Networks And The Enterprise

Many think that USV is a consumer web investor. We don't think of ourselves that way. We invest in networks and for most of our short history, that has meant investing in networks of individuals connecting with each other. Thus the consumer web investor moniker.

But if you go back over the past four years and analyze the roughly thirty investments we have made in that time period, you will see that a good portion, maybe a third, have been in networks where enterprises participate.

I like to think that our first foray into this kind of network was 10gen, the company behind MongoDB. MongoDB is an open source datastore for web scale applications. The first users were developers who wanted a simple, easy to get started datastore. It was perfect for hackathons and such where the developer needed to get something up quickly. This post I read yesterday does a good job of explaining why MongoDB took off. These developers became a network of users and contributors to the open source project. Many of them worked in enterprises and brought MongoDB into their teams. Soon enough 10gen started getting calls from executives saying something like "I just learned that we have 50 instances of MongoDB in production and I'm eager to get a support contract". That's where the enterprises joined the network.

A year later we invested in Twilio. It's a similar story. Twilio build a dead simple API and cloud service that allowed developers to quickly connect their apps to the world of telephony and SMS. The early users were the same kinds of developers who adopted MongoDB. The classic Twilio story is where the two founders of Groupme built the initial version of their app at the TechCrunch hackathon using Twilio. But again, these developers became a network and the adoption spread into the enterprise.

When an enterprise plugs into a network of developers and tools built in this way they get more than functionality. They get a platform that a lot of engineers know how to use and is becoming a standard in the market. There is tremendous value to the enterprise in these networks over time.

A year later we invested in WorkMarket. WorkMarket built a platform that allows enterprises to take their freelance workforces and put them onto an open shared network. But of course, once a bunch of enterprises do this there becomes a large supply of freelance workers on the platform that can be shared amoung the various enterprises. When an enterprise joins WorkMarket, they don't just get functionality. They get access to skilled workers. Lots of them.

Around the time we invested in WorkMarket, we also invested in Edmodo. Edmodo is a platform that allows teachers and students to connect to each other and communicate, share reading assignments, homework, practice tests, and such. Edmodo currently connects 9.3mm students and teachers worldwide.The Edmodo platform was adopted initially by teachers looking for a better solution to communicate with their students. But like the 10gen story, Edmodo started getting calls from Principals and School Systems looking to deploy the Edmodo platform across their entire enterprise.

One of our favorite kind of networks are marketplaces. And a particularly interesting category of marketplaces are lending marketplaces. We have invested in one called Funding Circle that connects enteprises, mostly small businesses, in the UK with a network of lenders. The more lenders that come into Funding Circle, the more attractive it is to borrowers. And the more high quality lending opportunities that come into Funding Circle, the more attractive it is to lenders. A classic network effect that drives value for small business borrowers.

Our two most recent investments, one of which is unannouced, are networks where enterprises play a big role. The one I can talk about, Behance, is a network of creative professionals, many of whom work in enterprises like agencies. Behance started out as a place where creative professionals could come and showcase their work. But quickly organizations like schools, publications, associations and the like asked Behance to power their networks. These enterprises plugged into the Behance network and created a network of networks.

Sometimes consumer networks can get pulled into the enterprise. A good example of that is Disqus, which started out as a network of bloggers and commenters talking to each other. But a year or so into its life, Disqus started hearing from big media companies who wanted to deploy the Disqus comment system. So slowly but surely Disqus has built a large user base among commercial publishers. And these commericial publishers get way more than functionality when they plug into the Disqus network. They get access to hundreds of millions of monthly viewers and the engagement they create.

We also occaionally invest in data networks in addition to networks of people. I've been involved in one of those for over a decade. It is called Return Path and I invested in it at both Flatiron Partners and Union Square Ventures, the only company that has that distinction. Return Path has constructed a very large data network where all the various participants in the email ecosystem (mailers, intermidiaries, recievers, consumers) contribute data to their system. That data is used to power a bunch of value added products that all go toward making sure the right mail gets to the right person and spam and related bad stuff don't. Every time a new participant in the ecosystem joins the Return Path data network, their systems and tools get smarter, making the service more valuable for everyone. That's a classic network effect and it is very powerful.

This post has gone on longer than I would normally like. And I am certain that I've left out a number of USV portfolio companies that are building networks where the enterprise is a participant. I am sorry if I failed to mention your business in this post.

My uber goal of writing this post is to explain that the wired and mobile internet is a global network and it powers all sorts of smaller networks to get built on top of it. These networks can often include small and large enterprises in them. And we like to invest in networks regardless of whether the enterprise is engaged or not. Increasingly it seems we like to invest in ones where the enterprise is part of the story.

#VC & Technology

Comments (Archived):

  1. Carl Rahn Griffith

    At one time – not so long ago – most small companies/startups aspired to act like and become ‘big’ enterprise companies.How times change…For the better.

    1. fredwilson


  2. RichardF

    You picked up a really important point about enterprise requiring support. I am amazed at the absolute lack of regard for decent support by many of the biggest names in tech. Amazon and Google provide a sub par level of support.I don’t know whether it’s down to the fact that companies that have tech founders don’t have customer support in their dna or they just don’t want to put the financial resources into it. Either way an email form with an auto responder that may or may not be responded to in a week by a support person is not providing even a basic level of support.Customer support is an important part of your sales and marketing team.

    1. JimHirshfield

      You’re spot on. Lots of start-ups try to automate the support and spend their resources selling the product/app or going long on distribution (lots of users of a free service).Another component to this is, IMHO, many VCs don’t see support services as a scalable business model. At least not the kind that they want to invest in and get out of in 5 to 7 years. Support takes a lot of resources. I think there are more “exceptions”, than “rules” when it comes to open source software companies that make their money on support contracts.

      1. kidmercury

        IMHO, what support lacks in scale, it makes up for with defensibility.

        1. JimHirshfield

          Interesting…I suppose so if it’s quality support.

    2. fredwilson

      support is what open source companies sell

      1. Carl Rahn Griffith

        Indeed. And as it is key to their core revenue stream they do it well, otherwise face the consequences – conversely, most enterprise mindsets see support dimply as a necessary overhead and offer it as little more than a token gesture. Even worst is the support and maintenance software industry model where a xx% annual fee is charged, and is a nice/easy steady additional revenue stream to the original licence fees. This is still pretty much common place in enterprise deals.It won’t last much longer, as is.

      2. andyidsinga

        yes – but the smart ones will also sell SAAS/PAAS – which can have software margins ๐Ÿ™‚

    3. brian trautschold

      if not more important, IMO marketing = customer service = sales…

    4. LE

      “I don’t know whether it’s down to the fact that companies that have tech founders don’t have customer support in their dna”Let me answer that for you. I think it’s the DNA. The business that I had before my current business was one in which support was key and we went out of our way to keep customers happy. [1] Because we had to, or there was a competitor around the corner ready to make that same business customer happy. And that DNA that I had came from observing my family business which operated the same way. It was amazing as a kid to take deposits to a bank and see how relaxed the tellers were and how they didn’t give a shit if you waited in line with a business deposit while they helped some kid with their passbook. Guess what? Most small businesses that are successful recognize who their important customers are and give them special treatment. My father had big buyers come to his booth at trade shows and I can assure you he wasn’t wasting time with the “noodniks” who placed small orders (I got to handle the noodniks at 12 years old or something like that).Now I’ve seen others who have started businesses and come from corporations who just don’t have the same attitude (and this is not to say they aren’t successful btw.) They just look at things differently. It’s not seat of the pants (VFR @JLM) It’s IFR.All this flows from the top. Just the same way that MSFT design sucks because at the top was Gates. And at the top of Google is two engineers who didn’t come from business backgrounds who essentially were academics. And academia is just different in the way it operates. And Bezos came from Wall Street.Also, coming from a traditional “grind it out” type of businesses where you had to take customers from someone else the Internet was truly unique when I got involved in it close to 17 years ago. All you had to do is put your hand out and catch business. It was really really easy compared to the work that I had to do to gain customers before. Night and day. And people thanked you if you got back to them quickly. Even now if we call people back they take the call right away as if there is a doctor on the phone returning their call.So it’s like “why does a dog lick his balls – because he can”. Why do Amazon and Google provide sub par level of support? Because ofa) the DNA andb) they can.”Either way an email form with an auto responder”Part of that is just some moron not understanding how to write an email that doesn’t seem like an autoresponder because he/she is just copying what others are doing. Mostly because they aren’t detail oriented enough to see the nuance in things like that. In general putting the time into emails that aren’t like that are a way to generate extra sales (if you have a product that you charge for). It’s like a way to spam people legitimately.[1] I got my first big account by sucking up to the right people and keeping them happy during a trial period so they would know we were their bitch and we kept that account for 6 years until they filed for bankruptcy. I bought a Mercedes with the profit from that account when I was 25.

      1. RichardF

        Great comment from the coal face LE, and I agree with you, response time to a sales enquiry or a support call are a tactical advantage. I’ve found the same in my business.

      2. ShanaC

        Google does provide support for certain things. Doubleclick related stuff, for example, they seem to be constantly hiring staff.

    5. ShanaC

      for some products it is near imossible to provide good support and good product at the same time.GA versus Omniture is a great example. Omniture basically requires a secondary consultant if you want to have certain kinds of implementation, provided for a fee by Adobe. GA provides absolutely nothing, instead they fostered a community and a DIY attitude. The DIY ended up pushing for a huge adoption rate, especially back when more search data was available.YMMV – but in small analytics departments where you have to learn on the fly, I much rather be equipped with GA over Omniture, irrespective of sampling/real time differences.

  3. John Revay

    I liked the quote on FW.VC yesterday”For 90% of web development cases, simply storing and retrieving objects from a persistent store is enough of an API. Mongo took that 90% case, and ran with it”

    1. fredwilson

      and ran they did

      1. Carl Rahn Griffith

        As they say to rookie racing drivers, “Drive it like you stole it.” ๐Ÿ˜‰

        1. John Revay


  4. William Mougayar

    What you have described without totally saying it is the “Consumerization of the Enterprise.”ย One of its key characteristics is that the buyer behaves like a consumer from a user point of view, even if they are in the enterprise. At least it starts that way due lower barriers of adoption.ย The other trend is that this blurs the lines between the traditional B2B vs. B2C separations. ย The user might be the consumer, but the buyer is the enterprise, and the startup company involved serves both of them.ย Exciting times!ย 

    1. JimHirshfield

      It’s a food chain. Consumers buy from enterprises; enterprises buy from other enterprises.

      1. William Mougayar

        Yup. And what has changed more is that a company can serve both sides (eg Disqus), whereas before it was one or the other (e.g take Oracle – no consumer outside of an enterprise will touch their product).

        1. awaldstein

          You are right on.Serving the free customer and building for the paying enterprise is the key. No mean feat.

          1. Carl Rahn Griffith

            B2B still holds true, I guess, but B2C is where I feel uncomfortable in today’s market – unless the C becomes for ‘Community’…

          2. awaldstein

            So true…but the definition of Community is as broad as the web is wide. Each one is different and doesn’t engender commerce as well as others.

          3. Carl Rahn Griffith

            That’s why I like ‘Community’ as opposed to ‘Consumer’ – consumer, to me, in the old B2C model, implies immediate tangible monetisation and a passive/transient relationship.

          4. awaldstein

            You know I agree with you on this one.

          5. Carl Rahn Griffith


          6. Wavelengths

            Niche communities?

          7. markslater

            we are doing it and winning.

          8. awaldstein

            Hey Mark…been thinking about you lately. We should catch up.

          9. markslater

            sure thing. any time.

          10. JamesHRH

            You are on a roll today, but the last line here is the best.

        2. markslater

          bang on! this is what we are attempting to do – its a very very big opportunity if you are positioned to face both

        3. LE

          I think either way you need to have a separate division to handle any product, even if sold to both consumers and enterprise. If you’re GE you can make jet engines and refrigerators because consumers don’t buy jet engines. But there are consumers who buy commercial ovens of course. So a separate channel is needed for consumers vs. restaurants for the same exact oven. In general.Generally, from what I’ve seen companies start out focused (like a small specialty restaurant with only handful of items) and then in order to grow start to expand their markets and become more like a deli, offering as many things as they can and thereby increasing the complexity of the organization until they become a big failing clusterfuck. Becoming a CF is enticing as it’s a quick way to gain additional sales. Then somebody comes in and starts slashing to pare down the product line (Jobs at Apple one example or a corporation selling off divisions).

    2. awaldstein

      There are very few models where there are just “Bs” and no “Cs”.

      1. Carl Rahn Griffith

        B2B/B2C strikes me as being from a bygone era of ‘us and them’ when times, transactions/boundaries and interactions were far more rigid and binary.

        1. awaldstein

          I agree.But while I always have a C there I constantly am thinking about the dynamics of the three pieces, how to seed the chicken/egg, how to create the value that creates the $$.I always love talking about what my products and services cost. Comfortable in charging. I just always wait till I know what that true value is then I can sell with comfort and with unlimited chutzpah.

          1. Carl Rahn Griffith

            Nicely put. That sums it up for me, re: adding value, Arnold – being comfortable with what your services cost = you can justify adding value so are happy discussing costs.Sadly, I think this is why – too many – free-to-use-at-the-moment-lets-think-about-monetisation-later(never) products have swamped the market, with little or no added value, just hype aplenty. Dangerous ground that very few will succeed in.Charge. If what you or your service is of some value, people will pay for it, correspondingly.

          2. awaldstein

            Been deep into this with my wine platform.Business behavior as in instantaneous adoption of the usage to fill a need is there.Market side where you intersect off and online in a new paradigm is interesting because the web as a vehicle for hyperlocal aggregation is still in its infancy. The old hack that ‘to build a community online, start at the street level’ is true again and what I’m doing.

        2. D Sushant

          Indeed. There is a slow but steady shift underway from a goods dominated (G-D) to a service dominated (S-D) logic of marketing (and management, in general): is the fountainhead if you wish to dive in.

        3. andyidsinga

          I don’t know about that .. (+ @wmoug:disqus )the thing is in the enterprise space there are a lot of folks that get involved with “the purchasing of things” …and none of those people want to get fired for being involved with something if it blows up.

      2. aweissman

        Incredibly well put

    3. fredwilson

      yes, exactly

    4. markslater

      absolutely correct. this is what he is saying.

    5. Russell

      Yes, I agree completely William. People’s expectations for service and independent research are set based on their personal experiences booking hotels, flights, restaurants etc and most B2B services are lightyears behind. Makes a salesperson’s life hard!It would be interesting to draw up some examples of B2C services that could be incorporated into B2B.

      1. andyidsinga

        A few months back I used the service “” here at work even though we have a full fledged travel booking system.I used it because we turned the trip into a mini-family vacation and I needed to add family hotel days to the trip before and after the company paid hotel days …strangely this service had a better room rate than our corp. travel service – so I saved myself and the company money in the process.

        1. Russell

          Andy, you took this is in a different direction than I was thinking – but love it. Corporate booking systems must be the bane of all business people on the road everywhere!What I was thinking of was doing a presentation for large companies, in my case a publishing company, about how they can adopt elements that already exist in other spheres. For example, I really like to use booking system for xyz – can we adopt these in the online trial sign up forms? I really love search and display – can we roll that into something? I really love disqus (even if I mispronounced it for two months) for comments – seems like other publishing companies are already rolling that in. My experience is the people capable of putting real money on the table in the b2b world are 40+ and aren’t using many of these services and so don’t ask the right questions or push for common functions. However if any percentage of their clients are under 40 they are using the web actively and they can tell a bad user experience when they see it.

          1. andyidsinga

            Hey if you do the presentation – put it on slide share then come back here and share it.I’ll pass it around at my bigco too.I think you’re kinda-sortof right about the 40+ crowd ..but I’m always loath to put ages on descriptions of folks because there are so many exceptions .I’ve started bucketing folks into those who are endlessly curious (looking at the past *and* future) and those who stop being curious at first frustration or blow up :).Of course, there’s another saying about putting people into buckets: “there are two types of people in the world : those who believe there are two types of people and those who don’t” :)Thankfully – in our group at bigco (intel new business initiatives) we’ve got a lot of the curious types for our fringe projects ๐Ÿ™‚

          2. falicon

            +100 to all of this…and happy to help out/get involved in any way that I can…especially as it relates to and the enterprise (something I’ve been thinking a lot about lately) ๐Ÿ˜‰

          3. Russell

            Would love to brain storm about B2C sites that people use – similar to the discussion @fredwilson started about blogs people read. Will five or six examples including and then throw it in to the mix in a week or two when there is a relevant topic.

