Predictions for 2021

2020 is (thankfully) over. With the new year starting, now is the time to review my 2020 predictions, and add some new ones. This year, I’m going to avoid specific stock prices (since I can’t tie back underlying rationales to exact prices), and political races (since I’m burnt out on politics at this point).

Stopping reckless securities trading will become a cause célèbre, leading to self-regulation.

With a booming stock market, and an incredibly low barrier to entry, general excitement around securities trading (stocks, options, etc) has reached a fever pitch. Robinhood has been leading the charge here, offering a commission-free, user-friendly, and gamified experience.  Robinhood makes it easy to trade stocks, but also to trade options, and trade on margin. Many of Robinhood’s features are good (e.g fractional shares), but they also put Robinhood (and the industry as a whole) on the edge of PR disasters caused by users who are dangerously in over their head. These PR crises are magnified by issues with the apps themselves, leading to ultimate tragedies like this one. Over the next year, enough of these issues will accumulate, leading to greater self-regulation from the apps.

Prediction: In the face of consistent, widespread public outrage, Robinhood (and similar apps) will self-regulate, increasing their requirements to trade options and trade on margin.

Miami, as a tech capital, will be a short-lived Twitter fad. There won’t be a new tech capital.

If Twitter trends are to be believed, San Francisco is falling to pieces, and Miami is rising to take its place. VCs and founders are moving there, and throwing their weight behind it. The mayor of Miami has become a cheerleader (and meme), pledging support and cafecitos to all.  COVID (and issues with SF) will surely lead to Miami having a larger tech scene than before. However, the increase (especially in raw numbers of jobs) will be a rounding error, and not more than other mid-sized American cities like Austin, Seattle, Philadelphia, etc. In this new remote-first world, it is easy for individual people (like the VCs and founders who hype Miami on Twitter) to move. It is not easy, nor beneficial, for employers to ask all employees to. Large, established tech behemoths will remain in their current cities, Stanford is not going anywhere, and the Miami weather will sound a lot worse come summer. This all leads to a whimper, not a bang.

Prediction: By August, we’ll be talking about Miami, the same way we talk about Seattle or Philly. Miami will not see a meaningful increase in tech jobs, or VC investments into companies founded in Miami.

It will become common for startups to incubate in-person, and grow remotely.

Remote work sounds great, and, in most cases, is great. We are big fans of it at Healthie. It has allowed us to scale our team much more easily, and gives our employees (and us as founders) a great deal of flexibility. However, I still think it is very hard to get a company off the ground in a fully remote setting. In those nascent stages, iterations need to happen faster, situations change rapidly, and targets can be less straight-forward and measurable. Effective remote working requires a great deal of written communication, and process overhead. This additional structure is great for established companies with clear next steps, but is just extra baggage for companies in the pre-product and pre-revenue stage.

Prediction: A new model will emerge with founders and early employees working in-person together for the first three to six months of the business. After that period, companies will transition to being remote first.

Traditional IPOs will get less and less popular, as more companies opt for direct listings and SPACs. 

This has been a very interesting year for taking companies public. We’ve seen three major trends this year. First, traditional IPOs have continued to have large first-day “pops”, leading to companies leaving a lot of money on the table when they go public. This is not new. However, in 2020, new alternatives have finally begun to gain real traction, which brings us to the two other trends. SPACs hit the mainstream this year. These “reverse-mergers” allow companies to go public with the least amount of moving parts. Instead of a drawn-out traditional road show, private companies can work with a single SPAC. This simplified process has benefits for both the SPAC and the private company, and we will continue to see it used in cases where the company wants to go public early (Hims, OpenDoor) and/or is in a “sexy” industry (Nikola, DraftKings, or Virgin Galactic). On the other end, recent SEC approvals , have expanded the utility of direct listings, making it a better option for more companies.

Prediction: Q3 and Q4 will see well-known tech companies opt for alternatives to a traditional IPO. If Stripe goes public this year, it will be via a direct listing.

The U.S will get their vaccination act together

The U.S vaccination effort is off to rough start. Despite months to prepare, the country has been caught flat-footed, and progress is slow. It is jealousy inducing to watch Israel, a country with a population the size of New Jersey, be on track to reach herd immunity in just a couple of months. The U.S predicament is pretty close to cat herding, with fifty different states, a federal government in transition, and a president with his mind on other matters. However, despite our slow start, the situation will stabilize, allowing America’s resources to be put to good use.

