March 29, 2020
Back in December, Marc was my attorney on a closing. We were talking casually, shooting the breeze at the closing table, waiting for a document to get copied or something. "I can't imagine the [stock] markets are going to keep going like this", Marc mentioned, to nods all around, including me, and Travis Thompson, our lender. It was late in the cycle; things were expensive.
About a month later, I was on the phone with my friend Craig, who's done time at Capital One, now works in fintech, and has done some real estate investing. He was talking about doing a real estate fund (I think back in January). "That's the long-term plan, but I wouldn't try to buy now; it's not the right time in the cycle".
Again, with my friend Kurt on the phone: "We couldn't get the numbers to work on the acquisition. It seemed a downturn was on the way, and our models just couldn't get to the price they wanted".
I don't hear about the business cycle here, in Silicon Valley; it's just not as much a part of the zeitgeist. I'm not sure whether that's because my network here skews younger, I talk to fewer banking/finance people here, or because good ideas are evergreen.
But for whatever reason, it just doesn't seem to be in the air here. Everyone's talking about VC valuations, option prices, how much money they've made on their Google stock, how unaffordable housing has become, how VC doesn't scale, but failing to see how, as Ray Dalio would say, it's just "another one of those".
It's like everything's falling toward earth, but nobody understands gravity.
Fund 1 = $300M, Fund 2 = $600M+, Fund 3 = $900M+ = how many books/blogs/mediums do we all need to write collectively to realize the truism = VC does not scale— Keval Desai (@kevaldesai) March 7, 2020
Or maybe I'm just getting older?
I read that report. It was excellent. Other thing been on my mind is general riskiness of late-cycle investing where assets are, in the polite speak of markets, "fully priced". Very little margin of safety.— David Albrecht (@davidralbrecht) March 26, 2020