11. On defining criteria, form and function

Dear Co-creator;

I was hoping to have a single well-defined idea by now but I don’t. It takes time and let’s continue our sparring.

What I do have are criteria. So let’s go over some of the ones you already know.

1) Public good. The company must enable one of the 17 United Nations Sustainable Development Goals at scale. One of the easiest ways to achieve this is to provide “enabler software” and price it in two-tiers (price adjusted per country PPP if the country is better than developing, and zero if not).

2) Unicorn potential. With my 30/30/30 heuristic on valuation, I want to imagine at least 30% growth and 30% margins, for a 30x valuation in 5 years = $100m revenues. Something like $1,000 ARR and 100k customers in B2C speak.

3) Technology. And specifically artificial intelligence. No need to go over this but the operative words are scale and intelligence. They will disrupt an incumbent in either or all of the fast, cheap, good categories.

4) Simple idea(s) with extremely complex operations that lends itself to vertical integration. Take a look at my Tesla breakdown below to get an idea. For me, it is easier to partner up with others to acquire missing pieces so starting with complex operations and/or value chain is definitely not intimidating. I also know the form and function better than the content having executed on such form and function over and over again in many different companies and industries.

Now let’s look at some of the other criteria that calcified in our journey:

5) Stick better with what I know better. Of the 11 newsletters I wrote, the last one on financial literacy and valuation was the most read and liked. The essay I wrote on tokenomics on LinkedIn a long time ago is still my number one piece ever. So yes, I know more about finance, investing, valuations, models, etc. than, say, medicine ceteris paribus. I made an executive decision to focus on the first iteration of the company on a variant of money as its main product.

6) Community. I have enjoyed writing these letters and participating in the Slack discussions. Open sourcing startup formation has been rewarding so far. There is more to do here though – still haven’t figured out the incentives, participation, etc. I certainly feel that anything we do will have some community/cooperative aspect to it.

Some updates:

1) Bank idea is out. The Fed doesn’t like innovation these days, and while I welcome regulation as it adds the required complexity, I don’t want to wait a decade to get the startup rolling. The straw that broke my camel's back was the latest amendment to US Capital rules. Why? It was fucking 1,087 pages. Of course I didn’t read it - I quit!

2) While I still like the doctor in your pocket, I am postponing that for two reasons: Google and liability. I rather give people investment advice, then health advice (for some reason, tech companies never delve into finance – if GOOG had a hedge fund, it’d have serious edge with the search data, and Apple card, while good to have, has cost Goldman Sachs $2bn). Never truly understood why this oil-and-water-don’t-mix phenomenon exists, and perhaps that’s my calling now.

Take care for now, and those in the northern hemisphere please stay safe with the weather and related phenomena.

Oltac

Today’s image is titled “Existential Criteria.”

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