TruthArchive.ai - Tweets Saved By @larryvc
@larryvc - Larry Cheng
Livestream follow-up #3: Here is my referral code if you want to switch to @USMobile. Code: 0E3113EB Link: https://www.usmobile.com/referrals?referrer=0E3113EB&name=Larry&utm_page_url=monster_referral
@larryvc - Larry Cheng
GameStop Announces Dividend of Warrants to Shareholders: - 1 warrant for every 10 shares of $GME common stock held - exercise price of $32.00 - expiration date 10/30/26 - warrants are freely tradable on NYSE: GME WS Full details below: https://investor.gamestop.com/news-releases/news-details/2025/GameStop-Announces-Dividend-of-Warrants-to-Shareholders/default.aspx
@larryvc - Larry Cheng
GameStop Q225 Earnings Results: · Net Sales: $972.2M (22% YoY growth) · Net Income: $168.6M (1039% YoY growth) · Cash + Equiv: $8.7B (107% YoY growth) · Bitcoin: $528.6M For more $GME information, here’s the full release: https://investor.gamestop.com/news-releases/news-details/2025/GameStop-Discloses-Second-Quarter-2025-Results/default.aspx
@larryvc - Larry Cheng
I had a funny convo last week with the global practice head for board searches at a top exec search firm. They do ~400 public co board searches a year. I told him how at GameStop, none of the board members or CEO are paid cash or equity. He said, "So you grant options?" I said, "No, the stock board members and the CEO get come from purchasing stock just like any other shareholder." He said, "So you grant restricted stock units?" I said, "No, we don't grant any equity and don't pay any cash. We believe this aligns our interest with shareholders." He said, "What?!" Out of the thousands of public co board searches his firm had done, they had never done one with no cash or equity comp - it blew his mind. To my knowledge, only Berkshire Hathaway and GameStop have no comp for the board. If there are others, let me know. This comp structure should be more common as it really does foster alignment with shareholders. $GME
@larryvc - Larry Cheng
Livestream #7 https://t.co/qMk3KeUiVH
@larryvc - Larry Cheng
It feels like three generations ago when the go-to-market model for Internet companies was to buy Facebook and Google ads. Times have changed, hire people who can learn, take risks and adapt. Experience isn’t always helpful when operating models change quickly.
@larryvc - Larry Cheng
When this is the stock chart for an IPO that priced at $33 - it typically means institutions won and retail lost. https://t.co/DbWHDzyOrT
@larryvc - Larry Cheng
During this tidbit on the power law from my chat with @MikeGelb on the @ConsumerVC podcast, I was thinking about a conversation with one of my partners when we exited Chewy in 2017. He noted that Chewy had returned more than every other investment in our history combined. And, I responded that if we do our job well, there would be another investment down the road that would return more than every other investment in our then history + Chewy combined. That's how the power law works. He looked at me like I was nuts - I stand by it.
@larryvc - Larry Cheng
I need to remind myself that a primary observational bias we all have is we only observe situations in which we are present. Drawing conclusions from what we observe is common, but should be treated as a skewed sample as we don’t observe situations where we’re not present. One’s own presence may or may not have a significant impact on the dynamics of the situation being observed. The more impact there is, the more skewed the observational sample is by definition.
@larryvc - Larry Cheng
GameStop Discloses First Quarter 2025 Results: Sales: $732.4M Net Income: $44.8M Adjusted Net Income: $83.1M Cash & Securities: $6.4B Release: https://investor.gamestop.com/news-releases/news-details/2025/GameStop-Discloses-First-Quarter-2025-Results/default.aspx $GME https://t.co/06msQsNNpX
@larryvc - Larry Cheng
Been thinking about when a company’s market value is most likely to increase during this journey. The short answer: when the company clears the phase that the market finds it least likely to achieve. For example, if the market believes in the revenue growth prospects of the company but views the balance sheet as unrepairable, then if the company can clear phase 4 (cleaning up the balance sheet) that might be when value accretion occurs. Another example is if the market doesn’t believe in the revenue growth prospects of the business, but believes it can be profitable, then value accretion may be unlikely to occur until after clearing phase 6 (YoY revenue growth). On the one hand, having to clear all six phases to see value creation requires patience and could be justifiably viewed by investors as a journey fraught with risk. On the other hand, it can also mean that there are opportunities to invest in companies that have cleared the first five phases but have not yet been rewarded with value accretion because the market is waiting to see phase 6 cleared. This could represent an asymmetric risk-reward. Of course the risk of investing in companies going through this journey is they never run the gauntlet and clear all six phases. Absent that, the company’s market value may never sustainably grow. However if a company can clear all six phases, the potential for outsized upside is also potentially there as well.
