Posts from Web/Tech


For as long as the web has been around, there have been entrepreneurs trying to build businesses around lists. And I’m having a tough time thinking of any company that has really nailed it in this category.

For one thing, there are two modes of listmaking; making lists for yourself (task management) and making lists for others (publishing). It would seem that by focusing on the single user case (making lists for yourself) a startup could bootstrap itself into a network (making lists for others). But to my knowledge, no startup has successfully done that. I wonder if nailing the single user case forces a company to build features that are orthogonal to the publishing use case.

It is certainly true that there have been some decent exits in this category. This past summer, Wunderlist was bought by Microsoft. Wunderlist is a great product, but to my mind focused more on the single user case and it never really broke out into a network.

Listmaking is the kind of thing that really lends itself to the internet architecture. There are a relatively small number of people who are obsessed with listmaking. But most people are into consuming lists. So, it would seem that, if you can get the obsessed listmakers on your platform, you can build a publishing network that millions will use without having to create any of the content. That’s a recipe for success.

Entrepreneurs continue to explore this area. Recently Expa launched Kit which is listmaking for products. This is an idea that has been tried a lot without any obvious breakout successes. So it is still vacant whitespace as far as I can tell.

I wonder if listmaking is really a vertical thing instead of a horizontal thing. That would suggest that there will be successes in verticals like food, travel, shopping, reading, film, music, etc but that each will be its own thing and not part of some meta listmaking community.

I frequently use the Foursquare app to make lists while I am traveling or doing something new and interesting. Yesterday the Gotham Gal and I went on an art gallery walking tour in the lower east side of NYC. I made this list of art galleries below Houston Street while we were doing that. It is simple to build a list on the go in Foursquare if you know how to do it. I would love to see Foursquare invest more energy in helping users make lists and consume lists. Using a geolocated and geosorted list on your phone while you are exploring a new area is a powerful and magical experience on a smartphone.

I am somewhat perplexed by the lack of breakout success to date in listmaking. It’s an obvious category. And it is certainly not for lack of trying. The commercial internet is 20+ years old now. So you’d think someone would have cracked the code by now. But I don’t think anyone has.

Watch What They Do, Not What They Say

Many of our portfolio companies struggle with the idea of changing something fundamental about their service, such as Twitter’s recent change from stars to hearts. It incites fury from the loyal users who believe they know what is best for the service.

I always encourage our portfolio companies to A/B test a change in a relatively small but representative sample of their users and to watch what users do and don’t spend too much emotional energy on what users say.

Twitter’s switch to hearts has resulted in more engagement with the favorite function. I would bet that Twitter had that data and understood it before deciding to make the change. You can’t make such an important change without first testing it to see what happens.

Loyal users are always going to hate a big change to a service they use every day. I recall the outrage when Facebook rolled out the news feed, which has become the central feature of its product. It was as if they had destroyed the service.

Users’ actions will tell you what they think about a change more than what they write (on your platform and elsewhere).

For what it’s worth, I loved to move to hearts the minute they did it. I feel like I favorite way more now. But Twitter would know. They have the data :)

That Time Of The Year

Last night I got home to watch the World Series and turned on the TV and fired up Twitter. In addition to the Mets Royals, you had the GOP Debate, and fourteen NBA basketball games. Twitter was on fire. I didn’t change the channel once on the TV, choosing to continue my pain from the night before and watch the Mets lose back to back games to the ferocious Kansas City Royals. But my Twitter feed kept me apprised of everything else going on. The Knicks beat the Bucks, the Bulls beat the Nets, KD is back and the Thunder beat the Spurs, and, apparently, Rubio had his coming out party last night in the GOP debate. I’ve always thought the GOP race was eventually going to come Rubio’s way. He’s the best of the bunch even though I prefer Kasich.

This weekend will have the World Series at Citifield, NBA games galore, and the NFL in mid-season form. It’s that time of year when all the major sports are in action. It’s a wonderful time for sports fans and a wonderful time for Twitter too.

I will leave you with this. Twitter does SportsCenter.

Where Is The Value In The Tech Stack?

