Posts from March 2019

Elizabeth Warren made news this weekend with her plan to breakup Google, Amazon, and Facebook (and also Apple).

Let me first say that I am sympathetic to Warren’s position. I particularly don’t like the way that Google, Apple, and Amazon use their market power in search and in their app stores to display their own products. The mobile app stores, in particular, have always seemed to me to be a constraint on innovation vs a contributor to it.

However, as you might imagine, I don’t love her proposal. I don’t think breaking up companies solves anything. And lots of rules on paper don’t either.

What we need is a competitive marketplace where new entrants have a chance to beat out old incumbents.

And I think we are on the cusp of that with crypto and the innovations in and around it.

This tweet exchange explains my high level view here:

we are on the cusp of a new architecture, based on a user's control of their own data, and monetized via protocol tokens, that will unseat all of these monopolies in time. the massive increase in ICO-based fundraising, largely outside of the US, is the counterweight to this.

— Fred Wilson (@fredwilson) March 9, 2019

I also quite like Mike Masnick’s much longer take on Warren’s plan.

What we need are policies that make it easier for startups to raise capital (like supporting ICOs instead of clamping down on them) and policies that open up the proprietary data assets of the big incumbents (like giving users control of their own data assets). Those sorts of things along with the never ending march of technology will do the trick I think.

I wrote a bit last Monday about the 60 Minutes piece last Sunday night about getting to gender equity in STEM education. My message in that blog post was that there are many innovators in this sector and not everyone will get the credit they are due.

Ayah Bdeir, who was left on the cutting room floor on that 60 Minutes piece, had a different message and one that I understand and appreciate.

Ayah is awesome and I want to shine a light on her and her work and there is no better way to do that than to repost her conversation with The Gotham Gal from last year.

I just backed this project. I like the part in the video where the robot passes them spices for their dinner.

I saw Zuck’s post on pivoting to private interactions from public posts yesterday and I had a flashback to Bill Gates’s Internet Tidal Wave memo to his company almost twenty-five years ago.

I have always seen a lot of Gates in Zuck. They both have this incredible ability to see someone else’s product and realize that they need to build their own version of it.

But copying someone else’s product is a lot easier than copying someone else’s business model, particularly when you already have a fucking great one that makes you and your shareholders billions of dollars a year.

It will be interesting to watch Zuck do what Gates was ultimately unable to do – completely reboot the company’s business model to position itself to win the next wave in tech.

In the case of Gates, it was the pivot from paid software to free advertising supported software (aka – the attention economy that we are now paying for).

In the case of Zuck, it will be the pivot from monetizing attention to monetizing the protocol. The good thing is he is headed in the right direction, and surrounded some of the smartest people I know in crypto. The bad news is when you have this anchor called a legacy business model, it means making the right moves and making them quickly a lot harder.

Here is an example of one of those choices Facebook will need to make and make correctly:

If @facebook’s stablecoin goes the private blockchain route it will be to #crypto what @Microsoft’s Internet Explorer was to the Internet.

— Chris Burniske (@cburniske) March 4, 2019

In any case, it is game on. Being on the verge of 60 years old means I have seen this game play out at least once before and so I have a frame of reference to observe it. That’s really great. It is an exciting time again in tech.

Daniel Olshansky asked me this question on Twitter:

@fredwilson Have you ever written about how to avoid "rest and vest" culture where there are employees who want to leave a company but are held down by golden handcuffs?

— Daniel Olshansky (@olshansky) March 4, 2019

I don’t believe I have ever addressed this issue here on AVC but I certainly have seen it inside of our highly valued portfolio companies.

Here is the issue. Employees join a high growth company, are issued options which become valuable as the company’s equity appreciates, and if they leave they have to exercise the vested part (and pay taxes) and walk away from the unvested part. So they stay even though they may not be happy at work. Maybe they are not in a challenging role or maybe they find themselves in a problematic management situation. This leads to “resting and vesting.”

Here are some thoughts:

1/ A four year option grant is not a gift. It has to be earned via performance over time, not just time. If there is no performance, then the employee should understand the vesting is at risk. Companies should be very clear about this when they issue the options and on an ongoing basis. This is a cultural issue and needs to be treated as such.

2/ Companies need to have performance oriented cultures where there are frequent checkins between managers and team members, with feedback going both ways, and where non-performance results in changes. These changes could be restructuring of teams, changes in management, or departures of employees. Companies that do not actively manage performance are likely to have lower morale and toxic issues like resting and vesting.

3/ Managers and company leadership must do their part to take ownership of these issues. Employees will adapt to the environment they find themselves in. If you have a rest and vest culture in your company, look in the mirror to see the problem.

4/ I would like to see a market emerge for financing of option exercises. There are companies actively working on this. I believe that departing employees ought to be able to borrow against their valuable equity at no recourse to them, so that they can exercise and pay the taxes. This would solve part of the problem, where employees can’t leave because they can’t afford the taxes (and, in some cases, the exercise price).

5/ I do not believe that the option programs are the problem here. I do think the taxation at exercise is bad public policy and I wish the US government would move taxation to a liquidity event, but I also think we can use the capital markets to address this problem.

6/ I think in the vast majority of cases, the golden handcuff problem is a result of poor management and a leadership team that is unwilling to address this issue head on and make unpopular and difficult decisions about people.

So there you have it Daniel. That’s what I think about this issue. Thank you for asking me about it.

Howard has a great (and short!) post on how blogging publicly gives you a timeline on how you were thinking at a given time. He’s right, it is awesome to be able to go back and see what you were thinking and evaluate it in hindsight.

Like my “What Is Going To Happen In 2019” post.

Sitting here two months and a few days into 2019, I could not have been more wrong about the first couple predications I made in that post.

The stock market has been on fire and the President is still firmly in charge.

Of course all of that could change.

It is still early days in 2019.

But going back and re-reading that post is super helpful in reminding me that my assumptions may be wrong and I need to re-evaluate the assumptions to make sure I am heading in the right direction.

And blogging (aka taking a stand publicly) is a great way to do that.

Last night CBS 60 Minutes aired a piece about the gender gap in tech and left out a number of important efforts to close the gap.

My friend Rob Underwood tweeted this out about that piece:

I admire work of my friend @hadip & the org he started, @codeorg. But the incredible, brave (!) @reshmasaujani is absolutely right. Having had a chance to work a bit w/ #CSForAll movement, @60Minutes leaving out contribs of @GirlsWhoCode, @NCWIT, @BlackGirlsCode is unconscionable https://t.co/hKwXLSkVXN

— Rob Underwood (@brooklynrob) March 4, 2019

And while I completely agree with Rob that Reshma has built something amazing at Girls Who Code, I also feel that the results she and her organization are getting are what matters the most and so I responded with this:

What I have learned from watching my wife (@thegothamgal) work on gender equity in startups and my own work on equity in CS education is that you cannot worry about who gets the credit, you have to worry about the results. It makes it easier to stay focused and stay happy

— Fred Wilson (@fredwilson) March 4, 2019

Later today, a friend and fantastic entrepreneur sent me a private email arguing that credit is very important and that it is how organizations gain credibility, legitimacy, and support to keep going.

Of course she is right. Credit is important.

I also got an email from the folks I work with at the NYC public school system pointing out that the NYC public school profiled in the 60 Minutes piece was the beneficiary of the CS4All effort which I have been championing for almost a decade now and that was left entirely out of the story.

All of this is unfortunate. There is a very broad coalition of organizations doing incredible work making sure that we have gender and racial equity in STEM education. And we are starting to see the results of all of the work of these groups. It would have been nice to credit a much broader group of organizations and companies.

But this happens all the time. USV has been the seed and largest investor and a highly engaged board member in companies that are referred to in the press as an “Andreessen Horowitz backed company” or a “Sequoia backed company” or a some other such characterization. When I see that I flinch a bit but tell myself that it is the company, the founders, and the results that matters and not who invested in it.

Success has a thousand mothers and some will get more credit than others. That is the unfortunate truth of success. But if we focus on the success versus the credit then I think we will all be better off.

A friend of mine sent me this the other day.

Two AVC posts were at or near the top of Hacker News.

But I did not go and read the comments as I have found the comments at Hacker News emotionally challenging for me.

As many of you know, I have also found the comments here at AVC emotionally challenging for me.

One of the suggestions I received when I blogged about that recently was to charge for comments.

I don’t want to charge for commenting because I want this to be an equal opportunity place for people to speak.

However, when something is free, it is abused. We have spam and trolls.

One mechanism that I like is Karma. You are given Karma when you join a system, and you may earn more Karma every month to replenish your supply. You spend Karma to make a comment. And if your comment is popular, you can earn more Karma. If your comment is deemed to be spam or against the community rules, you lose Karma.

Creating a native currency inside a social system is powerful. It allows you to start “charging” for things that should have a cost associated with them while still allowing the system to be “free to use.”

I am not planning on adding Karma to the AVC comments because Disqus doesn’t support this feature and I’m not eager to make any changes to the technology I use to put this blog out every day. I mean that. So if you email me or leave a comment suggesting I move to a new comment system, I am going to ignore it.

But this idea, combined with the ability to spin up a crypto-token simply and easily, is pretty powerful. A number of social platforms are doing this. Reddit is one that seems to be making a version of this work.

If I was starting over from scratch, I’d build on top of that idea. I think it would make things a lot better.

One of our first crypto investments maybe five years ago was Mediachain, founded by Denis Nazarov (@Iiterature), and Jesse Walden (@jessewldn). They sold that company to Spotify and eventually landed at A16Z crypto. One of the USV analysts who worked on our Mediachain investment was Joel Monegro (@jmonegro) who later teamed up with Chris Burniske (@cburniske) to start Placeholder, a crypto VC fund.

So we know these four people very well and all of them are now deeply involved in funding early stage crypto projects.

This podcast is a great conversation among the four of them on how to design cryptonetworks so that they function well over the long term.

Full disclosure: USV is an investor in Placeholder and my wife and I are individual investors in A16Z crypto.