Black Swan

the_black_swan_by_galen_marek-d67j4alImage by Etienne-Ripzaad

 No. This post is not about Natalie Portman. Even though you can call her a black swan. Rare and hard to come by.

What I am addressing is the likelihood of a Facebok, Uber etc. in the west; Ali Baba, Wechat, Jobstreet, My Taxi etc. from the east. As much as we might categorize these firms as black swans, the sizes are different. We don’t yet have a billion dollar venture capital backed firm in the east, and yet everyone is trying to build the first few billion dollar firms in Asia.

But if you take into account of the number of successful ventures from Silicon Valley, black swan doesn’t seem so black after all. Bubble or not? That is a question that venture capitalists are trying to figure out. Let’s take a step back and look at our basics. When Nassim Nicholas Taleb developed the black swan theory, he defined black swan events as events that:

  1. causes huge impact
  2. are unable to be explained by scientific method
  3. are unforeseen or unexpected due to psychological biases

Any successful venture would obviously tick the first check box of having a huge impact. If we take a step ahead, we can extrapolate and do up a hypothesis that says “existing or previous successful ventures are making the function of a successful venture more explainable by scientific method and less unforeseen due to the changed psychological biases. With Uber being a case of success, there is less doubt that firms like My Taxi could be very much successful as well. The key is implementation and that depends on the people who implements the strategies. My point here is that as these black swans are becoming more of a white swan, the traditional methodology of defining a black swan may no longer work. Given such, the expensive valuations that venture capitalists are paying may be justifiable at the end of the day and it may no longer be called a bubble, but more of a higher-cost-of-living kind of scenario.

I believe valuation should come fourth in ranking when a venture capitalist evaluates a deal. Instead, the more scientific methodology should be:

  1. Concept evaluation
  2. People and team dynamics
  3. Sustainability of chemistry of the two points above
  4. (Finally) valuations and agreements

At the end of the day, percentage of ownership is not the main concern if what we are trying to do is just to get into a good deal.

Done with my ranting and two cents.

 

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How do you start starting

Let’s see. How do we even begin?” That is precisely question. How do we start starting? A lot of people repeat that question when they are exploring options to jump out of their comfort zone. In the context that I am talking about, comfort zone refers to the steady job that comes with periodical paycheck.

I personally believe that starting a startup is a tedious, painful, tiring, stressful process. It requires you to not be in your comfort zone and throw (almost) everything away and taking the risk of losing everything. This is in synched with what Paul Graham (“PG”) from Y Combinator mentioned in one of his earlier posts in 2005 (Source: http://www.paulgraham.com/start.html) that, “There is no magically difficult step that requires brilliance to solve“.

There is no secret recipe to how you can start something afresh and take ownership of it. But here is the thing, you take ownership, that is the biggest reward that you could probably achieve, even when things fail. You are holding your fate in your hands where no one else have the right to do so. This is precisely why it is hard to start starting. This is also what makes “starting” such an interesting process that some people would just love to keep starting something and then hop on to another new beginning just to experience the thrill of adventure all over again. Of course, one could argue that this is not realistic because you would need monetary or financial incentives to be able to survive these kind of jobs. That is why you need to have an idea that serves a larger purpose and a team who can do it with you. Also in the same post that PG had written, the first two points he highlighted was the idea and the people.

So how do we begin? My simple recipe (like I said, no secret recipe. But you could always attempt to find a formula that works for you):

  1. 1 kg of motivation and incentives (such as privilege to take ownership, the tedious workout, the adventure etc)
  2. An idea that solves problems (either problems of a lot of people, or a very important problem)
  3. Find your soul mates who you can brainwash or already in synched with you from the beginning.

P/S: Just my two cents and does not represent any opinion of general public of interests unless they agree to my points!

San Francisco

San Francisco

The bridge

Building your castle requires pieces from every part of the world. Essentially, being physically in San Francisco to take in some of the “startup oxygen” becomes a process that most people in the venture industry or someone who wants to be a founder would love to do.

A couple of observations that you would be able to see (depending on how much special oxygen you are breathing in, you know I am just kidding):

1. San Francisco is what it is today because of the startup community as well as the venture capital activities
2. People are talking about entrepreneurship everywhere – be it an advertisement by the lamp post, or on the television where I do feel the programs are less interesting as compared to what we get on the blockbusters.

Anyway, the key message for my first post is that venture capital unlocks entrepreneurship, and with that entrepreneurship can unlock wealth and progress.

Til next time.