Hey,

This is the third installment of The Financial Report, a newsletter to share weekly insights on Finance and Tech. This week has articles on the two biggest drivers of inflation (energy and housing), valuation analysis from VCs and PE, and book from 50 Cent on how to fear nothing.

Market moves

• Inflation cooled in July in large part because of decreasing energy costs. Gasoline futures have ticked back up the past week, and may continue to move back up  due to the US depleting the reserves they’re putting on the market, increased demand from China coming out of lockdowns, and Europe’s energy crisis. More here.
• Housing is one of the most persistent components of inflation. There has been a slowdown though with increased price reductions, more inventory, and fewer sales. A deeper analysis of inventories, housing starts, and home prices can be found  here. 
• Unity announced the acquisition of Ironsource a few weeks ago. A move to unify their game development platform with Ironsource’s monetization and analytical tools. AppLovin attempted to thwart those plans by offering a merger with Unity to create a similar product offering with their combination. More here. 
• With deals like the ones mentioned above, M&A is starting to pick up. This year, private equity firms have acquired five public software companies, totalling $38b in value. Seven months into 2022, these figures exceed last year’s totals. Tomasz Tunguz does some analysis on what these PE transactions may mean.
  

Reads of the week

• A friend recommended The 50th Law, a book collaboration between Robert Greene (author of 48 Power Laws) and the rapper turned business mogul, 50 Cent. The book tells the story of 50 Cent’s life centered around his primary principle for success: fear nothing.  A fitting recommendation from my friend, who is among (if not the) most fearless people I know. 
• Talia Goldberg, a VC at Bessemer Partners, wrote about how to value an early-stage business. She focuses on scenario analysis, where you map different outcomes and the expected chance that each occurs to arrive at a weighted average expected outcome. Some call this probabilistic decision-making, and one of the best reads about this is Annie Duke’s book, Thinking in Bets.

PS. Talia shared her spreadsheet, and it probably doesn’t look too different from the spreadsheet you make to estimate how much your equity will be worth (if you don’t do that, here’s your template!).

• Samir Kaji shared interesting insights on the venture market and the role of the emerging manager (an investment firm early in it’s development). Notably, emerging managers are consistently among the top 10 performers among all funds (see below).
  

Another interesting chart shared shows that there was a 10x increase in seed stage investments from 2005-2009 to 2015-2019.

Startups to know

Farther is a new wealth management app for high earners with aspirations to build long-term wealth. They provide tech tools with professional advisors. Interestingly, they have alternative investment opportunities such as private equity and hedge fund investments. I’ve yet to come across a personal finance app built for a sophisticated user. With things like “cash waterfalls”, Farther might have potential. If anyone tries it, let me know what you think!   

Quote of the week

“The best moments in our lives, are not the passive, receptive, relaxing times—although such experiences can also be enjoyable, if we have worked hard to attain them. The best moments usually occur when a person’s body or mind is stretched to its limits in a voluntary effort to accomplish something difficult and worthwhile.

Optimal experience is thus something that we make happen. For a child, it could be placing with trembling fingers the last block on a tower she has built, higher than any she has built so far; for a swimmer, it could be trying to beat his own record; for a violinist, mastering an intricate musical passage. For each person there are thousands of opportunities, challenges to expand ourselves.”

– Mihaly Csikszentmihalyi, author of Flow

Mike