Posts from entrepreneurship

In-Person vs On-Screen

Last week I spent three hours with my six partners in a conference room talking through what we are investing in and why. It was a terrific session and I had more “ahas” in those three hours than I have had in many many months. There really is no substitute for sitting together with your colleagues working things out face to face.

This week our team met with a founder in Singapore via Zoom. It was midnight in Singapore and noon in NYC. In one hour we learned enough from the founder to be able to make a decision on whether or not to invest in the founder’s company.

In the last year, events like the latter one have been commonplace. Events like the former have been non-existent. And there are many in the tech sector and broader business sector (and other sectors too) that have come to believe that on-screen interactions will be the primary way we engage going forward.

For certain things, like raising capital and investing capital, on-screen works pretty well. Founders have figured out that they can raise capital from their kitchens, bedrooms, and offices in weeks vs roadshows that lasted months. I don’t think we will see founders going back on the road in any material way ever again. And founders in Singapore can access capital markets in NYC with ease. And investors in NYC can access investments in Singapore with ease. These are all important and disruptive changes to the startup, tech, and business sectors.

But in the last month, as I have been going into the USV offices most days, I have come to realize what we have been missing with the on-screen work model vs the in-person work model. Many things are more efficient on-screen but some things are way better in-person.

Understanding which is which and then figuring out how to continue to do the in-person things will be critical to leaders and teams navigating the new normal.

I got an email from a founder/CEO about six months ago saying that his company was going back to the office completely when the pandemic was over. I had not heard many CEOs taking that strong of a stance at that time. Since then, I have heard the same from a number of our portfolio company leaders. They are in the minority but they are not non-existent. When we survey our portfolio we find that about 20-25% will go back to full-time in the office work, another 20-25% have gone entirely remote, and the balance will try to figure out a hybrid model that makes sense for their company.

At USV, where we have landed for now, and maybe forever, is a bias to be in the office, particularly on the days we meet in person, but we are also way more open to on-screen work and we have an expectation that some team members will choose to work on-screen for multiple days a week, possibly the majority of days a week. We see that working parents benefit from the flexibility that on-screen work allows and younger team members benefit from the socialization and camaraderie that an office provides. We also see that those who commute long distances benefit significantly from being able to reduce the commuting load by working on-screen multiple days a week.

Our business has a natural rhythm of two days a week when we meet as a team; Monday and Thursdays. So those tend to be the days that team members try to be in the office and those are the days we do things like cater in lunch and maybe go out after work together. That allows us to retain the team dynamic and culture while being more open to on-screen work going forward.

We definitely have not figured this all out, but we are starting to see some patterns and some benefits of both work modes, and we are trying to navigate to a good middle ground.

Each company needs to figure this out in a way that works for their team and culture and I believe that there is no “right way” for everyone. But I also believe that in-person interactions remain critical to making better decisions, better products, better cultures, and better companies and so I would encourage everyone, including the fully remote teams, to figure out how to make in-person interactions happen on some regular cadence.

#entrepreneurship#management

The Bolster Board Diversity Survey

Last June, I wrote about board diversity and suggested some things we are doing and that you can do to diversity your board.

In the ten months that have passed since I wrote that I am pleased to say that we have seen a noticeable increase in board diversity in our portfolio. I have personally stepped off a few boards to make room for diverse board members and I am prepared to do more of that. A number of my partners have done the same. It is that important to me and USV.

But I can also tell you that the state of diversity in startup/growth company boards and our portfolio is still awful.

Our portfolio company Bolster connects fractional executives and board candidates to startup and growth companies. They have done some of the board searches for diverse candidates in our portfolio and they are going to do a lot more.

They have been surveying the startup and growth sector over the last few months to determine the state of diversity on boards. They published the results today. The numbers are embarrassing.

We can do better and we must do better.

Here is how:

1/ Make room on your board for independent directors at the very start and fill those seats with diverse candidates.

