Reading

I’ve been reading more in the past year than I have since college. I’ve mostly been focused on Science Fiction and Cyberpunk stuff, as you can see from my Amazon or Goodreads accounts.

It’s the best thing I’ve done in a long time.

I now read at least half an hour before I go to sleep every night, no matter where I am or how late it is. I read 80% on my Kindle, 5% magazines, and 15% on my phone (but that’s only when traveling, and mostly Pocket/articles).

What does this change for me?

  • I’m discovering a whole new universe – Science Fiction. I’ve never liked Science Fiction before, but I’m now hooked. I’ve read about 50 books in the last year (by a quick count of kindle downloads), and these were 2/3rd SF.
  • This makes me think a lot about new things. Self driving cars? Read Rainbow’s End for an incredibly prescient view on what it will become. VR? Read Player Number One, anything William Gibson, or the Nexus trilogy. Realistic Space Travel? Seveneves, the Martian, The Martians, and countless others. Extinction events? Earth Abides, Clockwork Century, Station Eleven, World War Z (so much better than the movie).
  • I sleep way better. Reading before you go to bed will put your mind on different tracks, reduce stress, and improve dreaming. Just don’t read articles, work stuff, or how-to books.
  • I get to recharge my brain. Just ask anyone around me – If i’m reading, I’m shut off from my surroundings and can mentally recharge.
  • I accept more new perspectives. Good fiction has good character development, moral and philosophical discussions, and different views through their characters. You don’t need to agree, just accept. Makes me humble.
  • I’m excited for the future. Whatever will come, If it’s half as crazy as those books, I am looking forward to it.
  • Makes me a little paranoid. I kinda want to build a pepper cave with supplies, a little farm, and a Unimog to drive across everything. But that might be watching too much Walking dead rather than reading Science Fiction, too.

It’s summer, you should read more on your next vacation.

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“For a given alpha, a shorter time to exit requires a larger growth rate. If it takes 20 years to…”

“For a given alpha, a shorter time to exit requires a larger growth rate. If it takes 20 years to exit a patent (alpha = 1.5) it implies a year over year growth rate in value of about 10%. If you wanted to exit in five years you would need a year over year growth rate of closer to 50%. To get to an alpha close to 2, as in venture capital, with an average time to exit of 5 years, the year over year growth rate of the portfolio companies needs to be 22%. For a time to exit of 3.5 years, the growth rate needs to be 33%.”

Power Laws in Venture | Reaction Wheel

Gerry Neumann is writing the most interesting material on VC right now, and I suggest anyone who’s interested in the industry to read his blog.

This post is a super interesting look at how power laws actually work – beyond “amazing outcomes are extremely rare but big”. Since the whole idea of Venture Capital is based on this (and it’s totally counterintuitive to everything we encounter in normal life), it’s importatn. Go read it and dig into the sources, and come back.

Some of the conclusions:

  • Low Alpha (less losses/small returns, and more outlier winners) is mostly a function of time and growth rate
  • Patents and smaller/earlier funds have low alpha: The very long timeframe for patents, and unproportional outcomes of large wins for small funds are probably the main reasons.
  • The market of VC is crowding around an alpha of 2, probably designed by market forces: usually very similar time horizons for funds, and the very low likelihood of extreme growth startups. If those are found (FB, Uber, Instagram, Whatsapp), the incredible growth rates determine the outlying returns in a short time (since the normal fund cycles don’t get changed).

What do I think that means?

  • A fund with a really long term horizon can achieve lower alpha if they invest in things that match this trajectory
  • A fund focusing on later stage deals could innovate by taking outlier risks, but since the amount of high growth companies in late stages are so few (and well known), there is upward drive on the price, which brings the alpha back down
  • Short term investing is almost impossible, since high growth opportunities are so rare and easily spotted, that prices go up super fast
  • Extreme valuations are explainable by their high growth rates above all else. However, it remains to be seen how patient this capital needs to be (they usually have a different time horizon from VC, so it might work for them).
  • Category killers like Uber that look like long term winners have both sides of this equation to their benefit.


