dr talisman | secret samwer & l catterton partner | sherman act violator | bunga bunga connoisseur | retired shape rotator | probably rotating mids
welcome to the layer cake son
Joined February 2013
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By all means build online. But please for the love of Christ, do something interesting with your new hard earned gains.
Write and produce a short film, buy a 35mm camera and randomly head out to Asia, pick up an old Land Rover and bum around some African countries whilst working out how you can give back.
It will do more for your mind, creativity and ambition than sitting in the Royal Palm in Dubai with your personalised Rimowa looking at your tacky ceramic Rolex.
Not to mention the stories that will inspire your kids in years to come.
You get just one shot at this, why not be unique?
Entropychaser Hindenburg research: AllPlants - a British failure.
Episode 1: Fraud, failure and falafels.
Welcome to the first in a new series where we take down VC backed companies in the UK and broader EU markets. Buckle up fuckleheads as we go full Hindenburg and gun down D-Grade startups which are paraded around London’s social scene like they’re Lazarus reemerging on the fourth day. I’ve been collecting data, insights and insider intel on these companies since 2017. I have decent exposure to this scene, IM as well as the PE world. Why is this important? Because these posts should be able to articulate customer acquisition, valuations and exit multiples in one post. I am not some rancid piss-stained Guardian journalist living in a flat share brownnosing the ‘next generation’ of British talent. This aims to be a brutal reflection on what the startup scene is really like with a side order of numbers. Ready? Good, let’s begin.
Company name: AllPlants.com - have a look and familiarise yourself prior to reading the below.
Inception: 2016
Revenue: £18MM
Raised: £55MM
Dilution: Huge, two founders probably own a little over 10% each. ESOP pool = tiny thanks to endless dilution. Limited options for exercising stock grants.
Business model: Retail and DTC, allegedly strong emphasis on subscription.
T.Exit multiple: Whether the founding team realise it or not, this company will probably sell for 4.5x EBITDA (but the company has never made a profit) or 1.5x revenue. Overall I find both scenarios highly unlikely. PE at this level is far too smart to fall for this and strategic’s will wait until the company implodes. Their best case would have been to prove they can handle retail distribution and then sell for an outsized multiple to a strategic - the Diageo playbook, a golden one if executed well. If.
Concerns: AllPlants has not been cashflow positive or profitable, endless financing rounds have diluted everyone to kingdom come. They were losing £1.5MM a month and over £10MM a year. Holy fuck that’s bad. E.C reporting guesses their customer base churns 30% YOY minimum. Little to no room for expansion revenue and no new products in the pipeline. Retention is a bitch as you’re fighting in a highly competitive market with well funded players. Retail is really tough. Plus their ads are dreadful. I can’t even explain how bad. No idea who their ICP is or how to write decent copy. I’d argue the whole model is flawed from the get go, but hey what do I know.
Pre money valuation: £54MM (2021 PRE - not even post).
Secondary share valuations: £5MM-10MM (Note, the secondary market is pricing them at upto a 90% reduction in value). I believe this to be an accurate assessment.
Company aims: As of late 2023, grow to £70MM and be profitable by 2026. Otherwise ladies and gentlemen, known as a fucking pipe dream. At that level they should be doing call it £14MM EBITDA and get acquired for roughly £150MM. I see this as highly unlikely. That’s £26MM in growth per year for the next two years. (£52MM expansion net net). They would have to double every year to hit their 26 targets. Not even SaaS VC firms like Craft are aiming for this internally. And that’s la crème de la crème in SaaS investing who are shooting for 70%-80% YOY growth. Good luck achieving 200% YOY growth in retail. I’m not going to comment further on the absurdity of this.
E.C. recommendation: Dump any equity you may own, avoid and run. If you’re in LMM PE or a distressed shop, I’d say buy this company for parts, but even then I don’t think they anything unique about them other than brand equity. This is probably worth <£1MM and can written off against tax.
E.C. Summary: This is what happens when arrogant hubris driven founders have access to endless amounts of cash from young VCs who can’t spell the term “liquidity event”. Instead of posting on here and LinkedIn, VC’s should log go off and learn the different between IRR vs. DVPI/TVI. Howard Marks’ papers are an exceptional place to start. I’d argue all VC’s should go work in PE first. L Catterton would be my preferred choice for educating these weapons grade morons who claim to understand consumer/retail/DTC.
The founders have spend nearly eight years of their lives on a company that will probably get aquihired (after yet further dilution) and probably sell for £20MM. This really is a best case scenario.
They’ll walk with call it £2MM, which becomes £1.5MM best case thanks to capital gains. Presuming an exit in 2026, that’s £150k a year pro-rata. I’m going to leave that there without judgement.
VC’s don’t care about losses as they can simply tax loss harvest and frankly good for them. The few decent senior VCs left in London (50yrs old +) know how to play this game and thank God they still exist.
My guess is AllPlants will continue crowdsourcing from pensioners who are so retarded as to never realise that this company is, was and always will be D.O.A. Hence why companies who crowdfund raise £5MM on a £50MM pre money. There’s literally no way economically for investors to make a penny. It’s rigged against them from the get go. VC’s will continue to pump cash in because deployment of funds boosts IRR allowing to them to raise more. The incentives for all parties are misaligned. This is always a red flag. Everybody should have the same outcome in mind.
Even if the market potential was there (hint, I really don’t think it is) they would still need a sterling team capable of understanding DR marketing/first order profitability, LTV/CAC and PE exit opps. The holy trinity. Oxbridge retards are simply bred to exit the womb and then fail spectacularity. This current crop seem to go around playing 2-7 offsuits whilst acting like they’re holding a Royal Flush.
Even with their current post money valuation hovering around the £70MM mark on private mkt investor’s balance sheets, (inside intel tells me it hasn’t been marked down), they would have to sell for that - at the bare minimum just to get any form of ROI for the founders and employees thanks to the liquidation preferences. Meaning their revenue would still have to almost 4x in two years. None of this takes into consideration the VC’s portfolio maturity window, which is another issue altogether. Good luck trying to sell the equity at the end of the maturity cycle to another fund.
I’d go as far as to argue that this was never a venture backerble business. They raised too much too early without true PMF. Went around pumping the valuation with endless fundraising rounds (what could possibly go wrong?) and moonlighting as a ‘DTC darling’ within London’s startup community in an attempt to impress precisely the wrong people. All whilst customers churned from a shitty product with dogshite unit economics and no true moat.
This post makes me both sad and angry. Sad because I hate seeing companies fail and this one has been destined for failure since 2019. Angry because there are so many talented founders and teams who can’t raise funds by dint of coming from precisely the wrong backgrounds or having a ‘funny’ accent. Note, I do not fall into either camp. This is not some vicious journalistic attack based on my own inherent biases. The numbers exist to demonstrate the absurdity of the whole picture.
As my aforementioned posts detail, the startup scene in London is one of fraud, moronic founders, no PMF or understanding of exit opps. I would bet you dollars to donuts that these founders still think that they can sell for a SaaS multiple, rather than valuing themselves according to their market’s multiples or better still, a full blown DCF. Oh but don’t DCFs require some form of growth and bottom line assumptions?
But there you have it folks, an honest assessment of one of the hundreds of companies that raise money in London every year. I’m sure the FT won’t publish this (despite me emailing them) as a guest publication because it calls out the cold hard facts. Something Brits seem to be allergic to.
Always remember that denial is not just a river in Egypt.
[End of broadcast]
Donald Trump has been elected the 1st three term consecutive President! Here are three things we can learn about B2B SaaS 🧵
• Forbes 30 under 30 - check
• Mainstream press coverage - check
• AI domain name - check
• Obnoxious founder with less than 5% equity - check
• Claims to have serious ARR - check (questionable if true)
• Use of the word “proprietary” on a site that’s been molested by Webflow devs - check
• History of M&A which includes MicroAcquire-esk shite - check
• £19MM rev, losing £21MM a year, raised north of £100MM - check
• AI eating away at technical moat + ‘IP’ built upon API calls - check
• VCs ploughing more British rupees in to inflate IRR rather than fix the mess - check
Lauded by the press, masses and ‘industry experts’. Outstanding chaps. Really well done. Good luck getting a PE firm to buy you out at 5X ‘ARR’.
The more emotion driven a decision or purchase is, the more people try to post rationalise it with logic. They try to discard and hide their initial beliefs as a way to convince themselves that their decision was correct, irrespective of quantitative evidence otherwise.
EG: “I’ve just bought an apartment.”
Reality: For the most part, real estate is a bad way to allocate capital. Yet the overwhelming majority of folks will justify their purchase, especially if it’s in a downmarket area, by using phrases like “it’s an up and coming neighbourhood”, or “its been gentrified” or “it’s where all the cool young people live” etc. The more out of sync with 1st principles a decision is, the more the masses need to justify their choice as a way to convince both themselves and their social group that it was the correct call.
Feel free to replace this example with dating, career choices or bad financial decisions and you’ll see similar patterns at play.
There’s a degree of Dunning Kruger here. Most people truly think that they have above average intelligence, which further gaslights them into believing their decision was correct in the first place. “If I’m so smart, how on earth can I be wrong” type of mentality. There’s that 1981 study by Ola Svenson on how 93% of American drivers rated themselves more skilled than the average driver, which helps demonstrate this. Narcissism en masse fuelled by social media compounds this too.
Conversely, the less you need to post rationalise and defend a decision, the greater the chance it was the correct choice. An example would be pursuing something entrepreneurial, creative, or learning a new skill that could increase your earning potential. In these instances, the primary objective is explicit and there is less of an urge to sit around post rationalising the chosen path. It literally speaks for itself. The intent is clear. There is a longer term outcome in mind.
All of this helps point out why the overwhelming majority of purchases that humans make are emotion driven impulse buys. And yes, whilst the impulse part may not be true at scale, buying a $50MM waterfront villa is still an emotionally charged choice.
Which is why consumers subconsciously love great direct response marketing in which they’re called out and sold to using emotion as the grease to lube up the sale. Ostensibly, the product doesn’t actually matter. It’s simply the delivery mechanism for a dopamine release.
For most people, life is so mundane that they’re constantly looking for some kind of an escape. Hence why gossip culture, porn and impulse purchases are ubiquitous. It’s also why they’ll never die away, no matter how regulated an industry becomes or how bad the economic era. It’s innate to human DNA. They all tie into Schwartz’ mass desires and Girard’s mimetic theory. Schwartz and Girard approached analysing life from the same viewpoint. One made a fortune, the other enlightened us.
Great direct response marketing allows consumers to feel fulfilled. As they’re able to justify making that seemingly irrational purchase, living out their dreams or hitting whatever mass desire they subconsciously harbour.
We sell or else.
[End of broadcast]
Entropychaser retweeted
A huge amount of the companies everyone looks up to started off with ‘black hat’ methods. It’s almost impossible to build anything of size or stature without bending the rules, in every asset class, even the highly creative non-online ones.
The problem comes for the next generation of builders who try to post rationalise this by thinking that the values and creativity that a company stands for today, were the same when they started.
I’ve had the benefit of seeing this across multiple asset classes. Particularly non-online ones. It’s normal. The name of the game.
[1] The mining oligarch to bought his countries national resources for kopeks on the ruble > milks the cashflow > exits to a western mining giant > moves into MMPE (I interned for that man in 2016).
[2] The film exec who buys scripts from screenwriters only to sit the option and never produce the film - in order to prevent other studios from developing it.
[3] The A&R exec that saddles talent with debt from producing their first record in order to prevent them from being bought out of their contract.
[4] The multinational that briefs all 1st and 2nd tier lawyers in order to prevent their impoverished plaintiff from being able to retain proper legal council, forcing them to settle or fold altogether.
