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?"

Small Thought About Working With a Board of Directors

Entrepreneurs need to manage their board members.  There is a lot written about this.  Just DuckDuckGo the internet and you will find plenty of advice.

At the same time, board members need to know their role.  They aren’t operators.  They are support personnel.  They are liquidity creators, not liquidity takers.  Additive to the process.  The company isn’t their toy to make them wealthy.  I like to tell entrepreneurs that when the journey is done and the cash register rung, I hope they buy an island or something like that.  All I want is a Porsche that goes fast and fits my frame. Maybe I should switch that to a Tesla?  No, a 1987 slant nose turbo will do the trick.  Stick please.  I am joking of course but I hope you get the point.

If you run your board right, there will be a cadence to it.  Decks will go Continue reading "Small Thought About Working With a Board of Directors"

City Mouse, Country Mouse

Read William Galston’s column in the WSJ.  He was describing the growth of cities in America.  In his analysis, he compared the vote in the cities to the candidate running.  I don’t think this is a good correlation at all. For example, in Chicago which has been run by a strong handed Democratic Machine for 100 years, having the city vote overwhelmingly for a Democrat and trying to make a statistical inference from it is pretty useless.  Other cities in America are the same.

The broader point that he is making is 100% correct.

Berkeley economist Enrico Moretti’s “The New Geography of Jobs,” is a book you should read to get a sense of the difference between the city and the country.

He writes,

Mr. Moretti’s book offers a compelling and simple explanation of the most fundamental economic trend of our time—the widening split between dynamic urban areas on the Continue reading "City Mouse, Country Mouse"

Ycharts Adds Crypto For Free

Great news for investors.  Ycharts platform just keeps getting better and better.  No need to pay for a new add on.  Ycharts just added data for cryptocurrencies.  YCharts enables people to make smarter investments. At no additional cost, wealth advisors leveraging YCharts can now track, compare and understand current and historical end-of-day pricing data for the top 25 cryptocurrenciesby market cap.

Wealth advisors are being peppered with all kinds of questions on cryptocurrencies.  Having data from Ycharts at their disposal to do research will help them answer those questions with actionable data that will help guide decision making.  Potential use cases include comparing Bitcoin ETFs to Bitcoin, understanding the potential risks and benefits of exposure to Bitcoin and comparing cryptocurrencies to other asset classes as part of a diversification analysis. With historical data on cryptocurrencies now available in YCharts, users can also compare cryptocurrencies to oil, stocks, bonds, Continue reading "Ycharts Adds Crypto For Free"

Ycharts Adds Crypto For Free

Great news for investors.  Ycharts platform just keeps getting better and better.  No need to pay for a new add on.  Ycharts just added data for cryptocurrencies.  YCharts enables people to make smarter investments. At no additional cost, wealth advisors leveraging YCharts can now track, compare and understand current and historical end-of-day pricing data for the top 25 cryptocurrenciesby market cap.

Wealth advisors are being peppered with all kinds of questions on cryptocurrencies.  Having data from Ycharts at their disposal to do research will help them answer those questions with actionable data that will help guide decision making.  Potential use cases include comparing Bitcoin ETFs to Bitcoin, understanding the potential risks and benefits of exposure to Bitcoin and comparing cryptocurrencies to other asset classes as part of a diversification analysis. With historical data on cryptocurrencies now available in YCharts, users can also compare cryptocurrencies to oil, stocks, bonds, Continue reading "Ycharts Adds Crypto For Free"

A Way To Make Your Day Go Better

One of the things that get broken up when you travel is routine.  Sometimes that is a good thing.  It’s good to get out of your bubble and some comfort zones to experience new things.  However, it can also be totally distracting.  Distractions hurt your productivity.  That’s not a good thing.  If you travel for your job, you know what I mean.  Sometimes it stinks to take over a desk or a conference room in the place you are working and you just need your own space.

In our month away, we did something a bit different.  Because we can work from anywhere, often we will go to a coffee shop and sit down.  Or, we will just hang in the place we are staying at and do our thing.  This time we tried Deskpass.  Deskpass has a directory of coworking Continue reading "A Way To Make Your Day Go Better"

Why ICO Petitions Came From the SEC

Did you think that it was going to remain the Wild West forever?  Even in old westerns the Marshall or the Sheriff eventually rode into town.

Yesterday, the SEC finally issued petitions to several firms in the process or post the process of doing ICOs.  I think this is a good thing.  Back in the day, OTC commodity derivatives like swaps were the wild wild west.  Their notional volume was triple or quadruple the volume in listed futures contracts.  Part of the Commodity Reauthorization Act in 2000 was to give legal certainty to these derivative swap contracts.  The legal certainty created an environment where the derivatives market could grow faster.

Doing the same with ICO’s will allow the market to get bigger more quickly.

There are several issues here.  For example, many investors, lawyers and VCs are uncomfortable with pre-sold tokens.  I think they ought to get comfortable with it Continue reading "Why ICO Petitions Came From the SEC"

Heading Back From San Francisco

We have been in the Bay Area all month.  It’s been nice, but it’s been chilly the past couple of weeks.  People had their down coats on!  It’s nice to have the sun out though.  We start driving back today.

It’s been great to really delve in and experience the daily life here.  We did two weeks in Silicon Valley and two weeks in Noe Valley.  We took public transportation.  We walked.  We drove.  We Ubered.  Sometimes we ate out but we shopped and cooked at home in both places.  We got reacquainted to old friends and met some new ones.  We saw some family.  If I didn’t get the chance to see you, I apologize.  There were a couple of people that read this blog who I tried to meet up with and I failed on my end to make it happen due to scheduling and just learning how Continue reading "Heading Back From San Francisco"