Posts from February 2016

Feature Friday: Paying With Your Phone

The other day I went to Whole Foods on the way home from yoga. It was around 7pm and the store was packed. I bought a whole bunch of stuff and when I got to checkout, I realized I did not have my “wallet” on me. I used quotes around “wallet” because those who know me know that I don’t carry a wallet. I just carry a bunch of cards held together with one of my daughter’s hair bands.

Anyway, I kind of flipped out thinking that I had just wasted a half hour shopping for stuff that I could not pay for. But then I thought about my phone. I asked the cashier if Whole Foods took Apple Pay (I”m on an iPhone right now), and she said “yes.” So she rang me up, I held my phone over the card swipe device, and I was out of there in about one minute. She told me it is actually easier for her to check a person out on their phone than via a card swipe.

You can do the same with an Android Phone with Android Pay. So both major mobile operating systems are now a substitute for carrying around a bunch of cards held together with a hair band.

I don’t think I am going to stop carrying around my cards anytime soon because not every store accepts Apple Pay and Android Pay. The very next morning I asked the barista at Blue Bottle if I could check out on their Square device with Apple Pay and she said it wouldn’t work. I found that a bit strange. I would have expected that Square would support both Apple Pay and Android Pay. But I guess they do not.

Which leads me to a feature request for Foursquare. They should start collecting information on their venues’ payment systems. Collecting information on Apple Pay and Android Pay support would be a great start. Venmo, Square Cash and Bitcoin might also be relevant in the future, who knows? Those of us who have sworn off cash and want to swear off cards too just need to know these things.

#hacking finance

Orphaned Investments

There are two intertwined things that entrepreneurs and their companies get from VCs – money and attention. You need both. And they feed on each other. Attention begets more money if necessary. And more money is usually necessary. Everyone always underestimates how much money a startup will require to get to breakeven and how long it will take. That includes the VCs. And we should know better. But entrepreneurs are even more guilty of seeing the light at the end of the tunnel when it is actually a train coming.

Which brings me to the subject of orphaned investments. Of all the bad things that VCs do on a regular basis, and that list is long, orphaning their investments is at the top of my list of bad behavior. I have never done it. I’ve wanted to. Trust me. I dream of doing it. But I won’t.

And the reason I won’t do it is that I have lived with the costs. I have sat on boards where two or three of the seats are vacant at every meeting. I have put together rounds where two or three of the syndicate members won’t participate. I have sat with an entrepreneur and explained that life is not fair and it is what you do after you realize it that really matters.

Orphaning an investment is when a VC firm decides that it doesn’t really care about an investment any more and stops paying attention. The primary cause is when a partner leaves a firm and nobody picks up coverage of his or her investments. The VC firm says that “so and so” is covering the investment now. Yeah, if you call reading an occasional email “covering.” But it can also happen when a VC loses interest in an investment they made and causes their firm to lose interest as well. It’s easy to not care about an investment if your partner who made it doesn’t care anymore.

And this brings me back to the link between attention and money. If you aren’t getting attention from a VC, you aren’t going to get money from that VC either. When a VC writes off an investment, either emotionally or literally on their schedule of investments, they are closing their wallet to it too. This rule works in bull markets and bear markets. But it is more painful for entrepreneurs in bear markets.

So how do you avoid being orphaned? Like most things, it comes down to picking your partners carefully. Ask around. Find out how they have acted in tough situations. Find out how solid the VC’s position is in their firm. You need to reference both the partner and the firm. The person is important but if they leave you will find out a lot about the firm.

This is the kind of post that after I write it, I get a ton of inbound email saying “you are talking about this company”, “you are talking about this VC”, “you are talking about this VC firm.” So I will say right now that this post is not about anybody, any firm, or any investment. I have been thinking about writing this post for months. I have nobody in mind right now. Other than entrepreneurs and their companies out there that are orphaned, or are going to be orphaned.

You can survive being orphaned. But it will require rebuilding your investor syndicate, it will require the other VCs involved to increase their support and attention, and it will require you to forget about life being fair and get on with it. Getting orphaned is not a time for feeling sorry for yourself. It is a time for doing something about it.

