Posts from entrepreneurship

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.

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.

The NYC Fintech Innovation Lab is a program which accepts fintech entrepreneurs to develop their businesses with the assistance of senior execs at the leading NYC banks and insurance companies.

The key priorities of the CTOs and CIOs of the Lab’s partner organizations include:   cloud, cyber-tech, data, digital engagement, enterprise IT and sustainability.

If you are building a fintech company and are focused on one or more of these areas, you should consider applying.

Applications are due on December 1st. You can apply here.

The Lab will be hosting a virtual info session for interested applicants on November 10, featuring a panel discussion with alumni and financial institution partners.

The David Prize is a philanthropic effort to find NYers who are doing amazing things and support them financially.

They recently announced five winners, you can see them here.

They have an open call for new applicants and you can apply here. The deadline is December 4th.

They are eager to support entrepreneurs of all kinds who are working to make a better NYC. If that sounds like you, then you should apply for a David Prize.

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.

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.

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.

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.

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.