Changing expectatons

I had a good birthday yesterday. Except for a couple morning calls, I largely took the day off to just to treat myself which mainly involved eating. I wish the weather had cooperated a bit more and allowed me to spend most of the day outside, but that is life.

On another note - I have been preaching for the last year that startup employees need to be lowering their expectations in the post free money world. The days of early stage funding rounds with absurd valuations accompanied by a secondary are over.

There’s a lot of holdover from the last few years. I get inbounds all the time with unrealistic expectations on due diligence timelines, valuations, pricing, etc. There’s founders and operators out there that are still brainwashed from 2021 and hoping that will come back soon. I’m hoping that will finally be over soon.

As for myself, I too have to lower my expectations in this new day and age. I had a good chat today with a lot of teammates about that today. During our pow wow, I’ve realized that I also still have to adjust some of my expectations on things like metrics and timelines.

As much as I want things to move like they did back in 2021, I know that’s not coming back and everything has changed. Apparently, I too have a bit of 2021 stilled ingrained in me that I need to shake out.

33 and blessed

I turned 33 today. It’s a bit surreal as I’m officially venturing into my mid-thirties. In my late teens and early 20s, I was always a bit terrified of getting older. Growing responsibilities and adulting just didn’t seem that fun to me. Like most people do, I guess I just grew up a bit and I’m now enjoying the process of getting older and wiser.

I feel like every year of growing older feels like exponential knowledge and growth. You know more and mature, and then life somehow gets a bit easier because you do. Suddenly, a lot of life’s problems aren’t as big of a deal as they were when I was in my 20s. I love that feeling.

Of course, not all is rosy. I’m tired all the time. My body is constantly stiff or sore. I feel like I have future (minor) health issues starting to pick up. I miss the limitless energy of my 20s. I do occasionally miss the 4am nights out with friends. All that said, growing older is definitely much better than I thought it would be in my 20s.

While I occasionally joke about wishing I was in my 20s at times, I am incredibly blessed. I’m surrounded by amazing family and friends that care about me. I am in good health. I have a job that brings fulfillment into my life. I am happily married to someone who I want to start a family with.

I don’t take any of these things for granted. I know how lucky I am to have the life that I do. I’ll spend my day relaxing, eating good food, and practicing some gratitude. As my friend Erica’s dad used to say, “we are so lucky to be here today”.

Down rounds?

I had thought there would be a lot more down rounds announced by now. Perhaps there are a lot happening but companies are just simply not announcing them or keeping it hush in order to avoid the potential backlash.

Other companies may just be raising convertible notes instead in order of doing a priced round.

I still think there’s more down rounds coming in the months ahead. Startups need capital and many are still very much fundable albeit at lower valuations than they raised in 2020-2021.

I suppose the scary thought behind all this is that perhaps VCs are simply just not funding a lot of these companies that need capital. Some companies with high valuations, even unicorns, may not be able to raise and may be against the ropes.

I obviously hope there’s much less of that and more that companies are either preparing to announce these new rounds in Q2 or keeping things hush.

Brainstorming business ideas

The last few years I’ve been so heads down with Secfi that I haven’t had much of a chance to do my usual brainstorming for business ideas. That’s not to say I haven’t learned much about business - I’m fortunate to spend most of my day looking at or working with innovative companies.

I’ve had the chance to see how successful companies operate and what can kill startups. It’s a great first hand look into seeing how the best companies are built.

On the other hand, almost all my day is spent working with venture backed companies. Not every successful company needs to be venture backed. In fact, the majority are not and nearly all business ideas are better off without taking VC money.

The last few months I’ve been doing a lot of outside the VC world brainstorming in terms of business ideas. I’ve always loved learning about unsexy businesses like car dealerships, gas stations, soil, etc. A lot of these companies exist because they simply print money.

While I may spend the rest of my career at venture backed companies, that’s not to say that my learning should stay within this bubble. There’s a lot of great opportunities out there and I want to stay educated on all kinds of companies. There could be potential side business or a future endevour that I get interested in. It’s a big world out there and it would be a shame if I only stayed in my tech bubble.

Getting my mind right

Things are fairly quiet right now at work. There’s still news and stories out there in the VC and startup world, but the capital markets are slow right now. We obviously wish things were different, but that is the way things go when you’re in a business that’s tied to the markets.

