Blog articles

Time Shift

A VC - 6 hours 4 min ago

The Gotham Gal and I are on the west coast for a while, escaping the NYC winter now that our kids are all out of the house.

That means this blog, which normally gets updated around 5-7am eastern will get updated around 5-7am pacific this winter.

We will resume our regularly scheduled programming when NYC thaws out.

Categories: Blog articles

Community Ownership Of Internet Applications and Services

A VC - January 27, 2015 - 6:19am

I kicked off the second topic of the week discussion on usv.com today with a post about community ownership of Internet applications and services.

If you want to read the post and/or join the discussion, go here and do that.

Here’s a teaser to get you interested in doing that:

With more and more web and mobile applications deriving their value mostly or completely from their user base (Facebook, Twitter, eBay, Etsy, Reddit, Kickstarter, Uber, etc, etc), there is a growing sense that the community could or should have some real ownership in these businesses.

I go on to explain a bit about why this has not happened except in very rare cases and what needs to get figured out to make it happen more frequently.

There’s a lot going on, including approaches unleashed by blockchain technology, to make this easier to do and we think this is a trend worth watching and discussing. That’s why we made it the topic of the week.

Categories: Blog articles

More On Seed Rounds

A VC - January 26, 2015 - 6:59am

There was a good discussion in the comment threads to yesterday’s post. This comment from Rick made me think a follow-up post would be helpful.

Seed, Later Stage, etc. all mean different things to different people. That’s where the confusion comes from.

I wrote a post explaining how we think about seed last June. Here’s the important part from that:

The first step you need to climb is building a product, getting it into the market, and finding product market fit. I think that’s what seed financing should be used for.

The second step you need to climb is to hire a small team that can help you operate and grow the business you have now birthed by virtue of finding product market fit. That is what Series A money is for.

The third step you need to climb is to scale that team and ramp revenues and take the market. That is what Series B money is for.

The fourth step you need to climb is to get to profitability so that your cash flow after all expenses can sustain and grow the business. That is what Series C is for.

The fifth step is generating liquidity for you, your team, and your investors. That is what the IPO or the Secondary is for.

At USV, we like to invest in a company once they have launched a product and we think that they have either found product market fit or they are well on their way. If you think about the “five steps” that leads us most often to invest in the Series A stage.

But occasionally one or two people, working nights or weekends, or working in an accelerator, or working for themselves and bootstrapping, are able to get a product into the market, get adoption, and get to or close to product market fit. They don’t need $3mm or $5mm, they need $500k to $1.5mm to finish off the search for product market fit, allow them to work full time on their project, and hire a few people to help them improve the product. That is the kind of seeds we like to do at USV.

Here are some examples:

Delicious – Joshua Schachter had built Delicious working nights and weekends, launched it, got traction, and needed $1mm to leave his day job, start a company, hire some people, and scale the product.

Tumblr – David Karp and Marco Arment built Tumblr while doing consulting to others. Tumblr took off and they needed to stop doing consulting work so the two of them could focus 100% of their time on Tumblr. Spark and USV each invested $300k to help them do that.

Etsy – Rob, Haim, and Chris built Etsy themselves, launched it, and were scaling the business. They had raised a little money from two local entrepreneurs but they needed more to keep Etsy growing. We participated in a $600k seed round to help them do that.

MongoDB – Dwight, Eliot, and Kevin had invested their own money and time getting the 10gen “stack” into the market. They wanted a financial partner to help them continue to fund the effort to find product market fit. USV provided seed capital so they could do that. They ended up finding product market fit for the database, MongoDB, but not the rest of the 10gen stack and they refocused the business entirely on the database and then were able to demonstrate product market fit and get to a Series A.

Foursquare – Dennis and Naveen built the initial version of Foursquare themselves. They launched the product and started to get users who liked the product, including a bunch of folks at USV. We liked what they were up to and thought they were close to nailing product market fit. We led a seed round that allowed them to hire a bunch more engineers who essentially rebuilt the product so it could scale.

Kickstarter – Perry, Yancey, Charles, Luke and maybe a couple others got the initial Kickstarter service launched and struck a chord with it. They had raised some capital from friends who helped them get the product into the market. USV led a seed round so they could hire a team and scale into the market.

Amino – Ben and Yin built Amino, went through Techstars, got their iOS product into the market, and proved that there was a market for native mobile communities. We led a seed round to enable them to hire a few more people, get an android app into the market, and nail product market fit.

OneName – Ryan and Muneeb built and launched OneName while they were in Y Combinator. We saw what they were doing and liked it a lot. We led a seed round to enable them to flesh out the product and build out the initial use cases.

Those are not the only seed investments we’ve made at USV. We’ve made over twenty seed investments over the life of USV. But these are good examples and I think they do a good job of explaining what it is we like to fund at the seed stage at USV.

Categories: Blog articles

Some Thoughts On Seed Investing

A VC - January 25, 2015 - 7:01am

We (USV) raised a new venture fund at the start of last year and started investing it in the spring of 2014. It is called USV 2014. We have made six investments in it so far and five of them are seed investments. That’s a very high ratio for USV and we do not expect that ratio to continue over the life of the fund. In fact our next investment will be a classic Series A so we are already lowering the ratio. But it is a bit of a return to form for USV as half of the initial investments in our first fund (USV 2004) were made at the seed stage.

In our core early stage funds (as opposed to our Opportunity Funds), we make initial investments at the seed, Series A, and Series B stages. In an ideal world for USV, there would be a normal distribution of these entry points with the highest percentage in the Series A stage. Over the entire history of USV, that is very much true. But on a fund by fund (or year by year basis) it varies a lot. It is mostly us reacting to the market. When the later stage rounds are too expensive on a risk/reward basis, we tend to move earlier. And when we can get good risk/reward opportunities in the Series A and Series B stages, we tend to move later. The downturn of 2008/2009, for example, led us to move a bit later in our 2008 fund because we could invest in more mature (and therefore less risky) opportunities at attractive prices.

The current market environment has pushed us to invest earlier. Some of it is that the Series A and particularly the Series B valuation environment has gotten very expensive relative to the risk as we see it. And some of it is that we are in a period of flux, where it is not entirely obvious to us where the next big things are going to happen. We have some ideas, of course, and I have been exploring them here at AVC and we have been exploring them as a team on usv.com. We think that in times of flux it is attractive to make a bunch of smaller seed investments in areas we think are going to emerge as important in a few years.

So that explains the move to seed as our primary entry point last year. I think it will continue this year but maybe moderate a bit as some of these developing markets mature and become more investable at scale.

Ok. Now that I’ve explained why I’m thinking about seed investing a lot these days, I’d like to talk about how we do seed at USV. Here are the important points:

1) We do not take a shotgun approach. We do not view seed investments as “options”. We only make a seed investment if we have as much conviction on the team and the opportunity as we would at the Series A round. We are as committed to our seed investments, both in terms of the time we spend with them and the willingness to follow-on in them. They are core investments with as much stature in our portfolio and in our firm as any other early stage investment. This is critical to understand. And it is not true of many (most??) VC firms who make seed investments.

2) We like seed investments in teams and opportunities where they have built and launched a product already. We don’t like investing in a concept or participating in a round where the uses of the capital will be to build and launch a product. This means the vast majority of seed rounds are not a fit for us. We pass on a lot of seed stage opportunities because it is “too early” for us. That is a comment on the specific opportunity however, and not seed stage investing as a whole. This confuses a lot of people. They tend not to think of USV as a seed investor when in fact we do make a lot of seeds (over 80% of last year’s investments, for example).

3) We will often lead the Series A (and sometimes Series B) in companies where we did the seed investment. We led both the Series A and Series B in Etsy and we co-led (with Spark) the Series A and Series B in Tumblr. We were seed investors in both companies. We continue to do that where it makes sense for the founders and USV. That is not a requirement or an expectation, but it does happen and I believe it is a very good thing in the right circumstances.

4) We like to participate in syndicates in our seed investments. We don’t focus too much on ownership at the seed stage. We do focus on the investors coming together around a project. We like partnering with smart angels, seed funds, and even other VCs, if the other VCs are aligned with us on how they are thinking about the particular seed investment. Our investment with Spark in the seed round at Tumblr is a good example of two VC firms partnering up at the seed round and doing a good job working together and scaling into the opportunity.

USV will never be confused with a seed fund, but we sometimes act very much like one, except that we can and will invest 20-30x our initial investment over the life of the company. That combination (a committed and active seed investor + deep pockets) is unusual. You can get one of those two a lot. But rarely both. So if you are working in an area that is interesting to USV, and if you have launched something into the market already, and if you are doing a seed round, please do reach out to us. We are in the business of making seed investments and doing a lot of it these days.

Categories: Blog articles

Video Of The Week: Opening Keynote Of The Women’s Entrepreneur Festival

A VC - January 24, 2015 - 6:58am

The Gotham Gal and her friend Nancy Hechinger have put on the Women’s Entrepreneur Festival for five years now. It’s become an annual celebration of women and entrepreneurship. It was held in NYC this past wednesday and thursday. Here’s the opening keynote the Gotham Gal delivered (it is the first 12-13mins of this video. the talk afterward is also very good):

Categories: Blog articles

Feature Friday: Back Up iPhoto To Dropbox

A VC - January 23, 2015 - 7:25am

The Gotham Gal moved from an old macbook air to a new one about a year ago. When she moved all of her files, configurations, and settings from the old macbook to the new one, somehow her iPhoto folders didn’t come over correctly. She was missing a bunch of photos on her new laptop and could not seem to find them on the old one.

I tried to help out but quickly got frustrated. Somehow she had messed things up in her moves from mac to mac to mac over the years and she had not backed up her iPhoto properly.

She told me that there were years, maybe a decade or more, of photos of our family and such on that laptop and that she feared they were lost.

So last week I decided to take another shot at it, using a Dropbox feature that scans your iPhoto library and backs up all the photos in it to Dropbox. I installed the Dropbox for Mac client on her old machine and let it do its thing. It eventually prompted me with the option to backup all of her iPhoto library to her Dropbox. I clicked yes and it started scanning and scanning and scanning. It must have been crunching away on her hard drive for an hour or more and eventually it said it had found over 14,000 photos that it wanted to upload.

I thought “14,000!!, that must be all of her lost photos” and went upstairs to tell her the good news. It took over a day to upload all of the photos and it seems that Dropbox found some old buried folders that I could not find myself that contained all that she had thought had been lost.

We haven’t taken a deep dive yet on the 14,000+ photos to see if they include everything she thought was lost. But I have a strong hunch that we have.

It’s a great ending to a frustrating story. If you had a fire in your house and you had to choose the few things you wanted to get out before everything went up in flames, family photos would likely be near the top of the list, after people and pets. So losing them, or thinking you lost them, is a terrible feeling. And finding them is an amazing one.

Categories: Blog articles

Deep Web Marketplaces

A VC - January 22, 2015 - 3:54am

Last week Joel sent everyone at USV an email outlining his journey through and exploration of the Dark Web which ultimately resulted in a purchase of a pair of boots for his girlfriend. Jonathan replied to all with “this is the best thing I’ve read on the Internet this year” to which I replied “except it isn’t on the Internet. it should be”.

Joel got around to posting it to the Internet earlier this week. It is here.

If you haven’t used Tor, if you haven’t bought stuff from these anonymous marketplaces, if you haven’t laundered your bitcoin, if you haven’t arranged for an untraceable shipment, you might want to read how all of this goes down on the Dark Web.

As my partner Brad explained in a follow up post on the topic of the week thread on usv.com, we were so fascinated by Joel’s exploration of these Dark Web marketplaces because it feels like a trip into the future in some ways. Brad said:

The really interesting thing about Joel’s analysis is what it tells us about the future of open, transparent and legal markets on the Internet.

and

All this leaves me wondering not so much if the world will move toward decentralized, and disaggregated marketplaces, but when and why. Because the activities on the dark web are largely illegal, there is no other choice. For the rest of us, we are still generally willing to depend on a centralized platform for discovery, and identity management. For the moment, we are also still willing to accept the fees, the terms of service, and the bundling, these platforms enforce. My guess is the models pioneered on the dark web will come into the light first as leaner more efficient competitors to the first generation of peer economy companies, but the question I am still struggling with is where to look. Are there legal markets where the value of a decentralized market is greater so this transition will happen sooner, or will it happen first in any market where a first generation peer economy company goes too far by economically and politically disenfranchising the value creators at the edge of their network?

This conversation gives me some small desire to go on a shopping spree myself because its easier for me to understand something with my hands than my eyes. If and when I do, I’ll report back here, as always.

Categories: Blog articles

A Lens Into The Future Of Enterprise Software

A VC - January 21, 2015 - 7:53am

I’ve been working with our portfolio company Work Market for four years now. It’s been a real learning experience for me as enterprise and SAAS has never been my long suit. We were attracted to Work Market because, as their name implies, they use a marketplace model to help enterprises get work done. Specifically, they created and are the leader in the Freelance Management System market. We like software that has a network effect built in because it is harder to commoditize. A marketplace of freelance workers inside an enterprise software application seemed to us to be exactly that. And that has been true. But along the way we’ve learned quite a few other things:

1) Mobile matters, a lot. I mentioned in my What Just Happened post that mobile is starting to really impact the enterprise software business.

At Work Market, the freelancers want to get work, accept work, and close out work on their phones. So mobile app development has become a huge part of what the Work Market engineering team has to work on. At some point, the enterprise will likely want to issue work orders on their phones too.

2) Freemium and transactional business models work in the enterprise just as well as they work in consumer. Work Market has a free tier with a transactional revenue model for enterprises that want to try the system or plan to be an occasional user.

WM pricing

We know that “freemium SAAS” works well for horizontal enterprise applications like Dropbox, Slack, Google Apps, etc and I believe we will start seeing freemium SAAS models applied to vertical applications as well. We already are.

3) Enterprise applications must also be platforms if they want to scale into the largest enterprises. Salesforce is the poster child for this trend. They have become a very powerful platform and distribution partner for SAAS applications. But every SAAS application should have APIs that allow their users to plug enterprise software together. Work Market can talk to the other large applications that enterprises use for managing talent (HR, VMS, etc) and that is a requirement for the largest deals. It will soon be a requirement for all deals.

I am seeing a bunch of new SAAS companies get started whose entire value proposition is building on the open APIs that most enterprise SAAS products have released in the past few years. If you are in finance, or HR, or marketing, or sales, you are now using a host of SAAS applications to get your job done and a big trend in the market is new applications that tie all of those together (via APIs) so that you can have a single view into your workflows. This is the “platformization” of SAAS and it is upon us.

The big takeaway for me is that all the things we have seen happen in consumer web and mobile software are happening in the enterprise and the impact of that is already being felt. I am seeing it up close at Work Market and fortunately they got started recently enough that they have been able to take advantage of all of these trends (marketplaces, mobile, cloud, freemium, platform) as they go to market and build their business. That is, among many other reasons, why we recently led a growth round to help Work Market’s new CEO, Stephen DeWitt, scale into the freelance management system market opportunity that they created a few years ago.

Categories: Blog articles

Money and Society: Free university-level online course being offered

Beyond Money - January 20, 2015 - 4:17pm

A free online course (MOOC) in Money and Society is being offered by Professor Jem Bendell, PhD (IFLAS) and Matthew Slater, under the aegis of the Institute for Leadership and Sustainability of Cumbria University. The four lessons of the course, intended to” explode myths about the history, nature, present and future of money,” will commence 16 February 2015 and conclude 18 March 2015. For details and registration go to http://iflas.blogspot.com/2014/12/money-and-society-mooc.html.

 


Categories: Blog articles

Five Changes Being Driven By Zero Marginal Cost

A VC - January 20, 2015 - 8:16am

My partner Albert gave this ten minute talk yesterday at DLD

Categories: Blog articles

The Tell Of The Proprietary First Movers

A VC - January 19, 2015 - 4:42am

I spent some time today on the new usv.com. We launched it on New Year’s Day and then pushed another rev of it last week. It’s pretty damn good, if I must say so myself.

Anyway, I read two posts back to back. Joi Ito’s post comparing the early days of the Internet to the early days of the Blockchain. And William and David Cohen’s post on The Trust Web.

Joi makes the point that interoperable email was the first killer app of the Internet and that Bitcoin is likely to the be the first killer app for the Blockchain. He talks about how we were able to send email on the proprietary online services like Compuserve, Prodigy, and AOL, but only to other users of those services. And then these services implemented connections to Internet email and all of a sudden we could talk to anyone. I remember that moment vividly. It was one of the many “aha moments” that I had in the mid 90s that led me to leave Euclid and start Flatiron with Jerry. I could see that something important was afoot and I needed to get in on it.

William and David talk in their post about SMS based banking and payment services in the developing world:

To peer into the future of decentralized banking for the masses, look no further than the success of easypaisa in Pakistan and M-Pesa in Kenya

It seems to me that easypaisa and M-Pesa are the equivalents to Compuserve, Prodigy, and AOL. They are the proprietary closed networks that deliver on much of the value of Bitcoin but are not open and interconnected to everything else. Their very existence, however, is the tell that we are on the cusp of something similar that is open, global, and interconnected. I know that people are working to connect easypaisa and M-Pesa to Bitcoin and the Blockchain. That’s an obvious but important step to get to “decentralized banking for the masses” as William and David call it.

