Tremendous

An angel investor's take on life and business

  • The Problem with Pro Rata

    “I want to support the founder.” Whenever I hear myself say that, I throw my checkbook in the river.

    Follow-on investments can massively increase your returns. But done wrong, they can sink you.

    When Pro Rata Works

    Let’s back up and explain what I mean by follow-on and pro rata.

    A follow on investment is an additional investment in a company I already placed a bet on. Pro rata is one form of follow-on — the right, but not the obligation, to maintain my ownership percentage in future funding rounds. Basically, it’s a right to invest a certain additional amount in each new round.

    Wisely investing follow-on capital can really juice your returns. A study from Primary VC showed that if good funds (3.5x average multiple on invested capital) had done more follow-on, they would’ve returned 8x or more.

    Throwing Good Money After Bad

    The problem with pro rata is when it becomes about saving a company. Then, we throw good money after bad.

    So often, investors put more cash into a company because they “want to support the founder.” That choice of words already implies the company isn’t performing.

    If it were performing, we’d say, “I want to jump on a rocket ship!” We wouldn’t be talking about “support.”

    That’s our job as investors: jump on rocket ships. Anything else is a waste of time.

    That might sound kind of harsh. But it’s really difficult to make money investing in startups.

    The vast majority will go out of business. To even return a 1x of what we invested, we have to disperse our funds very carefully.

    How I Handle Follow-On Investments

    I recently had 2 companies go out of business. I did not invest any follow-on capital in either of them, even though I had the opportunity to do so.

    This keeps my losses on those two startups very small. What I don’t want to do is concentrate capital in a company that isn’t performing, then lose it all.

    When a founder you invested in asks for more money, it’s hard to say no.

    You like them, you like what they’re doing, and you want to support them. What’s more, founders are some of the most persuasive people in the world.

    But I have to say no. I need to save that money for the successful companies to help them expand.

    I still support the founder in other ways. I’m always happy to help with intros and advice. But I can’t put more cash into companies that aren’t performing.

    Wrap-Up

    My job as an investor, small though I may be, is to starve poorly performing companies of money. Then, I give that money to the high performers.

    Is that a difficult process? Absolutely.

    But it’s necessary. That’s how we get innovation.

    Venture capital is not a charity.

    If we lose all our money, we won’t be able to keep making investments. Then, there will be no venture capital for anybody.

    More on tech:

    What To Do When a Company Fails

    Lessons From My 3 Most Challenged Investments

    Learning From My Top 3 Investments

    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. 

  • What To Do When a Company Fails

    One of my investments got acquired at a small loss. A co-investor flamed the founder over it. Never do this.

    If you invest in startups, most of them will fail. Some investors run wild, writing angry e-mails or even filing lawsuits.

    This is gross and counterproductive. Here’s how to handle it instead…

    What Not to Do

    When a company fails or has a less-than-awesome outcome, never flame the founder with angry messages. It’s mean and it makes you look like an ass.

    Let’s take the example above. The co-investor wrote a furious e-mail to the founder after the acquisition, accusing him of giving up too easily.

    What that investor didn’t know is that the founder had worked day and night and even lost a very important romantic relationship while trying to make the company work.

    I knew those things because I talked to the founder.

    You should also never badmouth a founder because they failed. It’s unfair, petty, and accomplishes nothing.

    And for goodness’ sake, don’t sue. Unless there is some sort of actual fraud going on (very rare), you don’t have a leg to stand on. You lost your money fair and square.

    What To Do

    So we know not to yell at a founder or disparage them. Here’s what we can do instead…

    First off, thank the founder for how hard he worked. Never forget, he’s losing a lot more than you are.

    He’s losing his dream and his livelihood. You’re losing a small amount of money.

    Just recently, I had a founder call me and tell me his company was shutting down. I made sure to thank him for his hard work. After all, he probably sacrificed in ways I’ll never know.

    If the founder is in your area, take them out to coffee or lunch and let them vent! Sometimes, all a person needs is someone to listen.

    Those moments with a founder who just got kicked in the face, they’re very special. There’s something about being around a guy who tried everything and failed, but fought the good fight.

    There’s one more thing you should do when a founder fails: keep in touch with them. You might want to invest in their next company!

