Posts from June 2017

Thirty years ago today the Gotham Gal and I were married. It was a very warm and humid day in the Washington DC area and the skies opened up and poured during the wedding ceremony which was happily inside. After that, the humidity cleared and the sun came out and it turned into a beautiful evening. That was a good omen and while our marriage has had a few thunderstorms, it has mostly been sunny skies.

We’ve known each other since we were nineteen and have lived together since we were twenty. We moved to NYC at twenty-one without a dime to our names and the first bank account we opened was a joint account. Everything we’ve accomplished over the years has been our collective success and there have been many successes and plenty of failures too.

Our three amazing children are our greatest success and our greatest joy. We also love NYC, LA, Amagansett, Paris, Park City, art, food, and entrepreneurs, not in any particular order.

Thirty years of marriage feels substantial. It’s not yet a lifetime together but we are getting there now. And it feels great. There is no greater feeling in life than to love and be loved and I feel bathed in it today and every day.

To celebrate this milestone, we took off four weeks from memorial day weekend through this coming weekend. I like to call it a victory lap. While we haven’t avoided work entirely, we have cut back on it dramatically. And today, we won’t work at all. We plan to spend the day together in Paris enjoying each other and everything this wonderful city has to offer.

The Gotham Gal and I have been coming to Paris for close to thirty years. We started coming with our family a little more than fifteen years ago and spent one summer here as a family about ten years ago. We bought an apartment here around five years ago and we try to be here two to four weeks a year. Needless to say, we love Paris.

We have been in Paris three times in the past month and just arrived back yesterday. Every time I arrive here I marvel at the beauty of the city. It’s not just the architecture and scale (no skyscrapers) and light, all of which contribute to the beauty of Paris, it is the people, the stores, the sidewalk cafes, the parks, and much more. I have been to hundreds of cities around the world and I have never been to a city as beautiful as Paris.

I have noticed a lot of changes in Paris over the years we have been coming. The Parisians are much more tolerant of English and English speakers these days. Their English is generally better than my French. 

Paris has always had great transportation with it’s amazing Metro system, and the best thing to do in Paris is walk, but Velib and a host of ride sharing apps have made getting around even eaiser.

Paris continues to reinvent itself. There are new neighborhoods to explore, new shops to buy from, and new restaurants that continue to push the cuisine forward. That is not true of many cities in Europe these days and is a testament to the city and its citizens.

The new French leader Emmanuel Macron wants France to act like a startup. From what I see in Paris these days, that is already happening although leadership at the top can and will certainly help.

And speaking of startups, there are plenty of good ones in France and specifically in Paris. We have one of them, LaRuche, in our portfolio and I know of many great entrepreneurs, startups, and VCs in Paris.

I also know of a few big tech companies in the Bay Area that are eyeing Paris for a remote engineering location. The French have a great education system and produce a lot of engineers. It makes a lot of sense that companies looking to access new talent pools would come here.

There are, of course, challenges doing business in France. It’s hard to rapidly scale up and down your workforces here. The labor laws are challenging for high growth volatile companies to deal with. And it’s too complicated to conclude financings quickly in France (and Germany and other European countries). Macron and his team would be wise to move these laws closer to the US model.

But all in all, Paris is a thriving, bustling, innovative place that is lovely to be in and I am very bullish on it and the new French leadership.

Here’s a photo I took on our walk home from dinner last night along the river that captures what a lovely place Paris is.

Mark Suster just put up a long post on this topic. His message is “it depends” and he explains the rationale for investing in growth vs getting profitable.

I have come to think about this differently.

If you are bootstrapping your company without the help of outside investment (ie angels, VCs, etc), then you have to be profitable from day one. No debate or discussion there.

But if you have the ability to lose money because of the availability of outside investment, then you can and should lose money in the first three stages of your company’s development which are; 1) building the product, 2) shipping the product, 3) scaling the revenues. But once you have achieved those three objectives, I believe you should move on to #4 – getting profitable.

There is this idea that you can’t grow really fast and be profitable at the same time. There is also this idea that you have to keep adding engineering and product resources as you scale your business. And there is this idea that more salespeople equals more sales. I have found that all three of those ideas are wrong to some extent. And I have found that really strong execution in product, engineering, and sales, based on doing less, not more, and based on having a high performing team without a lot of baggage, will allow your company to grow fast and be profitable at the same time.

