Blog articles

The Not So Global Internet

A VC - 16 hours 5 min ago

We’ve talked about this stuff before, but not lately. The promise of the Internet is you can connect a server to the Internet anywhere in the world and reach users anywhere in the world. You can login to the Internet anywhere in the world and reach services anywhere in the world. In reality it doesn’t work like that in many places for many services.

We are in the caribbean this week celebrating the year end holiday with friends and family. Yesterday we installed a VPN client so that the Gotham Gal could do some online shopping on a website that only sells to users in the US. We also installed a bittorrent client so that a friend of my son could watch films he had rented on iTunes before he came down here.

The latter experience was particularly frustrating. My son’s friend rented the films on iTunes in NYC, flew down here, then when he tried to play them, they would not play because of IP blocking, but the rental clock (24 hours) started ticking anyway and he lost the rental rights he had paid for.

So we installed a bittorrent client, downloaded the films, and watched them. We figured that my son’s friend had paid for them so we might as well watch them.

I’m not really down with spoofing my IP address or pirating films. I would way rather do things on the up and up on the Internet. But when companies break the Internet to enforce some random geography restriction, and when there are easy to use workarounds, it’s human nature to use them.

The worst thing about all of this, as I’ve blogged before, is that these restrictions teach us the workarounds. The Gotham Gal had never used a VPN before. My son’s friend didn’t have a bittorrent client on his computer. Now they are well versed in these technologies. That’s life on the Internet in late 2014. I’m hoping someday it won’t be like that.

Categories: Blog articles

Thomas H. Greco interviewed on Bartertown Radio

Beyond Money - December 23, 2014 - 2:02pm

My December 13 interview by Bob Prentice and Sandra Harshman on Bartertown Radio considered moneyless trading in general then zeroed in on what needs to be done to take credit clearing and private currencies to scale. To stream it or download it, click here.


Categories: Blog articles

College and Entrepreneurship

A VC - December 23, 2014 - 4:51am

After I tweeted out a link to yesterday’s post, I had this twitter exchange:

@dHandlos i don’t know the exact number but i would not be surprised if half of the entrepreneurs we have backed don’t have college degrees

— Fred Wilson (@fredwilson) December 22, 2014

I took some time today to look through our portfolio and estimate the percentage.

I believe 21 founders out of a total of 72 that we have backed in the history of USV did not graduate from college. That’s about 30%.

However, I believe 17 founders have advanced degrees, including a few PhDs. So roughly a quarter of the founders we’ve backed have invested heavily in their higher education.

There are no specific credentials required to get funded by USV or most other VC firms. You need to be credible as an entrepreneur. That means being able to see, recruit, make, and sell. If you can do that, and if you can prove you can do that to investors, you’ve got a great shot at getting funded.

Categories: Blog articles

Finding ROI In Higher Education

A VC - December 22, 2014 - 7:00am

The news is full of stories where students paid hundreds of thousands of dollars to go to college (and beyond) only to find themselves stuck in dead end jobs and unable to pay off the cost of student loans. We have a crisis in the US in higher education. The costs have risen and the benefits have declined.

It has gotten to the point where I believe if you have to personally shoulder the cost of your higher education, you should think twice about the traditional model. If you can get scholarships or if your parents are willing to pay the tuition bills, I still think its a valuable experience, but sadly it is not one that makes sense if you have to make the investment personally.

So what are we going to do about that? We need to find new models. And one new model that is working in NYC is The Flatiron School. The Flatiron School started two years ago and teaches students, both high school grads and college grads, how to become software engineers in a twelve week course that costs $15,000. Scholarships are available for students who cannot afford that investment.

Today The Flatiron School has published an audited report that validates the notion that their model produces graduates who can find high paying jobs. Here is a summary of the report and this is the “money slide” from it:

cost and benefit of flatiron

So for a high school graduate, the tuition at Flatiron can be paid back with six months of after tax income. For a college graduate, you can increase your pay by ~$30k by spending $15k. You get that payback in one year of after tax income.

