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That Was The Week, #38


The Chinese economy is the world's largest measured by Producer Price Parity (PPP). Its lead over the USA is accelerating.

Source - IMF

PPP is approximately comparing the buying power of the national GDP, allowing apples to apples comparisons between nations.

Even if we use the constant $ method the findings are clear.

Source: World Bank

The USA is the largest in absolute dollars. However China is catching up fast. With a rapidly growing middle class and associated purchasing power, China is a growing powerhouse and the USA is an aging, yet still powerful, engine.

Source: World Bank

In this week's newsletter we feature an article by CNBC, drawing on data from the US Bureau of Economic Analysis. It shows that the US recorded a $141.92 billion deficit in goods trade with China in the first half of 2020, whilst only recording an $11.74 billion Services trade surplus during that time. In short, non-good trade is a small fraction of the trade in goods. As a service heavy economy, the US is not in good shape.And worse still, the US services surplus is shrinking whilst the goods deficit is growing.

The larger point here is that the USA is heavily integrated at the global level with China. As China continues to grow, US exporters need access to that opportunity. It makes little or no strategic sense for the US to fight with China. This places the Tik Tok (on again, off again) ban in the correct context. Trump is clearly angry that Tik Tok users fooled him into believing a million tickets had been requested for a rally. His revenge is not in the interests of anybody.

So far the democratic opposition to Trump has not weighed in on their view of China. Let's hope it is more Nixon, embracing of China, than confrontational like Trump.

Talking of politics, Coinbase CEO Brian Armstrong got in trouble this week by attempting to ban his employees from all political activist agenda's and political discourse while at work. As we can see above, work and politics are closely affiliated. Jack Dorsey and Dick Costolo distanced themselves from the Coinbase CEO's stance whilst Paul Graham approved. That itself was strange because Armstrong is clearly attempting to "cancel" workplace activism and dicussion, and Graham is on the record supporting opponents of 'cancel culture'. Free speech, it seems, is not an absolute principle.

Best Keith.

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This week's video is here:

Top of the Week: ChinAmerica

Reads of the Week: The Public Markets

Startup of the Week: Coinbase

Raise of the Week: Palantir and Asana

Politics and Technology: Facebook, Apple and Being a Monopoly

Venture: Bubbles and Endowments

Startups: Pitch Decks

Podcasts of the Week: Elad Gil and Fabrice Grinda

Tweet of the Week: Sam Altman on Y Combinator

--Top of the Week - ChinAmerica

5 charts show how much the U.S. and Chinese economies depend on each other


  • Latest available estimates by the OECD showed that in 2015, foreign input accounted for 12.2% — or around $2.2 trillion — of total goods and services consumed in the U.S. China was the largest contributing country of that foreign input, the data showed.
  • Those ties suffered somewhat following a tariff fight that erupted in 2018, but bilateral trade of goods and services still totaled a substantial $636.8 billion last year, according to data by the Bureau of Economic Analysis.

: The IPO Boom

TikTok was just the beginning: Trump administration is stepping up scrutiny of past Chinese tech investments

The Washington Post

  • Trump orders Chinese company to divest ownership of U.S. firm, citing national security concerns The decoupling can be seen in data showing that Chinese venture-capital investment in the United States dropped to a six-year low in the first half of 2020, to $800 million, according to research provider Rhodium Group .
  • The emailed requests for information are being sent by a new enforcement arm of a government committee that monitors foreign investment for national-security risks, according to lawyers and a redacted copy of one email reviewed by The Washington Post.

Court temporarily blocks Trump order banning TikTok from US app stores

Technology | The Guardian

  • US district judge Carl Nichols granted a preliminary injunction sought by TikTok’s owner, ByteDance, to allow the app to remain available at US app stores, but declined “at this time” to block additional commerce department restrictions that are set to take effect on 12 November that TikTok has said would have the impact of making the app impossible to use in the United States.
  • A judge in Washington has temporarily blocked a Trump administration order banning Apple and Google from offering Chinese-owned app TikTok for download that was set to take effect at 11:59pm on Sunday.

