Posts from entrepreneurship

Tech Jobs For All Who Want Them

The tech sector is the fastest growing sector of the economy in NYC and around the US and around the world. The tech sector offers high paying jobs and a growing number of them.

But, as we all know, the tech sector lacks the gender and racial diversity that would allow everyone to benefit from this growing sector of the economy. Most of the studies that have looked at the lack of diversity point to a skills gap standing in the way.

So last year Tech:NYC (where I am co-chair) and a few large employers (Google, Verizon, Bloomberg LP) and the Robin Hood Learning and Technology Fund commissioned a study of the skills training programs in NYC to see where there are gaps and what must be done to close them so that tech jobs are available to everyone in NYC who wants one.

This report was done by the Center for an Urban Future and was released yesterday. You can read it here.

What the report reveals is that NYC has a rich and expanding ecosystem of tech skills training opportunities, including K-12 and adult education. But, as we all know, the quality is uneven and so are the outcomes.

The report makes twelve recommendations which are detailed here. They are:

1. Make a significant new public investment in expanding and improving New York City’s tech education and training ecosystem. 

2. Set clear and ambitious goals to greatly expand the pipeline of New Yorkers into technology careers. 

3. Prioritize long-term investments in K–12 computing education. 

4. Scale up tech training with a focus on programs that develop in-depth, career-ready skills. 

5. Build the pipeline of educators and facilitators serving both K–12 and career readiness efforts. 

6. Close the geographic gaps in tech education and skills-building programs. 

7. New York City’s tech sector should play a larger role in developing, recruiting, and retaining diverse talent. 

8. Increase access to tech apprenticeships and paid STEM internships through industry partnerships, CS4All, and the city’s current Summer Youth Employment Program. 

9. Expand efforts to market STEM programs to underrepresented students and their families. 

10. Develop and fund links from the numerous computer literacy and basic digital skills-building programs to the in-depth programs that can lead to employment. 

11. Expand the number of bridge programs to provide crucial new on-ramps to further tech education and training for New Yorkers with fundamental skills needs. 

12. Develop major new supports for the non-tuition costs of adult workforce training. 

I participated on the advisory board of this study and support all of these recommendations. Elected officials and policy makers in NYC (and really everywhere) should read and heed these recommendations.

The tech sector faces many headwinds in society right now for a host of reasons. Not all of them can be solved by an employee base that mirrors the planet. But many of them can be and we need to work to get there.

I want to thank the Center For An Urban Future, Tech:NYC, Robin Hood Learning and Technology Fund, Google, Verizon, and Bloomberg LP for giving us a roadmap on how to get there.

#economics#employment#enterprise#entrepreneurship#hacking education#hacking government#management#NYC#policy#Politics

The Management Rights Letter

A friend asked me over the weekend “why do VCs ask for a management rights letter when they make an investment?”

A management rights letter is a short agreement between a company and an investor to allow them certain “management rights.” These are typically the ability to attend board meetings, the ability to have access to financial reports on a regular basis, and the ability to advise and consult with the management of the company.

While it is nice to have these “rights”, the need for this letter actually has very little to do with how venture capital firms want to work with a portfolio company.

The existence of these letters has everything to do with where the venture capital firms get their funds from. If a VC firm has pension fund investors who are subject to ERISA regulations (as USV does), then they need to be a “venture capital operating company (VCOC)”. And one of the best ways to make sure you are considered a VCOC is to have management rights letters for all (or most) of your investments.

This post on Startup Lawyer explains it well:

Venture funds request these rights in order to obtain an exemption from regulations under the Employee Retirement Income Security Act of 1974. Absent an exemption, if a pension plan subject to ERISA is a limited partner in a venture fund, then all of the venture fund’s assets are subject to regulations that require the venture fund assets to be held in trust, prohibit certain transactions and place fiduciary duties on fund managers. However, a “venture capital operating company” is not deemed to hold ERISA plan assets. To qualify as a VCOC, a venture fund must have at least 50% of its assets invested in venture capital investments. In order to qualify as a venture capital investment, the venture fund must receive certain management rights that give the fund the right to participate substantially in, or substantially influence the conduct of, the management of the portfolio company. In addition to obtaining management rights, the fund is also required to actually exercise its management rights with respect to one or more of its portfolio companies every year.

http://www.startupcompanylawyer.com/2007/12/03/what-is-a-management-rights-letter/

So as annoying as these letters are, it really doesn’t make a lot of sense to try to negotiate away these agreements as the venture capital firm that is asking for it really does need these rights in order to be in business with their limited partners.

