A Purposeful Career

I’m starting to find more purpose in my career, and invest more time, energy and capital into activities that further this purpose (my 2021 goals here). There was a period in my life where I thought I only wanted to work on problems in emerging markets (particularly Africa) and although I still care deeply about this area, I realize that’s more narrow than where I actually enjoy spending my time and resources.

I’d like to build a career in service of entrepreneurs and creators.

  • Making software allows me to build tools that support entrepreneurs and creators at at the earliest stages and at scale.
  • Angel investing allows me to compound capital, relationships, and learning and ultimately make better software.
  • Investing and operating allows me to build both broad and deep relationships with people over a very long time horizon.
  • Investing and operating let’s me learn and writing helps me share my learnings with others which in turn refines these learnings.

Making Software

I’ve been working in software development for over 15 years. I’ve helped build products for consumers, enterprises, and small businesses. I’ve found the most fulfillment in building utility software to help entrepreneurs run their companies and help people collaborate.

I’m particularly drawn to building software that is ‘Free to Start’ as this allows users to get value even at the smallest scale. World class software can be used by people starting new projects without paywalls that prevents folks who are not well capitalized from participating.

I’m also interested in Open Source projects (e.g. WordPress) as they have all the benefits of ‘Free to Start’ but also allow users to contribute to the development and customize it for their own (possibly esoteric) requirements which is often necessary in emerging markets or emerging use cases.

Finally, I’m really excited about software that helps us collaborate better as humans especially as the way we collaborate evolves into cloud based and distributed work. I’m looking forward to spending my own time innovating in this area. I wrote more about this area in another post “A More Open World“.

My hope is these products can be helpful to entrepreneurs and creators.

Angel Investing

I’ve been angel investing for over a decade – I enjoy it and have learned a lot. Angel investing allows me to develop and cultivate new relationships with people I would not ordinarily meet, stay close to cutting edge innovation and compound capital over a very long time in a way that is very aligned with entrepreneurs.

I enjoy meeting entrepreneurs who are passionate about the problems they are solving and have a really strong ‘Why’ story. As a very small investor my role is a friend to the founder and cheerleader for the business and don’t have the same baggage that institutional investors need to consider (round dynamics, ownership targets etc).

I’ve found it helpful as an operator at scale to stay close to innovation in adjacent industries and adjacent business models. It helps me generate new ideas, recognize patterns across companies and ultimately makes me a better operator.

My hope is that these small investments can be helpful to entrepreneurs.

Building Relationships

Investing and operating has allowed me to build both broad and deep relationships with entrepreneurs and co-investors and colleagues.

I’ve found that more repetitions (over a concrete thing) with the same people or group builds lasting trust and rapport especially when I don’t have a formal relationship such working at the same company. If you are actively collaborating on a project together or evaluating an investment together over many cycles you can build deep, trusting relationships.

I’ve been spending time collaborating with a very small group of co-investors – many who I’ve known for 20+ years. In this strange time of physical distance I’ve tried to be more structured and disciplined in my approach to collaboration (more writing, more sharing) and it’s helped me build stronger relationships as an operator and investor.

I’ve found that broad relationships are very helpful for making connections / introductions which are important. The smaller set of deeper relationships are very helpful for refining synthesis and judgment (as these folks are much more direct and honest).

My hope is that these relationships can be helpful to entrepreneurs either directly or indirectly.

Learning and Sharing

I’ve been trying to compound my learning as much as possible – through operating, investing, and consuming content (mainly audio books and podcasts). The intersection of all of these activities helps me develop a perspective on the world that is unique to my set of experiences, which has the potential to have a lot of depth.

I’ve been trying to write and share more of this with others (in this public blog – now over 80 posts!) and some of the idas are ‘stubs’ and others are areas where I feel more confident in the subject matter.

Writing helps me synthesize and crystalize my point of view and also allows my thinking to be shareable at scale. I’d like to experiment with a newsletter next, even to a small private group as I think this could help me synthesize across a series of topics in a way that could be useful to a particular audience.

My hope is that this shared learning can be useful to entrepreneurs.


All this thinking may evolve, but it’s been consistently true over many years so I wanted to document it openly. I hope I can come back to this post in ten or twenty years and feel like I’ve had a career in service of entrepreneurs and creators.

Crypto Investment Strategy

Bitcoin has increased by 300% in the last three months from $10k (Oct 3) to $33k per $BTC (Jan 3). Ethereum has also increased by 270% in the same period from $350 (Oct 3) to $950 (Jan 3) per $ETH.

