1/6: I've been spending a lot of time this past year thinking about inflation in the US. There are skeptics and there are some that believe the signs and portents are here.
(I think it's already here and that our systems aren't tuned to measure it correctly)
A few fun stats:
2/6: The highest inflation rate ever observed in the US was 29.78% in 1778.
Since the introduction of the CPI, the highest inflation rate observed in the US was 19.66% in 1917.
3/6: The most dramatic deflationary period in U.S. history took place between 1930 and 1933, during the Great Depression.
The closest the United States has ever gotten to hyperinflation was during the Civil War (1860–1865) and only in the Confederate states.
4/6: The Great Inflation was the defining macroeconomic period of the second half of the twentieth century. Lasting from 1965 to 1982, it forced a complete restructuring of Fed and central bank policies.
5/6: In 1964, inflation was just over 1% and had been at this level for a sustained period. Inflation began moving upward in the mid-1960s and broke 14% percent in 1980. It eventually declined to average about 3.5% percent in the 2nd half of the 1980s.
6/6: In case you're wondering how compounding small levels of inflation over time is your mortal enemy if you're a saver, consider this:
It would take $31.14 of today's dollars to buy $1 of goods back in 1900. A mere 2.88% compound rate over 121 years ends up hurting!
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1/33: So you want to be a top performing #VC investor. Here are six exercises you can practice as you evaluate #startups that will hone your skills, establish frameworks, and help identify great investments.
Read on if you’re interested:
2/33: Exercise 1: Describe the company’s magical experience
After reading a deck or hearing a pitch, can you easily articulate who their perfect customer is and how they’d interact with the company’s product/service in a perfect manner?
3/33: Only after you understand the experience that a company is trying to create can you evaluate it against currently available options. If the new experience is truly magical and differentiated then it might be worth your time.
1/25: It was amazing to see the reaction to the thread by @dunkhippo33 about “why ownership doesn’t matter for early stage investing”. There are great nuggets in her thread but I have a very different perspective and counter-argument.
The case for why ownership DOES matter:
2/25: The main argument that @dunkhippo33 makes is that “multiples on invested capital” is all that matters. While this is a truism, the argument glosses over fund dynamics and how much easier it is to produce great fund returns with a concentrated vs dispersed portfolio.
3/25: Let’s start with the typical distribution of outcomes in an early stage fund. Most investments in the fund end up doing “OK” or they completely flame out. The bottom 75-90% of the investments will end up collectively returning 0.5-1.0X to the fund.
1/19: I asked a number of institutional LPs that invest in VC funds what they thought about the recent rise in exit valuations and if the resulting VC results were going to impact their view of managers and allocations.
You might be surprised about what they said! Unpacked:
2/19: Theme #1: A significant number of VC funds are posting better than expected returns driven partially by companies in their portfolios going public in today’s crazy environment. The LPs have an interesting view of what this means/how it impacts their view of specific VCs.
3/19: Many funds that were forecasted to deliver 1.5X MOIC are going to end up as 3X+ MOIC funds due to today’s late stage private and public market valuations. They love the returns but care about how they were generated as much as the actual outcome.
1/6: It seems to be a trend that’s hit peak levels during the pandemic, but people in the #startup ecosystem are throwing themselves into their jobs to the detriment of everything else in their lives. It reminds me of a funny story.
2/6: One day, a startup developer was walking down a road when a frog crossed his path. The frog hopped around to get his attention. The developer stopped out of curiosity and was amazed when the frog spoke. "If you kiss me, I will turn into a beautiful princess."
3/6: The developer picked up the frog and placed it in his pocket. The frog was confused and assumed the message wasn’t heard. So the frog went one step further. "If you kiss me, I’ll turn into a beautiful princess and we can go out on the town and have fun together.”
1/25: It’s been 6-months since I posted a thread about the trend of early stage companies raising of 2-3 back-to-back rounds with minimal progress in-between. I asked some amazing VCs whether or not anything has changed since. They think it’s gotten worse. Their thoughts:
2/25: We still have the conversation with Founders every few weeks if not more often: “How much can you learn how quickly for how much money?” This is even true for first equity rounds which are the bigger problem for us right now. (@iamjakestream)
3/25: The why: Many large VCs are incented to put money to work because in they’re playing an AUM game and need to show their LPs they have access to all the “hot companies”. (@iamjakestream)
1/16: One business model I talk about frequently with Founders is underbuilding their software as a strategy.
It’s a really powerful concept that can help a product stand out in a crowded market and turbo-charge growth. Unpacked 👇:
2/16: It’s difficult to deny that just about everyone is a user of software on a daily basis. Phones and Computers are just Operating Systems + Pre-Loaded Apps + Downloaded Apps. Apps include streaming services, browsers, spreadsheets and POS software. The list goes on and on.
3/16: But ask yourself this: How many functions do you typically use in the software/apps that you interact with most? Streaming services: Search, create playlists, play. POS software: Add item descriptions and pricing, ring up orders, view reports.