Technology

I spent TechCrunchlatest Disrupt extravaganza asking questions of various notables onstage, and what struck me most was how fantastically optimistic they were. To pick two examples: Kai-Fu Lee talked about preparing for a world of mass plenitude and abundance 30-50 years from now; Dario Gil waxed enthusiastic about quantum computers simulating life-changing new materials and pharmaceuticals, transforming everyonelives for the better.

And then I turned around and returned to the world of hair-trigger outrage, condemnation, consternation, pessimism, gloom and impending apocalypse; which is to say, America and social media, where it sometimes seems an encouraging word is rarely heard without being promptly drowned out by a dozen angry doomsayers prophesying rains of fire and blood. Surely the truth is somewhere in between; surely any rational assessment of the future must include a mixture of both optimism and pessimism. So why do those seem like two entirely separate modes of thought, of late

Certainly theremuch to be pessimistic about. Our slowly boiling planet; the resurgence of racist nationalism around the global; the worldwide rise of authoritarian demagogues who don&t represent their people. Certainly tech industry folk, and especially investors, are deeply incentivized to be optimistic. If they&re right, they win big, and if they&re wrong, well, thereno real downside except maybe having their embarrassing pro-Theranos / pro-Juicero tweets paraded out a few years later. Panglossianism is not the path of wisdom.

But neither is apocalypticism. Whisper it, but there is much to be optimistic about. For all of capitalismflaws, and there are many, it has reduced the number of people living in extreme poverty by more than a billion since 1990, even while the worldpopulation has grown by two billion. Fast, far-reaching progressive social change has been proved possible; witness e.g. the attitude change towards gay marriage in America from 2005 to 2015. We&ve connected the planet, put supercomputers in the pockets of a third of the world, made solar/wind power and electric cars both increasingly widespread and increasingly cost-effective, and we&re working hard at replacing most rote human drudgery with robot labor.

Sure, we live with fat-tail risks of various catastrophes of mindnumbing scale; but why do we never speak of the fat-tail chances of benevolent breakthroughs Why does optimism about the future — not even net optimism, but any optimism — seem so rare these days

Partly this is social mediafault. Facebook and Twitter &optimize,& so to speak, for engagement, which is to say they implicitly amplify that which causes outrage, fury, terror, and insecurity, rather than that which prompts a quiet hope for / confidence in things slowly getting better. From this we get the sense that everyone else is appalled by everything thatgoing on, and so we naturally grow more appalled ourselves.

Partly itthat the fruits of the advances which provoke this optimism remain so unequally distributed. Itnice to talk about a world full of plenitude, but if 80% of the benefits go to 20% of the population, while the 40% at the bottom see their lives actually get worse as a side effect of the disruptive changes, are our collective lives really getting better And even if your life is objectively improving a little every year, if you seem to be falling further behind the median, you&ll still feel itactually getting worse.

But theremore to it than that. Optimism is dangerously provocative. It implicitly calls on us to do something, to contribute, to join the spreading wave, whereas pessimism is easier. It only calls on us to endure.

Ittrue that the tech industry often seems to handwave that because in the long run, our new technologies will make everything better, we don&t need to bother worrying about its short- and medium-term effects. This is wrong and dangerous and (ironically) spectacularly shortsighted; we need to do better. But at the same time, the pessimists need to do better too, by realizing that there is plenty of room for hope and optimism in any reasonable imagination of the future.

Details: Category: Technology; Published: 09 September 2018

How does an employee look at tokens vs equity

Currently, equity in the form of stock options is widely distributed as part of compensation packages amongst startups. When employees join a company, they are usually offered a combination of cash and stock options. The options become a way for the employees to meaningfully participate ina companyupside should they succeed. Often, employees can negotiate between taking a higher cash compor higher options amount, dependingon their risk appetite.

There are many ways tokens and equity are similar. For one, both assets motivate individuals to align their goals with that of a company&s. If the company becomes more successful, the value of its tokens and equity should theoretically go up. Nonetheless, one of the downsides of stock options is that they usually require a liquidity event for an employee toconvert them to paper money. Historically, that was when a company went public and the employee could convert their options into stocks and then sell them in the public markets.

However, in the last decade, with the increasing amount of private capital and subsequent larger private fundraising rounds, companies are taking way longer to IPO. Companies such as Dropboxtook eleven years from founding to IPO, while Airbnbhas been around ten years and stillhasn&t gone public. As a result,private companies started doing option buybacks to provide liquidity for their employees. Simultaneously, this phenomenon has caused the secondary market to thrive in Silicon Valley.

