Posts from September 2015

I did a fireside chat at Google NYC yesterday and was asked a great question by one of the engineers in the room. He wanted to get at what exactly are we teaching when we teach coding to kids and why is it important.

I responded that coding is just instructing a machine what we want it to do. Anytime you are instructing a machine what to do, you are coding. That could be writing python code, that could be setting the alarm on your phone.

The point of teaching kids to code is that machines are becoming an ever more important part of our lives and an ever more important part of society and the economy.

Those who are good at instructing machines will have an easier time navigating the life that is in our future.

That’s why we should teach kids to code.

Our portfolio company CircleUp is a marketplace where consumer goods companies raise equity capital from accredited investors. CircleUp is a registered broker dealer and does all of this in full compliance with securities laws. Over the past few years, CircleUp has helped 113 consumer goods companies raise over $130mm and they are growing quite rapidly now as entrepreneurs who are building consumer goods companies increasingly understand the value of raising in a marketplace model vs the old fashioned “knock on doors” model.

I think the growth rate will accelerate in the coming months as CircleUp launched a secondary market last week they called Rights+. First a bit about the importance of secondary markets and then I’ll talk about what makes Rights+ different from other secondary markets.

One of the big challenges for investors in private markets is the securities we buy are illiquid. That means most of the time we will need to hold the investment until “maturity” whatever that is. And in early stage investing, that can often be 5-10 years (or more). If you suddenly have a need for cash, you can’t easily sell your angel investments. If you think the company is being managed badly, you can’t easily sell your angel investment. So the illiquidity significantly increases the risk of an private investment vs a public market investment. If, on the other hand, you could easily sell your angel investment (at a loss or a gain) if you needed to raise cash or if you lost confidence in the management, I believe the market for angel and early stage investing would grow significantly. Lower the risk of illiquid early stage investing and you will see a lot more people interested in doing it and you will see the ones who are doing it allocate a larger portion of their investment capital to it.

When we invested in CircleUp back in May of 2013, I asked Rory and Ryan “when are you going to launch a secondary market?” I’ve always thought that the key to making a marketplace model work in early stage investing is the ability to easily do secondaries. And now, roughly two years later, they have done it.

Why did they take so long? Well there have been a number of problems with secondaries in the early stage market. First and foremost, the companies themselves don’t generally like the idea that their investors are selling in the secondary market. So they do all sorts of things to prevent it. And second, investors who buy a secondary often get no rights that come along with the securities they buy. In particular, they have no rights to information from the company to ascertain how the investment is doing.

So CircleUp decided to fix those things as part of their secondary market. CircleUp’s CEO Ryan told me this via email last week:

CircleUp Rights+ rights give investors the ability to sell shares early – including through the CircleUp marketplace. We’ve standardized the rights (transfer rights & information rights) to streamline the process. A key difference between this and previous secondary marketplaces is that it is fully integrated with the primary investments.  Thus the companies themselves are actively giving these rights, which we think is key to success.

So when you decide to buy in an offering on CircleUp, you can see if the company is offering transfer rights. You can decide, for example, to only buy into offerings where there are transfer rights being offered. And you can sell these securities on CircleUp if you so wish.

This is a great thing for CircleUp, for the entrepreneurs who choose to raise capital on CircleUp, and for the investors who invest capital on CircleUp. And this shows others the path to creating a truly vibrant marketplace for private equity capital.

Broker dealer+accredited investors+marketplace+information rights+transfer rights=a vibrant marketplace for early stage equity capital

It would be nice for the accredited investor requirement to go away for smaller investment amounts so that this model could be opened up for all investors. Then we would really have something transformative. And maybe I would be out of business 🙂

I have not moved from one android phone to another in a few years. I’ve been going back and forth between the latest iPhone and the latest Android. I recently went through a period where I was carrying both.

But about a month ago, I went back to my Nexus 6 with a TMo sim as my sole phone. I really missed TMo’s wifi calling (and Google Fi’s wifi calling) so I bit the bullet yesterday and bought a TMo Android, the Samsung Galaxy 6 Edge.

So while I watched the Mets Nationals game yesterday (a super fun game with a happy outcome for Mets fans), I transferred over my content and apps from the Nexus 6 to the Galaxy 6 Edge. I was prepared for a lengthy go of it.

But to my amazement, the whole thing took almost no time because of a newish android feature called Tap & Go. As you go through the setup of your new android phone, you are asked if you want to restore from another device. If you say yes, you are asked to tap the two devices together, you hear a beep, and the new device copies everything over from the old device.

Well almost everything. You still need to manually launch and sign into each and every app. For me that’s a time consuming process because I use unique strong passwords. I imagine its a security hole to allow tap & go to restore logins as well. Convenience is the enemy of security.

But in any case, this Tap & Go is a really nice feature. It makes moving android phones a lot less painful. Which means I may do it more frequently. If Apple announces anything game changing on the iPhone tomorrow, I may move back to iOS for a bit. But if not, I am going to stick with android and possibly start trying out all sorts of different devices. Tap & G0 makes it super easy to do that.

When one looks back over the history of the development of the modern economy from the agricultural age, to the industrial age, to the information age, the development of a strong labor movement has to be one of the signature events. Capitalism, taken to its excesses, does not allocate economic value fairly to all participants in the economic system. The workers, slaving away to build the railroad, the skyscraper, etc, provide real and substantial value to the overall system and yet, because they are commodified and interchangeable parts, they don’t always get their fair share of the economic value they help to create. So the labor movement provides the market power that each worker individually cannot provide.