--Reads of the Week

Defiance ETFs Launches the First SPAC ETF

  • SPAK allows both financial advisors and retail investors to participate in an IPO private equity style of investing, which until now, was only available to large financial institutions,” a statement issued by Defiance ETFs earlier this morning.
  • The Fund invests in companies that have recently completed an IPO or are derived from a SPAC.

SPAC Managers to Watch

The Information

SPAC mania may be nearing its peak. Everyone from Peter Thiel to Paul Ryan is backing special purpose acquisition companies, firms that are taken public as empty shells, destined to raise money for the purchase of a business at some point in the future.

2020 is the year of the SPAC — yet traditional IPOs offer better returns, report finds


  • After a record 82 initial public offerings of special purpose acquisition corporations — known by the acronym SPAC — 2020 seems to have upended the traditional IPO market, yet most offer lower returns on average than conventional deals, according to a report.
  • Of 223 SPAC IPOs conducted from the start of 2015 through July, 89 have completed mergers and taken a company public, offering the chance to examine their performance, according to the report from Renaissance Capital, a provider of IPO ETFs and institutional research.

IPO market frenzy could be just the beginning - PitchBook News & Analysis

PitchBook News & Analysis

  • For the past couple years cloud-based business software companies have dominated the fundraising in the new-issue market, a trend punctuated earlier this month when Silicon Valley data-warehousing provider Snowflake flew out of the gate to notch a market value topping $70 billion.
  • The late-stage Silicon Valley firm has backed hundreds of software companies like Slack, which went public with a direct listing last year, and Sumo Logic , which went out earlier this month in a conventional IPO valued at more than $2 billion

Why Gross Margins Matter

Two Sigma Ventures

Gross margin is a very important metric for Software as a Service (SaaS) companies. It allows startups to fund large investments in product and sales during periods of rapid growth and be profitable when growth slows. Many factors contribute to a company’s ability to maintain high gross margin, including pricing discipline and power, a product that delivers high ROI for the customer, efficient and scalable infrastructure, and an easy to use product that requires little ongoing support by the vendor, to name a few. Gross margin has a significant impact on a company’s ability to invest in R&D, sales, and marketing, which may ultimately determine the winner in a competitive market. It is also an important valuation driver, which is why I am often surprised how little attention companies pay to gross margin in SaaS businesses.

From what I’ve seen, founders have little appreciation of why gross margin matters until a startup reaches some scale. Venture capitalists often ignore it. Even public investors seem to overlook the importance of gross margin (though, not for long). In this post, I wanted to provide some additional insight on the impact gross margin has on a SaaS business.

Surfing the Right S-Curve

The Diff

  • In this issue: Surfing the Right S-Curve Google: Benefits and Retention Tail Risk on Trial Policy Homogeneity Procurement Density Redistribution Crisis Hormesis The Other Derivatives Narrative Surfing the Right S-Curve Take anything that’s subject to selection pressure, and track how it grows in a new environment over time.
  • They jumped from one S-curve to another: This is a point Reid Hoffman makes in Blitzscaling : network effects are nice when a company grows, but they’re terrible when it’s subscale.

--Startup of the Week

Coinbase and Y Combinator-backed startup Multis raises $2.2 million in seed round

The Block

Business banking startup Multis has raised $2.2 million in its seed round with investors including White Star Capital, Y Combinator and Coinbase Ventures.  The French company confirmed the news in a tweet on Tuesday.

Coinbase CEO discourages politics at work, offers generous severance to employees who want to quit



  • Coinbase CEO Brian Armstrong told employees the company would offer severance packages for those who leave after he discouraged employee activism and political discussions at work.
  • He points to “internal strife” at Silicon Valley companies that “engage in a wide variety of social activism, even those unrelated to what the company does.”
  • “While I think these efforts are well intentioned, they have the potential to destroy a lot of value at most companies, both by being a distraction, and by creating internal division,” Armstrong says.
Coinbase CEO Brian Armstrong
Coinbase CEO Brian Armstrong: Getty Images

Coinbase is offering to pay employees who decide to quit the cryptocurrency company after it discouraged employee activism and discussing of political and social issues at work.

