Can You Trust Existing Crypto Exchanges?

There are 2000 Cryptocurrencies being traded at 14000 exchanges worldwide.  In the first nine months of this year, there has been $1B in theft at those exchanges already.  Here is what Reuters said,

Theft of cryptocurrencies through hacking of exchanges and trading platforms soared to $927 million in the first nine months of 2018, up nearly 250% from the level seen in 2017, according to a report from cyber security firm CipherTrace released on Wednesday.

On another note, some exchanges with very weak anti-money laundering processes have allowed $2.5B to be laundered through the crypto exchanges since 2009.

It is super easy to put together a platform to match trades.  It’s hard to actually do the business of being an “exchange” or even an auto trade platform.

There is a lot of talk about “institutional capital” coming into the crypto space.  It’s talk.  Institutional capital isn’t going to Continue reading "Can You Trust Existing Crypto Exchanges?"

Helping People $1 At A Time in A $1B Market

Great news for people that live in Zimbabwe and work out of the country.  WLV portfolio company PipIT has partnered with ZymPay to provide effortless and seamless money transfer.

If you know anything about Zimbabwe, you know the government there has totally devalued their local currency.  It’s pointless to use it and even more pointless to expend effort to work to earn it.  That’s fueled a large Zimbabwe diaspora.

The amount of money being sent into Zimbabwe from nationals working outside the country is $1B per year and it’s a giant part of their local economy.  Without it, the country would be in worse shape than it already is.  Three to four million citizens are living outside their home country.

PipIT and ZymPay allow people to make cross border payments and pay for goods and services directly in real time.  Payment is received and confirmed simultaneously and recorded in Continue reading "Helping People $1 At A Time in A $1B Market"

The Final Close for WLV Fund 1-The Opportunity Costs of Fundraising

The other day, I saw a tweet from my friend Samir Kaji on how much VC’s are paid.  I laughed because it is heavily skewed toward industrial venture capitalists with a series of funds, not micro VCs.  Micro VCs are not in the game for the management fee. We are in it because we are passionate about founders, ideas, and long term returns.

A lot, if not most of the industrial venture capitalists can snap their fingers and generate a new fund full of cash from existing LP’s on their wait list.  It’s not tough. They are going to make a lot of money even if they don’t return their fund.   Micro VC doesn’t have a staff.  You are the bottle washer, the rainmaker, etc.

We aren’t a lot different than the founders we invest in.  They only make money on exits, same with us.

At West Loop Ventures Continue reading "The Final Close for WLV Fund 1-The Opportunity Costs of Fundraising"

The Judge Kavanaugh Hearing and Tech Policy

The circus that is going on in Washington isn’t too much of an actual hearing.  It’s a circus.  The votes are already counted and none of the Senators are going in with an open mind.   Senators are going in to advocate for or against entrenched positions or they are trying to feather their own political ambitions which is exactly what Cory Booker and Kamela Harris did Thursday.  They are both running for President in case you didn’t realize it.  By the way, Booker had his fundraising website go live prior to the hearing.  Cynical I know but you can’t be too cynical these days.

An aside, I disliked the stupid protestors during the hearings for justices nominated by President Obama and I dislike them now.  I am of the opinion that the room ought to be sealed against anyone from the public and the hearing simply televised.  A court Continue reading "The Judge Kavanaugh Hearing and Tech Policy"

The SEC Takes A Step In The Right Direction

The other day SEC chairperson Jay Clayton said he’d like to find a way for more private investors to gain access to private deals.  This is a good idea and it’s the first time the SEC has recognized that there is a disconnect between private and public markets which has occurred over the last ten to twenty years.  That disconnect has made it harder for average individuals to take risk and build wealth.

If we look at a lot of the money that is raised in crypto markets, I think some of it can be traced back to bad public policy.  When investors who want to invest are shut out of all opportunities, they manufacture their own. A friend told me some stories about crypto and how people who probably shouldn’t be trading it are trading it on their phones.  They work as laborers at a car wash.

On Continue reading "The SEC Takes A Step In The Right Direction"

Our Investment in PipIT Global

This week, West Loop Ventures closed it’s fifth investment.  We led the seed round for PiPiT Global.  PiPiT means, “Pay in Person Information Technology”.  PiPiT is based in Galway, Ireland.  Enterprise Ireland is co-investing with us in the round along with some other investors.  WLV has led 4/5 of the deals we have invested in.  My partner Kenny Estes will take a seat on the board of PiPiT.  Aditi helped us analyze the space and company.  It’s been a busy summer for us as we just completed a round with Holberg Financial.  This is a quicker cadence than we are used to, but when you see a great team and a great opportunity you have to strike.

