#how to invest in startups for equity

[sharensharma]

How to Invest in Startups for Equity and Make High Returns

The startup world is a breeding ground for innovation and disruption. It's where revolutionary ideas take root and have the potential to blossom into industry giants. As an investor, this presents a unique opportunity to get in on the ground floor of the next big thing. By investing in startups for equity, you can share in their success and potentially reap high returns. However, startup investing is not without its risks. These companies are young and unproven, and there's a high chance of failure.

This blog will guide you through the process of how to invest in startups for equity, helping you understand the risks and rewards involved, identify promising startups, and navigate the investment landscape.

Understanding Startup Investment

Before diving in, it's crucial to understand the basics of startup investment. Here's a breakdown of key concepts:

Equity: When you invest in a startup for equity, you essentially become a part-owner of the company. In return for your investment, you receive shares in the company. The value of these shares fluctuates with the company's performance. If the startup succeeds, your shares could become significantly more valuable, potentially leading to high returns. However, if the startup fails, your investment could be lost entirely.

Investment Stages: Startups go through various funding stages, each with its own risk profile. Early-stage investments (seed and Series A) carry the highest risk but also the potential for the highest returns. Later-stage investments (Series B and beyond) are generally considered less risky but also offer lower potential returns.

Identifying Promising Startups

Finding the right startups to invest in is crucial for success. Here are some tips to help you identify promising ventures:

Market: Focus on industries with high growth potential. Look for startups that address a clear need in the market and offer a unique solution.

Team: The team behind the startup is one of the most important factors to consider. Invest in companies with passionate, experienced founders who have a proven track record of success.

Product: Analyze the startup's product or service. Is it innovative and well-designed? Does it have a clear value proposition?

Traction: Has the startup achieved any traction? Look for evidence of customer growth, revenue generation, or partnerships with established players.

Investing in Startups: Different Approaches

There are several ways to how to invest in startups for equity. Here's a breakdown of the most common methods:

Angel Investing: Angel investors are accredited individuals who invest their own money directly into startups. This is a popular option for early-stage investing.

Venture Capital Firms: Venture capital firms pool funds from various investors and invest in startups with high growth potential. [venture capital firms in india] specialize in funding Indian startups.

Crowdfunding Platforms: Some crowdfunding platforms allow you to invest in startups alongside other investors. This can be a good option for smaller investments.

How to Get Started

Do your research: Before investing in any startup, thoroughly research the company, the market, and the team. Due diligence is essential to minimize risk.

Connect with the startup ecosystem: Attend industry events, join startup communities, and network with other investors. This will help you identify promising startups and gain valuable insights.

Seek professional advice: Consider consulting with a financial advisor experienced in startup investments. They can guide you through the investment process and help you make informed decisions.

Important Considerations

Liquidity: Unlike stocks or bonds, startup investments are highly illiquid. There's no guarantee you'll be able to sell your shares easily, and it may take years to see a return on your investment.

Risk Tolerance: Startup investing is inherently risky. Be prepared to lose your entire investment. Only invest what you can afford to lose.

Investing in startups for equity can be a rewarding experience, offering the potential for high returns. However, it's crucial to understand the risks involved and approach this asset class with caution. By conducting thorough research, diversifying your portfolio, and seeking professional advice, you can increase your chances of success in the exciting world of startup investing.

Finding the Right Platform

Navigating the startup investment landscape can be challenging. Krystal Ventures Studio is a platform designed to connect the needs of startups with the interests of investors. They offer a curated selection of promising startups across various industries and stages of growth.  [Krystal Ventures] can help you identify suitable investment opportunities and streamline the investment process.

[krystalventures]

How Investment Partners Can Accelerate Your Financial Growth

Introduction:

In the world of finance and wealth building, the importance of smart investments cannot be overstated. While many individuals may have a general understanding of investing, achieving significant financial growth often requires expertise, experience, and the support of reliable partners. This is where investment partners come into play. Collaborating with investment partners can greatly enhance your investment strategy, diversify your portfolio, and ultimately accelerate your financial growth. In this blog post, we will delve into the numerous advantages of having investment partners and how they can propel you towards achieving your financial goals.

Access to Expertise and Experience:

One of the key benefits of having investment partners is gaining access to their valuable expertise and experience. These partners are professionals who possess in-depth knowledge of the financial markets, investment opportunities, and risk management strategies. They have honed their skills over years of experience and are adept at analyzing market trends, identifying potential pitfalls, and making informed investment decisions. By partnering with these individuals or firms, you can tap into their wealth of knowledge and benefit from their insights, which can significantly increase the likelihood of making profitable investments.

Diversification of Portfolio:

Investment partners can help you diversify your investment portfolio, which is crucial for managing risk and maximizing returns. By pooling resources together with your investment partners, you can collectively invest in a wider range of asset classes, such as stocks, bonds, real estate, and alternative investments. This diversification reduces the vulnerability of your portfolio to the fluctuations of a single asset class or market segment, ensuring a more balanced and resilient investment strategy. The expertise of your investment partners can guide you in selecting the most promising investment opportunities within each asset class, optimizing your portfolio's potential for growth.

Shared Network and Resources:

Collaborating with investment partners opens up a vast network of connections and resources that can significantly impact your financial growth. Investment partners often have established relationships with industry experts, entrepreneurs, and other investors, creating opportunities for strategic partnerships, joint ventures, and access to exclusive investment deals. This network can offer valuable insights, introductions, and synergies that can elevate your investment game and open doors to new investment avenues.

Mitigating Risk:

Investing inherently carries some level of risk, but investment partners can help mitigate these risks through their knowledge and experience. They can conduct thorough due diligence, assess potential risks associated with an investment opportunity, and devise risk management strategies. By partnering with experts who have a deep understanding of risk analysis and mitigation, you can make more informed decisions, minimize losses, and safeguard your investments.

Conclusion:

In the pursuit of financial growth, having investment partners by your side can be a game-changer. Their expertise, experience, and network can provide the necessary boost to your investment strategy, helping you achieve your financial goals faster and more effectively. Investment partners like Krystal Ventures, for example, offer a comprehensive range of services tailored to meet the unique needs of their clients. Whether you're a seasoned investor or just starting out, partnering with professionals can amplify your investment potential and set you on the path to long-term financial success. So, embrace the power of investment partners, leverage their knowledge, and watch your financial growth soar to new heights.

[sophie-frm-mars]

Dog Girl Elizabeth Holmes convincing you to invest in Therianos, her startup that can tell if you're a good girl from a single drop of your

Anyway you ever think about the contexts in which the scientific method is treated as a virtue? Like logically, the scientific method is, at least in abstract, water tight. That's why when people are showing misapplication of science by systems and institutions it's pretty much always that their argument shows how an aesthetic or gesture towards scientific soundness has been used in an unscientific way or to create an unscientific result. This I think drives the common technocratic impulse that "if only experts ran everything, everything would be fine" - if a state upheld science in earnest as its utmost virtue, it would be infallibly logical and therefore generally infallible. But do we want the state to be infallible? I don't want to just argue that the "science" of economics is bunk because rigorous economic science, materialist analysis frequently refutes the basic conclusions of what most economists treat as a given, I want economics to not be taken as an implicit authority that is allowed to rule and govern the lives of human beings and the general health of the planet because what is moral, sustainable, and creates the most equity and happiness is not necessary based in what can be proven on a whiteboard. Idk

[tomblomfield]

Taking Risk

I just spent a week talking with some exceptional students from three of the UK's top universities; Cambridge, Oxford and Imperial College. Along with UCL, these British universities represent 4 of the top 10 universities in the world. The US - a country with 5x more people and 8x higher GDP - has the same number of universities in the global top 10.

On these visits, I was struck by the world-class quality of technical talent, especially in AI and biosciences. But I was also struck by something else. After their studies, most of these smart young people wanted to go and work at companies like McKinsey, Goldman Sachs or Google.

I now live in San Francisco and invest in early-stage startups at Y Combinator, and it's striking how undergraduates at top US universities start companies at more than 5x the rate of their British-educated peers. Oxford is ranked 50th in the world, while Cambridge is 61st. Imperial just makes the list at #100. I have been thinking a lot about why this is. The UK certainly doesn't lack the talent or education, and I don't think it's any longer about access to capital.

People like to talk about the role of government incentives, but San Francisco politicians certainly haven't done much to help the startup ecosystem over the last few years, while the UK government has passed a raft of supportive measures.

Instead, I think it's something more deep-rooted - in the UK, the ideas of taking risk and of brazen, commercial ambition are seen as negatives. The American dream is the belief that anyone can be successful if they are smart enough and work hard enough. Whether or not it is the reality for most Americans, Silicon Valley thrives on this optimism.

The US has a positive-sum mindset that business growth will create more wealth and prosperity and that most people overall will benefit as a result. The approach to business in the UK and Europe feels zero-sum. Our instinct is to regulate and tax the technologies that are being pioneered in California, in the misguided belief that it will give us some kind of competitive advantage.

Young people who consider starting businesses are discouraged and the vast majority of our smart, technical graduates take "safe" jobs at prestigious employers. I am trying to figure out why that is.

___

Growing up, every successful adult in my life seemed to be a banker, a lawyer or perhaps a civil engineer, like my father. I didn't know a single person who programmed computers as a job. I taught myself to code entirely from books and the internet in the late 1990s. The pinnacle of my parents' ambition for me was to go to Oxford and study law.

And so I did. While at university, the high-status thing was to work for a prestigious law firm, an investment bank or a management consultancy, and then perhaps move to Private Equity after 3 or 4 years. But while other students were getting summer internships, I launched a startup with two friends. It was an online student marketplace - a bit like eBay - for students. We tried to raise money in the UK in 2006, but found it impossible. One of my cofounders, Kulveer, had a full-time job at Deutsche Bank in London which he left to focus on the startup. His friends were incredulous - they were worried he'd become homeless. My two cofounders eventually got sick of trying to raise money in the UK and moved out to San Francisco. I was too risk-averse to join them - I quit the startup to finish my law degree and then became a management consultant - it seemed like the thing that smart, ambitious students should do. The idea that I could launch a startup instead of getting a "real" job seemed totally implausible.

But in 2011, I turned down a job at McKinsey to start a company, a payments business called GoCardless, with two more friends from university. We managed to get an offer of investment (in the US) just days before my start date at McKinsey, which finally gave me the confidence to choose the startup over a prestigious job offer. My parents were very worried and a friend of my father, who was an investment banker at the time, took me to one side to warn me that this would be the worst decision I ever made. Thirteen years later, GoCardless is worth $2.3bn.

I had a similar experience in 2016, when I was starting Monzo, I had to go through regulatory interviews before I was allowed to work as the CEO of a bank. We hired lawyers and consultants to run mock interviews - and they told me plainly that I was wasting my time. It was inconceivable that the Bank of England would authorise me, a 31 year old who'd never even worked in a bank, to act as the CEO of the UK's newest bank. (It turned out they did.) So much of the UK felt like it was pushing against me as an aspiring entrepreneur. It was like an immune system fighting against a foreign body. The reception I got in the US was dramatically different - people were overwhelmingly encouraging, supportive and helpful. For the benefit of readers who aren't from the UK, I hope it's fair to say that Monzo is now quite successful as well.

___

I don't think I was any smarter or harder working than many of the recent law graduates around me at Oxford. But I probably had an unusual attitude to risk. When we started GoCardless, we were 25 years old, had good degrees, no kids and supportive families. When fundraising was going poorly, we discussed using my parents' garage as an office. McKinsey had told me to contact them if I ever wanted a job in future. I wonder if the offer still stands.

Of course, I benefitted from immense privilege. I had a supportive family whose garage I could have used as an office. I had a good, state-funded education. I lived in a safe, democratic country with free healthcare. And I had a job offer if things didn't work out. And so the downside of the risks we were taking just didn't seem that great.

But there's a pessimism in the UK that often makes people believe they're destined to fail before they start. That it's wrong to even think about being different. Our smartest, most technical young people aspire to work for big companies with prestigious brands, rather than take a risk and start something of their own.

And I still believe the downside risk is small, especially for privileged, smart young people with a great education, a supportive family, and before they accumulate responsibilities like childcare or a mortgage. If you spend a year or two running a startup and it fails, it's not a big deal - the job at Google or McKinsey is still there at the end of it anyway. The potential upside is that you create a product that millions of people use and earn enough money that you never have to work again if you don't want to.

This view is obviously elitist - I'm aware it's not attainable for everyone. But, as a country, we should absolutely want our smartest and hardest working people building very successful companies - these companies are the engines of economic growth. They will employ thousands of people and generate billions in tax revenues. The prosperity that they create will make the entire country wealthier. We need to make our pie bigger, not fight over the economic leftovers of the US. Imagine how different the UK would feel if Google, Microsoft and Facebook were all founded here.

___

When I was talking with many of these smart students this week, many asked me how these American founders get away with all their wild claims. They seem to have limitless ambition and make outlandish claims about their goals - how can they be so sure it will pan out like that? There's always so much uncertainty, especially in scientific research. Aren't they all just bullshitters? Founders in the UK often tell me "I just want to be more realistic," and they pitch their business describing the median expected outcome, which for most startups is failure.

The difference is simple - startup founders in the US imagine the range of possible scenarios and pitch the top one percent outcome. When we were starting Monzo, I said we wanted to build a bank for a billion people around the world. That's a bold ambition, and one it's perhaps unlikely Monzo will meet. Even if we miss that goal, we've still succeeded in building a profitable bank from scratch that has almost 10 million customers.

And it turns out that this approach matches exactly what venture capitalists are looking for. It is an industry based on outlier returns, especially at the earliest stages. Perhaps 70% of investments will fail completely, and another 29% might make a modest return - 1x to 3x the capital invested. But 1% of investments will be worth 1000x what was initially paid. Those 1% of successes easily pay for all the other failures.

On the contrary, many UK investors take an extremely risk-averse view to new business - I lost count of the times that a British investor would ask for me a 3 year cash-flow forecast, and expect the company to break even within that time. UK investors spend too much time trying to mitigate downside risk with all sorts of protective provisions. US venture capital investors are more likely to ask "if this is wildly successful, how big could it be?". The downside of early-stage investing is that you lose 1x your money - it's genuinely not worth worrying much about. The upside is that you make 1000x. This is where you should focus your attention.

