Posts from April 2015

The 2014 numbers for the VC category are out and it was a huge year, almost $50bn in total VC funding.

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But look at the numbers for “deals” vs the numbers for “dollars”.

In 2014, there were 4,356 deals vs 4,193 deals in 2013, an increase of 3.8% year over year.

In 2014, VCs invested $48.3bn, compared to $29.9bn in 2013, an increase of 61.5%.

Basically, the average deal size went from $7mm in 2013 to $11mm in 2014. But averages don’t really tell the whole story.

What is going on is that the late stage market is going crazy. There was a $100mm+ deal on average every month in 2014 and the late stage market made up 1/3 of all deals.

VCs are all about what is happening now and are not focusing as much on what will happen in five to ten years (the seed/early stage markets).

None of this should be news to those who are paying close attention. Round sizes have gone up and burn rates have gone up, but so much of this is limited to a hundred or a couple hundred companies. The rest of the market is more or less where it has been for years. The rich are getting richer. The middle class is stagnant. And the people who can’t raise a round still can’t. Only the top end of the market has really changed over the past five years.

Kind of like the entire economy, isn’t it?

So I got an email from a reporter on Friday. The note said “…. some emails from you to various Sony executives were part of the collection released on Wikileaks. I’m working on an article for [   ]  about some of them—how they depict a behind-the-scenes look at Silicon Valley dealmaking. And I plan to include a few where you’re either the sender or recipient.”

If you are looking for a clever way to do a phishing attack, this would be it because I clicked on that link as fast as one can possibly do so. Fortunately the email was mostly tame, about the Gotham Gal and I looking for a ride to a conference from LA on someone’s plane. I didn’t insult anyone and no confidential information was revealed. Phew.

I replied to the reporter that I appreciated the heads up and I had nothing other than that to say.

If you want to look at all of my emails in the Wikileaks email dump, you can see them here.

This is the future for all of us, as I’ve stated more than a few times on this blog. When writing emails, assume they are going to end up on a site like this. Because they will. I’ve been changing my email behavior over the past few years and this latest incident has caused me to be even more cryptic. I think the vast majority of my emails will start looking like “my cell phone is [   ]. i’m free at [  ]. give me a call to discuss”

Last night the Gotham Gal, our daughter Jessica, and I went to see Hamilton at The Public. This is a hip hop musical about the life of Alexander Hamilton. The writer and star of the show, Lin-Manuel Miranda, read Ron Chernow’s biography of Hamilton, got obsessed with Hamilton, and started writing a hip hop record about him. That eventually led to the show.

But along the way, back in 2009, the White House invited Lin-Manuel to Poetry Night and he performed the opening number for the President, the First Lady, and their guests. This is the video of that night. It’s great and serves as the perfect trailer for the play, which you should try to see when it opens on Broadway this summer.

It’s no secret that I HATE the term Silicon Alley. It’s a wannabe term if there ever was one. NYC’s tech community doesn’t want to be Silicon Valley. If they wanted that, they’d move there. NYC’s tech community is gritty, artsy, and full of edges like NYC itself. I am in no way dissing or dismissing Silicon Valley. It’s mecca when it comes to tech. Everyone knows that. I’m just saying that calling ourselves Silicon Alley is lame. We can do so much better.

So I’m turning this over to the AVC community. What’s a better term for the hundreds of thousands of people who work in thousands of tech companies, large and small, in NYC?

This video was made to celebrate Etsy’s year in 2007. That was the third year the company was in business and the second year we were invested. I think this does an incredible job of showing what the secret sauce was that made Etsy what it is.

I’ve gotten a lot of requests to share the results of the Apple Watch Survey I ran yesterday. I haven’t had time to do a lot of analysis on the results which I will do and follow up with another post. But here are some quick stats. These numbers are for the AVC readership. I did not tweet the survey out and it didn’t get shared much so I feel that it really is representative of the AVC community and not the broader Internet universe. There have been 1,827 replies so far.

Likely to Buy – 26%
Might Buy – 22%
Unlikely to Buy – 52%

These numbers were very consistent by operating system (iOS, Android, other), geography, sex, and age.

