Day: February 16, 2019

Source: Geek Wire On:

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Matt Rubright. (Matt Rubright Photo)

Editor’s note: This guest post is written by Matt Rubright, an operator turned banker at Silicon Valley Bank.

Building an effective pitch deck is a unique topic of conversation in the startup ecosystem. It’s one of the few topics where every startup has created one before, many people have written playbooks about how to create them, yet many early stage companies I speak with are still looking for guidance. What I surmise from hearing this time and again is that pitch decks are so important to the livelihood of a startup that we’re constantly in the pursuit of more perfect information.

In that spirit, I turned to Silicon Valley Bank’s unique data set that has been aggregated over the years and in various markets to provide tangible, quantifiable guardrails based on the successful fundraising processes of our clients. We then pressure tested our findings from the investor perspective with Randall Lucas of Voyager Capital, a first-round VC having led or co-led over 70 Seed and Series A rounds, to ensure we’re surfacing the most valuable points in the research.

Companies in the study

Our data set is comprised of Series A companies from diverse geographies, industries and founder experience levels. By doing so, we’re able to surface insight that has broad application in the innovation economy.

No client-specific data is presented in this post to maintain confidentiality.

Investors & funding outcomes

The pitch decks we evaluated came from companies that garnered highly credible investors and were able to close larger rounds than asked for in their pitch decks.

What we observed

Pitch deck length: Keep it short + appendix. We saw a great deal of variation in the number of slides as shown below. If you’re grappling with the length of a pitch deck, compare the slides in to the Sequoia template. If you have many additional slides or expound upon sections for multiple slides, it’s probably worth leveraging an appendix section. At a minimum, ask yourself if the slide is critical to the story you are telling or if it’s supportive in nature. Randall advises entrepreneurs, “Shoot for 10–12 slides knowing you’ll wind up at 14-16  —  entrepreneurs love to tell their stories, but you really need to ruthlessly focus.”

Problem statement: Be clear & concise

Every pitch deck had a problem statement but there was a decent amount of variability to how it was presented. The two most prevalent approaches we noted were “User X has Y problem” and “market A has B inefficiency or missed value.” Just shy of half (46 percent) actually specified a specific user in their problem statement; the remainder focused on the market problem/inefficiency approach. In speaking with Randall, there isn’t a “right” approach between the two options, as long as it’s clear what the company is solving for.

A tactic that doesn’t resonate is merely describing how much better the future world would be with everyone using your product. “Asking investors to ‘imagine a world where…’ is not a great start to understanding an early stage startup’s opportunity,” says Randall. “Focus on pain that customers are having today, and on articulating sustainable competitive advantage  —  and the ‘great and glorious future’ will be clear.” Be concise in the problem statement  —  1-to-2 slides maximum here.

Market Size: Billions can make sense within a context

If you’ve reached the point of pitching institutional venture capitalists, you must be able to prove that the market you operate in is capable of producing venture-size returns. We could belabor what the minimum market size is or how to assess a venture sized return, but we’ll defer to those who’ve already explained these concepts well (great illustration from Mark Suster here). That said, the desired VC return profile does have important implications on the approach to estimating size.

As noted in the graphic above, a top down approach is the significantly more popular. In terms of total dollar size, Randall told us he didn’t have a strong expectation that founders should present deep rigor around the estimate, however this does not negate thoughtfulness in the approach. “Many of the best market opportunities don’t have historical data available, or don’t even fully exist at the time you’re pitching,” he says. “You need to show that your addressable market is plausibly big enough and lucrative enough for your goals.”

Saying your market is $3T because your industry is “retail” does nothing for a potential investor because it’s too high level to tie to your company in any manner. The worst case scenario is having an investor question your market size and lose their confidence in you before you’ve really talked about what it is you do. Retail isn’t an appropriate context for your opportunity, but perhaps retail supply chain SaaS spend is. Furthermore, pitch decks that provided massive market sizes were often contextualized within an industry mega trend or paired with an addressable opportunity breakdown to show what is actually addressable.

Less prevalent in both our data set and in Randall’s experience are startups that complement their top down with a bottom up approach as well. Extending our prior example, a large retail supply chain market can further be contextualized by starting with how much on average a Fortune 100 organization spends on supply chain software today. Extrapolating from this data point can help show cost that you’ll attempt to displace at a minimum. Randall indicated he would see presenting both top-down and bottom-up calculations as an positive exception, not the rule. “The more surprising or non-obvious the market opportunity is, the more support it demands,” he says. “Don’t burn a lot of time and screen space on reinforcing readily grasped, credible market numbers.”

Your solution: Demo like a founder, not customer support

Your problem statement, market size, competitive landscape slides don’t deep dive into granular detail, so why should your product demo? From what we observed in the study, founders are using simple visual tools to help provide product context but aren’t providing a level of detail to onboard investors as successful users.

Perhaps the greatest indicator of the 50K foot approach is the prevalence of product screenshots over any other medium. Don’t forget, a pitch deck is just a first step — you’ll likely get into a much deeper product review during the diligence process, so don’t attempt to ramp up investors on the nuance of your product at this point. As you’ll note in the above graphic, 18 percent of companies didn’t use any product visualization in their presentation deck. However, we don’t want to draw conclusions here as it’s possible founders showcased their product outside of the presentation entirely.

“For an entrepreneur, your product is your baby. Of course you think it’s beautiful and exciting. To a venture investor, though, all the baby pictures kind of look the same,” says Randall. “I generally don’t like to see a product demo in the first meeting.” Exceptions would be products where user experience or visualization are truly core elements. Focus product slides *only* on key product aspects that drive your unique go-to-market edge or sustainable competitive advantage.

Traction: Showcase two types of credibility

A successful pitch deck will successfully weave together quantifiable metrics and customer profiles to establish credibility behind what has been accomplished to date. We’ll briefly touch on both below.

Metric Showcase

Knowing that our study covered a wide range of industries and business models, it would be improper to place targets on metrics to illustrate expectations for a Series A (we’ll likely address in a future post). Regardless of the industry or business, we did see three distinct categories across a majority of pitch decks that should be accounted for.

Customer Showcase

If metrics are the quantifiable success of the company, customers are the qualitative context that helps put it in perspective. Most pitch decks leveraged one or more of the below tactics to further ground their metrics in a customer context.

From what we’ve observed both in this study and in working with early stage companies, these illustrative approaches lend to different types of credibility:

  1. Customer logos: brand credibility  —  we are diligenced and paid by trusted brands!
  2. Testimonials: user passion credibility  —  our users can’t live without us!
  3. Case studies: end-to-end solution credibility  —  we can repeat this again!
  4. Pipeline: forecast credibility  —  look at the revenue we’re going to have!

As you look to build your deck, be cognizant of why you choose the above mediums and how it reflects on the state of your business. You should be able to show traction that is both quantitative and qualitative in nature.

Competition: Use it to demonstrate your strengths

Every founder would like to say they are completely unique and they’ve found completely white space. It is almost never true. For a vast majority of startups, there are competitors, potential competitors, or substitutes for solving your customers’ problem. Not addressing this can look like you don’t know the space well enough or are obscuring detail. It’s also a missed opportunity to tie in your competitive advantage.

As indicated by the data, most startups aren’t shying away from competition, but instead using this section as an opportunity to educate potential investors on how the startup will carve out their space. To illustrate this point, the majority of pitch decks leveraged a 2×2 graph to show position relative to competitive threats.

When asked about the 2×2 visualization, Randall urged founders not to neglect considering magnitude vs. specificity. “When you choose how to present the ‘market map,’ it’s important to note the scale of competitors and substitutes, but also how specific and direct the competitive threat is,” he said. In other words: who else can do what you’re doing and how well are they resourced to do it? For example, a large enterprise may have the magnitude (or scale) to compete with you, but may not choose to do so because it doesn’t make sense to pivot resources to build in your narrow space. However, if a competing startup raises a significant round, they can solve a specific problem and have the capital to move quickly. Your ability to speak to these dynamics in a pitch will help illustrate your understanding of the real threats to your business in the market.

Go to market: Sales channels + pricing at a minimum

Perhaps the widest variability of content was observed in go-to-market approaches. It was interesting to observe that other sections we address throughout this blog post had definitive titles and a discrete number of slides, yet GTM was rarely ever titled as such. The most notable approach observed was a combination of sales channels and pricing strategy. In speaking with Randall, we attribute this variability and lack of depth to how tried and true markets and business models are. For example, enterprise B2B SaaS is very well defined, so there is no need to belabor the mechanics of a GTM.

With that in mind, Randall did emphasize that you must answer two questions:

  1. How do you get the “kindling” started for very early sales if you’re still discerning product market fit?
  2. How do you think you’ll scale up the sales model once the fire is going?

Growth projections: Work within a knowable range

Similar to market sizing, projections help illustrate the aspiration and opportunity ahead of the business. Projections without any rigor will show lack of knowledge and/or understanding, while getting too granular in your attempt to model growth is unrealistic, cuz ya know, early stage startup.

A quick way to gut check your forecast is by asking yourself how “knowable” the industry and business model truly are. If you’re entering an industry that is fairly well understood or you employ a proven business model (think enterprise SaaS), you may have the ability to show longer time frames with higher confidence. From what we’ve heard from Randall and what’s we’ve seen from clients historically, 36 months is probably a good projection horizon. It’s long enough to show growth potential, but it doesn’t put you firmly into an “unknowable” range.

In terms of the metrics you choose to project, the two most common approaches were:

(a) revenue + # of customers + headcount, or

(b) income statement

In speaking with Randall, option A was the much preferred approach as it anchors on the most important drivers, but doesn’t attempt to forecast income statement line items that end up being based on very little knowable data. Revenue was by far the most common top prioritized metric, but as noted above there are many other top line metrics a company could optimize for.

Other important notes…

  1. Being cash flow positive: This may seem important to a founder, but don’t forget your Series A investors want to see rapid top line growth and another equity round to fuel continued growth and long term exit opportunities. Being cash flow positive isn’t the priority.
  2. Assumptions: None of the pitch decks stated explicit assumptions with their projections. The numbers aren’t perfectly knowable and having a reasonable approach is enough to satisfy investors during the pitch.

Team: Highlight what makes you credible

All pitch decks had a team slide that was either near the onset or the close. Team slides were primarily limited to the founders, but occasionally included other key team members. The data hierarchy on these slides was typically person A name, short title or statement about person A, previous companies and/or exits for person A. Many of the team slides observed also allocated space for existing investors and key mentors.

“If you’re going to include advisors  —  other than employees or directors  —  you get far more credibility if you can also say that they’re investors. It’s easy for a Ph.D. or retired CEO to lend you their name  —  but will they put even a modest sum at risk?” asked Randall. “I personally discount non-investor advisor names in a deck.”

All things considered, you should be able to accomplish this with one slide.

The Ask: A conversation starter

I’d imagine this is the most anxiety inducing slide for most founders. You’ve told your story and now it’s time to land the punchline.

Most investors want to see a dollar ask. After all, you’ve already told the investor what you expect to build and the expected projection for the business  —  shouldn’t you be able to project how much it’s all going to cost?

Beyond the capital ask, we saw common elements on the ask slide across many of the decks:

  1. Expected milestones and metrics to be achieved
  2. Projected spend allocation
  3. Remaining cash, burn rate and runway
  4. Expected participation from existing investors (if any)

From Randall’s perspective, No. 1, No. 3 and No. 4 are very important. He indicated No. 2, the specifics of spend, is helpful mainly when the business model doesn’t make it obvious where the funds will go. “OpEx  —  and head count in particular  —  is almost always the core spend driver. More detail in the use of funds is only helpful if it doesn’t clearly follow from a head count increase that ties to the GTM and product efforts,” he said.

In summary, don’t forget this presentation is the first step in a dialogue. By presenting a transparent ask with the above context around it, you’ll be more likely to have a fruitful conversation where potential investors can understand where you’re trying to go and how they can play a part.

Bonus round: wildcard slides

Through inventorying every slide in a large number of pitch decks, we came across interesting slides that are not always discussed in pitch deck discussions, but worth considering for any startup.

  1. TL;DR slide: A summary slide at the beginning to highlight the key information to follow. Randall indicated this was very helpful and often found in above average pitch decks.
  2. Capital efficiency slide: Some of the pitch decks included a slide to show revenue and customer growth achieved with the previous capital. A handful of these slides also included net burn, remaining months of capital and total cash on hand.
  3. ‘Explainer’ slides: I use this as a catch all where you want to dive deeper into things like tech infrastructure, product, hiring plans, etc. These are fantastic appendix slides.
  4. Appendix: We believe founders should create an appendix section. You won’t always use it, but supporting information can be helpful in a pitch.

About this post

Silicon Valley Bank is dedicated to helping founders increase their probability of success. Be on the lookout for more data-driven posts in the near future.

Voyager Capital is a venture firm providing entrepreneurs with the resources, experience and connections to build successful technology companies. The firm prefers to invest in the software, analytics and cloud infrastructure startups. It is based in Seattle, Washington and was founded in 1997.

For more writing from Randall Lucas check out his blog here.

NOTE: The views expressed in this article are solely those of the author and do not reflect the views of SVB Financial Group, Silicon Valley Bank, or any of its affiliates. Companies referenced throughout this document are independent third parties and are not affiliated with SVB Financial Group.

Source: Geek Wire On:

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RChain house
The West Seattle home that serves as base of operations for RChain Cooperative is currently listed for $1.35 million. (GeekWire Photo / Ian Edwards)

The two-story house sits on a quiet street in the Fauntleroy neighborhood of West Seattle, a few hundred yards from Puget Sound. Clad in red cedar shingles with a well-kept yard, the five-bedroom, 3,600-square-foot house offers sweeping views of the water.

But no family lives here. The house is owned by RChain, a Seattle-based cooperative that uses the property as its base of operations. RChain is building a decentralized computing platform based on blockchain technology. The founder of RChain and president of its board, software engineer Lucius Gregory Meredith, says that its platform, also called RChain, will handle far more transactions than competitors, with potential applications in industries as varied as music streaming, file storage, and journalism.

RChain Cooperative founder Greg Meredith.

The co-op’s purchase of the home is just one of the unusual aspects of its story, which is a microcosm of the boom-and-bust world of cryptocurrency – complete with heated controversies, high-profile defections, and plunging financial valuations that have left the future of RChain in question.

Despite raising $31 million in an initial coin offering at the end of 2017, RChain missed a major release deadline in December and has run into financial difficulties. It’s currently unclear when – or if – the company will release its flagship blockchain product, as well as a music streaming app that the company has spent millions of dollars developing.

While the firm is still in operation and developing its product, the West Seattle house, purchased by RChain in April 2018 for $1.5 million, currently has a sale pending after its list price was reduced to less than $1.3 million. A $1 million loan against the property was taken out in November, which Meredith said was used to fund ongoing operations, which are currently costing $750,000 per month.

Meredith, the public face of RChain and its chief software architect, has come under criticism from members of the co-op, investors and partners over his business decisions and management of the company. After knocking on the door of the West Seattle house, GeekWire met Meredith, who agreed to an interview.

During that interview, Meredith said that RChain has the funds necessary to finish the project. A test version was released in September 2018. But the “mainnet” launch of RChain – code named Mercury because each release is named after a planet in the solar system – was supposed to happen at the end of December, and has been delayed.

However, Meredith said the project is still under development and should be released within months. “With luck, we’ll be out Q2 (second quarter of 2019),” he said, calling that “much more realistic for the main net. Early part of Q2.”

Greg Heuss, the managing partner of Reflective Ventures, a venture firm that has invested in 23 blockchain startups using funds provided by RChain, said of the delivery timeline, “We’re very hopeful. But hope is not a strategy.”

A balance sheet released by Rchain during its annual member meeting in October 2018 showed that its liabilities exceeded its liquid assets by more than $10.5 million. Further, the value of the cryptocurrency, called RHOC, issued to investors by the company during its fundraising, known as an initial coin offering (ICO), has fallen from a high of $2.86 to less than 3 cents at the time of publication. Where it once was ranked around No. 30 on the CoinMarketCap list of cryptocurrencies by market cap, RHOC now stands at No. 232.

This puts financial pressure on RChain, which held a substantial portion of its treasury in RHOC. More than 200 million RHOCs were also given by RChain to Reflective Ventures and another venture firm, Pithia. Both firms signed deals with RChain in 2018, when the value of RHOC was much higher.

Bold promises from blockchain promoters

Meredith chose to found RChain as a cooperative association, a business run for the benefit of its members. The most well-known example of a cooperative business in Washington state is retailer REI. All of the investors in RChain are also members of the co-op, which requires paying a $20 fee and being actively involved in contributing to the development of RChain in some way.

Understanding why Meredith chose to make RChain a cooperative requires understanding a bit about blockchain technology and the ideology behind it.

Meredith, a former senior software architect for Microsoft, told GeekWire that the idea for RChain started when an entrepreneur approached him around 2009 with an idea to build a decentralized social network. The entrepreneur, who uses the email signoff, “Love to all Beings,” was worried about the large amounts of personal data accumulated by tech giants such as Google and Facebook, and thought they could be harmful to society and democracy.

According to Meredith, the social network project fizzled because there was no monetization model without relying on ads and saving user data. But bitcoin, which came into existence in January of 2009, offered a way to add a payment system. Bitcoin is based on blockchain, so Meredith began looking into the emerging technology.

The idea that blockchain can improve privacy is one of the principal arguments promoters of the technology make. Blockchains are essentially shared databases that are secured by cryptography, and all kinds of data can be stored in them. Cryptocurrencies are an application of blockchain technology, and at this point they are the only application that has attracted any meaningful user base.

In selling blockchain and cryptocurrencies to investors and the public, promoters claim they will make the internet more democratic because they remove the intermediaries – whether centralized social networks like Facebook and Twitter or financial institutions like banks – and return power to users. They also say that blockchain has applications in gaming, digital identity, supply chain, file storage, journalism, and other fields. It is a story which, if you believe advocates, doesn’t conflict in any way with creating highly profitable businesses for investors.

And, for a while, the decentralization story was successful in attracting investors to the blockchain space. Bitcoin started 2017 at $1,000 and ended that year at $19,500. But since then, its value has fallen more than 80 percent. Other cryptocurrencies, of which there are more than 2,000, have fallen by even greater percentages. The total market cap of all cryptocurrencies has fallen from over $800 billion in early 2018 to $125 billion today. In the last two years, billions of dollars were raised by blockchain startups in so-called initial coin offerings (ICOs), which are a cryptocurrency-enabled fundraising method.

ICOs are unregulated by most governments and exist in a legal grey area in the United States. The U.S. Securities and Exchange Commission has gone after multiple ICOs for breaking securities laws, including the recent settling of two cases against ICO issuers in November of 2018. ICOs are legal in most European Union countries and many other jurisdictions around the world, though some places, such as China, ban them.

The path to RChain

Around 2015, Meredith joined a company called Synereo as CTO. Synereo was building a decentralized social network and raised $4.7 million in September 2016 via an ICO. Meredith told GeekWire that the conceptual work for RChain began in late 2015 when he realized that blockchains that relied on proof-of-work or a sequential execution model wouldn’t work for the Synereo project. He said that by the spring of 2016 he was discussing it openly with the Synereo team. The CEO of Synereo, Dor Konforty, said that RChain wasn’t discussed within the company until the second half of 2016. In any case, differences between Meredith and Konforty arose in 2016 and Meredith was removed from his position by the shareholders of Synereo in December of that year.

“For the past two years, Greg has not shown that he’s able to deliver any piece of functioning code,” Konforty said at the time. Meredith, for his part, told GeekWire that Synereo attempted to trade on his reputation to raise funds for the project. According to him, when the time came to build the blockchain he was designing and which Synereo had promised their investors, the company’s leadership changed its mind.

When contacted for comment, Konforty said in a statement to GeekWire that he had “nothing further to add to the information that is already out there.”

In 2017 Meredith decided to continue building his technology under the name RChain, though by now his vision had expanded beyond just social networks to create a general purpose blockchain. The RChain Cooperative was founded in the second week of January 2017 by Meredith and several associates. Meredith was chosen to be president of the board.

RELATED: Blockchain 101: GeekWire’s guide to this game-changing technology and its vast potential

The RChain team knew that building a blockchain network on its own wouldn’t be enough to attract users. So, in addition to founding the RChain Cooperative, Meredith and others, including Ed Eykholt, a former manager for technology firms such as Alstom and LexisNexis, and Evan Jensen, a Seattle attorney, founded another company called RChain Holdings in early 2017. RChain Holdings was a for-profit venture firm responsible for funding startups that would build applications to run on RChain once it was finished.

The strategy was that the co-op would be responsible for developing the underlying blockchain platform, while RChain Holdings would raise funds and build a community of developers and companies to develop decentralization applications (dApps) on it once it was built. This dual structure is common to blockchain startups, though RChain’s version differed in one key respect. Most of the time, the organization tasked with building the platform is a non-profit entity, often a foundation, while a for-profit company is in charge of developing businesses for the ecosystem. In RChain’s case, both organizations were for-profit entities, though the cooperative is supposed to be managed primarily for the benefit of its members, who can simultaneously also be investors.

Eykholt became CEO of RChain Holdings. He told GeekWire that RChain Cooperative received about $1 million in cryptocurrency in mid April 2017 from its AMP-to-RHOC redemption process. AMP was the cryptocurrency that was used in the Synereo project that Meredith had worked on.

Despite that, things were slow at the beginning for the RChain project. Eykholt said, “Without a demonstrable RChain platform in 2017 (and much of 2018), there wasn’t very active marketing for Holdings nor portfolio investments that made sense for Holdings during 2017.” But RChain was in the right place at the right time: the ICO market heated up significantly over the course of 2017, with more and more blockchain startups launching as the year went on.

With market conditions improving, the RChain leadership decided to launch its ICO, with the goal of raising $15 million for the co-op. RChain chose to do a private sale to accredited investors, offering digital tokens called RHOCs at a price of 20 cents each with a minimum investment of $50,000. Once the blockchain was built, RHOC tokens would allow users to pay for the use the dApps running on top of it. However, from an investor’s perspective, speculating on the value of RHOC was an equally compelling reason for participating.

The ICO, which lasted a month, ended up selling $10 million worth of RHOC. But around the time the sale had closed or was drawing to a close, a new investor stepped up wanting to buy the unsold $5 million. By this time, the cryptocurrency ICO market was really heating up, with bitcoin touching $5,000 in mid-October 2017. Other investors, upon hearing of the new offer, also wanted in. This led RChain to hold another sale in December, where the company raised approximately another $21 million for a total amount raised of around $31 million.

After the money came in, the problems began

Problems started with RChain as soon the money from the ICO came in. According to an investor who put around $1 million into RChain, “In late 2017 Greg Meredith was ‘hacked’ and hundreds of thousands worth of crypto were stolen from a co-op wallet. No serious investigation has been done and the issue has not been mentioned since even though promises were made.”

In an interview with GeekWire, Meredith confirmed that $300,000 of investor funds was lost in the hack. He said one wallet was compromised.

Also in December 2017, another controversy came to embroil RChain. That month, a group of Seattle-area business executives became interested in the project. This group founded a company in late 2017 that was subsequently renamed Reflective Ventures for the purpose of developing for-profit businesses for the RChain ecosystem. Up to that point, this domain had been handled by RChain Holdings, who greeted the newcomers as potential rivals. However, the histories of some of the Reflective Ventures team made some of the co-op members uncomfortable.

One of the founding partners of Reflective Ventures is David M. Otto, a Harvard-educated Seattle attorney who was charged in 2009 by the SEC for his involvement in a penny stock “pump-and-dump” scheme. He eventually settled with the SEC in 2011, paying more than $225,000 in fines and receiving a five-year ban from participating in penny stock offerings. Otto was also the business partner of Steve Bannon, the former advisor to President Donald Trump, in several companies that were involved in legal difficulties in the early 2000s. Otto holds a license to practice law in the state of Washington and is the managing partner of Seattle law firm Martin Davis, PLLC.

Alongside Otto at Reflective Ventures was Steve Careaga, who is associate director at Otto’s investment firm Otto Capital. Careaga was involved in a controversy in the early 2000s when he was chairman of the board of directors for Firefighters National Trust, a Washington state charity set up to help fallen firefighters. Firefighters National Trust raised millions of dollars in the wake of the attacks on Sept. 11, but there were allegations of financial mismanagement by the board, and the charity shut down in 2005. Only 65 percent of the millions that came into Firefighters National Trust went to charitable purposes, according to a report from the Hartford Courant. Careaga has gone on to become chief financial officer of Casper Labs, a blockchain startup that is building off of RChain’s technology.

The third partner of Reflective Ventures is Greg Heuss, a Seattle marketing and product development executive, formerly with Amazon, who is also the co-founder and president of the Washington Blockchain Coalition, a non-profit trade organization which advocates for the adoption of blockchain technology.

When asked about the pasts of his partners at Reflective Ventures, Heuss said, “I hold myself to high standards and especially am conscience of those that I do business with – I have no issues with either Steve or David and their past – I’ve dug into these stories on them more than most and feel 100 percent confident that they both are clear and free of any ‘wrongdoing.’ ”

Deals with Reflective Ventures and Pithia raised eyebrows

Despite opposition from some members, Reflective Venture’s bid was successful, and in January 2018 the firm signed a “strategic partnership agreement” with the RChain Cooperative. According to a publicly available contract, the agreement saw 100 million RHOC tokens, which were valued at 35 cents each, put into an investment fund, called Fund I, managed by Reflective Ventures.

In reality, the market value of RHOC on cryptocurrency exchanges was far above that, increasing from around 60 cents in mid-December 2017 to nearly $3 in the second week of January 2018. This was the all-time high of RHOC’s value, from which it has fallen by over 99 percent. Other cryptocurrencies saw similar volatility in their prices during the same period. An August 2018 study by The Wall Street Journal found that price manipulation of cryptocurrencies is widespread on the unregulated exchanges where they are traded.

Around March 2018, a due diligence report, funded by members of the RChain co-op who were opposed to the Reflective Ventures deal, was prepared by Aces United. In it, lawyers from Pennsylvania law firm Promisloff & Ciarlanto, P.C. analyzed the terms of the deal between RChain and Reflective Ventures, and found that the agreement “highly favors” Reflective Ventures, which at the time the deal was written had not yet been established and was only named as “Ventures.”

Fund I, into which the 100 million RHOC were deposited, was described in the report as “a subsidiary of a subsidiary” of Ventures. Under the deal, 80 percent of the profits generated by the companies backed by Fund I would go to RChain, while the remaining 20 percent would be retained by Reflective Ventures. The report concluded that RChain had no power or votes to influence the affairs of Ventures or Reflective Ventures, though it would have two seats on the Investment Committee Board of Fund I.

Reflective Ventures was to be paid an annual fee of either $2.2 million or 2 percent of the value of the fund by RChain for the next five years, which the report said significantly reduced the downside risk to Ventures and meant it had “less skin in the game” than it otherwise would.

After the deal with Reflective Ventures, RChain Holdings continued operations, though it had been renamed Pithia in late 2017. A new CEO, Lawrence Lerner, was brought on board as CEO of Pithia around the same time as the renaming. Pithia/RChain Holdings had previously signed a deal with RChain Coop in Mach 2017, which occurred while Meredith was simultaneously on the board of both RChain and RChain Holdings.

The Pithia-RChain contract was subsequently renegotiated in August of 2018 and at that time had a clause where Meredith agreed to step down from the board of Pithia and return the shares he held in the company. RChain agreed to give Pithia 105 million RHOCs to put into an investment fund, 5 million more than it did Reflective.

There was another key difference between the Pithia and Reflective Ventures deals, which became important later in 2018. A clause in the contract with Pithia stated that if RChain failed to develop a working version of its blockchain platform by March 31, 2019, then Pithia would be allowed to keep the 105 million RHOC.

An investor who put more than $250,000 in RChain, who spoke with GeekWire on condition of anonymity, is skeptical of the terms of both the Pithia and Reflective Venture deals.

“It was ludicrous how the deal was structured though, for both Reflective and Pithia,” the investor said. “Effectively, research and development goals had to be achieved by the cooperative by certain dates otherwise the RHOC tokens contributed to the funds of both those firms would be kept by the firms. That’s the same as you giving money to your investment manager, and if you don’t do certain things, the manager keeps all your money. No fund on Earth works this way.

“I believe a lot of the deals constructed between the cooperative and entities like Pithia and Reflective had clauses that would never be acceptable in the real business world, but it appears Greg Meredith plays by his own moral compass,” the investor added.

Progress of RV and Pithia

Throughout 2018, both Reflective Ventures and Pithia began funding for startups that would be able to build dApps for RChain. Yet in August 2018, RChain made a decision that embroiled the project in a new controversy. RChain decided to invest, using its own funds, in a music streaming dApp, called RSong.

According to several investors as well as the crypto news site The Block, the deal saw RChain pay $23 million to Immersion Networks, a Redmond, Wash.-based software studio that develops audio technology. Though Meredith won’t confirm the terms of the deal, a balance sheet released at the annual member meeting last October showed a liability of $5.6 million to Immersion. Under the terms of the deal, Immersion developed a software player and gave RChain a multi-year license to use its audio codec. The idea is that RSong, when complete, will run on RChain and allow users to pay for music streaming with RHOC tokens.

The decentralized app RSong would allow users to pay for music streaming with cryptocurrency tokens. (RSong screen grabs)

Meredith said the plan was to rely on a third party to later buy RSong from RChain.

“We had a portfolio company called Resonate and we were hoping that we would spin that (RSong) out to them. And they would take it and run with it,” Meredith said.

Resonate was profiled by The Guardian in the spring of 2018. According to the newspaper, it was based in Berlin and received a $1 million investment from RChain in March of 2018. The article says that Resonate was also a cooperative that a had “stream-to-own” payment model and was using blockchain technology “to create a more transparent way of tracking and distributing payments as well as more user privacy and power over personal data and interactions on the service.”

But the plan with Resonate didn’t work out in the end.

“In many ways they were doing great work, but the crypto market was in a downward spin,” Meredith said. “And they so kind of have gone belly up as near as I can tell.”

The RSong deal is seen by many involved with the project as a boondoggle. An investor who put $1 million into RChain said the money spent on RSong was “wasted,” and may have jeopardized the future of the project. Another investor told The Block, “I’m not saying it’s not a good piece of tech. But it was a crazy amount for what we had. Let’s say you’re building a house for yourself and it’s $1M. But then you find a nice piece of furniture and you blow half a million on it. And now you don’t have enough to finish the house and you’ve completely destroyed the main project you’re working on.”

Meredith told GeekWire that RSong has benefited RChain by giving it a working dApp to test the network. He said that Immersion’s codec technology is very valuable and that RChain is currently negotiating an “eight-figure” deal to sell RSong to a third party. He also said that there are multiple record labels interested in putting their music catalogs on RSong.

GeekWire was given access to a working version of the RSong app for iOS, which has two audio modes, “stereo” and “immersive.” While the “immersive” mode, which uses Immersive’s codec technology, sounded better, there were only three songs on the app. One was from the English singer-songwriter Imogen Heap, who is starting her own blockchain music service called Mycelia.

Jim Rondinelli, the COO of Immersion Networks, confirmed that the audio technology utilized within the RSong application was provided by Immersion Networks. He wouldn’t confirm the terms of the contract, citing a non-disclosure agreement (NDA).

Some investors found it troubling that a cooperative like RChain, which is supposed to be run for the benefit of its members in a democratic fashion, would make public the price paid to Immersion. “This is yet another topic that suggests the business incompetence or unsavory management behavior conducted by Greg Meredith,” one investor said.

Meredith confirmed via email that there is an NDA on the Immersion deal:

The Cooperative never wants deals under NDA. However, the Cooperative cannot control the business practices of others. For example, several aspects of our business with Pyrofex [a firm that contracted with RChain to provide software development services] were under NDA, but no one complains about this.

In general, businesses may have information that is time sensitive or commercially sensitive for other reasons. Of all the industries, i can think of none more fraught with these sorts of landmines than the Arts & Entertainment industry, and specifically the recording industry.

When open source efforts, like RChain Cooperative, come into contact with these sorts of business there is no contract equivalent of CopyLeft that would force this kind of sensitive information out into the open; nor would people really want this because it would have all kinds of extremely negative consequences for the very people we are endeavoring to serve.

It is also impractical for the Cooperative to restrict itself to doing business only with organizations that do not impose NDAs. That would eliminate engagement with most commercial technology companies, such as IBM, Microsoft, Google, and Amazon, as well as the US Govt, and many other organizations and institutions.

I am sad that people, especially investors, assume the worst rather than coming to the Cooperative and asking for the details. We have provided very detailed information to Cooperative members, under agreements that they honor our agreements with our partners. Those who have taken advantage of this opportunity have come away quite satisfied with the value of our partnerships and agreements with our partners.

Consequences of RChain delay

“But it’s not just the business deals that RChain has entered into that are causing it problems. In mid-October, RChain sent a letter to Pithia stating that it would not be able to deliver the live “mainnet” version of RChain until April 1, just one day after the end of a three-month period that the co-op had to fix any technical problems which kept RChain from being commercially viable. In response, Pithia exercised its termination rights in mid-October, with Pithia CEO Lerner releasing this public statement:

After careful consideration, Pithia has determined it is in the better interest of our portfolio companies and business to terminate the August 13, 2018 Strategic Partnership Agreement with the RChain Cooperative. Several factors went into the decision, including the delay of platform delivery. Under the Agreement, Pithia was to fund a certain number of companies by a certain date, and the Cooperative was to provide a commercially viable platform by end of 2018. The Agreement further provided a March 31, 2019 deadline for the Cooperative to address technical issues in the platform. An email from Cooperative leadership confirmed that the platform would not be ready for launch until April 1, 2019.

Following the Cooperative’s confirmation of the delayed launch date, Pithia sent a letter to the Cooperative leadership and board indicating Pithia’s intent to terminate. The ten-day waiting period for termination provided under the Agreement ended on October 21st, at which time the Agreement terminates.

When questioned about this letter, Meredith told GeekWire, “It was a typo on the part of the letter. Instead of putting 11:59, March 31, someone wrote April 1. There was no intent to delay or anything like that, it was literally just a typo.”

Meredith said that negotiations between RChain and Pithia were underway and that legal action had not been taken off the table. Lerner declined to comment, other than to say, “We remain supporters of the community and look forward to the release of the platform.”

Lawrence Lerner, Pithia CEO. (GeekWire Photo)

One investor said of the letter, “A typo with incredible financial implications is not appropriate.”

At the start of October, the price of RHOC was trading at around 20 cents each, and has since fallen less than 3 cents. Another investor speculated that RChain purposefully sent the letter to ensure that Pithia would be free and clear to sell its RHOC before the price dropped further.

Reflective Ventures, for its part, is still in operation, but the companies it is funding may end up switching to other blockchain networks if RChain isn’t ready soon. Heuss, the partner at Reflective Ventures, sauid the firm had funded 23 companies after considering more than 600. A typical investment was somewhere between $300,000 and $3 million, with the average deal being $1 million.

“Governance has been a huge issue for RChain,” Heuss said.

As a result, the companies Reflective Ventures funded are keeping their options open as to which blockchain they will use, of which there are many currently under development.

This means that companies which were originally funded by RChain through Fund I may end up not actually using RChain. Heuss said Reflective Ventures’ priority is the success of its portfolio companies, and not RChain’s technology itself. He added that Reflective Ventures is looking for up to $35 million in new funding.

RChain fork Casper Labs reportedly raising $20 million

Reflective Ventures is making back-up plans in case RChain can’t deliver

The startup Casper Labs, where former Reflective partner Steve Careaga is CFO, is in the process of forking RChain’s open source code. The Block reported on Jan. 14 that Casper Labs is also raising its Series A funding round, with verbal commitments of $20 million.

Vlad Zamfir, a member of the RChain board and researcher for the Ethereum Foundation, has been negotiating a contract with Casper Labs, that would see Casper Labs fund Zamfir’s research into his proof-of-stake “Casper” protocol. A former product manager working at Pyrofex, Medha Parlikar, has also joined the firm. A source close to the project said that RHOC tokens would be matched one-to-one for any new Casper Labs token.

Meredith said the existence of forks like Casper Labs aren’t necessarily a bad thing, because they would be compatible with RChain and could operate side by side in order to benefit from network effects. But it remains unclear how Casper Labs or other forks would work with RChain, if it is launched in 2019 as planned.

RChain’s pending sale of the West Seattle home at an apparent loss seems symbolic of the project. All the same, Meredith said that his motivation in creating RChain goes beyond making a profit. In his view, pressures on modern society, such as climate change, mean that new coordination technologies, like blockchain, are necessary to meet the challenges.

In recent weeks, Meredith has been tweeting at politicians such as Washington Gov. Jay Inslee, Vermont Sen. Bernie Sanders, and New York Rep. Alexadria Ocasio-Cortez, offering up RChain and blockchain more generally as a solution to climate change, finance, and regulatory jurisdictions.

In one of the latest twists in the story, Kenny Rowe, who was named RChain Cooperative chief operations officer in 2007, announced his resignation this week from his roles on the RChain Cooperative staff and board, effective Feb. 28. He acknowledged the difficulties faced by RChain but ended his open letter to the community on an optimistic note.

“Though the Cooperative has been under great strain over the last several months, the idea of using a cooperative for blockchain governance is still sound,” he wrote. “I have full confidence that if the board of directors, leadership, and the membership can align and work together, then RChain Cooperative has a bright future.”

Editor’s note: This story has been updated to clarify aspects of the relationship between RChain and Pithia.

Source: Geek Wire On:

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Episodic tremor and slow slip events
A map of coastal Washington state and British Columbia shows the sweep of an episodic tremor and slow slip event, or ETS, from February to April 2017. The colors denote the time of the event as shown on the color-coded time bar at the bottom. The gray circles on the color bar indicate the number of tremor events per day. (UNAVCO Graphic / Kathleen Hodgkinson)

WASHINGTON, D.C. — Is it the tick of Earth’s heartbeat, or a ticking time bomb? Either way, instruments that monitor a 14-month pattern in seismic activity could serve as an super-early warning system for the “Really Big One,” the massive earthquake that’s expected to hit the Pacific Northwest sometime in the next few centuries.

The seismic ticks are known as episodic tremor and slow slip events, and they’ve been known about for more than a decade.

Such events are linked to the titanic clash between the Juan de Fuca tectonic plate and the North American plate, in a region known as the Cascadia subduction zone. The two plates grind into each other at a rate of an inch or two per year, about 25 miles below the surface.

Usually, it’s a slow grind, but every so often, there’s a sharp spike in the rate of movement. Along the Washington state coast, the spike comes roughly every 14 months. (The most recent spike occurred last May.) In California, the cycle takes 10 months. In Oregon, it’s more like 24 months.

Based on historical and geological records, seismologists have determined that the Cascadia fault can produce catastrophic earthquakes, on the order of magnitude 9.0 or more. In 2015, worries about the potential effects of a big Cascadia quake led to an eye-opening article in The New Yorker about the Really Big One.

Anne Trehu, a geophysicist at Oregon State University, isn’t saying the Really Big One is coming anytime soon. But during a presentation at this week’s annual meeting of the American Association for the Advancement of Science, she said a steadily expanding network of seismometers and strainmeter could give us advance notice.

The seismic detection network in the Pacific Northwest and California allows seismologists to map the pulls exerted by the episodic  in three dimensions, day by day.

“When there’s a little pull, it increases the risk, the stress increases, and the probability for a great earthquake increases,” Trehu said. “But it increases from one very small number to what’s still a very small number.”

Trehu said the key thing to watch for is a quickening in the pattern of episodic tremors.

“Potentially changes in the pattern, changes in that periodicity, could be indicative of something interesting,” she said. “But those are going to take longer monitoring times.”

For a time, it looked as if the West Coast’s earthquake early warning system was in trouble, but Congress kept the effort alive and added $10 million to install more seismic monitoring stations.

Efforts are already underway to extend the seismic monitoring network offshore: Those efforts include the Ocean Observatories Initiative and the Ocean Bottom Seismograph Instrument Center, operated by the Woods Hole Oceanographic Institution.

So there’s hope that when the Really Big One approaches, the West Coast’s network of seismic sensors will let us know it’s coming.

“It won’t lead to predicting to the minute or even to the hour,” Trehu said. “But there are potentially things one could do to improve the forecast.”

Update for 1:20 p.m. PT Feb. 18: Trehu sent along an email clarifying and expanding upon some of the points I laid out in the report above, and I’ve made a couple of tweaks as a result. Here are the bullet items from her email:

1) The Cascadia Initiative was a program to deploy ocean bottom seismometers across the entire Juan de Fuca plate for a limited time period (2011-2015). It is now over, although analysis of the data continues. The project was led by UO with team members from OSU, UW, WHOI and UCSC. For more information see: https://cascadia.uoregon.edu. Data were not available in real time.

2) More relevant to continued monitoring offshore is the Ocean Observing Initiative, a cabled observatory that currently includes 2 broadband and 3 short-period seismometers as well as many other instruments to monitor conditions along the continental margin. These instruments are currently recording data that are available in near real time. See:  https://oceanobservatories.org/cabled-array-seismometer-data/

3) More seismometers and geodetic instruments providing real-time data are needed. Japan has such systems. It is doable but expensive.

4) New insights about previously unobserved phenomena that can precede large subduction zone earthquakes are being obtained from large earthquakes that occur in well-monitored regions around the globe.  Examples include the 2011 earthquake off Japan and the 2014 earthquake off northern Chile.

Source: Geek Wire On:

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(BigStock Photo)

The previous year in the video game industry was punctuated by multiple high-profile layoffs, studio shutdowns, and the occasional genuine scandal. One of the results has been a new public chapter in the ongoing conversation about the personal and mental toll that game production takes on the people who create them.

Take This is a Seattle-based non-profit organization founded in 2013 by game journalists Russ Pitts and Susan Arendt, following the suicide of a colleague. The organization, which takes its name from a famous line of dialogue at the beginning of The Legend of Zelda, works to “provide resources, guidelines, and training about mental health issues in the game community, thus reducing the stigma of mental illness.”

Take This’s most visible service is the AFK Rooms it’s been providing since 2014 at gaming conventions across North America, such as the Penny Arcade Expos. An AFK Room is a quiet place for con-goers to relax, away from the noise and hustle of the show floor, with a friendly staff of volunteers and clinicians to help visitors regain their calm.

Raffael “Dr. B” Boccamazzo, Take This’s clinical director, led several panels at last year’s PAX West about the potential use of games, particularly tabletop games, as therapeutic tools and vehicles, such as “Am I Playing a Role: Identity Exploration and RPGs.” Earlier this year. Dr. B opened Save Point Behavioral Health in Bellevue, Wash., in partnership with Seattle-area clinician Sarah Hays. He’s also a regular player at Clinical Roll, a regularly livestreamed tabletop game played and run by a group of mental health professionals.

Eve Crevoshay, Take This’s executive director, has been working with non-profit organizations for 15 years. In addition to Take This, she also serves as a managing director for the New York-based musical charity Found Sound Nation.

GeekWire: I sat in on your panel at PAX West 2018 about games as an identity exploration tool. I was curious, walking out of it, why Take This is specifically focused on video game enthusiasts. What drew you to that cross-section of the population?

One of the official logos for Take This. (TakeThis.org Image)

Eve Crevoshay: We’re part of the community. The founding story was a story about a colleague of Russ and Susan’s who committed suicide, and it started a conversation inside the industry.

Mental health challenges exist throughout the population. That’s not a surprise, but every community and every subculture needs a language in which to talk about that. It needs a friendly space and a friendly language. Every industry has specific challenges related to mental health, and the games industry is no different.

So Take This is a game culture-specific, games industry-specific response to mental health challenges, and is very deliberately engaged in that community in order to support it. There are lots of mental health organizations out there that don’t speak game, and are skeptical or not supportive of people who are really into this culture, and the very different, very cool ways in which people love and are fans of games.

Raffael “Dr. B” Boccamazzo: To jump onto that and add to it from a mental health perspective, there are a lot of mental health professionals who really view geek and gamer culture as an extremely monolithic construct. We exist to, in some respects, bridge that gap, between mental health professionals and geek and gamer culture, where we can explain that no, a video game is not just a video game.

Game studio culture is a very different experience from triple-A to indie, and they have different stressors. We are able to offer and teach some of those things to clinicians so they can provide the appropriate support for the nuances of this culture.

Crevoshay: We have a paper called “Crunch Hurts.” We have a very specific set of conversations and services that we provide inside the game industry that are designed to address the specific nature of creative work, of the developer cycle, the boom and bust cycle that exists within game companies … the specific challenges around the culture in games companies. … We consult on organizational culture and practices, community management, mental health safety, and online environments.

GW: I didn’t know you did so much on the ground within the industry itself. Obviously, everybody knows you from the AFK Rooms.

Dr. B: Even with the AFK Room, one of the things I like to tell people is that it takes a lot of work to look like nothing’s going on. Before we bring an AFK Room to a show, we end up doing a full consultation and evaluation of a show to make sure that their policies, practices, the way they work with their staff and attendees, and their infrastructure are conducive to an AFK Room without turning it into something it’s not. We do a lot of back-end work just with the AFK Room program, in addition to all this consultation stuff that we also do.

GW: To help make conventions more accessible and welcoming to people who might be neurodivergent.

Crevoshay: Not just neurodivergent.

Dr. B: One doesn’t have to have a diagnosis to find conventions challenging and/or overwhelming.

Crevoshay: Just to parse it a little bit, because this is often a confusion that comes up, is that neurodivergence isn’t technically a mental health diagnosis. It’s a separate category. People with it often need the AFK Room space, for example, but there are a lot of other situations and experiences that people have, or specific environments that are challenging for people whether or not they have a diagnosis, and whether or not that is a psychiatric diagnosis or something else.

One of the things we really strive to do is normalize the experience of mental health challenges because it’s very, very common, and it’s not something to be embarrassed about.

The more we talk about it, the more we can provide a space, to say, “This is OK. If you’re having challenges, don’t be embarrassed about it. Don’t try to hide it. Come to the AFK Room, come use our resources.”

Say you feel like this is happening in your workplace. Seek out Take This as a resource in your workplace, in your community, knowing that what we provide first and foremost is just a place where we accept and respect that part of everybody’s divergence.

GW: We’re talking a lot right now about crunch in games development, especially in the wake of events like Telltale closing or the culture at Rockstar. What are some of the challenges you’ve seen as a non-profit, dealing with the effects of crunch time in the video game industry?

Dr. B: If you look at the [International Game Developer’s Association]’s developers’ satisfaction surveys over the last 10 years or so, you see an emerging awareness of the fact that game developers work hard. In some cases, it’s self-imposed, because games are a passion, and it’s really easy to get locked into your passions. In some cases, it’s a culture at the studio, a sort of unspoken expectation that you will work hard, and you will finish all these projects and then some.

Regardless of the reasons, overwork exists in the games industry, and again, looking at the surveys, it looks like it’s slowly getting better. But it’s still happening, and we know that there are negative effects to overwork, regardless of what industry you’re in.

It just so happens that there’s this culture of overwork in the games industry, and we want to do our darnedest to make sure that people are aware that that’s a thing, but also have some appropriate practices on how to avoid that thing, and actually make their work more efficient and creative in the process.

Crevoshay: I would add that not only is overwork still a thing, but consider the particular challenges of being an indie developer, outside of the large studios and outside of the protection of size and flexibility, where you’ve got to worry about funding, timing, and resources.

That’s common across creative industries, and we see it as a place where self-imposed crunch really still exists. For example, Mike Wilson, who’s on our board, is from Good Shepherd and Devolver. He’s been in the industry for years. He’s noticed — he’s been very vocal about this — a number of the indie developers at Devolver and Good Shepherd showing up with major mental health crises during the process of development, because of the toll that can take on their lives and livelihoods.

It hasn’t gone away, even though it first became a real hot topic about 15 years ago in the games industry, and it’s still a major thing.

GW: Are you talking about the “EA Spouse” thing?

Crevoshay: Yeah. Devolver has commissioned a great game, Fork Parker’s Crunch Out, and it’s about crunch. It’s a limited run, and the proceeds benefit Take This. It’s a generous thing that Mike and Devolver have done, and it’s a fantastic description of what crunch can do in a game form.

The cover art for Mega Cat and Devolver’s Fork Parker’s Crunch Out. (Mega Cat Studios Image)

GW: So it’s a Super Nintendo-styled game, or it’s an actual cartridge?

Dr. B: It’s an actual cartridge.

Crevoshay: In the presale, Mega Cat Studios received a number of messages from people in the games industry, some anonymous, some not, saying “Hey, this is the story about some crunch that I had 10 or 15 years ago. It’s still traumatic for me, I’m still afraid to talk about it, but thanks for making a game about it.”

What that says to me is that these experiences and the culture that supported them are still around, and it’s still a big deal. We need to continue to validate that experience and the trauma it can cause, to say “Hey, that’s not OK.” Take This still needs to be the voice in the industry that says mental health matters, mental health challenges are normal, and these practices do not support mental health.

GW: There’s definitely a feeling that you earn your bones in the games industry by putting in those 10 years of crunch, where you don’t really sleep and you live off Skittles.

Dr. B: My first thought was, “Yeah, if you make it 10 years.”

You’re absolutely right. I think that for a lot of people, it’s for the best of reasons. Games are their passion. It’s the same thing you’d see with a musician or an actor. It’s hard to set limits on your passion when you want it so badly, but it makes it easier to crash and burn.

GW: Do you think that part of it is the culture, where the higher ups know that there are a lot of passionate young programmers who’ll put in that kind of work, and who can be replaced relatively easily?

Dr. B: The majority of the people we encounter are incredibly well-meaning. They’re just passionate. You get a large enough sample, you’re going to get malevolent people anywhere, but really, the majority of the people we run into just want to make games.

Crevoshay: The reason that Take This offers management training as part of our consulting services is because these things are hard. They take knowledge, and experience, and figuring out structure, and that’s not how a lot of these companies start, right? A lot of these companies start because somebody says, “I want to make a really cool game!” Then two and a half years later, they have seven employees, and everybody’s about to not be paid for the 15th month.

It’s really about how does Take This provide resources to the community in a way that supports, recognizes, and honors the passion, but gives it some structure and some parameters.

GW: I’ve been talking to a lot of people lately who tell a lot of stories about that passionate workforce being up against more mercenary sorts of management. It’s interesting to see a perspective from your side of things. You’re seeing a different side of the business just because of who comes forward to you, and your specific areas of expertise.

Crevoshay: There’s a narrative that labor’s going to engage in that’s not our narrative. The truth is that we, Take This, have to provide and create as big a tent as possible, because everybody is affected by mental health challenges and everybody is going to need support.

So we are as inclusionary and as welcoming as we possibly can be. That’s intentional, because we also recognize that there are a lot of nuances inside companies, communities, and fandoms, we need to try to honor them, as long as they’re safe in terms of mental health practices.

We just developed and launched our Take This streaming ambassador program. It’s our entrée into this certification process, saying that we’re going to create parameters about what makes a safe mental health space, and we’re going to ask these streamers to adhere to a set of behavioral standards. We’ll provide them with some training and resources that they can bring to their communities. We’ll train them, we’ll train their moderators if they’d like it, and that creates expectations of what will happen when you show up in this streams, in these communities, and in these chats.

That’s something we’re planning to bring across the industry. There’s a basic level of behavior and interaction that’s safe and appropriate for supporting mental health. That’s where we want to start.

Dr. B: There’s an acronym that we’ve been using a lot lately. It’s a great mnemonic because all you have to remember is “extra virgin olive oil.” EVOO: Empathize, Validate, Offer Options.

Crevoshay: In addition to creating safe spaces, we also want to provide these people, who are advocates for mental health, with parameters about what they should do, and what they do not need to do. A Take This ambassador would know what the parameters are, and doesn’t feel like they’re compelled to offer therapy because that’s not appropriate. Stuff like that.

GW: It seems like there’s that middle range of streamer where they end up being a sort of advice columnist to their audience whether they like it or not.

Crevoshay: That’s a level of emotional labor, and that’s come up in the streaming community.

Dr. B: All the time.

GW: I’m curious. It seems like relatively specialized psychological language, like “triggers,” has become more mainstream in the last few years. What’s your perspective on that?

Dr. B: I hate to be a contrarian, but I still think it’s a relatively unknown concept. One of the struggles that I run into when educating people is that they know the words but don’t know the meaning. As part of our destigmatizing effort, I try and coach people to stop using psychological terms in common parlance, because they don’t necessarily understand what it means, and we end up conflating normal experiences with these psychological terms.

Some of the kids I work with, who I’ve worked with long enough, if a new kid comes into my group and says, “Oh, my God, I’m so triggered,” the rest of them know what’s about to happen. They know the talk the kid is about to get on what that word actually means.

One of the things we encounter all the time is, “Oh my God, I’m so ADD,” and we have to educate people on what that means. This is both personally and professionally meaningful for me, because one of the things I’m very open with is my autism.

GW: Your Twitter bio used to say that you have Asperger’s?

Dr. B: Technically, Asperger’s doesn’t exist anymore. It’s all been combined into autism spectrum disorder as of 2013.

But one of the things that goes along with that, a lot of the time, is attentional challenges. For me, when someone’s like, “I’m so ADHD,” I think, “Do you really want to know what that experience is like? Do you understand what it’s like to be distracted by a piece of dust floating by and literally forget what you were just talking about?”

That’s not a daily occurrence, that’s a minute-to-minute occurrence. That’s what it’s like. We exist to educate people on these psychological terms that I think most people are misusing.

Source: Geek Wire On:

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Bill Gates speaks with GeekWire editor Todd Bishop. (GeekWire Photo / Kevin Lisota)

Bill Gates is known to play his cards close to the vest, but in an interview with GeekWire, the Microsoft co-founder opened up on a wide range of topics, covering everything from his evolving philanthropic goals to his memories of his late friend and former business partner, Paul Allen.

Gates sat down with GeekWire co-founder Todd Bishop to discuss Bill and Melinda Gates’ annual letter, published this week. The letter focused on developments that surprised the philanthropists over the past year, and what those surprises can teach us about the world’s biggest challenges.

“A benefit of surprises is that they’re often a prod to action,” the letter says. “It can gnaw at people to realize that the realities of the world don’t match their expectations for it.”

It’s easy to see why the past year was defined by surprises for Gates. The U.S. political climate has been a roller coaster of unexpected twists and turns. It was also the year that Allen, Gates’ childhood friend and Microsoft co-founder, passed away.

Continue reading for Gates’ reflections on the state of the world, the surprises of 2018, and more from his interview with GeekWire.

Listen to the podcast above, or subscribe to the GeekWire Podcast in your favorite podcast app, and watch the full video below.

The nationalist case for globalism

GeekWire: In your annual letter, one of the points that you make — and I think this may be the point that’s going to get the most attention when this letter comes out — is that there is a nationalist case for globalism. Very important topic right now, not only in the United States, but in Europe and other parts of the world. Let’s hear your nationalist case for globalism.

Bill Gates explains why putting America first means giving a damn about the rest of the world, too

Bill Gates: If you disengage from the world, the instability in terms of those economies, diseases that can spread globally very quickly, there’s lots of reasons why that’s going to hurt you. Even if you say that the normal sort of empathetic humanitarian reasons of all lives have equal value and it bothers you that young children are dying in those countries, even if you zero that out, my view is that the impact per dollar of the aid, which in the case of the U.S. is not even half a percent of the budget, that as General Mattis has said, if you don’t fund the aid budget, you’ll have to spend more money on bullets. [That’s the case for] getting Vietnam to develop, and so we no longer think of it as a place we need to send soldiers to. Now [Vietnam has] actually done well enough, it’s graduating as an aid recipient, that is its domestic resources are funding things. India is graduating. Indonesia is graduating. Africa is a tougher set of countries but even there, the health improvements, which is our foundational piece, the health improvements have been super rapid. And that’s a place where our foundation plays a strong role. We’ve given over $10 billion to these health-related activities, and we’ve seen a fantastic result. So we’re going to keep doing that.

GW: It seems, though, a very difficult case to make in the world today, in the U.S. and internationally. Is that fact a blip? In other words, are we just happening to encounter temporary opposition to that view of a nationalist case for globalism, or is this the way it is going to be going forward? What’s your position on that?

Bill Gates: Well, definitely if people are disappointed in their government, they feel like it’s not respecting their values, or it’s not prioritizing them, or lets somebody else get in a better deal than they get, that general negativity can lead to the government not being able to invest in these long-term issues. If voters feel like, okay, the elites kind of like doing this stuff, and the elites are not caring about us, that really hurts. So it’s absolutely a wave of questioning … should we be in alliances with other countries, like NATO? Should we, the U.S., take this leading role in helping make the world a very, very stable place, or should we just sort of say, “Okay. That’s a waste of money. We won’t help out with those things.”

Since World War II, you’re almost taking for granted that the world is getting more stable, and that these investments make sense. I’m hoping it’s a cyclical thing, particularly if we can get people to go and see the work. Anybody who goes and sees it gets very drawn in because you see the kids who are still dying. You see the kids who are surviving. You see how it’s very little money and this is the investment. That stability is important even here in the U.S. We don’t want Ebola or a flu coming out of developing countries and coming here.

GW: What would you say on this topic to President Trump and Congressional leaders?

Bill Gates speaks with GeekWire at his private office in the Seattle area. (GeekWire Photo / Kevin Lisota)

Bill Gates: Well, I haven’t seen him for quite a while, but the American voters should be very proud of these programs that President Bush started. He said that there was an AIDS emergency, and created a U.S.-only thing called PEPFAR, that’s very generous, over $5 billion a year. He said the U.S. would be a third of the global fund where lots and lots of countries give. The U.S. has been out in front, and 23 million people are alive today because of that generosity. I’d want [Trump] to go and see that, meet those people and think about, “Okay, Africa, we’ve got this great population growth. It’s got a challenge from climate change. That’s where most of the challenge will be. Should we stay engaged there with aid programs that aren’t gigantic? I mean, the U.S., our defense budget is way larger than anybody else’s. The aid budget isn’t 5 percent of the defense budget, and yet it does help with the same kind of aims.

On climate change

GW: You have raised some skepticism among people who are really advocating instead of nuclear, green energy sources, so things like wind and solar. Do you see it as an either, or? Do you see it as a competition between nuclear and those? How do you respond to the criticism of your support of nuclear energy?

Bill Gates: No. In most places, if you have the right amount of wind or sun, that’s going to be a significant power source. It’s still less than 2 percent of global power, but it is, along with natural gas, going quite a bit. There’s several issues. You need power 24 hours a day. And Tokyo has seven days every year with no sun and no wind. It’s a 23-gigawatt power consumption. So we don’t make enough batteries in the world to handle that situation, ignoring even the economics. So because we won’t have a battery that’s good enough for that 24-hour storage, we need other sources of power. Hospitals want power all night when it’s super cold, like in Chicago now. People want their heaters to work. So even for the electricity piece, that reliability is a challenge. That’s only 25 percent. The word “clean energy” has kind of fooled people to not really let them know about the 75 percent that’s not electricity. It’s more making steel and cement.

The kind of extreme heat you get out of some reactors actually helps you with those areas of greenhouse gas emissions in a way that just renewable energy doesn’t. So it’s great. The price of electricity, when the sun is shining, will be low but it will be a lot higher at other times.

GW: You write in the letter that you wish more people fully understood what it will take to stop climate change. What is it going to take?

Bill Gates: Well, you have to innovate in all the areas of sources, and you have to innovate in such a way that not only do rich countries say, “Okay, we’ll pay a premium for our steel and our electricity,” but you have to turn to a country like India that’s electricity is just now starting to provide basics like air conditioning and lighting. And if you ask them to pay a big premium, will they really choose to when they’re not responsible for the greenhouse gas that’s already been admitted? Per person, we’ve emitted a thousand times as much as an Indian citizen. So until they get to the level that we have, should they slow down helping with basic needs? And the only thing that gets around that trade-off is if you’re so innovative that there’s no premium cost to being zero emission across making meat, cement, steel, trucks, planes, a lot of sources.

On education

GW: As part of the focus on poverty in the U.S., you’re spreading your wings as the Gates Foundation a little bit. Traditionally, the focus has been on global health and U.S. education. Do you see this focus on poverty and also on emotional maturity among kids as a third pillar, or does it simply fit into what you’re already doing?

How a group discussion about ‘Becoming a Man’ changed Bill Gates’ perspective on the world

Bill Gates: … It is a broadening in the sense of trying to understand what interventions — beyond just the normal, “this English class is better, this math class is better” — what is it about mentorship or these cycles, or even explicitly trying to train executive function skill? We did a whole half-day at the foundation [with] the leaders in that field who have done various interventions, some of which looked pretty promising. There’s always lots of things that, if you really measure them, don’t work but some things even meet that very high task. So it’s a broadening of, okay, what is hard for that student? Even understanding [does] that stress in the environment even create a biological situation where concentration is much more difficult? Absolutely that is a factor.

Now coming up with an intervention that improves the executive function skill or offsets the kind of stressed mode that you’re in if you live in a tough neighborhood, that is much harder. But there’s very little R&D money in this space. It’s not like software or pharmaceuticals where 10, 15 percent of the money gets spent on R&D. In education, society spends not even 0.1 percent. So it is a case where foundations might be able to come in, find the people with the best ideas, really prove which ones work. So we’re casting our net as wide as we can … hopefully, in five years, this field will be a lot smarter because the underinvestment is sad and yet maybe there’s some really good things that’ll now be discovered, finally.

GW: Let’s dive into one other area of education here, because there was a whole section of the letter that made me think, man, if I had time-warped to 2019 from 1995 having just read “The Road Ahead,” and then reading your description of how textbooks have evolved and, or actually not have evolved, are starting to evolve.

Bill Gates:  Starting, yep.

GW: Starting to evolve, I would have gone, “This didn’t happen two decades ago? I would’ve expected it to happen much faster.” Describe what you’re seeing in the world of textbooks, and why you think it’s working for a new era of education.

Bill Gates:  When you take that math textbook home and you’re trying to do those exercises, you can get kind of stuck, or you can think maybe you’re getting it right and you’re not. In this digital world, the idea that the software can generate the homework and generate it at the right level, and then if you need a hint, fine, you get the hint. Your teacher sees, “Oh, he needed a hint. He didn’t just get it. So maybe he has to try this out a little bit more.”

But the feedback used to be like three days later and he’d be like, “Oh, I really screwed this up. God. What were we working on then? That was three days ago.” Now when you’re just sitting there with your phone or tablet or PC, you’ll get that feedback. We’re much further along in terms of taking that experience for math and making it a richer experience …

GW: Why hasn’t it happened already? Why isn’t this our reality now?

Bill Gates:  Well, the textbook market is a tough market. Who should really try this stuff out? Where should the R&D money come from for these things? It’s really not like a normal consumer market, and you’ve got to get the equipment in. So having PCs or tablets all the time is much easier now than 10 years ago where you had to walk into the lab and some of them would be broken. Now, ideally, some of this can be done just on the cell phone screen, not all of it can but actually, quite a bit of it can. That is nearly pervasive at this point.

So it is moving slower than it should. Educational innovation, we, as society, way under-invest in. We’re trying to get some of these private sector companies to do well, but a lot of them just, as they try to build a sales force, the economics don’t work very well.

Remembering Paul Allen

GW: You and Melinda dedicate the letter to Paul Allen, your Microsoft co-founder who died of cancer in October. As you’ve reflected on his life over the past couple months and your shared experience with him, what have been your biggest memories and your insights from the time that you spent with Paul?

Bill Gates: Well, Paul was immensely curious. He read science fiction way more than I did. He was two years ahead of me, and I had done super well on some math stuff, so he was always kind of egging me on, “Hey, can you figure this computer thing out?” It was an amazing friendship because kids didn’t hang out that much with kids who were two years younger. We were very much bonded when we did the school schedule together. Paul had gone off to Washington State and my closest friend, who was also involved in the computer thing, Kent Evans, was tragically killed on Mount Rainier. So I went to Paul and said, “Hey, come back and help me.” And that sort of started a partnership that led to Microsoft.

Bill Gates patched things up with Paul Allen, hoped to travel the world with Microsoft co-founder

And Paul’s credit for Microsoft was pretty immense because not only did he have this insight about the microprocessor, he literally moved back to Boston — I helped him get a job back there — but he was back there not because he liked the winters or the place he was living, to basically bug me into dropping out because he knew he wanted to do the company with me. So he was just back there and then finally it looked like we were going to miss the whole thing when the first kit computer came out, and that’s when his argument, “Hey, Bill, drop out,” succeeded, and our first customer took us to Albuquerque, New Mexico.

So Paul always was curious about things. Paul didn’t like being a manager all that much and during the Microsoft days, I narrowed my interest very much to software. So like when Paul took a bunch of guys to go to the shuttle launch, I was like, “Hey, wait a minute. We’re supposed to deliver for IBM here. What the heck are you doing?”

GW: You heard about this DOS thing. Come on, guys.

Bill Gates: Yes! He always was wide-ranging in his thinking and reading … he always looked far field. He always had wanted to find some new and different thing, always a little bit ahead of his time with the stuff he was doing.

Now as my kids are getting older and leaving school, I was going to have more time to hang out with Paul because he has explored, he traveled the world … which I had to do some with him, but I was expecting to do a ton of that once our kids were at college.

GW: That’s really disappointing to hear. Where are you at this point in terms of coming to grips with the fact that he’s not here?

Bill Gates: Well, it’s kind of strange because we always would touch base on, “Hey, there’s this cool movie I saw, or here’s some new technical thing. Do we think this one’s going to work out or not?”

Seattle’s best burger

GW: We’ve talked about a lot of divisive issues here today. You recently put yourself right square in the middle of one. Somebody got a picture of you standing outside of Dick’s Hamburgers waiting in line for a Dick’s burger. You are a longtime Burgermaster fan. What do you say to people who would call you a burger flip-flopper?

Billions served: Bill Gates photographed standing in line for a burger at Dick’s Drive-In in Seattle

Bill Gates:  I absolutely love both. You know, I’ll eat lots of different burgers at various times but my two stark favorites are Burgermaster. I guess I’m not as photogenic when I’m sitting in my car as when I’m standing in a long line at Dick’s, but they’re both pretty amazing. The one thing about Dick’s, I will say, the fries are pretty good. It’s hard to beat the Dick’s fries.

Opinion: Without more DOD investment, there just aren’t enough incentives to lure talent away from high-paying jobs with great benefits into a life of public service.

Source: MIT Technology Review On:

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Kelvin Droegemeier
White House science adviser Kelvin Droegemeier addresses the annual meeting of the American Association for the Advancement of Science in Washington, D.C., with a video image of him looming in the background. (GeekWire Photo / Alan Boyle)

WASHINGTON, D.C. — President Donald Trump’s newly minted science adviser reached out to his peers today at one of the country’s biggest scientific meetings and called for the establishment of a “second bold era” of basic research.

“I hope that you never forget that I am one of you, that I came from your ranks,” Kelvin Droegemeier, who was sworn in as director of the White House Office of Science and Technology Policy on Monday, told hundreds of attendees here at the annual meeting of the American Association for the Advancement of Science.

The University of Oklahoma meteorologist is coming into a job that was vacant for two years, in an administration that hasn’t exactly been viewed as science-friendly. The White House’s environmental policies are a particular sore point, in light of Trump’s withdrawal from the Paris climate accord and regulatory rollbacks.

But Droegemeier’s selection has gotten generally good reviews from the science community. AAAS CEO Rush Holt, a Ph.D. physicist and former congressman, took note of Droegemeier’s reputation as a “solid scientist” in his introduction.

“Everyone who works with him finds him to have a very accessible manner,” Holt said. “We scientists hope and trust that this will turn into accessible policy.”

In his talk, Droegemeier invoked the legacy of science adviser Vannevar Bush, who set the stage for America’s postwar science boom in 1945 with a report he wrote for President Franklin D. Roosevelt, titled “Science: The Endless Frontier.”

Droegemeier said modern-day America remains the world’s leader in science and technology, but warned that other countries were “nipping at our heels.”

“In many respects, we’re kind of thinking in the same ways that we have since World War II … and I would call that period from the Bush treatise in World War II up to the present that first great bold era of science and technology in that endless frontier,” Droegemeier said. “The past 75 years have been extraordinary, and I think we’re about to turn a page into a new frontier.”

He noted that when the Soviets launched Sputnik to kick off the Space Race in 1957, “only our federal government could mount the response to that launch.”

“Today, it could easily be a private company, and perhaps even a startup,” Droegemeier said.

He said the second bold era would take advantage of the full sweep of America’s research assets, underpinned by American values and based on three pillars:

  • Understanding America’s research and development ecosystem in a new context: Droegemeier called for a quadrennial assessment that takes stock of the entire R&D enterprise, including research conducted by the government, the private sector, academia and non-profit organizations. He pointed to the example of artificial intelligence research: What’s the future demand for AI, and what assets can be deployed to supercharge progress in that field? “The answer is that we don’t really have a clue,” he said. “Getting a handle on this as a portfolio is a real challenge, but in my view, if we’re able to do that, it will really help us think about how to strategically invest and move forward.”
  • Leveraging the collective strength of R&D sectors through innovative partnerships: Droegemeier talked about rekindling the spirit of “those famous blue-sky research labs of the past,” such as Bell Labs, where the transistor was born. He suggested creating a network of “Alpha Institutes” to pursue “absolutely transformational ideas on some of the biggest challenges that face humanity today, like space exploration, climate change, eradicating disease and making it possible for people to live longer and healthier lives.” These institutes would be located at colleges and universities, and would be funded primarily by industries and non-profits.
  • Ensure that America’s research environments are safe, secure and welcoming: Droegemeier said he would work with the scientific community to tackle the issue of harassment at research institutions. He said another one of his top priorities would be to make sure that “our resources do not fall into the hands of those attempting to do us harm, or those who would seek to reap the benefits of our hard work without doing hard work themselves.” And he called for “reducing the unnecessary administrative burdens that divert researchers’ time and attention away from innovating and discovery.” He estimated that such burdens cost a few billion dollars a year.

After the talk, Droegemeier got a tentative vote of support from Harvard physicist John Holdren, who served as President Barack Obama’s science adviser.

“I think Kelvin’s going to do a great job,” Holdren told GeekWire.

He added that Droegemeier is likely to face extra challenges because he’s joining the White House team halfway through Trump’s term of office. Holdren hoped that the White House would follow up by making long-overdue appointments to the President’s Council of Advisers on Science and Technology, or PCAST.

AAAS’ Holt said Droegemeier’s speech was “a good talk,” but held off on discussing specific suggestions, such as the Alpha Institute concept.

“At the moment, it’s just talk,” Holt told GeekWire.

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