Coinbase is a mission focused company
There have been a lot of difficult events in the world this year: a global pandemic, shelter in place, social unrest, widespread protests and riots, and west coast wildfires. On top of that we have a…

--Raises of the Week

Palantir and Asana: Two Very Different Debuts: The Information’s Tech Briefing

The Information

Credit: Bloomberg

Palantir and Asana went public Wednesday, immediately doubling the number of high-profile tech companies that have joined the public market through direct listings of their shares, rather than via a traditional IPO.

Wall Street's IPO enemies ready one-two punch


  • Phil Hellmuth, an angel tech investor and poker player with over $20 million in career winnings, said in an interview that he tried to buy $500,000 worth of shares in data warehouse company Snowflake Inc SNOW.N during its $3.36 billion IPO earlier this month.
  • Data analytics company Palantir Technologies PLTR.N and workplace software maker Asana Inc ASAN.N are set to debut on the U.S. stock market on Wednesday bypassing an initial public offering (IPO).

Here’s What You Need To Know About Palantir’s Long-Awaited Direct Listing

Crunchbase News

  • Palantir has raised at least $2.6 billion in funding as a private company, according to Crunchbase.
  • Before Palantir’s public debut, here’s what you need to know about the company co-founded by Peter Thiel.

What To Know About Asana, the Productivity App Built By Former Facebookers, As It Goes Public

Crunchbase News

  • Project management company Asana is set to start trading on the New York Stock Exchange on Wednesday.
  • The Asana app helps workplace teams assign and manage tasks to keep projects organized.

From The Editor’s Desk: Two Direct Listing Debuts to Watch This Week

Crunchbase News

  • This week, two of the most highly valued venture-backed private companies in the U.S. are set to go public, not in traditional IPOs, but via Gurley’s preferred door into the stock markets: direct listings.
  • Gurley and other critics of the traditional IPO process contend that not only is it an expensive and inefficient way to take a startup public, it also enriches bankers while “robbing Silicon Valley founders, employees, and investors of billions of dollars each year.”

IPO Market Parties Like It’s 1999


  • This year, more than 80% of the money raised by initial public offerings falls into three buckets: healthcare, technology and newly popular blank-check companies —shell firms whose only purpose is to acquire a private target and take it public.
  • They’ll soon be joined by giants Airbnb Inc. and Palantir Technologies Inc., which will go public later this year after long tours as private companies.

--Politics and Technology

Facebook merges Messenger chat service with Instagram

Technology | The Guardian

  • It is the first step towards a goal announced in March 2019 to merge not only those two platforms, but also to incorporate WhatsApp , and to enable end-to-end encryption for all messages sent between the three apps.
  • There is also no timescale for the most controversial plans announced in Zuckerberg’s March 2019 blogpost: the integration of WhatsApp with Facebook Messenger and Instagram, and the decision to turn on end-to-end encryption for all conversations on the three platforms.

How Facebook Entrenches Itself

The New York Times

  • People tend to use Facebook’s apps in different ways.) One change from tech history is that people are now aware of the risks of companies uniting their products.
  • (That didn’t work, largely because governments and courts said no to this practice.) Facebook knitting together its apps is technically different than what Google and Microsoft did, but the practical effect is largely the same.

Competition is for Losers with Peter Thiel (How to Start a Startup 2014: 5)

Peter Thiel, founder of Paypal and Palantir, discusses business strategy and monopoly theory in "Competition is For Losers".

Everybody vs. the App Store: Why Companies Are Taking Issue With Apple’s Growing Revenue Engine


A host of companies, including Facebook Inc., Spotify Technology SA and “Fortnite” maker Epic Games Inc., are challenging the way Apple Inc. runs its App Store. The App Store generates at least $15 billion in annual sales for the tech giant, according to analysts’ estimates.

