From Short to Long Liquidity

I had the pleasure of meeting with one of the best investors on the planet yesterday (he will remain unnamed). He said being short liquidity was the best investment over the last 12 years or so until 2021. I have never heard anyone frame the private market in that manner, but it resonated. The smartest people I know can always boil an issue down to its simplest form. What we are interested in is the take-aways, and as one would guess, just like the pendulum in the clock swings wide, the markets swing just as far, but at unexpected intervals.

Currently, all the talk about preserving cash on companies’ balance sheets and raising capital is long liquidity. Managing burn and finding path to profitability is long liquidity. Offshoring and cutting staff is long liquidity. Using AI to streamline process is long liquidity. Long liquidity is the path to survival and ultimately better long-term outcomes which usually require a lot of short-term sacrifice and pain. I am not sure where this stops, but it feels like the long liquidity strategy will focus management teams at a micro level, and at a macro level should turn around the poor productivity numbers we have seen in the US.

In 1994, James Carville said if there was such a thing as reincarnation he wanted to come back as the bond market. Not dissimilar to Warren Buffet commenting that interest rates are like gravity in the business world – they affect everything. Couple this with Milken’s comment that for every 100-basis point increase in rates, tech valuations reduce by 10%. We’ve had a 500 bps, or 5% move in rates, and some of the most well-known tech companies have priced rounds at least 50% lower, such as Stripe. Turns out the price of money matters a lot!

Turning a tanker around takes time. What is interesting is we have larger companies that have been nimbler than some of our smaller companies. It all comes down to mindset. A long liquidity strategy is a mindset. Managing every dollar is a mindset. When reviewing or reading about some of the best entrepreneurs in the world, they knew their costs down to the penny. It is a mindset.

The change in rates or the bond market doesn’t have to have as much of an effect on the new businesses growing out of the ashes of the forest fire burning in Silicon Valley, New York, and elsewhere around the world. Those companies can still achieve everything that their predecessors did, but more efficiently. This will produce strong DNA, culture, and mindset. We believe the seeds are being planted today for the next crop of $100+ billion companies.

Which bring us to some exciting news: we made our first new platform investment of the year in Vartana – you can read about it below. Not surprisingly, the company has a long liquidity mindset.

Let’s go! 🚀

Steve Sarracino, Founder & Partner

We’re excited to announce that we have led Vartana’s $20M Series B. Vartana is bringing embedded fintech to the sales suite to streamline the closing process. Read more about our investment below, and check out coverage in TechCrunch and Business Insider.

1. Game night: We hosted a game night with the Emerging Venture Capital Association to bring together the emerging investor community in NYC. Members enjoyed a variety of games to play, networking and connecting over both classic board and video games.

2. David at Fintech Nexus: Partner David Yang spoke at Fintech Nexus USA, discussing embedded fintech on stage with Dr. Gal Aviv and Dan Williams.

3. Square One Summit: Partner Maximilian Mayer attended SquareOne Summit on May 25th hosted by SquareOne Venture Capital in Berlin.

4. Dublin Dinner: Partner Andrew Steele and our Community Lead Holly Love are hosting a Founders Dinner for Dublin Tech Summit tonight.

5. Partner Maximilian Mayer will be speaking at Money 20/20 Europe in Amsterdam on Tuesday, June 6th and South Summit in Berlin on Friday, June 9th.

6. SuperReturn: We are hosting a private dinner for SuperReturn in Berlin on Tuesday, June 6th.

Portfolio News

1. Insurtech unicorn bolttech closed their $196M Series B at a $1.6B valuation. [TechCrunch]

2. Pesto announced the launch of their Pesto Mastercard and their Series A; which Activant was proud to lead the round. [TechCrunch]

3. Cardless locked in a three-year credit facility from i80 Group, aiming to fuel growth and fund customer receivables. [AXIOS]

4. Both Hive and WorkMotion were named as one of the top 10 fast-growing German startups to watch. [EU-Startups]

Firm News

We are excited to announce Joshua Browder to the Activant team as our newest advisor. Joshua is best known as the founder & CEO of DoNotPay, the world’s first robot lawyer that fights for consumer rights.

Activant is a global investment firm that partners with high-growth companies that are transforming the way the world makes, moves, and sells.

Founded in 2015, Activant has invested in category-defining companies like Deliverr (acquired by Shopify), Hybris (acquired by SAP), Bolt, Better, Celonis, Sardine, and many more.

The firm has $1.5B assets under management, and is headquartered in Greenwich, CT with offices in New York City, Berlin, and Cape Town.

The Greene Street Observer is published monthly from Activant’s office on Greene Street in New York City.