Monthly Archives: September 2022

Business

New Report: Millions of Fails to Deliver in AMC and APE Shares

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Fails to deliver in shares of AMC Entertainment Holdings reached the millions in the first half of September. The chaos hit both AMC and AMC Preferred Equity (APE) shares, according to a new report out today from the SEC.

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APE fails to deliver peaked at 2.4 million shares on September 1st. AMC fails to deliver peaked a week later on September 8th, at 2.2 million shares.

AMC shares have had large and persistent fails to deliver for over a year. It’s telling that as soon as APE shares were issued, huge fails to deliver appeared there as well.

Meanwhile, much larger companies continue to have almost no trades failing. Let’s take a look at fails to deliver in a few major stocks on Sept 1st:

Amazon: 0

Apple: 5,679

Microsoft: 0

Tesla: 14,727

APE: 2,366,422

And again a week later:

Amazon: 17,603

Apple: 523,020

Microsoft: 179

Tesla: 10,561

AMC: 2,164,802

Fails to deliver in AMC and APE are dramatically larger than in much bigger companies. Why are these shares in constant chaos while other companies are unaffected?

I suspect it’s because of naked short selling by hedge funds. This illegal practice involves selling short shares you never borrowed.

It’s a powerful weapon to crush a stock. If you never have to find shares to borrow, you can sell short any amount!

This can reach absurd levels. In August, we saw fails to deliver in APE shares exceed the entire daily trading volume.

The SEC must investigate what’s going on in AMC and APE shares. Until they do, it’s hard to believe the prices we see are real.

What do you think of the huge number of failed trades in these shares? Leave a comment at the bottom and let me know!

Have a wonderful weekend everyone! 👋

More on markets:

Over 43 Million APE Shares Fail to Deliver — Market in Chaos

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

Morgan Stanley Investigation Spreads to Multiple Countries

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Business, Technology

USV’s Albert Wenger on Climate and the Post-Capital World

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Most of human history has been defined by a lack of capital. We struggled to scratch out a living from the earth and stay alive long enough to enjoy it.

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Today, our world is one of abundance. But what if the ice is melting right underneath our feet?

That’s the view of Albert Wenger, Managing Partner of Union Square Ventures, . In his new book, The World After Capital, Wenger argues that what we really lack today is not capital but a focus on key issues.

Wenger is particularly concerned about the climate crisis. On a recent interview on This Week in Startups, he argues that society has to undergo a transformation on the scale of the shift from hunting and gathering to farming in order to beat climate change.

The threat is real and shows up more prominently every day. One day it’s massive floods in Pakistan, the next a devastating hurricane in Florida.

Wenger and his legendary firm are fighting this battle by doing what they do best: investing. And unlike some VC’s, they’re not afraid to plunge into difficult hardware projects that could make a difference.

Wenger argues that software can’t solve most of the climate problem. I agree — we need solar panels, geothermal, and wind, not just computer systems.

Early VC’s successfully invested in hardware by taking a larger percentage of the company in early funding rounds. This model could work again for climate investments.

However, hardware is tough to scale and often has poor margins. So for now, I’m sticking to SaaS solutions.

While the climate crisis is urgent, I disagree that society must change fundamentally to address it.

The shift from hunting and gathering to static, agricultural societies was massive. But to address climate change, all we really need is some solar panels and wind turbines.

We’ll continue to live much as we do today. Our energy will just be coming from a different place, and we may be only dimly aware of it.

The biggest change may be geopolitical.

Would we care about Saudi Arabia if we didn’t need oil? Would we accommodate Russia in any way if we didn’t need gas?

Freed from resource dependence, countries may turn inward. If this avoids disputes and wars, I’m all for it.

I also disagree with Wenger about capital’s abundance. If you’re a white man on the US coasts (hi!), he’s definitely right.

But if you’re a woman, minority, or live in the developing world, scarcity is still the rule. From financial capital to roads and bridges, most of the world remains poor.

What do you think of climate investing? Leave a comment at the bottom and let me know!

More on tech:

SHOPIFY’S TOBI LUTKE ON LAYOFFS AND BUILDING FOR THE LONG TERM

WHEN ARE YOU READY TO RAISE A SEED ROUND?

HOW TO AVOID SCAMS, FIND INVESTORS, AND LEAD LIKE THE BEST

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Business, Technology

Shopify’s Tobi Lutke on Layoffs and Building for the Long Term

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Few people did better during the pandemic than Tobi Lutke. The Shopify founder signed merchants to his e-commerce platform at a record pace, doubling revenues in 2020.

