The NBA and Kyrie Irving, Steve Ballmer, and Venture Hype Cycles
Stretch Four Insights Volume 41
The snap shot above comes from my fitness app and our sponsor at Stretch Four. It has been a few months since I shared an update on my experience with Future app. Well the last thirty days I dropped off a bit but this month my goal is to get back to my normal training routine. Alex, my trainer, has been giving me great workouts as always but as the days get darker earlier it does get more difficult to stay on top of my training. Future makes it doable because Alex is always checking in to see how my workouts are going, how I am feeling and what reps I am hitting. He also has insight into all my data including my heart rate, workout duration, and more.
Future is a sponsor of this weekly newsletter and I cannot recommend them enough if you are like me and you need structure and a consistent feed of workouts. It’s the best personal training experience I have ever had so check it out at least for a month to see if you like it as much as I do. The current offer is $19 for your first month!
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Happy Saturday,
This week seemed like it was a blur and I think it was mainly because of the changing of the seasons. The weather is turning and while San Francisco stays fairly mild, we’ve definitely felt the Fall weather here.
It was also SF Tech Week, but coming off of Money 20/20 I think I’ve hit my limit of event and conferences for the rest of the year.
In other news, it was power-packed with a lot of negativity. We lost another talented rapper in Kirshnik Khari Ball, better known as Takeoff and one-third of the Migos, to a senseless shooting in Houston.
This week I want to highlight:
The NBA’s problem and how cancel culture is creating more harm than good
Steve Ballmer dedicates $400 million to black venture businesses; with a few caveats
VC hype cycles from the past five years and who is leading the charge?
The alarming rate of black men dying to gun violence
Let’s dive in.
Quote of the Week:
“You don’t get s**t straight if you don’t straighten it, I’m the type to sit back and watch patient, do a trick with the stick, it’s amazing, in the bando trappin’ out vacants, locs on like I’m starring in The Matrix, I keep the cookie like my grandma made it, I keep the keys and the pounds and the babies, and the bricks came white like Shady” - Takeoff, Straightenin, 2021
Chart of the Week:
This seems to be the great reset in technology and it happens every decade. This week in particular has been a rough week with three major Bay Area based companies including Twitter, Stripe, and Lyft making layoffs. Not only are companies laying off employees but they’re also hiring less.
Tweet of the Week:
The NBA and Kyrie Irving
The NBA was all over the news this week and it was not for anything related to basketball. Kyrie Irving was the subject of every sports and national broadcast thanks to primarily one reporter who is not a beat writer for the Brooklyn Nets but only covers stories on Kyrie Irving and Ben Simmons, two players who create some of the biggest storylines in the NBA, that have nothing to do with basketball.
Nick Friedell began by asking Irving questions about a controversial documentary he posted to his Twitter account and it went left for about six minutes. There is an alarming amount of controversy around the documentary which has been available since 2018, but my concern is how quickly this topic rose to the top of the charts and by week’s end it became the most polarizing topic in sports and the internet.
In a nutshell, the NBA has a lot of work to do on issues like this. For one, the league is hoping to negotiate an $80 billion media deal and the leadership has went out of the way to try and be this liberal-leaning, woke and active organization when it comes to social issues but it clearly is selective. The league has stayed away from taking political positions when it could affect their bottom line. An example is what is happening in China, a burgeoning revenue and growth market for the league.
The film Kyrie posted and has since deleted from his social media is now the number 1 best seller on Amazon Prime’s list under Ethnic Studies. Amazon has not deleted it or made any statements. The earned media, that in my opinion was generated by the NBA and the sports media, has likely taken the documentary to an entirely new level of exposure. Weirdly enough, I follow Kyrie on both Instagram and Twitter and never saw the post and only heard about it because of the media picking it up. The fact that athletes have a platform and influence is true, but I do wonder how many people establish beliefs around what athlete’s say.
