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Musings of a VC in NYC
Updated: 49 min 42 sec ago

Do Your Homework Before Sending That Email

June 12, 2018 - 10:36am

I saw this tweet today from our friend Arianna and I had a good chuckle:

Love when people cold email me with a pitch and ask to set up a call with management. Hi, that’s me!

Categories: Blog articles

Stakeholder Analysis

June 11, 2018 - 3:34am

I am a fan of looking at something from all sides and understanding how each side thinks about it.

Consider a neighborhood school. There are students, parents, teachers, administrators, non-teaching staff, taxpayers, the community, homeowners (whose home value is impacted by the quality of the school), and possibly other stakeholders.

In theory every one of those stakeholders has a vested interest in the success of the school but in reality there is often conflict between them.

The teachers would certainly welcome a pay raise, for example. But the taxpayers may not. Or maybe they would because it would keep the quality high and thus the values of their homes.

What if the school wanted to start later and end later? The parents might oppose it because it would make it harder for them to get to work on time in the morning. But the teachers, administrators, and non teaching staff might welcome it because they would find it easier to get to work on time in the mornings.

All complex systems have many stakeholders and while they all want the system to succeed, because they have a stake in it, they rarely view success in the same terms.

Stakeholder analysis is extremely helpful in running a company and governing it (the work of the Board).

And the stakeholders of a company are not just the stockholders. Even when a Board and management is tasked with acting in the best interests of the stockholders, it is wise and prudent to act in the best interests of all of the stakeholders.

Doing so, however, is often impossible because of these conflicts between stakeholders.

Done properly, a stakeholder analysis attempts to determine what each and every stakeholder desires and the impact to them of an important decision. It is like a scorecard. It is often helpful to look at short term, medium term, and long term impacts.

I find that it is often the case that conflicts are the most extreme in the short term and that if you can frame a decision and the impact of it over a very long time horizon, it can be easier to get alignment.

But regardless of whether you can get alignment, a CEO must act and act decisively. And a Board must make sure that the CEO is acting wisely and in the best interests of the stockholders and stakeholders.

So doing a stakeholder analysis, understanding where the issues are and will be, and making a fully informed decision is the best course of action. And you will want a communication plan to mitigate the fallout of the decision as much as possible.

You never want to surprise or be surprised by your stakeholders. They may not like you, agree with you, or even support you. But they must be understood, respected, and considered in your decision making process.

Categories: Blog articles

Supply And Demand

June 10, 2018 - 2:08am

I saw this chart on Semil‘s  blog this morning:

What is shows is that as the amount of money raised (and deployed) in seed funds has grown over the last ten years, the ability of the companies that received those seed investments to raise a follow-on Series A round has declined (massively).

That trend is what you would expect, of course. Supply outstrips demand at some point.

But from where I sit, I am having trouble with the magnitude of these numbers.

First of all, I don’t think the “conversion” from Seed to Series A was ever in the 80% range. I think it is generally around 50% and moves around that number a fair bit. But I can’t imagine a time when 80% of seed funded companies go on to raise a Series A.

I also don’t think it is now sub 30%. Maybe sub 40%. Maybe not. But I’m having a hard time believing that less than 3 in 10 seed-funded companies go on to raise a Series A.

What I think has happened is that there is now a significant “grey area” that has developed in the middle of Seed and Series A. We have “post seed”, or “seed two” rounds. We have “early As”.

So the data isn’t clean and it is harder to track from type of round to type of round.

I also think a lot of the seeds that were being done back in 2006 were non-institutional and harder to track. As the seed fund market has exploded in the last ten years, more of the seed rounds are including at least one institution and are now getting tracked in a way they were not in 2010.

So, are more companies getting seed funded? Yes.

Is a lower percentage of them going on to get Series A rounds? Yes.

Has that percentage gone from north of 80% to south of 30% in ten years? No way.

But, to the question of “is it harder to raise a Series A?”, I think the answer is “it depends.”

There is more Series A money out there too, but it has not grown as quickly as seed money.

It is certainly harder to raise a Series A than a Seed. But that has been true for some time.