It was all systems go. Lutke hired like crazy to meet demand and locked up every server he could.

Meanwhile, Shopify’s stock price more than quintipled, putting the company’s valuation at over $200 billion.

In an excellent episode of This Week in Startups, Lutke tells us what it was like to guide his company through these heady times.

Employees were so distracted that Lutke had to make a rule: anyone caught checking the stock price had to buy donuts for everyone. Tim Horton’s, if you please.

But as the pandemic receded and stores reopened, consumers retreated from e-commerce. This left Shopify overbuilt and overextended.

Lutke was in a position he’d never been in throughout Shopify’s heady expansion. He had to do layoffs.

Shopify laid off 10% of the company this summer. For Lutke, the decision was wrenching.

“They were some of our hardest days.”

Tobias Lutke

Because Shopify had expanded ahead of demand. When demand dropped, that left Lutke with no choice but to lay off workers.

However, many of those workers would’ve never had the job in the first place had Lutke not expanded aggressively. And as well-paid tech workers, they’re likely to land on their feet.

Shopify’s tough times show how even large businesses struggle. A company with a $200 billion market cap can see its stock crushed and be forced to do layoffs just months later!

Take heart, early stage founders! The big boys face huge challenges too, just like you.

In all, I think Shopify is well positioned for the long term. It focuses on providing amazing service and doesn’t copy merchants’ products like Amazon.

When your livelihood depends on a platform, you want someone you can trust. Shopify fulfills that role better than Amazon.

I also commend Lutke for building a more honest culture at Shopify than most companies. He calls Shopify a team, not a family.

We all know the “family” rhetoric is nonsense. I have to give Lutke credit for telling it like it is.

I think his employees will too!

What do you think of Lutke’s leadership during the pandemic? Leave a comment at the bottom and let me know!

More on tech:

When Are You Ready to Raise a Seed Round?

How to Avoid Scams, Find Investors, and Lead Like the Best

The Founders: The Story of PayPal

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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 with great returns.

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If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

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Business, Technology

When Are You Ready to Raise a Seed Round?

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It’s a huge moment in a startup’s life: you shake hands with VC’s and seven figures hit your bank account. But when are you ready to raise a seed round?

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One of the biggest mistakes I see founders making is trying to raise money before they’re ready. They wind up beating their heads against the wall, simply because they’ve put the cart before the horse.

Here is how you know if you’re ready to raise a seed round:

1) Your product is launched. Believe it or not, companies try to raise seed rounds all the time without even having a product in market.

Sometimes they don’t have anything built at all!

If that’s you, your time would be much better spent finishing your product and launching it. Few people will invest pre-launch.

2) You have real customers and revenue. In addition to being launched, you want signs that you have a real, viable business.

And you can’t have a viable business without paying customers!

Most companies that successfully raise seed rounds have about $3,000 to $25,000 a month in revenue. Less than that, and you may not be ready to raise yet.

Meanwhile, when your annual revenue tops $1 million, you’re getting into Series A territory.

3) You’re growing fast. You want to be growing revenue at least 10% month over month in order to raise a seed round.

I generally look for the most explosive growers, who are scaling at 20% a month or more.

If your revenue is flat, raising capital is tough. People want to be on a rocket ship!

4) You have a strong team. You want around 4-6 people, at least half technical.

If you’re a solo founder or you don’t have anyone technical on the team, you’ll struggle to raise. You’ll also struggle to build a product and iterate on it.

Those two are not unrelated. 🙂

5) Your valuation is reasonable. Seed valuations are around $8-10 million post money these days.

Startups generally raise $1-2 million in their seed round.

6) You’re incorporated properly. I know, I know, I keep harping on this!

But make sure you’re a Delaware C Corp if you want to raise venture capital. More on why here.

I’ve had founders tell me that fundraising is the hardest thing they’ve ever done in their career. One of the biggest reasons for that is companies try to raise money before they’re ready.

You’re better off building your company up a bit first! Then, fundraising becomes way easier.

Show us a company with delighted customers and rapid growth, and we’ll be knocking each other down to get in!

What questions do you have about raising a seed round? Leave a comment at the bottom and let me know!

