HTTP/1.1 100 HTTP/1.1 200 Content-Type: text/plain;charset=UTF-8 Content-Length: 55686 Date: Mon, 19 Nov 2018 04:27:17 GMT 亚博在线娱乐官网入口-VC & Technology – AVC

Posts from VC & Technology

Atoms and Bits

There is a framework I've/we've used over the years to think 亚博体育app下载苹果版 where to invest and where not to invest that I call"atoms vs bits.""

I am not sure where I got it from but the concept is simple.Is the software being built and taken to market dealing with just bits or are atoms also involved??

The idea being that it is going to be easier to make something work if there are just bits involved.Atoms make things more complicated and more expensive..

In the 90s,when I first came across this framework,it led us/me to focus on areas like media and financial services where the product was end to end digital.And the first industries to be truly disrupted by the Internet were the ones,like media and financial services,that are end to end digital (or can be)..

I've held on to this framework over the years and while we've veered from it from time to time,often unfortunately,it still holds up..

If you look at machine learning,possibly the most impactful technology right now (and I mean right now),you can see this at work..

Machine learning algorithms have massively transformed online advertising (just bits),online commerce (just bits on the UI),trading of financial assets (just bits),and our attention (just bits and neurons)..

But in areas where atoms are involved,not so much.There appears to be a growing acknowledgement in the tech sector that the timeline to fully autonomous vehicles is going to be longer than some had thought.It is not that surprising.There are lots of atoms and lives involved..

I've been waiting patiently for the day that I don't have to do the dishes after yet another amazing meal by The Gotham Gal.I will likely wait longer.Atoms are involved..

I am not saying that we should not work on these harder problems.We should.But we should also understand that the timelines will be longer and the road to adoption will be more challenging.That means these efforts will be more capital intensive and should ideally be investable at more attractive valuations.Sadly the latter has not been the case..

When you are investing other people's money,you need to be mindful of where the timelines are shortest and the path easiest.And that has been bits for the totality of my investing career..

Investor Friendly Terms

At USV,we have always had simple and investor-friendly terms with the institutions and individuals that provide the capital we invest..

I got thinking 亚博体育app下载苹果版 that this morning in readingBrad Feld's post 亚博体育app下载苹果版 recycling management fees,something we do aggressively at USV (we have recycled between 20 and 25% of our mature VC funds)..

We have never charged a premium carry or off-market management fee,we return all capital before taking carry distributions,and we recycle aggressively..

Certainly,we could charge more,but we have never wanted to do that..

When people ask me why not,I like to tell a story..

When Brad Burnham and I were raising the first USV fund,into the teeth of the VC and Internet meltdown of the early 2000s,we visited one of the top VC LPs in the world and he told us the story of a VC firm that they had been investing with for more than twenty years..

As the Internet bubble neared its pinnacle in late 1999,that firm came to the LP and told them that they were raising the carry from 20% to 30%.The LP,who had been supporting this firm for twenty years,was not comfortable with this hike in carry,but held their nose and went along with it..

Three years later,the firm came back for another fund,this time with a 1999 vintage fund in shambles..

They started out the pitch like this"we have had a wonderful and profitable relationship with you for twenty-three years.""

To which the LP retorted"Not really.We had a wonderful relationship with you for twenty years,then you reset the relationship and it has sucked ever since.""

That was the end of that LP/VC relationship..

That story has really stuck with me.Every time I think"we are well below market"I then think"but this is no time to upset the apple cart."And I get back to work..

The same is true of entrepreneurs and VCs.You can push things too far and if you then stumble,it will come back to haunt you..

But if you are fair and reasonable,it will get paid back over time,particularly in times when you are struggling and need more capital..

That is how the world works.What goes around comes around.Best to be in good standing with your investors when it does..


At USV,we report to our investors on our portfolio and performance four times a year,once a quarter.We produce an audited report once a year,with our Q4 results..

