Panic in the air

The panic meter is back at an all time high probably since the pandemic started. We’re in midst of a 50%+ pullback on a majority of tech stocks. I’m not sure you can technically classify most tech stocks as pandemic stocks, but there’s correlation there. Cloud and SaaS stocks pumped alongside Zoom, Peloton, etc.

Now we’re in the midst of a gigantic pullback. Like many, my liquid portfolio is significantly down this past month and is now down significant in the past year. My retirement accounts are faring much better in the index fund world.

We’re starting to see some ripple effects in the private markets in reaction to the public market pullback. I know some investors are getting much more defensive.

I for one am welcoming this correction. As painful as the public market pullback has been for my net worth, corrections are generally good things and happen. Things were getting too frothy and perhaps millennial investors (including myself) needed a reminder that fundamentals still exist and stocks don’t always go up. The market will recover - the question is how long will it take.

On the private markets - I remain just as optimistic. The amount of innovation and talent in the tech world continues to increase year over year. It’s hard not to be bullish on tech when you look at the long-term. With that said, valuations needed to be brought back to earth a bit. People were raising too much money too quickly. Greed and egos got in the way of common sense cap table math.

Crazy thought, but perhaps $100m valuation seed rounds weren’t such a good idea. As a VC/investor, I do not understand how you can justify that from a portfolio construction viewpoint. From a company perspective, you are severely limiting your future opportunity to fundraise by raising at such a high valuation.

So while panic is in the air, I remain excited that common sense items for investors such as fundamentals and cap table math will start to come back. Our society as a whole will likely be better off in the long run.

No excuses

I’m back in New York for the week. I landed last night at around 7:30, and immediately booked it to one of my favorite restaurants in the city, Szechuan Mountain House. It was fantastic as always. Unfortunately the fun and games ended there as I proceeded to lay wide awake in bed until 3:30am. In some kind of reverse jet lag, I was again wide awake at 7:30am. I don’t know what it is, but I never really sleep well when I travel jet lag aside.

I had a football coach in high school that would always harp “no excuses, next play”. I can imagine most football coaches had some sort of similar mantra. In the world of football, after one play ends, you need to put things aside and focus on the next play, lest you compound a potential mistake or distraction into something bigger.

Today is a no excuses type of day. There’s little to no sympathy for being tired, especially in New York of all places. I’ll power through and look forward to crashing in bed early tonight.

Pay to play

There’s so much FOMO right now in the web3 world of crypto and NFTs. People are minting NFTs and they are promptly 5-10x’ing in price in a short time frame. It’s hard not to have FOMO.

I’m definitely guilty of this myself. I’m part of 4 Discord servers in which I have bought into and another 4-6 at any given moment of projects I’m lurking. Each notification has me jumping up from my seat hoping for the magic word, “whitelist”.

I don’t know how this will all end. I do know that when I’ve seen this happen in the past, things don’t necessarily end well for most. Perhaps this time things will be different as we’re looking into a whole new asset class, or perhaps we’ll all be left holding a bunch of JPEGs that we paid thousands of dollars for.

I’ve come to terms that most of the projects I buy into will likely not end well for me. At least it won’t end up making me rich as I know some others are hoping for. That’s okay - I’m viewing these projects as pay to play. This is similar to how I view a casino… I know the odds are against me, but I still love going there and having fun. Plus there’s the chance that I do win big.

I’m having a lot of fun dabbling in web3. I do need to keep myself in check from time to time. At the end of the day, I’m still spending thousands of real dollars to buy into these projects.

My web3 / NFT update

Since late November, I’ve been deep down the web3 rabbit hole and written about it quite a bit. Lots has happened in the nearly 2 months since I aped into my first web3 project (Knights of Degen). I’ve learned a lot. I’ve made a good amount of money and lost a bit. I’ve made some pretty cool connections and I’ve also been scared shitless at the amount of yolo’ing and scams happening.

Overall, it’s been a rollercoaster ride, but I’ve been having a lot of fun. Here’s a recap of the events of the past 2 months.

• I bought a Knight back over Thanksgiving on OpenSea which gave me access to my first project, Knights of Degen. I was promptly overwhelmed and had to learn that you didn’t need to check every Discord channel and keep up.

