Posts from June 2019

Thirty-two years ago, the Gotham Gal and I got married.

We had been together for five years at that time.

We have now been together for thirty-seven years.

A relationship that has lasted almost four decades is a special thing.

There is a comfort, a deep friendship, a mind melding, that develops.

At least three or four times this week, one of us uttered something that the other was thinking but just had not said yet.

We are celebrating the day in Paris, one of our favorite places, and pretty much doing nothing, but of course doing everything. Together.

Last year, during its annual “crypto week”, our portfolio company Cloudflare shipped an IPFS gateway. I wrote about that then.

This year, they have shipped an Ethereum gateway.

It is great to see a very large Internet infrastrcuture provider build and ship crypto gateways.

If you are a small developer looking to create decentralized applications, having a web-scale provider offering IPFS and Ethereum gateways is really helpful.

I expect to see Cloudflare continue to extend the number of crypto protocols they support with their gateways.

And that will be part of what needs to happen to get to a world of truly decentalized applications.

If you are interested in developing on the Ethereum protocol and want to understand how the Cloudflare gateway works, this blog post explains it well.

A new blockchain & cryptocurrency project, Libra, was announced today. Libra has been incubated by Facebook. USV will be one of the founding members of the governing body, the Libra Association. Libra is a stable, fiat-backed cryptocurrency that will launch inside some of the world’s largest consumer-facing applications. We believe Libra has the potential to be the catalyst that brings the entire cryptocurrency and cryptoasset market into the mainstream.

When USV invested in Coinbase in early 2013, our rationale was that digital currencies and digital assets (like Bitcoin and beyond) were a breakthrough technology, similar to TCP/IP, HTTP and SMTP. But we also knew that it would take significant investment in the surrounding infrastructure to make them useful for businesses and consumers, just like it did with the Web back in the 80s and 90s. At the time of that investment, we wrote:

“There is much that must be built on top of of these digital currencies to make them work well enough to support real business at scale”

This has proven to be true. If we look back at the past 10 years since the invention of Bitcoin, we have seen a lot of infrastructure built to support an increasing variety of use cases. But there is still a long way to go.

We think about the crypto sector as the intersection of Finance 2.0 (“Money Crypto”) and Web 3.0 (“Tech Crypto”), and what we have seen is that the “Money Crypto” use cases have been the earlier to materialize, especially “slow money” use cases (those that don’t require high throughput):

For consumer use cases (including both Finance 2.0 and Web 3.0 use cases), the biggest barrier to date, beyond technical scalability, has been the rollout of crypto wallets to mainstream consumers. As of today, there is still no mainstream web browser with crypto built-in, no mainstream phone with crypto built-in, and relatively few mainstream applications with crypto built-in. As that changes, crypto assets have the potential to move from being curiosities for enthusiasts to being default internet and financial infrastructure.

Once we have crypto-compatibility built-in to applications, browsers, and phones, many new behaviors and use cases will emerge. The financial system, in general, will become more accessible (smartphone adoption is outpacing bank account adoption globally). Payments can become faster, more reliable and less expensive. Magical new user experiences will be possible due to interoperability and reduced friction, the same way that the Web’s native interoperability unlocked countless new use cases and experiences. And, perhaps most importantly, we will open the door to self-sovereign digital identities (private keys) that are the underpinnings of user-controlled privacy and control of data.

So as we think about the potential drivers for mainstream crypto adoption, a simple, fully-collateralized, cryptocurrency used inside the world’s largest applications, touching hundreds of millions or billions of consumers, is perhaps the most promising one. It is our hope that Libra will serve as a major on-ramp to cryptocurrencies and cryptoassets, to the benefit of the entire ecosystem.

USV will be joining as a founding member of the Libra Association, the governing body that will manage both the Libra technology and the Libra Reserve. As one of the initial 20 members of the Association, we will have the opportunity to participate in design and policy choices that will shape the network. It is worth noting that Facebook will be just one equal member of the Association, which was an important factor in our decision to join.

This will be a large and complex undertaking, as there are many unresolved and challenging questions, involving the technology itself (security, privacy, path to decentralization), the regulatory environment, and the nature of the ongoing governance. In some ways, the initial Association resembles a constitutional convention, where the main goal is to draft the long-term governance mechanisms themselves.

To be clear, we view this as both an ecosystem investment and a financial investment. In addition to participating in the governance process at the Libra Association, USV plans to invest in the Libra Reserve, which will provide the stability for the currency. This is an unusual type of investment for us, but we have learned that investing in the crypto sector requires us to explore a variety of new investment structures.

We appreciate that Facebook invited USV to be an initial founding member of the Libra Association and we take our role in that seriously. We will advocate for those things that USV values most: openness, transparency, decentralization, and permissionless innovation. We think that those features will help accelerate adoption within the entire crypto ecosystem — including our many existing investments in the space — and also help Libra succeed in its goals.

