Hear Ye! Since 1998.
20
Apr 19
Sat

It’s IPO Season

Strap in for thousands of investors and employees to get liquid in the coming months. Lyft, Zoom and Pinterest are among the first out of the gate, and it’s clear to me that the market really only cares about two things:

  1. Top line growth: Revenue growth of 50%++ is really going to juice up the valuation. You get huge multiples because at these growth rates, investors expect these companies to quickly “grow into” their valuations. (Facebook IPOed at $104bn in 2012 on 2011 revenue of $3.7bn for a 28x revenue multiple. In 2016, it recorded $23.8bn in revenue, and $46.4bn in 2018.)
  2. Profitability: Obviously this isn’t a requisite, but if a company is continually making a loss, it raises the longer term question of whether the business model is fundamentally flawed – do the unit economics work? You’ll tend to get a lot of short interest if there is a crowd who doesn’t believe the business is actually able to make more money than it spends. Of course, it’s important to understand what is driving expenses. In most cases, it’s heavy investment to drive growth (but if it’s all going into sales, are they spending $1 to buy $0.95?). Free cash flow might be a better metric for seeing if the business model is sustainable, but you have to also be wary about other expenses like servicing debt (although debt financing is relatively rare in this place). Also, when a company IPOs, that event may trigger a bunch of employee equity to vest, which is recorded in the financials as an expense, and that can impact the headline numbers.

If you can make a profit and demonstrate tremendous growth, you end up with a company like Zoom, which is the only company on the list that is profitable, yet has eye-watering 100% y/y growth… and look what happened to it on the first day of trading.

Here are the stats for the recent IPOs:

  • Lyft (2012 / 4.9bn funding @ 24bn IPO val, 16.7bn val today / 2018 2.2bn rev on 911m loss, 2017 1.1bn rev on 688m loss) — I don’t really know what to make of this business and whether it truly can become profitable while sustaining a decent growth rate. The dip in value over the last few weeks shows a lot of skepticism in the market as well.
  • Zoom (2011 / 160m funding @ 9bn IPO val, 16bn val today / 2018 330m rev on 7.6m profit, 2017 120m rev on 3.8m loss, 2016 60m rev on 14m loss) — the most successful business in this post, in my opinion. Viral business model, clear consumer and enterprise strategies, what’s there not to like? Anecdotally, I see Zoom being used for work much more commonly than alternatives like Webex and Uberconference (although the latter has a great UI).
  • Pinterest (2009 / 1.5bn funding @ 10bn IPO val, 12.7bn val today / 2018 756m rev on 63m loss, 2017 472m rev on 130m loss, 2016 299m rev on 182m loss)

Upcoming IPOs

The tech companies below are anticipated to IPO in the coming year. Without doing much research on them (and only cursory searches to find the publicly reported financial data below), I’ve ranked them in order of what I personally think are the most promising based on what I know of their business model.

  • Airbnb (2008 / 4.4bn funding @ 31bn val / reported 2017 2.6bn rev on 93m profit) — an extraordinary business (I used to work there as a contractor so I admittedly have a bit of bias here). I turned down an attractive offer to join them as an FTE – something I did knowing I’d regret – but it was to do something that I also knew I’d deeply regret if I didn’t.
  • Slack (2009 / 1.2bn funding @ 7.1bn val / reported 2017 221m rev on ?) — I like this company so much that I bought some stock on the secondary market a couple of years ago
  • Uber (2009 / ~25bn funding @ 76bn val / 2017 net 7.8bn on 4bn op loss, 2018 net 11.2bn on 3bn op loss) — everyone knows about Uber. It’s got the biggest numbers out of them all, and there’s so much hype about them that, at least in the short term, the stock is going to pop once it starts trading. See also comments on Lyft above.
  • Peleton (2012 / 995m @ 4.15bn val / reported 2018 800m rev run rate & profitable, 2017 <400m rev) — in the longer term, Peleton needs to successfully expand beyond bikes to other products, like its new treadmill. It reminds me a little bit of fitness consumable makers GoPro and Fitbit, except that Peleton also has a great subscription business.
  • CloudFlare (2009 / $332m funding @ 3.2bn val / financials unknown)
  • We Company (2010 / 12.8bn funding @ 47bn val, 12/2018 annualized rev $2.5bn) — no idea if this is a sustainable model or what happens if the bottom falls out of the property market again, but through great marketing and positioning, it looks like they’ve beat incumbent players like Regus (now IWG) at their own game
  • Robinhood (2013 / 539m funding @ 5.6bn val / financials unknown) — massive user growth, but an opaque business model
  • Fastly (2011 / 219m funding @ ? val / 2018 145m on 29m loss, 2017 105m on 31m loss)
  • Asana (2008 / 213m @ 1.5bn val, 2018 100m ARR)
  • Postmates (2011 / 681m funding @ 1.85bn val / financials unknown)

