The Flag

The Flag of the United States of America is a symbol of American ideals.  To me the following sentence from the Declaration of Independence covers a lot of what the Flag represents:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

In no way does the current actions being taken by professional athletes go against what the Flag stands for.  To me, the mind-numbingly stupid and purposefully provocative statements by Donald Trump goes against what the Flag means and what it means to lead.


Chinese Regulators vs US Regulators – Digital Asset version

After reading the Bloomberg piece that China plans to block cryptocurrencies from being traded on exchanges but not via OTC, I wanted to know why Chinese regulators and US regulators have such opposing views.

In the US, the Commodity Futures Trading Commission (“CFTC”) and the National Futures Association (“NFA”) have worked hard to eliminate OTC trading in favor of exchange-based trading.  Even the markets that remain available to be traded OTC now have to report all their client and trade data to a centralized clearing entity.  And now we hear that in China the regulator will allow for OTC trading but not allow the exchanges to offer cryptocurrencies.

I am going to use inductive reasoning here which I normally despise, but I do not have the underlying facts from the Chinese regulators to build a case for allowing OTC trading.

Cryptocurrency (or digital assets) are not regulated by any major economy regulator because the knowledge is not within the walls of the regulators to understand cryptocurrencies and to therefore make any rules about them.  Additionally I would add that a significant aspect to cryptocurrencies is that they are intended to be un-regulatable; the inventor(s) of Bitcoin were specific in their desire to create something that was above sovereign regulation.

I suspect that in China the regulators have a better grip on controlling the OTC brokerages (though my experiences operating in the FX industry for the last 10 years including partnerships with significant Chines OTC brokers tells me otherwise), than on cryptocurrency exchanges.  And what we have seen in the crypto space is the vulnerability of exchanges; even large ones like Mt Gox and even Bitfinex.  Whereas Chinese OTC brokerage firms have at least been around for a number of years and are pretty savvy when it comes to security of data.  I just searched for news on security breaches and missing funds at Chinese OTC brokerage firms on a number of industry portals and found nothing.

So even though one country is pushing cryptocurrency flow into the OTC brokers, and the other is pushing all OTC trading onto exchanges, the goals of the regulators is the same.  Get the trading into a place where they have a level of understanding and control.

ICO vs ico

Filecoin just completed their almost month-long ICO yesterday and raised a total of $257 million, including $52 mio from prominent VC firms Union Square Ventures, Andreeson Horowitz, and Sequoia Capital. has a great article on the process and players here.

As someone interested in the trading of crypto-currencies, what I took from this process is the ICO vs. ico aspect.  Filecoin is an “ICO” to me.  A growing firm based on a market-validated concept that already has clients and is successfully attacking a definable and known marketplace.  They have a product, they have product fit, they have clients, it is reasonable to think they need capital to rapidly expand and do their best to corner the market.  As we have seen in the last 20 years, market dominance is possible and incredibly profitable (AMZN, GOOG, FB).

An “ico” to me is an idea that may or not become a product or service that is seeking to raise money from speculators.  We have seen lots of ico’s in the last 8 months and I believe many ico’s are promoted by financial fraudsters who are unlikely to be able to see their idea through to successful product and who know that to be true.

So as my colleagues and I seek to determine which crypto-currencies we will add to our platforms, and support via market-making liquidity provision, we look to not just the initial hype, but to the product fit of the underlying promise.  We continue to get approached to add ico’s to our platforms and liquidity pool.  We are offered pretty healthy “fees” for doing so.  But that is not good for our clients and therefore not good for us.  Crypto-currencies are here to stay and we will be too.

PS – found this Forbes article just as I was finishing this post.  Good read and corollary to my post.

The Massively Geometric Sales Comp Plan

Tomasz Tunguz of Redpoint Ventures has a post about different type of Sales compensation plans for start ups.  It got me thinking about a discussion I recently had with a very early stage company.

Interesting SaaS offering; selling into an industry that has a lot of catch up to do re: technology.  We were discussing what compensation they would give to whomever they hired as their early VP Sales.  Their goal was to offer no salary to the VP Sales; just a very strong commission plan.  Hmmmmm.

I asked what revenue numbers they thought they needed to get to their A round of financing.  Their answer was that they were not worried about revenues; just users.  I get that for B2C platforms, but this was the first time I had heard of it for a B2B platform.  The offering was going out at $1,000/annum per seat license.  My math was that their median client would take 9 seat licenses.  That’s $9,000/annum per client.

Since they stated they were not worried about revenues, I asked if the VP Sales could keep 100% revenues generated for the first clients.  The answer was, “Yes.”  They thought valid first year OTE for the VP Sales was $180,000, and second year was $360,000.

What they decided to offer their chosen candidate (who knew of the “zero salary” mindset) was the following:  100% commission on Gross Sales up to $90,000, then 20% commissions above $90,000 in revenues generated.  So $540,000 Gross Revenues gets the VP Sales to her OTE in Year 1.  $1,440,000 Gross Revenues in Year 2.

When viewed on Tomasz Tunguz chart this would be an extremely steep-sloping line that would melt the chart.  I do not know if their chosen candidate took the offer and/or what the comp plan was.  But I am intrigued to see which type of personality would take on that role and comp plan.

Raise Your Standards

I’ve got this route I run that is half woods and half roads.  I do not know exactly how far the route is.  I do not know if I am running it quickly or slowly.  I do not know who’s property I am passing through on the well-trodden path along the banks of the Charles river.  I do not know much about this route except that I track my time each time I run it.  And my sole goal each time is to improve my time.  I do not always improve my time, but usually I do.  I do not allow myself greater time this year because I am a year older than last year.  If anything, I am also a year wiser and by running this route often I should know where to push hard on the uphills and where to save energy on the downhills.  What is important to me is that I raise the standard by which I compete with myself.

Fred Wilson’s “Resource Constraints”

As per the norm, a thought provoking piece by Fred Wilson of Union Square Ventures today.   Full text below.  It reminded me of a time when one of my companies, which was bootstrapped, was generating more than sufficient cash flow.  I started spending time looking at new, shiny businesses to start rather than focusing on executing at 100% and continuing to gain market share for the existing company.  In the end, the distraction of too much cash flow hurt the company.  I do not disavow cash flow, but need to be mindful that the cash flow from any business line is merely a scorecard of where you are to date; it is not an excuse to look around from your core mission and market.

Resource Constraints

Most of the companies I work with tell me that they are resource constrained and do not have enough capital and engineers to do everything they want to do.

I tell them that is a blessing not a curse.

They look at me like I am crazy and rationalize it as me being an investor and not an operator.

I will plead guilty to both (being crazy and being an investor) but I am extremely confident that being resource constrained is a blessing in the hands of a great operator.

I have seen companies do amazing things with no money and tiny teams.

I have seen companies do absolutely nothing with all the money in the world and hundreds of engineers.

This experience, built up over thirty plus years in tech and startups, has convinced me that resources are never the limiting factor to doing great things.

The limiting factors are;

  1. having great management that can make the right decisions and drive exection
  2. knowing what to do and what not to do
  3. playing your game and not someone else’s

Resources, measured in available capital and headcount, often make #2 and #3 more challenging.

Organizations start to feel that they can do more than they can and should.

They start looking around enviously and counting the size of the fundraises and engineering teams of their competitors.

They stop knowing who they are. And that is death.

I believe that excess capital makes companies weak and unfocused.

I believe limited capital makes companies strong and focused.

And I don’t believe capital has ever helped a company win a market. Many have tried that approach and it always ends badly.

So I encourage all of you entrepreneurs out there to embrace being resource constrained and learn to love operating with less.

It will serve you well.