Tremendous

An angel investor's take on life and business

  • How to Spot Vaporware

    Every now and then when I ask a founder for a demo, he can’t give me one. That’s because the product doesn’t exist.

    Let’s take the example of a restaurant reservation platform.

    Rather than building out the tech, some founders just start advertising to restaurants and diners and taking reservations. When a reservation comes in, they make a call and book it manually.

    This gets a marketplace going. The problem is, it doesn’t scale.

    Only Software Scales

    If you have a few reservations coming in, it’s not hard to make a call and book on your own. In fact, it’s a lot easier than building an app to do it!

    But what if a dozen turns to 100 turns to thousands? You can no longer do it manually unless you hire an army.

    And if you do that, you have a low margin call center, not a high margin tech business.

    Time to Grow Up

    I don’t see any problem with going the Mechanical Turk route at the very beginning. It can be an easy way to see if there’s demand for your service.

    But as soon as you see a little traction, start coding. A successful company can grow so fast it surprises you.

    If you’re still doing everything manually, don’t pitch investors. You’re wasting your time, and you’re wasting ours.

    Technology investors invest in technology, not call centers. Bring us some tech!

    Finding Vaporware

    The best way to find vaporware is to ask for a demo, every single time. Never, ever invest unless you get one.

    If for whatever reason a founder can’t even use his own product, he’s not qualified to be a founder. There are 0 valid excuses here.

    Some types of businesses are particularly prone to vaporware. Marketplaces are the biggest offenders, in my experience.

    Doing some hocus pocus behind the scenes instead of actually writing code is tempting. The customers won’t care, right?

    That’s all well and good until you realize your business cannot grow.

    Wrap-Up

    As investors, it’s our job to funnel money to the great companies and cut off the bad ones. Any company that cannot build a product doesn’t deserve investment dollars, period.

    It’s our job to assess that product. A demo is the best way to do so.

    Keep your eyes on the product and customers and you’ll find some awesome investments!

    Have you encountered vaporware? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Venture Capital Is a Terrible Asset Class

    Never Let a Founder Pay, and Other Do’s and Don’ts

    Why I Only Invest in Pure Software

    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. 

  • Venture Capital Is a Terrible Asset Class

    Everyone raising a venture fund will tell you they plan to 3x your money, at least. But it turns out, almost no one can do it.

    David Clark of Vencap International ran an analysis on nearly 1,200 funds covered by Pitchbook. Most haven’t even returned 2x their invested capital, much less 3x.

    Clark’s Analysis

    Clark’s analysis looked at funds from 2000 to 2015. Any fund from 2011 or earlier should’ve exited its investments by now, so I wouldn’t expect them to show higher returns in the future.

    Some of the newer funds are still holding investments that haven’t gone public yet. This may increase their returns somewhat, but performance is likely to remain middling.

    What Performance Should We Expect?

    I cannot stress enough how abysmal this performance is.

    A median return below 2x is far worse than you’d see in stock index funds! The S&P 500 has averaged a 10% annual return since 1957.

    In 10 years, that gives you a 2.6x return on your money. And that is with total liquidity at all times.

    Moreover, your money is in big, blue chip companies. That’s a lot safer than fledgling startups.

    Under no circumstances should you accept a lower return than that in illiquid, speculative companies. Investing in venture only makes sense if you can make 15% a year, minimum — or a 4x fund over 10 years.

    Why Does Venture Have Such Rotten Returns?

    The problem in venture is supply and demand.

    VC assets under management are growing at 20% a year. Meanwhile, there are still only so many great startups.

    Too much money is chasing too few good companies. Especially at the later stages when winners are becoming apparent, this leads to inflated prices and poor returns.

    Fat wallets also make investors lazy.

    Why not rip $10 million into a crypto company with no product? We’ve got billions to play with!

    What Kind of Funds Win?

    A few funds still produce amazing performance. Susa Ventures I is one such fund:

    The fund was small, making it easier to run up a big multiple. It’s a lot easier to get to 5x if that means you have to produce tens or hundreds of millions in returns, rather than billions.

    Each year, there are only so many big exits to go around. You don’t want to have to be in a decacorn in every fund just to get a decent return.

    What Does This Mean for Me?

    My “fund” is microscopic. That makes it much easier to get a big return, since I don’t need a monster exit to make it happen.

    If I take the money I have earmarked for the first 3-4 years investing (a typical fund life), I only need a single exit of about $2.5 billion to hit that 15% a year benchmark. The rest of the portfolio could go to zero.

    Hitting a unicorn isn’t easy, but since I’ll be making around 36 investments in that period, I think it’s feasible.

    What’s more, I invest much earlier than most VC funds. That gets me into deals at low prices with a lot of upside.

    Wrap-Up

    Anyone considering investing in a VC fund should be extremely selective.

    Look for smaller funds with strong track records. And carefully consider whether you need to be in this asset class at all.

    Those boring index funds perform surprisingly well!

    What do you think of VC performance? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Never Let a Founder Pay, and Other Do’s and Don’ts

    Why I Only Invest in Pure Software

    Super Pumped (Part Three): What Uber Can Teach 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!

  • In Porto

    I sat on the shore, watching the red sun descend into the ocean. This was truly a beautiful place.

    I just spent the last two weeks in Porto, Portugal, in the country’s north. This seaside town filled with beautiful architecture and great food is a must-visit!

    The Douro River and central Porto, seen from the lovely Palacio do Cristal.

    Let’s Eat!

    For me, food is the focus of any trip. On my first night, I had dinner at a real old school Portuguese restaurant: Murça No Porto.

    Located right in the center of town on the aptly named Rua de Alegria (Happiness Street), Murça No Porto dishes up traditional Portuguese food to locals. I ordered caldo verde, sardines and potatoes, and walnut cake.

    The soup was richly flavorful, made creamy by pureed potato, something I’ve never seen before. The sardines were fresh as could be, and the walnut cake was deliciously fluffy.

    All that, plus bread, any drink you want (including wine), and a coffee was less than 9 euros. That’s under $10 US.

    Good luck doing that in New York!

    Azulejos and More!

    But there’s more going on in Porto than just food. After dinner, I took in the vivid azulejos of Capella das Almas.

    Azulejos are traditional white and blue tiles containing intricate images. They cover churches and train stations all over Porto.

    They can even be found on a humble rowhouse.

    Mercado do Bolhão

    Okay, back to food. 🙂

    I stopped at Mercado do Bolhão, a lively market selling everything from wine to live shellfish.

    This market is home to the naughty fishwives who made fun of Anthony Bourdain when he visited to film Parts Unknown. In fact, I think I saw the naughtiest one at her stand — although she seemed to have cleaned up her act.

    This market is a must for any visitor to Porto. The sheer variety is mesmerizing, as are the smells of cheese, port, and fresh pasta.

    I grabbed a bola de berlim and strolled past the stands, taking in the atmosphere. A bola de berlim is a cream-filled donut bigger than your head. They’re everywhere in Porto, and not to be missed.

    The Hospitality of the Portuguese

    Unfortunately, I picked up a nasty stomach flu a few days into my trip. But it was this sickness that showed me how great the Portuguese are.

    I was to meet a young tech company founder named João the next day, but had to postpone. That night, he brought soup and light snacks to my hotel, the only thing I was able to eat.

    All this, for a person he hadn’t even met yet! What a great country.

    The next day, I met him and his lovely girlfriend Flor. We strolled through the verdant Parque da Cidade and then took in the surf crashing into the seacoast at Foz.

    Getting to Porto

    If you’re looking to take a vacation, I can’t recommend Porto highly enough. And you can even get a direct flight from Newark airport!

    The fantastic Santo Inácio Zoo — very much worth a visit
    Livraria Lello, a beautiful bookstore that inspired Harry Potter

    I stayed at the very central Eurostars Aliados, which was excellent. Get the breakfast — it’s phenomenal!

    In this wide world, I am so grateful for all the beautiful places and kind people. And that I have the privilege to experience them.

    Have you been to Portugal? Would you like to?

    Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on travel:

    The Tremendous Tapas of Barcelona!

    A Wisconsin Summer With The People Who Matter Most

    The Tonic of Wildness: Stokes State Forest

    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!