For the average college grad, it takes roughly three years of all of your after tax income to pay off your college costs. If you go on and do Flatiron, you can pay off everything with two years of after tax income.

Anyway you cut the numbers, The Flatiron School is a great investment. Part of it is that the students learn a valuable skill – software development. Part of it is that the cost of delivering that education are very reasonable. And it isn’t that they do this on the cheap. Here is the work required from a student at The Flatiron School:

educational activity at Flatiron

There’s been a lot of talk that online education is the answer to lowering the costs of higher education. The huge investment in MOOCS that happened a few years ago was based on that notion. The reality is that online education is a part of the answer but not the silver bullet that some thought it would be. I gave a talk at Wharton a couple years ago about this.

The answer to lowering the cost and increasing the benefits of higher education requires a multitude of changes to the current model. And one of them is teaching students skills that are directly related to job requirements. Doing that makes students more employable and more valuable.

This is not a criticism of the liberal arts model, per se. As Steve Jobs said in this interview, learning to code is a liberal art. This is a criticism of administrations and faculties that are rigid in their interpretation of what liberal arts and education should mean. This is a criticism of not evolving and changing with the times. This is a criticism of thinking what worked yesterday will work tomorrow.

And mostly this is a criticism of not making hard choices. Schools that are happy to add courses, faculty, and buildings are not willing to eliminate courses, faculty, and buildings. When you always add and never subtract, you get cost structures that are not sustainable.

The Flatiron School is an example of what can be done with a blank slate. They have figured out how to give students highly relevant and valuable skills at a cost that is both affordable and recoupable very quickly. Adam, Avi, Sara and the entire team has created a model that should be an inspiration for others.

Categories: Blog articles

What I Write About And What I Don’t

A VC - December 21, 2014 - 6:29am

There was a discussion in the comments on this week’s fun friday post about me “pimping” our portfolio too much. To which I responded with this:

i am my portfolio. its all the same thing. i go to bed thinking about it and wake up thinking about it. i would blog way more about it than i do but i can’t talk about most of the stuff that is going on in my portfolio.

It’s the latter point I want to talk about a bit today. Every day I run a bunch of blog topics through my head before deciding what I am going to write about. And most of them get rejected because they are “too close to home” meaning they are too specific to something that is going on right now in my work life. There is one thing right now, for example, that would make a great blog post but there is no way I can talk about it. That is almost always the case.

Here are some rules I live by:

1) If an entrepreneur walks into our office and tells us/me something that is not publicly known, it is confidential unless I explicitly ask for permission to mention it on AVC and receive permission.

2) If something happens in our portfolio, in a board meeting, in the company, or even in the market, and it is not public, then it remains confidential and I do not blog about it unless I’m asked to.

3) I don’t mention people by name unless I ask them and they OK it. There are times I don’t comply with this one perfectly. Last week I mentioned AVC community member Kirk Love in a blog post by name but left his wife’s name out. Kirk is known to this community and the mention was pretty harmless. This is something I manage as best I can. I think I do a decent job of it but it’s always a calculation.

4) If its a grey area, I don’t blog about it. Better to be safe than sorry.

What I should do and don’t, at least right now, is write down all of these things I’d like to write about but can’t, so that I could come back to them in the future when they are in a place where it is possible to talk about them. Not everything gets to that place. But a lot of things do. I will think about starting to do that.

I find myself in the middle of, or have a courtside seat for, a lot of super interesting things. But I can’t and don’t write about most of them. Which is a bummer for me and a bummer for all of you too.

Categories: Blog articles

Video Of The Week: A History Lesson On Why We Need Neutral Networks

A VC - December 20, 2014 - 11:41am

My partner Brad went down to Chattanooga where they have a gigabit fiber network around the city and attended an event about connectivity and what it does for society.

In this short (~10mins) talk he gives a history lesson on how we got permissionless innovation on the Internet and why we could lose it.

