It’s an exciting time at Portico as we mark our first anniversary in business. It has been a great year professionally and personally. I’m grateful to all of you who opened your doors for a meeting, picked up your phones when I called, shared our research with colleagues, and last but certainly not least, engaged us as a client. Thank you!
It ain’t an easy road, entrepreneurship. I underappreciated both the amplitude and frequency of the journey’s highs and lows before I got underway, but it is genuinely gratifying to wake up each day and create something of value for other people.
The best part of this endeavor is demonstrating to my son, through actions rather than words, that he should never be afraid to assume some risk and pursue the life of his choosing.
A few highlights from year one:
All in all, it’s a great start out of the blocks, but we’re focused on staying humble, staying hungry, and identifying ways that we can deliver more value to our clients in the year ahead. I hope you’ll share the journey with us.
Speaking of Status Updates, John Lanchester has a superb article in the LRB (“You Are the Product”) on the societal parasite that is Facebook. Lanchester’s article came out before the NY Times [disclosure: Mike is a shareholder] revealed the company’s role in facilitating the information operations that influenced the U.S. election. (Oops!)
Frankly, the entire tech sector is overdue for greater regulatory scrutiny and enforcement. Whether it’s Airbnb, Alphabet (fka Google), Amazon, Facebook, or Uber, the laundry list of unpaid taxes, unethical conduct, and outright illegal activities never fails to astound. Firms active in emerging markets often speak about a “social license to operate.” At what point do these firms’ licenses get revoked?
Parenthetically, will Uber be the biggest write-off in the history of venture capital?
On a related note, we’ve mothballed Portico’s Twitter account. It’s a channel that doesn’t deliver value for the company, so we will not spend energy on it.
Henry Nguyen of IDG Ventures Vietnam made some thought-provoking comments at an AVCJ event in Ho Chi Minh City a few months ago. In a nutshell, he noted that the tech giants—Alibaba, Alphabet, Amazon, Facebook, and Tencent, among others—have radically transformed the venture ecosystem. Not only are these companies scouring the same landscape for deals as VCs, but they’re also doing so with the advantages of: 1) a longer time horizon; and, 2) a lower cost of capital.
These seem like … insurmountable advantages for an investor?
Intuitively, this might leave some space for early-stage investors to front-run their later stage and corporate venture peers; but, I do wonder.
What I don’t wonder about: whether entrepreneurs will build great companies, or whether economic value will be created. These are certainties. The question is: who will capture the value?
I suspect a number of LPs in EM venture funds are asking themselves the same question. Having seen individual deals rocket in value, LPs are seeing appetizing write-ups on paper, but they remain hungry for realizations (see below).
Consider the following. Since 2006:
We have been living amidst a transition from a world in which financial capital was relatively scarce to one in which it has become abundant. Bottlenecks remain, of course, and there’s ample room to expand access to finance for productive enterprises, particularly in our geographies. Nevertheless, this development has profound implications, and I’ve been pondering a few thoughts as of late:
The world is always full of the sound of waves.
The little fishes, abandoning themselves to the waves, dance and sing and play, but who knows the heart of the sea, a hundred feet down? Who knows its depth?
— Eiji Yoshikawa, Musashi (Kodansha International: 1995).
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