    6. Jorge M. Torres

      Great way to put it – “consumerization of the enterprise.”Why should workers have to completely change the way they use and interact with technology when they walk into the office? Seems counterproductive to me.

    7. Pete Griffiths


    8. Brian Manning

      Good discussion. Though I’m not so sure we’re seeing the lines being blurred between B2B and B2C yet. Most of the networks Fred cites are used by start-ups or small businesses, not large, established companies. And small businesses and startups have always used consumer networks to run their business — entrepreneurs have been buying their office furniture on eBay for years.If large, established companies are using these services they have a very small proportional impact on their business. The consumerization of the enterprise is a nice thought, but i’m not so sure where they’re yet. I’m still seeing the traditional individual “agent” purchasing on behalf of large groups.

      1. William Mougayar

        But if you combine a truly scalable SaaS offering with a very easy way to on-board the user, then you’ve got enterprise infiltration by a consumer-like looking App. That’s mostly what I was referring to. If you find your way back into the the purchasing department and other gatekeepers, then you’re not really a consumerized App. It all boils down to purchasing levels of authority. Employees/Managers will use that authority to get things done, whether it’s $100 on a credit card or a $10K PO without anyone batting an eye about it.

        1. Brian Manning

          Yes, good point. This is super interesting to me. I’m thinking that I would call this B2E2B — where the “E” stands for employee.This is what Yammer does. They get a few employees to start using their social network and once they have some critical mass, they send a sales rep in for the upsell. B2E2B. It’s super interesting because it has a variety of ramifications of enterprise sales teams and managers.

    9. fendien

      @wmoug:disqus @fredwilson:disqus What’s ironic is how apple doesn’t work with enterprises, but it’s the iPad that’s been a driving force of consumerization of IT. Senior people at enterprises (both senior technologists and on the business side) demand it because the tablet form factor enables them to consume content on the road or at home in a convenient way. In order for IT to keep up, this has led to a whole generation of companies like Enterproid, Good, MokaFive, etc which enable personal and business identities on a single phone, while maintaining the security and differentiation of data that enterprises require. As many people point out on this thread though, this is an example of IT being reactionary versus proactive.There are two other trends too that can fall under the consumerization of IT umbrella, such as:1. Social – Tools like Yammer and Jive have reimagined how large teams can collaborate in the age of social networks.2. An emphasis on UX/UI – While in the past enterprise software was clunky and difficult to use, new companies like Workday have a focus on UX/UI which require less training to get started and do a better job at keeping employees engaged with their software.On another note, Big Data is another buzz word that gets thrown around, and has been having a massive impact on helping to redefine people’s habits in large organizations. NoSQL and columnar DBs have grown in popularity for enterprise technologists almost out of necessity because relational databases can’t meet the needs of certain data storage and processing challenges these days. Developers play with these tools in their free time and are comfortable given that they are often easy to deploy and have so many online support communities to learn from.My last comment is that data portability + the high support costs of legacy software combined with their inability to meet certain technical requirements is leading to a brave new world of enterprise software.To throw out a shameless plug for a second, all of these trends led to my creation of the NY Enterprise Technology Meetup ( in January of this year because with the power of employees to influence enterprise purchase decisions these days it is important to stay educated and be aware of new innovations in this rapidly evolving ecosystem.

      1. fredwilson

        So true

      2. William Mougayar

        Wow. Great response. Yes, social apps can infiltrate easily due to the viral factor, but when it comes time for deeper integrations inside legacy systems, then that’s when different conversations start to happen.

        1. fendien

          Thanks. I’d actually disagree though. Whereas on the consumer side, social apps can go viral relatively easily, within an organization it requires a cultural change to get people to alter workflows and start collaborating with enterprise social apps. To just install something and think people will find, use it, and get(/perceive) value from it requires some educating.Additionally, I think we’ve reached a tipping point where deep integrations with legacy apps can no longer be efficiently be achieved. There is too much patchwork implementation code custom to one’s environment, and many of these older tools can’t meet the storage and processing needs of our newer age of big data, mobile computing, parallel processing, etc.It is precisely because of the above that I think we’ll see new network effects at play in organizations, and that will lead the funding landscape for such enterprise software to evolve.

          1. William Mougayar

            Frankly, I’ve lost track of what we are disagreeing about. An “enterprise app” that has been consumerized is usually adopted by users voluntarily. It doesn’t require a cultural change because those users wanted it. I’m curious to learn more about what experience you are basing your observations on.

          2. fendien

            Haha true, I think I’ve lost track now as well ;)I wasn’t speaking so much about an “enterprise app” being consumerized, as much as generally about the implications of the trend “the consumerization of IT” wherein social and mobile are starting to really impact how people approach software for the enterprise.So while mobile doesn’t require a cultural change for users (they have for instance iphones from their personal lives which they’d like to use at work too), it changes the game for IT (namely around how to enable this in a secure way).On the flip side, bringing collaboration apps into the enterprise breaks people away from their “email tasks and files back and forth” mentality, and as such even though they may use Facebook and Twitter in their personal lives, it is an adjustment to use these new tools in the work environment.

