Category: Business

Blockchain for the Supply Chain

A question of trust in trade

The modern supply chain is long on data and short on trust. Historically, mistrust between organizations, including fear that information might be passed on to a competitor has stopped organizations from sharing data. In turn, even when information is shared, it’s often not fully trusted.

The Blockchain

Blockchains – distributed ledgers that create a permanent and shared record of every transaction associated with an asset – create an unbroken chain of trust. Each record is time-stamped and appended to the event before it. Blockchains have the potential to generate breakthroughs in three areas: visibility, optimization and demand.

Data records on the blockchain can be accessed only by authorized participants; this can be all participants or only those that need a particular portion of the data. Data ownership and access can be anonymous yet securely identified between partners who require verification. In short, it can be widely shared and protected at the same time.

Is Blockchain the right answer?

How can you create value, collaborate and compete with blockchains? Organizations looking for new ways to create value, collaborate and compete must consider the following questions:

  1. Which of your existing partners and what other institutions need to participate in the blockchain to make it worthwhile?
  2. How much and which data should you reveal and to whom?
  3. What data do you have that might have value to others and is there a way for you to benefit from that value?
  4. Which intermediaries in your ecosystem exist simply to certify trust or handle complexity?
  5. How would new access to customer – or supply chain partners’ – demand signals change my operations?

The quirky Lakh

One of the more interesting nuances of currency conversion in Myanmar (and more broadly in India) is the concept of the Lakh.

So the “Lakh” is a numerical value of 100,000 but is actually written as 1,00,000 according to the digit grouping convention.

The usage of the Lakh (or Lac) is surprisingly commonplace if you visit any South Asian country which includes Myanmar, India, Nepal, Pakistan, Bangladesh, and Bhutan).  So when discussing large-ish amounts of money, I was initially confounded trying to make conversions in my head when people would mention “10 Lakhs” instead of “1 Million” or “half a Lakh” instead of “50 Thousand”.  To the point that I considered creating a new calculator app or site that convert Lakhs to “metric” values.

But there you go.  Might come in handy the next time you do business in South Asia.

 

Cryptocurrencies

An interesting offshoot of blockchain technologies, and one of the key drivers and catalysts for it’s adoption and popularity – is the crypto currency.   As of writing, the booming crypto market has just had a recent correction but still holding ground. Nothing like the predicted bloodbath, but that’s not to say it one isn’t around the corner.

To quench my curiosity I’ve gone in bought some Ethereum, Ripple, and NEO to spread the portfolio.   I have stayed away from Bitcoin for the time being, as it just feels clunky and over valued – not that there’s any basis for value to be attributed to any crypto currency.   However, I have chosen the three currencies for the following reasons:

  • Ethereum – in my view is primarily a blockchain platform which doubles as a cryptocurrency in order incentive miners to process the chain.   It’s backed a significant consortium of industry heavy weights which lends credence to the platform.
  • Ripple – is unique in that it’s a closed system controlled by Ripple that facilitates transactions between financial institutions.  In many ways it represents the antithesis of blockchain’s purpose of being de-centralised.  However it has the backing of large financial institutions.
  • NEO – is China’s largest open source blockchain initiative.   Given most of the mining operations take place in China, it seems to have a good basis to succeed.  At the same tine, it also poses some potential risk if heavy Chinese government regulation comes into play.

 

The Venture Capitalist

Over the weekend I met with some VC’s from Silicon Valley and Switzerland, which prompted me to take a crash course in the world of venture capitalists and startups.

What is Venture Capital?

There are two types of financing: debt and equity. Debt financing means: I’ll give you this money, if you promise to pay it back to me with interest. Equity financing means: I’ll give you this money in exchange for owning part of your company. Venture capital (VC) is financial capital provided to early-stage, high-potential, companies in exchange for equity in the companies it invests in.

What is the structure of a venture capital firm?

A VC firm is comprised of limited partners (LP’s) and general partners(GP’s). Limited partners (pension funds, educational endowments, foundations, insurance companies, wealthy people) are investors in the venture capital firm’s fund. General partners (ex-CEO’s and founders) are are the ones who run the fund, source deals, make investment decisions, and maintain the portfolio. Fun Fact: 99% of the fund comes from LP’s while 1% comes from the GP’s.

Industry norm is that 20% of deal profit goes to GPs while LPs get the remaining 80%. Additionally, 2% of the fund size goes toward fund expenses, such as paying the salaries of the GPs and any additional staff (associates, analysts, etc). That means, if you have a $100M fund, $2M of that money automatically goes to the GPs who decide how to use it.

What are the different sources of capital?

Angels: A wealthy individual who invests their own money, usually in a business in which they have expertise. These are ex-founders and wealthy people.

Super Angels: An angel who is the lead investor of a group of angels (syndicates).

Micro Seed Funds/Accelerators: Small funds that do a lot of small investments in exchange for a small amount of equity. Accelerators tend to sell themselves as providing additional support such as mentorship, business connections, and a range of professional services (such as help on the legal part of your company). Examples of these are Y-Combinator, Kima Ventures, Techstars, etc.

Venture Capital: Medium funds that invest greater amounts of capital for greater amounts of equity. Examples of these are Andreeseen Horowitz, Sequoia Capital, Google Ventures, etc.

Growth Equity: Big funds that invest huge amounts of money to expand a successful business model. One example is Summit Partners.

What are the different types of rounds?

  1. Seed: Initial funding to build initial product and prove business model
  2. Series A: Build core team and launch core product
  3. Series B: Expand team and expand product portfolio
  4. Series C: Scaling the business model
  5. Series D+: Geographic expansion of business

If you are wondering what round a company is in or are curious about its funding history, take a peek on crunchbase.com.

How does venture capital work?

  1. Entrepreneur gets introduction to multiple VC firms
  2. Entrepreneur pitches business to VC firms
  3. Term sheet written if VCs want to invest
  4. Build business further
  5. VCs repaid through: acquisition, IPO, or bankruptcy