We are all Entrepreneurs Now

March 31, 2020

With everyone’s work day different than yesterday and destined to be different tomorrow, society is going to change due to #everything. I’m curious about whether we will become a nation of bowing instead of hand-shaking. I wonder whether “business sweatpants” will become a thing. I ask whether even a pandemic can slow the inexplicable career of Justin Bieber.

And all this change has created a business environment leaders and managers have desired, consuming books, seminars, and speakers without success. Slowly changing, entrenched, unimaginative corporations are adapting. We are now a nation of entrepreneurs.

Entrepreneurs operate in an area of uncertainty and still get things done.

Entrepreneurs do things faster than traditional business-people can.

Entrepreneurs aggregate the resources they need to do the job.

Entrepreneurs find a way to make things happen, rather than accept a no.

Entrepreneurs are you and me now. We’re making things work, we’re making changes quickly and to suit changing circumstances. We balance optimism and pessimism today  and still wake up tomorrow to another day, another challenge overcome, another weirdness accepted into our psyche.

We very well might emerge from this with the energy, drive, and flexibility of post-WWII America. The America that created the semiconductor, the internet, Google, Tesla, the longer lasting lightbulb, the self-cleaning oven, and the labradoodle. OK, those last two weren’t American inventions, but we’ve made them what they are: clean and cuddly.

Making Sense of an Upside-Down World

March 23, 2020

This is a note that my firm, Transform Capital, sent to our Limited Partner investors Friday.


If, like us, you have been told to shelter-in-place due to coronavirus, we have recommendations for your binge-watching.

In 1897, the psychologist George Stratton placed upon his nose a pair of spectacles that literally turned the world upside-down. The images projected upon his retina were a complete inversion, the complete opposite of a lifetime of experience. Through these inversion glasses, water poured up. His disorientation felt as if he walked on ceilings. He was nauseated. He reached out with his right hand when he should have used his left.

And after just a week of full-time wear, he adjusted. He was able to fully function. He could eat, drink, walk, sketch. In just a week!

We humans are infinitely adaptable. We can ride bicycles and sketch countryside through extreme distortion. (The upside-down experiment has been oft repeated, and you can see a few here: https://www.youtube.com/watch?v=jKUVpBJalNQ and https://www.youtube.com/watch?v=MHMvEMy7B9k ).

If humans are capable of adapting to a literally upside-down world, we can adapt to a figurative upside-down world of coronavirus and likely recession. Even though each day seems to bring a new, previously unthinkable announcement, we will adjust and thrive. We’ll reach with our left hand instead of our right.

We’ve seen multiple downturns from our work as VCs: the now quaintly named 2000 dot com bubble burst, the 2008 financial system meltdown, and now the 2020 Covid crash. They are different, but they have substantial similarities. We’re telling our portfolio companies and colleagues a few things, and we want to share them with you.

VC-backed startup companies should now internalize a few truths.

  • Cash burning companies should expect future funding will be harder than past fundraising. Extend your timeline, stretch your cash. If you can get to cash flow break even, do so, even if it damages future growth.
  • Assume no more VC money is coming. The market will soften substantially, and successful management teams adapt fast to the new reality. In my career, I’ve parted ways with more than 20 CEOs that couldn’t switch themselves from growing to battening down the hatches.
  • Plan for the future. We will get through this, and while sales may dip, it’s a great time to innovate, to discover the next great things. Google, PayPal, Airbnb, Square, Stripe all struggled through prior downturns to lead to success. So can you.

There are some bright spots in this economic downturn. These issues have been constraining the venture industry for some time.

  • Valuations will move off their highs.
  • Companies will become more capital efficient.
  • Talent will be easier to find.

We’re investing in companies that will come to fruition in, say, five years. By then, the pain of this disruption will be behind us and the lessons imprinted within us. The inversion glasses will be off our noses. Disruption often leads to tech innovation. We will be well positioned for the new wave of startups in health care, remote work, augmented / virtual reality, and more.

Our hearts go out to our neighbors and small businesses who may have a shorter horizon than we do. We recognize our luck, and we’ll do our part to support those we can.

In the meantime, the best tech companies in the world are still to come. We intend to be there with them.

Sean Foote and Jonathan Ebinger are the co-founders and General Partners ofTransform Capital: a later stage venture capital fund making minority investments in select, high-growth technology startups to generate outsized, top quartile returns for its investors. The General Partners donate their share of the profits to causes of interest to their investors.

More vignettes

March 19, 2020

On a walk, which we are allowed to do, I saw a man walking along playing a ukulele, smiling all the way. Pretty good music, too. Why hasn’t that been happening every day before we were locked in?

Different parts of the country are one to two weeks behind on the timeline of “oh shit!” I like being on the leading edge of this one, particularly if we are on the leading edge of the recovery.

Never realized the background noise of high-flying commercial jets overhead and low-slung speeding cars miles away. Things are quieter, which is nice. Too bad so many birds are dead, because it would be nicer still to hear them.

Vignettes from the lockdown

March 18, 2020

While we’re sheltering in place, we’re creating good memories.  Here are yesterday’s day one vignettes:

Now that everyone is staying home, the internet and cell service In the neighborhood has slowed to a crawl.  All those zoom meetings, or more likely Netflix binging or PornHub viewing. Our son’s reaction? “It didn’t feel like a crisis until the internet quit working.”

We are still allowed to exercise out of the house. On my run yesterday, the common greeting to other trail goers is no longer “hello” or “good morning”.  It’s “stay safe!”

Groceries stores are open, but they are limiting people in the store. In the checkout lines, they’ve taped squares on the floor 6 feet apart, to show where to stand.

Get to Work, America

March 17, 2020

When I first saw the movie Titanic, I recall my date swept up in the tragic romance of Jack and Rose, played by Kate Winslett and Leonardo DiCaprio. “So touching”, I think she said, with a far away look. Not surprisingly, that wasn’t my takeaway.

My takeaway was: Panic Early.

See, all those early lifeboats left the sinking Titanic partially populated. That was the moment to jump into action. For those that waited, and stayed calm, the last lifeboats were so overfilled that they nearly sank, while many, as we know from Jack and Rose, were left without lifeboats at all.  So having some early, healthy panic can be literally life-saving.

Of course, even writing the word “panic” doesn’t thrill me.  It wreaks of irrationality, of riots in the streets, of wrongness. We can substitute “early recognition” of problems, or “cautious action” or anything we want. To substitute, though, is to discount the simple humanness of a good freak out over the discomfort of disjoint change. It’s there, let’s recognize it. Heck, let’s live it a bit. “Aaah!”

And then let’s move on.

So we are in the throws of a coronavirus named Covid-19, whose marketing department did a great job of creating a label that is too many syllables, too technical, and can coverup any insidiousness. There is panic. Apparently toilet paper is this spring’s trendy gift for those you love. Folks seem stunned, disbelieving, from the top of the government to the bottom of the Missouri boot heel.

It’s fine to panic. The human adrenal system is created in part to speed our escape from the sabertooth tiger or unsuspected Frozen 2 soundtrack snippet.  It speeds our flight, it fills our cupboards. So go for it. Adrenalin it up. Like me, you will likely to be told to quarantine, or shelter in place, in order to slow this disease. You should do so knowing you can eat cans of lima beans for 21 days in a row.  So get it out of your system, because we need to get to the next step.

The next step isn’t panic.  It’s not flight. Flight isn’t the only thing we were bred to do. We don’t simply run. The classic description of what to do when faced with existential threat is not “panic or flight” or “lay-down-and-die or flight”.  It’s “Fight or flight”. So when you’re done with your panic, your flight stage, it’s time to fight. It’s time to get to work. It’s “Panic then Work”.

What that looks like for you can be different than what it looks like for me.  For me it means things like:

  • quickly getting into a new routine. For me, that includes lots and lots of work, because it feels normal and it moves the world forward. It’s also how I’m realizing that all those zoom calls (or Netflix binges) by my neighbors are killing my home internet.
  • helping local stores I know and love by buying locally (and getting it delivered). These stores are going to struggle to survive.
  • Helping friends. Heck helping strangers too. We are all in this together, regardless of race, immigration status, or political leaning.  We are all affected.

The physical risk of Covid-19 comes with economic risk to the world economies. Early data from other shutdown regions in South Korea and Italy show a 20% decrease in consumer spending.  That’s unprecedented. It will lead to negative GDP growth. Period. Recession is coming. Governments will likely pull multiple levers to try to soften the blow. Panic, then work.

