Different Strokes For Different Exchanges

One of the thing that really bugs me about exchanges is that there is no real standardization.  Unless you hear from a friend or actually open an account, it’s hard to know how it really works.

Coming from the CFTC side of the business, there was a certain amount of standardization.  No payment for order flow.  No wash trading.  When you saw volume and open interest in a contract you could be relatively sure what the liquidity pool would look like. When you are trading, you have to be able to get in, and get out of a position.  Less liquidity and the price to play goes up.  The SEC side of the business is a lot murkier.

Stablecoins are the rage, but the way to hedge risk in crypto is via traditional means.  If you used futures, options and OTC bilateral derivatives, Continue reading "Different Strokes For Different 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"

Democratizing Food

Prior to investing via West Loop Ventures I made a bunch of angel investments.  One of the companies I invested in was Simple Mills.  I like to joke that I am the worst consumer products investor in the world because my track record proves it.  I invested in Simple Mills for a few of reasons.

  1. Virtually every person I respected said that Katlin Smith was a tremendous person and when you met her, watched her present, you got a very good sense that she was.
  2. I knew about the gluten free trend, had tried some of the products and tried Simple Mills and found their products to be delicious.
  3. Chicago is a good place to invest in a food company.
  4. She won the New Venture Challenge at Chicago Booth.

If you know about early stage investing and look at the above as multiple choice, only the first reason makes Continue reading "Democratizing Food"

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 Little Things

Americans have  been dressing down for years now.  Just look at Mens Warehouse.  Place is empty   When you go to a startup event if you don’t have a t-shirt on you feel out of place.  Essentially you should have on some All Birds, be a bit unshaven and maybe even not fresh out of the shower.  Business casual could be flip flops

I don’t like it.  Sometimes I think I should teach a class in etiquette and the fine art of working your way around a place setting but I digress…

I agree, you cannot tell a book by its cover.  Judging someone by their appearance can be short sighted.  The person that looks and smells like a miscreant might be the most incredible entrepreneur ever.  Remember, in business, you need to be able to flow seamlessly from culture to culture.  It pays to remember, it’s “the suits” that Continue reading "The Little Things"

The Great Migration

Was reading some data from the Cato Institute.  It has to do with Tax Reform and Interstate Migration.  The problem is the data is a little too fresh.  Tax reform was only passed in 2017, so 2018 is really the first year that people are feeling the effects of it.

One of the major effects is SALT.  That’s the ability of citizens to deduct state and local taxes from their federal taxes.  In the past, it’s always been allowable.  Now, it is not and high tax states are trying to find an end run around it.  They have even resorted to the courts, trying to characterize taxes we pay for public schools as charities.  Of course, the other tact might be to act responsibly and reduce the tax burden on citizens but who knows a politician that would want to do that? There is no clear relationship between the level Continue reading "The Great Migration"

Goldman Pulls Out of Crypto

Goldman Sachs announced they weren’t going to put together a big crypto desk after all.  Predictably, the value of all crypto’s fell.  This is a tell in a lot of ways.

First, crypto markets have basically been tanking since CME/CBOT listed their respective futures contracts at the end of last year.  Futures allowed holders to manage risk and the risk premium that was in the cash contract is slowly finding its way into the futures contracts.  Futures have a way of letting air out of balloons.

Second, it shows that the institutions still aren’t there when it comes to buying, selling and transacting in crypto.   They certainly are interested but because the SEC/CFTC haven’t laid down any hard and fast regulation, they really can’t jump in.  No institutional flow limits Goldman.

Third, it also shows that Goldman couldn’t set up a network.  A lot of the flow for the Continue reading "Goldman Pulls Out of Crypto"

Should You Use Traditional Broadcast Media For Marketing?

For years, the only way to reach consumers was traditional broadcast media.  Radio, Newsprint, Television.  Billboards.  With the rise of social media, a new medium emerged.  Virtually every brand is on social media and it’s super noisy.  When was the last time you bought anything off seeing a billboard?

For most, instead of interacting and leveraging social media they stand on their soapbox and shout.

Ted Wright of Fizz, Inc just wrote a piece on broadcast media.  It’s insightful, but so are some of the comments below.  Ted makes the case that word of mouth marketing (WOMM) is the new power player when it comes to ways to engage with customers.

Broadcast alone doesn’t cut it.

Companies need to contemplate a word of mouth marketing strategy and insert it into their broadcast campaigns so that influencers will see the message and spread it.  Ted says, “the best broadcast campaigns out Continue reading "Should You Use Traditional Broadcast Media For Marketing?"

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"

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"