Fun Friday: A Blast From The Past

Last week I came into the USV office after being away for most of the prior week and Lauren said “I’ve got some photos of you on my desk.” I wasn’t expecting any photos so I was curious. She handed me a manilla envelope and it was from Euclid Partners, the first venture capital firm I worked at. I guess they were cleaning up their files and found some old marketing materials and sent over the photos of me.

This is me in 1988 or 1989.

FW Euclid

 

I was 27 or 28 and the Gotham Gal and I were just married. I worked in Rockefeller Center (you can see some of the Rock Center buildings in the background). I wore a suit and tie to work every day. And the device behind me is the Information Appliance, built by Jef Raskin, who designed the original Macintosh before Steve Jobs pushed him out of Apple and took over the project. Euclid Partners was one of the VCs behind Jeff’s startup, Information Appliance, and I had one of them on my desk. I would have preferred if Euclid had sent me that computer. It would be a mighty fine addition to my collection of failed devices. But this picture isn’t too bad either.

Since it’s friday, let’s do a fun friday and post throwback photos of all of us in the comments. This should be a blast.

Figure1

Last week I wrote the Dentist Office Software Story and the top comment on that post was this from LIAD:

….along comes Sevin Kystrom, he only cares about looking at photos of teeth. he unbundles photos from denstry.com by creating a standalone app called teethagram. users love it. he sells it back to dentistry.com for $1bn

I kind of flipped out when I saw that comment because it describes our most recent investment, Figure1, which my partner Andy blogged about at usv.com yesterday. We had closed but had not yet announced the Figure1 investment when LIAD made that comment.

Figure1 is “instagram for doctors.” It’s not for dentists, as LIAD’s fictional company teethagram is, but other than that, and the sale for $1bn, the story is pretty much the same.

We have believed that simple, easy to use, photo centric apps on mobile have the potential to become very large businesses for a host of reasons. First and foremost, as Brian Watson taught me, photos are the atomic unit of mobile. It’s easier to snap a photo and post it/send it, than it is to do anything else, including write something. And, as the old adage explains, a picture tells a thousand words.

A doctor can say “I’ve got a patient with a very rapid A-fib” or she can send this to her colleagues:

A-fib

There’s a hell of a lot more info in that EKG than a doctor could type into a text message or email.

But the even better thing is the conversations that instantly develop around these images, like this one:

I think it’s rapid a-fib. I think the ischemic changes are due to the rate. Give them some #Amiodarone and see what happens when the rate sloes down.

Instagram is a powerful product. And most people know how to use it and the value of the interactions around photos that it produces. Like our portfolio company Edmodo, which took the Facebook UI and applied it to teachers and students in K-12 education, Figure1 takes a popular and effective UI and applies it to an industry in desperate need of change.

I’m super excited about the value Figure1 provides to doctors and their patients and I am really pleased that the Figure1 team agreed to work with USV as they build their business.

The New Foursquare

Today our portfolio company Foursquare is launching the all new Foursquare. You can download it here.

There’s a really interesting lesson for entrepreneurs and developers in the Foursquare story. The initial product was very innovative and it brought to market the notion of checkins, being able to see where your friends were, recommendations of places by your friends instead of strangers, and a social feed based on location.

Since Foursquare launched, over 50 million people worldwide have checked into a place on Foursquare, creating over 6 billion checkins, and millions of new checkins are created every day. And yet for many, the initial Foursquare was a challenging product. Last year, the Foursquare team took a step back and analyzed why such a groundbreaking product was so challenging for so many.

This analysis told them a few important things:

1) Foursquare had to support two separate privacy models. While you probably want every Foursquare user to see your tips and recommendations, you definitely don’t want them to all know where you are. So that required two privacy models. Most users find two privacy models in one app to be quite confusing. 

2) A hard core of Foursquare users love to checkin. I am one of them. I want to database my life, the places I go, and what I see and do there. I have checked in a total of 6,342 times since I started using Foursquare.

3) Most Fourquare users don’t want to checkin. Like Twitter, where many users don’t tweet (or don’t tweet often), many Foursquare users don’t checkin. They use the app to find a place to go based on where they are and what they like to do.

So those key learnings and many more told the Foursquare team that they had two primary use cases and they needed two apps to satisfy them. Foursquare for everyone. And Swarm for those users who like to checkin. The all new Foursquare has the Twitter privacy model (default public). And the Swarm app has the Facebook privacy model (default private).

Foursquare and Swarm are an “app constellation.” They work tightly with each other if you have both of them. If you only have Foursquare, then it’s a different and lighter experience.

