⚡ Quick content on Venture and Economics

Observations

Source: Stephane Nasser

Always Be Closing

Glengarry Glen Ross

‘Is a Sales Deck (i.e. what a founder sends to prospective clients) more useful to a a VC than an Investor Pitch Deck?’ was a great question asked by Dan Bowyer over at SuperSeed VC recently. The result of his study was that its a useful supplement but not as a substitute — and he’s absolutely right. Let’s take a quick look at the value of a VC reviewing a Sales Deck:

• When a Founder puts together a Pitch Deck they’re cramming in details of the business, the roadmap, cashflow, hiring, and a million other things. When they put together a Sales Deck it’s ultra-focused on the actual product and its value-add.
• A Sales Deck provides a VC with a look at product positioning (unlike the generalist nature of a company’s website).
• Sales Decks are engaging and customer-centric. By the way, here are some great Sales Deck Do’s and Don’ts.
• You might think that reviewing the Sales Deck is the norm, but from my experience it’s not. Having pitched dozens of emerging and renown VCs myself, not one asked me for our Sales Deck; though they did ask for plenty of other material.
• With all that said, Sales Decks are high level conversation-starters and not a substitute for a Pitch Deck, let alone a Business Plan.

Source: Dan Bowyer

Trending

In Q4 2021 global venture financing sat at $210B and ~15k deals. In Q1 2024 its hovering around $75B and ~6k deals. That’s below 2018 levels. This isn’t inflation adjusted…but like I said before, now is an amazing time to be an investor because there is tremendous Founder talent not being funded by major institutions as many of them remain cautious about the market as they look to offset from investing at the peak in 2021.

Source: KPMG

Fascinating

Last week we looked at countries by their share of the global GDP. This week, we’re looking at the size (i.e. market capitalization) of their stock markets. Germany and Switzerland being at near par is rather surprising, don’t you think?

Source: Voroni by Visual Capitalist

Amusing

Source: marketoonist

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What I Found This Week #12 was originally published in Katha VC on Medium, where people are continuing the conversation by highlighting and responding to this story.

Worth Saying

Source: Vaibhav Domkundwar of Better Capital

Informative

Have you heard of the Human Development Index? It’s a comparative measure of countries, produced by the United Nations, based on several factors of their development. Now, how is development defined? The basic methodology considers: 1. Life expectancy 2. Expected years of schooling, and 3. Gross National Income per capita.

On related note, there is also an Inequality-adjusted Human Development Index, which arguably tells the truer story. While both of these measures are imperfect, they do at least serve as a starting point to understanding relative development.

Source: UN HDI Report

Fascinating

The US now accounts for ~26% of global gross domestic product — a 2 decade high. While undoubtedly driven, in part, by innovation and investment, a few points are worth considering:

1. How much of it is due to Europe’s continued decline and a flight to a safe alternative as opposed to American Dynamism?
2. To what extent does this measure impact the average American? Isn’t this a quantification of the success of a country’s businesses and government (as weighted by the value and liquidity of its bonds and ability to support businesses) and not the welfare of its people?
3. If you review the below chart, ~50% of the population accounts for ~70% of the global GDP.

Source: The Wall Street Journal

Trending

I was curious about where fintech has been trending most, based on Google searches, over the past 12 months. The results were surprising in some cases but unsurprising in others. Singapore, Nigeria, the UAE, China, India, South Korea, and the UK were amongst the leaders. And consistent with what I’ve been seeing in terms of my fintech dealflow, Colombia, Indonesia, and Mexico were not too far behind either.

Source: Google Trends

Hilarious

Source: Randy Glasbergen

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What I Found…This Week #11 was originally published in Katha VC on Medium, where people are continuing the conversation by highlighting and responding to this story.

Worth Saying

Celebrities arguably have an outsized influence on society’s tastes, priorities, political views, and apparently, capital allocation decisions. Everyone from the Chain Smokers to Serena Williams to Ashton Kutcher in the US, to Deepika Padukone to Suniel Shetty to Kareena Kapoor in India have become vocal investors.

It’s worth saying that the majority of athletes and actors have business managers and advisors who scout opportunities for them. Of course, celebrities do need to be clever in handpicking the talent that advises them, but that is not the same as being a brilliant investor / venture capitalist in their own right. Undoubtedly, there are numerous talented investors amongst celebrities as well but their track records, especially since they’re part-time investors, should be scrutinized before allocating capital or investing alongside them.

Ultimately, this means there are a few camps of investors amongst celebrities:

1. Casual investors (i.e. invest through their advisors) and often lend their image to supporting the startup publicly;
2. Active investors in retail products and services (e.g. coffee, alcohol, clothes, education) who effectively become a partner to the brand;
3. Full-time investors who are investing across sectors and with greater involvement than the first two categories.

Source: CB Insights and Inc42

Informative

Continuing our review of the Q1 State of Fintech from CB Insights, here are a few more takeaways:

Who is actually investing in startups? It’s not who you think.

Private Equity, Accelerators, Angels, Hedge Funds, Corporations, Family Offices, and only a quarter of deals are by VCs! It’s worth saying that all of this varies by sector, market, and investment stage but all the same!

The nation of Colombia 🇨🇴 continues its generation-long economic and reputational turnaround. Its startup ecosystem has become an absolute dynamo, with fintech leading the way. Personally, some of the most interesting deals I continue to see are coming out of Colombia, with its population of 52mm and the 46th largest GDP (nominal) in the world.

Source: CB Insights

Fascinating

Do you agree with this estimation?

Source: Franklin Templeton

Hilarious

This is old but gold. When do you aim to retire?

Source: Randy Glasbergen

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What I Found…This Week #10 was originally published in Katha VC on Medium, where people are continuing the conversation by highlighting and responding to this story.

Worth Saying

To all the founders and would-be founders, here’s a great perspective from Stephane Nasser at OpenVC. While the numbers aren’t so severe in every market (think emerging markets), at a baseline this is what you need to consider:

Source: Stephane Nasser

Informative

Reviewing the Q1 State of Fintech from CB Insights, I had a few takeaways:

1. Funding remains depressed, however the number of quality startups I’m seeing in my dealflow is not any less. This means there is a tremendous opportunity to invest in gems at value.
2. LatAm (see Chile, Mexico, and Colombia) and Africa (Kenya, Nigeria, and South Africa) in particular remain deeply underfunded. I would add some of the SE Asian countries (e.g. Indonesia and Vietnam) to this list as well.

Source: CB Insights

Hilarious

Smart Tea — found only in India!

Source: Linas Beliūnas

What I Found…This Week #9 was originally published in Katha VC on Medium, where people are continuing the conversation by highlighting and responding to this story.

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Worth Saying

VCs do not spend enough time on their front end value-add to prospective portfolio companies. Ideally VCs ought to work with founders who are in the pitching stage and have a meaningful discussion (not feedback) on valuation, product / service roadmap, pitch deck, and what would help get them over the hump to invest in the startup. We’re talking about 4 to 5 hours of front end work for the VC. I think far too many promising founders and companies are passed up because VC Associates (who are doing the filtering) are looking for the most buttoned up founders whom they can present to their investment committee and then quickly move on to the next potential investment. I get it, VCs are also tied up with responding to LP requests, doing market research, fundraising, and staying up to date on existing portfolio companies. However, this is where new and emerging venture managers can fill the void with founders and win deals. Go that extra mile upfront with the right founders and it just might pay dividends in spades.

Lucky

Every few years a new domain name gains momentum on the back of the latest trend. Anguila, a small British territory in the Caribbean has been at the forefront of AI…through the domain ending it owns: .ai. For each domain registration with that ending, Anguila earns a fee. So popular were .ai registrations in 2023 that the tiny territory of 15k people took in $32mm in fees. Now that’s island living!

Source: Straits Times

Hilarious

Source: Wall Street Oasis

What I Found…This Week #8 was originally published in Katha VC on Medium, where people are continuing the conversation by highlighting and responding to this story.

Informative

A few interesting quotes on the 2024 US economic and global fintech outlook:

Our outlook for the new year is “2024”: 2% growth, 0 recessions, 2% inflation and 4% unemployment. A soft landing remains in reach, particularly as disinflation looks set to continue and the Federal Reserve now appears satisfied with its progress.

- JPMorgan Asset Management

For Fintech, 2024 will be a year of both consolidation and innovation. AI-driven solutions will continue to propel the sector forward, making significant advancements in fraud reduction and automated accounting solutions, while cross-border and real-time payment systems will continue to evolve…

- Lightspeed

Source: Lightspeed and JPMorgan Asset Management

Fascinating

Have you heard of the Brazilian fintech, Nubank? They’ve not only become the dominant Brazilian bank in just 10 years, they also have a Net Promoter Score of 90 — which is unheard of for a company this size. Between that and their incredible growth in a tough regulatory environment, every founder operating in the consumer space should be studying their model.

Key facts and figures from Nubank’s 4Q 2023 earnings:

👥 94 million customers globally (+27% Year-over-Year)
🇧🇷 53% of the adult population of Brazil now uses Nubank
🇧🇷 It’s now the 5th largest financial institution in Latin America
💰 $23.7 billion worth of deposits (+38% YoY)
💸 $2.4 billion in revenues (+57% YoY)
🤑 $361 million in profit (+489% YoY)

Source: Linas Beliūnas

Engaging

Source: Pejman Milani

What I Found…This Week #7 was originally published in Katha VC on Medium, where people are continuing the conversation by highlighting and responding to this story.

Worth saying

VCs need to consider many things when evaluating a startup. Stage, cash burn, customer acquisition costs, the team’s experience, product, ability to execute, market risk, regulatory exposure and so on. As someone who’s been investing in public markets and fx for 20+ years and who’s learned from some brilliant quant hedge fund CIOs, I’m a firm believer that whatever your preferred metrics and investment strategies, your approach must be disciplined, methodical, and repeatable. Because otherwise, you’re just investing based on randomness. And if that’s the case, any success isn’t skill, it’s luck.

Informative

For the past decade, India has been building an ecosystem of identifiers and tools (i.e. digital public infrastructure) to streamline and make efficient:

1. Citizens’ interactions with the government (e.g. welfare, taxes, identification)
2. Reduce the costs and friction faced by millions of small and mid-size Indian businesses

If you’re interested in learning more, A Junior VC put together something of a whitepaper on the financial services-related digital public infrastructure in India.

Source: A Junior VC

Fascinating

What are the odds of a startup being acquired? Great infographic from Peter James Walker at Carta. Bear in mind, that these are US-based companies only. I’d posit that European and Emerging Markets acquisitions would be a fraction of the US numbers.

Source: Peter James Walker at Carta

Amusing

Source: Youtube

What I Found […] This Week #6 was originally published in Katha VC on Medium, where people are continuing the conversation by highlighting and responding to this story.

Reading this via email and can’t see the images below? Read it in a browser by clicking ‘View on Medium.’

Worth saying

Hierarchy of Investors

Level 1: Actively sabotage portfolio companies
Level 2: Push bad ideas that lead founders down wrong paths
Level 3: Distract companies with random obligations, ideas, etc that have to be fended off
Level 4: Hands off, neutral, and generally supportive
Level 5: Contribute in big ways in small number of key moments
Level 6: Have sufficient context and experience to be an ongoing valuable member of the CEO’s team

Source: Jack Altman

Fascinating

Cities being built from the ground up are nothing new, but greenfield financial powerhouses, that’s a rarity. To compete with Singapore, Hong Kong, and Dubai, the Indian Government is building GIFT City in Gujarat and has provided a decisive framework that’s attracted Indian startups and many of the major Western investment banks. On the positive, this keeps India incredibly competitive as it is being executed on impressively. On the other, this continues the long trend of relatively limited support of Northeast and South India by the Central Government in matters of business and development.

