here’s the current state of my phone’s home screen.
– snapchat – which along with Kik is how i stay in touch with my son Josh at college
– audible – which we are using to listen to audiobooks on our trip. i think we will continue to use audible on our drives back and forth to our house in long island so it’s now on the home screen
– wordpress – because i’ve been blogging on my phone a lot on this trip. i think i will continue to do that when we get back. it’s awesome.
to make room for all of these adds I took off the search bar. i find myself just going to Chrome to search anyway and i wasn’t using it
We were driving up the coast of Italy from Rome to Genoa listening to music being bluetoothed from my phone to the car’s audio system and the Gotham Gal said, “let’s listen to some audio books on this trip.” I was dubious but she was adamant. “I tried it on a drive from NYC to Long Island this summer and it is really great”, she said. So I replied “sure.” Later that night in our hotel, using their wifi, I downloaded the Audible app and a few books onto my phone.
We started with Peter Mayle’s A Year In Provence. That was awesome. Listening to a book about a place like Provence while driving around Provence is a fantastic experience. That sold me hook line and sinker on this audio book in the car thing.
Then we went for Daniel James Brown’s The Boys In The Boat. We failed to check how long the audio book was before selecting it. This particular audio book is 14 hours 25 minutes. Good thing we were taken with the story. We stuck it out and finished it yesterday. We cheered as the author ended the story. That was a marathon. All that said, it is a great story about the boys from the University of Washington who won the Olympic Gold Medal in the Berlin Olympics of 1936 in the eight category.
The strange thing about audio books is the play time of the book and the page length of the book are not directly correlated. Boys In The Boat took 14 hours 25 minutes to listen to and it is 416 pages. A Year In Provence took 2 hours and 52 minutes to listen to and the book is 224 pages. I think it may have to do with the fact that the audio book version of A Year In Provence we listened to is abridged.
In any case, we found that three hours is a great length for an audio book. Fourteen and a half hours felt a bit long, maybe even more than a bit long.
We are now listening to Hemingway’s The Sun Also Rises. Given that we are now in Paris having recently been in Barcelona, Pamplona, and San Sebastian, it seemed like the right time to revisit that novel.
The Gotham Gal’s pitch on audio books is that it makes long drives fly by. I am not sure they “fly by”, but I would agree that listening to a great narrator read an interesting story does make long drives a lot more enjoyable.
It looks like we’ve got a new pastime. And I’m happy about that.
We visited the Guggenheim Museum in Bilbao earlier this week. They were exhibiting a video installation called The Visitors by Ragnar Kjartansson. It’s not easily captured in a YouTube video, but that’s the best I can do for all of you. Basically you walk into a big room and on every wall there is a video playing of a musician and each is playing a part in the song. You walk around and you hear the various musicians playing. It’s awesome. I loved it.
We have found that the best way to deal with policy makers and regulators when something new and threatening and dangerous looking comes around is to educate, educate, educate, educate. You can hire expensive lobbyists, you can try the “ignore and deal with it later” approach, and you can try operating in other more welcoming locations. But in our view the best approach is to take the time and effort to explain things, listen to the concerns, get the best and brightest minds involved to work things out together and come to the right answers.
It is in this spirit that a new organization called the Coin Center has launched. The Coin Center will be led by Jerry Brito who has done some of the best Bitcoin education and advocacy work in his former role at George Mason University’s Mercatus Center. So Jerry really won’t be doing anything new here. But he will be able to focus 100% of his time on this work and will have more financial and organization support to do it.
The Washington Post has a good article explaining the Coin Center and who is initially behind it.
I would like to thank Alex Morcos of Chaincode Labs and Balaji Srinivasan of Andreessen Horowitz for all the hard work they did bringing the Coin Center to life. Without their persistence, I don’t think this would have happened.
