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Advice from Johnson on fund raising

Entrepreneurship is much like playing competitive basketball where it is becomes more mental competition and less physical competition as the game wears on. There will be phases during the fund raising process when you get so much external rejections and internal failed experiments that you starting thinking “am I just being a con-artist” when entering into the next fund raising session.

The real work of the entrepreneur is the mental exercise. Do not let external rejections and internal failed experiments cause your conviction to waver. Let the investor deal with their job (where to park their cash) and the management deal with theirs (how to use the cash). Your job one and only job is to convince the investor to part with his cash so that you can pass it to the manager to use the cash.

Do not confuse the roles of Entrepreneur, Management and Shareholders

  • Entrepreneur: role is to acquire external resources required to grow the company
  • Shareholder: role is to keep watch over security of the capital invested and have it grow
  • Management: role is to ensure the externally acquired resources get put to proper use with minimal wastage

When in fund raising mode, do not emotionally entangle yourself with “being accountable/responsible” for the funds that will be acquired externally to be put to good use internally. Just dealing with all the multitudes of external rejections during the fund raising exercise is in itself already a Herculean chore. There is no reason to self-sabotage by causing yourself to waver from your conviction by further introduction of self doubt during this critical process.

There is a difference between marketing the product and marketing the company. Products are marketed to customers while the company is marketed to the investors. The three classes of investors:

  • Angel investors – buy the story
  • Venture Capitalist – structured as a fund to ensure compliance with governance
  • Private Equity – late stage fund to get the company ready for IPO
  • Public offering – the general public as well as trust funds

The important thing during fund raising is to rapidly filter out the naysayers and frame a story that will excite the remaining investors to want to part with their cash. Do not waste time with the naysayers.

It is unlikely that you will be able to haul in all the capital you need in one shot. Just figure what story you need to tell to the next person to pull in the resources necessary to snowball the idea bigger and repeat that process until the entire idea gets fully realized.

Ideas/ brain child a fragile creatures that need to be protected and nurtured by the founder.

People who started companies but only have experience working in technical functions will under appreciate the importance of story telling. These companies will ultimately fail. They do not see all the marketing the partners in the company did to get it off the ground initially. People who started companies but do not attempt to build up the company in fear of failing are people simply just trying to find a job for themselves. They are not entrepreneurs but self employed.

The reason why entrepreneurs like to hang out with other entrepreneurs is that they feed off each others energy. And that is crucial for the mental game that they have to deal will on a daily basis. The most classic example is Steve Job’s reality distortion field.

There is one fundamental difference between Jeff Bezos and Elon Musk. Jeff Bezos is from the investment banking background, since series A he constantly tweaks his story to the tune of the market to get the resources the company he require. Whereas, Elon Musk was so strong in his belief and charisma that right out the gates he was able to create a cult following around his company while polarizing all the naysayers. These two approaches are reflected in their companies share prices with Tesla being really really turbulent.

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Predator’s Ball by Connie Bruck

  • no matter how much research you done regarding a stock you don’t have a contract what the future price should be
  • with high yield bond there is a contract for a certain price in a future, if you are correct about the calculation, you will be correct about your yield
  • bargain price: liquidation price 75cents on the dollar buy at 20 cents
  • when you are not a big established investment firm like Lehmen brothers, you have no franchise to protect. You are free to go the unconventional route for potential outsized returns
  • great ideas are born bad. Its easy to make your way to a great idea from crazy outrageous ones than cautious and sensible ones. Investment bankers by default filter out the crazy outrageous ones.
  • Contrarian thinkers need to train themselves to see things via unconventional routes
  • ways to structure a bond
    • give money back sooner
    • give higher interest rates
    • give more stock
    • give stocks cheap
  • It is easier for corporation to pay interest which is tax deductible than dividends which are not
  • Bonds offer process
    • first tier  high rollers offer liquidity get to buy at cheaper price and exit earlier
    • second tier payers, with franchise to protect, who want to avoid stigma of being junk bond buyers will come in later at more expensive price and exit later.
  • Successful leverage buyout scenario: after buy out use cashflow from business to pay off the junk bonds thus deleverage the business
  • Mutual fund arbitrage: compare value of underlying portfolio and stock price
  • If you are right about a company being undervalued and it is willing to put itself up for sale, there will be buyers
  • Poison pill: defense mechanism against corporate take overs. When would be acquirers crosses threshold of ownership, existing shareholders are given extravagant rights rights making it less desirable as take over target
  • Michael Milken:
    • perception versus reality, see what the world could not.
    • Vision is Strength.
    • capital is abundant, vision is scarce.
    • excess capital is not strength but opportunity for weakness
    • capital put in the hands of someone with vision will result in drastically different results.
    • return of the owner manager as opposed to the corporate manager
    • by-pass the China wall principle where companies try to isolate the deal making and arbitrage departments
    • knows many industry in depth

