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Doom and Gloom, Code of Conduct, Mafias, and More
The Future of Innovation is Global. We discuss it here.
Doom and gloom
Everybody has seemingly released their version of the Black Swan memo with advice on navigating the crisis (see here, here or here).
Sequoia, not to be left out, included one too. Their 52 page presentation is excellent.
My take, perhaps like a broken record over the last couple of years, is that startups should be Camels, built on a foundation of sustainable unit economics, managed burn and a long-term outlook.
Story to come here soon.
Codes of conduct
Venture needs a code of conduct. The venture capital industry has grown rapidly and globalized. Yet despite this, it remains largely a cottage industry. Great piece arguing the need for a code of conduct.
Five years ago, along with a few friends at Kauffman Fellows, we launched such a code of conduct for the organization. It is premised on the belief that “the venture capital community can no longer ignore the ethical and moral issues that arise alongside its investment activities, including power imbalances, lack of inclusion, and of course the deplorable treatment of women and minorities. Stakeholders across the ecosystem – from entrepreneurs to Limited Partners – are searching for a more proactive and affirmative approach from the investor community.”
Have a look here.
Interesting discussions
Entrepreneurial ecosystems do not appear out of thin air. They are built, brick by brick. And certain companies catalyze the ecosystem. The Paypal mafia was a catalyst in Silicon Valley. In Out-Innovate I profiled a few other examples around the world.
I loved this graphic on Rappi in Latam.
Is VC overly entangled? Great piece highlighting the entanglement phenomenon in VC. Crucially, it highlights some growing challenges from these evolutions. “This continued concentration, combined with increasing commingling of investment entities that arguably should remain independent, creates a perfect storm of conflicts of interest, misaligned incentives, missed opportunities, and compression of returns across the entire venture asset class.”
Creating infrastructure can unlock innovation. I have previously profiled Brazil’s efforts with PIX, a government run free real-time payment network. This enables a number of new apps and use cases to be affordably built on top and to better serve the underbanked. Similarly, Aadhaar, the universal ID in India has spawned the India Stack, a set of public tools and APIs.
In the same vein, good piece on digital citizenship in Estonia, and what it unlocks. “Other than getting married or divorced, there's now almost no limit to what you can do online in Estonia. You can file your taxes, apply for a new passport or driving license, decide where to deposit your pension, register for parental leave and manage prescriptions. If you call an ambulance, the paramedic will know by the time they reach you any medical history they need to be aware of and your blood type. All of this data is tied to a unique identification number and an ID card.” The savings are real. “The benefits of Estonia's digital public services are many, starting with the amount of money it saves the country – an estimated 2% of its GDP.”
Startups are on the rise. But it is important we don’t squander the moment. “By fall 2020, economists scrambled to make sense of why the rate of business formations were growing faster than they had in decades. The trend continued in 2021. Nearly 5.4 million applications were filed to form new businesses — the most of any year on record.” It behooves us to implement smart policy. “Entrepreneurship can’t be a ‘special interest group’ but a lens to view all our goals, from education to our economy.”
Interesting research on the link between small business and wealth. Findings include: “Small business owner liquid wealth is over 40 percent higher than that of wage earners before they start their businesses. Small business owners starting a business with more personal cash may be able to invest more in their business.” Also, “Owners of small businesses that close have substantially less liquid wealth than owners of businesses that stay open.” These are not earth shattering, but conclusions on how to make entrepreneurship more inclusive are important.
More interesting question is who are the rich? Short answer: it is not who you think they are. Of “the more than 140,000 Americans who earn more than $1.58 million per year…is in their words, the owner of a ‘regional business,’ such as an ‘auto dealer’ or a ‘beverage distributor.’” Turns out Peter Thiel was right, and that the best way to be rich in this country is to find an industry where one can be a monopolist in a market.
One of the commercial arguments for social impact is resonance for customers. Is it true, particularly in middle income countries? Interesting research in Mexico: “What do consumers in emerging markets think about brand purpose and impact initiatives? Are they more likely to buy from brands that support good causes? […] a clear majority of consumers (80%) indicated that it’s important or very important for them that brands generate positive social impact...The types of initiatives most valued include creating environmentally-friendly products (75%), helping consumers save money (58%) and supporting social causes and charities (45%). A further noteworthy finding was that, when purchasing a product, 71% of participants said they would choose a brand that confers a personal benefit over a brand that supports a broader social cause (29%).”
Last month I wrote about George Soros. I would therefore be remiss not to mention Terra, and its collapse. Here is a tweet that explained the attack better than I could.
Should you write a non-fiction book? I published a piece recently and the discussion continues.
Fun conversation on the More Than Profit podcast.
While I don’t know how these lists are compiled, fun to be included.
Book of the month
This month I read The Code Breaker: Jennifer Doudna, Gene Editing, and the Future of the Human Race. While styled as a biography on Jennifer Doudna, it is more of a biography on Crisper. Fascinating read that starts with the foundations and plunges into the science.
As the NY Times reviews it: “The landmark research that brought Doudna and Charpentier to the pinnacle of global acclaim has the potential to control future pandemics — either by outwitting the next viral plague through better screening and treatment or by engineering human beings with better disease resistance programmed into their cells. The technique of gene editing that they patented… makes it possible to selectively snip and alter bits of DNA as though they were so many hems to take up or waistbands to let out…The term ‘code breaker’ also describes the CRISPR complex itself, which cuts through the double strands of the DNA molecule carrying the genetic code.”
