Dragging My Feet

Yesterday was tough.

I was peaking with a cold/flu and my first meeting started at 7 am.

I imagine the flights and the sudden change of weather from Israel to New York did me in.

My friend Doug pushed and pulled me along for a full day of meetings that ended with a great dinner with friends.

This morning my head is pounding so I will grind out the few last meetings and head to the airport and get back to Phoenix.

I look forward to getting off the road through the end of the year and doing a lot of family time.

When I left Israel, the markets were hitting all-tine highs and as I leave New York, the S&P is doing the same.

This week I spoke to so many market participants including hedge funds, hedge fund allocators, portfolio managers, startup founders and venture capitalists. I also had the Stocktwits board meeting.

I have a lot to digest this weekend, but there are some big shifts at hand set off by WeWork, the failing Uber, Slack, LYFT IPO’s, Disney+, the bear market in weed, the breakouts in biotech, the rotation into value stocks and the battle between Microsoft and Apple for most valuable company.

Have a great Friday.

Why Should We Play By The Rules?

I love this riff from Ben Hunt in his post titled ‘The Age of the High-Functiong Sociopath‘.

Why should we play by the rules when raccoons like Donald Trump and Masayoshi Son not only break them with impunity and ludicrous intent, but are celebrated and made rich for breaking them?
Why should we care about anything when nothing matters?

Because you’re not a sociopath.

Because you care about your Pack.

Yes, this is the Age of the High-Functioning Sociopath. Yes, this is the Age of Sheep Logic. Yes, this the age where scale and mass distribution are ends in themselves, where the supercilious State knows what’s best for you and your family, where communication policy and fiat news shout down authenticity, where rapacious, know-nothing narcissism is celebrated as leadership even as civility, expertise, and service are mocked as cuckery.

Stipulated. What, did you think this was going to be easy?

These clowns don’t deserve us. And it will take decades of a persistent, bottom-up social movement that rejects and negs and ridicules them … ALL OF THEM … before we have the opportunity to reclaim our world.

The Age of the High-Functioning Sociopath will never change on a single point of failure like an election. Or a “suicide”. Or an impeachment. Or a busted IPO.
But a MILLION points of failure? A MILLION points of rejection and negging and ridicule?
Yeah, that can work.

So let’s get started.

Life has felt like a simulation for me the last few weeks as I do planes, trains, buses and ubers around the globe.

Now that I am back in the US getting back into a work routine, only the narratives I am immersed in are different.

Here, in our world, it is all about the economy and the Democrats versus the Republicans and a stock market that Ben Hunt says ( and I fully agree) is politicized.

The simulation and politicization of the stock market and economy continues …these tweets from Orange Julius exactly 7 years apart…

It’s no wonder we binge on Peloton’s and LULU clothing and Apple watches and noise cancelling airpods and Disney + and Tik Tok …

Disclosure – long Apple, LULU, Disney
.

Controlling Fundraising Risk and The Ultimate Deadline!

I love this founder/startup quote:

If your business is the right business, then money will never be an issue.”

Now guess who said it….

Yep….Adam Neumann, founder of WeWork.

I have gotten away from writing about startups and startup life and am going fix that starting today.

One great voice on startups is Eric Feng founder of Packagd and former partner of Kleiner Perkins. He recently wrote a post titled ‘ The Importance of Timing in Startup Fundraising‘.

Do not be fooled by the term startup as it applies to your early stage or late stage startup. The media still calls gigantic companies like Airbnb and Pinterest startups.

As someone who both trades and invests in public stocks and invests in early stage startups this sentence rang true…

This is an important structural advantage that startups have over public companies. In the public market world, investors control when the company prices. But in the startup world, the company controls when they price. And control means that startups only have to ask the question “what are we worth?” when they think the time is right.

Eric goes on to try to answer ‘when is the right time?’

The journey of startup fundraising can be described as a process of risk removal. At the very beginning when a startup is just formed, the entire company is a collection of risks as there are no assets, no products, no customers, nothing but risks. These risks are generally consistent for all startups and fall into these groupings:

1. Team Risk: can the founder(s) recruit a team to carry out their vision for the company?

2. Implementation Risk: can the team build the product they need to fulfill the company vision?

3. Market Risk: if the product gets built, will anyone use it?

4. Monetization Risk: if people are using the product, will anyone pay for it so the company can earn revenue?

5. Scale Risk: if a few people are using the product and there’s a little revenue being earned, can you grow to lots of people using the product and lots of revenue being earned?

6. Profitability Risk: once you have a lot of revenue, can you turn that into profits that can sustain the company?

Entrepreneurs then go raise financing to remove each of those risks, one group at a time. These startup financings fall into discrete moments (with their own class of stock) which we commonly refer to as Series: Series Seed, Series A, Series B, Series C, and so on. Not only are these Series fairly universal across all startups, the risk expectations for these series are also fairly consistent across investors. In other words at each Series, investors are actually expecting to see certain risks specific to that series —  that’s why they call it “venture capital”. You’re a brand new startup just getting underway? It’s expected that all 6 risk groupings are present. But as your startup matures, investors will expect fewer remaining risks. By the time you’re a unicorn startup preparing to go public, Profitability Risk is probably the only remaining risk grouping that investors will tolerate (if that).

