Author Archives: Hervé Lebret

The largest technology companies in Europe and the USA in 2020

I regularly look at the largest technology companies in the USA and Europe and obviously this year, I had the impact of Covid in mind. Here are the tables I build once a year (and that you could compare to the ones published in January 2020 here or in 2017 here.

I am adding below their PS (price to sales, ratio of market cap to revenues) and PE (price to earnings, ratio of market cap to profits when positive) as well as the growth of the market cap. and revenues. There are 3 new companies I had not studied last year (Airbnb, Paypal and AMD) for which the growth is therefore not mentioned.

There would be many comments to give btu I will be fast:
– The GAFAs are the clear leaders, 4 of them are trillion dollar companies. Facebook is a little surprinsingly not as impressive and Tesla is appearing on top.
– The COVID did not have a big impact, not to say it had a positive impact on technology companies (in financial more than in economic terms)
– Again, looking at averages we see Europe is lagging in market caps, employement, sales and profits by factors close to 10…

The Age of Founders – Again!!

As an interesting coincidence, I was mentioned twice in a few days a recent research about the age of founders:
– Colleagues from IMF – the International Monetary Fund – mentioned to me this morning an article from The Harvard Business Review published in 2018: Research: The Average Age of a Successful Startup Founder Is 45 by Pierre Azoulay, Benjamin F. Jones, J. Daniel Kim, and Javier Miranda.
– Just before Christmas, I had a debate with French economists about the age of founders, and they mentioned to me Age and High-Growth Entrepreneurship by Pierre Azoulay, Benjamin F. Jones, J. Daniel Kim, and Javier Miranda.

The same authors, the same messages… In a nutshell: “It’s widely believed that the most successful entrepreneurs are young. Bill Gates, Steve Jobs, and Mark Zuckerberg were in their early twenties when they launched what would become world-changing companies. Do these famous cases reflect a generalizable pattern? […] Our team analyzed the age of all business founders in the U.S. in recent years by leveraging confidential administrative data sets from the U.S. Census Bureau. We found that the average age of entrepreneurs at the time they founded their companies is 42. […] But what about the most successful startups? Is it possible that companies started by younger entrepreneurs are particularly successful? Among the top 0.1% of startups based on growth in their first five years, we find that the founders started their companies, on average, when they were 45 years old. […] These averages, however, hide a large amount of variation across industries. In software startups, the average age is 40, and younger founders aren’t uncommon. However, young people are less common in other industries such as oil and gas or biotechnology, where the average age is closer to 47. […] In light of this evidence, why do some VCs persist in betting on young founders? We cannot definitively answer this question with the data at our disposal, but we believe that two mechanisms could be at play. First, many VCs may operate under a mistaken belief that youth is the elixir of successful entrepreneurship — in other words, VCs are simply wrong. Though it is tempting to see age bias as the leading explanation for the divergence between our findings and investor behavior, there is a more benign possibility: VCs are not simply looking to identify the firms with the highest growth potential. Rather, they may seek investments that will yield the highest returns, and it is possible that young founders are more financially constrained than more experienced ones, leading them to cede upside to investors at a lower price. In other words, younger entrepreneurs may be a better “deal” for investors than more experienced founders.”

The age of founders has been an interesting topic here as you may check with tag #age. In particular I wrote
Data about equity of 600 startups in April 2020
The Age of Founders of Start-ups – Again! in April 2019
Age and Experience of High-tech Entrepreneurs in June 2014

What you will find in common between this recent research and my posts is that there is variation with the field. I am not sure this new research looks at the first entrepreneurial activity and it would make sense as their emphasis is towards experience. I also had different answers about the impact in value creation in my research with this striking illustration:

All this drives me to a second line of thinking:
– the importance of creativity: check #creativity.
– the importance of experience: I had a piece of research with strange results many years ago about serial entrepreneurs. The end result my be counterintuitive. Check #serial entrepreneur

I will not really conclude but say in the end it depends… except by mentioning Galenson‘s work about conceptual and experimental innovators: “Experimental innovators work by trial and error, and arrive at their major contributions gradually, late in life. In contrast, conceptual innovators make sudden breakthroughs by formulating new ideas, usually at an early age. […] Experimental innovators seek, and conceptual innovators find.” from Old Masters and Young Geniuses. This could be an answer to the authors’ question on the choice of VCs: they would be looking for conceptual innovators.

