Tag Archives: Podcast

From $10 Billion to Zero — Late Stage Ice Age

“…if you’re a Series C stage startup, you’re a late stage startup, with let’s call it a pre-AI model, the spigot is just turned off completely.”

David Sacks

The year was 2021, and late stage startups never had it so good.

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Tiger Global was ripping $100 million checks into everything in sight. Not wanting to be left behind, other big hedge funds dumped cash out of helicopters, buying everything in sight.

The bet: that buying into a startup that would IPO soon was a sure thing.

The price would go up in those last few years in the private markets. The hedge fund would take home princely gains, and all would be right with the world.

Cue that record scratch sound effect…

“The game done changed.”
“The game the same. Just got more fierce.”

The Wire

Funding for late stage startups no longer exists. Period.

Think I’m exaggerating? Look at this chart from Crunchbase:

Series C funding has dropped from $10 billion to effectively zero in April. OpenAI might be the only company that can actually raise.

Many of the biggest late stage investors are no longer investing. Period.

I haven’t seen Tiger in a late stage deal in a long time. Same goes for the other big funds.

In general, I see almost no late stage deals. What few I do see, may fail.

I hear that even if Tiger invested a fortune in your company, you cannot get them on the phone. Whoever led the investment may be gone.

I cannot verify that, and it may not be true, so take it with a grain of salt.

When I do see the big hedge funds in a deal today (rare), it’s always early stage. I think they’ll make the same mistakes there too.

But what about all that dry powder?

VC funds are sitting on billions they have raised but not deployed. Surely startups can grab a little of that, right?

Not so fast.

“This idea that there’s tons of dry powder sitting out there, I think is a myth. Or maybe it’s there but there’s no willingness to deploy it.”

David Sacks

The Limited Partners who put money into the VC fund may be telling it to pull back. Or maybe they’re not even meeting their commitments at all.

Get to breakeven and live to fight (and raise) another day. That’s the best choice for late stage companies today — and most early stage companies too!

You cannot count on fundraising right now. If you do count on it, you could quickly cease to exist.

For late stage companies making tens or hundreds of millions in revenue, getting to breakeven should be no problem. But many refuse to do it.

“What steps were taken to cut costs before you just went to the investors to pony up more money?

David Sacks

That’s the question every investor is asking!

I don’t do late stage. But when one of my companies isn’t meeting targets and is running out of money, I want to know what they did to cut burn.

If they didn’t do enough, I question the founder’s leadership. And I close the checkbook.

“Management has told you they’re incapable of running this business, this concern, in a thoughtful way.”

Jason Calacanis

Or in other words, this company is going to be a 0 anyway. No sense putting more money in.

Sound harsh? Yeah, it is.

So’s business, sometimes.

What do you think of today’s funding market? Leave a comment and let us know!

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From Anticommunist to Navy SEAL: “I Owe Everything to America”

“I owe everything to America.”

That’s Thomas ‘Drago’ Dzieran, who left Communist Poland in the 1980’s for freedom in America and became a Navy SEAL. His path to the teams is singular.

Drago began to oppose Communism at an early age. He refused to learn Russian in school and was promptly hauled to the principal’s office. The principal explained to him that if he refused again, he could be taken from his family and sent to a foster home.

This did not stop Drago from questioning the Communist system. He listened secretly listened to the BBC on the radio, a highly illegal act. There he learned that the Communist government was killing people in Poland. He covered himself in blankets to dampen the sound as he listened, but his mother scolded him to use even more blankets and pillows lest a neighbor hear. If anyone heard, she could go to prison.

But Drago didn’t need a radio broadcast to tell him things in Poland weren’t right:

“I was always cold in Poland because we didn’t have good clothes.”

Privation was the norm, and he often went to school hungry. He took to assaulting the children of high party members, who were well fed. If you want to eat tomorrow, bring two sandwiches, he told them.

As a young man, Drago found himself in a Polish prison for printing anti-Communist leaflets. When released, he emigrated to the United States, and found himself resettled in Memphis, Tennessee by a refugee program.

The luxury of America amazed him. He had never seen air conditioning before, and found himself particularly mesmerized by American grocery stores. The cereal aisle had so many choices, and the packages were so attractive, he decided to try one. And another, and another. Soon, his cart was full of 50 boxes of cereal! But he couldn’t stop his curiosity:

“I didn’t even know what a cereal was.”

After a stint as an auto mechanic, Drago was looking for a way to serve his adopted home. He settled on being a Navy SEAL, but at 32, he was at least 4-5 years beyond the typical age limit. No matter. He powered through the qualification tests and insisted on being allowed into BUD/S. Drago later distinguished himself as a SEAL during the Iraq war.

Drago’s commitment to freedom continues today, as the founder of a censorship-free social network called Connectzing.

What really struck me in this interview was Drago’s perseverance, along with the stark differences between the United States and where he comes from. On living conditions in Poland under Communism:

“I would trade my life in Poland for prison here.”

After all, they get food and medical attention! That’s better than he got much of his life.

Drago says he owes everything to America, and that’s equally true for those of us who are native born. Let’s seize the opportunity, remembering these words:

“This is America. You can be whatever you’re able to be.”

For more on leadership and service, check out these posts:

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Photo: “Navy SEAL Graduation” by uscgpress is licensed under CC BY 2.0

This Is How Vlad Tenev Built Robinhood

“You can break down Robinhood into a series of small steps, the first one being start Robinhood, and every subsequent one being some variant of don’t stop and keep going, right, and you end up where we are today. “

In his mid-20’s, Vladimir Tenev lived in New York City. His apartment was tiny and spare. All his time went into his high frequency trading startup. Then mom came to visit.

When she saw his shabby surroundings, she began to cry. She told him she had a friend who worked at Macy’s. Maybe, she could get him a job there.

It must’ve taken great fortitude for Tenev to push ahead with his own business, despite few signs of success and the anguish it caused his family. But push ahead he did. Today, the company he built, Robinhood, has over 13 million users and plans to IPO soon at a valuation of around $40 billion. Tenev’s net worth exceeds $1 billion.

Tenev came to the United States as a child from Bulgaria and attended the elite Thomas Jefferson High School for Science and Technology, which US News ranks the best public high school in the entire country. What would’ve become of Tenev if he had stayed in Bulgaria? He might have had a very normal life. But giving this smart kid a superb education and access to a great entrepreneurial ecosystem turned him into a billionaire executive.

Tenev didn’t stop learning when he finished school. He taught himself to write iOS apps by watching free Stanford courses online while commuting on the Caltrain. It really shows you what a person can accomplish learning on one’s own for nothing now that knowledge is much more freely available.

Robinhood faced numerous obstacles along the way, but Tenev and co-founder Baiju Bhatt blasted through them. It took two full years of constant work to build their product. Venture capitalists were highly skeptical of their business. How could they make money without charging commissions? How could they beat giant competitors like Etrade and Charles Schwab? And could a couple of math guys make a beautiful consumer product?

But they kept pitching, and ultimately raised $250,000 from Google Ventures. Tenev couldn’t even get a job interview at Google 4 years prior. What if he had let that discourage him from ever approaching Google for an investment?

Just days before a meeting to approve a critical license Robinhood needed to operate, they were still $500,000 short of the required capital. Only the birth of an executive’s baby saved them by providing an excuse to postpone. By the new date, Tenev had raised the money.

A key lesson for startups: Robinhood didn’t worry about monetization until it achieved a large user base. It was confident that, like Instagram, winning enough users would give them all the opportunities for revenue they’d need. And they couldn’t put the cart before the horse.

What sticks out to me most about the Robinhood story is Tenev’s perseverance. At first, his business looked laughable. Later, it gained a bit of traction but faced seemingly insurmountable obstacles in fundraising.

But he just keep pushing, day after day. Now, 11 years after he started his first company, he sits at the helm of one of the hottest startups in the world.

For more on startups, check out these posts:

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Photo: “File:TechCrunch Disrupt NY 2016 – Day 2 (26902081436) (2).jpg” by TechCrunch is licensed under CC BY 2.0