According to an analysis for The New York Time conducted by Mint, in 2019 people spent $640/year on digital subscriptions such as streaming video, music services, cloud storage, dating apps, and online productivity tools, up 7% from 2017.

West Monroe, a technology consulting firm published an article entitled America’s relationship with subscription services, where they conducted an analysis of 2,500 Americans’ budgets, spanning 21 categories of subscription service. When they first asked participants how much they spend / month on subscription expenses, the estimate was $79.74/month. …

Last week the DOJ filed a lawsuit to block Visa’s proposed $5.3B acquisition of Plaid which was announced in January. The complaint had to be creative because Visa & Plaid don’t really compete today but the DOJ held no punches. Throughout the complaint they harp on Visa’s monopolistic position as it pertains to online payments, the significant barriers to entry competitors would have entering the market, and the two sided network effect they’ve developed between both consumers & merchants.

Visa seeks to buy Plaid — as its CEO said — as an “insurance policy” to neutralize a “threat to our important US debit business.” Visa is a monopolist in online debit transactions, extracting billions of dollars in fees annually from merchants and consumers. Plaid, a financial technology firm with access to important financial data from over 11,000 U.S. banks, is a threat to this monopoly: it has been developing an innovative new solution that would be a substitute for Visa’s online debit services. By acquiring Plaid, Visa would eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers. …

Background

If you rewind the clock ~100 years, prior to the Great Depression there was no concept of “public” or “private” markets; investments were on a continuum of liquid vs. illiquid and regulated vs. non-regulated. Like most things in 2020 the “ideal state” isn’t one of 100 years ago, yet in this instance it’s important to look at what changed and why.

The Wall Street Crash of 1929, also known as the Great Crash saw a two-day decline in the Dow Jones of 23% between October 28–29th, and ultimately resulted in the loss of 89.2% of its value in less than a three year period, bottoming in mid-1932. The reaction to the crash was to establish the Pecora Committee which was an inquiry begun by the Senate Committee on Banking & Currency to investigate the cause of the crash. This ultimately led the passage of Glass Steagall (which was in place until 1999 when it was repealed) and the Securities Act of 1933 and the Securities Act of 1934 which still govern the bulk of securities regulation today. …

“Software contracts are better than first-lien debt. You realize a company will not pay the interest payment on their first lien until after they pay their software maintenance or subscription fee. We get paid our money first. Who has the better credit? He can’t run his business without our software”- Robert Smith

In June we wrote a piece entitled This Time It’s Different: Maybe? where we highlighted the outperformance of Cloud / SaaS stocks vs. …

Jack,

As we think about some of the top entrepreneurs in recent history names like Steve Jobs, Bill Gates, Jeff Bezos, Larry Page, Elon Musk, and yes Jack Dorsey are frequently mentioned. You co-founded not one, but two public companies that have a combined market cap approaching $100B and somehow manage to still run them both today. So why should you listen to an anonymous TWTR account about how to further generate enterprise value for shareholders? …

“QE Infinity turned your savings account into your checking account, the bond market into your savings account, the equity market into the bond market, the venture market into the equity market, while given rise to the crypto market as the new venture market”

On a recent podcast with Pomp we spoke about public & private markets, the current macro environment and implications for risk asset allocation. Some asked for the spark notes version of what was discussed and why it’s relevant; which is what is attempted below.

Macro Backdrop

In a world post-financial crisis, we have seen a structural move lower in global rates with an estimated $17.0 trillion of negative yielding debt. The COVID-19 pandemic has only accelerated this trend due to the unprecedented global fiscal & monetary stimulus with Central Bank’s (Fed, BoJ, Swiss National Bank, BoE, ECB) balance sheet’s expanding by $5.5 trillion YTD from $16.0 trillion to $21.5 trillion (+34.0%), representing the biggest move since the depths of the GFC in 2008. The U.S. 10-Year Treasury opened the year at 1.9% and is down to 0.7% …

Howard Lindzon had Bill Libby of Upper90 on a recent podcast where they discussed the merits of “Delaying the A round” of venture, through the use of structured finance. The Upper90 team provides $2-$10mn credit facilities with the ability to scale to $25-$50mn+ for Seed to Series B companies as a flexible alternative to equity. They make investments across FinTech, Supply Chain Finance, eCommerce / Brick & Mortar 2.0, and Digital Content. Bill talked about the desire to “productize” what they do and partner with Vertical SaaS companies to deliver lending as a service to vendors / clients.

This is something we’ve been thinking about quite a bit as it pertains to the evolving world of SaaS and the inevitable convergence of Vertical SaaS with Embedded Finance. …

A recent tweet from Charlie Bilello highlighted the top 30 performing stocks in the S&P 500 over the last 30 years from 1990–2020. Coming in at #1 topping AMZN, NFLX , AAPL, MSFT, NVDA, SBUX, etc… was Jack Henry & Associates, “JKHY” compounding at ~29.8%/year for 30 years with a total return of 238,379% over that time period.

Jack Henry is part of the original “FinTech” club before it was referred to as such, founded in 1976 as a provider of core information processing solution for community banks. Today it generates ~$1.5 billion / year in revenue with ~$425.4mn …