Posts from 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

Six Months Later

In early June, I wrote this post explaining that I and we need to do more to reduce the inequality issues for Black people in tech, venture capital, and startups.

I think MLK day is a good time to talk about what has happened since that post.

We have identified a number of areas where we must do better:

  • Increase the number of Black founders we back
  • Increase the number of Black team members at USV
  • Increase the number of Black VCs we work with and support
  • Increase the number of Black board members in our portfolio
  • Increase the number of Black leaders in our portfolio
  • Increase the number of Black employees in our portfolio
  • Increase the number of Black engineers in our portfolio
  • Increase the number of Black investors in our funds
  • Increase the number of Black college graduates going into tech, venture capital, and startups
  • Create pathways for Black students to study STEM and find their way into careers in tech, venture capital, and startups

We have ongoing projects, workstreams, investments, and efforts in each and every one of these areas and we have made tangible progress in almost all of them.

I believe that the inequity issues are so severe and deeply rooted that it will take a concerted effort over a number of years to truly erase them.

But we are making progress and if we keep at it, across many dimensions, we can get where we need to go. Roughly 15% of Americans are Black. Until we can look around the room and see at least one Black person for every six in the meeting, we haven’t done enough. Today is a good day to remind ourselves of that and recommit to the work that needs to happen.

#employment#entrepreneurship#management#VC & Technology

The Work-Life Balance Revolution

Yesterday, I had a gap in the middle of the day. So the Gotham Gal and I took an hour-long walk with our dog Ollie. It cleared my head and when I got back to work, I was full of energy and clarity.

I’ve been working exclusively from home since the end of November 2019 when we left NYC to go to LA. It has been a stretch of incredible productivity for me.

I am not arguing against going back to the office. As I’ve said in many posts recently, I can’t wait to go back to the office. But I am sure that many of us have had the same experience that I have had working from home during the pandemic. It has its advantages.

And in that realization exists the possibility that we are on the cusp on a revolution in how many of us can find work life balance going forward.

My friend Tom wrote this post last week suggesting that a husband and wife can now work a total of 50 hours a week between them and have two full-time jobs and raise a family. This part sums up the idea pretty well:

Why do I think 25 hours/ week is the equivalent of a 50-hour week (counting commuting)?

Given a nine-to five schedule with an hour for lunch, the 40 hour work week was only 35 to begin with.

As an ex-CEO, I think that at least ten hours of each workweek go to socialization, surfing the internet, checking with the spouse or checking up on the children, chatting on smartphones etc. (Mary thinks only five).

Meetings and travel to meetings waste a huge amount of time and money. One reason that Zooming appears not to have reduced productivity is that many of the meetings weren’t productive to begin with.

Office space and often parking are expenses to the employer but they are not income to the worker. If office space and all its attendant costs can be drastically reduced, employers can afford to pay more dollars in salary for the same productivity.

Commuting expense including perhaps even the second car, daycare, clothing and dry-cleaning bills, and paid before and after school activities whose purpose is to supervise school age kids are all expenses which go away when parents can work from home. Even if the WFH employee has less gross taxable income, he or she will have more cash at the end of each month.

https://blog.tomevslin.com/2021/01/newnormal-the-50-hour-family-work-week.html

Even if Tom is off by a bit with his math, he makes a terrific point. Companies can ask for less of a family’s time, pay them more, and get the same amount of work done using the techniques we have perfected during the pandemic.

I realize that not all jobs lend themselves to this approach. But maybe more than you think. Take doctors. We used to have to go see doctors in their offices. Now with digital health services like those offered by our portfolio companies Brave and Nurx, the doctors are seeing the patients from their homes (or wherever they are).

Teaching is another occupation that presents a lot of opportunity to rethink time and location. Many teachers have been learning how to help their students master new things from their kitchen counters over the last year.

I want to say it again. I am not suggesting that we won’t be going to offices anymore. I am not saying doctors won’t have offices anymore. I am not saying teachers won’t be in classrooms anymore.

What I am saying is that we can and should be asking how much of our work time needs to be in person, face to face, and how much can be virtual. And I am certain that we will be asking that. In our year-end reviews at USV, we heard again and again from our team that they wanted to ask those questions. They should. Commuting and business travel are not the necessities they were last century.

