Fabrice Grinda

  • Playing with
    Unicorns
  • Featured
  • Categories
  • Portfolio
  • About Me
  • Newsletter
  • AI
  • EN
    • FR
    • AR
    • BN
    • DA
    • DE
    • ES
    • FA
    • HI
    • ID
    • IT
    • JA
    • KO
    • NL
    • PL
    • PT-BR
    • PT-PT
    • RO
    • RU
    • TH
    • UK
    • UR
    • VI
    • ZH-HANS
    • ZH-HANT
× Image Description

Subscribe to Fabrice's Newsletter

Tech Entrepreneurship, Economics, Life Philosophy and much more!

Check your inbox or spam folder to confirm your subscription.

Menu

  • EN
    • FR
    • AR
    • BN
    • DA
    • DE
    • ES
    • FA
    • HI
    • ID
    • IT
    • JA
    • KO
    • NL
    • PL
    • PT-BR
    • PT-PT
    • RO
    • RU
    • TH
    • UK
    • UR
    • VI
    • ZH-HANS
    • ZH-HANT
  • Home
  • Playing with Unicorns
  • Featured
  • Categories
  • Portfolio
  • About Me
  • Newsletter
  • FAQ
  • AI
  • Privacy Policy
Skip to content
Fabrice Grinda

Internet entrepreneurs and investors

× Image Description

Subscribe to Fabrice's Newsletter

Tech Entrepreneurship, Economics, Life Philosophy and much more!

Check your inbox or spam folder to confirm your subscription.

Fabrice Grinda

Internet entrepreneurs and investors

Month: April 2021

Ep 22: Why Startups Fail with Tom Eisenmann

Ep 22: Why Startups Fail with Tom Eisenmann

9 out of 10 startups fail. This is a gloomy number. However, it has never stopped entrepreneurs from hedging their bets to create successful companies.

And I want to help entrepreneurs, whether they’re first, second, or third-time founders, increase their odds of success.

So this week, I talked to Tom Eisenmann about his new book, Why Startups Fail: A New Roadmap for Entrepreneurial Success. Tom is the Howard H. Stevenson Professor of Business Administration at Harvard Business School and holds the Peter O. Crisp Faculty Chair at Harvard Innovation Labs.

Tom shares his insights into why startups fail and how they can avoid them. It’s important to remember that these are not the only reasons why companies fail. But they are often why most startups fail.

Why Early-Stage Companies Fail?

1. Good ideas, bad bedfellows

Ideas are easy, execution is hard. If you assemble a bad team–team includes founders, early team members, and investors–it doesn’t matter how good the idea is you’ll run into serious trouble. Companies fail because they never got around to building a solid team that can execute.

2. Good team, bad idea

This is the opposite of (1). The team is star-studded but they never find a good idea or find product-market fit. As result, VCs lose faith and the startup runs out of money.

3. The false-positive

Early adopters are important to startups. They can help shape the trajectory of the company. However, single-mindedly focusing on early adopters can create products that are too complicated for mainstream users. A company that wisely avoided this was Dropbox.

Why Late-Stage Companies Fail?

1 of out 3 Series C companies and beyond don’t become profitable. So what are some ways to avoid failing as a late-stage company?

1. Speed trap

Growth is good, and learning to control that growth is crucial. Many companies fail because they grow too fast and their unit economics struggle. Additionally, clone products start eating away at their market share.

2. Help wanted

An early-stage company is dramatically from a late-stage company. Failure to make that transition can be detrimental. Companies need to find experts when transitioning to late-stage, otherwise, it’s a recipe for disaster.

3. Cascading miracles

A company requires multiple things to go right for their product to work. If one thing goes wrong, then the whole thing crumbles. So with each additional variable, it increases the odds of the product failing.

Bonus takeaways

Don’t skip the research, if you’re early stage. Talk to at least 20 people in your target segment, and find out what their pain points are.

If you’re a late-stage company, before you press the pedal to the metal find out what the speed limit is. Ask the following questions: Is the company is ready to scale? Do we have the team and the system to scale?

Often times, we only hear about successful companies because of survivorship bias. Tom sheds new light with Why Startups Fail. I recommend every entrepreneur read and absorb the lessons in this book.

If you prefer, you can listen to the episode in the embedded podcast player.

