Posts from Fred Wilson

I'd like to announce something that a few of us have been working on for some time now. My colleagues at The NYC Foundation For Computer Science Education and I are raising a $5mm seed fund to invest in computer science education in the NYC public school system. The Gotham Gal and I have been investing out of this fund for several years, and now we are now opening it up to others who want to participate alongside of us.

Though we call this a seed fund, and we do think of it as an investment vehicle, this is a non-profit entity, 501(c)(3), and any committments to it are tax deductible and you will not be getting any money back from us. But you will be getting karmic value in that 1.1mm kids (the largest public school system in the US) will be getting exposure to computational thinking and learning how to code.

If you, like me, had that life changing experience some time in your childhood where you entered some instructions into a screen and the machine executed them, well then you know the power of coding to make you think differently, make you think more, and endow you with superpowers that others just don't have. If you want to help me inject that experience into the NYC public school system, then think about investing in this fund alongside us.

If you want to change something as large as the NYC public school system, you need to start small but think big. We have started with a friends and family round and have some things to show for it.

Now it is time for seed capital so we can replicate these programs in more schools and back new programs, like Code.org, and help them come to NYC. That's where this seed fund comes in.

Eventually, it will be time for a growth round, and that's where the large philanthropic organizations come in. If you work at or with one of them, please reach out to me and we would love to come talk to you about what we are doing.

All of this investment is leveraged by the significant investments the NYC Department of Education is making in new schools, new school leaders, new curriculum, teacher development, and over 80,000 teachers. Think about it this way. The one time investment we made to get the Academy For Software Engineering off the ground is less than 20% of the annual operating budget of that school, all of which is funded by the NYC Department of Education. The power of public/private partnerships is that private capital can fund new things, that when they work can be scaled by public investment. That's what we are doing here.

On November 18th, we are hosting an event at USV where we will talk in more detail about how we intend to invest this $5mm fund. It will be 6pm to 8pm in the USV Event Space. Because we can only fit about 60-70 people in that space, attendance is limited to those who can make a $5,000 investment or more. If you would like to come, please RSVP here.

We will be doing a crowfunding campaign so that everyone can participate in this fund. I plan to announce that next week so stay tuned.

There will also be opportunities for everyone to volunteer time instead of money. We are already seeing the power of that in action and I am incredibly grateful to everyone who is taking time out of their day to go into schools and teach kids to code.

I got to this place initially out of self interest (how to get more coders for our portfolio companies in NYC?), but it quickly became about way more than that. When you walk into a school and see kids from neighborhoods like Brownsville and the South Bronx sitting in front of laptops and making software using modern tools like Ruby On Rails, Github, and StackOverflow, you see a pathway for them and for our city and for our country to change what ails us. This is about that. I hope you will join us in this effort.

A few weeks back, I wrote about a study commissioned by the Bloomberg Administration that said the tech sector was the second biggest industry in NYC and was responsible for 262,000 jobs. The comment thread to that post was full of debunking those numbers, particularly for counting media industry jobs in that 262,000 number. So after seeing all of those comments, I reached out to my friends at the Partnership For NYC, which is the chamber of commerce for NYC, and asked them what the right numbers were.

They did some work and published new numbers on their blog yesterday. The Partnership thinks the number of people in NYC working in positions that require "avanced tech sklls" is 150,000. That feels about right to me too.

In any case, what all of these studies point to is that the tech sector is growing nicely in NYC, at rates well in excess of other industries right now, and will become more and more important to the NYC economy in the coming years.

I read a book this weekend. It is called The Fall of The Alphas. It was written by my friend and former colleague Dana Ardi. Dana is a corporate anthropologist. She studies what makes management teams work. She has also been a writer, a recruiter, a coach, a VC, and a private equity investor.

There is a change afoot in the global economy that is impacting every institution, every market, and every business. Hierarchies are giving way to networks. At USV we have turned this observation into an investment thesis.

Dana has seen the same change impacting management teams, managers, and the companies themselves. Her book is about this change and in it she explores how the iconic Alpha CEO is giving way to a new kind of leader/manager that she, naturally, calls the Beta CEO.

Unlike many business books, this one is not boring or hard to read. Dana tells stories to make her points. Her language is light and airy but the lessons are clear and actionable.

