We’ve been at this podcast thing for a few years now. I’ve had some amazing conversations and have learned a TON, but we’ve decided that it’s time to try something new.
I get some of my most trusted and valuable updates from the partners at Interplay. They’re my main source of news and how I stay up to date on what the hell is really going on in the world. So we’ve decided to try to capture some of those convos and share them with you.
Introducing, the Partner Meeting.
I’m going to have a quick one on one chat with four partners from Interplay about their area of expertise.
Segment 1: Mike Rogers - partner of our venture capital vertical - will come on to chat about VC and startup trends.
Segment 2: Chris Zhang - partner of our Family Office - is going to cover global macro trends.
Segment 3: Brett Palatiello - partner of our blockchain vertical - is going to fill us in on the latest in the world of blockchain, crypto and web3.
Segment 4: Phuong Ireland - partner of our incubator - is going to share a business tip of the week.
So without further ado, let’s dive in.
Transcript (this is an automated transcript):
MPD: All right, Mike, what do you have for us this week?
Mike Rogers: Yeah the venture market's been interesting to say the least this September. So I think a lot of VCs after the summer break thought that coming back in September, deals was started to pick up maybe quite ferociously.
And the truth of the matter is we really haven't seen that yet. We are starting to see at the Series A, at least the market unstick a little bit people poking their heads back out to take temperature figure out what interest is on the investor side, pricing looks like, et cetera. But we really haven't seen the deal pick up that we thought we would.
And I think what that really bodes to is just a mis mismatch in the market between what the expectations are for founders and what the expectations are for VCs in terms of prices around. And we just haven't seen equilibrium yet. And because of that, I think again, dcs have an expectation that things are gonna price much lower given public market comps, investors, senti.
Overall macroeconomic feelings and headwinds, and investors still think their company's worth what it might have been worth six or 12 months ago. I think that might not be, that might not be completely true. I know they don't think it's worth exactly what it was at the peak of the market, but they don't think it's worth what people are trying to price at today.
And, we'll see. I think a lot of people are saying, Oh there's so much dry powder out there in the market. Yeah, that's true. There's a lot of dry powder out there. But at the end of the day, VCs don't have to deploy capital. Every day, every month, every week. Entrepreneurs will need to raise money at some point.
And we'll see how that shakes out over what I think will really be the
MPD: next three to six months. You know what's interesting is if, I talk to a lot of my buddies in private equity and they say, Look, there's a bid ask spread issue. Right now comp deals are not getting done. Yeah. But they live in a world where companies are generally cash flow positive.
They can just sell in two years, three years. They can wait. This out venture is not the. We intentionally run companies that could be profitable at a loss to optimize for growth. And so there's a lot of companies out there that aren't able to retool for profitability, and there's only so long they can hold their breath before they have to come up for air and raise money.
It's interesting. I thought we were actually gonna be seeing more transaction volume, more deal flow popping up already just because no one knew this was coming. It was impossible to budget properly. Now that said, deals are getting done. We've made some investments recently, but it's not back to the normal cadence that we saw, pre dip.
Mike Rogers: Yeah,
agreed. And I think if you look at what's going on in the public markets as well right now, and as that kid, another low, again, this just this week, we're talking Friday, September. And people are spooked. You've got sentiment ratching up in overseas, in Europe right now. I think that's definitely scaring some investors.
Obviously inflation is not quelled at all. So on our side, I think people wanna see that turning the corner before they start to write big checks. Now, again, at the seed, maybe even the series A level, people are really looking 3, 4, 5, 6, 7, maybe 10 years out. So can you still make bets at that stage?
Absolutely. B, c, d, Not sure. How do you know how to price a company fairly? How do you know what the thing might look like? What does an exit look like? Web, all these things that you try to pinpoint as an investor become really hard to do in a market like
MPD: this. Yeah. The valuations we're seeing in the deals we're doing on the early stage, they're down from where they were last year, but they're more like at 19 levels.
The carnage we're seeing at the growth stage where there's a shorter time horizon to. Early stage, we, we're buying now for a far off market exit. Yeah, exactly right. The carnage there is a lot different, a lot heavier. And it's a tougher time to be a founder of a more mature company. Yeah.
Mike Rogers: the growth stage math is really pretty simple if you think about it. It's if a company raised a large growth round last year, and let's say it was a SAS business and maybe they price it at 30 or 40 times revenue. Those market comps are now 10 or 15 times revenue, for a high growth business.
So for that company, they would've had to triple revenue between that raise and this raise even to get back to the same valuation on a relevant multiple. And that's just not happening, especially as the economy slows down, as people are cutting head count, as sales growth is slowed down and we're seeing it across pipelines for SaaS companies and for consumer businesses too.
