Posts from entrepreneurship

Spreading Jam

If your job requires you to design, build, and ship software applications and you want a better way to get feedback on the application, the design, etc, then I have a suggestion for you. Try Jam. Or Jam.dev to be specific.

Jam allows you to turn your web application into something akin to Google Docs, where your colleagues, customers, beta testers, QA team, etc can comment directly on the application. Jam integrates with existing tools like Jira, GitHub, Slack, Figma, Loom, and others to make the feedback collected on Jam as actionable as possible.

Jam was built by Dani Grant and Mohd Irtefa, who met as product managers at our portfolio company Cloudflare. Dani then spent two years at USV helping us spot interesting investments before starting Jam. USV is a seed investor in Jam along with our friends at Version One, Box Group, and Village Global.

So if you want a better way to collect feedback on your application, spread some jam on it.

#entrepreneurship

Mobile App Stores and Crypto

I have written extensively on this blog over the last decade and a half about the significant negative consequences that the two large mobile operating systems have on distribution of software. I am strongly opposed to the monopolies that Apple and Google have over mobile apps that run on iOS and Android.

I am rooting for Epic/Fortnite in their battle with Apple over the 30% tax that Apple charges developers for distribution in their app store. But more than the tax, what bothers me about these monopolies is the innovation tax they impose on the broad tech sector with their terms of service/rules.

There is no better place to see that than crypto, the next big wave in computing (after web and mobile). There are a number of reasons that decentralized crypto apps (dapps) have not gone mainstream, but certainly one of them is that the Apple and Google app stores don’t allow a number of important features that decentralized apps require.

The founder and CEO of our portfolio company Coinbase, Brian Armstrong, explained this well in a tweetstorm last week:

He ended with this tweet:

Coinbase, Epic, and Spotify are not alone in their struggles with Apple and Google. They are simply large enough and protected enough to go public with their struggles. The truth is every developer that distributes software through these two app stores struggles with them.

In what world does it makes sense for two large and powerful companies to completely control software distribution on mobile phones? In no world does it make sense. It must stop.

#crypto#entrepreneurship#mobile

Circulate Networking Events

My friend and former colleague Charlie O’Donnell created a new kind of networking event for the moment we are in. These are virtual networking events designed to “include diverse perspectives in the innovation community.” They are called Circulate.

These are curated discussions, meaning you sign up to participate and the right group is selected to attend.

These industry-specific events will bring together a who’s who of accomplished and influential professionals as well as the most promising and most curious people from underrepresented communities that represent the future of these spaces.

http://www.brooklynbridge.vc/circulate

The next three events are shown here:

If you are interested in participating in a Circulate Event, pls sign up here. There are a few remaining spots open for the event Thursday night on Education.

#entrepreneurship#NYC#VC & Technology

Bolster Your Management Team And Board

I have had the great pleasure of working with Matt Blumberg and the senior leadership team of USV’s former portfolio company Return Path (which was sold in 2019) for much of the last twenty years. Matt and many members of his leadership team got the band back together early this year and started a new company called Bolster in partnership with Silicon Valley Bank and the early-stage VC firm High Alpha. A few months later, USV joined that investor group along with our friends at Costanoa.

Matt is a great CEO and has even written a book about leading and growing a company called Startup CEO. Their new company Bolster is all about scaling and building a great management team for your startup. The Bolster team believes that scaling a high growth company means that you need to adapt, grow, and supplement your management team continuously along the way. And a big part of doing that is accessing “fractional talent” which means people that don’t work for your company full-time and permanently. All of this is outlined in the Bolster Founding Manifesto which explains why they started this company.

Fractional talent can be a fantastic independent board member, fractional talent can be a CFO mentor for your VP Finance that you want to grow into a great CFO, fractional talent can be a VP Product that can cover for your VP Product while they are on family leave, fractional talent can be a part time Chief Revenue Officer that you want to “date before you get married”, fractional talent can be a part time Head Of Insights that will allow you to understand if you need a full-time Head Of Insights. I could go on and on because there is no end in sight for the various ways a CEO can leverage fractional talent to make their company and their management team better.

