Tremendous

An angel investor's take on life and business

  • Why Hedge Funds May Pile into APE Shares

    Note: This is not financial advice

    This morning, new preferred shares of AMC Entertainment Holdings debuted on the New York Stock Exchange.

    Get the blog before anyone else…subscribe!

    Interestingly, the new shares (ticker symbol APE) have the same ownership interest and rights as normal AMC shares. But as I write this, they trade for $5.80, versus $10.52 for AMC shares.

    The shares appear ripe for one of Wall Street’s favorite strategies: arbitrage.

    If the two share types have the same economic value, they should trade at the same price. Hedge funds often buy an underpriced security while selling short an equivalent higher priced one.

    The bet: the two prices will converge.

    I expect hedge funds to buy APE shares while shorting AMC common stock. On paper the strategy makes sense, but there’s a little problem…

    AMC shares are heavily shorted. 20% of the float has already been sold short.

    If hedge funds continue shorting the stock, they become vulnerable to a short squeeze. Huge run-ups in shares of AMC, GameStop Corp. and others have bankrupted hedge funds before, such as Melvin Capital Management.

    What’s more, both AMC and APE shares have passionate fanbases that can cause massive volatility. The human factor could cause a seemingly straightforward pairs trade to go very, very wrong.

    Hedge funds should heed the lesson of Melvin Capital and avoid shorting volatile meme stocks. But as Benjamin Franklin said:

    “Wise men don’t need advice. Fools won’t take it.”

    How do you think hedge funds will react to the debut of APE shares? Leave a comment at the bottom and let me know!

    More on markets:

    AMC’s 9 Million Missing Shares

    Is Melvin’s Gabe Plotkin Headed to Prison?

    Wall Street Banks Turn on Each Other as Federal Probe Looms

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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. 

  • Talking Startup Fundraising with Travis King of Launch Point Labs

    How do angels and VC’s choose companies to invest in? Why do some founders struggle in fundraising?

    Get the blog before anyone else…subscribe!

    I dug into all that and more recently with Travis King, co-founder of Launch Point Labs. Some interesting points:

    2:42: How I choose companies to invest in

    6:57: How you can work backwards from the customer to the product

    8:44: How much help do founders need? And the ways I try to add value for startups.

    14:55: Today’s market slowdown and how I’m adapting.

    17:16: How angel investors can get burned.

    19:27: Lessons from the SaaS OG, Jason Lemkin

    23:35: Why some founders have unrealistic expectations about fundraising.

    27:26: Why there’s no substitute for traction

    28:49: Why I’m being brutally honest with founders in today’s tough market

    What questions do you have? What did we miss?

    Leave a comment at the bottom and let me know!

    Have a great weekend everyone! 👋🥳🎉

    More on tech:

    Record Funding for Climate Startups in Q2

    Angels Flocking to DTC Brands: Mistake or Opportunity?

    Will Adam Neumann Change Housing Forever?

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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. 

  • AMC Shorts Take $653 Million Loss in August

    It’s been a rough August. And it’s not over.

    Short sellers in shares of AMC Entertainment Holdings have lost $653 million so far this month. From a new Bloomberg report:

    Get the blog before anyone else…subscribe!

    Investors betting against the most well-known meme stocks have lost about $1.65 billion this month after the shares soared in value, prompting a short squeeze.

    AMC Entertainment Holdings Inc.’s 47% rally has pushed mark-to-market losses for short-sellers to $653 million, S3 Partners data show. Similar bets against Bed Bath & Beyond Inc. and GameStop Corp., which have surged 359% and 19%, respectively, in August, lost $1 billion combined.

    Bets against meme stocks like AMC and GameStop blew up hedge fund Melvin Capital Management, among others. But like moths to the flame, short sellers seem drawn to losing more.

    Many firms like Melvin heavily shorted multiple meme stocks. Rallies in several meme names at once multiplies their losses.

    Shorting a heavily shorted company is a recipe for a short squeeze. Add a fanatical retail following, and disaster could strike at any moment.

    The ideal short sale candidate is a failing company that isn’t heavily shorted. And you want something with no cult following.

    Or better yet, follow the counsel of a hedge fund manager I had dinner with recently:

    “Short selling is a great way to lose money.”

    I guess some are learning. As for the rest, bon chance.

    What do you think of short sellers recent losses? Leave a comment at the bottom and let me know!

    More on markets:

    AMC’s 9 Million Missing Shares

    Is Melvin’s Gabe Plotkin Headed to Prison?

    Shorts Having Their Worst Month Since January 2021

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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. 

