Posts from 2022

The Case For EVs

The Gotham Gal and I own five EVs and have been driving electric-powered cars since 2014. I don’t drive gas-powered cars and haven’t for a few years now. We have purchased two Chevy Bolts, two Tesla Model Ss, and one Rivian truck.

I love the instant acceleration you get from an EV, I enjoy driving mostly with just one foot due to the fact that EVs accelerate and brake using the accelerator pedal, I like that I can charge my car every night at home (using solar panels on our roofs) and don’t have to go to the gas station anymore, and I like that the maintenance costs and hassle are much lower with an EV. There is certainly an environmental benefit from driving EVs, but in my view, EVs are also better cars (and trucks).

But EVs remain expensive and “risky” for most folks and only 9% of global car sales are electric and that percentage is smaller in the US (more like 5%).

So how do we change that?

With gas prices sky-high, policymakers are looking to do something about the cost of driving. They are talking about short-term solutions like gas tax holidays that will do little to reduce the price of gas. I believe they should spend that money on longer-term solutions that will accelerate the conversion to EVs and reduce our reliance on the fossil fuel industry.

So what would those things be? Here is a list:

1/ A government-backed loan program (like student loans) that makes buying an EV less expensive to the average car and truck purchaser.

2/ An incentive program for merchants (think Starbucks or 7-Eleven, but it could be any merchant) to install and offer fast-charging stations.

3/ Subsidies to build battery manufacturing facilities (80% of EV battery manufacturing is in China).

4/ Policies to produce more cathode materials (which are roughly half of the cost of an EV battery).

Most automobile manufacturers are making EVs now. They understand EVs are the future. But there remain real impediments to consumer adoption of EVs. We need policies that work to reduce those impediments and speed the adoption of EVs and we need them now.

#climate crisis#economics#policy

Staying Positive

The last six months have been a challenging time for tech and tech startups. Macro events have weighed on the sector, valuations have come crashing down, revenue growth has slowed (or stopped), and layoffs are happening across the sector.

Many of the folks I work with are frustrated. The things that were working in their business stopped working and they can’t get it moving again. They are struggling to project the business and plan for the year and next year. They feel terrible about letting so many great people go and blame themselves for it.

It helps to work with many companies in times like this. We see this happening almost everywhere. And so we have some perspective. Yes, it is our collective fault for getting out over our skis during the good times and not seeing tougher times ahead. Yes, we could have and should have been more conservative with our growth plans and hiring. Yes, it is our fault for putting our companies in the position where they have to let go of so many people.

But it is also the case that the number one thing in times like this is staying in the game so you can play another round. You don’t want to go bust right now. So it is time to take your lumps, learn some valuable lessons from them, and move on.

It is also time to stay positive. When you are the leader of a company (or anything else), you have to lead with optimism, enthusiasm, and positive energy. There are people out there declaring tech is dead, web3 is over, and cheering on the fall from grace. It is best to ignore all of that, focus on what you are building, and find some wins for the team, and for yourself.

The great thing about working in tech is that there are always new problems to solve, new markets to create, new products to ship. The macro events don’t change that. So focus yourself and your team on building and shipping those things, get some wins, and move forward with optimism and positive energy. It will be infectious.

#VC & Technology#Web/Tech#Web3

The Partnership

I have worked in three venture capital firms in the thirty-six years I have been doing venture capital investing. They have all been small partnerships, between three and seven investing partners, where there is little to no hierarchy among the partners.

There are many models out there for building and managing investment firms. They vary from a single partner to an organization structure that looks like a Fortune 500 company. There is no best way to structure an investment firm.

But for early-stage investing, I believe that the small flat partnership is the best structure if the goal is to produce high return on capital funds. Here are some reasons why this model is superior for early-stage investing:

  • At the early stage, investors must bet on teams and ideas that have not been proven. The biggest winners almost always come from the investments that are the most controversial and “out there”. A small tight partnership where there is a lot of trust between the partners is a place where you can make a lot of these kinds of investments.
  • Being a lead investor in a company you start working with when it is very young (sub 10 employees) and remain actively involved with until exit can take a decade or more of work. Staying aligned as a partnership on the company and supportive of it is hard to do but incredibly important if you want the best outcome. That is hard, if not impossible if the investing team is large, hierarchical, bureaucratic, and largely disengaged with the company.
  • No single investor has the entire package. Not even the best investors out there. Trust me. I know this. Surrounding top investing talent with other top investors is a magical thing. Some have great deal instincts. Some have great networking skills. Some are great working with founders. Some have great financial minds. Some are great technical minds. Some see new markets before others. If you can put together a team that has all of this, they fill in each other’s gaps and everyone gets better. This describes the team we have at USV right now and it is a joy to work in a team like this.
  • It is very hard to make an investment that will produce over a billion of proceeds. You need to get and keep double digit ownership and the company needs to be worth over $10bn at exit. I’ve made less than five of these in my career, over almost forty years. So if you want to produce a high return on capital fund, you have to raise a lot less than a billion. I think a quarter billion is probably where it starts getting really hard to produce a high return on capital fund. This means you need a small partnership and a small firm.

