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Walmart Beats Q1 Earnings Forecast, Misses on Revenues; E-Commerce Sales Surge

Walmart Inc. (WMTGet Report) posted much stronger-than-expected first quarter earnings Thursday as same-store sales in the United States beat expectations amid a renewed push in the retailer’s e-commerce division.

Walmart said adjusted earnings for the three months ending in April, the retailer’s fiscal first quarter for the 2020 financial year, came in at $1.13 per share, well ahead of the $1.02 forecast. Reported earnings rose 84.7% from last year to $1.33 per share, reflecting a 20 cents per share gain from the group’s holding in China-based online retailer JD.com (JDGet Report) .

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Group revenues, Walmart said, rose 1% to $123.925 billion, missing analysts’ forecast of $124.51 billion, as currency moves clipped the topline. Excluding currency impacts, Walmart said, revenues rose 2.5% to $125.8 billion, but the company cautioned currency moves would hit sales by around $1 billion over the current quarter.

“We’re changing to enable more innovation, speed and productivity, and we’re seeing it in our results,” said CEO Doug McMillon. “We’re especially pleased with the combination of comparable sales growth from stores and eCommerce in the U.S. Our team is demonstrating an ability to serve customers today while building new capabilities for the future, and I want to thank them for a strong start to the year.”

Walmart shares were marked 3.7% higher following the earnings release at $103.59 each, a move that would extend the stock’s year-to-date advance to around 11%.

U.S. same-store sales rose 3.4%, Walmart said, with net sales hitting $80.3 billion while e-commerce revenues surged 37%, although that growth rate slowed from 43% over the Christmas holiday quarter. International sales, however, fell 4.9% to $28.8 billion. Sam’s Club revenues rose 1.5% to $13.8 billion.

Earlier this week, Walmart said  it will launch a free, next-day delivery service to challenge its online rival Amazon Inc.  (AMZNGet Report) as retailers step-up their efforts to cater to changing consumption patterns in the world’s biggest economy.

Walmart’s NextDay delivery service will apply to around 220,000 frequently-purchased items on the Walmart.com website, the company said, and will be offered without a membership on all orders over $35. The new service will launch in Phoenix and Las Vegas, Walmart said, before expanding to Southern California in the coming days and around 75% of the broader U.S. population, including 40 of the top 50 major metro areas, by the end of the year.

Walmart’s move follows a similar offering from Amazon, the world’s largest online retailer, which shifted to one-day from two-day delivery for its Prime members last month — who pay $119 per year for the loyalty club membership — with a strategy it said will cost $800 million over its fiscal second quarter.

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Source: Walmart Beats Q1 Earnings Forecast, Misses on Revenues; E-Commerce Sales Surge

 

Is This Really A Currency War Or Just A Tantrum?

Since the People’s Bank of China (PBOC) allowed the yuan to surpass the dreaded level of 7 to the dollar on August 11, rivers of ink have flowed citing a new matter of contention between the U.S. and China, namely using currencies to gain competitiveness or, more simply, a “currency war.”

To describe the events as a currency war may seem logical because another type of “war” between the U.S. and China, namely the trade war, has been on everybody’s mind for the past year and a half. Moreover, the Trump administration itself has continued this game by classifying China as a “manipulator” of its currency immediately after this latest devaluation.

In the same way as the U.S. Treasury is not following its own script when classifying China as a currency manipulator, neither should we think of the yuan mini-devaluation as China initiating a currency war with the U.S. The reason is simple: the yuan–which is not convertible–cannot afford a war with the dollar, nor can the U.S. Federal Reserve control its currency so as to use it as a weapon against China.

In other words, neither of the two rivals have the instruments to successfully engage in a currency war against each other. Starting with the dollar, there is no doubt that its value is determined by the market, as it could not be otherwise being the reserve currency of a world still governed by flexible exchange regimes for major currencies.

The Fed can influence the dollar with expansive or restrictive monetary policies, but there are many other factors that it and the Treasury simply cannot control. One important factor is risk aversion: the more the Trump administration tightens the screws on China and, thereby increases the risk of recession globally, the more the dollar appreciates, contrary to what Trump wants.

Moving to the yuan, the PBOC is much closer to determining its value than the Fed can for the dollar, as it retains control on capital flows and does not need to intervene in a highly liquid forex market like that of the dollar. Nevertheless, the reality is that capital is ubiquitous, so capital controls will never be completely effective.

In other words, the value of the yuan is not exempt from the forces of demand and supply, nor is its value in the medium term, no matter what the PBOC may opt to do on a specific date or period. Considering the yuan’s mini-devaluation, the beginning of a currency war is a mistake for one more very important reason. The PBOC has accommodated market pressure by devaluing while central banks tend to move against the market during currency wars.

It’s true, though, that the timing of the devaluation could mislead us towards the idea of a China-initiated currency war because it happened right after the U.S. announcement of additional import tariffs on Chinese products.

More than a war, we should see this reaction as a tantrum of Chinese policy makers facing additional pressure from the U.S. Besides, as happens for every tantrum, its consequences may not be the desired ones as such mini-devaluation will only prompt more capital outflows from China, undoing part of the monetary stimulus that the Chinese central bank has been carrying out for more than a year to sustain economic growth. In other words, it will not help China to grow, but rather the opposite.

Thus, it is important to distinguish between a war and a tantrum. In the former you control your weapons, in the latter you do not.

I’m the chief economist for Asia Pacific at Natixis. I also serve as a senior fellow at European think-tank BRUEGEL and am a non-resident research fellow at Madrid-based political think tank Real Instituto Elcano. I am also is an adjunct professor at the Hong Kong University of Science and Technology and member of the advisory board of Berlin-based China think-tank MERICS, an advisor to the Hong Kong Monetary Authority’s research arm (HKIMR) and the Asian Development Bank (ADB) as well as a member of the board of the Hong Kong Forum and cofounder of Bright Hong Kong. I hold a Ph.D. in economics from George Washington University and have published extensively in refereed journals and books. I’m also very active in international media as well as social media. As recognition of my leadership thoughts, I was recently nominated TOP Voices in Economy and Finance by LinkedIn.

Source: Is This Really A Currency War Or Just A Tantrum?

China allowed its currency to fall below the key 7 yuan-per-dollar level for the first time in more than a decade. CNBC’s Eunice Yoon joins “Squawk Box” with the details.

Russians Pulling Out Credit Cards & Consumer Debt Spirals

MOSCOW — Yekaterina V. Bulgakova gushed about the cozy one-room apartment that she and her boyfriend share, and particularly about the way they could always cover the rent: by charging it on credit card.

“Our salaries don’t go far enough” to pay for housing, food and other necessities every month, Ms. Bulgakova, a tattoo artist, said.

She earns about 35,000 rubles, or $560, a month, which she considers a good paycheck for a young person. Her boyfriend, a naval cadet, receives a monthly military stipend of $480. Together, their income is above the average monthly wage in Russia of about $735, and it usually covers their expenses. But every few months, Ms. Bulgakova has a drop in business. That’s when she relies on her credit card from Tinkoff, a large private bank.

“Nobody wants to go into debt,” Ms. Bulgakova, 21, said. Yet millions of Russians like her are doing just that, spurring a boom in consumer lending.

The growth in such lending has alarmed some economic policy officials, who note that a growing number of Russians are using a quick swipe of plastic or relying on payday lenders to cope with hard times brought on by Western sanctions and slumping prices for oil, one of the country’s major export commodities. The spending has lifted the economy but with ballooning consumer debt that could help start a recession.

Since the onset of Russia’s military interventions in Ukraine and the ensuing sanctions, total outstanding personal debt among Russians has roughly doubled, according to the country’s central bank. Outstanding average debt per person has reached about $3,300, according to the National Association of Professional Collection Agencies, a trade group whose membership has grown by a third since the crisis began in 2014.

Some independent and government economists say that the personal credit industry has found a mother lode in a population that was wholly debt-free when it entered the capitalist era a generation ago. Others warn that the industry’s expansion is unsustainable.

A pawnshop in Moscow. Many first-time credit card users have little experience managing debt. And with Russia facing other economic woes, these spenders are also seeing their inflation-adjusted salaries decline.
CreditMax Avdeev for The New York Times

Many first-time credit card users have little experience managing debt. And with Russia facing other economic woes, these spenders are also seeing their inflation-adjusted salaries decline.

Elvira S. Nabiullina, the central bank’s chairwoman, has played down the problem while also imposing some regulatory restrictions to slow consumer lending. “It’s absolutely wrong to think that already now we have risks to financial stability or a risk of a bubble,” Ms. Nabiullina said at an economic conference in St. Petersburg last month.

The central bank has tried to cool the market by raising so-called provisioning requirements that dictate how much money banks must set aside to insure against defaults and by capping the amount of interest that payday lenders can charge at 1 percent per day, still a steep 30 percent a month.

Debt payments are taking a bite out of some slim paychecks: Low-income households spend an average of 8 percent of their monthly incomes on debt payment, according to the central bank. Surveys show that most borrowers are 25 to 35 and that they are taking more than three loans from different sources, according to Vladimir Tikhomirov, the chief economist at BCS Global Markets.

There were warnings from others at the St. Petersburg conference, where Russian officials laid out their economic priorities for the year. Andrey R. Belousov, an economic adviser to President Vladimir V. Putin, said the debt market was “overheating.” Maksim S. Oreshkin, the minister of economy, warned that the surge in short-maturity consumer debt could bring on a recession within two years.

“You had a similar story in the United States,” with debt rising faster than salaries before the recession in 2008, Mr. Tikhomirov said.

In the first quarter of 2019, real incomes fell 2.3 percent from the same period a year earlier. Over the same three months, the amount of newly issued unsecured consumer debt rose 22 percent.

Consumer lending in Russia, as elsewhere, benefits the economy by sustaining consumer demand. The lending boom may have prevented a recession in the first quarter, according to a central bank report published in June. State-owned banks issued the bulk of this credit, about 70 percent, the report said, suggesting that the Kremlin has at least partly endorsed the rise in consumer lending.

CreditMax Avdeev for The New York Times

For some Russians, personal debt is akin to the garden plots of their parents’ generation. In that era of post-Soviet economic depression, many families short on money grew their own food, transforming their kitchens into storerooms of pickled vegetables, dried mushrooms and sacks of homegrown potatoes.

Despite the wretched poverty of those years, Russians entered the country’s capitalist era with some advantages. Families had no debt, and virtually every adult wound up owning the property where they lived. But they were also unschooled in matters of lending or in calculating reasonable levels of debt. And they were unprepared for a rush of predatory lenders offering quick loans burdened with high rates.

At the end of 2018, there were 2,002 payday lending companies in Russia, with many operating from storefronts in provincial towns and offering one-month loans with interest rates compounded daily. Established banks joined in, offering loans and credit cards with quick approvals.

Igor Kostikov, chairman of the Union for Protecting Financial Consumers, an advocacy group for debtors, said that poor Russians were accumulating payday-lending debt. “They are getting deeper and deeper in trouble,” he said. “The poorest will not be able to repay.”

On Vkontakte, a social media site, Russians swap stories of debt and bankruptcy, revealing the naïveté of their experience with debt.

One user, who identified herself as Helga, wrote seeking free legal advice. “Respected lawyers! I have an opportunity to take a loan of three to five million” rubles, or $48,000 to $80,000. “If I take it out, pay a few times, and then declare bankruptcy, what problems might arise?” She mused about possibly using the money for a down payment on a home.

Helga’s optimism might be crushed if she considered the realities of debt collection. Russian debt collectors are notoriously violent. The state allows court bailiffs with minimal oversight to enter homes to confiscate televisions or other valuables to offset debts. Scofflaws face harsh punishment, including a ban on foreign travel.

Ms. Bulgakova knows credit can cause trouble, but she and her boyfriend believe that they can stay afloat. She likened their experiment with debt to her approach to tattoos. “We are trying this out on our own skin,” she said. Credit has helped them afford their St. Petersburg apartment, and comfort is important in these uncertain times. So far, she has paid off her debts promptly.

“I want to say thanks that I can at least keep up this lifestyle” by using credit, she said. “But it would be better if I didn’t have to.”

By

 

Source: Russians Pulling Out Credit Cards, and Consumer Debt Spirals

 

Can Davao City Become The Philippines’ Next Investment Destination?

Perhaps the Philippines’ most underrated investment destination is its largest city in terms of area. Davao City has long attracted adventurous entrepreneurs and businesses for its rich natural resources and opportunities for economic growth, and yet, security issues in the southern region of Mindanao continue to deter many investors.

