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.  Coindesk.com 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.

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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.

Ari Gold on Elon Musk

Two of my favorite characters.  One is a fictional character, closely based on a small few of Hollywood’s elite agents (and played to perfection by Jeremy Pivens).  The other a brilliant entrepreneur and engineer rightly stepping into Steve job’s previous role as King of America’s Entrepreneurial Aspirations.

In the book written by the Ari Gold character, there is a great chapter named, “Your Most Important Product is Heat”.  An descriptive paragraph is below:

Heat is a kinetic, volatile, temporary bubble of energy that engulfs whatever it is you’re selling—be it a product, a client, even yourself—tipping the scales of attraction in your favor, allowing you to conjure outlandish, outrageous, inconceivable deals that would not be possible under more temperate weather conditions. Heat adds a layer of excitability to the demand side of the equation, triggering buyers to place a disproportionately high value on a product, giving you leverage to demand more . Why was Owen Wilson’s character in Zoolander the highest paid model in the world at the time? Because that Hansel… he’s so hot right now! Buzz. Momentum. Juice. It’s all the same. You’re catching lightning in a bottle and selling it before you hear the thunderclap. Remember, people may eat a steak for the taste, but they buy it for the sizzle. Heat makes people do crazy things. Four centuries ago, the whole country of Holland went completely batshit berserk for tulip bulbs. Yes, tulip bulbs. Tulipmania was the first time prices of a speculative asset, in this case—tulips—shot up through the stratosphere. Farms, homes, and families were lost, all because of a flower you send your girlfriend to apologize for sleeping with her sister. Heat is the ephemeral force that compels Midwestern morons to sink their life savings into Beanie Babies, that makes CPAs quit their jobs and spend six months building fallout shelters in their backyards before the Y2K apocalypse.

The best time to sell tickets to a volcano is just before it erupts.

I believe in Tesla, I believe in SpaceX, I saw the success of PayPal.  I believe Elon Musk is the real deal and an engineer with great aspirations and talent to match.  I also believe that Elon Musk knows how to generate Heat.  Half a million Model 3’s on order and production capabilities in doubt, losing increasing amounts of money each quarter yet can easily raise $1.5 Billion in debt?  That’s Heat.

Anyone selling anything is better served if they can create Heat.  Social media, personality, 10x performance, celebrity endorsements, an awesome give-away contest for clients…..whatever it is you need to do to create Heat, find a way to make it happen.

Confirming Who I Am

As part of an online application with Fulton Waters, I was asked to use the 16 Personalities website to take a test and see who I really am.  I recognized the website as something I had done a while ago.  Without going back in time to see my previous results, I plowed ahead with the requested (short & fun) quiz.

I am happy to report my results came out exactly as they had a year previously.  Good to know that I know who I am.

Add the Blockchain to My Cross-Margined Life and This Could Really Work

A while ago I put up a short post about the idea of cross-marginning my financial life.  https://wordpress.com/post/arhaik.com/835

I do not like tracking so many different aspect of my financial life; 401(k), mortgage, checking accounts, savings accounts, 529 plans, monthly bills, K-1’s, W-2’s, PayPal, Coinbase, on and on and on.  So the idea that you could have an available “balance sheet & income statement” of your financial life that you can choose to make available when you wish and to whom you wish would ease the pain of tracking your financial self.

There are some services out there that do some of the work like Intuit’s Mint platform.  Mint helps track your personal wealth, but it is self-reported and not considered valid information by any outside entity.

But what if there were a blockchain application that could track ALL aspects of your financial self?  For starters, it would still connect to current-day “accounts” as I listed above.  But eventually this blockchain-confirmed “personal balance sheet and income statement” would become those accounts.  No need for a Fidelity IRA & your 401(k) from that last job (and the associated paperwork and fees).  Your retirement balances would just be a part of your Retirement Assets under the blockchain.  Monthly invoices from the internet company, Amazon Prime, and the kid’s after school activities?  Record the invoices then auto pay from my blockchain account.  If I make my personal balance sheet (validated via blockchain technology) available to those vendors, they are likely to give me credit to pay at the end of each month.  In some cases people will not have a strong enough balance sheet to be extended credit by vendors.

The obstacles here are clear and massive.  The current global economy is strongly tied to the current global financial services industry.  None of those entities want to be disrupted.  But will any of them take on the challenge of making this a possibility?  Hard to say.  I’ll keep refining this idea and keep updating when I do.