According to Barter News Weekly, the Israeli government will now charge capital gains tax on profits made from Bitcoin transactions. here is their report:
TEL AVIV – Transactions involving Bitcoins in Israel could be treated as barter transactions, and profits from coin sales could be charged a capital gains tax.
Late last week the Israeli Tax Authority issued a circular detailing the authority’s stance on the taxation of cryptocurrencies, saying that the Bitcoins and other cryptocurrencies shall be treated as assets when sold.
Cryptocurrencies are often considered to fall into a legal grey area for the purposes of taxation, with some countries classifying them as financial instruments, or currency, or an equivalent of a currency, or an asset.
The ITA has now decided that any cryptocurrency sold in Israel shall be regarded as the sale of an asset, and, subsequently, will carry a potential capital gains tax obligation.
The profits made from the sale of cryptocurrencies will need to be declared to the tax authority.
Some experts have noted that if the currency is treated as assets, any businesses accepting crypto-coins as payment will need to treat the transaction as a barter transaction, and will be required to complete their tax filling obligations accordingly.
The treatment of cryptocurrency as an assets does not preclude any transactions from falling under the scope of the country’s VAT system.
It has been said that, “the power to tax is the power to destroy.” Well, the decision of the Israeli tax authorities to tax Bitcoin transactions as asset transfers may not destroy Bitcoin as a speculative medium, but it will surely inhibit its use as a payment medium. The money and banking cartel hates competition.–t.h.g.
I’m on a short vacation in Utah for the next few days and so I’m going to pull an oldie but goodie out of the archives. I’ve been seeing a lot of “turning the team” in our portfolio as of late so I thought it would be good to give this a re-run.
A serial entrepreneur I know tells me “you will turn your team three times on the way from startup to a business of scale.” What he means is that the initial team will depart, replaced by another team, which in turn will be replaced by yet another team.
I have been closely involved with over 150 startups in my career and since roughly 1/3 of the startups we back get to real scale, that means I’ve seen the “startup to scale movie” over fifty times in my career and I can tell you this – my friend is right.
The people you need at your side when you are just getting started are generally not the people you will need at your side when you have five hundred or a thousand employees. Your technical co-founder who built much of your first product is not likely to be your VP Engineering when you have a couple hundred engineers. Your first salesperson who brings in your first customer is not likely to be your VP Sales. And your first community person is not likely to be your VP Marketing.
Likewise, the first VP Engineering who figured out how to manage the unwieldy team left by your technical co-founder is not likely your VP Engineering when you have five hundred engineers. Your first VP Sales who built your first sales team is not likely the person who can manage a couple hundred million dollar quota. Companies scale and the team needs to scale with it. That often means turning the team.
The “turning your team” thing probably makes sense to most people. But executing it is where things get tricky and hard. How are you going to push out the person who built the first product almost all by themselves? How are you going to push out the person who brought in the first customer? How are you going to tell the person who managed your first user community so deftly that their services are no longer needed by your company?
And when do you need to do this and in what order? It’s not like you tell your entire senior team to leave on the same day. So the execution of all of this is hard and getting the timing right is harder.
This is where serial entrepreneurs have a real leg up on first time entrepreneurs. They have seen the movie too and they played the starring role. So they know what the next scene is before it even starts. They know the tell tale signs of the company scaling faster than their team. And so they move more quickly to move the early leaders out and new leaders in. One of the signature faults of a first time founder is they are too loyal to their founding team and stick too long with them.
If it is any consolation, the founding team makes most of the money when a company becomes successful. That technical co-founder who built the first product will likely end up with tens of millions of dollars, if not a lot more, if a business they helped start gets to five hundred or a thousand people. The VP Engineering of a five hundred person company will not likely have an equity package that is worth anywhere near that much.
So I generally advise entrepreneurs to be open and honest about all of this. Tell your early team that they may not make it all the way to the finish line but they will be handsomely compensated with equity and if you are successful, they will be too. And when it is time for them to go, think about how much they brought to the company and consider vesting some or all of their unvested stock on the way out. Also think about compensating them to stick around during the transition. And always make sure they leave the company with their head high feeling like the hero that they are.
Here’s the thing. Turning a team is not the same as firing someone for weak performance. You are firing someone for doing their job too well. They killed it and in the process got your company off to a great start and growing to a scale that they themselves aren’t a great fit for. They may not be right for the job at hand, but they are a big part of the reason that the company is successful. That’s the narrative that you need to have in your mind when you turn your team.
All of this is very hard, particularly if you are doing it for the first time. So get some mentors, advisors, and board members who have lived through this before. And listen to them about this. You may not want to listen to them too much about product and market stuff. Maybe you understand that better than they do. But when it comes to scaling a management team, those who have had to do it before will generally be right about the issues you are facing with your team. So their advice and counsel is worth a lot and you should pay close attention to it.
As we think about how to modify the ACA (aka Obamacare) into something different (aka Trumpcare) I would encourage everyone involved to think about one central tenet – put the person/consumer/patient at the center of the system, not the employer, not the insurer, and not the doctor.
I have written a few times about consumer centric healthcare here at AVC. I believe that patients should and will increasingly take control of their health care and that will be a good thing for costs and outcomes.
Our healthcare investment strategy at USV is largely based on this premise. My partner Andy who has done a lot of the critical thinking that has informed our investments in this sector, wrote this post on his personal blog six months ago explaining how we think about this sector.
Technology will have a lot to do with this. If the regulators will allow it. There are laws on the books in many states (NY State is among the worst) stopping patients from going around doctors and getting diagnostic tests, radiology exams, and, can you believe it, eye exams, using technology instead of humans. We must change those laws and I am involved in efforts to do just that. I would encourage others to engage on this issue. It’s important.
Andy Kessler had a good piece a few weeks ago on all of this. He points out that a lot of the data we need to train machine learning models are stuck in data silos controlled by big companies like Epic Systems. If Trump and his people want to make a better healthcare system, they should require Epic and its competitors to provide open APIs into these data silos so that people/patients can get access to their data and authorize third party systems to have it too. That one move would be huge for AI in healthcare, which we need to get costs under control.
Our problems in healthcare are largely structural. We have allowed employers and insurers to finance our healthcare system and take control of it. We need to get people back in control of healthcare. Technology can be the lever that will do that. If we allow it to happen.
This panel conversation about coping with the new reality took place earlier this week in Munich at the DLD Conference.
If you are looking for a restaurant, a bar, a cafe, a museum, or whatever, there are plenty of ways you can do that on your phone. You can use Foursquare (a USV portfolio company), you can use Yelp, you can use Google or Apple maps, you can do a Google search, or you can stop someone on the street and ask them.
I prefer to use Foursquare because its recommendations are personalized for me based on all of my history with Foursquare over the past eight years. Many others tell me they get the best recommendations from Foursquare too, even if they haven’t been using the app for the past eight years.
But last week, Foursquare launched something that makes searching with their app even better. They now let you search their lists and get user and brand created lists by topic. These searches are geolocated so you always get lists based on where you are.
Here’s a search for sushi lists (in NYC because that’s where I am right now):
Here’s a search for pizza lists:
Here’s a search for museum lists:
If you have never seen a list in Foursquare, this is what they look like:
And if you click on the map icon when you are on a list, you get my all time favorite feature, the list map view:
I find searching for and using lists better than searching for a single venue because a list contains multiple options for that single thing you are looking for. Lists have context, lists have options, and lists are fun.
So the next time you are looking for something local, try using Foursquare and searching by lists. You go to the list tab (second one), and hit the search icon. I think you will find it to be a terrific experience.
I always like to look for where conventional thinking might be wrong. I think you can find interesting investments that way.
I was exchanging emails with a colleague yesterday about Twitter’s decision to get out of the developer tools business and I asked her if it was possible that the conventional wisdom about Twitter (it is in decline and needs to be turned around) is wrong.
I shared these two Google Trends charts with her.
What if Twitter is not actually in decline but has seen the bottom and is growing again?
What if Facebook is in decline but nobody has realized it yet?
I am not saying either of those things is true. I am just asking the questions.
Disclosure: My wife and I are long Twitter and have never owned Facebook stock.
I stayed out of the public debate and discussion of the Gawker lawsuit because while I privately came down on the side of Gawker, the specifics of the case made me uncomfortable and I don’t think it was an ideal case to determine what is free speech and what is not.
However, the same lawyer, Charles Harder, who argued the case against Gawker, is back with another libel suit, this time against Techdirt and its founder and lead writer Mike Masnick. Regular and longtime readers of this blog will know that I am friends with Mike and have supported his efforts to speak out on Techdirt about all sorts of tech policy issues over the years.
The specifics of the Techdirt case are easier for me to get excited about. Mike has consistently and rigorously debunked the claims of Dr. Shiva Ayyadurai that he (Dr Ayyadurai) “invented” e-mail. Dr. Ayyadurai is upset with Mike about this and so he hired Charles Harder to file a $15mm libel suit against Techdirt and Mike.
Regardless of whether Dr. Ayyadurai invented email or not (I highly doubt it), we have a long standing history in scientific and technical circles and in the United States of freely, openly, and publicly debating and discussing technical issues like this. Through that sort of public debate and discussion we determine what is real and what is not and we also move the understanding of science and technology forward. These public debates can get nasty and personal, and that is unfortunate, but I believe it is better that we allow for this debate than set legal precedent that wealthy people can stifle debate by suing publications out of business.
So, I am urging everyone who cares about the legacy of free, open, and public speech and debate about technical issues to support Mike and Techdirt’s efforts to defend themselves. Mike wrote a blog post about this issue last week and this is taken from that post:
I am beyond thankful to the many of you who have reached out and offered to help in all sorts of ways. It is heartening to know so many people care about Techdirt. At some point soon, we may set up a dedicated legal defense fund. But, in the meantime, any support you can provide us will help — whether it’s just alerting people to this situation and the danger of trying to stifle a free press through meritless lawsuits, or it’s supporting Techdirt directly (or, if you have a company, advertising with us). As always, you can support us directly as a Friend of Techdirt, or check out some of the other perks you can get in our Insider program. You can also support us via Patreon.
I am hoping that Mike sets up a dedicated legal defense fund and plan to contribute to it if he does. I will let AVC readers know if that happens. Until then, let’s all get behind Mike and put a stop to this nonsense.
The Department of Homeland Security has officially enacted a provision to make it easier for immigrant entrepreneurs to build startups in the U.S. The rule, proposed by President Barack Obama last summer, takes effect exactly one week before he leaves the Oval Office.
The initial rule outlined a “parole” period that foreign entrepreneurs could apply for, granting two years in the U.S. to grow a startup. To qualify, the founder had to prove that the startup met certain requirements and demonstrated the potential for “significant public benefit.” After the initial parole period, the founder could apply to extend his or her stay in the U.S. for an additional three years, if the startup met additional benchmarks.
Over the past five months, DHS has been collecting public feedback on the proposal to inform the final rule. That comment period led to a few key changes to the final rule, enacted today.
Instead of a two-year period followed by a three-year period, the rule now says entrepreneurs can apply for an initial parole of 2.5 years, followed by an extended period of 2.5 additional years.
The proposed rule said startups needed to have investments of at least $345,000 from qualified U.S. investors to apply for parole. DHS has reduced that minimum required investment to $250,000. The official rule also gives entrepreneurs more time to land funding — 18 months instead of one year.
The final rule also reduces the ownership stake the founder needs to have to qualify. Instead of 15 percent, entrepreneurs need to own only 10 percent of the startup to qualify for the initial parole period. To re-apply for an additional 2.5 years, founders just need 5 percent ownership.
In the proposed rule, a startup had to generate at least 10 jobs during the initial 2.5-year parole period to qualify for an extension. That number has been reduced to five jobs in the final rule.
This is really good thing. I know of a number of founders who have been unable to stay in the US even though they started a company here that is growing and hiring people in the US. Tossing people out who are starting companies that are creating new jobs in the US is nuts but that’s what we have been doing. This rule changes that, at least temporarily, and that’s a good thing.
Here’s the rule in its entirety:
People fail to get along because they fear each other; they fear each other because they don’t know each other; they don’t know each other because they have not communicated with each other. – Doctor Martin Luther King Jr.
I judged the Debug Politics Hackathon yesterday. The winner was Second Opinion, a Facebook Messenger bot that allows users to send the URLs of stories they have read and the bot sends back a similar story with a different take on the issue (a second opinion). The bot does a bunch of other cool things but you get the gist of it.
Two other hacks I really liked were Phoneocracy that connects people of differing opinions via phone to talk to each other and PespecTV which is “chatroulette for political discussions.” Both of these hacks had issues which got in the way of them winning, but the basic idea that the key to debugging politics to is to get people of opposing views talking to each other instead of at each other is spot on.
Like Doctor Martin Luther King Jr. said …….
If you are in NYC this holiday weekend and looking for something to do, consider attending the Debug Politics Hackathon Showcase at 4pm this afternoon in the Flatiron District:
This video was left in the comments to my post about doing a side by side comparison of Google Home and Amazon Echo. It’s fun and I thought I’d make sure everyone sees it by elevating it to the main page.
I’m writing this entire blog post by speaking into my phone. The only things I’m doing with keyboard input are spacing and punctuation.
It would be fun if we could all try to do this today. If you want to leave a comment try leaving a comment with voice input. If you don’t have any voice input on your computer and you can’t do that feel free to leave a comment the regular way.
But my hope it is we’re all going to have some fun today speaking into our computers and phones and talking to each other the old-fashioned way.
Our portfolio company Kickstarter had another fantastic year in 2016.
They put this web presentation together to show what happened.
Things like turning smog into jewelry and turning subways ads into photos of cats are the kinds of things that always seem to happen on Kickstarter.
And I am always amazed and inspired by the creativity that people have inside of them and Kickstarter helps to pull out of them.
For years philanthropic organizations have bought fundraising software from the likes of Blackbaud and a host of other software companies, large and small, in the hope that these tools would help them raise money. The term I like for these fundraising software packages is “pay and pray.” There is no correlation between the amount of money a non-profit pays and the amount of money they raise with these tools.
I think we witnessed the end of pay and pray yesterday with the announcement that our portfolio company CrowdRise is joining forces with GoFundMe to create a single crowdfunding platform that will serve the needs of person to person fundraising, event based fundraising, fundraising for philanthropic organizations, and corporate social responsibility.
Over the past five years, CrowdRise built a suite of crowdfunding tools for philanthropic organizations, events like marathons and other races, and corporations that want to participate in social causes. Those web-based tools are used by tens of thousands of organizations to raise funds organically over the Internet. Now those tools sit on top of the world’s largest platform for charitable giving. In the six years that it has been around, GoFundMe has been used by over 2mm people to raise money from over 25mm donors. Over $3bn has been raised on GoFundMe since 2010.
I think the new GoFundMe has become the social charitable platform of choice, much like LinkedIn is the social platform for business relationships, Facebook is the social platform for staying in touch with friends and family, and Twitter is the social platform of choice for staying on top of what is happening. We will all have profiles on GoFundMe which speak to our charitable giving history and we will all have stored payment credentials on GoFundMe that facilitate one-click social action. In time, everyone who wants to raise funds from the billions of people who are on the Internet will use GoFundMe to do that. And everyone means you and me, it means charities large and small, it means corporations who want to light up social action in their employees, and it means events that want to offer charitable fundraising. One platform can do all of this and it will do all of this.
The other thing that is important to understand about a crowdfunding platform, like GoFundMe or Crowdrise, is that there are no upfront or fixed fees or minimums required to use the platform. Most crowdfunding platforms take 5% of the amount raised plus a credit card fee. So there is a direct correlation between the amount you spend for these tools and the amount you raise with them. And many charitable organizations that use these tools pass these fees onto the donor which means they keep 100% of what they raise on these platforms.
This is a revolution in the way money is raised for good causes. There is now a large scale network that exists to support charitable giving. And the tools now exist for any person or organization to participate in this network. And these tools cost relatively little, or nothing, to use. No more pay and pray.
Globalization is certainly a double edged sword for many people, but the truth is that over the past half century, the world has globalized enormously. We are now to the point that many employers around the world are looking outside their local or national talent pools for key hires.
Our portfolio company Jobbatical specializes in helping companies around the world hire from the global talent pool.
And it also helps people (maybe you are one of them) that want to think about working in a different country for a while.
Here are a few sample listings from Jobbatical’s explore page showing the diversity of job options that are available:
We think that the globalization of hiring is going to expand enormously over the next couple decades and we think Jobbatical has a fantastic opportunity in front of it. Hiring from the global talent pool has some unique challenges but that friction is what creates this opportunity.
If you are looking to hire someone from the global talent pool, list your job opportunity with Jobbatical.
And if you are looking to go work somewhere else for a while, explore the available jobs here.
I saw the news today that Nielsen reported that Streaming Now Officially the Number One Way We Listen to Music in America and I thought to myself “didn’t that happen a decade ago?” The report goes on to say that “on-demand audio streams surpassed 251 billion in 2016–a 76 percent increase that accounts for 38 percent of the entire music consumption market.” I guess that 38% is a global number and that streaming is over 50% in the US. At least that’s how I interpret the article.
A decade later, the market is in the process of flipping.
I started listening to streaming audio when Listen.com launched its subscription music service (which became Rhapsody and then Napster) in the late 90s. I moved on from file based music almost twenty years ago.
Which is a reminder that something may be inevitable, but that doesn’t mean it will happen quickly.
Reserves is the term VCs use to describe funds they “reserve” for follow-on financings of their portfolio companies.
Here are some things entrepreneurs should know about VCs and reserves:
- One very important thing that separates a strong VC firm from all other sources of capital is that the best VC firms reserve capital for follow-on financings for their portfolio companies and can be counted on to participate in subsequent financing rounds. This is not true for angel investors, seed funds, growth funds, and strategic investors. I don’t mean to be disparaging of these other sources of capital. They all are important at various stages of development. But if you want someone you can count on in your cap table, that would be a VC firm, particularly a top tier VC firm.
- Most top VCs will choose to take their “pro-rata share” of follow-on rounds. That means they will invest enough capital to avoid being diluted by the follow-on financing round. If a VC owns 15% of your company, they most likely are going to want to take 15% of follow-on rounds. That means that you can’t raise your next round from your VC investors, but you can count on them for a material part of the round. There are exceptions to this rule, and they are called “inside rounds”, but entrepreneurs should not count on inside rounds. It is generally preferable to raise an outside round, although there are exceptions to that rule.
- VCs raise money in discrete funds. These funds are pools of capital that are capped at some number. That number could be $100mm, $500mm, or $1bn, or more. VCs generally do not like to, and are often prohibited from, “cross investing” between these discrete funds. That means if your company raised money from USV 2004, LP (the name of our first fund, a $125mm fund), it will be hard for us to invest in your company out of USV 2008, LP (the name of our second fund, a ~$150mm fund).
- For this reason, experienced VCs have learned to create large reserves in their funds for supporting their portfolio companies. That means that a firm like USV might go back to its investors for a new fund (USV 2008) after only investing a portion of a fund (USV 2004). At USV, we generally go back to our investors for a new fund after investing about half of a fund. That means that we reserve roughly half of a fund for follow-on investments.
- VCs also have a tool called “recycling” at their disposal to supplement these reserves. At USV, we have the right to take some of our realized proceeds in a given fund and reinvest them in the portfolio companies of that fund. That recycling capability is typically capped in the agreement between the VCs and their investors. At USV, that recycling cap is roughly 25-30% of our funds.
So, given all of this, here is what entrepreneurs should understand:
- VCs, particularly top VCs, can be counted on to support a portfolio company from round to round, particularly for their pro-rata share.
- But VCs don’t have unlimited resources to invest in your company. If they are investing in your company out of a $150mm fund, that is the total amount of capital they have at their disposal as far as you are concerned.
- And a typical VC fund will have 20, 30, 40 portfolio companies in it, so those funds are allocated to the entire portfolio, not your company.
- If a VC invests $3mm in your company, they likely have another $3mm reserved for your company and may have as much as $6mm (2x the initial investment) reserved for it. Don’t expect more than that.
