I first met Jonathan at a small blockchain conference in Gibraltar, and his friendly attitude, loud laughs, and the ability to endlessly entertain blew me away. He looked nothing like Brad Pitt, but 95% of people he came across seemed to like him ( the rest 5% did so A LOT), and even I witnessed a couple fights amongst people who were willing to seat next to Jonathan during lunch breaks.
Overall it was a lovely trip: apart from the standard conference networking we visited some caves and went to meet local monkeys – those are a major (and, to be frank, the only) attraction in the area.
When Jonathan Nelson agreed to talk to me about his HACK Fund, sharing memories from that trip was an obvious thing to do. So, I asked if he missed the monkeys. The answer was negative.
“They just look cute, but in reality they are evil,” – said Jonathan laughing.
Turned out, when he was little, around seven years old, cute little blond haired angel boy, his parents took him to the Zoo in Costa Rica. The cage with monkeys was a huge success at the venue, however as soon as Jonathan approached it, one of its inhabitants managed to grab the boy by his blond hair and … BOOM! BAM! – banged his head against the fence.
Well, that takes some guts to be back to the spot filled with unfriendly animals and chit chat with fellows blockchainians.
Can a nurse make it in the Silicon Valley?
Mr. Nelson has the most unusual background for the Silicon Valley…and for the most places really. His parents devoted themselves to social impact work, so little Jonathan traveled quite a lot during. Spending the first four years of his life running around dirty roads in rural Honduras and then moving to Costa Rica where his family worked with refugees that suffered from the Cuban civil war during the 80s. “I had a great interest in computer science back in my early days, but dad talked me out of it, because he thought that I’ll pursue the same path as he and become a missionary. In that case, it would make perfect sense to learn how to be a nurse rather than a computer scientist”.
So, Jonathan became a nurse. A great nurse. And he kept going with it for 20 years. Eventually his inner calling won, and Jonathan went back to school to study software engineering, relocated to the Silicon Valley and started the series of events called Hackers and Founders. It grew from one meeting of 6 nerdy dudes to a massive community of more than 300 000 founders and engineers in 48 countries and 133 cities, to one of the largest networking groups in the world, including 11,000 members in Silicon Valley alone.
Rules of the house are simple: Don’t be a jerk, do the right thing for the community. If you use the H/F brand, please don’t mess it up and tell us what your community needs.
Can someone get banned from being a part of the movement? Yes, that can happen.
“Rule number two – do the right thing for the community – is very important. If you are with us for the wrong reason, it’s not going to work. Once, there was an investment banker we’ve banned because he wanted to use the venue for his personal pitch competition,” – shares Nelson when I asked for some bloody stories.
“I kept my nursing approach when dealing with founders. Trying to figure out what hurts and how to fix it. All those numerous conversations with thousands of entrepreneurs over the years convinced me that one of the major pain points of most startups is the break of the venture capital. So I kept thinking: “why there are so much money concentrated in Silicon Valley and so little invested anywhere else in the world.”
Eventually, Nelson launched his fund – H/F fund, and that establishment grew into the idea of the tokenized HACK Fund aiming to solve critical problems of traditional venture capital that were haunting entrepreneurs and founders from all around the world for years.
Weird but inspiring
“Yes, at some point I wanted to be a preacher like my dad. Although, I eventually dropped out of Sunday school. Before that, at the age of 21-22, I had a brief preaching experience, and I realized that people were paying attention to what I was saying”.
That idea scared Jonathan to some degree because he felt he didn’t know anything about life at that time, but apparently, people were listening and willing to do exactly as he preached. Many years later, while cheerfully consuming fries and drinking beers with the fellow founders during another meetup, Nelson had a sudden flashback to that preaching era: he saw people listening to him again, very carefully, catching every single word.
At that moment, encouraged by his wife Laura, Jonathan decided to do Hackers and Founders full time.
“Ten years ago I wanted to learn how to build a company, sell it for 10 million dollars, have 5 million dollars in the bank and then retire someone in Central America, helping poor people”.
And while I am not sure if it happens the way I imagined it, philosophically speaking most of the entrepreneurs are poor. Because you have to be – there’s no job with a fat paycheck every month.” – he explains.
“I am forty-five years old, and it still bugs me that there is such rampant inequality in the world and poverty still bugs the crap out of me. I grew up playing soccer with kids who didn’t have shoes, and now I am very close to figuring out how to fix it. Currently, the best case scenario is if someone finds those kids and gives them a nice pair of trainers. But imagine, what if we could actually help their moms and dads have better jobs?” – a passionate, entrepreneurial preacher proceeds.
“And how can we do it?” – I asked, while observing his face, light up from the anticipation of me asking.
“We need to teach them how to grow companies to sell,” – triumphantly beaming Jonathan. “And it should be something outside of the banana trading enterprise. Maybe something related to software development. The sad truth is if you’re not in the Silicon Valley, most likely you won’t be able to raise money for your company. So, how do we give money to companies outside of Silicon Valley? And so my super-secret mission is to solve the following riddle: how do we develop new ways of investing in companies available for everyone, not only rich people here in Silicon Valley, so that we can help give money to entrepreneurs anywhere in the word? And as soon as we figure it out, we have to find out how to scale it, creating millions of jobs and helping tens of millions or even hundreds of millions of people to afford to put shoes on their kids’ feet.”
He tells me one of the Peruvian non-profits that H/F fund currently supports. It’s called Laboratoria. They take females from very shitty poor neighborhoods, teach them how to code and give them a year’s worth of counseling. And after those 12 months of coding/counselling boot camp, they help graduates find jobs. So, instead of making $200-$300 per month, those girls will be able to earn $1500. And who knows what’s next, maybe that squad will learn how to code smart contracts and build blockchains. And here we go – they are making $10000 per month.
“And Holy crap, in a blink of an eye you’ve actually changed the entire economy of the neighborhood where those girls came from.” – he sums up the story.
It’s been going on for a while, and Laboratoria has already helped to train around 5000 women within the last three years.
“For now they are a non-profit as I mentioned, but I’d encourage them to think about becoming a business with the mission instead of a total non-profit. Just like Hackers and Founders, and all of its developments – all that we do is a business with a mission.” – Nelson adds. “What keeps me going for now is this idea that we can actually help reduce poverty and income inequality by helping more people get access to new investment tools.”
I am a bit sceptical about the speech. If carefully crawled H/F Fund website and its current portfolio you will notice that the majority of those 25 startups, fourteen, more than a half. There are eight from Mexico and four from Argentina (at least that was relevant on the moment of writing). But is it really enough to combat poverty?
He responds with a story: “Not everybody knows, but Colombia startup scene is blooming right now. However, news outlets are not showing the truth sometimes, especially if common sense and stereotypes (“look, a dozen of drug smugglers escaped the justice… again”) are more sellable and will get more eyeballs. So, right now Colombia has its special fleur. And if you try to approach the Silicon Valley investor by saying: “hey, would you like to invest in a startup from Colombia?” he or she will most probably respond (and I actually heard that on several occasions): “Dude, Narcos was a great show, but there’s no way I’m investing in Latin America.” So how do we market a 100 million fund to actually make people back us up? We still have to work for the projects they got used to and can see its value. At the same time, 2% of our fund will be allocated to community development – that’s our chance to help all those projects that might not easily get access to funding in the Valley”.
“Maybe it’s not ideal, but we will start somewhere.” – he elaborates.
As someone great once said (and Internet claims it was Lao Tzu): “A journey of a thousand miles begins with a single step,” so the beginning is impressive. And who knows maybe in several years or so the shift in perception of the projects outside the Valley will happen and there will be more money flowing in to support those. Nelson has a proven track of record in shifting the perspective in the Bay Area. He is a great example himself.
“First time I ever talked to investors in the Valley I still was a working nurse. And everybody was like: “Ah, the nurse guy… he is starting an accelerator, great.” Yes, maybe I don’t have that familiar packaging with the diploma of Ivy league school on top, but I’m intelligent and very curious. I love to learn, but I don’t really give a shit about a degree, so I have an associate’s degree in nursing. Now I serve on an SEC advisory committee, and I’m on the Wilson Center for Public Policy board and I teach entrepreneurship and fundraising related thing at Stanford and Berkeley. It’s still me, but I am gaining more credibility in the eyes of my Valley audience and the shift in perspective is happening. Same thing, we are trying to achieve this with the tokenized HACK Fund we are building as an accelerated liquidity version of H/F Fund.”
How the HACK that Fund is working? And why?
Jonathan strongly believes in the future of digital stock certificates. “The new normal that I envision ten years from now is that a company could get a seed into Series A funding from us. But if they need more, like 10-15 million dollars we can raise it via crypto IPO, a digital token sale. And we can provide liquidity for those on the crypto markets, instead of having projects go through an IPO analyst on the Nasdaq or the London Stock Exchange. All the projects I worked with at H/F Fund – I know them well, I know that they’re building great products and we’re willing to stand by them. Right now on the spot, I can think of 3-4 projects that might need additional funding – some are thinking about going public within the next four to five years. We are talking with the London Stock Exchange about taking them public in a traditional way, but maybe we can take them Crypto public with HACK Fund. And that’s roadmap is one of the reasons why we’ve slowed down a little with our own sale – the legal and regulatory piece has been slower.”
Jonathan Nelson and his team are not actively looking for new projects since they are busy with something else. Initial plan for the HACK fund after raising money is supporting its existing portfolio companies.
“I could immediately invest about 20 million dollars. We will offer to buy stocks of the best performers back at a discount. So for people who helped us before we’ll solve the liquidity problem and at the same time, the funds raised from token holders will be backed by real businesses we vouch for.” – he explains the right-after-token-sale plans.
“Financial product we are building – is something that I would have died for when I was a nurse. Imagine – a nurse or someone else in Mexico can invest $10 a month into a portfolio of 300 technology companies or into companies devoted to specific subjects or acting on the specific territories. That’s how we want to structure it in the future with all the profits going back to the fund to support more projects. So, there’s that. It’s not like: “Let’s get rid of poverty!”, But first, step. We are creating this new collaborative form of capitalism. It’ certainly is still very capitalistic, but prosperity has to be spread equally. And if to think what am I going to leave behind when I die if I die: I’m probably going to leave a foundation dedicated to collaborative capitalism and helping make the world a better place.” – Jonathan is planning.
I ask the last question. “What’s your ultimate goal? One thing.”
His response is quick and thought through: “Make life suck less by just about 34% for founders in Silicon Valley and around the world.”