@larryvc - Larry Cheng
GameStop 2024 CEO comp: Cash: $0 Options: 0 GameStop 2024 Board member comp: Cash: $0 Options: 0 $GME
@larryvc - Larry Cheng
What’s something you learned today? A good day is when you learn something you didn’t know, even if small. It all adds up. My learning today: if you’re holding cash in overnight repos, you have to wait until ~11am EST for it to be available for wire due to settlement timing.
@larryvc - Larry Cheng
Trying to internalize both charts - I don’t think I’ve ever seen such a dramatic decline in any start-up and funding ecosystem.
@FT - Financial Times
Venture capital executives in China painted a bleak picture of the sector to the FT, with one saying: 'The whole industry has just died before our eyes.' https://on.ft.com/4ejqPZD
@larryvc - Larry Cheng
I had dinner tonight with a very seasoned and successful microcap investor, and he made an observation particularly about microcap stocks: Sentiment often follows price, not fundamentals. That means that when the stock price goes up, there's greater interest from investors to buy the stock. And, when the stock price goes down, there's less interest from investors to buy the stock. This is not how it should be in his mind (I agree). What it really should be is when fundamentals go up, there should be greater interest from investors to buy the stock. And when the fundamentals go down, there should be less interest from investors to buy the stock. The interesting dynamic, particularly with microcap companies, is it's not uncommon for the fundamentals to go up, but the stock price to go down. When this occurs, it can lead to a loss of interest in the stock because for so many investors - sentiment follows price. Whereas in his mind, if the fundamentals are durably going up, these could potentially be good buying opportunities because for him - sentiment follows fundamentals. Therefore in this construct, the key question for any investment is not whether there's momentum around the stock price, rather it's whether the fundamentals of the company are durably going up or not. This is not always a simple question to answer because fundamentals need to go up - durably. Sometimes short-term performance could be indicative of a long-term trend or it might not be. But, this is where the crux of the investment diligence should be - evaluating the trajectory and durability of the fundamentals of the business.
@larryvc - Larry Cheng
What’s your favorite Psalm? Mine is Psalm 139: “You have searched me, Lord, and you know me. You know when I sit and when I rise; you perceive my thoughts from afar. You discern my going out and my lying down; you are familiar with all my ways. Before a word is on my tongue you, Lord, know it completely. You hem me in behind and before, and you lay your hand upon me. Such knowledge is too wonderful for me, too lofty for me to attain. Where can I go from your Spirit? Where can I flee from your presence? If I go up to the heavens, you are there; if I make my bed in the depths, you are there. If I rise on the wings of the dawn, if I settle on the far side of the sea, even there your hand will guide me, your right hand will hold me fast. If I say, “Surely the darkness will hide me and the light become night around me,” even the darkness will not be dark to you; the night will shine like the day, for darkness is as light to you. For you created my inmost being; you knit me together in my mother’s womb. I praise you because I am fearfully and wonderfully made; your works are wonderful, I know that full well. My frame was not hidden from you when I was made in the secret place, when I was woven together in the depths of the earth. Your eyes saw my unformed body; all the days ordained for me were written in your book before one of them came to be. How precious to me are your thoughts, God! How vast is the sum of them! Were I to count them, they would outnumber the grains of sand— when I awake, I am still with you. If only you, God, would slay the wicked! Away from me, you who are bloodthirsty! They speak of you with evil intent; your adversaries misuse your name. Do I not hate those who hate you, Lord, and abhor those who are in rebellion against you? I have nothing but hatred for them; I count them my enemies. Search me, God, and know my heart; test me and know my anxious thoughts. See if there is any offensive way in me, and lead me in the way everlasting.”
