Jumping on the cryptocurrency bandwagon

Blockchain and blockchain-based cryptocurrencies are all over the place these days. Is this just a fad or something that is here to stay? Are we talking about a valuation bubble or is this just the very beginning of a game-changing trend? I could not tell, and I dare say that the vast majority of people - even experts and those very familiar with these topics -  don't know wither.

In any case, I have been wanting to write a bit about this as, little by little, I am getting more immersed and interested in this ecosystem. I am not in a position to give a master class of any kind on blockchain and cryptocurrencies, so I will just jot down some notes about some topics that I find particularly interesting, in particular concerning the financial sector.

Blockchain-based applications and their legal fit
By providing an open, decentralized ledger of transactions, blockchain technology is challenging the status quo of information registration, authentication and distribution. In addition it is expected to provide additional transparency and lower transaction costs - I like how IBM simply and practically explains in this video how blockchain works.

Blockchain is not just a buzzword any more and a lot of applications and ecosystems are being built on blockchain across industries, including the broad financial one. One of the main challenges that I see is how blockchain-based applications are going to fit with existing legislation. One thing is disrupting processes and a different one is circumventing applicable laws which, in most cases, have not foreseen anything remotely close to blockchain.

A good example of this tension is the SEC's decision on initial coin offerings (ICO), according to which crypto tokens are to be regarded as securities under U.S. law. Renowned VC investor Fred Wilson wrote a blog post about this recently. I am sure other countries will follow suit. Again, ICOs may be a a way to disrupt money raising via cryptocurrencies; a different one is getting away from legal guarantees and requirements.

The cryptocurrency universe
A few weeks ago I came across the attached chart, which provides a pretty good view of this new ecosystem of cryptocurrencies that a month ago was valued at a "market cap" of around $80 billion. Yet Bitcoin, Ethereum and Ripple make up the most of that ecosystem, there are now 800+ cryptocurrencies out there.

According to a Bloomberg article, as of last July, more than 90 ICOs had taken place, resulting in more than $1 billion being raised - which exceeds the volume raised via early-stage VC financing.

Bloomberg further points out the fact that many of this ICOs are subscribed within minutes and, in many cases, based on simple product proposals, not on tangible MVPs or initial traction.

One last thing in the article that caught my eye is the fact that an increasing number of "traditional" bankers and investment professionals are migrating into this ICO universe.

Pricing cryptocurrencies
Many argue that there is a cryptocurrency bubble that could burst at any time following rapid price hikes in many tokens in the last months. Case in point: Bitcoin itself - price has quadrupled since January 1.

An interesting point to assess is the correlation between bitcoin and other cryptocurrencies. I dare say that it is not clear cut and there is no one-suits-all conclusion. However, it seems safe to say that, in general terms, tokens price are positively correlated. This and this analyses (charts below) I came across online exemplify this point.

So, are we witnessing a cryptocurrency bubble? This L2 video featuring a chat between NYU Stern professors Aswath Damodaran and Scott Galloway - definitely two of my very favorites while at b-school - provides some good insights:

• you cannot value (i.e. cashflow-based) cryptocurrencies, you can price (i.e. interaction between supply and demand) them;
• a lot of people have lost trust in paper money, central banks, governments... different crises (e.g. North Korea missiles) may be driving prices up, as cryptocurrencies become a sort of "haven" similar to gold;
• historically, the value of gold has relied on the "illusion" of people having the chance to sell it to someone else. A similar thing may apply to cryptocurrencies;
• people think that they have an insight to trade cryptocurrencies, they think they know more than they actually do. And that is a piece of the pricing game; and
• the subset of people who think that financial markets are overpriced is a fairly large one...and they may be moving to cryptocurrencies to find yield, driving prices up as a result.

In short, a super interesting, rather nascent ecosystem that is being developed at lightspeed and subject to permanent debate. Time will tell where the path ends.

Fred Wilson: some VC lessons from one of the best in the business

A couple of days ago, Fred Wilson, co-founder and managing partner of Union Square Ventures (USV), one of the most reputable and successful VC firms in the world, and the blogger behind AVC (a must read blog for anyone interested in the startup, tech and VC businesses) posted a video of a talk (the annual Georges Doriot Lecture) that he gave at MIT in Boston.

You can see the video here:

The chat is priceless and full of VC wisdom and I thought about summarizing some of the points that I found particularly interesting:

• A VC's most important role is that of a cheerleader (...). It is everything and just very few VCs can do it.

