Faux Networks

In my daily routine, I get the opportunity to chat with college students.  They are both undergrads and graduate students.  Usually, they are business school students but sometimes they are engineering students and sometimes they are just liberal arts students.  I enjoy meeting them.  I get to learn about things as much as they do so really, it is a two way street.

I always ask them how their school’s network is.

When I went on college tours with my children, every single college that we toured said they had a great network that would help your kids.  It might be possible but I doubt it.  Some networks are better than others.  In the Midwest, Notre Dame has a tremendous network.  So does Michigan.  They hew to the “blood is thicker than water” ethos.  No questions asked.

The Ivy League schools have legendary networks.  The service academies are called “ring Continue reading "Faux Networks"

Are You Smart or Lucky?

One of the hardest things to do is when good fortune happens to you is if you were smart or lucky.  When I was trading everyday, sometimes I was lucky. Sometimes I was smart.  Sometimes, I just had an edge that not too many other people could exploit.

It’s really hard to predict the future with any accuracy.  The global warming folks are finding that out.  Back when I was a kid, scientists predicted we’d run out of oil, food, and the world would be overpopulated.  None of those predictions panned out either.  All of us tend to think we are smarter and more prescient than we really are.  By the way, those that are writing about how Bitcoin will die because it consumes too much energy are probably wrong.  If it’s valuable enough, humans will figure out a solution to the problem.

As Bitcoin makes it’s precipitous Continue reading "Are You Smart or Lucky?"

Did The Supreme Court Just Save Brick and Mortar Retail?

Yesterday in a momentous 5-4 decision, the Supreme Court of the United States overturned a precedent and made new law.  It will have reverberations around the country.  It could help Megalytics, a startup our fund is invested.

The precedent they overturned was known as the “Quill” case.  Ironically, it involved a good friend of mine Steve Miller.  Steve started and runs Origin VC here in Chicago.  His family had started Quill and states wanted them to collect local and state sales taxes from customers when they sold in areas where they didn’t have a physical presence.  At the time it was really arduous to collect those sorts of taxes and would have increased the costs to the company making it extremely difficult even to execute the business.  Quill’s case paved the way for internet ecommerce.

Back then, the nascent internet technology hadn’t taken hold.  Most over the border commerce Continue reading "Did The Supreme Court Just Save Brick and Mortar Retail?"

What’s the Value of a Startup That Has Completed an ICO?

In the past year, $3B-$6B has been raised by startups using initial cryptocurrency offerings (ICO).  That’s a big number.  I don’t think that traditional venture capital statistics are capturing that number.

The hard thing is valuing a company in startup land.  It’s always been hard, and it always will be hard.  An ICO makes it harder.  Here is an example.

There are two kinds of valuations that I want to highlight: accounting valuation and economic valuation.  They are not the same and using accounting valuation will screw you up.  Governments and the media screw this up constantly.

Suppose you are a typical startup.  You pitch some VC funds that invest at seed and you are pre-product.  What valuation are you going to get?  In Silicon Valley, you will get a higher valuation than you will anywhere else.  For our example, let’s say it’s $5MM pre-money and you are raising Continue reading "What’s the Value of a Startup That Has Completed an ICO?"

A Book To Read For Budding Entrepreneurs

People wonder what books they should read.  My friend Donna White tweeted that she has so many book recommendations she has acquired a collection and now she just needs to find the time to read them all.

I was reading this article from AEI and a thought occurred to me. We tend to recommend books that are written near term, meaning the last five years. People are always looking for something new. There are some great books that have been written in the last five years and I have read some of them.

Yet, there are some great books written long ago that will help budding entrepreneurs think about their business. One of Continue reading "A Book To Read For Budding Entrepreneurs"

Where Is Alpha?

As a student of the markets, knowing where to try and find alpha is an interesting problem.  Basically, you have a few schools of economic thought out there.  If we generalize extensively when it comes to markets we can form two groups; the behaviorists and the efficient markets.

Behaviorism in markets is newer.  It’s sexy.  It is appealing because it makes individuals think they have more power than they actually do.  It appeals to our inner instincts that people are irrational and so when they make decisions, things get out of line.

In some cases, I think there is certainly a lot of behavioral economics at work. You can spot it in markets that are illiquid.  For example, last week a scooter company went from a $1B valuation to a $2B valuation.  Clearly, that is behaviorism and irrationality at work.