  • Never Let a Founder Pay, and Other Do’s and Don’ts

    I sat down to coffee and dessert with one of my founders recently. At the end, he tried to pay the tab.

    I had to explain to him what might be the most important rule of investing…

    Never Let a Founder Pay

    If you’re taking a founder out to coffee, lunch, you name it…always pay the bill.

    Founders bust their butts for us. It’s the least we can do.

    This goes for founders you’ve invested in and even those you haven’t. Don’t forget, many startup founders are barely scraping by financially.

    One of the best early stage VC’s told me this rule:

    “A founder remembers everything you ever did for them. Every drink you bought, every lunch tab you paid. Even when they’re running a billion dollar company.”

    Be Classy When a Company Fails

    The founder I was having coffee with had just sold his company. It wasn’t a huge success — we basically just got our money back.

    He was afraid I’d be upset. Quite the contrary — I was delighted to have my capital returned!

    Unfortunately, some investors lash out when a company doesn’t become a big success. One sent him an angry e-mail when the company was acquired at a modest price.

    Folks, never, ever do this.

    No one feels worse than the founder if he failed. There’s no need to pile on.

    If you’re investing in startups, you signed up to take losses.

    Take your lumps like an adult. And don’t forget to thank the founder for all the hard work they put in.

    When a company fails, you see an investor’s true colors.

    It’s easy to be nice when everything’s going well. But when times are tough, the knives come out.

    Keep Confidential Info Confidential

    As an investor, you’ll be exposed to tons of confidential information. It’s your job to keep that information confidential.

    No company wants its most critical information blabbed all over town.

    Never share anything that’s not public information unless the founder gave you permission. This includes the deck, deal memo, P&L, or even the fact that the company exists.

    Pretend you’re in the CIA. It’s on a need-to-know basis.

    If you want to introduce them to another investor, ask for permission to share the deck. If the founder gives you the okay, it’s fine to share it with investors you trust.

    And in terms of sharing public information, the more the better!

    Give your founders some love online. Like and retweet their posts.

    It helps them find more customers!

    Wrap-Up

    We investors are in a privileged position. We get to sit all day in judgement of some of the most innovative companies in the world.

    Let’s be classy while we do it. Keep private information private, don’t whine if a company fails, and pick up the check.

    As top angel Jason Calacanis says, “dealflow is destiny.” And your dealflow depends entirely on your reputation.

    If you follow these do’s and don’ts, you’ll be well on your way to building a great reputation as an investor.

    What’s the worst investor behavior you’ve seen? Leave a comment and let us know!

    This is the last blog until Monday, November 27th. I’m heading to Porto, Portugal on vacation!

    If you’re going to be in town, let me know!

    Have a wonderful Veteran’s Day and Thanksgiving, and I’ll see you on the 27th!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Why I Only Invest in Pure Software

    WeWork’s Bankruptcy: A New Beginning?

    Super Pumped (Part Three): What Uber Can Teach 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!

  • Why I Only Invest in Pure Software

    WeWork filed for bankruptcy on Monday. Allbirds is a penny stock. Companies like these are why I invest in pure software — only.

    The Penny Stock Parade

    WeWork peaked at a valuation of $47 billion. It was once the most valuable startup in America.

    Now, it’s a penny stock.

    The same goes for Allbirds, the once celebrated shoe company. Despite being on every foot in Silicon Valley, Allbirds too is a penny stock — 95 pennies, to be exact.

    In the boom times, countless companies raised venture capital by spreading a thin veneer of tech to their old school businesses. Venture capital, which used to back software, began to invest in coffee, eyeglasses, you name it.

    Now, those companies are circling the drain.

    Even the Biggest Successes Are Struggling

    It’s hard to think of a bigger darling in D2C than Warby Parker. As a lifetime glasses wearer, I have to admit, they look cool.

    But you know what doesn’t look so cool? Their stock chart.

    Warby has avoided penny stock territory, but it’s still down over 80% from its 2021 IPO.

    A couple of years ago, you couldn’t ride the NYC subway without seeing a Casper ad. Often, the entire inside of the train was covered in them!

    But Casper also turned out to be a flash in the pan.

    The company IPO’d in 2020 far below its last private valuation. The stock continued to fall, dropping over 75% before being bought out by a private equity firm for peanuts.

