On Covid

Two years ago this weekend, the Gotham Gal and I were in Park City at the annual Sundance Film Festival with another couple we have been great friends with for thirty years. On Monday morning we came down to breakfast and our friends announced they were flying back to NYC a few days early. Our friend Phil has been trading the financial markets for as long as we’ve known him and he knew, about a month before most of us, that something big was going to happen and he wanted to get prepared for it. That’s when it first hit me that we were in for something big. The financial markets tend to see things a bit ahead of us.

If you look at the financial markets now, as I wrote two weeks ago, what we see is the unwinding of the Covid trade. Companies like Zoom and Peloton have seen their stocks come way down. Fiscal and monetary policies around the world that kept people fed and housed for the last two years are being unwound. And the financial markets are reacting as one would expect. Stocks are down. All risk assets are down a lot. This is the “tell” that Covid, as we have known it, is coming to an end in many parts of the world.

There are three primary reasons why Covid, as we have known it, is coming to an end in the wealthier parts of the world. First, we have less severe variants now. Second, most people in the developed world who want to be vaccinated have been vaccinated, many multiple times. And third, we have antivirals that can protect those who get very sick.

One of the first wake-up calls I got early in the pandemic was a blog post I read called “The Hammer And The Dance” that was written by Tomas Pueyo on March 19th, 2020. In that post, he described the series of lockdowns and other drastic measures that we would all go through over the last two years in order to attempt to protect vulnerable populations and the medical system from a virus that would otherwise wreak havoc on the world. He was prescient and accurate. About a week ago Tomas wrote a Twitter thread explaining that we are now in the midst of the end of the pandemic. You can read it here. This tweet particularly rang true to me:

We all have been through a crazy, trying, stressful, and dangerous two years. Many of us have what Tomas calls PCSD, including our governments. And we all need to “unlearn many of the behaviors we’ve learned in the last two years”, particularly our governments.

But I am not one to criticize our governments too much. Almost 6mm people have died because of Covid around the world in the last two years. The death toll in the US is approaching 1mm people. If our governments had not done “The Hammer and the Dance”, those numbers would be massively higher. The death toll from the Spanish Flu pandemic of 1918-1920 was between 20mm and 50mm around the world. We can all find faults with the way our governments handled Covid, but I think it was largely a job well done.

In the US, the Trump administration prioritized vaccines with Operation Warp Speed which was a massive success. The Biden administration prioritized getting those vaccines distributed broadly and prioritized the most vulnerable populations. In NYS and NYC, vaccine mandates helped to get over 95% of NYers vaccinated and almost 75% “fully vaccinated“.

And yet, most Americans find fault with our government’s response. Trump lost his re-election bid at least in part because of Covid. And Biden is facing massive unpopularity, also at least in part because of Covid. We have people who oppose vaccination and masks. We have people who believe that everyone should be required to be vaccinated and masked. Nobody can agree on anything and everyone is angry.

It is time to stop obsessing about Covid. It is time to stop politicizing Covid. It is time to stop tweeting about Covid. It is time to stop reading about Covid. It is time to start healing and it is time to start moving on.

We can live with Covid and most of us will. The current death rate of Covid in the US is about what a bad flu season would be. We have vaccines if you want them. We will have anti-virals if you need them. We should take a lesson from many Asian countries and mask up if we are feeling sick from now on. And you can wear masks if you are uncomfortable on the plane or the subway. We’ve normalized mask-wearing in the US now and that is a good thing.

We’ve got other pressing matters to deal with. We have a warming planet that desperately needs our attention. We have economic challenges that need our attention. We have gun violence in our cities. We have other health care challenges to tackle. Covid was terrible, we are scarred from it, but we cannot let it divide us and we cannot let it drive us crazy. There are more important things facing us and let’s go deal with them now.

#Current Affairs

New Leadership At Tech:NYC

Six years ago this month Julie Samuels got together with a group of technology leaders in NYC and we decided to form an industry group for the growing tech sector in NYC. I agreed to co-chair the organization and have been in the chair role since then. We called it Tech:NYC and I first wrote about it here at AVC in March of 2016.

Last year, after more than five years at the helm, Julie decided it was time to pass the baton to a new leader and she and I and a group of board members spent the fall talking to lots of people and we found a fantastic new leader named Jason Clark. Jason starts as the Executive Director of Tech:NYC next week.

