Good Morning!
I am writing to you all from Washington DC where I spent Thanksgiving with the fam. We had a blast.
We saw a movie (the new George Clooney & Julia Roberts one that was actually pretty good), ate some perfectly cooked turkey (where the tryptophan effected me greatly and had a quick onset), watched some good football, and talked some (more like a lot of) stocks with the Pops.
It was a great day. Click here for actual footage of me being carried to the sofa after eating too much turkey!
On this rare Sunday, holiday send, we are going to be recycling and updating the second ever Crossover send which went out to only 200 people! Now with a list 10x the size, I thought it would be a great time to bring this piece back.
If you have seen it before, thank you for being a day one and enjoy the new Lead Edge 13-F update. Showtime! |
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Mitchell Green “The CEO that calls you right back is probably the one you do not want to talk to. It is the person that you call or email every two days for 3 weeks that gets back to you. Those are the CEOs that you really want to back.” - Mitchell Green Meet Mitchell Green. Green is the Founder of Lead Edge Capital (LEC), one of the most successful crossover funds in the investing industry. Lead Edge Capital currently has $3B AUM, and in 2020 closed a $950M fund from 500 investors.
75% of the current fund is dedicated to private equities while up to 25% can be invested in the public markets. The public companies that they do invest in are sub-$10B market cap companies. Here’s a list of Green’s greatest private investments: - Alibaba – $350M
- Ant Group – $160M
- Spotify – $150M
Beast. What would you pay to have just a 10-minute conversation with Green to discuss his investing process?
Well, today, you can pick Green’s brain for free! On a recent episode of the StrictlyVC Download podcast, Green shared the 8 key investing criteria LEC operates by: |
8 Criteria Here are Green's 8 criteria that he shared on the pod: - Are you $10M+ in revenue?
- Are you growing 50%+ YoY?
- Do you have 70% gross margins?
- Are you capital efficient? Are your revenues today greater than the amount of money that you burned since inception?
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Do you have 90% gross retention?
- Do you have a diversified customer base? Do you have any customers with over 10% of sales?
- Do you have recurring revenue?
- Are you profitable at EBITDA line?
Lead Edge’s goal is not for companies to meet all of the criteria, but rather between 5-7. Green also shared that the ones that are most important pillars are 1 & 5. |
Takeaways Investors: Off the bat, there is one main issue. Not all of us have the access to the deal flow that Green & co. do. If we checked just a couple of these boxes we would be happy campers.
I do think it is a great move to work on a checklist of similar criteria for you and your own investment standards. Here are a few ideas to add to your list: - Do I have connections/expertise in this field to leverage this investment?
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Will the founders protect my interest during future funding rounds?
- Do the founders have prior startup/business building experience?
A personalized checklist of seemingly simple questions can have significant positive ramifications in your due diligence process. Founders:
If you are a founder, listen closely to what the best investors in the world are looking for. Even if you are in earlier stages and spending day and night trying to build a brand/company, keeping criteria like these in the back of your mind is critical.
At the end of the day, making money is key to the success of your business, and consistently checking in on creating a scalable, profitable model is paramount.
Also, I totally disagree with Mitchell's quote that I kicked the newsletter off with. If someone wants to invest in your venture, get back to them within a couple of days. Trust me. |
Bonus Points: 13F
At the end of Q3, Lead Edge Capital had a portfolio valued at ~$240M vs. a ~$360M at the end of Q2.
Green & Co. left the quarter with a concentrated portfolio with 8 holdings: - Elastic: 23% of portfolio, $56M value
- Instructure: 23% of portfolio, $54M value
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Yext: 21% of portfolio, $51M value
- Stoneco: 14% of portfolio, $34M value
- NCR: 9% of portfolio, $21M value
- Weave: 7% of portfolio, $16M value
- Everbridge: 3% of portfolio, $7M value
- Bird: .1% of portfolio, $294K value
Lead Edge exited their $100M position in Toast. Additionally, Lead Edge's stake in Elastic decreased 1% QoQ, Everbridge stake decreased by 81%, and Next stake increased by 29%. Speaking of Elastic, sources tell me (me), that we might be seeing Elastic make an appearance in the Crossover Portfolio! -Alan |
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The Rundown: The great Doug Leone of Sequoia Capital shared a gruesome outlook for the next couple years for the economy and VC which he feels could be worse than what we saw in 2008 and 2000 3 Key Quotes:
- “The situation today I think is more difficult and more challenging than either ’08, which was really a protected financial services crisis, or 2000, which was a protected technology crisis."
- “Here, we have a global crisis. We have interest rates around the world increasing, consumers globally are starting to run out of money, we have an energy crisis, and then we have all the issues of geopolitical challenges.”
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“You were rewarded no matter what — you made a s--t decision, a crap decision, you got money; you made a good decision, you got money — which is a lousy way for you to learn your craft. All that is gone.”
Alan's Angle:
Anytime someone like Leone talks, I listen. Hence, why The Crossover Portfolio has a serious cash balance and why we are proceeding with caution and cleaning up our portfolio.
Also, why can't big time VC's just look at the camera! It is not that hard. Next time I am getting a picture for a passport or license, they are going to be extraordinarily confused when I simply am just looking off into the distance. This is my profound insight. |
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Missed a recent edition? That's okay! Now you can just click on these links below to catch up on what you missed! |
Note: The Crossover Portfolio is a mock portfolio of how I would be investing and not with real money. All trades are shared publicly @ The Crossover Twitter as they are recognized. |
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We added a new pic in $DOCN! I am a big believer in the company for several reasons, and I am sure we will cover it in the future. In the mean time, check out OG's tweet breaking down some key fundamentals.
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The great Mario Gabelli had some very bullish words for $PARA on CNBC last week
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We absolutely crushed it with $MANU on a little swing trade picking up the company at ~$15 and selling it @ $16.84 just a couple days later. We were all over the takeover rumors and following soccer and the business of sports closely helped us crush this one and make a quick $10K for the portfolio. (Side note - stock is now over $21 a share. It hurts, but you can never go broke from making a profit. Would love to break down my process here a little deeper in the future.)
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Here are some jobs that I’m curating in finance and tech. Use this link to submit a role to be featured if you’re looking to hire.
Senior Product Manager @ Capchase
Capchase is providing SaaS based startups with financial funding solutions and they are looking for a new Senior Product Manager! Director of Fraud & Payments @ Underdog Fantasy A very unique opportunity at an up-and-coming fantasy platform! Underdog Fantasy is looking for someone to determine fraudulent activity, suspend and reactivate accounts, and overall protect their platform. If you know someone that could be a great fit for this role, make sure to send this job their way. Sr Accounting Manager @ Uber
This accounting position is within the "Transformations" departments at Uber, an incredibly innovative and unique wing of the company. If you have 15+ years of accounting experience and want to be in an entrepreneurial environment, check out this opportunity! |
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Japan soccer fans are absolutely the best. What class acts.
- Big dub by Fan Duel Sportsbook social media team here
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Brian Daboll is all of us when the Turkey still isn't ready
- This pic of Musah and Saka is awesome
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Bailey Carlin is hilarious and he does it again
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Thanks for the read! Let me know what you thought by replying back to this email. — Alan
Disclaimer: The Crossover is not a professional financial service. All materials released from The Crossover are for educational and entertainment purposes. The Crossover is not a replacement for a professional's opinion. Contributors to the Crossover might have positions in the equities in the The Crossover Portfolio or mentioned in the newsletter. |
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