    Some of the best investments of all time have been repeat founders.

    Wrap-Up

    I expect 80% of my seed and pre-seed deals to go to 0.

    All I want to see from a founder is that he tries his best and keeps me updated. Beyond that, whatever happens, happens.

    Reputation is everything in investing. If your reputation is good, good deals come to you. If it’s not, they don’t.

    Give yourself a good reputation by being classy when a company fails. It’s what’s best for your business, and it’s also the right thing to do as a human being.

    More on tech:

    Lessons From My 3 Most Challenged Investments

    Why It’s Easier to Raise $3 Million Than $300,000

    Small Investors Lead to Big Investors

    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. 

  • Why the Chinese Startup Ecosystem Is Dead

    If your startup fails in China, investors can seize all your assets. Why would any ambitious young person start a company in China today?

    Chinese venture capitalists are going after the founders of struggling startups, trying to get their money back. They’ve taken apartments and bank accounts, according to an incredible report in the Financial Times.

    This is the final blow that will kill the Chinese startup ecosystem.

    Not a Big Success? You’re Screwed.

    If your startup fails or simply doesn’t become a high performer, Chinese VC’s will go after you. They use what’s called “redemption rights.”

    This lets them pursue you for the entire investment amount, plus interest.

    There’s no asset these VC’s won’t try to take. Worse yet, if you can’t pay, you can be added to the national debtor blacklist.

    This is where China’s creepy social credit system comes in.

    If you’re on the blacklist, you cannot start another company. You can’t even take a high speed train or airplane.

    And you can’t leave China.

    Big Success? You’re Still Screwed.

    Let’s say a miracle happens and your startup makes it big. And it would be hard to make it bigger than Jack Ma, founder of Alibaba.

    Everything was going great for Jack, until he criticized the Chinese government. Then he disappeared for several years to “paint”.

    Even if you don’t criticize the government, you’re not safe. China effectively banned ed tech companies in an effort to enforce some bizarre notion of equality.

    Ed tech was a huge category of startups there. Imagine being told one day that your business is suddenly illegal.

    The Silicon Valley Way

    In America, we do things differently. When a company fails, the founder is free to walk away and start again.

    Legally, they’re in the clear. And culturally, we do not look down on failure.

    Being able to start again is critically important.

    If people know that it’s not the end of the world when a startup fails, they’ll be more likely to start one. Reduce the cost of something, and you get more of it.

    Never forget, many successful founders (like Travis at Uber) took several tries to hit it big.

    When investors are true risk capital and entrepreneurs are free to try and fail and try again, you get big outcomes. Otherwise, you don’t.

    Wrap-Up

    Chinese entrepreneurs are in an impossible position.

    If their startup doesn’t become a unicorn, they face asset seizures and a lifetime in debt. If they do hit the big time, the government will imprison them or regulate them out of business.

    If I’m an ambitious young person in China today, all I’m thinking about is how to get out.

    Get to Singapore, get to the UAE or the US. Then start a company.

    China has some incredible tech companies: Alibaba, Tencent, ByteDance. But these may be the last.

    The next great company founded by a Chinese person will not be in China.

    More on tech:

    The End of Human Food Delivery

    Learning From My Top 3 Investments

    Lessons From My 3 Most Challenged Investments

    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. 

  • The End of Human Food Delivery

    Whenever I walk down Washington Street in Hoboken, NJ, I see them: the food delivery guys. There are dozens of them, zipping around on bikes or waiting for orders. What happens when there’s no more work for any of them?

    In Los Angeles, dozens of robots from Serve Robotics are delivering food today. They operate autonomously, trundling along sidewalks at about 5 miles per hour.

    As of last fall, there were only about 4 dozen of the bots in operation. But Serve plans to unleash thousands of them in the near future.

    In many urban areas like mine, food delivery is done by new immigrants. For people who don’t speak English and have few job skills, it’s one of the only ways available to earn money.

    Food delivery guys don’t make much, but they can never compete with robots at scale. Serve plans to get the cost of a delivery down to $1, a price no human can compete with.

    Robots don’t complain, get sick, or try to unionize. If Serve can make enough of them, they will put human deliverers out of business.

    That leaves the food delivery guys in a difficult spot. New to the country, unable to speak the language, lacking in job skills, and put out of the one job they can do.

    What’s next for them? Some will gain skills and get better jobs. Others may turn to crime to survive.

    For the rest of us, robot food delivery will be a boon.

    Delivery guys on e-bikes careening along sidewalks is a major hazard of urban life right now. A delivery guy recently struck my friend’s mother, putting her in the hospital.

    Small robots packed with sensors moving cautiously will be a huge improvement in safety.

    And of course, $1 deliveries will cut costs for consumers. What’s more, with deliveries that cheap, companies could deliver more items affordably.

    Need a tube of toothpaste within minutes? No problem.

    Robotics and AI working together will automate many low skilled jobs, and soon. Bringing folks into America who aren’t qualified to do anything else is a mistake.

    Instead, we should focus on bringing in higher skilled workers who can contribute to technological progress. Think robotics engineers, not the folks whom robots will replace.

    For immigrants lacking in job skills, the future looks bleak. But we’re not doing them any favors by bringing them into this country with nothing to offer them.

    Do you think robots will take over food delivery?

    I hope everyone had a wonderful Christmas and New Years. Great to be back!

    More on tech:

    Which Jobs Will AI Replace? Which Jobs Are Safe?

    Tesla FSD 13 vs. Manhattan Rush Hour

    Your First Cybercab Ride

    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. 

  • Tesla FSD 13 vs. Manhattan Rush Hour

    Manhattan rush hour is the ultimate test of self-driving. So, how does Tesla’s new FSD 13 do? Let’s find out…

    Tesla started rolling out its latest self-driving system, FSD 13, over the last few weeks. Tesla owners are already raving about it. One even used FSD 13 in Manhattan and uploaded the results to YouTube.

    Driving Through Chaos

    The drive begins at Grand Central in the heart of Midtown Manhattan during rush hour. Right away, we encounter a very difficult left turn on Park Avenue.

    The Tesla has to navigate a divided street and make the left as cars, pedestrians, and bikes swarm around it. I’m on pins and needles just watching.

    The Tesla creeps up slowly and waits. Once the traffic has cleared, it accelerates confidently and makes the turn.

    Beautiful! But another difficult test is coming right up…

    Master of the Edge Cases

    In most of America, you can turn right on red. Not in New York City.

    The owner explains that his Tesla used to ignore this idiosyncratic law. That could be a huge problem, resulting in tickets or worse.

    Now, with FSD 13, it respects this unusual rule and waits for the green. Perfection!

    Since When Do Food Delivery Guys Use Rollerskates?

    Christmastime is peak insanity in Manhattan. The island is teeming with tourists from all over. I was there recently and it was difficult to even walk, much less drive.

    Everywhere this Tesla goes, pedestrians crowd around it. Bikes zoom this way and that way. There’s even a food delivery guy on rollerskates!

    FSD 13 navigates the situation just right, giving pedestrians a wide berth but not stalling out entirely.

    It’s driving better than the average skilled human. It’s driving like a human skilled at navigating New York City.

    Would I Use FSD 13?

    As great as FSD 13 is, I wouldn’t feel comfortable using it.

    The most recent data I can find (September) shows that FSD requires an intervention roughly every 13 miles. I can’t find any data specifically for FSD 13, but knowing I could have to intervene at any time would stress me out majorly.

    That said, watching the Tesla drive itself, it really does seem to know what it’s doing. Maybe it is safe?

    Game Over for Professional Drivers

    My cousin is a truck driver. He’s 59. By the time self-driving is everywhere, he’ll be retired.

    But if he were my age (38), I’d tell him to start training for a new job immediately. I’d say the same to any Uber driver or food delivery person (even if you use rollerskates).

    These jobs could be gone within 5 years. If you’re not training for a new career today, you’re making a huge mistake.

    Wrap-Up

    Tesla FSD 13 is incredibly impressive. They’ve built a near-perfect robotic driver using nothing more than cameras.

    And if it can navigate Manhattan rush hour without a single mistake, it should crush it everywhere else.

    This is the last post of the year. I’ll see you again on January 6th, 2025.

