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Free International Roaming With A Premium Upsell

I just landed in Berlin after an overnight flight from the US.

In the past, turning on your phone after landing overseas could be an expensive experience as the phone downloads all the email you received since taking off at international mobile data rates.

I’ve used a host of techniques over the years to avoid the experience of landing, turning on my phone, and immediately getting a text message that I’ve blown past my international data roaming cap.

I’ve turned off mobile data and waited until I got to hotel WiFi to download my email but that meant no mobile data for directions to the hotel. I’ve bought SIM cards in airports. And more recently I’ve rented a pocket WiFi before traveling overseas.

But last year the Gotham Gal and I switched back to T-Mobile after they introduced free low bandwidth international data roaming for all customers in the US.

Here is the experience when I land. I turn on the phone, it finds the local mobile network, connects, and my phone lights up with notifications and emails start coming in.

In addition I get a text message from T-Mobile offering to upgrade me to an international data pass that offers 4G in 100MB buckets at roughly $10/100MB.

I buy the upgrade every time and am happy to pay for the higher speeds.

But the important thing here is the customer experience. No longer do customers have to fear turning on their phone. No longer do customers have to jump through hoops to procure an affordable mobile data plan. If you want faster speeds, T-Mobile makes it drop dead simple to upgrade right on your phone.

This approach to international mobile data should be adopted by all the mobile carriers. It’s a great experience.

Platform Monopolies

There’s an article in the NY Times Sunday Business Section today that lays out a very important question we have all been dancing around but will increasingly be dealing with. The article is nominally about Amazon’s fight with Hachette but it is really about internet platforms and monopolies.

The author of the NY Times piece tells the story of Vincent Zandri, an author of mystery and suspense novels, who has moved all of his publishing activities over to Amazon’s platform and is enjoying the benefits of doing that.

This could easily have been the story of the journalist who moves her writing from The Wall Street Journal to her own blog, or the story of the filmmaker who moves from the Hollywood studio system to Kickstarter and VHX. It could be the story of the band that leaves their record label and does direct deals with SoundCloud and Spotify. It could be the story of the yellow cab driver who moves his driving business to Uber or Sidecar.

The story of Vincent Zandri is the story of our times.

The Internet, at its core, is a marketplace that, over time, removes the need for the middleman. That is very good news for the talent that has been giving up a fairly large part of its value to all of the toll takers in between them and their end customers.

Take Etsy for example. Before Etsy, if you made knit hats, you would sell them to a boutique for $10, and that boutique would turn around and sell them to your customers for $25. Now you sell them to your customers on Etsy for $25 and pay a 20cents listing fee and 3.5% of the transaction and a payment processing fee. In the old model the knitter made $10 per hat. In the new model, the knitter makes about $23 per hat. That’s a big deal. And you see it all over the place in the Internet marketplace economy.

But there is another aspect to the Internet that is not so comforting. And that is that the Internet is a network and the dominant platforms enjoy network effects that, over time, lead to dominant monopolies.

We see that with Google today. Google’s global search market share is around 70%. It would be larger if not for China and Russia, where the governments have given benefits to local players. But even with its current market share, Google is pretty close to a monopoly in search. It is a benign monopoly for the most part and, as such, has largely stayed out of the sights of regulators. I, for one, am happy with that game of chicken between Google and the regulators.

Amazon is increasingly looking like a monopoly in publishing. This part of the NY Times piece is how all of these Internet stories have played out:

At first, those in the publishing business considered Amazon a cute toy (you could see a book’s exact sales ranking!) and a useful counterweight to Barnes & Noble and Borders, chains willing to throw their weight around. Now Borders is dead, Barnes & Noble is weak and Amazon owns the publishing platform of the digital era.

The same could be said of Google, Twitter, YouTube, SoundCloud, Uber, and all of the dominant networks that are emerging around us. From laughable toys to dominant monopolies in less than a decade.

It’s strange for me to write this post because this is our playbook at USV. We invest in networks that can emerge as dominant platforms by virtue of network effects. We like things that are laughed at. The more they are derided, the more we want to invest.

But here’s the rub. When a platform like Amazon emerges as the dominant monopoly in publishing, who will keep them honest? When every author has left the publishing house system and has gone direct with Amazon, what does that world look like?

That is the question the NY Times is asking in their story this morning. And that is an issue that we at USV have been confronting for a while now and we are investing against it.

We have invested in Wattpad, which is a bottoms up competitor to Amazon, as opposed to Hachette which is a top down competitor to Amazon. We think its easier for a more open, less commercial platform like Wattpad to keep Amazon honest than it is for a legacy publishing house.

We have invested in Sidecar, which has built a true open marketplace for ridesharing. We think its more likely that true peer marketplace will keep Uber honest than the legacy fleets of limos and taxis that are fighting for their life against Uber right now.

But maybe most importantly, we are investing in bitcoin and the blockchain, which is the foundation for truly distributed peer to peer marketplaces without the Internet middleman.

