Monthly Archives: November 2022

Business, Technology

Is SBF Headed to Prison?

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Crypto exchange FTX is spiraling toward bankruptcy. Its founder, Sam Bankman-Fried, could be facing prison.

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The SEC is investigating whether FTX misused customer funds. From Bloomberg:

The Securities and Exchange Commission and the Commodity Futures Trading Commission are investigating whether the firm properly handled customer funds, as well as its relationship with other parts of Bankman-Fried’s crypto empire, including his trading house Alameda Research, Bloomberg News reported Wednesday. Officials from the Justice Department also are working with SEC attorneys, one of the people said. 


This investigation has gone on for months, long before FTX teetered on the edge of insolvency.

At issue is SBF’s numerous interests. He founded the FTX exchange, its American counterpart FTX US, and crypto hedge fund Alameda Research.

FTX may have improperly moved client money between them. SBF could’ve been trying to plug a hole in another part of his empire.

To see how flagrantly illegal this is, let’s use an old economy example. Imagine if Bank of America also had a hedge fund.

When the hedge fund is struggling, Bank of America raids your checking account to make up the difference. See the problem?

If this is true, SBF could be facing years in prison.

With his empire in flames and the feds circling, SBF may go on the lam like Do Kwon, founder of Terra. It would be a stunning turnabout for a man whose net worth was $15 billion on Monday.

What do you think the future holds for FTX and SBF? Leave a comment at the bottom and let me know!

There will be no blog tomorrow in honor of Veteran’s Day. Have a great weekend and see you on Monday! 👋

More on tech:

FTX Blows A Massive Hole in Tiger’s Portfolio

Hedge Fund Giant Losing $40 Million a Day

VC’s Sour on China — Funding Down 44%

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Photo: FTX CEO Sam Bankman-Fried

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Business, Technology

FTX Blows A Massive Hole in Tiger’s Portfolio

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It’s going from bad to worse at Tiger Global Management. As crypto exchange FTX implodes, Tiger could lose hundreds of millions of dollars.

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From a new report in Forbes:

Tiger Global Management appears to have just taken another hit.

The hedge fund headed by billionaire Chase Coleman has been among the most prominent investors in Sam Bankman-Fried’s FTX crypto exchange.

On Tuesday, Binance CEO Changpeng Zhao tweeted that his firm was buying FTX’s non-U.S. businesses to rescue it from what he said was a “significant liquidity crunch.”

The hedge fund giant made multiple, huge investments in FTX:

Tiger was part of a group of investors in FTX’s January Series C round that valued the company at $32 billion. It previously also participated in a Series B round that valued FTX at $25 billion. During that raise, FTX took a page out of Elon Musk’s playbook by raising exactly $420.69 million.


Both the Series B and C raised about $400 million. A giant like Tiger would likely have written checks of at least $100 million in each of those rounds.

I’ve seen Tiger in numerous deals, and their typical check size was $100 million or more.

Now, Tiger will likely take a total loss on its FTX stake. Binance is expected to buy the exchange for essentially nothing, simply assuming its liabilities.

This means Tiger could be looking at hundreds of millions of dollars, up in smoke.

This comes at what’s already a terrible time for Tiger Global. Its fund is down 55% for the year, with losses accelerating last month.

Meanwhile, it has only marked down its private portfolio by 8%. That is far too little given the huge losses in the NASDAQ, which means more markdowns to come.

Could this be the straw that breaks the camel’s back? Only time will tell.

But even without the implosion of FTX, I expect Tiger to liquidate.

Its fund must more than double to get back to its high point and start charging performance fees again. Those fees make up most of a hedge fund manager’s pay.

Tiger has taken huge losses in both public and private markets. Why does anyone still trust them with their money?

Were I an investor in Tiger, I’d be dumping every cent of it yesterday.

What do you think the future holds for Tiger? Leave a comment at the bottom and let me know!

More on markets:

Hedge Fund Giant Losing $40 Million a Day

Tiger Global Down 52% — Losses Over $18 Billion

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

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Photo: FTX CEO Sam Bankman-Fried

Business, Technology

Hedge Fund Giant Losing $40 Million a Day

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The bloodletting continues at hedge fund giant Tiger Global Management. The fund lost approximately $40 million a day in October.

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From a new report in the Financial Times:

Losses at Tiger Global Management continued to mount in October after the New York-based hedge fund was buffeted by the whipsawing value of technology stocks in the US and a sell-off in China.

The firm’s flagship hedge fund lost 5.4 per cent in October, taking losses this year to a new low of 54.7 per cent, according to a person with knowledge of the figures.

Tiger managed about $17 billion in assets at midyear. With October’s 21 trading days, that 5% loss amounts to roughly $40 million per day or over $6,000,000 per hour.

