Thankfully

Thankfully the US is enjoying one of the longest economic expansions of the post-war period (101 months and counting)

Thankfully that economic expansion is starting to result in job growth for the parts of the economy that have lagged during this expansion

Thankfully the Trump Administration has, so far, failed to enact the most troublesome parts of its agenda

Thankfully the developing world continues to experience rising wealth, income, and living standards

Thankfully technology continues to produce answers to our most vexing problems

Thankfully renewable energy continues to grow and displace carbon-based energy around the world

Thankfully gender and racial equality is on the rise and white male dominance is on the decline

Thankfully literacy rates continue to rise rapidly around the world

Thankfully almost 100,000 students in the NYC public school system got a computer science class last year

Thankfully the NY Knicks are young, hungry, play hard, and are winning

Happy Thanksgiving Everyone

The End Of Net Neutrality As We Know It

I have written about net neutrality frequently here at AVC. I believe that for as long as we have local monopolies and duopolies for last mile broadband internet in most parts of the US, we need our federal government to actively reign in the broadband providers from doing things that are anti-innovation, anti-consumer, and pro-big business. For much of the last decade, the internet crowd has been a force to be reckoned with on this issue and we fought for and won good net neutrality rules that were put in place and defended in court. If you are a long time reader of AVC, you heard me advocating for and celebrating these wins.

The times have changed. We have a pro-big business team in the White House and at the FCC who are hell-bent to overturn those hard fought for net neutrality rules. We should fight them in these efforts, just like we have fought for these rules at every turn. Here are some things you can do:

But even as we fight for net neutrality, we also should be investing heavily in efforts to reduce our society’s reliance on the big cable and telcos for our broadband internet. That’s the core problem here.

So, in addition to fighting for net neutrality, here is what you should be doing:

  1. Don’t use an ISP who won’t commit to following basic net neutrality rules if you have a choice. Our portfolio company Tucows has a subsidiary called Ting that provides fiber broadband in some parts of the country and they are committed to following basic net neutrality rules no matter what the law says. Use an ISP like that if you can.
  2. Report abusive behavior and business practices by your ISP to the FCC. This will become even more important if the FCC overturns net neutrality.
  3. Join a mesh network or multiple mesh networks. Peer to peer wireless is our best long-term solution to the monopoly/duopoly issue.
  4. Look for blockchain projects that are seeking to solve the mesh networking issue and support them. The token-based incentive business model is a powerful way to bootstrap p2p mesh networks. This piece from 2015 explains that well.

I believe that technology is ultimately a better solution than regulation to market failures like the monopoly/duopoly issue in last mile broadband and I am confident that we will get the technology to solve it soon enough (certainly in my expected lifetime). But until that happens, regulation is a good tool to keep things moving in the right direction. That’s why I have supported net neutrality and will continue to support it until the technology arrives in the mass market to address the underlying problem.

200x Growth

Back in 2011, my partner Brad suggested that USV invest in a search engine called DuckDuckGo.

I laughed at the idea, “why would we ever want to compete with Google?”

“Because they do something Google will never do”, Brad explained.

That thing was private search, no storage of search history, no storing of personal information.

DuckDuckGo was doing about 100,000 searches a day when we had that conversation.

Last week, they had a day in which over 20mm direct searches were done.

That’s 200x growth over the six plus years we have been invested in DuckDuckGo.

Brad was right, of course, and I saw that pretty quickly as did everyone else at USV and we made that investment.

And I’m very glad we did.

I suspect I’ve told this story a few times now at AVC.

I love it so much.

The Top Of The Funnel

Whether you have a e-commerce business, a SAAS business, a media business, a marketplace business, or some other business model, you are going to start thinking about customer acquisition at some point.

And there are a lot of options out there for acquiring customers; direct sales, indirect sales, channel, search engine marketing, social media, email, display, etc, etc.

But the best option, if you can pull it off, is to own an organic customer acquisition channel that is large and that sustains itself.

At USV, we have investments in a bunch of companies that have very large organic and sustainable top of the funnel customer flows. Many of these companies use a number of customer acquisition techniques, but they start with the organic channel and optimize it with their product development efforts.

Here are a few examples:

Codecademy – Codecademy offers a number of subscription learning services to people who want to learn to code. But because it has been offering free curriculum for learning to code for six years now, it was the first organic result I got this morning when I typed “learn to code” into Google:

Quizlet – Quizlet offers over 200mm study sets on the web and mobile to people who want to study and master something. No matter what you want to learn, you can find a study set on Quizlet to learn it. Quizlet is the “Wikipedia of studying” and because these study sets are free on the web and mobile, they have a huge organic flow of new users every month. Quizlet offers two subscription offerings to students and one to teachers and this organic flow is the primary customer acquisition channel for these offerings.

SoundCloud – SoundCloud is the first place most musicians go to post their music on the Internet. There are upwards of 200mm tracks on SoundCloud, the vast majority of which are free for anyone to listen to. This content is a huge attraction for listeners on web and mobile. SoundCloud has three subscription offerings, two for listeners and one for creators. The organic channel is the primary acquisition mechanism for these subscription offerings.

Kickstarter – When a project creator launches a Kickstarter project, they share it with as many people as they can through email, social, blogging, etc. This brings millions of backers to Kickstarter every month. Most of those backers arrive to consider backing a specific project and move on. But enough of them stick around to see what else is going on that Kickstarter has been able to build a large and sustainable business without any need for paid marketing channels.

Etsy – Etsy is now a public company and is no longer a USV portfolio company but I am the Chairman and remain actively involved with Etsy. Etsy is similar to Kickstarter in that sellers who have shops on Etsy are actively promoting their shops through various channels. Most of the buyers who arrive on Etsy that way purchase from the seller who brought them but some stay and shop from other sellers too. Etsy explained in it’s IPO filing that the vast majority of it’s traffic was organic. That is slowly changing but in Etsy’s early years, all of the traffic was organic.

I could keep going but I think you get the point. One of the things I look for in an investment is a free and sustainable flow of customers. This big top of the funnel may not be the only way a management team will choose to build their business but it makes a great foundation to build on and the LTV/CAC is infinite.

Funding Friday: goTenna Puerto Rico Mesh

Our portfolio company goTenna sent a bunch of their mesh networking devices to Puerto Rico in the wake of Hurricane Maria and a number of mesh networks lit up on the island.

This is what the goTenna network map looks like on the west side of the island now:

So they kicked off this crowdfunding campaign to purchase another 300 devices to get more mesh connectivity on the island.

I backed the project yesterday and it would be great if the AVC community could close this out with more donations today. The total raise is $15k.

If you want to learn more about goTenna, this Techcrunch story is a good place to start.

In a few short months the goTenna mesh device has built this network around the US:

I’ve been a fan of the idea of people-powered mesh networking for a long time. It is great to see it happening.

Drip

Yesterday, our portfolio company Kickstarter announced that they had relaunched Drip, a subscription platform they acquired almost two years ago.

Perry Chen, Kickstarter’s founder and Chairman, wrote this blog post explaining what they are trying to do with Drip.

I would like to highlight a few quotes from that post:

Kickstarter is for projects, Drip is for people. – Kickstarter and Drip are different. Kickstarter is about funding a project. Drip is about supporting a person.

In recent years, we’ve seen the growing validation of subscriptions for serial online content creators — podcasters, YouTubers, bloggers — using tools like Flattr, Patreon, and Steady. It’s been great to see organizations build tools like these — the world is far from having too many tools for creators. But there remain large groups of artists and creators who don’t see subscriptions as fitting their creative practices. Our goal with the new Drip is to change that. – Drip is about expanding the market for subscription patronage beyond serial online content.

creators will be able to export their data and content, and we’ll even help creators securely transfer subscription and payments information to other subscription platforms. We believe creator independence means not being locked into a platform by design. – Subscriptions are different than campaigns, they are for the long run. Being able to leave one platform and join another is critical.

Every Drip begins with a founding membership period to help creators build momentum. The founding membership period is a way for creators to entice their fans, friends, and new audiences to jump in and build up their base of support. (This is not all-or-nothing like Kickstarter, but it does build on our experience that a strong call to action is essential.) – Kickstarter knows that having a call to action is key to generating early support for a project. Until now, that notion has not existed in the subscription market.

We also designed Drip to be both separate from but complementary to Kickstarter. One way we’ve done that is that existing Kickstarter users can use their stored account and payment details to easily support creators on Drip. Kickstarter and Drip are different services but they share user accounts and payment credentials. If you are logged into Kickstarter, you are logged into Drip.

We will operate Drip with the mission and values codified in Kickstarter’s Public Benefit Corporation charter, which mandate our commitment to helping people bring their creative projects to life, not putting profit first, and maintaining higher standards for our practices. We think these commitments are more important now than ever. – Kickstarter is a different kind of company, a Public Benefit Corporation. Their products and business practices reflect these values.

I backed about ten drips yesterday. It is about the simplest thing to do on the Internet if you already have a Kickstarter account.

If you are interested in doing the same, you can find some great Drips here.

Update On Stock Options/RSUs Issue

I just saw this on my twitter:

This means that the Senate has now made the tax reform bill a win for those who work in startups instead of a loss.

I’m thrilled and I want to thank all of you who called your elected officials and those in the Senate Finance Committee who clearly understand the importance of equity compensation to the startup model.

FemaleFounder.Org

My partner Rebecca posted this to her Twitter yesterday:

FemaleFounder.org is a group of women VC investors who are doing regular “office hours” to advise and mentor female founders.

As they say “A community of women helping women”

I know most of the women who are doing this and they are all great people, investors, and advisors.

If you are a woman getting started on your startup journey, check out FemaleFounder.org.

It’s a great initiative.