You Can Beat Fascist Jack


This post is by Jeff Carter from Points and Figures

When Twitter ($TWTR) deleted President Trump’s account, it set off a chain reaction.  It also should have woken everyone in America up to the power that Big Tech has.   Big Tech is more powerful than Congress by far.  To be clear, this is not about Trump or whether you like or hate Trump.  What is going on today has far bigger implications.

As a person that has been angel investing and interfacing with Big Tech people since 2007, I think I have a pretty good understanding of how they think and more importantly, what they think of you.  They hate your guts.  You are a pawn to be exploited in order to put money in their pocket.  They do not care about you despite their public proclamations. They are some of the phoniest people in the world.

It is a known fact that free markets and millions of people making individual decisions have more impact than anything else. Free markets are messy.  It is possible to build an entire tech ecosystem that caters to conservatives, but it takes a lot of time and money.  In the short run, conservatives can take action and have an outsize influence.  Twitter stock is down 16% since banning Trump.  Twitter has banned a lot of other accounts since.

The stakes are high and the ramifications are significant because members of Congress enabled and encouraged Big Tech.   It’s doubly true when a PRAVDA like Big Media complex locks arms with the leftists in government and Big Tech to spread falsehoods or just not report the actual news.  For the youngsters out there, PRAVDA was the media mouthpiece of the old Soviet Union.  It would be like Chinese media today.  They only report what the Communists want them to report.

The current environment can make conservatives and freedom-loving people lose hope as if there is nothing they can do.  But they are wrong.  You can take action and you can win against some Big Tech companies.  For others, you can give them a pretty good body blow.

Let’s look at Fascist Jack’s company Twitter.

I took a look at Ycharts.  Twitter’s profit margin is only 3%.    They are vulnerable.

Big Tech companies thrive on network effects.  But, network effects can be broken.  One of the reasons Big Tech and Big Government had to move on Parler was that it was a viable competitor and it was taking away the network effects that Twitter supposedly had.  Parler exposed Twitter.  Leftists could not tolerate it.  Twitter had no network effects like Facebook and Google.

As I said before, Conservatives need to realize that they are in a fight for their lives and their livelihoods.  In the New Jim Crow, left-wing Democrats are firing them right and left.  They must take the fight to the enemy and the enemy is people like Fascist Jack and most of his employees.

Let’s concentrate on one company that hates you at a time.  Win the small battles, win the war.  Use free markets to your advantage.  Free markets and bankruptcy or missed earnings will bring discipline far faster than a stupid Congressional committee.

Here is the battle plan.

  1.  Every freedom-loving person in the world has to delete their Twitter account.  Just do it.  I did.  There are competing platforms.  Gab.com, NottheBee.com, Codias.com, and hopefully Parler will make a comeback. FWIW I tried MeWe and it’s super buggy.  I don’t recommend that one.  I don’t have an investment in any of these.
  2. Ignore every statement or apology from anyone in Big Tech.  They hate your guts and they are just playing you.  Don’t fall for it like Charlie Brown does with Lucy and the football.  They fired the first shot.  We will fire the last.  There is no reconciliation, there is only unconditional victory.
  3. Conservative bloggers and Conservative publications have to delete their “Share on Twitter/Facebook” buttons. Make it hard to share.  We are the product and they monetize us.  Without conservatives generating content for them, it hurts their bottom line.  Do not support the enemy.  Remember, they hate your guts and they want to deplatform your publication anyway.
  4. ALL Republican politicians at every level of government and their staff should delete Twitter.  You are the leaders, lead.
  5. Conservative bloggers and publications should not link to Twitter, or quote directly from Twitter/FB.  Don’t post a tweet from AOC or any other schmuck on the other side.  All it does is inflame people and provide dopamine hits.  If you must quote the idiots who hate you on the other side, just lift it, and put it in quotes with no link.  No need to prove they are crazy by linking, we already know that.   Plus, when you quote them you give them credibility and a platform.  Ignoring them is more powerful because no one likes to be ignored.
  6. Get rid of any browser made by Big Tech.  Brave.com is the one I have been using.
  7. If you can change your email.  Get off Google mail or Apple mail and go to ProtonMail.com or some other private secure mail service. That’s an easy switch.  The tougher switches come later.  I will blog about them as I figure them out, or someone else figures it out.  For now, deleting email is just a shot across the bow.  I have used Apple mail for years and years and I am in the process of switching my Apple mail to Proton email.  I can’t do it for my business.  But, small actions by everyone make a difference.

Turning Twitter into a left-wing echo chamber will kill it.  They will go from a 3% profit margin to a loser.  Losing millions and millions of users, even if you don’t tweet and are just there to “watch” will hurt Twitter in the eyes of Wall Street analysts.  Twitter will engage in accounting hocus pocus to try and cover it all up but they cannot do it for very long.  In the end, all the numbers will come out in the wash and Wall Street will downgrade the stock.

Looking at a chart, Twitter is right around $45 per share.  It can easily dip to $20 per share.  Once momentum takes over, you never know where it can go.  They could be out of business by the end of 2022 if conservatives work together to make it happen.  Wouldn’t that be nice?

Just remember, every time you tweet or visit Twitter, you are sticking the knife and twisting it in your fellow conservatives back.  You are helping the people that want to destroy capitalism and free markets.  You are assisting them in destroying free speech and competition.

 

The post You Can Beat Fascist Jack first appeared on Points and Figures.

Happy New Year


This post is by Jeff Carter from Points and Figures

We all are anxious for 2020 to be over.  But, I don’t think 2021 will be that much different until the last quarter.

I am grateful for people who read this blog.  We had a hiccup midyear and I am sorry about that.  I don’t know if I will make this a daily thing anymore but I do enjoy blogging.  I killed Disqus comments because of a recalcitrant friend who personally attacked me.  Of course, over politics.  I couldn’t figure out how to moderate from Disqus so I just killed it.

I killed my Twitter account this year.  Why support a company that hates me?  I would encourage everyone to kill their Twitter accounts.  The best way to regulate them is bankrupt them.  If all of my FB friends switched en masse to another platform, I’d kill that one too.

My 2020 started off terribly during a vacation in Sayulita Mexico. We made a huge mistake renting a place we thought was cool but was more like a glorified picnic shelter.  Thank goodness for my friends John and Carol who saved us the last couple of days.  My 2020 ended with getting pneumonia.  I am over it now and trying to get back to full strength.

However, I had some really great things happen to me this year.  My daughter got married and we welcomed a new son-in-law to our family.  My other daughter killed it in law school.  We sold our place and escaped Chicago and moved to Las Vegas.  I had some companies exit.  No companies failed this year.

My wife and I got a rehab done up in Minnesota despite the pandemic.  We also put the finishing touches on our own cabin.  We have one or two more things to do.  At least they don’t have to happen right away.  Summer of 2021 we will build another new floating dock, and hopefully, clean up a bunch of trees that fell down for firewood.

I missed seeing friends and family big time in 2020.  No dinners out.  No dinner parties even. Let’s hope if they roll out the vaccine correctly we get back to normal in 2021.  I was very sorry to lose friends over politics.  Politics has become a religion for lots of people.  It shouldn’t be. I was happy to make some new friends this year after we moved.  It’s hard to make new friends during Covid.

I am reminded and inspired by what my friend Todd Schaefer who was a trader and is now an evangelical minister said,

“Brethren, I count myself not to have apprehended: but this one thing I do, forgetting those things which are behind, and reaching forth unto those things which are before, I press forward toward the mark for the prize of the high calling of God in Christ Jesus!” Philippians 3: 13,14
There is so much to say coming out of 2020 and going into 2021 but it’s impossible to improve on this scripture. I have not yet apprehended that for which I was apprehended by God. And so, I say farewell to 2020 in repentance and contrition for all the evil I did and for all the good I did not do… and I’m done forever with 2020! Now, today, I press closer to my Lord, my Savior, my Brother, my Creator, my Bridegroom ….Christ Jesus! My future is bright and amazing with Him as my guide and my goal! My past is behind, stripped of all power to hinder me with Him as my rear guard!
Today is HIS DAY…today is MY DAY.. I AM IN HIM AND HE IS IN ME!!!
And I am excited, thrilled, full of hope and joy as I approach 2021….much Love to all!
Even if you aren’t religious or a Christian, I think you can take something away from that.
I think you need things to look forward to.  Even if they are simple.  Sometimes, I really love simple.
I am looking forward to going back up to Minnesota to our lake place.  We will go in mid May and open up.  The drive through the American West is so pretty.  I understand what my grandparents thought about every year in the winter when they were alive and going up.  This year, I am going to become a better fisherman.  I am in the process of buying some stuff from FlyBox in Grand Marias.  I really wanted to support small businesses when I could this Christmas.  Fortunately for him, his daughter received a liver transplant for Christmas.  We will probably buy a new boat too.  I have my eyes on an electric pontoon.

In 2021, we will rehab our Vegas property.  It should be done by the end of August.  I am excited about that.  We bought a house with great bones and great views and we are actively planning it now.  I am hoping to get to Florida soon to see my parents and mother in law.  My daughter will graduate from law school which makes me pretty proud.

2021 is the last year of West Loop Ventures.  We have one more investment to make and I am looking forward to that.  As is typical for a seed portfolio, it’s always in flux.  Some of the companies we invested in raised next rounds of capital in 2020 and some improved their top-line revenue.  Fortunately, none of them went totally out of business but all were affected by the crappy public policies surrounding Covid.

My angel portfolio was similar and that’s where the exits happened.  Companies I invested in from 2007-2010 had some liquidity.  Always nice to ring the cash register.

Absent the pandemic, 2020 was actually a pretty great year in many ways for me.  But, I won’t look fondly back at it like I have others.

The post Happy New Year first appeared on Points and Figures.

Happy New Year


This post is by Jeff Carter from Points and Figures

We all are anxious for 2020 to be over.  But, I don’t think 2021 will be that much different until the last quarter.

I am grateful for people who read this blog.  We had a hiccup midyear and I am sorry about that.  I don’t know if I will make this a daily thing anymore but I do enjoy blogging.  I killed Disqus comments because of a recalcitrant friend who personally attacked me.  Of course, over politics.  I couldn’t figure out how to moderate from Disqus so I just killed it.

I killed my Twitter account this year.  Why support a company that hates me?  I would encourage everyone to kill their Twitter accounts.  The best way to regulate them is bankrupt them.  If all of my FB friends switched en masse to another platform, I’d kill that one too.

My 2020 started off terribly during a vacation in Sayulita Mexico. We made a huge mistake renting a place we thought was cool but was more like a glorified picnic shelter.  Thank goodness for my friends John and Carol who saved us the last couple of days.  My 2020 ended with getting pneumonia.  I am over it now and trying to get back to full strength.

However, I had some really great things happen to me this year.  My daughter got married and we welcomed a new son-in-law to our family.  My other daughter killed it in law school.  We sold our place and escaped Chicago and moved to Las Vegas.  I had some companies exit.  No companies failed this year.

My wife and I got a rehab done up in Minnesota despite the pandemic.  We also put the finishing touches on our own cabin.  We have one or two more things to do.  At least they don’t have to happen right away.  Summer of 2021 we will build another new floating dock, and hopefully, clean up a bunch of trees that fell down for firewood.

I missed seeing friends and family big time in 2020.  No dinners out.  No dinner parties even. Let’s hope if they roll out the vaccine correctly we get back to normal in 2021.  I was very sorry to lose friends over politics.  Politics has become a religion for lots of people.  It shouldn’t be. I was happy to make some new friends this year after we moved.  It’s hard to make new friends during Covid.

I am reminded and inspired by what my friend Todd Schaefer who was a trader and is now an evangelical minister said,

“Brethren, I count myself not to have apprehended: but this one thing I do, forgetting those things which are behind, and reaching forth unto those things which are before, I press forward toward the mark for the prize of the high calling of God in Christ Jesus!” Philippians 3: 13,14
There is so much to say coming out of 2020 and going into 2021 but it’s impossible to improve on this scripture. I have not yet apprehended that for which I was apprehended by God. And so, I say farewell to 2020 in repentance and contrition for all the evil I did and for all the good I did not do… and I’m done forever with 2020! Now, today, I press closer to my Lord, my Savior, my Brother, my Creator, my Bridegroom ….Christ Jesus! My future is bright and amazing with Him as my guide and my goal! My past is behind, stripped of all power to hinder me with Him as my rear guard!
Today is HIS DAY…today is MY DAY.. I AM IN HIM AND HE IS IN ME!!!
And I am excited, thrilled, full of hope and joy as I approach 2021….much Love to all!
Even if you aren’t religious or a Christian, I think you can take something away from that.
I think you need things to look forward to.  Even if they are simple.  Sometimes, I really love simple.
I am looking forward to going back up to Minnesota to our lake place.  We will go in mid May and open up.  The drive through the American West is so pretty.  I understand what my grandparents thought about every year in the winter when they were alive and going up.  This year, I am going to become a better fisherman.  I am in the process of buying some stuff from FlyBox in Grand Marias.  I really wanted to support small businesses when I could this Christmas.  Fortunately for him, his daughter received a liver transplant for Christmas.  We will probably buy a new boat too.  I have my eyes on an electric pontoon.

In 2021, we will rehab our Vegas property.  It should be done by the end of August.  I am excited about that.  We bought a house with great bones and great views and we are actively planning it now.  I am hoping to get to Florida soon to see my parents and mother in law.  My daughter will graduate from law school which makes me pretty proud.

2021 is the last year of West Loop Ventures.  We have one more investment to make and I am looking forward to that.  As is typical for a seed portfolio, it’s always in flux.  Some of the companies we invested in raised next rounds of capital in 2020 and some improved their top-line revenue.  Fortunately, none of them went totally out of business but all were affected by the crappy public policies surrounding Covid.

My angel portfolio was similar and that’s where the exits happened.  Companies I invested in from 2007-2010 had some liquidity.  Always nice to ring the cash register.

Absent the pandemic, 2020 was actually a pretty great year in many ways for me.  But, I won’t look fondly back at it like I have others.

The post Happy New Year first appeared on Points and Figures.

Happy New Year


This post is by Jeff Carter from Points and Figures

We all are anxious for 2020 to be over.  But, I don’t think 2021 will be that much different until the last quarter.

I am grateful for people who read this blog.  We had a hiccup midyear and I am sorry about that.  I don’t know if I will make this a daily thing anymore but I do enjoy blogging.  I killed Disqus comments because of a recalcitrant friend who personally attacked me.  Of course, over politics.  I couldn’t figure out how to moderate from Disqus so I just killed it.

I killed my Twitter account this year.  Why support a company that hates me?  I would encourage everyone to kill their Twitter accounts.  The best way to regulate them is bankrupt them.  If all of my FB friends switched en masse to another platform, I’d kill that one too.

My 2020 started off terribly during a vacation in Sayulita Mexico. We made a huge mistake renting a place we thought was cool but was more like a glorified picnic shelter.  Thank goodness for my friends John and Carol who saved us the last couple of days.  My 2020 ended with getting pneumonia.  I am over it now and trying to get back to full strength.

However, I had some really great things happen to me this year.  My daughter got married and we welcomed a new son-in-law to our family.  My other daughter killed it in law school.  We sold our place and escaped Chicago and moved to Las Vegas.  I had some companies exit.  No companies failed this year.

My wife and I got a rehab done up in Minnesota despite the pandemic.  We also put the finishing touches on our own cabin.  We have one or two more things to do.  At least they don’t have to happen right away.  Summer of 2021 we will build another new floating dock, and hopefully, clean up a bunch of trees that fell down for firewood.

I missed seeing friends and family big time in 2020.  No dinners out.  No dinner parties even. Let’s hope if they roll out the vaccine correctly we get back to normal in 2021.  I was very sorry to lose friends over politics.  Politics has become a religion for lots of people.  It shouldn’t be. I was happy to make some new friends this year after we moved.  It’s hard to make new friends during Covid.

I am reminded and inspired by what my friend Todd Schaefer who was a trader and is now an evangelical minister said,

“Brethren, I count myself not to have apprehended: but this one thing I do, forgetting those things which are behind, and reaching forth unto those things which are before, I press forward toward the mark for the prize of the high calling of God in Christ Jesus!” Philippians 3: 13,14
There is so much to say coming out of 2020 and going into 2021 but it’s impossible to improve on this scripture. I have not yet apprehended that for which I was apprehended by God. And so, I say farewell to 2020 in repentance and contrition for all the evil I did and for all the good I did not do… and I’m done forever with 2020! Now, today, I press closer to my Lord, my Savior, my Brother, my Creator, my Bridegroom ….Christ Jesus! My future is bright and amazing with Him as my guide and my goal! My past is behind, stripped of all power to hinder me with Him as my rear guard!
Today is HIS DAY…today is MY DAY.. I AM IN HIM AND HE IS IN ME!!!
And I am excited, thrilled, full of hope and joy as I approach 2021….much Love to all!
Even if you aren’t religious or a Christian, I think you can take something away from that.
I think you need things to look forward to.  Even if they are simple.  Sometimes, I really love simple.
I am looking forward to going back up to Minnesota to our lake place.  We will go in mid May and open up.  The drive through the American West is so pretty.  I understand what my grandparents thought about every year in the winter when they were alive and going up.  This year, I am going to become a better fisherman.  I am in the process of buying some stuff from FlyBox in Grand Marias.  I really wanted to support small businesses when I could this Christmas.  Fortunately for him, his daughter received a liver transplant for Christmas.  We will probably buy a new boat too.  I have my eyes on an electric pontoon.

In 2021, we will rehab our Vegas property.  It should be done by the end of August.  I am excited about that.  We bought a house with great bones and great views and we are actively planning it now.  I am hoping to get to Florida soon to see my parents and mother in law.  My daughter will graduate from law school which makes me pretty proud.

2021 is the last year of West Loop Ventures.  We have one more investment to make and I am looking forward to that.  As is typical for a seed portfolio, it’s always in flux.  Some of the companies we invested in raised next rounds of capital in 2020 and some improved their top-line revenue.  Fortunately, none of them went totally out of business but all were affected by the crappy public policies surrounding Covid.

My angel portfolio was similar and that’s where the exits happened.  Companies I invested in from 2007-2010 had some liquidity.  Always nice to ring the cash register.

Absent the pandemic, 2020 was actually a pretty great year in many ways for me.  But, I won’t look fondly back at it like I have others.

The post Happy New Year first appeared on Points and Figures.

Sometimes They Don’t Work


This post is by Jeff Carter from Points and Figures

Startups start with a basic idea.  Founders believe strongly in that idea and work on it.  Eventually, they might sell it to investors who invest in the founder and the idea.  The truth is, 50% of everything you write a check for will fail.  That’s typical over time as I have talked to all kinds of investors.

My own track record has about a 34% failure rate.  Maybe I needed to write more checks.  There is a ton of variability when it comes to startups.  That leaves a lot of room for excuses.  I hate excuses.  I love accountability and responsibility.  But, most people don’t like it because it can be a yoke around their neck rather than an opportunity to change and do better.

I was told by coaches to look in the mirror.  When I traded, I had no one to blame but myself.  Investing in startups is similar.

At the point where capital is exchanged for equity, there is accountability.  Investors expect a return on their investment and founders expect a return on their time.  No one is in the game for free.  Investors expect the return to be much larger than the stock market given the risk and illiquidity.

The startup continues to build.  What seems like a good idea at seed might not develop into anything.  In a lot of cases, that’s due to the founder not executing on the vision.  They take the wrong path.  They make an incorrect strategic decision.

In other cases, it’s just an idea whose time will never come.

Often times, at least I do this, you put the founder in front of people or customers that can propel their business forward.  Either they make it happen, or they don’t.  If they continuously cannot, either you are bringing the wrong people forward or they can’t sell.  There is no other excuse.

One of the other things I look for is tailwinds.  Trends.  Covid has altered a lot of trends and it also has given a lot of fuel to others that were either nascent or not there.  If there is a big macrotrend happening and the startup you invested in is supposed to benefit from that tailwind but it isn’t, then that is a good indicator that you won’t see a return.  At that point, you look to see if the founder has made the right decisions.  Are they being strategic or are they doing something else?  Are they spending time behind the computer rejiggering the engineering or are they in front of the customers?

Or, is the idea just not that big of an idea?  Is it too hard to execute on?

Or, did you make a fundamental mistake in analyzing the business?  Did you make a mistake looking at the market?  Did you make mistake in figuring out the character of the founder and their ability to execute?  Did something happen that was unexpected?  Maybe you or the founder screwed up on the cap table and that’s crushing your return?  In the future, what will you do to change your behavior and analysis so that it doesn’t happen again?

