Dave Lambert

My latest Substack post analyzes $XOM once again catching $TSLA in terms of market cap. Last 5 qtrs: $XOM returned ~$40bb to shareholders via divvies, buybacks. $TSLA: $0.00 That is what really matters. But the key to investing is the second derivative, and as EV sales slow (good for demand for oil, obvs, and for $XOM) I fail to see the Silver Bullet for $TSLA. Why? Because Elon let his product line get old. No amount of robotaxi/FSD necromancy is going to change that. Trade accordingly. Excelsior! --Jim

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LP Tip #11 of #50: A data room is used as a proxy for institutional potential Before we dive in please review the following: ➡️ This post is aimed at a GP of a Fund I which is why there is no mention of quarterly letters, financial statements, etc.  ➡️ LPs run different diligence processes which means that some may prefer a comprehensive data room while others want specific documents.  ➡️ An institutional investor and/or sophisticated family office will request a data room if you move to the diligence phase.  ➡️ Great data rooms stand out. 1️⃣ What is the point of a data room?  Your data room will house materials (strategy, operational, financial, legal) on the fund. The goal of sharing your data room with an LP is to help that LP get smarter on your fund. An LP will also refer back to the data room to write their investment memo. 2️⃣ When do I share my data room?  I suggest you understand the process of each LP you meet with. And, follow their lead when they want materials. It is important to keep in mind LPs have hundreds of funds they are culling through. Below are items that I like to see in a data room. 10 Components of a Data Room  1️⃣ Long Form Pitch Deck - This is self-explanatory.  2️⃣ Detailed Track Record - I learn so much about you as a fund manager by how you present this information and what you choose to present.   3️⃣ Sample Investment Memos - I expect you to include at least 2 memos.  4️⃣ Due Diligence Questionnaire (DDQ) - Typically, this document compiles answers to frequently asked questions. I love seeing one in the data room but I don’t require it.  5️⃣ References List - Please refer to LP Tip #4 regarding on-book references.   6️⃣ Service Provider List - This includes legal counsel, fund administrator, cybersecurity, etc.   7️⃣ Portfolio Construction Model - I am looking to see whether the math works and your assumptions make sense. 8️⃣ Budget - This is a spreadsheet that includes your salary, tech stack expenses, etc.  9️⃣ Org Chart & Team Bios - This is self-explanatory.    🔟 Legal - This includes documents such as Summary of Terms, Limited Partner Agreement, Sub docs, side letters, etc. ➡️ Compliance does not equal Quality:  The majority of new managers check the box on the components listed above but miss the mark on creating a great data room. I am looking for a well organized and substantive data room. For example, the order or labeling of folders in the data room should be intuitive. I want to quickly retrieve the information I need. It shows when a manager puts little effort into the data room. Please keep in mind I see hundreds of data rooms so I am constantly comparing data rooms to one another. Putting together a quality data room isn't rocket science, but it requires time. A well structured data room instills confidence in your fund and gives an LP more insight into how you may go about running your firm. Tomorrow, I'll be back to share red flags in data rooms.

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Private credit isn't just about yields; it’s about balance. RIAs are the new kids on the block as investors, but they're the next frontier. As RIAs enter the credit market, they face a dynamic landscape with opportunities and misconceptions. Understanding the current landscape assists RIAs in making informed decisions, and embracing complexities that lead to better client outcomes. Had a great chat with Joseph Weissglass and Jordan Selleck on the 51 Labs podcast, Investors and Operators, diving into the role of RIAs in the private credit space. Full episode linked in the comments below! #privateequity #mergersacquisitionsdivestitures #investorsandoperators

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TruthSayer AI's Earnings Trade Alerts have an 81.6% success rate on over 4,000 datapoints. Join our Early Adopter Program at www.truthsayer.com and see how TruthSayer AI helps retail investors get Hedge Fund-level quant analysis at their fingertips. 📈 Trade Smarter with TruthSayer AI! 📈 AMD earnings are out tomorrow, and with a 33% chance of missing, it’s crucial to be prepared. Our Hedge Fund clients avoid trading AMD into its earnings to minimize risk. 🕵️‍♂️ Get ahead with TruthSayer AI. Join our Early Adopter Program and enjoy lifetime free access to real-time market alerts and hedge-fund level insights. 📉💼 👉 Register now at truthsayer.com #Investing #stockmarket #earningsreport #marketinsights2024 #stocktrading #hedgefundmanager #aitrading #tradingalerts #truthsayerai #finance #technews #amd

