Donor-Advised Fund Tax Benefits (DAF)
Giving through a donor-advised fund can be tax-efficient. Using a donor-advised fund can reduce your tax liability while increasing your charitable impact.
Grow Your Donations Tax-Free.
Your DAF's charitable dollars can be invested before being distributed. Your DAF balance can grow with the market. This increases grantmaking funds. The assets of the DAF belong to the charitable sponsor, so you will not be taxed on any growth.
Avoid a Windfall Tax Year.
DAFs can help reduce tax burdens after a windfall like an inheritance, business sale, or strong market returns. Contributions to your DAF are immediately tax deductible, lowering your taxable income. With DAFs, you can effectively pre-fund years of giving with assets from a single high-income event.
Make a contribution to reduce or eliminate capital gains.
One of the most common ways to fund a DAF is by gifting publicly traded securities. Securities held for more than a year can be donated at fair market value and are not subject to capital gains tax. If a donor liquidates assets and then donates the proceeds to their DAF, capital gains tax reduces the amount available for philanthropy. Gifts of appreciated securities, mutual funds, real estate, and other assets are immediately tax deductible up to 30% of Adjusted gross income (AGI), with a five-year carry-forward for gifts that exceed AGI limits.
Using Appreciated Stock as a Gift
Donating appreciated stock directly to a DAF rather than liquidating it and donating the proceeds reduces philanthropists' tax liability by eliminating capital gains tax and lowering marginal income tax.
In the example below, a donor has $100,000 in long-term appreciated stock with a cost basis of $10,000:
Using a DAF would allow this donor to give more to charity while paying less taxes. This strategy often allows donors to give more than 20% more to their favorite causes.
For illustration purposes, this hypothetical example assumes a 35% income tax rate. All realized gains are subject to the federal long-term capital gains tax of 20% and the 3.8% Medicare surtax. No other state taxes are considered.
The information provided here is general and educational in nature. It is not intended to be, nor should it be construed as, legal or tax advice. NPT does not provide legal or tax advice. Furthermore, the content provided here is related to taxation at the federal level only. NPT strongly encourages you to consult with your tax advisor or attorney before making charitable contributions.
More on Economics & Investing
Tanya Aggarwal
3 years ago
What I learned from my experience as a recent graduate working in venture capital
Every week I meet many people interested in VC. Many of them ask me what it's like to be a junior analyst in VC or what I've learned so far.
Looking back, I've learned many things as a junior VC, having gone through an almost-euphoric peak bull market, failed tech IPOs of 2019 including WeWorks' catastrophic fall, and the beginnings of a bearish market.
1. Network, network, network!
VCs spend 80% of their time networking. Junior VCs source deals or manage portfolios. You spend your time bringing startups to your fund or helping existing portfolio companies grow. Knowing stakeholders (corporations, star talent, investors) in your particular areas of investment helps you develop your portfolio.
Networking was one of my strengths. When I first started in the industry, I'd go to startup events and meet 50 people a month. Over time, I realized these relationships were shallow and I was only getting business cards. So I stopped seeing networking as a transaction. VC is a long-term game, so you should work with people you like. Now I know who I click with and can build deeper relationships with them. My network is smaller but more valuable than before.
2. The Most Important Metric Is Founder
People often ask how we pick investments. Why some companies can raise money and others can't is a mystery. The founder is the most important metric for VCs. When a company is young, the product, environment, and team all change, but the founder remains constant. VCs bet on the founder, not the company.
How do we decide which founders are best after 2-3 calls? When looking at a founder's profile, ask why this person can solve this problem. The founders' track record will tell. If the founder is a serial entrepreneur, you know he/she possesses the entrepreneur DNA and will likely succeed again. If it's his/her first startup, focus on industry knowledge to deliver the best solution.
3. A company's fate can be determined by macrotrends.
Macro trends are crucial. A company can have the perfect product, founder, and team, but if it's solving the wrong problem, it won't succeed. I've also seen average companies ride the wave to success. When you're on the right side of a trend, there's so much demand that more companies can get a piece of the pie.
In COVID-19, macro trends made or broke a company. Ed-tech and health-tech companies gained unicorn status and raised funding at inflated valuations due to sudden demand. With the easing of pandemic restrictions and the start of a bear market, many of these companies' valuations are in question.
4. Look for methods to ACTUALLY add value.
You only need to go on VC twitter (read: @vcstartterkit and @vcbrags) for 5 minutes or look at fin-meme accounts on Instagram to see how much VCs claim to add value but how little they actually do. VC is a long-term game, though. Long-term, founders won't work with you if you don't add value.
How can we add value when we're young and have no network? Leaning on my strengths helped me. Instead of viewing my age and limited experience as a disadvantage, I realized that I brought a unique perspective to the table.
As a VC, you invest in companies that will be big in 5-7 years, and millennials and Gen Z will have the most purchasing power. Because you can relate to that market, you can offer insights that most Partners at 40 can't. I added value by helping with hiring because I had direct access to university talent pools and by finding university students for product beta testing.
5. Develop your personal brand.
Generalists or specialists run most funds. This means that funds either invest across industries or have a specific mandate. Most funds are becoming specialists, I've noticed. Top-tier founders don't lack capital, so funds must find other ways to attract them. Why would a founder work with a generalist fund when a specialist can offer better industry connections and partnership opportunities?
Same for fund members. Founders want quality investors. Become a thought leader in your industry to meet founders. Create content and share your thoughts on industry-related social media. When I first started building my brand, I found it helpful to interview industry veterans to create better content than I could on my own. Over time, my content attracted quality founders so I didn't have to look for them.
These are my biggest VC lessons. This list isn't exhaustive, but it's my industry survival guide.
Trevor Stark
3 years ago
Economics is complete nonsense.
Mainstream economics haven't noticed.
What come to mind when I say the word "economics"?
Probably GDP, unemployment, and inflation.
If you've ever watched the news or listened to an economist, they'll use data like these to defend a political goal.
The issue is that these statistics are total bunk.
I'm being provocative, but I mean it:
The economy is not measured by GDP.
How many people are unemployed is not counted in the unemployment rate.
Inflation is not measured by the CPI.
All orthodox economists' major economic statistics are either wrong or falsified.
Government institutions create all these stats. The administration wants to reassure citizens the economy is doing well.
GDP does not reflect economic expansion.
GDP measures a country's economic size and growth. It’s calculated by the BEA, a government agency.
The US has the world's largest (self-reported) GDP, growing 2-3% annually.
If GDP rises, the economy is healthy, say economists.
Why is the GDP flawed?
GDP measures a country's yearly spending.
The government may adjust this to make the economy look good.
GDP = C + G + I + NX
C = Consumer Spending
G = Government Spending
I = Investments (Equipment, inventories, housing, etc.)
NX = Exports minus Imports
GDP is a country's annual spending.
The government can print money to boost GDP. The government has a motive to increase and manage GDP.
Because government expenditure is part of GDP, printing money and spending it on anything will raise GDP.
They've done this. Since 1950, US government spending has grown 8% annually, faster than GDP.
In 2022, government spending accounted for 44% of GDP. It's the highest since WWII. In 1790-1910, it was 3% of GDP.
Who cares?
The economy isn't only spending. Focus on citizens' purchasing power or quality of life.
Since GDP just measures spending, the government can print money to boost GDP.
Even if Americans are poorer than last year, economists can say GDP is up and everything is fine.
How many people are unemployed is not counted in the unemployment rate.
The unemployment rate measures a country's labor market. If unemployment is high, people aren't doing well economically.
The BLS estimates the (self-reported) unemployment rate as 3-4%.
Why is the unemployment rate so high?
The US government surveys 100k persons to measure unemployment. They extrapolate this data for the country.
They come into 3 categories:
Employed
People with jobs are employed … duh.
Unemployed
People who are “jobless, looking for a job, and available for work” are unemployed
Not in the labor force
The “labor force” is the employed + the unemployed.
The unemployment rate is the percentage of unemployed workers.
Problem is unemployed definition. You must actively seek work to be considered unemployed.
You're no longer unemployed if you haven't interviewed in 4 weeks.
This shit makes no goddamn sense.
Why does this matter?
You can't interview if there are no positions available. You're no longer unemployed after 4 weeks.
In 1994, the BLS redefined "unemployed" to exclude discouraged workers.
If you haven't interviewed in 4 weeks, you're no longer counted in the unemployment rate.
If unemployment were measured by total unemployed, it would be 25%.
Because the government wants to keep the unemployment rate low, they modify the definition.
If every US resident was unemployed and had no job interviews, economists would declare 0% unemployment. Excellent!
Inflation is not measured by the CPI.
The BLS measures CPI. This month was the highest since 1981.
CPI measures the cost of a basket of products across time. Food, energy, shelter, and clothes are included.
A 9.1% CPI means the basket of items is 9.1% more expensive.
What is the CPI problem?
Here's a more detailed explanation of CPI's flaws.
In summary, CPI is manipulated to be understated.
Housing costs are understated to manipulate CPI. Housing accounts for 33% of the CPI because it's the biggest expense for most people.
This signifies it's the biggest CPI weight.
Rather than using actual house prices, the Bureau of Labor Statistics essentially makes shit up. You can read more about the process here.
Surprise! It’s bullshit
The BLS stated Shelter's price rose 5.5% this month.
House prices are up 11-21%. (Source 1, Source 2, Source 3)
Rents are up 14-26%. (Source 1, Source 2)
Why is this important?
If CPI included housing prices, it would be 12-15 percent this month, not 9.1 percent.
9% inflation is nuts. Your money's value halves every 7 years at 9% inflation.
Worse is 15% inflation. Your money halves every 4 years at 15% inflation.
If everyone realized they needed to double their wage every 4-5 years to stay wealthy, there would be riots.
Inflation drains our money's value so the government can keep printing it.
The Solution
Most individuals know the existing system doesn't work, but can't explain why.
People work hard yet lag behind. The government lies about the economy's data.
In reality:
GDP has been down since 2008
25% of Americans are unemployed
Inflation is actually 15%
People might join together to vote out kleptocratic politicians if they knew the reality.
Having reliable economic data is the first step.
People can't understand the situation without sufficient information. Instead of immigrants or billionaires, people would blame liar politicians.
Here’s the vision:
A decentralized, transparent, and global dashboard that tracks economic data like GDP, unemployment, and inflation for every country on Earth.
Government incentives influence economic statistics.
ShadowStats has already started this effort, but the calculations must be transparent, decentralized, and global to be effective.
If interested, email me at trevorstark02@gmail.com.
Here are some links to further your research:
Liam Vaughan
3 years ago
Investors can bet big on almost anything on a new prediction market.
Kalshi allows five-figure bets on the Grammys, the next Covid wave, and future SEC commissioners. Worst-case scenario
On Election Day 2020, two young entrepreneurs received a call from the CFTC chairman. Luana Lopes Lara and Tarek Mansour spent 18 months trying to start a new type of financial exchange. Instead of betting on stock prices or commodity futures, people could trade instruments tied to real-world events, such as legislation, the weather, or the Oscar winner.
Heath Tarbert, a Trump appointee, shouted "Congratulations." "You're competing with 1840s-era markets. I'm sure you'll become a powerhouse too."
Companies had tried to introduce similar event markets in the US for years, but Tarbert's agency, the CFTC, said no, arguing they were gambling and prone to cheating. Now the agency has reversed course, approving two 24-year-olds who will have first-mover advantage in what could become a huge new asset class. Kalshi Inc. raised $30 million from venture capitalists within weeks of Tarbert's call, his representative says. Mansour, 26, believes this will be bigger than crypto.
Anyone who's read The Wisdom of Crowds knows prediction markets' potential. Well-designed markets can help draw out knowledge from disparate groups, and research shows that when money is at stake, people make better predictions. Lopes Lara calls it a "bullshit tax." That's why Google, Microsoft, and even the US Department of Defense use prediction markets internally to guide decisions, and why university-linked political betting sites like PredictIt sometimes outperform polls.
Regulators feared Wall Street-scale trading would encourage investors to manipulate reality. If the stakes are high enough, traders could pressure congressional staffers to stall a bill or bet on whether Kanye West's new album will drop this week. When Lopes Lara and Mansour pitched the CFTC, senior regulators raised these issues. Politically appointed commissioners overruled their concerns, and one later joined Kalshi's board.
Will Kanye’s new album come out next week? Yes or no?
Kalshi's victory was due more to lobbying and legal wrangling than to Silicon Valley-style innovation. Lopes Lara and Mansour didn't invent anything; they changed a well-established concept's governance. The result could usher in a new era of market-based enlightenment or push Wall Street's destructive tendencies into the real world.
If Kalshi's founders lacked experience to bolster their CFTC application, they had comical youth success. Lopes Lara studied ballet at the Brazilian Bolshoi before coming to the US. Mansour won France's math Olympiad. They bonded over their work ethic in an MIT computer science class.
Lopes Lara had the idea for Kalshi while interning at a New York hedge fund. When the traders around her weren't working, she noticed they were betting on the news: Would Apple hit a trillion dollars? Kylie Jenner? "It was anything," she says.
Are mortgage rates going up? Yes or no?
Mansour saw the business potential when Lopes Lara suggested it. He interned at Goldman Sachs Group Inc., helping investors prepare for the UK leaving the EU. Goldman sold clients complex stock-and-derivative combinations. As he discussed it with Lopes Lara, they agreed that investors should hedge their risk by betting on Brexit itself rather than an imperfect proxy.
Lopes Lara and Mansour hypothesized how a marketplace might work. They settled on a "event contract," a binary-outcome instrument like "Will inflation hit 5% by the end of the month?" The contract would settle at $1 (if the event happened) or zero (if it didn't), but its price would fluctuate based on market sentiment. After a good debate, a politician's election odds may rise from 50 to 55. Kalshi would charge a commission on every trade and sell data to traders, political campaigns, businesses, and others.
In October 2018, five months after graduation, the pair flew to California to compete in a hackathon for wannabe tech founders organized by the Silicon Valley incubator Y Combinator. They built a website in a day and a night and presented it to entrepreneurs the next day. Their prototype barely worked, but they won a three-month mentorship program and $150,000. Michael Seibel, managing director of Y Combinator, said of their idea, "I had to take a chance!"
Will there be another moon landing by 2025?
Seibel's skepticism was rooted in America's historical wariness of gambling. Roulette, poker, and other online casino games are largely illegal, and sports betting was only legal in a few states until May 2018. Kalshi as a risk-hedging platform rather than a bookmaker seemed like a good idea, but convincing the CFTC wouldn't be easy. In 2012, the CFTC said trading on politics had no "economic purpose" and was "contrary to the public interest."