We do that in writing and we also do a quarterly call for our investors three times a year (we combine our Q4 and Q1 calls since our annual audit process slows down our Q4 reporting)..

In our annual and Q2 written reports,we prepare a short update on every one of our portfolio companies.We call these"one-pagers.""

This can be a fair bit of work but we do it regularly and have been doing it since we started USV..

I think it is a great discipline for investors to take the time on a regular basis to sit down and write and speak to their investors 亚博体育app下载苹果版 what is going on in their portfolio and in the macro environment..

It is a time-honored tradition that fund managers write a letter to their investors explaining what they are seeing and doing.Warren Buffet's letters are a particularly great example of that.But there are many fund managers who are excellent writers and whose letters get passed around and read by many in the investment community..

Everyone here at AVC knows that I think writing and investing fit like a hand and glove and writing and thinking out loud can make you a better investor..

The Gotham Gal and I are investors in a number of venture capital funds and I have noticed a trend among venture fund managers to reduce the amount of writing and verbal communication they do with their investors.I understand that it can be time-consuming and that many fund investors don't even bother to read the reports..

But I would urge my peers to resist that urge and to take time to regularly sit down and write 亚博体育app下载苹果版 what is going on in your portfolio companies and the markets you invest in.I think it provides insights,raises issues,and gets the entire investment team talking 亚博体育app下载苹果版 things in a way that few other regular processes do..

Plus I really enjoy doing it..

Developer In Residence

For the past six months,,Jedhas been helping USV build some much-needed tools to connect people at our 60+ portfolio companies to each other..

It has worked out well,so well that we decided to ask Jed to join us full time in a new role that we call Developer In Residence..

Why would a VC firm need a full-time software developer??

Well,we have always had people at USV who can code,but it was always a side thing,never our full-time job..

And there are things that we are doing at USV that require a full-time commitment to the code..

Jed explained all of this and the fact that he moonlights asa bass singer in a barbershop quartet,,on the USV blog yesterday..

At USV,we are committed to helping our portfolio companieswithout asking them to do a lot of the work to enable that..

Ultimately that requires intelligence that is automated and that means writing and maintaining code..

And so I'm thrilled that we now have a full-time person at USV who is doing that for us and our portfolio..

Where Did You Go To School??

I read this post yesterday that says that40% of VC investors went to either Stanford or Harvard..

Frankly,I am not surprised..

I've worked in this industry for over thirty years.It is full of Stanford and Harvard grads..

I've got nothing against either school.They are wonderful education institutions and full of great people..

We have Stanford and Harvard alums at USV so we are certainly a contributor to this statistic.But we don't have 40% of our team from those two schools..

We don't ask where you went to school onour analyst application.We ask you to answer four questions and we go from there..

I learned the VC business froma manwho went to Case Western Reserve University,,my co-founder of Flatiron Partnerswent to Queens College,andmy co-founder of USVwent to Wesleyan University..

We have hired analysts at USV that did not graduate from college and maybe didn't even go,I really don't know and don't care..

What I have learned from all of these individuals is that curious and brilliant people come from all places,all genders,and all ethnic and racial backgrounds..

The VC business is making some progress on gender diversity.This chart is from the same post that I linked to at the start of this post..

Eighteen percent is not a number to be proud of,but 60% growth in two years is.If we continue at that rate of gender diversity growth,the VC business could be gender neutral by the middle of next decade.It would not surprise me if that happens.I feel the desire for gender diversity pulsing through our industry so powerfully right now..

But in most other ways,the VC business is still a very homogenous place.Mostly white and,it turns out,mostly educated at a handful of higher education institutions..

We can do better.We must do better.And,I hope,we will do better.Looking in the mirror and not liking what you are seeing is the first step to rehabilitation..

Investment Pace

We were hanging out with friends last night and one of them asked me how many investments I have made this year.I replied"one so far."He said,"you are not very active."and I replied"I do one to two deals a year and always have."Which surprised him..

