Posts from 2014

Since its emergence as a commercial platform in the early 90s, the Internet has treated each bit equally as it makes its way over the “last mile” to your home or office. If you put up a web server and write a game that anyone could play, those bits will be treated equally with the bits coming from IBM’s web servers. There has been no fast lane or slow lane on the last mile of the commercial Internet. We have had a level playing field and that has resulted in an explosion of entrepreneurial innovation that has been very rewarding for entrepreneurs, investors, and society as a whole.

But that period of “permissionless innovation” is likely to come to an end soon if we all let it. The FCC has responded to a court ruling by proposing a convoluted set of rules that will allow fast lanes, slow lanes, and what’s even worse, no lanes. The FCC’s proposal will allow the telcos and cable companies that provide the last mile connection to your home or office to prioritize some bits over others. That’s how they create the fast lane and the slow lane. It also allows discrimination in which they can decide not to allow your bits through at all, creating a “no lane”.

Many, including a fair number of folks on this blog, have argued that we should not “regulate the Internet” and we have to allow the last mile providers to do what is necessary to make money. Sadly, we have already regulated the last mile of the Internet and have given local duopolies around the country to telcos and cable companies. For most citizens in this country, you have two choices for the Internet connection in your home. You can buy it from your phone company. Or you can buy it from your cable company. If there were dozens of choices for last mile connectivity, I would also argue for no regulation and let the market figure this out. But there is not enough competition in the last mile market to allow a true market to function. Instead we will have terms of service dictated to us and these providers will extract rents from all service providers on the Internet and the era when anyone could launch something and compete on a level playing field with the incumbents will be over.

Here’s what you need to do about this:

1) You need to be very clear that you will not accept fast lanes, slow lanes, and no lanes on the commercial Internet. A good start would be signing this White House Petition before May 15th. But you will need to do more. This rallying cry must be sustained until we rid the FCC of the idea that fast lanes, slow lanes, and no lanes are OK.

2) You need to “plug into” the Internet activists who are building the opposition to fast lanes and slow lanes. A good start would be to follow this facebook feed. I will point out others on this blog as the fight plan emerges.

3) You need to watch the FCC’s proposed rules that will be aired to the public on May 15th to see if they are going to consider “reclassification”. If they do not, we all need to rise up and go into action against these proposed rules. Because without “reclassification”, the FCC really cannot protect us from the last mile duopolies who are hell bent to build these lanes on the Internet and destroy the golden era of Internet innovation that we have experienced over the past twenty years. We cannot allow that to happen.

AVC community member Matt Myers has launched a Kickstarter project to fund his I Live Yoga project.

I contributed yesterday for several reasons; I love yoga, I think building tools for yoga instructors is a great idea, and I really appreciate Matt’s contributions to this community over the years.

Here is the video describing the project:

And here’s a link to the project’s Kickstarter page. I hope you’ll join me in supporting Matt’s project.

There is a long article on Square and Box in TechCrunch this weekend. I am not sold on the arguments the author makes about the commodity nature of both products. But the author makes a point at the end in a section called “The Valuation Trap” that I very much agree with:

A second iron law of startups might be that the higher the valuation of a startup, the fewer options it has for financing and exits…… once a company has raised mezzanine capital and is valued in the billions, its options are essentially to go public or find a very interested buyer with deep pockets. There are few other options on this side of the startup pipeline.

The past three months have not been good for highflying tech stocks and now we are seeing IPOs being postponed. Both Square and Box have recently done that.

Another thing that Square and Box have in common is very high burn rates. The author of the Techcrunch post says that Square lost $100mm and Box lost $160mm in 2013.

The combination of sky high valuations, equally high burn rates, and a disappearing IPO market is not a pleasant one. I am fairly confident that both Square and Box can and will navigate the valuation trap, but it will require making some hard choices in the coming months.

So the moral of this story is that you can push valuations when you have investors knocking down your door, but unless you are cash flow positive and expect to remain so for the foreseeable future, you do that at your own risk. You will need to find someone to top that price down the road and that person may not be there.

Epilogue: I am a VC. I am talking my book here. I don’t like to pay sky high valuations. And I like to argue against them. So understand this post in that context. But I am also an investor in companies that have found, and may or will find themselves in the valuation trap. I have lived it, felt it, and suffered from it. It is a real issue.

It’s been almost a month since we did a fun friday. I was talking with an old friend yesterday about how much we all hate email.

So I thought we could spend friday at AVC collectively hating on email.

Here are a few things I hate about email:

– There is no easy way for me to keep track of the emails I’ve sent where I really care about the response. These important responses get caught up in all of the other email and I often miss them.

– Calendar invites. I wrote an entire blog post hating on them. I particularly hate Calendar Invite Spam. But I dislike all calendar invites because the interaction should be in my calendar not in my inbox.

– Folders/Labels – I can’t be bothered to organize my email into folders/labels, and I never ever look at anything other than my primary inbox. Once an email goes into a folder/label, it is gone and the only way I will ever react to it is finding it with search.

– No Multitasking Support – I have to open up multiple tabs in gmail to do some tasks. It would be great if I could multitask in a single inbox view.

– Doing email on my phone. As much as I hate doing email on the web, it is worse on mobile. You have less screen real estate. Cutting and pasting is harder. Everything is harder.

So those are some, but not all, of my pet peeves about email. What are yours?