#entrepreneurship#VC & Technology

Marketing

I used this title for possibly the most regrettable blog post I have written on AVC back in 2011.

My friend Alex’s post on the topic this weekend has made me revisit my thoughts on the subject of marketing.

Alex starts off his post with this assertion:

2019 was the year when VCs and startup founders soured on paid acquisition.

I am not sure if that is true, but if it is, it suggests a dramatic change in the startup playbook.

Back in 2011, I wrote:

He said “every company needs a marketing budget.” It seemed like a strong reply but in truth not one of our top performing companies had a marketing budget in their initial business plan.

That is certainly no longer true. The 2010s were a decade in which startups mastered marketing and channels like Facebook and Instagram emerged to satisfy their demand.

But what if that game is over? What if that well has gone dry?

Alex suggests we have to go back to virality and customer to customer marketing in his post.

I think we are more likely headed to something new and I am not entirely sure what that is.

And the Google/Facebook/Instagram well has not exactly “gone dry”. But it sure feels like steady-state to me now. It is a must-do but you can’t beat the competition there anymore because everyone is there.

So here we are. At the cusp of something new because we need it. Now we need to figure out what it is.

#entrepreneurship

What To Work On

My partner Brad likes to ask about the distinction between doing things right and doing the right thing. His observation, which I totally agree with, is that many people and companies do things right but don’t do the right thing. Taking the observation one step further, I have seen that doing the right thing the wrong way can actually result in something important and successful whereas doing the wrong thing the right way rarely does.

So that begs the question “what should I work on?”

First and foremost, I believe we should all work on projects that interest us, where we have insights that others don’t have, and that motivate and inspire us and others.

I also think that working on something that meets this first test is necessary but not sufficient.

Beyond that test, which is a must, I believe we should be working on something that can have a large impact. Coming from a venture capitalist, I am sure many people will read that as “make a lot of money.” But that is not what I mean. Impact can be measured by money. But it can also be measured by the number of people that will use your product or service. It can be measured by how it changes the way people think and how they react to your product or service or innovation. Even if Tesla fails as a company (which I do not think will happen), they have changed the way the automobile industry operates forever. That is an example of impact.

And then a third very important thing is how you are going to address the problem, how you are going to market, how you are going to make money (the business model), and how you are going to defend your market position and business. This is often where the magic is. Let’s say you have an insight on how to use video to deliver education to young people to significantly improve learning. You could build a business that delivers that technology to the existing school system. Or you could build a business that goes directly to the students and bypasses the existing school system. These are two very different “go to market” strategies, they imply two very different business models, and they will result in very different long term market positions. Your choices on “how” will ultimately define your work more than anything and getting this right is so critical.

A lot of entrepreneurs ask me for help in figuring out what to work on. I tell them that I can’t tell them what to work on. That has to come from within and nobody can give it to you.

But I can give you a framework because choosing what to invest in is a lot like choosing what to work on. One is an investment of money (and time). The other is an investment of time and yourself. The latter is such a larger investment and the risks are much higher. But the framework is similar.

You must work on something that inspires you and others, you must work on something with a significant impact, and you must do it in a way that makes getting where you want to go as easy as possible and keeps you there as long as possible.

#entrepreneurship

What Will Happen In The 2020s

It’s 2020. Time to look forward to the decade that is upon us.

One of my favorite quotes, attributed to Bill Gates, is that people overestimate what will happen in a year and underestimate what will happen in a decade.

This is an important decade for mankind. It is a decade in which we will need to find answers to questions that hang over us like last night’s celebrations.

I am an optimist and believe in society’s ability to find the will to face our challenges and the intelligence to find solutions to them.

So, I am starting out 2020 in an optimistic mood and here are some predictions for the decade that we are now in.