There were a few differences to note though; The youngest cohort (24 and under) was 7% less likely to buy 19% vs 26%. That was the only cohort where that was the case.

iOS users did not differ from Android users except that they had a much higher propensity to preorder vs waiting for it to arrive in the store.

We could read these numbers many ways. We could say if Apple sells watches to 26% of iPhone users they will have a huge hit on their hands. But I don’t think we can extrapolate from the AVC community to the broader market. This is a geeky early adopted crowd.

We could note that there are almost as many people in the maybe category as the yes category. Apple has a huge opportunity to convince people over time to get a watch. I think how the maybe crowd breaks over the next year will be the single most important thing to watch in the watch category (pun intended).

Finally its quite interesting to note the relative apathy among the youngsters. We also saw them making fun of the watch in the comments. I see the same thing with my kids and their friends who are in the 18-24 crowd. It makes me wonder if the youth culture is mystified when it comes to watches or weather this is just a money thing. Maybe they see the price tag differently than older people with more disposable income.

In any case, its clear that Apple is going to sell a lot of version 1.0 watches. There is real interest and demand out there. Whether we will all be wearing them in six months is another question. We will ask that as year end approaches.

With the Apple Watch available via pre-order, we are starting to get some data on how it is doing. I thought I’d take this opportunity to survey the AVC community, an early adopter crowd if there ever was one, about it. Please take a minute this morning to answer five short questions about your interest and intentions for Version 1.0 of the Apple Watch.
Take Our Survey

Click here to see the early results (roughly 700 responses at 9am eastern)

Marc Andreessen delivered a lot of good one liners in this interview with Dan Primack, but my favorite was about the upcoming Presidential election cycle:

I’m really struggling between between the anti-science party and the anti-economics party. I’m highly tempted to sit this one out. I don’t know what I’m going to do.

Last week I was at a meeting of some NYC tech entrepreneurs and investors with a Republican Senator. After I made a few comments, the Senator turned to me and said “you sound like a Republican” to which I replied “I could never be that.” The Senator continued to press me and said “but you are a business person” and I replied “but I am also a human being.”

Now I don’t mean to say that Republicans aren’t human beings. I was just saying that I can’t and won’t put my business interests before other factors that enter my mind when I think about the orthodoxies of our two parties.

Marc’s construct of anti-economics vs anti-science is his way of describing the conundrum. It is a good one.

As we enter the 2016 Presidential cycle, I am reminded that there isn’t a candidate out there who sees the world (or at least admits seeing the world) the way I do. It’s a struggle for me and, it seems, many others as well.

On Friday we did our monthly two hour “deep dive.” That is when our entire investment team spends two hours going deep on one topic. This time we talked about how the Internet, twenty years in, has only really disrupted a few large industries so far and there are many that are largely operating in the same manner that they were operating before the Internet came along. Albert postulated that we are only now seeing these large industries be impacted by the Internet.

That led to a discussion about how to recognize the most interesting opportunities in these “laggard” industries. We went back and looked at our portfolio and what we have learned from that. I observed that many entrepreneurs look to use technology to automate a workflow as a basis to build a technology company, but we have learned that creating an entirely new workflow seems to produce bigger outcomes.

Albert brought up a famous Harvard Business Review article from 1990 by Michael Hammer titled Don’t Automate, Obliterate. In this article Hammer argues that reengineering industries using technology is much preferable to automating them. You can read the whole thing on the link above. It was written 25 years ago, but it seems as fresh and relevant today as it was when it came out.

So, to me, the thing to look for when investing in technology opportunities in “laggard industries” is entrepreneurs that want to obliterate business processes instead of automating them. That is hard to sell to the established companies. They will not willingly adopt an entirely new process. They will want you to automate it for them. So coming up with a back door into the industry is often better than a full frontal assault if you intend to use the obliterate approach.

Like most deep dives, we did not come away with a fully formed investment thesis. But we did come away with some important observations and words we can use to talk about them. Automate vs Obliterate is great and I am sure it will be quite helpful as we start looking around laggard industries for investment opportunities.