Posts from November 2011

Open Science

I had a rough night last night. A late flight, not enough sleep, and I'm feeling run down. So I'm not going to do a long post today.

But I saw this bit about Paul Allen advocating "Open Science" and I thought I'd flag it for all of you.

I've long felt that the way we go about doing research in our society is wrongheaded. We largely hoard our data and experiments until the breakthroughs are made and then we publish and patent them.

Imagine if all the research and work was being shared in an open platform (kind of like the Internet was designed to do??). Think about how much faster the breakthroughs would come if all the best minds in the world were working together instead of against each other.

Reception Desk NDAs

I've been out in the bay area for a few days making the rounds. One of the things I encounter out here that I don't encounter in NYC is reception desk NDAs. I really hate them.

You show up to meet someone. You are greeted by the person at the reception desk. They ask you to sign a boilerplate NDA. It's so insulting. I read one yesterday and thought "there is no way I'm going to sign this." I wasn't there to discuss anything related to the Company whose offices I was visiting. I was just there to catch up with someone on general stuff going on in the angel and VC world. But I didn't want to make a scene and I wasn't going to discuss any company business anyway so I signed it.

These companies don't offer you a copy of what you signed. They don't offer you the option of meeting in a lounge where you don't enter company premises and thus don't have to sign the damn thing. They don't offer you a call to your lawyer to find out what the hell you are signing. It is just sign this or don't come into our offices.

Google does this. LinkedIn does this. Facebook does this. I am sure many other big Internet companies do it. But when you visit News Corp, Time Warner, Goldman Sachs, WPP, Warner Music, or any other large NYC company, you never are asked to sign something like that. What do Google, LinkedIn, Facebook, and other large Internet companies have going on in their offices that is so different than what the big companies in NYC have going on in their offices?

I have refused to sign these Reception Desk NDAs in the past. It is usually when I'm visiting the CEO or some other top exec. Then I don't feel so badly about making a stink. But when I'm visiting an employee who doesn't have any control over the policy, I usually just sign the thing and steam about it privately.

I'd love to hear some rationale for this behavior. It really makes no sense to me. And it's just not hospitable behavior to someone who makes the trip to come see you in your place.

Finding Signal In The Noise Of Demo Days

I'm taking a break from MBA Mondays today because Christina Cacioppo just posted a terrific blog post on the USV blog on her takeaways from a summer attending most every demo day imaginable.

Christina notes:

Over the past few months, I've seen over 160 companies come through eight different accelerator programs. It's a skewed group, but it captures the zeitgeist of a certain segment of the tech industry – and, I think, looking at these companies is one of the best ways to get a sense for which opportunities compel internet entrepreneurs today. Here's a look at some of what these entrepreneurs are thinking about – and where we all might be headed.

Over the course of the summer and into the fall, my partner Albert's office whiteboard started to fill up with sticky notes of various colors. Christina was mapping out all of the startups she was seeing. And in the end she came away with two big megatrends.

Go read her post and find out where they are.

Bitcoin

I've mentioned Bitcoin a number of times on this blog. It is something our firm is watching closely. We thought briefly about making a Bitcoin specific investment earlier this year but ended up deciding to sit on the sidelines for now.

We are quite taken with the idea of a currency that is not controlled by governments and central bankers and that is based on faith in an algorithm and a network instead of the "full faith and credit" of a country.

Wired has a good post on the history of Bitcoin. It's a quick read. If you are at all interested in this topic, I suggest you check it out.

The Wired post has this chart in it:

Bitcoin

You could take that as a sign that Bitcoin has failed. Or if you put that chart in the context of the Gartner "hype cycle" chart, you could say that we just went through inflated expectations and now we are into the real work.

Hype cycle

The hype cycle model rings so true to me because it maps out what has happened with the commercial Internet over the past fifteen years. In 2002/2003, so many people thought the Internet was "over" as an investment opportunity. And they were wrong.

So it seems to me and my colleagues at USV that an alternative currency with roots in peer to peer networks and based on an algorithm that is transparent to everyone is an idea whose time has come. The question remains if the Bitcoin algorithm or some other algorithm (possibly a derivative of the Bitcoin algorithm that deals with some of Bitcoin's weaknesses?) will ultimately win out. That's an important issue that has a lot to do with when this space becomes investable.

