I’ve been seeing a fair number of negative reports on the Apple Watch and so I’d like to survey the Apple Watch users here at AVC again. We did this exact survey in late May. I’m interested to see if there are any changes to the results after a few more months of watch wearing.Take Our Survey
The reason people go out and fundraise is they need capital for their business. I would not recommend doing it for any other reason. It’s hard and time consuming work and can be extremely frustrating.
But there is another benefit of fundraising. You get feedback on your business from people who see a lot of businesses like yours every day.
The feedback you get from any one investor can be horrible and you need to learn to ignore off base feedback from idiot investors. And you will find that on the fundraising trail.
However the aggregate feedback you get from a diverse collection of investors, ideally dozens or more, can be super helpful.
So what I suggest to entrepreneurs is to use some sort of note taking system, paper or electronic, and write down the hard questions you got and the points of feedback you received after each meeting. The sooner you do it after the meetings the better.
Then start to sort them into a list of “issues” that you are hearing about your business. And the ones you hear the most are the one to focus on.
These are not just sales hurdles to overcome in your financing (although they are that too), these are the things that make your business less attractive to investors and they are things you need to address in your business.
These issues could be about your team, your product, your competition, your market, your go to market strategy, your business model, etc, etc.
The point I am making is that fundraising is a bit like the customer development process. You are showing your business to the market and it is critical to listen to what the market is telling you as no business is perfect and investors will take the time to tell you what is wrong with yours, often right in the meeting.
So treat your fundraising process as two things. First and foremost, it is about getting the capital you need to operate and grow your business. But it is also a fact finding mission about the things you need to address to make your business better. Don’t forget to do the second thing because it is a fantastic opportunity to improve your business for the long haul.
We’ve had my entire family at our beach house this weekend. That includes my 87 year old father, my 19 month old nephew, and a dozen other Wilsons in between.
So I’ve got a house full of folks and not a lot of time to post this morning. So if there’s any action here today, it will be in the comments.
I hope you are enjoying your summer weekend. I am.
I apologize if you came here looking for the business/tech section and landed on the sports section. But that’s how its going to be today.
I grew up an army brat moving every year. I was a baseball fan and my teams were the A’s and the Pirates, the two most colorful teams in baseball in the 70s. When we arrived in NYC in 1983, I had two choices, the Mets and the Yankees. There was no way I was going to be a Yankees fan, so the Mets were the default choice but not one I was excited about.
A year later in the summer of 1984, I arrived back in NYC from a business trip on a steamy July night, just like this week has been, and got in a taxi at LaGuardia. Back then the taxis did not have AC so we drove into Manhattan with the windows down and the breeze in our faces. The taxi driver had the Mets game crackling on the radio, the best way to consume baseball in my opinion. The Mets had their young rookie pitcher Dwight Gooden on the mound and it was late in the game and he was striking out everyone. It was mesmerizing to listen to this kid strike out batter after batter. I got home, turned on the game in our apartment, watched the end of it, and have been a dedicated Met fan ever since.
The early years of my Met-fandom were easy. The 80s were a great time to be a Met fan. The rest of my time in NYC no so much.
But this year has been different. The Mets have pitching, lots of it. And so I’ve been watching more closely all summer long.
Last night, after dinner and after our guests retired for the night, Josh and I turned on the Mets Nationals game. Matt Harvey was in fine form and, as usual, the Mets were not hitting. Harvey stayed in an inning too long, lost the lead, and the game went into extra innings. Finally, in the 12th inning, Wilmer Flores hit this walk off homer and the Mets are now two games out of first place with Yoenis Cespedes on a plane to NYC. I think we’ll be watching a lot of Mets games the rest of this season.
We use a lot of document sharing applications at USV. We use Google Docs, Hackpad (which was bought by Dropbox), Quip, Dropbox’ new Notes service, and a number of other document sharing apps.
But as we have moved most of our internal and USV network communications to Slack, we wanted a document sharing app that people in a Slack channel could use.
We call it Quackpad, although we’d prefer to call it Slackpad, and you can use it here.
Just sign in with your Slack credentials and you are good to go.
If you, like us, use a lot of Slack for internal and external communications, I think you will find Quackpad really useful.
Nick blogged a bit about the history of Quackpad and how they built it here.
Responding to charges of treason leveled against him by his “self-styled persecutors,” former Greek Finance Minister, Yanis Varoufakis, on his personal blog, has laid down the gauntlet, accusing “Greece’s oligarchic establishment” as being “troika-friendly.”
In his post of July 28, Varoufakis defended his “defiant negotiating stance” saying:
My dastardly ‘crime’ was that, expressing the collective will of our government, I personified the sins of:
• Facing down the Eurogroup’s leaders as an equal that has the right to say ‘NO’ and to present powerful analytical reasons for rebuffing the catastrophic illogicality of huge loans to an insolvent state in condition of self-defeating austerity
• Demonstrating that one can be a committed Europeanist, strive to keep one’s nation in the Eurozone, and, at the very same time, reject Eurogroup policies which damage Europe, deconstruct the euro and, crucially, trap one’s country in austerity-driven debt-bondage
• Planning for contingencies that leading Eurogroup colleagues, and high ranking troika officials, were threatening me with in face-to-face discussions
• Unveiling how previous Greek governments turned crucial government departments, such as the General Secretariat of Public Revenues and the Hellenic Statistical Office, into departments effectively controlled by the troika and reliably pressed into the service of undermining the elected government.
Varoufakis also claimed a moral victory, arguing that “The debate about the democratic deficit afflicting the Eurozone is now unstoppable.”
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I’d like to add another chart to this conversation, mortgage rates over the past thirty years:
The bear case for solar has been that the payback times are too long. But with cost declines (Albert’s chart) and carrying cost declines (my chart), solar makes more sense today than ever.
The other chart worth looking at is home energy prices over time. Your payback on solar depends a lot on how much you are paying for alternative sources of energy.
This part of the analysis is not as easy. It depends on what kind of energy you are consuming (coal, natural gas, oil) and where you live.
But my view is that the long term price of carbon energy will not decline as fast as the long term price of solar. Particularly if carrying costs (which are dominated by interest rates) continue to be low.
Cap rates (the yield an investor gets in real estate) are in the 5-6% range around the US these days. That means an investor is willing to wait for 15-20 years to get their money back on a real estate investment.
Solar payback times are half of that and going down fast.
The Gotham Gal and I are putting solar onto every building and home we construct these days. We are believers and bullish on solar.
This morning I citibiked down the west side of Manhattan along the Hudson to Pier 11, where I caught the East River Ferry to Dumbo. I took this picture on the ferry ride across the east river.
In Dumbo, I got on another Citibike which I rode to Clinton Hill, docked it, got an iced latte, and hopped on the subway for a few stops into Bed Stuy. If Citibike was available in Bed Stuy, as it soon will be, I would have biked all the way to my breakfast meeting. But the subway works fine too.
I have a friend who Citibikes every morning from Bed Stuy into downtown Brooklyn where be catches a subway to work.
Transportation options matter a lot in a dense urban environment like NYC. Transportation is one of about five or six things (safe streets, good schools, affordable housing, great parks, convenient transportation, etc) that makes for a great city and a good quality of life.
In NYC we’ve had a few new modes of transportation arrive in the past few years. Citibike has been amazing for me. Same with the east river ferry. Uber and Lyft have also made getting around NYC easier for those who can afford it. The green cabs in the outer boroughs have also made things a bit better.
But its multi modal transportation that really gets me excited. When all of these various modes are well connected and available via one subscription on your phone then we will really have something. We are close as my commute this morning proves.
Six times elected to the British Parliament, now running for Mayor of London, George Galloway, in this video interview lays the truth on the line, describing the “crimes against humanity” that continue to be perpetrated by financial capitalists and their top-level political minions all around the world.
From Henry’s post:
We were 0 for 21 with Silicon Valley VCs. I never got close. Most of the big firms wouldn’t even meet. A few had an associate do a Skype call even though we were 20 minutes away.
After 21 meetings in SV, I took a Hail Mary trip to the east coast and met with 3 funds. All 3 invested.
Thank god Henry came east. We are hugely excited about the company he’s building.
Henry also makes some great observations about the fundraising process. I like this one a lot:1. Fundraising is a filtering exercise, not a popularity contest.
I could tell within 5 minutes of meeting an investor whether they would invest. Investors who invested were excited about eShares before we met. They either saw the vision and liked it. Or they didn’t.
Most didn’t but met me anyway. They spent the entire meeting hoping I would convince them eShares was a good idea. I never did.
Excited investors (and the ones who invested) were different. They didn’t let me pitch. Instead, they asked questions to assess risk. They tried to find reasons not to invest. That is the pitch-paradox. The investors who won’tinvest will ask you why they should . The investors who will invest ask you why they shouldn’t. Your job is to make sure you don’t have reasons that they shouldn’t.
Fundraising is simple: find investors that get excited about your company. It is a filtering exercise. Too many founders believe they have the wrong pitch instead of realizing they have the wrong audience. On that note…
You’ve now read half the post here at AVC. To read the rest, go here.
Entrepreneurs always ask what the one number they should focus on for raising money. I always say “90 day retention numbers for your acquisition cohorts”. There’s a common view in silicon valley and around the tech sector that growth is the one thing you should focus on. But it’s hard to grow if you are churning your users. And if you are paying for user acquisition, as many startups do in search of growth, then retention/churn becomes even more important.
This issue was highlighted in a Forbes post on Homejoy, which apparently had a retention problem. A former employee said:
Retention was clearly bad, and that’s what killed us
This is a huge conundrum for entrepreneurs who want and need to grow in order to build confidence with investors (both existing and future) and to attract and retain talent.
This all comes back to stepping on the gas before finding product market fit. You might think you have product market fit and so you scale up your hiring, your marketing, your sales, and your capital raising and spending.
But if you can’t retain a healthy percentage of your users past ninety days, you don’t have product market fit yet and all the investment you make in your business is just money down the drain.
So focus first on your 90 day retention numbers and make sure to nail them and prove you have product market fit. Then scale.
Anxiety is something all investors feel at one point or another. Investing is a mix of greed and fear. When things aren’t going great, anxiety sets in.
In public equity when you get nervous about a stock, you can usually sell the position and move on.
In private equity, you are stuck with the investment. So anxiety sets in.
Entrepreneurs might mis-diagnose anxiety as something else. If your investors are all of a sudden meddling in the business, you might be seeing anxiety. If your investors are asking for endless amounts of data, you might be seeing anxiety. If your board meetings have become tense and difficult, you might be seeing anxiety.
You can’t just suggest they take a pill and chill out. Though I’ve seen entrepreneurs do that before.
Here are a few suggestions for managing anxious investors
1) Increase the frequency and duration of the communication. There is nothing that amplifies anxiety like a lack of communication. So do the opposite. Overcommunicate.
2) Have a frank and candid conversation with your investors about the source of their anxiety. Getting them to articulate what they are worried about will help a lot. Then you can address the issues directly.
3) Get more face time with the rest of an investor’s firm. Often the anxiety comes from the investor’s relationship with and place inside of their firm. This is particularly true of junior partners or associates. Offer to come talk at the weekly team meeting. Or suggest that an investor bring one of their colleagues to a meeting. This one can backfire because if things are truly messed up you might amplify and multiply the anxiety inside the firm. But if you believe the anxiety is misplaced, this approach can be helpful.
4) Get some independent directors on your board. If your board is full of investors and you don’t have any independents, you are setting yourself for an anxious board. Get investors on your board who are less susceptible to get anxious when things go wrong and the dynamic of your entire board will improve.
5) Fix the problems in your business. Nothing helps to reduce the anxiety level in an investor than strong performance.
I am an anxious investor myself. I was worse when I was younger and everything was riding on my performance. I’ve eased up over the years. But I still wake up in the middle of the night anxious about a particular company/investment. It’s how I’m wired up. And I think its part of what makes me a good investor. It is also what makes me potentially a problem. I try to be self aware of the anxiety and manage it so it doesn’t impact our portfolio companies. But I know it can and it does.
Entrepreneurs need to learn how to manage anxious investors. It’s an important skill that will come in handy many times.
There were a number of interesting and relevant discussions at the Cities For Tomorrow conference last week. This one, between Michael Barbaro of the New York Times, Dan Doctoroff of Sidewalk Labs, and Alicia Glen, Deputy Mayor of NYC, about economic development in NYC was particularly relevant to entrepreneurs looking to build companies in NYC.
The best features are the ones that you discover on your own and say “wow, that’s amazing.”
That happened to me last weekend.
We were coming back from dinner at night and the Gotham Gal was driving our Tesla.
She had the brights on and as another car came into view coming toward us, the Tesla automatically switched the brights to normal.
Then as the car passed, the Tesla switched back to bright.
I don’t know how long Tesla has had this feature on its cars. But I noticed it for the first time last weekend.
It’s such a simple thing. It’s not that hard to swap the brights on and off as you drive at night.
But having your car do it for you is better.
It is a great feature.
Last night my son drove me out to the east end of long island where we have a packed day of meetings on some family business today.
As we hit the long island expressway, I got on my phone and started DJing and we got into a zone.
As the traffic thinned out, we started making great time.
At one point I looked over and Josh had his phone in his lap. I was about to go off on him about on not texting and driving (something I constantly harp on with our kids), but before the words left my mouth I realized he had Waze open in his lap.
Let’s just say Josh is not a fan of the speed limits on the LIE. And I know that on his last trip he got pulled over for going 70 mph.
I realized he was looking to avoid getting another speeding ticket. So instead of lacing into him about texting and driving, I asked where the radar detector was.
He said “its coming up in about a quarter mile.”
For the rest of the way out, we watched the traffic speed up and slow down as we passed various speed traps.
It seemed like everyone on the LIE last night was on Waze. Which would not surprise me.
Today Waze is mostly used for getting traffic and driving directions. That’s a use case most everyone who drives needs and wants.
But the original use case for Waze is the one Josh had landed on last night in his effort to avoid another speeding ticket on the LIE.
Which takes me to the point of this post.
If you want to bootstrap a peer to peer network, you can’t start with the mainstream use case. You need to start with the highest value use case, even if it is a much smaller niche.
Not everyone likes to drive 80mph in a 65mph zone. But the ones who do will take extra measures to avoid getting pulled over. They report the speed traps to everyone else in real time. Which is what the first users of Waze did.
That led to more people using Waze to avoid speed traps.
And eventually that led to enough critical mass that the mainstream use case of a peer to peer traffic monitoring/avoidance application was possible.
The same is true of Snapchat. People made fun of Snapchat in its early days for being a “sexting” app. That was the “high value niche use case” that bootstrapped the network. And once critical mass was reached, the broader use case of a network for ephemeral photo/video sharing could emerge.
So if you want to build a peer to peer network, you have to find the use case that is high enough value that some people will do things (like put content into your application) that most people won’t. If you nail that, and win the hearts and minds and activity of that small high value user base, then you will have to opportunity to go mainstream. If you aim for the mainstream users first, you are setting yourself up for failure.
Andrew Ross Sorkin and I talked about creating startup hubs yesterday at the New York Times’ Cities For Tomorrow conference. It’s about 20 mins.
I saw the news that Phil Libin has stepped up to Chairman and the Board of Evernote has hired Chris O’Neill to be CEO. I don’t know much about Evernote, I don’t use their product, but I admire the company and I like the idea of a founder leading a company without being its Chief Executive Officer. There are many examples of this working. The most well known is Larry Ellison’s role at Oracle. Larry doesn’t run the business on a day to day basis but his influence is felt deeply in that company. Another great example of this relationship is Reid Hoffman and Jeff Weiner at LinkedIn.