So while I think the economic shock hasn't been quite as strong yet, and you saw that in the consumer spending data this week, people are still spending a lot of money. Companies are bracing for impact and that is slowing sales down by by the natural.
MPD: Mike, this is great. Thanks for giving us some insight here.
Appreciate you. My pleasure. Up next, we have Chris Zang covering the broader market dynamic. Chris, my dude, what? Mark, how are you? Good, man. What's happening in the market? Give us the update.
Chris Zhang: It's one of those weeks where, Every day we're bombarded with headlines, and unfortunately most of them are not looking great.
Long story short start from the beginning. In the US we had a few data came out. Of course we've got the perpetual inflation data that that this week was the personal consumption of expenditure data, which is really the Fed's preferred way of looking at inflation that came out stronger than expected.
We have all got the job data, which is, and this week it's the initial job listing claims that came out at the lowest level since March, 2022. Both data basically gave the Fed more reasons to hike at a faster than expected speed. Which of course is bat for risky assets. So you've seen this capitulation of market since the fed meeting two weeks ago of the 75 base, based upon hike of continued losses in equity market and the rest of the risky assets as well.
And in addition to the US of course, the biggest news of the week arguably was in England where after the surprise. Tax cuts, which are obviously very controversial and have driven the market to extreme in risk sentiments. Now Bank of England came out with a surprise intervention, which is a bomb banging program similar to the QE program here in the States where the banking Glen is has agreed to buy up to 5 billion sterling a day worth of long dated.
Skills are also known as the treasury, effectively the treasury bonds in the in, in the uk for two weeks straight. So this has, was intended to stabilize the market, has sent signals that to the rest of the central banks in the world that maybe it's time to begin some sort of easing, which has helped risk sentiment Initially for about a day, we saw s and p rallied back about 2% from the lows.
Treasury rates have stabilized guilt again the treasury in the UK sold off 150 basis point, almost leading up to it, and then all of a sudden had a single day, single biggest rally many years of 50 basis point. After all that, only to give back, basically all the gains in the market on Thursday.
Where investors are taking a hard look at intervention and basically have decided that maybe the scale's not big enough and the timing is not right. And so what we've seen, what we're seeing is a continued downward trend in sentiment. So today we're basically making Yesterday and today making you lows in the market again.
And I know it was longwinded answer to your question, but let me, There's one more thing. Of course. And we cannot talk about what's happened in the war without mentioning Elise Russia, where the big news this week is the official. Votes on the Ann Annexations of a few Ukraine territories.
That has gone through officially as of today. Again, Bat River sentiments. This could lead to a dragged on war scenario where Europe will definitely suffer in the winter with the supply chain destruction energy crisis, and of course the rest of the world
MPD: Will feel that as well.
So the overall headline is, Hey, we've been. And it tails been for a while and it's not over.
Chris Zhang: Unfortunately, yes. The, as an investor, you, of course you don't like, Uncertainties and you there are more centers, certainties in the world, but at the moment we're just seeing uncertainties in all fronts.
Geopolitical, economic, domestic, international, you name it. And it's a tough spot to be and it's hard to see the bright side at the moment.
MPD: You are the most pessimistic person in our group probably with good reason. You're staring at this data, whereas all the private market folks are staring at these rosy stories of companies, building the future.
What's what's the opportunity set here? Is there any silver lining in kind of all of this negativity that people should be thinking?
Chris Zhang: Great question. Frankly as an investor, you want to be the long link type of investor. You want to bet on the rosy future, if you will. And me included.
So I we're always on a hunt for an upturn in the market. Look, it's all about expectations, ver versus reality and market. Remember, Mark is always for looking six months, nine months. It's arguable. So it's a matter of when you think markets overpriced, the risk and the uncertainties around the.
If at one point we're starting to see that the mark market right now is for instance, pricing in about 4.6% top rates from the Fed in the us. If at one point we're starting to see market participants are, in the future's market, are starting to price in 5%, 6% interest rates. And our view is a potentially we will need to get there to bring down inflation.
And that's a scenario where, markets overpriced, the risks overprice the down. And that's potentially when we can start to think about adding to our loan positions and betting on a better future in risky assets. And of course, whenever, Marcus are too pessimistic about the world I think it's always good to come in and think more rationally.
MPD: You've brought down my mood for the entire day. But thanks for being here. So everyone knows Chris is a s e c registered raa, so nothing he said should be consider. Financial or investment advice, blah, blah, blah. That's my disclaimer. You're probably gonna hear it way too often. All right, buddy.