This is where I like to refer to my friend Richard Duchossois’s phrase, “Always inspect what you don’t expect.”  He learned the hard way to do that in WW2 and it stuck with him ever since.  It’s a part of his company’s core culture and it’s a good one.

In my seed-stage investments, I have seen all these things.  When it’s just not that big of an idea you understand.  When it’s other things, it grinds on you.  This is the time of year when you start to really look at a lot of things and try to account for them.

 

The post Sometimes They Don’t Work first appeared on Points and Figures.

Predictions For 2021


This post is by Jeff Carter from Points and Figures

Most of the time they are wrong.  People try to be logical, but often, they are full of confirmation bias.  I was reminded of that when I read some predictions this morning. 

Here are some predictions for you to ponder.

  • VCs that think SF and NYC are going to come roaring back in a 1920s style are all incorrect.  SF was a shithole before Covid.  I was there in January of 2020 and I never wanted to go back.  I am not alone.  It’s a horribly mismanaged city where drug overdoses are outpacing Covid deaths.
  • New York is also the sight of flight.  It’s not Covid.  It’s DeBlasio and a litany of shitty political policies and positions that have been put in place prior to DeBlasio.  Bloomberg wasn’t exactly the best mayor either.  Between Chicago, LA, SF and NYC I don’t know who has the worst mayor.  An embarrassment of mediocrity.
  • Neither city along with Chicago recovers in 2021.  They have the wrong management team at the top.  Their fiscal challenges are too steep.  Poor and middle-class citizens that cannot escape will be hurt badly.  As F. Scott Fitzgerald said, “The rich are different than you and me.”  The stupid among them will continue to press for stupid policies.  The unaware will wonder where everyone went.
  • The social contract between citizens and cities has been broken.  Cities all over the country are not safe.  They are shuttered.  They are totally mismanaged.  Portland, Seattle, and Minneapolis are perfect examples.  There is no energy or vitality.  More importantly, it’s super tough to build wealth there.  Remember, the millennial generation has been hurt more than once.  2008 hurt them.  Covid hurt them.  It will have a persistent effect on their lifetime wages similar to what the Great Depression did to that generation.  Southern and low tax cities will prosper.  Suburbs will be where it’s at until millennials raise their families and want to move back to the cities.
  • The Suburban Office Park will be cool again
  • Some are thinking venture valuations come down.  I don’t think so if the stock market remains robust and interest rates stay at 0%.
  • Many are saying we will see the return of the office.  I don’t see that either.  There is controversy with the vaccine, especially with the way it is being doled out.  There is so much fear porn on Covid that has been imprinted on the American mind people are living in fear for no good reason.  Some will go to offices but a lot of people will stay remote.  When they go to an office they will want some space.
  • I think that the migration out of places like California, Illinois, and New York will intensify.  Especially if there is a Biden Administration that raises taxes and fees. All three will lose congressional seats and won’t the redrawing of districts in those states be fun!
  • Silicon Valley remains the citadel of Venture Capital and innovation.  The network effects are still there.  Sure, people are moving away from the Valley to places like Texas, but it will take a few years to tear down and build in another place.  People are moving from SF to the Valley reversing a big trend.  The money is there, and the power is there.  It’s not changing.  However, capital will flow out of the valley to find innovation in other places unlike in the past where capital was about place.
  • Capitalism will continue to be dinged by the people that benefitted from it.  They will try to change capitalism, but capitalism will not die.  Businesses that do not follow the classic rules and return money to risk-taking shareholders and servicing the heck out of their customers will lose market share.  Go woke, go broke.  Lose market share if you try and force a bunch of stuff down the pipes of customers that aren’t demanding it.
  • If the Republicans hold the Senate, there will be a day of reckoning in states like Illinois that cannot access the debt markets.
  • If we get a Democratic Senate, we will see a recession.
  • The amount of money that goes into venture deals will increase next year as investors chase yield and opportunity.  As Chicago Booth Professor Steve Kaplan has shown, returns are beating the S&P 500, even with a white-hot stock market.
  • Trump will not be President in 2021 despite the fraud that happened in the 2020 election.  We are stuck with Biden for four years and we will have to deal with a very different and more powerful China in 2024.  Trump will have a peaceful transition of power, but will not be moot when he leaves office.  Obama ruined that construct.  It’s over for now.
  • Civil Disobedience will become a big trend in 2021.  People will stop listening to authority.  States will opt out of federal mandates.  Cities will opt out of state mandates.
  • The public school system is utterly broken in the United States.  2021 will be the rise of alternative learning.  It’s a trend that will not stop.  My friend Temp Keller had a great post about this.  Public schools are all about teacher’s unions.  Covid exposed them.
  • Google, Facebook, and Twitter will lose market share to upstart competitors.  Rumble, Parler, Locals and other platforms will arise and grow.
  • Congress will try to regulate the big tech platforms, but they will screw it up.  By the way, for this point, it doesn’t really matter which party is in charge.
  • As the national debt grows, confidence in cryptocurrency will grow.  The Federal Reserve will be forced with a choice in the next four years.  Grow, or inflate.  Governments never pick the right policies to grow.  This is much bigger than bitcoin.
  • Artificial intelligence, machine learning, and algorithms will continue to grow and make processes we don’t think about a lot more efficient.  This will cause goods and services to continue to cost less, but at the same time, it will put pressure on employment because we will need fewer people to do more stuff.
  • Factories that were moved overseas will move closer to the US or into the US as the formula for “just in time” inventory changes.
  • Journalism will become more and more fragmented.  Alternative news will be a thing.  Mainstream journalism is dead.  No credibility.
  • Conventions won’t be back until 2022.  But entertaining yourself somewhere will make a comeback.
  • The outdoor craze caused by Covid will not abate and golf/tennis/pickleball will get bigger in 2021.  Gonna be tough to find a quiet fly fishing stream in 2021.
  • Big weddings will be a thing of the past.  Small intimate gatherings will be cool.
  • People won’t “enjoy” funerals, but they will look forward to attending them to communally celebrate someone’s life.  2020 took that intimacy and reflection away from us and it’s an integral part of the human experience.
  • The dinner party is back with a vengeance.
  • Exotic food purveyors that used to sell only to restaurants will expand their offerings and ability to try and reach consumers.
  • We live in two Americas today.  Get ready for more fragmentation.  This will offer opportunities to people that can “broker” between the various Americas.
  • In 2022, we will see the rise of individualistic type political candidates that are willing to break with the constraints of their political party.  More Trump/Tulsi Gabbard style.  Less Romney/Schiff style.  People are sick of career politicians.
  • I thought there would be a pandemic baby boom.  Not gonna happen.

What are your predictions?  Leave them in the comments.

 

 

 

 

 

The post Predictions For 2021 first appeared on Points and Figures.

Venture Returns


This post is by Jeff Carter from Points and Figures

Returns to venture capital have outpaced the S+P 500 over the past decade. Here is the growth of $10,000 over the past decade courtesy of Ycharts.
SPY Chart

SPY data by YCharts

Very very good return when you look at historical numbers.

But venture has been better. Chicago Booth professor Steven Kaplan has studied venture returns over time and I linked to his 2017 study. That trend has persisted through today.  Venture returns are outpacing S+P returns.

I think it’s important to understand venture returns vs stock returns because with Covid, capital will get democratized more and new entrepreneurial ecosystems might jumpstart.  We might see new investors enter into venture investing that didn’t do it before.

The next twenty years will bring new technology to the market that will be powerful and some outsized returns will be gained by savvy investors.

High net worth individuals and family offices that might not have considered venture investing before might want to take a stab at it.  They need to understand what they are getting into, establish some systems and rubrics, and then have at it if they want to assume the risk.  Personally, I think it would behoove them and society if they did.

Here is the thing.  In Venture, returns happen in certain companies, and the others fail.  My friend Brian Lund wrote about two different kinds of traders in his weekly blog. 

Time works for long-term investors in a different way. It relieves themselves of the burden of themselves.  

All they need is a drawer to put their stocks in and they are good to go.

The above is the way to invest in the stock market and it’s been proven over and over again.  Stick your money in an S+P 500 fund with no fees/low fees and forget about it.  Eugene Fama showed it in 1962 and wealth managers have been fighting with him ever since.

Venture investing is not the stock market.  Returns are uneven and unpredictable.  Remember a story Bob Okabe told me about an angel investor that lost money on the first 19 companies they invested in.  They should have kept investing….

There also is a liquidity premium in venture vs stocks which demands a higher return.  Venture investing is a roach motel.  You can get in, but you can’t get out.

One of the reasons that putting your stocks in a drawer and forgetting about them works is it takes away “variance”.  You aren’t subjecting yourself to the daily gyrations of the market.  As long as the market goes up, and so far over the course of time it has despite hiccups, you are okay.  Behavioral economics would tell you why people overweight hiccups.  If you need the money, you can get the money.

Day traders want variance.  They are in and out, in and out.  Without variance, they don’t have opportunity.  But, day trading is not investing.  If you day trade and aren’t earning more than a minimum 25% on your capital, you probably won’t be doing it a sustainable period of time.  That day when you take a big loss will wipe you out.  It’s gonna happen.

Venture investing means accepting A LOT of risk, or variance. So by definition, returns should be outsized.  One thing that would be tough to execute, but I believe the time has come, is a fund to raise a huge pool of capital and become an LP in many many venture funds.  That won’t mitigate risk, but improve your chances of finding the outsize return if the manager of that fund chooses funds correctly.  The problem is getting access to the funds.

When you look at the universe of funds that return 3x after fees, it’s very small.  Venture is a tougher business than stock picking.

I have seen people try to execute on this portfolio idea by raising money and putting the same check inside lots and lots of startup firms, but that doesn’t work.  You are only adding more risk with every investment and your expected outcome isn’t any better.  There is no “diversification” in the classic finance sense.

The trick in VC is who is managing the money, or in finding the best deals.  Deal flow is the life blood of a VC because it gives them enough looks so that when they decide to invest they feel like they have an edge over the market.  The only way to make money in VC is to go against the herd.  You see something that the market doesn’t.

The other hard thing in VC is putting enough money in a company to own a big enough chunk of equity so that if it pays, it pays big.  This is why if you are an angel, be disciplined.  Put similar amounts in every company on initial check sizes so that the check sizes combined with the amount of equity you own are replicated across your entire portfolio.  That way, when one pays you probably will pay for your entire portfolio.  Rule of thumb angel math is 50% of your investments will fail.  20%-40% will return 1x-4x.  That means you need 10% of them hit 30x to realize a 27% IRR.