Prediction: After a couple of months of non-stop media coverage of vaccination delays, the system will get into gear, and we will reach herd immunity by the fall.

Goals for 2021

Professional

Get Healthie to (redacted)MM in ARR

We had a strong year in 2020, and are looking to improve on that in 2021. I am confident that the opportunities and plans we tee’d up in 2020 will get us there in the new year.

Maintain Healthie’s profitability in 2021

As I mentioned last year, being a (cash-flow) profitable company lets us control our destiny, and build the company we want to build. Now that we have a history of turning a profit, we should maintain that, barring any large new growth channels that prove worth pouring a ton of money upfront in to.

Make API product a meaningful part of Healthie’s business

In order to enable our own practice management software (and its features like scheduling, video chat, payments, etc), we have had to build some very cool back end tech in-house. In 2021, we want to to make that available to other companies as an API product. A lot of work has already been done. Goal is to launch in January, and reach (redacted) in MRR by the end of 2021.

Write and share my thoughts more regularly

In 2020, I started blogging somewhat actively, publishing 13 posts (versus 0 in 2019). I also was quoted in a couple of third-party articles, and tweeter more frequently. I want to build on that by publishing two blog posts a month, and tweeting more, with a goal of 100 newsletter sign-ups (up from 9), and 1000 Twitter followers (up from 180)

Fitness

Work out 4 times a week

This is a carry-over goal from 2020. I failed miserably. Easy to blame on COVID, but, with greater self-control, is definitely something I could have accomplished. When I work out regularly, I sleep and manage stress better, and it’s definitely something I want to make a focus in 2021.

Learn to Surf

One of the benefits of COVID is that I don’t have to be in NYC in the office all year. In 2021, I want to go somewhere with good surfing for beginners, and become a competent surfer.

Personal

Read 45 books

I didn’t read a single book in 2020 until mid-April. After that, I got back into gear (thanks eBooks!) and read 31 (mostly great) books before the end of 2020. I want to keep up the consistency, and read 45 books in 2021. I read almost all non-fiction, but feel free to send any type of recommendation.

Complete a full week of New York Times crossword puzzles in a row

Crossword puzzles have been one of my consistent quarantine habits in 2020, and I’ve gotten a lot better at them. Currently, I can complete Monday through Wednesday close to 100% of the time, but struggle beyond that.  In 2021, I want to complete 7 puzzles in a row (e. Sun-Sat). I’ll count any 7 subsequent days, so the streak can start on any day of the week.

 Call/meet with 1 new person a week (outside of job, immediate family, and my SO)

Especially with COVID (but even before), it is easy for me to get tunnel vision socially. I regularly get on calls for work, and with my SO and immediate family. However, I don’t do a great job actually talking to (not just texting) the wonderful people outside of those groups. I want to get on a call (or meet up with if COVID allows) a least one new person a week. These people could be extended family, older friends, or just people I come across that seem interesting.

 

 

 

Just Ask

On a recent Hacker News post about Stripe pricing, one of the top comments was posted by the founder of Streak.

Streak is close to a decade old, has hundreds of thousands of users, and presumably millions in annual revenue. They went through Y Combinator, the same accelerator program as Stripe. Yet, despite all this, they have apparently been on Stripe’s out of the box rate for the past nine years. Stripe offers discounted volume pricing, and Streak almost certainly could have saved tens of thousands of dollars by taking advantage of that.

Why is Streak not on a lower-fee plan, despite their qualifications? They must never have asked. Stripe will happily give volume discounts, but they don’t do it automatically. You have to ask.

The simple act of asking has made a huge difference for me, both on a business and personal level. I didn’t use to ask. I used to assume that whatever was offered was the best option available. Outside of very specific situations where there is an explicit negotiation (buying a car, flea markets, etc), I didn’t think there was any wiggle room. Clearly, from the Streak cofounder’s experience, I was not alone. There are countless intelligent, driven people who accept most offerings as they are initially presented.

