Hello from Kauai

I thought Iceland might have been the most beautiful place I’ve seen. Kauai is definitely giving it a run for it’s money.

I had an amazing first day yesterday hanging out at the beach and drinking Mai Tai’s with my sister. Today, I went on a 6 mile hike and checked out the Na’Pali coast. It’s as gorgeous as advertised.

The island lifestyle is definitely different. Most of the island is asleep by 9am and up by 6am. It’s definitely a welcome adjustment. Getting up early and getting the most out of my day is something I could get used to.

I’m planning on grinding out some work for the next hour and get to bed shortly. Tomorrow, I’m taking the morning to do a bit of work and take some meetings. I’m limiting myself to 3 hours though which I think is a win for me. I love the island life, but at end of the day, I also still love being productive.

The big win

I wrote on Sunday how I wanted to come away from this week with a big win. I knew it was going to be a busy week workwise and personally as I head into a long vacation and recover from a company trip. These weeks don’t typically stack up to be the most “productive” in terms of knocking off the checklists. Instead, I wanted to go into my vacation with a major win under the belt and feeling good.

Well we got that win today. and also accomplished a lot more than I expected. I’m stoked. It was a good week for us at Secfi. There’s a whole lot more work to be done though and I plan on trying to limit myself to working only an hour or two a day at most during my trip.

I’m feeling fired up going into the weekend and my trip. I’m going to be able to see my sister, old friends and celebrate my best friend’s wedding. I can’t wait. I also can’t wait to get back and start grinding again with the team. It’s a great feeling.

The risk of recourse

The news of the day in startup twitter is that Bolt has just conducted a layoff. Some of these employees had taken out loans from the company to exercise their options. I just got done speaking to a few reporters about it today.

First, these loans are inherently risky. I wrote about this many months ago when the CEO announced publicly that the company would offer these loans out. Recourse loans are a good option for some individuals, but the vast majority of startup employees should not be touching recourse loans to exercise their options. They can and have bankrupted individuals.

These loans should not be offered to employees on a broad scale. They should only be available to the individuals who can take on the risk of servicing the debt in the occasion that the worst case happens.

In this situation, the worse case scenario is that you are laid off by the company and your company will demand that you pay back the loan in full. This is unfortunately the situation we see at hand at Bolt. While I do not personally know any employees who took out the loans, I’ve worked with thousands of startup employees who are in this position.

These employees likely took out the loans without having proper education on how stock options work, yet alone the debt instrument. They were very likely blindsided by the layoffs and the corresponding triggers that require repayment. In addition, they likely will have a difficult time servicing the debt now that they no longer have a source of income. Last and not least, once they do pay off debts, they will hold Bolt stock which may not be liquid for years (or ever).

As you can see, this can snowball into a terrible situation very quickly. I’m hoping that is not the case and that Bolt will hopefully help these departing employees.

Adapting to Endure

I just finished reading Sequoia’s Founder All Hands presentation titled “Adapting to Endure”. It was a good one.

I haven’t been working long enough to see the last downturn so I have been reading and learning as much as I can. The presentation did an amazing job bringing decades of experience and anecdotes to the current situation at hand.

As expected, Sequoia is predicting that this is not a short-term downturn and we are headed for some rough times ahead. As such, founders need to be preparing themselves, their team, and their company for what is about to happen.

There are countless tidbits of great info, but the biggest takeaway I had was to play for the long-term. We need to weather the short-term storm, but have a much longer-term view in terms of our investments. I will be adjusting my planning accordingly.

There’s a lot of work to be done here at Secfi. We have a strong team, but some difficult days ahead of us. It could be the other way around, so I’m grateful.

Imitation is the greatest form of flattery

To pretty much no one’s surprise, COVID has been running rampant through a group of people who attended our company trip in Iceland last week. Many others including myself have some sort of a cold but remain negative. I’m now headed to Hawaii to visit my sister and attend my best friend’s wedding and COVID is the talk of the town. After 2+ years in, I’m absolutely sick of it and ready to just treat it like the flu. Canceling events and trapping people in foreign countries doesn’t do any good when everyone has had it.

Anyhow, I saw a long thread from the Co-Founder of ECO yesterday about how there was a company out there that was effectively copying everything they’re doing. He was visibly upset and used his network to put the copycats on blast.

I had a good laugh as I reading through as he did seem to have a case. My stance is that imitation is the greatest form of flattery. If a company is copying what you’re doing, that means you’re doing something right.