• I got to hang out with a few current and former NFL athletes in the Knights of Degen “sports bar” (Discord channel). It was fun being able to ask Ricky Williams and Tiki Barber questions while watching a Sunday Night game.

• I got on my first whitelist for the Illuminati NFT project. I ended up minting 3 NFTs and joined an eclectic but fun “secret” community. The project has been a hit and the pricing of the NFTs keeps going up.

• I missed out on 3 killer projects brought to my attention in the Illuminati NFT discord. It ended up being amazing “alpha” as all 3 projects ended up 2-5x’ing since the info was released. I just didn’t have enough time to do my research, and I’m kicking myself for it.

• I got on the whitelist for LinksDAO whose goal is to purchase a golf course. I ended up minting a Global pass for myself and the value has nearly doubled since. This has been the intersection of both my current hobbies which is golf and web3. I’ve been having a ton of fun hanging in the Discord and plan on golfing with a few other members soon.

• I ended up buying a Cryptojankyz on OpenSea last weekend. It was announced a couple days ago that there was going to be an airdrop which will allow me to mint a new NFT. I have no idea where this will go, but I can’t wait.

• I’ve lost a ton of money in gas and taxes with these transactions. I’ve largely use my highly appreciated ETH to pay a lot of these transactions and that comes with a nice tax bill. Furthermore, I’ve had to learn the hard way when it comes to gas.

I’ll look to write about some of my findings and takeaways later this week.

Time

As I’ve gotten older, my time has become more and more of a premium. I feel like my weeks and weekends are getting busier by the year. My weekdays are getting more planned and structured due to work. My weekends are now also starting to become much more planned.

This past 3 day weekend felt like it went by a bit too quick. I had too many things planned from events to work that I wanted to catch-up on. As I write this, I’ve realized that I’ve only done a portion of my weekend to-do list. It’s not a great feeling.

It’s been a bit of a harsh reality that things will not get easier as I continue to get more responsibilities in life. I’ll need to adapt and adjust. Part of this is lowering my expectations on weekends. I simply just cannot expect myself to recharge over the weekends and be as productive as I want to be and that’s something I need to be okay with.

Secondly, I need to pick my battles when it comes to events. There’s just not enough time to say yes to everything anymore. There’s a balance with sleep/rest, social, and productivity. I need to cut down a bit more on the social and productivity aspect and focus a bit more on the sleep/rest side of things.

My hunch is that cutting back on the social and focusing on sleep/rest will naturally increase my productivity on the weekends and afterwards.

Is it over yet?

I went to happy hour with a few people from the team last night. Naturally the convo started gravitating towards COVID and how we were all sick of having an emptier office and abandoned downtown. My teammate mentioned that it feels like a ghost town and there’s just no energy in the city. It’s hard to disagree.

I’m trying not to get my hopes up as I had thought the vaccine would’ve ended COVID for all of us in 2021. The optimistic side of me sees the numbers and data and realizes that we may actually hit herd immunity after omicron is done.

I sure as hell hope so. I miss a crowded office. I miss a crowded after-work happy hour. It’s just a different energy when everyone is here. It mays the work environment more fun and when I have more fun, I do better work.

I’ll be headed out to New York for a week at the end of the month to meet some new team members and do some training. I’m hoping some of that New York energy starts to pick up back in San Francisco when I get back.

Training

Things are chugging along here at Secfi. I wrote a bit about our record year in 2021 after a record Q4 to close out the year strong. We’re hiring top talent that everyone is excited about.

One area that I look back on that we need to do better on is training as we scale.

We work in a highly regulated and complex financial industry. Our product is not easy to grasp for people with financial backgrounds yet alone people that do not come from the world of finance.

My stance has always been to slow things down with onboarding new hires and ensure that they get proper time to learn and digest all the materials. Candidly, looking back at the second half of last year, we were a bit too eager to get new hires out in front of clients and others. There was a demand and we were very quick to try to meet that demand with new hires.

There’s a level of acceptability especially in the startup world. Things move really quick and we need to hire good talent to figure things out on the job. With that said, I’ve started to realize that a lot of the new hires that came onboard in H2 of 2021 could have used a bit more time when it comes to training and learning.

It’s my job to realize this and get them the proper training so they can be the best versions of themselves. In order to address this, we’ll be holding a lot more training sessions in January and February. In addition, my goal is to set-up a much more rigorous onboarding plan for new hires going forward.

