Professor Harry Davis, on Leadership

Leadership is hard. There are no classes in school for it unless you go to certain schools. Military academies actively train leaders. At those schools, the first step is learning how to follow.

One of the reasons I signed on with Raman Chadha and his ideas around The Junto Institute is that there is a gap in education around leadership. As Raman pointed out and found, we teach people to pitch. We teach people accounting, marketing and finance. We teach them operations. We don’t teach them to lead.

I never realized the wisdom behind Schofield’s quote until later in life. It’s pretty succinct and genius. It helps to know that it came at a time when the military was learning new ways to lead.

Not Continue reading "Professor Harry Davis, on Leadership"

Are Companies Responsible for Employees?

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?"

Health Tech Conference in Chicago

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"

Compete Compete Compete

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"

Your School

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"

When You Fail, Try To Have Fun

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"

A Slight Pivot

Startups talk about pivots. Sometimes they are radical but most of the time you can think about a pivot like a person going on a long trip.  You run into unexpected construction on a road and you take a detour.

Venture funds sometimes do the same thing.  Andreesen-Horowitz recently announced a brand new fund dedicated only to cryptocurrency.  Other funds raise “opportunity funds” as their situations change.  People forget that VC funds are often as entrepreneurial as the companies they invest in.

Our fund started out as a B2B Fin Tech fund.  It still is.  We don’t invest in anything that is consumer facing. Our wheelhouse is Big Finance.  When we started out, we hypothesized that our deal flow would come from places like Chicago and New York City.  So far, we have invested in two Chicago based companies and one New York based company.

However, we have seen a Continue reading "A Slight Pivot"

Are You Smart or Lucky?

One of the hardest things to do is when good fortune happens to you is if you were smart or lucky.  When I was trading everyday, sometimes I was lucky. Sometimes I was smart.  Sometimes, I just had an edge that not too many other people could exploit.

It’s really hard to predict the future with any accuracy.  The global warming folks are finding that out.  Back when I was a kid, scientists predicted we’d run out of oil, food, and the world would be overpopulated.  None of those predictions panned out either.  All of us tend to think we are smarter and more prescient than we really are.  By the way, those that are writing about how Bitcoin will die because it consumes too much energy are probably wrong.  If it’s valuable enough, humans will figure out a solution to the problem.

As Bitcoin makes it’s precipitous Continue reading "Are You Smart or Lucky?"

Here’s To The Crazy Ones

Steve Jobs said,

Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently — they’re not fond of rules… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things… they push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do.

People in general are risk averse.  If you don’t look like what the heuristics or spreadsheet says then you are easy to pass over.  The people that pass you over answer to a boss.  It’s easy for them to justify the pass.  One friend of mine said when selling to corporates, find out Continue reading "Here’s To The Crazy Ones"

Deals Get Screwed Up

A lot of the time we point to deals getting screwed up and Harvard Business School writes a case about some entrepreneur somewhere that made the wrong decision or didn’t execute and blame for failure gets delivered upon them.

Often times, this is the case.  But, not always.

Sometimes a VC firm will totally screw up a deal because they don’t have the company’s best interest at heart.  They are only concerned with themselves.  One of the things we have been very cognizant of as we build out our fund is to be very transparent with entrepreneurs.  In some cases, they don’t like the transparency.  It chafes on them.  But, while we might be incorrect it’s the way we see it.

I have always been transparent.  It comes from my time on the floor and the time I spent at USAFA.  I probably share too much.  It can be used Continue reading "Deals Get Screwed Up"

Regulation and The Retail Investor

One of the things that came out of the lunch we did at the University Club the other day was the focus of the SEC. There are several agencies and independent organizations that regulate finance and the SEC is at the top of the pyramid.

I have spoken to both SEC and CFTC regulators on cryptocurrency. They seem to be working together and are not engaged in turf battles. Right now, they say that’s the case and you have to take them at their word. In past engagements, like the CFMA Re-authorization in 2000, it was a brutal bare knuckle battle between agencies and the industries they regulated.

Here are a couple generalizations.

When we think about markets the CFTC regulates, they are not targeted to retail investors. They exist for the risk management and risk transfer of professional investors and big time industrial organizations. That requires a different touch Continue reading "Regulation and The Retail Investor"

Scheduling Can Be A Nightmare

One of the trickiest thing in this day and age is scheduling.  It should be a snap since it’s all digital.  You’d think a lot of people wouldn’t need assistants but I see a lot of job openings for assistants.  Older people in my generation often have trouble with the links.  We aren’t hip.

My partner Kenny is a stickler for a calendar.  I don’t blame him.  He came from the trading tech world and it was very easy to schedule your day using a digital link.  It’s been a process we put together right away when we were building our fund that I value.

I used to be very random at how my calendar went.  Instead of me controlling my calendar, it controlled me. I really like the way Kenny set our links up and it makes things go a lot more seamlessly with less screw ups.  We use Continue reading "Scheduling Can Be A Nightmare"

Perspective on Tech: There Will Still Be Jobs

Our first daughter was born right about the time this ad ran. Pretty amazing how things changed 16 years later.  As this article pointed out, almost everything on this piece of paper now fits in your pocket and costs you a lot less.  This is especially true if you compare 1991 dollars to 2018 dollars. $1 then is worth $1.84 today.  The cumulative inflation rate is 84%.  The calculator that now is swag that you get for free was around $30 when I was in high school.  It also didn’t have a solar battery.  You can see the effect of new technology on the price of it.  It’s advertised for 39% off at $4.88 (on the way to please just take it).