Related references

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King Icahn, biography of a renegade capitalist by Mark Stevens

  • way of thinking
    • There is a strategy behind everything. Everything fits. Thinking this way taught me to compete in many things, not only take over but chess and arbitrage
    • Empiricism says knowledge is based on observation and experience, not feelings
    • Studying 20th century philosophy trains your mind for takeovers
    • Chain thinking: just like chess, in any transaction, think of every single possible move and counter move
    • always consider what might be the worst case scenario and then protect your downside while increasing your control
    • a civilization starts to decline when a large part of its population stops working
  • Icahn/Kingsley theory: focus the market’s attention on the disparity in values and someone will buy you out
    • Take over strategy potential outcome after indicating it as a take over target
      • acquisition of shares by original suitor
      • hostile challenger
      • white knight  who will come and free up the locked up value
    • Prefer stocks with limited downside exposure, gravitate towards out of favor stocks that had already been discounted by the market
    • When analyzing a company, earnings does not always present a clear picture. Depreciation is paper losses. Cashflow presents a better picture. Key components to analyze
      • asset
      • return on equity
      • cashflow
      • capitalization
    • committed the mistake of just focusing on financial engineering to reduce cost, think about how to grow the business
    • Did not realize after fully taking over a company that the revenue side of the business is usually circumscribed to external factors not under direct management control
  • On negotiations
    • everything has to be negotiated
    • threaten, continuously threaten by painting a very dire picture. This helps frame the alternative which you demand as something very very reasonable
    • wear down your opponent
    • answer a question with a question
    • always push the deal as far as it can without blowing up
    • wait until a company is so stretched in need of a deal before buying on the most favorable terms
  • On goal setting
    • have no fixed goals
    • see all the possibilities
  • Princeton liberal arts eduction:
    • exposure to eclectic mix of human knowledge teaching a student how to think, explore and question rather than prepare them for a specific career
    • the best thinkers will rise to the top of their chosen careers precisely because they have not limited themselves to narrow courses of study

Related references

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Evening out watching Rambo, last blood

From Sujit on trading

  • not necessary to get numbers further back than six months
  • stock market subjected to fractal distribution
  • it is possible to generate returns of up to 140% per year by trading on stocks that are moving within a range
  • going all in on each position each time leads to a very low Sharpe ratio
  • Sharpe ratio should be calculated separately for method and for SnP benchmarked against US treasury interest rates. The difference is the actual returns

On Rambo Last blood

A movie is a reflection of the culture and attitude of an age. Rambo was a very popular cultural icon during the eighties and the early nineties when memories of the Second World War and the Cold War against the communist were still very fresh in the minds of the people in America.

If you looked at the world today through the eyes of someone like Rambo, you would have been able to easily draw facts to back the narrative painted by Trump prior to being elected president.

When operating in an environment of uncertainty, a decision maker formulates multiple often competing narratives in the head that best explains majority of the facts presented. He calibrates the weightage assigned to the probability of each narrative as new pieces of data become available. He simultaneously utilizes multiple ones that are assigned high plausibility in his decision making to strive for the best possible expected outcome . It is a cognitively demanding iterative activity that goes on indefinitely.