    Why Are These Businesses Doing So Poorly

    None of these companies should’ve ever raised a dime of venture capital.

    Venture capital is meant for highly scalable businesses. Adding one more user to a software product like Salesforce costs basically nothing.

    Since high margins kick in at scale, it’s okay for these companies to lose money in the beginning.

    The fixed costs of building a product are high. But once software businesses reach a certain size, they become money machines.

    Indeed, Salesforce is worth over $200 billion, orders of magnitude higher than any of the other companies we just talked about.

    Businesses involving “stuff” like offices or mattresses aren’t easy to scale. And the margins stink.

    I don’t blame the founders of WeWork, Casper, or any other company for taking venture capital. Founders get money where they can.

    I blame the VC’s for handing it out.

    What I Look For Instead

    I like businesses that are pure software.

    Salesforce makes a CRM it sells to businesses. There is no stuff — just code.

    There are no supply chain issues. Adding another user is trivial. And it’s pretty hard to knock off.

    You can’t say the same for a mattress.

    What’s more, many pure software businesses are winner take all.

    If Salesforce is the best CRM for large companies, that’s what you’re going to use. Since it scales easily, there’s no reason the entire Fortune 500 can’t use it.

    And indeed, 90% of them do.

    Wrap-Up

    I want a portfolio full of Salesforces, not WeWorks.

    So I look carefully at a startup’s business model. Is it pure code? Is it scalable?

    If not, it’s a pass.

    There are other forms of financing that can work for old school businesses. Bootstrapping and bank loans are a few options.

    But they should never raise venture capital.

    What do you think of WeWork and Allbirds? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    WeWork’s Bankruptcy: A New Beginning?

    Super Pumped (Part Three): What Uber Can Teach Investors

    Super Pumped (Part Two): The Rise and Fall of Travis

    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: “WeWork Büro Außenansicht Glaseingang” by verchmarco is licensed under CC BY 2.0.

  • Super Pumped (Part Three): What Uber Can Teach Investors

    Uber made its early investors billions. But some had a chance to invest early — and missed an incredible opportunity.

    The book Super Pumped details how some investors won the Uber deal, and how others missed out. This fascinating tale of one of the decade’s best startups taught me a lot as an investor.

    Sequoia’s Miss

    Sequoia Capital, long considered the finest venture firm in the world, passed on Uber repeatedly.

    We don’t know why they didn’t invest. But I suspect they were concerned about Uber running afoul of taxi regulations.

    However, the initial product was entirely legal. UberCab was simply software to order a black car.

    In the past, you did it with a phone call. Now, you clicked a button. Either way, it’s legal.

    For a firm betting on early stage moonshots, Sequoia was too cautious.

    Skate to Where the Puck Is Going to Be

    “I skate to where the puck is going to be, not where it has been.”

    Wayne Gretzky

    When UberCab launched, it was a rather unattractive desktop app, not the slick mobile platform it is today.

    But early investors like Jason Calacanis saw past that.

    They knew Travis’ vision was to be able to get a car anytime, anywhere using your phone. Their bet was that he could do it — and the bet paid off.

    When Uber was founded in 2009, smartphones weren’t yet widespread. The iPhone was just two years old.

    But a good investor can spot a trend. And iPhone sales were skyrocketing.

    Soon, there’d be one in every pocket. If that iPhone had the Uber app on it, Uber would make billions.

    The Best Deals Don’t Come Easy

    Other than the first few angels, every investor had to fight to get into Uber. Bill Gurley and Travis Kalanick made the Uber deal in a San Francisco bar on a Sunday night.

    You have to chase the best deals, even in your off hours.

    That’s why I found myself in a quiet corner of a hotel lobby in Barcelona one night in 2021.

    It was almost midnight local time. But this was a deal I couldn’t miss.

    The meeting went great and I made the investment.

    Today, that company, Deft, has created one of the most exciting multimodal search engines in the world. They just got featured in TechCrunch!

    What to Look For

    Above all, what made Uber was Travis’ tenacity.

    If an investor asked him about his prior experience as an entrepreneur, they’d find out he sold Cutco knives door to door. They’d also learn that his first startup got him sued for $250 billion.

