Startups are taking Advil when in fact might have Cancer
"It is the destiny of the weak to be devoured by the strong."
― Otto von Bismarck
The corrections we observed in 2022 will present fantastic opportunities for the already adapted ones.
If you haven't — there is still time, and I suggest you take action as promptly as possible.
Since April, I have been pretty vocal with the CEOs we have a close relationship with, giving them basic advice that split into the trifecta:
(a) reduce SG&A by 20-30%
(b) develop a plan for profitability and
(c) understand if/when you will have to raise more capital, and be honest about your company's last valuation.
Some followed. Others didn't.
Once we announced the first close of our new fund, we were inundated with CEOs wanting to meet — thank you. That said, many outbound requests were from companies that needed bridge financing. Mostly did not make the necessary inner sacrifices—their idea of a solution = more capital.
New startups continue to be built. It is a great time to start a startup, but one must be realistic that the era of Blitzscaling is over.
This structural change deeply impacts how Venture Capital and startup building is done.
Investors that put capital to work in the asset class expect a 20-30% yearly return, and given the liquidity of the asset class, ownership in more sustainable business becomes paramount so that managers can return capital with exits between 100-300M.
We are not back at pre-pandemic levels. We might have returned to when firms like Softech (now Uncork) and First Round were just getting started. Effectively, we have returned to a world where the term Unicorn wasn't even a reality.
We shall see. I hope I am wrong.
I recommend these two posts if you want to explore this topic. further
PIX is now the most used payment system in Brazil. It only took two years.
According to FEBRABAN a total of US$2.42 Trillion has already been transacted in the network, passing 26 billion transactions.
For my American friends, PIX is the equivalent of Zelle, but instead of a private consortium of top banks, a mandatory money protocol layer that every bank must offer its customers. It allows the movement of money to be almost free, instant, and available mostly 24/7.
It is the SMTP for money in Brazil, without needing a digital currency — just a simple digital transformation on top of the Brazilian Real itself.
There is a logical argument it could kill the crypto libertarian dream, as it removes enough friction.
A16Z wrote about it. It is worth a read, in case you are unfamiliar with it.
When in Brazil, I use PIX a few times daily, mostly to pay for taxi rides or service providers. That said, I am excited to see B2B applications on it and a pool of developers dedicated to applications built on top of it.
On the surface, it is pretty awesome. Underneath is an argument of “meeting the new boss, the same as the old boss” — since, again, large banks are necessary for this system to work.
It will be interesting if PIX can be a simple feature added with Defi at some point. I doubt we’ll see that anytime soon, mostly due to the illegal activity that could surface on top of it.
Inhotim and Spinoza
I am flying back from Belo Horizonte today after being in Mexico, Miami, São Paulo, and Argentina in less than a week.
I came to Minas Gerais for the wedding of Felipe Lamounier a dear friend and founder that we have backed via Atman's most recent fund.
I haven't been to Minas Gerais for a few years and took yesterday off to visit Inhotim, the world's largest open-air museum.
Laura and I had a wonderful time there. World-class. Extremely well run and organized.
My favorite installation was Doug Aitken's Sonic Pavilion. They installed a live microphone that goes 200M deep into the land and transmits the sounds and vibrations of Gaia / The Earth to its visitors.
This work of art symbolizes real integration between humans and nature.
It reminded me of Spinoza's concept of Deus Sive Natura, the view that God and nature are interchangeable or that there is no distinction between the creator and the creation.
"The world would be happier if men had the same capacity to be silent that they have to speak." - Benedict de Spinoza: Ethics