Bitcoin enthusiasts will focus on the 84% inflation rate but they will be wrong.  Bitcoin can divided.  Gold hasn’t appreciated in value since Continue reading "Perspective on Tech: There Will Still Be Jobs"

What’s It Mean to Fire Fast

Yesterday I was at the Foley and Lardner Tech event in Chicago.  The first panel had some successful entrepreneurs on it talking a bit about their journeys.  One of the questions was on getting rid of people that were not propelling your company forward.

I want to make sure that everyone understands we are talking about employees here, not founders or co-founders.  That’s a different issue entirely.

One entrepreneur said, “Imagine yourself sitting behind your desk and having a person come into your office and tell you they were leaving the company.”

If you are happy they are leaving, it’s probably the right decision.

We have trouble firing people for a lot of reasons.  One is our own admission of failure.  It was probably the entrepreneur that hired the person in the first place.  It’s sometimes hard to admit that it’s not going well because you feel like you Continue reading "What’s It Mean to Fire Fast"

The Drag Along Right

Enough has been written about drag along rights that I don’t want to write specifically about them.  Here is what it looks like in a term sheet:

Drag-Along Agreement: The [holders of the Common Stock] or [Founders] and Series A Preferred shall enter into a drag-along agreement whereby if a majority of the holders of Series A Preferred agree to a sale or liquidation of the Company, the holders of the remaining Series A Preferred and Common Stock shall consent to and raise no objections to such sale.”

Brad Feld does a fantastic job describing what they are here (2005)

I have done enough deals to recognize when a lawyer doesn’t really understand venture.  Because of the explosion in various startup communities across the US and world wide, along with the explosion of crypto, I think it’s worthwhile to revisit the term and really understand Continue reading "The Drag Along Right"

Sometimes It Doesn’t Work Out

One of the things that people hear about when it comes to startups companies is the rate of failure.  The failure rate is 50% or more depending on how you measure it.  If you are an investor with eyes wide open, you know that this is part of the game going in.  The path to exit is not linear and the path to failure is often not linear either.

The venture business is a home run game.  Other VCs have posted about how they swing for the fences.  Some have posted about how it’s the middling part of their portfolio that takes a lot of their time but if they can get it from 2x to 3x it sure makes a big difference in return.

Companies weave their way through this process. Abrupt failure is rare.  Usually it’s death by a thousand cuts and companies just seep blood until they Continue reading "Sometimes It Doesn’t Work Out"

Ycharts +TD Ameritrade

The news came out last week but it is worth highlighting. Ycharts integrates with TDAmeritrade now on their Veo One platform.  Ycharts is a B2B Fin Tech company I invested in back in 2009.  Their target market is RIA’s, wealth managers, hedge funds and other firms like that in the investor universe.

Ycharts is like a Swiss army knife for investors.

I have used it successfully to pick strike prices for options trades.  It is the best research terminal on the web.  It’s not for moment to moment trading. It’s an example of the quiet things going on behind the wall that you might not notice because it’s not on your phone.  But, they add a lot of value.


A Tweetstorm Thought

Was in NYC the past couple of days to see some folks and to attend Stocktwits East. Listened to the panels and something occurred to me.  I thought I’d explain it deeper in a blogpost.  One panelist said, “The most money is made during chaos.”

If we think about some really great times to initiate positions, it’s in times of extreme stress.  If you bought the market in 1987 or 2009 after the huge drawdown you made big money.  In the flash crash, some companies were trading at prices way way below book value and if you had the chance to buy them you had a long term winning trade.

When the broader economy is in recession or under a lot of stress it is usually a great time to start a company.  There were a lot Continue reading "A Tweetstorm Thought"

Headed to Wall Street

Today I am flying to New York City.  If you are attending Howard Lindzon‘s Stocktoberfest East, hopefully I will see you there.  I am looking forward to it.

As a person who is not of Wall Street I have always looked at it differently than a lot of people.  I grew up in the pits of Chicago.  We traded our own dough and didn’t use OPM.  We had a lot more in common with Roman gladiators than the suits in NY.  The markets were different, cleaner in my opinion, with less conflicts.  I never understood the whole market maker system.  We prohibited order fillers from even trading, much less taking the opposite side and “adding liquidity” to the market when they felt the need.

At the same time, NYC is one big gigantic capital market.  Only a couple of other cities on earth might rival it, London and Continue reading "Headed to Wall Street"

Do Seed Funds Seed?

Saw some action on Twitter yesterday about how seed funds are not leading deals.  They are waiting.  They are making a mistake.  Being a VC is about having conviction.

I agree very much with Charlie O’ Donnell’s post. If you are a seed fund and you aren’t leading seed deals, why are you in business?  If you are an angel group and find it hard to lead deals, I get it.  It’s awfully hard for an angel group to lead.  Angel groups need to have efficient internal processes to move quickly enough so that it is easy for them to work with seed funds.  By quickly, I mean less than three months.  They need to be very Continue reading "Do Seed Funds Seed?"