Facebook Opens New Fight With Apple Over Messaging

The Information

Facebook executives have sharply ramped up their criticism of Apple in recent months, contesting the iPhone maker’s restrictions on gaming apps and ad targeting, as well as its cut of in-app purchases.


Investment return of 6.8% brings Yale endowment value to $31.2 billion

Yale News

Yale’s 10-year asset class performance is solid. Domestic equities returned 12.8%, underperforming the benchmark by 1.0% annually. Foreign equities produced returns of 15.8%, surpassing the composite benchmark by 10.7% annually. Absolute return produced an annualized return of 5.3%. Leveraged buyouts returned 14.6%, while venture capital returned 21.3%. Real estate and natural resources contributed annual returns of 9.7% and 4.4%, respectively.

My First Week Investing at Venrock

Julie Park, Notion

Dear Founder,

Today begins my first week at Venrock. I’m excited and very humbled to join this long-standing team of whip-smart, hardworking investors in supporting you, the entrepreneur. Drawing on my background, I’ll be investing in consumer, commerce enablement, and SMB services & tools. I imagine my focus may evolve over time. However, there’s one thing that will remain consistent - my commitment in service to you, the founder.

As the new kid on the investing block, I wanted to share three snapshots that give you some color on me. In 2005, Steve Jobs gave my commencement speech at Stanford. One phrase in particular lingered with me over the years: “You can’t connect the dots looking forward; you can only connect them looking backwards.” So here are three snippets into what’s shaped my perspective of our relationship.


Now is a time of bubble companies, not of market bubbles

Financial Times

  • When you combine the rise of Spacs with other recent market dynamics, there is good reason to worry we may be in a bubble again.
  • These sound grander than bubble companies but come to much the same thing: listed shells that hold no operating businesses but intend to acquire them.


Post-Traction, You Need to Spend 20% of Your Time Recruiting


  • I’m going to suggest to you that, at least from Initial Traction until Initial Scale (say $1m ARR until $10m ARR) — this is the single most important improvement you can make to your SaaS company: To recruit every single day .
  • Because it’s this stretch from Initial Traction until Initial Scale when many SaaS CEO and founders fall down a bit in recruiting.

The Early Pitch Decks Of 21 Startups Before They Became Billion-Dollar Companies

CB Insights Research

The Early Pitch Decks Of 21 Startups Before They Became Billion-Dollar Companies

--Podcasts of The Week

Elad Gil and Kevin Hartz on Angel Investing, SPACs, and The Evolution of Venture - Village Global's Venture Stories - Overcast


Elad Gil and Kevin Hartz on Angel Investing, SPACs, and The Evolution of Venture — Village Global’s Venture Stories — Overcast

Elad Gil and Kevin Hartz on Angel Investing, SPACs, and The Evolution of Venture September 29, 2020

Elad Gil Has Backed 24 Companies Worth $1 Billion or More


Elad Gil Has Backed 24 Companies Worth $1 Billion or More
20VC: Elad Gil on Startup Offense and Defence in a Recession, How The Venture Landscape Has Shifted & All Things Valuations, Secondaries and Layoffs

Playing With Unicorns – Episode 2: Build a MVP for less than $20k

Fabrice Grinda

I start by covering the theoretical do’s and don’ts of building a minimum viable product (MVP) before giving an in depth and specific example of how I would go about building a mobile golf application allowing golfers to find partners to play with at their handicap, in their region and/or club, with the same availability.

--Tweet of The Week

PG and Jessica

Sam Altman

A lot of people want to replicate YC in some other industry or some other place or with some other strategy. In general, people seem to assume that: 1) although there was some degree of mystery or luck about how YC got going, it can’t be that hard, and 2) if you can get it off the ground, the network effects are self-sustaining.

More YC-like things are good for the world; I generally try to be helpful. But almost none of them work. People are right about the self-sustaining part, but they can’t figure out how to get something going.

The entire secret to YC getting going was PG and Jessica—there was no other magic trick.