    And still, he kept going.

    A founder that dogged attacking a huge problem is a great bet.

    I find myself looking for the same things Gurley does: strong traction in a giant market. And if the startup takes advantage of a huge platform shift, like AI today, that’s chef’s kiss.

    Wrap-Up

    For an angel like me, Uber would be the ultimate score. All day, every day, all I try to do is find one.

    Super Pumped shows me how important it is to back gritty founders. And they don’t come grittier than Travis.

    Uber also taught me to accept some risks, like regulatory issues, if the upside is big enough.

    What did you learn from Travis? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Super Pumped (Part One)

    Super Pumped (Part Two): The Rise and Fall of Travis

    WeWork’s Bankruptcy: A New Beginning?

    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!

  • WeWork’s Bankruptcy: A New Beginning?

    WeWork filed for bankruptcy last night as the weak office market led to huge losses. From Bloomberg:

    WeWork Inc. filed for bankruptcy, capping a tumultuous period that saw the once high-flying startup navigate a failed initial public offering, Covid-19 lockdowns, a blank-check merger and slow return-to-office trends.

    The company — which at its 2019 peak commanded a $47 billion valuation — listed $19 billion of liabilities and $15 billion of assets in its bankruptcy petition in New Jersey on Monday. The Chapter 11 filing allows WeWork to continue operating while working out creditor repayment terms.

    Even founder Adam Neumann weighed in — and he’s not wrong!

    A Broken Business Model

    WeWork has been a capital incineration machine. Once the most valuable startup in America, it raised $22 billion in investor money.

    Now, all that money is likely gone.

    When I popped into a WeWork in New York last month for a meeting, the place was empty. Perhaps a dozen people occupied a space meant for at least 50 — even at 4:30pm.

    This was Lexington Avenue in the 50’s…prime Manhattan real estate. But workers were at home on their couch, not at WeWork.

    Part of the problem is there are just too darn many of them. In western Midtown, there are 2 WeWorks just two blocks from each other: one at 37th and 7th Ave, and another at 36th and 8th.

    Bankruptcy: Just What the Doctor Ordered?

    WeWork could probably close at least half their locations with no impact on members. And bankruptcy will actually let them do that.

    WeWork is trying to renegotiate almost all its leases, according to CoStar. The company should be able to secure much lower rents for the locations it keeps open.

    Many of WeWork’s leases were signed at the top of the market, from roughly 2019-2021. The rents for office space today are far lower.

    With lower rents, WeWork may be able to lower prices from an already low $149/month. Since it’s almost impossible to renegotiate a lease without going through bankruptcy, this is an advantage many of its competitors won’t have.

    WeWork could also improve its footprint.

    Today, it’s heavy in business districts like Midtown Manhattan. In the future, WeWork could move into dense residential areas.

    Think Williamsburg, not Wall Street. The shorter commute might finally get people out of their jammies and into an office.

    Wrap-Up

    People like getting out of the house. But they don’t want to go far, and they’re stingy.

    If WeWork can renegotiate leases, winding up with better locations at lower prices, it could be a solid business.

    What do you think the future holds for WeWork? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on markets:

    Is Adam Neumann Coming Back to WeWork?

    Distressed Commercial Real Estate Hits Highest Level in Ten Years

    Did SBF’s Testimony Seal His Fate?

    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!

    Photo: “WeWork” by Open Grid Scheduler / Grid Engine is marked with CC0 1.0.


  • Super Pumped (Part Two): The Rise and Fall of Travis

    “Bill Gurley needed to get in on this deal. Over his decade-plus of venture investing, Gurley had watched enough startups succeed and fail to know that this one — Uber, ‘everyone’s private driver’ — was special.”

    Super Pumped

    Winning the Deal

    In 2010, Bill Gurley was already a one of the top venture capitalists in the world. In this little taxi startup, Gurley saw the opportunity to hit the biggest score of his entire career.

    Gurley saw two key things in UberCab: strong traction and a platform shift. Above all, Gurley was excited by the size of the market.

    “Not only was the company growing fast, but it was perfect for the iPhone, the device that was changing the world.”

    Super Pumped

    Winning the deal wasn’t easy. After multiple meetings, Gurley’s cell phone rang late one Sunday night.