Token liquidity changes the game

One of the largest differences between tokens and equity is that tokens are immediately liquid, assuming that they have already been listed on an exchange. To put simply, equity options only prove their valueat theend, whereas tokens have certainty values from the beginning.

Now in cryptocurrency and blockchain companies, employees could get paid in tokens in lieu of equity or cash, primarily outside of the U.S. Many tokens have a liquidity advantage over equity. For example, it can be immediately sold upon reception, assuming that the token has been listed on an exchange and there is enough trading volume.

This is also one of the reasons why exchanges are so important for the cryptocurrency space because 1) itone of the easier ways to gauge the value of a company given that the industry has yet to figure out a proper valuation methodology, and 2) it provides immediate liquidity for employees who have been burned by the hopes a billion dollar company not coming to fruition and all the options going to zero.

For an employee looking for a job in a technology-based company, consider two companies that are exactly the same, with the same team quality and same targeted industry, but one company has a token incentive structure instead of an equity incentive structure, and the token is already traded on an exchange. Why would the employee ever want equity With tokens, you&d still share the upside in the companysuccess, but also have immediate liquidity.

Additionally, outside the U.S., often employees can also get paid in tokens or stable coins in lieu of cash to take advantage of tax benefits given the lack of regulatory sophistication. That may change very soon, however.Token structure, therefore, is a disruptionto a companyinternal structure and we will share some examples below of how thatalready affecting a number of Chinese crypto companies.

Token incentives will disrupt traditional ways of compensating employees

These changes to employee compensation have already become popular in places like China, where a number of Chinese blockchain companies have started on the foundation of distributing tokens as compensation. Companies like Ontology, NEO, Huobi, and Binancepay their employees in their own tokens. Many of these teams operate worldwide but they are able to manage hundreds of people, often with just a handful of HR staff, through ashared incentive structure.

In the case of Neo, the original founding team, in fact, didn&thave anyone with a computer science background. When they were looking for developers, they would pay tokens to people to do development work for them. For Ontology,it was even more extreme. The founding team initially set up the Ontology Foundation. They didn&t want to hire people, so instead, they listed out a list of things that needed to be developed and paid tokens to all the developers who contributed.

Binance, similarly, paid their employees in tokens. They would then use their quarterly profits toburn tokens,which subsequently boosted the value of the remaining tokens.It is possible that partially due to these effective token incentives, Ontology has been the best performing token this year whileBinancecontinues to hold the lead in the exchange space.

China has taken a lead here compared to the U.S. partially because of regulatory uncertainties, but there are examples in America as well of these changing compensation norms. In the early days of cryptocurrency when it was (even more) wild west, Consensys got started by compensating their employees in tokens until their first legal hire came along. That story is similar to Coinbase, where initially a number of first employees were given the choice of being paid in coins and/or cash.

Token compensation alsoseems to be particularly powerful incentives for Chinese blockchain companies, more so than their U.S. counterparts.Maomao Hu, Partnerat Eigen Capital and CTO of Calculus Network, talks about the psyche of the young generation of Chinese developers: &Being Chinese, Chinese engineers, especially the young ones, have a hunger that you only see in some parts of Silicon Valley, and thatlike everyone. They are just doing 80 hours 100 hour weeks because they hate being poor and they hate not having an opportunity and they don&t have other ways to get an opportunity, and thatlike everyone.&

It may also be that because there have been fewer technology cycles in China, and the rise of the largest technology companies happened only in the last decade, equity compensation remains a relatively new concept to local citizens. With token compensation introduced, this is the first time for many Chinese people to be able to participate in a companyupside so directly.

Despite their growing popularity, these incentive schemes are still early and experimental, and there are unforeseen risks associated with token issuance as compensation. In particular, the appeal of short-term, quick gains from tokensis ever more attractive. If wrongly incentivized, people could end up spending time hyping up their tokens instead of building product, allowing employees to cash out quickly without producing.

As a result, seriousfounders of new token-based companies should be aware of such short-sightedness when designing employee token incentives. They can potentially introduce long-term token vesting schedules, and also hire people who care about driving long-term value. For CEOs, this is going to be an increasingly important role they will have to take in the token economy. I&m certain though that the next set of large unicorns will be coming from tech companies with great token incentives structures, in or outside of the U.S.

Details: Category: Technology; Published: 09 September 2018

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For all of the excitement centered around fintech over the past half-decade, most venture-backed fintech companies struggle to acclimate to public markets. LendingClub and OnDeck have plummeted since their late 2014 IPOs after several years of darling status in the private markets. GreenSky, which went public in May of this year, has been unable to return to its IPO price. Square is the exception to the rule.

Sometimes we overlook the companies that hail from the era that precedes the current wave of fintech fascination, a vertical which has accumulated over $100 billion in global investment capital since 2010.

One of these companies is LendingTree, which got its start height of the Internet bubble, going public in mid-February of 2000, less than a month before the Dot-com bubble peaked. LendingTree began in 1996 in a founding story that epitomizes the early Internet era. Doug Lebda, an accountant searching for homes in Pittsburgh, had to manually compare mortgage offers from each bank. So he created a marketplace for loans in the same way OpenTable helps you find your restaurant of choice or Zillow simplifies the home buying process. In the words of Rich Barton, iconic founder of Expedia, Zillow, and Glassdoor, this business is a classic &power to the people play.&

The marketplace business model has been the darling that has driven returns for many of the leading VCs like Benchmark, a16z, and Greylock. Network effects are a non-negotiable part of the explanation as to why. Classic success stories that have transitioned nicely into public markets include Zillow, OpenTable (acq.), Etsy, Booking.com, and Grubhub. LendingTree is often left off of this list, yet, the business sits in a compelling space as consumers and lenders continue to manage their financial lives online.

Insight in a Sea of Ambiguity

The lending process has been defined by significant information asymmetry between borrowers and lenders. Lenders have a disproportionate amount of leverage in the relationship. And thatnot to say it should be different & itperfectly logical to require a borrower to prove their creditworthiness. However, aggregation, synthesis, and recommendations modernize a dated dynamic.

Ironically, in an age where consumers are inundated with information,less than 50% of interested borrowershop for loans. Most consumers take the first offer they receive. The benefit of a marketplace, however, is price competition and transparency. The ability to shop the market and access the same information that lenders have is a luxury that didn&t exist twenty years ago. The borrowers who do shop through LendingTree reap significant benefits; on average,roughly $14,000 on mortgages and 570 basis points on personal loans. Therecertainly something to be said for comfortability and hand-holding, but at some point the metrics speak for themselves.

LendingTree isn&t a marketplace in the purest sense because of the process that takes place after a borrower clicks &apply.& While a diner can reserve a table at any listed restaurant with OpenTable for dinner tomorrow tonight, she can&t simply take the loan she wants. LendingTree lacks the direct feedback loop between consumers and lenders that characterizes most marketplaces. Instead, the platform aggregates information from a network of over 500 lenders to provide options according consumerneeds. LendingTree is effectively the onramp for interested borrowers, which necessitates the entry of lenders to fill the borrowerneeds.

As this &onramp& continues to serve a larger audience as more consumers conduct their finances online, banks and lenders intend to seize the opportunity. Digital ad spend in the financial services industry is going to continue to grow rapidly at an estimated 20% CAGR between 2014 and 2020, effectively tripling the size of LendingTreecore market.

Diversifying away from Mortgages

LendingTree is the secret success story of fintech

LendingTreerevenue mix has change over the years.

For all intents and purposes, LendingTree has been in the mortgage business since its inception. The company experimented with a myriad of business models, including a foray into loan origination through their LendingTree Loans product line, which they ultimately sold off to Discover in 2011. Even in 2013, only 11% of their revenue originated from non-mortgage products.

LendingTree has expanded their platform in a few short years to build their non-mortgage products including credit cards, HELOCs, personal, auto, and small business loans. They have also pursued credit repair services and deposit accounts, with insurance in the pipeline. Whereas mortgage revenue made up roughly 60% of total sales in Q2 2016, it dropped to 36% as of this quarter. They wanted to diversify their product mix, but they realized they were also leaving money on the table.

Through strategic M-A activity, LendingTree has acquired a number of leading media and comparison properties to expand into new products. Acquiring CompareCards, a leading online source for credit card comparisons, has allowed them to catch up to Credit Karma and Bankrate, who own a large part of the existing market. Additional acquisitions in tertiary products like student loans, deposit accounts, and credit services have enabled the company to expand their market share in markets that are both ripe for growth and sparse of competition. The inorganic growth strategy emulates that of two of LendingTreemajor shareholders: Barry Diller, whocompany IAC previously owned LendingTree before spinning them off in 2008, and John Malone, who owned 27% of shares as of November, 2017.

LendingTree has made significant acquisitions to expand and grow

Enhancing Customer Engagement

The potential scale and success of LendingTreebusiness model is predicated on discovering prospective borrowers. If they&re repeat customers, thata big win because their promotional costs drop significantly once a customer is familiar with the platform.

My LendingTree, the companypersonal financial management (PFM) app launched in 2014, has 8.8 million customers and generates roughly 20% of the companyleads. It offers free credit scores, credit monitoring, and goals-based guidance through a proprietary credit and debt analyzer. At the surface, itnot especially different from any of the other leading consumer PFM apps. Thatbeen the issue with these apps: the service is valuable, but itvery difficult to differentiate beyond UI/UX, which is far from a defensible moat.

However, the ability for LendingTree to lock in customers and accumulate customer data to personalize product recommendations is a breakthrough for both consumers and lenders. Consumers outsource the loan diligence process to their phone, which explores the universe of lending options in order to find the most suitable options.

LendingTreenew personal finance management app. (Photo by LendingTree)

The leader in this space is Credit Karma, and by a wide margin. They&re estimated to have around 80 million customers. Those numbers appear starkly different at first glance, but itimportant to keep in mind LendingTree is relatively new, launching in 2014. Credit Karma developed a more captive relationship with customers from their inception in 2007, beginning as a free credit score platform. They&re effectively in an arms race, trying to emulate each otherprimary value propositions in order to win over a larger share of customer attention.

By all accounts, the My LendingTree product is still in its infancy. Personal loans make up nearly two-thirds of revenue generated through My LendingTree. Credit cards were integrated through CompareCards earlier this year; deposits will be integrated in the fourth quarter through DepositAccounts. As the platform more formally integrates mortgage refinancing and HELOCs, there are more channels to drive user engagement.

For the consumer, this app reinforces the aggregation and connection between interested borrowers and willing lenders. Arguably more significant, however, is the personalization of individual customer experience that will drive further engagement and improve the recommendation engine. With the continued migration to online and mobile for financial services, this product benefits from natural demographic tailwinds.

If LendingTree can successfully reengage with customers on a more recurring basis via My LendingTree, the app should be accretive to overall variable marketing margin because they&ll have to spend far less on promotional activities due to organic customer. The combination of a market-leading aggregator with a comprehensive PFM tool creates a flywheel effect where success begets success, particularly with a major head start in the lending aggregation business.

Removing the Informational Asymmetry

In LendingTreebusiness model, customer demand drives the flow of ad dollars and ultimately origination volume. Lenders follow customer demand. LendingTree helps expedite that process. Lenders can expand their conversions by boosting the number of high-quality leads and reducing obstacles to the loan application process. LendingTree improves both catalysts.

On the lender side, My LendingTree fundamentally changes LendingTreevalue proposition. They used to be responsible for connecting lenders with warm leads to drive conversions. With an existing customer base, the lead generation suddenly gets easier. It also significantly reduces the customer acquisition cost for lenders, notoriously a major component of their expense profile.

Nearly 50% of all consumer interactions with banks and financial services companies occur online. Itnot controversial to say that figure is likely heading in only one direction. Currently, credit cards and personal loans are the most automated online application processes because the decisioning occurs relatively quickly. Of the expansive network of mortgage lenders on LendingTreeplatform, only 40 currently enable borrowers to continue their application online. As mortgages and small business loans become more automated through partnerships with third-parties like Blend and Roostify, LendingTree will benefit from more seamless integrations and likely, higher conversions.

The real value proposition for the lender, however, is in the headcount consolidation. Just as the number of stock brokers and equity traders has diminished significant, the role of the loan officer will follow a similar trajectory. LendingTree initially supplemented loan officers in their borrower sourcing from a marketing perspective, which drove loan officer commissions down significantly.

Doug Lebdanext conquest is to supplant the entire sales function. In response to a question about LendingTreeimpact on lender headcount, Lebda responded: &what will happen is [lenders will] be able to reduce commission. So the real competitor, if you will, to LendingTree…is the fully commissioned loan officer…In the future, you&re going to have LendingTree convincing the borrower through technology and then you&re going to have an individual lender just basically processing and getting it through.&

The relationship between a loan officer and a prospective borrower is marred by informational asymmetry. Incentives aren&t aligned. Soon enough, the pre-approval process launched through their new digital mortgage experience, &Rulo& will help to solve a problem that has plagued LendingTree since its inception: an exhaustive pursuit from loan officers.

With Rulo, LendingTree sorts and filters the list of offers and provides a recommendation based on the best option. Then, the app allows you to contact the lender directly, offering the consumer the freedom they historically haven&t had. Commenting on the early success of the new experience, Lebda said &[the conversion rate is] literally about triple what it is on the LendingTree experience.& LendingTree is streamlining a low value, yet operationally costly element of the lending business that has remained more or less stagnant for half a century.

Seeing the Forrest through the Trees

The fawning over fintech companies has driven exorbitant amounts of global investment from venture capitalists and private equity firms who are ultimately looking for exit opportunities. Two things are happening: first, most of the major fintech companies aren&t going public, although that is beginning to change. Second, and perhaps more importantly, the ones that do go public don&t fare particularly well.

The tried and true strategy of most emerging financial technology startups is to focus on user growth and monetize later. LendingTree did the opposite; they created a cash-flow generating platform that served a critical purpose, simplifying a historically complex landscape for consumers, while simultaneously driving directly attributable revenue for lenders. They have proved their original value proposition, connecting borrowers with lenders, and now they&re playing catch up to provide supplementary tools to add more value for customers. Ita rare pathway, but a productive one that more fintech startups should consider.

Details: Category: Technology; Published: 09 September 2018

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&Unmortgage enables everyone to live in the home they want to, thatour mission,& Unmortgage co-founder and CEO Ray Rafiq-Omar tells me. &We do that by allowing people to buy as little as five percent of a home and rent the rest. So thereno mortgage involved, hence the name Unmortgage&.

The burgeoning London startup, which aims to launch next year having just closed a hefty £10 million seed round, calls its model &part-own, part-rent&. However, unlike traditional shared ownership schemes, Unmortgage doesn&t want you to have to take out a mortgage to buy the first portion of your own, and it isn&t targeting new-builds.

Like a number of other fintech/proptech companies, such as Strideup and Proportunity, it is the latest attempt to solve the increasing difficulty first time buyers face trying to get on the housing ladder as rising house prices typically outstrip wages. If people rent, they often cannot save the large deposit required for a mortgage. It is this &vicious circle& that Unmortgage want to break: by helping families that can afford to rent gradually buy a home.

&The way we like to think about it is the security of home ownership with the flexibility of renting,& says Rafiq-Omar. &You find a home. If we like it too, we&ll but it together in partnership. You&ll own your bit and you&ll pay rent on our bit. Then you have the option to buy more of your home from as little as a pound at any time&.

To keeps things fair — Rafiq-Omar stresses that fairness is &our core value& — Unmortgage will revalue the property on a monthly basis so you&ll always have an up-to-date valuation when increasing your stake. And at any point you are free to either buy out Unmortgage with a mortgage or an inheritance or to give the company three monthnotice for it to buy you out so you can take your cash at market price and move on to your next home.

Likewise, the rent you pay on the part of the property you don&t own is pegged to rises to inflation. But in case inflation outpaces market rate rents, Rafiq-Omar says Unmortgage will allow the customer to ask for a rent review. &They have the ability to not have to worry about their rent but if they are worried they can have it reviewed,& he says.

Unmortgage will use institutional funding to finance its part of the homes it purchases, who Rafiq-Omar says would like to own residential property, and the secure income stream it brings, but don&t want to be landlords or end up in the media for behaving like a landlord. &Unmortgage gives them a way to invest in residential property while solving societal need, which is [that] people want to own their own homes and have security over their housing situation&.

Meanwhile, investors in Unmortgageseed round are fintech venture capital firms Anthemis Exponential Ventures, and Augmentum Fintech plc. &&We&re grateful to our investors for believing in us and our social mission and excited to be working with them & especially Tee Pruitt [of Anthemis], who was instrumental through much of this process,& adds Rafiq-Omar.

Details: Category: Technology; Published: 09 September 2018

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The two best men's singles players at the 2018 US Open will meet in the final today. It's Juan Martin del Potro vs Novak Djokovic and we've compiled this handy guide for watching the 2018 US Open on TV or by live stream online, no matter where you are in the world - you can even watch it for FREE in some areas.

US Open 2018 final - where and when

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Details: Category: Technology; Published: 09 September 2018

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Tokens can better incentivize startup employees than equity