Distilling Venture Capital

Host Bill Griesinger brings an informed, unbiased and unique historical perspective to the venture capital and high-tech world. Drawing on over 20 years in venture finance, working with tech companies and venture capitalists, he offers an unfiltered and transparent view of the venture capital & high-tech universe.

EPISODE 029 – UNICORN MANIA, The Real Facts About Post-Money Valuation 04/17/2023

EPISODE 029 – UNICORN MANIA, The Real Facts About Post-Money Valuation UNICORN MANIA, The Real Facts About Post-Money Valuation Post-Money Valuation; The Facts It is absolutely NOT the market capitalization or market value of a tech unicorn company; PM Valuation completely ignores all the prices paid, preferences, and rights granted, for ALL prior rounds – a major flaw and a farce; Thus, a completely distorted picture of value is created by actually assuming that all of these past preferred rounds of equity, plus common, are all magically worth the same price as the round just completed. This is insanity; To make matters worse, The derivation of the PM Valuation is cloaked in secrecy – it´s a black box - you don´t get to see the calculation! Remember, from the Stanford Study, ALL 135 Unicorn companies evaluated were overvalued using the PM Valuation AND, 65 lose their Unicorn status! This is a ‘Houston-we-have-a-problem’ moment. If these statistics aren’t an indicator that something is terribly wrong with the PM Valuation...well…then you are in Unicorn land. A Unicorn Index Fund is a Sham Given the above facts, the concept of a Unicorn Index, then, is a sham based on this faulty method of valuation. The indexes, in fact, do not have visibility into the requisite information and data actually needed to return a market value or market capitalization (i.e., financial statements). That´s why they use the inappropriate and discredited PM Valuation and then try to sell it to you as some rigorous and proprietary methodology. Complete BS. Since these index funds have very limited information in these private companies (again, no fin. statements), they are trying to triangulate a valuation from incomplete information and back-of-the-envelope approach. It turns out, based on the research, the PM Valuation is a very bad proxy for determining value. It cannot even be considered a derivative of value. It’s far worse. At a minimum, a derivative security actually derives its underlying value from another asset or group of assets PM Valuation is far riskier and worse than a derivative because there are well-documented, glaring flaws in the methodology; that all prior rounds with different economics are suddenly worth the same as the last round. It’s messed up and it’s improper, as the Study indicates. In fact, let me let you in on a key piece of information, a key fact: I’ve known about the concept of PM valuation for more than 20 years, during my time as a venture debt lender. The PM valuation was never intended to be used for this purpose (trying to determine a market value for private companies). EXPLAIN: In 90% to 95% of all the deals, loans we did for VC-backed tech companies, they typically had to raise an additional round or two of capital before we were paid out on the loan. When they raised a new round, the Loan & Sec. Agr. required full reporting. And, Many times company mgt and investors would tell us the PM valuation after this round was X. We knew how it was calculated and always knew this was not the real market value for the company, b/c of all the terms and conditions of prior rounds of capital. It was always considered a rough, back of the envelope way to look at the company as a very rough approximation of perhaps its future potential value – but in no way did it represent its market value. The idea that index funds, the financial press, and the analytics companies have been trying, for years now, to use this as a representation of value is insane and it’s fraudulent. Btw, Why would anyone invest in an index fund that can´t provide investors with a true picture of value? Any index fund should be required, and investors should demand, full disclosure of the valuation methodology. One would think disclosing your valuation methodology would be a strength, a positive, to show investors you do have rigor in your analysis and determination of value. Transparency should be an asset. Instead, these so-called index funds use stealth because they don´t want you to know that they don´t really have visibility and the tools normally utilized to actually determine real market value for these private tech firms. Why the secrecy and black-box approach if the index funds are asking investors to pony-up vast sums of money to get exposure to private tech company deals? The risks of a private, early-stage technology company are already significantly high enough; and their performance is not proven nor is it disclosed. To gain exposure to this high-risk asset category via an index fund with a completely improper, bogus notion of value is insane. Stay Far Away from any Index of Unicorns So, let´s understand what is really going on here. The facts are these regarding any index comprised of so-called Unicorn tech companies. They possess none of the following key pieces of financial statement information necessary and normally used to properly value a firm: Firm’s Actual Revenue and its revenue run rate. Thus, no sense of what aggregate monthly and annual revenues are AND, the growth rate of revenue month-over-month; i.e. How fast are revenues growing? More importantly, no sense of a firm’s gross margins and net operating margins – Is there a path to profitability anywhere in the future? Is the firm even generating positive or meaningful gross margins? A firm’s gross margins reflect basic survivability? Firm’s Performance to Plan or against the monthly Forecast; Firm’s monthly cash burn rate; to understand when they run out of cash, in number of months; to ascertain when they need to raise another round of capital from investors Each of the above financial metrics would normally be used to value a firm and measure its financial health and trajectory. These so-called index funds do not have access to any of this information and therefore operate in a vacuum when it comes to relying on real financial metrics normally used to value a company. Investors should be informed as to just how flimsy and flawed these valuations are based on the PM Valuation. The Stanford Study conclusively proves there is a serious problem with the PM Valuation methodology. Further, the Study has developed a methodology that works and clearly demonstrates how to calculate a value for these private tech firms. /episode/index/show/markwking/id/26570556

Episode 028 - UNICORN-MANIA; Tech Unicorn Valuations are FAKE 02/23/2023

Episode 028 - UNICORN-MANIA; Tech Unicorn Valuations are FAKE Tech Unicorn Valuations are Fake Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech landscape. And provide you with information you can use. It is your podcast for Fintech, DeFi, Blockchain and smart contracts, digital banking and all the frontier Web 3 technologies changing the financial landscape globally. Hello everyone – it´s been a couple of months since my last podcast episode – I took some time off...It´s great to be back with you again. After some thought, consideration and a couple defining events, and an announcement by Pitchbook, one of the so called data analytics firms in the VC space, I decided it was imperative that I do an episode in my Unicorn Mania series. I´ll fill you in on the PB announcement I am referring to in a moment – it´s insane! Before we jump into the episode though, I wanted to pay recognition and acknowledgement to a wonderful Brazilian singer and artist, Gal Costa. My intro music and exit music is Aquarela do Brasil by Gal Costa. Gal Costa passed away on Nov. 9, 2021. A makpr talent in Brazil, I thoroughly enjoyed her music. She will be missed. So, let´s jump into this edition of Unicorn Mania: If you´ve followed this podcast in the past, you are aware that in the UnicornMania series I highlight the largely fake, deceptive valuations of VC-backed private technology companies – Which are Fondly called Unicorns...Isn´t that cute? For background, I refer you to my first episode in the UnicornMania series, March of 2020. Episodes 5 and 6 also deal with this twisted freak show perpetrated by VCs, the tech & financial press and others that engage in all of this Unicorn nonsense. I encourage you to go back to Episode 1 for insights and valuable background information as to why I categorically state and prove that tech Unicorns, a VC-backed tech company allegedly with a $1B or more valuation, are indeed mostly fake… Let´s start off with some levity and have a little fun, shall we, at the expense of Sil. Valley VCs? I read this a couple years ago in a CrunchBase piece; There´s an old joke about a new bar in Sil. Valley. On opening day, 6,000 people showed up. No one buys a drink. The business is declared a roaring success! [This joke will hopefully make perfect sense by the time we finish this episode. Only in SV culture would the above be considered a success! In Sil. Valley, comedy often becomes reality To briefly review, let´s start with some basics I will get into in this episode: So, as I just mentioned, the definition of this tech unicorn we hear so much about is: A private VC-backed tech company with an alleged valuation of $1B or more; I say allegedly b/c these valuations are largely fake; I´ll demonstrate that with conclusive evidence in just a moment; VCs and others arrive at this distorted value using a completely improper, simplistic method known as the Post Money Valuation – In a moment, I´ll walk through how the Post-Money Valuation is calculated and explain why it is a completely erroneous notion of value; On what basis do I call it fakery and deception? Largely b/c it has been conclusively proven beyond a doubt based on the research; The body of evidence comes from a Stanford Univ. GSB study called, ``Squaring VC Valuations with Reality.`` The results were originally revealed at a Silicon Valley Open Doors conf. in 2016 and then officially published in April 2017. It´s been updated since, as late as Dec. 2019. It also has been published in peer-reviewed journals like The Journal of Financial Economics in 2020. There are links to both the 2016 video and to the research report in the description of this video Links: Squaring Venture Capital Valuations with Reality Video presentation to the Silicon Valley Open Doors conf., 2016 Why a return to this topic? Several reasons; Because it continues to be an absolute freak show that is out of control. It is a twisted and a deceitful exercise that, as I mentioned, VCs, the tech and financial press and others engage in to ascribe and hype a false value to priv. tech companies; Further, It is an insult to those of us who have an interest in discovering the true value of these tech companies; And Finally, b/c many of the largest mutual fund companies have been investing in the high-risk asset category since at least 2015 (think of Fidelity, T. Rowe Price, Vanguard, JH) – so I view it as a consumer protection issue, well. Where is the SEC?? Where is FINRA? They claim to be interested in protecting the consumer. My mission, as I´ve always stated, is to cut through the BS that tends to dominate the VC & tech landscape to inform you and make you fully aware of what´s going on in this freak show; I stated at the open, one of the defining events that motivated/prompted me to do a Unicorn Mania episode was a recent announcement by Pitchbook, which is owned by Morningstar, btw (acq. in 2016) That is Morningstar, the venerable, well-known mutual fund rating company founded in 1984. Its star rating system has been considered the gold std in rating mutual funds, ETFs, etc., for years… What is The announcement: I get a daily feed in my email inbox called the Daily Pitch. In the last 30-45 days or so, PB announced they are creating a new index fund for, are you ready for it?; An index of unicorn tech companies. When I saw this I thought, I couldn’t think of anything more ridiculous and useless. B/C an index that begins with garbage valuations, yields garbage! I will get into that and demonstrate how this alleged index fund is deceiving to investors and should be scrapped immediately…IMO So, when I received this announcement, I immediately downloaded the Whitepaper at the PB website; It is called, ´Harnessing Unicorns; ``Demiystifying the venture capital Market with the Moringstar-Pitchbook Global Unincorn Indexes.`` I´ll share some of the key findings and takeaways in a moment – truly a fraud, in my view, to be avoided at all costs – I´ll explain Finally, there was one other event that was a motivating factor. That is, in the wake the FTX implosion, the crypto exchange company that blew up in November 2022, caused by a liquidity crisis of the company's token and fraudulent use of investors funds. As investors all tried to get their money out at the same time, the whole thing collapsed. Why do I bring up this event? B/C prior to its collapse, FTX would have surely been, no doubt, a part of this bogus index fund. [Just like Wework before, only a couple years ago. Remember them?] WeWork was valued at $47B before pulling its IPO around Sept. 2019 when many entities called BS on its S-1 filing. I devote all of Episode 6 (Aug. 5, 2020) to exposing the Wework fraud and breaking down their bus. model – something, unfortunately, Firms like Pitchbook, CB Insights and the tech press failed to do; In fact, they continuously published fawning articles prior to Wework´s collapse and implosion, slobbering all over themselves about WeWork´s amazing valuation ($47B)! And now, they want you to trust them with an index of Unicorns based on fake valuations – right! That´s messed up, IMHO. So, let´s get into this PB announcement, shall we? Whitepaper Takeaways: It´s a complete mishmash of deceptive jargon, in my view; Under, ``Clearly defined eligibility rules:`` The Whitepaper clearly states at the outset it uses the post-money valuation Under, ``Quarterly Rebalancing;`` It states, All companies attaining unicorn status in the preceding qtr are eligible for inclusion. [That would have meant FTX, Wework, and other failed, overvalued companies!] Get the picture? Under, ``Weighting Methodology:`` It states, ``companies are, weighted using their latest post-money valuation or estimated worth after latest round of outside financing.`` There´s that term again… And, ``The model prioritizes a company´s most recent VC deal.`` i.e., post-money valuation; Further, it emphasizes, and I quote, ``Past Deals (post-money valuation) is arguably the most important data point used to value unicorns because it reflects real world deals and valuations.`` Are you kidding me?! How about NO, it does not. Completely erroneous statement! And, here is one of the real head-scratchers in the Paper under `´Index Calculation`´ - It states, the index is ``calculated once a day at the close of public markets in the US.`` Huh? These are private companies with no reporting of financial results or any other fin. info., for that matter, to the public. There is no correlation b/c of all the private equity rounds of preferred stock are not public either; Each round has its own exclusive rights, protections, economics and terms that usually suck value from prior rounds, especially from common shares. There is no daily determination of value like in most all mutual funds and ETFs! And Morningstar knows this! The terms and conditions of these priv. preferred stock financings are not reported to the public and there is no correlation whatsoever to US public markets – there is no repricing daily based on this information. • This is nothing more than a fake, window-dressing comment to give the false impression that there is some rigorous analysis going on and is correlated to public markets – Prime Unicorn Index BTW, in preparing this episode, I discovered there is already an existing Unicorn Index Fund, created in 2017, called Prime Unicorn Index. On their website they describe it as, ``A modified market cap price return index that measures the share price performance of private companies valued at $1B or more…. I take issue with the term, ``market cap return`` It is not the market cap. Prime reveals that they also use the flawed post-money valuation as one of the factors in calculating value – but the don´t say so on their website! [Dig into the key highlights and takeaways of the Stanford/Strebulaev Report] Conclusions I´ve seen what I would characterize as three major frauds during my professional lifetime where the major institutional entities that we normally rely on to provide us with independent, unbiased assessments and analysis, were all compromised: Dotcom Bubble (2000 – 2001): The Major investments banks were peddling bogus research and analysis on tech company IPOs that had little to no revenue – this helped fuel outrageous valuations; 2008 Financial Crisis: This was a real estate crisis and bubble. The rating agencies were compromised (S&P, Moodys, etc.) and part of the problem and fraud. They erroneously rated packages of low-grade and subprime mortgages as investment grade quality – and you know the rest of the story… I view Unicorn Mania as, perhaps, just another iteration or vector of the dotcom bubble only with a different twist or flavor. In the dotcom fraud, it was the I-Banks peddling nonsense and hype, unsupported by company fundamentals. In the Tech Unicorn fraud, the complicit entities are the VCs, tech press, financial press and perhaps accounting firms. They Used a black-box approach, protected by non-public reporting of financial transactions (i.e. Pref. Stock rounds with unique, exotic, and complicated structures). They then peddled a completely useless and inappropriate notion of value via the post-money valuation. This is fraud IMO. Again, the research supports this conclusion… And this one is inexcusable b/c the hard data and research exists. It is being ignored. /episode/index/show/markwking/id/26025480

Episode 027 - Jonathan Hung, Angel Investor - Los Angeles, CA 10/06/2022

Episode 027 - Jonathan Hung, Angel Investor - Los Angeles, CA Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger; Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. It is your podcast for Fintech, Decentralized Finance, Blockchain and Smart Contracts, Digital Banking and all the frontier technologies that are changing the financial landscape globally. Episode Introduction: Welcome back everyone. We have a fantastic program for you today. I am excited about today´s conversation because I have the pleasure of welcoming to the podcast Jonathan Hung; Jonathan is a successful and accomplished angel investor based in Los Angeles. He is considered one of the most active angel investors in Southern California. In addition, he serves as Co-Managing Partner at Unicorn Venture Partners and Senior Venture Partner and Head of Due Diligence at Expert Dojo. We´ll get into that and a lot more. Jonathan, thank you for making the time to be on the podcast today; So, before we dig into the meat of your work as an angel investor and venture partner, we typically begin by having you provide your background and details about your journey, more broadly, that led you into technology and angel investing… In addition to providing venture capital funding and advisory support, Jonathan also provides business mentorship based on his experience running U.S. and China offices as the President of United Overseas Textile Corporation. Jonathan was also a Managing Member for his family office fund, J Heart Ventures, which made investments in start-up companies such as Gyft, ChowNow, Miso Robotics, Clover Health, Bitmain, etc. He also leverages various degrees from the University of Southern California, London School of Economics, Massachusetts Institute of Technology, and The Wharton School at the University of Pennsylvania. Topic Areas Covered with Jonathan Your investing history in So. Cal and types of sectors, companies you look for; Jonathan and his team target investments in US companies that have global market potential with a focus on long-term growth expansion to East Asian markets. I´d like to highlight some of the Blog topics you cover on your website with respect to: Covered liquidity runway (cash) and monthly cash burn rate Gross Margins Monthly Recurring Revenue Operating Income/Net Income Web 3.0 and its role in future of startups; touching on blockchain, smart contracts, DeFi etc. 10 key metrics you look for in evaluating prospective investment Alternative funding strategies SPACs and SPVs; Distinguish between the two. Also, particularly since SPACs were all the rage in 2020-2021 but as a sector haven´t done well as public companies Your views on Leadership and Successful team building Other areas you would like to cover; Closing Remarks: Jonathan, thank you very much for joining me today on the program… Jonathan, how can those who are interested in learning more about you and your practice in So. California get in touch? Contact Information Website: jonathanhung.com Social Media (if applicable): Or, Linkedin: Jonathan Hung Thank you for joining me for this edition of DVC. I hope you found today’s discussion with Jonathan Hung interesting and it gave you some additional insights into the state of angel investing in So. California and beyond. Stay tuned for my next Episode of DVC…thank you. /episode/index/show/markwking/id/24604713

