Leonard Tan
Level 6. Master
‧ 104 upvotes received
About

Leonard Tan's profile is not filled up yet.

Credentials

More

Leonard Tan's credentials are not filled up yet.

Top Contributor
Top Contributor
(Feb, Mar)
  • 136

    Answers

    Answers (136)

  • 4

    Questions

    Questions (4)

  • 0

    Reviews

    Reviews (0)

  • 2

    Topics

    Topics (2)

  • Asked by Anonymous

    Leonard Tan
    Leonard Tan
    Level 6. Master
    Answered on 22 Apr 2019
    Misconceptions 1. VCs get approached with pitches and business proposals they will read through before deciding whether to invest. A lot more goes into the work behind that. First of all, the more established your VC name, the greater inflow of investment proposals and pitch ideas. Not all VCs have the luxury of enough quality inflows and thus resort to researching and sourcing potentially promising companies to invest in.But it is true the idea must pique the VCs interest before they decide to consider and research further. It is simply inefficient and frankly impossible to evaluate every idea in depth. 2. VCs invest in companies purely based on their financial projections and ROI. VCs cannot simply trust financial projections of business proposals. Very often the VC already has a strong background understanding in their niche selected market and will still research further for things such as market sizing, competitors and their USP. Ultimately, VCs still prioritise the founding team both expertise and experience, product and service provided before lastly looking at financials. Therefore VCs going into the specific number projections are usually keen to invest to a certain extent already. The importance of ROI however is v important. I would recommend reading this as it explains the math very well https://hackernoon.com/vc-math-2848971a34a0. A summarised explaination: Based off Pareto Principle aka 80-20 rule, your returns are likely uneven and to come from the top 20% of portfolio companies. Therefore to hit their expected return to investors, VC funds must invest in a portfolio consisiting of more companies giving exceptionally higher multiple of returns for the law of numbers to work. And as the article states, there has been cases the author has rejected companies simply because they do not offer high enough promised returns, not because their business model or projections are poor.
  • Asked by Anonymous

    Leonard Tan
    Leonard Tan
    Level 6. Master
    Answered on 22 Apr 2019
    I would say it is really difficult to pick one or two. For one, you must look at various metrics to get a better understanding of the company and that is why people even bother looking at annual report in the first place. Metrics like Revenue, EPS, forward growth guidance are usually reported firsthand in quarterly releases already. In fact for US listed companies there are data crawlers that instantly extract the moment quarterly financial statements are out and to immediately prices in news releases to their DCF valuations. Therefore there is often no point trying to evaluate if stocks are correctly priced from a fundamental quantitative perspective. I would say it is more important to look at things outside of quarterly statements. While many people tend to focus on overarching metrics like P/B, EV/EBITDA and Sales/Revenue (esp for growth stocks). I would focus on yearly data aggregation through things such as revenue breakdown by geographical or product segment, in depth look at cashflow management of company and their exsiting ST and LT debt management.
  • Asked by Anonymous

    Leonard Tan
    Leonard Tan
    Level 6. Master
    Answered on 22 Apr 2019
    Having recently networked with some VCs and currently in interview stages for VCs abroad, I am more aware of the framework behind VCs decision process. Evaluation process 1. Background understanding VCs usually have specialized niche sectors they are more invested in and have prior background understanding. They are more likely to invest in these areas and are up to date with latest developments are startups here. 2. Business Proposal(ideally given) If it is the VC got approached, they likely have access to this document. 3. Self Research VCs look out for promising startups and new kids on the block here and do their own backend research especially if they seem promising 4. Business Proposal(request if not given) VCs can be the one to approach these startups for this. VCs can view their financial projections and fully evaluate their business model and strategy with this. Pre-emptive VCs can even draw up their own valuation and financial projections for the company. 5. Listen to founders pitch Get pitched for funding and clear up any doubts and queries. 6. Bang out financial projections and eventual valuation Can be done prior to Step 5 if VCs are quite committed to investing already. 7. Ultimate Decision Time VCs will convene with Founders on another occassion to negotiate terms of investment including preventing excessive dilution, liquidation preference, board seats etc. Bare in mind this is not a one size fits all industry structure and might vary across practices between startup cultures in diff countries.
  • Asked by Anonymous

    Leonard Tan
    Leonard Tan
    Level 6. Master
    Answered on 20 Apr 2019
    Quick Market Analysis: Grubhub was one of the first players in the food delivery industry, incorporated in 2004 and established a large foothold of market share. In the height of its peak growth years(shown below), it merged with competitor Seamless and IPOed in 2014, and acquired Yelp24 in 2017. Today with over 9.18 million active diners, almost 300K daily orders, 75K restaurant partners, and presence in over 1,100 cities across the US & the UK, Grub is still the biggest player in the food delivery industry. However, they have been facing recent strong competition in recent years from major rivals such as UberEATS and Doordash who have been tailored their offerings to differentiate themselves from Grub. Some current market trends: 1. Food Offerings . Many of Grub's smaller rivals have positioned themselves by bringing onboard unique food listings with restaurants not currently on other platforms. This differentiated especially done by DoorDash has been a major reason for their recent growth success. It is estimated its share has fallen from more than 50% to less than 40% over the last year. KeyBanc said Grubhub's diner retention fell from 59% in the first quarter to 36% in the third quarter, and competition is only likely to increase, with DoorDash fresh off a new funding round and Uber and Postmate preparing for their IPOs. 2. Declining Sustainable Competitive Advantages. Against the threat of rising competition, Grubhub is fending to retain its marketshare by increasing expenditure in marketing and other areas. Despite many restaurant partnerships and acquisition strategy, Grubhub has no true competitive advantage in the long run, which makes its valuation less attractive taking into account more uncertainty in future cashflows. Even comparing against UberEATS case, Uber can better leverage on their existing services to better market and also their ridehailing network of drivers in many cities and countries to minimise entry costs. Moreover, UberEATS has been the most profitable area for the Giant so far. We can expect them to invest more and grow much bigger with regards to food delivery services. TLDR: I believe Grubhub despite capable management and early market entry to have grown rapidly established its significant marketshare today, is no longer as attractive as what its once was due simply to the change in food delivery landscape. While it may be trading at significant discounts to its original price, I believe the price is reasonably justified given it is still trading 52x P/E ratios.
  • Asked by Anonymous

    Leonard Tan
    Leonard Tan
    Level 6. Master
    Answered on 19 Apr 2019
    Basically in essence, VIX is the expectations on volatility on the S&P500. In its derivation, I believe VIX is calculated over a 30 day range of put vs calls in SPX (S&P Index). I recommend you search up more online if you are curious. Here's a technical analysis chart on VIX I saw. Not sure exactly how credible this analysis is though(what specific indicators he based it off) TLDR: Wouldn't recommend longing or shorting VIX. You are essentially investing in the expectated volatility increasing/decreasing which is essentially market timing.
  • Asked by Anonymous

    Leonard Tan
    Leonard Tan
    Level 6. Master
    Answered on 19 Apr 2019
    I think this question is better answered from the context of US pharmacutical industry in the overall market cap of US equities. Notice how Health Care is the 4th largest sector in S&P500 behind IT, Financials and Consumer Discretionary. This is the invidual breakdown on industries under the Health Care Sector itself. Plus an added benefit of pharma is that the need for a given medicine is pretty much a necessity for patients. Therefore despite the economic situation/cycle, there existing demand/potential of every drug can be more accurately evaluted. With the nature of many healthcare & pharma research companies being capital intensive and needing to raise money through private investors and IPOs, there exists alot of potential investment opportunities in the market given the existence many small caps listed. Therefore being a lucrative sector, there are plenty of traders who choose to stay up to date to latest news concering drug developments and patents especially those with technical knowledge in the domain. Day & Swing traders are particularly attracted to the huge volatility swings and if they are able to follow and get access to news quickly, they can leverage off that to potentially make many lucrative trades. Many of these individuals are not scientists or have foundations in technical science backgrounds. Therefore I believe it is possible you do not exactly need firm background knowledge in the field to justify trading on healthcare sector in general.
  • Asked by Anonymous

    Leonard Tan
    Leonard Tan
    Level 6. Master
    Answered on 19 Apr 2019
    Saw a bearish comment online which was trending I will let you guys do the rationalizing yourself if its fair and apt in your opinion. I myself see great truth in many of the statements. I myself believe the whole promise of the business model innovation was good, but many of the details that made the model attractive(legally not employing drivers) is now being picked apart by countries govt regulations and unions. Costs therefore are not as low as ridesharing companies like Uber would like to be. As much as worldwide growth and horizontal growth into other side domains(food delivery) is what Uber is looking at to eventually make turning profitable easier, there is a limit to its current growth potential seeing how the global ridesharing and food delivery landscape has grown to saturation in pretty much every country. The fact that Lyft is specialized on ridesharing alone just makes its prospects more confined to current situation of the battle of ridesharing against regulation.
  • Asked by Anonymous

    Leonard Tan
    Leonard Tan
    Level 6. Master
    Answered on 19 Apr 2019
    I would hold off to see how well subscribed Disney+ becomes. Currently from their aggressive pricing strategy of 6.90, we can see they are pricing below NFLX (half of netflix's 13USD monthly) and going for a market penetration strategy, targeting higher user adoption rates and top-line revenue generating strategy rather than profit making. With a 12% increase in stock price since the announcement, I would say street sentiment has priced in optimism on the announcement as well as future NPV of 36billion in market capitalization currently. Not sure exactly how big of a growth projection and numbers they are expecting. I would potentially look at NFLX/ AMZN and Hulu when they started out- taking an average to see how they would fair by next quarter. Definitely DIS bulls will hope to see better than expected numbers coming in nxt earnings report possibly from the existing quality content Disney already has and does not need to re-establish themselves. Going forward however, Disney must be able to continue generating content to retain its acquired users against strong competition from NFLX's market dominance.
  • Asked by Anonymous

    Leonard Tan
    Leonard Tan
    Level 6. Master
    Answered on 19 Apr 2019
    Yes similar to Gabriel and Thaddeus, I would recommend holding bonds till maturity. 1. Ask yourself: Why are you buying bonds? For most people, they are seeking safe haven against inflationary pressures be it coupon or no coupon bonds. Stability is what general investors are seeking and not to yield surprise returns. If you are in for capital appreciation, you should be looking at making plays with stocks. 2. Not all bonds are liquidly traded . Bonds are mostly trade on OTC(on the counter) markets and is thus hard to determine fair market price to liquidate your position. 3. In a diversified bond portfolio, you want varying maturities in your bonds. Therefore by selling a bond, you want to ideally replace the position with a similar maturity, coupon and risk. Therefore unless you are actively managing your bond portfolio and lining up potential alternative bonds, selling your bonds midway would create unnecessary hassle.
See more questions