The pre-IPO issue

There’s a large backlog of companies right now in the pre-IPO phase patiently waiting for the markets to rebound so they can go public. The IPO market has effectively been dead all of 2022 and combined with the pandemic and market of 2021, we’re seeing a larger than normal backlog of companies.

1. The pandemic of 2020 closed the IPO market for just about half the year starting in March.

2. Most executive teams updated their plans to push back exit plans for another 1-2 years to 2021, 2022, or beyond.

3. That lead to a flurry of exits in 2021 with the market “booming” and capital effectively free. (A lot of companies that were not ready to be public also went public through SPACs)

4. Those that didn’t make it to the public markets in 2021 or were planning to go public in 2022 are now all in limbo patiently waiting for the markets to bounce back before attempting to go public.

5. We now have a build-up of VC backed companies with $1B+ valuations looking to go public.

I suspect that many of these companies may not be ready for the public markets. In the most basic sense, a lot of these companies just do not have strong enough financials for a successful IPO in a normal market.

That’s fine of course as companies can grow into better numbers, but the potential problem may be retaining the employees through the down market. High quality talent jumps to fast growing startups in promises of equity and massive exit potentials. In a way 2021 may have created a false expectation for a lot of these employees.

When they see their companies delaying IPO plans for another year or two, a natural instinct for many may be to flock to greener pastures. This is a pre-IPO company’s biggest problem - losing high quality talent in that limbo phase.

A lot of these pre-IPO companies are in tough positions right now and I imagine a lot may not ever make it out to the public markets.

Hope for the climate

I just read that it’s the hottest day on record for the San Francisco Bay Area and Sacramento today. San Francisco is burning up at a whopping 95 degrees today and while I don’t think that sets the record for hottest day in the city, I’m sitting in front of a fan as I write this at 4pm in our office.

I really hope that we’re able to figure out a way to combat climate change. Things do not look good right now. I’m not convinced that as a species we’re made to last millions of years.

Maybe humans are just too smart for our planet. We’ve destroyed nearly everything in our path since we we evolved nearly 300,000 years ago and I don’t see that stopping anytime soon. It’s very much a real possibility that we end up just destroying ourselves.

The positive spin to all this is that we’ve accomplished feats unimaginable for any other species in known history. If there was anyone that could fix what we’ve destroyed, it’s humans.

Only time will tell which path we choose. I remain optimistic about our species and planet, but acknowledge that things look very bleak right now.

Existence

I had a great long weekend. I golf on Friday and today. Went on a short hike on Saturday and had some good time to relax to myself afterwards. On Sunday, we slept in and went to the beach then had friends over for dinner. It was a full weekend and exactly what I needed before my month of work starts to pickup quite a bit.

After my round today, I had some time to myself to go to a park and finish Seven Brief Lessons on Physics by Carlo Rovelli. It was a fascinating book on modern physics and Rovelli has a great way to explain complicated topics to the layman.

I will never be smart enough to fully understand loop quantum gravity and other deep theoretical physics concepts, but it is incredibly interesting to read about the concepts from a high level. Rovelli delivers in that regard. It’s a fascinating book and one that got me thinking a lot about the world and my existence.

As humans, we are such a tiny part of the known universe. We do not understand much about existence besides what our brains depict. It’s a humbling thought but at the same time soothing. Humans may not be as important as we perceive ourselves to be. The sheer thought of that makes me realize just how irrelevant a lot of my worry about life and the world is.

We are all alive and we will all die one day. We might as well enjoy our short time on our planet.

Sifting through the BS

One thing I’ve learned from evaluating and conducting due diligence on hundreds of startups is that there’s a whole mess of BS out there.

At the most basic level, there’s a lot of startups, founders, executives, etc. using fancy adjectives to describe their products. This is similar to “greenwashing” with ESG which has largely been proven to be a false marketing campaign across investing.

“We analyze thousands of data sets using AI / ML”

“Our proprietary algorithm does….”

Of course, I’m not arguing that AI / ML is BS or companies do not have proprietary algorithms, but that more often companies are using these as a a way to provide a false moat or strength of their business when in reality they are doing what every other company has been doing.

There is and always will be an aspect of faking it until you make it in tech. I’m okay with that in many instances, but what especially bothers me if when these companies are targeting everyday consumers who do not know any better.

