Our partner Brad has had an interest in Berlin’s growing tech ecosystem since the earliest days of USV. One of our first investors in USV is a good friend of Brad’s from Berlin. So he has been a big supporter of what is going on in Berlin and goes there frequently, as we all do. He has developed a close relationship with Blue Yard, a new VC firm in Berlin, and he and Blue Yard’s co-founder Ciaran O’Leary did a talk there last month. It’s really good (and not too long at 24 mins).
Posts from VC & Technology
There is nothing the tech media and the broader press likes to ask me about more than bubbles.
“Is Snapchat a bubble?”
“Is Uber a bubble?”
“Is Facebook a bubble?”
“Is seed investing a bubble?”
“Is growth investing a bubble?”
And on and on and on.
It’s like bubbles are a disease that we need to eradicate.
Don’t get me wrong. Bubbles are something investors need to be careful with. You can make money on the way up but lose it all on the way down. I’ve done that. It hurts.
So at USV, we are careful to invest early in cycles and get defensive later in the cycle and take profits when they are available. If anything, I think we have been too conservative in this regard.
However, as I pointed out in a conversation with my colleagues yesterday, bubbles are a necessary part of any technology cycle, large or small.
Carlota Perez talks about this in her seminal book on technology cycles, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.
But maybe the best thing written on this topic is my friend Tom Evslin‘s blog post from January 2005, when the investment world was just waking up to the fact that the Internet bubble wasn’t the end of things, but just the beginning. I particularly love how he ends that post:
Historically, the results of bubbles have usually been more empowerment for more people. Historically, bubbles have provided an explosion of funds which blasted away the entrenchments of an old oligarchy not only to the benefit of entrepreneurs but also to the benefit of consumers in general. Think of the constantly falling price of transportation and communication.
If we should find a way to stop bubbles, if we were to put the genie of irrational exuberance back in the bottle, the winners will be whoever are the incumbents at the time and the losers will be all those who could benefit from another great breakthrough in infrastructure like railroads, canals and the Internet.
Bring on the next bubble. And invest in it at your own risk. I will.
Jerry Colonna, Brad Feld, and I go way back in the venture capital business. We met in the mid 90s and worked very closely together during the late 90s. I still work closely with Jerry and Brad but not quite as intensively as we did back then.
We got together a couple weeks ago (virtually) and chatted for an hour about the personal struggles we all dealt with and overcame as we grew up in the business.
It’s a pretty revealing discussion. I just listened to it and cringed a few times. Jerry has this uncanny ability to get people to say things they don’t often say. He did that well on this one.
There is a lead in of about five minutes. The conversation starts after that.
The combined company, which will operate under the MyTaxi brand, will be the dominant taxi hailing app in Western Europe.
Hailo is huge in the UK and Ireland and has a strong position in Spain. MyTaxi operates in Germany, Australia, Italy, Poland, Portugal, Spain, and Sweden. So this combination is a great strategic fit and the new company will benefit from a lot of synergies.
Andrew Pinnington, the current CEO of Hailo, will become the CEO of MyTaxi and the company will consolidate its operations in Hamburg Germany. The combined company will be majority owned by Daimler.
Unlike the US, the regulated taxi business in Europe got on the ridesharing bandwagon early and it is as simple and easy to hail at taxi in Europe as it is to use Uber. If you travel to Berlin frequently, you will know that ridesharing in Berlin is all about taxis.
I can’t reveal numbers, but the combined MyTaxi/Hailo business will operate at a scale that puts it in the big leagues along with Uber and a number of other emerging winners in the ridesharing business.
This is a great outcome for Hailo and I would be remiss if I didn’t thank Andrew Pinnington for his incredible leadership at Hailo over the past 18 months. Without that, none of this would have been possible.
When you buy a stock in the public markets, that is passive investing.
When you buy 10% of that public company in the open market and then seek to obtain board seats, that is active investing.
When you buy a REIT, that is passive investing.
When you buy vacant land, build an apartment building, and lease it up, that is active investing.
When you buy a treasury bill and collect interest, that is passive investing.
When you make “hard money loans” to developers, that is active investing.
When you toss some money into an angel deal that others are leading, that is passive investing.
When you lead a seed round and take a board seat, that is active investing.
Both models work, but when you do passive investing, it is best to invest in liquid markets so you can get out when things aren’t going your way.
When you do active investing, you are most likely investing in illiquid markets and you have to invest your time, energy, and intellect to make sure things go your way.
It is hard to “beat the market” when doing passive investing. That doesn’t mean you can’t make good money doing passive investing, particularly over a long period of time.
But like everything else in life, if you really want to make big gains with your investments, you are going to have to invest your time, energy, and intellect as well as your capital.
And that means being an active investor.
That’s how I like to invest and it limits how many investments you can make. It is hard to scale “active investing.”
One of the things I see in the angel, seed, and VC markets is investors and firms trying to scale their investing while pretending to be active investors.
I don’t think that is possible.
You have to either choose to be active and concentrated or passive and diversified. Either model works, but I think you need to be one or the other. It’s not really possible to be both.
Matt Turck has penned a “State Of The City” post about where the NYC tech ecosystem is right now. I get asked this question all the time and I haven’t been doing a great job of answering it. I will use some of Matt’s work the next time that happens.
Here’s some of my favorite points from Matt’s post. If you live and work in the NYC tech ecosystem, or care about it, you should go read the whole thing.
NYC as a leading AI Center:
The New York data and AI community, in particular, keeps getting stronger. Facebook’s AI department is anchored in New York by Yann LeCun, one of the fathers of deep learning. IBM Watson’s global headquarter is in NYC. When Slack decided to ramp up its effort in data, it hired NYC-based Noah Weiss, former VP of Product at Foursquare, to head its Search Learning and Intelligence Group. NYU has a strong Center for Data Science (also started by LeCun). Ron Brachman, the new director of the Technion-Cornell Insititute, is an internationally recognized authority on artificial intelligence. Columbia has a Data Science Institute. NYC has many data startups, prominent data scientists and great communities (such as our very own Data Driven NYC!).
NYC as a home to “deep tech”:
Finally, one trend I’m personally particularly excited about: the emergence of deep tech startups in New York. By “deep tech”, I mean startups focusing on solving hard technical problems, either in infrastructure or applications – the type of companies where virtually every early employee is an engineer (or a data scientist).
For a long time, MongoDB was pretty much the lone deep tech startup in NYC. There are many more now. A few of those are in my portfolio at FirstMark: ActionIQ, Cockroach Labs, HyperScience and x.ai. But there’s a lot of others, big and small, including for example: 1010Data (Advance), BetterCloud, Clarifai, Datadog, Dataminr, Dextro, Digital Ocean, Enigma, Geometric Intelligence, Jethro, Placemeter, Security ScoreCard, SiSense, Syncsort or YHat – and a few others.
The Diversification and Broadening of NYC’s Tech Ecosystem:
One way of thinking about New York’s tech history is one of gradual layers, perhaps something like this:
- 1995-2001: NYC 1.0, lots of ad tech (Doubleclick) and media (TheStreet)
- 2001-2004: Nuclear winter
- 2004-2011: NYC 2.0, a new layer emerges around commerce (Etsy, Gilt) and social (Delicious, Tumblr, Foursquare), on top of adtech (Admeld) and media
- 2012-present: NYC 3.0 – in addition to the above, just about every type of technology covering just about every industry
Certainly, the areas that put NYC on the map in the first place continue to be strong. New York is the epicenter of the redefinition of media (Buzzfeed, Vice, Business Insider, Mic, Mashable, Bustle, etc.), and also home to many great companies in adtech (AppNexus, Tapad, Mediamath, Moat, YieldMo, etc.), marketing (Outbrain, Taboola, etc) and commerce (BarkBox, Birchbox, Harry’s, Warby Parker, etc.).
