Posts from Fred Wilson

Exciting Protocol Lead Opportunity

Last month our portfolio company Kickstarter announced the creation of a protocol organization that will develop a web3 protocol for the crowdfunding of creative projects.

They are now assembling a protocol team and are talking to candidates to lead that effort. The protocol lead role is an exciting one that combines product leadership, smart contract development, team management, and a lot more.

I believe Kickstarter is at the forefront of a wave of companies that have been built on web2 technologies that will be adopting web3 approaches to move their products and stakeholder networks forward. And so leading this protocol effort will be an opportunity to help shape what that looks like.

If you are interested in this role or know someone who would be great for it, please email me and I will make the connection.

#crowdfunding#Web3

The Selloff

The stock and crypto markets have started off the year in selloff mode, with the Nasdaq down almost 5% this week and the big crypto assets down almost 10% this week. But this selloff has been going on for a lot longer than one week. It has been going on since early November when the Nasdaq peaked at $16k and BTC hit $67k. Since then it’s been downhill and the biggest carnage has been in the highflying “cloud” stocks. The Gotham Gal and I own a few stocks that have been cut in half in the last two months. Yes, they lost half of their value in the last two months.

Of course, these highflying stocks have only given up some of their gains over the last two years. In the case of a few of our public stock holdings, they went up 10x in the last two years and are now “only” up 5x. Easy come, easy go.

Even at these new “discount” prices, none of these stocks look cheap to me. Most are still trading well in excess of 10x revenues which has always been my baseline for a subscription-based software business. I don’t know where they will bottom out, but it certainly could be lower. Or the sector could have already bottomed out in this first week of 2022 blowout sale. One never knows where the bottom is until you are well on your way back up.

The capital markets have been awash in money for the entire pandemic and it has resulted in some crazy prices being paid for public stocks and for growth rounds in high-performing privately held companies. The optimist in me sees this selloff as a return to normalcy, in the capital markets and in the world we live in. It’s hard to see a return to normalcy when offices remain closed, events are being postponed or moving to virtual. But markets tend to see things first and I do wonder if the capital markets are coming back to earth in anticipation of things getting better this year.

It also makes me wonder if the “pay any price” mentality in venture may ease up a bit this year. When the IPO markets or the M&A markets can’t/won’t be able to pay more for a business than the private markets are paying, that’s unsustainable. It can last a few quarters, maybe even a year. It can’t last forever. We will see.

#crypto#stocks#VC & Technology

What Is Going To Happen In 2022

So last year I made a bunch of predictions that with one exception were kind of obvious. I don’t want to do that again, so I am going to list five things that I think will happen this year that most people would not likely agree with.

1/ As the pandemic evolves into an endemic in the first half of 2022, companies will reopen their offices and their employees will largely opt to go back to working together in offices.

I qualified this with “largely” because I don’t think we will go back to everyone in the office again. Companies have become much more comfortable hiring remote employees who don’t live near a company office. Employees have made it clear that they want/need the flexibility to work from home a day or two a week. Some companies have moved to an entirely remote work environment. But I think the dominant form of working will return to “in office, with others” by the end of this year.

2/ Carbon offsets, effectively a voluntary form of self carbon taxation, will take off in 2022 and by the end of the year, we will have a global market in excess of $10bn (up ~10x in 2022).

I think the big unlock will be bridging between the existing carbon offset market and the crypto markets where decentralized finance tools can bring massive innovation and demand to this market very quickly.

3/ K12 systems around the US (and around the world) faced with teacher shortages and desperate to erase several years of learning shortfalls, will increasingly adopt online learning services in the school building in lieu of and in addition to in-class learning.

This may be obvious. I don’t really know. But there are many forms of learning that work in addition and in compliment to teacher-led classes and school leaders will need to be open to using them aggressively to turn around several years of learning losses.

4/ Twitter opens up its APIs and allows anyone to operate Twitter clients that compete with its own.

Now I am going out on a limb. But why not? That would be so amazing if it happened.

5/ As I predicted back in the spring of 2017 [8:30 into this video], only five years too soon, Ethereum’s market cap will surpass Bitcoin’s in 2022. I hope I get at least as much abuse for this prediction as I did for that one.

Ethereum’s merge in 2022, combined with the understanding that productive assets must be worth more than non-productive assets, make this a fairly obvious prediction. But I got it wrong last time, so I surely can get it wrong again.

I hope that 2022 brings us more positive surprises and less negative surprises than the last two years.

Happy 2022 everyone!

#climate crisis#crypto#hacking education#VC & Technology

What Happened In 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.

#climate crisis#Current Affairs#VC & Technology#Web3

Why Web3?

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.

#Web3

The Pull Forward

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.

#management

Consumer Trends 2022

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.

#VC & Technology

Getting Together In Person

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.

#life lessons

Computer Science Education Week

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.

#hacking education#NYC

The Great Formation

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.

#entrepreneurship