• The best time to invest in something  is when nobody believes in it besides you (...). You have to totally believe in it and you have to know why.

• Entrepreneurs and the companies they build are the VCs' customers - not the VCs' investors, who are their shareholders. The entrepreneurs are the center of gravity in the business and VCs are service providers to entrepreneurs.

• Even though venture capital requires a sophisticated understanding of finance, technology, markets and strategy, it is ultimately a people business.

• Three things that USV looks at when investing in an entrepreneur: charisma (the ability to convince people...it goes beyond salesmanship), technical expertise (knowing how to make aomething, not outsourcing the making of sonething to somebody else but leading it), integrity (honesty).

• In order to have better chances to succeed, he recommends angel investors to build a portfolio as broad as possible - broader than that of a traditional VC - and build networks with other angel investors. He also points out that angel investors should help entrepreneurs get to the VCs to raise their series A and subsequent rounds.

• On how to getting into VC as a profession, as a general piece of advice, very graphically he recommends spending your 20s and 30s working at startups as a path to dedicating your 40s, 50s and 60s to being a venture capitalist. Ironically, he feels like the best VC investors did not take that path.

Interestingly, as a closing remark, Fred pointed out that if he was 35 now he would probably go do VC investments in emerging markets.... anyone up for the next challenge?


Until next time!

My 2016 in review: the good, the bad & the ugly (of working at a young startup)

There are just a few hours left in this 2016. It's been a curious year, a bumpy, rollercoaster-kind of ride with a lot of takeaways and learned lessons. It's time to look back and do a sincere and objective assessment from a professional standpoint.

THE GOOD
(1) 2016 has given me the opportunity to work in the kind of startup environment that I had longed for quite some time, after having worked at multinationals pretty much all my life. I see that as a big success in itself after my bet on pursuing this path and my overcoming the hurdles that I had to face as a result of immigration issues kicking me out of the U.S.

(2) I have learnt a lot of new things following my jumping into an unknown territory that included a new industry, a different role, and multiple and diverse responsibilities. I have had the opportunity to be out there "in the trenches" to a larger extent, to expand my network, to work and get to know some great colleagues and to experience first hand a different way - improvisation, flexibility, I am embracing you - of doing things.

(3) I have been able to go way beyond my comfort zone and to challenge myself as I had not done in quite some time. I am satisfied with my overall performance but, above all, I value my daring to do so. Plus I strongly feel that this has helped me gain new skills and change my personal brand, as I explained in this post.

(4) Leading a learning the in & out's of a fundraising process has been priceless. I have enjoyed every minute of it: from researching, identifying and reaching out to domestic and international investors, to crafting pitch documents, presenting to investors and at different events and negotiating. It's been the most exciting and challenging thing I have done in years.

(5) Enjoying again what going to work means. I had forgotten that magic mix of excitement, cheering, happiness, challenge, commitment... I am aware that such a thing does not last forever but experiencing it again was awesome.

(6) Last but not least, I will remember 2016 as the year in which I was given the opportunity to pursue an exciting fintech opportunity in Berlin, one of the world's tech hubs - more on that here. There is no doubt that it will be a big challenge, both personal and professional, yet I am looking forward to starting.

THE BAD
(1) Things have not finished as I had envisioned them. Twelve months ago I was fully invested in a project and had the stamina and the confidence that we were on the path to building one of the next great companies. Even after having voluntarily decided to part ways, I can't avoid a somewhat bitter feeling of unfinished work and personal failure.

(2) Internal politics. When referring to corporate feuds, I guess we all tend to think of bankers, corporate finance titans such as Gordon Gekko or of powerful Fortune 500 companies' CEOs. Unfortunately, this happens everywhere, even in young startups. And assuming of course that such feuds are no good anywhere in the vast majority of cases, I dare to say that the harmful effects are more relevant in young, smaller companies. Disappointment is probably the word that best describes how I feel about that.

THE UGLY
(1) It is cold out there beyond established corporations. Success stories tend to make people think that building a startup - from coming up with an idea through to a billion dollar IPO - is way easier than it actually is. In most early-stage cases, you have limited resources, you do not have a powerful brand to leverage in your sales pitch, you have no significant track record to negotiate with banks and other stakeholders, you face dead-ends any other day... There are times when you feel powerless. You already knew it and embraced the challenge, true...but still.

(2) Having everyone pushing in the same direction and under the same vision is tough. Being able to align everyone in the team, from the CEO to the last intern, is not an easy task. Learning (or trying) to navigate the time-bomb resulting from human relationships in scenarios of uncertainty and cash pressure, is a priceless lesson that I definitely did not learn in my managing organizations course while at business school.

(3) As mentioned above, over the last year I was able to enjoy my work again. But at the same time, I experienced some of the worst days in my career to date. By joining a young, promising project I was confident that I would experience the former, but I would have never expected the latter. Even if this has been the case, I can assure you that I have learnt a lot from the experience, from both my mistakes and those of others.


Overall, in hindsight and having had time to reflect on all these experiences, I can say that it's been a valuable year. Let's see if 2017 is a better year, with more "good's" and fewer "bad's" and "ugly's".

My best wishes to y'all for the coming year!

Startups e inversores: algunas lecciones de Jason Mendelson de Foundry Group

Hace un par de semanas tuve la oportunidad de asistir a una conferencia organizada por Telefonica Open Future para hablar de temas de venture capital y de financiación para startups. A tal efecto, los organizadores tuvieron la brillante idea de invitar a Jason Mendelson, co-fundador de Foundry Group, uno de los fondos de venture capital más reputados y rentables del mundo. 

Jason y su socio, otro mito de este mundillo, Brad Feld (tiene, por cierto, un blog bien recomendable) escribieron hace años el libro "Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist" que se ha convertido en un clásico a la hora de entender las claves de los procesos de fundraising. Según indicó Jason, los principales motivos por el que escribieron el libro fueron “teach entrepreneurs and piss off VCs”. Todo un ejemplo. Por cierto, ahora el libro también está disponible en español gracias a la traducción de Manuel Matés, co-fundador del fondo español Big Sur Ventures.

La charla se centró en recomendaciones y best practices para emprendedores que acuden a venture capitalists en busca de financiación. Aquí comparto algunas de las cosas que más me llamaron la atención:

1)  Cómo acceder a un VC: ser referido por alguien es sin duda la mejor manera. Curiosamente, sin perjuicio de ello, Jason indicó que alrededor del 15% de sus inversiones tienen origen en una llamada a puerta fría del emprendedor.

En ese sentido, si uno va por esta última vía debe ir sí o sí bien preparado porque solo tendrá “one shot to amaze” al inversor, lo que implica tanto conocer bien el background del interlocutor como ser 100% transparente y manejar todos los KPIs y detalles sobre la propia empresa al dedillo.

2) Qué no hacer en ningún caso: tan importante es saber qué hacer como saber qué no hacer. En este último sentido, apuntaba Jason dos grandes errores a evitar: por un lado, no estar preparado (tanto respecto a uno mismo y a su empresa como respecto al VC con el que se va a hablar); por otro, pasarse de autoconfianza llegando a la arrogancia (evitar cualquier sensación de entitlement).

3) Inversores y área geográfica: aunque el approach es diferente en cada fondo, Jason opina que “el antiguo modelo de ser un inversor en tu ciudad ya no es tal”, de manera que hay fondos que invierten más allá de sus fronteras geográficas. Echando un vistazo al perfil de cada fondo y a su portfolio de participadas resulta relativamente fácil hacerse una idea de si siquiera merece la pena contactarle en vista de su ámbito geográfico de inversión.

4) Discutiendo la valoración: es un tema siempre sensible y recurrente y la práctica varía según los fondos. En Foundry Group no discuten demasiado sobre esto y tratan siempre de llegar muy cerca de su mejor oferta desde el primer minuto de conversaciones.  Yo siempre recordaré lo que me dijo Federico Antoni, co-fundador de ALL VP,  fondo líder de América Latina: más allá de la cifra que uno tenga en mente, “tu empresa vale lo que el mercado diga que vale”. En otras palabras, de nada sirve un poner un numerito en tu deck.

5)  Negociando un term sheet: aquí  igualmente variará en cada caso, pero Foundry Group publica en su web un montón de información sobre term sheets – interesante verlo – y sólo negocia option pool, puestos en el consejo y valoración.

6)  La importancia de las aceleradoras: en opinión de Jason, son un player importante para los VCs porque con su selección y aceleración de empresas reducen algo el riesgo para los inversores y dan mayor credibilidad a los proyectos. De manera que si existe la opción de entrar en una, más allá de lo que aporte (indica Jason que es clave mirar su track record, red de mentores, dinero levantado por sus empresas seleccionadas a la hora de elegir), puede facilitar procesos futuros con fondos. Startupexplore publicó hace poco una referencia sobre las que considera mejores en España.

Por último, me llamó poderosamente la atención que Jason indicó que “ser el CEO de una startup es el trabajo más solitario del mundo” y que por eso resulta fundamental que un VC no solo aporte dinero sino que sea capaz de “estar ahí para el fundador y para escuchar sus problemas”. Es por ello que considera fundamental que un CEO sea resiliente, tenga estabilidad emocional y sea capaz de celebrar sus victorias.

Hasta la próxima.

Startup fundraising - some simple, yet practical, lessons (I)

Over the last few months I have been working on fundraising. It is a challenging process that takes time, effort and organization. At this point I can share some piece of advice based on my own experiences which will hopefully help entrepreneurs and/or startups going through this process for the first time.

There is a lot of thorough literature out there on this topic, which has been contributed by people way more experienced than I am and who for sure have many more war stories than I do. My goal is not to provide the definitive fundraising guide but to simplify things a little and just provide some easy steps for those who get involved in this process for the first time or so. These are a few:

(1) Invest time in research: there are hundreds of investors out there and each one of them is different.  Put in some good prep time to figure out who you can contact as a potential investor in your venture. Some things to look at are:

• investment stage: angel investors and investment clubs tend to focus on very early-stage investments (ie. seed), while venture capital funds range from seed stage to early, growth and later stage - follow the letters typically attached to post-seed financing rounds in which they have participated (A, B, C, etc... - moving along the alphabet means later stage);
• sector focus: venture capital investors typically target different sectors but that does not mean that everyone targets everything. Do not waste time and energy approaching those funds whose investment strategy lies outside of the sector where your startup operates; 
• geographic focus: make sure the investors you target typically fund companies from your continent / region / country;
• business model: leaving geography and vertical aside, some investors primarily or exclusively focus on specific business models. For instance, marketplaces are really hot these days. 
• who does what: funds' websites typically provide information on the team members, their backgrounds and areas of expertise (but not necessarily their respective emails). Identify who in each team is potentially best suited re: your company;
• Crunchbase is your best friend: it is the best free database out there to research for investors and to identify rather quickly - do not forget to check investors' websites too - who can be a potential good fir for you

(2) Get introductions from your network: VCs, in particular the most reputed ones, receive countless pitches, so being able to stand out from the crowd to get their attention is critical. You will hardly succeed if you go through their general "info@vc.com" inbox. Analyze your network (e.g. LinkedIn) and ask friends, colleagues, fellow startups and other contacts to make an introduction for you; this will certainly not guarantee any funding but it will at least give your pitch a better chance to be read.  Plus it may help that friend of yours to score a point with the VC if the latter decides to fund your project.

In the absence of an introduction, find ways to avoid the general inbox. Look for the right person's email (see last bullet above), reach out via Linkedin or Angelist, etc...

(3) Try to build rapport and credibility from the outset: you are not going to be given many opportunities (most likely you will just have one shot) to get any given investor's attention. Making a good impression from minute 1 may give you the chance to start a conversation. On the contrary, a bad first impression will shut the door in your face. Yet obvious, these are some things to take into consideration:

• avoid typos, both in your communications and in the pitch deck;
• write an effective email (in particular if you have not been able to secure an introduction): in addition to some general guidelines like these, try to build a connection (e.g. referring to the addressee's past investments or industry focus, following up from a previous event where you met) with your counterpart and do your best to capture her interest (e.g. the "magic" your product is bringing to the market, any awards or competitions your startup may have won);
• be professional in everything that you do: reply promptly, follow up timely, etc.

(4) Organize yourself: unless you are operating in a very niche space (in terms of sector and/or geography), the research mentioned in (1) above may result in multiple potential leads. This means that you are going to be communicating with a lot of people/organizations and that the flow of information (who and when you have contacted, outcomes from calls/email exchanges, follow up actions, contact details, etc.)  will be very significant. You may think that your amazing memory will be able to retain everything clearly, but that is wrong. Find ways - a CRM, spreadsheets, organization tools like Redbooth etc. - to keep your information organized; otherwise you will be wasting the precious time that you need for a whole lot of other things.


In subsequent chapters I will be touching on a number of other aspects to be accounted for during the fundraising process. But I hope this helps for the time being.