What I Think We’re Talking About When We’re Talking About What We Can’t Talk About

It’s no longer worth it to vocalize controversial beliefs. Silicon Valley has become a PC echo chamber. I can’t say what I think without fear of reprisal.

These are not beliefs I personally hold but ones which I’ve heard expressed with increasing volume from people I know well and people I don’t know as well, in public spaces and in private conversations. Often these sentiments are expressed by 30 – 50 year old white men (and women) of economic privilege. I say this not to discredit their feelings or observations but because (a) it does seem to be relevant and (b) that’s the group which dominates my own social circles, which means that my POV is constrained by my own limitations in perspective.

But obviously since you’re reading this, I felt confident enough I had something to say that I’m wading into this conversation. Not to dissect a blog post.

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A Pitfall of Fundraising

If you don’t know, it’s really hard to raise a new VC fund.  One thing that happens when you raise is you get contacted by “brokers”.  These brokers don’t have the interest of the general partners at all.  They’ll give you a call or email you and tell you some song and dance about how many family offices they work with.  They will go on to tell you about all the fancy conferences they have and that they will put your fund in front of hand-selected family offices and do everything but guaranteed those offices will invest.

Then, they tell you the cost of those services.  It’s usually around $40K minimum.  Sometimes, it’s pay for a family office conference at some club.  The cost is minimum $2500.

I have never met a fund manager that has raised any real money from one of those Continue reading "A Pitfall of Fundraising"

BREAK THE INTERNET TO SAVE NET NEUTRALITY

We have just hours. The FCC is about to vote to end net neutrality—breaking the fundamental principle of the open Internet—and only an avalanche of calls to Congress can stop it. So we decided to help “Break the Internet” on our sites. You can also support on TwitterTumblrYoutube or in whatever wild creative way you can to get your audience to contact Congress. That’s how we win. Are you in?

More info here.

 

The post BREAK THE INTERNET TO SAVE NET NEUTRALITY appeared first on Feld Thoughts.

Big Innovation is Non-Linear

Humans tend to think in terms of lines.  Point A to B to C.  Great innovation draws a new line.  This occurred to me when I was reading Seth Levine’s post on how startups grow and thought about this.  While it’s intuitively obvious that innovation jumps the track and builds a new track, I don’t think it’s exactly clear when it’s happening.  Of course, the best innovation is when you look in the rearview mirror and wonder why you didn’t think of it.  Post an innovation being successful we wonder why we never had it before.

For what we do in B2B Fin Tech an entrepreneur likely spent a lot of time in the industry that they are building for.  They know what the problem is.  Sometimes the answer they come up with is pretty obvious except it was just them that Continue reading "Big Innovation is Non-Linear"

You Can’t Bullshit a Good VC, But You Can MAKE THEM BELIEVE

It’s the season of giving, so when my friend Nathan Bashaw asked for follow-up on my last post, well, I cracked open WordPress to deliver! Nathan wanted my POV on the difference between bullshitting to investors versus telling a BIG VISION CRAZY STORY.

So here we go…..

Bullshitting is telling prospective investors one story – what you think they want to hear and you’re not really committed to – while telling your team another story. Making Them Believe is articulating what your company has the chance to become, even if it’s dependent on lots of hard work and there’s lots of unknown between now and then. Remember, VCs are listening for what could happen if things go right, not wrong.

Bullshitting is building a spreadsheet with assumptions which

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To Raise a Venture Round These Days, You Need To Be a Little Crazy

None of our portfolio companies seeking additional dollars in 2017 had a “standard” venture fundraise. You know, the one where you advise the company “plan to take 2-3 months to get one or more term sheets and then another month to close.” Zero. Every one of them were feast or famine. 2-4 weeks to multiple termsheets (sometimes under a week!) or 4+ months of meetings and milestones before finding the additional capital (or in one or two cases, *not* finding the additional dollars) they needed.

The startups which took longer were mostly very solid businesses with quality teams. Companies where we would have certainly done our pro rata in a new round. My partner Satya summarized part of our reaction in this tweet:

CS Education Week In NYC

All over the city this week, students in NYC’s public schools have been celebrating CS Education Week by doing events and hackathons to showcase their coding skills.

Through NYC’s CS4All program, over 1000 teachers have been trained to teach CS classes in their schools. That is over 500 schools to date. Over the course of the ten-year CS4All program, over 5,000 teachers will get this training so that all 1700 school buildings in NYC will have at least one CS teacher and many will have two, or three, or even four.