1/ The looming climate crisis will be to this century what the two world wars were to the previous one. It will require countries and institutions to re-allocate capital from other endeavors to fight against a warming planet. This is the decade we will begin to see this re-allocation of capital. We will see carbon taxed like the vice that it is in most countries around the world this decade, including in the US. We will see real estate values collapse in some of the most affected regions and we will see real estate values increase in regions that benefit from the warming climate. We will see massive capital investments made in protecting critical regions and infrastructure. We will see nuclear power make a resurgence around the world, particularly smaller reactors that are easier to build and safer to operate. We will see installed solar power worldwide go from ~650GW currently to over 20,000GW by the end of this decade. All of these things and many more will cause the capital markets to focus on and fund the climate issue to the detriment of many other sectors.

2/ Automation will continue to take costs out of operating many of the services and systems that we rely on to live and be productive. The fight for who should have access to this massive consumer surplus will define the politics of the 2020s. We will see capitalism come under increasing scrutiny and experiments to reallocate wealth and income more equitably will produce a new generation of world leaders who ride this wave to popularity.

3/ China will emerge as the world’s dominant global superpower leveraging its technical prowess and ability to adapt quickly to changing priorities (see #1). Conversely the US becomes increasingly internally focused and isolationist in its world view.

4/ Countries will create and promote digital/crypto versions of their fiat currencies, led by China who moves first and benefits the most from this move. The US will be hamstrung by regulatory restraints and will be slow to move, allowing other countries and regions to lead the crypto sector. Asian crypto exchanges, unchecked by cumbersome regulatory restraints in Europe and the US and leveraging decentralized finance technologies, will become the dominant capital markets for all types of financial instruments.

5/ A decentralized internet will emerge, led initially by decentralized infrastructure services like storage, bandwidth, compute, etc. The emergence of decentralized consumer applications will be slow to take hold and a killer decentralized consumer app will not emerge until the latter part of the decade.

6/ Plant based diets will dominate the world by the end of the decade. Eating meat will become a delicacy, much like eating caviar is today. Much of the world’s food production will move from farms to laboratories.

7/ The exploration and commercialization of space will be dominated by private companies as governments increasingly step back from these investments. The early years of this decade will produce a wave of hype and investment in the space business but returns will be slow to come and we will be in a trough of disillusionment on the space business as the decade comes to an end.

8/ Mass surveillance by governments and corporations will become normal and expected this decade and people will increasingly turn to new products and services to protect themselves from surveillance. The biggest consumer technology successes of this decade will be in the area of privacy.

9/ We will finally move on from the Baby Boomers dominating the conversation in the US and around the world and Millennials and Gen-Z will be running many institutions by the end of the decade. Age and experience will be less valued by shareholders, voters, and other stakeholders and vision and courage will be valued more.

10/ Continued advancements in genetics will produce massive wins this decade as cancer and other terminal illnesses become well understood and treatable. Fertility and reproduction will be profoundly changed. Genetics will also create new diseases and moral/ethical issues that will confound and confuse society. Balancing the gains and losses that come from genetics will be our greatest challenge in this decade.

That’s ten predictions, enough for now and enough for me. I hope I made you think as much as I made myself think writing this. That’s the goal. It is impossible to be right about all of this. But it is important to be thinking about it.

I know that comments here at AVC are broken at the moment and so I look forward to the conversation on email and Twitter and elsewhere.

#climate crisis#crypto#economics#employment#entrepreneurship#Food and Drink#hacking energy#hacking finance#policy#Politics#Science#VC & Technology

What Happened In The 2010s

My friend Steve Kane suggested I take a longer view in my pair of year end posts this year:

And so I will.

Here are the big things that happened in tech, startups, business, and more in the decade that is ending today, in no particular order of importance.

1/ The emergence of the big four web/mobile monopolies; Apple, Google, Amazon, and Facebook. A decade ago, Google dominated search, Apple had a mega hit on their hand with the iPhone, Amazon was way ahead of everyone in e-commerce, and Facebook was emerging as the dominant social media platform. Today, these four companies own monopolies or duopolies in their core markets and are using the power of those market positions to extend their reach into tangential markets and beyond. Google continues to own a monopoly position in search in many parts of the world, has a duopoly position in mobile operating systems, and controls a number of other market leading assets (email, video, etc). Apple owns the other duopoly position in mobile operating systems. Amazon has amassed a dominant position in e-commerce in many parts of the world and has used that position to extend its reach into private label products, logistics, and cloud infrastructure. Facebook built and acquired its way into owning four of the most strategic social media properties in the world; Facebook, Instagram, Messenger, and WhatsApp. Most importantly, outside of China, these four companies own more data about what we do online and also control many of the important channels to reach us in the digital world. What society does about this situation stands as the most important issue in tech at the start of the 2020s.

2/ The massive experiment in using capital as a moat to build startups into sustainable businesses has now played out and we can call it a failure for the most part. Uber popularized this strategy and got very far with it, but sitting here at the end of the 2010s, Uber has not yet proven that it can build a profitable business, is struggling as a public company, and will need something more than capital to sustain its business. WeWork was a fast follower with this strategy and failed to get to the public markets and is undergoing a massive restructuring that will determine the fate of that business. Many other experiments with this model have failed or are failing right now. When I look back at the 2010s, I see a decade during which massive capital flowed into startups and much of it was wasted chasing the “capital as a moat” model.

3/ Machine learning finally came of age in the 2010s and is now table stakes for every tech company, large and small. Accumulating a data asset around your product and service and using sophisticated machine learning models to personalize and improve your product is not a nice to have. It is a must have. This ultimately benefits the three large cloud providers (Amazon, Google, Microsoft) who are providing much of the infrastructure to the tech industry to do this work at scale, which is how you must do it if you want to be competitive.

4/ Subscriptions became the second scaled business model for web and mobile businesses, following advertising which emerged at scale in the previous decade. Startups that developed the skills to execute a subscription business model with positive unit economics delivered fantastic returns to investors and capital flowed into this sector as a result. This was a very positive development as subscriptions better align the interests of the users and the developers of mobile and web applications and avoid many of the negative aspects of the free/ad supported business model. However, as we end the decade, a subscription overload backlash is emerging as many consumers have signed up for more subscriptions than they need and in some cases can afford.

5/ Silicon Valley’s position as mecca for tech and startups started to show signs of weakening in the 2010s, largely because of its massive successes this decade. It is incredibly expensive to live and work in the bay area and the quality of life/cost of life equation is not moving in the right direction. The physical infrastructure (transit, housing, etc) has not kept up with the needs of the region and there is no sign that it will change any time soon. This does not mean “Silicon Valley is over” but it does mean that other tech sectors will find an easier time recruiting talent to their regions and away from Silicon Valley. And talent is really the only thing that matters these days.

6/ Cryptography emerged in the 2010s as a powerful technology that can solve some of the web and mobile’s most vexing issues. Cryptography and encryption have been around for a very long time, well before the computer. Modern computer cryptography came of age in the 1970s. But the emergence of the internet, web, and mobile computing largely did not integrate many of the central ideas of cryptography natively into the protocols that these platforms were built on. The emergence of Bitcoin and decentralized money this decade has shown the way and set the stage for cryptography to be built natively into web and mobile applications and deliver control back to users. Credit to Muneeb Ali for framing this issue for me in a way that makes a lot of sense.

7/ Technology inserted itself right in the middle of society this decade. Our President wakes up and fires off dozens of tweets, possibly while still in bed. We are all hostage to our phones and the services that we rely on. Our elections are conducted using machine learning technology to segment and micro-target important voting groups. And bad actors can and do use the same technologies to interfere in our elections and our public discourse. There is no putting the genie back in the bottle in this regard, but the fact that the tech sector has such a powerful role means that it will be highly regulated by society. And there is no putting the genie back in the bottle in that regard either.

8/ The rich got richer this decade. Axios wrote in a recent email that:

“The rich in already rich countries plus an increasing number of superrich in the developing world … captured an astounding 27% of global growth.”

But the very poor also had a great decade as Axios also reported:

The rate of extreme poverty around the world was cut in half over the past decade (15.7% in 2010 to 7.7% now), and all but eradicated in China.

The losers in the 2010s were lower middle class and middle class people in the developed world whose incomes stagnated or fell.

Technology played a role in all of this. Many of the superrich obtained their wealth through technology business interests. Some of the eradication of extreme poverty is the result of technology as well. And the stagnation of earning power in the lower and middle class is absolutely the result of technology automation, a trend that will only accelerate in coming years.

