Tyler Tringas Profile picture
Feb 19 17 tweets 4 min read
I think folks are sleeping on one of the biggest and most obvious "zero interest rate phenomena" that's going to get vaporized slowly and then all at once: Andreessen Horowitz

Here's my thesis:
In recent years a16z built an incredible machine to accumulate "assets under management" (AUM) to the tune of tens of billions of dollars. Nominally they were supposed to be doing venture capital—investing in startups and entrepreneurs—but really they were making a different play
As I laid out in 2021, they (along w hedge funds like Tiger) identified there were vast pools of capital searching for *any* returns in the zero-interest-rate wasteland and came up with a fundamentally different strategy from the traditional VC model
Instead of seeking "home run" returns, they'd move giant piles of cash into growth-stage tech companies. Instead of trying to get a sensible valuation so they could get a huge return, they'd just try to put in 10s/100s of millions at whatever valuation got the deal done quickly
They led the charge on the "lol valuations don't matter" approach that defined 2019-2022 venture capital with deals like the one valuing Clubhouse at $4B or Hopin at $6B. businessinsider.com/clubhouse-andr…
Along the way, they probably nuked the returns of just about every seed fund as well, which is another story entirely
But now they face two massive risks (1) their most recent vintage funds (which represent the vast majority of all capital ever invested by the firm) are probably in huge trouble & (2) their AUM aggregation pitch makes zero sense when you can get 4% yield on savings accounts again
In the chart above (from Pitchbook) you can see the vast majority of all the capital ever raised by the firm spans 2019-2022, with much of that likely invested over that period. Those funds contain huge bets on (1) crypto (2) late-stage tech "unicorns"
a16z was early and all-in on crypto. Their first $300m crypto fund, invested at the start of the bubble, was reported to have generated eye-popping returns, which they parlayed into raising and investing $7B+ more in crypto funds in a giant double-or-nothing bet
Time will tell, but personally, I think those massive crypto funds are toast. web3 is dead, and now that we've had the super bowl ads phase of the hype cycle, there just isn't another wave of greater fools coming to pump up prices and end the crypto winter.
Second, you can see in this chart, they massively shifted their allocation to investing in later-stage Series B-G venture rounds, meaning they took huge positions in startups valued at billions or tens of billions.
It's now consensus that those valuations made no sense & equity in similar startups are regularly trading in secondary markets at huge 50%+ discounts to their last VC round. Only the fact that these are private market portfolios will delay the actual realization of those losses.
The nature of private markets means it will take some time for this to all shake out, but the fate of the billions invested in these two strategies (which again is the vast majority of all capital ever invested by the firm) is probably locked in.
At the same time, demand is cooling for the style of money-firehosing the firm developed a specialization in. Less risky assets offer attractive yields again, and mega pools of capital are likely souring on this model as interest rates rise.
Case in point: a16z's two closest peers in the mega-VC strategy...

Tiger is scaling back its venture fundraising wsj.com/articles/tiger…

And Sequoia voluntarily cut management fees in anticipation of a much slower market: reuters.com/business/finan…
The massive stream of fees they've accumulated from tens of billions in AUM can certainly sustain the firm for a very long time, but it's hard for me to see how this doesn't end, like so many aspects of the fever dream of zero interest rates, gradually then suddenly
that being said, they have the most valuable asset in venture capital: being considered a name brand "tier 1" firm. Which in a world of very slow feedback loops, matters more than anything else.
So maybe I'll be right about the facts but wrong about the outcome. We'll see.

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More from @tylertringas

Feb 20
Ok folks, Feb marks 4 years since we started investing at @calmfund and it's time for a big update thread. It's been a challenging but insightful few quarters but I'm absolutely fired up about the road ahead. I'll cover what we've been up to, our strategy & the game plan for 2023
If you're new here, @calmfund is a fund built to support founders of calm companies that are capital efficient, grow sustainably, & built for the long term. Here is an overview of our high level investment thesis (we used to be called @earnestcapital btw):
"Calm company" is both an investing strategy and a mindset for founders looking to build a company in a manner that I call "being long-term ambitious" ... here are some of the key principles to give you a sense of what it means:
Read 32 tweets
Feb 17
Good morning, AI-based tools will be a massive opportunity for calm companies, but a dud for VC. Here's my thesis:
1/ this market map will become an iconic case study of "was a feature not a product" with all of the value ultimately being split between the actual core AI platforms in the top left corner and incumbent software tools with distribution (mostly not shown) who will add AI features
2/ It's almost a meme/joke at this point, but the vast majority of these products are just (a) an API call to GPT-3 or similar platforms and (b) a thin layer of "prompt engineering"

This is the most nonexistent moat in the history of tech waves with no clear way to improve
Read 18 tweets
Nov 24, 2022
✨ Cultivating a Calm Company ✨
A running thread of the most important things I have learned about building a calm company and being long-term ambitious as an entrepreneur. Let's go 🙏👇
Note: I plan to expand on each of these in short essay form. Subscribe to the @calmfund email list to receive them: tyler-tringas.ck.page/94b41c3e91
Chaos inevitably happens in business. Sometimes the answer is taming the chaos, sometimes you just need to get comfortable in the chaos.
Read 31 tweets
Nov 22, 2022
People keep asking me "why aren't more investors using a strategy similar to @calmfund's"... the answer is very simple: it is *unbelievably* difficult to raise capital for an early stage fund that doesn't fit the traditional VC model. That's it.
For our first 3 small funds we had to raise money from nearly 200 individuals. I had to write 200,000 words of content and build a fully automated fundraising funnel such that for Funds 2 & 3, I didn't even speak to >half of the investors before they committed.
But those funds were "sub-scale" (<$10m)... in order to really address the market need, build a fully staffed team, and get the best returns for our LPs, we need to raise substantially larger funds (like $100m... still tiny in the scheme of things)
Read 8 tweets
Nov 22, 2022
I looked at dozens (100s?) of crypto/web3 startups and projects the past few years. I felt obligated to not miss an opportunity for my LPs. With each one I asked a simple question: "does this do what it says it does?" and every. single. time. the answer was "it does not."
I'm talking about technical and logical due diligence of the basic claims being made about the technology with regard to utility, security, and decentralization. And every time I did a little homework, the answer was an obvious no.
I'm not a technical wizard or domain expert, but I (a) tried to learn as much as I good (b) asked dumb questions (c) paid attention to technical experts and (d) just thought hard about it a little bit. Turns out that was far more than 99% of investors were doing.
Read 5 tweets
Nov 17, 2022
Making Twitter truly great feels like an empathy challenge, not a technical one.
I don’t really see how being hardcore yields better results here like it would launching rockets?
Besides squashing crypto-spam-bots, what other technical solutions would make twitter materially better?
😂 Image
Read 4 tweets

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