1/We’re thrilled to share the news that @Riskalyze has been recapitalized by @HgCapital, one of the world’s leading software investors with $37B under management. This is a huge step forward for the Fearless Investing Movement. https://t.co/yOVEbmDDqP

— Aaron Klein (@AaronKlein) August 25, 2021

Aaron announced this today on Twitter so I guess it is okay to blog about it. I was an early investor in Riskalyze. As I was trying to build my street cred as a solo investor, I built a syndicate for Riskalyze and we invested. It paid off.

The whole story isn’t so simple. I met Aaron in NYC at Fred Wilson’s beer blast. It was Fred’s 10th anniversary party of his blog, and he invited some people who interacted with his blog. I met Andy Swan there, who became a Riskalyze board member. I met Donna Brewington White there, who became a talent agent for Riskalyze. I met Arnold Waldstein there who also invested. RIP Arnie, I know you are smiling.  Arnie and I didn’t agree on politics, but we agreed on Riskalyze and Aaron.

For some background, I took Professor Scott Meadow’s class at Chicago Booth on PE/VC. When he teaches that class, he tells a story about passing on Starbucks not once, but twice.  He passed because of valuation, and because he wasn’t getting preferred.  I always remembered the Starbucks story.  It didn’t hit home because of the lost opportunity.  It hit home because in investing, you have to be objective on each (Read more...)

The little seed fund we started back in November of 2016 has reached the end of its investment period.  We just closed our last investment.  The fund is closed to any new investments and we aren’t raising another fund. So far, we have had some nice markups on companies we invested in.  The total fund is doing well, but it will be a few years before we realize cash on cash exits.

This week, we invested in MLTech.  We met them through the Chicago Booth New Venture Challenge.  They placed in the Top 10.  This was a convertible debt seed round.  ML is hiring.  This is a tremendous opportunity for an engineer to hop on a great company in the most innovative space going right now, crypto.

We are excited to work with Leo, Markus, Ying, and the rest of the team.  We are really looking forward to being with them on this ride.  Prior to our investment, they had put together a strong cadre of angels in their round.  The team has extensive experience in the hedge fund or trading industry and will put it to use for ML.  Many of the angels are from the trading industry too.  When we chatted with our LPs about this investment, a lot of them were super enthused about it since they are actively trading crypto today.  This investment fits our thesis and was a fat pitch down the middle.

MLTech is a B2B FinTech platform for researchers to (Read more...)

Over the last five to seven years, I consistently have seen articles talking about the end of the bull stock market.  My favorite Permabull is Tim Knight of Slope of Hope.  The stock market has continuously hit new highs.  The Federal Reserve’s easy money policy has really propelled it.

Over the course of years since 2009 when quantitative easing forever started happening, the market has rallied.  It took awhile, but risk preferences changed.  People abandoned “safe” assets for riskier ones.  One anecdotal piece of evidence is the percentage change in startup valuations.  They are up by large percentages as new money has filtered into all stages of the space seeking returns.

I have watched it and tried to keep my confirmation bias out of it.

In April of 2020, my wife woke up nervous and wanted to sell.  We sold some stock.  I reinvested after the market kept going up.

However, today is the first day I ever took a look around, put my finger in the air and thought, the bull is broken.

Why?  More importantly, why don’t I think there is anything the Fed can do about it?  Permabears have hated the Federal Reserve since at least 1997 when the Fed seemingly propped up the tech sector.  The “Greenspan Put” is not a colloquialism for nothing.

1.  Ramp up of Federal Spending.  We always spent way too much, but what they are doing and have done since Covid is unprecedented and stupid.  It’s irresponsible.
2.  Covid policy.  It’s not (Read more...)

I remember after 9/11, there was a fervor across America to make the bad guys pay.  It took until 2003, but President Bush was going to make the bad guys pay.  The bad guys were in Afghanistan and Iraq.  Remember the hearings at the UN?  Hans Blick said there were no weapons of mass destruction.  Colin Powell said there were.

Those hearings turned Powell into a Democrat.

Turns out, there were WMD in Iraq and they spirited them out of the country before we got there.  In early battles, we decimated the Iraq army, and decimated the Taliban.  From all news reports, we were “winning”.

Then came an election and Bush put up the banner, “Mission Accomplished”.  That was the tell.  No one knew the mission.  When you don’t know the mission, you can’t win.  They tried to articulate the mission, but even when they said exactly what it was the fighting on the ground said otherwise.

The war was terribly politicized at home.  Every day and week, mainstream media slanted their coverage.

I remember thinking back then that Bush will go down as the President that remade the Middle East, or go down as one of the biggest goats in history-and that doesn’t mean greatest of all time.  Bush didn’t remake any of the Middle East countries formerly trapped by radical Islam to be a peaceful loving democratic republic.

Obama didn’t do much more.  He extended the war.  He was always an uncomfortable war president having no knowledge of (Read more...)

As the bloated infrastructure bill makes its way through the US Senate, a donnybrook has ignited about regulation on cryptocurrency.  The initial bill had an amendment that was agreed on by everyone, or so the world thought.  Then uber-Washington Machine politician Democratic Senator Mark Warner of Virginia, and retiring Machine politician Republican Rob Portman threw a wrench into it.  Democratic Senator Kristin Sinema of Arizona also joined in sponsoring the amendment.  The White House and US Treasury signed on to the Warner Amendment.

The competing amendment sponsored by uber-liberal Democratic Senator Ron Wyden of Oregon, RINO Pat Toomey, and Republican (Trumpish) Senator Cynthia Loomis of Wyoming is the one the crypto industry would like to see passed.

Lost in the noise, Republican Senator Ted Cruz of Texas offered up the idea that the US shouldn’t regulate crypto at all. Cruz is probably right if you want to see competition and innovation pick winners and losers in the crypto industry.  Unfortunately, once a pen has been put to paper by a government bureaucrat, there is no shortage of paper or ink.  They are often ideological and driven by their pursuit to control outcomes rather than for the good of the people.  I fought a transaction tax on trading for years and they are still fighting it.

I have some experience with government regulation as it pertains to commodity markets.  I was a part of the CME Board when we engaged in the CFMA in 2000.  At the time, OTC derivatives didn’t have (Read more...)