Episode 026 - Alex Branton, Partner Sturgeon Capital, London 07/21/2022

Episode 026 - Alex Branton, Partner Sturgeon Capital, London Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger; Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. This is your podcast for Fintech, Decentralized Finance, Blockchain and Smart Contracts, Digital Banking and all the frontier technologies that are changing the financial landscape globally. Episode Introduction: Welcome back everyone. We have a fantastic program for you today. Today, I have the privilege welcoming back to the podcast Sturgeon Capital, when we did an interview early part of 2021 Sturgeon Capital is a London-based investment firm with a very interesting, and successful, I might add, geographic strategy; Sturgeon was established in 2016 to specifically to tap into vast opportunities its team has identified in Central Asia; So, think of Kazakhstan, Uzbekistan, and in adjacent regions such as Bangladesh, Egypt, Turkey; We´re going to get into all of that and a lot more. To help me do that I have the pleasure of welcoming Alex Branton, a Partner at Sturgeon. Alex, thank you very much for making the time to be on the program today. Before we get into the meat of what Sturgeon Capital is doing, I find it useful for listeners if you could provide your background, and your journey, more broadly, that led to the founding of Sturgeon; Alex Branton Bio: Over a decade of investment industry experience with a blend of direct investment experience and fundraising expertise. Studied, lived and worked in emerging markets (most significantly China and Central Asia) on and off for 15 years. Whilst maintaining a vital role on the investment team, spends significant time working with companies on their fundraising and strategic partnerships. Before Sturgeon, part of a 4-person team, that helped build a tech-focused asset manager called Columbus Point with the co-founder of Cantillon in the capacity of head of business development, raising approximately $200m, building the operational infrastructure and working with the investment team. Prior to this, was an Associate Investment Director at Cambridge Associates working in the emerging markets team, advising on direct co-investment deals, economic consulting, financial modelling, and portfolio advisory and discretionary management. Alex holds a BA in Industrial Economics from the University of Nottingham (during which time he also spent time studying finance at Hong Kong University) and an MSc in Development (specialism in Development Economics) from the London School of Economics. He is also a chartered alternative investment analyst (CAIA) and is fluent in Mandarin Chinese having studied in a post-graduate in Shanghai and has taken R programming courses at UCL. History of Sturgeon, why founded with this vision for frontier markets in Central Asia? What is a “frontier market” according to Sturgeon? Your website indicates “we reject traditional definitions of ‘frontier markets’ – expand on this… Sturgeon invests at an early stage (Seed and A round) in technology across huge untapped geographies ~$275m AuM across our venture fund and inaugural growth equity mandate Raising our second early-stage VC Fund Sturgeon Opportunities II ($50m) The TAMs in our addressable markets are so big you don´t need an Excel spreadsheet. Our companies target massive addressable markets that are highly fragmented or otherwise dominated by bad (or often non-existent) incumbents that are not capable of technological innovation. We don’t speculate on “frontier technologies”, rather we focus on tried and tested business models in ``frontier`` markets. You are now raising capital for the Sturgeon Emerging Oppor. Fund II. Target of $50MM 80% of the portfolio will be comprised of companies from emerging tech capitals in Pakistan, Bangladesh, Egypt & Central Asia representing well over 500 million people. When including adjacent countries, our geographies of interest represent over 1 billion people. We will keep our funds small and are not afraid to double-down on winners. We want to keep our “low denominator” advantage and optimize for returns by matching fund size to the opportunity set. Although we see ourselves as a smart index, we also believe in concentration and follow-on heavily in our winners. We are filling the ``funding gap.`` We focus on entering at Seed and then leading Series A and Series B. Beyond Series B we support our companies to raise growth capital from strategic co-investors. The funding gap: Our target countries represent some of the last truly enormous digitally unaddressed markets. How do you source deals, what you are looking in an investment in a co. in this geographic mkt (game-changing tech, solving major pain points, etc.) Network Effect: Genuine local and global networks that inform us as investors and create value for portfolio companies. A huge % of our value add to Founders comes from our Global + Local positioning. If there is a company worth knowing in our region, we will know about it. Experience - Highly experienced team with a wealth of crosssector experience in developing markets. We understand and can help companies navigate risks/bottlenecks. Diversity of opinion is prized and we have a reputation for hiring the best VC talent We work with companies to help them articulate and realise their long-term vision. Fintech for inclusion - Deep understanding of the needs of underserved consumers. Local markets are aware of how seriously we take impact: from rigorous measurement to the provision of local scholarships/fellowships. Portfolio Highlights: ZoodPay’s success exemplifies Sturgeon’s approach to backing the best management business models and operating teams; ZoodPay - The largest Payments, Marketplace and Fintech ecosystem in Central Asia Markets : Pakistan, Uzbekistan, Jordan, Iraq, Lebanon ZoodPay is a FinTech Super App targeting 330m people in untapped countries, delivering the highest quality service to merchants and shoppers. The team has created an innovative ecosystem combining offline and online commerce, payments, credit solutions and logistics to empower buyers and sellers. Closing Remarks: Alex, how can those that are interested in learning more contact you or the Company? Contact Information Website: sturgeoncapital.com Or, Linkedin Alex, thank you very much for joining me today on the program…It would be great to do a follow-up some time to get an update…And, if you and Kiyan want to have a conversation sometime about Brasil, I am all over the Brasil Fintech and DeFi sectors, so would love to do that. Thank you for joining me for this edition of DVC. I hope you found today’s discussion with Alex Brandon and Sturgeon Capital interesting. If you’re looking for alpha, and who isn´t, and you hadn´t thought of Central Asia, Sturgeon Capital is the go-to Fund with the regional expertise and successful track record. Stay tuned for my next Episode of DVC…thank you. /episode/index/show/markwking/id/23821847

Episode 025 - João Zecchin, Founder Fuse Capital 06/17/2022

Episode 025 - João Zecchin, Founder Fuse Capital Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger, Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. This is your podcast for Fintech, Decentralized Finance, Blockchain and Smart Contracts, Digital Banking and all the frontier technologies that are changing the financial landscape globally. Episode Introduction: Welcome back everyone. I am really excited about today´s conversation because we`re going to chat with a very innovative investment firm, known as Fuse Capital, based in Rio de Janeiro, that is changing the Inv. Fund Model for investing in early-stage and growth stage technology companies with an interesting approach, and has also created a new fund that provides dedicated exposure to DeFi (Decentralized Finance) for institutional investors. We´re going to get into all of that and more… To help me do that, I have the pleasure of welcoming to the program, João Zecchin, Founder at Fuse Capital. João, thank you very much for making the time to be on the podcast today… So, before we dig into the meat of all the innovative structures Fuse Capital is offering to its investors and the market, I usually find it useful for our listeners to understand a bit about your background and your journey, more broadly, that ultimately set the stage for founding of Fuse Capital. Tell us a bit about your journey that led you into technology, investing in tech companies… Topic Areas Covered Talk about the origins of Fuse Capital and then the how you arrived at the strategy that led to Fuse Capital I Fund – 1st hybrid fund, offering not only equity to early stage companies but a venture debt product, as well. This a unique approach to someone like me who spent 20 years+ in the venture debt space. Can you give some examples of venture debt deals you´ve done? I understand most or all of the debt deals you´ve done are not portfolio companies where you have an existing equity investment, correct? Mix in the Fund - When one looks at Fuse Capital I Fund, what is the % of Fund assets are made up of Venture Debt vs Equity? What´s the typical structure of a venture debt deal? Term Loan, advance based on multiple of MRR? Return profile for venture debt deals? Provides current income to investors thru monthly P&I pmts.? Risk management and portfolio management processes for the debt deals? Target sectors, target geographies for venture debt deals? For debt deals, talk about that deal process and how you credit underwrite and diligence deals Let´s talk about the newly created fund, The Wasabi Fund, which provides exposure to DeFi for Inst. Investors; When was the Fund launched? Thinking/Strategy that led to the offering? Tell us how you define DeFi and what does exposure to DeFi mean or entail? Mechanics, details of how the fund is structured and works… You don´t actually provide exposure directly to stable coins themselves, right? Main Strategies Offered; Liquidity staking, Lending, Futures, Leverage; Anticipated yields – Examples (20% - 40%) Risk mitigation features and strategies? I had a question about one of your Regulatory Risk mitigation strategies: Underweight allocation to centralized stable coins; Is this referring to USDT, USDC? Given the some of the negative blowups recently (e.g., Terra-Luna; UST debacle), how do you assess and diligence what projects to include in terms of DeFi projects and protocols? Because this blow-up has broken trust in the sector – even though there are many solid projects that are decentralized… The DeFi Fund is structured such that it does not necessarily include direct exposure to the underlying stable coins of projects, is that correct? Closing Remarks What is a good way for those seeking additional information about Fuse Capital to get in touch? Website – Social media? Other contact methods? Thank you for joining me for this edition of DVC. I hope you found our discussion today with João Zecchin and Fuse Capital interesting and it gave you new insights about how the venture capital and venture debt landscape is evolving in Brazil. I look forward to joining you on my next edition of DVC. Thank You… /episode/index/show/markwking/id/23464127

Episode 024 - Slater Victoroff, Founder & CTO Indico 03/18/2022

Episode 024 - Slater Victoroff, Founder & CTO Indico Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger, Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. This is your podcast for Fintech, Decentralized Finance, Blockchain and Smart Contracts, Digital Banking and all the frontier technologies that are changing the financial landscape globally. We will start here - Episode Introduction: Welcome back everyone. I am really amped and excited about today´s conversation because I have the pleasure of welcoming to the program Slater Victoroff, Founder and CTO of Indico. Indico is the leading machine learning, and AI platform that has developed technology to unlock the value of unstructured data, about 85% of all data, providing enterprises with the ability to automate heavily time-consuming tasks and derive value from unstructured docs like emails, images, texts and more. The Indico Platform uses AI and ML technology to automate the intake and understanding of unstructured documents, emails, images, videos, audio files, and much more, giving structure to this unstructured data. As a result, enterprises get much more value from their existing structured data only software and technologies — including RPA, CRM, ERP, Analytics, and more. We´re going to get into that and more…Slater, thank you for making the time to be on the show today… Before we dig into the meat of what Indico is really all about, I thought it would be useful if you could tell us a bit about your background and about your journey, more broadly, that ultimately set the stage for founding of Indico… Topic Areas Covered with Slater Victoroff Talk about your training, background and work in SW and computer engineering that led to the development of the technology and Indico Talk about the technology development from SW engineering standpoint to achieve this breakthrough related to being able to analyze, automate unstructured data. In the past (2016), you previously stated that Indico is `` like a co-pilot in some ways`` indicating ``We´re not automating away the person but taking the grunt work out of processes, allowing them to do much more what they enjoy doing, which is critical thinking.`` Expand upon what you mean by that. Let´s talk about some of the actual use-case applications of the technology. You serve major, marquis customers in the Insurance, Financial Services, Real Estate, Legal, Marketing, Retail, and other huge verticals. Discuss some client use cases. MetLife, etc. Why have you succeeded where others have failed? How has Indico been able to beat out juggernauts such as IBM, Google, AWS, that spend billions on projects? I wanted to talk for a moment about your martial arts training and background. In the past you indicated that Entreprenuership and martial arts training have parallels. What do you mean by that? At the end of 2020 Indico closed a $22M Series B round. You´ve raised about $34M in total. How do you view or see the need regarding additional capital? Closing Remarks Slater, what is a good way for those seeking additional information about Indico to get in touch? Website – www.indicodata.ai Other contact methods? Thank you for joining me for this edition of DVC. I hope you found our discussion today with Slater Victoroff and Indico interesting and it gave you new insights and things to think about regarding machine learning, AI and its application to unstructured data. I look forward to joining you on my next edition of DVC. Thank You… /episode/index/show/markwking/id/22487261

Episode 023 - Jeremy Neilson, Founder & CEO Assure 01/31/2022

Episode 023 - Jeremy Neilson, Founder & CEO Assure Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger, Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. This is your podcast for Fintech, Decentralized Finance, Blockchain and Smart Contracts, Digital Banking and all the frontier technologies that are changing the financial landscape globally. We will start here - Episode Introduction: Welcome back everyone. I am really excited about today´s program because I have the pleasure of welcoming to the program Jeremy Neilson, Co-Founder and CEO of Assure Assure specializes in Special Purpose Vehicles (SPVs) and Fund Administration for the private investment marketplace, simplifying the deal process and fund administration so funds can focus on finding deals and building relationships. We´re going to get into that and more…Jeremy, thank you for making the time to be on the show today… Before we dig into the meat of what Assure is really all about, I thought it would be useful if you could tell us a bit about your background and about your journey, more broadly, that ultimately led you to co-founding of Assure. Topic Areas Covered with Jeremy Neilson Talk about the Assure business model, when and why it was created, how it has evolved over the years, etc. Talk about the service offerings, SPVs, etc. Why SPVs? What is it, how does it work, who utilizes SPVs? Expand on your competitive advantages and differentiation in the marketplace; No other service provider can match Assure’s expertise, speed or cost-effectiveness in delivering SPVs to the private investment community. How do you assess or look at the competitive landscape for Fund services? Who else is doing this…? Assure acquired BoomStartup and also launched both Glassboard Technology and Assure Syndicates. When were the acquisitions done? What is the function of each entity? How do they broaden your services and offerings? Jeremy, in addition to Assure and its services I´d love to hear your thoughts and remarks on other topics in the VC and priv. investment landscape in general if you are open to opining on them; How do you look at SPACs and explosion of SPAC activity over the last 18-24 months How has the VC model and landscape evolved and changed over the last 10-15-20 years? How do you see what´s going on in DeFi broadly affecting the VC model? In terms of the many options for how start-up companies can raise capital today, ? Other opinions and remarks you have on DeFi are welcome. Open to other areas you would like to discuss that are important to describing Assure and the industry. Closing Remarks Jeremy, what is a good way for those seeking additional information about Assure to get in touch? Website – Other contact methods? Thank you for joining me for this edition of DVC. I hope you found our discussion today with Jeremy Neilson and Assure interesting and it gave you insights into SPVs, fund administration services and their importance in the marketplace to VCs and private equity. I look forward to joining you on my next edition of DVC. Thank You… /episode/index/show/markwking/id/21962981

Episode 022 - James Bianco, President & Founder; Bianco Research, Chicago; DeFi – Decentralized Finance 12/14/2021

Episode 022 - James Bianco, President & Founder; Bianco Research, Chicago; DeFi – Decentralized Finance Episode Introduction: Welcome back everyone. I am really excited about today´s program because we are going to do a deep-dive and explore DeFi – Decentralized Finance, a topic you hear much about but may have little insights into what this frontier technology is all about and what its true impact will be on the future of global finance. To help me do this I have the pleasure of welcoming to the show Jim Bianco who is the President and Founder of Bianco Research, LLC in Chicago. Jim is someone I consider a visionary thought leader on the DeFi sector. Jim, thank you so much for making the time to be on the podcast today… So, before we dig into the meat of what DeFi is really all about, I thought it would be useful if you could tell us a bit about your background and about your journey, more broadly, that ultimately led to take a bullish stance toward DeFi. Mainly because you have this traditional Wall Street, I-bank research background. Tell us how the long-time, traditional finance guy goes actively pro-DeFi… Topic Areas to be covered After introduction and you provide your background, I´d like to get into the following… In prior commentary, you stated you came to the realization that DeFi is a `brand new financial system.´ Expand on this revelation and what drew you to this conclusion. You have previously stated, Existing financial system is slow, cumbersome, has way too many permissions required, ´I basically have to beg my broker to do stuff´, it´s a series of toll booths´ ´Current system is in trouble. Many in financial world don´t get it and they don´t want to get it.´ ´You are going to look like a bunch of taxi drivers in a ride-sharing world.´ I tell people about DeFi; ´It will come here and completely flatten you.´ Jim: DeFi is also about fairness…You and I don´t get the Warren Buffet deals. With DeFi we get exactly the same deal Jim discusses ´qualified investors´ if you have over $1M net worth, `what an insult´ You´ve previously segmented your clientele in two broad categories, ´Young and Old´ discuss what you mean by this with respect to understanding the impact of DeFi. Why does Warrant Buffet call crypto rat poison squared? Regulatory issues: Impact of central bank´s own digital currencies…expand on what you see going on here and why it´s not really DeFi… Jim: ´A CBDC, if done correctly, presents a financial threat to the existing financial system´…and in the end, they won´t do that b/c it bypasses the current banking system all together Jim: ´It´s not about technology or whether we have the design right – it´s about policy – how much do we want to disrupt the current banking system?´ Regulation: Problems regulators have, they don´t understand what´s going on in the DeFi industry…´It´s a Cambrian explosion of ideas End of the day, I don´t know what regulators can do except regulate the ´On-and-Off Ramps´ (Uniswap, Kracken, etc.) i.e. – how do I get dollars to crypto and crypto back to dollars To the Regulators, ´what are you trying to do?´ I see where we are going and it´s exciting and an explosion of ideas… Closing Remarks James, what is a good way for those seeking additional information about Bianco Research to get in touch? Website – Thank you for joining me for this edition of DVC. I hope you found our discussion today with Jim Bianco interesting and it gave you better insights into what DeFi is really all about and what it means for the future of finance globally. I look forward to joining you on my next edition of DVC. Thank You… /episode/index/show/markwking/id/21481604

Episode 021 - Oddup; FOCUS ON FINTECH; James Giancotti, Founder & CEO 11/23/2021

Episode 021 - Oddup; FOCUS ON FINTECH; James Giancotti, Founder & CEO Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech landscape. And provide you with information you can use. Episode Introduction: Welcome back everyone. I am excited about today´s program because I have the pleasure of welcoming to the show James Giancotti who is the Founder and CEO of a really interesting company called Oddup. Oddup is a provider of a data-driven, intelligence platform that helps users more efficiently evaluate and understand the startup ecosystem and for digital assets it includes a proprietary Cryptocurrency Rating System. Oddup provides users with powerful tools and proven methods of data collection and insights for making investment decisions in a more efficient manner…[My attempt at describing the co. and what you do…feel free to give me the succinct, company-preferred version] And, we´ll get into all of that in greater detail…. James, thank you for making the time to be with me on the podcast today… So, before we dig into the meat of what Oddup is and its key offerings, I thought it would be useful if you could tell us a bit about your background and about your journey, more broadly, that ultimately led to the formation of Oddup… Topic Areas Covered: AI and data driven approach, what was the impetus, thesis for developing this into a company in the first place? What is the end-product offering actually and how has it evolved over time? Is it investment research on steroids…or how would you best describe it? Talk about the offerings in more detail; What is the Startup Rating System, other offerings and services, i.e., Crypto-custody? Talk about major Customers: Thomson Reuters, Bloomberg, Google, etc. Key Partners? How would you assess the competitive landscape? There seems to be a number of newer startups entering this space in different ways Competitive advantages of Oddup offering…Key Value proposition? ´Our main advantage is we have been right often on our valuation assessments which has given our tools and platform credibility as a go-to source.´ Particularly, more recently, we have been very accurate at assessing and valuing crypto and digital asset sectors. How do you get access to all of the detailed information and analysis for what are mostly private companies? Let´s discuss Forge Global, a major private exchange allowing investors to trade shares and evaluate secondary offerings of innovative private companies. They also offer custody, tools and data in addition trading. They announced a public offering via a SPAC in September. Do you view them as an enabler, competitor or other? Is there an interesting story behind the company name? Discuss your recent equity round - $12.8MM Series C We actually raised the round a year ago. COVID and pandemic related factors kept us from announcing it until recently. However, we used the proceeds to build really innovative and quality data analytics tools, especially in the crypto and digital asset sectors. Future plans for capital? Closing Remarks James, what is a good way for those seeking additional information about Oddup to get in touch? Oddup website: Other contact methods you would like to include; Thank you for joining me for this edition of DVC. I hope you found our discussion today with James Giancotti and Oddup interesting and it gave you things to think about regarding your ability to evaluate, analyze and invest in new economy companies. I look forward to joining you on my next edition of DVC, Thank You… Bio: James Giancotti, CEO and Co-founder OddupJames Giancotti is the founder and CEO of Oddup, an early-stage startup ecosystem rating system. James began his career in investment banking and research roles at Goldman Sachs and J.P. Morgan. After nearly a decade of researching companies’ financials to determine their value and assessing investment risks and opportunities, he saw firsthand the challenges that most institutional investors constantly confronted. The biggest obstacle was a lack of reliable, collated analyst insights that overcome subjectivity, so he created Oddup to address this problem by giving investors more transparency and objective insights to make the most informed investment decision. James holds both a Bachelor of Commerce in Business Intelligence and a Bachelor of Law in Intellectual Property from La Trobe University. /episode/index/show/markwking/id/21260270

