Posts from June 2014

On June 20, 1987, the Gotham Gal and I got married. A lot has transpired since then. We raised three kids who are now young adults, we built a wonderful life in NYC, and we made a fortune, lost it all, and made it back. It’s been a fantastic ride and I could not have picked a better partner to take it with me.

Last tuesday night, I was hanging out with my friends Jordy and Paul on Jordy’s balcony looking out at the Hudson River. I told them a story about the Gotham Gal and me. When we got out of college in 1983, I had no idea what I wanted to do or what to do. Joanne was completely different. She wanted to move to NYC, work at Macy’s and become a store manager. She knew what she wanted in life and how to get it.

So I followed her to NYC. She pushed me to get a job in NYC. I did. She then pushed me to go to business school. I did. She pushed me to get a job over the summer in VC (because I told her I thought it was interesting). I did. She pushed me to ask the partners to hire me out of business school. I did. She pushed me to ask for a raise. I did. Eventually she pushed me to ask to be made a partner. I did. And finally she pushed me to leave and start my own firm. I did.

Flatiron, the firm I started along with Jerry Colonna, was the end of me finding my way with gentle (and not so gentle) pushes from the Gotham Gal. At the age of 35, I was the co-founder of a VC firm, the commercial Internet had arrived, and I was on my way.

There is a saying that behind every successful man, there’s a strong woman who helped make them so. I am not sure that is true in every situation. But it certainly was true in mine.

We have a sign like this in our beach house. We got it in New Orleans many years ago.

I thought of that sign when I was on the phone yesterday. I was talking to a person involved in a deal I’m working on right now. He said “you guys are being awfully nice here.”

For much of the rest of the day, I was thinking “are we being too nice?”

I don’t want to talk about this specific deal. Too much information. But I do want to talk about being nice in business. The conventional wisdom is nice and business don’t go hand in hand.

We learned from The Godfather that “it’s not personal, it’s business.” We know that some of the most successful entrepreneurs in tech have been difficult individuals who did what they had to do to get ahead.

We know that a lot of investors, VCs included, will do what is required to make a buck.

So its conventional wisdom that being nice is a bad idea in business.

I have found otherwise. I have found that reputation is the magnet that brings opportunities to you time and time again. I have found that being nice builds your reputation. I have found that leaving money on the table, and being generous, pays dividends.

I am not saying you should be overly generous or nice to a fault. There’s a limit to everything. But I do think that thinking about others, and trying to make things right for everyone (which is impossible and will drive you crazy) is an approach that pays off in business.

It’s not the fastest way to make a buck. It takes time. But it is way more sustainable than screwing people over.

Marc Andreessen posted a tweetstorm last week and he talked about how to think about seed financings and how they lead into Series A and Series B rounds.

Feature request for Twitter: Please make it possible to permalink to and embed a tweetstorm. You can call this the @pmarca feature.

I replied to item 6/ of his tweetstorm:

@pmarca I assume Seed is to build product and get to PMF, Srs A is to build business, Srs B is to scale business

— Fred Wilson (@fredwilson) June 14, 2014

I feel very strongly that seeds should not be as large as they are these days and they should not be used to fund anything other than building product and finding product market fit.

It is possible to raise a large seed that, in theory, could fund all of that, plus a lot more. And all entrepreneurs are encouraged and interested in taking as much capital as they can given the dilution that they can stomach.

But I’m old school. I think of building a startup and funding it as walking up a flight of stairs. My partner Albert prefers the videogame (leveling up) analogy. Both work. I will stick with stairs.

The first step you need to climb is building a product, getting it into the market, and finding product market fit. I think that’s what seed financing should be used for.

The second step you need to climb is to hire a small team that can help you operate and grow the business you have now birthed by virtue of finding product market fit. That is what Series A money is for.

The third step you need to climb is to scale that team and ramp revenues and take the market. That is what Series B money is for.

The fourth step you need to climb is to get to profitability so that your cash flow after all expenses can sustain and grow the business. That is what Series C is for.