I’m hoping that this new program can ensure that our people get out and hit the ground running rather than letting them limp out of the gates early.

Diamond hands

Yesterday was a great sports Sunday. I was tired so I decided to stay home and watch sports all day. It was a great day to do so. In the middle of yesterday’s 49ers game I wrote about how gritty the Niners and Klay Thompson have been. The Niners ended up pulling out a comeback win in overtime against the Rams to secure a playoff spot. Klay Thompson dropped 17 points in his first game in 2.5 years. It was a great day to be a San Francisco sports fan.

On another note, I woke up this morning to further losses in the stock market and crypto followed suit. It’s been a long month of losses and my liquid portfolio has shrunk considerably.

One of my favorite crypto/web3 phrases is diamond hands. If you have diamond hands, you’re an investor who doesn’t sell despite downturns or losses. In other words, you stick to your guns when things get tough.

Given the way the market has been, a lot of us need to find our diamond hands. Given the day and age, it’s easy to panic sell. Yet no one on the planet knows for sure where the bottom is here. It was only a year and half ago that we saw the market rebound in record fashion after a record drop due to the pandemic.

There will be better days ahead. We all just need to stay in the game long enough to reap the benefits of our diamond hands.

Gritty SF Sunday

I’m writing this as the 49ers are in overtime against the Rams fighting for a playoff spot. No matter how this game turns out, I’m impressed by the grit of this team and Jimmy Garrapolo. With this back against the wall, he led the team back and gave us a chance to win the game.

I still don’t believe he’s the long-term answer at quarterback for the Niners. He has his limitations and he’s injury prone. Regardless, I’ve been impressed all season with the way he’s handled his business despite knowing that we just drafted his replacement. He hasn’t flinched with fans and media calling for him to be replaced. Now he’s put us in a position to make the playoffs with a gutsy week 18 game.

In other gritty sports news, Klay Thompson also makes his debut after two injuries has cost him almost 3 years of his playing career. He hasn’t been shy about how hard it’s been for him to be sidelined for 2 full seasons plus. I can only imagine what it’s been like going through almost 3 years of rehab. I can’t wait to watch his first game back. I’m not sure how he’ll play, but I hope he absolutely crushes it and drops 40.

It’s a gritty San Francisco sports Sunday.

Recruiting

Anyone that has worked at a fast growing early stage startup will tell you that recruiting is the hardest and possibly most important part of growing. This has been my experience so far.

Hiring great talent raises the bar and amplifies your ability to grow by magnitudes you didn’t expect. Hiring bad fits has the opposite effect and can set you back worse than you thought.

I haven’t been actively hiring for the last 6 months since I’ve handed off my previous team. I’ve been interviewing and helping out other departments, but I haven’t served as hiring manager in quite a bit.

I’m now starting the recruiting process again for my new team and admittedly I’m a bit rusty. I’ve had to pump the brakes a bit and do a quick reset as I go through candidates and set-up an interview process.

I learned early on that you need to come up with a set process in order to be as objective as possible on candidates. Humans are naturally emotional and we like/dislike people for various reasons. Some of these reasons may be warranted and some may be a blindspot.

Following a process is much more difficult and takes more time than going with your gut. But everything is worth it when you hire that all-star candidate.

Timing over idea

I had a funny thought this morning as I read about the labor shortages and realized that Zume Pizza may not have been that crazy of an idea, it just may have been too early for our taste.

One thing I’ve come to realize quite a bit as an investor is that timing is just as, if not, more important than picking the right ideas.

A simple example. I can tell you today that self-driving cars will become a thing in the future. When and how long until it takes to become a standard in our lives is a much harder prediction.

We saw Pets.com become one of the poster children of the dotcom bust as the company went bankrupt in the same year it went public and raises $82.5m in it’s IPO. Yet today, we see Chewy which is the modern day version of Pets.com on the public market. The stock hasn’t been doing too hot, but it’s far from going bankrupt like Pets.com.

So going back to Zume Pizza. The company became a bit of a poster child of the SoftBank “capital-as-a-moat” era. There was a lot of media backlash and the company unfortunately became a bit of a joke in the tech world. Yes back in 2019 and 2020, it seemed really bizarre that a company that made robot pizza cars was receiving so much money from VCs. The business model seemed broken and they were burning cash.

