Velocity, Openness to change, Debasement: An investment thesis for the roaring twenties
Frst is a seed-stage VC firm focused on supporting a new generation of French entrepreneurs with global ambitions.
It felt weird to work in tech in 2020. As the rest of the world is just starting to heal its wounds, there have never been more excitement with a cambrian explosion of interesting new companies created, hockey stick growth curves and staggering valuations. It’s always easy to call for the top, but I don’t think this is what we are looking at.
I think the 2020s will be roaring because of three root phenomenon which combine powerfully: Zoom makes the world moving faster, openness to change makes innovation easier, and money debasement provides entrepreneurs with almost unlimited ressources.
Velocity: Zoom makes the world moving faster
Every big decision is made of a chain of small decisions taken by multiple people. The longer each step takes, the longer it takes for important things to happen.
In the old world, each link of these decision chains was taking ages. Even a meeting happening 20mn away from your office implied 1 hour of lost meta-time, let alone business flights and night stays. In the post-Zoom world meetings involving 5 people from across the world can happen in minutes, to the price of a quite reasonable loss of signal quality.
As a corollary, Zoom makes possible to “multitask”, even if no one will admit it publicly. Obviously detrimental to the conversation quality, but in many cases still a net positive. In the old world, when someone was asking you something important she had to wait minimum 1 hour to get it. In 2020 she doesn’t have to wait anymore, neither her own counterparts.
Resistance to change is over
Resistance to change is probably innovation’s #1 enemy. Evolution programed humans to be unconsciously suspicious of new things, and most people don’t consciously fight against this trait. This is why it’s frequent to hear an employee talking badly about the “new IT system” which has been rolled out 3 years before.
When a crisis happens, our Darwinian brains switch to survival mode and become way more open to change. Notaries magically discover that it’s possible to sign documents online, health agencies divide by 10 the time needed to approve a vaccine, and grand parents learn to use Whatsapp. What a time to be an innovator!
Debasement: Cash is trash, everyone wants to own stocks
Every dollar or euro that has been used to help the economy to deal with Covid has been printed directly (by central banks) or indirectly (by states making loans they won’t repay). It generated the most extraordinary Monetary Mass increase of modern history, which is impressive considering the fact that the 2010s were already serious contenders.
This money has been distributed to already wealthy people and organizations who don’t need to buy more physical goods, and chose to store it in financial assets such as stocks. It created a massive financial inflation, for now particularly visible with tech stocks since traditional companies will take a bit of time to recover. Tesla grew by 10x on the last 12 months, and Nasdaq by 1,4x.
Dollar and euro holders got poorer without fully realizing it, to the benefit of entrepreneurs.
This gigantic wealth transfer is worrying because of the inequalities it creates but is extremely beneficial to entrepreneurs, who currently have access to almost unlimited financial ressources to fuel their projects. Startup valuations no one would have ever dreamt of a year ago are now common. It’s for instance not surprising anymore to see a pre-launch company raising $5m in a week with a Powerpoint.
The end of the story will depend on what entrepreneurs do with this infinite magical money. As a strong believer in tech and entrepreneurship, I think they will combine it to the world’s new taste for velocity and change to build companies meaningful and useful to the world. It will create way enough value for states to fix the remaining inequalities, provided that they deploy new tools such as Universal Basic Income.
But I’m an optimist.