Bear Market Hits Climate Tech

April 14, 2023 tremendousblog 2 Comments

Raising money is hard these days. Even climate startups, a VC darling, are starting to feel the pinch.

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From a Pitchbook report:

In Q1, climate tech startups raised $5.7 billion across 279 VC deals, according to PitchBook data. That’s a 36% decline in deal value and a 31% decline in deal count from the previous quarter. From its peak in Q3 2021, quarterly deal value has fallen more than 50%.

Overall US venture funding fell only slightly in the last quarter. But it too is down over 50% from the peak in 2021.

The bear market hit most startups hard in 2022. But climate tech held up better — until now.

Bad practices purged from the market in 2022 continued in climate tech until recently.

In February, I saw an uncapped note in a climate company. Even generative AI startups don’t seem to be getting away with that.

These notes are a terrible deal for investors. You don’t even know what you’re paying for your shares!

Running a financing like this will attract poor quality investors.

Savvy founders wouldn’t do it, even if they could. They want the best people around the table, period.

In a hot market, loosey goosey business practices proliferate. That sloppiness kills companies once the downturn hits.

I expect to see numerous climate companies go bust soon. That said, they’ll have plenty of company.

Long term, the outlook for climate tech is bright.

The US wants our own energy, produced here, cleanly. That’s true regardless of the business cycle.

Businesses and individuals also want to reduce their energy use. Energy costs money!

If you can produce clean energy or save energy, you can find customers.

I’m still excited about investing in climate tech. I’m mostly looking for SaaS products that can track and reduce energy use.

That product should be easy to sell.

The customer doesn’t believe in climate change? No problem.

You believe in saving money, right? If you don’t believe in saving money, you’re not a businessman.

I encourage climate founders to keep at it! Don’t worry about the macro environment — just build something great.

What do you think of climate tech? Leave a comment and let me know!

Have a great weekend everyone!

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To Riyadh, Hat in Hand

April 13, 2023 tremendousblog 3 Comments

“We came to San Francisco looking for them in 2017. Now . . . everyone is coming to [us].”
Ibrahim Ajami, Mubadala Investment Company (Abu Dhabi’s $284 billion sovereign wealth fund)

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Every hour on the hour, a private jet filled with men in Patagonia vests is landing in the Middle East. What do they want?

What does everyone want? Money.

From a new report in the Financial Times:

Top technology VCs such as Andreessen Horowitz, Tiger Global and IVP have jetted teams of executives to Saudi Arabia, the United Arab Emirates and Qatar in recent weeks, according to people with knowledge of the trips.

These visits come after their traditional North American and European backers contend with an economic downturn that has forced them to rein in private investments.

Here’s what’s going on.

VC’s usual investors are US pensions and endowments. Those guys aren’t investing right now.

Pensions and endowments allocate a certain percentage of their money to venture capital. A typical allocation might be 15%.

But the rest of their portfolio, especially stocks, has been hammered in the past year. Since venture investments aren’t priced daily, those appear to have held up better.

What happens when your stocks are in the toilet and your VC funds haven’t taken big markdowns? That 15% venture allocation has ballooned to 20%, 25%, or more.

So, want to put more money in venture? Yeah, didn’t think so. You’re already overexposed.

But on the other side of the table, VC’s have spent a lot of their funds. They invested rapidly in 2021, and need to raise again so they have something to deploy.

If their normal investors (also known as LP’s) are out, who else is there? Who else has a giant pot of money?

The oil rich nations of the Middle East.

The Middle East is the only game in town for the big VC’s. And the folks in Saudi Arabia and the UAE — they know it.

Now is a great time for them to get huge allocations in the finest funds. They should seize it.

But should the funds take their money?

Some governments in the Middle East have a poor human rights record. If it were me, I would never accept a dime from any authoritarian government, anywhere on Earth.

I just don’t agree with their actions. And frankly, I didn’t need money when I started this business.

However, there’s no reason to paint all of the Gulf with the same broad brush. Some countries are more forward thinking than others.

