Posts from VC & Technology

Last year at LeWeb I talked about four areas that we are looking at closely to make investments in. One of them is identity. I said this at the very end of my talk:

I predicted that there would emerge a “bitcoin like protocol” for identity. And we’ve been looking for that.

One thing we realized along the way is that this could be built on top of bitcoin or another blockchain. And so earlier this year we made a seed investment in a startup called OneName that is building exactly that. On Wednesday of this week, OneName announced a bunch of things, including our investment, and my partner Albert wrote about OneName at usv.com.

Now many will say “well Facebook, Google, and Twitter handle that pretty well for me” and they would be right. But are you really comfortable with Facebook or Google operating the identity layer of the Internet? I am not. And I think over time less and less of us will be.

But the answer isn’t another startup controlling the identity layer of the Internet either. The answer is a distributed ledger of identity that is open and not controlled by any entity. And that sounds like an application for a blockchain if there ever was one.

I have cleared my identity on the blockchain and it is here. I have verified it on Twitter and Facebook and you can send me bitcoins through it. It’s not much today, but in some ways it is everything. Because everything can be built on this and our hope is it will.

To date about 20,000 people have cleared their identity on the blockchain via OneName. My hope is that number will be in the millions within the next year. If you want do do that today, go here and get started.

I saw a post that described how Uber tried to mess with Lyft’s fundraising. This is not a new tactic. I have seen it used for as long as I have been in the VC business. It is, however, unethical and unsavory, just like the companies that use it.

And it is one other thing, ineffective. When I get a phone call from a company telling me that they are going to raise more money and we should think about investing in them instead or at least not investing in their competitor, I hear fear and it makes me more excited about investing in the competitor. If you can’t win in the market on the merits and have to turn to messing with a competitor’s fundraising, what does that tell you about the defensibility and differentiation of a company’s service?

And when another VC calls me to ask about a company that competes with our portfolio company, I don’t bother to trash talk the competitor. I just tell them the pros and cons of the market, the two companies, how I think things will play out, and then let them make the investment decision on the merits. I assume the competitor is going to get funded from someone so I might as well provide an honest assessment of the situation.

Capital is not normally a recipe for success vs competition. Product execution, network effects, go to market strategies, and a few other things are what allows companies to win the market. Access to capital and raising a boatload of it is rarely the thing that wins the market.

And there is a ton of money in the market for funding startups right now. When the CEO of one of our portfolio companies tells me one of their competitors is raising money, I always tell them “assume your competitor will raise successfully and raise a lot” because that is what is happening in the market today.

Don’t waste your time trying to mess with a competitor’s financing. It doesn’t look good, it won’t work, and your time and energy is best spent elsewhere, where the real competition happens, product and market.

Last week my friend Chris Albinson formed an interesting new firm called Founders Circle Capital. He wrote a bit about what they are doing here.

In a nutshell, Founders Circle provides liquidity for the founders and employees of a “breakaway growth companies” so they don’t need to sell or take the company public prematurely. I like this line from the post I linked to above:

An investment from Founders Circle–typically just enough for team members to pay off graduate school debt, put a down payment on a house, send the kids to school, or pay for a loved one’s medical expenses–gives companies the flexibility to pass on early acquisition offers and motivates essential team members to stay at the company they have put their heart and soul into.

Of course the question is always “when is the right time to do this?”. You should not do this sort of thing too early in a company’s life. It takes time for the equity value to get to a point where it makes sense for the founders and employees to take a bit of their equity value off the table. I guess that’s why they focus on “breakaway growth companies”. That’s smart.

If you want to learn more about Founders Circle, here’s a page on their website that outlines the kinds of investment programs they operate. It’s great to have investment vehicles like Founders Circle in the venture capital market. It provides an important part of the “capital stack” that startups need to access to go all the way to the finish line.

Yesterday our portfolio company Firebase was acquired by Google. We invested in Firebase in the summer of last year and Albert wrote this post talking about the investment.

