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Musings of a VC in NYC
Updated: 1 hour 30 min ago

Funding Friday: Ski Maps

November 23, 2018 - 5:11am

This coffee table book of ski maps looks awesome. I backed it today and also got one for our coffee table. You can do the same here.


USV TEAM POSTS:

Bethany Crystal — December 2, 2018
Analysis: Two Years of Blogging

Albert Wenger — December 2, 2018
Speech on Twitter: Platform not Publisher

Nick Grossman — November 28, 2018
A Visual Guide to the Howey Test

Categories: Blog articles

Giving Thanks

November 22, 2018 - 4:54am

Happy Thanksgiving Everyone.

I appreciate the annual ritual of surrounding ourselves with family, making a big dinner, and enjoying all of that.

I also appreciate taking some time to look back on things and be thankful for what we have.

I am most thankful for what I have around me today, my wife, who makes everything better for everyone around her, and our three fantastic children.

But I thought I would also talk about something that has helped me a lot in the past year – taking a more meditative posture to life. I started meditating last fall and have now been doing it every day since then. But that’s only part of what I am talking about. I am also talking about doing yoga two to three times a week, and making the most out of those sessions. And then taking all of the experiences and sensations and feelings that those things give me and introducing them into the rest of my day.

I have always been high strung. I throw myself at the world and keep throwing myself at it until I am exhausted. That personality has made me who I am and produced much of the success I have enjoyed. But it is also the source of the anxiety and worry that I have experienced regularly and, at times, acutely.

Breathing, deeply and repeatedly, and taking it down a notch and sitting with that feeling is something I wish I had learned as a child. I am sure that there were people who tried. But it took me until my mid 50s to really get it. But now that I do, I have found a balance to the “go go go” way of life that I still live and enjoy.

I am very thankful for that.


USV TEAM POSTS:

Albert Wenger — December 2, 2018
Speech on Twitter: Platform not Publisher

Bethany Crystal — December 1, 2018
When worlds collide

Nick Grossman — November 28, 2018
A Visual Guide to the Howey Test

Categories: Blog articles

Bleeding

November 21, 2018 - 5:19am

The Nasdaq is down almost 15% from its labor day highs.

Apple is down almost 25% in the last two months.

Facebook is down about 40% since July.

Bitcoin is down about 80% from its highs last December.

Ethereum is down about 90% from its highs in January.

All of those are examples of bleeding, if you happen to own any of them.

So what do you do?

Close out your position?

Buy the dip?

Sit on your hands?

It all depends on your fundamental views on these various investments.

Here are mine.

Apple is the easiest one for me. They aren’t going anywhere, although growth is slowing as they are close to saturating the high end of the mobile phone market. It will be a value stock at $120/share. If it gets there, load up on it.

Facebook is harder. They own some incredible assets like Instagram but the outlook there is cloudier given likely regulation and it won’t be a value stock for another $100 of losses. 

The Nasdaq is even harder. Are we in a bear market now? Or just a painful correction? A bull market that is almost ten years old feels long in the tooth and I can see the arguments for a bear market more clearly than a correction.

Bitcoin will form a bottom at some point and is a buy when it does. But where is that bottom? Probably not $4500.

Ethereum feels like the easiest one to make a bull case for right now. It is hated. Everyone has lost their shirt on it by now. Nobody other than developers want to know about it. It feels like time to start nibbling on it but not loading up on it.

But the thing to understand more broadly about what is going on right now is that big sophisticated investors are reducing their risk exposure across all asset classes and have been doing that for some time. The pace of the “risk off” trade is accelerating. Which means a flight to safety is going on. And when that is happening, you really need conviction to be buying. 

Categories: Blog articles

The Kickstarter 2017 Public Benefit Statement

November 20, 2018 - 3:31am

Our portfolio company Kickstarter is a Public Benefit Corporation.

One of the requirements of a Public Benefit Corporation is that they publish an annual benefit statement outlining how they are doing living up to their PBC charter.

This is Kickstarter’s PBC Charter.

And this is their 2017 Public Benefit Statement, which was published yesterday.

Here is a page from the 2017 statement, which shows how much funding they provided to creative projects across the categories they support.

That is a lot of economic activity, almost 20,000 creative projects were brought to life by Kickstarter PBC and its creator and backer communities.

