If asked, run.

An entrepreneur asked me about her pitch deck. A Platform as a Service (PaaS).

She told me she hadn't done her 5-year forecasts but would soon.

I said, Don't bother. I added "time-wasting."

“I've been asked”, she said.

“Who asked?”

“a VC”

“5-year forecast?”

“Yes”

“Get another VC. If he asks, it's because he doesn't understand your solution or to waste your time.”

Some VCs are lagging. They're still using steam engines.

10-years ago, 5-year forecasts were requested.

Since then, we've adopted a 3-year plan.

But It's outdated.

Max one year.

What has happened?

Revolutionary technology. NO-CODE.

Revolution's consequences?

Product viability tests are shorter. Hugely. SaaS and PaaS.

Let me explain:

• Building a minimum viable product (MVP) that works only takes a few months.

• 1 to 2 months for practical testing.

• Your company plan can be validated or rejected in 4 months as a consequence.

After validation, you can ask for VC money. Even while a prototype can generate revenue, you may not require any.

Good VCs won't ask for a 3-year business plan in that instance.

One-year, though.

If you want, establish a three-year plan, but realize that the second year will be different.

You may have changed your business model by then.

A VC isn't interested in a three-year business plan because your solution may change.

Your ability to create revenue will be key.

• But also, to pivot.

• They will be interested in your value proposition.

• They will want to know what differentiates you from other competitors and why people will buy your product over another.

• What will interest them is your resilience, your ability to bounce back.

• Not to mention your mindset. The fact that you won’t get discouraged at the slightest setback.

• The grit you have when facing adversity, as challenges will surely mark your journey.

• The authenticity of your approach. They’ll want to know that you’re not just in it for the money, let alone to show off.

• The fact that you put your guts into it and that you are passionate about it. Because entrepreneurship is a leap of faith, a leap into the void.

• They’ll want to make sure you are prepared for it because it’s not going to be a walk in the park.

• They’ll want to know your background and why you got into it.

• They’ll also want to know your family history.

• And what you’re like in real life.

So a 5-year plan…. You can bet they won’t give a damn. Like their first pair of shoes.

I recently wrote about getting VCs excited about Marketplace start-ups. SaaS founders became envious!

Understanding how people wire tens of millions is the only Series A hack I recommend.

Few people understand the intellectual process behind investing.

VC is risk management.

Series A-focused VCs must cover two risks.

1. Market risk

You need a large market to cross a threshold beyond which you can build defensibilities. Series A VCs underwrite market risk.

They must see you have reached product-market fit (PMF) in a large total addressable market (TAM).

2. Execution risk

When evaluating your growth engine's blitzscaling ability, execution risk arises.

When investors remove operational uncertainty, they profit.

Series A VCs like businesses with derisked revenue streams. Don't raise unless you have a predictable model, pipeline, and growth.

Please beat these 3 metrics before Series A:

Achieve $1.5m ARR in 12-24 months (Market risk)

Above 100% Net Dollar Retention. (Market danger)

Lead Velocity Rate supporting $10m ARR in 2–4 years (Execution risk)

Hit the 3 and you'll raise $10M in 4 months. Discussing 2/3 may take 6–7 months.

If none, don't bother raising and focus on becoming a capital-efficient business (Topics for other posts).

Let's examine these 3 metrics for the brave ones.

1. Lead Velocity Rate supporting €$10m ARR in 2 to 4 years

Last because it's the least discussed. LVR is the most reliable data when evaluating a growth engine, in my opinion.

SaaS allows you to see the future.

Monthly Sales and Sales Pipelines, two predictive KPIs, have poor data quality. Both are lagging indicators, and minor changes can cause huge modeling differences.

Analysts and Associates will trash your forecasts if they're based only on Monthly Sales and Sales Pipeline.

LVR, defined as month-over-month growth in qualified leads, is rock-solid. There's no lag. You can See The Future if you use Qualified Leads and a consistent formula and process to qualify them.

With this metric in your hand, scaling your company turns into an execution play on which VCs are able to perform calculations risk.

2. Above-100% Net Dollar Retention.

Net Dollar Retention is a better-known SaaS health metric than LVR.

Net Dollar Retention measures a SaaS company's ability to retain and upsell customers. Ask what $1 of net new customer spend will be worth in years n+1, n+2, etc.

Depending on the business model, SaaS businesses can increase their share of customers' wallets by increasing users, selling them more products in SaaS-enabled marketplaces, other add-ons, and renewing them at higher price tiers.

If a SaaS company's annualized Net Dollar Retention is less than 75%, there's a problem with the business.

Slack's ARR chart (below) shows how powerful Net Retention is. Layer chart shows how existing customer revenue grows. Slack's S1 shows 171% Net Dollar Retention for 2017–2019.

Slack S-1

3. $1.5m ARR in the last 12-24 months.

According to Point 9, $0.5m-4m in ARR is needed to raise a $5–12m Series A round.

Target at least what you raised in Pre-Seed/Seed. If you've raised $1.5m since launch, don't raise before $1.5m ARR.

Capital efficiency has returned since Covid19. After raising $2m since inception, it's harder to raise $1m in ARR.

P9's 2016-2021 SaaS Funding Napkin

In summary, less than 1% of companies VCs meet get funded. These metrics can help you win.

If there’s demand for it, I’ll do one on direct-to-consumer.

Cheers!

Weekend project: limitless design service. It was fun to see whether I could start a business quickly.

I use no-code apps to save time and resources.

TL;DR I started a business utilizing EditorX for my website, Notion for client project management, and a few favors to finish my portfolio.

First step: research (Day 1)

I got this concept from a Kimp Instagram ad. The Minimalist Hustler Daily newsletter mentioned a similar and cheaper service (Graphically).

I Googled other unlimited design companies. Many provide different costs and services. Some supplied solely graphic design, web development, or copywriting.

Step 2: Brainstorming (Day 1)

I did something simple.

• What benefits and services to provide

• Price to charge

Since it's a one-person performance (for now), I'm focusing on graphic design. I can charge less.

So I don't overwhelm myself and can accommodate budget-conscious clientele.

Step 3: Construction (Day 1 & 2)

This project includes a management tool, a website, and a team procedure.

I built a project management tool and flow first. Once I had the flow and a Notion board, I tested it with design volunteers. They fake-designed while I built the website.

Tool for Project Management

I modified a Notion template. My goal is to keep clients and designers happy.

Team Approach

My sister, my partner, and I kept this business lean. I tweaked the Notion board to make the process smooth. By the end of Sunday, I’d say it’s perfect!

Website

I created the website after they finished the fake design demands. EditorX's drag-and-drop builder attracted me. I didn't need to learn code, and there are templates.

I used a template wireframe.

This project's hardest aspect is developing the site. It's my first time using EditorX and I'm no developer.

People answer all your inquiries in a large community forum.

As a first-time user developing a site in two days, I think I performed OK. Here's the site for feedback.

4th step: testing (Day 2)

Testing is frustrating because it works or doesn't. My testing day was split in two.

• testing the workflow from payment to onboarding to the website

• the demand being tested

It's working so far. If someone gets the trial, they can request design work.

I've gotten a couple of inquiries about demand. I’ll be working with them as a start.

Completion

Finally! I built my side project in one weekend. It's too early to tell if this is successful. I liked that I didn't squander months of resources testing out an idea.

Overview

Ethereum blockchain is a network of nodes that validate transactions. Any network node can be queried for blockchain data for free. To write data as a transition requires processing and writing to each network node's storage. Fee is paid in ether and is also called as gas.

We'll examine how user-initiated transactions flow across the network and into the blockchain.

Flow of transactions

• A user wishes to move some ether from one external account to another. He utilizes a cryptocurrency wallet for this (like Metamask), which is a browser extension.

• The user enters the desired transfer amount and the external account's address. He has the option to choose the transaction cost he is ready to pay.

• Wallet makes use of this data, signs it with the user's private key, and writes it to an Ethereum node. Services such as Infura offer APIs that enable writing data to nodes. One of these services is used by Metamask. An example transaction is shown below. Notice the “to” address and value fields.

var rawTxn = {
    nonce: web3.toHex(txnCount),
    gasPrice: web3.toHex(100000000000),
    gasLimit: web3.toHex(140000),
    to: '0x633296baebc20f33ac2e1c1b105d7cd1f6a0718b',
    value: web3.toHex(0),
    data: '0xcc9ab24952616d6100000000000000000000000000000000000000000000000000000000'
};

• The transaction is written to the target Ethereum node's local TRANSACTION POOL. It informed surrounding nodes of the new transaction, and those nodes reciprocated. Eventually, this transaction is received by and written to each node's local TRANSACTION pool.

• The miner who finds the following block first adds pending transactions (with a higher gas cost) from the nearby TRANSACTION POOL to the block.

• The transactions written to the new block are verified by other network nodes.

• A block is added to the main blockchain after there is consensus and it is determined to be genuine. The local blockchain is updated with the new node by additional nodes as well.

• Block mining begins again next.

The image above shows how transactions go via the network and what's needed to submit them to the main block chain.

References

ethereum.org/transactions How Ethereum transactions function, their data structure, and how to send them via app. ethereum.org

Microsoft co-founder Bill Gates assesses digital assets while the bull is caged.

Bill Gates is well-respected.

Reasonably. He co-founded and led Microsoft during its 1980s and 1990s revolution.

After leaving Microsoft, Bill Gates pursued other interests. He and his wife founded one of the world's largest philanthropic organizations, Bill & Melinda Gates Foundation. He also supports immunizations, population control, and other global health programs.

When Gates criticized Bitcoin, cryptocurrencies, and NFTs, it made news.

Bill Gates said at the 58th Munich Security Conference...

“You have an asset class that’s 100% based on some sort of greater fool theory that somebody’s going to pay more for it than I do.”

Gates means digital assets. Like many bitcoin critics, he says digital coins and tokens are speculative.

And he's not alone. Financial experts have dubbed Bitcoin and other digital assets a "bubble" for a decade.

Gates also made fun of Bored Ape Yacht Club and NFTs, saying, "Obviously pricey digital photographs of monkeys will help the world."

Why does Bill Gates dislike digital assets?

According to Gates' latest comments, Bitcoin, cryptos, and NFTs aren't good ways to hold value.

Bill Gates is a better investor than Elon Musk.

“I’m used to asset classes, like a farm where they have output, or like a company where they make products,” Gates said.

The Guardian claimed in April 2021 that Bill and Melinda Gates owned the most U.S. farms. Over 242,000 acres of farmland.

The Gates couple has enough farmland to cover Hong Kong.

Bill Gates is a classic investor. He wants companies with an excellent track record, strong fundamentals, and good management. Or tangible assets like land and property.

Gates prefers the "old economy" over the "new economy"

Gates' criticism of Bitcoin and cryptocurrency ventures isn't surprising. These digital assets lack all of Gates's investing criteria.

Volatile digital assets include Bitcoin. Their costs might change dramatically in a day. Volatility scares risk-averse investors like Gates.

Gates has a stake in the old financial system. As Microsoft's co-founder, Gates helped develop a dominant tech company.

Because of his business, he's one of the world's richest men.

Bill Gates is invested in protecting the current paradigm.

He won't invest in anything that could destroy the global economy.

When Gates criticizes Bitcoin, cryptocurrencies, and NFTs, he's suggesting they're a hoax. These soapbox speeches are one way he protects his interests.

Digital assets aren't a bad investment, though. Many think they're the future.

Changpeng Zhao and Brian Armstrong are two digital asset billionaires. Two crypto exchange CEOs. Binance/Coinbase.

Digital asset revolution won't end soon.

If you disagree with Bill Gates and plan to invest in Bitcoin, cryptocurrencies, or NFTs, do your own research and understand the risks.

But don’t take Bill Gates’ word for it.

He’s just an old rich guy with a lot of farmland.

He has a lot to lose if Bitcoin and other digital assets gain global popularity.

This post is a summary. Read the full article here.

More retail traders means faster, more sophisticated, and more successful methods.

Tech specifications

Only requires a laptop and an internet connection.

We'll use OpenBB's research platform for data/analysis.

Pricing and execution on Options-Quant

Background

You don't need to know the arithmetic details to use this method.

Black-Scholes is a popular option pricing model. It's best for pricing European options. European options are only exercisable at expiration, unlike American options. American options are always exercisable.