Episode 020 - 10Web; Tigran Nazaryan, CEO 08/25/2021

Episode 020 - 10Web; Tigran Nazaryan, CEO Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech landscape. And provide you with information you can use. Episode Introduction: Welcome back everyone. Today, we have a really interesting program for you b/c I have the pleasure of welcoming to the show Tigran Nazaryan, who is the CEO of 10Web, a Tigran, thank you for making the time to be with me today on the podcast. I am super excited about today’s conversation after learning about the company b/c 10Web has created a really interesting business model and is changing the game around the area of Web design and hosting, and is doing that through automation of an old but very reliable tool and ecosystem many of us are familiar with have used, WordPress. 10Web has a very interesting history and story and what I believe is a huge addressable market. Tigran, I thought it would be useful for you to provide us first, with some of your background, and then we can get into the interesting story around the origins of 10Web as a company Five years before founding the company in 2017, a small team of engineers were building WordPress plugins. This helped you identify the biggest problems in web development, leading to the formation of 10Web. With vision to create a platform for hosting for professionals and agencies. We built an advanced, modern type of hosting technology. Allows automatic creation of WordPress websites and powered by AI algorithms and neural networks. We also created our own tools for optimizing websites We are getting a lot of momentum, growing really fast… Hear is a quote from a press release after your raised your Seed round last month where you stated, "Tens of millions of WordPress websites are built every year, and an average website launch takes 5 weeks! We wanted to bring automation to WordPress development to facilitate and speed up this process," can you expand on this? Why did you choose WordPress automation as opposed to, say, building your own website builder tools? Tigran: Old school platform, but WordPress powers 45% of all websites built. It is really flexible and workable. Yet, we found the experience of creating WP websites was really painful. Flow is time-consuming and requires some deep knowledge where many web developers don’t go that deep. Our vision was to solve these problems for web developers. Huge potential for automation because WordPress Here is a quote from your investor at AI Fund; “10Web has built an innovative, no-code solution utilizing artificial intelligence to automate website porting and creation.” (Perry Wu, General Partner, AI Fund) We spend greater than 2 years with a team of machine learning engineers to create the solution. Not a simple undertaking. You use Google Cloud as infrastructure, why? Tigran: We use Google Cloud for hosting. Clients’ websites are stored. We also use AWS, MS Azure. There is no fundamental difference between these 3 solutions, only difference is in details. Talk about achieving 90+ Google Page speed score. Tigran: Page Speed score is a metric defined by Google. Important metric. Affects conversion, effectiveness of ads, for all web pages of the site. Technically very challenging. Not a single plug-in or solution. Also, WP websites are not all the same. Helps professionals streamline website development. We offer a full, complete, turn-key solution for agencies Discuss target market and go-to-market strategy. Tigran: Our current focus is on develpers, agencies and free-lancers You recently closed a $2MM Seed Round. Where are you in terms of traction in the marketplace? Tigran: Priority is to grow. We have thousands of customers today. How are you rolling out in terms of launch strategy for customer acquisition? Tigran: We don’t have any specific geographical limitations. It’s popular with web builders globally and WP is translated into hundreds of languages. We focus on US and western Europe right now. Can you discuss the subscription-based revenue model? How do you view the competitive landscape given your value proposition of top class hosting and automation of WordPress? Tigran: Many provide hosting and site building tools. Competition not only within WP community but also between WP and other platforms Your competitive advantage is in the pricing and the automation, right? Tigran: Yes, and none of the others provide a specific, customized solution to cover agency site development needs with simplicity through automation. Want to shift back to the technology. We hear a lot about artificial intelligence (AI)… Do you think AI will replace traditional web development or is it supplemental technology? Discuss additional capital needs and process… Capital efficient business model; recurring revenue, high gross margins with major expenses being development and people… Tigran: AI Fund and Sierra are Seed investors so we will consider other investors, as well Closing Remarks Tigran, what is a good way for those seeking additional information about 10Web and its products to get in touch? Obviously, there is the 10Web website: Invite agencies to sign-up 10Web, we will invite you to our Slack platform for more detailed, closer conversations. Linkedin Thank you for joining me for this edition of DVC. I hope you found our discussion today with Tigran Nazaryan and 10Web interesting and it gave you things to think about regarding how you go about building and creating high-quality websites in the future. I look forward to joining you on my next edition of DVC, Thank You… /episode/index/show/markwking/id/20258798

Episode 019 - EQUIAM; John Zic, Partner and Founding Member 07/23/2021

Episode 019 - EQUIAM; John Zic, Partner and Founding Member Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech landscape. And provide you with information you can use. Episode Introduction: Welcome back everyone. Today, we have a really fantastic program b/c I have the pleasure of welcoming to the show John Zic who is a Partner and Founding Member of EQUIAM, a San Francisco based firm that provides access to VC investments in a John, thank you for making the time to be with me today on the podcast. I am really excited about today’s conversation about EQUIAM for a couple of reasons: One, because it represents a true, analytics and data-based approach to investing in a basket of VC-backed private tech companies, and we’ll get into that; Also, b/c as a venture lender, the team I worked with spent many hours , days and years developing a risk assessment and risk rating model for the VC-backed companies we were providing debt commitments to. John, to begin the conversation, I thought it would be useful for you to provide us some of your background and then discuss how EQUIAM came to be… Talk about the early stages of creating this company because it’s not a new endeavor or venture, relatively speaking. Talk about the two Funds under management; Recently closed (June 2021) the Private Alpha Fund of $50M – and you have the Private Tech 30 Fund that closed Feb. 2019; Describe these funds and investment thesis behind them Why 30 to 35 companies in a Fund? Talk about the proprietary data-driven approach that EQUIAM has developed; not only for picking the companies in the funds, but also the ongoing evaluation and monitoring processes to make adjustments, including potentially removing an investment from the basket of stocks? Known as the Equiam Systematic Ranking (ESR), which applies a suite of proprietary algorithms to distill approximately 10,000 private companies and 10 million data points into a ranked list of approximately 30 investment targets. You’re CEO, Ziad Makkawi, believes the VC industry “should embrace the kind of AI tools it invests in.” Expand on that… How are you able to get access to preferred shares? What if you want to reduce no. of shares held in a co. in the Fund – how do you sell them? Use of secondary market platforms like Forge, allows EQUIAM to readily participate in private offerings of technology companies; access has not really been a problem overall… Forge used to be Equidate. Forge is actually a minority shareholder-owner of EQUIAM, LLC According Makawi, CEO and Founder of EQUIAM, The business operates on the assumption that there is enough data out there on firms that can be analyzed and used to manage a portfolio of VC investments quantitatively. In the past, most people didn’t have access to the data or hadn’t put in the effort to find it. We have taken a data-driven, risk-based approach to mitigate the froth that we see in the market right now; e.g. Over-valued unicorns… Introduces a more tech-driven way of investing in VC deals. Are you still accepting new investments in the Private Alpha Fund? How does the process work? Accredited investors, minimum investment, etc? Potential to begin offering smaller investment sizes to non-accredited? Closing Remarks John, what is a good way for those seeking additional information about EQUIAM or perhaps have an interest in making an investment, get in touch? EQUIAM website: Thank you for joining me for this edition of DVC. I hope you found our discussion today with John Zic and EQUIAM interesting and it gave you things to think about regarding your ability to invest in a fund of private tech companies. I look forward to joining you on my next edition of DVC, Thank You… /episode/index/show/markwking/id/19908704

Episode 018 - Brian Requarth: CEO and Co-Founder, Viva Real in Brasil: Author of, “Viva The Entrepreneur” 06/18/2021

Episode 018 - Brian Requarth: CEO and Co-Founder, Viva Real in Brasil: Author of, “Viva The Entrepreneur” Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech landscape. And provide you with information you can use. Episode Introduction: Welcome back everyone. Today, we have a really fantastic program b/c I have the awesome pleasure of welcoming to the show Brian Requarth – who is an entrepreneur and true veteran of creating and scaling a technology businesses in Brazil and LatAm. Brian is the co-founder and former CEO of Viva Real, the leading real estate, property technology business in Brazil. He raised over $74MM in venture capital for Viva Real. He merged the company with ZAP Imóveis (owned by Grupo Globo) and became the Chairman of Grupo ZAP. He later sold the business for $550MM He now invests in the most promising tech companies in Brazil and Latin America as an angel investor. More importantly, he is dedicated to empowering the next era of entrepreneurs in the region. Brian, welcome and thanking you for making the time to share your incredible story and journey on the program… This motivation to help entrepreneurs in the region is done in part, through his new company, Latitud which aims to democratize access to everything an entrepreneur needs to succeed in building a successful business in LatAm. And also through your new book, Viva The Entrepreneur – where Brian seeks to help demystify the obstacles you’ll face, teach what you won’t learn in business school, and offer you inspiration and encouragement on your journey. Viva The Entrepreneur is book where Brian shares lessons learned while building his company. He shows how to manage your own psychology and your operations, be it working with co-founders, building a culture, or managing a board of directors. Brian also reveals the secrets of scaling a business and best practices for raising venture capital in Latin America. You will develop an understanding of the most critical parts of an investor term sheet, and gain perspective into the inner workings of the venture capital game. So, I’ve read the book almost in its entirety and really want to dig into some key takeaways that struck me as I read this amazing story… We discuss Brian’s views on being “vulnerable” and willing to hear, accept and take advice you can act on. Brian mentions he could not have built Viva Real to its scale and success w/o the partners, advisers and board members on the ground in the region. Brian thinks about vulnerability from the standpoint of your team and trust you can build. “A lot of entrepreneurs try to shoulder everything”… “reality is you need to share the burden with your founders and the rest of team.” Key component to success Named Entrepreneur of the Year in Brasil. Expressed it as the “best day and worst day, all in the same 24 hours.” Brian discusses formation of Latitud in Brasil in Sept. 2020; Decided to “Scale my advice” for entrepreneurs and investors in the region. Initially, a growing community of founders; organized cohort-based programs. Eventually we’ll build a community of investors and talent. Brian funded the costs of the foundation himself. Aggregate talent and capital to founders and investors. “I didn’t have it” - this type of support. It’s why I wrote the book and formed Latitud. In this interview, you’ll find out why Brian is “bullish on the next decade” in Brasil and LatAm because there are so many customer experience challenges and problems to be solved. What sectors are hot? Brian says, “pick a sector,” really! There are so many that are consumer-facing industries where the customer experience and customer satisfaction metrics are simply terrible. They “scream opportunity” Every sector is filled with massive opportunities. LatAm is twice the GDP of India and has received about half the venture investment. There is now a robust Angel investing community in Brasil, seeding the next generation of companies. NuBank will eventually go public and the wealth from that will create the next generation of Angel investors. They are seeing the deals before institutional capital and we have that communicy We have a Fellowship for entrepreneurs and Founders. We’ll be launching and Investor Fellowship. Including group of Angels, then opportunity for VCs looking to dive into the region. We have a network and hub for all of that through Latitud. Start your journey with Latitud. “We have great momentum.” Can be as early as “ideation.” “We are actually the on-ramp to the VC ecosystem” for investing in the region. See Latitud Go. Full-stack where you go to find talent, capital, community. Closing Remarks Brian, what is a good way for Those seeking additional information and wishing to learn more about Latitud or get in touch? Latitud website: Order the Book, Viva The Entrepreneur, via Kindle or Amazon.com Thank you for joining me for this edition of DVC. I hope you found our discussion today with Brian Requarth interesting and it gave you things to think about regarding building a business in Brazil or LatAm. I look forward to joining you on my next edition of DVC, Thank You… /episode/index/show/markwking/id/19530014

Episode 017 - JP Baric, CEO, Aurum Capital Ventures Cryptocurrency Mining & Energy Technology 05/31/2021

Episode 017 - JP Baric, CEO, Aurum Capital Ventures Cryptocurrency Mining & Energy Technology Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech landscape. And provide you with information you can use. Episode Introduction: Hello again everyone. Today, I have the pleasure of welcoming back to the program one of my favorite guests, JP Baric, CEO and Founder at Aurum Capital Ventures, because he is my go-to source & expert in explaining and making sense of all things crypto; BTC, crypto-mining, crypto-energy… JP thank you for coming back to join me on the show. And to reiterate so that folks know, Aurum Capital Ventures is technology/energy company engaged in multiple aspects of the crypto-mining business. And we’re going to highlight a new Fund you’ve launched for providing exposure to crypto assets, called Lucid River Partners BTC’s Very Volatile Week: I would like to anchor the conversation initially with: All that’s been going on in the news over BTC volatility and in crypto-asset category over the last week to 10 days; Recent price crash and negative commentary around crypto mining activity in general; Including effects of China’s announcements on banning mining, Elon Musk “poking the bear” on ESG concerns, and Jim Cramer, who gets it completely wrong, suggesting it points to the need for regulation of crypto b/c of “systemic” risk…blah, blah, blah JP, I know you’ll make sense of this for us and put it into understandable English! What do you make of all this? What are your initial thoughts, your take? Mike Novogratz CEO of Galaxy Digital chimed in with a short video providing some perspective and reassurance – I thought some of his comments were insightful: Mike Novogratz: “The underlying progress that is happening in the BTC ecosystem, the ETH ecosystem and crypto in general is full speed ahead. “This is not trading Tulips – this is trading a technology that is going to revolutionize how we transmit value to each other…” JP, what do you think? Is Novogratz right about this? [Galaxy Digital/Galaxy Fund Mgt. - a full-service institutional player, with asset management, capital markets, and investment banking.] Galaxy is well positioned to compete with Coinbase and Gemini around institutional funds, as well as with Fidelity on third party wealth management, as well as Grayscale on asset management. This entire business exists because of Mike Novogratz’ bet on crypto assets. Is Crypto-mining Eco-unfriendly? JP, I also wanted to spend some time discussing the energy use side of crypto-mining because, again, there is so much faulty information disseminated by folks in tech media and financial press that is just simply erroneous. Many articles recently published are suggesting crypto-mining is not environmentally feasible due to the amount of energy used…and that this is unsustainable And China is often claimed to be a geographic center of concentration for BTC mining. However, several bloggers and others point out this is not true at all… See Dec. 29, 2020 Forbes Article by Roger Huang, The ‘Chinese Mining Centralization’ Of Bitcoin And Ethereum Link: Take-aways from Article: The first thing to understand about this erroneous argument is: Mining pools command loyalty not based on geographic traits or even political ones, but rather, reward types, fees, and how the pool deals with bitcoin transaction fees. Mining pools might have a geographic base, but miners that pledge their hardware and their hash rate might and can switch their loyalty depending on a host of factors. Important to look at the hash rate of a mining pool not as one monolithic bloc that can be controlled and manipulated at will, but rather as a marketplace or as an aggregator that commands a fickle amount of loyalty. At any given time, if the rewards and technical conditions of mining pools change, there can be a shift towards mining pools based in Europe or North America — or anywhere else in the world. In addition, Miners are very long BTC; they wouldn’t act contrary to their financial interest to damage the ecosystem. Mining pools based in China also run contrary to State policy; The People’s Republic of China has a skeptical view towards bitcoin and other cryptocurrencies Finally, Miners are also not the only institutions that matter in the balance of proof-of-work blockchains; Nodes are run around the world. The coders/developers that build up the framework of cryptocurrencies are distributed around the world, With US-based institutions such as cryptocurrency exchanges and non-for-profits like the Human Rights Foundation providing funding “Ethereum Merger” announcement; that Proof-of-Work will merge to become Proof-of-Stake, and that the benefits are energy conservation on the blockchain to confirm transactions…What do you make of this announcement? From our October 2020 Conversation – you went into some detail regarding Energy Utilization & Economics of Crypto-Mining: JP provides a deep-dive into the interrelated metrics and dynamics of Energy and Crypto-mining. Here is what you will learn: Crypto-currency Mining involves sourcing and utilizing the most advanced equipment, for sure, which you guys provide, but also one of the key components that has a huge impact on the cost and viability of crypto-mining itself – is the cost and amount of energy consumed – and, therefore, the energy component and its costs have a huge impact on the industry and its success. Metrics/Discussion: Terahash Rate – core measure of energy usage in crypto-mining Can predict and model the Terahash rate for mining equipment. USD per terahash – how much we make on a USD basis - the speed of how fast a mining machine runs. Price per terahash dropped to 7.5 cents – when BTC crashed (March 2020). Was 13 cents per terahash prior. Amount of new machines on the network has grown – at 8 cents per TH – betting that price of BTC will continue to rise… Miners all over the world are thus, searching for most cost-effective energy costs. Cost/Mwh Rates in crypto-mining Old machines vs. New machines and economics Revisit the halving event from May 12, 2020 – when reward for mining was, by design, the reward went from 12.5 BTC to 6.25 BTC – Impact? Inflation Rate of BTC (1.8% infl. Rate) compared to USD inflation…digital currency has a lower effective inflation rate than the fiat currency! BTC price may be volatile but depends on what you compare it to New equip. is coming online line as fast as the manufactures can produce them. Most are made in Taiwan and China Coming into facilities that have power in the 4cent to 5 cent range Mining Machines: The S-9s are the older; Newer are the Ant Miner S19 Pros are Let’s talk about your new Fund – Lucid River Partners; What was the idea behind creating it? What will be its mandate/mission? How do folks find out more? Closing Remarks Contact Information for Aurum Capital Ventures Those seeking additional information and wishing to learn more about Aurum Capital Ventures: JP’s Twitter Account – @JPBaric Email: The New Fund - Lucid River Partners: Thank you for joining me for this edition of DVC. I hope you found our discussion today with JP Baric and Aurum Capital Ventures interesting and useful. Stay tuned for my next Episode, where I will have a very special guest and accomplished expert on building successful tech companies in LatAm. Brian Requarth, who created the leading Real Estate Technology Co. in Brazil, Viva Real, will join me. He’s also an author - Thank you again and I look forward to joining you for my next Episode of Distilling VC. /episode/index/show/markwking/id/19299692

Episode 016 - FOCUS-ON-FINTECH Series André Bastos, Co-Founder, Open-Co São Paulo, Brasil 05/21/2021

Episode 016 - FOCUS-ON-FINTECH Series André Bastos, Co-Founder, Open-Co São Paulo, Brasil Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world, including Fintech. My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape. And provide you with information you can use. Episode Introduction: Today’s Episode is another in my Focus-on-Fintech Series where I provide you with a close-up look into the top companies in the Fintech sector that are bringing new innovations to the financial services market globally; In Today’s Episode, I once again highlight the hot FINTECH market in Brasil. I have the pleasure of welcoming back to the show, André Bastos, who is a Co-Founder and the Chief People and Strategy Officer at Open-Co, the largest Consumer Credit Fintech in Brazil. André, thank you for coming back to the show… André, the last time you and spoke it was October 2020 and the company was called REBEL. After a merger of Geru and REBEL, which was announced just last month, you are now Open-Co. But the REBEL and Geru brands remain under that umbrella… Tell us a little bit about this merger and what it means for scaling your consumer lending services business in Brasil; What is Open-Co? Geru and Rebel are both in the business of extending unsecured consumer credit, but your models are somewhat different, can you explain? A short time after announcing the formation of Open-Co, you all had another major announcement on the fund-raising side of the business; That being the closing of a $270MM credit facility, led by Goldman Sachs - very impressive This announcement is on top of a Series C equity round with IFC and Goldman as leads, correct? Highlight your proprietary Credit Scoring Technology – Importance this played in building credibility with Lenders/Investors prior to your recent credit facility. I would love to dig into your recent post on Linkedin about the “Tony Awards and Open Co.” I thought it was very creative, had great take-aways. Can we talk about your thoughts, ideas and motivation for putting it together? It’s a great piece b/c it’s about lessons and what we learn from our personal experiences and how we can utilize those lessons to build our own leadership, mentoring skills, stimulate innovative ideas to improve the lives of others…and grow personally… You discuss your personal experiences in attempting to secure financing for your first home in Chicago; You even weave some Chicago history in from the Great Fire, to the 1892 World’s Fair, the rich history and importance of the Theatre in Chicago, focusing on Victory Gardens…and more; But mostly it was about learning from our experiences…and applying those learnings to improving our effectiveness and growing in the workplace The home page of your website begins with this statement; “The credit market in Brazil is one of the most dysfunctional and exclusionary in the world. High default rates encourage traditional financial institutions to charge even higher interest rates, further driving defaults.” And finishes the home page with this statement; “Open Co believes that the key to building groundbreaking credit products lies not only in technology, but mainly in building a relationship of trust with customers. The time for expensive debts, bureaucracy and closed doors is over. The future is now Open.” Historical Perspective Re Technology: What a difference a few years makes! I found this in my archive of articles from Dec. 2015 in TechCrunch regarding Whatsapp; A judge in Brazil wants to shut down WhatsApp and Brazil’s Congress wants to shut down the social web next; WhatsApp was shut down for 48 hours mainly because the popular messaging platform had not cooperated in turning over user data and information in an investigation; WhatsApp is the single most used app in Brazil with around over 100 million users; Incredible to think this was happening just a few years ago in Brazil… Growth Plans for 2021-2022 – And Other… Closing Remarks:André, thank you very much for joining me today… Contact Information – Open Co André, how can those seeking additional information and wishing to learn more about Open Co contact you or the firm? Website: Linkedin: André Bastos Thank you for joining me for this Episode of DVC. I hope you found the conversation with André Bastos and Open-Co interesting and it gave you some things to think about regarding developments in Fintech services in Brasil. I look forward to joining on my next Episode of DVC. /episode/index/show/markwking/id/19178063

Episode 015 - Redpoint e.Ventures, São Paulo, Brasil Anderson Thees, Managing Partner 05/06/2021

Episode 015 - Redpoint e.Ventures, São Paulo, Brasil Anderson Thees, Managing Partner Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger; Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape. And provide you with information you can use. Episode Introduction: Welcome back everyone. We have what I believe is a very interesting program for you today b/c I have the pleasure of speaking with a true veteran of the Brazilian technology investment landscape, Anderson Thees, who is a Managing Partner at Redpoint e.Ventures based in São Paulo, Brasil. Anderson, thank you very much for making the time to join me today. So, I labeled you a veteran in tech investing in Brasil because you’ve been at it for about a decade or so with Redpoint. I think it would be useful to begin by telling the listeners about your background and experience and then how Redpoint eVentures came about. In today’s episode, Anderson will cover, Talk about Redpoint eVentures’ development in Brasil; You have a Dedicated Fund in Brasil; How does this help you and how does the affiliation with Sil. Valley network add value? Ability to bring not only funding, but Silicon Valley access and global best practices to local entrepreneurs. When was Fund launched and size of Fund? We were the first fund to raise more than $100M. Fund we raised in 2012 was targeted at a $130M Cap. We were over-subscribed at more than $150M but we needed to stay with the $130M cap. Huge first fund – much bigger than we expected The fund is fully deployed now; Macro economy tanked and the tech and e-commerce ecosystem We have now three unicorns with another coming… We raised another fund of $175M in 2018 which we are investing out of today. Investment themes – what types of technologies & deals do you look for? We think of our pipeline of investments in two ways; Proactive deal flow, our investment thesis; Second is incoming deals that come to us But always tech-driven theme plus market must be big or will become big fast Series A and B we do, Series A is our core. Most important criterion is the founding team, especially the earlier we invest… How you approach deal flow and qualifying target companies; Verticals, fintech, education, retail, SW B2B; We do have concentrations in Fintech and SaaS B2B; but this is mainly driven because of demand not due to our selection process Other: Regarding investment themes, I’d like to get your take on Insurtech and the opportunities you see there; you recently had a conversation with CQCS on this topic; Anderson discusses Insure-tech; Insurance is actually larger than banking in terms of industry size and moving toward its own bucket in fintech; Cost of storing data, reduction of fraud, use of AI; all affect the channels and deployment as well as how the very core product is developed and priced We discuss Rebel, now Open-Co’s closing of a $270M credit round led by Goldman Sachs What’s next for scaling fintech? Your sense of advancements in access to financial services, the regulatory environment and macro trends? Discuss partnership with Itau and creation of CUBO (Cube); How did it come about and what is it? Does Itau co-invest in any deals with you? How does this partnership help you in Brasil? Closing Remarks: Anderson, thank you very much for joining me today on the program…It would be great to do a follow-up some time to get an update… Thank you for joining me for this edition of DVC. I hope you found today’s discussion with Anderson Thees and Redpoint eVentures interesting and it gave you new insights into the Brazilian tech investing landscape. Anderson, what is a good way for those who are interested in learning more about Redpoint eVentures contact you or the Company? Contact Information Website: rpev.com.br Stay tuned for my next Episode of DVC…thank you. /episode/index/show/markwking/id/19004915

Episode 014 SPECIAL EDITION – Investing in Human Capital 03/29/2021

Episode 014 SPECIAL EDITION – Investing in Human Capital DISTILLING VENTURE CAPITAL Episode 014 SPECIAL EDITION – Investing in Human CapitalProjeto Sol, São Paulo, Brasil Sister Angela Mary, Co-Founder, Director Recording Date: February 24, 2021 Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger; Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. Episode Introduction: Welcome back everyone. So, as many of you know, this podcast covers multiple aspects of key technology trends, including Fintech, and venture capital and I even talk about over-valued Unicorns at times. Today, however, we are going to change things up a bit – b/c I want to talk about a different type of Capital that’s just as important or likely more important than the financial capital we often discuss… Today, I want to talk about Human Capital – what do I mean by that? As many of you know, There is an entire area, Social Impact Investing, that has been a rapidly growing trend for maybe the last 5-7 years, or more. Impact investments are made with the intention to generate positive, measurable social and environmental impact alongside a financial return. But today, We’ll discuss Human Capital through telling the incredible story of a very special place, known as Projeto Sol, or Project Sun or Sun Project, if you prefer. It is located in an area of São Paulo, Brazil known as Cidade (City) Dutra in Favela Vinte. And let me just start by saying, It has literally transformed the lives of thousands of individuals and an entire community. It is a beacon of hope in an otherwise hopeless place…We’ll get into that. Projeto Sol has served the Brazilian community of Cidade Dutra for four decades. In 1978 Sister Angela Mary and Louis Carlos dos Santos converted a wood shack into a social centre for youth, known today as Projeto Sol – a pivotal organisation that has transformed a community long marked by drug trafficking, gang wars and police violence. Sister Angela hoped that through education, she can offer them a life beyond the confines of poverty and exclusion. Beyond education, Sister Angela has also helped residents legalise the ownership of their property while reforming & building 95 houses. So, We can say Projeto Sol is truly a family owned and operated business – but it’s in the business of changing lives and instilling basic human dignity Projeto Sol serves 250 children daily within its walls, from 5 – 17 years of age, providing two meals per day – a full breakfast and lunch. It provides all the materials and facilities for classes in art, dance, theatre and sports. And, it instills a discipline and attitude of self-worth and self-responsibility through education. That’s a mere, brief summary of the Social Impact that Projeto Sol has had on the community To help me tell this amazing & powerful story of positive Social Impact I have the pleasure of introducing one of the most incredible people I know, Sister Angela Mary…who is from the Sisters of the Holy Cross, South Bend, Indiana Sister Angela, thank you very much for being here today (We’re together in SP, Brasil) to share with us the amazing journey that Projeto Sol represents Sister Angela Mary: Formative years – major life influencers for you then your arrival in Brazil and founding of Projeto Sol Sister Angela’s Story… Projeto Sol Website: How to Participate and Support: If you are in the US/Canada; Go to Simple Instructions for Supporting Projeto Sol at the cscsiters.org website: On the top right of the Home Page, click on: Support Us → Then click, Donate Now → Scroll down, select your $ amount. You can even make it a monthly recurring gift. I did! Then scroll to the box, My Gift is for and select; Brazil Mission from the drop down menu. Finally, there is a box; To provide more detail about the intent of your donation…, and simply type in, Projeto Sol That’s it. If you are interested in and motivated by a TRULY significant Return on Investment in positive Social Impact, supporting Projeto Sol via the cscsisters.org website is an excellent way to show support. You can also send an Email to Sister Angela: Closing Remarks: Thank you for joining me for this Episode of DVC, we discuss Human Capital. Stay tuned for my next Episode of DVC…thank you. /episode/index/show/markwking/id/18480371

Episode 013 - Sturgeon Capital, London; Kiyan Zandiyeh, Chief Investment Officer 02/25/2021

Episode 013 - Sturgeon Capital, London; Kiyan Zandiyeh, Chief Investment Officer Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger; Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape. And provide you with information you can use. Episode Introduction: Welcome back everyone. We have what I believe is a very interesting program for you today. Today, I have the privilege of speaking with Kiyan Zandiyeh, Chief Investment Officer of Sturgeon Capital, a London-based [boutique] investment firm with a very unique investment strategy and thesis. Sturgeon was established specifically to tap into Central Asia. Kiyan, thank you very much for joining me today… Let’s begin by providing some background on yourself and then an overview of Sturgeon Capital, when and why it was founded, etc. History of Sturgeon, why founded with this vision for frontier markets in Central Asia? What is a “frontier market” according to Sturgeon? Your website indicates “we reject traditional definitions of ‘frontier markets’ – expand on this… Your website indicates Central Asia is a “vast area of enormous potential and extreme complexity… I like the ‘enormous potential’ aspect – who wouldn’t. The ‘extreme complexity’ characteristic might give many investors pause…Can you explain this further? In this Episode, Kiyan discusses the following: Describe Funds 1 & 2 Purpose/strategy of each, when launched; $$ size of each, no. of investments to-date, no. of investments total to be made from each Fund; target technologies and target size of investment per co. on average; Do you typically lead, co-invest, or indifferent? Fund 2 – describe its focus on Uzbekistan… Other countries in the region where Sturgeon is invested? Do you leave a reserve or have an allocation from each Fund for follow-on investment to support portfolio companies through additional rounds? Sturgeon leaves about 10% reserves for follow-on investments Spend some time on how you source deals, what you are looking for in an investment in a co. for in this geographic region (game-changing tech, solving major pain points, etc.) We like market-place bus. models, e-commerce and SaaS Can capture customer base, then capture other services… Had to solve for: Logistics, payment solutions (< 10% Visa/MC penetration), then needed to have products on the platform that people could buy Effectively starting e-commerce businesses building from the ground up But the opportunity is huge with attractive returns, 4X-5X+ Even though we focus on “frontier” markets and regions, what we are presenting is a business bet not a country bet… Public-private partnerships you have developed and how that works… There isn’t a well-established venture investing ecosystem in these countries By product of our investing in the region, though, creates jobs, especially among youth - So, we are adding lots of value in infrastructure, in case of e-commerce you’re helping the national logistics company become more efficient. In some cases, govt. co-invests with us, reduces impediments to establishing new businesses, etc. Where does Sturgeon’s capital come from mainly? Family offices, geographic diversity? Are you currently accepting new investments into Fund 2? First close in June 2020 Fund 2 will be capped at $25MM; 2/3 of the way there now. Before we launch any fund we spend 6-12 months building a pipeline, doing diligence and de-risking; then we know how much we need to raise. Rather than raising a pool of money and then hunting for deals. Closing Remarks: Kiyan, thank you very much for joining me today on the program…It would be great to do a follow-up some time to get an update… Thank you for joining me for this edition of DVC. I hope you found today’s discussion with Kiyan Zandiyeh and Sturgeon Capital interesting. If you’re looking for strong risk-adjusted returns and concerned about an overheated public equity markets (you should be) and private tech markets (where you can invest in Unicorns??) and would like to understand more about investing and gaining exposure to Central Asia, Sturgeon Capital is the go-to Fund with the expertise… Kiyan, how can those that are interested in learning more contact you or the Company? Contact Information Website: sturgeoncapital.com Company Email: for information/inquiries Stay tuned for my next Episode of DVC…thank you. /episode/index/show/markwking/id/18013862

Episode 012 - Alberto Gaidys, Chief Investment Officer & Founding Partner of Wright Capital Wealth Management & Pioneer in Brazilian Fintech; São Paulo, Brasil 02/18/2021

Episode 012 - Alberto Gaidys, Chief Investment Officer & Founding Partner of Wright Capital Wealth Management & Pioneer in Brazilian Fintech; São Paulo, Brasil Episode Overview: My guest today, Alberto Gaidys is a Brazil Fintech Pioneer. He was involved in creating some of the first Fintech companies in Brazil, even before it was called “fintech.” Settle in for a highly informative and detailed look at Brazilian Financial markets and Brazilian Fintech. Alberto takes you on a remarkably interesting journey through the creation of the first fintech companies in Brazil in which he was directly responsible with building. Some of the companies you will hear about include: Grana AQUI, Brazilian Mortgages, BankFacil, and Creditas, among others. In this Episode, Alberto provides an in-depth, well-informed analyses of credit and capital markets in Brazil along with incredibly interesting first-hand accounts of the beginnings of Fintech in Brazil. Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger; Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape. And provide you with information you can use. Welcome back everyone. It is great to be back with you in 2021 providing you with the quality content you´ve come to expect and rely on at DVC. Today’s Episode is another in my Focus-on-Fintech Series where I provide you with a close-up look into the top companies in the Financial Technology sector that are bringing new innovations to financial services markets globally; I am super excited about today´s show because, while it is in the Fintech theme common to this podcast, it will have a bit of twist. We will focus on Brasil Fintech and dig into characteristics of Brasil Capital, Credit and Financial markets as it relates to Fintech in Brasil. My excitement is because my guest today is not only very knowledgeable regarding Fintech in Brasil, and brings a unique perspective on the role of capital markets in scaling Brasil Fintech; but he happens to be one of the leading experts on Brazil´s Capital Markets, Credit Markets and the Brazilian financial system. It is my pleasure to welcome to the program Alberto Gaidys. Alberto, thank you very much for making the time to join me today… I was going to detail some of your impressive credentials, but I think it´s better for me to allow you to tell us a about your background and expertise and then we can move into our topic. So, Brasil is reported to have over 400 Fintech companies in operation. One of the most recognized names on the list is Nubank, which just raised another $400MM round in its Series G and has raised more than $1.8B since 2013. It claims to be the largest digital bank in the world, starting with a simple no-fee credit card offering. It has grown its customer base from 12 million to 34 million, freeing millions in one of the most concentrated banking environments in the world. The new funding will be used to expand in Colombia and Mexico. Alberto, you are an advisor on another successful Brazilian Fintech co., Creditas, a secured lender to consumers. Creditas has an interesting back-story as it relates to its stages of development as a Fintech in Brasil…can you tell us how this company evolved to its current model and your role…? The Grana AQUI story: (Acquired by Creditas) “Too early in the game when cap. markets buzz was not as strong…” Banco Central even looked at this co. with suspicion of its P2P lending model…expand on this… Your perspective and thesis related to all of this Fintech activity and assessment of the Fintech landscape in Brasil: Focus on disintermediation – a key objective of Fintech – related to evolution of capital markets to support it… You have previously stated that without this evolution of capital markets instruments, “there would be no Fintechs out there…” can you expand on this? Isn’t it also true w/o the development of these Fintech apps., regulators would not have moved to address rules and regulations allowing cap. markets to evolve? There is also the narrative that the high adoption of digital technologies by Brazilians (72% of population has a smartphone), and the huge entrepreneurial economy has led to a wave of Fintech innovation?? Closing Remarks: Alberto, thank you very much for joining me today on the program… It would be great to do a follow-up conversation if you are open to that – I would enjoy getting your input and perspective regarding continued of capital markets in Brasil and what it means for Brasil Fintech… Thank you for joining me for this edition of DVC. I hope you found today’s discussion with Alberto Gaidys interesting and it provided you with things to think about regarding Brasil Fintech and capital markets. Or, perhaps you are an investor fund looking to enter the Brasil market… Stay tuned for my next Episode of DVC where I will highlight a London-based investment fund with a very unique geographical approach to deal flow and investments. Thank you for joining me today. /episode/index/show/markwking/id/18000386

Episode 011 - FOCUS-ON-FINTECH Series, Molecule Software with Sameer Soleja, CEO 01/29/2021

Episode 011 - FOCUS-ON-FINTECH Series, Molecule Software with Sameer Soleja, CEO Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger; Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape. And provide you with information you can use. [This intro para. is pre-recorded so you won´t hear it] Episode Introduction: Welcome back everyone. We took December 2020 and the beginning of the New Year off – so I am definitely excited to be back providing you with the quality content you´ve come to rely on at DVC. Today’s Episode is another in my Focus-on-Fintech Series where I provide you with a close-up look into the top companies in the Financial Technology sector that are bringing new innovations to financial services markets globally; In today’s Episode, I have the pleasure to be joined by Sameer Soleja, Founder & CEO of Houston-based Molecule Software; Molecule Software, founded in 2012, is billed as the world´s most modern, advanced full-service ETRM/CTRM. We´re going to talk about what that means and define the market itself – for those not as well versed in it – which includes me - Sameer, thank you for making the time to join me today; you are our first Episode of 2021. In Today’s Episode we Will Cover: Let´s start by Defining the Business you are in & Creation of the Company: So, for those of us who are not as familiar with the ETRM/CTRM landscape, how would you describe or define the industry itself that Molecule is engaged in? And, we are going to get into some of the key features, benefits and competitive advantages that make the Molecule solution so game-changing to the industry; But first, can you describe/talk about what it was you saw in the ETRM/CTRM market, before 2012, that led you to create the company? What was it about competitive offerings that prompted you and your team to spend the effort creating and building Molecule? Who were/are the vendors and what were they offering? How close would you consider Molecule today to be what you set out to build in 2012? What were driving factors behind these adjustments? Business Model Characteristics/Features & Benefits/Competitive Advantages Go-to-market; Talk about your prospective clients´ view on embracing a cloud-based data solution; Info on your website mentions that roughly 75% of customer spend on ETRM/CTRM systems has historically been on installation & implementation, noting this is `waste`; Talk about how your cloud-based solution eliminates costs for clients while at the same time, vastly improves their access to reliable data information. Disaggregation of solutions & functionality – discuss what this means and how your solutions addresses this and more. You note on your website; “Deal Capture, Mark-to-Market, Black-76, and VaR math are not proprietary in the least.” What’s important is your reporting, your custom models, and your data feeds — all being integrated into customized reports. What's been the hardest thing for potential customers (and investors!) to understand about the value Molecule provides? How do you manage that? New Product – Can you talk about Elektra? New power markets package for independent power producers, hedge funds, hedge advisors, and power utilities. With Elektra, Molecule is the ETRM that provides the most automated and transparent (i.e. modern) visibility into P&L, position, and risk exposure for a large variety of power trades. Key market characteristics re adoption? you´ve previously touched on what you see as 3 Macro Factors: Consolidation in the market Reluctance to pay millions of $$ for mega-development and installation projects There was slowing pace of innovation in general; clients will spend less, not more, on these platforms Is there a story behind the Molecule name? Additional Capital Required to Grow? Whatever you are at liberty to or want to discuss here – if anything; Didn´t know what your future capital-raising plans were… Would you do anything differently along your fundraising path knowing what you do today? Closing Remarks:Sameer, thank you very much for joining me today…I appreciate your time. I would love to do a follow-up sometime to check in on Molecule… Contact Information, Molecule Sameer, how can those seeking additional information and wishing to learn more about Molecule contact you or the firm? Website: Social Media (if applicable): Company Email: for information/inquiries Thank you for joining me for this edition of DVC. I hope you found today’s discussion with Sameer Soleja and Molecule interesting and it gave you things to think about regarding developments in the ETRM/CTRM marketplace. Stay tuned for my next Episode… /episode/index/show/markwking/id/17739041

Episode 010 - Hyliion Holdings (NYSE:HYLN); Conversation w/CEO Thomas Healy 11/09/2020

Episode 010 - Hyliion Holdings (NYSE:HYLN); Conversation w/CEO Thomas Healy Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape. And provide you with information you can use. Episode Introduction: Welcome back everyone. In today’s Episode, I have the pleasure to be joined by Thomas Healy, Founder & CEO of Hyliion, creator and maker of high-tech drivetrain for traditional Class 8 long haul trucks powered by lithium-ion batteries and CNG Thank you Thomas for making the time to join me today… First, congratulations on your public launch via the SPAC – Special Purpose Acq. Corp. which was official as of Sept. 28th. It doesn’t seem all that long ago that we were getting introduced to Hyliion at the 2015 Rice Business Plan Competition – when you guys rolled into Houston – literally – from Carnegie Mellon with the big green Hyliion-branded truck…it was quite a prop! In This Episode, Thomas Healy Covers Hyliion’s Journey to its Public Offering, Including: Background on the formation/launch of Hyliion Development of the “e-axle” electrified axle design; Lithium-ion/CNG design Went public couple of weeks ago – Came to Rice Bus. Plan Competition in 2015 – presented to over 500 people Brought prototype – goal of bringing electrification to the trucking space – virtually untapped market opportunity Semi-truck traffic is the backbone for moving cargo around the US and the globe Why did you choose a SPAC as avenue for going public? Advantages, etc… Looked at all paths of private and going public Chose the SPAC path – a reverse merger into being a public co. Merged with Tortoise Acquisition Corp. Capital we brought in – Little over $500M Saw a great team in Tortoise in terms of similarities in outlook and key industry needs and characteristics Tortoise raised $235M over year ago – they pitched to their investors that they would go find a co. like Hyliion. Their group looked at 100s of companies before selecting Hyliion – Tortoise is a big energy expertise player and particularly sustainable/efficiency drive Story behind the Hyliion name? Business Model & Business Model Characteristics Producing a fully electric truck – using an onboard natural gas generator to produce electricity and charge the battery Leverages Mega-trend toward renewable natural gas, as well Created very capital efficient business model – Hyliion is a powertrain co. working with existing OEMs like Volvo, Freightliner, Kenworth No need to reinvent the whole truck – solution and benefit is in the powertrain, leveraging great existing truck technology Infrastructure to recharge vehicles is one of the biggest hurdles and uses of capital to enter the market Our solution uses renewable and traditional natural gas to recharge the batteries Existing grid there – but hardly any recharging stations for electric trucks – so have to create the infrastructure, requiring billions of investor capital – just to set up the charging stations Two of the Tesla “Mega Chargers” actually uses massive amount of power to recharge trucks Go-to-Market Strategy…Incorporated design into the drivetrain of existing Class 8, long-haul truck Value of CNG and Lith.-ion combo Advantage of existing CNG fueling infrastructure around the US – big competitive advantage Discusses advantages over hydrogen as a fuel source How Hyliion defines your Addressable Market? Key Partner/Investor network (Sumitomo, Dana, Inc. – leading force in trucking industry – valuable partner on supply chain and also mfg. Product is already shipped in low volume today: Selected use-case partner/pilot examples; (Penske, Ryder, Wegmann, other trucking industry pilots & partnerships) Importance of your Partners and related network in delivering the offering; Capital Required to Grow? – It was announced you netted approx. > $500MM from the public offering via Tortoise Acq. Corp. – Fully-funded plan with that capital – Capital to move tech to commercialization, volume manufacturing and production and scale the business. Our capital efficient, capital light approach is leveraged via Dana, Inc. for our outsource manufacturer; we don’t have to find or build a facility – great mfg. partner Dana, Inc. already a leader in producing product for trucking industry Discuss how you execute and get to breakeven and profitable on this capital? Competitive differentiation – Fleets care about cost savings. Goal/bus. model is moving cargo from point A to B in most cost-effective manner possible to increase their margins. Hyliion is less expensive than diesel, certainly cheaper than hydrogen and significantly cheaper than building a completely new electric truck and the recharging infrastructure. So, Hyliion has a solution now that saves the trucking industry money and is environmentally friendly. Competitive Advantages Discussion competitive landscape, relative cost/pricing structure and how you leverage your expertise to bring a compelling value proposition Other competitive advantages, differentiation… View of Addressable Market Plans for International Expansion – Hyliion is a North American Co. for now right now with product already in Canada in addition to US traction. Closing Remarks:Thomas, thank you very much for joining me today… Contact Information, Hyliion Thomas, how can those seeking additional information and wishing to learn more about Hyliion contact you or the firm? [I guess referring listeners to the ticker, HYLN, would be best start, right?] I’m typically interviewing companies that have not gone public yet – so this is new Website: Thank you for joining me for this edition of DVC. I hope you found today’s discussion with Thomas Healy and Hyliion interesting and it gave you some things to think about regarding developments in long-haul truck technologies. Stay tuned for my next Episode. /episode/index/show/markwking/id/16737299

Episode 009 - Cryptocurrency Mining/Energy Operator Aurum Capital Ventures - (Revisit with John Paul Baric, Founder & CEO) 10/30/2020

Episode 009 - Cryptocurrency Mining/Energy Operator Aurum Capital Ventures - (Revisit with John Paul Baric, Founder & CEO) Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech landscape. And provide you with information you can use. Episode Introduction: Welcome back everyone. Well, today I have the pleasure of welcoming back to the program JP Baric, CEO and Founder at Aurum Capital Ventures, which is engaged in the crypto-mining business. JP thank you for coming back to join me on the show. So, the last time we did a program was in mid-May, about 5 months ago, and I introduced Aurum Capital Ventures then as a technology/energy company directly involved in multiple aspects of the crypto-mining industry – and we delved into the many interesting aspects of your business model. I have received a lot of positive feedback to that show – so glad you’re here to do this again… Crypto-currency Mining involves sourcing and utilizing the most advanced equipment, for sure, which you guys provide, but also one of the key components that has a huge impact on the cost and viability of crypto-mining itself – is the cost and amount of energy consumed – and, therefore, the energy component and its costs have a huge impact on the industry and its success Aurum has developed a truly innovative vision and approach to this aspect (Energy) of the business. And I wanted to provide a platform here today for you to explore in-depth how you think about and approach the idea of generating, producing and sourcing energy at the core of Please introduce and present this in the way you think would be most helpful and useful for our listeners to appreciate the impact of this vision Energy Utilization & Economics of Crypto-Mining: JP provides a deep-dive into the interrelated metrics and dynamics of Energy and Crypto-mining. Here is what you will learn: Terahash Rate – core measure of energy usage in crypto-mining Can predict and model the Terahash rate for mining equipment. USD per terahash – how much we make on a USD basis - the speed of how fast a mining machine runs. Price per terahash dropped to 7.5 cents – when BTC crashed (March). Was 13 cents per terahash. Today, sitting at 8 cents per terahash with BTC at roughly $12,000 today. Amount of new machines on the network has grown – at 8 cents per TH – betting that price of BTC will continue to rise… Miners all over the world are thus, searching for most cost-effective energy costs. Cost/Mwh Rates in crypto-mining Old machines vs. New machines and economics Revisit the halving event from May 12, 2020 – when reward for mining was, by design, the reward went from 12.5 BTC to 6.25 BTC – Impact? Inflation Rate of BTC (1.8% infl. Rate) compared to USD inflation…digital currency has a lower effective inflation rate than the fiat currency! BTC price may be volatile but depends on what you compare it to New equip. is coming online line as fast as the manufactures can produce them. Most are made in Taiwan and China Coming into facilities that have power in the 4cent to 5 cent range Mining Machines: The S-9s are the older; Newer are the Ant Miner S19 Pros are 30 Juuls per terahash. Square Announces Purchase of $50MM BTC for its Balance Sheet Here’s a perhaps diversion from our main topic related to mining & energy, but it’s related to Bitcoin and the larger ecosystem. So, here’s some industry news I wanted to get your opinion on re Square – We all know them as the POS payment company. not only does Square have the retail app and footprint now, but they’ve also got a lot of very granular, small business merchant data. They've turned that into Square Capital and the small business lending business. And the data on the consumer side, the spending side, the merchant acquiring side, and visibility into SMB finances to drive the business forward, creates a pretty tight loop, closed ecosystem. Square just recently announced – put out a press release actually – that they had purchased around $50MM of Bitcoin…Now other major financial services companies have bought substantial sums of BTC too, but didn’t necessarily announce it by press release – What’s going on here in your view? This from another podcast I listen to called ReBank. Their comments regarding Square purchase of BTC Will Beeson (ReBank): “It's like investing in treasury assets, and you use them to run your business. It's about 1% of Square's assets. And I think the bigger question is, is this Square, or is this a representation of broader investment theory? Like is Bitcoin now something of an asset class that institutional investors and traditional institutional investors are taking more seriously and are viewing either as an inflation hedge or an option on potential future upside.” Lex Sokolin (ReBank/Consensys): “All you have to do is look at venture investments and Andreessen Horowitz with hundreds of millions of dollars in dedicated crypto funds and that being true for the long tail of Silicon Valley players as well. And so when people who want to be like Square and want to have that same outcome, or like Twitter or venture funds that want to be like Andreessen, which is by the way, 100% of anyone who is an entrepreneurship, when they see these actions being taken, they're both symbolic, but they're also inspirational.” Then, if that weren’t innovative enough, Aurum Capital Ventures is also focused on leading efforts to bring much needed liquidity and financing to the mining and cryptocurrency markets themselves…Can you elaborate on why this is important and what you are doing to facilitate attracting mainstream forms of capital to the industry? Other Learnings from Today’s Episode: Define Cryptocurrency-Mining & How it Works The Future of Crypto-Mining Crypto-Currency and Crypto-Mining are Fully Transparent Markets, by Design The Search for the Best Equipment and Cheapest Source of Energy How Aurum Capital Ventures is Changing the Game and Mindset Regarding Crypto-Mining and the Production of Energy Aurum is Both a Buyer and Seller of Energy Aurum is Redefining How Energy is Consumed and Transmitted Aurum is Creating Unique Investment Vehicles to bring needed liquidity – both debt and equity capital – to the Crypto-Mining and Crypto-Currency How Crypto-Miners are Rewarded What is a Halving Event and What does it Mean for Cryptocurrency Mining? And Much More… Business Model Characteristics Your Bus. Model has Multiple Revenue Sources: Turnkey Mining Equip Deployments & hosting services; Speed & Efficiency through repeatable process of Power procurement, infrastructure deployment, and remote management Running your own Mining servers Managed Services Selling used equipment to established network Competitive Advantages Modular, mobile equipment deployment – more efficient Rapid Payback/Utilization of “Stranded Energy” - Aurum’s mobile mining deployments profitably monetize any type of stranded energy anywhere in the world Situation where the value of the underlying collateral (mining equipment) can increase in value during life of the equip. and related financing, due to a halving event of Bitcoin Allows you to build inventory of equipment for deployment now, in advance of halving event that you know occurs approx. every four years JP Baric explains Aurum’s business model advantages relative to competitors such as Genesis Mining Closing RemarksContact Information for Aurum Capital Ventures Those seeking additional information and wishing to learn more about Aurum Capital Ventures: JP’s Twitter Account – @JPBaric Email: Sign up for Investor Newsletter at: Launching new podcast called “Digital Gold” Thank you for joining me for this edition of DVC. I hope you found our discussion today with JP Baric and Aurum Capital Ventures interesting and useful. Stay tuned for my next Episode, where I will have a very special guest of a high-profile company getting lots of buzz, that just went public via a SPAC in just the last few weeks. Think electric truck technology – like big, 18-wheeler truck – industry. That’s all I’m giving you for now. Stay tuned… Thank you again and I look forward to joining you for my next Episode of Distilling VC. /episode/index/show/markwking/id/16617662

Episode 008 - FOCUS-ON-FINTECH Series - André Bastos, Co-Founder & COO, REBEL - São Paulo, Brasil 10/14/2020

Episode 008 - FOCUS-ON-FINTECH Series - André Bastos, Co-Founder & COO, REBEL - São Paulo, Brasil Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape. And provide you with information you can use. Episode Introduction: Welcome back everyone. Today’s Episode is another in my Focus-on-Fintech Series where I bring you a close-up look into the companies in the Fintech Sector and the innovations they are bringing to financial services markets; And, based on the intro theme music for today’s Episode, (Aquarela do Brasil by Gal Costa) you may have guessed we are headed again to the land of Samba, Carnaval, Futebol and now, FINTECH - Brasil. We’ll revisit why Brasil has become one of the hottest Fintech markets globally, attracting massive investor and consumer interest. Today I highlight one of the fastest growing Fintech companies in Brasil, São Paulo-based REBEL, a leading consumer lending fintech I’ve been following for around a year or so now…(That’s REBEL.com.br) The REBEL Story To help me do all of that, I am super-excited and pleased to be joined today by André Bastos, a Co-Founder of REBEL and currently its COO, among other things; André, thank you very much for joining me today. There are a lot of interesting and important characteristics of the REBEL bus. model I want to get into today but; To start things off, please give us some background, history on the formation of the company and what REBEL offers; when and how you got started, and the motivations behind the creation the company. What was the impetus, motivation? The REBEL Business Model & Business Model Characteristics REBEL services offering; Starting with a true Lending offering as opposed to credit card or payment services like many other fintech models Importance of developing your proprietary Credit Scoring Technology; as a competitive advantage Talk about how REBEL drives client engagement and loyalty; REBEL is taking a unique, dedicated approach when it comes to cust. Engagement – right? With a hands-on, Human touch; What is the role and strategy of the Financial Wellness offering? Is there a consumer finance education component to this initiative? Why is that important? Discuss how blockchain and Machine Learning plays a critical role in REBEL’s offering and strategy…How do you utilize the capabilities of blockchain technology? Will REBEL consider secured lending in the future? Will you expand to other geographies in LatAm, elsewhere, in the future? Licensing opportunity for the credit score tech. in other geographies? Is there any unique or special story around the company name REBEL and your branding strategies? Other Brasil Fintech Companies that Have Raised Capital Recently: NuBank has raised over $800MM, starting with just a credit card offering, now valued at over $10B; Neon Pagamentos just raised a $300MM Series C round earlier this month and has raised over $420MM; Klarna raised $650MM at a $10.6B valuation, double its prior; Offers a buy-now-pay-later in 4 installments bus. model – Mach. Learning approach Growth Prospects for REBEL? REBEL has had impressive growth: Loan Originations nearly tripled 2H 2019 vs 1H 2019 How did 1H 2020 track? What’s growth expectation for 2020? When do you predict reaching breakeven and CF positive results? What is your addressable market? $100B USD for unsecured consumer loans – huge! Brasil Credit Markets – Historical Perspective I wanted to discuss credit markets in Brasil historically and why the current environment is so much more Fintech-friendly than in the past – as regulators have become somewhat accommodative embracing digital solutions and competition in financial services. Provide a short historical perspective of the role of credit and equity in Brasil…Brasil has not historically had “deep” credit markets – and very expensived; Condition of historically high interest rates… If you weren’t a large corporation with access to the public stock market, you really couldn’t raise capital or get credit/debt – you had to grow your business with cash – which means limiting and constraining your growth. Banco Central – Central Bank created a new class of financial services company in mid-2018 (sociedade de crédito direto – SCD OR Society of Direct Credit). What does it mean for consumers, businesses and new digital offerings? CVM – Comissão de Valores Mobiliários; Brazilian equivalent of the SEC Then, in May 2020, The Brazilian Central Bank and the National Monetary Council set out open banking regulations. The data-sharing framework aims to foster financial inclusion, drive competition in financial services and increase security. Finally, O Banco Central is launching its own digital payment platform - PIX Regulatory Initiative Supported by Central Bank: “The premise is that the personal data held by banks and other financial institutions do not belong to them, but to the respective holders, customers,” according to Marcelo Chiavassa, professor of digital law at Universidade Presbiteriana Mackenzie Campinas Financial institutions must begin adhering to new rules stipulating that data belongs to individuals, says Maristela Martins, country manager for Brazil at Backbase. How important are these regulations for Brasil credit and financial services markets, in your view? Plans for Capital to Grow – discuss only what you care to disclose here; Capital you’ve raised in the past and who your investor partners are; REBEL just raised a substantial securitization facility end of 2019 representing a validation of your business model, technology and customer engagement; Importance of access to other liquidity facilities to grow loan portfolio with favorable cost of capital and generate profitability; Importance of Diversity of capital sources; Capital needs to grow and scale the business; Are there any plans to take your business model and credit tech to markets outside of Brasil? Closing Remarks: André, thank you very much for joining me today… I would love to do a follow up sometime as you make progress, to get an update on how things are going. Contact Information - REBEL André, how can those seeking additional information and wishing to learn more about REBEL contact you or the firm? Website: www.rebel.com.br Thank you for joining me for this edition of DVC. I hope you found today’s discussion with André Bastos and REBEL interesting and it gave you some things to think about regarding rapidly advancing growth and trends of Fintech services in Brasil. Thank you again and I look forward to joining you for my next Episode of Distilling VC. /episode/index/show/markwking/id/16399304

Episode 007 - FOCUS-ON-FINTECH Series - Yuval Brisker, Co-Founder & CEO, ALVIERE 09/01/2020

Episode 007 - FOCUS-ON-FINTECH Series - Yuval Brisker, Co-Founder & CEO, ALVIERE Show Introduction – Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world, including Fintech. My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape. And provide you with information you can use. Episode Introduction: Today’s Episode is another in my Focus-on-Fintech Series where I provide you with a close-up look into the top companies in the Fintech sector that are bringing new innovations to the financial services market In today’s Episode, I delve into and distill down new Fintech Company, Alviere, just launched earlier this month. Alviere has created and launched a plug-and-play, single-integration SW platform that streamlines and automates delivery of a broad array of financial products and services. It is headquartered in Cleveland, OH and Lisbon, Portugal – we’ll get into that aspect of the business a bit more, as well. To help me do that, I am pleased to be joined today by Yuval Brisker who is the Co-Founder and CEO of Alviere. Yuval, thank you very much for taking the time to join me today. Today, You Will Learn the Following About Alviere: Background behind company’s genesis, development and launch; The many “learnings” from Mezu payment app. operations; highlight experience and pains of taking a payments fintech to market and how it laide the groundwork for Alviere; Yuval’s extensive experience/background as a pioneer in the development of B2B SaaS platform tech companies – your first having been acquire by Oracle Story behind the Alviere name…? Business Model Features & Characteristics Yuval provides details on the HIVE solution and its components; Selected use-case applications, as noted in Press Release info and other stories – examples of business users; Importance of Alviere Financial Institution Partners and related network in delivering the offering; Fact that this product is fully developed, tested and ready for market, as scale; Discuss Revenue Model - Services, subscription-based revenue model Addressable Market – Your ready for US and Canada; Mexico by end of 2020; Other international expansion? Go-to-Market Strategies… Goal is to be the Amazon Web Services offering of the Financial Services sector We also highlight Yuval’s background as a pioneer in the development of B2B SaaS tech companies; Acquisition of TOA by Oracle (2014), Mezu payment app., now Alivere; Plans for Capital to Grow – Yuval discusses his thoughts on capital needs to grow the business; Yuval is no stranger to raising capital from Venture and other investors. Yuval discusses some of the key objectives in that regard with respect to Alviere? Roll-out Plan for International Expansion Competitive Advantages Description of the competitive landscape, relative cost/pricing structure and how Alviere leverages its expertise to bring a compelling value proposition to clients Other competitive advantages, differentiation – Beyond traditional Banking-as-a-Service offerings; Closing Remarks:Yuval, thank you very much for joining me today Contact Information, Alviere Yuval, how can those seeking additional information and wishing to learn more about Alviere contact you or the firm? Website: Email: Thank you for joining me for this edition of DVC. I hope you found today’s discussion with Yuval Brisker and Alviere interesting and it gave you some things to think about regarding rapidly advancing trends in Fintech services. I look forward to joining on my next episode of Distilling Venture Capital /episode/index/show/markwking/id/15840308

