Posts from April 2016

I read the other day that Patrick Ewing would like to be considered for the currently vacant NY Knick head coach role.

I think that’s a terrific idea. Companies like Apple and Twitter have gone back to their early leaders to rejuvenate the company.

The Knicks have started down that path by bringing Phil Jackson back as GM. They should complete the effort by bringing back Patrick Ewing as head coach.

I arrived in NYC a couple years before Patrick showed up in 1985. And for the next fifteen years there was an energy and a winning attitude at the Garden that honestly hasn’t existed since then.

While Patrick doesn’t have a ring, he has about almost everything else on his resume that a basketball player can accomplish. And he has been one of the most respected assistant coaches in the league for years.

Patrick has the heart of a lion. The Knicks need that, badly.

I’m going to the Garden tonight to close out the season, yet another losing one. I am thinking about bringing a Bring Back Pat sign with me.

Our portfolio company OB1 launched the Open Bazaar p2p decentralized marketplace protocol recently. Here’s a video where OB1 founder Brian Hoffman explains what Open Bazaar is and why they built it.

I’m pretty skeptical about the early implementations of Virtual Reality and Augmented Reality. I think the early versions are expensive, require powerful computers, are tethered, require headsets, and can cause headaches and worse. But I am in the minority in our business and in the tech community. VR and AR are among the most hyped and invested new areas of tech right now.

So let’s talk about this today on fun friday.

Are you bullish on AR and VR over the next several years? If so, why?

Or are you with me that the early implementations will underwhelm?, If so, why?

I remember back in the mid 90s, I used to say with some pride that I had not lost money on any of my VC investments. Then one day, someone told me “then you are not taking enough risk.” I ended that streak of not losing money on VC investments in the late 90s in a series of epic flameouts. I lost somewhere between $25mm and $30mm on one single investment. I am not proud of those mistakes. They were stupid. I am ashamed of them to be honest. But I learned a lot from them. Not only was my “winning streak” a case of not taking enough risk, it was also a case of not enough learning. The go-go Internet era of the late 90s fixed both of those things for me. I took more risk and learned a ton.

Our first USV fund, our 2004 vintage, has turned out to be the single best VC fund that I have ever been involved in. We made 21 investments. We made money on twelve of those investments. We lost money on nine of them. And we lost our entire investment on most of those nine failed investments. The reason that fund performed so well has pretty much nothing to do with the losses. It was all about five investments in which we made 115x, 82x, 68x, 30x, and 21x.

It wasn’t like we were swinging for the fences in that fund. Every single one of those 21 investments seemed like an intelligent investment decision at the time we made it. But many of them didn’t work. We lost all or almost all of our money on over 40% of our investments in that fund.

The next fund we raised, our 2008 vintage, is now eight years old and we can begin to calculate the win/loss ration on that one too. We don’t yet know the magnitude of our winners, but there will be a bunch. It will be one of the better funds I’ve been involved with. I doubt it will be as good as our 2004 fund, but it will be a very good fund. We invested in 22 companies in that 2008 fund. We have already completely written off six companies. Those are complete and total losses. And, I think there will be at least a couple more losses in that fund when it is all said and done. So it looks like something like 14 winners and 8 losers. We will likely lose all or almost all of our money on roughly 40% of our investments in that fund.

My point on sharing all of this with you is to explain that losing money is part of being an investor. It happens. As Richie, the guy who sits behind me and my friend John at the Nets game, says “you can’t make ’em all.”

But there are some things you can do with your winners and losers to drive up your performance.

The first and most important thing you can do is minimize the amount of money you invest in your losers. In our 2004 fund, we invested a total of $50mm out of $120mm of total investment in our nine losers. That wasn’t so good. We could have, and should have, recognized our bad investments earlier and cut them off. In our 2008 fund, I think we will invest roughly $35mm out of roughly $140mm of total investments in failed investments. So even though our loss ratio on “names” is around 40%, our loss ration on dollars will be around 20%. We did a good job of not allocating too much of the fund’s capital to losers in our 2008 fund. And most of those losers were mine by the way.

Ironically, another key to managing your losses is to spend more time with them, not less. By spending more time with them you can develop clarity about the investment, whether it will work or not, and you can get the founders and other investors to see the light early and not waste more of their time and/or money on it. I am a big believer in “loving your losers” in the sense that you should not orphan them and you should work hard to get to the right outcome. Enabling them with good money after bad is not loving them.

Finally, getting clarity on your losers, getting them sold or shut down quickly (with dignity for everyone), frees up more time and money for the winners. And, as our 2004 fund shows, a few really good companies can carry a fund to the moon. You must make sure you can get a disproportionate amount of your time and money invested in those great investments.

