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How much traction do I need to raise money? 23 April, 2013, 11:23 am
How much traction do you need to raise $1M? AngelList’s Ash Fontana has the answer on TechCrunch: Read the post for details and also see these comments by me, Michael Wolfe, and Shallaba.
No email at AngelList 22 March, 2013, 11:05 am
We use very little email at AngelList. Most of our communication happens on Yammer, HipChat, Tracker and face-to-face. This probably gets us a 90% reduction in email. If you’re running your company via email, you’re missing out on newer, more effective communications technologies. Yammer is our company mailing list Yammer has nested conversations, search, inline images and likes. It is also our company directory. And they have a mobile app. We use it for asynchronous communication across the whole company. Most of all, it keeps our company “mailing list” out of email. Yammer, HipChat and Tracker all have email, mobile and desktop notifications. You don’t need to check them every 5 minutes. HipChat is for IM HipChat is an IM app for desktop and mobile. It has inline images, presence, search and a company directory. The (buggy) iPhone app keeps you accessible when you’re out of the office. It also supports multi-person rooms (we have a room for our engineers) and it has an API that we use to feed other rooms with exceptions, GitHub notifications and deploys. We use HipChat for synchronous 1-on-1 and group communication. If you’re using Skype for IM, try HipChat. Alternatives include Yammer, which has rudimentary IM. Or a Facebook group which has a wall and basic IM. But I recommend HipChat. Tracker is for product specs We use Tracker to spec out goals and tasks for new features. Each spec has its own todo list, image attachments, comments and status. It’s also easy to re-prioritize features and assign them to different people. Some people prefer Asana or Trello for specs. Face-to-face is for everything else The biggest companies weren’t built remotely. Families don’t live remotely. Sports teams don’t train remotely. Face-to-face is for high bandwidth communication, sub-communication (body language and facial expressions), leaving an impression, new ideas, overhearing other people’s conversations, bonding with your co-workers, whiteboarding, throwing chairs, and everything else you need to say to build a big business. When we use email I discourage new team members from using email, but there are a few places where we use it. First, when we need to communicate with people outside the company. Second, when we need to have a conversation with an ad hoc group of people inside the company. HipChat is not great for ad hoc groups that only need to discuss a single task like, “how should we negotiate this deal.” Third is laziness and stupidity (guilty). Update: There’s an excellent discussion of alternative approaches on Quibb. Screenshots Here are screenshots of the mobile apps. They all have desktop apps as well. Yammer HipChat Tracker My Inbox Comment on Hacker News →
6-year vesting 1 March, 2013, 9:30 am
Every team member of AngelList is on a 6-year vesting schedule. Including the founders. Why? Because it takes a long time to build something important. And we want everyone to stick around for a long time. Because we want people who are here for the mission, not a payday. Because it sells prospective hires: the team you’re joining isn’t going anywhere. Does that mean I get more equity? Everyone asks whether they get more equity to make up for the longer vesting schedule. A good way to think about that is whether we would give smaller grants if new team members were on a 4-year schedule. And the answer to that is ‘yes’. There are a lot of benefits to getting additional equity now, instead of 4 years from now: The strike price is today’s strike price, not a higher strike price 4 years from now. The clock on long-term capital gains starts as soon as you exercise the grant. A new grant 4 years from now wouldn’t be as big. Any acceleration is likely to consider the entire grant, not a smaller 4-year grant. If you’re interested in a 6-year vesting schedule, AngelList is hiring engineers and designers. Related: 1-man startups and Ask forgiveness, not permission Comment on Hacker News →
The Entrepreneurial Age 25 February, 2013, 1:19 pm
