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Video Of The Week: From Agile To Immutable

A VC - January 26, 2019 - 8:20am

Two weeks ago, my colleague Nick traveled to Hong Kong to attend a Blockstack event (Blockstack is a USV portfolio company) and deliver this talk, which covers some important questions/issues in the crypto sector.

This short tweetstorm sets up the video well, so I will start with that and follow with the video which is 17mins long.

In a nutshell: On the one hand, we have the "agile" approach to building apps: start small and iterate quickly. On the other hand, we have "immutable" decentralized systems, which are — by design — stable and hard to change.

— Nick Grossman (@nickgrossman) January 24, 2019

This presents a challenge when trying to find product-market-fit. Being agile means prioritizing user experience, but retaining control. Being decentralized means prioritizing security and handing over control

— Nick Grossman (@nickgrossman) January 24, 2019

Both at the application layer (e.g., cryptokitties, numerai, augur) and at the blockchain layer (bitcoin, ethereum, eos, etc), this tension is playing out, and it will be interesting to see what will ultimately become a new paradigm for developing platforms and apps take shape

— Nick Grossman (@nickgrossman) January 24, 2019
Categories: Blog articles

Funding Friday: Funding Films

A VC - January 25, 2019 - 7:37am

The Gotham Gal and I are at the Sundance Film Festival this weekend and we are going to watch all sorts of films, from features, to documentaries, to short films, and more. It is a blast to see such a variety of films and the filmmakers who made them. We will see a few of these films that were funded on Kickstarter.

So I’m featuring a documentary about surf culture in the 60s that needs another $30k (ish) to finish the film and show it at an upcoming film festival. I backed it this morning and maybe some of you will too.

Categories: Blog articles

The Founder’s Commitment

A VC - January 24, 2019 - 7:19am

The people who start companies are special people. We call them founders in the startup world and I have had the opportunity to work with many of them over the years.

They bring all sorts of important things to the companies they start (or help to start). One of those things is a level of commitment, responsibility, and care that others rarely bring to a company.

I was reminded of that today when I saw what Eric Wahlforss, one of the two founders of our portfolio company SoundCloud, wrote about his decision to step away from the company after 11 years:

After 11+ years of building SoundCloud, it is time for me to take a break, reflect and think about what’s next.

I will be stepping back from day-to-day operations and into an advisory role on March 1st.

I am incredibly proud of what we have achieved and deeply grateful. pic.twitter.com/71DQ8h0Sjv

— Eric Wahlforss (@ericw) January 24, 2019

Eric did pretty much every job in the company at one time or another, including being the CEO for a three month period in 2016. He gave SoundCloud everything he had for eleven years.

Startups are incredibly chaotic organizations with a lot of change. Very few people can make it through all of that chaos for a decade or more. But founders can and do.

Eric is an example of that and I am incredibly grateful to him, and his co-founder Alex, for the level of care and responsibility they brought to SoundCloud (not to mention the original idea and the original product!)

We meet with founders all the time and a few times a year decide to back them with our firm’s capital. One of the things we look for is that commitment, responsibility, and care, the “founders commitment.” It has to be there or it isn’t going to work. Because building a company is really hard. But also incredibly rewarding.

Categories: Blog articles

Capitalism and Inequality

A VC - January 23, 2019 - 8:19am

I was talking to a friend about AOC’s proposal to increase marginal federal rates to 70% to fund investments in fighting climate change. My friend said he was disappointed that she didn’t propose a top federal rate of 83.25% so that the marginal rate in NYC would be 100%. He was joking but his remark is important because it speaks to the nuance of the marginal rate, something AOC and her followers don’t really understand as much as they claim.

It reminds me of a heated conversation I had with my kids and their friends during our family ski trip over the year end break. Our kids, like most millennials I know, are struggling with the notion of capitalism at any cost and the massive income and wealth inequality that we are witnessing.

This headline I came across on Twitter today kind of sums it up well:

.@AOC: Economic system that allows billionaires is “immoral” https://t.co/qINA2oXiwu pic.twitter.com/Z3mSVRXuti

— The Hill (@thehill) January 22, 2019

I am in the business of helping founders start companies which results in some of them becoming billionaires. Contrary to what some think, my wife and I aren’t in that club ourselves. But I know a fair number of billionaires and I have had a front row seat to the process of them going from not having a penny in their pockets to billions on their balance sheet.

And we are participants in the “economic system that creates billionaires.” I do not think it is immoral and I do not think billionaires are immoral. I do think the inequality that we allow in our country is immoral.

To me, these are two different things. And that is the gist of the discussion I was having with my kids and their friends over the year end holiday. They asked me why I don’t believe in massively raising taxes on the rich to pay for all of these new social programs that the candidates on the left are proposing.

I am a fan of many of these social programs, like medical care for all, like more affordable education for all, like new approaches to what we once called “welfare” and now is taking shape as Universal Basic Income. I have been called a communist, a socialist, a liberal, and more on this blog and all of those labels could be accurate in someone’s mind. I believe that society must find ways to support the basic needs of everyone, which include wellness, knowledge, and income. That we do not is immoral. That we allow billionaires is not.

I am a capitalist and a business person. I understand that increasing taxes on the wealthiest leads many of them to move their income and assets to lower tax jurisdictions and can be counter productive, particularly when you go beyond a certain threshold. I also understand that government is bloated and there are many places where we could cut spending to fund these new innovative programs that could help counter the immoral wealth imbalance we have in our country.

I believe that technological revolutions, like the industrial revolution and the information revolution, create opportunities for entrepreneurs to reimagine how the economy should operate. Those entrepreneurs, like Rockefeller, Carnegie, Morgan, Bezos, Page, Zuckerberg, build very powerful monopolies and amass billions.

As these revolutions reimagine how the economy should operate, many people lose jobs, can’t find jobs, find themselves in lower paying jobs, and there is real dislocation that results. And you get this “immoral wealth imbalance.”

The one part of the economy that seems immune to re-imagination is the government. If we were to force it to go through the same technological revolution that the private sector is going through, we would see massive efficiencies, and massive job losses, that would free up a huge amount of capital that could be used to pay for things like medical care for all, affordable education for all, and some amount of income for all.

That is what I am for. That is what I explained to my kids and their friends that I am for.

Times of change are times of change. And we can’t change some things but not everything.

I will end with a story from a book I read a few years ago. The book is called The Prize that was written by Dale Russakoff and is about the effort by Chris Christie, Cory Booker, and Mark Zuckerberg to fix the broken Newark NJ public school system.

The story takes place at an anti-charter school rally. Dale meets a woman who is protesting against the charter schools that are replacing the district schools. As she is talking to this woman, she explains that she is late to the rally because she had to spend all morning in line trying to get her child into the new charter school in her neighborhood. Dale is perplexed. Why would she be protesting charter schools if she is that committed to getting her child into one? The woman explains that most of her family works in the district schools and will lose their jobs if the city moves to charter schools.

And that’s where we are. We are not willing to move away from the things of the past to get the things of the future. So our elected officials decide to try to give us both and we struggle with how to pay for it all.

I am not for the emerging progressive Robin Hood narrative. I am certainly not for the entrenched conservative Let Them Eat Cake narrative. I am for a new narrative that understands that everything must change if we are to find ways to support everyone in our society.

Categories: Blog articles

What Kind Of Coach Do You Want?

A VC - January 22, 2019 - 6:44am

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

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

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

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

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

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

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

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

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

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

Categories: Blog articles

MLK Day Quote

A VC - January 21, 2019 - 8:00am

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

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

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

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

Martin Luther King Jr.

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

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

Categories: Blog articles

Screen Time Tracking/Management

A VC - January 20, 2019 - 7:42am

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

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

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

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

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

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

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

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

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

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

Categories: Blog articles

Video Of The Week: Our Partner Rebecca Kaden

A VC - January 19, 2019 - 9:39am

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

Categories: Blog articles

Funding Friday: Return To Sender

A VC - January 18, 2019 - 10:00am

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

Categories: Blog articles

Executive Sessions and Continuous Feedback

A VC - January 17, 2019 - 10:05am

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

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

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

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

But that would be a big mistake.

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

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

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

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

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

Categories: Blog articles

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

A VC - January 16, 2019 - 10:34am

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

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

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

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

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

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

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

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

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

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

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

Categories: Blog articles

The Daily Dose

A VC - January 15, 2019 - 10:57am

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

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

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

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

Categories: Blog articles

President Donald Trump – the first two years

Beyond Money - January 14, 2019 - 7:28pm


The American people elected Donald Trump to shake things up, and, for better or for worse that is what he’s been doing. Most of what Trump has done in the first two years of his presidency has been destructive—to the environment, to social justice, to economic equity, and to civil discourse. But whether he knows what he is doing or not, he has been shaking up America’s longstanding foreign policy in a way that I think is positive. The United States, under both major parties, has, since the fall of the Soviet Union, been working to maintain “full spectrum dominance” around the world. It has been bent upon constraining the power and influence of potential rivals like Russia and China, and promoting by both overt and covert means, regime change in numerous countries around the world in hopes of installing puppet regimes that would be subservient to the demands of the “New World Order.”

Trump may very well be a narcissistic “loose cannon,” and his intentions may be purely self-centered and aimed at self-aggrandizement, but many of his foreign policy actions are moving the world in the direction that it needs to go, i.e., towards a multi-polar world order. He is doing this by (1) trying to cooperate and normalize relations with Russia, (2) pressuring Britain and Western European (NATO) allies, thus undermining longstanding alliances, and (3) upsetting prior trade agreements via the imposition of tariffs.

The turmoil in Washington politics has at times been almost comical, as we’ve seen the evident tug of war between a strong-willed President with his own ideas, and the entrenched “deep state” that is controlled by the elite global power establishment. This has been evident in some of the presidential appointments that seem at odds with Trump’s rhetoric, like the appointment of super-hawk and Russophobe, John Bolton as national security advisor.

The appointment of John Kelly, as White House Chief of Staff, was supposed to control Trump, but now Trump has ousted Kelly and named Mick Mulvaney as his temporary replacement. Does that indicate a power shift in Trump’s favor? Or now that the Democrats have taken control of the House, will they be able to tie Trumps hands?

Time will tell.

Categories: Blog articles

More Data On VC’s Big Year In 2018

A VC - January 14, 2019 - 8:21am

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

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

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

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

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

Categories: Blog articles

Cause Or Effect?

A VC - January 13, 2019 - 10:16am

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

Dan Primack tweeted this yesterday:

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

— Dan Primack (@danprimack) January 11, 2019

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

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

— Fred Wilson (@fredwilson) January 12, 2019

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

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

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

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

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

Categories: Blog articles

Audio Of The Week: Marc Andreessen and Ben Horowitz

A VC - January 12, 2019 - 12:42pm

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

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

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

I hope you enjoy it as much as I did.

Categories: Blog articles

Funding Friday: Pigzbe

A VC - January 11, 2019 - 7:22am

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

Categories: Blog articles

The Hinman Test

A VC - January 10, 2019 - 10:06am

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

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

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

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

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

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

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

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

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

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

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

Categories: Blog articles

Fewer And Larger

A VC - January 9, 2019 - 7:49am

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

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

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

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

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

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

Categories: Blog articles

The Tortoise And The Hare

A VC - January 8, 2019 - 8:51am

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

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

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

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

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

It is a lot like The Tortoise and The Hare.

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

Categories: Blog articles
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