All signs point to an elongated recovery.  U-Shaped or Swoosh Shaped (above).

The reality of living with COVID for a long time is setting in.  We must be vigilant and flexible on these life changes with respect to Restaurants, School and Work.  Travel and public gatherings will be touch-and-go.  Second waves of COVID could make these recoveries a jagged curve with stops-and-starts.  Deep breath.

Three weeks since the last post.  COVID-19 has gone from an abstraction to a “New Normal” — self-isolation, periodic hand washing, social distancing on occasional walks outside.

What happens to the “New, New Normal” once Stay-at-home mandates are lifted?:

OFFICE:  Limits to attendees in conference rooms ; increased proximity between desks/cubicles/ open seating?

RESTAURANTS:  Limited capacity in restaurants ;  10 feet radius on seating ;

OTHER: ???

Assuming this pandemic subsides, one wonders whether we will be any better prepared on a national, state and municipal level?   I’m guessing only marginally.

In reading Sequoia’s notable advice to their PortCos. re: the Coronavirus, more questions arose than answers.   Often a good thing.  I have no doubt that these tectonic shifts represent BOTH opportunities AND challenges.  However, for Tech Startups, i surmise that during these Black Swan events, the bar is raised and creates different challenges for a startup depending on the stage (Early vs Late — I’m disregarding mid-stage, growth equity for the time-being),

For an early-stage startup (Seed to Series A), the advantages might be clear:  you have less OpEx and theoretically are more nimble to adjust, (as Sequoia suggests is the key).  Also in tough market conditions, execution is even more important as you have less buffer (less customer spend due to market uncertainty and less access to liquidity) so skillful captains and their teams are able to weather better.  The disadvantages are also manifest:  challenges for fundraising/ less access to liquidity (especially through traditional forms of finance and lending), less willingness for customers to try new services (both enterprise and consumer), and possibly recruiting challenges (i.e. if people are fearful , they are more risk adverse in charting career changes), et al.  In the proverbial “Get on my Startup Bus, there will be less Gas Stations, less people willing to get on, and the map will be murky (i.e. Less market/social proof b/c potential customers are spooked).”

For later-stage startups (Series C onwards), the advantages are clear:  larger balance sheets to “weather the storm” ;  more institutional know-how and experienced personnel to navigate these situations; more/ better data and forecasting tools to be able to cut costs quickly, a patient long-term view and operating horizon.  The disadvantages are more nuanced:  the advantages allowing them to re-trench in tough market conditions, potentially exacerbate the Innovators dilemma, as fear and risk aversion are further amplified.  The potential gains accrued to newer firms competing in more disruptive segments can increase during this time.  One caveat to later-stage startups who cannot/ do not make significant changes to their cost structure:  i.e. any WeWork-like whose core competency has ONLY been one of continued, outsize growth ; the right-sizing of the ship is a dangerous, often potentially fateful one.

As Sequoia reminds us, for those companies who can execute in a time of massive market uncertainty including “Airbnb, Square, and Stripe (who) were founded in the midst of the Global Financial Crisis“, the potential upside is massive.

Be safe, all.

Earlier in the week, Super Tuesday saw the largest number of Delegates up for grab in 1-day (roughly 34% of the all possible delegates in the Democratic Primary).  In a 72-hour period, I watched Pete Buttigieg, Amy Klobuchar and Tom Steyer withdraw before Super Tuesday; providing leverage for Joe Biden to cement a Comeback Kid rally to become the co-Front-Runner with Bernie Sanders; oh, and Mike Bloomberg graciously withdrew on Wednesday, followed shortly by Elizabeth Warren on Thursday.  I was considering how, as these campaigns rose and folded, they were eerily similar to startup companies.

The Similarities are striking:  All campaigns require 3 key components in the Bus Analogy (of which Political campaigns actually have a ‘Literal, nonfigurative bus’):

Vision:  Where is the Bus headed (what do you stand for ; what are the key tenets of the Platform; where do you see the biggest problems and how are you going to solve them).  For Dems right now, the choice appears to be Democratic Socialism or Centrist, Moderate Liberalism.

Team:  Who is on the bus?  Campaign managers (C-level); Field and Office managers (Middle-management Plus); to lower-level staffers (analysts/ associates)  ; and Volunteers (Interns are also Interns sometimes).    There are serial “entre-politicians”, admittedly, a phrase unlikely to catch-on, including Joe Biden (ran in 1988, 2008, 2020) to first-time founders (Mayor Pete and Amy Klobuchar).

Gas:   How much gas do you have in terms of funding?  Do you have enough gas to get from Milestone Point A to Point B.   There is “crowdfunding” (Bernie Sanders raised $6M from 220K supporters in 24 hrs after announcing his candidacy) to loopholes which allow Big, unlimited Super PAC contribution (“Institutional / VC financing”).

