Posts from VC & Technology

I am in Paris this weekend and I always love being here. I am reminded of attending LeWeb back in 2008 and having dinner with Jeff Clavier and Reid Hoffman and our wives.

And I remember meeting with Alex and Eric from SoundCloud at LeWeb that year. We didn't invest then, nor the first time Alex pitched me, but a little more than a year later Alex sold me on the third pitch and we are very happy that he did. I mention an entrepreneur pitching me about 22 minutes into this video. That was Alex (and Eric).

I've been going back and forth with Loic about coming back to Le Web this year. I would very much like to do that, schedule permitting, and hope that it happens.

So in the spirit of all that, here's a video of a panel I sat on at LeWeb 2008, moderated by AVC community member, Ouriel Ohayon.

I had dinner with my daughter Jessica last night. We got to talking about creativity. She's a photographer. I asked her how she thinks Pieter Hugo comes up with his ideas for photos. She said "I bet he reads a lot about the topics he is interested in and then writes his own thoughts down and from that comes the ideas for the work".

That led to a long discussion about the value of reading and writing, with a particular emphasis on writing. I told her that I toiled in the VC business for close to twenty years before I hit my stride and the reason I found my stride was my adoption of blogging.

As all of you know, I write every day. It is my discpline, my practice, my thing. It forces me to think, articulate, and question. And I get feedback from it. When I hit publish, I get a rush. Every time. Just like the first time. It is incredibly powerful.

And it is permanent. There is a long and winding record of my thinking out there on the public Internet. Google "mobile app deep linking" and you find my post first. At the top. That's because I have been thinking about mobile app deep linking and I wrote my thoughts down.

A journalist is doing a profile of me. I told him that I don't like profiles of VCs. I suggested that he should focus on the entrepreneurs who are doing the real work in startupland. But that didn't get him to back off. He replied

I understand your reticence, though think it would be instructive to hear how you’ve come to some decisions. (What struck you about Twitter, for instance? Many people would have shaken their heads.)

What struck me about Twitter? That's here. I wrote it down.

The New Yorker has a piece on Stanford's StartX. They ask some interesting questions and end with this one:

If the university is a farm, do the students become the cows?

I have promoted this idea of becoming an early stage investor to a number of Universities and schools within Universities for some time now. It isn't the IP and patents that are held by Universities that interest me. It is the human capital that is inside of them.

Universities are organized to educate students and do cutting edge research. The byproduct of that is a lot of great ideas. In an era when the cost of a University education has gone up way faster than the value of it, we need new business models to sustain universities other than tuition increases, federally funded research, and the generosity of the alumni.

I think capital gains from equity investments in startups that are birthed inside universities is an interesting idea and I am glad to see Stanford and some other schools trying it out.  If Universities are the farms, I think students might be the farmers, not the cows.

The JOBS Act was signed into law on April 5, 2012. This legislation was designed to make it easier for small businesses in the US to raise capital and contained a number of important and valuable changes to securities laws. One of the most promising changes in the JOBS Act is around the concept of General Solicitation. 

General Solicitation is the marketing of a securities offering (a fundraise) publicly in the open market. The Securities Act of 1933 (which still governs much of securities law in the US) prohibits "general solicitation" or other forms of advertising in securities offerings pursuant to Rule 506 and Rule 144A which are the two most common forms of securities offerings for private companies.

In response to the JOBS Act, the SEC has lifted the ban on General Solicitation and on September 23, 2013, companies can start to use public marketing in their fundraising efforts with some important conditions. I blogged about how important this could be for startups when that news came out.

First and foremost, if you want to use General Solicitation, you must limit your investors to accredited investors (investors that satisfy net worth or annual income requirements) and you must undertake some specific efforts to make sure that your investors are in fact accredited. This is above and beyond what is typically required in a securities offering where General Solicitation is not used.

But the SEC has not stopped there. They have put foreward additional rules for public comment. If anyone in the SEC cares to read this blog, they can consider this my public comment. I am not planning to send in a formal comment nor is USV or anyone else at USV.

It is my opinion, and that of those who we do business with, including our securities lawyers, that these proposed rules effectively make General Solicitation a non-starter for startup companies. If the SEC's intention, with these proposed additional rules, is to neuter General Solicitation to the point that it is legal but nobody avails themselves of it, they will succeed.

Here are a few of the most problematic rules:

1) A 15 day filing period for Form D before the company initiates its fundraising process (and before the company even knows if it will be able to raise capital). Typically we file for Form D after the raise has been completed. To do so before the company intitiates a fundraise is not realistic and ignores how startups raise capital. If there was one rule that I would most like to see the SEC remove, this would be it.

2) The requirement to formally file all written materials provided to investors with the SEC is very burdensome when entrepreneurs update their slides and other fundraising material from meeting to meeting.

3) The penalty for violating any of these rules is a one year prohibition from being able to raise capital under Rule 506. Given that startups need to raise capital frequently and they need to avail themselves of this form of securities offerings, this effectively means that a startup that violates any of these rules is likely to be put out of business. This is way too harsh and means the risk/reward analysis around using General Solicitation is skewed too much toward risk. Which means nobody will use it.

USV is an interested party to this rulemaking process in a number of ways. First, we invest in startups. The more startups there are, the better for us. So anything that creates more financing for startups is good for us. And anything that makes it harder for startups to raise capital is bad for us. Further, we are investors in CircleUp, a fundraising platform for startups that would benefit greatly from opening up General Solicitation. 

