It is a tremendous read. Very Bezos. Very Buffett too. Here's a few highlights,. On innovation:. One of the lesser known facts about innovative companies like Amazon is that they are relentlessly debating, re-defining, tinkering, iterating, and ...
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Andy Jassy’s first letter as CEO of Amazon and more | bwagy


Andy Jassy’s first letter as CEO of Amazon

It is a tremendous read. Very Bezos. Very Buffett too. Here’s a few highlights,

On innovation:

One of the lesser known facts about innovative companies like Amazon is that they are relentlessly debating, re-defining, tinkering, iterating, and experimenting to take the seed of a big idea and make it into something that resonates with customers and meaningfully changes their customer experience over a long period of time.

On building products:

1/ Hire the Right Builders: We disproportionately index in hiring builders. We think of builders as people who like to invent, who look at customer experiences, dissect what doesn’t work well about them, and seek to reinvent them. We want people who keep asking why can’t it be done? We want people who like to experiment and tinker, and who realize launch is the starting line, not the finish line.

2/ Organize Builders into Teams That Are as Separable and Autonomous as Possible: It’s hard for teams to be deep in what customers care about in multiple areas. It’s also hard to spend enough time on the new initiatives when there’s resource contention with the more mature businesses; the surer bets usually win out. Single-threaded teams will know their customers’ needs better, spend all their waking work hours inventing for them, and develop context and tempo to keep iterating quickly.

3/ Give Teams the Right Tools and Permission to Move Fast: Speed is not pre-ordained. It’s a leadership choice. It has trade-offs, but you can’t wake up one day and start moving fast. It requires having the right tools to experiment and build fast (a major part of why we started AWS), allowing teams to make two-way door decisions themselves, and setting an expectation that speed matters. And, it does. Speed is disproportionally important to every business at every stage of its evolution. Those that move slower than their competitive peers fall away over time.

4/ You Need Blind Faith, But No False Hope: This is a lyric from one of my favorite Foo Fighters songs (“Congregation”). When you invent, you come up with new ideas that people will reject because they haven’t been done before (that’s where the blind faith comes in), but it’s also important to step back and make sure you have a viable plan that’ll resonate with customers (avoid false hope). We’re lucky that we have builders who challenge each other, feedback loops that give us access to customer feedback, and a product development process of working backwards from the customer where having to write a Press Release (to flesh out the customer benefits) and a Frequently Asked Questions document (to detail how we’d build it) helps us have blind faith without false hope (at least usually).

5/ Define a Minimum Loveable Product (MLP), and Be Willing to Iterate Fast: Figuring out where to draw the line for launch is one of the most difficult decisions teams must make. Often, teams wait too long, and insist on too many bells and whistles, before launching. And, they miss the first mover advantage or opportunity to build mindshare in fast-moving market segments before well-executing peers get too far ahead. The launch product must be good enough that you believe it’ll be loved from the get-go (why we call it a “Minimum Loveable Product” vs. a “Minimum Viable Product”), but in newer market segments, teams are often better off getting this MLP to customers and iterating quickly thereafter.

6/ Adopt a Long-term Orientation: We’re sometimes criticized at Amazon for not shutting much down. It’s true that we have a longer tolerance for our investments than most companies. But, we know that transformational invention takes multiple years, and if you’re making big bets that you believe could substantially change customer experience (and your company), you have to be in it for the long-haul or you’ll give up too quickly.

7/ Brace Yourself for Failure: If you invent a lot, you will fail more often than you wish. Nobody likes this part, but it comes with the territory. When it’s clear that we’ve launched something that won’t work, we make sure we’ve learned from what didn’t go well, and secure great landing places for team members who delivered well—or your best people will hesitate to work on new initiatives.

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It’s time to upskill

New year, new you, right? Well it is a fresh start, to lay a foundation for a big step up in the year ahead. And a couple of thoughts I wanted to share were around upskilling and data.

We are now seeing the culmination of covids acceleration in the evolution of the internet. And that has brought a lot of new lingo, new tools and culture. But so many of us are having a challenge catching up on this new world. We do have two choices, to get in there and learn, or to sit this one out.

That means its time to upskill, to tinker with these new tools, to spend a few hours just trying to make something work. To find time in the calendar, not for anything specific other than to play and learn.

The year also brings a fresh start on data, what data are you using as feedback? Daily, weekly, monthly? Data nudges you along on any journey. And now don’t be so limiting to think all data is a dashboard, data can be a journal or log you keep of activity, it can be your Apple watch, it can be actual measurement. Data comes in many forms.

The power of data is often in that it just exists, it acts as a feedback loop, which keeps focus on what you’re trying to achieve. And that itself, without the substance of what the data is telling you, is very valuable.

So as you think about the year ahead, think on upskilling and what data can nudge you on the things you want to achieve.

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Exercise bands and distillation

I’ve been enjoying exercise bands, $20 from Amazon. They’re the ones with grips and depending where you are there’s a million knock offs.

Initially the bands were to to round out others I was doing outside. But now that I am able to go back to the gym, I’ve made them part of my gym protocol. For biceps, chest, back.

(If you grab them, they come with a manual showing a bunch of exercises to try).

