Thoughts

Some thoughts on risk arbitrage

Mike Kwatinetz Stocks, Thoughts , ,

I promised a new post within 3 weeks of the last one. It’s here…but is different than originally planned! Several recent M&A events have motivated me to try to explain some basics on what happens to associated stocks in such a situation, the most recent being the Zoom acquisition of Five9. If the acquisition is a stock for stock transaction (as the Zoom one is), the acquirors stock will usually decline in price right after the announcement of the deal.  The reason for the inevitable next day decline of the acquirer’s stock can be misunderstood. In this post I will explain why the decline has little to do with investors reaction to the quality of the acquisition.

What happens when a stock for stock acquisition of a public company is announced?

When a public company offers to acquire another, it is quite usual for the offer to be at a premium to the current stock price of the target company. Without a premium there is little motivation for the target company to accept the offer, and it can create a legal issue – as class action attorneys are vigilant to find opportunities to sue and can claim that the target sold out too “cheaply”.

Assuming the number of shares involved is a material amount, then once the deal is made public, the stock of the acquirer will almost always decline the next day while the target’s price rises. The press often interprets this as “The Street” being negative on the acquisition, when in fact it has little to do with a critique of the deal. Instead, it stems from “Risk Arbitrage” where arbitragers will short the acquirer’s stock and buy the target’s stock to create a certain profit if the acquisition is consummated. To illustrate this, I will use an easy-to-understand example:

Suppose Company A is trading at $100/share and then offers to acquire Company B (trading at $60/share). Suppose the offer is one share of Company A stock for each share of Company B stock. At these prices an arbitrager can:

  1. Buy Company B stock at $60/share – this equates to buying Company A stock at a discount if and when the deal closes since each share of B will then convert to one share of A
  2. Short Company A stock and receive $100/share

The net result is a gain of $40/share assuming the deal consummates. This occurs because when the share of B is converted to a share of A it can be used to cover the short position without the arbitrager spending any money. The Arbitrager will continue to do this as long as there is a gap between the prices of the shares. Given the number of shares being sold, A’s stock price will usually fall (the next day) and B’s will rise until it is virtually equal to A’s price on an as converted basis. The difference once this reaches equilibrium is the “risk premium”.

The reason it’s called “Risk Arbitrage” is that if the deal falls apart money could be lost. Therefore, a smart arbitrager will assign a risk premium based on his or her assessment of the probability that the deal will break. Once the 2 stocks are in sync, they will continue to trade in sync with the difference in prices being the risk premium. This will probably mean that the acquirer’s stock will return to around its prior price a few days later plus or minus its normal fluctuation, and the premium or discount assigned by investors to the deal.

Using Zoom Acquisition of Five9 as a Real Example

For an actual example, lets review the Zoom acquisition of Five9 announced on Sunday July 18, 2021. The agreement was to exchange each share of Five9 for 0.5533 shares of Zoom. At the close of the market on Friday, July 16 (just before the announcement):

  1. Zoom shares were at $361.97 and Five9 shares were at $177.60
  2. The theoretic value of a Five9 share based on 0.5533 of a Zoom share was $200.28 a 13% premium to the July 16 Five9 share price.

By the close on Monday July 19, Zoom shares had declined to $354.20 and Five9 shares had increased in price to $188.12. I saw many articles interpreting the Zoom drop in price as investors being negative on the deal. However, I believe it was the result of the volume of Zoom stock shorted by arbitragers.

Since 0.5533 times the Zoom price of $354.20 is $195.98 there was still a discrepancy in the ratio between the two stocks versus the ultimate conversion multiple of 0.5533 since Five9 was trading at 4.01% lower than the exchange ratio implied it was worth. This meant that Arbitragers were initially assigning a 4.01% risk factor based on the odds the deal would close. Once the two stocks settled into the appropriate ratio they have traded in sync since (less the Risk Premium). The risk premium has declined slightly in the two weeks since the deal was announced as arbitragers began to assess a lower risk factor to the odds the deal would break.

This same pattern usually occurs each time a stock for stock transaction is announced. There is too much money to be made from the arbitrage if the two stocks don’t adjust based on the conversion ratio. Any time they get out of sync arbitragers will step in again. When they initiate a pair of transactions the combination of buying stock in the target and shorting stock in the acquirer generates an immediate profit in cash. In our example of Zoom if the stocks were still at the July 16 price a transaction could be:

  1. Buy 10,000 shares of Five9 at $177.60 at a cost of $1,776,000
  2. These shares would convert to 5,533 shares of Zoom when the acquisition closes
  3. Sell short 5,533 shares of Zoom at $361.97/share to receive $2,002,780
  4. Immediate cash to arbitrager = $2,002,780 – $1,776,000 = $226,780
  5. If and when the acquisition closes the arbitrager would net a profit of $226,780
  6. If the deal breaks there could be a loss as the Zoom share short would need to be covered and the Five9 shares sold. This is why there is a risk premium involved.