The key to all of this is partnership. Real partnership. A real partnership is where everyone is equal, not just in terms of economics (which is critical to sustaining this model), but also in terms of influence and stature. This is actually quite rare in the venture capital business. I see it in some other firms. But I don’t see it very frequently. The firms that have this are special places. They are special places to work at. And special partners to take capital from.

#VC & Technology

The Gillibrand Lummis Bill

New York Senator Gillibrand and Wyoming Senator Lummis have teamed up to propose a bi-partisan bill that would shift much of the regulatory oversight of crypto assets from the SEC to the CFTC, acknowledging that these tokens are much more like commodities than securities.

The details of the bill will be made public today and then there will be a lot of feedback from elected officials, regulators, and industry. It is not certain that this bill will become law and if it does, it is not certain that it will look anything like the initial bill.

But even so, I am very encouraged by this development. Crypto tokens are a foundational element of web3, a technology architecture that allows for decentralized applications which lessen the control of big tech monopolies on our lives and our data, and that allows for users to own their data and a share of the networks that the applications are built on. Constraining these user tokens as securities is not only incorrect but also would inhibit much of their utility and therefore the potential for web3 to remake the technology industry as is so desperately needed.

So I applaud the work of Senators Gillibrand and Lummis and their staffs. They are making an important statement with this bill and I believe that this is a big step in the right direction.

#crypto#policy#Politics#Web3

Gotham Gives

Gotham Gives is a public charity that the Gotham Gal and I started one year ago to complement the family foundation that we have been using to make philanthropic gifts for over two decades.

A public charity allows us to raise capital from others in addition to our family’s philanthropic gifts. We use this public charity to put together syndicates of donors and raise more capital for our projects than would be possible on our own. It reminds me very much of the way early-stage venture capital works.

We started raising funds in addition to making gifts over a decade ago when we started our computer science education work in New York City and Gotham Gives takes that approach to philanthropy and allows us to use it in other areas.

This page shows the projects we have supported in our first year and who we have partnered with on them.

This page hosts videos we have recorded with some of the founders and operators of these projects and we plan to produce more videos in the coming months. You can subscribe to our YouTube channel to see more videos as they come out.

You can also follow Gotham Gives on Twitter if you want to follow our activities on social media.

Gotham Gives is run by Jennifer Klopp and we are joined on the board by our long-time friend and philanthropic partner Sarah Holloway. The entire team is shown on this page.

Philanthropy is an incredibly rewarding way to invest in the change you want to see in the world. In our case, that is change we want to see in our home, New York City, and we are committed to investing in programs that leverage community, knowledge, and culture to drive positive change for New York City.

#hacking philanthropy#NYC

How This Ends

Back in February of last year, I wrote a blog post with the same title and said this about the asset price bubble we were living in and investing in over the last few years:

The big question is how does this end?

I believe it ends when the Covid 19 pandemic is over and the global economy recovers. Those two things won’t necessarily happen at the same time. There is a wide range of recovery scenarios and nobody really knows how long it will take the global economy to recover from the pandemic.

But at some point, economies will recover, central banks will tighten the money supply, and interest rates will rise. We may see price inflation of consumer goods and labor too, although that is less clear.

When economies recover and interest rates rise, the air will come out of the asset price bubbles that have built up and the go go markets will hit the brakes.

Well now the markets have hit the brakes and the new question is how that ends.

I have been using the early 80s as a bit of a mental model. The late 70s saw oil prices rise and stagflation emerge and while that is not exactly what has happened with COVID and the war in Ukraine, there are some similarities.

In the early 80s, the G7 economies tightened the money supply, raising interest rates dramatically, in an effort to bring inflation under control. You can see the effect in this image:

The early 80s had a double dip recession (one in 1980 and another one for 18 months in 1981 and 1982). The economy was weak for three years at the start of the decade. But the latter half of the decade was one of the best economies in modern times.

So I suspect we are either in a recession right now or headed to one, brought on by tightening money supply/higher rates that are being used to control inflation. That recession could easily last until the end of 2023. But we don’t really know how long it will take for this cycle to play out.

Markets have already corrected and I think that public tech stocks have already seen most of the damage they are going to see. I don’t know if we have hit bottom but I think we are closer to the bottom than the top now. But that does not mean they will turn around and go right back up.

This is a price chart of the NASDAQ during the early 80s recession and you can see that prices did not start to move up until the second half of 1983, when the recession was starting to end.

So how does this market meltdown that we are now in end?

