🍋 VCs are Now Hedge Funds

Author

Short Squeez
October 14, 2022

Together With

"You don’t run a business hoping you don’t have a recession." â€” Jamie Dimon

Good Morning and Happy Friday! Another day, another hot inflation reading as CPI hit a new four-decade high (8.2% for September). That dials up the pressure on the Fed to raise interest rates, but stocks rallied back as investors make sense of the new data. Retirees are getting an 8.7% Social Security raise to keep up with boomin' inflation. Netflix is releasing its new ad-supported plan starting Nov. 3 in US, which will cost you $6.99 a month, $1 less than Disney+ and Hulu. Kroger and Albertsons are in talks to merge and create the largest grocery chain in the United States.

As promised, you can download the VC interview guide here.

1. Story of the Day: VCs are Now Hedge Funds

The lines between venture capital and hedge funds are blurring.

Tech stocks are plummeting, and venture capitalists are going all in on the dip. VC firms are going to the public market to try and make their investors more money. 

VC firms made their name unicorn-hunting unproven, risky startups. For example, Uber and Facebook were VC-backed and made their investors a killing when they IPO’d.

Competition in the private markets is heating up as investors try and replicate the industry’s previous success. Investors are eager to get their hands on the next 100-bagger but are wary of overpaying for unpromising startups.

Some firms say they'll dabble in the public markets indefinitely, and some are even registering to trade stocks and crypto. 

Not all their investors are psyched with the news. They want exposure to start-ups, they say, not public stocks anyone can buy. Venture capital firms are betting that their investors will eventually warm up to higher returns from public market exposure.

Takeaway: 2022 has been a down year for both, the public and private markets, but competition is still stiff. Venture capital firms race to deliver superior returns and, if that means buying the public tech stock dip, so be it. As VC investors dabble in public markets, their private equity counterparts are limiting LBO exposure and embracing the credit markets. Neither of these pivots is sexy, but alternative investors believe broadening their capabilities is a win for clients.

2. Markets Rundown

If you want access to Wall Street insider interviews, industry deep-dives, and investment ideas, check out our Insiders newsletter.

Stocks rebounded on Thursday after swinging 5% on the day.

Movers & Shakers

  • (+) Revlon ($REV) +22% after creditors who accidentally sent the company money were denied a review.

  • (+) Domino's Pizza ($DPZ) +10% after quarterly revenue came in at over $1 billion.

  • (–) Relmada Therapeutics ($RLMD) -80% after its depression drug failed a clinical trial.

Private Dealmaking

  • LingoAce, a remote language learning platform, raised up to $200 million

  • Homa, a mobile game publishing platform, raised $100 million 

  • Inari, a gene editing startup, raised $124 million

  • Immersive Labs, a cybersecurity skills platform, raised $66 million

  • CrowdStreet, a real estate investing platform, raised $43 million

  • Diamondback Energy bought FireBird Energy for $1.6 billion

Top Reads

  • Cathie Wood’s ARK innovation runs aground (Axios)

  • The September inflation breakdown in one chart (CNBC)

  • The “big driver” lurking behind Q3 earnings (Axios)

  • Britain’s bond market turmoil (Reuters)

  • Tom Brady buys a Major League Pickleball team (CNBC)

  • BlackRock profit falls 16% amidst shaky stock market (YF)

  • Mortgage rates hit 20-year high (CNN)

  • TikTok parent ByteDance plans music-streaming expansion (Reuters)

  • Why your boss can’t quit you (Axios)

A Message from BioTech Stock Trends

Meet the little-known Biopharma company that targets multiple disease markets (Recent Nasdaq Uplisting).

It’s not difficult to discover large, underserved medical markets. They’re everywhere if you do a little research. 

Alzheimer’s Disease, Multiple Sclerosis, Rheumatoid Arthritis, Stress-induced psychiatric disorders, and Fibromyalgia are just a few. One company already has 5 patents issued and provisional, 4 patents pending, and has 5 novel drug candidates that are under development that could disrupt these markets in unimaginable ways.

4. Book of the Day: Power Play

Tesla is the envy of the automotive world.  Born at the start of the millennium, it was the first car company to be valued at $1 trillion.  Its CEO, the mercurial, charismatic Elon Musk has become not just a celebrity but the richest man in the world.

But Tesla’s success was far from guaranteed. Founded in the 2000s, the company was built on an audacious vision. Musk and a small band of Silicon Valley engineers set out to make a car that was quicker, sexier, smoother, and cleaner than any gas-guzzler on the road. 

Tesla would undergo a hellish fifteen years, beset by rivals—pressured by investors, hobbled by whistleblowers. Musk often found himself in the public’s crosshairs, threatening to bring down the company he had helped build.

Wall Street Journal tech and auto reporter Tim Higgins had a front-row seat for the drama: the pileups, breakdowns, and the unlikeliest outcome of all, success. A story of impossible wagers and unlikely triumphs, Power Play is an exhilarating look at how a team of innovators beat the odds—and changed the future.

“Belief created the vision; the vision would create a market; the market would create cash; and cash would create cars.”

5. Short Squeez Picks

A Message from GoingVC: Interview Guide

Interviewing for a VC position like any other job requires thorough preparation. Whereas in the past you may have needed to prepare to answer questions about your resume, strengths, weaknesses, and so on. When interviewing for a VC position there are more important things to focus on. 

GoingVC, the venture ecosystem for emerging VCs, has developed a comprehensive VC interview guide with real interview questions and actionable steps for you to land your next VC role!

6. Daily Visual: Inflation Stays Hot

Source: Axios

7. Daily Acumen

"Calm plants the seeds of crazy. 

If markets never crashed, they wouldn’t be risky. If they weren’t risky, they would get expensive. When they’re expensive, they crash.

Same for recessions. When the economy is stable, people become optimistic. When they get optimistic, they go into debt. When they go into debt, the economy becomes unstable. 

Crazy times aren’t an accident – they’re an inevitability. The same cycle works in reverse, as depressed times create opportunities that plant the seeds of the next boom. One way to summarize it: Nothing too good or too bad lasts indefinitely."

Source: Collaborative Fund

8. Crypto Corner

9. Memes of the Day

 

 

 

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