Tax credits for NBA teams, tax breaks for us all, generative AI goes mainstream with venture capital, and Money 2020
Stretch Four Insights Volume 39
Happy Saturday,
I am happy to be back sharing insights into technology, startups, and a little bit of NBA after a two-week hiatus.
The past few weeks have been a bit lackluster but things picked up this week and the tax deadline has now passed so we can all breathe easy for a few months. It was also opening week for the NBA and I spent time watching some teams. I will say the NBA had a much better kickoff than the NFL in terms of broadcasting and while it is early we know one thing…that the Lakers are one of the biggest train-wrecks in professional sports right now.
This week I want to share what I read and listened to across the internet including:
Tax credits for NBA teams who draft and develop their own stars
The IRS had a big news week around 401k’s and the 2023 income tax brackets are now adjusted for inflation
Artificial Intelligence becomes the new hot space for venture capital in the ongoing crypto winter.
The biggest smhmoozefest in financial services invades Vegas
Let’s dive in.
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Quote of the Week:
“Only damned fools stand in front of oncoming trains.” - John Doerr on investing in Microsoft competitors
The NBA opens with a California beat down
Opening day for the NBA was Tuesday. I watched the Warriors and Lakers in a game that was a clear indicator of two things: 1) The Warriors should be the favorite to repeat as champions, and 2) the Lakers need to completely reconstruct their current roster. The NBA is proving it is a key to success is a league built on actual culture building and drafting well.
Bobby Marks, ESPN NBA front office insider, highlights the Golden State Warriors absurd financials for 2022-2023. The team has a 7:1 ratio of what they will pay in tax penalties versus the actual salaries it will pay to players. Marks presents a scenario where the Warriors could receive a tax credit for each player they acquired to their team through the draft. I like the idea and the salary breakdown would help teams like the Warriors continue building the their teams the right way in my opinion and further punish teams like the Lakers who built it around stars and free agents. While it is alarming that a team is paying over $400 million in taxes to keep a team together it is important to realize that players that were drafted by their respective teams are becoming the better teams in the current NBA.
The IRS is trying to stop the bleeding of inflation for 2023
This week the IRS announced the largest increase in allowable 401k contribution as well as new income tax brackets for 2023. In a nutshell, these new announcements are heavily influenced by what we are going through right now with inflation; in the US we are currently on a trajectory of seeing 10% inflation in the coming months. From my view, rents are increasing and the cost of living in cities, which is already high, is rising even higher. We are seeing salaries that are staying flat in the technology industry and layoffs are happening every week. Instead of printing money, the treasury is trying to ease the pain of all this by lowering taxes and increasing tax-free retirement limits. The bigger question is: will it be enough?
Generative AI and Venture Capital go official
As the crypto winter continues to rage on, the venture capital community has turned to generative AI as the new hot space. One piece from silicon valley darling and investor Elad Gil highlights what it will take for new AI companies to beat incumbents and why this time around things may be different.
Eric Newcomer dedicated his scoop this week to AI and focused on companies backed by Sequoia and Benchmark and also highlighted a market map from Sequoia on the hot companies in the space according to their team.
All this content signifies one thing to me, venture capitalists are moving away from crypto as the hot space and onto something else. With the large amount of venture capital committed over the past year the capital will have to find a new shiny object and AI fits the bill. In my line of sight this is generally a good thing, and crypto will still have ample dollars being invested considering by market cap of BTC still remains a top 10 asset in the world, but we will see less hype around it.
The tweet below from Sarah Guo who launched an AI-focused fund after leaving Greylock sums up the hype pretty well, she was promoting NFTs this time last year.
SF was power-packed this week with conferences including TechCrunch Disrupt and the Masters of Scale Summit
San Francisco had a week as far as technology conferences with at least five happening all in tandem this week. The annual TechCrunch Disrupt conference brought lots of folks to the city and the more exclusive Masters of Scale Summit brought the likes of Tyler Perry and Bill Gates. What is interesting is despite this some folks still found away to find the negative see the tweet below. If this week was not enough, San Francisco is having its inaugural tech week from November 1-6.
Tidbits
If you needed a quarterly reminder of how bleak the fundraising market is look no further than this report from TechCrunch on how black founders only received $187 million in venture funding in the third quarter.
Money 2020 is back — this is the conference that is relentless and despite record drops in public fintech stocks, a looming recession, massive pullbacks in corporate spending and layoffs the conference seems to be getting more hype than ever. I am happy to attend the “lobbyfest” for a few days in Vegas and catch up with old friends and meet new folks as well.
What’s Next
I am heading to Money 2020 tomorrow and I will be there through Tuesday for meetings with current investors, friends, and others.
At ModernTax, we are making some new product announcements and closing out Q4 with some new large customers on board.
Lastly, would love your feedback on the newsletter and you can always drop me a line at matt@stretchfour.co.
Also if you are a tax or accounting professional I would love your feedback by completing this brief survey for a project we are working on at ModernTax.
Back to the trenches.
Best,
Matt