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EIEIO…Fast Facts
Entrepreneurship: 87% – The percentage of US small business owners who are Gen X or Baby Boomers (Business Dasher).
Innovation: 9 billion – The number of items Amazon delivered on the same or next day in 2024 (Sherwood News).
Education: 33% – The percentage of 8th graders who scored below the lowest level, “basic,” on the 2024 NAEP test (Minding The Gap).
Impact: 186,000 – The number of pages in the code of federal regulations as of 2019, compared to 9,745 in 1950 (Heritage).
Opportunity: 63% – The percentage of U.S. children who live in a home with married parents (TIME).
“The race might not always go to the swift, nor the battle to the strong, but that’s the way to bet.” – Damon Runyon
“Starbucks represents something beyond a cup of coffee.” – Howard Schultz
“People bet on the hourly wiggles of the market, but it’s the earnings that waggle the wiggles long term.” – Peter Lynch
Where do big companies come from?
Big trees don’t start as big trees, they start as acorns.
The world’s largest corporations didn’t begin as behemoths, they started as startups.
When Amazon began as an idea – with Jeff and MacKenzie Bezos driving from NY to Seattle – it was just going to sell books on the internet. And this was the world headquarters.
Amazon did $620 billion in revenue last year and is the biggest retail and logistics company in the world.
NVIDIA started in a Denny’s over pancakes in 1993.
Today, it has a $3 trillion dollar market cap, and consider this:
Google started just down the street from our original GSV office in Woodside, California at Buck’s restaurant, blossoming from the back of a napkin.
Today, Google has a $2.5 trillion market cap and services 99,000 queries per second. Its subsidiaries aren’t too shabby, either. Android has a 72% market share of the global smartphone market in terms of operating systems, YouTube has 1 billion hours per day (just on YouTube TV?), and Google Chrome has 3.5 billion users.
Fun fact – As some of you may know, there is one single building in which Google, PayPal, and Logitech all got their start known as the “Karma Building” – 165 University Avenue in Palo Alto, California.
When Apple started in a garage in 1976 with Wozniak and Jobs, their vision was to create an insanely great computer. Here’s what that looked like 49 years ago:
Today, Apple has a $3.5 trillion market cap and is arguably the most successful technology business of all time.
FedEx began as a research paper that Fred Smith turned in to his professor as his senior thesis at Yale in 1971 – he received a C on it. The good news is, he didn’t take his professor’s criticism too hard. He turned the idea into a company called Federal Express. Early on, he found himself down to his last $5,000 – so he did what any good entrepreneur would do. He flew to Vegas. Smith arrived on a Friday, played blackjack all weekend, and left with over $27,000. As the story goes, FedEx planes were flying that Monday morning. The rest is history. Today, FedEx delivers almost 6 million packages per day.
India’s Reliance Industries started in 1958 as a yarn trading company. Today, the $200 billion global conglomerate has over 200 businesses under its belt.
Tata started in 1868 with less than $250. Today, the company has over 1 million employees and $165 billion in revenue.
Starbucks was a little storefront at Pike Place in Seattle, Washington in 1971 before it went on to become the dominant player in the coffee market, today selling over 5 million cups per day in the US while changing the world one cup of coffee at a time.
I happened to be the first analyst to write research on Starbucks in 1992. I wrote a book in 2007 called “Finding the Next Starbucks,” in which I discuss how I’ve taken the lessons I learned from Starbucks and turned it into an investment philosophy.
From that, I came up with several key thoughts and frameworks for investing. One was that there is a correlation between topline growth and stock performance. Here are three examples:
How do we identify companies that can achieve and sustain such high growth?
One way is by using the 5 Ps – People, Product, Predictability, Potential, and Purpose, a framework we originally learned from Starbucks.
When I first met Howard Schultz, he was 30 years old and had braces on his teeth, but you could tell there was something special about him, and there was a sense of electricity around the team he had.
His product was not only great coffee but creating a truly unique experience for the customer through exceptional service.
When we looked at potential, it did not take long to understand that this concept could absolutely succeed as a global offering.
In terms of predictability, while you think that retail/restaurants are inherently unpredictable, this wasn’t the case for Starbucks. The average Starbucks customer, because of the nature of the product and how they did things, went there on average 21 times per month.
We came to love businesses that were addictive but didn’t cause cancer.
In terms of purpose, while the company had a huge ambition for success financially, they operated under the belief that they could get what they wanted if they could help enough people get what they wanted.
We’ve been fortunate to apply that formula to a number of businesses that have become global leaders.
These include Facebook ($1.8 trillion market cap), Palantir ($233 billion market cap), and Spotify ($122 billion market cap).
The 5 Ps formula was foundational in guiding each of these investments.
We took the 5 Ps and many other concepts and principles and created the GSV MBA in partnership with Belhaven University, and Forbes named it one of the best entrepreneurial MBA programs in the world in 2024.
The second book I wrote was really about this thesis we had that we named the firm after. The Global Silicon Valley is the idea that the mindset of innovation and entrepreneurship that made Silicon Valley so special was going to spread throughout the world. We wanted to connect Silicon Valley to this emerging Global Silicon Valley.
In 2010 when we started GSV, 92% of VC was in the US and mostly in Silicon Valley. In 2023, 51% of global VC was invested outside the United States. This Global Silicon Valley has truly taken shape.
As we like to say, from Austin to Boston, from Chicago to São Paulo, from Mumbai to Shanghai to Dubai…this is the Global Silicon Valley. The good news for the future of entrepreneurship is that talent is everywhere but opportunity is not. And that has changed.
The learning market is a core piece in advancing society specifically with respect to innovation and entrepreneurship.
Historically, human ability has been growing on a linear path while computer ability has been growing on an exponential path.
We’re currently at a place where technology is replacing the technologist. Where we see an opportunity in the AI revolution is to accelerate human capabilities to close this gap. A few themes include the Time Dividend, Moneyballing Everything, Multiplication by Division, and Learning at the Speed of Light. We’ll jump the median and catch the rocket ship…and will end up with lightning in a bottle.
Market Performance
Market Commentary
We live in interesting times.
The major indices all took a pause last week, with the S&P 500 off .2%, and the Dow and NASDAQ were both down .5%. With Mega Cap Magnificent 7 representatives Tesla, Amazon, Apple, Microsoft, and Alphabet all negative for the week, it’s notable that the indices weren’t off more.
Alphabet, a.k.a. Google had mixed results with a slight overall miss on top line revenue growth of 12% and fell 8% for the week. It also announced it would spend $75 billion on capital expenditures to compete in the AI Arms Race.
On the other hand, AI superstar Palantir reported 36% revenue growth and 75% EPS growth, with its stock soaring 35% in kind.
Other economic notables were that non-farm payrolls were 143K in January, slightly below analyst estimates – that number was 307K in December. The University of Michigan Consumer Sentiment Index fell to 67.8 vs. expectations of 71.1. Also, President Trump promoted the removal of the carried interest provision for Hedge Funds, Private Equity, and Venture Capital.
While there is a lot of noise both in the World and in the markets, we remain optimistic in terms of opportunities for growth investors. Volatility is the friend of the long-term investor, and we see the broadening of upside participation as a positive signal. Moreover, the growing pipeline for IPOs will provide fresh oxygen for investors.
Accordingly, we are BULLISH.
Need to Know
WATCH: ASU GSV Summit: Fireside Chat with Dick Kramlich, Bill Sahlman and Deborah Quazzo | GSV
READ: How to Hire a Simplifier |
LISTEN: Graham Duncan – Talent Whisperer | Invest Like The Best
GSV’s Four I’s of Investor Sentiment
GSV tracks four primary indicators of investor sentiment: inflows and outflows of mutual funds and ETFs, IPO activity, interest rates, and inflation.
#1: Inflows and Outflows for Mutual Funds & ETFs
#2: IPO Market
#3: Interest Rates
#4: Inflation
Charts of the Week
Maggie Moe’s GSV Weekly Rap
Chuckles of the Week
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Connecting the Dots & EIEIO…
Old MacDonald had a farm, EIEIO. New MacDonald has a Startup…EIEIO: Entrepreneurship, Innovation, Education, Impact and Opportunity. Accordingly, we focus on these key areas of the future.
One of the core goals of GSV is to connect the dots around EIEIO and provide perspective on where things are going and why. If you like this, please forward to your friends. Onward!
Make Your Dash Count!
-MM