Going Bananas - It’s Time to Go Fast...

Erewhon is a celebrity mainstay around LA - and the only place to get Hailey Bieber's Strawberry Glaze Skin Smoothie ($20). While health is wealth, it might be hard to stomach the $9.50 raw cinnamon rolls and $13 coconut water. However, organic bananas are only $1.29/lb…and can easily fit into a $50 tote bag. Considering a banana (pretty ripe and possibly not organic) just sold for $6.2m - it might be time to load up at Erewhon. 

I’m not the artsy type, and can barely tell the difference between fine art and something from a kids art class. In many cases, I’m not sure there is much of a difference these days. Hell, Chester the Cheetah’s cheetos version sold for $20,100 - a relative bargain. And, unlike the banana, the Cheetos will last more than a week and come with a ton of Cheetos (in bags). 

While the $6.2m banana and strip of duct tape might be a statement by the artist, or have some hidden artistic meaning, it has a very simple meaning to me. People will chase attention, or notoriety - even if they’re spending $6.2m for essentially nothing. And to be clear, spending more than $.50 on a banana and piece of duct tape is just completely idiotic. The buyer should have put that money toward a charity, and eaten a normal banana - even an overpriced one from Erewhon.  

I could take this article in a few directions from here, but the cleanest tie-in to venture investing is…

Beauty really is in the eye of the beholder, and venture valuations are way more art, than science. And, like art, the real value can vary wildly from the sale (or round) price. As the venture market starts heating up, and VCs start chasing deals again, there might be plenty of $6.2m bananas. 

2022 and 2023 sobered up a lot of GPs from their 2020/2021 excesses. The complete lack of DPI continued in 2024 as well - especially as former unicorns continued to generally weaken. Although the super startup friendly macro conditions and growth potential might return to the startup market, legacy companies will largely be left behind. Even the coconut cloud smoothie can’t save them. 

As a (non-AI) founder, you’ve probably been fighting uphill for the last few years. Growth has been elusive and challenging, fundraising has been tough, and the M&A market has been slow. However, things are opening up - and could potentially explode up again. The fundraising balance of power might decisively shift in your favor, growth will feel much more accessible, and M&A activity (and multiples) could open up in 2025. Growth will again be the currency of choice, and liftoff velocity will let you write your own VC checks. Although there are still plenty of risks over the next few years for the long awaited massive crash, it feels like you’ll have 2-3 years of very healthy tailwinds. Now is the time to go fast, and go big…provided you have a great off ramp starting in 2-3 years. 

As a GP, I will never pay $6.2m for a banana. And though I love smoothies, I’d have heartburn over a $20 smoothie (Healthy Habit in Hilton Head and Ruby Jeans in KC are also better). I’m still allergic to most crazy rounds, and don’t play the normal power law game. However, I have loosened some of my self imposed constraints, and am aggressively writing checks. In the last 6 months, I’ve deployed almost ¼ of Fund 2, and might deploy another 25% in the next 6 months. This burst of activity comes after I essentially sat out 2022, and wrote very few checks in 2023. 

I’m not an economist, or a psychic - but I’m (for now) putting my money where my words are. It feels like an amazing time to invest, provided the companies have real optionality within 2-3 years. M&A multiples could be juicy in 2026-2027, secondary activity might be very healthy, and corporate spending might be very vibrant. In other words, startups will have copious fuel (easy fundraising and corporate spending), and also plenty of buyers (willing to pay very attractive prices). 

I’m always cognizant and a little worried about the looming mega crash - but it does feel like we might have 2-3 years of smooth sailing. With that said, I’m mostly doing A/B stage deals, and taking plenty of precautions. Small preference stacks vs. ARR, capital efficiency, obvious strategic acquirers (more than just a few), high multiple comp exits, and an ability to sell fairly quickly are table stakes. I’ll never have total downside protection or be able to remove all risk, though there are some very interesting A/B stage deals right now. I’ll never buy those $50 tote bags, but I am actively shopping around and writing checks.