I had my first hard lesson on this when I launched a card game on Amazon many years ago. My friends and I were bored and we wanted to launch something on the side for extra income. After a successful Kickstarter and launching on Amazon, we soon had multiple companies copying our game nearly identically. It absolutely drove my 23 year old self nuts.

Of course, this was just the start of it. After initial success at Secfi, we started to see competitors popping up left and right. We had one that copied our entire website but changed the blue to red. A cease and desist followed shortly after that.

For better or worse, this is part of business and you have to accept that success will bring in the copycats. You just have to block out the noise and focus on continuing to innovate.

Buy, wen?

Finally home after 2 weeks and of course I catch a cold. Not happy about it, but it’s much better than having COVID. The worse part about having a cold is that everyone around me is going to think I have COVID.

On another note, I and pretty much every other investor has been sitting on their hands waiting for the market to stabilize a bit. I don’t see many seasoned investors buying stocks or investing in startups right now. There’s just too much uncertainty at the moment.

The problem with this volatility is that no one knows what a company is worth right now. We know that multiples will be compressed severely especially compared to last year, but we don’t know where those multiples will eventually land.

For most people, it’ll likely be better to wait things out a few weeks/months in order for the dust to settle rather than overpay. That’s the advice I’m getting from investors, and I plan on following suit.

Home

I’m finally home after 2 weeks on the road for work. It was a long journey back that took just about 20 hours from leaving my hotel to making it back to my apartment in SF. I don’t take the ability to travel for granted, but man I am glad to be home.

Speaking of home, I’m here for 1 week and then head out for vacation and a wedding for 2 more weeks in Hawaii. Again, don’t feel sorry for me but it has been a long time away from home and the office.

I’ve got a busy week ahead catching up on everything from the last week while also planning ahead for my trip. Given the circumstances, I’ve conceded that this may not be the most productive week of work in terms of completing projects. That’s okay - not every week needs to be a huge sprint.

Instead, I’m focusing on managing my expectations so I don’t go into my trip upset and stressed. I want to get 1 big win this week at work. If I can get 1 big win, I’ll feel great going into my vacation and be able to be more present. Time to work!

Reflection on an amazing trip

I’m finally headed home after 2 weeks on the road in Seattle, Amsterdam and Iceland. The last 5 days in Iceland with nearly the entire Secfi team has been amazing for so many reasons.

First, it’s worth noting that Iceland may be one of the coolest places on the planet. There are so many natural sights to see and things to do. It’s an adventurers paradise filled with waterfalls, geysers, glaciers, volcanos, caves and more.

I was able to go rafting and snorkeling with the team during our team activities this past week. I topped it all off with a few hours in a natural hot spring called Blue Lagoon with a few teammates. I have no doubt that I need to come back to Iceland at some point and do a proper 1-2 weeks exploring more of what this island has to offer.

On another note - it was absolutely amazing to see our team together, especially after COVID. It’s been almost 2.5 years since our last company trip in Austria. Since then we’ve nearly tripled our headcount to over 100 employees. It was honestly a bit surreal at times meeting everyone and hanging out with everyone. I was speaking to our CEO about how crazy this was and we were both in awe of what this team has become.

We’re by no means a small company anymore. By the end of the trip, I believe I’ve got everyone’s name and where they are from down. I’m proud of that, but I imagine that next time we meet, I’m not going to be able to meet everyone. It was so fun meeting everyone.

We’ve built a great team from all over the world. It was really fun hanging out with such a diverse group of individuals. Most of all, these are some of the most talented people in the tech world. I’m coming back home to San Francisco energized and excited to continue to build this company with this amazing team.

Fraud in the air?

I believe one of the story lines to watch in the coming few months is the unraveling of some companies and accusations of fraud. At most of VC backed startups, you raise money before ever building a product or generating revenue from selling that product. This creates an interesting situation where entrepreneurs are taught to dream things into existence while at the same time bring given often large sums of money to build said thing.

Naturally, we’ll see situations where lots of entrepreneurs never actually build a product that generates revenue. On the extreme end, we see Elizabeth Holmes where she pretended that her Theranos blood testing system was actually fully functioning. We now know that was completely false.

On the other end, we’ll see a lot of people selling products that may severely under deliver. Perhaps there may be even more to the story that leans towards more of a Theranos situation.

