A peek inside Alphabet’s investing universe

 Chances are you’ve heard of Google. You’re likely a contributor to one of the 3.5 billion search queries the website processes daily. But unless you’re a venture capitalist, an entrepreneur or a slightly obsessive tech journalist, you may not know that Google, or, more properly, Alphabet, is also invests in startups. And, like most of what Google does, Alphabet invests… Read More

Thought This Talk Was Interesting

I write this from the left coast.  I am spending some time out here to get away from the Chicago winter and to meet people.  I also do it to get out of my Chicago bubble.  I spent a short amount of time in LA.  I spent some time in Silicon Valley and now I am in San Francisco.  Being here in person allows me to experience things and decide if what I see being reported is true or not.

I like the above video and I think the answer to separate the wheat from the chaff is to have principles that you believe in and to understand why you have those principles.  When I was going to church regularly, I was surprised how many ministers told me to question why I was a Christian at all.  You’d think in a church they’d not actively ask that question.  It turns Continue reading "Thought This Talk Was Interesting"

Do Your Homework

If you want to be successful, you have to put in the time.  Nothing worthwhile comes easy.   This is the same across all occupations and endeavors.  When I talk to millennials a lot of the time I hear, “That’s hard.”

Yes, it is.

Too often we get exposed to people that completed their journey.  We don’t get get a look at them before they were on it, or while they were on it.  While stories are powerful, it’s hard to imagine what it was like for yourself.  That law partner making the big bucks?  They were in law school once and they were low on the totem pole in a law firm once too.

The same is true with traders.  Before they became great traders, they had to learn the mechanics.  They had to ingrain the fundamentals into their workflow and brain.  Before I traded, I worked from Continue reading "Do Your Homework"

Why Female Founder Office Hours is So Important

If you haven’t yet heard about Female Founder Office Hours it is an initiative you should be aware of whether you’re male, female or any other gender identify. The idea is simple enough: several female VC partners at top funds will hold 1-hour meetings with 40 promising female entrepreneurs looking to get advice on their business and pitch in a friendly, non-judgmental, safe environment.

I want to outline why I think this is such an important initiative but first want to be sure you know that my partner Kara Nortman and my friend Eva Ho are hosting the next Female Founder Office Hours in our offices on March 13 and you can sign up here → LA Female Office Hours.

Please help share this widely so that more women become aware of this important resource that is being run nationally. For the LA event, for example, they will not only have a selection of great LA VCs but also 10+ senior VC women from the SF Bay Area will be coming down for it.

So why is this initiative so important for men, women and other gender identities?

1. Mentorship / Modeling Behavior

An important part of leadership is being a role model for those who may come after you to look up and say, “If she can do it then why can’t I?” Female Founder Office Hours gives founders the mentorship and the role models to see that it is in not only possible but also to have a plan to make it a reality.

My partner Kara wrote a great post on the topic that you should read. But I’ll give you one quote that struck a chord with me,

“Since childhood, I have been fortunate enough to be inspired by strong women. My grandmother was one of the first woman to earn a math degree from Columbia and never gave a damn about what women are “supposed to do.” Thanks to her, I never thought much about my identity being defined by being a woman. I always wanted my academic & career achievements to just stand on their own.

Kara is a strong person and a confident leader and it’s clear that she had role models that taught her from a young age that there were no limits to her career potential or doing what she wanted in life. When people provide that kind of modeling you lift up those who come after you and make them better.

2. Inclusion

I recently read Dan Rather’s book “What Unites Us,” which is a book I highly recommend, in anticipation of interviewing him at the Upfront Summit. He has a section on “Inclusion” and I loved his angle on this term. What

Continue reading "Why Female Founder Office Hours is So Important"

CME’s Speed

You might have seen this article in the WSJ yesterday about how trades are confirmed by CME.  Some traders get confirmation before the rest of the market.  They are able to exploit that information advantage to create a profit for themselves.

CME isn’t the only exchange where this happens.  Everyone has a similar issue that is an electronic exchange.  CME is the biggest kid on the block, so they get the headlines.

There doesn’t seem to be a clear pattern in the amount of time some traders get confirmations earlier than others.  Might be 500 milliseconds or it could be a different amount of milliseconds.  In CME’s defense, that makes the technological problem tougher to fix.

In addition, CME sells co-location to traders that pay for it.  They will automatically get faster information and order entry.

I can only speak for myself and Continue reading "CME’s Speed"

Startups are a global opportunity!

Despite a boom in startup activity, more and more companies being formed, it doesn’t mean that more good companies are being created. I keep seeing the same names hit up investors again and again. A few successful ones are garnering a lion share of the total funding dollars, especially as they get more traction. Even those companies that have little traction are generating a lot of investor interest, while others who fall in the in-between range are getting less attention.

