Chat with Yi

  • Building user profile data set for machine learning purposes can be a lucrative business
  • getting an MnA guy involved to manage relationships with acquirer is helpful to tweak the company features for eventual acquisition. Once an acquirer signals intent other competitors will follow along
  • enterprise business
    • Once software is complete is about solidifying business model and supply chain
    • High revenue but potentially low margin business
    • once u get into this it’s hard to crawl out
  • Finance
    • Benchmarking negative momentum across entire industry
    • company with the slowest negative momentum in a negative environment is the one with the most resilience

Patagonia’s brilliantly executed brand positioning

This company has moved beyond selling physical products and lifestyles into the business of selling an identity.

The persona

I am youthful and vibrant, I am passionate about the great outdoors and I will fight to preserve the environment which I so much love.

My thoughts

Nowhere within this 100 page magazine was there ever a mention that Patagonia sells outdoor gears but if you identify with the persona just described above then Patagonia is your go to brand.

The company has positioned its brand at the self actualization level of the Maslow’s hierarchy of needs.

Key insights from weekend with Jerry, Liza, Ada and Dan

On US/China trade war

  • 25% tariff basically wiped out whatever profit margin importing from China could bring
  • China’s labor cost have been increasing over the past few years that it is no longer a competitive advantage
  • China’s main advantage is the expertise they built up over the years. A company can easily spin up 25 manufacturing lines in China very quickly
  • US companies are all rapidly shifting their manufacturing activities out of China
  • New locations are Taiwan, India and Vietnam
  • Chinese staff that were retained by Google are now flying to new manufacturing facilities spun up in these countries to oversee the spin up process

On alternate data

  • Real estate
    • the rise  of platforms like AirBnB has lead investors to seek out alternate data that can help predict short term rental yield as opposed to long term rental yield in a neighborhood
    • government agencies are seeking such data to detect neighborhoods where they should focus their efforts to crack down illegal subletting on AirBnB
  • Sports
    • being able to predict strategy coaches of football teams will employ in real time will help support strategies
    • being able to predict starting line in close to real time and the corresponding outcomes will be valuable for coaches in making play decisions

On HongKong/China protest

  • Public opinion is the agenda for the ongoing protest is now getting really murky
  • Airport has stopped operations, it’s hard to even get in and out of the country
  • Foreign Chinese nationals are supportive of protest in HongKong
  • Topics pertaining to Taiwan, Tibet and TianAnMen massacre are sensitive topics amongst mainland Chinese
  • Funds of funds from Hong Kong are still very liquid

Book summary: Barbarians at the gate by Bryan Burrough and John Helyar

This book documents the series of events leading up to the successful leverage buyout (LBO) of RJR Nabisco.

Mechanism of an LBO exercise

  • Figure out the cheapest possible price to acquire the asset and its future cashflows while keeping transaction costs low
  • The acquisition team access the business to decipher potential cashflow, areas for cost savings and parts that could be sold off
  • The acquisition team raises private money to do the acquisition
  • During this period of time bandwidth of law firms and banks are fully engaged
  • Competing offers should be expected once a public announcement of an LBO buyout is made
  • Law firms and investment banks will charge fees even if the hiring party does not win the bid

Methods for financing an LBO exercise

  • issue of junk bonds
  • raising from private investors
  • issue of shares to directors to drive down level of cash required for the purchase
  • payment through cash
  • utilization of legal loop holes to reduce taxation on the LBO transaction

Motivations for an LBO exercise

  • The management team:
    • a option to exercise when the market is persistently undervaluing the shares of the business
    • free up value to reward themselves and their share holders
    • the CEO being the typical Type A personality got bored and restless from running his day to day business
  • The investment banks:
    • when the market is down but they still need to figure out ways to make money through business transactions
    • some needed an opportunity to enhance their prestige so as to attract future opportunities. Securing a prominent position in the transaction has that effect

