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High-frequency trading is the practice where automated systems search for minor differences in price of stocks that can be exploited for small financial gains. Executed often enough and with a high enough investment, they can lead to serious profits for the investment firms that have the wherewithal to run these systems. The systems trade with minimal human supervision, however, and have been blamed for a number of unusually violent swings that have taken place in the stock market.

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KentuckyFC writes "The banking system is closely regulated and monitored by central banks and other government agencies. But it has become common practice for banks to get around this by doing business in ways that don't show up on conventional balance sheets. This so-called shadow banking system is thought to be huge, but nobody knows exactly how big. Now three econophysicists have discovered that the size distribution of the world's largest financial firms significantly differs from the size distribution of smaller ones or indeed non-financial firms. And they hypothesize that the difference is the result of the hidden transactions that make up the shadow banking system. By this new measure, the shadow banking system has grown dramatically since the financial crisis and was worth over $100 trillion in 2012, significantly more than had been thought and more even than the GDP of the entire planet. Nothing to worry about, then."

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An anonymous reader writes with a link to a story at Forbes about what's said to the first Bitcoin hedge fund; the article goes into some of the details of how the (literally) valuable data is kept. A selection: "The private key itself is AES-256 encrypted. After exporting Bitcoin private keys from wallet.dat file, data is stored in a TrueCrypt container on three separate flash drives. Using Shamir's Secret Sharing algorithm, the container password is then split into three parts utilizing a 2-of-3 secret sharing model. Incorporating physical security with electronic security, each flash drive from various manufacturers is duplicated several times and, together with a CD-ROM, those items are vaulted in a bank safety deposit box in three different legal jurisdictions. To leverage geographic distribution as well, each bank stores only part of a key, so if a single deposit box is compromised, no funds are lost."

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FOCUS 100, Investors, VCs

Investors take a big financial risk each time they invest in a startup, so they're pretty careful about who they back. You may have the best product in the world, but it's no guarantee that investors will shell out for you.

Earlier this month, startup founders from around the country gathered at Ogilvy in New York for the first annual FOCUS 100 Symposium. We attended a session called "Why We Invest," where angel investors and VCs shared what they're looking for in entrepreneurial talent. Here's what we found out:

Who they invest in:

Lauren Maillian Bias, Founding Partner and Director of Operations, Strategy and Investor Relations at Gen Y Capital, says her firm looks for entrepreneurs who have the ability to adapt and evolve. "Many times you'll meet a team in the beginning stages of the company and they'll morph into something else later," she says. "You have to have that ability within you to not take it personally either, in saying, 'this isn't working for the market,' and your business has to work for the market. It can't just work for you."

Deborah Jackson, Founder of Women Innovate Mobile (WIM), likes to see founders with big visions. She looks for "an entrepreneur that sees where they want to go, that has a vision. You need an entrepreneur that sees it."

What they invest in:

"Number one," says Jackson, "I really have to understand what the company does. And that's not always easy to do, particularly if you have a new kind of technology or you're trying to break into a market that's really not been proven. Second of all, I look for very big markets. So if it's a good product, is it a niche, or can it go big? Usually to have a big return you need to have a big market."

Eghosa Omoigui, General Partner at EchoVC Partners, disagrees. "[I] don't get lured by big markets, because you don't always have to have a big market to invest in a company. I look at DailyCandy as a classic example of an interesting company that didn't need five or ten million users. It just needed a million users to each spend 16 dollars, and that's a 16 million dollar a year business. It wasn't 10 or 20 or 30 million users, which everyone's so quick to think that's what you need. You just want super-engaged, super-attentive customers and users who... don't want to leave you."

How to nail the pitch:

"I'm a big believer of the six slide deck," says Brian Watson, Investment Team Member at Union Square Ventures. "In six slides you can get your vision across really quickly and succinctly, and create a conversation you can talk about at the end [of the pitch]." He also warns startup founders that "investors don't want to see all the small details and every single number about how you're going to do your business. We'd rather see you give the vision or let us use our imaginations to see how big things could really be... Investors want to be wowed, we want to think of the bigger business and imagine this to be much larger, because we're putting money in this and we want to see growth."

