Network Updates, 25 July 2017
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Log into TENx for complete details and RSVP information for all KF events, unless noted.
- August 13-15: Singularity University Global Summit, SF (special KF discount)
- September 14: KF Women’s Group breakfast. Hosted by Miriam Rivera (Class 15) at her private residence.
- September 22: NY Regional Chapter breakfast
- October 5: Defy Ventures visit to California State Prison – Solano
- October 22-27: Modules 2 & 5
Intercontinental Hotel, San Francisco
- December 8: NY Regional Chapter breakfast
- January 21-26, 2018: Modules 3 & 6
Convene, 101 Park Ave., NYC
- International Summit, April 22-27, 2018: Tel Aviv & Jerusalem, ISRAEL
- Justin Hall (Class 20) on Blockchain and ICOs
- Yinglan Tan (Class 15) Wants Americans to Know that Chinese Technology Companies Are Global Competitors
- Saed Nashef (Class 14) Answers the Question, “Who would want to build a tech startup in occupied territory?”
- Brian Trelstad (Class 12) Interviewed on Private Equity’s New Role in Impact Investing
- U.S. Census Bureau Releases 2015 Annual Survey of Entrepreneurs in Partnership with the Kauffman Foundation
- Enjoy this 3-minute slideshow of Class 20’s graduation
- Fundraising: Evolution Equity Partners (Richard Seewald, Class 16; Karel Obluk, Class 19) closes $125M fund
- Podcast: Listen to the latest episode of Daniel Kraft’s (Class 13) BioTech Nation Radio broadcast
- This week’s blog selection: Samir Kaji (Class 20) on raising a micro-VC fund
- Job opportunities:
(CONTINUING) Frontline Ventures seeks Head of Platform • Catalina Labs looking for a senior UX developer • Emergence Capital hiring an associate • Johnson & Johnson Innovation seeks business development director • Wisconsin Alumni Research Foundation (WARF) looking for a Chief Venture Officer
Justin Hall (Class 20) on Blockchain and ICOs
Readers got a high-level introduction to ICOs from Ramphis Castro (Class 19) last week; this week Justin Hall (Class 20), Principal at Golden Gate Ventures, offers a more in-depth look in “Do Initial Coin Offerings Represent the Inevitable Disruption of Venture Capital?” In this piece he co-wrote for e27, Justin shares what he’s learned as GGV prepared for portfolio company Omise’s upcoming ICO.
First, a primer. While blockchain and Bitcoin are often mentioned in the same sentence, they are not the same thing; blockchain is the technology behind Bitcoin (and other coin/token cryptocurrencies). Blockchain is a public, permanent, and secure ledger of transactions that can be accessed and added to by multiple parties at once (a capability not present in most financial transactions today) with built-in systems to avoid duplication of entries. Each entry is tied to the one before it (making a chain), thus preventing entries in the middle of the chain from being modified. There is no central authority that approves transactions or sets rules in blockchain. Instead, computer servers (nodes) reach consensus about a transaction, a setup that also permits transactions between unknown parties (i.e., coin transactions can be anonymous).
Initial Coin Offerings (ICOs) can issue one of two types of tokens: utilitarian or asset-based. The former, as the name suggests, allows users to take a functional action; Ethereum’s ETH tokens “allow for the execution of smart contracts on the Ethereum blockchain.” Asset-based tokens are “simply claims on an underlying asset, usually gold or fiat currency, with the original issuer serving as ultimate redeemer” with the expectation that the tokens’ price will increase as the issuing project or company succeeds. So, the more smart contracts are established on the Ethereum blockchain (i.e., the more successful Ethereum becomes as a company), the more ETH tokens are worth.
There are significant risks to ICOs. A firm’s white paper, which it publishes for investors, is completely unregulated and may contain falsified or unrealistic data; investors can be anonymous or non-accredited; and investors may have little recourse in the event of bankruptcy, mismanagement, or other financial disaster. Justin believes that regulation is on the way—it’s ”not a question of ‘if’ but ‘when’ regulators will begin directing their focus on ICOs to protect investors.”
One thing that makes ICOs attractive to startups is that tokens are not equity (which entails “a transfer of ownership”), and are thus nondilutive. Founders retain full ownership of their firm after an ICO; coin holders’ assets appreciate the better the company does financially.
