Brad Feld has an excellent post up about why he is deleting his Facebook account. Based on his logic, he’s right. There is no reason for him to have a Facebook account. He used it for “broadcast only” purposes. If it’s a one way platform it’s not very useful for you and actually is a pain in the ass.
I am not going to define Brad’s target market for him but I suspect he blogs for a few reasons. First, for himself. Second to engage with potential target companies, target LPs, target partners, target customers for the companies they invest in. Third, he is very active in educating the community on topics related to startups and he has done a very good job of doing it. Does he need Facebook for that with the plethora of social media outlets? No. The opportunity cost for him given the demands on his Continue reading "Quitting Facebook and B2B Marketing"
Senator Elizabeth Warren doesn’t think they are and she’s proposing a new bill to put in regulations that would make sure they are. She wants to establish a new “federal corporate charter” for companies larger than $1B.
Clearly, she detests and abhors Milton Friedman. I wish Friedman were alive to debate her. He would do so and relish the opportunity. He would eviscerate her points one by one with logic, smiling all the way.
Here are her points:
In the four decades after World War II, shareholders on net contributed more than $250 billion to U.S. companies. But since 1985 they have extracted almost $7 trillion. That’s trillions of dollars in profits that might otherwise have been reinvested in the workers who helped produce them.
Before “shareholder value maximization” ideology took hold, wages and productivity grew at roughly the same rate. But since the early 1980s, real wages have Continue reading "Are Companies Responsible for Employees?"
This is dumb. New York just capped the amount of licenses that Uber and Lyft can have. It will cause the rates that NYC people pay for Uber and Lyft to go higher and it will help the cab companies compete.
Here is what a price ceiling does to a market:
The demand for licenses will outstrip the supply. There will be dead weight loss in the market and fewer drivers and passengers will get served. This is an example of regulation that shouldn’t be. Regulation like this encourages bad behavior, not curb it.
Now, crony capitalists will find ways to favor their best politician and get a leg up on licenses. Bootleg cab companies will startup and work under ground.
It doesn’t surprise me that some drivers wanted the regulations. Of course, if you already have a license you want to limit competition so you can drive your Continue reading "Caps and Supports Make Markets Gum Up"
Chicago’s startup community has made a lot of progress in medical startups over the last few years. There has been a good emphasis and my friend Jordan has a dedicated fund for medical seed stage startups. I am not a med tech investor, but I am very supportive of the community. We talk a lot about changing lives with different startups and I think medical startups offer you the most tangible evidence of that.
There are a lot of resources for med tech in Chicago and the surrounding area. Labs, wet labs, bench space. Chicago Innovation Mentors does a great job mentoring and fostering small companies. The University of Illinois in Champaign just started its first ever, and the US first ever, medical school dedicated to engineering. There is a cutting edge Jump Simulation lab in Peoria, and another in Champaign. We have a couple of top med schools and Continue reading "Health Tech Conference in Chicago"
Does it surprise anyone that there are traders doing “pump and dump” in crypto? It happens in stocks and other heavily regulated asset classes from time to time.
Since it’s happening in crypto, it doesn’t mean trading should end in crypto. It just means that it needs to come out of the dark and be more transparent with regulation that forces transparency. One of the things that will hurt the crypto industry is disenfranchising retail investors.
My lawyer friend Pat Daugherty of Foley and Lardner used to be an SEC regulator. He is part of a group that leads a lunch and learn Fin Tech group at the University Club of Chicago. In that group we don’t pick stocks, but we talk about issues in Industrial Fin Tech or Big Finance. One of the things Pat has driven home over and over again is that the SEC cares deeply Continue reading "The Crypto Pump and Dump"
You have to want to compete if you are going to be a startup entrepreneur. If you don’t like competition, don’t even think about doing it. Go work for someone else.
Competition is underrated today. Kids are raised to think they are all “special” and everyone gets a trophy. Each human has an attribute that is indeed special but you have to spend a lot of time figuring out what it is. Every kid on the soccer field isn’t special and as a matter of fact it’s rare to have even one special kid in an entire league.
Brian Urlacher played for the Chicago Bears. I saw him play a bunch. I couldn’t believe how fast he was. A friend of mine played middle linebacker for the Bears. His name was Tom Hicks and he started in the mid-70’s. After Butkus and before Singletary. He wore #54 too!
I was Continue reading "Compete Compete Compete"
Yesterday Trump Treasury Secretary Steve Mnuchin put out some new policy. The Trump administration is embracing Fin Tech startups. This is good for the fin tech world and good for American citizens. I am sure Trump haters will find a way to twist it into something nefarious.
