Marvin’s Best Weekly Reads February 14th, 2021

“Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence.” — Helen Keller

  1. This is a great description of what is happening in VC in Silicon Valley right now. Its cray cray to say the least.

2. “Slootman likes to say that he doesn’t have a formula, even after having pulled off similar magic at both Data Domain and ServiceNow. Talk to him at length, though, and watch the patterns, and you can see that’s not true. The former sailor runs pre-IPO companies like a tightly rigged high-performance watercraft, a captain with extreme confidence who will throw overboard anyone who shows the mildest mutinous inclination.

“When I was a younger man, I was more tolerant; I always thought I could coach people to a place where they would be great,” Slootman says. “And 99 times out of 100, you’re wrong on that, which is the reason I [now] pull triggers much faster. I still don’t think I’ve ever taken anybody out of a job too soon. It’s [always] been too late.

“I exercise executive prerogative,” he adds. “I don’t have to justify it, I don’t have to convince you. I just have to know that this is what I want to do. And the reason is, CEOs are only there for one reason, and that is they need to win. When you win, nobody can hurt you. And when you lose, nobody can help you.”

3. A very good primer on short selling. Or Short selling for dummies.

4. This is pretty damn funny!

5. For those still trying to understand DeFi like me.

“What is DeFi Again? Pretty simple, you put up a crypto currency as collateral (BTC or ETH for example) and take a loan against this collateral. That loan comes with an interest rate. The person giving the loan is protected by the assets you put up for collateral (BTC or ETH), so if the prices drop and the loan is not repaid the BTC/ETH is sent to your address. We’ve simplified this quite a bit but it is an easy way to think about it. It is similar to you giving a pawn shop $10,000 worth of gold and taking a loan out from them. If you don’t pay back the loan they keep the gold at a certain agreed upon threshold.”

6. Food for thought here. To be clear, I hate this guys politics but sometimes a broken clock is right. I enjoy his commentary in the translation of the write up. Net Net: Lockdowns do not work.

7. “In general, all of these uses can be grouped under a single umbrella concept: System failure. The system of governments, banks, financial regulations, etc. etc. that currently runs the world is not infinitely robust. In the places and times and future conditions in which that system fails, peer-to-peer financial solutions like Bitcoin are inherently very valuable. That gives Bitcoin fundamental value.”

8. Bullish on the African startup market. This VC fund makes sense.

9. Very observant view of San Francisco.

“This is a city that’s perpetually on edge. I lived in NYC for a year, and even though people didn’t say hi it was much friendlier. Maybe it’s the high rents weighing on San Franciscans’ minds, or the constant sights of homelessness and poverty. But I think it also has to do with the fact that SF is a strangely balkanized city.

San Francisco is functionally divided into a set of groups that, as far as I can tell, rarely talk to each other.”

10. Cancel culture is getting out of hand. I don’t agree with many of the alt-right but definitely do not agree with alt-left either. Woke Mob SJWs are a brainless cancer on society.

Whatever happened to freedom of speech? This is a dangerous path that western culture is moving down. (and away from what made it great).

11. Good solid tips for sales growth.

“Be where your customers are — even if they don’t expect it

Even if you’re taking a bottom-up approach, you’ll need outbound sales when you reach a certain scale. In the early days, however, generating inbound leads increases velocity significantly & in sales, velocity is key.”

12. “The missing ingredient in the purposeful work recipe is curiosity.

Let’s make learning for its own sake more important than passion. That’s how you fall in love with someone. There’s just something about the other person that makes you have to know more. That’s how it is with work. Let curiosity about the subject matter carry you.”

13. Interesting theory here. I guess we will see.

“In other words, the edifice of Reaganism, so robust and vigorous in the 80s, had become increasingly decrepit over the decades, and COVID gave it the push it finally needed to topple over. Now Biden is the one who has to come up with the next big thing, simply because that is what America requires right now. His own history of moderation may not even matter; he’s surrounded by advisors and allies who understand the need for a transformational push toward bigger and less conditional cash handouts, increased government investment, and a greater focus on the environment and racial equality. This new approach may come to be called Bidenism, but it was developed by a huge array of thinkers and leaders.

So Skowronek might be proven right after all. Biden may change America simply because it’s time.”

14. This is actually a good Tweet thread & rundown of the Gamestop saga.

15. The wonders of technology. How emerging fund managers can leverage tech to compete against the big VCs.

“How can emerging managers compete? They have limited budgets even for key professional services. They can’t delegate. So they must automate. By leveraging process automation and data strategy, emerging managers can claw back their time and cognitive space and earn the returns they deserve for themselves and their LPs.”

16. The emerging science & study of mycology. Mushrooms could actually be the savior of civilization from a biotech, medical and mental health perspective.

17. Important read as we are going into uncharted macroeconomic territory.

“Maybe the only way to find out where the invisible pit lies is to just keep walking down the corridor, so that future economists can dissect our experience and draw lessons from it.

But maybe not. If there is any helpful insight to be gleaned from the data — any scrap of information as to where the invisible pit lies — then macroeconomists should be scouring the records in search of it.

And in the meantime, if someone asks you “How much can the government borrow safely?”, just remember that the correct, canonical, scientific answer is “NO ONE KNOWS, HAHAHAHAHAHA”, followed by a strange, herky-jerky little dance representing the inherent chaos and ineffability of this mad world.”

18. Miami definitely positioning itself as the most forward thinking American city (in painful contrast to San Francisco, talk about a squandered edge).

19. A good dissection on the phenomenon that is Clubhouse.

“If it feels like there’s a gold rush of sorts to be an early adopter, it’s because we’ve all been through this cycle and understand the advantages of being early to a new medium and amassing a sizable following. We’ve seen it with TikTok, where the D’Amelio family is wisely parlaying its short-form fame into lucrative multimedia deals.

We’ve seen it with Twitter, where folks who inexplicably have hundreds of thousands of followers get three likes and a retweet on most posts yet are able to command serious fees for sponsored content. And we’ve seen it on every other platform where the number of followers/subscribers/friends is used as cachet and a proxy for one’s influence”

20. Forget sales at your own risk.

“Yet many entrepreneurs keep saying: “We’re focusing on the product first. We’ll hire a salesperson soon.” And that’s why they are raising funds: to pay marketing and sales. That’s also why they struggle to get good term sheets.”

21. “Quite literally, we are watching politicians and central bankers destroy the wealth of a large percentage of the population. They are forcing families into nearly impossible scenarios. Take middle income families as an example — their share of the aggregate US income has fallen nearly 33% in the last 50 years, while the richest Americans have increased their share by over 50%.

The rich are getting richer and the US government is helping them do it. Once you realize this, you have two choices. You can sit around and complain about how it is unfair, or you can decide to take personal responsibility and make sure you benefit from the structural trends that are at play. Remember, the system is working exactly as it is designed.

This means that you have to invest. You can’t sit with majority of your wealth in dollars anymore.”

22. One of the most important yet misunderstood metrics. BTW: this is an iterative process you improve over time and with more data.

“The rule of thumb in ecommerce is that customers need to be unit profitable after a single purchase (this high bar is a driver behind the popularity of subscription ecommerce). If average order price is $100, average cost of goods sold is $60, then you have $40 of margin to play with for CAC.”

23. This is incredibly useful for those new to sales management.

“Once an AE hits quota in a quarter, their commission rate should increase to 15% on incremental sales. This “accelerator” incentivizes the best AEs to keep pushing past their target, instead of slowing down at a perceived finish line.

For new AEs, the industry-standard time to hit productivity is 4 months, but this can be longer or shorter depending on how long it takes to learn the product and develop a pipeline. Most sales orgs set a ramping schedule, during which time new AEs have a lower quota and higher guaranteed comp (known as a “draw”) to make up for lack of commission.”

24. “Let’s talk about status in the technology world momentarily. You rarely see your boss with a Rolex like you would in investment banking or hedge funds. Angel investing is the tech industry’s status symbol.

But more than that, many of the people quoted in this article cited networking, education, growth, interest, and most importantly, they believed in the founder, as reasons they wrote their checks.”

25. “So, the economic incentive for increasing fund size is pretty astronomical. And if an investor has success with a smaller fund, it’s only natural that he or she will convince themselves that they’d be equally good investing a larger and larger fund. So it’s not surprising that quite a few of the seed funds that began in the first half of the past decade now raise funds that are hundreds of millions of dollars in size or more. They still claim to do seed, but really, they just moved upsteam because they believed they could be similarly successful and the economic incentive is great.

This is why I’m so impressed by GPs that have had amazing success, but have kept their fund sizes at a fraction of what they could raise.”

26. The history of Venture capital goes back longer than people think. To the barbaric Whaling industry. Also good discussion on the emerging startup & VC scene in Africa & other developing markets.

“Like whaling, technology entrepreneurship ordinarily shouldn’t work. Founders shouldn’t forgo stable incomes at large corporations for the uncertainty of a new/risky venture; developers and other team members shouldn’t stake their most productive years working for companies that may not exist in less than a decade. But people start or join startups for the same reason crews go on whaling expeditions — a little madness, some excitement, and a tiny chance at a massive return[1].