As Mark Twain supposedly said, “history doesn’t repeat itself, but it does rhyme.” I’m banking on that to be true.

Categories: Blog articles

Topic Mining AVC

A VC - January 18, 2015 - 6:04am

So I’m on sitting on the couch waiting to go out to dinner with the Gotham Gal and friends last night, and wasting time by scrolling through Twitter and I came across this tweet:

New Blog Post: Mining a VC http://t.co/BKJr43xhzq | Topic Model Analysis on Fred Wilson’s blog posts over more than 11 years!

— Bugra Akyildiz (@bugraa) January 17, 2015

I didn’t have time to check it out, so I favorited it and made a note to come back to it. And I did that this morning.

Bugra is a Data Scientist ; he likes machine learning, data, Python and NLP, not necessarily in that order. He did some data science on this blog, starting on September 23rd, 2003, which is when I wrote the first post here.

Here is his post. It’s worth a full read but I’m going to gank a few images from it to summarize his findings for those who don’t feel like clicking over to it (you should).

Bugra mined 22 topics based on things I wrote most about and then did some analysis on those topics. Here is a frequency graph of them:

topic-frequency

But of course my interest in these things rises and wanes over time.

I mentioned at year end 2014 that I thought social media had become uninteresting. Well the data on what I write about proves that:

social-media-topic-trend

Sometimes it’s a lack of interest. But it could also be a conscious decision to stop writing about something. As the readership of AVC grew, it became a lot less personal. That was a conscious decision on my part.

family-topic-trend

Not everything has gone down over time.

I’ve become a policy wonk (thanks to my partner Brad mostly):

internet-regulation-topic-trend

And some topics just reflect the changing landscape we operate in, like this one:

mobile-apps-topic-trend

And some topics reflect the changing patterns of my blogging, like the rise and fall of MBA Mondays:

company-management-topic-trend

Anyway, I found Burga’s post fascinating. I would like to see him add a few more topics, like bitcoin/blockchain, education, healthcare, and crowdfunding. Those are all things that I think a lot about and I’d be very curious to see how my interest in them has risen and/or fallen over the years.

In closing, I’d like to thank Burga for his work. It is valuable and revealing to me. Thank you Burga.

Categories: Blog articles

Video Of The Week: The Berlin Seedcamp Discussion

A VC - January 17, 2015 - 6:30am

On the same day that Brad and I did our Berlin talk, I spent an hour with Seedcamp during their Berlin Seedcamp Week. I chatted on stage with Dave Haynes, who before Seedcamp was at our portfolio company SoundCloud. So we had a lot to talk about.

Categories: Blog articles

Feature Friday: US Dollar Wallet

A VC - January 16, 2015 - 3:48am

My colleague Joel told me he doesn’t own any bitcoin right now. Instead he has a “USD Wallet” on Coinbase and when he needs to spend or send bitcoin, he just does that out of his USD wallet.

So I decided to set one up myself. I now have three accounts on Coinbase. A bitcoin denominated wallet, a USD denominated wallet, and the vault where I keep most of my bitcoin (I don’t own much, around 30 bitcoin in total).

The recent slump in price for Bitcoin revives the issue for many of the price volatility of owning bitcoin. Some want that. They are speculators who think the price of Bitcoin will increase substantially as the technology is broadly adopted. That may well happen. But others, like me, hold bitcoin so that I can use to it spend money and send money. For them, having their bitcoin denominated in dollars makes a lot of sense. Joel is one of those people. I could become one, but for now I’m happy to do it both ways.

Coinbase has had a USD wallet since October 2014, but it has not been available in many states as a result of regulatory issues. Coinbase recently added New York State customers to the USD wallet which is why I was able to add it to my account.

If you own a lot of bitcoin and are concerned about price volatility, you might consider putting it in a dollar denominated account on Coinbase. You can still do everything with your bitcoin you want to do, but you can now do it in dollars. If you have stayed away from bitcoin because of the price issues, you now have a way to “pay with bitcoin” without taking price risk.

If you want to try it you visit your account or set up an account at Coinbase.

Categories: Blog articles

The Canvas Spindown

A VC - January 15, 2015 - 3:59am

Our portfolio company Canvas made the decision to shutter operations early last year. But there is a bit more to entirely dissolve a company. Chris Poole, the founder of Canvas, describes the remaining work he had to do to entirely wind things down in this post.

Chris is a special person. Working with him has been such a pleasure. You get some great things from failure. One of them is my relationship with Chris.

Categories: Blog articles

Vladimir Putin and the New World Order

Beyond Money - January 14, 2015 - 8:10am

Despite the ongoing attempts of the Western media and politicians to vilify him, Russian President Vladimir Putin is showing himself to be a true statesman deserving of international attention and respect. Former Reagan administration official and Wall Street Journal editor Paul Craig Roberts, in a recent post, goes so far as to declare Vladimir Putin Is The Leader Of the Moral World.

Roberts begins his post by commenting as follows:

Dear Friends,

Vladimir Putin’s remarks at the 11th meeting of the Valdai International Discussion Club are worth more than a link in my latest column. These are the remarks of a humanitarian political leader, the like of which the world has not seen in my lifetime. Compare Putin to the corrupt war criminal in the White House or to his puppets in office in Germany, UK, France, Japan, Canada, Australia, and you will see the difference between a criminal clique and a leader striving for a humane and livable world in which the interests of all peoples are respected.

In a sane Western society, Putin’s statements would have been reproduced in full and discussions organized with remarks from experts such as Stephen F. Cohen. Choruses of approval would have been heard on television and read in the print media. But, of course, nothing like this is possible in a country whose rulers claim that it is the “exceptional” and “indispensable” country with an extra-legal right to hegemony over the world. As far as Washington and its prostitute media, named “presstitutes” by the trends specialist Gerald Celente, are concerned, no country counts except Washington. “You are with us or against us,” which means “you are our vassals or our enemies.” This means that Washington has declared Russia, China, India, Brazil and other parts of South America, Iran, and South Africa to be enemies.

This is a big chunk of the world for a bankrupt country, hated by its vassal populations and many of its own subjects, that has not won a war since it defeated tiny Japan in 1945 by using nuclear weapons, the only use of such terrible weapons in world history. ….

Read the rest of Roberts’ post and the full text of Putin’s speech at http://www.paulcraigroberts.org/2014/10/25/vladimir-putin-leader-moral-world-paul-craig-roberts/

This RT report gives some highlights of the speech:

And this video purports to provide a summary of the main points that Putin made in that speech:

 #     #     #


Categories: Blog articles

The Reboot Podcast

A VC - January 14, 2015 - 3:38am

A few weeks ago Jerry Colonna and I got on Skype and had a 40min chat about startups and what goes on in them. As most of you know, Jerry and I started a venture capital business together in the mid 90s and have been close friends since then. So this is a public conversation between friends, which is usually a recipe for a good discussion.

The first five minutes is some stuff about Jerry’s new business, Reboot.io. It’s worth listening to, but if you want to skip it, click on the soundwave at 5mins in and you will get to the start of our conversation.

Categories: Blog articles

DIY vs Delegate

A VC - January 13, 2015 - 7:26am

I am a bad delegator and very much a do it yourselfer (DIY). It’s one of the many reasons I am certain I’d make a terrible CEO.

CEOs must delegate. At scale, they should only do three things; set the vision and strategy and continuously communicate it, recruit and retain the very best people, and keep the company funded. Everything else has to be delegated at scale.

But when you start a company, you (and your cofounders) have to do everything yourself. There is nobody to delegate things to. And hiring a bunch of people to do things like schedule your meetings, answer the phones, keep the books, review contracts, interview candidates, etc is a bad idea because it uses up money which is always in short supply at the early stage of a startup. You can, and should, see if there are service providers who are inexpensive who can help. Bookkeeping is one area where that is certainly true. Reviewing contracts and recruiting is harder to hand off to an inexpensive third party. I wish it were not.

I like it when I see a founder team that is resourceful, has range, and can do a lot of this stuff themselves. I like to see them running lean and mean and spending money on the things that really matter (product!!!!!).

But at some point they need to start delegating this stuff. And first time founders often make the mistake of waiting too long to take things off their plates. For one, they like the control and insights they get from doing things themselves. For another, they are often lean to a fault (penny wise and pound foolish).