I’ve had a lot of spidey senses about some companies in the last few months. Hopefully none come close to Theranos levels of fraud, but I do feel like we’re in for a bit of a reckoning given the capital environment of the last year.

We’ll see, but I suspect there to be more Netflix documentaries in the near future.

The sun is still shining

I had an amazing weekend in Amsterdam with a bunch of people from the team. The weather even decided to cooperate. There may not be a more amazing city in the world on a sunny weekend day. It’s almost if the weather didn’t get the memo from the markets that it’s all supposed to be doom and gloom.

One of the best parts about my weekend was that I didn’t open the laptop or check my email once from Friday evening until Monday morning. I desperately needed a break from the difficulties of the world. I think most people do.

Weekends like these are a great reminder that no matter how much it seems like things around us are burning down, we all have to realize that everything is going to be okay. The markets will come back. Things will stabilize. It won’t always be bad news.

Secfi is on our company trip in Iceland starting tomorrow. The trip couldn’t have come at a better time. I think we all could use some time to focus on building relationships internally within the company while blocking out the outside noise.

It’ll be a great reminder of all the awesome parts about building a startup. During these periods of tough times, we all could use a reminder.

Survive and advance

At Secfi, we have and continue to prepare for a prolonged downturn. Similar to how we did during the 2020 shutdown, we’ve started the process of navigating a difficult macroeconomic environment for a prolonged period.

The first step in preparation is acceptance. Realizing that we likely won’t be seeing a V-shaped recovery like we did in 2020, I’ve started acknowledging the fact that this is will be life in the coming few months and perhaps year(s). This allows us to take a hard look at ourselves, our financial situation and current spend, then make crucial decisions today.

As a company, the #1 and most important goal is to survive. There will be many startups in bad financial positions that won’t make it out unfortunately. At Secfi, we’re in a fortunate position but regardless, we need to evaluate our burn and plan for the worst case scenarios. Everything I and my team does needs to look towards this goal as a baseline. It may sound obvious to most, but those in lower level positions may have never needed to manage burn before. This needs to be articulated and reinforced. Survive.

From a business unit perspective, I’ve started to review and adjust my roadmap. Things will take longer in an environment like this. Hiring will slow down. Deals will take longer to close. Priorities will change. This is the new reality and we need to set new expectations. Launching a new product will be for naught if you fail to survive as a company.

We’ve gone from a grow as fast as possible environment to a grow with caution to manage burn levels. Nowadays, the name of the game is survive and advance.

Pain and diversification

Hello from sunny Amsterdam. I just realized I hadn’t written anything since last Tuesday. The last week has been a blur. We had some team members in town last week. Then I flew out to Seattle for meetings on Monday. Then I hopped on a flight to Amsterdam to do some work with the product team.

Behind the last week of work has been the tech and growth stock market collapsing and crypto capitulation. I wrote a few weeks ago that we’re in for a lot more pain ahead. We’re starting to see a lot of that pain now and boy does it hurt.

Like many, my portfolio is down significantly. It sucks to watch but it’s part of the process. Markets go up and markets go down. I suspect there will be many that learn about diversification during this downturn. Putting your net worth into one token or picture of an ape turns out not to be such a good idea.

I wrote last year that I go through a quarterly rebalancing as I evaluate my net worth and decide where to trim my positions. Back then, I wrote about how painful it was to sell some of my crypto positions. I had ridden BTC and ETH up from the crypto winter and had significant gains. Selling means generating a tax bill and going against the HODL mentality. But at the end, I was overconcentrated and I needed to diversify so I sold and reallocated my assets.

Hindsight is 20/20 and I obviously wouldn’t be writing this is BTC was trading at $60k right now. But it’s in times like these where sound financial advice comes in handy. It’s easy to ignore diversification plans in the good times, but when everything around you is burning, you’ll be glad you did. I sure as hell am.

There’s likely more pain to come in this market. That pain is the price you pay for returns in the future. Diversification helps you manage that pain and puts you in the best position to succeed when the market comes back. Many people forgot this last year.

Competition and capitalism

The news in Fintech today was that Stripe released Financial Connections which is effectively an APi service to connect to financial institutions. If this sounds familiar, it’s because it is exactly what Plaid does. I don’t think this was a crazy surprise that Stripe would indeed one day stray into Plaid’s world.

What is interesting was this tweet reply from Zach Perret (CEO of Plaid) who accused the PM at Stripe unethically probing into Plaid in order to copy what they were doing.

https://twitter.com/jay_ssh/status/1521884840991330306?s=20&t=pkbKjyqvtiIbSDbZZJxLGw

Business is the ultimate competition. Capitalism is the league that allows businesses to compete.