In addition to the above Youtube video and embedded podcast player, you can also listen to the podcast on:

  • Itunes: https://podcasts.apple.com/us/podcast/why-startups-fail-with-tom-eisenmann
  • Spotify: https://open.spotify.com/episode/3gdvoQJWwzbLvidTIJ5QOy
Author ClémentPosted on April 27, 2021May 31, 2021Categories Playing with UnicornsTags fabrice, Startups, fabricegrindaLeave a comment on Ep 22: Why Startups Fail with Tom Eisenmann

The Moaning 20s

The Moaning 20s

By Matias Barbero

“No more …. masks. Everything open too. School opens this week — Thursday! Did you ever? As if they couldn’t have waited till Monday!”

With multiple vaccines around the world, the COVID-19 pandemic seems to be coming to an end. The US for example is currently applying +3mm doses per day, and at this pace, it will take less than 3 months to cover 75% of the population.

The quote above belongs to a 15-year old, Violet Harris, who’s excited about the taming of the virus. Thing is… that quote was taken from a 1919 dairy announcing the end of the Spanish Flu which, in 1920, marked the beginning of one of the most exuberant, remarkable, and catastrophic eras in recent history.

The 1920s was an age of unprecedented change in almost all aspects of life. Ford made the most modern cars accessible for the masses for the first time; technological innovations like the radio and telephone changed the way people thought about entertainment and community; retail investors rushed to the stock market like never before; there was an explosion of consumerism. The list could go on.

Not only the pent-up energy after a draconian lockdown resembles what we are currently living, but swap some keywords from the paragraph above for Tesla, Zoom, social media, and Reddit and we could very well use it to describe what seems to be the beginning of our own version of the roaring 20s.

But we all know how things ended almost 100 years ago. The roar suddenly morphed into a painful moan and in 1929 burst the bubble and marked the start of the Great Depression. So far, this century’s 20s are by all means roaring (Figure 1), but are they also going to end up moaning like their predecessor?

Figure 1

Killing a mosquito with a bazooka

At the same time, and partly causing the above, government spending is off the charts. On March 27th of 2020 Trump passed an unprecedented act to combat Covid-19’s economic disaster: a $2.2 trillion stimulus bill which included loans for corporations, unemployment benefits, and the well-known $1,200 checks given to individual people. This was more than what Bush and Obama had each passed as a consequence of the great recession, COMBINED… and what they did was already unmatched by any other stimulus package in recent history. The Marshall Plan, for example, was a US$130bn program providing aid to Western Europe following the devastation of World War II (Figure 2).

In comes Biden and signs an additional $1.9 trillion stimulus into law, making the total budget assigned for Covid-19 relief a whopping $4.1 trillion. Now, only ~1 month after, Biden is looking to pass a $2 trillion infrastructure plan to “re-shape the economy”. The bill is already headed to Senate and is expected to be passed in August of this year.

It’s not my intention to judge on the utility or need of these individual plans but to point to the staggering amount of money that the government is spending. Do we need to push the printing machine to this extent? Take a look again at Figure 1; are we re-building the economy just like previous administrations did after catastrophic world wars or recessions? Or are we fueling the bubble, or worse, creating new bubbles everywhere?

Figure 2

If you think our roaring twenties may moan…

I will not waste your time by making pointless predictions about what will happen next or when. Instead, I would like to present a couple of options in case you were wondering what to do or how to be prepared for a scenario like this.

1. Cash is king (?)

Yes, fiat money depreciates over time and suffers the effects of inflation. The discussion above on the government going brrrr with the money printing machine will only worsen this condition. In the long run, if you just hold cash, you’re going to see your purchasing power deteriorate through dilution of the currency. But fiat money, particularly the US dollar, is still used for virtually all transactions you will encounter in your daily life today and is, arguably, one of the best assets to hold during periods of a market downturn. So, if a crisis does hit, you may want to have some cash reserves that will a) not be subject to the swings of the market, and b) will enable you to opportunistically buy your favorite stock at a steep discount and quickly reduce your cash position thereafter.

This may vary based on personal situations, but aiming to have 20% cash or more of your assets could be a smart move. Our own Fabrice Grinda suggests this approach and has a great piece on the everything bubble that I highly recommend.

An alternative along the same vein would be to pick a different currency other than the US dollar. The Swiss Franc has historically been used as safe heaven given the stability of the Swiss government and its financial system. So you may want to diversify your cash holdings and own some Swiss Francs too.