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Congratulations to Paul Mikesell and the Carbon Robotics team and Board on the announcement of its $70 million series D funding. Carbon Robotics is a leader in AI-powered farming, having developed a laser-powered weeding machine that combines computer vision, AI deep-learning technology, robotics and lasers to identify and eliminate weeds with millimeter accuracy, cutting weed control costs by 80% and increasing crop yield and quality. The financing was led by new investor BOND with participation from existing investors nVentures (NVIDIA’s venture capital arm), Anthos Capital, FUSE, IGNITION PARTNERS, Revolution Partners, LLC, Sozo Ventures, and Voyager Capital. This round brings total company funding to $157 million. I recently saw the Carbon Robotics LaserWeeder in action, and can attest that it could be a game changing technology for farmers, for whom conventional weeding solutions, particularly chemical herbicides, are no longer a panacea, as they are costly, environmental destructive, are becoming less effective as weeds develop an immunity to these products. Automation & robotics remains attractive for investors and strategics, despite the harsh financing market for the AgTech sector overall. However, the key question for Carbon Robotics and its peers is, with higher upfront costs compared to traditional crop protection products, will they be able to offer customers a positive ROI today or will rapid adoption only occur when either product costs drop significantly or regulations force herbicides, pesticides and other crop chemical use to decline or be outlawed. It is clear that the agriculture sector, particularly specialty crops, is facing significant challenges due to labor availability, costs, and turnover, making automation and robotics a necessity for long-term survival. For some time now, I have discussed how low-skill, low-cost labor no longer exists, especially in places like my home state of California, where businesses are struggling to pay the minimum wage, while keeping down costs. Carbon Robotics is not alone in driving innovation; companies such as advanced.farm, Burro, Farm-ng, FarmWise, Greeneye Technology, MagrowTec, Monarch Tractor, PlantTape Inc., Pyka, Rantizo, Solinftec, Stout Industrial Technology, Inc., Tortuga AgTech, and Verdant Robotics, have been gaining traction throughout the agriculture-equipment sector globally. Although the hurdles of high cost and technology validation remain for many of these new agriculture-equipment companies, farmers don’t have any other option than to adopt automation & robotics, or face a future where they struggle to plant, weed and harvest crops effectively. https://lnkd.in/gKaHqZjY Erik Benson Mohamed (Sid) Siddeek Mood Rowghani Rob Freelen Sam Robertson Zane Khatib EcoTech Capital Cy Obert #agtech; #digitalagriculture; #ai; #robotics; #automation; #precisionagriculture; #sustainableag

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https://lnkd.in/ezeReQ8A Radiant Industries, an El Segundo, CA-based advanced nuclear technology company, raised $100M in Series C funding. The round, which brought the total amount to $160M, was led by DCVC, with participation from a16z’s American Dynamism team, Union Square Ventures, Felicis, Washington Harbour Partners, Chevron Technology Ventures, Founders Fund, Decisive Point, McKinley Alaska, Boost VC, and Also Capital. The company intends to use the funds to complete its Kaleidos Development Unit, the same reactor design that will be manufactured and sold to customers. Led by CEO Doug Bernauer, Radiant is developing technology with the potential to provide reliable and lower carbon energy to remote, off-grid locations, among other areas. This solution can circumvent grid connection challenges and provide uninterrupted, lower carbon intensity power for long periods. Its Kaleidos microreactor is a 1MW nuclear power plant in a box that replaces diesel generators, providing power for military installations, remote industry, data centers, EV charging, and more. It can be shipped by land, sea or air and installed in a matter of days.

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After raising nearly $1B in capital in recent months, some acquisitions are especially fulfilling - this one being the case. But, first, a thanks and brief recap. In a stage in life I’ve come to learn as 'post-achievement,' my good friend Damien Rocchi told me recently: “Jeff, you may not feel the need to share what’s been going on in your world, but there are probably many people who would like to know because they care about you.” Thank you, Damien, for the wisdom and kindness. Now, for the recap. Hard to believe, but this year marks a decade since I signed the contracts governing the sale of my former company to Baker Tilly. The years following the merger brought great experiences, scale and phenomenal people into my life - both professionally and personally. Lots of good decisions (and some mistakes) that led to a tremendous journey which included: * The privilege to work and create value across 100+ countries * Effecting large-scale, positive impact spanning multiple industry sectors, companies and the teams within them * The invitation to consider the global CEO role for a $4B organization If someone told me in 2014 that this is what would be ahead, I may not have believed it. The years since the merger were indeed great - and the people even better. My hope during the time we worked together is that I brought each of them some small measure of the significant enrichment they brought me. As in life, one’s career has seasons. In 2020 it was time for a new one to begin in mine - even if such change would not be immediate. In long being a 'free agent' post-close in the sale of my company, the pandemic marked a point of observation, reflection and clarity: it was time for a change. Specifically, it was time to return to industry as CEO through acquisition, with a focus on sectors aligned with my experience. The aim: find a company that does good work but facing an evolutionary hurdle - whether in leadership succession gap, growth, recapitalization or otherwise. Once identified, acquire it, lead it and honor the legacy of those who founded it by generating outsized market value and positive impact post-close. And to such work I took, starting in earnest in mid-2022 and joining forces with a small but mighty group of great people. Together, we raised nearly $1B of capital in support of single asset fund deals where we could lend our experience in turning good companies to into great ones. While there have been many deals in recent months, one where I can combine my love for healthy company cultures with my passion for value-creation and all things tech, mobility, space and the conquest of flight, this is an especially fun one share. Heartfelt thanks to those of you who have been part of the journey thus far, and who continue to be part of it going forward. Means a great deal. Excel always and in all ways - and keep in touch. https://lnkd.in/dsGiYnD2

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Factoids of the week: Fundraising through 6/2024: VC: $40 B Buyout: $155 B PE Growth: $21.7 B PE/VC backed IPOs through 6/2024: VC: 37 PE: 8 (Pitchbook) The number of documents mentioning PIK debt rose about 240% over the last five years among BDCs (Bloomberg) The California State Teachers’ Retirement System announced it voted against a record 2,258 boards of directors among its portfolio companies during the 2024 proxy season, mainly due to insufficient climate risk disclosure. (P&I) The funded status of the largest 100 corporate defined benefit plans currently stands at: 103.5% (Milliman 100 Pension Funding Index) 8 million dogs go to work with their owners. Cats spend up to 50% of  their waking hours grooming themselves. (Dogster/Catster)

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Successful ventures that have achieved Product-Market Fit and have scaled their operations will probably face this new reality: 𝗧𝗵𝗲 𝗻𝗲𝗲𝗱 𝗳𝗼𝗿 𝗹𝗶𝗾𝘂𝗶𝗱𝗶𝘁𝘆 𝗳𝗿𝗼𝗺 𝗽𝗿𝗼𝗳𝗲𝘀𝘀𝗶𝗼𝗻𝗮𝗹 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀. As explained by Mark Suster, this liquidity is most likely to come from Private Equity firms, who have the expertise to evaluate companies based on long-term fundamentals, much like the approach taken by Warren Buffett (rather than the speculative one from crypto-traders 😉). Valuation is not a one-time event but a dynamic process that follows a chain-like logic, where each link is interconnected. An irrational (high) valuation early in the chain can have significant repercussions later on, leading to fewer financing or liquidity options - as professional investors will not accept it. You may avoid this by establishing a clear valuation roadmap that demonstrates a consistent risk/return rationale for each type of investor, from business angels and venture capitalists to Private Equity firms and the Public Market, spanning from the first funding round to the eventual public offering. #EntryPriceMatters #ValuationRoadmap #PrivateEquity

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Re: Investing - MBI: Will Lightning Strike a Third Time? Lightning struck the same place twice in MBI in 2023/2024 and may yet strike a third time. This is a live case study on Restructurings, Creditor-On-Creditor Violence, and “Event Optionality." https://lnkd.in/gDdpvSDk

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Read the latest edition of SchusterWatch by IPOX®: https://lnkd.in/gZ-C7NA2 📊 IPOX® International (ETF: FPXI) demonstrates continued strength, outperforming MSCI World ex. U.S. by +1236 bps YTD. Notable contributions from Amer Sports (+10.56%), Krafton (+9.66%), and Arm Holdings (+7.82%). 🌍 IPOX® 100 Europe (FPXE) maintains strong relative performance, achieving +1722 bps outperformance vs MSCI Europe YTD, supported by robust U.K. market activity. 💼 Global IPO Market Remains Active: 24 new listings raised $5.6B with median appreciation of +8.42%. Key offerings include Talabat's $2B Dubai listing, DigiCo Infrastructure's $1.3B Australian debut and ServiceTitan in the U.S. 🇬🇧 U.K. Listings Show Momentum: Raspberry Pi (+24.96%), Petershill Partners (+2.20%), and Wise (+0.81%) demonstrate sustained institutional interest in British offerings. 🎯 Focus on Japan: Kioxia's $800M IPO set for Wednesday, representing Japan's third-largest listing of 2024, valued at $5.1B. Read more: https://lnkd.in/gZ-C7NA2 #IPOX #IPO #Markets #Investing #ETF #GlobalMarkets

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Startup Founders: here is a SUPER interesting list of emerging and first-check VC firms, many of them new or under-the-radar. Why should you care? Because... 1) emerging VCs are often easier to get in front of and, 2) since they are still building their track record, they will often hustle harder to make your startup a success. (Excellent work, Anne Gherini! :) #startups #venturecapital #entrepreneurship

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Great question by Jason Long on a previous thread ( link in comments below): """ I'd be curious to understand the SECs rationale for making sub-$1B valuation IPOs so difficult. The US public market might be losing its agility by effectively barring small-caps from having a fighting chance. As you mentioned, plenty of great companies IPO'd below the $1B range. """ Here's the 3 U.S. Securities and Exchange Commission mandates with roughly # of employees devoted to each. 1. Investor protection -- Think securities police -- 2,500 2. Maintaining efficient markets -- think regulators -- 2,500 3. Capital formation -- think helping businesses raise capital -- 2 Why? The SEC has an impossible task of policing a $100 Trillion stock and bond market with 2,500 cops. So, they focus on the big banner cases that are most likely to get the rest of the market to pay attention and change behavior. Congress isn't going to ask the SEC commissioners to testify as to why small businesses struggle to IPO. But they do ask them to testify when stock markets collapse or we have derivatives crisis like 2008-09. And, so they work very hard to make sure investors don't get screwed, and that we have efficient public markets. But as a result, compliance to be a public company costs between $2-5 million a year. This is why there's half as many public companies as there were 20 years ago. Crowd-funding is a thing, but only a couple hundred companies take advantage of that every year, because if a crowd-funding investor buys stock in a small business, where can they resell the stock and take a profit? There's no stock exchange available to do that. So, small business capital formation is left to the venture capital community. VC's funds are structured so they and their investors can only make money on their fund when they invest in future unicorns.

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saas-capital.com just put out great benchmarking data on 1500 private SaaS company growth rates. -If you didn't think B2B SaaS valuations were driven by growth rates before, the correlation should be obvious at this point. Valuations over the last 4 years exactly mirror the growth rate trends over the same period: strong growth in 2019 (median above 40%), a sharp decline in 2020 (median 27%) at the onset of the COVID-19 pandemic, huge revenue growth in 2021 (median 45%) as end customers undertook rapid digital transformation, followed by a return to pre-pandemic levels in 2022 (35%) and then softer growth in 2023 (30%). -Anecdotally here in 2024, we're seeing slightly stronger growth rates and a gradual thawing of equity and M&A markets. We will see to what extent the recent Federal Reserve Bank's interest rate cuts help unstick the capital markets. -The median B2B SaaS company growth rate in 2023 was 30%, down from 35% in 2022. -Revenue growth above 50% is good enough for top-quartile performance for companies with $1 to $10 million in ARR. For larger companies, that bar is 35% (their median growth rate is 25%). -Company variance, at least among companies with at least $1M in ARR, is fairly low, however. While the top quartile threshold is ~50% and the median is 30%, the bottom quartile is still growing at 20%.

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See #APLD Applied Digital (NASDAQ: APLD) Today. This is another holding in our Equity innovation portfolio with tremendous potential. Last Quarter the company grew sales by 124%. Currently trades at only 8.5x forward sales, and "6.2x" forward pe. About the company: Applied Digital Corporation (APLD) is a U.S.-based company that designs, develops, and operates digital infrastructure solutions and cloud services for high-performance computing (#HPC) and artificial intelligence (#AI) industries in North America. The company operates through three segments: #DataCenter, #CloudServicesBusiness, and #HPC Hosting Business. In its Data Center Hosting segment, Applied Digital provides infrastructure services to clients, including those involved in cryptocurrency mining. The Cloud Services segment offers GPU computing solutions for critical workloads related to AI, machine learning, and other HPC tasks. Additionally, the company is involved in designing, constructing, and managing data centers to support HPC applications. Applied Digital's AI Cloud service, known as Sai Computing, empowers businesses with a turnkey GPU-as-a-Service solution. This secure, scalable, and managed service provides high-performance computing power for demanding workloads like AI, machine learning, and rendering, all at a cost-effective price. This is not generalized investment advice. https://lnkd.in/ePwxJ9v6

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This FT article has a fancy graphic illustrating the layers of debt in private equity, but -- despite my prior post warning about the risks of debt layering in PE -- this article is inaccurate scaremongering. Here’s the key line: “Much of this lending is ultimately underpinned by the financial health of a fund’s portfolio companies. Yet every transaction ends up adding more leverage to heavily indebted businesses, which can make them more vulnerable in a downturn.” This statement is fundamentally incorrect. From the leverage used by General Partners or Limited Partners on their overall private equity portfolios to the use of subscription lines, secondary fund leverage, and leverage by funds purchasing GP stakes—none of these add leverage to the individual businesses or increase their susceptibility to economic downturns. The only mechanism that does add leverage to a business is a dividend recapitalization. However, the alternative is typically the PE firm selling the business to realize its investment, where the acquirer, especially if it’s another PE firm, would likely employ the same amount of leverage. Net Asset Value (NAV) loans may represent leverage on leverage from an LP’s perspective, but they do not increase the portfolio company’s debt or its bankruptcy risk during a downturn. Instead, they merely increase the possibility that the GP might need to sell sooner than desired to repay fund-level debt. Therefore, the only factor impacting a portfolio company’s failure probability is dividend recapitalization. The bank’s expertise is to assess the risk of its debt investment in the company. Whether a GP sells a stake in their management company, an LP sells a stake to a secondary fund, or the fund uses a subscription loan (a short-term loan backed by LP capital commitments to optimize investment IRR by delaying capital calls) to purchase the company—none of these scenarios affect the portfolio company’s ability to weather a downturn. “There should not be a pocket of the market that touches on so much of the economy in such a sizeable way, where we can say, ‘oh there’s leverage,’ and then very few of us can explain what that leverage means and why it might—or might not—be risky,” said Victoria Ivashina, a professor at Harvard Business School specializing in private capital. I can only assume Professor Victoria Ivashina was either unaware of the article’s specifics or, as a private markets expert, she is 'one of a few' (?) who could have alleviated the author’s concerns about this ‘web of debt.’ Moreover, where is the causality here? There is no indication (other than the title of the article) that PE firms are coercing banks into making these loans. The title could just as easily have been “How Banks Have Mired PE Shops in Potentially Depression-Inducing Debt.” Both parties willingly engage in these transactions, and as new debt products emerge, banks are as proactive in marketing them to PE firms as the firms are in seeking them out.

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