Maillian Bias reminds founders not to leave out information about who is advising your business. "People don't really give a lot of attention to advisory boards or actually formalize them before they go out [and pitch]. It's really important because in the early stages we can't actually pick who our winners are going to be, and that's okay, nothing has to be a done deal. But who has their social capital? Who do you have at your disposal who's supporting you that you can call and ask that has relevant expertise to what is is you're doing? If you already have them, I'd like to know about them."

All four agree that investors don't usually read your business plan. It's great to have one, but investors prefer seeing a one-page summary of your startup, clean and simple.

Watson also adds, "If you can include a demo of your product, we would much rather see a live product on the web than just mock-ups. The cost of starting a web company has gone down tremendously in the past few years and so there's almost no excuse not to have a working product when you're at a VC session."

How often you should communicate with your investors, once you get funding:

Monthly, says Maillian Bias. "Everyone has a different idea of what the ideal cadence is, but monthly updates to your investors on how you guys are growing, everything from your social media 'likes' and engagement to users on your platform to dollars to trends, the goods and the bads, very clearly outlined." These kinds of updates tell investors where their help is needed, and creates the "strong ongoing relationships" that investors like to see.

NOW READ: What Are The Odds Of Your Startup Succeeding?

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i do

The right investor, the kind who can help startups get over the inevitable “We’re Fucked It’s Over” (WFIO) moments, can turn a startup into a multi-billion dollar company.

The fact is that choosing the right investors, whether it be at the seed level or at a Series B or C stage is a life-changing decision for an entrepreneur and a startup. The wrong investor match could derail a startup. “It’s like a marriage and it might even last longer.” That’s how Kleiner Perkins partner Chi-Hua Chien describes the relationship between investor and entrepreneur. And he’s not joking in the least bit.

It’s a dilemma that many entrepreneurs face when it comes to signing term sheets—which angel, seed, and/or venture investor do I choose?

What got me thinking about this particular subject was hearing Dave Morin chat with PandoDaily’s Sarah Lacy about Path’s road to success. Referring to the company’s reported $100 million-plus acquisition offer from Google, Morin (who in the conversation didn’t elaborate much on the offer), did highlight that he didn’t want to sell, and having his investors on board with that decision was incredibly important for the company’s future. As Lacy had reported last year, the weekend Morin was making the decision, he consulted Moskovitz, who gave him the confidence to go with his gut feeling. As for being able to make the decision to turn down the offer and continue iterating on Path, Morin credited the importance of having the right investors who shared his vision for what Path could become. Which is now a $250 million-plus company.And rumor has it that someone with the power to do so has stated that Path would be worth buying for a billion

Survey any number of entrepreneurs, investors and VCs on the subject of choosing the right investors and you’ll find out that it’s actually a pretty controversial subject filled with horror stories of investment-entrepreneur matches gone bad. Here are some of the observations and advice that I put together from a number of startup founders, investors and VCs.

Asking The Right Questions

“What baffles me is the lack of questions that come from entrepreneurs at the table,” says Tony Conrad, who is a partner at True Ventures, and co-founder of and Sphere (both companies were acquired by AOL separately). “You really need to look at the person across the table and understand what your needs are.” He explains that entrepreneurs are in as much of a buying position as investors.

Conrad says that in conversations with potential investors, it’s extremely important to understand how they think about cultural DNA and how these investors, with their experience and approach to involvement, could impact the culture of the company. “Entrepreneurs don’t realize it but early investors can play a significant role in shaping a company,” he says.

Bo Fishback, CEO and co-founder of mobile-focused peer-to-peer marketplace recommends asking specific questions around the nature of a VC or investor’s decision-making process within the firm. Fishback, who has raised $15 million in funding from angels like Ashton Kutcher, Paul Buchheit and Bill Lee, as well as from investors including Kleiner Perkins, and CrunchFund (*Disclosure: TechCrunch founder Michael Arrington also founded CrunchFund), says that one of the things he didn’t realize was important in the investor-startup relationship was understanding the decision-making process inside a VC firm.

In particular, he advises startups to ask questions about how autonomous a partner or investor is in terms of decision-making within a firm. Specifically with Zaarly, Fishback said that they ended up working with an investor (and declined to name names) who didn’t have full control over how much could be invested in the Series A round, terms and other issues, and slowed the whole fundraising process down. “These were decisions and conversations that should have gone fast,” he explains. “Ask a lot of questions about who at the firm ultimately makes decisions.”