  • common themes between movie and Trump’s narrative
    • Mexico drug cartels
    • Mexico prostitution rings
    • The world is a dark place
    • illegal border crossing
    • poor border fence
    • white male
    • Rust belt
    • Protagonist is in his 70s
    • Freedom fighter who fought the communist in Vietnam and Russia
    • guns and lots of blood
    • man of steel
    • manifest destiny
  • Cognitive biases
    • Narrative fallacy
    • Framing bias
    • selective bias

Related readings

  • Expert political judgement, Philip Tetlock
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Donald Trump’s August 1st 2019 tweet on additional tariffs

Highlights

  • The effect of a negative shock is 3X worst that the effect of a disappointment
  • The effect of a negative shock is longer lasting than the effect of a disappointment
  • The market does retain memory of prior states
  • Seems like each negative political macro event has approximately negative 3% impact on the SnP

Series of events

Wednesday, 31st July 2019, 2pm, US Federal Reserve’s disappointment

  • Federal Reserve announced an interest rate cut of 0.25% from 2.5% to 2.25%
    • no hints of further cuts
    • before announcement SPY price 300.04
    • after announcement SPY price 296.98
    • net effect on SPY -1.02%

Thursday, 1st Aug 2019, 10.26am, US President’s negative shock

  • President Donald Trump announced additional 10% tariffs on remaining 300 billion imports from China on Twitter.
    • before announcement SPY price 300.45
    • after announcement SPY price 291.02
    • net effect on SPY -3.14%
    • SPY price still above the 7th June 2019 price of 288.97 when the effect of Fed’s hint to adjust interest rate cuts has been priced in.

Sunday, 4th Aug 2019, 6.20pm PST, China exchange rate sinks below 7CNY/1USD for the first time

Monday, 5th Aug 2019, 9.58am PST, China suspends purchases of US farm products

  • US Market takes a sharp dip on Monday
    • SPY price 281.90 at lowest point
    • net effect on SPY -3.13%

Monday, 5th Aug 2019, 5.27pm PST, China announces fix to prevent further RMB depreciations against the USD

  • US market rebounds
    • SPY price 293.55 at highest point
    • net effect on SPY 4.13%

13th Aug 2019 Trump announces delay of tariff

  • US market rebounds
    • SPY price 292.32 at highest point
    • net effect on SPY 1.91%

14th Aug 2019 UK and US 2 years / 10years yield curve inverts. Germany reports GDP shrinkage for 2019Q2

  • US Market takes a sharp dip
    • SPY price 284.20 at lowest point
    • net effect on SPY -2.77%

Related artifacts

Trump’s tweet on additional 10% tariffs at 1st Aug 2019, 10.26am PST

Chinese RMB crosses 7RMB/1USD for the first time on 4th Aug 2019, 640pm PST

Related readings

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Key takeaway from Great Again by Donald Trump

Personal mous operandi

  • When you draw a line in the sand if someone else crosses the line enforce repercussions
  • When laws are not enforced them, they don’t exist
  • Plays cards close to vest to keep opponents second guessing
  • Values loyalty highly
  • find the best people to get the job done and then watch over them
  • The side that needs the deal most should walk away with the least

On foreign military

  • Long term rivals: China and Russia
  • Build up strength of US military as a form of deterrence to avoid necessity for deployment
  • Only intervene when US economic interest is served as opposed to a purely ideology driven approach
  • Countries that benefitted from US military aid should pay for service
    • South Korea
    • Germany
    • Saudi Arabi
    • Japan
    • Britain
  • On the middle east
    • Iran should not be trusted
      • their nuclear research program
      • their motivation to take over the entire Middle East
      • their motivation to wipe out Israel
    • See Israel as an ally. Sees the need to ensure balance of power amongst players within the middle east
    • The removal of Iraq has a net destabilizing effect on the region
  • Keep oil prices in check
    • to keep ISIS oil revenue from Iraq and Syria in check
    • To insulate the US economy from OPEC’s price setting ability
    • To become the largest oil producer in the world so as to overtake Saudi Arabia and Russia so as to keep their economic influence in check

