I posted the discussion my partner Andy and I did at the Upfront Summit last week.
There were other great conversations at the Upfront Summit.
This discussion with Mark Cuban was great. I totally agree with Mark that we need more tech companies to go public and have been saying that publicly for several years.
I backed this journalism project a few days ago and I thought I would highlight it to all of you here today.
Off Assignment is a publication that allows writers to go off assignment and tell the stories they really want to tell.
Here’s a video that explains it in more detail:
We announced an investment in Toronto based Top Hat yesterday. I RT’d my partner Albert‘s post on the investment with this bit:
“We now have five investments there, placing Toronto third as a location in the USV portfolio after New York and San Francisco.” https://t.co/IinjtETAIj
— Fred Wilson (@fredwilson) February 15, 2017
Toronto is a great place for startups. In addition to five investments of ours that are HQ’d there, I know of at least one other USV portfolio company that has much of their engineering team in Toronto. The talent, mindset, and quality of the people in the Toronto/Waterloo tech/startup community is really top notch and we love investing there.
Top Hat is an interesting investment. It’s a bet that interactive learning tools for college classes can be a platform to re-imagine how the college textbook market should work. Here’s is Albert’s post in full about all of that.
Even back when I was in graduate school, I found the price of textbooks to be high and their quality to vary widely. Now that I have children taking college courses, I was shocked to find textbooks that cost over $200 and are still large physical objects that have to be lugged around! The high prices and lack of innovation are the result of a market structure which has become highly concentrated among just a few textbook publishers. That’s why I am excited to announce that USV has led a new round of financing for Toronto-based Top Hat, which last year launched a content marketplace for higher education.
I first met Mike, the founder & CEO of Top Hat, shortly after he had started the company. He told me about his exciting vision for bringing innovation to the higher education market. But then he said he was getting going by replacing Clickers. For starters I didn’t know what those were as they had come after my time in college. Once I figured out what a Clicker was, I admittedly thought going after those was, well, boring. But Mike was right and I was wrong. Starting with classroom engagement turned out to be the perfect basis for establishing a large footprint in higher education. We stayed in touch as Top Hat grew and then last year the team successfully used their user base to launch a content marketplace.
While it is still early there are many positive signs about the potential for the content marketplace that remind us of other successful marketplaces we have invested in over the years such as Etsy and Science Exchange. In addition to individual professors adding content by themselves there are also new behaviors emerging and we are particularly excited about collaboratively developed content. Much work remains to be done but the company is now well funded to execute on that.
Our investment comes from the USV Opportunity Fund, which we set up in part for this type of situation where we have developed a relationship with an entrepreneur over time. Also worth noting is that Toronto continues to impress us with its quality and diversity of companies. We now have five investments there, placing Toronto third as a location in the USV portfolio after New York and San Francisco.
Yesterday, on Valentine’s Day, Etsy invited press to its headquarters in Brooklyn and took the covers off a bunch of things they have been working on for most of last year and will launch shortly. For those that don’t know, USV was one of the first investors in Etsy and I have been on the Board of Etsy for over a decade now.
Here are the details of what they talked about and showed yesterday:
Etsy Studio – This is a brand new marketplace, built from the ground up, to allow makers of craft supplies, large and small, to reach crafters all around the world. Etsy Studio will compete with retail stores like Michaels and others but with ~200x the inventory. A typical retail craft store will carry 30,000 to 40,000 SKUs. Etsy Studio will carry 8mm SKUs at launch.
Etsy also plans to bring the “joy of crafting” to Etsy Studio with its signature design and ease of use, but also with content and projects that connect what you want to make with the supplies you need to make it.
Etsy Studio will launch in April.
Etsy Shop Manager – Over the years Etsy has offered sellers the opportunity to use Etsy tools in a variety of places. They can use them on Etsy.com, they can use them in a craft fair with Etsy’s mobile apps and card reader, they can sell on their own website powered by Pattern, and soon, they can sell on Etsy Studio. And sellers can use Etsy’s advertising services, payment services, and shipping services on most of these sales channels. If you follow this trend, it is clear that Etsy wants to help sellers sell wherever they want to sell. Etsy Shop Manager is an entirely new interface for sellers to manage their business. It puts all of the Etsy seller tools in one place and helps sellers decide which tools and which sales channels to use to grow their business.
There are a bunch of other things Etsy has been building to make all of this work like structured data and search, a new and better way to manage inventory, and the ability to check out with as many items in your basket as you want.
Since I started working with Etsy over ten years ago, they have been committed to a single idea – that there is an emerging economy of creative entrepreneurs who power a personal form of commerce that is better for everyone. Here are some stats that show the power of that idea:
Companies like Etsy don’t come around that often, but when they do, I am drawn to them. They are mission driven and they make things happen that need to happen. It’s very fulfilling to work with companies like this.
My two favorite holidays are Thanksgiving when we are thankful for family and food and Valentine’s Day when we celebrate love and the people we love.
Love is a powerful thing, maybe the most powerful thing. And I am blessed to have a lot of it in my life.
So I hope everyone in AVC land takes time today to be with your loved ones and celebrate the love in your life.
Happy Valentine’s Day
At the Grammy’s last night, Chance The Rapper, one of the night’s big winners, gave props to SoundCloud in his acceptance speech for Best Rap Album:
Chance talked about the importance of artists staying independent and his shoutout to SoundCloud was a well deserved acknowledgement of the power of platforms like SoundCloud in helping artists get discovered independently of the traditional music system and staying there.
Here’s the Best Rap Album of 2016, in case you missed it.
And if you didn’t know, SoundCloud is a USV portfolio company.
Strategy is hard and becomes increasingly important as companies grow and scale.
One thing I advise teams to focus on when they go through a strategy exercise is to identify the things they won’t do.
One way to do this is to make a list of all the things people inside (and outside) the company are encouraging the company to work on.
Then break that list into two lists – the things you will do and the things you won’t do. This should be a group exercise, iterative, and ideally done on a whiteboard or some other similar tool.
The timeline for this list of projects doesn’t matter a lot. It could be for the next year or it could be for the next three to five years.
This exercise identifies the things that are most important versus the things you would like to do but can’t get to right now.
And this process helps solidify the strategy.
I think a company, at least a company that is smaller than 1000 people, should not try to do more than three big things a year. These big things can include a number of smaller things in them. So you might have a list of ten things you want to do this year. If you can organize those ten things into three big focus areas, then that works. If there are literally ten big things you want to do this year, I think that is way too many.
The most successful companies I work with have a clear sense of Mission/Vision>Strategy>Priorities that guides the company quarter to quarter, year to year, and aligns everyone on the team around where the focus is and why.
Saying no to things that are off mission, off strategy, or are not a priority right now is critical to getting this right.
I say this as an investor who has seen his ideas end up on the no list way more often than the yes list. I understand why that is and accept it. I would rather work with a company that knows where it is going and why than one that blindly listens to its investors.
A couple weeks ago my partner Andy and I talked about generational change in a VC firm in a conversation moderated by our longtime investor Lindel Eakman. I blogged a bit about generational change prior to that conversation.
Here is the video of that conversation:
This was a fun twitter exchange yesterday:
@fredwilson agree, but how do they better monetize that influence and impact?
— Scott M (@SouthofAmerica) February 9, 2017
I can’t help but think that competing with Facebook and Google in the online advertising market is an uphill battle for Twitter. They have done a great job at building a $2bn annual advertising business that pays the bills and generates positive cash flow. I know the people who have built this ad business and they are world class.
But given that Twitter’s strength is influence and impact, not page views and clicks, is there a business model that compliments the ad business that Twitter should be leaning into?
As always on fun fridays, the action will be in the comments. So let’s get this discussion going.
I picked up a bad head cold in SF this week. It’s rainy and cold there and that got the best of me. So I’m running a post from the archives and medicating myself instead of writing today.
I hate to see employees leave our portfolio companies for many reasons, among them the loss of continuity and camaraderie and the knowledge of how hard everyone will have to work to replace them. Many people see churn of employees in and out of companies as a given and build a recruiting machine to deal with this reality. While building a recruiting machine is necessary in any case, I prefer to see our portfolio companies focus on building retention into their mission and culture and reducing churn as much as humanly possible.
There isn’t one secret method to retain employees but there are a few things that make a big difference.
1) Communication – the single greatest contributor to low morale is lack of communication. Employees need to know where the company is headed, what they can do to help get there, and why. You cannot overcommunicate with your team. Best practices include frequent one on ones between the managers and their team members, regular (weekly?) all hands meetings, quick standup meetings on a regular basis for the teams to communicate with each other, and a CEO who is out and about and available and not stuck in his/her office.
2) Getting the hiring process right – a lot of churn results from bad hiring. The employee is asked to leave because they are not up to the job. Or the employee leaves on their own because they don’t enjoy the job. Either way, this was a screwup on the company’s part. They got the hiring process wrong. The last MBA Mondays post(two weeks ago) was about best hiring practices. Focus on getting those right and you will make less hiring mistakes and experience less churn.
3) Culture and Fit – Employees leave because they don’t feel like they fit in. Maybe they don’t. Or maybe they just don’t know that they do fit in. Another post in this series on People was about Culture and Fit. You must spend time working on culture, hiring for it, and creating an environment that people are happy working in. This is important stuff.
4) Promote from within. Create a career path for your most talented people. The best people are driven. They want to do more, develop, and earn more. If you are always hiring management from outside of the company, people will get the message that they need to leave to move up. Don’t make that mistake. Hire from within whenever possible. Take that chance on the talented person who you think is great but maybe not yet ready. Work with them to get them ready and then give them the opportunity and then help them succeed in the position. Go outside only when you truly cannot fill the position from within.
5) Assess yourself, your team, and your company. We have discussed various feedback approaches here before. There is a lot of discomfort with annual 360 feedback processes out there. There is a growing movement toward continuous feedback systems. Whatever the process you use, you must give your team the ability to deliver feedback in a safe way and get feedback that they can internalize and act upon. You must tie feedback to development goals. Feedback alone will not be enough. Build a culture where people are allowed to make mistakes, get feedback, and grow from them. I have seen this approach work many times. It helps build companies where churn rates are extremely low.
6) Pay your team well. The startup world is full of companies where the cash compensation levels are lower than market. This results from the view that the big equity grants people get when they join more than makes up for it. There are a few problems with this point of view. First, the big option grants are usually limited to the first five or ten employees and the big management positions. And second, people can’t use options to pay their rent/mortgage, send their kids to school, and go on a summer vacation with the family. Figure out what “market salaries” are for all the positions in your company and always be sure you are paying “market” or ideally above market for your employees. And review your team’s compensation regularly and give out raises regularly. This stuff matters a lot. Most everyone is financially motivated at some level and if you don’t show an interest in your team’s compensation, they won’t share an interest in yours (which is tied to the success of your company).
I believe these six things (communicate, hire well, culture matters, career paths, assessment, and compensation) are the key to retention. You must focus on all of them. Just doing one of them well will not help. Measure your employee churn and see if you can improve it over time. A healthy company doesn’t churn more than five or ten percent of their employees every year. And you need to be healthy to succeed over the long run.
