Sunday, January 13, 2019

CLASSIFIED: The most powerful investor you never heard of

Pre IPO Swap New York, NY 1/12/2019

Did you know that the CIA has its own Venture Fund?  And did you know that Venture fund was key in starting Facebook and Google?  As explained in the book Splitting Pennies – the world is not as it seems.

For many readers especially on Zero Hedge this comes as no surprise, as you are well aware of the octopus that wraps its tentacles around the globe.  But it may surprise you how active In-Q-Tel is and how chummy they are with the rest of the VC community.  It’s as if they are just another VC, but with another purpose.  Let’s look at some of the stats, from Crunchbase:



Here’s a list of recent investments…



If you dig back you won’t see Google or Facebook on there – which is company policy for retail consumer investments that can impact the public (it’s kept secret behind an NDA).  Here’s how it works – In-Q-Tel may invest in your startup but there’s a big catch.  First, you have to sign an NDA which is enforced strongly – that you are not to disclose your partner.  Second, you must agree to ‘cooperation’ when it comes to information sharing now or down the road, such as location data on people using Facebook, Google, or other systems – perhaps only to feed it into a big data brain at Palantir.  Or perhaps for more street level surveillance.  The surveillance is known by fact, not conspiracy theory – but by fact – due to the disclosure of classified documents by Edward Snowden.  If it were not for Snowden, we could only guess about this.  The name of the main program is PRISM but there are many others.

For those in the VC community that are deep in the know- the “Deep VCs” like Peter Thiel for example, the Snowden revelations would come as no surprise.  MUST READ – No Place To Hide – the story of the NSA, PRISM, and Snowden (written by Greenwald).

But for others, it may come as a surprise that not only the CIA has its own VC fund, but that it sits on many corporate boards alongside many Wall St. firms and other VCs.

And of course, they always do well.

Let’s consider the doors they opened for Google, or in the case of Google it was more like the doors that were closed.  Google was not the best search engine, it was not superior technology – it wasn’t even really very good.  It just became a monopoly and crushed the competition.  Many wonder how they were able to do it, and that this is part of the Entrepreneur “Magic” that few have.  Well we can say in the case of Google there was no Magic they had a helping hand from a friend in the deep shadows.  Google wanted to become huge – the CIA wants information (they always do, so we don’t use the past tense ‘wanted’).  So it was a cozy and rational partnership – in exchange for making the right handshakes at the right time, allowing Google to become a global behemoth, all they needed to do was share a little information about users.  Actually, a lot of information.  No harm in that, right?

But in doing so Google violated itself as well as prostituted its model and its users.  Google still does this and is not nearly as flagrant as its brother Facebook, however Google shares more detailed ‘meta data’ which is actually more useful to Echelon systems like Palantir that rely on big data, not necessarily photos of what you ate for breakfast (but that can be helpful too, they say).

The metaphor is making a deal with the devil; you get what you want but it comes at a price.  And that’s the price users pay to Google – they get service ‘free’ but at a huge cost, their privacy.  Of course – this is all based on the concept of Freedom which really does exist in USA.  You don’t have to use Google – there are many alternatives like the rising star Duck Duck Go:



But who cares about privacy; only criminals, hackers, programmers, super wealthy (UHNWI) and a few philosophers.

Google remains the dominant search platform and much more.  Google exploits niche by niche even competing with Amazon’s Alexa service.

The argument here is that Google wouldn’t be Google without the help of the CIA.  This isn’t our idea it’s a fact, you can read about it here on qz.com:

Two decades ago, the US intelligence community worked closely with Silicon Valley in an effort to track citizens in cyberspace. And Google is at the heart of that origin story. Some of the research that led to Google’s ambitious creation was funded and coordinated by a research group established by the intelligence community to find ways to track individuals and groups online.  The intelligence community hoped that the nation’s leading computer scientists could take non-classified information and user data, combine it with what would become known as the internet, and begin to create for-profit, commercial enterprises to suit the needs of both the intelligence community and the public. They hoped to direct the supercomputing revolution from the start in order to make sense of what millions of human beings did inside this digital information network. That collaboration has made a comprehensive public-private mass surveillance state possible today.

There you have it – Google is the child of the digital revolution of the surveillance state.  Why spy, when you can collect data electronically and analyze with machine learning?

The new spy is the web bot.

And the investors in Google did well – so that’s the investing story that matters here.  It pays well to have friends in high places, and in dark places.  Of all the investments In-Q-Tel made, almost all of them have done very well.  That doesn’t mean that Palantir is going to grow to the size of Google, but it does provide natural support should a company backed by In-Q-Tel run into problems.

By the time Facebook came out, digital surveillance was already in the n-th generation of evolution, and they really stepped up their game.  In the creepiest examples, Facebook doesn’t necessarily (and primarily) collect data on Facebook users – it does this too.  But that’s just a given – you don’t need to perform surveillance on someone who gives all their data to the system willingly – you always know where they are and what they are doing at any given moment.  The trick is to get information about those who may try to hide their activities, whether they are real terrorists or just paranoid geniuses.

How does Facebook do this?  There are literally hundreds of programs running – but in one creepy example, Facebook collects photos that users take to analyze the environment surrounding.  Incidentally, the location data is MUCH MORE accurate than you see on the retail front end.  So you get the newspaper and see a gift in your mailbox for your birthday – you take a photo because the ribbons are hanging out.  What shows up in the background?  All kinds of information.  What the neighbor is doing.  License plate of the car driving by.   Trash waiting to be picked up by the street.  A child’s toy left by the sidewalk.  You get the picture.  Facebook users have been turned into sneaky little digital spies!  While they are walking around with their ‘smartphones’ (should be called ‘dumbphones’) scrolling their walls and snapping photos away – they are taking photos of you too.  That means, Facebook collects data for the CIA about users who don’t have Facebook accounts.  This is the huge secret that the mainstream media doesn’t want to tell you.  Deleting your Facebook account will do nothing – every time you go out in public you are being photographed, video recorded, and more – all going into big data artificial intelligence for analysis.

But here’s the best part.  You own it!  The CIA may have a bad reputation but it is part of the US Government, and thus – profits go back to the Treasury (those which are declared) or at least they are supposed to.  Considering this, why is there a stigma about even talking about In-Q-Tel when in fact we should be more involved in any US Government operation when it is technically owned by the people and funded by taxpayers?  Meaning, do taxpayers have rights to know what goes in in taxpayer funded entities, like In-Q-Tel?  The big difference between In-Q-Tel and the CIA is that In-Q-Tel functions just like any other VC – they disclose most of their investments, they attend conferences, they accept business plans.  You can literally submit your idea to In-Q-Tel and get funding.  Of course, like any VC there’s a very small chance of being funded.

So what’s an investor’s take on this story?  In-Q-Tel is not Freddie Mac there is nor a quasi-government entity; it’s not an NGO and there is no implicit guarantee that In-Q-Tel’s deals will do any better than Andreessen Horowitz.

However, their deals do very well.  Companies they fund not only have the backing of the CIA explicitly, it’s not only about business – it’s about national security!  Under that guise, it’s no wonder that companies like Google and Facebook rocket to the top.

We are not suggesting that investors double down on In-Q-Tel bets.  We are only suggesting that at a minimum, we follow what they do.  It’s a data point – a good source of information.  And the best part is that it’s public.

Their most recent investment is in a virtual reality company in Boca Raton, FL called Immersive Wisdom:



Immersive Wisdom® is an enterprise software platform that allows users to collaborate in real-time upon diverse data sets and applications within a temporal and geospatially-aware Virtual, Mixed, and Augmented Reality space. Immersive Wisdom is hardware-agnostic and runs on VR, AR, as well as 2D displays.  Regardless of geographic location, multiple users can be together in a shared virtual workspace, standing on maps, with instant access to relevant information from any available source. Users can simultaneously, and in real time, visualize, fuse, and act upon sensor inputs, cyber/network data, IoT feeds, enterprise applications, telemetry, tagged assets, 3D Models, LiDAR, imagery and UAV footage/streaming video, providing an omniscient, collaborative view of complex environments.  Immersive Wisdom also acts as a natural human interface to multi-dimensional data sets generated by AI and machine learning systems. The platform includes a powerful SDK (Software Developer Kit) that enables the creation of customer-specific workflows as well as rapid integration with existing data sources/applications.

Cool stuff for sure – but it’s in early stages.  Pre IPO Swap suggests real Pre IPO ‘unicorns’ not because of size, but because of the right mix of risk and reward.  https://preiposwap.com/pitch See why we think so in our pitch.

In any analysis, it’s worth watching In-Q-Tel, which is a top source of funding and investment data we watch on www.preiposwap.com  Pre IPO Swap.

To get real-time updates on companies like this, companies that In-Q-Tel invests in - www.preiposwap.com/follow   follow our blog free.

Monday, January 7, 2019

Renaissance, Bridgewater And DE Shaw All Generated Remarkable Returns In 2018

In what was an abysmal year for most hedge funds, three investing icons successfully pulled their weight and generated outsized returns amid an otherwise dreary landscape.
Last week we reported that after correctly predicting the "significant risk of a correction", quant giant Renaissancemade an impressive 8.5% return in 2018 despite a 2.1% drop in December, solidly outperforming the broader market.
It wasn't just the secretive fund founded by chain-smoking codebreaker Jim Simons that blew past its competition last year. On Sunday, Bloomberg reported that Bridgewater's flagship Pure Alpha fund rose a remarkable 14.6%. This was no small feat for Bridgewater which also happens to be the world's biggest hedge fund with $160 billion in unlevered assets, and came at a time when hedge unds on average lost 6.7%  in 2018, according to the HFRX Global Hedge Fund Index, as market trend and momentum both collapsed.
A just as impressive record is that since its inception in 1991, Pure Alpha Strategy has generated an average annualized return of 12% after fees, a track record which some have wondered if it is too good to be true.
And yet in a bizarre twist at the start of 2018, Bridgewater's Ray Dalio said on January 23 that "If you're holding cash, you're going to feel pretty stupid." Ironically, cash ended up being the best performing assets, while virtually every other asset class posted negative returns in 2018, making those holding anything but cash feeling pretty stupid. Which means that at some point between January and December, Ray Dalio quietly moved out of most assets although "surprisingly" he never made that shift public.
In any case it wasn't just Simons and Dalio: according to a Monday note from Bloomberg, the flagship fund of another computer scientist, David Shaw's, D.E. Shaw, also generated double-digit returns, gaining 11.2% last year.
The New York-based investment firm’s Composite fund invests across multiple strategies and is the company’s largest and longest-running. It returned 3.5 percent last month, the person said, as the S&P 500 Index sunk 9.2 percent.
And in yet another indication that Madoff was an amateur, DE Shaw's composite fund, which has about $14 billion in assets, amazingly hasn’t had a losing year over the past decade. In 2017, it gained 10.3%, the Bloomberg source said.
D.E. Shaw was founded by computer scientist David Shaw and has more than $50 billion in assets under management, including $28 billion in hedge funds. Its Composite fund has largely been closed to new investors since mid-2013, but the group continues to build out new strategies and products. Recent areas of development have included private credit opportunities in Europe and renewables investing.
Some trivia: when DE Shaw was just two years old, a largely unknown 26-year-old took a job at D.E. Shaw and became one of the company's vice presidents in just four years; he was tasked with researching new business opportunities on the rapidly growing Internet, which was held tremendous potential in the early 1990s. That youngest made a list of 20 products he could sell online, and decided that books were the most viable option. When he couldn't get D.E. Shaw on board with the idea, he decided to branch out on his own.
A little under three decades later, that "relatively unknown" person is now the world's richest person.

Saturday, January 5, 2019

The PayPal Mafia: Who are they and where are Silicon Valley’s richest group of men now?

The company founded by Peter Thiel, Elon Musk and Max Levchin has spawned three billionaires, many, many millionaires and generation-defining companies. Here, we break down the key players from the most notorious group in Silicon Valley.

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The picture above features some of the most poorly dressed men of the 2000s. Behold the outsized sportswear, the leather blazers, the silky shirts. But these men can afford to both laugh off our criticism and buy several new wardrobes. For they are the ‘PayPal Mafia’ and between them, these 13 men are worth billions and billions of dollars. And to be fair to them, they were styled as faux gangsters for the 2007 Fortune magazine shoot that birthed their infamous moniker. Mick Brown recently met PayPal co-founder Peter Thiel for an extraordinary Telegraph Magazine feature. The vast success enjoyed by Thiel and his former colleagues got us thinking: how did one company breed such a remarkable crop of entrepreneurs and capitalists? Click on the famous Fortune photograph below and discover exactly who the PayPal Mafia are.
The 'PalPal Mafia' photographed for a Fortune magazine feature in 2007. PHOTO: Robyn Twomey - Corbis Outline
1. Jawed Karim
Role in PayPal: Designed and implemented PayPal’s incendiary real-time anti-fraud system, among other key components of the business.
After PayPal: Karim, Chad Hurley (designer of PayPal’s first logo) and Steve Chen (another PayPal colleague and early Facebook employee) founded a video sharing site in 2005. They named it YouTube. Soon after developing the fledgling site, Karim enrolled at Stanford University where, despite having already displayed a certain acumen in this area, he chose to study computer science. He continued to act as an advisor to YouTube before cashing in 137,443 shares of stock (worth a cool $64 million) when Google purchased YouTube for $1.65 billion in November 2006. Now 35, Karim launched a business called Youniversity Ventures in 2008 aimed at helping students and graduates develop business ideas with early PayPal investors Kevin Hartz and Keith Rabols.
Estimated net worth: $140 million
2. Jeremy Stoppelman (below)
Role in PayPal: Joined PayPal as an engineer whilst it was known as X.com, eventually becoming the Vice President of Engineering.
Post-PayPal: Resigned soon after PayPal was picked up by eBay for $1.5 billion in 2003, taking a year to attend Harvard Business School. Inspired whilst poorly with flu and finding it tricky to find decent doctor recommendations, he and a former colleague Russel Simmons dreamed up the idea for online reviews site Yelp in 2004 and convinced former PayPal Chief Technology Officer Max Levchin to put up $1 million in initial funding. Steve Jobs convinced him to reject Google’s acquisition offer in 2010 and in 2012, Yelp became a public limited company. But it’s not been a smooth recent few years: Yelp reviewers leaving negative reviews have faced legal action from affronted businesses and the site’s faced accusations of handing positive reviews to advertisers.
Estimated net worth: $111-$222 million
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PHOTO: Getty
3. Andrew McCormack
Role in PayPal: Joined in 2001, working closely as an assistant to Peter Thiel as the company prepared for its initial public offering (IPO)
After PayPal: Helped set-up another Thiel venture, hedge fund company Clarium Capital before founding a restaurant group in San Francisco. Currently a partner at venture capital firm Valar Ventures, he found his way back to Thiel in 2008 to join Thiel Capital via corporate development roles at eCount (now part of US banking conglomerate Citigroup) and Yahoo!.
Estimated net worth: Unknown
4. Premal Shah
Role in PayPal: Spent six years at the company as a product manager.
After PayPal: Became President of non-profit organisation Kiva, which allows people to lend money to struggling entrepreneurs and students in over 70 countries via the internet. Founded by former programmer Matt Flannery and his businesswoman ex-wife Jessica Jackeley, the site was raising around $1 million every three days by November 2013.
Estimated net worth: Unknown
5. Luke Nosek
Role in PayPal: One of the co-founders, alongside Thiel, Elon Musk and Ken Howery and his friend from the University of Illinois, Max Levchin and Vice President of Marketing and Strategy.
After PayPal: Departed after the eBay takeover and travelled the world, before founding San Francisco venture capital firm Founders Firm (slogan: ‘We wanted flying cars, we got 140 characters’) with Thiel and Howery in 2005. Has spoken extensively about the benefits of brain training through meditation.
Estimated net worth: Unknown
6. Ken Howery
Role in PayPal: A co-founder and Chief Financial Officer between 1998-2002.
After PayPal: Hung around as eBay’s Director of Corporate Development for just under a year after the takeover, before rejoining Thiel as vice president of private equity at Clarium Capital in 2004. Started Founders Fund less than 12 months later with Thiel and Nosek. In 2012, he co-founded Popexpert, an online learning platform that allows users to connect face-to-face with experts across a broad range of fields. Howery’s available for consulting sessions if you have a spare few $100,000.
Estimated net worth: Unknown
55382205_3044414cPHOTO: Getty
7. David Sacks (above)
Role in PayPal: Joining from management consultancy firm McKinsey & Company, Sacks became PayPal’s chief operating officer.
After PayPal: Sacks boasts one of the Mafia’s more diverse post-PayPal CVs. After eBay assumed control, he left for Hollywood and produced and financed the Golden Globe nominated 2005 movie Thank You for Smoking. The next year, he founded genealogy website Geni.com. Frustrations with inter-office communication led him to develop a productivity tool to help employees share information. This was to become the social network Yammer. Mircosoft acquired the company for $1.2 billion in July 2012. Sacks was named corporate vice president in Microsoft’s Office Division. He hit the headlines in 2012 after throwing himself history’s most gauche 40th birthday party. The theme? ‘Let them eat cake’ French revolution. The entertainment? Snoop Dogg. The cost? A reported $1.4 million.