On foreign trade

  • Believe in escalating use of sanctions to force other countries to table for negotiations
  • US Trade deficit is concerning
  • On China
    • Have deep respect for the Chinese who are great businessmen
    • largest holder of American debt
    • Chinese stock markets have too much influence on US stock markets
      • 2015 Chinese stock markets collapse caused US Dow Jones to plummet 1,000 points
    • Sees China as more dependent on US than US is on China. To utilize this as a leverage
  • Discourage other countries from devaluing their currencies against the USD
    • Japan
    • China
    • Mexico
  • Rectify faulty trade arrangements
    • China
    • Mexico
    • Russia
    • Iran
    • Saudi Arabia
  • Willing to utilize economic strength (American consumer) to reward countries that cooperate and punish those that don’t

On the economy

  • Believes in a progressive individual taxation system to provide more liquidity for the lower to middle class
  • Encourage companies to bring jobs and manufacturing back to the US
  • Streamline and lower corporate taxation to encourage companies to bring foreign reserves back to the US
  • Reduce corporate taxation to encourage growth of local companies and manufacturing
  • To reduce over-regulations to increase growth rate of corporate activities
  • Build up of military encourages GDP growth
  • Build up of infrastructure encourages GDP growth and facilitates commerce
  • On Oil
    • To build up the US Shale oil industry
    • Create more jobs domestically

On healthcare

  • break up virtual state monopolies by insurance companies
  • allow competition to make insurance companies compete for their customers

On education

  • decentralize control of the educational system to the districts to enforce standards
  • mistrust teacher unions’ ability to make sure only the best teachers get the job

On domestic operators

  • On reporters
    • mistrust political reporters as they generally misrepresent and bias towards sensationalization
    • trust financial reporters because dollars and cents are at stake
    • build relationship with them to generate free publicity for his ideas
  • Views interest of politicians as mis-aligned to interest of people

On immigration

  • Wants to retain the best foreign talents within the country and make it easy for them to contribute
  • To stem out illegal immigration so as to keep out unqualified immigrants
  • To remove the USD1billion/yr cost of keeping foreign criminals in US prison
  • Stop the tide of refugee immigrants to reduce the cost and repercussions of supporting them

On guns rights

  • 2nd Amendment, gun rights needs to stay intact so that citizens can keep the state in check and have a way of protecting their family
  • People with mental health should not be allowed to own guns
  • Over regulation is ineffective, criminals do not get their guns via normal routes

On religion

  • Believes in the freedom of religion
  • Believes Christian ideals is the philosophical foundation of the US
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Coaching for founders

  • As a CEO, being in the trenches feels a lot like being punched in the face over and over again
  • A lot of dysfunctions in teams boils down to not being clear about roles and responsibilities
  • always talk about the task and not about the person
  • The (blame of the screw up) Buck stops with the CEO whose role and responsibility includes being the ultimate decision maker
  • It is the CEO’s job to bring up difficult conversations that are necessary
  • performance issues boil down to two types motivational, perceived or ability
    • motivation because feeling burned out
    • perceived because role n responsibility not clear
    • ability then not supposed to clear  skillset mismatch
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Key take aways from Exit Strategies for Entrepreneurs and Angel Investors

Early Exits
Early Exits

Key advice for Startups and emerging companies

  • Start small
  • Stay lean
  • Raise only the funding you really need and grow judiciously.
  • Alignment from all parties on exit strategy is extremely important
  • Best time to sell a company is when the future has never looked brighter

On VCs

  • Interest of VCs might not be aligned with interest of founders and angel investors
  • VCs need to satisfy the needs of their LPs
    • Need their successful companies to generate a minimum of 10-30X return for their fund to perform respectably, taking into account overall failure rates
    • They thus need to wait longer to exit and work their investments harder.
    • They are ok to accelerate the growth of their investments with their capital or blow it up quick for a capital right off. The latter helps minimize management overheads.
    • They will block a sale if the return multiples do not meet their expectation
  • VC return multiples of term sheet valuation
    • Series A – 10X return
    • Series B – 4-7X returns
    • SEries C – 2-4X returns
  • VC funds have been getting bigger overtime. The need to deploy their capital forces them to seek for opportunities where likelihoods are slim.
  • Companies with VC money tend to exit at year 16 on the average

