I’m going with something a bit different today on Funding Friday.
Longtime AVC reader Kirsten Lambertsen has created an email newsletter featuring creators and their projects across many different creator platforms. It is called Patron Hunt.
It looks like this:
I have written about stablecoins in the past. I think they are a very important part of the crypto asset landscape. Two of the top ten crypto assets by market cap are stablecoins, Tether ($62bn) and USDC ($27bn). You don’t buy these assets to generate gains because they are price stabilized. You hold them like cash, to be able to move in and out of trades, purchase things, etc.
Countries around the world are looking at stablecoins and thinking “we should issue these assets via our central banks.” That is called a “central bank digital currency” or CBDC for short. China is the farthest along on a CBDC but many other countries around the world are thinking about CBDCs or building them.
Yesterday, SEC Commissioner Hester Pierce [suggested that stablecoins are preferable to CBDCs](https://twitter.com/CoinDesk/status/1418155169502609417?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1418155169502609417%7Ctwgr%5E%7Ctwcon%5Es1_c10&ref_url=https%3A%2F%2Favc.com%2F2021%2F07%2Fstablecoins-vs-cbdcs%2F.
Hester focused on the privacy concerns around CBDCs, and I agree with her that I would rather hold USDC than a Fed issued digital dollar.
This morning I was sitting outside of my coffee shop, sipping on a cortado and reading the news on my phone while the NY Times, which I buy for The Gotham Gal every morning, sat folded up next to me. I gave up on mainstream news media two decades ago and have been relying on the Internet for news for a long time now. By “Internet”, I mean blogs, Twitter, and increasingly, email newsletters.
What I was reading this morning on the bench sipping coffee was News Items, an email newsletter by John Ellis. News Items is a subscriber-only newsletter, as opposed to the free stuff you can get on Axios. But you get what you pay for with John. His newsletter is smarter, edgier, and out in front of most anything else out there. The topics that interest John the most are technology (lots of biotech), geopolitics, and finance.
The way John describes it is:
Three baskets: (1) World in Disarray, (2) Financialization of Everything and (3) Advances in Science and Technology. Bonus basket: Electoral politics in the US and around the world. Six days a week, not Sundays.
Over the last 18 months, the early-stage financing market has seen dramatic changes characterized by these three things:
I believe that for the most part, these changes will be permanent.
And I believe that for the most part, these changes are good for early-stage company formation and innovation.
ETHEREUM: THE INFINITE GARDEN is a “feature-length documentary film that explores the innovative real-world applications of the Ethereum blockchain, the die-hard community of enthusiasts and developers, and its creator, Vitalik Buterin, whose vision for the internet has the potential to change the world.”
The film is being crowdfunded on the Ethereum blockchain and the campaign ends at 6pm eastern time today.
When you choose to back the project, you will have a choice to pledge one ETH and get an NFT from the film or pledge less and get a token recognizing your contribution.
My family has a history of irregular heartbeats, from PVCs to AFIBs. So when I saw my cardiologist recently, I asked him how I could track my beats. I have worn a Holter Monitor a few times and did not want to do that again unless it was absolutely necessary. He pointed me to this Kardia Mobile device which I purchased on Amazon a few weeks ago.
This Kardia Mobile 6L device is remarkable. It delivers a “6 lead” EKG reading into your smartphone by putting the device on your knee and pressing both thumbs on it. I realize that 6 leads is not the same as what you get with a Holter Monitor or an EKG in your doctor’s office. But it is really amazing because it is so easy to use in your own home. It is the size of an Apple TV remote, maybe even a tad smaller. I just email my cardiologist the result and he tells me what is going on without him having to take fifteen minutes or more to see me and without me having to visit his office.
This is just one example of the revolution underway in health care. Driven by advances in technology, a computer in everyone’s pocket, ongoing changes in the healthcare system accelerated by the pandemic, among other forcing functions, we are seeing more and more healthcare being accessed in our homes vs in the doctor’s office.
This does not mean that doctors are needed less. I think they are needed more. But they can focus their time and energy where it is most needed, in providing the care itself vs all of the other things that lead to the care.
The Gotham Gal and I are watching Succession after being told by so many friends and family members that we had to see it. We are in season two and last night we watched an episode where Logan Roy tries to acquire a family-owned media business. The selling family, led by the mother, tells him they will do the deal if he names his daughter Shiv as his successor. Logan explains that is not how he does things and that he will name his successor on his time and terms. The mother explains it is a requirement of the deal. And so Logan leaves the meeting without closing the deal.
On his arrival back in NYC Logan hears that the selling family has “caved” and will do the deal without a named successor.
The walk-away move is a bold one and does not always lead to winning on your terms. It can cause you to lose the deal.
But I am a fan of the walk-away move because it shows the other party that you are not going to move on your offer anymore and forces a hard decision instead of endless negotiating, which I personally don’t like.
There are many stories of chefs, bakers, etc cooking from their homes and apartments during the pandemic and now turning that activity into permanent businesses with storefront leases. I’ve backed quite a few projects like this on Kickstarter and found a great one today.
L’Appartement 4F is a couple who baked in their tiny Brooklyn apartment during the pandemic, found a clientele for their products, and now are opening a bakery in Brooklyn Heights.
You can watch the video here.
My partner Albert shared this article yesterday which suggests that the price of carbon will have to reach $150/ton by 2030 in order to create the conditions for the world to get to zero carbon by 2050. The current price of a ton of carbon on the EU’s Emission Trading System is about $60/ton and you can buy carbon offsets for much less than that although you may be purchasing junk credits if you are not careful.
If you bought carbon today at $60/ton and held it until 2030 and sold it at $150/ton, you would get 2.5x on your money and a roughly 11.4% annual rate of return. If you can figure out how to buy carbon for a lot less than $60/ton, then your returns could be a lot higher.
It is increasingly obvious that the world will need to get off its addiction to carbon in order to stave off very serious climate impacts. The path to doing so is fairly clear but will be expensive. This chart from our portfolio company Wren’s website shows how we might get there:
My friend Gary Ginsberg’s book, First Friends, is out today.
Gary gave me an advance copy a few weeks ago and I have been reading it.
First Friends is a book about US Presidents and their best friends who influenced them in the office.
The book starts with Thomas Jefferson and James Madison and ends with Bill Clinton and Vernon Jordan. In between, there are chapters about Abraham Lincoln, Woodrow Wilson, and six other Presidents and their best friends.
Jul 2, 2021
I am a fan of wireless charging for my various devices and I am glad that there is a standard, called Qi, for wireless charging that many manufacturers support. This means you don’t need to buy your wireless charging device from Apple or Google, you can buy it from any manufacturer you prefer.
This nice looking small charging device, called Biscuit, is a great example of that:
The Internet was developed by the US Defense Department to create a network that was capable of surviving a military attack. They accomplished that with a design where no part of the system was central to its operation. You can take out any part of the Internet and it will still operate.
When I read the Bitcoin White Paper for the first time, I was struck by the similarity of its design to the Internet.
And we are watching an “attack” on the Bitcoin system right now, in the form of a purge in China.
Over the last three months, the government in China has moved to rid the country of Bitcoin mining. You can see the effect of the purge on the chart of Bitcoin Hashrate:
This should be obvious to AVC readers but I am a fan of short and sweet. Why take two pages to say something you can say in one page? Why take two paragraphs to say something you can say in one paragraph?
This letter to potential investors from the CEO in the Duolingo S-1, which was flipped to the public yesterday, is a fantastic example of that.
Disclosure: USV is an investor in Duolingo and we stand to profit from their IPO. This is not in any way an endorsement of the offering. Investors should read the S-1 and make up their own mind about it.
A reader asked me if I had ever written about the infrastructure I use to run AVC. We both searched the archives and could not find a post on that topic.
So here it is:
1/ Content Management System – WordPress – I use the open source software version of WordPress to write these posts and manage them.
2/ Hosting Provider – Cloudways – I have used a number of hosting providers over the years. If you use WordPress, it is fairly easy to migrate from one to another. Cloudways is the current favorite.
I understand that regulators and elected officials need to raise concerns about new technologies and their impact on society. It is their job or at least part of their job. But I am also dismayed regularly by how poorly many elected officials and regulators understand the technologies they are talking about.
In particular, I am deeply concerned with how poorly many elected officials and regulators understand blockchains, smart contracts, and decentralized applications and organizations. They assume that these things are run by companies and people and can be regulated with traditional corporate regulatory activities.
What people need to understand is that blockchains, smart contracts, and decentralized applications and organizations are not companies. They are software. And they can and do run without any company operating them.
Let’s look at Bitcoin. There is no Bitcoin Inc. There is no company to sue. The founder is unkown and may not exist. So she can’t be sued either. There is nobody to call before Congress. There is no entity to make regulatory filings.
It is officially summer now and with adult vaccination rates passing 70% in many parts of the US, people are out and about. I’ve heard the term “analog summer” used to describe this moment. If the past 15 months have been a digital lockdown, then the next three months are going to mark a return to analog activities; beaches, parks, concerts, bars, restaurants, nightlife, etc, etc.
We’ve already seen the effect of this change in behavior in our portfolio companies, many of which benefited significantly from the digital lockdown. Digital providers of education, entertainment, shopping, and so much more had banner months in 2020 and the first half of 2021.
I am looking forward to the analog summer. I can’t wait to do all of the things that we could not do in the last year and a half. I think it will be a much-needed return to normal for all of us.
As for our portfolio and the tech sector more broadly, I am not too concerned about the return to normal. These businesses all got a huge boost in business over the last year and they aren’t going to give it all back. But their growth rates will be more like what they were in 2019 than 2020. And they will be growing from a much larger base.
My friend Kirk backed this project earlier this week and I got a notification and checked it out and backed it immediately.
I like everything about this project. Finding opportunities for people with special needs to work productively and happily is such a great thing to do.
You can watch the video here.
For as long as I can remember, Pier 76 on the west side of Manhattan has been home to the west side tow pound. Some of my worst moments as a NYC resident have been there retrieving a car or a scooter, something I’ve done more than I want to remember. It was pure misery to have to go there and I think that was intentional.
So over the last four months on my morning bike rides up the west side bike path, I have been watching the city tear down the west side tow pound and replace it with an urban park.
I believe Pier 76 opened last week and is hosting one of the outdoor locations for the Tribeca Film Festival which is going on in NYC right now.
So today on my morning ride, I took a slight detour and visited the new Pier 76.
ENS stands for Ethereum Name Service and it is a decentralized domain name system built on the Ethereum blockchain. You can get domains with the .eth extension by going here, connecting a wallet, and searching and purchasing a domain.
I have purchased fredwilson.eth and avc.eth and a bunch of other .eth domains for my family. It does not cost a lot of ETH to register a domain, but you need to remember to go back and renew it as there is no company/registrar operating a business to do that for you.
An interesting angle on ENS is that the .xyz extensions are interoperable with ENS and that is explained here.
So if you own .xyz domains, you can participate in the ENS system. I also bought fredwilson.xyz and avc.xyz and a bunch of other .xyz domains for my family.
NYC has a primary next week (June 22nd) in which parties will pick their nominees for Mayor, City Council races, Borough President races, and Manhattan will pick candidates for Attorney General. Because NYC is overwhelmingly Democratic, the primary is the main event. Most of the time, Democratic candidates prevail in the General Election in November.
So this is a big election for NYC and everyone who cares about the future of NYC should make it a point to vote in this primary.
Early voting started last Saturday and I made my way to my early voting location (which is different from the regular voting location) yesterday morning and was in and out in two minutes. It was the smoothest voting experience I have had in NYC since we moved here almost 40 years ago.
If you live in NYC want to do early voting this week, go here and enter in some address info and you will be shown your early voting location.
I remember when a friend of mine told me five or six years ago that he had bought some Dogecoin. I thought “what is he doing?” and dismissed it as something silly and or crazy.
Dogecoin was initially introduced in late 2013 and 7 1/2 years later it has amassed a market cap of $43bn and is one of the most popular crypto assets in the world. It may be silly and crazy, but it has also been a good investment for my friend and anyone who bought it in the early years.
For those that don’t know, Doge is an internet meme that became popular around that same time. The combination of memes and investing is a powerful cocktail that I have been ignoring for a long time, probably incorrectly.
More recently we have seen meme investing move into public market stocks like Gamestop, AMC Theaters, Wendy’s, and more. The community that drives these “meme stocks” is based in Reddit and the combined purchasing power of this community is substantial, particularly in illquid stocks (and crypto assets).
Jun 11, 2021
I just backed this project. I love the idea of a simple deck of cards that can let anyone or any group design a website without any software or device.
So many times, I have known pretty much what I want for a website for a project, an event, a new business, or whatever, but I am a terrible sketcher and I don’t know how to use the software tools that web designers use. A deck of cards would be ideal for me and probably a lot of other people too.
You can watch the video here.
On Monday, a copy of Startup CXO, my friend Matt Blumberg’s new book, arrived at the USV office. I picked it up to take a quick look and thought “this a heavy book!”
So I texted Matt, congratulated him on getting the book out, and then asked why it was so heavy. He replied “because it is 640 pages, there is a section on every C-level function in that book.”
That’s when I realized that Startup CXO is not really a book. It’s a “field manual” to scaling a leadership team and company. It is the kind of book you will keep by your desk and pull out from time to time to figure out how to approach an issue or to help one of your senior leaders figure out how to do that.
And in that context, it’s a very valuable resource for CEOs and leadership teams as they scale a company and find new challenges around every corner.
Digital Asset Mining is shorthand for “proof of work consensus validation of public blockchain infrastructure”. Thankfully we have the shorthand. But it is important to understand what digital asset mining is.
Public blockchains, like Bitcoin and Ethereum, store data securely but publicly in a cooperative ecosystem that is not controlled by any company or government. When you store data on a public blockchain, it is your data, secured by your keys, and nobody can do anything to it without your approval.
That is a big deal and it is the future of all internet data. In time, all software systems will operate on top of secure public blockchains.
The consensus mechanism in public blockchains is the method that they use to cooperatively validate transactions without a controlling party.
We had a situation recently where a rooftop solar project on a building we own became too expensive (because of NYC Fire Department requirements) and it no longer made economic sense to do the installation. And yet we want to avail ourselves of solar energy to benefit from the economics of solar, to reduce our carbon footprint, and to increase the resiliency of our property.
So we are reaching out to some community solar developers in NYC who have built out solar infrastructure that the community can participate in.
I’ve been interested in community solar for a while now. It makes sense to me that a group of people can build and participate in a solar installation where it most makes sense and then share in the energy that installation generates.
Community solar works best when a consumer can receive a credit on their electrical bill for their community solar output. This is possible in the states that have deregulated their electrical systems.
I backed this project last week and think the idea is really great. You put a Terra device outside where you hear the sounds of birds in nature and you can then listen to those sounds indoors. There are also features that let you identify the species of birds and track their migration.
The video is here.
One of the biggest challenges for developers building on Ethereum’s market leading smart contract platform/blockchain are the high fees and slow transactions. These issues arise from the fact that the Ethereum blockchain’s current architecture is not particularly scalable.
The Ethereum core developers have been working on these issues for years and there are changes coming in the core Ethereum protocol that will help with scalability. But the broader Ethereum community is not relying entirely on the core developers to address these issues. There are a number of “layer two” solutions that have emerged that will bring very significant increases in speed and lower fees.
One of these layer two solutions, called Zero Knowledge Rollups, is particularly exciting to us at USV and earlier this year we invested in a project called Matter Labs (also known as ZKSync) that has built what we think is the best approach to Rollups on top of Ethereum.
My partner Nick posted today about ZKSync and outlined why we are so excited about this approach. If you are a developer building on Ethereum and are looking for a good layer two solution, you should absolutely read Nick’s post. I would also recommend it for anyone who is invested in or interested in Ethereum as layer two scaling solutions will likely unlock a lot of value in the Ethereum community over the coming years.
I’ve written a bunch about the globalization of the startup economy. You can start and build a tech company almost anywhere these days. That has been true for at least the last decade. But until very recently, raising capital for your startup was significantly easier if it was located in the major startup hubs, most notably Silicon Valley.
I believe the pandemic changed that equation dramatically and USV’s “deal log” is a great example of that. When I look at all of the opportunities we are currently considering plus all of the investments we have made this year to date, what stands out most to me is the location of the founders and teams. It seems to me that about half of our “new deal activity” right now is happening outside of the US. And very little of it is in western Europe where most of our non-US investing has been for the last decade.
This is a big change from where it was just last year and the year before. The emergence of raising money and supporting investments on Zoom has made it possible to have a much broader reach than was possible a few years ago.
What makes it easier for USV is our thesis-driven model of investing. We know exactly what we are looking for in new opportunities in wellness, education, financial services, climate, and crypto and so we can react to opportunities that fit into our thesis pretty much anywhere in the world. And we are doing exactly that.
I bought a Pea Green just now for .05 ETH:
I am returning to a topic that I have talked a lot about on this blog.
A number of years ago at our annual CEO Summit, we had Angela Duckworth speak to our portfolio about Grit, the topic of her excellent book on the subject. In Angela’s research, she determined that the single greatest determinant of success was not talent. It was grit.
I was reminded of that last night as I watched Derrick Rose lead the New York Knicks to a must win in game two of their series against the Atlanta Hawks. The Knicks were a mess for the first half of the game and Derrick Rose singlehandedly kept them in the game.
Derrick Rose was the first pick in the 2008 draft and by 2011 he became the youngest NBA player to win the Most Valuable Player award, something he accomplished at age 23. A year later he tore his ACL and he has struggled with injuries ever since.
I am working on a new weekday routine the goal of which is to give me more time to read, think, and meet in person and less zoom meetings and phone calls. I am also mixing up my morning routine and attempting to sleep and work out longer.
The net of all that is I am seeking a new time of day to write and I have not yet found it. I may need to go back to writing first thing in the morning but I am not yet sold on that.
I missed my daily blog post yesterday and finally found some time to write today mid-afternoon.
I really value finding time to write each day so I will figure out how to fit it in, but things might be a bit bumpy over the next few weeks while I sort all of this out.
I was rooting for Phil Mickelson all weekend to win the PGA at age 50. I’ve watched Phil for thirty years and I’ve seen all of the highs and lows and there have been many. He plays the game of golf with a level of creativity that can often lead to problems. He is a risk-taker which isn’t always the best way to approach a golf course.
But this weekend at the PGA, he was simply better than anyone else. He hit the ball as far as players thirty years younger than he is. And he showed off his incredible short game.
We have now seen this a few times, where athletes who are “past their prime” continue to be better than anyone else, at least for a game or a long weekend.
Some of this is due to the better conditioning that today’s athletes are in. Some of it is that they are older and wiser and have been there before and understand how to handle the moment. And some of it is that they are the best of their generation and that level of talent goes a long way.
If I am going to be outside much, I need to wear a hat to keep the sun off my face. My light skin doesn’t react well to the sun. I like baseball-style hats, but I don’t like wearing logos.
So this Kickstarter project got my attention. Fun stylish hats without logos, made with sustainable materials. Right up my alley. I backed it immediately.
You can watch the video here.
Back in the early 2000s, it was exciting to blog and use social networks to create our own media and move away from the traditional media outlets. That was the pull that got me into blogging and got me investing in Twitter. It was a powerful feeling.
But a decade and a half later, it is obvious that we just replaced one type of media company for another and that we don’t really control our own media yet. I have a bit more control over this blog because I run it on my own domain using open source WordPress software, but most people are blogging on Medium or Substack or some other centralized service these days. And the social media platforms, well we know all about them in the wake of recent takedowns. You don’t control your own media platform if you run it on a centralized service.
And yesterday, I claimed @fredwilson on Bitclout with this tweet:
As USV is now about six months into investing our first climate fund, I am starting to see more clearly what climate investing is all about and my partner Albert said something in a team meeting earlier this week that really stuck with me.
I did not write it down but it was something like, “we’ve spent two hundred years taking carbon out of the ground, burning it, and putting it into the atmosphere and what we now need to do is get it from the atmosphere and put it back into the ground.”
That is a simplification of the many technologies and projects that are underway to capture carbon and sequester it, but I am a fan of simple. In investing, the simpler the better for me.
Coinbase shipped an important piece of its wallet product portfolio yesterday, the Coinbase Wallet Browser Extension.
Wallet extension is great for security as your Wallet’s private keys stay on your mobile app, protected by fingerprints, faceID or PIN. pic.twitter.com/bbg0i7h8zF
— Coinbase (@coinbase) May 17, 2021
You can download the chrome extension here.
If you want to use DeFi apps, buy and collect NFTs, or do anything that requires a crypto wallet in your browser, then the Coinbase Wallet Extension is the best way to do all of those things.
Last week, I had to clear my calendar for two days and spend them in doctors’ offices and radiology labs. I developed a kidney stone last week and my doctors and I wanted to understand how large and where it was. The answer is 4mm and it was somewhere between my kidney and bladder as of last Thursday. That may be more information than you need to know.
Over four appointments, I experienced how much progress we have made during the pandemic and how much more we have to go before we have a high functioning software powered health care system in the US.
The good news is that for all four of my appointments, I was able to check into them via an app on my phone and in most cases, leverage stored information in apps on my phone to complete most of the forms. The stack of forms that we all usually complete when arriving at a new doctor has been reduced significantly during the pandemic, but it is not yet zero. I still had to complete at least one paper form at three of my four appointments.
The pandemic has forced health care providers to use mobile apps and software to automate much of the check-in functionality and that is great news. The fact that they only went 90% of the way there is a bit depressing though.
This public art work speaking to the growing refugee crisis around the world is really great. I backed it earlier this week when I saw my friend Sunny back it.
From July to November 2021, a giant puppet of a 9-year-old Syrian refugee girl called ‘Little Amal’ will walk from the Syria-Turkey border, across Europe to the UK, travelling 8,000km to focus awareness on the refugee crisis. The Walk is an international arts festival meets endurance event – the length and sheer size of the challenge is capturing imaginations even before our heroine’s first step.
If you are reading on Mirror or via email, click here and watch it.
Stock-based compensation plans throughout the startup and tech sector are based on “golden handcuffs” – the idea that an employee can’t leave because they would be giving up too much money if they do.
I’ve never loved that concept. It feels like staying in a bad marriage for the kids.
So I have been involved in a number of efforts to rethink that practice and one of those efforts came to light earlier this week when Coinbase, where I am on the board and compensation committee, blogged about their new compensation strategy.
This line in particular stands out to me as a powerful way to think about retaining employees:
Last week I spent three hours with my six partners in a conference room talking through what we are investing in and why. It was a terrific session and I had more “ahas” in those three hours than I have had in many many months. There really is no substitute for sitting together with your colleagues working things out face to face.
This week our team met with a founder in Singapore via Zoom. It was midnight in Singapore and noon in NYC. In one hour we learned enough from the founder to be able to make a decision on whether or not to invest in the founder’s company.
In the last year, events like the latter one have been commonplace. Events like the former have been non-existent. And there are many in the tech sector and broader business sector (and other sectors too) that have come to believe that on-screen interactions will be the primary way we engage going forward.
For certain things, like raising capital and investing capital, on-screen works pretty well. Founders have figured out that they can raise capital from their kitchens, bedrooms, and offices in weeks vs roadshows that lasted months. I don’t think we will see founders going back on the road in any material way ever again. And founders in Singapore can access capital markets in NYC with ease. And investors in NYC can access investments in Singapore with ease. These are all important and disruptive changes to the startup, tech, and business sectors.
I have read more books written by Steven Johnson than any other author. In addition to being a friend and a USV-funded founder, Steven writes about things that fascinate me. And he is a wonderful writer. That’s a potent combination.
I am about to embark on another journey with Steven. This one is called Extra Life and it is about how mankind doubled our life expectancy over the last hundred years.
But Extra Life is not just a book. It is also a four part TV series airing on PBS that starts tomorrow night at 8pm.
Steven told me that when he started exploring the idea of this book years ago, he thought there might be a nice symmetry to launching the book on the hundred-year anniversary of the end of the flu epidemic of 1918-1919. Well little did he know then that we would have our own 100 year anniversary of that event that has shaken our world to its core over the last year.
May 7, 2021
Longtime AVC reader Alex Wolf has a Kickstarter project that I think is awesome.
She has long been working on a “pattern alphabet” to encode the patterns of nature and life.
Yesterday’s post has this line in it:
I suspect all buy maybe two of those eleven funds have outperformed the public markets
As you can see, there is a typo there. “buy” should be “but”
A number of readers let me know about the typo, which I very much appreciate.
There has been this narrative about investing in VC funds that you have to get into the top quartile (25%) or possibly the top decile (10%) in order to generate good returns. I have heard that for as long as I have been in VC and probably have written it here a few times.
Well, it turns out that is not right. Half of all venture funds outperform the stock market which is the benchmark most institutions measure VC funds against.
My friend Dan Malven wrote about this on his blog yesterday:
A working paper published by the National Bureau of Economic Research (NBER) in November 2020 contradicts that notion, showing that half of all VC fund managers outperform the public markets, and are therefore worthy of institutional investment.
My friend Seth Levine and Elizabeth MacBride have written an important book about the changing face of entrepreneurship in the US. It is called The New Builders and it came out this week. You can purchase it at all the places listed here.
This bit from the book’s Amazon page explains The New Builders’ message:
The dominant image of an entrepreneur as a young white man starting a tech business on the coasts isn’t correct at all. Today’s American entrepreneurs, the people who drive critical parts of our economy, are more likely to be female and non-white. In fact, the number of women-owned businesses has increased 31 times between 1972 and 2018 according to the Kauffman Foundation (in 1972, women-owned businesses accounted for just 4.6% of all firms; in 2018 that figure was 40%). The fastest-growing group of female entrepreneurs are women of color, who are responsible for 64% of new women-owned businesses being created.
In a few years, we believe women will make up more than half of the entrepreneurs in America.
Seth sent me a manuscript about six months ago and I read with interest the stories of these women of color starting businesses of all kinds. This is not the entrepreneurship that I tend to write about here at AVC, but in many ways it is more important, more courageous, and more powerful.
I was purchasing some domains with Ethereum yesterday and ran out of funds in my wallet and went to Coinbase to buy some more ETH. The price was approaching $3000 and I thought to myself, “the demand side of this network is exploding.”
The way crypto-networks work is that the supply side gets built first with incentives to mine, validate, stake, etc. This has been going on for over a decade now. People started mining Bitcoin twelve years ago.
The demand side of most crypto-networks has been dominated by buying, holding, and speculating for those twelve years. There is nothing wrong with that. Buying, holding, and speculating has provided the funding to pay for building out the supply side of these networks.
But I think that is changing now, certainly with Ethereum and a number of other crypto-networks. You need ETH to do things on the Ethereum network. And people are doing things on it; buying domains, peer-to-peer lending, buying art, racing horses, etc.
One of the many things I love about Kickstarter is when a friend backs a project, I am alerted. My friend Kirk went on a binge yesterday and backed a half dozen photo book projects and I followed him on that binge.
I thought I’d blog about one of the projects we backed today.
NYC is many things, and one of them is a beach town. In the summer, the beaches of south Brooklyn and Queens (Rockaway) fill up with NYers of all ages and ethnicities. It is like the subway, a total melting pot.
This photo book project celebrates those beaches and the couples who fill them up in the summer months.
When I was in my early 20s, I had a conversation with my dad. I told him I was against nuclear power because it was dangerous and because it created radioactive waste that we had no idea how to safely dispose of. He replied that there certainly were problems with nuclear energy but that they paled in comparison to those of burning fossil fuels. This was before greenhouse gases and climate change were front and center in my mind and the minds of most people. I was not convinced by my dad’s argument.
Forty years later, my dad is no longer with us, but his words ring loudly in my ears. I have come full circle on nuclear energy and now see it as way more attractive than most other forms of generating energy.
We have understood how to make nuclear reactors that generate energy with fission for 80 years now. But these fission reactors have two unsolved issues. In rare situations they can get out of control and melt down. We have seen that at Three Mile Island, Chernobyl, Fukushima, and a few others. While rare, these have been scary events that have shaken confidence in the safety of nuclear reactors in the public eye. Fission reactors also create radioactive waste that we have not yet found a good way to dispose of and that nuclear waste has slowly been building up around the world.
A trend I’ve been watching for a while now is the use of solar for devices that live outside away from electrical outlets.
Last summer, I bought an inexpensive device that keeps snakes away from our yard. It vibrates into the ground like the animals that hunt snakes and scares them away. I don’t really know if it works but we have not seen any snakes since we got it. The device is powered by a small solar device that is on top of it. Installation was basically pushing it into the ground.
This morning on my way back from getting coffee, I passsed this Citibike station.
Jason Fried, CEO of Basecamp, posted a message to his team yesterday in which he outlined a bunch of changes they are making to the way they run the business. Some will be familiar as others have done similar things (no more politics on the company’s communication channels, no more committees, rethinking the review process).
I think it is a good thing to revisit the ways a company does things and make changes when issues arise. And posting these changes publicly so that others can see them and think about them is very helpful. I had chats with a number of portfolio CEOs yesterday about this post. It is making people think. That’s a good thing.
One change that got my attention was this one:
2. No more paternalistic benefits. For years we’ve offered a fitness benefit, a wellness allowance, a farmer’s market share, and continuing education allowances. They felt good at the time, but we’ve had a change of heart. It’s none of our business what you do outside of work, and it’s not Basecamp’s place to encourage certain behaviors — regardless of good intention. By providing funds for certain things, we’re getting too deep into nudging people’s personal, individual choices. So we’ve ended these benefits, and, as compensation, paid every employee the full cash value of the benefits for this year. In addition, we recently introduced a 10% profit sharing plan to provide direct compensation that people can spend on whatever they’d like, privately, without company involvement or judgement.
I saw this tweet in my feed yesterday and I sent some ETH to India this morning.
Here’s the @gnosisSafe Multisig address to donate in ETH/ERC20 to this address.
"If you want", Plz fill this form so we can reach you for more help and specially if needed for regulatory filings.https://t.co/ZzDrBZYC7p
— Sandeep – Polygon(prev Matic Network) (@sandeepnailwal) April 24, 2021
Sandeep followed with a bunch more wallet addresses to use if you want to send other crypto assets:
Any other ERC20, same ETH Address
— Sandeep – Polygon(prev Matic Network) (@sandeepnailwal) April 25, 2021
In the ten months that have passed since I wrote that I am pleased to say that we have seen a noticeable increase in board diversity in our portfolio. I have personally stepped off a few boards to make room for diverse board members and I am prepared to do more of that. A number of my partners have done the same. It is that important to me and USV.
But I can also tell you that the state of diversity in startup/growth company boards and our portfolio is still awful.
Our portfolio company Bolster connects fractional executives and board candidates to startup and growth companies. They have done some of the board searches for diverse candidates in our portfolio and they are going to do a lot more.
A well-known entrepreneur turned VC, who will go unnamed because I am not sure he would want me to share this conversation publicly, once told me “if you remove a founder, you must sell the company within a couple of years or it will start to decline in value.”
I don’t entirely agree with that and my experience with it has been different, but it brings up an incredibly important topic about leadership.
I like to keep things simple and in my simple mind, leadership comes in two flavors, visionary leadership and operational leadership. Founders are almost always visionaries (if they aren’t, run in the opposite direction) and hired CEOs are almost always operators.
What this VC was saying is that once you replace visionary leadership with operational leadership, the Company will stop innovating and start to lose value. I agree completely that companies that stop innovating will start to lose value. What I don’t agree with and have seen first hand, is that you can have a team that can provide both operational and visionary leadership.
Long-time readers know that I am a big Citibike fan. Citibike is the name of NYC’s bike-share program. I have been blogging about it since it launched in the spring of 2013, eight years ago now. I wrote this at the time.
Since it started getting warm in NYC about a month ago, I have been Citibiking to work, to home, to dinner, etc. And I must say that the Citibike experience in NYC has gotten a lot better in the last few years.
There are now a lot of electric bikes. I don’t use them because I prefer to get the workout, but I see a lot of people using them.
The newer bikes are really easy to ride. They keep improving the bikes and the latest lot of them are terrific.
With new Covid cases down 30% in the last two weeks and partially vaccinated people approaching 50%, NYC seems ready to start getting back to work.
I have been going to the office several days a week for the last two weeks and will be there again today. As my USV colleagues get fully vaccinated, they are joining me and our office is starting to fill up.
But our Flatiron neighborhood still feels empty and there is not one good restaurant open for lunch during the week.
As we head back to work, what will the new normal be?
Last night I watched the NY Knicks win their fourth straight game on the road in New Orleans. They are now 29-27 and have a fighting chance of being a .500 team this season with only 16 regular season games left.
This is essentially the same team that went 21-45 last year. Elfrid Payton, RJ Barrett, Julius Randle, Mitchell Robinson, Taj Gibson, and Reggie Bullock were all on that 21-45 team.
The coach is what changed. Tom Thibodeau came in and has instilled an entirely different approach and culture. The Knicks are the league’s best defensive team, allowing the least points per game. Last year, they were 18th in defense.
It is a little known part of my career, but for a brief period from 1997 to 2001, I was part of a small group of investors who helped to create a startup ecosystem in Latin America.
It all started with a company called StarMedia which created a Yahoo-like “portal” for Latin America. My partner Jerry Colonna and I met StarMedia in early 1997 and we brought it to our partners at Chase Capital Partners because we wanted to lead a Series A investment in it. In that Chase Capital Partners meeting was a woman named Susan Segal who ran Chase’s Latin American private equity investing. She pulled me over after the meeting and asked me if there were other startup companies like StarMedia in Latin America. I told her that there must be but I wouldn’t know how to find them. She said, “I can help with that.”
So began a five year investment partnership between Flatiron Partners (our VC firm) and Susan’s Latin American private equity business. She and her team worked their Latin American connections and they brought the deals to us and we vetted them for team, technology, market need, etc. We did something like a dozen investments together including MercadoLibre (one of the greatest Internet companies ever in any region), and Patagon.com (where I met the founders Wences Casares and Micky Malka).
But it was StarMedia where I learned the most. I made and lost more money personally (at that time in my career) on Starmedia. I have a StarMedia stock certificate in my office that I look right at that was made out to one of our family entities. It was once worth tens of millions of dollars and is now worthless and has been for decades. It takes messing up on that massive of a scale to learn some things.
For years, one of my prized possessions has been my MTA EasyPayXpress Metrocard.
It’s a little worn down from a lot of use because it auto refills itself. It is a Metrocard that is connected to a “card on file” and it automatically refills itself so that it always has money on it and you never miss a train because your Metrocard has run out of funds. I’ve had one of these for something like twenty years. And yet many NYers don’t know that this product exists.
But last week, I realized that my Metrocard’s days are numbered. I walked into one of the subway stations I use the most and saw that the turnstiles now accept Google Pay and Apple Pay.
I contributed 0.1 ETH to the effort yesterday evening and she is now approaching her 25 ETH goal.
If you have an Ethereum wallet, like Coinbase Wallet or Metamask, you can participate in her crowdfunding project here. The rewards are pretty cool as is the premise of the novel. You can see all of that on her blog.
There was a day in the last week when four million americans got a Covid vaccine. That’s more than one percent of all citizens of the US. One in every hundred people in the US got vaccinated on the same day. Think about that!
Mayor de Blasio tweeted yesterday that 4.7 million doses of the Covid vaccine have been given out in NYC. Assuming that 2/3 of those have gone into new arms and 1/3 have gone into returning arms, that means almost 40% of adults in NYC have gotten introduced to the Coronavirus via a vaccine.
As an aside, another 20-30% of people in NYC got introduced to this nasty and deadly virus the old fashioned way and that means that we could have two thirds of adults in NYC with Covid antibodies in their systems.
But returning to the point of this post, we are vaccinating at scale in the US now.
Tech:NYC is the industry association for NYC’s tech sector. I am the Chair of the organization. I am excited about Tech:NYC’s work to bring the ongoing NYC Mayoral race to the tech sector.
On Thursday, April 8th (tomorrow) at 4pmET, Tech:NYC will host a webinar with the top mayoral candidates that is open to all NYC tech employees. The candidates participating are Eric Adams, Shaun Donovan, Kathryn Garcia, Ray McGuire, Scott Stringer, Maya Wiley, and Andrew Yang. The forum will be moderated by Josh Barro. The NYC Mayoral Forum is hosted by Tech:NYC and Warby Parker and is co-hosted by AT&T, Bowery Farming, Etsy, Harry’s, Via, WeWork, Zola, and more.
Tech:NYC did a poll of NYC tech employees earlier this year and it showed that the New Yorkers who work in tech largely care about the things that all New Yorkers care about. People are attracted to NYC because of its diversity, cultural institutions, subway, etc. – the things that make NYC NYC. And they care about their neighborhoods, schools, parks, quality of life, etc.
The poll also showed that lots of people in tech care about the mayoral race – 87% said they plan to vote in the primary.
We have a house in the northeast United States where the summers are warm and the winters are cold. We have solar on the roof and we heat and cool this house with electricity. This is the electrical generation/consumption chart for all of 2020 for that house:
We produce almost all of the heating and cooling for that house with solar power. How do we do that?
We use geothermal energy to heat and cool it. We drilled wells down into the earth and pull water up to heat the house in the winter and cool the house in the summer.
I do a lot of “bulk emailing” but I hate sending bulk emails. I prefer to personalize emails and send them one by one so that the recipient understands that the email came from me.
What that has meant is that I take google sheets full of email addresses and I cut and paste a message into my gmail for each and every email address. That is incredibly slow, dull, repetitive, and painful.
About a year ago, we started using Hubspot for our family’s philanthropic efforts and it was a revelation to me. Hubspot connects to my gmail account and the emails I send from it appear to the recipient like I sent them personally from my gmail.
But behind the scenes, I can collaborate with my colleagues on templates and lists for various bulk emails that I need to send. When it is time for me to send the emails, I simply work my way through the list, selecting a new name, adding the template, making any little changes to personalize the message, and then I hit send.
I wrote a blog post last fall asking for advice for headphones that don’t go into my ear and allow me to hear ambient noise around me. I got a ton of responses and that led me to bone-conducting headphones. I have been using AfterShokz bone conducting headphones for the last six months and they work well.
So when I came upon this Kickstarter project to make a pair of “smart” bone conducting headphones, I got interested. I backed it and went for the reward which I rarely do. I will hopefully get a pair of these Sentien headphones this fall.
If you are reading this via email, the video is here.
Most venture capital funds have a “recycling” provision that allows them to sell some percentage of their investments and reinvest those funds back into new investments instead of distributing that capital to their limited partners. There is no standard recycling percentage in the market, but I think 20-25% is fairly common.
We do this at USV very aggressively. It allows us to put the entire fund to work and recoup the management fee load. A $100mm venture capital fund will pay something like $20mm in management fees over a ten-year life. So it would only actually invest $80mm into startups. But if that fund recycled $20mm back into new investments, it could put the entire $100mm to work even after paying the $20mm in management fees.
Sometimes it is also possible to use recycling to invest more than the fund actually raised. We have done that in a number of funds. Our first fund was a $125mm fund, but we only called something like $110mm from our investors and I think we ultimately put to work something like $140mm.
These might feel like small moves, but they can be very big moves when you are trying to make 3x or more on a fund. Three times $110mm is $330mm. Three times $140mm is $420mm.
TEALS is a longstanding program supported by Microsoft where software engineers assist in computer science instruction in K12 schools. I have been blogging about and advocating TEALS for over eight years now. TEALS came to NYC in 2013 and has been helping kids learn computer science in NYC schools ever since.
For many of those years, the software engineers would have to travel to the school building to assist in classroom instruction. But that has changed and now TEALS volunteers can teach remotely. I think that is a huge unlock for everyone and I am encouraging software engineers in NYC to consider doing TEALS during the 2021/2022 school year.
You can learn more here.
If you are interested, you can apply here.
I have written about all of these things here at AVC before. But I am writing again as there is likely to be a bunch of chatter about Dapper, Flow, and NBA Top Shot as the news of a financing round comes out today.
Financings don’t really interest me but companies do. And this is a fascinating company.
Dapper Labs came out of an incubator called Axiom Zen back in 2017. The Axiom Zen team was looking at interesting things they could build using Ethereum. They contributed to the ERC 721 standard for non-fungible tokens and started building an NFT collectible game that became Cryptokitties. That got our attention and led to a financing that spun out the team and Cryptokitties into Dapper Labs. I wrote a short post on the USV blog announcing that we had invested in Cryptokitties, but in truth, we invested in much more. We are only seeing the entire vision now.
After building a few more collectible experiences on Ethereum, the Dapper Labs team concluded that the NFT experiences they wanted to create needed a different blockchain and they started building Flow. Flow is a proof of stake blockchain that was designed from the ground up for consumer experiences that require scale and performance and more.
One of the gifts that I got was the ability to stay positive. I am grateful to my parents, my wife, and my genes (and anyone else responsible too). It is such a superpower.
I don’t just mean optimism. I mean saying nice things about people. I mean keeping a smile on your face. I mean positivity in all things. I do have my moments of negativity, but they come infrequently and go away quickly.
I saw Magic Johnson say something nice about the Lakers last night and I texted my son that I appreciate how Magic is always so positive. He always has a smile on his face. He is always saying nice things. I am sure he was a vicious competitor on the court, but he did it nicely.
I recall when David Karp was building Tumblr, he refused to have comments. He refused to have downvotes. The only user engagement was a heart and a repost. He told me he wanted to emphasize positivity and de-emphasize negativity. And Tumblr was a very positive place to be during its heyday.
I have a Samsung Frame in my home office. I think I posted a photo of it here at AVC once before. But for those who did not see that post, here it is:
I’ve had it for something like three years and I change the digital art on it from time to time.
Digital Art has been tricky to purchase and own and the business models around it are a bit challenging.
A friend and I dined last night at a restaurant that opened in our neighborhood last summer, in the middle of the pandemic. For the first six months of its existence, they could not welcome diners into the space that they had spent time and money creating. They carried on, figured out how to make money serving customers outside. As the NYC economy starts to recover, they are still standing. And they are now welcoming diners into the lovely space they created for them a year ago.
Resilience is an extremely valuable trait when you are starting and running a business. In a bull market that rewards other things, it is often overlooked. But I don’t overlook it.
A reporter asked me recently about a company that I am on the board of that has become very successful. I told the reporter that for years, the founder carried on while every competitor left the market in search of a viable business. The viable business arrived eventually and the founder was rewarded for his patience.
Sticking with something, even when the chips are down, is hard. Many people (most?) can’t do it. They are impatient. They want the easy money.
I wrote about crypto and climate earlier this month and suggested that the narrative that crypto is bad for the climate is not as straightforward as many make it out to be.
Over last weekend (a beautiful one in the northeast), two of my partners wrote on this topic.
My partner Albert took a similar approach as I did in my post and outlined many reasons that crypto and climate are not at odds with each other. He went further than I did in my post and it is worth reading his, even though they are similar.
My partner Nick went out on a limb and compared Bitcoin to a battery. He used that analogy to be provocative. He took some heat for doing it, but I think it was worth it because you sometimes have to stake out a provocative position to get people’s heads to turn a bit on something.
I could not help but use the word Freemium in the headline to this post. For those that don’t know, the word Freemium was invented here at AVC, back in 2006. I am quite proud of that fact, even though I did not come up with the word myself.
With that business taken care of, let’s move on to the topic of the day.
Our portfolio company Stack Overflow, best know for its massive free knowledge sharing service for programmers, has been building a companion business over the last few years called Stack Overflow For Teams. Teams is the same knowledge-sharing software that programmers know and love but for private sharing inside of companies.
Since launching Teams, it has been free for the first thirty days. But it takes longer than that to build great knowledge sharing inside of companies. So last week, Stack launched a new version of Stack Overflow For Teams that is now free forever for teams of 50 or less.
This project was right at the front of my Kickstarter home page this morning. I clicked play and watched the video (you should too). The project creator, Daniel Wegner, says “there is power in young people, there is power in talent, there is power in art.” I agree with all of that and I backed the project.
I have written many times here that it is important to me that I control the platform that I publish on. I use the open-source WordPress software for my content management system and run that on a hosted server. I use my own domain, AVC.com, to locate my writings on the Internet. That has served me well. No matter how horrible I become, nobody is going to take me down.
But we can go even further down this path of controlling our destiny. We can decentralize the entire thing; the content management system, the storage of the content, the domain name system.
As a start, I am going to mirror this blog on Mirror and you will be able to read it at AVC.mirror.xyz. I have secured AVC.xyz and will eventually move my Mirror blog to that domain.