After starting Healthie, I realized that was absolutely not the case. This realization came from two major factors, seeing how customers acted with us, and watching my cofounder interact with others. With customers, despite any initial intent, I found customers who “asked” getting better service and pricing. If a customer asked, It made sense to me to knock a little bit off the price to get a deal in the door.  When going through support tickets, we responded faster to customers who followed up, or expressed urgency. This doesn’t mean that these customers had less ability to pay, or had more important support requests, but they did better on both fronts then those who took everything as is.

My cofounder, Erica, is firmly in this vein. When we started Healthie, I was blown away by the type of things she would ask for. “Are you sure you don’t have any extra tables?” when a restaurant said they had a thirty minute wait, or “is there anything more you can do on the price” after a vendor had already given us their “best price possible.” I felt somewhat awkward being around her during these requests. It felt cheap, and borderline unprofessional.

Despite how I initially felt, the vendor clearly didn’t feel that way about Erica. We would get a table early, or get an additional discount, and Erica’s ask wouldn’t be held against us. Instead, I felt like we were respected, and treated more fairly off the bat in our future interactions with the same vendor. I was amazed. There was a whole host of opportunities that I had never even realized. I just had to ask.

There are definitely limits to asking. You need to be firm, but always respectful, and ask in good faith. You should benefit from what you are asking for, don’t just ask to see if you can get a concession. Also, don’t ask about everything. It very rarely makes sense to have a 30 minute call to save $10 for your business. That said, if you aren’t asking regularly, you are doing a disservice to yourself, your company, and your colleagues. Just ask.

Crowd-Investment Sites Are More Crowd, Less Investment.

Crowd-investment sites are never a company’s first choice for a funding round. Fundable, Republic, WeFunder, and their ilk, are a last resort for companies that cannot (or choose not to) bootstrap, and cannot raise money from VC funds or angels. At Healthie, we went through a pre-seed (via Techstars) and did a seed round, without once ever considering these types of platforms. We were the norm.

Why are these platforms a last resort?

1. Huge fees. These platforms don’t invest, and make their money off of fees. WeFunder, for example, charges companies 7.5% of their total fundraise. On a 1MM fundraise, that is 75K. As an investor, that diminishes your investment, since the company will receive less of it. As a company, it means you have to raise more money than needed (so more dilution) to accomplish your goals. 75k is the salary of an entire employee. What founder would ever sacrifice the extra dilution or extra person-power, if they could raise funds from a no-fee source? Other platforms charge a subscription fee (e.g Fundable charges companies $180/month), which means the platform is incentivized to have every company possible on their platform. A tiny fraction get funded. Most just pay the subscription fee, and end up with nothing to show for it. If you want new horror material for halloween, just search “COVID” on Fundable.

2. No help from investors. VC’s are often derided for promising “value-adds” that they don’t deliver. Some VC’s are decried as “dumb money.” These are real issues. Some VC’s over-promise and under deliver. Some have no clue what is going on. However, these ineffective investors are offset by truly helpful VCs and angels, and, in general, pale in comparison towards the systematic nothingness that crowd-investment sites provide. Fundable (and the individual investors in a Fundable round) will never do a bridge round for a company during tough times. They will never be a trusted confidante to bounce ideas and hard decisions off of.  There’s a great saying “if you owe the bank 100 dollars, it’s your problem, if you owe the bank 100 million, it’s the bank’s problem.” When a seed-stage VC puts a million dollars in, they are heavily invested in your success. Outside of financials, not supporting a company would also take on great reputational risk for the VC. When a thousand people put in $1,000 each, no investor is accountable, and the bystander effect can easily lead to companies twisting in the wind.

3. No one cares. I don’t think raising a round should be celebrated the way it currently is. That said, there is definitely value for some companies in getting the wave of PR that comes from raising a round. TechCrunch articles spread awareness, legitimize newer businesses, and help with recruiting talent. Tech sites, like TechCrunch, don’t report on crowd-investment rounds. It is not due to the amounts raised, but due to the open secret of illegitimacy that fundraises on these sites have.

These three factors mean that you have adverse selection. Companies that can raise from better sources do, leaving only the runts of the litter to attempt to raise on crowd-investment platforms. Even if the company you invest in objectively is successful, you also have horror stories about these crowd-investment platforms going under (or getting acquired) and losing record of the investment.

