Mass Firings at Citadel Right Before Federal Probe

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Last October, Citadel LLC’s Surveyor Capital unit suddenly fired several portfolio managers at once. 

In the preceding five months, half of Surveyor’s portfolio managers had either been fired or resigned. In May, Todd Barker, the head of Surveyor Capital himself, departed after 16 years at the firm.

His timing was good. All hell was about to break loose.

In November, just after the mass firings at Surveyor, Morgan Stanley’s head of block trading suddenly stopped showing up for work. The trader, Pawan Passi, had been put on leave due to a federal investigation of his conduct, Bloomberg later reported.

Passi and Morgan Stanley are under investigation for allowing hedge funds to front run large block trades of stock. A tip-off from Passi could let a hedge fund buy or sell right before a big institution, locking in profits and giving the institution a worse price.

Also ensnared in the probe: Andrew Liebeskind, Surveyor’s top trader. Passi may have fed him tips on big trades to front run.

So Surveyor suddenly fired a large group of traders right before the federal probe came to light in November. Were they either part of the alleged scheme or, worse, fall guys for top executives like Liebeskind?

We will have to wait for more information to surface in the federal investigation before we know for sure. But I find the timing….convenient.

What do you think is behind the sudden Citadel firings? Leave a comment below and let me know.

Have a great weekend everyone!

More on markets:

Citadel Under Federal Investigation

FBI Raids Short Sellers

Melvin Capital Under Federal Investigation

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Photo: Citadel LLC CEO Kenneth Griffin

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Our Man in Hunan

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On a quiet block just south of bustling 42nd Street, my wife and I ducked into a doorway and disappeared.

This isn’t a spy novel. But it is an incredible lunch.

Hunan Manor in midtown Manhattan serves outstanding Chinese food firmly rooted in the traditions of the motherland. You’ll find American dishes like an excellent General Tso’s, but also traditional recipes like scallion pancakes.

We sat down today in the surprisingly spacious dining room and within minutes, our waiter brought my wife’s spicy hot and sour soup and my enticing spring roll. Biting down with a satisfying crunch, I could tell this torpedo of flavor was freshly fried.

A few minutes of conversation later, out came the entrees. For the lady: ginger shredded beef with peppers. For me: Hunan style shrimp in a thick, piquant sauce.

The shrimp were cooked perfectly. Their texture was springy and yielding, unlike the little overcooked stones so many restaurants pass off as shrimp.

But the missus’ beef stole the show. The char on the thin strips of flesh, coupled with the perfume of ginger and tender peppers, made for a perfect dish.

I found myself wishing for tortillas to put the beef in, fajitas style. It’s interesting to see how different cultures approach similar ingredients and put their unique stamp on them.

We both ordered off the lunch combo menu, which I highly recommend. Everything is between $9.50 and $12.50, and that includes rice and either soup or a crispy spring roll.

You’d be hard pressed to find a better deal in town!

There will be no blog tomorrow. I have an acting gig. 🙂

See you Thursday!

More on food:

Manhattan’s Burger Baron

The Best Mexican Food Is In…New Jersey?

Alphabet City’s Best Pizza

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Misfits Market

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Manhattan’s Burger Baron

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I’ve been going to this restaurant so often, I might have to move in and save the bus fare.

Schnipper’s in New York City is American food done right. Done with respect.

On Thursday, my wife and I rushed in for the third time in two weeks. From a mouthwatering burger to artistic salads, everything they make uses the best ingredients and technique.

I had a massive, juicy bacon cheeseburger. The meat is incredibly fresh.

It’s telling that even the lettuce isn’t some sad, wilted vegetable. Instead, they use crisp bib lettuce that snaps as you bite into it.

You might even be able to convince yourself the burger is health food.

My wife had a beautiful fried chicken salad. It was topped with beets, sweet corn, and housemade sourdough croutons.

A triumph!

I also heartily recommend the tuna melt. I made sourdough for years and alas, the bread in that sandwich is better than anything I ever produced. 🥲

Schnipper’s also makes an outstanding milkshake. I had sip after sip of the one my wife ordered.

For research purposes.

You’ll notice that the food takes a little longer to come than most fast food places. It’s worth it; they’re actually making your meal from scratch!