    Have a wonderful Christmas and a happy New Year everyone, and thanks for reading Tremendous all year!

    More on tech:

    Your First Cybercab Ride

    Autonomous Driving in Central London

    Why Most Startups Suck at Enterprise Sales

    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. 

  • ChatGPT Pro vs. Gemini Advanced vs. Grok vs. Claude

    You can now pay $200/month for ChatGPT Pro. But is it worth it? How does it compare to other models?

    Let’s look at a four-way model comparison and find out…

    The first two models we’ll look at will be ChatGPT Pro and Gemini Advanced. Jason Calacanis and Sunny Madra tested those on an excellent new episode of This Week in Startups.

    Next, I’m going to take the same prompt they used and feed it to Grok and Claude.

    Let’s see who wins!

    ChatGPT Pro

    Jason did not make it easy on OpenAI. He asked for a detailed model on what it would cost to build a robotaxi fleet to replace all car trips.

    This model requires a ton of research and calculations. It might take a skilled human an entire day.

    Let’s see how ChatGPT Pro does…

    O1 gave a detailed analysis nicely broken up into tables. But o1-pro, the $200 version, was more detailed and included great links to sources.

    O1 pro answered every element of this very complex question well. It really does excel at deep analysis.

    O1 pro was better than o1, but not by much. If you’re price sensitive, o1 is the better choice at just $20/month. But for major businesses, o1 pro makes sense.

    Next, Jason and Sunny tried Gemini…

    Gemini Advanced

    Gemini really crushed it here. The new Gemini Advanced 1.5 Pro with Deep Research may be a mouthful, but it’s also a heck of a model.

    Gemini accounted for bus trips and flights that could be replaced by robotaxis. It also calculated the maintenance costs for the robotaxis, something all the other models ignored.

    The answer is clear, exhaustive, and contains lots of sources. Jason and Sunny were really impressed, and so am I.

    Can Elon do even better? Next, I tried my recent favorite, Grok…

    Grok

    Grok just gave up. It said it couldn’t conduct such a detailed analysis using outside sources.

    I actually respect that. Instead of giving us a wrong answer, it just declined the question. That’s a lot better than making something up!

    I find that Grok is great for most questions. But for super detailed data analysis, other models are stronger.

    Claude

    Finally, I fed the same prompt to Claude. I’ve always had great luck with Claude for detailed data analysis tasks.

    I used Claude’s most advanced model, 3.5 Sonnet. Let’s see how it does…

    Claude got the replacement cost of normal Uber/Lyft rides with robotaxi rides correct. But it skipped the part of the question about replacing the entire US auto fleet.

    So, Claude gave only an incomplete answer to the question. O1 pro was better, and Gemini beat them both.

    Wrap-Up

    In the world of AI models, more expensive doesn’t necessarily mean better.

    Google’s $20/month tool outperformed the $200/month ChatGPT Pro, along with everything else we tested. For hardcore analysis, nothing beats Gemini.

    I’m going to upgrade to Gemini’s paid tier and keep playing around with this incredible tool. I’ll let you guys know what I find out!

    What’s your favorite AI model, and why?

    More on tech:

    ChatGPT vs. Grok: Head-to-Head Comparison

    ChatGPT Search vs. Google: Which Should You Use?

    How to Get Started Angel Investing

    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. 

  • ChatGPT vs. Grok: Head-to-Head Comparison

    16 sources. Less than a second. $0. Welcome to the future.

    Yesterday, I tried xAI’s Grok chatbot for the first time. I was amazed how well it performed — but can it beat ChatGPT?

    I decided to run a head-to-head test to find out.

    I will ask the same 3 questions to Grok and ChatGPT*. Let’s see who wins!

    Prompt 1: Info on Databricks

    Databricks just announced a massive, $10 billion funding round at a $62 billion valuation. When I saw that headline, I wondered, “How long did it take them to get this big?”

    Let’s ask Grok…

    The question is straightforward and simple. But the quality of Grok’s response stunned me.

    Even for this simple answer, Grok cited 15 websites and an X post. I can easily browse each of them, confirming that Grok is correct.

    Now, let’s try ChatGPT…

    ChatGPT is correct as well. But it doesn’t cite a single source.