Angel investing, as I mention in a prior essay, is also a bad financial decision, but has side benefits. Investing via crowd-investment platforms has worse financial returns (due to the adverse selection of companies), without any of the benefits. Furthermore, you have to trust not just the company you are investing in, but the crowd-investment platform itself.

Given all of this, it makes much more sense to treat these platforms like Kickstarter, versus an investment. I have no clue if Lloyd Armbrust’s American-manufactured masks are a good business. However, I respect what they are doing, and want to see it continue. Putting in $100 helps with that, and, much like a Kickstarter, comes with 50 free masks!

I expect the financial return to be zero. You should expect the same when investing through these platforms.

Don’t Invest in Rolling Funds

Recently, rolling venture funds have become the next big thing™. (See an overview of them here). Their unique ability to fundraise in public, means that information about (and solicitations to invest in) them have blanketed Twitter and news sites.

They make for flashy pitches. This first wave have generally been started by individuals with large followings, and track records of angel investing into now unicorn-sized startups. The GPs of these funds talk about democratizing being an LP and strong financial returns. A Techcrunch article about Sahil Lavingia’s (one of the most prominent rolling fund creators) new fund mentions that rolling funds prevent “disproportionate benefits for those who already have their foot in the door.”

Rolling funds really do make it easier to be an LP. A first-time LP could find out about the fund on Twitter, click through to the one-page description on AngelList, and set up quarterly ACH payments to commit. The minimum commitments are (compared to traditional venture funds) small, spread out, and shorter.  These new benefits gloss over a more important question, “If you are a marginally-qualifying accredited investor, should you be an LP?”  If you couldn’t tell from this post’s title, the answer is no. Specifically, rolling funds will likely provide poor financial returns, without the side-benefits of direct angel investing.

Venture as a general category has poor returns.  Of 2,254 funds, 68.9% had returned less than 2x, after ten years! VC funds, much like the startups they invest in, are highly outlier-driven. Outside of the poor returns, LPs normally spend over a decade with no access to liquidity on their investment. For comparison, investing into the S&P 500 ten years ago, would have been a 2.85x return, and you can access liquidity at any time. Access to liquidity is greatly underrated. Shit happens, and if you suddenly need access to cash, investments in a rolling fund won’t help.

Angel investing is also a poor financial choice, for basically the same reasons. It is highly outlier driven, and as a non-famous angel, you are unlikely to have access to the (on paper) most desirable companies. All that said, if you can stomach the financial risk, direct angel investments have a lot of side benefits. You get to meet some great founders, learn about a range of industries and companies, and get the occasional warm, fuzzy feeling that you are helping some of those founders succeed. More over, you are building a track record. Putting your money on the line is a very concrete way to prove what companies you believe in, and that, sometimes, those beliefs are ahead of their time and right.

Funnily enough, it is this exact track record that enables rolling fund creators to raise money. Sahil regularly mentions his angel investments into Figma and HelloSign. Cindy Bi lists three unicorn investments in her twitter bio. If you invest in Cindy’s fund, and that fund invests in more unicorns, that doesn’t help your track record. You can’t list those investments, because you did not make them. Angel investing is not a good risk-adjusted way to invest money. Neither are NYC rent, craps, oyster happy hours, or many other things that I spend more than financially optimal. However, I still find angel investing to be worth it. It’s enjoyable and aligns long term with my personal goals and love for early stage companies.

I can’t see close to the same benefits — financially, personally, or professionally — in becoming a rolling fund LP. They combine the poor returns of venture, with the aloofness of investing in public equities. I have no doubt that they can make sense in a larger portfolio full of existing venture investments. However, rolling funds claim to be a great opportunity for a new class of people. That claim is, frankly, bullshit.

Thoughts on API Design and Compliance

I got a chance to do an interview with Pandium about my thoughts on GraphQL, productizing an API, and HIPAA-compliance. They did a good job framing the questions in a way that should still be understandable to non-technical people.

I left GraphQL out of my 2020 predictions, since it is pretty technical, but I am very confident that GraphQL will become the de-facto way to build APIs. The benefits are humungous, and the surrounding community and libraries are quickly catching up to (and surpassing) what exists around REST. We’ve been using it since early 2018, and it’s transformed how we are able to build things at Healthie.

Check out the interview here

Hurdles to Being a Solo-Creator

In all the discussion of of people leaving large media companies to go solo, I have not seen anyone address how creators (and subscribers) are going to handle life events that prevent creators from producing content for prolonged periods of time.

Money Stuff’s Matt Levine just went on paternity leave, and is taking a break from writing the column. I assume this doesn’t present any career or financial issues for him. He’s a Bloomberg employee, and he can take paternity leave knowing that his salary is secure, and that his job is waiting for him. If Matt Levine was a solo-creator on Substack, how would he be able to handle this? His column is based on current events, so he would not be able to write a backlog of them, and schedule their release. Would monthly subscribers be OK with paying the monthly subscription fee for a newsletter they aren’t actually going to get?

In other freelance fields, like web development, it is possible to take on extra work in compressed period of time (“Feast Period”) in order to bank money for when you are unable to work (“Famine Period”). This doesn’t work for newsletters. If you normally send a daily column of 5,000 words, you can’t just write twice as much, and expect your subscribers to pay double that month. Subscribers are price-sensitive, and doing extra work likely won’t lead to higher average revenue per subscriber. Even if a solo-creator decided to just not charge their subscribers while they were out, they would be at a serious disadvantage when they returned. For topical newsletters, the archives have minimal interest, and would likely not draw in any new subscribers. Meanwhile, regular churn (due to both real reasons, and delinquent cards) would continue to pile up.

If Pete Wells (another of my favorite columnists) took two months off, it would have no bearing on me continuing my New York Times subscription. The Times has a lot of content creators (even within the Food section), and still delivers a lot of value. For creators going it alone, the freedom can become a liability in cases like these. Life events happen, and they need to be accounted for when we talk about financial shifts (like the rise of solo-creators and Substack). One obvious solution is for solo-creators to band together (like what Everything Bundle is doing), but then we eventually end up right where we started.

If you know how people are planning to handle this, let me know on Twitter!

Creating Independent Board Seats. Don’t Do It

My company, Healthie, has a board. It’s made up of myself, my cofounder, and the VC who led our seed round.

We do a board meeting every quarter, and it’s invaluable. It gives my cofounder and I a chance to break out of the day-to-day grind, and do long term strategic thinking. Our third board member brings a wealth of experience and insights, sanity checks us, and pushes us In a way that is motivating and not overbearing. The non-founder board seat comes with the ability to approve or veto certain things, but it has never once been an issue, or forced us to do something that my cofounder and I disagreed with.

As that dry background shows, I have had nothing but positive experience with our board, and boards in general. That said, I vehemently disagree with the recent advice I’ve seen saying that founders of early stage companies should voluntarily create boards, and that those boards should have independent board members. This advice is bad for founders because it introduces new risks outside the founder’s direct control, without giving the founder any additional upside.

At the founding of a company, the founders have 100% of the risk and 100% of the upside. When founders reduce the share of upside they have (by diluting themselves), they do so to either reduce their risk, or to increase the absolute value and/or liquidity of their upside. This is true when you are raising a round, giving employees or advisors equity, or even choosing to sell.

When founders create a board as a condition of fundraising round (like we did), it can make sense. We traded some control of our company, and share of the upside, for money and help that we were confident would lead to a greater overall absolute return for us. The board seat that we created and gave away was part of the control that we sold, and we got something back for it. When founders create board seats, just because they read that it’s a good idea, they gain nothing and lose both control and upside. Common arguments for creating and expanding boards don’t address or explain these negative repercussions on founders.

One major pro-board argument is that independent boards ensure better corporate governance and better company performance. I disagree.

Early-stage founders should be, both in self-confidence and actuality, the best people to make final decisions for their company. The unique mix of insights, passion, and drive that lead founders to start a company, also means that good founders are uniquely positioned to ultimately make the right calls. Founders should seek advice, review data, and listen. However, impeding the founders’ ability to make hard and unpopular decisions jeopardizes what makes early stage companies able to punch above their weight.

In addition, a board preventing bad governance or behavior, means that the founders initiated (or at least condoned) bad behavior. If you’re a founder who does that, why are you reading this? If you aren’t, why get get dragged down by unrelated people’s bad behavior?

