Posts from May 2022

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