The American Formula

It’s that time of year when investors (including me) spend the morning reading Warren Buffett’s annul shareholder letter.

There are always nuggets of wisdom and insight in these letters and I enjoy them very much.

In this year’s letter, Warren spells out the formula that America has used to build the greatest economy in the world.

Sadly one of those four pillars is at risk – “a tide of talented and ambitious immigrants.”

We can’t allow that to happen. There is too much to lose by turning off that tide.

Thanks to AVC reader Abid Azam for sending me that quote this morning.

The Monthly Match

Last month, when the Gotham Gal and I and our friends Brad and Amy combined to match $20k of donations to the ACLU and ended up raising $120k on a weekend that saw the ACLU raise over $25mm, we committed to do a match every month for all of 2017. Part of me wants to keep doing this as long as we have an administration hostile to the rights of minorities in the White House but we will see about that. We are going to keep doing this monthly match for the rest of 2017 and then we will see how we feel about it.

So, today we are launching a second match offer. Brad, Amy, Joanne, and I will match the first $20k of donations to the National Immigration Law Center, which “engages in lawsuits that defend the fundamental and constitutional rights of all Americans, including low-income immigrants and their families, often in coordination with other local and national civil rights organizations.” You can read about their work and their mission here. The NILC has been around for almost 40 years and has done some amazing work over that time and we need them more than ever right now.

Why did we pick the NILC over many other groups that need our support right now? Well first of all, we plan to do this every month with a different organization that is supporting the rights of minorities that are at risk under this administration. So we have a long list and this is just the first of many we will support with our monthly match.

But more importantly, we remain upset and anxious about the efforts of this administration to throttle immigration and the rights of immigrants, both those in the US and those coming to the US. We have had some early victories in the courts but we need to keep up the fight for as long as the administration continues to pursue these efforts and along with the ACLU, the NILC is an important leader in this fight.

Here is how the monthly match works:

  1. Go to our monthly match page and hit the donate button and give whatever you feel like giving (min is $10).
  2. After you complete the donation, TWEET your donation out on the post donation page. That will register it for our match.
  3. If you don’t use Twitter, you can forward your email receipt. The instructions will be on the post donation page. We would vastly prefer you tweet it out if you can.

Last month, we used Twitter for this and had to manually record every tweet including a receipt. That was fun but a pain to administer. This time we are using Crowdrise for the donations and the accounting but keeping Twitter for the virality that was so awesome and brought in so much money. We have customized Crowdrise to make it feel as much like the Twitter campaign we ran as we could. We think this will work better and we will be optimizing this as we continue these monthly matches for the rest of the year.

I hope all of you who agree that we must fight the efforts of this administration to throttle the rights of minorities will join our monthly match campaign this month, and every month this year, and support the NILC. Go here to do that.

Getting Human Resources Right

The news out of Uber last weekend was horrifying. A woman engineer was unable to get human resources to deal quickly and appropriately with a sexual harassment claim. I don’t know anything more than what I learned in her blog post. Uber is investigating and the full story will likely emerge in due course. I am not interested in piling on Uber right now. Plenty of people doing that.

But it does raise a great question which is how to get human resources right in a fast growing tech company. Growing from 50 to 500 to 5,000 to tens of thousands of employees is hard. Operating systems and processes that work in a 500 person company don’t work in a 5,000 company. The same is true of every growth spurt. Systems break down and stuff gets messed up.

A well designed and implemented human resources organization can help. A messed up human resources organization will hurt. As Uber has found out.

So what have I seen work and what do I recommend?

Here are some things you can do to increase the chances that your human resources organization will be a force for good in your company:

  1. Hire a human resources (HR) leader EARLY in the development of your company and “level up” your HR leader as needed as your company grows. The right HR leader in a company of 50 is not likely the right HR in a company of 5,000. Of course there are exceptions to this rule, but in general you will need more experience in the HR leadership function as your company grows.
  2. Have your HR leader report directly to the CEO. Do not tuck the HR leader underneath your COO, VP Ops, CFO, GC, or VP Admin. The CEO has a hard enough time figuring out what is going on in her company as it is. Putting someone between them and their cultural leader/thermostat is a bad idea. Plus the optics are terrible. Your management hierarchy says a lot about what you value and what you do not. Actions speak louder than words, always.
  3. Do not make your HR function a recruiting function. Of course HR needs to help the company hire. And it certainly needs to help transition out people who have to leave the organization. But HR orgs that function mostly as an I/O pipe are bad HR orgs.
  4. Do make your HR organization about culture and leadership first and foremost. I have heard many HR leaders called “our culture carrier.” That’s good. And HR orgs should be making sure everyone is getting feedback on their performance and development goals, including the CEO. Organizations that share feedback top to bottom with dignity and professionalism are great places to work and perform better.
  5. Always have a company handbook that lays out the rules of behavior in the workforce. You can’t do this too early. You set the tone early and it propagates. It is great if you can start with your values, clearly laid out for everyone, and then lay out the rules and what happens if they are not followed.
  6. Build a great employee onboarding process. I believe that the companies that take the time to properly onboard new employees are better places to work and perform better. Onboarding should be more than “here’s your laptop, here’s your desk, here’s your boss.” It should be at least a few weeks of getting ingrained in the values, culture, systems, processes, and rules. It should be learning about every part of the organization, the current operating plan, strategic priorities, management team, and more. Doing it right is hard but it pays off bigtime.
  7. One CEO that I have worked with for more than fifteen years once told me his HR leader was his most important senior executive. He said she was his “business partner.” That’s a great place to get to if you can get there. What is more important than your team, after all?

I hope those suggestions are helpful. They are based on what I’ve seen work and not work over the years.

In the Uber situation we also saw a failure in the “whistleblower process.” This is a particularly hard process to get right. First of all most teams, whatever kind of team, don’t really want “snitches.” It is human nature to try to come together and support each other. And blowing the whistle is the exact opposite of that. So here are some things you can do to get this right:

  • Train your organization about the situations that are particularly tricky; sexual harassment, drug and alcohol issues, fraud, etc. Teach everyone how to recognize them and what to do about them. Make it clear that they are EXPECTED to report these issues to management and that failure to do so is complicit behavior.
  • Have some sort of whistleblower hotline. Often times the company General Counsel will manage this hotline. Make sure everyone knows about it.
  • Enable anonymous feedback throughout the organization and explain when it is appropriate and when it is not. Obviously anonymous feedback has great potential for abuse. But it is often the only way you are going to get the most important feedback that nobody will share otherwise.
  • Talk about this stuff in your all hands, regularly. I am sure this is a big topic this week but it should not get talked about only when something bad happens somewhere. This is something that should be discussed at least a couple times a year. Companies that scale rapidly can double in size in less than a year. So you have to talk about this stuff frequently to make sure everyone understands it. And make sure to clearly cover it in the onboarding process.

If you don’t have this stuff worked out in your company, now is a great time to do that. Your employees are watching you.


Late last year, USV invested in Numerai, a hedge fund that uses data scientists all around the world to “crowdsource” stock price predictions. I blogged a bit about Numerai then.

If that business model wasn’t cutting edge enough for you, the Numerai team has now gone a step further and issued a crypto-token called Numeraire to incent these data scientists to work together to build the best models instead of just competing with each other.

When I read the Numerai blog post about Numeraire yesterday, I tweeted this out:

This is all pretty out there stuff in a world, hedge funds, that has more or less done things a certain way for the last thirty years. I’m not saying hedge funds haven’t innovated, they certainly have, but I don’t think anyone has attempted to change the behavioral economics that underpin hedge funds in quite the same way that Numerai has. It is, if nothing else, a fascinating experiment that will tell us a lot about crypto-tokens, machine learning, and behavioral science.

I must admit that some of this is over my head. I’ve read the Numerai blog post as well as the Forbes and Wired posts several times now and I am not sure if I could explain all of this perfectly at a dinner party. But I am super excited that USV has invested in this audacious experiment and I look forward to seeing how it all pans out.

The Bloomberg Startup Barometer

I came across this index from Bloomberg that tracks the health of the US startup ecosystem.

This index “incorporates both the money flowing into VC-backed startups, as well as the exits that are making money for investors. To smooth out some of the volatility, we calculated the average value for the last 12 weeks.”

I like that they are tracking both inflows (investments) and outflows (exits). What’s interesting is that over the past year, the exit chart is looking better than the investment chart:

If exits continue to outpace investments, that’s a very bullish thing for the startup sector, particularly for investors. But what is good for investors is ultimately good for founders because strong performance will lead to more capital flowing into the sector.

This chart is investments since 2007:

You can see that the VC sector ramped its investing activity significantly in 2010 & 2011 and has maintained it at roughly those levels (with some tailoff recently) since then.

This chart is exits since 2007:

You can see that exits did not start increasing until 2014, roughly three to four years after the significant pickup in investment pace. That makes sense because of the “gestation period” of startups is at least four years and in most cases longer.

I will be keeping my eye on this new index from time to time. And I will be most interested in the shape of the exit chart because it is the strongest predictor of the long term health of the startup ecosystem.

Why Ethereum?

AVC regular William Mougayar gave this presentation at the European Ethereum Developers Conference, Edcon, in Paris a few days ago. In his talk, William argues that Ethereum, unlike Bitcoin, is developing into a rich environment with many different services coming together to provide developers a wide platform to build on top of.

I am increasingly viewing Bitcoin and Ethereum as complimentary, not competitive, and see both of them as important public blockchains that will grow in significance in the coming years. But regardless of that, William’s take on Ethereum is correct and there is a lot of developer momentum and enthusiasm around it.

The Robot Tax And Basic Income

In my work to prepare for the Future of Labor conversation we had at NewCo Shift a few weeks ago, I talked to a number of experts who are studying job losses due to automation and thinking about what might be done about it. Two ideas that came up a number of times were the “robot tax” and the “basic income.”

The ideas are complementary and one might fund the other.

At its simplest, a “robot tax” is a tax on companies that choose to use automation to replace human jobs. There are obviously many variants of this idea and to my knowledge, no country or other taxing authority has implemented a robot tax yet.

A “basic income” is the idea that everyone receives enough money from the government to pay for their basic needs; housing, food, clothing so that as automation puts people out of work we don’t see millions of people being put out on the street.

What is interesting about these two ideas is that some of the biggest proponents of them are technology entrepreneurs and investors, the very people who are building and funding the automation technologies that have the potential to displace many jobs.

It is certainly true that we don’t know that automation will lead to a jobs crisis. Other technological revolutions like farming and factories produced as many new jobs as they wiped out and incomes increased from these changes. Automation could well do the same.

But smart people are wondering, both privately and publicly, if this time may be different. And so ideas like the robot tax and the basic income are getting traction and are being studied and promoted.

The latest proponent of a robot tax is Bill Gates who said this about it:

You ought to be willing to raise the tax level and even slow down the speed. That’s because the technology and business cases for replacing humans in a wide range of jobs are arriving simultaneously, and it’s important to be able to manage that displacement. You cross the threshold of job replacement of certain activities all sort of at once.

There is a lot of economic surplus that could come from automation. Let’s look at ride sharing. Today I pay something like $15 to go from my home to my office in the morning. Something like $10 of that ride is going to the driver. If the ride is automated, either the price goes to $5, saving me $10 a ride which then is surplus to me, or the profit that Uber is making goes up significantly, which is surplus to them. Some of both is likely to happen. This surplus could be taxed, either at the company level or the individual level, so that the cost of the ride doesn’t go down nearly as much and the driver can continue to compete with the robot or the driver can collect some basic income, funded by the robot tax, while they find a new line of work.

At least that is the idea.

I would not characterize myself as a proponent of a robot tax or a basic income. But I find these ideas interesting and worth studying, debating, discussing, and testing at a small scale to understand their impacts. We should absolutely be doing that.

Video Of The Week: Mark Cuban At Upfront Summit

I posted the discussion my partner Andy and I did at the Upfront Summit last week.

There were other great conversations at the Upfront Summit.

This discussion with Mark Cuban was great. I totally agree with Mark that we need more tech companies to go public and have been saying that publicly for several years.