On Angels

  • Invest much less money than VCs
    • USD10,000 to USD250,000
  • Happy to exit in a few years with a 3-5X return
  • In the 50s and 60s
  • prior successful entrepreneurs or senior executives
  • allocate around 5-10% for angel investing
  • has experience and inclination to be great mentors and valuable directors
  • Companies with angel only money tend to exit at year 4 on the average

Drivers of acquisition

  • trend has been dramatic shift towards earlier exits
  • huge amounts of cash on balance sheets of large corporation
  • growth in Private equity and buy out funds

Insights on Growth

  • The first USD10 to USD20 million valuation are the easiest and less challenge on the skills of the CEO
    • It is easy for young companies to maintain year on year compound annual growth rates of 100% or even 200%
  • Knowledge of how hard it is to be a CEO and lots of money in the bank is usually a huge deterrent for serial entrepreneurship.
  • VCs replace CEOs of 75% of companies within 18 months of their initial investments
    • Founder’s shares get trapped in an illiquid private company for another 5-10 years
  • Use a 2 year time horizon
    • year 1 develop technology
    • year 2 develop distribution

On valuation

  • A lot of factors that have the biggest impact on a company’s short term value fluctuation will be out of management’s control
  • The factors will also be unforeseen
  • General valuation multiples
    • SAAS companies are typically valued at 3-4 RR
    • Service body shops 0.5 of per staff revenue or PE ratio of 3-4

On sales process

  • Typically 4-5 months
  • CEOs must focus on the business to ensure metrics are at their best during the sales to maximize valuation
    • can add up to 10-20% more valuation
  • Until the very last phase of the sales, it is best to delegate the sales process to a professional
    • Business broker or M&A advisor – use them as the bad guy
      • big firms shoot for exit above USD100million
        • 2-3% of final value
      • boutique firms shoot for USD20-70 million
        • 4-6% of final exit value

Related references

  • Evolution and revolution as organizations grow, Larry Greiner Harvard Business School
  • Raising money: The canadian guide to successful business financing, Douglas Gray and Brian Nattrass
  • High Anxiety or Great Expectations, Bart Schachter and George Hoyem, Venture Capital Journal
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Understanding cognitive biases is important for startups

Overview

All decisions are inherently emotional. Our lymphatic system is a more ancient and robust system than our logical faculties. Its been shown in studies, conducted by Antonio Damasio in 2000, that patients with damage to the part of the brain that processes emotions have trouble making even the smallest decisions.

Humans are by nature social creatures. Studies show that our brains contain mirror neurons which endows us the ability to empathize with another fellow human being. This also implies our emotions are easily subjected to the influence of others. This is why it is important to get familiar with the various cognitive biases in the human brain and what triggers them (see lecture by Charlie Munger).

On the flip side, it is possible to exploit cognitive biases to boost sales conversions. This is an art that touts in the streets of Cairo have mastered through years of practice. The effectiveness of any street tout is dependent on the number of cognitive biases he can exploit during the short period of encounter with his subject.

A case study on how cognitive biases are combined and used

A tout might start the conversation with a small ask, e.g. as simple as “what is your name?”. This seemingly innocent question when responded will trigger off the consistency bias. The subject will inevitably feel a sense of cognitive dissonance if he were to stop further conversation after having started the conversation by telling the tout his name.

The tout next proceeds to offer a seemingly harmless “gift” which might be small and of little value. This gift, when accepted, will exploit the reciprocity bias. The subject having received something of value will inevitably feel uneasy if he does not reciprocate in kind.

Since the subject at this point, without any prior data points, is yet sure on the “value” to place on the “gift”, a skillful tout might take the opportunity to exploit the anchoring bias by providing an high arbitrarily number about something seemingly unrelated such as one of the following:

  • the age of his 90 year old mum
  • the age of the pyramids
  • the inhumanly high temperature

This arbitrarily high number will help facilitate a higher perceived valuation of the “gift”.

