Posts from 2021

As is my custom here at AVC, I like to end the year looking back and start the year looking forward.

This post will be the look back and I started by revisiting my look forward into 2021 that I wrote on New Year’s Day 2021.

In my typical optimist fashion, I was dead wrong about how quickly the pandemic would fizzle out. I predicted that vaccines plus immunity from those who had been infected would end the pandemic by mid-year 2021. That was obviously totally wrong and I am sitting here isolating with my own Covid case (seven days in now). I can’t imagine a more appropriate “punishment” for getting that one wrong.

I got the rest mostly right and when I look back at 2021, what I see is a world that is changing before our very eyes; becoming more digital (leading to metaverse fever in tech), less tethered to a job and place to work (and live because of work), warmer, more prone to natural disasters, and tribalizing along different dimensions than what has divided us in the past.

In truth 2021 was a deeply troubling year and no wonder that mental health issues abound among all of us, but particularly our young. Nothing seems right anymore. We must face that and then fix it.

Of course, 2021 was a great year for the financial markets, both stocks and blockchain assets. Even with a big year-end selloff, which I believe was mostly tax-driven (we will see soon if I am right about that), investors who owned tech stocks and blockchain assets saw huge gains in 2021. USV was no different. We had a banner year.

But that also means that it is on us who have benefitted the most to work harder and invest to address some of these troubling issues. We are doing that with our first climate fund, which we have been investing aggressively and we hope to have a second one to invest before the end of 2022. We are seeking to both invest in technologies/companies that can mitigate the climate crisis and that can help us adapt to the changes that are permanent and we must accept that many will be.

I want to return to the pandemic before I wrap this year-end post. Sitting here with a mild case but isolating so I don’t pass it on brings home for me that our society has really struggled to find the right balance between what is right for the individual and what is right for society during this pandemic. We can’t agree on anything. Vaccines, masks, lockdowns, schools, offices, etc. Those who have a high tolerance for risk believe that we have gone way overboard in trying to manage this pandemic when we never could. Those who believe in government, public health, etc, believe that those with a high tolerance for risk are putting all of us at risk. And I think the truth lies somewhere in between. This pandemic is a metaphor for the broader inability of society to find a way to move forward together.

Beyond climate or covid, it is this plague of dissension, doubt, fear, disrust, hate, and worse that is our biggest challenge and one that is very much raging across our world right now. That’s what 2021 brought home for me.

Over the last month, there has been a ton of debate and conversation about web2 vs web3 with many leading voices raising doubts about web3. Debate and doubt are healthy. And web3 enthusiasts, particularly on Twitter, remind me of missionaries trying to recruit the unwashed to their belief system. Frankly, it is all too much for me.

However, the debate is important, the pushback is healthy, and ultimately web3 will have to deliver on its promise which means teams building things that provide new unique value to society. If that doesn’t happen, then web3 will turn out to be the snake oil that some are suggesting it is. I am confident that won’t happen, but it is important to understand that the proof is in the pudding and talk is cheap.

With that backdrop, I want to point everyone to a post my partner Albert wrote yesterday that explains why we at USV believe that web3 will allow teams to build new things that provide unique value to society.

It all comes down to the database that sits behind an application. If that database is controlled by a single entity (think company, think big tech), then enormous market power accrues to the owner/administrator of that database.

If, on the other hand, the database is an open public database that is not controlled and administered by a single company, but instead is a truly open system available to all, then that kind of market power cannot be built up around a data asset. As Albert says in his post:

It is difficult to overstate how big an innovation this is. We went from not being able to do something at all to having a first working version. Again to be clear, I am not saying this will solve all problems. Of course it won’t. And it will even create new problems of its own. Still, permissionless data was a crucial missing piece – its absence resulted in a vast power concentration. As such Web3 can, if properly developed and with the right kind of regulation, provide a meaningful shift in power back to individuals and communities.

You can already see this effect at work in the most developed areas of web3, like decentralized finance (aka DeFi) where literally hundreds of financial applications have been built on top of Ethereum that all share the same database and users can move from application to application, keeping their data (and their login credentials stored in their wallet) as they go.

But until teams build the same experiences for a wide swath of consumer and business applications, we will continue to have this debate. As we should. The good news is there are literally tens of thousands of teams building new things on a web3 stack now. Some of the best entrepreneurs and developers have moved over. The tooling is getting better. It reminds me of the early days of web2 in 2001/2002/2003, when we started USV. That was also a time of great cynicism. We almost did not get our first fund raised. Nobody was buying the story we were telling. But of course, that story turned out to be true. And I am confident this one will too.

I saw two charts last week that showed the same thing:

This chart was in the deck I shared here last week called Consumer Trends 2022. It shows that after a big lift in 2020 and a bit of a lull in 2021, the e-commerce trendline is back to its old baseline.

This is our portfolio company DuckDuckGo‘s search traffic curve, available here, on a ten-day moving average. You can see after a huge move up in late 2020, it had a pullback in early 2021 and has now gotten back on its normal growth curve.

Both of these are examples of what is called “the pull forward”, an event or a series of events that draws a large and unsustainable boost of new users. It is often followed by a lull where growth is flat or even down for a while, but then the normal growth pattern resumes.

We have seen curves like this throughout our portfolio this year as the pandemic and other factors (in DuckDuckGo’s case the presidential election also played a big part) have whipsawed growth curves. It feels great when things are growing faster than ever. It feels bad when things are flat or down.

My suspicion is a lot of these odd-looking curves are going to resume their normal shapes in 2022 when things gradually start to normalize.

The last two years have been a challenge to manage through. There have been endless curveballs coming our way. Boom and bust. It is important to see things for what they are and not get too up or down in times like this.