If you lead a company or a team inside a company, you ought to read this book. It will change how you think about leadership and leadership styles.

If a Company is making huge profits this year but will not make any profits in the future, it is worthless in the eyes of an investor. But if it loses money this year and next year and may lose money for a few more years, it can still be very valuable in the eyes of an investor.

Amazon had negative net income in 2012 and pretty much zero net income this year to date. And yet it is worth $166bn in the eyes of investors.

This is because companies are worth the present value of future cash flows, not current cash flows, and certainly not past cash flows.

Amazon is not the only company that is plowing back all of its incremental profits into growing its business. This is very common for enterprise software companies as well. Salesforce has made or lost a small amount of money every year for the past four years but it has grown its revenue from $1.3bn to over $3bn in those four years. And its market value has gone from $12bn to $32bn in the same time frame. Workday hasn't made any profits in the last four years, in fact the net losses have been increasing. But the stock has doubled in the past year and the Company is now worth almost $14bn.

The lesson here is that you can't just value a company by taking its current performance into account. You really need to have a view towards its future performance. And you need to understand why the company is not currently profitable.

In the case of Amazon, it is making huge investments in warehouses and logistics to be able to continue to grow its retailing business and it is making similarly large investments in data centers to be able to continue to grow its AWS business. If Amazon did not want to continue to grow, it could stop making those investments and start generating profits. If you believe, as Amazon management does, that the future growth is going to be there for Amazon, then you ignore the current P&L and think about what a future P&L might look like. 

In the case of Salesforce and Workday, they are making huge investments in sales and marketing to secure additional customers. They are also making significant annual investments in R&D to maintain the market leadership of their existing products and bring new ones to market. If you think that Salesforce and Workday can continue to grow their revenues at or near their current growth rates, then you ignore the current P&L and think about what a future P&L might look like.

Profits are critical to the health of a business, but that doesn't mean a healthy business has to currently profitable. It needs to be able to be profitable if it wants to be and it needs to be profitable at some point in the future, at least hypothetically. So when you read that a company is losing money, don't read that as a bad thing. It could be a very good thing. It all depends on why. 

A few weeks ago, my partner Albert gave a talk on Startup Recruiting in the USV Event Space. It’s 45mins long but there are some real gems in here.

I was reading the latest Twitter S1 on edgar.sec.gov this morning and saw this tweet embedded in their filing. It made me smile to see that.

That is a great twitter conversation. It is one of my all time favorites. And, as many of you know, I also love KD. His game is pure pleasure to watch. I can't get enough of him. And if you want to see the flag football game in question, you can watch it here.

I will end this feature friday with some embedded music. My colleague Brian made this mix on a plane last week. I've been listening to it since. The A$AP beat that kicks it off is excellent.

I saw this chart on our favorite analyst's blog this morning:

And I thought "that's a shitload of cheap android tablets." 30mm cheap Android tablets in the first six months of 2013?

And of course Benedict was asking the same question I was thinking:

Why are people buying these? What are they being used for? They're mostly in China (that’s the pink bar above) and emerging markets and in lower income groups in the west. And it seems that they're being used for a little bit of web, and a  bit of free gaming. Perhaps some book reading. And a LOT of video consumption. In fact, one might argue that for many buyers, these compete with TVs, not iPads, Nexuses and Tabs. But regardless of what they’re being used for, they’re not being used the way iPads are used. In effect, they are the featurephones of tablets. 

I use the Nexus7 (the thin yellow line). I have a bunch of them. One on my bedstand at home. One on my bedstand at my beach house. I use them for remotes in our family rooms and I use them as recipe stands in our kitchens. I may make up that entire yellow band. I love the Nexus7.

But clearly most folks like me use the iPad. The people who are buying the cheap Androids are using it for something very different.

But how long will that last? I was at a school the other day. The school had laptop carts full of macbooks and the Principal was talking about getting iPad Minis for the kids. I suggested laptop carts of Chromebooks and Nexus tablets instead. It will save the school hundreds of thousands of dollars.

Education, Healthcare, etc, etc. These industries need commodity mobile devices but in volume price matters a lot. I think cheap Android tablets have a lot of room to grow and the use cases will widen and this chart will change. At least that's my bet.