Justin goes on to discuss his portfolio company Omise, a Bangkok-based online payment gateway. It’s using an ICO to launch OmiseGo (OMG), a platform for managing a variety of assets—including “regular” money and cryptocurrency—in one wallet, allowing the user to make mix-and-match transactions, such as “paying for your McDonald’s meal with Singapore Airline miles,” and without the need for cash or a bank account. Read Justin’s article to find out the details that make Omise’s ICO unique, as well as the financial structures in place for its implementation.
Yinglan Tan (Class 15) Wants Americans to Know that Chinese Technology Companies Are Global Competitors
Institutional Investor interviewed Yinglan Tan (Class 15) for the article “China’s Internet Sector Grows Up.” The image many in the US still have of Chinese companies—as inefficient, state-run enterprises creating cheap knock-offs of American products—is woefully outdated, particularly in technology. And while the US still relies on an infrastructure that is a century old, Japan, China, and other countries in Asia are building high-speed railways and other components of a state-of-the-art infrastructure.
Not only have Chinese technology companies made major advances in the last ten years, but they have become global leaders in fields like mobile technology and AI. Alibaba’s Alipay and Tencent’s WeChat Pay “allow their users to make transactions all over the world using their mobile phones … at present not a single U.S. rival can offer a similar global product.” “We’re seeing an increasing trend of Chinese core technology companies exporting all over the world,” says Yinglan, pointing to two other Chinese companies as examples: Xiaomi and DJI (Da-Jiang Innovations Science and Technology Co.). Xiaomi makes the world’s third-most-popular smartphone, Mi, which dominates emerging markets because “many consumers find Apple iPhones and Samsung handsets prohibitively expensive and technologically not that much better than Mi handsets.” DJI is the top global manufacturer of recreational and industrial drones. “We’re seeing many companies born in China but growing worldwide with leading-edge technology of their own that they developed,” says Yinglan.
Saed Nashef (Class 14) Answers the Question, “Who would want to build a tech startup in occupied territory?”
Saed Nashef (Class 14) was featured in the Quartz article “Who would want to build a tech startup in occupied territory? Meet the optimists of Palestine,” about company founders “returning from the international diaspora.” Saed is the co-founder of Ramallah-based Sadara Ventures, Palestine’s first VC fund, which focuses on the Palestinian tech sector. To date, the fund has invested in 12 startups. The challenges of operating in the Israeli-occupied West Bank are daunting, with regular interruptions in electricity and water, and Internet speeds considerably slower than those of other countries. In discussing his choice to return to Palestine from his US-based job at Microsoft, he says, “I do believe that the work being done here—for people who have a connection to the region—will always feel more meaningful. … It doesn’t matter how successful I was or could have been in the States, it wouldn’t have meant the same as the work I do right now.”
Brian Trelstad (Class 12) Interviewed on Private Equity’s New Role in Impact Investing
Brian Trelstad (Class 12), Partner at Bridges Fund Management, was interviewed for ImpactAlpha’s “What we know about Bain Capital’s $390 million Double Impact Fund.” The impact investing industry’s growth may have exceeded all expectations: one estimate in 2009 saw the field growing to US$500 billion in assets within 10 years, yet only 8 years later a $390M impact fund can be described as “a small first fund.” The difference may be recent participation by larger private equity firms like Bain Capital and TPG; the impact fund in question is the Bain Capital Double Impact Fund, which represents a small percentage of Bain’s $75 billion in managed assets. Brian sees this development as “the sign of an increasingly vibrant capital market for businesses at various stages of investment.”
Bain Double Impact has three themes to guide investing: health/wellness, sustainability, and community-building. Brian’s involvement with the Fund came through Bridges’ co-investment in Impact Fitness, “a franchisee of 13 Planet Fitness health clubs operating in Indiana and Michigan, states with high rates of obesity, diabetes, and high blood-pressure.” He points to the fact that health insurers are increasingly offering discounts for members who join a gym, because the evidence indicates that “getting first-time gym users to join, stay and change their health habits can be a game-changer.” The entry of firms like Bain doesn’t just mean more fundraising and bigger investments. It also “broadens the range of possible exits for early-stage investors, as mid-market private-equity players move in to take majority, or at least controlling, stakes.”
