Slanging bits
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Not Jewish, but 10/7 shook me harder than any recent global event. A harsh reminder of pro-civilization vs anti-civilization and a culture of progress vs a culture of barbarism. Proud Zionist.
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There is so much equity trapped in late stage tech. Public markets don't want it. PE doesn't want it.
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If you surround a guy, throw shit at him, put your hands on him you deserve to get knocked the fuck out.
JUST IN: Full footage released of the NYC banker who went viral last month for hitting someone from a pride event.
Jonathan Kaye went viral after a short clip showed him KO'ing a person in Brooklyn, however the video didn't show the full story.
On Monday, Kaye turned himself in on second and third degree assault charges.
New footage shows a group of pro-Palestine LGBTQers taunting Kaye before throwing liquid at him.
Kaye was then hit in the face with a bottle before he charged at the person, knocking them to the ground.
Kaye has since resigned from Moelis & Co. investment bank.
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The AI labs are basically like 2005 Google in terms of comp, employee perks, etc. But, unlike Google they are not a monopoly, have upside down unit economics, and are in maybe the most capital intensive red queen’s race in economic history.
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Of course that’s your contention, you’re a first year macro tourist. You’ve just finished a podcast, Forward Guidance probably, so naturally that’s what you’ll believe until next month when you get to Doomberg and get convinced that the German industrial complex will be unable..
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Every fintech superapp seems to start with a mission of financial inclusion and end shilling high margin credit cards and crypto trading
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if you'd valued google at $500B in 2007 on its $15B or so of revenue your IRR would have been like 10%...gotta really dream the dream on openAI/anthropic in these recent rounds
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Dinner with a few senior tech people last couple nights:
1. Q1 is trending as shit
2. RIF just the beginning. Everyone culling low performers aggressively
3. WFH might be dead or at least kicked down the stairs in a year
4. SF is back babayyy
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the biggest red flag on Kamala is she went to Hastings for law school despite having well-off/educated parents. prob means she is dumb.
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Growth/crossover stage shut because you can either own
Ramp at $100M ARR and $8B or BILL at $600M and $16B.
FRSH at $450M and $3.5B or rippling at <$100M and $6B.
CFLT at $500M and $8B or CockroachDB at $80M and $5B.
Notion at $150M and $10B vs Monday at $400M and $5B.
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If you are on the board you see the plan/budget every quarter (at minimum). You also approve the grants for all new hires.
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The bottom 90% of Silicon Valley employees prob gonna have a tough time over next decade
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I like to shit on a16z for their relentless crypto garbage, but Marc and Ben pod on just how broken Biden admin is from a business POV was pretty damning. These guys aren’t grifters like Chamath trying to sniff jock of power. They just seem deeply frustrated.
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The downside of podcasting all the time is people get to hear your terrible investing takes on a regular basis
Scoop: Chamath Palihapitiya is no longer raising a VC fund axios.com/2024/01/26/chamath…
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The majority of SVB deposits are uninsured and are VC and startup funds. The chilling effect on the SV ecosystem is going to be insane unless there is a clear path to being made whole from asset sales.
Thinking through the ripple effects here.
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Every growth stage VC-backed company thinks their worst outcome is to sell to private equity for 5x sales. What if there is no money in the banana stand?
WSJ has interesting numbers on the state of Private Equity in an article today. Thinking through capital dynamics, the industry is in a difficult spot and I'm having trouble imagining how this works out generally positively for investors of existing funds.
WSJ chart shows the volume of companies to be sold. Sponsor acquisitions represent about half of deals recently. Fundraising is declining and there is a lower amount of dry powder compared to value on the books of unsold companies relative to history. Where is the capital going to come from to purchase all of these assets?
Institutional portfolios are generally maxed out on illiquid allocations, family offices are in the mid 40%s in alternatives exposure, Harvard has to issue bonds to make payouts, private equity firms are targeting 401Ks for dollars. These aren't positive signs for access to funding to do buyout deals.
Leverage at the company level being high relative to historical norms makes me skeptical that debt financed bolt on acquisitions can provide significant capacity to absorb companies on the books of funds. Cost of debt is higher on a fixed basis relative to years ago.
On the positive side, strategics could get more active under a different regulatory regime, but I'm skeptical it will be done at a level that offsets the headwinds sellers will face. IPOs are weak.
This also impacts venture exits and liquidity. Much of these portfolios, both in private equity and venture, are full of slop cos that got funding due to the need to deploy dollars.
Unclear to me how this will all resolve, but I'm pessimistic for investors getting good outcomes for their dollars.
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There has been a lot of discussion about SaaS margins and margin potential over the last couple of months. I’m going to weigh in with a case, highlighting my POV that for the right business margin expansion can happen very quickly.