Bolster came out of stealth and into a beta period today and is opening up its marketplace to companies that want to access fractional talent and to executives who want to work at high growth companies in interim, fractional, advisory, or board roles. Bolster also will allow venture capital firms and startup investors to participate in its platform as super users. If you are any of the above and want to engage with the Bolster network, you can sign up here. The full marketplace will launch soon.

We have already introduced Bolster to a bunch of USV portfolio companies and the enthusiasm for this model is really high. I love the idea of USV investing in a company that can help our portfolio companies do things better. We have done that before with Twilio, MongoDB, Carta, Sift, and a host of other companies. It’s a double whammy and it pays off in so many ways.

#entrepreneurship#management

Pay and Precedent

We are finally in an era where an equal role comes with equal pay. This is a very good thing but it comes with some hard lessons. One of them is about pay and precedent.

You cannot make a hire and a compensation commitment without thinking very deeply about the precedent you are setting.

Let’s say your company is now fifty people and you can see that you will need to be a hundred and fifty people in a couple years. You decide it’s time to build a proper senior leadership team. And you want to start with a CTO. That first “C level” hire will set a precedent for what you should be prepared to pay (in cash and in equity) for all of your C level hires. You do not have to pay every C level executive the exact same amount but they need to be in a band and I would argue that they need to be in a tight band. And there needs to be a strong rationale for the compensation for each role.

Let’s say you are bringing on your first independent director and that person is so great and you want to give them a very generous equity grant. You can do that but you should know that you ar setting a precedent for what the next independent director will get.

Let’s say you want to bring on a mentor and advisor for your VP Finance to help her “level up” to a CFO. That advisor will want and should get some equity compensation. What you do for that advisor will set a precedent for all other advisors you bring on.

Many times I hear founders say “this is good enough for now and we can fix it later.” But fixing compensation issues later can be very hard and sometimes impossible, particularly if your company significantly increases in value between the problem you want to fix and when you need to fix it.

These are some of the most painful errors you can make in a startup. It is very important to be thoughtful, diligent, and precise in your compensation decisions and approach and you have to start early in a company’s life. Getting a strong and experienced head of people onboard early on will help you avoid these issues. And trust me, you want to avoid them.

#entrepreneurship#management

Investments That Don't Work

I woke up to a dream this morning where I was playing a game that was very similar to Turntable.fm, a failed effort to create a social music experience that had a moment back in 2011 and that I had invested in via USV. In the dream, someone had created a new version of the game that was basically identical to the original version. It was as fun to play it as it was to play Turntable back in the day. Then I found out that the creators of this new game had received venture capital funding and were going to turn it into a business. I met the founders and was happy for them. Then I woke up.

Investments that don’t work haunt me. It isn’t the losing money part. I have learned to live with that. It comes with the territory in VC. It’s the losing part that haunts me. The what could have been part. The “if only we had done it differently” part.

Good ideas will eventually be executed successfully. And investments that don’t work are often failures of execution. So it makes sense that someone could come along and make your idea work after you failed with it. It happens regularly in the startup world. And it can be painful to watch.

I’ve gone through a few periods of burnout in my career and it was usually brought on by a string of painful failures. I’ve watched others navigate that similarly. If you are heavily invested in something that doesn’t work, it hurts. And the more the investment is of yourself, your time, your enthusiasm, the worse it is.

I’ve gotten out of these periods of burnout by turning my attention to something else. Crypto was helpful for me back in 2013 and 2014 when I was going through one of those periods. It was something new that I could throw myself at, that was different, and that was working.

It’s that old adage about getting back on the horse that tossed you. I am not a horse rider, but I get the adage and agree with it. The best salve for failure is success. And you have to keep going to get there.

#entrepreneurship#VC & Technology

Financing Document Forms

Many founders want to do SAFE note financings for their early rounds to save time and money.

My response to that is “let’s do a priced round, we can use a standard financing form we both like, we won’t use a lawyer on our side, and we can close in a week.”

The key to being able to do that is the availability of standard financing forms. Many venture law firms and also the NVCA have published standard forms on the web.

Here are Cooley’s forms.

Here are Orrick’s forms.

Here are the Series Seed forms created by Fenwick.

Here are the NVCA forms.

Here is Gunderson’s document library.

