Posts from August 2020

Investments That Don't Work

I woke up to a dream this morning where I was playing a game that was very similar to, a failed effort to create a social music experience that had a moment back in 2011 and that I had invested in via USV. In the dream, someone had created a new version of the game that was basically identical to the original version. It was as fun to play it as it was to play Turntable back in the day. Then I found out that the creators of this new game had received venture capital funding and were going to turn it into a business. I met the founders and was happy for them. Then I woke up.

Investments that don’t work haunt me. It isn’t the losing money part. I have learned to live with that. It comes with the territory in VC. It’s the losing part that haunts me. The what could have been part. The “if only we had done it differently” part.

Good ideas will eventually be executed successfully. And investments that don’t work are often failures of execution. So it makes sense that someone could come along and make your idea work after you failed with it. It happens regularly in the startup world. And it can be painful to watch.

I’ve gone through a few periods of burnout in my career and it was usually brought on by a string of painful failures. I’ve watched others navigate that similarly. If you are heavily invested in something that doesn’t work, it hurts. And the more the investment is of yourself, your time, your enthusiasm, the worse it is.

I’ve gotten out of these periods of burnout by turning my attention to something else. Crypto was helpful for me back in 2013 and 2014 when I was going through one of those periods. It was something new that I could throw myself at, that was different, and that was working.

It’s that old adage about getting back on the horse that tossed you. I am not a horse rider, but I get the adage and agree with it. The best salve for failure is success. And you have to keep going to get there.

#entrepreneurship#VC & Technology

Funding Friday: Ghost Pacer

As is my weekly routine, I went onto Kickstarter and backed a bunch of projects this morning. One of them was Ghost Pacer, a holographic running partner.

Ghost Pacer was created by AbdurRahman Bhatti, an “All-state cross country runner, Princeton-bound engineer, and an avid tinkerer and Tetris player.” I guess he made this for himself and is now bringing it to market.

I really like it when people are inspired to make something for themselves and then they make it for everyone. If you want to back Ghost Pacer, you can do so here.


Quizlet’s State of Remote Learning Report 2020

Our portfolio company Quizlet put out a “State of Remote Learning Report” this week based on what they are seeing across their global learning platform during the pandemic. Quizlet wrote a blog post about it as well.

There are some very interesting data points in the report:

Quizlet explains this chart in their report this way:

Although no country was prepared for the quick pivot to remote learning, most were able to not only return to their pre-COVID-19 online study levels, but actually became more engaged than before. In fact, across Quizlet’s top 50 markets, we saw a 200 to 400percent increase in new students and teachers signing up to use the platform as schools moved to distance learning models. This was especially true in countries, such as Singapore, where the national government mandated classes to resume and provided guidance on the structure and tools to use in a remote setting. The U.S. however, was far less prepared than many other countries to pivot and engage their students online through the rest of the school year. As shelter in place orders came into effect, U.S. high school student visits dropped, and even as students tried to finishout the school year and regained some of their study habits back, the U.S. did not return to normal study engagement levels.

So the US has not reacted to the shift to online learning nearly as successfully as many other countries around the world.

It also seems that subjects like math tend to work better in an online environment.

These are just two of the interesting data points in the report. The entire report is worth a read and it is only ten pages. You can read it here.

#hacking education

Subscription Agreements

I just finished completing a thirty page form for an investment my wife and I are making in a limited partnership. This form is called a subscription agreement. I wrote about the frustration of having to complete this identical form again and again six and a half years ago here on AVC.

One great thing has happened on this issue in those six and a half years. Many/most subscription agreements are now sent digitally via Docusign or Adobe. That’s great. It is certainly a bit easier to complete them online and once you have done that, there is no need to scan and email.

But I remain confounded by the fact that we complete the exact same form time and time again, answering the exact same questions. One would expect that there would be registries/registrars that would onboard an entity (a person, an investment fund, etc) and then when that entity planed to subscribe to an investment, it would just authenticate with the registry and that would be that.

That’s what I was hoping we would see emerge when I wrote that blog post six and a half years ago and we still have not seen it happen. That is kind of amazing to me given how much innovation we have seen in and around financial and investing services in the last decade.