But Bitcoin or something else, I'm confident we'll see the emergence of currencies that are not controlled by nation states in my lifetime. Whether that is a good thing or not remains to be seen. I think it is, but there are significant ramifications that will result from the decoupling of currencies from governments. And one of them is an interesting investment opportunity that we hope to participate in.

Healthcare

A few weeks ago, I met with a VC who has been investing in healthcare for over 30 years. He asked if we invested in healthcare and I told him that we'd like to but we don't really know how to fit it into our investment thesis which is focused on large networks of engaged users disrupting large markets. Clearly healthcare is a large market, possibly the largest measured as a percent of GDP. But we haven't seen many large networks of engaged users emerging in healthcare.

A week later, I got an email from an entrepreneur I backed something like sixteen years ago. I think that his company was the very last healthcare investment I've made. He built an enterprise IT healthcare software company and sold it for a nice return. Then we mostly lost touch. He emailed me that he had a very exciting new opportunity to create a new software solution to managing costs in large hospitals. I told him it sounded like something that was needed but that we were not the right investor for him. That turned into a long back and forth discussion of the state of healthcare, healthcare investing, and the role of the web in it.

When we look at education, what's wrong with it, and what needs to happen to fix it, we can see how the web, technology, and large networks of engaged users can impact education in a positive way. That is why, after studying the market for a couple years, we started to invest in education services late last year. We've now made four of these investments and will certainly make a bunch more.

When we look at healthcare, what's wrong with it, and what needs to happen to fix it, we can't see as clearly how the web, technology, and large networks of engaged users can impact healthcare in a positive way. But that is starting to change. When we first looked at education, we saw a market that was largely controlled by big powerful institutions that were not adapting to the needs of the market. But then we saw things emerging like home schooling, online learning, low cost learning tools in emerging markets, and teachers and students opting out of the system and taking things into their own hands. And that has led us to vision of how to invest in education. We are looking hard for those kinds of changes in healthcare that can help us start to see the way forward. We know that consumers need to take more control of their healthcare choices, their healthcare costs, and their health. And we know the web and large networks of engaged users can help all of that happen.

It is likely that we'll be doing more looking and studying and less investing in healthcare for a while (as we did in education). But I'm hopeful that entrepreneurs, industry observers, and of course all of you, will help us develop a thesis that allows us to start investing in healthcare. Like education, it feels like a market where you can make strong returns and also help facilitate important and needed changes.

Feature Friday: Mobile Shopping

It's Black Friday, the biggest shopping day of the year. But you don't have to get crushed by the crowds stampeding the doors in order to participate in this shopping crazed day.

You can take out your mobile phone and do your holiday shopping while you are sitting in the park, on the beach, or by the pool.

Consider the new Etsy iPhone app, for example. Download it to your iPhone and shop away.

Etsy iphone

The treasury lists make a great way to shop on mobile. Here's a treasury called "Merry X-mas for him"

Etsy treasury

And if you find something you like, you can purchase it right on your phone:

Etsy checkout

So if you want to participate in Black Friday mania from the comfort of your couch watching football games, try shopping on your mobile phone. It works nicely and you aren't likely to get trampled.

Happy Thanksgiving

I'd like to wish everyone out there a happy thanksgiving. I am thankful every day that I have a great wife and family, that I get to do a job I love, and that I live and work in an incredibly interesting time. I am very fortunate and I know it and am thankful for it.

I am also very thankful for the community that has built up around this blog. As someone said in the comments to my "writing" post the other day, if I wrote a post and it got no comments, I might feel differently about writing. Fortunately I don't have to worry about that. Even the weakest post here gets close to fifty comments. And we've seen a post get a thousand comments. Your participation here makes writing every day a pleasure. So thank you for that.

Happy Thanksgiving Everyone

eBay Comes To NYC

A lot of the coverage of eBay's acquisition of Hunch has focused on the possibility of much better recommendations on eBay. And I'm sure we will see that. Think about login with Twitter and get personalized recommendations on eBay. Hunch's technology can do that kind of magic and a lot more.

But I'm most excited about eBay's decision to build an office in NYC. According to Mike Arrington,

That New York office will eventually grow to some 200 employees, I’m told, who’ll focus on recommendations. But the team will also analyze lots of Ebay data, and perhaps productize some of it or otherwise release it.

My parter Albert calls Google's fortress on 8th Avenue "the gift that Google gave New York." That's because Google has well over 1000 engineers here in NYC and continues to build that team. Those engineers are exactly the kind of talent that web startups need. Some of Google's talent bleeds out into the startup world. But also having that kind of ballast anchoring the engineering talent pool makes it such that young software engineers are more confident to come to NYC and build their careers here.

And now we will have eBay with a team of 200 engineers. And with Twitter's acquisition of Julpan a few months ago, we have Twitter building an engineering team in NYC. Surely Facebook will come to town and start building an engineering team here too.

In the short term, this may put a further squeeze on the super tight market for software engineers in NYC. But if we invest in efforts to bring more engineers to NYC, as we are actively doing, then we can build the market together. And having some awesome large engineering teams working for big tech companies is super healthy for the NYC market long term.

So I'm pumped about this news. And congratulations to Chris and the team at Hunch on a great exit.

Writing

I came to writing relatively late in life. Of course I wrote for work and during school. But I always saw writing as a chore and did not feel that I was particularly good at it. I went to a mediocre high school and then to engineering school where writing was technical, not creative. We wrote in business school, but I don't recall a lot of effort being put into making us better writers. And for almost two decades in venture capital, writing meant memos and quarterly reports and not much more.

Then, at age 42, I started blogging. And I've been writing daily ever since. Something like 5,600 blog posts have been entered into my Typepad CMS. Almost all of them by me. I'm getting close to Malcolm Gladwell's 10,000 hours. My writing has improved immeasurably. But more importantly, I have learned to love writing. It's creative. It's a puzzle. How do I tell the story? How do I get my point across? How do I do it crisply and clearly? How do I end it on a strong note?

I've been thinking about this because my son, who is in high school, has been working hard on his writing skills. And my daughter, who is in college, has shared a few of her papers with me recently. My daughter's writing has improved so much in the past few years. She writes so beautifully now, with poise and confidence. And my oldest daughter writes in her journal every day, keeping a private record of her life. My son is still working to find his voice, his style, his flow. I've noticed that the high school my children go to/went to really emphasizes writing and communication skills. I think that's great. I wish I had that kind of high school education. Better late than never.

But I still struggle to help my children with their written work. I find it easy to help with Math and Science homework. I know how to ask them the questions that lead to the insights that help them answer the questions themselves. But when I read a draft paper that isn't the best they can do, I struggle to help them. I certainly don't want to edit the paper. I want them to edit it. But it's hard to find the words, the strategies, and the ways to inspire them to improve it. I've noticed that the best english and history teachers usually ask their students to hand in a draft, which they mark up, and then the students are asked to write a final version. I think that's a great way to go. I guess I suffer from never having had an editor or an editor's job. I'm just a self taught writer.

Communication skills are so important in life. The investment I've made in my communication skills over the past eight years is paying huge dividends for me now. I want to help my kids make the same investment, just much earlier in life. I know it will come in handy and I know it will be a great source of pleasure for them thoughout their life.

Sustainability

When I was in business school 25 years ago, I don't recall the term sustainability used. Maybe it was, but it certainly didn't register in my brain. The mantras that I recall were return on investment, shareholder value, revenue growth, and driving efficiencies in the business.

But as I look at many of the challenges facing businesses today, it seems to me that the focus on performance and efficiency often comes at the cost of sustainability. This talk by Clay Christensen really drives that point home. The recent history of the steel industry in the US is a case study in managers doing everything they were taught in business school and in the end they bankrupt the business.

Going back to business school, they teach you the value of a business is equal to the present value of future cash flows. If the company is likely to stay in business forever, then the value is most likely way higher than a business that is going to be out of business in a decade. The present value of a hundred years of cash flow is likely to be larger than the present value of  ten years of cash flow.

And sustainability is all about figuring out how to be in business forever. It is about business models that are win/win and lead to happy long term customer and supplier relationships. It is about avoiding the temptation to overeach. It is about avoiding the temptation to mazimize near term profits at the expense of long term health. It is about adapting the business to changing market dynamics. It is about building a team and a culture that can survive the loss of the leader and keep going. And it is about many more things like this.

I am tempted to develop a course on this topic. I think we need a lot more of this type of thinking in business. It seems in such short supply these days.