The emergence of the middle class in the developed world in the 19th and 20th centuries has as much to do with the emergence of a labor movement as it has to do with anything. And a growing middle class in turn drove economic development as the obtained earning power was spent on needs like homes, cars, education, etc.

I am a fan of the idea that labor needs a mechanism to obtain market power as a counterbalance to the excesses of markets and capitalism. I think we can look back and see all the good that has come from a strong labor movement in the US over the past 150 years.

However, like all bureaucratic institutions, the “Union” mechanism appears anachronistic sitting here in the second decade of the 21st century. We are witnessing the sustained unwinding of 19th and 20th century institutions that were built at a time when transaction and communications costs were high and the overhead of bureaucracy and institutional inertia were costs that were unavoidable.

One has to think “if I were constructing a labor movement from scratch in 2015, how would I do it?”  My colleague Nick Grossman coined the term “Union 2.0” inside our firm to talk about all the organizing tools coming to market to assist workers in the “gig economy.” But I think Union 2.0 is way bigger than the gig economy. The NY Times has a piece today on workers in a carwash in Santa Fe organizing outside of the traditional union system. One can imagine leveraging technology, communications, and marketplaces to allow such a thing on a much larger scale.

I don’t know how much the traditional union system taxes workers to provide the market power they need. But if its like any other hierarchical system that we are seeing replaced by networks and markets, the take rates are in the 20-40% range and could be lowered to sub 5% with technology.

That’s a big deal. And I suspect we will see just that happen in my lifetime. I sure hope so.

It seems like more and more of my engagement with various services I use involves some sort of recommender. The new version of Google Maps on my phone recommends a certain way to get from one place to another along with a couple other options. SoundCloud and Spotify are generating awesome recommended listening streams to me. Twitter tells me what I missed when I was away and gives me Highlights on my phone. Gmail recommends who else to send the email to. Etsy shows me things I might want to buy.

I am sure all of you are experiencing the same thing. Web and mobile apps are getting smarter and smarter about each of us and recommending things to us that until recently we had to figure out all by ourselves. It almost seems like recommenders are table stakes these days. You can’t even play in the game unless you can do this sort of thing. And that requires a data science team to sift through all the data on your service and make smart recommendations to your users.

This is one of many things that has tilted the web and mobile game in favor of the larger and more mature companies. But there are also tools that you can use to get machine learning as a service to compete with the big guys. Our portfolio company Clarifai has an API for machine learning for images and video, for example. If you are building a service that has a lot of images and video and know you need to build a recommender but don’t have the machine learning expertise in house, you may be able to do a lot with Clarifai.

My partner Albert calls this sort of thing the “unbundling of scale” and it is something entrepreneurs need to do more than ever as the big “new incumbents” are turning scale into advantage using data science.

The economist Ian Hathaway did a public video hangout with Brad Feld this week and posted it on YouTube. They cover a lot of interesting territory in and around the startup accelerator phenomenon.

I found out about this feature here at AVC a few weeks ago so it is fitting that I’m telling you all how much I like it. I believe it is only available on Android right now. I could be wrong about that, but I think that is the case.

This morning I had this notification on my phone:

When I clicked on that notification, I got this:

As I swiped through these cards, I got these in sequence:

These highlights are personalized for me based on who I’m following and likely a bunch of other things. So not all of them will matter to you. But I can tell you that this is a damn good personalized set of highlights for me.

If you want this on your Android, go to your mobile notification settings:

And select the Highlights checkbox:

When you follow almost 1,000 people on Twitter, you need something like this to make sure you don’t miss the good stuff. I really like it.

My partner Albert has long been arguing on his blog (which you should be reading) that technology is bringing massive changes to society and we are going to have to change the way we think about things in reaction to these changes. One of those areas is privacy and the “post privacy world” that we are entering.

Last week he wrote this about the Ashley Madison hack and argued that society needs to be accepting of and forgiving of transgressions like using a website to arrange extramarital affairs. When I read that post, I thought “oh my, that’s pretty out there.” Mind you, I don’t disagree with Albert’s point at all, I just thought most people aren’t going to see it that way.

So I was pleasantly surprised this morning to see Farhad Manjoo make essentially the same argument in the New York Times.

Farhad quotes a security expert at the end of his post:

True online security is not just defending against compromise, it’s operating under the assumption that compromise will happen.

And of course that is true for the technologists who work in the teams that strive to keep our systems secure. But if you, like Albert and Farhad did, take that point to its logical conclusion, then all of us will have are in for having our deepest darkest secrets outed at some point. So let’s hope society becomes more forgiving over time. It’s going to have to.

I’ve been told over the years that the number one reason employees leave a company for another job is that they don’t know where the company is headed and they don’t know what their role in that roadmap is.

Apparently a bad boss and below market comp and long working hours all come in lower than that one.

Which tells me that if people believe in you and your plan and have a role to play in it, they will put up with a lot of other stuff.

I am not advocating for a hostile workplace or below market comp.

What I am advocating for is the value of having a clear and intelligent plan, communicating it often and often, and, most importantly, mapping that plan to each team and each person in your organization.

This is pretty easy when you are five people. It gets harder when you are fifty people. And it’s really hard when you are 500 people.

The communication plan is very important particularly as the size of the company grows. And making it matter to everyone is quite challenging.

But it all starts with a plan. I know companies that are great at communicating but don’t really have a coherent plan. All the communicating in the world won’t help them.

So figure out where you are taking your company. Answer the basic question on everyone’s minds, “what are we doing?”, and you will be on a path to building a loyal, hardworking, and motivated team.