#hacking finance

Nurx: Reimagining Healthcare

I’ve written a bit about our portfolio company Nurx since we made the investment back in 2016. Nurx is a great example of how technology is helping to reshape how healthcare is delivered.

With the Nurx mobile app, women (and men too) can find the prescription or home diagnostic test they need, connect to a doctor who can review the request and write the prescription, and get the medication or test shipped to them at home. No stigma, no wait, no travel.

What is amazing to see is the scale with which people are opting to access their healthcare this way. Nurx and their doctors are currently providing healthcare this way to over 300,000 patients a month. That turns out to be over $150mm a year of healthcare being provided by a mobile app and a network of doctors. I suspect these numbers are only the tip of the iceberg in terms of how many people will opt into this sort of relationship for their regular healthcare needs.

The Covid pandemic has certainly been a boost to all forms of telehealth and Nurx is no exception. They have seen a 75% increase in new patient requests this year. But like many things that got a boost in this pandemic, I believe many patients who adopted this approach to everyday healthcare needs will not go back to the old way when the pandemic ends. We are witnessing a sea change in the way we want to access healthcare in this moment.

Nurx accepts insurance and also offers affordable options for those who don’t have insurance. That is a reflection of Nurx’s mission to expand access and improve the quality of care while decreasing cost to the patient. Technology makes all of this possible. At USV we believe that technology can expand access and reduce the cost of healthcare at the same time and we have been investing in that theme for the last six or seven years. Nurx is a great example of our thesis in healthcare.

#hacking healthcare#mobile

Financing Document Forms

Many founders want to do SAFE note financings for their early rounds to save time and money.

My response to that is “let’s do a priced round, we can use a standard financing form we both like, we won’t use a lawyer on our side, and we can close in a week.”

The key to being able to do that is the availability of standard financing forms. Many venture law firms and also the NVCA have published standard forms on the web.

Here are Cooley’s forms.

Here are Orrick’s forms.

Here are the Series Seed forms created by Fenwick.

Here are the NVCA forms.

Here is Gunderson’s document library.

I am not suggesting the founder go without a lawyer. I am suggesting that the founder and their lawyer pick a “standard form” to use to do the equity round, send it to us for our review, and if we are comfortable with it (they are all pretty much the same), then we will agree to sign it without negotiation and close within a week.

Typically the only thing we all have to agree on is what the cap table will look like before and after the financing so that the correct numbers are put into the documents. Everything else is pretty standard anyway.

There is this narrative that equity rounds are expensive and take a long time and that SAFE notes are quick and inexpensive. That is not right. We can do priced rounds as quickly and inexpensively as SAFE notes. And we do that regularly.

#entrepreneurship#VC & Technology

Funding Friday: Jelly2

I’ve written about the need for smaller form factor smartphones and know a bunch of people who are frustrated by the lack of choice in small form factor smartphones.

So I was interested to see this Kickstarter project to bring to market a 3″ Android smartphone that sells for sub $200.

Not everyone wants or needs a credit card sized smartphone, but those that do benefit from Android being open and platforms like Kickstarter that make niche products viable for creators.


NBA Top Shot

One of the questions I hear on crypto is “what can I do with it besides trade it?” And that’s a good question because truth be told, there have not been great use cases for crypto other than storing value, sending value, and speculating.

But that is changing, as I mentioned in this blog post last week.

One thing you can do with crypto is make digital assets scarce. Bitcoin is scarce. There will be only 21mm Bitcoins. And Bitcoin is a digital asset.

So using the same technology, you can make any digital asset scarce.

And that’s a big deal. Ever since media went digital (mp3s, jpegs, movs, etc), media creators have been trying to figure out how to put the genie back in the bottle and largely failing. But if you create a crypto-asset, you can make it scarce.

Our portfolio company Dapper Labs has been working with the NBA and the NBA Players Association over the last year to create digital trading cards that are scarce. These digital playing cards are being made available via a game called NBA Top Shot. NBA Top Shot is invite only right now but if you read on, you will be given an opportunity to get an invite.

