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  • Leon Apel 5:11 am on December 21, 2018 Permalink | Reply  

    Factors Leading to Significant Potential Company Value 

    1. IP (Intellectual, Human/Experiential, and Financial

    a) Intellectual Property (IP): If a company can solve a problem that involves superior intellectual abilities (eg. AlphaZero can win a chess match), then it has significant potential value. IP also refers to legal protection. By holding patents, you have the option to protect a potential intellectual advantage in a market.

    b) Human/Experiential Capital: If there’s a winning team capable of solving significant challenges, that increases the potential value of the company.

    c) Financial Capital: If a company has significant resources, it can afford to build a significant presence or network capable of generating a significant advantage.

    2. Product-Market Fit

    My definition of product/market fit is the degree to which you can design a product/service that solves a problem so well that you have the ability to attract the following:

    • Significant revenue
    • Ability to increase pricing

    3. Investing in Vertical Integration to Capture Significant Revenue in a Large Market

    By investing in vertical integration and widespread cover, multiple products/services have become almost essential oligopolies to users including the following:

    • mobile carriers (eg. TMobile, AT&T, Verizon)
    • credit card issuers (eg. Visa, Mastercard, and AMEX)
    • Amazon (enabling one hour delivery by having significant vertical integration in some markets)
    • Overnight delivery service providers (eg. DHL, Fedex and UPS)

    4. Network Effects/Widespread Adoption/Exclusive Content

    • Search (eg. Google)
    • Connections/Relationships (eg. Facebook and LinkedIn)-
    • Unique content (eg. Facebook/Instagram, Netflix, YouTube, and Twitch)

    5. Good Strategy/Management/Governance 

    Structuring with some of the following characteristics may increase the odds of success:

    • Creating a board of directors
    • Aligning incentives
    • Having a defined a process for decision-making and dispute resolution
    • Applying a meritocratic system of sharing ideas where the best ideas win
    • Reporting data systematically/regularly to key stakeholders to make decisions

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  • Leon Apel 7:10 am on December 5, 2018 Permalink | Reply  

    Critical Thinking vs. Rehashing 

    I’m impressed with how fast conclusions spread–both good and bad. In fact, it’s a bit concerning that ideas can spread so quickly, often without much due diligence.  It’s also a potential problem because people are trained to trust authority or certain sources and they are overconfident about half-baked conclusions.

    I think the root issue is that people aren’t motivated enough to determine the truth because it involves reviewing source/raw data. Instead, the majority of people believe a headline or some clickbait without doing sufficient due diligence.  Sometimes issues are rather complex and involve hours of study to determine fact from fiction (eg. nutritional recommendations, global warming, vaccine safety, etc). Sometimes, ideas that are stated as “absolute truths” are not that.

    It’s quite refreshing to hear new ideas because many social interactions involve someone repeating, almost verbatim, a common news headline.  In fact, it’s gotten to a stage where Gmail and Skype have begun predicting your response to someone’s email/messages.

    This may seem off-topic but one clear symptom of this is that people tend to repeat the hottest buzz words of the week, or month. For example, as of December 2018, I’ve heard the word “Millenial” so many times it’s quite ridiculous.  A millenial is a wide age range so people casting a large group as acting in a similar fashion is quite ridiculous and almost meaningless.

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  • Leon Apel 12:44 am on November 1, 2018 Permalink | Reply  

    Suggested Investment Criteria 

    Suggested Investment Criteria:

    1. Excellent product market fit (the product needs to be highly appealing to its intended audience)
    2. Excellent ability to acquire clients, partners, and team members to grow
    3. Excellent management team and reasonable equity structure to align incentives
    4. Reasonable valuation/terms
    5. Reasonable upside: 100x+ potential for very early stage companies and 10-50x for later stages
    6. Excellent probability of traction and capturing significant market share
    7. Strong business references
    8. Desire/passion to focus on the business rather than on other interests
    9. Reasonable skin in the game
    10. The company must have reasonable odds of generating a competitive advantage over time (eg. knowledge advantage, IP, network effects)
    11. Aligned incentives with the investor
    12. Historical track record of success with other companies/projects/employers
    13. The founder must consider feedback and be open to suggestions; however, the founder must have great judgement and ultimately decide what is in the company’s best interest.



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  • Leon Apel 12:40 am on September 4, 2018 Permalink | Reply  

    Chance of Crowd Funded Venture Getting Liquidity? 

    I wonder if crowdfunding sites were forced to disclose the probability of an investment’s liquidity what would happen? For example, if only a single digit% of ventures after 5 years achieve a liquidity event would it change market behavior significantly?
    It’s incredible that the big question isn’t answered clearly enough: Why do you think you have a good probability of getting a liquidity event?
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  • Leon Apel 4:37 pm on August 15, 2018 Permalink | Reply  

    Testing Prospective Founders 

    The following are same ways you can test for the credibility of potential founders:

    1. Real Positions: If a founder puts positions on their deck like COO, CEO, CTO make sure that the founder explains exactly what each person will be directly responsible for. I’ve seen multiple situations where a founder lists people on their deck who do virtually nothing. It comes off as dishonest, especially when you cross-reference their position with their LinkedIn position.
    2. Skin in the Game: What is the exact dollar amount the founders invested? If they have liquid assets why aren’t they putting a significant percentage of their funds in a company?
    3. Personal Guarantee: While this might be a controversial ask, it helps to understand their level of confidence. In some cases, such as for hard money loans, this should be a requirement.
    4. Jurisdiction: It adds significant credibility to be based in the US and have significant US assets.
    5. Ability to Explain a Strategy Specifically and Clearly: If the founder can’t explain their strategy in detail, they may not understand the problem or have the skillset to solve it.  In eCommerce there are a few buzzwords that people consistently use that tip me off that they don’t understand how to grow their company.
    6. Peer-Review from Several Sources/Experts: Get help compiling questions/due diligence from others/experts to get a better understanding of the risk/reward of the company.
    7. Addictions: Does the founder have any alcoholic, gambling, or drug-abuse issues?
    8. Realism: If a time frame for milestones or the amount of funds asked for are unrealistic, it shows potential issues with the founder’s judgement.
    9. Funding Vehicle: For example, an ICO from a BVI company may have a worse reputation than a SAFE agreement or a public company, which does quarterly disclosures.
    10. Professional Communication: If the founder can write professional updates, it helps add credibility.
    11. Social Media Presence: You may question the founder’s judgement if they post inappropriate content on social media.
    12. Ability to Cope with Stress: Ask the founder about the most difficult business challenges they encountered and how they solved them.
    13. Excuses: I’d rather hear about how someone plans to grow and solve an issue than someone who spends too much time explaining their setbacks (this is just a personal preference). “Dont criticize, condemn or complain” – Dale Carnegie.
    14. Focus on pro-forma vs actual performance numbers: I want to see both. However, if pro-forma is listed I want the strategy to be explained clearly so that the pro-forma is not complete nonsense.
    15. Time Management: The “I’m too busy” excuse isn’t impressive or make you seem to be in demand. If you’re good at managing time, you can focus on the important things.
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