Categories: Blog articles

Fun Friday: Year End Music List

A VC - December 19, 2014 - 5:05am

Every year since I started this blog, I’ve shared my favorite music of the year with the AVC readers.

In the early years, I would post different album every day for ten days (or eleven) in the process of putting together a top ten list. I moved away from albums a few years ago because I just don’t listen that way very much anymore.

I’ve moved to SoundCloud playlists and today I’m publishing my Essential Tracks of 2014 playlist here at AVC. It’s also available On SoundCloud and everywhere that SoundCloud is available (your phone, your browser, your Sonos, etc, etc). Enjoy.

Categories: Blog articles

The Interview Mess

A VC - December 18, 2014 - 5:06am

So Sony has decided to pull the plug on The Interview after the major theater chains decided against showing the film.

This is a fascinating story on so many levels. It is not clear  to me who was behind the hacking attack on Sony, but there are some obvious candidates. We are witnessing cyber warfare in real time. And there are real costs involved. Who knows how much Sony has lost or will lose as a result of the hacking incident and all the repercussions. But we do know that The Interview cost $42mm to make and there were “tens of millions” of marketing and distribution costs already spent as well. All of that comes from the article I linked to at the start of this post.

How will this impact the entertainment business going forward? Will they now harden all of their systems? Yes. Will the cybersecurity industry get a boost from this incident? Yes. Will it change how they think about making films and other entertainment? I would have to imagine the answer to that question is yes.

And what of the film itself? Should we allow censorship of this form to exist in our society? Should the film get released in some form?

I think the Internet, which was the source of so much harm to Sony, should also provide the answer to what happens to this film. If I were Sony, I would put the film out on BiTorrent, and any other Internet services that want it. Give it to Netflix if they want it. Give it to iTunes if they want it. Give it to HBO if they want it. Give it to Showtime if they want it. Essentially give the film to the world and let the world, via the Internet, decide what they want to do with it.

Of course this is about money to Sony. $42mm is a lot of money to write off. And it is a lot more than that given all the extra costs. But keeping the film locked away in a vault is also a cost. Both to Sony and to society. It says that the attack worked. I think the best thing Sony can do at this point is give the world the film and let us all decide what we think about it. We should not let cyberterrorist censorship have its way.

Categories: Blog articles

What’s Next

A VC - December 17, 2014 - 4:58am

I am always thinking about what is next and I feel like I’m spending even more time this year thinking about this. All of us at USV seem to be pondering this question a lot right now.

I came across this nice post by Ben Thompson in which he ponders the question out loud, which is my favorite way to ponder.

Here is the money quote:

While the introduction of the iPhone seems like it was just yesterday (at least it does to me!), we are quickly approaching seven years – about the midway point of this epoch, if the PC and Internet are any indication.4 I sense, though, that we may be moving a bit more quickly: the work/productivity and communications applications have really come into focus this year, and while the battle to see what companies ride those applications to dominance will be interesting, it’s highly likely that the foundation is being layed for the core technology of the next epoch:

Ben’s framework is roughly similar to ours but his conclusions are a bit different as follows:

1) I would substitute personal mesh for wearables

2) I would substitute the blockchain stack for bitcoin

3) I would bet on messenger as the next mobile OS over anything else. We have already seen that happen in China.

But in any case, posts like Ben’s and what comes of them (this) are super helpful. Thanks Ben.

Categories: Blog articles

Hashtags As Social Networks

A VC - December 16, 2014 - 6:32am

Our portfolio company Kik launched hashtags yesterday. Kik is a mobile messenger so in Kik’s model hashtags are private or public group chats.

If I send a hashtag to a friend in Kik that says let’s chat about tonight’s knicks game at #knickskik, then that becomes a private group between me and that friend (and any others who we invite). I’ve done that so the #knickskik hashtag is now private on Kik.

But hashtags can also be public. If you have the latest version of Kik on your phone (came out yesterday), type #avckikgroup into a chat and then click on that link. Up to 50 of us can be in that group.