Fast forward to 2022 and we are at a severe shortage of labor. Restaurants, yet alone fast food restaurants, cannot hire enough to properly operate. Perhaps the idea behind robot pizza trucks was the right idea afterall, but the company just missed timing by a mere 2-3 years. I don’t know if the company would be thriving in today’s world… they had other challenges of course but if the company was around today, maybe they would have been praised as a fix to the labor shortage rather than a joke in the tech world.

Maybe in 5-10 years, we’ll see the next Zume Pizza go public at a massive valuation.

"This market sucks"

I suspect many younger investors are struggling a bit with their tech and growth heavy portfolios. How fast things can change over the course of a year.

One web3 project I’m involved with has a #stocks channel in their Discord. One member of the project proclaimed “this market sucks” in the channel this morning.

Of course, the reality is that this market does not suck right now. The DJIA just hit a record high today. The S&P 500 hit a record high just the other day. On the flip side, the Nasdaq was down 1.33% due to a continuing pullback of tech stocks.

My entire retirement account is in various index funds so I haven’t been in a complete downfall. With that said, my liquid portfolio is very much tech and growth stock heavy and it’s been a rough couple of months. My portfolio sucks right now and it may suck for awhile longer, but I’m not that worried about it.

Truth is, portfolios tend to suck from time to time. Stocks go up, down and sideways often. So yes, my portfolio is sucking right now and it will suck again in the future. In between those periods of sucking are hopefully going to be great periods of growth where I’ll be ecstatic that I didn’t panic sell everything.

The emotional side to investing is tough. Hold on, it’ll suck a lot less in the near future, I promise.

Closing out 2021 and goals for 2022

I’ve been publishing personal goals every new year since 2020. It’s been a fun experiment. I believe that forcing myself to write goals down publicly helps keep me accountable.

Before we get to 2022, I want to review my 2021 goals and judge myself based on them. I put together 4 personal goals for myself in 2021 and it was a mixed bag.

1. Find work life balance - Half the year was a bit of a struggle for me. I burnt out hard in the summer, but started to find work/life balance towards the end of the year. I give myself a C for figuring it out eventually.

2. Drink less - Another mixed bag. Post-vaccination world was a lot of fun. The summer was a bit of a blur as I was constantly traveling for work and social events that involved a lot of drinking. I slowed things down in the fall and winter months though which I was proud of myself for. Still, I have work to do here and give myself another C.

3. Learn Mandarin - complete fail as I never started and instead switched to Spanish Duolingo due to my upcoming month in Mexico. I never got fluent. This was a bit of a stretch goal but I did start learning a new language in 2021 so I give myself a F+.

4. Practice gratitude - this was probably my biggest win of the year. Coming out of the pandemic post-vaccination was a great way to practice gratitude. There were a lot of things we took for granted and 2021 was a great way to take a step back and realize how lucky I am. Solid B.

For 2022, I’m going to give myself 3 achievable personal goals that I wanted to work on this year. They’re different but they have a common theme on helping me become a better person.

1. Drink less. Back in my goal list for 2022 is to drink less. I’m getting older and my body isn’t reacting well to alcohol anymore. I have more responsibilities as time goes on and sleep is much more valuable nowadays. Drinking less and saying no more often to social events is the healthier choice that will help me become more productive and focused.

2. Read a book a month. I have realized that I have become more and more addicted to my phone as time goes on which means less reading. Discord, Slack, Twitter, etc. have all become a distraction and often do not lead to productive gains. I love reading so consciously putting my phone away and taking time to read before bed or over the weekend should be an achievable goal.

3. Maximize my time. I am continually taking more responsibilities both in work and personal life. This is going going to continue to increase as I get older. I realize that I need to focus much more on maximizing my time spent during activities. When I’m working on something, I want to be 100% focused. If I’m socializing, I want to be 100% present. If I am relaxing, I want to be 100% there. I have been bouncing around too often and distractions have gotten the best of me recently. I won’t be perfect, but this is a big goal I want to focus on in 2022.

Here’s to my 2022 goal recap being much better than my 2021 recap.

Recharged for 2022

It’s been a great holiday break. We had an amazing December to close out the year at Secfi. I’m so proud and impressed by the team. The past few weeks have proven just how much we can accomplish when the entire team is on the same page.