Firebase makes a backend that allows developers to store and sync their data in real-time.  In a relatively short time, Firebase has been adopted by over 100,000 developers. It solves some complicated problems simply and elegantly.

We believe Google will be a good home for Firebase. They have the resources and desire to continue to build out Firebase and scale it. I saw the two founders last night at our dinner in SF and they told me that Google is giving them budget to go out and scale up the engineering team. They had big smiles on their faces when they told me that.

Though our time as investors and partners in Firebase was short, we enjoyed working with them very much and are happy that they have found a good home for their company and their technology. It sure looks like the perfect match.

When you are VC, you live in this protected environment. You sit in your office in a glass conference room with lovely views and entrepreneurs walk in and pitch you and you get to decide who you are going to back and who you are not. People tell you what they think you want to hear. That you are so smart. That you are so successful. They suck up to you. And it goes to your head. You believe it. I am so smart. I am so successful.

You have to get out of that mindset because it is toxic. My number one secret is the Gotham Gal who brings me down to earth every night, makes me do the dishes, walk the dog, and lose to her in backgammon. Actually I have not lost to her in backgammon in over twenty years because she used to beat me so badly that I couldn’t take it anymore.

But blogging is another helpful tool in reminding yourself that you are not all that. Marc Andreessen said as much in his excellent NY Magazine interview which was published yesterday. I loved the whole interview but I particularly loved this bit:

So how do you, Marc Andreessen, make sure that you are hearing honest feedback?

Every morning, I wake up and several dozen people have explained to me in detail how I’m an idiot on Twitter, which is actually fairly helpful.

Do they ever convince you?

They definitely keep me on my toes, and we’ll see if they’re able to convince me. I mean, part of it is, I love arguing.

No, really?

The big thing about Twitter for me is it’s just more people to argue with.

Keeping someone on his or her toes, making them rethink their beliefs, making them argue them, is as Marc says “fairly helpful.” That’s an understatement. It is very very helpful.

That’s the thing I love about the comments here at AVC. I appreciate the folks who call bullshit on me. There are many but Brandon, Andy, and Larry are common naysayers. They may come across as argumentative, but arguing is, as Marc points out, useful.

The comments are also a place where people play the suck up game. It isn’t necessary to do that and I don’t appreciate it. It makes me uneasy.

So I would like to thank the entire AVC community for being a sounding board for my ideas, for pushing back when I am off base, and for resisting the suck up whenever the urge presents itself. I appreciate it very much.

Most companies have a mission statement and many have a values statement. But not so many companies live their values so much that they permeate the company and ooze out from every pore; the product, the office, the hiring process, the marketing, and so on and so forth.

Last night I did an event with City National Bank and their clients. I did a chat with Robin Gill and he asked me to talk about my most successful investments. I don’t really like to stack rank my investments so I struggle with that question. But I found my footing and started talking about Etsy. Etsy oozes its values from every pore. I am not sure they have a printed out values statement. Maybe they do somewhere but I don’t think I’ve seen it. But it really doesn’t matter because Etsy’s values are hard coded into their culture and they emanate out in every conceivable way.

Kickstarter is the same way. They stand for something. It’s not just talk. It’s real. And you can feel it in the product, the office, the marketing, and in the founder and in the CEO.

Twitter is like that too. I saw that they filed a lawsuit in Federal Court to be able to publish a full transparency report of all government information requests. That’s fucking awesome. And it is not a publicity stunt. Dick Costolo once said “Twitter is the free speech wing of the free speech party” or something like that. That’s a deeply held core belief of the company and it runs deep and strong in the culture.

These are three examples that folks will have some connection to and are easy to talk about. They are not the only three companies I work with or we have invested in that live their values. Meetup and SoundCloud would be a couple of other obvious examples. But they are good enough for the point of this blog post.

Values matter. A lot. In a hypercompetitive world where technology eats at every advantage you have over time it is good to have unique and distinct values that you live as a company. That’s a form of differentiation that is not easily copied. It matters and is at the core of building great companies. The kind of companies I like to talk about when people ask me about my best investments.

