Posts from November 2018

The Pitch Meeting Setup

We’ve known for a long time that one of the most stressful things for entrepreneurs when they pitch us and other VCs is the initial setup of the meeting when they need to be meeting and greeting the folks in the room and, at the same time, figuring out how to connect their laptop to present their deck.

That combo is a real challenge. Some entrepreneurs navigate it with grace and some really struggle with it. But it is a pain for everyone.

We used to have a cable that the entrepreneur could connect their laptop with but that had its own set of problems as not every laptop would work with the cable.

We use Zoom now and we ask the entrepreneur to get on our guest wifi (no password) and then fire up zoom, join our room, and share their screen.

That works better, particularly when we let the entrepreneur know in advance that is the way we do it so they can download zoom onto their laptop before the meeting.

But even with all of that, we still have this awkward few minutes where the meeting is getting set up.

I am curious to hear from all of you about the best meeting setup situations you have run into in your careers. We do not subscribe to the theory that making it hard on the entrepreneur shows us something. We do subscribe to the theory that making it easy on the entrepreneur is in everyone’s interests.

Track Record

I’ve had a few conversations in the last few days about a VC’s track record, which is a schedule of investments over the years with the wins, losses, and everything else.

I was seeing an old friend who has been in the VC business as long as I have yesterday. We got to talking about the notion of a track record. I told him that what is most valuable in a track record to me is not the gross returns, IRRs, or even big winners. What is most interesting and valuable to me is the cumulative experience you can see by looking at the track record. You can see how long someone or some firm has been at it, their mistakes, their successes, how they have evolved as investors, style changes, risk appetite, and a lot more.

Then this morning, I was talking with one of my partners about USV’s track record and we both were cringing at some of our big mistakes. Neither of us were focused on the winners. We were just stung by the mistakes. 

And I think that’s important. We should not stare too much at our big winners. We don’t learn that much from them. We should stare at our big mistakes, because we do learn a lot from them.

I am proud of USV’s track record. We have produced fund after fund of strong performance, something that is not easy to do. But I don’t think that is what differentiates us in the market. And we rarely talk about it with entrepreneurs. We do talk about the difficult lessons we have learned over the years and how those lessons may allow us to help them avoid a similar fate. And, ironically, maybe that is what allows to produce the track record we have.

Giving Tuesday

I don’t care about or participate in Black Friday or Cyber Monday.

But Giving Tuesday is awesome and I never miss the opportunity to participate in a day of collective giving. I love it.

This morning I went on to DonorsChoose and fully funded a project that is near and dear to my heart, teaching early elementary school kids how to write code on tablets with visual programming languages. And in this case, the kids are from a high need neighborhood in the Bronx.

I would encourage everyone to take a few minutes today and give what you can to a cause that is near and dear to your heart. I promise you that it will make you feel great. It really isn’t about how much you give. It is about finding something that matters to you and supporting it with whatever you can afford.

Here are some great resources to find something to support today:

DonorsChoose – Find A Classroom To Support

GoFundMe – Support Holiday Gift and Food Drives Across the US

Twitter – the #givingtuesday hashtag has some excellent giving opportunities on it

I hope you take a few minutes today to give. 

My Amicus Brief

The Supreme Court is going to start hearing arguments today in a case where consumers are challenging Apple’s distribution monopoly on iPhone apps. These consumers are represented by the attorney generals of 30 states including California, Texas, Florida and New York.

I just heard about this case today and it is too late to file an amicus brief, so I am simply going to share my thoughts on this case here.

1/ Apple argues that consumers cannot bring suit against them as it is the app developers who are the harmed party if there is one at all. I don’t agree with that for two reasons. First, developers pass the increased costs on to the consumer. Second, the developers are not going to attack Apple because they are their only way to get to market.

2/ Apple argues that a decision against them will harm the broader e-commerce market. I don’t agree with that either. If anything, opening up the distribution system for mobile applications would massively increase the e-commerce market which is artificially constrained by Apple and Google’s mobile app store monopolies. I wrote a bit about that earlier this year.

3/ The US Chamber of Commerce did write a brief in support of Apple in which they argued that “The increased risk and cost of litigation will chill innovation, discourage commerce, and hurt developers, retailers and consumers alike.” I cannot disagree with that statement more. Innovation flourishes when there is an open market where no one party can control what can be sold. Apple routinely prevents innovative new apps from being sold in their app stores. A good example of that right now are crypto-based games and other applications that threaten Apple’s 30% take rate on digital goods business model.

Apple and Google have constrained the distribution system for mobile apps in many parts of the world and the result is higher costs for consumers, less choice, and ultimately less innovation. None of this is good for the economy. It is high time for the courts to weigh in here and open up the opportunity for third party app stores to exist on Apple and Google phones. I encourage the Supreme Court to rule in favor of the consumers in this case in hopes that it will lead to that.

What Bear Markets Look Like

It’s hard to look at the price charts of the big crypto assets and not cringe. 

But it helps to look back to an earlier time, when a new sector was emerging, and understand what can happen.

