Feed aggregator

Event Driven Growth

A VC - April 23, 2020 - 7:23pm

I realize that most businesses are suffering greatly in this pandemic. Many have been shut completely.

But there are some that are experiencing the opposite situation. They have a growth spurt as a result of this moment. Businesses in food delivery, e-commerce, online education, telehealth, remote work, and cloud infrastructure are examples of such situations.

I’ve seen event driven growth spurts over the years. A plane lands in the Hudson and everyone heads to Twitter to see it. A competitor is shut down and everyone shows up on your door. Crypto gets hot and everyone wants in on the action. That sort of thing.

And I’ve been talking to leaders who are experiencing this and wondering how to model out what happens when and if things return to normal.

Each situation is different but a framework I like is to take your pre-event baseline, your event driven peak, and assume you will give up half of the delta when things return to normal and that will be your new baseline.

That won’t be right of course. It’s a model. You can revise as real data comes in.

But what it suggests is that not all of your new customers will stick around. But some will. And you will have a new and higher baseline. That has been true of almost every event driven growth spurt I have seen in my career.


Albert Wenger — May 2, 2020
COVID19 and the Decentralization of Money

Categories: Blog articles

My latest article in Medium

Beyond Money - April 22, 2020 - 12:02pm

The global money system: not the kind of normal we should get back to describes the urgency, and the opportunity, of ushering in a new, more equitable and sustainable economy based on the deployment of the innovative mechanisms of exchange and finance that I have long advocated. We need to ask ourselves what it is that keeps us on the treadmill. We try to get ahead but so often we end up simply standing still or falling farther behind. We are all chasing after that thing that everyone demands from us–money. The problem is that there is never enough money in the right places to fairly distribute the vast amount of wealth that the economy produces. What if we could all stop chasing after money? Money scarcity is an artifact of the interest-based, debt-money regime. Better means of exchange are available; we simply need to organize and use them.

Categories: Blog articles

The Duolingo English Test

A VC - April 22, 2020 - 8:26am

I wrote about our portfolio company Duolingo’s English Proficiency Test back in August of last year. I have always loved the idea that a company that helps people learn a language can also help people prove their fluency in a language. It is two sides of the same coin.

But the road to success with the English Proficiency Test has been hard. The “incumbent provider” of English proficiency tests, Test Of English As A Foreign Language (aka TOEFL), has had all of the companies and universities who accept it locked up for many years. And if you are required to certify with TOEFL, well then you take TOEFL.

The Duolingo English Test is and has always been a way better product than TOEFL. But in some markets, incumbency matters more than better. One of the primary benefits of the Duolingo English Test is you take it at home on your computer versus having to go to a proctored location. It costs less ($49 vs $205). And the test takes one hour vs three hours. And yet, it has been hard to crack into this market.

And then the pandemic hit. No more in-person testing. As the international higher education publication PIE News puts it:

With the suspension of traditional English proficiency tests in countries most affected by the coronavirus, a wave of US institutions are now accepting the results of the Duolingo English Test, either as stand-alone proof or as a supplement to other measures of English-language proficiency.


Duolingo’s co-founder and CEO, Luis von Ahn, told me this in an email yesterday:

1. The number of tests we administer per day has gone up 10x!

2. 500 new university programs have begun accepting the Duolingo English Test in the last 8 weeks (we had 1,000 before this). 

3. Both TOEFL and IELTS, after spending a lot of time saying that online tests were no good, now have online options.

So now the market is open to competition and the best product can win. I’m betting on Duolingo (and have been since we made our seed investment in the company in 2012).


Albert Wenger — May 2, 2020
COVID19 and the Decentralization of Money

Categories: Blog articles

The AVC Cap Table Template

A VC - April 21, 2020 - 7:07am

I woke up to this tweet this morning:

@fredwilson someone has hijacked your cap table link in this post – it now goes out to some random company rather than your template https://t.co/UzzIWcAtob

— John Henderson (@johnhenderson) April 21, 2020

I went to that blog post and clicked on the link and sure enough someone had swapped out my cap table template from 2011 with their own cap table. I am not entirely sure how that happened and for how long that has been the case, but I was not going to let that stand.

So I went to my google drive and searched and found the cap table that I had built for that post back in 2011, made a copy, made it public on the web but view only, and fixed the link.


If you want to see a cap table and waterfall template in the style that I have become accustomed to over the years, here it is. Hopefully, nobody will hack it again. I will be super careful not to permission anyone to have edit capabilities (which is what I think I may have done accidentally).


Albert Wenger — May 2, 2020
COVID19 and the Decentralization of Money

Categories: Blog articles

Still Open For Business

A VC - April 20, 2020 - 3:53pm

I wrote a blog post on March 12th called Open For Business and thought I would return to the topic.

If you search for “vc open for business” on Twitter, you will see almost universal scorn for the idea that VCs are open for business right now.

But our experience doesn’t match that scorn. Since writing that post, we have watched a bunch of our portfolio companies close financings, some on the same terms as provided before the pandemic and some on slightly adjusted terms. We have mostly seen VC firms live up to the commitments they made pre-pandemic and in the cases where terms changed, it has not been not gratuitous.

On our side, we have signed three or four term sheets since I wrote that post, closed on a few of them already, are currently engaged in several processes.

We have had to step up to the plate in a few situations and provide interim financing, and we are certainly working very closely with our existing portfolio companies during this challenging time for many of them. But our focus has not moved dramatically away from looking at and investing in new companies and we don’t see a dramatic change in that regard among many of our peers in the venture community.

David Kelnar sent me a blog post he wrote addressing some of these trends this morning and I saw this chart in it.

I don’t think new investment activity has shrunk from 40% of the industry’s time to just above 20%. From what I see, it has shrunk a bit, but not cut in half.

There certainly are funds who are focused on sectors that have taken a bath in the pandemic and in those cases it is natural and appropriate for those funds to be more focused on their portfolios. But I don’t see that across the entire VC landscape.

It is always easy to talk yourself into the idea that the door is currently shut for you. But before you do that, I suggest you knock on it. It may in fact be open.


Albert Wenger — May 1, 2020
No End of Computer History (Yet)

Categories: Blog articles

A Conversation About the Dysfunctions of Money, and the Need for Decentralized Exchange Alternatives

Beyond Money - April 19, 2020 - 2:19pm

This conversation, sponsored by the Praxis Peace Institute, is Episode 8 in our podcast series. It was recorded on April 10, 2020 and covers such critical questions as:

  • What is the essence of money?
  • What are the functions of money?
  • Where does money come from?
  • How does money enter the economy?
  • Who controls the issuance and flow of money?
  • Why does total debt in the world keep growing?
  • Is the system of money, banking, and finance stable, fair, sustainable?
  • Are there better ways to “do” money?
  • Why have local currencies not been more successful?
  • Are there any success stories?
  • Is there a “magic formula” for making an alternative money system work?

It continues with a discussion of the history of local currency efforts in Sonoma County, California and a description of straight forward approaches to creating local liquidity that is independent of banks and conventional money.


Categories: Blog articles

Video Of The Week: Stand With Small

A VC - April 18, 2020 - 10:11am

You may have seen this short advertisement called Always Open on television over the last few days.

It is part of a larger campaign called Stand With Small that Etsy (where I am Chairman and a large stockholder) is running right now to encourage everyone to support small businesses during this downturn.

This 2 1/2 minute video explains the idea in more detail:

Categories: Blog articles

Funding Friday: NYC Covid Fund

A VC - April 17, 2020 - 7:24am

We continue to be concerned about the most vulnerable among us and that is where we want to focus our giving right now.

To that end, Give Directly has a NYC Covid Fund that will give funds directly to people. Specifically:

GiveDirectly is delivering cash to families enrolled in SNAP (a federal nutrition assistance program) and living in the local ZIP codes most affected by COVID-19. Most recipients are single mothers. Each will receive $1K.


I made a personal donation to this today and I know of a number of other significant contributions to this fund by others.

If you want to support it, you can do so here.

Categories: Blog articles

In Real Life

A VC - April 16, 2020 - 6:55am

We call it IRL “In Real Life” in the tech sector. IRL is the opposite of the virtual reality/online worlds that we have been reading about in science fiction and slowly building over the past three decades.

I have heard a number of people assert that this pandemic, when we are staying home and working, learning, and playing online, will rapidly increase our comfort with and usage of the virtual world.

I beg to differ. I think this pandemic is showing all of us how much we crave being in real life.

After five weeks of total and complete self isolation in our home, the Gotham Gal and I started inviting another couple over for a socially distant cocktail this week. They come and go via our driveway, we sit in the back yard, separated by ten feet. I serve drinks in latex gloves. We talk. After an hour or two, they depart the same way and we wash everything up in warm soapy water and then have dinner back in our self isolation.

It has made a big difference to our frame of mind.

In person social interaction is the core of being human and I think this pandemic is reminding all of us how vitally important that is.

The tech sector will continue to build virtual worlds and online experiences. We will continue to use them, some more than others. They are valuable, efficient, convenient, and entertaining. But they can not and will not replace in real life experiences. This pandemic has shown me that in spades.


Albert Wenger — Apr 18, 2020
A Plan for Rapidly Ramping COVID19 Testing

Categories: Blog articles

Best Anonymous VPN Will Help You Hide Online

nuance intelligence - November 23, 2015 - 1:53pm

You have probably gotten used to the general visibility and exposure of the internet world. You communicate freely with your friends on social media, research on current events and important items that you come across. People you don’t know may even have approached you with a post or inquiry. Certainly, being in the “public eye” has its advantages.

The Need for Invisibility

best secret vpn

Sometimes, there are certain aspects of your life, or your work that needs some sort of invisibility cloak. Take for instance, launching a personal blog or website. While preparations are ongoing, you focus on ensuring that your products and services remain hidden for public view – after all, this is part of your marketing program to come out with a bang. Online viewers are more likely to appreciate something that just popped out of nowhere, than view bits and pieces before the full unveiling.

You can be a game developer, and pooling general and technical data needs to be something that must be kept under wraps, until the appointed time wherein you can show the whole internet world about what you have created. You can be a business owner or an employee, and needs a secure connection in order to access company data over the public internet.

Read more useful info about vpn for anonymity on the below URLs Too:


Going incognito in the public eye

This is where virtual network services come in. A Virtual Private Network (VPN) is your own unique pathway in order to achieve invisibility and secure your details while working online. It is an application or service that helps provide you with a cloak to put on your activities while using the internet. VPN provides a user with a unique IP address that can help dissuade traces, and ensures that you remain invisible to the other internet users when dealing with important or sensitive data.

With the advantages of the internet, there are still times that what you are doing does not need to be under public scrutiny. It can be to protect an online study, or in the downloading and uploading of personal and sensitive company information.

An anonymity vpn benefit is an application that you need to include in your dossier of online tools. A networking vpn is designed to provide you with the invisibility that you need in order to secure your details. The best of vpn utility are easily accessed and found on the internet. Several types and applications are available – those that are used in a professional capacity and focuses on security, and those that provide best virtual secured network services for torrenting and transmitting of data.…

Categories: Blog articles

Evaluating the Right Chef And Step Into This Article To Hire Personal Chef

nuance intelligence - October 22, 2015 - 7:54am

Hiring the right personal chef is a big challenge to all people, especially that there is a lot of them that they can find in the market. Most of the personal chefs that you can hire may have their own skills for you to know and consider for your needs and preferences.

Hire Personal Chef  At  www.ANGIESSECRETGARDEN.com– there are some things that you have to check to have assurances on the services that they will provide to you. In this article, you will be guided on the things you have to consider when you hire a chef in your own home.

choose the best cook

A Quick Checklist

In order for you to know the things that you have to check on the personal chef that you will hire, there is a quick checklist that you can follow. Check the rundown below to have a better idea:

check list to pick the right personal chef

Long Term Experience – before you hire a chef for a dinner party, you have to check first if he has enough experience in this field. This is really important as you would not want to hire someone that does not have any idea on the things that he has to do for you.

Knowledge in Food Safety and Sanity – food poisoning is starting to become really common in the market right now and it is the last thing you want to experience. So, make sure that the personal chefs you will hire do know how to keep the food safe and clean.

Flexible Time and Schedule – there should also be a very flexible time and schedule from the chef especially if you will need their services during the weekends or even during the holiday season.

Can Cook Any Kind of Food – there are times that you would like to ask the chef to cook the food you are craving for and with that, you have to make sure that he do know how cook any kind of food especially your favorite ones.

Prepare Meals on Time – the chef should also need to prepare the meals on time. This is really important, especially if you will hire them for special occasions wherein there will be guests that you do not want to experience delays with the foods.

If this article helps you out in evaluating and finding the right personal chef for you, then we would be glad to hear your story. Please let us know about it and leave your message in our comment box below.…

Categories: Blog articles

Top 10 Places to Visit in the World for Beach Lovers

nuance intelligence - October 21, 2015 - 4:31am

Are you thinking where could be the best beach for you to visit? We provided a list of the UpandNet.Com top 10 places to visit in the world that are all meant for beach lovers like you. Check it out and know what you are looking for.

top 10 places

  • Seychelles

The color pale pink sands of the Anse Source d’Argent is really the most common reason why many beach lovers would like to visit and go in this place. One should not miss the chance of enjoying the beauty of it.

  • Maldives

Whether you want to spend most of your day with the fishes or just go and do some water activities, the Maldives could be the one you are looking for. Almost every part of the place shouts for eternal beauty that is being appreciated by many tourists around the world.

  • Bora Bora

The place is considered to be a magical island and it could be the best place for most couples because of the intimate hotels, isolated beaches and total quiet atmosphere that could give you peace and love at the same time.

  • The Hamptons

We all know that New York City is one of the most modern cities in the world and with the Hamptons you can surely enjoy the prettiest beaches along the Long Island with the unspoiled and well preserved shoreline as well.

  • Lanikai Beach

There are a lot of palm trees swaying along the white beach, the sparkling sand, the endless sunshine and the lush tropical plants which makes the Lanikai Beach to be part of the top places to go in the world.

  • Nantucket Island

The waters in the area are extremely calm and there are a lot of sands that you can use for castle building and sunbathing!
Fraser Island

This is part of the world’s heritage that you should really check out and visit.

  • St. Bart’s

The place totally stands out because of the relaxation that you can have from it.

  • Langkawi

As translated, this is the land of one’s wishes and it is a reputed refuge for the pirates which could be perfect for all travelers looking for escape.

  • Kauna’oa Bay

The perfect blue ocean and white sand waits for all beach lovers in the Kauna’oa Bay!

Do you agree with our list? Do you have some suggestions? Don’t hesitate to share it with us.…

Categories: Blog articles

Fashion Guest Post Blogs How to Find the Right Website Read to Learn More

nuance intelligence - October 20, 2015 - 8:47am

taking guest post on your fashion blog siteWhen it comes to looking for the best cheap guest posting service, it would take a pretty good amount of research to succeed. However, it is possible and that is for sure. Good thing, this is possible to be undertaken these days because there are posting services which are natural in nature. They can provide the needed help in here. What can be expected from the service anyway? For sure, upon checking for the said service provider, authoritative blogs will surely be enjoyed. The links from the mentioned can be interesting enough. They are only produced by experts.

Buying Guest Posts

There are tons of considerations when it comes to those who want to buy fashion guest post. This should be realized prior to engaging with anyone. High quality service should always be the goal. Natural guest posting services are meant to promote the website to more clients. This has to be achieved. Google turned out be ruthless and for those who want to protect their website from the wrath and faith of Google Penguin, and then link profile has to be strengthened for whatever it’s worth. Private networks are rarely encouraged though.

The use of black-hat SEO tactics is not acceptable. The idea is always to adopt natural approach. With the best research, blog posting services can be enjoyed. That is for sure! It is not impossible considering the fact that there are always authority websites.

As what has been said over and over, it will help a lot to conduct a research. This is always the answer for – the best fashion guest posting site for you. Selecting the best option is always available for tons of digital business owners around the place.

The same is also true for marketing agencies almost available for everyone. The experts in the industry will definitely be able to work on this. This is for sure! Experts in the industry will always come to a scale of high-grade and quality creation. This should be an effective way to reach and then make use of a powerful link building later on.

Nothing will be safer than going for agencies which have been working on high standards ever since. Learning about this is feasible by reading reviews and the like. Paying a meticulous attention to details and even to client service should be the answer too.

Enjoying weekly reporting must be undertaken. This is going to support responses as time goes by. That is for sure! Take note of this!…

Categories: Blog articles

Buy Targeted Traffic To Benefits When Having a Business Online

nuance intelligence - October 17, 2015 - 12:18pm

buy targeted traffic to get more website visitors

Online marketing can be the best way for you to start a business. If you will compare the way people put up a business before on how people do it these days, for sure you would be more favorable having a business online. It doesn’t matter if you are rich or poor because as long as you are determined to manage an online business and share what you have to people then starting an online business will always be possible.

If you are planning to take your chance succeeding online, then you have to learn first how to establish your online presence. This is when web traffic is needed in order for you to make a sale.

Though you can try using social media just like what I did, it would be better for you to go for an assured way. So to help you out you can buy quality website traffic online in order for you to save time, effort, and money,

For people who are having doubts whether to invest their money in an online business, I will share these benefits for you to realize how it can be advantageous to your finances if you can successfully make remarkable sales.

Reasons of Why You Have to Try Marketing Online

1. You don’t need to come up with a large amount of budget to get started.
2. You have the control with your time. This is why even if you are employed or have to deal with other tasks it is still possible for you to have a business online.
3. You can manage your business anywhere you are as long as you have a device and an internet connection to go online.
4. You can experience a constant amount of profits without exerting much effort or hiring employees.

web based business

Read More: Best website for buying targeted traffic, it would be easier for your website to appear in search engine results despite of having lots of competitors. You have to look for a reputable provider that can guarantee you quality services. You can avail cheap website traffic that will suit your budget. As long as you find the service effective to your website then you can start applying it.

It is also of a great advantage if you know something about web traffic analysis. This will give you an idea if your website is improving or not. There are various tools that can help you check the traffic that your website receives. If ever that you have an idea about the best tool that people can use to monitor web traffic then you can leave your comments.

You can also share useful tips to boost up website traffic easily.…

Categories: Blog articles

Why Do You Need To Buy A Designer Dog Collar

nuance intelligence - September 22, 2015 - 10:27am

Having a dog in your life can be one of the good decisions you can ever make. Though there are people who are afraid of dogs, experiencing the good side of these pets will surely make you realize that they are worth taking care of. Instead of suffering from depression, why not look for ways on how you can be able to make yourself happy. By playing with a dog, you can keep away from the pressure you experience at work and forget your problems even for a while.

Other Things That Your Dog Might Need

Aside from buying a feeding bowl and dog foods, you also have to look for collars and dog leashes for sale. There are places where in dogs are required to wear collars and leashes. This is to give the owner the authority to stop their dogs from making unwanted attacks from other people. Surely you are aware about the danger that people can get when bitten by a dog so as much as possible dog owners know how to handle their pets.

You can also accentuate your dogs with funny dog collars. This can somehow put a smile to other people especially if your dog is really cute and cuddly. There are factors that you have to consider when buying dog collars like for example the size, the material it is made of, the design, and of course the price. Putting collars on your dogs doesn’t mean that you can treat them unreasonably. Remember that they also have feelings and they seem to understand what is on your mind.

If you have set a budget for your dogs then you can buy a designer dog collar (http://www.bitchnewyork.com/) that could easily get the attention of the crowd. This is suitable if your dog will join a show that can help your pet win the contest. You can add small dog accessories that you can buy online instead of going to a pet store. You can even save money if you will prefer making a purchase in online pet store.

If your dog is big then looking for dog leashes for sale is also necessary so that you can bring your dog for a walk. There are dog owners who would always want to bring with them their pets where in dog leash can be very useful particularly if you train your dog and teach him various tricks.…

Categories: Blog articles

Play Girl Games On The Internet With Your Children

nuance intelligence - September 20, 2015 - 12:30pm
Great way to spend your bonding time

Girls often idolize their mothers not just the way she talks or moves but also with the way she fixes herself like the clothes she wears and the way she puts on her makeup. Most young girls often play with their mother’s makeup kits, dresses and shoes and at times they would wear their mother’s belongings and paint their faces with her makeup as they imitate their mother’s movements including the smacking of the lips.

It cannot be helped as daughters are always on their mom’s side and they see her as their role model so it is just normal for them to mimic their mothers. This is the reason why a lot of girl fashion games are popular on the internet. Many girl players can relate to it and so these types of games didn’t have difficulty to penetrate its target market and continue to hook players to play it.

Many of these girl games can easily be played online for free. Young girls, teenagers and even adults may choose from several of them which topic range from:

  • Love
  • Makeover
  • Puzzle
  • Cooking
  • Dress up
  • Action
  • Sports and skills and many other games which are exclusively for girls which they will definitely like

It is fun if mothers will play girl games with their daughters as it can be their bonding moments. There are makeover games which characters are popular celebrities like the stars of Twilight Saga Edward Cullen and Ashley Greene. There is also Jennifer Lopez, Keira Knightley, Hilary Duff and Kim Kardashian. Some games even have images which seem real so it’s like you are really putting makeup on them.

fashion girl games only

There is also the all-time favorite character of girls, Barbie and her partner Ken. Girls can help her to choose her wedding dress, help her make pizza, and help in building her family.

Girls can have so much fun with these games as they will learn to mix and match colors and it will also help them improve their sense of fashion and creativity as they learn to choose which dress would fit the occasion.

makeover barbie girl games

Most mothers can relate to their daughters with regard to these games because they have also experienced playing with their makeups and at times their mom’s shoes and clothes.

It’s like reminiscing their youth while seeing their young daughters at play.

Are you a mother of  girls? What do you say about them playing these games for young girls online?

You may tell us how you feel about it by providing your comment below.…

Categories: Blog articles

All About Us | Nuanceintelligence

nuance intelligence - August 19, 2015 - 5:08am



Andrew profile

Who Am I? Andrew Law

What I’m doing?  Software Engineer

Where I’m living?  Dallas, Texas

When I start Blogging?  2012 until Now

Why I start Blogging?  Interested to provide more tips about everthing..









Who Am I ?  Sam Anderson

What I’m doing?  Professional photographer

Where I’m living? Dallas, Texas

When I start Blogging?  2013 until Now

Why I start Blogging?   Interested to provide more tips about photographs etc…..





Hey Folks, this is Andrew. Nowadays peoples sharing everything in internet through blog, social media etc… Sam is my friend since We were kids and still now we are close friends. We Decided to open a Blog Which is http://nuanceintelligence.com  we are going to share and give more tips about everything as much as possible. So please give us a support. Thank You So much.…

Categories: Blog articles

Will the Next Unicorn be a Distributed Autonomous Organization?

The Emergent Fool - July 12, 2015 - 1:28pm

With the recent talk of reddit being cannibalized by bitcoin technology, I thought it a good time to post something I’ve been thinking about for a while. Could a completely decentralized startup one day rival the likes of Google, Facebook and Amazon?

Within the bitcoin world there’s a common understanding that the most valuable thing about bitcoin is not the monetary currency but the underlying “blockchain” technology that the bitcoin currency runs on. For those unfamiliar, you can check out three heavily-funded ventures creating infrastructure that would enable anyone to program applications on the blockchain that go way beyond monetary currencies: Ethereum,Swarm and Blockstream.

One such application is what’s known as a “Distributed Autonomous Organization,” which is an organization like a corporation, government or NGO, but which has no central leadership and uses internet technologies to organize and function. Examples of DAOs that you are familiar with include open-source software systems like Linux; terrorist organizations like Al Qaeda; communities like Anonymous; and of course, the Internet itself.

The logical question it seems to me is what will it take for the first Silicon Valley style startup to appear that provides a truly useful product or service to the marketplace, and makes its founders and investors gobs of money, but which is truly distributed.

What follows here is an analysis and thought experiment on how the next unicorn could be a DAO.

The Central Hurdle

In the U.S. today, the main hurdle for any startup is access to capital. Even the great Mark Zuckerberg took several years and significant effort to raise enough venture capital to expand beyond the tipping point and crush Fox/MySpace. Imagine if Zuck, instead of pitching a handful of gatekeepers in Silicon Valley, could have sold just $100 worth of stock to each of the first 100,000 Facebook users? Facebook would have been able to bypass the VCs and have $10 Million in working capital. Not to mention 100,000 new evangelists to expand the network — each of which would go on to become a college-educated millionaire today, ready to revitalize the economy and invest in the next Facebook.

If this seems far-fetched, consider that Kickstarter and IndieGogo have crowdfunded several $10+ Million campaigns to launch startups. The most successfully crowdfunded startup to date is a video game company called Star Citizen, which has raised $85 Million from almost a million financial backers as of today. And all of these campaigns were done simply by offering products and other rewards, no financial upside for backers.

While donation and rewards crowdfunding sites have proven that the public appetite for funding great ideas is latent and massive, there is the beginnings of a backlash towards for-profit endeavors that make founders rich while leave backers holding the bag full of product (see Oculus and Spike Lee for two high-profile examples).

So why don’t startups like Oculus offer stock as a reward for its early backers? The short answer is that it’s illegal to make such an offer in the U.S. unless the backer is an Accredited Investor — someone worth over $1,000,000 not including their home.

While non-accredited investment crowdfunding is in the process of becoming legal and regulated by the Securities Exchange Commission (SEC), that process has been stalled for over 3 years. And it’s likely to take  several more years before this is the default way startups attract investment.

In the meantime, many startups are turning to platforms like Crowdfunder* where they can crowdfund invesetment from Accredited Investors. A poignant example is Neil Young’s startup, PonoMusic, which attracted over $6 Million in investment interest in the first 48 hours of their campaign on Crowdfunder.

But this is just the tip of the iceberg in terms of unmet demand, and it doesn’t address the $20 Trillion of investment capital in the U.S. public stock markets. The vast majority of U.S. investors — a full 93% — are not accredited and never will be.

On the flip side, there are 540,000 new businesses started each month in the U.S. alone. Venture capitalists and angel investors combined invest under $100 Billion per year. And while that may seem like a lot, it’s just 0.3% of U.S. long-term investment capital and 0.02% of worldwide long-term investment capital. Once you compare the 9% historical returns in public stocks to the 28% historical returns in startup stocks, you begin to see the magnitude of the problem — and the opportunity for non-accredited investment crowdfunding.

Threading the Needle

One of the more fascinating aspects of Swarm and Ethereum is that they capitalized their idea by running a crowdfunding campaign to non-accredited investors. Each of these crowdfunders received a “reward” of virtual currency that has a lot of the same properties as stock, including voting rights and the potential for financial upside. And because of this, the SEC is taking a very close look at whether they have violated securities laws.

The founders of these two groups will argue that they have “threaded the needle” and successfully constructed an offering that has the desired properties of equity ownership while staying clear of selling unregistered securites. And while they may have a valid technical point, the SEC takes a practical stance rather than a technical one: if it looks like a duck, quacks like a duck and waddles like a duck….

The main litmus test the SEC employs in such cases is called the Howey Test, which asks whether there is “reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others” (for more details read here and here).

As a serial startup founder and prolific angel investor, I believe the Howey Test is not only simple and elegant, but also a good thing.  Over the course of the last 80 years, corporate structures and financial engineering of securities have served to limit the liability of investors and distance them from the source of their profits. This has been essential for the public markets to flourish, but in the startup world, it’s counterproductive.

As a founder, I’d much rather have an investor who provides value beyond their money; I want someone who is passionate about the business and will use their network, their expertise and their time to help the company grow.  And as a startup investor, I desire to have more visibility into and influence over the performance of my investment than typical equities contracts guarantee or anticipate. Again, think back to what would happen if the next Facebook or Uber could offer equity to their most ardent users and customers?

Threading the needle on securities regulations, especially for an undercapitalized startup, is fraught with unacceptable risk, in my opinion. Not only is the SEC hyper-sensitive to this sort of activity, it has nearly unlimited resources it can (and does) use to enforces its regulations. Each state also has an SEC-like agency with nuanced state-specific regulations that apply if anyone involved in a securities transaction happens to be in that state. I found this out first hand as an investor in an early equity crowdfunding site, which was forced to close because the State of California made a unilateral determination that what the company was doing wasn’t kosher. While company lawyers and investors disagreed, nobody was wiling to re-invest to fight the state’s decision, and we ran out of money quickly thereafter and had to shut down.

Rather than threading the needle, I believe there is a way for startups to raise investment from non-accredited investors today, and be fully compliant with all current securities laws and regulations. But until recent advances in both blockchain and crowdfunding technology, it hasn’t been practical.

My purpose in publishing the following is twofold:

  1. Provide a roadmap for pioneering entrepreneurs and their lawyers to unlock the buried treasure
  2. Alert regulators so they can be prepared to work with the pioneers

Here’s my warning for the pioneers: do not go off half-cocked; talk to several securities and corporate attorneys before you go down this path. And make sure they are confident that you are in the clear, and they are willing to defend you (without bankrupting you) in case there’s a fight with regulators.

And here’s my warning to regulators: trying to stop DAO activity is as foolish as banning the internet itself; given the financial incentives for both entrepreneurs and investors outlined above, DAOs that sell profit interest are inevitable, and will simply go offshore and underground if the climate is too restrictive. Given recent advances in blockchain anonymity and cryptography, there will be no way to identify who the principals are, let alone seize their virtual currency assets.

The Roadmap to Unstoppable DAOs

From here on out, I’m going to assume a layman’s working knowledge of blockchain technology, equity crowdfunding, and basic securities and corporate law.  You should also go to Ethereum.org, read what’s on the home page, watch the 10 minute video, and read the white paper. Note, that even if Ethereum is stillborn, or shut down somehow, these same advancements are being added to the Bitcoin blockchain (see Sidechains), which means the necessary technical infrastructure for DAOs is already unstoppable.

In order to function and thrive, a DAO must be “invisible” to government bodies which would seek to threaten its existence. Since the main hurdle is securities law, and since the SEC has pre-emption over the states, the key to DAOs is staying out of the crosshairs of the SEC. The SEC’s mission is in regulating the sale of securities, and protecting investors from securities fraud. But the SEC has no jurisdiction over entities or individuals that do not deal in securities.  If you’re selling hotcakes out of a food truck, you’re going to fall under many regulatory agencies’ purview, including FTC, FDA, DMV, various health departments and business administrations.  But unless your hotcakes are laced with company stock, you are a non-entity as far as the SEC is concerned.

While most startups are structured as C-Corps, S-Corps or LLCs, these are not the only options. In fact there are much older corporate structures better suited for startups, namely General Partnerships and Workers Cooperatives.  Rather than limiting investor control and liability like their newer counterparts, GPs and Co-ops blur the distinction between investor and founder.  And in so doing the presumption under law is that membership in a General Partnership or a Co-op is not a security.  Unless of course it fails the Howey Test.

So let’s talk about how to pass the Howey Test while allowing startups to raise capital from investors.  Since the Howey Test is to determine whether something is a security, we must reverse the logic of the test to “pass”.  For instance, if there’s no “reasonable expectation of profit”, there’s no security.  Similarly, if there is reasonable expectation of profit, but that profit is based on the investor’s own efforts, then it’s not a security either.

As a thought experiment, let’s imagine that you tell me you are starting a gold mining club and that for $100 you will sell me a membership that entitles me to mine for gold on your land and keep whatever I find.  You warn me that only one in a thousand people who do this full time for a year have found enough gold to make a profit, but the ones who do strike it rich.  Here’s a situation where there’s no reasonable expectation of profit. And, any profit that I might make is derived only through my own entrepreneurial and managerial efforts.  Clearly, membership in your mining club is not a security.

However, we don’t have to be so strict.  For instance, you could say that I have a 90% chance of making a profit, and as long as I’m doing my own mining, it’s not a security if you sell me the right to do so.  Or you could say profits are one-in-a-thousand, but that you have a mining rig that does all the work and randomly assigns any proceeds to members based on how much they paid for their membership (i.e. a $200 membership is twice as likely to get gold as a $100 membership). It should be noted that this probably would be considered an “illegal lottery” in most states, but the point here is that it’s not a security.

Since the exercise here is to solve for allowing anyone to invest in a startup, there’s always an expectation of profits.  Thus, we need to focus on whether this expectation comes “from the entrepreneurial or managerial efforts of others.”  Before I dive in though, it’s worth remembering that the whole reason we are even having this discussion is that prior to the the Securities Acts of 1933 & 1934 (and the formation of the SEC), stock market fraud was rampant.  Grandmothers in Kansas would regularly get fleeced out of their retirement nest egg by stock brokers in New York.  So the main thing you need to remember is that the SEC’s raison d’être is to protect investors from getting hurt.