On the flip side, there are highly liquid markets.  They Continue reading "Where Is Alpha?"

Forced Local Can Limit

There are a lot of different movements in various businesses with an emphasis on locality.  American Express has their “shop local” event around the holidays.  There is farm to table and other things that manifest themselves into this whole “local” culture.

I get it.  However, sometimes it is totally limiting.

One way it’s limiting is in scaling a business.  Suppose I have a business and I want to do business in another country.  Often, there are regulations that I have to use local banks and keep a minimum amount of capital there.  I might have to hire a certain number of local people and put boots on the ground in that country.

For tech companies, that will be limiting.

It raises costs and acts like a tax.  Instead of an area getting new technology and access, the policy stops new things from going there and reinforces domination of existing businesses.

Continue reading "Forced Local Can Limit"

Happy Father’s Day

Hope you make it a great one.  We are making Bistecca alla Fiorentina today. I went to Butcher and Larder and had him cut me a 3″ thick chunk.  We will cook it the sous vide method today.  Here is a photo of pre.

What Company Do You Want To Build?

If you aren’t asked this question, or don’t ask this question I think it is an important one when you are deciding whether to invest in a company or not.  It’s sort of loaded from the investor perspective.

Never forget, no matter what you do you are human.  There are costs and opportunity costs associated with every decision you make and every action you take.  They are different for everyone.

I know an angel investor in Ohio that would walk away from the deal if the person answering said, “A billion dollar company”.  They like to play for small exits.  It suits their style and the way they view the ecosystem they play in.

Of course, typical VCs would want to hear, “A billion dollar company”.  Everyone is conditioned to say that.  But, that statement is too loaded because few people know what it’s like to really build a billion Continue reading "What Company Do You Want To Build?"

What’s Real?

In all the excitement about fake news these days I see that most people are in two different tribes.  They see the same information and process it differently.  Sometimes it’s because of their own confirmation bias and sometimes it’s because of the way it is served up.  I am going to give you an example of that as it relates to my own city and state.

I am concerned because we cannot have a brain drain out of Chicago if we want to have an entrepreneurial community.  We need to be attracting people like a magnet.

Chicago has always had a natural draw for Midwesterners.  I think it can be a draw for people from all across the globe.  I am typing this outside on a beautiful summer day.  I am on a balcony looking at a fantastic skyline with a city abuzz.  I am blocks from a lake.

It Continue reading "What’s Real?"

How Term Sheets Build Community

One of the things that is tricky with entrepreneurship is the term sheet.  A ton has been written about term sheets and all the terms that go into them.  What I want to explore is why it is beneficial for a seed stage VC to make sure they offer term sheets that are good for everyone.  When they do it that way, successful companies will go on to seed the ecosystem.

I don’t know if you have read the book Venture Deals, but you should if you are an entrepreneur or an early stage VC.  They cover term sheets extensively in the book.  We encourage every entrepreneur that we speak with the read it if they haven’t read it.

Seed deals should not cost a lot of money when it comes to legal.  I am disappointed that more rounds are not priced at seed.  Two of the largest reasons Continue reading "How Term Sheets Build Community"

Here’s To The Crazy Ones

Steve Jobs said,

Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently — they’re not fond of rules… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things… they push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do.

People in general are risk averse.  If you don’t look like what the heuristics or spreadsheet says then you are easy to pass over.  The people that pass you over answer to a boss.  It’s easy for them to justify the pass.  One friend of mine said when selling to corporates, find out Continue reading "Here’s To The Crazy Ones"

Read This, Resolve to Be Present

Blow this up and read it. Tears me up

A post shared by Jeff Carter (@pointsnfigures) on

When I was at the National World War Two Museum this past weekend, I went to the special exhibit they have on Bob Hope. When I was growing up, I remember the Bob Hope specials when he went to Vietnam. My uncle was there and we never missed his TV specials and looked in the crowd to see if we would see him.

This past weekend, the museum gave the American Spirit Award to actor Gary Sinise. Gary doesn’t talk about what he does a lot but he spends thousands of dollars of his own money to entertain, and help American veterans from WW2 on. What he said at the museum was moving.  If I hadn’t been present physically, it would have been less moving.  I

Continue reading "Read This, Resolve to Be Present"


When people read about an acquisition, they immediately jump to the conclusion that all the investors made a lot of money.  That’s often not the case.