And, naturally, this coming work-life balance revolution presents tremendous opportunities for new products, services, and companies. We have been seeing many of them crop up over the last year and have invested in a few of them.

From bad comes good. This pandemic and all of the things that have come with it has been awful. But I believe it will unleash all sorts of new behaviors and businesses that will be for the better. If you squint, you can see them coming.

#climate crisis#economics#employment#enterprise#entrepreneurship#Family#hacking education#health care#management#VC & Technology

What Is Going To Happen In 2021

Hi Everyone. Happy 2021.

Today, as is my custom on the first day of the new year, I am going to take a stab at what the year ahead will bring. I find it useful to think about what we are in for. It helps me invest and advise the companies we are invested in. Like our investing, I will get some of these right and some wrong. But having a point of view is very helpful when operating in a world that is full of uncertainty.

Let’s start with the elephant in the room. The Covid Pandemic will end in the developed world in 2021. I think we will see the end of the Covid Pandemic in the US sometime in the second quarter. I believe the US will work out the challenges we are having getting out of the gate and will be vaccinating at least 40mm people a month in the US in the first quarter. When you add that to the 90mm people in the US that the CDC believes have already been infected, we will have well over 200mm people in the US who have some protection from the virus by the end of March. By the end of the second quarter in the US, anyone who wants to be vaccinated will have been able to do so. All of this will be aided by at least two additional approved vaccines in the US in January and new and improved protocols, like emphasizing the first dose over the second one.

The second half of 2021 will be marked by two conflicting trends. First, we will see people returning in droves to offices, restaurants, bars, clubs, gyms, stadiums, concerts, parties, travel, theaters, and anywhere that they can be social with others, ideally many others. I personally cannot wait to do all of that when it is safe to do so.

But ironically, this mass socializing trend will not materially and/or permanently change many behaviors we adopted in the Covid Pandemic. I believe that we will continue to want to work from home, exercise from home, shop from home, watch first run movies from home, order in, livestream, and all of the other new behaviors we learned to enjoy and perfect in the last year.

Where all of this shakes out will be the big reveal of 2021 and will impact many tech companies and many tech stocks. As I wrote yesterday, I think the trends that were accelerated in 2020 will not reverse in 2021, although the slope of the adoption curves will likely flatten a fair bit.

While we are out mass socializing, we will also be picking up the pieces of our world that was shattered by the pandemic. In the US, we have racial equity issues that are longstanding, real and demanding to be addressed. We also have an economy that is in tatters. And we have sectors of our economy like retail, commercial real estate, carbon based energy, and more that will never be the same. The restructuring of our economy and government and corporate balance sheets and income statements that have been blown wide open will take a decade or more to work out.

Sitting above all of this is an atmosphere that is getting warmer by the day. As I wrote in last year’s looking forward post:

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.

https://avc.com/2020/01/what-will-happen-in-the-2020s/

At USV, we have begun that reallocation of capital and we will be investing heavily in companies and technologies that can help the world address this existential threat. I believe that many of our colleagues in the venture capital world will do the same because not only does the world need this investment, it will generate fantastic returns too. Climate will be to this decade what cloud was to the last one.

The twin terrors of the Covid Pandemic and the Climate Crisis will drive the great US migration of the 21st century and we are already experiencing it. We will see it accelerate in 2021. If, because of what we learned in the Covid Pandemic, a good job no longer requires someone to live in a low lying flood-prone city like Miami or NYC or a city that is burning like SF or LA, we will see many people in the US choose to leave those places and adopt new homes that are less impacted by the climate crisis. We call this “adapting to the climate crisis” at USV, and this will be a huge investable trend for many years to come.

I believe that governments will respond to all of these economic challenges by continuing to print fiat money without restraint and by taxing and regulating innovative new companies to protect old and dying companies. This will lead investors to continue to allocate capital to new forms of money (crypto) and new ways of creating and financing innovation (decentralized projects and organizations). We are already seeing that happen in the finance sector, with breakout projects in decentralized finance in 2020 like Compound, Yearn, and Uniswap (a USV funded project). We will see this approach accelerate in 2021 and expand into areas beyond the financial sector. The idea of financing and executing innovation inside of a global decentralized autonomous organization is such a powerful idea and one whose time has come.