If a government displays a commitment to treating its people with respect, we should be happy to do business with them.

For smaller funds, the picture gets even more interesting.

Governments aren’t the only ones in the Middle East interested in tech. There are also many wealthy individuals who want a piece of the future.

If that person is honorable, I welcome the opportunity to do business with them, wherever they live.

What do you think of tech in the Middle East? Leave a comment and let us know!

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Meet My Latest Investment: TANGObuilder

April 12, 2023 tremendousblog 5 Comments

Housing costs are out of control. We all know it — but how do we fix it?

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Construction delays are a major driver of costs. If only we could design buildings easily, get them approved, and break ground sooner!

TANGObuilder makes that possible. This cutting edge software makes structural engineering a breeze.

Designs take less than half as long. Projects start months earlier.

TANGObuilder’s approach is unique. CEO Martin Diz is a PhD aerospace engineer who noticed that structural engineering was decades behind aerospace.

So Martin and his team took the best tools from aerospace and applied them to construction. TANGObuilder helps engineers avoid costly errors, cut unnecessary materials, and more.

Martin’s unique insight and strong customer focus excites me. And so does living in a rock solid home that costs less!

I’m delighted to be a new investor in this great startup. Check out TANGObuilder and build something great!

What do you think the future of housing will be?

Leave a comment and let us know!

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Revenge Startups – Yum!

April 11, 2023 tremendousblog 6 Comments

Over 300,000 people in tech have lost their jobs since 2022. And they’re out for revenge.

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A revenge startup, to be exact. From a report out today in The Wall Street Journal:

Jen Zhu co-founded Maida Health Inc., a startup that provides software tools for healthcare organizations, after her job as a senior manager of program development at Carbon Health Technologies Inc. was eliminated last year. “For me it was initially a sense of relief,” Ms. Zhu said of her dismissal, which made her feel like she “didn’t have an excuse anymore” not to pursue her entrepreneurial ambitions, she said.

I love revenge startups! These founders have amazing skills honed for years at the best companies.

But more importantly, they’re pissed off.

They’re pissed off at the boss who fired them. And maybe they’re pissed off at themselves too — for waiting too long to follow their dreams.

“I’ll show you!” is a powerful motivator.

Give me an unbalanced, chip on her shoulder, slightly crazy founder any day! The calmest person isn’t necessarily the best entrepreneur.

Even better, these revenge founders are recruiting at the perfect time. Great talent is more available than it has been in years.

A few talented people and something to prove — that’s all a startup needs.

Some investors are skeptical of founders who were laid off:

“Wesley Chan, co-founder and managing partner at FPV Capital, a $450 million early-stage venture firm, says his firm has received pitches from founders affected by layoffs. “We always encourage them to pursue their idea but we are unlikely to fund it,” he said. “The startups that drive exceptional returns have been thinking of their idea their entire lives.”

I disagree. Did Elon think about electric cars all his life? Was Travis always focused on killing taxis?

No. Elon and Travis worked on completely different businesses before Tesla and Uber (payments and file sharing, respectively).

But what about this scary fundraising landscape? Don’t worry about it.

I’ve seen companies run out of money completely and keep grinding. And I’ve seen others raise millions from the best investors and self-destruct.

If you make something people want and stay focused, you can succeed! And you’ll never miss that cushy job at Google.

Are you starting a revenge startup? Leave a comment and let us know!

Great to be back!

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Business, Technology

Why I Still Love Silicon Valley

April 6, 2023 tremendousblog 3 Comments

Every day, I read about another venture firm that won’t touch Silicon Valley. This is a mistake.

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As VC’s and angels, we have one goal: invest in the next Uber. Or Snowflake. Or Google.

Of the 100 largest tech companies on earth by market cap, 61 are in the US. Of that 61, 35 are in the San Francisco Bay Area.

That’s 57% of US tech giants.

It’s great to look at startups in many cities. But if most of what you’re looking for is found in City A, you have to look in City A as well.