The NASDAQ index of technology stocks rose slightly last month. This underscores Tiger’s abysmal stock picking.

Tiger’s losses may be even worse than they appear.

Its $40 billion portfolio of private tech startups dwarfs its public holdings. Tiger values those companies itself.

Has Tiger really taken markdowns commensurate with its huge losses in public stocks?

I doubt it. Why make a bad situation look even worse?

The end game for Tiger is liquidation.

Their fund would have to more than double just to get back to its high point. Only then could the partners start collecting that juicy 20% performance fee again.

That fat fee is the biggest prize in hedgefundland. You can bet these traders won’t want to give it up.

If Tiger liquidates and the partners start a new fund, they can start charging performance fees on day one. The slate is clean!

If I were an investor in Tiger, I’d be dumping my shares. These losses are huge and show no signs of improving.

Why pay Tiger’s fees when you can park your money in a low fee index fund instead?

What do you think the future holds for Tiger? Leave a comment at the bottom and let me know!

More on markets:

Tiger Global Down 52% — Losses Over $18 Billion

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

VC’s Sour on China — Funding Down 44%

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Photo: Tiger Global CEO Chase Coleman

Business, Technology

Is It Time for a Startup Hiring Spree?

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Many top tech companies are dumping talented engineers. Is it time for startups to pounce?

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Last year, I watched many of my portfolio companies struggle with hiring. They had raised big funding rounds in the hot market, but good engineers were all spoken for.

With layoffs at companies like Twitter, Stripe and Lyft, the game has changed. From a new report in The Wall Street Journal:

Kathy Zhu said she is lining up candidates for engineering, customer service and other roles at Streamline AI, the two-year-old tech startup she co-founded. They include prospects from “two or three companies that just had big layoffs,” she said.

“There’s an abundance of talent right now, because of these layoffs,” Ms. Zhu said. “A few years ago, there was no way we could’ve attracted candidates like this.”


It’s a welcome reprieve for startups that struggled to compete with tech giants.

Facebook paid $500,000 a year or more to many experienced engineers. No startup can compete with that.

But now Facebook is planning huge layoffs. That $500,000 a year offer at Big Tech isn’t happening.

In addition to frozen hiring and layoffs, many tech giants’ stock has been crushed. Facebook’s stock is down 75% from the peak last fall.

Facebook offered my friend a job last year. He declined, uncomfortable with the company’s impact on the world.

That also proved a wise financial decision. His stock grants would now be almost worthless.

The value of stock grants falling off a cliff makes Big Tech workers more willing to leave for a startup. The golden handcuffs have been loosened.

After all, who cares if you leave before your stock vests if the stock isn’t worth much anyway?

But despite the buyer’s market for engineers, startups will likely keep hiring limited. The funding environment is difficult, and preserving cash is more important than splurging on talent.

The best option for startups is to snap up a couple of top candidates you could never have gotten otherwise. Keep the rest of the business lean and mean.

Is hiring getting easier for your startup? Leave a comment at the bottom and let me know!

More on tech:

Bridge Rounds: The Path to Riches?

VC’s Sour on China — Funding Down 44%

The First Time I Used the Internet

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Business, Technology

Bridge Rounds: The Path to Riches?

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We usually think of bridge rounds as throwing good money after bad. But new data shows that some bridge rounds can be an amazing bet.

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Bridge rounds with a top tier VC are some of the best performing investments in venture capital. They have returned a multiple of over 5x in less than 4 years, according to a new analysis from AngelList:

…on an indexed basis, the top-tier / bridge segment is the best performing segment. We find that for investments aged 2+ years (completed after 2018), the gross TVPI of capital in bridge deals with top-tier VCs vastly outperforms all other segments:

Case in point: a consumer app I re-invested in this summer. I first invested in this startup’s seed round last fall.

Since then, it had more than 5x-ed revenue. Burn is low and the company is firing on all cylinders.

Seeing the same great performance I did, several top tier VC’s joined the round. But the valuation was only a little higher than the fall of 2021.

Given the opportunity to put more capital into one of my winners, I backed up the truck. And I hope to invest even more in their Series A!

Why is this such a great bet?

I already knew the company well, and I saw it execute on its plan over a period of 9 months. Meanwhile, the revenue multiple I paid this time was far lower than before!

So what’s in it for the founder?

They can quickly raise capital from investors they already know and trust. Then, they can get back to building.

They’ve still preserved the option to get a Series A at a much higher valuation. And now they have the cash to get them there.

The outperformance of bridge rounds with top tier VC’s is no accident. Many top firms opportunistically offer more money to their top performers, even when they’re not raising.