If anything, the world is harsher in a non-online setting compared to the seemingly limited damage that can done online, where consumers are protected by credit card providers and regulatory bodies.
It’s the game. Always has been, always will be.
Always remember how stupid your average person is, then remember there are 50% who are even stupider.
Build offers, write copy and script ads accordingly.
Newbie: OMG this is so saturated. There’s too much competition.
Non newbie: If we reverse engineer a particular group’s mass desire and double down on angles around this with solid direct response, strong positioning and banger creatives that can educate totally unaware cold prospects, and intro our unique mechanism whilst dialling in EPCs, then there’s a strong gap to build something out.
Why be a cog in the wheel, when you can be the whole machine?
Imagine growing up actively wanting to be a management consultant or a PM at some tech company.
To squander that childlike curiosity - which contrary to conventional wisdom, does not fade with age - in favour of Patagonia vests, meal prep, running clubs and mansplaining about excel models is nothing short of a travesty.
The masses really don’t realise you can live multiple lives if you’re prepared to look like a fool for the first part of your existence. A big ‘if’ in and of itself. We’ve reduced everything to being binary and relegated nuance to play in the third division, rather than promoting her to the champions league.
Being a creative does not mean you’re unable to succeed in the business world.
Being corporate does not mean you cannot succeed in being a creative.
People often conflate and misattribute their identity with their work, to the extent that they box themselves into a position whereby they cannot explore anything new or different for fear of looking like a fool within their social group.
Mimetic desire, if left unchecked, will lead to a life of broken dreams, shattered minds and empty souls.
Under its shadow we seek comfort. We have become lazy, fat and complacent.
Podcasters have replaced religion. Brands have replaced community. And community has replaced family.
We have developed an autoimmune disease to doing ‘the hard work’ or ‘putting in the reps’. Our current lifestyles reflect this and more crucially, so too do our aspirations - or lack thereof.
I cannot fathom a world in which a younger version of me could lay awake at night dreaming about aligning logos in Powerpoint for corporations that use terms like “fiduciary duties”, “corporate governance” or “ESG” whilst maintaining a serious face.
We should all aim to be the swashbuckling hero that is innate to our DNA.
We should all aim to better our environment, and in doing so, be thankful to our parents (for those blessed enough to have them) for the multitude of sacrifices they have undoubtedly made.
And most important of all, we should never give in. To live on our terms, in accordance with our own values - never letting mimetic desire blunt our burning passion, rage, creativity or outright capitalist tenancies are all elements we all need to double down on.
For if not, the SSRI ridden masses, with their Netflix, escapist weekend trips abroad and love of matcha tea will devour us all in the dead of night.
Entropy is coming for us all. Know this and embrace her whilst you can. For she is the only constant in our incredibly short existences.
Do not go gentle into that good night.
[End of broadcast]
At an event next to some broccoli haired agency boy who’s told me that direct response doesn’t work and that companies should be judged based on how much they raise and how many employees they have.
Welcome to London’s startup scene. I’m off to kill myself.
Other fun points, now that I’m sober again.
- Meta doesn’t work. It’s just used by old people.
- Roas is not tracked. Clients don’t care, nor should you. All about brand equity mate.
- MER? What’s that mate.
- Random influencer marketing trumps dialled in VSLs/UGC with a detailed creative system. ‘We just let the influencers do it mate’, ‘you should to if you weren’t faking it’ - No, I shit you not.
- “Also, what the hell is a VSL” - yes really.
- Never run a paid ad in his life
- “How would you run paid for an enterprise software company?” (Yes, really. He even specified using TikTok for enterprise SaaS for Christ’s sake).
- No core marketing ‘skills’ just waffle and ‘bro what systems do you use’ and how much can we bamboozle clients with data that doesn’t matter to make us sound smart.
End of the evening: Bunch of consultants jerking each other off talking about assigning titles within their shitty ’startup’ - founder, creative director (?!), CTO all for their Grindr app for transexual labradoodles in East London.