First, we need to see the economy slow down and inflation slow down. We need to see stocks bottom out and hang out there for a while. And we need to be patient. None of this is going to happen fast.

I would be planning to ride this thing out for at least eighteen months or more.

#Current Affairs#economics#entrepreneurship#stocks#VC & Technology

Funding Friday: The $2.5mm Match

I blogged about the $1k Project For Ukraine a couple of months ago. Since then over 5,000 families in Ukraine have gotten a $1k gift, no strings attached, to help them survive during this crisis. That is $5mm of direct aid to families in Ukraine.

Yesterday, Stewart Butterfield, the founder of Slack, tweeted that he and Jen Rubio will be matching another $2.5mm of $1k donations over the next 48 hours, starting at mid-day yesterday.

I just supported another five families and with this generous match, that is ten families.

You can join me in supporting a family, or five, or however many you’d like here.

#Current Affairs#hacking philanthropy

The Founder Resolve

Investing in founder-led businesses is comforting to me. They have the ability to see the forest through the trees and do what is necessary to evolve the business.

Two great examples of this are Microsoft in the mid 90s and Facebook a decade ago.

Microsoft had spent more than a decade competing and winning the desktop software market and then Netscape came along and presented an entirely new market opportunity that had both major upside and major downside for Microsoft. Microsoft reacted by moving aggressively to compete with Netscape by launching Internet Explorer and using its desktop software dominance to establish IE as the dominant browser by the end of the decade.

Facebook had spent about a decade competing and winning the social networking market and then Apple launched the iPhone and new mobile social networks like Instagram emerged that both threatened Facebook’s existing dominance and also presented new large opportunities in social networking. Facebook went on a year-long effort to become a “mobile-first” company and also acquired Instagram that year. This all happened in Facebook’s first year as a public company.

I was thinking about that because as many are wringing their hands about the collapse of crypto prices and stock prices and cutting back costs and playing defense, Coinbase announced yesterday that they are investing heavily in the next wave of web3:

The application era of crypto is upon us and products/companies like Metamask and OpenSea are showing how important and lucrative that market is. Coinbase has reacted by making huge new bets on Coinbase Wallet and Coinbase NFT and is committed to winning in those markets like it did in the investment era of web3.

It is very hard to do this sort of thing when your stock price is under pressure and when the markets are in free fall. And yet that is what leaders must do when new use cases emerge and present themselves as both an opportunity and a threat.

Disclosure: I am a Director of and our family is a large shareholder of Coinbase.

#entrepreneurship#Web3

Tech Year NYC

Tech:NYC is launching a new initiative, Tech Year NYC, which helps young people from underrepresented backgrounds get access to careers in NYC’s fast-growing tech sector.

Tech Year NYC is a rollup of several existing city programs into a single point of entry and engagement for tech companies and students. The idea is to make it easier for local tech companies to engage with this population and easier for the students to get access to these pathways to jobs.

Students are compensated for their participation by the city and industry partners and will come out of the program with professional skills essential to work in the tech sector and additional skill-building opportunities.

Tech Year NYC is an expansion of a project-based learning curriculum that Tech:NYC developed with the Mayor’s Office of Youth Employment back in the summer of 2020 called Summer Bridge. Over the last two years, over 100 tech companies and over 3,000 students have participated in this effort.

The summer 2022 Tech Year NYC pilot will run from July 5th to August 12th and serve over 1,000 students. 500 of these students will continue career exploration and skills development through the fall semester. If and when this pilot proves successful, Tech Year NYC will be expanded to reach many more students and employers.

Tech NYC is recruiting employer partners to lead these 5-week long project-based programs, open your doors for “tech open houses”, and participate in professional skills workshops for these students. You can learn more and register to be an employer partner this summer here.

#employment#hacking education#NYC

Getting Together In Person

Last week we held USV’s annual Portfolio Summit here in NYC. Every year we invite the leaders of our portfolio companies to come to NYC and spend a couple of days with us and each other. However, we were not able to do that in 2020 and 2021 so this was our first Portfolio Summit since 2019.

In the three years that have passed since our last summit, we roughly doubled the size of our portfolio, adding 65 new investments. That is 65 founders and leaders that had not been to a USV Summit, and in some cases, we had not met them in person.

This is a photo of folks arriving on the first day and settling in:

There is nothing particularly interesting about that photo. Most of us have been to these sorts of business affairs countless times. Except that we have not been able to do it for the last two years.

I have always felt like our two-day Portfolio Summit is my favorite work event of the year. And I had not realized how much I had missed it. It is so great to see everyone together in person, sharing experiences and ideas with each other and building relationships.

We learned some new tricks over the last two years. Those of us who work in VC and startups can work remotely and get most everything we need done. But we have to remember the power of being together and do more of it. It really makes a difference.

#VC & Technology