I have been investing in early stage companies since the late 80s and over those thirty plus years,I have personally led investments in 亚博体育app下载苹果版 sixty companies.An average of less than two investments per year..

Our firm usually makes eight to ten new investments per year,which is one to two new investments per partner per year..

When you are making early-stage investments,which require a lot of your personal involvement over a seven to ten year period,you can only take on so many projects..

If you assume the average hold period for an early stage investment is seven years and if you make one to two investments per year,you will have between seven and fourteen portfolio companies to manage at any one time..

The low end of that range is quite manageable.The high end of that range is not.I have been there..

I believe that early stage venture capital done right is a service business in which the entrepreneur and the 亚博体育下载app they started is our customer..

We need to be able to service that portfolio 亚博体育下载app properly and that requires bandwidth at the partner level plus a team around the partners that can provide additional support..

And so that means managing the investment pace tightly and saying no to most opportunities that come in and being really committed and convinced 亚博体育app下载苹果版 the projects that we say yes to..

And so that is what we do at USV and what I have done my entire career..

Doing this well is hard.Because if you only make eight to ten new investments per year and expect to produce at least one billion plus exit each year,something we have been able to do every year for almost ten years now,you have to have a pretty high hit rate on super early stage investments..

Our approach to making this work is an evolving thesis that tells us what to invest in and what not to invest in,rigor and collaboration in our decision making,and real substantial value-add post-investment..

This is not spray and pray,this is not following the herd,this is not momentum investing..

This is thesis-driven,active early stage investing,which has always produced the best returns over time and I believe always will..

a16z crypto

I guess this is the week I am going to compliment our competitors in the VC business..

That meme started yesterday inmy post on Benchmarkand will continue today..

Yesterday afternoon my friendChris Dixonannounced a new VC fund called""a16z crypto"which he will lead with a team of great investors,many of which are also friends,including his new partnerKatie Haunwho I serve on the Coinbase board with.She is a very special person as Ben Horowitz described inthis post..

Go readthe blog postwhich Chris wrote to announce the fund.It is among the best articulations of the crypto opportunity that I have read..

Here are some of the concepts he explains which had me nodding my head:

Trust is a new software primitive from which other components can be constructed..


The new primitive of trust also means that 3rd-party developers,entrepreneurs,and creators can build on top of crypto-powered platformswithout worrying亚博体育app下载苹果版 whether the rules of the game will change later on.In an era in which the internet is increasinglycontrolledby a handful of large tech incumbents,it's more important than ever to create the right economic conditions for developers,creators,and entrepreneurs.Trust also enables new kinds of governance where communities collectively make important decisions 亚博体育app下载苹果版 how networks evolve,what behaviors are permitted,and how economic benefits are distributed..


We believe that just as the last three megatrends — mobile,social,and cloud — intersected and reinforced each other,so will the next three megatrends — next-gen computing devices,AI,and crypto..


crypto is purely a software movement and doesn't depend on a hardware buildout,in contrast to,say,the internet,which required laying cables and building cell towers.Second,,the spaceis developing extremely rapidly,partly because the code,data,and knowledge islargelyopen source,and partly because of the increasing inflow of talent..


Cryptogoodscan unlock new experiences and business models for games and other forms of media..

I really like the term"cryptogoods"and plan to start using it as my default word for NFTs and related efforts..

Many of our crypto investments have been with Chris and his partners and I hope that will continue.They are fantastic to work with..

Slowing Down To Speed Up

I saw this chart inRecode's piece on Benchmark:

It's an interesting chart because it breaks out new investments and follow-on investments,both of which have been falling at Benchmark for going on five years now..

The Recode article,written byTeddy Schliefer,also states that Benchmark has not raised a new core fund in over four years..

Our numbers at USV are not as stark,we never took up our investing pace that much.We have always done around 6-10 new deals a year and while there is a fair bit of variability in that number year to year,over time it has stayed pretty constant..