Categories: Blog articles

Video Of The Week: The Noodle Slurp

June 9, 2018 - 10:49am

The world lost a man of taste, adventure, and humanity yesterday. Anthony Bourdain was an inspiration to everyone in our family. He amplified our love of travel, food, adventure, and other cultures. We will miss him greatly.


Albert Wenger — June 17, 2018
Back (Well, Almost)

Categories: Blog articles

Funding Friday: Hack Your Notebook

June 8, 2018 - 2:47pm

I backed this project by AVC community member David Cole earlier this week.

Categories: Blog articles

Proof Of Blog

June 7, 2018 - 4:37am

We have a tradition at USV that one of our new analysts, Dani, coined Proof Of Blog.

Excited to be a part of the @usv team (it’s official now – based on Proof of Blog). I’m two weeks in, here’s some of what I’ve learned so far. https://t.co/1bajnjongr

— Dani Grant (@thedanigrant) June 4, 2018

I like that term so much. It really speaks to why we have this tradition.

When someone new joins USV, we ask them to introduce themselves to our world on the USV blog.

Here are some recent “proof of blog” posts:

Dani Grant

Naomi Shah

Zach Goldstein

Even partners at USV do this. Here is Rebecca’s post announcing her arrival at USV last fall.

And Lauren, who has been at USV for almost four years now, but is in a relatively new role, introduced a new wrinkle to this tradition blogging about her new responsibilities.

It is easy to think of a venture firm as a collection of partners; me, Brad, Albert, John, Andy, Rebecca, because we are the most visible people in our firm to the outside world.

Proof of blog is a bit about changing that perception so people know the larger team. And it is also about the broader team making sure folks know a bit about them and what interests them so entrepreneurs can leverage relationships with them too.

If you don’t follow the USV blog, but want to, you can do that on the USV Twitter handle or the USV blog RSS feed.

Categories: Blog articles

Taxation Of Carried Interest

June 6, 2018 - 6:57am

The issue of how to tax carried interest, the profit sharing interests that VCs, Private Equity firms, and Hedge Funds receive as compensation for generating returns to their investors, is in the news again.

This time it is not a debate at the Federal level, but at the state level. There are carried interest taxation bills under discussion in California, Illinois, Maryland, New Jersey, New York,Rhode Island, and possibly other states that I am not aware of.

My view on this issue is simple and I’ve stated here publicly and regulary since mid 2007.

If you are being paid a fee for managing other people’s money and have no capital at risk on the carried interest, I don’t understand how it can be considered a capital gain.

It may be good economic policy to incentivize people to manage other people’s money and maybe there should be some tax break for doing so. That is a different conversation in my view. Though I don’t buy that one either.

But capital gains tax rates should only be available to those who put their own capital at risk. Many VCs do that in their funds. The partners at USV make up a sizeable portion of our funds. We should and do get capital gains treatment on those investments.

But we also get capital gains treatment on the carried interest and I’ve never understood why. I think it’s wrong.

Finally, because I’ve written these thoughts here before, I know that some will say “well then you should be sticking to your principles and paying ordinary income rates on all of that carry you have received over the years.”

I don’t think that is right either. If the government sets the rules, and everybody else is playing by them, I don’t think it makes sense to play by different rules. I do think it makes sense to explain why you think the rules are wrong. Which is what I am doing here.

Categories: Blog articles

Deleting Your Voice Recordings

June 5, 2018 - 6:35am

A few months ago, the Gotham Gal asked me to disconnect the Amazon Alexa and Google Home devices we have in our family room.

I complied with that request.

This is what the two devices look like now:

At some point, I will remove them and either do something else with them or dispose of them.

If anyone in our house is uncomfortable with devices listening to our conversations, I don’t want to subject them to that.

I do plan to go look at our voice recording history and delete anything that seems off limits.

Here is how you do that with Google Home and Amazon Alexa.

This raises a broader question about these voice devices which is whether the value they offer outweighs the creepiness they create in the home.

For us, the answer has been a resounding no, as evidenced by that photograph.

Categories: Blog articles

Why Decentralization Matters

June 4, 2018 - 4:11am

So the news over the weekend is that Microsoft is buying GitHub. Many companies and developers are thinking “do I want my source code hosted on a service owned by Microsoft?”