2/ Ask your investor directors to become observers to make room for independent diverse candidates.

3/ Prioritize this.

4/ Use Bolster or other service providers to surface great diverse board candidates.

There are so many qualified diverse candidates out there for you to bring onto your board. I have participated in many of the board searches in our portfolio in the last year and I am blown away by the diverse talent that is out there waiting to help you grow your company. You just need to make room for them and ask them to join your board.

Just do it.

#entrepreneurship#management#VC & Technology

The Vision Thing

A well-known entrepreneur turned VC, who will go unnamed because I am not sure he would want me to share this conversation publicly, once told me “if you remove a founder, you must sell the company within a couple of years or it will start to decline in value.”

I don’t entirely agree with that and my experience with it has been different, but it brings up an incredibly important topic about leadership.

I like to keep things simple and in my simple mind, leadership comes in two flavors, visionary leadership and operational leadership. Founders are almost always visionaries (if they aren’t, run in the opposite direction) and hired CEOs are almost always operators.

What this VC was saying is that once you replace visionary leadership with operational leadership, the Company will stop innovating and start to lose value. I agree completely that companies that stop innovating will start to lose value. What I don’t agree with and have seen first hand, is that you can have a team that can provide both operational and visionary leadership.

Leaders who can provide both operational and visionary leadership are a rare but special breed. When you find one, get on their bus and stay on it for as long as you can. It will be an incredible trip.

It is also the case that you can pair visionary leadership with operational leadership and I have seen that model work very well for long periods of time. Most commonly, the visionary leader is “in charge” and the operational leader runs the business on a day to day period. That can be an Executive Chairman (visionary) and a CEO (operator) or it can be a CEO (visionary) and President/COO (operator). Most commonly in this model, the visionary leader is the founder and the operator is a hired executive.

Small early-stage companies can succeed without operational leadership but not forever. That is why founders who are great visionaries but weak operationally can be very successful for a while at least. Once a company gets into the hundreds of employees and is headed to the thousands, it needs operational leadership and this is where many visionary founders struggle. And this is when operational leaders are hired and the work starts to find the right long-term sustainable operating model.

Some founders are this rare breed of visionaries who can operate too. Most are not. So this work to find the right pairing is critical and is a lot of the work that board members do with the founders and their leadership team in startups.

But going back to my friend and his advice that I started this post with, it is true that operational leadership alone will not get the job done. And it is also true that operational leaders will have a hard time getting “the vision thing” from below. It has to come from the top. Operational leadership, fortunately, does not.

#entrepreneurship#management

Entrepreneurship In Latin America

It is a little known part of my career, but for a brief period from 1997 to 2001, I was part of a small group of investors who helped to create a startup ecosystem in Latin America.

It all started with a company called StarMedia which created a Yahoo-like “portal” for Latin America. My partner Jerry Colonna and I met StarMedia in early 1997 and we brought it to our partners at Chase Capital Partners because we wanted to lead a Series A investment in it. In that Chase Capital Partners meeting was a woman named Susan Segal who ran Chase’s Latin American private equity investing. She pulled me over after the meeting and asked me if there were other startup companies like StarMedia in Latin America. I told her that there must be but I wouldn’t know how to find them. She said, “I can help with that.”

So began a five year investment partnership between Flatiron Partners (our VC firm) and Susan’s Latin American private equity business. Susan and her team worked their Latin American connections and they brought the deals to us and we vetted them for team, technology, market need, etc. We did something like a dozen investments together including MercadoLibre (one of the greatest Internet companies ever in any region), and Patagon.com (where I met the founders Wences Casares and Micky Malka).

But it was StarMedia where I learned the most. I made and lost more money personally (at that time in my career) on Starmedia. I have a StarMedia stock certificate in my office that I look right at that was made out to one of our family entities. It was once worth tens of millions of dollars and is now worthless and has been for decades. It takes messing up on that massive of a scale to learn some things.

