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Highlights from the HedgePo conference

In late October, I had the opportunity to speak at (and attend) a CIO Summit in Gleneagles, Scotland, which was put on by HedgePo.  (HedgePo itself is a startup that connects investors and family offices with a vast field of investment opportunities.)  All of the talks were 20-minute “TED”-style talks, and many of them were quite interesting!  In my talk, I spoke a bit on how Techstars evaluates the very early stage companies that apply to our programs.  But I wanted to provide a little re-cap of some of the more thought-provoking talks I saw.

Phil Carson – former SVP of Atlantic Records

Simply put, Phil Carson is a legend in the music business.  He personally signed AC/DC to Atlantic Records, toured the world with Led Zeppelin (coordinating promotion of their albums), and has managed artists like Robert Plant, Jimmy Page, Foreigner, and Ronnie Wood.  He was close colleagues with the Atlantic Records founder (Ahmet Ertegun) and promoted the Ahmet Ertegun tribute concert at the O2 in London… you know, the one where Led Zeppelin played a full set for the first time since John Bonham died?

I had the chance to speak with Phil at a dinner before the main conference began, and he’s just a wealth of data and stories about the music industry.  We talked about Led Zeppelin recording their first album at Olympic Studios in London, and how Taylor Swift will have been the only artist to sell over a million records in all of 2014.  And if she didn’t, it would have been the first time in decades that no one would have sold a million records in a year.

In his talk, he gave a little more background on signing AC/DC.  They were an Australian band, but Australian artists at the time had very little (if any) success outside of Australia.  One of the female assistants who worked for Phil at Atlantic Records had a brother who managed them in Australia, and convinced him to consider signing the band.  After checking out a primitive video of AC/DC performing, he signed the band to a 15 album deal for just $25,000.  (Phil claimed it was the most profitable record deal ever!)  As he said, “There is money in the record business… you just need a pretty girl to give it to you.”

Phil also gave some great perspective about how the user experience in the music business has changed.  In the 1950’s a single cost 99 cents, which equates to about $8-9 in today’s money.  But they still only cost about 99 cents, so artists are making much less money from album sales.  At the same time, the tour revenue for top artists is going up massively.  But overall Phil is actually fairly negative about the record industry.  As he titled the talk, “The Music Business is Alive & Well, and Living in 1947”.

Professor Tim Jenkinson – Professor of Finance, University of Oxford

Professor Jenkinson talked quite a bit about the performance of private equity and venture capital funds.  He’s co-author of the paper “Private Equity Performance: What do we know?” which is the data from which he based his talk.

But out of all the data he shared and conclusions he made, one stuck out to me massively: if an investor were to invest in every first time venture capital fund, that portfolio’s performance would be top quartile among venture funds.  The illustrates the fascinating dynamics in venture investing.  First time funds have a hard time raising money from LPs because they have no track record.  But those that do appear to do particularly well in their first fund, perhaps because their first fund sets a massive benchmark for their ability to survive in the future.  So while any individual first-time fund looks even riskier than average, collectively they perform very well.

Professor Mark Most – Maastricht University

Professor Post’s talk blew my mind a little bit.  If you search for his name, you’ll see quite a few results with his research.  He and his team have developed a way to “grow” meat in-vitro.  The impact of this is transformational… in today’s world, a huge amount of resources around the world go toward meat production.  Vast acreage of farmland go just to growing food that will be fed to cattle, and the cattle themselves take up large tracts of land in addition to consuming that food.

The technology Professor Post has created takes a small biopsy of muscle from a cow, and then replicates that to “grow” meat.  The meat is literally the exact same genetically as the cow it was taken from.  Right now, they are only able to replicate the meat, which means that the traditional fat in the meat doesn’t exist.  That’s the next step in their development of the technology.

Professor Post estimates that this method of creating meat will be production-ready in 10 years.  Even if you’re pessimistic on timelines or cost, it is very feasible that in a generation the entire meat industry will be transformed.  This could mean that hundreds of thousands to millions of acres of farmland would open up for other crops.  It could mean the loss of thousands (or tens of thousands) of jobs across the supply chain from farm to table.  But all of that said, it still strikes me as a hugely positive step for society, particularly as rapidly growing societies (China, for one) consume more and more resources.  This technology could radically reduce the resources required to maintain our existing standard of living, and I think that’s a very good thing.

Scott Jacobs – Generate Capital

Scott was a co-founder of McKinsey & Company’s global CleanTech practice, and is now a cleantech investor.  He was clearly a very smart guy, and talked about how many cleantech investment opportunities are isolated and treated in silos, such as solar energy or wind energy, etc.  But really, all of these environmental risks are correlated, and that thematic investment across sectors makes much more sense in the world of sustainability.

Gregory Perdon – Co-CIO of Arbuthnot Latham

Gregory’s talk piqued my interest because he spoke about something I knew nothing about: the housing market in Denmark.  He provided some persuasive data as to why Denmark’s housing market is f**ked, calling it a “fake haven” instead of a “safe haven”.  Apparently this particular market has been stable for many, many years but recent regulation and market movements have actually caused severe problems in its foundation.  The Q&A after this talk was also memorable when one of the academics in the audience asked him, “If you’re so smart, why aren’t you rich?”.  He replied first “How do you know I’m not rich?”, quickly followed up by stating that he and his firm believed strongly in the thesis he presented, and that they had made trades such that if they were correct they stood to make quite a lot of money.

Dr. Ayo Salami – CIO of the Duet Africa Opportunities Fund

Dr. Salami gave the most passionate talk of the entire conference, and I was massively impressed by him.  He packed in a lot of content and data, but the fundamental message was that Africa is on the rise.  He also beat the message into people that Africa is not one market or country, and in addition to that, African countries are not correlated!  Unlike Europe, where economies are highly linked, that isn’t the case in Africa.  You can have one country with a chaotic economy right next door to a country with a very modern economy, and they fundamentally don’t affect each other.

Instead of summarising his talk, I’d just suggest that you watch it in the embedded video here:

Finally, I’d like to say thank you to the three other “startup” speakers at the event:

All three of these guys has lots of good things to say; I just took fewer notes since their messages were familiar to me.