From the Wall Street Journal article I linked above:
The Treasury Department in a report recommended that regulators adopt changes it said would better support such financial companies. It recommended a “sandbox” giving regulatory relief to startups; encouraged the federal consumer regulator to rescind its payday-lending rule; pushed for a fresh look at rules governing fintech investments by banks; and endorsed an effort by nonbank lenders like LendingClub Corp. to ease the resale of loans.
The regulator of federally chartered banks also said it would start accepting applications from fintech firms “effective immediately,” opening the door for those firms to receive charters that Continue reading "A Regulatory Sandbox"
We met Joe Holberg through Rob Topping. Rob is another Chicago investor. I never asked Rob how he met Joe but my guess is it was through the Michigan network since they are both alums.
Joe grew up in western Michigan. He paid his way through school and went on to work for Teach for America and Google. One day, he woke up with an idea, a cell phone and a computer and started Holberg Financial. Ironically, my father spent his teen years in western Michigan. I still have some family there in Three Rivers.
Holberg Financial is a financial health and wellness platform that helps employees reduce financial stress. 85% of Americans are financially stressed and 62% have less than $1,000 in savings. HF is 100% free to employees and 100% unbiased since they don’t sell data, products, or financial services. They just get people the unbiased info Continue reading "Our Investment in Holberg Financial"
Barry Ritholtz published this interview with Warren Buffett. It was Buffet’s first ever television interview. The interview was in 1985. Berkshire Hathaway started in 1962.
The video is well worth watching. Some gems:
“When you buy a company if you are worried about the stock market opening tomorrow then you aren’t investing. You shouldn’t worry if the stock market isn’t going to open for the next five years”-this is long focus, not short term focus. Fama would tell you the same thing about investing for retirement.
“Stock prices don’t tell you about how the business is run”-True. They tell you the sentiment of the market given all the public information available.
“I don’t have to play every game”-Buffett focuses on what he knows.
I think what’s interesting about Berkshire, is the first investment he made failed.
In 1962, Warren Buffett began buying stock in Berkshire Hathaway after noticing a pattern Continue reading "These Maxims Are Always True"
The crypto world sometimes takes things to extremes and pushes the envelope. I think this is okay. After all, when you take a serious study of economics you always look at extreme cases and what happens at the margin. How much does it cost to make one more? How much revenue can I generate by selling one more?
I am appreciative of the framing and view that people advocating for decentralized exchanges are taking. There is a lot of power concentrated inside an exchange. It’s more than just the data. On the SEC side, there is listing requirements. There are transparency requirements. There are plenty of other rules and regulations that turn over power to centralized exchanges. On the CFTC side, it’s about clearing. Because exchanges own their own clearinghouses, they have an incentive to innovate and respond to customers. But, at the same time they have a lot of Continue reading "The Decentralized Exchange"
Fred Wilson wrote a post today about where you went to school and the VC biz. He’d like to see some things change and he’d like it sooner rather than later. I don’t disagree but I also know that inertia, network effects and networks are hard to change.
Fred’s post came out of Richard Kerby’s post on Medium. My friend Rick Zullo is partners with Richard and was tweeting about it yesterday. They have a VC firm in NYC. Jason Rowley of TechCrunch wrote a series of posts about where VCs went to school and what they studied.
Unfortunately, it does matter.
It’s reflected in the cost of tuition and the difficulty in getting in. There is only one Stanford. There is only one Harvard. I think it will change but change will be slow. There are factors outside of network that bear on the reasons why.
In my own Continue reading "Your School"
Sometimes it’s overwhelming to a startup when they have several different projects they can do. All of them are staring them in the face. All of them seem meaningful. All of them seem like they will bring something back to the company.
Yet, they sit there on the shelf.
Often, it’s hard to decide what to do. Where do I start? What if I start this one and then the other one would have been the better choice?
Best to just start doing one. Do the one that you rank which has the highest return. The other ones will always be there.
Focus never killed a startup
Facebook crashed last week. The numbers are astounding. But, the company is still in business and it’s not laying off anyone. They are resilient. The drop hurt the $QQQ, and it certainly affected companies like Twitter $TWTR. Twitter is trying to get rid of fake robot accounts too. But, a lot of the tech stocks were unaffected.
I think those are good developments. I don’t think when those companies were started the founders envisioned people doing any nefarious stuff or being fake on their platforms. For most of us, it’s hard to even imagine setting up a fake profile and attacking people or causes with it.
