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true meaning of risk

What risk is all about… in a sad life and death story

Tolerance to risk is a tough issue to tackle in my line of work… and it is curious to see that each person has different tolerance levels due to their past experiences and the way they see the world… this article is a story that highlights well that… there are three distinct sides of risk:

“

The odds you will get hit.

The average consequences of getting hit.

The tail-end consequences of getting hit.

The first two are easy to grasp. It’s the third that’s hardest to learn, and can often only be learned through experience.

“

In early stage investing, most invest without never having a full grasp of the tail-end consequences of getting hit, or some might know what that means but don’t care (aka a lot of money to spare or a less than advisable care with the money of others)… but, I believe that the best early stage investors factor in their approach a big chunk of probability of suffering of tail-end consequences of getting hit in their investments. They have a clear idea of the risks involved and that it is a part of the game, no matter how cautious you are in every step of the way. Informed data driven risk takers are better than gun swinging ones…

a great article from Morgan Housel

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tech deciphered – covid impact in world

My good friend Nuno Gonçalves Pedro, that also sits with me at Bright Pixel’s Investment Committee, is one of the tech VCs that I admire the most and a continuous source of inspiration and learnings.

He launched recently Tech Deciphered Show – a great podcast about tech and VC (unbiased opinion… really! I listen to a bunch of podcasts and this one competes neck to neck with the best of them!) – with Bertrand Schmitt, an entrepreneur with a great story and track record, that I had the pleasure to also e-meet recently.

I’ve listened to most of the episodes they’ve done so far.

I truly recommend to any entrepreneur or investor that should listen carefully to the two episodes that analyses the impact of covid19 in the world.

 

The full transcript is also here and is a good reading alternative:

Tech Deciphered – Impact of COVID-19 in the World- Venture Capital and Start-ups – Tech DECIPHERED Show 

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the changing value of money

Interesting read that took me back to my economics degree.

In a nutshell, if you do not have the time to read this…

Long on Gold

Be careful with holding USD – it’s reserve currency attribute might be now even more at risk.

”

Most people don’t pay enough attention to their currency risks.  Most worry about whether their assets are going up or down in value; they rarely worry about whether their currency is going up or down.  Think about it.  Right now how worried are you about your currency declining relative to how worried you are about how your stocks or your other assets are doing?  If you are like most people, you are not nearly as aware of your currency risk and you need to be.

So let’s explore that currency risk.

All Currencies Have Been Devalued or Died

”

Read the article

 

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the winner takes it all

Our third edition of Bright Pixel Newsletter – subscribe here!

The winner takes it all

Today is my 51th day confined at home. I would rather we weren’t in these circumstances, but I must admit I have been enjoying the slower pace. There’s a sense of guilt about it, but it was good to realize I wasn’t the only one.

Unfortunately, most businesses are unable to enjoy the silver linings of this situation. Covid-19 has been putting all companies to test, leaving them to the brutal and unsympathetic forces of natural selection. As it often happens in most crises, some players will thrive, while others will struggle to survive.

The winners and losers could be purely  temporary. Most meetings might revert back to face to face, and our problems with overbooked planes and crowded restaurants could soon be back (miss this already?).

Telling long-term winners and losers is much harder than just predicting short-term adjustments. The world has been predicting the demise of cinemas and brick-and-mortar retail for too long now.

 

At this point, we already have some clues about who these winners are

Enterprise software has seen increasing  demand for their services. Zoom is the most obvious one here. As of 28/04, its stock has appreciated 140% since the beginning of the year. Slack is also attracting the attention of remote workers. According to a series of Tweets from the CEO, its user base has grown from 10.4M in March 16 to 12.5M, just 10 days later! Facebook is also joining the party by releasing messenger rooms and even Skype has awakened from the death to make some new announcements lately.

Entertainment is going through some big momentum too. On 21/04, Netflix has crushed investors’ expectations by adding 16M new paying subscribers, more than double of what was expected by investors. Disney+ has seen tremendous growth adding 50M subscribers in its first 5 months, and HBO Max is set to launch in May. Expectations are high.

When it comes to short-video, the youngest social-media giant, Tik Tok was downloaded 2 million times between March 16 and 22, an increase from the previous week’s 1.7 million. The emerging short-video platform Quibi, a high-profile startup in the valley that has raised $1.8B, was made available to the public in April, and Youtube announced it is working on a competitor.