9/ This a post publish addition. A huge miss in my original post is the emergence of China as a tech superpower and a global superpower. There are many areas (digital money for example) where China is light years ahead of the western world in technology and that will likely accelerate in the coming years. Being a tech superpower is a necessary condition to being a global superpower and China is already that and getting more powerful by the day.

I will end there. These are the big mega-trends I think about when I think about the 2010s. There is no doubt that I left out many important ones. You can and will add them in the comments (wordpress for now), emails to me, and on Twitter and beyond. And that is what I hope you will do.

#crypto#entrepreneurship#machine learning#policy#Politics#VC & Technology#Web/Tech

Butter

I once asked a famous celebrity chef how he made his pasta taste so good.

He answered “Butter. Lots of it.”

When we land in Paris, jet lagged and cranky, we head right to our favorite street cafe and order strong coffee, baguettes and butter. And our systems are restored.

Butter is one of my life’s treasures. I love it.

Butter is also something we look for in the products and services we invest in at USV.

My partner Nick coined the term Butter, at least inside of USV, and he wrote about Butter on his blog recently, explaining what it is and why we look for it.

I particularly like this part of his post:

On the consumer side, Butter means end-user experiences that are frictionless and joyful.  For example, I recently went to China and was blown away by the QR Code experience — straight butter wherever you go, linking the real world to the online world.  Duolingo is Butter for Learning.  Nurx is Butter for Health.  Coinbase is Butter for Crypto.  Amazon Prime is Butter for e-Commerce.

https://www.nickgrossman.is/2019/the-butter-thesis/

Nick provides some good guidelines on how you can make your product or service buttery in his post.

We look for buttery products and services to invest in because customers look for buttery products and services to use. It is really that simple.

So when you design and build your product or service, make it buttery. That will lead to all sorts of good things.

#entrepreneurship#VC & Technology

Bigger Isn't Necessarily Better

Crunchbase has a story up today explaining that Series A and Series B rounds make up between 25% and 35% of all $100mm+ “supergiant” rounds every year.

That’s interesting but what would be more interesting is to compare the cohort of companies raising Series A and Series B supergiant rounds to the rest of the companies in a given year that raised Series A and Series B rounds.

What would interest me are success rates between the two cohorts. One could measure how many of each cohort are alive five years later. Or one could compare the stock price appreciation over the five year period between the two cohorts.

I have found, and written here, that performance of VC backed companies is inversely correlated to how much money they raise.

There are all sorts of reasons for that, but mostly it is that money is a burden, and anchor, it weighs you down and slows you down.

So I’d like to see the data on these supergiant A and B rounds. I suspect it will be pretty poor.

#entrepreneurship#Uncategorized

Grinding

It is tempting to search for the one magic move that will make everything better. A new VP of Sales. A new database layer in your tech stack. A new brand for your company. Moving everything to the cloud. More capital in the business.

But it is rarely one thing that a business needs to succeed. It is often a little bit of everything.

Back in the early days of Twitter, we could not keep the website and API up. We would hire advisors and they would recommend something new and we would try it and we would still go down. It was terribly frustrating and threatened the business.

During this period of instability, Twitter purchased a search engine called Summize. Summize was a small team of engineers, most of whom had come out of AOL.

After we cut the deal to acquire Summize, I asked Jack Dorsey, who was running Twitter at the time, how we planned to integrate the Summize team. He looked at me and said “we are not going to integrate them, they are going to integrate us.” And Jack made Greg Pass, Summize’s engineering leader, Twitter’s engineering leader.

It was interesting to watch Greg and the Summize team tackle the “fail whale.” Instead of searching for a magic solution, they instrumented the entire system and just started rebuilding every part that was about to break.

It was a slow and steady approach. It took time. But within six months (or thereabouts), we had a much more stable system. And after about a year of this approach, we had mostly said goodbye to the fail whale.

Grinding isn’t very satisfying. It is hard to stand up in front of everyone and say “we are going to fix things around here bit by bit with a lot of hard work.” Big flashy moves are an easier sell most of the time. But they don’t work nearly as well and are prone to complete and abject failure.

If given a choice between a flashy operator or a grinder, I will take a grinder every time. It is a much higher percentage bet. It requires faith and patience and the results are sometimes hard to see. But if you look at the results from grinding it out over a long enough time frame, you can see the power of that approach.

#entrepreneurship#life lessons#management