I started buying Cryptocurrency in early 2013 ($BTC mainly) mainly because I thought it was an interesting concept at ~$50 a coin. I ‘lost’ most of these coins as part of the Mt Gox Bankruptcy in 2014. I’m hopeful that 10-15% of our holdings may be returned soon, after seven years of waiting.

The US government has printed more than 20% of the total USD in circulation in 2020 alone (over $USD 9 Trillion) and many people have no idea we just got a lot poorer. Given this is happening globally (across governments) I’m starting to think that I should have a more significant percentage of my savings in $BTC and cryptocurrency in general over fiat ($USD). There are also lots of other benefits/value of cryptocurrency beyond inflation protection but I won’t cover them here.

Ultimately, I’d like to allocate 10%+ in Crypto, 20% in technology companies (private), 30% in real estate and 40% in public equities (mostly in tax advantaged retirement and non liquid accounts) but this will take many years and a good amount of luck, too 🙂

Given these observations, here is how I’ll modify my strategy going forward.

Crypto Strategy

  • Focus on $BTC and $ETH: Most of my $BTC is locked up in Mount Gox, and this counts towards my overall allocation. I assume around 15% of coins returned at some point as $BTC (not fiat). My next largest position is ETH which I’ve had for years. I plan to hold BTC/ETH/All Altcoins in a 70/20/10 ratio in terms of USD fiat value.
  • Regular Purchase: I started taking 15% of my paycheck (2x per month) and purchasing $BTC and $ETC in the correct ratio (80/20), which I would ordinarily leave in fiat in a savings account. I’ve been doing this for about a month. The goal here is to remove emotion from the decision and dollar cost average over the next few years.
  • Crypto Savings Account: I started to move most of my $USD out of Marcus (CDs) into BlockFi (referral link). I have kept some $BTC and $USDC (a USD stablecoin) for the last 6 months or so, and I’d rather make 6-8% interest over 0.5% interest in alternatives. Note that BlockFi is not risk free (they are lending like banks do) but they do have some strong security measures in place.
  • DeFi: I have positions in all the stuff powering Decentralized Finance (DeFi) on the Ethereum network, but that is mainly for fun (which is how $BTC started for me anyway). I play around with staking, liquidity pools and lending but beware the large gas fees (I got burned). My largest position is in this DeFI Pulse Index (https://defipulse.com/blog/defi-pulse-index/) which is a weighted index of all the tokens powering DeFi.
    • Feb 5 Update: Given all the growth in the last 30 days this has now also evolved into a more ‘core’ position.

I also hold small amounts of other Altcoins like Stellar Lumens ($XLM), Polkadot ($DOT), Ripple ($XRP), Filecoin ($FIL bought in the 2017 SAFT), Arweave ($AR), UNI ($UNI), Sushi ($SUSHI), Cosmos ($ATOM) as well as about a dozen others, but those are more out of interest than part of an actual strategy. I also added NFTX as an index for collectibles to the mix.

All of this is still very experimental, and I wrote this up to share more easily and get feedback. Despite dabbling for eight years, I still feel like a n00b most of the time in the crypto world.

Creating Liquidity in Private Markets

Two of the most significant issues with private market investing are their inherent illiquidity and the unpredictable nature of exits. It means that you need to ‘invest and forget’ when investing in private markets, and is particularly true for angel investing. This problem also applies to equity based compensation for employees at startups, where employees are unable to realize value even when the business has increased in value.

I believed this problem will be solved over the next few years. There will be a number of new options for liquidity in the private markets and early stage investing is going to become even more attractive to even more people. I also think that the US government will make further relaxations to the accreditation rules that restrict investors from making certain investments based on their net worth or income (originally intended for their protection).

For late stage (pre-IPO) private companies there are a number of platforms (e.g. Forge, EquityZen) working on the liquidity problem, but very little is automated. Typically ‘blocks’ of equity become available either in secondary offerings (existing holders, like an early employee selling their stake) or when early investors have pro rata rights to a future fundraising round and can’t fill it themselves. I’ve used these platforms from a buyer’s perspective (and explored as a seller) and it’s all fairly manual right now, and the products are mostly a nice user interface. There are also more traditional alternatives like Setter Capital who don’t claim to be a technology platform.