This investment is a rare one for a fund like ours.  It’s not in US jurisdiction.  Most microfunds invest a day’s drive or bike ride from their headquarters.  When we Continue reading "Our Investment in PipIT Global"

Hunting Nazi Treasure

My friend Robert Edsel has done a lot for the art world.  He brought a lot of transparency where there was none.  When the Nazi’s took over Germany and Europe, they looted a lot of art.  They didn’t steal only art that belonged to Jewish citizens.  They also looted timeless cultural treasures from Christian churches all across Europe.

In the ensuing mess, it was sometimes impossible to track that art down.

Robert wrote two books about how the US tried to help rectify the problem.  One became a movie, Monuments Men.  The other, Saving Italy is not a movie yet but it should be.  As I get older, I have a new respect for Eisenhower as a classically educated man.  He is the one that installed the Monuments Men into the ranks.  He put the orders out to recruit art curators, historians and then put them in the field.  It Continue reading "Hunting Nazi Treasure"

Awe Inspiring Feat

Back in 1969, America landed on the moon. It was an amazing feat and awe inspiring for millions of people world wide. Essentially, it was accomplished and consumed the first part of my life. I was born in 1962. President Kennedy outlined a goal of putting a man on the moon. Seven years later, it was done.

The Franklin Institute is live tweeting the first lunar landing. You can follow them on Twitter here.

Here is a website of the actual radio transmission of the landing.  It’s super cool.

I remember staying Continue reading "Awe Inspiring Feat"

More Thoughts on Lanier’s Ten Arguments for Deleting Your Social Media Accounts Right Now

A few weeks ago I read Jaron Lanier’s Ten Arguments for Deleting Your Social Media Accounts Right Now. It helped consolidate some thinking on my part and I sent a few copies out to friends who I knew would have thoughtful and interesting responses. One that came back is very worth reading as it has a healthy critique as well as some personal reflections. The note from my friend after reading Lanier’s book follows.

He makes a reasonable case (obviously with a lot of room to dispute individual points) that social media is “bad” in general and a source of concern. Some of it is old hat but the way he puts it together is certainly helpful. It seems like it would be good if a lot of people read it.

I had two major concerns with it structurally. First, he positions the book as making arguments as to why *the

Continue reading "More Thoughts on Lanier’s Ten Arguments for Deleting Your Social Media Accounts Right Now"

Relentlessly Turning Input Knobs To 0

I’ve got a lot on my plate. I always do. Presumably, I like it this way because I’d change things if I didn’t. And yes, that’s continuous fodder for conversations with my therapist and with Amy.

I have always tried to ignore the macro, especially short-term dynamics, in the context of my work. I collect a lot of data and like to be well informed. I get this data from lots of different inputs. I regularly play around with the volume on the inputs as well as try different inputs.

One of my key inputs is reading books. I read 50 to 100 books a year (the number seems to be steadily increasing as I get older.) It’s a great joy of mine to sit and read, especially stuff friends recommend to me. I read across all categories and am game to try anything. And I’m willing to quit

Continue reading "Relentlessly Turning Input Knobs To 0"

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?"

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?"

The Foibles of Tax Bills

As the details of the tax overhaul come dribbling out, I noticed one yesterday that seemed odd.  There is a backdoor capital gains tax hike in the bill.  Predictably, there was some outrage since there seems to be something to rage about every day these days.  Cliff Asness wrote about how parts of the bill pick winners and losers instead of doing big-time tax reform.  Personally, I think capital gains taxes are basically a disincentive to invest and a tax on risk capital.  They are generally unproductive.  Here is the crux of the capital gains tax hike.

If you buy stock and accumulate a position, the old tax law let you sell the most recent stock you bought and pay the least gain.  In accounting terms, this is known as LIFO, last in first out.  It might even be the case that you Continue reading "The Foibles of Tax Bills"

Early Stage Financings Drop

When I read the Techcrunch article on the early stage finance drop it resonated with me. It is where we invest in as a fund, and it’s what HPA did when I co-founded it way back in 2007.  Virtually all of my investments since 2007 that haven’t failed are still in process.  Most are doing quite well, but you don’t ring the cash register until they actually exit.  Fred Wilson blogged about it and his points also hit home with me.  Especially this,

When I talk to my friends who do a lot of angel investing, I hear that they are being more selective, licking some wounds, and waiting for liquidity on their better investments.

When I talk to my friends who started seed funds in the past decade, I hear them thinking about moving up market into larger funds and Series A rounds.

He also said,

SPY Chart
Continue reading "Early Stage Financings Drop"

Should Platforms Like Google And Facebook Be Regulated?