    If I wanted to make sure ChatGPT isn’t mistaken, I’d still have to Google it. So, what use is ChatGPT?

    Grok wins this one easily.

    Prompt 2: My (Very Minor) Acting Career

    One of my hobbies is being an extra on TV shows and movies.

    Yesterday night, I was chatting with a friend who loves Law and Order: SVU. She was surprised when I told her I was actually in it as an extra!

    She asked which episode, so I wanted to pull the exact one and link her to it. I gave Grok the title as best as I could remember it.

    Let’s see what it says…

    Wow! It grabbed the exact episode, gave us a synopsis, and cited a total of 21 sources. These sources are highly relevant — one of them is the IMDb page for the episode.

    I sent her the link to the IMDb page. Now, she can watch the episode at her leisure, and so can you (I’m in the opening scene on the subway).

    Let’s try ChatGPT…

    ChatGPT’s response stunned me.

    It found the episode and linked to the IMDb and a Law & Order Wiki. That’s about the same as Grok. But what came next was wild…

    ChatGPT included a YouTube video showing a preview of the episode! I’ve never seen ChatGPT respond to a prompt with a video like that. Amazing.

    As good as Grok’s response was, this round goes to ChatGPT.

    Prompt 3: Multipart Question on Trains

    This one was a toughy. I thought I just might stump Grok.

    Yesterday, I wrote about train systems in the US and Japan on this blog. As I was writing that post, I needed some info on train speeds in the two countries.

    Let’s ask Grok…

    Grok nailed it! Despite the complex, multipart question, it gave us a great answer.

    The speeds and distances it cites for trains in the US and Japan are quite accurate. The sourcing is elaborate, pulling 19 citations.

    We’re tied between ChatGPT and Grok right now, one to one. Can ChatGPT take the day?

    Let’s find out…

    I asked ChatGPT to find a train route in America that’s about the same length as the Tokyo-Osaka route.

    Grok gave us Philly to Boston, which is almost exactly the same distance as Tokyo-Osaka. ChatGPT is giving us DC to Boston, which is about 50 miles longer than the Japanese route.

    Not a bad response, but not as good as Grok. What’s more, ChatGPT didn’t cite a single source.

    Once again, I have no idea if this information is right. Since I don’t want to make up facts on the blog, I’d have to run down every detail on Google…or perhaps Grok.

    Grok takes this one, easily.

    Wrap-Up

    Grok beat ChatGPT convincingly in this competition, taking 2/3 head-to-head comparisons.

    Grok did a wonderful job with sourcing, giving accurate citations for everything it told us. It also ran faster than ChatGPT, which is important to anyone who does many queries per day like I do.

    Up until yesterday, I’d never tried Grok. “How good can it be? Besides, I already have ChatGPT,” I figured.

    Oh Francis, how little you know.

    Grok is so good that this morning, I changed my homepage from ChatGPT to Grok. Until OpenAI releases the next big thing, Elon’s chatbot rules the roost.

    What do you think of Grok?

    *For ChatGPT, I used the 4o model. There are more advanced models like o1-preview, but I’ve actually gotten better results in the past with 4o. I haven’t tried o1-pro yet. O1-pro cannot access the internet, so it would likely have performed worse than 4o for these questions.

    More on tech:

    ChatGPT Search vs. Google: Which Should You Use?

    Llama 3.1 vs. ChatGPT: Battle Royale

    Meet My Latest Investment: Recall

    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. 

  • Your First Cybercab Ride

    A sleek automobile glides to your front door. You lower yourself in. Let’s ride.

    On October 10th, Elon Musk revealed the new Cybercab at the We, Robot event. I’ve been salivating over it ever since.

    This morning, I dug a little deeper to find out what our first rides will be like…

    Taking Your First Ride

    The Cybercab only has two seats. They’re big and spacious. There’s plenty of leg room, partly because there are no pedals.

    The ride is smooth and pleasant. Headroom abounds, which we six footers really appreciate. I used to nail my head constantly inside NYC taxis — one of the reasons I take Uber now.

    Let’s say we’re stuck in traffic. What’s the difference? The robot is doing the work.

    A New Way to Build a Car

    Tesla will build the Cybercab in a completely different way from how Ford builds a truck.

