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Musings of a VC in NYC
Updated: 1 hour 24 min ago

What Kind Of Coach Do You Want?

January 22, 2019 - 5:44am

My colleagues and I are asked all the time for recommendations for coaches, mostly for the founders and CEOs we work with, but often for others on the senior team. I am a huge fan of coaches. I think they can be game changing for leaders and their teams.

I always ask a bunch of questions to find out what kind of coach someone wants before making suggestions.

A key question is whether you want answers or questions from your coach.

My partner Andy wrote a bit about this, in a very different context, the other day.

I’ve spent a large portion of my career investing in early-stage companies. Part of that job is to advise and counsel, to assist a company in reaching its potential. I try to ask for feedback on how I am doing in that job. A constant thing I hear is to provide more direct answers to problems posed to me. Typically, I am told, I answer their questions with further questions.  

Yet, I think it’s important to tolerate ambiguity. Maybe there isn’t a direct answer. Maybe I don’t know the answer. Maybe I want to assist others in coming up with their own answers.

I have to confess that I am more of a “why don’t you try this?” sort of advisor.

Andy is more of a “why do you want to do that?” sort of advisor.

Both can be very valuable but it really depends on what you want/need in an advisor. Getting answers when you want questions can be frustrating. Getting questions when you want answers can be equally frustrating.

So think about what it is you want from a coach before going out and finding one. Getting the fit right is important.

Categories: Blog articles

MLK Day Quote

January 21, 2019 - 7:00am

Martin Luther King Jr. was a man of words. He used them to inspire, to rally, and to ultimately bring change. The change he brought is the reason we remember him on this day every year.

Many of his words are broadly applicable, well beyond the worlds he occupied.

This quote strikes a nerve for me as we work with many founders and leaders:

A genuine leader is not a searcher for consensus but a molder of consensus.

Martin Luther King Jr.

Leading is knowing where you want to go and working to get others to want to go there too. That could be your team, your board and investors, your customers, or the entire world.

Molding is the word I like most in that quote. It describes the work of leading correctly. You can’t will people to follow you. You can’t expect people to follow you. You need to work to get them there.

Categories: Blog articles

Screen Time Tracking/Management

January 20, 2019 - 6:42am

In my “What Happened in 2018” post I wrote this:

And the usage of screen time management apps, like Screentime on iOS, is surging. We know we are addicted to tech, we don’t want to be, and we are working on getting sober.

I wrote that based mostly on anecdotal data but we have been looking for better data and have not found it.

So Dani and I worked on a survey that she ran last week and we got these results from a survey of 1,000 adults in the US using Google Surveys:

  • 24% use an app to track their screen time.
  • 34% of iOS users use an app to track screen time vs 19% of Android users.
  • iOS users are twice as likely to use the default screen tracker app than Android users.
  • People across age groups are equally likely to use an app to track their screen time.

Here is a graphical representation of that data that Dani put together:

What we don’t know is what these numbers looked like a year ago, but I am fairly confident that we are seeing a surge in the usage of these tools to manage screen time.

We will run this survey again mid-year and again at the end of the year to see if this trend continues.

This is a good trend in my view but it does mean that there is a governor on the amount of usage time that consumers have on their mobile apps and that will make it a bit harder for new mobile apps to gain traction and market share.

It will be interesting to see if usage of mobile apps, including the most popular ones like Instagram, show any signs of slowing down.

Categories: Blog articles

Video Of The Week: Our Partner Rebecca Kaden

January 19, 2019 - 8:39am

Rebecca Kaden, who joined USV in late 2017, was on Bloomberg last May. Somehow, I had never seen this. So I am running it today. If you don’t know Rebecca, you should meet her. She’s leading our efforts in a bunch of areas that she talks about in this interview.

Categories: Blog articles

Funding Friday: Return To Sender

January 18, 2019 - 9:00am

I love short films. I think they are a great way to tell a short story on a shoestring budget. I have seen some great ones over the years. So when I saw this Kickstarter project this morning, I backed it instantly.