Over the past few years I had some angel investments pay off.  They had been in my portfolio over 10 years.  The internal rate of return was well over 20%.  It beat the same return on the SPY over the same period by quite a bit.  What I mean by this is if I invested $1 in the SPY, or $1 in this company, I was far better off accepting the risk, lack of liquidity, and being in the company.  I also had some companies fail over that same time period.  Your failures happen early.  That’s the thing about venture investing, your choices are highly dependent and the outcomes highly variable.

By the way, I co-founded Hyde Park Angels in April of 2007.  4 out of the first 5 investments paid off and the other company is still a going concern.  That’s an amazing track record.

Risk is severely misunderstood in America and not taught well.  Conditional probability is not understood, and not taught well either.  That’s apparent in how we have dealt with Covid.

I will post tomorrow on what I see for the future of VC and the stock market.

The post Venture Returns first appeared on Points and Figures.

Venture Returns


This post is by Jeff Carter from Points and Figures

Returns to venture capital have outpaced the S+P 500 over the past decade. Here is the growth of $10,000 over the past decade courtesy of Ycharts.
SPY Chart

SPY data by YCharts

Very very good return when you look at historical numbers.

But venture has been better. Chicago Booth professor Steven Kaplan has studied venture returns over time and I linked to his 2017 study. That trend has persisted through today.  Venture returns are outpacing S+P returns.

I think it’s important to understand venture returns vs stock returns because with Covid, capital will get democratized more and new entrepreneurial ecosystems might jumpstart.  We might see new investors enter into venture investing that didn’t do it before.

The next twenty years will bring new technology to the market that will be powerful and some outsized returns will be gained by savvy investors.

High net worth individuals and family offices that might not have considered venture investing before might want to take a stab at it.  They need to understand what they are getting into, establish some systems and rubrics, and then have at it if they want to assume the risk.  Personally, I think it would behoove them and society if they did.

Here is the thing.  In Venture, returns happen in certain companies, and the others fail.  My friend Brian Lund wrote about two different kinds of traders in his weekly blog. 

Time works for long-term investors in a different way. It relieves themselves of the burden of themselves.  

All they need is a drawer to put their stocks in and they are good to go.

The above is the way to invest in the stock market and it’s been proven over and over again.  Stick your money in an S+P 500 fund with no fees/low fees and forget about it.  Eugene Fama showed it in 1962 and wealth managers have been fighting with him ever since.

Venture investing is not the stock market.  Returns are uneven and unpredictable.  Remember a story Bob Okabe told me about an angel investor that lost money on the first 19 companies they invested in.  They should have kept investing….

There also is a liquidity premium in venture vs stocks which demands a higher return.  Venture investing is a roach motel.  You can get in, but you can’t get out.

One of the reasons that putting your stocks in a drawer and forgetting about them works is it takes away “variance”.  You aren’t subjecting yourself to the daily gyrations of the market.  As long as the market goes up, and so far over the course of time it has despite hiccups, you are okay.  Behavioral economics would tell you why people overweight hiccups.  If you need the money, you can get the money.

Day traders want variance.  They are in and out, in and out.  Without variance, they don’t have opportunity.  But, day trading is not investing.  If you day trade and aren’t earning more than a minimum 25% on your capital, you probably won’t be doing it a sustainable period of time.  That day when you take a big loss will wipe you out.  It’s gonna happen.

Venture investing means accepting A LOT of risk, or variance. So by definition, returns should be outsized.  One thing that would be tough to execute, but I believe the time has come, is a fund to raise a huge pool of capital and become an LP in many many venture funds.  That won’t mitigate risk, but improve your chances of finding the outsize return if the manager of that fund chooses funds correctly.  The problem is getting access to the funds.

When you look at the universe of funds that return 3x after fees, it’s very small.  Venture is a tougher business than stock picking.

I have seen people try to execute on this portfolio idea by raising money and putting the same check inside lots and lots of startup firms, but that doesn’t work.  You are only adding more risk with every investment and your expected outcome isn’t any better.  There is no “diversification” in the classic finance sense.

The trick in VC is who is managing the money, or in finding the best deals.  Deal flow is the life blood of a VC because it gives them enough looks so that when they decide to invest they feel like they have an edge over the market.  The only way to make money in VC is to go against the herd.  You see something that the market doesn’t.

The other hard thing in VC is putting enough money in a company to own a big enough chunk of equity so that if it pays, it pays big.  This is why if you are an angel, be disciplined.  Put similar amounts in every company on initial check sizes so that the check sizes combined with the amount of equity you own are replicated across your entire portfolio.  That way, when one pays you probably will pay for your entire portfolio.  Rule of thumb angel math is 50% of your investments will fail.  20%-40% will return 1x-4x.  That means you need 10% of them hit 30x to realize a 27% IRR.

Over the past few years I had some angel investments pay off.  They had been in my portfolio over 10 years.  The internal rate of return was well over 20%.  It beat the same return on the SPY over the same period by quite a bit.  What I mean by this is if I invested $1 in the SPY, or $1 in this company, I was far better off accepting the risk, lack of liquidity, and being in the company.  I also had some companies fail over that same time period.  Your failures happen early.  That’s the thing about venture investing, your choices are highly dependent and the outcomes highly variable.

By the way, I co-founded Hyde Park Angels in April of 2007.  4 out of the first 5 investments paid off and the other company is still a going concern.  That’s an amazing track record.

Risk is severely misunderstood in America and not taught well.  Conditional probability is not understood, and not taught well either.  That’s apparent in how we have dealt with Covid.

I will post tomorrow on what I see for the future of VC and the stock market.

The post Venture Returns first appeared on Points and Figures.

Venture Returns


This post is by Jeff Carter from Points and Figures

Returns to venture capital have outpaced the S+P 500 over the past decade. Here is the growth of $10,000 over the past decade courtesy of Ycharts.
SPY Chart

SPY data by YCharts

Very very good return when you look at historical numbers.

But venture has been better. Chicago Booth professor Steven Kaplan has studied venture returns over time and I linked to his 2017 study. That trend has persisted through today.  Venture returns are outpacing S+P returns.

I think it’s important to understand venture returns vs stock returns because with Covid, capital will get democratized more and new entrepreneurial ecosystems might jumpstart.  We might see new investors enter into venture investing that didn’t do it before.

The next twenty years will bring new technology to the market that will be powerful and some outsized returns will be gained by savvy investors.

High net worth individuals and family offices that might not have considered venture investing before might want to take a stab at it.  They need to understand what they are getting into, establish some systems and rubrics, and then have at it if they want to assume the risk.  Personally, I think it would behoove them and society if they did.

Here is the thing.  In Venture, returns happen in certain companies, and the others fail.  My friend Brian Lund wrote about two different kinds of traders in his weekly blog. 

Time works for long-term investors in a different way. It relieves themselves of the burden of themselves.  

All they need is a drawer to put their stocks in and they are good to go.

The above is the way to invest in the stock market and it’s been proven over and over again.  Stick your money in an S+P 500 fund with no fees/low fees and forget about it.  Eugene Fama showed it in 1962 and wealth managers have been fighting with him ever since.

Venture investing is not the stock market.  Returns are uneven and unpredictable.  Remember a story Bob Okabe told me about an angel investor that lost money on the first 19 companies they invested in.  They should have kept investing….

There also is a liquidity premium in venture vs stocks which demands a higher return.  Venture investing is a roach motel.  You can get in, but you can’t get out.

One of the reasons that putting your stocks in a drawer and forgetting about them works is it takes away “variance”.  You aren’t subjecting yourself to the daily gyrations of the market.  As long as the market goes up, and so far over the course of time it has despite hiccups, you are okay.  Behavioral economics would tell you why people overweight hiccups.  If you need the money, you can get the money.

Day traders want variance.  They are in and out, in and out.  Without variance, they don’t have opportunity.  But, day trading is not investing.  If you day trade and aren’t earning more than a minimum 25% on your capital, you probably won’t be doing it a sustainable period of time.  That day when you take a big loss will wipe you out.  It’s gonna happen.

Venture investing means accepting A LOT of risk, or variance. So by definition, returns should be outsized.  One thing that would be tough to execute, but I believe the time has come, is a fund to raise a huge pool of capital and become an LP in many many venture funds.  That won’t mitigate risk, but improve your chances of finding the outsize return if the manager of that fund chooses funds correctly.  The problem is getting access to the funds.

When you look at the universe of funds that return 3x after fees, it’s very small.  Venture is a tougher business than stock picking.

I have seen people try to execute on this portfolio idea by raising money and putting the same check inside lots and lots of startup firms, but that doesn’t work.  You are only adding more risk with every investment and your expected outcome isn’t any better.  There is no “diversification” in the classic finance sense.

The trick in VC is who is managing the money, or in finding the best deals.  Deal flow is the life blood of a VC because it gives them enough looks so that when they decide to invest they feel like they have an edge over the market.  The only way to make money in VC is to go against the herd.  You see something that the market doesn’t.

The other hard thing in VC is putting enough money in a company to own a big enough chunk of equity so that if it pays, it pays big.  This is why if you are an angel, be disciplined.  Put similar amounts in every company on initial check sizes so that the check sizes combined with the amount of equity you own are replicated across your entire portfolio.  That way, when one pays you probably will pay for your entire portfolio.  Rule of thumb angel math is 50% of your investments will fail.  20%-40% will return 1x-4x.  That means you need 10% of them hit 30x to realize a 27% IRR.

Over the past few years I had some angel investments pay off.  They had been in my portfolio over 10 years.  The internal rate of return was well over 20%.  It beat the same return on the SPY over the same period by quite a bit.  What I mean by this is if I invested $1 in the SPY, or $1 in this company, I was far better off accepting the risk, lack of liquidity, and being in the company.  I also had some companies fail over that same time period.  Your failures happen early.  That’s the thing about venture investing, your choices are highly dependent and the outcomes highly variable.

By the way, I co-founded Hyde Park Angels in April of 2007.  4 out of the first 5 investments paid off and the other company is still a going concern.  That’s an amazing track record.

Risk is severely misunderstood in America and not taught well.  Conditional probability is not understood, and not taught well either.  That’s apparent in how we have dealt with Covid.

I will post tomorrow on what I see for the future of VC and the stock market.

The post Venture Returns first appeared on Points and Figures.

Venture Returns


This post is by Jeff Carter from Points and Figures

Returns to venture capital have outpaced the S+P 500 over the past decade. Here is the growth of $10,000 over the past decade courtesy of Ycharts.
SPY Chart

SPY data by YCharts

Very very good return when you look at historical numbers.

But venture has been better. Chicago Booth professor Steven Kaplan has studied venture returns over time and I linked to his 2017 study. That trend has persisted through today.  Venture returns are outpacing S+P returns.

I think it’s important to understand venture returns vs stock returns because with Covid, capital will get democratized more and new entrepreneurial ecosystems might jumpstart.  We might see new investors enter into venture investing that didn’t do it before.

The next twenty years will bring new technology to the market that will be powerful and some outsized returns will be gained by savvy investors.

High net worth individuals and family offices that might not have considered venture investing before might want to take a stab at it.  They need to understand what they are getting into, establish some systems and rubrics, and then have at it if they want to assume the risk.  Personally, I think it would behoove them and society if they did.

Here is the thing.  In Venture, returns happen in certain companies, and the others fail.  My friend Brian Lund wrote about two different kinds of traders in his weekly blog. 

Time works for long-term investors in a different way. It relieves themselves of the burden of themselves.  

All they need is a drawer to put their stocks in and they are good to go.

The above is the way to invest in the stock market and it’s been proven over and over again.  Stick your money in an S+P 500 fund with no fees/low fees and forget about it.  Eugene Fama showed it in 1962 and wealth managers have been fighting with him ever since.

Venture investing is not the stock market.  Returns are uneven and unpredictable.  Remember a story Bob Okabe told me about an angel investor that lost money on the first 19 companies they invested in.  They should have kept investing….

There also is a liquidity premium in venture vs stocks which demands a higher return.  Venture investing is a roach motel.  You can get in, but you can’t get out.

One of the reasons that putting your stocks in a drawer and forgetting about them works is it takes away “variance”.  You aren’t subjecting yourself to the daily gyrations of the market.  As long as the market goes up, and so far over the course of time it has despite hiccups, you are okay.  Behavioral economics would tell you why people overweight hiccups.  If you need the money, you can get the money.

Day traders want variance.  They are in and out, in and out.  Without variance, they don’t have opportunity.  But, day trading is not investing.  If you day trade and aren’t earning more than a minimum 25% on your capital, you probably won’t be doing it a sustainable period of time.  That day when you take a big loss will wipe you out.  It’s gonna happen.

Venture investing means accepting A LOT of risk, or variance. So by definition, returns should be outsized.  One thing that would be tough to execute, but I believe the time has come, is a fund to raise a huge pool of capital and become an LP in many many venture funds.  That won’t mitigate risk, but improve your chances of finding the outsize return if the manager of that fund chooses funds correctly.  The problem is getting access to the funds.

When you look at the universe of funds that return 3x after fees, it’s very small.  Venture is a tougher business than stock picking.

I have seen people try to execute on this portfolio idea by raising money and putting the same check inside lots and lots of startup firms, but that doesn’t work.  You are only adding more risk with every investment and your expected outcome isn’t any better.  There is no “diversification” in the classic finance sense.

The trick in VC is who is managing the money, or in finding the best deals.  Deal flow is the life blood of a VC because it gives them enough looks so that when they decide to invest they feel like they have an edge over the market.  The only way to make money in VC is to go against the herd.  You see something that the market doesn’t.

The other hard thing in VC is putting enough money in a company to own a big enough chunk of equity so that if it pays, it pays big.  This is why if you are an angel, be disciplined.  Put similar amounts in every company on initial check sizes so that the check sizes combined with the amount of equity you own are replicated across your entire portfolio.  That way, when one pays you probably will pay for your entire portfolio.  Rule of thumb angel math is 50% of your investments will fail.  20%-40% will return 1x-4x.  That means you need 10% of them hit 30x to realize a 27% IRR.

Over the past few years I had some angel investments pay off.  They had been in my portfolio over 10 years.  The internal rate of return was well over 20%.  It beat the same return on the SPY over the same period by quite a bit.  What I mean by this is if I invested $1 in the SPY, or $1 in this company, I was far better off accepting the risk, lack of liquidity, and being in the company.  I also had some companies fail over that same time period.  Your failures happen early.  That’s the thing about venture investing, your choices are highly dependent and the outcomes highly variable.

By the way, I co-founded Hyde Park Angels in April of 2007.  4 out of the first 5 investments paid off and the other company is still a going concern.  That’s an amazing track record.

Risk is severely misunderstood in America and not taught well.  Conditional probability is not understood, and not taught well either.  That’s apparent in how we have dealt with Covid.

I will post tomorrow on what I see for the future of VC and the stock market.

The post Venture Returns first appeared on Points and Figures.

Venture Returns


This post is by Jeff Carter from Points and Figures

Returns to venture capital have outpaced the S+P 500 over the past decade. Here is the growth of $10,000 over the past decade courtesy of Ycharts.
SPY Chart

SPY data by YCharts

Very very good return when you look at historical numbers.

But venture has been better. Chicago Booth professor Steven Kaplan has studied venture returns over time and I linked to his 2017 study. That trend has persisted through today.  Venture returns are outpacing S+P returns.

I think it’s important to understand venture returns vs stock returns because with Covid, capital will get democratized more and new entrepreneurial ecosystems might jumpstart.  We might see new investors enter into venture investing that didn’t do it before.

The next twenty years will bring new technology to the market that will be powerful and some outsized returns will be gained by savvy investors.

High net worth individuals and family offices that might not have considered venture investing before might want to take a stab at it.  They need to understand what they are getting into, establish some systems and rubrics, and then have at it if they want to assume the risk.  Personally, I think it would behoove them and society if they did.

Here is the thing.  In Venture, returns happen in certain companies, and the others fail.  My friend Brian Lund wrote about two different kinds of traders in his weekly blog. 

Time works for long-term investors in a different way. It relieves themselves of the burden of themselves.  

All they need is a drawer to put their stocks in and they are good to go.

The above is the way to invest in the stock market and it’s been proven over and over again.  Stick your money in an S+P 500 fund with no fees/low fees and forget about it.  Eugene Fama showed it in 1962 and wealth managers have been fighting with him ever since.

Venture investing is not the stock market.  Returns are uneven and unpredictable.  Remember a story Bob Okabe told me about an angel investor that lost money on the first 19 companies they invested in.  They should have kept investing….

There also is a liquidity premium in venture vs stocks which demands a higher return.  Venture investing is a roach motel.  You can get in, but you can’t get out.

One of the reasons that putting your stocks in a drawer and forgetting about them works is it takes away “variance”.  You aren’t subjecting yourself to the daily gyrations of the market.  As long as the market goes up, and so far over the course of time it has despite hiccups, you are okay.  Behavioral economics would tell you why people overweight hiccups.  If you need the money, you can get the money.

Day traders want variance.  They are in and out, in and out.  Without variance, they don’t have opportunity.  But, day trading is not investing.  If you day trade and aren’t earning more than a minimum 25% on your capital, you probably won’t be doing it a sustainable period of time.  That day when you take a big loss will wipe you out.  It’s gonna happen.

Venture investing means accepting A LOT of risk, or variance. So by definition, returns should be outsized.  One thing that would be tough to execute, but I believe the time has come, is a fund to raise a huge pool of capital and become an LP in many many venture funds.  That won’t mitigate risk, but improve your chances of finding the outsize return if the manager of that fund chooses funds correctly.  The problem is getting access to the funds.

When you look at the universe of funds that return 3x after fees, it’s very small.  Venture is a tougher business than stock picking.

I have seen people try to execute on this portfolio idea by raising money and putting the same check inside lots and lots of startup firms, but that doesn’t work.  You are only adding more risk with every investment and your expected outcome isn’t any better.  There is no “diversification” in the classic finance sense.

The trick in VC is who is managing the money, or in finding the best deals.  Deal flow is the life blood of a VC because it gives them enough looks so that when they decide to invest they feel like they have an edge over the market.  The only way to make money in VC is to go against the herd.  You see something that the market doesn’t.

The other hard thing in VC is putting enough money in a company to own a big enough chunk of equity so that if it pays, it pays big.  This is why if you are an angel, be disciplined.  Put similar amounts in every company on initial check sizes so that the check sizes combined with the amount of equity you own are replicated across your entire portfolio.  That way, when one pays you probably will pay for your entire portfolio.  Rule of thumb angel math is 50% of your investments will fail.  20%-40% will return 1x-4x.  That means you need 10% of them hit 30x to realize a 27% IRR.

Over the past few years I had some angel investments pay off.  They had been in my portfolio over 10 years.  The internal rate of return was well over 20%.  It beat the same return on the SPY over the same period by quite a bit.  What I mean by this is if I invested $1 in the SPY, or $1 in this company, I was far better off accepting the risk, lack of liquidity, and being in the company.  I also had some companies fail over that same time period.  Your failures happen early.  That’s the thing about venture investing, your choices are highly dependent and the outcomes highly variable.

By the way, I co-founded Hyde Park Angels in April of 2007.  4 out of the first 5 investments paid off and the other company is still a going concern.  That’s an amazing track record.

Risk is severely misunderstood in America and not taught well.  Conditional probability is not understood, and not taught well either.  That’s apparent in how we have dealt with Covid.

I will post tomorrow on what I see for the future of VC and the stock market.

The post Venture Returns first appeared on Points and Figures.

YCharts Exits to LLM Partners


This post is by Jeff Carter from Points and Figures

YCharts is the best charting service around for professionals to investigate the stock market and find structural holes that they can relay to clients to build wealth.  I am a seed investor.  Last week they exited to a private equity firm and recapitalized the company.

I decided to blog about it because there are a lot of important lessons to be learned about investing in startups from this exit.  I am still going to keep the blog on ice for a little bit though.  I do miss blogging regularly, so at some point it will come back.  Thanks for all your notes.  This blog NEVER received a lot of comments so you never knew how many people were really reading it.  Turns out, a lot.

It is interesting to note that Hyde Park Angels, the angel group in Chicago that I started in April of 2007 has had successful exits with almost all of its first few investments.

  • Shuffletech.com
  • Gradebeam.com
  • UICO.com (still operating and the leader in touchscreen technology)
  • Ycharts.com
  • Brilliant.com

I don’t think any seed investors expected that.  My favorite line on seed investing came from my friend Brian Hand.  Once he said at a presentation, “When you invest in a startup, you might as well take the money to the toilet and flush it away because the odds are you will never ever see it again.”

