Tremendous

An angel investor's take on life and business

  • India’s COVID Nightmare: “Bring Oxygen or Take Your Father Away”

    At 5 a.m. on Saturday, Aparna Bansal’s cellphone rang. “Can you come now?” said a man from the New Delhi hospital where her 76-year-old father is being treated for Covid-19. The instructions were clear, she said: Bring oxygen or take your father away.

    Her husband lines up at 4 a.m. every morning at an oxygen-supply store in east Delhi to buy two cylinders of oxygen to take to separate hospitals treating her mother and father. Neither facility has enough supply to treat the waves of patients coming through every hour.

    India is fighting the highest COVID caseload of any country so far. Hospital beds and especially oxygen are running critically short, and deaths are increasingly rapidly. The medical system has nearly collapsed:

    India has been reporting more than 2,000 deaths a day for five straight days. The real toll is likely much higher. It is expected to grow in the coming weeks.

    A general relaxation of caution earlier this year, along with several massive superspreader events, seeded the current crisis:

    Life returned to normal. Weddings and parties resumed. Masks slipped, as did social-distancing rules. A new season of state-level elections ushered in big political rallies and street parades. A massive religious festival known as the Kumbh Mela was allowed to take place, bringing millions of Hindu pilgrims to the banks of the river Ganges and sending a message that there was no reason to worry about Covid-19.

    By mid-March, cases started climbing again—then accelerated with breathtaking speed, becoming a vertical line rather than an upward sloping curve.

    Much more here.

    Many had put their faith in an herbal remedy called Coronil, which was even touted by Indian Health Minister Harsh Vardhan. However, there is little evidence behind the treatment.

    Reports from people inside India right now are dire:

    You can find the full thread on India’s crisis here, and another excellent thread on how it began here.

    Dig into these posts for more on COVID:

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  • Inside a Startup Accelerator Demo Day

    Yesterday, I attended the Remote Demo Day for the latest class from the Launch Accelerator, a startup accelerator run by noted investor Jason Calacanis. We hear a lot about accelerators (also known as incubators), from famous programs like Y Combinator or Techstars to small, local outfits.

    One thing most of them have in common is a demo day. This occurs at the end of the accelerator program and gives the startups an opportunity to pitch their company to investors.

    So what goes on at these demo days?

    Seven companies had three minutes each to present. A panel of judges (investors at venture firms) and members of The Syndicate (Calacanis’ investment group) submitted questions. Founders then had two minutes respond. Finally, both the judges and syndicate members voted on their favorites.

    Here are some interesting trends I noticed from the meeting:

    1) Business-to-business companies got a better reception than business-to-consumer companies. Business customers are less fickle and more likely to remain customers once acquired. They also have deeper pockets, and if you can show them that a technology clearly saves them money or gives them an important new capability, they’re likely to buy. Consumers are harder to pin down.

    2) Startups are very diverse now, in terms of race, gender and geography. Two of 7 founders were female, and two were minorities. This isn’t equal representation, but it is progress. The companies came from all over America, from the usual suspects (Bay Area, NYC) to the South and even Europe.

    3) It’s not all software companies. My favorite was actually a beverage company. Show investors some substantial recurring revenue and fast growth, and you may find checks flying back at you. What’s more, so many companies these days have a tech angle. This company sells their beverages online in a subscription model.

    4) Everyone’s nice. Despite stereotypes of grizzled money guys telling you “It’ll never work!” the reality is that reputation is critical in this industry. Expect specific questions that might be hard to answer, but don’t expect (or tolerate) jerks.

    Expect specific questions that might be hard to answer, but don’t expect (or tolerate) jerks. #startups

    5) Even early stage companies fresh out of an accelerator have real products and revenues. There were no companies just trying to get an idea funded or still working on a prototype. They wouldn’t have made it into the accelerator in the first place, and even if they had, they wouldn’t have attracted any investor interest. Investors help business scale. They don’t help ideas become products.