As a type A person who has lived my first 32 years trying to find ways to be busy, it’s pretty hard for me to accept the fact that I’m not absolutely swamped all day. I get the thrill out of getting things done and/or beating the competition.

It’s funny to think about but when I’m absolutely swamped at work, all I want to do is do nothing or go on vacation. But when we’re in a slow period at work, we just want to feel busy.

I know things will get pretty hectic in the next few months as well so I’m doing my best to enjoy my time right now. It’s good to recharge the batteries and get my personal life.

There’s a lot of work projects that require my attention so I’m focusing on those tasks that normally wouldn’t get the time of the day. But I also know that I need to be my best self when things get hectic later this year.

That means taking this time to recharge rather than spinning my wheels on low value tasks. I’ve come to realize this from working at a startup in the last 5 years. There’s times to absolutely grind, but you can’t do it indefinitely. And grinding on low value projects or tasks just to stay in the grind doesn’t do you or your startup any good either.

So for now, I’m enjoying the relatively lighter work load while focusing on high value projects and getting my mind right for the upcoming year ahead.

Low morale and hard times

I had someone cold email me today asking to shares of his “startup” valued at $7m for $170k today. That may have been the steepest discount of any company I’ve seen so far in the private markets although to be fair I’ve never really heard of his company.

The cold email is symbolic of the times right now. Post pandemic we were promised the Roaring 20s. We got the roaring 20s for just a little over a year before the fun was all over. Lucky for us, we’re not in Great Depression times but things are far from good in startup and tech land.

I know quite a few people who are searching for jobs after going through layoffs. They’re in a brutal market right now. Those that are fortunate enough to be left are dealing with reduced workforces and slowing business. Couple a tough work environment with lowered valuations of their equity, and many employees are in a morale trough right now.

A large part of my day is spent speaking to other current and former startup employees and I’ve never seen morale this low across the board. A lot of individuals are just plain disgruntled and/or burnt out. They went from dealing with COVID to being busier than ever in the post-pandemic phase to everything coming crashing down again.

It’s been a hell of a 3 years since COVID started. Every year has been unique and challenging in different ways.

There’s not a magic fix for all this. Nearly every company is dealing with it right now and we’re no exception at Secfi. To remedy this, we’re going to go back to the COVID playbook a little bit. We’ll start small with more team events to enable camaraderie (and venting). We’ll of course encourage more vacation time, but also look to do company-wide days off as well.

Grateful

It’s an ugly day out here in San Francisco. It’s been cold and rainy for the last week, but today feels especially dark and depressing. I saw a bit of hail this morning and it looks like it’s 6pm out my office window right now. Couple the bad weather with the fact that it’s Monday, and it’s not an ideal scenario.

On Mondays like today, I try my best to stay positive. I’ve realized that in my past, it’s been easy to fall into a down Monday just by focusing on the negativity.

One of the tricks to staying in a positive mindset over the years is to write down things that I’m grateful for. I used to keep a journal and write 3 things I’m grateful for everyday, but I’ve since switched to blogging everyday instead. So I figured that today I get back to that to start my day off on a positive note.

Today I am grateful for:

1. A warm apartment where I was able to get some much needed rest

2. A great weekend to myself where I was able to recharge and get caught up in life

3. Cats. I was cat sitting for my friends who were out of town and I had a great time bonding with a very cute kitten.

Maybe I’ll get back to doing it every Monday.

Marathons not sprints

My wife tells me that I need to listen to my body a bit more. Like always, she’s right. I was absolutely just dead most of yesterday and almost fell asleep in the gym in the afternoon. I went to bed at 10:30 last night exhausted from the week.

I typically don’t set alarms unless I have morning calls and I pretty much wake up everyday by 7am at the latest regardless. Well this morning I woke up right at 9am in a bit of a daze. This never really happens to me and it threw me for a bit of a loop.

I was a bit surprised, but at the same time I’ve realized that I’ve run my body into the ground this week with a lack of sleep and overdoing it on the work.

I’ve unfortunately have a ton of work to do still, but I figured I need to take the weekend to rest and recover. There’s more days and this startup thing is a marathon, not a sprint. Or at least I can’t sprint the entire marathon.