USV is proud to be a financial supporter of the Coin Center along with a handful of the most active entrepreneurs and investors in the blockchain sector. We will be reaching out broadly to everyone who has an interest in this sector in the coming months to get involved in some way. Technologies such as cryptocurrencies, bitcoin, and the blockchain are important, fundamental, and will foster innovation for decades to come. We must make sure that policy makers and regulators are well educated and informed so that they will put forward policies that will accelerate the development of these technologies, not retard them.
Back in 2008 and 2009, probably because of our investment in Twitter, I was obsessed with looking at acquisition traffic from search and social and comparing the two. Here’s an example of a post I wrote at that time looking at the two channels and comparing them.
At some point, I became convinced that websites would eventually see more acquisition traffic coming from social than they were seeing from search, which was the king dog of Internet traffic at the time. It was a hotly debated issue but, again maybe because of how long we were on Twitter, I was convinced social would be king some day.
I stopped obsessing about that issue sometime around 2010 and moved on to mobile as the thing I thought about and wrote about the most.
But today, when I was looking to see if the traffic to AVC had declined a lot while I have been away and blogging about all sorts of non work stuff (it hasn’t), I saw this chart of year to date acquisition traffic to AVC.
Social, and for AVC that means Twitter and Disqus, brings 23% of the visits to AVC. Search brings less than 20%. And it’s been that way for a long time now. Well over three years.
It’s kind of funny to think that we wondered and debated about such things back in 2008 and 2009. It’s not a debate any more and its not something to wonder about. It’s reality now.
Our portfolio company Coinbase announced something yesterday that went largely unnoticed, but might be one of the most important things to happen in the Bitcoin space in a while.
They put out a bunch of developer tools under the name Toshi, including a full open source version of their Bitcoin node. When you combine Toshi with the core Bitcoin APIs it comes with and the Coinbase APIs, you get a platform for building Bitcoin applications that is unmatched in the market.
The reality is building on top of the Bitcoin Core is not a simple task. There is a lot you need to do to make it work. Coinbase has been building on top of the Bitcoin Core for over two years and has addressed many (most?) of the obvious needs and they are now making all of that technology available to developers who want to build Bitcoin applications but don’t want to get knee deep in the Bitcoin Core.
There is a free hosted version of Toshi, you can download and run Toshi on your own servers, or you deploy Toshi to Heroku with just one click.
If you are building Bitcoin applications or thinking about it, check out Toshi. I think making Bitcoin easier for developers is a big thing and I’m pleased to see Coinbase doing exactly that.
Regular readers know that I’m a huge fan of Bill’s. He’s as smart as they come and I generally agree with him on things. As I was reading the WSJ piece, I found myself nodding my head and saying “yes”, “yes”, “yes”.
The thing I like so much about Bill’s point of view is that he does not focus on valuations as a measure of risk. He focuses on burn rates instead. That’s very smart and from my experience, very accurate.
Valuations can be fixed. You can do a down round, or three or four flat ones, until you get the price right.
But burn rates are exactly that. Burning cash. Losing money. Emphasis on the losing.
And they are indeed sky high all over the US startup sector right now. And our portfolio is not immune to it. We have multiple portfolio companies burning multiple millions of dollars a month. Thankfully its not our entire portfolio. But it is more than I’d like and more than I’m personally comfortable with.
I’ve been grumpy for months, possibly for longer than that, about this. I’ve pushed back on long term leases that I thought were outrageous, I’ve pushed back on spending plans that I thought were too aggressive and too risky, I’ve made myself a pain in the ass to more than a few CEOs.
I’m really happy that I’m not alone in thinking this way. At some point you have to build a real business, generate real profits, sustain the company without the largess of investor’s capital, and start producing value the old fashioned way. We have a number of companies in our portfolio that do that. And I love them for it. I wish we had more.
Back in February, I wrote about our investment in Sidecar. At that time, Sidecar had recently launched a marketplace model where riders can choose the drivers they want to ride with. That model has proven very popular and Sidecar’s ride volumes grew significantly after it launched. Sidecar followed up that innovation with the launch of Shared Rides this summer and is already matching thousands of shared rides every week in San Francisco.
The tech industry has grouped many different apps under the label ridesharing. The name comes from the idea that anyone can be a transportation provider by taking out their car and giving rides via an Internet network powered by mobile apps in both the driver’s and rider’s hands. That is not really how most of these networks work. In reality, what we have seen develop is a new form of a limo service powered through technology. That isn’t really ride sharing.
And to take it a step further, if there is only a single passenger in the car, that’s not really ridesharing either. True ridesharing would be me taking out my car from my garage, powering up my Sidecar driver app, and accepting rides in which as many people as possible pile into my car and I take them all where they want to go. That’s the most efficient and highest form of utilization for my car and my time and will lead to the lowest cost rides for the passengers (and the most money for the drivers).
If we really want to reduce the number of cars on the road and make ridesharing a game changer in the transportation market, we need to see a model develop where anyone can be a driver whenever they want to drive and as many people as is safe and comfortable can get in the car with the driver and get where they want to go.
That is what Sidecar is building. That is the vision they had when they started the Company, that is the vision they had when we invested last year, and that is the vision they continue to pursue.
I am very excited by the potential of Shared Rides. I don’t really see any other way that regular people who can spend a few dollars, but not tens of dollars, every day to get to work, can take advantage of ridesharing. The leaders in this market can subsidize prices and cut fees for their drivers as much as they want. But that’s not sustainable. What is sustainable is increasing the utilization of the car as much as possible. That’s Shared Rides.
At USV, we are very excited about Shared Rides and Sidecar’s commitment to rolling out Shared Rides in every market they operate in and then expanding the markets they operate in. We’ve co-led a round with our friends at Avalon and Richard Branson which the company has announced today.
We drove early this morning from Barcelona to San Sebastian. To be more accurate, the Gotham Gal drove and I sat in the passenger seat amazed at the vastness of the landscape where for large parts of the drive there was 20 to 30 kilometers between towns. It was desolate and a bit depressing for someone used to seeing a new person every ten feet in NYC.
We got to San Sebastian in time for lunch. After checking into our hotel, we walked to the beach where there were boat races going on, and then walked into the old part of town in search of lunch.
We found a few tapas bars that looked good and pushed our way in, and I do mean push. Eating in these bars on a sunday afternoon is a full contact sport. I was thinking I could have used some shoulder pads.
Here’s a selfie I took in one of the bars we pushed our way into.
In each bar, we got a beer to split and one or two tapas.
While it was work, and we had to push and shove a few times, the payoff was well worth it.
We got this Pulpo A La Planxta Con Membrillo in the first bar we went to.
And we got this grilled shrimp bruschetta (although they call it something slightly different here) in the second one we went to.
We are going back to the bars tomorrow night for more contact sport. I have to say it’s a lot of fun.
We visited the Joan Miro Foundation in Barcelona today. He was an amazing artist. We spent over an hour gazing at his work and then watching a short film about him.
It made me want to know more about him and his work. So I went on YouTube and found this
We visited the Picasso Museum this afternoon so we got quite a dose of Spanish painters of the 20th Century today. It was very enjoyable.
Our portfolio company CircleUp, a crowdfunding market for equity investments in consumer products companies, launched something this week that I think is a something we will see more and more in the crowdfunding world going forward.
They have added filters to the left side of their company discovery page. It looks like this:
I decided to filter for food companies in New York that have more than $500k of annual revenue. That got me three results:
Whether it is equity for consumer products (CircleUp), equity for tech startups (AngelList), consumer lending (LendingClub), small business lending (Funding Circle), philanthropy (CrowdRise), or creative projects (Kickstarter), all of these crowdfunding marketplaces have a tremendous amount of things to fund. Drilling down to find exactly what you want to fund is becoming harder and harder. Discovery tools are becoming critical to the user experience.
So I think CircleUp is showing one good way (another is social discovery which Kickstarter does a good job with) to help funders find the things they want to back. My bet is we will see more of these kinds of tools cropping in up in the marketplaces in the coming year(s).