In real estate, companies like Cadre are both providing access to large real estate projects to small investors (breaking up allocations into smaller chunks), and providing “windows” where investors on the platform can sell portions of their positions (every 6 months or so). This both increases the number of investors who can invest in the asset class (lower minimums) and improves the exit options for investors who would typically have to hold their equity position for 5-10 years.

In the future, I expect platforms like Carta and AngelList to lead the way in creating a true ‘marketplace’ for private securities. Carta just announced their new liquidity platform CartaX, a private stock exchange which is an awesome innovation launching in January 2021. It’s a natural extension of their business model, and I’m excited to try it out. Angellist will also continue to innovate, especially because of their SPV and fund offerings, as they hold a lot of private company stock (and have access to a lot of data).

There are some problems that need to be solved such as restrictions on employee stock, rights of first refusal and companies at the early stages desiring control of their cap table. I think these are all surmountable, and most of the trading will start with late stage private companies first, where these concerns are less relevant.

Overall, these developments make me even more excited to continue angel investing; as private company stock becomes more liquid, it’s value will increase (in addition to normal value creation through growth). Ultimately, it means that more investors will invest in private companies and they can have more of their capital ‘working’ (and need less of a cash buffer) because they know that there will be a liquid market in case they need the capital.

Democratizing VC Investing in Africa

Most people don’t have access to investment opportunities in either emerging markets or private markets. Access to early-stage investing (venture capital), in particular, requires prohibitively high minimum amounts of capital, and emerging markets investing requires specific knowledge and access. While it would be rational (both for diversification and long term gain) for many investors to have part of their capital allocated to these segments, most investors are over-exposed to both traditional asset classes (public equities/bonds) and their home markets and lose out on the benefits of diversification. This needs to change. 

I strongly believe that there is a tremendous market opportunity in African entrepreneurship and technology over the next decade. I’ve been an active angel investor in Africa for six years (and a global angel investor for ten years). I’ve set up a rolling fund focused on Africa to offer more investors in my extended network access to early stage investing in Africa. 

This new fund is my small contribution towards democratizing access to global, private markets which have long been difficult to access. It has some additional benefits, including over 10x lower minimum commitment amounts and 10x lower management fees, and I am personally one of the largest investors, which is all atypical in the industry. 

Access to private and global investments

Over the last decade, technology has enabled many notable trends towards democratization and decentralization — in publishing (blogging), television (YouTube), and radio (podcasting) to name a few. As platforms and tools continue to evolve, I believe this trend will extend to more industries (including private investing), and I’m excited to contribute towards this movement.

Access to private investments is becoming increasingly relevant and important; public equities are now more concentrated than ever, and actively managed public funds have been replaced by ETFs. This Morgan Stanley report summarizes the increased capital allocations over the last decade towards private investments driven by technology investing — and these investments have historically been impossible to access for all but the very wealthy, or large institutions (pension funds, endowments, etc).

Source: Morgan Stanley

Most individual investors have a more limited set of assets that they can access and are excluded. This results in individuals being overexposed to the most liquid, tradable assets (e.g. public equities in the USA). 

In addition, individual investors are typically over concentrated in their home markets (real estate, stocks, etc) relative to their net worth – foreign markets are harder to understand, and can be legally complex. I believe that there will be significant value created in global, and particularly emerging markets over the next decade. The data point to more and more entrepreneurs building businesses in their home countries (even after a tier 1 US education) versus trying to build their companies in entrepreneurial hubs like Silicon Valley and the USA. Over 40% of Y Combinator founders are now international, and the vast majority want to build their businesses in their home markets. This trend has been accelerated by Covid 19, and the rise of distributed work which allows for much better labor mobility regardless of physical location. 

Source: Vanguard for public equities 

AngelList (Rolling Funds) have built tools for angels to accept small amounts of capital from external investors, and invest this capital globally which was very hard and expensive previously. My rolling fund was developed to democratize access to investing in private markets (venture capital) in Africa; more details in the next section. 


Investing in VC in Africa

There is significant market potential in Africa – many young people ready to work (median age of 19), increased urban mobilization (45% living in cities by 2025), high smartphone penetration (50% and growing fast) with digital finance access, and increasing capital and talent flows into African technology hubs (e.g. Nairobi, Cape Town, Lagos).

This year we finally saw the start of technology company exists, where seed investors realized over 30x their capital. Stripe bought Paystack ($200M), WorldRemit bought SendWave ($500M) and GoDaddy bought Over.

I am passionate about advancing the technology ecosystem in Africa. I was born and raised in Mombasa, Kenya where my family has lived for five generations. I have a strong network of co-investors and local entrepreneurs, several of whom are investors in this fund. I’m a Kenyan, a product manager, and an entrepreneur, and my experience (including building technology products in Africa as an operator) allows me to have empathy for founders on their journey. 

I’ve been personally investing in technology companies in Africa since 2014 through Musha Ventures, and am now excited to allow others to participate in these deals. Over the last six years I have backed 35+ African companies in 8 countries with an IRR of over 36% (based on future fundraising rounds) and MOI of 1.7x. The portfolio includes companies like Flutterwave, mPharma, Sokowatch, Branch, Twiga and Kobo360.

Here are some of the important details:

  • 10x+ Lower Investment Minimums: Investors are able to invest in this fund with as little as $2.5k per quarter whereas most VC funds have a $250k+ minimums for LPs. Investors will need to meet US-Accredited Investor requirements to participate.
  • 10x Lower Management Fees: The fund has a management fee of 0.2%, to cover basic running costs, which is 10x lower than the industry standard. This further helps to align incentives; I earn carry when investors make positive returns. 
  • Alignment of Incentives: I’m personally one of the largest investors in the rolling fund, as this is an extension of my existing angel investing. This is not funded through deferred management fees, it is capital that I wire into the fund just like every other investor.
  • Consistent Investment: I intend to invest conservatively and consistently into companies across Africa over many years. It’s very hard to ‘time the market’ and so we will instead focus on factors we can control like amazing entrepreneurs, evidence of traction, product quality and delighted customers.
  • Investing in B2B: We are focused mainly on startups that serve other businesses — particularly fintech, marketplaces and software as a service technology companies. We may make the occasional consumer investment, but think that business is the foundation that comes first.
  • African Entrepreneurs’ Fund: For entrepreneurs building businesses focused on Africa (and particularly portfolio company CEOs), they are able to invest in the fund with no fees or carry. This is my attempt to pay it forward, and also get even better deal flow from my network due to further aligned incentives.

I believe in the power of being transparent, which I hope will allow me to build new relationships and deepen my current relationships – it’s why I’m publishing this openly. 


Want to learn more? 

If you’d like to get in touch please fill out this short form and I’ll reach out to you so we can get to know each other better. 

If you’d like to see more detail on the fund (market opportunity, detailed investment history and fund terms) please check out the rolling fund page (https://angel.co/v/back/musha-ventures). 

Evolution of Megacities

I live in New York City, and have been thinking about how I think large, densely populated cities (in developed markets) will evolve after Covid-19. I don’t think the soul of the city will change, and reading Here is New York (by E.B. White) from the 1940’s affirms this, but I do think the city will go through an evolution over the near to medium term.

New York City has gotten more and more expensive which has resulted in it shrinking (net population loss). The growth of the suburbs continues to be good (across the US) particularly from immigrants who tend to have less disposable income and seek better value for money. This podcast episode with Alex Danco and David Perell also is a fun discussion on the subject that is worth checking out if you’re interested in the subject.

The continued rise of eCommerce/delivery, distributed work and autonomous vehicles, are all shifts that are likely going to accelerate changes in megacities (some of which were catalyzed by physical distancing).

Fully distributed or partially distributed is a particularly powerful trend as many technology and finance jobs may no longer require living in places like NYC as a prerequisite but can still pay the same wages.

Here are a few of my predictions:

  • Offices centered around collaboration, not individual contribution: Office in the future will look different. I imagine they will have more meeting space, and more collaboration space versus single person desks designed for individuals. These collaboration spaces will be shared, and only a portion of the company will be in the office on any given day.
  • Less office space, more (and larger) residential spaces: Individual contribution work will happen outside the office, and much of it from home or other flexible work spaces (coffee shops, shared office space). Office space will be repurposed into residential space or other gathering (e.g. bars or restaurants) or ‘multipurpose’ spaces. Homes will be larger to accommodate flexible working spaces or dedicated offices.
  • More young people, more old people and fewer families: Young people love densely populated places, and so do healthy empty nesters. Megacities will have more of them particularly as empty nesters are fitter and healthier for longer. The food, culture and nightlife scene will become even more vibrant.
  • Growth of the suburbs around megacities for families: Families all move outside the city epicenter, where dual-income parents can still easily go to their offices for occasional collaboration sessions (e.g. 1-2 times a week) but spend most of the time working from their home. The quality and comfort of these homes becomes even more important for families. The transport from homes to offices becomes even easier and faster because of driverless cars (5-10 years away).
  • More pedestrianized, car free zones, and even more delivery: Purchase of ‘staples’ happens more and more via delivery vs. in person and ares of the city (e.g. Flatiron) become fully pedestrianized and cycle zones with delivery permitted during certain windows.

