Jason Guss

Regulatory clarity for responsible crypto innovation is emerging in the US and stands to catalyze the market adoption of such innovations. When regulations are clear, consumers and innovators all benefit. Financial Innovation and Technology for the 21st Century Act (#FIT21) is expected to pass with bipartisan support in Congress. FIT21 would redefine how securities issuers have to comply with existing federal law and Supreme Court precedent. The bill would create a new definition specific to digital assets, to identify when they're digital securities or digital commodities and whether the SEC or CFTC should be the primary spot market regulator. This collaborative approach signals a shift away from the current unclear, antiquated and antagonistic processes in some of the US regulatory agencies.

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In the world of startups, a fascinating trend is emerging from Y Combinator (YC) cohorts: smaller rounds with higher valuations. Loren Straub of Bowery Capital noticed this shift while engaging with recent YC grads. These startups seek modest investments but aim for hefty post-money valuations, typically around $15 million. This departure from the norm reflects a nuanced understanding of market conditions. YC's stamp of approval holds weight, but founders are recalibrating their strategies. While some outliers like Leya and Yoneda Labs reel in substantial funding, many tread a leaner path, testing the waters with angel investors. Yet, this shift isn't without its complexities. This evolving narrative underscores the dynamic interplay between startup culture and investor sentiment. As the startup ecosystem continues to adapt, one thing remains clear: YC's influence reverberates far beyond Silicon Valley, shaping the contours of innovation. To delve deeper into this captivating narrative, check out the original article on TechCrunch.com 🚀 #StartupInsights #VCtrends #Cre8tiveCapital https://lnkd.in/g5aSS9gX

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"Small funds may have more incentive to produce higher returns The alignment of incentives between GP and LP varies drastically based on fund size. Managers of smaller funds who have invested substantial personal capital demonstrate an unwavering commitment to lucrative returns, while managers at the helm of colossal funds, buoyed by significant management fees, may exhibit a diminishing drive. This constitutes an almost incontrovertible structural benefit of managing a small VC fund. Furthermore, fund managers of established funds may, over time, raise larger subsequent funds and grow more risk averse. This can present a sub-optimal outcome for their LPs and, by virtue, manifests a bad omen for VC investing." https://lnkd.in/gHKgea4e

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Long-Term Treasuries Calendar Effects: TLT Seasonal Trading Strategies In this post, we look at some specific calendar effects in long-term Treasuries. We backtest some calendar effects by using the ETF with the ticker code TLT which tracks the 20 year Treasury bonds. It turns out the first seven trading days of the month produce strong negative returns, while the rest of the month has doubled the returns of buying and holding the TLT. We backtest the following trading rules: * We buy at the close on the seventh last trading day of the month. * We sell at the close of the last trading day of the month. * We are not using calendar days but trading days. They are, most of the time, slightly different. The strategy and its trading rules return the equity curve (shown below) since TLT’s inception until today. Want to learn more about the strategy? Check comment 👇 #TradingStrategies #Backtesting #BondTrading #SeasonalTrading #Investing #FinancialMarkets

Long-Term Treasuries Calendar Effects: TLT Seasonal Trading Strategies In this post, we look at some specific calendar effects in long-term Treasuries. We backtest some calendar effects by using the ETF with the ticker code TLT which tracks the 20 year Treasury bonds. It turns out the first seven trading days of the month produce strong negative returns, while the rest of the month has doubled the returns of buying and holding the TLT. We test the following hypothesis and make the following trading rules: * We buy at the close on the seventh last trading day of the month. * We sell at the close of the last trading day of the month. * We are not using calendar days but trading days. They are, most of the time, slightly different. The strategy and its trading rules return the equity curve (shown below) since TLT’s inception until today. Want to learn more about the strategy? Check comment 👇 #tradingstrategies #BondTrading #TLT #TreasuryBonds #TradingStrategy #SeasonalTrading #Backtesting #Investing #FinancialMarkets

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Here’s a question investors are often asked: When evaluating early stage companies, how much time do you spend on due diligence around future exits? It’s not surprising we hear this question a lot. Also not surprising: it’s got a wide range of answers depending on the firm. Some don’t spend much time here at all. Others make it a point to put meaningful time in as part of their process. Our current thinking: take the time to do the work on public market comps. At Alpaca VC, we spend significant time understanding how public market investors will  realistically value a business based on margin profile, product, business model & TAM. In short, we want to know: how will this company be valued at scale when we get taken out? Yes, we can acknowledge that the journey toward exit is a windy road and that there may be pivots along the way, but there are still public market companies that have a business model similar to the early stage company you're evaluating. And you can always look at gross profit multiples if you think the margin profile will change over time. So we still do the work on the comps. Quantitative metrics we look at when making the comparison to public market comps include EBITDA multiple, revenue multiple, Gross Profit multiple or all of the above. As part of this process, it’s also important to factor in the public market company’s year-over-year revenue growth as this will also significantly impact the multiple it trades at. Simple example: if you have two public market companies with similar business models and similar margin profiles, but one's growing 100% year over year, and one's growing 50% year over year, then obviously the DCF (discounted cash flow) analysis is going to spit out a very different valuation for the one that's growing faster. Why this matters: When you take all of that information into account as you evaluate an early stage business, you can begin to create a realistic picture of how this company will be valued in the public markets at exit - or how an acquirer will value the company for an acquisition. Strategic acquirers may, of course, pay a premium, but we won’t underwrite for that. This allows us, for example, to form conviction around valuation based on revenue and gross profit predictions. If we think they can do $100M of revenue five years from now, we use this diligence process to form a thesis about whether the characteristics above (product, margin, business model, etc.) will cause the company to be valued at $200M vs. $500M vs. $1B at exit. Curious how other early stage investors think about underwriting an exit and how much time they’re spending on public market comps even though these companies are in their infancy.

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The #1 Factor to Determine Max Valuation in Micro SaaS...is debt financing. Here's why, plus a free valuation calculator... Most buyers in the $500,000 to $2 million valuation range use SBA loans, which come with specific requirements. The SBA requires a Debt Service Coverage Ratio (DSCR) of 1.25, meaning the company needs $1.25 of income for every $1 of debt payments. In simpler terms, the key question is: Can the business afford itself? Does the Micro SaaS firm generate enough income to cover the loan needed to buy the business? As the valuation rises, so do the loan and debt payments. At some point, the valuation requires a loan that breaks the DSCR requirements. The upper limit of a Micro SaaS valuation is ultimately determined by the maximum loan a buyer can secure based on the company's income. Here's a simple calculator to illustrate this concept, helping us all determine valuation more accurately based on the real world 👇 #microsaas #acquisitionentrepreneur #saasgrowth

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It is the main reason that I decided to join as an investor as well as fund partner in Allocator One. As anyone who has ever run a VC will tell you, as a fund grows in size, it inevitably prioritizes deals with a higher probability of return. That's why, in Korea, where funds are growing in size, this leads to similar results. In the last 10 years, a total of 432 funds (118 VCs) have closed in Korea, with an average ROI of about 1.4X. This means that if you invested 10M$ in a venture capital fund, you got back 14M$ on average.(in 2022). The IRR for closed venture funds in 2021 was 12.4%, the highest in the last decade. Most VCs in Korea invest in pre-IPO companies in moderate proportions to increase the chances of returning their fund. This naturally leads to a lower probability of failure and a lower ROI. This doesn't mean it's the wrong approach. However, from the perspective of fostering the startup ecosystem, more is better when it comes to early-stage investing, and I believe that having more small funds and allowing them to invest in innovative companies more aggressively will help the ecosystem develop. So in order to create diversity in such a small fund, Allocator One provides a VC backoffice as a platform that allows one person to run a VC with $1M$ of anchor money. If you are a GP or LP interested in participating in this way in Asia, please get in touch. Jack Phin Lim Viktor Kyosev Kang Hoon Lee BJ Jun Alvin Ng Adalyn Yeap Alan Goh Anselm T. Dario Heymann, PhD Dyota M. Marsudi Eugene Wee Evonne Tan Ghee Chuan Lai Hari Bhullar Herman Fung https://lnkd.in/gSEh9xVi

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Great question by Jason Long on a previous thread ( link in comments below): """ I'd be curious to understand the SECs rationale for making sub-$1B valuation IPOs so difficult. The US public market might be losing its agility by effectively barring small-caps from having a fighting chance. As you mentioned, plenty of great companies IPO'd below the $1B range. """ Here's the 3 U.S. Securities and Exchange Commission mandates with roughly # of employees devoted to each. 1. Investor protection -- Think securities police -- 2,500 2. Maintaining efficient markets -- think regulators -- 2,500 3. Capital formation -- think helping businesses raise capital -- 2 Why? The SEC has an impossible task of policing a $100 Trillion stock and bond market with 2,500 cops. So, they focus on the big banner cases that are most likely to get the rest of the market to pay attention and change behavior. Congress isn't going to ask the SEC commissioners to testify as to why small businesses struggle to IPO. But they do ask them to testify when stock markets collapse or we have derivatives crisis like 2008-09. And, so they work very hard to make sure investors don't get screwed, and that we have efficient public markets. But as a result, compliance to be a public company costs between $2-5 million a year. This is why there's half as many public companies as there were 20 years ago. Crowd-funding is a thing, but only a couple hundred companies take advantage of that every year, because if a crowd-funding investor buys stock in a small business, where can they resell the stock and take a profit? There's no stock exchange available to do that. So, small business capital formation is left to the venture capital community. VC's funds are structured so they and their investors can only make money on their fund when they invest in future unicorns.

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Since joining SVB at the start of the year, I’ve been asked, “Why SVB?”. First a sidetrack on VC equity, and selecting the right VCs. Over the years, I’ve counseled management teams when considering equity options, to not simply go for the highest valuation. Sure, terms matter, but who you take those terms from (and their track record when things don’t go to plan) matter even more. In venture, it’s really about the ‘eventual outcome’ more than the immediate gratification of the highest valuation. Taking equity from a ‘tourist VC’ is riskier, particularly if they have poor incentives or a track record of supporting companies. Great VCs support with additoinal equity and/or aid the company to a soft landing when the going gets tough. For venture debt/banking it’s the same. The terms really do matter...but who you take the terms from...can matter even more, especially if the Company deviates moderately from plan. When I was looking to make a career change, SVB was at the top of my list. Why? ·        SVB has 40+ years doing Venture Debt ·        SVB speaks Venture Debt most fluently, with 1500+ bankers focused solely on the technology sector, and largest market share. ·        SVB cares tremendously about its reputation as having the softest approach when a company underperforms (happens regularly in venture) ·        SVB continues to attract strong talent and clients, post First Citizens merger (very safe, stable). Not a tourist (many platforms try it for a few years and then exit the product set abruptly). #SiliconValleyBank #VentureDebt

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Within the venture industry, illiquidity in is sometimes viewed as a feature rather than a bug, as it protects investors from selling at the worst times (which as seen throughout history is commonplace in the public markets). However there are limits, and the problem of illiquidity will have to be solved in a more systematic way. LP driven secondaries are inefficient and opaque, large M&A comes with major regulatory hurdles, selling in traditional secondary rounds is limited given the focus on efficiency and the departure of crossover funds, and the IPO bar is expected to remain very high (don't see <$1B market cap IPOs). Meghan Reynolds and I talked a few weeks ago about this (see link in comments) as has Mark Suster in many recent pods. Agree that over the next decade, we should see more of the following to solve for the liquidity problem. 1) PE funds serving as an exit for VC backed companies, meaning companies that are near or at EBITDA positive. 2) Continuation funds that provide LPs with an option to rollover or get liquid (single asset or all assets). I'm spending a lot of time here. 3) A more efficient liquidity marketplace for LP sales/buys. 4) Strip sale of a set of assets. Planning a special roundtable pod with some secondary and primary managers to discuss the growing liquidity problem in VC.

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1 in 8 vs. 1 in 50. It's obvious that only certain fund sizes are worthy of underwriting venture risk. VC can't be done halfheartedly. If you aren't accessing the best performing funds, the asset class isn't worth the risk. Period. #VC #venturecapital

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Want to be a Venture Capital Scout? Scout for Syndicate leads. I’m biased, but I think SPV/Syndicate leads are some of the best connections for VC scouts. As a syndicate lead, I’ve leaned into working with VC scouts the past 3-4 years. It's been a great way to gain unique access to deal flow and many of my most exciting portfolio companies have come from various “scouts”. Given the deal by deal investing strategy and ability to share carry with those who support sourcing & diligence, it’s become increasingly common for syndicate leads to actively partner with scouts and share carry or upside in the SPV. What’s in it for the scout? Deal x deal carry. While there are multiple traditional VC scout models that exist, the syndicate scout model is pretty straightforward. If you source a deal and support diligence, the syndicate lead is going to share some of the carry with the scout, and likely a more meaningful amount than a traditional venture fund. This is of course an SPV, so you are getting carry for the specific deal you sourced and not fund-level carry. A little more background on why the SPV model aligns with VC scout deal sourcing… Syndicate leads are structured (and many times set up) to invest in more companies than a traditional venture fund. In order to consistently bring LPs high quality deals, it makes sense to partner with folks in your network who have strong deal flow. Most times the carry split from syndicates will be more generous than that of a traditional venture fund. Syndicates do not necessarily have a certain number of portfolio companies they can invest in, meaning as long as they are getting access to quality deals that LPs want to participate in, then they will: 1) Be more likely to say yes and run the SPV into that investment and 2) Be more willing to provide a higher carry split, especially if you as a scout show you can repeat this with more future access In summary, if you are going to scout for venture funds, you might as well explore doing so with syndicates and capitalize on deal by deal carry/upside. Disclaimer: If you are scouting deals because you want to get into VC, working with traditional VCs is likely better from a networking standpoint, but if you are scouting to capitalize on carried interest/upside, I think the SPV lead route can be more attractive, and more frequently. -- Interested to see if you are a fit for our new Deal Sheet accredited investor product? Explore Deal Sheet to access 100-200+ of the best SPV startup (pre-seed to pre-IPO) investment opportunities per year. Deals are curated by Zachary Ginsburg & Alex Pattis (deployed > $200M across 750+ SPVs) across 50+ syndicate leads.

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What I appreciate most about how we designed the SMArtX Advisory Solutions platform is that we provide software to Turnkey Asset Management Programs as a FinTech, but we prove out every piece of our technology platform by using it to run a TAMP and servicing advisors ourselves. In tech this is called "Eating your own dogfood" or simply "dogfooding". Wikipedia says: "Eating your own dog food or "dogfooding" is the practice of using one's own products or services. Hence dogfooding can act as quality control, and eventually a kind of testimonial advertising. Once in the market, dogfooding can demonstrate developers' confidence in their own products." No matter how you cut it, whether we are servicing them directly or through our enterprise clients; the end consumer is the advisor. And servicing them through an "out-of-the-box" TAMP gives us the unique opportunity to hear the clients needs directly and hone our product and make it a better experience for everyone using it. So let's be both a TAMP and a FinTech while we sing along with Dierks Bentley and agree that SMArtX is "little bit of holy water, but still a little bit burning man"

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Block, the parent company of Square and Cash App, aims to leverage its dual ownership to create synergy between its point-of-sale software and peer-to-peer payments app. Jack Dorsey, Block's founder, highlighted the advantage of having relationships with both merchants and consumers, stating it's a rare position in commerce and payments. Ryan Budd, Cash App's head of financial products, hinted at plans to integrate a small business experience into Square and incentivize Cash App users to engage with Square merchants. Block is focused on connecting Cash App's consumer base with Square's merchant network, aiming to transform Cash App into a consumer app for interacting with Square merchants. This move aligns with Block's strategy to dominate various aspects of the consumer ecosystem and potentially monetize consumer spending data for advertising purposes. Read More Here: https://lnkd.in/eh-8KS9V Eugene Tsay Wade Robison John O'Beirne Emily C. Chiu Eileen Wiens Jim McKelvey Branded Hospitality Ventures #innovation #venturecapital #hospitality #technology Owen Jennings (OBJ) Brooke Ellis Jamie (Russo) HicksMing-Tai Huh

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