2. Let’s get physical

Real estate. After the great recession of ’08/’09, we came to associate economic crisis with real estate crisis but that’s not necessarily always true. Investing in real estate has always been a synonym of inflation hedge. That’s one positive point. How real estate will perform as an asset class during a crisis will depend on the nature of the crisis itself. But considering investing in land, farms, and high-quality apartment buildings could hold up better than most alternatives, are less volatile, and may result in a winning strategy.

Legendary media mogul, John Malone, has mentioned in several recent interviews that he worries about the current frothy markets and that the way he’s personally insulating himself is by buying forest land, farms, and high-quality apartment buildings. And he’s not the only one… ever heard of Bill The Farmer? Me neither, but Bill Gates is now officially the largest farm owner of the United States.

3. Cryptocurrencies

I will make this a short sub-section given I basically laid out the case for crypto in point number 1. Owning bitcoin and other cryptocurrencies are a hedge against inflation but also against current governmental and financial institutions. This is a deep rabbit hole and could write many dedicated posts on it. If you don’t have exposure to crypto yet, I’d assign a certain % of your overall portfolio and follow Balaji’s advice to put 50% on Bitcoin and 50% on Ethereum. If you already do, then you’re probably a convert and can get more sophisticated with the choice of assets : ) Crypto would fit the ‘risky asset’ bucket mentioned later in the post and could also be hedged using put options (see below).

4. The antifragile option

I love the ‘antifragile’ term coined by Nassim Nicholas Taleb. It’s such a powerful concept and extremely relevant to the topics we’re discussing today. In a nutshell, being antifragile is gaining from disorder. A crystal is fragile (hates shocks), a rock is robust (indifferent to shocks), Hydra, the Greek mythological creature, is antifragile: when you cut one head off, two grow back in its place. So what if we can actually benefit from the burst of a bubble?

A. CDS

In early 2020, billionaire investor Bill Ackman pulled what some called the ‘single best trade of all time’ turning $27mm into $2.6bn in a matter of weeks. He basically used financial options to bet against the American economy thinking the then incipient Covid virus would have a greater economic impact than it was priced in by the markets at that time.

But how? You may ask. Ackman used a combination of CDS (Credit Default Swaps). Here’s a refresher by Margot Robbie for those who need it. You could buy CDS for a company, a country, or other entity. In this case, Ackman bought CDS on US Investment Grade Bonds, European Investment Grade Bonds, and US High Yield Bonds. Think about CDS as buying fire insurance for your house. You pay a regular fee and get reimbursed if your house burns down. He initiated the trades when these indexes were trading near all-time tight levels (cheap premiums) and sold them once he saw the government was rushing with firehoses to contain the Covid fire.

Small caveat: banks typically require long bureaucratic processes before you can place trades on instruments such as CDS and will most likely not pay attention to you unless you have $50mm with them. I know. Don’t kill the messenger.

B. Put options

If you’re just a mere mortal like myself, armed with a Robinhood account and not much else, the strategy below is one I really like to keep investing in the markets while hedging ‘fat tail’ risks using put options. There’s a detailed explanation of this strategy used by Universa hedge fund in this article, and I will list a step-by-step in the simplest way I can:

  1. Each month, set aside 0.5% of your total exposure. If you have, say, $100k invested in the S&P then you will need to spend $500 per month on this strategy
  2. Buy put options of the market you are trying to hedge from. In this case, it would be S&P put options but the same could also apply to hedge against whatever exposure you have (e.g., Apple stock, bitcoin, etc.).
  3. Should I buy any put option? No. Buy ~2-month put options that are about 30% out-of-the-money. That is, if the S&P is currently trading at a symbolic price of $10 you will want to buy put options expiring 2 months from today at a strike price of $7. We are going after “cheap” options that will be highly valuable if the market plummets
  4. Repeat. Every month you should roll your options and purchase new puts with 2-3 months expiration dates and ~30% discount with fresh $500 and whatever proceeds you have from selling your existing options

The reason this strategy is so hard to implement consistently is because 99% of the time it doesn’t work (if the stock market doesn’t crash your options will be sold each month for almost nothing)… but when it works, it works big time. You take small hits every month (just $500 in our example) but you’re likely more than compensating with one large win if the crisis does come (enter Bill Ackman’s example from before).

It’s the opposite of eating like a bird and pooping like an elephant.