A major update : data about 700+ startups

I regularly compile data about startups, mostly when they file to go public, when I can use their IPO prospectus (typically S-1 or 424B4 documents on Nasdaq). Thanks to a rush of IPOs this year (despite the covid) but also by revisiting older filings thanks to Jay Ritter great database of 11000+ IPOs since 1975, I could recently increase my own (much smaller) database of cap tables to 716 former technology startups (from 600 startups last April). This is a 20% or so increase, so it is quite a major update. Here is the document of all individual cap. tables:
Equity List – Lebret – Nov2020

You may prefer to download the pdf. And before reading the rest of the post, you may be interested in the analysis of the 600 startups last April : Updated data in equity of 600 (former) startups.

I will not go into the details of the data analysis, which would no doubt be similar to the 600 startups of last April. You can find the new stats beginning page 729 of the pdf. The evolution of the figures by period of 5 years is striking. It undoubtedly shows in part the evolution of the importance of technology but also the influence of venture capital in growth strategies. For better or for worse as I said in my previous article and as Philippe Labouchère said very well in Le Temps: These mega-investments that distort reality (Ces méga-investissements qui déforment la réalité).

Don’t be misled by the drop in the 2015 period. These very young companies who filed to go public are mostly biotech companies which have sligthly different dynamics. The IT companies which will file in the next years will be interesting to analyze: we’ll see if the trend continues or collapses…

One final element. Out of the 716 companies, 274 have been acquired and 383 are still public. The average M&A value is $3B and the median is $600M (remember the statistics of startups are not gaussian but follow a power law, a kind of “winner takes all” situation). Here is the list of the main acquirers:

How Venture Capitalists Are Deforming Capitalism

This is the title of a great article from the not less great New Yorker, dated November 23, 2020 and written by Charles Duhigg:

How Venture Capitalists Are Deforming Capitalism,
Even the worst-run startup can beat competitors if investors prop it up. The V.C. firm Benchmark helped enable WeWork to make one wild mistake after another—hoping that its gamble would pay off before disaster struck.


Illustration by Golden Cosmos (from the New Yorker article)

I am infringing copyright here and hope the magazine and author will forgive me. But the illustration says so well what the author describes! Yes, for a few years now, venture capital has become a crazy money spending machine.

I already posted blog about VC crises as over time the activity as evolved. From frugal investors in technology in the 60s and particularly in the 70s (Apple, Microsoft,..) and 80s (Cisco, Sun, …) The internet “bubble” was not the first period of hubris, there was one in the early eighties with tons of PC clones. But the real hubris came with the social media. Today, startups raise hundreds of millions of dollars before going public and experience huge, huge losses even at IPO as you may want to check in my 600 startups analysis (and it will be probably even worse in my 700 startups analysis to come). Here are past articles:

September 2020: Theranos, the (not so)-Silicon Valley biggest scandal ever – https://www.startup-book.com/2020/09/12/theranos-the-not-so-silicon-valley-biggest-scandal-ever/

April 2016: Is the Venture Capital model broken? – https://www.startup-book.com/2016/04/26/is-the-venture-capital-model-broken/

January 2016: Is Silicon Valley crazy (again)? – https://www.startup-book.com/2016/01/28/is-silicon-valley-crazy-again/

January 2011: Is there something rotten in the kingdom of VC? –
https://www.startup-book.com/2011/01/27/is-there-something-rotten-in-the-kingdom-of-vc/

