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.

Business decisions

My morning was plagued with news that the 49er’s Deebo Samuel has requested a trade. For those football fans, Deebo has been one of the most electrifying and unique players in football the past year. He’s a bully and I love watching him play.

Unfortunately it seems that contract discussions have stalled out between the team. He’s due for a large payday and one that 49ers GM John Lynch doesn’t seem to want to be giving him at the moment.

I remain hopeful that this is all just part of the negotiations as Deebo with Kyle Shanahan calling plays is a match made in heaven. I don’t know if Deebo will realize his potential elsewhere outside of Shanahan’s system. I’m sure Deebo knows that as well.

Regardless, I do trust John Lynch to make a good sound business decision here. Unfortunately in business, there are tough decisions that need to be made and feelings often get hurt. It’s unfortunate but it may be necessary and what’s best for the business.

Trading away an electrifying player in order to build a better team in the long run is likely one of those business decisions that may need to be made.

Anyone that’s worked at a startup has had to made tough business decisions. Sometimes it can be as simple as leaving some people out of a project. Sometimes it can be as brutal as a layoff. Sometimes it’s cutting a business line that just gained no traction. You can’t let your emotions get in the way of these decisions.

Turbulence for startups

Typically, the private markets will lag a bit behind the public markets when it comes to pull backs and corrections. Unfortunately, I believe that’s what we’re seeing here in 2022.

While there have been some glimpses such as companies going under (Fast) and companies revaluing their stock (Instacart), I do not believe that we’re even touching the tip of the iceberg when it comes to the tech correction.

Many companies raised large sums of money at crazy valuations last year. Many, possibly a majority, will not be able to grow to sustain those multiples. For companies that are not able to grow as they had anticipated, they will either have to work towards profitability or raise money at a downround to sustain their growth.

While the former may sound like the lesser of two evils, the reality is that most will have to enact layoffs in order to work towards profitability and reducing burn. Layoffs are almost part and parcel at startups and even some of the best companies have had layoffs. With that said, I believe we’re due for an industry-wide cuts coming later this year.

On top of layoffs, I have heard rumblings that downrounds are coming. Companies that need cash will need to raise money one way or another and if they do not have the growth to maintain their last valuation levels, they’ll need to raise at a down round.

In the long run, the best companies, products and teams will always prevail. But we should be well prepared for the heavy turbulence along the way.

Changing things up

I had a nice week and weekend to myself as Sophia was visiting a friend in Paris. I ended up cooking some amazing meals for myself, worked out a lot and practiced my golf game. As much as I missed having her around, it was really nice to change things up on my routine and do something a bit different at home.

For example, I hadn’t challenged myself to cook something new in a long time. Sophia usually handles most dinners and then I’ll come in and cook one of my go-to recipes once a week or so. Given that I was on my own this week, I ended up picking a bunch of new recipes and challenging myself. I almost forgot how much I did enjoy cooking.

It was a nice reminder to myself that it’s really good to change things up from time to time.

I’ve become a bit of a creature of habit lately. Doing the same workouts every week, going to the office and coming home at the same time, watching the same shows weekly, etc. While habits can be good, I feel like things have gotten a bit stale and it’s time for some changes.

I’ll look to switch things up a bit in the coming weeks. Different kinds of workout classes. Working from different locations when I can. Doing activities on weekdays. Cooking more. Change is often good and I’m looking forward to it.

Ain't no hobby

Kevin Kisner is one of my favorite golfers on tour. He’s always brutally honest with the media like when he admitted that he couldn’t win the Master’s but that placing 20th pays pretty damn well. He also has a hilarious line when golfing: “this ain’t no hobby”.

For him, technically golf is his job. For me, golf is a hobby. A very addicting one that I’m not very good at, but that’s beyond the point. My job today is to grow my startup, Secfi. For anyone that has worked at a startup, you know for sure that it isn’t no hobby.

I think the media and television glorifies startups quite a bit. They picture us hanging out, playing ping pong, having amazing meals catered to us. There’s some truth to this of course, but the reality is that most of time my life is hectic and stressful. It’s exhausting dealing with constant fires and issues that come up. By the end of a work week, I’m often ready to hibernate for 48 hours.

