Posts from October 2019

The World Is Messy And There Are Ambiguities

I’ve been wanting to say something like this here at AVC for several years and have held back for a host of reasons, mostly because it’s a sensitive topic and it would be misunderstood.

But after watching Obama say this, I had to repost it. I could not agree more.

Pacing

Pacing in a VC fund context is how much capital the firm is investing in a given period and tracking that over time.

I don’t think a VC firm should manage to a pacing number. It should manage to the opportunity set that it sees.

But I think pacing is a great thing to track in the rearview mirror.

I like to look at investment pace by quarter and year. And by dollars and deals. And by new names and follow-ons.

If you keep track of that, chart it, and review it, you will be mindful of whether the firm is getting too far out over its skis or heels.

And that is a super useful thing to be aware of.

Recount Media

This post is also live on USV.com as we announce all of our investments there with a blog post.

Eighteen months ago, I had breakfast with John Heilemann and he told me that his world, political media, was challenged in the shift from linear television (ie cable news) to real-time mobile (ie Twitter). He saw an opportunity to address that by filling the void in between them with news content that was made for real-time mobile consumption but had the journalistic integrity and production values of linear television.

I said to him “you should start a company to fill that void and you should get John Battelle to join you in starting that business.”

John did exactly that and six months later USV provided the seed capital along with True Ventures and a fantastic group of angel investors. 

Their company is called Recount Media and it has stayed largely under the radar for the last ten months as they built the team and started producing news content that promises “no bullshit, no bad faith, in five minutes or less.”

Having provided the initial funding for Twitter twelve years ago, we at USV are acutely aware that the disruption in media that it caused has been both positive and negative and that there is more work to do to make sure our society is well served by both the Fourth and Fifth estates.

We think that the work John, John and the dream team of journalists, producers, technologists, and business people are doing will make a material impact on filling the void and we are proud to be supportive investors in Recount Media.

If you want to see what Recount is all about you can download the Recount iOS app and/or sign up for their videos delivered via a daily email. You can also follow the Recount on TwitterInstagram, and YouTube.

What You Do Is Who You Are

This past summer I read a proof of Ben Horowitz’s new book, What You Do Is Who You Are, and I even blogged about it here without naming the book.

What You Do is about culture, how you make it, how you keep it, and how the big decisions you make and how you explain them set the culture in your organization.

To explain this Ben tells the story of four different cultures that were set by strong leaders:

– the leader of the only successful slave revolt, Haiti’s Toussaint Louverture

– the Samurai, who ruled Japan for seven hundred years and shaped modern Japanese culture

– Genghis Khan, who built the world’s largest empire

– Shaka Senghor, a man convicted of murder who ran the most formidable prison gang in the yard and ultimately transformed prison culture.

https://www.amazon.com/What-You-Do-Who-Are/dp/0062871331/

These stories really make it clear how you set and keep your culture. You will come away from this book with a clear understanding of how your actions will set the culture in your company.

I read Ben’s interview with Connie Loizos and I like what he said here about why he wrote the book:

First, it was the thing that I had the most difficult time with as a CEO. People would say, ‘Ben, pay attention to culture, it really is the key.’ But when you were like, ‘Okay, great, how do i do that?’ it was like, ‘Um, maybe you should have a meeting about it.’ Nobody could convey: what it was, how you dealt with it, how you designed it. So I felt like I was missing a piece of my own education.
Also, when I look at the work I do now, it’s the most important thing. What I say to people at the firm is that nobody 10 or 20 or 30 years from now is going to remember what deals we’ve won or lost or what the returns were on this or that. You’re going to remember what it felt like to work here and to do business with us and what kind of imprint we put on the world. And that’s our culture. That’s our behavior. We can’t have any drift from that. And I think that’s true for every company.

So if you leading your company and you are thinking “ok, great, how do I do that?”, then go get this book and read it. I think you will come away with a much better understanding of what culture is all about.

Bringing It All Back Together

Early-stage companies are exercises in experimentation, iteration, and figuring things out. You try one thing, it sort of works, but you see a tangential opportunity and go after that. Sometimes that leads to a full-on pivot, other times it leads to an evolution of the opportunity.

This process can create multiple products, services, projects, and it can look messy. I love it when founders bring it all back together into one cohesive package. That doesn’t always happen, but when it does, it is a thing of beauty.

That happened this week with our portfolio company Numerai. I saw this tweet by Numerai founder Richard Craib:

If you have not been following Numerai, let me explain.

The initial idea behind Numerai was to build a quant hedge fund using “the crowd” to surface the machine learning models. They do that by running the Numerai Tournament and taking the best models and operating a hedge fund with them. That is what Numerai does and that business is working well.

Along the way, Numerai observed that incenting the players in the tournament with a crypto-asset they could stake on their models was a better way to crowdsource the best models. So they made a crypto-asset called Numeraire.

Numeraire is a crypto-asset that you can trade, own, and, if you are playing in the tournament, stake.

So then Numerai was in several businesses, the hedge fund business and the crypto business.

And then the team observed that there was a generalization of the thing they had built that had much broader applications – a decentralized marketplace for predictions. So they created a protocol called Erasure that allows anyone to build markets for predictions.

It started becoming a fairly messy story.

But last week it all started coming back together when team successfully ported the Numerai Tournament to operate on the Erasure protocol.

This accomplishes several things. First, it starts to tie all these loose threads together and the story becomes easier to understand. And also, you have a very successful application, the Numerai Tournament, running on Erasure. So developers can see what Erasure is good for and can start building other things on it.

I am excited for the Numerai team. And I quite like this example of how things get messy as you expand the opportunity but you can clean things up by bringing it all back together and would encourage founders and teams to look for opportunities to do that whenever possible.