@larryvc - Larry Cheng
This is an insightful piece linking payment terms to equity value creation by my colleague, Tomy Han. It’s positioned for SaaS companies but has broader application for how working capital dynamics impact market value creation.
@volitioncapital - Volition Capital
In today's edition of the Volition View, Volition Capital Partner, Tomy Han, shares a thought piece where he discusses the equity impact of payment terms in SaaS businesses. Make sure to check out the full article below: https://www.volitioncapital.com/news/tomy-han-equity-value-of-payment-terms/
@larryvc - Larry Cheng
For this reason, capital allocation is one of the most essential responsibilities and capabilities of a CEO. Effective capital allocation leads to dilution being positive. Ineffective capital allocation leads to dilution being negative. It's usually that linear.
@larryvc - Larry Cheng
Dilution is not neutral and shouldn't be viewed as such. It's either positive or negative, good or bad. In the world of VC-backed companies, dilution is such a normalized part of the journey that it is often passively accepted. This often leads to the negative form of dilution such as capital raised for: -inefficient sales and marketing spend -R&D supporting technology searching for a market -layers of unnecessary organizational overhead -supporting broken business models -vanity valuations -etc... However, dilution has a positive and accretive expression as well such as capital raised for: -scaling efficient go-to-market efforts -product and channel expansion with clear ROI -deleveraging and strengthening the balance sheet -accelerating market share gains for a sound business model -transformative investments (e.g. M&A, R&D, capex) -etc... Therefore, dilution should neither be passively accepted nor should it be categorically prohibited. It shouldn't be viewed as always positive or always negative because it can be either. The purpose and quality of the use of capital is what ultimately defines the merit of any dilution.
@larryvc - Larry Cheng
Interesting… “Growth funds are modeling time to ‘breakeven’ from multiple compression at over 2 years with even the most optimistic company forecasts.” LPs backing this are backing commoditized strategies competing on price. Probably better to just invest in the Nasdaq index.
@amytongwu - Amy Wu
Was at a VC dinner last night where the main topic was the max divergence of public multiples (now 5.2x fwd EV in software and 15.9x for top cos) vs private VC multiples. In AI land we’re back at 2021-era 100x multiples, this time without the elevated public comps. Growth funds are modeling time to “breakeven” from multiple compression at over 2 years with even the most optimistic company forecasts. While there will likely be some number of new generational companies built this cycle, many funds will likely lose $ in the hype, as they had in the 2021 cycle. What will happen from here? - VC consolidation will continue but slowly. As 2021 era investments eventually become marked to mkt, LP allocations to VC will continue to adjust to pre-2021 era. A couple “index” funds may continue to accumulate capital but otherwise selection and discipline (and ability to invest in the long-term winners) will separate returns - AI multiples will remain high. In many cases AI companies are raising large rounds because they are demonstrating remarkably fast revenue and user growth. However, retention remains a leading indicator of which products may reach true PMF (eg it is actually helping people do something 10x faster / cheaper / better) vs which are enjoying AI novelty. As soon as a company’s growth declines from 2-3x to <50% many will struggle to raise a next round at such a high watermark. Understandably many are stockpiling funds while they can now - As we’ve seen from WWDC, in many use cases, incumbents are the largest threat and most likely long-term winner. The M&A market unlocking (post elections) would be a big positive for VC DPIs
@larryvc - Larry Cheng
GameStop Completes At-The-Market Equity Offering Program https://news.gamestop.com/news-releases/news-release-details/gamestop-completes-market-equity-offering-program-2
@larryvc - Larry Cheng
The executive session of a board meeting is important for governance. This is defined board time without management. For a company, it's time without the CEO. For a school, it's time without the Head of School. For a church, it's time without the Senior Pastor. And without all other operational leaders/management... Experienced operational leaders should want exec sessions established as a normal part of the board meeting agenda because it's a safeguard for the company and shareholders. If the exec session is established as normal course, it's less likely to be taken personally or interpreted specifically by management. If the exec session is entirely perfunctory because everything is going well, that's great - they are still worth having perfunctorily. If leadership is resistant to executive sessions, it's a red flag and is usually because the leader wants to control the narrative with the board. That's one of the key reasons why they are necessary.
