Posts from Fred Wilson

Helium

One of the areas of blockchain innovation I am most excited about is building open, permissionless, and decentralized technology infrastructure.

The three areas that seem most obvious to me for decentralized infrastructure are compute (code execution), storage (storing files, etc), and bandwidth (network infrastructure).

And today, we are excited to announce that USV has made an investment in a decentralized network infrastructure project called Helium.

My partner Nick, who led this investment for USV, wrote about Helium on the USV blogand explains why we made the investment (as is our practice with all new investments). I would encourage you to read that blog post as it explains a lot about how Helium works, how the token economics builds the supply side of the network infrastructure, and why it fits so neatly into our investment thesis.

I would just like to point out how cool Helium is.

Anyone can run a Helium hotspot in their home:

And then they can earn Helium tokens for doing so.

You can run a hotspot in your home/apartment and do the equvalent of bitcoin mining for network infrastructure.

Helium is optimized for very long distance, low power communications. It is ideal for Internet of Things (IoT) devices. Think about electric scooters needing to “phone home” over long distances. Think about your dog’s name tag. Think about figuring out when the school bus is going to arrive at the bus stop.

We plan to run a Helium hotspot or two at USV and it would be great to see people powered Helium networks popping up all over the place and providing very low cost, low power, highly reliable long range network infrastructure.

Turning Streetlights Into EV Charging Stations

Owning an EV in a dense urban city is challenging. Most people don’t have their own garages and so they park on the street or in large parking garages. We do the latter.

About five or six years ago, I walked into our parking garage and saw that the garage operator had installed a ChargePoint charging station in the garage.I literally walked back across the street to our apartment and bought our first EV. We now own three.

But charging with ChargePoint is not ideal. There are a limited number of these charging stations in our parking garage and more and more EVs. They are often filled up. And the rates that ChargePoint supplies electricity at are borderline gouging. They have a monopoly on our garage and price accordingly. I believe the rate we pay in our parking garage in NYC is literally double the rate we buy electricity from ConEdison in our NYC appointment.

In our homes in Los Angeles and Long Island we charge off our solar panels on our roofs and basically don’t pay to charge our EVs other than the depreciation on the solar installation costs. That is absolutely the way to go if you can afford the cost of a solar installation.

But back to dense urban areas like NYC. If we want more EVs and less gas powered cars on our streets, we need better charging infrastructure.

In Paris, where we have been for the last few days, they are trying an experiment with putting EV charging stations on street lights.

 

If the city makes those curb locations only available for charging and not parking, that could be a great option for encouraging more city dwellers to buy or rent EVs.

I believe the availability of charging options, whether it is a rational fear or not, is holding back a lot of people from moving from gas to electric. So anything that can change that dynamic is a good thing in my view.

Seven to Ten Years

I have worked in three venture capital firms over the last thirty-three years and am intimately familiar with the performance of the fifteen (ish) venture funds raised and invested by these three firms. Much of what I have written about fund management and investment performance here at AVC over the last sixteen years comes from my observations of these funds and firms.

Starting in the mid-00s, The Gotham Gal and I started investing in other venture capital funds, always limiting these investments to firms where we knew the partners well and had sat on boards with them.

And The Gotham Gal started angel investing around the same time, often writing the first check into startups. She has made something like 140 angel investments over the last dozen years, mostly into companies founded by women.

We keep good records on these personal investments and I now have another data set to observe.

Across these three sources of data (my firms, other firms, angel investments), there are well over 1000 individual angel, seed, and early stage venture capital investments over four decades.

I have no plans to publish this data. It is not in a single database and there is a ton of confidential information in it.

But I can observe things about this data and have been doing so and will continue to do so.

One of the great truths about early stage investments is that you have to be patient with them. The losses come early and the winners take longer to realize.

It takes seven to ten years to get to real liquidity in a portfolio of early stage venture investments. You can’t short cut it. It just takes time. But come years seven, eight, nine, and ten the returns will start coming in.

I am not sure why seven to ten years and not five to seven or not ten to fifteen. It’s seven to ten. That’s how it has always been and seemingly always will be.

Low (No) Barriers To Entry

There are a dozen electric scooter companies operating in Paris right now. There are so many that the Mayor just announced that she will reduce that number to three with new rules for electric scooters in Paris.

But before we get into the new rules, I want to stare at that first sentence for a bit.

In less than a year, twelve companies have started operating electric scooter services in Paris.

Paris is the largest electric scooter market in the western world right now.

To enter this business, you need capital to purchase the scooters from China, you need a mobile app on iOS and Android to allow users to locate, unlock, and pay for the use of one, and you need a small team to handle the local logistics.

Apparently those are not significant barriers because a dozen different companies have been able to do it in less than a year.

There are many things that are attractive about the electric scooter business. It has taken off as a transportation option for consumers and is the fastest growing new transportation technology in terms of revenues in history.