All of the companies above had positive returns.

One thing I don’t like about the way VC firms present themselves is on exits.  Go to websites and they have little banners that show all these firms as “exited”.  It doesn’t say if they made money or not.

As an old trader, we all know people lose money.  If you don’t lose money, you aren’t taking risk.  I think if you lose money you ought to be transparent about it.  At HPA right around when we invested in Brilliant, we invested in Tap.me and did a very small investment in Noblivity and we lost money on both.  I have lost on more companies than I have made but the trick is to have outsize gains to make up for the losers.  It’s also important to be disciplined about check size, and for a fund to be disciplined about ownership percentage.

I have some thank you’s I want to make publicly.

Personally, I want to thank the original CEO Shawn Carpenter for starting YCharts.  He brought the deal to HPA when we were still a fledgling angel group with not a lot of people and only three investments under our belt.  He pitched it in 2009 and we didn’t invest until 2010.

I also want to thank two HPA people.  Richard Box for illuminating the group on how the back end of YCharts worked.  All the traders I recruited to the group understood the power of the charting.  It was how the guts worked that turned our heads.  RH Bailin for stepping up and being a deal lead and serving on the board until he retired from the group.  They made a difference and you don’t get to exits without a team effort.

I also want to thank Bob Giammanco and Jeff Kleban for picking up the baton and serving as board member and observer after left.

I am very grateful to Sean Brown and want to thank him for becoming the CEO of YCharts.  He took over the company when it was in a very precarious situation.  This doesn’t happen without the above people but it certainly doesn’t happen at all without Sean.  He is a great CEO.   I interviewed him on a podcast and he laid out his philosophy there.  I am grateful to Sean because a lot of people wouldn’t have wanted to accept the challenge.  Sean had just gotten done running a different company, and wasn’t actually looking for a new gig and this one fell into his lap.

Sean built a great team, and culture.   He stayed extremely focused and tight.  I have spoken randomly to wealth managers and they have told me YCharts is indispensable to them.  That’s before they knew I was an investor.

The path to success in startup land is a long and winding road.  Every startup usually goes through at least one moment where they look like they are going out of business.  As a CEO, when it happens keep your head and calmly assess your options.  As an investor, you cannot panic.  You must work to keep your emotions under control so you can be a port in the storm for the CEO.

The path to exit truly is a journey.  At the beginning, you are at the bottom of the foothill on the plains.  You begin to climb and you don’t actually know how you will get to the top.

Exits from LBO funds are going to become a lot more common.  PE has a lot of money to put to work.  I always thought YCharts would sell to another Fin Tech company.  In the other companies I listed, only one sold to a corporate, Gradebeam.  The rest were creative finance and Shuffletech was a patent lawsuit.  All of them are in business in one way or another because the entrepreneurs behind them created something of value that customers wanted.

It is instructional to note that when seed investors like this make money, they plow it back into new startups.  That is how Silicon Valley was built.  This is contrary to the “greedy capitalist” spin that is currently a part of our national conversation.
Many of the initial seed investors in YCharts have left the state due to the corruption in government which has led to Illinois and the city of Chicago being insolvent.  When your sitting governor cheats on his property taxes prior to being elected, you know as a normal person you don’t have a chance.  Will the money YCharts investors earned get reinvested back into Chicago?  It’s not a slam dunk that it will.   The risk is a lot higher today than it was in 2010 because of how screwed up fiscal policy is and expected future tax policy.  Chicago and the state would be better off going through a bankruptcy process to get things straight.
If you are running a business in Chicago reading this, and you aren’t a customer of one of HPA’s companies, why not?  You support the startup community by being a paying customer, not just by investing. You’ll do more for the city by patronizing startup firms based in the city than you will be donating to some non-profit organization.  Every wealth manager in Chicago ought to be using YCharts.  If they aren’t, they are missing data and potentially losing customers to wealth managers that are using YCharts to give great insights to their clients.
It’s also interesting to note that historically, the trading community does things outside of trading in Chicago to build the city.  Traders built the Art Institute.  Ken Griffin is doing it today.  I was a trader and started HPA.  Doug Monieson was a trader who I recruited and was the first chair of the board and now is running UICO.  RH Bailin was a trader who led several deals and invested in several HPA backed companies.  Many other traders were initial or are members of HPA.  Perhaps politicians ought to think about that before they pass a transaction tax on LaSalle Street.
I think Ycharts will continue to grow as a part of LLR Partners.  They have grown this year despite COVID and that is due to the efforts of their entire team.  They are in a space that is growing and from the outside, it looks like the LLR strategy is a good way to attack their target market.

 

 

 

 

 

The post YCharts Exits to LLM Partners first appeared on Points and Figures.

YCharts Exits to LLM Partners


This post is by Jeff Carter from Points and Figures

YCharts is the best charting service around for professionals to investigate the stock market and find structural holes that they can relay to clients to build wealth.  I am a seed investor.  Last week they exited to a private equity firm and recapitalized the company.

I decided to blog about it because there are a lot of important lessons to be learned about investing in startups from this exit.  I am still going to keep the blog on ice for a little bit though.  I do miss blogging regularly, so at some point it will come back.  Thanks for all your notes.  This blog NEVER received a lot of comments so you never knew how many people were really reading it.  Turns out, a lot.

It is interesting to note that Hyde Park Angels, the angel group in Chicago that I started in April of 2007 has had successful exits with almost all of its first few investments.

  • Shuffletech.com
  • Gradebeam.com
  • UICO.com (still operating and the leader in touchscreen technology)
  • Ycharts.com
  • Brilliant.com

I don’t think any seed investors expected that.  My favorite line on seed investing came from my friend Brian Hand.  Once he said at a presentation, “When you invest in a startup, you might as well take the money to the toilet and flush it away because the odds are you will never ever see it again.”

All of the companies above had positive returns.

One thing I don’t like about the way VC firms present themselves is on exits.  Go to websites and they have little banners that show all these firms as “exited”.  It doesn’t say if they made money or not.

As an old trader, we all know people lose money.  If you don’t lose money, you aren’t taking risk.  I think if you lose money you ought to be transparent about it.  At HPA right around when we invested in Brilliant, we invested in Tap.me and did a very small investment in Noblivity and we lost money on both.  I have lost on more companies than I have made but the trick is to have outsize gains to make up for the losers.  It’s also important to be disciplined about check size, and for a fund to be disciplined about ownership percentage.

I have some thank you’s I want to make publicly.

Personally, I want to thank the original CEO Shawn Carpenter for starting YCharts.  He brought the deal to HPA when we were still a fledgling angel group with not a lot of people and only three investments under our belt.  He pitched it in 2009 and we didn’t invest until 2010.

I also want to thank two HPA people.  Richard Box for illuminating the group on how the back end of YCharts worked.  All the traders I recruited to the group understood the power of the charting.  It was how the guts worked that turned our heads.  RH Bailin for stepping up and being a deal lead and serving on the board until he retired from the group.  They made a difference and you don’t get to exits without a team effort.

I also want to thank Bob Giammanco and Jeff Kleban for picking up the baton and serving as board member and observer after left.

I am very grateful to Sean Brown and want to thank him for becoming the CEO of YCharts.  He took over the company when it was in a very precarious situation.  This doesn’t happen without the above people but it certainly doesn’t happen at all without Sean.  He is a great CEO.   I interviewed him on a podcast and he laid out his philosophy there.  I am grateful to Sean because a lot of people wouldn’t have wanted to accept the challenge.  Sean had just gotten done running a different company, and wasn’t actually looking for a new gig and this one fell into his lap.

Sean built a great team, and culture.   He stayed extremely focused and tight.  I have spoken randomly to wealth managers and they have told me YCharts is indispensable to them.  That’s before they knew I was an investor.

The path to success in startup land is a long and winding road.  Every startup usually goes through at least one moment where they look like they are going out of business.  As a CEO, when it happens keep your head and calmly assess your options.  As an investor, you cannot panic.  You must work to keep your emotions under control so you can be a port in the storm for the CEO.

The path to exit truly is a journey.  At the beginning, you are at the bottom of the foothill on the plains.  You begin to climb and you don’t actually know how you will get to the top.

Exits from LBO funds are going to become a lot more common.  PE has a lot of money to put to work.  I always thought YCharts would sell to another Fin Tech company.  In the other companies I listed, only one sold to a corporate, Gradebeam.  The rest were creative finance and Shuffletech was a patent lawsuit.  All of them are in business in one way or another because the entrepreneurs behind them created something of value that customers wanted.

It is instructional to note that when seed investors like this make money, they plow it back into new startups.  That is how Silicon Valley was built.  This is contrary to the “greedy capitalist” spin that is currently a part of our national conversation.
Many of the initial seed investors in YCharts have left the state due to the corruption in government which has led to Illinois and the city of Chicago being insolvent.  When your sitting governor cheats on his property taxes prior to being elected, you know as a normal person you don’t have a chance.  Will the money YCharts investors earned get reinvested back into Chicago?  It’s not a slam dunk that it will.   The risk is a lot higher today than it was in 2010 because of how screwed up fiscal policy is and expected future tax policy.  Chicago and the state would be better off going through a bankruptcy process to get things straight.
If you are running a business in Chicago reading this, and you aren’t a customer of one of HPA’s companies, why not?  You support the startup community by being a paying customer, not just by investing. You’ll do more for the city by patronizing startup firms based in the city than you will be donating to some non-profit organization.  Every wealth manager in Chicago ought to be using YCharts.  If they aren’t, they are missing data and potentially losing customers to wealth managers that are using YCharts to give great insights to their clients.
It’s also interesting to note that historically, the trading community does things outside of trading in Chicago to build the city.  Traders built the Art Institute.  Ken Griffin is doing it today.  I was a trader and started HPA.  Doug Monieson was a trader who I recruited and was the first chair of the board and now is running UICO.  RH Bailin was a trader who led several deals and invested in several HPA backed companies.  Many other traders were initial or are members of HPA.  Perhaps politicians ought to think about that before they pass a transaction tax on LaSalle Street.
I think Ycharts will continue to grow as a part of LLR Partners.  They have grown this year despite COVID and that is due to the efforts of their entire team.  They are in a space that is growing and from the outside, it looks like the LLR strategy is a good way to attack their target market.

 

 

 

 

 

The post YCharts Exits to LLM Partners first appeared on Points and Figures.

