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Thinking Ahead To 2019

In the last week, we have learned that Uber, Lyft, and Slack plan 2019 IPOs. I am sure that a few more highly valued private companies are also planning to go public in 2019. It is something that I have been expecting and predicting for a few years now. Eventually these companies that have raised a ton of capital in the private markets will choose to go public and generate liquidity for the shareholders who plowed all of that capital into them. And yet storm clouds are on the horizon for the capital markets in 2019. Rates have risen significantly in the last eighteen months, pulling capital out of the equity markets and into the fixed income markets. There are some leading indicators that suggest a business slowdown is on the horizon, which would be the first one in the US in a decade. And, of course, the situation in DC is getting dicey and that will weigh on markets as well. Good companies can go public in bad markets so I am not saying that the long delayed IPO plans of juggernauts like Uber will be squashed by a bear market in 2019.  But what I am saying is that 2019 is shaping up to be a very interesting year for the capital markets that power the startup economy. There is a big difference between the private markets and the public markets. They do not move in lockstep. For years now, the late stage private markets have been trading at valuations that are well in excess of their public market comps. That is true for a number of reasons. First, private market investors have longer time horizons and are looking for a three to five year return, not an immediate one. Second, private market investors get a liquidation preference which in theory protects them from losses. Finally, deals in the private markets clear in an auction like environment where the highest bidder wins the deal. All of these factors mean that a hot company can raise capital in the private markets at valuations well in excess of where they can raise capital (and trade) in the public markets. But the public and private markets are connected to each other. If the Nasdaq falls significantly, and it is down roughly 15% from its highs in the late summer/early fall, then it will eventually weigh on the private markets. And, if Uber, Lyft, and Slack do go public in 2019, where they price and where they trade will impact startup valuations, both late stage, and ultimately early stage too. These markets, public, late stage private, and early stage private, feed off each other and the participants in one look to the others for supply of deals and liquidity. So while they may appear to be disconnected, and often are, they do ultimately sync up. And so I’m wondering if 2019 is the year they start to sync up again, after quite some time being out of sync. And if that comes to pass, what it means for our portfolio companies and their financing and liquidity options. Fortunately for most of our portfolio companies, and most companies in the startup sector, we have had a number of years of very flush capital markets and many companies have strong balance sheets and a lot of staying power. The same is true of most venture capital firms as the past few years have been a great time to raise capital. So if things slow down in 2019 and I am not predicting they will, but I think they might, the startup sector is in good shape to weather it. But at some level, the startup capital markets are a game of musical chairs and you don’t want to be the one who can’t find the chair when the music stops.

