Posts from August 2016

The blockchain sector continues to entertain, amuse, impress, and inspire me. 

Last week one of the biggest cryptocurrency exchanges, Bitfinex, was hacked and was reported to have lost around $65mm of bitcoin it was storing for its customers.

So what did they do in response? They told every customer that they had lost a portion of their assets (36% to be exact) and that they were issuing crypto-tokens to them in proportion to the amounts they had lost. 

I have not done business with Bitfinex so I was not directly involved in this affair. However our portfolio company Coinbase competes with Bitfinex so I am most certainly an interested observer and maybe even an interested party.

What is interesting is that it is not entirely clear what these crypto-tokens will be exchangeable for. Will Bitfinex treat them as liabilities that they will eventually pay off (debt)? Or will they ultimately be paid back with equity in Bitfinex? Will there be a traditional bankruptcy or will this be settled out of court? And who is going to represent the creditors?

But maybe the most interesting thing of all is that a market is being made in these crypto-tokens. If you hold them and want to sell them for dollars or bitcoin, you can do that. 

They have tokenized the claims their customers have against them. Talk about the dogs eating the dog food. It is impressive in many ways to watch the blockchain sector encounter traditional business problems and address them in a native blockchain way. And it will be interesting to see if the legacy system intrudes or not.

Nine months ago, I wrote a post saying that opening up Twitter’s Moments would make it a way better product.

The news came out yesterday that Twitter has now opened up Moments to certain users and plans to open up to all users in the coming months.

I am not sure why it took Twitter so long to do this. Maybe the curation tools were not that good and they needed to improve them before opening it up.

Maybe they hadn’t figured out how to keep spam, porn, abusive content, etc out of Moments.

Maybe they hadn’t figured out the discovery issues once there are hundreds of thousands of Moments being created every day.

Whatever the reasons for it, I think this is great news for Twitter and Twitter users.

Moments are a super easy way to get a quick glimpse of something that is happening right now. I use it every day, many times a day. Opening it up will make it deeper, richer, and better.

Yesterday’s post on streaming the Olympics vs watching them on TV produced some great comments. 

A lot of them were about the crappy video quality and heavy ad load on the stream. I am not sure what to take from that but it is clear that NBC has not yet made their streaming experience as high of a priority in terms of user experience as they could and should.

But the more interesting conversation to me was about the business model for streaming the Olympics on phones, tablets, and smart TVs. A number of readers pointed out that the streams use the same business model (advertising) as broadcast TV and so the ad loads will be the same and just as annoying.

But I think the broadcasters like NBC have an opportunity to take a page out of the playbook of the streaming music companies like Spotify and SoundCloud and offer both free ad supported streams and subscription streams that are ad free and offer offline sync (record and playback later).

Would you pay for a $19.99 in-app upgrade on your NBC Sports app to remove ads and get offline sync for the entire 17 days of the Summer Olympics? I know I would but I also know that I am less price conscious than most AVC readers. Please weigh in on that in the comments.

The broadcast television companies have been advertising supported businesses for the most part. In recent years they have been able to get retransmission fees and start getting paid for their programming from the cable operators but I think the subscription opportunity in the streaming world is significant for them, particularly when it comes to big events like the Olympics.

I looked around for a subscription based app for NBC Sports and found something called NBC Sports Gold but that looks like an experiment that doesn’t support the main events like the Olympics. I hope we will see the main events make it onto something like that in the coming years. I think it would be great for viewers and for the broadcasters as well.

My friend Patrick told me yesterday that I should check out Team Handball. He said its a lot of fun to watch. I immediately thought “I should find out when they are streaming a Team Handball match.”

My daughter posted on social media that she can’t deal with the non stop advertising that NBC is running on their main channel. I can’t either.

The combination of being able to watch when you want and how you want with the incredibly annoying experience of the main NBC broadcast tells me that this may be the Olympics that streaming starts to beat TV.

So when I saw this Variety headline this morning, NBC Universal’s Olympic Upset: Streaming Trumps TV, I clicked on it and read it.

There isn’t enough data in that article to conclude that streaming has, in fact, passed TV as the dominant way we watch the Olympics.

But I can tell you that the streaming experience definitively has.

Winning a medal at the Olympics is a big deal for athletes all around the world. Obviously a gold medal is better but silver and bronze are pretty awesome too.

In startup land, it works out pretty similarly. In each and every big “winner takes most” market there is one big winner (the gold medal winner) and a few other big companies (silver and bronze) and then not much more.

If you look at web search, Google won the gold medal and has a $550bn market cap to show for it.

In social, Facebook won the gold medal and has a $360bn market cap to show for it.

In ridesharing, Uber won the gold medal and has a purportedly $60bn market cap to show for it.

You can do well with silver and bronze. Twitter is worth $13bn. Lyft is supposedly worth $5.5bn. But coming in second or third in a big market is generally an order of magnitude (or two) less valuable in the long run.