    It was Travis.

    Gurley raced up to San Francisco from his Silicon Valley home, joining the young entrepreneur for a drink. That night, they made the deal.

    Spinning Out of Control

    Uber grew fast, hitting city after city and expanding all over the world. Wherever it went, riders flocked to the platform.

    Kalanick raised billions, pouring fuel on the fire. But Uber’s breakneck expansion began to cause serious problems.

    Foreign offices like Bangkok were a mess. Employees were doing cocaine and ordering prostitutes — in the office!

    Back home in San Francisco, Uber HQ was only a bit more restrained. Sexual harassment and discrimination against women were commonplace — and unpunished.

    The dysfunction got so bad, it was impossible to hide from the public. Kalanick was even filmed cursing out an Uber driver who complained about the company cutting fares.

    The Investigation

    The board was getting nervous.

    Investors like Gurley were sitting on billions of profits on their Uber investments — on paper. What if the company melted down before they could get their money out?

    It was time to face the music. The board appointed former Attorney General Eric Holder to investigate claims of sexual harassment, gender discrimination, and more.

    Holder’s report was damning. He found widespread harassment and discrimination throughout the company.

    The Showdown

    Bill Gurley had heard enough. Quietly, he started to lobby the board to take out Kalanick.

    Kalanick fought back, hard. But after several unsuccessful attempts to rally his allies, he agreed to step aside.

    On the day Travis left, Uber was valued at $69 billion. Today in the public markets, it’s worth $98 billion, a growth rate far below the NASDAQ.

    Kalanick’s successor, Dara Khosrowshahi, is a competent CEO. On his watch, Uber’s performance has been good — but not great.

    I find it hard to believe that Uber wouldn’t be bigger and better today with Travis at the helm. No one can match his intensity or love for the company.

    Wrap-Up

    Uber’s problems were very real. But pushing out Kalanick was the wrong solution.

    Uber could’ve simply fired anyone guilty of sexual harassment, discrimination, or drug use. Kalanick could’ve made clear that any such misconduct in the future meant instant dismissal — if the board had let him.

    Instead, they went for the quick fix: dump the CEO.

    Still, Uber is a remarkable success. Kalanick’s company took the miserable process of calling a cab and turned it into magic — a feat I would’ve thought impossible.

    Even if he was pushed out of his own company, Travis can take pleasure in that.

    Should the board have dumped Travis? Why or why not?

    Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Super Pumped (Part One)

    Did SBF’s Testimony Seal His Fate?

    Why Marc Andreessen Passed on Airbnb

    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. 

  • Did SBF’s Testimony Seal His Fate?

    FTX founder Sam Bankman-Fried was convicted on all counts in federal court yesterday. His own testimony may have helped seal his fate.

    ‘I Cannot Recall’

    From The New York Times:

    Mr. Bankman-Fried’s decision to take the stand allowed him to argue he had no intent to steal money and defraud anyone. But it was a risky move and Mr. Bankman-Fried said he “couldn’t recall” more than 140 times in response to questions on cross-examination.

    FTX collapsed less than a year ago. When you tell a jury over and over that you can’t remember anything about events that recent, they smell bulls—.

    Zero Contrition

    SBF was so evasive in response to the prosecutor’s questions that even the judge was visibly annoyed. And it didn’t help that he seemed to regard the proceedings as one big joke.

    From Axios:

    SBF’s frustration peaked when Sassoon presented a document on FTX key principles submitted to Congress in early 2022. It included a statement that, “adequate liquid resources to ensure the platform can return the customer’s assets upon request.”

    • When asked to read a portion of this document aloud, SBF mocked an informercial-like voice.

    If the trial was a joke, the joke was on him.

    A Ridiculous Defense

    Fundamentally, his defense never made any sense. How can you not know that taking $10 billion in customer money without their permission and spending it isn’t okay?

    A better defense might have been that SBF didn’t know about the withdrawals and his underlings acted alone. Or maybe he could’ve argued that his doctor-prescribed ADHD medications drove him into a mania in which he couldn’t distinguish right from wrong.

    But I doubt even those defenses would’ve worked. The evidence was just too damning.