          3. William Mougayar

            Cool. I think we agree a lot more now ๐Ÿ™‚

  5. JimHirshfield

    “skiller workers” – love that term even if it was unintentional.

    1. fredwilson

      it wasn’t. i will fix that. thanks!

    2. Kasi Viswanathan Agilandam

      yah … it sounds better than just ‘skilled’. when market is asking for better and better what is wrong in skiller?

      1. ShanaC

        i think we need to figure out a definition for the word skiller

        1. Kasi Viswanathan Agilandam

          Skiller is one who with killer skills!! ย what we otherwise call a rockstar ๐Ÿ™‚

        2. Wavelengths

          And the next step up is obviously sklllest.

          1. ShanaC

            exactly ๐Ÿ™‚

  6. awaldstein

    I’ve been thinking about the b-2-b-2-c paradigm a lot which is part of what I think you are driving at. I’m nudging this into life with theLocalSip project.Selling products to companies or enterprises without a promise that you are providing a customer funnel is a dead end.Charging customers for business access is a non starter mostly.Following the money to the enterprise is natural and a great plan as long as the customer value creates the market for the marketplace.Caution is always not to lose the dna which is always the intersection of customer need and business value where it all intersects.

    1. JimHirshfield

      Voted that one up, Arnold. Well said.

      1. awaldstein

        Thanks.You know this dance well Jim. That is one of the reasons you are such a great match for the work you are doing at Disqus.

        1. JimHirshfield

          You’re awfully kind, sir.

    2. William Mougayar

      “as long as the customer value creates the market”Golden words. +10

    3. fredwilson

      yes, that is what i am getting at

    4. Kasi Viswanathan Agilandam

      Intersection of customer need and business value…+100 (falicon way) on that.very rarely customer is taught/educated of their need.

    5. Ro Gupta

      Nicely put, Arnold.

      1. Roy

        agreed. curious to hear more about how you guys think about it.

    6. ShanaC

      well, can you charge for better understandings of their customer? The person most likely to help shape your wine decisions is your wine dealer, not your sommelier (especially since most people go to multiple restaurants)I may, figuring out demand so that your stock moves is a worthwhile thing to know, especially for your top 20% of buyers?

      1. awaldstein

        Shana…thanks for your thoughts.theLocalsip only functions for the retail supply chain at this point and the center of the world is the buyer.Business is very simple. Supply chain is convoluted and wrapped in product scarcity.I am starting to have a very good idea in detail of where the value is. Find the value and the model is there.

        1. ShanaC

          I still think inventory management in areas where supply chain is really convoluted is a valuable idea (not just wine)

          1. awaldstein

            Yes…but not really for wine. Everything at the artisanal level is allocation. There are never enough great wine and all of it gets sold if it is quality and priced appropriately for the market it sells into.Fascinating world.

  7. JimHirshfield

    So is this the kind of post that a Hacker News reader stays a little longer for? Or is it exactly this kind/length of post that sends them back in 21 secs?

  8. Dan Epstein

    FC looks very cool. Any idea when it’ll be available to investors and businesses outside the UK?

    1. aweissman

      the UK is a really good market for that marketplace as it is lightly regulated, so I imagine as they expand it will be similar places in the EU first

      1. RichardF

        yup and the UK lending market is ripe for it because the traditional market has all but closed for business

  9. Kasi Viswanathan Agilandam

    Fred, your last sentence “Increasingly it seems ” sounds like… all the ‘enterprise part’ is happening unconsciously … Does that mean they were not the initial plans of those companies and market is driving towards the ‘enterprise part’ ?

    1. fredwilson

      for the companies it was conscious. maybe less so for USV

  10. Barry Nolan

    With an engaged developer community, the network effects are orders of magnitude. In addition, the business model is typically transactional, success driven: not eyeballs/CPM dependant.The bar though, to engage developers, is very high – it has to be super easy to use, and solve their poblems immediately. Otherwise, you quickly develop a rep in what is a hyper-networked developer community.

    1. fredwilson


  11. disqus_GmsXRtHHvJ

    “And we like to invest in networks regardless of whether the enterprise is engaged or not.” do you happen to have network science in the portfolio?

    1. fredwilson

      what is network science?

      1. disqus_GmsXRtHHvJ

        It’s an emerging field that combines CS with other engineering branches to study natural phenomenon through network analysis. It’s a very hot area in academia with many active researchers and funding opportunities. I asked because it is a promising topic. Can the research ideas be transferred into commercial applications is another question. Won’t be surprised to see investments of this sort in the near future. Here is a good theoretical introduction.

        1. fredwilson


  12. David Semeria

    For me, the smartest observation from the last five or so years is Tim O’Reilly’s “Create more value than you capture”.A very close second is USV’s “Networks over hierarchies”.Both have the potential to bring untold goodness to the world.

    1. awaldstein

      I had forgotten “create more value than you can capture’. A great one.

      1. leigh

        yes agreed….

    2. aweissman

      also as @andyswan taught me: “”We make a fine bourbon, at a profit if we can, at a loss if we must, but always a fine bourbon.”

      1. David Semeria

        Good one. And has Mr. Swan ever uttered a sentence without at least a passing reference to bourbon? The man must dream Pappy…

      2. ShanaC

        still makes me crack up every time

    3. fredwilson

      maybe networks create more value than they capture and hierachies don’t

      1. David Semeria

        I think Tim was referring to business models. Networks and hierarchies don’t have inherent business models, but I can see what you’re getting at.