For years, I walked past Schnipper’s and smelled ambrosial odors wafting forth. Why I never stopped in until now is beyond me.

Schnipper’s has two locations in midtown Manhattan, both east and west. If you’re in the city, stop in for a reliably outstanding meal.

More on food:

The Best Mexican Food Is In…New Jersey?

Alphabet City’s Best Pizza

The Best Bakery in NYC (It’s Not Levain)

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Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been great so far.

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Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

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Ken Griffin Makes $2.5 Billion in 2021 as Investigation Looms

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Citadel LLC CEO Kenneth Griffin made $2.5 billion in 2021. That was enough to give him third place among hedge fund managers in the list just released by Institutional Investor.

For Griffin, its unclear how long the good times will last. His firm is under federal investigation.

Investigators are examining the communications of Andrew Liebeskind, one of his top traders, among others. And if that weren’t bad enough, other investigators are looking into Melvin Capital, in which Citadel invested billions.

That probe too could lead to Citadel.

I found it interesting that Griffin was bested by Jim Simons of Renaissance Technologies LLC, who earned $3.4 billion, putting him in first place. Simons’ firm has been a buyer of meme stocks including AMC Entertainment Holdings Inc.

Perhaps it’s easier to swim with the current than against it.

Not being under federal investigation probably helps too.

Have a great weekend everyone!👋

More on markets:

Citadel Under Federal Investigation

Melvin Capital Under Federal Investigation

FBI Raids Short Sellers

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Photo: Citadel LLC CEO Kenneth Griffin

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Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been great so far.

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If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

Why High Oil Prices May Not Matter for Stocks

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You don’t need me to tell you that oil and gas prices are through the roof these days.

Gas stations are changing numbers faster than slot machines. And the explosion in prices is sowing fear in the stock market.

But I think this huge spike in oil prices won’t matter much for stocks in the long term.

Looking at some historical data today, I noticed that big advances in oil prices are actually associated with above average returns for stocks.

Let’s look back at some major oil price spikes and see what happened to stocks.

A Trip Down Memory Lane

Our first stop takes us back to the late nineties. That was the last time I saw gas under a dollar!

Indeed, oil was a mere $12.36 a barrel in February of 1999. Just one year later, it had shot up to $28.28, a 128% increase.

Surely a stock market crash was next, right?

Wrong. Stocks increased 11% that year, an above average return.

Our next stop takes us to the depths of the financial crisis. At the beginning of 2009, oil traded for $46.17.

By April of 2011, the price had jumped to $107.55, an advance of 133%.

Market meltdown? Hardly.

Stocks surged 48% as the economy rose again from the ashes.

Why would stocks go up even as oil, a major cost center, rises?

Both are responding to an improving economy. Stronger economic growth means better prospects for companies, raising stock prices.

A stronger economy also means more demand for oil as families go on vacations again and buy bigger and shinier SUV’s. That increases oil prices.

Indeed, you’ll notice that during periods of increasing oil prices, economic growth also increased rapidly:

What About Today?

In April 2020, oil prices stood at just $20.28 a barrel, the lowest in over 20 years. Today, West Texas Intermediate oil has increased to $119.26 a barrel, a staggering 488%.

Sure enough, a similarly massive upshift in economic growth happened during that time. US GDP went from falling 31% year over year to growing 34% year over year, as lockdowns were implemented and then lifted.

Since lockdowns began to ease in later 2020, economic growth has remained strong, routinely clocking around 7%.

That roller coaster for growth resulted in a roller coaster for oil prices as well. We shouldn’t be unduly alarmed that oil is recovering along with the economy as a whole.

While geopolitical events have contributed to higher prices this year, you’ll note that most of the increase in oil prices happened well before Russia’s invasion of Ukraine.

High prices or no, I’ll be holding my stocks.

More on markets:

How Did High Dividend Stocks Perform In the Last Crash?

FBI Raids Short Sellers

Is Russia’s Google Finished?

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Photo: “Gas Prices. WTF?” by kristiewells is marked with CC BY-NC-SA 2.0.

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Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been great so far.

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Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

Short Squeezes Could Get Much Easier Under This New Rule

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A new proposed rule by the Securities and Exchange Commission could make creating short squeezes much easier.

The proposed rule would require reporting of large short positions. From The National Law Review:

Under Proposed Rule 13f-2, managers would be required to report on a monthly basis — for equity securities in which the manager holds certain minimum short positions — the manager’s end of month gross short position and certain daily short-selling activity affecting the growth short position.

This data will be made public, letting traders see which firms own large short positions in certain stocks. Those traders can then target a firm specifically, buying up those shares:

As the SEC notes, if market participants can ascertain which short positions belong to only one manager — something the SEC estimates may occur in as many as 32% of the stocks for which there would be reporting under Proposed Rule 13f-2 — traders may seek to orchestrate a short squeeze targeting that particular manager.

And if that weren’t bad enough, the SEC plans to use this data to increase enforcement against short sellers:

From an enforcement perspective, the submissions required by Proposed Rule 13f-2 will be used by the SEC to more efficiently police fraud related to short selling activity. In its justification for Proposed Rule 13f-2, the SEC emphasized that data collected under the new rule could help detect and deter fraud.

Short sellers lose twice: first to other traders who target their positions, and again if regulators crack down. Indeed, this rule could be a powerful tool in the DOJ’s ongoing investigation of fraud by short sellers.

I expect to see both hedge funds and individual traders carefully combing these reports. Once they find a firm that’s overexposed, they could target its entire book of short positions.

Such an attack could take down a short selling firm, fast.

I’ll be eagerly watching the SEC to see if this new proposed rule becomes law. It could change markets forever.

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More on markets:

FBI Raids Short Sellers

How DTCC Makes Fails to Deliver Disappear

Melvin Capital Under Federal Investigation

Photo: Prominent short seller Gabriel Plotkin

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This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

Is Russia’s Google Finished?

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Yandex NV dominates the Russian market, with a majority of all Russians visiting its platforms every month. It offers the nation’s most popular search engine, an e-commerce portal, and even ride sharing.

But now Russia’s premiere tech company’s days may be numbered.

Yandex’s stock is down 75% from its peak last fall. Partnerships with Uber and Grubhub are being wound down since Russia invaded Ukraine.

Yandex’s ambitious expansion overseas is dead in the water. A plan to offer cloud computing in Europe has been shelved.

Indeed, it will be hard to do any business overseas with the banks Yandex relies on within Russia facing crippling sanctions.

But the most immediate threat to Yandex may lie in obscure covenants on its debt.

The Securities and Exchange Commission has suspended trading in its Nasdaq-listed shares. A long enough suspension may trigger a requirement for Yandex to immediately repay $1.25 billion to owners of its convertible bonds.

Yandex does not have the money.

Meanwhile, the company’s staff are nervously eyeing the exits.

Yandex employees’ compensation is largely in stock, which has lost most of its value. This will make it hard to motivate and retain employees.

Those who can are likely to move abroad. In a red hot market for engineers, finding a new position should be easy for them.

In all, Yandex is losing key markets, dealing with staff panic, and facing imminent insolvency. Absent help from the Kremlin, it’s hard to see how this company survives.

Yandex’s woes spell trouble for Russia as a whole.

The nation is heavily dependent on resource extraction. Companies like Yandex represented a chance to diversify and join the lucrative tech industry dominated by the West.

But Russia’s authoritarianism is making that transition harder and harder.

Oil prices are high right now, but as the world transitions to renewable energy, Russia may be left with resources the world no longer wants.

And not much else.

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More on tech:

Hedge Funds Pull Back from Tech Amid Big Losses

VADE: The Future of Parking

How China’s Tech Industry Dies

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If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

VADE: The Future of Parking

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I recently took a short ride with my friend Paulie. We reached our destination in less than 10 minutes, only to find nowhere to park.

We circled block after block. Any open spot turned out to be a fire hydrant.

Finally, after 20 minutes, we found a spot! Then, we walked many blocks in the cold to our destination.

Parking had taken more than twice as long as our trip!

But what if you could instantly see on your phone where the open spots are? A company called VADE is making that a reality. 

VADE puts wireless, solar powered cameras in cities to monitor parking use. It can find open spots, double parked cars, and blocked bike lanes automatically.

Quickly directing drivers to an open spot could save tons of time and carbon emissions. Researchers estimate 15-30% of all driving is people searching for parking spots

VADE could have a profound effect on climate change. Imagine if we eliminated 15-30% of all vehicle emissions!