Lessons from the LBO exercise

  • The inability to sit in a room and doing nothing is the source of most trouble.
    • The CEO ended off worst off than he did before the LBO event
  • Having inside support matters
    • Having support of the management team provides knowledge of where cost savings could be had in the operations
  • Just when you think shit will not happen, it usually does.
    • The management team was expecting an uneventful transaction. Unfortunately, the operation quickly escalated out of control when competing bids surfaced.
  • When money is cheap, Wall street gets creative
    • the Federal reserve provides cheap money which cannot be put to real economic use, LBO is just another method Wall Street utilizes to make a profit from this cheap money
  • When egos start getting involved, its no longer about making a profit
    • the successful acquirer ended up defaulting on a lot of the junk bonds issue
    • what started as an initial USD76/share bid quickly escalated to USD106/share
  • When an opportunity as large as this becomes available, the services of lawyer firms and bank credit becomes scarce and it is hard to gain access to such facilities as a new comer to the table
  • Companies actively manage Wall Street expectation
    • RJR Nabisco actively engaged in wasteful activities to project a steadily advancing year over year profitability and thus share price. It could have operated efficiently and have the share price reflect the actual value on day one
  • The core business will falter overtime when the operators get distracted by other activities and are no longer engaged and connoisseur of their own products
    • early employees of Reynolds cigarettes are themselves enthusiast smokers. They released a new product only when it passes their own taste test
    • later management were focused on milking the cash cow and started changing the culture as such
  • Negotiation dynamics
    • the senior financiers will generally play the diplomat (good cop)
    • the junior and middle level financiers will be in charge of hashing out the details (bad cop)

 

Thoughts on avoiding the greater fool theory

Once a project’s mission statement is defined, it becomes easy to determine when to stop further iterations. 

Below are the listed of statements I periodically revisit when pursuing GetData.IO’s mission to help people make good decisions by making data gathering simple and affordable. 

Hypothesis 1: People no longer need make good decisions.

Hypothesis 2: People no longer need data to make good decisions.

Hypothesis 3: People no longer find it hard to get data.

Hypothesis 4: We have exhausted all known approaches to lower the cost of data gathering to an affordable range. 

Hypothesis 5: We have exhausted all viable approaches to reach people who need to make good decisions.

Hypothesis 1 and 2 are existential questions, while hypothesis 3 focuses on substitute availability. These are out of our control. The only thing we could do is monitor for changes.

Hypothesis 4 and 5 focuses on economic feasibility. These we will fully focus our efforts on. Once we eliminate all none viable options, whatever remains will be the limitations we must accept and live with. 

It is useful to note the lack of any mention on funding. The underlying assumption is that every successful iteration necessarily unlocks resources from the environment which is then fed back to further the compounding process. The discipline is to minimize wastage. 

Relying on external funding is like utilizing margins during day trading. While earnings get amplified, failures tend to be really spectacular. One additional drawback is that they tend to mask critical flaws in the short run leading to the commonly observed greater fool phenomena in the financial markets.

https://GetData.io/about-us 

Learnings on enterprise sales – SVB and SalesForce workshop

General observation on networking

  • There were a total of 40 attendees and we received a total of 2 name cards – net conversion rate 5%
  • Social expectation during a networking session is that you can approach people to talk
  • Start with a clearly one liner if asked about your project
  • actively direct the conversation to them and spend more time listening
  • make sure to bring name cards

Compare and contrast small businesses and medium sized businesses

  • Small businesses
    • acquiring new customers
    • accessing to investment capital
    • not enough time
  • Medium sized business
    • acquiring new customers
    • achieving work life balance
    • not enough time

Sales best practices for founders n SMB sales leaders

managing leads process

  • Develop a concrete definition of a lead and make sure all employees understand it.
  • Install an effective Customer Relationship Management (CRM) Tool.
  • Track the source.
  • Distribute your leads quickly.
  • Nurture your leads and get your Sales team excited about every prospect.
  • Treat your prospects like customers.
  • Measure everything you do.
  • Hold regular meetings with your sales staff and anyone else involved in the sales process.

build out sales stages n codifying it

standardized sales process see up to 28% increase revenue

  • A consistent schedule: You should know when and how often you are going to be
    performing your sales activities.
  • A strong message. You should know what you are going to say and at what point in the
    process you are going to say it.
  • Mixed media plan. Use multiple channels to convey your message and mix it up – emails and phone calls are the most common, but perhaps it’s appropriate to reach your potential customers on a favorite social channel.

focus on boosting sales rep productivity

  • Make ongoing sales coaching a priority.
  • Advance prospects faster with Value.
  • Evaluate & re-evaluate sales processes.
  • Embrace Automation and technology.
  • Use Analytics to always be improving.