There are certain truths to business. One of them is that if you’re doing something right, someone is likely going to copy you. We’ve seen that happen many times over the years at Secfi.

If Zach’s accusations are indeed true, then this is just another instance of capitalism at work. It’s unethical for sure. No one should be taking interviews at a company or asking for a RFP just to copy it. But it happens, a lot.

I’ve had many competitors reach out over the years pretending to interview me for a role, or looking to partner, etc. all just prying for more information. Often times they are blunt and ask to see a contract right away. Other times they are a bit more clever and will ask for a demo or a proposal.

It’s good to keep your guard up. Competitors are watching.

Office vs home

We’ve got a large office in Jackson Square in San Francisco. It’s a lovely space with great views and lots of room to work and conference rooms to meet. Unfortunately, only about 25% of local employees are coming in on a regular basis.

Almost all of the ones who do not come in on a regular basis have a longer commute as they live in the greater Bay Area versus the city. It seems like the biggest thing holding people back is just pure convenience. Driving 30 minutes or hopping on BART for a 45 minute commute seems like too much to overcome for most folk. Whereas those who live in the city will gladly walk or commute in under 30 minutes to the office.

We have a relatively full house today as we have some leaders visiting the office and we are all going to dinner afterwards. I believe the only way we are going to get people to come into the office full time is to mandate it or make the benefits outweigh the inconveniences.

For us, mandating office work will not be in the cards anytime soon. So we have to find ways to incentive people to come into the office. Lunch right now is not good enough. I suspect we’ll start with more team events and regular happy hours, and look to expand there. We’ll see how it goes.

Overcoming inertia

One of the hardest parts about launching a new business or product is overcoming inertia. Very few companies go through exponential growth just by launching a product. In fact, almost all products require a lot of brute force initially to kick off that flywheel. As Paul Graham put it, you need to do things that don’t scale at the beginning of the startup.

When I helped launch our financing product 3+ years ago, it felt like we would take 2 steps forward and then 1, sometimes 2 back. There would be prolonged periods of nothing happening. No new leads coming in. Not hear from any potential customers. We went out and tried lots of things that don’t scale, conferences, personal outreach, etc. It was a grind, but it needed to be done.

We’re currently deep in that phase of a product build right now. We’re building and making great progress, but it feels like baby steps at this point.

The beauty behind the grind is that if you design the flywheel correctly and your thesis is correct, then things can pick up quickly. 5 deals a month quickly turns into 15 then 40 then 80.

The problem is to get to this point, you have to grind. Inertia is not easy to overcome and for most, the grind can last months or years. The best tip I have for people in the grind is the embrace it and come to terms that these things take time. Set expectations accordingly. If you’re hoping for an easy answer to get users, customers, etc. you’re setting yourself up for failure.

No better time to build

I watched the Warriors game with my Dad today. It was a good one. My Dad is a forever pessimist and announced at the end of the 1st quarter that the Warriors were done. I believe we were down 6 at the time. I had to remind him of the time that he bet against the Niners in the Super Bowl and ended up losing $10k to a friend.

There’s a lot of doom and gloom nowadays in the startup space. Markets are down. Downrounds are coming. Layoffs are likely on the horizon. Yet, we need to remind people that we’re still in the early innings.

In my short time building Secfi, I’ve learned that the best opportunities come when the future seems less than certain. No startups ever make it without some major bumps along the way. This time is just another bump. We’ll get over it.

In the meantime, there are major opportunities for those looking for it. It could be in the form of a game changing hire that was unfortunately laid off. There may be a new business opportunities that opened up because of the market volatility. Or perhaps it’s as simple as a team coming other and prioritizing better when times are tough.

There’s no better time to build than right now.

Bring shit up

One of the things I learned early in my career about managing people is to encourage and create an environment for people to bring things up that they want to say. Most employees, especially on the lower levels, are often worried about bringing things up that are important because it may be controversial.

The problem with this thinking is that everything comes out eventually. Like a fire, things start as little embers and over time may turn into a full fledging forest fire if untreated. I was guilty of this in my last job when I couldn’t muster the courage to tell my manager that he was too unorganized and he was slowly losing the entire team. It didn’t end well and it could’ve been nipped at the early stages.