Drive through Davao City and you’ll see the tell-tale signs of a growing metropolis–high-end condos and malls, construction sites and traffic congestion. Philippine President Rodrigo Duterte is credited with bringing progress to the hometown he led as mayor

for more than two decades before moving to Malacañang Palace. Today, his children are following in his footsteps: daughter Sara Duterte-Carpio is the current mayor and his son Paolo is a congressman and other son Sebastian is city vice mayor.

In the private sector, wealth and power remain mostly in the hands of the homegrown elite: pioneer families unfazed by global stigma who invested in the city’s agribusiness, real estate, logistics and infrastructure thought too risky by their counterparts in the north. Meantime, bold foreign investors saw profit potential in this “Wild West” and blazed a trail–like Lars Wittig, country manager of Regus & SPACES by IWG Philippines.

Wittig began seeking new markets in Mindanao some 30 years ago, first for tobacco giant Philip Morris, then Dole’s plantation empire, and now for a leading operator of flexible workspaces. He says one of the biggest indicators that Davao was the place for Regus to invest was the number of gas stations, McDonalds and even the Starbucks he saw in 2012.

“This is really becoming a ground zero for all types of industries to venture into,” Wittig explained, noting the need to alleviate the burden on Metro Manila and shift operations to tier two cities like Davao. “We all know how difficult it is to maintain productivity [in Manila] and meanwhile down here, there’s less competition for a very young and IT-savvy population.”

Last month, local government and business leaders sought to sell an image of openness and security at the 5th biennial investment conference Davao ICON with the theme “Davao: Your Southeast Asian Investment Destination.” It was the first to be co-organized with the Joint Foreign Chambers of Mindanao, with a third of 600+ delegates coming from China, Japan, Singapore, South Korea, Malaysia, Indonesia, Russia, Mexico, and European Union countries, including the Netherlands, Sweden, France, Belgium, Romania, Hungary and Austria, many of which sent their official ambassadors based in Manila.

“We hope they will find investment opportunities here to present to their business councils and business groups,” Mayor Duterte-Carpio said after meeting the ambassadors, reassuring them that she would ask the city council to draft a resolution requesting President Duterte to consider localizing martial law to help ease foreign investors’ concerns. She admitted that martial law may not be needed for the entire region.

Leaders in the private sector say that while foreign nationals view a militarized presence in Mindanao as negative, residents and business owners welcome soldiers as support for local law enforcement, considering the region’s history and culture.

The real challenge will be taking the positive messaging and translating it into actual business deals. Aside from the long-time presence of Japanese and Chinese investors, international investment from western countries is relatively small, ranging from Swedish company Transcom Holdings’ acquisition of local BPO firm Awesome OS to Dutch experts’ work in supporting the local cacao industry.

Philippine President Rodrigo Duterte speaks to the media after arriving in Davao on May 16, 2017, from a working visit to China.

Philippine President Rodrigo Duterte speaks to the media after arriving in Davao on May 16, 2017, from a working visit to China.

MANMAN DEJETO/AFP/Getty Image

With President Duterte’s “Mindanao First” policy, more countries are exploring the region’s potential as an economic partner, rather than a beneficiary of funding for conflict resolution. Davao’s business community touted the region’s strong economic growth of 8.6% in 2018, outpacing that of the country’s GDP, which came in at 6.2%.

Mayor Duterte-Carpio pointed to efforts to improve international connections, including direct flights to/from Hong Kong, Jinjiang and Doha, and incentives for investors to inject money into rural communities. City officials touted deals with Austrian companies and Chinese firms like China Telecom and Alibaba, as well as increased official development assistance from entities like the Japan International Cooperation Agency and the Asian Development Bank. The new Bangsamoro Autonomous Region in Muslim Mindanao, or BARMM, is also focusing on economic development to support the peace process.

The message? Davao City is an attractive alternative to overcrowded Manila and Cebu, and hungry for investment partners, particularly in tourism, infrastructure, real estate, information and communication technology, and halal trade and tourism.

“You have to come and see,” says Regus’ Wittig. “You don’t know the Philippines before you have experienced the hospitality, the people, the culture, not least the nature here in Mindanao and

specifically in Davao.”

I’m an international news anchor, Asia correspondent and freelance content creator based in Manila, with 20 years of experience in news, business and lifestyle reporting, producing and anchoring across Asia and the United States, including Singapore, New York City, Washington, D.C., and Los Angeles. In 2017, I launched ABS-CBN News Channel’s morning newscasts Early Edition and News Now as lead anchor and managing editor and hosted the popular “Food Diplomacy” segment. From 2013-2016, I was an anchor/correspondent for Channel NewsAsia and hosted “What’s Cooking,” a weekly food and travel show. Before moving to Asia, I worked in New York as an anchor, reporter and editor for several major media companies, including Forbes, CNBC, HGTV, Yahoo and Bloomberg. Born in Los Angeles, I graduated from UCLA and Columbia University’s Graduate School of Journalism.

 

Source: Can Davao City Become The Philippines’ Next Investment Destination?

Trade War Is Hiding China’s Big Problems

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Getty

The ongoing US-China trade war is a distraction from China’s big problems: the blowing of multiple bubbles and the country’s soaring debt, which will eventually kill economic growth.

It happened in Japan in the 1980s. And it’s happening in China nowadays.
The trade war is one of China’s problem that dominates social media these days. It’s blamed for the slow-down in the country’s economic growth, since its economy continues to rely on exports. And it has crippled the ability of its technology companies to compete in global markets.
But it isn’t China’s only problem. The country’s manufacturers have come up with ways to minimize its impact, as evidenced by recent export data. And it will be solved once the US and China find a formula to save face and appease nationalist sentiment on both ends.
One of China’s other big problems , however, is the multiple bubbles that are still blowing in all directions. Like the property bubble—the soaring home prices that makes landlords rich, while it shatters young people’s dreams of starting a family, as discussed in a previous piece here.

New Home Prices 2015-19

New Home Prices 2015-19

Koyfin

Unlike the trade war, that’s a long-term problem. Low marriage rates are followed by low birth rates and a shrinking labor force, as the country strives to compete with labor-rich countries like Vietnam, Sri Lanka, the Philippines and Bangladesh—to mention but a few.
Then there’s the unfavorable “dependency rates” — too few workers, who will have to support too many retirees.
And there’s the impact on consumer spending, which could hurt the country’s bet to shift from an investment driven to a consumption driven economy.
Japan encountered these problems over three lost decades, even after it settled its trade disputes with the US back in the 1980s. China experience many more.
Meanwhile, there’s the infrastructure investment bubble at home and abroad, as discussed in a previous piece here. At home infrastructure investments have provided fuel for China’s robust growth. Abroad infrastructure investments have served its ambition to control the South China Sea and secure a waterway all the way to the Middle East oil and Africa’s riches.

City overpass in the morning

City overpass in the morning

Getty

While some of these projects are well designed to serve the needs of the local community, others serve no need other than the ambitions of local bureaucrats to foster economic growth.
The trouble is that these projects aren’t economically viable. They generate incomes and jobs while they last (multiplier effect), but nothing beyond that—no accelerator effect, as economists would say.
That’s why this sort of growth isn’t sustainable. The former Soviet Union tried that in the 1950s, and it didn’t work. Nigeria tried that in the 1960s ;Japan tried that in the 1990s, and it didn’t work in either of those cases.
That’s why bubbles burst – and leave behind tons of debt.
Which is another of China’s other big problem s.
How much is China’s debt? Officially, it is a small number: 47.60%. Unofficially, it’s hard to figure it out. Because banks are owned by the government, and give loans to government-owned contractors, and the government owned mining operations and steel manufacturers. The government is both the lender and the borrower – one branch of the government lends money to another branch of government, as described in a previous piece here.
But there are some unofficial estimates. Like one from the Institute of International Finance (IIF) last year, which placed China’s debt to GDP at 300%!
Worse, the government’s role as both lender and borrower concentrates rather than disperses credit risks. And that creates the potential of a systemic collapse.
Like the Greek crisis so explicitly demonstrated.
Meanwhile, the dual role of government conflicts and contradicts with a third role — that of a regulator, setting rules for lenders and borrowers. And it complicates creditor bailouts in the case of financial crisis, as the Greek crisis has demonstrated in the current decade.