If you’re getting the investor updates and you saw the company just tripled revenue, why wouldn’t you offer them another $1 million? What’s the point of waiting for someone else to steal the deal from you?

But we have to distinguish these awesome bridge rounds from their evil twin: the bridge to nowhere.

A company in my portfolio that’s barely growing and burning tons of cash raised a small bridge recently.

Tellingly, no top tier VC participated. They were only able to raise from a few angels.

I declined to participate. I’m happy to help the company in other ways, but follow-on capital is reserved for top performers.

No exceptions.

I’m excited to keep re-investing in the stars of my portfolio. I can’t wait to see them use that cash to take over the world!

Do you do bridge rounds? Why or why not?

Leave a comment at the bottom and let me know!

Have a great weekend everybody!

More on tech:

Bridge Rounds: Yea or Nay?

VC’s Sour on China — Funding Down 44%

The First Time I Used the Internet

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I wrote a detailed review of Misfits here.

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Photo: “Fishing at Jade Belt Bridge, Summer Palace, Beijing” by Dimitry B is licensed under CC BY 2.0.

Business, Technology

VC’s Sour on China — Funding Down 44%

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Venture funds are giving up on China. Funding has fallen 44% this year amid a government crackdown on tech.

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From a report out overnight in Bloomberg:

Venture capital investments in China are falling sharply this year, making it one of the worst-performing countries globally after the Communist Party’s crackdown and an overall decline in tech valuations.

The value of venture capital deals in the country tumbled 44% to $62.1 billion through October, compared with the same period in 2021, according to research firm Preqin.

…China is among the worst performers, with a venture investment drop that is worse than the global decline and the pullback in the US. 

The US has fared considerably better than China. Venture funding is down just 27% in the first three quarters compared to the same period in 2021, according to CB Insights.

The Communist party has cracked down on numerous Chinese tech companies. This has crushed the stocks of companies like Alibaba and DiDi Global.

As if that wasn’t enough, neverending Covid lockdowns have taken a toll on the economy. From Bloomberg:

China’s venture landscape has been aggravated by the Communist Party’s harsh Covid Zero policy. Lockdowns in cities like Shanghai and Zhengzhou have hampered all manner of business, from advertising and investments to the production of Tesla Inc. automobiles and Apple Inc. iPhones.

Some VC’s are hiding out in semiconductors. The government currently favors the industry as a strategic priority.

That’s all well and good until Xi Jinping decides foreigners shouldn’t own assets critical for national security. Then, venture fund go bye-bye.

Investors getting involved with China are playing with fire. It is a brutal dictatorship with no respect for human rights or the rule of law.

We should invest in places like the US, Europe and Japan. Democracies that take property rights seriously are a much better place to do business.

Would you invest in China? Leave a comment at the bottom and let me know!

More on tech:

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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, Life, Technology

The First Time I Used the Internet

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It was 1994. I was eight years old. And I was pretty sure this was going to change everything.

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My mother and I were in the basement of a low-slung brick building. This was the University of Wisconsin-Oshkosh, the first place in town to get the internet.

My mom explained that you could type any question into the computer and get an answer. I hesitated, wondering, “What should I ask first?”

I typed in question after question, amazed as answers popped up like magic. Before I knew it, our hour was up and we emerged back into the light.

I was pretty sure this was going to be big.

All week, I wrote down question after question. I could hardly wait for Saturday, when we could go to the computer lab again.

About a year later, we found ourselves in a downtown office. Cables hung from the ceiling and boxes were half unpacked.

These were the offices of NorthNet, a new internet service provider. We were going to be one of their first customers.

I don’t know how we ever afforded it. But even back then, my mom must have seen that this was the future.

Soon, we were hearing the screech of the modem and interrogating Webcrawler at home.

By the late 90’s, my mom had switched to a new search engine called Copernic. Copernic aggregated results from a bunch of different search engines.

My mom began to notice that most of the best results were coming from a new search engine.

It was called Google. And it was just a few months old.

She wrote to them to tell them how great their results were. They responded with a care package full of Google swag: hats, shirts, you name it!

If only we had been accredited investors. We could’ve put a check in! 🙂

Those were great days on the early internet. The future seemed limitless and tech could only do good.

I didn’t know it then, but those hours in the computer lab would help form the rest of my life.

I worked in medical software after college. Later, I became an angel investor.

Today, I look for startups that can be as transformational as Google was.

They’re rare. But it only takes one.

Do you remember the first time you used the internet? What was it like?

Leave a comment at the bottom and let me know!

More on tech:

What I Don’t Invest In

Andreessen Crypto Fund Down 40%

Why Now Is the Best Time to Invest in Startups

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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. 

Photos: Webcrawler in 1996