Often it leads to higher fees and worse outcomes for these consumers all justified by making something much more complex or confusing than it needs to be.

I live in Florida *wink wink*

I was laughing a bit at the lawsuit that the District of Columbia filed against Michael Saylor from Microstrategy. Apparently Michael has been a legal resident of Washington D.C. for the last 5 years, but has not paid any district taxes in that period. Like a lot of the wealthy, Michael had a very typical set-up:

• Michael claims to have lived in Florida

• As a resident of Florida, he would be subject to no state or local income tax

• He also owns a home in D.C. (and elsewhere) but would aim to spend more time in Florida to abide by rules to be a legal resident of Florida, not D.C.

All this sounds great of course. Many people do it legally. I know many people who legally live in Nevada, Washington, Texas, or Florida and count their days to ensure they are in compliance with all the laws.

The problem is that these rules are not black and white. While many guidelines say you need to spend more than half the year in that state to be a resident, there are other factors that go into the decision as well. Even if you spend 183 or more days in Florida, another state may still deem you to be a resident of their state.

So where did Michael Saylor go wrong? Well I don’t have all the facts, but for one he posted on Facebook calling D.C. home multiple times (he owns a home in D.C.) and he’s been recorded talking about D.C. being his “home.” That’s a pretty telltale sign to begin with. I’m sure the district has a lot more evidence tying him to D.C. as well.

The bad part about working at a startup

We’re coming upon our big launch here at Secfi and we’ve officially entered the tough part of the workload aka the shit no one wants to do. I’m talking about the administrative, compliance, legal, etc. that is very necessary to run a business but creates a gigantic backlog in your to-do checklist and takes up way too much time to complete.

This is the unfortunate part of a startup that people seem to rarely talk about. Back at PwC, we used to have teams all over the world to handle things for us. And if there wasn’t a team for it, you always have junior staff or interns to pick up the slack. You don’t get that luxury at a startup. For better or worse, you’re responsible for every aspect of the business.

It’s a mountain of work to get through at times and it’s definitely not fun, but neither is getting your product shut down for not being compliant. It’s one of the downsides of working at a startup, but something that you’ll need to quickly embrace if you plan to work at one for awhile.

Ethereum Merge

And just like that, it’s unofficially the last week of summer. Nearly every seems to be out of the office right now at Burning Man or in Europe. I’m a bit jealous as I’ve been at home for the last month. It’s been nice to get some rest and get caught up in life, but I’ve got the travel bug right now. For now, I’ve got this upcoming long weekend and some travel in September/October to look forward to.

While it seems like a rather dead period in tech and VC, the crypto world is about to get really interesting in the next 2-3 weeks. The Ethereum merge is set to take place around September 15th which means that the entire network will be moving from proof-of-work to proof-of-stake. If all goes well, Ethereum will be much more energy efficient network.

Accompanying this transition will be what some are calling the triple halving. After the merge, there will be 3 mechanisms that will reduce the supply of Ethereum and hopefully drive up the price of the token.

First, there will be reduced issuance. Second, Eth will be burned to reduce inflation. Lastly, Ethereum stakers will not be able to withdraw their until 6 months after the merge.

This is definitely an exciting and interesting time. As a big Ethereum holder, I’ve got my figures crossed that everything goes according to plan. Of course there’s an impact to my wallet, but I’m excited to see how this will impact the entire crypto ecosystem.

Minor improvements

I write a lot about my golf game on this blog as I see a lot of similarities to my career and running a startup. Like building a company, learning and improving in golf is a grind. It doesn’t happen overnight and can take months if not years to even see some sort of improvement.

Two years into playing golf, I am officially consistently shooting in the low 90s and finally feel like my swing is in a decent position. It took me two years to get to this point and I still haven’t even broken 90 once.

The startup grind often feels similar. You work your ass off and often don’t get immediate results. It can take months or even years to see the fruits of your labor.

They say golf is a mental game and I would say the same applies to startups. You need to mentally prepare to grind day in and day out despite not having immediate results.

Having fun

It was my turn to host our biweekly all hands today. Our management team takes turns hosting it and everyone adds their own flavor. We of course cover the important things like company updates and announcements, but we also try to add some flavor to the meetings to make the more engaging.