Among the best performing sectors this year is healthcare. Finding a cure for this virus would be the best news for any stockholder (and everyone in general) in a pharmaceutical company. At the same time, technology is also gaining space in a science-led industry. From real-time well-being trackers and medical professional’s support systems, to less obvious spaces like sextech

 

Many are struggling but not backing down just yet

Mobility is definitely one of the hardest-hit sectors. Even with questionable unit economics, the sector has been one of the hottest investment topics in recent years, with Bird holding the record of the fastest startup to ever reach the unicorn status, in only 2 years. Right now,  these companies are reinventing their purpose, such as the micro-mobility company, Felyx, that has made their electric scooters available at a reduced rate to entrepreneurs who want to serve customers at home.

Tourism and hospitality are also going through a rough period with most restaurants and hotels closed.  Travel companies are providing virtual booking services for sightseeing and others, such as online-only classes and webinars. Restaurants are selling vouchers for post-Covid-19 meals to keep their businesses alive. Airbnb has also debuted online experiences and their accommodation offers are becoming less short-term and more long-term rentals. Even movie theatres found a way. In a very “back to the future” style, some are promoting drive-in experiences. Do you have Grease vibes?

 

This time is different

At the risk of falling for the same trap of those who predict the end of industries for too long, we will place our bets on who the long-term winners will be.

The first one is Cybersecurity. The growing importance of this vertical is not new. As people and devices become more connected and dependent on online services, cyber risks increase significantly. Still, IT architectures are shifting towards becoming more decentralized and reliant on 3rd party services, exposing companies to new attacks and increasing their vulnerabilities. Just in March, online threats have risen by as much as six-times their usual levels. By accelerating remote work and promoting digital environments, this crisis emphasizes the relevancy of cyber security for years to come.

As we scale-down human interactions, our reliance on digital engagements is increasing. Existing user interaction platforms must evolve towards automation and new interfaces. We’ve never seen brands being so dependent on customer experience as they are in the digital age, and now, more than ever, customers are unsatisfied. They want refunds of their trips, they expect their favorite restaurants to have take-away, and they order groceries to be delivered within a day. How to deal with such demanding clients? You’re right: with a very efficient contact center and an optimized virtual assistant.

For the near-future, we expect a bumpy road ahead with lower growth expectations, scracer capital availability and rising unemployment. Still, on the health front, things seem to be improving, and hopefully, the peak of the worst health crisis of our generation is past us, and we can go back to business (almost as usual) soon enough

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boozoo bajou revival

Satta, Dust My Broom… great names to special and delightful albums

Featuring producers Florian Seyberth and Peter Heider, Boozoo Bajou are a downbeat duo from Nuremberg, Germany known for blending inspirations like reggae, dub, Cajun music, folk, jazz, and pop.

They first appeared in 1998 via the Stereo Deluxe label and the single “Night Over Manaus.” The exotic lounge number drew the attention of Richard Dorfmeister, who hired the duo to remix “Chocolate Elvis,” a 1999 single from Dorfmeister and Rupert Huber’s project, Tosca.

That same year, Bajou’s jazzy single “Under My Sensi” became the chill-out tune of choice. It landed on their 2001 debut Satta! a dub-meets-electronica effort suitably named after the Jamaican Patois term for “relax.”

No surprise, then, that their 2003 mix CD Juke Joint skillfully blended Groove Armada, Burnt Friedman, Gregory Isaacs, Paul Weller, and John Lee Hooker, or that the same year’s Remixes collection found them working with names like Common, Mousse T., and Thievery Corporation.

Their sophomore release, Dust My Broom, landed in 2005 with country-rock hero Tony Joe White appearing on the single “Keep Going,” while Jamaican deejay U-Brown traded lines with Fat Freddy’s Drop singer Joe Dukie on the track “Take It Slow.”

Actually… Take it Slow is one of the great songs of Dust My Broom!

Night from Manaus from Satta takes back to great memories of Lisbon and my first days and nights spent with Ana!

have a look at the lyrics…

Continue reading “boozoo bajou revival”

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barbaric ventures

I’ve taken part and witnessed  several big discussions about changes to how VCs should manage these times of higher uncertainty in the market.

If we should delay or even stop investing in new startups, change our approach to investments (e.g. look at new areas of interest and forget several sectors altogether), put in more protective clauses to have more guarantees if we invest from now onwards, due to these weird and very uncertain times…

The article below is very good and provides insights and details about the typical clauses that can influence investment discussions between VCs and startups now and in the near future.

Personally, I do not like most of the barbaric approaches (it’s a bad way to engage in a long term relationship that should be managed with equilibrium and fairness), but a few might make sense (if we do not over engineer everything in the process). Overall, I believe that VCs (specially the early stage ones) will have to still take the plunge and assume the risk (it’s their job to do so), but there can be fairer ways of having in place some more checks and balances that simply were most of the times put aside in the last upward movement of the VC market, due to mostly competitive deal discussions that typically were skewing things to a more founder friendly approach…

Medium post by Fred Destin

VC terms — Return of the Barbarians.

I hate complex terms in venture investments. Value is created by backing exceptional companies that return your fund, not by word-smithing aggressive legal agreements. In the last decade, we’ve seen cleaner and simpler terms become the norm, which has been great for everyone and created more alignment.

However…

Founders beware. OG venture capitalists like myself remember vividly the days of full ratchet wiping out entire cap tables and leaving founders with nothing.

As we’re entering a new ice age, I’m hearing that paring knives are being sharpened and old weapons might get taken out of storage. I’m hoping I’m wrong and VCs will keep their term-sheets clean, but in case they don’t, here’s a detailed look at the arsenal that these barbarian investors can draw from.

So saddle up, grab you shield and get familiar with the subtleties of Participating Preferred’s, Full Ratchet Anti-Dilution, Pay-to-Plays and more by reading further. As Andy Grove would say, only the paranoid survive.

Here go the details – read more here

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building times

Marc Andreessen just wrote recently a great post about what society (US centric) should be doing differently… He is one of the best Venture Capitalists in activity and with a great view of what we need to tackle in our collective future.

In a word: build

In a couple of more words: if we build what is really needed – more and better housing, transportation, hospitals, universities / schools for all, we as a society will evolve.

The article itself – click here

Every Western institution was unprepared for the coronavirus pandemic, despite many prior warnings. This monumental failure of institutional effectiveness will reverberate for the rest of the decade, but it’s not too early to ask why, and what we need to do about it.

Many of us would like to pin the cause on one political party or another, on one government or another. But the harsh reality is that it all failed — no Western country, or state, or city was prepared — and despite hard work and often extraordinary sacrifice by many people within these institutions. So the problem runs deeper than your favorite political opponent or your home nation.

Part of the problem is clearly foresight, a failure of imagination. But the other part of the problem is what we didn’t *do* in advance, and what we’re failing to do now. And that is a failure of action, and specifically our widespread inability to *build*…

read the rest…

 

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the unleashing power of marketplaces

In this new normal, I think that marketplaces will be even more important and crucial to our collective way of living…

Thank you, Bill Gurley for a great post that now with more than one year of existence is even more relevant to read carefully at the always interesting blog called Above the Crowd!

What new marketplaces are still missing in to cater our collective needs?

Bread baking marketplaces? 😉

Digital Learning marketplaces for kids?

A small teaser…

Money Out of Nowhere: How Internet Marketplaces Unlock Economic Wealth

A post from February 27, 2019: 

(*) Benchmark is/was an investor in companies labeled with the asterisk.

In 1776, Adam Smith released his magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations, in which he outlined his fundamental economic theories. Front and center in the book — in fact in Book 1, Chapter 1 — is his realization of the productivity improvements made possible through the “Division of Labour”:

It is the great multiplication of the production of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to exchange a great quantity of his own goods for a great quantity, or, what comes to the same thing, for the price of a great quantity of theirs. He supplies them abundantly with what they have occasion for, and they accommodate him as amply with what he has occasion for, and a general plenty diffuses itself through all the different ranks of society.

Smith identified that when men and women specialize their skills, and also importantly “trade” with one another, the end result is a rise in productivity and standard of living for everyone. In 1817, David Ricardo published On the Principles of Political Economy and Taxation where he expanded upon Smith’s work in developing the theory of Comparative Advantage. What Ricardo proved mathematically, is that if one country has simply a comparative advantage (not even an absolute one), it still is in everyone’s best interest to embrace specialization and free trade. In the end, everyone ends up in a better place.

click to read the rest