High cost experiments

I’m beat this week. I’m normally at my desk at 8am for my morning slate of calls, but this week has started earlier and my routine has been completely thrown off. I’m excited to get to the weekend and get some rest.

This week, my team and I have been working on a few projects that we’re thinking about launching. I’m huge on trying new things and seeing if they work. We’ve had a lot of great success running these experiments in the past, although nearly all of them fail. One way or another, you learn something.

With that said, one question I always ask is what is the cost of this experiment. That cost may not necessarily mean just pure dollars. Time is probably the most expensive cost we have at a startup.

For a simple example, if we go and chase a theory that sending a calendly link directly to our calendars instead of having them set-up accounts will generate more leads. I can likely tell you with good certainty that theory will likely be true if we run the experiment. On the surface, most may think that “more leads are great, let’s do it!”

But then if you start breaking down the cost of running this experiment, then things start becoming much murkier. You will likely introduce many more unqualified leads. Let’s say you expect 100 new leads and your normal unqualified lead % is around 50%. With the new method, you may think this will go up to 80%. So you have 30 more unqualified leads.

At an estimated 30 minutes per unqualified lead call, then you have 900 minutes of employee time of cost to get 20 more qualified leads. That’s 15 hours of additional work to get those 20 qualified leads. Depending on the business or project, that may not be worth the time now that you’ve dug into the numbers.

On the verge of bankruptcy

One of the more surprising things I’ve learned about successful late stage startups is just how many of them were on the verge of dying at one or multiple points in their journey.

There’s the famous stories about Lyft being 6 weeks away from missing payroll and AirBnb’s founders selling cereal to try to keep the company alive, but I was a bit shocked to see that this was quite often the norm.

I’ve met and worked with a lot of successful companies in the last few years who were months, if not, weeks away from declaring bankruptcy. Some of the most successful $1b+ tech companies that we know of today were in that boat as recently as a few years ago.

It’s one of these things that’s incredibly stressful but inspiring at the same time. No one wants to be that position to be close to a dying business, but at the same time, it’s part of the gig of being a VC-backed startup. If you are in that position, then there’s not much you can do but put your head down and get to work. It can and often does work out.

Unfortunately, I imagine there’s a lot of startups out there that are in that position today. I’m hoping most of them are able to make it out of this down market and are able to continue building.

Learning Chinese

I’m excited for tonight as I have my first in-person Mandarin class. After I got back from my honeymoon in January, I had a desire to learn Mandarin after visiting Singapore. I figured it would be fun to start on Duolingo and see where things went after a few weeks.

Things started out slow and I was doing a lesson or two a day. But then I started to get addicted. Duolingo does an amazing job gamifying the language learning experience. Within a couple of weeks, I was pretty darn addicted. So much that I would take a break during dinner with friends to do a lesson to ensure that I kept my daily streak up.

While the gamification is part of why I like Duolingo, I also realized that I just miss the learning experience. I’m fortunate to be in a job where I do learn a lot on the job, but learning a new language is something completely different than learning job skills or knowledge.

I wanted to speed up my learning so I decided to enroll in an in-person Mandarin class that meets weekly. I can’t remember the last time I was so excited to go sit in a classroom with a teacher. The in-person learning experience is also something I’m really looking forward to. It’s been awhile since I’ve been in a setting like this meeting new people.

I’m not sure how long it’ll take me to get to a conversational stage of Mandarin, but I’m excited for the journey ahead to say the least.

Tis the Friday before a long weekend

This week went by real quick as I felt like I was booked on back to back calls for pretty much the whole week. No major fire drills this week so that’s always a win, but just lots of news in the tech world.

It feels like the second wave of bad news is coming around. While we don’t want to hear the bad news, we’ve known it to be coming for awhile and the sooner we can get past it, the better. We all need to move on with the new reality of lowered valuations and tempered expectations.

I have a feeling things are going to start to heat up in the next coming weeks. The valuation resets are going to drive a lot of demand for advisory and liquidity. I’m mentally preparing for a crazy few months ahead.

For now, I plan on relaxing at home during the long weekend. I got a lot of golf planned that I am excited about.

The secondary market

Part of my job requires me to be pretty tied into the secondary market for startups. While we do not buy or sell shares, it’s always good to see where trades are happening so we can better inform our clients.

After being largely dead for almost an entire year, I’m finally starting to see life in the secondary markets. Bid/ask spreads are narrowing and investors are starting to put their money where their mouths are.

As expected, the pricing is largely depressed to where most of these companies were last valued. The most stable companies are selling at a 30% discount while the average seems to be about a 50% discount.

I expect a lot of the pricing to stabilize. There’s been a lot of volatility in the last year, and we’re likely going to start settling into these large discounts as the accepted pricing.

I do not expect the pricing to dramatically get better anytime soon. Just as I mentioned last year that we’re seeing the tip of the iceberg of layoffs, I believe we’re just seeing the tip of the iceberg when it comes to down rounds. A lot of mid to late stage companies will need to have their valuations reset in the coming few quarters.

The positives to all this is that we can move on and come to terms with the new reality.

Building a money making business

One of the best parts of my job is that I get to look at many startups across different industries. The sheer number of VC backed startups never seem to amaze me, and there’s so many companies building some really cool shit.

I only get to do a deep dive in a very small portion of these companies so quite often it’s literally checking out the website and then getting a synopsis via Pitchbook. I’ll admit that I only probably understand the product of 50% of the companies that come through. Many others are in spaces where I have no expertise in, such as deep tech, healthcare, biology, etc.

Then there’s other times where I understand their product and just have no clue how this company could be a viable business that makes money. Fully acknowledging that I could be very wrong about some of these companies, I believe that a lot of these companies that received funding are very likely a product of the post-pandemic cash is free world.

With the market turning, I suspect a lot of investors will start asking, “how do you make money or plan to make money?” Unfortunately for a lot of these companies, many won’t be able to give a clear answer to that question.

There’s a lot of great ideas and products out there, but if you can’t make money, then you don’t have a business. Very few companies (ahem OpenAI) can pull off building something without even thinking about monetizing. For the other 99.99% of companies, you better start thinking about your business plan versus just building a product.

A reason to celebrate

I’ve never really been big on Valentine’s Day. For one, it’s largely been overshadowed as Sophia’s birthday is the day before. Secondly, it’s a corporate holiday that just gives companies the excuse to run a mid-winter sale.

Perhaps at some point, I should stop sounding like such a disgruntled and grumpy man when it comes to Valentine’s Day. I got married two months ago and have an amazing wife. Maybe it’s time to turn the corner on Valentine’s Day next year.

On the topic of love, my colleague John wrote Why it may be time to break up with your favorite stock. Anyone that has experience investing has undoubtedly fallen in love with a stock (or many). This can lead to less than desirable outcomes as an investor. I had to pull quite a few text message breakups in December with some of my stocks. It was painful at the the time, but my portfolio has been happy ever since.

Happy Birthday Sophia

I can’t remember the last time that my inbox was this quiet on a Monday morning that isn’t a holiday. I suppose the Monday after the Super Bowl is an unofficial holiday and maybe we should just combine it with President’s Day at this point.

On another note, we spent the weekend celebrating Sophia’s 35th birthday which is tomorrow. On Friday, we got our group of friends together for an amazing dinner at Ilcha on Union. It was elevated Korean bar food and the hype was justified. Even more memorable than food was the fact that our friends and I probably let loose a little too much. We drank like we were celebrating a 25 year old birthday, not a 35 year old one.

Needless to say Saturday was a bit of a wash for me. We ran a few errands and took it rather easy for most of the day. At night, I took Sophia to Itria in the Mission which was another restaurant that we had been wanting to go to for the last year. The crudos and the pastas were amazing there.

This birthday would mark the 5th birthday that we’re celebrating together. I suppose this is really early on in our lifetimes as 5 years is really nothing in a relationship. But it also means that Sophia has put up with me for over 5 years which is no small feat. I count my blessings everyday that I met someone who volunteers to be with me for life. I’m a lucky dude.

Not getting out of your own way

98% of the people I meet doing this job at Secfi are awesome people. They’re smart and generally always willing to learn. Most of my job is working with these awesome people and helping them with a complicated financial situation in which they are not familiar with. And they’re incredibly grateful for it.

Today was one of those days where I worked with someone in that 2% and it was brutal. This particular prospective client had been working with myself or someone on my team for the last 3 months…. largely looking for free advice. I typically don’t mind giving it.

