Bitcoin is inter-planetary currency

A lot of people are naturally hesitant and suspicious with crypto currencies such as Bitcoin. What they don’t understand is that Bitcoin and/or Crypto Currency in general, is the natural evolution of money, and is inevitable.

As the title of my post reads, I want to use inter-planetary commerce as an example to illustrate this principle.

Because if there is to be inter-planetary commerce, how is value transferred? Can you imagine cash being transported in spaceships? Gold? I don’t think so. Both are physical, and it will take months or years to transfer. Clearly the cheapest way to send value between spaceships and/or planets is by using a technology such as the one Bitcoin is based on.

Here’s another illustration: If I were able to send my Bitcoin to a Bitcoin wallet on the MRO (Mars Reconnaissance Orbiter), then my Bitcoin would be physically in space, in orbit around Mars! And if an Asteroid were to hit the MRO, those Bitcoin would be destroyed in the process and lost forever.

 

Why the value of Bitcoin will increase tremendously

The skinny: Supply is limited, while demand is growing tremendously. Every day more businesses use Bitcoin, and this is not just online businesses. Yesterday I read about yet another bar, the first in Shanghai to accept Bitcoin.

And here’s why I feel more confident than ever about this:

  1. Technology: Major vulnerabilities have not yet been discovered. You would think that after all the analysis performed by countless experts, not to mention countless tech-thieves trying to find weaknesses, by now something would be found. Especially considering what a single BTC fetches these days ($270 USD at least!). I believe it is safe to say, at this point, that the technology is solid. I believe in the next couple of years, the technology will improve so much that we’re going to see Bitcoin in taxis, restaurants, food trucks, and so on. Because if a food stall can use their smart phone to accept value, instead of buying one of those ugly rechargeable credit card swipers, they saved money (and companies like Square already monetize on that premise).
  2. Regulation: The general trend with regards to regulation is that while there are still many questions left unanswered, things will eventually settle and business will do its thing, and before you know it, the financial and political ramifications of going against Bitcoin will be so severe that no country will seriously consider it (on penalty of causing great damage to countless businesses). Some countries have indeed already accepted Bitcoin as a legitimate financial tool, and the rest will follow.
  3. Business Adoption: As I said above, the rate of adoption of Bitcoin as a protocol, and as a currency, are simply astounding and unprecedented. More high-profile executives approve of it, are investing in it, rely on it in one way or another, or own a Bitcoin startup. I do believe eventually eBay will add Bitcoin support, and PayPal will allow holding a BTC balance. The pressure from the market will simply overwhelm them. And I think they day is not far when investment managers will advise their clients to add BTC futures into their basket currencies (at first in their “high risk” category, but later in their “low risk” category!).

So by how much? And for how long?

It is not inconceivable that the market will multiply a hundred fold at the very least. This probably means that the BTC will be worth $27000 at some point, and people will be trading in milliBTC and microBTC (mBTC and uBTC respectively). And for how long? It is also possible that eventually, Bitcoin will become a currency you use for transferring funds cross-border, while using other digital currencies to conduct local business. It is all quite possible. It is also possible that the Bitcoin protocol will be expanded to create regional sub-currencies (imagine chained block chains per zone: North America, South America, Europe, Asia Pacific…). This will probably not mean a devaluation; the opposite will be true. At that stage, banks will probably be holding their Bitcoin in digital safes just like Gold is kept today, in what would become the equivalent of Fort Knox in the real world.

But the short term…?

Let’s face it, a lot of early adopters will eventually cash out. This will invariably cause some additional “drops” along the road, meaning that Bitcoin investments are still risky if you’re trying to make short term gains. However for the long term, considering Bitcoin fuels real commerce, with a rising adoption rate and rising demand, the trend will remain positive for a very long time.

 

Investors with Vision; Oxymoron?

I recently found myself engaged in heated debates with a few of my friends and acquaintances about Angel Investors (the real and the wannabe), Venture Capitalists, Incubators, Bankers, etc.

One of the things said, which resonated with me, was the following: “An Angel Investor or VC is looking for companies like Facebook, Twitter and Google. Basically superstars.”

But if we look at most investors in the market, we would find NONE of them would have the vision to fund Google when they were getting started. Sergey and Larry even went to Yahoo, who reviewed the company and declined to purchase it or invest in it. Now ask yourself this: If Yahoo (who supposedly “understood” the Internet and were a major player) failed to see the vision in Google’s product, why should an Angel Investor? Or even worse, a VC? (who is really more like a banker).

Indeed – Sergey and Larry had to work hard and against all odds, to get their search engine up and running and make it useful for internet users. And what they created changed search engines forever, changing the perception and meaning of search, and big data along with it all. It was true innovation, and at the time it was introduced, NO INVESTOR UNDERSTOOD IT. Remember this when you start working on your idea.

I feel I need to expand a bit on what it means that they “did not understand it”. Sure, they saw the product demo, they heard the pitch, but they were unable to project the impact of the technology they saw on the market. The ability to look at a market and say, wow, this really changes everything, is a combination of skill and art reserved to a handful of people. In other words, don’t assume that Angel Investors have this magical ability to see into the future of your company, and understand whether or not it will succeed.

UPDATE: I found this report today by the awesome guys at CB Insights: Top NY Seed Investors ranked by Follow-on Investment Rate and while I am not saying you should ignore investors who are not on that list, I do strongly recommend you take a look at the ones on this list first. As a small company, you need to be even more careful how you spend your time.

Investors: Basically sheep, with strong herd instincts

“Fear is the path of the dark side…” — Yoda

The problem here is fear. Here is a list of problems caused by fear:

  1. Investors who invest in “packs” or a “herd”, look for a leader. You will quickly recognize them; you’ll be presenting to a room full of “investors” (sometimes ~30 people!). If there is no leader, this diminishes the chances of investment by many orders of magnitude (to basically none).
  2. Modern investors no longer invest with their hearts, they try to invest with their “brains” instead (which in theory should be a good thing, and while many of them are pretty smart, it takes time to really look into a technology, do a proper due diligence, and make an informed decision). So instead of performing a proper analysis, they look for something to make them feel “comfortable” that there will be an adequate ROI (Return On Investment). They no longer “connect” with the venture’s “spirit”, something that might give them the needed courage to make a leap of faith.
  3. VC’s are really more like bankers. Why? Because they are not investing their own money. They fear failure above anything else. When you invest your own money, and you make sure it’s money that you wouldn’t cry over it if you lost it, you tend to have way more courage with your money, and you put your money where your mouth is, without fear.

Now, Bankers operate according to the most basic fear principles: What if you are unable to repay your debt? What if this, what if that? This is why unless you can offer some assurances, banks will usually not lend you money. If you own a house, a banker will agree to use your house as security, and will give you a loan up to X% of the house’s value (taking into account depreciation, costs of handling, etc). Needless to say, the whole thing will be insured from here to the moon. All due to fear, and the need to perform. Or rather, the fear of not performing. We all know what happens to men who have performance anxiety: Impotence.

Mathematical formula to magically convert an investor into a sheep:

Anxiety Performance + Investor = Sheep (baaaaaaa!)

A fun exercise!

I decided to test this theory. The idea was to find a company that became extremely successful, improve on its products, but address the same market with a more or less similar technology. In other words, innovate enough to be different, but be similar enough to be able to replicate the same success.

The problem was that Facebook, Google and Twitter were started, and have succeeded in the US. I had to import something that the US had not seen yet, but that I knew the US needed. I chose the QIWI model. I added some innovative ingredients into the formula: Bitcoin currency support (sell Bitcoins, and accept Bitcoins for products), and a QR Code Scanner which doubles as a document scanner for KYC (the US is a heavily regulated business environment, and I knew better than to leave this feature out of the Kiosk).

QIWI is a highly successful, publicly traded company, but it is almost unknown in the US. It has nearly 200,000 cash payment kiosks in Russia, Ukraine, and a few other countries. I don’t think many people realize what a great company QIWI is, and how awesome its impact on humanity is.

I spent a year developing the technology as a hobby, and a few months ago I presented it at Ultralight Startups, and surprise surprise, it took second place in the startup competition. This earned me the “privilege” of being considered for investment by New York Angels.

