Marvin’s Best Weekly Reads Feb 19th, 2023
“As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.” —John F. Kennedy
Europe needs to wake up & ramp up on defense spending and their militaries. Unfortunately, USA is an unreliable ally, thanks to soulless, evil individuals on the hard left and right. ie. Tucker Carlson et al.
"Militarily, Europe will be able to outmatch Russia — if it tries to do so. The Ukraine war has shown that NATO’s military equipment, culture, and doctrine is superior to that of Russia. The only reason Russia looms so large as a military threat is that commits far more of its economy to its military than European countries do — even East European countries that are under immediate threat from Russia.
In order to stare down Russia over the next two or three decades, Europe must change this mindset completely. The invasion of Ukraine caused the region to unite politically around sanctions and military aid in a way that it hasn’t been united in its entire history. But this isn’t enough; Europe must unite to increase defense spending substantially, and wean itself entirely off of Russian energy."
https://noahpinion.substack.com/p/europe-has-to-stand-against-russia
2. Lots of great insights from a VC who started in 1985. Lots of cycles and lots of learning.
https://www.youtube.com/watch?v=X73seiJW3L8
3. "Of the two leaders – Zelenskiy and Putin – it’s clearly the Ukrainian who is heeding most of the warnings. Perhaps Putin needs to read my book so he can learn this history for himself. Although, since we all hope he keeps performing incompetently, maybe it’s best if he doesn’t."
4. "Layoffs: Unsurprisingly, cuts are still occurring. It’ll be Wall Street cutting more through end of March and the Main Street effects will be seen in the second half of the year. This is how it goes historically: Tech, Wall St. and Mainstreet"
https://bowtiedbull.substack.com/p/2019-vs-2023-more-sec-regulation
5. "In any case, with the Treasury flooding the market with debt and the Fed talking out of both sides of their ass, I would say this future is negative at the margin for risky assets.
That means that, if you are planning to buy risky assets now, you need to be prepared to watch the market very closely and be ready to pound the sell button as soon as the TGA has been completely drawn down to zero but before the debt ceiling is raised."
https://entrepreneurshandbook.co/be-present-aff45d6421b4
6. A must read here. About entrepreneurship and life in a war zone: the Baghdad Country Club.
https://magazine.atavist.com/baghdad-country-club
7. "A strong bridge financing ask paints a clear picture of what the company will do with the money that will change the company’s trajectory and answer some of the big outstanding questions about the business.
In many cases, a strong bridge financing ask explicitly calls for changing something about how the company operates – reducing burn rate, focusing more energy on generating revenue, improving unit economics, or shipping key features or products that will unlock new customer segments."
https://www.charleshudson.net/tips-for-talking-to-your-investors-about-bridges-and-extensions
8. "If you’re bad at picking winners…well, other than considering another line of work, you could eliminate the effect of your decision quality by indexing the market and allocating capital randomly. But, again, it depends on your goal.
If you want to just achieve 1x and avoid losses, create a large portfolio. If you want to achieve 2, 3, 5x, you either need to improve your decision quality or invest in fewer companies and hope for the best."
https://pulse.moonfire.com/972-billion-portfolios-how-to-design-the-optimal-venture-portfolio
9. "So, does this mean venture capital is taking a couple years off? Definitely not. But what becomes more likely is an exacerbated bifurcation between companies that can and can't access capital.
Now just apply that same dichotomy to private companies, and assume its like we're in ~2011-2012. The more pressure there is on capital, the less fluid it is, and the more dramatic people's expectations are for what kinds of companies will get capital."
https://investing1012dot0.substack.com/p/dreaming-of-dry-powder
10. "Russian advances, when they are successful, are incremental, their losses in tanks and aircraft when they engage the Ukrainians are extremely high (especially for tanks) and so far we see no sign of successful combined-arms Russian warfighting which would allow for such an amazing reversal in the course of the war.
Moreover, and I know this is my constant personal bugbear, no one bothered to analyse just how such a massive force of machines would be supplied. Once again, logistics lost out to scary hordes of Russian tanks streaking forward in the popular imagination.
All I can say, is that I see no indication whatsoever that the Russians could attempt such a major, air-armor breakout and exploitation. I don’t see how they could supply it, I don’t see any indication that their army knows how to execute it, and I can't see how the Ukrainians could be caught by surprise were the Russians to attempt it."
https://phillipspobrien.substack.com/p/weekend-update-15
11. "The major things that should be highlighted are as follows:
1) there is no way you should try to retire in a bull market. This typically over-states your net-worth,
2) you should not try to cheap your way to the top since it creates a lifetime of stress,
3) most people severely underestimate how much they can earn as an entrepreneur *IF* they have a successful career based income stream and
4) within the blogosphere, FAT Fire is probably the most respectable as it doesn’t force you to live a boring life forever."
https://bowtiedbull.substack.com/p/retire-with-fire-and-guarantee-a
12. "Additionally, I believe that small businesses are going to come under even more immense pressure. Technology is empowering large companies like Amazon to eat more market share of various industries, so the small business entrepreneur is going to feel the squeeze. They are under attack from an economic standpoint and they are under attack from a competition standpoint.
The competition aspect is a net positive for the consumer, especially when you consider how much improvement to products and services happen via the free market, but the economic pressure is going to be a net negative for the consumer, particularly around increasing prices and an erosion in the quality of service.
Many people I talk to on a daily basis share stories that make you think we are in the 12th round of a title fight. We have been hit in the face over and over again. We can’t see straight and we’re not sure where we are exactly. But be very, very careful — just because we have been beat up economically for the last 14 months doesn’t mean that more pain can’t be on our doorstep."
https://pomp.substack.com/p/inflation-is-destroying-small-business
13. "How do we fix this? Simple. Fix the timing. If your company has a a quarterly business review (QBR) where next-quarter OKRs are discussed and assigned, then ensure the CSAT report arrives days before that meeting.
Better yet, make the CSAT report review a standing item on the QBR agenda. Along with a review of the win/loss report. Time the annual state-of-the-market study so it arrives a week or two before the strategy offsite.
Don’t fight your company’s cadence. Instead, slide into it. Design the surveys to be actionable and time them so they can be. Work with your vendors to move to new timing. Otherwise, you’re spending $50K to dump a report into a drawer (or a PDF into a shared drive)."
https://kellblog.com/2023/02/13/the-key-to-making-market-research-actionable
14. This is an incredibly good commencement speech by Ashton Kutcher.
"And the only thing that provided me with an opportunity to be where I am today was a willingness to throw out the master plan. Now, I didn't throw out the hard work, I didn't throw out the morals, I didn't throw my goals, I didn't throw out my ambition, my drive, my experience. I just threw out the master plan. I'm not saying you're gonna have to do that. But I'm saying having a willingness to do that goes a long ways.
You don't ever have to know what you want to be when you grow up. And the truth is, even if you think you know who you are right now, you're probably wrong. Because you're not who everyone else thinks that you are. In fact, you're probably not who you think you are. And your life will definitely not go as planned."
https://aletteraday.substack.com/p/letter-56-ashton-kutcher-2020
15. We're at war and most people don't know it.
"Today, I stand by all this and will now argue that many of the strange events around UAPs, odd lights in the sky, and other concerning events, are the result of this arms race and the ongoing invisible war that the superpowers are conducting with all this money and new tech in the places the public cannot see: near and far space, across and under the open oceans, within data/cyberspaces, and in, let’s call it, “Spygame land” where spies have returned as a “thing.”
The Chinese “Sky Lanterns” floating across the skies have illuminated a previously invisible arms race and a war that we need to understand."
https://drpippa.substack.com/p/qe-uaps-aliens-and-the-invisible
16. "Knowing that empirical evidence suggests 10 seats is a catalyst for sustained expansion, B2B software companies with PLG motions can take a leaf out of consumer growth playbooks when designing expansion processes.