If you are like most people and don’t want to checkin but do want to know where to go and what to do when you are somewhere new and different or just looking for some inspiration, download the new Foursquare. It’s powered by those 6bn and growing checkins. It has incredible data based on “what they do instead of what they say” and the recommendations are great. I’ve been using the new Foursquare in tandem with Swarm for the past month and I love the combo and what each brings to my life.

Get Lucky

I’ve always thought of myself as a lucky person. I’ve had a tremendous amount of good fortune in my life; a happy marriage, great kids, a fantastic job, several great partnerships, and lots of financial success.

So it was with interest that I read this post about some research a psychologist named Richard Wiseman did on lucky and unlucky people. Wiseman concludes that luck (and unluck) is a function of state of mind (positive vs negative), being open minded, and trusting your gut.

Here’s the money quote from the post:

My research revealed that lucky people generate good fortune via four basic principles. They are skilled at creating and noticing chance opportunities, make lucky decisions by listening to their intuition, create self-fulfilling prophesies via positive expectations, and adopt a resilient attitude that transforms bad luck into good.

I have heard similar things over the years and these findings certainly resonate with me. I can’t stress enough the importance of the last point – “a resilient attitude that transforms bad luck into good.” If you always look on the bright side of life, to quote Monty Python, you will have much greater success.

And, of course, it turns out you can learn to be lucky. Wiseman ran a “luck school” and less than a month he turned unlucky people into lucky people. So if you aren’t feeling it, get lucky. You can do it.

A Comment About Comment Spam

The AVC blog has been hit with a rash of comment spam in the past several weeks. Every day we take down at least five or ten of these annoying things. And some days, we take down a lot more.

The “we” is me, William, and Shana. I really appreciate their help with this chore. They’ve been helping me moderate and manage the comments here at AVC for several years now. It’s an unpaid and mostly unnoticed job. I really appreciate their help on it.

I honestly don’t understand why these spammers do this. The Disqus system has its own filters and very little of it actually gets through and into the comments. And the stuff that does get through gets taken down by us.

These past few weeks has been particularly bad. I am not sure if the problem is an increase in spam attacks or some sort of change in the Disqus filters. But whatever is causing the increase in spam, it’s pissing me off.

If you leave comments here regularly, you will certainly have experienced getting a reply that is spam. So you know how I feel about this stuff.

One of the many reasons I moved away from Typepad comments and to Disqus back in 2007 was to manage comment spam. I could not manage it on Typepad and the old AVC comments were full of the stuff. That’s why I left all of those old comments behind on Typepad when I moved to WordPress. I am not going to let that happen again.

The fight against The Internet Axis Of Evil never stops but it does change. When I wrote that post a decade ago, it was mostly about email spam and viruses. I don’t think so much about those scourges now. We’ve moved on to getting hacked and DDOS’ed and worse. The good thing about the Internet is you can do what you want on it. The bad thing about the Internet is you can do what you want on it.

So if you’ve noticed an increase in comment spam recently, you are correct in your observation. We are taking it down as fast as it comes in. Maybe the spammers will move on to somewhere more fruitful for them. Or maybe Disqus will tighten their filters a bit. Either way, we are going to keep this bar clean of that stuff. I promise you that.

Tearing Down The Teardown

CB Insights published a “teardown” of USV’s investment strategy last week. It’s a pretty solid piece of work considering they did not have access to any of our internal data.

The got some stuff wrong, however.

1) We did not participate in Zynga’s “megaround” in Feb 2011.

2) We only have six main investment vehicles;

USV 2004 – $125mm

USV 2008 – $160mm

USV Opportunity Fund – $125mm

USV 2012 – $200mm

USV 2014 – $175mm

USV Opportunity 2014 – $175mm

3) We have invested in a lot more than four YC companies. I think the number is closer to ten. I think YC is by far the investor we follow the most, particularly in recent years.

But, as I said, they did a pretty good job considering they don’t have access to our internal data. And I do not believe our limited partners are sharing our reports with them.

What this shows is that the venture capital business is becoming more transparent because so much of our investment activity, and the activity of our peers, is being tracked as it happens. When we raise a fund, that is reported (we must disclose that fact due to securities regulations). When we make an investment, that is generally announced by the portfolio company. And there are reporting requirements for that too. It is possible to do a stealth financing, but it’s not easy. When we make a follow-on investment, that is often announced and/or disclosed. And most exits are disclosed.

What is harder to figure out is what our ownership levels are in our portfolio companies. If you knew the amount we invested and the valuation of the round, you could figure that out. But that would be very hard to do accurately and consistently. I don’t think anyone is going to be able to do a teardown of a VC fund and its returns any time soon.

But even so, it’s impressive what CB Insights and others are doing to track and measure and report on VCs and their investment activities. Entrepreneurs should be able to get some third party assessment of the quality and performance of the VCs they might work with. That’s totally possible now and I think that’s a good thing.

Video Of The Week: Etsy and Rockford

Our portfolio company Etsy is helping Rockford Illinois build an entrepreneurial economy in their city. Here’s a short (3 min) video that talks a bit about what they are doing and how it got started.

Feature Friday: Embedding Tweets Inside Tweets

Since the very beginning of Twitter, users have wanted to take tweets from their timeline and tweet them out to their followers. Initially it was just users copying the original tweet and pasting it into the tweet box. Quickly the user convention became to put the initials RT in front of the pasted text. And the retweet was born. Birthed by the users like many of the best things about Twitter.

When I showed up at Twitter in the summer of 2007, there was a debate about how to productize retweets. Some wanted retweets to be hard coded so that the only thing that got retweeted was the original text. Others wanted to continue to allow users to mark up the tweet while retweeting it. The argument in support of the hard coded retweet was that would treat the original tweet as the atomic unit and retweets could be tracked as a signal of super valuable and popular content. The argument in favor of the marked up retweet was that users wanted to editorialize with stuff like “this is awesome” and such.

The timeline is blurry to me, as is so much about those early years at Twitter. But I think that debate raged on and was not resolved until Ev took over as CEO. It is my recollection, although I could be wrong about this, that one of the first product changes that happened under Ev’s leadership was the hard coded retweet was launched and this button started appearing underneath tweets in your timeline.

RT button

Users could still cut and paste and manually retweet but if they wanted it to be counted as a retweet, you had to use the retweet button which did not allow manual editing. Like all product changes at Twitter, that created a fury of outrage from the users. But Twitter stayed the course and the productized retweet has become an enormous success.

At some point, clicking on the retweet button started to support the idea of adding some text to it. I can’t really recall when that change happened.

But recently Twitter has added another solution to the “share this tweet with my followers” need. You can now embed a tweet inside a tweet.

I started seeing embedded tweets in my timeline yesterday. My favorite was this one from Dick Costolo:

So this morning I decided to embed a tweet inside a tweet. It’s really simple. You just grab the permalink of the tweet and insert it into your tweet. Here was my first embedded tweet:

You will notice that when you embed a tweet on a blog that has an embedded tweet in it, the embedded tweet doesn’t render. My first embedded tweet looks like this in the timeline:

embedded tweet

So Twitter isn’t finished completing this feature. This blog post will suffice as a feature request to Daniel and the product team to do that.

But I’m quite excited about this feature. Sometimes you don’t want to do a hard coded retweet. You want to editorialize the tweet. This is a very elegant way to support that. Well done Twitter.

The Scourge Of Zero Rating

It seems like every week I read another article about a mobile carrier offering some incredible deal to eat the mobile data costs you rack up using certain apps.

The most recent was the news that Sprint will sell at data plan that “only connects to Facebook and Twitter”.

Many on the Internet are up in arms about “net neutrality” amid concerns that the wireline carriers will discriminate between or block applications on their networks. I’m a supporter of net neutrality regulations, but it’s worth pointing out that wireline carriers haven’t done a lot of discriminating and blocking on their networks over the past 20 years of the commercial internet.

And yet in mobile data, there is discrimination and blocking all over the place. The main kind of discrimination is called “zero rating” in which a mobile carrier makes a deal with certain applications to eat the mobile data charges a user racks up when using certain apps. A good example of that is T-Mobile’s deal with a bunch of music apps announced back in June.

The pernicious thing about zero rating is that it is marketed as a consumer friendly offering by the mobile carrier – “we are not charging you for data when you are on Spotify”.

But what all of this zero rating activity is setting up is a mobile internet that looks a lot more like cable TV than our wide open Internet. Soon a startup will have to negotiate a zero rating plan before launching because mobile app customers will be trained to only use apps that are zero rated on their network.

I strongly encourage policy makers, policy wonks, internet activists, and anyone who cares about protecting an open internet for all to take a hard look at zero rating. Like all the best scourges, it’s a wolf in sheep’s clothing.