But New York has seen explosive entrepreneurial activity across a much broader cross-section of verticals and horizontals, including for example:
- Fintech: Betterment, IEX, Fundera, Bond, Orchard, Bread
- Health: Oscar, Flatiron Health, ZocDoc, Hometeam, Recombine, CellMatix, BioDigital, ZipDrug
- Education: General Assembly, Schoology, Knewton, Skillshare, Flatiron School, Codecademy
- Real estate: WeWork, HighTower, Compass, Common, Reonomy
- Enterprise SaaS: InVision, NewsCred, Sprinklr, Namely, JustWorks, Greenhouse, Mark43
- Commerce infrastructure: Bluecore, Custora, Welcome Commerce
- Marketplaces: Kickstarter, Vroom, 1stdibs
- On Demand: Handy, Via, Managed by Q, Hello Alfred
- Food: Blue Apron, Plated
- IoT/Hardware: littleBits, Canary, Peloton, Shapeways, SOLS, Estimote, Dash, GoTenna, Raden, Ringly, Augury, Drone Racing League
- AR/VR/3D: Sketchfab, Floored
I like the NYC 3.0 moniker. It’s a very different place to start and invest in tech companies than it was even five years ago. Bigger, deeper, broader, and scaling nicely. Just like the companies themselves.
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:
Saving myself the anguish of digging up the 2008 game spec & mock-ups we made for a AR treasure hunt/landmine avoidance game. #PokemonGO
— Liad Shababo (@L1AD) July 11, 2016
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.
I’ve been thinking about Amazon’s Lambda service which I mentioned in the Hacking Echo post last week. Lambda is not new, but last week was the first time I saw it in action. I need to see things in action to understand them.
Business model innovation is interesting to me, maybe more than technology innovation. Because new business models open up new use cases and new markets. And new markets create a lot of new value. And I am in the new value business.
Think about this value proposition:
AWS Lambda lets you run code without provisioning or managing servers. You pay only for the compute time you consume – there is no charge when your code is not running. With Lambda, you can run code for virtually any type of application or backend service – all with zero administration. Just upload your code and Lambda takes care of everything required to run and scale your code with high availability. You can set up your code to automatically trigger from other AWS services or call it directly from any web or mobile app.
“You pay only for the compute time you consume, there is no charge when your code is not running”
So we have gone from “you have to buy a server, put it in a rack, connect it to the internet, and manage it” to “you can run your code on a server in the cloud” to “you can run your code on a shared server in the cloud” to “you can pay for code execution as you use it”. And we have done that in something like ten years, maybe less. That’s a crazy reduction in price and complexity.
But we also have put a ton of code in an open repository that anyone can access and copy from.
So, like we did in the Hacking Echo situation, you can now browse GitHub, find some code, use it as is or modify it as needed, and then put it up on Lambda and pay only when you execute it.
I think this is going to make for a lot more hacking, experimentation, and trying new things.
And that is going to result in new use cases and new markets. It may already have.
We are entering the summer months when things move slower in the investor community. This is true of venture capital, but it is also true of other investment sectors as well. Summer vacations slow things down and investors also use the time to step back a bit and evaluate how the first half of the year has gone and plan for the second half.
I know many companies don’t like to raise capital in the summer months. While I understand that approach and it is conventional wisdom, I think the contrarian approach of raising in the summer can also work.
Raising money in the summer months will go slower and can be frustrating as you lose weeks at a time to vacations. Partner meetings are harder to get scheduled. And trying to get multiple potential investors on the same time frame is nearly impossible.
But the benefit of raising in the summer is that you are not competing with as many other companies to get the investor’s attention. You can more easily rise above the noise in the summer. Investors don’t take the summer off, they just slow things down a bit. So if you need to raise capital in the summer or just want to, you can make it work. You just need to allow more time for the process and be patient and flexible.
One advantage of raising in the summer is that you can take care of fueling the tank when things are slow with customers and be ready to step on the gas in the fall when things pick up again. The last four months of the year are often a sprint to the finish line and using up some of that energy raising is often suboptimal.
So if you find yourself in the market for capital this summer, don’t fret. But be prepared for a slog that doesn’t move as fast as you’d like it to. It’s the doldrums after all.