Posts from VC & Technology

What’s Next

I am always thinking about what is next and I feel like I’m spending even more time this year thinking about this. All of us at USV seem to be pondering this question a lot right now.

I came across this nice post by Ben Thompson in which he ponders the question out loud, which is my favorite way to ponder.

Here is the money quote:

While the introduction of the iPhone seems like it was just yesterday (at least it does to me!), we are quickly approaching seven years – about the midway point of this epoch, if the PC and Internet are any indication.4 I sense, though, that we may be moving a bit more quickly: the work/productivity and communications applications have really come into focus this year, and while the battle to see what companies ride those applications to dominance will be interesting, it’s highly likely that the foundation is being layed for the core technology of the next epoch:

Ben’s framework is roughly similar to ours but his conclusions are a bit different as follows:

1) I would substitute personal mesh for wearables

2) I would substitute the blockchain stack for bitcoin

3) I would bet on messenger as the next mobile OS over anything else. We have already seen that happen in China.

But in any case, posts like Ben’s and what comes of them (this) are super helpful. Thanks Ben.

Video Of The Week: The Bubble Question

Since the LeWeb video I posted on wednesday was so long (>40mins), we are going with short and sweet today.

In late October, I did an event with City National Bank. For those that don’t know, City National is one of the banks that are active in the tech startup sector, banking and lending to startups. We did a “fireside chat” format which is really my favorite way to do a public appearance. And, of course, I got “the bubble question.”

Here is how I answered it in less than three minutes:

A Day In Berlin

Man is Berlin cooking. I mean the tech startup community, not the temperature. The Gotham Gal and I flew to Berlin yesterday and it was -2 celsius when we landed and it did not get a lot warmer. But I managed to do three events and met at least fifty entrepreneurs, maybe a lot more, in less than 24 hours.

The highlight of the day was an event we did yesterday evening in partnership with the Tech Open Air folks. My partner Brad was in Berlin for two days of meetings with one of our Berlin based portfolio companies and we did a joint appearance at a cool event space.

Brad and I don’t do a lot of joint appearances but we’ve always had a way of finishing each other’s thoughts. Spending eighteen months together raising a venture fund in 2003 and 2004 will teach you how to do that and you don’t forget.

I’m hopping on a plane in a couple mins and don’t have much more time for this blog post. But I would like to thank everyone who made our day in Berlin so great and to say to all the Berlin based entrepreneurs that I met that you are all very impressive. Makes me want to come back more often. Which we will do for sure.

Veniam

I’ve been talking a lot and writing a lot about mesh networking. I think it has the potential to wrest control of the last mile of the wired and wireless internet from the carriers who mostly control it around the world. Peter Kafka noticed yesterday that we had finally put those words to work with a mesh networking investment:

We made this investment, in a neat company called Veniam that comes out of Porto Portugal, some time earlier this year but they finally got around to announcing it yesterday.

My partner Brad talked about it in a short post on usv.com yesterday. And our partner in the investment Om Malik talked about it here.

I had breakfast with Om in NYC earlier this year and told him about Veniam. Those breakfasts do pay dividends eventually. This is how Om describes that breakfast and what came of it:

Union Square Ventures’ Fred Wilson introduced me to João after a long, spirited discussion about network neutrality, new models of networks, and policies that will influence the future of the internet. As we walked back to our office (aka my favorite cafe), he said, “You should talk to this guy in Portugal that my partner Brad [Burnham] has been in touch with. He has some interesting ideas.” An email introduction with João followed, and we were soon talking to each other via Skype. He quickly came to San Francisco, and we met for coffee on the weekend and then again the next day. João likes to talk: It is his super power. And here we are.

So enough about all of that. What does Veniam do? They make a “stack” of wireless technology that lets moving objects (think buses, garbage trucks, cars, vans, etc) carry a wifi access point/router and mesh with each other and anyone else who wants to join the network. With enough density, buses driving around your city can provision a wireless mesh that anyone can use on their smartphone when they are out and about. It’s a big vision and will take a lot of work (and luck) to realize, but this or something like it is eventually going to work and we are going to have a better way to access the internet on our phones than we have today.

Here’s a video of Veniam’s technology in action in Porto. I suspect you will want this in your city too. I certainly do.

The Emerging Architecture Of Internet Applications

The bitcoin blockchain is not just going to change the way money works on the Internet (and off). It’s going to change the way Internet applications are built. We have been working hard to understand how things are going to look in five to ten years and Joel Monegro has been providing much of that thought leadership inside our firm.

Since we are not into keeping our insights to ourselves, we have encouraged Joel to publish all of our work in this area (and every area). And today Joel has posted something that is really important and needs to be understood by every Internet/mobile entrepreneur, investor, developer, employee, and analyst. It is the blockchain stack and it looks like this.

blockchain stack

The most important things to understand about this blockchain stack are the overlay networks (most of which are still emerging), and the shared data layer and the shared protocol layer. Please read Joel’s post which describes each of these in some detail.