Categories: Blog articles

Executive Sessions and Continuous Feedback

January 17, 2019 - 9:05am

I’ve written about these two related but different topics before but I’ve been doing a lot of board meetings as we kick off 2019 and I am reminded of how important both are.

At the end of every board meeting, the board should meet alone with the CEO in an executive session, followed by a session without the CEO, followed by a session where at least one director, but possibly all of the directors, meet again with the CEO.

This requires a fair bit of time to do right. These three back to back sessions will easily take thirty minutes to do right and could take as much as an hour.

When a board meeting goes three or four hours, it is tempting to wrap when everyone has “hard stops” and punt on these executive sessions.

But that would be a big mistake.

CEOs need to know where the board stands on the meeting, the big issues, the team, the strategy, and most importantly the performance of the CEO. And CEOs need to know that in real time and all the time.

The big problems that I have run into with companies over the years often have to do with misalignment between a management team and the board, and most acutely misalignment between a CEO and the board.

A process by which the CEO gets real time, regular, in person feedback from the board will alleviate many of these issues. These can be hard conversations and they can be difficult for the CEO to understand and process. None of this is easy stuff. But when people know where they stand and can react to it, things go better. It is when people don’t know where they stand and are grasping for straws when things go most badly off the rails.

The executive session/feedback process is also used by audit committees to manage the relationships between the board, CFO, and external auditors. I have found that they are incredibly important in that setting too.

If you aren’t doing executive sessions with your board, start doing them. And if you do them, but you skimp on them frequently due to time issues, shorten your board meetings and protect your executive session time. These sessions need to come last and that makes protecting them challenging but I believe a board meeting without an executive session is a bad board meeting.

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“If The Train Is Delayed, Find Another Way Home”

January 16, 2019 - 9:34am

I worked for a man named Bliss McCrum (and his partner Milton Pappas) in my mid 20s. They taught me the venture capital business. They were in their 50s, around my age, at that time.

Bliss one time gave me this business travel advice. He said, if the train is delayed or stops at a station and can’t move, get off the train and find another way home. His experience told him that once delays start happening, they tend to get worse, and you are better served by ditching plan A and finding a plan B.

I have used that advice many times over the years, and while it is not perfect, it has been on point more often than off point.

Today I had a 6:30am flight to SFO from LAX. When I picked up my phone as I was leaving the house for the airport, I saw a text from Alaska Airlines that my flight had been cancelled and they were booking me on the next flight.

Bliss popped into my head and I thought, “I’m going to get to LAX and get on the 7am flight that I usually take.” I had wanted to get to SF super early today so I booked the first flight out of LAX to SFO instead of my usual 7am flight.

Once I got to LAX, I was able to get onto the 7am flight, and then headed to the gate where my new flight was leaving from. That required getting on a bus and heading to a new terminal. This is what the guts of LAX look like at 6am.

Once I got to my gate, I learned that my 7am flight was delayed into SFO by 90 minutes, thus pushing my arrival back two hours from when I wanted to be there.

Again Bliss entered my head and I thought “what about San Jose?”. So I went to the board and saw that there was a 7:30am flight getting into San Jose at 8:50. I went to the service desk and asked if there were any delays getting into San Jose this morning and was told there were not.

So I swapped my SFO ticket for a SJC ticket and got basically the same seat on a similar plane.

I’m in the air to SJC right now and hope to land in about 30 mins\utes and then get in a car and be taken the hour+ that it will take to get to into San Francisco. But at least I can call into the start of my meeting instead of missing the first couple hours completely.

I have to thank Bliss for the inspiration to scramble today instead of just taking what the airlines were giving me and being chill about it. I think it worked out well and I’m going to be able to participate in the entirety of my meeting today. Thanks Bliss.

Categories: Blog articles

The Daily Dose

January 15, 2019 - 9:57am

At the bottom of the first post on this blog is a widget that contains links to recent blog posts by other USV team members. Many USV folks blog regularly and this widget surfaces those posts to all of you and everyone who visits the various blogs of the USV team members.

Other than me, there are a few other USV team members who blog regularly; Albert, Nick, and Bethany are the most prolific writers at USV. Andy and Brad are the best writers but we don’t get a lot of production out of them.

Since the start of the year, Bethany, who runs USV’s portfolio network, has produced a dozen blog posts, on topics like Hamilton In Puerto Rico, Nostalgia Creep In A High Growth Company, How To Measure A VC Firm’s Platform Efforts, and a lot more.

I am just one window into USV and the VC/startup world in general. I encourage those who are interested in this stuff to seek out other voices as well. Right now, Bethany is one fire. You should check her blog out.

Categories: Blog articles

More Data On VC’s Big Year In 2018

January 14, 2019 - 7:21am

Last week I wrote about and linked to the PWC/CB Insights round up of venture investing in 2018.

Well less than a week later Crunchbase is out with its own data on 2018.

The Crunchbase numbers are much bigger, they report about $330bn of global deal volume.

But otherwise the trends are roughly the same. Flattening deal volumes and amounts raised in the early stage market with massive expansion in the late stage market.

Make no bones about it, there is a lot of money in the venture capital ecosystem right now.

Categories: Blog articles

Cause Or Effect?

January 13, 2019 - 9:16am

In the wake of Erin Griffith’s piece in the NY Times suggesting that venture capital is toxic for some entrepreneurs, there has been a fair bit of debate about the causes of that situation.

Dan Primack tweeted this yesterday:

One thing that I think gets lost in the VC vs. non-VC discussion is that VCs don't need a company to become a "unicorn." At least not the early-stage VCs. They might want it, but unicorns weren't really a thing until a few years back, and VCs "settled" for much shorter home runs

— Dan Primack (@danprimack) January 11, 2019

I pushed back on that notion in a series of tweets yesterday morning:

I think the truth is somewhere in between. Ownership levels have been coming down in VC over the last thirty years. When I got into VC in the mid 80s it was very typical for a VC to want 25% of the company. Then it became 20%. Then 15%. Now we ask ourselves if we can get to 10%

— Fred Wilson (@fredwilson) January 12, 2019

It is tempting to look at what is going on in the startup/tech landscape and say that the growing amount of capital under management is the problem.

But the capital market for startups is a complex system and I don’t think it is as simple as that.

It may well be that as entrepreneurs have had more negotiating leverage over the last twenty+ years, they have pushed valuations up significantly and the capital markets (ie VCs) have reacted to that by accumulating more capital so that they can try to buy the same amount of ownership at the higher prices.

That hasn’t really worked and the VC industry typically owns a lot less of a company at exit and the founders and team own a lot more versus 25 years ago. We have seen that clearly in our own portfolios over the last fifteen years and I would assume that is true across the industry.

So while it is tempting to suggest that big bad VCs are the reason for all the problems in the startup sector, I would caution everyone from coming to that conclusion. Like all relationships, it takes two to tango, and both sides have had something to do with where we are right now.

Categories: Blog articles

Audio Of The Week: Marc Andreessen and Ben Horowitz

January 12, 2019 - 11:42am

I listened to this 40min interview of Marc and Ben earlier this week.

I enjoyed it. Marc and Ben are smart and witty and know how to work off each other.

I got a few really good laughs too, which is always a bonus with these things.

I hope you enjoy it as much as I did.

Categories: Blog articles

Funding Friday: Pigzbe

January 11, 2019 - 6:22am

A friend sent me this Kickstarter project earlier this week. I took a look and thought “wow, that’s so great. a digital piggybank for kids with its own cryptocurrency, a mobile app, and educational games teaching them to earn and save.” I backed it this morning and though I don’t normally take the rewards on Kickstarter, I did this time. I can’t wait to give this to a kid when I get it this summer.

Categories: Blog articles

The Hinman Test

January 10, 2019 - 9:06am

For most companies and projects in the crypto sector, a big issue has been how to design their token and how to get it in the hands of users, validators/miners, and investors. As Joel explained in this post, you need all three stakeholders to create a well functioning crypto-token.

