Josh Miller, CEO of The Browser Company in his latest post on finally sunsetting Arc:

So when people ask how venture capital influenced us — or why we didn’t just charge for Arc and run a profitable business — I get it. They’re fair questions. But to me, they miss the forest for the trees. If the goal was to build a small, profitable company with a great team and loyal customers, we wouldn’t have chosen to try and build the successor to the web browser – the most ubiquitous piece of software there is.

I used Arc since the beta and I loved it. Arc was the first credible and ambitious attempt to reinvent web browsing that was actually able to get some traction. Unfortunately, it didn’t get enough.

Davie Pierce covered this for the story on the original announcement of Dia:

A strange thing has happened over the last couple of years, Miller says. Arc has grown fast — users quadrupled this year alone — but it has also become clear that Arc is never going to be a truly mainstream product. It’s too complicated, too different, too hard to get into. “It’s just too much novelty and change,” Miller says, “to get to the number of people we really want to get to.” User interviews and data have convinced the company that this is a power-user tool, and always will be. On the other hand, the people who use Arc tend to love Arc. They love the sidebar, they love having spaces and profiles, they love all the customization options. Generally speaking, those users have also settled into Arc — Miller says they don’t want new features as much as they just want their browser to be faster, smoother, more secure. And fair enough! So The Browser Company faced a situation many companies encounter: they had a well-liked product that was never going to be a game-changer. Rather than try to build the next thing into the current thing, and risk both alienating the people who like it and never reaching the people who don’t, the company decided to just build something new.

Many people believe that the venture capital and the “endless сhase for growth” is the culprit here. After all, The Browser Company raised $50M at a $550M valuation in 2024. I’d say these people don’t truly understand how startups and venture capital work.

Less than 0.1% of new businesses in the US receive venture capital funding. Venture capital is intended for companies that would never be able to get a bank loan. It’s an exception, not a rule, reserved only for the riskiest bets, because 90% of startups fail within 10 years. The one and only reason some crazy people are willing to fund them is they might find the next Google or at least an Uber and earn billions. The zero-marginal-cost nature of the tech industry this makes possible: once a product works, scaling it is far easier than scaling something tied to physical infrastructure (Walmart took 63 years to reach a $700B market cap).

Most startups in any given VC portfolio fail. But you don’t know which ones will, so investors place multiple bets, evaluating what it would take for each company to become a unicorn.

Fred Wilson, General Partner at Union Square Ventures, one of the best VC firms in the game, wrote in 2016:

Our first USV fund, our 2004 vintage, has turned out to be the single best VC fund that I have ever been involved in. We made 21 investments. We made money on twelve of those investments. We lost money on nine of them. And we lost our entire investment on most of those nine failed investments. The reason that fund performed so well has pretty much nothing to do with the losses. It was all about five investments in which we made 115x, 82x, 68x, 30x, and 21x. It wasn’t like we were swinging for the fences in that fund. Every single one of those 21 investments seemed like an intelligent investment decision at the time we made it. But many of them didn’t work. We lost all or almost all of our money on over 40% of our investments in that fund.

Mind me, this is the best fund of one of the best investors out there. The majority of funds don’t even beat the S&P 500. Carta published their data on the VC performance at the end of 2024:

For the 2017 vintage, for instance, median IRR fell from 16.8% as of Q4 2021 to 12.0% at the end of Q4 2024.

During that same period, the S&P grew by 2.5x—so you’d be slightly ahead if you’d gone with public markets (with full liquidity along the way).

Indeed, taking venture capital means committing to building a fast-growing product with enormous market potential. It’s not the only way to build a company, and nobody is forced to take it. In fact, anyone who’s raised funding can tell you how hard it is to convince fund managers that your startup is the next big thing.

But it might be one of the few viable paths to building a specific kind of company: one working on a truly novel product with untested technology and unclear product-market fit. One that needs to hire a full team and pay them salaries before generating revenue.

Like the Browser Company.

The same people who lament businesses for looking to grow their revenue probably care a lot about their paycheck coming on time each month. And this team has over 130 people in employment.

Arc was an extremely ambitious endeavour. The team went to rebuild the entire user interface from scratch, something neither Microsoft nor Brave were brave enough to do with their Chromium forks. But this unique interface built for the modern age is exactly what fueled Arc’s growth and recognition. Meanwhile, charging a subscription simply to use the product would kill it in the cradle since most of the growth was happening because of the word-of-mouth and all other browsers from big tech companies are free. Unfortunately, that also means they don’t care much about them.

The middle ground simply wasn’t possible.

***

There are many small myths around venture capital. People made wild statements based on the fact that people invest in companies, as if having Founders Fund on your company’s captable means Peter Thiel is personally making decisions for you.

Or you might point to Zed, an open-source Arc’s copycat as a counterexample to this story. Well, I’ve tried it out and I have to say that lifting 99% of Arc’s design still didn’t fix the natural roughness of consumer open source.

There are plenty of companies, even in software, that never raised venture capital, ranging from JetBrains to Basecamp, and a myriad of others you and I have never heard about. There are even unique companies that switched from a venture path to a cashflow-generating business like Buffer, who bought out their investors, and Gumroad, whose founder essentially got a gift from the investors who wrote the company off. Most successful venture-backed companies like Webflow or Figma raise funding on their own terms just to have a war chest.

Venture capital didn’t kill Arc. It gave us the chance to see what Arc could be. That’s more than most products ever get.

Most people tend to overvalue ideas and undervalue execution. In my experience, that holds even for many people in the tech industry. In general, this couldn’t have been further from the truth.

Now, there are some rare moments in history when getting the right idea at the right time could dramatically affect your outcome. Facebook would have issues coming up either 10 years earlier or later despite their famous ruthless execution. But it should still be true for most cases.

Thomas Edison didn’t develop an idea for an electric light bulb. On the contrary, he entered a race to invent one pretty late in the game. Many people thought of using electricity to produce light, yet nobody figured out how to do this reasonably. There were multiple attempts before him in the 1800s. Edison tried out hundreds and thousands of different combinations of construction and material until he could build a relatively affordable light bulb that could work for many hours.

Around 2014-2015, before I had my stint in venture capital, I worked in comms. We were building lots of spreadsheets that we were effectively using as databases (but with no added functionality or guard rails). Google Sheets were Excel for the web, but they didn’t copy and simplify Microsoft Access. So, I went to look for something that would allow me to create very simple databases. Effectively, a spreadsheet where you can’t just paste arbitrary data in the middle of the sheet.

I found Fieldbook. It was almost exactly what I was looking for. I explored using it for our coverage trackers, media lists, and other use cases. Even back then, it was already miles ahead of Sheets in some specific areas that I needed, but a few things felt a bit suboptimal. I tried looking again and suddenly discovered Airtable. It was an extremely similar product on the surface, but a few key details were different enough to convince me to shift to it.

Even though Day One Ventures didn’t exist yet, we were already doing angel investments. Imagine getting on that opportunity! But back then, I convinced myself that I was a clear outlier and nobody would geek out in databases for some reason. Turned out it was an enormous industry and we got the likes of Notion and Coda. Many industry SaaS solutions are just specialized databases with a couple of custom fields and integrations bolted on. The smaller the industry, the more expensive they often are. So many businesses find it easier to create something on Airtable instead of paying $250 per seat (e.g. Tesla used them to run their inventory).

There wasn’t even a better A/B test for startup outcomes. Airtable was once eyeing $10Bn valuation and downgraded to $5Bn after the pandemic and the financial crisis. Still, it is an extremely impressive result for any business. Fieldbook was only able to raise $2.9M and got acquhired by Flexport. And thankfully, its founder Jason Crawford wrote two good post-mortems (1,2). Companies went after slightly different markets, and Airtable was able to leverage its resources better. But at its core, it was the same idea.

