I had such a hard time writing today’s newsletter. I kept going down all these tangents. I did my best to reign it in, but my apologies if it’s somewhat rambling this week.
Topic of the Week: Drunk Spider Webs
I was in a sorority. We had a big house that had a three-story entryway. Once a year, to welcome the new girls, the entryway was transformed into a rainbow-colored, drunken spider web of yarn.
There were yarns of every color going up, down, across, looping with other colors, wrapping around furniture and then repeating the whole process over again. It was an impressive mess.
Each yarn string started in the entryway and was attached to the name of one of the new members. Each member then had to untangle her string to find the other end, which was connected to a big ole basket of presents. If this is hazing, consider me hazed.
This multi-colored yarn mess is the best analogy I could come up with to explain the financial relationships and incentive structures in late-stage startups tied to Saudi Arabian capital. See this article here for more background on why this interested me this week.
It is almost impossible to pick any company that has raised over $100M in funding recently and not tie it back to Saudi Arabia. Either they received an investment directly from Saudi Arabia, indirectly through a fund which has Saudi Arabia as an LP, or they have investors who co-invested with Saudi Arabia.
To give you a sense of the magnitude, check out this chart which outlines Softbank’s investments. Saudi Arabia is almost 50% of the capital behind Softbank’s $80B plus Vision Fund.
Saudi Arabia is just one player fueling the massive flow of capital into late-stage startups. One of the things I keep noticing is the number of startups whos entire customer base is made up of other startups, which makes the yarn web infinitely more complex and confusing.
It feels like I’m back in my sorority’s living room trying to untangle my string, but instead of each string leading to a separate basket, they are all attached to the same basket.
What happens to the last few people to untie their strings? Does the basket keep getting replenished by Saudi Arabia or the public markets, or are some people going to lose out?
If you’d like to comment or share your thoughts on this post, you can join in on the conversation by commenting here.
Have a great weekend everyone!