Last week, Fred Wilson from Union Square Ventures wrote about Kickstarter's transformation into a Benefit Corporation in his blog. A Benefit Corporation, or B-Corp integrates social causes into its objective, similar to Non-Profits, but remains nearly all the other features of an C-Corp or S-Corp, and can choose to be taxed as either.

Of course, the question is, why would corporations need to integrate a built-in social cause into its objective? After all, part of the vision of Founders often sets the corporate culture and objectives, and many C-corps naturally incorporates the triple bottom line into their ideology.

However, there are some legal arguments that could be made that provide reasons why a B-Corp is much more advantageous for start-ups that a traditional C-Corp or S-Corp. One primary reason is that it shields the Directors from lawsuits by shareholders and third parties. I made the following chart here as a general guide.

​One argument for B-Corps is that Founders/ Directors can make decisions on liquidity, acquisition or other fiduciary matters in which they are shielded from potential lawsuits by shareholders. The most cited case is when Ben & Jerry's had two offers of acquisition- one from a similar company with the same environmental objectives, and the other higher offer was from Unilever. Eventually, Ben & Jerry's chose to be acquired by Unilever because of fears of impending lawsuits against the Directors had they chosen to be acquired by the other company with the lower offer; also their board had a legal responsibility to their shareholders to choose the higher offer despite the fact that the Founders did not want to sell the company. Truth be told, although this is an standard example, in a lot of cases, I think it is more common that the CEO is blamed then fired rather than a lawsuit against all the Directors. Clearly this was the case when Microsoft wanted to acquire Yahoo! for $47 billion and former CEO Jerry Yang refused, which caused much criticism and eventually led to his dismissal, or rather, his "resignation". 

In either case, a B-Corp is clearly more advantageous than a traditional corporate model because it effectively shields the Founders and Board members from making decisions that might not be in the best financial interests of the company, but that rather takes into account the social responsibility of the company. (I have to add a note here that despite Ben & Jerry's acquisition by Unilever, and its transformation into a B-Corp in 2012, that the acquisition itself wasn't such a bad thing after all since Unilever kept Ben & Jerry's mission in tact.)

In the UK, the CIC (Community Interest Company) is often compared to the US B-Corp, however if we take a closer look, the CIC is actually closer to the US 501(c)(3) Non-Profit than a B-Corp. The CIC is something of a hybrid between a traditional UK Charity and a Limited Liability Company. However, the CIC allows Directors to have a salary whereas in a Charity, the positions of Directors are entirely voluntary. Also the legal entity of a charity is the same as its members and Directors, so that Directors can be directly sued by third-parties, although these sorts of lawsuits against Charities in the UK are quite rare, compared to the US, where litigation runs rampant in every sector under any possible circumstance.

In my humble opinion, if entrepreneurs or Startup Founders with social motivations had to choose between a CIC or a regular Ltds I think it would be more advantageous to choose the latter. Although CICs are a hybrid between Charities and Ltds, there is a maximum cap on dividend payouts and profit distribution that would not be appealing for investors. In addition, in a traditional charity, tax relief can be applied to donations, whereas the CIC is considered similar to a Ltd in structure, which puts it into a unique position where it cannot benefit from private investors nor have the same advantages as charities by giving tax relief.

Although the Benefit Corporation structure is one that has its roots in social causes, so do Non-Profits, and there have been mass reported cases of fraud and misuse in regards to the latter (eg, American Breast Cancer Foundation, United Way, Kids Wish Foundation et al). The list of corrupt Non-Profits in America is disturbingly unending, despite the fact that there are many (such as NPR) that are highly regarded. 

I think one should keep in mind that although the B-Corp should ideally have a Board of Philosopher Kings, who are collectively working towards the common good of the people and the environment, that any company can mask itself as mimicking those same causes, whilst taking advantage of its position of being effectively shielded by lawsuits.

UK charities, on the other hand, because they have such stringent fidiciary reporting measures and voluntary Board of Directors, do not suffer from the corruption that high profile US Non-Profits are known to have. In fact, I myself, had such bad experiences with US Non-Profits that I often become suspicious when someone tells me he or she is starting a US Non-Profit or some sort of "Foundation". Of course, there are many good Non-Profits as well, and I am probably not doing them any justice in this entry, but generally I find 'philanthropy' in the US often has a double-edged sword, and one that is highly motivated by profit. Many people may not be aware, but the Gates Foundation has often been criticised as a shell corporation and acts as a for-profit entity.

Currently there are approximately 1,500 B-Corps in the world, with over 10,000 CICs in the UK and 1.5 million Non-Profits registered in the US. Despite whichever corporate designation that startup Founders may use, ultimately, it is up to the Founders and Board of Directors to drive the vision, not a company designation. Let's hope that B-Corps can overcome the corruption that has plagued many US Non-Profit entities, and be able to do the kind of incredible work that many charities have done in the UK, whilst still being profitable entities that are interested in the triple bottom line. 

​By Sierra Choi

Founders are always ahead of the trend of what people want, and it is not merely about convenience, SCRUM and agile development nor about crowdfunding popularity.

Founders are naturally stubborn, and persistent. If they all gave up so easily at the first sight of criticism, then they would all become cubicle drones. That's why I think it's important that investors support the vision of the Founders, because it is that long-term vision that will gain the greatest return on investment.

Lean methodology, I find (almost always), is for people looking for a quick profit.


By Sierra Choi

As an update, I had written a couple of weeks ago that the stock market will be entering an area of consolidation. So far, it held up to my predictions and have held the support level of 181.31 for the SPY.  As I mentioned previously in another post, it is currently resembling the consolidation pattern from Sept 2011. I extrapolate that in the next couple of months, around mid-November, that this would signal the end of the consolidation period, and I will then be on vigilant watch for the lookout of uptrend signals.

Truth be told, doctors are people, flawed people with an often outdated education. My doctor who was also my friend's doctor, and whom I know never had any bad intentions, was the one who prescribed the experimental-cancer drug that eventually killed my best friend. He didn't know any better. This is what he had been taught in medical school: to treat symptoms and prescribe new drugs. He wanted to help my friend, but he was limited by what he could do, and he was told, this experimental drug could help my friend, FDA approved. (As a note, it only takes 2 studies to become FDA approved. You could have a million trials but if 2 are successful, your new drug is approved.) My doctor is not a bad guy, but the system he worked under limited his choices in treatment for his patients.

I sometimes wonder what it would've be like if my friend were still alive? What if he never took those experimental cancer drugs? What if he had fought the cancer on his own, and let his own immune system destroy the skin cancer on his back? Would he still be alive today?

After WWII, the UK did an extraordinary thing: it ratified universal health care for anyone. After those years of fighting wars together, people were rather connected through society; we were all human after all, and the UK decided to take care of its own people, all of its people. What kind of nation are we? If we can't take care of our children, our sick and the elderly? 
In comparison, what has been the history of healthcare in the United States? It has been a series of abject failures- of citizens declaring mass bankruptcy at the face of overwhelming health costs, deterioriating health for all, and abject ignorance of disease conditions. In the United States, Obamacare has become nothing but a fallacy to the concept of universal health care, and acts as a method to increase profit margins over a short period of time. Healthy people must pay an extraordinary amount to have simple benefits of health care, and sick and poor people are forced to declare bankruptcy to get the health care that they need. Is this the model that the UK would like to follow when funds for the NHS expires in 2020?

That legacy wasn't so far off, because even after the US' abolition of slavery in 1863 by President Abraham Lincoln (157 years later after the British courts declared slaves as "free men" in England), slaves were left to fend for themselves in poverty and segregation and it wasn't until the 1960s when Martin Luther King Jr. changed the world with his view of racial equality in "I have a dream".


Meanwhile, the UK had done something completely different. After the World Wars, they integrated a system known as the National Health Service, or NHS. Rich or poor, race or gender aside, people had a right to health care. I wonder what would happen if the UK decided to follow the US in their approach in health care post-2020? In history, the UK typically sets the precedent, however in the post-modern era, many Labour Party leaders have instead, embraced the tactics of the American strategy for short-term profit margins at the expense of the population at large (eg, Tony Blair)


We have to remember that at one time, slavery was a large percentage of England's GDP until the courts dictated in 1706, that all men were free once they landed in England. How brave must that decision have been to go against conventional morals and prejudices? And how brave was it to set a precedent for the US to follow 157 years later?

CB Insights, often makes fun of people for being "wantrapreneurs": people who are primarily interested in becoming billionaires than entrepreneurs per se, and often have "get-rich quick" schemes or perhaps even have ambitions of creating wealth out of the suffering and exploitation of others, often at an extravagant burn rate. I even think that perhaps this wantrapreneur model has been elevated in the media by Hollywood, a sector I am quite familiar with that celebrates exploitation.

My hope is that all entrepreneurs, such Sir John Holt and Abraham Lincoln, have the courage to do the right thing, even if it only begins with an idea and goes against the status quo.

And I wonder, which are the UK and US startups that will disrupt the global medical and pharmaceutical models of profit in our current era?


By Sierra Choi

DISCLAIMER: This post was not intended for any stock advice and for educational purposes only

For me, a lot of my interest in not knowing everything about a particular subject is what captivates my interest. I can't think of anything more egocentric and boring as to say one is a complete expert on something. For me, learning is an integral part of this product life cycle. Brad Feld, entrepreneur and VC writes in his blog:

While a great mentor knows a lot and has had plenty of experiences, she’s always learning. The best mentor/mentee relationships are peer relationships, where the mentor learns as much from the mentee as she teaches the mentee...I know a lot about some things. And I know very little, or nothing about a lot more things. My business and technology experience is deep in software, where even the hardware companies we are investors...But I don’t know all software. And I especially don’t know vertical markets. We’ve consciously stayed horizontal in our investing, being much more interested in our themes which apply to many different vertical markets. But ask me about a vertical market, whether it be entertainment, real estate, insurance, auto, food, energy, or financial services and I’ll often approach it with a beginners mind.


I think this is the best kind of attitude to have, and nearly all of the A-list Producers I have met via the Guild have this mindset. There is an openness to Product Development in a technology startup, where ideas are shared and there is a collective mindset where relationships are built that is parallel to the life cycle of feature films.

And possibly, another reason why Steve Jobs had successful careers in both feature film and technology could be attributed to the parallels in the film life cycle to the product life cycle.

By Sierra Choi

Likewise, I think there has been a progressive movement for startups to utilise videos to promote their products, so much so, that if we examine all the startups in London that have been funded £6 million+ in recent years, we will see that they all produced several product and team videos. Of course, a good video should not be produced in lieu of a great product- but the trend seems to be that when they are able to connect emotionally to their audience- the users and companies who use their product, and the VCs that fund them, that videos have rather become a necessity rather than an option. In fact, all well-known accelerators and incubators in the US and the UK require videos as part of their admission process, and never a slide deck, business plan or a long IM (information memorandum).

A couple of years ago, I was at a mobile gaming conference, representing a startup I was working for at the time, and after meeting with an investment banker from Morgan Stanley, he told me to shorten the company business plan to 1 page, at most 1.5 pages. 
"I want to read down the middle, skim through the content, and see the bottom line in [sic] one page." He didn't want to read the IM nor know more details about the technology. He wanted a 1pp business plan and a short company demo video which we did not have. He did not want to read the 60 pp thesis that detailed all the company objectives nor any of the patents we held nor the ideology of the company that the KidsApp EdTech CEO of the company I was working with had taken weeks to write. What he wanted a movie trailer, something that made him curious about the company that would pique his interest.

Simon Sinek in his TedTalks, The Why partly describes this phenomenon. The most effective adverts and commercials are those that rarely have anything to do with the actual product, but about people's experiences and relationships with each other. In a world where we are inundated by technology, apps, mobile games, SaaS applications and the like, we need to humanise the content, to reaffirm our humanity, rather than denying its existence.

Mark Suster, who is both an entrepreneur and VC, in his blog bothsidesofthetable also discusses the power of video and how the single best method to explain your startup is through this audiovisual power of narrative.

Some of his favourite startup videos include:

Masterpiece for Osmo 

MakeSpace storage and MakeSpace storage 2

As one can see, these product/ service videos focus entirely on relationships between people, so that the product/ service itself becomes ancillary to the focus, therefore getting closer to the Why of what makes people act.

Some of my personal favourites include the original gmail product video (now Chrome)

Awhile back I wrote about the issues regarding CALPERS and CALSTERS being unable to calculate private equity fees.  At the time I stated that it was almost a dereliction of duty that pension funds of this size and supposed sophistication could not address a very simple issue on fees paid. 

Unfortunately, it gets worse.  This Naked Capitalism blog post details  how the head of Calpers Private Equity, at a public investment committee meeting, appears to fail to understand some of the basic structures of the private equity industry.  Please click on the link and watch the videos; its quite frankly a train wreck.   Please remember, Real Desrochers is responsible for upwards of $40 billion in private equity and venture capital commitments.  The pensioners of California deserve better. 


By Ashok Parekh

To understand the future of energy, I think it's immensely valuable to study the history of energy consumption within the last two hundred years.

The current dominant market forces are the petroleum and gas industries, a reign long held since the mid 1900s when there was a shift from coal to crude oil.  The pioneer and entrepreneur who began it all was a man named Edwin L. Drake, who had used a steam engine and cable-tool drilling rig to drill the first petroleum oil well in 1859. However, his path was filled with many obstacles, and the future founding father of the petroleum oil industry spent 5 months unsuccessfully drilling for oil in Pennsylvania that earned him the nickname "Crazy Drake" and his venture as "Drake's Folly."

Standard Oil was the Microsoft and Google of its day, and in a similar manner, attracted anti-trust lawsuits from the U.S. Government. Much of the history of Industrial Era and its innovative newfound technologies were fictionalised in a novel by Ayn Rand in Atlas Shrugged, which was fairly revolutionary for its time because much of the novel integrated intimate conversations between the author and the founders of different companies in uncensored format, detailing many woes faced by Founders when the U.S. Government often usurped their technologies or stopped them from operating via lawsuits.

However, Standard Oil, with Rockefeller as head, created a precedent in many business practices, including acquisition of smaller competitors and by combining all their disparate companies spread across many states under a single group of trustees. Rockefeller integrated many other tactics, such as secret transport deals and because of its acquisition of all aspects of its trade, it would eventually lead to the passing of the Sherman Antitrust Act by U.S. Congress in 1890- just twenty years after the inception of Standard Oil. After losing its antitrust legal battles with the U.S. Justice Department in 1911, Standard Oil was broken down into smaller companies, what would be known today as Chevron and ExxonMobil. 

At the time however, coal was still the dominant energy market force around the world, and petroleum oil was simply an up-and-coming competitor. In 1905, the UK produced 235 short tons of coal, and was the leading coal producer in all of Europe, with Germany as a close competitor with 121 short tons produced in the same year. The United States was the predominant coal producer in North America with 350 short tons with coal as the leading source of energy used in the United States until the 1950s when oil and gas would lead the energy industries.

The UK has implemented biofuel for its buses and transportation since 2012 and Japan has started using algae biofuel in their operating bus services last year via Isuzu Motors and bio-venture firm Euglena. However, there was much resistance against utisiling biofuel cells around the world for many political reasons, and Japan's plans to launch the water-powered car into the U.S. were temporarily halted when they had suffered devastating effects of the tsunami + earthquake in 2011.

In 2012, The University of Birmingham created a prototype, a mini-hydrail Hydrogen Pioneer Train and this year, the University of Warwick is also creating a hydrogen powered locomotive using the biofuel cell technology. 

Historically, UK pioneers have been the innovators that have pushed new technology and energy sources to the forefront of Europe. This has been the case with both coal and with petroleum and gas. The question remains, which are the companies that will bring biofuels and biofuel cell technology for public consumption into the next century?

By Sierra Choi