Not Boring should incubate companies
A pitch to Packy Mccormick to conceive and launch vertical integrators via Not Boring
Hello readers!
As you know, the mission of this substack is to help normal founders figure out how to build ambitious, meaningful companies. All my posts are geared towards answering this question
How do we help normal founders anticipate the future, act on this knowledge and build meaningful, impactful companies?”
Today’s essay is directed towards this goal but is a bit different.
I want to pitch Packy Mccormick a concept called Not Boring Labs, an incubator to build vertical integrators within the Not Boring ecosystem. As a founder who just finished his first company and wants to build a vertical integrator for his 2nd company, I wish something like Not Boring Labs existed so I could participate in it. Rather than sit on the sidelines, I decided to just sketch the idea and pitch it.
For context, Not Boring is my favorite publication because they popularized an idea called vertical integrators, which are full-stack hardware-software companies that focus on atoms-based industries (energy, construction). Think Ford, GE, Boeing, SpaceX, Anduril.
My goal with this essay is 3-fold
Reach Packy Mccormick and have him consider the Not Boring Labs
Argue how other founders & VCs have successfully built similar concepts
Show how Not Boring Labs will help drive Not Boring’s existing moat
Full disclosure, I am not affiliated with Not Boring and this concept doesn’t exist yet.
Not Boring labs
For 5 years, I’ve been pondering this question
Is it possible to dramatically improve the world’s ability to launch vertical integrators? What could enable that?
In some form, this theme has always appeared in my writing
how to predict the rise of a $100B vertically-integrated startup
a customer discovery process to learn new domains and spot opportunities
One day, I read how Sutter Hill Ventures incubates companies like Snowflake. Then it hit me. The answer is incubation.
Inspired by the incubation model of SutterHill and Greylock, I believe Not Boring has the opportunity to build one of the best vertical-integrator incubators of our generation and capture out-sized returns.
Not Boring’s current moat
Not Boring’s is making a bet that techno-industrials (aka vertical integrators) will drive the biggest venture outcomes in the next decade. As such, Not Boring has built a strong brand around this thesis through its content and portfolio.
Content
Investment Portfolio
And lots of other companies I’m excited by
Look at these awesome deep dives
Not Boring aims to be the world’s expert at enabling vertical integrators and it does this by researching, writing and investing in this niche of startups. By publishing content on how vertical integrators approach things like idea identification, business strategy and recruiting, Not Boring is has become to go-to-source on how vertical integrators are conceived and built. In essence, Not Boring is democratizing the knowledge of how to build vertical integrators, which serves founders who are hungry for this knowledge. So when these founders start to build, they will naturally reach out to partner with Not Boring for 2 reasons.
Not Boring is top-of-mind
Not Boring has a network of other vertical-integrator founders to learn from
The fundamental ingredient for Not Boring’s success is insight on how vertical integrators are built. If Not Boring can continue to publish insights that give founders intuition on how to build vertical integrators and insights that improve the success-rate of their vertical integrators, it will continue to have great deal flow and maintain its moat.
Fortifying the moat with incubation
Not Boring has established its niche (200k+ subscribers) and the venture community regularly talks about Not Boring. So how can it go even further? How can Not Boring go from top 10 VC-firm for vertical integrators to the absolute best?
The foundation of Not Boring’s moat is insight on how vertical integrators are built. So the answer is innovate on insight (deeper insights, better insights, more insights faster).
To do this, Not Boring should start to incubate vertical integrators. By going through the process of actually launching vertical integrators, it will start to uncover insights to a new set of questions
How do you distinguish which sectors of the economy are promising for rebuilding?
How do you research and find the right problems for vertical integrators?
How do you spin up founding teams to execute on an idea once the problem is identified?
What do the first 90 days, 180 days, 360 days for a new vertical integrator look like?
The answers for all these questions exist, but no one has put this together in a cohesive format that furthers the world’s understanding.
Why incubation will work
By now, we’ve seen numerous examples of companies that VCs have incubated that went on to be successful.
Varda, incubated by Founders Fund, aims to create space-based manufacturing facilities. After building a perspective on manufacturing drugs in microgravity, they recruited a team of ex-SpaceX engineers and raised a $9m series A. Recently, they raised $90M in a Series B.
Kurion, incubated by Lux Capital, focused on nuclear waste management technology. They explored multiple energy verticals including solar, liquid fuels before they sold to Veolia for $350M and generated a 43x return.
Snowflake, incubated by Sutter Hill Ventures, is now a $60B company
Palo Alto Networks ($126B)
Workday ($71B)
Snorkel AI ($1B)
Is there any reason why incubation won’t work for vertical integrators? Why can’t Not Boring be the first to dominate this niche for vertical integrators?
Why now for incubation
There are two trends that form the “why now” reasons for Not Boring
Not Boring has built specific knowledge for building vertical integrators
The number of in-transition, capable founders is increasing
This presents an interesting opportunity for Not Boring to build world-class education on how to build vertical integrators (similar to what YC did for software startups). In doing so, Not Boring could catalyze the creation of many more vertical integrators and capture the upside.
Vertical integrator knowledge
I believe there are certain class of startups where it is easier to manufacture PMF; vertical integrators fall under this class of startup.
