Posts from 2011

I spent the past couple hours watching videos from Le Web in our family room. I love to queue up videos from the prior week and spend sunday morning watching them on the couch instead of sitting at my desk.

Of all the video I watched, the one that made me stop and think the most was this talk by Forrester CEO George Colony. In it, he predicts the end of the web and the emergence of “post social.” If you have 20 minutes this morning, give it a watch and let’s discuss his predictions in the comments.

My friend Joshua Schachter was in NYC yesterday. We braved the cool weather and went to our favorite – the Shake Shack. Over burgers and fries, Joshua gave me an update on Jig.com, his startup that USV is an investor in.

The idea behind Jig is that people have needs they want resolved. Jig is trying to be the service where you post the needs and others help you resolve them.

After lunch, we went to our conference room, fired up the computer, and posted a need on Jig. I'm trying to figure out how to ship a bunch of wine from NYC to Utah. So I posted that need on Jig. Then I tweeted it out.

A number of people @replied answers to that need on Twitter. But even more clicked through and gave me answers on Jig. Turns out that it is illegal to ship wine to Utah. That's good to know.

I plan to use Jig when I want to ask a question on Twitter. It databases the answers in a clean and organized way. Give it a try. It might be a useful way for you all to do the same.

Yesterday Twitter rolled out a feature that I have been requesting for what seems like four or five years now. I am so happy to be able to embed tweets in my blog posts. So I'm celebrating by making "embed this tweet" the featured feature this friday.

When you open a tweet onto its permalink page in the new version of Twitter that rolled out yesterday it looks like this:

If you look right above the "reply, delete, favorite" links, you'll see a link that says "Embed This Tweet". If you click that, you'll get something that looks a lot like the embed option in YouTube (the all-time king of "embed this media").

I did that on my twitter love tweet from yesterday morning and when I embed it in this blog post, I get the following:

i love twitter more and more every day. it is the ultimate embodiment that less is more.

— Fred Wilson (@fredwilson) December8, 2011

I love it! The real live tweet with all the important tweet actions right in the post.

Thank you Twitter. You made my week. And I dig the new UI/UX too. So simple. Less is more.

Just In Case You Didn't Know: USV is an investor in Twitter. I was on the board for four years. I love Twitter.

Saw this question on Hacker News today:

Went to a talk by a VC who is very active in my area. Didn't get a chance to introduce myself after the talk (there were < 25 ppl at the talk but the VC had to run). A few hours later, was out for drinks with a friend and saw he was at the same bar but talking with someone else. Discussion ensued with my buddies around whether or not I should intro myself considering I didn't have a chance earlier in the day, but I ultimately decided against it. What say you: Should I have? I ask for the next time I'm in this situation.

I say hell yes you should introduce yourself. But you should also respect that the VC is out with friends and probably isn't up for a long conversation.

I would suggest you walk up to the VC, say "I saw your talk today. It was great. My name is Jane Doe and I'd love to find a suitable time to tell you what I'm working on. I'll send you an email to follow up. It's a real pleasure to meet you." Then make a polite departure.

My view on these sorts of things is that I love meeting people, no matter where I am. But I don't love being pitched when I'm out with friends and family. The Gotham Gal has witnessed this so many times that she gets annoyed by it now. It happens most often at parties. Sometimes she'll just grab me and say "let's get out of here."

Social situations are ideal for a quick hello. Make an impression. Put a face to a name. But don't pitch. That's going overboard.

For the past few months, I was carrying the T-Mobile version of the Galaxy S II, the Samsung phone featured in this awesome commercial that I can't stop watching and laughing at.

A few days ago, my friends at Google sent me the new Galaxy Nexus. So I switched, which is super easy if you use Google's cloud services. Just pop the sim card in the new phone, login with your Google credentials and all the magic happens over the air.

The two phones are very similar. They both have huge beautful screens. Reading on them feels like reading on small tablet. I prefer the menu buttons at the bottom of the Galaxy S II, but that could just be a matter of getting used to the different ones on the Galaxy Nexus.

I prefer the Nexus series because they come with a clean build of Android on them without any carrier add-ons. But I was able to reconfigure my Galaxy S II without too much work.

I would highly recommend either of these samdroid phones. They are both awesome. The ad says it all in my mind.

About a month ago, William Mougayar, an AVC regular if there was ever one, emailed me about an idea he had to create a web service to make social conversations easier. We went back and forth on the idea. I pushed him to come up with a simple name and a simple UI. I told him "make it like gmail for social conversations."

Over the past month, he and his crack team of something like two or three developers did just that. And today, I'm pleased to tell all of you that William and his team have built something pretty special.

He calls it engag.io. It's a good name. An io channel for social engagement. Here's what my engagio inbox looks like this morning:

My inbox is dominated by AVC discussions. For most people, their inbox will have a multitude of conversations from many services; Twitter, Foursquare,  Hacker News, Facebook, and hopefully AVC too.

There are a few other nifty features shown on the left sidebar. Engagement shows who you are engaging with. Shared links stores all the links being passed back and forth in your conversations. And Sites shows what sites your friends are having discussions on. So engagio is not just your inbox for social conversations. It is your dashboard for social conversations.

William's got a blog post up on the engagio blog explaining his vision for the product. It's a good read.

Engagio is offering 100 invites this morning to AVC readers. The first 100 users will get in. The invite code is avcengage (lower caps). Give it a try and let us know what you think.

Just In Case You Were Wondering: Neither me nor USV has any financial interest in engag.io or eqentia, it's sister service.

MBA Mondays is back after a week off. Today we are going to talk about burn rate, or cash burn rate to be more specific.

Your burn rate is the speed at which your cash balance is going down. If you had $1mm in cash on January 1st, and now it is October 1st and you have $250,000 left, your burn rate is $750,000/9, or $83,333/month. Just to be perfectly clear the $750,000 in this calculation is the amount of cash that has gone out the door ($1mm minus $250,000 is $750,000). And the 9 is the number of months that have transpired (January through September is nine months).

So it is October 1st and you have $250,000 left and your burn rate is $83,333/month. So how many months of cash do you have left? Well now that you know your burn rate, that's easy. Take the amount of cash you have left ($250,000) and divide by your burn rate ($83,333/month) and you get three months. At year end, you will be out of money.

That's the whole point of knowing what your burn rate. If you had unlimited funds, burn rate would be an irrelevant number. But I've never seen a company wtih unlimited cash. So entrepreneurs, CEOs, and certainly CFOs should always know how much cash they have and if they are burning cash, they should know the rate at which their cash balance is going down. And of course, they should know the date on which they will have no cash left.

If your company is highly profitable and spitting cash (like Apple), then this whole issue is not as important. But companies can go from profits to losses pretty quickly, because of a bad economy or a product cycle transition or some other bad fortune. And when that happens, burn rate can become important very quickly. So having a sense of cash balance and expense structure is always a good idea.

The calculation of burn rate above is what I call the "back of the envelope method". You can do that in a board meeting, a pitch meeting, or in a car driving down the highway (which I did last tuesday) as long as you have two dates in time and cash balances on both dates (assuming there has not been a financing in between).

But there is a more sophisticated way to calculate burn rate. You look at your monthly expenses on your income statement. Add all of them up. And then look at any outlays of cash for capital expenditures or other regular uses of cash on the balance sheet and cash flow statement. Add all of these monthly cash outlays together. This is "gross burn rate". Then you look at revenues, or even better cash reciepts from revenues. Include all incoming cash you are certain you can count on every month. Subtract this from gross burn and you get "net burn rate". This should be the amount of cash that your business is burning in any given month.

Whenever I get a version of this more sophisticated calculation of burn rate, I always do a sanity check by comparing to the "back of the envelope" method just to be sure they are in the same ballpark. If a CFO reports to the board that the Companny has a net burn rate of $100,000/month, but the cash balance has gone down by $1mm in the past five months, it's a signal that something's not right. And then you have to dig deeper.

When you do these "deeper dives" you often run into "one time expenses". "Well, we had to lay out a huge security deposit in February that was a big hit to cash" or "our legal fees on the big contract with IBM were a big hit to cash in June". But my view is if a company has big "one time expenses" every month or two, they really aren't one time expenses. The burn rate calculation needs an accrual for these sorts of things in it.