    So, who got funded? That remains to be seen, but if there’s enough interest from syndicate members, several could potentially get the nod. I know I’m interested in investing in two of the startups I saw.

    We are so fortunate to live in a country that produces incredible entrepreneurs with such regularity. This was the 21st class to go through the accelerator, and there will be many more!

    Congrats to all the great founders that presented, and a happy weekend to all my readers!

    Dig into these posts for more on startups:

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    Photo: ““Great white shark” by Gussy (Luke) is licensed under CC BY-NC-ND 2.0

  • Departing GameStop CEO Gets $179 Million Payout

    GameStop CEO George Sherman will be leaving the company soon, but not empty handed:

    As a condition of his exit, GameStop is speeding up the time frame for Sherman to receive the shares, generating the award.

    Sherman, who has been CEO since April 2019, forfeited $98 million worth of stock this month because he did not meet performance targets, GameStop disclosed last week.

    Still, he stands to receive a stock payout currently worth $179 million because GameStop granted him more shares linked to his tenure at the company rather than to his performance as most companies do with their CEO, said Eric Hoffmann, a vice president at compensation consultant Farient Advisors LLC.

    This strikes me as bad policy and poor corporate governance, especially for a company that is losing a lot of money and facing rapidly declining sales. Why should an executive be rewarded simply for sticking around, as opposed to actually accomplishing something?

    Why should an executive be rewarded simply for sticking around, as opposed to actually accomplishing something? $GME

    I am hoping the new board, which will be chaired by Chewy founder Ryan Cohen and includes several other former Chewy executives, will put a stop to payment for no performance. After all, GameStop is already being robbed enough:

    Two dozen cars squealed up to a GameStop store in Emeryville early Thursday and their occupants smashed the front door glass, broke inside and rifled the store shelves, police said.

    An unknown amount of goods, including collectible figurines, was taken from the store at 3980 Hollis Street shortly after midnight.

    Dig into these posts for more on GameStop:

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

  • The Unstoppable Wave Behind Stocks

    In the last year, a torrent of money has flooded into Exchange Traded Funds (ETF’s) that track the stock market:

    Over the last 12 months, about $650 billion has flowed into stock and bond ETF’s, a flow that’s unusually large versus history and may help explain why markets have been so strong.

    Despite the attention to volatile stocks like GameStop, a far bigger firehose of cash is aimed at ETF’s. When investors buy ETF’s, fund managers have to buy the stocks in the index. If I buy an S&P 500 index fund from Vanguard, for example, Vanguard has to buy the 500 stocks in the index in proportion to how much of the index each comprises. This pushes up the stock market.

    A big force behind this buying may be increasing personal income, partly due to COVID-related stimulus. With consumer balance sheets looking flush with cash, I expect this trend to support markets for the forseeable future.

    Dig into these posts for more on markets:

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    Photo: “Huge wave” by bluesbby is licensed under CC BY 2.0

  • How China Could Attack Bitcoin

    China is creating its own cryptocurrency, which will allow much easier surveillance and control of their population than existing coins. In order to push bitcoin off its throne and replace it with a digital yuan, China could launch a powerful sneak attack on bitcoin.

    In order to push bitcoin off its throne and replace it with a digital yuan, China could launch a powerful sneak attack on bitcoin.

    Bitcoin transactions are handled by “miners,” or powerful computers that perform calculations to verify transactions. A report from scholars at Princeton University and Florida International University notes that 74% of this mining power is in groups, or “pools,” managed by China.

    That much computing power, also known as hash rate, gives China an unrivaled ability to hack the currency:

    One broadly understood security property of Bitcoin is that no single party can control more than 50% of the hash rate, so this statistic is worrying.

    Cheap land and energy have helped China dominate bitcoin mining:

    These facilities are primarily located in remote areas with inexpensive electricity and cheap land, such as Sichuan province and Inner Mongolia. These advantages allow Chinese miners to achieve greater profit margins than their competitors in other countries; a study in early 2018 found that one bitcoin could be mined in China at 2/3rds the electricity cost of the same operation in the U.S.