In contrast to the utter simplicity of Slack (chat rooms), Trello (a board of cards) or Dropbox (literally just a folder), Fieldbook required people to learn a new paradigm in order to fulfill the promise that had hooked them in. We worked on this long and hard, and the team did a great job at digging through many layers of incidental complexity, but in the end we hit a bedrock of essential complexity that we didn’t have the resources to drill through.

In contrast, our closest competitor, Airtable, seems to be getting more traction. Early on, their product focus was subtly different, with more emphasis on mobile experience and collaboration features than on data modeling or formulas. These aren’t the features that were most important to the users we talked to, but they’re easier to understand, and I suspect they made both marketing and onboarding easier for Airtable—maybe just enough to make all the difference.

Because it’s the execution that truly matters. If you or I got teleported to 2004 with an idea for Facebook, I doubt we’d be able to create it.

Almost every tech startup that raised funding from venture capital funds periodically sends them an investor update to showcase the latest numbers, trends and just generally keep them aligned with the direction the company took. When I was working at Day One Ventures I’ve seen hundreds of these emails of various quality. Since my primary job right now is helping startups and VC firms communicate better internally and externally I’d love to give my own perspective on writing investor updates that help both you and your investors.

Investor updates allow to build a sense of connection and show your momentum to your current and prospective investors. As a founder you often want your current investors to participate in further funding rounds (right up until the point Andreessen Horowitz steps in and want the entire round for themselves). You also might be talking with some prospective investors who aren’t ready to make the move yet. It’s quite customary to include the warmest of these investors onto your mailing list as well. It’s much easier to make an investment decision based on a few data points you were able to witness yourself and not just placed on a chart.

All the best updates I saw had these things in common:

1. Had a simple format
2. Came on a regular cadence
3. Pushed the ever-changing startup’s narrative
4. Showed both absolute and relative numbers
5. Engaged the investors to keep them closer
6. Gave enough information without being too long

Let’s dig into all of these aspects. Or feel free to jump to an example in the end.

Also, let’s define the applicability before it’s not too late. I’d suppose it might be helpful to very early-stage companies until their Series B tops. Also, some of the most successful investments we made haven’t ever had a regular update. Of course you can live without it, it’s up to you.

Format

An investor update isn’t a board meeting. You don’t need to have a deck nor you want to create a custom complicated formatting for your emails.

Always remember that in the majority of the cases your investors will be reading that on their phone sitting in an Uber. I admit, this particular piece of advice might not be that true in 2020 with the pandemic going on – but it’s generally applicable whenever you do something for busy people to review.

Use a plain text email. You can add a few visuals, like photos or charts, but nothing excessive. If you have a very small & loyal group of investors you might just cc all of them and let them engage in a conversation. Anything more and you can put them in a bcc. It’s primitive but it does the job, and believe me, the investors are much more interested in the numbers and facts than the technical means you used. They certainly don’t want you to spend too much time.

The best option is to use a basic newsletter service that would allow you to track the open rate and put the first name of each investor right in the greeting. Make it personal without making it too complicated.

Cadence

You want to keep investors updated but you don’t want to turn it into a full-time job. Especially at the beginning, that’s not the part that you can simply outsource.

I’ve seen companies sending weekly updates but I doubt it helps except maybe for very early-stage companies with inexperienced founders. Monthly is the best option for most startups probably until around Series A/B. The amount of information that needs to be processed for a proper update rises a lot and your shareholders already believe that the company won’t suddenly die.

It’s okay to be slightly off your scheduled time, especially in the early days, but it might cause you to decide to drop some updates altogether – there are always better things to do, aren’t there? And then it’s just like going to a gym where missing it a few times might lead to you visiting it three times a month.

Everyone knows you’re busy. Find a length/complexity level that works for you and stick with it.

Story

I’ve seen founders put their complete roadmaps in an update, copying their spreadsheets or taking screens from some project management software. Your job isn’t to dump your Asana and JIRA on people. Your job is to process all that information and build a narrative around it, presenting the most important things in the way that helps you.