    The Cybercab’s design is incredibly simple. Its exterior contains just 80 pieces, compared to hundreds on a typical automobile.

    In a fascinating interview on the FutureAzA podcast, Robert Scoble breaks it down:

    “They can make these on shorter lines, with fewer people, less complexity, less problems, less supply chain complexity.”

    Tesla’s likely goal is to have robots do all Cybercab assembly. Robots making robots — that’s when the pace of technological change goes exponential.

    Uber, Tesla and Waymo Win

    Tons of people are predicting the end of Uber once the Cybercab rolls out. They’re wrong.

    Demand for rides is very spiky. There are big peaks during the morning and evening rush hours. There’s another peak on weekend evenings, when people go out to socialize.

    The rest of the time, demand is much lower. But who can afford to buy a ton of Cybercabs and have them sit idle most of the time?

    The solution: put Cybercabs on the Uber platform.

    Cybercabs, owned by new fleet managers or by Tesla itself, will be available on Uber. You’ll also see self-driving cars owned by individuals who aren’t using them at the moment. And for the foreseeable future, there will be some human drivers too.

    Waymo already has its self-driving cars on the Uber app. Tesla will do the same.

    I used to think that robotaxis would kill Uber too! Kudos to Bill Gurley for explaining why that won’t be the case.

    Legacy Automakers and High Speed Rail Lose

    Tesla, Waymo and Uber all win in a world of robotaxis. The biggest losers will be legacy automakers.

    The first to hit hard times will be the Big 3 and Volkswagen. With their quality problems and dated technology, who will want their cars anymore?

    Next in line are the Japanese. Honda, Toyota and Nissan make better products, but they’re nowhere in the robotaxi race. They will become increasingly irrelevant.

    High speed trains are another loser in a self-driving world.

    Tokyo Station to Shin-Osaka Station (308 miles) takes 2 hours and 22 minutes on Shinkansen. I’ve taken Shinkansen — it’s a fantastic experience.

    Philadelphia 30th Street to Boston South Station is almost the exact same distance (306 miles). On the Acela, America’s fastest train, it takes 5 hours and 12 minutes.

    American trains are slow as heck. We know that.

    But building bullet trains is incredibly expensive. The recent extension of the Hokkaido Shinkansen is costing about $15 billion at current exchange rates.

    And that’s in Japan! I think we all know it’s going to cost a lot more here. The California high speed rail project is projected to cost as much as $128 billion.

    Maybe a car takes longer, but if you’re watching Netflix or taking a nap, do you care? And it’s kind of nice to save $128 billion, especially when our country is deeply in debt.

    Wrap-Up

    “This is a beautiful future, man.”

    That’s what Shaul Nakash said when he took the first-ever Cybercab ride with Elon (see the video at the top). I couldn’t agree more.

    When I was a kid, we didn’t have a car. My mom was born blind in one eye, which makes driving difficult.

    In our tiny town in northern Wisconsin, we were at the mercy of buses that stopped running at 6pm. And no bus on Sundays.

    When we couldn’t get a bus, we used a payphone to call the one cab company in town. We had to call over and over to find out where it was. Sometimes, we waited over an hour.

    This was a massive pain in the butt. The difference between the world of the 90’s and 2000’s and the world we’ll see this decade is incredible.

    I’m just grateful for men like Elon. He’s doing what few people can.

    It all comes down to founders.

    What do you think of the Cybercab?

    More on tech:

    Which Jobs Will AI Replace? Which Jobs Are Safe?

    Lessons From My 3 Most Challenged Investments

    Learning From My Top 3 Investments

    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. 

  • Is A Financial Crisis Brewing in CRE?

    Note: This is not investment advice.

    Martin Selig owes $800 million. He can’t pay.

    The major Seattle real estate developer is defaulting on a $379 million loan tied to 9 downtown office buildings, according to the Seattle Times. Selig has defaulted on several other large loans recently, totaling over $800 million.

    The Maturity Wall

    Selig is not alone. The national office vacancy rate cracked 20% earlier this year for the first time on record.

    Commercial real estate loans aren’t like your usual, 30 year mortgage.

    CRE loans last an average of just 7 years. When the 7 years is up, you refinance the property with a new loan.

    A “maturity wall” of over $1 trillion worth of loans is coming due between now and 2027. Property owners will have to refinance their properties at much higher interest rates.

    A higher rate means a higher payment. Meanwhile, income from their properties is declining due to vacancies, especially in the office market.

    Why This Isn’t 2008

    This weekend, a post on CRE defaults went viral on X:

    This post has over 300,000 views, but it’s a little misleading.

    The author compares the value of all CRE loans coming due over the next 2 years to the value of subprime residential mortgages leading up to the 2008 financial crisis. But this isn’t comparing apples to apples.

    Porter is comparing all CRE loans to subprime residential specifically. The apples to apples comparison would be poor quality CRE loans to poor quality residential ones.

    Extend and Pretend

    The picture isn’t quite as ugly as Porter says. But it’s bad enough — there will be many more defaults like Selig’s.

    I expect lenders to “extend and pretend.”

    Banks love to do this. They extend the duration of the loan to avoid taking an upfront loss.

    But when you extend loans on bad assets at below-market interest rates, you’re losing money anyway. You’re just not coming clean about it.

    When banks extend and pretend, they often don’t take a loss on their books. That can help keep investors off their back, not to mention regulators.

    But it doesn’t change the facts: there’s a half empty office building and a loan the borrower can’t pay.

    Muddling Through

    My prediction is that everyone will muddle through. Here’s how it could work:

    1) Banks extend the loan durations
    2) Property owners find some new tenants, especially as some companies return to office
    3) Everyone makes less money for a while
    4) The Fed keeps cutting rates
    5) Most lenders and property owners avoid catastrophic losses

    Despite the bad CRE loans, American banks are well capitalized right now. They can afford to take some losses, so long as those losses aren’t catastrophic.

    Wrap-Up

    When we see the problems in CRE, our brains jump straight to 2008. But history does not repeat itself.

    These CRE problems are different.

    Today’s defaults are more driven by temporary interest rate changes. What’s more, the office market is much smaller than the residential real estate market.

    We’re going to see some gnarly losses. But don’t expect another 2008.

    What do you think is next in commercial real estate?

    Note: This is not investment advice.

    More on markets:

    Why I’ve Never Owned Bitcoin

    America Outspent Europe During COVID, Fueling Prosperity

    The ServiceTitan IPO

    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. 

  • The ServiceTitan IPO

    Note: This is not investment advice.

    “They watched their fathers get up at the crack of dawn, work all day, and then spend all night going through invoices, setting schedules, and other mundane business tasks.” From these humble beginnings sprang a $9 billion company.

    Yesterday, ServiceTitan went public on NASDAQ. Markets have welcomed the LA-based SaaS company, giving it a healthy $9 billion valuation and a 12x ARR multiple.

    Bessemer Partner Byron Deeter led the Series A and wrote a great piece on how ServiceTitan came to be, which I quoted above.

    The intense founder-market fit really stands out. To work nonstop on a problem for over 10 years, you need to care deeply about it.

    Founders Ara Mahdessian and Vahe Kuzoyan are laser focused on their customers.

    During COVID, they even gave webinars to tradespeople to help them with safety protocols. This helped the tradespeople keep their businesses open.

    So, how does ServiceTitan stack up as a business?

    The company has $772 million of implied ARR, based on their latest quarterly results. They’re growing 24% YoY and haven’t reached profitability yet — their net loss over the last 12 months stands at $183 million.

    Net dollar retention is strong at 110%. But the burn multiple concerns me.

    It’s sitting at 2.6 for the latest quarter, a little high for a company at this stage. Reducing those losses will be a priority.

    If the stock holds up over the next few months, more startups will have the courage to IPO. And that’s on top of strong performance by other recent IPO’s like Reddit and Instacart.

    Some day, I hope to have my own ServiceTitan, ringing the bell in Times Square.

    Congrats guys!

    What do you think of the ServiceTitan IPO?

    Have a great weekend, everybody!

    Note: This is not investment advice.

    More on tech:

    Why Most Startups Suck at Enterprise Sales

    Lessons From My 3 Most Challenged Investments

    Learning From My Top 3 Investments

    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.