To make a long story short, I presented the company, showed that the product works, explained that I already signed important agreements and explained that i’m about to deploy several machines in the market. Guess what? They didn’t get it. And they declined to invest. Their concern? That I won’t be able to sell it…

And now, just to prove them wrong, I am going to actually deploy this Kiosk in the US market, and it is going to work. Why? There are many reasons for this, one of them is of course my tenacity and determination. But also because America has at least 25% unbanked population (this morning at Finovate I heard a much more pessimistic figure, claiming that after 2008, almost 50% of the population is now living month to month, with very little access to advanced financial tools). And finally, because this model has been proven to work, and it will work. I will then also take it to North Africa, and other African countries in West Africa.

I found out that there are credit unions working very hard to address this population with innovative products. There’s even a foundation called The Ford Foundation, which invests money in innovative products that serve the un-banked and the under-banked. I’m also seeing huge excitement when I tell people I managed to build it so cheap, that I will be able to sell it at a street price of $2500. This is unheard of in the world of self-service Kiosks of this class and quality, and the people who live and work in this market know this, and respect it.

Anyway, Wish me luck! 🙂

 

When is a business plan needed?

I saw this question today on a forum in LinkedIn and decided to write this quick post, about when exactly a business plan is needed.

One of the participants in the discussion even suggested that VC’s should be more trusting of entrepreneurs, which caused me to scoff and cough. Anyway, here’s how the world really works: Nobody trusts anybody. People don’t even trust themselves. We are all human beings. Human beings invented the atomic bomb, and human beings orchestrated the holocaust. So nobody should trust you that your idea just works – that just makes no sense.

If you have a great idea, one you think will revolutionize some thing or other, you need to first create a working prototype. This is the ultimate proof that you can actually make something happen, and not just talk about, or write a word document about. If you create a working prototype it means so many things: You have the team. You have the skills. You have the motivation. You validated your concept. You invested your own time and money into your vision, instead of waiting for someone to shower you with money.

What if creating a prototype costs way more money than you have? That’s where investment is needed. And that’s also where you’ll need a business plan. But you need to realize that a business plan is something that will change many, many times over the course of a company’s life. Below, I detail to some degree, how that business plan changes, as you progress in the investment/stage ladder.

And it goes in this order of precedence:

You are the first investor: Do you have a day job? Don’t hurry to quit your day job. Maybe you can move to a cheaper apartment, maybe that will mean you can divert some of your salary to building your product. You are your best investor. And you should become your own devil’s advocate, and ask yourself: Would I invest in myself? And this is where your first business plan comes. This is a simple spreadsheet. Put your costs, and put the costs of your product, put the market size, and try to include the element of time. Nothing happens overnight. Just creating this first spreadsheet will be very revealing even to yourself. And you should ask yourself difficult questions: Will people pay X for Y? How much % of the market will actually purchase?

Friends and Family: You’d be surprised and enlightened, when trying to pitch the idea to your friends and family. How fast will they get it? Will they shoot you down? Will they have other great ideas to contribute to you, for free? An idea is great, but presenting it to someone other than yourself is an enlightening experience. You can trust your family, and sometimes you can trust your close friends. Maybe some of them will help you with money. I’ve seen it happen, so don’t rule it out. This is where your business plan will probably change again, and improve. It needs to look simple for your friends and family. Is it overly complex? Chances are your friends and family are not going to be the only ones who will lose interest in your spreadsheet.

Crowd funding: This new investment channel is revolutionary in itself. If your product appeals to consumers, you can sell it before it even exists. Isn’t this extraordinary? Many projects are now starting their way in crowd funding. One of those projects that is close to my heart is the Oculus Rift. Here’s an absolutely perfect example of a product that no VC would ever fund. And worse! The world of VR was considered worse than dead. Why do I say worse? Because there have been several attempts at VR, all have failed miserably. But here comes a guy with a vision (Palmer Luckey), and a promise to make it happen. And guess what, I now have a Rift and I can testify it works, and Palmer delivered on his promise. Not only that, but due the wild success of his campaign, game companies joined in the effort, and many games are now adapting their software to work with the Rift. And with all this incredible success, Oculus can now raise money from VC’s and bring the product to the masses. But even here, you need a business plan. Why? Because if you promise a product for $300, but spend $500 building it, you will not be able to supply this product to all the customers who ordered it, and you fail miserably. A business plan is ALWAYS needed, even a simple one that makes sure you are at least in the green.