Amazon peaked in the Internet bubble in late 1999 at around $90/share.

Almost two years later, at the trough, you could briefly buy Amazon at $6/share.

And then it took until late 2007 for Amazon to trade above the highs it reached in 1999.

But of course, all of this is ancient history and if you look at Amazon’s chart today, all of that turbulence is hardly even visible.

But for those of us who were investing in tech and tech startups back in 1999-2002, that time will forever be etched in our minds. It was a brutal period during which our belief in the Internet and its potential was sorely tested. Many friends and colleagues left the sector and never returned.

So while crypto asset prices are down 80-95% in USD terms over the last year, they could and probably will go lower. Amazon was down 80% a year into the post-bubble bear market and it got cut in half again before it made a bottom almost two years after it peaked.

What we have yet to see in crypto land is when they kick you when you are down. And that is certainly coming. Regulators came after the Internet sector in a big way post the bubble and that seems likely to happen in the crypto sector too.

And most everyone in big companies wrote the Internet sector off, cancelling their Internet efforts as a fool’s errand. That seems likely to happen in crypto too.

And many talented people left the sector. That seems likely to happen in crypto as well.

But those who stayed were rewarded, although it took a long time for that to happen. We didn’t see meaningful paydays in the Internet sector until the 2007-2008 period and the big paydays didn’t start coming until 2010 and beyond.

The thing to look for in the downturn is signs of life. There were little projects that turned into big ones. Blogger was started in late 1999, almost shut down many times in the next few years, and was picked up by Google in 2003. Myspace, LinkedIn, and Facebook all emerged in the 2002-2004 period, as the Internet was finally coming to life again.

So that is my framework for thinking about where we are with crypto and where we are going.

I think some crypto asset (and possibly a number of crypto assets) will have a price chart like Amazon’s current one in 18 years. But we will have to do what Amazon did, hunker down and build value and survive, for quite a while to get there. And I think things will get worse before they get better.

Video Of The Week: The End Of The Beginning

This is a talk that Benedict Evans gave at the A16Z Summit earlier this month. If it were possible to watch YouTube in 2/3 speed, I would love to do that with this video. Otherwise, I think it is terrific in it’s ability to capture where we are in “tech” and where we are going. It is about 25mins long.

Funding Friday: Ski Maps

This coffee table book of ski maps looks awesome. I backed it today and also got one for our coffee table. You can do the same here.

Giving Thanks

Happy Thanksgiving Everyone.

I appreciate the annual ritual of surrounding ourselves with family, making a big dinner, and enjoying all of that.

I also appreciate taking some time to look back on things and be thankful for what we have.

I am most thankful for what I have around me today, my wife, who makes everything better for everyone around her, and our three fantastic children.

But I thought I would also talk about something that has helped me a lot in the past year – taking a more meditative posture to life. I started meditating last fall and have now been doing it every day since then. But that’s only part of what I am talking about. I am also talking about doing yoga two to three times a week, and making the most out of those sessions. And then taking all of the experiences and sensations and feelings that those things give me and introducing them into the rest of my day.

I have always been high strung. I throw myself at the world and keep throwing myself at it until I am exhausted. That personality has made me who I am and produced much of the success I have enjoyed. But it is also the source of the anxiety and worry that I have experienced regularly and, at times, acutely.

Breathing, deeply and repeatedly, and taking it down a notch and sitting with that feeling is something I wish I had learned as a child. I am sure that there were people who tried. But it took me until my mid 50s to really get it. But now that I do, I have found a balance to the “go go go” way of life that I still live and enjoy.

I am very thankful for that.

Bleeding

The Nasdaq is down almost 15% from its labor day highs.

Apple is down almost 25% in the last two months.

Facebook is down about 40% since July.

Bitcoin is down about 80% from its highs last December.

Ethereum is down about 90% from its highs in January.

All of those are examples of bleeding, if you happen to own any of them.

So what do you do?

Close out your position?

Buy the dip?

Sit on your hands?

It all depends on your fundamental views on these various investments.

Here are mine.

Apple is the easiest one for me. They aren’t going anywhere, although growth is slowing as they are close to saturating the high end of the mobile phone market. It will be a value stock at $120/share. If it gets there, load up on it.

Facebook is harder. They own some incredible assets like Instagram but the outlook there is cloudier given likely regulation and it won’t be a value stock for another $100 of losses. 

The Nasdaq is even harder. Are we in a bear market now? Or just a painful correction? A bull market that is almost ten years old feels long in the tooth and I can see the arguments for a bear market more clearly than a correction.

Bitcoin will form a bottom at some point and is a buy when it does. But where is that bottom? Probably not $4500.

Ethereum feels like the easiest one to make a bull case for right now. It is hated. Everyone has lost their shirt on it by now. Nobody other than developers want to know about it. It feels like time to start nibbling on it but not loading up on it.

But the thing to understand more broadly about what is going on right now is that big sophisticated investors are reducing their risk exposure across all asset classes and have been doing that for some time. The pace of the “risk off” trade is accelerating. Which means a flight to safety is going on. And when that is happening, you really need conviction to be buying.