As I go back and re-read this post, I am struck by how obvious and unprovocative all of these predictions are. Either that means that I am not getting far out enough on the curve to see things before everyone else does, or it means that the trends that will define 2021 have been building for years and are finally coming of age. Maybe it is a bit of both.

In any case, 2021 will be a year of returning to normal, but it will be a new normal and not like one we have experienced before. Adapting to change is my mantra for 2021. Happy New Year everyone.

#climate crisis#crypto#Current Affairs#economics#entrepreneurship#life lessons#VC & Technology

The Rise Of Everywhere

This is a theme I have come back to many times over the last decade but in the wake of all of the headlines about high profile founders, VCs, and companies leaving the bay area, I thought I would return to it.

There is no question that the bay area is losing some talent to other markets but I don’t think that is anywhere near the most important thing. It is also the case that Google and Apple show no signs of leaving the bay area any time soon. Silicon Valley will remain a mecca for talent and tech for as far into the future as I can see.

What is more important is the rise of everywhere. In the most recent Pitchbook 2021 predictions, they project that Silicon Valley will make up less than 20% of all VC deals in 2021. The way that happens is not less funding in Silicon Valley. The way that happens is way more funding everywhere else.

In the first decade of USV, the 2000s, we mostly invested in NYC and Silicon Valley. In the second decade of USV, the 2010s, we invested throughout North America and Western Europe. In the third decade of USV, I suspect we will extend our geographic range even further. We already have.

If there is one megachange in VC from the pandemic (there may be many), I think it is the comfort with making investments over video without the founder or the VC traveling to meet each other. Related to that is the rising comfort of VCs and founders working closely with each other over video and not traveling to work with each other in person.

I am not saying that founders will stop traveling to raise money, although I think that may stick post-pandemic. And I am not saying that VCs will stop traveling to attend board meetings. But I am saying that we will see less of both and the result of that will be a massive increase in the geographic range of where investors can and will invest.

If you add to that the rising comfort of companies employing people remotely and the rising number of people in tech living somewhere other than the big tech hubs, we will see a massive increase in the number of founders starting companies in places other than Silicon Valley, NYC, and a few other locations. This is not just happening in the US, this is happening everywhere.

So let’s stop worrying about Silicon Valley, it will be fine, and start celebrating the rise of tech entrepreneurship everywhere. That is a profound thing for the world and something to be incredibly happy about.

#entrepreneurship#VC & Technology

Michelle Zatlyn on Gotham Gal's Podcast

Michelle Zatlyn is the co-founder and COO of our former portfolio and now public company Cloudflare (NYSE: NET). In this conversation she did with the Gotham Gal a few weeks ago, she talks about how she and her co-founder Matthew decided to work on cybersecurity versus many other ideas they had. I love that they had the “would I be proud to work on this?” test. Michelle explained that “making the Internet safer for businesses to operate on” passed that test and that’s what got them to start Cloudflare.

The conversation is on YouTube and I have embedded it below for those who read on the web.

#entrepreneurship

Cliff Vesting

It is very typical that options and RSUs that are issued to new employees upon joining a company will have “one year cliff vesting.” This means that the first year of vesting into your options or RSUs will not happen until you have completed one entire year. After that vesting usually happens quarterly or monthly.

I am a fan of cliff vesting because if either the employee or the company made a mistake and the employment ends quickly, no equity has been spent on it.

But there are a couple of caveats that come with cliff vesting that I think should be understood by everyone.

The first is that while the letter of the agreement will say that the first year of vesting is not earned until the anniversary of the grant, if employment is terminated by the employer for anything other than cause within a few weeks or even months of the first anniversary, some accommodation should be made for the vesting upon termination. It is hard to put this in writing for a whole host of reasons, but best practice is for the employer to make some adjustment if the termination is close to the cliff vesting date.

The second point is that many companies include a cliff vesting provision in retention grants. These are grants that existing employees get to supplement the sign-on grant and help with longer-term retention. I do not believe it is appropriate to put cliff vesting into retention grants. The very fact that an employee is getting a retention grant suggests that the match has been a good one for both the employee and the employer and that the cliff provision is not necessary.

Many companies, particularly younger companies without experienced and sophisticated HR organizations, don’t understand these nuances and don’t factor them into their equity compensation programs. That is a mistake and it harms both the employees and the employer because a fair and equitable equity compensation program is of great value to a company.

#entrepreneurship#management