___

A thriving tech ecosystem is a virtuous cycle - there's a flywheel effect that takes several revolutions to get up-to-speed. Early pioneers start companies, raise a little money and employ some people. The most successful of these might get acquired or even IPO. The founders get rich and become venture capital investors. The early employees start their own companies or become angel investors. Later employees learn how to scale up these businesses and use their expertise to become the executives of the next wave of successful growth-stage startups.

Skype was a great early example of this - Niklas Zenstrom, the co-founder, launched the VC Atomico. Early employees of Skype started Transferwise or became seed investors at funds like Passion Capital, which invested in both GoCardless and Monzo. Alumni of those two companies have created more than 30 startups between them. Matt Robinson, my cofounder at GoCardless, was one of the UK's most prolific angel investors, before recently becoming a Partner at Accel, one of the top VCs in the world. Relative to 15 or 20 years ago, the UK tech ecosystem is flourishing - our flywheel is starting to accelerate. Silicon Valley has just had a 50 year head start.

There is no longer a shortage of capital for great founders in the UK (although most of the capital still comes from overseas investors). I just believe that people with the highest potential aren't choosing to launch companies, and I want that to change.

___

I don’t think the world is prepared for the tidal wave of technological change that’s about to hit over the next handful of years. Primarily because of the advances in AI, companies are being started this year that are going to transform entire industries over the next decade.

It doesn't seem hyperbolic to say that we should expect to see very significant breakthroughs in quantum computers, nuclear fusion, self-driving vehicles, space exploration and drug discovery in the next 10 or 20 years. I think we are about to enter the biggest period of transformation humanity has ever seen.

Instead of taking safe, well-paying jobs at Goldman Sachs or McKinsey, our young people should take the lead as the world is being rebuilt around us.

[cyberpunkonline]

The Stock Market's Role in Cyberpunk Futures: Speculation Beyond Currency

In the shadow-streaked corridors of cyberpunk fiction, where neon signs flicker against rain-slicked streets and the divide between the powerful and the powerless widens, the stock market emerges not just as a battleground of wealth but as a pivotal narrative device. This genre, known for its gritty exploration of futuristic dystopias dominated by mega-corporations and technological advancements, often delves into unconventional economies. An intriguing aspect of this exploration is the use of stock shares as compensation, a concept highlighted in works like Walter Jon Williams' "Hardwired," where mercenaries and operatives navigate a world where loyalty can be bought with equity.

The Fictional Forefront

In "Hardwired," the characters inhabit a post-catastrophe Earth, engaging in high-stakes missions against the backdrop of corporate warfare. Here, currency transcends traditional boundaries, with stock options serving as payment for services rendered. This mechanism isn't just a quirky detail; it's a reflection of the characters' deep entanglement with the corporations that shape their world. The notion of being paid in stock positions them as stakeholders, literally invested in the success or failure of their corporate benefactors. This intertwining of personal fate with corporate performance underscores the cyberpunk theme of blurred lines between individual and institution.

Such narrative choices speak volumes about the genre's fascination with the fluidity of value and the potential for individuals to navigate, manipulate, or fall victim to these systems. By grounding remuneration in stock, cyberpunk fiction underscores a reality where everything is commodified, and human worth is measured in market potential.

Echoes in Reality

The concept of being compensated with stock, once a speculative fiction trope, now resonates with real-world trends. The proliferation of retail investment platforms and mechanisms has democratized access to equity markets, blurring the lines between professional traders and the general public. This accessibility invites a scenario where companies, especially startups and tech giants, offer stock options as part of compensation packages, embedding employees within the financial fabric of the enterprise.

This trend raises questions about the implications of a society increasingly invested—literally—in the success of corporations. Could this lead to a future where employment and investment are so intertwined that individuals become microcosms of the market? And if so, is this fusion of roles beneficial or detrimental?

Prospects and Pitfalls

The potential benefits of a stock-based compensation system include increased employee loyalty and a vested interest in the company's success. This could foster a culture of innovation and collective effort, driving companies to perform better. Additionally, it democratizes wealth creation, offering individuals a stake in economic growth previously reserved for the elite.

However, the risks are significant. Such a system could exacerbate wealth inequality, with market fluctuations disproportionately affecting those whose livelihoods depend on the performance of their corporate shares. It also raises ethical concerns about the concentration of power and influence within corporations, potentially leading to abuses and exploitation.

Navigating the Dystopia

The cyberpunk narrative of a corporate-led dystopia, then, is not just a cautionary tale but a roadmap of potential realities. It challenges us to consider how close we are to a world where our fortunes are as volatile as the stock market, and where our identities and destinies are intrinsically linked to the corporate entities we serve or oppose.

In this landscape, winning might not mean amassing wealth or stockpiling shares but finding a way to navigate the system without losing one's humanity. It's a delicate balance, one that requires vigilance, adaptability, and, perhaps most importantly, a clear-eyed view of the value we place on ourselves and our labor.

As we edge closer to this speculative future, the questions posed by cyberpunk fiction become increasingly relevant. Is the integration of personal and corporate fortunes a path to empowerment or enslavement? Can individuals thrive in a system where success is measured by market performance? And perhaps most crucially, how do we ensure that in this corporate-led dystopia, people can still win—or at least, find a way to redefine what winning means?

In exploring these questions, cyberpunk fiction doesn't just entertain; it educates and warns, offering a glimpse into a future that might already be upon us. As retail investment mechanisms continue to evolve and the line between employee and investor further blurs, the genre's speculative visions become vital reflections on our collective trajectory. The stock market, in this context, is more than a backdrop—it's a battleground for the soul of society, where the stakes are as personal as they are financial. - REV1

[poipoipoi-2016]

@youzicha

#trying to understand wtf is happening to svb because uh. i want my salary

The business model of banks

The way banks work is that they take in deposits and make loans.

So I put money in a bank, but ALSO I took money out of a bank to get a car loan which let me buy the car that I used to commute to work to pay off the car loan. And also drive to Death Valley. GOOD little car. Could go from Vegas to SF on a tank of gas.

What this means from a bank's perspective is that your bank balance is a problem and the loans they make are assets. Because you took in $20K of deposits and then gave me an $18K car loan that I paid back at $400/month for 5 years. And at the end of 5 years, you will have taken $18000 and turned it into $24000.

And if one person asks for $2K back, you have $2K. And if someone(s) a year from now asks for $10K back, you have:

$2K in cash

But also the $4800 in cash I paid you last year. Minus the amount of money you spent last year running the actual bank.

The money used to found the bank (The Equity)

The ability to shop around and say "Poi is going to pay us $400/month every month for the next 4 years and if he stops doing that, you get a gently used Chrysler 200 to sell. How much are you willing to give us for that cashflow?" <- THIS IS THE PROBLEM

So as long as you are:

Liquid, meaning that you can give people their money back when they ask for it

Solvent, meaning that if EVERYONE asked for their money back, you'd sell off all the loans you'd made, give them their money back, and also have a >$0 pile of cash to go Scrooge McDuck in after you shut down the bank.

you get to keep existing.

If you're liquid, but non-solvent and somehow manage to hide it, this is called Bernie Madoff. But also "The Bank of Japan in 2023".