Angel Investors: And I am talking about REAL angel investors here, not VC/Bankers who are masquerading as Angels. An Angel investor loses money if you go bust, and you are not expected to return any “loans”. It is more like receiving a Grant. You receive it based on trust, that you can make it happen, and that your idea is worth trying. The Angel investor should sit down with you, one on one. Do not fall for the trap of meeting “flocks”. Insist on meeting one on one, and if that angel wants to bring more people in on the investment, let him do the work of convincing additional angel investors into joining. If they have questions, they will ask him, and he will ask you in turn. And this is where a good Angel Investor who has experience, will help you revise your business plan again. They will ask for more details, and help you structure your business plan, and make it look more professional. In some cases, if they put money into your idea, some of that money will go to a professional business plan analyst who will make your business plan look like a tasty cake.

The banks: Sometimes banks are seen in a negative light, but I avoid falling into that trap. Same thing with VC’s, but more about that in the next section. So banks are in a position to give you a business loan. Depending on your relationship with the bank, you could get a loan with more, or less, favorable interest rates. And yet, they do not expect a x5 ~ x20 times return on investment. They only expect the money back with interest, and you can usually refinance and spread it over a period of time. If you have reached the prototype stage, and spoken to a few customers and realized they want to buy it or lease it, and you have orders, say 200 orders for a device that cost $200 to make, and sells for $400. You need $40,000 which the bank will usually give you quite easily. You then sell your customers the device for that 100% profit, give the bank their 3% ~ 12% and you are still left with 80%+ of the margin, and no VC meddled into your business, or replaced you with his brother in law CEO, just because you failed to produce a x20 time ROI. This is where your business plan might change again, you need to show your bank that there is a very high chance that you are making your money back. This should boost their confidence in you and your business, and increases your chances of getting the business loan.

Finally, Venture Capitalists: Those guys are last in the list, and for good reason. A VC usually sits on a pretty large amount of cash. Say $100M to $500M, many times more (I’m not going to talk about Micro-VC’s, they are a slightly different creature). The VC’s goal is to make at least x5 ~ x10 ROI. To achieve this fantastic ROI, they need companies that are at a very mature stage, selling an existing product to existing markets. In other words, a company that has already proven its business model and is on the verge of international success, but now needs more money in order to replicate that success. The VC then invests the money required to reach those new markets, to produce more products that will sell to those untapped consumer markets, to advertise the product to more people, to raise brand awareness, to hire more teams to produce the product faster, and so on. So primarily, their investment is focused on maximum ROI, always, forever. They do not need or want to trust you, and they do not need to have a vision – they only need to focus on ROI. That is their job, and don’t take it personally. This is why their due diligence is a long, painful process. To get to this point, you must have a very mature business plan, where all the numbers are REAL numbers (data collected in the field); You know how many people bought the product, you know how much it cost to produce, you know your own costs (burn rate, production costs, advertising costs), you know everything there is to know about your business!

 

Venture Capitalists Hijack “Angel Investor” Term?

I read an article today about some “Angel” group in New York City, and I realized something horrible is happening. It seems VC’s are trying to disguise themselves as Angel Investors. Maybe to attract more startups? Maybe to appear less frightening? Maybe to shed the negative “aura” attached to VC’s?

It used to be that Angel investors gave small amounts of money to startups, not because they were looking to make an “Exit”. The meetings were one-on-one, it was personal, it was friendly warm and humane. The Angel investor remembered himself being in the Entrepreneur’s shoes, and was not afraid to say things that were perhaps not very politically correct. When you’re doing a one-on-one, that works fine, but when you’re in a group, you will most likely remain politically correct, and refrain from giving the kind of advice you’d give in a one-on-one session.

So when I read that article about how that group of “Angel Investors” operates, it sounded to me more like a group of Bankers or VC’s, than a group of Angels. I was quite annoyed to say the least. While I have no problem presenting my company to a crowd, when it comes to an investment meeting, I do not believe elevator speeches or 15 minute presentations are the right tool to present to Angel investors (or in fact to any investor).