I don’t have any real unique insight into this topic, beyond personal interest. I’ve spoken to a number of business owners who are not extending their office lease, and also a number of friends (particularly with families) who are leaving the city for the suburbs.

I would personally not invest in real estate in Manhattan over the next few years until we see how it’s going to shake out. I think that investing in the city suburbs, and in ‘up and coming’ cities with net population growth, growing income/capital and with great culture but lower cost of living is likely still a solid call.

Angel Investing Learnings

In this post I’ll share some advice and learnings from a decade of angel investing to help others get started or improve their own process. In general, I’d advise investing in companies where you have some asymmetric advantage – either because you know the founder(s) well or because you know the space well.

I’ve been investing in startups for about 10 years through Musha Ventures, after learning the ropes at Index Ventures. I’ve made ~70 investments (around 40 in Africa), and realized around twice my total invested capital (Distribution to Paid in Capital – DPI). Most of the companies in my portfolio (~55) continue to operate without a realized liquidity event.

I love meeting and learning from founders, and being exposed to different business models. When I support a company, I am able to learn from observing its journey and build relationships with the founders beyond my small investment. I think that early stage investing has made me a better product person and operator, and I hope to continue to keep investing in entrepreneurs throughout my life.

Investing Frameworks

Ben Holmes, Index Ventures

I worked with Ben Holmes at Index Ventures, who led their investments in King, iZettle, and Just Eat. He showed me a simple framework, which is still the foundation of my investment evaluation process, detailed below. At least one dimension of Team, Technology or Traction should be an A+, and a big enough Market (now or in the future) should be a precursor to making the investment.

  • Market: Is the market big enough ($1Bn+) and can you see this company being a leading player (with 10%+ market share) in the next 3-5 years? If you think that the market now or in the future is too small, then don’t make the investment.
  • Technology : Is the product or technology differentiated and sticky within their market? How difficult is it to replicate?
  • Team: Is the founding team both individually exceptional and complement each other? How deep and long is their professional relationship?
  • Traction: Is the business growing and do they have positive unit economics? Do they have paying users? What does customer retention look like?

Brian Singerman, Founders Fund

I don’t know Brian Singerman personally but I really enjoyed this episode of “Invest Like the Best” with him. He’s invested in companies like Oscar, Affirm, Wish, and AirBnB. Here are a few of my takeaways from the conversation:

  • As a startup market, moats and execution are the only things that matter.
  • As a VC, seeing, picking and closing are the only things that matter.
  • You learn to invest in startups by actually investing, not by observing.

Investing Advice

This is a collection of advice when you are starting to invest, in no particular order:

  • Learn with small investments: Optimize for learning per dollar invested if you are just getting started, have limited capital and hope to build a portfolio. If you invest $1k with the same diligence process as if you were investing $100k, then you will learn by making less expensive mistakes early on.
  • Take it slow: Start early in your career but start slow, and invest more frequently as you improve your judgement – I made too many investments in my first year. It takes a long time to calibrate your gut because it can take 10-15 years to figure out if you are a good investor (but you’ll get some validating and invalidating data points along the way).
  • Asymmetric Advantage: Invest in areas where you have some asymmetric advantage. If you know a founder super well, or know a space really well and can invest in a related company (without conflict) these are sources of asymmetric advantage.
  • Time vs. Money: Invest money in companies that you would be willing to spend your time on personally, but may not be the right personal trade off for you. When you are earlier in your career you can think of time and money as interchangeable. If you don’t have the capital to invest, then try and join these companies and get some equity for your time.
  • Deep Relationships: Invest in great teams who’ve known each other a long time and even better worked together for a while – it reduces the risk of founder issues (65% of company breakups are for this reason).
  • Founders you like and respect: I invested in a few companies that I did not have the best rapport with personally, or had an unexplainable ‘gut’ reaction to avoid even it if looked good on paper. Most of these companies did not work out, but I have a small sample and so this still needs more data.
  • Company first, then terms: Terms are less important than believing in the company and the founders. Don’t make an investment because of a low valuation or tax incentives – these are all bonuses, and never a reason to make an investment. I made a number of mistakes here early on and regretted them.
  • Valuation: If you are going to negotiate on anything, negotiate on price although this is mostly supply/demand driven and you may not have leverage if you are a small investor. There is a common belief that valuation does not matter in venture capital, but if you are investing your own money then overpaying consistently will hurt your returns.
  • Get written answers: When I have follow up questions, I usually send them over email and look for an email response. This is an indication of how clearly they think, and communicate. It is also more efficient for me and I have a permanent record.
  • Cap table: Look for ‘clean’ cap tables (equity split) in early rounds. If the founding team has an unexpected equity split, or there are early inactive employees/ investors significant equity it can affect the company’s ability to raise money in later rounds and if founders are too diluted, then they may lose motivation.
  • Discipline: Founders who are structured and regular with investor communication are often also good operators. If they show discipline with investors, they are likely applying the same discipline to running their companies. I often ask for the last investor report to get a sense of their communication quality.
  • Metrics: Founders should be super on top of their key metrics, growth rates, revenue distribution, burn rate etc. This shows that they both track them carefully, and review them frequently.
  • Pace of iteration: At all stages look for pace of iteration and product development. Teams that ship more often and test more hypotheses are likely to have better products and build long term sustainable advantage.
  • Sleep on it: Even when I really like a company, I always sleep on the decision and never commit after a meeting. If I still feel good about it the next day, then I’ll message the founder to invest. Try not to get pressured, or react to FOMO and make a decision too quickly or without conviction.

Practical Tips

This is a collection of more practical/tactical things to do when you are investing:

  • Track your portfolio: If you only make a handful of investments, then think of it as money spent and a nice bonus if one of them is successful. If you have a portfolio, then keep a strict record of your investments and track their progress and returns (I use a simple Google Sheet). I track key dates like fundraising events and summarize the status of each investment about once a year.
  • Write Memos: Your memory is less reliable than paper record, and so I recommend writing short 1 page memos with the ‘why’ behind your investment. I’d start with the structure I outlined from Ben Holmes up above and expand it over time.
  • Customer References: For software as a service businesses in particular, do some customer reference calls. I always ask the following three questions: What was it like before the product? What is it like after the product? What would happen if you took the product away? If they get very upset at the last question happening, that is a very good signal.
  • Post Mortems: If companies fail, write a few bullet points down about why the company failed (I just add them to my original memo), and see if you identified the risk when you made investment. Learn from this, and don’t repeat mistakes.
  • Intro Email: I’ve just started writing an ‘intro’ email to founders which founders seem to appreciate. It allows you to clearly express how you can help, how you operate as an investor, and share some of your expectations as well.

I’ll continue to add to this list as I learn more, and please send me any thoughts or feedback!

Seeking Leverage

Leverage allows us to amplify the impact of our creations and decisions. If we apply leverage to these things we can create more value for the amount of time invested. Leverage is not easy to attain, and the different forms of leverage either don’t scale easily or require specialist skills and the ability to distribute creations effectively. I’ll summarize the inspiration behind this post, and then go into the different types of leverage below.

Inspiration

I listened to Naval’s Podcast Series a few months ago – I don’t love the title of the series, but I agree with many of his principles. Here is a link to a set of Tweets from him which are a little faster to digest, which catalyzed the podcast.

Here are a few of my favorites from the Tweets:

  1. Seek wealth, not money or status. Wealth is having assets that earn while you sleep. Money is how we transfer time and wealth. Status is your place in the social hierarchy.
  2. Pick business partners with high intelligence, energy, and, above all, integrity. Don’t partner with cynics and pessimists. Their beliefs are self-fulfilling.
  3. Learn to sell. Learn to build. If you can do both, you will be unstoppable. (Aadil Note: The two things we were never taught at business school).
  4. Leverage is a force multiplier for your judgement. Fortunes require leverage. Business leverage comes from capital, people, and products with no marginal cost of replication (code and media).

Gated Leverage

Gated leverage requires an outside party to agree to give you leverage and does not scale without additional marginal cost – for example, raising money from an investor or recruiting a new person to your team still takes incremental time and effort.

People

If you have people working for you who are able to execute your ideas you can (in theory) make more decisions for greater output versus doing it all yourself. This is not costless leverage as recruiting is expensive, developing trust and high performing relationships is difficult, and alignment between people as you scale is challenging. People can be amazing to bring in new skills, different ideas and make a product or organization better but they are not my favorite source of pure leverage.

Capital

Let’s assume you spend 100 hours developing a well reasoned theory to pick an investment (e.g. buying Amazon stock in 2011). If you have $100 of your own capital to invest and it returns 10x, you make $1,000. If you have $1,000,000 to invest because you raised money from others (let’s assume you get 20% of the upside), you would make $2,000,000 in the same scenario. The amount of time you spent crafting the thesis remains constant but the returns are much larger if you have more capital. This is not costless, because you have to convince other people to part with their capital and trust you with it unless you are already wealthy.

Scaleable Leverage

Scaleable leverage has zero marginal cost of replication, and does not require someone else to agree to it. This is the best kind of leverage as it can create value even without ‘active’ involvement from you. Code and Media are both great forms of leverage but distribution and discovery of your code and media is still a requirement for success.

Software

A line of code can be deployed and distributed at scale with very little marginal additional cost. Servers are constantly available, and users can interact with your technology whether or not you’re actively working on it. Imagine, if like a doctors office, Google Search was only available from 9am-5pm, Monday to Friday.

Media

Books, Blog Posts, Podcasts, Youtube videos are all good ways of getting your ideas across at scale. The cost of creating the content is fixed but the marginal cost of a user downloading another podcast episode or viewing another blog post is essentially zero.


Scaleable leverage is both responsible for a lot of wealth creation for modern content creators and technology company builders, with very little invested capital for the relative impact. I think that this kind of leverage will grow in popularity and impact, whereas many companies of the past were built with Gated Leverage.

I would like to spend more of my career seeking scaleable leverage. Working in technology and investing in startups (for equity) will hopefully allow more passive wealth creation than purely ‘renting’ out my time.

Investing in Africa

I’m frequently asked ‘why’ I invest in startups focused on Africa, and this post attempts to clearly articulate the reasons this is important to me.

I was born and raised in Mombasa, Kenya and my family has been in here for 5 generations (since the 1850s). I grew up in relative privilege compare to most Kenyans. I remember being about 6 years old sitting in our car when a homeless boy about my age knocked on our window. My father opened the window and handed him some candy, and turned to me and said ‘You are sitting here and that little boy is out there. I hope you appreciate that was luck of the draw and will do something good in your life’. I remember that moment quite clearly even now, over 30 years later.

There are many reasons for my interest in investing in Africa, and I don’t pretend that I invest out of altruism, but I think this is what led to my interest in supporting early stage entrepreneurs on the continent.

I always liked maths and science and studied engineering at university. This experience taught me to approach problems from first principles and think through effective systems. I don’t really have skills that I can directly help people (e.g. a doctor), so I needed to approach the problem space differently. In my early 20s, I realized that entrepreneurship and technology could drive economic development, in a relatively capital efficiency manner. I started building my career in technology, starting at Google in London. After spending time at Index Ventures and learning about venture capital, I realized that, with even small amounts of capital, you could have outsized returns both in terms of value creation and impact.

Technology entrepreneurs create products that improve the effectiveness for people and businesses, and create new jobs with new skills. Given all these benefits I decided to start investing in technology companies in Africa a little over 5 years ago, after ‘learning to invest’ in silicon valley as an angel through my own fund, Musha Ventures starting in 2011. As an inexperienced investor, I tried to maximize learning per dollar invested, as I did not have a lot of capital. I tried to be disciplined by writing investment memos (that no one read), conducting reference checks and completing annual reviews for every company. 

In 2014, there was little capital available for early stage entrepreneurs in Africa and even today in 2020, there is still a deficit of capital available for those who don’t have the right networks. With small investments I am hopeful that I’m able to have an outsized impact on this ecosystem. Even when I don’t invest, I try and give entrepreneurs feedback, be clear on my reasons for passing, or share articles or advice that I think might be valuable to them. 

There have are some early positive signals; my Africa portfolio has rougly doubled in value (on paper), and the companies have created thousands of jobs, enabled new startups to exist, and improved efficiency in archaic supply chains / markets. Despite these early signals, it’s still very early in the life of the venture capital ecosystem in Africa and it’s still unclear if these companies will endure and to have a lasting positive impact on the economic development and people’s lives in the markets. Only time will tell.