If you're solvent, but non-liquid, someone rolls up and buys your assets for "The value of your liabilities and also this Snickers Bar" and that's a pretty standard action.

And if you're non-liquid and insolvent, uh look crypto is weird but go look at FTX. There's a list of creditors and several months or even years from now, you'll get a fraction of your deposits back based on the recovery value of the underlying assets.

What specifically happened to SVIB

So you are a bank in 2019. And specifically, you are the Bank of Startups. And startups are very bad loan risks and also have giant piles of VC checks so they don't actually need loans.

$200 Billion of VC checks in fact. Which they gave to you. And because you're a good bank, you put $20 Billion in the cushion fund and now you have to figure out how to use $180 Billion to generate enough money to keep running the bank.

Unfortunately, it's 2019 and all the liquid risk-free assets pay 0.08% and that's not enough money to pay your bank tellers. So you make a (in retrospect dumb, in practice I'm not sure it's dumb enough I scream just at SVIB) decision to put it into:

A bunch of Treasuries that pay 1.5% or so

A bunch of mortgage-backed securities which are default risk-free b/c of post-2008 reforms. If someone forecloses, the government pays you back at par.

Corporate bonds which are risky but hey that's why you charged 5% right?

So these are illiquid, but they're not like... that illiquid and if interest rates ticked up a percentage point, a 5-year bond with 3 years to go is still like 98% of face value, it's totally fine.

And now you have $4-6 Billion/year to pay your bank tellers with and also improve that cushion.

And if you don't do these things, Silicon Valley Investment Bank does not exist. CHASE BANK does not exist. This was a prerequisite to having banking services in this country post-2008 in literally 0 interest rate environments.

And then the Fed goes on a historically unprecedented interest increase. So your 1.x% bonds are now competing in the market with 5% bonds and your 2.6% mortgages are competing with 7% mortgages and hoooo boy.

A 2.6% $400K mortgage pays you $20K/year and is currently worth $260K at 7%. $180 Billion of assets marked down to ???? Billion. 7 years to break-even and your bank tellers need to get paid.

Now for most banks, this isn't a problem. They're an actually profitable Bernie Madoff by design as a feature. They can't give everyone their money back, but they don't have to. And the bonds are paying up and the mortgages are paying up and 5% nominal GDP growth isn't a lot, but it's something and of course, you're making NEW loans at 7% so if you can just keep paying 0% interest on bank deposits and keep pulling in 7% interest loans, you'll make it out of the next few years, and you're suddenly solvent again.

Except for you.

Because you are the Bank of Startups.

And when interest rates went up, VC funding went down. So you have these perfectly good businesses (for now at least) that are constantly and continuously drawing down on their bank accounts.

And remember, this isn't 1982. You're only making 2%. Your cap ratio is 5%. All those mortgages paying in 5% of book value every year and if you get out over your skis, you cease to exist. You're going to hear the words "Duration Risk" a lot and this is that.

So you try to do an equity raise. You'll sell the rights to some of that 5% cashflow (and remember, it's increasingly 7% interest/10% cap which is slightly more exciting) in exchange for the money you need NOW TODAY to pay out your withdrawals.

At which point Andreesen goes "Uh what my friends?", tells all of his buddies to pull their cash, and $42 Billion gets withdrawn in less than 24 hours. Leaving $160 Billion behind.

And now we remember that bank accounts over $250,000 (IE: One paycheck at a $6.5 Million payroll company) aren't technically FDIC insured.

Lessons Learned

And the thing is that I really can't just blame SVIB here. They got stuck in a pretty terrible trap caused by the US Government. And the US Government likes it when you buy Treasuries and likes it when you buy and SVIB was, more or less, doing the things you as a society wanted them to do.

And the Federal Reserve explicitly destroyed them for it.

Don't get me wrong, they were weird. But I'm not sure they were weird enough especially given the constraints of 2019-2021 that I can just go "Eh, screw them". Spread that blame AROUND.

And any bank that can survive a FORTY PERCENT drawdown in the value of the underlying assets.... isn't a bank. At least not as we mean it here in 2023. The Fed's stress tests involve a 'severely adverse scenario' where 10-year US Treasury yields are at 0.7% (and only get to 1.5%). They're currently at 3.6%.

The second set of lessons that we learned today goes like this:

There are lots and lots and LOTS of reasons that small or medium businesses might temporarily or permanently want more than $250K in raw USD cash in a bank account at some point. This is now a banking risk. (There's some tricks you can play if you're really large, but those also have limits)

However, if you bank at Chase Bank (or any other bank on the too-big-to-fail list), you are infinitely insured. Because CHASE BANK is backed by the entire combined firepower of the US Government and banking sectors. If Chase Bank stops existing, the nukes have fallen.

So why would I ever use a local bank for anything at all ever again? At which point you now get another round of contagion in the system where everyone gets out of these regional banks. Because remember, EVERY BANK IN THE WORLD INCLUDING THE BANK OF JAPAN is now insolvent.

Because they were destroyed for the crime of "Doing exactly we wanted them to do". Oh sure, in a risky sort of way, but see that note above about the Fed Stress tests.

Where "What we wanted them to do" involved buying government debts

Are you uh... 100% absolutely certain you want to be teaching those lessons? That if you buy US Treasuries, you will be destroyed for your crimes? That if you use a regional bank and they are destroyed for their crimes of making loans to the Feds, your business dies with it?

[tumblingyeti]

A brand mythology that brought a startup into the heart of the nation’s children

I thought for my first belated post, I’d talk about a story of rebranding from an Indonesian start up where I spent four years as VP of Product and reflect how Go-jek’s branding story touches on the concepts of brand mythology and equity, brand architecture, and even friction.

A bit of context

Go-jek was founded in 2010 and is on-demand “super-app” platform that started as motorcycle ride-hailing but now one of the largest SEA tech giants, providing more than 20+ services extending beyond transportation to logistics, food-delivery, grocery-delivery, digital payments and lending, entertainment, e-commerce, and more.

Brand mythology

Go-jek’s registered company name reads “Aplikasi Karya Anak Bangsa” which translates to “an application that is the work of the nation’s children.” This tagline resonated with many people in Indonesia; the fourth-most populous country in the world which was in the midst of the smartphone revolution and which had yet to produce a “unicorn” (tech company valued over $1Bn). By using this tag line as part of their brand mythology, it allowed the company to become more than its on-demand transport and delivery products. It sought to enter the consumer psyche as something that they can be proud of. Go-jek aspired not just  to be the story of a company but a story of the nation. The emotional implication was that using the services would feel like an act of patriotism.

Exhibit 1: Photos below show the tag line “Karya Anak Bangsa” as well as the Indonesian flag (and colors, red/white) featured prominently on advertisements as well as the Gojek driver jackets.

