Hey Reader,

Altitude Weekly Edition 006 is hot off the press from Cirrus Capital Partners 📰

Once weekly, we give you a bird's eye 🦅 view of the most exciting news and insights around...

• Successful Companies and Founding Teams
• VC, PE, M&A, and Credit Transactions
• Growth Metrics, Benchmarks, Charts & Data
• New and Emergent Technologies
• Productivity Hacks

Created for founders, bootstrappers, VCs, angel investors, marketers, technologists, executives, and operators—everywhere.

Let’s get into it:

​What I learned from Reid Hoffman​

In the first season of "Letters to a Young Investor", Mario Gabriele interviews in legendary investor Reid Hoffman in conversations focused on, you guessed it, investing. Here are the best parts.

1. Build a Good "Theory of the Game": Before investing, understand the market's development and how a company fits or challenges this view. Reid's love for strategy games influences this approach. It emphasizes the importance of skill, and expects founders to have their theories relative to their businesses.
2. Pay Attention to "Surge Moments": Distinguish between speculative bubbles and productive effervescence. Surge moments are periods when technology advances rapidly, which may not always yield immediate massive returns but are important for future developments.
3. The Importance of "Re-Founders": While founders are crucial, the role of "re-founders" who transform and lead existing businesses to new heights is equally vital, with Satya Nadella at Microsoft as a prime example.
4. Venture Capital as "Predictive Anthropology": Investing is about predicting society's future needs and how startups today fit into that vision.

This is a fantastic series interviewing exceptional founders who separate signals from noise in the tech sector, and explore the potential impact of artificial intelligence on the future.

​The bill that could ban TikTok passes in the House​

In the distance, you can hear the cries of content creators, musicians, and marketers everywhere...

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The U.S. House of Representatives voted to favor a bill that could lead to TikTok's ban unless it separates from its parent company, ByteDance. The bill, which received bipartisan support with a 352-65 vote, now moves to the Senate with President Biden's backing. TikTok has expressed hope that the Senate will consider the economic impact and the views of its 170 million American users before making a decision.

There's two outcomes for TikTok:

Either successfully negotiate a separation from ByteDance within six months.

OR

Face a ban from U.S. software marketplaces like Apple's App Store and Google Play.

Despite previously advocating for a ban, former President Trump now opposes it, suggesting it would unfairly benefit Facebook, a competitor. Some Republicans share Trump's view, while Democrats express concerns about the bill's impact on creatives and small businesses. The bill's fate in the Senate remains uncertain, with some senators, including Rand Paul, voicing opposition. China has also indicated it would oppose a forced sale of TikTok. The bill's rapid progression has surprised TikTok, prompting the company to mobilize its user base and CEO in opposition.

​Early-stage startups seeking venture debt find investor prestige isn’t enough​
A year after the Silicon Valley Bank crisis, there's something going on the venture debt market...

It's harder for seed and early-stage startups, especially fintech and consumer tech, to secure venture debt. Despite previously relying on the prestige of venture capital backers like Sequoia or Khosla Ventures, startups now face a higher bar for obtaining debt funding.

The number of early-stage venture debt deals dropped by 39% from 2022 to 2023, indicating a significant decline in availability.

Lenders are cautious, conducting thorough due diligence and placing less emphasis on VC backing. SVB's market share in venture debt has significantly decreased, and although many SVB bankers have moved to other banks, the gap in seed and early-stage venture debt has not been fully addressed.

We definitely see a broader change in the venture debt landscape, where lender scrutiny has increased, and startups have to meet higher standards to secure funding.

​The Vicuñas and the 9,000 Dollar Sweater​

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Andrea Barrientos, a 75-year-old subsistence farmer from the Peruvian Andes, works without pay once a year to herd wild vicuñas for their wool.

Wool that's sold to the fashion house Loro Piana, a fashion brand part of the luxury conglomerate LVMH—that ends up in a sweater selling for about $9,000.

But Barrientos' Indigenous community of Lucanas, which exclusively supplies Loro Piana, receives only about $280 for an equivalent amount of fiber. Despite the high value of vicuña wool on the global market, the arrangement has done little to benefit the Indigenous people of Lucanas, many of whom live in poverty.

The uglier side of conglomerates is damning. This was a hard, but an important read.
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​Executive Team Meetings: The Good, The Bad and The Ugly​
Executive team meetings are a huge invesment, which is why they need to be productive af.

Here's a great article about the indicators of ineffective meetings, and the reasons behind particularly unproductive or "ugly" meetings.

Good Executive Meetings involve:

1. A published agenda circulated in advance to allow for preparation.
2. A shared measurable objective or "metric of the week" to focus on company goals.
3. Documentation of notes, decisions, action items, and responsibilities to ensure follow-through.