VADE also makes cities safer. If a city can find blocked bike lanes and clear them, bicyclists no longer have to venture into perilous traffic to get around obstacles.

I had some privacy concerns with putting cameras all over a city, but VADE’s cameras are intentionally lower resolution. They can spot a car but can’t identify a person, a wise design decision.

I’m super excited to be an investor in VADE. I look forward to a day when Paulie can save tons of time and effort parking, and you can too!

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More on tech:

The #1 Reason I Say No to Founders

Why I Just Invested in Deft, the Best Way to Shop Online

Tech Plunge Hits Early Stage Startups

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You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

GameStop Fails to Deliver Nearly Double in Latest Report

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Fails to deliver in shares of GameStop Corp. nearly doubled in the latest report from the SEC.

Shares that failed to clear numbered over 43,000 by February 14th, the end of the reporting period. That is up from 24,000 at the end of the prior period, a substantial increase.

The number of failed trades in GameStop shares is unusually large for a company its size. By way of comparison, here are the fails to deliver at the end of the period for some of the largest stocks in the market:

Alphabet Inc: 0

Amazon.com Inc: 4,000

Apple Inc: 21,410

Nvidia Corp: 0

Tesla Inc: 143

Keep in mind, these companies have market caps orders of magnitude larger than GameStop’s. If anything, their fails to deliver should be much greater.

So why does this small stock have such large and persistent fails to deliver? Failed trades can happen for various reasons, some of them benign.

But when there is a long term pattern of huge numbers of failed trades, it can be a sign of naked short selling. This mostly illegal practice involves selling short shares you did not borrow.

The trade never clears because the shares never existed! Meanwhile, you can short endlessly without needing to find shares to borrow.

Naked short selling allows a trader to push down a stock’s price, big time.

I suspect hedge funds are using this illegal strategy to drive down the shares of GameStop, AMC Entertainment Holdings Inc., and other meme stocks. But with the FBI and SEC circling, it may be only a matter of time before they’re caught.

Have a great weekend everyone, and see you Monday! 🙂

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More on markets:

FBI Raids Short Sellers

Citadel Under Federal Investigation

How DTCC Makes Fails to Deliver Disappear

Photo: “Retail GameStop” by ccPixs.com is licensed under CC BY 2.0

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Save Money on Stuff I Use:

Amazon Business American Express Card

You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

The #1 Reason I Say No to Founders

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Every month, I look at over 200 startups. I choose one.

Among those hundreds of companies raising funds, I always see tons of cool ideas. So what distinguishes the companies I choose from all the others?

The number 1 reason I say no to founders is that they’re raising funds too early.

Many of the pitches I see are little more than a few slides with a lot of projections. But most investors want more than projections.

We want a track record.

For companies raising seed funding, I expect at least six months of revenue, growing month over month. For consumer products that are pre revenue, I’d like to see a similar track record of user growth.

Many companies I see trying to raise seed funding are nowhere near that. They have no revenue and often not even a product! 

What founders have to realize is without any track record in the market, how can investors tell if your company is a good bet?

Without a track record, the only thing an investor has to go on is the team. And talented as so many founders are, the fact is that most founders raising seed rounds are unknown.

They might build the next Uber or Airbnb, but they haven’t done it yet. 🙂 

Raising money without a track record in the market is much easier for serial entrepreneurs with a big win behind them. If you sold your last company for $1 billion, I’m willing to fund you a lot earlier.

Founders will make the fundraising process much easier for themselves if they build their company to at least a few thousand a month in revenue before raising a seed round. 

This gives them greater credibility among investors. It shows they know what investors are looking for.

Bootstrapping your company to thousands in monthly revenue isn’t easy. But neither is raising money without a track record to point to.

Another benefit of doing some building before the fundraising is that you’ll have a better idea how to deploy that capital because your business is more mature. A big check from a VC won’t do you much good if you don’t know how to spend it to drive growth.

Best of luck to everyone out there building!

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More on tech: 

Tech Plunge Hits Early Stage Startups

Founders Biggest Pitch Mistake

Why I Just Invested in Deft, the Best Way to Shop Online

Photo: “Startup” by Skley is marked with CC BY-ND 2.0.

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You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order.