At this point read carefully what venture capital was according to the author of the article: From the start, venture capitalists have presented their profession as an elevated calling. They weren’t mere speculators—they were midwives to innovation. The first V.C. firms were designed to make money by identifying and supporting the most brilliant startup ideas, providing the funds and the strategic advice that daring entrepreneurs needed in order to prosper. For decades, such boasts were merited. Genentech, which helped invent synthetic insulin, in the nineteen-seventies, succeeded in large part because of the stewardship of the venture capitalist Tom Perkins, whose company, Kleiner Perkins, made an initial hundred-thousand-dollar investment. Perkins demanded a seat on Genentech’s board of directors, and then began spending one afternoon a week in the startup’s offices, scrutinizing spending reports and browbeating inexperienced executives. In subsequent years, Kleiner Perkins nurtured such tech startups as Amazon, Google, Sun Microsystems, and Compaq. When Perkins died, in 2016, at the age of eighty-four, an obituary in the Financial Times remembered him as “part of a new movement in finance that saw investors roll up their sleeves and play an active role in management.”

But some famous experts of innovation are quoted about the current situation:

Steve Blank: “I’ve watched the industry become a money-hungry mob. V.C.s today aren’t interested in the public good. They’re not interested in anything except optimizing their own profits and chasing the herd, and so they waste billions of dollars that could have gone to innovation that actually helps people.” and his answer to the crisis is quite strong: “The first time you see a venture capitalist prosecuted for failing to uphold their duty as a board member, you’re going to see Silicon Valley transform overnight. All it takes is one V.C. doing a perp walk and everyone gets the message—you’re responsible, you have a legal duty, and if you do things that are bad for society you’ll be called to account.”

Martin Kenney, the professor at the University of California, Davis, said, “Obama loved Silicon Valley and V.C.s, and Trump craved their approval.” He went on, “Regulators have been totally defanged from doing real investigations of venture-capital firms. I think people are finally waking up to the damage the tech industry and V.C.s can do, but it’s slow going.” Today’s V.C.s, “money-losing firms can continue operating and undercutting incumbents for far longer than previously.”

Josh Lerner, a professor at Harvard Business School: “Proclaiming founder loyalty is kind of expected now.”

A Harvard Business School professor, Nori Gerardo Lietz, noted that the document exposed WeWork’s “byzantine corporate structure, the continuing projected losses, the plethora of conflicts, the complete absence of any substantive corporate governance, and the uncommon ‘New Age’ parlance,” the S-1 was “misleading, and probably fraudulent.”

I will finish my post with a quote mentioned by Bruce Dunlevie, the partner from Benchmark who was one the WeWork boardmember, a task he did not handled perfectly even if not that badly. Nothing to add. “Power tends to corrupt, and absolute power corrupts absolutely.” Lord Acton and the rest of the quote (not mentioned in the article) is “Great men are almost always bad men…”

Covid-19 Startups : BioNTech and Moderna

Yesterday I posted about Airbnb IPO filing here and in a few weeks or months I will update my 600-startup cap. tables to 700. A major upgrade. In the mean time, even if I am not a specialist at all of biotechnology I study some startups of the field from time to time. You can check the tag #biotech for example or a post about Crispr startups. It would have been difficult not to notice recently two other startups which went public recently, Moderna in 2018 and BioNTech in 2019, because of Covid19. Look at their recent stock history when they annouced a vaccine against the virus:

Maybe have a quick look at their cap. table below but first some comments: Moderna had been founded in the Boston area in 2009 and BioNTech in Germany in 2008. Their revenues (and losses) were large at time of filing. A lot of venture capital (which owns 60% of both startups), many employees. Not young founders (46 and 60 at Moderna, 41, 43 and 64 at BioNTech). You can add any comment you want, if any…

In reality, these figures are not that different from those of the giants of the digital world in yesterday’s post, except one maybe, the founders’ age.

Airbnb files to go public – the last giant?

Airbnb just filed to go public. Finally! It maybe the last IPO of the recent giants (and not the latest only), these giants which emerged in the 21st century, such as

and of course is the cap.table, not that far from what I had tried to guess in 2017 in www.startup-book.com/2017/03/13/what-is-the-equity-structure-of-uber-and-airbnb/

Apple and its first investors : hilarious!