This is especially true now that valuations for Silicon Valley startups have fallen. From a new report in The Wall Street Journal:

One of the biggest drivers of investing far from a venture investor’s base has always been the search for places where there was less competition for deals, said Olav Sorenson, faculty director of the Price Center for Entrepreneurship and Innovation at the UCLA Anderson School of Management.

“The number of people writing checks right now in Silicon Valley has gone down,” Dr. Sorenson said, adding, “For those who are still investing, it makes it more attractive to stay local.”

I have 19 investments and I’m finalizing a 20th now. 8 are based in the Bay Area, or 40%.

This is below the historical representation of the Bay among megacorps. That makes sense because post-COVID, companies have spread out more.

I suspect the trend of VC’s avoiding the Valley is driven by marketing. A venture fund has to distinguish itself from others in order to raise money.

One way to do that is say “You know that place where most of the great companies are? We’re actually not going to look there.”

It may help you raise money. But I doubt it will help you get a return on that money.

This doesn’t mean founders need to be in the Bay. Show me any company in a huge market with rapidly growing revenue and a great product, and I don’t care if it’s in San Francisco or Sandersville, Mississippi.

In fact, I think the best place to build is a small town. It lowers your burn, especially critical in a down market.

You can supplement that with fundraising trips to Silicon Valley. Most investors are still there.

As for me, I’m going to keep investing nationwide. Only a big net will catch a big fish.

What do you think of Silicon Valley startups? Leave a comment and let us know!

The next blog will be on Tuesday, April 11. I’m taking off for Good Friday tomorrow, and on Monday I have an acting gig! 🙂

Have a wonderful Easter weekend everyone! 🐇

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Putting the Cart Before the Horse

April 5, 2023 tremendousblog 2 Comments

A founder’s time is the world’s most valuable resource. And every day, I see them waste it.

Let me explain…

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Investable vs. Not Investable

All day every day, I get pitches from ambitious entrepreneurs. I love talking with them — but they usually have the same problem.

Their company isn’t ready for investment yet.

Their product isn’t finished. They have no customers. They have no revenue.

And they all want to raise venture capital.

I get it, we all need money! But consider the investor’s perspective.

Every year, I look at over 2000 deals. I choose around 10, or 0.5%.

At that point, I’m going to pick companies that are launched with some paying customers, right?

It’s an easy way to narrow down the list. Paying customers also show they can build a product people want.

Given the available deals, why would I put money into a company with no product and no customers? It just wouldn’t make sense.

There is the rare investor who wants to invest as early as possible. But they seem to be even more elusive than the unicorn startups we’re all chasing.

Capital Raised Per Hour

Consider your precious time. For every $1 million in capital you raise, how many hours will it take?

If you have a launched product making $20,000/month in revenue, perhaps it takes 200 hours to raise a $2 million seed. That’s $10,000 per hour.

Now, what if you are pre-product?

The odds of raising at all are very slim. Even if you did, it’s likely to be a much smaller pre-seed round of, say, $500,000.

What if that takes up half your time for a year? Perhaps you’re working 70 hour weeks, and spending 35 on fundraising.

That’s just $275/hour, about a 97% lower yield than the founder with some traction.

What Do I Do for Money in the Mean Time?

Accelerators are a great choice. They’re used to working with early stage companies and typically provide $100,000 to $150,000 plus a great network.

But even most of them want to see a finished product. So get that out the door as soon as you can!

But I Need Money to Build the Product!

Time for the hard truth. If your team doesn’t have the technical skill to build an MVP, investors won’t touch it anyway.

You can’t make a software company without people who know how to make software.

But all is not lost!

You can learn coding. And you can also use amazing no-code tools like Bubble to get an MVP out the door.

Wrap-Up

Raising money isn’t the best use of your time at the earliest stages. Especially in a down market, you’ll be beating your head against the wall.

Do you want to have Zoom after Zoom that goes nowhere? Or do you want to build an awesome product and get some paying customers?