StarMedia is also where I met my good friend Jerry who would have been 70 today. Jerry grew up in Mexico and moved in and out of Latin America and Silicon Valley with ease. He understood both places and helped to bring them together. I miss Jerry so much. He was a mentor, advisor, and coach to many of the earliest Latin American Internet entrpreneurs.

I was reminded of all of that history yesterday as our firm listened to a pitch by a Latin American team that is building a very exciting company. It reminded me that we seeded something twenty-five years ago that has gone on to become a vibrant startup ecosystem. Jerry, Susan, and I made a great team and we did something really important together.

#entrepreneurship#VC & Technology

Resilience

A friend and I dined last night at a restaurant that opened in our neighborhood last summer, in the middle of the pandemic. For the first six months of its existence, they could not welcome diners into the space that they had spent time and money creating. They carried on, figured out how to make money serving customers outside. As the NYC economy starts to recover, they are still standing. And they are now welcoming diners into the lovely space they created for them a year ago.

Resilience is an extremely valuable trait when you are starting and running a business. In a bull market that rewards other things, it is often overlooked. But I don’t overlook it.

A reporter asked me recently about a company that I am on the board of that has become very successful. I told the reporter that for years, the founder carried on while every competitor left the market in search of a viable business. The viable business arrived eventually and the founder was rewarded for his patience.

Sticking with something, even when the chips are down, is hard. Many people (most?) can’t do it. They are impatient. They want the easy money.

While the world has been going through a painful and deadly global pandemic, the tech sector has experienced a bull market of epic proportions that has lifted all boats and made some incredibly wealthy. But that bull market will eventually end and things will get harder for founders and CEOs and investors.

And that is when resilience will be in short supply. So look for it in founders now, when it is less necessary.

#entrepreneurship#VC & Technology

News Moments

There are these news moments that we remember vividly forever. The plane flying into the World Trade Center. The mob breaking into the Capitol. Reagan at the Berlin Wall. Just writing the words, I can see the images in my head.

Our portfolio company Recount Media is all about these moments. Recount captures them quickly and concisely and shares them on social media and other digital platforms so that the world can see what is going on around them.

Today, they are trying an experiment that I am quite interested in. They have taken one of their most-viewed news moments, one they published exactly one year ago today, and they have minted it into a one-of-a-kind digital news moment and are offering anyone the opportunity to own it.

The auction is going on here and I just placed a bid. My goal is not to win this auction, although it is possible that I could. If I do, I will contribute it to a DAO that would allow group ownership.

Recount explains why they are experimenting with NFTs here. I particularly like this line:

So as we approached the one-year anniversary of the Calendar, our first runaway viral video, we thought it would be fun to celebrate that breakthrough in a manner that itself is an expression of our relentless aspiration to rethink how journalism works — its form, function, and economics — in this moment of intense fluidity and flux in digital media.

One of the challenges with digital media is the limited business models available to news organizations. You either sell ads or subscriptions, or both.

Who knows whether minting news moments can help stimulate new business models, but it sure can’t hurt to try. Sticking to the old ways of sharing the news and making a business out of it is not interesting to me. Coming up with new ways of sharing the news and making a business out of it very much is.

#crypto#Current Affairs#digital collectibles#entrepreneurship

Return/Hybrid/Remote

With vaccinations topping 90mm doses in the US and upwards of 75mm doses likely to be injected into arms in the US in March, many companies are starting to think about what a return to the office might look like this summer and fall.

I read two great posts this weekend talking about what this all means for knowledge workers and the companies that employ them:

Imagine Your Flexible Office Work Future – Anne Helen Petersen

We’re Never Going Back – Packy McCormick

They both reference the writing of Dror Poleg on this topic so I will link to his blog as well.

What Anne and Packy are writing about is the future of our work spaces and whether our employers will require us to come back to the office full-time or will something else emerge.

Anne opens her post explaining that while the pandemic has proven that knowledge work does not need to be done in an office filled with all of our co-workers, what we have been doing in the last year is not what we will likely be doing in the future. As she observes, we have simply been working from our homes in the last year and that is not necessarily the future.

Packy asserts that employers don’t really have control over the decision of where we will all work going forward, employees do. The war for talent will determine where all of this lands.

Both are extremely thoughtful posts. I have been thinking about this topic for the better part of a year, for USV and for the 150 portfolio companies that we have invested in and advise. Anne and Packy’s thoughts line up pretty cleanly with mine. I think the change in venue for knowledge work is likely to be one of the biggest changes that we will see this decade.

Last summer, the Gotham Gal and I decided to make a co-working space where people living in the Clinton Hill and Bed-Stuy neigborhoods in Brooklyn could work when they don’t want to go to the office but also don’t want to work from their kitchen or bedroom. We call it FrameWork and it will be opening next month. The tagline is “Your Home Office Away From Home.” We are very excited by the possibility that many more people will work most of the time in the neighborhoods that they live in and commutes will be an occasional thing versus an everyday thing. I think the quality of life improvements and the quality of neighborhood improvements that will emerge from this will be dramatic.

FrameWork is just an example of the many ways that knowledge workers will choose to work going forward. I expect the innovation around work spaces will be fast and furious once we can actually start working somewhere other than our home. And I expect that to start to happen in the second quarter of this year as I explained in my Jan 1st 2021 blog post.

So if you are an employer, what do you do? This suggestion by Packy is interesting:

instead of mandating a certain number of days in-office, companies should view employees as customers who they need to convince to come in with a great product:

Re-design the office to facilitate things that employees can’t do at home: whiteboard rooms, podcast and video recording studios, screening rooms, maker tools, etc… 

Take less space on more flexible terms in order to adapt and evolve as employees’ needs do.

Make the office feel more like a social club, with more focus on spaces for employees to share meals, have spontaneous conversations, and take in work-related programming. 

Hire hospitality and flexible operators to help them figure it out. Alma does hybrid work/social well, so Carlström set up Another Structure to bring that expertise to companies that want to build the right spaces for this new world. 

Infuse the space with technology to facilitate communication and collaboration with remote employees. 

https://www.notboring.co/p/were-never-going-back

But it is this observation by Anne that I think is maybe the most powerful of all:

The idea of “boundaries” has become so porous when it comes to cultivating work/life balance that it’s lost all meaning. People don’t respect boundaries. You don’t respect them. Even when the pandemic is over, it’s going to be very, very difficult to try to rebuild them. What we actually need are guardrails, big and sturdy ones, to protect us from the runaway semi-truck of work.

In our current framework, boundaries are the individual’s responsibility, and when they’re broken, it’s because the individual failed to protect them. But guardrails? They’re there to protect everyone, and they’re maintained by the state, aka your company. There are a lot of ways to actually build guardrails around employee’s lives, and we discuss them at length in the book. But the larger shift has to be away from all of this worthless “personally-maintained boundaries” bullshit.

https://annehelen.substack.com/p/imagine-your-flexible-office-work

As Anne correctly points out, working from home has meant working non-stop for many of us. I am guilty of this and I feel it after a year of working this way. Employers will need to figure out how to constrain work hours for their employees because it turns out we can’t do that for ourselves. Office hours (9 to 5) did that for us. What will be the new office hours? We will need to figure that out.

We have the possibility to fundamentally change the way knowledge work is done and how we who do it experience it. The opportunities around this are almost endless and I am personally very excited by it.

#employment#entrepreneurship#NYC

Ten Years And Just Getting Started

I remember meeting Zach Sims and his co-founder Ryan Bubinski back in 2011 when they started Codecademy. Zach was still in college and thinking of dropping out to focus on the Company. I just realized this morning that it has been ten years since then. Wow. Time does fly.

Like many great companies their idea was simple, but powerful.

build the easiest way to learn to code

They did that and they have gone on to build a large and profitable business helping anyone learn to code, get a job, and start a career.