#entrepreneurship#VC & Technology

End To End Encryption

I’ve been trying to figure out what I think about a bunch of things that keep cropping up. Yesterday it was ad blocking. Today it is end to end encryption. This community is really helpful to me. It is like having another set of colleagues to bounce ideas off of. So thank you for that.

Tim Cook wrote a public letter to Apple’s customers yesterday explaining his position on the San Bernadino shooter case.

He correctly states that “This moment calls for public discussion” and so hopefully that’s what we are going to do. I’d like to see our Presidential candidates start talking more about this too. It is one of the single most important issues that our society faces in the coming years.

He goes on to say that:

For many years, we have used encryption to protect our customers’ personal data because we believe it’s the only way to keep their information safe. We have even put that data out of our own reach, because we believe the contents of your iPhone are none of our business.

That is not an open and shut case to me.

Of course I’d like the contents of my iPhone to be out of reach of everyone other than me. But if that means the contents of the iPhones of child pornographers, sex slaverunners, narco gangsters, terrorists, and a host of other bad people are “none of our business” then that gives me pause.

I don’t think we can have it both ways. We have to choose one way or the other.

My partner Albert has written publicly on this issue and he comes out in favor of being public with our data and not going down a crypto “rat hole”. Here are some of his relevant posts on the topic:

Sept 2013

Jan 2014

Aug 2015

But many of the other folks at USV feel very differently and are more supportive of an end to end encryption world.

I lean in Albert’s direction. But I also see logic in the arguments that Tim Cook makes against opening up a back door to the iPhone.

So I am struggling with this issue this morning, and I imagine many others are too.

So let’s talk about it. What is your take on end to end encryption?

#crypto#policy

Ad Blockers

I’ve been thinking a lot about ad blockers. I have always resisted using an ad blocker on the view that I value the web and mobile services I use and they need to make money somehow.

But there is a view that ads are unwanted and by opting out of them, you are forcing web and mobile services to come up with a better business model. Of course, I also wonder how many people that use an ad blocker would come out of pocket a couple bucks a month to pay for an ad-free version of the services they use. Pandora has had an ad-free version of its music service for years and I believe (not sure) that only about 5% of its users opt for that.

The idea of taking the business model decision out of the service’s hands and putting it into the user’s hands is interesting. If an ad blocker came with a micro-payments service that automatically paid the web or mobile service the same average revenue per user (ARPU) it was making via ads, that would be cool. That is quite possible with bitcoin and I am expecting we will see something like that emerge in the coming years.

I also think we will see browsers and possibly even mobile phones come with ad blockers built in. Would you swap browsers to get built in ad blocking? Would you swap mobile phones to get built in ad blockers?

One thing is for sure, ad blocking is not going away. If anything, it is growing appreciably.

So, let’s end this with a poll? Do you use an ad blocker, and if so, where?

#mobile#Web/Tech

The Power Of Civil And Intelligent Debate To Make Us All Better

One of the things I cherish about the AVC community is the civil and intelligent debate that goes on here. It has made me crystalize my thinking in ways that would not have happened without it. I was reminded of that when I read Ruth Bader Ginsburg’s comments on Antonin Scalia, in particular this part:

We disagreed now and then, but when I wrote for the Court and received a Scalia dissent, the opinion ultimately released was notably better than my initial circulation. Justice Scalia nailed all the weak spots—the “applesauce” and “argle bargle”—and gave me just what I needed to strengthen the majority opinion.

Debate and dissent are critical. If you can’t cite the opposing point of view on an issue, you may not have thought it through as well as you should.

When I think through all of our investment decisions at USV, it is the ones that we breezed through and got to an answer quickly where we made the biggest mistakes. Some of our best investment decisions started out with a strong dissenter or two, often me. I remember my indignation at the idea that we would invest in a search engine (duckduckgo). But others convinced me that I was wrong and that has turned out incredibly well for us.

Maybe the most important part of the title to this post is the word civil. Without civility (and respect), it is hard to have intelligent debate. Respecting those with opposing views, working to understand them, and listening closely to them is the key. Even if they don’t change your mind, they can reshape how you discuss and present your views. And that can make all the difference in the world.

#life lessons

Bitcoin Is Having An Election

Brian Armstrong, CEO of our portfolio company Coinbase, published this deck on Friday.

In the deck, Brian argues that the current debate over Bitcoin scaling is an “election” not a “split.”

There is certainly a raging debate in the bitcoin community about how to scale Bitcoin and the value of decentralization versus scalability. That debate has been going on for quite a while and may continue to go on for much longer. But one way or another, Bitcoin will eventually figure out how to scale. The process may be messy, but so is the process of electing a President. That’s one of the main points Brian makes in his deck.

Another important point Brian makes is the need for competition in core development. Since the beginning of Bitcoin, the development of Bitcoin’s core software has been done by a small group of developers who have come to be known as Bitcoin Core. That has led to a dependence that is not entirely healthy. Brian makes the comparison to web browsers where there are four competing browsers, all with more than 10% market share and none with more than 50% market share. Each browser development team competes to bring new technologies to market, some of which eventually get adopted by all of them. And consumers have the choice of which ones to use. That is a much healthier market architecture for sure.

For me, this scaling debate is not really about Core vs Classic or XT or any other version of the core protocol. I suspect in ten years none of them will be used. Much like nobody uses the Netscape browser anymore. This debate is about whether we want a truly diverse and distributed developer ecosystem building, innovating, and maintaining the software at the core of Bitcoin. And I think the answer to that question has to be yes. It’s just a question of how we get there.

#blockchain#hacking finance

23 And Me

A month or two ago our daughter Jessica asked us to get 23andMe kits and get our genes sequenced. Jessica wants to add some information from our results to hers so she can better understand her own genetic makeup. So the Gotham Gal and I did it a few weeks ago and we are now awaiting the results.

The 23andMe process requires that you set up a profile on their web service and answer some questions about yourself before submitting the saliva sample for processing. If you wish, you can give them a full health care profile which is almost exactly identical to the interview a new doctor will give you on your first visit (do you/did you smoke, do you/did you drink, are your parents alive, are they healthy, are you allergic to this and that, etc, etc). I went through the entire process and shared all of my medical history with 23andMe in great detail.

So now 23andMe will have a full medical history/profile of me plus my genetic makeup. That’s pretty cool.

I have some suggestions for them as a user.

First, I wish that I could connect my profile on 23andMe with Jessica’s profile on 23andMe as her father. And I wish that I could connect my profile to the Gotham Gal as her husband. In summary, I would like for us to build a family tree on their service so that the work Jessica wants to do can be done automatically by their software. That seems like an obvious thing to do in a service like 23andMe, but I looked around pretty hard and could not figure out how to do that.

Second, I would like to be able to authorize third party services (starting with my doctor’s Patient Fusion service) to access all of this genetic and medical information I have stored at 23andMe. I found the 23andMe API so that’s a good thing. But I could not find a marketplace of third party apps that connect to 23andMe via its API. That would be really useful.

Another thing I would like to be able to do is sync my 23andMe data with my mom’s genealogy data that she keeps on Ancestry.com. I believe she has some basic genetic information there on herself. That would inform my profile in the same way that my data informs Jessica’s profile.

The bottom line for me is that this data (genetic information and medical history) is really powerful stuff. It should not be held in silos. Users should have the power to move it around, connect it up, and share it with their medical providers, family members, and others who can benefit from this data.

This is a big part of our thesis in health care. Users are starting to get control of their own medical data and decide how it will be used and by whom. That will lead to better outcomes for everyone. I am very excited by the potential of what can happen when this is really happening at scale. And that feels like it is right around the corner now.

If you want to get a 23andMe kit, you can do that here.

#hacking healthcare

When the going gets tough, the tough get going

It sure feels like the long awaited headwinds have arrived and the tailwinds are behind us for now. A friend sent me this chart today.

You could create a similar chart out of many tech sectors right now but SaaS is as good of an indicator of what’s happening out there as any.

I welcome this new environment. You might think “of course you do, you can buy things less expensively” but I would remind you that USV has a portfolio of investments that are unrealized at this point and subject to a chart like that.

I think any benefits we might get from a better buying environment are negated by the impact on our current positions.

The real reason I welcome the tougher environment is that it will make all of us better. We will have to make better decisions.  The market won’t bail us out. We will have to earn our returns instead of being handed them.

And I’m not just talking about investors. I’m talking about everyone working in tech startups. The going is getting tougher. Time for the tough to get going.

#entrepreneurship#management#VC & Technology