Thanks for being here. Thank you. Have a good one. All right. Now Brett's gonna come in and cover blockchain. All right, Brett. What's happening in the world of blockchain? Yeah.
Brett Palatiello: So we're, One thing I wanted to bring up, and I've noticed over the past couple weeks we're starting to see more high profile forays into web three.
Starbucks recently announced that they're gonna integrate NFTs into their rewards program on Polygon. So that's very interesting because obviously the rewards program is pretty massive. We also saw Warner Music Group a big record company. They're gonna be partnering with Open Sea to allow, their artists like Cardi B to more easily access and,
Brett Palatiello: There's a few other things. Finally, us Facebook and Instagram users, everybody will be able to display their NFTs on those different social media platforms. Google's had a web three said they're looking to be layer zero for web three. So it's very interesting to see everybody starting to pile.
And that's a little concerning in the space for some people considering a lot of this technology is supposed to be disrupting their business models. But it does show that the space is being taken much more seriously. The values of decentralization and interoperability are being taken much more seriously.
So it's definitely a hat tip to what we're building
MPD: here. Here's a question though. I've been talking to people at large companies for the last couple years about this, and it doesn't seem like they really had their head around how blockchain, how NFTs really fit into their businesses. They knew it was neat.
They knew it was a hot topic. They probably knew they'd get promoted if they did something around it, but. The ways they were talking about using it didn't real have real practical business applications, and I think they knew that. So are the approaches that you're seeing now thoughtful and reflecting the underlying utility of the technology, or are they like lipstick on a pig?
What's happening here?
Brett Palatiello: Yeah, no I think they're definitely starting to figure out that there's real use cases for this stuff. For example, NFTs for rewards programs can be a much more engaging, interactive way to issue a rewards program. And it's all in the blockchain, so it's all interoperable with.
Everybody else's ecosystem, right? They all share the same rails which is why both Instagram and Facebook you can display your nfps, right? So you're able to port things from different places. And also it's a shared layer for all of this data to live and move. So they don't need to build out this infrastructure.
They can just place it on a public blockchain that's being managed in by a decentralized community of validators or
MPD: notes. And so I, I would imagine a lot of these companies are starting to work with the consultants in the space. For those who don't know that there's a number of firms that have popped up that are experts in how to work with NFTs and the blockchain, and they're advising large corporations are you hearing any engagement on that in the background, or do you know how they've picked up the intel on.
On in terms of consultants Yeah. People who are actually helping them, and we've got friends over at a place like Minar and other places that Oh, yeah. Do real work and try to help people navigate this.
Brett Palatiello: Yeah, a lot of what we're looking for is people that are and they call it Web 2.5 is one of the themes we're gonna be investing in is bringing all this technology to the mainstream, right?
There's a lot of, it's supposed to liberate artists from big record labels. The problem is they don't have the tool sets. To be able to use this type of technology or create, NFTs or issue them and create generative art and things like that. A lot of that's gonna require a traditional Web two ui, ux which is much nicer than Web three UI UXs.
But it's also gonna be a little bit more white glove. We're gonna start seeing probably the larger labels, at least we're gonna have people like Minar. Creating NFT projects for these larger artists. So a lot of the next transition from where we are to the next a hundred million users I think is gonna be within or in front of a traditional web two interface.
Abstracting away all of this technology from users and creators and instead you just have one more seamless experience and you're able to do things that you couldn't do before, or you're able to do things in a much
MPD: more efficient way. I totally agree on that front. I think when people's, from a consumer standpoint don't know the taglines or the web three or the blockchain or nft, when that's not actually part of the user experience, they're just doing something.
They wanna do in a mobile app or on a web. I think that's what I think we're gonna get mainstream. Yeah, no, that's,
Brett Palatiello: That's exactly what I think it's gonna look like. We're just gonna be using this technology. You're not gonna know which chain you're on. You're not gonna worry about moving assets to and from different different applications or different different chains.
So ultimately, again, you're just gonna be able to do something cooler that you couldn't do before, or more engaging, right? You have NFPS that evolve or they allow you to do certain things or access certain people. I think that's the ultimate end. And then at a very based layer we're gonna see, much more decentralized things that are more trying to be universally accessible so people can take their keys and their data from them and go, they call it self sovereign.
And essentially it's a check on power of big corporations who are, abusing data or abusing users. So I think it's a great system overall.
MPD: Brett, appreciate you man. Thanks for the, Thank you. And last but not least, we've got Fong here covering the business tip of the week. Fong. All right.
What do you have for us this week?