There is the Bitcoin approach, which is to allow anyone to mine the protocol and earn tokens.

There is the Ethereum approach, which is to do a pre-sale.

And there are many other approaches. The last time I looked there were over 2,000 crypto-tokens that are trading on various exchanges around the world and many more that are not yet trading.

There are plenty of considerations when you design a crypto-token but certainly one of them is figuring out how to avoid having it deemed to be a security in the US. Securities are highly regulated in the US, can only be traded on regulated exchanges, come with significant disclosure requirements (many of which make no sense for an open source project), and there are limits to whom you can sell them to and how.

Most token projects and companies look at Bitcoin and Ethereum and say “we want to be like them.”

So when William Hinman, director of the SEC’s Division of Corporation Finance gave a speech at the Yahoo Finance All Markets Summit on June 14, 2018 suggesting that Bitcoin and Ethereum were not securities and laid out an argument that they were sufficiently decentralized, it got a lot of people’s attention in the crypto sector.

The basic reasoning behind the decentralization framework is that if a project is truly decentralized and there is no central actor or actors, then there really is no “issuer” and there is no possibility that the central actor(s) can act on insider information or otherwise have information asymmetry.

The crypto industry has been pressing the SEC to codify this logic in a set of rules that projects and companies can follow. But the SEC has to date been unwilling to do so.

So the Blockchain Association has stepped in and taken a stab at codifying the Hinman Test. In a post they published today, they have laid out the basic arguments of Hinman’s Framework and then outlined how one could determine if a token project was sufficiently decentralized.

This is not as helpful as an SEC published set of guidelines, but until we get that (soon I hope), this will have to suffice.

Categories: Blog articles

Fewer And Larger

January 9, 2019 - 6:49am

Those are the two words that come to mind when I looked at the Q4 2018 PWC/CB Insights Money Tree Report.

2018 saw the venture capital business moving to larger and larger deals. There were roughly 200 deals around the globe in 2018 where $100mm or more was raised.

And yet the number of total transactions declined slightly from 2017.

This trend is much more obvious if you look at the six years from 2013 to 2018. Total deal activity has increased less than 10% while total capital investment has almost tripled.

These trends are unsustainable. It is certainly attractive to de-risk by moving upstream to invest in more mature companies, larger rounds, etc. But if we don’t reseed our fields there won’t be as many of those mature companies in the future.

And that is why USV remains a small fund/firm which allows us to invest in Seed, Srs A, and Srs B rounds. It may not be fashionable to do that right now, but I am certain that it is and will continue to be profitable.

Categories: Blog articles

The Tortoise And The Hare

January 8, 2019 - 7:51am

Aesop has some great fables but my favorite is The Tortoise and The Hare. I was reminded of it yesterday when I saw this chart in my colleague Nick‘s deck for a talk he is giving this week in Hong Kong:

That is the installed base of iOS phones vs Android phones globally over the last decade.

I have been a long and loud fan of Android’s open (or at least more open) model and an equally long and loud detractor of Apple’s closed model.

I’ve taken a lot of heat and ridicule for it over the years and still do.

But to me, there is no way to win long term with a closed model.

It is a lot like The Tortoise and The Hare.

Closed allows you to build a better user experience and get out of the gate quickly. Open takes longer, the user experience is poor initially and for quite a while, but when open gets going, it is unstoppable.

Categories: Blog articles

Take Your Lumps

January 7, 2019 - 6:51am

The Gotham Gal and I went through our (actually her) angel investments yesterday and figured out which ones went under in 2018 so we could take the tax write-offs on our 2018 returns.

It is an odd exercise. Kind of like reading the obituaries.

But it is an important exercise for several reasons.

First, taking the write-offs against the gains shelters the gains so they can be re-invested in full. Over her first six years of investing (2007-2012), she has realized a bit more than she invested and the losses have sheltered the gains so all of that capital can be reinvested. And the investments that remain unrealized from that cohort are all solid now and will likely produce another 2-3x on invested capital.

But it also a nice “post mortem” process to go through the ones that didn’t work and think a bit about what went wrong. We don’t obsess about the losses, but taking some time to run through them is helpful.

Sometimes failed investments turn into the “living dead” in which you end up a tiny investor in another company by virtue of an acqui-hire, a distressed sale, or some other such transaction. It is generally a smart idea to sell your stock back to the company or another shareholder or abandon your interest and take the loss on those kinds of investments. The tax loss is often worth more than the stock you own. A regular process of going through the losses will surface opportunities like that too.

The bottom line is that angel investing is risky business. Super early stage investing, like the kind the Gotham Gal does (she is most often the first check into the company), will produce loss ratios of 50% or higher. The winners eventually bail you out and super early stage investing ought to produce 3x on capital or better (or you shouldn’t be doing it). One nice advantage of this model is the losses come early and the wins come much later. Taking your losses, getting the write-offs, and sheltering your gains is an important part of the model and it is best to have a regular process to make sure you are taking the losses when you can.

Categories: Blog articles

Stakeholders In A Cryptonetwork

January 6, 2019 - 7:17am

Joel Monegro, who is one of the Partners at Placeholder and a former USV analyst, has written an important post that outlines the relationships between the three primary stakeholders in a cryptonetwork; users, miners/validators, and investors.

Joel calls it the Cryptoeconomic Circle, although it sure looks like a triangle to me

Categories: Blog articles

Audio Of The Week: Flip’s Susannah Vila

January 5, 2019 - 8:56am

Flip is a USV portfolio company. They provide a suite of services to renters that allow them to easily flip out of leases and move when they need to with the cooperation of landlords.

Before Flip was a USV portfolio company, it was angel funded by the Gotham Gal and Flip’s founder Susannah Vila went on the Gotham Gal’s podcast last month to talk about how she got the idea to start Flip and how she has gone about building the company. It is a great listen.

Categories: Blog articles

Funding Friday: Music Labs For Kids

January 4, 2019 - 7:55am

I saw this project this morning and backed it instantly. It checks a lot of boxes for me.

Categories: Blog articles

Scratch 3

January 3, 2019 - 9:18am

As many of you know, I have been spending a fair bit of my time on K12 Computer Science Education over the last decade. The good news is that over that time period, there has been massive progress in getting computer science into our K12 schools in the US.

And if I had to pick one single thing that has been the biggest catalyst for that, I’d point to Scratch, the brainchild of Mitchel Resnick and his Lifelong Kindergarten lab at MIT’s Media Lab.

Yesterday was a big day for Scratch, and therefore, for K12 CS Education around the world. The Scratch team launched Scratch 3, a major release which brings a number of important new features and functions to Scratch. Here is the Scratch Team’s blog post on Scratch 3.

The three big improvements to Scratch in this new release are:

1/ Scratch everywhere. It used to be that you could only run Scratch in a browser. Now you can run it on touch devices like tablets. This is a big deal as many early elementary school classrooms tend to use tablets not computers.

2/ Extensions. The Scratch team has made Scratch extensible via a new element called Extensions. Examples of Extensions are the Lego Mindstorms Extension, or the Google Translate Extension, or the Amazon Text to Speech Extension. I am excited to see all of the amazing Extensions that will get built using this new feature.

3/ New characters, sounds, and backgrounds. Most kids use Scratch to build games, animations, and other fun experiences. Scratch is fun!!! So Scratch 3 brings a massive expansion of creative elements that kids can use to create the things they want to make.

Obviously Scratch can’t and won’t be used to make things like operating systems, machine learning models, transaction processing systems, etc, etc. But the people who will be building those things in the next ten years will have likely gotten into programming via Scratch.

Scratch is the on-ramp to computational thinking, coding, programming, and whatever word you want to describe the essence of computer science education. It makes something that seems so daunting really fun and approachable. And that is why I think it is the single biggest catalyst for K12 Computer Science Education.

And it just got a lot more fun and a lot more powerful.

Categories: Blog articles