Observations on Sales force

  • UVP helps users get data from spreadsheet into systems that allows easy sharing within the sales team
  • Sales force comes with Gmail integration
    • disrupted CollaSpot’s business model
  • Social proofing: Video where users talk about the benefits they get using a tool
  • Extending existing business lines
    • current base – market segment with higher margins using enterprise sales acquisition strategy
    • new business line market segment with lower margins using self service model
      • USD25/user/mth package self service tier
      • acquisition strategy is not well defined yet
  • partnership with companies to value add for their customers
    • sales force partners with SVB to throw event to teach SVB clients how to better do sales.
    • Helps with SVB retention.
    • tap into Silicon Valley Bank’s extensive distribution network

Alessandro Chesser, VP of Sales Carta

Key regrets

  • Not investing early enough in sales operations.
    • CRM system very important. Cleaning up the mess later is going to be a headache
    • Dealing with duplicate accounts are pretty painful
  • Don’t over engineer sales process up front.

Enterprise sales versus organic adoption

Organic signup forces u to put your whole pitch online for easy copying. A sales rep can sell the vision to extract higher margins. Deliberate back and forth. Use the demo form to generate leads for sales rep

Getting the enterprise sales engine started

  • The more data you have the better your decisions. Create baseline and iterate over it over time.
  • Marc Benoff on Closing. When he joined eshare there was no product. His job was to get potential customers excited about the future of their own company. The vision and the pitch is so important. Get their feedbacks.
  • Don’t sell to far ahead and can’t deliver. Need to spend time with engineers to know what can be delivered. Always keep in mind a 1 to 2 months implementation cycle. Only sell ahead when is early stage company but don’t over promise. If failed to deliver, will create bad PR
  • Always iterate on the vision of the company and the pitch to figure out what resonates with your potential buyers
  • Early stage startups can utilized VC to generate inbound leads. The more money raised the more inbound happens with PR that follow each fund raising events

Scaling the sales organization

  • Make sure one person can bring in 100K ARR before replicate and scale up sales process
  • When is Sales cycle replicable? Use revenue as signal. Driving 100K ARR per month is a good signal. Gut feeling. When deals leads are starting to slip through the cracks
  • Charge via ACH instead of credit cards. ACH is more scalable, since the latter tends to expire.

Structuring and managing the sales team

  • For smooth transition from inbound sales to outbound sales first create demand from SDR first before hire sales team.
    • Not all sales people are comfortable with generating sales leads
  • Extremely important to make that SDR hire early. Utilize tools like OutReach.IO
  • SDR – handle email marketing and phone calls. Uses pitchbook. Scrape Startup names and email addresses. Thousands of emails a day to generate leads.
  • Ensure at least sales development representatives hit at least 60% their quota. If hitting below, it means u have over hired. It’ll create very bad culture like sales leads stealing if not hitting above quota.
  • Have sales people prioritize and focus on closing and not be the jack of all trades.
  • Promote Successful SDR  to become sales reps. They will be well positioned for success.

Mapping the hiring process for the sales leader.

The mistake is hiring really experienced and expensive people who are not willing to roll out his sleeves. You need someone who is really willing to get his hands dirty to go out to close sales. Industry experience is important, will ensure sales leader motivation level. Since he knows what is broken

Balancing the functions of marketing and sales

  • Early in startup marketing and sales goes hand in hand. How to ensure no stepping on each other’s toes?
  • Marketing organization should have good process too
  • Need to balance load of marketing and sales organization. Make sure invest more heavily in marketing to generate more leads than sales can handle to ensure good culture.

On Pricing

Pricing is important. Need to make sure not too cheap. Perceived value is very important. Need to be more expensive than competition and explain the value clearly to targeted subset of customers.

Learnings from Loominance

 UVP to attract customers via word of mouth: They need us when they are drowning in data.
Account based marketing
  • Scrap company websites, identify and recommend similar companies as sales leads to clients

Related readings

Thoughts on systemic risk

A bottle neck was observed this evening with the data pipeline for trends.getdata.io.
 
Gradual addition of more new data sources eventually lead to more jobs being added to the queue than could be processed per period time.
 
Phenomena of a similar nature was observed with getdata.io during the beginning of the year when our user base started ramping up.
 
The higher order principle is that bottlenecks are inherent within systems. They are emergent by nature. Situation will deteriorate exponentially once threshold is crossed.
 
The same principle applies with financial systems, flight systems and boat sailing.

Book summary AI super-powers, China, silicon valley and the new world order by Kai Fu Lee

The difference waves of AI

  • Internet AI – Facebook, Netflix, Google search
  • Business AI – Palantir
  • Perception AI – Tesla cars
  • Autonomous AI – Tesla self driving, Google self driving

Key locations

  • Silicon Valley
  • Zhong Guan Cun – Beijing

State of the Union

  • We are in the stage of implementation/application as opposed to RnD
    • having access to more data is more important than have expertise to do more RnD
    • having solid AI engineers is more important than AI researchers
  • We are still far from general AI
  • Key ingredients
    • data
    • computing
    • maybe work of strong AI algorithms engineers

Key differences between eco-systems

  • Silicon Valley businesses are mission and core values driven while Chinese businesses are pragmatically focused on profitability.
  • Silicon Valley businesses stay in bits and binaries offloading the brick and mortar to external vendors vendors while Chinese businesses extend their business model into the brick and mortar (online to offline)
  • Silicon valley prefers one size fit all strategy, Chinese businesses utilized localized solutions often investing/acquiring in local startups
  • Americans treat search engines like Yellow Pages (come and leave fast) while Chinese treat search engines like shopping mall (come to linger around long)
  • Silicon Valley is adversed to copying preferring to be unique Chinese business copy the heck out of each other

Chinese Advantage

  • Abundant data – quality and quantity aided by their online to offline initiatives
  • hungry entrepreneurs
  • AI scientist
  • AI friendly policy environment – strong emphasis by Chinese government
  • Hardware manufacturing know how – Shen Zhen
    • unparalleled supply chain flexibility – XiaoMi

Silicon Valley Advantage

  • Microchip manufacturing know-how

Trends within the Chinese eco-system

  • Darwinian eco-system has lead to extreme levels of competition
  • Chinese companies have already moved past the stage of clone Silicon Valley business models
  • Businesses innovate to build a defensive moat around themselves. Local businesses have advantage, with no timezone differences to deal with, decision making is relatively faster.
  • Online to offline
    • an essential ingredient to building strategic moats
    • caused the decline of cash use
  • Chinese government information systems will be able to leap frog US government information systems

Policy approaches

  • Google – impeccable safety
  • Tesla / China – trial by fire
  • key to winning the Autonomous AI race
    • is the bottleneck technology (Silicon Valley) or policy (China)?

Key concerns

  • having cheap labor is no longer going to be a source of advantage in a world heavily powered by automaton.  Developing countries hoping to employ this well tested strategy to progress will not be able to do so anymore
  • Estimated 60% potential job loss worldwide barring policy interventions
  • Job loss probability assessment
    • physical labor
      • environment – unstructured versus structure
      • tasks nature – level of dexterity versus high dexterity
    • cognitive labor
      • social – high versus low
      • cognitive – optimization based versus creativity/strategy based
  • AI replacement approach
    • single tasks approach
    • ground up rethink re-imagination
  • A population of irrelevant (no longer employable) as opposed to unemployed

Tackling Key concerns

  • Silicon valley – reduce, retrain and redistribute
  • Kai Fu Lee – stipends for care, service, education

New promise

  • Humans freed up from repetitive tasks can now focus on becoming more human oriented

Related readings

  • Disruptor, Zhou
  • www.Arvix.org – an online repository of scientific papers
  • Folding Beijing – Hao JingFang

Mark Zuckerberg chats with Yuval Noah Harrai on the Future of AI

Key take aways

  • Spread of inequality where some countries have the ability to harness AI while others don’t
  • AI based recommendation systems moving from being just an oracle to becoming a sovereign
  • AI as a tool is an amplifier
    • concerns that it will benefit totalitarianism more than democracy leading to totalitarianism becoming a more favorable governance model worldwide
    • surveillance
    • psychological manipulation – the inability to know your true self through your thoughts
    • what happens if morality and expediency diverge when it comes to governance
  • Effectiveness of curbing the negative effects of AI by encoding values within policy frameworks governing these AI based systems
    • Companies based in Democratic countries will encode democratic values within their systems vice versa for Totalitarian countries
  • Personalization versus Fragmentation
    • when everyone in a country chooses his own community that is mainly online there is no longer a glue holding the local community together
  • Long term versus short term
    • The long term benefits might come sooner than expected when taking a short term trade off

 

Trends associated with GetData.IO

Alternative Data

Robotic Process Automation