The entrepreneurial age will be as important as the industrial age and the information age. In the industrial and information ages, we learned how to put physics and information to great use. Physics and information were also the basis for an organization’s differentiation and victory. In the entrepreneurial age, physics and information will be replaced by entrepreneurship: the ability to serve a customer at the highest level of quality and scale, simultaneously. We will learn to put entrepreneurship to great use and it will be the basis for an organization’s differentiation and victory. This is not a statement that the winners are going to win. It is a statement that (1) the best strategy is to attempt to deliver the highest quality with the highest scale and (2) other types of differentiation should only be tactics that serve an organization’s entrepreneurial capability. Differentiation is being commoditized Physics, information, hardware, software, marketing, press, business development, recruiting, training and every damn thing a business needs to do is quickly becoming available as a service. And innovations by one company are quickly made available to its competitors by other entrepreneurs. It is no longer effective to rely on any type of differentiation—organizations must focus on delivering the best product in the world to as many people as possible. All other activities just help them on their way. Scale is getting easier In the past, scale (low cost, high distribution) was so difficult that organizations with bad products and great scale could win. And it was so difficult to scale the very best products that they never left the boutique. The challenges of scale are now diminishing rapidly. Scale is now available as a service—see Foxconn (manufacturing), AWS (hosting) or Facebook Platform (distribution). But scale is not being commoditized Scale is getting easier and other forms of differentiation are being commoditized. But scale will not be commoditized. It is as important as an organization’s product development capabilities. Why? Because the best products require unique means of scaling. The delivery of the best products is tied into the product itself. For example, look at Apple’s efforts to develop new manufacturing techniques and stores for its products. If you don’t scale quality, you will be shut out of the marketplace Today, it’s too easy to spread the word about the best products to leave any room in the marketplace for merely good products. The organizations with the greatest entrepreneurial capability will collect the most customers and greatest profit. They will also attract the best talent, who will continue to build the best products, with the greatest distribution and highest profits, which will attract the best talent and so on. It’s not bad enough that the winner is collecting the greatest profits, it’s also collecting the best talent, leaving competitors without the people it needs to stage a comeback. The industrial and information revolutions are enabling the entrepreneurial revolution The continuous improvements in our ability to manipulate physics and information are helping us commoditize every capability on the planet. These improvements enable entrepreneurs to deliver services to other entrepreneurs—and these services are commoditizing every type of differentiation except product development and delivery. If you’re interested in building a steam engine for the entrepreneurial age, AngelList is always hiring engineers and designers. Related: Startups are here to save the world and There is no finish line for entrepreneurs Comment on Hacker News →
There is no finish line for entrepreneurs 18 February, 2013, 11:03 am
For an entrepreneur, if it is possible to make it better, she must make it better. If it is possible to make it more accessible, she must make it more accessible. If it is impossible to make it better or broader, she innovates. Starting a great Italian restaurant is not entrepreneurship because the proprietors make no attempt to scale it. Running McDonald’s is not entrepreneurship because they make no serious attempt to build a better product. Apple is an entrepreneurial venture because it is in the business of delivering ever-increasing quality at higher scale. There is no tradeoff between quality and scale Quality measures how far a product advances the customer. Scale measures how many people use it. For entrepreneurs, there is no tradeoff between quality and scale. The job is to do both—not one or the other. If it can’t be done, you innovate. Quality without scale is not entrepreneurship—it is a tree falling in the forest with no one around. Scale without quality is also not entrepreneurship—it is business as usual. And it leaves businesses exposed to competitors who steal its customers (and, worse, employees). Anyone who attempts to serve a customer at a new level of quality and scale is an entrepreneur. Anyone who does not, is not. If you’re interested in helping entrepreneurs never reach the finish line, AngelList is always hiring engineers and designers. Related: Startups are here to save the world Comment on Hacker News →
1-man startups 15 February, 2013, 8:49 am
The AngelList team is roughly organized into 1-(wo)man startups. That means we expect you to treat your project like a startup. You come up with the idea, do the design, write the code, release it, market it, support customers, collect external and internal feedback and then get to work on the next version. We also expect you to work directly with our business partners like SecondMarket, VC funds and incubators. We don’t hire people who just want to code We don’t hire anyone who just wants to be an engineer. Or a designer. Or a product manager. We hire people who want to start their own company—at AngelList and beyond. Many of our team members, including me, have started their own company and failed—others have done quite well. I would put our engineers up against any startup in the world, but we’re not a good place for someone who wants just wants to code. And we’re not a good place for people who want to be told what to do. If you sit and wait for instructions, you will fail. Pull the help you need Everyone on the team is exceptionally good at one or two things (code, design, product, marketing…). Some of them might be fine at another one. But it falls off quickly after that. So we expect engineers to pull help from designers (and vice versa). We expect designers to push help on the engineers (and vice versa). We expect teammates to ask the founders for help getting press. To get advice on how to sequence the launch. To ask for a better idea. To ask what’s the most important thing you could be working on right now. Pull help from whomever is best at X, but don’t let them be a bottleneck. And expect strong feedback from people who are better at X. Coordination costs go way down Each person on the team does a ridiculous amount of cross-functional work, so coordination costs go way down. It is pretty easy to coordinate with yourself. There are less stakeholders on each project, so freedom and happiness go way up. So does responsibility. Finally, we get the chance to improve the average quality of the team as we hire new people. Instead of hiring teams of decent people who are managed towards a good outcome, we can hire unicorns that actually increase the average quality of the team. And we can create our own unicorns through training. The product gets messy We don’t have a consistent design across the entire site. The design is embarrassing in many places. The product is embarrassing in places. The code is rough in places. The site isn’t fast. We mitigate this by having very high standards–so our standard for embarrassing is another company’s standard for good. We mitigate this by solving very hard problems for our users, so they cut us lots of slack. We mitigate this by being fast instead of consistent or perfect. And we mitigate this with internal startups who serve our team members with design, engineering, refactoring, etc. It’s a great way to recruit Every candidate loves to hear that they will get the opportunity to be a 1-(wo)man startup. It lets us hire past and future entrepreneurs. A new team member isn’t going to take over one of our top-line metrics on her first day. She will start small but nobody is going to stop excellence from shining through. Related This won’t work if you don’t give the team freedom and responsibility. So read this: Ask forgiveness, not permission. It won’t work if you don’t have a strong sense of mission. So read this: Startups are here to save the world. And it might not work for your size or domain. We are only 13 people: 5 engineers, 2 designers, 2 “dealflow managers” and 4 G&A (including 2 founders). If you’re interested in working with us, we’re always hiring. Comment on Hacker News →
Ask forgiveness, not permission 11 February, 2013, 9:40 am
AngelList “corporate policy” is that team members should ask forgiveness, not permission. We would rather have someone do something wrong than ask permission to do it. Or better, we would rather have someone do something right and not need permission to do it. This is the most common outcome. We would rather have people ship to production whenever they want, than go through an internal review process. We can fix it on production. We prefer the customer’s review process. And it isn’t too hard to reveal a new feature to a small portion of our users and iterate on it as we expand it to more users. Eliminating permission increases speed and diversity Eliminating permission increases the speed and diversity of our decision-making. Our incubator applications are a good example of diverse decision-making: one of our team members built it even though I was telling him, “This is fine, but I don’t think it is that important. Why don’t you work on something else.” It ended up being very important to our users and mission. There are some sensitive parts of our product that are walled off from this “ask forgiveness” policy. There are some things we want reviewed by the people who “know better”. But it’s really rare. How it works This policy only works if you hire insanely smart and capable people, and let go of the ones who are not. We also filter for people who are mission-oriented, care about our customer and want to learn more. And it doesn’t mean that the founders aren’t standing over your desk telling you, “this isn’t