Posts from 2021


Yesterday’s post has this line in it:

I suspect all buy maybe two of those eleven funds have outperformed the public markets

As you can see, there is a typo there. “buy” should be “but”

A number of readers let me know about the typo, which I very much appreciate.

But for some reason, I am not all that motivated to change it.

I make typos all of the time in my emails and texts and other informal communication.

And I am increasingly seeing AVC as another form of informal communication.

AVC is me. I am human. Humans are imperfect. So AVC should be imperfect.

So there it is. I am letting it stand.


Half Of All VCs Beat The Stock Market

There has been this narrative about investing in VC funds that you have to get into the top quartile (25%) or possibly the top decile (10%) in order to generate good returns. I have heard that for as long as I have been in VC and probably have written it here a few times.

Well, it turns out that is not right. Half of all venture funds outperform the stock market which is the benchmark most institutions measure VC funds against.

My friend Dan Malven wrote about this on his blog yesterday:

working paper published by the National Bureau of Economic Research (NBER) in November 2020 contradicts that notion, showing that half of all VC fund managers outperform the public markets, and are therefore worthy of institutional investment.

This study was based on a large sample of VC fund level returns from 2009 to 2017 and does not include the last few years which have been particularly strong for the VC sector.

Manager selection remains an important part of VC investing because the lower half of VC funds do not outperform the stock market. An interesting data point from this study is the VC “fund of funds” mostly outperform the stock market so a portfolio of VC funds will generally give you enough diversification that you can meet your performance objectives.

The best way to know what managers to pick is to be in the startup business in some way. All you need to do is watch how people behave to know who is good and who is not. The Gotham Gal and I have been investing in the VC funds of managers we know well and have worked with closely on boards of startups for about fifteen years now.

These are the gross return multiples of all of the funds that are “mature” meaning the returns are pretty clear now:

MultipleYear Of Initial Investment

I am not going to do the work of calculating performance against the stock market for these funds, but I suspect all buy maybe two of those eleven funds have outperformed the public markets.

As you can see, investing in VC funds can be very profitable. And I suspect it is getting more profitable, not less, as the capital markets and M&A markets are providing robust liquidity options for managers.

Sadly the VC market remains largely out of reach of many “main street” investors as the SEC limits these fund investments to qualified and accredited investors. That has never made sense to me and is yet another example of the “well meaning” rules resulting in the wealthy getting wealthier and everyone else missing out.

#VC & Technology

The New Builders

My friend Seth Levine and Elizabeth MacBride have written an important book about the changing face of entrepreneurship in the US. It is called The New Builders and it came out this week. You can purchase it at all the places listed here.

This bit from the book’s Amazon page explains The New Builders’ message:

The dominant image of an entrepreneur as a young white man starting a tech business on the coasts isn’t correct at all. Today’s American entrepreneurs, the people who drive critical parts of our economy, are more likely to be female and non-white. In fact, the number of women-owned businesses has increased 31 times between 1972 and 2018 according to the Kauffman Foundation (in 1972, women-owned businesses accounted for just 4.6% of all firms; in 2018 that figure was 40%). The fastest-growing group of female entrepreneurs are women of color, who are responsible for 64% of new women-owned businesses being created.

In a few years, we believe women will make up more than half of the entrepreneurs in America.

Seth sent me a manuscript about six months ago and I read with interest the stories of these women of color starting businesses of all kinds. This is not the entrepreneurship that I tend to write about here at AVC, but in many ways it is more important, more courageous, and more powerful.

If you want to be inspired and encouraged, pick up The New Builders give it a read.


The Demand Side Of A Crypto-Network

I was purchasing some domains with Ethereum yesterday and ran out of funds in my wallet and went to Coinbase to buy some more ETH. The price was approaching $3000 and I thought to myself, “the demand side of this network is exploding.”

The way crypto-networks work is that the supply side gets built first with incentives to mine, validate, stake, etc. This has been going on for over a decade now. People started mining Bitcoin twelve years ago.

The demand side of most crypto-networks has been dominated by buying, holding, and speculating for those twelve years. There is nothing wrong with that. Buying, holding, and speculating has provided the funding to pay for building out the supply side of these networks.

But I think that is changing now, certainly with Ethereum and a number of other crypto-networks. You need ETH to do things on the Ethereum network. And people are doing things on it; buying domains, peer-to-peer lending, buying art, racing horses, etc.

The more people use ETH, the more the demand side grows, and the value of Ethereum goes up.

Of course, we could be witnessing another speculative wave, but it feels different to me this time. I think the demand side is taking off now.

Disclosure: Long ETH personally and professionally


Funding Friday: Beach Lovers: A NYC Summer Love Story

One of the many things I love about Kickstarter is when a friend backs a project, I am alerted. My friend Kirk went on a binge yesterday and backed a half dozen photo book projects and I followed him on that binge.

I thought I’d blog about one of the projects we backed today.

NYC is many things, and one of them is a beach town. In the summer, the beaches of south Brooklyn and Queens (Rockaway) fill up with NYers of all ages and ethnicities. It is like the subway, a total melting pot.

This photo book project celebrates those beaches and the couples who fill them up in the summer months.

Email readers can see the video here.


