Posts from January 2016

Global Venture Capital Distribution

Richard Florida published some stats on the distribution of global venture capital investment last week. His work focused on 2012 numbers so the data is a bit dated, but I am sure it is still directionally correct.

This map summarizes his findings:

global VC investment

The bay area numbers are stunning. SF proper and the broader bay area make up 25% of the global venture capital investment activity (~$10bn out of $42bn).

SF, Boston, NYC, and LA are the top four (or five if you count SF and the bay area as two different locations).

London and Beijing crack the top ten. Ten of the top twenty cities are outside of the US. Berlin, a city that USV invests a lot in, was not in the top twenty in 2012 but I bet it is now.

The most interesting thing about Richard’s data are his conclusions about “dense urban cities.” He writes:

The upshot is this: While some smaller places, mainly in the U.S., do well on a per capita basis, venture capital increasingly flows to large global cities, with all their density and dynamism. The leading centers remain the Bay Area and the Boston-New York-Washington Corridor, while a number of global cities outside of the U.S. have become significant centers for venture capital-backed high-tech startups: London, Paris, and Moscow in Europe; Toronto in Canada; Beijing and Shanghai in China; and Mumbai and Bangalore in India. Across the world, the top 10 metros account for more than half of global venture investment, the top 20 metros account for almost two-thirds, and the top 50 account for more than 90 percent. Ultimately, global venture investment ishighly uneven and spiky, concentrated in a small number of leading cities and metros around the world.

Although venture capital investment has certainly “gone global” by spreading to places like China and India, the dominant centers remain large U.S. cities that combine density, great universities, and the open-mindedness and tolerance required to attract talent from across the world. While cities like Mumbai, Bangalore, Beijing, and Shanghai have certainly shown their ability to attract venture investment and create start-up ecosystems, their levels of venture capital remain well below that of the Bay Area, New York, and Boston. As of yet, these former cities are hamstrung by their inability to attract the world’s top talent. Outside of the U.S., the places that seem to have the brightest future as start-up hubs are dense, diverse, global cities like London, Toronto, and Paris, which can effectively compete for talent on an international scale.

This uneven or spiky nature of investment and its flow to great cities marks a broader transition away from sprawling suburban campuses, or “nerdistans.” In recent years, innovation and entrepreneurship have returned to the great global cities and dense, diverse urban areas that have long served as fonts of creativity and invention. What once seemed like a shift toward suburban innovation and startup clusters in the late 20th century has proven to be a brief aberration from the long-held connection between density and innovation.

I would add one more thing to Richard’s analysis. Transportation convenience matters a lot. You can fly direct multiple times a day to and from all of the cities on Richard’s top ten list. Investors value their time and focus it on markets that they can get in and out of easily. I think that has a big impact on where money flows.

But regardless of the reason, I agree with Richard’s conclusion. VC has gone urban. And I think that trend will continue as far as I can see.

Fun Friday: Twitter

I don’t think there is a company we’ve discussed here more than Twitter. And since it is Fun Friday, we are going to talk about it some more.

I tweeted this out yesterday after reading the zillionth blog post claiming to know what is wrong with Twitter and how to fix it. Instead of puking, I tweeted. Ah, the irony of it all.

So let’s get to the discussion. Is the negativity too high right now? Does Twitter know what is wrong and how to fix it?

Full disclosure: We own a lot of Twitter. It is our largest personal holding and a material portion of our net worth.

Is This You?

I caught an early flight out of LAX yesterday morning. I sat next to a woman who slept all the way to SF. I am always jealous of people who can do that. I don’t sleep much on planes.

When we landed in SF and were taxiing to our gate, she woke and checked her phone. She landed on my daily email, read the bit about flying to SF, and turned to me, showed me the AVC email, and said “is this you?” I replied “yes.”

It turns out she works for a startup and knows people who have worked for various USV portfolio companies. And she uses Foursquare.

We had a nice chat, I bought one of her company’s products, I am mulling over the idea of buying another one, and I pitched a BD partnership between her company and one of Gotham Gal’s portfolio companies.

Why am I telling this story? Because it’s good to have a calling card in business and this blog is mine. It pays off all the time. It widens my network constantly. 

I am not saying that everyone should blog. That’s not going to work for most people. But finding some way to connect to the people you should know is huge. It could be public speaking, it could be publishing research, it could be going to conferences all the time. Whatever it is, getting out there and networking and meeting people is the secret to building a big rolodex. And a big rolodex is an incredible asset to have.

Foursquare Trip Tips

One of the things I love about Foursquare is the focus on tips. Not ratings, not reviews, but tips. It’s the power of the positive over the negative. Tips from friends are even better.

So this week, Foursquare (which is a USV portfolio company) rolled out something called Trip Tips. You go to Trip Tips, you say where you are going, and you tweet it out to your followers on Twitter or your friends on Facebook.

I am at LAX, headed to SF today. So I entered San Francisco into Trip Tips, like this:

sf trip tips

And I got these share options:

trip tips URL

I decided to tweet the trip tip out like this:

My SF list is already filling up and the best part is its immediately available on my mobile phone in the Foursquare app lists tab (bottom left):

foursquare trip tips in my list tab

And here is the list as it stands (less than ten mins after my tweet!):

my sf trip tips

Give it a try with a trip you are planning to take soon. It’s a lot of fun.

Let’s Give William A Big Advance

AVC community member William Mougayar is seeking an advance to write two books about the blockchain and business. The first is called The Business Blockchain and the second is called Centerless. Instead of schelpping his work around to the various publishing houses seeking an advance, he’s gone directly to the crowd via Kickstarter. William is seeking an $18,000 advance to write and self publish these two books.

William is also going to syndicate drafts and excerpts of the book on Wattpad. You can follow him on Wattpad and get these writings delivered directly to your phone via the Wattpad app.

As the AVC’ers who hang out in the comments know, William has made himself an expert in the business of the blockchain over the past 2-3 years and is well suited to write these two books. I’ve kicked things off by backing his Kickstarter and I hope others here at AVC will join me in doing that.

The Product Hunt Podcast

I listen to tons of podcasts on SoundCloud. I follow them and they just come into my feed every day and I can listen on my phone in the SoundCloud app. It’s a great experience.

One of the podcasts I like is the Product Hunt Podcast. This weekend I listened to this podcast with Patrick Collison, CEO and co-founder of Stripe.

I enjoyed it and because I’ve been on a call since 5am this morning and don’t have time to write today, I am using this opportunity to post something useful on AVC today.

Get The Strategy Right And The Execution Is Easy

In the mid/late 90s, we had a venture capital firm called Flatiron Partners. Our primary investor was Chase Capital Partners (CCP) and for the first year of our existence we worked out of CCP’s offices in midtown manhattan. I learned a lot from the partners at CCP, they were experienced and disciplined private equity investors. One of the best of the group was Arnie Chavkin and he taught me something that I come back to often. Arnie told me “get the strategy right and the execution is easy.”

Up to that point, about ten years into my venture capital investing experience, I did not have enough appreciation for strategy. I came from the “work hard and surround yourself with smart people and you will succeed” school. That’s how I went about my job and that’s what I looked for in teams to back. But Arnie’s words got my attention. The idea that execution could be easy was tantalizing to me. And it made sense. If everyone knows what the company is trying to do, and what it is explicitly not trying to do, then they can be focused and efficient in their work. It also caused me to look at the companies that I worked with that were working really hard but not succeeding and I could see that many of them were not pursuing an intelligent strategy.

One of my favorite stories about getting the strategy right is TACODA, a company that Brad Burnham and I were angel investors in during the post bubble period in the early 2000s. TACODA made enterprise software for media companies that allowed them to understand their audience and serve more targeted ads to them. TACODA was one of the earliest, if not the first, behavioral targeting companies. TACODA was working extremely hard, with a very gifted and experienced team, and yet four years in, they were struggling to build a business. My partner Brad became obsessed with the strategy and go to market and told Dave Morgan, the founder and CEO, that he was “working too hard and getting nowhere” and encouraged him to rethink his strategy. Ultimately Dave decided to flip the go to market model to an ad network and within a year the business exploded and it sold a few years later to AOL for something like $275mm.

TACODA had the right idea, the right team, the right tech, but not the right strategy. When they fixed that, a ton of good things happened.

So if you are working really hard and have a strong team and aren’t getting where you want to go, take a hard look at your strategy. As Arnie told me, once you get that right the execution will be easy.

Fun Friday: The Culture Caucus Podcast

My friend John Heilemann (Bloomberg Politics, Game Change, etc) and his friend Will Leitch (Deadspin, etc) have launched a podcast called Culture Caucus. They are going to talk about sports, television, film, and culture at large and its intersection with the body politic.

The first episode has two parts. The first part is about the changes in late night television shows, who is rising and who is falling, and how politicians think about going on these shows. I sat through the taping of this part and I found it fascinating. The second part features me talking about tech and Twitter.

It’s a long podcast, almost an hour in total. Here is the first episode. I hope you enjoy it. You can follow Culture Caucus on SoundCloud here.