What Could Go Wrong With Investing $100 Million In Your Girlfriend's Company?
An Eric Schmidt investment, PLUS: Coke blows it out of the water.
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Tale As Old As Time
There’s a pretty epic exchange in an episode of Billions, where hedge-fund genius and amoral sociopath Bobby Axelrod decides that he’s had enough with his wife Lara’s little business idea to schlep around IVs from fund to fund, hydrating and invigorating vest-wearing hedge fund traders everywhere.
Lara, you see, has been pestering Bobby for some seed money for the company, and Bobby, well… let’s say he’s not convinced. In response to why one of her pitch meetings went poorly, he lashes out:
Bobby: You weren't ready. Leave it there.
Lara: Why the fuck not?
Bobby: What is it that you do that you're the best in the world at? You offer a service you didn't invent, a formula you didn't invent, a delivery method you didn't invent. Nothing about what you do is patentable or a unique user experience. You haven't identified an isolated market segment, haven't truly branded your concept. You need me to go on? So, why would an investment bank put serious money into it? I all but told you ahead of time, but you wouldn't listen. Now you've heard it,
but it's too late. You weren't ready.
The exchange kind of highlights the peril in mixing personal relationships (particularly romantic ones) with business.
On a totally unrelated note, Eric Schmidt seems to be having a difficult time with a startup helmed by his girlfriend Michelle Ritter which purportedly has been fueled up with $100 million of his own money.
The company, called Steel Perlot, is a startup accelerator, presumably in the same vein as Y-Combinator and other vaunted Silicon Valley incubators, except with a way worse name.
Things, it seems… could be going better.
In an interview with Forbes, Ritter claimed the company has multiple backers beyond Schmidt. She added that Steel Perlot now also manages a total of $450 million on behalf of institutional investors and high-net-worth individuals, and had been deploying that capital “since April.”
But Forbes was unable to find evidence that anyone other than Schmidt had provided significant funds to Steel Perlot, and Ritter declined to identify other investors. When pressed for more details on the asset management portfolio, Ritter clarified that Steel Perlot had only received a “preliminary [letter of intent]” from institutional investors, including a family office and sovereign wealth fund. She declined to comment further.
Not good!
The article concludes with “a person close to the situation said they are currently spending “less time together.”
I’m not besmirching the aspirations of Ms. Ritter, but perhaps the world wasn’t in dire need of yet another Silicon Valley incubator…? Ah, well. Given the fact that Schmidt’s fortune is estimated at $20 billion, sinking $100 million almost seems like just a cost of doing business.
Coke Blows It Out
There are, generally speaking, two basic ways a company can make more money:
Sell more stuff
Raise the price for that stuff
For the last few decades, option two has essentially been off the table. Non-existent inflation and the ‘race to zero’ in so many categories (from telecom bills to fashion thanks largely to globalization) contributed to the cheapening of prices for goods generally worldwide.
Is one of them better than the other? I dunno, they seem to be two sides of the same coin, although I can definitively tell you which one consumers would prefer.
CEOs, on the other hand, seem to really like the former. Remember when Iron Mountain’s CEO made headlines for claiming he was ‘praying for inflation?’ Inflationary pressure seemed to grant license to companies everywhere to take all the price they had been unable to claim for decades, like little old ladies raiding the bargin bin.
Today, Coke is the latest company to post some impressive revenue gains off the back of inflation—the company updated its outlook to state that “The company expects to deliver organic revenue (non-GAAP) growth of 10% to 11%” for the full year 2023.
10%! For Coke!
This growth is almost—almost—exclusively from taking price, since global case unit volume was up only 2%, while EPS grew 9% (including a 4-point currency headwind).
Tweets Of The Day
Yeeeee-ikes…
We’ve all been here… right?
This needs verification…
Final Thoughts…
Small-cap investing is making a comeback. Qualcomm is wading into the PC chip war. Despite promised infrastructure spending, industrial stocks are still anemic. The world cannot figure out how to regulate AI. GM is scrapping its self-imposed EV plans. Shocker: high bond yields could cool down the economy.