Pre-Money: Feb 19th, 2024

Operator v investor, Club Unicorn, Show me the money, Reddit's IPO

This issue is brought to you by 10 East, where sophisticated investors access private markets.

The Vibe

The week’s most important happenings

As two Presidents prepare for an epic election battle, the VC world keeps charging ahead. Here’s what’s on tap:

  • Operator v. Investor

  • Unicorns, the exclusive club

  • VCs need to be shown the money

  • Reddit gets ready (for an IPO)

  • OpenAI keeps selling stock

  • and more…


The week’s top performance indicators

Based on publicly available data from Thompson Reuters, NASDAQ, CNN Business & other third-party sources


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Dots & Lines

The week’s top takeaways

  • The Unicorn Club — hard to join, and harder to remain: A lot of ink has been spilled about Unicorns, private companies with more than $1B of market cap, especially during the pandemic when it seemed like there was a new one every day. While 2023 was light for new Unicorns with only 95, less than any year since 2016, the exclusive club still boasts 1,500 members worth more than $5T. Unicorns tend to hang around longer than top companies of a prior era, with their average lifespan to exit standing at almost 11 years. On that kind of timeframe, the chances of a misstep or failure to meet massive growth expectations rise considerably. Quite a few of their ilk will fall back to reality, like Bolt, the high-flying online checkout company that saw 97% of its value vaporized in a recent buyback transaction with one of its investors. Others will bring tomorrow’s mergers and IPOs. Here’s to the Unicorns, may they live long and prosper.

  • Show them the money: With venture distributions at a multi-decade low, the VC cash squeeze continues. Recently, many funds have been willing to accept considerable discounts on some of their company holdings and fund stakes in secondary market transactions. Selling lets them raise and distribute cash, and eventually move on to a subsequent fund. For newer managers who raised a first fund in the past few years, raises are taking considerably longer, with 2.6 years as the mean time between funds. Indeed, more than a third of firms started in the 2019 to 2021 timeframe are unlikely to raise that sophomore fund at all. In the land of VC, look for cash to remain king.

  • Founder vs. investor: There is a long-standing dichotomy in venture capital between GPs with prior experience successfully founding and building companies, and classically trained investors who came up through the ranks without that pedigree - though often, with an MBA. Now, as funds seek to boost flagging capital raises, the split is making its way into the LP ranks. With the contraction in fundraising, now may be the chance for founders and family offices to find their way into top-tier funds. This new breed of LP - the operator - is compelling since they have a lot of capital, can make decisions quickly, and signal well to potential founders who may admire their experience. Contrast this with the institutional limited partner(LP), who typically represents an institution and operates within a more defined framework. Keep an eye on how the composition of new fund investors changes in today’s market moment.


Smart Humans explores venture capital

In this episode, Slava Rubin talks with Everywhere Venutures’ Jenny Fielding about angel investing, believing in yourself, and innovation going global.

Deal Points

A few items of interest

  • As a tech hub rich with talent and funding at the epicenter of the AI surge, San Francisco is back, while sojourns to Miami and elsewhere wrap up

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The Forecast

Looking ahead to this week

During the week of February 19th, look out for:

  • A bit of President’s Day recharge

  • Earnings from Block($SQ), Intuit ($INTU), Nvidia ($NVDA), Rivian ($RIVN) & Walmart ($WMT)

  • FOMC Meeting Minutes on Wednesday

  • Initial jobless claims and home sales on Thursday

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