How it’s actually supposed to work

I believe in two people meeting and taking a deep dive into the core of the startup being presented. One is the Entrepreneur, who may be seeing his own startup for the first time being reflected from the perspective of the Angel investor (an eye opening experience, to some!), and the second is the Angel investor, who has the challenge and responsibility of getting into the Entrepreneur’s mind.

I do not believe in a murder of crows (bunch of VC’s sitting in a room, with a lone entrepreneur presenting to them). This is not “American Idol”. It is criminally presumptuous to think that you can judge a startup from one short presentation. It’s also sad to think that a startup might get filtered out because the entrepreneur fumbled some of the answers. Not everybody was born a Steve Jobs, and even Steve Jobs was not born Steve Jobs. He was shaped and hardened by his life and experiences, over a very long period of time. An entrepreneur is not there to entertain with a magical presentation that came out of a unicorn ass hopping happily on a rainbow.

Any veteran partner of any business will tell you – A partnership is like marriage. And like in most good marriages, you will find people who nurture each other, allow each other to grow, allow each other to make mistakes and learn from those mistakes, not judge each other so harshly all the time, etc.

So yes – I believe in one on one sessions, where even if the entrepreneur is rejected by the angel investor, at least he came out of it with tons of personal advice; he came out of it smarter. Maybe the angel investor also learned something. Maybe he learned something he would never have learned, about that person standing in front of him, if he were in a room full of other angel investors. Something that might have changed his mind, and made him into a fan and a believer, rather than a minute-judge.

Angels can’t possible know everything, right? After all, while many of them succeeded because of personal sacrifices and some very hard work, some of it was also pure luck, being in the right place in the right time, and knowing the right people – How many people know the right people? Despite the world being small, not too many.

So be humble, be humane, be respecting of yourself and others, regardless of how many silly ideas were/are presented to you. You are dealing with people, and while money is important, so is the journey. Do you feel a bit “burnt”? Do the right thing and take a short (or long) vacation from investing, just whatever you do, don’t vent your accumulated frustrations on entrepreneurs.

So am I doomed as an entrepreneur?

No. I believe the good old Angel Investors still exist, and are out there somewhere. You just need to steer clear from the rotten ones. When you consider meeting with an angel investor, check the following list:

  • Was it easy to get a meeting with the angel investor? or did they do you a favor and gave you a meeting some 30 ~ 50 days from today? Bonus points if you managed to talk to the Angel Investor directly, and did not have to go through bureaucracy or secretaries.
  • Are they investing on their own, or in “packs of wolves”? I recommend you avoid “panels” with 3 or more investors. If an Angel investor is incapable of deciding on his own whether or not he likes your idea, you don’t want him or his money.
  • Are you expected to prepare a detailed business plan? show traction? That’s not angel investment, that’s venture capital. Stay away from those clowns looking to make money on your exit, and find a real Angel Investor.
  • Is the investor constantly late, difficult to reach, canceling/postponing meetings, and is generally flaky? You should ask yourself if you really want to do business with a disorganized entity. Especially as you take your first steps setting up your venture, you can not afford wasting time on cancelled meetings and flakiness.
  • Are they behaving like assholes, trying to lump sum your ideas into a narrow category, and completely missing the point? Telling you there is already a company like yours out there? (Google was not the first search engine, Yahoo was not the first news portal, and Skype was not the first VoIP app!). Are they just plain being rude? Get out of there and don’t come back. And warn your friends.
  • Is the Angel Investor knowledgable? Are they asking you smart questions? Do they understand your answers, or are they foggy at best? The best investors, are investors who understand your venture on a deep level. They may even become your fans and followers, if your idea really touched them. That’s the kind of Angel Investor you want, and should strive to find.

 

WPML: WordPress Plugin gone wrong

A few years ago I decided it’s time to offer one of my WordPress sites in more than one language. After researching a bit, I found the best product was WPML. I found references to it in the WordPress Plugin Directory, googled it, found and visited the website, and decided it was worth the $79. So I purchased it and started the long and painful job of translating my website.

My website was quite technical, and I found it difficult to believe the iCanLocalize translators would do it justice, especially considering the target language was Hebrew, which is a language with many horrible pitfalls when translating technical terms.