  • Record Funding for Climate Startups in Q2

    My appointment got cancelled, so I get to spend the afternoon with you guys! And we’ve got some big news…

    As founders struggle with a down market, one corner of startupland is flush. Climate startups raised record funding in the second quarter.

    Get the blog before anyone else…subscribe!

    From a report out this morning on Bloomberg:

    Carbon and climate startups have attracted record investments at a time when other industries are struggling to tap funds from venture capitalists.

    Buoyed by corporate and government pledges to cut greenhouse gas emissions, a record $1.4 billion poured into climate and carbon-focused startups in the second quarter of this year. That’s in stark contrast to the broader market for venture funding, which faces its largest quarterly percentage drop in nearly a decade, according to CB Insights.

    These startups have an incredible tailwind: $369 billion in government climate funding.

    There are billions of dollars for batteries, reducing emissions, and reforestation. A small portion of one of these categories is enough to make a $1 billion startup.

    I had a front row seat when huge government subsidies hit another part of tech — medical software. Before I became an investor, I worked on one of the leading platforms, Epic.

    When the 2009 stimulus pumped $25 billion into the sector, everything went bonkers.

    My phone started ringing off the hook with recruiters. And I started making a lot more money.

    I wasn’t any better at the job than I was before the bill passed. But all that government money had to go somewhere.

    Climate tech is about to be hit by the same kind of cash tsunami. And if you’re standing anywhere nearby, you’re going to get wet.

    I favor SaaS products with a positive climate impact. Think software to reduce a truck fleet’s fuel economy, for example.

    No scientific breakthrough needed, no messy and low margin “stuff,” just a proven business model applied to a new area. And it sells itself — even a climate change skeptic wants to save on fuel!

    I actually just invested in a climate tech company a couple of months ago. (I’ll give you more details when the deal is announced.)

    A great SaaS business is always yummy. A great SaaS business with a tailwind of government cash and regulation — chef’s kiss.

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

    More on tech:

    Will Adam Neumann Change Housing Forever?

    Angels Flocking to DTC Brands: Mistake or Opportunity?

    Seed Valuations Are…Up?

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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: President Biden signs $369 billion in climate funding into law

  • Angels Flocking to DTC Brands: Mistake or Opportunity?

    Angel investors are flocking to Direct to Consumer (DTC) brands, even as venture firms have pulled back. From a report out this morning in Business Insider:

    A growing class of angel investors is now swooping in to write the early checks fledgling DTC-brand founders need to bring their products to market. While individual angel investors may not offer the large sums of cash or the pedigree and connections a blue-chip Silicon Valley VC can provide, they offer other advantages, DTC founders told Insider. Perhaps most importantly, they are willing to open their checkbooks to untested new brands as VCs analyze them more critically.

    “If you think about the early floodgates of VC money going into DTC, it was because they were using a specific playbook,” Eunice Shin, a partner at Prophet, a DTC consultancy, said. “That playbook is broken.”

    DTC brands like Peloton, Casper and Blue Apron used to be some of the best known names in tech. Now those companies are struggling and VC’s are wary.

    So founders go where they can: to angels. Angels usually ask fewer questions and may be unaware of the headwinds DTC is facing.

    Advertising, manufacturing and shipping costs have skyrocketed. Supply chains are a mess.

    Things started to go very wrong for DTC last spring. Apple released an iOS update that let users stop ad tracking, and almost all did.

    This meant apps like Facebook and Instagram had no idea who saw an ad.

    The update was a gut punch for DTC brands. A woman’s underwear startup that only ships in the US could waste its precious ad dollars advertising to men in Germany.

    Many startups saw their Customer Acquisition Cost (CAC) triple. What had been a solid business model no longer worked.

    And it’s going to get even worse. Google also plans to limit ad tracking next year.

    What happens when your advertising, manufacturing, and shipping costs skyrocket? You start bleeding red ink.

    VC’s are usually familiar with these problems facing DTC. Unfortunately, many angels are not.

    As scary as things may be in DTC land, a few companies have bucked the trend.

    Eight Sleep, which produces a heating and cooling cover for mattresses, is one great example. The cooler surface can greatly improve your sleep.

    Eight Sleep produces a highly differentiated and expensive product. Its mattress covers start at $1,845, and its mattresses are even more.

    This is the kind of consumer product that can still be a great business.

    It’s expensive enough to absorb a higher CAC. And it doesn’t have to fight it out with a dozen competitors.

    Still, I prefer SaaS. You’re not dependent on online ads, customers tend to stick around, and your product is infinitely scalable without any messy “stuff.”

    DTC brands are sexy.

    A yummy steak from Blue Apron is a lot more exciting than a SaaS revenue retention product. And it’s a service you could use yourself, unlike most SaaS products.

    But if we want to make returns, we have to focus on what’s financially viable, not just what’s exciting.

    What do you think about the DTC industry today? Leave a comment at the bottom and let me know!

    And now, I’m off to invest in some more boring SaaS companies. 🙂

    P.S. There will be no blog tomorrow. I have an appointment. See you Thursday!

    More on tech:

    Will Adam Neumann Change Housing Forever?

    Seed Valuations Are…Up?

    $500 Billion in Venture Capital is Sitting on the Sidelines

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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. 

  • Will Adam Neumann Change Housing Forever?

    He’s baaaack! Adam Neumann, the controversial WeWork founder, has a new startup called Flow.

    This time, Neumann plans to transform the home rather than the workplace. Details are scant, but Flow appears to be a sort of WeWork for apartments.

    Get the blog before anyone else…subscribe!

    Today, venture firm Andreessen Horowitz announced a $350 million investment in the startup. The deal values Flow at over $1 billion before it has even launched and is Andreessen’s largest check ever.

    Neumann has bought over 3,000 apartments in Miami, Nashville and other Sun Belt cities. His plan may be to turn them into homes for digital nomads.

    Imagine buying a Flow membership, just like WeWork. In return, you get access to a hip apartment in any city you want, for as long as you want.

    No more taking chances on random Airbnb hosts and managing bookings. Who wouldn’t prefer a seamless, consistent experience?

    Shoot, I might even move in myself!

    Neumann’s strategy of buying up reasonably priced housing in the Sun Belt has succeeded before. Fundrise, through which I invest in real estate, has similar strategy and has made substantial returns.

    Americans are flocking to the Sun Belt, providing a strong tailwind of demand. Cities like Miami are cheaper and warmer than places like New York.

    So Neumann’s strategy seems sound — but is he the best person to execute it?

    Neumann has a history of erratic and unscrupulous behavior. He trademarked the word “We” and sold it back to his own company for millions of dollars.

    He also routinely bought buildings and leased them to WeWork, a huge conflict of interest. He even invested $13 million of company money into a wave pool startup.

    Neumann was too aggressive and unfocused at WeWork — which is fine. All founders learn with time.

    But I can’t excuse him for putting himself before his company, his employees and his investors. Unlike business strategy, ethics aren’t something you can learn.

    You either have them or you don’t.

    I wouldn’t invest in Flow given Neumann’s past. What’s more, a startup valued at over $1 billion before it launches is a major red flag.

    Historically, most such companies implode.

    However, Neumann has charisma and vision. He just might be the best salesman of his generation.

    Andreessen Horowitz may just prove me wrong and make a killing here. One way or another, I can guarantee it won’t be boring.

    What do you think of Neumann’s new startup? Leave a comment at the bottom and let me know!

    More on tech:

    Behind the Scenes of WeCrashed

    The True Story Behind WeCrashed

    What Can The Dropout Teach Investors?

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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 and Flow founder Adam Neumann

  • Is Melvin’s Gabe Plotkin Headed to Prison?

    The SEC is investigating Melvin Capital Management for securities fraud. From a report that broke last night in The Wall Street Journal:

    Get the blog before anyone else…subscribe!

    The U.S. Securities and Exchange Commission is looking into Melvin Capital Management risk controls and investor disclosure after the hedge fund was crippled by the meme-stock rally last year, said people familiar with the matter.

    The regulator has contacted investors in the hedge fund in recent months as part of an investigation into what Melvin founder Gabriel Plotkin and other senior executives told them following the meme-stock rally in January 2021 and whether it misled investors when it raised money last year.

    If Plotkin and other top Melvin executives lied to investors in a fundraising presentation, they committed a very serious crime: securities fraud.

    Securities fraud can be punishable by prison time, not to mention large fines. Of course, no one has proven anything yet against Plotkin or anyone at Melvin.

    When Melvin raised money last year, it had already suffered massive losses. Its losses during the meme stock rally of January 2021 were $6.8 billion, or more than half its assets.

    The worst days saw losses of over $1 billion. A day.

    If you’re raising funds and fighting for survival in a situation like that, you might be tempted to stretch the truth.

    We don’t yet know which fundraising presentations the SEC is looking into. But we do know that Melvin raised $2.75 billion last year from Citadel and Point72 Asset Management.

    Did Melvin lie in those presentations in order to secure the bag?

