Posts from June 2017

Funding Friday: The Human Utility Monthly Match

And we are back with this month’s matching campaign to support a good cause.

We are moving away from the big well known causes to some lesser known but important efforts to help people who need our help.

We are going to start with helping people in need pay their water bills and keep clean water flowing to their homes.

The Human Utility helps almost 1000 families in Detroit and Baltimore pay their water bills and avoid a water shutoff.

We are going to match the first $20k of donations that anyone makes to The Human Utility between now and Sunday night (midnight PST). If we fully utilize this match, we will raise $40k which might get another 100 families their water back. That would be awesome.

To donate and have your contribution matched, go here and hit the big blue Donate button and make sure to tweet out your donation so we can match it.

Let’s get some water flowing again.

#crowdfunding#hacking philanthropy

But Why?

Being an investor and board member means that you are close to the companies you invest in but not “in them.”. This near and dear relationship creates some interesting challenges for both the management and the investors. One of them is understanding the difference between information/reporting and a real understanding of what is going on in the business.

I often find myself saying “but why?” at board meetings:

  • “Revenues are soft this quarter” – but why?
  • “MAUs are up 150% over last quarter” – but why?
  • “We are going to miss our ship dates” – but why?
  • “We expect to decrease our hosting costs by 50% next quarter” – but why?
  • “We can’t seem to get any interest in the next round” – but why?
  • “We are getting a lot of inbound interest from investors” – but why?
  • “We have a lot of turnover in our engineering organization” – but why?

The beauty of working with investors who see a lot and have seen a lot is that they can often help you diagnose the disease by looking closely at the symptoms. But you have to be willing to engage in that exercise and be open to hearing “but why” and be prepared to answer it.

#Uncategorized

Being Transparent About Your Long Term Strategy

Elon Musk famously posted Tesla’s long term strategy in 2006 and ended the post with “don’t tell anyone.” That has led may entrepreneurs around the world to follow suit and be transparent about what they are up to and why. I think its a great practice for companies to follow. It helps the outside world understand your company and it helps with recruiting as potential employees can better decide which companies they want to work for and why.

Our portfolio Coinbase has been doing that for a while now and Founder/CEO Brian Armstrong just posted the latest version of their “secret master plan” to use Elon’s words.

You should go read the post as I think it does a nice job of explaining where they have been and where they are going. But if you want the quick summary, here are the four steps:

  1. First, we will make it easy for consumers to invest in digital currency by building a retail exchange (Coinbase). The differentiators for this product are trust (security, compliance, etc) and ease of use (access to convenient payment methods, intuitive interface, etc). This will allow more people to own digital currency, especially non-technical people.
  2. Second, we will enable professional traders and institutions to trade digital currency (GDAX). This will support the investment use case in step one, but also scale it by driving larger trading volumes. More liquidity in the markets will reduce volatility of the underlying assets, which is important to enabling the payment network. The differentiator for this product will also be trust (security, compliance, etc) to encourage larger, traditional investors to enter the market.
  3. Third, we will create a mass market consumer interface for people to start getting value from the payment network (Token). Now that a critical mass of early users have been drawn in by the investment use case, the industry is ready for its “Netscape moment”. This product will make it dramatically easier for consumers to use digital currency as a payment network, and for developers to build applications that utilize the payment network.
  4. Fourth, by lowering the barrier to create new digital currency applications, we’ll see an explosion in the number of ideas tried. We’ll invest in, partner with, or build a number of new applications in this space, including replacements for many of the services people use in finance 1.0. Some examples include merchant processing, remittance, loans, fundraising, venture capital, escrow, credit scores, and more.

If you have a secret master plan for your company, think about posting it publicly. I think it will do a lot more good than bad for you and your company.

#entrepreneurship#management

There Is No Free Lunch

I am reminded time and time again that things that sound too good to be true almost always are. There really is no free lunch, in business or in life.

Here are a few examples of things that seem so tantalizing to entrepreneurs and the companies they create but turn out to be just as costly (or more) than the alternative:

  1. Taking on debt instead of equity in the hope that it will be paid off in the future with equity sold at much higher prices. Or convertible debt that converts in the future at a much higher price, which is basically the same thing. I have seen this go badly so many times that I now almost throw tantrums when our portfolio companies choose to do this.
  2. Raising another round to buy more time to figure out the business model vs figuring out the business model now. “Buying time” is one of the greatest free lunch fallacies of all time. I strongly believe that now is almost always a better time than later to do something.
  3. Hiring a service provider (lawyer, accountant, PR firm, etc) who will do your work for free in return for your company’s business later. This sounds great but unfortunately locks you in to using this firm later on when others may be a better choice for your company.
  4. A big enterprise company will pay you to modify your software to work “better” for them. Sounds great now, when you need the revenues/cash so badly, but little did you realize that you just outsourced your roadmap to a big company.

I could go on and on, but hopefully I’ve made my point. I encourage everyone to make the hard and painful choices when they have to be made and avoid the free lunch fallacy. It mostly leads to indigestion.

#entrepreneurship#management

Getting Hacked, Lessons Learned

I read Cody Brown’s blog post about getting hacked on Thursday of last week. I feel very badly for Cody and plan to send him some BTC once I get access back to my account. His post helped me avoid his fate.

I woke up Friday morning (central european summer time) and saw a bunch of emails in my inbox suggesting that suspicious activities were happening in my personal gmail account, my mobile phone account, and my two factor service.

I immediately thought “that’s the same attack pattern that Cody wrote about” and I was able to get to Coinbase and have them lock down my account immediately. The good news is nothing appears to have been taken from my Coinbase account although I don’t currently have access to it right now and thankfully nobody else does either.

Without getting into the specifics, I would like to tell everyone five things I learned from this awful experience:

  1. Call your cell phone provider and put a “do not port under any circumstances” hold on your phone number. I did this about six months ago and I think it may have saved me. It is way too easy to port a phone number and once a hacker has your number, they have access to two factor codes coming via SMS.
  2. Put two factor on everything you can. I did not have it on my old and dormant gmail account which is partially why it was vulnerable. Obviously I have it on there now.
  3. Check your password recovery settings on all of your accounts (even old and dormant email accounts) and make sure they are secure accounts (locked down phone numbers (#1) and secure email accounts (#2)). Once a hacker has access to one of your old email accounts, they can impersonate you digitally.
  4. Use Google Authenticator for two factor on your phone. I have used SMS and Authy in the past and my research yesterday suggests that Google’s Authenticator is the most secure of the two factor options out there right now.
  5. I keep almost all of my Bitcoin in Coinbase’s vault service which requires 48 hours and multiple approvals to make a withdrawal. If the hacker had gotten into my Coinbase account, they would have been able to take my Ethereum and a small amount of Bitcoin, but not most of it. I believe Coinbase should evolve their vault offering to handle all of the crypto assets they support, or possibly make the two day withdrawal/multi-sig feature available to all of their wallet offerings.

I am still a bit shaken up from the experience and a fair bit more paranoid from it. Which is a good thing I’m sure.

I hope my sharing this with all of you helps you make your online life a bit more secure because there are a lot of bad people out there working hard to hack into your accounts and do bad things.

#life lessons

Fun Friday: More Cavs Warriors

Last week on fun friday we discussed the NBA Finals. I went out on a limb and predicted Cavs in seven. The comments were full of predictions, with a slight preference for the Warriors but not a landslide by any measure.

Last night the series kicked off with a drubbing as the Warriors won by 22 points and took every quarter and blew the game open in the third quarter.

It sure makes it clear how good this Warriors team is. My prediction of a Cavs victory looks worse today than yesterday for sure.

Does last night’s drubbing change anyone’s view of how this series will go?

#Sports

ICOs and VCs

The Brave browser team concluded an ICO for their Basic Attention Token yesterday in about thirty seconds. This led to this tweet:

Of course folks will see ICOs as the end of the hated VC era of startup funding. And there is some truth to that.

But I see it a bit differently:

  1. Brave was VC funded prior to doing their ICO. We talked to Brendan when he was doing his seed round. He’s a great entrepreneur and technologist and he has assembled a terrific team. Although we are not investors in the company, we are sympathetic to the cause they are addressing. VC has had role in the Brave story. It helped them launch a product and get to the point where they could do a highly anticipated ICO.
  2. USV has a number of portfolio companies that will do ICOs. I have mentioned Kin and Filecoin in a previous blog post.  There will be others. Like Brave, it often makes sense for a company to raise VC to build the team and tech and get to a place where it can do an ICO.
  3. Not every company can do an ICO. Contrary to the hype machine working on ICOs right now, they are not simply a funding mechanism. They are about an entirely different business model. The token that you sell in your ICO is the atomic unit of your business model. You are selling some of it to raise capital but the main purpose of the token is to monetize your product or service.
  4. The investors who bought your token, like public market investors, may be gone tomorrow, next month, or next year, having moved on to the next big thing, leaving you with little to show for it other than the money you raised. VCs, at leas the best ones, are there for your company in good times and bad. There is a difference, trust me.

So, while ICOs represent a new and exciting way to build (and finance) a tech company, and are a legitimate disruptive threat to the venture capital business, they are not something I am nervous about and they are not something USV is nervous about. We are excited about them when they are the right thing for our portfolio companies and we are encouraging those companies to use this new approach. We are also investing in tokens, through token funds, and directly on or own.

Now I need to go put on my sweater vest.

#blockchain#VC & Technology