Howard Morgan is a Data Freak

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The CoVenture Event

A conversation between Ali Hamed and Howard Morgan 

For those of you who think Howard Morgan is retired, think again. Yes, he recently left First Round Capital, which he co-founded with Josh Kopelman in 2005. Yes, he says he’s retired, but don’t let that fool you. He may be switching gears, but he is still actively investing.

Last week, we had the pleasure of watching Howard on stage with Ali Hamed, Managing Partner of CoVenture, discuss everything from AgingTech to ICOs (Initial Coin Offerings). Howard is well known for co-founding First Round Capital, a prominent seed-stage Venture Capital firm, but here are a few fun facts Ali surfaced that you may not be aware of.

About Howard

… a PhD in Operations Research from Cornell University
… worked on Arpanet
… written at least 3 books on marketing and 2 books on computer science (our favorite light summer read: Implementation of Complex Management Information Systems)
… was a lead investor in Bill Gross' Idealab
… co-founded Renaissance Technologies, one of the first quant funds
… served on, or led, 28+ corporate Boards of Directors
... co-founded First Round Capital. Starting with a $7 mm AUM, he helped grow it to hundreds of millions of assets under management
... and invested with Bernie Madoff in the 1990s and escaped losing his shirt.

And one fun fact that Ali did not mention, but that we love:

Howard has...
… three amazingly distinguished daughters, who have all led high-powered careers themselves, at places as far flung as McKinsey, Goldman Sachs and a private investigation firm (we couldn’t get the name out of Howard!).

 

    The ICO Bubble

    Regarding quant funds, “Most people don’t understand how or why they work, and therefore when a model goes wrong, it can be very difficult [to correct.].” But despite these concerns, he’s considering raising a fund of funds to deploy into quant managers, some of whom he’s already seeded (stay tuned for that announcement).

    Howard has successfully made similar investments, most notably in Numerai, an “open-source” quant fund that combines AI and crypto-currencies. Talk about radical transparency.

    Since every manager touts that he or she aspires to be in the top decile of fund managers, Howard’s criteria for finding a great investment manager includes these things:

    • Deal taste – what kinds of companies do they like? Are those things that I would like?
    • Deal flow – Where is their deal flow coming from?
    • Thesis – do they have a solid thesis that they can apply to each deal?
    • Discipline – Will they say no, and be disciplined?
    • Track Record – what kind of history do they have?

    Sorry, Montana and Nebraska

    “Why hasn’t Seattle taken off like San Francisco?” Ali asked. They have the rich environment – capital, technology, infrastructure and expertise. There are certainly companies there that could be seedbeds for talent. Howard thinks former employees of Amazon, Microsoft and Adobe have not spun out and spawned because of the more “corporate” cultures of such companies. “Even Google strives to [remain] entrepreneurial,” he points out.

    Future tech hot spots? Beyond San Francisco, Israel, New York and Los Angeles, Howard thinks Atlanta and Austin have a chance. What about Montana or Nebraska? “Not likely,” he states.

    EXIT FAIL

    Howard has given thought as to why companies don’t go public at the same rate they did in the 1980s and 1990s. He blames “decimalization.” Before 2001, trades used to be denominated in eighths, meaning 12.5 cents became the smallest amount a stock could change in value. IPO underwriters depended a lot on the spread between the buy and the sell. If the buyer paid $12 a share, and the seller got $11.875, that spread was meaningful enough to be split by the brokers to pay for the marketing and research of the company pre-IPO. When the stock exchange moved towards a decimal system, the spread became only a tenth of a cent, leaving no money for marketing a small cap IPO. Fewer sub-$50 mm IPOs mean startups must focus on other types of exits. For more fun facts about Spanish doubloons and the stock market, click here.

    What, outside of Venture, does Howard invest in? “Things that change the world,” he says simply. And, yet, isn’t all tech changing the world? That may be, but Howard’s devoting himself to more personal interests, things like biotech, genomics, and agriculture. And don’t forget SilverTech: “Aging is a monster market,” he notes.