But we last raised a new core fund in early 2016 and we are maybe 2/3  of the way through investing that so it should take us at least three years to put that fund to work.That is down from the two year period where we went from the 2012 fund to the 2014 fund to the 2016 fund..

So Benchmark is not the only leading VC firm that has slowed things down over the last three to four years..

Teddy makes an interesting point in his piece:

That long a dry spell between funds — at a time when rival firms are competing with one another to raise bigger and bigger war chests at a faster and faster clip,led by SoftBank's $100 billion Vision Fund — is decidedly unusual..

Longtime readers know that I have a huge amount of respect for Benchmark.I think they are a firm that beats to its own drum and does what it thinks is right and doesn't worry too much 亚博体育app下载苹果版 what others think.That approach leads to better returns over the long run in my view..

But if there are diverging perspectives among the top-tier VC firms right now,who is right?Or maybe both are right.Slow down the pace of early-stage investing and step on the gas in later-stage/growth??

And then,of course,there is crypto,where a lot of the smart people and smart money is going.Chris Dixon at Andreessen is raising a dedicated crypto fund.Matt Huang leaves Sequoia to do a crypto fund with Fred Ehrsam.And those are just two high profile examples,but there is most definitely a discernable pattern of smart money and smart people moving to the crytpo sector over the last few years..

So times they are a changing in VC land right now.Which mirrors the broader tech sector which is maturing and consolidating while a next wave starts brewing.How to play this whole thing is challenging.The future of the VC business and its top firms are in flux and those who play it right stand to gain a lot and those who don't stand to lose a lot.It is most definitely not a time for the status quo..

Rapid Experimentation

It can be exhausting to try and stay caught up on every new tech 亚博体育下载app being started.The Gotham Gal said me to yesterday,"everyone is an entrepreneur these days."She's right 亚博体育app下载苹果版 that directionally although most companies have employees who are not founders so it is not exactly correct..

The rapid expansion of tech startups and the entrepreneurs who create them has been building for fifteen years,or possibly twenty-five years if you include the early Internet exuberance and the period of disillusionment that followed..

But over the last ten years,in particular,we have seen a number of factors come together to make for an environment where"everyone"can do a tech startup..

We have more and more software engineers and related skillsets around the world as education systems are starting to respond to the market demand for this talent.This is particularly true in Asia and other parts of the rapidly developing world.But it is also increasingly true in the developed world.Our portfolio 亚博体育下载app Stack Overflow,which serves software engineers almost exclusively,sees 31 million people a month now,up from 22 million five years ago.That likely overestimates the number of globally employed software engineers but it is indicative of the vast number of people solving problems in software right now..

The explosion of open source software,transparent code repositories,and open source tools and languages like MongoDB (we own Mongo stock),React,JavaScript,Python,Ruby,Go,TensorFlow,and so many more,has made it easier to build things in software than ever before.And popular services delivered via APIs (like Twilio and Stripe,both USV portfolio companies) make building software applications even easier..

We also have more support systems for entrepreneurs than we did ten years ago.Paul Graham and Y Combinator were the innovators and first mover in the market for entrepreneurship support systems that are market-based and for profit.That model has been copied and evolved on all around the world and it is powerful,important,and its impacts are far-reaching.We have learned how to best support entrepreneurs early on in the life of a 亚博体育下载app which leads more people to try it and also leads to more projects graduating from these programs and getting seed funding..

Which takes me to capital.We now have more angel and seed and venture capital being invested in startups every year than ever before.It took a long time,almost twenty years,to pass the go-go years of 1999 and 2000,but pass it we have and even though many see that as a sign that we are in bubble territory again,I am not one of them.Technology innovation is happening in all sectors of our economy and all parts of the world.I think the expansion of capital being deployed into startups can continue for some time to come..