Fortunately, the protocol that GitHub is built on, Git, is open source and there are other Git hosts, like GitLab.

There are also a number of proprietary Git solutions offered by companies like Atlassian and BitBucket.

Moving your source code repositories from GitHub to GitLab or somewhere else is not a simple thing, but it can be done. Kind of like moving your email from Outlook to Gmail.

Lock-in is a bitch. And everyone who has ever been locked into a shitty piece of software over the years knows, there is often no easy way out.

Software built on decentralized protocols offers a different and better way. You can move your data out if you don’t like where things are going. And that is what some developers are doing right now with GitHub.

Categories: Blog articles

Valuation Inflation

June 3, 2018 - 9:05am

In the blog post announcing changes at SV Angel last week, the SV Angel partners wrote:

The amount of money raised in seed rounds has doubled and valuations have increased significantly.

I thought I’d go back over the last three USV funds and see what I could learn about the market from our experience.

Since raising our third early-stage fund in 2012, we have led or co-led 16 seed rounds, 31 Srs A rounds, and 8 Srs B rounds, for a total of 55 new USV portfolio companies over the last six years.

I put all of that data into a google sheet this morning and this is what I learned:

The average pre-money valuation for a seed round has gone from $5-10mm in the 2012 time frame to $10-15mm in the 2017 time frame and the average amount raised in seed rounds has gone from $2.5mm in the 2012 time frame to over $4mm in the 2017 time frame.

The average pre-money valuation for a Srs A round has gone from $10-15mm in the 2012 time frame to $22-$27mm in the 2017 time frame and the average amount raised in Srs A rounds has not changed very much. It still averages around $5-7mm.

We have not been leading or co-leading many Srs B rounds in the last three years so my data on that market is not good enough to come to any conclusions there.

USV invests in North America and Europe and our largest density is in NYC and the Bay Area. This data is averaged across all of those markets and so it could be off significantly for a specific market. We find the Bay Area to be the most expensive place to invest and Europe to be the least expensive.

I think the comment made by the SV Angel partners is correct, at least directionally so. What this means for returns for angel and early-stage investors remains to be seen. Right now the angel and VC sector is producing great returns, but those are driven off of investments made in the 2005-2010 era for the most part and we have yet to see what the returns for the 2010-2015 cohort will deliver and we are a long way from knowing how the 2015-2020 era will turn out.


Dani Grant — June 11, 2018
An Overview Of The Distributed Computing Landscape

Categories: Blog articles

Video Of The Week: Paradex

June 2, 2018 - 6:45am

A few weeks ago, our portfolio company Coinbase announced that they had acquired a company called Paradex, which operates a 0x relay (in other words a decentralized exchange). If you want to know more about what all of that means, here is a video from Token Summit where it is explained in less than five minutes.


Dani Grant — June 11, 2018
An Overview Of The Distributed Computing Landscape

Categories: Blog articles

Funding Friday: RaceYa

June 1, 2018 - 4:22am

I saw this project this morning and backed it right away.

I’m a sucker for anything that is a fun and engaging way for kids to learn.

Categories: Blog articles

Some Things I Read This Morning

May 31, 2018 - 4:46am

I don’t have much to say today that I can say.

So I thought I’d do a little link blogging instead.

Here are some interesting things I read online today:

1/ Tim Wu on a legal framework called “fiduciary duty” in lieu of a US version of GDPR

2/ John Battelle on why 50% of young adults use ad blockers as a form of civil disobedience

3/ My friend Tom Evslin on why he voted for Trump and why he’d like a better option next time

4/ Mary Meeker’s Internet Trends report (not much new in there but still worth a skim)

5/ And in the interest of finishing this off with some absurdity, Monster Headphones plans a $300mm ICO

I hope there is something of interest in there for all of you. I am off to start my day.


Nick Grossman — June 7, 2018
Compound interest goes in both directions

Categories: Blog articles

Immigration and Entrepreneurship

May 30, 2018 - 5:31am

I realize that immigration is the third rail of our political discourse right now.

But one thing should not be controversial.

Entrepreneurs exist all over the world and if they want to come to the US, hire our citizens, and build large economic engines here in the US, we should welcome them with open arms.

