Amit Raizada Finance Archives | Amit Raizada | amitraizada.com (2024)

In my more than twenty years as a venture capitalist and entrepreneur, I’ve always felt a strong affinity for the restaurant industry. I’m a foodie at heart, and I love being able to back the ventures that help share the wonders of food with the world.

Restaurants have always comprised a significant portion of my investment portfolio—and, as such, I write a lot about the industry. Back in February, I wrote an article about developing successful restaurants in which I stated that restaurants should work to cultivate a unique atmosphere and embody a certain energy.

Wow—to think how much has changed in the last ten months! Little did I know that no less than a month after writing that piece, restaurants around the country would be asked to close their doors upon the coronavirus’ arrival in the United States. Little did I know that most of these restaurants would go months without accommodating a single dine-in customer, that proprietors would need to devise a wholesale transition to patio dining just to stay afloat, and that millions of hospitality workers would soon lose their jobs.

The restaurant industry has been turned upside down in the time since I wrote that piece.

Now, restauranteurs and investors are constrained by a national patchwork of regulations and restrictions. In some states, restaurants are operating almost as normal. In others, like California—one of the nation’s culinary capitals—restaurateurs have been on a rollercoaster ride.

After only being permitted to offer take-out dining in the spring, most restaurants were able to accommodate outdoor dining during the summer months. Proprietors spent large sums of money on tarps, decks, and furniture to build attractive outdoor patios for diners. In late November, amid a nationwide surge in cases, outdoor dining was shuttered across the Golden State, leaving restaurants to pivot back to take-out only models.

As this troublesome year winds down, I wanted to share a few thoughts I’ve had about the restaurant industry, where it’s been, where it’s going, and how it can make the most of this inauspicious situation.

FOCUS WHAT YOU CAN DO

The COVID-19 pandemic has significantly constrained restaurants’ ability to operate in a normal capacity. While many of these restrictions are necessary to slow the spread of the virus and ultimately save lives, it benefits restaurateurs to focus less on what they cannot do and more on ways to maximize what they can still do.

In states like California, the answer may be that restaurants are only permitted to fulfill take-out or to-go orders. In other markets, restaurants may be able to accommodate the public on outdoor patios. Whatever the restrictions in your municipality may be, discern which functions are still permissible and leverage those to the best of your ability.

CREATE NOVELTY

In earlier iterations of my musings on restaurants, I wrote that proprietors should focus on cultivating within their establishment a unique and trendy atmosphere that transforms dining at your restaurant into a sharable, unique experience.

While new restrictions have recharted the ways in which this is possible, I encourage restaurateurs to figure out how to make eating at their establishments feel like a novelty—and something worth sharing with family and friends—during the pandemic.

This could involve a pivot in service or recalibrating your cuisine to better meet the needs of a pandemic era-crowd. Developing ambiance during a pandemic is far easier said than done, but must nonetheless be a priority for restaurants adapting to this era of uncertainty.

THINGS WILL GET BETTER

I know that the last thing any struggling restauranteur wants to hear during these trying times is a platitude, but with the Pfizer and Moderna vaccines already being administered to the public, the restaurant industry looks ripe for a resurgence at some point in 2021.

When the clock struck midnight last January 1, no one could have foreseen the struggle and discord the proceeding 364 days would have in store for our society, the boom to Zoom & at home fitness companies like Peloton, and our country. But we’re here now, vaccines are on their way—keep your heads up.

As we begin to wrap up Q4, I can’t help but reflect on the state of the economy. After a whirlwind year that took us from business as usual in January and February to a spring, summer, and now winter mired in challenge and uncertainty, the caprices of the 2020 economy have left us in an interesting place.

While the markets have soared this week, their success belies the difficulties that many Americans still face. Millions remain out of work and countless others with few job prospects on the horizon.

There is, however, cause for cautious optimism. Pfizer and Moderna’s recent announcements that their COVID-19 vaccines have reached 90 and 94.5 percent efficacy, respectively, could spell an eventual return to normal.

With the year nearing its end, I wanted to recap a few thoughts I’ve had about the economy and the finance industry over the last year.

UNCERTAINTY

The last eight months have been defined by uncertainty, a feeling that is likely to continue until a vaccine is approved for mass use, scaled, and distributed to billions of global citizens. Uncertainty has a couple of effects.

For one, it causes investors to put their money in longer-term bids. Within the markets, this means betting on long-term assets like Treasury Bonds or even gold. Uncertainty also slows down economies. It also dissuades folks from making big purchases—like cars or houses—and slows down spending on consumer nondurables.

A few recent events have, at least somewhat, chipped away at our nation’s collective sense of uncertainty. The news about the potential COVID-19 drugs and the conclusion of the presidential election have helped flesh out a more tangible picture of 2021. While things are still far from normal, these events are helping reduce global and national uncertainty.

LOW INTEREST RATES

In mid-March, the economy looked dire. To bolster the rapidly declining economy, the United States Federal Reserve embarked on an expansionary monetary policy in March, lowering interest rates to near zero and purchasing securities to flood the country’s money supply.

Low interest rates incentivize economic activity by making it easier to borrow money, which lowers barriers to home-ownership and investment. Low interest rates have helped propel the stock market’s robust growth during this otherwise dreary chapter in our nation’s economic history. Federal Reserve Chair Jerome Powell has signaled that the central bank is reluctant to raise interest rates once again—a motion sure to keep the market on its current track.

With interest rates remaining at historic lows, many aspiring investors are looking to enter the market. I do caution aspiring investors, though, to look for the opportunities and ventures that will transform our economy in the long-run—the ventures operating at the cutting edge of technology, offering innovations once thought impossible. These ventures are far more lucrative—and rewarding—than investing in short-term IPOs.

LIVING HISTORY

Peruse any college economics syllabus right now and you are sure to find at least one lecture on the Great Depression—its causes, its effects, and its legacy. A century from now, I wouldn’t be surprised if March 2020 occupied a similar position of scholarly and cultural intrigue.

One year ago, our biggest worries when it came to the economy were slowing rates of economic growth in Germany and China and the Fed’s decision to cut interest rates by 0.25 percent (25 basis points, as investors would say). Who could have seen that an unprecedented global pandemic would grind the world economy to a complete and utter halt in just a few days?

Now, trillions in stimulus spending and millions of lost jobs later, we find ourselves celebrating Thanksgiving and the Holidays in one of the most peculiar economic situations in our nation’s history. While I have no doubt we will recover and continue to drive innovation throughout the twenty-first century, the end of this long year offers a moment of reflection—and I’d be remiss not to acknowledge this last year’s challenges.

Just four months ago, I published an article on this very same blog detailing the books that have helped shape my investment philosophy. Since that time, the world has changed inexorably. Wildfires and hurricanes have ravaged large swaths of the country, protests against racial inequities have sparked a national conversation reckoning, and the coronavirus continues to kill Americans.

Economically, we have experienced both highs and lows. The stock market has oscillated between the bull and the bear, ultimately siding with the former. Congress has balked at the prospect of passing another fiscal stimulus package. Businesses around the country remain closed entirely or operating under significant restrictions.

Aspiring investors are facing a gauntlet.

As CEO and Founder of Spectrum Business Ventures, though, I’ve always sought to see the world differently, to discover lucrative ventures stepped in innovation where others see losses. During this difficult time, I strenuously encourage aspiring investors to think similarly.

As I’ve said before, one does not need an MBA from Wharton or Harvard to find success in venture capital and investing. Often, the most successful investors hone their philosophies and approaches by combining the lessons they’ve learned in the classroom with those derived from real life, hands-on experience. This list aims to help give you the first part of the equation. Equipped with new strategies and shifted mindsets, it’s up to you to put the second component into motion.

Think and Grow Rich by Napoleon Hill

Napoleon Hill published his magnum opus during the Great Depression. With millions of Americans out of work, his work—unfortunately—takes on a new resonance when read under these current conditions.

Inspired by his conversations with legendary entrepreneur Andrew Carnegie, Hill’s book propounds a series of principles, which he dubs “laws,” that induce success and invite prosperity. Hill argues that maintaining a positive mindset, defined by perseverance and desire, creates a positive feedback loop that begets success.

I’ve always sought to advance a similar philosophy. Shrewd investments are the result of a mental acuity spurred by measured confidence and determination. Mindset is integral to investment. Hill got this right more than 80 years ago, it’s time for us to apply it now.

Tools of the Titans by Timothy Ferriss

Sometimes, to join the best, you have to learn from the best.

That’s exactly what New York Times bestselling author Timothy Ferriss seeks to do in Tools of the Titans, a collection of wisdom derived from his more than 200 interviews with the world’s leading business, athletic, political, and artistic minds. In taking these lessons from the globe’s luminaries, Ferriss attempts to distill the essence of success.

I urge aspiring investors to closely read this work and evaluate how they can apply these principles to their pursuit of innovative, profitable ventures.

The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution by Gregory Zuckerman

Zuckerman’s book is another masterclass in learning from the best. Lauded by the Financial Times, The Man Who Solved the Market examines the rise of Jim Simons, the multibillionaire Wall Street financier who perennially delivers unthinkably high returns to his investors.

Zuckerman looks at how Simons’ background in mathematics helped him see opportunities and ventures differently. This mirrors the approach we employ at Spectrum Business Ventures, where we strive to invest in innovative opportunities in nascent markets. Like Simons, we believe in closely monitoring data and emerging market trends to gain footholds in the markets of the future.

With so much going on in the world, I find it comforting to turn to wisdom and ideas for some respite. I hope aspiring investors will take these recommendations to heart and seek ways to imbue their investment philosophies with the many great strategies, lessons, and outlooks articulated by these authors.

If you have been paying attention to the stock market at all these last few months, odds are that you’ve seen skyrocketing IPOs that seem to defy all logic. Snowflake (SNOW) IPO’s at $120 a share, then closes at $254 after reaching $319 at its highs. Lemonade (LMND), a tech/insurance hybrid, opened its big day at $29 and traded to highs of $64—a 132% gain on the day. These are the kinds of jumps investors dream about seeing once a year, let alone in one day.

Even in the midst of the deepest economic crisis we’ve seen in decades, IPO’s are having a banner year. September was one of the best months on record for IPO funding, and all signals are pointing to an October defined by the same astronomic impact. In fact, IPO tracker Renaissance Capital found that IPOs this year are enjoying 2.5x more first-day pop than the historical average. These head-turning debuts are exactly what financial bloggers and stock market reporters salivate over, creating headlines that catch even the most casual investor’s attention. Pair that with the meteoric rise of easy-to-use online, app-based brokers like Robinhood—which has an $11 billion valuation itself—and you have a recipe for quick success (and in many cases, ensuing disaster).

Gains of this magnitude can paint a rosy picture over a rough canvas, highlighting the outliers while ignoring the true reality of the underlying economy. This primes amateur investors and get-rich-quickers to enter into IPOs purely based on the initial event, ignoring the inherent value of the company and long-run considerations. As I have frequently cautioned in the past, investing with a long-term time horizon in mind beats fast, speculative trades. Every. Single. Time.

As a venture capitalist and entrepreneur, I’ve long pursued opportunities in the economy of the future. At Spectrum Business Ventures, we see the world differently, closely monitoring the preferences of young consumers and emerging market trends to gain footholds in the firms and products that will come to define our economy in ten, fifteen, or twenty years—even if doing so means incurring short-term losses. I urge aspiring investors to do the same.

IPO deal hunters have the right idea—they just need to refine their approach. Investing in IPOs requires meticulous research and assiduous reading of market trends. Rather than funneling this energy into boom-and-bust stocks, though, look for the ventures promising to deliver innovation for the long-run.

FOMO-induced surges

The allure of 200 percent overnight gains has attracted many aspiring investors, and while some may have realized gains from these one-day pops, most are being dragged down by the subsequent crashes. As the legendary Jim Cramer says, you never have a gain until you actually take it.

Take hydrogen-powered vehicle company Nikola (NKLA), for example. After a significant run-up to $80 a share in early June, very shortly after its IPO, the stock now sits at a cool $24.15. This means that there are some people out there who got trapped at $80/share who are now sitting on nearly 75 percent losses. Those who bought at the top were not making decisions based on long-term considerations—they were jumping in on a short-lived rocket ride.

Shades of 2000-2002

The 2020 IPO landscape is demonstrating remarkable similarities to the tech melt-up of 2000-2002. Driven by simple online investing, unrestrained optimism, and manic buying, the current valuations of some tech stocks have soared through the roof.

I urge aspiring investors new to the stock market to look toward fair or underpriced businesses whose products or services have the potential to change the way we live. Some of these IPOs even have these traits, but make sure you are getting a good deal on any stock you get into. And if that means pinning the stock to your watchlist and buying in after a sharp decline, then waiting is the way to go.

Those in search of lucrative IPOs have the right idea—they’re searching, ultimately, for innovation. But I caution aspiring investors to look toward the long term. Search not for lucrative stocks to purchase for cheap and sell at a profit a few weeks later, search for the ventures and opportunities that are popular among young consumers and in emerging markets and that deliver innovative new products or services that improve peoples’ lives. Investing in these opportunities for the long-haul is when venture capital truly becomes worth it.