Posts from September 2020

We have been back in NYC for about a week after being away for the entire pandemic. We were in LA when the pandemic hit and then spent the summer on the east end of Long Island.

Like everyone, we have read the horror stories of NYC being a wasteland of homelessness, crime, shuttered storefronts, filthy streets, and more. These stories occupy the front page of the NY Post every day and cannot be avoided.

While we have not ventured into every borough and neighborhood, we have been in downtown Manhattan and North Brooklyn, and what we have found is almost the exact opposite of what is being reported.

New Yorkers are out and about, wearing masks, keeping their distance, and enjoying our city very much. Fall is the best season in NYC and New Yorkers are taking advantage of it. My daughter and I biked in Prospect Park yesterday like we do most Sunday mornings and it felt as busy as any Sunday morning in my memory.

The Gotham Gal and I have been going out to dinner at our favorite restaurants in lower manhattan, sitting outside, and enjoying the experience. The walks to and from dinner through lower manhattan are amazing, the streets are bustling and NYC feels very much alive.

It is true that the streets are filthier. It reminds me of NYC in the 80s and 90s when we first fell in love with this place. It is also true that many storefronts are empty, a continuation of something that has been going on in NYC for the last decade and has been accelerated by the pandemic.

I am sure there are parts of the city that are not doing so well. I’ve heard that midtown is empty and facing challenges. I know that the neighborhood around the USV office in Flatiron is not as vibrant as it usually is. And I am sure that there are challenges in the neediest neighborhoods where the pandemic hit hardest and the economy is the most challenging. I am not saying that NYC is doing great.

What I am saying is the demise of NYC seems to have been greatly exaggerated by the media and others. The NYC that we are experiencing is showing its resilience and makes me very confident that it will once again get back up from the punch it just took and start swinging again.

The author Cory Doctorow is out with his third book in the Little Brother series. called Attack Surface, and is crowdfunding the audio book to keep it out of the Amazon/Audible ecosystem. I backed the project this week.

I’ve written about the power of having a really great setup for doing long video meetings. I call it my “zoom room” because it rhymes. I use Google Meet and a bunch of other video services regularly in my Zoom Room so it’s not so much about the video service I use.

One of the challenges of using a computer (in my case a Mac Mini) from a couch vs a desk is the keyboard and pointing device setup.

My partner Nick suggested this trick and I use it in the office and at home. I buy an Apple Magic Keyboard and an Apple Magic Trackpad and then I snap them together with this piece of plastic called the MagicBridge.

It looks like this:

I find this works really well and if you are putting together a similar setup, I highly recommend it.

I have had the great pleasure of working with Matt Blumberg and the senior leadership team of USV’s former portfolio company Return Path (which was sold in 2019) for much of the last twenty years. Matt and many members of his leadership team got the band back together early this year and started a new company called Bolster in partnership with Silicon Valley Bank and the early-stage VC firm High Alpha. A few months later, USV joined that investor group along with our friends at Costanoa.

Matt is a great CEO and has even written a book about leading and growing a company called Startup CEO. Their new company Bolster is all about scaling and building a great management team for your startup. The Bolster team believes that scaling a high growth company means that you need to adapt, grow, and supplement your management team continuously along the way. And a big part of doing that is accessing “fractional talent” which means people that don’t work for your company full-time and permanently. All of this is outlined in the Bolster Founding Manifesto which explains why they started this company.

Fractional talent can be a fantastic independent board member, fractional talent can be a CFO mentor for your VP Finance that you want to grow into a great CFO, fractional talent can be a VP Product that can cover for your VP Product while they are on family leave, fractional talent can be a part time Chief Revenue Officer that you want to “date before you get married”, fractional talent can be a part time Head Of Insights that will allow you to understand if you need a full-time Head Of Insights. I could go on and on because there is no end in sight for the various ways a CEO can leverage fractional talent to make their company and their management team better.

Bolster came out of stealth and into a beta period today and is opening up its marketplace to companies that want to access fractional talent and to executives who want to work at high growth companies in interim, fractional, advisory, or board roles. Bolster also will allow venture capital firms and startup investors to participate in its platform as super users. If you are any of the above and want to engage with the Bolster network, you can sign up here. The full marketplace will launch soon.

We have already introduced Bolster to a bunch of USV portfolio companies and the enthusiasm for this model is really high. I love the idea of USV investing in a company that can help our portfolio companies do things better. We have done that before with Twilio, MongoDB, Carta, Sift, and a host of other companies. It’s a double whammy and it pays off in so many ways.

Something that bugs me about our tax code in the US is that we tax labor more than capital.

If you make $100,000 of gains on your purchase of Tesla stock you pay 15% of those gains to the IRS.

But if, instead, you earned that $100k of income as a school teacher, you would pay 22-24% of that income to the IRS (depending on if you are married and filing jointly or single).

This tax policy values capital over labor and seems wrong to me.

I think it would be better policy to lower the income tax rate and raise the capital gains rate to something like 20% so that all income is taxed equally no matter how it is achieved and so they the net impact on revenues is neutral.

It’s fine to have a federal holiday called Labor Day to recognize the contributions from working people but an even more powerful gesture would be to stop taxing their work more than your stock market gains.

The comic book community on Kickstarter is so great. This project that I backed today is a great example of the creativity that they express in every project they do.

As many of you know, Special Purpose Acquisition Companies (SPACs) are all the rage on wall street right now. SPACs are publicly traded “shell companies” that raise capital in an IPO process and then use that capital to merge with a privately held business.

SPACs have been around for at least thirty years and I have always thought of them as a “liquidity path of last resort” for our portfolio companies. The thinking was that if you could not go public in a traditional IPO, and if you could not find a traditional M&A buyer, then you would consider a SPAC.

But my thinking on SPACs has changed in this latest SPAC frenzy. I now see them as part of the continued “assault” on the traditional IPO process and largely a good thing.

For most of my career as a VC, the IPO has been the holy grail. Our very best portfolio companies would be offered an opportunity to go public by the top investment banks on wall street. And I have been involved in several dozen IPOs in my career.

The terms of an IPO are fairly locked down and are largely a great business for the top wall street banks and their buy side clients. I don’t take as much offense to this situation as others in the VC business have. I have viewed it as a mutually beneficial relationship between the top banks, VC firms, and the founders and CEOs who lead our portfolio companies.

However, in the last few years, competition has emerged for IPOs. On the left has come direct listings. And on the right, we have SPACs. Now founders and CEOs and Boards have a plethora of options for moving from a privately held business to a publicly held business.

Competition and choice is good. That is deeply held belief of mine across all aspects of life and business. And so the deluge of SPAC money coming to market right now is a good thing for the founders and CEOs who lead our portfolio companies. It offers them a wider array of options for going public than they had before. I am certain that will be a good thing for the tech sector and the VC sector.

All of that said, I do think SPACs have positives and negatives relative to IPOs and Direct Listings. What is right for your company will depend on the circumstances you find yourself in, including whether or not you need to raise primary capital, whether or not you need a lot of secondary liquidity, whether or not your “story” will be exciting to public market investors right out of the gate, how quickly you need to transact, and a host of other factors.

It is also the case that a number of VC firms and growth investors are raising their own SPACs. That too reflects the changing dynamics of the investment business and how fund managers like USV access capital and deploy it. I have always been a traditionalist when it comes to raising capital and deploying it. I like the small VC firm model, a close and long standing relationship with our investors (called LPs), and the rhythm of raising funds and sending the money back again and again. But I appreciate that others don’t see things that way and they may be on to something important with the VC SPAC model. We will see. I like that people are experimenting with the model. It will be revealing to all of us in time.

My colleague Hanel wrote an important post on USV.com yesterday. It looks at mental healthcare solutions and compares them to what has happened in online learning in the last decade. USV invests in both wellness and learning and we believe that the way learning has evolved can teach us about where healthcare can go. Hanel’s post is in keeping with those beliefs.

I particularly like this chart which lays out how mental health solutions have evolved over the last decade and where they may go in the next one:

If you want to understand that chart better and understand our thinking on where mental healthcare solutions can go, please read Hanel’s post.