Of course, the July 16 prices disappeared quickly when the stocks opened on July 19 as the arbitragers begin to execute their transactions. But as long as the difference exceeded the risk premium, they continued to transact to realize an immediate cash return. Once equilibrium was reached arbitragers ceased transacting (unless the stocks were to get out of sync again).

Conclusion

If you own a stock making a major acquisition and its stock price drops the day after the transaction is announced, the drop is likely to be temporary. Of course, there are situations where investors actually are so negative towards the transaction that the acquirer stock does not recover, but the first day drop usually has little to do with that.   

Random Thoughts as I Shelter in Place

Mike Kwatinetz covid-19, Stocks, Thoughts , ,

This post will be more of a stream of consciousness rather than one of focus on a topic.

Sheltering in Place

My wife, Michelle, and I have obeyed the order to “shelter in place” by staying at home except for walks outside (avoiding going within 6 feet of anyone). The order started in San Mateo County at 12:01 AM on March 17.  Our last time being in close proximity with anyone was Friday March 13, so we’re getting close to knowing we are virus free. We stocked up on food a day before the order began and have already had one “Instacart” delivery as well. Not sure what you are all doing but we have called a number of family members and friends to make sure they are ok – times like this make you want to verify the health of others! We also had to cancel vacation plans – which happened in steps as fear of the virus increased. We had scheduled a trip that included visiting Cabo followed by some time with good friends/cousins in Arizona.

I was scheduled to have my annual checkup before the trip, but 2 days before my doctor called to tell me not to come. It seems that the building he is located in is a center for virus testing and he thought it made no sense to have unneeded exposure. During the course of the conversation I mentioned we would be leaving for Cabo on Thursday, March 19 and he immediately warned me not to go. While I don’t want to be compared to the premier of Italy who initially told people to ignore the risk, at the time I felt the risk was overblown (as long as I was careful in Cabo). My doctor made an impossible to refute point saying: “What if you couldn’t get back because of a lockdown. Wouldn’t you rather be in the vicinity of Stanford Hospital if anything happened instead of in Mexico?” Hard to argue with that, so we decided to fly directly to Arizona instead. As flying became a risky option, we next thought we might drive to Arizona. Finally, we decided it was best to postpone the vacation. I’m guessing some of you went through a similar gradual awakening to the degree of risk.

Still Partying

Michelle and I truly enjoy the company of others. Staying at home precludes that, at least in the normal way…but then Zoom came to the rescue! We have had two “Zoom cocktail parties.” The first was more formal so everyone dressed up (I wore a wild Shinesty tuxedo and Michelle a matching outfit). Each couple at this virtual party had their drink of choice in front of them as well as appetizers. A few days later, Michelle and I hosted a similar party after becoming paying subscribers for Zoom. At our party we asked people to dress business casual. The benefit of requiring some higher level of dress than jeans is that it makes one feel (almost) like they are out partying.  Each party lasted a little over one hour and the conversation was pretty lively. Of course, the first 10-15 minutes were all about the impact of the virus, but then the conversation rotated through a number of less depressing subjects.

We now have been invited to a virtual dinner party by the first group host and we are planning a winery hosted party for the second group. Not sure, but in all likelihood, we’ll also work on setting up a third group. If we are still in this situation when Passover arrives, we will have our traditional seder (for 20 people) via Zoom.

 

Our Crossword Puzzle Tradition Continues

My family has been jointly solving the NY Times crossword puzzles for many years. More recently our grandson has not only joined in but become pretty prolific. On a typical Sunday we meet our daughter, son-in-law and their two kids for brunch and do the famous NY Times Sunday puzzle. If our son is in town, he also joins us. The only difficulty is that we each have our own copy, either on an iPhone or physical printout, so coordinating is a bit more difficult. This past weekend that tradition was replaced by doing it together over brunch at each of our homes. Once again, a Zoom conference call was the method of joining together. An added benefit was that, using Zoom, the puzzle was up on each of our large screens for all of us to share one version, and we actually finished in one of our fastest times ever!