This morning, I was participating to a workshop about startups and one question came about the relationships with investors entrepeneurs are trying to attract and invest in their company. I told them it could be frustrating for many reasons, often because VCs never say no but decline too often to invest too. The best illustration comes from Something Ventured, a documentary movie I never stop celebrating. The Apple case is close to being hilarious. You find the extract beginning around minute 51 in the video:


and here is the text: [Narrator] In 1976, the computer was about to get personal. […] For venture capitalists, this represented the opportunity of a lifetime.

[Perkins Chuckles] We turned down Apple Computer. We didn’t – We didn’t even turn it down. We didn’t agree to meet with Jobs and Wozniak.
[Reid Dennis] Oh, that would have been a fabulous investment if we had made it, but we didn’t. We said, “Oh, no, we’re not really in that business.”

[Pitch Johnson] “How can you use a computer at home? You’re gonna put recipes on it?”

[Bill Draper] I sent my partner down to look at Apple. He came back and he said “Guy kept me waiting for an hour, and he’s very arrogant.” And, of course, that’s Steve Jobs! I said, “Well, let’s let it go.” That was a big mistake.

[Narrator] In 1976, the only people who believed in the personal computer… were the geeks and nerds who gathered at Homebrew Computer Clubs.

[Bushnell, founder & CEO of Atari] They needed an investment, and, uh, they offered me a third of Apple Computer for $50,000… and I said, “Gee, I don’t think so.” I could have owned a third of Apple Computer for $50’000. [Sighs] A big mistake. But I said, “Call Don Valentine.”

[Valentine] So we had our meeting. I went to Steve’s house. And we talked, and I was convinced it was a big market… just embryonically beginning. Steve was in his Fu Manchu look, and his question for me- “Tell me what I have to do to have you finance me.” I said, “We have to have someone in the company… who has some sense of management and marketing and channels of distribution.” He said, “Fine. Send me three people.” I sent him three candidates. One he didn’t like. One didn’t like him. And the third one was Mike Markkula. Mike Markkula worked for me at Fairchild before he went to Intel.

[Markkula] I said, “Okay.” ‘Cause that’s what I did on Mondays. I was retired. [Chuckles] I think I was 32 when I retired from Intel. But one day a week, I would help people start companies and write business plans. I did it for free, just for the interaction with bright, uh, people… So I went over and talked to the boys. [Laughs] The two of them did not make a good impression on people. They were bearded. They didn’t smell good. They dressed funny. Young, naive. But Woz had designed a really wonderful, wonderful computer. […] And I came to the conclusion that we could build a Fortune 500 company in less than five years. I said I’d put up the money that was needed.

[Narrator] Mike Markkula came out of retirement, becoming the president and C.E.O. of Apple. And the first call he made was to Arthur Rock. Arthur would have missed Apple if it weren’t for Mike Markkula.

[Rock] Jobs and Wozniak came up to see me, and they were very unappealing. Goatee, long hair [Muttering] Markkula said, “Well, before you make up your mind, there’s a computer show. You ought to come down and see what’s going on.” And he did. He thought somethin’ was happenin’. He wasn’t quite sure what. And there was this booth with everybody around it. I couldn’t even get next to it. And it was the Apple booth.
Then I got a call from Don Valentine. [Chuckles] “I want to put some money in that company” I said, “Okay, you gotta come on the board then.”
You know in the venture capital business, if you look at 200 deals, and you, you might do 10 of’em, and you will think they’re all great, and if one of’em is great, then you’re in the hall of fame.

Just in case, a little more about something ventured from my blog in 2012: https://www.startup-book.com/2012/02/08/something-ventured-a-great-movie/.

Finally, let me remind you of other “missed deals” in another recent post: The amazing challenge of finding great startups.

