Day 6 Doing Research is Actually Fun!

Today is my sixth day at CoreNetwork Fund. This morning, not long after I got to the office, I got an email from Bob. It was a newsletter from Pitchbook that Bob thought was interesting. There were a few things I found interesting as well, so I will share them in my blog today.

The first one was the “30 Most Valuable VC-backed companies”. Besides a few famous U.S. ones, I saw some familiar Chinese companies’ logos. I wasn’t that shocked about the fact that 11 out of 30 were from China but rather the fact that those companies were VC-backed (I never know!). I have used some of those apps before in China. In fact, I just used the one called Meituan (ranked 4th in current valuation) last summer. It is an app that gives you MANY food delivery choices (anything from a cup of tea to a company luncheon). I want to emphasize “many” because the first time when I used it in Shanghai, I spent at least 30 minutes going through all the options. I was also surprised and happy there were so many healthy choices (that I thought food delivery only provided fast food). I actually missed this app a lot when I am in the U.S., such a time saving yet quality meal for students and workers (and the price was not expensive too). I guessed it wouldn’t work well in the U.S. (maybe except big cities), but it worked well in China because its population is big and centered

Also, during my recent experience, I see a lot of U.S. VCs invested in healthcare industry. Reflecting with my own experience with the healthcare system here and the one I had in China, I thought it was weird that America, a country that has much more advanced healthcare technology, does not provide a very affordable or any social program for healthcare. I may be wrong, but I think insurance is very costly here yet does not cover a lot of health expenses (the normal ones does not cover emergency visits which can be detrimental for a lot of poor families if something urgent happened). But this is also interesting that I think earlier in the year, Amazon, Berkshire and JPMorgan Chase decided to form an independent healthcare company for their employees in the U.S.. If they really establish such a company that offers much lower price insurance, I feel like the three powerful corporations could convince other corporations like Disney (that has a lot of employees) or Google (that provides good benefits to its employees) to join.

I sent this article to my online business class teacher and he thought it was interesting that combined those three companies represent 1.2 million employees (though it's doubtful many of those would be benefits-eligible) but that the article stated 151 million Americans receive health insurance from their employers.  So, at a representation of less than 1% of the market, this move alone might not be able to influence the change that is needed in our healthcare system, but like I said, maybe it can motivate other businesses to get on board with making changes. 

After reading the newsletter, I began my research for my final project today. While compiling the list of companies, I saw a line on a VC firm’s website, which I found interesting: “Great ideas have a chance to grow into successful companies, but entrepreneurs cannot do that alone, or without resources from an early stage. That is where we come in. We are classic early stage venture capital investors.” This line perfectly described the mission and meaningful side (besides making money) of VC. When I was doing my research in the afternoon, I also found something interesting. There was an angel fund from Toronto, Canada called Ramen Ventures. Its name made me smile a little but this firm really has an unique style of talking. On the website, unlike other conventional business descriptions of the company’s investment criteria, it only posted 4 questions (but they implied their investment criteria):

1. Will these founders develop into “forces of nature”?

2. Will this company build something lots of people really love?

3. Will this company be easy to copy?

4. Does this company have a clear and important mission?

Today I mainly did research for my final project, which I turned out to have fun (in contrary of what I thought that I would get bored quickly). By reading different VCs’ websites, I understood more How Venture Capital Works. By summarizing and comparing VCs’ investment criteria, I learned how to determine whether an investment is good or not for a certain firm. Today’s work mainly help me know the beginning process of a VC deal, and I hope to learn the later part during some of my future work, too. Today I read Chapter 8-9, which talked about Convertible Debt and Crowdfunding. Since the crowdfunding idea is straightforward, I will mainly talk about theConvertible Debt here today. In short, a Convertible debt is when a company borrows money from an investor or a group of investors and the intention of both the investors and the company is to convert the debt to equity at some later date. The investors and the company would both prefer to issue debt instead of equity and convert the debt to equity at a later date. If the company believes its equity will be worth more at a later date, then it will reduce less by issuing debt and converting it later. Investors benefit from debt because it is senior to equity in a liquidation so there is some additional security in taking a debt position in a company vs an equity position. This book has been very interesting and exciting to read (when I understand it). I look forward reading tomorrow’s chapter which will talk about how Venture Capital Funds Work.