Which means that to stay out of the SEC’s crosshairs, we need to prevent investors from getting hurt whenever they are expecting profits from the entrepreneurial or managerial efforts of others.  Let’s look at these elements in a bit more detail:

  • Financial Risk & Liability – By definition, if your paycheck is not at risk, it’s not entrepreneurial activity, it’s a salaried job. Thus to remain clear, there must be financial risk for both investor and the people doing the work at the startup.  And they must both bear the financial liability if there’s a loss.
  • Corporate Governance & Control – When the SEC takes action against a company for securities violations, they look for who’s making the decisions (governance) and who’s ultimately in control of the company.  If everyone is a decision maker— investors and employees alike — and no individual person can be identified as having more control than others, then there’s no security, regardless of the financial risk and liability.

Thus, we are looking for a way to organize and run a startup that distributes risk, liability, governance and control amongst its stakeholders such that, when the SEC comes looking, it only sees a group of individuals who have pooled their resources for mutual benefit, and who are not offering investment to anyone outside the group.

Programming Your First DAO

At this point you may be wondering if we are about to throw the baby out with the bathwater. In particular, how many people would want to invest significant sums of money into a startup and have to do a lot of work? Wouldn’t this be antithetical to the first rule of investing, which is to diversify (and thus not put too many resources into one basket)?

In the past, having distributed governance and control would indeed have required each investor to do significant amounts of “work”. But with the ability to automate and coordinate activity virtually, a Distributed Autonomous Organization need not require more labor from its investors than overseeing a startup investment does today. In fact, investing in DAOs has the potential to streamline investor engagement and allow investors to spend less actual time on more startups, leading to greater diversification and thus reduced financial risk.

What follows is a description of one possible DAO structure that accomplishes these goals and remains clear of securities violations (check with your lawyer first, I’m not one :-) There are many possible alternative structures that will work, some no doubt better and more efficient than the one I am proposing. This is simply to illustrate that it’s possible. The structure I will begin with is that of a General Partnership, and for clarity I will refer to the partnership as the Company, regardless of whether it is registered as such in any legal jurisdiction.

The structure proposed here is to be run on a system like Ethereum, where smart contracts, currency and financial flows are enforced in a distributed and autonomous fashion.

General Partners (GPs) – Any individual who has a financial stake in the Company (not including Charitable Beneficiaries) must be a General Partner. GPs — and only GPs — may also be Directors, Managers, Workers or Investors (see below). GPs must be individual human beings (not corporations, organizations, animals or technological agents such as software programs). GPs have the following rights and obligations:

  • Right to an equal portion of Dividends (see below)
  • Right to an equal vote on all voting matters
  • Eligibility to work for the Company for cash and/or equity (see Working Partners)
  • Equal responsibility and liability under the law for the Company’s decisions and actions in all jurisdictions it operates in plus all jurisdictions the GPs reside in
  • An obligation to indemnify all other GPs from legal actions and government sanctions arising from their role as a GP
  • All GPs are granted a single Share of Company equity upon becoming a GP, and may acquire more Shares via investing or working
  • Upon voluntary or forced removal as a GP, all Shares are relinquished back to the Company

Directing Partners (Directors)  – Directors serve the sole function of hiring/firing and compensating the Managers. Directors may not contemporaneously be Managers or Workers. Directors are elected by a majority vote of GPs once per quarter. Directors may not receive compensation of any form (except Dividends) while they are Directors. Think of them as jurors; they serve temporarily for the greater good, and they sacrifice accordingly.

Managing Partners (Managers) – While their main function is management of the Company and Workers, the Managers also set the strategic direction of the Company (relative to the Mission), and they hire, fire, and set compensation of the Workers (other than themselves, which is handled by Directors).

Working Partners (Workers) – A Workers is anyone who does work for the Company in exchange for compensation. In the eyes of many legal jurisdictions, there is a distinction between officers, employees, contractors, and advisors, but for the DAO these are all considered Workers.

Investing Partners (Investors) – An Investor is anyone who purchases Shares in the Company from the Company itself. Being an Investor does not affect one’s status as a GP, Director or Manager.

Charitable Beneficiaries (CBs) – Any organization or individual who receives cash donation from the Company without obligation in return. CBs may not be GPs.

Shares – The Company’s currency, which entitles holders to Royalties and Liquidity. Shares may only be held by GPs (who are referred to as Shareholders in such capacity).

Royalties – A percentage of revenues which is allotted for distribution to Shareholders on a pro-rata basis.

Liquidity – Shareholders may sell all but one share to the Company or other GPs through a transparent/fair marketplace at any time. Upon dissolution of the Company via acquisition, merger or IPO, all assets of the Company will be distributed to Shareholders pro-rata.

Revenue Waterfall – All revenues to the Company — including from sales, contracts, grants, prizes and investment returns — will be distributed in the following manner:

  1. Taxes: all accrued and potential estimated taxes are paid first
  2. Royalties to Shareholders: distributed pro-rata based on % of Shares held
  3. Salaries to Workers: as set by Managers (or Directors in case of Managers)
  4. Accounts Payable: as standard for any corporation
  5. Capital Investment: the Company may invest in assets to grow capital or hedge operational risk, as determined by the Managers
  6. Charitable Contributions to CBs: the Company may make charitable contributions as determined by vote of GPs
  7. Bonus Pool to GPs: all GPs except acting Directors participate
  8. Dividends to GPs: all GPs get an equal share

Company Formation – The Company is formed by a Genesis Raise that ratifies the Charter, which can only be changed later via supermajority vote of all GPs.

Company Charter 

  • The Mission: why the Company is being formed and what its ultimate goal is
  • Royalty Rate: % of undistributed revenues distributed to Shareholders
  • Charitable Contribution Range: minimum and maximum % of undistributed revenues to be donated
  • Bonus Pool Size: % of undistributed revenue distributed to GPs
  • Initial Directors: an odd number of Directors, along with names of individuals willing to serve the first quarter
  • Initial Managers: one or more individuals who will serve at the pleasure of the Directors
  • The Genesis Raise: the number of Shares to be sold (in BTC) during an initial capital raise and a timeframe during which it will take place. Note that:

• The first share purchased by any individual comes with GP Membership

• Proceeds from the Genesis Raise are not included as Revenue

Becoming a GP - After the Genesis Raise, if there are Shares left over, or new Shares issued, then anyone who is eligible (see above) can purchase their first Share, thereby becoming a GP.

Voting – Voting matters will be programmed into the DAO and automatically administered. In addition a majority of Shares may call a referendum at anytime for any reason. Here is a non-exhaustive list of voting matters and their requirements to carry:

  • Referendum: simple majority
  • Issuance of New Shares: simple majority
  • Quarterly Election of Directors: simple majority
  • Modification of Company Charter: supermajority
  • Removing GPs: supermajority
  • Acquisition / Dissolution / Change of Control / IPO: unanimity

While the above is not meant to be complete, it should give anyone a good headstart. Note that the standard way a company’s operating agreement or articles of incorporation is enforced is through legal contracts as interpreted by officers of the company and attorneys. With DAOs, the vast majority is programmed into the blockchain and thus immune from interpretation, tampering or influence. Still there will always be elements that require human oversight and discretion. The exercise above is designed to minimize human involvement, and where necessary to distribute both the effort and control in a way that is both mission-aligned and free from securities violations.

Further Reading:

* full disclosure, I’m a principal Crowdfunder.

Related posts:

  1. Why Crowdfunding Changes Everything
  2. Radical Transparency
  3. 25 Important Facts About the Startup Economy

Categories: Blog articles

Plans for the Workshops - An Online Workshop Deck Virtual Library

Angel Capital Summit - December 7, 2010 - 3:51pm
JWconsulting Square Logo.jpg

Thank you to all of those that attended my presentation yesterday, I hope everyone walked away with a little more information than they had before the workshop. There were a few presentations that I was not able to see because of the timing and I thought it would be a great idea to post all the decks or even something more if the presenter chooses.

One side note... I would like to apologize to anyone that went to my session thinking that I was going to hand 10,000 contacts. I wish it was that easy but as many things in business, there is some work involved in lead generation.

Please Click below for the Database Marketing Presentation:

This is what I did and I can do it for you...

For ease of use and viewing enjoyment, I turned my presentation into a movie and put some mood music behind it. If you don't like mood music you can certainly turn off the volume, the big idea is the movie part. I have also attached a couple worksheets one of which helps define a company's target audience and the other asks some thought provoking questions about current processes.

As I stated earlier, the point for me is to educate people on the power and effectiveness of using data to glean information, which feeds better decision-making. Click the picture below to open up pdf versions of the worksheets that you can print and fill out if interested.

Other Presenters...

If you would like to have your presentation turned into a video, let me know. I am planning to create a movie with a YouTube link that will go on either the ACS YouTube page or the ACS website. This way you can see what you might have missed and reference the information for future use. It would be nice to have a virtual classroom of workshop deck so let me know if you'd like me to post one for you.

Categories: Blog articles

Valuation is a tricky subject for early-stage entrepreneurs raising capital.

Angel Capital Summit - December 3, 2010 - 10:22am
Jim Nollsch.jpg

Valuation is a tricky subject for early-stage entrepreneurs raising capital. With a limited performance history of the business, how do you accurately determine valuation? For an early stage company, common metrics (such as multiples of earnings) can’t be applied because there often aren’t any earnings. The business plan and model will be adjusted as the company scales, so a group of peers can’t be used to benchmark, as the peers may change along with the model. So how do you manage the conversation around valuation?

At this stage valuation is important because it is the determinant of how much of your company you are willing to part with in exchange for an infusion of capital. Assuming that you are asking for the “right” amount of money (that’s a blog post in and of itself), determining the “right” amount of the company to part with involves a few factors.

Depending on just how early stage your deal is, expect to give up more the earlier you’re seeking capital. That is, if you have a napkin and some scribbles, you’ll be giving up a lot more than if you have a few enthusiastic beta customers. From a valuation perspective the logic fits: you’ve created value for those customers and that value is reflected in the price of your company.

Also, remember that, as an entrepreneur, you are looking for an investor who believes in you first, and your mission second. Investors place money on the jockeys, not the horse. So a strong personal relationship with the prospective investor is key.

Investors should have a meaningful stake in the company but is also be rewarded in parallel with the entrepreneur. If the entrepreneur is left with a limited share, then it puts the investor(s) at risk of the entrepreneur leaving the company—a situation that (presumably) nobody wants.

The best thing an entrepreneur can do to increase their chances of funding and improve their valuation is to focus on lowering the risk profile by executed on the business plan. Show the investors that you’ve actually accomplished what you set out to do. Bring in customers who can attest to the value of the product. Demonstrate how quickly product adoption can lead to revenue growth. These all will help your valuation and make you attractive to an prospective investor.
Ultimately, valuation for early stage companies is a negotiation exercise and requires a bit of haggling back and forth. When they come to agreement, we know they’ve arrived at the market value. How do we know? Because, hopefully, a deal was done.

Written by Jim Nollsch, partner at www.laylinepartners.com

Categories: Blog articles
Syndicate content