The buzzword of 2024 is “AI” and like social, mobile, cloud, fintech, and blockchain, every startup is claiming to have it and every big startup fundraising is claiming to expand what can be done with it. Or in short, we’ve been here before. A Grand Unified Theory of the AI Hype Cycle does a very good job explaining how this will play out in 13 steps, and how it already played...
The standard structure for private equity funds (and venture capital funds) is “2&20”, as in a 2% management fee (±1%) and 20% (±10%) of the profits, a.k.a. “carried interest“. Why 20% of the profits?
Henry Kravis of KKR explains below, starting at 6:00. TL;DR: Necessity, as he and his partners had no capital to put at risk.
Other people, see things and . . . say ‘Why?’ . . . But I dream things that never were– and I say: ‘Why not?’ – George Bernard Shaw This has shown in my 30+ year career repeatedly. Most recently a few months ago, when pondering the “Missing Middle” of capital for startups in general, and SMEs in Africa specifically. Why? Why is it taking so long for...
Venture capital funds often tout cash-on-cash returns of 2x-3x over 10 years. That is the supposed “norm” for successful funds. But despite the industry being tracked investment by investment in detail, the industry as a whole is notoriously opaque when it comes to the returns of the funds. Thank you to Dan Gray (@credistick) who tweeted the following table, with data from 1981...
Is every investee at Africa Eats and Africa Trees an SME? Are they all small. Are any big enough to be medium? Did the biggest grow beyond SME status last year? Where are the edges to these categories? There is no global authority to answer those questions, but the EU does have a definition that they’ve not only published, but have updated at least once. The boundaries between...
Why did New York need another stock exchange in 1968? Why was the New York Stock Exchange, American Stock Exchange, and Pacific Stock Exchange insufficient? An unprecedented bull market coupled with paper-based systems. I’m in my 50’s and don’t remember “Wall Street” not having both the NYSE and NASDAQ as the two main exchanges. I am old enough to remember the AMEX...
Ars Technia published a lovely history of the changes in market leadership in computers, tables, and smartphones. My takeaway is another reminder of how much more difficult foresight is than hindsight. Especially when I was reading the prospectus to the Apple IPO, where the risks were about the TRS-80, Atari 400, Commodore PET, and other competitors of the day. We all think of Apple today as a...
I’m often asked what I do. I invest in young companies and help them scale up. That is true but a bit vague. So today let me show you what I mean by scale up, using seven examples from my Africa Eats portfolio. Africa Eats invests in companies building the food/ag supply chain, filling in the gaps of business infrastructure, and our progress ending hunger and poverty. I met all of the...
Apple went public in December 1980. They successfully raised $100 million at $22 per share. They’ve split those shares 2:1 three times since then, and 7:1 once, and 4:1 once, plus they’ve bought back a lot of shares, but roughly that $22 share today is worth at least $40,000. If you read this blog, you know that rise in value isn’t what mosts interests me, but rather the fact...
It feels like venture capital has been around forever. Forever as in at least a few hundred years, if not thousands, no? No. Venture capital as talked about and practiced today has only been around since 1959. It is younger than my parents. And it wasn’t a $1+ billion industry until the 1980s, when I was in high school. This is part 2 of a series and will focus on that slow growth of the...
