The markets are pricing in a “soft-landing” in the economy. The tech sector reaching price levels we haven’t seen since August of last year.
In today’s letter:
- Substack crowdfunding: The $5M cash raise was offered to contributors of the platform
- Google glass get’s nixed: TikTok on the chopping block, Baseball kicking off opening day
- Housing market: inventory levels lower than pre-covid. Market steadying
- The Matrix is 24: Playboy Issue 1 sells for $150,000. Beautiful financial charts
The Dossier
Substack’s Crowd-Powered Expansion Strategy
Substack, the subscription-based newsletter platform, launched a community investment round at a $585M pre-money valuation.
Interestingly, they chose to use a crowdfunding approach offering their users an opportunity to invest in the private company.
The SEC increased the limits that startups can crowdfund in 2021 from $1.07M to $5M per 12-month period.
Back in 2021, it also raised a $65 million series B round led by venture firm Andreessen Horowitz (a16z) at nearly the same valuation.
The network has 2 million paid subscriptions. With the “top 10 publishers on Substack collectively making more than $25 million annually.”
If we assume an average annual revenue per paying subscriber of $70 per year. We would come to a $14 million current revenue run rate. (10% fee of the $70 = $7 * the 2 million subscribers)
A $14 million revenue at a $585 million valuation gives it about a 42x revenue multiple.
The growth of Substack has been quite impressive over the last year. It has encouraged great writers to pursue their passions and be well-rewarded.
For this, I applaud the company and am happy that writers now have a way of connecting with their readers and now can write about the things they enjoy.
Fundraising for high-growth companies over the last year has fallen off a cliff. As a result, many startups that aren’t generating positive cash flow have been completely overlooked by many investors, especially given the amount of money invested in 2020 and 2021 at extremely high multiples (likely multiples those companies will never see again).
There’s no need to rush into investments. Don’t purchase something without truly understanding the financials and the management team behind the business.
As Warren Buffet put it, “I’ve never swung at a ball while it’s still in the pitcher’s glove.”
(Buying unproven companies with a little history of consistency is not his ideal way of investing)
BRAIN FOOD
Nuisance Subscriptions: New rule to penalize companies for annoying subscription cancellations
Google Glass No More: Sales of AR smart glasses officially discontinued
TikTok’s Dilemma: IPO or buyout to avoid 90% chance of US ban
Out-of-Control AI: Tech pioneers call for six-month development pause
LeBron James, AOC, and More: Twitter reportedly boosting 35 VIP users
New MLB Rookie Patches: Fanatics’ latest move in collectibles expansion
NUMBERS IN THE NEWS
Time to Make a Move?
Zillow’s Home Value Index (ZHVI) has raised its 2023 home price forecast by 0.5%, mostly driven by the historically low supply of houses for sale. The home listing has led to a growth in the home price index by 4.4% over the last year and expectations to grow by 0.6% this year.
Zillow estimates that 4.3 million homes will sell in 2023, which is a 14% decrease from its 2024 expectations.
Meanwhile, Realtor.com reports a 59.9% increase in the number of homes for sale compared to last year.
The average time homes spend on the market has risen to 54 days, 18 days more than last year but still shorter than pre-pandemic levels.
March saw a 20.1% decline in newly-listed homes compared to the same period last year, with new listings remaining 29.7% below pre-pandemic levels from 2017 to 2019.
One significant factor contributing to the low number of listings is the ultra-low interest rates of 2-3% during 2020-2021. Homeowners who purchased at these rates are hesitant to list their properties for sale, knowing that such attractive rates may never be seen again in our lifetime.
Today, 30-year fixed rates are hovering between 6.0% and 6.6%.
So, what does this mean for us market investors? Signs point to the possibility that the housing market is approaching its bottom, creating potential opportunities for those with a keen eye on investments.
Potential investors or home buyers may try to grab some of the low inventory this year and plan for a refinance or sell into the next couple of years. Interest rates are expected to come down starting next year per the Fed’s dot plot. (we know how accurate that is)
HAND-PICKED
🎥 On this day: The Matrix released in theaters March 31, 1999
📈 Stunning visuals: Company finances presented in easy-to-understand charts
👩 Playboy Issue #1: Yesterday, the most well-preserved copy (1 of 3) of the (in)famous Playboy Magazine ft. Marilyn Monroe on the cover sold for $150,000 at auction.
MEME OF THE WEEK