FinMkt Partners With Porch


This post is by Jeff Carter from Points and Figures

It’s been challenging to get stuff done since the COVID 19 outbreak manifested itself far and wide back in February.  The other goings on made it more difficult.  However, FinMkt and their terrific CEO Luan Cox have been working steadfastly.

FinMkt is a network.  WLV is a seed investor.  Manchester Story led the seed round and Fin Top Capital led the last round.  It’s not something consumers would see, but it is something that consumers benefit from.  Lenders of all stripes like leading banks, credit unions, and non-traditional lenders are part of the FinMkt network.  The network is growing quickly because of the efficiency FinMkt brings, and the high-quality loans that the network gets a look at funding.

Prior to all this going down, they had been working on several partnerships.  They recently launched a partnership with Porch, PenFed Credit Union, and Genesis Financial Solutions.  With Porch, contractors and home improvement outlets can have customers finance purchases through their new link at FinFi.

Here is a video of how it all works.

Great news for consumers, suppliers, and FinMkt.

Regulating Twitter


This post is by Jeff Carter from Points and Figures

President Trump signed an Executive Order yesterday to put more onus on social media platforms.  He did it because he was unfairly maligned on Twitter.  To be clear, no matter how you feel about Trump, what they did to him was wrong.

To be clear, I am not a huge fan of Executive Orders by the Executive branch of government no matter who is in charge.  It seems so un-Democratic to me and against the process set up by the Constitution.  There are certain things that should be debated, voted on, and brought to the Executive’s desk.  In our times with a very divided people, debate is hard and arduous.  It takes an inordinate amount of time.

However, in a state like Illinois where the state has been gerrymandered, the only reason the legislature takes any time is so they can examine all the angles.  The debate and the vote is just for show.  Similar to China.

I’d rather take the time.

To be clear, Twitter, Facebook, Google, and almost all the social media platforms have a gigantic bias against conservatives.  They encode that bias into their algorithms and it’s either encouraged by their management or their management is so biased themselves they don’t see it.

Here is an example. Yoel Roth is head of integrity at Twitter.

He should be fired.  If you are on the Twitter board, or a shareholder you ought to say something.

Conservatives will rally to Trump’s side on the executive order he signed yesterday. I do not. I don’t think he should have issued it. It’s not that I don’t want to stop the bias by social media platforms but this issue is much thicker and deeper.

The Stigler Center at the University of Chicago has initiated a lot of the legal and economic debate around it. I have blogged about it in the past and I think if you really want to understand both sides of the issue deeply without just opining around the headlines or your personal confirmation bias it is well worth your time to watch the videos.

I can see real places where the population might benefit from some government regulation of social media platforms. I also can see where if the government were to get involved, it would be significantly worse for all of us.  The Wall Street Journal published an editorial today that made some good points, but to be clear was a bit self-serving.

Even though the Executive Order is narrow in its scope, it still will have an effect on platforms other than Twitter.  The WSJ writes,

The executive order that Mr. Trump signed Thursday is aimed in particular at Section 230 of the Communications Decency Act. That 1996 law lets websites moderate posts by users without risking liability for the content. Without this shield, a company like Yelp might be sued by every business that gets a bad review. The Journal might be sued for something in the comments section beneath this article.

For sure, this is all about politics.  We are starting to get into the middle of the stretch run for November.  Trump will use this to help him fire up his base and keep them engaged in the same way Democrats will use the riots in Minnesota to try and help them.  Neither is productive.

 

Two New Things


This post is by Jeff Carter from Points and Figures

During the lockdown, some businesses had to remain still. They couldn’t do anything. Other businesses had the lockdown challenge their business model. The sales cycle seized up. They had to rethink everything.

We had two businesses in our portfolio that did just that and I’d love you to take a look at what they did and share them with people who might benefit.  One thing we have found is that independent workers are especially vulnerable at times like this.  The US has had a trend toward more independent work over the last eight years as the gig economy has grown.

Kover now is offering income and disability insurance to workers in the gig economy. Big company benefits for the self-employed. Freedom to be your own boss. Benefits to protect your bottom line. It’s the first of its kind insurance. They have a great FAQ on their website.

Holberg Financial just announced a partnership with Fringe.  Fringe offers more than 80+ lifestyle benefits to employees via companies that want to give their employees freedom, flexibility, and choice when it comes to choosing the perks and benefits that they value.  Employees across the country are seeking out financial wellness at work, especially during the COVID 19 lockdown. Holberg Financial seamlessly blends a straightforward and powerful financial wellness technology platform with confidential, unbiased financial coaching. This “one-two punch” builds the financial health of employees which reduces their financial stress and in turn increases loyalty and tenure at the companies they work for – it’s a win for companies, employees, and for Fringe as they give millions of employees access to the lifestyle benefits of their choice.  Financial stress is the #1 concern of employees across the U.S. Holberg’s financial wellness benefit solves it.

Both of these companies are solving big headaches for people and alleviating stress in their lives.  They do it cheaply and efficiently.

 

 

More Thoughts On The Future


This post is by Jeff Carter from Points and Figures

I am seeing more and more predictions about the future. Most are produced by Captain Obvious.  For example, as a society, we will do more and more online.  Duh.  That trend was happening prior to the Wuhan Flu.

I was chatting with a friend yesterday. In late January, he had a horrible flu. I brought him some chicken soup. I was around him in his house for a bit. Around 8 days later I had a horrible cold. Turns out my friend was on a plane next to a Chinese gentleman who was hacking up a storm. I can’t wait for antibody tests because I may have had it.

It’s pretty easy to say telemedicine will happen.  Great.  We knew that and anyone that invested in telemedicine in the last five years is hopefully reaping a windfall now.

The real hard stuff though happens in structure.  For example, many hospitals are laying off people and closing during this Wuhan Flu crisis.  Crazy right?  Amazing that a health care professional would be out of work during a medical crisis.  Why is this happening?  A lot of the healthcare system runs on elective surgery.  The government bans elective surgery and the revenue driver that holds the health care system up goes away.  Welcome to your taste of single-payer socialized medicine.

We are seeing that the regulatory system our country has for lots and lots of industries is out of whack and when stressors happen the system buckles.  Don’t fall for the “the free market doesn’t work” meme.  The free market does work.  We don’t have a lot of truly “free” markets in the United States.

What if you unbundled the medical system?  Wouldn’t it be more efficient not to have general hospitals but have smaller specialty clinics?  When a crisis happens, the orthopedic surgeon, the plastic surgeon, the dermatologist, the ophthalmologist don’t have to shut down.  They are away from the action.  They just operate as normal.

Wouldn’t it be better not to have single-payer but more price transparency?  We were recently in Nevada.  I asked someone about getting medical insurance there and what were the costs.  It’s amazingly byzantine.  My health care plan that I have had since 1992 in Illinois doesn’t transfer at all.  My plan in Illinois is byzantine too.  Socializing the health care system will only make it worse.  Why not remove all the price floors, price ceilings, mandates and let everyone from insurance companies to providers compete? Why not remove the tax write off for employers to provide insurance so that your insurance isn’t tied to your job?

Oh, scary!  The naysayers will immediately criticize the free market idea because someone is going to make money.  Yup.  That’s how America works.  Will some people get better or more access to care than others?  Yup.  Will there be a baseline of basic care.  Yup, because the market will fill the need for it.

There are plenty of other industries that could be totally blown up and remade through free-market competition.  Insurance, Banking, Distribution, and Mining to name but a few.

What about conferences?  My friend Nilesh posted on his Facebook that software might eat conferences.  I had been thinking about that too.  It also came up on a webinar I was listening too.  If you are an executive and looking at your budget you might be spending millions of dollars to sponsor various events and big conferences around the country-or world.

I have been to a few of these things and generally find them to be a waste of time.  The information is not fresh, and often times it’s been filtered through a legal department.  The “networking” is generally lame.  How do the big conferences change to really add value for participants and sponsors?  I don’t know the answer to that.  But, if they don’t they will go away.

I am seeing protests happening now across the country. People are seeing the death count from the Wuhan Flu and realize it’s not as serious as the faulty models projected. They are ticked as they see their rights trampled on by government that is making decisions based on politics and not science. Michigan’s governor might be the worst but there are plenty of other examples.

Maybe we are waking up. Why is it that I can buy liquor at a grocery store, but some states have closed liquor stores? Why is it that I can get my dog washed at some big box store that might provide that service, but I can’t use a boutique business set up to do the same? How is the government determining what is essential and what’s not essential? Why are we giving the government the power to even do that?  Why is a throw pillow non-essential and a sleeping pillow essential?  Why is my cancer biopsy non-essential?  How about my hip replacement?  Maybe those things are essential to me.

Instead of trying to predict what will happen, maybe we ought to take a really hard look at our regulatory regimes and look at how much power local government has over our lives.  As Thomas Sowell said,

What’s the History? What’s Next?


This post is by Jeff Carter from Points and Figures

This is a great video for anyone that has a lot of fear around the virus.  If you mostly listen to MSNBC, CNN etc give it a try.  It will confirm some things you might believe, but it might also jostle your confirmation bias.  We all need our confirmation bias jostled.

I post it because I was chatting with someone and they asked the question, “What do you think will be some non-obvious things where businesses will get a win coming out of the situation we are in?”

Great investments are not made when you think along linear lines. For example, if you come out of this and say, “We are going to work a lot more virtually, and I don’t think we need as much CRE office space” that trend was invested in back in 2012. You are too late.

I haven’t thought super deeply about it yet. Just starting to cogitate which is why this video is also so good. At around 30 minutes in, it’s mentioned how Bloomberg in his presidential campaign said that farmers don’t need a lot of gray matter. They just put seeds in the dirt and they grow.

However, from my experience farmers do need A LOT of gray matter. They are incredibly innovative. Plus, if you are going to go to your nice little Manhattan restaurant, maybe you will come away from this crisis with a healthy respect for a farmer, the muscle that harvests, packages, and transports the product from the muddy dusty field to your pristine privileged plate. Not just the chef, waiter, and dishwasher.

One thing that will happen I think.  There are people like Governor Pritzker that are playing political football with the crisis. Already I see Governor Cuomo is holding his press conferences to compete with Trump’s.  Governors that utilize policy to extend the lockdown when the numbers show they shouldn’t will pay a price.  Pritzker saying there should be no summer festivals in Chicago is naive.  Not because I want them-but because it totally is ignorant of data and science.

Maybe a summer festival like Lollapallooza will decentralize to several towns that will have them.  Or, maybe an enterprising state will figure out a way to host a festival like Lolla in a way that meets the public need to feel safe.