The Wild Stock Market

As you know, at the beginning of each year I select stocks to invest in. One point I continue to make is that my picks tend to be high beta stocks so they might depreciate disproportionately in a down market. With the S&P down about 25%, this is certainly bear territory, but this is not your ordinary down market as the virus impacts different companies in different ways. I have been most fortunate in that 3 of my 6 selections, Zoom, Amazon and Docusign, should benefit from the virus. Zoom is the most obvious and this has not been lost on investors, as the stock as of this writing (March 24) is up almost 90% year to date. Of course, given the substantial day to day fluctuations this might not be the case by the time this blog is posted. Docusign should also be a major beneficiary of an increase in the number of people who work at home as its electronic document signing technology increases in importance (I’ve already had a major increase in e-signing in this past week at home). Amazon is having trouble keeping up with demand since most people have decided to rely on home delivery for fulfilling their needs. A fourth stock, Tesla is also ahead 21% year to date, but its stock has been impacted by the virus as it was up over 100% before the virus impact was felt. The other 2 stocks in my picks, Facebook and Stitch Fix, are down quite a bit but I still expect them to recover by year end despite the fact that Facebook should have lower revenue than previously forecast (advertising budgets will be cut) and Stitch Fix likely will also miss prior forecasts since people not leaving their homes are less likely to be buying a lot of new clothes – but whatever they do buy will be online (partly offsetting a reduction of total spending on new clothes).

Is it a good time to be buying stocks and/or munis?

In my last post I reminded you that the best strategy for making money in the stock market is to “Buy Low Sell High”. While this seems silly to even say, people have difficulty buying low as that is when the most fear exists (or the market wouldn’t be low). While there is danger that the impact of the virus could trigger a weak economy for at least this year, I still believe this is now mostly factored into the market and have been buying after days of large market declines. Don’t do this indiscriminately, as some companies (think physical retailers for example) may be permanently impaired, but others may also benefit from what is taking place. Still others will recover and their stocks are now trading at attractive prices. What has surprised me is there has also been an opportunity to buy munis at good rates of return (3.8% to over 4% for A or better rated bonds with 8 or more years to call/maturity). But this was only available to me on Schwab (not on several large well-known brokerage houses I use). It seems the panic for liquidity has led to better than expected returns despite 10-year Treasuries dropping to 1.02% from 2.41% a year ago. However, it also seems that several of the larger brokerage firms are not passing these returns through to their customers. Once the current “panic” situation passes (say 3 months from now) tax-free bonds with 10 years or less to call should be yielding under 2% annualized return to call leading to substantial appreciation of munis acquired at a much higher rate.

We need a Sports Interlude

Since sports are at a standstill my usual analysis of performance seems out of context. Instead I wanted to suggest something I have been thinking about for the last few months – how to punish the Houston Astros for their cheating. Given the mounting disapproval of the Baseball Commissioners lack of action perhaps he will even adopt my suggestion (of course he may never even hear of it). It’s a simple one that is the mirror image of the advantage the Astros created by stealing signs (through use of technology) in their home playoff games for about 3 years. My answer is to take away at least one home game from them in every playoff series they are in (including the World Series) for the next 3 years. If it’s a one game series, they would always play at the other team’s park. If it’s a 5-game series, they would at most have one home game, and in a 7-game series at most 2 home games. While this would not totally make up for what they did, it would at least somewhat even the playing field (no pun intended).

Back to the Virus

Given all the sacrifices many are making by sheltering in place, it should be easy to expect an immediate decline in the number of new cases. Unfortunately, the incubation period for the virus is estimated to be up to 14 days. We also have under-tested so there are more people who have it than the statistics show. With increased testing more of the actual cases will be detected. When these two factoids are combined, even if there was zero spread of the virus once the stringent asks were put in place, we would still continue to see many new cases during the 14-day period and the number would be further increased by improved testing. Unfortunately, not everyone is behaving perfectly so while I would expect (hope) that in each geography we would see substantial reduction in the number of new cases after 2 weeks of sheltering in place, the number won’t get to zero. It should take a drop but getting to zero could take much longer especially considering that part of the process to fix things still exposes medical professionals, delivery people, and more to becoming carriers of the virus.

What should Companies do to Protect their Futures?