We have a number of portfolio companies that are now seven, eight, nine, and ten years old that for most of their lives have been unprofitable and focused on growing users, revenues, and the team. I have been working closely with a few of them in the last year or two to help them to change their mindset to get profitable. This has, in some cases, meant reducing the size of the team, in a few cases significantly.

It has been enlightening to watch what has happened with this cohort of companies. They have kept growing, sometimes at a higher growth rate than before the belt tightening. They are better places to work, more stable, more focused, and more successful. They are better companies and they are more valuable companies. They are easier to finance and they are easier to exit.

I would encourage all entrepreneurs and leaders out there to embrace the idea of getting profitable sooner than you might think you can or should. It’s good for your companies and it is good for you.

This is a few weeks old, but I finally got around to watching it.

Mary always does a nice job of summarizing the latest trends.

Here’s an awesome Kickstarter project. I just backed it. You can collaborate with renowned astrophysicist Neil deGrasse Tyson to make a Space Odyssey video game.

Here is the video:

And here is the project if you’d like to back it.

Our portfolio company Dronebase announced something interesting and fun this week. They have partnered with Getty Images to provide opportunities for drone pilots to fly “creative missions”:

Before today, DroneBase pilots had access to just two types of missions: client missions and panomissions,  both of which have unique photography specifications. Today, we’re excited to introduce Getty Creative Missions as a third opportunity for our pilot community.

For the first time ever, drone pilots have an opportunity to flex their creative muscles for a chance to have their work to be featured on Getty Images for purchase.

If you are a drone pilot, amateur or pro, and want to fly these creative missions and sell your work via Getty, download the Dronebase iPhone App or log into their website and follow the “Get On Getty” links.

To kick off this partnership, Getty and Dronebase are running a campaign called Cityscapes:

We’re excited to kick off our Getty partnership with a “Cityscapes” theme, a call for the best metropolitan aerial submissions from around the world.

So if you are a drone pilot and live or work in or near a city, take your drone out and capture some amazing cityscapes and submit them to Dronebase. They may end up on Getty Images and start earning you money.

There are a lot of things that excite me about this partnership, but maybe the biggest thing for me is how it reveals the core mission of Dronebase which is to give drone pilots lots of fun and rewarding things to do with their drones. And this is just the beginning. If you have a drone and want to do more with it, get the iPhone app or join via their website and start doing fun and rewarding missions with Dronebase.

I got this question on Twitter yesterday:

Are there any parallels you can draw between ICOs and private investment rounds?

— Daniel Olshansky (@olshansky) June 13, 2017

And I responded with this:

Yes, buyer beware. Do your homework. Don’t be greedy.

— Fred Wilson (@fredwilson) June 14, 2017

I could say a lot more and so I will.

Whether you are buying in a private placement of securities as a venture capitalist or buying in an ICO as a crypto enthusiast, there are certain things that you need to be careful about. And right now, with all of the enthusiasm for crypto assets out there, I am very concerned that nobody is being careful about anything.

So here are some things to think about before placing your order on that next ICO:

