rlucas

Investment bankers talk about “The Window.”

When The Window is open, you can “File.”

When the window is closed, you can’t file. (General rule)

The window can slam shut at any time. It is usually declared open after 1-2 obviously strong filers actually Make It Out and Trade Up, after which more marginal players can start gingerly to try going out.

Once it’s fully obvious that the window is open, IPOs are a super hot commodity and bankers will work themselves to death to take out any promising deal. These are some of the best transactions for bankers and historically were 7% headlines in fees and a lot of extra opportunity for enrichment and influence through the green shoe and the ability to dole out allocations to private clients.

When the window is closed, there might be an equivalent flow of IPOable companies ready, but they won’t make it out. They’ll wait for the window, sell in strategic M&A, or occasionally even opt to stay private.

But the reason we have so many S-1s right now is that the consensus of the animal spirits is that The Window Is Open.

Your last graf implies that there was some nefarious favoritism that gave a turbo boost to Seattle's 2nd Ave bike lane project, due to the connectedness of the woman killed shortly before it took effect.

If you are referring to the well known tragic death of Sher Kung in August 2014, just before the September 2014 scheduled opening of the 2nd Ave bike lane, you are very wrong. The project had been underway long before that.

It’s the fact that the source of sound is often 10-20 cm from your ear. As the average source-ear distance grows though, their lung volume grows too so you end up with a looong period of dangerous sound pressure levels.

Very true. In Calgary for example, following the drop in oil price there’s a rumor that over 50% of the downtown office space is empty, but landlords won’t drop rents for this very reason.

In such times you see all kinds of shenanigans such as landlords giving massive concessions and tenant improvements, effectively dropping the economic price of the rent drastically but preserving the “headline” rent number. Go figure.

It's a 1920s (pre-FDIC) bank, or a 2008-style risky financial instrument, like an Auction-Rate Preferred.

WeWork's business model is "borrow short, lend long." That is, they accept very short term promises to pay (month to month leases from customers), and aggregate them to make very long term promises to pay (mutli year leases from suppliers). Keep the spread.

This works as long as there are lots of customers who will pay a premium for short term flexibility. We can presume that will be somewhat cyclical, although in fairness they also probably have caught a secular trend toward remote / coworking / flexibility.

When the cycle turns down, those short termers are done but the long term promises to suppliers keep going ...

That also leaves aside the question of leases with escalators. I have heard a rumor that some WeWork locations have substantial out-year escalator clauses (meaning the rates they owe to suppliers sharply increase in future), meaning that even if customers stay on board, WeWork will face a need to raise prices substantially to meet its obligations.

Softbank deals are hardly what I would call VC-style -- certainly not "early" or even "mid stage" venture. Their very size tends to require much later-stage deals to absorb the large check sizes. This is growth or borderline "mezz" or "PE" frankly.

In contrast, Microsoft Ventures / M12 will do proper early-stage venture, doing a check of $2 M or $5 M or $10 M into a growing but still uncertain company.

Source: I have done single-digit $M deals with M12 and am a VC.

This coverage leaves out that the expedition and recovery were financed by one of the successful sons of Middlesboro, Kentucky, who put the refurbished plane in a museum airstrip in that town as a trophy. Disclaimer: family hails from near there and Middlesboro needs all the promotion it can muster.

I doubt it's due to the EV's regenerative braking; if anything, that's a more complex system with more things that can go wrong.

The answer is probably easier: a Prius is 3300 lbs and a Dodge Ram is 6600 lbs and carries much, much more if working. Those truck brakes are going to be thrashed much harder.

One of the things the internet has been really great at is allowing those small (n~50) networks with high trust for e.g. identifying trusted vendors, but for really niche things where it’s hard to get an organic local network. Think new programming languages, or to crib from a recent HN topic, building tube headphone amps.

These kind of emergent niche communities can only exist when the broader network gets sufficient scale to have a critical mass in the niche.

So in limiting scale overall let’s take care not to throw out the baby etc.

There’s a reason that works (sorta, mostly, and when it does).

The infrastructure of web navigation and search is foundationally built on textual, first party published content that enjoys some presumptions of good faith authorship: that it was written to be read, by a reader, and meant to be informative, persuasive/argumentative, or recreational/entertaining.

Think: journal articles, Usenet debates, faq compilations, RFCs, product spec sheets, forum postings, IRC logs, ur-blogs, even the original social media content types (tweets, wall posts, comments).

The cycles and epicycles of architecting atop this “real” content gives us mechanisms that reward and incentivize content produced neither for the ends of the writer writing nor any reader reading, but rather in service of manipulating search and driving ux patterns of various darkness.