Once you have that, we investors will be calling you.

Best of luck!

What are your experiences with fundraising? Leave a comment and let me know!

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Food, NYC Area

The Pizza Princes of Grimaldi’s

April 4, 2023 tremendousblog 3 Comments

Pizza is a religion in New Jersey, ranking just below the Catholic Church. So I observed a moment of silence as I entered the inner sanctum.

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This is Grimaldi’s in Hoboken, NJ. Founded in 2010, Grimaldi’s serves outstanding Neapolitan and New York style pizzas from its 1000 degree coal oven.

After perusing the extensive menu, I decided to order the original: a margherita.

I tried to pay attention to how my friend’s week had gone, but I kept getting distracted. Just feet away, pizzaiolos were shaping dough with the skill of Michelangelo.

Whenever a pizza came out, I eyed it like a hungry dog. Shoot, not mine!

Then, the moment of truth. Our waitress placed my steaming pie in front of me, and I beamed.

Hoisting the first slice, I could tell the crust was crispy but not singed. Perfection.

Time for a bite….

I could almost see the garden where the tomatoes were planted. Fresh basil perfumed the luscious fruits.

This was the best pizza sauce I’ve ever had.

The mozzarella was soft and unctuous. The crust: airy and crisp.

You won’t find a better margherita. I made just one mistake: not ordering the larger size, like my friend did!

Perhaps the reason Grimaldi’s is so good is its attention to detail.

Every pizza is carefully formed. Every drink comes in a frosted glass.

That’s what it takes to be the best.

Grimaldi’s also has mouth-watering entrees like eggplant parm. I have to try it some day — if I can ever turn down the pizza!

Grimaldi’s is conveniently located on Hoboken’s Washington Street. It’s open from 11:30am to 11:00pm, seven days a week, and even delivers.

Stop in for the pie of your life!

What are you favorite pizzerias? Leave a comment and let me know!

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Food, NYC Area

Chocolate Almond Croissant Paradise

April 3, 2023 tremendousblog 6 Comments

Strolling down a side street in North Jersey, I popped into a small storefront. Inside: the best almond chocolate croissant I’ve ever had.

This is Petite B French Bakery in West New York, NJ.

In a town that’s historically Cuban, Petite B brings a different flavor. The owners, originally from France, opened in late 2020 to rave reviews.

I feasted my eyes on baguettes, lemon tarts, and madeleines. But I was here for one reason, and one reason only.

A chocolate almond croissant.

This is the granddaddy of French pastry. You get everything wonderful at once: buttery layers of pastry, smooth almond cream, and rich chocolate.

I ordered, paid, and scampered off like a mouse with a treat. Standing on the sidewalk, I gingerly removed the pastry from the bag, not wanting to lose a single almond.

I bit down through crunchy layers of pastry and nuts into the gooey interior. Perfection.

A good almond croissant is moist without being soggy. Its outside is crisp, its inside yielding.

Petite B does it better than anywhere I’ve ever been, even in France.

Petite B also has excellent prices. A cannelé is just 50 cents, the lowest I’ve ever seen.

This sunny bakery offers a lot more than pastry. Savory dishes like quiche and croque monsieur round out the menu, along with a wide assortment of La Colombe coffees.

There’s even a spacious outdoor seating area in the warmer months!

I used to have to go to New York City to get some of my favorite French foods. Not anymore!

Petite B is open every day but Monday. Closing time varies throughout the week, so be sure to check the hours before your visit.

I hope you enjoy this taste of France as much as I did!

What are your favorite bakeries? Leave a comment and let us know!

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Tremendous

Monthly Archives: April 2023

Bear Market Hits Climate Tech

To Riyadh, Hat in Hand

Meet My Latest Investment: TANGObuilder

Revenge Startups – Yum!

Why I Still Love Silicon Valley

Putting the Cart Before the Horse

The Pizza Princes of Grimaldi’s

Chocolate Almond Croissant Paradise

An angel investor's take on life and business