Crucially, in startups, like in whaling, most ventures do not actually deliver these expected profits. Venture Capitalists famously say that their returns follow a “power law distribution” i.e., that the vast majority of returns are generated by a small number of firms, and that the majority of each firm’s returns are generated by a small number of companies.”

27. “We continue to believe the Bay Area will be an important ecosystem for venture capital and technology. But, echoing Fred Wilson’s argument, the pandemic has clearly catalyzed a growing comfort in making investments remotely, leading to a widening in geographic scope for many venture investors.”

“Across Sapphire Partners’ entire portfolio of over 2,000 underlying companies, the top five companies represent 15% of our total value and the top two companies represent 11%.”

28. Way more true than ever.

“If you look, I think you’ll find that wherever information is exchanged — wherever there are products, companies, careers, politics, knowledge, education, and culture — you will find that the best story wins. Great ideas explained poorly can go nowhere while old or wrong ideas told compellingly can ignite a revolution. Morgan Freeman can narrate a grocery list and bring people to tears, while an inarticulate scientist might cure disease and go unnoticed.”

29. Go Taiwan! The place to be in 2021!

30. Rebuttal to the recent hit piece on Silicon Valley from NY Times.

Title says it all as SF Bay is hardcore left leaning. NY Times gets it wrong….again.

31. One of the most important scientific discoveries ever. Huge ramifications for human civilization.

“The ability to code messenger RNA to do our bidding will transform medicine. As with the COVID vaccines, we can instruct mRNA to cause our cells to make antigens — molecules that stimulate our immune system — that could protect us against many viruses, bacteria, or other pathogens that cause infectious disease. In addition, mRNA could in the future be used, as BioNTech and Moderna are pioneering, to fight cancer. Harnessing a process called immunotherapy, the mRNA can be coded to produce molecules that will cause the body’s immune system to identify and kill cancer cells.”

32. Good rundown and commentary on EU tech scene!

“One year later and 400 SPAC IPOs already executed in the US since last summer, Europe finally wakes up and smells the coffee. Because that is what innovators do. :D

Idly wondering when the EU heads will chime in saying that it is anti-something and needs regulation.”

33. “Those names, viewed as top-tier public market investors, are becoming familiar to SPACs, with at least one of them showing up in the PIPE for SoFi, Matterport, Opendoor and consumer genetics company 23andMe.

For companies that can attract investors of that caliber, and have sponsors they trust to stick with them through the ups and downs of the journey, a SPAC can be the most efficient way to raise money. Large private rounds typically require hefty dilution, while IPOs often come with a discount of 50% to 100% for new investors.”

34. Pretty inspirational to say the least.

“As she grew up, Qasim began to understand that there would be biases, judgements, and taboos that would come with all that she wanted to accomplish. Even though she understood, she refused to passively comply with a system designed to keep her trapped.”

35. Bitcoin mining for dummies. Timely now that a BTC has hit 49k usd!

36. “Cryptocurrency offered a means of circumventing the volatility of the local economy, and the members of Voltaire House were early adopters. They believed that Bitcoin would enable them to build a future that didn’t depend on decaying institutions. Two decades later, with the value of the peso plummeting and Bitcoin trading in Argentina soaring to historic highs, this kind of thinking has emerged again.

Blockchain evangelists have long touted its revolutionary power to disrupt global economic models and supplant central authorities. While this seems unlikely in countries with stable monetary institutions like the United States, Argentina is in certain respects an ideal test case. Ultimately, however, Voltaire House offered a very different lesson about the cryptocurrency’s transformative power.”

37. “The 2010s saw the rise of the aggregators, who profited by creating bottlenecks on consumer access.

The 2020s will see the rise of the infrastructures — the as-a-service ‘shovels’ that capture most of the profits while the rest of the economy scrambles for gold.”

38. This man is living his dream! He made enough $$ to go to space!

“One of the best times at a start-up is when you’ve got the eight people in the basement eating Chinese food and everybody kind of shares knowledge, and you share in your successes and failures together, and you learn together,” he says.”

39. Lessons from Chef Jose Andres World Central Kitchen.

“Success comes not from depending on a particular innovative solution that worked in the past but rather from depending on the spirit of situational awareness and timely responsiveness that generated the solution in the first place. And even greater success comes from designing for the success of others in the ecosystem, knowing that the greater the resilience of the ecosystem the greater the resilience of the individual members of it.”

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