The following excerpt from a 2018 blogposts describes this well “There is pride in what GO-JEK has done in Indonesia. And when you talk to Indonesian’s about GO-JEK, you will notice a particular phenomenon: The brand is theirs, their home-grown star, a reflection of a new era in technology.” Source: Medium Blogpost (2018) - “Why Go-Jek is the operating system of Indonesia”

Brand equity and extensions

The mythology as well as smart use of words, was in-part, one of the reasons why Go-Jek was able to expand from 3 services to 20+ within a span of three years. Subsequent product launches included Go-Car (car ride-hailing, think Uber/Lyft), Go-Food (food delivery), Go-Beauty (on-demand haircuts and beauty services, beauticians would come to you!), Go-Pay (peer-to-peer transactions, digital wallets, and more) and so-forth. Because Go-Jek had so much brand power and recognition, there was a lot of built-up trust and it reduced the hurdle for consumers to try out new services immediately after they were launched, even if it was in a completely new vertical. For example, one may not think that a company you trust to get you from place a to b is one that you might also trust to get you a good haircut or one that you may trust with sending money or taking loans.

I personally find it hard to imagine if Uber or Lyft launched a peer-to-peer transaction or money lending service in the US that their brand equity would carry over and consumers would try out those new services. I think if this happened, this would end up like the failed brand extensions that we discussed in class (e.g. the fate of Bic’s perfume and Levi’s suits).

This brand mythology was not a one-time play but a strategy that we continued to invest in as a company. In 2018, eight years after the company was founded, Go-jek launched a campaign titled #AnakBangsaBisa (translates to: Children of the Nation Can) to celebrate the 73rd independence day of Indonesia. Source: Gojek Blog

And in the Youtube comments of the campaign video, we can glean that the emotional impact of national pride is still very much alive:

This perspective of brand mythology / equity / extensions adds a new dimension to my previous reflections on our work at Gojek. What I thought was more of a branding strategy for recruiting and “feel-good” emotional aspect with using our services may have also played a significant role in enabling us to extend to so many different services in such a short time and become the “super-app” that it is today.

Final thoughts on friction

In 2019, Gojek did a rebranding with a new logo, a new look, and new in-app landing page. The new company mission was to “remove friction from people’s lives.” Refer to the LinkedIn post below by one of the CEOs at the time announcing the new homepage. Source: LinkedIn.

In thinking how this squares with the discussions in our last class. In a country where life is chaotic (ask any Indonesian or person who has been to Jakarta, the capital city, and chaotic will be an adjective that is certain to come up), daily life is fraught with friction. In that sense, I do believe that the overall mission to remove friction was aspirational and is still relevant.

However, when thinking of the work I did day-to-day as a product manager considering today’s era of surveillance capitalism, and given the lessons learned in our last class, I am becoming increasingly more cognizant that removing friction in the design of products and applications should not be done at the expense of the user’s agency and should not exploit their resources including their data, time, and money. Sources: “The Age of Surveillance Capitalism” by Shoshana Zuboff and Renee Richardson Gosline’s MIT Sloan 15.846 Branding lecture.

[joyxjwang]

How to build brand mythology for D2C brands?

In my VC career before Sloan, investing in D2C was an investment thesis for many VC investors. The driving powers of that trend include the high flexibility in manufacture, the slow innovation in product design from the incumbents, and the booming social media and efficient digital marketing allowing new brands to accumulate customers with less resources.

I have made several investments in this field, and looking at their growth trajectory, I still have confusion about how can those new brands build mythology via what kind of communications with the customers. I raise this question because, as startups, most of the energy from the founding teams and the capital are allocated to the product design and manufacture and the digital marketing to drive sales and customer base growth. And the digital marketing channels for the e-commerce merchants are mainly Amazon and social media such as Tiktok and Facebook. Amazon is such a pain for them because the platform recommend mechanism doesn't help with the building of brand mythology at all. The differentiators of brands are not easy to stand out and only the price and some reviews are helpful for moving the needle. And for media like Tiktok, the marketing related videos have to attract audience attention within seconds, which is also not an effective way of the communication of brands with their target customers.

With all the frustration, most of the D2C brands are just focusing on selling, without knowing much about what does the customers profile look like and their behaviors especially in retention and churn rate, as well as the reasons behind. Most of the startups are hanging there as they still are able to drive the sales growth, but very few of them have built any brand equity. To put it in a very straight forward way, if they increase price to somewhere higher than the incumbents' comparable products, a great portion of the customers will go back to the latter very fast. During our discussion with the founders, I suggested them increase exposure in the offline, brick and mortar stores, which I believe is a way to increase the touch points and communication opportunity with the customers. But in markets like China, their target customers are making most of their purchasing online, and the costs in the offline channels are even higher than the online channels. Therefore, most of the D2C model companies are struggling, leaving investors like me doubting if they even have a brand. How should new comers in the market to build their brands, mitigating through the digital world?

[mariacallous]

To achieve net-zero carbon emissions by 2030, we have to increase the amount of capital invested in climate tech by 590 percent, says Daria Saharova, managing partner at VC World Fund, a European venture capital firm specializing in climate tech. While European funds, including the UK’s, have €19.6 trillion ($21.1 trillion) under management—and invested €19.6 billion in 2022—that’s not enough. We need to invest at least €1 trillion every year.

The good news? “Europe is leading the world in patent applications for climate technology,” she says. “Twenty-eight percent of all patents in this field originate in Europe, so almost one-third of the technology needed is created here.”

The problem, Saharova warns, is the misalignment between emissions and venture capital. Forty-eight percent of VC investment in 2022 was into mobility technology, such as e-scooters. Mobility accounts for only 15 percent of emissions, while more polluting industries like manufacturing, food and agriculture, and the built environment are underfunded. “Eighty-five percent of emissions receive only 52 percent of funding,” according to Saharova.

This matters, she explains, because personal behavior change will reduce only 4.3 percent of emissions. Technologies already in the market will account for 49.8 percent—meaning technologies under development and in need of investment will need to fill in the rest. “Forty-six percent of emissions will be reduced by technology that’s yet to be developed, and this is the tech we desperately need,” she says. “And we need venture capital.”

Venture capital has had its fingers burned in this area before, she points out. “Between 2008 and 2013 there was a lot of investment and a lot of failures. So right now, R&D accounts for 35 percent of investment, private equity 37 percent, and venture capital just 13 percent of climate tech funding.”

There’s a huge opportunity for VCs—as the fast rise of late-entrant private equity shows. The return on new investment in climate tech between 2015 and 2019 stands at almost 22 percent. But how do VCs pick the right investment areas when they often lack the skills?

“We need a crystal ball for a tech product’s sales, the target market, the tech’s influence on that market, its climate footprint, and interrelations with other solutions—in particular, some serious climate science,” she explains. “That’s a long list.”

World Fund has developed a benchmarking system called the Climate Performance Potential, or CPP, which is gradually filtering through to academia. It’s a blend of comparing the potential a startup has to avoid or reduce emissions, a willingness to ignore the startup’s own predictions, and its ability to look at the Total Addressable Market (TAM), which World Fund calls the Total Avoidable Emissions. This pairs a team’s ability to execute with an almost competitive product in a climate-effective technology bucket to understand the order of magnitude that your multiple can achieve.

“This model is focused on the technology rather than the company, so it can be applied to large organizations as well,” she explains. “It allows us to measure the carbon market for a technology compared to others by 2040. We need more private capital and public capital, and this model makes it easier for them to predict success.”

[investment2024]

Unlocking Value: The Rise of Fractional Ownership and Asset Tokenization

Introduction In the ever-evolving landscape of finance and investment, two concepts are gaining significant traction: fractional ownership and asset tokenization. These innovative approaches are reshaping how individuals and institutions engage with and invest in a wide array of assets. Let's delve into the intricacies of these concepts and explore the transformative potential they bring to traditional markets.

