Posts from August 2019

The Long Engagement

The Gotham Gal and I met when we were 19 and got married when we were 25. We lived together for most of those six years before we got married. By the time we tied the knot, we knew each other very well.

While venture capital investing and marriage are two different things, I think there are some things one can take from love and marriage into the world of startups and venture capital investing.

One of them is the value of long engagements.

I have never understood why founders want to run a lightning fast process to select business partners who they may have to “live with” for the next seven to ten years.

And yet we see this behavior all of the time. Often it is driven by other VCs who toss in “preemptive term sheets” thus turning a fundraising process into a sprint.

What I would prefer to see, and do see in many cases, is a founder who takes the time while they are not raising money to build a number of relationships with potential investors and then engages those investors in a process when it is time to raise capital. I like to call this process the “long engagement”.

It might sound like a lot more work than the fast and furious fundraising process that many founders are running these days.

But I don’t think it is a lot more work. Building relationships over a six to twelve month period can take the form of an occasional face to face meeting, emails back and forth, and even a few visits to the office by the investor. And none of that has to have the pressure of a pitch, an ask, and a price.

For the investor, this is a much better process. It allows them to see the founder and the business execute over time. It allows everyone to develop comfort with each other.

I would argue that it is a much better process for the founder too. It let’s them see which investors are truly interested in their business, their team, their product, and their success. It also reveals which investors are “here today, gone tomorrow.” You want the former on your cap table, not the latter.

It is easy to get caught up in the game of startups and investing in them. A fundraising process is at its heart a competition. And everyone wants to win. But you don’t get a trophy for winning this game. You get into a relationship. Often a very long one. So I think stepping back from the game theory and stepping into the relationships is the way to win long term. Which is the only form of winning that really matters.

Video Of The Week: A Reminder

As the US government thinks about regulating big tech and constraining crypto-currencies, I think a reminder about the value of open markets and freedom to innovate is important.

Zooming

For the past three or four years, I have been trying to reduce my air travel for a host of reasons (wellness, reducing carbon footprint, increasing productivity, etc) and I would say that this effort has largely been successful.

The main tool that I have used to accomplish this is videoconferencing and although I use whatever videoconferencing software that the other side wants to use, it turns out that I am mostly Zooming these days.

We use Zoom at USV for all of our team meetings and for many of the pitches we receive over video (which has increased significantly in the last few years).

And the vast majority of our portfolio companies use Zoom too.

There are many days when I will be on Zoom for three, four, five hours and I can get a lot done that way.

We had a board meeting yesterday that was one of the best meetings that the company has had and everybody was on Zoom.

I will say that video works better when everyone knows each other well (like the USV team) and the benefits of body language are less.

But without a doubt, videoconferencing has arrived and it can and should reduce your need for air travel. We can’t fully replace the in-person, face to face experience, but we are pretty close to it now. And so we should leverage that to improve our lives, our effectiveness, and our business.

Tumblr

The news hit yesterday that WordPress has purchased Tumblr from Verizon (which owns it by virtue of its acquisition of Yahoo! and AOL).

USV seeded Tumblr along with our friends at Spark in the summer of 2007 and were actively involved in the development of the company until its sale to Yahoo! in 2013.

I maintained an active Tumblog from before we invested in 2007 until October 2016, when I stopped posting there. There was no moment when I decided to stop posting there. I just did.

The narrative around the sale of Tumblr to WordPress is all about Yahoo! paying more than a billion for it and selling it for $3mm. It is absolutely true that Yahoo! never figured out how to turn Tumblr into a business and ending up losing its shirt on the investment.

But it is also true that Tumblr was bypassed by native mobile applications like Instagram and Snapchat where it was even easier to post about your life. Tumblr was both a blogging platform and a social media application and while I always loved the versatility of the platform, native mobile applications benefit from simplicity, not complexity.

There was a time around 2010 and 2011 when Tumblr was the most engaging social platform that I was on. I followed and met quite a few interesting people there and it was a lot of fun to be on it.

David Karp, the founder of Tumblr, always focused on making Tumblr a “positive” experience. That is why he refused to have comments, even though I pushed him to do it and hacked Tumblr by putting Disqus on mine. That is why he made the primary (only?) form of engagement a heart.

And it worked. Tumblr was a happy place and using it made people feel good about themselves.

While the world of social media has evolved a lot in the last six years, since Tumblr sold to Yahoo!, it has not really gotten better. One could make a very strong argument that it has gotten a lot worse. Tumblr was an example of how to do social media right and we can learn a lot from it.

Open Finance First, Open Data Second

My partner Nick put together a deck outlining USV’s approach to crypto investing earlier this year and we have been using it with founders and investors since then.

One slide I particularly like from that deck is this one which describes how we think the crypto market will develop over time.

We have already seen an explosion of assets issued on blockchains and a number of very large and profitable custody/brokerage/exchange businesses built. We expect we will see continued innovation in the open finance (finance 2.0) sector in the next few years while the open data (web 3.0) sector will take longer to develop.

We also think that open finance will inevitably lead to open data as users (both consumers and businesses) will start to understand and appreciate the benefits of increased user control, lower transaction (and other) costs, and other benefits of decentralization.

Awesome Features That I Did Not Know About: Version Management In Google Sheets

One of the joys of using technology for me is discovering awesome features that I did not know about. This happens to me every so often and always brings a smile to my face. So I thought I’d blog about this when it happens to me.

This recently happened with version management in Google Sheets. When I work with a big spreadsheet, I always worry about making some change and messing the entire thing up. I have been using spreadsheets since Lotus123 and have messed up many a spreadsheet. So I like to make copies of my work regularly so I have something to roll back to.

Sometime in the last few weeks, I accidentally deleted a row and could not undo it. So I searched for “version management in Google Sheets” and got this one box answer:

This works for all Google apps but is particularly valauble for Google Sheets.

So now I can stop saving my work regularly. Google is doing that for me. Awesome.

Risk Tolerance

Startup companies go through a number of phases as they mature from an idea, to a small team, to a growing team, to a small company, to a big company.

And along this journey, the leadership team you need changes. You need little to no leadership structure when you have a small team, you need some sort of leadership structure when your team is growing, you absolutely need a leadership team when you become a “company”, and the leadership team becomes incredibly important when you become a big company.

In the last week, I’ve had several conversations with CEOs in our portfolio who are leveling up their leadership teams and are recruiting executives from larger organizations.

I’ve counseled them to make sure that they hire executives who have a lot of risk tolerance.

High growth companies that emerge from a startup situation tend to be volatile. They have a lot of turnover in their organization, they have moments when the cash balances get low, they sometimes face existential risks.

If you have executives that you need to spend a lot of time comforting and solidifying, that’s not good. Ideally your leadership team is your steadying force and if you are steadying them, then your setup is suboptimal.

It is always tempting to bring in people who have operated at a scale well beyond where you are. And I am not saying you should not do that. You should. But just make sure they can handle the heat in the kitchen because it’s gonna get hot sometimes.

Video Of The Week: Overcoming Sprawl

I have been fortunate to work for the last 25 years in the Flatiron District of NYC, which is a mixed-use neighborhood (office, retail, residential) that has excellent mass transit options (three major subway lines converge at Union Square), great biking and walking streets, and a feeling of vitality that is infectious.

So this video I watched this morning rings very true to me. I think cities around the world (both new cities being built in Asia and existing cities looking to transform themselves like Los Angeles) can and will adopt policies that limit sprawl and get us back to living with other people in mixed-use environments that make us happier, more productive, and more sustainable.

Funding Friday: Break Kickstarter

Last month our portfolio company Kickstarter invited project creators to “break conventions, but not our rules” and create campaigns that were different from the traditional Kickstarter campaign.

There are 99 “break Kickstarter” campaigns live on the platform now and I featured one of them last week. But there are many more super interesting and creative campaigns.

I backed a bunch of them this week and thought I’d showcase them to all of you today. You can find them and back them here.