Lopes Lara and Mansour cold-called 60 Googled lawyers during their time at Y Combinator. Everyone advised quitting. Mansour recalls the pain. Jeff Bandman, a former CFTC official, helped them navigate the agency and its characters.
When they weren’t busy trying to recruit lawyers, Lopes Lara and Mansour were meeting early-stage investors. Alfred Lin of Sequoia Capital Operations LLC backed Airbnb, DoorDash, and Uber Technologies. Lin told the founders their idea could capitalize on retail trading and challenge how the financial world manages risk. "Come back with regulatory approval," he said.
In the US, even small bets on most events were once illegal. Under the Commodity Exchange Act, the CFTC can stop exchanges from listing contracts relating to "terrorism, assassination, war" and "gaming" if they are "contrary to the public interest," which was often the case.
Will subway ridership return to normal? Yes or no?
In 1988, as academic interest in the field grew, the agency allowed the University of Iowa to set up a prediction market for research purposes, as long as it didn't make a profit or advertise and limited bets to $500. PredictIt, the biggest and best-known political betting platform in the US, also got an exemption thanks to an association with Victoria University of Wellington in New Zealand. Today, it's a sprawling marketplace with its own subculture and lingo. PredictIt users call it "Rules Cuck Panther" when they lose on a technicality. Major news outlets cite PredictIt's odds on Discord and the Star Spangled Gamblers podcast.
CFTC limits PredictIt bets to $850. To keep traders happy, PredictIt will often run multiple variations of the same question, listing separate contracts for two dozen Democratic primary candidates, for example. A trader could have more than $10,000 riding on a single outcome. Some of the site's traders are current or former campaign staffers who can answer questions like "How many tweets will Donald Trump post from Nov. 20 to 27?" and "When will Anthony Scaramucci's role as White House communications director end?"
According to PredictIt co-founder John Phillips, politicians help explain the site's accuracy. "Prediction markets work well and are accurate because they attract people with superior information," he said in a 2016 podcast. “In the financial stock market, it’s called inside information.”
Will Build Back Better pass? Yes or no?
Trading on nonpublic information is illegal outside of academia, which presented a dilemma for Lopes Lara and Mansour. Kalshi's forecasts needed to be accurate. Kalshi must eliminate insider trading as a regulated entity. Lopes Lara and Mansour wanted to build a high-stakes PredictIt without the anarchy or blurred legal lines—a "New York Stock Exchange for Events." First, they had to convince regulators event trading was safe.
When Lopes Lara and Mansour approached the CFTC in the spring of 2019, some officials in the Division of Market Oversight were skeptical, according to interviews with people involved in the process. For all Kalshi's talk of revolutionizing finance, this was just a turbocharged version of something that had been rejected before.
The DMO couldn't see the big picture. The staff review was supposed to ensure Kalshi could complete a checklist, "23 Core Principles of a Designated Contract Market," which included keeping good records and having enough money. The five commissioners decide. With Trump as president, three of them were ideologically pro-market.
Lopes Lara, Mansour, and their lawyer Bandman, an ex-CFTC official, answered the DMO's questions while lobbying the commissioners on Zoom about the potential of event markets to mitigate risks and make better decisions. Before each meeting, they would write a script and memorize it word for word.
Will student debt be forgiven? Yes or no?
Several prediction markets that hadn't sought regulatory approval bolstered Kalshi's case. Polymarket let customers bet hundreds of thousands of dollars anonymously using cryptocurrencies, making it hard to track. Augur, which facilitates private wagers between parties using blockchain, couldn't regulate bets and hadn't stopped users from betting on assassinations. Kalshi, by comparison, argued it was doing everything right. (The CFTC fined Polymarket $1.4 million for operating an unlicensed exchange in January 2022. Polymarket says it's now compliant and excited to pioneer smart contract-based financial solutions with regulators.
Kalshi was approved unanimously despite some DMO members' concerns about event contracts' riskiness. "Once they check all the boxes, they're in," says a CFTC insider.
Three months after CFTC approval, Kalshi announced funding from Sequoia, Charles Schwab, and Henry Kravis. Sequoia's Lin, who joined the board, said Tarek, Luana, and team created a new way to invest and engage with the world.
The CFTC hadn't asked what markets the exchange planned to run since. After approval, Lopes Lara and Mansour had the momentum. Kalshi's March list of 30 proposed contracts caused chaos at the DMO. The division handles exchanges that create two or three new markets a year. Kalshi’s business model called for new ones practically every day.
Uncontroversial proposals included weather and GDP questions. Others, on the initial list and later, were concerning. DMO officials feared Covid-19 contracts amounted to gambling on human suffering, which is why war and terrorism markets are banned. (Similar logic doomed ex-admiral John Poindexter's Policy Analysis Market, a Bush-era plan to uncover intelligence by having security analysts bet on Middle East events.) Regulators didn't see how predicting the Grammy winners was different from betting on the Patriots to win the Super Bowl. Who, other than John Legend, would need to hedge the best R&B album winner?
Event contracts raised new questions for the DMO's product review team. Regulators could block gaming contracts that weren't in the public interest under the Commodity Exchange Act, but no one had defined gaming. It was unclear whether the CFTC had a right or an obligation to consider whether a contract was in the public interest. How was it to determine public interest? Another person familiar with the CFTC review says, "It was a mess." The agency didn't comment.
CFTC staff feared some event contracts could be cheated. Kalshi wanted to run a bee-endangerment market. The DMO pushed back, saying it saw two problems symptomatic of the asset class: traders could press government officials for information, and officials could delay adding the insects to the list to cash in.
The idea that traders might manipulate prediction markets wasn't paranoid. In 2013, academics David Rothschild and Rajiv Sethi found that an unidentified party lost $7 million buying Mitt Romney contracts on Intrade, a now-defunct, unlicensed Irish platform, in the runup to the 2012 election. The authors speculated that the trader, whom they dubbed the “Romney Whale,” may have been looking to boost morale and keep donations coming in.
Kalshi said manipulation and insider trading are risks for any market. It built a surveillance system and said it would hire a team to monitor it. "People trade on events all the time—they just use options and other instruments. This brings everything into the open, Mansour says. Kalshi didn't include election contracts, a red line for CFTC Democrats.
Lopes Lara and Mansour were ready to launch kalshi.com that summer, but the DMO blocked them. Product reviewers were frustrated by spending half their time on an exchange that represented a tiny portion of the derivatives market. Lopes Lara and Mansour pressed politically appointed commissioners during the impasse.
Tarbert, the chairman, had moved on, but Kalshi found a new supporter in Republican Brian Quintenz, a crypto-loving former hedge fund manager. He was unmoved by the DMO's concerns, arguing that speculation on Kalshi's proposed events was desirable and the agency had no legal standing to prevent it. He supported a failed bid to allow NFL futures earlier this year. Others on the commission were cautious but supportive. Given the law's ambiguity, they worried they'd be on shaky ground if Kalshi sued if they blocked a contract. Without a permanent chairman, the agency lacked leadership.
To block a contract, DMO staff needed a majority of commissioners' support, which they didn't have in all but a few cases. "We didn't have the votes," a reviewer says, paraphrasing Hamilton. By the second half of 2021, new contract requests were arriving almost daily at the DMO, and the demoralized and overrun division eventually accepted defeat and stopped fighting back. By the end of the year, three senior DMO officials had left the agency, making it easier for Kalshi to list its contracts unimpeded.
Today, Kalshi is growing. 32 employees work in a SoHo office with big windows and exposed brick. Quintenz, who left the CFTC 10 months after Kalshi was approved, is on its board. He joined because he was interested in the market's hedging and risk management opportunities.
Mid-May, the company's website had 75 markets, such as "Will Q4 GDP be negative?" Will NASA land on the moon by 2025? The exchange recently reached 2 million weekly contracts, a jump from where it started but still a small number compared to other futures exchanges. Early adopters are PredictIt and Polymarket fans. Bets on the site are currently capped at $25,000, but Kalshi hopes to increase that to $100,000 and beyond.
With the regulatory drawbridge down, Lopes Lara and Mansour must move quickly. Chicago's CME Group Inc. plans to offer index-linked event contracts. Kalshi will release a smartphone app to attract customers. After that, it hopes to partner with a big brokerage. Sequoia is a major investor in Robinhood Markets Inc. Robinhood users could have access to Kalshi so that after buying GameStop Corp. shares, they'd be prompted to bet on the Oscars or the next Fed commissioner.
Some, like Illinois Democrat Sean Casten, accuse Robinhood and its competitors of gamifying trading to encourage addiction, but Kalshi doesn't seem worried. Mansour says Kalshi's customers can't bet more than they've deposited, making debt difficult. Eventually, he may introduce leveraged bets.
Tension over event contracts recalls another CFTC episode. Brooksley Born proposed regulating the financial derivatives market in 1994. Alan Greenspan and others in the government opposed her, saying it would stifle innovation and push capital overseas. Unrestrained, derivatives grew into a trillion-dollar industry until 2008, when they sparked the financial crisis.
Today, with a midterm election looming, it seems reasonable to ask whether Kalshi plans to get involved. Elections have historically been the biggest draw in prediction markets, with 125 million shares traded on PredictIt for 2020. “We can’t discuss specifics,” Mansour says. “All I can say is, you know, we’re always working on expanding the universe of things that people can trade on.”
Any election contracts would need CFTC approval, which may be difficult with three Democratic commissioners. A Republican president would change the equation.
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Daniel Vassallo
3 years ago
Why I quit a $500K job at Amazon to work for myself
I quit my 8-year Amazon job last week. I wasn't motivated to do another year despite promotions, pay, recognition, and praise.