And you had better get on the stand and get a medal if you are working in a big “winner take most” market because fourth or fifth or sixth is rarely worth much, if anything.

These are high stakes markets where winning is everything and losing is nothing. And things play out pretty quickly. Within five years, we generally know who won, who placed, who showed, and who whiffed.

It is possible that with the emergence of decentralized networks these dynamics will change and we will be on to a very different market dynamic. But for now this is how it goes. Go big or go home.

Our partner Brad has had an interest in Berlin’s growing tech ecosystem since the earliest days of USV. One of our first investors in USV is a good friend of Brad’s from Berlin. So he has been a big supporter of what is going on in Berlin and goes there frequently, as we all do. He has developed a close relationship with Blue Yard, a new VC firm in Berlin, and he and Blue Yard’s co-founder Ciaran O’Leary did a talk there last month. It’s really good (and not too long at 24 mins).

It’s fun friday. Time for more talking and less reading.

The opening ceremony is tonight. We have a fortnight (ish) of sport to watch. This is one of the very few gatherings of the entire world in one place. It’s a celebration of what brings us together. The opening ceremony is such a beautiful thing. The flags, the garb, the pomp and ceremony. The torch. I have to say that I love the Olympics, warts and all.

So for fun today, let’s discuss what our favorite sports are to watch at the summer olympics.

For me, it is swimming. I particularly love the relays.

How about you?

There is nothing the tech media and the broader press likes to ask me about more than bubbles.

“Is Snapchat a bubble?”

“Is Uber a bubble?”

“Is Facebook a bubble?”

“Is seed investing a bubble?”

“Is growth investing a bubble?”

And on and on and on.

It’s like bubbles are a disease that we need to eradicate.

Don’t get me wrong. Bubbles are something investors need to be careful with. You can make money on the way up but lose it all on the way down. I’ve done that. It hurts.

So at USV, we are careful to invest early in cycles and get defensive later in the cycle and take profits when they are available. If anything, I think we have been too conservative in this regard.

However, as I pointed out in a conversation with my colleagues yesterday, bubbles are a necessary part of any technology cycle, large or small.

Carlota Perez talks about this in her seminal book on technology cycles, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.

But maybe the best thing written on this topic is my friend Tom Evslin‘s blog post from January 2005, when the investment world was just waking up to the fact that the Internet bubble wasn’t the end of things, but just the beginning. I particularly love how he ends that post:

Historically, the results of bubbles have usually been more empowerment for more people.  Historically, bubbles have provided an explosion of funds which blasted away the entrenchments of an old oligarchy not only to the benefit of entrepreneurs but also to the benefit of consumers in general.  Think of the constantly falling price of transportation and communication.

If we should find a way to stop bubbles, if we were to put the genie of irrational exuberance back in the bottle, the winners will be whoever are the incumbents at the time and the losers will be all those who could benefit from another great breakthrough in infrastructure like railroads, canals and the Internet.

Bring on the next bubble.  And invest in it at your own risk. I will.

Like all impassioned political debates, there is a reason to be on both sides of the immigration divide.

If you are against immigration, you are likely afraid of what these new people might bring to the US. They could bring lower cost labor and cause you to lose your job. They could bring crime or worse. They could bring additional votes that would cause your political party to lose more of its power and weight.

But if you are for immigration, you are excited about what these new people will bring.

And I am most decidedly on the pro-immigration side, even though I understand the anti-immigration arguments.

The reasons I want to reform our immigration laws have mostly to do with opportunity, innovation, and our economy.

Let’s look at NY State.

Immigrants now account for 23 percent of all residents of New York State. More strikingly, they make up more than a quarter of all STEM workers. A third of all entrepreneurs in the state are immigrants and their businesses alone employ just shy of 500,000 people. And this is only the private companies. New York is additionally home to 55 large Fortune 500 companies, more than half of which were started by immigrants or their children.

Since the earliest days of the US, immigrants have been coming to our country and building things, often businesses that employ our citizens.

The tech sector is pro-immigration because it benefits from immigration and because it was created, at least in part, by immigrants. Unlike some sectors of our society, tech has not forgotten where it came from.

If you too have reasons to support pro-immigration reform, then you might want to participate in a “day of action” today called Reason For Reform.

The Partnership for a New American Economy’s (NAE) Reason for Reform campaign is a way to put a face on our current immigration system which is badly in need of reform.  NAE is gathering stories and videos in every single congressional district across the country showing how immigration benefits the local community and why reform is so necessary.  They’re getting business leaders, farmers, entrepreneurs, students, faith leaders, and others to record their #ReasonForReform on cell phones or computers, which will then be sent to members of Congress and shared through social media.

If this is for you, visit Reason For Reform to tell Congress and America what immigration means to you. And you can check out what’s going on in your state here.