Posts from Uncategorized

Hard Forks

The crypto-currency Ethereum completed a hard fork on Wednesday. The Ethereum core developers, after getting a vote of support from the Ethereum community, hard forked Ethereum to “get back” the roughly $40mm of Ethereum that was taken in the hack of The DAO.

Hard forks are a bit of a lightning rod issue in the blockchain sector. The Bitcoin community has been debating the idea of doing a hard fork to increase the block size for well over a year. It seems that most of the Bitcoin core developers are against a hard fork and see it as risky. Bitcoin did have an accidental hard fork back in 2013, but that was dealt with quickly and confidence in the Bitcoin blockchain was restored.

I believe that hard forks are an inevitable occurrence in the blockchain sector. There have been, and will continue to be, issues that crop up that are best solved with hard forks. I do not think they will be common and I do not think they should be common. But they are an important tool in the toolset that core developers have to move these protocols forward. And so I see the successful Ethereum hard fork this week as an important milestone for public blockchains.

I like what Cornell CS Professor Emin Gün Sirer said about the Ethereum hard fork:

It’s a point of strength to be able to adapt to that change, to be able to respond to it, to be able to do it in an orderly fashion. Ethereum just demonstrated this. I think this is a rite of passage for ethereum.

In my mind, adaptability is more important than immutability.

And to some extent, that is what is now at the center of the Bitcoin vs Ethereum competition for the hearts and mind of developers. I believe the Bitcoin core developers have more or less landed on immutability and Ethereum core developers are very much into adaptability. It may be that it is useful to have two significant, liquid, and highly capitalized public blockchains, one that is immutable (think of gold) and one that is adatpable (think of the dollar).

There was a time when I was a Bitcoin absolutist. That changed a while ago and I now believe that we are going to have multiple blockchains, multiple currencies, and a ton of app tokens, some with their own blockchains, some built on top of Bitcoin or Ethereum.

It’s a very interesting time in the public blockchain sector right now. Stuff is happening. Lot’s of stuff.

Nailing It

I saw dozens of pitches for what was essentially YouTube between 1998 and 2005. But when YouTube launched, it was pretty clear pretty quickly that they had nailed it and nobody else before them had.

I saw way more pitches for what was essentially Pokemon Go between the arrival of the iPhone and now. But when my daughter told me to download Pokemon Go and play it, I immediately realized that they had nailed something that nobody had before them

AVC regular LIAD tweeted this today:

You are not alone LIAD.

I recall seeing John Geraci‘s ITP senior thesis project in 2005 which was a web version of this idea powered by Google Maps, and understanding that we all want to interact with interactive media in the real world.

I’ve always loved the idea that we could do a massively public treasure hunt together using the web and mobile. But it took over ten years since I first saw this idea to have it really happen.

It made me smile when Emily told me to download it and I am still smiling days later. And I have a gym right outside my front door.

gym on W side hway

Zero And Negative Interest Rates

Larry Summers has a post in the Washington Post about the incredibly low interest rate environment we are witnessing right now.When you consider the effects (slim as they are) of inflation, there are cases where the rates borrowers are paying are zero and even negative.

That means the lender is happy to get back less than they lent because they think that’s a better deal than they can get elsewhere. Think about what that says about the mindset of lenders (or holders of capital assets writ large) right now.

My partner Albert has written a book called World After Capital in which he argues that what has been scarce until now (capital) will no longer be scarce and that we will move on to other forms of scarcity. 

When capital is abundant and when you are getting paid to access it temporarily that leads to a very different set of decisions.

What we don’t know is whether this is a temporary situation (as Larry Summers hopes and policy makers are attempting to ensure) or a more permanent situation as Albert envisions. That is an important question.

Seattle

I called Seattle a “third tier startup city” in a blog post earlier this week.

Which generated this series of tweets:

After reading them, I thought “geez, I really screwed that up” and replied with this series of tweets:

Here’s the thing that is amazing about Seattle. It doesn’t rank as high as NYC, LA, or Boston in the number of startups funded or capital invested. Here are the NVCA numbers for the first three quarters of 2015:

  1. San Francisco, $9.32 billion, 506 deals
  2. San Jose, California (Silicon Valley), $3.78 billion, 237 deals
  3. New York, $3.05 billion, 272 deals
  4. Boston, $1.05 billion, 158 deals
  5. Los Angeles-Long Beach, California (Silicon Beach), $768 million, 105 deals
  6. Oakland, California, $510 million, 41 deals
  7. Seattle-Bellevue-Everett, Washington, $471 million, 56 deals
  8. Provo-Orem, Utah, $462 million, nine deals
  9. Washington D.C., $456 million, 77 deals
  10. Chicago, $402 million, 57 deals

But the companies that have come out of Seattle over the past thirty years put NYC and LA and probably even Boston to shame. So on a dollars in/dollars in, Seattle outperforms. By a lot.