The Microchip Revolution (Appendix) – Intersil

As I mentioned in my previous post, I was a little desperate to find specific information about Intersil that would allow me to illustrate its shareholding when it went public.

You can skip this very anecdotal narrative which is probably above all an archive for me, but which also shows that you always have to persevere. Note that each country has a register of companies, more or less rich in information, sometimes for a fee, sometimes free. In the USA, the Security and Exchange Commission (SEC – www.sec.gov) provides access to all documents about public companies (i.e. listed on a stock exchange). In contrast, private companies (not listed on a stock exchange) are not obliged to publish any information, especially financial. (And I would add that Private Equity – of which venture capital is a part – only finances private companies, i.e. unlisted).

The SEC provides a service – EDGAR – free of charge for all documents published up to the mid-1990s, 1996 to be precise, I think. The SEC sold the pre-1996 documents for around $40-60 and then handed the service over to Thomson Reuters (then Refinitiv) a few years later – a privatization of “public service” and the price rose to $80 then $120-140 per document…

On October 4, I contacted Thomson Reuters asking for the IPO prospectuses of IDT, Lam Research and Intersil.

While I got the first two almost immediately, on October 7 I got a question as an answer for Intersil that asked me to choose a document from the following table:

The question was unsettling because Intersil was not Harris and I wanted a document dated 1972. There should not have been earlier documents.

Intersil was founded in 1967, went public in 1972 and was reportedly acquired in 1981 by General Electric (GE) and in 1988 by Harris (that’s it!) which combined Intersil with units from RCA and GE. In 1999, Harris made Intersil a spin-off which went public again in 2000… In 2017, Japanese company Renesas bought Intersil.

In explaining this situation to the SEC, a second research led them to offer me these documents:

Buying 2 documents at that price made me hesitant. So I needed more information. I contacted individuals:
– Christophe Lecuyer, author of Making Silicon Valley, Innovation and the Growth of High Tech, 1930-1970
– David Fullagar, formerly at Intersil,
– Michelle Lowry at Drexel University,
– Josh Lerner and Paul Gompers at Harvard University,
– Jay Ritter at University of Florida,
as well as institutions:
– The Computer History Museum in San Jose, CA (https://computerhistory.org/)
– The libraries of Stanford University, Harvard University
– The WRDS service at Wharton (Wharton Research Data Services), the business school of the university of Pennsylvania

Most answered even if they had no information. This is the American culture: people try to help, often by giving new names or leads. I must in particular thank Jay Ritter who wrote back immediately: “My records have Intersil going public on Jan 20, 1972 at $14 per share. The first market close may have been $12.00. But I have less information about this company than most IPOs from 1972.” then later “In another file I found that it had ticker ISIL, listed on Nasdaq, might have been a General Electric spinoff, but was VC-financed with Diebold Venture Capital Corp., RCA Corp., Sutter Hill Ventures, Bessemer Venture Partners, Mayfield II, Citicorp Venture Capital, and Small Business Enterprises (Bank America) as investors, Bache was the lead underwriter, and sold 360,000 shares at $14 per share (352,000 newly issued, with 8,000 from selling shareholders).”

Interestingly there are mixed information about 2 different IPOs not to say companies. But I had my date! January 20, 1972.

On October 11, I could contact again Refinitiv and my contact answered “Please allow at least 2-3 hours for this process.” The next day, “They need to scan the microfiche for the document of Intersil. [But] it seems that they are having trouble on finding it.” And the next day, I finally had it which made possible the next table:

Remember Bauer and Wilder have dedicated their book to Jean Hoerni : “This book is dedicated to Jean Hoerni, the inventor of the planar process; without which none of this would have been possible. Hoerni became an entrepreneur and owned about a quarter of Intersil IPO. This is uncommon and huge for a founder. You my not know the investors, this was the sixties. But Arthur Rock is a legend (an investor in Intel, Apple – see my next post!) and Fred Adler is also famous, though to a lesser extent. These were the early days of startups and venture capital, but fundamentally, everything was being invented then and the rules are pretty much the same today.