For this is the truth that we are now facing. For all of its democratizing power, the Internet, in its current form, has simply replaced the old boss with a new boss. And these new bosses have market power that, in time, will be vastly larger than that of the old boss.

So, as an investor, when you see a dominant market power emerge, you should start asking yourself “what will undo that market power?” And you should start investing in that. We’ve begun doing that, but are not anywhere near done with this effort.

Checking Your Work

I don’t recall who drove it into me when I was young, but I have always been obsessive about checking my work. Whenever I do a math problem, I take my answer and do a reverse check to make sure the answer makes sense. I do this even when adding a tip to a bill at the end of a dinner. It drives the Gotham Gal crazy to see me take so much time to do a simple math problem. It’s not even a conscious thing for me. It’s just how my mind works.

I tell all of you this because it relates to writing. I was talking to an educator that I respect greatly last night and I asked her what is the most effective technique for teaching kids to write. I expected her to say one on one editing sessions with a mentor, coach, or teacher was the most effective way to teach writing. But she told me that forcing kids to rewrite their work, solo, was the most effective technique to improve their writing.

When I write a blog post, I tend to write it as the idea forms in my brain. I write the whole thing out. And then I rewrite it. I go over every line and make sure the spelling and grammar are correct, I look at the phrasing. I consider the flow. I read it start to finish at least three or four times. I think about the whole and then each part. And I’ll cut out paragraphs, move things, rewrite parts, and mess with it for almost as long as it took me to write it in the first place. And I’ll do that even after I’ve posted it. I actually get some extra benefit from editing while the post is live. I am not sure why that is, but often times the best edits come to me after the post is live.

And so it turns out, if my educator friend is right and I would imagine she is, that this kind of obsessive self editing is the best way to become a better writer. I don’t consider myself a great writer by any means, but I have improved immensely over the years I’ve been blogging. Some of that, for certain, comes from writing every day. According to WordPress, I have written over 6,500 posts here at AVC. That’s a lot of writing. But you don’t learn as much from the process of putting words on paper (or online). You learn most from the process of perfecting the piece.

Based on the countless hours I have worked with my kids over the years, getting students to spend time on a project after they feel like they have finished it is really hard. They get annoyed. “It’s done, it’s right, why are you making me do this?” is a common refrain. But if you want your kids or students to learn and improve, you have to force them to do that. Like someone did for me when I was young. It’s a gift that pays dividends for me every day.

The Basic Income Guarantee

My partner Albert has begun a series of blog posts on a concept called The Basic Income Guarantee. This is fundamentally different than a minimum wage. It is essentially a safety net for a world where robots will be doing more and more of the manual and difficult labor that has, until now, provided income for unskilled workers.

I don’t have a formed opinion on this idea. I know that welfare didn’t work out too well in the last century. So I’m nervous about any system that encourages or incents people not to work. But if we really are headed into a world where there aren’t any low skilled jobs, then I guess we need to be talking about ideas like this.

All of Albert’s posts on this topic are here.

The Open Internet Letter

I realize I’ve been writing a lot this week about the FCC’s decision next week on new rules for the last mile Internet here in the US. I promise I will return to the regularly scheduled programming soon. But this is a big issue and we need to keep up the pressure on the FCC to do the right thing here.

Today, about fifty leading VCs have signed onto a letter to the FCC asking them to keep the Internet free of fast lanes and slow lanes.

We are hoping that more angel investors and VCs will want to sign onto this letter today before we send it to the FCC tomorrow.

We pulled this together quickly over the past 24 hours, and weren’t able to directly reach as many VCs and other investors as we would have liked, so will gladly welcome additional signatories throughout the day today before we formally file this with the FCC tonight. Email nick [at] usv [dot] com if you’d like to join.

This debate is just picking up, and it will be critical for everyone who cares about innovation on the Internet to wrap their heads around this issue, and engage on it, as the FCC runs its rulemaking process through the summer and fall.

The Valuation Trap

There is a long article on Square and Box in TechCrunch this weekend. I am not sold on the arguments the author makes about the commodity nature of both products. But the author makes a point at the end in a section called “The Valuation Trap” that I very much agree with:

A second iron law of startups might be that the higher the valuation of a startup, the fewer options it has for financing and exits…… once a company has raised mezzanine capital and is valued in the billions, its options are essentially to go public or find a very interested buyer with deep pockets. There are few other options on this side of the startup pipeline.

The past three months have not been good for highflying tech stocks and now we are seeing IPOs being postponed. Both Square and Box have recently done that.

Another thing that Square and Box have in common is very high burn rates. The author of the Techcrunch post says that Square lost $100mm and Box lost $160mm in 2013.

The combination of sky high valuations, equally high burn rates, and a disappearing IPO market is not a pleasant one. I am fairly confident that both Square and Box can and will navigate the valuation trap, but it will require making some hard choices in the coming months.

So the moral of this story is that you can push valuations when you have investors knocking down your door, but unless you are cash flow positive and expect to remain so for the foreseeable future, you do that at your own risk. You will need to find someone to top that price down the road and that person may not be there.