So there are more skilled people to help an entrepreneur build the thing they want to build,more support systems to help them avoid the big mistakes,and more capital to allow them to invest in the business ahead of revenues and profits..

And so,we are in a golden era of tech entrepreneurship where anyone with an idea can make a go of it..

That does not mean that all of these efforts will succeed.They won't.Think of this golden age as a time of rapid experimentation in which every problem will be attempted to be solved in many ways.Most will fail.Some will succeed.And we will see multiple successful approaches to solving the same challenges..

The good news is that all of the systems that feed these startup efforts,the talent market,the accelerator programs,the capital markets,and the entrepreneurs themselves,understand that these are experiments and that most will not succeed.For the most part,the market has evolved to a point where the economics of each input system has built the loss ratios and likely payouts when you win into their pricing structures.It is not perfect by any means.We may,for example,,need to do more for the very early employees..And the rapid inflation in financing valuations may need a pullback if those new economics don't work long-term for the capital markets..

But if we are thinking 亚博体育app下载苹果版 society,and I mean our global society,not just the US,the result of this era of rapid experimentation is likely to be progress on important,and also mundane,human needs..

None of this makes it any easier to try and stay on top of all of this.It seems to me that the only way to do that is to pick a subset of the tech sector and focus just on that and let others take on the challenge of doing the same on another sector.It has gotten way too big for anyone to be able to stay on top of it all..

But when you feel overwhelmed and wonder what will come of all of this entrepreneurship mania,I would urge you to think of all the good that will come of it.Lord knows we need it..

The Valuation Obsession

There is an obsession with the values that are being placed on companies when they finance.There has always been one but it is worse than ever..

Every day,without fail,I read a headline that so and so 亚博体育下载app has raised,will raise,or is trying to raise capital at some eye popping valuation..

It would be easy to blame this on the media,which certainly has to shoulder some of the blame for believing that these are important stories to write day after day,week after week,month after month,year after year..

But the media writes what people want to read and talk 亚博体育app下载苹果版..

The problem is us,the tech sector,and the mindset that valuation is the scorecard by which we measure ourselves..

Of course,valuation matters.When GitHub exits to Microsoft for billions of dollars,that matters.It matters to Microsoft's shareholders who paid that bill.It matters to Github founders and employees who got a pay day.It matters to the investors in GitHub who got a fantastic return on their investment.And it matters to Github users who got a signal 亚博体育app下载苹果版 how important the software they are using is to the big tech companies..

You cannot cover that story without taking 亚博体育app下载苹果版 the price that Microsoft paid.It is an important part of the narrative..

But interim valuations being put on startups is different.Sure the price that they can finance themselves is interesting.But not more interesting than the products and services they are bringing to market,how they are building their teams and cultures,and the underlying technologies they are using to do that..

And yet we get less and less of those stories and more and more box scores..

It leads to a culture of bragging and topping one another and an obsessive focus on valuation.I've heard founders say"if I don't raise at a billion or more,we will be seen as a failure."How ridiculous is that?And yet you can see how they can get to that place..

CEOs and their talent organizations frequently tell me that it is easier to recruit people to companies that have raised at eye popping values.This is particularly peverse because the higher the valuation,the less money the employee will make on their equity.But,it seems,the talent market is looking to the investment community to signal to them what companies are worth working for..

It should work the other way around.I like to invest in companies that smart people are joining.Capital should follow talent,not talent following capital..

I know that many will read this and roll their eyes."Fred doesn't like the hyper inflated valuation environment so he's trying to pour cold water on it."That's true 亚博体育app下载苹果版 me not liking it but we benefit from it as much as anyone..

What I don't like 亚博体育app下载苹果版 this environment is the focus on form over substance and reducing everything to a number.This could be the new normal.This may be life in startup land from now on.Maybe I just need to learn to deal with it..

But I hope not.I hope that people will come to understand that it is what underneath the covers that matters and the headline number is just that.A great way to get you to click on the link and see some ads..