I don’t know how to say this politely, but a lot of it has do with the sheer laziness of investors who view what are essentially opportunities as “deals” in their backyard, preferably over expensive coffee. The polarization of investor interest is exacerbated by long standing dogma in Silicon Valley: we will invest within drive able distance. Which is strange, because the same investors are the first ones to espouse Continue reading "Startups are a global opportunity!"

Betting On Same Horse, Different Race

One of the tough things about being a fund is you only get a limited number of investments.  Of those, you get to pick one in any particular race.  If you invest in one insurance startup, that investment ought to preclude you from doing any more investments in the area of insurance that startup is targeting.  Funds need to write a bigger check, so they actually take more risk not less.  Funds also might avoid the space if there is failure.

When you are an angel, it’s a bit different.  You might make multiple investments over a period of time in the same or similar sorts of things but on different companies.  As long as you limit your check size, the pain of failure won’t be as bad.

Of course, it goes without saying that you should be investing in jockeys and not horses Continue reading "Betting On Same Horse, Different Race"

Raise softly and deliver a big exit

 In the world of venture capital, the prospect of a successful “exit” looms large in the minds of investors. A VC’s business model is less about the money that goes into a startup than it is about what comes out. It’s true that most companies fail to exit gracefully, and of those that do, surprisingly few exit by going public. Read More

Getting Out of Bubbles

One good thing about getting out of Chicago once in awhile is I get out of routine and the bubble.  I grew up in the western suburbs of Chicago.  I worked and lived downtown.  I am a Chicagoan (minus the graft and corruption) through and through and have the accent to prove it.  I am sad about the end of the Blackhawks run and surprised whenever the Bulls win.

My wife and I “missed” the snow yesterday that fell on Chicago.  It was fun to look at photos on social media of it.  Our routine of leaving in February isn’t about just missing some bad winter weather.

It’s good to get out and see how other people experience their world.

For example, driving through California, I cannot get my radio to hold a radio station for long.  You can see why someone would

Continue reading "Getting Out of Bubbles"

The Darker The Market The More It Needs Sunlight

There are a lot of nooks and crannies in capital markets.  Exchanges only trade the big ones.  I think it’s important to note that matching trades is super simple.  You can go out and buy a crude automated trading system off the shelf and a simplistic one is not that hard to build.  The trick is when the trade is made how do you report it?  How do you account for it?  How do you margin it?  How do you make sure both entities on each side of the trade perform?  How’s the security of the exchange?

These are huge issues.  Bitcoin exchanges have been ripped off causing people to lose money.  I went to a presentation of a new Bitcoin exchange once.  I asked two questions.  How do you margin and how do you clear?  The Continue reading "The Darker The Market The More It Needs Sunlight"

Trade From Twitter

Kind of a cool idea that TD Ameritrade rolled out today. You will be able to initiate trades from Twitter.  Hey, maybe soon you will be able to do it with Alexa and Snapchat. TD already has that sort of functionality with Facebook Messenger.  A lot of traders have Twitter open to keep track of breaking news when they trade.  There are numerous companies that translate tweets into machine-readable language for computers to digest and act on.  There are other apps that synthesize social feeds to create trading signals and more alpha for hedge funds.  I think that in the startup world they often think that big incumbents will roll over and play dead.  After all, they are just corporate whales waiting to be harpooned.

Sometimes bureaucratic corporate structures do allow startups to harpoon whales.  But, most of the time the whales feel the Continue reading "Trade From Twitter"

YCharts Partners With Dynasty

If you read my post about the stock market NOT melting down yesterday, you saw a lot of charts incorporated into the post. I get those from Ycharts.  Today, Ycharts announced a partnership with Dynasty Financial Partners.  They have more than 450 advisors and support staff that will be utilizing the fantastic analytical tools of Ycharts to do research on stocks, ETFs, and other financial instruments.

This is a nice deal for Chicago based Ycharts.  I invested in the company way back in 2008-09 at the height of the financial crisis.  They continue to add features and provide them at an affordable price so that advisors, family offices, and firms that manage money for people can have quick access to information that is actionable.  I find that when I am putting on an option trade, Ycharts really helps me select the duration and the Continue reading "YCharts Partners With Dynasty"

Is This A Market Melt Down?

Short answer if you don’t want to read the rest of this is, no this is not a meltdown.  It’s not a correction either.  For newbies, meltdowns look like this.  If you believe this is a market meltdown, then perhaps you follow the Super Bowl Indicator too.  When an NFC team wins the championship, buy the market.SPY Chart

SPY data by YCharts

If you are only watching Bitcoin, it is in meltdown phase. But, it’s not as if you had to be Methuselah to see it coming. The Bitcoin bubble might have been the easiest one to pick out in recent memory. However, it was impossible to short. You could have shorted it with futures once they started trading but it was very thin, and margin requirements were pretty high so your risk was high in an irrational market. The GBTC is 75% off of its high.
GBTC Chart

SPY Chart
SPY Chart
Continue reading "Is This A Market Melt Down?"