Me: How much in revenue are you making?
Them: Well nothing.
Me: Right, so respectfully shut the fuck up.
…
Me: I’m leaving, pleasure gents let’s do it again soon.
LMFAO. Bridges burnt me thinks.
Entropychaser retweeted
Selling anything to the US makes so much more sense, when it comes to consumer products.
[1] You’re average Briton has the same purchasing power as man from Tennessee. ie, they’re cucked peasants.
[2] No silly VAT issues in the U.S. Europooors down bad.
[3] 21% of Americans are illiterate. If you can’t find a few thousand to buy some cheap plastic tat, then it’s a skill issue.
LMFAO. Predicting an aquirehire by some non-target acquirer inbound. Watch Cisco or similar buy them out for ten cents on the dollar. No tech giant will overpay given the lack of proprietary IP, distribution or goodwill/intangibles.
The only people that win here are the VC’s who can write off any gains within that fund against tax, a la Murdoch with Theranos.
[1] Reread this.
[2] Spend less time here.
[3] Delete app for good.
Earning capacity and mastery, lessons for us all.
Distilling everything down to ‘bro how much do you make a month’ seems to be a great way of killing true long term progress, innovation and mastery. It reduces everything to focusing on today, rather than what tomorrow is going to look like.
It’s the same reason high growth publicly traded companies hate having to give quarterly earnings calls as it requires them to cater to the market’s demands rather than what’s intrinsically right for the business.
It may well be the most logical outcome to reinvest into OPEX, R&D or building an amazing team which tends to lead to a reduction in net income in the short term, only for that company to then reap the benefits months or years further down the line. Both in terms of EV and also value for customers.
The same is true with individual innovation or mastery. It may actually be a prerequisite to have a depreciated earning capacity whilst spending years mastering a skill instead of chasing riches at all costs.
There are countless examples of incredible once in a generation talents who sacrificed earning capacity (most without realising it) to focus on their craft. JK Rowling, Jack Dorsey, Christopher Nolan or any of the Tiger Cubs. The list is non exhaustive.
My worry is that so much of what Gen Z/Gen A consumes is distilled to, and revolves around monthly earning capacity that they, or indeed the broader market starts to lose touch with how just hard it is to focus on building skills when the world does not reward them in the short term. My broader point is more complex than the delayed gratification studies people like to throw around.
Spending years mastering a craft, honing a skill set or becoming a protégé under a great is a phenomenal way to spend your youth and twenties. Every single centi-millionare or billionaire I have come across or know(n) has followed this very approach. Most without realising it. Even in era’s akin to ours when new forms of innovation or technology are rapidly taking the world by storm. It doesn’t mean this is the only way to unlock the levels of wealth most profess about harbouring to seek, merely that mastery and true innovation take time.
You may have even spent a period of time mastering a skill or learning under a mentor without realising it, which further solidifies my broader point. So often we spend years in the darkness only to retrospectively realise that the light was actually shining upon us all along.
So many of these old ways are being lost in favour of a world which glorifies rapid rises in wealth at the expense of morals and mastery. A dereliction of skills in pursuit of what are being treated as vanity metrics.
I fear that the notion of spending years or decades to pursue mastery shall be abandoned on the grounds of it being non sequitur logic and thus deemed irrelevant. Even if subconsciously.
The gulf will increase not only in earning capacity but also skill. Those who are able to maintain steadfast to their own convictions will become so desperately sought after by the free market, purely as a byproduct of increased homogenisation of the masses. Even amongst those with significant wealth.
Whatever innate curiosities you have, double down on them at all costs. No matter how much you are mocked, belittled or bullied.
They will become your saving grace when the sun finally sets.
[End of broadcast]
“The world breaks everyone and afterward many are strong at the broken places. But those that will not break it kills.
It kills the very good and the very gentle and the very brave impartially. If you are none of these you can be sure it will kill you too but there will be no special hurry.”
- Hemingway