Posts from May 2017

Path Forward is an organization that helps employers (large and small) run “returnship” programs in which people who have left the work force to care for a family or a parent have a structured and supported way to return to work.

In this podcast, the Gotham Gal talks about Path Forward with Tami Forman who is the Executive Director of Path Forward.

Today is the annual USV CEO Summit. Once a year we ask our portfolio CEOs to gather at our office in NYC and spend the day talking to each other about what they have learned and are learning about building and leading companies. This is not a novel idea. Many/most VC firms do this sort of thing. We have been doing it for something like ten years now. We will have about sixty CEOs in our offices today.

I often think about the founder/CEO who has five or six VC firms invested in their company. They get invited to attend five or six of these a year. And participate in five or six networks. That’s a lot of networking with other CEOs. I sometimes wonder if there is a point of marginal utility for them in all of this “learning from others.”

Don’t get me wrong. I think there is so much founders/CEOs can learn from their peers. I encourage the CEOs I work with to join CEO groups, talk frequently with their peers, get peer CEOs on their boards, and do whatever else they can to learn from the experiences of others. Our CEO Summit today will be yet another great opportunity to do this.

But at some point, you have to learn things yourself. You can talk to peers until you are blue in your face about how to hire a great VP Engineering or CFO. But making a bad hire or two in these roles will teach you a lot more about it than talking to others. At some point, you are going to have to figure things out by yourself. There is no substitute for direct personal and painful experience. That’s just how life works.

So I like to think of learning from others as a way to steepen the learning curve. You can get there faster if you talk to others and are open to lots of feedback and advice. But no amount of feedback and advice will make you an amazing leader on your first day as a newly minted CEO. That comes with time and the scars and pain that result from your bad decisions. I have many of them myself and wear them as a badge of honor.

Two of my favorite techniques in investing are dollar cost averaging (when buying and selling) and rebalancing.

The early stage venture capital business has dollar cost averaging built into its buying model. You build up a position over multiple rounds and years. That is a great thing. I also try to exit investments, particularly public stocks, via this technique. But when a company is sold in an M&A transaction, you generally have to sell everything at once.

In public stocks and other marketable assets, these techniques are particularly important. I believe you can spot a long term trend and ride it. But I do not believe you can spot a market bottom or top until it is in the rear view mirror. So that is why I like to average into and out of a position over time.

Rebalancing is even more important. If you have a position that has worked incredibly well and it starts to become a very large portion of your overall portfolio, it is wise to take some of that position off the table and reinvest it in other attractive assets. This gives you more diversification, which I believe is generally a good thing, and also de-risks your portfolio from a big selloff in the largest position.

The reason I mention this is that I have been rebalancing my crypto portfolio. I got into BTC early and have held a highly concentrated position in BTC for the past five years. As other crypto assets have developed enough liquidity and maturity that they become attractive holdings, I have been taking profits on my BTC portfolio and reinvesting, mostly in ETH for now. But I am also looking around at other crypto assets to start buying.

The macro thesis around crypto has been building for the last six years that I have been investing and following it. I think it is certainly time to have a diversified portfolio and start using best practices for investing in marketable assets in this sector.

AVC regulars William Mougayar and Nick Tomaino are putting on an exciting event in NYC on May 25th called Token Summit.

I blogged about it a while back but I thought an update was in order because:

1) I am going to do the wrap-up session with William at 5pm. That should be fun.

2) The agenda has been published and it looks great.

3) AVC wine geek Arnold Waldstein and William are doing a talk on natural wines at an event for attendees the night before.

This is the closest thing to an AVC meetup that I know of since the 10th anniversary party back in 2013.

It should be a fun couple of days in NYC.

I was talking to my friend Simon yesterday and he observed that the essential skill of entrepreneurs and early stage VCs is to “be able to see through the fog of an emerging market and pick out the winning idea.”

And of course, I agree with that. It is something that we have done pretty well at USV over the years.

But how do you do that? Is seeing through the fog a skill that can be learned?

I think seeing through the fog can be learned but it takes time and practice.

Some people are innately good at it and they seem to be able to do it naturally.

But I was not that person. It took me years to be able to do it well and I think there are a few things that helped me a lot.

1. Focusing on a sector and dedicating yourself to it helps a lot. I have been investing almost exclusively in Internet-based businesses since 1993 and that has helped me understand the dynamics, economics, and unique characteristics of doing business on the Internet. That framework helps me see through the fog.
2. Doing the upfront work to have a thesis before investing in a sector is important. My partner Brad taught me this trick back when we started USV in 2003. He insisted that we have a thesis before we raised our first fund and started investing. That thesis has evolved a lot over the years but we have always had one. When we wanted to start to invest in verticals, like financial services, healthcare, and education, almost ten years ago now, we took deep dives on those sectors and developed a thesis about how they would emerge, where the value was going to be, and  where we wanted to focus before making a single investment in these verticals. That has served us incredibly well as we have built/are building fantastic portfolios in all three verticals.
3. Avoiding the noise is particularly important. This is hard to do unless you have a thesis. But even if you have a thesis, there is often a ton of noise around other things that you have to ignore. Otherwise, it will pull you in all sorts of directions, waste a ton of your time, and possibly lead to bad investments. I like to think of having blinders on when we are starting to invest in a new area. It is critically important to not let the hype and bluster and bullshit misdirect you.
4. Using the technology of the emerging sector really helps. That is often not easy. I remember when I first started playing around with Bitcoin in 2011, it wasn’t simple to get a wallet, mine some Bitcoin, use an exchange. But I did it because I wanted to use the technology and understand how it worked. Getting your hands dirty by using the technology as early as you can will you help to see through the fog. I strongly recommend it.
5. Reading everything that is written on an emerging sector is critical. I am not talking about books, they usually come too late. I am talking about academic/research/white papers and blog posts written (often poorly) by the leading technologists in the sector. There are sometimes early observers/pundits in these nascent sectors and some of them can be quite good. Find them and follow them.
6. Meeting with as many people working in the emerging sector as you can will help a lot. I don’t just mean entrepreneurs but you should meet as many of them as you can. I mean everyone and anyone who is working in the sector, investing in the sector, writing about the sector, and engaging in the sector. It’s a lot of work (and travel if you don’t live in a place people come to a lot), but it is invaluable.

When something new comes along, like the Internet in 1993, Web 2/Social in 2003, Mobile in 2007, or Blockchain in 2011, initially it is opaque, like mist, as Simon said to me. But amazing business opportunities will emerge from that mist and those entrepreneurs and early stage investors who jump onto the right ones will be rewarded greatly. It takes a prepared mind to do that and you have to do the work before the opportunities start emerging from the mist. That is how you get the clarity to see the best ideas through the fog.

Ethereum (ETH) has exploded in the first half of 2017, with its dollar exchange rate going from $8.29 to $93.65, resulting in a current market cap of $8.6bn.

We can (and do) argue all day long about whether these numbers are crazy or not.

But I always like to think that where there is smoke, there is fire.

So it might make sense to try to understand Ethereum a bit better.

And nobody is better to do that than Vitalik Buterin, the inventor/founder of Ethereum.

Here is his take from Ethereum DevCon2 last fall in Shanghai.

UPDATE: This campaign has been fully funded. Thanks everyone who donated and shared on social media.

Our monthly match campaign for Planned Parenthood, which we launched yesterday late morning has raised half of its target as of this morning.

The match offer is open until midnight pacific time tonight or until we reach our $30k goal.

Please go make a donation and tweet it out to be matched.

Thanks!!!

The House is planning to vote today on a bill that will repeal Obamacare.

Included in that bill is a provision that would prohibit Medicaid from paying for services from Planned Parenthood.

Planned Parenthood is an organization dedicated to women’s reproductive health and more broadly women’s healthcare.

It does fantastic work and provides treatment for women who cannot get it otherwise.

Our monthly match efforts are designed to combat the efforts in Washington to undo things that are near and dear to us.

And Planned Parenthood and low cost/free women’s reproductive health care is one of those things.

So today, we are launching a $30k match offer for Planned Parenthood.

Amy, Susan, Joanne, Brad, Albert and I will collectively match $30k of donations made to Planned Parenthood.

Our match offer will end when we reach $30k of collective donations or Friday night at midnight pacific time (May 5th).

Here is how the monthly match works

1. Go to our match offer page and click the big Donate button
2. Select any amount (min is $10) and click the big Donate button again
3. Enter your payment credentials and click the big Donate button again
4. Click the big Tweet Your Donation button
5. Once you have done all of that your donation will automatically be matched
6. If you don’t have Twitter, forward your email receipt to [email protected]

I hope you will join us in supporting Planned Parenthood on this difficult day for all who care about women’s reproductive health and women’s health more broadly.

Two former USV portfolio companies had tough earnings calls last night.

And you look at that and you might say “why would any company want to go public?”

But here is the thing. Being public is about being transparent, accountable, and owning up to the issues and dealing with them.

I think it makes companies better.

If you are losing your biggest customer, you have to tell the world and deal with the consequences.

If you are making a leadership change, you have to tell the world and deal with the consequences.

Both of those companies are great companies, in which the Gotham Gal and I are a very large shareholder, and in which we believe in totally and completely.

Nothing is always up and to the right, even though you might want it to be.

The great companies are the ones that have the guts to bare it all and keep building.

Which is why I think being public is a good thing for the companies we work with that are large enough and have unique and differentiated businesses and business models.

I think more tech companies should be going public and I have been saying that for quite a while now and last night doesn’t change my views one iota.