Bay Area Impact

The NY Times wrote a provocative article entitled “When Uber and Airbnb Go Public, San Francisco Will Drown in Millionaires“. The basic premise is that, flush with cash, a bunch of professionals in their 20s and 30s will push up the pricing of everything in the city – most of all real estate. In an area where all-cash purchases of housing are common, adding thousands of millionaires to the pool doesn’t sound like it will help with affordability. No one knows what will really happen, but there are several different theories.

(1) Increased post-IPO demand for properties will lift pricing, as the cashed up millennials will be able to muscle out the competition by making all cash bids above asking.

(2) Sellers are holding onto inventory now, waiting for the demand to come later. A spike in supply at that time could actually mean that prices don’t move as much as they might.

(3) If you make enough money, it may make sense to move completely out of state. I know people who have moved (whether it’s actually moved, or moved for 181+ days) to no income tax states like Washington and Nevada to save the 10%+ income tax that California levies. (California taxes capital gains at regular income, with no special treatment for long term capital gains.)

(4) Buyers in the market today may move forward their plans to buy, to avoid getting caught in the post-IPO rush.

(5) Remember that there’s a 6 month lock-up period after most IPOs, so there’s a little bit of a lag. (The exception is direct listings, like what Spotify did and what Slack is reported to be considering.)

(6) The real estate market this year seems to have plateaued over the last 12 months or so.

(7) Macro factors are always at the back of my mind. The expansion cycle we’re in has been one of the longest in history, and it’s been fueled by historically low interest rates. However, all the value has been accruing in assets – not wage growth, which is why inflation appears stubbornly low. (Trump’s fiscal stimulus isn’t helping.) I haven’t looked at the figures, but I’m sure a tremendous amount of debt has built up in the system (money is cheap, and somewhat perversely, there are a ton of negative interest rate bonds that have been issued). That’s a powder keg waiting to blow. And when it blows, everything heads towards zero* – quickly. I have more thoughts on this, but that’s for another post.

*The great thing about buying a house using all cash, is that you’re not saddled with a big mortgage – so if there’s a downturn, you’re not going to be a forced seller of assets to meet debt repayments. Assuming you aren’t levered somewhere else, right?

  12:35pm  •  Business & Finance  •  Tweet This  •  Add a comment  • 

Weekly Wrap Up

TV: The TV season is changing over. Of the shows I watched, Season 2 of Star Trek: Discovery wrapped up this week and The Orville has its season finale next week. Big Bang Theory would normally be ending around now, but it’s the end of the series and they’ve scheduled their final one-hour episode in mid-May. And of course, Game of Thrones is back! As is another season of The Amazing Race.

+ GoT Season 8. From a little over 2 million viewers for its series premiere, to over 12 million for the Season 7 finale (at the time of airing), the world’s most expensive TV show ($850m to make!) starts its final run. Apparently there is a 40 minute battle scene in an upcoming episode…

+ TAR is getting tired as a format, but my wife and I continue to watch it out of tradition.

+ Discovery flourished this season. As a die hard Trekkie, I found Season 1 really tough to digest given that it was meant to be canonical (why have we not heard about the mycelial network or Discovery or Spock’s sister before?). But Season 2 papered over the cracks in the timeline enough to satisfy me. I also found the idea of bringing in some key characters only for a season interesting (like Anson Mount’s Pike and Ethan Peck’s Spock). Now it looks like the Discovery is 930 years in the future. I have been waiting for a new Trek franchise to be set further in the future for a couple decades now, so this is an exciting turn.