Episode 006 – UNICORN-MANIA – WeWork & its Investors Confront Reality 08/05/2020

Episode 006 – UNICORN-MANIA – WeWork & its Investors Confront Reality Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech landscape. And provide you with information you can use Opening Observations: Hello everyone, and welcome back. I promised you in the prior Episode that I would devote this Episode to distilling down one of the most famous poster-kids for Unicorns-aren’t-real; WeWork Today, I am going to provide you the insights and analysis that the technology and financial press, investors and others have failed to deliver to you over the last few years regarding this tarnished unicorn. To set the stage though, let’s do a quick timeline review of WeWork leading up to and then after its failed IPO of Sept. of 2019: WeWork valued itself at a cool $47B by early 2019 and, that in fact would be its valuation leading up to its announced IPO WeWork filed its S-1 and IPO paperwork in mid-Aug. 2019 After more than a few I-Banks and others scrutinized its financial condition and bus. model and “questioned” the proposed go-public valuation the Co. made some, shall we say, “adjustments” to its valuation After some consideration, WeWork suggested it would now go public at, uh, $10B-$16B Bam! A greater than 65% vaporization of its valuation in a matter days - amazing Cancelled its IPO in Sept. 2019 when support waned By Oct. 2019, Adam Nuemann asked to step down after discovering a few “corporate governance” problems. He received a total $1.7B golden parachute to go away. Bloomberg opinion writer, Matt Levine, put it this way in a late Oct. 2019 piece, writing tongue-in-cheek suggested how the news was communicated to employees at the time: It was explained, “We had to give him a billion dollars to go away because we couldn’t afford to have him stick around,” So, his value to the Company was negative a billion dollars. Levine continues, in other words, “We can’t pay you for your good work because it was more urgent to pay your boss a billion dollars to stop doing his bad work.” Sounds about right. By Oct. 2019, life support was needed. The Co. accepted (as if it had a choice) a Softbank rescue pkg. where SB took control of the Co., valuing it at $8B (about $19/share, which, as it turns out, was still too high) More recently (April 2020), SoftBank pulled the plug on and backed out of a planned tender offer of an addl $3B to bail out, er, I mean plan to shore up, WeWorks shareholders. To a lawsuit; Following the termination of that agreement, WeWork Board voted to sue the only thing that was keeping it alive…SoftBank’s money. Great strategy Then came the question; Who should lead the Co. post-A. Nuemann? After being led by such an irreplaceable visionary as Adam Nuemann (according to the S-1), surely a similarly disruptive, forward thinking genius would be required. Or, you could hire this guy: in Feb. 2020 WeWork announced it had named Sandeep Mathrani, a senior executive with RE Company Brookfield Properties, as its new CEO. Wait, what? An experienced RE executive from one of the top companies in the field? A sordid mess, I know…but this is what passes for reality now when you are dealing in the land of unicorns, right? Things get a little distorted Let’s get back to reality and restore some meaning to this mess: I told you my main objective is to cut through the hype that tends to dominate… With a bit of cursory, basic diligence, I’ll point out and highlight a few of the basic risks of the WeWork bus. model. Something one would have expected from the analysts, I-Banks, INVESTORS, lenders and, oh yeah, the tech and financial press, to have done – but they didn’t. It’s not really that complicated to determine what WeWork is and understand its key business model characteristics. The First thing to point out is this; WeWork is not a tech company! News Flash. I know this may come as a rude surprise to many...and despite the narrative and musings of a truly voluminous S-1 to the contrary (> 350 pages), the WeWork vision and version of the co-working ofc. space business is not transforming our consciousness and vision on how we all work… What Adam Neumann and WeWork wanted you to believe, however, was that he and his firm were transforming the very way we all work and we’re “building community” fostering some new form of “collaboration,” and so on In other words, if you accept WeWork’s view of the world, it’s basically like saying your bus. model is the equivalent of “boiling the ocean.” Doable? How does that sound as an investment opportunity? In the real world, renters of commercial ofc. space desire functionality, convenience and flexibility at a reasonable price – All before this nebulous creating community nonsense. It’s common sense and bottom line thinking in which any business must engage. Again, not a new phenomenon or metric of the commercial ofc. space market, correct? The WeWork Business Model in About Two and a Half Minutes: What is the WeWork business model at its core? How does the company actually derive/earn revenue? Let’s examine the fundamentals. In short, WeWork creates a marketplace for commercial property that seeks to match the supply of commercial office space (from landlords, comm. Bldg. owners, prop. mgt. companies) with space users (those renting) in one place. You know, like Regus, w/o the “cool factor” and Kambuca on tap – and, oh yeah, billions from SoftBank So, WeWork signs long term leases on properties and also purchased some properties outright, sometimes just a floor or two in an office building—and transformed it into smaller offices and workstations with common areas, other amenities and offered a basket of shared services. Avg. initial lease term is 15 years, according to the S-1 Filing. It then rents offices and desks to individuals or groups on relatively short-term agreements, who want the benefits of a fully stocked office with some functional common areas, but without the expense of operating a full office. Sounds reasonable. WeWork calls it clients “Members” and sells Memberships Memberships can be On-Demand; provide access to shared workstations or private spaces as needed, by the minute, by the hour or by the day. “Space-as-a-Service platform. Enterprise Memberships are signed with organizations with 500 or more employees – As of June 2019, WeWork’s Enterprise Memberships accounted for 40% of all Memberships Capital expenditures relates to creating Workstation Capacity + other improvements WeWork also has utilized the services of a few major third-party Com. RE management firms like JLL and CBRE to facilitate leasing of the space it owns or leases itself. Risk Assessment: So, let’s step back for a moment and summarize: WeWork incurs rent liabilities and payment liabilities for its properties that are fixed pmts. and long term. Its revenue, on the other hand, is generated from the short-term contracts it signs with clients, many month-to-month. Let’s stop here and identify one of the major risks that becomes very obvious in the WeWork business model, has always existed, and is potentially huge? The possibility for a significant C.F. timing mismatch between the long term, fixed payment liabilities WeWork carries on its balance sheet vs the short-term agreements with clients that represent its primary source of revenue and cash flow. (to pay those property liabilities and cover bus. expenses) More specifically, the risk I have identified is renewal risk and/or non-payment risk. I don’t know the avg. term that clients have signed up for; i.e. renting monthly, for 6 months or a year (to obtain the flexibility they desire)? SO, renewal rates are directly dependent upon a firm’s ability to provid great service, Completely independent of the mission of “transforming the way we all work, collaborate, etc. Presents the classic CF squeeze that can occur if things do not go as planned The rent or loan payments are due every month, fixed, for many years. (Avg. 15 years) My diligence questions upon reviewing this business risk would include the following: What is the avg term of your rental agreements? i.e. – how long are clients signing up for space on avg? (allows one to see a schedule of lease renewal dates) What is the historical renewal rate experience? (After all, WeWork has been operating under this model since 2014 – it’s not new – should be readily available data) Alternatively, What’s the churn or non-renewal rate? This analysis, with the historical experience, provides one with a semblance of margins generated and whether there is EVER a path to profitability – and ability to service the lease/debt payment obligations. So, that is the WeWork business model in a nutshell – Providing flexible ofc space with some common area, amenities and services... How should such a company be valued? Well, like most any company – by the cash flows that it generates from operations…right? A basic “smell test,” that should have been a reality check, a wake-up call evident to anyone analyzing WeWork was presented by Professor Ilya Strebulav’s (Stanford valuation model creator and author) from his June 2016 presentation to the SVOD. Again, please refer to the Show Notes for a link to the video. I highly recommended you watch it. Link to Video: Presentation at SVOD (Sil. Valley Open Doors Conf.), June 19, 2016 by Ilya Strebulav, author of the Study and Professor, Stanford Univ. Grad. School of Business: Link to Stanford University Study: Squaring Venture Capital Valuations with Reality - Downloadable pdf found here: (Social Science Research Network – SSRN) Here is what Professor Strebulav points out in his presentation regarding WeWork: On March 1, (2016) WeWork closed a $430MM round of capital at a post-money valuation of $16B. That is the valuation that the WSJ and others printed and reported the next day as the “value” of the Company He notes that, At this valuation, WeWork would have represented the 3rd most valuable publicly traded ofc landlord (if it were publicly traded). Even though it controlled only small fraction of the sq. footage compared to the leading companies in the sector. Remember, by the time WeWork filed for its IPO, it represented that it was nearly triple that ($47B) Such a valuation makes no financial or intuitive sense…based on what we know of the business model, as practiced by its “peers” in the sector (Regus) – And, set against the sq. footage it operated. This valuation it obviously what investors and some I-banks thought they could get leading up to Sept. 2019 when WeWork was indicating a $47B valuation go-public offering. A reading of WeWork’s S-1 filing, if you could stomach it, is mostly an exercise in fantasy-land thinking. What are some of those “other” public firms that WeWork’s valuation mirrored or exceeded at the time of its S1? Brookfield Asset Management - CAN (> 152M retail s.f.; 300M s.f. ofc, hotel, apt.; Mtk Cap - $51B; highly profitable) As of June 1, 2019, WeWork’s location pipeline included approximately 40 million “usable” square feet, which it estimates could accommodate approximately 724,000 workstations. Again, this is “Pipeline” of “Useable” s.f. not actual rented and under management square footage. How VCs Make Final Investment Decisions: Ask any associate or partner at a VC firm to divulge one of the key criteria they evaluate before making a decision to invest in a tech company – The answer you will receive most often, if not unanimously, is; Quality of the Management Team. Can this team move this co. forward to success? I know this b/c I’ve been asking VCs this question as part of my investor diligence for more than 15 yrs – it’s required understanding before our venture debt group would approve making a loan to the companies we considered…VCs bet on management teams in the end… It seems this key tenet of the VC decision process was thrown to the wind in the case of WeWork…and many other unicorns. Perhaps it was the lure of all the SoftBank dollars pouring in through a firehose? Either way, the process was tainted and distorted. Thus, we cannot lose sight of the unmistakable role of SoftBank in fueling this craziness – and the related poor VC decision making – in light of the bankrolling on steroids in which SB engaged – driving up the “on-paper-only” valuations of the companies in its portfolio. While examining SoftBank’s Vision Fund activities is worthy of an episode of its own… one can certainly read all the commentary and articles on your own… Failure of the Tech Media: Yet, in May of 2019 only a few months before WeWork pulled its IPO, here was PitchBook, with another fawning piece expressing total amazement at the killer valuation growth of some of the most bad-ass unicorns, including WeWork. They were so giddy they could hardly contain themselves.. In another Weekend Pitch edition, “When your valuation is growing by nearly $1 billion a month, you must be doing something right.” [They were referring to DoorDash] “It calls to mind a stretch experienced a few years ago by WeWork. Today, WeWork is reportedly worth $47 billion, making it the most valuable VC-backed company in the US.” Amazing, isn’t it? Again, no supporting analysis, no bus. model assessment, no risk assessment – just sheer amazement at valuation growth based upon a faulty measure of Value – the post-money valuation! And from my last Episode, this is worth repeating - PitchBook Weekend Pitch from Nov. 3, 2019: “For a long while in and around Silicon Valley, unprofitability was what every startup hoped to achieve. And if losing hundreds of millions of VC dollars was cool, then Adam Neumann was Miles Davis.” Really? Are you kidding me? This is post-IPO cancellation, post Andy Neumann is toast and post-SoftBank rescue package! This is your expert analysis that PitchBook is charging for? PitchBook continues, “But these days, in the wake of WeWork’s sudden fall from grace, investors are feeling differently. All those years of red ink are finally adding up.” Again, the only redeeming thing I could take from such a ridiculous statement is that the writer even knows who Miles Davis is. But then I realize, the whole thing is an insult to Miles Davis and our intelligence. Miles Davis was a musical/jazz genius, a master artist. Adam Neumann was a fraud. And the VCs in the WeWork deal should have known this through their diligence. Hey, I’ve got another survey question or two for the VC community that I would ask; 1) is losing 100’s of millions of VC dollars a cool thing? 2) Do you agree that every startup hopes to achieve this “unprofitability” status? That’s what PitchBook suggests…as recently at Q4 2019 e.g. - CB Insights CEO, Anand Sanwal, opined in an August 2019 piece that it (unicorn status) is often used as a scheme to attract top talent in a very tight hiring market for key tech talent… Of course, Sanwal also said this in a June 25, 2019 presentation he gave to partners, investors, supporters: “Blockchain is a buzzword looking for a problem…” Another example of the disconnect… My Takeaways/Conclusions: What can we deduce and learn from all of this? This is a bubble in private co. tech stocks – it’s an artificial inflation of valuations due primarily to a non-standard, faulty method of applying valuations – the Post Money valuation - Bubbles can only be created and progress toward a bursting point if they are embellished and fueled by those perpetuating the non-market, non-fundamentals approach to value. There is no more disconnected phenomenon today in private tech than the post-money valuation. Enter SoftBank Vision Fund: They provided the fuel necessary Disappointments to share value after tech unicorns go public will be the norm, not the exception. Luckily for investors in public companies – we don’t have to suffer through trail of tears on WeWork – they didn’t make it that far and with good reason…as outlined in this Episdoe. Not so lucky, however, for WeWork employees with worthless stock options… My Recommendation/proposal: All private tech company valuations should be run through the Stanford Univ. Valuation Model prior to any kind of exit – I believe it should be made an integral part of the S-1 filing process. Or any time the value of a private tech company needs to be certified for audit or other purposes. These companies owe it to their employees who are provided, in many cases, with near worthless Common stock or options for common. Thank you for joining me for this edition of DVC. I hope you found the topic interesting and useful. I am currently working on the DVC website. In the meantime, Please send questions and your comments regarding today’s episode to: Again, check the links in the Show Notes for the Stanford Valuation Model Study and the video of Prof. Strebulav’s 2016 presentation to SVOD… Stanford University Study - Summary of the Findings – From Study Abstract: Developed a valuation model for venture capital-backed companies and applied it to 135 US unicorns - private tech companies with reported valuations above $1 billion. Valued unicorns using financial terms from legal filings, finding that reported unicorn post--money valuations average 48% above fair value, with 14 being more than 100% above. Every Company reviewed and valued, (100% of the Sample) was overvalued to some degree – that means not one company came in at the post-money valuation utilized by the VC industry Values were calculated for each share class, which yields lower valuations because most unicorns gave recent investors major protections such as initial public offering (IPO) return guarantees (15%), vetoes over down-IPOs (24%), or seniority to all other investors (30%). According to the authors, “Overvaluation arises b/c the reported valuations assume all of a company’s shares have the same price as the most recently issued shares.” Even though each new round of funding effectively sucks the value out of prior rounds through seniority and superior rights, among other preferences. /episode/index/show/markwking/id/15495881

Episode 005 – UNICORN-MANIA - Redux; Failure of the Tech Press; The Sagas of WeWork & Uber 07/22/2020

Episode 005 – UNICORN-MANIA - Redux; Failure of the Tech Press; The Sagas of WeWork & Uber Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech landscape. And provide you with information you can use Opening Observations: In Today’s Episode I return to what I have termed Unicorn-mania, building on the subject of my first episode in March. So, it will be a Unicorn-mania Redux. I’m returning to this topic b/c, well, we need to revisit it primarily b/c things seem to be sliding further toward the insane, literally with each passing week. And, I will talk about the continuation of this insanity in the context of some real-life examples: The true poster-kids for “Unicorns are not real”… Specifically, I’ll provide insights into WeWork and Uber, and the unmistakable role played by Softbank’s Vision Fund in helping to fuel the craziness. And, let me say from the outset, how disappointing it is to see the technology press and the data analytics firms like CB Insights and Pitchbook (a Morningstar Co.), continue to engage in this ridiculous charade. I am going to get into some examples of that in a moment. Suffice it to say, that if you have a subscription to one of these firms, my analysis may leave you questioning what value are getting for the money… To begin, let’s quickly review what I covered and highlight a few take-aways from Episode 1 of Unicorn-mania; I outlined and highlighted the hype that characterizes VC and techland today with respect to overvalued, so-called Unicorns – companies alleged to be worth $1B+ I also highlighted the Stanford Univ. Study, Squaring Venture Capital Valuations with Reality, that reveals and proves that so-called Unicorn tech companies are substantially overvalued – and offers a valuation model that really works in valuing theses companies The Study dissects and debunks the use of post-money valuation as nothing short of an illegitimate method for valuing any company, let alone VC-backed private tech companies. Before I go further into the topic, I am going to strongly encourage you to please refer to the Show Notes for this Episode to access links to the following: Link to Stanford University Study: Squaring Venture Capital Valuations with Reality - Downloadable pdf found here: (Social Science Research Network – SSRN) Link to Video: Presentation at SVOD (Sil. Valley Open Doors Conf.), June 2016 by Ilya Strebulav, author of the Study and Professor, Stanford Univ. Grad. School of Business: Original Version of the Study was submitted and published April 19, 2017; However, the findings were presented about a year earlier in June 2016 at SVOD Conf. (Silicon Valley Open Doors) Where Prof. Strebulav was the Keynote Speaker (I encourage you to got to the link and watch it. It’s < 20 minutes) Summary of the Findings – From the Study Abstract: We develop a valuation model for venture capital--backed companies and apply it to 135 US unicorns, that is, private tech companies with reported valuations above $1 billion. We value unicorns using financial terms from legal filings and find that reported unicorn post--money valuations average 48% above fair value, with 14 being more than 100% above. Every Company reviewed and valued, (100% of the Sample) was overvalued to some degree – that means not one company came in at the post-money valuation utilized by the VC industry Values were calculated for each share class, which yields lower valuations because most unicorns gave recent investors major protections such as initial public offering (IPO) return guarantees (15%), vetoes over down-IPOs (24%), or seniority to all other investors (30%). According to the authors, “Overvaluation arises b/c the reported valuations assume all of a company’s shares have the same price as the most recently issued shares.” Even though each new round of funding effectively sucks the value out of prior rounds through seniority and superior rights, among other preferences. Common shares lack all such protections and are 56% overvalued. After adjusting for these valuation-inflating terms of the Preferred rounds, at the time of the Study, almost one-half (65 out of 135) of unicorns lose their unicorn status. Stanford Study Pre-work: In 2016, prior to publishing the Stanford Univ. Study, Strebulav and his team of researchers surveyed, as part of their work, more than 1,000 VCs regarding valuations. It was the first survey of its kind: Result; 92% of respondents of the VCs surveyed agreed unicorns are over-valued; A whopping 75% believe unicorns are significantly over-valued AND, as I noted in Episode I, did you ever notice that the PE industry doesn’t have an equivalent designation (Unicorns) for its $1B+ value companies, even those that are in the tech category? Why this study’s findings are not a wake-up call to the industry is currently a mystery to me. Who Cares? To demonstrate that my concerns and the opinions I’ve expressed, that Unicorn-mania is a total distraction, a waste of time, as I stated in Episode I, are not just some overly-dramatic soap-box issue I am on… Turns out, I am in some pretty impressive company, actually – with respect to my criticisms of the mania. Let’s take a look: All of the examples are from the 4th Quarter of 2015, when some rather prominent and accomplished investors and tech company leaders had begun calling BS on Unicorn valuations, even before the real Mania commenced in earnest over the last several years: Marc Benioff, Chmn and CEO of Salesforce, Dec. 2015 on Bloomberg TV stated, “The unicorn mania that’s going on, that’s dangerous for our Silicon Valley economy," “this is just, you know, unheard of... It’s become a self-esteem issue for these entrepreneurs.” Benioff states to the SF Bus. Times, also Dec. 2015: “I’m not buying the unicorn theory…" There's no reason [for] these companies who claim to be worth billions of dollars and making billions of dollars to stay in the private markets." Benioff asserted that some billion-dollar valuations are the result of "manipulation" of private tech markets and again called on founders to go public to "rationalize" their worth. Suggesting, by implication, that these values are not rational! Legendary VC John Doerr, who joined Kleiner, Perkins, Caufield in 1980 – [did they even call it venture capital back then?] – In the same 12/7/2015 SF Bus. Times article Doerr pointed out, “Google has acquired one company per week since 2010 but has only five times paid more than a billion dollars for a company,” Doerr said. “There are 150 companies considered unicorns, 93 are in the United States. How does that math work?” Great Q indeed! I suggest it doesn’t, b/c it’s not about the math but rather about the hype. Bill Gurley, another highly respected and accomplished VC veteran from the Valley and Founding partner of Benchmark Capital. In Oct. 2015 at the WSJ Laguna Beach Tech Conf. stated, "All these private valuations are fake. ... It's all on paper, it's all a myth," "Anyone that's raised $400 million is probably spending $100 million a year," he said. "Until you get liquid, you haven't really accomplished anything." And finally, Mark Suster, a voice I respect a lot in the industry. He has been a Managing Partner at Upfront Ventures since 2007. Suster puts out one of the better blogs in venture called “Both Sides of The Table” in which he dispenses and provides excellent, valuable, how-to and other advice for start-up entrepreneurs on a whole range of topics – you should check it out. Well, back in a Sept. 2015 piece that he published on his blog, Mark does not hold back with his sentiments regarding Unicorns stating, “There’s no one sane I know any more who doesn’t privately say that things have gotten out of hand. Few like to say so publicly. And I blame unicorns. Mark is very clear that he’s not referring to what he identifies as “successful” companies themselves but “the entire bullshit culture of swashbuckling startups who define themselves by hitting some magical $1 billion valuation number and the financiers who back them irrespective of metrics that justify it. Unicorn has become part of our lexicon in a sickening way and will no doubt become part of the history we tell about how things got so out of control again. 10 years from now people will be embarrassed to say unicorn.” Well, we are about 5 years out from those highly critical assessments from some really smart people in the industry. Unfortunately, the sane voices of these reputable tech titans from late 2015 have gone under-reported or unreported in recent years. Which, I guess, is a primary symptom or characteristic of a “Mania” itself – delusional thinking…prone to exaggeration, denial and so on, but I’m no doctor…so I’ll leave that diagnosis for others to ascertain. I stated in Episode I in March, It Is a big distraction from what’s really important in evaluating and valuing venture-backed tech companies. We’ve been completely DISTRACTED for nearly 5 consecutive years since the warnings and criticisms of this mania in 2015 by key, reputable industry players in VC and tech. And, that’s despite the publication and dissemination of the most conclusive, comprehensive accurate study ever regarding what the valuations of these companies really are. Here’s the central problem – The $1B+ valuations ascribed to so-called unicorn companies are not true market valuations at all. They all utilize a metric called “post-money valuation” that inflates their value. As stated, the Stanford Univ. Study found 100% of all unicorns are actually over-valued to some degree when applying proper market valuation metrics based upon the terms and conditions found in the Preferred Stock rounds The Post-money valuation methodology is like an alternative universe, or worse, when it comes to valuing private tech companies. This should not be the case. The multitude of preferences, IPO kickers, and other terms and conditions attached to these preferred rounds have no relationship to company fundamentals and performance. Again, I understand why many are being negotiated…b/c of the high risk and probability of failure in the VC model. So what Strebulav and Gornall had to do in building their model was to be able to identify and value all of the disparate Ts & Cs underlying all the different Preferred rounds, each with differing economics, rights and conditions by round. This was a rigorous and complicated undertaking. They have done the industry a great service the development of this model. One of The Study’s major conclusions: “Our results show that equating post-money valuations and fair values is inappropriate.” AND, “Marking unicorns to their most recent round’s price leads some venture capitalists to overstate their funds unrealized value. Unrealized asset values are an important determinant of future fund-raising.” Most LPs revealed to the Study’s authors that most VC funds mark all of their investments to the most recent round’s price. It might be understandable why an unsuspecting public might not get the full risk impact of this, one wonders why major, sophisticated LPs put up with this nonsense… Mutual Fund filings show that almost all of the major mutual funds tend to hold their private VC-backed assets at the post-money valuation. Where are the Real Journalists? On the Media side - There exists an almost a schizophrenic-like behavior exhibited by the technology press in its years-long coverage of unicorns; To be sure, at the beginning there were some real attempts by a handful of outlets to highlight the findings of the Stanford Study, which were astounding; e.g. - CB Insights CEO, Anand Sanwal, opined in an August 2019 piece that it (unicorn status) is often used as a scheme to attract top talent in a very tight hiring market for key tech talent… PitchBook Weekend Pitch from Nov. 3, 2019: “For a long while in and around Silicon Valley, unprofitability was what every startup hoped to achieve. And if losing hundreds of millions of VC dollars was cool, then Adam Neumann was Miles Davis.” Really? Are you kidding me? This is your expert analysis that PitchBook is charging for? PitchBook continues, “But these days, in the wake of WeWork’s sudden fall from grace, investors are feeling differently. All those years of red ink are finally adding up.” The only redeeming thing I could take from such a ridiculous statement is that the writer even knows who Miles Davis is. But then I realize, the whole thing is an insult to Miles Davis and our intelligence. Miles Davis was a musical/jazz genius, a master artist. Adam Neumann was a fraud. And the VCs in the WeWork deal should have known this through their diligence. So, my criticism is reserved for the adults that allow this nonsense to continue, followed closely by some of the more youthful folks who are in senior roles at the data analytics companies (CB Insights, PitchBook) and write the articles for TechCrunch, Wired, Crunchbase, et. al. Whether you realize it or not, you are on a path to making yourselves irrelevant, in my opinion. Your so-called analysis is not widely recognized as providing rigorous, meaningful, and dependable insights and analytics regarding what’s really going on in tech. It’s more like click-bait tactics to get noticed and get “likes” than demonstrating some actual skill and expertise as to how firms should be evaluated and valued by those making the investment or managerial decisions…What are your subscribers actually paying for anyway? Further, as stated in Episode 1, It’s a Consumer Protection Issue: Definitely NOT a soap box issue! A number of the largest US mutual fund companies (Fidelity, JH, T. Rowe Price and Vanguard) have invested directly in private co. unicorns In 2015, Fidelity > $1.3B into unicorns! That’s more than any single US-based VC fund invested, in total, that year. Including $235M in WeWork, $129M in Zenefits – A company that hired too many people, grew too fast, and the company culture spiraled out of control, and $118M in Blue Apron, the food delivery startup that IPO’d in June 2017 and is now looking for a buyer… The common thread on all these investments by major mutual fund companies? Use of the meaningless post-money valuation to value these private tech company assets in their portfolios. It’s Mind-boggling to think that this is the valuation methodology used… Incredibly, they have accepted and used these meaningless valuations to mark their holdings of these private tech companies w/o further analysis – a completely irresponsible methodology. It surely doesn’t inspire confidence in their ability to perform proper valuation analytics Where’s the adherence to the fiduciary responsibility of these investment firms to their clients? There are real financial implications for any retail investor in a mutual fund (401k or directly) related to this high-risk category. How about institutions? Univ. endowments, public pension funds, etc.? Are mutual fund companies fully disclosing real risk of this asset class to their retail investors? Accurately? How so, if at all? (e.g. – Fidelity had to recently write down its WeWork holdings to reflect the difficulties the company has “reported” after the cancelation of its IPO.) Where are the Regulators? The SEC… Sagas of WeWork and Uber They represent some of the many Poster-Kids for, Unicorns aren’t real I want to take a look at Uber first then we’ll talk about WeWork. Uber went public in May of 2019, so a little over a year ago. It priced its shares at $45 upon IPO The IPO was billed as the largest of 2019 as Uber sought to go out at greater than $100B with $120B even suggested by some of the I-Banks underwriting the deal. However, what’s intriguing is to evaluate, are the Uber valuations in the years leading up to its IPO – In fact, Strebulav Stanford Study authors, posted to Linkedin in early 2018 that they extended their analysis to re-value Uber after a deal it closed at the time with SoftBank – we are in Jan. of 2018, more than a year before Uber’s IPO. Basically, a consortium led by SoftBank and prior investors, they were purchasing about $8B worth of Uber Common and some early preferred shares in a tender offer for about $34/share AND; An additional $1.25B consideration for some Series G-1 shares for $49/share. Based on the deal terms and details analyzed, it was determined that the Series G-1 shares I just mentioned, being purchased at $49/share, had no special features or terms making them worth more than Common shares. So, why the 42% mark-up as part of this transaction? Conclusion: My Recommendation/proposal: All private tech company valuations should be run through the Stanford Univ. Study Model prior to any kind of exit or any time the value of a private tech company needs to be certified for audit or other purposes. These companies owe it to their employees who are provided, in many cases, with near worthless Common stock or options for common. In the interest of time and also to provide a proper analysis, I prefer to save WeWork’s story and saga for my next Episode. Thank you for joining me for this edition of DVC. I hope you found the topic interesting and useful. I am currently working on the DVC website. In the meantime, Please send questions and your comments regarding today’s episode to: Stay tuned for my next Episode, in a few days, where I will pick back up with discussing and analyzing WeWork’s saga, … Thank you for joining me for this episode of DVC… /episode/index/show/markwking/id/15312932

Episode 003 - FOCUS-ON-FINTECH Series: Frederico Rizzo, Founder & CEO, Basement.io São Paulo, Brasil (A first-hand look into Brazil Fintech and why it’s attracting record investment) 06/25/2020

Episode 003 - FOCUS-ON-FINTECH Series: Frederico Rizzo, Founder & CEO, Basement.io São Paulo, Brasil (A first-hand look into Brazil Fintech and why it’s attracting record investment) Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world, including Fintech. My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape. And provide you with information you can use. Episode Introduction: Today’s Episode is another in my Focus-on-Fintech Series where I bring you a close-up look into companies in the sector and the innovations they are bringing to the market Given that Fintech is global movement and phenomenon that is changing, for the better, the way we participate in and get finance done around the world, one of the hottest places on the globe for Fintech investment today is Brazil. In today’s Episode, I delve into and distill down why Fintech is attracting such interest and investment in Brasil Fintech in Brasil: The Basement.io Story To help me do that, I am pleased to be joined today by Frederico Rizzo, Founder and CEO of Brazilian Fintech company, Basement, based in São Paulo, Brasil. Basement is a fintech company leading the way in Brasil related to innovation in the investment sector, providing a platform for individuals to invest in SME private companies and other services. Frederico, thank you very much for joining me today. Please tell us a bit about what Basement does, when and how you got started, and the reasons that motivated you to create the company. What was the impetus, motivation for the formation of Basement? What is the story around the company name Basement? What is the opportunity or need for Basement to collaborate or partner with other major financial or investment institutions? Is it necessary for success in your business model? Can you Provide a short history of the role of credit and equity in Brasil…Brasil has not historically had “deep” credit markets. This access to financing is simply not available to well-managed SMEs. You must be a big corporation and listed publicly to get access to credit at reasonable interest rates… Meaning, if you weren’t a large corporation with access to the public stock market, you really couldn’t raise capital – you had to grow your business with cash – which means limiting and constraining your growth. Fintech in Brasil, é Muito Quente (is super-hot) What is driving this? One reason is a result of concerted effort by the key financial governmental regulatory bodies in Brasil over the last 1-2 years to move toward open, digital banking through open data sharing mandates… What does this mean? CVM – Comissão de Valores Mobiliários; Brazilian equivalent of the SEC The Brazilian Central Bank and the National Monetary Council set out open banking regulations earlier (May 2020). The data-sharing framework aims to foster financial inclusion, drive competition in financial services and increase security. “The premise is that the personal data held by banks and other financial institutions do not belong to them, but to the respective holders, customers,” according to Marcelo Chiavassa, professor of digital law at Universidade Presbiteriana Mackenzie Campinas Financial institutions must begin adhering to new rules stipulating that data belongs to individuals, says Maristela Martins, country manager for Brazil at Backbase. That means that clients’ journeys will need to include explicit, simple, quick and secure consent agreements. Other Comments on Brasil Credit Markets: In recent posts you written, you have noted some delays in certain key regulatory initiatives on the private investment front. Can you describe what those are and what, in your view, needs to be done to move forward? How important are these regulations for Brasil, in your view? The Basement Business Model & Business Model Characteristics You offer several services, please elaborate on the services offerings of Basement Cap table management and valuation services Ultimately an alternative exchange, but it’s the early days and that will take time Growth Prospects for the Basement Business? Huge addressable market; Two main things: 1st, Regulation changes that are already in motion have to move forward. We work closely with the regulators in this regard. 2nd big challenge is the go-to-market. Learning a lot along with the market. Education, product-market fit, channels. We are testing all of this After 6 years in the market we know a lot of intermediaries – funds, angel groups, accelerators, lawyers – so we are trying to build the channels and go-to-market. We knew early we couldn’t have the type of venture model where we scale fast so we’ve spent 6 years developing. That’s been the best approach – almost boot-strapping model We’ve raised about 4 rounds; have over 300 investors, the huge majority with no control. A very healthy cap table in our perspective. It’s all about execution now. Now for us, the next 12-18 months, we have what we need to execute and develop a great go-to-market strategy. Competitive Advantages Describe the competitive landscape, relative cost/pricing structure and how you leverage your expertise to bring a compelling value proposition to clients Other competitive advantages, differentiation… Closing Remarks: Frederico, thank you very much for joining me today. I would love to do a follow up sometime as you progress and things are going. We will ultimately become a Delaware co. eventually to get closer to a bigger market – in terms of capital structure. Contact Information, Basement Frederico, How can those seeking additional information and wishing to learn more about Basement contact the firm? Website: www. basement.io Frederico Twitter: @Frederico.rizzo Linkend also as Frederico Rizzo Thank you for joining me for this edition of DVC. I hope you found the topic interesting and it gave you some things to think about regarding how to implement successful Fintech services. I am currently working on the DVC website. In the meantime, Please send questions and your comments regarding today’s Episode to: Stay tuned for my upcoming Episodes in which I am going to provide a follow-up to Episode 001, Unicorn-Mania. We’ll do a Unicorn-mania-II Redux where I will dig into and discuss the sagas of WeWork and Uber in the context of Unicorn-mania. And, I’ll be bringing more episodes highlighting the Fintech sector in Brasil with other innovative companies that are changing the financial services landscape in Brasil. Thank you again and I look forward to joining you for my next Episode of Distilling VC. /episode/index/show/markwking/id/14951867

Episode 002 - FOCUS ON FINTECH Series: Federico Baradello, Founder & CEO, Finalis (1st modern broker-dealer & priv. M&A platform with customizable deal technology) 06/16/2020

Episode 002 - FOCUS ON FINTECH Series: Federico Baradello, Founder & CEO, Finalis (1st modern broker-dealer & priv. M&A platform with customizable deal technology) Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world, including Fintech. My mission is to cut through and go beyond the hype that tends to dominate the tech and VC landscape. And provide you with information you can use. Episode Introduction: Today’s Episode is part of my Focus-on-Fintech Series As background, When we talk about Fintech, Financial Technology, many in the sector think of technologies being deployed by startups in the areas of payment solutions (Transferwise, Square, many international players), peer-to-peer lenders (Lending Club, FundingCircle, Prosper, SoFi), digital banking – neobanks (many by non-banks), wealth management – robo advisors (Robinhood), AND also insurance-tech and real estate-tech, where the processes in those industries are being automated with technology, blockchain, smart contracts, AI, etc. There are many examples… I have the pleasure today to be joined by Federico Baradello, the Founder and CEO of Finalis. Finalis is a visionary company that is revolutionizing the way private deal making and M&A gets done. Thank you Federico for joining me today… One of the things that intrigued me about your business model was when I read a post you published near the end of March I happened to see on Linkedin. You brought into focus and pointed out statistics regarding the private M&A industry that I had not really paid attention to before as a huge Fintech opportunity… You drew the comparison and contrast of how there has been very little VC investment to bring technology and innovation to the enormous broker-dealer/M&A deal process, unlike what has occurred in Real Estate Tech and Insurance Tech, which are similar in size to private M&A from a commission/fee revenue perspective US Totals Invested in Fintech: 2019 US Fintech investment - $59.8B; 2018 was $58B 2019 Real Estate Tech ~ $15B 2019 InsureTech ~ $12.1B Federico explains and discusses the reasons why the Investment Banking-private M&A business has attracted so little investment dollars (< $50 million) compared to the large sums raised by InsureTech and Real Estate Tech. You’ve pointed out that private deal-making is broken, noting that $4T+ of M&A and private placements are transacted operating on 1990s technology I thought it would be useful for listeners, [in the context of this dearth of tech/innovation spending in priv. deal M&A,] to take a few minutes to talk about the idea for and creation of Finalis. The Finalis Business Model & Business Model Characteristics You’ve described the Finalis model as a “broker-in-a-box” solution… and, the first scalable BD that automates and brings together streamlined, efficient processes for Compliance (FINRA, SEC) as well as deal-flow technology solutions… Solution – “Lease a broker-dealer-instead” model Create technology to automate the process rails for priv. M&A transaction from beginning to end – Federico Explains… How did your prior experience as a Deal Attorney and your understanding of the existing incentives native to I-banking business provide you with the vision for creating Finalis? It’s an execution-driven business Paper the process – law firms get paid by the process I-Banks are in it for the commission %, so incentivized to reduce costs and get to the close Thus, not inclined, incentivized to leverage technology; there is a resistance to change that gets in way of the closing processes… In a prior conversation, you described Finalis’ Mission as, to “Empower Deal Makers” and your Vision as, to be the “world’s largest distributed I-bank.” Also, to become the “first scalable broker-dealer” in the private M&A industry. Can you elaborate on what this vision/mission means and how you arrived at it based on your direct experience doing and documenting deals? Growth Prospects for the Finalis Business? Huge addressable market; How do you define the addressable portion you go after initially and strategies for executing? Private market deal-making was booming pre-pandemic and you’ve described the enormous size of the private deal M&A industry ($4T+). Do you have a view or prediction regarding what is in store for this industry post-COVID19? Competitive Advantages Describe the competitive landscape, relative cost/pricing structure and how you leverage your expertise to bring a compelling value proposition to client firms Other competitive advantages, differentiation… Closing Remarks: Company Name, Finalis; Federico provides an interesting account and story around where the name Finalis originated. Contact Information, Finalis Those seeking additional information and wishing to learn more about Finalis can visit the firm’s website at, finalis.com Other ways to reach out and engage… Thank you for joining me for this edition of DVC. I hope you found the topic interesting and it gave you things to think about. I am currently working on the DVC website. In the meantime, Please send questions and your comments regarding today’s Episode to: Stay tuned for my next Episode in the Focus-on-Fintech Series where I am going to provide insights and real examples of the extremely hot Fintech market in Brazil; I’ll explore why it has been attracting record venture investment at a rapid pace. I’ll be interviewing a São Paulo, Brasil-based Fintech company that is at the forefront of this rapid growth – that also happens to be focused on the private investment market. Stay tuned. Thank you again and I look forward to joining you for my next Episode of Distilling VC. /episode/index/show/markwking/id/14844335

Episode 001 - FOCUS ON FINTECH Series: Cryptocurrency Mining Explained - Aurum Capital Ventures (with John Paul Baric, Founder & CEO) 05/27/2020