Every so often Paul Graham will email me something and say “can you read this before I post it?”. He did that last week. It was a talk he was going to deliver in Sam Altman‘s startup class. It was great. I told him I wouldn’t change a thing. I am not sure if he changed it before he delivered it, but what I do know is he posted it yesterday. And here it is.

I just went back to my emails with him and pulled these quotes out for all of you. These are some nuggets that I particularly liked.

On Investors – “our function is to tell founders things they will ignore”

On Selecting Investors, Co-Founders, Etc – “If you’re thinking about getting involved with someone– as a cofounder, an employee, an investor, or an acquirer– and you have misgivings about them, trust your gut. If someone seems slippery, or bogus, or a jerk, don’t ignore it.”

On Knowing About Business Before Doing A Startup – “The way to succeed in a startup is not to be an expert on startups, but to be an expert on your users.”

On Success – “Y Combinator has now funded several companies that can be called big successes, and in every single case the founders say the same thing. It never gets any easier. The nature of the problems change. You’re worrying about construction delays at your London office instead of the broken air conditioner in your studio apartment. But the total volume of worry never decreases; if anything it increases.”

On Finding The Next Big Thing – “If you think of technology as something that’s spreading like a sort of fractal stain, almost every point on the edge represents an interesting problem.”

Those are the quotes I called out in my emails back to Paul. They all resonate hugely with me. But the whole post is great. Give it a read.

For the past two years, NYC’s loss has been the Bay Area’s gain. No I’m not talking about hot startups, VC, or anything like that. I’m talking about Steven Johnson‘s two year departure for the beauty of Marin County over the grimy streets of NYC. But this summer Steven and his family came back to NYC, reminding me that the world is just and fair if you wait long enough.

I liked Steven the minute I met him. He has a wonderful smile and a gracious being, he is whip smart, and he writes beautifully and simply. He tells stories that educate. I have read pretty much everything he’s written and whenever something new comes out, it is an instant buy.

Yesterday was “pub day” for his most recent book, How We Got To Now. It’s the story of six technological revolutions that set up the world for what it is now. Those would be glass, cold, clean, sound, light, and time. The book has a companion TV series on PBS of the same name. The first of the six episodes airs on Oct 15th at 9pm

And to make things even better, I got to spend part of “pub day” with Steven yesterday. We did an event at WNYC’s Greene Space (a great venue in west soho) yesterday morning.

Wonderful discussion with @stevenbjohnson @fredwilson @manoushz @PBS #HowWeGotToNowPBS pic.twitter.com/bPZK9vfbj1

— Alexandra Stromer (@al_stromer) September 30, 2014

I believe the event was recorded and will be online at some point. If and when that happens, it will be a video of the week post.

We talked about a bunch of things, but the most interesting thing is how all of these innovations are related to each other. Steven told a story about the printing press and how when books started making their rounds, people realized that they needed reading glasses, which spurred a spike in demand for lens makers, which in turn led to microscopes and telescopes, which led to all sorts of biological and astronomical discoveries. That’s the kind of connections Steven makes in his stories. I love them.

I have the book and I am going to watch the series. If you love history, technology, and great story telling, I strongly encourage you to do both of these things as well.

We had one of our many (non-stop) email conversations among the USV crew last week about a situation in our portfolio where nobody could agree on something. I lamented that “VCs are such optimizers.” It takes one to know one you see.

Nick Grossman replied that he prefers satisficing to optimizing. I had never heard that term. So Nick sent me to Wikipedia which says:

Satisficing is a decision-making strategy or cognitive heuristic that entails searching through the available alternatives until an acceptability threshold is met.^[1] This is contrasted with optimal decision making, an approach that specifically attempts to find the best alternative available. The term satisficing, a portmanteau of satisfy and suffice,^[2] was introduced by Herbert A. Simon in 1956,^[3] although the concept “was first posited in Administrative Behavior, published in 1947.

I love the concept of satificing instead of optimizing. It is something I have been trying to adopt (changing behavior is hard) for close to twenty years now with a good measure of success. But I never had a word for it. I do now. Thanks Nick!