As a Manager, it’s my job to create a space and forum that anyone can tell me anything without fear. This open dialogue cannot be created with just telling your direct reports that you can tell me anything. Like anything related to culture building, you need to live and breath it.

Here’s some tricks that I currently use to ingrain this in my team’s culture.

I ask for feedback after a call whether it’s with a lower level staff or a higher level staff. This creates a culture where it’s okay to speak up even if it seems critical of me. Make it okay for your staff to give you feedback. In addition, I always try to provide feedback when I can.

After meetings with other teams/departments, I like to debrief with my team and ask their opinion on what they thought. Often times, staff will mention things to me afterwards that they were afraid to bring up during the meeting. If that happens, I try to coach them to speak up next time.

I openly discuss my weaknesses, faults and mistakes. It may seem self-deprecating at times but it lowers my guard and establishes the fact that no one is perfect. We all make mistakes and it’s okay to make mistakes.

Lastly, I have regular check-ins with the team to discuss any issues. We also discuss the positives, but I openly ask if there’s anything I can be doing better.

Breaking things down to build it back up

We’re in the process of figuring out how to best scale this new business line. The last couple of weeks have been filled with a lot of brainstorming and whiteboarding sessions. It’s been a nice change of pace as it gets me away from a computer screen for a change.

When it comes to brainstorming sessions, I utilize first principles thinking. In the most basic and practical way to describe first principles, it is the process of breaking down something into as smaller pieces and then building things back up.

The end result is hopefully soemthing that utilizes pieces from the original form, but a much more improved and efficient form. I find this immensely helpful as I look to build out a new business line that is more much efficient and effective than previous.

For example, I have spent the last week breaking down the processes and people needed to run this new business line. Instead of reviewing existing business models and finding ways to improve them, I want to break down the model completely and rebuild it back up. This of course is much more difficult than it sounds to describe it.

Most people will build based on what exists. It’s natural. They see something and they want to improve it. It’s much easier than inventing something that does not exist.

But easier is not always the best route. If you want to invent the future, you need to think with first principles. Often the harder route is the better route.

Free speech

I’m feeling nice and well rested after this weekend. I’d imagine it partly has to do with the fact that I was in bed by midnight both weekend nights. Partly due to the fact that it’s sunny again in SF. Partly because there’s some exciting things happening this week at work. Mondays are usually a bit of a struggle for me so this is a nice change of pace.

News as of this morning is that Elon Musk has officially bought Twitter. Initial reaction from Twitter seems that there’s a lot of mixed feelings as expected. Half the world seems to think of Musk as an inspiring entrepreneur. The other half just hates him because he’s either quirky, rich, or both.

I myself am cautiously optimistic. I sold my Twitter shares last year after being a bag holder of many years. Anyone could see that there’s lots of untapped potential for Twitter and I’m excited that there will be a leader who can unlock that potential.

On the flip side, I am always cautious when one person may have too much power. We have seen it with Facebook and how what they did, or didn’t do, was able to influence an election.

Free speech is a cornerstone of our democracy. Yet, there are many interpretations of free speech and when taht interpretation is left up to one person to decide, I will remain nervous.

Starting to hire... again

As we get closer to officially launching a new business line, I am going to start shifting a lot of my attention to hiring once again. I had a nice little break from the grind of hiring for the past 6 months as I focused on setting the groundwork for the new business line.

In the early days of Secfi’s financing business, I felt like I was spending almost 20 hours a week just hiring. Resume reviews, hunting, interviews, planning, etc. It was exhausting.

Luckily, this time around we have much more help with an awesome HR and recruiting team. Regardless, I’m forecasting that a lot of my time will be spent hiring. Anyone that has done it at a startup knows it’s not easy.

Prior to even beginning the process, it’s important to really define what you are looking for and why. Too loose of a job description is going to leave you with too much room for error in what you actually need. There are a lot of good looking resumes out there, but most of them won’t fit what you actually need. Often you can meet individuals who are smart and driven, making it hard to pass up on them, but they just do not fit what the role description is. That won’t ever end up well.

Secondly, I find it vitally important to set-up a fair and objective interview process. Everyone should go through the same interview flow and case studies. We should be grading everyone objectively based on set criteria. If you don’t do this, you’re setting yourself up for hiring based on emotion which leads to bad decisions.

Planning for hiring isn’t the most fun part. I’d much rather be out there meeting people, but without proper planning, you’re going into the hiring decision blind which is never a good thing.