This is so good I decided to go with back to back videos this weekend.
Posts from VC & Technology
But I’d like to take a second to tell the story of Songza as I know it. I am sure there are lots of parts of this story that I don’t know but the parts I do know make for a great story and now is a good time to tell it.
A few Brown University students had a great idea in 2006. They felt that mp3s should be priced based on demand not on a fixed price. So they started a company called Amie Street and built that service.
I first met them at some point after they had graduated from Brown and moved to NYC. I liked the idea a lot but was hesitant to invest. Others were not and they raised some money and chased that dream.
At some point Amazon got involved, I think as an investor. The Amie Street model ultimately did not pan out and in 2010 it was sold to Amazon. I don’t know the terms of that transaction but it did allow the team to stay together and work on a something else.
Long before the sale to Amazon, in October of 2008, Amie Street acquired Songza, a music app that was built by Aza Raskin and Scott Robbin.
After the sale of Amie Stree to Amazon, the team focused on Songza and iterated on it for a few years until they landed on the concierge user interface that helped popularize Songza.
I started using Songza in early 2012 and have been actively using it ever since.
I have three modes for listening to music and a primary services for each.
But back to the story of Songza. Over time Songza built a popular music service and they raised some more capital in the fall of last year. We spent some time with them during that process but we were already knee deep in online music with Turntable (RIP) and SoundCloud.
Every interaction I’ve had with the Songza team has been fantastic. They are great people. And every interaction I’ve had with the Songza service has been equally good. Which furthers my view that great people build great products.
I wasn’t surprised to see that they sold to Google. The streaming music business is hard. And the big platforms understand that music is a great audience builder and retainer. And Google has been a great home to great products (YouTube, Android, Nest, etc).
So that’s the end of my story. It has a happy ending.
If there is a moral to this story it is that tenacity pays off. The Songza team graduated from college eight years ago and worked on two separate services over that time with a fair bit of success and failure. They hung together and built something that is very good. And they got a good exit. As JLM would say “well played.”
This past week YC did their first Startup School in NYC. I was honored to be part of it. Aaron Harris and I did a fireside chat. It’s about 25mins long. I hope you enjoy it.
By the way, how awesome is the thumbnail they chose for the video? I need to get a copy of that image.
Marc Andreessen posted a tweetstorm last week and he talked about how to think about seed financings and how they lead into Series A and Series B rounds.
Feature request for Twitter: Please make it possible to permalink to and embed a tweetstorm. You can call this the @pmarca feature.
I replied to item 6/ of his tweetstorm:
@pmarca I assume Seed is to build product and get to PMF, Srs A is to build business, Srs B is to scale business
— Fred Wilson (@fredwilson) June 14, 2014
I feel very strongly that seeds should not be as large as they are these days and they should not be used to fund anything other than building product and finding product market fit.
It is possible to raise a large seed that, in theory, could fund all of that, plus a lot more. And all entrepreneurs are encouraged and interested in taking as much capital as they can given the dilution that they can stomach.
But I’m old school. I think of building a startup and funding it as walking up a flight of stairs. My partner Albert prefers the videogame (leveling up) analogy. Both work. I will stick with stairs.
The first step you need to climb is building a product, getting it into the market, and finding product market fit. I think that’s what seed financing should be used for.
The second step you need to climb is to hire a small team that can help you operate and grow the business you have now birthed by virtue of finding product market fit. That is what Series A money is for.
The third step you need to climb is to scale that team and ramp revenues and take the market. That is what Series B money is for.
The fourth step you need to climb is to get to profitability so that your cash flow after all expenses can sustain and grow the business. That is what Series C is for.
The fifth step is generating liquidity for you, your team, and your investors. That is what the IPO or the Secondary is for.
That is a very simple view of the world. Very few companies will walk up the stairs easily and hit each one perfectly. Shit happens. And we all know that and can deal with that.
But I will tell you that the companies that have performed best in all the portfolios I’ve been involved with over the years have climbed those stairs more or less like that.
I don’t think its a good idea to jump over the first three steps and land on the fourth even if you have the legs (and funds) to do that. It is risky. If you don’t land it right, you can slip and fall. And its hard to get up if you do that.
Brian Watson spent a little more than two years at USV and yesterday was his last day. He’s moving on to an operating role in a fast growing company that will remain nameless until Brian decides to tell that part of his story (soon). We have a two year rotational analyst program at USV that has produced an incredible alumni class and Brian is now a member of that illustrious group. He has a very bright future ahead of him.
Brian took the time to write a post on the things he learned at USV. I kidded him yesterday that it could have been a tweet storm because it’s chock full of 140ish character lessons learned. It’s a great collection of insights and I would encourage everyone to read it.
Our analyst program is a two way street. We teach our analyst things and they teach us things. Brian has taught me a lot. He was never afraid to walk into my office and say “we aren’t paying attention to this and we should” and he did that a lot.
I am a pretty directed person in the office and I am sure I put off a “don’t bother me” vibe. Brian ignored that and I appreciate it.
Here are a few of the things that Brian taught me in no particular order:
- Photos are the killer content type on mobile. Quick to consume like text, but easier to produce on a phone.
- Pay attention to what Apple does. It is more important than you think.
- Tech is fashion as much as you don’t want to admit it.
- If you insist on using everything we invest in, we will miss important things (Tinder).
I am proud of many things about USV, and Brian noted a bunch of them in his post, but the thing I am most proud of is the people that collectively make up USV, past and present. Brian is a great representation of that and I wish him well.
My favorite talks are between interesting people who know each other well. This talk is one of those. Joi and Reid have been friends for as long as I’ve known them, which is over a decade.
Reid is the founder and Chairman of LinkedIn and a leading VC with Greylock. Joi is the Director of the MIT Media Lab and formerly the Director of Creative Commons.
Thanks to Tyrone who sent this one to me earlier this week.
Yesterday, on stage at an event hosted by our portfolio company Disqus, it was suggested that I was “trolling Apple” with the comments I made at TechCrunch Disrupt. I explained that I was not trolling anyone and that I attempted to honestly answer a question about the changes afoot in technology. I think there is a fundamental and important distinction between a device focused strategy and a cloud focused strategy.
Carlos Kirjner is an analyst at AB Bernstein who covers Internet companies. I was reading his analysis of Larry Page’s letter to shareholders this morning (the analysis is not a public document and I cannot link to it).
In Carlos’ analysis, he wrote this:
We believe … Larry Page’s discussion about the new mobile, multi-screen world …. is really about the importance of cloud services in that world. This is by no means a trivial statement and we believe goes against a more device centric model favoured, we believe, by Apple.
Many interpreted my comments as anti-Apple and pro-Google and I guess they were. But I was attempting to make a larger point. Which is that a device centric strategy is not a winning strategy in my mind. The big gains from technology in the coming years will come from things like machine learning and collective intelligence. Hardware and operating systems are important but to some extent a commodity at this stage of the game in mobile. Yes, we will see more sensors, better screens, better battery life, and more and more technology packed into these mobile devices. But I don’t think any one company has a lock on all of the device level innovation and I worry that one company, Google, is developing a very large and sustainable advantage in machine learning and collective intelligence that will be hard for anyone to compete with.
So when I look at which top technology company is best positioned for the next decade as I see it unfolding, well that’s an easy answer in my mind and that’s the answer I gave.
I touched on the concept of App Constellations in my post on Friday about Swarm. I’ve been thinking about this concept for the past week and I think its an important development in the world of non-game native mobile applications.
If you made a list of all the non-game mobile apps that have more than 10mm MAUs, it would be a pretty short list. It probably would not look much different than the top 100 or 150 free apps in the iOS and Android app stores without all the games. In a leaderboard driven world, the big get bigger and everyone else goes home. We’ve discussed this phenomenon many times on AVC, most recently here.
Early last week my colleague Brian showed me the home screen of his iPhone.
He pointed out to me that he had three Dropbox apps on his home screen – Dropbox, Mailbox, and Loom. He said he could imagine a world in which his entire home screen was populated by apps from a few of the top companies.
So that got me thinking. Not only do we have a rich get richer dynamic in mobile apps, but we also are witnessing a maturing market consolidating. The big mobile app companies, Google, Facebook, Dropbox, Twitter, Yahoo!, and most recently, if you believe the rumors, Apple, are acquiring the leading mobile apps, further concentrating the list of companies that have apps on the leaderboards and apps on our home screens.
But if that was not enough, two additional trends are worth noting in these emerging app constellations. Many of these app constellations offer a single login across all of their apps and if you are logged into one of their apps on your phone, you are logged into all of their apps on your phone. This is particularly helpful when downloading a new app that is part of a larger constellation. It is also helpful for CRM and ad targeting.
And we are seeing increased use of deep linking app to app among the apps in the same constellation. It is increasingly possible to do deep linking app to app between apps that are not part of a single constellation. Facebook and Twitter are making it easier for third party developers to take advantage of deep links in their apps to do this. But when you control a constellation of apps, it is much easier to make deep linking from app to app a standard across all of your apps. This is a very big deal because it creates a web like experience on mobile and the fluidity of that experience is very engaging, further drawing users in.
These app constellations are possibly the only sustainable answer to solving the distribution conundrum in mobile – how do I get around the app store leaderboard traffic jam? If you own a leading constellation, you can use your apps and your relationship with the users of those apps to promote and distribute new apps that you either build or buy. This promotion is “in situ” right on the mobile phone where the consumer’s attention is increasingly placed. I see this as yet another “rich get richer” dynamic in the mobile ecosystem.
It is interesting to contrast all of this to what happened in the last downloadable software phase in tech – PCs and PC Software. In that world, Microsoft’s Windows OS became totally dominant and led to a dominant application monopoly (Outlook, Excel, Word, Powerpoint, etc). In native mobile, we have a duopoly with iOS and Android and what looks like at least six App Constellations (Google, Apple, Facebook, Twitter, Yahoo!, Dropbox). There may be some other important constellations emerging. I would love some suggestions of other ones in the comments (Foursquare?).
Here’s my home screen. Other than my total and complete capitulation to Google, my phone isn’t yet a collection of app constellations – other than the USV constellation
But I think it is likely headed there along with all of your phones.
A couple weeks ago, I sat down with Mike Arrington to kick off TechCrunch Disrupt NYC. Everyone reacted to my comments about Apple, which were simply a reaction to a question posted by Arrington. I’m not backing away from those comments, but I was a bit taken aback by the vitriol that came at me in the days after this talk.
We covered some interesting territory, including privacy, valuations, and the NYC tech scene. It’s about 20mins long but you will have to wade through the opening ceremonies (3-4 mins) to get to our talk.