I’ve taken the past week to recharge and it’s been amazing. I caught up with friends, got up to the mountains and played some golf. Best of all, I slept a lot and got caught up on rest.

I wanted to do a bit of reading today and write about some of my 2022 goals, but I thought it would be best to take it easy and maximize my time off. I’m back at it tomorrow and I’ll look to catch up this week.

I’m looking forward to writing about my 2022 goals and predictions this week.

LinksDAO

It’s been a great few days of doing… well nothing. The last week has largely consisted of me sleeping in, watching TV, reading a bit and relaxing. I was supposed to head up to Lake Tahoe yesterday, but the snow made the roads unmanageable so we decided to wait back. It’s been a blessing as I’ve gotten the chance to catch up on a few things while resetting. I’m going to try to head up tomorrow and get some time on the slopes.

One project in web3 that I came across today was LinksDAO. It immediately caught my eye as this is the intersection of my two current biggest hobbies, golf and web3. I joined the Discord and plan to buy in when the public sale opens on January 1st. I unfortunately missed the pre-sale.

The project is relatively early, but the main mission is to acquire a golf course which has been semi-jokingly one of my dreams ever since I fell in love with golf almost 2 years ago. I’m not sure if the DAO will succeed and odds are probably against it to be honest.

With that said, the community has been fantastic so far. I’ve enjoyed interacting with others and talking golf. There’s some really cool ideas brewing in the Discord server and I want to be part of the future.

If everything goes well, maybe I’ll be part owner of a new type of country club. If everything goes to shit, then I’ll hopefully make some new friends and get some great rounds of golf out of it. That alone is worth the price of admission.

Powering down

For me, the holidays are a great time to sit down and reset. I got to hang out quite a bit with my sisters and other family for the first time together in over 2 years. While this may seem like a standard occurrence every holiday season, I’ve realized that I’ve gotten to the age where we may be spending the holidays together less often.

I’ve had a lot of urges over the last few days to power on the computer and grind out some work. I’ve had to consciously stop myself and tell myself to not do any work. Bad habits that need to be curbed.

I’ll do some clean-up work for year end in the morning tomorrow and then look to head to Lake Tahoe on Tuesday for the week. I do have one goal for this week and that’s to get caught up on some great web3 readings and articles. I’ve got a big pile up of things to catch up on and I look forward to digging in even deeper.

Besides some light reading, my main goal for the next week is to power down, rest and charge for the new year. It’s been a long year and we all deserve it.

Reevaluate and rebalance

Most investment funds will be a big rebalancing of their portfolios quarterly and a larger one towards the end of the year. I always encourage my friends and clients to do the same. There’s a reason why those who invest for a living rebalance their portfolios on a regular basis, but yet most retail investors do not.

I do a modified approach which I call reevaluate and rebalance. Every quarter, I review where my portfolio sits at the current moment. I create a breakdown of my money and break this all down into different asset classes between private companies, public equities, crypto, and others.

I first measure performance and reevaluate my strategies. It’s important to note that this does NOT mean changing strategies every quarter or every year. It’s largely a check-in to ensure that things are on the right track and I’m sticking to my guns. I will occasionally make tweaks here or there to ensure that things are on the right track. Rarely, I will completely switch out of a strategy as I realize that I’m in the wrong place.

Secondly comes the rebalancing. With appreciation, portfolios become unbalanced at times with more weight going into one asset class. For example, if you’ve held crypto for a couple years, you’re likely going to have an outsized crypto position relative to when you first invested in crypto. I am always looking for outsized positions to determine whether or not I should reallocate some of that asset class into other areas.

Diversification is good. As much as I’d like crypto to continue to go up and power great gains, I also need to ensure that I am not in financial ruin if there is a crypto winter.

I’ll be doing my revaluating and rebalancing in the next couple of days and I’d encourage all to do the same.

The rise of retail investors

I read a fascinating stat the other day either on a newsletter or in a deck. I of course forgot to write down the source and I can’t remember exactly where I found it.

The data point was that retail investing more than doubled from 11% of total trades to over 23% in the span of a year. I thought that was fascinating. Almost a quarter of all trades done are now done by retail investors.