1. Understanding Fractional Ownership Fractional ownership involves dividing the ownership of an asset into smaller, tradable units. Breaking Down Barriers: Traditional high-value assets like real estate or fine art become accessible to a broader audience. Democratizing Investments: Individuals can now invest in premium assets without the need for substantial capital. 2. The Rise of Asset Tokenization Tokenization Defined: Asset tokenization is the process of converting ownership rights into digital tokens on a blockchain. Enhancing Liquidity: Tokenization facilitates the trading of fractionalized assets in a secure and transparent manner. Smart Contracts: The role of programmable contracts in automating processes like revenue distribution and governance. 3. Advantages for Investors Diversification: Fractional ownership allows for a more diversified portfolio, even with limited funds. Liquidity Boost: Tokenization brings increased liquidity to traditionally illiquid assets. 24/7 Accessibility: Digital tokens enable trading and ownership transfers around the clock, irrespective of geographical constraints. 4. Challenges and Regulatory Landscape Security Concerns: Addressing cybersecurity issues and ensuring the safety of digital assets. Regulatory Frameworks: The evolving regulatory environment and its impact on fractional ownership and tokenization. Educational Imperative: The need for widespread understanding and awareness among investors and regulatory bodies. 5. Real-world Use Cases Real Estate: Tokenizing real estate unlocks new investment avenues and simplifies property transactions. Art and Collectibles: Bringing liquidity to the art market by allowing investors to buy and sell fractionalized ownership of valuable artworks. Startups and SMEs: Enabling access to capital for small and medium-sized enterprises through tokenized equity. Conclusion The fusion of fractional ownership and asset tokenization represents a paradigm shift in the way we perceive and interact with valuable assets. As technology continues to advance and regulatory frameworks adapt, these concepts are poised to reshape the investment landscape, unlocking opportunities for a broader spectrum of investors.

[anniekoh]

Silicon Valley, despite being a supposed hub of innovation, one separated from the garish demands of regular industries, has culturally grown to resemble an open-air private equity firm where companies are incubated like animals bred for slaughter.

While I’m not saying the Valley is entirely bereft of innovation, the modern tech ecosystem has become an alternative asset market built to enrich the very same people it once claimed to reject. Fred Wilson, the co-founder of Union Square Ventures, said in 2016 that startups that took corporate money were “doing business with the devil,” yet the only remaining difference between the current state of venture capital and private equity appears to be how willing they are to say the quiet part (“we need to make money off of this investment”) out loud. 

Silicon Valley’s key differentiator was that it was theoretically the place where venture capital took risks on interesting and innovative technology, yet the best-funded startups remain siloed in whatever industry venture capital believes will be “big,” even if they haven’t got any true path to profitability.

It may also be a result of the different incentives that bring people to the Bay Area and the tech industry in general. A decade ago, engineers made an average base salary of $92,648 versus $139,729 in 2023. The software industry has created 82 new billionaires since 2010, and the 2019 tech IPO rush created an estimated 5000 new millionaires across eight tech companies. In 2013, there were 39 unicorns (tech companies worth a billion dollars or more). According to CBInsights, there are now over a thousand of them. And because Andreessen and his fellow venture stooges forced so many lossy, unprofitable companies to go public, many of them are underwater (and they have been for some time), with the top 50 Tech IPOs since 2020 losing 59% of their market capitalization as of May 13 2023.

As a result, the Valley is left with the avaricious culture of the finance industry without any of the stability. Venture capital’s elite turned startups into alternative investments, fattened them up to sell, and, when the market dropped out in 2022 and 2023, shrugged their shoulders and blamed the workers. They, along with tech’s leaders, derided a culture of “entitlement” that they themselves created. Oh, workers want food at the office? They want a gym? They want a place to nap? Then why didn’t you fucking complain when companies started offering this shit back in 2015?

Because tech’s elite hates labor, and hoarding talent was a necessity to pump valuations. The tech industry — by which I mean the Valley’s powerful venture arm — spent a decade convincing software engineers that they were an elevated class, promising them the world and oftentimes delivering it without requiring them to build something that improved the world in any way. And the second the party ended — the moment that the economy stopped endlessly providing growth to every single company in the market, and when money stopped being free — tech was ready to eject tens of thousands of workers, and tech’s venture capitalists were ready to stop signing checks and start requiring “hard numbers” for the first time in years.

And the problem with an industry that is led and powered by venture capital is that it doesn’t build any real culture. “Startup culture” is a vague shibboleth that exists to justify labor abuse in exchange for a theoretical massive payday in the future, with the hollow premise that there is something more noble about writing code or “working at an early-stage company” than there is any other job. While there are people doing cool, weird or societally-beneficial shit, they are endlessly drowned out by a combination of founders trying to build “the next big thing,” with “big” referring to how much they can sell it for, and “thing” being “whatever is going to sell to someone.”

[sharensharma]

Angel Investing in Tech: Top Strategies for Early-Stage Startups

The tech industry is a breeding ground for innovation, with new ideas constantly emerging and disrupting established markets. For those with a keen eye for potential, angel investing in tech startups offers a thrilling opportunity to be at the forefront of progress while reaping potentially high returns. However, navigating the world of early-stage startups requires a specific skillset and a well-defined strategy. This blog delves into the top strategies for angel investors seeking to back the next big thing in the tech space.

Understanding Angel Investing

Before diving in, it's crucial to understand the basics of angel investing. Angel investors are typically high-net-worth individuals who provide financial backing to early-stage startups in exchange for equity ownership in the company. Unlike venture capitalists (VCs) who manage funds from institutions, angel investors invest their own money and often take a more hands-on approach. This can involve mentorship, industry connections, and strategic guidance alongside the financial injection.

Why Tech Startups?

The tech sector boasts a unique allure for angel investors. Here's why:

High Growth Potential: Tech startups often have the potential to scale rapidly, offering the possibility of significant returns on investment.

Disruptive Innovation: Early-stage tech companies can revolutionize entire industries, allowing investors to be part of shaping the future.

Direct Impact: Angel investors can directly influence the growth and trajectory of a promising startup, fostering a sense of personal connection to the venture's success.

Top Strategies for Angel Investors in Tech

Now that you're familiar with the landscape, let's explore the key strategies that will set you up for success as an angel investor in tech startups:

Develop a Niche:  The tech industry is vast.  By focusing on a specific sub-sector that aligns with your interests and expertise (e.g., fintech, cybersecurity, AI), you can gain a deeper understanding of market trends, identify promising opportunities, and conduct more effective due diligence.

Conduct Thorough Due Diligence:  Investing in early-stage startups is inherently risky.  Mitigate this risk by conducting thorough due diligence on potential investments. This involves meticulously evaluating the startup's business model, market opportunity, competitive landscape, financial projections, and most importantly, the team's capabilities and vision.

Focus on the Team:  The team behind the idea is paramount. Look for passionate, competent founders with a proven track record and a clear vision for their startup's future.  Assess their ability to execute, adapt, and lead the company through challenges.