If you don’t know who economist George Stigler is, you should. He received a Nobel Prize for proving the concept of “regulatory capture”. We see it again and again and again in all industries. Finance is where some of the most regulatory capture is practiced. Dodd-Frank is a textbook example as it made regulations so expensive only the big banks could afford to compete. The George Stigler Center at Chicago Booth discusses economy and state. How does economic and public policy intersect and what should we be doing? What are mistakes to avoid?

When I was in Torino, Italy at the i7, we talked about a lot of different issues. At one session a very well respected computer science professor from an Italian university asked, “Should Google and Facebook face some sort of regulation that limits their ability to compete?” It’s a compelling question.

One answer is that Continue reading "Should Platforms Like Google And Facebook Be Regulated?"

Avoid The Perception, or Temptation of Any Impropriety. Get Deskpass!

The tally of sexual harassment offenders that have been outed in the past few months is too long to name.  High profile journalists, venture capitalists, businessmen, and politicians all have been implicated.  I am sort of surprised we haven’t seen anything in reverse where a powerful woman does something to a man.  When I was in college I had it happen to me once.  I put an end to it.  Had a male teacher in high school do the same thing.  Not cool.

I don’t want to go into the tawdry details.  As a father of daughters, I am shocked it still goes on.  A friend of mine was at a business conference last week and a potential customer shook her hand with a room key in it.  When it dropped to the floor he said, “Just joking.”  Screw him.  Continue reading "Avoid The Perception, or Temptation of Any Impropriety. Get Deskpass!"

The Last Mile in Rural Tech

Over the course of the last ten years, I have spent a lot of time in rural Midwestern and Southern America.  When we drive through small towns, we always wonder what the heck people do there to exist.  Many of those small towns were “factory” towns.  When the factories left the towns were devastated. Another thing we have noticed is that rural areas are experiencing some of the exact same problems inner cities are. Drugs, out of wedlock babies, depression.  It’s real.  At least in the city, you can go to a library.  You can go and get a job by walking somewhere.  You have more of a chance in the city than you do in a remote rural area. The Illinois Policy Institute has been running a series called “Forgotten Illinois”.  It profiles various areas of Illinois that are struggling.  They have been neglected.  Government isn’t going to provide Continue reading "The Last Mile in Rural Tech"

What Makes You Happy? Experiences.

As an alum of Chicago Booth, I look forward to reading their magazine.  It has an article or five I always find interesting.  I tore one below out and wanted to blog about it. The study is “Cultivating Gratitude and Giving Through Experiential Consumption” by Jesse Walker, Amit Kumar, and Thomas Gilovich.  Buying experiences makes you more generous.  You know where you can do that? If you are a business, Kapow. In my own family, we quit giving material gifts at Christmas years ago. Now we try to organize an experience.  Even if we stay home, we do the Carter 12 Days of Christmas.  We pick something to do in the city that we haven’t done before and do it together.  We find we remember the experiences a lot more an a gift.  I remember being in a warm rainstorm in the middle of a Balinese rice paddy with my
Continue reading "What Makes You Happy? Experiences."

Deliberative Practice and Grit

While on vacation, I read a couple of books.  One of them was Grit (which I still have to finish).  It’s a great book. I was intrigued because her initial research on grit was with West Point cadets. Since I was an Air Force cadet, I totally understood. I made it through BCT. The reasons I left had nothing to do with the process. It had to do with being stubborn. It had to do with a lot of other things that had nothing to do with the Academy. BCT wasn’t easy. But, I survived it and was accepted into the Cadet Wing. Angela also found that people who go to two-year colleges and finish usually have a lot of grit. 80% of people that go to a community college don’t go on to a four-year school and get a bachelors degree. I left USAFA and went to a two-year Continue reading "Deliberative Practice and Grit"

Accounting Versus Economics When It Comes to Tax Policy

Trump is moving ahead with his tax plan.  Strategically, it’s smart to do this now because everyone in America just paid taxes.  I guarantee that no one will report it correctly no matter what their political bias.  People look at tax cuts with the green eyeshade of an accountant.  What do I mean by that?  You will hear statements like, “How are you going to pay for that?”  Or, “This tax cut is paid for by cuts in X.” In budget math, it might be like this:   Last year, we had a tax rate of 35% and realized $XXXmm in revenue.  If we decrease the tax rate to 15%, we won’t realize the same amount of revenue.  The budget people just imply a 15% tax rate on the same numbers as the 35% tax rate.  On spending, they do the same thing. If something was budgeted to Continue reading "Accounting Versus Economics When It Comes to Tax Policy"