Investors put money in a startup because of its story. Even if you had crazy charts of WoW growth, everyone understands that it might die out or end up being not enough. You’re selling a vision of some distant future.

Early-stage companies often change their product and their business as they learn more about the market. Use every opportunity to remind investors about your potential and explain each current iteration of your vision that comes around.

Figures & Numbers

One of the most common mistakes I saw was omitting the real numbers behind the business. If you do that you either show that you are hiding them or look unprofessional.

Each company has a set of key numbers that would describe its performance. Some are standard: revenue, burn rate, the number of customers. Some depend on the industry: # of supply providers, cities/states covered, followers, couriers, etc.

Show both the absolute and relative figures, for instance, how much revenue you had this month and how that relates to the previous month. If you have enough data and in a seasonal business it might be more useful to show how it relates to the previous year or your initial plan.

Engage!

Each investor update is an opportunity to talk to your current and prospective investors. First, have a clear ask in the end highlighting the things your investors can help you with. It should only be a few things, don’t lose the focus by listing everything you have issues with.

For example, you can say that you’re looking to hire a full-stack developer with experience building fintech applications and looking for introductions to a specific type of people at US banks.

Create FOMO. Mention and thank the people who helped you earlier. By doing that you’re creating an incentive for others to materially help you. All of us are vain..

Structure & Length

Here’s the structure I’d suggest you follow.

1. Greet the investor(s)
2. Remind what you’re building
3. Tell about the most notable things that happened since the last update
4. Have a short list of bullet points with the most important numbers about your business
5. Thank people who helped you the most by their names
6. Ask to help you with one or two things where your networked investors might be useful

It’s natural to feel the need to hide the bad things that happened – or good things that didn’t. Don’t do that, it’s quite easy to grasp after a few emails from you. People understand how startups work and that there will be setbacks. That’s where your input is required. Build a narrative around that. Write about that with high energy, explain what your hypothesis was, what really happened, and what you’re going to do. The best investor updates I’ve seen didn’t shy away from problems.

Example

I’d love to share a few real examples of great investor updates but I understand why the founders I talked to weren’t particularly happy about that. Unfortunately, that leads to a clear lack of good templates online. It’s easier to find examples of great startup decks.

As an alternative, I drafted this update for an imaginary company utilizing the best practices I saw.

Hi Marc,

Wanted to share an update for September. It was a roller coaster of a month!

Over the past three years we’ve built Redd into the most powerful personalization engine for news content. We now have over 25,000 paid subscribers, double of what we had just 6 months ago!

Redd’s mission is to build the only news digest people would have to read. We help busy professionals stay on top of their field without consuming too much of their time – as if a dedicated analyst was crawling the Internet for them. Right now our PMF score is at 36% and we hope to drastically increase it with the new features we’ve been brewing.

Stats

• MRR: $126k (+9% MoM)
• Paid Subscribers: 51,203 (+11% MoM)
• Burn: $174k (+14% MoM)
• Headcount: 16 (+2)
• Runway: 11 months

Highlights

• We’re about to launch our B2B offering for employees at large organizations and expect it to significantly increase the number of subscribers and diversify our acquisition channels.
• We’ve revamped large parts of the recommendation engine under the hood and seeing higher satisfaction from its results.
• The referral program we launched four months ago is now bringing at least 40% of new sign-ups.

Setbacks

• We’re still seeing lower quality of subscribers from our paid acquisition efforts and we believe that in order to scale faster we’d have to crack this.
• We’ve spent a bit too much time on the idea of running multiple focused digests and will be focusing on one per day with separate topics-related sections.

Special thanks to Phil Dunphy, who helped us hire two amazing designers, and Gloria Delgado for all the enterprise sales advice she gave us.

Asks

• We’re still looking for data scientists with experience in recommendation engines. Feel free to share our job description with relevant people.
• We’d love to talk to editors at major news organizations to learn more on how they build their main page.