+ Trek seems to be getting a lot of spinoffs. There’s Picard’s new series, Georgiou’s new Section 31 series, and now talk about a Pike spinoff. Oh, and there’s Short Treks.

Music: This is the best cover of Dire Straits’ Sultans of Swing like, ever. 

  9:53am  •  Music  •  TV  •  Tweet This  •  Add a comment  • 
28
Jan 19
Mon

Hear Ye! is 21

Ok, so I obviously did no posting last year, and I failed in my attempt to fit in a redesign of this site. Life had other plans. Maybe this year?

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12
Jan 19
Sat

Cities over the last 365 days (2018)

Here’s the annual list. At at mere ~37k air miles traveled, it’s my least amount of travel in a decade (due to one very good reason!). 2019 is looking better, with 38k miles already booked in Q1.

Sydney, Australia
London, UK †
Oxford, UK
Chicago, IL
Vancouver, Canada
Shanghai, China
Charleston, SC †
Kiawah Island, SC

All places had overnight visits, unless marked with †.

* Multiple entries, non-consecutive days.
† Daytrip only.
‡ New country or territory.

  1:09am  •  Travel  •  Tweet This  •  Add a comment  • 
9
Sep 18
Sun

What it’s like to run a High-Roller Suite in Vegas 

A Bloomberg article, Secrets of Las Vegas’s Exclusive High-Roller Cosmopolitan Suite, shares some interesting stories about high-roller suites and the guests that use them. Nothing terribly surprising, but still a fun read.

Among high-rollers, superstitions can quickly escalate from the demanding to the absurd. Some millionaires will sleep on the couch because they believe a bed with a headboard will beckon bad fortune. Others crowd themselves with citrus—often with holes poked to “unleash the luck”—scattering pierced oranges and lemons around the suite, letting them rot during longer stays. Also lucky for clients from the Far East: filling water basins to the brim. That’s how one high-roller flooded his bathtub … and the suite underneath.

  12:10pm  •  Culture  •  Tweet This  •  Add a comment  • 

How the Court Got So Supreme

An interesting article about the institution at the top of the judicial branch of government, the SCOTUS:

Neil Gorsuch moved into Scalia’s chambers, though those who knew him said if Kennedy were to step down, Gorsuch would prefer his former boss’s more commodious chambers; Gorsuch had clerked for Kennedy. (In a gesture to Scalia’s family and as a totem of his philosophical allegiance with Scalia, Gorsuch allowed Leroy, the mounted head of the 900-pound elk Scalia had shot, to remain. Scalia’s widow didn’t want it. Nor did his children. Gorsuch did insist on moving Leroy out of his personal office; now he stares down at the clerks in their work space.)

  12:06pm  •  Law  •  Tweet This  •  Add a comment  • 
25
Aug 18
Sat

Million dollar artworks, sold in $20 lots

Masterworks is a like investing in a fine art work fund, but for individual artworks. I can see the appeal to some. From CNN:

Masterworks is one of a handful of new investment platforms hoping to widen access to the elite world of art collecting. The firm will purchase paintings at auction before transferring ownership to shareholders. It then takes a management fee — covering costs like storage, transportation and insurance — as well as a percentage of any profit made when the artworks are sold.

Fees are a roughly flat 10% management fee for the first 5 years, plus 20% carry. So basically a 2 and 20 model.

  1:58am  •  Business & Finance  •  Culture  •  Tweet This  •  Add a comment  • 
28
Jan 18
Sun

Hear Ye! 20th Anniversary

Twenty years!

Coming soon: A 20th Anniversary redesign of this site, and most frequent posting (I promise).

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10
Jan 18
Wed

Cities over the last 365 days (2017)

Here’s the annual list – pretty spotty during the middle of the year, but a solid Q3 picked up the slack:

Sydney, Australia*
Dallas, TX*
Reykjavik, Iceland‡
London, UK*
Abu Dhabi, UAE†
Dubai, UAE
Oxford, UK
Abingdon, UK
San Diego, CA†
Salt Lake City, UT†
Nashville, TN
Hopkinsville, KY†
Birmingham, AL†
New Orleans, LA
Montgomery, AL†
Savannah, GA
Charleston, SC
Charlotte, NC†
New York, NY†
Delhi, India†
Thimphu, Bhutan*‡
Gangtey, Bhutan
Punakha, Bhutan
Paro, Bhutan
Singapore†
Auckland, NZ†
Tahiti, French Polynesia‡
Bora Bora, French Polynesia
Honolulu, HI
Boston, MA
Palm Springs, CA
Copenhagen, Denmark

All places had overnight visits, unless marked with †.