By the way, even though the Russians and foreign entities created fake profiles, it didn’t affect the outcome of the election. Social media is powerful, but not that powerful. At some point, it does come down to candidates. Hillary wasn’t a very good Continue reading "Facebook Crash Didn’t Crash Everything"
One thing entrepreneurs have to be is tenacious. Often, tenacity is misconstrued with stubbornness. Stubbornness is doing the same thing over and over again. It’s being Sisiphus. Tenacity is a sticktoitiveness. It’s riding the storm out, and adapting as the various waves roll in.
Jerry Colonna calls it being fierce. I think I like the word tenacious because all the coaches I was exposed to used that particular word.
I want to be clear, this post is not about every single entrepreneur I have invested in. But, I do want to highlight a couple from my angel portfolio that have illustrated tenacity. That’s not to say others are not tenacious. They are. It’s just these guys were top of mind recently. None of what I am typing is meant to call out anyone or ridicule anyone. It’s just illustrative of entrepreneurship.
Both companies are still in business today and it’s Continue reading "Being Tenacious"
I once heard Warren Buffett say that deals that come together rather seamlessly and easily are good for each side. If you find yourself in a lot of back and forth, a lot of knits and frustration over terms, money and other things, it’s likely not going to be a fun investment to be in long term.
I think this is true.
I find people that over negotiate, or negotiate for continual strategic advantage, or negotiate for win-lose are pains in the butt. You always lose money. I once worked a year on a deal. We were going to a meeting. I always show up early to meetings if I possibly can. I detest being late with a passion. The guy I Continue reading "Great Deals Come Together Easily"
Failure is a part of the startup world. It lurks around every corner like a Turk at a football training camp. It’s gonna happen you just hope it doesn’t happen to you. However, how the team deals with failure mentally is a game changer. It can mean the difference between winning and losing in the long run because it’s certain there are things that are not going to work in the short run.
Aaron Klein of Riskalyze built a big part of his business on failure. He says, “The challenge is that humans react to risk in the short-term. That approach is all about pushing back against human nature.”
Short term failure looms large for people. Kahneman showed how short term events really impacted our thinking and adjusted how we’d perform over the long term. Of course, startups are built for the long term but you get there Continue reading "When You Fail, Try To Have Fun"
This whole post by Semil was fascinating. I spent a month in SF and Silicon Valley in February of this year. Met with some people, and learned a lot. An interesting thing that I learned working with my partner Kenny at West Loop Ventures had to do with the psychology of engineers.
Virtually every seed fund I spoke with didn’t invest outside the Bay. If they couldn’t get to a board meeting in 30 minutes, they didn’t do the deal. When I co-founded Hyde Park Angels we zeroed in on a “day’s drive”. That Continue reading "There Is Life Beyond The Bay"
Thought this was interesting. The responses were interesting as well.
A lot of people wanted to know how VCs analyzed failed deals. Some wanted to know how they added new partners or analyzed deals before they invested.
Some wanted some “day in the life” type stories or posts on Instagram or Snapchat.
When it comes to things that are basic block and tackling, most of it has been blogged about in some form or another. Credit Fred Wilson and Brad Feld. Go back and see their early posts and it’s the building blocks of how to do a deal, what term sheets are etc.
I understand why there is a desire for this. I enjoy reading blogposts by fund of funds or any endowments or family offices that might care to Continue reading "What Content Should VCs Be Producing?"
There are a lot of reasons seed deals get turned down. I want to explore one.
The person listening to the deal uses accounting numbers rather than economic numbers to analyze the deal.
Seed stage companies don’t have a lot of revenue. I see companies that get turned down where everything else seems right. But, the revenue isn’t there because it’s early.
If entrepreneurs would budge on valuation, the deal might get done. If investors would truly try and look at how big the market is, more deals might get done.
The problem with a lot of investors is they don’t have a thesis on the future of the world. They just look at what is, not what could be. They are so risk averse that they have a lot of trouble wrapping their head around it.
Maybe the investor doesn’t have enough experience. Maybe they don’t really understand Continue reading "Turning Down A Seed Deal"
Some of the best organizations I have seen gather a lot of input from employees and research before they make a decision. I have a good friend at CME that I used to talk to a lot. He would examine things from lots of different angles. He’d consider opposite opinions and run down lots of ratholes. He had the luxury of time because he’d consider these things well in advance of having to actually make the decision.
When the time came, he had summed up all the angles and knew what the chessboard looked like. He’d make a decision and nothing could move him from it. He’d be focused, and anyone that would differ would be left behind.
Digesting all of that information can be frustrating when we are in Startup Land. We are trained to go fast. John Wooden was one of the best basketball coaches of all time. Continue reading "Best Organizations"