A couple days ago, I saw a tweet by Henry Blodget and replied:

@hblodget @TheStalwart yup. here is the seminal book on that http://t.co/nNGStKDiCy this is not war. surges don't work. open source it

— Fred Wilson (@fredwilson) October 21, 2013

I am really upset by the problems with healthcare.gov. Leaving aside all the issues with Obamacare, and I hope and pray this discussion does not downgrade into a debate about that, I am very excited about the potential of marketplaces and marketplace economics on the price, availability, and transparency of healthcare insurance. It is way too complicated to buy healthcare insurance today and it costs way too much. The Internet and the power of marketplace economics has the potential to change that.

But our government has badly botched the construction of healthcare.gov and is now proposing a tech surge to fix it. More people, more money, and more promises thrown at a badly broken process. This will end about as well as Afghanistan and Iraq.

I'd like to suggest another way. Open source the healthcare.gov project, or at least all the components that easily lend themselves to open source. I think that some of it may already be open sourced. But instead of hiring an army of contract developers who will cost us so much money, harness an army of volunteers, who are likely better engineers, who will do the work for free.

That's what is increasingly done by technology companies and so much of the software that runs the web these days is open source. Why can't the software that runs our government be open sourced too? If you think this is a good idea, you can sign this petition. I signed it yesterday.

There is a lot going on in this area. My colleague Nick posted this link on usv.com today. GitHub now has a "subgit" on government projects. That's awesome and I hope we see the healthcare.gov codebase show up there soon.

This won't be news to many of you who figured this out a while ago. But USV has a new front door and has had it for a few weeks now. I blogged about the desire for a new usv.com back in June of 2012, when we started thinking about what the new website should be. I framed the problem we were trying to solve as:

We started having the conversation all over the place. We've been having the conversation here at AVC since 2003. But we also have the conversation at continuations.com, aweissman.com, unfinished work, christinacacioppo.com, garychou.com, and on countless tumblrs, twitters, disqussions, and elsewhere around the web.

You might ask "why did it take you 16 months to build a new website?" and you would be right. When it comes to VCs, do as we say, not as we do 🙂

But seriously, we went down a few dark alleys and it took a while to figure out they were leading nowhere. We ended up with something that some have characterized as a "clone of hacker news" and you would be right to say we were inspired by the design of hacker news in our new website. We hope it is not a clone because if it is, we have contributed nothing new to the Internet.

The new usv.com looks like this:

First and foremost, it will be a place that we can cross post the things we write from around the web. As you can see, I cross posted my blog from yesterday and it is currently at the top of the feed.

But it is also a public view into the links we are sharing with each other at USV. You can see Andy sharing a post written by our friend Bijan, Brittany sharing a post about the Lanyrd startup story, and me sharing one of my favorite Tumblrs.

Most of all, it is a place for everyone to have a public conversation with USV about the things they think are interesting right now. Anyone can post to the new usv.com. All you need to do is login with your twitter handle and you are cleared to post.

If you want to show us your new startup, it is cool to pitch us publicly. We would encourage you to use the "Show" syntax, so if you are pitching, start your headline with Show USV: and everyone will know what is going on. Pitching is not spamming at usv.com if its done correctly.

New posts go onto the new page not the front page. Many of us at USV and a growing number of others are visiting the new page several times a day and upvoting posts. When you get upvotes and comments, you get onto the home page, and if you post something awesome, you will get the top of the front page. Nothing new here. Reddit, Hacker News, and others have been doing this sort of thing for years. We finally got around to it oursleves.

Nick, who led the effort to get this out the door, along with Zach, Zander, and Brian, wrote a short explanation of why we did this. I have been encouraging him to write a follow up on how, what stack we used, etc. I hope he will do that.

We have some great tools to make it easier to participate on usv.com, you can find them on the tools link at the top of the feed. Commenting is powered by Disqus, of course, and we would love to hear your thoughts as often as possible. There is a post bookmarklet, a chrome extension, and an android share app. We will be getting a firefox extension out shortly. And if iOS ever opens up sharing in their OS, we will build an iOS share app.

I hope you'll make the new usv.com a place you want to visit regularly and if you are the kind of person who enjoys sharing and posting, please do that. The more the merrier I believe.