Blog articles

The Long Engagement

A VC - August 18, 2019 - 4:03am

The Gotham Gal and I met when we were 19 and got married when we were 25. We lived together for most of those six years before we got married. By the time we tied the knot, we knew each other very well.

While venture capital investing and marriage are two different things, I think there are some things one can take from love and marriage into the world of startups and venture capital investing.

One of them is the value of long engagements.

I have never understood why founders want to run a lightning fast process to select business partners who they may have to “live with” for the next seven to ten years.

And yet we see this behavior all of the time. Often it is driven by other VCs who toss in “preemptive term sheets” thus turning a fundraising process into a sprint.

What I would prefer to see, and do see in many cases, is a founder who takes the time while they are not raising money to build a number of relationships with potential investors and then engages those investors in a process when it is time to raise capital. I like to call this process the “long engagement”.

It might sound like a lot more work than the fast and furious fundraising process that many founders are running these days.

But I don’t think it is a lot more work. Building relationships over a six to twelve month period can take the form of an occasional face to face meeting, emails back and forth, and even a few visits to the office by the investor. And none of that has to have the pressure of a pitch, an ask, and a price.

For the investor, this is a much better process. It allows them to see the founder and the business execute over time. It allows everyone to develop comfort with each other.

I would argue that it is a much better process for the founder too. It let’s them see which investors are truly interested in their business, their team, their product, and their success. It also reveals which investors are “here today, gone tomorrow.” You want the former on your cap table, not the latter.

It is easy to get caught up in the game of startups and investing in them. A fundraising process is at its heart a competition. And everyone wants to win. But you don’t get a trophy for winning this game. You get into a relationship. Often a very long one. So I think stepping back from the game theory and stepping into the relationships is the way to win long term. Which is the only form of winning that really matters.

Categories: Blog articles

Video Of The Week: A Reminder

A VC - August 17, 2019 - 5:25am

As the US government thinks about regulating big tech and constraining crypto-currencies, I think a reminder about the value of open markets and freedom to innovate is important.

Categories: Blog articles

Funding Friday: Vacuum Tube Speakers

A VC - August 16, 2019 - 4:02am

I love when old meets new. And so when I saw this project this morning, I backed it immediately.

Categories: Blog articles

Zooming

A VC - August 15, 2019 - 3:46am

For the past three or four years, I have been trying to reduce my air travel for a host of reasons (wellness, reducing carbon footprint, increasing productivity, etc) and I would say that this effort has largely been successful.

The main tool that I have used to accomplish this is videoconferencing and although I use whatever videoconferencing software that the other side wants to use, it turns out that I am mostly Zooming these days.

We use Zoom at USV for all of our team meetings and for many of the pitches we receive over video (which has increased significantly in the last few years).

And the vast majority of our portfolio companies use Zoom too.

There are many days when I will be on Zoom for three, four, five hours and I can get a lot done that way.

We had a board meeting yesterday that was one of the best meetings that the company has had and everybody was on Zoom.

I will say that video works better when everyone knows each other well (like the USV team) and the benefits of body language are less.

But without a doubt, videoconferencing has arrived and it can and should reduce your need for air travel. We can’t fully replace the in-person, face to face experience, but we are pretty close to it now. And so we should leverage that to improve our lives, our effectiveness, and our business.

Categories: Blog articles

Tumblr

A VC - August 14, 2019 - 4:55am

The news hit yesterday that WordPress has purchased Tumblr from Verizon (which owns it by virtue of its acquisition of Yahoo! and AOL).

USV seeded Tumblr along with our friends at Spark in the summer of 2007 and were actively involved in the development of the company until its sale to Yahoo! in 2013.

I maintained an active Tumblog from before we invested in 2007 until October 2016, when I stopped posting there. There was no moment when I decided to stop posting there. I just did.

The narrative around the sale of Tumblr to WordPress is all about Yahoo! paying more than a billion for it and selling it for $3mm. It is absolutely true that Yahoo! never figured out how to turn Tumblr into a business and ending up losing its shirt on the investment.

But it is also true that Tumblr was bypassed by native mobile applications like Instagram and Snapchat where it was even easier to post about your life. Tumblr was both a blogging platform and a social media application and while I always loved the versatility of the platform, native mobile applications benefit from simplicity, not complexity.

There was a time around 2010 and 2011 when Tumblr was the most engaging social platform that I was on. I followed and met quite a few interesting people there and it was a lot of fun to be on it.

David Karp, the founder of Tumblr, always focused on making Tumblr a “positive” experience. That is why he refused to have comments, even though I pushed him to do it and hacked Tumblr by putting Disqus on mine. That is why he made the primary (only?) form of engagement a heart.

And it worked. Tumblr was a happy place and using it made people feel good about themselves.

While the world of social media has evolved a lot in the last six years, since Tumblr sold to Yahoo!, it has not really gotten better. One could make a very strong argument that it has gotten a lot worse. Tumblr was an example of how to do social media right and we can learn a lot from it.

Categories: Blog articles

Open Finance First, Open Data Second

A VC - August 13, 2019 - 2:15pm

My partner Nick put together a deck outlining USV’s approach to crypto investing earlier this year and we have been using it with founders and investors since then.

One slide I particularly like from that deck is this one which describes how we think the crypto market will develop over time.

We have already seen an explosion of assets issued on blockchains and a number of very large and profitable custody/brokerage/exchange businesses built. We expect we will see continued innovation in the open finance (finance 2.0) sector in the next few years while the open data (web 3.0) sector will take longer to develop.

We also think that open finance will inevitably lead to open data as users (both consumers and businesses) will start to understand and appreciate the benefits of increased user control, lower transaction (and other) costs, and other benefits of decentralization.

Categories: Blog articles

Awesome Features That I Did Not Know About: Version Management In Google Sheets

A VC - August 12, 2019 - 4:20am

One of the joys of using technology for me is discovering awesome features that I did not know about. This happens to me every so often and always brings a smile to my face. So I thought I’d blog about this when it happens to me.

This recently happened with version management in Google Sheets. When I work with a big spreadsheet, I always worry about making some change and messing the entire thing up. I have been using spreadsheets since Lotus123 and have messed up many a spreadsheet. So I like to make copies of my work regularly so I have something to roll back to.

Sometime in the last few weeks, I accidentally deleted a row and could not undo it. So I searched for “version management in Google Sheets” and got this one box answer:

This works for all Google apps but is particularly valauble for Google Sheets.

So now I can stop saving my work regularly. Google is doing that for me. Awesome.

Categories: Blog articles

Risk Tolerance

A VC - August 11, 2019 - 3:39am

Startup companies go through a number of phases as they mature from an idea, to a small team, to a growing team, to a small company, to a big company.

And along this journey, the leadership team you need changes. You need little to no leadership structure when you have a small team, you need some sort of leadership structure when your team is growing, you absolutely need a leadership team when you become a “company”, and the leadership team becomes incredibly important when you become a big company.

In the last week, I’ve had several conversations with CEOs in our portfolio who are leveling up their leadership teams and are recruiting executives from larger organizations.

I’ve counseled them to make sure that they hire executives who have a lot of risk tolerance.

High growth companies that emerge from a startup situation tend to be volatile. They have a lot of turnover in their organization, they have moments when the cash balances get low, they sometimes face existential risks.

If you have executives that you need to spend a lot of time comforting and solidifying, that’s not good. Ideally your leadership team is your steadying force and if you are steadying them, then your setup is suboptimal.

It is always tempting to bring in people who have operated at a scale well beyond where you are. And I am not saying you should not do that. You should. But just make sure they can handle the heat in the kitchen because it’s gonna get hot sometimes.

Categories: Blog articles

Video Of The Week: Overcoming Sprawl

A VC - August 10, 2019 - 4:47am

I have been fortunate to work for the last 25 years in the Flatiron District of NYC, which is a mixed-use neighborhood (office, retail, residential) that has excellent mass transit options (three major subway lines converge at Union Square), great biking and walking streets, and a feeling of vitality that is infectious.

So this video I watched this morning rings very true to me. I think cities around the world (both new cities being built in Asia and existing cities looking to transform themselves like Los Angeles) can and will adopt policies that limit sprawl and get us back to living with other people in mixed-use environments that make us happier, more productive, and more sustainable.

Categories: Blog articles

Funding Friday: Break Kickstarter

A VC - August 9, 2019 - 3:00am

Last month our portfolio company Kickstarter invited project creators to “break conventions, but not our rules” and create campaigns that were different from the traditional Kickstarter campaign.

There are 99 “break Kickstarter” campaigns live on the platform now and I featured one of them last week. But there are many more super interesting and creative campaigns.

I backed a bunch of them this week and thought I’d showcase them to all of you today. You can find them and back them here.

Categories: Blog articles

Streaks

A VC - August 8, 2019 - 4:40am

Seth Godin says it so well in this blog post celebrating his 11th anniversary of writing every day on his personal blog.

Streaks are their own reward.
Streaks create internal pressure that keeps streaks going.
Streaks require commitment at first, but then the commitment turns into a practice, and the practice into a habit.
Habits are much easier to maintain than commitments.

We see this in several of our portfolio companies. Duolingo leverages streaks to encourage people to stick with language learning. Foursquare’s Swarm uses streaks to reward people for continuing to play that game (one I’ve played religiously for over a decade).

And of course my 16 year streak here at AVC is working powerfully too.

As Seth says:

once a commitment is made to a streak, the question shifts from, “should I blog tomorrow,” to, “what will tomorrow’s blog say?”

Bingo

Categories: Blog articles

The Kik Answer

A VC - August 7, 2019 - 3:17am

I have mentioned the legal case between USV portfolio company Kik and the SEC several times here on AVC, most recently here.

Last night Kik filed a 130 page Answer to the SEC and made this press release.

The story was picked up by Coindesk and other news outlets.

I am not going to get into the details of this matter here on AVC, but this is not an open and shut case by any means.

Categories: Blog articles

Ignoring vs Not Replying

A VC - August 6, 2019 - 8:37am

I had an exchange recently that has stuck with me and so I thought I would write a bit about this topic.

When someone tweets at me, emails me, texts me, tags me, etc, and I don’t reply, they assume I either did not see it or am ignoring it. That might be true but generally, it is not the case.

What is more likely is that I saw it, I got the message, I understand it, and I may even be acting on it. But for any number of good reasons, I have chosen not to reply to it.

There is a very big difference between ignoring something and acting on it, but that difference is not visible to the person sending the message. And so they assume that it is being ignored.

Sometimes I will like the message (if it is on social media) to acknowledge that I saw it. But if I don’t actually like the message (eg “you are the dumbest person in the world Fred”), I might not do that. Or I might. It sort of depends on my mood.

But the truth is I read a lot more and act on a lot more than I acknowledge publicly. And that is the case for many people I know who for various reasons (volume, legal, PR, etc) can’t or don’t reply to many messages.

So my point is don’t assume your messages are being ignored. They may be having the desired impact. But you may not know it.

Categories: Blog articles

Reserves

A VC - August 5, 2019 - 4:27am

One of the unique things about early stage investing is the ability (and in my view, the need) to continue to invest in the companies for multiple rounds of investment.

Late stage, public market, private equity, real estate, and most other popular forms of investing typically involve a single or a time limited series of investments.

But at USV, we typically will make four to six investments in a “name” over five to seven years.

And we do this style of investing with a fixed pool of capital.

So we have gotten very analytical about modeling out our reserves for our follow on investments.

What we do is maintain a spreadsheet of every investment in a given fund and the likely amount and timing of future follow on investments as well as the probability of us having the opportunity to make those investments.

We then run a Monte Carlo simulation 1000 times and draw a distribution curve of outcomes and then manage our funds against that.

We have a “cushion” for error which is our ability to recycle roughly 20% of our funds and that has come in handy on every fund we have managed at USV.

I think the proper allocation of follow on capital into the portfolio and making sure you can follow your winners and defend your position in certain situations is absolutely critical to producing top tier returns.

It is not as important as portfolio selection (which comes from our thesis) or our work on the boards of our portfolio. Those two things are the most critical factors in our performance.

But I think capital allocation/fund management is third on the list and is a missed opportunity for many early stage investors.

Categories: Blog articles

Striking The Right Balance

A VC - August 4, 2019 - 4:06am

I was talking recently to a friend who advises a lot of boards. I asked him his view on boards overall.

He said that he saw two styles, both of which he found problematic.

The first style is the “rubber stamp board” that does whatever the CEO asks of them.

The second style is the “meddling board” that acts like it is running the business.

He told me he sees very few boards that manage to strike the right balance.

I sit on a lot of boards and have been doing so for thirty years now. I have been on rubber stamp boards and I have been on meddling boards. And I agree that both are problematic.

What I have learned over the years from those not great experiences is that boards must respect the line between governance and management and never cross it. But they also must govern. They must push back on things that don’t make sense and they must exercise the authority that has been vested in them by the shareholders.

This need to strike the right balance exists in many other contexts in our lives. It is the essence of good parenting. It is the essence of good management.

To a large extent boards reflect the CEOs that report to them. Strong willed successful CEOs can often construct rubber stamp boards because that is what they want. And weak ineffective CEOs find themselves with meddling boards who are trying to manage the poorly managed company from above.

Neither of these situations is good. The weak and ineffective CEO should be replaced by the board instead of trying to manage from above.

And the strong willed CEO must have checks and balances placed on them, no matter how well they are doing.

A great board chair can be transformative for a board. They can stop the meddling and force the necessary management changes. And they can stand up to a strong willed CEO and build the trust and respect that can lead to a well functioning board.

This is why I do not believe that CEOs should chair their boards. They should find someone who has a lot of board experience, knows how to strike the right balance, and vest in them the authority to lead the board to the right place.

I have been on boards that do strike the right balance and are chaired properly. It is a pleasure to work on these boards and a well functioning board is a thing of beauty. Every CEO should want one.

Categories: Blog articles

Video Of The Week: What Coinbase Is Up To And Why

A VC - August 3, 2019 - 4:17am

Brian Armstrong, CEO of our portfolio company Coinbase, gave this talk to the Company at a recent all-hands. In it, he describes the founding story for Coinbase, and then goes on to describe the Company’s Mission, Vision, and Strategy.

Categories: Blog articles

Funding Friday: Bellwether

A VC - August 1, 2019 - 5:23pm

I saw this project this morning and backed it immediately.

Bellwether is Sam Greenspan‘s next project (after doing 99% Invisible for five years).

Bellwether is about the future and what might happen. It is half journalism and half sci-fi storytelling. And it is delivered via 30min podcast episodes.

Finally, Sam has stated that he cares more about building a community around this project than the money he’s raising and so he will not consider this project a successful Kickstarter campaign unless he reaches 1000 backers or more. He’s at 652 as of this morning.

Categories: Blog articles

Employee Equity: How Much?

A VC - August 1, 2019 - 5:08am

I wrote a blog post about this topic in November 2010 that has become one of the most searched on and referenced AVC posts of all time. The numbers in that blog post are long out of date and so I now have a popup on it warning people not to use those numbers. However, the methodology in that blog post remains sound and is used by many startup companies.

Yesterday, Matt Cooper, the CEO of our portfolio company Skillshare, published a very detailed blog post on how Skillshare uses that methodology in their employee equity program.

He includes updated multipliers for the NYC startup market in that post, which is something many readers have been asking me for over the last few years.

The reality is that these multipliers differ from market to market. They are highest in the Bay Area, high in NYC/LA/Boston, and lower in other parts of the US and in Europe, and even lower in other parts of the world. And, like all markets, they change over time. So it is hard to maintain a valid set of multipliers and I have given up on doing that. A startup could be created to maintain those numbers, or an established company like Carta, which has access to the raw data, could do it.

But even with the vagaries of what multipliers to use, the methodology that I laid out in my initial blog post on the topic is best practice in my view and anyone who is struggling to figure out how much equity to be offering employees would be well served by reading Matt’s post.

Categories: Blog articles

A conversation with Ron Whitney

Beyond Money - July 29, 2019 - 9:26pm

In our latest Beyond Money Podcast we explore with Ron Whitney the evolution of the commercial trade exchange industry, which over the past 50 years has proven the workability of credit clearing as a way of doing business without the need for money payment.

Ron operated his own trade exchange for 15 years, and since 2007 has taken on the role of President and CEO of IRTA, the International Reciprocal Trade Association, the premier trade association of, and advocate for, the commercial trade exchange industry.

Ron shares his vast knowledge and insights about the current challenges, prospects, and opportunities, including a description of the benefits of trade exchange membership and the increasing use of Universal Currency (UC) to enable purchases and sales over an extended trade exchange network.

This interview can be found at: http://beyondmoney.libsyn.com/ron-whitney-irta, or https://soundcloud.com/user-27167973/ron-whitney-irta.

You can find links to all of our Beyond Money Podcasts in the menu at the top of this page or at https://beyondmoneypodcast.wordpress.com/.

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Best Anonymous VPN Will Help You Hide Online

nuance intelligence - November 23, 2015 - 12:53pm

You have probably gotten used to the general visibility and exposure of the internet world. You communicate freely with your friends on social media, research on current events and important items that you come across. People you don’t know may even have approached you with a post or inquiry. Certainly, being in the “public eye” has its advantages.

The Need for Invisibility

best secret vpn

Sometimes, there are certain aspects of your life, or your work that needs some sort of invisibility cloak. Take for instance, launching a personal blog or website. While preparations are ongoing, you focus on ensuring that your products and services remain hidden for public view – after all, this is part of your marketing program to come out with a bang. Online viewers are more likely to appreciate something that just popped out of nowhere, than view bits and pieces before the full unveiling.

You can be a game developer, and pooling general and technical data needs to be something that must be kept under wraps, until the appointed time wherein you can show the whole internet world about what you have created. You can be a business owner or an employee, and needs a secure connection in order to access company data over the public internet.

Read more useful info about vpn for anonymity on the below URLs Too:

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Going incognito in the public eye

This is where virtual network services come in. A Virtual Private Network (VPN) is your own unique pathway in order to achieve invisibility and secure your details while working online. It is an application or service that helps provide you with a cloak to put on your activities while using the internet. VPN provides a user with a unique IP address that can help dissuade traces, and ensures that you remain invisible to the other internet users when dealing with important or sensitive data.

With the advantages of the internet, there are still times that what you are doing does not need to be under public scrutiny. It can be to protect an online study, or in the downloading and uploading of personal and sensitive company information.

An anonymity vpn benefit is an application that you need to include in your dossier of online tools. A networking vpn is designed to provide you with the invisibility that you need in order to secure your details. The best of vpn utility are easily accessed and found on the internet. Several types and applications are available – those that are used in a professional capacity and focuses on security, and those that provide best virtual secured network services for torrenting and transmitting of data.…

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