Key Moments
E146: Did the Fed break the VC model? Plus IPOs, M&A, revaluing unicorns & more
All-In PodcastKey Moments
All-In Podcast discusses the current market, including IPOs/M&A, Fed policy, VC model, and unicorn valuations.
Key Insights
Recent IPOs (Arm, Instacart, Klaviyo) and M&A (Cisco/Splunk) signal a cautious market reopening, not a full revival.
The Fed's 'higher for longer' interest rate stance is forcing a revaluation of growth stocks and impacting the VC funding landscape.
The VC model faces challenges as LPs demand earlier stage investing and clear edges due to lower portfolio returns.
Companies like Instacart and Klaviyo show varied business models, with Instacart leaning towards advertising and Klaviyo as a strong B2B SaaS.
Unicorns, particularly those over-funded in the ZIRP era like Airtable, face significant valuation resets and complex recapitalizations.
The consumer economy may be entering a 'belt-tightening' phase due to high interest rates, potentially leading to reduced spending on discretionary items and a shift in market dynamics.
THE POST-ZIRP MARKET REALITY
The podcast opens with a discussion on personal wellness and then transitions into the political landscape, but quickly pivots to market dynamics. Recent IPOs from Arm, Instacart, and Klaviyo, alongside Cisco's acquisition of Splunk, are presented not as a robust market reopening, but as a sign of companies needing liquidity at potentially lower valuations. The consensus is that the era of easy money and high valuations fueled by zero interest rates is over, forcing a recalibration across the tech and venture capital sectors.
THE IMPACT OF FEDERAL RESERVE POLICY
A central theme is the Federal Reserve's commitment to keeping interest rates 'higher for longer.' This stance is fundamentally altering how assets are valued, particularly growth and unprofitable tech companies. The increased discount rate significantly reduces the present value of future earnings, leading to substantial market cap erosion. This environment necessitates companies to be more capital-efficient and less reliant on continuous funding rounds, impacting investment strategies and founder expectations.
RETHINKING THE VENTURE CAPITAL MODEL
The Federal Reserve's policy shift is directly challenging the traditional venture capital model. Limited Partners (LPs) are becoming more discerning, indicating a preference for earlier-stage investments (seed and Series A) and demanding clear competitive advantages ('edges') from fund managers. With alternative investments like bonds offering attractive yields, the alpha generation of VC is under scrutiny. This forces General Partners (GPs) to either adapt their strategies, focus on capital efficiency, or face reduced commitments.
IPO CONSTRUCTION AND COMPANY VALUATIONS
The recent IPOs are critiqued for their flawed construction, characterized by low float percentages and a lack of anchor investors, leading to immediate price drops. Companies like Instacart, which went public at a fraction of its private valuation, highlight the drastic reset. The discussion emphasizes that the 'great reopening' fell short, and companies are now prioritizing liquidity, even at discounted prices, over waiting for an unlikely return to zero-interest-rate policy (ZIRP) era valuations.
ANALYZING SPECIFIC BUSINESS MODELS
The business models of Instacart and Klaviyo are dissected. Instacart's increasing reliance on advertising revenue, while its core grocery transaction volume remains flat, raises questions about its long-term revenue quality and valuation. Klaviyo, a B2B SaaS company, is presented more favorably due to strong ARR growth, high net revenue retention, and capital efficiency, though its significant platform dependency on Shopify is noted as a potential risk. The conversation contrasts these with older models like Airtable, which faces severe revaluation challenges.
THE UNICORN PROBLEM AND FUTURE PROSPECTS
The concept of 'unicorns'—privately held companies valued at over $1 billion—is revisited, especially those over-funded during the ZIRP era. Companies like Airtable are cited as examples of significant valuation downturns, where current market value may not even cover the total capital raised ('pre-stack'). This leads to complex recapitalizations, often wiping out founders and early employees as late-stage investors try to salvage preferences. The broader implication is a potential shift towards more realistic valuations and a tougher environment for late-stage private funding.
THE CONSUMER ECONOMY'S UNCERTAIN FUTURE
While the B2B and software sectors have already experienced a downturn, the consumer economy has remained resilient, partly due to stimulus measures. However, rising interest rates on credit cards and mortgages, coupled with stagnant housing markets, suggest a coming period of consumer belt-tightening. This could manifest as deferred purchases of big-ticket items like cars and electronics, impacting consumer-facing businesses and potentially leading to a broader economic slowdown beyond the already-observed B2B recession.