American options carry a premium to cover for the risk of early exercise. The Black-Scholes model doesn't account for this premium, hence it can't price genuine, traded American options.

Barone-Adesi-Whaley (BAW) model. BAW modifies Black-Scholes. It accounts for exercise risk premium and stock dividends. It adds the option's early exercise value to the Black-Scholes value.

The trader need not know the formulaic derivations of this model.

https://ir.nctu.edu.tw/bitstream/11536/14182/1/000264318900005.pdf

Strategy

This strategy targets implied volatility. First, we'll locate liquid options that expire within 30 days and have minimal implied volatility.

After selecting the option that meets the requirements, we price it to get the BAW implied volatility (we choose BAW because it's a more accurate Black-Scholes model). If estimated implied volatility is larger than market volatility, we'll capture the spread.

(Calculated IV — Market IV) = (Profit)

Some approaches to target implied volatility are pricey and inaccessible to individual investors. The best and most cost-effective alternative is to acquire a straddle and delta hedge. This may sound terrifying and pricey, but as shown below, it's much less so.

The Trade

First, we want to find our ideal option, so we use OpenBB terminal to screen for options that:

• Have an IV at least 5% lower than the 20-day historical IV

• Are no more than 5% out-of-the-money

• Expire in less than 30 days

We query:

stocks/options/screen/set low_IV/scr --export Output.csv

This uses the screener function to screen for options that satisfy the above criteria, which we specify in the low IV preset (more on custom presets here). It then saves the matching results to a csv(Excel) file for viewing and analysis.

Stick to liquid names like SPY, AAPL, and QQQ since getting out of a position is just as crucial as getting in. Smaller, illiquid names have higher inefficiencies, which could restrict total profits.

We calculate IV using the BAWbisection model (the bisection is a method of calculating IV, more can be found here.) We price the IV first.

According to the BAW model, implied volatility at this level should be priced at 26.90%. When re-pricing the put, IV is 24.34%, up 3%.

Now it's evident. We must purchase the straddle (long the call and long the put) assuming the computed implied volatility is more appropriate and efficient than the market's. We just want to speculate on volatility, not price fluctuations, thus we delta hedge.

The Fun Starts

We buy both options for $7.65. (x100 multiplier). Initial delta is 2. For every dollar the stock price swings up or down, our position value moves $2.

We want delta to be 0 to avoid price vulnerability. A delta of 0 suggests our position's value won't change from underlying price changes. Being delta-hedged allows us to profit/lose from implied volatility. Shorting 2 shares makes us delta-neutral.

That's delta hedging. (Share price * shares traded) = $330.7 to become delta-neutral. You may have noted that delta is not truly 0.00. This is common since delta-hedging means getting as near to 0 as feasible, since it is rare for deltas to align at 0.00.

Now we're vulnerable to changes in Vega (and Gamma, but given we're dynamically hedging, it's not a big risk), or implied volatility. We wanted to gamble that the position's IV would climb by at least 2%, so we'll maintain it delta-hedged and watch IV.

Because the underlying moves continually, the option's delta moves continuously. A trader can short/long 5 AAPL shares at most. Paper trading lets you practice delta-hedging. Being quick-footed will help with this tactic.

Profit-Closing

As expected, implied volatility rose. By 10 minutes before market closure, the call's implied vol rose to 27% and the put's to 24%. This allowed us to sell the call for $4.95 and the put for $4.35, creating a profit of $165.

You may pull historical data to see how this trade performed. Note the implied volatility and pricing in the final options chain for August 5, 2022 (the position date).

Final Thoughts

Congratulations, that was a doozy. To reiterate, we identified tickers prone to increased implied volatility by screening OpenBB's low IV setting. We double-checked the IV by plugging the price into Options-BAW Quant's model. When volatility was off, we bought a straddle and delta-hedged it. Finally, implied volatility returned to a normal level, and we profited on the spread.

The retail trading space is very quickly catching up to that of institutions.  Commissions and fees used to kill this method, but now they cost less than $5. Watching momentum, technical analysis, and now quantitative strategies evolve is intriguing.

I'm not linked with these sites and receive no financial benefit from my writing.

Tell me how your experience goes and how I helped; I love success tales.