There are a number of steps every company needs to consider in reacting to the threat posed by the virus to both health and the economy. At Azure we have been advising our portfolio companies to consider all of them. They include:

  1. First and foremost, make sure you protect your employee’s health by having them work remotely if at all possible.
  2. Draw down bank lines completely to increase liquidity in the face of potential reduced revenue and earnings.
  3. Create new forecast models based on at least 3 scenarios of reduced revenue for varying periods of time. If you were anticipating a fundraise assume it will take longer to close.
  4. If modeling indicates additional risk, consider cutting whatever costs you possibly can including:
    1. A potential reduction in workforce – while this is unpleasant you need to think about insuring survival which means the remaining employees will have jobs
    2. Reduced compensation for founders and top executives possibly in exchange for additional options
    3. Negotiating with your landlord (for reduced or delayed rent) as well as other vendors
    4. Eliminating any unnecessary discretionary spending
    5. Evaluating the near-term ROAS (return on advertising spend). On the one hand, preserving capital may mean the need to cut if the payback period is more than a few months. On the other hand, since advertising cost is likely to be lower given reduced demand (for example the travel industry likely will completely shut down advertising as will physical retail) it is possible you may find that increasing marketing adds to cash flow!
  5. Think about how you might play offense – are there things you can offer new and/or existing customers to induce them to spend more time on your site or app (and perhaps increase buying) in this environment?

Stay Safe

While I was a sceptic regarding how pandemic this pandemic would be, I eventually realized that there was little downside in being more cautious. So please follow the guidelines in your area. It is easy to order just about anything online so going out to shop is an unnecessary risk. As they said in the Hunger Games: “May the odds be ever in your favor!” But, unlike the Hunger Games you can improve the odds.

The Warriors Ain’t Dead Yet!

Mike Kwatinetz Golden State Warriors, NBA, Sports, Thoughts , , , , ,

Why the team is still a contender

My long term readers know that every so often the blog wanders into the sports arena. In doing so, I apply the same type of analysis that I do for public stocks and for VC investments to sports, and usually, basketball. Given all the turmoil that has occurred in the NBA this off-season, including the Warriors losing Durant, Iguodala, Livingston, Cousins and several other players, I thought it would be interesting to evaluate the newly changed team. Both ESPN and CBS power rankings have them 7th in the West and 11th in the NBA. I find that an overreaction as the Warriors may have beaten the Raptors if Klay Thompson not been injured, they swept Portland, and won the last 2 Rockets games without Durant. At the time this drove a lot of chatter that the team might be better off without Durant (I disagree).

But rather then compare the revised roster to last year’s, it seems more closely matched with the 2014-15 team, as that was a championship team that did not include Kevin Durant. I will make 2 key assumptions:

  1. Klay Thompson will return by the end of February and be as effective as he was before his injury
  2. The Warriors will make the playoffs despite missing Thompson for the majority of the season

It all starts with Curry

A third key assumption that has been proven over and over again is that players that come to the Warriors usually perform better as they benefit from the “Curry Effect”, namely, getting more shots without having someone closely guarding them, (The Curry Effect), resulting in an average improved shooting percentage of over 5%. In all fairness, it really is the “Curry plus Thompson Effect” as the extreme focus on preventing the two of them from taking 3 point shots is what frees up others. It helps that Curry is unselfish and readily passes the ball when he is double or triple teamed. Thompson’s passing has improved substantially but since he gets his shot off so quickly, he has less need to pass it. Last year both shot over 40% from 3 despite defensive efforts focused on preventing each of them from taking those shots.

Starting Teams: 2019-20 vs 2014-15

Table 1

Curry, Thompson and Green, the heart and soul of the Warriors, all remain from the 2014-15 roster, and now are at their peaks. In the 2014-15 season when Green first became a starter, Curry was one year away from reaching his peak and Thompson was just coming into his own especially on defense. I believe each of them is better today then they were at that time. At his best, Bogut may have been better than Cauley-Stein, but by 2014 Bogut had been through a number of injuries. Last year Cauley-Stein averaged nearly double the points of 2014 Bogut (11.9 vs 6.3), took slightly more rebounds per game and was a better free throw shooter. Stein, much like Bogut, is also considered a solid pick setter and defender. Russell is someone who should benefit greatly from playing with Curry. Even without that, last season he averaged over twice as many points per game as 2014 Barnes (21.1 vs 10.1) which should take considerable pressure off Curry (and Klay when he returns). However, Barnes was a better defender in 2014 than Russell is today. I give the edge to all 5 starters on the 2019 starting team compared to the 5 that started in 2014-15.

Thompson may be the most underrated player in the league!

