Open Internet Rules

The FCC is expected to approve its Open Internet Rules today. This is a big deal and something we have been fighting for since former FCC Chair Michael Powell unfortunately and incorrectly ruled that Internet Access was an “information service.” We believe that last mile Internet Access is a natural monopoly/duopoly in most geographies and needs to be regulated as such.

My colleague Nick Grossman has a good quick read on usv.com about these rules, why we are strongly in support of them, and what this means.

As Nick says in his post,

We believe in markets. We believe that by recognizing that access to the Internet is an essential service, the FCC has moved to protect the free and open markets that depend on that access. Contrary to much FUD, this is NOT regulating the internet, it’s ensuring open access TO the Internet.

Building A Diverse Culture And Team

Brittany posted today about the first USV portfolio diversity summit. Last year we had forty-two portfolio summits all driven by topics that bubble up from our portfolio. Diversity has been rising as a topic that people want to talk about and we reacted to that by hosting a summit on it. We had 28 attendees from 13 different portfolio companies in attendance.

In Brittany’s post, she cites two important reasons to strive for diversity on your team:

  • Do you want your company to increase your company’s competitive advantage? Extensive research has proven that more diverse perspectives leads to more innovative ideas and better financial returns.
  • Do you want your company to one day serve millions of people? It helps if you know how different people in the population think. If companies want to last, they need to think about this early.

She goes on to outline how the portfolio companies are approaching diversity:

  • Getting Started: having the discussion, language, and online tools
  • Company Culture: embracing diversity, inclusive mission vision values, and performance
  • Recruiting: tactics, expectations, interviews, job postings, resources, and external organizations
  • Constant Evolution: Feedback, measuring success, training, and materials

If you are seeking to build a diverse culture and team in your company, I would encourage you to read Brittany’s post which she will follow with dedicated posts on all four topics in the outline.

Sending Stuff To The Wrong People

I got a bunch of emails yesterday that were clearly not meant for me. I replied to let the senders know and deleted them without reading beyond what I had read to know it wasn’t for me.

Then I saw this tweet by Chris Dixon:

Then it all jelled in my mind. Gmail was autosuggesting the wrong people to a large swath of its users over the weekend. I was struggling with the same problem but I hadn’t realized it was a service wide issue.

Sending emails to the wrong people is embarrassing and potentially much worse. The same is true of google docs, dropbox, and a host of other cloud based services where we create and store sensitive information. At least google docs pops up the warning “you are about to send this outside of your domain.” That has saved me many times from sending a google spreadsheet or doc with personal information to a woman with the same first name in Mellon’s Private Bank instead of my wife. You would think Google would know my wife is more important. But it does not, particularly on mobile.

The thing of it is that Google is so good at knowing who you might want to send something to that they should do more than they do right now. They could easily pop up a warning saying “you don’t normally send this kind of document to this person” or “you don’t normally include this person in the group you are sending this to.” These sorts of data driven protections/warnings would further cement the already airtight lock they have on me and many others who use gmail and google docs.

But try as we might, we are human and prone to error. It is almost certain that each of us will send something super confidential to someone who should not see it at some point in our life. My hope is when I do that, the person on the receiving end is decent enough to do what I did, inform and delete, not store and forward.

Building Enterprise Networks Top Down

Most people that are in the VC and startup sector know that USV likes to invest in networks. And most of the networks we invest in are consumer facing networks of people. Peer to peer services, if you will. The list is long and full of brand name consumer networks. So it would be understandable if people assumed that we do not invest in the enterprise sector. That, however, would be a wrong assumption.

We’ve been looking for enterprise networks to invest in since we got started and we are finding more and more in recent years. There is a particular type of enterprise network that we particularly like and I want to talk about that today.

Businesses, particularly large ones, build up large groups of suppliers. These suppliers can be other businesses or in some cases individuals. And these suppliers also supply other businesses. The totally of this ecosystem of businesses and their suppliers is a large network and there are many businesses that are built up around making these networks work more efficiently. And these businesses benefit from network effects.

I am going to talk about three of our portfolio companies that do this as a way to demonstrate how this model works.

C2FO is a network of businesses and their suppliers that solves a working capital problem for the suppliers and provides a better return on capital to large enterprises. Here is how it works: C2FO has a sales force that calls on large enterprises and shows them how they can use their capital to earn a better return while solving a working capital problem for their suppliers. They bring these large enterprises onto their platform and, using C2FO, they recruit their supplier base onto the platform. They also bring all the accounts payable for the large enterprise onto the platform. Once the network and the payables are on the platform, the suppliers can bid for accelerated payment of their receivables. When these bids are accepted by the large enterprise, the suppliers get their cash more quickly and the large enterprise earns a return on the form of a discount on their accounts payable. C2FO takes a small transaction fee for facilitating this market.

