May 20, 2021 Sign Up

By Overheard on Wall Street

"Learning never exhausts the mind." –Leonardo da Vinci

Good morning! Yesterday was a bloodbath for the crypto markets as Bitcoin dropped below $40k and ETH traded closer to $2.5k (from $4.2k a week ago) on US inflation concerns and a Chinese ban on institutions providing services related to cryptocurrency. All hell is breaking lose but we are #BuyingTheDip.

1. Story of the Day: From Dorm Room to Stardom

From a college dorm room at the University of Maryland to a $6 billion public company. That's what Anthony Casalena, the founder of Squarespace, was able to accomplish in 18 years. Back in 2003, Casalena wanted to make a website for himself but quickly realized that to put together different aspects of a website (domain name, hosting, blog), he needed to combine different services. That was way too clunky so he decided to create his own service. After borrowing $30k from his dad for a couple of data center servers, Squarespace was born. After college, he drove to Manhattan and got a fourth floor walk-up apartment that he found on Craigslist. (looks like he was a Murray Hill bro too)

On Wednesday, Squarespace went public valuing Casalena's stake at $2.4 billion. Although Squarespace had an underwhelming first day of trading, closing at $44/share, below its $50 IPO price, Casalena at 38 years old, became the latest tech entrepreneur to join the three-comma club, joining the founders of Affirm, Roblox, Coinbase, Bumble, UiPath and AppLovin, companies that IPO'd earlier this year. Squarespace also followed in the footsteps of Spotify and Coinbase, and went public via a direct listing avoiding the high af Investment Banker fees.

Short Squeez Takeaway: The reason Casalena still owns such a large stake in his Company is because he bootstrapped (no outside investment) his business till it reached $10 million in revenue before taking any outside capital. The was helped by the fact that Squarespace was a profitable company early on, unlike many early-stage tech companies. At that time Getty Images approached him to sell but he declined and took capital from Index Ventures & Accel, and remained in control. The lesson here is that if you really believe in what you are building, keep at it, it can make just a few billion dollars of difference in a few years.

2. Markets Rundown

• Stocks ended lower for a third consecutive day on inflation concerns
• Crypto markets continued their free fall as all major currencies fell sharply

Movers & Shakers

• (+) Upstart Holdings ($UPST) +11% on strong Q1'21 earnings performance.
• (–) AMC ($AMC) -10% as investors cooled interest in riskier assets on inflation concerns.

3. Top Reads

4. Book of the Day: Think Again: The Power of Knowing What You Don't Know

The author (Adam Grant) is a professor of organizational psychology at the prestigious Wharton School of Business and in his newest book, Adam talks about a concept that he likes to call rethinking.

In a nutshell, it means taking a second to look at the opinions that we currently hold and periodically reevaluating them based on any new evidence that may or may not contradict them.

We all tend to have strong opinions about important things and we’re more than happy to defend them. What we sometimes don’t realize is that some of the opinions we formed a long time ago, might have a little rust on them and in need of a tune up. Let’s give ourselves the permission to change our mind.

5. The Daily Visual: US Smartphone vs Tablet User Penetration

Source: Insider

6. Tip of the Day: How to Retire Early

Calculate how much you need to save – According to the Trinity Study, retirees can withdraw up to 4% each year in retirement without depleting their portfolio over a 30-year period. To calculate how much you need to retire, take your future annual expenses and divide it by your target withdrawal rate.

For example, if you plan to spend $70,000 per year in retirement and want to withdraw 4%, you'd need $70,000 divided by 0.04, or $1.75 million to retire.

Save 50% or more of your salary - Saving 50% of your salary sounds difficult at first but when you look at what you're spending on, so much of it is stuff you either don't need or don't use.

Invest like crazy - Be as aggressive with your investments as you can tolerate. We recommend investing in the Vanguard Total Stock Market ETF, ticker symbol VTI. It's a cost effective option at just 0.03% annual fees and it keeps you diversified across all sectors of the US economy. (if you're feeling really bullish, could also YOLO your savings in Dogecoin... but really don't do that)

The key is to start investing as early as possible. The longer you give your investments to grow, the more likely they are to match the stock market's long-term average return of ~10%.

7. Memes of the Day

@wallstbets Instagram

@overheardonwallstreet Instagram

@ParkPatelCFA Twitter