A few months back, I shared that WeWork had issued a dire warning in its quarterly financial filing: “substantial doubt exists about the Company’s ability to continue as a going concern.”

Today, the Wall Street Journal reported that WeWork is planning to file for chapter 11 bankruptcy. To be fair, it hasn’t filed yet, and something could happen to allow it to avert bankruptcy and continue to operate.

Regardless, this is a stunning fall for a well-known, venture capital–backed company. Crunchbase says that the company has raised over $22 billion in equity and debt financing over the years. Its valuation peaked in 2019, when it raised a reported $6 billion from Softbank at a $47 billion valuation. When I shared the dire-warning post on August 9, 2023, the company had a market capitalization (i.e., valuation) of $272 million. As of today, October 31, 2023, it’s worth $120 million. From $47 billion to $120 million in roughly four years is a staggering valuation drop.

I’m curious to see what happens next with WeWork and if it will impact investor and founder sentiment.

Today I read Fred Wilson’s post about sleep. Wilson is a well-known VC and general partner at Union Square Ventures, which he cofounded in 2003. In his post, Wilson talks about his struggles with sleep over the years and what changes he’s made to improve it. The big takeaway is that poor sleepers can improve their sleep, and even become good sleepers, by changing their habits.

I’ve spent time researching ways to improve my sleep. I don’t have an Oura Ring like Wilson, but I’ve done a few things that have significantly improved my sleep quality:

• Eight Sleep bed – This bed has had the biggest impact on my sleep quality. I was an early adopter and have had one of these for a few years. The bed regulates the temperature, which helps me get into and stay in a deep sleep.
• Television – I don’t have a TV in the bedroom. My body knows that when I’m in my bed, it’s time to start transitioning to sleep mode.
• Bedtime – I try to stick with a consistent bedtime on weekdays. This keeps my body on a schedule.
• Reading – I like to read in bed to wind down. I try not to read anything that requires deep concentration and usually save biographies and histories for bedtime.  
• Blackout curtains – I’ve found that a dark room helps me go to sleep and stay asleep.

Sleep quality is something I’m curious about. Good sleep’s ROI is massive. Therefore, I enjoy learning about the subject and tinkering with ways to improve the quality of my sleep. I suspect that high-quality sleep will be a lifelong quest as my body continues to evolve.

A few months back, I shared some stats on initial public offerings (IPOs). I’d learned that 2021 had the highest number of IPOs (1,035) in more than twenty-five years. The next year it dropped off a cliff; 181 IPOs were completed in 2022.

We have right at two months remaining in 2023, and I wanted to see how IPO activity this year stacks up. As of today, we’ve seen 131 IPOs. For context, the lowest number of IPOs since the great financial crisis, 133, was in 2016. This year will likely end up with the second-lowest number of IPOs in that period.

I view IPOs as an indicator of public-market investor sentiment. The data shows that sentiment has gone from one extreme in 2021 to the other in 2023. 

If you want more data on annual IPO activity, take a look here.

This week an entrepreneur friend pinged me about an idea. We did a call and he laid out his idea for solving a problem that impacts a large segment of society. He went on to explain how his solution is now possible only because of AI. He was energized by the idea and its possibilities. We talked for a long time, and I left the call with a new perspective.

I can’t predict the impact that AI technology will have. But I can see that AI is having an impact on how entrepreneurs think. It has entrepreneurs more excited than I’ve seen in a long time. They’re overflowing with ideas around potential solutions. They’re thinking bigger about the impact of their solutions. And they’re starting to view challenging problems as solvable.

AI is affecting how entrepreneurs think, and that’s bound to have an outsize impact on society.

This is my one-hundred-eighty-seventh weekly reflection. Here are my takeaways from this week:

• VC – There’s an interesting dynamic now in seed-stage venture capital. Fund managers are out fundraising for new funds—but it’s tough because limited partners (LPs) are, in general, less receptive to the venture capital asset class. Some of these managers have some companies in their portfolios that are running out of runway and having a hard time raising capital. These companies could shutter. It’s already hard to raise a new fund right now. If some of a fund manager’s investments go to zero during their fundraise process, that won’t exactly give LPs a warm and fuzzy feeling about giving them more money to invest.   
• Value-add investors – Things are tough for some founders right now. They’re likely finding out which of the investors on their cap table are truly value-add investors.

Week one hundred eighty-seven was another week of learning. Looking forward to next week!

I caught up with an early-stage founder considering his company’s next steps. The runway is shrinking. He’s pursuing several paths, including raising more capital or selling the company. The market isn’t as big as he initially thought, and the business doesn’t have the potential to become a nine- or ten-figure company. He’s accepted that fact and doesn’t want to pursue an option that requires a nine- or ten-figure exit for success.

The probabilities are low that this founder’s current company will get him the type of exit he hoped for when he started the company. He feels he has a lot left in the tank and wants to use that energy on something high return.

This founder is an entrepreneur at heart. He has the drive and intelligence to build something amazing. Unfortunately, the market for his first business is smaller than he and his investors envisioned. He also happened to raise capital in the 2020–2022 window when valuations were inflated. These and other dynamics have taught him painful but valuable lessons that he’ll carry forward.

This founder is part of a group of founders who, I think, will experience pain with their pandemic-era companies but go on to have wildly successful second acts. They may not realize it, but the things they’re learning and the relationships they’re building now will be immensely valuable and contribute significantly to their future success.

I had an interesting conversation with an early-stage founder who’s launching an AI company in San Francisco. He walked me through a demo of his MVP. Then he shared a prediction.

He believes ChatGPT will cause an explosion in vertical software solutions. Building is easy using ChatGPT, a fact that has aspiring founders flooding to build solutions using the service. The low barriers to entry and ease of building will likely prevent founders from scaling a solution that appeals broadly (i.e., horizontal software). There will be too much competition. Instead, founders will go niche. They’ll find small markets they can dominate. They’ll build solutions for painful problems that affect a smaller base of people but have been overlooked historically because of the small market size.

He also believes these companies will be able to scale faster because of ChatGPT. This, combined with the niche nature of the market, will make founders aim to sell earlier than we’ve seen historically and at less than unicorn (i.e., $1 billion) valuations (assuming they haven’t raised too much capital). 

This founder’s perspective is interesting and something I want to think about more.

Over the last few weeks, I’ve been learning about a new topic. Part of that effort has been seeking out credible people who deeply understand it. It’s not always easy to figure out who deeply understands a particular topic. I’ve noticed that finding the first person can be a challenge, but once you do, they’ll usually lead you to others.

YouTube has been a helpful source. I’ve been able to find videos of interviews from fifteen years ago up to today for some of these people. This has been an efficient way to evaluate people and learn the new topic. When I’m comfortable that someone is a master of the topic, I’ll watch as many interviews of them as possible and buy any books they’ve written on the topic. 

Today I was reading a transcript of an interview of a successful investor. He casually mentioned a generally accepted investing principle that he’s observed to be invalid over many years of investing. He went on to say that he believes many investors don’t understand that this principle isn’t true or the impact of that fact.

This caught my attention because another investor, someone who’s well regarded and well known, briefly mentioned something similar in an old interview I dug up. When two or more credible people have reached the same conclusion, it’s contrary to what others believe, and it hasn’t been noticed or discussed (that I know of), that’s something I take note of and want to investigate further. 

I’m curious to understand their insights that led to this contrarian perspective and will dive into this more.  

An early-stage founder asked me for feedback on his fundraising deck, and I went over it with him. Then he asked me to also look at his data room and provide feedback.

The data room was well organized and included more detailed information than I’d expect for an early-stage company. I asked the founder about that, and he said it’s the expectation these days—without this level of detail, his chances of getting funded would be significantly lower.

My takeaway is that investors are focusing more on substance, and founders are starting to get the message. Investors are taking longer to evaluate investment opportunities and diving deeper into whatever data exists to help them make an investment decision. They want to understand the problem, the market potential, and whether the solution is adding (or could add) real value to customers. Founders looking to raise should be aware of this and prepare accordingly.