@larryvc - Larry Cheng
Do you remember when: Berkshire Hathaway was a textiles company? American Express was an express mail business? Nokia was a pulp mill? Samsung was a grocery trader? Marriott was a root beer stand? Instagram was a check-in app? I don't - businesses evolve... Other examples?
@larryvc - Larry Cheng
Always things to learn from one of the greats…
@F_Compounders - Finding Compounders
An article by Peter Lynch How to catch companies that are on their way back and avoid companies that are on their way out https://t.co/2dTBaI6VwV
@larryvc - Larry Cheng
One clear sign of lack of strategic clarity in a business is when you’re relying on investment bankers to define your strategy. Bankers can play a valuable role but defining the company’s strategy shouldn’t be one of them.
@larryvc - Larry Cheng
The profitability sanity test for VC-backed unprofitable cos... Ask this question: How much revenue would it take to be breakeven if: -gross margin % is held constant -all opex spend is held constant on a $ basis Is that revenue achievable with no additional cost? In the attached example, the company needs to grow revenues from $50,000,000 to $87,500,000 with no additional expense to be breakeven. That's $37,500,000 of incremental revenue with $0 of added expense. The question for this business is whether that's possible. If the gap seems too large, then to make the gap more attainable there are two levers: -increase gross margin % -reduce operating expense The best means to do that varies by business, but those are the two levers. And this needs to happen while the company is growing revenues. If the gap seems impossible, then you may have a fundamental business model issue that will make profitability a remote possibility. Of course, there are means in which companies can grow to achieve scale which will help with the profitability likelihood over time - but that will require outside capital which should never be treated as a categorically attainable.
@larryvc - Larry Cheng
Conventional wisdom says avoid micro cap stocks due to lack of institutional coverage and support. That's exactly why I like micro cap cos - it's an inefficient market. What's your favorite microcap stock (<$100M mkt cap)? Something you think has 5x-10x potential and why?
@larryvc - Larry Cheng
The interest rate on debt should be calculated on the principal minus any minimum cash covenant, not just the principal. Ex: if you raise $20M of debt at a 10% interest rate but have a $5M min cash covenant, that's $2M of interest on $15M of available cash which is 13.3% rate. Raising capital which has stipulated covenants that restrict its actual usage is often the most expensive type of capital to raise on an effective basis even if it is advertised as "non-dilutive" capital.
@larryvc - Larry Cheng
Three sub-plans essential to any overarching corporate financial goal: -A P&L plan -A balance sheet plan -A cash flow plan It's common to over-index to one. But, to hit on all cylinders, there should be execution plans across all three for any single corporate financial goal.
@larryvc - Larry Cheng
I always see customer acquisition cost (CAC) presented by channel: Facebook CAC = $x Google CAC = $x Tiktok CAC = $x DOOH CAC = $x While there is utility in this approach, it should be complemented by a customer-centric view: Customer Type A CAC = $x Customer Type B CAC = $x Customer Type C CAC = $x Customer Type D CAC = $x In the customer-centric analysis, the customer types could be category-based, persona-based, demographically-based, first order basket-based, etc. - whatever the most appropriate segmentation is for your business. It's equally as important to understand the lifetime value (LTV) by customer-type because that drives the ceiling on CAC for that customer-type. As an example: Customer Type A LTV = $1,000 Customer Type A CAC = $100 Customer Type A LTV:CAC = 10x Customer Type B LTV = $160 Customer Type B CAC = $80 Customer Type B LTV:CAC = 2x You would much rather pay a higher CAC to acquire Customer Type A given the superior LTV:CAC dynamics. When you look at CAC only by acquisition channel, it's easy to default to scaling the lowest cost channel without completely understanding the quality and economics of the customer being acquired through that channel. It may be that a more expensive channel is more economic if it's acquiring a higher quality, higher retaining customer. Therefore the optimal analysis overlays customer segment LTV/CAC with acquisition channel economics/CAC to find the optimal seam in the business.