What is most important about this emerging stack is, in Joel’s words,

This imposes a very interesting set of challenges for developers, entrepreneurs, and investors as so much of the value in the current Internet stack will be commoditized by this architecture.

Differentiation and defensibility and network effects will be much harder to obtain with this architecture. Most things will work like email. Take your keys from one app to another and all your data and relationships come with it.

Fun times are ahead. Time to put your seat belt on.

Values and Culture

If the Uber mess over the past few days tells us anything, it is that values and culture matter more than anything. They seep into the product, the user experience, the brand, and ultimately define the company in the market. And all of this comes from the top.

It is absolutely true that when you hit the bigtime, which Uber most certainly has, the media will take it to you with a vengeance. I still cringe when I think about Jessi Hempel’s Fortune cover story about Twitter in 2011. They build you up and then they bring you down. That’s the media game. You have to expect it. And right now is Uber’s turn to get the takedown.

But Uber makes it so damn easy. The win at all cost approach is so deeply ingrained in the culture that they take that attitude with the media as well. And that’s not a winning strategy with journalists. I prefer the “turn the other cheek” approach when it’s my turn to get savaged. You just have to take the heat and move on. Fighting back will get you nowhere but a world of hurt.

USV has investments in not one, but two Uber competitors. So I’m not the least bit objective here. But I’ve watched this company closely for a long time now and what I see is ruthless execution combined with total arrogance. I am in awe of what they have done. It is about the best execution I’ve witnessed in a long long time. But I am not in awe of how they conduct themselves. And I wonder if the two are connected at the hip. Can they lose the swagger without losing the execution? I guess we will see. That is the $100bn question.

Capital And Success

In a post early last week I asserted this:

Access to capital and raising a boatload of it is rarely the thing that wins the market.

And then later in the week I saw this tweet

And then this one

These tweets are about the competition between our portfolio company DuckDuckGo and another search engine called Blekko.

Blekko has raised $60mm to date and DuckDuckGo has raised $3mm (and never spent it).

In that post last week, I also asserted this:

Product execution, network effects, go to market strategies, and a few other things are what allows companies to win the market

It is what you build, how you go to market with it, and how you monetize it that will determine your success. By all means raise money, from USV if at all possible, but don’t fool yourself into thinking that raising money is the secret to success. It is decidedly not.

Feature Friday: Distributed Identity

Last year at LeWeb I talked about four areas that we are looking at closely to make investments in. One of them is identity. I said this at the very end of my talk:

I predicted that there would emerge a “bitcoin like protocol” for identity. And we’ve been looking for that.

One thing we realized along the way is that this could be built on top of bitcoin or another blockchain. And so earlier this year we made a seed investment in a startup called OneName that is building exactly that. On Wednesday of this week, OneName announced a bunch of things, including our investment, and my partner Albert wrote about OneName at usv.com.

Now many will say “well Facebook, Google, and Twitter handle that pretty well for me” and they would be right. But are you really comfortable with Facebook or Google operating the identity layer of the Internet? I am not. And I think over time less and less of us will be.

But the answer isn’t another startup controlling the identity layer of the Internet either. The answer is a distributed ledger of identity that is open and not controlled by any entity. And that sounds like an application for a blockchain if there ever was one.

I have cleared my identity on the blockchain and it is here. I have verified it on Twitter and Facebook and you can send me bitcoins through it. It’s not much today, but in some ways it is everything. Because everything can be built on this and our hope is it will.

To date about 20,000 people have cleared their identity on the blockchain via OneName. My hope is that number will be in the millions within the next year. If you want do do that today, go here and get started.

Messing With A Competitor’s Fundraising

I saw a post that described how Uber tried to mess with Lyft’s fundraising. This is not a new tactic. I have seen it used for as long as I have been in the VC business. It is, however, unethical and unsavory, just like the companies that use it.

And it is one other thing, ineffective. When I get a phone call from a company telling me that they are going to raise more money and we should think about investing in them instead or at least not investing in their competitor, I hear fear and it makes me more excited about investing in the competitor. If you can’t win in the market on the merits and have to turn to messing with a competitor’s fundraising, what does that tell you about the defensibility and differentiation of a company’s service?

And when another VC calls me to ask about a company that competes with our portfolio company, I don’t bother to trash talk the competitor. I just tell them the pros and cons of the market, the two companies, how I think things will play out, and then let them make the investment decision on the merits. I assume the competitor is going to get funded from someone so I might as well provide an honest assessment of the situation.

Capital is not normally a recipe for success vs competition. Product execution, network effects, go to market strategies, and a few other things are what allows companies to win the market. Access to capital and raising a boatload of it is rarely the thing that wins the market.

And there is a ton of money in the market for funding startups right now. When the CEO of one of our portfolio companies tells me one of their competitors is raising money, I always tell them “assume your competitor will raise successfully and raise a lot” because that is what is happening in the market today.

Don’t waste your time trying to mess with a competitor’s financing. It doesn’t look good, it won’t work, and your time and energy is best spent elsewhere, where the real competition happens, product and market.