I have been investing in startups since the mid 80s. I have participated directly or indirectly in the financing of hundreds of startups, possibly more than a thousand when all of my activities are aggregated. If I am an expert in anything, I am an expert in the financing of startups. And in that capacity, I can tell you that the proposed additional rulemaking around General Solicitation is a non-starter in startup land. If these rules come down as drafted, we will keep doing things the way we have been doing them for years and possibly the single most important change from the JOBS Act will have been for naught. And that would be very dissapointing to me and many others in startup land.

Here are some other links worth reading on this topic:

Angel.co's public comment

Startup Law blog

William Carleton's blog

Brad Feld

I am headed out on a bike ride with my daughter this morning and don't have a lot to say today. But I did read an interesting post by Semil Shah where he outlines what he thinks is going on in the early stage financing markets right now.

He starts with this observation:

Young founders are incredibly influenced by the online brands of certain investors. 

And so that's why I post every day, even when I don't have anything to say 🙂

But go give Semil's post a read and do me a favor and have the discussion about his post on his blog, not here. He deserves it and I don't. And I'll make sure to engage there as well today.

William reminded me that I posted this interview to my tumblr a while back but it had never made it to AVC Video of the Week. So I went back to Charlie Rose's site and figured out how to embed it here. This is a great interview that everyone who reads AVC should watch.

At 35mins, the video turns to Charlie's talk with Aaron Levie. I have not watched that yet, but I plan to and I imagine it is pretty good too.

USV is an investor in Twitter so I've been watching the Vine story closely. As AllThingsD reports, Vine continues to grow in the wake of Instagram's video feature launch. Vine is a top ten free app on iOS and top 25 on Android in the US. So the addition of video to Instagram has not seemingly hurt Vine very much.

I've asked my kids and their friends about this and I've observed behavior a bit and that tells me a few things:

1) the social pressure to post something great to Instagram is high among the hyperactive social media teens that make up an important cohort on these services. it's easier to take risks on Vine, where most people have less followers, than it is on Instagram

2) as a result Vine videos are funnier, edgier, and crazier than those posted on Instagram

3) scrolling through the Instagram feed casually looking through photos and liking them is interrupted by playing videos and many Instagram users I talk to don't end up playing a lot of the videos that are posted there.

4) Vine is all about video and so it does not suffer from the "being part of the photo feed" problem

Once again, it appears that the category creating innovator isn't hurt too badly when the bigger and more popular social platform copies their signature feature in their product. We have seen this before with Twitter and Facebook and Foursquare and Facebook and many other similar situations.

My guess is Vine will continue to grow in popularity as long as the Vine team can improve the service and make it better and better over time. And as a Twitter investor, I sure hope they do.

I have found it increasingly difficult to find blogs and blog posts by regular bloggers who are talking about things that are interesting to me. The big aggregators (Hacker News, Reddit, Techmeme) sometimes surface interesting posts, but where do you find about the every day blogger who is writing about tech stuff? The idea of a blog roll seems to have come and gone. I stopped running a blog roll here at AVC at least six or seven years ago.

So starting today, I am participating in a new service operated by our portfolio company Zemanta called Tech Circle. There will be a widget at the end of every post with some links to posts by bloggers who are similar to me. 

If you want to join the Tech Circle, let Zemanta know here. And if you'd like to start a different kind of circle, you can let them know about that too.

I am excited to give this a try. I hope all of you are too.

People ask me what a day in the life of a VC is like. Each one is different. But they can be a grind. Take yesterday for example.

I started yesterday at 8am with a breakfast meeting. I ended around 8:15pm when I wrapped up a pitch meeting in my office. In between those two meetings I did ten other meetings for a total of twelve meetings in a bit more than twelve hours.

Of those twelve meetings, one was a three hour board meeting, one was a breakfast meeting with another venture investor, one was a lunch meeting to talk about CS Ed in NYC, four were pitch meetings, one was an interview with a journalist about the future of VC, one was a call to discuss board subcommittee work, one was a meeting with regulatory consultants for bitcoin and other payments systems, one was a negotiation on the windup of a seventeen year old VC transaction, and one was a visit to my dermatologist for a regular checkup.

In the middle of all that http://avc.com went down due to an apache config issue somewhere and I was debugging it via email and kik. I think I've got a temporary fix working and now I need to find out what the culprit is and get it fixed.

Before starting my day yesterday, I got up at 5am and read, blogged, and did email for 2 hours and 45 minutes before taking a quick shower and going to breakast.

After ending my day, I met my son for sushi at Chez Sardine. After dinner, I went home and went to bed around 11:30pm.

Depending on your perspective, my day yesterday will either seem stimulating or exhausting. It is both. I love my job. I get to meet amazing people and learn about awesome things every day. But the cost of that is meeting marathons where you have to be alert, active, and on your game in every one.

My goal is to give every entrepreneur as good of a meeting as I possibly can. A second goal is to give as many entrepreneurs as possible an opportunity to meet with me and pitch me if they want to do that. That requires many days like yesterday. And that can be a grind.

The goal of this post is not to complain or whine. I hope it doesn't come across that way. The goal, as always, is to "open the kimono". To give you a hint of the mindset of the person you are going to meet with today (or someday) and understand what their day is like and how they are coming into the meeting. Do us all a favor and give us a good meeting too. It helps. A lot.