@larryvc - Larry Cheng
A great learning exercise is to review all of the original diligence done prior to making an investment, years after making the investment. Word-by-word, line-by-line, number-by-number. What happens with the benefit of hindsight is certain numbers, certain words, certain observations from the original diligence jump off the page. What might have been innocuous points that blended into a sea of diligence at the time of the investment now elevate themselves into being the key elements that disproportionately drove the entire trajectory or outcome of the investment. And it is with the clarity of that lens that when now doing due diligence on a new investment - you just know that certain aspects of this diligence will pop years later as the core drivers of the outcome. The key is to discern which items will be those disproportionate levers in advance. Therefore, the best way to train one’s mind to see those levers in advance is to go through the process of reviewing past diligence, word-by-word, line-by-line, number-by-number, to see them in prior investments to train one’s eye for future investments.
@larryvc - Larry Cheng
The Ugly Teenage Phase of Profitable Growth This is a phase that companies that were once high-growth, high-burn companies (that are typically transactional) go through as they try to get profitable. Phase 1: You start with high revenue growth, high burn rate. Then you realize due to market conditions that you need to get profitable. Phase 2: You drive for operating leverage: - You cut operating expenses - inefficient marketing spend, headcount, etc. -All out focus on enhancing gross margins - pricing, COGs, shipping, etc. Phase 3: You focus on improving working capital dynamics. -renegotiate with vendors, suppliers, manufacturers, etc. to enhance payment terms to improve cash. Phase 4: You clean up the balance sheet - Optimize inventory, renegotiate/refinance debt, try and solidify cash, etc. During these four phases, revenue is declining YoY (sometimes materially) because you're comping against prior quarters with heavy marketing spend. This is why this is the "ugly teenage phase" - it looks ugly if all you're looking at is the top-line. But, there are usually good signs: -marketing and sales efficiency is improving -all opex lines are decreasing as a % of revenue -EBITDA and/or OCF is growing Phase 5: Revenue is declining YoY, but you have achieved profitability (EBITDA and/or FCF). At this phase, you are still ugly to the world because revenue is declining, but the end of the teenage years is on the horizon. Phase 6: Maintaining profitability and returning to YoY revenue growth by investing some of your own cash flow back into growth. This happens typically in 4 steps: -step 1: sequential Q/Q gross margin growth -step 2: sequential Q/Q revenue growth -step 3: YoY gross margin growth -step 4: YoY revenue growth The revenue growth comes from first from delivering real customer value and then: -efficient marketing spend -introducing new products -expanding new channels -reactivating churned customers -pricing -defending the base of loyal customers The challenging part of this journey is the ugly period can last a long time. From Phase 1-5, you don't get much of any credit. It's not until you hit Phase 6 that outsiders will believe in the company again. But, those close to the company can watch as each phase is cleared and know that the company is going in the right direction. However, to be fair, until you get to Phase 6, you haven't reached the ultimate end goal. **For the sake of clarity, this is a general observation across several different companies in different contexts many of which I'm not involved with. This is not an observation or prediction related to any specific company.
@larryvc - Larry Cheng
GameStop FY Results: 2022 Adj EBITDA: ($192.7M) 2023 Adj EBITDA: $64.7M 2022 Net Income: ($313.1M) 2023 Net Income: $6.7M 2023 Cash + Equiv: $1.199B 2023 Long-Term Debt: limited Thanks to the GameStop team for their efforts. $GME For full results: https://gamestop.gcs-web.com/news-releases/news-release-details/gamestop-reports-fourth-quarter-and-fiscal-year-2023-results