In my job as a VC, this will be my third sharp downturn — the now quaint sounding 2000 dot com crash, the 2008 financial system meltdown, and now the 2020 Covid crash.  Here’s what start-up companies need to be doing to fight on:

  • Extend your timeline, stretch your cash. If you can get to cash flow break even, do so, even if it damages future growth.
  • Assume no more VC money is coming. The market will soften substantially, and successful management teams adapt fast to the new reality. In my career, I’ve fired more than 20 CEOs that couldn’t switch themselves from growing to battening down the hatches.
  • Plan for the future. We will get through this, and while sales may dip, it’s a great time to innovate, to discover the next great things.

Finally, I’m not just optimistic that we will adapt, thrive, and emerge victorious from this unique moment in history.  I’m feeling greedy. The economy will stabilize with lower-priced assets. First-time home buyers will benefit from low interest rates and lower housing prices. Travel will increase because of low cost fuel and attractively priced destinations. Concepts like “no paid sick leave” and “airline change fees” will be shown for the ridiculousness that we’ve always known them to be.

So Panic it up America. And then, let’s get to Work. Let’s show everyone what we’re made of.

Covid-19 and Exponential Education

March 5, 2020

Humans aren’t good at some things, like perfect recall of events,


or creating enduring fashion,


or, for this post, understanding math.


The math in question is exponential growth, and it’s what’s occurring in the Covid-19 spread. It is not something that as humans walking around, driving our cars, or buying groceries, we see often. Thus, we’re not attuned to what it means. We don’t see a bamboo tree grow one inch one day and then 1 foot the next and 10 feet the next.

Internationally, the Covid-19 virus is currently increasing at about 8% to 10% per day, compounding. This number is of course limited by how many people can be tested, and whether governments want to tell you what’s really going on.

We are not sure, really, of the denominator of Covid-19 cases well enough to understand its virality and mortality rates. It seems at the moment to be as contagious as the flu we all know and love, and about 20 times more deadly. That would mean in the US, we could imagine an annual 30m to 40m cases (similar to the annual flu), and up to one million deaths per year. That would be somewhere between 1 in 50 and 1 in 30 deaths. At my son’s high school of about 750 students, that’s 15 to 20 dead high schoolers (although, older folks appear to be more at risk than younger, healthy folks). That’s the demographics for this disease, anyway. Spanish Influenza and Zika had different demographics.

Here’s the non-China growth of Covid-19 cases as of yesterday:


That doesn’t look too bad.  (Here’s the source of this data, and thanks to Dominic Hughes for the link)

But notice the Y axis. That’s a log scale, a 10x increase for each horizontal line. Currently, cases are increasing by a factor of 10 every 15 days or so. By this time next week, you’ll see the headline of “Cases of Covid Outside China Now Exceed Those Inside” or some such.

Now, let’s wrap our human brains around this math:

March 15 = 100,000 cases

March 30 = 1,000,000 cases

April 15 = 10,000,000 cases

April 30 = 100,000,000 cases

May 15 = 1 Billion cases

That’s what exponential growth looks like. Now, before we all head to our underground bunkers, most epidemics don’t look like that. They look like a bell curve. We tend to change our behavior, quarantine, don’t shake hands, and the spread of disease levels off and then decreases. Here’s an epidemic curve for the 2003 SARS outbreak, for example.


What we are looking for, then, is when the exponential growth starts to level off, and then decline. That’s when we’ll know we’re improving — for this season.

Right. For this season.

It is possible this is not a one-and-done thing. Covid could be multi-seasonal. The 1918 Spanish Influenza epidemic (h1N1) had a mild first season in spring of 1918, but went on to infect 500 million people worldwide (1/3rd of the world population at the time, so gross that up to 4 billion in current terms) and killed 10% of those infected. Any vaccine for Covid-19 will not be ready until after this coming fall-winter 2020 flu season.

There is a lot we don’t know. We need be cautious, but not panicky. Wash your hands for 20 seconds, often. Don’t wear a mask unless you are already infected. If you haven’t had a flu shot, get one. It doesn’t help for Covid-19 but catching Covid-19 while already sick with the flu is worse than being healthy and doing so.

A Herd of Unicorns = ?

November 21, 2019

According to CBInsights, there are 418 Unicorns in the venture funding world.  A Unicorn is a term coined by Aileen Lee to describe the highly rare case of a startup company that reaches a private funding valuation over $1 billion.

But 418 unicorns is no longer a rarity.  It’s a herd.  Dare I say, it’s an infestation.

So I’m going to coin a new term for this herd of unicorns.  Ready?

A herd of unicorns aren’t unicorns.  They’re “Fantasy Cattle.”

Pass it on.

Facebook is in deep doo doo

September 11, 2018

Social media could fail spectacularly, and there’s one simple reason why.