Moreover, campaigns like startup companies can:

• continue to raise financing and pursue a land/delegate grab  — I.e. Biden and Sanders;
• can shutter (Kamala, Corey, Beto, Julian C, Andrew Y., Elizabeth W); OR
• can shutter but potentially be Acqui-hired into a winning Administration (Amy K, Mayor Pete;  possibly Kamala or Julian C or Andrew Y);

Other similarities:  there is Product-Market fit and Market timing highly correlated to success.  2008 saw an electorate that was fatigued of a 2 Term-Republican administration associated with a disastrous war in Iraq and dishonesty (WMD optics) that allowed us to get involved.  That paved the way for a Change-Agent, an unknown first-term Black Senator who was the 180-degree anti-thesis of his predecessor, an intellectual, articulate revolutionary.  We felt good about him and we felt great about ourselves for choosing him.

What are the key differences?

• Given the respective Convention and November election dates, there is an EndPoint , an actually Game-Clock on the Game. ( However it can go to Overtime, to our dismay.)
• Choosing your national leader is a more nuanced B2C choice than a vertical product —even socially responsible, coffee, socks or eyeglass companies .  Deciding your values, your family’s values, what you ultimately hope or believe in — married with your evaluation of a person and how well, that person represents you and your goals/ dreams.  And you kinda have to like them — or resonate with them— at some level.
• The political process itself is grueling and idiosyncratic by nature.  For a company: build it, get it market, distribute the hell out of it.   For Politics:  more of a Final Four Tournament/ NCAA bracket.   Destroy your opponents in early rounds.  Get to your side of the Finals bracket ( I.e. Nomination) and then 1-1 competition in this 2-party system.

Heck, Andrew Yang was a successful serial entrepreneur.  Perhaps that is why he played the Political game well.  If/When the Political startup gods favor him, he may rise again.

Aside from Coronavirus/ COVID-19 effecting the largest drop in the Dow Jones since 2008, my post here has little to do with Tech and/or Finance….

It is great when Life imitates Art. This Guardian article shows the renewed interest in the 2011 Soderbergh film Contagion, starring Gwyneth Paltrow as Patient Zero of a global pandemic.  Given the public’s heightened anxiety which has been amplified by the mainstream media, people are looking to this film as an illustrative “How to Get Prepared” guide.   In real life and on a recent trip to France, Gwyneth goes Full-On facemask channeling her Contagion film experience.  Awesome.

My wife just returned from Germany and she was asked by her co-workers to self-quarantine (what about the Family??!!).

We are all subject to the same anxieties.  I did not google whether netflix has contagion (below) prior to searching netflix (it does not).  Happily it is on AMZN Prime Video!

Startup hits are always viewed as phenomenons but what factors are the ACTUALLY the most important to success? There was a study attempted a few years ago to list [6] key factors below , across a broad longitudinal study of X companies, and to rank them in terms of predictive success:

• Founding team quality
• Novelty/ ingenuity of idea
• Market Opportunity
• Market timing
• Capital Raised
• C-level Management effectiveness

What do you think the results showed?

It turns out that Market Timing is #1 as most important.  There were 16 businesses with AirBnB’s business model before it came along.  However 2 years post-financial crisis, many Americans were looking for ways to generate income and that facilitated the rapid growth of the Homesharing marketplace (and sharing economy).  Founding team quality was #2 and the others were a wash.  The market timing allowed AirBnB to generate outsize returns on their good execution.

Whether is be Technology or Life, it helps to know the Game that one intends to play.

Jet.com created massive value through the idea that a successful serial E-commerce entrepreneur could build an online wholesale club.  Using ample cheap capital in the private markets, the Marketing was broad and ambitious including a ‘ridiculous’ marketing video of a massive warehouse being built from the ground-up in NJ.  Using credit cards on the back-end to order from other competitors and cobbling together fulfillment, it didnt seem to matter if the business model and execution were ideal.  They created enough marketing and brand awareness (NY Subway ads and TV spend notwithstanding) to effect an acquisition by Wal-Mart and become their E-commerce presence for a massive $3.3B 18-months into their business.  Timing certainly helped but their plan was marketing all along for an acquisition.  Bravo.

The SoftBank Vision Fund has invested in PortCos similarly leveraged large war chests for a land-grab to grow as quickly as possible and their Valuations were rewarded.  Now that it may be drying up, with some unproven models  – one hopes that they will figure out a Plan B.

“Let’s wait and see.  We need time to evaluate the Tech landscape.  Best of luck on the fundraising and please keep us posted on how else we can be helpful.”

I’m not sure if Yoda has heard this before.  Here are the headwinds that the WSJ article highlights:

1.  Key LPs including Mubadala and PIF are getting cold feed
2. There are key executive departures at the Vision Fund
3. Softbank is ponying up most of the $48B they will likely close Fund II at (less than half of Target) and looking for creative ways to raise cash (leveraging alibaba stock with asset-backed loan against their ARM semis holdings…hmm)

May the Force be with you.

Thanks for joining me!

Good company in a journey makes the way seem shorter. — Izaak Walton