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?"
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 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.
Continue reading "Is This A Market Melt Down?"
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"
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, Continue reading "Early Stage Financings Drop"
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?"
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!"
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"
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."
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"
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"
On May 15th with the cooperation of:
West Loop Ventures
is happy to host an event on Financial Technology Security. It’s going to be at Illini Center in downtown Chicago. We will convene on the 4th floor at 200 South Wacker at 4:30pm-6pm. There is a small fee to cover some incidental expenses. Sign up here.
Joe Rickard is the CTO of Incapital
, and Stelios Valvanis is the CEO of OnShore Security
. They approach financial internet security from different angles. Joe from an enterprise perspective. Joe also has a unique problem because Incapital has a high profile CEO. How do you keep your company secure?
Stelios looks at it from an institutional perspective. How do you keep your bank and the banking system secure?
You will be part of a lively discussion. Joe and Stelios will Continue reading "Financial Services Internet Security; What Should Be Your Concerns?"
Most of the stuff you read these days is all politics, even when it comes to real data. Here is an example. Recently, Trump’s Treasury Secretary Steve Mnuchin said it would be 50-100 years for robots. I’d love to see the data he’s looking at. Certainly, they’d like that to be true. Of course, they do have a lot of more pressing things on their plate right now like tax reform. Here is the quote from the Axios story:
On AI supplanting human jobs: “it’s not even on our radar screen…. 50-100 more years” away. “I’m not worried at all” about robots displacing humans in the near future, he said, adding: “In fact I’m optimistic.”
Former Treasury Secretary Larry Summers wrote an article with a differing opinion. Jeb Bush thinks it is imminent. PWC says that 38% of all US jobs are subject to being disintermediated Continue reading "How Long For Robots?"
Michael Siebel of Y-Combinator wrote an excellent blog on equity splits among founders. I love some of the points he made and they cannot be underestimated. The conversation about splitting equity will help you have a conversation that helps founders learn about each other.
I find the “priced round” versus the SAFE or Convertible Debt round conversation is similar with entrepreneurs.
Brad Feld also has a nice post up about how to split equity and why. In his book, Do More Faster, they talk about how to split founder equity. The post I linked to from Brad is from 2011. Nothing has changed and it still can be a thorny issue. I think Brad’s advice is right. Invest the time needed to get the founder’s documents right. It might be frustrating, and you might try and avoid it. But, it’s important because it’s part of the foundation of the Continue reading "The Founder Equity Split"
When things get tough inside companies, one of the first budgets to get hacked is entertainment. It’s an easy hack. One of the reasons it’s an easy thing to cut is there is virtually no data-driven metrics around it. “Hey Salesperson, you took out clients and did several events, how much did that contribute to your bottom line?”
One of the companies I invested in is Kapow. Kapow makes customer and employee entertaining a snap. It creates experiences for people that they remember. The other secret sauce is they can create data and deliver ROI so the bean counters in the company know what they are getting for their spend. Kapow is based in Chicago but has operations nationwide.
Kapow wrote about what they do here.
Kapow has rolled out Kapow Enterprise. It’s not just a best-in-class platform. It is the only system that can provide many insightful metrics Continue reading "ROI on Entertainment Spending"
When I speak to students at Universities about entrepreneurship and what I am anticipating for the future, we eventually talk robots, artificial intelligence and machine learning. Those three things are going to put a lot of people out of jobs. JP Morgan is now using software to do things it took lawyers 360,000 hours to do.
The program, called COIN, for Contract Intelligence, does the mind-numbing job of interpreting commercial-loan agreements that, until the project went online in June, consumed 360,000 hours of work each year by lawyers and loan officers. The software reviews documents in seconds, is less error-prone and never asks for vacation.
JPMorgan’s total technology budget for this year amounts to 9 percent of its projected revenue — double the industry average, according to Morgan Stanley analyst Betsy Graseck.
The finance industry is one industry that is always on the cutting edge Continue reading "No Occupation Is Immune From Automation"
A lot of the time during this process,
I am on my computer reading stuff. We talk. We have moments of intensity. Then, we retreat. My father in law passed yesterday. Hospice people are really great. One of the most terrifying things of the whole experience was that I knew someday I’d be there. I haven’t sorted out my feelings on that yet-but I have never really had a fear of death. Maybe I do now. I don’t know.
Apologize for the rambling nature of this blogpost, but that’s the way things are.
Here are a few things that make me think that what I am seeing isn’t really what is there. The mainstream media shouts from a soapbox about causes they care about and want you to notice. I am mindful that in urban centers, there is a lot of discord because that’s where the Democrats live. The
Continue reading "Things That Make You Go Hmmmm"
“With or without regulation by the federal government, the principle of ‘clients first’ is here to stay.”
– Jack Bogle
When I read the Department of Labor was wading into financial regulation, my first inclination was dread. I didn’t trust President Obama and thought that the DOL was certainly guilty of regulatory over reach. Dodd-Frank was an utter disaster. It wouldn’t have been the first time a regulatory agency in the Obama administration crossed the line. I was glad Trump signed an executive order requiring regulators to eliminate two regulations for every new one they established. The first time I had any sort of meaningful discussion about it was when I was having coffee with Aaron Klein. Aaron is the CEO of Riskalyze
. I am an investor.
The regulation seemed really stupid to me. Who wouldn’t have the principle of “clients first”? Of course, if you read Josh Brown’s Continue reading "Trump Loses on Department of Labor Law"
This Sunday is the big game. Super Bowl. It’s become something of a national holiday. Of course, I will be in Detroit, Michigan playing in Sam’s Game. Read about it here.
But, I was thinking about how America entertains for the Super Bowl. Lots of get togethers. People come that you may or may not know. I have been hanging out in NextSpace
and at least once a week I buy donuts for the space. One of our members is gluten free. Gluten makes him physically ill.
I was thinking, how many people are going to have Super Bowl parties where they might not know if a guest is sensitive to gluten or not.
Enter Simple Mills.
The recently had a blogpost about 5 super easy things to make
that will be safe for your gluten free friends to eat. Plus, they taste amazing anyway so your other Continue reading "It’s Simple To Care of Your Gluten Free Friends"
There is a lot of discussion of fake news these days. Welcome to the world of entrepreneurship. A lot of people follow the “fake it till you make it code”. I think it invites trouble. There is a big difference between selling a vision and selling bunk. With Theranos and others
in the entrepreneurial world getting a big comeuppance, it’s something to consider. Lending Club, Zenefits, and others on the list of famous companies that generated a lot of publicity who faked it create a perception that casts a shadow on everyone.
It’s not that you should be brutally honest and show the underbelly of everything. But, you shouldn’t lead someone astray. There is a difference.
Yesterday, President Elect Trump called out CNN for publishing fake news
. Sometimes fake news is a matter of framing and opinion. Perhaps you don’t believe something, see an article that counters that belief and Continue reading "When Stuff is Fake"
When we were raising our fund
, I still made a couple of angel investments. One of them launched their platform yesterday. Build Truss
is going to disrupt the commercial real estate market.
The low end of the commercial real estate market really sucks. For owners that want to lease smaller spaces, it’s really hard. Commercial Real Estate brokers don’t make money leasing a 5000 or 10000 square foot space. They make the big bucks by leasing out large floors in buildings over multiple years.
For people looking for that small office, it sucks as well. No one wants to pay attention to them. Searching for an office is time consuming. It’s one dead end after another. Doing the paperwork for the lease is painful as well.
Build Truss fixes
I have made prior investments in the commercial real estate space. It’s a core competency of Chicago. Continue reading "A New World In Commercial Real Estate"