Nuclear Energy

When I was in my early 20s, I had a conversation with my dad. I told him I was against nuclear power because it was dangerous and because it created radioactive waste that we had no idea how to safely dispose of. He replied that there certainly were problems with nuclear energy but that they paled in comparison to those of burning fossil fuels. This was before greenhouse gases and climate change were front and center in my mind and the minds of most people. I was not convinced by my dad’s argument.

Forty years later, my dad is no longer with us, but his words ring loudly in my ears. I have come full circle on nuclear energy and now see it as way more attractive than most other forms of generating energy.

There are two ways of making energy with atoms. We can split atoms to generate energy and that is called Fission. Or we can combine atoms to generate energy and that is called Fusion.

We have understood how to make nuclear reactors that generate energy with fission for 80 years now. But these fission reactors have two unsolved issues. In rare situations they can get out of control and melt down. We have seen that at Three Mile Island, Chernobyl, Fukushima, and a few others. While rare, these have been scary events that have shaken confidence in the safety of nuclear reactors in the public eye. Fission reactors also create radioactive waste that we have not yet found a good way to dispose of and that nuclear waste has slowly been building up around the world.

We don’t yet understand how to make nuclear reactors that generate energy with fusion in a sustainable way, although there has been a lot of exciting technological progress on fusion over the last few decades. I believe fusion is not an if, but a when.

As we electrify more and more of our energy use, we will need ever more electricity and most students of energy consumption do not believe we can fully electrify our lives with renewable energy (solar, wind, hydro, etc). I’ve heard people say there is a 30-40% gap between what we need and what we can generate with renewables.

At this time, nuclear is the best way to close that gap.

At USV, we believe that fixing fission and making fusion work are technological and engineering problems that can be solved with sufficient creativity and capital.

In fission, that means figuring out how to make reactors that are not prone to catastrophic meltdown and figuring out how to use/consume the radioactive waste that fission generates. There are a number of promising technologies that are attempting to do these things.

In fusion, that means figuring out how to make a reactor that generates more energy than it is given. The progress on that dimension is promising but we are nowhere near where we need to be and more creativity and capital will be needed to solve the fusion puzzle.

Our climate fund is focused on both mitigating the climate crisis and adapting to it. Solving these technological problems with fission and fusion is an important part of mitigating the climate crisis and we are talking to teams working on both approaches.

I am excited to do that and believe my dad would be too.

#climate crisis

Solar For Outdoor Devices

A trend I’ve been watching for a while now is the use of solar for devices that live outside away from electrical outlets.

Last summer, I bought an inexpensive device that keeps snakes away from our yard. It vibrates into the ground like the animals that hunt snakes and scares them away. I don’t really know if it works but we have not seen any snakes since we got it. The device is powered by a small solar device that is on top of it. Installation was basically pushing it into the ground.

This morning on my way back from getting coffee, I passsed this Citibike station.

I have noticed that most (all?) Citibike stations are now powered by solar. I imagine they also have a battery of some sort that stores solar energy for use at night.

Solar is slowly but surely making its way into all of our lives. It is a great way to power homes and offices, cars and buses, and, it turns out, all sorts of devices that live outdoors away from the electrical grid.

#climate crisis

Paternalism In The Office

Jason Fried, CEO of Basecamp, posted a message to his team yesterday in which he outlined a bunch of changes they are making to the way they run the business. Some will be familiar as others have done similar things (no more politics on the company’s communication channels, no more committees, rethinking the review process).

I think it is a good thing to revisit the ways a company does things and make changes when issues arise. And posting these changes publicly so that others can see them and think about them is very helpful. I had chats with a number of portfolio CEOs yesterday about this post. It is making people think. That’s a good thing.

One change that got my attention was this one:

2. No more paternalistic benefits. For years we’ve offered a fitness benefit, a wellness allowance, a farmer’s market share, and continuing education allowances. They felt good at the time, but we’ve had a change of heart. It’s none of our business what you do outside of work, and it’s not Basecamp’s place to encourage certain behaviors — regardless of good intention. By providing funds for certain things, we’re getting too deep into nudging people’s personal, individual choices. So we’ve ended these benefits, and, as compensation, paid every employee the full cash value of the benefits for this year. In addition, we recently introduced a 10% profit sharing plan to provide direct compensation that people can spend on whatever they’d like, privately, without company involvement or judgement.

That does not feel right to me. If you care about the mental and physical well-being of your team, I believe it makes sense to support them by investing in that. Companies can do that tax efficiently and employees cannot. Paying employees more so that they can then make these investments personally sounds rational but I don’t believe it will be as effective as company-funded programs that employees can opt into or not.

It is also the case that companies carry much of the cost of insuring their employees health in the US. While that may not be great health care policy, it is what it is right now. And so companies do have a vested interest in the health of their employees that goes beyond wanting them to be well and feel well.

It may be paternalistic, but I believe that companies can and should invest in the health and wellbeing of their team. I think it makes good business sense to do so.


Sending Crypto To India

I saw this tweet in my feed yesterday and I sent some ETH to India this morning.

Sandeep followed with a bunch more wallet addresses to use if you want to send other crypto assets:

With the pandemic easing in the US, thanks to vaccines, we cannot turn a blind eye to what is happening elsewhere, particularly India.

I appreciate the crypto community, which is global, stepping up to do this and I encourage anyone with some crypto to participate.

And we finally found something useful to do with DOGE coins.

#crowdfunding#crypto#Current Affairs#hacking philanthropy