Facebook, Reddit, Google, Twitter.  Sure they are private companies, but none of these are a “common carrier”.

Wait, what? What’s a “common carrier”?  It’s the legal standing of the telephone network.    I can use a telephone to harass, lie, coordinate illegal campaign contributions, hire a hitman.  The telephone company isn’t responsible for any of that.  They merely provide the service.  That’s what the legal standing of “common carrier” allows.  I’m merely the messenger, don’t shoot me.

Social media has failed to obtain common carrier status.  Which makes these companies much more like a magazine than a telephone.  A magazine, often also a private company, is responsible for the information on its pages, which is why they have editors and reporting standards and such.  Hate speech in a magazine can be prosecuted against the publisher.

Facebook and others are stuck in the middle.  They would like to say they are only providing a service, but they are clearly involved in setting and enforcing standards of use (Radiolab has an excellent story on this).  These rules have grown from a few paragraphs to 50 pages.  An example:  A photo of a breastfeeding woman is not pornography.  But this simple rule had to be expanded with “if there is no nipple or aureola showing, if the baby is in contact with the breast, if the baby is not old enough to walk, and if the baby is a human baby.”  This is an impossible task, with gray areas.  What if it’s art? What if breastfeeding a goat is societally acceptable (which, apparently it is in some countries experiencing drought)?

Technology may not be able to help, particularly when humans struggle at the same task.  As Supreme Court Justice Potter Stewart famously said during an obscenity case before the court (forgive the paraphrasing) “I can’t define pornography, but I know it when I see it.”

Without common carrier status, social media may end up overwhelmed by editorial responsibilities, leading to its diminishment or demise.

Let’s talk Constitutional Amendments!

September 6, 2018

I’m not a Constitution expert, nor do I play one on TV.  However, in our current state of affairs, we’ve seen some cracks in the system that may only be able to be filled by Constitutional amendment.

These are bi-partisan issues, because eventually whatever side you’re on will be out of power, and the abuses that we’ve identified need to be fixed to keep good ole’ America humming along.

With that, let’s start with the Articles of our Amendment that seem most sound:

  1. The Supreme Court will have an even number of Justices.

    Currently the Court sits at 9 jurors, but it has varied over time.  The Constitution does not specify a number.  In our current environment we have 5-4 decisions for things like Citizens United, allowing even more money into politics (more on that later) and Bush v. Gore.

    An even number requires the best legal minds of our generation to have a clearer opinion, a 6-4 or 5-3.  This keeps the Court out of contentious cases, sending them back to lower courts.  Germany, a system we helped establish after World War II, has an even number of Justices.

  2. Presidential candidates are required to disclose their financial dealings.

    The emoluments clause in the Constitution is not enforceable without data.  In the future, we could have a President being actively paid for, say, foreign policy decisions, with no record for voters or Congress to consider.  In fact, we may have that now.  Don’t know, because the data is unavailable.

  3. The Electoral College will be modified to vote the popular vote.

    The Electoral College was originally designed to be a deliberative body.  Electors met in person, and though they were loyal to those that selected them, they had the ability to change their votes after that debate.  This was created at a time when it took days to travel from Boston to DC, and weeks to complete the vote count and Electoral College decision.  The Electoral College was a buffer against the vote.

    No more.  The Electoral College is a passthrough entity.  I’ve heard debates that it makes small vote differences appear larger so as to amplify the feeling of mandate for the new President.  Also, it adds power to voters in perhaps otherwise less powerful states like Ohio or Pennsylvania.

    Poppycock.  A vote should be a vote, whether it’s from Nebraska or New York, and should be considered equally.  After all, the Electoral College has led to a different answer than the actual vote count 40% of the time since 2000.

    Several states are considering laws to force their Electors to vote the popular vote.  If a majority of Electors are so bound by their States, then this can be accomplished without a Constitutional amendment, unless those efforts are found unconstitutional.

  4. Congressional districts are established by independent redistricting commissions, not by state assemblies.  

    Today, a citizen’s vote is not necessarily a vote.  Because of gerrymandering, we have a set of congressional districts that guarantee a Republican majority in the House unless there is a 5% margin advantage for Democrats.  Doesn’t seem like that’s reflective of the people’s will.

    Independent redistricting commissions have proven to generate more competitive and less partisan districts reflective of their voters.

    There are details required here.  The charge to the independent commissions is typically to consider some things, like racial bias protected by the Voting Rights Act, and not others, like political party (in the case of California).  California subsequently has more competitive districts than the nation as a whole.

    This is already happening at the state level, but a specific Constitutional amendment would make it the law of the land.

  5. Election advertising in all forms requires disclosure of citizens responsible.

    I don’t think we can keep money out of politics.  It’s free speech, after all.  If a wealthy person or a corporation wants to put millions into advertising their opinion of a candidate, that’s on them.

    I also think it’s hard to enforce laws that prevent that money from “coordinating” with the candidate.  So, essentially, limits on campaign contributions are dead — the money has just moved from the campaign to Super PACs, to be run by close personal friends of the candidate who are not allowed to “coordinate”.  But they probably do.  You know, we should probably just enforce that law against “coordination”.  But I digress.

    What we can do is require complete disclosure of the source of the money.  And not just the private LLC shell corporation set up to get around disclosure, but the owners of that, and the owners of that, until we get to individuals with social security numbers.  And they have to have social security numbers, because foreign nationals are not allowed to influence elections.

    If the donor is a publicly held company, then that’s sufficient disclosure.

Now here are some Articles of our amendment that I think are a bit more problematic.  These need more work:

  1. The Senate, as part of its “advise and consent” duties with judicial nominees, requires 3/5ths to approve a Supreme Court candidate.

    This is important to keep the Supreme Court from becoming just another political arm.  These are lifetime appointments precisely to prevent it from being overly politicized, and now the process of selecting justices is supercharged with politics thanks to a change in the Senate rules to make this approval a simple majority (technically by changing the rule on ending filibusters).  3/5th votes worked in various forms since the 1800s, and the change has not improved things, leading to more politically lopsided Justices.

    Note I’m not even suggesting we return to 3/5th votes for lower court nominees.  Could do that too.

    3/5th vote thresholds increase the odds of an obstinate minority blocking ALL nominees, for years.  This was not a problem in the past, but now…. I suspect that article 4 above could help with that.  Gerrymandering leads to the most partisan divisions in Congress ever.

    I also worry that as a Constitutional amendment makes Senate rules too rigid.  The Framers were quite open to changing Senate rules, basically allowing each seated Senate to make its own rules.

  2. Election advertising in all forms requires adherence to libel laws.

    This is the hardest clause to get right.  Libel laws don’t apply equally to public figures.  Public figures can be criticized at length and with shoddy support, it’s the American way.

    But what is the consequence to false fact claims that Ted Cruz’s dad helped assassinate JFK?  That’s not hyperbole created in the heat of the moment, it’s not alternative facts, that’s a lie.  It seems that buying an advertisement claiming your opponent is a philanderer should at least be backed up with some facts.  Otherwise, money, and the internet, can amplify all sorts of crazy.  So, you can say whatever you want.  You can even speak in the form of an opinion, like “my opponent, to me, has the beady eyes of a philanderer”.  But to purchase an ad that says “My opponent sleeps with goats” should require some photo evidence.

    The concern as I’ve written it, of course, is that this would be a boon for the legal industry.  Every claim would have to be deliberated pre or post hoc, leading to a nonstop slew of lawsuits.  That’s not good either.  But there is a balance to be found here.

That’s it for now. Do you like these?  What would you add?

Since 2003, More American Kids have been Shot than US Soldiers During the Iraq War

March 14, 2018

Today is the march by empowered kids against the violence they receive because of guns in the US (or because of crazy people with guns.  Regardless, bullets keep hitting kids).

During the 7 years of Iraqi Freedom, there were 36,377 US casualties.  That’s over 5,000 per year.

These military deaths are better reported than US gun violence, because US gun violence is not well researched.  The CDC is prohibited by Congress from looking at gun violence after their 1993 finding that a gun in the house increases the chance of injury rather than reduces it.

So, we have to use non-government data like The Gun Violence Archive, which shows about 3,000 to 4,000 kid casualties per year due to guns.  Over 7 years, that’s 21,000 to 28,000 kids gunned down in the US. Since the Iraq War started in 2003, it’s closer to 45,000 kids.  It’s an average of at least 250 bullet riddled kids per month.

But that’s just kids.  Include adults and there are more domestic American casualties due to guns EVERY YEAR than during all 7 years of Iraqi Freedom. (same sources)

Some countries where kids (and you) are safer from guns on a per capita basis? Philippines (who just pulled out of the International Criminal Court), India, Belarus, Serbia, Cyprus (now run by the Russians), Kyrgyzstan, and Ukraine.