In AWS, I built developer tools. I could have worked in that field forever.
I became an Amazon developer. Within 3.5 years, I was promoted twice to senior engineer and would have been promoted to principal engineer if I stayed. The company said I had great potential.
Over time, I became a reputed expert and leader within the company. I was respected.
First year I made $75K, last year $511K. If I stayed another two years, I could have made $1M.
Despite Amazon's reputation, my work–life balance was good. I no longer needed to prove myself and could do everything in 40 hours a week. My team worked from home once a week, and I rarely opened my laptop nights or weekends.
My coworkers were great. I had three generous, empathetic managers. I’m very grateful to everyone I worked with.
Everything was going well and getting better. My motivation to go to work each morning was declining despite my career and income growth.
Another promotion, pay raise, or big project wouldn't have boosted my motivation. Motivation was also waning. It was my freedom.
Demotivation
My motivation was high in the beginning. I worked with someone on an internal tool with little scrutiny. I had more freedom to choose how and what to work on than in recent years. Me and another person improved it, talked to users, released updates, and tested it. Whatever we wanted, we did. We did our best and were mostly self-directed.
In recent years, things have changed. My department's most important project had many stakeholders and complex goals. What I could do depended on my ability to convince others it was the best way to achieve our goals.
Amazon was always someone else's terms. The terms started out simple (keep fixing it), but became more complex over time (maximize all goals; satisfy all stakeholders). Working in a large organization imposed restrictions on how to do the work, what to do, what goals to set, and what business to pursue. This situation forced me to do things I didn't want to do.
Finding New Motivation
What would I do forever? Not something I did until I reached a milestone (an exit), but something I'd do until I'm 80. What could I do for the next 45 years that would make me excited to wake up and pay my bills? Is that too unambitious? Nope. Because I'm motivated by two things.
One is an external carrot or stick. I'm not forced to file my taxes every April, but I do because I don't want to go to jail. Or I may not like something but do it anyway because I need to pay the bills or want a nice car. Extrinsic motivation
One is internal. When there's no carrot or stick, this motivates me. This fuels hobbies. I wanted a job that was intrinsically motivated.
Is this too low-key? Extrinsic motivation isn't sustainable. Getting promoted felt good for a week, then it was over. When I hit $100K, I admired my W2 for a few days, but then it wore off. Same thing happened at $200K, $300K, $400K, and $500K. Earning $1M or $10M wouldn't change anything. I feel the same about every material reward or possession. Getting them feels good at first, but quickly fades.
Things I've done since I was a kid, when no one forced me to, don't wear off. Coding, selling my creations, charting my own path, and being honest. Why not always use my strengths and motivation? I'm lucky to live in a time when I can work independently in my field without large investments. So that’s what I’m doing.
What’s Next?
I'm going all-in on independence and will make a living from scratch. I won't do only what I like, but on my terms. My goal is to cover my family's expenses before my savings run out while doing something I enjoy. What more could I want from my work?
You can now follow me on Twitter as I continue to document my journey.
This post is a summary. Read full article here
Ben
3 years ago
The Real Value of Carbon Credit (Climate Coin Investment)
Disclaimer : This is not financial advice for any investment.
TL;DR
You might not have realized it, but as we move toward net zero carbon emissions, the globe is already at war.
According to the Paris Agreement of COP26, 64% of nations have already declared net zero, and the issue of carbon reduction has already become so important for businesses that it affects their ability to survive. Furthermore, the time when carbon emission standards will be defined and controlled on an individual basis is becoming closer.
Since 2017, the market for carbon credits has experienced extraordinary expansion as a result of widespread talks about carbon credits. The carbon credit market is predicted to expand much more once net zero is implemented and carbon emission rules inevitably tighten.
Hello! Ben here from Nonce Classic. Nonce Classic has recently confirmed the tremendous growth potential of the carbon credit market in the midst of a major trend towards the global goal of net zero (carbon emissions caused by humans — carbon reduction by humans = 0 ). Moreover, we too believed that the questions and issues the carbon credit market suffered from the last 30–40yrs could be perfectly answered through crypto technology and that is why we have added a carbon credit crypto project to the Nonce Classic portfolio. There have been many teams out there that have tried to solve environmental problems through crypto but very few that have measurable experience working in the carbon credit scene. Thus we have put in our efforts to find projects that are not crypto projects created for the sake of issuing tokens but projects that pragmatically use crypto technology to combat climate change by solving problems of the current carbon credit market. In that process, we came to hear of Climate Coin, a veritable carbon credit crypto project, and us Nonce Classic as an accelerator, have begun contributing to its growth and invested in its tokens. Starting with this article, we plan to publish a series of articles explaining why the carbon credit market is bullish, why we invested in Climate Coin, and what kind of project Climate Coin is specifically. In this first article let us understand the carbon credit market and look into its growth potential! Let’s begin :)
The Unavoidable Entry of the Net Zero Era
Net zero means... Human carbon emissions are balanced by carbon reduction efforts. A non-environmentalist may find it hard to accept that net zero is attainable by 2050. Global cooperation to save the earth is happening faster than we imagine.
In the Paris Agreement of COP26, concluded in Glasgow, UK on Oct. 31, 2021, nations pledged to reduce worldwide yearly greenhouse gas emissions by more than 50% by 2030 and attain net zero by 2050. Governments throughout the world have pledged net zero at the national level and are holding each other accountable by submitting Nationally Determined Contributions (NDC) every five years to assess implementation. 127 of 198 nations have declared net zero.
Each country's 1.5-degree reduction plans have led to carbon reduction obligations for companies. In places with the strictest environmental regulations, like the EU, companies often face bankruptcy because the cost of buying carbon credits to meet their carbon allowances exceeds their operating profits. In this day and age, minimizing carbon emissions and securing carbon credits are crucial.
Recent SEC actions on climate change may increase companies' concerns about reducing emissions. The SEC required all U.S. stock market companies to disclose their annual greenhouse gas emissions and climate change impact on March 21, 2022. The SEC prepared the proposed regulation through in-depth analysis and stakeholder input since last year. Three out of four SEC members agreed that it should pass without major changes. If the regulation passes, it will affect not only US companies, but also countless companies around the world, directly or indirectly.
Even companies not listed on the U.S. stock market will be affected and, in most cases, required to disclose emissions. Companies listed on the U.S. stock market with significant greenhouse gas emissions or specific targets are subject to stricter emission standards (Scope 3) and disclosure obligations, which will magnify investigations into all related companies. Greenhouse gas emissions can be calculated three ways. Scope 1 measures carbon emissions from a company's facilities and transportation. Scope 2 measures carbon emissions from energy purchases. Scope 3 covers all indirect emissions from a company's value chains.
The SEC's proposed carbon emission disclosure mandate and regulations are one example of how carbon credit policies can cross borders and affect all parties. As such incidents will continue throughout the implementation of net zero, even companies that are not immediately obligated to disclose their carbon emissions must be prepared to respond to changes in carbon emission laws and policies.
Carbon reduction obligations will soon become individual. Individual consumption has increased dramatically with improved quality of life and convenience, despite national and corporate efforts to reduce carbon emissions. Since consumption is directly related to carbon emissions, increasing consumption increases carbon emissions. Countries around the world have agreed that to achieve net zero, carbon emissions must be reduced on an individual level. Solutions to individual carbon reduction are being actively discussed and studied under the term Personal Carbon Trading (PCT).
PCT is a system that allows individuals to trade carbon emission quotas in the form of carbon credits. Individuals who emit more carbon than their allotment can buy carbon credits from those who emit less. European cities with well-established carbon credit markets are preparing for net zero by conducting early carbon reduction prototype projects. The era of checking product labels for carbon footprints, choosing low-emissions transportation, and worrying about hot shower emissions is closer than we think.
The Market for Carbon Credits Is Expanding Fearfully
Compliance and voluntary carbon markets make up the carbon credit market.
A Compliance Market enforces carbon emission allowances for actors. Companies in industries that previously emitted a lot of carbon are included in the mandatory carbon market, and each government receives carbon credits each year. If a company's emissions are less than the assigned cap and it has extra carbon credits, it can sell them to other companies that have larger emissions and require them (Cap and Trade). The annual number of free emission permits provided to companies is designed to decline, therefore companies' desire for carbon credits will increase. The compliance market's yearly trading volume will exceed $261B in 2020, five times its 2017 level.
In the Voluntary Market, carbon reduction is voluntary and carbon credits are sold for personal reasons or to build market participants' eco-friendly reputations. Even if not in the compliance market, it is typical for a corporation to be obliged to offset its carbon emissions by acquiring voluntary carbon credits. When a company seeks government or company investment, it may be denied because it is not net zero. If a significant shareholder declares net zero, the companies below it must execute it. As the world moves toward ESG management, becoming an eco-friendly company is no longer a strategic choice to gain a competitive edge, but an important precaution to not fall behind. Due to this eco-friendly trend, the annual market volume of voluntary emission credits will approach $1B by November 2021. The voluntary credit market is anticipated to reach $5B to $50B by 2030. (TSCVM 2021 Report)
In conclusion
This article analyzed how net zero, a target promised by countries around the world to combat climate change, has brought governmental, corporate, and human changes. We discussed how these shifts will become more obvious as we approach net zero, and how the carbon credit market would increase exponentially in response. In the following piece, let's analyze the hurdles impeding the carbon credit market's growth, how the project we invested in tries to tackle these issues, and why we chose Climate Coin. Wait! Jim Skea, co-chair of the IPCC working group, said,
“It’s now or never, if we want to limit global warming to 1.5°C” — Jim Skea
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DC Palter
3 years ago
Is Venture Capital a Good Fit for Your Startup?
5 VC investment criteria
I reviewed 200 startup business concepts last week. Brainache.
The enterprises sold various goods and services. The concepts were achingly similar: give us money, we'll produce a product, then get more to expand. No different from daily plans and pitches.
Most of those 200 plans sounded plausible. But 10% looked venture-worthy. 90% of startups need alternatives to venture finance.
With the success of VC-backed businesses and the growth of venture funds, a common misperception is that investors would fund any decent company idea. Finding investors that believe in the firm and founders is the key to funding.
Incorrect. Venture capital needs investing in certain enterprises. If your startup doesn't match the model, as most early-stage startups don't, you can revise your business plan or locate another source of capital.
Before spending six months pitching angels and VCs, make sure your startup fits these criteria.
Likely to generate $100 million in sales
First, I check the income predictions in a pitch deck. If it doesn't display $100M, don't bother.
The math doesn't work for venture financing in smaller businesses.
Say a fund invests $1 million in a startup valued at $5 million that is later acquired for $20 million. That's a win everyone should celebrate. Most VCs don't care.
Consider a $100M fund. The fund must reach $360M in 7 years with a 20% return. Only 20-30 investments are possible. 90% of the investments will fail, hence the 23 winners must return $100M-$200M apiece. $15M isn't worth the work.
Angel investors and tiny funds use the same ideas as venture funds, but their smaller scale affects the calculations. If a company can support its growth through exit on less than $2M in angel financing, it must have $25M in revenues before large companies will consider acquiring it.
Aiming for Hypergrowth
A startup's size isn't enough. It must expand fast.
Developing a great business takes time. Complex technology must be constructed and tested, a nationwide expansion must be built, or production procedures must go from lab to pilot to factories. These can be enormous, world-changing corporations, but venture investment is difficult.
The normal 10-year venture fund life. Investments are made during first 3–4 years.. 610 years pass between investment and fund dissolution. Funds need their investments to exit within 5 years, 7 at the most, therefore add a safety margin.
Longer exit times reduce ROI. A 2-fold return in a year is excellent. Loss at 2x in 7 years.
Lastly, VCs must prove success to raise their next capital. The 2nd fund is raised from 1st fund portfolio increases. Third fund is raised using 1st fund's cash return. Fund managers must raise new money quickly to keep their jobs.
Branding or technology that is protected
No big firm will buy a startup at a high price if they can produce a competing product for less. Their development teams, consumer base, and sales and marketing channels are large. Who needs you?
Patents, specialist knowledge, or brand name are the only answers. The acquirer buys this, not the thing.
I've heard of several promising startups. It's not a decent investment if there's no exit strategy.
A company that installs EV charging stations in apartments and shopping areas is an example. It's profitable, repeatable, and big. A terrific company. Not a startup.
This building company's operations aren't secret. No technology to protect, no special information competitors can't figure out, no go-to brand name. Despite the immense possibilities, a large construction company would be better off starting their own.
Most venture businesses build products, not services. Services can be profitable but hard to safeguard.
Probable purchase at high multiple
Once a software business proves its value, acquiring it is easy. Pharma and medtech firms have given up on their own research and instead acquire startups after regulatory permission. Many startups, especially in specialized areas, have this weakness.
That doesn't mean any lucrative $25M-plus business won't be acquired. In many businesses, the venture model requires a high exit premium.
A startup invents a new glue. 3M, BASF, Henkel, and others may buy them. Adding more adhesive to their catalogs won't boost commerce. They won't compete to buy the business. They'll only buy a startup at a profitable price. The acquisition price represents a moderate EBITDA multiple.
The company's $100M revenue presumably yields $10m in profits (assuming they’ve reached profitability at all). A $30M-$50M transaction is likely. Not terrible, but not what venture investors want after investing $25M to create a plant and develop the business.
Private equity buys profitable companies for a moderate profit multiple. It's a good exit for entrepreneurs, but not for investors seeking 10x or more what PE firms pay. If a startup offers private equity as an exit, the conversation is over.
Constructed for purchase
The startup wants a high-multiple exit. Unless the company targets $1B in revenue and does an IPO, exit means acquisition.
If they're constructing the business for acquisition or themselves, founders must decide.
If you want an indefinitely-running business, I applaud you. We need more long-term founders. Most successful organizations are founded around consumer demands, not venture capital's urge to grow fast and exit. Not venture funding.
if you don't match the venture model, what to do
VC funds moonshots. The 10% that succeed are extraordinary. Not every firm is a rocketship, and launching the wrong startup into space, even with money, will explode.
But just because your startup won't make $100M in 5 years doesn't mean it's a bad business. Most successful companies don't follow this model. It's not venture capital-friendly.
Although venture capital gets the most attention due to a few spectacular triumphs (and disasters), it's not the only or even most typical option to fund a firm.
Other ways to support your startup:
Personal and family resources, such as credit cards, second mortgages, and lines of credit
bootstrapping off of sales
government funding and honors
Private equity & project financing
collaborating with a big business
Including a business partner
Before pitching angels and VCs, be sure your startup qualifies. If so, include them in your pitch.