E146: Did the Fed break the VC model? Plus IPOs, M&A, revaluing unicorns & more

Health & Biohacking Trends

• Chamath Palihapitiya reports a personal record low weight of 169 lbs following cold plunge and sauna cycles.
• Palihapitiya conducts cold plunges at 56–58°F, dismissing temperatures below 50°F as unnecessary for health benefits.
• Palihapitiya and David Sacks confirm a preference for ending heat/cold cycles with cold exposure to boost energy levels.
• Palihapitiya reports high-end normal testosterone levels at age 52 and declines testosterone replacement therapy based on medical advice.
• Sacks warns against "off-menu" medical interventions like HGH or high-dose testosterone for men in their 50s and 60s, citing safety concerns despite availability to affluent individuals.

US Political Landscape & Candidate Analysis

• Polling data from September 18, 2023, indicates Trump leads at 39%, followed by Haley at 12%, Christie at 11%, and DeSantis at 10%.
• Chamath Palihapitiya anticipates Vivek Ramaswamy rising to become a clear second place contender in New Hampshire polls within 4–8 weeks.
• Palihapitiya expresses a preference for a debate between Vivek Ramaswamy and Donald Trump to assess fiscal responsibility and government reduction plans (specifically Ramaswamy's proposal to cut the federal government by 75%).
• Sacks categorizes candidates as "acceptable" (Ramaswamy, DeSantis) or "unacceptable" (those who would escalate the Ukraine war, potentially leading to World War III).
• Sacks argues that avoiding WWIII is the central litmus test for the campaign, prioritizing it over fiscal emergency concerns due to the president's unilateral power over foreign policy.
• Sacks contends that bipartisan support is required to address the US fiscal emergency, but notes a lack of political will to cut military or social spending in either party.
• Sacks predicts fiscal restraint will eventually be imposed externally by market forces (e.g., rising interest rates on refinancing debt) rather than through legislative action.

All In Summit 2023 Highlights

• The summit was praised for excluding "woke" social justice content, focusing instead on optimism, technology, and historical cycles.
• Key speakers identified as most intellectually stimulating included Ray Dalio (250-year empire cycles), Graham Allison (Cuban Missile Crisis insights), and Larry Summers (quotes on self-esteem).
• Bill Gurley's presentation received a four-minute standing ovation and is expected to go viral.
• Chamath Palihapitiya humorously complained about being booked in a handicap-accessible room with closet heights unsuitable for his stature, a logistical issue Sacks acknowledged as a "troll."
• David Sacks attended every talk and soundcheck, demonstrating high commitment to the event's production.

IPO Market Analysis & Valuation Resets

• Cisco announced the acquisition of Splunk for $20 billion in an all-cash deal, valued at roughly 10% of Cisco's market cap.
• Recent IPOs of Instacart, Klaviyo, and Arm occurred within one week, marking the end of a 21-month drought for significant venture-backed public listings.
• Chamath Palihapitiya criticizes the US IPO model for selling less than 10% of the float without anchor investors or lockup periods, leading to immediate price drops when retail and hedge funds sell.
• Sacks notes that Instacart's private valuation of $39 billion has collapsed to a market cap of approximately $8–9 billion, confirming investors should not expect a return to 2021 bubble valuations.
• Data from Ernst & Young shows 2023 IPO volume through June is roughly half the 2021 peak ($60B raised vs. $450B).
• Instacart's Series F investors (2018) underperformed the S&P 500 by a significant margin (13% return vs. 68%), while Series C investors (2015) generated ~32% alpha before recent valuations.
• Late-stage investors (Series F and beyond) in Instacart are currently "underwater" relative to the S&P 500 and issue prices, whereas seed investors generated massive returns.
• Sacks suggests Instacart is transitioning from an e-commerce model to an advertising business model, with ad revenue projected to reach $800 million annually.
• Klaviyo is identified as a key benchmark for SaaS, trading at ~12x forward revenue with 56% growth and 119% net revenue retention (NRR).
• A major vulnerability for Klaviyo is its 70% dependency on the Shopify platform, creating "existential risk" if Shopify integrates competing features.
• Airtable is highlighted as a company where the $1.4 billion in raised capital now exceeds the company's estimated current value, illustrating the "zombie unicorn" phenomenon.
• Sacks warns that companies like Airtable face a "nasty unwinding" of their cap tables, potentially requiring recapitalizations that wipe out founder and early employee equity.

Macroeconomics & Consumer Economy

• The Federal Reserve signaled "higher for longer" interest rates, pushing expectations for rate cuts out to late 2024 or 2025.
• Palihapitiya advises founders to ensure cash reserves last until Q1 2026, correcting his previous mid-2025 forecast.
• The economy has shifted from a regime of capital abundance to capital scarcity, with fewer companies getting funded and higher bar for venture returns.
• The B2B sector has experienced a "software recession" with growth forecasts for SaaS companies cut in half over the last year.
• Consumer spending has remained resilient but is showing signs of strain due to record credit card debt and mortgage rates approaching 8%.
• Auto industry analysts predict a $47 billion swing in profits for Ford if union demands for a four-day work week and wage hikes are met.
• High interest rates (7-8%) on auto loans combined with union wage demands may force uncompetitive legacy automakers out of the market in favor of non-unionized, automated rivals like Tesla.
• Larry Summers' analogy that "soft landings are like second marriages" is cited as the likely economic outcome of current rate hikes: recessions are the predictable result.
• Automation is identified as a long-term solution to labor shortages and high wage demands, as seen in the fast-food industry's shift to kiosks.

Science & Medicine Update

• A new study published in Nature by the University of Chicago demonstrates a novel therapy for autoimmune diseases using "inverse vaccines."
• The technique involves glycosylating (attaching sugar molecules to) specific antigens and injecting them into the liver to trigger regulatory T-cells.
• This process teaches the immune system to recognize specific proteins as "safe," thereby stopping the autoimmune attack (e.g., in Type 1 Diabetes and Multiple Sclerosis).
• Sacks notes this is a superior alternative to current treatments, which either involve broad immune suppression or prevention strategies that only work pre-symptom onset.
• The new modality targets the root cause of the immune system's misfire rather than just suppressing symptoms.