Posts from July 2011

A few weeks ago Jason Calacanis stopped by our new offices and recorded an episode of This Week In Startups. It was a fun chat, almost an hour long. My audio is not as good as the audio on Jason so it's a bit hard to hear me unless you want to hear Jason shouting.

If you want to fast forward through the sponsorship message, go to 6:30 and start there.

If you want to fast forward through parts of the discussion, here is the breakdown:

0:00-1:00 Welcome to TWiST from NYC in the Union Square Ventures' offices.
1:00-2:00 Thank you to iStockphoto for sponsoring the show.
2:00-6:30 Demonstration of how easy it is to purchase high-quality photos within iStockphoto.
6:30-8:00 Welcome to Fred Wilson, principal at Union Square Ventures.
8:00-8:30 Jason: The biggest mistake of my career was not listening to [Fred’s] wife when she advised me to go national with Silicon Alley Reporter.
8:30-9:30 How much of being a VC is being a therapist to the entrepreneurs?
9:30-10:30 You’ve worked with Mark Pincus, what was that like?
10:30-11:45 You invested in all four of Mark’s companies, yes?
11:45-14:00 When Mark came to you for the fourth time with Zynga, what did you say?
14:00-15:15 The same sort of situation happened with Twitter, didn’t it?
15:15-16:30 If a VC flies out to see you–the entrepreneur–you know there’s serious intent.
17:45-19:15 So speed is the big difference between web 1.0 and now?
19:15-20:15 Have you ever spoken for your companies too much on your blog?
20:15-20:45 Your blog has really made you into one of the most well-known east coast VCs around today.
20:45-22:30 How much of your success this time around has been because of the blog?
22:30-23:30 Did you enable too much transparency and lose some of your power?
23:30-24:30 If money’s not an issue, why go to a VC?
24:30-25:00 Are there funds that are now following Union Square Ventures?
25:00-26:00 Thank you to MailChimp for sponsoring the show.
26:00-29:30 Demonstration of how you can segment your lists to target your emails using MailChimp.
29:30-30:00 Fred explains why he would like to see entrepreneurs work backwards and think about who they would like to invest in them.
30:00-32:15 How do you reconcile this, the new golden era of Internet companies, with the scars you have from past fund failures?
32:15-33:00 When do founders start thinking, “I should start a new company?”
33:00-35:15 Let’s talk about entrepreneurs. What are you looking to see in the eyes of an entrepreneur?
35:15-37:00 So you’re looking for a persuasiveness that is so strong, people can’t help but follow that person?
37:00-38:15 Do you find that this new generation of founders has an entitlement issue, thinking that they’re owed success?
38:15-39:15 Does that make that person impossible to manage?
39:15-42:15 Are you on the secondary markets? What’s your take on that?
42:15-43:45 Fred: Are Mahalo shares being traded?
43:45-45:30 Are limited partners stoked about the secondary market?
45:30-46:15 Why does a venture firm put money into a single established company and not into several startups?
46:15-48:30 What does an opportunity fund mean?
48:30-49:00 Fred: In the private equity business, you buy one and you’re done. In the venture business, you make multiple investments and the risks are mitigated.
49:00-50:40 What’s your advice for a young entrepreneur who wants your money?
50:40-51:15 Fred, it’s been great to watch you rise over the years. Thank you so much.
51:15-51:45 Thank you again to our sponsors. We appreciate all of your support!

For the past couple years, when I travel in europe I turn mobile data roaming off on my phone and grab wifi when I can. That's the best way to avoid ridiculous data roaming charges.

Last year, on the advice of readers of this blog, I started buying prepaid sim cards in countries where I planned on being for a few days or more. I did that in the UK last summer and it worked out well. I still have my prepaid sim card from that trip. I wonder if it still works.

When my daughter was getting ready to go to Paris for a month in mid June, I got an unlocked iPhone 4 directly from Apple (they had just started to sell it) and sent her to France with it instead of her US iPhone. I figured that our whole family could share that unlocked iPhone and use it whenever one of our iPhone users traveled outside the US.

I also DM'd a friend in Paris and asked him what prepaid plan to get. He suggested Orange's Mobicarte service. So my daughter arrived in Paris, went to an Orange store as I suggested, bought a Mobicarte sim and started using it. Within hours her phone was out of money. She emailed me and asked what was up. I suggested she go back to the Orange store and ask what was happening. Turns out she needed to get something called Internet Max on her Mobilcarte plan. Once she did that, she was in business.

Around the exact same time, my friend Brad Feld was having the exact same problem. He emailed me. I told him what I knew from my daughter's experience. But I didn't have all the details. He banged his head against the wall, broke his glasses, and finally figured it out. Thankfully, he blogged exactly how to do this so the rest of us won't have the same issues.

So I show up in Paris a few days later and confidently walk into an Orange store and buy two Mobicarte sims for the Gotham Gal and me. Armed with my daughter's experience and Brad's blog post, I figure no problem. Well not exactly. I started using mobile data on my Mobicarte sim before the Internet Max kicked in (it takes a while), and ran through all my prepaid money. I had to recharge at the local Tabac this morning and now I am set. Meanwhile the Gotham Gal's HTC G2 is apparently locked (who knew?) and we are waiting for T-Mobile to send an unlock code.

The point of all of this? It is damned hard to beat the man when it comes to mobile data in europe. I'm starting to think that turning it off and grabbing wifi here and there isn't such a bad solution. But if you want to do the local sim card thing, here are my suggestions:

1) Make sure you have a totally unlocked phone. The unlocked iPhone Apple sells online will work. So will the Nexus S. Beyond that, check before you leave home. If you need an unlock code from your carrier, plan ahead.

2) If you are coming to France, read Brad's blog post and print it out for safe measure. I used on O2 sim in the UK and it worked like a charm with no configuration needed.

3) Be prepared for stuff to go wrong. If you don't have the time and patience to deal with snafus while you are traveling, don't go down this path.

I was having lunch with a friend today who lives in Ljubiana Slovenia. We got to talking about mobile data in europe. We both felt that the EU really ought to require all the telcos operating in the region to open up to new providers so we can get a pan-european prepaid sim with a good mobile data plan. Then we'd only need to do this once and it would work everywhere in europe. And on top of that, Google should work to get Google Voice working over here as well. One can dream.

I'm off to Europe today for a week of board meetings and vacation. It has become a bit of a tradition in our family to spend some time in europe every summer. Last summer we spent close to six weeks in europe in four countries. This summer it will be only one week in two countries.

USV now has a significant european portfolio. We have five companies in our portfolio that were started in europe and another four or five with significant operations in europe. Seven of our portfolio companies have job openings in London right now (a total of 20 job openings). There are fifteen job openings in Berlin (all with our portfolio company SoundCloud).

I've written about the Internet startup sector in Europe a fair bit. I'm bullish on the Internet startup sector all over the world but Europe is closer to NYC than most of the rest of the world, both in terms of how long it takes to get there and also in terms of culture, language, and a host of other things that matter in the relationship between entrepreneur and investor.

We don't have an office in Europe and we can't be on top of everything that is happening there. We are more reactive in our European investments than proactive. SoundCloud is a good example. I first met the team at LeWeb in 2008. We missed on the first VC round and didn't get involved until after we'd met with the team three or four times over a couple years.

Europe will likely never be a larger percentage of our portfolio than it is now (between 10-15% by names and dollars). But it is a place where interesting companies are getting started. And I'm eager to get over there and take the pulse of things.

I'll be blogging as usual. It might be lighter than usual. We'll see.

In late May, Joel Spolsky, co-founder/CEO of our portfolio company Stack Exchange, wrote a great post called Modern Community Building.

Stack (as I like to call the company) is building out a large network of highly engaged communities (57 as of right now) all focused on knowledge sharing.

Joel described the basic problem:

There are an awful lot of technology companies, founded by programmers, who think they are building communities on the Internet, but they’re really just building software and wondering why the community doesn’t magically show up.

Joel points out an important truth. Online communities require both software and people. Sometimes the software part is the easier part. Curating communities is hard work and requires people to do it. It is an inherently social behavior. Joel describes the role of the "online community organizer":

This job will be sort of like being a community organizer at a non-profit. It combines elements of marketing, PR, and sales, but it’s really something different. I don’t expect that there are a lot of people out there who already kn0w how to do this well, so I’m going to train them, personally. Not that I know how to do this, but we’ll learn together. Every workday is going to start with a huddle at 9am and a plan for the day’s activities and an intensive six hours of work. Every workday is going to end with an hour of learning… reading Kawasaki and Godin and Ries and Trout, talking with invited experts, meeting with members of the community about what worked and what didn’t worked. Everyone who joins the program (and survives for a year) will come out with an almost supernatural ability to take a dead, lifeless site on the internet and make it into the hottest bar in town. That’s a skill worth learning for the 21st century.

Many of our companies need both community managers and community organizers. And I agree with Joel that this is a new job type that not many people have a ton of experience in. But as Joel says, those who develop these skills will be in high demand in the coming years.

If you are interested in joining Stack's community evangelist team, you can apply here. If you'd like to see all the open community manager positions in our portfolio, and there are a bunch of them all around the world, you can see them here.

Modern community building isn't easy but if there is one thing the Internet has taught me over the past 15 years, large engaged communities are incredible powerful things, both commercially and socially. Building them is important and ultimately very valuable work.

Happy July 4th Everyone

I'm taking a break to celebrate the July 4th holdiday with friends and family. We'll be back next Monday with the next topic in our Financing Options For Startups series: Convertible Debt.

Image via Wikipedia

I spent some time yesterday talking to an entrepreneur about this topic and I thought I'd share what I told him with everyone.

When your company is growing really fast, doubling employees year over year, adding users and customers at a very rapid rate, you don't want to raise too much money. If you raise three or four years of cash, there is a very good chance that by your second year, you will be sitting on cash that you raised when your company was worth considerably less. That's not a good thing. It's too dilutive to you and your co-founders and angels.

I've got two basic rules of thumb. First, try to dilute in the 10-20% band whenever you raise money. If you can keep it to 10%, that is great. You might have to do more, but try hard to keep your dilution below 20% each round. If you do two or three rounds at north of 20% each round, you'll end up with too little of the company.

Second, raise 12-18 months of cash each time you raise money. Less than a year is too little. You'll be raising money again before you know it. Longer than 18 months means you may well be sitting on cash that you raised when your company was worth a lot less.

These rules are most applicable in the early stages. When your company gets above 100 employees and valued at north of $50mm, things change. You may need to have more cash on your balance sheet for working capital reasons and you may not be increasing value at quite the same rate as you were when you were smaller. You might want to raise 24 months of cash or more at that stage.

But for the seed, Series A, and Series B rounds, I think 10-20% dilution and 12-18 months of cash are ideal. It's what I advise our portfolio companies to do and it is what I advise other entrepreneurs to do.

The day Google+ launched, I sent a friend at Google who was involved in building the service an email requesting an invite. I got the invite late that day and started playing with the service. Here's my profile. I'm not sure if this page is public or you need a Google+ login to see it. At some point Google will open the service to everyone and I expect this page will be public, but I'm not sure.

In any case, I hope Google+ succeeds. Given the blog posts saying this will kill Tumblr, Twitter, Foursquare, etc, you might wonder why I feel that way. Well first, I don't think competitors kill companies and services. I think the vast majority of "deaths" are self inflicted. Facebook didn't kill MySpace and Friendster, they killed themsleves by failing to address the shortcomings of their services and their inability to respond to changing market dynamics, in some cases brought on by competitors. Of course, that fate could be in store for any company, including our portfolio companies, but it won't be because of Google+.

My vision for social media is:

every single human being posting their thoughts and experiences in any number of ways to the Internet

Not everyone wants a Facebook experience; default private, mutual follow, best for close friends and family. Not everyone wants a Twitter experience; default public, asymmetric follow, best for broadcasting short burts of information to large networks. Not everyone wants a Tumblr experience; totally public, asymmetric follow, best for posting microchunked media.

My dad, for example, doesn't want any of those experiences. He might like Google+. It's a lot like email. He can curate groups of friends; his friends from school, his friends from the army, his friends from the community he lives in, and share information with them quickly and easily. I can see The Gotham Gal's dad loving Google+ too. It's very utilitarian and functional and powerful for certain kinds of users.

I've never thought that there would be one social service to rule them all. I've never thought that there would be one social graph for the web. I believe we'll need a multitude of social services to satsify the needs and desires of all the users of the web. Google+ fills a void between public and private, it serves what is likely to be an older demo less interested in hooking up or hipstering out and more interested in the social utility it provides. That's a good thing. We'll get more people "posting their thoughts and experiences in any number of ways to the Internet."

And there's another reason I hope Google+ succeeds. Developers need more social platforms of scale. A friend on Twitter posted a link yesterday to the post I wrote on the USV blog when we first publicly acknowledged our investment in Zynga. We first invested in Zynga in the fall of 2007 and back then I was eager to see Zynga build a business on multiple social platforms. I wrote:

Currently all of Zynga's games run inside social networks, largely Facebook, but also Bebo and several others. And that list of social nets will grow longer in the next few weeks.

Developers like Zynga benefit from having multiple large social nets to build on top of. Tech blogs have noted that Google+ has hooks for social gaming built in. That is great. My dad would love some of the Zynga games. Maybe he'll join Google+ and play them with his friends (including me) there.

My line about "don't be a xyz bitch" is all about controlling your own destiny. These social platforms are awesome to build and launch on. They give you instant distribution, instant users, instant social identity. But in a perfect world you don't want to be dependent on any single one of them. The more social platforms of scale there are, and we have a bunch now, including Twitter, Tumblr, and Foursquare, the better world it will be for developers. And our business at USV is investing in and helping developers build companies. So I'm rooting for Google+. I think it will serve users who aren't being served well (or at all) on the social web right now. And I think it will be a strong new platform for developers. And both of those are great things for the web, our business, and entrepreneurs.