2018 Predictions Report Card

Source: Big Red Car here on a cold ATX day, y’all. Time to grade our 2018 predictions. Today we deal with POLITICS. Here are the 2018 predictions we made in regard to POLITICS. The US Congress passes an infrastructure bill with a small amount of bi-partisan support. It will be a deficit busting, Jabba the Hutt, pork project of gargantuan proportions. It will include something for every state, every industry, and every Republican Congressman running for re-election. It will be an all-you-can-eat buffet with seconds and a take home container of desserts. The Republicans will say, “Deficit? What freakin’ deficit?” Every politician will be a pig at the trough trying to get theirs. It will be huuuuuuuuuuuuuuge! WRONG. No infrastructure bill though there was a little smoke being blown by Jabba. Could happen next year? I don’t think so. Speaking of elections — Republicans pick up a half dozen seats in the Senate. HALF WRONG/HALF CORRECT Republicans picked up a quarter dozen seats in the Senate, but, more importantly, the faux Republicans in the person of Senators Flake, Corker, McCain are all gone. This makes the remaining Republicans more Republican. Then, we do still have Murkowski, Collins, Rubio. Lindsey Graham becomes the First Buddy. Republicans lose ten seats in the House — all from states with high SALT and in affluent, property-rich Districts. Otherwise, the Republicans hold serve rather handily. WRONG. Republicans lost approximately 40 seats. Still not finalized as we speak, but not an “over perform” for Republicans. Some take comfort that it ran true to form for a first mid-term, but your Big Red Car says, “Wrong.” The Democrats are unable to find a central message, theme, or leader. They have nothing to run on except, “Hey, Trump.” CORRECT, Big League. President Trump still controls, well, everything. Nobody has an original thought. Everybody finds out what Trump likes and opposes it. It is embarrassing to see what people said four years ago and what they say today when President Trump is on the same side they used to be on. Their positions “evolved?” President Trump is all over the campaign trail supporting Republicans in tough races. He goes all in and drags all of his campaign operative pals with him. All the naysaying Republicans will be begging him to come to their state or their District. It will be big league. CORRECT. Everybody Trump campaigns for wins. Some Republicans make a decision not to ask for help. They almost all lose. Where is the LOvE? Well, she got defeated. The big issue is “How did the candidates vote on tax reform?” The economy, jobs, taxes — “It’s the economy, stupid.” Imagine the debates wherein the Republican points at his/her opponent and says, “That son-of-a-bitch wants you to pay more taxes. Vote for him/her if you want to pay more taxes.” WRONG. We learn once again that the electorate doesn’t vote based on gratitude. “What have you done for me lately? Tax cuts were so yesterday. Plus, I already have a job.” The sexual antics of male Congressmen blows up as names and settlement amounts are all publicized. It is so much, it becomes impossible to keep track. Female candidates will do very well. MOSTLY WRONG. Congress still obscures their wrong doing. Female candidates do well because they are excellent candidates. Looking forward to seeing the antics of Alexandria Ocasio-Cortez. This is going to be fun. Big hidden story becomes how much President Trump has shrunk the size of Federal employment through attrition and hiring freeze. CORRECT. This story doesn’t get covered at all. President Trump is shrinking the size of government while all of his predecessors grew it. Right after the election Speaker Ryan floats a trial balloon on fixing entitlements. Gets shot down by President Trump who says, “Wait until after 2020, Paulie boy.” CORRECT. Lip service toward fixing entitlements is a total non-starter. Speaker Ryan takes a powder and doesn’t seek re-election. Highly ineffective Speaker. Said he didn’t want the job which proved to be prescient. The Republicans should have listened. President Trump begins to practice Tweet Discipline. He still tweets, but Gen Kelly puts some Leatherneck discipline on him. Kelly denies it, but it is Kelly. This will creep up on you. At first, the media will miss it and then somebody is going to say, “WTF?” Ha, ha — WRONG. WRONG. WRONG. President Trump doubles down on Twitter. Considers naming a Twitter Chief as a Cabinet officer then decides he’ll keep the job. Nothing is safe from the Tweeter-in-Chief. Kelly does exert some discipline, but at this writing is headed for the door. I will be sad to see General Kelly go. The brain trust of Pence, Mad Dog, Kelly, McMaster, Pompeo, Tillerson, Coats begins to rock and roll. Trump runs policy through them and we have adults running things. HALF CORRECT. HALF WRONG. McMaster is gone. Tillerson is gone. Kelly is on the way out. Mad Dog is, well, Mad Dog — steady, solid, cool under fire. Pompeo is the rock star here — Director Central Intelligence becomes the Secretary of State President Trump wants and the Sec of State that our new robust foreign policy needs. Coats is MIA which is a good thing. The DNI is supposed to be a spooky, ghostly presence. The moves with McMaster and Tillerson are hire fast/fire faster type moves. Sad to see Kelly go. The House and Senate begin to purge some of the Undocumented Democrats — Flake, McCain, Corker. The others — Murkowski, Collins, Rubio — begin to follow Lindsey Graham’s lead and work with the President. McConnell and Ryan work with each other and the White House. It becomes a great team. Bannon, Priebus, Flynn — not missed. CORRECT. Surprised at how correct this turned out to be. Donald J Trump begins to act like President Trump six days a week. Melania keeps him in line. WRONG. President Trump has fleeting moments of inspired “Presidential” behavior — Geo HW Bush funeral was superb — but is still an angry may with an ax in his hand looking for the drain. Melania emerges as a very classy First Lady who the Pope has mentioned for sainthood. Huge win for President Trump. President Trump loses 15 pounds and does a weight loss commercial for Nutrisystem. WRONG. President Trump gets high marks for his health from White House doctor — sort of a mystery why. He has boundless energy and makes all his opponents look like old men while he is out shaking the bushes 24/7. Incredible energy. Former President Obama takes a back seat and is cautious in his support of any mid-term candidates, remembering it was under his admin that the House and Senate were delivered to the Republicans. He kicks it up a notch on the money-making speaking circuit and the book writing business. He plays a lot of golf and decides politics is too hard for him now. HALF CORRECT/HALF WRONG. President Obama, watching his — cough, cough — legacy being dismantled returns to the spotlight. “Hey, I need some spotlight. Can you swing that baby over here, please.” Candidates he supports, like Andrew Gillum in Florida, go down swinging. In mano-a-mano matchups, Trump runs the field. Truly nobody misses President Obama. He and Michelle launch into new careers as writers with great success. President Obama takes a primer from Bill & Hill and gets out on the speech hustle. Crushes it. Takes credit for everything that Trump has done — “Hey, that was me. I did that.” Not able to explain why Trump is a fuckup if he, Obama, takes credit for everything Trump does. Oh, well. It’s politics. So, there you have it, dear reader. A few hits. A few misses, but a decent performance overall. In the days ahead, look for the report card on Foreign Affairs, Domestic Policy, Business, Economy, Investigations, Society, and Terror. If you want to cheat ahead, here are the 2018 Predictions. Predictions 2018 But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. Hey, get out there and finish up your Christmas shopping. Merry Christmas. Happy holidays. Peace on earth. Peace on you.   Share this:EmailTweetShare on TumblrPrint Related Source:

