Posts from January 2017

Two years ago, on January 30th, 2015, Dronebase founder Dan Burton flew a DJI Phantom 2 Vision+ drone over a quarry in southern Orange County California and captured a TNT explosion in the quarry that turned big rocks into little rocks.

Dan was paid $300 by the quarry owner to do the mission.

And thus, our portfolio company Dronebase was created. USV invested a few months later as Dan and his partner Eli were doing Y Combinator.

In a remarkable coincidence, two years later to the day, a drone pilot in Boston named Michael K completed Dronebase’s 10,000th mission, flying a DJI Inspire One Pro drone over a construction site.

The first 100 missions took eight months to complete, the next 900 flights took nine months to complete, and the last 9,000 flights took 10 months to complete. As I told Dan over email yesterday, I am expecting the 100,000th flight before year end. He groaned. Growing at log scale is hard. But that’s what they are doing.

The key insight that Dan had was that a network of freelance drone pilots all over the world working on a platform designed to to get drone pilots working within hours of a job coming in would drive that kind of scale. And it has. In addition, Dronebase is committed to delivering commercial grade drone flights at prices that customers can afford.

If you are paying more than a few hundred dollars for a commercial grade drone mission, you are paying too much. By driving down the cost of drone missions, Dronebase has brought a lot of work to its pilots an has paid them over $1mm over the last two years and that number is now scaling rapidly. Driving down the cost of drone missions also opens up applications that are not cost effective at higher prices. And that scales the size of the available market for drones.

It’s the classic story of the power of networks. Dronebase is a network of drone pilots doing commercial missions all over the world. And I’m convinced that is the winning model in the commercial drone services sector.

Dan wrote a really great post yesterday celebrating their 10,000th mission with a lot of interesting details on the first and 10,000th mission. You can read it here.

Congratulations to Dronebase and all of its pilots on completing 10,000 missions. I’m looking forward to writing about the 100,000th flight soon.

Reposted from Feld.com

Sunday morning Fred Wilson put up the following blog post: A $20,000 Match Offer On ACLU Donations Today. Joanne Wilson put up a similar post titled A $20,000 Match Offer On ACLU Donations Today on her blog.

It came after a flurry of emails that started with one from me at 7:41am.

“Inspired by Chris Sacca, Amy and I are considering doing an ACLU grant with a 100% match”

Joanne, Fred, Amy, and I were all distressed by Trump’s executive order on immigration, which Fred wrote about in Make America Hate Again and I wrote in Unsettled and Disgusted. We had seen the ACLU already jump into action so we collectively decided to do something about it by supporting it.

Fred’s partner Albert Wenger and his wife Susan Danzinger had already started a match for $15,000 so we (Fred, Joanne, me, and Amy) agreed that when they maxed out they’d hand the ball to us to match for another $20,000.

Jet lag then ate my soul and I went to sleep for a few hours. When I woke up, Amy said “we did something good while you were asleep.” I had well over 100 tweets with ACLU receipts, Fred had started a spreadsheet of all the matching gifts, and we had blown through our $20,000 match. By the end of the day, we were over $90,000 of matches with more coming in so we stopped counting and, with our $20,000, were easily over $100,000 to the ACLU in one day, which started with Fred’s blog post.

By the end of the day it had picked up enough speed to become a TechCrunch article: Some tech executives are matching ACLU donations amid immigration ban protests.

We know more executive orders on immigration are expected. Bloomberg is hinting Trump’s Next Move on Immigration to Hit Closer to Home for Tech. Regardless of how this plays out, I’m hopeful that Congress will step up and do their job at this point, rather than just let executive orders slide by, create chaos, and get litigated in court. Remember – Congress makes the laws and the President is supposed to execute the instructions of Congress.

In the mean time, thanks to everyone who contributed to the ACLU match yesterday. We helped the ACLU raise $24 million since Saturday morning. For perspective, the ACLU typically raises a total of $4 million in a year. Amy and I have been long time ACLU supporters and I expect they will have an outsized and important role in our democracy in the next four years.

Brad, Amy, Joanne, and Fred have been inspired by Chris’s $150,000 match offer yesterday and Albert and Susan’s $15,000 match offer today. So we are joining together (the four of us) and joining the movement they started and doing a $20,000 match offer on ACLU donations today.

And in the interest of keeping this thing we’ve got going, we are committing to run a $20,000 match offer for ACLU donations every month of 2017 on the first of the month.

Our hope is that by raising almost $250,000 during 2017, we will help the ACLU continue the legal and moral fight against the Trump Administration’s effort to institutionalize and legalize hatred, racism, and bigotry.

To participate in this match offer, just send us a receipt of your ACLU donation today. You can do that by tweeting your ACLU donation receipt to any one of us:

Brad

Amy

Joanne

Fred

Update: We maxed out on our match after about an hour this morning. Patrick Collison picked it up and will match until he maxes out. You can tweet your receipts to him here. Thanks to everyone who participated. It felt good, really good, to do something like this.

I’ve kept my mouth shut about President Trump since he was elected in early November.

I figured there were other things to focus on where I could have an impact and so I did that.

But friday’s executive orders are too much for me.

Trump is institutionalizing hatred, bigotry, and racism with these orders.

They have absolutely nothing to do with policy.

They were not even vetted by the relevant governmental organizations who will have to implement them.

Make no mistake about this. These orders are not policy. They are politics. They are the politics of hate.

And we must rise up as a country against them.

The ACLU has already succeeded in obtaining a stay of deportations of immigrants and refugees trapped in airports and I suspect and hope that they are just getting started.

So I’ve just become a member of the ACLU. I’ve never been tempted to join this organization before, but Trump pushed me there and I’m glad he did.

Every month, I will be donating a nice chunk of change to the ACLU so they can fight the institutionalized hatred, racism, and bigotry that this administration is foisting upon us.

I hope you will join me in taking this action. You can do so here.

And I’m done with keeping my mouth shut too.

Update: Brad, Amy, Joanne and I are doing at $20,000 ACLU match offer today and plan to do another one every month for all of 2017. You can read about the details of the match here.

Second Update: Our $20,000 ACLU match offer filled up in about an hour. So Patrick Collison picked it up and he’s doing a match offer now. You can tweet your ACLU receipt to Patrick here until he maxes out.

We have had fintech and now we have femtech.

Ida Tin, founder/CEO of our portfolio company Clue, explains it in less than two minutes.

USV has several femtech investments and we would love to make even more.

Livestreaming is everywhere. Twitch, YouNow, YouTube, Periscope, Snapchat, Facebook, and many many other services allow you to broadcast what you are doing to the world and let anyone and everyone watch it.

But how do you discover the best live content when there is so much of it and the streams can last hours, if not longer?

Enter our portfolio company Oddshot.tv.

Oddshot allows anyone who wants to capture the last 40 seconds of what they are watching on their computer and share it with the world. Oddshot recently released a desktop app for Windows that makes this super easy. They also have browser plugings for Chrome and Firefox and mobile apps for iOS and Android. You can get these downloads here.

The front page of Oddshot.tv is like Reddit for livestreams. You can quickly scan what has happened and watch the clip. If you like the clip, you can go watch the stream or follow the streamer.

If you are into livestreaming or want to get into it, check out Oddshot.tv.

I saw this tweet in my notifications timeline when I looked at Twitter this morning, and so I replied with a screenshot.

@teawaterwire pic.twitter.com/ESS9fK9mEi

— Fred Wilson (@fredwilson) January 26, 2017

One of the things I am spending a lot of time on these days is Board leadership. That usually means Board Chair, but can also mean “Lead Director.” If you have a Board of five or more and are struggling with managing your Board, get a Board Chair or a Lead Director asap. Here’s a post from the archives about this.

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Continuing our series on The Board Of Directors, this week I’ll talk about the role of the Board Chair.

The Board Chair runs the Board Of Directors. He or she is a Board member with the same roles and responsibilities as the other Board members. But in addition, the Board Chair is responsible for making sure the Board is doing its job. The Board Chair should make sure the Board is meeting on a regular basis, the Board Chair should make sure the CEO is getting what he or she needs out of the Board, and the Board Chair should make sure that all Board members are contributing and participating. When there are debates and disagreements, the Board Chair should make sure all opposing points of view are heard and then the Board Chair should push for some resolution.

The Board Chair should be on the nominating committee and should probably run that committee. I do not believe the Board Chair needs to be on the audit and compensation committees, but if they have specific experience that would add value to those committees, it is fine to have them on them. Either way, the Board Chair needs to be on top of the issues that are being dealt with in the committtees and making sure they are operating well.

Small boards (three or less) don’t really need Board Chairs. In many cases the founding CEO will also carry the Chairman title, but in a small Board, it is meaningless. Once the Board size reaches five, the Board Chair role starts to take on some value. At seven and beyond, I believe it is critical to have a Board Chair.

It is common for the founder/CEO to also be the Board Chair. I am not a fan of this. I think the Chair should be an independent director who takes on the role of helping the CEO manage the Board. The CEO runs the business, but it is not ideal for the CEO to also have to run the Board. A Chair who can work closely with the CEO and help them stay in sync with the Board and get value out of a Board is really valuable and CEOs should be eager to have a strong person in that role.

When a founder/CEO decides to transition out of the day to day management but wants to stay closely involved in the business, the Board Chair is an ideal role for them, assuming that they were responsible for recruiting or grooming the new CEO. If the founder is hostile to the new CEO, then this is a horrible idea.

When Boards get really large, like non-profit boards, the Board Chair is even more important. I’ve been on a few non-profit Boards over the years. I don’t really enjoy working in the non-profit world, but I do it from time to time. I have had the opportunity to watch a couple amazing Board Chairs at work and I’ve learned a ton from them. The partnership between Charles Best and Board Chair Peter Bloom at Donors Choose is a thing of beauty. Same with the partnership between John Sexton and Board Chair Marty Lipton at NYU. For profit CEOs and Board Chairs could learn a lot from watching these masters at work.

When it works, the Board Chair role is hugely impactful. It allows the CEO to spend their time and attention running the business and not worrying about the Board. The Chair will manage the Board and when the CEO has issues with the Board, the Chair will be clear, crisp, and quick with that feedback and will help the CEO address those issues.

Many CEOs find working with a large group of people who have oversight over their work and performance challenging. It makes sense. Who has ever worked for six or more people at the same time. How do you know where you stand with all of them? How do you know what they want you to do? How do you know what is on their minds? The Board Chair’s job is to give the CEO a single person to focus on in dealing with these issues.

The Board Chair job is hard, particularly when the company is in crisis, but it is also extremely gratifying. It is an ideal job for entrepreneurs and CEOs to take on when they are done starting and running companies and want to move into something a little less demanding. I’m always on the lookout for people who can take on this role in our portfolio companies. The good ones are few and far between and worth their weight in gold.

I’m skiing this week. It’s snowed two feet in the last two days. So we will continue to dip into the archives until I come up for air, later this week.

I saw this tweet exchange yesterday about my employee equity post.

So I’ve reposted it here below.

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The most common comment in this long and complicated MBA Mondays series on Employee Equity is the question of how much equity should you grant when you make a hire. I am going to try to address that question in this post.

First, a caveat. For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula. Getting someone to join your dream before it is much of anything is an art not a science. And the amount of equity you need to grant to accomplish these hires is also an art and most certainly not a science. However, a rule of thumb for those first few hires is that you will be granting them in terms of points of equity (ie 1%, 2%, 5%, 10%). To be clear, these are hires we are talking about, not co-founders. Co-founders are an entirely different discussion and I am not talking about them in this post.

Once you have assembled a core team that is operating the business, you need to move from art to science in terms of granting employee equity. And most importantly you need to move away from points of equity to the dollar value of equity. Giving out equity in terms of points is very expensive and you need to move away from it as soon as it is reasonable to do so.

We have developed a formula that we like to use for this purpose. I got this formula from a big compensation consulting firm. We hired them to advise a company I was on the board of that was going public a long time ago. I’ve modified it in a few places to simplify it. But it is based on a common practive in compensation consulting. And it is based on the dollar value of equity.

The first thing you do is you figure out how valuable your company is (we call this “best value”). This is NOT your 409a valuation (we call that “fair value”). This “best value” can be the valuation on the last round of financing. Or it can be a recent offer to buy your company that you turned down. Or it can be the discounted value of future cash flows. Or it can be a public market comp analysis. Whatever approach you use, it should be the value of your company that you would sell or finance your business at right now. Let’s say the number is $25mm. This is an important data point for this effort. The other important data point is the number of fully diluted shares. Let’s say that is 10mm shares outstanding.

The second thing you do is break up your org chart into brackets. There is no bracket  for the CEO and COO. Grants for CEOs and COOs should and will be made by the Board. The first bracket is the senior management team; the CFO, Chief Revenue Officer/VP Sales, Chief Marketing Officer/VP Marketing, Chief Product Officer/VP Product, CTO, VP Eng, Chief People Officer/VP HR, General Counsel, and anyone else on the senior team. The second bracket is Director level managers and key people (engineering and design superstars for sure). The third bracket are employees who are in the key functions like engineering, product, marketing, etc. And the fourth bracket are employees who are not in key functions. This could include reception, clerical employees, etc.

When you have the brackets set up, you put a multiplier next to them. There are no hard and fast rules on multipliers. You can also have many more brackets than four. I am sticking with four brackets to make this post simple. Here are our default brackets:

NOTE: The numbers below are as of 2010. They have moved a lot since then. I am working on an updated set of numbers. The Senior Team numbers have moved the most. I would not recommend using these numbers or you will be below market with your employee equity grants.

Senior Team: 0.5x

Director Level: 0.25x

Key Functions: 0.1x

All Others: 0.05x

Then you multiply the employee’s base salary by the multiplier to get to a dollar value of equity. Let’s say your VP Product is making $175k per year. Then the dollar value of equity you offer them is 0.5 x $175k, which is equal to $87.5k. Let’s say a director level product person is making $125k. Then the dollar value of equity you offer them is 0.25 x $125k which is equal to $31.25k.

Then you divide the dollar value of equity by the “best value” of your business and multiply the result by the number of fully diluted shares outstanding to get the grant amount. We said that the business was worth $25mm and there are 10mm shares outstanding. So the VP Product gets an equity grant of ((87.5k/25mm)  * 10mm) which is 35k shares. And the the director level product person gets an equity grant of ((31.25k/25mm) *10mm) which is 12.5k shares.

Another, possibly simpler, way to do this is to use the current share price. You get that by dividing the best value of your company ($25mm) by the fully diluted shares outstanding (10mm). In this case, it would be $2.50 per share. Then you simply divide the dollar value of equity by the current share price. You’ll get the same numbers and it is easier to explain and understand.

The key thing is to communicate the equity grant in dollar values, not in percentage of the company. Startups should be able to dramatically increase the value of their equity over the four years a stock grant vests. We expect our companies to be able to increase in value three to five times over a four year period. So a grant with a value of $125k could be worth $400k to $600k over the time period it vests. And of course, there is always the possiblilty of a breakout that increases 10x over that time. Talking about grants in dollar values emphasizes that equity aligns interests around increasing the value of the company and makes it tangible to the employees.

When you are doing retention grants, I like to use the same formula but divide the dollar value of the retention grant by two to reflect that they are being made every two years. That means the the unvested equity at the time of the retention grant should be roughly equal to the dollar value of unvested equity at the time of the initial grant.

We have a very sophisticated spreadsheet that Andrew Parker built that lays all of this out for current employees and future hires. We share it with our portfolio companies but I do not want to post it here because it is very complicated and requires someone to hand hold the users. And this blog doesn’t come with end user support.

I hope this methodology makes sense to all of you and helps answer the question of “how much?”. Issuing equity to employees does not have to be an art form, particularly once the company has grown into a real business and is scaling up. Using a methodology, whether it is this one or some other one, is a good practice to promote fairness and rigor in a very important part of the compensation scheme.