Most of these 500 schools, and many others around NYC, participated in CS Education this week. I was out in the schools along with my colleagues at the Department of Education, CSNYC, and the companies that support us, including Google, Accenture, and Alexandria Real Estate.

I met this eighth grader up in the Bronx at In-Tech Academy, a

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Bitcoin Futures Are Coming. Are You Ready?

There are three ways to trade futures coming on Bitcoin.  The most under-reported one is Ledger X.  It’s not a true future, but a swap.  Technically they call it a SEF, or a “swap execution facility”.  Most of the time, swaps are exchanges of cash flows of an underlying financial instrument.  In Bitcoin swaps, it’s really only a long vs a short since there is no underlying cash flow.

CBOE and CME both announced futures contracts.  Both are settled in cash-US dollars.  Or, if you are a crypto-fanboy fiat currency.

A long time ago I had a meeting with Leo Melamed about listing Bitcoin futures.  Leo is a good friend and invented FOREX futures.  He is an innovator.  We talked at length about it but it was pretty clear CME wasn’t going to take the risk at that time to Continue reading "Bitcoin Futures Are Coming. Are You Ready?"

Exposing Yourself

Last night I went to the Economic Club of Chicago’s dinner with Ex-President Obama.  I took my daughter.  We saw some people we knew and we met some new people.  Dinners like that can be interesting if you take the time to try and meet people.

Some of my friends wondered why I even would go to a dinner honoring a President whose policies I almost universally disliked and thought could be done differently.  As an out of the closet libertarian, conservative Republican in Chicago it’s sort of like a gay person going to an Anita Bryant convention.

The reason, if you are going to be any good at anything you have to expose yourself to diversity, diverse ideas and listen.  If you are going to truly understand the other side you better truly know people on the other side so you know where they Continue reading "Exposing Yourself"

Internet Content Moderation 101

Since Facebook, Twitter and YouTube have all been vocal (to various degrees) about staffing up the human element of their content moderation teams, here are a few things to understand about how these systems typically work. Most of this is based on my time at YouTube (which ended almost five years ago, so nothing here should be considered a definitive statement of current operations), but I found that most of our peer companies approached it similarly. Note, I’m going to focus on user generated/shared content, not advertising policies. It’s typical that ads have their own, separate criteria. This is more about text, images & video that a regular user would create, upload and publish.

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What Is Meant By Content Moderation

Content Moderation or Content Review is typically a term applied to content (text, images, audio, video) that a user has uploaded, published or shared on a social platform. It’s distinct

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Which Crypto is Going to Win?

My friend Michael Kogan wrote a piece called Proof of Stake vs Proof of Work.

It’s worth reading because virtually all the popular blockchains today are “proof of work”. That allows the chains to become trust networks among other things. Proof of stake is different.

One of the critiques of cryptocurrency from Finance professors is there is no claim on any future cash flows embedded in the currency. A US Dollar has a “claim” on the future cash flow of the United States via the US Treasury Market. The only thing backing up the crypto market is expectation and trust.

Proof of stake allows a crypto to have a base value in the future of a blockchain. I think it’s important to note that not all proof of stake coins would be successful because not all blockchains are going to be successful. However, the ones that are should have value

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The Seed Slowdown

My pal Fred Wilson wrote about the “Seed Slowdown” today. The numbers show two clear trends:

1. 2015 was the peak of angel investing in technology startups in terms of dollars and number of deals.

2. 2017 is crashing in terms of the number of deals closed, with dollar amounts off significantly — but not as much.  

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Fred points out some of the reasons for the boom and bust, and I’m in agreement and expand a bit on what happened — since I lived it and recently wrote about it in my book (angelthebook.com).

There were two major trends contributing to the 2014/2015 boom:  

1. Facebook created a crazy number of new investors (e.g., Dave Morin, TWIST #216 and Chamath Palihapitiya TWIST #238 & #776), who were added to the legions Continue reading "The Seed Slowdown"

Power Laws in Venture Portfolio Construction

Every article that has ever given advice on investing in venture capital has said that you need to invest in a portfolio of companies, because each investment on its own is probably going to be worth nothing and if you invest in just a few you will almost certainly lose all your money. This is good advice.

If you want to know exactly how much to diversify, that’s a harder question. There are a lot of articles and posts out there that give you advice on how big your angel portfolio should be. I think they’re wrong. Maybe not in the advice you give, but in their methodology. They are a dead end.