good enough to ship”. That’s why we write down and promote these ideas. Because there is always pressure from someone important to do it another way. It also wouldn’t work without these other items of corporate propaganda: You break it, you bought it If you break something or your stuff is buggy, please fix it. As in straight away mate. Sweat the details and corner cases If people are going to ship whatever they want, we need them to sweat the details if they’re going to avoid mistakes. The best way to do that is to have the rest of the team constantly complain that your code and/or design sucks or, in polite terms, “contains opportunities for improvement.” Actually, mistakes are fine. They’re something you trade off for other variables like speed of iteration. We just want people to sweat the details because we care about the details. Be real Again, if people are going to ship whatever they want, whenever they want, how do we get them to make good decisions? One answer is that we ask them to “be real”. As in, treat our users like real people. Treat your teammates like real people. Just be real and do the right thing. Do what you think is right (and be right) If you have the freedom to make decisions, you also have the responsibility of being correct. S/he who codes, rules Another way we promote good decisions is by pushing the decisions down to the people doing the work. We memorialize that with the motto, “s/he who codes, rules”. As in, when we disagree, the person doing the work makes the decision. Own the result Pushing the decision-making down to the worker works best if the same person is responsible for the metrics. So we try to have 1-wo/man teams whenever we can, and we ask them to own the result. We also hire people who care about our customer and want to solve problems for them. Freedom and Responsibility All of these dictums are variations on freedom and responsibility. Netflix has a great presentation on the topic. So does Valve. Peter Drucker probably wrote about it 50 years ago. We didn’t invent this stuff, we don’t claim to know what we’re doing, nor is this a perfectly accurate or complete model of how we operate. Freedom Ask forgiveness, not permission Do what you think is right (and be right) S/he who codes, rules Responsibility You break it, you bought it Sweat the details and corner cases Be real Own the result If you’re interested in working with us, we’re always hiring. Comment on Hacker News →
Startups are here to save the world 7 February, 2013, 9:24 am
“He cares deeply about… the advancement of humankind, and putting the right tools in their hands.” – Laurene Powell Jobs on her husband, Steve Startups aren’t here to change the world, they’re here to save the world—by bringing us innovation that advances humankind. Our universities, labs and garages create enormous amounts of innovation—and there’s more coming every day. Today’s challenge is delivering it to customers in ways that advance humankind. Super companies Apple, Google, Facebook and Amazon all deliver innovation at scale: they reliably bring it to the whole world at once. I call them super companies. (And there are many more in information technology, hardware, healthcare and energy.) It might seem impossibly difficult, but super companies can be built. And the only way they get built is by starting a startup. Our duty If super companies are saving the world, and every company started as a startup, then it is our moral duty to remove the frictions along the startup’s way. That’s our duty at AngelList: to serve the startups that are saving the world. By eliminating the frictions along their way, in the most meaningful way possible. It is also the duty of every service provider in the startup ecosystem: investors, incubators, advisors, lawyers, recruiters, etc. Entrepreneurs If the service provider’s duty is to eliminate the frictions in the startup’s journey, then it is the entrepreneur’s duty to only start companies that can make a meaningful contribution to the advancement of humankind. That means saying no to businesses that are the Internet equivalent of McDonald’s. And it is our duty as entrepreneurs to never sell, shut down or give up until we’re delivering innovation at scale. Comment on Hacker News →
How to make money with pro rata rights 1 July, 2012, 4:40 pm
How to make money with pro rata rights: Exercise the pro rata, no matter the valuation, as long as the company is underpriced. Heuristically: a smart VC is leading an up round in the company. Lead an inside round so you can buy more than just your pro rata. Get a supra pro rata. Alternatively: convince the company to cut out other investors who have pro rata rights, so you can buy more than just your pro rata. Sell the pro rata right. Buy so much of the company in the first round, at such a low price, that you don’t need a pro rata. This probably isn’t realistic, but incubator investments are a little like this.