I like to think that I understand my value prop. I generally always aim to give unbiased advice and like to put myself in their shoes. I would never recommend something that I wouldn’t do myself if I was in that situation. But I also get that many people won’t take the advice for one reason or another. Sometimes it goes over their head and sometimes they just view things differently than I do. That’s okay with me.

This particular individual was possibly the most bizzarre situation I’ve dealt with in my 5 years at Secfi. He keeps asking for advice, and then pretty much tosses it aside completely in the middle of our call. It felt like he was trying to get us to affirm his really shitty financial plan which we of course wouldn’t do.

On that shitty plan - it quite honestly felt like this guy has created a plan based on doing the complete opposite of what someone should be doing in this situation. Without diving into specifics, his plan entails doing nothing now, but then double down in months when the risk is much higher, and the benefits are much lower.

It wasn’t a decision based on risk, but solely just a misunderstanding and focusing on the wrong things. I couldn’t believe the situation and how hard headed this guy was. Unfortunately for this guy, he can’t get out of his own way.

Grass is always greener

One of my weekly lunch spots by the office is this new restaurant called Hed Thai. It’s smack dab in an alley way in the FiDi and just opened a couple months ago. I was stoked to see that there was an Isan style Thai joint opening up by my office and they have these great lunch sets.

I’ve become friendly with the owner’s husband, Dennis, who runs the front of the house. Today we had a long conversation about living in San Francisco vs Bangkok. He had just moved with his wife to San Francisco a few months ago so they could open these restaurants together.

I have always loved southeast Asia and had on many occasions thought about moving there. I figured that Bangkok would be a likely place where I would set-up given that it’s a large city which I would need. I joked that every week when I start daydreaming about moving to Bangkok or Asia, I have to go to Hed to get my Thai food fix.

It was a fairly notable conversation because while I was dreaming about moving to Bangkok, he was talking about how happy he was to be out of Bangkok and here in San Francisco. He had mentioned that he loved it and did a good five years there, but after awhile, the craziness of Bangkok just gets to you.

It was a great for me to remember that the grass is always greener on the other side. For as much as I get sick of SF from time to time, there are millions of people who would love for the chance to live here. It puts things in good perspective.

Going public or staying private

Ever since the ‘08 crash, most startups have taken much longer to go public. Back in the day, internet or tech companies would go public after only a few years with little revenue traction. This shifted dramatically after ‘08 presumably due to the fact that VC money was more readily available.

Fast growing startups could live very comfortably off VC capital and grow without the issues of being a public company. There would be no fluctuating stock price to worry about, no burdensome filings, no scrutiny from the SEC, etc. They could just focus on their goals without the outside noise.

During the pandemic, I had predicted that the trend would likely reverse in the 2020s and companies would flock to the public markets earlier than the predecessors such as Airbnb and Palantir.

So far that prediction has been a mixed results. Lots of companies did hit the public markets sooner through SPACs, but what we quickly found out was that many of these companies that did go public through a SPAC were definitely not ready to be public companies yet.

With the IPO market completely dried up right now, it will be interesting to watch what the rest of the decade will look like. Companies like Stripe seem to be hunkering down and avoiding the public markets for as long as possible.

On the flip side, VC money is now more expensive and we may see a world where companies will need to go public earlier.

The next big one

I was just reading about all the sad news in Turkey and Syria right now. There was a 7.8 magnitude earthquake and this could be one of the deadliest in the last 100 years. The death count keeps rising and it’s pretty damn devastating to see all the photos and videos coming from the rescue efforts. I’m hoping that the rescue efforts catch a break from the weather.

I walked by a newspaper stand today and the headline of the Chronicle was pondering what an 7.8 magnitude earthquake in San Francisco would look like. Growing up in SF and now living here, I can’t help but think when the next big earthquake will hit. When I interned for the city in high school, the scientists had projected that it was a matter of time, not if.

The thought of such a large natural disaster scares me. But at the same time, we’ve been fortunate to live in a place that has prepared for the next big earthquake for quite sometime. I still remember my mom keeping packs of water and food in the basement just in case there was disaster though. I suppose it’s a reminder that it’s always good to be preparted.