has never been stronger. I feel like I am going to the Olympics again, only this time as an investor. Look forward to an amazing 2024, when TSFV and our portfolio companies bring home more gold medals.\\nHappy New Year, everyone!\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nType your email…\\nSubscribe\\nPosted on\\nJanuary 8, 2024\\nJune 2, 2024\\nby\\nAllen Lau\\nPosted in\\nventure capital\\nLeave a comment\\nIt is Time to Convince Canadians Canada is Great!\\nI was reading a\\nreport\\nfrom the investment firm LetkoBrosseau, which highlights how minimally the Canadian pension system is investing in Canada. Their headline caught my attention:\\n“Canada Has Cut Back On Investing In Its Greatest Asset – Itself.”\\nCanadian pension funds largely invest our money outside of Canada. Given Canada’s population size, it’s not unreasonable for our pension funds to look abroad, but the pendulum may have swung too far. That’s a topic for another day, however.\\nOne particular slide, slide 4, jumped out at me, presenting several not-too-fun facts:\\nCanada’s GDP per capita has steadily declined to 75% of that of the United States, down from near parity 40 years ago. One of the main reasons is Canada invests substantially less in our own startups, R&D, and our workers.\\nIn 2023, American investment per worker is 2.25x that in Canada. It was near parity 40 years ago.\\nIn R&D intensity (the ratio of a country’s R&D expenditures to its GDP), the US is at 3.5, Japan at 3.3, Germany at 3.1, the G7 average at 2.6, France at 2.4. Canada lags at 1.9.\\nCanada is underinvesting in its own startups: For every dollar Canada invests in venture capital, Israel invests $2 (despite Israel’s economy being a quarter the size of Canada’s), and the US invests $39. This means that on a per capita basis, Israel invests 8 times more than Canada, and the US 4 times more.\\nMoreover, Canadians only provide about 33% of the funding for their own startups, with the remaining 66% coming from other countries. At Wattpad, we observed a similar ratio. Our largest investors were Union Square Ventures (NYC), Khosla Ventures (Silicon Valley), OMERS (Canada), August Capital (Silicon Valley), and Tencent (Asia). As you can see, most of them are not Canadian, highlighting a limited appetite for investing in our own innovative ventures.\\nBut it’s not just about pension funds. The awareness and appetite to invest in venture capital as an asset class are significantly lower among family offices and endowments in Canada. For example, in the US, it’s not uncommon for university endowments to allocate over 20% to VC. In Canada, many are at zero or in the low single digits.\\nBut it all depends on whether you’re a glass-half-full or glass-half-empty person.\\nI’m a glass-half-full person. This is clearly a market gap, and market gaps create opportunities.\\nA decade ago, when Wattpad began raising capital from Silicon Valley, Valley VCs didn’t ask me ‘if’ I would move the company there; they asked ‘when.’ I told them, ‘I won’t move.’ They were all surprised to hear from me that building the company in Canada would be far better due to less competition for talent, paradoxically allowing us to hire and retain top talent more easily. Wattpad was one of the first to commit to scaling our company in Canada, successfully proving (to them) that a world-class tech company could be built here (obvious to me). The Wattpad team played a part in reshaping the narrative of Canada’s innovation ecosystem.\\nI am very committed to doing it again. This time, I’m not convincing people in the Valley that Canada is great; I’m convincing\\nCanadians\\nthat Canada is great! My goal is to encourage more attention towards VC as an asset class. As a VC myself, I’m putting my money where my mouth is, and I will let our results speak for themselves. For many decades, Americans and Israelis have known that investing in top-tier VCs can help create world-class, iconic companies, benefiting their local economies significantly while also generating consistent, outsized returns. Canada can undoubtedly do the same.\\nThis is my last post of the year. I’ll be “off the grid” until the new year, recharging for what promises to be a super busy 2024. Happy holidays!\\nP.S. This blog is licensed under a\\nCreative Commons Attribution 4.0 International License\\n. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.\\nType your email…\\nSubscribe\\nPosted on\\nDecember 18, 2023\\nMarch 9, 2024\\nby\\nAllen Lau\\nPosted in\\nentrepreneurship\\n,\\nventure capital\\n2 Comments\\nPosts navigation\\n←\\nOlder posts\\nAllen's Thoughts…\\nThe Journey Begins\\n/\\nProudly powered by WordPress\\nTheme: Tonal.\\nLoading Comments...\\nWrite a Comment...\\nEmail (Required)\\nName (Required)\\nWebsite\"}]" + ] + }, + "execution_count": 28, + "metadata": {}, + "output_type": "execute_result" + } + ], + "source": [ + "messages_for(ai_blog)" + ] + }, + { + "cell_type": "code", + "execution_count": 30, + "id": "444a5c45", + "metadata": {}, + "outputs": [], + "source": [ + "def summarize(url):\n", + " website = Website(url)\n", + " response = ollama.chat(\n", + " model = MODEL,\n", + " messages = messages_for(website)\n", + " )\n", + " return response['message']['content']" + ] + }, + { + "cell_type": "code", + "execution_count": 31, + "id": "f81ef372", + "metadata": {}, + "outputs": [ + { + "data": { + "text/plain": [ + "\"**Blog Post Summary:**\\n\\nThe article discusses the emergence of Artificial Intelligence (AI) as a transformative technology, mirroring the rise of the internet. The author, Allen Lau, highlights several key lessons and parallels between the two technological revolutions.\\n\\n**Key Points:**\\n\\n1. **Democratization of AI Innovation**: AI has become more accessible, allowing startups to scale with minimal initial capital, democratizing innovation.\\n2. **Disruption and Commoditization of Infrastructure**: AI's influence extends beyond preprogrammed software; it now integrates hardware and collective learning, enabling autonomous systems and real-time adaptation.\\n3. **Cost of Intelligence Declining**: The value derived from increased intelligence continues to grow, driving demand and creating opportunities for investment in early-stage ventures, growth-stage private markets, and public investments.\\n4. **Shift from Infrastructure to Applications**: Economic value shifts from infrastructure to applications, as it did with the internet.\\n5. **Opportunities Ahead**: AI is poised to bring enormous opportunities over the next decade, including a new wave of tech giants and inevitable casualties.\\n\\n**Lessons Learned:**\\n\\n1. The cost of connectivity (internet) has declined steadily while productivity gains expand demand, creating a virtuous cycle.\\n2. AI's influence extends beyond preprogrammed software; it integrates hardware and collective learning, enabling autonomous systems and real-time adaptation.\\n3. The value derived from increased intelligence continues to grow, driving demand and creating opportunities for investment.\\n\\n**Author's Perspective:**\\n\\nThe author emphasizes the importance of understanding these parallels between technological revolutions, highlighting that AI is not just a tool but a transformative platform shift that will bring about significant economic change.\\n\\n**Call-to-Action:**\\n\\nReaders are encouraged to like, comment, subscribe, and share the blog post. The author also invites readers to subscribe for access to the full archive of posts.\"" + ] + }, + "execution_count": 31, + "metadata": {}, + "output_type": "execute_result" + } + ], + "source": [ + "summarize(\"https://allensthoughts.com/2025/03/31/ais-real-revolution-is-just-beginning/\")" + ] + }, + { + "cell_type": "code", + "execution_count": 32, + "id": "001d4ff7", + "metadata": {}, + "outputs": [], + "source": [ + "def display_summary(url):\n", + " summary = summarize(url)\n", + " display(Markdown(summary))" + ] + }, + { + "cell_type": "code", + "execution_count": 33, + "id": "e07ed152", + "metadata": {}, + "outputs": [ + { + "data": { + "text/markdown": [ + "**Summary of the Blog Post**\n", + "\n", + "The blog post, written by Allen Lau, discusses the parallels between the internet revolution and the AI revolution. The author highlights three key lessons learned from these platform shifts:\n", + "\n", + "1. **Disruption and Commoditization**: Just as the internet disrupted traditional industries like media and finance, AI will disrupt industries like manufacturing and energy. The cost of infrastructure is declining, making it more accessible to startups.\n", + "2. **Democratization of Innovation**: The rise of connectivity led to an explosion of innovative startups. Similarly, AI's influence extends beyond software to hardware and machines, democratizing innovation and creating new opportunities for growth-stage ventures and early-stage startups.\n", + "3. **Value Shifts**: As with the internet, economic value shifts from infrastructure to applications over time. Today, many valuable companies are in the application layer or operate full-stack models.\n", + "\n", + "**Key Takeaways**\n", + "\n", + "* AI is not just a software problem but also a hardware and machine learning challenge.\n", + "* The cost of intelligence (AI capabilities) is declining, making it more accessible to startups.\n", + "* The next decade will bring enormous opportunities for growth-stage ventures and early-stage startups in the AI space.\n", + "* It's essential to understand the shift from infrastructure to applications and identify opportunities in both areas.\n", + "\n", + "**Conclusion**\n", + "\n", + "The author concludes that the AI revolution is just beginning, with many core technologies already in place. As Bill Gates once said, \"Most people overestimate what they can achieve in one year and underestimate what they can achieve in ten years.\" The next decade will bring significant opportunities for growth and innovation in the AI space.\n", + "\n", + "**License and Related Posts**\n", + "\n", + "The blog post is licensed under a Creative Commons Attribution 4.0 International License. Related posts are available on Allen's Thoughts, including \"Network Effect is Dead. Long Live Network Effect.\"" + ], + "text/plain": [ + "" + ] + }, + "metadata": {}, + "output_type": "display_data" + } + ], + "source": [ + "display_summary(\"https://allensthoughts.com/2025/03/31/ais-real-revolution-is-just-beginning/\")" + ] + } + ], + "metadata": { + "kernelspec": { + "display_name": "venv", + "language": "python", + "name": "python3" + }, + "language_info": { + "codemirror_mode": { + "name": "ipython", + "version": 3 + }, + "file_extension": ".py", + "mimetype": "text/x-python", + "name": "python", + "nbconvert_exporter": "python", + "pygments_lexer": "ipython3", + "version": "3.12.7" + } + }, + "nbformat": 4, + "nbformat_minor": 5 +}