    One way China could attack bitcoin and its users would be to refuse to deal with certain addresses controlled by dissidents or geopolitical rivals. China could connect IP addresses and e-commerce data with bitcoin wallets in order to crack bitcoin’s anonymity:

    With control of at least 51% of the hash rate, Chinese mining pools could simply announce that they will not mine on chains containing transactions from their list of censored addresses.

    China could also use a variety of techniques to double-spend coins, which would undermine faith in the bitcoin system as a whole, perhaps paving the way for their own cryptocurrency.

    One silver lining is that although nearly 3/4ths of mining capacity is in Chinese-managed pools, this doesn’t mean the computers doing that mining are all physically located in China. Miners can and do join pools managed by groups in other countries. The Communist Party will likely find it much more difficult to control miners abroad.

    In all, China’s authoritarian government and massive influence in bitcoin mining represent a real risk to the currency. Crypto enthusiasts should begin preparing responses to possible Chinese attacks before they happen.

    Dig into these posts for more on bitcoin :

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    Photo: “President Kagame and President Xi Jinping of China Joint Press Conference | Kigali, 23 July 2018” by Paul Kagame is licensed under CC BY-NC-ND 2.0

  • This Congressman Is Buying Dogecoin

    Dogecoin has become so popular, even Congressmen are getting into the game:

    U.S. Rep. Mark Green purchased Dogecoin on April 1 and April 14 according to Congresstrading.com. The purchases were in the amount of $1,001 to $15,000 on each occasion.

    A $1,000 purchase each time would now be worth $17,078 based on today’s price of $0.4009. A $15,000 purchase each time would now be worth $127,985.

    More here.

    As cryptocurrencies including dogecoin become increasingly mainstream, with more investors holding them and more companies accepting them as payment, it will become harder and harder for the government to ban or even regulate them. Congressmen won’t want to hurt their own portfolios, nor those of their wealthy contributors.

    For more on dogecoin, check out these posts:

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  • You Can Now Buy a Rolls Royce with Dogecoin

    Post Oak Motor Cars is now accepting dogecoin, a cryptocurrency that recently gained new heights of popularity following support from Tesla founder Elon Musk, as a form of payment. New Bugatti, Bentley, Karma, and Rolls-Royce vehicles are sold at the boutique sales location next to Houston’s only five-star hotel, The Post Oak Hotel at Uptown Houston.

    This is the second form of cryptocurrency the Houston dealership has accepted. In 2018, Post Oak Motor Cars announced that it would allow customers to pay using bitcoin after integrating cryptocurrency processor Bitpay into its payment system.

    More here.

    Given the enormous price spike in the currency recently, I imagine quite a few holders are in the market for Rolls Royces.

    This is the same pattern I saw with bitcoin: increasing acceptance in the real world as the price increases. I don’t own cryptocurrencies due to their volatility and lack of an income stream. That said, in the crypto market, dogecoin has long seemed like one of the better bets. Its market cap is a fraction of bitcoin’s, despite using the same underlying technology.

    Its biggest disadvantage was a lack of acceptance as a form of payment, but that too is changing. Perhaps this coin has a lot further to run.

    For more on dogecoin, check out these posts:

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    Photo: “Mansory Conquistador Rolls Royce Phantom – Team 93 – Team Rolls Royce Austria” by daveoflogic is licensed under CC BY-ND 2.0

  • Why Aren’t Flu Vaccines Free for Everyone?

    If you have health insurance in the United States, you can usually get a flu vaccine for nothing. But for the 28.9 million Americans who are uninsured, a flu vaccine can cost up to $50. For a population that is often hard pressed, this can be unaffordable. And if you have a family of 4 to vaccinate, the numbers are even worse.

    Meanwhile, COVID vaccines cost absolutely nothing, whether you have insurance or not. Why aren’t we doing the same for flu vaccines?