Understand the Investment Landscape:  Stay informed about current trends and valuations in your chosen niche.  Research typical investment rounds for early-stage tech startups and be prepared to negotiate terms that are fair for both you and the founders. Familiarize yourself with "how to invest in startups for equity" to structure your investments effectively.

Embrace Patience:  Building a successful tech startup takes time.  Be prepared for a long-term investment with a horizon of 5-10 years before seeing significant returns.

Build a Network:  Connect with other angel investors in your area or industry.  Sharing knowledge, experiences, and deal flow can significantly enhance your investment decisions. Angel investment network India, like many others globally, offer valuable resources and connections for angel investors.

Finding Tech Startups to Invest In

Identifying promising tech startups can be challenging. Here are some effective strategies:

Attend Industry Events:  Pitch competitions, conferences, and meetups are excellent platforms to meet promising founders and get a firsthand look at innovative ideas.

Leverage Online Platforms:  Several online platforms specialize in connecting startups with angel investors.  These platforms allow you to browse startups based on industry, stage, and funding requirements.

Network with Incubators and Accelerators:  These organizations provide resources and support to early-stage startups.  Building relationships with them can give you access to a pipeline of promising tech ventures.

Angel investing in tech startups presents a unique opportunity to be part of the future while potentially reaping significant rewards. By following the key strategies outlined in this blog and diligently researching "tech startups to invest in," you can increase your chances of success in this exciting investment domain. Remember, a successful investment journey requires a blend of calculated risk, deep due diligence, and a commitment to supporting passionate founders in building the next generation of tech giants.

Krystal Ventures Studio can be your gateway to this world of possibilities. As a platform that connects the startups' needs and investor's interests, Krystal Ventures Studio can streamline your search for promising tech ventures and facilitate meaningful connections with the next big thing in the tech space.

[krystalventures]

Tech Startups to Invest In: The Top Opportunities for Savvy Investors

Introduction:

In today's fast-paced and ever-evolving world, the tech industry has emerged as a hotbed of innovation and entrepreneurial spirit. With groundbreaking advancements and disruptive ideas shaping the future, tech startups to invest in has become an enticing prospect for savvy investors. In this blog post, we will explore some of the top opportunities for those seeking to capitalize on the exciting world of technology and highlight one particular investment firm, Krystal Ventures, that holds promise for prospective investors.

AI-Powered Solutions:

Artificial Intelligence (AI) is revolutionizing numerous industries, and investing in AI startups can yield substantial returns. From advanced machine learning algorithms to natural language processing, startups harnessing the power of AI are transforming sectors like healthcare, finance, and transportation. Companies like Sentient Systems, utilizing AI for predictive analytics, or SentiMed, developing AI-driven healthcare diagnostics, are just a couple of examples of promising ventures in this space.

E-Commerce Disruptors:

The rise of e-commerce has forever changed the way we shop. As traditional retail models continue to adapt to the digital era, investing in e-commerce startups presents a lucrative opportunity. Innovative companies like EcoMart, a sustainable online marketplace, or ShopSavvy, a mobile app that enables consumers to compare prices across various online retailers, are poised to redefine the e-commerce landscape.

Clean Energy and Sustainability:

With the increasing demand for renewable energy and sustainable practices, investing in tech startups focusing on clean energy is not only financially rewarding but also contributes to a greener future. From solar energy solutions to smart grid technologies, companies like SolarX or CleanGrid Systems are making significant strides in revolutionizing the way we generate, store, and distribute clean energy.

Blockchain and Cryptocurrency:

Blockchain technology, known for its decentralized and secure nature, has gained immense popularity in recent years. Investing in startups exploring blockchain applications and cryptocurrencies presents an opportunity to capitalize on this transformative technology. Companies like BitSecure, providing blockchain-based cybersecurity solutions, or CoinTrade, an innovative cryptocurrency exchange platform, are paving the way for a decentralized future.

Healthtech Innovations:

Advancements in technology have had a profound impact on the healthcare industry. Investing in healthtech startups can lead to significant financial gains while improving patient care and outcomes. From telemedicine platforms like MedConnect to wearable health monitoring devices such as LifeTracker, these startups are at the forefront of transforming healthcare delivery and revolutionizing the patient experience.

Conclusion:

As the tech industry continues to expand and innovate, investing in startups within this realm presents a wealth of opportunities for savvy investors. From AI-powered solutions to e-commerce disruptors, clean energy ventures to blockchain applications, and healthtech innovations, there are numerous promising areas to explore. When considering tech startup investments, it is essential to conduct thorough research and due diligence. However, for those seeking guidance and expertise, investment firms like Krystal Ventures provide valuable support and a wealth of experience in identifying and nurturing promising startups. With their deep industry knowledge and network, Krystal Ventures could be an excellent option for investors looking to enter the exciting world of tech startup investments. So, if you're looking to be part of the next big thing, consider exploring the possibilities offered by Krystal Ventures and embark on your journey towards financial growth and technological innovation.

[paulobrignardello]

Paulo Brignardello Shares 5 Advantages of Investing in Private Equity

Paulo Brignardello, a private equity professional with over 20 years of experience, shares his insights into the five main advantages of investing in private equity. Paulo Brignardello shares why this form of investment can be profitable and how it can help you reach your goals. Investing in private equity can be a great way to diversify your portfolio and achieve higher returns.

Potential for higher returns: Private equity investments have the potential to deliver higher returns than traditional investments like stocks and bonds. According to Paulo Brignardello Advisor, private equity funds have delivered a median net internal rate of return of 14.9% over the past 10 years. This is because private equity firms are able to take a more active role in managing the companies they invest in, which can lead to increased efficiency and profitability. Additionally, private equity investments are often focused on high-growth companies, which can result in significant returns for investors.

Greater control over investments: Private equity investors have greater control over where their money goes and can influence the direction of the company they are investing in. This can be particularly appealing for investors who want to have a say in how their money is being used. Private equity firms often take an active role in managing the companies they invest in, which can lead to greater control over important decisions.

More flexibility: Private equity investments offer companies more flexibility than traditional financing methods. This is because private equity investors are more willing to provide customized financing solutions to meet the specific needs of a business. Private equity firms can also provide operational expertise to help the companies they invest in improve their performance.

Access to a wider range of investment opportunities: Private equity investors have access to a wider range of investment opportunities than traditional investors. This is because they can invest in companies at every stage of their development, from startups to established businesses, across various industries. Investing in this way provides investors with greater diversification and higher returns.

Potential for long-term growth: Private equity investments are often geared towards long-term growth, which means investors can benefit from steady returns over an extended period. Private equity firms typically hold their investments for several years before selling or taking the company public, which can provide investors with a stable source of returns.

[truspanfinancial]

The Top Financial and Accounting Services Your Business Needs to Succeed

Running a business comes with numerous challenges, and managing finances and accounting can be daunting tasks for many entrepreneurs. However, with the right financial and accounting services, you can streamline your operations, ensure compliance, and make informed business decisions.

Here are the top financial and accounting services your business needs to succeed:

Bookkeeping and Accounting: This includes maintaining financial records, preparing financial statements, and managing accounts payable and receivable.

Tax Planning and Preparation: Tax planning ensures that you comply with tax laws, minimize tax liabilities, and make informed financial decisions. Tax preparation involves preparing and filing tax returns accurately and timely.