Work Market is a network of businesses and their freelance workforce. Work Market’s salesforce calls on these large enterprises and explains how they can manage their freelance workforce directly and more efficiently. These enterprises come onto the Work Market platform and then, using Work Market, invite all of their freelance workers onto the platform. They then issue all of their freelance work orders on the Work Market system, manage the work, and pay for the work, all on Work Market. Work Market takes a transaction fee for facilitating this and many of Work Market’s customers convert to a monthly SAAS subscription once they have all of their freelance work on the platform.

Crowdrise is a network of non-profits, the events they participate in, and the people who fundraise for them. Crowdrise’s salesforce calls on these events and the large non-profits who participate in them. When a large event, like the Boston Marathon, comes onto Crowdrise, they invite all the non-profits that participate in their event onto the platform. These non-profits then invite all the individuals who raise money for them onto the platform. These events and non-profits run campaigns on Crowdrise, often tied to the big events, and Crowdrise takes a small fee for facilitating this market.

I hope you all see the similarities between these three very different companies. There are several but the one I’d like to focus on is the “they invite all the ….. onto the platform”. This recruiting function is a very powerful way to build a network from the top down. And once these networks are built, they are hard to unwind.

We don’t see many consumer networks built top down, but we do see a lot of enterprise networks built top down. And we are seeing more and more of them. It is also possible to build enterprise networks bottoms up (Dropbox is a good example of that). That’s the interesting thing about enterprise networks. You can build them top down or bottoms up. And we invest in both kinds of enterprise networks.

The top down enterprise network is a growing part of the USV portfolio. We like this approach to building an enterprise software business and it does not suffer from the “dentist office software” problem. Which is a very good thing.

Feature Friday: Accept Bitcoin With Stripe

Stripe has had this in beta for quite a while but yesterday they launched it and now any merchant who is using Stripe can accept Bitcoins in the regular Stripe checkout flow.

Here’s the details on how it works and there’s a nice interactive demo on this page.

If you are using Stripe to handle your checkouts, just add a few things to your Stripe code and you are good to go.

It’s things like this, making it drop dead simple for merchants to accept Bitcoin, that will help drive adoption of Bitcoin payments in the coming years.

And accepting payment with Bitcoin via Stripe costs a merchant 0.5% vs the customary 3%. For low margin products, this is real money. I expect merchants will start incenting customers to pay with Bitcoin in certain product sectors.

I’m going to go find some Stripe merchants that are accepting Bitcoin and try out the checkout flow. It looks really smooth and clean, like everything Stripe puts out.

Reblog: VC Cliché of the Week

Back in the early days of this blog I had a series called VC Cliche Of The Week. I’m not sure how long I ran it but I did eventually run out of material and phased it out. In continuation of yesterday’s good vibes and with yet another shoutout to Bliss, here’s a reblog of one from March 2006:

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The father of this weekly series, the guy who taught me at least half of the cliches I know, is a guy named Bliss McCrum. He and his partner Milt Pappas taught me the venture capital business from 1986 to 1996 when I worked with them at their firm, Euclid Partners.

One of my favorite cliches from Bliss is a rising tide lifts all boats.

Whenever things seemed too good at a portfolio company, in the stock market, the economy, or somewhere else, Bliss would quip, “well you know that a rising tide lifts all boats“.

It was his way of saying “don’t mistake a good market for a good business”.  The insinuation was always that the tide would come back in and so would the boats.  And you had to be prepared to make things work in tough times as well as good times.

And we are in good times in the venture business, the internet business, and for the most part, the US economy.  Consumer confidence hasn’t been this strong since before the Iraq war.  The Fed has raised rates 15 times and may not be done, signalling that the economy remains stronger than they’d like it. Venture money is flowing freely in Silicon Valley and China and in many parts of the developed or developing world.  Advertising dollars continue to move from offline media to online media and that is one rising tide that is certainly lifting all boats.

But we know these good times will come to an end at some point.  Are we in 1998 as Caterina suggests and have another year or two before the good times end?  Who knows?  I don’t expect this run of good times to play out like the last one anyway.

The best we can do is prepare our companies to withstand a business environment that is less friendly.  Companies need a business model, they need a seasoned and well constructed team, and they need patient and experienced financial partners.  With these ingredients, hard work, and some luck, you can survive a downturn.

Some of the best companies I’ve ever worked with were funded at the height of the last bubble and they are doing great now.  So it doesn’t really matter when you start a company, but it does matter that you can make it through tough times.  Because right now we have a rising tide that is lifting all boats and that won’t last forever.

Finding Your Passion

I graduated from college with a technical degree from one of the finest engineering schools in the world, I had helped to pay for college by writing code in a research lab, I had a strong academic record, and I had no clue what I wanted to do with my life.

Fortunately the Gotham Gal did and I followed her to NYC where she got busy with her career in fashion and retail. Meanwhile I took a job in an engineering firm where I used my coding skills to help design a new class of Navy ships. It was a good paying job, the kind that is in short supply for college grads these days, but it wasn’t anything I was passionate about.

We were visiting our families who lived in DC at the time and at the dinner table one night the Gotham Gal’s mom Judy who is no longer with us said to me “Get an MBA from one of the top schools. With an engineering degree from MIT and and MBA from a top school, you can write your ticket”. I liked the sound of that phrase “write your ticket” so I took her advice.

But the business school applications all asked the same thing, “what do you want to do in your career?” And I really had no good answer to that question. I knew that we were going to live in NYC because that’s where Gotham Gal’s career was flourishing. And I knew that I liked technology. But there wasn’t a tech sector in NYC at that time. All the good and high paying jobs were on Wall Street. And then it hit me. What was at the intersection of Wall Street and technology? Financing tech companies of course.

So I did some research and found out about this, at the time, sleepy little business called venture capital. This was the early 80s and the venture capital business was a much smaller and closer knit business than it is today. But I loved the sound of the word “venture”. It reminded me of adventure. I was smitten.

And so I wrote my business school applications about venture capital. I told all the schools (all three of them) that I wanted to be a VC. One of them, Wharton, accepted me and I went there, commuting back and forth to NYC for two years.

The Gotham Gal, who always pushes me and thank god she does, started asking me a few weeks into the fall semester of  business school what I was going to do the following summer. I said “get a job in venture capital”. That was my plan. Nothing more to it than that.

I wrote letters (yes letters) to all the Wharton alums in the VC business and got one reply (via letter) from Bliss McCrum. He said “please come in for lunch”. So I did that. And I got the summer job. That led to a full time job when I got out of school.

That lunch with Bliss happened 30 years ago. It was the key to finding my passion. And it led to a fantastic career that has taught me so much and connected me to so many amazing people.

Last week I got a voice mail message from Bliss. I called him back. He’s living on a ranch in Montana now. He invited me to come up and go fishing with him. We traded a bunch of stories about the venture business in the 80s. I told him that I still use all of his sayings and cliches. He loved hearing that. He and his partner Milton taught me a lot and gave me a place to find my passion. I owe them a lot for doing that. We pay that forward by doing the same thing at USV with young people who want to find their passion. And that feels good.

So where is this story going? Well it seems to me that finding your passion is critical to having a full and fulfilling life. And you have to put yourself in a place to do that. For me, it started with a woman who knew what she wanted to do long before I did and who pushed me to “figure it out” and it ended with a couple guys, Milton and Bliss, who passed their passion on to me.

I am sure there are many other ways to get there. But it won’t happen without help. So surround yourself with people who care about you and listen to them. And good things will come from that.

Blockstore

Our portfolio company Onename is announcing something today that I think is pretty powerful. It’s a key value store built on top of the Bitcoin blockchain called Blockstore.

Onename initially built Blockstore for their own business but is releasing it to the cryptocurrency community today to solicit feedback.

Here’s how Onename designed Blockstore:

  1. Based on the Bitcoin blockchain:
  2. Unlimited data storage: Storing large amounts of data in the blockchain can lead to blockchain bloat, so we decided to use a DHT for data storage while storing only hashes of the data in the blockchain, yielding virtually unlimited storage.
  3. Give money back to miners: Miners provide critical infrastructure for the Bitcoin ecosystem and we believe that any services built on top of Bitcoin should contribute to Bitcoin mining incentives.
  4. End-to-end design principle: The end-to-end design principle of keeping the core of the network simple proved to be very successful for the Internet, and we believe this is a good decision for blockchain applications as well. Thus, we use the blockchain for a few basic operations and keeping most of the intelligence client-side.

You can check out the Blockstore  codebase and documentation on Github for more information.