Why There’s No Such Thing as a Corporate Entrepreneur

PhotoAlto/Jorge Goncalves/Getty Images

Can we please agree that there is no such thing as a corporate entrepreneur?

The term corporate entrepreneur devalues what real entrepreneurs do, and it creates a haze of hokum around people trying to innovate in large companies that sets them up to fail.

There is an ocean of difference between people innovating or designing new offerings inside a large company, and actual entrepreneurs. On one shore of the ocean is certainty — the steady paycheck, the options vesting, status, the cushiness of a corporate campus — and on the other is the possibility of incredible wealth. Fly-your-own-plane-to-your-own-private-island-level wealth. And in between the two shores are a million ways to fail, to sink without a trace.

I have now interviewed hundreds of actual entrepreneurs — including founders of Amazon, Apple, Biogen, Boston Scientific, iRobot, Netflix, PayPal, and YouTube — as well as new venture and innovation leaders in large companies like Disney,

Continue reading "Why There’s No Such Thing as a Corporate Entrepreneur"

The Hard Thing About Small Funds

One of the most difficult things about being in a small fund is how much capital to allocate to an investment.  Many funds put the exact same amount in each deal.  That doesn’t seem right to me because the valuations of each deal are always slightly different.  Cap tables are different.  The capital needs of the company to get to exit will almost certainly be different.

Others are very random in their approach.  They might put more in one deal because either they understand it better or they trust the lead investor more.  Perhaps something clicks between them and the team so they feel more comfortable putting more money in.

When you are a small fund, the math gets really difficult.  You try to forecast the future, but of course that only usually plays out well on a blackboard. There will only be Continue reading "The Hard Thing About Small Funds"

Facebook and Google Kill ICO Ads

Yesterday Facebook and Google killed ads for ICO’s. My friend Josh Brown (@reformedbroker on Twitter) applauded it. Last fall, he blogged about getting a walrus sex ranch off the ground and funding it with an ICO. It’s preposterous and obviously a farce, but so are many ICOs.
I am not against ICOs. It’s important to go in with eyes open.

There is a whole cottage industry around them. Not only legal, but there are small investment banks that raise money for ICOs. I saw a pitch for an ICO yesterday. Without grading the pitch, or the company I will tell you it reminds me a lot of the very very early days of starting Hyde Park Angels. You cannot imagine the places I would go to hear pitches in Chicago. Many apartments. The crowd that showed up was a combination of sketchy, service providers looking to make a buck, and Continue reading "Facebook and Google Kill ICO Ads"

The Co-Founder Relationship

If you were making a list of things that could go wrong on an seed, angel, or Series A investment, you would have to put the co-founder relationship right up there at the top of the list. Not every startup has co-founders. Some just have one founder. In some ways, that is a bit easier to “underwrite.” At least it is clear who is in charge and why things are happening or not happening.

With co-founders, it is always a bit unclear where the issues are coming from. Founders don’t generally like to disclose their issues to their investors and Board. If it gets really bad, the stuff comes out. But often it stays under the covers where you, as an investor, can’t do much about it, other than wonder what is really going on.

Frequently one of the founders is the “business person” and the other is the

Continue reading "The Co-Founder Relationship"

Risks For Audit Are Too High

Ernst and Young did some research on the crypto world.  They analyzed more than 372 ICOs, and found that $400 million of the total $3.7 billion funds raised to date had been stolen by hackers.  How’d the hackers do it? Phishing.

A while ago West Loop Ventures hosted an event on security.  Joe Rickard and Stel Valavanis talked extensively about how they approach security in the finance world.  Phishing was one of the things they talked about.  It is the number one way through the security in the network.    Somebody mistakenly opens an email and it’s over.  I remember Joe saying that hackers wouldn’t hack if there wasn’t any money in it.  With crypto, the money just got a lot larger and the networks they can attack became a lot larger too.

Hackers are looting $1.5MM per month.

One of Continue reading "Risks For Audit Are Too High"

Board Feedback

Something I am a huge fan of is Board Feedback. I’ve written about this a lot here at AVC and I am writing about it again today. Because it is important and not done regularly in my experience.

A founder/CEO and their team spend a lot of time preparing for a meeting, and then they give the meeting their all, and often the Board leaves and nothing is really said about it.

That sucks. For everyone, but most of all for the CEO.

Here is what I try to do and mostly do. I sometimes mess this up but not often.

After the meeting ends, at least one director, ideally the Chairman if there is one who is not the CEO, or the lead director, or the director who is there in person, should lead an executive session without the CEO and get feedback from all of the directors and

Continue reading "Board Feedback"