My friends at The New Consumer and Coefficient Capital have published their annual consumer survey. There are many interesting slides in it, none more than this one.

I guess that explains this chart:

But back to the consumer survey, there are lots of interesting slides in it and you can get it here by creating a free account to The New Consumer. I strongly recommend doing that and enjoying your coffee this morning mulling over the report.

After skipping a year last year, USV held its annual team party last night.

It has felt great getting back to getting together with friends, family, and co-workers this holiday season. It has meant a lot of rapid testing for me, all negative thankfully, including one this morning.

We also had every single team member in the USV office yesterday, which was a first since we fully re-opened in March of this year.

And for our weekly team meeting yesterday, we had everyone around the conference room table. Nobody on Zoom. I can’t remember the last time that was the case.

I’ve been doing in-person board dinners and in-person board meetings a lot lately as well.

While Zoom has certainly transformed the way we work and I don’t expect that we will ever go back to everything in-person, the last few months of getting back together in groups has reminded me how important the human connection is to life, love, and work.

I met with a founder yesterday and he told me that his executive team gets together in person once a quarter. I encouraged him to get the exec team together in person at least once a month, if not more frequently. It is hard to be a tight team, that gives and takes, debates and commits, and moves fast in sync without the in-person connection.

We have a great team at USV and we did great working remotely during the pandemic, but being back in the office since March, working together, and celebrating together, has made things so much better. I am very appreciative of that.

The second week of December every year is Computer Science Education Week. It is a week to celebrate efforts to get computer science education into the K12 system around the world, and it is also a week in which schools do events, like The Hour of Code, to encourage students and teachers to get excited about learning computer science.

Most AVC readers know that my passion project for the last decade has been getting computer science education broadly available in the NYC public school system. I have also been involved in efforts to get computer science education adopted around the US and around the world. But my primary focus has been NYC.

This Computer Science Education Week, I celebrated by meeting with a very large employer in NYC and talking about getting that company’s employees deeply engaged with computer science education in the NYC schools and supporting the CS4All Capital Campaign, which I Chair. CS4All is NYC’s ten-year effort to get computer science classes into every school building in NYC by training 5,000 NYC public school teachers to deliver computer science classes. The CS4All Capital Campaign is a $40mm fundraising effort to support CS4All. We are now within spitting distance of the $40mm goal as we are in our seventh year of the campaign and program. If you know any individuals or non-profits or companies that would like to support the capital campaign, reply to this email or hit me up on Twitter and I would love to talk to them.

I also participated in an event at Hunter College last night to discuss their effort to provide computer science certification courses to NYC teachers. This is a program that has run for two years now, led by my friend Mike Zamansky, who I like to call “the godfather of CS education in NYC.” The Hunter computer science certification program is supported by our public charity Gotham Gives and Google. We provide scholarships to high-performing teachers who want to get NYS certified as computer science teachers. If you know individuals, non-profits, or companies that would like to join Gotham Gives and Google supporting this effort, reply to this email or hit me up on Twitter.

My one regret about this computer science education week is that I did not make it into a school building. This is the second year in a row that has been the case and I miss seeing teachers and students working together on projects and problems. My best moments over the years in this work have always been in the schools.

This photo of incoming mayor Eric Adams and former Chancellor Richard Carranza was taken by me at PS24 in Sunset Park Brooklyn during CS Education Week in 2018. I wrote about that visit here.

Computer science is the first new subject to be taught in K12 in 50+ years. Getting it broadly available in schools is hard work and requires commitment and persistence and a massive investment of time and money. But it is all worth it. Seeing the kids get excited about coding brings a big smile to my face every time.

On Friday, the US jobs report produced a confusing result. From Bloomberg:

The jobs report is composed of two surveys — one of employers and the other of households. The employer survey, which determines the payroll and wage figures, showed hiring slowed across industries, including declines at automakers and retail outlets. The household survey, which determines the jobless and participation rates, showed employment surged by 1.14 million people and many came off the sidelines.

So employers are reporting sluggish job growth (and an inability to hire in some sectors) and households are reporting a huge surge in newly employed.

What is going on?

I don’t know but I have a theory.

I believe more people are going to work for themselves and/or going into small businesses that are not part of the employer survey.

Here is US Census data on new business formation:

What was an upward trend for the last decade has become an explosion during the pandemic.

Maybe what we are witnessing is not the Great Resignation but the Great Formation.

I backed this project the minute I saw it this morning. The idea of a wall-mounted device like a Nest Thermostat that controls/dims lights and lets you turn up or down your music seems awesome to me. The Nest interface is simple, intuitive, and works wonderfully.

Also, the video is fantastic. More like a movie trailer than a promotional video. It’s embedded below on the blog but if you are reading this on email, click here and watch it.

Like many did, we spent much of this weekend watching Peter Jackson’s wonderful documentary of the Beatles making Let It Be, titled Get Back.

I enjoyed so much of the film, particularly the music, but the big thing I took away is the power of real partnerships. While this was the Beatles last recording session, what you see in the film are four partners working together creatively and wonderfully. I wasn’t really expecting that and I found it so enjoyable to watch.

I have worked in partnerships for most of my adult life, since I was in my mid 20s. I have spent 35 years in three partnerships, all of them “equal partnerships”, the kind where everyone brings their own ideas, they are worked on together, and there is mutual respect and admiration.

Partnerships are not easy. Everyone has to dial back their ego a bit and let others have their say on things. But what you get when you do that is an environment where everyone gets better than they would be on their own. And you can see that in the Beatles work. All of the four Beatles went on to have solo careers, but none of them produced a sustained level of work that the four of them were able to make together.

Watching Paul, John, George, and Ringo work together for a month to make an incredible record was a reminder that when we sacrifice a little bit of our self and commit to a team dynamic, wonderful things can and do result.