Electric scooters also are a much cleaner way to travel than cars or other gas powered technologies.

So there is a lot to like about this business.

But if anyone can open up shop and compete with you with little to no differentiation and your only defensibility is the time it takes to download a new mobile app and put in your credit card, well then one has to ask if this is or will be a good business.

And that is where the Mayor of Paris comes into the picture. She wants to limit the number of scooter providers to three, by requiring licenses and issuing only three of them.

That will sufficiently lower the competition in Paris, lead to a triopoly which may stabilize pricing and margins, and possibly reduce the number of scooters littered all over Paris.

Winning a license will be a political process and there are many issues with that. And the three companies that win a license will become acquisition targets for the big players which are increasingly the ride share companies (who themselves have very low barriers to entry but now have public currencies to buy with).

There are many who have wondered whether ride share will ever be a good business. The public market caps of Uber and Lyft suggest that it will be or that there are plenty of people who currently think it will be.

Scooters are ride share on steroids. Even easier to get into the game with possibly a larger market opportunity.

It will be quite interesting to see how this plays out and how much regulation will be needed to tame this market.

Funding Friday: DefendCrypto.org

As expected, the SEC sued USV’s portfolio company Kik this week. Here is Kik’s response to the news:

This part of Kik’s response explains that the SEC is stretching the interpretation of the Howey ruling (from almost a century ago) in its efforts to claim jurisdiction of crypto token regulation:

For the reasons set forth in our Wells Submission, the SEC’s complaint against Kik is based on a flawed legal theory.  Among other things, the complaint assumes, incorrectly, that any discussion of a potential increase in value of an asset is the same as offering or promising profits solely from the efforts of another; that having aligned incentives is the same as creating a ‘common enterprise’; and that any contributions by a seller or promoter are necessarily the “essential” managerial or entrepreneurial efforts required to create an investment contract. These legal assumptions stretch the Howey test well beyond its definition, and we do not believe they will withstand judicial scrutiny.

https://www.prnewswire.com/news-releases/kik-responds-to-sec-complaint-300862114.html

I believe that crypto networks are different than companies and that crypto tokens are different than securities. I look forward to seeing these issues debated in a court of law instead of the basement conference rooms in DC.

If you are interested in supporting Kik’s case, you can do so by contributing crypto tokens to DefendCrypto.org.

Fly Like A Bird

We arrived in Paris this morning and, after dropping off our bags, we walked to our favorite cafe for breakfast and on the way we passed a Bird scooter waiting patiently for a rider.

We don’t yet have Bird scooters in NYC, at least to my knowledge, but apparently they are available in Paris.

It is impressive how quickly Bird has built out its international footprint. In the winter of 2018, I started seeing them in our neighborhood in Venice Beach Los Angeles.

And now less than 18 months later they are in Paris (and likely many other cities in Europe).

I have no idea how good of a business electric scooters is. There is no shortage of competition and, as I’ve written about here before, the dockless system can be a nuisance leading to inevitable regulation.

But Bird is not waiting to figure all of that out before building out a global footprint. It is impressive. I hope it works. The benefits from an environmental perspective are significant.

Getting Out Of Town

The Gotham Gal and I are going on vacation for a couple weeks.

I will turn on my out of office responder and stop responding to most emails.

I plan to continue to write here daily but the timing of the posts will change. They will probably happen much earlier in the day on US time.

I am hoping for a bit of distance and reflection from the world of tech and startups and maybe that will result in some good writing. Who knows? One can hope.

Open Up Vs Break Up

There have been many calls to break up the large Internet monopolies; Amazon, Google, Facebook, Apple, etc.

Breaking up a large monopoly feels like a very 19th/20th century move to me.

I would prefer that politicians and policy makers think about opening up as the better intervention.

A good way to explain this is to go back to the architecture that Twitter used in its early days when there were many third-party Twitter clients. Imagine if Facebook, Instagram, Twitter, LinkedIn, etc were protocols, not applications, and there were many high-quality clients to participate in these networks.

Then the clients could innovate on things like content filtering, promotion of high quality content, business model, etc

If we are going to “break up” these large social media platforms, I would urge elected officials and regulators to think about pushing them to move from platforms to protocols instead of just ripping them apart.

We could do the same thing with search. Our portfolio company DuckDuckGo has built a nice search business by building a different user interface on top of one of the two leading search indexes. If we made it easier and reliable for others to innovate on top of the core search engine, then there might be many more options in search.

In mobile, a good first step is to open up the app stores and allow the browsers to have the same access to the operating system as native mobile apps.

In commerce, if I could checkout as easily everywhere as easily as I can on Amazon, there would be more competition for my shopping dollars.

I think you get the idea. It is very true that the big Internet services have built centralized monopolies and have consolidated their market positions. We do need more competition in these core services. And the best way to do that is force them to open up their services, not break them up.