News
The Shearwater team like to share our thoughts and updates on our LinkedIn profile. Please follow us there. Below are some of our previous posts.
WeWork’s IPO and the power of preference shares
Much the chatter surrounding the IPO of the We Company (aka WeWork) relates to the eye-watering valuation being sought. Yet recently there’s speculation that the IPO may end up closer to $20 billion, as opposed to the the $47 billion valuation SoftBank offered when they invested $5 billion in January 2019.
How to assess a potential investor
A founder can change every aspect of their business except their shareholders. Anyone who has had a difficult shareholder knows the real truth in this statement. So founders should be equally thorough in
When SAFES aren’t all that safe
In late 2013 Y Combinator released its innovative Simple Agreement for Future Equity (SAFE) investment instrument. The purpose of the SAFE was to allow pricing to be deferred in an early investment round, as early stage companies are somewhat difficult to value. YC wanted to take some of the benefits from Convertible Notes (which are debt) and make them available in equity form. Thus the SAFE was born.
Your ESOP plan requires wise management and clear thinking
At Shearwater we often say to founders that if there’s strong demand for your round, that’s the best time to raise *less*. The demand lets you tap into extra funds later, when the valuation of your business is likely to be higher.
Launching our Shearwater private dinners with the founder of WiseTech Global, Richard White
As the managing partner of Shearwater, I frequently find myself thinking about the quality of our own ‘product’. One of the differentiators of Shearwater is that we’re three founders investing our own money to back the generationally best tech companies in Australia and NZ
Understanding the various business models when raising capital
At Shearwater we often say to founders that if there’s strong demand for your round, that’s the best time to raise *less*. The demand lets you tap into extra funds later, when the valuation of your business is likely to be higher.
Passive Investing
J.P. Morgan released data this month that $90 billion has been pulled from active funds in public equity markets in 2019, while $39 billion flowed into index-style funds. Passive funds (including quant funds) now control a whopping 80% of equity assets. Passive investing has won the public markets.
Why small TAMs can be good
In the early 1980s AT&T asked McKinsey to estimate how many mobile phones would be in use worldwide by the year 2000. Their conclusion was it would be a niche market of around 900,000 subscribers. They were off by 108 million.
Some thoughts on ESOP
As investors in high growth tech businesses, it’s typical that our portfolio companies have an employee share option plan (ESOP) in place. ESOPs allow staff to feel ownership in a business and lets them benefit from growth in the value they directly contribute to. This is why ESOP is a common device around the world for ensuring alignment between founders and their employees.
Understand the business model of the firm you’re pitching
Sun Tzu said: ‘If you know the enemy and know yourself, you need not fear the results of a hundred battles’. When seeking investment, it helps to understand the business model of the firm you’re pitching.