I’ve always turned to hanging out with each other and making it as fun as possible. This startup thing is hard. We work a lot and it’s often frustrating. Every other week we get a chance to come together as a company, hang out with each other and have fun for this one hour before we go back to the grind.

Today, I started with a fun debate game where we posted a “controversial” question and then broke out into breakout rooms to discuss. The first question was “are Cybertrucks cool?” and the second question was “is your iPhone listening to you?”

This all set things up for a big company announcement. We set a date for our big product launch and I introduced it with a silly meme video. I’ll share it after our launch that will be soon.

After a tough summer with the market and seemingly only bad news in the startup world, we had a good hour together where we hung out, laughed and turned to optimism about the future. We all needed a bit of fun in our workday.

3 years of this blog

I was on the bus this morning thinking about what I wanted to write about today when I realized that it had to be almost 3 years since I started the blog. Sure enough, I check the date for when I started this Squarespace subscription and it turns out that I launched it August 25th, 2019. I have no idea if this was just some really good guess ort if I subconsciously knew that it was at the end of August. Maybe I’m just that good at feeling out dates.

Writing this blog has been a daily pleasure of mine. I have been decent at attempting to write everyday although I skip almost all weekend days. I could be better, but if you told me that 3 years in I created a nearly daily habit of writing something on my blog everyday, then I’d take it.

I started the blog mainly as a personal journal of mine. I wanted to write down my thoughts and become a clearer thinker. I also knew that I needed to improve my writing. This blog has definitely helped me achieve that. Despite hating writing and English classes growing up, I actually enjoy writing nowadays. No newspaper is going to recruit me to be a journalist anytime soon, but I’m a much better writer today than I was 3 years ago.

So where do I go from here? I’m hoping to continue to write daily and perhaps even start writing more on the weekends and on vacation. I do want to write more technical and nuanced posts more often. It’s been unfortunate, but I just haven’t had the time and I’m now writing a weekly newsletter for Secfi that will dive into more technical topics.

Here’s to another year of writing.

Be a kid

One of the best pieces of advice I ever got was from my wise friend Spencer when we were 17. Even though this was 15 years ago, I still remember it to this day. Spencer and I played football together and became really close friends during high school. He was wise beyond his years and was always the voice of reason.

One day after practice, I was rushing out of the locker room to go home to do homework and I was really stressed out. I tried to storm out of the locker room as fast as I could while all my teammates were hanging out. Spencer stopped me and told me that I “needed to be a kid for once”.

While this may not be a surprise to those who knew me back then, I was very uptight, stressed and anxious as a teenager. My dad’s always working mentality really rubbed off on me and I always felt the pressure of the world.

Spencer’s advice was exactly what I needed to hear at the time and I still go back to that advice today despite being in my adult years. There are some moments that we’ll never get back again in life. Being a locker room with my friends after football practice is one of those moments that I wish I relished more instead of storming home to do homework.

Life shouldn’t be all that serious. While homework and work may be important, sometimes we all need to channel our inner kid and just enjoy life.

Too much content?

Like most people last night, I watched the House of the Dragon premiere on HBO. It was fantastic and brought back a lot of great memories from the glory days of Game of Thrones. Starting in college in 2012, my friends and I would get together Sunday nights and watch Game of Thrones live. It was a Sunday ritual that lasted for about 2-3 months every year or so. It was usually one of, if not the only show I was watching at a time.

What a different time 2012 was compared to now. Fast forward 10 years and we’re in an age of never ending content. I have a list in my notes on TV shows that have been recommended to me. For better or worse, that list just continues to grow rather than shrink.

Outside of streaming, I get sent a steady list of content via Instagram or TikTok daily from my fiancee or friends. It comes at me so fast and often that I spend a good 5 minutes almost every night checking everything. And of course - football season is coming up shortly which means that my Saturdays and Sundays will be booked for the next 6 months or so.

We’re living in a unique time where there is too much entertainment right now and not enough time. I know I definitely feel a bit overwhelmed. The FOMO is real and I feel like I’m missing out if I’m not keeping up. I have no clue about the correlation between technology/content and the worsening mental health crisis. But I guess I can completely see why kids and even adults are struggling more in school and socially nowadays than 20 years ago.

