Posts from Fred Wilson

I realized a long time ago that the VC’s customer is the founder/CEO/portfolio company and that our investors (called LPs in VC speak) are our “shareholders”. That was a very defining moment for me and has clarified what matters the most in a VC firm.

That said, we take investor relations very seriously at USV and always have.

This is our model:

1/ We are loyal to our LPs and offer them the opportunity to invest with us fund after fund after fund unless something has materially altered the relationship. That is very rare but has happened.

2/ We regularly provide our LPs with a lot of information on our portfolio. We send financial reports including detailed schedules of investments quarterly and we provide detailed one-page writeups on each and every portfolio company twice a year.

3/ We do two “quarterly calls” a year, one in the spring to review Q4 and Q1 and one in the summer to review Q2. These are now Zoom meetings. We are approaching our summer call which is what prompted me to write about this today.

4/ We do one annual meeting in the fall after Q3 results are out. These used to be in-person meetings in our office featuring several (3-5) presentations from a representative mix of portfolio CEOs. We like to have a wide variety of companies present (by stage, performance, etc) and absolutely do not do a “greatest hits” experience at these meetings. We did our annual meeting over Zoom last year and may continue to do that going forward as it makes it much easier for the portfolio CEOs to present and easier for our LPs to attend. If we do that, I will miss the in-person interaction we have at our annual meeting but also believe making things easier for everyone is very important.

5/ We don’t do splashy meetings at fancy places with our LPs. We believe in substance over form when it comes to investor relations and we believe that our LPs do as well.

The Gotham Gal and I are investors in dozens of VC funds/firms and there are many ways that VCs do this. Some provide little to no information and let the returns speak for themselves. That can work too. But I believe frequency, regularity, and transparency are the key factors to focus on with investors. It has worked well for us.

Today is my sixtieth birthday and I plan to goof off with friends and family all day and night in celebration. If I don’t respond to an email, text, or tweet, well that’s because I’m celebrating.

I’ve been told that turning 60 is a big one and to expect to feel a lot. I will make sure to do that but as many know, it is not my nature to do that. So I will have to work at it.

I have cut back on blogging a lot in the last year. Four posts a week on AVC is now a lot. Many weeks there are only three. I’m hoping that the quality has gone up as the quantity has come down. At least that is the goal.

I’ve caught a second (or maybe third or fourth) wind with my work in the last year. It is a combination of covid, climate, and crypto. The world is changing and there is so much energy being released from these changes that draws me back. At sixty, it is a different kind of work; less hustle and more conviction. I like that.

As the Gotham Gal and I enter our fifth decade together, I am struck by how much we have become one. We often say the same thing to each other at the same moment. A mind meld.

As I told my partner Albert this morning on text, I am a very fortunate person. Life has given me many blessings. I try to give them back as much as I can and AVC is an important part of how I do that.

With that, I am off to have fun with friends and family for the rest of the day.

I wrote about NFTs last week and said this in that post:

But when a party emerges online that anyone is invited to attend and the 500 person group picks up a punk with a party hat and they all change their social network avatar to this, well that got my attention.

https://avc.com/2021/08/the-opening/

Fractional/collective ownership is something we have been interested in at USV for a while. It fits well with our thesis about expanding access. We have an investment in Otis that is providing fractional ownership for collectibles and NFTs.

But there is an important difference between fractional/collective ownership of physical and digital goods.

When you purchase a share of a 1985 Air Jordan collection, as I did, you can’t showcase it in your home or office. It is shared ownership with many others. So it goes to a gallery or somewhere it can be shown publicly. That’s fine but somehow less satisfying than having it in your home or office for everyone who comes to visit you to see.

Contrast that to what happened with the punk. Everyone who bought it put it on their Twitter avatar. They collectively displayed it on their own digital property.

That is because of an important point my partner Albert made in this post a few months ago.

The underlying misconception here is to think that in the digital world copies are indistinguishable from originals. In a trivial sense this is true. Let’s say you copy a digital artwork, you will now have exactly the same bit sequence as the original. But in a much more profound sense it is not.

https://continuations.com/post/645017712412786688/a-word-on-nfts

What NFTs do for digital art (images/Punks, videos/Top Shots, music, animations, etc, etc) is they separate the concept of ownership and the display and consumption of them. The ownership is on a public secure ledger. The display and consumption of them is out in the open for everyone to see and hear and more.

That’s not something that is easy to wrap your head around but it is profound.

I recall when my partner Brad and I were raising our first USV fund, back in 2003, and potential investors wondered about my blogging habit. They asked if I was making a mistake telegraphing our investment thesis for everyone to see, including our “competitors.”

We strongly defended the practice and explained that the benefits of telling the world what we were looking to invest in, and why, strongly outweighed any costs. We explained that telegraphing would bring entrepreneurs to us.

And that turned out to be the case. So many of our top-performing investments over the years came to us because of our telegraphing strategy. It is hard to know who is working on a problem you are interested in. But if you put the word out far and wide, they will find you.

I was reminded of those conversations almost twenty years ago now when I read this post on USV.com by Hanel outlining our interest in measuring carbon. She explains that we have made one investment in that area already and are looking to make more. And she explains why.

I am sure that Hanel has already heard from a bunch of founders working on measuring carbon and will hear from more in the coming weeks and months. That’s excellent and how it should work in our view.

Dune.xyz is a community of crypto enthusiasts, analysts, and investors who use the open data available to all via public blockchains to create charts and other analyses to understand what is going on in these systems.

One of the most important differences between blockchain-based systems and traditional web-based systems is that the blockchain has an open data layer. That means that we all control our data when we use a blockchain-based system. But it also means that this shared data layer is available to all to observe, measure, and analyze.

Here are some examples of community-built charts:

The P&L of the Maker lending system:

A time-based comparison of trading volume on the leading AMMs:

What is interesting and different about Dune vs traditional analytics services is that everything is built on open data. There is no proprietary data involved. And this is as much a community (like Reddit or Wikipedia) as an analytics service.

USV recently participated in a financing for Dune.xyz and we plan to start using it to observe and analyze blockchain-based systems that we are involved in and interested in.

It makes sense to me that analytics tools for blockchain-based systems will be open, community-driven, and composable. And that describes Dune.xyz.

I like to think of investing in new things a bit like a football running play. Imagine you are the running back. You’ve been handed the football and you are looking for a hole to open up and run through. What you really want is some running room beyond the opening.

We’ve known for a while that crypto is the next big tech architecture. We’ve known that once the wave breaks on the shore, there will be enormous opportunities unleashed. Like the web. Like mobile. Like the PC.

But what has been hard to see is the opening. It wasn’t trading/speculating, although that has been huge. Coinbase announced yesterday that 68 million verified users. It wasn’t DeFi, although that has also been huge.

What we have been looking for is the consumer opportunity to emerge. Until you have billions of consumers around the world using a technology, you don’t have a new wave to ride. So like the running back, you wait and hope you don’t get hit.

But in the last few months, the opening is emerging. In slow motion. I can see the left tackle move his man off the line. I can see the left guard move his man off the line. And there is running room. The defensive backs are on the other side of the field.

I’ve always thought the opening would be at the intersection of gaming, online communities, and social networks. Why? Because those are the mainstream consumer experiences where geeks tend to be the first adopters.

But it is hard to take on the existing gaming companies with a new architecture. The user experience around new stuff always sucks and who wants to play a game with a shitty UI? It is also hard to take on the existing social nets. Why would someone with a million followers on Instagram or TikTok or Twitter leave those behind for a new social net? So the existing incumbents are the defensive line. They look impenetrable. Until they aren’t. That’s when the opening emerges.

The opening is emerging around NFT experiences, something we’ve been excited about for quite a while now. But not the NFTs that Sothebys sells for $69mm. Not even the CryptoPunk that sells for $7.5mm. But when a party emerges online that anyone is invited to attend and the 500 person group picks up a punk with a party hat and they all change their social network avatar to this, well that got my attention.

PartyBid is cool. That’s why I wrote about it on Friday. TopShot is cool. And so is Axie. And so is the Bored Ape Yacht Club. But what is cooler is that these NFT experiences are operating at the interaction of gaming, communities, and social nets. And they are not taking on any of the incumbents directly. They are building on top of them all.

I am not saying NFTs are the next big thing. I am saying that consumer experiences built on a crypto stack are the next big thing. I am saying that NFT experiences are showing the way. They are the left tackle that you can run behind into the opening. Where enormous opportunity exists.

It would be easy to get depressed reading the morning news. Climate change is happening more quickly. The Covid pandemic shows no signs of abating. And there are all sorts of other things that are challenging our way of life.

But on days like today, I find it helpful to remember that science and technology helps us address these challenges.

We understand the carbon cycle and how far it is out of equilibrium. We also have many of the technologies we need to bring it back to equilibrium. And more are being invented every day.

We also understand the Covid virus and how to create vaccines that reduce its severity. And scientists have developed and continue to develop therapies that will do even more to reduce its severity.

Over the course of history, mankind has leveraged science and technology to meet big challenges and overcome them. And we can continue to do that. We simply need the will to make the required investments and societal changes that go along with them.

PartyBid is a fun way to collect NFTs with others.

Here are some live parties you can join and bid with others:

Funding Friday has always been about the idea that others might want to fund things that I am funding. Party Bid takes that idea a step further and makes funding things more social and fun. That’s a really neat idea.

Managing a business is about having a plan, sticking with it, and not panicking or looking for hail mary passes. There are no silver bullets or shortcuts to success in life. You need to have a five to ten-year plan and you need to stick with it and execute against it day after day, week after week, year after year.

I was reminded of this watching my NY Knicks navigate the off-season after making the playoffs for the first time in eight years. The Knicks front office stuck with the core of the team, kept all of their young talent, and upgraded significantly at point guard and small forward. They also do not have a guaranteed contract that extends beyond the 2022-2023 season.

I am sure it was tempting to think about accelerating the plan after a season that went better than anyone was expecting. I am sure that they thought about taking bigger risks and going for broke now. But I am glad they did not do that.

Instead, they rewarded players like Derrick Rose, Alec Burks, and Nerlens Noel who were a big part of getting them into the playoffs with multi-year contracts, they got Kemba Walker and Evan Fournier as upgrades at point guard and small forward, and kept all of their youngsters.

That’s a model for how to think about building a business and a leadership team. It is much more likely that you can get a win with a five-year plan than a one-year plan. And you need to build your team over time, developing promising talent, and making smart upgrades when they are required.

There are times when you need to throw in the towel on the plan, blow things up, and execute a turnaround. That usually comes with new leadership at the top and a new five-year plan. But that should be rare and done only when it is clear that the current plan is not working.

When the current plan is working, even better than expected, it is best to stick with it, make incremental improvements here and there, and keep at it.