Burn rates can change pretty quickly.  If revenues are ramping faster than expenses consistently month after month, the burn rate will go down. And for good reason – the company is getting closer to making money, which is what all this stuff is about at the end of the day. Burn rates can also go in the other direction if expenses are ramping faster than revenues or if there are no revenues. Burn rate calculations need to take into account the fact that burn rates aren't constant. If your burn rate is going up, from $83,333 per month to $100,000 per month, then the $250,000 you have left will not last three more months. It might only last 2 1/2 months. Assuming a constant burn rate can be very dangerous. Always know if your burn rate is going up or down and include that fact in your analysis.

Most startups burn money for a time. Some for only a very short time. But many for a longer period of time. During that period of cash consumption, it is critcal to keep a close eye on cash balance and burn rate and cash out date. It will tell you when you need to raise money again (at least six months before you run out of cash please!). And it will tell you how much you are investing on a monthly basis on your company. These are important numbers to know, to internalize, and to operate with.

I wrote about this a while back but I've been refining and sharpening my thinking on the question of which devices will be smart and which devices will be dumb. It's an important question because it gets to what platforms developers should build on.

I believe that cheap devices will be smart and expensive devices will be dumb. Here's why:

Technology is moving very fast these days. Look at the latest iPhone 4s. It has Siri in it. Look at the latest Android Galaxy S II. It has NFC and Bluetooth 3.0 in it. And these phones will be leapfrogged in 12-18 months with something even more amazing. Furthermore, these devices have open marketplaces for apps and APIs and SDKs that allow those app developers to bring new experiences to these devices every day.

Contrast that with cars, boats, refridgerators, air conditioners, TVs, and other devices which we are led to believe will become "smart" in the coming years. These devices are usually owned for somewhere between 3 years and 10 years by most consumers. The upgrade cycle for these devices is too long to allow most consumers to experience the kind of smarts on these devices that they are experiencing on their cheapest devices with shorter upgrade cycles.

And that's why technologies like airplay, DLNA, and similar approaches are so important. When smart and cheap devices can take control of expensive and dumb devices, we will see the dumb devices become smart.

When I got the SoundCloud app on my iPad and I airplayed into my sonos, it was one of those "I get it" moments. Every time I get into my car these days, I want to airplay into my car audio system. The idea of connecting via an aux jack seems so nuts.

I don't expect the makers of expensive devices to accept this idea quickly. It goes against the grain. How can my expensive device be dumb when one of those cheap devices is so smart? But I'm certain that this is the way the market will play out over time.

Bridge technologies will play an important role for a while. As will Apple's licensing strategy for airplay. Airplay could become a standard if it is broadly and cheaply licensed. Otherwise, we will see other technologies in this market. We may anyway because there are other issues that matter, like the ability to connect over a cellular data connection instead of a wifi connection, latency, and a number of other important features.

Regardless of timing and the technologies that get us there, I have no doubt that the way we will make our expensive devices smart will be via our cheap devices. That's how I am viewing the market opportunity these days. It's a very crisp and clear vision. And that's a good thing when you are trying to peer into the future.

I've been doing that route for 25 years. And never have I felt that these two cites/regions have been more connected at the hip than I do right now.

This past week brought the news that Facebook plans to open an engineering office in NYC. Serkan Piantino, the Facebook engineer who will lead the NYC team said:

This isn’t a satellite office. This is going to be a core part of our engineering stack.

This follows on the heels of eBay's Hunch acquisition and the news that eBay will build a team of 200 engineers in NYC. Twitter has a team of engineers in NYC now after the acquisition of Julpan this summer and Zynga has a game development team in NYC as a result of its acquisition of Area/Code almost a year ago.

For many years, Google was the sole big bay area company with a strong engineering presence in NYC. That's changing and changing quickly.

Sales offices are one thing. Tech companies have had strong sales offices in NYC forever. But adding product and engineering to the mix changes things in important ways. Most importantly for NYC, it brings talent flowing here that would not have otherwise come here. And it makes it easier for the talent to stay here through multiple job changes.

Kudos to our mayor and his team for recognizing that NYC has an important new industry developing and pouring fuel on the fire to get things going even stronger. The city's leadership is on its game right now and showing how to lead. It's great to see.