These streamers and apps need viewers so content is going to continue to increase. If we don’t want a future where everyone is staring at a computer or phone screen 18 hours per day, then this problem is going to need to be solved a different way.

I would love to see a new era of tools and technology that looks to counteract this worsening content problem. An app that helps myself and my potential future kids get outside more instead of logging back in? Sign me up.

AOE 2

My new weekend leisure has been playing Age of Empires II. The AOE series is one that I loved playing growing up. The game has aged remarkably well. There’s a great feeling of nostalgia playing the game but I love the strategy aspect even more. I don’t play video games often anymore unfortunately so this has been a nice treat for me.

Although a video game, I believe real time strategy games is probably as educational as a video game gets. You’re forced to deal with learning about economies and resource constraints. You have to learn to be patient and defend when needed, and take windows of opportunity. Lastly, you’re managing multiple different tasks at once and it’s nearly impossible to be present at all points.

Best of all, the game has forced me to stay in and get some more rest. It’s a win-win.

Work flexibility

I’ve been fortunate to work for two companies that have embraced work flexibility. My first job at PwC is a company with flexibility ingrained in the culture by nature. A lot of the firm that did auditing or consulting would either be traveling or at the client site. Other service lines would be in the office, but we were always able to work from multiple locations. By nature, the firm had to embrace flexibility in order to work.

At Secfi, we’ve been very flexible from the start as our offices are all over the world in San Francisco, New York, Amsterdam or remote. My personal stance is that I prefer to be in the office, but greatly support work flexibility. With that said, I believe flexibility is a two way street.

In order to be able to do things like take care of personal needs during normal work hours, you also need to be flexible outside of work hours. At Secfi, we may take calls starting at 7am to ensure face time with our Amsterdam office, but I may also take an hour break in the afternoon to go workout. I hate 7am calls, but I love being able to take a break in my workday.

Not everyone is cut out for this type of schedule though. I’ve dealt with a lot of employees at PwC who would take flexibility to a new level and not really work when needed. It was brutally obvious to others when that would happen.

Whenever we get a new person on my teams, I tell them the same thing: I don’t care if you take an hour or two during the workday to handle personal things, but you need to understand flexibility goes both ways. You may work early mornings or late nights sometimes. There may be weekend work to make up for the lost time.

I love this schedule and I know others do as well, but it’s not for everyone.

The case of Adam Neumann

I’m a couple days late on this, but I’ve been talking about it quite a bit with colleagues and friends so I wanted to write about it. Marc Andreesen and a16z is leading a $350m round into Adam Neumann’s next venture called Flow.

The details are sparse, but I can imagine that the business is effectively creating WeWork but for residential rentals. The company will acquire large apartment buildings, spice them up to be WeWork-esque and then rent them out. I’d imagine this becomes some sort of membership where residents will be able to visit other cities and stay in those Flow’s as well.

First, I have to admit that I think this seems like an interest idea. Just like WeWork as a product has been largely good for the customer, this seems like an interesting idea. Rent a place with other like-minded folk. Be able to travel to other cities and have a place to stay. I’m not sure how it would work and it may be flooded with a bunch of douchebags that I don’t want to call my neighbors, but who knows. I’m interested.

Of course, a lot of the attention has been put on Marc Andreesen for leading this round. Given Adam’s previous venture, there’s a lot of rightful critics. I don’t disagree with a lot of what has been said about Adam and his antics. He crossed the line on many areas and navigated the grey often.

With that said, if you take the top 20% of Adam Neumann’s antics off the table at what he did with WeWork, then perhaps this doesn’t seem that crazy to fund his second venture. I presume that Marc Andreesen is hoping that Adam Neumann has learned from his mistakes and will eliminate the bad 20% the second time around.

I don’t know how this will all end. Maybe we’ll get WeWork part 2 or maybe we’ll get a really good residential realty company that takes the country by storm. I’d imagine the answer is somewhere in between. If that happens, then Marc Andreesen’s $350m bet may not be that crazy afterall.

Money2020

This is the first year that Secfi will be opening a booth at Money2020. We’ve looked into it in previous years, but the pandemic, cost and time have always prevented us from going officially.

I went to last year’s “Fintech Superbowl” and it was a blast. I met with some amazing fintech founders, operators and investors. I got much more out of it than I thought I would have.