    The Sentence

    Now, the disgraced former crypto mogul faces up to 110 years in prison. He also may be tried early next year on even more charges.

    Realistically, the sentences for each count will probably run concurrently, not consecutively. That would put his sentence at closer to 20 years.

    However, the judge may throw the book at SBF given his lack of contrition. From Bloomberg:

    “He has lost a lot of his arguments for a reduced sentence by taking the case to trial, by not accepting responsibility, and by essentially arguing at every turn that he at least did not commit fraud,” [former federal prosecutor Ari Redbord] said. “Those are the kinds of factors that cause prosecutors to ask for very, very high sentences.”

    SBF will be sentenced on March 28th, 2024. I’d set the line at 19 years.

    Wrap-Up

    In the end, despite all the cryptobabble, SBF’s crimes were very simple.

    His job was to safeguard people’s money. He stole it and spent it on himself.

    That’s fraud. End of story.

    How many years do you think SBF will get? Leave a comment and let us know!

    Have a great weekend, everyone!

    If you enjoyed this post, subscribe for more like this!

    More on markets:

    Goldman Insider Trader Headed to Prison

    Scandal at Two Sigma — Hundreds of Millions Lost

    Carl Icahn Loses $740 Million on Bet Against Malls

    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!

    Photo: “Sam Bankman-Fried” by Cointelegraph is licensed under CC BY 3.0.

  • Goldman Insider Trader Headed to Prison

    A Goldman Sachs banker is headed to federal prison after being found guilty of insider trading. Brijesh Goel was convicted in federal court in Manhattan yesterday and sentenced to three years behind bars.

    The Squash Court Conspiracy

    The scheme played out at the tony New York Health and Racquet Club in Midtown Manhattan. During games of squash, Goel passed tips about upcoming deals to his friend Akshay Niranjan, a Barclays trader.

    Niranjan then traded using that inside information, netting about $280,000 for the both of them, according to Bloomberg.

    The Sentence

    Judge P. Kevin Castel lambasted Goel for lying under oath during the trial:

    In handing down the sentence, the judge criticized Goel harshly for lying on the stand during the trial and for diminishing the magnitude of his misconduct in his request for leniency. ‘You took the stand right in this chair and you lied again and again and again,’ said Castel.

    Goel Tries to Cover His Tracks

    Goel and Niranjan’s friendship was characterized by partying and drug use. And not only did Goel give Niranjan confidential information, he also tried to cover it up:

    The details of Goel and Niranjan’s close relationship, including copious drug use, regular squash matches and music festivals, heightened the drama of Goel’s trial, where Niranjan was the prosecution’s star witness against his onetime friend. Niranjan recorded conversations in which Goel asked him to delete texts about his tips, which resulted in a conviction on obstruction as well as insider-trading charges.

    ‘F***… This we need to delete,’ Goel said in a conversation Niranjan recorded. ‘Did we put on any trade?… It has to be deleted. I don’t even have this chat.’

    Time to Pay the Piper

    I always assumed Goldman investment bankers were smart. But texting about federal crimes is incredibly stupid.

    In addition to his prison sentence, Goel is now on the hook for almost half a million dollars in fines and legal judgements. After he completes his sentence, he may be deported back to India.

    It’s quite the comedown for a man who until recently was working one of the most lucrative jobs in finance.

    NYC — Insider Trading Heaven

    Living near New York City, I can see why it’s ripe for insider trading conspiracies.

    Investment bankers, traders and corporate lawyers meet each other on a regular basis. Some become friends — and may be tempted to share tips.

    Goel’s sentence is a positive step for fair markets. Still, many blue collar people steal far less and spend much more time behind bars.

    Wrap-Up

    It’s critical that we protect markets from arrogant, immoral people like Goel.

    If the average person starts to think the market is rigged, he’ll pull his money out. This means less capital for business, and a worse future for everyone.

    If you know about anyone insider trading, report it! It’s not right to take advantage of average investors with inside knowledge.

    Do you think Goel’s sentence was fair? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on markets:

    Scandal at Two Sigma — Hundreds of Millions Lost

    Carl Icahn Loses $740 Million on Bet Against Malls

    Pelham Capital: A Hedge Fund in Crisis

    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!