The fifth step is generating liquidity for you, your team, and your investors. That is what the IPO or the Secondary is for.

That is a very simple view of the world. Very few companies will walk up the stairs easily and hit each one perfectly. Shit happens. And we all know that and can deal with that.

But I will tell you that the companies that have performed best in all the portfolios I’ve been involved with over the years have climbed those stairs more or less like that.

I don’t think its a good idea to jump over the first three steps and land on the fourth even if you have the legs (and funds) to do that. It is risky. If you don’t land it right, you can slip and fall. And its hard to get up if you do that.

Brian Watson spent a little more than two years at USV and yesterday was his last day. He’s moving on to an operating role in a fast growing company that will remain nameless until Brian decides to tell that part of his story (soon). We have a two year rotational analyst program at USV that has produced an incredible alumni class and Brian is now a member of that illustrious group. He has a very bright future ahead of him.

Brian took the time to write a post on the things he learned at USV. I kidded him yesterday that it could have been a tweet storm because it’s chock full of 140ish character lessons learned. It’s a great collection of insights and I would encourage everyone to read it.

Our analyst program is a two way street. We teach our analyst things and they teach us things. Brian has taught me a lot. He was never afraid to walk into my office and say “we aren’t paying attention to this and we should” and he did that a lot.

I am a pretty directed person in the office and I am sure I put off a “don’t bother me” vibe. Brian ignored that and I appreciate it.

Here are a few of the things that Brian taught me in no particular order:

– Photos are the killer content type on mobile. Quick to consume like text, but easier to produce on a phone.

– Pay attention to what Apple does. It is more important than you think.

– Tech is fashion as much as you don’t want to admit it.

– If you insist on using everything we invest in, we will miss important things (Tinder).

I would also like to thank Brian for introducing me to Isaiah Rashad and many other great musicians. Brian’s soundcloud likes are here.

I am proud of many things about USV, and Brian noted a bunch of them in his post, but the thing I am most proud of is the people that collectively make up USV, past and present. Brian is a great representation of that and I wish him well.

I am making some comments on Blended Learning tomorrow at the Forbes 400 Philanthropy Summit. My goal in doing this is to excite education philanthropists about the potential of Blended Learning to reshape our K-12 classrooms and improve learning outcomes in them.

For those of you who are not familiar with Blended Learning, it is a growing movement in K-12 education in the US and around the world. Some conflate Blended Learning, Online Learning, and Flipped Classrooms. They are related but they are not the same.

Blended Learning, at its core, is a repudiation of the one size fits all model of K-12 education that has been the standard model in the US for at least the last century. Blended Learning uses a combination of classroom redesign, schedule redesign, online learning, peer learning, and tutoring to delivery a personalized learning experience to each and every student.

In its simplest form, I like to think of Blended Learning as a restructuring of the teacher’s role from being the broadcaster at the front of the room to the person who creates the “aha moments” for the student, often in one on one or small group settings. Blended Learning would not be scalable without technology but it is not a technology centric approach to education. It recognizes that we need teachers more than ever in our K-12 system and attempts to leverage teachers for what they are best at and uses technology and process redesign to free the teachers up from the work that can be done in other ways (like content delivery and evaluation). It gets the teachers teaching more. As Michael Horn of the Clayton Christensen Institute says in this Forbes column:

the real insight behind what it is doing is that it is not about the technology first and foremost. It’s about the learning model itself, and technology then acts in service of that model

I am sure there are people in the AVC community that know more about Blended Learning than I do and I would welcome suggestions on case studies, examples, papers, books, and other resources I should know about as I prepare to advise the wealthiest people in the world how to spend their money. Please leave those thoughts and suggestions in the comments.

That said, I have been doing my homework and reading up on Blended Learning. Here are some links I found valuable.

Clayton Christensen Institute’s Blended Learning Resources

A video on Rocketship Charter School’s approach to Blended Learning

A Foundation Strategy Group whitepaper on Summit San Jose’s High School Math program

A New Classrooms web page where they show how they redesign classrooms for Blended Learning

Kahn Academy Course on Blended Learning

A blog post on Summit’s Personalized Learning Software

A Virtual Tour (video) Of Acton Academy

A Forbes article on Teach To One, a Blended Learning program for middle school math

A Columbia Teachers College whitepaper on Teach To One

When people think of Kickstarter, they tend to think of the Pebble Watch, or Veronica Mars, or Double Fine Adventure. These were all huge projects that raised millions and got a ton of press attention. And yet those projects are the minority of what happens on Kickstarter. The heart and soul and center of gravity of Kickstarter are projects that raise $5,000 to do a book, $10,000 to do public art project, or $15,000 to make a film.

I backed such a project this week. It’s called Crazy Glue and its a film project by a friend of our family Raella Rothman. She is doing a visual treatment of the Etgar Keret short story, Crazy Glue.

Raella has hand drawn all of the scenes in the story and actors will play them out in front of the drawings on a green screen. My daughter Jessica is helping Raella by laying out the camera angles.

She needs $6,000 to make this film and already has $3,200. But she’s running out of time. The project closes on Tuesday. The video is below. If you are so inclined, you can back the project here.

My favorite talks are between interesting people who know each other well. This talk is one of those. Joi and Reid have been friends for as long as I’ve known them, which is over a decade.

Reid is the founder and Chairman of LinkedIn and a leading VC with Greylock. Joi is the Director of the MIT Media Lab and formerly the Director of Creative Commons.

Thanks to Tyrone who sent this one to me earlier this week.

If you did a topic analysis on AVC over the past 10+ years that I’ve been blogging, I suspect patent reform would rate highly. I’ve been advocating for eliminating software patents and cutting back patent protection broadly as loudly and frequently as I can. I believe that sharing intellectual property will lead to way more innovation than hoarding and protecting it. I’ve seen a huge amount of pain and agony inflicted on innovative companies by trolls and “inventors” who never did anything other than write their ideas down on paper. Having ideas is not innovation. Making something new and different and putting it into the market is innovation.

So it was with incredible joy that I read these words by Elon Musk, founder and CEO of Tesla Motors and possibly the most innovative entrepreneur in the world right now.

Yesterday, there was a wall of Tesla patents in the lobby of our Palo Alto headquarters. That is no longer the case. They have been removed, in the spirit of the open source movement, for the advancement of electric vehicle technology.

Elon’s post is a short and powerful statement in favor of the idea that innovation comes from a movement and that innovative companies should lead those movements by sharing their intellectual property, not hoarding it.

What is most significant to me is that this is not coming from a software company. It has become generally recognized that software companies are harmed not helped by patent laws. But this is coming from an automobile company. The most innovative automobile company in the world right now. For such a company to say to the world “come compete with me and you can use my intellectual property to do so” is a huge deal. I hope everyone who has a hand in the patent system thinks long and hard about this. We may have reached a turning point in the conversation about patents and intellectual property. At least I sure hope so. Thank you Elon.

So this week we saw the first time since the 19th century that a House leader lost in a primary. Some will attribute this to Cantor’s support of immigration reform. Some will see this as the ascendancy of the Tea Party on the right. I suppose both of those are true.

But I think we are seeing something else. Gerrymandering is coming home to roost.

We have turned our electoral maps into something that look like a warped jigsaw puzzle and we have districts where only Republicans can win and we have districts where only Democrats can win.

This leads to a situation where the more moderate candidate in a primary is vulnerable and the more extreme candidate is at an advantage. And we see this effect play out in the House Of Representatives.

Right now, this is more of an issue for the Republicans, where they are being driven more and more to the right every day. And that may well keep them in control of the House for a long time, but may also keep them out of the White House just as long. Because extremist positions help win primaries and primary winners take the general election in a gerrymandered district. But national elections, like the Presidential election are not won on the extremes.

This all leads to gridlock and posturing and a federal government that is more political than practical. Which is a bad thing in the long run.