Dr. Paul Craig Roberts is a man with impeccable credentials. Besides having been affiliated with a half dozen universities and think tanks, he served as Assistant Secretary of the Treasury for Economic Policy in the Reagan administration.
In his latest web post, he recalls the events of 9/11, 2001, debunks the official story, and sums up the changes that have transformed the United States into a “warfare/police state.”–T.H.G.
9/11 After 13 years
Paul Craig Roberts
The tragedy of September 11, 2001, goes far beyond the deaths of those who died in the towers and the deaths of firefighters and first responders who succumbed to illnesses caused by inhalation of toxic dust. For thirteen years a new generation of Americans has been born into the 9/11 myth that has been used to create the American warfare/police state.
The corrupt Bush and Obama regimes used 9/11 to kill, maim, dispossess and displace millions of Muslims in seven countries, none of whom had anything whatsoever to do with 9/11. .. More..
Today is a very meaningful day for all New Yorkers. For me, the terrorist acts of September 11, 2001 came at an important time in my life. The Internet bubble had burst and my professional life was all about dealing with the ramifications of that. I had just turned 40, we had three kids, 10, 8, and 5. We had lived in NYC for almost 20 years and we were building a life in the greatest city in the world. That day changed everything and changed nothing at the same time. We stayed downtown, we raised our kids in the post 9/11 NYC, and we still live in NYC in much the same way we lived there before that day. But we were all impacted by the sights, sounds, and smells of that day and the days and weeks that followed and certainly still are.
I don’t think much about September 11th anymore but I do try to remember it every year on its anniversary.
We are in Barcelona today. September 11th means something very different here. It is the “national day of Catalonia” and a holiday.
To make things even more interesting the Catalan Separatist Movement is mounting a huge protest today in Barcelona and they are expecting 1.5 million people to fill the two main streets in town and create a V sign in an effort to pressure Spain to allow a vote for Catalonia to secede.
The streets are literally filled with people wearing the yellow and red colors. We walked around for a couple hours and observed the goings on.
There are separatist movements cropping up all over Europe right now. I imagine the weak economy and rampant unemployment is a factor but underneath it all these are tensions that have existed for centuries and it’s not really a new thing at all.
The hatred that fed the horrible acts of 9/11 isn’t a new thing either. The techniques are modern and so are some of the resentments that feed it but the underlying hatred goes back a long way.
So for me, today is a reminder that conflict and resentment and the hatred that can result is a permanent human condition. We can work to minimize it and we should do that tirelessly. But we are unlikely to eliminate it.
When you come to AVC for the first time today, you will be met with a “modal” that shows the site loading slowly. This is my way of participating in a day of protest to send a message to the FCC and others in government that I don’t want to see an Internet where some sites can pay to load more quickly than others.
We’ve discussed this issue so many times at AVC that it’s old hat to most of us. Many of you don’t see things the way I do. I understand and respect that. But today, I am showing solidarity with everyone who sees it my way.
The modal will be gone tomorrow in case it annoys you.
This may be the most popular AVC post of all time based on the amount of traffic it gets month after month after month. I think I may rewrite it at some point because while I still believe the basic ideas here are correct, some of the math has changed due to market pressures and it deserves a rewrite. With that caveat, here it is.
The most common comment in the long and complicated MBA Mondays series on Employee Equity is the question of how much equity should you grant when you make a hire. I am going to try to address that question in this post.
First, a caveat. For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula. Getting someone to join your dream before it is much of anything is an art not a science. And the amount of equity you need to grant to accomplish these hires is also an art and most certainly not a science. However, a rule of thumb for those first few hires is that you will be granting them in terms of points of equity (ie 1%, 2%, 5%, 10%). To be clear, these are hires we are talking about, not co-founders. Co-founders are an entirely different discussion and I am not talking about them in this post.