Estimated net worth: Unknown
8. Peter Thiel
Role in Paypal: Co-founder and CEO.
After PayPal: After earning $55 million from his 3.7 per cent stake in the eBay deal, Thiel immediately founded hedge fund Clarium Capital, a global macro hedge fund and made the ludicrously savvy decision to angel invest $500,000 in fledgling social network Facebook. Thiel was the first outside investor in the company and sold almost has made over $1 billion selling his shares. You can read Mick Brown’s in-depth profile on Thiel right here.
Estimated net worth: $2.2 billion
9. Keith Rabois
Role in PayPal: Held the nicely extravagant title of Executive Vice President, Business Development, Public Affairs and Policy between November 2000 and November 2002.
After PayPal: Regarded as a very useful person to have around at a start-up, Rabois went onto hold senior positions at LinkedIn (more on that in a minute), Max Levchin’s Slide (a company responsible for slideshows and animations in social networks) and electronic payment firm Square (founded by Twitter’s Jack Dorsey). Controversy accompanied his exit from Square, with a threat of a lawsuit over sexual harassment claims by a male employee who allegedly obtained a job at the company after beginning a relationship with Rabois. Which makes Gawker’s accusations of Rabois’ undergraduate homophobia all the more disturbing. Rabois is now a partner at venture capital outfit Khosla Ventures and serves on the board of directors at Yelp and Xoom.
Estimated net worth: $1 billion
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PHOTO: Getty
10. Reid Hoffman
Role in PayPal: Joined from the world’s first (failed) social network SocialNet to become a member of the board of directors, then went full-time to become PayPal’s COO. By the time of the 2002 eBay takeover, he was executive vice president.
After PayPal: ‘The most connected man in Silicon Valley’ co-founded inbox bothering business social network LinkedIn in December 2002, owning a stake now worth an estimated $2.39 billion with its IPO in May 2011. The eldest of the Mafia is also lauded for his clever/lucky angel investing. He’s made upwards of 80 angel investments (including Facebook, Zynga, Flickr, Digg and Last.fm) and in 2010 joined Greylock Partners, running their $20 million Discovery Fund; designed to seed fundings of worthy start-ups.
Estimated net worth: $3.9 billion
11. Max Levchin
Role in PayPal: A co-founder and the firm’s chief technology officer, well regarded for his contributions to PayPal’s anti-fraud efforts.
After PayPal: Took his $34 million from the PayPal sale and founded Slide. Google picked it up for $182 million in August 2010, with Levchin becoming Google’s Vice President of Engineering on 25 August. A year and a day later, Google closed Slide and Levchin departed. Between Slide’s rise and fall, he helped start Yelp in 2004 (and is the company’s largest shareholder), was appointed to the board of directors of Evernote and and co-founded financial services company Affirm. In recent years, he’s started a company called HVF (standing for, enjoyably, ‘Hard, Valuable, and Fun’), a firm designed to fund projects looking to leverage data and joined Yahoo!’s Board of Directors. He’s keeping himself busy.
Estimated net worth: $300 million
12. Roelof Botha
Role in PayPal: A qualified actuary, South African Botha negotiated PayPal’s sale as its Chief Financial Officer. He had joined the company prior to his graduation from the Stanford School of Business, becoming director of corporate development.
After PayPal: A regular on the Forbes Midas List of top tech investors, Both joined venture capital giant Sequoia Capital in January 2003 as a partner, where’s he’s stayed ever since. His extra curricular business pursuits include sitting on the boards of 13 companies, including Jawbone, Evernote, Tumblr and Xoom. He was also on YouTube’s board before the company was acquired by Google.
Estimated net worth: Unknown.
13 Russel Simmons
Role at PayPal: The firm’s Lead Software Architect.
After PayPal: Co-founded Yelp with Jeremy Stoppelman and served as its CTO until he ‘transitioned’ into an advisory role in June 2010 to take some ‘much needed time off to travel’. Fresh from his high end gap year, Simmons launched Learnirvana in 2012, a web tutor program that helps users learn languages.
Estimated net worth: Very difficult to discover. It’s very easy to tell you that near-namesake and hip-hop mogul Russell Simmons is worth around $340 million, however.
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PHOTO: Art Streiber/August Image
Not in the picture, but absolutely worth profiling:
Elon Musk (above)
Role at PayPal: PayPal had merged with Musk’s financial services and email payment firm X.com in 1999 and Musk became the new company’s largest shareholder by the time of its sale to eBay. He earned $165 million from the deal.
After PayPal: Strap yourselves in. Musk launched Space Exploration Technologies (SpaceX) in June 2002, where he serves as the CEO and CTO. In May 2012, their Dragon spacecraft ensured SpaceX became the first commercial vehicle to launch and dock a vehicle to the International Space Station. He assumed leadership of electric car firm Tesla Motors in 2008 and in 2013 unveiled a proposal for a new form of transportation between the Greater Los Angeles area and the Bay Area in San Francisco. His ‘Hyperloop’ is a subsonic air travel machine completely reliant on solar energy.
Estimated net worth: $9.7 billion