1. The amount raised matters, a lot. More money is not generally a good thing. I wrote a blog post about this a while back. In my experience, the startups that are careful and raise modest amounts of capital outperform the startups that raise crazy amounts of capital and are overly aggressive. I would look for capped ICOs and modest amounts of capital. Teams should raise enough money to do what they want to do but you can do a lot with $10mm and a tremendous amount with $50mm. Ethereum raised $18.5mm USD (in BTC) in their token offering and lost some of that due to a decline in BTC value. And look at what they have been able to accomplish with that funding.
2. You should understand what the token that is being offered does and have some feel for how large of an opportunity that is. I remember friends buying hot Internet IPOs in the late 90s and I’d ask them why they were investing and they would say to me “I heard its a hot deal” and I would say “But what does the company do?” and they would say to me “I don’t know, but I know I’m going to make a lot of money.” That kind of investing is dumb. Be smart and understand what you are buying and why. And if you can’t hold the investment through to the point at which the token will have real utility and real value, you might want to think twice about buying it in the first place.
3. Valuation matters. I know that many in startup land don’t really agree with this. There are VCs who want to be in the best deals and don’t really care what they have to pay to get into them. That might work as an investment strategy but it requires a lot of luck and market timing. If, instead, you focus on valuation when you make your investments and buy into investments at prices that make sense to you and have a model for why and how the investment will be worth 10x your entry price in 5+ years, you stand a much better chance at making solid returns. There are people in the crypto space who are building valuation models. You should follow them and understand their work. And you should try to apply that kind of thinking to your crypto investing.
4. Avoid scams and things that feel like scams. Scams are not limited to the crypto sector. They exist in all forms of investing (and many other sectors too). As VCs we often get pitched an opportunity that has red flags all over it. You learn quickly to delete those emails and not return those calls. But an emerging sector, like crypto, where there is less regulation, scrutiny, due diligence, and knowledge, scams are going to be more common. There have already been a bunch of well publicized scams in the crypto sector and I would bet that one or more successfully funded ICOs that have already been done will turn out to have been a scam in some measure. There is a difference between a intentional scam and an accidental scam, but if you are the investor, you were scammed in both instances. Be on the lookout for scams and avoid them. The best red flag for a scam is lack of detail on the technology, how it will work, and a lack of credibility of the people behind the project. Do you homework on these investments and make sure the technology and the people are credible before you part with your money.
5. Look for projects where the technology is well specified and is working in the wild. It is much easier as a VC to invest in companies where the product has been shipped and you can use it. I would venture to guess that more than 80% of USV’s investments over the years have been into companies where that was the case. You can use Bitcoin, you can use Ethereum, you can use Steem, you can use Zcash. These are fully functioning crypto assets that have been “shipped” and are widely used. That does not mean they will be successful, but it sure gives you more confidence that they might be successful. Investing on a white paper is way more risky than investing in a working technology that you can use yourself.
6. Don’t be greedy. This goes for both buyers and sellers in the market. You might be able to make a killing right now. But I would suggest you resist that urge. Those who play this market right over the long term will do extremely well. But trying to make a killing overnight is always a bad idea. So for sellers that means raising reasonable amounts, not all you can get. And selling more into the market over time, as Vitalik suggests in this blog post:
   If we want to strike at the heart of this problem, how would we solve it? I would say the answer is simple: start moving to mechanisms other than single round sales. For the buyers, this means not putting all of your assets to work in one ICO, or even all of your assets into crypto. Markets can crash. You need diversification to manage risk, particularly in highly volatile markets.

I have been a big booster of Bitcoin, blockchain, crypto tokens, and the like on this blog for the past six years. I am a big long term believer in this sector. USV is investing in this sector. We are investors in token funds and I believe we will start directly buying tokens soon. So we are bullish on crypto.

However, there are many things going on in the sector right now that are head shakers to us. We have been investing in startups and emerging tech sectors for over thirty years. We have seen this movie before . We know how it plays out and we know that all is not up and to the right forever.

When people are afraid, be greedy. And when people are greedy, be afraid. We are much closer to the latter scenario in crypto right now and while I am not afraid for my investments and USV’s investments in this sector, I am afraid for the sector and those who are being the most greedy right now. I am cautioning our portfolio companies to tread carefully and we are treading carefully. And I would advise all of you to do the same.

That’s a line from one of my favorite films, The Warriors.

But this post is not about those Warriors.

It is about the Golden State Warriors.

Who are now the world champions for the second time in three years and did it impressively in five games.

Like most of this NBA season, it wasn’t even close.

The Warriors, with the addition of KD, have assembled a dynasty, if they can stay healthy and keep the core together. Steph, KD, Draymond, and Klay are four of the best twenty players in the league and they are all on the same team.

This dynasty could go on for a while unless some other team can match it. Maybe the Spurs if they get CP3? Or maybe the Celtics or the Sixers if they can assemble some terrific young talent?

But those are big maybes.

We may have to get used to seeing these players with the trophy in their hands for a while.

I remember back in 2011 when I first learned about Bitcoin, we started talking about the technology and the model internally at USV. My partner Albert had done a lot of reading about it and he raised the 21mm hard cap as something that had both pros and cons associated with it.

Ever since then I’ve been mindful of that when looking at the design of various crytpo currencies. Most have a hard cap or some small inflationary model (like ETH).

Yesterday Albert wrote a blog post explaining some of the issues that hard caps create for crytpocurrencies.

In his post, Albert explains that the hard cap approach:

results in extremely rapid appreciation of tokens well ahead of their use value.

We are certainly seeing that at play right now with the rapid price escalation across the crypto landscape. Of course, some of that is the speculative fever that has invaded the sector.

But it may also be related to the inherent monetary policy that most teams are choosing for their tokens. And so I think it’s a good thing to have this discussion and think about whether a hard cap is a feature or a bug.