All the good stuff on the internet is reborn in a spasm of returning to people creating content they care about for other people who care. Then eventually with success it gets polluted into shit with bots, seo, mass media and agencies, influencers, etc.

One silly rubric I use is: could this page / app / venue have been there in 1999? If so it’s probably worth reading. If not, who knows.

(Of course there are cesspools that qualify too, like the chan world and certain subreddits, but there were cesspools in the early days of the web as well.)

Most cities of scale, certainly Seattle and Portland, have drunk tanks and vans that are on call to scoop up non criminal drunks to dry out. In Seattle it’s called “SUV” and in Portland it’s contracted to a group called “Chiers” (hah).

Life Improvement Protocol:

Move as much as you can of your decision space into "default trust" environments.

Save the "default skepticism" environments for areas where your counterparties are particularly sketchy and/or the parts of your job that make you a professional risk-sniffer-outer (journalist, investor, cop, etc.).

Default skepticism is a hell of a bad way to go through life buying rice and greeting your coworkers in the morning.

In my limited experience -- there's a lot of corporate "innovation groups" or SWAT team kind of things that get put into a WeWork.

It's very rational -- if you are an "intrapreneur" and wanting to break out your team from the mothership, it's probably easier and faster to get your office space at a WeWork. Plus, you get a recruiting / lifestyle / hipness benefit from getting to be downtown with exposed brick, instead of out at the suburban office park with the sea of landscaped parking lots.

But my sense is that it's a high-beta customer base. When times are good and there's lots of corporate cash for high-urgency, high-concept stuff like innovation teams and new product skunkworks, a $25k/month WeWork bill is peanuts. When times get tight, that's going to dry up fast.

Similarly high beta on VC-backed startups. That cohort is pretty cyclical, though it won't disappear completely. I predict a similar % of Series Seed/A startups would still opt for a WeWork in a venture downturn as do today (but there will be many fewer of them).

Much lower beta on satellite offices and smaller professional services type groups -- they'll still show up to work, as it's a primary office for their primary business.

Wild card on the bootstrap / solo / freelancer stuff.

Also (IMO) sort of a wild card on the larger corporate buyouts of an entire floor or location. In crowded cities it really can be worthwhile to pay for the branded facilities management as the locations WeWork acquires are quite good.

However, and here's the big however. My understanding is that We's leases are LONG term and tend to have escalator clauses (they owe more rent to the landlord in the later years, faster than inflation). Which generally means their supply / cost structure is as good today as it's ever going to get. If the topline gets hit, which in a recession it surely will, the bottom line will take a double whammy as the escalators kick in.

In the very best of circumstances your approach would be optimal. And in fairness at later rounds or M&A this is what you hire an I banker for — To create an auction.

But the great majority of firms raising a Series A aren’t so obviously “Fundable” that they can reliably gin up a parallel set of term sheets. Consider that if it takes 30 VC outreaches to average one TS, what would it take to average two within an overlapping two week window (realistically these things expire)? A lot more than 60 I’d bet.

Another thing about this is that these aren’t bandits or oracles or black boxes you’re doing some kind of algorithmic search on. Ideally each pitch you do will give you feedback and practice to hone the pitch, market feedback on the actual underlying business, and possibly even introductions to helpful others (customers or rarely investors; VCs tend not to pass along deals they rent investing in because of signaling effects but intros / sharing does happen).

So a Series A raise is a path dependent process.

My Unix time question is, when I do “sudo date <DDMMhhmmyyyy>” and then get a sudo password prompt, is the time supposed to take effect before or after the sudo is authenticated?

Emprically it seems to be after but that seems wrong; shouldn’t the result of the command be the same regardless of how long it takes to type the sudoer’s pw?

...aaaand, Uber (meaning, the owners of Uber pre-IPO) has less ownership in the business afterwards.

Sure, you can argue that the $8.1B is something "real" that the owners of Uber have more of, afterwards.

But you also have to acknowledge that the business of running Uber is also something "real" that the owners of Uber have less of, afterwards, having traded it in a heavily-scrutinized auction.

True, but for over a decade Postgres common wisdom has discouraged using the OID for anything in the app level.

As I recall, OIDs only ever came up in practice if you wound up wrapping the 32 bit uint.

There's a banking product for that, it's called a safe deposit box.

Understood, although eventually it has to become "economical" or it doesn't fly.

My point was, you can view the alcohols as a feedstock for the gasoline production, and given that, you might just stream in large quantities of already-produced and cheap grain ethanol etc. from Indiana.

If the alcohol upgrade to gasoline makes sense technically and economically for you, why is it not commonly done with (presumably much cheaper and extant in great volume) industrial alcohol today?