Once you have assembled a core team that is operating the business, you need to move from art to science in terms of granting employee equity. And most importantly you need to move away from points of equity to the dollar value of equity. Giving out equity in terms of points is very expensive and you need to move away from it as soon as it is reasonable to do so.
We have developed a formula that we like to use for this purpose. I got this formula from a big compensation consulting firm. We hired them to advise a company I was on the board of that was going public a long time ago. I’ve modified it in a few places to simplify it. But it is based on a common practive in compensation consulting. And it is based on the dollar value of equity.
The first thing you do is you figure out how valuable your company is (we call this “best value”). This is NOT your 409a valuation (we call that “fair value”). This “best value” can be the valuation on the last round of financing. Or it can be a recent offer to buy your company that you turned down. Or it can be the discounted value of future cash flows. Or it can be a public market comp analysis. Whatever approach you use, it should be the value of your company that you would sell or finance your business at right now. Let’s say the number is $25mm. This is an important data point for this effort. The other important data point is the number of fully diluted shares. Let’s say that is 10mm shares outstanding.
The second thing you do is break up your org chart into brackets. There is no bracket for the CEO and COO. Grants for CEOs and COOs should and will be made by the Board. The first bracket is the senior management team; the CFO, Chief Revenue Officer/VP Sales, Chief Marketing Officer/VP Marketing, Chief Product Officer/VP Product, CTO, VP Eng, Chief People Officer/VP HR, General Counsel, and anyone else on the senior team. The second bracket is Director level managers and key people (engineering and design superstars for sure). The third bracket are employees who are in the key functions like engineering, product, marketing, etc. And the fourth bracket are employees who are not in key functions. This could include reception, clerical employees, etc.
When you have the brackets set up, you put a multiplier next to them. There are no hard and fast rules on multipliers. You can also have many more brackets than four. I am sticking with four brackets to make this post simple. Here are our default brackets:
Senior Team: 0.5x
Director Level: 0.25x
Key Functions: 0.1x
All Others: 0.05x
Then you multiply the employee’s base salary by the multiplier to get to a dollar value of equity. Let’s say your VP Product is making $175k per year. Then the dollar value of equity you offer them is 0.5 x $175k, which is equal to $87.5k. Let’s say a director level product person is making $125k. Then the dollar value of equity you offer them is 0.25 x $125k which is equal to $31.25k.
Then you divide the dollar value of equity by the “best value” of your business and multiply the result by the number of fully diluted shares outstanding to get the grant amount. We said that the business was worth $25mm and there are 10mm shares outstanding. So the VP Product gets an equity grant of ((87.5k/25mm) * 10mm) which is 35k shares. And the the director level product person gets an equity grant of ((31.25k/25mm) *10mm) which is 12.5k shares.
Another, possibly simpler, way to do this is to use the current share price. You get that by dividing the best value of your company ($25mm) by the fully diluted shares outstanding (10mm). In this case, it would be $2.50 per share. Then you simply divide the dollar value of equity by the current share price. You’ll get the same numbers and it is easier to explain and understand.
The key thing is to communicate the equity grant in dollar values, not in percentage of the company. Startups should be able to dramatically increase the value of their equity over the four years a stock grant vests. We expect our companies to be able to increase in value three to five times over a four year period. So a grant with a value of $125k could be worth $400k to $600k over the time period it vests. And of course, there is always the possiblilty of a breakout that increases 10x over that time. Talking about grants in dollar values emphasizes that equity aligns interests around increasing the value of the company and makes it tangible to the employees.
When you are doing retention grants, I like to use the same formula but divide the dollar value of the retention grant by two to reflect that they are being made every two years. That means the the unvested equity at the time of the retention grant should be roughly equal to the dollar value of unvested equity at the time of the initial grant.
We have a very sophisticated spreadsheet that Andrew Parker built that lays all of this out for current employees and future hires. We share it with our portfolio companies but I do not want to post it here because it is very complicated and requires someone to hand hold the users. And this blog doesn’t come with end user support.
I hope this methodology makes sense to all of you and helps answer the question of “how much?”. Issuing equity to employees does not have to be an art form, particularly once the company has grown into a real business and is scaling up. Using a methodology, whether it is this one or some other one, is a good practice to promote fairness and rigor in a very important part of the compensation scheme.
The President said this the other day:
The world’s always been messy… we’re just noticing now in part because of social media
I don’t think terrorists posting gruesome videos on YouTube and spreading them virally via Twitter, Facebook, and many other internet media channels is “social media”. It’s just Internet media, in which anyone can post anything on the Internet. There is nothing social about it. It’s anti-social in fact. Maybe we should call it user generated media. That’s an accurate term.
The same is true of some hacker getting access to celebrities’ nude selfies and posting them on Reddit and elsewhere. That’s not social media either. It is just Internet media.
We are going to test our notions of free speech and civil rights as we go forward. Should Twitter and YouTube be actively taking down this stuff? And if so, where is the line drawn? What do they take down and what do they leave up? They have been dealing with this issue for as long as they’ve been around but it sure seems like the stakes are getting higher and higher for them and every company that allows the posting of user generated content on their service.
The President is right about one thing. Humanity is at times horrible. Seeing that horror in your timeline next to something familiar and pleasing is deeply troubling. But we may need to get used to it. I don’t see any easy ways out of this mess.
I’ve always liked the idea of documenting a trip, leaving breadcrumbs for others to follow, or at least consider as they are planning a similar trip. The Gotham Gal and I do it very differently but we both do it.
She writes a blog post, chock full of photos, and a few links, every day recounting the prior day’s activities. Here’s her post on the day we recently spent on Lake Como. She has written hundreds of blog posts like that (according to her archive page, she has written 357 travel posts). If you are planning a trip to South Africa, you can go to her blog, search on South Africa, Cape Town, or some other keyword and get a bunch of posts like that which you might want to read while planning your trip. You can do that sort of thing for many places in the world that she has visited, with our without me and our kids.
I like to checkin to places on Swarm, save them on Foursquare, leave tips and photos, and then add them to lists on Foursquare. I’m building one now for the trip we are taking. I’ve built lists like this for Tokyo, Paris, and many other places.
Joanne’s approach is more like a travel magazine or the travel section of a newspaper. It’s great but you have to consume it in bulk quantities. What I like about my approach is it is microchunked down to the smallest atomic unit, the place, with value added metadata (tips and photos), and then built up into lists of various sorts. It feels more like a database that I am building than a magazine.
But both of these approaches work and deliver a lot of value to travelers who might want to follow in our footsteps. And we follow others in their footsteps so what goes around comes around. We use travel magazines, travel sections of newspapers, blogs, and Foursquare to plan our trips. Last week I read online a Food and Wine article on the Piedmont wine region, and it in, I read about a restaurant called Piazza Duomo, checked it out on Foursquare, and we booked a lunch there the next day. It was a fantastic lunch, now documented in a Gotham Gal blog post and a Foursquare tip.
We’ve talked a lot here at AVC about Net Neutrality. I hate that term because it’s got so much baggage now that it is essentially meaningless to me. What I want to see is a framework that everyone agrees to (application developers, bandwidth providers, last mile access providers, and the regulators) that says you can’t prioritize one bit over another in the last mile access network and you can’t charge application developers to deliver their bits to the end user.
This issue is coming to a head at the FCC as the comment period is ending and some sort of decision will be made this fall. So next Wednesday, September 10th, is the Internet’s opportunity to stand up and be heard.
If you are with me on this issue, please consider joining the Internet Slowdown campaign next Wednesday. There are all sorts of ways you can do this. You can change your avatars on your social media profiles, you can send push notifications if you operate a mobile app, you can put a slow loading graphic on your blog or website (there are WordPress widgets if you are on WordPress like I am).
And if you still aren’t convinced, please read Chad Dickerson’s piece in Wired this week on why this issue is important to businesses and everyone who uses the Internet to reach their customers and/or audience.