Source: Think School

Engaging

Source: Pejman Milani

What I Found […] This Week #5 was originally published in Katha VC on Medium, where people are continuing the conversation by highlighting and responding to this story.

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Worth saying

Whenever I read something, I ask myself:

• What is the author’s agenda?
• Is their logic sound or are they performing mental gymnastics to make their point seem correct?
• Does the writer dive into detail or is the analysis surface-level?
• Is it catering to an audience or at least attempting to be objective? i.e. does the writer use negative or non-neutral adjectives to describe the point or people they disagree with.

Informative

Revenue ≠ Revenue. It’s easy to forget but incredibly true. When considering the revenue of any company consider the following to start:

Revenue Growth — Rate at which revenue is increasing.

Free Cash Flow (FCF) — The cash a company has left after paying for its operating expenses and capital expenditures.

Profit Margins — Net income as a percentage of revenue.

Unit Economics — Revenue and costs associated with each product/unit sold.

Predictability of Revenues — How consistent and predictable future revenues are expected to be.

Diversification of Revenues — Having multiple revenue sources lowers customer/market concentration risk.

Defensibility of Revenues (or Stickiness of Revenues) — How well revenues are protected and likely to recur. More defensible & sticky revenues are desirable.

Net Revenue Retention — Measures the change in recurring revenue from existing customers over a period of time.

Source: Last Money In

Fascinating

How do can VCs obtain liquidity for investments in emerging markets startups? Terra Incognita wrote a nice piece on this:

Source: Terra Incognita by Robin Butler

Amusing

Source: Roberto Ferraro

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Worth saying

Remember folks, concentration risk is real. All it takes is a minor accounting scandal to tank company’s stock. So don’t invest too much in any one company. I go by the 5% rule — I don’t invest more than 5% of my equities portfolio (not my entire portfolio) in any 1 any.

Informative

We’re a 1.5 months into 2024. Maren Thomas Bannon at January Ventures spoke to a number of other VCs to hear their predictions for 2024. Here’s what they said:

1. We will see the great VC resignation

2. Record amounts of dry powder will put downward pressure on returns

3. The hype around LLMs won’t last

4. 2024 will prove to be a year of critical importance for managing bias

5. We will see a drop in “bridge” rounds in 2024, meaning more cash for new startups

6. 2024 will be a banner year for tech M&A

7. VC secondaries will increase; so will a re-setting of price expectations

8. The investors entrenched in the ecosystem will have access to the best secondary opportunities

9. We will see a rebound in VC fundraising

10. Next-gen family office leadership will champion more VC commitments

11. New managers starting VC firms will increasingly be spin-outs from big firms

12. 2024 will be the year of the hyper-specialist VC

13. VC firms that are heavily entrenched, either through legacy or specialism, will be most appealing to LPs

14. The best-performing VC firms will generate the lion’s share of returns

Source: Forbes

Fascinating

Did you know this about the Sahara Desert?

The end of the last ice age caused the Sahara to experience a wetter climate between 8,000 B.C.E to 6,000 B.C.E, potentially due to low-pressure areas over collapsing ice sheets to the north.

After the ice sheets disappeared, the northern Sahara dried out — but soon, a monsoon came farther north to counteract the dry conditions in the southern Sahara. In around 2500 BCE, the monsoon retreated south and caused the Sahara to become a desert. For the past 13,000 years, the Sahara desert has remained at the same dryness.

Approximately every 20,000 years, the Sahara transforms into a savannah covered with lush grasses due to the angle of the Earth’s axis changing. This axis change causes the position of the North African monsoon to shift, a monsoon that could revive the Saharan region.

Source: Geographical

Amusing

Philomena Cunk’s on the invention of maths:

Source: Diane Morgan as Philomena Cunk

What I Found […] This Week #3 was originally published in Katha VC on Medium, where people are continuing the conversation by highlighting and responding to this story.