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 BLOG >> October 2016

Startup Risk Factors [Investing
Posted on October 28, 2016 @ 11:06:00 AM by Paul Meagher

The Coding VC website published a couple of useful articles detailing their risk-based framework for valuing and managing startups. Startups are Risk Bundles is their first article and deals with the issue of startup valuation. They summarize their valuation approach this way:

In essence, a company's valuation is based on its ideal outcome, weighed by the likelihood of overcoming all of its risks. The best way to grow the valuation is to mitigate the biggest risks.

They use the diagram below to illustrate how risk factors are used to compute an expected valuation. Each risk factor is represented by a number between 0 and 1 that is multiplied by the ideal outcome if everything worked out as planned. The diagram also illustrates why a technically adept startup needs to specifically focus on it's primary weakness in "selling product" in order to drive a much higher valuation (Option 1). They shouldn't be focusing all their resources on something they are already good at (building a full product) if they want a higher valuation (Option 2).

Their second article is called How to De-Risk a Startup and offers qualitative and quantitative guidance on risk factors startups should look out for, how to rate the magnitude of the risk associated with a risk factor, and tips and heuristics for reducing the magnitude of the risk.

Overall these two articles offer up some useful ideas how one might value and manage startups based on risk factors. I had a somewhat similar idea when I discussed business faults but using a risk framework offers more options for quantitative development. Also, in my research the concept of "de-risking" an investment is often mentioned but seldom discussed in much detail. The latest article helps to remedy that problem for me.

There is some thoughtful commentary on the latest de-risking article on the Y-Combinator newsfeed.

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Precision Viticulture [Agriculture
Posted on October 25, 2016 @ 09:05:00 AM by Paul Meagher

Lately I've been dealing with the issue of not having a good system for identitying rows and vines in my vineyard. I finally came up with this system:

A-[01..11]
B-[12..19]
C-[20..28]

The letters A, B, and C designate the vineyard parcel. The oldest parcel is labelled A, the second oldest parcel B, followed by the youngest parcel C.

Within each parcel there is a row number. A-01 refers to the first row in parcel A. It also corresponds to the first row I ever planted. Likewise C-28 corresponds to the last row of vines in parcel C and also the last row ever planted.

If I didn't want to keep increasing my row numbers, I could organize the numbering like this:

A-[01..11]
B-[01..08]
C-[01..09]

It is possible to extend the system like so:

A-[01..11]-[01..200]
B-[01..08]-[01..200]
C-[01..09]-[01..200]

A-01-15 would identify the 15th plant in the first row of the vineyard.

In the future, I might do a lookup to find out that it is in the second section of the first row between post number 2 and post number 3. In that section I might also note there are 8 vine plant slots, with 2 needing replacement. They will need to be replaced with 2 more Marechal Fosh grape vines. One didn't make it through the cold season and the other died of gall.

There is alot of power latent in well organized labelling schemes. Precision viticulture can involve drones, multispectral sensing, advanced mapping, soil samplers and so on but it is all just data if you don't have a good organizing system for it to go into. Maybe that system is the map itself, or maybe it is something a bit more abstract like a meaningful labelling system.

Another important aspect of a labelling system is that it can help you make better observations.

I can observe that a certain vine is not doing well and I can just as easily forget that observation or do nothing with it because I don't reference it to a precise positional labelling scheme for storage.

A labelling scheme can also help to organize work when you can provide specific instructions on what to do and where to do it. One can walk the vineyard and make job notes on what needs to be done and where in a very precise way if need be.

One way to be more lean is to be more precise.

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Garage Mini-Winery: Part 3 [Design
Posted on October 19, 2016 @ 08:44:00 AM by Paul Meagher

I now have a working mini-winery in my garage (see part 1 and part 2 for background).

I am testing the system out on some plum wine and plum port that I recently started fermenting. You can see wires dangling from the wall. These are wires from a humidity controller and a temperature controller. The temperature controller isn't doing anything other than monitoring the temperature of the fermentation bucket. I had an electrician install two 500 watt heaters, one for the (future) red wine zone and one for the (future) white wine zone, so I am not using my temperature controller at this time to control any aspect of the temperature. What I am using the temperature controller for is to monitor the difference between the baseboard temperature setting/current value and the fermentation bucket temperature (the temperature probe is attached to the fermentation bucket). The fermentation temperature runs a bit higher than the heater temperature setting so to get your desired fermentation temperature you have to set the heater temperature a bit lower that the desired fermentation temperature. I'm also monitoring and controlling relative humidity. If the humidity goes beyond a certain level an exhaust fan will come on. When the baseboard heaters come on they also dry out the air so they also act like a dehumidifier. Air quality is being monitored with my nose for now. When I visit the room I'll air out the room before I go in by leaving the door open and I'll leave it open after I go in if I feel it needs more of an air exchange.

When you reach milestones in a project they are times to reflect, learn, correct course, and plan for your next milestone. This is the 4th milestone for the mini-winery. The third milestone was sheathing it in and realizing that before I put up some trim I should consult on some electrical upgrades. It was not difficult to unscrew the plywood off the wall to handle the electrical upgrades. I could perhaps have planned better but the need to get something in place for an upcoming grape harvest meant I had to achieve some milestones fairly quickly in order to get ready. The 4th milestone was to actually get something fermenting in the room and monitoring the fermentation. The next milestone will be to build some shelving, figure out what to do with my wash tub, and scale up fermentation with grapes from my vineyard.

The plum wine/port that I am fermenting was from plums I harvested of a healthy and productive plum tree on our farm property (no nearby sprays and no treatments, all natural). I harvested 62 lbs of plums off the tree. I let them ripen for a while in my basement, then put them into plastic 5 gallon fermentation buckets after I broke the skins and ran a paint mixing tool on them to further macerate the must. Topped the fermentation bucket up a bit with water so there wouldn't be alot of air headspace in the bucket. I added pectic enzyme to break down the cell walls of the plum flesh to release the juice, and campden tablets to kill of the wild yeast. After 4 days of sitting, and with a few more campden tablets added to keep the fermentation halted, I juiced the plum mash at my kitchen sink by straining it through a nylon mesh that you can buy at wine store for this purpose. I had to hand rinse the bag of pulp and seeds to extract the more stubborn juice.

I had good recovery of juice using this method and didn't have to add any more water to my juice after I added the amount of sugar amount required for 5 gallons of plum wine and 5 gallons of plum port. This is my first time fermenting plum juice so we'll see how it turns out and what there might be to learn from it. I planted plum seeds from the tree in a part of my garden after harvesting just in case I need to produce plum juice in the future. Didn't cost me anything for the seed and the tree it came from impressed me. The mini-winery will give me a better ability to reproduce the fermentation conditions that might have resulted in a nice plum wine or port.

Today I will be driving down to visit the vineyard. Last time I was there I left early in the morning as the fog was lifting. I took a photo of the section of the vineyard I'll be harvesting this year. Most of it is netted against birds so hopefully the crop will still be there when I check it out.

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Need For Speed [Entrepreneurship
Posted on October 10, 2016 @ 02:08:00 PM by Paul Meagher

Are startups that execute quickly more successful than startups that execute slowly?

Dave McClure, of 500 Startups fame, has a slideshare titled Best Strategy Is Speed, in which he argues that speed is critical to success.

I found this particular slide illustrating the speed of execution of one startup, XFIRE, interesting:

Once the money was committed, this startup was ready to get things rolling quickly. There was obviously some planning that preceded the speed of this execution. When things weren't moving ahead investment-wise, they were still moving ahead in terms of getting things mapped out and ready for the money.

The main tautological argument for why speed is critical to economic success is that you can grow faster if you execute faster.

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Garage Mini-Winery: Part 2 [Design
Posted on October 6, 2016 @ 06:19:00 AM by Paul Meagher

I reached another milestone in my garage mini-winery project (see part 1). It is now framed in and ready to be covered in. My son and I got a couple of hours in last night framing the long wall and installing a used door I got for the project. Still tweaking the door.

One unique problem you may encounter in taking over the space in your garage for some serious hobby is that you may already have alot of stuff in your garage that you have to deal with while you are building your space. The stuff in my garage has created alot of clutter in our workspace and involves extra work taking stuff out to work on the project, then putting it back in the garage at night when you are done. Project can turn into decluttering and relocation subprojects.

This project has reminded me of the Permaculture principle of highest use wherein we are supposed to ask what the highest use is of some design element so that our design is especially geared to that use. Another Permaculture principle is the principle of multiple uses wherein we are supposed to ask what are all the uses that some design element can have so that our design also takes into account as many of the most important uses as possible.

In the case of a garage we can ask what is the highest use that a garage can have? To store cars? To store accumulated family belongings? To fix and repair automotive and house hold items? To build stuff? A place to hang out and some beer or wine? A mini-winery?

I would say the highest use for my garage right now is to perform the role of being a mini-winery for my grapes this fall. Almost as high a use is to store stuff. Fixing, repairing, and building is another use. The use profile of the garage has changed because I introduced a new highest use to the structure and demoted other uses. The space has a new plan.

The next blog on this project should be when it is all enclosed at which point I can start testing its thermal efficiency at colder temps. I picked up an Inkbird thermostat as a device to potentially regulate the ambient temperature of the winery. The device cost approx. $50 and is used by alot of home beer and wine makers. This video provides an excellent educational review of the device and how to practically set it for controlling temperature.

I have a similar Inkbird controller for relative humidity (expressed as a percentage) but I'll be addressing temperature control first while monitoring the relative humidity of the mini-winery space.

An important design constraint for the wall sheathing is that I be able to remove each piece of plywood easily if I have to get back into the wall. I had to set the depth gauge on my circular saw to remove parts of the installed plywood ceiling because the partition walls would have overlapped it. Wore ski googles to keep the dust out of my eyes and drilled holes at the end of the cut to finish it. Not the best way to get your ceiling panels cut to size but it worked.

I will be putting in two maintenance hatches in case I need to bring power from adjacent plugins or run water lines. Here is one of the hatches located at the bottom to the right. It is close to another electrical outlet on the other side of the wall in case I want more plugins.

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