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In today’s edition

1. A quick message

2. The context surrounding Biden’s decision to drop out, and implications for the 2024 election

3. A deep dive on JD Vance - who he is, where he’s worked, what he’s invested in, what he believes, and what his vice presidency means for the economy and VC

4. The current calculus of the election

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Hey RTF readers.

I usually don’t start editions with a message, so bear with me.

The newswire has anything but cooled during this hot, much-needed summer. I want to extend a thank you for exponentially growing this community and regularly engaging with our content.

As always, don’t hesitate to email me at [email protected] with opinions, disagreements, feedback, etc. I read everything. It’s always a pleasure to hear how readers in and out of startup-land find value in RTF.

I scrapped a fully-finished edition this morning, just as I did last week when Trump was shot in the ear at a rally, bringing our country quite literally a half inch from civil war. This edition went out the following day.

Earlier today, Biden dropped out of the election. While RTF is not political, our industry is deeply impacted by the ever-changing expected value of this election. Every decision changes the probability and magnitude of a given outcome, thus changing the expectation of how it will affect not just VC and startups, but our lives.

And boy, is there a lot to unpack. While I write about tech and startups persuasively, I’m not here to persuade you of anything when it comes to politics. I believe that the bedrock of free speech is defending speech you disagree with.

With that said, let’s dive in.

COMING SOON

An Inside Look

I’ll soon be speaking with Evan Vucci, the AP photographer behind one of the most iconic photos in American history.

Vucci’s story is incredible. When gunshots rang, amid the pandemonium, his instincts led him to capture a series of images never to be forgotten.

Stay tuned to hear his perspective directly.

DROPPING OUT

Biden Leaves the Field

Sunday morning began with Cedric Richmond, senior advisor to the DNC and co-chair of Biden’s campaign, making the following statement on CBS.

This statement was unsurprising, given the status quo over the last month: A recurring loop of Biden asserting his resolve, and increasingly mightier democrats calling for him to step down.

It began with his performance at the first presidential debate.

Watching Biden speak, it was difficult to gain confidence in his ability to simultaneously and effectively handle our economy, the Russia-Ukraine conflict, Israel and Gaza, China… the list goes on.

When asked about his performance, Biden’s press secretary Karine Jean Pierre made the following statement.

Later, we heard excuses of jet lag and simply having a bad day.

The following phrase will likely ring familiar given the frequency of its usage in the media: Biden is “as sharp as a tack.”

Still, an emerging faction from the democratic party was coming to grips with the reality of Biden’s disappointing polling. “If we want to beat Trump, which we do, and Biden is our weapon? We’re done,” was their opinion.

Later this morning, Joe Biden posted a statement on X announcing his withdrawal.

Why this matters

Was Biden forced out of the election?

• On July 8th, Biden calls into MSNBC’s Morning Joe expressing exasperation towards democratic “elites” urging him to withdraw from the race.

• On July 19th, the New York Times reports on Biden still feeling bitter about being pushed out of the 2016 race (in favor of Hillary Clinton) by democratic elites.

• On July 20th, NBC reports on Biden’s allies arguing that pushing him out of the election is “undemocratic” and “disenfranchising” to voters.

• Biden writes a letter to democratic lawmakers, urging them to halt the pressure on him to withdraw.

The irony in this change of perspective lies in the last election’s primaries, wherein Obama and the aforementioned “elites” drove Bernie Sanders out of contention to pave the way for Joe Biden.

That said, his frustration is justifiable. In fact, when calling into MSNBC, Biden said something conventionally democratic.

As reported by FT, the Biden-Harris campaign raised $270 million in Q2. As Kamala Harris shares Biden’s campaign committee, she has access to those funds.

Donor transfers to an outside candidate are limited to ~$2,000. And while Biden could transfer any amount of money to the DNC, only $32 million can be deployed towards a new candidate’s campaign.

From last week’s edition…

It seems that following the money will once again prove effective, unless democrats make the bold move of sacrificing Kamala and hundreds of millions of dollars in search of a few more percentage points.

Interestingly, Biden did not initially endorse Kamala Harris within his announcement. He thanked her, but only endorsed her hours later in a follow-up. It’s hard to know what happened behind the scenes, but the events certainly appeared uncoordinated.

In the final section of this edition, we’ll dive into the latest polling and prediction market data.

THE VICE PRESIDENCY

JD Vance is Chosen

On Monday, July 15th, Donald Trump announced JD Vance as his pick for the vice presidency.

Unlike when Trump chose Mike Pence to appeal to the evangelical voter base, there doesn’t appear to be an obvious identity-political benefit to JD Vance’s position as running mate.

Who is he?

JD Vance is a former VC and U.S. senator.

• Joined the Marines after high school, served for 4 years

• Graduated Summa cum Laude from OSU in 2009 with a BA in Political Science and Philosophy. Went to Yale (alongside Vivek Ramaswamy); graduated in 2013 as a Doctor of Law

• Started with Mithril Capital as a Principal, 2016 to 2017

• Co-founded Narya and served as a Partner in 2019

• Made 14 early-stage deals as a lead partner on behalf of Revolution, a D.C. VC firm

(Some of) JD Vance’s investments

1. AppHarvest ($28 million deal): An American food production company developing and operating indoor farms in Appalachia

2. Chassi ($3 million deal): An AI-powered process helping PE funds and portfolio companies eliminate uncertainties and accelerate value creation by providing visibility into business process performance

3. The Minte ($24.64 million deal): Hotel-style housekeeping service for apartments, rooted in the belief that a “clean space makes for a clear mind” (from their documents)

4. Lumenari ($3 million deal): Advanced materials discovery company for device innovation

5. Aatmun ($20 million deal): Developer of a connected frontline worker platform focused on creating productive work environments

6. DemandJump ($6 million deal): Marketing strategy platform showing you the exact content to create to increase first-page rankings and drive SEO outcomes

7. Engage Talent ($3 million deal): AI-powered recruiting platform that helps companies identify and target new talent

8. Losant ($5.20 million deal): Enterprise IoT enablement platform that allows enterprises to effectively build applications that scale securely

Vance’s stances

• Has advocated for breaking up big tech, specifically Google and Meta

• Supports a broader approach to antitrust/M&A enforcement beyond the traditional consumer welfare standard, accounting for consumer choice, quality of goods, and labor impact

• Is skeptical of AI regulation, supporting the open-source realm and focusing on innovation

• Advocates for a more permissive stance on cryptocurrency regulation, and voted to overturn the SEC’s guidance on how banks should handle customers’ crypto assets

• Has praised FTC Chair Lina Khan, calling her “the best person in the Biden administration”

• Co-introduced the “Stop Subsidizing Giant Mergers Act,” aiming to end tax-free treatment for tech behemoths in the acquisition process

Why this matters

The VC topic of the week is DPI (distributions to paid-in capital). DPI is the cash that VCs “return” to their own investors. It’s the true metric of a fund’s performance, as ultimately, a return-on-investment is what you get out compared to what you get in. That’s it.

Other metrics—IRR (internal rate of return), TVPI (total value to paid-in capital, basically the fund’s valuation)—are only proxies for performance. They’re useful intermittent metrics because funds take many years to distribute returns (DPI) to investors.

A fund’s TVPI can be amazing, but if nobody is willing to buy the portfolio companies, and the IPO market is closed, the TVPI is meaningless. There is no path to returning money to investors, which is what a return is, by first principles.

Industry-wide DPI metrics are extremely disappointing.

To return money, VCs need a strong exit landscape.

• An IPO market with liquidity, buy-side demand, strong valuations, and upward momentum

• An M&A market with minimal acquisition blockage, allowing companies to exit by being acquired

Lina Khan has been ferocious in her attacks on M&A. And, JD Vance has been a notable supporter of her’s.

VCs need both sides of the regulatory coin.

• Strict regulation against big companies, so their portfolio companies can fairly compete against incumbents

• Moderate regulation against big companies’ acquisition attempts to allow their portfolio companies to exit (by being acquired)

It seems that JD Vance, as an early-stage investor himself, is a sigh of relief for fellow early-stage investors. Late-stage ventures would still struggle for exits, though lower interest rates and economic tailwinds would help wondrously.

ELECTION UPDATE

Polling and Predictions

Currently, Kamala Harris is the overwhelming favorite for receiving the 2024 democratic presidential nomination.

According to prediction markets, the odds for the presidential win itself (across parties) following Joe Biden’s announcement are as follows.

Kamala, as the nominee, will need a VP. According to prediction markets, the odds for her VP pick are as follows.

I can’t wait to see where this goes.

WHO WE ARE

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Last week, we dove into the VC implications of a Trump presidency.

As you know, we’re hell-bent on uncovering future unicorns cruising under the radar. Preeminent companies are lean, quiet, and driven before reaching their watershed moments. By the time people start talking about them, it’s too late.

You won’t get editions from us very often. Weekly at best. Two reasons:

1. We’re balancing full-time VC/startup work with Return the Fund.

2. We prioritize depth, insight, and value. This is not a daily news publication… We hope that when you do get an email from us, it’s dense, valuable, actionable, and worth saving.

Thanks for reading today’s RTF. Feel free to reach out to us at [email protected]. 🤝 

Psst: None of our company picks are ever sponsored. All research and opinions are completely held by the Return the Fund team.