Knowing when it is the right time to start handing things off and hiring is an art not a science. It has something to do with the availability of resources. And it has something to do with the scale of the organization. When the CEO is still scheduling her own meetings when there are over fifty employees, something is wrong. Investors can help a lot. We have pattern recognition. We can see two very similar companies (size, stage, etc) and compare how much delegation is happening in one vs the other. We can make suggestions.

One suggestion I frequently make is to find a “utility infielder” for your first business hire. This is someone who can do a lot of things well but nothing spectacularly well. This is often someone who has done this role before in a startup and likes working in companies that are between five and fifty employees. There are people who make a career out of this job. It is lucrative if you value equity over cash compensation. You can build a nice portfolio of early stage equity grants doing the “first business hire” gig for two or three years at a time and then doing it again and again.

Doing a startup is an evolution from DIY to Delegate. And timing the evolution is important. If you haven’t done it before, ask people who have for advice on this. Allocating your time (your most precious resource) is critical to the success of your business.

Categories: Blog articles

Backing Up Your Files

A VC - January 12, 2015 - 3:34am

I read an article a few weeks ago about a class of malware called ransomware. The author’s mom had clicked on some sort of attachment which installed the malware on her computer which in turn locked all of her files and delivered a ransom note to her requiring $500 for the decryption keys. The ransom had to be paid in bitcoin, of course, and the price escalated the longer she waited to pay the ransom.

I immediately thought of my situation. I like to think I would not have clicked on the attachment. But even if I had, my files are backed up into the cloud. As long as my cloud backup service doesn’t back up the encrypted files and overwrite the earlier versions, I’ve got unlocked versions of everything. I think I am good. But I made a note to ask around about this.

I’ve been backing up my hard drive for as long as I can remember. There was a time when I backed up to local storage. But starting in the late 90s, I used a variety of online backup services, what we would now call “the cloud”, to backup my files.

My rationale for backing up my files was always fear of a hard disk crash. I’ve lost important files over the years and I’ve spent a small fortune to get them back, usually by hiring someone who knows how to work miracles on a corrupted hard drive. But I have not worried about this issue for at least a decade, maybe more.

But when I read the article about the woman whose files were being held hostage, I realized that many people still don’t backup their files every night. Just like many people don’t use strong passwords. Just like many people click on attachments they should not click on.

My number 10 prediction on the What’s Going To Happen post was:

10/ cybersecurity budgets will explode in 2015 as every company, institution, and government attempts to avoid being Sony’d. VCs will pour money into this sector in the same way they poured money into the rental economy. and, yet, the hacks will continue because on the open internet there is no such thing as an impenetrable system.

It is not just big companies and institutions and governments that need to be diligent about information security. It is all of us. The consumerization of technology works both ways. We are all targets and we all need to protect ourselves. Backing up your files is one of those things we should all do. Another thing to add to the new year’s resolution list.

Categories: Blog articles

Ethics and Morals

A VC - January 11, 2015 - 7:39am

At the end of the Berlin talk I posted yesterday, there was a question about ethics. It was directed at startups and how they build a culture of ethical behavior.

But ethics and morals is an issue that extends beyond startups. It is an issue for all businesses and business people.

The Gotham Gal recently told me a story about one of her portfolio companies. I am going to leave names out of this post because I don’t want to get in the middle of something that, at least right now, is between the parties involved.

Her portfolio company went out to raise an early Series A for a business that was in market and ramping. They met with a VC who passed on the deal. A few months later they saw a competitor emerge in the market with an identical business plan and a website that was eerily similar to their own. The CEO of the competitor was the son of the VC who passed on the deal. And the VC was the seed investor in the competitor.

There was no NDA or non-compete between the parties involved so it is not clear that anything illegal transpired here. But it sure feels unethical to me. And I bet it feels unethical to you too.

At USV, we work very hard to avoid these sorts of things. We do not start or incubate businesses. We do not have EIRs sitting in pitch meetings while they think up their next startup. We put big moats around our existing portfolio and try hard not to invest in anything competitive. If we are looking at investing in a competitor, we let the entrepreneur know that before we meet with them.

I am sure we have messed up a little bit here and there over the years on these rules. But we try really hard to live up to our ethics, values, and morals and I think we do a decent job. And we get to see great deals because of that.

This unnamed VC will not see great deals if this behavior continues. You can’t behave this way for long before the market becomes aware of it. So even if the legal system can’t take care of this situation, I believe the market will. As it should.

Categories: Blog articles
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