Jeremy Giffon - Special Situations in Private Markets

Key Takeaways

1. The Value of Coordination in Private Investments: Jeremy Giffon stresses the significance of coordination, particularly in private markets. For instance, situations arise where both founders and VCs have a mutual desire to exit an investment, but neither party initiates the conversation. Such scenarios often stem from misaligned incentives, misunderstandings about capital structures, or concerns about reputational risks.
2. Misunderstanding Growth and Capital Allocation: Venture-backed companies often misattribute their growth to increased spending, without considering the counterfactual scenario. Giffon suggests that many of these businesses experience growth due to inherent product strengths rather than their spending habits. Unfortunately, with the pressures of venture capital, companies rarely get the chance to evaluate whether their growth would have occurred without that additional spend.
3. Simple Questions and Pattern Recognition: According to Jeremy, investing largely boils down to pattern recognition. Initially, there might be an inclination to delve into complex quantitative analyses, but with experience, the importance of asking simple, qualitative questions becomes apparent. For example, instead of focusing on intricate financial metrics, it's more beneficial to ask straightforward questions like what the business does, why customers prefer it over competitors, and how it makes money. For him, a good investment should be immediately apparent, and it shouldn't take weeks of debate to decide.
4. Energy and Alignment with Core Desires: From Jeremy's perspective, the most crucial criterion when making decisions, such as hiring CEOs or choosing investments, is the energy one feels from the interaction. He emphasizes that it's crucial to be brutally honest about one's feelings towards a person or an investment. For instance, if an interaction or potential investment drains you, even if it seems profitable or the person is competent, it might not be the right fit.
5. True Calling and Personal Envy Test: Jeremy believes many people, despite having options, end up dedicating their lives to tasks or careers they don't genuinely love. One key heuristic he offers to uncover one's true calling is identifying tasks they couldn't be paid to stop doing, exemplifying it with the difference between Andre Agassi and Novak Djokovic's perspectives on tennis.
6. Resilience: Jeremy talks about the concept of individuals being "pre-fall" or "post-fall" - whether someone has been deeply humbled or impacted by life experiences. He also introduces the dichotomy of being "easy to kill" versus "hard to kill", suggesting that post-fall individuals are harder to "kill", metaphorically speaking.
7. Value of Online Presence & Audience: Jeremy emphasizes the underrated power of having an online audience. Even with a small, quality audience, one can access significant opportunities and serendipitous moments. For instance, monetizing online audiences has shifted from selling to a large percentage at a low price to potentially transacting significant deals (up to $100 million) with just one member of the audience. The future may see businesses having "audience co-founders" who organically market to their followers, leveraging the trust and repeated exposure to foster sales, especially in commoditized markets. The prestige gained from online platforms, such as podcasts, is still not fully recognized.
8. The Illusion of Advice and Over-Preparation: Jeremy contends that general advice is often misleading, as it's derived from one's personal experiences and may not be universally applicable. For example, every piece of advice has a counterexample, highlighting its lack of consistency. Furthermore, many individuals consume vast amounts of self-help content under the guise of productivity, when it's merely a form of entertainment. Over-preparation, like optimizing performance without a clear goal, is another common pitfall; it's akin to constantly sharpening a sword for a battle that never arrives. Real progress is made by identifying specific challenges and addressing them directly, rather than engaging in abstract optimizations.
9. Nuances of Venture Capital in Software Businesses: Jeremy highlights the origin of venture capital (VC) as a means to fund high-capital expenditure businesses with a slim chance of success but massive potential outcomes. In contrast, many software companies don't fit this mold, making VC not always the right choice. For instance, while it's easy to secure a couple million dollars for initial growth, transitioning to institutional funding can lock businesses into a path with no easy return. Jeremy admires firms that bootstrap and then secure large rounds later, like Atlassian or GitHub.

Transcript