So why does anyone do it? Everyone has their reasons. Some do it for the potential payout, some for the prestige, others may just simply enjoy working in a small team. For me, it’s all the above - within 6 months of working for Secfi, I knew I found my calling and I will likely never work for a large company again.

I love the aspect of building and growing a company. I love working in small teams to solve problems. I love the idea that there may be a delayed payout one day if I do my job and succeed. All these things excite the heck out of me and get me out of bed every day to work.

Of course, all the positives also comes with the negatives mentioned above. As much as I like it, working at a startup ain’t no hobby.

Win-win negotiations

When I was younger, I used to think negotiations were about winning. I’m a natural competitive person so during school I would always try to find ways to win and beat the other party. In order words, I viewed it as a zero-sum game. There was a winner and loser in a negotiation.

I quickly learned in my career that successfully negotiating is far from that. Zero-sum negotiations more often than not result in upset parties and fractured relationships. Even if you do win this round and get what you want, the losing party is going to have a sour taste in his mouth. That’s a great way to end a business relationship or get a bad review.

Rather, successful negotiations can be simply summarized as finding a way for both parties to win and feel good about it. This all starts from establishing a mutual understanding of where all parties are coming from. Of course in a negotiation, not everyone will always get what they want and you have to accept that coming in.

I used to think there was no better feeling than squashing an adversary. Nowadays, I get more excitement from working with an individual to create a win-win scenario.

At this point of Secfi, we’re fortunate to be in a position that we can cut prospective clients who are assholes out. We’ve all dealt with them and I’d much rather work with individuals who try to work with you rather than run you over. No one likes working with an asshole. I try my best to be the opposite of that person.

More pain in the markets ahead?

I had an amazing golf weekend with Sophia out of town. I took my first lesson on Thursday. Got the range for practice on Friday. Watched the Master’s all day Saturday. Then got out for 18 on Sunday. I ended up playing the best I’ve ever played on Sunday…. unfortunately I didn’t score as I pulled a Tiger and forgot how to putt. Golf is much more fun when you’re striking the ball decently well. If only I could do this every weekend.

On another note, I have a feeling that there’s likely to be more pain in the markets coming up. While the economy may be in a better state than the last recession in 07-09, there are just too many factors working against right now. Inflation, war, supply chain shortages, etc. are all giving me a bearish sentiment for the moment.

Investors are very cautious right now across the private and public markets. Many VCs that I’ve spoken to are much more reluctant to deploy capital at the moment. Many are waiting to see how things play out in the coming months.

Us millennials have never really had to live through a recession or big market downturn. Things have largely been great ever since the last recession ended in 2009. Of course there was some short term pain, but if you zoom out, you’ll see that from 09-present has been the longest bull market in history. Most growth stocks may turn sideways or down for a much longer period than we are used to in our adult lives.

I remain hopeful but I am mentally preparing for the worst. Things will be much easier to process if the recession does play out. I’ll be ready for it either way.

Blockchain

Seems like I’m missing out on a good time in Miami based on the tweets. Admittedly I’ve got a bit of FOMO as it sounds like fun. I do feel like I’d be a bit out of place down there. While my friends probably would call me a crypto bro, I do believe I’m pretty far away from the typical crypto junky. I’ll have to make my way to one of these events soon and find out for myself.

Speaking of crypto…. I’ve written quite a bit on the private markets. Given the current market environment and geopolitical events, it’s probably no surprise that investments in startups are down this year.

One area that hasn’t slowed down is crypto. We’re seeing a large number of blockchain companies raising money at high valuations. There were a few that announced rounds in the past few weeks and rumblings are that there are quite a few more who will be announcing massive rounds at high valuations soon.

Even Jamie Dimon seems to have a bullish sentiment on the blockchain.

We’ve been doing a lot more deals in blockchain companies and we expect to continue to do more in the coming weeks.

Supply and demand

I’m watching Tiger at the Master’s today and it’s amazing to watch him out there. Just over a year removed from a devastating car accident that left his leg almost amputated. Now he’s competing on the largest stage. Meanwhile, I can’t hit a ball straight to save my life and I am a healthy 32 year old. One day….

I’ve been speaking to quite a few people in the media on private market valuations recently. While there’s a lot of reasons for what’s happening right now in the private markets/VC backed startup, I like to simplify things.

There’s more demand than supply in the private market space right now. In this case, I’m referring to startup founders selling stock as suppliers. And investors as the consumer in buying these stocks.

Capital was and is still is cheap. With the Fed printing money, there is more money in the markets than ever before. This started during the pandemic in 2020 and continued into 2021. With cheaper capital, means more investors looking to deploy capital and “buy shares”.

Right now, there are more investors with capital than there are quality entrepreneurs meaning more demand.. This drives the valuation of priced rounds up as we saw in 2021. Investors compete for the relatively little supply and drive the price up.

With the imbalance in supply and demand, the supply will come. And often that comes with lower quality companies/ideas/entrepreneurs initially. Of course, the hope is that this will correct itself and we’ll see more innovation and quality entrepreneurs starting. This could also be corrected by lowering the demand, i.e. making capital more expensive for investors.

Secondary markets

The accepted consensus right now amongst VCs and those who follow the private markets is that most startups raising capital are seeing much lower valuations than they would have last year. The exception being the top tier 20% companies who are going through business as usual.

That’s largely been true from what I’ve seen so far from fundraises and speaking to VCs/founders who are currently raising.

On the secondary front, some companies will obviously take a larger hit, but I am seeing valuations depressed across the entire industry, even the top 20% companies. One of those said top 20% companies is currently trading at 66% of what they would have received back in December.

Based on this, we can see that the secondary markets are much more correlated to the public markets than VC primaries right now.

If I had some more cash on hand, I’d start looking into buying some of these “discounted” secondaries in these top tier companies. There could be a lot of gains to be had when the IPO market does indeed come back.

When things don't go to plan

The news of the day in the VC world is the one-click checkout company Fast shutting down their doors. There’s a lot of stuff to be said about the Founder/CEO’s past and some of his antics, but I’m going to refrain from writing about that. It’s been written about plenty over the last few weeks.

Instead, I wanted to focus on what’s been missed by the media, the employees.

Startups are hard. We all know it. We know part of the risk of going to a startup is that you may fail and your equity may be worth nothing. Unfortunately that’s what happened here at Fast.

Employees often get the short end of the stick when things don’t work out. They take a paycut to come join the company. Put in long and hard hours to build the company. And when things don’t work out, their hard work in form of equity is last of people to get paid out. It’s a brutal realization.

In this situation, you had a charismatic CEO who was popular on social media. I can imagine he no doubt attracted some top tier talent to come join Fast and their mission. Unfortunately for most of these employees, they will be left with nothing in form of equity. The hope is that these employees learned a ton and I do believe that going to a startup, even one that fails enables gives you the opportunity for massive personal growth.

Hopefully things work out the next time around for these employees. For now, I feel for the employees who have had to endure these last few weeks.

Elon buys almost 10% of Twitter

On Saturday night, I met up with some old buddies from college. We were fairly close but largely lost touch after graduating and had only seen them a handful of times in select occasions over the last 10 years. They were in San Francisco for the weekend so we all watched college basketball on Saturday and hung out for the night.

It was amazing seeing them and catching up on life. One thing is evident in our conversations - we’re growing old, quick. Our conversations ranged from drinking less to having children. It was funny to contrast to our last conversation 10 years ago.

On another note - the market news this morning is that Elon Musk just purchased almost a 10% stake in Twitter. As a former Twitter bagholder, I truly am jealous that I sold out and didn’t hold on. It would’ve been fun to see this happen after holding for almost 4 years with no real movement in the stock price.

It would also be fascinating to be able to just wake up and say, screw it - I’m going to buy a significant stake in one of the largest social media platforms in the world. Elon started tweeting about free speech on Twitter last week and at some point, I suppose he decided he’d like to buy a stake and ensure that free speech is maintained.

I’m not sure what will come out of this. I’ll probably buy some Twitter at some point when the price dips again. I’ve always felt that Twitter was untapped potential and just needed the right leadership to make things work. We’ll see if Twitter can benefit from having Elon involved to some degree.

Secfi Advisory

We’re in the midst of launching Secfi Advisory which is a new business unit focused on providing 1:1 guidance with startup executives and employees. The service provides holistically financial planning with a focus on the employee’s biggest asset, their startup equity.

This has been in the making for many years. We’ve heard from clients starting in 2018 that they wanted more in-depth help and dedicated financial planners. As counter-intuitive as this sounds, startup employees are currently underserved. They do not have enough assets for traditional financial advisors to work with them so they are typically ignored until their companies go public.

The problem is most of the planning associated with an exit should be happening right now prior to an exit. There’s a huge opportunity for us right now and we plan on seizing it.

We launched our Secfi Advisory Beta program a couple of weeks ago and have already signed up many amazing startup operations and investors. As much as I’m excited about the number of clients, I’m more excited about the type of clients.

It’s been an exciting week for us at Secfi. My energy is at an all-time high right now and we plan to continue this momentum into Q3.

Inverted yield curve

The news of the day in the markets was the inverted yield curve. For a brief moment today, the yield on a two-year treasury note was higher than the 10 year note. This means that you could invest in a 2 year note and earn a higher interest rate than a 10 year note. This of course is inverted as you should earn a higher return for locking up your cash for a longer period like 10 years versus a 2 year period.

I won’t pretend like I know exactly what’s going on with the inverted yield curve and the markets so I set aside some time today to do some reading and talk to people much smarter than I am. My not helpful conclusion from about 30 minutes of reading Twitter and articles is that this could be a sign of a recession incoming or it could be a fake and mean nothing.

I really enjoy learning about the market and it fascinates me, but I’ve come to realize that making actionable decisions based on things like a brief inverted yield curve is not something I’m qualified to do. Instead, I’m going to focus on what I know and that’s investing in great companies that have potential to grow significantly in the next 10 years.

Back to work

I’m back home after flying home on Sunday… only 2 days after originally planned. I feel lucky that I was able to test negative and come home after two days. I know others who have traveled and have had to extend almost 2 weeks. Despite life trying to work against me and ruin my vacation, I’ll go as far to say that I had a great trip. It was less than ideal and there were for sure unfortunate circumstances.

With that said, I got the rest I needed. I read some great books and was able to unwind to clear my head. I’m back at work feeling rejuvenated again. Mission accomplished.

I come back from a vacation at a great time. It’s about to be a new quarter and we’ve had some timely news that will allow me to focus on some key initiatives in Q2.

On Q2, I always tell the new hires that working at Secfi gets interesting when the macroenvironment seems to be against us. This is one of those periods.

We’re seeing much less VC activity across all sectors. Those that do raise capital are doing it at much lower valuations. Investors are marking down their portfolios quite considerably. Some companies such as Instacart are lowering their internal valuations as well.

On the surface, this could be a challenge for Secfi, but in many ways it’s actually a great thing. We understand corrections happen, and I do believe a correction was needed. On the individual level, I saw some unreasonable actions last year with people taking on too much risk given the bull market.

We’ll need to help our clients navigate through this period. We’ll have to work harder and make sure we help as many people plan for this correction and get them in the right positions for when the market bounces back. This is really where things get interesting.

Extra few days of vacation

So far my trip has been extended an extra two days with my flight now scheduled for Sunday (originally Friday). I’m choosing to look at this as an extra 2 days to explore Spain. The reality is that it could be longer than 2 days. I’ll take a test this afternoon and see if I’m able to fly tomorrow. If not, then I’ll continue to extend my trip.

These are not ideal circumstances. I haven’t been home in over 2 weeks and I do look forward to getting back. But these are things that I am not in control of so I am trying to turn down situation into something positive.

The weather is supposed to be nice this weekend. There’s plenty of outdoor activities for me to do. It could be a lot worse. I’m going to enjoy my extra few days of vacation.