The Longest View
Notes on Startups, VC & Entrepreneurship
A Tale of Two Cities (Bilt vs Brex): Bilt raised a $200M round valuing the company at $3.1bn. They’re reportedly profitable on an EBITDA basis with annualized card spend “nearing $20 billion.” Brex on the other hand had to layoff 20% of their headcount, and is reportedly burning $17M a month.
Comparable business models, but wildly different outcomes. What gives? The glaring differences are between the EBITDA profitability and the number of employees. Revenue per employee at Bilt is ~$1.4M, revenue per employee at Brex is ~$260K.
So what’s the takeaway? I think there’s two main takeaways. 1) Competition is a mf’er. Brex has to go against Ramp, Amex, SAP Concur, Payhawk, Pleo, Navan. The list goes on. Conversely, Bilt doesn’t really have any head to head competition 2) We’re in a brave new world of company building! The market prioritizes, rewards, and values efficiency. From a pure dollars and cents perspective. I would much rather be an employee at Bilt vs. Brex. On a relative basis, my equity is likely worth more, there is a clearer path to upside potential from the current mark, and there’s a lower pref stack that could crush my value.
A Handful of Electrons: Daniel Gross shared a thought provoking post on the implications of AI. In his own words, “I think we can all agree that GPT-4 completes many tasks at human-level proficiency. It is imperfect in odd ways -- it can write software like a smart MIT undergrad, but can't do basic task planning like an entry-level EA. It speaks all languages, but can barely do math. Suppose the progress doesn't stop, just like GPT-4 was better than 3, GPT-5 is capable of basic agentic behavior -- i.e. able to accept a task, work on it for a while, and return results.
Some modest fraction of Upwork tasks can now be done with a handful of electrons. Suppose everyone has an agent like this they can hire. Suppose everyone has 1,000 agents like this they can hire...What does one do in a world like this? What do you long or short?”
What to Go Long: US suburbs. In the context of Daniel’s question, I thought about what I would do in my own life if I was replaced by a handful of electrons. Currently, my order of operations are:
Make plans to leave NYC to extend personal runway
Move to a suburb with attractive cost of living
Become a home builder
In a scenario where the job of a venture capitalist can be done by a handful of electrons, things have gone wildly right for AI. And in that future state of the world, my thinking is I’d want to have a job that those electrons were unlikely to do well, and a job that the country desperately needs. Enter home building. There’s a severe housing shortage in the US and to my knowledge we’re still pretty far off from having robots that can put up drywall.
To extend some of my thinking further take this hypotehtical. If 20% of white collar professionals in the US (the majority of which live in cities) lost their jobs they would no longer be able to afford their rent, if they were no longer able to afford their rent they’d look for a cheaper place to live, if they’re looking for a cheaper place to live, the suburbs and rural areas are logical options. If they’re considering between the suburbs and a rural community, a majority are likely to choose to move to the suburbs. So, if some material percentage of the original 20% of white collar professionals move to the suburbs what’s the potential impact?
Looking at economic census data, there’s ~13M workers that I would narrowly categorize as white collar professionals. In aggregate the payroll for these 13M people is about $729 billion and they produce about $1.8T of economic output. For argument's sake, let’s say that 3 out of 4 displaced white collar professionals in the future choose to move to the suburbs. That would mean that roughly 2M people representing $100bn in wages and economic activity would be shifting their spend from high cost of living urban areas to relatively more affordable suburban areas (I’m assuming people can rebuild their incomes). So in the context of that potential economic transfer it would feel a lot better to be in a position to own assets that serve the needs of that $100bn in spend. Hence why I’d be long US suburbs.
Gene Therapy: Over the holiday break I read this fantastic article detailing the history of the pharma industry and how it’s become more and more difficult to produce new drugs. Since reading that article I’ve been more and more curious about the biotech/pharma world and the ways it overlaps with the broader tech/VC landscape. In one sense it’s incredibly topical because it’s almost impossible to avoid Ozempic ads or news coverage, and people like Bryan Johnson have pushed the extremes of biohacking to the mainstream. In the other sense I probably notice more news about the industry because in general I’m more curious, but in any event I was intrigued when I saw a NYT article headlined “Gene Therapy Allows an 11-Year-Old Boy to Hear for the First Time”
What Happened? “Aissam Dam, an 11-year-old boy, grew up in a world of profound silence. He was born deaf and had never heard anything…On Oct. 4, Aissam was treated at the Children’s Hospital of Philadelphia, becoming the first person to get gene therapy in the United States for congenital deafness. The goal was to provide him with hearing, but the researchers had no idea if the treatment would work or, if it did, how much he would hear. The treatment was a success, introducing a child who had known nothing of sound to a new world.”
So What? Stories like these make me wonder about the future. We’re living in a world where technology is curing obesity and deafness. Those are extremely positive benefits to society. And that’s just what we’re doing today.
If we overlay the megatrend that is AI, what happens?Does the pace of drug discovery become faster? Do we get personalized designer drugs that allow people to selectively edit or amplify their genes? This is the stuff of science fiction that before getting deep into the tech ecosystem I would have written off as fanciful and crazy, but the fanciful and crazy are what produce the largest outcomes and thus what the entire industry is oriented toward. In any event, it’s another interesting subsector to pay attention to and one that has more material impact on the world in a positive way than workflow SaaS