The cool thing about Kik is that it doesn’t use phone numbers like other messengers. It uses usernames and is not tied to your phone number or Facebook username. And so Kik, unlike other messengers, is used for both chatting with people you know (like other messengers) and people you don’t know.

That makes Kik an ideal platform for these public (and searchable) group chats. You can meet people in these public chatrooms and then take your conversations private in a one to one chat in Kik.

Ted Livingston, Kik’s founder and CEO, called this “hashtags as social networks” in a blog post yesterday.  I agree with Ted that Facebook’s model of the one network to rule them all has not really worked and that many of us are using messengers as defacto social networks. My friend Kirk told me that his wife’s family uses a group in WhatsApp like their personal family facebook feed. I think that’s the phase of social networking we are now into and so Kik’s hashtag as social network model makes a ton of sense to me.

Categories: Blog articles

Holiday Giving

A VC - December 15, 2014 - 4:40am

Every year at this time of the year, my office piles up with gifts that people send me. I don’t drive back and forth to work so it’s not easy for me to bring them home. So a big pile builds up and sometime in January or February, I get a big bag, come in on the weekend, and pick everything up and bring it home. As you can imagine reading this, I get annoyed by this. I know the gifts are sent with the best intentions. But sadly they are not received that way.

What I would massively prefer is a donation be made instead.

– Back a Kickstarter.

– Or participate in the Crowdrise Holiday Challenge (which The Gotham Gal and I helped make happen).

– Or help a teacher on DonorsChoose.

If you are in the giving mood, I have a specific suggestion. CSNYC, our non-profit that funds computer science classes in the NYC public schools, has a holiday wish list up on Crowdrise.

If you want to see a map of what CSNCY is funding, you can see that here.

Our wishlist was built with our existing donor pool in mind and AVC readers might find the specific asks a bit steep. So if you don’t find any of our wishes to your liking you can make a donation of any size here:

Fundraising Websites – Crowdrise

Categories: Blog articles

The Perfect Board

A VC - December 14, 2014 - 5:48am

Last month Sam Altman wrote a post about board members and why you should want them. I read it and then tweeted it out:

This is a great post by @sama about board members and why you should want them http://t.co/09Har9cfpb

— Fred Wilson (@fredwilson) November 11, 2014

In Sam’s post, he says:

Personally, I think the ideal board structure for most early-stage companies is a 5-member board with 2 founders, 2 investors, and one outsider.  I think a 4-member board with 2 founders, 1 investor and 1 outsider is also good (in practice, the even number is almost never a problem).

I’ve been serving on boards for 25 years. I’ve been in every conceivable configuration. To my mind, the perfect board is either five or seven and it looks like this:

Founder CEO, Two Independents, Two Investors

Founder CEO, Three Independents, Three Investors

If the Founder is no longer the CEO, then I like this configuration:

CEO, Founder, Two Independents, Three Investors

If you have less than three investors (yay!), then replace investors with independents in each formula and you’ve got a winning configuration.

An entrepreneur the Gotham Gal is invested in asked me this question via email a few weeks ago, and I told him this:

This is a long way of saying that you aren’t done once you put one independent on the board. You are going to need a bunch. Finally – don’t try to satisfy your VCs. They will want “names” “trophies” and the like. Satisfy yourself. Find people, ideally peer CEOs, you like respect and want to spend time with who you know can and will add value. A great company deserves a great board. And a great board has bunch of people on it, ideally a bunch of people who are experienced at running a business, growing a business, and dealing with all the stuff that comes with that. Do yourself a favor and build a great board for your company.
Categories: Blog articles

Video Of The Week: The Bubble Question

A VC - December 13, 2014 - 7:12am

Since the LeWeb video I posted on wednesday was so long (>40mins), we are going with short and sweet today.

In late October, I did an event with City National Bank. For those that don’t know, City National is one of the banks that are active in the tech startup sector, banking and lending to startups. We did a “fireside chat” format which is really my favorite way to do a public appearance. And, of course, I got “the bubble question.”

Here is how I answered it in less than three minutes:

Categories: Blog articles

Newsletter – 2014 Year end

Beyond Money - December 12, 2014 - 8:49am

In this edition:

  1. Upcoming interview—December 13, 11 AM Eastern time (8 AM Pacific time)
  2. My New Course Offering — Principles of Exchange Innovation
  3. Report on California Tour
  4. Major conference upcoming, June, 2015
  5. My next book?, + video projects

______________________________________________________

Upcoming Interview

I have accepted an invitation to be the featured guest on Bartertown Radio on Saturday, December 13.

Bartertown Radio, which describes itself as “your educational station for Trade,” is a Live Radio Talk Show every Saturday Morning at 11:00 EST ( check your local time please). My interview will be all about moneyless trading and exchange innovation, particularly as it applies to the commercial trade exchange business. To listen in and/or share your thoughts you can call 1-347-989-8557 for the show. Calls can be made using any phone or by using your Skype account which provides calls at very low cost especially for those living outside the U.S.

______________________________________________________

My New Course Offering — Principles of Exchange Innovation

As the years pass I become ever more aware of time as a scarce commodity, and as the global mega-crisis intensifies, I feel a greater urgency about the need to transcend the global interest-based, debt-money system that is driving us to destruction. Thus I am eager to pass on to the next generations the important insights and discoveries I have made over the past 35 years. I am intent on doing this in ways that will have a greater impact than the presentations, workshops and writings I have been producing over the past many years.

While I relinquished my formal academic career decades ago in favor of independent inquiry, scholarship, writing, and consulting, I remain a teacher a heart and am making it my highest priority to offer a course in the Principles of Exchange Innovation. I am quite sure that there is no other course like this anywhere, and I am uniquely qualified to conduct it.

It is my intention to guide dedicated cadres of change agents through an intensive process of inquiry, discovery, and planning to bring to market revolutionary structures and processes for value exchange that promote a sustainable economy and have the potential to usher in a new equitable and peaceful economic paradigm.

I am willing to go wherever suitable venues might be found. I’ve considered offering this as an online course, and that can be one component of it, but I believe that the impetus toward timely and effective action requires the continuity and intensity that comes from the regular face-to-face interaction and ongoing collaboration in a classroom setting.

You can find the detailed course description and syllabus here: https://beyondmoney.files.wordpress.com/2014/12/principles-of-exchange-innovation-course-syllabus.pdf.

Prospective course participants and host institutions are invited to fill out the short form at http://wp.me/P43RA-Ea. If you know of other institutions, departments, or individuals that might be interested in participating, please pass this along to them.

______________________________________________________

California Tour-October/November

My two week trip to California in October could not have been better. It started with the Living the New Economy Convergence that was held in Oakland, October 23-24, and ended with a delightful visit with my dear friends, the Lub family, in Napa and Martinez. In between, I gave another presentation at the Institute of Noetic Sciences, attended an open house at the new Oakland offices of Berrett-Kohler Publishers, and conferred with several long-time friends and colleagues.

Living the New Economy Convergence

The convergence was the best conference I’ve attended in many years—well organized, with excellent presenters, and participants that were enthusiastic, well-informed, and intelligent.

A few of the presentations, including one of my own, were recorded by Bitcoin magazine. My presentation during the panel on The Future of Value Exchange can be found in my blog post here. Links to the others can be found here, and a few photos that I took at the Convergence can be viewed on my Picasa Web gallery. If you would like to see a more detailed report on this event, check out this one on the Shareable website.

The convergence was followed by a two day “hackathon” that gave participants an opportunity to brainstorm together and propose ideas, collaborations, and business projects. Sergio Lub’s pictures from that part of the event (October 25) are on his Flickr site.

IONS

The event at the Institute of Noetic Sciences (IONS) on the evening of October 30, was very gratifying, drawing about a dozen participants, many of whom I’ve known and worked with over the past several years. My presentation titled, The Evolution of Money and its Potential to Improve Humanity, was followed by a lively discussion that went on for more than 2 hours. The entire proceedings were video recorded by Sergio Lub and can be seen via my blog post at BeyondMoney.net.

Sonoma GoLocal

The day before I left to return to Arizona, Sergio and I visited our friends who run the Sonoma GoLocal project. This is an exciting project that goes well beyond the conventional “buy local” agenda.IMG_4919

A few years ago, Sonoma GoLocal initiated a merchant rebate program, which is gradually becoming more popular. According to Terry Garrett, about 17,000 swipe cards have been issued to consumers and there are now 53 merchants offering “Reward Points,” with each merchant choosing their own percentage rate of rebate that varies from 2% to 10%, with the median rate being 5%.

Over the past year they have experienced a growth rate of about 20% in both the number of participating merchants and the number of cardholders. Between January1 and September 30, 2014, the amount of transactions involving either issuance or redemption of Reward Points was about $3.8 million with that number expected to reach $5.5 million by year’s end. Sonoma GoLocal has been publishing both a printed pocket guide and a free bi-monthly magazine that help to make the project financially viable. You can see some photos from our meeting, including cover photos of the publications here.

______________________________________________________

Seizing an Alternative: Toward an Ecological Civilization

I would like to make everyone aware of a major conference that is upcoming next June 4-7. This conference, to be held on the campus of Pomona College, located in Claremont, CA, is the result of several events held in conjunction (10th International Whitehead Conference, 9th International Forum on Ecological Civilization, Inaugural Pando Populus Conference, Pilgrim Place Centennial Celebration, and Process & Faith Summer Institute) and will consist of 12 Sections divided into approximately 78 Tracks. Each Track will have 8 sessions, which will be 90 minutes each.

After my meeting with renowned philosopher and theologian, John Cobb, a couple years ago, he invited me to participate in this conference which he was then helping to plan. I will be presenting in Section I, The Threatening Catastrophe: Responding Now, Track 6, Political Collapse: The Alternative. You can get all the details, and register at http://www.ctr4process.org/whitehead2015/.

______________________________________________________

My next book?, + video projects

I’m aware that in today’s information-rich environment people tend to be overloaded and getting their attention is becoming ever more difficult. Short videos on YouTube, Vimeo, or other video showcases are probably the best bet for getting a message across. I’m hoping to find someone with the requisite editing skills to help me parse some of my recorded presentations into short topical lessons. That, combined with a new book aimed at the mass market, might attract the kind of attention, and provide the essential information needed to dispel false beliefs that prevail in the minds of the general public and stimulate the kinds of fundamental structural changes that are becoming ever more urgent. I’m inclined to give this new book a provocative title, like Everything You Know About Money (And Banking) Is Wrong! It would follow a question and answer format that presents first a fundamental question, then the orthodox answer and prevalent belief, then the truth of the matter as I have come to see it.

This project is of course a major undertaking, and if it is to achieve the kinds of results hoped for, calls for some skills and resources that exceed my own. Collaborators and suggestions are invited.

______________________________________________________

Finally, on a personal note, after spending the summer in Bisbee, I’ve reestablished myself in Tucson, sharing a house on the far east side, close to the Rincon Mountains and Saguaro National Park. Though a bit distant from downtown, it is in a lovely, peaceful setting—rather ideal for creative work.IMG_4942

My accustomed robust health has been disturbed in recent months by some digestive difficulties. A course of medication and a combination of dietary changes and natural supplements seem to be resolving the worst of it and I’m hopeful that I’ll soon be back to normal.

Best wishes to all for a Happy Holiday Season, and may the coming year bring a great leap forward in creating a more peaceful, just, and sustainable world.

Thomas


Categories: Blog articles

Feature Friday: Embedding Spreadsheets In WordPress

A VC - December 12, 2014 - 4:59am

So yesterday morning was a bit nuts. I decided to flush out some thoughts on valuations that I had talked about on stage at LeWeb. I started writing a post that would become this. I started building a spreadsheet that would become this.

I had an 8:30am breakfast and as it got closer and closer to 8am, I realized I was screwed. I had cut and pasted certain rows from the google sheet into my post and they were not fitting properly on the screen. As I played around with the underlying code, it just got worse. I was digging myself into a hole.

So at 8:10am, I made a decision. I wrote a note to everyone that the post was messed up, jumped into the shower, and got to my breakfast about 5mins late.

When I got to the office after my breakfast, I learned that a meeting I had in my calendar was not happening. Oh happy day. I love when that happens.

So I googled for a wordpress plugin that allows the embedding of google sheets and found this one.

It is called Inline Google Spreadsheet Viewer and it gives you a wordpress shortcode that looks like this:

gdoc key

If you want to embed a google sheet in a blog post, you install the plugin, you insert that shortcode, and you put the URL of the public/open google sheet into the ” ” and that’s it.

What I could not figure out how to do was to embed different tabs from the same sheet, so I ended up creating four different sheets and embedding each one separately.

But it all worked out fine. Within ten minutes I had cleaned up my post and put that to bed. Had I known about this plugin when I started the post around 7:30am, I could have easily polished the whole thing off and even had time to shave in the shower. Fortunately, it takes days for my beard to show up :)

Categories: Blog articles

Revenue Multiples And Growth

A VC - December 11, 2014 - 6:05am

When you say “the stock is trading at 20x revenues” people rightly shake their head and say “that is nuts.” I got a lot of tweets like that in reaction to my comments about the Uber valuation in the LeWeb breakfast chat.

However, what people fail to realize is these things happen in a moment in time and that stocks won’t trade at 20x revenues forever.

Let’s take a fictional company that has $1bn in revenues in 2014 and goes public at $20bn, 20x revenues. Let’s say it will double revenues in 2015, then grow 60% in 2016, and 40% in 2017, and 30% in 2018.

So here are the revenue numbers

(000s)20142015201620172018Revs$1,000,000$2,000,000$3,200,000$4,480,000$5,824,000Yr/Yr %100%60%40%30%

So, let’s now look at profits, since valuations are ultimately a function of profits, not revenues.

Let’s say this fictional company is breakeven in 2014, but expects to make 10% EBITDA margins in 2015, growing to 25% EBITDA margins by 2018. So here are the EBITDA numbers that fall out of that.

(000s)20142015201620172018EBITDA Margin0%10%15%20%25%EBITDA$0$200$480$896$1,456

Let’s say this fictional company’s stock will go up 10% a year each year until 2018. So the valuation goes from $20bn today to $29bn over five years.

(000s)20142015201620172018Valuation$20,000,000$22,000,000$24,200,000$26,620,000$29,282,000Yr/Yr Growth10%10%10%10%

So here are the Revenue and EBITDA multiples that fall out of this thought exercise

20142015201620172018EBITDA Muiltple110.050.429.720.1Revenue Multiple20.011.07.65.95.0

The point of all of these numbers is to show that if a company can grow very quickly over a five year period, and become highly profitable, the stock can perform well and the multiples can come down to earth pretty quickly.

That is a bunch of “ifs”, but every once in a while this actually happens. It happened with Google which now trades at 5-6x revenues, and it is happening with Facebook which is in the middle of this kind of a story. So my point is 20x revenues is a huge number, but every once in a while, a company actually deserves it.

For anyone who wants to dig into the numbers a bit more, here’s a link to the google sheet that I built as I wrote this post.

Categories: Blog articles

The LeWeb Breakfast Chat

A VC - December 10, 2014 - 2:42am

I blogged about this yesterday and the talk went up last night. So here it is. Its about 40mins but its a fun and wide ranging conversation.

Categories: Blog articles

LeWeb Breakfast Chat

A VC - December 9, 2014 - 5:12am

I just boarded a plane back to NYC and sadly we won’t have wifi on this flight so I’ll share some quick thoughts from my “breakfast chat” with Loic at LeWeb this morning and you can all discuss them as I fly home.

Six or seven years ago Loic and I had a very nice breakfast outside at a French bakery in San Francisco. So Loic decided to recreate that vibe on stage today and we sat at a table with coffee, croissants, and juice while we talked about where we are right now in the world of tech.

IMG_0412.PNG

We covered a lot of ground but I thought the most interesting themes were

– the maturing/mainstreaming of the sharing economy and the likely IPOs of these companies in the next year or two which will cause them to become even more mainstream.

– whether wearables means watches (I don’t think so) or a whole ecosystem of devices/our personal mesh (I think so).

– the downturn in bitcoin which Loic thought means it’s over and I think means it’s a good time to invest

– European discomfort with tech innovation. Loic mentioned the Uber Paris issues and I mentioned Merkel’s wrongheaded stance on net neutrality

I’m fairly certain the video of our breakfast chat will be online soon and I will post it then. See you on the other side of the pond.

Categories: Blog articles

Homescreen.is

A VC - December 8, 2014 - 2:36am

If you want to see what mobile apps are the most popular, you can do a number of things.

You can look at the mobile apps that have the most downloads by checking out the leaderboards in the iOS and Android app stores. They will differ from country to country. You can use a service like AppAnnie to help you do this kind of work.

You can try to figure out what apps have the most MAUs and DAUs. That is a lot harder. There are some services out there that attempt to do that. comScore’s Mobile Metrix will give you that data. It’s a paid service so not everyone can afford it. Full disclosure, I used to be on comScore’s board and still own stock in the company.

Another interesting metric is homescreen real estate. Being on a user’s homescreen will tell you something about the loyalty the user has to the app and it is most likely correlated to MAUs and DAUs (why would you have an app on your homescreen that you don’t use regularly?).

I’ve been pretty obsessed with homescreen real estate and have posted my homescreen here on AVC a number of times. My homescreen moves around a lot, particularly when I’m traveling and need certain apps more than others. For example, the Delta and Uber apps are on my homescreen while I’m in europe because I’m using both frequently while I’m over here.

My friend John Borthwick is also obsessed about homescreen real estate and he and his colleagues at Betaworks have built a service to aggregate homescreens and then create a data service around them. The service is called homescreen.is and it’s pretty simple. If you have an iPhone, you download the app, you take a screenshot of your homescreen, and you upload it to homescreen.is via the mobile app.

Each user has a profile on the site with their current homescreen on it. Here is mine. There is a leaderboard, of course, which is here. And you can see some interesting things, like the top homescreen apps of people who follow someone on Twitter. Here’s that data for me. It turns out the top homescreen apps of my followers on Twitter is not much different from the top homescreen apps for all homescreen users.

Right now, this data is heavily skewed to the geek/tech insider crowd. You can see that in the data. 1Password, Pocket, and Overcast are top apps on Homescreen.is. They are not top 100 apps, maybe not even top 250 apps. But they are very popular in the same crowd that is using Homescreen right now.

Can Homescreen go viral and get mass adoption such that its data will be more mainstream? Maybe. Sharing homescreens seems like something everyone would want to do. Making Homescreen.is fun, engaging, and viral seems like the thing they need to do to get the app on everyone’s phones. An android version would be good too.

In the long run, Homescreen.is could be a great tool for discovery. The mobile app ecosystem could use some help with that.

Categories: Blog articles

Learning To Code

A VC - December 7, 2014 - 2:01am

Christina Cacioppo, who spent a few years with USV in our analyst program, spent the next two years after leaving USV teaching herself to code and making a bunch of products herself and with a few colleagues.

She recently wrote a post outlining her learnings from that experience. It’s good. For anyone who is teaching themselves to code or thinking about doing so, I highly recommend reading this.

Categories: Blog articles
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