The starting point is how consumer growth teams think about the adoption funnel."
https://akashbajwa.substack.com/p/consumer-gtm-insights-for-b2b-software
17. This is good news for the Canadian startup scene and most needed.
https://betakit.com/real-ventures-partners-with-panache-inovia-to-relaunch-founderfuel-accelerator
18. Always learn stuff on culture capital and leverage in discussion with Trapital & the NIA boys.
https://www.youtube.com/watch?v=82LIplhsyNI
19. "So let’s wrap up. If we want to ensure that our market research is actionable, then we need to:
Time its arrival
Study the right questions
Ask those questions in a way that provides action-oriented answers"
https://kellblog.com/2023/02/14/the-keys-to-making-market-research-actionable-part-ii
20. "Now the good news for Ukraine in this coming mess, is that the Russians still don’t seem to be able to patiently assemble well-trained and supported assault forces. Instead, they seem to be feeding troops into combat piecemeal up and down the line as they become available. This was similar to what they did in the Donbas earlier in the war, drip-feeding forces as they arrived.
So until Ukraine gets access to all the new NATO weapons, and can launch operations against Russian logistics and front line forces simultaneously, its probably not a bad thing that the Russians do the attacking. It wont be pretty, and Im sure the same chorus that went nuts over the suppposedly great Popasna breakthrough or the fall of the strategic fortress city of Soledar will continue their bleatings.
However, keep the aid flowing to Ukraine, increase their range and capabilities (yes ATACMS would be the ultimate) and the war is still heading strategically in the direction of Ukrainian success."
https://phillipspobrien.substack.com/p/weekend-update-14
21. Learning from investing vets. This is really invaluable. Surviving cycles.
https://www.youtube.com/watch?v=1N3POLPxYlY&t=90s
22. "Incidentally, it’s hilarious to me that something so catastrophic (100% capital loss for all investors) is almost celebrated in the VC world. As if a zero-recovery outcome is acceptable, at all for any purpose in any scenario for investment, rationalized by the dartboard-portfolio mentality of “well we’ll have a bunch of zeroes in the book but we’ll also find the next Google!” O.K."
And then the SaaS business came along. Revisiting the 2020-2022 period of excess in public markets, several phenomena informed professional investment decision-making, combined with markedly higher interest rates, that contributed to the eventual collapse of the Unprofitable Tech Company (“UTC” as a catchall for anything that traded on a EV/S or EV/GP multiple in 2021)."
https://variances.substack.com/p/revisiting-unprofitable-businesses
23. Sounds about right.
“We expect there’s going to be an increasing number of zombie VCs; VCs that are still existing because they need to manage the investment they did from their previous fund but are incapable of raising their next fund,” Maelle Gavet, CEO of the global entrepreneur network Techstars, told CNBC.
“That number could be as high as up to 50% of VCs in the next few years, that are just not going to be able to raise their next fund,” she added."
24. His messaging can be bombastic and too certain but there is alot of good research here. De-globalization is happening.
https://www.youtube.com/watch?v=pw9piPgOPeY
25. "Anecdotally, LP’s are really annoyed by all these data points and indicators showing how atrocious venture capital is as an asset class. And with rising rates, LP’s will definitely choose to pause or pull back the percentage of allocation they’re dedicating to venture. With the risk-free rate of return going up 225 basis points last year, and not projected to go down anytime soon, LP’s can sit on the sidelines and wait it out until better times come around.
At the end of the day, a lot of the issue here is with venture itself. VC’s are trained to think about power laws—the fact that most of your fund will be returned by 1 or a few investments. That has created a sort of power law effect in venture capital as well; 31% of funds between 05 & 2015 have a IRR above 20%, and the top 10% returned 35%+ IRR.
Over time, LP’s will start holding out for allocation into the best performing funds, and nothing else. And over time, that’ll cause a lot of funds to evaporate."
https://workweek.com/2023/02/17/lps-are-pissed-off-rightfully-so