Posts from Fred Wilson

Business Model Innovation

I’ve shared my views on this before here at AVC. I believe business model innovation is more disruptive than technical innovation.

A good example of this was moving from web apps to mobile apps, which was largely a technical innovation. While the move to mobile certainly created some new companies, it largely strengthened the market position of the big Internet companies because there was little to no business model innovation.

Compare that to the move from desktop computing to the web. We saw massive disruption as we went from a licensed software business model to an advertising supported business model, which has evolved into an advertising/subscription freemium business model.

I am excited about the move to crypto based business models supporting decentralized apps for this very reason. I think it opens up the possibility that some very large new companies will be created that innovate largely on entirely new business models.

An area that is particularly ripe for this kind of innovation is user generated content or, more broadly user generated products and services.

If you think about something like Instagram, the software is great but could fairly easily be replicated. But the network of users and the content they create is impossible to replicate. That is where the value is created. Or think about Reddit where the community creates the content. Or think about Waze where the users generate the data about which way has the least traffic.

In these sorts of businesses, the ideal model would remunerate the users for creating the content and allow them to take their content elsewhere if a better deal were to emerge.

That is precisely what a decentralized application built on an open data protocol would do from a technology perspective. And the remuneration of the user is what a token incentive model would offer in terms of a new business model.

So why have we not seen this emerge yet? Bitcoin has been around for over ten years. People have been mining Bitcoin and earning tokens for doing so for more than a decade. This new business model is sitting there in plain sight.

Well first of all, quite a few entrepreneurs have tried. Steem is a decentralized Reddit with a token incentive model and it has been around for a while now. There are over 150 decentralized apps in the Blockstack app store (Blockstack is a USV portfolio company).

So it is not for lack of trying.

I believe the primary inhibitor to this business model innovation is that it requires users to own crypto-assets and store them in a wallet somewhere and be comfortable using them to access decentralized apps. That has not gone mainstream and we need a killer app to make that happen. That is why USV has gotten behind Libra. We think it could be the thing to get mainstream users there.

But if not Libra, I am confident it will be something that gets billions of users holding and using tokens on our phones. And when that happens, a wave of business model innovation will be upon us. I’m super excited for that.

Price Stability

One of the use cases that has eluded cryptocurrencies to date is “means of exchange” (something you would spend).

I wrote about this a couple years ago and showed this transaction in that blog post:

That was a payment I made to a caddie named Kris after he carried my bags one morning six years ago.

We played today and he was carrying a friend’s bag and I asked him if he still had that Bitcoin and he smiled and said “absolutely.”.

That made me feel good but the truth is nobody should be paying for anything, including caddying services, with something that can appreciate 123x. That’s just not rationale behavior.

Which is why stablecoins, cryptocurrencies which have price stability built in to them, are one of the important sectors in crypto right now.

There is the “dollar pegged” approach, like Tether (which may not actually be dollar pegged) and USDC (which is actually dollar pegged). One of the issuers of USDC is Coinbase, a USV portfolio company.

There is the Libra cryptocurrency, which USV is involved with as a Founding Member of the Libra Association. Libra will not be pegged to a specific fiat currency, but will have a reserve made up of many fiat currencies so it will have price stability.

And then there are stablecoins that are asset backed but not fiat backed like Dai.

Finally there are stablecoins that attempt to deliver price stability programmatically. I am not confident that approach will work.

I am confident that one way or another consumers will adopt cryptocurrencies that are price stabilized and when they do they will start transacting in them. And that will unlock a lot of utility that has so far been elusive.

Video Of The Week: Angela Duckworth – Grit

A few years ago, we invited Angela Duckworth to speak to our portfolio company CEOs at our annual get together. It was a terrific talk that absolutely impacted the way these CEOs thought about hiring and managing their teams. Angela’s theory of “Grit” as a predictor of success in education, careers, and life is powerful. If you have not read her book on the topic, you should. You can get it here.

Practice

When I started writing this blog in 2003, I was not a strong writer. Sixteen years later, I am a better writer. Doing something every day is the best way to improve at something.

I’ve been doing yoga for roughly the same number of years as I’ve been writing this blog. But I am not as religious about yoga as I am about writing.

For the last two weeks, I’ve been doing the exact same yoga practice (the Mysore style) three mornings a week and today I noticed that I was able to do some things I could not do before.

I have a long way to go before I can do yoga the way that most of the people in the yoga studio with me can do it, but the mere fact that I am noticeably improving gives me great satisfaction.

Practice means doing something again and again in an effort to improve. But it also means a way of doing something (a law practice). The two are really the same thing. A lawyer who has been practicing law for thirty years is likely a better lawyer than someone who is right out of law school.

It is easy to watch a basketball player like Steph Curry hit three pointer after three pointer and think “that is raw talent” and surely that is true. But it is also true that he has probably practiced those shots for endless hours in the gym perfecting the shot and stroke.

I think everyone can improve at things they are not good at and become competent, even excellent, at them. I am not going to win a Pulitzer Prize, but I can write well and have become a strong communicator by practicing it routinely. Practice really works.

