Posts from Current Affairs

Conversation with General Keith Alexander

I follow Emily Chang’s Studio 1.0 podcast on SoundCloud. It’s very good.

She recently sat down with Former NSA Director General Keith Alexander to discuss privacy vs. security and why there needs to be more collaboration between Washington and Silicon Valley in the on-going encryption debate.

I enjoyed the conversation and you may too.

A Decade Of Twitter

So Twitter is ten today. I celebrated with this tweet:

I do love Twitter. It is my news feed. Like most people who use Twitter, I mostly use it to consume information. I have never met a web or mobile service that gives me what I need to know better than Twitter.

I think that’s the thing that many people don’t understand about Twitter. They think of Twitter as a social network, like Facebook, where everyone posts and everyone consumes. Twitter is different. It’s a network and it can be social, but at its core, Twitter is a user configurable broadcast network. It has a very different read/post ratio than a classic social network and that’s part of why it is so good as a news feed.

Anyway, here’s to the next ten years Twitter.

The Twitter Contradiction

So everyone around here knows I’m bullish on Twitter and we own a lot of stock. So take all of this in that context please.

I just don’t understand the narrative around Twitter. “It is in trouble. It isn’t growing. It’s time has come and gone. The kids all use Snapchat and Instagram.”

That last part is true, to a degree. But it isn’t as simple as that.

The presumptive Republican nominee for President of the United States has largely conducted his campaign on Twitter and in massive public appearances that feel like rock concerts. He has avoided the traditional media channels and taken his message direct to the people on Twitter. Not on Facebook. Not on Instagram. Not on Snapchat. Not on Pinterest. Not on his website or mobile app. On Twitter.

My brother in law and I watched the best basketball game of the year so far on Saturday night. Steph Curry was unreal. And he won it with a few seconds left in overtime with a bomb from something like 40 feet that everyone knew was going in. And what happened next?

This:

And this:

And this:

Steph’s opponents expressed their appreciation for what he is doing on Twitter in the moment. Not on Facebook. Not on Instagram. Not on Snapchat. Not anywhere else. And you don’t have to be on Twitter to see that. You can see that here and many other places.

Here’s the thing about Twitter. You don’t need to be logged into Twitter to see these tweets. You can see them on Twitter logged out. Or you can see them embedded in other places on web and mobile or on TV and elsewhere. You only need to be logged into Twitter to tweet.

So anyone who is focusing on the logged in monthly active user number is missing something bigger. Twitter is where people who have something to say go to say it. And right now we are witnessing Twitter being used for what is arguably the biggest thing out there. A run for President of the United States.

That is the contradiction of Twitter.

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.

What Happened In 2015

Last year in my What Just Happened post, I said:

the social media phase of the Internet ended

I think we can go further than that now and say that sometime in the past year or two the consumer internet/social/mobile gold rush ended.

Look  at the top 25 apps in the US:

top 25 apps

The top 6 mobile apps and 8 of the top 9 are owned by Facebook and Google. 10 of the top 12 mobile apps are owned by Apple, Facebook, and Google.

There isn’t a single “startup” on that list and the youngest company on that list is Snapchat which is now over four years old.

We are now well into a consolidation phase where the strong are getting stronger and it is harder than ever to build a large consumer user base. It is reminiscent of the late 80s/early 90s after Windows emerged as the dominant desktop environment and Microsoft started to use that dominant market position to move up the stack and take share in all of the important application categories. Apple and Google are doing that now in mobile, along with Facebook which figured out how to be as critical on your phone as your operating system.

I am certain that something will come along, like the Internet did in the mid 90s, to bust up this oligopoly (which is way better than a monopoly). But it is not yet clear what that thing is.

2015 saw some of the candidates for the next big thing underwhelm. VR is having a hard time getting out of the gates. Wearables and IoT have yet to go mainstream. Bitcoin and the Blockchain have yet to give us a killer app. AI/machine learning has great potential but also gives incumbents with large data sets (Facebook and Google) scale advantages over newcomers.

The most exciting things that have happened in tech in 2015 are happening in verticals like transportation, hospitality, education, healthcare, and maybe more than anything else, finance, where the lessons and playbooks of the consumer gold rush are being used with great effectiveness to disrupt incumbents and shake up industries.

The same is true of the enterprise which also had a great year in 2015. Slack, and Dropbox before it, shows how powerful a consumerish approach to the enterprise can be. But there aren’t many broad horizontal plays in the enterprise and verticals seems to be where most of the action was in 2015.