More on tech:

Why Your Startup Shouldn’t Be an LLC

How to Avoid Scams, Find Investors, and Lead Like the Best

The Startup Metrics That Make Investors Drool

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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 with great returns.

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Business, Technology

How to Avoid Scams, Find Investors, and Lead Like the Best

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Happy Monday everyone! I wanted to share an interview I did recently on startups and fundraising with the Finance Videos Network.

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We cover a lot of great topics, like leadership, finding investors, and red flags founders should look out for.

Here are some interesting points:

2:40: What great leadership looks like in early stage startups.

5:02: How to find investors.

6:30: What if you didn’t go to Harvard or Stanford?

8:18: When is the right time to raise money?

9:30: How to do a first meeting with an investor.

10:26: Signs that an investor is a fraud.

11:48: Should founders move to a tech center?

What do you think of today’s funding environment? What did we miss?

Leave a comment at the bottom and let me know!

More on tech:

The Startup Metrics That Make Investors Drool

How Startup Founders Get Scammed

The Founders: The Story of PayPal

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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 with great returns.

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Misfits Market

I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $15 on your first order. 

Business, Technology

The Startup Metrics That Make Investors Drool

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Many entrepreneurs can tell an amazing story. But what about the hard numbers you need to back it up?

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Here are the type of figures that get me salivating:

1) Revenue growth. I like to see startups signing up customers at a rapid clip.

Companies I invest in usually are growing their revenue at least 20% month over month. These represent the cream of the crop of seed stage companies.

As startups mature, that benchmark goes down. For a company at Series A or later, 10% month over month growth is excellent.

You can calculate your growth using a tool like this.

Growth is critical because the best startups tend to catch on fast. Google, YouTube, PayPal and countless others grew at incredible rates shortly after launch.

2) Gross Margin. It’s not hard to grow if you’re selling a dollar for 90 cents. Knowing your Gross Margin makes sure that doesn’t happen.

Here’s how to calculate it: take the money left over from a sale after variable costs (marketing, etc.) and divide it by the revenue from the sale.

A SaaS business should shoot for a Gross Margin of at least 75%.

3) Burn Multiple. Many startups lose money to fund growth. But how do you know if you’re losing too much?

That’s where the Burn Multiple comes in. It measures how much money you burned in the prior month divided by how much new revenue you signed.

Seed stage companies should have a Burn Multiple of 3 or less. More on the burn multiple here and here.

4) Runway. This is how long you have until you run out of cash.

If you’re burning $50,000 a month and you have $300,000 in the bank, you have 6 months of runway.

I want a startup to have a bare minimum of 18 months of runway after the round closes. In today’s down market, I’d prefer to see at least 30 months runway.

This way, you have plenty of time to wait out a difficult market.

And if you’re “default alive” (break even or better), congrats! Burn Multiple and Runway don’t apply to you and you’re in an exceptionally strong position.

Is it hard to hit all these benchmarks? Absolutely!

That’s why I have to look at 150-250 companies to find a single investment. Performance at this level is rare.

But if you can hit these hurdles, you’ll find investors breaking down your door. And I’ll be one of them. 🙂

What key stats do you track as a founder or investor? Leave a comment at the bottom and let me know!

Have a great weekend everyone! 👋

More on tech:

How Startup Founders Get Scammed

The Founders: The Story of PayPal

Midas Speaks: Sequoia’s Don Valentine at Stanford GSB

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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 with great returns.

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Misfits Market

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I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $15 on your first order. 

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Business, Technology

How Startup Founders Get Scammed

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Startup founders sometimes tell me about mysterious “services” they’re thinking of paying for. That’s when I get out my megaphone and shout into their ear “Never pay for that!”

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Entrepreneurs are hopeful people. They have to be.

But some scammers take advantage of that optimism to make a buck. And sadly, they like to prey on women and minorities.

They know that these folks have a harder time raising money and may be more desperate.

Let’s avoid you getting scammed. Here are some things you should never pay for:

1) Pitching investors. Investors like me listen to pitches all day, every day.

We don’t expect to be paid for it. We get paid when we invest, you grow your company, and go public!

Never pay to go to a pitch event. Ever.

Real investors will never charge you. Anyone who’s charging you is pretending to be a VC and isn’t worth your time.

2) Investment. Some so-called venture funds will charge you mysterious fees to get the investment.

Sometimes it’s a “syndication fee,” whatever that is. Sometimes they choose another name.

It’s like the Nigerian prince who needs $300 so $1 million will be released to him.

Whether it’s a Nigerian prince or a bogus VC fund, you should tell them to talk to the hand.

There are real costs to making investments: SPV incorporation fees, wire fees, etc.

But guess who should be paying those? The investors!

3) “Advice”. Don’t give up cash or precious equity for some amorphous “advice.”

If you want to give advisor shares to someone who has put cash into your company, feel free. Just be sure they’re spending at least several hours a month on your startup.

But if someone doesn’t believe in your company enough to put their own cash on the line, why would they want to be an advisor?

4) Introductions. Some scammers want to charge you for introductions to some magical list of investors.

This is a cousin to #1, the pay to pitch. And you should run away from both, as fast as you can.

Let me tell you how intros really work in venture capital. I invest in a company, then I e-mail my friends at a few funds I regularly co-invest with.

I tell them what I’m investing in and why. And I ask if they want to meet the founder.

How much do I charge the founder for this? Zero!

It’s part of the value I try to add at every company I invest in. It helps me win deals and helps the companies I’ve bet on.

I don’t want to see any of you guys get scammed. So be on the lookout for vultures circling trying to peck at your precious capital.

Real investors are happy to meet with you and help out for free. That’s what they do.

Anyone else is a clown who isn’t worth your time.

What other scams have you seen in startupland? Leave a comment at the bottom and let me know!

More on tech:

The Founders: The Story of PayPal

Why Drone Delivery Will Be an Awesome Business

Giving Investors What They Need to Say Yes

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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 with great returns.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

Misfits Market

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I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $15 on your first order. 

Photo: “The scam truck” by jepoirrier is licensed under CC BY-SA 2.0.

Business, Technology

The Founders: The Story of PayPal

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PayPal processes over $1 trillion in payments every year. But its product began as an afterthought.

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The PayPal founders’ originally wanted to beam money between PalmPilots.

After all, everyone they knew had a PalmPilot! E-mailing money would be a backup in case you left your PalmPilot at home.

The problem was, not everyone was a Silicon Valley early adopter. Few people had PalmPilots at the time, and money beaming never caught on.

What did catch on was that throwaway product: e-mailing money. Buyers and sellers on eBay flocked to PayPal, with users growing ten-fold every month.

In the excellent new book, The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley, author Jimmy Soni tells the story of how this iconic company came to be.

A key advantage for PayPal was its laser focus on hiring the best people.

Few had experience in payments or designing internet products. But they were smart, capable and driven.

Once they joined PayPal, the company trusted them from day one. Having real influence made these new employees act like owners.

PayPal also kept very close to customers.

They used their own product frequently to suss out bugs. Employees even responded to user complaints on eBay forums, earning great loyalty in the process.

And even before Confinity and X.com merged to form PayPal, the young entrepreneurs carefully observed the competition.

One would often find the names of the other’s employees in its customer records. They were keen to learn from their competitor.

Just four years after its founding, PayPal was acquired by eBay for $1.5 billion. For eBay, it was an admission that it couldn’t beat its scrappy competitor.

PayPal has some great lessons for founders. Sometimes the market shows you what your product is — be open to it!

It also shows how critical hiring is. Indeed, PayPal’s staff was so good they went on to dominate Silicon Valley, founding Tesla, SpaceX, YouTube, LinkedIn and more.

For investors, PayPal shows the timelessness of a question from Arthur Rock, perhaps the first venture capitalist: “Who do you admire?”

PayPal co-founder Max Levchin deeply admired his grandmother.

She overcame antisemitism and sexism to get a PhD in physics in the Soviet Union, a rare feat. Later, she was diagnosed with breast cancer but willed herself to live another 25 years.

Any investor who heard that story would know that Levchin aspired to be as tough as his grandma. But how many investors would think to ask?

Fortunately, if you missed that, PayPal’s off the charts growth would catch your attention. Any startup that’s growing ten-fold every month is a bet you have to make.

Tech giants often had massive growth early. PayPal’s early numbers look a lot like those of Google, YouTube or WhatsApp.

This is why I strongly emphasize growth when I make early stage investments. Whatever its flaws, it’s hard to argue with a startup that’s 10X-ing its customer base every few weeks.

Somewhere right now, there’s another PayPal. A small group of driven people who are creating something big.

And I won’t stop until I find them.

What lessons do you draw from PayPal? Leave a comment at the bottom and let me know!