With Kleiner Perkins he says, partner Chi-Hua Chien was able to make decisions independently, which made the investment process with the firm much easier. Fishback’s one piece of advice when it comes to choosing the right investor is not to fall in love with the a firm’s name or reputation but really focusing on whether the actual person leading the deal is the right fit.

The reverse of startups asking questions is also important, Fishback adds. He felt more confident with investors who actually asked compelling questions about the startup, the market, competition, business and more. It’s not just about acting interested, but actually doing the research to come into the meeting with educated questions, he says.

J.R. Johnson, serial entrepreneur and founder of recently launched social travel site Trippy agrees with Fishback’s view on investors and question-asking. Johnson has just under $2 million from Sequoia Capital, SV Angel, Rob Solomon, Rachel Zoe and others. “They need to find a balance between asking the hard questions and showing enthusiasm,” he explains.

He says the old school traditional VC mentality is that companies pitch VCs and they get to choose, but some of the investors and firms getting better deals are the ones who feel and act as if there’s a two way street in the decision making. Part of showing this mentality is coming to the table with research and thoughts about where the startup is heading, challenges in the industry and thought-provoking questions, he says. In the end it’s about finding a balance between asking the hard questions and showing enthusiasm, Johnson adds.

Due Diligence

VCs and angels tend to do a tremendous amount of diligence on a company and founders before investing. From a financial point of view, this just make sense. But many of the VCs and founders I spoke to agreed upon one trend: not enough entrepreneurs do the same sort of diligence on investors, and can thus find themselves in dissatisfactory relationships down the line with these individuals and firms.

Andreessen Horowitz general partner and entrepreneur Scott Weiss firmly believes in reference checks. Weiss was the co-founder and CEO of IronPort networks, which was acquired by Cisco in 2007 for $850 million. “Always do reference checks on the investor, especially if he or she is going to be a board member.”

Chien, who has served as a company founder, early employee of several startups as well as an investor in his career, compares the choice of investor to dating someone, and potentially making a long term commitment (i.e. marriage) to them. He says entrepreneurs should evaluate how many investments an investor makes in a given year, and ask for references from 3-5 entrepreneurs who worked with the investor. And it’s important to get references from startups who have both succeeded and failed with the investor (if applicable).

“Talk to as many CEOs of the companies angels or firms have invested in as you can,” warns Fishback. “Many founders take it for granted that an investor will be the right fit because they have done a lot of investments or had big wins but you have to do your due diligence.”

Bringing Value

It seems like a given that you’d want to choose investors that bring value to the table, but strategically it is important to understand what that value is ahead of signing any term sheets.

Weiss’s advice when it comes to finding investors who could bring value stems from his days founding IronPort. “When we were first launching the business, we tried to find people that know and understand the market. Find experts in the field, perhaps the top ten individuals, and just ask for advice and thoughts about your company and your idea.” He says that if you can get them excited about the opportunity, many of these individuals could end up investing in the company. And because these investors also happen to be involved and knowledgeable in the market, they “have driven through potholes you’re about to drive through and typically have a lot of contacts and potential employees for your business.”

When raising his seed round for Trippy, Johnson said that one of the main objectives when evaluating potential investors was “How can this person support the business.” With Brian Lee, a serial entrepreneur who has co-founded ShoeDazzle, LegalZoom, and The Honest Company; Johnson felt his insight from a product standpoint would be invaluable to Trippy. Johnson said that Factual CEO and founder Gil Elbaz as an investor made sense because he was one of the smartest people he knew and because Trippy is dealing with so much data, Elbaz’s experience would be helpful. And with some of the less traditional angels such as celebrity fashion stylist Rachel Zoe, and musician Jason Mraz, Johnson felt that each had a unique following of people who would trust their recommendations, and their brand would help grow the business in different directions.

Zaarly’s Fishback is also of a similar mindset to Johnson. “I’m a big believer in the Ocean’s Eleven model for the seed round with lots of people putting in small amounts of money,” he says. “It’s about putting a network of people around you.”

Fishback raised seed funding from Ashton Kutcher, Felicis Ventures, SV Angel, Paul Buchheit, Bill Lee, Michael Arrington, Naval Ravikant and Lightbank. In fact, Fishback says that even in the actual arrangement of the seed round, he started to see some of the benefits to having a well-connected group of angels. According to Fishback, Kutcher felt that SV Angel would be a great fit in the seed group for Zaarly, but the round was full. So Kutcher dialed back his investment to let SV Angel into the round.