U.S. Census Bureau Releases 2015 Annual Survey of Entrepreneurs in Partnership with the Kauffman Foundation
The Minority Business Development Agency (MBDA)’s press release on the results of the 2015 Annual Survey of Entrepreneurs (ASE) quoted Victor Hwang (Class 12), VP of Entrepreneurship at the Kauffman Foundation, who said “Entrepreneurs are the heart of the American economy, but they face barriers to success every day.” This is the second year that the Foundation has partnered with MBDA and the U.S. Census Bureau to commission the ASE to provide “timely and accurate data that will help local, regional and national programs respond more effectively to the needs of minority-owned businesses and entrepreneurs.” This annual survey replaced the Survey of Business Owners, which was only released every 5 years.
“This comprehensive survey is the most accurate and direct way of understanding what entrepreneurs need. Data that produces actionable insights will help us understand what’s working—and what’s not working—in businesses across the country,” said Victor. Notable changes from the 2014 survey results include a 4.9% increase in the number of minority-owned employer firms. Ownership of firms by women increased by 3% from 2014, while payroll for women-owned firms also increased by 5.5%. Yet on average, “annual receipts for non-minority employer firms are 52% higher than minority-owned firms.” [Read the full ASE results]
Enjoy This 3-Minute Slideshow of Class 20’s Graduation
Evolution Equity (Richard Seewald, Class 16; Karel Obluk, Class 19) closed its first fund at $125M; they had an earlier close of $70M in 2015. Richard says, “Evolution has considerable experience in developing and exploiting new markets internationally and has become a preferred partner for cybersecurity and enterprise software entrepreneurs.” It plans to invest in cybersecurity and next-gen enterprise software and services in North America, Europe, and Israel, with investments ranging from $5M to $25M. [Press release]
Daniel Kraft (Class 13) has a new episode of his NPR radio segment, BioTech Nation: “The Present and Future of Medicine”
This week’s blog selection:
- Samir Kaji (Class 20): “What You Need to Know Before Raising a Micro-VC Fund Today”
If you are a Fellow or Mentor and would like to post a job at your firm or portfolio company, please email us. Jobs are shown here for 4 weeks unless otherwise requested.
- (CONTINUING) Dublin, Ireland-based Frontline Ventures (Will Prendergast, Class 14; William McQuillan, Class 21; Shay Garvey, Mentor Class 21) is hiring a Head of Platform. Frontline Ventures is an early-stage firm focused on “European B2B companies with global ambitions.” The goal of this position is to manage and connect Frontline’s network of entrepreneurs, LPs, and co-investors “to ensure our portfolio of companies are learning faster than just the speed of experience.” Read the full job description.
- (CONTINUING) Gayathri Radhakrishnan (Class 16) is hiring a Senior UX Designer to join her team at Catalina Labs. This person will “lead the design direction for our product [Wixi] by placing the user at the center of the design process.” See the full job description online.
- (CONTINUING) Jeff Calcagno (Class 11), Senior Director, New Ventures at Johnson & Johnson Innovation, has a job opening for a Director-level business development person—preferably with PhD or MD-PhD and a few years of license deal experience—to focus primarily on biopharma external innovation sourcing and deal-making. (Note that despite the job title “Director of New Ventures,” this is a business development role and not a venture investing role.) See the J&J website for a full job description and qualifications.
- (CONTINUING) Emergence Capital is hiring an Associate to join its investment team. At Emergence, Associates drive the sourcing process, allowing them to work closely with every investor on the team and work with every portfolio company. Associates also support diligence efforts and drive the development of new investment themes. See the full job description.
- (CONTINUING) The Wisconsin Alumni Research Foundation (WARF) is seeking an inaugural Chief Venture Officer (CVO). This person will be responsible for growing the direct-investment portfolio by leading deal origination across a variety of sectors and asset classes, supporting the commercialization of discoveries at the University of Wisconsin – Madison (UW-Madison). WARF is a 501(c)(3) organization with $2.7B AUM. The CVO will establish and manage a small team; requirements include 10+ years of direct investing experience. See the full job description [scroll down and click on “Chief Venture Officer” from the linked page]. Application deadline: July 31.
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