Hey,

Hope you’re having a great day. This is the first installment of The Financial Report, a newsletter to share weekly insights on Finance and Tech. It’s a summary of the top things I learned and found interesting this week. 

Hope you enjoy it!

Mike

Market moves

• Jeffrey Gundlach thinks the fed funds rate will max out at 3%, and we’re close to the end of rate raises. He mentions the bond market is starting to price in rate reductions in 2023. There will certainly be more volatility ahead, but stabilization in rates will minimize the dislocations we see in valuations. (see the first 5 minutes of Jeffrey’s interview).
• The long term average cloud software multiple is 7.8x, and the average 10Y in that period was 2.3%. The current median multiple is 6.3x and the 10Y is 2.65%.
  

• This is a friendly reminder that a multiple is a lazy concept. The multiple drawdown is common parlance in investor circles, but the mix of business profiles at any point in time is different, as are the market conditions. Don’t confuse stock price action with fundamentals. Multiples come down with higher rates because the discount rate increases. A public company with a 8-10% discount rate is much more sensitive than a private company with a 20-30% discount rate. So why is analysis so focused on price action and short-term multiples? As Buffet said, “Mr. Market is a drunken psycho.”
• Earnings for next week. Tuesday is particularly interesting to get a status on the state of the middle-class consumer.
  

Reads of the week

• 15 charts every investor needs to memorize
• The blueprint for profitable growth by Mutiny. This presentation provides a practical overview of deciding where and how to cut marketing spending to grow more efficiently. Jaleh and Henry led Marketing and GTM Finance at Gusto and now work together at Mutiny. You can also view a recording of the live presentation.
• So far this year, VC funds in the US have closed on $137.5 billion, just shy of 2021's full-year total of $142.1 billion, according to PitchBook data. Just this month, Lightspeed raised $7.1 billion across four funds, Battery Ventures announced $3.8 billion in funding, and Oak HC/FT closed on a nearly $2 billion fund. Read more here.
  

Startups to know

• Continuum is a marketplace to access the world's best executive talent for part-time, advising, and full-time roles. A majority of startups fail due to poor management and inexperienced leadership. In today's current landscape that's especially true. Get experienced leadership to help navigate layoffs, pivots, scenario planning, fundraising, and more.

From Mike

• Lessons Learned Restructuring
• Improving alignment between CEO and CFO
• Improving how information flows for financial decisions

Quote of the week

"I can do things you cannot, you can do things I cannot; together we can do great things."
— Mother Teresa

Mike