But it isn’t as simple as that. In fact, when you look at the ten-year history of the Company that Zach lays out in this great tweetstorm, you see how hard it is to build something lasting, sustainable, and important.

What is more impressive is that when you read this blog post Zach wrote this week you see that he is just getting started. When building long-lasting companies, it helps to have a mission that really matters. This line from Zach’s post brings it home for me:

Times like these remind us that what we’re doing matters: hundreds of thousands of people around the world use Codecademy every single day to learn the skills they need to find jobs, upgrade their careers, and live better lives.

The world is changing quickly before our eyes, the job market is changing with it. Our educational institutions are trying to evolve to meet the needs of students and employers but it is hard to turn a battleship around. So companies like Codecademy are filling in the gaps, helping people learn the things they need to learn, and building some incredible businesses along the way.

To another ten years!

#entrepreneurship#hacking education

Secondary Markets

Buying something from the creator or issuer is often called the “primary market.” Reselling it to someone else is often called the “secondary market.” I have spent my career in the primary market, buying equity from very young companies and holding it for many years usually until a sale or IPO. That has worked well for me over the years but recently, I have watched a vibrant secondary market develop for private company shares and I think that is a good thing as I believe more liquidity is better than less liquidity in most, maybe all cases.

I was reminded of this yesterday when I purchased tickets to a Knicks game against the Warriors next week at Madison Square Garden. As a season ticket holder, I was able to get into a pre-sale to purchase two of the two thousand seats that will be available at that game, the first Knicks game at MSG with fans in almost a year.

Those tickets come with some very serious, and appropriate requirements including obtaining a negative Covid PCR test within 72 hours of the game. After discussing the requirements with my son last night, we decided it wasn’t for us and I put the tickets on StubHub. Although I probably could have and should have marked them up, I just wanted my money back and the tickets sold in a matter of minutes and I was made whole.

I knew I could do a secondary sale when I purchased the tickets and I also knew that as a season ticket holder, I had the ability to buy when others could not, and that I had to move quickly. Knowing that I could resell them took the risk out of moving quickly and I was able to do that with confidence.

That’s an example of how secondary liquidity reduces risk and increases trust and confidence in a market.

Going back to startup equity, I believe that we will continue to see more and more secondary liquidity for startup equity. Our portfolio company Carta has recently launched a market for exactly that called CartaX and I believe it will be an important source of secondary liquidity for founders, employees, and investors in startups. As we de-risk the investments of time and money that everyone is making in these startups, I believe that will draw more talent and more capital to the startup sector.

And that is a good thing.

#entrepreneurship#VC & Technology

Rooftop Solar

I’ve been thinking a lot about the economics of rooftop solar. Our family has invested in rooftop solar over the last five years in an attempt to reduce our carbon footprint and reduce our electric bills. When you do that in combination with electrification of your heating and cooling (using electric heat pumps vs gas or oil), you can save money and live a more sustainable life.

We have used SunPower solar panels and inverters and they come with a nice analytics service that shows how much of your electric consumption is being generated with solar power.

Here is a chart from our SunPower dashboard that I looked at this morning:

You can see that we generate about 2/3 of our energy consumption with solar. I believe that with some additional conservation efforts, we can get to 75%+ solar.

The installation cost of the rooftop solar was about $24,000 after the federal solar tax credit.

Had we taken a 30 year self amortizing home equity loan to finance the solar installation, we would be paying $1900 a year in principal and interest payments at current home equity rates.

As you can see, Sunpower estimates that we are saving $2854 a year with our rooftop solar, so there is quite a nice profit in rooftop solar at current interest rates if you live in medium to high energy cost locations in the US.

I think there are a number of good business opportunities in and around rooftop solar. For one, making it drop dead simple for a homeowner to finance, order, and install rooftop solar and start getting paid for doing so feels like a winner to me.

#climate crisis#entrepreneurship