It depends on the terms on the term sheet.  What price was the investment made?  Were their liquidation preferences and how did that affect the payout?  It depends on where the investor sits on the capitalization table.  It also depends on the price of the acquisition.  If it’s a public company, you can derive or find the price.  If it’s two private companies there is no way to find out unless you are an insider.

I also think a lot of firms are disingenuous with the way they present acquisitions. You might look at their website and there will be a banner or tag that says, “acquired”.  Given what I wrote above, that banner is meaningless.  The only thing that matters is how much Continue reading "Acquisitions"

The First Time Fund

It’s interesting how a “first time fund” often isn’t a first time fund.  Generally, VC funds are spin outs.  A partner is with a big firm and then spins out and raises a fund.  To me, that’s not really a first time fund.  It’s a spin out fund.  Fred Wilson talks about a “hard raise” and I am sure it was hard but it wasn’t as hard as a lot of them.

Spin out funds don’t have as hard a time raising capital as real first time funds.  They know where to go, already have relationships, and already have been in the game.  Some funds started out with one partner being politically connected.  They have a political benefactor that gives them a slug of capital to get going which makes the water safe for more investors.  Some funds are simply connected.  That’s how they really get started.

When you are

Continue reading "The First Time Fund"

Down In NOLA

My wife and I flew down to New Orleans for the National World War Two Museum black tie gala.  It’s good to catch up with old friends and make new ones.

This year the museum is honoring Senator John McCain, Actor Gary Sinise, and Maurice “Hank” Greenberg.  Senator McCain’s father and grandfather were active in the Navy during the war.  Of course, he has his own war record which is distinguished.  Mr. Sinise has done yeoman’s work for veterans.  He has his own “Honor Flight” where he brings vets in to see the museum.  It’s incredible.  You might know Hank Greenberg for his exploits as a Wall Street businessperson.  He fought in Normandy on D-Day.

We are headed to Shaya tonight.  People ask me where they should eat in this town.  If I lived here I’d be 900 pounds.  I have eaten at quite a few places over the years. Continue reading "Down In NOLA"

Deals Get Screwed Up

A lot of the time we point to deals getting screwed up and Harvard Business School writes a case about some entrepreneur somewhere that made the wrong decision or didn’t execute and blame for failure gets delivered upon them.

Often times, this is the case.  But, not always.

Sometimes a VC firm will totally screw up a deal because they don’t have the company’s best interest at heart.  They are only concerned with themselves.  One of the things we have been very cognizant of as we build out our fund is to be very transparent with entrepreneurs.  In some cases, they don’t like the transparency.  It chafes on them.  But, while we might be incorrect it’s the way we see it.

I have always been transparent.  It comes from my time on the floor and the time I spent at USAFA.  I probably share too much.  It can be used Continue reading "Deals Get Screwed Up"

Never Forget Them

My old friend who is now deceased was in the “back half of the first wave” at Omaha Beach.  I was always in awe of him. I told him I wasn’t sure I had the courage to do what he did-yet as soon as my word ended he would retort “of course you do”.  If you follow my friend Rahul on Twitter, he just visited Normandy with his children.  I would urge anyone to make the trip.

Here is one clip of my friend Walt talking about his experience that day.

I visited Normandy with my family in June of 2006.  I still do not understand how the GI’s in the Higgins boat pictured above won the day.  It’s amazing, especially when you go there.  It’s one of the reasons I am a passionate supporter of the National World War Two Museum and will be there Thursday and Friday.  I Continue reading "Never Forget Them"

Crypto And Term Sheet

If you read yesterday’s Fortune Term Sheet, I was quoted. I thought I might cross paste it here and see if anyone would respond.

Here was the question posed:

If you work at a traditional venture capital or private equity firm, I’m curious to hear how you are thinking about these initial coin offerings and new blockchain/crypto-focused funds?


Brian Murray, Craft Ventures:

ICO compliance lessons have not sunk in (despite the SEC’s best efforts). ICO campaigns conceived months ago — before we had regulatory clarity — are now hitting their launch date; hoping a bit of utility-token sophistry can help them outsmart regulators and save their attempt at a money grab. That’s just not going to work. This is why we’re so excited about what Harbor is doing and the next generation of ICO: the PICO.

**Term Sheet note: Craft Ventures is David Sacks’ venture firm. Sacks originally

Continue reading "Crypto And Term Sheet"