While having a group of well-connected angels can be a huge win for an early stage startup, Conrad advises startups to have an anchor in larger rounds. “Rounds with 20 investors where there is no leadership can be really messy,” he says. “Having an anchor in these seed rounds is very important.”

Weiss also has advice to help entrepreneurs extract value from larger seed rounds. He says that from the round, put together an advisory board of the four people from the round that will be most helpful to the startup and have that board meet every month to six weeks.

Chien says that he asks founders to give him actual jobs. Each week, he spends a day or an afternoon (depending on his to-dos for each company) at his portfolio companies, which include Path, Klout and Zaarly, and has a set of responsibilities for each of them. “Having that kind of hands-on support from investors in both the good and difficult times inspires confidence in startups,” he explains.

The Warning Signs, WFIO And The Hard Times

Weiss says there is a term in the Valley for the challenging moments startups face: “We’re Fucked, It’s Over” (a.k.a. WFIO). He says that so many startups go through WFIO, but sometimes it’s the investors that can help pull companies from these “Valleys of Despair” as he puts it. At Andreessen Horowitz, part of the mentality of hiring partners who are previous founders and CEOs of technology companies is that these individuals can help during the WFIO times as well as the peaks.

He adds that it is important to have at least one investor who has experience as a founder, or in the particular market a startup is tackling, and can help calm the CEO during a storm, which will inevitably arrive during the course of a startup’s life. “Having old hands on the table that can be a calming force is very important,” he says.

Chien says that in his experience as a founder, employee and investor, what separated the winners from the losers of every one of the companies that went through periods of significant challenge was whether or not the investors stuck with the company.

Conrad says that founders should look for investors who have reputations amongst portfolio companies for having steady, predictable behavior. One of the warning signs he has seen both as an entrepreneur and as an investor, is that when things are going well at a company, “investor x” is awesome, but when things get weird or there is a challenge at a company, the investor is uneven emotionally, or even unsupportive. He believes that many times, these scenarios occur with younger investors. And he doesn’t mean by age—he says experience as a founder or early startup employee tends to make investors more reliable in times of crisis as well as during the good times.

As for warning signs of what could be red flags for startups when it comes to investors, many times this can be a gut feeling, specific stipulations in a term sheet or even responsiveness. Many of the individuals I spoke to said a potential investor who is not responsive via email or phone during the fundraising process is likely to be the same post-raise as well.

Conrad highlights blocking rights to the sale of a company as a term he dislikes in the VC and investment world. “I think it is inappropriate for us to have a blocking right on the sale of a company,” he says. He used Kevin Rose’s recent sale of mobile development lab Milk, in which True Ventures was an investor, to Google. “Kevin felt like it was the right thing to do. Would I have liked to see him to go deeper and longer. Yes. Do I think he could have? Yes. But this is his decision not ours,” he explains.

However, whether you have the pick of the investment litter or are more on the “beggars can’t be choosers” side of things, it’s helpful to think through some of the advice mentioned above when deciding to whom you give that final “I do.”

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Editor’s Note: Alexander Haislip is a marketing executive with cloud-based server automation startup ScaleXtreme and the author of Essentials of Venture Capital. Follow him on Twitter @ahaislip.

“Portfolio” is a word that Silicon Valley loves. Venture firms have portfolios of startups, web designers have portfolios of their work and even public relations agencies have a portfolio of clients. Now chief information officers and IT architects have portfolios of computing power made up of physical servers, virtual machines and public cloud instances at multiple providers.

For most people, a portfolio is little more than an accumulation of individual decisions over time. Look in a typical VC’s portfolio, and you’ll see a storage locker stuffed with buzzword bingo startups slouching toward an orderly shutdown. A web designer’s portfolio? A collection of unrelated commissions.

CIOs don’t have the same luxury to be so haphazard. They have to have a little more foresight when it comes to putting together a compute portfolio. They’re juggling functionality, availability, security and cost and can’t afford to drop anything. And they’re stealing concepts from the world of high finance to make it work.

Finance became a true science when Harry Markowitz invented Modern Portfolio Theory. His simple insight was this: each asset has a risk/reward tradeoff and there’s a single collection of assets—an optimal portfolio—that maximizes reward and minimizes risk. Then Markowitz did a lot of math to show how an investor could get to that optimal portfolio.