Back to your startup and Eric once again…

A company’s runway is therefore the ultimate deadline as there is no future beyond that date. Even if a company had well laid plans around when would be the best time to fundraise, those plans get superseded if their runway is coming to an end. In other words, when a company is out of runway, they lose control over when they price.

I’ve personally stared down ultimate deadlines and it is not pleasant. Most entrepreneurs, if not all, will face this ultimate deadline.

Eric’s advice is great if you want to focus on keeping the ultimate deadline at bay.

Social Leverage Invests in Alpaca (Alpaca.Markets)

Recently Social Leverage invested in Alpaca. Last week Alpaca announced their $6 million raise.

Josh Constine at TechCrunch broke the news and explained:

Stock trading app Robinhood is valued at $7.6 billion, but it only operates in the U.S. Freshly funded fintech startup Alpaca does the dirty work so developers worldwide can launch their own competitors to that investing unicorn. Like the Stripe of stocks, Alpaca’s API handles the banking, security and regulatory complexity, allowing other startups to quickly build brokerage apps on top for free. It has already crossed $1 billion in transactions within a year of launch.

In simple terms, using Alpaca…any company can build a Robinhood from the ground up.

I have been talking with Yoshi, the founder of Alpaca, for the last few years as they have developed their middleware/infrastructure products for the global financial industry. Yoshi has been very patient and I am glad we had the opportunity to invest. We have invested alongside Spark Capital with who we invested in Etoro back in 2011.

Josh at Tech Crunch does a good job of analyzing the playing field as well as the opportunities:

One major question is whether fintech businesses that start to grow atop Alpaca and drive its revenues will try to declare independence and later invest in their own technology stack. There’s the additional risk of a security breach that might scare away clients.

Alpaca’s top competitor, Interactive Brokers, offers trading APIs, but other services as well that distract it from fostering a robust developer community, Yokokawa tells me. Alpaca focuses on providing great documentation, open-source contribution and SDKs in different languages that make it more developer-friendly. It will also have to watch out for other fintech services startups like DriveWealth and well-funded Galileo.

There’s a big opportunity to capitalize on the race to integrate stock trading into other finance apps to drive stickiness because it’s a consistent, voluntary behavior rather than a chore or something only done a few times a year.

Yoshi has a big push right now in Japan hopping to bring broader access to the US stock market in the coming months.

Momentum Monday – Stocks Continue To Break Out Celebrating a Mike Bloomberg Presidency

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

I am heading back to New York this morning after a thrilling week in Israel.

The markets had a great week too.

I have no idea if my headline above is why the stock market continues to trend higher, but it is as good a guess as anyone else in media.

Here were my thoughts in last week’s Momentum Monday post.

Let us keep enjoying this while it lasts.

I added to my Google position this week on the break to all-time highs and Apple had another great week. The Airpod Pros will be the big Christmas gift and the stock should continue to lead tthe market. The market is in the middle of repricing Apple as a services company, but the watch and the Airpod Pros will likely bring some surprises to the upside for them.

Underneath all the political fighting and bullshit in our governments around the world as well as the sloppy investing by late stage funds like Softbank (via Saudi Arabia), investing at the ground level keeps on trucking.

There are now more than 900 Micro VC’s.

Life is good if you are street level and have a great network.

Because life is good for Micro VC’s, I think life will continue being good long term for the technology sector and the buy the dip crowd.

Nasdaq 10,000 is back in sight.

Hello From The West Bank, Ramallah and Rawabi…and Doobie Means Teddy Bear

Today is my last day in Israel before heading to New York and back to work this week.

Yesterday was a long and interesting day spent in The West Bank, the city of Ramallah and the massive real estate development called Rawabi.

I have a lot of strong feelings and opinions about The West Bank and Gaza but will leave them out of this post and just focus on what I saw.

Our tour into The West Bank was run by Rami Nazzal a journalist and entrepreneur running Beyond Border Tours. Israeli’s are not allowed into the West Bank so we had a whole new team of Palestinian guides and guards spend the day with us.

The West Bank is as complicated geographically/politically as Jerusalem. Have a read.

Our first stop was inside the wall which Israel believes is crucial to their protection and the Palestinians think is crushing them. I admit that I was very nervous during this part of the trip. This area of the West Bank (area C) is considered lawless. Here is our group picture with Rami as well as a Banksy original (girl releasing balloons)…

Next we headed to 1 of 18 refugee camps in the West Bank called Amari. It has about 10,000 people and because of the lack of municipal services was a mess. This is a 3rd generation refugee camp. As a group we felt that these people are being used as pawns by the Palestinians (30 minutes away is the brand new and mostly empty city of Rawabi), but obviously this is complicated. It is sad to see children live in such chaos and poverty but still easy to make kids smile …

In the afternoon we headed up past Ramallah to the massive $2 billion city (the first ever planned Palestinian city) still being built high up on a hill by Palestinian entrepreneur and billionaire Bashar Masri (funded 90 percent by Qatar money). The city is called Rawabi and it felt like one of those empty Chinese cities.