Leadership is different than management. I have said that many times before on this blog and I will say it again. I believe it to be true. Leading is charisma, strength, communication, vision, listening, calm, connecting, trust, faith, and belief. Management is recruiting, retaining, delegating, deciding, communicating, and above all executing. Many CEOs do both for their companies. But getting leadership from the founder and management from a great executive is a model that can work really well.
The key to making this work is having the founder totally bought into the split roles and totally bought into the person who is going to be the executive and provide day to day management to the Company. In the leadership role the founder must step back and allow the executive to manage the business. They need to step in when leadership is required. That is usually when hard decisions are required and the founder’s instinct can be incredibly valuable.
A really good Board can help the founder and the executive figure out when management is required and when the founder’s leadership is required. But the Board cannot babysit this relationship. It has to work and be functional between the two people. If it is not, then someone has to go and that is usually the executive. That is because a founder’s leadership is hard to replace. A strong manager and executive is not easy to find but that talent exists in many places in the market and is not inexorably tied to the company because of the founding relationship.
If a founder can find their manager/executive inside of their company, that is ideal. Because going with a known relationship vs a brand new relationship produces a higher likelihood of success. But you don’t have to do this. Jeff Weiner was hired from outside of LinkedIn. And, I believe Chris O’Neill was hired from outside of Evernote. Both approaches can and do work. But if you have a strong manager/executive inside of your company, I would strongly suggest trying that. It is lower risk.
I have also seen a fair bit of talent churn out after the founder steps up to Chairman, particularly in the senior team. That’s a reason that many founders are nervous about doing this. My advice is to go ahead and do it. The first year of any new CEO’s tenure is going to be super hard and will require rebuilding the senior team, no matter what. But that can be healthy for a business too.
I admire Phil Libin’s conviction that he is not the right CEO for the next stage of Evernote. And I would encourage him to stay deeply involved in the company, providing the kind of leadership that only a founder can provide. And by supporting his chosen CEO who will need it in spades. I wish them both success in this transition.
Over the weekend I got an email from an entrepreneur wanting to come pitch his startup to USV. He copied my partner Andy on the email.
I immediately thought “I’m going to let Andy reply to this one.” But a couple days later the email still was sitting there in my inbox unreplied to. So then I thought “Andy is probably waiting for me to reply to this.”
Finally I shot Andy an email and we compared notes on it and then I replied to the email.
But it doesn’t always work out like that. I’ve seen a similar situation end with neither partner replying to the email and it goes unresponded to.
I call this situation email hot potato and entrepreneurs should avoid it by sending an email to only one partner at a VC firm, not two or more.
A good alternative is to send an email to one partner and copying an analyst at the firm as well. The analysts are the most diligent people in a VC firm about staying on top of inbound deal flow and they will often step in and reply to an email that a partner has missed or forgotten about.
The important thing here is to avoid confusing who has the responsibility to reply to the email by putting multiple responsible parties on it. While it would seem that it would increase the likelihood of getting a reply, it actually reduces it.
Last week I saw this tweet from Dan Primack who covers the VC sector for Fortune:
At VC breakfast (90 attendees), I asked how many would invest in Bitcoin startup (not general blockchain). Zero hands. #FortuneTech
— Dan Primack (@danprimack) July 14, 2015
I replied to it and I also mentioned it in a comment thread here at AVC recently.
Here’s what I can’t reconcile.
I know that measuring something using y/y growth rates can be misleading because of the small numbers involved. But Bitcoin is the fastest growing area in startup investing over the past three years.
And yet not one VC in a room full of them (90 of them) raised their hands when asked how many would invest in a bitcoin startup.
Maybe the distinction is bitcoin vs blockchain. I understand that. But bitcoin and blockchain are joined at the hip. You don’t get one without the other. So I’m still scratching my head.
But I do know one thing. When not one hand goes up in a room full of VCs, go there. It is going to be profitable.
I had a conversation with my son yesterday about watching games vs playing games. He told me he doesn’t watch a lot of videogame play on the web, but he has friends who are really into watching others play videogames.
Of course, this is not new. Amazon bought Twitch.tv for almost a billion dollars a year ago. And more and more people are watching others play videogames instead of or in addition to playing them.
Here’s an example of why: