The Star Pupils

I was looking at the numbers on an early-stage VC fund that the Gotham Gal and I are invested in. I am not very familiar with the portfolio but this fund was formed in 2012. There are 24 names (investments) in the portfolio and 3 of them have produced 92% of the value in the fund.

This is more or less the pattern of every early-stage venture capital fund I have helped to manage and every early-stage venture capital fund I have invested in over the last thirty years. I believe it is a fundamental law of early-stage investing that a small number of investments will produce that vast majority of the returns.

But here is the thing. You may get your returns from a small number of names, but you cannot simply focus on them.

I liken it to a teacher and a class full of students.

There will always be the “star pupils” but the teacher’s job is to serve all of the students. The reward may be to watch the star pupils shine, but the job is not. The job is to serve all of the students equally, or possibly to help the students who are struggling more than the others.

That mindset has helped me navigate this challenging issue in the early stage venture capital business. The work is often in one place and the rewards in another.

#VC & Technology

The Covid Rotation

Yesterday morning we got the news that Pfizer’s mRNA Covid vaccine developed in partnership with BioNTech saw 90% efficacy in phase three clinical trials. While this is terrific news, Wall Street saw it as bad news for companies that are doing well during this pandemic (Zoom, Peloton, e-commerce, etc).

This is a chart of Jim Cramer’s Covid 100 index:

Wall Street believes the end of the Covid pandemic is in sight and is rotating out of this group. I see that as terrific news, even though I am a large holder of a name or two in that index.

I cannot wait until I can start meeting entrepreneurs again in person. I cannot wait until USV can meet together in person. I cannot wait until I can see live music, movies, theater, etc, etc. These things cannot come soon enough for me.

But I also wonder how many of the habits we acquired during this pandemic (which is NOT over yet), will stick when we can go back to doing all of these things we long to do.

Here are some questions to ponder:

1/ Will our use of Zoom to meet decline materially when the pandemic is over?

2/ Will we get back on planes and resume our business travel like we did before the pandemic?

3/ Will we go back to the spin studio even though we learned to love a spin class on our Peloton?

4/ Will we rush back to stores and abandon our e-commerce habits?

5/ Will we all go back to the office five days a week?

I think the answer is yes to a degree, but almost certainly not totally. We have created new habits in this awful year and they are not going to go away so quickly, or ever.

I don’t know if that means the Covid 100 index is a buying opportunity or it needs to go down some more. I will leave that to Jim Cramer.

I do know that the way we work and live and entertain ourselves has changed materially and forever in this pandemic and things won’t be exactly the same when it is over.

#Current Affairs#stocks

Some Good News

There has been a fair bit of good news in the last 48 hours. Here is some more. I logged onto Twitter just now and saw this tweet from my colleague Matt:

It has taken almost nine months, but our USV portfolio companies have as many open and unfilled jobs this morning as they did prior to the pandemic. That is approximately 1,500 open positions.

That’s very good news. If you want one of them, go here and check out our job board.

#employment

Turnout

Well, we don’t know who won the election this morning, but we know that the turnout was the strongest in 120 years at roughly 2/3 of eligible voters. We can thank mail-in votes and early voting for that. Some will take offense at the late counting of mail-in votes and claim fraud. I am not one of them.

I believe that massively opening up access to our elections by making voting by mail easy and trusted and by allowing voting to happen for weeks (or months) before election day is a good thing.

Regardless of how this election turns out, we can be optimistic about the path we are on to engage more Americans in the voting process.

#Politics

Vote

I am not working today. USV gave everyone the day off. It is Election Day in the US. I believe it should be a national holiday so everyone can have the day off and vote. I can’t think of many things more important than participating in the selection of our government.

I saw that over 100mm people have already voted in the US. And I’ve read that another 50mm people are expected to vote today. That would mean that about 60% of eligible voters will have voted in the 2020 Presidential election. I hope the numbers are even higher.

High voter turnout is a good thing. It means we are engaging in democracy.

So I am going to be in line this morning when my polling place opens. If you live in the US, I hope that you have already voted or plan to vote today. It is important.

#life lessons

Going Direct To Learners With Software

I was talking to a group of education entrepreneurs (on Zoom naturally) last week and was advocating for the “direct to learner” approach that defines our eduction investing strategy at USV. For the most part, we do not like to back companies that sell learning tools to educational institutions. We like to back companies that use software to go directly to learners, wherever they may be.

As an example of a powerful model that I like very much, I talked about Scratch, the visual programming environment built at MIT over the last twenty years. Anyone can use Scratch, from anywhere, as long as they have a computing device.

And between that talk and today, Scratch published their 2019 Annual Report. Scratch is a non-profit that the Gotham Gal and I have supported over the years. So I read that annual report with interest.

Here are some charts from that annual report:

Scratch is heavily used in schools all around the world. But it is not sold to schools. It is simply used by schools. It is also used by kids, parents, tutors, and anyone else who wants to help a child learn to instruct a machine to do something fun and rewarding.

That’s the power of using software to go direct to learners. You can reach so many learners and teach them so much.

#hacking education

Funding Fridays: Agi's

This project has a bunch of things that interest/excite me:

1/ Entrepreneurs committing to building new things in NYC during the pandemic

2/ Young chefs going out on their own

3/ Brooklyn

4/ Jelly donuts

I backed this project just now and took the jelly donuts reward because how could I resist?

The video is great and the project has one more day and is about 10% away from its goal. Check it out. You might like to back it too.

#crowdfunding#NYC

When are we going to know who won the election?

Our portfolio company Recount put out this two minute video primer on the question of “when will we know.” I like getting the information I want in a very short period of time. This does that so well.

#Current Affairs