The NBA and the Brooklyn Nets took their stand and have suspended Irving for at least five games and most recently his endorsement deal with Nike has been suspended as well. While Irving has since apologized, donated $500,000 to the ADL which they declined, and deleted the post the damage may be done. I honestly believe that the NBA wants to rid itself of Irving all together, it dates back to his ant-vaccine stance and his lobbying to not play in the 2020 NBA bubble.
Ballmer puts $400 million into black businesses with a caveat
Last week, Andre Iguodola and Evan Turner had Steve Ballmer as a guest on their Point Forward Podcast. It was an interesting conversation as you got a bit into the mind of Steve Ballmer the most charismatic and wealthiest owner in the NBA.
A week prior to that, Ballmer made an announcement that he and his wife were dedicating $400 million into black businesses. I think this is a great thing, but to be clear, Ballmer is not writing seed checks into startups founded by black people.
The way the funds will be distributed is through private-fund ventures. Meaning, he will select certain funds to distribute the funds to black business owners. Ballmer means well but these types of things are widely misunderstood.
What is happening in this case is Ballmer is utilizing Goldman Sachs, Fairview Capital, JPMorgan Chase, Ariel Investment and GCM Grosvenor as the partners to work with to deploy the capital. These firms will likely source, vet, diligence, and make the investments but it will be interesting to see what types of black businesses they fund. My hunch is it will not be net new businesses that had not previously been funded, but businesses who have already likely received prior funding.
In summary, I think this is a good approach not a great one, but I respect that Ballmer is investing real money that is looking for a return versus looking at it as a charity.
Hype Cycles in Venture Capital and Andreessen Horowitz (A16Z)
The Silicon Valley eco-chamber is predominantly about two things: hype and getting out of an investment before the hype dies down while making at least five times your money. It is honestly like going to a night club in Vegas. The goal is to arrive when the party is about to pick up and leave before you’re the last one standing. This is the dance I have seen play out over and over again for the past five years.
In late 2017, when I moved to San Francisco the hype was about Bird and Lime which raised $523 million this time last year at its peak. Scooters were the last mile of transportation and these companies each got to billion dollar valuations in what seemed like months.
Before that, it was Blue Apron and the meal kit craze. These are the points of The Hype Cycles of Venture Capital. This essay breaks down the most recent hype cycles and why they are detrimental.
When I think of venture capital hype cycles in the past few years Andreessen Horowitz is top of mind. According to The Information, the firm is experiencing some pushback from some current LPs because there have been quite a few questionable investments lately. Current LPs are not happy as they have already forked over $350M into Adam Neumann and another $400m into Elon Musk’s purchase of Twitter. Their hands were all over the hype cycles of the past five years and while they had wins like Coinbase at the IPO price some of the investments, including Clubhouse where they invested at a $4 billion valuation, have not faired well.
What’s Next
This week is another week of grinding with ModernTax, as we have signed a few new customers in the past weeks and have a few more we expect to sign this week.
Additionally, I am preparing for a presentation I am doing in my hometown of Charlotte, North Carolina (close to enough, I grew up 40 minutes outside of Charlotte) at the Venture 135 event.
This event bills itself as the premiere venture event in the southeast and attracts leaders in insure-tech and fintech to the city for a two-day event. It will also be great to see friends and family while I am there.
I am also hard at work with my engineering team on two new products at ModernTax.
We are releasing a product that helps companies verify business tax records and identity.
We are in beta testing with a few design partners and we are also looking to launch a new buy-now pay later product for tax refunds this tax season.
If you are building any B2B financial products or any B2C e-commerce products where the costs can range from $1000 and up I would love to chat offline. My email is matt@moderntax.io.
Back to the trenches.
Best,
Matt
Good write-up! I also follow Irving on social media and didn't see the post until the media brought it up. Glad the producer is now seeing the #1 spot on Amazon. But Ballmer working with those banks, same banks like JP morgan chase that cancelled Kanye. How many of those banks will divvy up those funds to black businesses in support of Kanye? That's the problem.