A few months ago, I posted about a student coding contest called Dream It Code It Win It. I attended the awards contest last night at The Great Hall at Cooper Union. I love that space. You feel the history when you walk into the room.

The majority of the event was a panel event which in my opinion was a waste of time. I wanted to see the students present their projects. Which sadly did not happen. But the students were invited up onto the stage to collect their awards.

In the high school category, almost half of the participants were women. That is a fantastic stat and hopefully a sign of things to come with women and coding.

I was super excited to see a team from The Academy For Software Engineering win one of the awards. That is a great accomplishment for a school that hasn’t yet completed its second year. Here is the team from AFSE getting its award.

It was also really fantastic that The Young Women’s Leadership Academy (an all girls high school in NYC) fielded a winning team. I’ve heard great things about that school.

Not surprisingly Stuyvesant High School had three winning teams. The Stuyvesant CS program has been around for almost twenty years and its leader Mike Zamansky is one of the unsung heroes of the NYC tech scene.

Mike sent me videos last night after the event for the three winning teams from Stuy. One of them is so good, I think it would easily get funded on AngelList. It’s called Cartwheels (great name) and here’s the video.

These kids eat at food carts every day, they dreamed of a better way, they built it, and they won it. That’s awesome.

I’ve said many times on this blog that I like to give away bitcoin. I have my Coinbase wallet on my phone (yet another great reason to use a phone that allows you to do what you want with it). I’ll be out at dinner with friends or wherever, and I will take out my phone and send some bitcoin to a friend. It is amazing to see the effect of owning bitcoin on people. They go from being dismissive to being fans pretty fast when they own some bitcoin.

So it was with great joy that I read that every MIT student (all 4,528 of them) is going to get $100 in bitcoin to use however they wish. This is like giving every MIT student a laptop thirty years ago. That didn’t happen, but I had to make some kind of comparison. I can’t imagine a better group of students to infect with bitcoin religion than the MIT students. This will encourage them to get into bitcoin, understand it, and build stuff on top of it.

I don’t know the two MIT students who are doing this, but I do know their largest funder. I have reached out to him this morning in hopes that I can join the funding group behind this bitcoin giveaway. It is awesome. I love it.

More and more artists are embracing social sharing platforms like YouTube (video), SoundCloud (audio), Wattpad (storytelling) to get their works out and connect with fans. We have invested heavily in this category and both SoundCloud and Wattpad are USV portfolio companies. Another benefit of these platforms is you can use your followers/fans on these platforms like a panel. If you assume that the millions of followers you have on SoundCloud are more or less a representative sample of your entire fan base, then their behavior is more or less a reflection of the behavior of your entire fan base. If they like a new song a lot, it will probably be popular with your entire fan base. If they aren’t so excited about it, then maybe it won’t be a hit with your fan base.

SoundCloud announced a new feature for creators today that is a great example of this. It is called “Top Cities”. This is how SoundCloud describes it:

Plan your next tour, release strategy, and get better at connecting with your fanbase, by knowing exactly where they are — just click the ‘Top cities’ tab in your stats dashboard.

I recall seeing startups crop up from time to time where this was the entire business plan – figuring out where artists fans were so they could plan a tour. It turns out it wasn’t a great business. But I do think its a great feature. And just one example of how you can turn your followers on social sharing platforms into a panel that will allow you to understand them and connect with them better.

There has been a lot of hullabaloo about Airbnb here in NYC over the past few weeks. The NY Post had a field day using Airbnb as a punching bag for a week or so. It made for good tabloid media but lacked a honest discussion of the pros and cons of Airbnb and all that comes with it.

I’ve lived in NYC for over thirty years. It’s a very dense urban living environment. As the Gotham Gal likes to say, “we live on top of each other.” And clearly having your neighbors renting out their apartment to folks visiting NYC for days or weeks at a time is problematic. I think Airbnb has a lot of work to do here in NYC to educate folks about what the service is actually all about, who most of the 40,000 hosts here in NYC are, and how the service works to protect people.

Let’s take two relatively unknown aspects of Airbnb.

– identity checks – many hosts will not rent to people on Airbnb who do not have their identity checked and verified. Airbnb provides this identity check service to the hosts and a large percentage of guests on Airbnb are identity checked before they show up and rent a place.

– smoke and carbon monoxide alarms – Airbnb requires hosts to have working smoke and carbon monoxide alarms in their homes. if a host does not have one, Airbnb provides it to them.

Now let’s compare that to the alternatives. Do hotels verify the identity of their guests? Do hotels provide smoke and carbon monoxide alarms in every room? Do apartments rented out on Craigslist verify the identity of their guests? Do apartments rented out on Craigslist provide smoke and carbon monoxide alarms?

My point is this. You can attack Airbnb for all sorts of things. But consider the alternatives. Do we want hosts putting their apartments on Craigslist instead of Airbnb? Do we want tourists who only have $150/night to spend on housing in NYC to rent a room in a flophouse or the apartment of a photographer who is away for a few weeks on a photo shoot?

I think the better approach would be to have a conversation with Airbnb’s executives about how to make the service work better for New Yorkers. By making Airbnb work better here, we get the best of both worlds. A safer alternative than Craigslist and a more affordable alternative than high priced hotels. My hope is that cooler heads prevail and we find a happy medium that works for everyone.