Innovation takes many forms. Innovation in governance and business model is particularly important right now. And Kickstarter PBC is exploring a new way of running a for profit business and showing the way for others who might want to do the same.

Categories: Blog articles

The Overpay Critique

November 19, 2018 - 4:33am

It is so easy to look at a headline announcing a deal and say “they overpaid.” I have done that myself plenty of times. It’s a natural emotional reaction.

But what I have learned is that you can’t really critique an investment until you know how it plays out.

Some things that look so expensive turn out to have been bargains in hindsight.

And, of course, some overpays are just that. Prices that nobody can make money on.

The current debate raging in NYC about the Amazon deal that the Governor and Mayor made reminds me of that.

Everyone is saying “they paid billions of taxpayer dollars to the richest company in the world” as an argument that they overpaid for the deal.

But this line in the Mayor’s OpEd yesterday in the Daily News got my attention:

New York City alone will net $13.5 billion in tax revenue from the new headquarters, and the state another $14 billion. That’s a nine-fold return on our investment

If these numbers are correct, the billions NYC and NYS spent to incentivize Amazon to come to NYC, will have been a great investment. 

We would take 9x on our money any day at USV.

It is easy and natural to critique an investment on the headline number. But the headline number is only half the story. You really need to see how it pans out to know if it was an overpay.


USV TEAM POSTS:

Nick Grossman — November 28, 2018
A Visual Guide to the Howey Test

Albert Wenger — November 28, 2018
On-Chain versus Off-Chain Computation, Turing Completeness and Zero Knowledge Proofs

Bethany Crystal — November 28, 2018
Getting people to take care of their dishes

Categories: Blog articles

Pivot or Fail?

November 18, 2018 - 4:57am

The Pivot is celebrated in startup land. Huge successes like Twitter and Slack are all the results of pivots. So surely pivoting is a good thing, right?

Well, I am not so sure. And I certainly don’t want entrepreneurs to think that pivoting is the right thing to do when their original idea fails. It may be better to let the failing startup fail and start over again from scratch.

I am not talking about the slight pivot; making a change in business model with the same product, selling a slightly different product to the same customer, going up market to a different customer. Those are not really pivots, they are evolutions that every startup company goes through. 

I am talking about the hard pivot. Changing the product, market, and business entirely. Essentially starting over from scratch.

And I am not sure hard pivots are good for anyone.

Here is why.

If you raise funding for a startup idea, you will take some dilution and you will have a bunch of investors who backed you and your idea and are believers in it. You will have assembled a team that you built with the original idea in your mind. 

If that idea fails and you pivot into a new idea, you will take all of those investors, team members, and dilution with it, whether or not they are excited about it.

You can always swap out old team members for new ones, and so the team issues are real but probably not as significant as your investor and dilution issues.

If you choose the pivot approach, you will have investors for the life of the pivot who did not choose to back your new business and may have no interest in it other than their financial interest. 

But the bigger issue is the dilution you take into your next startup. I have never understood why entrepreneurs would want to use a company and a cap table that they no longer own 100% of to do a new startup. They are just carrying baggage that they don’t have to and probably should not carry.

I understand the argument that starting a new company by pivoting with cash in the bank and a team that is already built is attractive and giving those back and starting over from scratch is harder. But the harder path is often the best path. And the easy path is often the harder one.

If you were able to do a startup from scratch once, I would imagine you can do it again. And doing it again allows you to keep a lot more of the new company and custom build it from scratch, putting together the ideal team and the ideal investor group.

I have always suspected that entrepreneurs also choose the pivot over some sort of loyalty to their investors. If that is the case, I would like to say that this investor does not want any of that misguided loyalty. 

The truth of seed and early stage investing is that the failure rates are very high. We write off investments in failed companies in every one of our funds at USV, usually multiple times. The Gotham Gal, who invests much earlier than USV, writes off investments at an even higher rate.

So early stage investors are used to failing. It is built into our business model. What we want in return for accepting this high rate of failure are the spectacular successes that we get when everything clicks; the right idea, at the right time, with the right team, the right investor group, and the right execution.

And while pivots can deliver all of the “rights”, I am not sure that they do that at the same percentage as the startup from scratch, given all of the baggage that they are carrying.

And there is nothing I dislike more than carrying on with something when I’ve lost interest, and worse, the founders have lost interest.

So my view is if you’ve failed, accept it, announce it, and deal with it. Shut the business down, give back the cash, and rip up the cap table. Then do whatever you want to do next. If it is another startup, do it from scratch and keep as much of it as you can. If it is something else, well then do that too.

Startups are not indentured servitude. And I have been around some that feel like it. That sucks. I would encourage everyone in startup land to reject that approach and focus on a better one. There are so many options for things to work on that everyone should make sure they are working on the right thing and excited about it. Anything that gets in the way of that is suboptimal in my view.


USV TEAM POSTS:

Bethany Crystal — November 28, 2018
Getting people to take care of their dishes

Nick Grossman — November 27, 2018
Crypto Fundamentals

Albert Wenger — November 26, 2018
World After Capital: Informational Freedom

Categories: Blog articles

Video Of The Week: Setting A Holiday Table

November 17, 2018 - 7:27am

It is that time of year when we are having our families and friends over and celebrating holidays with a big meal.

And there is no better way to create that personalized one of a kind table than going to Etsy and getting the stuff you need.

This video/advertisement showcases that so well.

Disclosure: I am the Chairman of the Board and a large shareholder of Etsy.


USV TEAM POSTS:

Bethany Crystal — November 27, 2018
The Fear

Albert Wenger — November 26, 2018
World After Capital: Informational Freedom

Categories: Blog articles

Feature Friday: Wireless Charging

November 16, 2018 - 4:32am

One feature of the Pixel 3 that I really like is the return of wireless charging, something earlier Google phones had but went away.

I bought a Pixel Stand and set it up where I charge my phone when I come home.

I just place my phone on the stand and it charges. No cords involved.

You can set up all sorts of cool things like a screensaver of your recent photos and photo albums, Google Assistant so you can ask your phone questions when it is charging, and a display of your upcoming appointments.

I am still playing around with the right choices for me but I think there is a lot of interesting things one can do with this charging stand

I quite like it and just got one for my office too.


USV TEAM POSTS:

Bethany Crystal — November 24, 2018
The motivation of being second place

Albert Wenger — November 23, 2018
Tail Risk: China-US Relations

Dani Grant — November 19, 2018
Looking For Syllabus 2.0

Categories: Blog articles

Crypto Explorers Goes On The Road

November 15, 2018 - 4:09am

The Crypto Explorers community was seeded right here on AVC. It is a community of over 200 people who are working in the crypto sector, interested in the crypto sector, and/or are invested in the crypto sector.

They have taken five group trips to Zug Switzerland (Crypto Valley) and built friendships, learned a ton, and had some fun too.

I found out yesterday that they are going global now, with planned trips to other crypto hot spots around the world.

The next trip is in a couple weeks to Singapore on November 26-27. And spots like Korea, Hong Kong, Malta and eventually the Americas are also on the roadmap.

If you want to join this community of crypto travelers and join the trip to Singapore, you can do that here.


USV TEAM POSTS:

Bethany Crystal — November 24, 2018
Thank you David, for this kind comment!

Albert Wenger — November 23, 2018
Tail Risk: China-US Relations

Dani Grant — November 19, 2018
Looking For Syllabus 2.0

Nick Grossman — November 19, 2018
Getting Hands-On

Categories: Blog articles

Economic Development

November 14, 2018 - 4:44am

On the west side of Manhattan, from the west village, where we live, to the Javits Center on 34th Street and the west side highway, runs an abandoned elevated train track called The Highline.

Eleven years ago, the Gotham Gal and I took a walk on the old Highline with Joshua David, one of the two founders of Friends Of The Highline, and I wrote this post about what was going to happen.

The Highline cost something like $400mm to renovate. Some of the funds came from the city and state, but most came from private donations, like the one the Gotham Gal and I made after taking that walk.

And then we got to watch what happened. The neighborhood exploded and is still exploding. There has to have been tens of billions of dollars of investment in real estate along The Highline over the last ten years and it is still going on. I am not including Hudson Yards, which sits at the northern end of The Highline, which is another economic development story but not the one I am telling.

This is a photo of the northern spur of The Highline I took about a year ago from the top floor of one of the buildings in Hudson Yards

And into those buildings move companies and people. New homes get created. Then the coffee shops and grocery stores and restaurants come. And the local economy expands, by a lot. The city and the state taxes this economic activity and its coffers fill up a bit more as a result.

When we took that first walk on The Highline, I asked Joshua if there was some way to tax the land owners along The Highline to fund the renovation of it. It was obvious to me that the value of that land was going to go up a lot. He told me there was not. That seemed like a missed opportunity to me back then and still does. I suspect the increased land values along The Highline are an order of magnitude higher than the total investment in The Highline. 

That is the power of economic development. It is a virtuous circle. You invest, you grow, you produce economic returns, you invest, you grow. Rinse and repeat.

Why am I telling you this story today?

Well I got this tweet in my timeline sometime yesterday:

Amazon Is Getting $1.5 Billion to Come to Queens https://t.co/B4ITzuSXmj <- Why? @fredwilson Did NYC really need to pay Amazon $1.5B to come there? Will they get it back?

— Peter Radizeski (@radinfo) November 13, 2018

It is a great question. And some economist should do the work. The city probably already has.

My bet is that the City will get a return on this investment. Possibly a very large one. Twenty-five thousands jobs and all of the economic activity those jobs create are going to do a lot for Long Island City and all of NYC. 

The annual salaries for those 25,000 employees will be more than the $1.5-2bn that the city and state are committing to this project. When you add to that the real estate that will be constructed and renovated, all of the new homes that will be created for people, and the salaries for all of those construction workers, the local commerce (coffee shops, grocery stores, restaurants, etc) and the salaries that all of those employees will take home, etc, etc, I think it is a “no brainer” to be honest.

You can all tell from the posts I have written on this subject over the last week that I am a big fan of economic development. I think it is one of the things that makes a city vital and allows a city to retain its vitality. In the thirty five years we have lived in NYC, we have seen much of Manhattan and Brooklyn rebuilt. Now we are seeing Queens do the same thing. The Bronx and Staten Island are not sitting idle either. It is a magnificent thing to see and I pinch myself every time I think about it.


USV TEAM POSTS:

Albert Wenger — November 23, 2018
Tail Risk: China-US Relations

Bethany Crystal — November 23, 2018
Communal meals

Dani Grant — November 19, 2018
Looking For Syllabus 2.0

Nick Grossman — November 19, 2018
Getting Hands-On

Categories: Blog articles

Welcome Amazon

November 13, 2018 - 4:39am

The New York Times is reporting that Amazon has officially chosen NYC and DC as the locations for its big planned expansion, known as HQ2.

This is big news for NYC, as I wrote about last week.

I would like to welcome Amazon to NYC. I think this is going to work out great for Amazon and for NYC.

I know there are plenty of “not in my back yard” opponents to this idea and folks who think growth is bad and we should not grow until we fix things that are straining under the load.

I appreciate all of those concerns. They are valid at some level.

But I am a fan of grow, prosper, invest, fix, grow, prosper.

And we are doing that in NYC right now.


USV TEAM POSTS:

Bethany Crystal — November 22, 2018
Thanks so much for sharing your schedule too!

Bethany Crystal — November 22, 2018
How to practice management skills around the Thanksgiving table

Bethany Crystal — November 22, 2018
The last one to know

Categories: Blog articles

Mementos

November 12, 2018 - 5:17am

I keep little things that remind me of events over my career in venture capital. And I have been doing that for most of those thirty plus years. I keep them on a bookshelf I have in my office at USV.

It started with the lucite “tombstones” that bankers would make up when a deal closed. I started collecting them in the late 80s and had them on my bookshelf until recently. I finally got rid of them. Over time, I moved onto more interesting things and started putting them on the bookshelf.

I moved offices at USV this fall and I had to put my bookshelf back together. I did that on Saturday afternoon this past weekend.

The new configuration looks like this:

The third shelf has my collection of useless consumer electronic devices that were a big deal at one time. I have a Apple Newton there, a first generation Blackberry pager style device, and a whole lot more.

I have a bunch of family photos and things my kids made for me over the years. The peace sign painting on the left of the third shelf was made by my daughter when she was ten. I love it.

I put my old Mac desktop on the right corner of the second shelf. I plan to put some digital art on there but have not yet gotten to that.

It took me about three and a half hours to put everything back on the bookshelf on saturday. I had to wipe stuff down to get the dust off. Dusting off memories, literally.

There are a few gems that I had forgotten about. The lighter that Jerry and Dan brought back from Beijing when they did the diligence on Sina.com in the late 90s. The matchbox Porsches that Mark Pincus sent me when we exited Freeloader. The “move to NYC” booklet that Rob Kalin made to convince engineers to leave Silicon Valley and move to the greatest city in the world and work for Etsy. The Dick Costolo mask (partially hidden on the upper left) that the entire Feedburner board put on before he walked back in for exec session. I chuckle every time I look at that one.

I have a ton of stuff that did not make the cut this time. Including all of the lucites. I can’t throw them out so they will collect dust in a closet somewhere and drive the Gotham Gal crazy.

Memories are important. A career of memories is a blessing. And I like to live with mine. It reminds me why I do this work and why I love it so much.


USV TEAM POSTS:

Bethany Crystal — November 21, 2018
Knowing your productivity peaks

Bethany Crystal — November 20, 2018
Thank you for sharing these thoughts.

Bethany Crystal — November 20, 2018
“There’s a strange woman living in our basement”

Categories: Blog articles

What Happens When A Founder Is Fully Vested?

November 11, 2018 - 4:51am

Let’s say you are the founder and CEO of a startup and you have now been at it for four years. The company is doing great, you’ve raised several rounds of financing, you have a product in the market that is solving a real problem, you have a bunch of customers, you have a growing team, and things are stressful but largely great.

And you realize that you are now fully vested on your founder’s stock which means if you were to leave the company tomorrow, you get to keep all of it. What do you do about that?

This is a common question I hear from founders. They ask me what is standard in this situation. And I tell them that not only is there no standard answer, that this is one of the most emotionally charged issues to come between founders and their investors and boards and companies.

This situation also exists for other founders who are not the CEO, and the issues are very similar, but for the purposes of keeping this post as simple as possible, I am going to focus on the founder/CEO role.

Here are some, but not all, of the issues that come into play in thinking about this:

1/ If a founder/CEO were to leave their company after they become fully vested on their founder’s stock, the company would have to go out and hire a new CEO and that new CEO would get an equity grant that would be between 2.5% and 7.5% of the Company, depending on the value of the business. So one could certainly argue that the founder CEO ought to get similarly compensated.

2/ But that argument about how a new CEO should be compensated essentially puts on the table the question of whether the founder CEO is actually the best person to run the Company right now or if there is someone better suited to do that who could be recruited for a new market equity grant. It is often not in everyone’s best interests to have that conversation.

3/ Many founder CEOs four years in still own a lot of their companies. A typical range would be between 10% and 40% depending on if there are co-founders and how much capital had to be raised in the early years and at what valuations. For most situations, an equity grant that would be made to a new CEO is actually a relatively small percentage of the overall equity ownership of a founder CEO and in the context of that, it is not as valuable to the founder CEO as many other things.

4/ However, the founder CEO is subject to additional dilution in subsequent rounds so a new grant would at least partially offset future dilution and that is quite attractive to founder CEOs.

5/ One of the most valuable things to a founder CEO is having a large unissued equity pool from which to hire talent into their company and any allocation of that pool to the founder CEO reduces that asset.

6/ It is generally a good practice to have all executives vesting into some equity compensation. It standardizes the executive compensation program and aligns incentives.

7/ Refresh grants for executives are not usually equal to their sign-on grants. They are usually some percentage of the sign-on grant. So the same should be true of a founder CEO getting a refresh except that they never got a sign-on grant.

8/ Investors bet on the appreciation of the equity they already own not the issuance of new equity. A founder is aligned with the investors when they too are focused on making the equity they already own more valuable.

9/ When founders get diluted below double-digit ownership, they begin to see themselves as employees, not owners and that is bad for the company, the team, and the investors. For some founders, they start to feel that way at below 20% or 15%.

10/ It is hardly ever the case that what happens after a founder is completely vested is negotiated ahead of time, during the various rounds of financings, and priced in by the investors. If a founder was to pre-negotiate a new “market grant” for themselves once they are fully vested, and that was included in the size of the option pool that is set aside and baked into the pre-money valuation, investors could model that future dilution and build that into their valuation models and price that into a round. But nobody does that because founders want to maximize valuation in the financing rounds and investors assume that the founders will be happy with their initial grant or will not be around to earn it. Both parties either naively or purposefully kick the can down the road until the issue rears its head and then the emotions come out.

So what happens in practice?

It depends entirely on the situation at hand.

If the founder CEO owns a large percentage of the business, a new grant is rarely made because the value of it pales in comparison to the annual value that their founder’s equity is increasing organically.

If the founder CEO has been massively diluted and owns a small percentage of the business, a new grant is often made.

If the business is performing very well, the likelihood of a new grant is higher.

If the business is performing poorly, the introduction of the idea of a new grant can be very destabilizing and can actually precipitate a larger conversation about who should be running the company.

A common area for compromise is a new grant to the Founder CEO that is some percentage of what a “market” grant to a new CEO would be and that percentage ranges from 20% to 50% depending on the situation. The less a founder owns of the company, the higher the percentage will be and the more a founder owns, the less that percentage will be. If a Founder owns more than a quarter of the business, this is almost never done. I certainly have never seen it done for founders who own more than a quarter of the business.

I have two suggestions for how entrepreneurs should handle this issue.

The first suggestion is that you might want to raise this issue with all of your investors before you take money from them, and understand how they feel about this issue and what their expectations are so that you know that ahead of time. Do not wait until the moment to find that out.

The second is that if you wait to raise this issue once you are fully vested, do it carefully and delicately. If it is seen as a demand, it will not go well. If it is seen as a discussion about what is in the best interests of the company, it will go better.

But most of all, remember that there is no “one size fits all” solution for this situation and that you and your board will have to figure it out on a case by case basis.


USV TEAM POSTS:

Bethany Crystal — November 21, 2018
Knowing your productivity peaks

Bethany Crystal — November 20, 2018
Thank you for sharing these thoughts.

Bethany Crystal — November 20, 2018
“There’s a strange woman living in our basement”

Categories: Blog articles

Audio Of The Week: Turning Buildings Into Power Plants

November 10, 2018 - 6:04am

The Gotham Gal and I are investors in Blueprint Power, a company that helps landlords turn their buildings into mini power plants.

Robyn Beavers, the CEO of Blueprint, was on the Gotham Gal’s podcast this past week. They talked about how Robyn spent fifteen years working in the tech, energy, and real estate industries and took all of those work experiences and combined them into the idea for Blueprint. They also talk about how the changing supply and demand for energy is opening up new revenue streams for property owners and how Blueprint enables that. 


USV TEAM POSTS:

Dani Grant — November 19, 2018
Looking For Syllabus 2.0

Nick Grossman — November 19, 2018
Getting Hands-On

Albert Wenger — November 19, 2018
World After Capital: UBI as a Moral Imperative

Categories: Blog articles

Funding Friday: Women in STEM Holiday Cards

November 9, 2018 - 3:49am

I backed this project the minute I saw it.

Maybe you might like to back it too and get some holiday cards that might inspire the girls in your life to grow up and be like these amazing women.


USV TEAM POSTS:

Bethany Crystal — November 19, 2018
Recruitment vs. retention in the short-term labor market

Bethany Crystal — November 18, 2018
The artistry of consistency

Categories: Blog articles

The Anchor Tenant

November 8, 2018 - 4:12am

Malls need anchor tenants. These are the stores that bring the folks to the mall so that they can discover all of the other amazing places to shop that sit between the big tenants.

Cities need the same. Particularly cities that are trying to develop new industries.

NYC’s tech sector has had an anchor tenant since the early 2000s in Google. I wrote a bit about this a few years ago and cited my partner Albert’s line that 111 8th Avenue (Google’s NYC HQ) is the “gift that Google gave NYC.

Big anchor tenants to a tech ecosystem provide all sorts of benefits but the biggest impacts are that they are both talent magnets (they attract people to relocate to the region) and talent sources (you can recruit from them).

Rumor has it that NYC is going to get a second anchor tenant as Long Island City is apparently a strong candidate to be one of two locations for Amazon’s HQ2. This would result in something like 25,000 new jobs for the NYC tech sector.

And another rumor is that Google is going to purchase the massive St John’s Terminal in the West Village and take its NYC workforce up to 20,000 over the next few years.

If both of these things happen, and that is still a big if, then NYC’s tech sector would have two large and well known anchor tenants. Together they would speak for about 10% of the jobs of the entire NYC tech sector.

I have had a front row seat to watch the emergence of the NYC tech sector over the last thirty years. It started as a trickle, then a stream, then a river, and it’s feeling more and more like an ocean.

NYC has responded well to the challenges of supporting a rapidly growing new industry with investments in infrastructure (real estate, connectivity, etc) and talent/education (CS4All, Cornell Tech, NYU Tandon, etc). Some areas have been lacking like transportation where we need better subways, better airports, and better regional rail systems.

I am hopeful that the continued growth of the NYC tech sector and the overall regional economy will give our elected officials and permanent bureaucracy the will and the resources to address these deficiencies and allow the NYC region to continue to develop into one of the most important tech sectors in the world. 


USV TEAM POSTS:

Bethany Crystal — November 18, 2018
The artistry of consistency

Bethany Crystal — November 17, 2018
Asking questions

Categories: Blog articles

TYWLS Digital Dance

November 7, 2018 - 5:45am

I blogged about this in the spring of 2017 but I am back with more.

TYWLS stands for The Young Women’s Leadership School, which is located in Astoria Queens in NYC. A few years ago the students decided to show off their computer science coding skills by making a “digital dance.” I posted the first one they did at the link above.

I just saw a video about their most recent digital dance and I just had to post it here.

I love this digital dance thing so much. It shows that coding skills can be used creatively. It shows that young women, particularly young women of color, can be coders and be proud of it. And it shows that technology is everywhere.

I have met some of these young women and they are impressive and I can’t wait to see what they are going to do when they grow up.


USV TEAM POSTS:

Bethany Crystal — November 17, 2018
Asking questions

Bethany Crystal — November 16, 2018
The last unpacking

Categories: Blog articles

If You Do Just One Thing Today, Vote

November 6, 2018 - 4:24am

Today is Election Day. Polls are open in every state in the US. It is time to stop the incessant back and forth, and do the one thing that counts – voting.

There is very little on my ballot here in NYC that matters much to me. The races are not close. The ballot referendums are not on issues that matter a ton to me. 

It would be easy for me to blow off voting today.

But I am not going to do that.

I plan to go to my polling place, stand in line for however long it takes, and fill out the ballot and submit my choices and be counted.

I hope everyone who reads this blog that lives in the US and is a citizen will do that today unless they have already done it via early voting.

I feel that voting is not only our right, it is our responsibility.

Let’s do it.


USV TEAM POSTS:

Rebecca Kaden — November 15, 2018
Welcoming Dia&Co to USV

Bethany Crystal — November 14, 2018
The opportunity for CS in education

Categories: Blog articles

Pixel 3 XL

November 5, 2018 - 4:29am

I spent a fair bit of time this weekend moving phones from the Pixel 2, which I have loved using, to the Pixel 3 XL.

It is drop dead simple to port over all of my accounts, data, and apps from one Pixel to another. Google has made that as easy as moving from one iPhone to another. You just connect both phones with the cable that comes in the Pixel 3 box and in about ten minutes the new phone has everything that was on the old phone.

But getting all of my security set up on a new phone (2FA, passwords, etc) and then logging into all of my apps (because I don’t like to log in with Google or Facebook or anyone else) is a massive pain. 

But at least I feel more secure.

After using the Pixel 3 XL for the last couple days, I cannot say that it is a meaningfully different experience than using the Pixel 2. Everyone says the camera is better. I have not noticed that yet but I am also not hugely particular about my phone camera.

One new feature of the Pixel 3 that I am using is wireless charging. I also bought the Pixel Charging Stand and when I get home, I just put the phone on the stand and it charges wirelessly. That’s nice. I used to charge my earlier Pixels wirelessly but they got rid of that in the recent models and now it is back. I like that.

I am excited about getting the Pixel 3 to screen my calls. That is another new feature it comes with. But I have not yet set that up. I will report back on how that is working for me.

The biggest disappointment for me is the lack of facial recognition on the Pixel 3. I like using my fingerprint to log into my phone, but I think I would like facial recognition even more. The iPhone has had that feature for a year or so now and I can’t understand why Google can’t match that.

Anyway, my big takeaway from spending a fair bit of my time this weekend moving from Pixel 2 to Pixel 3 is that not much changed for me. That’s fine. A new phone is always a nice thing to have. But I am not sure it was worth all of the setup time I put in this weekend. It’s pretty much the same phone I have had for the last year or so.


USV TEAM POSTS:

Bethany Crystal — November 14, 2018
The opportunity for CS in education

Bethany Crystal — November 13, 2018
The 4-Box Job Searching Grid

Categories: Blog articles

Broken Syndicates

November 4, 2018 - 7:18am

One of the most challenging situations in startup/venture capital land is the broken syndicate. It is not a topic that is talked about much, but it is fairly common, particularly for companies that succeed in building a business but falter at achieving escape velocity.

A syndicate is a group of investors that come together to support a startup financially. They tend to be built over time. Some investors get involved with a company in its seed round. Others get involved in a company in the Series A round. And some get involved in the Series B round.

By the time a startup has raised three or four rounds of venture capital, it is likely to have built a syndicate of between three and five venture capital firms and other investors (corporate, strategic, individuals, family offices, etc).

The idea is that the syndicate supports the company financially until it no longer needs capital. That can happen via a sale of the company, an IPO, or achieving profitable operations.

And that is typically what happens in the best situations, when the company executes well and finds that happy financial chart that goes up and to the right with a steepening slope. In companies like that, the syndicate almost always sticks together and more investors clamor to get into it.

And then there is the company that never really figures out how to build a business. In those situations, everyone around the table, including the founders, figure out how to wind things down, either through a sale of the business, an acquihire, or a wind down. This happens all the time and is generally not a particularly painful process.

But there is a middle ground, where the team figures out how to build a business with customers, revenue, and lots of employees. But often the business stumbles and revenues flatten and losses pile up and more capital is needed, often a lot more than the existing syndicate is prepared for. This is when there are often management changes, founders depart, and there is a lot of drama.

And holding a syndicate together during the “stumble” is very hard. Some investors are managing huge funds and need exits that will produce hundreds of millions to their fund. When they see that a company will not do that, they often move on. Some investors have small funds and don’t have the capacity to fund a company round after round. Corporate and strategic investors can lose interest when a company stumbles and they no longer believe the business is strategic to them. 

Those are the “rational” reasons that syndicates break.

But there are other reasons. There is a fair bit of churn inside venture capital firms right now. Younger partners leave to start their own firms. Or are asked to leave because they are not producing the expected returns. When a partner who leads an investment inside a venture capital firm leaves, the investment is often “orphaned” and the other partners will pretend to support it but they really don’t want to and don’t.

Or even more upsetting is when a venture capital firm finds another company in the same sector that they like more and they lose interest in your company and stop supporting it.

All of these things happen to companies who stumble and they happen way more frequently than anyone talks about. It really doesn’t benefit anyone to go public with these situations. So they are worked out quietly.

Often broken syndicates lead to early exits, when the founder(s) and remaining investors realize that they are screwed and decide to find a home for the business before they run out of gas. Many times these exits are disappointing outcomes relative to the opportunity and they can make for fantastic acquisitions.

Another thing that happens with broken syndicates is the recapitalization. This is when the remaining investors reset the valuation in order to bring in new capital, either from their funds or ideally from fresh sources of capital. The losers in this situation are the early investors, founders, and investors who walked away. 

And sometimes what happens is the business shuts down, leaving people scratching their heads. Why did that company which had lots of customers, revenues, and employees suddenly close up shop? Well the answer is often that their syndicate broke and they could not put it back together.

At USV, we have worked through these stumbles and broken syndicates many times over the years. We often find ourselves in the position of trying to put Humpty Dumpty back together again. We have managed to do that many times. But we don’t manage to do it every time. 

It is incredibly difficult work, probably the hardest work we do in the venture capital business. And we often are asked why we bother.

We have found that we can make excellent returns when we stick to our conviction around an opportunity and work to restructure the team, the operations, and the syndicate (and the valuation). We also have found that we are rewarded reputationally in the market as investors who are supportive when times get tough. And we believe that it our job to support companies and the founders who create them.

We wish everyone in venture capital land saw things the way we do, but they do not. And that is the reality of the world we operate in. 

Founders need to understand all of this when they put their syndicates together. You should ask around about the investors who want to put money in your company. Look for companies that have stumbled and get to the people who know what happened in those situations and ask about how their investors behaved. That will tell you a lot.

The bottom line is that syndicates are fragile things. They break. And putting them back together is hard. So figure how to build one that is strong and will stay strong. The best way to do that is to under promise and over deliver on the business plan. But you can also do yourself a lot of good by finding resilient investors and getting them into your cap table. So do that too.


USV TEAM POSTS:

Bethany Crystal — November 13, 2018
The 4-Box Job Searching Grid

Bethany Crystal — November 13, 2018
Noise-cancelling headphones

Albert Wenger — November 12, 2018
World After Capital: UBI and the Labor Market

Categories: Blog articles