My plan, which has remained consistent over the last 5 years, is to continue to think very long term and invest consistently and conservatively in early stage (mostly B2B) technology businesses in Africa and support entrepreneurs doing the hard work along the way. 

Predictions for the Future

The goal of this post is to opine on some things that 20-30 years from now (our children) would be surprised that our generation thought was ‘normal’. I am looking forward to reading this later in my life and seeing how it plays out!

I’ve broken this up into two categories – predictions where I have higher confidence and predictions where I have lower confidence.

Higher confidence Predictions

  • Driving cars: Much of the the research and data points to autonomous vehicles being the future of transportation. Lower rates of accidents (1m people die per year with 95% of deaths caused by human error), increased independence, reduced traffic, fewer parking spots and lower ‘wasted’ time from travelers makes this very compelling. I think our kids will think that we were ‘crazy’ to do something so dangerous every day. ‘Classic’ cars will still exist but they will be more focused on collectors and enthusiasts vs. a common mode of transportation.
  • Eating meat: I am a meat eater and enjoy eating meat. However, I realize that eating meat is inhumane, bad for the environment (deforestation, fresh water usage and greenhouse gasses) and an inefficient way of generating calories. We are much more likely to enjoy plant-based, lab grown ‘meat’ like the products from Beyond Meat (now served at McDonalds) and Impossible Foods – which are only going to become cheaper to produce over time.Like ‘classic cars’ it’s possible that consumers will still be able to buy meat but it will become much more expensive and rare and not a common mode of calorie consumption.
  • Mental health: As modern medicine allows us to extend life, cure disease and regenerate our bodies it’s entirely possible that (wealthy) humans will not die of natural causes in the next generation. As we live longer and longer, I think we are going to be more mindful of our mental health and not just our physical health. There will be better measures of overall mental health, preventative check ups with mental health specialists (like we do annual physical check ups now). We will also integrate time for meditation or reflection as part of our daily routine just as we do with physical exercise now.

Lower confidence Predictions

  • Owning a primary residence: Fewer people are buying homes (marrying later and higher student debt) and I think this trend is going to continue. Young people are spending more money on consumption and want optionality to move around. I also think that many people (in the US) have too much of their net worth concentrated in a single asset and would be better placed investing in a more diversified manner. I think there are lots of emotional reasons to purchase a home – e.g. roots in a community and family stability which is why I have lower confidence in this prediction.
  • Drinking alcohol: Drinking alcohol is terrible for you – we’re essentially poisoning our bodies. Studies have shown that alcohol is both more dangerous to individuals and to society than a number of illegal drugs. However, as humans we crave products that help us feel more relaxed, less inhibited, and facilitate shared social experience with others. Also many cultures all around the world have their own alcoholic drinks that are an important part of their history, and there is a massive $1.5 trillion global industry around alcohol production and consumption. Drinking might be too ingrained in society to go away, but I’ll follow how young people behave closely.

Thanks for reading – I wrote this mostly for fun and to capture my thoughts at a single point in time on how the world may change in the future.

Unbundling your job

Why do we have jobs? Jobs provide us with a bundle of many things, which is why they’ve been around for so long:

  • Predictable cashflow: cover lifestyle costs, plan for the future
  • Benefits: 401k retirement accounts, health and life insurance, paid time off, access to new capital such as mortgages
  • Purpose: creative outlet, sense of accomplishment, contribution towards something bigger than yourself
  • Identity: personal and company branding, access to opportunities and people that would not otherwise be attainable
  • Social Interaction: friendships, human contact, collaborating with others towards a shared purpose

I’ve been starting to lightly consider what it would look like to unbundle these components of work, particularly the predictable cashflow component. Are there other vehicles that might provide a better source of predictable cashflow that we don’t typically consider investing in as ‘normal’ retail investors?

A couple of areas that I’m starting to explore, beyond dividend focused public markets investing are below:

1. Franchises: one idea could be investing in / running franchises which can have quite low initial investment costs, fast payback periods and decent margins which can lead to predictable cashflow. You would need to diversify the type of franchises to invest in so you’re not over-indexed on specific sectors e.g. boutique fitness or fast-food.

2. Real estate: a diversified real estate portfolio which focuses on yield is another interesting avenue – I’m currently exploring fundrise and potentially cadre to learn how each of these work.

This is currently just in the idea stage, and I’ll publish more on this if/when I develop my thinking beyond this initial idea.