I’ve been playing NBA Top Shot for about a month now. I have bought something like 5 or 6 “packs” which contain a bunch of cards. When you buy a pack, you don’t know what cards you will get. Opening them is a lot of fun. Players are posting their pack openings on YouTube. Here is one of those videos:

Here is my collection of cards (sorry for the messed up formatting, I had to shrink my screen to get them all):

As you can see, I have put two of my cards up for sale in the NBA Top Shot marketplace. Like a good Knicks fan, I have to trade KP away. I’m only asking $25 for that card.

There is a lot more coming in this game, but for now the game play is buying, opening, collecting, and trading. And it is a lot of fun.

If you want to check it out, here’s a typeform where you can enter your email address and answer one quick question and then you will get an invite. I encourage you to buy my Joe Harris and KP cards so I can turn around and buy RJ Barrett and Julius Randle in the marketplace.

I encourage everyone to check out NBA Top Shot. For one, it is a lot of fun. And it also reveals something important about crypto and how it can and will change videogames, collectibles, and other sectors by making digital/virtual goods scarce and collectible.


Independent Director Compensation

I got this question yesterday and answered via email and thought I’d share that discussion with all of you:

I enjoyed your article on Board Diversity ( ) and am planning to implement it at my company. I was hoping to get some guidance on the following:

* How would you define the role of the independent director / what is their job? 

* How would you compensate them for this job? 

I believe the role of the independent directors is to represent “the Company” in all board discussions. Founders and investors can and do think about what is best for the Company, but they also think about what is best for them. An independent director can and should represent the Company in Board discussions. Also, an independent director should have experience operating a business and should actively share that experience with the leadership team.

For compensation, I like the use an annual amount of $100,000. That is substantially less than public company directors make (which is more like $200,000 per year), but being a public company director is more time consuming and exposes a director to more liability. So I feel like $100,000 a year is reasonable compensation for a private company director. The spread between private company board compensation and public company board compensation narrows as a Company gets closer to being public.

Private company directors are usually compensated in stock, not cash.

I like to use the following approach for stock based compensation:

  • For companies valued below $40mm enterprise value, pay an independent director 0.25% of the Company per year served on the Board.
  • For companies valued above $40mm of enterprise value, pay an independent director a percentage of the Company per year served equal to ($100k/enterprise valuation). For example, if your Company is worth $100mm, then you would pay 0.1% per year served ($100k/$100mm).
  • It is typical to make a “front-loaded” grant of four years of value and vest it over four years. So in this second example, where the Company is worth $100mm, the independent director would be granted an option for 0.4% of the Company, worth $400k, and vest that over four years.
  • However, for very early stage companies where the annual grants are quite large (0.25% per year), it is more common to make those grants annually so that the dilution from these grants comes down as the Company’s value increases. That said, front-loaded four-year grants are made for directors of early-stage companies as well.

As I said in the blog post on Board Diversity linked to above, I believe getting independent directors on your board from the very start is a good move. It will make your Board meetings better and it will make your Company better. And make sure to strongly consider diverse candidates when you add independent directors to your Board.


Instant Covid Tests

We are now approaching five months into the Covid pandemic in the US. The world is more like six or seven months in. And while we wait for vaccines and/or therapeutics to end it, we are left with social distancing, mask wearing, testing, and tracing. These tools can and do work well if used rigorously and ubiquitously.

As we prepare to return to NYC in the fall, I am curious about the state of small and portable diagnostic technologies that can deliver an accurate and “real time” result cost effectively. I am thinking of something like a pregnancy test.

There are many things that would benefit from such tests. Schools could be more agressive about re-opening if everyone (teachers and students and staff) could be tested every morning on the way in the door. Offices could re-open too. So could stores and other local businesses.

And it would be easier to go see friends and family if you arrive at their front door with a test in hand and get a negative result before walking in the door.

I know that there are a number of companies working on such tests. What I don’t know is the status of these efforts, how soon they can come to market, and what they will cost. The less expensive the better obviously.

If you know anything about these technologies, please hit the “Discuss On Twitter” button below and share it with all of us. If you want to see what has been shared, hit the “View Discussions” button. If you are reading via email, go here to see these buttons and hit them.

#Current Affairs