A good example of this is Microsoft Windows 95, which was very poorly translated to Hebrew. So poorly that it was the subject of many jokes when one of the first Hebrew translations appeared back in 1995. Screenshots with funny translations were circulated over Email.

So needless to say, I did not trust their translators and decided to translate it myself. I was of course very happy with the results, because the pages ended up not being a literal translation, while still carrying the same message. In fact I felt the translated pages were better worded than the original English counterpart, if only because I had to think about the meaning and how to say it better in Hebrew, and was quite successful with that.

But I digress. Fast forward two years later, and I find myself in a Mafia situation. The plugin has upgrades, but I can not upgrade my WPML plugin. Apparently I need to pay iCanLocalize some more money before I can upgrade the plugin. I decided to wait with the upgrade, and instead to follow their release notes and wait for a compelling feature that will force me to upgrade. Unfortunately, two bad things happened:

1. The bad: No compelling reason materialized for upgrading. It was all either security fixes, or minor improvements for compatibility with other plugins.

2. The worse: Security fixes were introduced, but I was not allowed to receive those fixes!

This pissed me off. Enough so that I decided to write about it and explain all that is wrong with their practice, and hopefully warn other WordPress site owners about this.

You see, If I can not upgrade the product, at the very least I do not want to be reminded about it. Every time a new version is released, my WordPress Updates Manager alerts me. And because I decided on principle not to pay the “Mafia” for upgrades, It angers me even more to see those warnings all the time. Why do I call them a “Mafia”? Because that’s just how the Mafia works: They throw a brick on your store, smashing your window front. A bit later, while you are still cleaning up the mess, the goons show up and offer you “protection” in exchange for a monthly “retainer” ($$$).

I believe that if you make a plugin, and decide that new features should cost more, that’s fair. Sure. After all, developers need to make a living. However, I also believe you have a responsibility to your previous customers. This is why Auto Manufacturers are forced to keep a stock of replacement parts for their cars for 7 years after the model is introduced into the market.

A bug YOU introduced, is YOUR responsibility, and you need to fix it for me or else the product I purchased is defective by definition. Security updates should also be part of the deal, and should be back-ported into my old version. I should not have to pay you just because you introduced a security flaw into your own product, and won’t fix that security flaw for your old users. That’s just totally irresponsible.

I eventually decided to remove Hebrew from my site and uninstall the plugin, effectively throwing away the original $79. It is the first time I throw away a piece of software I purchased for ethical reasons.

Elon Musk, Mars Colonization, and me

Imagine you have lots of money, what do you do? Do you give it all to charity? Do you keep it until you’re 80 and then let your children fight over the will? Do you perhaps setup trust funds with altruistic goals, that end up eating most of the money for management overhead after you’re dead? (hey, execs need their bonuses, right?).

What I like about Elon Musk’s choices and initiatives is that he’s putting his money and energy into humanity’s future. He is not investing in its present or past problems, and he is not getting his hands dirty with politics.

What I realized today, is that if I had all that money, I would probably want to join him as a co-investor, and at the very least, I would try to get involved into one of the projects, even if just to help him reach his goals sooner.

I think of the countless times in my childhood when I really wished I could travel to the distant future. I did not like what I was seeing around me as a child engrossed in Science Fiction books that described partially utopian futures. I spent a lot of time thinking about how far I would have to travel into the future until I reached an era that might be to my liking. I figured at least 200 years into the future until most resource and religion wars are behind us, and the majority of humans have evolved enough to become decent human beings, with advanced, friendly philosophies that promote exploration, science, and simply being good to others (humans and non-humans).

What Elon Musk is doing is admirable because his actions bring this future into our present. This is the kind of atmosphere I want to live and work in. When you actively build the future, you invite it into your present life, and you become part of that future as much as that future becomes part of who you are. And let’s not neglect the gadgets: When you build futuristic gadgets, you live in the future right now.

This makes me want to focus even harder on my own business venture, with the goal of making enough money to be able to join Musk’s adventures.

Let’s hope I succeed! But whether I succeed or not, I am at least proud to belong to a species that produces people like Elon Musk, who are constantly pushing the envelope. They stay a tree is as tall as its many branches, I say the tree is tall as its highest branch / leaf / flower.