Following this advice does not only lead to you immediately giving up control of the board, it also leads to further equity dilution! Fred Wilson’s advice is to to give every independent director 25 basis points per year. If you appoint the recommended two, and have them for four years, that’s two percentage points (more if you raise money in between) that you’ve lost, for the pleasure of having less control over your company. In my experience, the people who give the best advice either do it for free because they like helping, or because they have invested in the company. It is very possible to get more advice then you need, without resorting to further dilution.

The second argument is that large boards, with diverse board nominees, increase diversity. That is fundamentally true, but is a cop out/founder-unfriendly way to solve the very important problem of diversity in tech. The most heralded (and most committed) way to increase diversity, is to hire or wire. If VCs know diverse people who’d be amazing board members, why not invest in them? If you’re a founder, why not go all out trying to hire them? If you don’t know them well enough to do either of the above, how can you be comfortable with them representing your best interest on your board?

When we got our initial term sheet, I (as the CTO) was not included on the board, and we would have had an independent board member instead. That was the area of the term sheet where we put our foot down the most. As a founder, I can’t imagine not being in the room when some of our company’s largest decisions were made. Whether you hate them or respect them, there’s a clear precedent of successful founders, like Zuck, maintaining board control and building large companies. Don’t give in to pressure or online advice to give up board control.

Have comments, or disagree? Let me know on Twitter

TL;DR Watch the below video, and replace “Teen Suicide” with “Creating Independent Board Seats”

 

The Horizon Never Gets Closer

This week, I read Alex West’s post about chasing goals when building a company. Here are some of my thoughts/anecdotes on chasing goals when building a company.

I started Healthie because I was bored.  The season for the sport I was playing ended, and I was suddenly faced with hours a day of new free time. I met an MBA candidate with an interesting idea, and figured “why not?”.

At first, it was all great. My only goal was to build an MVP. Each new piece of functionality added, and the time invested doing so, felt like a huge win. There was no status quo, no real plans, and no targets. I was just replacing my HBO-watching time with something a little more productive.

We launched that MVP, and the first few customers we got felt absolutely amazing. My co-founder and I were still in school, and had no expectations. Every dollar we brought in infinitely exceeded what I had planned.

Things got more serious and stressful when we raised some money, and started Techstars. Suddenly, there were expectations and growth goals. I had taken a leave of absence from Penn. We had employees who we had convinced to leave stable jobs to join our nascent company.

Initially, we consistently hit our monthly goals, and it felt good. Not amazing, but good, like we were doing what what was expected. Then, we didn’t, and it felt awful, bone-crushingly awful.

The pain and stress of missing a goal was ten times worse than the joy of achieving one. I had gotten addicted to the growth, and each new milestone quickly became the status quo. Each best month in company history became my new standard, and any performance below that was untenable.

I started (literally) dreaming about customer cancellation emails and product issues. I would physically vibrate at my desk at work from tensing up so much. On an academic level, I understood there would be swings in our business. Mentally, I couldn’t wrap my head around it.

It’s been five years since we started. I’d love to say that I feel like we’re closer than ever to achieving our end goals. I don’t. The more we grow, the more I see opportunities to take us even further. The horizon never gets closer.

When people ask me about Healthie, I say we’re bigger than I ever thought we’d be, and smaller than I want. That answer is never going to change. What has changed is that I now appreciate the journey.

Our company performance varies. We have good and bad quarters, achieved and missed goals. Throughout all that, I enjoy what we do and who I work with. That’s been a much more helpful, consistent, and happier motivation than a sole focus on chasing ever-moving goal posts.

Learning To Code Is Not A Solution To Your Problems

Fred Wilson published a post today recommending the recently unemployed to “Learn to Code If You’ve Lost Your Job”.

Learning to code is great, but the way Fred presents it as a solution for unemployed people is wrong.

Even pre-Corona, the job market has been absolutely flooded with juniors developers, even in traditionally hard-to-hire markets like NYC. AngelList is full of incredibly raw bootcamp grads, who are still months ahead of people just starting on Codecademy

With Corona, there are also a lot less dev jobs available. Most of the companies still hiring are huge companies like Google and Facebook. These companies have strict requirements, drawn out interview processes, and are less willing to take chances on atypical backgrounds.

More people should learn to code, and it really does help with generally applicable problem solving skills, but please don’t rely on it as a quick solution to financial or career issues.