Today the most cutting edge IT professionals are starting to discover the idea themselves. For them, the tradeoff isn’t between risk and reward, it’s between functionality and cost. Functionality encompasses a range of variables, from availability to security to sheer processing power. Cost, on the other hand, has never really been that clear until now.


Cloud computing exposes the naked cost of processing cycles. It strips away the long amortization of under-utilized physical hardware and confusing vendor contracts. It eliminates the abstraction of virtualization efficiency. It clarifies the ambiguous costs of IT employees. Public cloud vendors focus on a single metric: Cents per hour.

The naked cost of computing, once exposed, re-orients your thinking. You’re constantly appraising whether a given job would be cheaper to run on Rackspace or internally.

CIOs are thinking harder than ever before about the tradeoffs they make. They’ve got options now that they didn’t have before. They’re no longer stuck in a monogamous relationship with hardware vendors, so they’re thinking about the features that matter most and what they’re willing to pay for them. It’s clear that credit card data should run only on hardened machines optimized for security, but what about player data in a virtual world? The public cloud may be perfect when you launch a new online video game, but it may make sense to build your own private cloud when demand levels off.

The compute infrastructure has to fit the workload and the cost has to fit the budget.


The good news is that there’s an optimal portfolio of computing capacity—just like Markowitz laid out for stock and bond investors. Given a company’s functional requirements and its budget, there’s a perfect combination of physical servers, virtual machines and public cloud instances that maximizes the benefits and minimizes the cost.

Getting to that optimal combination of compute resources isn’t easy. IT Professionals need visibility their existing IT assets and the ability to reorient their resources. It also requires forethought, a truly rare commodity.

It’s often stunning to see how little systems architects know about their own systems. We’ve all heard about rogue IT and the BYOD movement, and some confusion about those devices might be understandable. But not know the basics of what servers you have, what they’re running, how close they are to capacity and how much they cost you is shocking. As Peter Drucker once opined: If you can’t measure something, you can’t manage it. Visibility is the first step to control.

Better information is necessary for creating an optimal compute portfolio but it isn’t sufficient. You also have to have the ability to swap one type of compute infrastructure for another. In finance, this corresponds to the concept of liquidity, or your ability to buy and sell assets on the open market. Getting liquidity in compute infrastructure is more complicated.

It’s long been possible to swap one machine out for newer one, or to re-provision a workload. Virtualization makes it easier to move processing around, but you’re still locked in to your underlying hardware and the operating systems you’ve loaded. Moving between cloud providers can be extremely tricky if you’ve not architected your instances with templates.

Most importantly, getting to an optimal compute portfolio requires forethought. You have to think carefully about the mix of functionality you’ll need and your willingness to pay for it. Not just now, but also in the future. You have to plan for the time when you’ll need to re-balance your compute portfolio. That means architecting your systems for portability from the outset.

Finance, when it’s done right, is a disciplined way of balancing tradeoffs and planning—that’s a rigor IT departments need to adopt as they build modern computing infrastructure.

Let’s just hope they don’t take it too far and start issuing compute default swaps.

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Today is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

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TEDxDanubia 2011 - Martijn Gribnau - Leadership -- The Art of (Continuous) Learning

Martijn Gribnau is a business leader and innovator. Over the last 20 years Martijn has worked in different senior leadership positions from banking to insurance within ING. He worked 5 years in the US, was responsible for Postbanks (now ING Bank) Mutual Fund and Security Business as well as responsible for developing its Internet Competency Center in the Netherlands. Since 2007, Martijn has held the position of CEO of ING Insurance Hungary where he was responsible for developing and implementing a multi-channel strategy to boost growth and productivity. He also implemented a re-engineered tied agency channel. Based on this innovation, he was asked to lead a global initiative to reinvent the Tied Agency Distribution across ING. In thespirit of ideas worth spreading, TEDx is a program of local, self-organized events that bring people together to share a TED-like experience. At a TEDx event, TEDTalks video and live speakers combine to spark deep discussion and connection in a small group. These local, self-organized events are branded TEDx, where x = independently organized TED event. The TED Conference provides general guidance for the TEDx program, but individual TEDx events are self-organized.* (*Subject to certain rules and regulations)

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