      2. kidmercury


      3. Lee Blaylock

        ” Because that’s where the money is” is what Willie Sutton so famously said about why he robbed banks. that is the same reason why the enterprise is so attractive + if you can use the cash flow from enterprise customers to scale and then attack the consumer market after you reach some scale. After all, each professional in an enterprise is also a consumer too. If you can do that, then you have a very powerful business model. + the enterprises give you staying power b/c consumers are very fickle and the switching costs too low. Just ask Friendster, MySpace and, heaven forbid, FaceBook someday. Where you have some dinos sticking around in the enterprise that should have died long ago but corp IT hasn’t prioritized changing them yet.

    4. andyidsinga

      Love Tim O’Reilly’s philosophy in this area. He did a great keynote at OSCON this year in Portland!

  13. D Sushant

    It would be interesting to understand how your geographic focus has evolved. Do you see USV deploying funds in geographies where you have not yet invested?

    1. fredwilson

      probably not. we want to be able to get to the headquarters of a portfolio company in no more than seven hours by air.

      1. LE

        I never told the “cab” story here.My first trade show I went to out of college, I had to fly to Atlanta. It was a word processing show (Syntopican IX I believe and I can’t even find a reference on Google for it at all..)Anyway I was standing out in the rain at 21 in Atlanta from PHL after flying in as I wanted to sell computer supplies to companies and this was a show dealing with word processing. I was in the rain waiting for the show shuttle because that is what my father always did. He never took a cab he took the shuttle to save money when going to the Coliseum in NYC or McCormick Place in NYC. So that is what I did.As I got wet I realized “why don’t I just take a cab?” which seemed totally distonic to me given my upbringing. Had it not been raining, who knows?So I took a cab, it cost $10 at the time and I learned a very important lesson at that early age which was not to simply do something w/o considering that if circumstances change you should change your behavior. Or, most importantly, is there something you can do with money to save yourself time? (I have 4 computers at work which I work with and large monitors and you would be amazed at how much I can get done in 1000sf of personal office space for just me.)So my question is, even if you do desire to limit where you invest, why not explore cutting down that travel time of 7 hours to even less time by using private jets? It’s a cost of doing business and will give you more time to relax and not waste it in transit like a family from Queens going through security who saved up for their yearly vacation.

        1. fredwilson

          Would flying private make it possible for us to invest in Asia or Latin america? Not sure but it is an interesting suggestion

          1. LE

            The efficiency comes in several places even if used only for your existing travel.1) On shorter hauls you cut out the time involved in messing with an airport, the overhead time of arriving early and going through security, and waiting around. Plus you can schedule flights to suit the exact timing that you need.2) You can work and hold meetings on the flights if you want.3) You can visit more places in one day obviously because of scheduling.4) You can fly into smaller airports5) Planes fly the speed that they fly. So that’s why I didn’t attempt to “sell” you on the international angle. Assuming that the major time savings is not in the air but on the ground.…But as mentioned when you add up the ground time as well as the “work in the air” time (or ability to rest) you still can travel farther than flying commercial.

          2. D Sushant

            A partner located within the 7 hour baseline could be an alternative.

          3. fredwilson

            a cardinal rule of USV is that all partners work together in the same office i can’t work with others any other wayi know other VCs make this work just finebut not this VC

          4. D Sushant

            Good to know that. Your approach seems to be that of a craftsman as opposed to an assembly line approach to investing that some may be following.

          5. fredwilson

            That’s what we aspire to do

      2. ShanaC

        the deep south is less than seven hours away….

        1. fredwilson

          I would be happy to invest there

  14. JaredMermey

    Can we differentiate marketplace effects from network effects? Using FC as an example, I fully agree that every new Lender adds value to a Borrower and every new Borrower adds value to a Lender. BUT, does a new Lender add value to existing Lenders and do new Borrowers add value to existing Borrowers?Intuitively, my first thought is it adds more competition, which can be seen as both good and bad. I would think that if you asked an existing Lender, s/he would not want more Lenders as competition would cause him/her to drive down interest rates. If not everyone in the ecosystem benefits from a new citizen, is that still network effects?

    1. fredwilson

      creating competition isn’t always a bad thing

      1. JaredMermey

        I fully agree it is not always bad. But it also isn’t always good for every member of the marketplace. It is always good for at least one member of the marketplace though I’m not sure if that postulate suffices for network effects.

        1. fredwilson

          More liquidity is usually good for most everyone in a market

      2. LE

        I know of a guy who owned a chain of jewelery stores in malls. He would operate under two different names in the same malls in order to provide the competition for himself. The mall obviously was ok with this as it appeared they were giving people choices. While this is an anecdote I’m sure this is fairly typical behavior.

        1. kidmercury

          to your point, starbucks has started building coffee shops that are outside of its core brand: different look and feel, different name, etc. only a “powered by starbucks” disclosure for those who read the fine print.

          1. LE

            Starbucks essentially will be running out of steam at some point. I mean everything revolves around those coffee shops (of which I am a big fan of and spend $1500 per year at). There are so many eggs in that basket and there is little room for improvement. They can only go down if they don’t go up.They need to get into other businesses while they can. So they are and should be experimenting with new ideas to see what sticks. Even if they are just more of a “sugar delivery system” as I like to refer to Starbucks business as.…The world’s biggest coffee chain bought Evolution Fresh for $30 million in cash in November to get a piece of that business. At the time of the purchase, Starbucks Chief Executive Howard Schultz said successful independent juice bars have annual sales of well over $1 million per unit.

          2. kidmercury

            IMHO there is a lot they can do with their real estate, and many non-coffee uses their customers are finding for their real estate. i think there are some great business opportunities there.they do own part of square and pepsi owns part of them, so they do have some interests outside of possibilities outside of sugar. although i suppose pepsi is the original sugar distribution company!

        2. fredwilson

          That’s crazy but I get it

        3. andyidsinga

          was he selling to different customer segments across those two store brands?

          1. LE

            “was he selling to different customer segments”Nope.Same products, same discount signs, same displays. Different store names and themes.And, ready for this? In some cases even the same employees.Some (but not all) of the stores were located next to each other. There was a way for employees to go back and forth between the two stores in the back. The only thing that was different was the branding. That wasn’t everywhere because he couldn’t always get the stores next to each other. But a mall must have a critical mass of certain types of stores to get people to shop and feel that they have selection.Anyway, this particular chain sold cheap “fashion” jewelry to tweens and the type of people who bought that type of jewelry. So they would enter one store and then go to his other store next door where the same product would be. Or vice versa. It was a chain of about 25 stores at peak.The market dried up (he was in this forever and made plenty of money). In the end he was ready to close up because sales had dropped and someone came along and wanted his mall locations so he got them to also pay him for his inventory as well by playing hard to get.

          2. andyidsinga

            fascinating! love those kinds of stories.

          3. LE

            Yeah unfortunately though there might theoretically be a decline in stories like that. Why?Because while in the past you could share a story with a friend about something you did in business, and not fear the entire world knowing, now anything you say can be repeated and a million people would know what you do and how you do it.It might come as a surprise to some people how close to the vest business people traditionally are with what they do lest competitors find out. My ex father in law had some good angles in running his alarm business. He didn’t belong to any local groups lest his competitors find out anything about him because a slip of the tongue.When I sold my first business there were only four people on my side who knew of the transaction. Lawyer, accountant, wife and my father. Key people didn’t even know until a deal was inked (and the buyers needed to get them on board).Anyway the same father-in-law who was secretive with what he did was quite insulted when he found out the day after the closing. To me it was simply a possible vector that could cause a disruption to the carefully orchestrated pitch and story I had setup in order to control the entire situation which took place over the course of perhaps 5 months or so. They story is always quite critical in any negotiation.

          4. andyidsinga

            I see what you’re saying. A lot of what you’re talking about probably comes with maturity and good mentors. In the current setting care must be taken to separate public comments on blogs from private email conversations or private face to face conversations over beers. It certainly seems more complicated now – but that might be because we’re just getting used to it – I dunno.

  15. takingpitches

    I think I am having problems with Disqus, so reposting. Sorry if it appears twice:Individuals can be subsumed within institutions or can remain individuals but be connected by a network.The world is run through the interface of institutions.Institutions become stagnant, in part because they have gatekeepers that keep disruptive forces and people out; networks can more easily be constantly disrupted and changed by individual passion, drive, and thought if there are no artificial gatekeepers.The Internet, in all its variants and evolution, is the ultimate network, with the capacity to transform fields stagnated by institutions by devolving them into networks. As such, long-standing institutions lose by the web to the extent that the network is used to mobilize individuals to supplant or weaken and then revitalize the institutions.

  16. Carl Rahn Griffith

    Let alone what the implications are here. Good read…The Untouchable Economy: Why Americans Are Turning Against ‘Stuff’

  17. AlexBangash

    Fred, its great how you’ve moved between consumer and enterprise and Peter Fenton from Enterprise to consumer. I wonder why you did not mention stackoverflow. Also it would be great to see USV invest in Github, a story that parallels 10GEN. :)On another note, you should check out an engaged community of institutional investors.

    1. fredwilson

      we would have loved to invest in github and certainly made our interest known to them. but the investment round they did doesn’t fit our parameters

  18. lawrence coburn

    This makes a lot of sense Fred. The Enterprise can only hold off the forces shaping the consumer technology world for so long before it is overrun. IT, Policy, and incumbent systems can slow change down, but can’t stop it. It’s a really good time to be thinking about the implications of how networked employees, partners, and customers will change the way people work.

  19. leigh

    Growing concern for enterprise is the extent to which startups focus on getting bought. Was working with a startup i loved and started talking to them about guarantees — if you are going to be core to our business, what happens when you sell yourself and the business model changes? It’s very risky from the enterprise perspective.

    1. fredwilson

      True. But if they get bought by a larger enterprise focused business it could be a good thing

  20. Pete Griffiths

    Lessons learned in building and managing consumer networks are transferable to the business world. And as more and more people spend more and more time online they are increasingly disinclined to put up with the kind of shitty user experience that used to be the norm in so much business software. In the old days such software required tons of training and support, nowadays it is supposed to be obvious. One of the challenges to companies wishing to straddle the two worlds is that the business relationship is so different and in the early days resources are so finite. Still – nice problem to have. ๐Ÿ™‚

    1. fredwilson


  21. Shaan Rafiq

    …just a quick question. May seem a little/lot off topic. You guys invested in Skillshare right? I assume that was because of the power of the network and its potential value/scalability etc. When considering the B2C model of Skillshare for example what made you guys choose to ‘go’ with that ‘mainstream’ network rather than a more niche ‘network’. Say for example a Skillshare for businesd/enterprise. Sure you guys like to invest whether enterprise is involved or not but with the SkillShare example wouldn’t it be possible just to say great product/businedd but we’ll wait till we find a more enterprise centric version. Especially as, like you said, you’re starting to find more often that enterprise is/should be involved.Sorry if this makes no sense haha.

