Posts from August 2012

Feature Friday: Concierge

Eighty percent of all music listening happens in lean back mode where someone or something plays the music for you. That's a fact. I am not sure where I saw it, but I believe it to be true based on my own music listening experience.

That's why I haven't found iTunes, Spotify, Rdio, Rhapsody, or any of the "on demand" experiences particularly inspiring. I've used all of them at one time or another and our family still logs a fair bit of time on Rdio and Rhapsody (which we've had for something like thirteen years now).

But there is something magical about logging into a music service and having music start playing that you love and you don't need to do anything to make it happen. It's also true that these lean back experiences are better for music discovery. That's the role that old fashioned radio has been playing in the music business for as long as I've been alive.

I have been using several rooms in Turntable (my favorite being Indie While You Work) for the past year for this purpose. And it has served it incredibly well.

But Turntable is not available on Sonos and the hack where I airplay into my Sonos from my laptop is just that, a hack that isnt' ideal. So I've been looking for a great lean back experience on the Sonos for a long time. And Pandora isn't that for me and has never been.

This spring I noticed that Songza was available on Sonos in the "Sonos Labs" area. We've had Songza on the Sonos in our homes for at least three months now and it has quickly become the most used music service on Sonos in our homes.

And the reason is a feature they call Concierge. Instead of asking you what artist you like as Pandora does, Songza notices what time of day it is and then asks you what you are doing. I am writing this post at 6:53am and Songza's Concierge looks like this on my Sonos (pardon the photography, I had a tough time with the glare off the screen of the iPad):

Songa 1

When I select "Working Out", I see this screen:

Songza 2

When I select "Eclectic Workout Mixes", I get this screen:

Songza 3

Then you select your playlist and the music starts playing.

All of these playlists have been constructed by real humans, so it's more like a real DJ on the radio playing music for you than an algorithm in the cloud somewhere. I prefer that as I mentioned in that link on Pandora.

I've turned all my kids onto Songza and they love it. And they've turned their friends onto it and their friends love it too. So I think Songza works for all ages and all types of music.

But don't listen to me. Give it a try. Songza is available on the web, on Android, on iOS, and on Sonos. It's awesome on Sonos so if you have one, I strongly encourage you to add Songza to it.

Networks And The Enterprise

Many think that USV is a consumer web investor. We don't think of ourselves that way. We invest in networks and for most of our short history, that has meant investing in networks of individuals connecting with each other. Thus the consumer web investor moniker.

But if you go back over the past four years and analyze the roughly thirty investments we have made in that time period, you will see that a good portion, maybe a third, have been in networks where enterprises participate.

I like to think that our first foray into this kind of network was 10gen, the company behind MongoDB. MongoDB is an open source datastore for web scale applications. The first users were developers who wanted a simple, easy to get started datastore. It was perfect for hackathons and such where the developer needed to get something up quickly. This post I read yesterday does a good job of explaining why MongoDB took off. These developers became a network of users and contributors to the open source project. Many of them worked in enterprises and brought MongoDB into their teams. Soon enough 10gen started getting calls from executives saying something like "I just learned that we have 50 instances of MongoDB in production and I'm eager to get a support contract". That's where the enterprises joined the network.

A year later we invested in Twilio. It's a similar story. Twilio build a dead simple API and cloud service that allowed developers to quickly connect their apps to the world of telephony and SMS. The early users were the same kinds of developers who adopted MongoDB. The classic Twilio story is where the two founders of Groupme built the initial version of their app at the TechCrunch hackathon using Twilio. But again, these developers became a network and the adoption spread into the enterprise.

When an enterprise plugs into a network of developers and tools built in this way they get more than functionality. They get a platform that a lot of engineers know how to use and is becoming a standard in the market. There is tremendous value to the enterprise in these networks over time.

A year later we invested in WorkMarket. WorkMarket built a platform that allows enterprises to take their freelance workforces and put them onto an open shared network. But of course, once a bunch of enterprises do this there becomes a large supply of freelance workers on the platform that can be shared amoung the various enterprises. When an enterprise joins WorkMarket, they don't just get functionality. They get access to skilled workers. Lots of them.

Around the time we invested in WorkMarket, we also invested in Edmodo. Edmodo is a platform that allows teachers and students to connect to each other and communicate, share reading assignments, homework, practice tests, and such. Edmodo currently connects 9.3mm students and teachers worldwide.The Edmodo platform was adopted initially by teachers looking for a better solution to communicate with their students. But like the 10gen story, Edmodo started getting calls from Principals and School Systems looking to deploy the Edmodo platform across their entire enterprise.

One of our favorite kind of networks are marketplaces. And a particularly interesting category of marketplaces are lending marketplaces. We have invested in one called Funding Circle that connects enteprises, mostly small businesses, in the UK with a network of lenders. The more lenders that come into Funding Circle, the more attractive it is to borrowers. And the more high quality lending opportunities that come into Funding Circle, the more attractive it is to lenders. A classic network effect that drives value for small business borrowers.

Our two most recent investments, one of which is unannouced, are networks where enterprises play a big role. The one I can talk about, Behance, is a network of creative professionals, many of whom work in enterprises like agencies. Behance started out as a place where creative professionals could come and showcase their work. But quickly organizations like schools, publications, associations and the like asked Behance to power their networks. These enterprises plugged into the Behance network and created a network of networks.

Sometimes consumer networks can get pulled into the enterprise. A good example of that is Disqus, which started out as a network of bloggers and commenters talking to each other. But a year or so into its life, Disqus started hearing from big media companies who wanted to deploy the Disqus comment system. So slowly but surely Disqus has built a large user base among commercial publishers. And these commericial publishers get way more than functionality when they plug into the Disqus network. They get access to hundreds of millions of monthly viewers and the engagement they create.

We also occaionally invest in data networks in addition to networks of people. I've been involved in one of those for over a decade. It is called Return Path and I invested in it at both Flatiron Partners and Union Square Ventures, the only company that has that distinction. Return Path has constructed a very large data network where all the various participants in the email ecosystem (mailers, intermidiaries, recievers, consumers) contribute data to their system. That data is used to power a bunch of value added products that all go toward making sure the right mail gets to the right person and spam and related bad stuff don't. Every time a new participant in the ecosystem joins the Return Path data network, their systems and tools get smarter, making the service more valuable for everyone. That's a classic network effect and it is very powerful.

This post has gone on longer than I would normally like. And I am certain that I've left out a number of USV portfolio companies that are building networks where the enterprise is a participant. I am sorry if I failed to mention your business in this post.

My uber goal of writing this post is to explain that the wired and mobile internet is a global network and it powers all sorts of smaller networks to get built on top of it. These networks can often include small and large enterprises in them. And we like to invest in networks regardless of whether the enterprise is engaged or not. Increasingly it seems we like to invest in ones where the enterprise is part of the story.

Social Sources

Google Analytics has a relatively new feature that allows you to look at your "social sources" of traffic. According to Google, about 27% of the vists to AVC in the past month came from social sources. For those who are curious about the rest of the traffic, 30% is direct, 15% is search (much of which is really direct traffic), and of the rest, about half is from social sources.

Here are the top social networks that drive traffic to AVC:

Social sources

Twitter and Hacker News have been the mainstays of the social traffic to AVC for a long time. Last year, StumbleUpon was driving a ton of traffic to AVC, but that waned early this year and it is much less of a factor today.

Facebook, Techmeme, and Disqus are the other big social drivers of traffic. 

And the traffic that Disqus drives is markedly different than all of the other social sources. These folks hang around longer, read more pages, and engage more.

If you have a blog or some other form of online media and have a Google Analytics tag on your pages, I suggest you take a look at your social sources. I think you'll find it interesting.

HBO No Go

I put the awesome HBO GO app on the family's iPad yesterday and tried to Airplay into our family room TV. I got audio on the TV but not video. I thought I was doing something wrong. So I rebooted everything and tried again. Same thing.

So I did a web search on the topic to see what was going on. Turns out HBO GO has disabled the video on Airplay but not the audio. That's right. They disabled the video but include an Airplay button in the app.

What kind of decision is that? If you don't want folks Airplaying the video from the iPad to the TV, don't put an Airplay button in your app. I can't imagine who would want to airplay the audio but not the video. That's messed up.

In truth, the whole thing is messed up. HBO GO requires a cable account to use the service. I have a cable set top box connected to the TV I tried to Airplay to. I just prefer the navigation on the HBO GO app and its way easier to use than the set top box. Allowing me to Airplay HBO GO from my iPad to my TV isn't going to make me cancel my cable subscription because I can't get HBO GO without one.

So they break the product instead. It's nuts. But I see big media doing this kind of thing all the time. And I just don't get it.

MBA Mondays: Accounting From The Archives

We have five weeks (including today) before we start the sustainability course. It's not enough time to start a new series. So I've decided to rerun five posts on accounting and financial statements that I did early on in MBA Mondays. This is core stuff. If you want to start a business, run a business, and/or operate a business, you need to know the basics of accounting and finance.

So today we will rerun the post on accounting. The next three weeks we will go through the three main financial statements. And we will end with a post on understanding financial statements.

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Accounting is keeping track of the money in a company. It's critical to keep good books and records for a business, no matter how small it is. I'm not going to lay out exactly how to do that, but I am going to discuss a few important principles.

The first important principal is every financial transaction of a company needs to be recorded. This process has been made much easier with the advent of accounting software. For most startups, Quickbooks will do in the beginning. As the company grows, the choice of accounting software will become more complicated, but by then you will have hired a financial team that can make those choices.

The recording of financial transactions is not an art. It is a science and a well understood science. It revolves around the twin concepts of a "chart of accounts" and "double entry accounting." Let's start with the chart of accounts.

The accounting books of a company start with a chart of accounts. There are two kinds of accounts; income/expense accounts and asset/liability accounts. The chart of accounts includes all of them. Income and expense accounts represent money coming into and out of a business. Asset and liability accounts represent money that is contained in the business or owed by the business.

Advertising revenue that you receive from Google Adsense would be an income account. The salary expense of a developer you hire would be an expense account. Your cash in your bank account would be an asset account. The money you owe on your company credit card would be called "accounts payable" and would be a liability.

When you initially set up your chart of accounts, the balance in each and every account is zero. As you start entering financial transactions in your accounting software, the balances of the accounts goes up or possibly down.

The concept of double entry accounting is important to understand. Each financial transaction has two sides to it and you need both of them to record the transaction. Let's go back to that Adsense revenue example. You receive a check in the mail from Google. You deposit the check at the bank. The accounting double entry is you record an increase in the cash asset account on the balance sheet and a corresponding equal increase in the advertising revenue account. When you pay the credit card bill, you would record a decrease in the cash asset account on the balance sheet and a decrease in the "accounts payable" account on the balance sheet.

These accounting entries can get very complicated with many accounts involved in a single recorded transaction, but no matter how complicated the entries get the two sides of the financial transaction always have to add up to the same amount. The entry must balance out. That is the science of accounting.

Since the objective of MBA Mondays is not to turn you all into accountants, I'll stop there, but I hope everyone understands what a chart of accounts and an accounting entry is now.

Once you have a chart of accounts and have recorded financial transactions in it, you can produce reports. These reports are simply the balances in various accounts or alternatively the changes in the balances over a period of time.

The next three posts are going to be about the three most common reports;

    •    the profit and loss statement which is a report of the changes in the income and expense accounts over a certain period of time (month and year being the most common)
    •    the balance sheet which is a report of the balances all all asset and liability accounts at a certain point in time
    •    the cash flow statement which is report of the changes in all of the accounts (income/expense and asset/liability) in order to determine how much cash the business is producing or consuming over a certain period of time (month and year being the most common)

If you have a company, you must have financial records for it. And they must be accurate and up to date. I do not recommend doing this yourself. I recommend hiring a part-time bookkeeper to maintain your financial records at the start. A good one will save you all sorts of headaches. As your company grows, eventually you will need a full time accounting person, then several, and at some point your finance organization could be quite large.

There is always a temptation to skimp on this part of the business. It's not a core part of most startup businesses and is often not valued by tech entrepreneurs. But please don't skimp on this. Do it right and well. And hire good people to do the accounting work for your company. It will pay huge dividends in the long run.

Prior Art

One of my biggest beefs with the patent system, particularly in tech, is the fact that often there is prior art.

I read this thread on groklaw about the Apple/Samsung decision and the issue of prior art is raised but I am confused about it.

What I would love to know is if the jurors evaluated the prior art issues in their deliberations or whether they punted on them.

Does anyone have any clarity on this?

The Bain Capital Files

I've posted about this topic before. I wrote down my thoughts about the Obama campaign trying to make an issue of Mitt Romney's departure from Bain. And I've written about trying to keep stuff private in the Internet era. Well this past week we saw those two themes come together in a single story.

Gawker obtained "more than 950 pages of internal audits, financial statements, and private investor letters for 21 cryptically named entities in which Romney had invested" and published them on the Internet this past week.

I will stay out of the issue of whether this was legal, moral, or right. What's done is done. And it is apparently not too damaging to Mitt Romney according to this reporter who went through most of the material.

But there's a lesson this for me and my partners. Everything we publish to our investors should be written as if it will someday be published in Gawker. And every action we take in structuring our business, our relationships with our investors, and our relationships with the entrepreneurs we back should be conducted as if it will someday be published in Gawker.

I think this policy will be good for us and others who choose to adopt it.

Fun Friday: Blogs We Read

I am going with another reader suggestion for fun friday. Blog discovery is still too hard. There are so many great blogs out there and it is still too hard to find them.

So today we will list blogs we read that folks might not know about.

I will start it off with a few that I enjoy:

The Gurgling Cod – written by a friend's brother. It's mostly about food, but also veers into culture and politics from time to time.

Techman's World – written by AVC community member Michael Hazell. It's mostly tech reviews, news, and commentary.

Tracey Talks – written by screenwriter and author Tracey Jackson. Tracey Talks is a wide ranging blog about life, culture, and other interesting stuff.

Arnold's Wine Blog – everyone here knows Arnold. And Arnold knows wine. Enough said.

Becker Posner Blog – written by University of Chicago Professors Richard Posner and Gary Becker. This is the home of serious thought on the web. Amazing stuff.

AndySwan.com – nobody does the "picture plus a few choice words" thing better than Andy.

So those are a few of my regular reads that folks might not be reading and should. Now we open it up for everyone to chime in with their favorite blogs that folks might now know about.

The AFSE Rec Room

The Academy For Software Engineering (AFSE) is opening in a few weeks. Roughly 125 high school freshmen will be starting a four year program that is designed to prepare them for secondary education if they want that and also for a career in software engineering and web development.

The inspiration for AFSE was the computer science program that Mike Zamansky has built at Stuyvesant High School in NYC over the past 15 years. When I first went to visit Mike at Stuy a few years ago, I walked into his office through a room where a bunch of his students were hanging out after school. These high school students could have headed home after school, or they could have hit the streets. But instead they were hanging out writing code, listening to music, playing video games, and in general geeking out together. I thought "this is where the magic happens."

So when we negotiated with the DOE for space for AFSE at the Washington Irving Campus, I was insistent that we create something similar for AFSE. We got a room and Frank Denbow is leading the effort to deck it out.

He needs the following stuff:

Furniture: Bean bag chairs, couches, small tables, tv stands

Electronics: TVs, game systems, speakers

Books: Technology, entrepreneurship, etc

Misc: Anything else that you think might be interesting to high school students interested in computer science

If you can help, please email Frank @ frank at startupthreads dot com.

An Interview With Technology Review

Technology Review was once MIT's alumni magazine. It's now "MIT's Magazine Of Innovation." Whatever they call it, I have a soft spot for this publication and agreed to sit for an interview with them last month.

Here's the result. I talked mostly about the venture capital business, what ails it, and where it might be headed.

I hope you like it. But please come back here to comment. They use LiveFyre which I don't approve of.