When I look at a VC to work with, recommend to LPs, or very rarely, invite into our partnership at USV, I look for someone who has made their share of mistakes. Making bad investments is humbling, frustrating, annoying, time sucking, and most of all, a big part of the VC business. I look for VCs who have done it a lot, have done it with grace and respect, and continue to learn from it. They are the best VCs to work with.

Disqus, the USV portfolio company that powers the comments/community here at AVC, released an iOS app this past week. You can download it here.

The Disqus mobile app has two primary features.

The first is the ability to follow channels and discover content and conversations in those channels.

Here’s a screenshot of my home tab which features this discovery capability:

The second primary feature, and possibly more interesting to the AVC community, is the notifications tab where you see your comments and related activity:

I have found that Disqus works really well on the mobile web now (a big improvement over where it was a few years ago) and so I mostly review and respond to comments in line in the browser, but it’s nice to have this mobile app to be able to read and respond quickly to all of your activity.

I expect that Disqus will follow with an Android app in due course and I also believe they will add features for the publishers (ie me) into these mobile apps as well.

Our portfolio company Kik launched its bot platform today. Kik has supported bots for several years but they were limited to bots from publishers and brands that were willing to make a significant effort to be on the Kik platform.

What is new today is that any developer can build a bot for the Kik platform. Details and tools are available to do that at dev.kik.com. And once you build your bot for Kik, it is available in the bot store in Kik.

Kik has been innovating in the “chat as a platform” space for three or four years now. They have been a real pioneer in this area. You may recall Kik Cards which are html micro apps that run natively in Kik which has its own built in browser. Cards still exist but Kik found out that “chatting” is the more native user behavior in chat apps so conversing with a bot turns out to be more powerful than running a micro web app in a messaging app. That said, Kik still supports cards for bots that need to display content as part of its user experience.

Kik is also leveraging its “Kik codes” to make bots easily discoverable and shareable. Here is an example of a Kik code:

So if you own a retail store, restaurant, etc you could put your Kik code sticker on your window and your customers and walk-by traffic could communicate with your bot and get offers, coupons, etc.

I am expecting developers to turn their attention to bots in the coming months as multiple chat platforms will be supporting them. Right now in the US, you have Kik, Slack, and Telegram supporting bots natively on their platforms. And most everyone expects Facebook to launch their own bot platform at the upcoming F8 event.

And there are quite a few bot development platforms emerging that will allow developers to “write once, run many” so you can build a bot for all of these platforms instead of having to choose one or the other.

So it may well be that we are going from websites>native mobile apps>bots as the dominant way users will interact with your business. At least many people are projecting that. I am proud that Kik’s team continues to lead and innovate in this sector.

We are heading back to NYC tomorrow and, among other things, that means I can end my 6 months on iOS. I force myself to spend six months of the year on iPhone to make sure I’ve got my head wrapped around that platform and how it is changing and evolving. But I feel like it costs me a pretty significant productivity hit and I am eager to get back on Android.

So I need to decide which phone I am going to get. I am thinking of buying a Nexus 6P directly from the Google Play Store. But I am open to other ideas and would welcome them.

Here are my needs/desires:

1. Phablet form factor/size
2. Stock Android (no bloatware from carrier issued phones)
3. Unlocked device that can run on any carrier
4. Lots of memory (at least 64GB)

So with those needs/desires, what phone should I get?

The NY Times suggests that the reason there have been no tech IPOs in the past quarter is that the tech sector is having a “standoff” with the public markets.

The logic goes like this:

• many of the tech IPOs that happened in 2015 are now underwater so public market investors are tired of losing money on IPOs
• the prevailing valuations that exist in the private markets are higher than comparable companies in the public markets
• it is relatively straightforward to raise capital in the private markets using convertible debt or other structures that are driven off the eventual IPO price

So why rush to the public markets now when you would be forced to take a lower valuation than you could get in the private markets and maybe a lower valuation than you got in your last round?

Eventually someone is going to blink. If the public markets wait long enough many of these IPO price driven structures will force the companies that issued them to go public and “price their stock.” You can only kick the can down the road for long enough.

I do think this “standoff” could go on for a while longer, maybe for most or all of this year. Unless a courageous company or two decides to go public regardless of price, gets the capital and liquid stock that comes with the IPO, and shows that you can in fact do well as a public company.

I am hoping for that latter scenario to play out. I think its better for everyone than the standoff we are having now.

My partner Albert went on the Techdirt podcast last week and talked with Mike Masnick about his thoughts on encryption, secure elements, and other issues related to the ongoing debate about privacy and security.