    1. fredwilson

      I think enterprises will join the skillshare network in time just like they joined the behance network and the edmodo network

  22. Gary Krivin

    I’m a frequent reader and infrequent leaver of comments. When I saw the title of this post, my reaction was not interested but as usual there was a lot of value in it for me so much so I forwarded two of the companies profiled to clients. Just wanted to say thank you for the effort and constant value of this blog and community.

    1. fredwilson

      Thanks for taking the time to stop by and share your thoughts

  23. Techman

    Disqus just keeps getting better and better.

  24. andyidsinga

    Sometimes I feel like the poster child for this sort of developer-enterprise thing you talk about – not on a large scale or anything – but at BigCos there are a lot of small, fringe projects going on – and since developers at BigCos can move around a lot they talk a lot!Oh I love mongodb! The experience setting it up and getting it up and running for our small project was such a delight. And gridfs for storing big binaries easy and cool.This summer we also developed a proof of concept that used twillio for SMS and robocalls. Again – such a good experience. If only they had a direct speech to text API outside of their call recording stuff – I wouldn’t have had to go to another API ๐Ÿ™‚ ..still not complaining – talk about a useful, easy to use service!

    1. fredwilson

      Makes my heart sing

  25. takingpitches

    To me, the most interesting networks are those that connect free agent talent and customers, bypassing those institutions where the talent was housed pre-Internet.The pattern of disruption is so Clay Christensen. First the talent congregates on a network and the institutions ignore, second, the institutions follow and by doing so validate the network, and third, the disaggregated talent wins out.Individuals are empowered across the board.On the supply side, you increase the number of competitors by encouraging and empowering suppliers, in line with the general societal trend toward a freelance economy, where a lot of talent sits dis-aggregated from large institutions. The best expertise is no longer just at brand-name organizations and firms.On the demand side, the marketplace also empowers customers. Initially, the old guard of customers โ€” nervous to use newcomers โ€” will continue relying on the establishment service providers. Other customers, more on the cutting edge, will take a shot with the young Turk suppliers.Eventually, like with disruption innovations generally, the niche โ€” demeaned at first โ€” will become the market, as it is proven that services can be provided better and more cheaply.

    1. fredwilson

      we have a bunch of them in our portfoliobehanceworkmarketsoundcloudwattpadkickstarteretcetcetc

      1. takingpitches

        The thesis is awesome because the opportunities are basically endless as their value proposition does not turn on grabbing and maintaining people’s general purpose attention, which is bounded, limiting the number of winners.USV is awesome because you could respond to my post with a serious list ending with multiple etc. etc. etc.!!

  26. noela

    Fred,the article is so true.I do believe if well implemented by entrepreneurs, it can fill up the gape between the industries and customers.Social looping is the main factor in today’s business world

  27. fredwilson

    yay. this post turned you into a sales channel for edmodo. winning.

  28. awaldstein

    Creative went public basically on the promise of the distribution of the developer SDK.In truth, we had giant mail sacks full of BRCs (remember them), literally thousands of them that showed the application reach of the ‘standard’. I know because it was my job to create the database and build the developer org!

  29. fredwilson

    it’s a great model and the inspiration for freemium

  30. awaldstein

    Big time for a short time period (4+ years).Sold approx 80M Sound Blaster cards in four years mostly to support applications of some 3500 active developers world wide. As a de facto standard we were I believe some 95% of the market for that period.Good run.

  31. awaldstein

    My schooling was at the intersection of brick and mortar retail, event-based marketing and fan-based on and offline communities. That’s my early dna.Actually they were really good days…

  32. William Mougayar

    I’m not sure I follow. You mind elaborating please? Thanks.

  33. PhilipSugar

    It is a fun space…..I’m in it now.

  34. awaldstein

    A large part of my consulting over the last two years has been predominantly web-based as the model. Great inspiring companies.But two new personal projects are really grounded at the street level. Harkens me to my core marketing and sales beliefs. And feels good and tangible.I’m enjoying it.

  35. William Mougayar

    In my experience, it depends on the level of decentralization that already exists in said enterprise. I’ve seen where the central purchasing politbureau is still rigid and other cases when the business unit has purchasing power and imposes it. Thats’ when the other parts of the organization are a service to them (including IT). On the whole, I’m sure it is leading to changes in current practices, example where BYOD is becoming more common now (Bring Your Own Device). BYOS – Bring your Own Software has been going on for years. I like the case where the employee can whip up their credit card and pay for it just like that and expense it later.

  36. Pete Griffiths

    I think you are right but this is a longstanding pattern. For example, the PC first penetrated the enterprise not through the MIS department but through departmental budgets. MIS often resisted PCs but the functionality offered (typically WP and spreadsheets) made the encroachment inevitable. So if a technology offers serious value at the user level it generally enters bottom up and then and only then is it eventually adopted by the powers that be. As I said, I think this has been typical ever since the cost of products has been low enough for departments to buy them.

  37. ShanaC

    I wonder how bring your own software works – how do you get interoperability?

  38. ShanaC

    !!!! that’s it? No local carrots, or local dairy?

  39. fredwilson


  40. William Mougayar

    I meant it in a pejorative way. If you use a SaaS app, it’s like bringing your own software with you, but it’s in the cloud. As for BYOD, there are companies that specialize in that sort of thing like Enterproid… or Fixmo.

  41. William Mougayar

    I don’t know the details of that policy change, but I recall they banned Siri on the iPhone and some cloud software.

  42. fendien

    Andrew Toy of Enterproid demo’ed the Divide BYOD Platform recently at the NY Enterprise Technology Meetup. You can check out his 15 minute presentation here —

  43. William Mougayar