Follow me on Twitter.

I’m Professor and Chair of the Department of Economics at LIU Post in New York. I also teach at Columbia University. I’ve published several articles in professional journals and magazines, including Barron’s, The New York Times, Japan Times, Newsday, Plain Dealer, Edge Singapore, European Management Review, Management International Review, and Journal of Risk and Insurance. I’ve have also published several books, including Collective Entrepreneurship, The Ten Golden Rules, WOM and Buzz Marketing, Business Strategy in a Semiglobal Economy, China’s Challenge: Imitation or Innovation in International Business, and New Emerging Japanese Economy: Opportunity and Strategy for World Business. I’ve traveled extensively throughout the world giving lectures and seminars for private and government organizations, including Beijing Academy of Social Science, Nagoya University, Tokyo Science University, Keimung University, University of Adelaide, Saint Gallen University, Duisburg University, University of Edinburgh, and Athens University of Economics and Business. Interests: Global markets, business, investment strategy, personal success.

Source: Trade War Is Hiding China’s Big Problems

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Private Sector GDP Growth is Kind of Anemic

Today’s GDP report got me curious about something: how does private sector GDP compare to total GDP? That is, if you pull out government contributions to GDP growth, what does purely private-sector growth look like? Here it is:

Private sector growth has been declining since the start of the expansion, and that decline has picked up speed over the past two years. It’s no wonder President Trump was so eager to agree to sizeable increases in the federal budget this week. He knows perfectly well that his tax cut has worn off and he needs all the help he can get from government spending to prop up an increasingly anemic private sector. For the next year, anyway.

Personal consumption was up a healthy 4.3 percent, but business investment plummeted -5.5 percent. Exports were down and imports were flat. Federal government spending added more than usual to GDP by about 0.4 percentage points. State government spending was also higher than average, by about 0.2 percentage points. If government spending had been at normal levels, GDP would have increased 1.5 percent instead of 2.1 percent. Inflation was higher than last quarter.

Overall, this is an OK but not great GDP report for the private sector, saved only by higher government spending.

The most remarkable thing about Donald Trump is how eerily stable his approval rating is. Here is 538’s chart over the past year:

After the Republican tax cut passed in late 2017, Trump’s approval rating rose to 41 percent and it’s stayed within two points of that ever since. I don’t know if this is good or bad—bad for Trump, I suppose, since that’s a tough re-elect number—or if there’s much Trump can do to improve it. But it’s definitely unusual. It sure looks like nearly everyone has their mind made up about Trump and isn’t likely to change it.

 

Source: Private sector GDP growth is kind of anemic

He Built A $1 Billion Business Where All 700 Employees Work Remotely

Sid Sijbrandij knows a thing or two about building, scaling and even walking away from companies. His current venture is doing over $100 million in revenue and is valued at over $1 billion.

Originally from the Netherlands, Sid Sijbrandiij is now the founder of one of Silicon Valley’s unicorns that is powering the web through developers worldwide. It’s not his first startup rodeo either.

Sid Sijbrandij recently appeared on the DealMakers podcast. During the exclusive interview, he shared his entrepreneurial journey, the process of finding cofounders, bootstrapping versus raising millions, his addiction to fast-growth startups, and many more topics.

Seizing Opportunities

Sid Sijbrandi seems to have always had a gift for spotting business opportunities.

During high school, he studied applied physics and management science. He chose a kind of program that blends the benefits of an M.B.A., with getting good at several engineering disciplines.

In his first year at college, he also started his first company.

The idea came from a fellow Ph.D. student that had made an infrared receiver you could use to skip to the next song on your computer (the only thing that played an MP3 song at the time). He started buying these infrared receivers from him and selling them in the U.S. You’d send him an envelope of dollar bills, and he would then send you a printed circuit board.

Ultimately, his two cofounders didn’t agree on growth plans concerning hiring more people. Sid wanted to hire faster, so he didn’t have to spend as much time on it, while his cofounders wanted to optimize for free cash flow. They ended up parting ways amicably.

The Two Most important Things for Launching with Cofounders

Sid has experienced several startups and says his two big takeaways when it comes to cofounding a company are:

1) To be smart with the shares

2) To be sure you and your cofounders are aligned in vision

For example, automatically making everyone an equal cofounder, even if they come in way later in that process, can be a mistake.