More on tech:

The Power Law (Part One)

Amp It Up

The Lean Startup

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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 with great returns.

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If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

Misfits Market

I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $15 on your first order. 

Photo: “PayPal Co-Founder Max Levchin, Allen & Company, 2015” by Thomas Hawk is licensed under CC BY-NC 2.0.

Business, Technology

Bringing Starlink to Iran

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Iran’s government has shut down the internet in many parts of the country amid mass protests. But Elon Musk is offering Iranians a lifeline.

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Musk hopes to provide internet to Iranians cut off from the web. He is seeking an exemption from Iran sanctions to do so.

Protests spread across Iran after the death of a young woman in police custody last week. Masha Amini, a healthy 22 year old, died of a supposed heart attack shortly after being arrested.

Her crime: not wearing the hijab, or traditional veil. Her family denies she had any history of heart problems, per NPR.

Protesters have flooded the streets of the capital, Tehran, chanting “Death to the Dictator.” At least five protesters have been killed by security forces.

The protests are occurring against a backdrop of economic misery. Inflation is over 50% a year and the price of basmati rice alone is up 200% from 2021.

In the face of unrest, the Iranian government has shut down cell service in central Tehran. It has also cut the entire Kurdish region in the northwest off from the internet.

Starlink may be able to reconnect protesters with the world. But it won’t be easy.

Starlink requires a special receiver. The company would have to smuggle large numbers of them into Iran to get people online.

Getting the units into Iran will be difficult. But the receiver is small enough to hide and can support many users at once.

Restored internet will help Iranians coordinate protests. It will also let them shine a light on their government’s thuggery.

I applaud Musk’s work to get Iranians back online. Best of luck!

What do you think of Musk’s attempt to get Starlink to Iran? Leave a comment at the bottom and let me know!

More on tech:

Robot Hands, Vertical Farms, and the Future of Food

Why Drone Delivery Will Be an Awesome Business

How to Get Internet to Cuba

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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 with great returns.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

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I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $15 on your first order. 

Photo: “Tesla and SpaceX CEO, and Solar City Chairman, Elon Musk, Sun Valley Idaho, Allen & Company Conference, July 2015” by Thomas Hawk is licensed under CC BY-NC 2.0.

Business, Technology

Who Will Unfreeze the IPO Market?

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It’s every founder and investor’s dream: ringing the bell at the NASDAQ on the day you go public. But in 2022, that dream has been elusive as tech IPOs have vanished.

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From a report out this weekend in the Financial Times:

The stock market downturn since the start of the year has caused the longest drought in US technology listings this century, with experts cautious about the pace of a revival even after tentative signs of life in other sectors.

Wednesday will mark 238 days without a tech IPO worth more than $50mn, surpassing the previous records set in the aftermath of the 2008 financial crisis and the early 2000s dotcom crash, according to research by Morgan Stanley’s technology equity capital markets team.

Startups are afraid to IPO in a down market. The NASDAQ has fallen 28% so far this year, and many tech stocks have fallen far more.

No startup wants its stock to get hammered like high profile IPOs Robinhood or Coinbase:

When you go public and your stock starts dropping like a stone, employees watch the price all day. This hurts morale, not to mention productivity.

In these turbulent times, startups are better off in the tranquil harbors of the private markets. There, valuations rarely change and companies can build outside the public eye.

Startups are able to stay private longer because many raised huge sums last year. Many late stage startups bagged $100 million or more from firms like Tiger Global.

That means they don’t need to go public to raise money. So, they can wait until the most opportune time to cash out.

If I were a shareholder of a late stage startup, I wouldn’t want them to go public any time soon. Why risk a black eye in the markets when you can wait it out?

Sooner or later, the IPO window will reopen. The most likely candidates to force it open are high profile startups like Stripe or Instacart.

Indeed, Instacart is working on an IPO and may list later this year. If that IPO is a success, you can bet there will be many more.

Until then, let’s bide our time and build!

When do you think the IPO window will reopen? Leave a comment at the bottom and let me know!

More on tech:

Midas Speaks: Sequoia’s Don Valentine at Stanford GSB

Why Drone Delivery Will Be an Awesome Business

Giving Investors What They Need to Say Yes

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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 with great returns.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

Misfits Market

I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $15 on your first order. 

Photo: “Yahoo! opens NASDAQ” by Yahoo Inc is licensed under CC BY 2.0.