And I really like this as an analogy, the bands were made to help distill a gym workout in to something that was portable. And then reversing that, it has a great role in a gym based workout.

It’s like adding chicken stock to a chicken soup. The distillation, re-added to what was aiming to distill improves the end product. Funny thought but kind of makes sense.

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Tinkering

There is an immense satisfaction in tinkering. Just playing about, exploring, seeing what something does.

It’s being curious without an agenda.

The same as pursuing boredom is a worthy goal, so is tinkering. Treat this post as permission to tinker, I sure am.

The post Tinkering first appeared on bwagy, the blog of Ben Young.
   
 

Late stage secondaries

This is the third in my recent posts about investing (100 Companies, Investment lens, what I’ve been up to). More about the discoveries I’ve made the past 18 months or so. This post is on secondaries, that is buying shares in later stage startups. This is an area that has been getting more and more democratized. Examples might be a SpaceX or a Stripe.

The present market state, is such, that for institutional investors who want exposure to future IPO companies there are a lot of options. For individual investors the options drop off compared to that but are still available.

Who can do this?

Typically the minimum is $50k, however some platforms come down to $10k depending on the deal. So these are sizable investments. Which hold a lot of risk, an IPO or acquisition isn’t certain. However you can buy in to quality companies that you want to own.

You also need to be a qualified individual under US law.

How are they structured?

Typically the firm creates a SPV to hold the secondary shares and you are buying units in that entity. You can hold the units directly or you can hold through your own entity.

Can you buy a ‘fund’ of secondaries?

Yes, most providers either offer these in batches over time or continual funds.

Where do they get the shares from? Why are those people selling?

Typically these are early employees selling their shares, it can also be funds from early investors selling a portion of their stock. You might think they’re crazy to sell stock in such a hot company. But these holdings might represent most of their gains or all of their net worth. A smart individual would sell some, to at least pay off the mortgage, diversify.

The other thing is, life happens. The employees may have left or are leaving. Tax bills arise.

But you are right to be skeptical, maybe they are selling as bad things are on the horizon. Be attentive if you’re seeing a lot of sales or a depressed price. That is where your own due diligence needs to come in, a long term outlook and to listen to the market.

The final way is some firms offer financing for startup employees to exercise their option or to buy their options if they are leaving. If they finance the exercising of the options, they typically take some upside. So in each case they are on-selling their asset.

Right now, you also have to question why aren’t they going public now? Typically they have access to capital and a good plan to keep growing in the private markets. Or they have more work to do to get the business ready.

Information issues, rights & lock ups

Because these are secondaries, you are going to get imperfect information. Prior financing may have additional warrants or the total amount of issued shares may be inaccurate. Typically they are close but don’t go in to this expecting to lift the kimono and see everything.

The next thing is rights, you likely will not get information rights to receive updates from the company. And also will not get a vote etc. You just get the exposure to the upside.

As these are employee shares, you will likely be held to the same employee lock ups. Meaning you may have public stock for 3 or 6 months. Further for tax compliance, you will receive K1s each year.

How do the firms offering these make money?

The firm offering it will charge a placement fee and take some carry. Carry will be calculated on the IPO price, or an average of the last 30 days of trading if a lock up period is in place. There may be a management fee as well to maintain the entity and compliance.

Imperfect pricing

To set expectations, because this is a secondary and limited supply available, you are typically going to get imperfect pricing. You may be buying at a discount, or a premium to the last round.

Tips

  • Be fast, hot companies can get allocated very rapidly. As fast as 8 minutes I’ve found.
  • Friday, I tend to see the offerings coming on a Friday. I’m not sure why, my guess is that they’ve spent all week finalizing the details and now need to get it out.
  • Complete your KYC details early. KYC is know your customer and requires validation of who you are, or your entity, and your role in acting on its behalf.
  • Insidery, hot companies are going to go fast so often *may* be provided to their top or most frequent investors first. I haven’t seen this as a strict policy but observed it happening. So do put the highest allocation you could make when you indicate interest and let your account manager know your interest or flexibility.

Who are some of the firms that offer these?

  • MicroVentures, from my observation they appear to have the best deal flow for ‘retail’ like investors. They provide companies, small funds with a collection of companies.
  • Forge, they merged with SharesPost to offer a broader array. They also have a good volume of deals.
  • EquityZen, a generalization but they tend to have more media/NY offerings. Lower minimums.
  • EquityBee, is similar to EquityZen, they also tend to have a mix of different types of companies. Lower minimums too.

Those are the main ones. The Forge founders are also working on a new company, which may yield new options in the future.

Here are some offerings that *may* in the future offer more options for retail but offer options for those with larger commitments:

CartaX is more for institutional right now, but may have more retail like options in the future.

SecondMarket, acquired by Nasdaq also is on the same path. Providing offerings in private companies.

SecFi, they fund employee options and take a portion of the upside, and will sell some of that exposure.

GSquared, they also offer options for family funds.

What about Crypto?

There have been coins been sold against soon to be public companies, like Coinbase & RobinHood. The coin represents, converting the initial capital at the first day of trading. So this gives you synthetic exposure without underlying stock ownership. This is a space I would expect more to happen over time.

The post Late stage secondaries first appeared on bwagy, the blog of Ben Young.
   
 

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