It’s unfortunate that Thompson was injured in game 6 of the 2019 finals as he was once again proving just how good he can be. Not only was he playing lockdown defense, but he also drove the offense in what has been referred to as a typical Klay game 6. In just 32 minutes, before getting injured, he scored 30 points on 83% effective shooting percentage (67% on 3s), went 10 for 10 on free throws, and had 5 rebounds and 2 steals. I believe Golden State, even without Durant, would have forced a game 7 if Thompson did not get injured.

It boggles my mind that one of the websites could refer to Thompson as “an average player” who did not merit a max contract. This is bordering on the ridiculous and has a lot to do with the fact that the most important measure of shooting, effective shooting percentage (where each 3 made counts as 1½ 2 point shots made) does not normally get reported (or even noticed). In Table 2, I list the top 31 scorers from last season (everyone who averaged at least 20 points per game) and rank them by effective shooting. Thompson is number 8 in effective shooting and number 3 in 3-point percentage among this group. So, if effective shooting percentage was regularly published, Thompson would show up consistently helping the perception of his value. When this is coupled with his being a third team all-defensive player (i.e., one of the top 15 defenders in the league) it appears clear that he should be considered one of the top 15 players in the league.

Table 2: Top Scorers 2018-2019 Season

6th Man 2019-20 vs 2014-15

Kevon Looney has emerged as a potential star in the works. While he may not yet be the defensive presence of Iguodala, he is getting close. His scoring per minute played was higher than Andre’s 2014-15 numbers and his rebounds per minute were more than twice as much. While Iguodala had greater presence and could run the team as well as assist others in scoring, Looney at least partly makes up for this in his ability to set screens. Looney also has a much higher effective shooting percentage (62.7% vs 54.0%) than Andre had in 2014-15. While Kevon doesn’t shoot 3s he gets many points by putting back offensive rebounds and dunking lob passes. Overall, I give the edge to Iguodala based on the Looney of last season but given Looney’s potential to improve this might be dead even in the coming one.

Rest of the Bench for the 2 teams

It is the bench that is hardest to evaluate. Unlike last year’s bench, the 2014-15 bench was quite strong which spawned the Warrior logo “Strength in Numbers”. It included quality veteran players like Leandro Barbosa, David Lee, Mareese Sprouts and Shaun Livingston, who was playing at a much higher level than last season. The four of these together averaged over 26 points per game.  This coming year’s bench is much younger and more athletic. It includes Alec Burks, Glenn Robinson, Alfonzo McKinnie and Omari Spellman, plus several rookies and Jacob Evans III. The first four are all capable of scoring and are solid 3-point shooters (they could increase to well above average once with the Warriors). I expect that group, coupled with one or two of the others, to exceed the 2014-15 bench in defense…but may not have as much scoring fire power. The team is likely to give one or two of the rookies as well as Evans opportunities to earn minutes as well. The bench is an improvement over last year but may not be as strong as the 2014-15 squads.

Overall Assessment

I believe the 2019-2020 squad is better than the championship team of 2015. The starting lineup features the core 3 players who have improved since then, D’Angelo Russell who was an all-star last year, and a solid center in Willie Cauley-Stein making the edge substantial. Looney as 6th man is already giving evidence of future stardom. While he was not quite the Andre Iguodala of 2014-15, the difference is modest, and Looney continues to improve. The 2014-15 bench appears superior to that of next season, but the edge is not great as the newer group should be stronger defensively and is not far off the older group as scorers – the question will be how well they gel and how much the Curry/Klay factor improves their scoring. Finally, I think Kerr is a better coach today than he was given the last 5 years of experience.

They May Have Improved vs 2014-15, but so has the Competition

ESPN and CBS power rankings reflect the fact that multiple teams have created new “super star” two-somes:

  • Lakers: Lebron and Anthony Davis
  • Clippers: Kawhi Leonard and Paul George
  • Houston: Harden and Westbrook (in place of Chris Paul)
  • Nets: Kyrie Irving and Durant

Contenders also include improving young teams like Boston, Philadelphia, Denver, and Utah plus an improved Portland squad. This makes the landscape much tougher than when the Warriors won their 2015 championship. Yet, none of these teams seem better than the Cleveland team (led by a younger LeBron, Kyrie Irving and Kevin Love) the Warriors beat in 2015. So, assuming Klay returns by late February and is back to par, I believe the Warriors will remain strong contenders given the starting team with four all-stars augmented by Willie Cauley-Stein and an improving Kevon Looney as 6th man. However, it will be much tougher going in the early rounds in the playoffs, making getting to the finals longer odds than in each of the past 5 years.

SoundBytes

  1. An examination of Table 2 reveals several interesting facts:
  2. Curry, once again is the leader among top scorers in effective shooting and the only one over 60%
  3. Antetokounmpo is only slightly behind despite being a very poor 3-point shooter. If he can improve his distance shooting, he may become unstoppable
  4. Russell Westbrook, once again, had the worst effective shooting percent of anyone who averaged 20 points or more. In fact, he was significantly below the league average. Part of the reason is despite being a very poor 3-point shooter he continues to take too many distance shots. Whereas most players find that taking 3s increases their effective shooting percent, for Westbrook it lowers it. I haven’t been able to check this, but one broadcaster stated that he has the lowest 3-point percentage of any player in history that has taken over 2500 3-point shots!
  5. I believe that Westbrook has a diminished chance to accumulate as many triple doubles next season as he has in the past. There is only one ball and both he and Harden tend to hold it most of the time. When Chris Paul came to the Rockets his assists per game decreased by about 15% compared to his prior 3 season average.

The Importance of Lifelong Relationships

Mike Kwatinetz Thoughts

At my son’s convocation at Wharton, the incoming MBA class was asked to write the names of their five best friends on the left side of a page and then the five people with whom they would most want to start a business on the right side of a page. The lesson was that the key to success in business was to develop relationships so that the future version of that piece of paper would have as many overlapping names as possible on both sides of the page.

Earlier this summer, I was invited to speak to Brooklyn College’s 2016 graduating class. I wanted to emphasize the importance of lifelong relationships for personal and business success. For me, Brooklyn College was foundational to so many of my most important relationships. It is where I met my beautiful, brilliant wife Michelle as well as eight couples who all attended my son’s wedding late last year. As we wrapped up our 10th Annual Azure CEO Summit, I was humbled to see so many familiar faces that may have started as business acquaintances but have now become close friends. As I reflect on the importance of these lifelong relationships, I wanted to share my speech to the Brooklyn College’s Class of 2016.

Good Morning, President Gould, distinguished faculty, parents, and especially – the fabulous graduating class of 2016! It’s a great pleasure to be back in Brooklyn to greet you all today, as I now live in what’s known as Silicon Valley, California.

I want to focus on three things:

  1. Make sure your friends from Brooklyn College become friends for life.
  2. College is only the beginning of your education, post-college you must continue to learn or you will be left behind.
  3. Never forget that Brooklyn College helps people move up in society.

My beautiful, brilliant wife, who I met at Brooklyn College, is also here today. We recently celebrated our son’s wedding. One of the highlights was there were 8 couples attending where the origin of the relationship stemmed from our school days. And make no mistake about it; there is a difference in the depth of the relationship when you know someone from that early in life. So my first advice is: “Make sure you stay in touch with those you really care about from college”

Brooklyn College is for people who work hard, are smart and typically couldn’t have afforded to go to college were CUNY not available

It helps people move up in society

The close friends I met here all had parents with modest incomes. Yet, we are all very successful financially –but more importantly –in life.

In my case, my father was an immigrant who came through Ellis Island. He had to go to work and couldn’t even attend high school. My mother, the daughter of an immigrant, did have the opportunity to finish high school.

Brooklyn College allowed me to be part of the first generation from my family that could afford college. And it provided as good an education as any school in the country!

I became the CEO of a successful startup and then went to Wall Street where I became the Number 1 Analyst following the PC space, and after 10 years left Wall Street to co-found a Venture Capital firm. 

The trick for you to replicate what my friends from College and I have achieved is to leverage this great education and your superior intelligence beyond college. Senator Schumer mentioned the advantage you have because you know today’s technology. This advantage is ephemeral. Whether you’re going to grad school or straight to a job my second bit of advice is:

Never take anything for granted, the world is changing at an increasingly rapid pace. Within 5 years all that you know regarding technology will likely be obsolete. To keep up you must always continue to learn. That coupled with working hard is the way you will succeed beyond college.

Many of you may have noticed that governmental support for CUNY is diminishing and could impact the school. “So, once you do succeed, as I know you will, remember to give back to Brooklyn College so the next generation that wants to move up in society has the same opportunity as you

Thank you and congratulations.

Soundbytes

  • Speaking of long term relationships, I am both happy and sad to note that Dan Park, my editor and collaborator for SoundBytes is leaving his full-time position at Azure to take a senior operating role at Uber Canada. I’m happy for him but sad not to have him continue full-time at Azure. Fortunately, he has agreed to remain as an Azure Venture partner and to continue to work with me on this blog.