#87 - The Onlyfans Unicorn, Why Time Horizons Matter and All-Time Best Startup Investments
#87 - The Onlyfans Unicorn, Why Time Horizons Matter and All-Time Best Startup Investments
In this week's episode of Reformed Millennials, Broc and Joel start out discussing how to properly think about investing and the competing market participants. After the Market update they also dive into best investments ever, Onlyfans most recent venture round and whether Substack can handle their great expectations.
Listen on Apple, Spotify, or Google Podcasts.
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👉 For specific investment questions or advice contact Joel @ Gold Investment Management.
📈📊Market Update💵📉
To start todays episode we want to talk about something that we think is important to understand as market participants.
When we were first starting out, time horizons were difficult to conceptualize. We pitching ideas to get them into portfolios you can’t possibly run money without also first understanding why you own something. Why someone else owns something and how that affects prices.
Investing isn’t binary. 101010
There isn’t always a right and wrong when it comes to stocks, and investing. It’s missing the point. With the RM podcast we make an effort to point listeners in the direction of global trends to make more informed business and life decisions. We feel like were pretty damn good at that. But that job requires a certain time horizon... And that horizon isn’t a short one. It’s quite the opposite. It’s much longer...
So tune in for 2 stories:
First one is from my favorite writer in the world. Morgan Housel
Knowing what game you’re playing
An idea that’s obvious but overlooked is that investors on the same field play different games. We buy the same companies, read the same news, talk to the same people, are quoted the same market prices – but we’re everything from day traders to endowments with century-long time horizons. Even investors who think they’re playing the same game – say, stock pickers – have wildly different goals and risk tolerances. My view is that most investing debates do not reflect genuine disagreement; they reflect investors playing different games talking over each other, upset that people who don’t want what you want can’t see what you see. Understanding your game, without being swayed by people playing different games, is a rare investing power.
Second is a story/lesson from Peter Lynch “Invest In What You Know”
Peter Lynch on the biggest mistake investors make:
"They don't know what they own. They do more research on a microwave oven and buy based on a tip they heard on the bus. They buy into the potential of something. They hear a terrific story."
"I find when you hear that [story], you just have to black out. You have to think of a movie you went to recently because the stories are very appealing."
“The public is very careful with their money when they buy a dishwasher or a TV set, when they rent an apartment. When it comes to the stock market, for some reason they just don't do any work."
What would they find out with 30 minutes of research?
"They would first of all see if the company has sales and profits. A lot of times they buy companies and there's nothing there. There's literally nothing there."
"There are people that own electronic stocks that don't know the difference between an EPROM and the senior prom. And they're trying to buy stocks."
EPROM = erasable programmable read-only memory, had to google that one.
"Wal-Mart started as a public company with 37 stores in October of 1970. 10 years later you can tune into Wal-Mart. Their profits are up 20x. And the stock was up 20x. It still had another 10 years left. Profits went up 25x in the last 10 years. You can make 25x your money again"
"You have plenty of time. My best stocks have been the third year, the fourth year, the fifth year. Not the third week the fourth week. People want to make the money very rapidly."
Wal-Mart's first annual report:
💯Unofficial List of The 16 Greatest Investments Ever🍄
Naspers - Tencent (2001): $32m -> $250B (7800x)
Softbank - Alibaba (2000): $20m -> $100B (5000x)
Saverin - FB (2004): $15k --> $14B (866,666x)
Peter Theil - FB (2004): $500k --> $1B (2000x)
Sequoia/Kleiner - GOOGL (1999): $13m --> $20B (1500x)
Jeff Bezos - Google (1998): $250k --> $5B (20,000x)
Andy Bechrolsheim - Google (1998): $100k --> $1.5B (15,000x)
Jackie & Mike Bezos - Amazon (1995): $250k --> $20B - $60B (80,000x to 240,000x)
Bruce McKean (Tobi's father-in-law) - Shopify (2007): ~$200k --> $7B (35,000x)
John & Cathy Phillips - Shopify (2007-09): $750k --> $4.4B (6000x)
SIG-Bytedance (2012): $5m --> $15B (3000x)
Steve Jobs - Pixar (1986): $5m --> $7.4B (1480x)
Ruby Lu - Kuaishou: $40m --> $12B (300x)
FB - IG (2012): $1B -> $250B (250x)
GOOGL - YT: $1.6B --> $300B (200x)
eBay - Paypal (2002): $1.5B --> $100B (70x)
Worst sale ever candidate:
Goldman sold its position in Alibaba in 2004 for $22m. That stake would be worth $200B now. Goldman's current market cap is $110B 🤯
The Tale of Two Creator Platforms
Onlyfans:
The business of only fans - set to do $4B in GMV in 2021.
They take a 20% cut of the GMV as their “rake”.
OF is closing in on doing $1B in revenue this year (growing 400% y/y).
As of late 2020, it had ~75% EBITDA margins. 550 employees.
Substack:
Substack raises $65m series B @ $650m valuation.
Someone on twitter deduced that from credit card data the average paying user, of which they have 500,000, is paying for about 2 subs or on average $18/month.
That 18 puts their gross revs at about $18mm per month ($216mm per year) or said another way, their net revenues are somewhere between $1.8 -$2.7 mm per month ($32mm net revenue).
Substack has 95 employees and their current valuation at 30X net revs or 3X gross revenue.
🌊Best Links of The Week☔
Chips with everything - Following last week's Intel strategy reset, with $20bn or more of new investment in fabrication plants announced, TSMC has announced a $100bn (!) building program over the next 3 years. I wrote about this last week: chip production becomes a step harder and more expensive with each generation and that's now reached the point that real money is involved, and that only a handful of companies can do this, with TSMC dominating. Meanwhile, for context, apparently Amazon is designing its own new networking chips, presumably to be made by TSMC, or Intel if its foundry business takes off. This isn't just about PCs anymore - more and more devices need chips, more and more companies want to go deeper into the stack, and so more and more companies (Apple, Google, Amazon) want their own. Links: TSMC, Amazon ($)
US stimulus/infrastructure proposal has a lot of tech (and chips)- The new US president has unveiled a big stimulus and infrastructure investment proposal, and a large part of it involves investment in tech, including migrating US government vehicles to electric and building chargers, expanding broadband access, $120bn of R&D and science spending, $35bn on climate tech - and $50bn on semiconductors. China is mentioned, a lot. Link
US online gambling - The US allowed states to license online sports gambling in 2018, and that has been slowly rolling out state by state. Draftkings is now a $20bn company and did two big deals in the last week (WWE partnership and content acquisition), while NYC will probably legalise it this year. Links: New York regulation, DraftKings/WE
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