    Medicare pays $10-60 for flu vaccines, with an average price of $36 across all the vaccines they cover. If the federal government bought one for every uninsured American, the price would be $1.04 billion.

    In the midst of the COVID pandemic, it’s easy to forget just how deadly the common flu can be. But the flu has killed between 12,000 and 61,000 Americans per year since 2010.

    How do we decide if a policy is worth it compared to the number of lives it could save? The government uses a figure called the “statistical value of a human life” to measure whether many policies, such as environmental regulations, are worth it or not. That figure is about $10 million.

    At that rate, giving a free flu shot to every uninsured American would only have to save 100 lives a year in order to pay for itself entirely. That’s just 0.2% to 0.8% of all flu deaths. Offering free flu vaccines to 8.8% of the entire population would probably prevent a lot more than a fraction of a percent of flu deaths.

    Let’s give this policy a try!

    For more on health, check out these posts:

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    Photo: “01a.UStreet.NW.WDC.13September2015” by Elvert Barnes is licensed under CC BY-SA 2.0

  • Short Sellers Have Abandoned the Stock Market

    Short sellers have abandoned the stock market after massive losses in GameStop shares, among others:

    According to data from Goldman Sachs, median short interest as a percentage of float across the S&P 500 has fallen to 1.6%, near the lowest reading since 2004.

    More here (see the April 19 post.)

    But that’s not all. As downward pressure on stocks from short sellers has all but disappeared, upward pressure via margin buying is exploding. Margin buying lets traders borrow money to buy more stock than they could otherwise afford. All those buy orders push up prices:

    While the bears head for the hills, the bulls double down. Data from FINRA released today (thank you, Kevin Duffy) show that margin debt among member firms reached a record $822.5 billion in March. That’s up 35% from the average for March across 2018 and 2019 and 82% above last year’s virus-influenced figure.

    These are worrying signs for stocks. True believers mortgaging themselves to the hilt along with a lack of skeptics looks like an excessively frothy market to me. I cut back my allocation to stocks several weeks ago, buying beaten-down Treasury securities instead. Especially if your portfolio is out of balance, with stocks accounting for a share that’s above your target due to recent gains, it may be time to take some profits.

    Especially if your portfolio is out of balance, with stocks accounting for a share that’s above your target due to recent gains, it may be time to take some profits.

    For more on the stock market, check out these posts:

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    Photo: “Tumbleweed” by jezarnold is licensed under CC BY-SA 2.0

  • How Do You Know If a Startup Is Getting Traction?

    Investors look at a lot of startups before laying a bet. But how do we know if the company’s product is catching on, or has failed to find traction? And as a founder, how do you know if you’re headed in the right direction or…nowhere?

    In a recent episode of the superb podcast This Week in Startups, investor Jason Calacanis and guests Craig Zingerline and Allen Chen broke down a key metric: customer retention.

    Do you have product-market fit? There’s no one better to answer that question than the people who use your product every day. Here are the customer retention numbers to look for, over a 6 month period, for different types of startups:

    • Consumer social (think Instagram): 25% is good, 45% is great
    • Consumer transactional (think Uber): 30% is good, 50% is great
    • Consumer SaaS (think Netflix): 40% is good, 70% is great
    • Small and medium business (SMB) and midmarket SaaS (think Freshbooks): 60% is good, 80% is great
    • Enterprise (big company) SaaS (think Oracle): 70% is good, 90% is great

    As you can see, business-to-business products should be a lot stickier than business-to-consumer ones. Consumers are fickle and their investment is minimal. At the other end of the spectrum, major corporations don’t adopt new software lightly. It’s a process that sometimes takes years and costs a fortune. So they don’t switch often, either.

    The panel emphasized that you don’t have to get to these numbers right away, but that they should be a goal. Good luck!

    For more on startups, check out these posts:

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    Photo: “Jason Calacanis” by jdlasica is licensed under CC BY 2.0