this week i'm thinking about – #3 – debt in SV
I’m writing a weekly blurb about 1) one thing I learned, and 2) one question I’m thinking about that’s broadly tech-related.
If you have thoughts on the topic or question, please do reply! I’ll paraphrase the best responses in the next newsletter. My goal is to conduct a search for dialogues with people thinking about similar things with different lenses. I'm trying this out with a small group of friends (congrats, you're a VIP), but if you know anyone who would be interested in the discussion, please do forward this along or have them subscribe here.
What I learned about: debt
TechCrunch published an article this week about Softbank’s use of debt in their Vision Fund, with a sharply negative tone: “That’s $14.6 billion in debt for a $98 billion fund… it’s hard to believe that the GPs could invest $98 billion and not find at least $14.6 billion in returns to cover their debt repayments.”
I’ve observed blanket negativity around debt in Silicon Valley: being indebted doesn’t mean that immediate repayment is financially logical. Although credit is no longer a sin in two of the three major religions, its role in the student debt crisis and 2008 financial disaster drives a crippling fear of all debt despite its usefulness as a financial tool.
Doing Capitalism in the Innovation Economy, a book about the early days of pioneer VC firm Warburg Pincus, details deal structures that use debt, covenants, and VC-funded research projects to build great companies. Creative strategies like these are oddly absent a half-century later in a supposedly more sophisticated Silicon Valley. I suspect there are creative ways to use debt in SV that haven’t fully been explored yet, particularly on the venture side.
What I’m wondering about: unbundling of labor marketplaces
There’s an article from 2010 that shows the unbundling of Craigslist that makes the rounds every year or two. Investing in a basket of these unbundled services would make for one of the best venture funds in history. Will we similar unbundling of digital labor marketplaces like Upwork, or physical labor marketplaces like Thumbtack?
Top replies from last week’s edition (on creative distribution channels):
Michael suggested there’s a powerful underexplored distribution channel hiding in plain sight: programming Twitter bots to algorithmically retweet relatable content and promote your brand.
Brandon saw a unique distribution strategy in Zoom’s automatic integration with calendar invites, which lowers the friction for virality between coworkers.
Axel chimed in on the live-streaming phenomenon, pointing out that a large, relatively low-income, and internet-connected population like China’s creates (1) interest in cheap P2P entertainment and (2) a large potential pool of people trying to strike gold by broadcasting.
Andrew thinks the long-tail of social media influencers are a relatively untapped channel, but the influencer arb is diminishing. He shared a recent paper that surprisingly suggests random seeding of content in a network may be as effective as targeting influencers.
What I’m reading: