The New Investment Banks. Thumbs Up/Down. Unlocked Essays.

European Straits #237

The Agenda 👇

  • My Sifted column about Big VC and the problem it poses for Europe

  • Thumbs up/down for the last weeks

  • A list of recently unlocked essays from the archive

If, like me, you’re following Andreessen Horowitz to better understand the evolution of the venture capital industry, then you’ve probably stumbled across this article by Dror Poleg: Andreessen Pulls a Bezos. In it, Dror, an analyst and strategist, discusses strategic positioning on the VC market:

How do you compete in a world of abundant capital? You think strategically. In the case of venture capital, that means doing things your competitors aren't doing. And that's exactly what Andreessen Horowitz (A16Z) is doing. The firm is on a hiring spree, recruiting new partners and former government officials, writers, editors, and more. A16Z is no longer building a venture capital firm; it is building a new type of company with a thick management layer that helps support its multiple portfolio companies with marketing, legal, lobbying, and technical resources. It's no longer venture capital; it's a venture corporation.

To me, what it looks like is rather simple: Andreessen Horowitz is to our time what nascent investment banks were to the burgeoning mass production economy at the beginning of the 20th century. But then the question becomes: Can we have the same in Europe? And if not, as is likely (if established investment banks are any indication) is it OK to only have tier-2 and tier-3 “venture corporations” in Europe?

👉 Read more in my latest Sifted column: US VC firms are becoming modern-day investment banks. Can Europe compete?

Bonus: This was an enlightening research paper on the global market for investment banking published in 2016 by Bruegel: The United States dominates global investment banking: does it matter for Europe? I drew inspiration from it in various writings over the past two years:

Also, if you haven’t read it already, you shouldn’t miss my 11 Notes on Goldman Sachs.

😀 I didn’t know him at all, but Ramzi Musallam is a prominent investor focused on the intersection of technology and government. He’s clearly a successor to the Carlyle Group, a private equity firm that was founded by former government insiders to try and turn their knowledge of the public sphere into a successful investment business. Is this also a model to follow for the likes of PUBLIC and Form Ventures in London? Read more in Meet Ramzi Musallam, Wall Street's Top-Secret Billionaire Investor.

🙂 Will we finally arrive at indexing in the venture capital space? Many venture capitalists are writing about it these days, from John Luttig of Founders Fund (The index mindset) to Tomasz Tunguz of Redpoint (Passive Investing in Venture Capital and the Parallels to Public Equities). I myself tried my hand in VCs: Would You Rather Be Yahoo or Google? (just unlocked)—and on the same topic (indexing in venture capital) you could read this by Nnamdi Iregbulem and this by Patrick Ryan of Odin.

😏More diffraction! Hedge funds are all over the place in venture deals these days: U.S. tech investor Coatue is planning to set up an office in Europe. Our continent is not that far from Coatue’s base since founder Philippe Laffont is a Belgian educated in France—but it still suggests how hot the competition is getting around here. As for me, I rejoice at witnessing many different firms exploring new approaches to deploying capital across European markets (here was my take two years ago). There’ll be many lessons to be drawn from this, both for Europeans and non-Europeans! About Coatue, also make sure to read this by Akash Bajwa: Coatue: The cub on the prowl

😐 Love this idea by Amazon—that you can send a (tangible) gift without knowing the recipient’s address! Imagine if you never had to give an address anymore in order to be delivered a tangible item: you just trust an intermediary to find you wherever you are at any given moment. It’s an idea I’ve been pitching a lot in my work with the French postal services. Now Amazon is turning it into reality: Amazon Prime members can now send gifts with just a phone number or email address.

😒 How many times do we have to write that venture capital will get better if more people, starting with limited partners, can access data related to returns? Well, the problem with accessing data exists far beyond the tiny world of venture capital and is in fact plaguing the much larger segment of private equity, as explained in this article published in Institutional Investor: Private Equity is Notoriously Opaque. Researchers and Investors Say This is No Longer OK. If change is coming to private equity, hopefully it’s coming to venture capital, too!

😖 What’s been awful this week? Maybe the fact that the US political system is entering stasis and sending clear signals that it’s about to unravel. I’m not indifferent to the consequences for Americans themselves, but even more critical are the consequences from a geopolitical perspective. About all that, I liked this thread by Balaji S. Srinivasan (reacting to an essay by Dominic Cummings, about whom you can read my thoughts here) 👇

📚 I unlocked a few more essays from the European Straits archive this week:

💔 Investment Banking Rifts (July 2020) 

🤔 VCs: Would You Rather Be Yahoo or Google? (October 2020)

🇺🇸 We All Need a Lone Star State (March 2021)  

And here’s the Twitter thread including all unlocked essays since last June:

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From Munich, Germany 🇩🇪