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.

This week

Man, this week wrecked me…. and it’s not over yet. There wasn’t one major event that was the cause of my stress. Rather it was just a culmination of a lot of shit hitting on Tuesday and Wednesday. After a couple late nights, I’m finally getting my head above water and my checklist under control.

Furthermore, it seems like we had nothing but good news hit our inbox today. Looks like after a crappy week, our hard work and perhaps a bit of luck finally p[aid off.

It was a stark reminder of the ups and downs of startup life. Building a company isn’t a hobby and it’s challenging as hell most times. The reward is always worth it though.

Tornado Cash

The news headline of the web3/crypto world of the last few days has been focused on Tornado Cash which is a crypto token that has been blacklisted by the US Treasury Department.

Tornado Cash is not just an ordinary crypto token. It’s a token that is purposely designed to protect the privacy of those who send and receive the tokens.

Of course, there’s many great use cases of this. In a world where governments and companies are tracking your everyday movements easily, privacy has become a huge factor. Perhaps someone wanted to donate money to Ukraine without fear of the recipient being targeted. Or maybe there’s a large movement of money between accounts, and the recipient or sender is worried about hackers.

The other side of the equation is that Tornado Cash could be used to launder money and for other illicit activities. In this case, the US Treasury Department cited that North Korean hackers used the tokens to move money around. That is the major problem.

Tornado Cash is the latest incident in the ongoing debate of privacy versus regulation. Like most good things in life, bad actors ruin all the fun for the good guys.

I don’t know how this problem is solved. I would love to meet some entrepreneurs who have a good idea though.

How does this inflation end?

On a personal note, I just booked my flights for my bachelor party to Cabo. $730 for roundtrip non-stop from San Francisco. That’s just about double what I paid last year for the same flight in October.

We can blame inflation but the real root cause of all this is due to excessive spending. Let me explain.

The pandemic caused the government to print more like no end. There was excessive cash in the system and people are now looking to spend that cash. There is more demand for consumer goods and services than they is supply right now.

As there is more demand, then consumers are willing to spend more cash to purchase that same avocado, television or plane ticket. Hence the value that my dollar could buy is less today than it was last year.

This cycle of excessive spending by consumers is driving this inflation today.

In basic terms,. the easy answer is to get Americans to spend less. Unfortunately, this is a country where everyday Americans are used to excess. We like our extra cars, our vacations, multiple TVs in the household, etc.

The only way to curtail this inflation is to reduce the amount of dollars in circulation by raising interest rates. This upcoming November will mark the anniversary of the first interest rate fed hike.

The scary part to me is how all this will end. Americans are spending more and saving less. Many of those are spending more than they can afford. Like most, I’m hoping that this will be a soft landing, but there could definitely be more economic pain in the near future.

Random Monday

I have severe writer’s block right now and to be honest, can’t really think of one topic to write about. I’ll call it a case of a the Mondays on a gorgeous day in SF. Until I get back on track tomorrow, I figured I just write about a bunch of random things in my mind instead.

Sophia and I finally found a ceremony location for our wedding in December. We found a small plant shop that used to be a restaurant in the Embarcadero. They have this awesome secluded patio with good views that they’ve been hosting some wedding ceremonies on. I cannot tell you how happy I am that we finally booked the venues and can start focusing more on the fun parts of the wedding like the food, drinks and welcome party location.

I was nice and bored on Saturday. It was a perfect afternoon and I ended up grabbing some beers with a friend. Later that night, we decided to switch things up and play Age of Empires 2 on Saturday night. I don’t really play video games anymore, and AOE2 is a 20+ year old game. We had both played as kids and there was this amazing nostalgia factor. Video game nights are definitely going to be back in my rotation of things to do.

Speaking of AOE2… man there was something about those simple real time strategy games back in the back. Warcraft 2, Starcraft, AOE2…. those were the days. I don’t think they’re as popular nowadays, but those games teach you a lot. You have to learn about resource constraints, economies, building, planning, etc. I know Shopify CEO Tobi Lutke talks a lot about how much he learned from playing Starcraft growing up. I’m a bit addicted again and starting to play some single player campaigns now. I’ll tell Sophia that it’s part of learning agenda.