Epilogue: I am a VC. I am talking my book here. I don’t like to pay sky high valuations. And I like to argue against them. So understand this post in that context. But I am also an investor in companies that have found, and may or will find themselves in the valuation trap. I have lived it, felt it, and suffered from it. It is a real issue.

Feature Friday: Voice Posting

It’s Friday and I’m in Middletown Connecticut and I don’t have a laptop with me. All I’ve got is my Nexus 7 and my phone and so I thought I would I try Google Voice Recognition to write a blog post and see how it goes.

So I just fired up the WordPress app on my Nexus 7 and I hit the little button at the bottom of the keyboard that’s the microphone and I’m just talking into the Nexus 7 now and this is what being recorded.

I think it’s pretty easy to post with voice. This is working out pretty great and I think Google has pretty much got it nailed. Anybody who doesn’t like to type but is happy to talk can start blogging.

I don’t really have a whole lot to say today other than this so I will quit now.

Feature Friday is Google Voice Recognition on Android.

PS – I did not edit any of this other than to do some punctuation and make some paragraphs.

Revitalizing Urban Cores

We’ve all seen the movie. A bustling inner city experiences the flight of people and businesses to the outer edges or suburban locations and then falls on hard times. The city becomes a suburban story and lacks the creative core that attracts younger people and new residents. The economy falters.

This could be the Brooklyn story, the Newark story, the Detroit story, the Buffalo story, the Cleveland story and many other stories.

We’ve seen that things can be turned around. The economic and cultural juggernaut that is Brooklyn right now is a perfect example. The grandchildren of the people who fled Brooklyn in the fifties and sixties are now coming back in droves, attracted to its lifestyle, its coffee shops, bars, restaurants, art and culture, parks, and affordable real estate. And the tech companies are coming too. Attracted by all the talent that is there.

I’ve been asked by civic leaders from places like Newark, Cleveland, Buffalo, and a number of other upstate NY cities that have suffered a similar fate how they can do the same thing. They all talk about tax incentives, connecting with local research universities, and providing startup capital. And I tell them that they are focusing on the wrong thing.

You have to lead with lifestyle. If you can’t make your city a place where the young mobile talent leaving college or grad school wants to go to start their career, meet someone, and build a life, all that other stuff doesn’t matter.

So it was really great to see what Tony Hsieh and his colleagues are doing at the Downtown Project in Las Vegas. The Gotham Gal has made a number of investments with Tony and his team and so she asked if we could get a tour of their efforts while we are in Vegas this weekend for our friends’ wedding. We spent most of Friday touring the work they are doing. And it is impressive.

The downtown Vegas story is a similar one. The hotels and casinos left downtown for the strip in the fifties and sixties and the city center faded leading to crime and decay. It was a tough place to live and/or work.

When Tony moved Zappos from the suburbs to the former City Hall in downtown Vegas a few years ago, he decided to invest $350mm in a massive urban revitalization project. He set aside $200mm to purchase land at bargain prices and the other $150mm to invest in three areas, arts and culture, small businesses (restaurants, cafes, bars, markets, boutiques, etc), and tech startups. $50mm is going into each area.

I was particularly impressed with The Container Park which opened late last year and houses food shops, boutiques, a playground, live music performances, and is a great place to hang out with friends and family. Here’s a photo I took while we were enjoying tacos at lunch on a sunny day in downtown las vegas.

container park

They have also taken a number of residential and hotel buildings and converted them into low cost and attractive housing for the hundreds of college grads who are moving to Las Vegas to work in the tech startups that are cropping up everywhere, largely funded by Tony’s Vegas Tech Fund.

You can feel the excitement and energy in the coworking spaces that are cropping up all over the place. There is a sense of purpose that goes beyond building a startup. They are also building a community and revitalizing a city.

It’s too early to know if this audacious project will work. But I think it has a decent shot. And mostly because Tony and his team focused on art, culture, lifestyle, housing, night life, parks, and recreation first and foremost. That’s the only model that I think can work and it seems like its working in Las Vegas right now.

Changing Clocks

I was in an elementary school in Brooklyn the other day and the clocks in the halls were an hour off. It was really bothersome to me. Maybe that school does not observe daylight savings time, but more likely the janitor or whomever is responsible for changing the clocks could not be bothered. Of course, the clocks in that school are now set correctly.

I’m a bit OCD about changing the clocks in our house and our cars. I hate it when a clock is set to the wrong time. And, each and every clock has its own system for changing the time. The clock in our double hung oven in our kitchen has a particularly complicated system. I had to find the manual on the Internet and look up the technique this morning after The Gotham Gal and I spent a few minutes hitting all sorts of combinations of buttons and got nowhere.

And then there are the cars. Whomever teaches people how to design user interfaces for car dashboards must have a perverse sense of humor. Each and every car has a different system for changing the clock time and each one is more clunky than the next.

But I go through all these machinations every six months because I can’t stand having clocks with the wrong times on them. Thankfully more and more of the clocks in my life are connected to the Internet and update automatically. I wish the clocks in our cars, on our ovens, and in our elementary schools would do the same.