Funding Friday: Shapeshift

Our portfolio company Kickstarter is running a cool crowdfunding event called Shapeshift that is focused on “bold new products made from recycled materials.”

You can see them here and back the ones that are interesting to you.

I did that this morning.

Here is one of the Shapeshift projects I backed:

Carbon Offsets

Business and personal travel, which we’ve been doing a lot of the last two weeks, is a big producer of carbon in the atmosphere. I’m actually writing this on a cross Atlantic flight.

But you can offset those carbon emissions fairly inexpensively

There are a number of services on the Internet that will help you do it.

Over the last four years the Gotham Gal and I have racked up about 570 tons of carbon via air travel.

Depending on how much we spend per ton to offset it, the coast could be as low as $10,000 or as high as $60,000.

At $10,000, that is about a 3% increase to our air travel costs. At $60,000, that is about a 20% increase to our air travel costs.

There are a lot of debates about how much it should cost to offset a ton of carbon. Right now it is inexpensive because the supply of offset projects is higher than the demand for them.

But at market equilibrium, the price should be a lot higher and many people offset at the theoretical market equilibrium price not the current market price.

I don’t think there is a right or wrong answer to this question about how much per ton you should pay for offsets. It depends on how you think about it.

Our flight today could cost as little as $100 to offset for both of us. Or as much as $600.

Either way, we are paying to reduce our carbon footprint and that is a good thing in our view.

If everyone started doing this, it would transform the carbon offset markets and lead to a lot of great projects, like reforestation and other approaches that would have a meaningful contribution to reducing the amount of carbon in the atmosphere.

The Access Act

Yesterday three Senators, Democrats Mark Warner (VA) and Richard Blumenthal (CT) and Republican Sen. Josh Hawley (MO), put forward new legislation aimed at opening up the markets in web services. Their proposed legislation is called The Access Act and you can read it in its entirety here.

First let me say that this is exactly the kind of regulation we need to deal with the growing monopoly powers of companies like Apple, Google, Facebook, Amazon, etc, etc.

When Liz Warren came out with her idea to breakup these large monopolies, I wrote here that I thought that would turn out to be bad policy and ineffective. I came back to this issue when Liz starting breaking out of the pack and leading the race to run against the President next year.

As I said in both of those blog posts, it is my view that the monopoly powers that Google, Facebook, Apple, Amazon, etc have do not stem from their size and market reach, they stem from the data monopolies they own about us and our online activities. Breaking these companies up into smaller parts does not solve that problem. As my partner Albert observed in a blog post last week, spinning Instagram out of Facebook will do nothing to reduce Instagram’s market power, which is massive in its own right.

What we need to do is to allow any company, large or small, to compete on a level playing field with these large monopolies and they way to do that is to force them to open up their platforms and data so that competitors can provide similar services.

Senator Mark Warner put out a long tweetstorm yesterday laying out the ideas behind this bill and I would like to highlight a few of them here.

And

I am excited about all three of these ideas and they work together. You can’t do just one of them. But I am most excited about the third, delegation. My partner Albert calls this “the right to be represented by a bot” and it is critical to making all of this work.

Just when you thought government was lost and useless, someone inside the walls of power in Washington steps up and puts forward a set of ideas like this and you think “well someone actually gets it.” I am deeply grateful to Senators Warner, Blumenthal, and Hawley (and their staffs where so much of this work gets done) for their leadership here.

Finally, one complaint. The bill defines a term “large communications platform” and that is the entity it seeks to regulate. As currently defined in the bill, a service would have to have 100mm monthly active users to be considered a large communications platform. That number is way to high in my view. We ought to regulate companies in this way at much smaller sizes. 10mm MAUs is where I would start requiring this sort of thing and maybe ratchet up the requirements as they scale to 50mm, 100mm, and beyond.

But all of that can get sorted out as this bill is discussed, debated, and hopefully eventually made into law.

I hope Liz and the other candidates out there who want to use old techniques on new markets will read their colleagues’ bill, understand its importance, and start changing their tune on this issue. It is too important to get wrong.

Franz Liszt

We went to a piano recital last night in Budapest.

Gabor Farkas played a number of compositions by Chopin and Liszt.

I was particularly taken with the Liszt compositions. The one called “Les Jeux d’eaux de la Villa d’Este” was particularly lovely.

I shared another pianist’s rendition of it with some friends on Twitter this morning.

After the recital, we went to dinner and we spent much of dinner talking about Liszt and reading about his life and work. It’s nice when a phone connected to the Internet can be a catalyst for a conversation at dinner instead of a hindrance.

As many of you likely know, Liszt was a “rock star” in the world of classical music in the mid 19th Century.

He fell in and out of love with Countesses and Princesses and held court in some of the most important cities of the era, including Vienna and Weimar.

But possibly most interesting was the level of hysteria that he generated in his fans with his piano playing, a phenomena known as Lisztomania.

The kind of hysteria that the Beatles and other rock bands produced in their fan bases was not a new thing.

It had gone on a century before in the concert halls of Europe at the height of the Classical Music era.

Which leads me to speculate that Lisztomania itself was not a new phenomena and that great performers at the height of their powers have had the capacity to cause people to lose their composure for as long as humans have had the power to perform.

In any case, Franz Liszt is an interesting case in the study of celebrity. And his music is also wonderful. He has found two new fans, a century and a half after his departure from Planet Earth.

Which is the amazing thing about arts and culture. It survives and can be appreciated by generations to come leading us to become fanatical about someone who has not been alive for a very long time.

And yes, if you were wondering, I have Ken Russell’s Lisztomania downloaded into my Google Pixel Slate to watch on our flight back to the US later this week.