Private industry should not wait for the government to mandate something.  Do it themselves.

For example, I would urge airlines to band together to find a way to clean and sanitize planes.  Maybe make passengers wear masks and have their temp taken before they board. Maybe don’t have as many passengers on a plane.  Maybe for some point to point flights, just have an entire plane as business class.

Restaurants should come together to figure out ways to operate their businesses while still paying attention to not being conduits to spread a virus.  Figure it out-then go to the local government and show how you do it.  Then open.  Casinos, theme parks, movie theatres, sporting stadiums should do the same.

Private industry will figure out the way out A LOT faster and more economically than the government will.

Personally, I think this is a serious disease.  A 2-3 week shutdown to get a handle on it is a good idea.  We were fed false data from the Chinese and World Health Organization.  But, clearly the models that predicted dire disease and death were WAY OFF.  It’s not because of the quarantine it’s because they are terrifically hard to build and the builders didn’t input the right denominator and in most cases didn’t input the right numerator.  Also, medical personnel and medical bureaucrats have a different perspective about outcomes that economists might.

I think we will find a fair amount of the things being spread by politicians and the media are in fact just political.  Seeing this story on a phlebotomist testing 400-600 samples of blood daily in south Chicago should open your eyes that you might be being fed something that isn’t for your own good, but instead for extending or forming a political power base to infiltrate more and more of your personal life.  In this part of Chicago, 30% of tests show people already have immunity.  We might already have more immunity in the US than we realize.

Many politicians acted out of fear.  Many out of spite and disrespect for the intelligence and freedom of their constituents.  Many deliberately hid factual numbers so they could spin their own version of events.  Others have been transparent.  In Illinois, politicians are feeding their hungry Union mouths. The mayor of Chicago suspended the Freedom of Information Act.  She’s acting more and more like Nikita Kruschev every day.  Or is it Marie Antoinette?

We have seen the politicization of this and its been there from the very beginning.  An example is the malaria drug.  Trump says it and the knee jerk reaction is that whatever Trump says must be wrong.  So, the partisan media goes into overdrive and tries to fact check the story using their facts.  When they run into a dead end, they accuse Trump of having an investment in the firm.  They prey on confirmation bias to keep their herd in line.

This is not death vs life.  It’s lives versus lives.  In the shutdown, lives are being totally destroyed.  Anxiety, subtance abuse, suicide, meaning and dignity of life not to mention personal finances are all being destroyed.   To me, this looks like a bad flu season.  Not Spanish Flu of 1918, nor the Black Plague.  Maybe 1968 Hong Kong flu.  We never shut our economy down for any of them.

 

All Good Things Must End


This post is by Jeff Carter from Points and Figures

My wife and I left Chicago for Las Vegas on Feb 8th.  For the past several years, we always leave Chicago in the winter.  Part of it is we are sick of being cold and part of it is we are investigating areas to move to.  Another part of it is we like to experience different parts of the country.

No one could have seen a worldwide pandemic coming then.

We had a lot of plans that fell through in Las Vegas.  No side trips, the parks were closed.  No shows.  We experienced a lot of hiking but like the rest of the country, we have been cooped up in the place we rented.  We have rented three different places in Vegas in three different areas of the city.  I think we have a pretty good idea of what it’s like to live here.

Because of the pandemic and all the rules surrounding it, a lot of places are cracking down on short term rentals.  Our daughter lives in LA and we were going to rent a place in Newport Beach to see her but that fell through.  Neither of us really were excited about returning to April weather in Chicago.  A lot of short term rentals are off the market since no one is renting them.  In addition, a lot of people that live in cold weather climates that can left and did a long term rental somewhere to ride it out.

We found a place in Scottsdale, AZ and we are driving down there to hang out for a couple of weeks to see how this all turns out.  As long as there is an internet connection, you can do basically what you need to do.

Today there are a few articles around the state exactly what I have been saying for a while.  The models are incorrect and overestimated everything.  When I looked at my hometown to see reported coronavirus cases, it’s not that serious.  This graphic allows you to search by zip code.  The most dangerous place is the far south side of Chicago.  Viruses attacking people have nothing to do with race.  However, I think the standard of living and general health prior to an invasion certainly does.

We need to figure out a way to re-open the economy by the end of April.  America needs to get back to business and anyone calling for a 12 to 18-month shutdown isn’t living in reality and might have an ulterior motive besides the health and safety of people.  Good statistical models will be a guide.   Good practices will be essential and my bet is people will practice them.

Sure, this virus is serious but it is not Black Plague and it’s not Spanish Flu.  I remember as a little kid my mother being worried about the Hong Kong Flu of 1968 which went through the world and didn’t die off until 1970.  I suspect this will be like that.

What if we are wrong?

People will get sick.  But based on current statistical data, masses and masses of people will not die.  This thing is tougher in urban areas that are densely populated like NYC.  It’s tough on places that have a lot of multigenerational housing.  It’s tough on people that use public transportation.  It’s not tough on suburbs and rural areas and from the chart in Chicago, it’s not tough on most areas of the city.

Re-opening the economy will allow people to re-establish some normalcy.  There are a lot of businesses that were teetering before this happened.  They will probably die.  A larger example is Boeing.  They were having trouble before the virus and certainly with a mandated government shut down are going to have trouble after.  I read Howard Tullman’s recent article and agree with the spirit and the principle of it, but boy is it awfully hard to execute.  Re-opening the economy might save some money for the US fiscally too.

It will be good for peace of mind and the idea of empowering people as well.

Killer Companies


This post is by Jeff Carter from Points and Figures

I have watched a few webinars on how to talk to Limited Partners and investors.  What do you say in times like this?  What should you be thinking about?  What should you be thinking about in terms of what is going through your LP’s minds?

All good questions.  By the way, if you are an LP in our fund we have a call coming up.  Make sure you sign up and check your email!  Interestingly, we scheduled our call after we got our audit back not because of any issues around COVID19 or the audit.  It’s something we do every quarter.  But, no doubt, C19 will be one topic of conversation!

One thing that every webinar and a lot of online advice has included is this;  In prior downturns, killer companies were created.

This is true.  However, it’s a bit naive and a lot of pattern matching to think that a killer company is being created today. If it is, it was probably started before the virus, not as a result of the virus.  Certainly, some companies were positioned well to take advantage of the situation.  We have some in our portfolio and I have some in my angel portfolio.  It’s really fun to watch resilient CEO’s work through this kind of problem.

If you are a small fund like ours, you have exactly zero chance of raising another fund now.  The VC industry is going to take a bruising.  I don’t think the floodgates open up again until at least mid to late 2021.  People will want to see the dust clear and who is left standing.  We could see a world where allocations to venture drop.  When the stock market is on sale, it might be smarter for a lot of entities to put money in equities than it is alternatives.  There will be fund of funds that go under too.

I think an advantage our fund has is trading through several downturns.  Gives you a different perspective.

Here is the advice we have given the CEOs in our portfolio:

  1.  We invested in you.  We are confident you can lead your team through this.
  2.  When you talk to your team, be transparent.  Show them the difficulties, but also show them hope.  Teams survive on hope.
  3.  Make sure you worry and execute on things you can control.  There are a lot of uncontrollable variables now.  Don’t think about them or spend time worrying about them.
  4.  If you can open up a line of credit, do it.  If you can apply for an SBA loan, do it.  You might or might not need the money but cash is a nice thing to have.  If you can extend payables and renegotiate some contracts, do it.  If you can bring in receivables quicker, do it.
  5. Have a serious heart to heart chat with your investors.  Know your burn rate and their appetite for supporting you.
  6. If you have interested investors, talk to them about doing a round.  You might get a lower price than three months ago, but if you can take on some money and it doesn’t cost you a boatload of equity the tradeoff is worth it.
  7. There will be companies that fail.  Great talent will be on the sidelines.  You can pick them up but make that great talent prove themselves.  If they are salespeople, they need to go out and sell.  Bring you orders, pay them a rich commission.  Do it again.  Scrappy wins, not credentials.  If they prove themselves, hire them.  That being said, hire carefully!!
  8. There will be opportunities that didn’t exist before that will avail themselves.  Go after them if it doesn’t burn a lot of cash or entails using a lot of cash to support something after you get it.  They probably will be smaller opportunities that could eventually be big.  Make sure the CAC>LTV….and most of all if it isn’t working cut the cord and fail fast.  Live to fight another day.
  9. Some of our companies have cut their pay already.  They are doing without or making it up with options.  It’s extending their burn.
  10. Competitors will go out of business. Grab their customers and earn their business.
  11. Take some time for yourself each and every day.  Go for a walk-no phone on.  Work out.  Stretch.  Do yoga.  Anything to get away for a little bit.  Key in a crisis.
  12. Oh, and if you need us for anything, don’t hesitate to call, email, or text 24/7.  We will actively work for you as we always have.

There will be some killer companies created in the wake of this.  However, I don’t think brand new spanking companies will be created until at least the back half of this year.  I also don’t think the smoke has cleared enough to know what will be huge yet.  Other crisis situations were not as widespread.  In the last downturn, the financial crisis put good people out of work.  However, the mobile phone was the game changer and the surfboard everyone road to smashing success.

Our fund is still actively looking for investments but we are not running around with money burning a hole in our pocket.  We consistently think about our existing portfolio and things we need to be doing to support it.  Sometimes that is being creative about how they find money.  That’s not going to Vito and getting charged a 55% interest rate but it might be reaching out to various non-traditional investors to see if they might want to participate in some way.

There will be funds that might want to sell positions in great companies too in order to provide liquidity to investors.  Figuring out how to help entrepreneurs navigate that is one job we are preparing to do.  It’s also a way for an enterprising fund to grab more equity in an existing portfolio company-or in a company they would like to be a part of.

There are some obvious things we are learning.  For example, distance learning will be huge.  But if you start a company today, you are way late.  However, a private equity-type roll-up of existing distance learning companies to create a big SaaS platform might be interesting.  A lot of people might be looking at different types of manufacturing given we need masks, respirators, ventilators and other specialized equipment.  Why can’t existing companies just expand capacity?  Why won’t governments stockpile?  If it’s obvious, then it’s probably not a good entrepreneurial idea.  Some things that seemed too early might get some traction.  Some things that seemed on point might be dead.

It’s abundantly clear a lot of other things are going to change that entrepreneurs have no control over.

A little humor helps you deal with a crisis too.