This has also been posted on usv.com.

One of the many great things about vacations is reading books. Vacation is the one time that I can really prioritize reading books (as opposed to everything else I read).

I just finished Scott Kupor‘s Secrets Of Sand Hill Road, a book for entrepreneurs about rasing capital from venture firms.

Scott makes the point numerous times in the book that the capital raising process is asymmetric for entrepreneurs in that they do it a few times in their career and VCs do it every day.

That is true for the pitch meetings, the negotiation process, and the post financing relationship too.

What Scott does in this book is break down every part of the process and explain it in plain english so that entrepreneurs can understand what’s going on and why it matters to them.

That last part is important, this book is written for entrepreneurs, not VCs.

Scott uses real world examples, mostly investments made over the last decade by his firm A16Z, to make the lessons he is delivering more “real.”

And he uses spreadhseet examples in one chapter and shows how various events can change the cap table for everyone.

It’s very much a “how to” book, more practical than theoretical.

There have been other books written about this topic, I like Brad Feld and Jason Mendelson’s Venture Deals, which is on its third edition now.

Jeff Bussgang’s Mastering The VC Game is also great.

You could teach an MBA or undegraduate course on capital raising for entreprenuers with these three books.

It would be a great course.

If you plan to be raising venture capital for your startup and don’t have the benefit of experience or a fantastic course on the topic, I would strongly recommend you pick up Scott’s book, or all three books, and spend some time reading them now or on your next vacation.

The Gotham Gal and I walked into the Musee de l’Orangerie yesterday and found a line of about 20 people waiting to purchase tickets to enter. The Gotham Gal whipped out her phone, went to the Orangerie website, and bought two tickets that were sent to her phone. It took her less than a minute to do it and we walked in. As we were leaving we noticed the ticket line had almost doubled. We shook our heads and made our way to our next stop.

The mobile phone we all have in our pocket or purse can do so many things but one of its superpowers is a point of sale terminal. Increasingly there is no reason to wait in line for tickets to anything. You can just get them on your phone.

I really like just in time ticketing with the phone. I have the NYC East River Ferry app on my phone and whenever I want to take a boat to Brooklyn or Queens, or back, I open up the app, provision a ticket or two if I’m round tripping it, and I’m good to go. I am seeing more and more mass transit systems adopt this approach.

And then there is the NYC subway system which has started to roll out new turnstiles which you can tap and pay at:

I remember the days of carrying metal tokens in my pocket. It wasn’t that long ago!

The smartphone is twelve years old at the end of the month. It is remarkable to step back and think about how much it has changed how we live and work.

Peter Kafka interviewed YouTube CEO Susan Wojcicki at the Recode Conference last week.

It’s an interesting discussion about many of the issues facing YouTube and the Internet at large right now.

I saw this project earlier this week and backed it immediately. Solar energy is not easy to adopt. But I have found that once you start, you get into it and keep going.

This might make it easier for some to start down that path.

Our portfolio company Cloudflare provides a suite of mission critical security services, and increasingly other services too, in the cloud to their customers. Among the most well known of these security services is DDOS protection (aka denial of service attack protection). A DDOS attack is a massive traffic burst aimed at a website to take of offline.

Among the most vulnerable and attacked websites are those belonging to non-profits and other organizations doing work that upsets those in power.

So Project Galileo is Cloudflare’s effort to provide security services to these sorts of organizations for free so they can stay online and continue to do their work.

And Galileo turns five years old this week.

Matthew Prince, Cloudflare’s CEO and co-founder, wrote this blog post yesterday celebrating five years of Galileo and he explains why this is so important to Cloudflare, the Internet, and the world.

One of the areas of blockchain innovation I am most excited about is building open, permissionless, and decentralized technology infrastructure.

The three areas that seem most obvious to me for decentralized infrastructure are compute (code execution), storage (storing files, etc), and bandwidth (network infrastructure).

And today, we are excited to announce that USV has made an investment in a decentralized network infrastructure project called Helium.

My partner Nick, who led this investment for USV, wrote about Helium on the USV blogand explains why we made the investment (as is our practice with all new investments). I would encourage you to read that blog post as it explains a lot about how Helium works, how the token economics builds the supply side of the network infrastructure, and why it fits so neatly into our investment thesis.

I would just like to point out how cool Helium is.

Anyone can run a Helium hotspot in their home:

And then they can earn Helium tokens for doing so.

You can run a hotspot in your home/apartment and do the equvalent of bitcoin mining for network infrastructure.

Helium is optimized for very long distance, low power communications. It is ideal for Internet of Things (IoT) devices. Think about electric scooters needing to “phone home” over long distances. Think about your dog’s name tag. Think about figuring out when the school bus is going to arrive at the bus stop.

We plan to run a Helium hotspot or two at USV and it would be great to see people powered Helium networks popping up all over the place and providing very low cost, low power, highly reliable long range network infrastructure.