Jason takes over an organization of 800+ member companies, from the largest names in tech to the three-person startup you have yet to hear of. Tech:NYC has succeeded in getting tech “at the table” in Albany and City Hall and helping to make the tech sector more civic-minded and more integrated into the city and state. Julie and her team have done a tremendous job of taking an idea and making it a reality and I am incredibly grateful for her leadership.

The tech sector finds itself at an interesting moment in NYC. It is quickly becoming the largest employer in NYC and is bringing much-needed innovation to the city, state, and world. We have new leaders in Eric Adams and Kathy Hochul who are eager to work closely with the tech sector to do new things and move the region forward. But with great success comes great responsibility and the tech sector needs to employ a broader and more diverse group of NYers, it needs to be more civic-minded, it needs to be more philanthropic, and it needs to think beyond Manhattan out to the five boroughs and on to New York State and the NY Metropolitan region.

And Jason is the perfect leader to take Tech:NYC in those directions. Jason is a born and bred NYer, from southern Queens, a product of the NYC public schools, a lawyer who has started a law firm and worked in the Attorney General’s office in Harlem, and a former candidate for public office for the City Council seat in his home neighborhood in southeast Queens. Jason has the relationships, the lived experiences, and the mindset to lead NYC’s tech sector in the directions it must go as it becomes the leading industry and employer in the city and state.

I welcome Jason to Tech:NYC and look forward to working closely with him and the city and state leaders to step up to the opportunity that is in front of us. It is an exciting time.

Also, Jason is already on the hunt for a strong policy director with lots of tech experience. If you would like to fill that role or know someone great, please visit this job spec with instructions on how to get into the process.

#NYC#policy#Politics

Exciting Protocol Lead Opportunity

Last month our portfolio company Kickstarter announced the creation of a protocol organization that will develop a web3 protocol for the crowdfunding of creative projects.

They are now assembling a protocol team and are talking to candidates to lead that effort. The protocol lead role is an exciting one that combines product leadership, smart contract development, team management, and a lot more.

I believe Kickstarter is at the forefront of a wave of companies that have been built on web2 technologies that will be adopting web3 approaches to move their products and stakeholder networks forward. And so leading this protocol effort will be an opportunity to help shape what that looks like.

If you are interested in this role or know someone who would be great for it, please email me and I will make the connection.

#crowdfunding#Web3

The Selloff

The stock and crypto markets have started off the year in selloff mode, with the Nasdaq down almost 5% this week and the big crypto assets down almost 10% this week. But this selloff has been going on for a lot longer than one week. It has been going on since early November when the Nasdaq peaked at $16k and BTC hit $67k. Since then it’s been downhill and the biggest carnage has been in the highflying “cloud” stocks. The Gotham Gal and I own a few stocks that have been cut in half in the last two months. Yes, they lost half of their value in the last two months.

Of course, these highflying stocks have only given up some of their gains over the last two years. In the case of a few of our public stock holdings, they went up 10x in the last two years and are now “only” up 5x. Easy come, easy go.

Even at these new “discount” prices, none of these stocks look cheap to me. Most are still trading well in excess of 10x revenues which has always been my baseline for a subscription-based software business. I don’t know where they will bottom out, but it certainly could be lower. Or the sector could have already bottomed out in this first week of 2022 blowout sale. One never knows where the bottom is until you are well on your way back up.

The capital markets have been awash in money for the entire pandemic and it has resulted in some crazy prices being paid for public stocks and for growth rounds in high-performing privately held companies. The optimist in me sees this selloff as a return to normalcy, in the capital markets and in the world we live in. It’s hard to see a return to normalcy when offices remain closed, events are being postponed or moving to virtual. But markets tend to see things first and I do wonder if the capital markets are coming back to earth in anticipation of things getting better this year.

It also makes me wonder if the “pay any price” mentality in venture may ease up a bit this year. When the IPO markets or the M&A markets can’t/won’t be able to pay more for a business than the private markets are paying, that’s unsustainable. It can last a few quarters, maybe even a year. It can’t last forever. We will see.

#crypto#stocks#VC & Technology

What Is Going To Happen In 2022

So last year I made a bunch of predictions that with one exception were kind of obvious. I don’t want to do that again, so I am going to list five things that I think will happen this year that most people would not likely agree with.

1/ As the pandemic evolves into an endemic in the first half of 2022, companies will reopen their offices and their employees will largely opt to go back to working together in offices.

I qualified this with “largely” because I don’t think we will go back to everyone in the office again. Companies have become much more comfortable hiring remote employees who don’t live near a company office. Employees have made it clear that they want/need the flexibility to work from home a day or two a week. Some companies have moved to an entirely remote work environment. But I think the dominant form of working will return to “in office, with others” by the end of this year.

2/ Carbon offsets, effectively a voluntary form of self carbon taxation, will take off in 2022 and by the end of the year, we will have a global market in excess of $10bn (up ~10x in 2022).

I think the big unlock will be bridging between the existing carbon offset market and the crypto markets where decentralized finance tools can bring massive innovation and demand to this market very quickly.

3/ K12 systems around the US (and around the world) faced with teacher shortages and desperate to erase several years of learning shortfalls, will increasingly adopt online learning services in the school building in lieu of and in addition to in-class learning.

This may be obvious. I don’t really know. But there are many forms of learning that work in addition and in compliment to teacher-led classes and school leaders will need to be open to using them aggressively to turn around several years of learning losses.

4/ Twitter opens up its APIs and allows anyone to operate Twitter clients that compete with its own.

Now I am going out on a limb. But why not? That would be so amazing if it happened.

5/ As I predicted back in the spring of 2017 [8:30 into this video], only five years too soon, Ethereum’s market cap will surpass Bitcoin’s in 2022. I hope I get at least as much abuse for this prediction as I did for that one.

Ethereum’s merge in 2022, combined with the understanding that productive assets must be worth more than non-productive assets, make this a fairly obvious prediction. But I got it wrong last time, so I surely can get it wrong again.

I hope that 2022 brings us more positive surprises and less negative surprises than the last two years.

Happy 2022 everyone!

#climate crisis#crypto#hacking education#VC & Technology

What Happened In 2021

As is my custom here at AVC, I like to end the year looking back and start the year looking forward.

This post will be the look back and I started by revisiting my look forward into 2021 that I wrote on New Year’s Day 2021.

In my typical optimist fashion, I was dead wrong about how quickly the pandemic would fizzle out. I predicted that vaccines plus immunity from those who had been infected would end the pandemic by mid-year 2021. That was obviously totally wrong and I am sitting here isolating with my own Covid case (seven days in now). I can’t imagine a more appropriate “punishment” for getting that one wrong.

I got the rest mostly right and when I look back at 2021, what I see is a world that is changing before our very eyes; becoming more digital (leading to metaverse fever in tech), less tethered to a job and place to work (and live because of work), warmer, more prone to natural disasters, and tribalizing along different dimensions than what has divided us in the past.

In truth 2021 was a deeply troubling year and no wonder that mental health issues abound among all of us, but particularly our young. Nothing seems right anymore. We must face that and then fix it.

Of course, 2021 was a great year for the financial markets, both stocks and blockchain assets. Even with a big year-end selloff, which I believe was mostly tax-driven (we will see soon if I am right about that), investors who owned tech stocks and blockchain assets saw huge gains in 2021. USV was no different. We had a banner year.

But that also means that it is on us who have benefitted the most to work harder and invest to address some of these troubling issues. We are doing that with our first climate fund, which we have been investing aggressively and we hope to have a second one to invest before the end of 2022. We are seeking to both invest in technologies/companies that can mitigate the climate crisis and that can help us adapt to the changes that are permanent and we must accept that many will be.

I want to return to the pandemic before I wrap this year-end post. Sitting here with a mild case but isolating so I don’t pass it on brings home for me that our society has really struggled to find the right balance between what is right for the individual and what is right for society during this pandemic. We can’t agree on anything. Vaccines, masks, lockdowns, schools, offices, etc. Those who have a high tolerance for risk believe that we have gone way overboard in trying to manage this pandemic when we never could. Those who believe in government, public health, etc, believe that those with a high tolerance for risk are putting all of us at risk. And I think the truth lies somewhere in between. This pandemic is a metaphor for the broader inability of society to find a way to move forward together.

Beyond climate or covid, it is this plague of dissension, doubt, fear, disrust, hate, and worse that is our biggest challenge and one that is very much raging across our world right now. That’s what 2021 brought home for me.

#climate crisis#Current Affairs#VC & Technology#Web3

Why Web3?

Over the last month, there has been a ton of debate and conversation about web2 vs web3 with many leading voices raising doubts about web3. Debate and doubt are healthy. And web3 enthusiasts, particularly on Twitter, remind me of missionaries trying to recruit the unwashed to their belief system. Frankly, it is all too much for me.

However, the debate is important, the pushback is healthy, and ultimately web3 will have to deliver on its promise which means teams building things that provide new unique value to society. If that doesn’t happen, then web3 will turn out to be the snake oil that some are suggesting it is. I am confident that won’t happen, but it is important to understand that the proof is in the pudding and talk is cheap.

With that backdrop, I want to point everyone to a post my partner Albert wrote yesterday that explains why we at USV believe that web3 will allow teams to build new things that provide unique value to society.

It all comes down to the database that sits behind an application. If that database is controlled by a single entity (think company, think big tech), then enormous market power accrues to the owner/administrator of that database.

If, on the other hand, the database is an open public database that is not controlled and administered by a single company, but instead is a truly open system available to all, then that kind of market power cannot be built up around a data asset. As Albert says in his post:

It is difficult to overstate how big an innovation this is. We went from not being able to do something at all to having a first working version. Again to be clear, I am not saying this will solve all problems. Of course it won’t. And it will even create new problems of its own. Still, permissionless data was a crucial missing piece – its absence resulted in a vast power concentration. As such Web3 can, if properly developed and with the right kind of regulation, provide a meaningful shift in power back to individuals and communities.

You can already see this effect at work in the most developed areas of web3, like decentralized finance (aka DeFi) where literally hundreds of financial applications have been built on top of Ethereum that all share the same database and users can move from application to application, keeping their data (and their login credentials stored in their wallet) as they go.

But until teams build the same experiences for a wide swath of consumer and business applications, we will continue to have this debate. As we should. The good news is there are literally tens of thousands of teams building new things on a web3 stack now. Some of the best entrepreneurs and developers have moved over. The tooling is getting better. It reminds me of the early days of web2 in 2001/2002/2003, when we started USV. That was also a time of great cynicism. We almost did not get our first fund raised. Nobody was buying the story we were telling. But of course, that story turned out to be true. And I am confident this one will too.

#Web3

The Pull Forward

I saw two charts last week that showed the same thing:

This chart was in the deck I shared here last week called Consumer Trends 2022. It shows that after a big lift in 2020 and a bit of a lull in 2021, the e-commerce trendline is back to its old baseline.

This is our portfolio company DuckDuckGo‘s search traffic curve, available here, on a ten-day moving average. You can see after a huge move up in late 2020, it had a pullback in early 2021 and has now gotten back on its normal growth curve.

Both of these are examples of what is called “the pull forward”, an event or a series of events that draws a large and unsustainable boost of new users. It is often followed by a lull where growth is flat or even down for a while, but then the normal growth pattern resumes.

We have seen curves like this throughout our portfolio this year as the pandemic and other factors (in DuckDuckGo’s case the presidential election also played a big part) have whipsawed growth curves. It feels great when things are growing faster than ever. It feels bad when things are flat or down.

My suspicion is a lot of these odd-looking curves are going to resume their normal shapes in 2022 when things gradually start to normalize.

The last two years have been a challenge to manage through. There have been endless curveballs coming our way. Boom and bust. It is important to see things for what they are and not get too up or down in times like this.

#management

Consumer Trends 2022

My friends at The New Consumer and Coefficient Capital have published their annual consumer survey. There are many interesting slides in it, none more than this one.

I guess that explains this chart:

But back to the consumer survey, there are lots of interesting slides in it and you can get it here by creating a free account to The New Consumer. I strongly recommend doing that and enjoying your coffee this morning mulling over the report.

#VC & Technology

Getting Together In Person

After skipping a year last year, USV held its annual team party last night.

It has felt great getting back to getting together with friends, family, and co-workers this holiday season. It has meant a lot of rapid testing for me, all negative thankfully, including one this morning.

We also had every single team member in the USV office yesterday, which was a first since we fully re-opened in March of this year.

And for our weekly team meeting yesterday, we had everyone around the conference room table. Nobody on Zoom. I can’t remember the last time that was the case.

I’ve been doing in-person board dinners and in-person board meetings a lot lately as well.

While Zoom has certainly transformed the way we work and I don’t expect that we will ever go back to everything in-person, the last few months of getting back together in groups has reminded me how important the human connection is to life, love, and work.

I met with a founder yesterday and he told me that his executive team gets together in person once a quarter. I encouraged him to get the exec team together in person at least once a month, if not more frequently. It is hard to be a tight team, that gives and takes, debates and commits, and moves fast in sync without the in-person connection.

We have a great team at USV and we did great working remotely during the pandemic, but being back in the office since March, working together, and celebrating together, has made things so much better. I am very appreciative of that.

#life lessons