I am not suggesting the founder go without a lawyer. I am suggesting that the founder and their lawyer pick a “standard form” to use to do the equity round, send it to us for our review, and if we are comfortable with it (they are all pretty much the same), then we will agree to sign it without negotiation and close within a week.

Typically the only thing we all have to agree on is what the cap table will look like before and after the financing so that the correct numbers are put into the documents. Everything else is pretty standard anyway.

There is this narrative that equity rounds are expensive and take a long time and that SAFE notes are quick and inexpensive. That is not right. We can do priced rounds as quickly and inexpensively as SAFE notes. And we do that regularly.

#entrepreneurship#VC & Technology

Independent Director Compensation

I got this question yesterday and answered via email and thought I’d share that discussion with all of you:

I enjoyed your article on Board Diversity (https://avc.com/2020/06/board-diversity/ ) and am planning to implement it at my company. I was hoping to get some guidance on the following:

* How would you define the role of the independent director / what is their job? 

* How would you compensate them for this job? 

I believe the role of the independent directors is to represent “the Company” in all board discussions. Founders and investors can and do think about what is best for the Company, but they also think about what is best for them. An independent director can and should represent the Company in Board discussions. Also, an independent director should have experience operating a business and should actively share that experience with the leadership team.

For compensation, I like the use an annual amount of $100,000. That is substantially less than public company directors make (which is more like $200,000 per year), but being a public company director is more time consuming and exposes a director to more liability. So I feel like $100,000 a year is reasonable compensation for a private company director. The spread between private company board compensation and public company board compensation narrows as a Company gets closer to being public.

Private company directors are usually compensated in stock, not cash.

I like to use the following approach for stock based compensation:

  • For companies valued below $40mm enterprise value, pay an independent director 0.25% of the Company per year served on the Board.
  • For companies valued above $40mm of enterprise value, pay an independent director a percentage of the Company per year served equal to ($100k/enterprise valuation). For example, if your Company is worth $100mm, then you would pay 0.1% per year served ($100k/$100mm).
  • It is typical to make a “front-loaded” grant of four years of value and vest it over four years. So in this second example, where the Company is worth $100mm, the independent director would be granted an option for 0.4% of the Company, worth $400k, and vest that over four years.
  • However, for very early stage companies where the annual grants are quite large (0.25% per year), it is more common to make those grants annually so that the dilution from these grants comes down as the Company’s value increases. That said, front-loaded four-year grants are made for directors of early-stage companies as well.

As I said in the blog post on Board Diversity linked to above, I believe getting independent directors on your board from the very start is a good move. It will make your Board meetings better and it will make your Company better. And make sure to strongly consider diverse candidates when you add independent directors to your Board.

#entrepreneurship

Entrepreneurship And The Climate Crisis

Vinod Khosla penned a fantastic blog post this week outlining how a few entrepreneurs have made a material impact on clean energy and reducing our collective carbon footprint in the last decade and how a few more can move the needle even further in the next one.

Vinod starts off with this statement:

12–15 entrepreneurs, driven by entrepreneurial energy and passion for a vision, and a little bit of luck, could change the climate crisis into societal transformation

This is music to our ears as USV has started to back climate-focused entrepreneurs. I hope that we can back one or two of these 12-15 innovators in the coming years. That would be great for society and great for USV too.

#climate crisis#entrepreneurship

When Do I Create A Board?

I’ve been asked this question a bunch in the last few weeks in response to my post about more diversity on Boards.

My answer to this question is simple.

A Company should have a Board the day it is formed. The Board should contain one Founder (or possibly two) and at least two independent Directors.

I know that many founders want to control their Boards for as long as possible. I would prefer to see a Founder give up control right away but place control in the hands of independent Directors they nominate. That way they can be comfortable that the independent Directors will have both their interests and the Company’s interests at heart.

This will also make it a lot less likely that the Investors will eventually control the Board as the Board will have institutionalized the notion of independent Directors early on and ideally they will remain the majority of the Board forever.

Finally, it’s a great idea to pick diverse candidates for those independent seats day one. Diversity means “not like us” so it could mean gender diversity, racial diversity, industry diversity, experience diversity, or ideally more than one of those things.

#entrepreneurship