    When you rob mom and pop, it’s hard for the victim to fight back. But if you rob some of the richest and most sophisticated investors in the world, they can hire an army of lawyers to make your life very difficult.

    This investigation comes on top of a DOJ probe into Melvin’s short sales. That investigation too could result in prison time for insider trading if wrongdoing is found.

    In all, it’s not hard to see why Melvin shut down. It had lost a fortune, couldn’t get any more performance fees, and feds were circling.

    I don’t know whether Melvin did anything wrong. But I do know that today, I’m glad I’m not Gabe Plotkin.

    Do you think Melvin is guilty? Leave a comment at the bottom and let me know.

    Have a great weekend everyone! 👋

    More on markets:

    Melvin Capital Under Federal Investigation

    The Real Reasons Melvin Is Shutting Down: No Fat Fees and a Federal Investigation

    AMC’s 9 Million Missing Shares

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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: Melvin Capital founder Gabriel Plotkin

  • Seed Valuations Are…Up?

    It may be tough times in startupland, but one area is bucking the trend: seed stage. Median pre-money valuations are up 33% year over year, according to a report released yesterday by Pitchbook:

    Get the blog before anyone else…subscribe!

    Seed-stage investment has possibly held up better than any other stage to this point in the economic slowdown. Seed deal counts have remained elevated, and median deal sizes and valuations continue to grow. The median pre-money valuation for seed in 2022 has reached $12.0 million, 33.3% above 2021’s full-year figure of $9.0 million.

    Seed is my playground. And seed investors are wise to continue doing deals.

    Most companies at that stage won’t exit for ten years. By then, the economy and markets are likely to be completely different.

    Late stage deals have also been surprisingly resilient. Although the median deal size has dropped slightly, valuations are actually up 10% over 2021.

    This is harder to make sense of, because late stage startups are close to an IPO. That makes them more comparable to public tech stocks than a seed stage company.

    And holy mole, have public tech stocks gotten hammered! The NASDAQ is down 21% from its peak last year, and many major companies like Shopify are down over 70%.

    Yet somehow, it’s early institutional rounds that are struggling to get done.

    Early-stage valuations have started to mirror broader economic uncertainty and show signs of decline. While select startups continue to find success fundraising amid headwinds, quarter-over-quarter median pre-money valuations saw their first decline in ten quarters. The Q2 median pre-money valuation for early-stage VC was $52.0 million, exhibiting a 16.1% decrease from the Q1 2022 median pre-money valuation of $62.0 million.

    This is around Series A and Series B. The slowdown at this phase mirrors what I’ve heard from VC’s.

    Seed will likely continue to outperform other stages, given how much time the companies have to grow before they hit the public markets. But I still expect a drop in valuations in the rest of the year.

    Pitchbook’s report for the first half covers deals that closed in the first half, not deals that began then. Venture deals often take months to close.

    So, many of the deals we’re seeing were agreed to in Q1 2022 or Q4 2021. I’ve seen the market cool substantially since then.

    Founders should extend runway so they can get through this tough market. And investors should continue to fund great companies at reasonable valuations.

    That’s what I’ll be doing!

    What do you think of today’s funding market? Leave a comment at the bottom and let me know!

    More on tech:

    $500 Billion in Venture Capital is Sitting on the Sidelines

    Hedge Fund Giant Tiger Loses Over $18 Billion — Long Fund Down 64%

    The Startup Glossary

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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: “Confused Dog meme” by Dianna Geers is marked with CC0 1.0.

  • $500 Billion in Venture Capital is Sitting on the Sidelines

    Over $500 billion in venture capital is sitting on the sidelines, according to a report that broke this morning in The Wall Street Journal:

    Get the blog before anyone else…subscribe!

    Venture-capital firms are sitting on a record cash pile. Their so-called dry powder—money raised but not deployed—has increased by more than $100 billion worldwide since the end of last year, reaching almost $539 billion in July, according to data firm Preqin Ltd.

    The buildup comes as many venture firms have slowed deal making amid the market pullback, a signal that investors ranging from stalwart firms to niche crypto investors are hoarding capital as they grow more picky about which startups to back.

    Across the market, fewer deals are getting done. Deals were down 24% in the second quarter, per Pitchbook.

    That likely understates how cold the market is.

    Venture deals routinely take months to close. Deals that were announced in Q2 were likely agreed to in Q1 or even before.

    The slowdown really hit hard this spring, so I expect the Q3 numbers to be much worse.

    I see this slowdown every day as an angel investor. One after another, VC’s and angels have retreated from the market.

    Just this morning, a top VC pulled out of a deal I’m working on, citing market conditions. No matter — I’ll find them another firm.

    Is this just a brief pause, given how much money is waiting to be deployed? Maybe not.

    Just because limited partners (LP’s) have committed $539 billion to venture funds doesn’t mean it’ll ever go to startups. LP’s can ask the VC to slow down or stop deployment at any time.

    Many have already done so, in all likelihood. And if a VC has a long term relationship with a major institutional investor, the VC will obey.

    Why would these institutions pull back on their commitments? Target allocations, for one.

    LP’s have taken big losses on their public stocks. If they wanted to allocate 15% of their total assets to venture capital, that would be $150 million of a $1 billion endowment.

    But their stocks have fallen so much this year that their endowment might be down to $750 million. So, they can only allocate $113 million to venture.

    Add the math of target allocations to general fear and wimpiness, and you’ve got yourself a venture slowdown.

    What this means for founders is raising money now is going to be a lot harder than in the past. I expect the market will take a year or two to recover.

    But if you keep your game tight and extend that runway, you’ll be fine.

    I’m actually investing in startups faster than ever.

    I’ve committed to 4 deals in the last two weeks, by far my fastest pace yet. I normally do about one deal a month.

    Especially at the early stages, there are a ton of great deals out there now. And the prices are much better than during last year’s bacchanal!

    This slowdown has pushed the weak companies out of the market, along with my competing investors. It’s go time!

    What do you think about the venture slowdown? Leave a comment at the bottom and let me know!

    More on tech:

    Inside the Seed Funding Slowdown

    Talking Startups and Today’s Fundraising Pullback

    The Startup Glossary

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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 by Blogging Guide on Unsplash

  • The Startup Glossary

    I had wandered into a foreign land. The people spoke a strange tongue…CAC, LTV, SMB.

    How could I join their tribe and learn their ways? I consulted the oracle: Google.

    Get the blog before anyone else…subscribe!

    The world of startups has a language all its own. When I started angel investing last spring, I found it nearly impenetrable.

    Here are some of the terms I hear, and use, the most:

    ARR = Annual Recurring Revenue. If you have subscription-based revenue, this is how much revenue you would make from those subscriptions in a year.

    Burn Multiple = Measures capital efficiency by comparing how much money you’re losing to how much you’re growing. More here.

    CAC = Customer Acquisition Cost. Measures what it costs to get a new customer. If you have 10 customers and spent $1,000 to get them, your CAC is $100. CAC is also measured by channel (Instagram, YouTube, etc.). More here.

    Cohort = Customers who signed up at a particular time, usually a calendar month. You look at that group of customers over time and see how many stayed, how many left, etc.

    Churn = Customers leaving you. Churn is often measured per cohort to understand which customers are leaving and which ones are staying.

    D2C = Direct to Consumer. This is a type of startup that sells a physical product to consumers — think Peloton. It’s a tough business and is avoided by most investors today.

    Gross Margin = Your profit margin on each additional sale. You take the revenue and subtract costs like customer support, CAC, etc. This gives you a sense of how much profit you could make as you scale and fixed costs become less of a burden.

    Land and Expand = Doing more business with existing customers, like selling them more seats for your software. Closely related to NRR (below).

    LTV = Lifetime Value. Measures how much money you can expect to make from a customer. This should usually be 3 times your CAC or more. More on LTV here.

    MoM = Month over month. Let’s say you doubled ARR from 2020 to 2021. Your monthly growth would be 6% MoM.

    MRR = Monthly Recurring Revenue. The monthly equivalent of ARR.

    NRR = Net Revenue Retention. Measures how much new revenue you’re getting from existing customers minus what you lose in churn. Especially relevant for SaaS businesses. Also called Net Dollar Retention (NDR). More here.

    PMF = Product Market Fit. Do customers want what you’re selling? If so, you have it.

    SMB = Small and Medium Sized Businesses. This usually means businesses with 1,000 employees or less. The term is used to describe potential customers.

    SaaS = Software as a Service. Software that customers pay for by subscription. SaaS usually refers to business software, but consumer SaaS is also an important category. These are consumer subscription companies like Calm.

    YoY = Year over Year (similar to MoM above).

    If you know these terms, life in startupland gets a lot easier! They also provide you with helpful ways to understand a business.

    What did I leave out? Leave a comment at the bottom and let me know!

    More on tech:

    The Top 5 Things I’ve Learned from Angel Investing

    Inside the Seed Funding Slowdown

    Twilight of the Quick Delivery Startups

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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 by Romain Vignes on Unsplash