Payroll Management: Payroll management involves calculating and processing employee salaries, deductions, and benefits. It also ensures compliance with labor laws and regulations.

Financial Analysis and Reporting: Financial analysis and reporting provide insights into your business's financial health, performance, and trends. It helps you make informed business decisions and identify opportunities for growth.

CFO Services: Chief Financial Officer (CFO) services offer strategic financial planning, forecasting, budgeting, and analysis. It helps you manage financial risks and optimize your business's financial performance.

Audit and Assurance Services: Audit and assurance services provide an independent evaluation of your business's financial statements and internal controls. It ensures compliance with accounting standards and helps identify areas for improvement.

Business Valuation: Business valuation services help determine the value of your business, which is crucial for making informed decisions regarding mergers and acquisitions, selling the business, or securing funding.

Financial Planning and Analysis: Financial planning and analysis services help you plan and forecast your business's financial performance, identify potential risks and opportunities, and make strategic decisions.

Inventory Management: Inventory management services help you keep track of your inventory levels, costs, and profitability. It helps optimize your inventory levels and avoid stock-outs or overstocking.

Debt and Equity Financing: Debt and equity financing services help you secure funding for your business, whether it's through loans, lines of credit, or equity investments. It helps you manage cash flow, invest in growth, and finance capital expenditures.

By leveraging these financial and accounting services, you can streamline your operations, ensure compliance, and make informed business decisions. Whether you're a startup or an established business, partnering with a reputable financial and accounting services provider can help you achieve your goals and succeed in today's competitive market.

In conclusion, partnering with the right financial and accounting services provider can help your business thrive. At Truspanfinancial , Finance & Accounting Services, we offer a comprehensive suite of financial and accounting services tailored to your business needs. Contact us today to learn more about how we can help your business succeed.

[continuations]

The Banking Crisis: More Kicking the Can

There were a ton of hot takes on the banking crisis over the last few days. I didn't feel like contributing to the cacaphony on Twitter because I was busy working with USV portfolio companies and also in Mexico City with Susan celebrating her birthday.

Before addressing some of the takes, let me succinctly state what happened. SVB had taken a large percentage of their assets and invested them in low-interest-rate long-duration bonds. As interest rates rose, the value of those bonds fell. Already back in November that was enough of a loss to wipe out all of SVB's equity. But you would only know that if you looked carefully at their SEC filings, because SVB kept reporting those bonds on "hold-to-maturity" basis (meaning at their full face value). That would have been fine if SVB kept having deposit inflows, but already in November they reported $3 billion in cash outflows in the prior quarter. And of course cash was flowing out because companies were able to put it in places where it yielded more (as well as startups just burning cash). Once the cash outflow accelerated, SVB had to start selling the bonds, at which point they had to realize the losses. This forced SVB to have to raise equity which they failed to do. When it became clear that a private raise wasn't happening their public equity sold off rapidly making a raise impossible and thus causing the bank to fail. This is a classic example of the old adage: "How do you go bankrupt? Slowly at first and then all at once."

With that as background now on to the hot takes

The SVB bank run was caused by VCs and could have been avoided if only VCs had stayed calm

That's like saying the sinking of the Titanic was caused by the iceberg and could have been avoided by everyone just bailing water using their coffee cups. The cause was senior management at SVB grossly mismananging the bank's assets (captain going full speed in waters that could contain icebergs). Once there was a certain momentum of withdrawals (the hull was breached), the only rational thing to do was to attempt to get to safety. Any one company or VC suggesting to keep funds there could have been completely steamrolled. Yes in some sense it is of course true that if everyone had stayed calm then this wouldn't have happened but this is a classic case of the prisoner's dilemma and one with a great many players. Saying after the fact that "look everyone came out fine, so why panic?" is 20-20 hindsight -- as I will remark below there were a lot of people arguing against making depositors whole.

2. The SVB bank run is the Fed's responsibility due to their fast raising of rates

This is another form of blaming the iceberg. The asset duration mismatch problem is foundational to banking and anyone running a bank should know it. Having a large percentage of assets in long-duration low-interest-rate fixed income instruments without hedging is madness, as it is premised on interest rates staying low for a long time and continuing to accumulate deposits. Now suppose you have made this mistake. What should you do if rates start to go up? Start selling your long duration bonds at the first sign of rate increases and raise equity immediately if needed. Instead of realizing losses early and accepting a lower equity value in a raise, SVB kept a fiction going for many months that ultimately lost everything.

3. Regulators are not to blame

One reason for industries to be regulated, is to make them safer. Aviation is a great example of this. The safety doesn't just benefit people flying, it also benefits companies because the industry can be much bigger when it is safe. The same goes for banking. You have to have a charter to be a bank and there are multiple bank regulators. Their primary job should be to ensure that depositors don't need to pour over bank financials to understand where it is safe to bank. If regulators had done their job here they would have intervened at SVB weeks if not months ago and forced an equity raise or sale of the bank before a panic could occur.

4. This crisis was an opportunity to stick it to tech

A lot people online and some in government saw this as an opportunity to punish tech companies as part of the overall tech backlash that's been going on for some time. This brought together some progressives with some right wing folks who both -- for different ideological reasons -- want to see tech punished. There was a "just let them burn" attitude, especially on Twitter. This was, however, never a real option because SVB is not the only bank with a bad balance sheet. Lots of regional and smaller banks are in similar situations. So the contagion risk was extremely high. The widespread sell-off in those bank stocks even after the announced backstopping of SVB underlines just how likely a broad meltdown would have been. It is extremely unfortunate that our banking system continues to be so fragile (more on that later) but that meant using this to punish tech only was never a realistic option.

5. Depositors should have taken a haircut

I have some sympathy for this argument. After all didn't people know that their deposits above $250K were not insured? Yes that's true in the abstract but when everyone is led to believe that banking is safe because it is regulated (see #3 above), then it would still come as a massive surprise to find out that deposits are not in fact safe. As always what matters is the difference between expectation and realization. If SVB depositors would take a haircut, then why would anyone leave their funds at a bank where they suspect they would be subject to a 5% haircut? There would have been a massive rush away from smaller banks to the behemoths like JP Morgan Chase.

6. The problem is now solved

The only thing that is solved is that we have likely avoided a wide set of bankruns. But it has been accomplished at the cost of applying a massive patch to the system by basically insuring all deposits. This leaves us with a terrible system: fully insured fractional reserve banking. I have been an advocate for full reserve banking as an alternative. This would let us use basic income as the money creation mechanism. In short the idea is that money would still enter the economy but it would do so through giving money to people directly instead of putting banks in charge of figuring out where money goes. The problem of course is that bank investors and bank management don't like this idea because they benefit so much from the existing system. So there will be fierce lobbying opposition to making such a fundamental change. I will write more posts about this in the future but one way to get the ball rolling is to issue new bank charters aggressively now for full reserve banks (sometimes called "narrow banks"). Many existing fintechs and some new ones could pick these charters up and provide interesting competition for the existing behemoths.

All of this is to say that this whole crisis is yet another example of how broken and held together by duct tape our existing systems are. That's why we are lurching from crisis to crisis. And yet we are not willing to try to fundamentally re-envision how things might work differently. Instead we are just kicking the can.