Episode 001 - FOCUS ON FINTECH Series: Cryptocurrency Mining Explained - Aurum Capital Ventures (with John Paul Baric, Founder & CEO) Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype that tends to dominate the tech landscape. And provide you with information you can use. Episode Introduction: I would like to introduce Today’s Episode topic as follows; We hear a great deal about cryptocurrencies, mostly Bitcoin, and the impact they are having on the financial services and investing landscape, with respect to how we define money, e-commerce, make investments, and even what Central Banks are doing to authorize/issue their own digital currency or stable currency, etc. On the other hand, we don’t hear much or may understand very little about the derivation and creation of cryptocurrencies themselves. Where do they come from? What is their intrinsic value and utility? How is all of this accomplished? So, today We’re going to get into what I consider a very interesting segment of the crypto-currency world – Crypto-Mining - that we don’t often hear that much about but yet is vitally important to our ability to be able to utilize these digital currencies, digital assets to conduct financial transactions: Crypto-currency Mining To answer these questions and distill down our understanding of the crypto-mining industry, I am joined by JP Baric who is the Founder and CEO of an technology/energy company directly involved in multiple aspects of the crypto-mining industry, operating as Aurum Capital Ventures Aurum Capital Ventures is leading the way not only in the development and deployment of turnkey crypto-mining technology in the field…but also efforts to bring much needed liquidity and financing to the mining and cryptocurrency markets themselves… So, we’ll dig into those topics… Welcome JP and thanks for joining me today. To kick off today’s conversation, JP, perhaps you can provide a little background about the origins around the formation of your Company and identify its core goals and objectives. What you Will Learn in Today’s Episode: Define Cryptocurrency-Mining & How it Works The Future of Crypto-Mining Crypto-Currency and Crypto-Mining are Fully Transparent Markets, by Design The Search for the Best Equipment and Cheapest Source of Energy How Aurum Capital Ventures is Changing the Game and Mindset Regarding Crypto-Mining and the Production of Energy Aurum is Both a Buyer and Seller of Energy Aurum is Redefining How Energy is Consumed and Transmitted Aurum is Creating Unique Investment Vehicles to bring needed liquidity – both debt and equity capital – to the Crypto-Mining and Crypto-Currency How Crypto-Miners are Rewarded What is a Halving Event and What does it Mean for Cryptocurrency Mining? And Much More… Cryptocurrency Mining Explained Miners are, in effect, getting paid for their work as auditors. They are doing the work of verifying previous bitcoin transactions. It is said that, miners are, in effect, "minting" digital currency… By verifying transactions, miners are helping to prevent the "double-spending problem," a scenario in which a bitcoin owner illicitly spends the same bitcoin twice In addition to rewarding miners and supporting the bitcoin ecosystem, mining serves another vital purpose: It is the only way to release new cryptocurrency into circulation. In other words, miners are basically "minting" digital currency The primary draw for most Bitcoin miners is the prospect of being rewarded with valuable bitcoin tokens To earn bitcoins through mining, you need to meet two conditions. One is a matter of effort; one is a matter of luck: 1) You have to verify ~1MB worth of transactions. This is the easy part. 2) You have to be the first miner to arrive at the right answer to a numeric problem. This process is also known as, proof of work The integrity and value of crypto is predicated upon the ability of miners to confirm, validate a 1MB block We just had a pre-designed reduction in the reward that miners can earn when mining, referred to as a Halving Event: On May 12, 2020, Yesterday, the reward for mining Bitcoin just dropped from 12.5 BTC to 6.25 BTC, for validating a 1MB Block - This is what crypto- miners face all over the world. Block-halving is hardcoded into how Bitcoin operates. Its business as usual and it means that Bitcoin is doing exactly what it is supposed to do according to the original design of Satoshi Nakamoto. Halving Event - So, when we talk about miners being motivated and incentivized by being rewarded with Bitcoin for successfully delivering a proof of work, Describe what a “halving” event is and what it means – how it affects crypto-mining activity Why is There a Halving Event? There can only ever exist a maximum of 21 million bitcoins. Therefore, the reward for making new ones needs to be reduced periodically in order to bring sustainability to its value. That’s exactly what blockhalving accomplishes once every 210,000 blocks (roughly every four years). The creation of “mining pools” Business Problem that Aurum Capital Ventures is Solving Mining is a very capital and energy intensive business and is presently “oversupplied” globally Description of the main Business Problem Aurum solves – Its value proposition Where geographically are your major deployments? Discussion of Iowa, NY and other major installations Unique concept and approach to the energy component of operations Business Model Characteristics Your Bus. Model has Multiple Revenue Sources: Turnkey Mining Equip Deployments & hosting services; Speed & Efficiency through repeatable process of Power procurement, infrastructure deployment, and remote management Running your own Mining servers Managed Services Selling used equipment to established network Defining and Solving the Capital Procurement Obstacles of the Crypto-Mining Industry: One of your firm’s stated GOALS: There exists a lack of liquidity in the space. JP explains how Aurum is creating unique investment vehicles to enable institutional capital to enter the space to provide liquidity Launch Global Bitcoin Mining Fund to allow for better market liquidity and transparency in the sector; JP Baric Explains Securitization of mining hash rate (hash rate tokens); JP Baric Explains Launching vehicles like investment trusts and funds that offer investors exposure Goal: Enables Liquidity Unique Financing Approach: Issuance of secured, insured bond to finance equipment and projects Attractive risk-adjusted return characteristics for investors Opportunities for arbitrage in power contracts Providing increase in credit and capital to Aurum and the entire market Providing investment banks Mining, b/c it’s an infrastructure investment is easier for institutions to get into to than Bitcoin purchasing Not currently in the prospectus of the major Energy Funds to invest in energy consumption products – they are only focused on energy generation - Bitcoin is not part of their investment thesis. Allows exposure to underlying Bitcoin asset and mine Bitcoins at a discount relative to the volatile Bitcoin market price itself. JP Explains Competitive Advantages Modular, mobile equipment deployment – more efficient Rapid Payback/Utilization of “Stranded Energy” - Aurum’s mobile mining deployments profitably monetize any type of stranded energy anywhere in the world Situation where the value of the underlying collateral (mining equipment) can increase in value during life of the equip. and related financing, due to a halving event of Bitcoin Allows you to build inventory of equipment for deployment now, in advance of halving event that you know occurs approx. every four years JP Baric explains Aurum’s business model advantages relative to competitors such as Genesis Mining Closing Remarks JP provides an overview of where he sees things headed for crypto-mining industry in general… We’ve just had this Halving Event – what are some key things that happen next as it relates to Crypto-Mining? JP explains Aurum’s leverage, differentiation and its expertise to bring to market top equipment and energy sources required by Miners and the financial liquidity mechanism to make it happen – keeping with Aurum’s core mission Contact Information for Aurum Capital Ventures Those seeking additional information and wishing to learn more about Aurum Capital Ventures: JP’s Twitter Account – @JPBaric Sign up for Investor Newsletter at: Aurumcapitalventures.com Thank you for joining me for this edition of DVC. I hope you found the topic interesting and useful. I am currently working on the DVC website. In the meantime, Please send questions and your comments regarding today’s episode to: Stay tuned for my next Episode, coming very soon, where I will I am going to provide a follow-up to Episode 001, Unicorn-Mania, where I will dig into and discuss the sagas of WeWork and Uber in the context of Unicorn-mania. Thank you again and I look forward to joining you for my next Episode of Distilling VC. /episode/index/show/markwking/id/14589572

UNICORN-MANIA: The Valuation Follies 03/12/2020

UNICORN-MANIA: The Valuation Follies Introduction Welcome to Distilling Venture Capital. I am your host, Bill Griesinger Distilling VC is a visionary podcast that provides an insightful and informed view of the key trends affecting the VC and tech startup world. My mission is to cut through and go beyond the hype and Silicon Valley pop-jargon that tends to dominate the tech landscape. I seek to provide transparency and Opening Observations: Given that this is my inaugural episode under the Distilling VC label, I thought it would be appropriate and useful to provide you with some brief background regarding the podcast and the type of content you can expect in the future and a little about me… First, the podcast; The vast majority of episodes I will bring will take you inside the insights, challenges, successes and the journeys revealed and shared directly through the words and experiences of tech company entrepreneurs, sometimes from the VCs who back them and others in the tech and VC community…So, I’ll usually have very interesting guests. Some brief background on me, your host: I have spent a large part of my professional life (last 20 years) working in the Venture Finance business assisting VC-backed tech companies in procuring the capital they need to grow Over the years, I have had the opportunity and good fortune to meet and work with incredible, visionary management teams, many savvy investors and have had the privilege of underwriting and financing ground-breaking technology companies, many of which continue to have an impact on the technology landscape today (like Google; a $10M deal in 2001, for example). With that as backdrop, today I want to focus on a topic that I believe signals something has gone awry in tech startup and VC land over the last 4-5 years. And it concerns me greatly. Have you noticed, Everyone seems to be fascinated with “unicorns?” Venture capitalists, tech company founders and management teams, the tech press and the financial press and many others, So, today’s episode will delve into and distill down, “Unicorn-mania” so we can make sense of what’s really going on. Let me state for the record, It Is a big distraction from what’s really important in evaluating and valuing venture-backed tech companies. Furthermore, it really touches upon the issues of transparency and accuracy, and ultimately the credibility of the industry itself, in my view The longer this mania continues, I believe it presents dangerous consequences for multiple players inside and outside the VC industry. So, what am I talking about? Let’s unpack this… First, some definitional context: What is a Unicorn company that we hear so much hype about today? In tech and VC parlance, it is a private startup tech company that is valued at $1B or more, in theory, referred to as its “Post-money Valuation.” Great, what does that mean? Not what you may think it does, as I will explain… And for historical context, The term unicorn, in VC, originated…in late 2013 when Cowboy Ventures Partner, Aileen Lee, coined the term for what she described as a tech company with a $1B valuation – and noted it was a pretty rare thing, as she pointed out then – which was correct. There were 39 companies identified then in the ‘Unicorn Club.’ 27 of those were in the Bay Area! So, it really was just a Silicon Valley phenomenon in the beginning… Lee admitted the term probably wasn’t the best or most well-thought-out description but went with it nonetheless. “Yes we know the term “unicorn” is not perfect – unicorns apparently don’t exist, and these companies do – but we like the term because to us, it means something extremely rare, and magical” Aileen Lee, Cowboy Ventures, Nov. 2013 The term was reinforced further in a 2015 interview with Crunchbase, and it has unfortunately, been with us ever since, to the detriment of the industry, in my view. The Cowboy Ventures’ website, even contains, to this day, a link to what it calls its “Unicorn Handling Guide” or protocol insisting that anyone using the term give proper attribution to the firm. No one actually adheres to this “guideline” today, of course – but there it is. This is not to malign or denigrate Cowboy Ventures as a reputable VC firm in any way. It is, by most measures, a successful venture firm boasting a number of impressive investments and it has had a substantial number of notable exits, which you can find on their website. So, I’m sure their LPs and their portfolio companies alike are pleased… The real issue is not about Cowboy Ventures at all…but rather a group-think mentality that has gripped and permeated venture capital…with no discernable benefit… How Many Unicorns Are There? It depends on who you ask & upon whose data you rely: (Q2 2019), there were around 450 companies globally designated as ‘Unicorns’ Fast fwd to Feb. 2020 and it’s alleged to be 580! Valued at ~ $2T (From Recent Crunchbase Unicorn Leaderboard) Q4 2019 CB Insights states there are about 390 (CB Insights) Roughly 48% to 50% are in the US About 24%-25% are in China UK and India come in 3rd and 4th with roughly 5% each Here’s the central problem – The $1B+ valuations ascribed to so-called unicorn companies are not true market valuations at all. They all utilize a metric called “post-money valuation” that inflates their value. In fact, based on a Stanford Univ. Study, which I will dig into in a moment, 100% of all unicorns are actually over-valued to some degree when applying proper market valuation metrics based upon the terms and conditions found in the Preferred Stock rounds. There is both Good News and Bad News to report with respect to this phenomenon: The Good News: There is a solution, a remedy, if you will, for this self-inflicted malady of unicorn-mania. It is The Stanford Graduate School of Business Study - And it has been readily available for several years. Stanford GSB (By Prof. Ilya Strebulaev and his colleague, Will Gornall) – which I’ll dig into in a moment Now, The Bad News: Few are paying attention, and some are deliberately ignoring the solution that’s been made available. Why? The Study: Squaring Venture Capital Valuations with Reality Downloadable pdf found here: So, let’s dig into the study. The results are astounding and vitally important to EVERYONE connected to Venture Capital, tech startups, capital markets and even consumers – I’ll explain. Released in April 2017 by the Stanford Univ. Graduate School of Business The Authors: Prof. Ilya Strebulaev, Prof. of Private Equity & Prof. of Finance, Graduate School of Bus., Stanford University Will Gornall, Sauder School of Bus., University of British Columbia, (Gornall earned his PhD from the Stanford Graduate School of Bus.) Summary of Findings – From the Study Abstract: We develop a valuation model for venture capital--backed companies and apply it to 135 US unicorns, that is, private companies with reported valuations above $1 billion. We value unicorns using financial terms from legal filings and find that reported unicorn post--money valuations average 48% above fair value, with 14 being more than 100% above. Reported valuations assume that all shares are as valuable as the most recently issued preferred shares. We calculate values for each share class, which yields lower valuations because most unicorns gave recent investors major protections such as initial public offering (IPO) return guarantees (15%), vetoes over down-IPOs (24%), or seniority to all other investors (30%). Common shares lack all such protections and are 56% overvalued. After adjusting for these valuation-inflating terms, almost one-half (65 out of 135) of unicorns lose their unicorn status. Important takeaway regarding the findings of the Stanford Study: The results and findings are not predicated upon some intricate mathematical or econometric model requiring reliance on multiple assumptions and conditions to arrive at its conclusions. On the contrary, the Stanford Study valuations are derived directly from the legal, contractual terms and conditions negotiated between the venture investors and the companies. Therefore, the study utilizes the actual economic terms of each Preferred round as it was negotiated – No assumptions or conjecture about the values in the Study are necessary. This is a critical point. It’s a Consumer Protection Issue: A number of the largest US mutual fund companies (Fidelity, JH, T. Rowe Price and Vanguard) have invested directly in private co. unicorns In 2015, Fidelity > $1.3B into unicorns! That’s more than any US-based VC fund invested that year. Including $235M in WeWork, $129M in Zenefits – A company that hired too many people, grew too fast, and the company culture spiraled out of control, and $118M in Blue Apron, the food delivery startup that IPOd in June 2017 and is now looking for a buyer… What is the common thread on all these investments by major mutual fund companies? They all used the meaningless post-money valuation to value these private tech company assets in their portfolios. Let that sink in for a moment. It’s Mind-boggling Incredibly, they have accepted and used these meaningless valuations to mark their holdings of these private tech companies w/o further analysis – a completely irresponsible methodology. It surely doesn’t inspire confidence in their ability to perform proper valuation analytics Where’s the adherence to the fiduciary responsibility of these investment firms to their clients? There are real financial implications for any retail investor in a mutual fund (401k or directly) related to this high-risk category. How about institutions? Univ. endowments, public pension funds, etc.? Are mutual fund companies fully disclosing real risk of this asset class to their retail investors? Accurately? How so, if at all? (e.g. – Fidelity had to recently write down its WeWork holdings to reflect the difficulties the company has “reported” after the cancelation of its IPO.) In addition, 3rd party equity market platforms, such as EquityZen, are providing average retail investors exposure to this class of priv. company unicorns…never before available. Where are the Real Journalists? On the Media side - There exists an almost a schizophrenic-like behavior exhibited by the technology press in its years-long coverage of unicorns; To be sure, at the beginning there were some real attempts by a handful of outlets to highlight the findings of the Stanford Study, which were astounding; On the one hand, tech & financial media and the data analytics groups (CB Insights, Pitchbook) seem to recognize the lack of rigor and reality associated with over-valued unicorn companies. They openly refer to it at times in their reporting e.g. - CB Insights CEO, Anand Sanwal, recently opined in an August 2019 piece that it (unicorn status) is often used as a scheme to attract top talent in a very tight hiring market for key tech talent… At the same time, however, they ALL seem to vacillate between this recognition that something isn’t quite right about the valuations, yet still breathlessly, gleefully and even feeling duty-bound to report on the next stable, class, pack, leaderboard or club of unicorn companies, which have allegedly “achieved” unicorn status as a result of their last preferred stock financing round; Some of which are even “born,” as has been reported! Who knew? Just a matter of being born into the unicorn aristocracy, I guess. From my experience, a $1B tech company isn’t ‘born.’ They are built, nurtured and grown with talent, hard work and execution with a value proposition geared to solving real, identifiable needs and wants of customers. Did you ever notice that the PE industry doesn’t have an equivalent designation (Unicorns) for its $1B+ value companies, even those that are in the tech category? Let’s Summarize Where We Are: So, The widely touted tech unicorn is a myth…So, why are so many tech and business news outlets breathlessly reporting about it as if there is some meaningful significance behind these widely hyped values? We surely know that unicorns are mythical and not real – just like the post-money valuations touted and hyped by Silicon Valley and many others… How do we know that? The Stanford Study proves it! Again, we’ve had the empirical evidence showing exactly that since the Study was first published in 2017. Keep in mind, that I don’t care or decry that Pref. equity investors desire, negotiate and receive such terms. It’s a matter of proper disclosure…not economics. The market will make its own determination of value associated with such economics. However, the economics must be disclosed…before an IPO or other exit. Every claim that a tech firm has allegedly achieved what is fondly referred to in the Silicon Valley bubble of “Unicorn” status, a valuation of $1B+, should be required to apply an asterisk * next to that proclamation. A footnote detailing and clearly explaining that “post-money valuation” is not market value nor market capitalization and explain how it’s derived. However, there is no such reporting requirement for these private companies. Should there be? You know, in the interest of transparency and accuracy; In other words, some real “truth-in-advertising” I believe it says a lot about the state of reality in tech-land today; A loss of focus on business fundamentals, a willingness to kid ourselves, our LPs and the public about true value… In the long run, history will reflect upon this episode in tech history, as nothing more than a silly aberration…and hopefully a forgotten footnote Conclusion: It’s been fun and, and I will admit, even entertaining at times, but we need to put a stop to this game before it all gets out of hand…and someone gets hurt. The WeWork debacle, among other examples, indicates some have already been harmed…And major mutual funds are in on the game and failing to uphold their fiduciary responsibility to retail investors. Caveat: While unicorns are definitely mythical characters, there is an identifiable, measurable valuation of priv. tech companies – it just isn’t what has been used to arrive at the purported $1B+ valuations promulgated today that are masquerading as unicorns… What I am really hoping we can do is just move on, refocus on the important and relevant metrics in building and growing successful companies, and dismiss the unicorn-mania phase as nothing more than an idyllic aberration and distraction, to be forgotten, for good…because it has served no useful purpose in understanding VC and technology. NONE! [Also See: Silicon Valley has a Media Problem and it’s Getting Worse – Yahoo Finance] [Note: It’s not a media problem. It is a credibility and transparency problem, which is creating negative coverage, that SV finds uncomfortable.] /episode/index/show/markwking/id/13529138

Why A Startup Needs 16 Lawyers 04/27/2017

Why A Startup Needs 16 Lawyers For detailed show notes and links go to In this episode, I distill some positive and negative lessons about why a startup might need multiple attorneys. The short answer…lawyers are like doctors, they specialize. One size does not fit all situations. Equally important, entrepreneurs need to be careful about who an attorney has a duty of loyalty to. A lawyer that represents a company's best interest does not by default represent the founder. Also in this episode, I reintroduce the Venture Capital Coroner's Report. Previously, I did an entire podcast focused on lessons from failed, VC backed companies. The show failed (I know, ironic, right?). I just couldn't get enough interviews. However, there's more than enough material for an occasional segment of this show. The autopsy of VATLER provides an important lesson about disrupting entrenched players (and a resurrection story in the founding of SpotAngels). Naval Ravikant - Angel List In a very short post Naval lays out six important lessons he learned about hiring lawyers. He learned these the . Jose Ancer - Miller, Egan, Molter & Nelson Often lawyers are like that coach in the corner of a boxing ring. They're an experienced, voice of reason in a life or death struggle. Jose Ancer points out, however, that you need to be sure the lawyer in your corner owes his highest allegiance to you. It's not always obvious. Jose does a great job explaining how attorney loyalty works. Hamza Ouazzani Chahdi - Now at SpotAngels.com Founders ran head first into a wall called entrenched city government. Follow to track the story of SpotAngels, Hamza's new attempt to disrupt urban parking by helping you avoid parking tickets. Bonus Material – More About Naval Ravikant Naval says this about himself: "I am the CEO and co-founder of AngelList. I previously co-founded Epinions (which went public as part of Shopping.com) and Vast.com. I'm an active Angel investor, and have invested in dozens of companies, including Twitter, Uber, Docverse and Jambool (both sold to Google), and Mixer Labs and Fluther (both sold to Twitter)." Background article from PE Hub on why Naval feels so strongly about lawyers: Blog Web Site Twitter LinkedIn (little dated) I'd love to connect at any of the following: Twitter: LinkedIn: Facebook: Old School Email: /episode/index/show/markwking/id/5304626

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