The American Dream

It has been 243 years since our founding fathers signed the Declaration Of Independence and the great American experiment began.

These words form the moral backbone of our country and represent our core values:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness

We have not always lived up to these values. Slavery and the treatment of the Native American Indians are glaring examples. And there certainly have been other moments where America has not lived up to these values.

However, it has been my experience, over fifty-seven years living in the US, that we try to live to these values and that the notions of freedom and equality are deeply rooted in the culture of America.

Which leads me to the American Dream, the notion that there is economic opportunity for all, regardless of who you are and where you come from.

That has been my experience personally. I worked my way through college, arrived in NYC at the age of 21 with not a penny to my name, but with a job waiting for me, and I made the best of that.

It is also my experience in the venture capital business. I have seen people without a college education pursue their dream and come out a winner. I have seen people with broken English make it with hustle and ingenuity.

But again, there are gaps in this record of opportunity. It is not as easy for a young black woman growing up in Brownsville to find economic opportunity as it is a young white man growing up in Palo Alto. There are many parts of America where life has gotten harder for the current generation relative to their parent’s generation.

But what makes America special is that we believe that isn’t right and it should be addressed. And I see it being addressed in my work on the education sector and beyond. I am hopeful that we will see a meaningful dent in many of these opportunity gaps in my lifetime.

It is fashionable these days to bemoan what is wrong with America and there is much that is wrong. But I prefer to stare at what remains right about America and celebrate it, particularly on our birthday.

A Blast From The Past

I saw this in my twitter feed today.

Almost a decade ago, my friend John Heilemann interviewed John Doerr and me at Web 2.0.

It is interesting to go back a decade and see what we were talking about then.

Some of the same issues exist today. Some of the questions we debated have been answered now.

It’s about forty minutes long.

Oculus Quest

If there is a technology that has overpromised and underdelivered more than AR/VR over the last five years, I am not sure what it is.

Facebook paid $2bn (or possibly more) for Oculus in the spring of 2014 and maybe a couple million Oculus headsets have been sold since then. And Facebook is reportedly continuing to spend billions more on Oculus.

So when is all of this investment going to pay off? Maybe sooner than people think.

Oculus Quest is a wireless (untethered) VR headset that shipped this spring and sells for $399 to $499 depending on how much memory you want.

In the past few weeks, a number of friends of mine have suggested I get a Quest (which I will do but have not yet done) and that I will be impressed by it.

I have long thought that an untethered headset that can deliver real VR experiences are what we need to unlock the VR market.

There aren’t many games or experiences for the Quest yet. Hopefully that will change soon.

Most technologies go through a cycle in which the promise is hyped up, followed by the reality setting in and going through a downturn. That has certainly been the case for AR/VR.

But it may well be that the technology is finally catching up to the promise in AR/VR. At least that is what the smartest people I know in this sector are telling me right now.

Disappointment

Being a Knicks fan teaches you a lot about disappointment. At one point this spring, we thought we were going to get a couple top free agents and the first pick in the draft. We ended up with a lot less.

Fortunately, I have learned a lot about disappointment in three decades of backing early-stage startups. Our business is one where a third of things we do don’t work out at all and another third deliver a lot less than we had hoped when we pulled the trigger. Only a third of our investments deliver on what we expected when we made them.

Fortunately about ten percent of the investments we make so vastly outperform our expectations, that they make up for everything else we do.

So we live with a lot of disappointment. And one of the questions I struggle with is how much of that disappointment do we share with the founders and teams we work with.

Certainly feedback helps founders. But if the feedback is too negative and too downbeat, it is not helpful and can also lead to tune-out.

So I have found that many times I need to bite my tongue and take the disappointment in stride and chalk it up to the cost of doing business in early-stage investing. You have to be an optimist to make early-stage investments and you can’t let the disappointments take that optimism out of you.

Which takes me back to the Knicks. It has been twenty years since the Knicks had a winning culture. That is a lot of losing to endure. But I keep buying the seasons tickets in hopes that things will change. I am going to stay positive and hope for the best.

The 5G Conundrum

Christopher Mims has a good post on the 5G headaches that are in store for those of us in the US as we roll out 5G:

While getting to wireless speeds that are close to the fastest wired speeds is important, it also begs the question why are we doing it this way.

Jessica Rosenworcel, who is one of the FCC Commissioners, explains why the US approach to 5G is different than elsewhere in this opinion piece:

I was in a meeting earlier this year and there were some execs from the big wireless carriers in the room. They were complaining about how difficult local governments are being on the 5G rollout. I asked them if 5G is really going to work with this network architecture that requires so much infrastructure buildout. They were confident. I am not.

Video Of The Week: What Is Web3?

Juan Benet, founder and CEO of our portfolio company Protocol Labs, developer of the IPFS and Filecoin protocols, gave this talk last fall.

I like Juan’s statement, about 10mins into this talk, that “what Bitcoin did to money, Web3 does to everything.” That is obviously a very big statement/ambition, but I agree with it.

Here is Juan’s talk: