A VC

Syndicate content AVC
Musings of a VC in NYC
Updated: 6 hours 56 min ago

Accelerating Working Capital

April 13, 2020 - 7:08am

As policy makers around the world seek to mitigate the economic shock from this pandemic, one less obvious but powerful place to look are working capital flows.

Yes we do need direct relief for small businesses like the forgivable PPP loans. We also need things like payroll tax deferrals and other relief from the CARES Act. We also need our capital markets to work so actions like the Fed is taking are necessary and important.

As Sandy Kemper, founder and CEO of our portfolio company C2FO puts it in this blog post:

The greatest financial relief we can give small and mid-sized businesses in this economic crisis is faster payment of their outstanding invoices — liquidity. The lending programs being launched by the world’s governments and central banks and directed to small and mid-sized businesses are extraordinary, needed and laudatory, but will fall short not just in terms of dollars, but more critically, they will not arrive soon enough for tens of millions of the world’s small and mid-sized businesses in dire need.

https://c2fo.com/resources/vendor/how-to-solve-the-16-trillion-small-business-liquidity-trap/

Sandy goes on to calculate that the world’s “150 million small and mid-sized businesses, employing 60% of the world’s working population and generating nearly 50% of the world’s GDP, are owed more than $16 trillion by their customers, half of which are large companies.” Sandy calls that the $16 trillion liquidity trap.

His proposed solution is:

low-cost funding specifically for larger companies to pay their small and mid-sized suppliers immediately

You can read the entire proposal here. It makes a lot of sense.


USV TEAM POSTS:

Albert Wenger — Apr 18, 2020
A Plan for Rapidly Ramping COVID19 Testing

Categories: Blog articles

Funding Friday: The $1k project

April 10, 2020 - 7:18am

This is the fourth funding friday blog post in which I’ve suggested good causes to contribute to during this pandemic.

March 20th – restaurant workers

March 27th – health care protective gear

April 3rd – feeding people in need

Today, I would like to highlight The 1k project.

The 1K project was built by Alex from NYC, Minda from Seattle, and a group of over 20 volunteers consisting mostly of tech founders

This is an effort to pair people with means with individuals who have lost their jobs and need some help to get through to the other side. A supporter signs up to support one or more individuals who have recently been laid off and have been nominated by their former employer. The support is standardized at $1k per month for three months. I joined here. You can too.

If you decide to participate, you will be asked who referred you. Please say “Fred Wilson” and use this email address for me – fred@1kproject.org. That way they will be able to track the supporters who came via this blog post.


USV TEAM POSTS:

Albert Wenger — Apr 18, 2020
A Plan for Rapidly Ramping COVID19 Testing

Categories: Blog articles

The Internet

April 9, 2020 - 7:27am

I linked to a post by Cloudflare CEO Matthew Prince the other day. In it, he wrote:

The super heroes of this crisis are clearly the medical professionals at the front lines saving people’s lives and the scientists searching for a cure. But the faithful sidekick that’s helping us get through this crisis — still connected to our friends, loved ones, and, for those of us fortunate enough to be able to continue work from home, our jobs — is the Internet.

The data is kind of incredible. My friend Paul sent me this from Akamai:

– Since the week of Feb 10th, Akamai has seen a 30% increase in traffic in four countries with early lock-downs (China, South Korea, Japan, Italy) vs. RoW.

– Since the week of March 9th as more countries implemented lock-downs, global traffic saw 30% Y/Y growth vs. 3% on average

–  Peak traffic has more than doubled Y/Y to 167 Tbps.

– AKAM execs calling it the “greatest spike in Internet traffic the company has ever experienced”

Cloudflare is seeing similar numbers.

Big cloud providers are investing massively in their infrastructure to keep up.

I was on a Zoom yesterday and the clarity of the picture was remarkable. I thought to myself, “how are they doing this when everyone is using this service?”

And the answer, of course, is that Zoom doesn’t have to provide all of the bandwidth for their service. We all do.

Netflix doesn’t have to provide all of the bandwidth for their service. We all do.

The decentralized architecture of the internet is showing itself off right now. And it is a beautiful thing to behold.


USV TEAM POSTS:

Albert Wenger — Apr 18, 2020
A Plan for Rapidly Ramping COVID19 Testing

Categories: Blog articles

Masks4All

April 8, 2020 - 6:38am

A couple of weeks ago, I saw this tweet by my partner Albert:

Must read thread on #Masks4All #covid19 https://t.co/NEqgZjPnDs

— Albert Wenger
Categories: Blog articles

Slowing Down

April 7, 2020 - 7:41am

One of the silver linings to this awful pandemic is that things have slowed down a lot. Not just work. Everything really.

I find myself taking more time to do the dishes, work out, meditate, etc. There is less “racing through the day” and more time to do things right and carefully. We clean the house on Sundays and it takes the two of us almost three hours and while I can’t call it enjoyable, there is a certain satisfaction from doing it well and doing it right.

My inbox has less in it and I can spend more time talking to people; my colleagues, the leaders of the companies I work with, friends in the business, etc. I find myself being more proactive and less reactive.

It feels really good. I would happily trade this good feeling for a world in which nobody is dying and nobody has lost their job. It’s a terrible price to pay for more time.

But we are where we are and we can’t go back and change the course of history.

What I am wondering is how we keep this slower pace when the world gradually reopens. And will we? I hope so because it is showing me the cost of going so fast and the benefits of going more slowly.


USV TEAM POSTS:

Albert Wenger — Apr 18, 2020
A Plan for Rapidly Ramping COVID19 Testing

Hannah Murdoch — Apr 8, 2020
What We’re Learning About How We Learn

Hanel Baveja — Apr 8, 2020
What We’re Learning About How We Learn

Categories: Blog articles

Summer Internships

April 6, 2020 - 6:24am

There are so many challenges facing us right now that the smaller things often get overlooked. One of those things is summer internships for students who are focused on a career in tech. Many companies are struggling to stay afloat and have canceled all of their summer internships. That makes total sense as you can’t really consider having summer interns when you are laying off half of your workforce or more.

But there are many companies in the tech sector who are going to be able to get through this crisis without major cuts. And I am hoping that they can pick up the slack a bit.

Etsy, where I am Chairman, just notified all of their summer interns that they are maintaining the program, but all of the interns will work remotely this summer. That will be challenging for Etsy and the interns, but I am thrilled that Etsy is able to do this.

Our portfolio company Cloudflare went a step further last week. They are doubling the number of summer interns they will take. And they are encouraging other companies in a position to do this to follow suit.

If you have a summer internship program and are in a financial position to continue it, please consider doing so. A remote internship might not be as great as an in-person one this summer, but it is way better than sitting at home doing nothing.


USV TEAM POSTS:

Albert Wenger — Apr 18, 2020
A Plan for Rapidly Ramping COVID19 Testing

Hannah Murdoch — Apr 8, 2020
What We’re Learning About How We Learn

Hanel Baveja — Apr 8, 2020
What We’re Learning About How We Learn

Categories: Blog articles

Funding Friday: Americas Food Fund

April 3, 2020 - 3:27pm

As we continue to make our way through this pandemic, I keep coming back to the question of how do we help those in the most need right now. Last week it was our health care responders on the front lines, the week before it was workers in the hospitality industry who are now out of work.

This week, I’m drawn to this huge GoFundMe campaign that Apple, Laurene Powell Jobs, and Leonardo DiCaprio launched yesterday to raise money for World Central Kitchen and Feeding America, two large charities who run food programs for the poor and dislocated.

When things go wrong, it is always those with the least who suffer the most. So I am helping this campaign get to its $15mm goal. If you want to join me, you can do so here.


USV TEAM POSTS:

Albert Wenger — Apr 12, 2020
Help Promote Earth Day Live

Hannah Murdoch — Apr 8, 2020
What We’re Learning About How We Learn

Hanel Baveja — Apr 8, 2020
What We’re Learning About How We Learn

Categories: Blog articles

The SoundCloud Stimulus Plan

April 2, 2020 - 8:52am

As Billboard is reporting this morning, our portfolio company SoundCloud is putting up $15mm to support its creator community in this difficult time for musicians.

Musicians can’t tour right now. That’s a huge part of their earnings. Many are turning to live streaming and I hope that will turn into real money for them. But regardless, everything that supports musicians right now will help.

SoundCloud is investing an additional $10mm in its Repost Select artist services platform to get money into the hands of artists now. They are also making $5mm of Promote On SoundCloud inventory free to artists.

And SoundCloud has made it one-click simple for artists to connect to Kickstarter, Patreon, Bandcamp, and PayPal so their fands can provide direct support.

And last but not least, SoundCloud has relaunched its Repost by SoundCloud offering that makes it simple for its artist community to get plays (and get paid) across all of the major streaming services.

All of this will help the SoundCloud artist community make more money online while their in-person business is offline. And that is a really great thing.


USV TEAM POSTS:

Albert Wenger — Apr 12, 2020
Help Promote Earth Day Live

Hannah Murdoch — Apr 8, 2020
What We’re Learning About How We Learn

Hanel Baveja — Apr 8, 2020
What We’re Learning About How We Learn

Categories: Blog articles

An Emergency Response Startup Story

April 1, 2020 - 1:09pm

My friend Matt Blumberg, who ran USV’s former portfolio company Return Path for twenty years before selling it last spring, got a call from Colorado’s Governor Polis two and half weeks ago asking him to fly out and be the founding leader of an innovation startup to help Colorado’s Covid 19 response. A large part of Return Path’s organization has always been in Boulder so Matt is well known out there.

Matt said yes and spent fourteen days getting it off the ground and hiring his replacement before flying back to the NY metro area last weekend.

He took notes throughout the entire two week experience and is sharing them on his blog, called Only Once.

Here are Days Zero and One

Here are Days One Two and Three

Here are Days Four Five and Six

Matt will post the rest of the days over the course of the next week.

You can subscribe to his blog and get the posts via email.

I asked Matt to send me the entire thing yesterday and read it last night.

It is fascinating reading and I think all of you who start and lead companies will think so too.


USV TEAM POSTS:

Albert Wenger — Apr 12, 2020
Help Promote Earth Day Live

Hannah Murdoch — Apr 8, 2020
What We’re Learning About How We Learn

Hanel Baveja — Apr 8, 2020
What We’re Learning About How We Learn

Categories: Blog articles

Drones – A Socially Distant Way To Get Work Done

March 31, 2020 - 1:24pm

If you have a roof that needs to be inspected but you don’t want people crawling all over your house right now, if you have mission-critical infrastructure that needs to have its regular inspection done but you don’t want third parties in your environment right now, if you want to have your facade inspected but don’t want to be putting up a sidewalk shed and all of that, then you might want to use a Drone mission to get that work done.

Our portfolio company Dronebase is in that business and has been doing “socially distant” missions for over five years. Over the last three weeks, as much of the US and Europe have shut down with work from home orders, Dronebase has been able to deliver on that vast majority of its missions and is very much open for business.

One of Dronebase’s smaller customer sectors is media, but they do regularly fly missions for news organizations and here is some imagery of New Orleans that they captured recently for Reuters (video link, image below):

Here is some from Santa Monica, where I just was socially distant biking this morning (video link, image below):


USV TEAM POSTS:

Albert Wenger — Apr 12, 2020
Help Promote Earth Day Live

Hannah Murdoch — Apr 8, 2020
What We’re Learning About How We Learn

Hanel Baveja — Apr 8, 2020
What We’re Learning About How We Learn

Nick Grossman — Apr 3, 2020
Quarantine Creativity

Categories: Blog articles

Startups and SBA Loans

March 30, 2020 - 7:54am

Last week Congress passed the CARES Act which provides a vast array of financial relief provisions to people and businesses in the US.

Congress is providing relief to small businesses via a forgivable loan program administered by the Small Business Administration (SBA). The SBA has long been in the business of making small business loans, but the loans under the CARE Act are very different. Here are the primary provisions of these CARE Act loans (cut and paste courtesy of my friends at KE Law):

  • Loan Program Eligibility.  Any business concern (including franchises) as well as non-for-profit organizations, with no more than 500 employees are eligible to receive a single loan under this Act.  The maximum amount of the loan is the lesser of (1) $10M, and (2) 2.5 times the monthly payroll costs determined over a specific testing period.  No personal guarantees or collateral will be required for loan eligibility under this Act.
  • Loan Proceeds Usage.  Loan proceeds can be used for payroll and other compensation costs, health benefits, insurance premiums, mortgage interest, rent, utilities and interest on other outstanding debt.
  • Loan Forgiveness.  Perhaps the most important element of the Loan Program is its loan forgiveness element.  Pursuant to the Act, borrowers under this Act will be forgiven a specific sum equal to the sum of (1) certain payroll costs, (2) mortgage interest payments, (3) rent, and (4) utility payments that were incurred during an 8-week period beginning on the loan borrowing date.
  • Forgiveness Penalties.  Given the intent of the Act to save American jobs and salaries, the amount of the foregoing loan forgiveness will be reduced by certain factors.  These factors include a reduction in the average number of full-time employees as well as substantially reduction (beyond 25%) in employees’ salaries.
  • Other Terms.  The maximum loan term under the Act will be 10 years (for amounts that were borrowed that are not subject to loan forgiveness), and the maximum interest rate is 4%.  The first payment on any loan under this Act will be for at least six (6) months, but not longer than a year.
  • How to Apply.  Eligible business should seek competent counsel immediately to work on the application, as the loans will begin to be available likely by the middle of April 2020.  Required information for the application will include payroll documentation, tax filings, unemployment insurance filings, proof of payment of payroll taxes, mortgage applications and the like.

So this sounds great for startups, right?

Well not so fast.

The law as written requires “affiliates” to aggregate their employees into a total and that must be below the 500 employee threshold in order to qualify for these loans. And most of the lawyers that I have talked to over the last few days read the affiliate provision in the CARES Act such that any venture capital-backed startup would need to affiliate with all of the other startups that are backed by the same venture capital firm or other kind of investor.

There are many folks in startup land (lawyers, investors, CEOs, lobbyists, etc) who are working with Congress and the SBA to address this issue. Many of the largest employers in small businesses in the US are backed at some level by investors who back many startups, including angels, seed funds, VC firms, and corporate investors.

From what I can tell, based on some work but not exhaustive work, this was not intentional on the part of Congress and there seems to be a willingness to figure this out.

If you are planning on accessing these loans, I recommend talking to a lawyer who is well versed in venture capital and startup law and make sure you are looking carefully at the affiliate provision. And if you have a relationship with your elected officials in Washington, you might want to reach out to them and explain that the Cares Act affiliate rules are problematic.

It is my hope that this “bug” in the law will get fixed over the next week or so. It may be possible for the SBA to address this issue without the need for any more work by Congress and that would be ideal in my view.


USV TEAM POSTS:

Hannah Murdoch — Apr 8, 2020
What We’re Learning About How We Learn

Hanel Baveja — Apr 8, 2020
What We’re Learning About How We Learn

Albert Wenger — Apr 6, 2020
Normalcy Bias: We Live in a Dynamic World (But People Don’t Believe It)

Nick Grossman — Apr 3, 2020
Quarantine Creativity

Categories: Blog articles

Video Of The Week: The Bill Gates TED Interview

March 28, 2020 - 10:58am

Earlier this week Chris Anderson, who runs TED, hosted a 45min conversation with Bill Gates. I heard a lot about it in the last few days (it has already had 1.2mm views) and this morning the Gotham Gal and I watched it over our morning coffee.

What I like about this conversation is that Bill provides a lot of information and helpful context in a very calm, serious, and helpful way. It made me more comfortable just watching it. And we can all use some comfort right now.

If you do watch this, please make sure to stick around to the last six minutes or fast forward to it. It has such a hopeful ending. Bill is a long term optimist about science and technology, as am I, and the talk ends in a discussion around that.


USV TEAM POSTS:

Albert Wenger — Apr 6, 2020
Normalcy Bias: We Live in a Dynamic World (But People Don’t Believe It)

Nick Grossman — Apr 3, 2020
Quarantine Creativity

Categories: Blog articles

Funding Friday: Helping Healthcare Workers

March 27, 2020 - 6:46am

As the coronavirus pandemic spreads across the US, the people who are stepping up the most to meet this challenge are our country’s healthcare workers. We should do everything we can to help make sure they can work safely during this crisis.

So today I am highlighting two fundraisers for protective equipment for these health care workers. Both are on GoFundMe (which happens to be a USV portfolio company but that is just a coincidence here). I have given to both of them.

A Million Masks For NYC – This one was started by a bunch of folks in the NYC tech sector and has raised from individuals (like me) and NYC tech companies. You can give here.

Frontline Responders Fund – This is a $10mm campaign started by Edward Norton and the logistics company Flexport to fund supplying “masks, gowns, gloves and other critical supplies to protect medical professionals in hospitals across the world.” You can give here.


USV TEAM POSTS:

Albert Wenger — Apr 6, 2020
Normalcy Bias: We Live in a Dynamic World (But People Don’t Believe It)

Nick Grossman — Apr 3, 2020
Quarantine Creativity

Categories: Blog articles

Buying Bitcoin In Your IRA – The Alto IRA

March 26, 2020 - 7:27am

I wrote about the idea of buying Bitcoin in your IRA last year. I got a lot of responses to that post and one of them was from the founder of Alto IRA.

I set up an Alto IRA, moved my old IRA over to it, and waited. When they had an alpha version of the crypto service up and running, I bought some Bitcoin in my Alto IRA via their Coinbase integration.

Now that service is fully battle-tested and ready for everyone.

Here are the details of the Alto Crypto IRA. If you are interested in buying crypto in your IRA, they have a slick Coinbase integration that worked great for me and should work well for you too.


USV TEAM POSTS:

Albert Wenger — Apr 6, 2020
Normalcy Bias: We Live in a Dynamic World (But People Don’t Believe It)

Nick Grossman — Apr 3, 2020
Quarantine Creativity

Categories: Blog articles

OnCoins

March 25, 2020 - 7:53am

If you are a crypto enthusiast like me, how do you stay on top of the daily crypto news cycle? There is crypto twitter, but that’s not for the faint of heart. If you hang out there, you know what I mean. You can read the news at Coindesk, Cointelegraph, and the other leading crypto news sites. I do both of these things as well as participate in a number of chat groups where we trade links. It gets the job done, but it’s a lot of work.

Enter OnCoins, a crypto news aggregator by our friend William Mougayar. It looks like this:

You will find the format familiar if you use Techmeme to follow the tech sector news. It’s a great format, efficient, clean, fast, and it lets you go deep when you want to.

William told me that he has used some technology and some tricks to make this work a bit differently than Techmeme and he has more planned.

You can get OnCoins by email once a day if you prefer that format. Sign up here if you are interested.

Well done William. I look forward to getting my daily email and staying on top of the fast-moving crypto sector.


USV TEAM POSTS:

Albert Wenger — Apr 4, 2020
VC Backed Startups and PPP: Do You Really Need It?

Nick Grossman — Apr 3, 2020
Quarantine Creativity

Categories: Blog articles

Firefox Better Web (with Scroll)

March 24, 2020 - 9:23am

Ad blockers are hugely popular. Close to 800mm people around the world use them to avoid intrusive ads and data collection. I do not use an ad-blocker but I completely understand why one would choose to do so.

And yet much of the media business is supported by advertising. There are a growing number of subscription-based media services, but many people cannot or won’t pay for content and the vast majority of content consumed on the web is advertising supported.

So USV has long felt that a subscription-based ad blocker would make a lot of sense. Ad-supported publications could opt-in to get a piece of the subscription revenue and agree to block ads to the subscribers who have the ad blocker.

And that is why we invested in our portfolio company Scroll which makes exactly that.

And today, Scroll and Firefox are launching Firefox Better Web, which is a service inside of Firefox ($2.50 a month to start and $5 a month in time).

I downloaded the latest version of Firefox this morning and signed up. It went like this:

I signed up by giving my email address and entering my payment credentials.

And then I added the Scroll browser extension and was good to go.

I visited SB Nation and got an ad-free experience.

Which compares to this experience in my Chrome browser without Scroll (Scroll works on Chrome too)

The partnership between Firefox and Scroll makes a ton of sense. Firefox has long been committed to privacy and making the web work better for its users. If you use Firefox try the Better Web service. And if you use Chrome or another browser, you can get Scroll and experience more or less the same thing there too.


USV TEAM POSTS:

Nick Grossman — Apr 3, 2020
Quarantine Creativity

Albert Wenger — Mar 29, 2020
Privacy, Power and the Commons

Categories: Blog articles

Teaching Online

March 23, 2020 - 7:00am

I have been teaching in one form or another since college. I helped pay for graduate school by teaching other grad students. For most of my life, teaching has meant standing up in front of a group of people and explaining things to them in a large group setting.

But, like many things, that is quickly changing right now.

I mentioned that we have a new group of analysts at USV. And we are doing an onboarding program for them where the various partners at USV take turns teaching them things they will need to know during their time at USV.

When we planned this onboarding program, we thought those classes would take place in person. But now they are taking place online.

This week, I am going to teach a three-hour class on cap tables and liquidation waterfalls. These are the spreadsheets we use to track everyone’s ownership in a company and how much money each shareholder gets in a sale transaction. While much of this is straightforward, there are edge cases that can be pretty gnarly. I am looking forward to teaching this class.

As I prepared for it this weekend, I decided to create the bare bones of a google sheet that will have one tab for the cap table and another for the liquidation waterfall.

The three analysts will act as the three founders of a company and we will simulate three rounds of financings and then a sale of the company.

We will all be in the google sheet together and also in a zoom room together. I will coach them through the exercise but they will do all of the work.

And as I was planning all of this out and building the bare bones google sheet, I thought to myself, “this may be the single best way to teach this material that I have ever come across.”

I have taught this material to many people, but never quite like this.

We are leveraging two technologies that have come of age in the last ten years; collaborative documents (google sheets) and videoconferencing (zoom). And we are using project-based learning in a small group setting which has always been one of the (the most?) powerful teaching/learning models.

The question I am wondering about is once I teach this subject this way, will I ever want to teach it any other way? I think maybe not.


USV TEAM POSTS:

Albert Wenger — Mar 29, 2020
Privacy, Power and the Commons

Nick Grossman — Mar 24, 2020
Post-COVID: Which Behaviors Will Stick?

Bethany Crystal — Mar 24, 2020
Introducing Everyday Experts: A New Podcast

Categories: Blog articles

Funding Friday: The Restaurant Workers’ Community Foundation Relief Fund

March 20, 2020 - 7:26am

I mentioned in yesterday’s post that when this is all over, I can’t wait to go to my favorite restaurants and enjoy their hospitality and food. If they are able to re-open.

While many industries are facing difficult times in this crisis, the restaurant and hospitality industry is particularly hard hit.

So for today’s funding friday, I am encouraging everyone to do what I did this morning – make a donation to the Restaurant Workers Community Foundation Relief Fund.

So far, the RWCF has raised close to $100,000 for this relief fund. I hope they can raise a lot more. The funds will go to these three areas:

50% FOR IMMEDIATE, DIRECT CRISIS RELIEF ASSISTANCE TO INDIVIDUAL RESTAURANT WORKERS

25% FOR NONPROFIT ORGANIZATIONS SERVING RESTAURANT WORKERS IN CRISIS.

25% FOR ZERO-INTEREST LOANS FOR RESTAURANTS TO GET BACK UP AND RUNNING.

There are more details on the RWCF relief fund here.

Again, if you’d like to make a donation, go here.

Also, if this is a sector you care about, you might want to subscribe to Some Meals Considered, a newsletter written by our daughter. She has been covering the challenges facing the restaurant industry almost daily this week and is surfacing a lot of useful and helpful information.


USV TEAM POSTS:

Albert Wenger — Mar 29, 2020
Privacy, Power and the Commons

Nick Grossman — Mar 24, 2020
Post-COVID: Which Behaviors Will Stick?

Bethany Crystal — Mar 24, 2020
Introducing Everyday Experts: A New Podcast

David Gabeau — Mar 22, 2020
Synchronous Entertainment

Categories: Blog articles

Correlation and Market Meltdowns

March 19, 2020 - 4:04pm

On the first episode of Howard’s new podcast, his guest said, “in panics, all assets are correlated.” I suspect that is true to some extent.

When bad news hits, I have seen traders sell quickly, get to cash, and then take some time to evaluate the situation before acting on the news. That is true of a company missing its quarter, a sudden management change, and many other forms of bad news. It is also the case when macro events hit the market.

So when a macro event hits the markets, all assets get sold in a “risk off” trade to increase liquidity and buy some time to figure out what is going on.

But soon enough, the market starts to sort through winners and losers. That’s when things stop correlating.

The obvious example is Zoom which is clearly a major beneficiary of this macro event we are in the middle of.

Zoom sold off with the market over the last week and a half but has rebounded nicely and year to date is up something like 75%.

Blue Apron, which the market had left for dead, is another example of a business that will likely do well in this macro environment, or at least it seems that the market thinks so.

Contrast that chart with Bookings, one of the largest (the largest?) online travel businesses, and you can see the lack of correlation.

I believe this downturn will see a greater number of winners and losers than most of the downturns I have lived through. That is because we are already into a pretty meaningful transition from an industrial/physical economy to a knowledge/digital economy and the very nature of this macro event is accelerating that transition in many ways. We just won’t go back to doing some things the same way.

I do plan to go out to my favorite restaurants as soon as I can. But I also plan to fly even less for business when this thing is over. Some things will return to normal. Others won’t.

And that is what the market will sort out over the course of this downturn and is already busy sorting out.

Which takes me, naturally, to crypto. Crypto, to true believers like me, was supposed to be a place to go for safety. We can trust crypto when we can’t trust banks or governments, right?

Wrong.

Bitcoin crashed harder than anything in the first few days of the market selloff. It was down 60% over five days from March 7th to March 12th. But since then it has recovered nicely and is now only down about 30%.

Howard’s guest was right. In panics, all assets are correlated because the market needs to deleverage. Margin loans get called. Leveraged bets go bad. Weak hands fold. And in crypto that happened faster and more furiously than any other asset class. That’s because the market infrastructure is less mature, there are places (largely outside of the US) where you could (and maybe still can) get 100x leverage on a crypto trade, and because these markets are not as liquid and other markets.

But now that the deleveraging has happened, we can look at what crypto has to offer.

Bitcoin is “hard money.” There is a fixed supply of it. 21mm bitcoins to be exact, some of which are gone and are never coming back.

Contrast that to what the central banks are doing right now. The printing presses are melting down there is so much money being printed to stabilize the global economy.

So if you want to hedge your portfolio from that risk, where can you go? Actually a few places. But one of them is Bitcoin. And I suspect that will be where some smart money will go over the next few months, quarters, etc.

But that’s not all that crypto has to offer. The entire decentralized finance stack (fintech 2.0) is being built on Ethereum. And we are seeing decentralized bandwidth, storage, and other critical infrastructure being developed in a number of new protocols.

I’m not going to write an entire crypto thesis here. But my point is that crypto won’t be correlated with the overall market for long. It’s doesn’t even appear to be a week in.


USV TEAM POSTS:

Albert Wenger — Mar 29, 2020
Privacy, Power and the Commons

Nick Grossman — Mar 24, 2020
Post-COVID: Which Behaviors Will Stick?

Bethany Crystal — Mar 24, 2020
Introducing Everyday Experts: A New Podcast

David Gabeau — Mar 22, 2020
Synchronous Entertainment

Categories: Blog articles