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Some things people miss about the 6Wunderkinder exit: The fact that Microsoft and other large corps…

Some things people miss about the 6Wunderkinder exit:

  • The fact that Microsoft and other large corps are now going to look for more startups to buy in Berlin, because you CAN find interesting companies. THAT IS AMAZING for angels, accelerators, and smaller funds who have few internationally comparable exit scenarios until now.
  • The amount of offshore capital large companies have, with repatriation costing anywhere between 20-40% in taxes. This is like a discount on the exit amount.
  • That Berlin will now be a major Dev location for MS, meaning more money, more developers, startup oriented folks, and international exchange
  • Angels are much more important than $B funds for the development of a startup ecosystem, and Berlin now has at least 6 more heavy hitter angels that can fuel the scene

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ONE BILLION DOLLARS

“Oh, what a feeling — fuck it, I want a billion”
– Jay-Z, Picasso, Baby

Next to quoting rap in blog posts, being a Unicorn is the next big thing. While it’s easy to shout “bubble bubble”, there’s something most commentary on the subject doesn’t mention. Most headlines are “Company X raised at a billion dollar valuation”. Ever wonder why everyone suddenly raises at exactly that number?

It’s a game of egos. Founders want to have the Unicorn Club membership card, and VCs aren’t too unhappy about getting press for having a large wallet and doing huge deals. VCs also know that the Billion Dollar card is a great negotiating chip in competitive deals to get the founder over the line.

I bet that if you would run the numbers (if you have them), there’s a gap between company valuations from about $800M to $1B – where the final valuation of a deal is driven up in this game of Unicornization.

So, are all these companies overvalued by 20%?

No. One thing that the press doesn’t write about are other terms and general economics in deals. This is because they don’t know the inside details, and often don’t care much about venture economics and terms (which is fine). Also, ONE BILLION DOLLARS is a great headline, and I can’t blame anyone for using it.

In these negotiations, the 1 Billion mark is a goal the founders or previous investors have their mind set on. Now, there’s a ton of other terms that can be played with to reach that number.

For example, new investors can:

  • Demand a higher liquidation preference for an exit that is below the 1B mark (or just demand a higher liq pref, period)
  • Have a staggered pay out of the investment based on company metrics (this means they actually invest less money now)
  • Get other control rights (board seats, etc) for the higher valuation to keep the company in check
  • Play the option pool shuffle: A new option pool is installed, pre money – everyone dilutes, except for the new investors (note that undistributed option pools may mean a lower effective valuation)
  • Play tricks with a combination of secondaries at lower valuations and smaller actual cash injections – especially if the company has enough money in the bank.

This is not always good for the founders, as you can tell. However, I’m not one to dispute the outsized attention these rounds get, so the trade off might be valuable somewhere else.

After all, if you manage to build a company to a valuation of hundreds of millions of dollars, you should know what you’re doing.

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Process vs. Outcomes Especially in our world, we’re very…




Process vs. Outcomes

Especially in our world, we’re very focused on outcomes, and process is a much dreaded word.

It’s definitely wrong to start building processes to early (before you know what’s going on), but at some point, the only way to scale smartly is through better product and process, not more people working on the same thing.

We’re about 25 people (total) at AngelList – a fact that surprises many. More than two thirds of those are engineers. We try to stay small because it’s better to work in a small team, and because smart people want to be independent – which is not possible in a large organization with all it’s managers, politics and, yes, processes.

You have to distinguish between processes that are focused on the customer (that’s how we helped to raise more than $100m for startups last year), and ones that help you scale your organization. In a time constrained environment, the former takes precedence. Staying small is one way to tackle the latter.

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Ich habe mich eine Stunde lang mit Marcel Weiss über AngelList,…



Ich habe mich eine Stunde lang mit Marcel Weiss über AngelList, Startups, und Venture Capital unterhalten. Wem also auf einer Autofahrt sehr langweilig ist, der kann sich meine Stimme anhören und etwas über meine Sicht der Dinge erfahren.

Marcel schreibt seit Jahren Neunetz und ist einer der Blogger, die in Deutschland eine echte Meinung haben, sie darstellen, und gerne mal anecken. Er ist deswegen ein super sympathischer Typ, und die Stunde ging schnell vorbei.

Podcasts machen Spaß. Soviel ist sicher.

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