* Multiple entries, non-consecutive days.
† Daytrip only.
‡ New country or territory.

  5:47pm  •  Travel  •  Tweet This  •  Add a comment  • 
2
Oct 17
Mon

Star Trek: Discovery

It’s been over a decade since Star Trek: Enterprise, the last series of the Trek franchise, has graced our television screens. I grew up in the 1990s, which was the heyday for Trek. The 90s had 3 series running almost concurrently (TNG, DS9 & Voyager) and featured 4 films (Star Treks VI to IX). Back then, I binged watched seasons with a friend during sleepovers. (Binge watching then meant going to Blockbuster and renting a stack of VHS tapes.) I spent countless hours with high school friends discussing all the ideas, themes, and concepts that Trek introduced us to – astronomy, astrophysics and other sciences, “what if” questions about the universe, ethical issues, so so on. The sorts of stuff that most teenagers pseudo-philosophically discuss, but through a geek’s sci-fi lens. I also used to attend Trek conventions and had a pretty encyclopedic knowledge of Trek trivia (like, memorizing Starfleet ship registration numbers). At the turn of the century, the output of the Star Trek universe slowed down, and that obscure knowledge started to mothball in the recesses of my brain.

When news broke of Star Trek Discovery, I was excited that my sci-fi franchise of choice was going to be back on the small screen with new content.

Television has evolved a lot since the 90s. We’re in the so-called Golden Age of television, and the episodic nature of TNG has long since been replaced by grand story arcs, sophisticated treatment of themes, and great acting. I wanted to see what Trek might look like given the advances in television story telling over the last half of my life.

After watching the first two episodes of Discovery, I am disappointed. Like Enterprise, Discovery is a prequel, and the problem with prequels is that they are constricted by events that have already happened in the future, so to speak. The new Star Trek movies try to avoid that by splitting the timeline and creating an offshoot universe. But Star Trek is about the future, and I do miss forging even further ahead in the future and exploring more uncharted territory.

With Discovery, what we get instead is an opening few episodes where we are introduced to the start of hostilities between the Klingon Empire and the Federation. Perhaps the writers will eventually make this a compelling story-line, but it’s not one that they have managed to grab my interest with. In the future Trek story-line, there is peace between the two civilizations, and how that came to be was an interesting concept.

It also doesn’t help that all the episodes so far are lacking in personality. The characters and acting feel wooden. I just don’t care about any of them, and none of them stand out.

The focal character is, for the first time, not the captain of a starship or space station, but it remains to be seen if something interesting comes from this shift in perspective. Michael Burnham’s initial personal theme of an internal conflict between emotion versus logic, child versus parent, has been done before: Spock, Data, 7. Simply reversing the dynamic by thrusting a human child into having a Vulcan upbringing feels like a gimmick.

The Klingons are also somewhat boring. Their dialogue is slow and stilted, and even the font selection for the subtitles (ALL CAPS, SERIF, BIG) felt like a crutch to supplement the acting.

Even the theme song played during the opening credits is bland and meek. The only memorable part of it is when its closing bars throw back to the original Alexander Courage theme.

The story itself feels jumpy and contrived, unfolding unnaturally as you try to make sense of where it’s trying to go. A Klingon from nowhere shows up, recruits another houseless Klingon to be a “torchbearer” because he can hold his hand in fire for a while, and suddenly they reunite the Klingon empire. They blow up a bunch of Federation ships and then warp out of there. What?

As critical as I’ve been so far, it’s Star Trek, so I’m going to keep watching. But I do hope it starts to kick into gear.

  11:46pm  •  Star Trek  •  Tweet This  •  Add a comment  • 
29
Sep 17
Fri
1
Jul 17
Sat
26
Apr 17
Wed
28
Jan 17
Sat

Hear Ye! turns 19

Yes, but not much has been going on here lately…

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7
Jan 17
Sat

Cities over the last 365 days (2016)

Here’s the annual list – pretty sparse last year:

Maui, HI
Sydney, Australia*
Bangkok, Thailand†
Tokyo, Japan†
San Francisco, CA*
Dublin, Ireland
New York, NY†
London, UK†
Abu Dhabi, UAE
Dubai, UAE
Yulara, NT, Australia
Los Angeles, CA†
Hong Kong, China*
Minneapolis, MN†
Bayfield, WI

All places had overnight visits, unless marked with ††.

* Multiple entries, non-consecutive days.
†† Daytrip only.

  5:42pm  •  Travel  •  Tweet This  •  Add a comment  • 
13
Dec 16
Tue

Arrival

This movie review is a guest post by Andrew Lau

Arrival is executed in the style that fools most film critics into thinking there’s a lot more going on than there really is.

That understated style where the camera lingers a lot longer than it should on everything. Where dolly moves and zooms are slow and seemingly deliberate to imply depth and meaning.

Where the camera is placed wide and never cuts into the emotion. Where people talk at one end of the room but are photographed (with an extra long lens) from the other side in silhouette. Yes, that style.

Amy Adams, translator extraordinaire, is called by the military to communicate with aliens upon their arrival on Earth. She meets with the over-sized squids and tries to decipher their language of circular, squiggly, inky lines.

Meanwhile, there’s a little confusion about what the inky lines mean. Suspicious and jittery, the Chinese decide the aliens have come to blow our planet away. They gather their military forces to blow the aliens away first… but Amy works it all out before the shit hits the fan.

Not giving anything away here. All this is in the trailer.

The film has a fabulous aesthetic — the spaceships and aliens are unlike anything we’ve seen before. The music is GREAT and the tone is consistently mournful keeping within the theme of loss.

Max Richter’s “On the Nature of Daylight” is effectively used, anchoring the emotions of our heroine, allowing the audience into her state of mind.

But if you watch the film carefully, you’ll see the film is mostly style. There’s little tangible substance. There’s so little story content in this film it could, and should have been a 45 minute short.

The film lacks in conflict and drama between the cardboard-thin characters. What you see in the trailers isn’t the tip of the iceberg. It’s what you get. Cut and dried. That’s it.

Denis Villeneuve (Sicario) directed this and makes these choices deliberately. He’s just being himself. I’ve decided he’s more a minimal stylist than story-teller.

After the initial awe and excitement of the alien landing and first-contact, whether or not you enjoy this film will depend on your taste. Whether or not you are bored, will depend on if you’re just happy to go along with style.

If you’re into films where people gaze into the distance mournfully or stare at computer screens with deep bewilderment for long periods, this is the movie for you. If you’re a film-maker or film-geek who gets excited by long-lens silhouette shots, this is the movie for you.

If you want a concrete story with in-depth characters and tension, this is NOT the movie for you.

Arrival is about the importance of communicating. Communicating with honesty, integrity and transparency. It takes time to understand what doesn’t make sense and points of view that are opposite or different to our own.

Arrival was released days before Donald Trump was elected into office, making these ideas all the more poignant for these politically divisive times.

I can say I love what the film’s story is about, but not how the film goes about telling its story.

Arrival gets 7 out of 10, for style.

* * *

Stu’s note: Based on a Ted Chiang short story, the concept for this movie was instantly interesting to me. However, it’s a slow-paced film with many contemplative shots that linger too long. As Andrew mentions, the style of this movie makes you think there’s more to the story than there really is. After the movie, I felt like there was something deeper that I was missing, but additional probing with friends failed to turn up much. Many science fiction movies of this type provide a fertile seed for “what if” conversations about free will, predestination, and soothsaying, but Arrival didn’t feel like a typical sci-fi movie in that respect. Instead, it focused on exploring the idea of communication – both intra- and interspecies – while doing so in an innocuous manner that didn’t provoke the “what if” kind of curiosity that I love about sci-fi.

  11:33pm  •  Movies  •  Tweet This  •  Add a comment  • 
8
Nov 16
Tue

  stuloh I can hardly believe it but he's won

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  stuloh WTF America

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