Sid says it is important that shares “are aligned with their contribution to the company. It’s very important if you start a company to have vesting of your shares as well.”

This helps avoid the free rides, because if someone leaves with all the equity, then people that need to invest like VCs are going to be like, “Why am I investing for just 50% remaining of the business.”

In the Netherlands, Sid didn’t find the goal of local companies to grow really fast. If you do want to grow a company really fast, he says it is beneficial to be somewhere like the Bay Area, where everyone just assumes that is the goal.

Not just your cofounder, but also your accounts person and your lawyer, and everybody else requires the growth mindset.

Passion for Growth

After graduation, Sid spent a few months at IBM and could have stayed there. He had an interest in strategy consulting, as well as building a recreational submarine.

He made a balanced scorecard of all the different ways to make that decision. One of the criteria being, “Is this a good story to tell in a bar?” He showed his dad who said it was a ridiculous way to decide on your career but was very supportive either way.

So, he called someone interested in a submarine venture. His pitch was, “Look, you should really hire me because I have a job offer from IBM. Otherwise, I’ll start working there, and we both don’t want that.” He got the job.

He built the first onboard computer for the submarine. Today, U-Boat Worx is one of the biggest builders of recreational submarines. If you go on a cruise, and they have a submarine, it’s likely from U-Boat Worx.

Still, after five years, it just wasn’t growing at a pace that kept Sid interested. He then went on to do a part-time stint on an innovation project with the government as a civil servant.

During this time, he really got to know himself, and how fast-growing companies with a continuous string of problems to be solved were what kept him interested.

Funding Your Startup

After starting and selling app store Appappeal, Sid turned open-source software GitLab into a fast-growing venture that is on its way to an IPO in 2020.

He took the proceeds from his previous venture, doubled it in bitcoin, and began bootstrapping GitLab.com.

Sid got the first few hundred signups through an article posted on Hacker News. Then together with his cofounder applied and got into Y Combinator. The race to demo day, where they would present in front of top tier investors, was on.

Compressing their three-month plan into just two weeks, the GitLab team had a highly successful demo day, landing Ashton Kutcher as an investor.

There was so much interest in their seed round, they rolled right into the Series A financing round. They’ve since followed that up with a B, C and D financing rounds, raising a total of $158 million at $1.1 billion valuation.

Today, some of their investors include Khosla Ventures, Google Ventures, August Capital, ICONIQ Capital, 500 Startups, and Sound Ventures to name a few. It doesn’t get much better than that as a hyper-growth startup.

In order to do this, Sid and his team had to master storytelling. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Embracing The Remote Work

Sid states they “don’t do in person.“ At Gitlab they encourage having meetings with webcam. They believe there’s something to see in the other person even if it is via video.

To put this into perspective, every day, employees have a company call, and it’s a thing you do with a limited set of people. In this regard, there are about 20 in each group, and they just hangout.

During the group calls there are all types of topics discussed that vary from movies to magazines. Topics are not necessarily work-related.

Sid and his team very much believe that their company is more than just, “Hey your work…”

As part of Gitlab‘s culture, the social interaction plays a key role and they have a lot of ways in which they facilitate this inside the company. Even if this happens remotely.

M&A Made Simple

Recently Sid and GitLab have been very active when it comes to acquisitions on the buy-side. That includes Gitorious in 2015, Gitter in 2017 and Gemnasium in 2018.

When it comes to acquiring companies, they’ve made the process incredibly simple, and are actively looking for more companies to buy.

In this regard, they like to acquire teams that have built a product before. Preferably a team that made a great product, but didn’t get distribution. Especially because typically they shut their existing product down.

To make things easier, they have an acquisition offer page. It even includes a calculator, so you can go online and calculate how much they’re offering.

Listen in to the full podcast episode to find out more, including:

  • When to pull the plug on your startup
  • The advantages of SAFE notes for raising money
  • How GitLab does meetings and culture around the globe
  • Why they pay based on where team members live
  • Tips for recruiting top engineers
  • Why you should read the GitLab handbook

Follow me on Twitter or LinkedIn. Check out my website or some of my other work here.