Every person in venture, when pushed on why either so many companies don’t succeed or on why any young company deserves to be valued at $1 billion or more, says that it’s because venture-backed companies follow a

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Can We Beat The Robots?

In September, I was part of a delegation that advised the G7 on the future of work, big data, and artificial intelligence. It was called the i7. It was the first time it had been attempted and it was Diego Piacentini’s idea that he put into action. The video will give you a snippet of what we did while we were there.

Here is a link to the entire report.

How do we make the digital economy open, and secure? How do we make it work for everyone? These are hard questions to answer but I think Continue reading "Can We Beat The Robots?"

@bfeld v52.0

I turned 52 on Friday. Last year, when I turned 51, I wrote a post titled @bfeld v51.0 where I talked about several things that I wanted to change in v51 of me. This year, I enhanced my annual tradition of birthday reflection by reviewing my previous year’s blog post, writing a letter to my 52-year-old self, going for a 52-minute run, and then condensing the letter to myself into a public blog post (the letter was much longer.) I planned to do this on Friday and the day was set up nicely for it, but work got in the way. So I did this on Saturday instead.

Let’s begin by reviewing my v51 plans.

No Booze: I had a no alcohol goal for v51. Late in 2016 and early in 2017 I had several nights where I drank alcohol, but I think all but one was a special

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Is a Blockchain a Clearinghouse?

Many people think that clearinghouses can be replaced by blockchains.  The answer is it depends.  If we think about trade matching and having a transparent general ledger to show who traded with who and how many, blockchains can do that.  But, that isn’t the core part of clearing a trade.

Some blockchains have smart contracts that auto-execute.  They put in motion the things that have to be done in order for all the legal ramifications of the contract to be fulfilled.  Clearinghouses do that too.  In commodity businesses, clearinghouses inspect and approve of delivery facilities to make sure that the contracts cleared by their operations get fulfilled.  But, that’s just one piece of the clearinghouse.

The core thing that clearinghouses do which a simple blockchain does not do is get rid of counterparty risk and charge margins to customers.  The margin is

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Even If You Think You Are Thinking Big, Think Bigger

Yesterday I was privileged to have been invited to a University of Chicago class to judge some student teams that were working on startup ideas.  It can be very interesting to listen to pitches in this format because you get a window into some things undergrads have to deal with.

It also helps me think about things.

Sometimes when I hear a pitch, I see a bigger idea or a different path.  The best way to get that across is to ask a question not blurt out what you are thinking.  Asking a question gives you some insight into how the entrepreneur is thinking.

One of the common things that I notice about a lot of early-stage businesses is they don’t think big enough.  Think HUGE.  Total world domination is okay.  Try to reformulate what you are doing and then see what it looks like. Continue reading "Even If You Think You Are Thinking Big, Think Bigger"

For VCs, “What Could Go Right” Is More Important Than “What Could Go Wrong”

You ever notice how when someone leads off by saying, “Now, I don’t mean to overgeneralize but…” they almost always are overgeneralizing? Now, I don’t mean to overgeneralize but I want to tell you about something that reporters and pundits frequently get wrong when evaluating the venture-worthiness of a failed startup. They focus on the answer to the question “what are all the things which could have gone wrong here” versus “how valuable would this company have been if things went right?”

VCs are in the business of backing companies that have a substantial chance of failing and the earlier you invest, the more likely you are to see a zero return on your capital. What offsets this is that the successes tend to be outsized, returning 20x, 50x, or even 100x+. The notion that tremendous value is created by a very small percentage of startups, and the financiers

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What Are You Going To Do With The Money?

This is a question that isn’t considered often enough.  Investors ought to really think about the answer before they ask it.  It’s a critical question that an entrepreneur needs to answer.

One thing we know in our line of business is this.  If “hiring and expanding our sales/business development/marketing staff” isn’t an integral part of the equation, we become far less interested.

In Fin Tech, it’s all about sales.  The technical aspects of product development are generally not very difficult.  It’s understanding how to apply the tech to a problem in a new and different way that creates a bigger business.  Then, it’s selling it.  Just because you have a better mousetrap doesn’t mean everyone will knock on your door.

I think business schools and undergraduate programs should have a sales skill class as a required part of any curriculum.  If you Continue reading "What Are You Going To Do With The Money?"