Yesterday’s discussion was fantastic. Days like that are where the USV community really shines.

David argued that data is the new oil, not software. There’s a lot of validity in that comment.

Kirk pointed out that ISPs are the pipelines of the digital revolution and I liked that.

And TR followed Kirk with this observation:

Oil in all its various forms (software)
Pipeline/delivery (networking/access)
Infrastructure/Drilling Equipment (hardware)

What they were all discussing is the tech stack and where the value is.

A simple version of the tech stack of the information revolution would look something like this:


Applications (software)

Infrastructure (software)



At USV, we have invested mostly in the top three layers, and most actively in layers four and five (Applications and Data), but we are increasingly drawn to Access and Infrastructure (software).

But, as I tried to point out in the Dentist Office Software Story, software alone is a commodity. You need data to provide defensibility and differentiation. And so most of USV’s investments have been companies that combine software and data to provide a solution to the market that we believe is defensible, usually via network effects which are a data driven phenomenon.

So why would we move down the stack to Infrastructure (software) and Access? Well there are data driven network effects in those layers too if you know where to look for them. And, increasingly, we are finding them there and finding them at prices that make a lot more sense to us too.

So, in summary, I agree with David that software alone is not the new oil. But neither is the entire tech stack. That’s why I moved away from the phrase “tech is the new oil” that I used in the comments the day before. I also don’t think data alone is the new oil.

The new oil is going to be found in various places in the tech stack where software and data come together to produce a service that has high operating leverage at scale and is defensible by the network effects that the data provides. That’s a mouthful. Software is the new oil sounds a lot better. But the mouthful is more accurate.

Software Is The New Oil

I was with some friends this weekend and one of them was talking about an investment committee meeting he attended and there was a discussion at that meeting about some of the threats out there in the macro investment landscape. One of them was “vanishing liquidity” and the significant change in net cash flows from the global oil sector. Oil producing regions have gone from being a massive cash generator to a relatively small one in the past few years. Now this could well be a temporary thing as the oil market adjusts to some new realities. This post is not really about oil, even though that word is in the title of this post.

As I pondered that, I thought about oil’s role as the thing that captured the economic surplus of the industrial revolution. You can’t run factories, railroads, trucks, etc without carbon-based products and in particular oil. So oil has been a cash/capital magnet for the wealth that the industrial revolution produced. Those that owned oil producing assets (or better yet, oil producing regions) sat back and collected the economic surplus of the industrial revolution and that has been a path to vast wealth and economic power.

What is that same thing in the information revolution? And where is cash piling up around the world? On tech company balance sheets, of course. Apple has $200bn of cash on its balance sheet and produced $53bn of cash in the six months ending March 2015. Microsoft has $110bn of cash on its balance sheet and produced $30bn of cash in the year ended June 2015. Google/Alphabet has $70bn of cash on its balance sheet and produced $14bn of cash in the six months ended June 2015. Facebook could have $20bn of cash in the next year and could be producing $20bn of cash a year soon. Amazon, the company that “will never make money” surprised Wall Street last week with strong profits and it seems to me that they are going to start producing cash like these other big tech companies now.

It makes sense to me that software is the oil of the information revolution. Companies that control the software infrastructure of the information revolution will sit back and collect the economic surplus of the information revolution and that will be a path to vast wealth and economic power. It has already happened but I think we are just beginning to see the operating leverage of these software based business models. The capex spending necessary to be a software infrastructure provider at scale has shielded the cash producing power of these companies (and many others) and may continue to do that for a time, but I suspect at some point the profits are going to overtake the capex at a rate that the cash will be flowing out of software companies the way that oil flows out of wells.

Full Disclosure: The Gotham Gal and I own a lot of Alphabet stock and also shares in several hundred other software based businesses. We are long software.

Twitter Moments As A Platform

The conversation we had on this blog a couple weeks ago about Twitter becoming a journalistic entity by hiring editors to curate Tweets and create what is now known as Moments was interesting. But it missed something important about Moments that I did not realize at the time. Moments will be a platform for anyone to curate Tweets and publish them as Moments. I figured this out yesterday in this tweet conversation with Madhu who is Twitter’s product manager for Moments.

When anyone can create a Moment and publish it into Twitter’s Moment stream, then we will have something very interesting. A crowdsourced newspaper.

Think about following an event like Twitter’s Flight conference via the Moments interface. It would be way better than all the liveblogging services that I had to rely on yesterday as I wanted to follow what was going on there.

But a curated set of tweets could be used to cover a lot of interesting stories and events. You can see the potential of it in the current Moments stream, but the total number of Moments is small and not that many of them are interesting to me right now. Opening up Moments as a platform will change all of that. I can’t wait until that happens.

Winner Takes Most

The history of the Internet and mobile is that in many categories the winner takes most of the market:

  • Search – Google
  • ecommerce – Amazon
  • Social – Facebook
  • Ridesharing – Uber

We can go on and on with making a list like that and I have left off many many markets, but I think this short list I made at least gets the point across.

The reasons are many, but at the core are network effects and the fact that the more users and data a service has, the more value it can create for its customers and users.

We strongly believe in network effects at USV and look for them as the primary form of defensibility in the investments we make. We don’t always get things right and we certainly don’t always end up investing in the company that wins the market. But we understand how these things work and invest with the mindset that winning a market can result in a very large return on investment.

Lately, we’ve been wondering if there is an end to this pattern on the Internet and mobile. We think it is possible that an open data platform, in which users ultimately control their data and the networks they choose to participate in, could be the thing that undoes this pattern of winner takes most. The blockchain is the closest thing to emerge that looks something like that. But the blockchain hasn’t (yet?) shown that it can produce something important like Google’s search or Facebook’s social graph and until it does, we are just waiting.

This is an issue for society to ponder. As I have spent time in Europe this past month, it’s easy to see that the search engine they use here is Google, the social graph they use is Facebook, and so on and so forth. If the US produces the networks that win most of the market, that’s an issue for the rest of the world. The Chinese have dealt with that issue by protecting their market. The rest of the world (mostly) has not.

Will that always be the case? Will the countries with the most sophisticated tech startup communities end up winning the global economic race as we transition from an analog to a digital world in which the winners take most of the market?

It’s unclear to me how all of this plays out, but it’s been on our minds at USV and we are talking a lot about it. So I figured I’d talk a bit about it here too.

Video Of The Week: Kim-Mai Cutler and Sam Altman

This past week YC announced a $700mm Continuity Fund to allow YC to continue to invest in its portfolio companies. YC has become one of the most important investors in the startup sector and it’s leader, Sam Altman, is driving it to do more faster. This interview he did with Kim-Mai Cutler recently reveals a side of Sam that many may not see that often.

Twitter’s Moment

Ben Thompson has penned the bull case for Twitter the product, Twitter the company, and Twitter the stock in a blog post carrying the same title as this post.

Those who have been reading this blog over the past few weeks will know that I share Ben’s views and have articulated similar ideas on this page. It should also be stated that I am long Twitter the stock and subject to whatever emotions, conflicts, and other bad behaviors that generates.

Ben ends with something I have not articulated on this blog before but have felt since the day I sent my first tweet, and that is the notion that there is something special about Twitter:

There’s just something different about Apple, a company that seems so full of contradictions yet one that has continued to lead the industry both financially and in key innovations. I’d argue the same about Twitter: it doesn’t make sense, hasn’t really ever made sense, and perhaps that’s the reason it, and the irreplaceable ideas it contains, are so important.

I realize that I am horribly biased on this topic and that others may not see what I see. But I have always felt that Twitter is a special company, full of conflicts and contradictions, that, maybe because of them, had the potential to deliver something unique, different, and compelling. And I continue to believe that.

Twitter Moments

So the thing I blogged about last week launched yesterday. Twitter is calling it Moments.

I think this is a big deal for first time and casual users of Twitter. It’s an easier way to consume the content in Twitter for people who don’t have the time or inclination to customize Twitter to work for them the way many of us have.

Since the AVC community was fairly negative on this in concept, I’m wondering how all of you are thinking about it now that it is out. Let the conversation commence.