The Smart Watch

Last week, at an event I attended, I was at the bar after dinner and a few people sat down wearing the latest Android Smartwatch from Samsung.

There were a bunch of oohs and aahs.

I mentioned that I’ve never worn a watch and can’t imagine ever wearing one, no matter what is on it. I just have never gotten used to wearing something on my wrist, though I have tried many times.

I don’t think the ability to see notifications and calls coming in on my wrist instead of my phone will change that.

This reporter from New York Magazine suggests that nobody other than tech moguls and geeks are interested in smartwatches.

I don’t really have an opinion on whether the smart watch is going to be a hit or not.

But I do know that pulling my phone out of my pocket will remain the primary way I connect to the world when I am out and about.

I am not bearish on wearables in general however.

I really like wearing a “necklace” which I blogged about a few weeks ago. I like the vibration on my neck when a call comes in. I like being able to easily connect to the audio services on my phone without taking out the phone.

I can imagine there will be a plethora of wearables in the market in a few years and some of us will tend toward the watches, others will tend toward the necklaces, others will adopt the rings, and some will go for the glasses.

It will be fun to watch this market evolve.

Bitcoin and Charities

Tonight, at 6:30pm at NYU’s Eisner and Lubin Auditorium, I am giving a talk on the topic of Bitcoin and Charities. If you want to come, the ticket is $25, paid in Bitcoin, and all ticket proceeds are going to CSNYC.

We are expecting about 300 people right now based on ticket sales and there are another 100 seats left so there’s room if you want to come.

Here’s why I think Bitcoin will become important to charities.

Traditionally non-profits have spent upwards of 20% of their budget raising money.  The Internet, software, and the crowd have dramatically changed that.  Non-profits like Charity Water, DonorsChoose, and others have shown that using the Internet and the crowd can bring those costs down considerably. And now we have crowdfunding networks like CrowdRise that can help every charity be like Charity Water and DonorsChoose.

But there remains a pesky cost to online fundraising that is harder to eliminate and that is the payment processing fees. A charity may be able to lower their cost of fundraising from 20% to 5% by using these online tools, but virtually the entirety of that last 5% is going towards credit card processing fees.

This is where Bitcoin comes in. If you own Bitcoin, at Coinbase or in your own wallet, you can gift your Bitcoins to charity and save them pretty much all of their online fundraising costs.

The nirvana of charitable fundraising is that all of the money raised goes to the cause, not the operations and fundraising costs of the non-profit. Some non-profits have founders or boards that cover the overhead and fundraising costs so that all funds raised go to the cause. That’s how CSNYC works. The Gotham Gal and I cover the operating and fundraising costs. So if you make a donation to CSNYC, all of your funds go to our mission (which is bringing CS Education to the NYC public schools).

But most non-profits don’t have founders or boards that can support them like that. So when you make a donation, you are funding not only the mission, but the costs of raising those funds. The Internet and bitcoin can change that.

If you run a charity or work at one, consider signing up for a fundraiser on CrowdRise and connect with CrowdRise about accepting Bitcoin as an option. There is no less expensive way to raise money than that.

I will get into all of this in more detail tonight, including providing a basic description and history of Bitcoin, how it works, and why it is important. I hope to see you there.

Platform Monopolies

There’s an article in the NY Times Sunday Business Section today that lays out a very important question we have all been dancing around but will increasingly be dealing with. The article is nominally about Amazon’s fight with Hachette but it is really about internet platforms and monopolies.

The author of the NY Times piece tells the story of Vincent Zandri, an author of mystery and suspense novels, who has moved all of his publishing activities over to Amazon’s platform and is enjoying the benefits of doing that.

This could easily have been the story of the journalist who moves her writing from The Wall Street Journal to her own blog, or the story of the filmmaker who moves from the Hollywood studio system to Kickstarter and VHX. It could be the story of the band that leaves their record label and does direct deals with SoundCloud and Spotify. It could be the story of the yellow cab driver who moves his driving business to Uber or Sidecar.

The story of Vincent Zandri is the story of our times.

The Internet, at its core, is a marketplace that, over time, removes the need for the middleman. That is very good news for the talent that has been giving up a fairly large part of its value to all of the toll takers in between them and their end customers.

Take Etsy for example. Before Etsy, if you made knit hats, you would sell them to a boutique for $10, and that boutique would turn around and sell them to your customers for $25. Now you sell them to your customers on Etsy for $25 and pay a 20cents listing fee and 3.5% of the transaction and a payment processing fee. In the old model the knitter made $10 per hat. In the new model, the knitter makes about $23 per hat. That’s a big deal. And you see it all over the place in the Internet marketplace economy.

But there is another aspect to the Internet that is not so comforting. And that is that the Internet is a network and the dominant platforms enjoy network effects that, over time, lead to dominant monopolies.

We see that with Google today. Google’s global search market share is around 70%. It would be larger if not for China and Russia, where the governments have given benefits to local players. But even with its current market share, Google is pretty close to a monopoly in search. It is a benign monopoly for the most part and, as such, has largely stayed out of the sights of regulators. I, for one, am happy with that game of chicken between Google and the regulators.

Amazon is increasingly looking like a monopoly in publishing. This part of the NY Times piece is how all of these Internet stories have played out:

At first, those in the publishing business considered Amazon a cute toy (you could see a book’s exact sales ranking!) and a useful counterweight to Barnes & Noble and Borders, chains willing to throw their weight around. Now Borders is dead, Barnes & Noble is weak and Amazon owns the publishing platform of the digital era.

The same could be said of Google, Twitter, YouTube, SoundCloud, Uber, and all of the dominant networks that are emerging around us. From laughable toys to dominant monopolies in less than a decade.

It’s strange for me to write this post because this is our playbook at USV. We invest in networks that can emerge as dominant platforms by virtue of network effects. We like things that are laughed at. The more they are derided, the more we want to invest.

But here’s the rub. When a platform like Amazon emerges as the dominant monopoly in publishing, who will keep them honest? When every author has left the publishing house system and has gone direct with Amazon, what does that world look like?

That is the question the NY Times is asking in their story this morning. And that is an issue that we at USV have been confronting for a while now and we are investing against it.

We have invested in Wattpad, which is a bottoms up competitor to Amazon, as opposed to Hachette which is a top down competitor to Amazon. We think its easier for a more open, less commercial platform like Wattpad to keep Amazon honest than it is for a legacy publishing house.

We have invested in Sidecar, which has built a true open marketplace for ridesharing. We think its more likely that true peer marketplace will keep Uber honest than the legacy fleets of limos and taxis that are fighting for their life against Uber right now.

But maybe most importantly, we are investing in bitcoin and the blockchain, which is the foundation for truly distributed peer to peer marketplaces without the Internet middleman.

For this is the truth that we are now facing. For all of its democratizing power, the Internet, in its current form, has simply replaced the old boss with a new boss. And these new bosses have market power that, in time, will be vastly larger than that of the old boss.

So, as an investor, when you see a dominant market power emerge, you should start asking yourself “what will undo that market power?” And you should start investing in that. We’ve begun doing that, but are not anywhere near done with this effort.

Video Of The Week: The High Road With Mario Batali

A month or so ago, I taped an episode of The High Road With Mario Batali. We went to the Frick Museum, we bowled in the basement of the Frick, we ate grilled cheese sandwiches, and we rode around on the upper level of a double decker bus. Mario asked me a bunch of questions along the way. It’s about ten minutes long and it came out well. I apologize in advance for the ads at the start and in the middle.

Feature Friday: SoundCloud on Sonos

Yesterday Sonos announced a feature that I have been waiting years for. There is now an official SoundCloud app on Sonos.

To add SoundCloud to your Sonos system, you simply visit ‘Add Music Services’ in the new Sonos app and add it to your music services. SoundCloud tracks are also now available in the universal search feature in the new Sonos app.

We have had the unofficial SoundCloud hack for Sonos running on our systems for a long time now but it was a bit wonky to set up and it was not included in universal search.

If you want something to listen to this morning on your Sonos, you can try listening to my favorite tracks on SoundCloud.

Checking Your Work

I don’t recall who drove it into me when I was young, but I have always been obsessive about checking my work. Whenever I do a math problem, I take my answer and do a reverse check to make sure the answer makes sense. I do this even when adding a tip to a bill at the end of a dinner. It drives the Gotham Gal crazy to see me take so much time to do a simple math problem. It’s not even a conscious thing for me. It’s just how my mind works.

I tell all of you this because it relates to writing. I was talking to an educator that I respect greatly last night and I asked her what is the most effective technique for teaching kids to write. I expected her to say one on one editing sessions with a mentor, coach, or teacher was the most effective way to teach writing. But she told me that forcing kids to rewrite their work, solo, was the most effective technique to improve their writing.

When I write a blog post, I tend to write it as the idea forms in my brain. I write the whole thing out. And then I rewrite it. I go over every line and make sure the spelling and grammar are correct, I look at the phrasing. I consider the flow. I read it start to finish at least three or four times. I think about the whole and then each part. And I’ll cut out paragraphs, move things, rewrite parts, and mess with it for almost as long as it took me to write it in the first place. And I’ll do that even after I’ve posted it. I actually get some extra benefit from editing while the post is live. I am not sure why that is, but often times the best edits come to me after the post is live.

And so it turns out, if my educator friend is right and I would imagine she is, that this kind of obsessive self editing is the best way to become a better writer. I don’t consider myself a great writer by any means, but I have improved immensely over the years I’ve been blogging. Some of that, for certain, comes from writing every day. According to WordPress, I have written over 6,500 posts here at AVC. That’s a lot of writing. But you don’t learn as much from the process of putting words on paper (or online). You learn most from the process of perfecting the piece.

Based on the countless hours I have worked with my kids over the years, getting students to spend time on a project after they feel like they have finished it is really hard. They get annoyed. “It’s done, it’s right, why are you making me do this?” is a common refrain. But if you want your kids or students to learn and improve, you have to force them to do that. Like someone did for me when I was young. It’s a gift that pays dividends for me every day.

Amino

At USV, we have always been interested in communities. They are, in some ways, the iconic representation of our “large networks thesis”. We have been impressed by communities like Reddit, 4chan, and Hacker News. We love what our portfolio company Disqus has done to turn blogs like this one into vibrant communities. And we have turned our own website at USV into community, using Disqus and Twitter and link sharing.

We’ve long wondered what a native mobile community looks like. A few months ago we saw one when the two founders of Amino came into our office. They have built an app constellation of native mobile apps, each focused on a niche topic (like a subreddit). Examples are Minecraft, K-Pop, and Anime.

My partner Andy wrote a short post on USV.com about our investment in Amino yesterday. If you want to see what the future of communities might look like check out Amino. We are intrigued and excited to see how this plays out.

The Basic Income Guarantee

My partner Albert has begun a series of blog posts on a concept called The Basic Income Guarantee. This is fundamentally different than a minimum wage. It is essentially a safety net for a world where robots will be doing more and more of the manual and difficult labor that has, until now, provided income for unskilled workers.

I don’t have a formed opinion on this idea. I know that welfare didn’t work out too well in the last century. So I’m nervous about any system that encourages or incents people not to work. But if we really are headed into a world where there aren’t any low skilled jobs, then I guess we need to be talking about ideas like this.

All of Albert’s posts on this topic are here.

Silicon Valley: A Place Or A State Of Mind?

Marc Andreessen, as is his wont, posted a tweetstorm this morning that was a spirited defense of Silicon Valley. It starts with this tweet:

One thing I always think about in reading things like this is the use of the phrase “Silicon Valley” or SV as Marc uses in his tweetstorm. Let’s look at this tweet:

Does Marc mean “move to Silicon Valley” or does he mean “do a startup or join one and work on this stuff”?

I actually don’t know what Marc meant by his use of SV in this tweetstorm, but having spent 25 years in the tech/startup/VC sector and having done that time outside of Silicon Valley (the place), I am sensitive to the use of those words and always wonder.

We have about a third of our portfolio in the bay area. We have about a third in NYC. We have about a third elsewhere with a large concentration in Europe where I am heading in a few weeks to attend several board meetings. I like to think of the tech startup ecosystem as a global movement. We don’t invest in Asia, South Asia, or Latin America but I see more and more interesting things coming from those regions these days.

Silicon Valley is most certainly a mindset and it is one that is infecting large swaths of the global economy. I agree with Marc’s tweetstorm, in particular this one.

And I think, when applied to the global startup ecosystem, he is absolutely right.