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Who is interfering with whom?

Beyond Money - July 25, 2018 - 12:54pm

Virginia State Senator Richard Black addressed the June 30, 2018 Schiller Institute conference via video. In his presentation titled, The True Interest of the United States, Senator Black, a combat veteran, argued that “U.S. foreign policy in Iraq, Libya, Syria and elsewhere in South-West Asia, …has spawned huge armies of terrorists,” and in no way benefits the interests of the American people.

And a vintage article by William Blum, recently republished by Global Research, highlights the hypocrisy of U.S. government officials and the media in blasting Russia for their alleged interference in the U.S. political process, while the U.S. government has a long and sordid history of extreme interference in other countries. I count 55 instances in William Blum’s list of “the United States overthrowing, or attempting to overthrow, a foreign government since the Second World War.” See it here:  Overthrowing Other People’s Governments: The Master List of U.S. “Regime Changes.” –t.h.g.

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Categories: Blog articles

Investment Pace

A VC - July 25, 2018 - 5:15am

We were hanging out with friends last night and one of them asked me how many investments I have made this year. I replied “one so far.” He said, “you are not very active.” and I replied “I do one to two deals a year and always have.” Which surprised him.

I have been investing in early stage companies since the late 80s and over those thirty plus years, I have personally led investments in about sixty companies. An average of less than two investments per year.

Our firm usually makes eight to ten new investments per year, which is one to two new investments per partner per year.

When you are making early-stage investments, which require a lot of your personal involvement over a seven to ten year period, you can only take on so many projects.

If you assume the average hold period for an early stage investment is seven years and if you make one to two investments per year, you will have between seven and fourteen portfolio companies to manage at any one time.

The low end of that range is quite manageable. The high end of that range is not. I have been there.

I believe that early stage venture capital done right is a service business in which the entrepreneur and the company they started is our customer.

We need to be able to service that portfolio company properly and that requires bandwidth at the partner level plus a team around the partners that can provide additional support.

And so that means managing the investment pace tightly and saying no to most opportunities that come in and being really committed and convinced about the projects that we say yes to.

And so that is what we do at USV and what I have done my entire career.

Doing this well is hard. Because if you only make eight to ten new investments per year and expect to produce at least one billion plus exit each year, something we have been able to do every year for almost ten years now, you have to have a pretty high hit rate on super early stage investments.

Our approach to making this work is an evolving thesis that tells us what to invest in and what not to invest in, rigor and collaboration in our decision making, and real substantial value-add post-investment.

This is not spray and pray, this is not following the herd, this is not momentum investing.

This is thesis-driven, active early stage investing, which has always produced the best returns over time and I believe always will.

Categories: Blog articles

Tech:NYC Turns Two

A VC - July 24, 2018 - 3:44am

It seems like yesterday when a bunch of folks in the NYC tech sector decided that it was time to form an organization to represent the tech sector in NYC.

But in fact, it was a little more than two years ago.

There was some upfront work we had to do and in the summer of 2016, we announced Tech:NYC.

Two years later the organization is 630 member companies strong, including over 500 small early-stage companies.

Yesterday, Tech:NYC issued their second annual report, which is just one long web page.

I really like this way of doing annual reports. It’s easy to consume and accessible to anyone with a computer or mobile phone.

If you are involved with or care about the tech sector in NYC, take a minute to read the annual report (it won’t take much more) and see about all the great things that are going on in NYC’s fastest growing economic sector.

And if you aren’t a member yet, you can join our email list at the end of the report and start hearing from us, which hopefully will lead you to join.


USV TEAM POSTS:

Albert Wenger — August 1, 2018
Blogging Hiatus: Reading More

Categories: Blog articles

The Long Raise

A VC - July 23, 2018 - 4:59am

I’ve been chairing a $40 million capital campaign for NYC’s CS4All effort to bring computer science education to every school and every student in the nation’s largest school district.

We are just into year four of the ten-year CS4All effort and we are also into year four of the capital campaign.

The good news is I can see the light at the end of the tunnel. Depending on whether you count “soft circles” or not, I think we have about $10 million left to raise.

We started out with a bang, announcing $11.5mm in contributions, including those of my wife and me, at the start of the effort.

Year one went well, with another roughly eight million raised.

Year two was a struggle and year three started out similarly. We made some changes to our team and strategy and message and the second half of year three was much better and we are entering year four with great momentum.

I have learned a lot about running a capital campaign or any sort of large and long fundraising effort and I thought I would share some of the big lessons:

1/ You have to be patient. It is a marathon, not a sprint. No matter how much you want it to go quickly, it won’t.

2/ Cultivation is the name of the game. You have to work the top prospects slowly and carefully and patiently. Most eventually come through but you need to invest a lot of time and effort without any certainty of closure. I found this particularly hard as I always want to be investing my time where it is going to pay off.

3/ You need people around you who are experienced fundraisers. There is an art AND a science to qualifying, presenting, and following up that the best people in the fundraising business understand and bring to their work. Without that, you are going to flounder.

4/ Communicating and engaging your donors is critical. I thought a donor would write one check and be done. It turns out many donors like to start small and grow their committment over time as they see progress and get comfortable with the effort.

It turns out that raising a big sum of money is like a lot of other things in business and life. Slow and steady is a virtue, great people make all of the difference, your best prospects are the people you have already closed, and frequent communication fixes a lot of problems.

I think all of these lessons I have learned in the last three years are applicable to raising capital for your business. Fundraising is a process not a campaign and it needs to be part of a CEO’s daily cadence and calendar.

You are never not raising money when you are running a company or any sort of business endeavor that requires capital, which is basically everything.


USV TEAM POSTS:

Albert Wenger — August 1, 2018
Blogging Hiatus: Reading More

Jed Schmidt — July 31, 2018
Jed @ USV

Dani Grant — July 31, 2018
Lite Mining

Categories: Blog articles

Cutting The Cord/Trashing The Dish

A VC - July 22, 2018 - 5:01am

Last Sunday I wrote about the over the top video market and made some observations about it in light of the challenges we were having getting our satellite dish working again.

In the week that passed, we had another no-show appointment by DirectTV, more success watching whatever we want on our AppleTVs, and on Friday I called up DirectTV and canceled my re-install order for our beach house once and for all and we are now officially off of traditional “cable TV” out here.

After canceling our re-install order and shutting down the account we have had for twenty years, I paid for a Hulu and a YouTube TV subscription and checked out DirectTV Now.

I was surprised that DirectTV Now has no incentives for existing DirectTV subscribers to purchase it. You don’t get a reduced price or free access. I decided to pass on it and see if Hulu and YouTube TV get it done for me.

Finally, we went out in our backyard and got the 20-year-old satellite dish and tossed it in the garbage truck when it stopped by to pick up the trash.

It feels good to be done with the world of wires and set-top boxes and truck rolls and all of that. I won’t miss it.


USV TEAM POSTS:

Jed Schmidt — July 31, 2018
Jed @ USV

Dani Grant — July 31, 2018
Lite Mining

Nick Grossman — July 30, 2018
Minimum Viable Economy

Categories: Blog articles

Audio Of The Week: Vitalik Buterin on Cryptoeconomics and Markets in Everything

A VC - July 21, 2018 - 6:01am

I received a bunch of emails last week suggesting I listen to this interview with Vitalik.

I finally did and it was as good as advertised.

So I am now suggesting that all of you give it a listen too.


USV TEAM POSTS:

Dani Grant — July 31, 2018
Lite Mining

Nick Grossman — July 30, 2018
Minimum Viable Economy

Categories: Blog articles

Funding Friday: Don Giovanni Records

A VC - July 20, 2018 - 4:02am

I got such a chuckle(s) watching this Kickstarter video that I immediately backed this project.

I love it.

Categories: Blog articles

Opportunity Zones

A VC - July 19, 2018 - 5:56am

I was at dinner with my friend Stephen a month or so ago and he was bending my ear about a provision in last year’s tax bill that provides very significant tax incentives to invest in businesses or real estate in certain locations around the US that have been underinvested in.

It all sounded way to good to be true and I kind of ignored him. This sort of thing has been part of so many economic development plans over the years that it sounded like more of the same to me.

We had dinner again last week and he started in again, but this time we were with some other friends and they chimed in.

It turns out the tax incentives are as generous as my friend said and what seemed to me to be too good to be true is in fact true.

These locations are called Opportunity Zones and here is a map that shows where they are located. I bet there are some near you. There are a ton in NYC.

Forbes has a long piece on how these rules came to be and how they work.

I have never been a fan of letting taxes drive my investing and I don’t plan to change that but there are plenty of good investments that can be made in these zones and these new rules seem like they are going to catalyze them.

Categories: Blog articles

Priorities and Triage

A VC - July 18, 2018 - 6:54am

When my life gets crazy, which it is right now, it helps me to internalize what is most important and triage around that.

And I’m not just talking about what tasks to do and what not to do.

I’m also talking about prioritizing friends and family, exercise, eating right, communicating, and all the things that at one time or another in my life I have let slide in favor of work.

The triage is visible to people, of course, and saying no can be challenging.

I saw some friends last night and they invited me to a thing they are doing in a couple weeks. They said “would you like to come?” I said “No”. My friend said, “do you mean you can’t?” And I said “I just mean I won’t.” He got a chuckle out of it but when I’m in triage mode, I can be curt. I am working on that but sometimes it is easier to just say no and leave it at that.

This blog remains a priority for me and I continue to be able to post something here every day, generate some conversation, and, at times, unlock something for myself and/or some of you.

If you are feeling swamped like I am right now, it helps to take a second to think about what’s most important, do those things, and say no to everything else.

Categories: Blog articles

It Feels Like Summer

A VC - July 17, 2018 - 4:05am

Speaking of doing things on our phones, I made this playlist on my phone on the train ride into NYC yesterday morning.

It was inspired by the Donald Glover/Childish Gambino track of the same name that kicks off the playlist.

I got off the train into a steamy NYC and I’m gonna need this playlist to get through the week.

Maybe you will too.

Categories: Blog articles

Writing On My Phone

A VC - July 16, 2018 - 4:44am

We write on our phones all day long. Texts, emails, searches, etc.

But long form writing is a different thing. I’m not sure how much long form writing happens on phones.

I’ve been mostly writing my daily posts on my phone in the last month and I quite like it. I am writing this post on my phone on a train to NYC this morning.

It has a more casual feel. The words flow naturally from my head to my thumbs to the screen. I feel connected to the writing in a way that doesn’t quite happen on a big screen.

I like that I can write on my phone anywhere. On a park bench. On a train. Sitting on the beach.

Being able to write anywhere makes it less of a chore and more of a treat. Like having a moleskin with you all the time.

I don’t write well with a pen or pencil. It is something I’ve struggled with my entire life. Bad eye hand coordination or something else. Whatever the case, I press too hard, my hand cramps, the writing is barely legible, and I race to finish as I hate it.

So my moleskin is my phone. And it is always with me and I can pull it out and start typing whenever I want. And I do that quite often.

There are a few downsides to writing on a phone. I don’t have Grammarly on my phone and I quite like it to keep my writing clean and neat. And I tend to make a lot more little typos on my phone (misspellings, missing a letter in a word, etc). But I expect the tools for long form writing on a phone will improve over time.

The pros outweigh the cons for me and I expect to frequently write blog posts on my phone.

Many people tell me that they want to blog but can never find the time to do that. If you are someone like that, try writing on your phone. WordPress has an excellent mobile app that I write in but you could also write in Google Docs or some other mobile app.

It’s easy, it can be done anywhere, and it feels so natural.

Categories: Blog articles

Going Over The Top

A VC - July 15, 2018 - 8:51am

I have long had an interest in determining when the video offerings available “over the top” will be sufficient so that customers will no longer need to buy video from their cable providers.

I was writing about this issue in the early days of AVC, fifteen years ago, but certainly, that was way too early for the over the top market to develop.

USV had an investment in this market, the hardware device Boxee, that missed the mark and was beaten by Roku and, most significantly, by AppleTV.

I have not written as much about this topic in recent years as my interests have been elsewhere, but I continue to pay attention to this sector.

Over the last few weeks, we have been moving into a new home where we have broadband internet and satellite television.

The broadband has been working well but we have had installation issues with the satellite.

And so we have been using our AppleTVs to watch video while we wait for the satellite to get installed.

We have yet to find something we want to watch that we could not get over AppleTV.

World Cup – yes, on the Fox app

Wimbledon – yes, on the ESPN app

Summer NBA League in Vegas – yes, on ESPN app

It helps that we have a satellite TV account that we can log into these apps with.

So while we can cut the cord, or the dish as it were, we still need to pay the legacy industry some money every month.

I have heard that the new YouTube TV offering is pretty amazing.

And I have also heard that the DirectTV app on AppleTV gives you everything you get on your dish.

I need to check out both of those things.

I also realize that many people have gone over the top in the last ten years and have not missed cable and our family is, if anything, late to making this switch.

But I like to have redundancy. The internet can go down. The dish can go down. But rarely do they go down at the same time.

But at some point, it may be better to have two internet providers and no video provider.

We may have reached that point.

Categories: Blog articles

Video Of The Week: Roham Gharegozlou At Techcrunch Blockchain Sessions Zug

A VC - July 14, 2018 - 7:20am

Roham Gharegozlou is the founder and CEO of the company that made CryptoKitties (which USV is an investor in).

In this talk, Roham discusses what CryptoKitties was all about and where they intend to take the business.

Categories: Blog articles

Funding Friday: The Backtrack Box

A VC - July 13, 2018 - 5:16am

Dylan is a musician, an entrepreneur, a hacker, and a geek. That’s quite a combination and a good one at that.

He’s come up with a better way for live musicians to play their back tracks without the need for a computer and lots of cables.

It is called The Backtrack Box and he’s raising funds to manufacture it on Kickstarter.

I backed this project earlier this week and think it is the perfect Kickstarter project; creative, unique, and something that should exist in the world.

Categories: Blog articles

Trophy Board Members

A VC - July 12, 2018 - 5:04am

I am not reading Bad Blood, the book about Theranos, but many of my friends and colleagues are.

One of the many “tells” that Theranos was not a good company was the board chock full of trophy board members.

A “trophy” board member is someone with a big name who, in theory, brings credibility and connections to your company. They are often out of the world of politics, or a Fortune 500 CEO job, or Wall Street.

I dislike trophy board members and advise our portfolio companies to avoid them. But they don’t always take our advice.

One good example is Lending Club, a very good company run by a very good entrepreneur, who got thrown under the bus, in my view, by his trophy board.

USV is an investor in that entrepreneur’s new company which says all you need to know about where we come out on that one.

Trophy board members are more concerned about their reputations than your company and will often react badly in times of crisis and challenge, which is exactly when you need your board members at your side more than ever.

Trophy board members often miss board meetings, show up unprepared, and frequently don’t take the time and effort to truly understand your business.

I am a huge fan of independent directors to complement the founders and investors on a board. The quality of the board is highest when there are more independents on it than investors and founders. Try to get that ratio right on your board as soon as practical.

But don’t put “names” on your board. Put operators, ideally very seasoned operators, who have done everything you want to do, ideally multiple times, and can help you spot the issues before they become problems and spot the opportunities with enough time to go after them.

These ideal board members are often not big names and they usually don’t have big egos. They are solid, steady, and worth their weight in gold. They come in male and female varieties and across the racial and ethnic spectrum too. It is true that it takes a bit more work to build a diverse board of operationally focused board members but it is worth it.

But whatever you do, stay away from trophy board members. They rarely help and often hurt.


USV TEAM POSTS:

Albert Wenger — July 20, 2018
Facebook’s Travails and the Decentralized Future

Categories: Blog articles

The Web 3 Stack

A VC - July 11, 2018 - 4:59am

Web 3 is the next generation of the web in which decentralized apps (dApps) operate on top of a shared data layer and users have control of their data and the ability to move between dApps with little to no switching costs.

Think about the way domains and email addresses work. We (individuals and/or companies) own these identifying data elements and we can provision them in any app we want (I provision my email addresses in gmail and my domains in wordpress but I could choose many other options). In Web 3, this is how all of our data will work.

But we have a long way to go to get there. The infrastructure for Web 3 is immature and at least a few years away from being mature and stable enough to build mission-critical dApps on. We can see glimpses of Web 3 in games and collectibles, where the stakes are not that high, and we can see glimpses of it in financial services that have built up around Bitcoin and other leading crypto assets. But it will be a while before we are keeping our resumes on DinkedIn and our documents on DDocs, our friends and family networks on Dacebook, our photos and videos on Dinstagram, and our President’s tweets on Dwitter. But that time will come. I am more sure about that than anything else right now. The last few years of Web 2 have shown us what is wrong with the current architecture of the web and what we need to do to fix it. When this all happens is another thing.

Our friend and colleague Kyle Samani posted a long and thorough description of the current state of the Web 3 stack yesterday. My colleagues Albert and Nick provided some feedback on it before he published it so it reflects some of our thinking too.

As investors, we are spending much of our time wrapping our heads around these infrastructure layers, trying to understand which approaches will win out, where value will accrue, and when dApps can be successfully built, scaled, and delivered to market.

We think this is where the action is right now and we are heads down in this mess trying to understand it and invest in it.


USV TEAM POSTS:

Albert Wenger — July 20, 2018
Facebook’s Travails and the Decentralized Future

Categories: Blog articles

Streaks

A VC - July 10, 2018 - 4:28am

My son told me he wanted to learn Japanese. I told him to check out our portfolio company Duolingo‘s awesome language learning product of the same name.

He told me that he has used Duolingo and likes it, particularly the ability to generate streaks. He told me that once you have a streak going, you really want to keep it going and that keeps you at the language learning exercises that are the heart of Duolingo.

Yesterday, I kicked off my weekly game of Swarm (from our portfolio company Foursquare) with some big point generating check-ins. My daughter, who I play the game each week with (among others) also had a quick start.

I texted her and she texted me back:

Streaks are a terrific game mechanic and can be used to motivate user behavior.

But streaks are also powerful in real life.

This blog is a good example. When you have posted every day for fifteen years (that anniversary is coming up this fall), you have quite an incentive to keep it going.

And the same is true in the VC business.

When you have had a big win every year for the last eight years, you want to keep that going.

When you have had four highly successful VC funds, you want to make the fifth work.

Keeping something going is a powerful motivator.

So when you have that day or week you really don’t want to get up for, think about your streak, get up for it, and do it.


USV TEAM POSTS:

Albert Wenger — July 18, 2018
Uncertainty Wednesday: Updating (Conclusion)

Categories: Blog articles

Honu – A CryptoKitty Charity Auction

A VC - July 9, 2018 - 4:41am

I am excited by the potential of cryptocurrencies and cryptogoods to change, and hopefully improve, the way we raise funds for charity.

Cryptogoods are particularly interesting as they are scarce and unique digital goods.

AVC community member Arnold Waldstein tipped me off to a really good example of this:

Little Honu (Hawaiian for turtle) is part kitten, part sea turtle. Honu is the first of a lineage of CryptoKittens ‘hatched’ to both raise funds and be ambassadors for their causes and to be bought, sold, and bred within the game itself.

Honu will be auctioned to raise funds for charity. The auction starts today, on Monday the 9th, ends Sunday the 15th.

Auction proceeds go directly to two sea turtle conservation projects in the Caribbean: Operation Jairo and Unite BVI.

Previous CryptoKitty charity auctions have raised in excess of $140K.  Donations are tax exempt for the winner if a US citizen.

This is part of a pilot for CryptoKitties, tied to their KittyVerse partner program and their Kitties-for-Good initiative.

CryptoKitties teamed up with Bill Tai and his ACTAI community of activists, athletes and investors, and Ocean Elders, a conservation group headed up by Sir Richard Branson, Jane Goodall and others to make this happen.

And Arnold is the quarterback of this initiative, creating and orchestrating a mashup of traditional, web, crypto and event-based grassroots marketing and partnerships.  It’s a first step in a broader project he is developing with Bill Tai to bring together incentivized communities through unique cryptoassets into a larger framework for non-profit projects everywhere.

I just bid on Honu and am currently the leading bidder, which I expect won’t last for long.


USV TEAM POSTS:

Albert Wenger — July 18, 2018
Uncertainty Wednesday: Updating (Conclusion)

Bethany Crystal — July 17, 2018
A brief history of the adoption of the rules of the road

Categories: Blog articles

Governance

A VC - July 8, 2018 - 4:35am

Software systems have largely been governed by the companies that operate them.

The Washington Post reports that Twitter has been suspending more than a million accounts a day recently.

That certainly is necessary given all of the fake accounts, bots, spammers, and worse plaguing Twitter.

Twitter, the company, is making those determinations.

Twitter the company governs Twitter the software.

But that doesn’t have to be the case.

Back in 2007, a few years too early :), my partner Brad argued on usv.com that governance was the next big thing in software.

I suspect Brad was right, but maybe a decade and a half or possibly two decades too early in making that call.

One of the many interesting ideas that have emerged from the crypto sector is the idea of decentralized governance.

Decentralized governance can be implemented in many ways but the basic idea is that the token holders will control the operation of the software system.

The 0X decentralized exchange protocol is an interesting case in point.

They way 0X works is that companies build “relays” on top of the 0X protocol and operate decentralized exchanges on it.

Our portfolio company Coinbase operates a relay on top of 0x called Paradex.

Now imagine you are Paradex and 0X wants to make a change to the protocol that you don’t like.

If you hold a significant amount of 0X tokens, you can vote against that change.

Think about the Bitcoin miners. They would probably like to have the ability to weigh in on the roadmap for Bitcoin, but they do not.

Many crypto projects have either implemented a form of decentralized governance or have committed to doing so in their white papers.

And I am certain that we will start to see the benefits, and challenges, of a community governing a software system instead of a company.

And I believe we will see that start to play out in the coming years.

And then what? Well the basis of competition may shift from functionality to values as Brad predicted at the end of that post:

Is there a basis for competition beyond the governance systems underlying these services? If pressed, I would guess it will be values. It might be possible for two equally effective governance systems to compete by internalizing different values. One could perhaps embrace openness and diversity at the cost of some efficiency and the other could be optimized for efficiency for a more homogeneous set of users and interests.


USV TEAM POSTS:

Bethany Crystal — July 17, 2018
A brief history of the adoption of the rules of the road

Dani Grant — July 17, 2018
A Quick Primer on 5G

Albert Wenger — July 16, 2018
World After Capital: Limits of Capitalism (Self-Conservation)

Categories: Blog articles

Video Of The Week: How To Tell If Something Is Blockchain Native

A VC - July 7, 2018 - 5:43am

In this video, AVC regular William Mougayar describes the fundamental properties of a blockchain native application.

The key section starts at 4mins and goes for about two minutes.

If you want to see the slides, which are not visible in the video, they are here.


USV TEAM POSTS:

Dani Grant — July 17, 2018
A Quick Primer on 5G

Albert Wenger — July 16, 2018
World After Capital: Limits of Capitalism (Self-Conservation)

Categories: Blog articles
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