One of the greatest lessons I learned in my short stint at the US Air Force Academy was a sentence. It was “No excuse Sir/Ma’am.” If you were late, if you performed poorly, if you didn’t have the right level of intensity, energy, passion and if you weren’t prepared, that was the answer. Period.
When I played basketball, it was the same. When I traded, the same. Funny how those ten simple things can thread their way through anything. Not making excuses means you take responsibility for your actions, including how you mentally prepared prior to whatever it was you were doing.
TANSTAAFL. People should remember that. Nothing in life is free. Everything has a cost and an opportunity cost. Facebook isn’t free. You supply them data and they resell it and make a lot of money off of you. Google isn’t free. They do the same.
Whenever you are promised something free from a business, they are figuring out other ways to monetize it. The same goes for promises of “free college” or “free healthcare”. Somewhere someone is paying. Nothing that anyone spends energy working on and providing to you is free and if it is then it’s worth less than a Cracker Jack prize.
Robinhood built a large business off of the concept of free. They are a retail brokerage that works on your phone. As they walk the line to go public, the way they actually monetize their customers is starting to be understood. To make a long story Continue reading "There Ain’t No Such Thing As a Free Lunch"
Today is Veterans Day. It’s a day to remember the ones that came back, and remember the ones that are gone. It started after WW1. Memorial Day is the day we remember the fallen. However, I guess every day is a day to remember the fallen.
Wars are never fought the same way. There is always a new wrinkle. New technology. The only common thing is they are costly and people die. But when America commits it is usually worth fighting for. The Revolutionary War was 235 years ago. The Civil War 153 years ago. Both of those were certainly worth fighting.
People have different risk preferences. They have different costs and opportunity costs that they have internalized. That’s why there are supply and demand curves. I have seen some interest from people in “stable” jobs thinking of joining a startup. It doesn’t matter why they want the change.
We herald the founders of startups, but rarely do we give accolades to the early joiners. Without them, the startup wouldn’t make it. They are critical to the success of the startup and the reason I am writing this is I’d like to see more Midwestern people start to look at the startup ecosystem and really think about how they can play a role in building it. They can also help themselves in the process. The problem for many is lack of understanding and lack of knowing when to join.
Startups entail assuming a lot of risk. The outcome is highly variable. Volatility reigns. At the outset, you don’t know if that startup is going to be a rocket ship or a failure. All you know is a lot of them fail for a large variety of reasons. Most people overestimate the failure rate of startups. At a conference I was at a family office said they had been investing in startups for around 30 years and their failure rate was about 50%. Those are good odds from where I come from. 50/50 with the upside that a startup can bring. I’ll take that trade all day long especially if I can figure out ways to improve my odds.
There are a ton of resources today for startup entrepreneurs that didn’t exist before. You can improve your odds if you want to and work at it.
Almost everyone pays attention to the stock market. It’s on the news every night. The stock market is the smallest market when it comes to the big three of financial marketplaces. Credit markets and foreign exchange markets dwarf the stock market.
The Federal Reserve meets today on interest rates. I traded short term interest rate futures for 16 years so this day was always one we watched. I still watch the markets. Once embedded in you it never leaves your blood. If you ever have the pleasure of a meeting with Leo Melamed in his office he will interrupt constantly to buy or sell something.
I don’t know how closely you follow the bond market. When Greenspan was Fed Chair, the US switched from issuing very long term 30 year debt to 10 year notes. The Fed chair felt they could more efficiently finance the needs of the country by
The other day Fred Wilson posted about syndicates. Sometimes they break. With the rise of a lot of new funds over the past several years this situation is coming up more and more.
However, for entrepreneurs having a good thoughtfully assembled syndicate is a strategic advantage.
Just because a VC firm exists doesn’t mean it will exist forever. In the past year, Social+Capital and Kleiner Perkins had big transitions. If you had them in your syndicate and on your board, their transitions might have rippled the waters a little bit. VCs have to raise funds every few years and there is no guarantee that they will be able to do that. It all depends on the appetite of the market and the prior success of the firm.
As you go to the polls today, it might be helpful to read this post by Professor John Cochrane. It talks about the financial crisis ten years later. The financial crisis spawned a lot of really bad legislation and policy. It also created a lot of falsehoods that permeate the dialogue and discourse.
Cochrane lays it bare.
He talks about the causes, and the fixes. He talks about leverage and being over leveraged. It’s a calm and academic breakdown. You should read it because you won’t find David Stockman talking about a 40% decline in the stock market and you won’t find a permabull case for Dow 50,000.
The reason I started blogging was because I knew Dodd-Frank was a terrible response to the financial crisis. Sarbanes-Oxley was a less terrible response to Enron, but Dodd-Frank was exactly the wrong thing to do and doesn’t protect us at all Continue reading "Was It The Banks Fault?"
Last Saturday while SNL was mocking a disabled veteran, I was at Pritzker Military Library Gala in Chicago. If you haven’t seen the clip, here it is. I was thinking of not sharing it. But, it’s been shared all over the internet so you might have seen it.
The veteran is a political candidate. He was a Navy SEAL. If you care to learn more about the SEAL’s, you can at this link right here courtesy of the PMML. When this exhibit was at the library, I took a SEAL through it that had done three tours in Afghanistan. You ought to talk to some folks that have been there sometime if you get the chance.
For one Dutch businessman and father of three, it was the year to make a radical change. Didi Taihuttu sold almost everything he owned, including his business, house and car, and put all that money into bitcoin. He bet everything he had, and everything his family had, on a decentralized cryptocurrency future.
When Mr. Taihuttu first bought into bitcoin in February 2017—with the price around $1,000—he told The Wall Street Journal he was “in it for the long run.” He held on to his investment even as it hit historic highs of almost $20,000. Then came the bitcoin crash.
That’s just crazy and he put his family at huge risk. I know you can be bullish on bitcoin but I also remember the old CME poster, “Risk not thy
A lot of times, people think that pitches are like Shark Tank. Shark Tank is a super condensed version of a months long process. The impression is that the entrepreneur pitches and the VC listens like Caesar and gives a thumbs up or thumbs down.
There is a lot more nuance than that.
A lot of times, the information presented in the pitch is new to the VC. After all, this is supposed to be an idea/business that is breaking new ground where no one has gone before. VC’s don’t know everything about everything so a lot of the things presented might really challenge how an investor views the world.
If an entrepreneur makes a statement, like this from Zuora’s pitch deck, a VC might not believe them. They need to go back and investigate. They need to find data to back up the pitch. Entrepreneurs can provide them
When you run into a brand new technology, there is a certain “whiz bang” part of it that is always interesting. I think we saw that with artificial intelligence and we are seeing it with other new technologies that are being developed. Deep Blue beats the best human chess player and wins at Jeopardy and a lot of people think humans are doomed.
Money starts to flow into the sector and valuations creep up.
The truth is, even with the most cutting edge new technology you have to build a business. The principles of building a sustainable business are relatively unchanged. You produce where marginal costs equal marginal revenue. You have to market the business and brand the business. But most of all, you need an moat that competitors cannot easily get over.
We started a rehab today. We have been planning it for a year and a half. It’s our fifth building project. When we became empty nesters, we downsized. Big time. I saw the Illinois tsunami coming, and I couldn’t sit still. At the same time, my business for the time being is here so I can’t leave.
Most of my friends are leaving or they are redomiciling. When I mean most, it’s not 90% but it’s over 80%. Most of my friends are encouraging their children to go to school out of state and not take jobs back in Chicago. This is very very different from the past. A good friend of mine grew up in NYC. He went to Harvard and when he met a Chicago person at Harvard virtually 100% of them wanted to move back to Chicago after graduation.
Ian Hathaway isn’t an investor. He blogs about startup stuff and is an economist. He looks at data. That can be insightful. It shows the paper trail of where we have been and if you have good data, along with good projection skills you might be able to look into a crystal ball and discern the future.
Of course, we all make mistakes which is why macroeconomists are rarely right on their ten year predications and entrepreneurs are rarely right when they show you a five year top line revenue growth projection.
It’s well worth a read if you are into this stuff.
If you are younger, you might not realize that short term interest rates can go above 0%. When I was in high school back in the dark ages before they invented calculators, short Continue reading "Valuation Crush"
Have you ever been in the zone? It’s surreal. When you see someone in the Zone it’s a thing of beauty. Klay Thompson was in the zone last night in Chicago. I realize that the Bulls aren’t that good. However, it’s still the NBA. The game is significantly faster than the college game and the worst players are still really really good and play on a far different level. If you have never experienced it then it’s hard to explain. I have played against NBA players. All you see is the bottom of their shoes.
I know a few scratch golfers. You know the difference between them and the pros. The Zone. To play at a high level, it becomes mental not physical.
Businesspeople can get in the zone. A coder can write code where the commands just seem to drip out of their fingertips. Salespeople can be in a Continue reading "The Zone"
Berkshire Hathaway disclosed it made two fin tech investments. Good to see it. They invested in some payments companies which makes a lot of sense. They are also investing in two big emerging markets, India and Brazil. Makes sense since financial services are not nearly as developed there as they are in more “organized” countries.
The hard thing for Berkshire when it comes to investing in a lot of fin tech firms will be check size. They are so massive, it’s just not worth the time to do small deals. One company that might be an interesting play for them is PayPal. With a market cap of $100B, it’s one they could find enough room in.
Last week, Penny Pritzker the former Commerce Department Secretary under President Obama announced a new plan for Chicago tech called Project 33. John Pletz is a person I respect and a tech columnist for Crain’s. He thinks it’s a good idea. The prior link is to his column. It’s good and it uncovers some past problems. Others have added support via Twitter and other mediums.
I am mixed.
One of the good things about this is it seems like corporate CEO’s will get engaged. If they force their companies to be more hospitable to startups selling into them that is a good outcome. It’s terribly hard to sell into a corporation. Ask some of the B2B Startups that have come through the various accelerators how arduous it is to get a corporation, bank, insurance company or large institution to do more than a token pilot. Forget about selling Continue reading "Project 33 In Chicago"
As a fund manager, sales people from PEO’s hit us up all the time. It’s a time suck from our end. In the main, we let the companies we invest in decide who they are going to use. If they want to chat with us about it, we talk to them. The final decision is the CEOs and we stand by it. It’s just not that big a deal to us. We have plenty of other things to worry about.
If you don’t know, a PEO is a Professional Employer Organization and they allow smaller companies to outsource their human resources needs like health insurance and other benefits. They are at a lot of the startup events.
Honestly, I don’t know the difference between one PEO and another. Even for our fund, each of us has our own insurance. We don’t have an specialized HR program for our two employees. Continue reading "PEO’s"
Yesterday I was at the Fund Conference in Chicago. Late in the day if you stayed you got a treat. Tom Sosnoff of Tastytrade gave a forty minute talk. They have a newish brokerage called Tastyworks. I have seen and used their tech and it’s super intuitive for people that don’t know how to trade. I dare say it’s the best trading software out there.
Tom was a floor trader like me. We are a different breed. He traded in the pits from 1980 to 2000. He started ThinkorSwim in 2000, and sold it in 2008 to TDAmeritrade. Ironically right around the same time another CBOE floor trader started Options Express and sold that to Charles Schwab. Another one started Archipelago which runs the NYSE. It’s pretty likely that if you are doing anything in capital markets you are using or trading against a Chicago trader from one Continue reading "Decisions Decisions"
Micro VC is something that is newish in VC circles. It’s small funds. WLV is a micro. We just did our final close. So far so good.
I saw this article yesterday and haven’t had the time to go through it deeply but will try tomorrow. Busy day today.There seem to be a lot of good stats in it as I perused it. Of course, the main thing is return.
The article admits it’s bias there. It restricted its sample size
They compared Europe versus the US as well. That’s interesting. From the article.
The US has seen accelerated Micro-VC fundraising trend in the past 10 years and some of the key drivers are: 1) the improved capital efficiency for start-ups has made small size checks more meaningful; 2) some traditional funds have moved upmarket and left more opportunities in investing in seed stages; 3) The VC Continue reading "Are Micro VC’s A Worthwhile Investment"