When I was just starting to learn how to invest just a few years ago, I was told that retail investors do not move the market. Institutional investors did the bulk of buying and selling. Retail investors were just in for the ride.

Well, as we head into 2022, we now know that power of retail investors. We have seen meme stocks go crazy with AMC and Gamestop earlier this year. Professional investors who invest other peoples’ money can no longer ignore the possibility that a group of retail investors on Reddit can band together and move the market.

If 2021 is a snapshot in the future of investing, 2022 is going to be exceptionally interesting. With crypto, gone are the accredited investor regulations (for now at least). Web3 is at it’s infant stages and I expect 2022 to be the year that web3 officially arrives for the mainstream.

Tax tech

In a somewhat under the radar acquisition, Square bought Credit Karma’s tax filing business last year. The acquisition seems to have been completed and Cash App had a great press release where they are now offering free tax filings to all users.

For the consumer, I think this is huge news as tax filing software can often cost hundreds of dollars. I’ve never used Credit Karma’s product but I heard that it’s pretty good overall.

Given my background in tax, I’ve had a lot of people ask me why I haven’t looked into building a better and easier tax product. It’s a good question.

There’s undoubtedly demand in this space. No one likes doing their taxes and if tech can make tax filings easier then people will buy the product. Given that, the market is somewhat limited. I read somewhere that the market for tax filing is a $11b business which seems about right. It’s growing, just not at an exponential speed as it’s tied to Americans growing up to become paying tax payers.

Possibly the biggest issue with create a tech forward solution here is that you are bound to the Federal, State and Local government’s tech. There’s 1 Federal government, 50 states, and many more locales for you to deal with to complete all your tax filings. I can tell you right now that the IRS still requires you to fax stuff over to them and there’s also some tax forms that you MUST paper file. Multiple this by the 50 states and local governments and you got a gigantic mess on your hands.

On top of all this, tax is insanely complicated. It is very much a garbage in, garbage out situation. Taxpayers are required to collect documents and enter it into their tax software. Most do not know where to get these forms and these forms can often come in paper, electronic or never show up at all. It’s an absolute mess.

This creates a perfect storm where taxes become a very manual process. There’s limited ability to automate tax filings. Consumers can either use a software to file themselves or hire someone to do it for them. If you have a somewhat complicated tax return, it becomes very difficult to file yourself unless you understand what you are doing. This results in these individuals paying firms to do the filings for them.

Most people I speak to are looking for something in between. They want a tech solution but someone to review and verify what they do. Unfortunately, everything I’ve seen in this space ends up becoming much more of a manual solution. The tech ends up being the front end only and there’s little to no automation possible.

I do wish to see someone prove me wrong here, but there needs to be a lot of changes within the IRS, state and local governments from a tech perspective before something can be done here. Given that this is the government, I’m not expecting that to happen soon.

The web3 true degens

I’ve been writing a lot about web3 and pretty much all my posts have largely been positive. It’s probably fair to turn the tide a bit and look at some of the negative things I’m seeing right now.

I’m not talking about the clunky interface and tech as well - that stuff is come along as web3 develops and grows. I’m going to focus on the bad behaviors that crypto and NFTs that I’m seeing quite a bit on Twitter and my Discord servers.

There’s a running “joke” in web3 where people self-deprecate and call themselves degen, short for degenerate. This term is used in the same light as a degenerate gambler, but in the web3 world, focused more on the crypto and NFT space. We make light of the word and I go as far to call myself a degen.

The market has been trending down the last few days. We are now seeing the crypto market largely follow the equity market. Along with the downfall, I’ve seen the true degens emerge from darkness and it isn’t pretty.

Most shocking to me is just how rampant leverage is used to buy crypto. One individual mentioned that he’s lost everything he had twice already over the last year and he’s just starting to build everything back up. Yet, he’s sitting here in a $1k+ floor NFT project.

I don’t love this aspect of web3. The insane gains have created a lot of scammers, rug pulls and pump and dumps. On a less nefarious side, it has created a lot of gamblers, “ true degens” if you will.

I’m all for a good bet every now and then. Gambling can be fun if it’s done responsibility. Ordinary individuals levering up 10x to buy a shitcoin or ape into a NFT project is not just gambling, it’s stupid.

As web3 evolves, I’m hoping we’ll start to see much less speculation and more focus on great projects.