1. Corporations exist to benefit their shareholders over some term (short, long, whatever) as the shareholders ask for, through their elected board of directors. I tend to be sympathetic to what you're saying about taking the long view (esp. for a company like 3M) but the many vs. few doesn't make sense in a corporate context. It's the now vs. the later.

2. "Buy bonds"?? A corporate CFO would be pilloried for buying bonds. The shareholders are emphatically not interested in the CFO playing amateur bond-picker in order to generate a bunch of double-taxable income.

And to further complicate things, neither jobs performance nor broader economic performance (i.e. GDP growth) correlate really well with the stock market. So beware trying to market-time on macro indicators alone -- sometimes bad times for workers can be good times for corporate profits and hence shareholders.

This is not how it works. The dam in Oregon (or anywhere) doesn’t work on kinetic energy from the flow. In fact it often is stopping the flow (dissipating the kinetic energy) entirely.

The elevation drop that matters is from the top of the dam to the bottom of the damn.

Doesn’t matter a whit whether the water that falls that 500’ has previously come from 1000’ or 10,000’.

The current Bankrate benchmark 30-year is 4.17%.

That is, by historical standards, absurdly low. The likelihood that a rate drop will 1. occur, and 2. materially contribute to your financial well-being, is very low.

Part of the reason is that when rates drop, prices tend to rise.

https://fred.stlouisfed.org/graph/?g=NUh

> BeerAdvocate, of all things, takes on this problem with interesting meta-info like "reviewer's average distance from consensus".

There's a lot to be said for intelligently dealing with ratings and their metadata in ways like this.

For example, the Kappa statistic: https://en.wikipedia.org/wiki/Inter-rater_reliability

Presenting crowdsourced ratings as mere averages -- or really any collapse onto a single scalar -- is a big step up from no info at all, but it's hardly the best one can do even with well-known statistical techniques.

Good point, YC is a uniquely powerful market participant these days and has both the power and the breadth of portfolio to negotiate hard.

I actually agree (broadly) with your statement about founders.

As far as what the VC is optimizing for -- fair enough, I am only pointing out that saying the 1 point difference in, say, a 10 or 11 point equity stake is somehow actually only 0.2% to the VC isn't fair. It's a 10% difference in the VC's stake.

I don't disagree with what you're saying schematically. I agree that there's a lot of propaganda that serves the money machine, and that it's not suitable for most founders.

I think the specific numbers you're providing are tricky, because generally, getting to $200 M exit within, say, a decade, involves institutional funding (VC, PE, "growth", whatever).

(As a relatively small non-Valley funder, I would generally also prefer to be an investor in a company that exits at $200 M with a much lower risk than a $600 M exit, given that getting to $600 M might mean another $50-100 M in late-stage, first-money-out, preference overhang capital.)

I think the real question usually has orders of magnitude difference here. Internally-fundable businesses tend to opt for business models like services, consulting, etc., since they can scale without a lot of invested equity. Hence a lot of times you wind up growing a business semi-organically and end up getting a 1-2x revenue multiple for a modest growth, modest gross-margin, consulting type business. Or, if you do get a good SaaS operation going and grow it organcially, you might find yourself faced with the late-arriving roll-up play heavily funded by private equity, who will buy you at a 3-5x in an attempt to consolidate the market and float it at a 6-10x.

And yes, if you as a founder have a 90% shot at $10 M in 10 years, vs. a 9% shot at $100 M or a 0.9% shot at $1 B, most rational founders should and do take the safe road. Stipulated :)

But in my experience and observation, getting over the hurdle of product-market fit and a repeatable go to market strategy is what tends to kill startups. If you get that PMF and GTM working, it often makes sense to fund hypergrowth. If you don't, the company is walking dead anyway.

Pro-rata doesn't mean what you are implying.

Pro-rata is in theory the right (but not the obligation) to buy back in, at the new price, to get back to your prior ownership level.

In practice however, pro-rata is a firmly stated polite request to the next round lead investor to let you do so. The real determinant of whether you get to use the pro-rata right is whether your next round lead investor is OK with it (and whether you want to try to block that next round).

Agreed with a caveat (from a VC perspective, mind you).

99% (schematically) of new businesses should indeed optimize for flexibility.

But, if you judge yourself to have a real shot at the >> $100M exit, then optimize for that path and foreclose the flexibility.

There's a real truth to the idea that you will be putting your all into any business, so if you have one that really can create an entire career's worth of wealth at once for you and your whole team, you should optimize for that.

If on the other hand your business doesn't have a realistic shot at that, stay the hell away from VC. Waste of time and cash is king anyhow.