I knew that this year was time to make a big splash. We’re investing big in going to Money2020 this year. There’s too many potential partners and investors attending for us to ignore.

I love in-person events and Money2020 is the grandaddy of them all. I can’t wait.

The ESG lie

One trend that I am fascinated with is the rise of ESG funds and investment opportunities. It’s apparently the new hot investment trend among millennials and Gen Z.

I love the idea of ESG, but absolutely hate the execution of it. The reality is that most investing in ESG is investing in garbage that provides no societal benefit.

Many of the ESG ETFs and funds launched are simply broad based indexes with higher fees. ESG is something that is not defined so you very well could end up investing in a company like Microsoft which many likely wouldn’t consider ESG.

Furthermore, it’s largely been a ploy for managers and advisors to charge clients higher fees for placing clients into ESG funds and investments. Often times, there’s subpar performance that accompanies these higher fees.

Lastly, buy shares in an even legitimate “ESG” company does not necessarily mean that you’re making any meaningful contribution to any ESG causes. I’d imagine there’s some debate on this topic which I may want to write about in the future.

I’m sure there are some legitimate ESG funds out there, but at this point, I think it’s a bullshit trend that needs to stop. Folks who want to make more of an impact should be looking to donate or volunteer their time instead. That could be some real material impact.

The big month ahead

For the first time in awhile, I’ve been home an extended period and will continue to be home until mid-September when my trips start to begin. It’s been really nice being home on the weekends and just relaxing. I had an amazing weekend where I got to the beach, driving range and caught up on some sleep.

I’m planning for the month ahead and it’s an exciting time to be at Secfi. We’ve got some big things planned for the month ahead and I realized today that the next 4 weeks are going to be a bit hectic.

It was a bit anxiety driving this Monday morning so I took some time to do some planning. Most important, I’ve started to do some mental preparation for this especially since this is traditionally a big vacation time. Watching your friends having fun on vacation when you’re working 12 hour days isn’t always the most fun.

Here is my plan of attack for the next 4 weeks.

First, I’m planning on getting on a regular schedule including workouts and only 1-2 nights a week where I stay late in the office. I’ve learned that setting expectations with Sophia ahead of time works best so we all know what to expect. In addition, the dedicated gym time allows me to unwind and destress.

Secondly, I planned a short trip to Seattle to watch a college football game for right after this busy period. I wanted to have something to look forward to after these weeks.

In addition to a trip after this sprint, I’m allotting myself 3 personal days during this period. These days are reserved for emergency days off when I feel like I need a break or if I get ahead of my tasks and run across a few good days to take off and enjoy the summer.

Finally, I’ve gotten myself really excited to start to grind. I’m always reminding myself of the reward at the end of the tunnel instead of focusing on everything that I need to do. Shifting your mindset goes a long way when it comes to getting shit done.

It won’t be easy, but I’m excited and going to hopefully have a lot of fun grinding these next 4 weeks.

Marathons not sprints

I’m feeling great after getting some much needed rest last night. It was a long week at work and I felt that my brain was zapped by the end of it.

Reflecting back on the week, I probably overextended myself a bit. Taking on a few too many things that should have been deprioritized.

It was a nice monthly reminder that startups are more marathons than sprints. Although we’re required to sprint through some of the segments, longevity is much more important.

Next week is another big week with a key hire starting. This will mark an official new era of Secfi and I’m excited. For now, this weekend will be about getting caught up and getting some needed rest and relaxation.

Attrition

We had a happy hour and dinner last night to celebrate two colleagues. One will be moving back down to LA and staying with Secfi. Another will be taking a good opportunity at a pre-IPO company. It was a great night and obviously a bit bittersweet.

Attrition is hard to deal with anywhere, but much harder to deal with at a startup. You don’t want large attrition numbers but at the same time, attrition is always going to happen. The best companies will see regular attrition as they become great training grounds. In a few years at these companies, employees will ideally be highly sought after by other employers or become good feeders into the new generation of startups.

As a startup, you want your employees to be desirable. It means you’re doing something right. At Secfi, I’ve always had the mentality that everyone (including myself) is replaceable. We need to be constantly hiring and training people to take the next step. There comes a time for everyone to leave, and we always need to be preparing the company for attrition.