We did meet with Bashar who was very forthcoming with the financial information and partnerships. Our crew had several large Phoenix real estate developers, so the grilling was intense.

Personally, I don’t see it working and am going to try and have Bashar on my podcast soon. He told us that 60 Minutes is running an interview with him about his businesses and this project in a couple weeks so I am looking forward to see how they cover it. He let me do a selfie with him as we left…

This 15,000 person outdoor amphitheatre at the centre of the development was crazy and I crushed a few jokes for a small audience of Palestinians…

Back in Jerusalem with the sabbath over and the streets alive with people, music and food I enjoyed a fantastic falafel spread at Houmus Ben Sira and spent the rest of the night with the crew buying cocktails for young Israelis and a little Hookah…

PS – a very special thanks to our guide Doobie Sabbo who was a wealth of knowledge, infinitely patient and smart and also a spitting image of Shrek. I did not know that in Hebrew Doobie means ‘Teddy Bear’.

Hello From Jerusalem… and It’s Complicated

This trip to Israel continues to be a trip of my life. I am grateful that my good friend Steven Schwarz made last minute room for me to join. Steven has been very active as a past president of the Phoenix Federation and now focuses on mentoring young people while he continues to build his successful real estate company ViaWest in Phoenix. I have had Steven on the Lindzanity podcast and you can listen here.

I can’t wait to pay it forward next year and organize a group to come on a trip like this.

Today we spent the day touring the in and around Jerusalem and ending up at the Western Wall. Here are a couple photos:

I did leave the ‘perfect’ note.

What a complicated city and I’m talking just the maps and territory rights, not politics, government, religion etc.

At our shabbat dinner our group hosted a ‘lone soldier‘. A ‘lone soldier‘ is a soldier in the IDF (military) with no family in Israel to support him or her: a new immigrant, a volunteer from abroad, an orphan or an individual from a broken home. It was quite humbling to hear his story. There are tens of thousands more.

Tomorrow we are heading to Ramallah which is inside the West Bank. Israeli’s are not allowed so it will be another complicated day but hopefully a great day to observe and learn.

Google At All-Time Highs…You Can’t Be So Big and NOT Be Evil

Yesterday I spent the day touring the Negev and the area along the Gaza Strip.

Here was our exact spot as we looked over Gaza:

Our tour guide and teacher for the day was a retired Colonel in the military and at one time back in 1994 the Mayor of Gaza (there used to be Jewish settlers in Gaza).

I won’t get into the lessons and the politics because it is so complicated but it was a fantastic day.

What was fascinating was how often Google came up in discussing Gaza.

The colonel calls Google Dr. Google and was explaining how the Hamas and other 50 or so terrorist organizations running out of Gaza have used Google to learn how to build bombs and tunnels.

As it so happens Google actually hit all time highs (I am long Google).

Today it is Facecbook/Zuckerberg that people hate, once it was Microsoft.

Google’s old motto was ‘Don’t Be Evil’, but you can’t be this big and profitable and not be evil.

Evil and all-time highs pretty much go hand in hand.

Never Say Never, Context Matters and Israel Rocks

I am off to Jerusalem today making stops along the way at some Arab/Israeli mixed schools, Gaza and West Bank in a long day of history and education.

One thing that always amazes me most about the country of Israel is how small (in land size) it is. With no traffic you can drive from the north tip of Israel to the south tip at Eilat in under 6 hours.

Yesterday was the first time in all my trips that I flew in a helicopter from Tel Aviv north along the coast up to Lebanon and then north east up to the tip of Israel at Mt. Hermon.

It really gave me some fresh context.

We stopped just short of the Syrian and Lebanon border at the Galilee Medical Center in Nahariya. I was amazed to see what they had built. Because of the shelling from The 2006 Lebanese war, the hospital was expanded underground and able to treat 500 patients at a time and move them out of the four stories above extremely fast. Their hospital ‘war room’ is a state of the art bunker that is now being studied and used around the world. The hospital has also served thousands of enemy patients over the years.

I have a fresh appreciation of’Iron Dome‘ missile defense system the country had to build and deploy to protect it from short range rockets. I got a fresh sense of how close Israel’s enemies are to main population centers. Sure the fences have helped stop suicide bombers, but without the Iron Dome Israel would look very different today.

I remember coming here in 2010 after being invited to meet founders and invest and being supremely confident that I would never need to invest in Israel. My feelings were that as a relatively small investor if I could not find investments at home in the USA, I was being lazy. I ended up investing in Etoro and Billguard (acquired by Prosper), first heard about Bitcoin and learned to never say never when it came to investing.

Yesterday my helicopter pilot flew me over the grounds of a Warren Buffett investment who I was told also said he would never invest outside the USA and after visiting made his first international investment in Israel.

I read yesterday that the market cap of Microsoft and Apple combined is larger than that the market cap of the whole German Stock market. Yes Israel is small, but so is the German market in the context of just Apple and Microsoft.

There is opportunity everywhere and an investors best weapon continues to be the experience gained from their own feet, noses, eyes and ears.