And while he is telling about his mum or kids, he might exploit the authority bias by saying his mum is sick and needs money to see the doctor. One might say there is no person of authority in the immediate proximity. However in this scenario, the person is actually some authority figure the subject had in his life, while he was growing up, who preached to him the importance of being a good human being and helping others in need. Having delivered his story till this point, the tout should have successfully wiggled himself to a moral high ground in relationship to the subject.

It can be assumed that sometime has already past since the subject was given physical possession of the gift. The endowment effect should have kicked in by then. The subject if he was even mildly inclined towards the gift at the onset, he will feel a potentially higher level of psychological discomfort at returning the “gift” to the tout.

At this point from a psychological perspective, for the subject to be able to refuse the request of the tout for a donation, he would necessarily need to have priorly developed much mastery over his own emotions. It can be safely assumed the percentage of subjects parting with a “token” amount of donation to the tout will be significantly higher than an alternative scenario where a beggar simply approached begged for money.

How it is relevant to your funnel

Now one would ask how does this relate to driving up conversion rates in my startup application? The point of the story is not to teach you how to be “evil“, by getting your user to doing something against his will, but to illustrate the importance of catering to his psychological needs within your onboarding experience. The reason why your user landed at the top of your funnel was because he has a genuine need that he hopes your application could get done for him.

A smooth flowing onboarding experience coupled with a compelling story will help keep your user motivated as you drive him down the funnel towards the magic moment within your application. There is a reason why folks call the magic moment an Aha! moment. From a biological perspective, your user’s brain releases a small dose of dopamine (a feel good reward) during that very instance.

The key to user retention is to figure how to encourage repeated actions by your user so that he could experience the Aha! moment again and again until the action becomes a habit and your user does it reflexively without needing to think about it. Of course, to ensure your service can continue to benefit the world,  it is important to remember asking for contribution to pay for server cost at some point…

At GetData.IO, our mission is to turn the Web into the fully functional Giant Graph Database of Human Knowledge. We aim to do so by nurturing a community of like-minded contributors, hence the importance of successfully on-boarding our users. This is because every successfully created data source will not only benefit its creator but also other community members that might have need of it in the future.

Related References

  • Hooked: How to Build Habit-Forming Products, Nir Eyal
  • Altered Traits: Science Reveals How Meditation Changes Your Mind, Brain, and Body, Daniel Goldman
  • AARRR framework, Dave McClure
  • Influence: The Psychology of Persuasion, Revised Edition, Robert B Cialdini
  • The Power of Habit: Why We Do What We Do in Life and Business, Charles Duhigg
  • The psychology of human misjudgment, Charlie Mung
  • Jobs to Be Done: A Roadmap for Customer-Centered Innovation, Stephen Wunker
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Navigating the trough of sorrow

While I was reading through most of the success stories that were published on IndieHackers.com, it occurred to me that my project GetData.IO really took longer than most others to gain significant traction, a full 5 years actually.

The beginning

I first stumbled upon this project back in December 2012 when I was trying to solve two other problems of my own.

In my first problem, I was trying to identify the best stocks to buy on the Singapore Stock Exchange. While browsing through the stocks listed on their website, I soon realize that most stock exchanges as well as other financial websites gear their data presentation towards quick buy and sell behaviors. If you were looking to get data for granular analysis based on historical company performance as opposed to stock price movements, its like pulling teeth. Even then, important financial data I needed for decision making purposes were spread across multiple websites. This first problem lead me to write 2 web-scrappers, one for SGX.com and the other for Yahoo Finance, to extract data-sets which I later combined to help me with my investment decision-making process.

Once I happily parked my cash, I went back to working on my side project then. It was a travel portal which aggregates all the travel packages from tour agencies located in Southeast Asia. It was not long before I encountered my second problem… I had to write a bunch of web-scrapers again to pull data from vendor sites which do not have the APIs! Being forced to write my 3rd, 4th and maybe 5th web-scraper within a single week lead me to put on hold all work and step back to look at the bigger picture.