I can’t imagine anyone disagreeing with that logic. I am sure someone will. But I still can’t imagine it.

So when I read this yesterday, that the Dept of Homeland Security wants to end the International Entrepreneur Rule, it made me angry.

This is economic suicide.

In service of what?


Nick Grossman — June 7, 2018
Compound interest goes in both directions

Categories: Blog articles

A Changing Of The Guard?

May 29, 2018 - 5:36am

The world has all-but stopped making new tech unicorns. pic.twitter.com/rppXVg5hWX

— Jim Edwards (@Jim_Edwards) May 29, 2018

21 new ones on this list here https://t.co/eZRoyNfACZ WSJ may not know where to look these days

— Fred Wilson (@fredwilson) May 29, 2018


Bethany Crystal — June 6, 2018
Content consumption vs. content creation

Categories: Blog articles

In Memory

May 28, 2018 - 4:16am

Let’s take some time to remember our fallen service men and women today.

After all, that is what today is for.


Bethany Crystal — June 6, 2018
Content consumption vs. content creation

Categories: Blog articles


May 27, 2018 - 5:46am

I looked up the definition of the word commencement and it includes starting something and also the conferring of diplomas. Those seem like two different things. The start of something and the completion of something.

But maybe they are the same thing.

Today, our family will sit through several hours of speeches waiting for our son, the youngest of our three children, to walk across the stage and collect his diploma.

This is not our first rodeo in this regard and likely will not be our last as we already have one daughter in graduate school and hopefully there will also be another generation after this one.

But it is a milestone for us, as The Gotham Gal wrote about in the victory lap she took on Friday.

I have given several commencement speeches and my mindset with them has always been to look forward not backward. After all commencement means the start of something.

For our son Josh, it is the dawn of that exhilarating, confusing, and rewarding experience we called adulthood. I am excited for him.

For us, it is the end of the era of having our kids living with us, at least part of the time, and the start of what’s next.

I like starting things. I like looking forward. And I like commencements. They are hopeful, optimistic, and serious days. I am looking forward to enjoying this one today.


Dani Grant — June 4, 2018
Dani @ USV

Categories: Blog articles

Video Of The Week: Dieter Shirley and Non Fungible Tokens

May 26, 2018 - 6:11am

Non Fungible Tokens (or NFTs) are one of the most interesting things to emerge in the blockchain sector in the last year. Dieter Shirley came up with the ERC721 spec and the name and I talked to him about both and a lot more on stage at Token Summit last week.

If it seems like I am shouting every time I talk into the mic, I was. It was very loud in the room and I wanted to make sure people heard us. The video is about 30mins long and we covered a number of interesting topics.

Categories: Blog articles

Funding Friday: The Bottery

May 25, 2018 - 5:07am

I like 3D printing and I like ceramics.

So when I saw this project on Kickstarter this morning, I backed it instantly.

Categories: Blog articles

GDPR Is Upon Us

May 24, 2018 - 5:45am

As we all know from the flood of emails coming into our inboxes explaining that privacy policies have changed and more, the dawn of the GDPR era is upon us.

Technically companies have until tomorrow, May 25th, to get into compliance with GDPR.

USV portfolio companies have been working on getting compliant for more than a year and we have been active in helping them do so and advising them on best practices.

I blogged about GDPR here at AVC last September in hopes that all of you would also start working on getting compliant.

If you have customers or users in Europe, you must comply with GDPR. But many companies are taking the approach that they will be GDPR compliant with all of their customers, regardless of geography.

For this reason, GDPR is the biggest user data privacy regulation to hit the Internet, at least in the last decade, and possibly forever.

There are some good things in GDPR. The basic notions that users have the right to control how their data is used and to opt-out of that usage seems right to me.

But like all regulations, the implementation and compliance details are painful in parts and there certainly could have been a lighter weight way to get to the same place.

My hope is that the US and other countries copy some of the better parts of GDPR but go without the overwrought elements.

The other thing to note about GDPR is that we should expect revenue headwinds from it for the next few quarters. Less emails will be going out. Less engagement will be going on. And less revenue will be generated.

I am OK with that. It’s a price to be paid for a step forward for user’s rights. No pain, no gain.

Categories: Blog articles