Kevin Kwok noted this in his piece on how Sutter Hill incubates companies
Unlike consumer, traditional enterprise markets lend themselves more naturally to deterministic and repeatable success. There’s a small handful of VCs who have clearly shown they can succeed repeatedly and whose approaches and playbooks are legible enough to imply it’s not a fluke. Speiser is one of them.
Something Packy said in The Good Things about Hard Things hints at this
In fact we’ve seen this insight play out repeatedly
Elon Musk built SpaceX ($250B, reusable rockets) (not a space expert according to Jim Cantrell). Before this, Musk built a fintech startup.
Eric Lefkofsky built Tempus ($10B, cancer diagnostics & testing). Before this Lefkofsky built an e-commerce startup.
Brad Keywell built Uptake ($2B, industrial monitoring tools). Before this, Keywell built a media-startup.
None of these founders were domain experts, which means they figured out an effective research process to learn about important industries and build perspectives on where the innovation lies. Because they have done this repeatedly, we know it’s not a fluke and there is some process for researching ideas that works for vertical integrators.
I can’t say for certain, but my intuition is that this research process is based on a rare combination of spotting emerging trends and being well-connected enough to talk to 100s of experts to get smart about a field.
Consider the founding story of Kurion as told by Lux founder Josh Wolfe,
The takeaway is that there exists a science in finding ideas for vertical integrators, a science that can be discovered and taught to the next generation of founders. These data points leave me with 2 burning questions.
What does world-class research look like for finding vertical integrator ideas? Can we teach this to founders?
What tools can Not Boring Labs create to enable founders to ideate well and search for PMF effectively? Can these tools increase the chance at hitting PMF?
I don’t know the answer to these two questions, but I’m going the guess the answer is yes. And if the answer is yes, Not Boring can acquire this knowledge and use it to launch more companies the same way the best incubators/founders do (e.g. Sutterhill, Elon, Eric, Brad).
I’d even argue Not Boring already has an unfair advantage. Because Not Boring has seen dozens of vertical integrators and interviewed the founders on how they navigated the idea maze (Base, Hadrian, Varda, EarthAI, etc), it already has a starting point for taking this knowledge to bootstrap its own process for identifying new vertical-integrator ideas. It’s simply missing a cohort of capable founders that are willing to get their hands dirty in this pre-PMF phase, founders that can help refine and improve this playbook.
The number of in-transition founders is growing
The number of capable founders is growing, but they’re being underutilized. This presents an opportunity for Not Boring to build world-class education on how to build vertical integrators (similar to what YC did for software startups). In doing so, Not Boring could catalyze the creation of many more vertical integrators and capture the upside. As the number of VC deals increase, more companies are being built. As a result, the world is naturally training more and more people on how to conceive, build and run companies.
Because more companies are being created, more companies will also shut-down (this is just the nature of startups).
Why is this relevant?
Every founder that exits or shuts down will be in a transition-period. These in-transition founders are among the most capable founders because they’ve already gone through their first startup and made their mistakes.
The number of in-transition founders is increasing. These founders will be like me — capable, but lost and yearning direction. A majority of them will be asking this question.
As a founder who just exited, how can I find the next thing to build?
A percentage of those founders will have their own ideas. A percentage of those founders will want to get corporate jobs. But a percentage of those founders will also be like me, eager to find a meaningful problem and build a vertical integrator, but no idea how to start. These in-transition founders are looking for a home.
Not Boring can be that home.
The why now argument
In short, my “why now” argument for Not Boring Labs stems from 2 observations
Not Boring has silently acquired valuable knowledge on how to conceive and launch vertical integrators
The number of good-fit founders for vertical integrators is increasing
What’s preventing many good-fit founders from starting vertical integrators is not a lack of ambition or desire, but friction in starting a company. By building a product that democratizes the knowledge of launching vertical integrators and tooling to enables easier PMF-discovery, Not Boring can increase the number of vertical integrators the world sees. This product is called Not Boring Labs.
Why I wrote this essay
Ever since reading Packy’s Better Tools, Bigger Companies, I felt like someone voiced exactly what was in my head 5 years ago when I first became an entrepreneur.
I founded basis/Downtobid (YC S19), construction-tech because I wanted to solve the world’s housing shortage. Previously, I worked in ML for self-driving cars at Uber so I had 0 background in construction.
Downtobid ultimately did not find great PMF ($600k ARR, profitable). As I wind down, I realized I made 1 major mistake. We tried to build software for an atoms-based industry, but because our software did not materially change the cost-physics of the industry, it was impossible for us to have a large impact. If I could redo it, I’d build a vertical integrator similar to Cuby. Because I was a 1st time entrepreneur, I instead picked SaaS because it was more capital efficient, hoping that I could pivot into a vertical integrator once we found PMF and learned the industry. Unfortunately, that PMF never came and I didn’t have a good contingency plan.
I share this story because my long-term mission is to build my own vertical integrators or help launch many vertical integrators. To kick this off, I want to build something like Not Boring Labs.
Why this is worth building
There’s a lot to figure out to make Not Boring Labs a reality.
How do we build a research process that correctly identifies good vertical integrators?
How do we build an insane talent network and train future founders to build vertical integrators?
How do we learn from the best repeat entrepreneurs of our generation and use their knowledge to train the next generation of entrepreneurs?
Building an incubator that launches vertical integrators is highly improbable but if it works it will be incredibly meaningful and inspiring - so let’s give this a shot!
Packy - if you’re reading this! Let’s chat!