The insight

Being a web developer, and understanding how other web developers think, it quickly occurred to me the patterns that repeat themselves across webpage listings as well as nested webpages. This is especially true for naming conventions when it came to CSS styling. Developers tend to name their CSS classes the way they would actual physical objects in the world.

I figured if there existed a Semantic Query Language that is program independent, it would provide the benefit of querying webpages as if they were database tables while providing for clean abstraction of schema from the underlying technology. These two insights still prove true today after 6 years into the project.

The trough of sorrow

While the first 5 years depicted in the trend line above seem peaceful due to a lack of activity, it felt anything but peaceful. During this time, I was privately struggling with a bunch of challenges.

Team management mistakes and pre-mature scaling

First and foremost was team management. During the inception of the project my ex-schoolmate from years ago approached me to ask if there was any project that he could get involved in. Since I was working on this project, it was a natural that I would invited him to join the project. We soon got ourselves into an incubator in Singapore called JFDI.

In hindsight, while the experience provided us with general knowledge and friends, it really felt like going through a whirlwind. The most important piece of knowledge I came across during the incubation period was this book recommendation?—?The Founder’s dilemma. I wished I read the book before I made all of the mistakes I did.

There was a lot of hype (see the blip in mid-2013), tension and stress during the period between me and my ex-schoolmate. We went our separate ways due to differences in vision of how the project should proceed shortly after JDFI Demo Day. It was not long before I grew the team to a size of 6 and had it disbanded, realizing it was naive to scale in size before figuring out the monetization model.

Investor management mistakes

During this period of time, I also managed to commit a bunch of grave mistakes which I vow never to repeat again.

Mistake #1 was being too liberal with the stock allocation. When we incorporated the company, I was naive to believe the team would stay intact in its then configuration all the way through to the end. The cliff before vesting were to begin was only 3 months with full vesting occurring in 2 years. When my ex-schoolmate departed, the cap table was in a total mess with a huge chunk owned by a non-operator and none left for future employees without significant dilution of existing folks. This was the first serious red-flag when it came to fund raising.

Mistake #2 was giving away too much of the company for too little, too early in the project before achieving critical milestones. This was the second serious red-flag that really turned off follow up would-be investors.

Mistake #3 was not realizing the mindset difference of investors in Asia versus Silicon Valley, and thereafter picking the wrong geographical location (a.k.a network) to incubate the project. Incubating the project in the wrong network can be really detrimental to its future growth. Asian investors are inclined towards investing in applications that have a clear path to monetization while Silicon Valley investors are open towards investing in deep technology of which the path to monetization is yet apparent. During the subsequent period, I saw two similar projects incubated and successfully launched via Ycombinator.

The way I managed to fix the three problems above was to acquire funds I didn’t yet have by taking up a day job while relocating the project to back to the Valley’s network. I count my blessings for having friends who lend a helping hand when I was in a crunch.

Self-doubt

I remembered having the conversation with the head of the incubator two years into the project during my visit back to Singapore when he tried to convince me the project was going nowhere and I should just throw in the towel. I managed to convince him and more importantly myself to give it go for another 6 months till the end of the year.

I remember the evenings and weekends alone in my room while not working on my day job. In between spurts of coding, I would browse through the web or sit staring at the wall trying to envision how product market fit would look like. As what Steve Jobs mentioned once in his lecture, it felt like pushing against a wall with no signs of progress or movement whatever so. If anything, it was a lot of frustration, self-doubt and dejection. A few times, I felt like throwing in the towel and just giving up. For a period of 6 months in 2014, I actually stopped touching the code in total exasperation and just left the project running on auto-pilot, swearing to never look at it again.

The hiatus was not to last long though. A calling is just like the siren, even if somewhat faint sometimes, it calls out to you in the depths of night or when just strolling along on the serene beaches of California. It was not long before I was back on my MacBook plowing through the project again with renewed vigor.

First signs of life

It was mid-2015, the project was still not showing signs of any form of traction. I had by then stockpiled some cash from my day job and was starting to get interested in acquiring a piece of real estate with the hope of generating some cashflow to bootstrap the project while freeing up my own time. It was during this period of time that I got introduced to my friend’s room mate who also happened to be interested in real estate.