Phuong Ireland: Hi everyone. Today I wanted to talk about talent and team building. In the Interplay Incubator, a big part of what we do is we work with companies to ensure that they have the right people in place and the right team structure so that they can really succeed in scale.
Now, to create a high performing team, it's absolutely essential that you pull together people with different backgrounds, different skill sets, and different working styles. So how do you know that you have the right people in place? How do you know if you're missing a key team member? An exercise that we like to do in the incubator and something that we internally call the Superman analysis, and we call it that because no one can do it all by themselves, right?
No one's a superman. So it's really simple, but it's a great tool to help you uncover the holes on your team. So for those of you watching on YouTube, I'm gonna show you an example of what it looks like, and then for people just listening, I'll just follow along. I'm just gonna explain it. So here we've come up with I'm doing the Superman analysis for an econ company, so on the left hand column, We list out all the skills that you would need for across the entire company, for that company to really run efficiently and meet their business objectives.
So specifically for this co this company, it's things like supply chain management, assortment building three, PL management tech builds, emails, all the marketing activities. This is probably not exhaustive, but and this will differ between companies and industries. Then on the next few columns, we list out each person on the team.
So in this particular case, we have two co-founders and three employees. Now, for each team member, we then go down and put an x next to the skills that they have on each. So you'll see co-founder one is really doing a lot of supply chain management at three PL management. Co-founder two is doing a lot of the kind of Shopify and website management and then on and on for the three other employees.
Now, once you're done with that, it'll become really clear where the holes in your team are. So for example, in this particular case, customer service seems to be something that co-founder one is doing. But. But he or she is not really, That's not a strength of theirs. That's why I have this this, I bold the areas where it's a strength for that person and then I put in a different color where they're doing the activity, but they're, it's not a strength for them.
So it seems like customer service is a, is an opportunity here. Co-founder one is doing it. She has a lot of on her plate. And it's a really important activity for an econ company. Partnerships and events seems like another opportunity, content creation, community building on and on. So as you can see, it's a really illuminating analysis.
It tells you visually where the holes on your team are and if one person is doing too much or too little for that matter, or if someone's working on too many activities that are not a key strength for them. So that's a Superman
MPD: analysis. This is a great tool. One of the things that's so powerful about it is bon what you're doing.
I have found that founders will look at this and be like, Oh, we basically have an act two activities with this person, two activities with that person, two activities with this person, and we put it all together. It's actually a full-time job description, and it's not easy to see that you can create jobs out of kind of the little overage that a lot of different people are facing.
So this is a really useful tool for it. One other thing I think is really fun with it too, for folks listening is, Once you figure out where you currently are, you can make another copy of this document and you can plot out where you wanna be. You can say, Okay, we're gonna move these three over to this person and we're gonna, we're gonna realign some work internally.
We're gonna add a couple people to the team. Here's what they're gonna be doing. It's so simple. Having the team, doing the right types of work is so important. And almost shamefully there's, we've never experienced another tool to do this, so we came up with this concoction. One of the last things I wanna talk about, which I think is fun on this particular topic, Fong when you look at these roles and how things are allocated, I love thinking about how it's gonna evolve as the organization scales.
Now, a lot of people are doing the Superman analysis in the early days, they're doing it on their team of one to 10. But if you're doing it right, when someone has a 20 person team or 30 person team, there's a trend here, right? The founders should increasingly. Move tasks off their plate. So I love that this starts to give insight into what people should be faking about getting out of their workflow, what they should stop del doing and start delegating, which is a constant challenge for folks.
And I think being intentional about is a little easier when you see it. Yeah, for
Phuong Ireland: sure. I think, as founders and co-founders, it's really a lot of co-founders really have too much on their plates, right? They're doing everything from high level to some more of the, day to day.
I wouldn't wanna call it menial tasks, but those are the things that you can start prioritizing. To get off of the founder's plate so they can focus on the big activities that are really driving the business. But you can't do it on day one, obviously. It's over time.
MPD: This was awesome.
Thank you for sharing this phone. Thank you.
All right. That was our first go at the partner meeting. I thought that was pretty awesome. I don't know if you liked it as much as I did, but I was interested in it. Hopefully it was engaging for you guys. We're trying to come up with fun names for each of the segments for the four partners. If you have ideas, please drop 'em on Twitter or in the chat commentary area.
And that's our first go at the partner meeting format. So look, you know the drill. If you wanna get in touch, you can find me on Twitter at mpd, and to hear more of my conversations with innovators, you can subscribe on YouTube or any major podcast platform. Just search for innovation with Mark Peter Davis.
PS we need better names that segment one, two, three and four, so if you have any ideas, please share!
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