Category Archives: Capital

Montage Sequence #2 – bubbles, loonshots and the OA

Some great stuff in this issue.

This I think about a lot especially in the context of SEAsia:

4/ Finally, I was struck by how all the companies mentioned in the “bubble” pieces – often in reaction to the sticker shock of what seemed like a large valuation back then – went on to bigger and bigger valuations as time went on, often many times over. Which leads me to wonder:
a) why did so many commentators miss the growth that was going to happen to these companies?
b) is the same mistake being made now in the narrative around valuations?

Now I want this book :: Loonshots.

I am still struggling to like OA. 😉

Montage Sequence #2 – bubbles, loonshots and the OA

Amazon bought Eero for $97 million and employees still got screwed

More from the Verge :: https://www.theverge.com/2019/4/5/18297619/amazon-eero-price-fire-sale-mesh-wi-fi-buyout

Not all exits are exits. 😉

Hardware is hard.

Now on to the mechanics.

Amazon bought Eero for $97 million and employees still got screwed

Hard to know all the specifics but this is a common tactic when a large company acquires a smaller one. One way to buy something is pay enough money for it that all the investors, employees and founders make money. This could be a considered a normal deal but when a company isn’t doing well and owes money then lots of other things could happen.

What the deal looks like is Amazon paid just enough to get a deal approved and then incentivized the founders to take a lower overall price but made it up to them in their new employee deal. VC’s are pretty aware of this and early stage paperwork is sometimes drafted that tries to deal with this but in later stages an exit is sometimes an exit. 

Looks like only real early investors made some money and the core team getting spiffed to stay at Amazon will do okay.

A bunch of other investors and even worse, employees are getting screwed. Looks like some employees will have paid for their options and have nothing but losses to show for it. Options can be wicked, especially in the USA – where one could even being paying AMT on their options but never realize a gain.

The way the USA deals with options sucks since the core premise is they can tax you on unrealized gains. Painful.

Again – I don’t know the specifics but if the founders or core execs are eventually going to be minted and a bunch of rank & file got screwed – that’s bad. But let’s be honest. Lay that blame on the founders – not Amazon or the VC’s since the founders ultimately accept the deal and they can negotiate or even give their pool or bonuses to the rank and file. That’s at their discretion.

Startups are hard and this is probably a more normal story than the ones of glorious riches and fame that we always seem to hear about.

Andreessen Horowitz Is Blowing Up The Venture Capital Model (Again)

Their new move is intense.

Andreessen Horowitz Is Blowing Up The Venture Capital Model (Again):

And so Andreessen and Horowitz, who rank 55th and 73rd, respectively, on this year’s Forbes Midas List, intend to be disagreeable themselves. They just finished raising a soon-to-be announced $2 billion fund (bringing total assets under management to nearly $10 billion) to write even bigger checks for portfolio companies and unicorns the firm missed the first time. More aggressively, they tell Forbes that they are registering their entire firm—all 150 people—as financial advisors, renouncing Andreessen Horowitz’s status as a venture capital firm entirely.

Why? Well, venture capitalists have long traded a lack of Wall Street-style oversight for the promise that they invest mainly in new shares of private companies. It was a tradeoff firms gladly made—until the age of crypto, a type of high-risk investment the SEC says requires more oversight. So be it, says Andreessen Horowitz. By renouncing its venture capital status, it’ll be able to go deeper on riskier bets: If the firm wants to put $1 billion into cryptocurrency or tokens, or buy unlimited shares in public companies or from other investors, it can. And in doing so, the thinking goes, it’ll again make other firms feel like they have one hand tied behind their back.

The Valuation vs. Traction Matrix – Jason Calacanis

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Image from here :: The Valuation vs. Traction Matrix – Jason Calacanis

Great post. Will try to dive into it more later.

This is good though:

Startup valuations are not science, but they’re not magic either. It’s a bit of alchemy, combined with bizarre marketplace dynamics like famous founders getting 3x the price for half the traction, or Y Combinator hosting a gigantic demo day in order to create FOMO with novice investors who are explicitly told not to think things through and just cut a big check (literally, that’s their bad advice to investors).

Transactional Angst

I think nary a week goes by where someone doesn’t ask me how VC is going and when am I going back. I guess back means to return to building something, joining a company or working on a product.

It’s normally something that requires a longer answer but usually I say ask me in 10 years. That’s cause it will probably take me that long to see if I am any good at this VC thing. 

That being said I think people ask this due to the very nature of VC being somewhat transactional and maybe building something is more of a co-op approach since there are teams involved all working together to ship. It is a sentiment I think about a lot.

Saw this tweet the other day and was thinking about it even more:

However I always consider that there may be a better way but I am not saying I discovered it but highlighting that each and every craftsman in the world can approach their craft with a new frame of mind. With VC I think about what that means often. 

Let me run down a few areas I think as a VC I can be more like the product person still living inside me:

  • Be open and transparent. Of course not everyone reacts well to this but I find a certain amount of it works
  • Be humble 
  • Be helpful
  • Have empathy for the founder and the other people/organizations in the mix
  • Try to write often enough so people can see what’s on my mind and how I feel about something
  • Continue to focus on doing the right thing – it may not payoff immediately but I believe it will win in the end
  • Learn to listen more – speak less. I am terrible at this but I am very conscious of improving it. That’s a start right? 😉
  • Foster an ecosystem since everyone will benefit (https://alpha.seedplus.com)
  • Be company friendly. This is a long one to explain but I think the right folks now what I mean

I don’t intend to go back as some people call it since I think I moved forward while still getting better at my craft. I see my craft as helping build great companies by being their investor and whatever else they need me to be while I am in that role. 

Pretty sure that is similar to what I did as a product person but I am not an employee or a founder.

However the North Star feels similar to me.

Your mileage may vary.