I am a serial entrepreneur and the author of the The Art of Startup Fundraising. With a foreword by ‘Shark Tank‘ star Barbara Corcoran, and published by John Wiley

Source: He Built A $1 Billion Business Where All 700 Employees Work Remotely

Here’s Why We Suddenly Stopped Hearing About A Recession

Topline: Economists—especially after the stock market took a dive in December—had been warning that a recession was coming, and possibly imminent. But a combination of low-interest rates and an improving labor market has quickly silenced those fears — and complicating the hopes of Donald Trump’s foes in 2020.

  • The risk of a recession decreased last week after the Federal Reserve declined to raise interest rates this year, said Brian Rose, senior Americas economist at UBS Global Wealth Management’s Chief Investment Office.
  • Combined with a stock market bounce-back and a growing economy, investors are now optimistic — a big shift from earlier this year.
  • Major economic predictors showing an increased threat of a recession have scaled back it’s predictions in recent weeks.
  • Asterisk: If President Donald Trump escalates the trade conflict with China by adding more tariffs on Chinese imports—particularly auto parts—the economy could suffer, increasing the chances of a recession, Rose said.

Earlier this year, half of economists surveyed by the National Association for Business Economics predicted a recession in 2020. Another poll of economists by the Wall Street Journal in January put the chances of a recession at 25 percent—the highest since 2011.

Coverage piled on (a few examples: “4 Signs Another Recession Is Coming―And What It Means For You,” “A recession is coming, but don’t flee markets yet,” “The Next Recession Is Coming. Now What?”), with many predicting bad news for Trump (Politico: “Trump advisers fear 2020 nightmare: A recession”). Some industries girded for the worst, like online lenders, who tightened its rules to lessen risk.

And then, suddenly, the panic eased. Now Goldman Sachs economists say there is only a 10 percent chance of a recession. What happened?

The biggest factor in that shift came when the Federal Reserve opted not to not raise interest rates, a pleasant surprise to economists. Rose said lower-than-expected inflation led the Fed to keep rates modest.

The economy, too, has grown, allaying recession fears. According to the latest job numbers, the U.S. has the lowest unemployment rate in 50 years.

“It is hard to have a recession when unemployment is this low and interest rates are this low,” Richmond Federal Reserve president Tom Barkin said on Wednesday.

The biggest risk of recession comes from Trump himself. If he increases tariffs on more goods than the $200 billion in Chinese imports he’s already promised, the risk of a recession increases, Rose said. As trade negotiations remain rocky, investors are increasingly concerned.

“Left on it’s own, there’s little risk to the economy,” he said. “The real risk of a recession comes from policy, particularly trade.”

Barring another recession, positive economic growth should mean good news for Trump in 2020. But as it stands, Trump is still relatively unpopular (his approval rating sits at 46 percent, although that is a high for him). And most forecasters agree the economy won’t grow as much as the White House says it will.

“A normal president with these economic numbers would have job approval somewhere in the vicinity of 60%,” Republican pollster Whit Ayres told the Los Angeles Times. “But Donald Trump is a nontraditional president, and he has, at least at this point, severed the traditional relationship between economic well-being and presidential job approval.”

Still, a recent CNN poll found that 56 percent of Americans approve of Trump’s handling of the economy. And while many Democrats haven’t focused on the latest job numbers, Senator Amy Klobuchar (D-MN), who is running for president, tried spinning the numbers a different way during an appearance on CNN, crediting President Obama with job growth.

I’m a San Francisco-based reporter covering breaking news at Forbes. Previously, I’ve reported for USA Today, Business Insider,

Source: Here’s Why We Suddenly Stopped Hearing About A Recession

DoorDash Is Now Worth Nearly As Much As Grubhub After $400 Million Funding Infusion

Investor appetite in food delivery companies is growing, notwithstanding a rash of customer complaints about how these startups pay contract workers. On Thursday, DoorDash announced it had raised another $400 million in a Series F funding round led by Temasek and Dragoneer Investment Group. The cash infusion brings DoorDash’s total capital raised to $1.4 billion, of which $978 million came from funding rounds in the last year.

Source: https://www.forbes.com/sites/bizcarson/2019/02/21/doordash-funding-400-million-grubhub-7-billion-valuation/#3df12b267e10

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