Continuing the discussion of early-stage investing, a common thought circling around the venture capital community is that their the traditional investment model is broken. In “Investing without Zombies”, I focused on the odd choice of optimizing the system for the least likely case. But there is a second flaw in that system as well. Exits. Traditional equity investments are worthless until a...
Income inequality has finally floated to the surface of the news. It’s nice to see this issue being talked about, but much of what I’m seeing is focused on the symptoms, with solutions like “just pay the workers more”. What I’d prefer are some opinions on the root causes, purposefully plural as this is not a simple issue. I believe I have uncovered one such hidden cause. It lies down in the...
The results of an investment (in an early-stage startup) depend not only on the success of that startup, but also on the form of the investment. A sophisticated investor is going to be nodding right now, thinking about liquidation preferences and other common add-on’s to equity investments. But at the same time, those sophisticated investors likely have a majority of their investments in a state...
Speaking about assumptions, there is a long-held belief by the regulators in Washington D.C. and all 50 States that the masses can’t be trusted with investments. An assumption dating back from the 1929 stock market crash. An event now 85 years old, from an era when my grandparents were children. Meanwhile, back in 2009, a small startup in Brooklyn took a small step toward breaking this...
The most interesting ideas come about by questioning assumptions. In science, Copernicus questioned the assumption that the Earth was fixed in the center of the universe. Newton questioned the assumption that an apply falling and the moon orbiting were related. In government, Madison, Jefferson, Franklin, and friends questioned whether a government needed a king. In business, Henry Ford...
