Category Archives: Technology

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

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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When Are You Ready to Raise a Seed Round?

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

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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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.

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The Startup Metrics That Make Investors Drool

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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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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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. 

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How Startup Founders Get Scammed

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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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.

The Founders: The Story of PayPal

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

Bringing Starlink to Iran

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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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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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.


Who Will Unfreeze the IPO Market?

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

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

Midas Speaks: Sequoia’s Don Valentine at Stanford GSB

“We love recessions. Best time to invest in our experience.”

That’s Don Valentine, founder of Sequoia Capital and perhaps the greatest VC of all time. Today, I dug into a fascinating talk he gave in 2010 at the Stanford Graduate School of Business (GSB).


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Valentine breaks down Sequoia’s investment approach, which heavily emphasizes markets.

Sequoia only wants to bet on companies taking on the biggest markets. If the startup isn’t solving a huge problem, the odds of an outlier success are slim.

“If you don’t attack a big market, it’s highly unlikely you’re ever going to build a big company.”

Don Valentine

Valentine is wise to emphasize the size of the opportunity. After all, a tiny number of highly successful startups drive almost all the returns in venture capital.

I’m going to focus more on market size, based on Valentine’s advice.

An outstanding founder with a rapidly growing company is great. But if she doesn’t have a giant market to grow into, the company can only go so far.

Once Valentine finds a market he likes, he often makes numerous investments in that area.

He invested in Apple, which helped create the PC market. Then he invested in other companies to produce memory for the PC’s, peripherals, etc.

Presciently, Valentine mentions the opportunities in the mobile market in his talk. This was in 2010, just 3 years after the launch of the first iPhone.

Sure enough, Sequoia made a killing betting on the iPhone ecosystem. The firm invested early in Instagram, WhatsApp and others, netting billions.

At one point, Valentine shows a slide of some of the greatest founders he’s invested in.

What strikes me is how happy many of them look. They’re beaming, ear to ear.

This is the look of people who are building what they dream of and reaching their full potential.

Now, I’m off to find some entrepreneurs like that!

More on tech:

Managing a Crisis the Sequoia Way

John Doerr’s Biggest Mistake

The Power Law (Part One)

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Save Money on Stuff I Use:

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. 

SoftBank May Launch Third Vision Fund

Masayoshi Son’s Softbank Group may launch a third, massive venture fund. From a report that broke this morning in The Wall Street Journal:


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Global tech investor SoftBank Group Corp. is considering the launch of a new giant startup investment fund, part of a plan to turn a new leaf after the poor performance at its two earlier funds, according to people familiar with discussions at the company. 

SoftBank, led by Chief Executive Officer Masayoshi Son, has been hit particularly hard by the rout in tech valuations that began last fall, posting a record $23 billion loss in the three months ending in June. 

The first two Vision funds, massive at $99 billion and $56 billion respectively, have not performed well. The first is up just 20% since its launch in 2017, while the second has lost nearly 20%.

Massive bets on WeWork, Didi Global, and others have soured, leaving the funds with huge losses.

But if we look at Softbank’s performance more closely, the picture begins to brighten.

Vision Fund 1 is at least in the black. And since it was launched in 2017, it has about another 5 years on its fund life.

That’s a lot of time to notch big gains.

Vision Fund 2’s performance looks awful, until you realize it’s only 3 years old. It’s common for venture funds to lose money early on, as poor performers go bust.

The big winners usually take longer to mature.

But the Vision funds have one big thing against them: size. A venture fund is expected to at least triple in 10 years to justify the risk.

That’s hard enough with a small fund, but when you’re sitting on $100 billion, it’s almost impossible.

If you own 10% of companies you invest in, you have to find companies that will generate $3 trillion of value in 10 years. That’s more than the entire market cap of Apple.

Even if you own 20%, you still need to find a Google. In every fund.

Companies like Apple and Google are rare, coming along perhaps once a decade. The idea that you’ll find one every few years and be able to get major ownership is unlikely.

Another problem with having so much capital is that you have to write tons of huge checks, fast. It’s venture capital meets Brewster’s Millions.

This means writing giant checks at high valuations with minimal oversight. After all, who has time to attend all those board meetings when you’ve got billions more to deploy?

Big investors have been lured by the siren song of venture capital for years, from Softbank to Tiger Global. They see the big returns and think “What if I could get returns like that on my $100 billion?”

The problem is that venture capital doesn’t scale that big.

Done right, Vision Fund 3 could be a huge success.

Valuations are down and capital is scarce. This is especially true at the late stage, Softbank’s specialty.

Son could have his pick of deals, making gains so large any past failures are forgotten. But he’d be wise to keep the fund small.

Son has had some incredible successes — Alibaba, DoorDash, Uber. He may be struggling now, but something tells me he’ll make a comeback.

Would you invest in Vision Fund 3? Why or why not?

Leave a comment at the bottom and let me know!

More on tech:

Why Drone Delivery Will Be an Awesome Business

John Doerr’s Biggest Mistake

Giving Investors What They Need to Say Yes

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Save Money on Stuff I Use:

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: Masayoshi Son