Filling Out A Round: When It Matters, and When It Doesn’t

Almost every financing I’ve been involved with over the years (seed, VC, growth, raising a VC fund) goes mostly like this:

  • Struggle like hell to find a lead
  • Come to terms with the lead
  • Turn your attention to filling out the round
  • The deal gets oversubscribed as all the investors that could not summon up the courage or did not have the checkbook to lead the deal scramble to get into what is now a “hot deal”
  • You end up saying no to a lot of people you wish you could say yes to

So how do you decide who to let into the round and who to say no to?

Well the truth is that it sometimes matters a lot and sometimes doesn’t matter at all.

There are two primary factors that I like to focus on when choosing who to let in and who to say no to:

  • Do they have deep pockets and have they shown a history and a propensity to follow on in future rounds. Yes means try to let them in. No means prioritize others over them at the margin.
  • Can they add value and/or will they cause harm in any way. Adding value is a plus. Doing harm is a negative (obviously). Harm should be avoided at all costs. Adding value is a nice to have but not a must have. And investors always claim to be able to add value and very few actually do. If someone has already added value without even being in the deal, that’s a strong signal that carries a lot of weight with me.

There is one other factor that is worth considering. If someone is a friend, a former colleague, a person you know, trust, like and would like to have along for the ride, that is as good of a reason as any to let them in. But just remember that having friends in a deal that goes bad is a good way to lose friends. So make sure these are friends who have lost money, can take the hit, and aren’t going to hold it against you.

So here is when it matters and when it doesn’t.

  • Seed investors aren’t likely to follow round after round and while some can add value, many don’t. I would not sweat the allocations/syndication decisions that much in a seed deal other than avoid troublemakers at all costs. Otherwise, get the money and move on.
  • VC rounds (Srs A, Srs B, Srs C) are generally where the syndicates matter the most. Find a strong lead who will take a board seat, manage the syndicate, and help you. Then if there is money left over find VCs who have deep pockets, who have demonstrated a bias to follow on in round after round, and are willing to follow your lead.
  • Growth rounds are generally where everyone wants to pile in and there aren’t a lot of board seats or governance issues to deal with. You may find investors that can help in these rounds but they are mostly about getting the money at a good price and getting back to business.

I have seen entrepreneurs try to optimize these decisions and spend a lot of time on them. Investors scrambling to get into the deal will fill your head with all sorts of promises, arguments, and the like. Which makes it even more tempting to spend time on the decision and make the best one.

My advice is to make good decisions and not try to make the very best ones. Focus on deep pockets who are known to follow on and be supportive and avoid troublemakers. Everything else is a nice to have but not a need to have.

Trends

I like to look at Google Trends from time to time to see what it can tell me about things. I realize that search keyword activity is only one data point in a complex system and that with the move to mobile, it is less important than it was in the web only era. And people search for things when they want them. Once they have them, the search volume goes down. But I still think Google Trends can reveal some interesting things.

Here are some queries I ran today:

Facebook and Google are battling it out for video supremacy, but this query really doesn’t tell us very much about where that battle is going and how it will end. It is interesting to note that YouTube has been a mature but stable business for a long time now.

Twitter and the smartphone seem to have risen with a similar curve and are now in decline, with Twitter falling a bit faster than smartphones.

We see a similar shaped curve with Facebook, but the order of magnitude is quite different which is why I did not combine it with the previous chart.

December 2013 sure seems like the high water mark for the mobile social sector.

But not all boats go out with the receding tide.

Here is Snapchat and Instagram, with Twitter thrown in for scale comparison

It will be interesting to see when Instagram and Snapchat start flattening off. My gut tells me Instagram may already be there but we just don’t see it in the data yet.

Moving on from the past to the future, here are some of the sectors that entrepreneurs and VCs are betting on as the next big thing:

If you take out the VR term and look at the other three, you see something that looks like the NCAA football rankings over the course of a season. Each team/term has had a moment at the top but it remains unclear who is going to prevail.

If we look at one of the most interesting coming battles in tech, the voice interface race, the data is less clear.