At USV, we take reserves very seriously. We know that early stage companies require a fair amount of capital to grow into profitable sustainable businesses and we work hard to make sure that we have the staying power that our portfolio companies require from us. Specifically, we have done two things to help us manage this reserves issue:
- For each fund we raise, we build a model of the portfolio that lays out all future financing rounds as far as we can predict them. We estimate the timing, size, and probability of that financing round happening. We then run a “monte carlo simulation” of that portfolio to develop a statistical distribution of outcomes. That looks like a normal distribution and we make sure we have a 95% probability of being able to participate in all of these future funding rounds. Practically speaking, this tool allows us to determine how many portfolio companies we should put in each fund before we go back to our investors for another fund.
- We have raised two Opportunity Funds which allow us to continue to participate in funding rounds for our most successful portfolio companies that start raising very large growth rounds. We also use these Opportunity Funds to occasionally participate in later stage rounds of companies that we did not invest in at the early stage.
One of the most common mistakes I see new “emerging VC managers” make is that they don’t sufficiently reserve for follow-on investments. They don’t go back for a new fund until they have invested 70 to 80% of their first fund and then they run out of money and can’t participate in follow-on rounds. They put too many companies into a portfolio and they can’t support them all. That hurts them because they get diluted by those rounds they can’t participate in. But it also hurts their portfolio companies because the founder and/or CEO has to explain why some of their VC investors aren’t participating in the financing round.
Most people think that VC is all about the initial portfolio construction, selecting the companies to invest in. But the truth is that is only half of it. What happens with the portfolio after you have selected it is the other half. That includes actively managing the portfolio (board work, adding value, etc) and it includes allocating capital to the portfolio in follow-on rounds, and it includes working to get exits. And it is that second part that is the harder part to learn how to do. The best VC firms do it incredibly well and they benefit enormously from it.
One of our colleagues at USV pointed us at a series of web videos called Stated Clearly.
I really like this one that explains DNA and how it works in a very simple and easy to understand way.
Here are the details:What is Make 100?
Make 100 is a creative initiative focused on editions of 100. Kick off 2017 by challenging yourself to bring your brightest idea to life, x100.How can I take part?
Getting involved in Make 100 is simple: just launch a Kickstarter project this January featuring your idea as a limited-edition reward capped at 100 backers. Then, share your live project with us: firstname.lastname@example.org.
If you’ve been wanting to do a project on Kickstarter but just haven’t had the right catalyst, maybe this is it. If you do a make/100 project, let me know in addition to Kickstarter and I’ll feature as many of them as I can on subsequent funding fridays this month.
I saw this tweet suggesting they are looking at Spotify for inspiration:
— Neil Cybart (@neilcybart) January 4, 2017
I don’t have any inside information here. USV is not an investor in Medium and I am not privy to any of the strategic thinking at Medium. So they may not be looking at Spotify for inspiration. But they are certainly looking around to figure out where to go from here.
I don’t think Spotify (music), or Netflix (video), or Amazon (books), should be the inspiration for online publishers in search of a new business model. The sad truth is most people are not going to pay a monthly subscription for online publishing content. Certainly not for blog posts by people they have never heard of.
The new online publications that have a paywall have built nice small businesses that pay the bills and maybe make some money for the founders. That’s a great way to go if you want to be small. But if you want to be a large network with millions of readers and publishers, as Medium already is (2 billion words written on Medium in the last year. 7.5 million posts during that time. 60 million monthly readers), a paywall is not going to work.
To be clear, I don’t think Steem has this all figured out. I don’t own any Steem (or at least I don’t think I do). And I think they have made things a bit too complicated with their tokens and incentives. To their credit, they have taken steps to simplify things and they are headed in the right direction.
The thing about token based business models is that the token captures the value of the network as it grows and it is the only business model that exists for the network. You can buy tokens if you want to speculate on the value of the network (or invest in the online publication business, as it were). You can earn tokens by participating in the network (or by publishing content on the online publishing network, as it were). You can spend tokens to participate in the network (or by engaging in or curating the online publishing network, as it were).
Twitter could also go this route but clearly it would be harder for them to move away from an ad-based business model than it was for Medium. And believe me, it was not easy for Medium to do this.
The most likely companies that are going to figure out this token based business model are startups. They have nothing to lose and everything to gain. It would be stunning, bold, and brilliant for Medium to do this. I hope they do.