Posts from mobile

The Dentist Office Software Story

I’ve been telling this fictional story about Dentist Office Software for years to describe why we are so focused on our “networks” investment strategy. Yesterday I told it at a HackNY event we did at the USV office and my partner Albert provided a finishing touch that really drives it home. Since I’ve never told the Dentist Office Software story here at AVC, I will do that and then I will add Albert’s alternate (and better) ending.

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An entrepreneur, tired of the long waits he is experiencing in his dentist’s office, decides that dentist offices are badly managed. So he designs and builds a comprehensive dentist office management system and brings it to market. The software is expensive, at $25,000 per year per dentist office, but it’s a hit anyway as dentists realize significant cost savings after deploying the system. The company, Dentasoft, grows quickly into a $100mm annual revenue business, goes public, and trades up to a billion dollar valuation.

Two young entrepreneurs graduate from college, and go to YC. They pitch PG on a low cost version of Dentasoft, which will be built on a modern software stock and include mobile apps for the dentist to remotely manage his office from the golf course. PG likes the idea and they are accepted into YC. Their company, Dent.io, gets their product in market quickly and prices it at $5,000 per year per office. Dentists like this new entrant and start switching over in droves. Dentasoft misses its quarter, citing competitive pressures, churn, and declining revenues. Dentasoft stock crashes. Meanwhile, Dent.io does a growth round from Sequoia and hires a CEO out of Workday.

Around this time, an open source community crops up to build an open source version of dental office software. This open source project is called DentOps. The project takes on real life as its leader, a former dentist turned socialist blogger and software developer named NitrousOxide, has a real agenda to disrupt the entire dental industry. A hosted version of DentOps called DentHub is launched and becomes very popular with forward thinking dentist offices that don’t want to be hostage to companies like Dentasoft and Dent.io anymore.

Dentasoft is forced to file for bankruptcy protection while they restructure their $100mm debt round they took a year after going public. Dent.io’s board fires its CEO and begs the founders to come back and take control of the struggling company. NitrousOxide is featured on the cover of Wired as the man who disrupted the dental industry.

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That’s the story. I hope to fine folks at YC, Sequoia, and Workday don’t mind me using their names in this fictional story. I picked the very best companies in the industry and my use of their brands is a compliment. I hope they take it that way.

This story is designed to illustrate the fact that software alone is a commodity. There is nothing stopping anyone from copying the feature set, making it better, cheaper, and faster. And they will do that. This is the reality that Brad and I stared at in 2003 as we were developing our initial investment thesis for USV. We saw the cloud coming but did not want to invest in commodity software delivered in the cloud. So we asked ourselves, “what will provide defensibility” and the answer we came to was networks of users, transactions, or data inside the software. We felt that if an entrepreneur could include something other than features and functions in their software, something that was not a commodity, then their software would be more defensible. That led us to social media, to Delicious, Tumblr, and Twitter. And marketplaces like Etsy, Lending Club, and Kickstarter. And enterprise oriented networks like Workmarket, C2FO, and SiftScience. We have not perfectly executed our investment strategy by any means. We’ve missed a lot of amazing networks. And we’ve invested in things that weren’t even close to networks. But all of that said, our thesis has delivered for us and we stick to it as much as we can.

So here’s Albert’s alternate ending (with my editorial license on the colorful aspects of this story):

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A young dentist, named Hoff Reidman, just starting up his own private practice, decides that he wants to network with other dentists. Because Hoff went to CMU before going to dental school, he’s pretty technical and he hacks together a site in Ruby called Dentistry.com. He emails all of his friends from dental school and they sign up. Every dentist wants to be on Dentistry.com and the site takes off. Hoff realizes he has to quit his dental practice to focus on Dentistry.com. Albert Wenger, who happens to be a patient of Hoff’s, convinces him to let USV do a small seed round of $1mm to help build a company around Dentistry.com. Hoff comes up with a product roadmap that allows patients to have profiles on Dentistry.com where they can keep their dental records, book appointments, and keep track of their dental health. It also includes mobile apps for patients to remind them to floss and brush at least twice a day. While Dentistry.com is free to use for anyone (dentist or patient), it monetizes with native advertising, transactions between dentists and their patients, and transactions between patients and providers of consumer dental health products, and transactions between dentists and providers of dental equipment and products. Dentistry.com ultimately grows into a $1bn revenue company and goes public trades at a market cap of $7.5bn. Wall Street analysts love the company citing its market power and defensible network effects.

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I hope you enjoyed this fictional story. I find it explains our network thesis simply and easily. I will keep telling it to groups I talk to, but now with Albert’s ending. I like it very much. Thanks Albert.

Flurry

Yesterday our portfolio company Flurry announced it was being acquired by Yahoo!

I thought I’d provide a bit of history since this was an interesting investment for us.

Back when Apple was launching its app platform in the winter of 2008, we met with Greg Yardley who had teamed up with Jesse Rohland to build an analytics service for app developers. We had known Greg from his work with Seth Goldstein at Root and we were fans. And it seemed to be a smart idea to give developers the ability to see what people were doing in their mobile apps. So we provided seed financing to Greg and Jesse along with our friends at First Round.

Pinch launched the first iOS analytics service and got rapid adoption. But they ran into some challenges, the two primary ones were monetization and getting onto Android and Blackberry (which was relevant back then). And that’s where Flurry entered the picture.

Flurry was a pivot into the same business as Pinch was in. They were already on Android and Blackberry but were far behind Pinch on iOS. They were led by a hard charging CEO named Simon Khalaf who had big ideas for monetization. It was a match made in heaven. So the two companies merged and Flurry became the surviving company.

Flurry continues to lead the mobile app analytics business. According to Simon’s blog post yesterday, there are 170,000 developers with 542,000 mobile apps using the Flurry service.

And now Flurry becomes a Yahoo! branded offering. There is no question that the Flurry data and its advertising products (powered by Flurry’s data) will be a great fit for Yahoo!’s mobile ambitions.

So we have a happy ending to a startup story with a few twists and turns. This is an example of where 1+1 equaled a lot more than two. I’ve been involved in a number of “startup mergers”. Some work. Some don’t. This one worked beautifully.

Messaging, Notifications, and Mobile

I’ve written about this stuff before, but I continue to be interested in it.

I actively use the following messaging apps on my phone:

Kik – my primary channel for The Gotham Gal, my daughter Jessica, and USV people

Snapchat – my primary channel for my son Josh

SMS – my primary channel for my daughter Emily and a lot of my friends

Hangouts – secondary channel for my daughter Jessica and USV people

Twitter DM – primary channel for people who don’t have my cell number

Though I don’t use them, I realize the following apps are quite popular in the US as well

WhatsApp

Facebook Messenger

Skype

Viber

Tango

Line

So how is it possible that we can all have and use four, five, six or more messenger apps on our phones?

It’s because the notifications channel is the primary UI on mobile, replacing the home screen, and its easy to communicate with people using a variety of applications on your phone.

What I’m wondering is if we will see even more fragmentation in our messaging behavior on mobile in the coming years, or if five to six apps per person is status quo, or might we see some consolidation?

I personally don’t see any reason for consolidation and if I had to make a bet, it would be on further fragmentation. Each of the apps I use offers something slightly different than the others. And so for certain people, and certain kinds of conversations, one messaging app is preferable to another. It’s very possible that entrepreneurs will continue to come up with unique and differentiated experiences and that will drive further fragmentation.

Amino

At USV, we have always been interested in communities. They are, in some ways, the iconic representation of our “large networks thesis”. We have been impressed by communities like Reddit, 4chan, and Hacker News. We love what our portfolio company Disqus has done to turn blogs like this one into vibrant communities. And we have turned our own website at USV into community, using Disqus and Twitter and link sharing.

We’ve long wondered what a native mobile community looks like. A few months ago we saw one when the two founders of Amino came into our office. They have built an app constellation of native mobile apps, each focused on a niche topic (like a subreddit). Examples are Minecraft, K-Pop, and Anime.

My partner Andy wrote a short post on USV.com about our investment in Amino yesterday. If you want to see what the future of communities might look like check out Amino. We are intrigued and excited to see how this plays out.

Feature Friday: Trust

I went back and looked at the Ten Golden Principals For Web Apps presentation I did four and a half years ago.

Nowhere on this list is Trust. Maybe that was an oversight. Or maybe times have changed.

Take auto photo backup from my Android phone to the cloud. I have two great options on my phone, Dropbox and Google+.

I don’t use Google+ for this and I do use Dropbox for this.

It is not that I don’t trust Google to host my photos. And it is not that I don’t trust Google in general. It is that I don’t trust Google to change the privacy rules on Google+ and instantly expose all of these photos to their crawlers and the web at large.

It’s really Facebook’s fault that I don’t trust Google with this. Anyone in the social networking game who isn’t already default public is trying to figure out how to get there. That’s the nice thing about Twitter. It has always been default public and so you know what to expect when you post something there.

I trust Dropbox to keep the photos I backup to the cloud private. It’s not that Dropbox is more trustworthy than Google in my mind. But it is that privacy is part of the brand promise that Dropbox makes and their business of hosting all of our data in their cloud depends on them being very careful with our privacy expectations.

Going back to why in early 2010 I didn’t put Trust in my top ten – it may be that Facebook’s assault on our privacy and the loss of trust that ensued was just developing in our collective consciousness at that time. And now we live in a more paranoid state about this stuff.

The rise of Snapchat, I believe, is largely in response to this exact thing. With Snapchat, you have explicit control over who sees your photos and where they go from there. That was a feature we did not know we needed four years ago. And it is a feature that built an entire company. And probably many more. Trust is a very important feature these days.

Some Quick Thoughts on I/O

I am in SF but sadly was not able to make it to I/O. So I’ve been reading up on the news coming out of I/O.

Here, in no particular order, are the things that I am most excited about or thinking the most about:

1) Smart notifications. Many times the top of my screen gets filled with Twitter notifications (I get notifications whenever my daughters and my partners and my wife tweet), and so I don’t see my Kik notifications unless I swipe down to see all my notifications. I would like a mobile OS that looks at what notifications generate the most reliable and immediate reactions from me and put those front and center for me. The notification channel is becoming more and more like email and Google is well positioned to bring some of the smarts it has brought to email to mobile notifications.