I think we haven’t really gotten going on this one. But it is an important one as Chris Dixon explained in a really good blog post last week.

My semi regular Google Trends session today confirms what I’ve known for a while and have written here before. We are largely moving on from mobile and social in terms of big megatrends, video is being played out now, and its not yet clear what is going to emerge as the next big thing. Google is betting on AI and I tend to agree with them on that. Voice interfaces may be a good proxy for that trend.

Fun Friday: What To Do With Your DNA Information

I got my 23andme DNA report back this week. I shared it with my family (parents, siblings, wife, children) and participated in the “DNA Relatives” program that shows me likely relatives who have done 23andme. I found the information that came back to me from this sharing to be really interesting and potentially quite valuable.

I had lunch yesterday with a friend who I am not going to name to respect his privacy who spent many years trying to find his mother and finally tracked her down using public DNA records. It was an incredibly moving story and I am still thinking about it today. Stories like his make me feel that we ought to be more public with our DNA so that matches like his can be made. The DNA match he made was not to his mother. It was to his aunt, who then got him to his mother.

Obviously there are reasons not to be public with your DNA. The one most commonly mentioned is potential impacts on life insurance.

I started a Twitter poll to see how my Twitter followers feel about this issue. Feel free to participate in it and let’s talk about this issue today in the comments.

Fun Friday: AR and VR

I’m pretty skeptical about the early implementations of Virtual Reality and Augmented Reality. I think the early versions are expensive, require powerful computers, are tethered, require headsets, and can cause headaches and worse. But I am in the minority in our business and in the tech community. VR and AR are among the most hyped and invested new areas of tech right now.

So let’s talk about this today on fun friday.

Are you bullish on AR and VR over the next several years? If so, why?

Or are you with me that the early implementations will underwhelm?, If so, why?

What Android Phone Should I Get?

We are heading back to NYC tomorrow and, among other things, that means I can end my 6 months on iOS. I force myself to spend six months of the year on iPhone to make sure I’ve got my head wrapped around that platform and how it is changing and evolving. But I feel like it costs me a pretty significant productivity hit and I am eager to get back on Android.

So I need to decide which phone I am going to get. I am thinking of buying a Nexus 6P directly from the Google Play Store. But I am open to other ideas and would welcome them.

Here are my needs/desires:

  1. Phablet form factor/size
  2. Stock Android (no bloatware from carrier issued phones)
  3. Unlocked device that can run on any carrier
  4. Lots of memory (at least 64GB)

So with those needs/desires, what phone should I get?

SoundCloud Go

Today is a big day for our portfolio company SoundCloud. They are launching SoundCloud Go in the US today. They plan to launch SoundCloud Go in other parts of the world as soon as they can get the rights together to do so.

SoundCloud Go is the ultimate music service, giving listeners access to 125 million tracks from all over the world, offline or online, and ad-free. For comparison, traditional music subscription services, like Spotify and Apple Music, offer access to roughly 35 million tracks and internet radio services, like Pandora, offer access to roughly 2 million tracks.

I’ve had beta access to SoundCloud Go for the past month and it is an entirely different experience than the other premium music services. Here are some of the things you can only do on SoundCloud Go:

  1. build a playlist that includes the top hits, emerging unsigned artists, and remixes and listen to it on the subway to work
  2. stream your favorite podcasts online or offline and ad free
  3. listen to mixtapes legally in a way that honors the rights of the underlying content creators
  4. start a listening experience with a top hit and find emerging artists that are similar

You can either build a content platform on the internet top down or bottom up. It is easier to do it top down, going to the industry for the content. But it is better to do it bottom up, going directly to the creators for the content. Because a service with an upload button in it is fundamentally different than a service without one.

The bottom up approach can be harder to pull off, but the services that have done it like YouTube and SoundCloud are special.

I am listening to my favorites on SoundCloud Go while I write this. In that playlist I have Kanye and I have my friend Noah who grew up with my son and is an emerging artist. Both Kanye and Noah have profiles on SoundCloud. Both Kanye and Noah upload tracks they make to SoundCloud. So SoundCloud Go is the democratic, open, all inclusive music service, built for creators first and foremost, but also perfect for listeners.

To try SoundCloud today, go to https://soundcloud.com/go. It is $9.99 on desktop and Android. If you are an iOS user, I would recommend you subscribe on web and then enjoy on your mobile. There is a 30 day free trial. I hope you enjoy SoundCloud Go as much as I do.