I’m hopeful that 2015 will also go down as the year we buried the Unicorn. The whole notion that getting a billion dollar price tag on your company was something necessary to matter, to be able to recruit, to be able to get press, etc, etc, is worshiping a false god. And we all know what happens to those who do that.

As I look back over 2014 and 2015, I feel like these two years were an inflection point, where the underlying fundamentals of opportunity in tech slowed down but the capital rushing to get invested in tech did not. That resulted in the Unicorn phase, which if it indeed is over, will be followed by an unwinding phase where the capital flows will need to line up more tightly to the opportunity curve.

I’m now moving into “What Will Happen” which is for tomorrow, so I will end this post now by saying goodbye to 2015 and hopefully to much of the nonsense that came with it.

I did not touch on the many important things that happened outside of tech in 2015, like the rise of terrorism in the western world, and the reaction of the body politic to it, particularly here in the US with the 2016 Presidential campaign getting into full swing. That certainly touches the world of tech and will touch it even more in the future. Again, something to talk about tomorrow.

I wish everyone a happy and healthy new year and we will talk about the future, not the past, tomorrow.

September 11th

Today is a very meaningful day for all  New Yorkers. For me, the terrorist acts of September 11, 2001 came at an important time in my life. The Internet bubble had burst and my professional life was all about dealing with the ramifications of that. I had just turned 40, we had three kids, 10, 8, and 5. We had lived in NYC for almost 20 years and we were building a life in the greatest city in the world. That day changed everything and changed nothing at the same time. We stayed downtown, we raised our kids in the post 9/11 NYC, and we still live in NYC in much the same way we lived there before that day. But we were all impacted by the sights, sounds, and smells of that day and the days and weeks that followed and certainly still are.

I don’t think much about September 11th anymore but I do try to remember it every year on its anniversary.

We are in Barcelona today. September 11th means something very different here. It is the “national day of Catalonia” and a holiday.

To make things even more interesting the Catalan Separatist Movement is mounting a huge protest today in Barcelona and they are expecting 1.5 million people to fill the two main streets in town and create a V sign in an effort to pressure Spain to allow a vote for Catalonia to secede.

The streets are literally filled with people wearing the yellow and red colors. We walked around for a couple hours and observed the goings on.

There are separatist movements cropping up all over Europe right now. I imagine the weak economy and rampant unemployment is a factor but underneath it all these are tensions that have existed for centuries and it’s not really a new thing at all.

The hatred that fed the horrible acts of 9/11 isn’t a new thing either. The techniques are modern and so are some of the resentments that feed it but the underlying hatred goes back a long way.

So for me, today is a reminder that conflict and resentment and the hatred that can result is a permanent human condition. We can work to minimize it and we should do that tirelessly. But we are unlikely to eliminate it.

Today, September 10th, Is A Day Of Protest

When you come to AVC for the first time today, you will be met with a “modal” that shows the site loading slowly. This is my way of participating in a day of protest to send a message to the FCC and others in government that I don’t want to see an Internet where some sites can pay to load more quickly than others.

We’ve discussed this issue so many times at AVC that it’s old hat to most of us. Many of you don’t see things the way I do. I understand and respect that. But today, I am showing solidarity with everyone who sees it my way.

The modal will be gone tomorrow in case it annoys you.

It’s Not Really Social Media, Maybe It’s Anti Social Media, But Regardless, It Is Here To Stay

The President said this the other day:

The world’s always been messy… we’re just noticing now in part because of social media

I don’t think terrorists posting gruesome videos on YouTube and spreading them virally via Twitter, Facebook, and many other internet media channels is “social media”. It’s just Internet media, in which anyone can post anything on the Internet. There is nothing social about it. It’s anti-social in fact. Maybe we should call it user generated media. That’s an accurate term.

The same is true of some hacker getting access to celebrities’ nude selfies and posting them on Reddit and elsewhere. That’s not social media either. It is just Internet media.

We are going to test our notions of free speech and civil rights as we go forward. Should Twitter and YouTube be actively taking down this stuff? And if so, where is the line drawn? What do they take down and what do they leave up? They have been dealing with this issue for as long as they’ve been around but it sure seems like the stakes are getting higher and higher for them and every company that allows the posting of user generated content on their service.

The President is right about one thing. Humanity is at times horrible. Seeing that horror in your timeline next to something familiar and pleasing is deeply troubling. But we may need to get used to it. I don’t see any easy ways out of this mess.

The Government Surveillance Letter

Note: The website this post is about is now down. I am not sure if that means this thing was a hoax or something along those lines. Regardless, I believe the sentiments expressed on the website are correct and that Internet companies, large and small, should ban together to express them.

Sometime last night, a letter to the President of the United States and Congress was published on the Internet. It was signed by eight of the largest Internet companies; Apple, AOL, Facebook, Google, LinkedIn, Microsoft, Twitter, and Yahoo!

The website where the letter is hosted outlines five principles for government surveiilance:

1) sensible limitations on government's ability to compel service providers to disclose user data

2) checks and balances, including court oversight

3) transparency about government demands

4) letting information flow freely, particularly across national boundries

5) cooperation between governments to create multi-national treaties

I wholeheartedly support these five goals. These issues do not only impact large Internet companies. They impact all Internet companies. When you get a National Security Letter, you have no choice but to comply, even if it violates everything you and your company stand for.

It is time for governments around the world to rethink how they go about spying on us, particularly with the help of companies, both large and small.

Some Thoughts On The SEC’s Rulemaking On General Solicitation

The JOBS Act was signed into law on April 5, 2012. This legislation was designed to make it easier for small businesses in the US to raise capital and contained a number of important and valuable changes to securities laws. One of the most promising changes in the JOBS Act is around the concept of General Solicitation. 

General Solicitation is the marketing of a securities offering (a fundraise) publicly in the open market. The Securities Act of 1933 (which still governs much of securities law in the US) prohibits "general solicitation" or other forms of advertising in securities offerings pursuant to Rule 506 and Rule 144A which are the two most common forms of securities offerings for private companies.

In response to the JOBS Act, the SEC has lifted the ban on General Solicitation and on September 23, 2013, companies can start to use public marketing in their fundraising efforts with some important conditions. I blogged about how important this could be for startups when that news came out.

First and foremost, if you want to use General Solicitation, you must limit your investors to accredited investors (investors that satisfy net worth or annual income requirements) and you must undertake some specific efforts to make sure that your investors are in fact accredited. This is above and beyond what is typically required in a securities offering where General Solicitation is not used.

But the SEC has not stopped there. They have put foreward additional rules for public comment. If anyone in the SEC cares to read this blog, they can consider this my public comment. I am not planning to send in a formal comment nor is USV or anyone else at USV.

It is my opinion, and that of those who we do business with, including our securities lawyers, that these proposed rules effectively make General Solicitation a non-starter for startup companies. If the SEC's intention, with these proposed additional rules, is to neuter General Solicitation to the point that it is legal but nobody avails themselves of it, they will succeed.

Here are a few of the most problematic rules:

1) A 15 day filing period for Form D before the company initiates its fundraising process (and before the company even knows if it will be able to raise capital). Typically we file for Form D after the raise has been completed. To do so before the company intitiates a fundraise is not realistic and ignores how startups raise capital. If there was one rule that I would most like to see the SEC remove, this would be it.

2) The requirement to formally file all written materials provided to investors with the SEC is very burdensome when entrepreneurs update their slides and other fundraising material from meeting to meeting.

3) The penalty for violating any of these rules is a one year prohibition from being able to raise capital under Rule 506. Given that startups need to raise capital frequently and they need to avail themselves of this form of securities offerings, this effectively means that a startup that violates any of these rules is likely to be put out of business. This is way too harsh and means the risk/reward analysis around using General Solicitation is skewed too much toward risk. Which means nobody will use it.

USV is an interested party to this rulemaking process in a number of ways. First, we invest in startups. The more startups there are, the better for us. So anything that creates more financing for startups is good for us. And anything that makes it harder for startups to raise capital is bad for us. Further, we are investors in CircleUp, a fundraising platform for startups that would benefit greatly from opening up General Solicitation. 

I have been investing in startups since the mid 80s. I have participated directly or indirectly in the financing of hundreds of startups, possibly more than a thousand when all of my activities are aggregated. If I am an expert in anything, I am an expert in the financing of startups. And in that capacity, I can tell you that the proposed additional rulemaking around General Solicitation is a non-starter in startup land. If these rules come down as drafted, we will keep doing things the way we have been doing them for years and possibly the single most important change from the JOBS Act will have been for naught. And that would be very dissapointing to me and many others in startup land.

Here are some other links worth reading on this topic:

Angel.co's public comment

Startup Law blog

William Carleton's blog

Brad Feld