The Dentist Office Software Story

I’ve been telling this fictional story about Dentist Office Software for years to describe why we are so focused on our “networks” investment strategy. Yesterday I told it at a HackNY event we did at the USV office and my partner Albert provided a finishing touch that really drives it home. Since I’ve never told the Dentist Office Software story here at AVC, I will do that and then I will add Albert’s alternate (and better) ending.

————-

An entrepreneur, tired of the long waits he is experiencing in his dentist’s office, decides that dentist offices are badly managed. So he designs and builds a comprehensive dentist office management system and brings it to market. The software is expensive, at $25,000 per year per dentist office, but it’s a hit anyway as dentists realize significant cost savings after deploying the system. The company, Dentasoft, grows quickly into a $100mm annual revenue business, goes public, and trades up to a billion dollar valuation.

Two young entrepreneurs graduate from college, and go to YC. They pitch PG on a low cost version of Dentasoft, which will be built on a modern software stock and include mobile apps for the dentist to remotely manage his office from the golf course. PG likes the idea and they are accepted into YC. Their company, Dent.io, gets their product in market quickly and prices it at $5,000 per year per office. Dentists like this new entrant and start switching over in droves. Dentasoft misses its quarter, citing competitive pressures, churn, and declining revenues. Dentasoft stock crashes. Meanwhile, Dent.io does a growth round from Sequoia and hires a CEO out of Workday.

Around this time, an open source community crops up to build an open source version of dental office software. This open source project is called DentOps. The project takes on real life as its leader, a former dentist turned socialist blogger and software developer named NitrousOxide, has a real agenda to disrupt the entire dental industry. A hosted version of DentOps called DentHub is launched and becomes very popular with forward thinking dentist offices that don’t want to be hostage to companies like Dentasoft and Dent.io anymore.

Dentasoft is forced to file for bankruptcy protection while they restructure their $100mm debt round they took a year after going public. Dent.io’s board fires its CEO and begs the founders to come back and take control of the struggling company. NitrousOxide is featured on the cover of Wired as the man who disrupted the dental industry.

—————

That’s the story. I hope to fine folks at YC, Sequoia, and Workday don’t mind me using their names in this fictional story. I picked the very best companies in the industry and my use of their brands is a compliment. I hope they take it that way.

This story is designed to illustrate the fact that software alone is a commodity. There is nothing stopping anyone from copying the feature set, making it better, cheaper, and faster. And they will do that. This is the reality that Brad and I stared at in 2003 as we were developing our initial investment thesis for USV. We saw the cloud coming but did not want to invest in commodity software delivered in the cloud. So we asked ourselves, “what will provide defensibility” and the answer we came to was networks of users, transactions, or data inside the software. We felt that if an entrepreneur could include something other than features and functions in their software, something that was not a commodity, then their software would be more defensible. That led us to social media, to Delicious, Tumblr, and Twitter. And marketplaces like Etsy, Lending Club, and Kickstarter. And enterprise oriented networks like Workmarket, C2FO, and SiftScience. We have not perfectly executed our investment strategy by any means. We’ve missed a lot of amazing networks. And we’ve invested in things that weren’t even close to networks. But all of that said, our thesis has delivered for us and we stick to it as much as we can.

So here’s Albert’s alternate ending (with my editorial license on the colorful aspects of this story):

—————

A young dentist, named Hoff Reidman, just starting up his own private practice, decides that he wants to network with other dentists. Because Hoff went to CMU before going to dental school, he’s pretty technical and he hacks together a site in Ruby called Dentistry.com. He emails all of his friends from dental school and they sign up. Every dentist wants to be on Dentistry.com and the site takes off. Hoff realizes he has to quit his dental practice to focus on Dentistry.com. Albert Wenger, who happens to be a patient of Hoff’s, convinces him to let USV do a small seed round of $1mm to help build a company around Dentistry.com. Hoff comes up with a product roadmap that allows patients to have profiles on Dentistry.com where they can keep their dental records, book appointments, and keep track of their dental health. It also includes mobile apps for patients to remind them to floss and brush at least twice a day. While Dentistry.com is free to use for anyone (dentist or patient), it monetizes with native advertising, transactions between dentists and their patients, and transactions between patients and providers of consumer dental health products, and transactions between dentists and providers of dental equipment and products. Dentistry.com ultimately grows into a $1bn revenue company and goes public trades at a market cap of $7.5bn. Wall Street analysts love the company citing its market power and defensible network effects.

————-

I hope you enjoyed this fictional story. I find it explains our network thesis simply and easily. I will keep telling it to groups I talk to, but now with Albert’s ending. I like it very much. Thanks Albert.