Holy shit it’s gorgeous right now in San Francisco. It’s 75 degrees and perfect out. The rest of the country seems to be in a crazy heat wave and I’m loving my life in a t-shirt and shorts in the office today. It’s amazing how much better Mondays are when San Francisco is like this.

Good and bored

It’s Outside Lands here in San Francisco this weekend. While I imagine it could be a great time, big festivals are just not my cup of tea so I’m happy to sit this one out. This makes for a really nice and relaxing weekend at home.

Most of my friends are at the festival and Sophia is leaving to stay with a friend in Walnut Creek tonight so I’ll have a nice and quiet sunny San Francisco day to myself. That leaves me good and bored for the remainder of my Saturday.

I used to love these days and nights when I was in my earlier 20s. I was able to get a reset and be with myself, and my own thoughts. I used the time to read, brainstorm and just enjoy being alone. I felt that a lot of my best ideas and motivation came from these days of solitude.

Unfortunately, I don’t get many of these days anymore. Life seems to just move a lot faster now that I’m in my 30s. I’m excited to be nice and bored all day.

On hold for the summer

I’ve spent a lot of time trying to learn as much as I can about the markets and investing over the last 7 years. It was a hobby of mine prior to starting at Secfi and when I joined Secfi, it became part of my job.

One major thing that I didn’t realize was just how much the markets impacted nearly everything in business. For those that work in finance or adjacent, it makes a lot of sense, but you don’t really realize just how connected everything is until you’re living in this world.

When the capital markets dry up, everyone feels it’s impact in one way or another. It’s one gigantic ripple effect. A simple example for those that work in startups.

The public markets going down eventually makes it way to the private markets. Funding becomes harder to come by and companies are not raising capital to grow their businesses. Employees who work at these companies are not going to get much liquidity for their private company shares as the IPO market is dried up and secondaries are also down.

As employees do not have liquidity, they do not spend as much. They are not buying homes. They are not investing money with funds and banks. They do not spend as much buying consumer goods. The ripple effect eventually makes it’s way all the way down the chain.

Capital allocators have effectively taken the summer off while they wait out the storm to get a clearer picture. Down the stream, there are a lot of folks who work in other industries that are also seeing this impact. I spoke with a commercial real estate agent the other day who mentioned that he’s largely taken the summer off as well. I suspect many others are also in the same boat.

Fintech revenue concentration

One trend that I’ve been noticing is that many fintechs that raised money at large valuations in the last 2 years are now in a difficult situation with flat or declining revenue. The common theme here is that a lot of these fintechs had large concentration of customers in the crypto space.

With the crypto boom in full force the last 2 years, many fintech startups had massive revenue spikes as they provided services necessary for other crypto startups to operate. Think of all the things that you need to run a crypto exchange for example: payments, KYC, security, etc.

Now as crypto trading and volume has declined massively, we are starting to see the ripple effects throughout the fintech ecosystem as well.

Like I wrote on Tuesday, many companies will be okay as they perhaps just accelerated revenue. If you Zoom out and average out the growth, it may still be a healthy growth rate for a company.

I am still long fintech, but there’s going to be many bumps and bruises along the way. Fintech will be back and healthier.

Youthful vigor

A friend of mine that works for a fund invited me to speak to their intern class today. It was a nice change up from my day to day. I spent an hour and half speaking about my career path, Secfi and life in general.

The best part about the day was that I got to meet six incredibly talented, smart and motivated individuals. My first impression was that this group is impressive. They asked lots of tough and great questions. They knew a lot about the startup and investing world.

I was in a much different mindset when I was 21 years old and wish I was as mature and motivated back then as this group.

We haven’t hired someone from out of college in awhile but it reminded me that curiosity and vigor may make up for the inexperience. Perhaps we will be dipping back in the pool and looking for that youthful vigor sometime soon.

Startup growth in 2022

Public company earnings generally have been strong but show a declining growth rate. I suspect that a lot and likely most startups will not be in such a luxurious position. After a likely booming 2020 and 2021 of growth, I expect most startups to come back to earth and experience flat or even down revenue.

In the long run, this may be okay as COVID could have accelerated growth for most of these companies.

For example, imagine a company that grew from $10m in ARR at the end of 2019 to $50m at the end of 2021, but stayed flat at $50m at the end of 2022.

There’s multiple ways to look at the company.

The pessimistic view is that the company is flatlining. Their growth has plateaued and they need to make serious changes in order to continue growth.

A more optimistic way to look at it is that the company cleared it’s pipeline and just grew faster than normal in 2020 and 2021. They paid for their success in 2022 when the market and budgets dried up. Their product may be perfectly fine, but they may need time for the market to recover and GTM to build a pipeline.

Many companies would’ve been happy that if you told them at the end of 3 years, they would 5x their ARR.

Of course, all this is an insanely simplified view in a complicated time right now in startup land. There’s many more factors than looking at growth rates of companies. But it is one indicator and an interesting one that many will be focused on as numbers start to leak out about startup performance in this down market.

Planning my wedding

Sophia and I did some big wedding planning this weekend and also started planning our honeymoon to Southeast Asia.

I was initially really against the idea of having a wedding. It all felt like a bit of a scam to me. You pay all this money for 1 night and I’ve heard horror stories of venues and vendors effectively extorting the couple. I always felt that weddings were fine if parents wanted to front the wedding, but it just did not make any fiscal sense for 20 or early 30 somethings to be paying for a wedding out of pocket.

There’s definitely some truth to that statement. I know some who have gone into debt to pay for their wedding. We’re saving for a house in the most expensive city in America and breaking into our savings for a wedding didn’t really make much sense to me. But here I am, planning for my wedding in 4 months and I’m actually excited about it.

I’ve realized that in planning my wedding, it wasn’t that I disliked weddings, I just disliked the traditional ones at cookie cutter venues. It just wasn’t me. So Sophia and I decided to do a wedding in the lounge area of a Michelin star restaurant in Chinatown… one of our favorites in the city. Food is very important to Sophia and I, and it just fit perfectly.

We’re going to have a fire spread of Michelin star rated food in a unique venue overlooking one of the coolest streets in San Francisco. That’s something to get excited about.

Of course, we had to make some sacrifices. The venue is smallish and capped out at 60 people. We unfortunately will be unable to invite quite a few of our friends.

While we won’t skimp out on the things that matter (see food and alcohol), we’ll probably be a bit more reserved when it comes to things like flowers and decorations. I’m okay with that - no one ever goes to a wedding and remembers only the table settings afterwards.

I’m pumped. We’re doing our wedding our way at a cost that sits well with us. It won’t be the most lavish wedding with all the bells and whistles, but it’ll be perfect for us.

Rest and recovery

I was about to give up golf after last weekend. I was south of Seattle in Olympia and we played Chamber’s Bay. The course absolutely kicked my ass. I had never played a links course before and Chamber’s was not a fun introduction.

The first 3 holes, I was going up and down the hills searching for ball. I never recovered after the disastrous start and everything was out of whack the rest of the round. I shot a 55 on the front 9 which is the highest score I’ve posted in a long time. The next day at Indian Summer was not much better except that I recovered a bit on the back 9.

Today, I played Harding with a partner. Everything felt different. I was well rested after a good night’s sleep. I felt loose and ready to go in the car ride over. It was far from perfect, but my swing felt good and natural from the minute I got on the range through the 18th hole.

Last weekend to today was really night and day. It reminded me of the importance of rest, recovery and how much alcohol impacts both of those things. I had flown into Seattle on Thursday night and probably had a few too many drinks. Despite sleeping in a bit the next day, I could definitely tell my body was still tired and a bit off.

I’m getting older now and my body can’t handle the booze like it used to. Sleeping 7 hours is a must nowadays. Getting rest after a hard workout or a long day is a necessity not a luxury.

Earnings

It’s earnings season right now which means that most public companies will be releasing their earnings results from the last quarter.

I’ve been on an individual stock buying freeze for most of the last 6 months. I of course am stilling DCA’ing into indexes, but my “liquid” portfolio has been frozen. Things are much too volatile for me right now to be putting more money into individual stocks, especially in the growth/tech sector.

With that said, I’ve been paying particular attention to earnings this time around, not because I am buying stocks, because I am trying to get a pulse for the health of the economy.

Sales trend of software, cloud computing, cars, etc. can be a telling picture of what is happening right now in the world economy. For example, Meta’s YoY revenue fell for the first time ever which is an indicator. Of course, these are just one indicator. Slowing Facebook ad sales does not necessarily mean that we are in a recession, but it does mean that businesses are spending less than they did last year.

So far, I’ve been seeing a mixed bag. Some companies are bracing for a recession, others are saying that we’re not in the recession. My philosophy here is to err on the side of caution and be happy that I’m wrong. I’m preparing for a tough few quarters ahead and hoping for the best.

SF Energy Woes

I’ve been writing quite a bit about how the energy is lacking in San Francisco’s downtown. Everything is just a bit boring nowadays. My office has at most 8 people at a time when there are no visitors, and while my coworkers are great, I just miss the overall energy of the city.

Prior to COVID, there was this startup energy that was different. Groups of individuals wearing the same startup backpacks walking to happy hour. Spontaneous run ins with others in fintech. Waiting in a lunch line with your competitors. I loved that SF and I miss it.

I tweeted about this a few weeks ago and based on the response, it feels like nearly everyone remaining in San Francisco also feels as I do. It was great to see that I wasn’t the only one feeling this way. I had multiple people DM me asking to grab a coffee and lunch.

I was stoked when this happened and I’m meeting my first “Twitter friend” post-pandemic tomorrow for coffee. I don’t know where these meet-ups will go in the future. I think a great outcome will be if we can get a group of startup folk together into a regular happy hour or lunch so we can expand outside our immediate colleagues, but we’ll see.

At minimum, I’m hoping that these regular meet-ups turns into at least bringing back some of that pre-COVID startup energy in San Francisco.

Doing vs. guiding

My work life the last few months have been marked by back to back Zoom calls. Weekly catch-up calls, 1:1s, strategy, planning, brainstorms… I feel like I’ve had ever type of meeting ever imagined.

I had a slowdown in my meetings the first few months of the year as I got to focus solely on launching a new product with just 1 other team member. Over the last few months though, I’ve slowly built my number of direct reports back up and now have more direct reports than ever before. With that, comes more meetings and calls.

I’m not necessarily complaining of course. Moving up the ladder and leading a team is part of progressing in most career paths and I’ve had a crash course in management over my last 4 years of time. It’s an experience you don’t get in any other place besides a startup.

The biggest change for most people that move into more of a managerial role at startup will be that transition where you are “doing” nearly everything to where you are now a manager and “guiding” people through the day.

When you move into that manager role, you need to gain leverage by using your team to accomplish much more than you would be able to. Focusing on doing everything will stunt your team’s development and lead you to a path of burnout as you look to both do and guide.

It was definitely a challenge for me as I was used to just plowing through my checklist at work as fast I could… in other words… get shit done. Taking multiple calls a day to guide my team to get shit done was a gigantic change of pace as I took a step back in almost all areas of the business.

All that said, there may be nothing more beautiful at a startup than a highly functioning team that works together to get shit done. It’s an investment that you need to make as a manager, but one that pays off many times your investment in the future.

Housing prices and shortages

This past weekend, I was in Seattle for the wedding of one of my college buddies. We stayed at my friend’s parents’ home in Olympia where they live on a nice golf course. The nice was huge with a big backyard and everything you’d want in a suburban home. You even had hole #8 right behind you. It may have been the first time I thought that life in the suburbs may not be so bad after all.

Naturally being in my early to mid 30s, the topic of real estate comes up a lot. My friend’s parents made sure to ask me about whether I’m buying in San Francisco sometime soon. The unfortunate reality is that even with Sophia and my joint income, buying a home in San Francisco will likely be out the picture for at least the next 5-10 years unless one of us has a windfall.

I’m not the only one who goes through this. I know nearly all my friends are struggling to buy real estate in the cities that they love. The only ones who are buying homes are those that are lucky enough to have supportive parents. One of my clients awhile ago proclaimed that he was a “middle class millionaire” in San Francisco.

This housing shortage started in California long ago and has gotten worse. It’s definitely not fun to be directly impacted by this. My Dad likes to remind me to buy a house every time I come home. I have to remind him that buying a house in San Francisco 30 years ago for $200k was much easier than it is now.

Unfortunately for now, there’s not much we can do. At this point, my strategy is to save, invest, and hope for the best. I suppose if buying a house in San Francisco doesn’t work out, the suburbs aren’t so bad after all.