Video Of The Week: The Shifting Funding Landscape

Our friend and USV Limited Partner Beezer Clarkson hosted a panel at the recent Slush Conference in Helsinki talking about the shifting landscape for startup funding. My partner Rebecca participated on the panel along with several others. It’s a roughly 30min conversation and covers the big topics in startup finance.

Video Of The Week: The Shifting Funding Landscape1

Our friend and USV Limited Partner Beezer Clarkson hosted a panel at the recent Slush Conference in Helsinki talking about the shifting landscape for startup funding. My partner Rebecca participated on the panel along with several others. It’s a roughly 30min conversation and covers the big topics in startup finance.

Pearl Harbor Day

Source: Every Pearl Harbor Day, I remember a conversation I had with a soldier who had been at Pearl on the day of the attack. It reverberates in my head. I can’t get it out. This man had been at Sunday morning chow and was returning to his barracks when a Jap Zero made a low pass over the parade ground. He was located at one of the Army airfields and knew that there wasn’t supposed to be a Meatball flying over his parade ground. He was there when the Japs returned and bombed the airfield into oblivion.The Japs would destroy all the American fighters that were lined up wing tip to wing tip to prevent sabotage. I asked him, “What did you think the second you saw that Jap Zero?” His answer was insightful. At first, I didn’t believe it. I would ask others if they felt the same way. My Dad was in the Army that same day and he told me the same thing. This is a picture of my Dad three weeks before Pearl Harbor on maneuvers in Louisiana when the Army was beginning to grow and shake out its fighting capabilities. The man said to me, “Those Japs had really fucked up.” I asked him, “What did you think was going to happen? He had seen the ships on Battleship Row the next day, so he was intimately familiar with the damage. Everything was still on fire. Burial details were going about their work. They were expecting landings to commence. His reply was surprising. “I thought we were going to put an ass whipping on those Jap motherfuckers like they could never imagine.” I remember him saying it as clearly today as then. I probed and asked, “Did you have any reservations that the US Army wasn’t equal to the task?” “No. I knew the Army wasn’t big enough to do the job yet, but I knew America was.” On 1 September 1939, the US Army was 174,000 men with 75% scattered across the entire United States and only 25% overseas. By the end of the war, more than 16,000,000 men and women had served in the US military with approximately 11,200,000 in the Army, 4,200,000 in the Navy, and 660,000 in the Marine Corps. We beat the Germans and the Japs. Unconditional surrender. I went to a military school, Virginia Military Institute, where I met men who had fought in World War II. When I served in the Army, I met a handful of officers who had served. I asked them the same question. Got the same answer. In Korea in the early 1970s, I had a guy in my platoon who had been a glider trooper on D Day in Europe. He was a total fuck up, but could he tell some stories. He had been 16 on D Day and was in his late 40s when he was in my platoon. Good demo man when he was sober. I used to wonder where that confidence came from — your fleet is on the bottom of the harbor, your battleships are sunk and burning, you’ve been dealt a crushing naval blow, the Japs are conducting landings all over the place, but these men knew that we would rise, we would re-build, we would return the favor. How did they know that? Where did that come from? I never found out. To this day, I wonder. Are we still that nation? That nation which kicked the shit out of the Japs and the Germans? The nation which became the arsenal of democracy? My father used to tell me, “The sons of tigers are tigers. Never forget that.” I hope that is true. Here’s to the Greatest Generation, our fathers who when evil was winning hitched up their pants, said, “We got this” and went out and rebuilt the world. It started on this day, at Pearl Harbor. God bless America. But, hey, what the Hell do I really know anyway? I’m just a Big Red Car — made in America, y’all. America – a damn good country.    Share this:EmailTweetShare on TumblrPrint Related Source: