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Do The Right Thing

A VC - 10 hours 25 min ago

Airbnb has been operating in NYC and NY State for about ten years now and yet we still don’t have comprehensive home sharing legislation on the books in NY State. The reason is that the enemies of Airbnb, mostly the hotel employee unions, have been fighting Airbnb’s existence in NY State very effectively in Albany.

Many of the largest cities in the US and around the world now have comprehensive home sharing legislation on the books. It makes sense. It allows homeowners to share their homes legally and earn extra income but it also protects neighbors and neighborhoods from bad actors who abuse the system.

It is time for the folks in Albany to join that group and put fair and balanced and serious home sharing legislation on the books.

The good news is that we have good comprehensive bills before both houses of the state legislature right now.

Assemblyman Joseph Lentol and Senator James Skoufis have recently proposed comprehensive regulations for short term rentals in NY State.

An increasing number of New Yorkers rely on home sharing services not only when they travel, but also for the additional income they generate by opening up their homes here in New York.

The bills proposed by Lentol and Skoufis will create fair and restrictive rules to govern short-term home rentals in New York. Existing NYC legislation has unfairly penalized everyday New Yorkers for sharing their homes and left many confused about the law.

The proposed legislation bans short-term rentals in all affordable housing and also limits NYC residents to listing only one home. The bills also mandate data-sharing with New York City to boost transparency and enable NYC agents to target and take action against bad actors abusing the system.

The proposed legislation also allows Airbnb to collect and remit taxes on behalf of its users. Currently, NY State is missing out on badly needed tax revenue.

It is time for the NY State Legislature and Governor to pass clear and commonsense legislation to safely and responsibly regulate the home sharing industry. I would like to acknowledge Assemblyman Lentol and Senator Skoufis who have the common sense and courage to lead the way.

Categories: Blog articles

Concrete Vs Wood

A VC - April 24, 2019 - 7:06am

Our friend Eric sent us an article in the Globe and Mail yesterday about plans to build a 35 to 40 story tower in Vancouver out of wood. Here’s the link to that story but you can’t read it without a subscription.

Contrast that to the dominant way we build tall buildings in NYC which is out of concrete, steel, and glass.

The reason that a move back to wood based structures is so important is that the concrete structures are huge contributors to greenhouse gases. According to the Globe and Mail article, “concrete construction is responsible for an estimated eight per cent of all carbon emissions worldwide.”

The Gotham Gal and I are in the process of making two passive house apartment buildings in Brooklyn based on cross-laminated timber structures with only a small amount of concrete in them.

This is a photo of one of them back in December when the CLT structure had just been completed:

Our buildings are five or six stories high. The idea that you can make a building of 35 or 40 stories out of CLT and dowel laminated timbers (DLT) is very exciting to me.

I believe we can innovate our way out of the climate change mess we are in right now and changing the way we make our homes and offices is a big part of that.

Categories: Blog articles

Opting Out Of The Legacy Model

A VC - April 23, 2019 - 9:30am

When you look at industries that continue to operate on old, outdated, and highly regulated models (education, health care, banking, brokerage, etc, etc), it is interesting to look at the numbers of consumers who are opting out of the legacy model.

In K12 education, many people think of charter schools as the disruptive model and there are something like 3.5mm to 4mm students attending charter schools in the US now (out of roughly 55mm K12 students in the US: 50mm public, 5mm private).

But if you really want to look at where the disruptive models exist, you need to look at consumers who are completely opting out and in K12 education, that is the homeschooling movement.

My partner Andy sent around this tweet this morning and it is quite interesting:

I’m trying to understand which are the fastest growing trends in education. Homeschooling seems to be one of them. Technology is only getting into the space, that's why I assume the growth will be accelerated. #homeschooling #edtech pic.twitter.com/cr8RfOMBGW

— Vlad Stan
Categories: Blog articles

I was right about “quantitative tightening”

Beyond Money - April 22, 2019 - 10:51am

I was right about “quantitative tightening”
by Thomas H. Greco, Jr.

Just about two years ago, someone sent me a link to an article titled, Why America’s Federal Reserve might make money disappear, that appeared in The Economist on April 17, 2017. The gist of the article was the predicted move by the Fed to unwind quantitative easing, that is, to sell off some of the securities that it bought in the wake of the 2008 financial crisis. The expansion of Fed holdings from the $850 billion it held just prior to the crisis, to the $4.5 trillion it held at the time the Economist article was written, was a desperate move that was taken to keep a flawed financial system from crashing down.

After I read that article, this is what I wrote to my correspondent on April 25, 2017:

Dear…,
Thanks for alerting me to that article in the Economist. Interesting.
The sub-head reads, “The Fed has signalled that it will soon reduce the size of its balance-sheet,” yet the article says nothing about how it signalled that move. It seems to be the author’s own speculation based on the Fed’s recent small interest rate increase. To wit, “Today, however, the Fed, now led by Janet Yellen (pictured), is raising short-term rates, as it tries to keep a lid on inflation. So—the logic goes—it should also shrink its balance-sheet, to push up long-term rates.”

You need to ask, why did the Fed load up on government bonds to begin with?

I am reminded of a story about a man who wanted to invest in the stock market. He opened an account with a broker who immediately steered him into some penny stock.

The dialog went something like this:
Broker: Welcome aboard. I can get you in on the ground floor of this new company. Their stock is really hot right now and it’s only four dollars a share.
Customer: Fine, buy me 1000 shares.

The next day the broker calls and says,
Broker: Hey, that stock is now up to eight dollars a share.
Customer: Wow, that’s great, buy me 2000 more shares.

A couple days later, the broker calls again and says,
Broker: Amazing, that stock is now up to 12 dollars a share.
Customer: Fantastic, sell all my shares.
Broker: To whom??

In other words, the Fed is locked in to their position, it’s a one way street and there’s no going back.

The answer is that there was not nearly enough available capital in private hands to fund the government budget deficits, at least not at interest rates that would not make the deficits even more gigantic than they have been.

As I’ve written in my books, there is a collusive arrangement between bankers and politicians that goes back more than 300 years. Governments get to spend more than their revenues, while banks get to lend money into circulation by making interest bearing loans. Yes, open market operations by the central banks do distort financial markets as QE critics claim, but that is the fundamental role of central banks, to manipulate financial markets. It’s the biggest scam in history. The central bank is the lender of last resort, and the government is the borrower of last resort to keep the money supply pumped up as bankers suck interest earnings into their capital account.

The Fed will be lucky to get away with small interest rate increases, but unloading their holdings of government bonds will not happen.

The entire article seems disingenuous, suggesting the possibility of actions that cannot be taken without severely unbalancing government budgets and contracting the money supply which will send the economy back into recession.

Real inflation rates are much greater than government figures indicate.  See the Chapwood index, http://www.chapwoodindex.com/, and Shadow Stats, http://www.shadowstats.com/alternate_data/inflation-charts.

Also, follow Chris Martenson, http://www.shadowstats.com/alternate_data/inflation-charts.
This interview is particularly pertinent, Oil, Gold, & The Collapse of Central Banking ~ Interview with Chris Martenson.

Regards,
Thomas

Now, on March 20, 2019, this Bloomberg article, Powell Signals Prolonged Fed Pause as Inflation Lags, Risks Loom, acknowledged that the Fed has thrown in the towel on tightening, saying, “Federal Reserve Chairman Jerome Powell said interest rates could be on hold for “some time” as global risks weigh on the economic outlook and inflation remains muted. … Officials also decided to slow the drawdown of the U.S. central bank’s bond holdings starting in May, then end them in September. Together, the moves complete the Fed’s 2019 pivot away from policy tightening and toward a markedly cautious stance.”

Surprise, surprise!

#     #     #

Categories: Blog articles

The Upside And The Downside

A VC - April 22, 2019 - 4:39am

As I wrote in yesterday’s post, there are good and bad things that come from new technology and new innovations.

The challenge for many of us is that the promoters of the technology only want to talk about the upside. And often the media responds by focusing on the downside. It is hard to find a balanced take on things.

Let’s take this Bloomberg article on ISAs in which students trade a percentage of future earnings to fund tuition. The headline is “College Grads Sell Stakes in Themselves to Wall Street.” Which of course, is the negative narrative on this innovation in financing education.

As my colleague Nick pointed out to me this morning, “the stories often seem to ignore the reverse: how hard it can be to carry a large amount of debt, which is the situation that the vast majority of student loan holders find themselves in.”

The whole ISA movement is a reaction to the student debt crisis that many in this country have found themselves in.

Certainly there are questions that need to be asked about ISAs and the model will evolve and adjust over time.

But to throw ISAs under the bus by suggesting that “students are selling themselves to wall street” is the kind of negative narrative that doesn’t help anyone.

Categories: Blog articles

Facial Recognition

A VC - April 21, 2019 - 9:13am

I would like to start this post with a disclosure. USV portfolio company Clarifai has one of the best facial recognition models on the market and is very active in the facial recognition market. Now that I have disclosed that, we can move on.

Facial recognition has come of age. Machines can figure out who we are and more.

One of the most popular booths with students at The Annual CS Fair this year was the Microsoft booth where they were showing some of their facial recognition technology.

The delight and amazement on the students’ faces was infectious.

But of course, not everyone is excited about facial recognition technology being deployed in the market.

woooooow pic.twitter.com/qWvGQeSjLb

— Laurie Charles (@TheStuffOfMemes) April 20, 2019

I particularly like that question in the embedded image in that tweet:

How does Jet Blue know what I look like?

The answer turns out that there are many ways to know what we look like and you can start with the federal government and go from there.

Like all technologies, facial recognition can be used for good and bad. And it will be.

I like what my partner Albert wrote on this topic recently:

And then some things are incredibly hard. Such as face and object recognition. There are tons of amazing positive applications for such technology. And yet they could also be used to bring about a dystopian future of autonomous killer weapons chasing citizens in the streets. Does that mean we should not develop these capabilities? Should we restrict who has access to them? Is it OK for corporations to have them but not the military? What about the police? What about citizens themselves? Those are hard questions and anyone who thinks they have obvious answers I submit hasn’t thought long enough about them.
So what is to be done? A good start is personal responsibility. 

We used to have to stop at toll booths and wait in long lines to get across bridges and tunnels. Now we drive past the tolls at 60mph and the machines detect our license plates and debit our accounts.

The same is going to happen with our faces and that will be great for many things. But, of course, it will also freak us out on a regular basis and add to the “technology is turning everything into a surveillance state” narrative that has more truth than we would like to admit.

So what is my point? Well for one, the technology is here and we had better get used to finding it deployed in the wild. And second, that it will bring a lot of good. So we should not over react. But we should be mindful of the downsides and those of us who are working on this technology, those of us who are financing the development of it, and those of us who are deploying it, need to take great care with it.

Categories: Blog articles

Video Of The Week: John von Neumann on K12 CS Education

A VC - April 20, 2019 - 6:43am

As many of you know, I have spent a fair bit of my time over the last ten years on increasing the amount of CS Education in our K12 system in NYC and around the US.

My friend Rob sent me this short (2 1/2 min) clip of John von Neumann in the early 50s talking about how important CS Education and in particular K12 CS Education would be.

We largely ignored his advice for the last sixty years but I am optimistic that we are finally heeding it.

Categories: Blog articles

Funding Friday: Chili Peppers

A VC - April 19, 2019 - 5:20am

This project is hot!

I backed it this morning

Categories: Blog articles

A Hackathon At NYC’s City Hall

A VC - April 18, 2019 - 4:40am

I like going to hackathons. A number of USV portfolio companies have emerged out of hackathons, like our portfolio company Dapper which created its hit crypto-collectible game CryptoKitties at a Hackathon in late 2017.

So yesterday I headed down to NYC’s City Hall which was hosting the finals of a citywide hackathon competition (called The Hack League) among NYC schools to create the best software applications to make the city better.

The final projects were judged by people like the Chief Policy and Data Office (Comptroller’s office); the Chief Analytics Officer (City of NY); the Chief Technology Officer (Mayor’s office); the Executive Director of NYC311 (City of NY) and other folks in city government tasked with a similar mandate.

There were 28 finalist teams at City Hall yesterday competing to win the trophy. They were from all five boroughs, representing schools from all kinds of neighborhoods. It was as diverse as the city is and that is a wonderful thing.

I gave them a pep talk at the start of the day and encouraged them to “instrument their applications” so that they and others can determine how their users are getting value from them.

This is a photo I took of the students as I was about to address them:

The winning teams came from these schools with these applications:

Middle school Winners:
1st: Queens TWYLS – “Trash Go” game that incentivizes proper disposal of trash

2nd: Staten Island IS63 – “Oh Deer” app for residents to report on deer sightings and upload photos so the Dep’t of Environmental Conservation can track the deer

3rd: Brooklyn Parkside Prep – “Hero Foods” app that delivers nutritious lunches to students with special needs (financial or health)  

High school Winners:
1st: Brooklyn International HS at Lafayette – “Busted” app for students to report real-time data about buses (such as too full, never arrived)

2nd: Manhattan Bridges High School – “Heat track” app that tracks temperatures inside and outside of homes and communicates to landlords about issues.

3rd: Bronx Millennium Art Academy – “Safety 1st” bi-lingual alert system to keep students informed when they are without their phones during the school day.

I was super impressed by how focused and committed the students were on making their applications better yesterday:

Here is a photo of all of the students who competed yesterday in the City Hall Rotunda.

These are the employees of the future for NYC startups, larger tech companies, and, frankly, every company in NYC. And let me tell you something. They are going to be really good.

Categories: Blog articles

Healthcare At USV

A VC - April 17, 2019 - 6:05am

Over the last five years, we have stepped up our investing in and around healthcare. About 15-20% of the early stage companies we have invested in over our last two fund cycles are working in this sector.

If you look at our current investment thesis at USV, you will see that wellness is one of the key areas of interest for us:

USV backs trusted brands that broaden access to knowledge, capital, and well-being by leveraging networks, platforms, and protocols.

So where in the healthcare sector are we focused?

Rebecca tweeted this out yesterday and I think it is a good articulation of what we find most interesting in healthcare:

What excites us about whats happening in healthcare:
1) tech + humans: data powered humans=better decisions than either data or humans alone
2) broaden access by increasing value & decreasing cost of care
3) outcome orientation: not just care, better delivered, but better care

— Rebecca Kaden (@rebeccak46) April 17, 2019

Making affordable healthcare more available to everyone seems like the winning formula in this sector.

Take our portfolio company Nurx for example. They make birth control and other important prescriptions and home testing kits available to millions of people who have found them difficult to obtain through traditional channels.

I hope and expect that we will increase our investment in the health and wellness space in the coming years. It is an important sector that has immense challenges, but also immense opportunities.

Categories: Blog articles

Underground Infrastructure

A VC - April 16, 2019 - 7:23am

One evening last week my daughter and I spent an hour with a team from our portfolio company Pilot Fiber who were pulling a new fiber cable from Sixth Avenue to Fifth Avenue along a cross street in lower Manhattan.

My daughter is doing a project and wanted to understand how this all worked and I was curious myself. It was fascinating.

We met them at a manhole near Sixth Avenue where they had pulled a fiber cable into a building where one of their large customers is based.

The team uses a thin line of “mule tape” that is placed in the conduit between the manhole and the building to pull the fiber cable from the manhole to the building. Ideally the mule tape stays in the conduit so that the next team that needs to run fiber from one manhole to another or into a building can use it again.

Pilot had a couple of their trucks on the street that have huge fiber spools on the back of them.

The team runs fiber using the mule tape in the conduits that exist from manhole to manhole. This was the next manhole they worked in that evening.

You can see that there are a lot of fiber cables in these manholes. The big clunky plastic things are splice enclosures that protect the splices that join fibers to each other.

You can see a line of mule tape on the lower right of the photo above that the team was using to pull the fiber cable from one manhole to the other.

When we got to Fifth Avenue, the manhole was cavernous. One of the team members was comfortably working down in the hole which would not have been so easy in the manholes on the cross streets.

I learned quite a bit that evening about how all of this infrastructure is laid and managed. But mostly I was so interested in how this modern infrastructure (fiber) has overwhelmed the prior kind (copper and coax) under the streets of NYC.

If you want high speed/reliable/reasonably priced fiber Internet in Manhattan for your company, you can get that from Pilot Fiber who is out on and under the streets of NYC most nights laying the cables to make it happen.

Categories: Blog articles

More S1 Fun

A VC - April 15, 2019 - 5:05am

I am continuing my mini series on reading S1s (IPO documents). We are enjoying an IPO bonanza this year, so we might as well use it for some good and learn something.

When a company files for an IPO, I like to think if there is a publicly traded company that looks a lot like that company and if so, I lik to run some numbers comparing the two.

Well we have that exact situation with Uber filing to go public last week. Here is Uber’s S1.

We can compare Uber’s numbers to recently public Lyft, which I blogged about earlier in this S1 Fun series.

Here are Uber’s profit and loss numbers from their S1:

We can compare this to Lyft’s profit and loss from my prior blog post:

I put all of these numbers into a spreadsheet and added some estimates for 2019 that are nothing more than back of envelope guesstimates.

What you can see from this is that Uber is 4-5x larger than Lyft, growing a lot more slowly, has slightly better gross margins, and both are still losing a lot of money but both are moving towards getting profitable on operations in a few years.

Finally lets look at market valuations. Lyft is currently trading at a market cap of $17bn. If you say that Uber is 4-5x larger than Lyft, then Uber ought to be worth in the range of $70bn to $85bn.

There are other factors that will be in play when Uber eventually prices their IPO and trades. Uber owns minority interests in a number of other ridesharing businesses that could be worth as much as $10bn of additional value. On the other hand, Lyft is growing more quickly than Uber.

Ultimately we will see how the market values Uber. But from this analysis, and the public market comparables from Lyft, we can see that Uber should be worth quite a bit when it goes public.

Categories: Blog articles

Functionality Vs Content

A VC - April 14, 2019 - 7:14am

I saw some chatter on Twitter this past week about Netflix and Disney in the wake of Disney’s announcement of Disney+:

I’m long $dis myself and no $nflx at the moment. That said will never not pay $nflx at current pricing https://t.co/aInOGQQFXZ

— Lindzon+ (@howardlindzon) April 12, 2019

Disney’s stock was up 11% on the week

And Netflix stock was down 5% on the week

Certainly getting into the streaming game will be good for Disney. But I am less sure that content matters that much when it comes to Netflix.

A friend of mine shared this with me earlier this week:

When I saw that data, I replied to him with this:

It is the frustrations of the prior model (interruptive advertising, by appointment consumption, etc) that open the opportunity for the next model

Given that the new model, streaming, is well entrenched now, I am not saying that functionality alone will save Netflix or anyone else.

But I do believe that the functionality of a service (no ads, binge watching, user interface, curation, notifications, price, etc) are just as important, or possibly more important, than whether or not you can watch The Incredibles on it.

And most importantly, it is the frustrations of the prior model, as I mentioned above, that creates the opening for the new model.

So if you are working on a new model, for anything (it could be crypto, health care, education, finance, etc, etc), you should look very closely at what are the most annoying and frustrating aspects of the current model and focus on leading with features that remove them.

Categories: Blog articles

Audio Of The Week: Coinbase Custody

A VC - April 13, 2019 - 5:57am

And now a word from your sponsor:

Coinbase is a USV portfolio company, I am on the board, and I am deeply invested in this business.

Coinbase’s regulated custody subsidiary is an important part of their overall business and I am also on the board of it.

This Unconfirmed Podcast with Sam McIngvale is a really good explanation of what Coinbase is doing in the custody market and how they are developing new income earning options for their customers.

Categories: Blog articles

Funding Friday: Math In America

A VC - April 12, 2019 - 4:29am

Did you know this?

Well, this film that is being funded on Kickstarter is all about the math crisis in America. I backed it this morning and you can too.

Categories: Blog articles

A Registered Token Offering

A VC - April 11, 2019 - 10:29am

Our portfolio company Blockstack tweeted out this today:

After rounds of private comments, we’ve publicly filed for a $50M token offering with the SEC.

Upon qualification, our network and the Stacks tokens will be available to retail investors, including the US. https://t.co/OuPVbA4eJt

— Muneeb Ali (@muneeb) April 11, 2019

Given that USV is an investor and one of my partners is on the board, I don’t want to opine on this in any way.

But I do think this is an interesting development in the evolution of tokens as investable assets.

So here is a Coindesk post on this news.

Categories: Blog articles

Dronebase Goes Thermal

A VC - April 10, 2019 - 6:00am

Our portfolio company Dronebase is announcing some big news today.

They are going to be offering thermal imaging missions in partnership with FLIR, the leading provider of thermal sensors. And FLIR has made a strategic investment in Dronebase.

What is thermal imaging? Thermal imagery, which is also called infrared imagery, is the ability to see a much larger portion of the electromagnetic spectrum than what is visible to the eye. This page from FLIR’s website does a good job of explaining the technology.

If you put a FLIR thermal sensor on a drone, you can learn a lot more about buildings, equipment, terrain, etc, etc. The military sector has been doing this for years and the commercial sector is starting to use the technology a lot now too.

Here is an image of a roof captured with a traditional drone camera:

And here is an image of a roof captured with a drone using a FLIR thermal sensor:

This drone mission, recently run by Dronebase, identified water damage and leakage on this roof.

So what is the big deal here?

Dronebase offers the world’s largest drone pilot network. They have pilots all over the world who are skilled at operating commercial drone missions. And they have an API that captures information from drone missions at scale. Now enterprise customers can use their pilot network and API to capture thermal imagery. This will significantly reduce the cost and increase the availability of drone-based thermal imagery to enterprises of all sizes and locations.

If you want to learn more, you can contact Dronebase here and start using thermal imagery to improve your business operations.

Categories: Blog articles

Get Your Message On Mobile

A VC - April 9, 2019 - 4:41am

I finally got around to reading the Political Advertising Report from Tech For Campaigns. My conclusion is we are going to see our phones light up with political messages over the next year and a half. Here is why:

Only Trump spent a percentage of total spend on digital that is close to what companies do When you buy Facebook ads, you are buying mobile ads The older you are the more likely that you click on ads on your phone

So let’s brace ourselves for the messages that are going to start coming into our phones from politicians over the next 18 months. Mobile advertising works.

I am closing comments to this post because I don’t want to turn this blog’s comments into a soapbox for certain people and we all know who they are.

Categories: Blog articles

Scaling A Company While Controlling Costs

A VC - April 8, 2019 - 4:42am

Over the last decade, the costs of scaling a company in the bay area, NYC, and many other startup regions in the US has escalated sharply. We have encouraged our portfolio companies that are located in these high cost regions to build out secondary locations where they can hire high quality engineering and other talent at lower costs. Locations in North America that have been attractive to our portfolio companies are cities like Des Moines, Indianapolis, Toronto, and a number of others.

Another approach that has worked well for our portfolio companies is to have a secondary location outside of the US, where talent can be hired a much lower cost than the US.

So it was with interest that I read this in Zoom’s IPO prospectus;

we have a high concentration of research and development personnel in China

It turns out that Zoom has most of its engineering team in China, where they can hire high quality engineering talent at much lower cost.

Look at this P&L.

Zoom spends most of its opex on sales and marketing because it has kept its engineering costs lower as a result of building product in China.

This is something to think about as you scale your company.

Categories: Blog articles

The Heartbeat (Continued)

A VC - April 7, 2019 - 6:56am

I wrote a post last year called The Heartbeat in which I advocated for a cadence and a rhythm in an organization.

I was reminded of that in this exchange on Twitter over the last 24 hours:

I am a fan of routines and set cadences

— Fred Wilson (@fredwilson) April 7, 2019

Many of USV’s portfolio companies use an OKR process to create this rhythm in their teams. What I have learned from watching these companies and listening to how the teams talk about the OKR process is that to some extent it is “form over substance” in that the process is ultimately more important than the specific objectives and key results that flow through the process.

I am not saying that teams shouldn’t be thoughtful in setting objectives and committed to hitting them. They should.

But I am saying that the regular setting of objectives (quarterly is a time frame most companies use) and the weekly or bi-weekly reporting against them is the most valuable thing that comes from the process. It sets the heartbeat and keeps it. And that is so valuable.

Many VC firms, including USV, use a weekly team meeting, often on Mondays, to align the group, report on the week that has past, and focus on the week to come. That weekly cadence allows us to be responsive to entrepreneurs, come to relatively quick decisions as a group, and stay in sync.

Public companies report on a quarterly basis. That rhythm sets up a cadence of setting expectations (guidance) and reporting on results (earnings reports). It is not entirely different from the OKR process in a few important ways. It creates a cadence that is super valuable for execution and performance.

I am a fan of all of these processes. They set a cadence and rhythm for an organization and force decision making and provide for timely execution.

The best companies master this and working in those organizations is fun and rewarding. Setting objectives and meeting them on a regular basis is a virtuous system that brings out the best in people and teams.

Categories: Blog articles
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