2) Android mirroring on Chromecast. I have been so jealous of entrepreneurs walking into USV with only an iPhone, mirroring it to our conference room displays via Airplay, and doing their pitch on their phone. As an Android user, I have not been able to do that. We have both Chromecast and Airplay in our conference rooms at USV. Now Android users will not be second citizens. Yesssss.

3) In app data available in web search. This is a big one. When I search on mobile web for a restaurant, I’d sure like to see a Foursquare result come up if I’ve got the Foursquare app on my phone. Same with Tweets, Songs on SoundCloud, Movies on Fandango, etc, etc.

4) Wear, Car, TV. Google is trying to get Android everywhere. Just like Apple is trying to be everywhere. Regular readers know that I’m a bigger fan of “casting” your phone onto your car, watch, TV, than running apps and such on the devices. We will see how far Google is going in terms of putting smarts on these devices vs making Android phones control these devices. I prefer the latter approach myself.

But, as I said, I was not there. Benedict Evans was and here’s a 30 min podcast where he shares his impressions.

Flipping The Model

We’ve had AppleTVs and Boxees on our family room TV for a while now. Last year I put Chromecast on it as well. I use it a lot but my kids haven’t warmed up to it yet.

Yesterday I got a call from my son. He said “how do you use this Chromecast thing?” I told him to take out the Nexus7 and turn on the TV and go to the Chromecast video source. He said he had already done that but there were no content options on the screen. I asked him if he still had the Nexus7 in his hand. He said yes. I told him to launch the Netflix app on the Nexus7. He did that. I told him to click on the Chromecast icon in the app. He responded “wow, that was easy.”

In an instant he understood that Chromecast flips the model. The content is on your device and you “cast” it onto the screen. He asked me if he could do the same with his iPhone. I told him he could. He was pleased.

I’ve written this before, but I think things like Bluetooth, Airplay, and Chromecast are the better model for getting content from the Internet onto TVs and into cars.

TVs and cars are expensive, you don’t replace them very often, and it takes time to get a new model designed, built, and into the market.

Contrast that with an app on your phone or tablet. You can iterate on that quickly with new features, functionality, and content.

It’s always tricky to go to market with a different model. We’ve had smart devices like set top boxes connected to our TV sets for decades and that’s how people think of getting content onto screens.

But I’d be plenty happy with a new TV and car that came with nothing more than a screen and bluetooth, airplay, and chromecast built in. No wires, no UI, just a screen and connectivity.

That’s where I think we are headed. It may take some time to get there. But it makes a lot more sense.

Privacy As A Competitive Vector

Our portfolio company DuckDuckGo has made privacy a big part of its value proposition. And slowly but surely, their search engine has gotten good enough that people are using it instead of Google.

DuckDuckGo publishes its search volumes publicly. They are doing 6mm searches a day now. This page says that Google does 6bn searches a day. So if that’s right, DuckDuckGo is doing 0.1% of Google’s search volume.

That’s not a huge market share. But DuckDuckGo is growing quickly. A year ago, their search volume was 1.8mm/day. So if they continue to triple their daily search volume each year for the next three years, they would have >150mm searches a day by June 2017. And assuming that Google’s search volume keeps growing at 15% per year, DuckDuckGo would be doing 1.7% of Google’s daily search volume in three years.

So there is certainly a market out there for people who will accept a slightly weaker product in exchange for privacy. It’s not 25% of the market. It may not even be 5% of the market. But I believe it is well north of 1% of the market.

And if that is the case, are there other big product categories out there other than search where privacy could be used as a competitive vector? How about email? How about messaging? How about maps? How about browsers?

I think we are going to see this play out in the coming years. DuckDuckGo is making it work. Why won’t others do the same?

Feature Friday: Bluetooth Stereo Headset

A month or so ago, my friend Jeff Epstein walked into a board meeting with these around his neck.

bluetooth stereo headset

He stopped next to me, took them off his neck, and said to me “these are life changing”.

I pulled out my phone, went to Amazon, and ordered a pair. I’ve been using them ever since. They are life changing.

It’s not like I haven’t used a Bluetooth headset before. I’ve had many. I’ve just never stuck with any before. I would keep going back to wired headphones.

But these LG stereo headphones just do it right. I like the feeling of buds in my ear. These replicate that feeling, but deliver it wirelessly.

The controls are placed perfectly on the device. When you slide the on switch, they tell you that the headset is on, the battery is high, and you are connected to your phone. You get similar information when you turn them off.

They are comfortable, the battery time is long, and the sound quality is great.

I use them in my office to do all my calls now. I put my Nexus5 in its wireless charger, and walk around my office with these on doing calls.

I use them on the subway to listen to my soundcloud feeds (another feature friday topic).

I use them to walk to and from work and make phone calls and listen to music.

It is amazing how something so simple can make a measurable improvement in my life. These have done it.

Now I just want the blinged out version with gold and diamonds :)