The [insert adjective here] 20s

It’s April of 2021. We’re living through and building our own version of the “roaring 20s”. Time will tell which adjective is the one we’re supposed to be using here. So far, some of the similarities with its predecessor are striking. I will not pretend to know when or if the ‘bubble’ will burst. The best way to avoid a bad hangover is not even going to the party in the first place, but this party has proven to be a particularly fun one to attend (figure 1). The options from the section above are some alternatives that we have at our disposal to alleviate the headache if the party suddenly comes to an end. If you’re inclined to pick ‘terrible’ as your adjective for our 20s and are really worried about the current state of the markets, then you could use one or a combination of the options above to protect your portfolio. If instead, you are thinking of a synonym of ‘roaring’ and believe this party is yet to be over, then you can combine your choice of ‘risky’ assets (e.g., stocks) with one or more of the choices from above (barbell strategy: high-risk assets on one end and one or more protective alternatives on the other). As for my choice of adjective, I’m going to play it safe and allow for both an exciting and a painful outcome. I shall call it the moaning 20s.

Matias is an investor at FJ Labs. Previously, he was an M&A investment banking associate at JPMorgan. Before that, he held different strategy, marketing, and finance roles. Originally from Argentina, Matias holds an MBA from Duke University, where he graduated with honors as a Fuqua Scholar. You can follow him on Twitter at @matiasbarbero13

Further Reading:


Nothing in this post is financial advice. The goal of this post is to have a conceptual discussion around the topics covered here and generating awareness of the options available to people looking to diversify and/or prepare themselves for a potential shock in the near future. The financial instruments covered in this post are highly volatile and could lead to large losses if not used responsibly.

Author ClémentPosted on April 20, 2021May 28, 2021Categories The EconomyLeave a comment on The Moaning 20s

Search

Recent Posts

  • The Meaning of Life
  • FJ Labs Q2 2025 Update
  • World of DaaS Conversation with Auren Hoffman: Diversified Portfolios, Secondary Sales & Dinner Parties
  • Episode 50: Venture Market Trends
  • Decoding the Future: AI, Venture Market & Marketplaces

Recent Comments

  • Ahmed Aladdin on The Meaning of Life
  • Ahmed Aladdin on The Meaning of Life
  • Germine Rose on The Meaning of Life
  • Fabrice on 2024: Amélie
  • Michael J on 2024: Amélie

Archives

  • July 2025
  • June 2025
  • May 2025
  • April 2025
  • March 2025
  • February 2025
  • January 2025
  • December 2024
  • November 2024
  • October 2024
  • September 2024
  • August 2024
  • July 2024
  • June 2024
  • May 2024
  • April 2024
  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • August 2018
  • June 2018
  • May 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • April 2008
  • March 2008
  • February 2008
  • January 2008
  • December 2007
  • November 2007
  • October 2007
  • September 2007
  • August 2007
  • July 2007
  • June 2007
  • May 2007
  • April 2007
  • March 2007
  • February 2007
  • January 2007
  • December 2006
  • November 2006
  • October 2006
  • September 2006
  • August 2006
  • July 2006
  • June 2006
  • May 2006
  • April 2006
  • March 2006
  • February 2006
  • January 2006
  • December 2005
  • November 2005

Categories

  • Crypto/Web3
  • Books
  • Business Musings
  • Displays of Creativity
  • Entrepreneurship
  • Featured Posts
  • Year in Review
  • Life Optimization
  • FJ Labs
  • Decision Making
  • The Economy
  • Asset Light Living
  • Musings
  • Optimism & Happiness
  • Dogs
  • FJ Labs
  • Happiness
  • Interesting Articles
  • Interviews & Fireside Chats
  • Marketplaces
  • Movies & TV Shows
  • New York
  • OLX
  • Panels & Roundtable Discussions
  • Personal Musings
  • Playing with Unicorns
  • Plays
  • The Economy
  • Quotes & Poems
  • Speeches
  • Tech Gadgets
  • Travels
  • Video Games
  • Year in Review

Meta

  • Log in
  • Entries feed
  • Comments feed
  • WordPress.org
  • Home
  • Playing with Unicorns
  • Featured
  • Categories
  • Portfolio
  • About Me
  • Newsletter
  • FAQ
  • AI
  • Privacy Policy
× Image Description

Subscribe to Fabrice's Newsletter

Tech Entrepreneurship, Economics, Life Philosophy and much more!

Check your inbox or spam folder to confirm your subscription.

>
This site is registered on wpml.org as a development site. Switch to a production site key to remove this banner.