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This country needs to get back to basics
Tough on crime
Schools we are proud of
Median SaaS trading at 20x NTM sales
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Goog: the literal future… full stack AI and self driving cars
MSFt: NVDA reseller, garbage apps no one uses
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A lot of SaaS companies trying to become a “platform” by launching multiple products. But, often they launching into markets where they don’t have a clear right to win.
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Finally, if you're a man over 30, you should have one wife, maybe 5 good male friends max, and a wider circle of male acquaintances whom you gradually kill and eat. That's it.
No adult man should want to "make friends". Big red flag.
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This goes against what has worked for last few years in SaaS (momentum), but I suspect that the best risk/reward over next 3yrs are best of breed fallen angels now trading at low-mid single digit ARR multiples.
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Investors to WDAY: your SBC is too high
WDAY: we'd like to welcome our new chief commercial officer, who will work in conjunction with our president, our two co-presidents, our chief customer officer, and our chief business officer to Supercharge Work. Only $38M of RSUs!
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Good setups often are companies with super strong position in core with lots of FCF generation, but undertaking expensive expansion into new bets. Stock usually underperforms when this happens, but you get two embedded options: 1) new bet works, 2) new bet is wound down, FCF up
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There is such a timing mismatch on software short thesis re:GenAI. Software companies are the ones taking this technology to market. That may change as models improve, but for the next yr it is mostly TAM expansion. This is like shorting ORCL on SaaS in 1998.
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the funny thing about this astronomer thing is the CEO is a shitco CEO and his company (and prior companies) are irrelevant...like BMW of San Rafael is more important to the economy
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figma run reinforces AI software narrative is mostly just growth driven. figma as at risk as adbe in their core biz. if you don't believe me ask any PDE team what they are using for ideation (answer will be lovable, v0). figma does have a great product leader in Dylan tho.
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zuck has a "beast mode" reputation but sucks at building things that don't involve feeds and ads
*ducks*
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Dad did you make money in the great bear market rally of ‘22?
No, son, your dad took a principled stance against stock based compensation
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Our culture feels overly financialized. Weekday markets to weekend sports betting. Prediction markets on everything. Roaring 20s baby
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Has anyone tried to calculate how many points of GDP growth HR departments cost the economy each year
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AI takes a good biz model w/SaaS and makes it worse, at least in the near-term. If AWS costs $1m/yr for a startup, AI is costing another $2-3M. And because so much money flooding into the space, customers going to be conditioned to get queries for free.
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AI bubble more epic than '99, just happening entirely in private markets.
Current AI market: a promising but unproven AI startup does a Series A that creates VC FOMO and leads to an immediate Series B in the same startup, which creates FOMO and leads to a Series A in a competitor that creates FOMO and leads to an immediate Series B in that competitor.
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Not that surprising that a generation that doesn’t drink or have sex is aligned to Islamic extremists
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…Papic dramatically underestimates the impact of China’s demographic decline. You got that from a Twitter spaces with Kyle Bass. Do you have any thoughts of your own or were you just gonna plagiarize all of fintwit for me?
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At this point google needs to fire most everyone in product mgmt and trust and safety. Completely gut the org and rebuild. They have elite infra and AI capabilities but the user experience is such garbage because of a feckless and distracted PM/safety org.
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Heist movies ranked:
1. Thomas Crown Affair
2. Heat
3. Usual Suspects
4. Town
5. Reservoir Dogs
6. Oceans 11
7. Inside Man
8. Snatch
9. Hell or High Water
10. Inception
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If you are public SaaS and trade at a >10x rev multiple and core biz is humming along pretty well it is a great time to do some accretive M&A in the 5-8x rev range. Lots of late stage privates desperate for liquidity. Surprised more deals in the $1-2B range aren’t happening.
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SNOW CEO employment letter: required to buy $5M of stock to get his $5M RSU grant. Not quite the signal you think.
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So many SaaS GTM orgs just broken. Hired leaders that were wrong fits in 2020/2021, those folks promoted/hired poorly to try to keep up with growth. Processes broken, comp plans broken, etc. Most need a complete reset.
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The end state for TWLO is being acquired for $100 by PE, the messaging business levered up at 15% EBITDA margins and the software business spun out to Adobe for 8x sales.
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Pretty amazing DJ D Sol still in charge of GS. The contrast btwn GS and MS with regards to talent retention and general coherence of strategy is pretty fucking stark.
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All-in victory lapping a 2024 short vertical software call with 1yr performance:
CSU +23%
GWRE +64%
AZPN +20%
PCOR +14%
CCCS +9%
APPF +52%
QTWO +155%
VEEV +15%
MANH +36%
TYL +46%
TOST +115%
ADSK +28%
Nice call guys! Just a bit outside
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Stocks where downside prob limited over next 3yrs due to intersection of business quality, multiple and M&A potential:
AVLR, ESTC, WIX, TWLO, BL, APPF, FROG, KLTR, FRSH, CRM, WEAV, PATH
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HF conversations everywhere
Analyst: The stock has pulled back 45%. Had monster Q1 and street is too low by 10% this year and next.
PM: What does it trade at?
Analyst: 20x my CY22 sales
PM: Is 20x the right multiple?
Analyst: Well it is only 10x CY25
PM: ...
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Keep seeing argument that a small % of US population owns stocks. But boomers own a lot of stocks and their consumption is very levered to stocks. They also vote. A congressional put is a real thing and is what will put a short-term bottom in.
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Some predictions:
1. Datadog ramps up M&A and moves into product analytics, among others
2. OKTA and HCP hit bid
3. Scarp or Frank retire from SNOW
4. Stripe has a very successful IPO
5. Regs block AMZN from buying a model company (anthropic or the like)
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What the Chinese really love is to be called peasants by an arrogant westerner...nice job JD!
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Predictions for 2025:
1. Dev retires from MDB
2. FRSH hits the bid (to PE); GTLB to one of NOW or IBM
3. DDOG continues knocking on every door; overpays for something (Statsig maybe)
4. OAI declares AGI and begins multi-year courts battle with MSFT
Some predictions:
1. Datadog ramps up M&A and moves into product analytics, among others
2. OKTA and HCP hit bid
3. Scarp or Frank retire from SNOW
4. Stripe has a very successful IPO
5. Regs block AMZN from buying a model company (anthropic or the like)
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Software a great tactical long:
1. hated
2. spending fine
3. startup growth a NT tailwind for many
4. numbers conservative because set during lib day aftermath
Many companies have great 1-2 year setups here, with no AI threat
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Get drunk with your colleagues and build relationships (small groups)
Ignore emails not relevant to what is important. Email sender does not have a right to your time/attention.
Avoid write anything more than 1-2 sentences in an email or message. Use the phone liberally
Random career tips
1. Don't get drunk at company events
2. Never write a business email while mad or frustrated
3. Don't come to 1:1s with manager w/out agenda
4. Don't take 1+ days to respond to work emails
5. Format your emails (no walls of text)
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The End of Software but Google desperately trying to get to scale in multiple software end markets as quickly as possible
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Someone in that traffic probably had a hungry baby in the car or a kid that needed to get to school or someone sick they were trying to visit. These people should get their asses beat by riot police and thrown in jail.
Both directions of the Golden Gate Bridge have been shut down due to a Pro-Palestinian protest. Demonstrators have blocked the southbound direction of Highway 101. This is the second protest causing major back-ups on Bay Area roadways, the demonstration has blocked northbound I-880 in Oakland. abc7ne.ws/3UhhvOB
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Remote is a dead man walking IMO. SF commercial real estate the easiest long in world.
Whether you like it or not; the best companies I meet today in the US are in office 6 days per week.
I do not know one single company in the UK that is 6 days per week. 🤷♂️
We need to up our game. We need more intensity.
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NotebookML is first AI tool useful for research IMO. Am sure everyone will copy and I am very excited for that.
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People talking about crazy AI and security co ramps as unprecedented but... Siebel $15M to $250M inflation adjusted in 2yrs. PeopleSoft $60M-$1B inflation adjusted in 4yrs. Juniper $0-$1.2B in 2 yrs.
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I sympathize with hiring best and brightest. But, in many cases American companies have stopped hiring younger American engineers and instead are setting up offshore development centers. For similar cost to a new grad you can hire an experienced India or Poland-based engineer.
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not sure people ready for Gemini to be the best coding model. but that is where we trending.
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Three kinds of white collar jobs and wfh experience is v different:
1. Performance (e.g. sales, investing) - make money or get fired
2. Transactional - e.g. banking, accounting, legal) - turn stuff or get fired
3. Coordinatooooor (e.g. PM, middle mgmt) - work poolside
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One of the best deep dives on AI in SaaS I have read.
My current thinking based on the speed with which companies are embedding functionality is that going to be hard to differentiate via AI. At least initially until workflows attacked in a completely AI first way.
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What is the name for group of people that say go vegetarian for climate reasons, but then fly cross country every couple of weeks and to Europe a few times a year
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When I do reference checks I like to ignore all first hand accounts and instead fill in what I prefer to believe about the candidate
Q. How can you support Trump after what John Kelly revealed about him?
Bill Ackman: “It's one person stating a series of things."
CNBC host: actually, there are 28 people who worked with Trump in the Oval Office who said similar things about Trump
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Google is San Francisco. Tremendous natural advantages. Full of talented people. Headed by a mostly powerless leader. Run by a sprawling bureaucracy.
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People will shit on a SaaS biz growing 20% organically with 25% FCF margins because of SBC, but love an industrial roll-up levered to the hilt trading at 30x.
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clearly been awhile since he has used excel
What would Excel look like if it were built for today? It would be connected directly to data sources, instead of making you copy/paste. Excited to be leading the seed round for Equals, the cloud spreadsheet. Congrats @bobbypinero @heyequals!
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