Bad Executive Meetings are characterized by:

1. Lack of agenda or structure, leading to unfocused discussions.
2. Absence of measurable goals, making it difficult to manage what cannot be measured.
3. Failure to assign action items and follow-up, resulting in repeated discussions without progress.

Ugly Executive Meetings occur when:

1. Personal agendas and opinions dominate, stifling collaboration.
2. Introduction of vanity metrics or new dashboards that distract from key company goals.
3. Infighting and finger-pointing, which undermine team cohesion and trust.

✅ Structured agendas

✅ Actionable metrics

✅ Collaborative and respectful environment

You'll be good to go.

​A Look At Reddit’s Biggest Shareholders Ahead Of Its IPO​

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Reddit is set to go public on the New York Stock Exchange under the ticker symbol RDDT, with a targeted share price of $31 to $34, valuing the company at up to $6.4 billion.

This marks the first social media company IPO since Pinterest in 2019.

In a unique move, Reddit is offering 74,000 of its active moderators and users the chance to purchase stock at the pre-public price.

Let's take a look at some of their shareholders:

➡️ Advance Publications, which acquired Reddit for $10 million within 18 months of its founding in 2005, remains the largest shareholder with a 30.1% ownership.

➡️ Tencent, Fidelity, Sam Altman, Quiet Capital, Tacit Capital, and Vy Capital (Tencent, Fidelity, and Altman leading significant funding rounds since 2014.)

Reddit has raised over $1.3 billion since its inception, reporting 2023 revenues of $804 million, a 21% increase from the previous year. The company anticipates similar growth in 2024 and has recently entered a $60 million annual deal with Google to train AI models. However, the U.S. Federal Trade Commission has opened an inquiry into Reddit's AI data licensing business.

Increased valution, increased user growth—but a company operating at a loss each year. We're curious to know: what do you predict with this IPO? (and do you appreciate this rhyme?).

​AI Venture Funding May Be Hot, But M&A Remains Slow​
Venture funding for AI startups topped $50 billion last year with significant investments in companies like Figure and Lambda, and public market enthusiasm as seen with Nvidia's valuation

Yet M&A activity for AI startups remains slow.

Last year saw a 31% decline in M&A deals in the AI sector, with only 190 deals compared to 276 in 2022, marking the slowest pace since Q1 2019. High-profile acquisitions, such as Databricks' purchase of MosaicML for $1.3 billion, have been exceptions rather than the norm. The first quarter of this year shows a slight uptick in deal activity, with 43 deals, but no large transactions have been announced.

WTF is going on here?

The slow M&A market may be attributed to high valuations deterring potential buyers and the dominance of established tech players like Google and Microsoft in AI infrastructure and applications, potentially limiting exit opportunities for startups and their investors.

​Revenue-Based Financing for SaaS Companies - What You Need To Know​

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There's two kinds of RBF:

1. Resting Bitch Face
2. Revenue-based Financing

The former is just an unlucky facial arrangement, the latter is innovative and flexible funding model.

If you run a SaaS company you know that the financial landscape is evolving—which is why RBF (not resting bitch face) might yield a lot of benefits for you. We wrote a wholistic guide on RBFs, it's benefits to SaaS businesses eligibility criteria, and the importance of seeking professional debt capital advisory. We also present some real-world case studies to illustrate the application of RBF and SaaS lending technology in various industries.

When it comes to capital raising for SaaS companies it's important to have a balanced approach. and the potential of financial innovations like RBF and SaaS lending technology can support business growth and success in the software industry—if you access reliable lending platforms.

​Exclusive: The Founder Mental Health Pledge is looking to create a turning point in startup culture​

Mental health isn't talked about enough among founders.

Starting a business requires incredible persistence, focus and resilience, but sometimes it's just f*cking grueling. Yet there's an expectation to toughen out these moments to get to a greater result that might never come.

The Founder Mental Health Pledge is a nonprofit initiative aimed at promoting mental health and well-being among startup entrepreneurs. Created by Naveed Lalani and Brad Baum in response to the mental health struggles observed during the Silicon Valley Bank crisis, the pledge has gained significant support, with 748 investors and startup leaders from over 42 countries signing on.

The initiative now includes a new effort to incorporate mental health clauses in VC term sheets, with twelve firms already adopting this practice. The clause encourages founders to use a portion of their funding for mental health care as a legitimate business expense. There's an advice column called "Ask Andy," by Andy Dunn, a founder who has openly shared his mental health struggles, to offer guidance to others in the startup community.

No one is a lone wolf. We all had to get somewhere through the good will, time and help of others (at least, that's what we believe). One thing that reminds me of the goodness of humanity is that whatever problems we face, someone, somewhere is coming up with a solution.

Until our next flight,

Ryan Ridgway & your friends at Cirrus

​cirruscap.com

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