We started meeting on weekends and utilizing GetData.IO to gather real estate data for our real estate investment purposes. We were gonna perform machine learning for real estate. The scope of the project was really demanding. It was during this period of dog fooding that I started understanding how users would use GetData.IO. It was also then when I realized how shitty and unsuited the infrastructure was for the kind and scale of data harvesting required for projects like ours. It catalyzed a full rewrite of the infrastructure over the course of the next two years as well as brought the semantic query language to maturity.

Technical challenges

Similar to what Max Levchin mentioned in the book Founder’s at work, during this period of time there was always this fear in the back of my mind that I would encounter technical challenges which would be unsolvable.

The site would occasionally go down as we started scaling the volume of daily crawls. I would spend hours on the weekends digging through the logs to attempt at reproducing the error so as to understand the root cause. The operations was like a (data) pipeline, scaling one section of the pipeline without addressing further down sections would inevitably cause fissures and breakage. Some form of manual calculus in the head would always need to be performed to figure out the best configuration to balance the volume and the costs.

The number 1 hardest problem I had to tackle during this period of time was the problem of caching and storage. As the volume of data increase, storage cost increase and so did wait time required before data could be downloaded. This problem brought down the central database a few times.

After procrastinating for a while as the problem festered in mid-2016, I decided that it was to be the number 1 priority to be solved. I spend a good 4 months going to big-data and artificial intelligence MeetUps in the Bay Area to check out the types of solutions available for the problem faced. While no suitable solutions were found, the 4 months helped elicit corner cases to the problem which I did not previously thought of. I ended up building my own in-house solution.

Traction and Growth

An unforeseen side effect of solving the storage and caching problem was its effect on SEO. The effects on SEO would not be visible until mid-2017 when I started seeing increased volume of organic traffic to the site. As load times got reduced from more than a minute in some cases to less than 400 milliseconds seconds, the volume of pages indexed by bots would increase, accompanied by increase in volume of visitors and reduction in bounce rates.

Continued education

It was in early-2016 that I came across an article expounding the benefits of reading widely and deeply by Paul Graham which prompted me to pick up my hobby of reading again. A self-hack demonstrated to me by the same friend, who helped relocated me here to the Bay Area, which I pursued vehemently got me reading up to 1.5 books a week. These are books which I summarized on my personal blog for later reference. All the learnings developed my mental model of the world and greatly aided in the way I tackled the project.

Edmodo’s VP of engineering hammered in the importance of not boiling the ocean when attempting to solve a technical problem, of always being judicious with the use of resource during my time working as a tech-lead under his wing.  Another key lesson learned from him is that in some circumstances being liked and being effective do not go hand in hand. As the key decision maker, it is important to steadfastly practice the discipline of being effective.

Head of Design, Tim and Lukas helped me appreciate the significance of UX during my time working with them and how it ties to user psychology.

Edmodo’s CEO introduced us to mindfulness meditation late-2016 to help us weather through the turbulent times that was happening within the company then. It was rough. The practice which I have adopted till to date has helped keep my mind balance while navigating the uncertainties of the path I am treading.

Edmodo’s VP of product sent me for a course late-2017 which helped consolidate all the knowledge I have acquired till then into a coherent whole. The knowledge gained has helped greatly accelerated the progress of GetData.IO. During the same period, I was also introduced by him the Vipasanna mediation practice which coincidentally a large percentage of the management team practices.

One very significant paradigm shift I observed in myself during this period of continued education is the observed relationship between myself and the project. It has changed from an attitude of urgently needing to succeed at all cost to an attitude of open curiosity and fascination as one would an open ended science project.

Moving forward

To date, I have started working full time on the project again. GetData.IO has the support of more than 1,500 community members worldwide. Our mission is to turn the Web into the fully functional Giant Graph Database of Human Knowledge. Financially, with the help of our community members, the project is now self-sustaining. I feel grateful for all the support and lessons gained during this 6 year journey. I look forward to the journey ahead as I continue along my path.