AUTOMATION AND LABOR MARKET SHIFTS
The discussions on economic stress touch upon labor dynamics. The potential for significant wage increases demanded by unions, particularly in the auto industry, could accelerate automation and shift production to regions with lower labor costs. This, combined with extended work weeks in international auto manufacturing, poses existential risks to established U.S. auto companies. The conversation also highlights how technology is reducing the need for certain roles, impacting job markets and increasing efficiency for companies like Kayak.
A NEW PARADIGM FOR AUTOIMMUNE DISEASE TREATMENT
Shifting to scientific advancements, a breakthrough in treating autoimmune diseases is presented. Researchers have developed a method using glycosylation to present specific antigens in the liver, effectively re-regulating the immune system to stop attacking the body's own proteins. This novel therapeutic modality has shown promise in animal models for conditions like Type 1 diabetes, Multiple Sclerosis, and egg allergies, offering a new path beyond immune suppression and opening doors for targeted treatments.
Mentioned in This Episode
●Software & Apps
●Companies
●Organizations
●Books
●People Referenced
IPO Activity: Volume and Proceeds (2019-2023 H1)
Data extracted from this episode
| Year | Number of IPOs (approx - up to June 30) | IPO Proceeds (Billions USD - up to June 30) |
|---|---|---|
| 2019 | ~1200 or less | No specific data |
| 2021 (Peak) | 2400 | 450 |
| 2022 | <2400 | 180 |
| 2023 (YTD June 30) | <1200 | 60 |
Instacart Investor Returns vs. S&P 500 (Illustrative Alpha)
Data extracted from this episode
| Investment Round | Year | Instacart Return (per $1 invested) | S&P 500 Return (per $1 invested) | Alpha Generated |
|---|---|---|---|---|
| Series F | 2018 | $13 | $68 | Negative (Underperformed) |
| Series C | 2015 | $153 | $121 | $32 (Positive) |
Project Management Software Valuations (Price-to-Sales Multiples)
Data extracted from this episode
| Company | Price-to-Sales Multiple |
|---|---|
| Monday.com | 12x+ |
| Asana | 6.6x |
| SmartSheet | 8x |
| Airtable (current implied) | 78x |
Common Questions
Vivek Ramaswamy is rapidly gaining ground, potentially surpassing Ron DeSantis to become the clear number two in New Hampshire within four to eight weeks, behind Donald Trump. The hosts also discussed the perceived railroading of Robert F. Kennedy Jr.'s candidacy by Democrats, limiting his national platform.
Topics
Mentioned in this video
One of the hosts, known for his venture capital insights and role in managing the All-In Summit. Mentioned for showing up for every talk and crushing it at the summit.
An American environmental lawyer and anti-vaccine advocate, discussed as a presidential candidate whose candidacy the Democrats have chosen to 'railroad'.
Billionaire investor and hedge fund manager, mentioned for his compelling insights on the grand sweep of history and empire cycles at the All-In Summit.
An American businessman and political candidate, discussed as potentially becoming the clear number two in New Hampshire primary polling.
The current President of the United States, mentioned in the context of hypothetical debates and presidential choices.
Prominent venture capitalist, whose talk at the All-In Summit 2023 received a four-minute ovation and was considered a master class.
CEO of Shopify, admired for his intelligence and different mindset as a special entrepreneur.
CEO of Uber (formerly Expedia), whose anecdote about Expedia's stock price in 2008 highlighted the disconnect between market price and fundamental business value.
An American politician and Governor of Florida, mentioned as a presidential candidate who Vivek Ramaswamy is poised to overtake in polling.
A former U.S. President, mentioned in discussions about current polling for the Republican presidential primary.
Entrepreneur and CEO of Tesla and X, mentioned for his insightful talk at the All-In Summit.
Economist and former US Treasury Secretary, credited with an insightful line at the summit about self-esteem and achievement.
Actress and businesswoman, mentioned humorously by one of the hosts as professing him to be her 'favorite bestie'.
Former Speaker of the United States House of Representatives, humorously and speculatively linked to a profitable options trade on the Cisco-Splunk acquisition.
Chair of the Federal Reserve, discussed for resisting market pressure to cut interest rates, reinforcing the 'higher for longer' narrative.
Technology conglomerate that announced the acquisition of Splunk for $20 billion, representing 10% of Cisco's market value.
Grocery delivery service that recently went public, with many late-stage investors being underwater due to high previous valuations.
Mediterranean fast-casual restaurant chain that recently went public.
Technology company whose market value accrued significantly post-IPO, mentioned as an example of long-term value creation.
Technology company whose market value accrued significantly post-IPO, mentioned as an example of long-term value creation.
Ride-sharing and food delivery company, whose advertising revenue has grown significantly, also used for business model quality comparison to Instacart and DoorDash.
E-commerce platform, on which PayPal was heavily dependent in its early days, illustrating platform risk.
A research firm that analyzes venture capital and startup metrics, whose analyst published a tweet storm regarding Airtable's valuation.
Multinational automotive manufacturing corporation, mentioned as facing 'existence risk' due to proposed union deals and higher consumer lending rates.
Music streaming service that went public via direct listing, whose stock traded up post-listing due to fundamental business performance and the novelty of the listing vehicle at the time.
Cryptocurrency exchange that went public via direct listing, where venture investors distributed stock at the highest price on day one, leading to subsequent price drops.
A regulated prediction market, used to check the chances of a rate cut by May 2024.
Technology conglomerate that cut thousands of jobs during the software recession, and mentioned for its advertising scale.
Messaging app, cited as an example of a successful, capital-efficient business with minimal dilution for early investors.
Startup accelerator, mentioned as having massive deal flow, providing a benchmark for venture funds seeking differentiation.
Food delivery service, whose business model quality is seen as having big upside compared to other marketplace businesses.
Software company acquired by Cisco for $20 billion in an all-cash deal.
Japanese multinational conglomerate holding company, which needed liquidity from the Arm IPO.
Online travel shopping company whose stock price dropped dramatically in 2008 but saw massive long-term gains for those who bought at the bottom.
E-commerce and cloud computing giant, whose advertising business dynamic is compared to Instacart's increasing ad revenue.
Online marketplace for lodging, which may face long-term issues with take rates due to competitive and regulatory pressures.
Online payments system, whose historic reliance on eBay is used as an example of platform dependency risk.
Electric vehicle and clean energy company, mentioned for significantly lowering its vehicle prices and benefiting from union strikes in the traditional auto industry.
American multinational automobile manufacturer, whose P&L analysis showed a massive swing to losses if proposed union deals were implemented, also facing 'existence risk'.
Marketing automation software company that recently went public, considered a strong business with high growth and margins.
Technology conglomerate (formerly Facebook) that cut thousands of jobs during the software recession.
E-commerce platform, praised for building an ecosystem and owning a significant stake in companies like Klaviyo, enhancing partnerships and reducing existential risk.
A company that studies fast-food restaurant operations to increase service speed, thriving due to labor scarcity and automation.
American electric vehicle manufacturer, mentioned as a non-unionized, highly automated competitor to traditional automakers.
American news website, cited as the source for an investment visualization used in the discussion.
Academic institution where a team of researchers published groundbreaking work on an 'inverse vaccine' for autoimmune diseases.
A multinational professional services network, cited as the source for IPO activity data in one of the slides.
Venture capital firm, praised for their early and continued investment in WhatsApp.
A British multidisciplinary scientific journal, where a significant paper on inverse vaccines for autoimmune diseases was published.
Project management and issue tracking software, mentioned as a more specialized alternative to Airtable for project management.
Workspace software for notes, tasks, wikis, and databases, increasingly used for project management with templates.
Video conferencing software, now integrating AI summaries for calls, eliminating manual note-taking tasks.
Work management and collaboration software, cited for its price-to-sales multiple in comparison to Airtable.
Communication platform that went public via direct listing. Its direct listing strategy saw initial distribution for sellers at the highest price, leading to price volatility.
No-code development platform that functions as a hybrid spreadsheet-database, currently facing a significant valuation reset.
Classified advertisements website, presented as a platform whose various categories eventually spun off into dedicated marketplaces and apps (e.g., Airbnb, Uber).
Web-based project management tool, considered an alternative for project management by a team evaluating Notion.
Online travel agency, whose CEO noted that developer productivity gains from AI meant no new hires for 1-2 years.
Microsoft's spreadsheet software, used as a comparison for Airtable's extensible functionality and as a 'long tail of use cases' for potential SAS apps.
Document editor that blends text, tables, and apps, described as a combination of Wiki, Airtable, and database functionalities.
Project management software, compared in valuation multiples to Airtable.
Work operating system platform, cited for its price-to-sales multiple in comparison to Airtable.
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