You can be so bad at so many things 3 December, 2011, 1:24 pm
“You can be so bad at so many things… and as long as you stay focused on how you’re providing value to your users and customers, and you have something that is unique and valuable… you get through all that stuff.” – Mark Zuckerberg

Fred Wilson

You Can Do Too Much Due Diligence 13 May, 2013, 3:18 am
It's Monday, time for another lesson I've learned in the venture capital business. Today I will tell a story that I love telling. It has some of my favorite people in it. Back in 2004, early in my blogging career, I heard about a service that had just launched called Feedburner. It provided a number of useful services for a blog's RSS feed. So I went and signed up and AVC became one of the first users of the service. I immediately liked the service and the idea. So I contacted the founder/CEO Dick Costolo, who has gone onto bigger and better things. I told Dick that I was interested in making an investment in Feedburner. My friend Brad Feld was also talking to Dick about the same thing so we decided to do the investment together. As part of our investment process, we do a bunch of fact gathering/checking work that is called Due Diligence in the vernacular of the VC business. So my partner Brad Burnham and I put together a list of leading blogs and online publishers who had popular RSS feeds at the time. I think there were a dozen or so publications on that list. It included Weblogs (Engadget), Gawker (Gawker), NY Times, and a bunch more. We know most everyone who ran those operations so we called them. What we heard was surprising. Not one of them was willing to hand over their RSS feed to a third party for analytics and monetization. We were very surprised to hear that and thought a bit about it. But, we decided, we could not invest in something that the big publishers would not support. So regrettably, I called Dick and told him we had to pass and why. Brad Feld went ahead with the investment and Feedburner closed their round without USV. About six months later I ran into Dick at an industry conference. We decided to grab lunch together and during lunch he said to me "you know those dozen publishers you called?" I said "yes, what about them?" He said "every single one of them is on Feedburner now." I was pissed. How could that be? So I said to Dick, "Would you consider letting us into that last round we walked away from." He said "No, but I will let you invest at a 50% increase in price". We did that and became an investor in Feedburner. And that worked out well when Feedburner was sold to Google a few years later. So what did I learn from this lesson? First, trust your gut. I was using Feedburner and knew it was a very useful service. I felt that others would see that too. They did, but it took some time. Second, I learned that a service can get traction with the little guys and in time, the big guys will come along. I have seen that happen quite a bit since then. And finally, I learned that you can do too much due diligence. It's important to talk to the market and hear what it is saying. But you have to balance that with other things; the quality of the team, the product, the user experience, etc. You cannot rely alone on due diligence, particularly early on in the development of a company and a market.
Off The Schneid 8 May, 2013, 3:15 am
The almost two year long slump is over. I've led a new venture investment for USV, which closed a few weeks ago and was announced last night. The company is Coinbase and my blog post announcing the investment is on the USV blog. The WSJ also wrote about it here. This hiatus, which I've blogged about a bit on and off, was mostly a result of being very full up with responsibilities for existing investments. I have made twenty investments since the founding of USV in the fall of 2004 (now 21) and have only exited six, so I have had fourteen investments that I am responsible for at USV. I take our responsibility to our portfolio companies higher than any other work related responsbility and these fourteen companies have required a lot of time and attention over the past two years. Two things have happened to get me off the schneid (a hitless streak if you aren't familiar with that term). First, the fourteeen companies have all matured a lot in the past two years and the demands of that group of companies has waned a bit. And second, I have come to believe that a number of new fundamental technologies have hit the Internet and it is time to get busy putting out money. One of these is Bitcoin. Here is a snippet of what I wrote today on the USV blog: We believe that Bitcoin represents something fundamental and powerful, an open and distributed Internet peer to peer protocol for transferring purchasing power. It reminds us of SMTP, HTTP, RSS, and BitTorrent in its architecture and openness. Like what happened with those other low level protocols, entrepreneurs and developers are now building technology on top of Bitcoin to make it more useful, more accessible, and more secure. It is possible that we may make more Bitcoin/digital currency investments but we will try to make sure they are not competitive with Coinbase. And there are other sectors out there that are emerging now that I am keeping my eye on as well. I hope to be more active in making new investments in the coming months. It's good to be back at it. Related articles Bitcoin: The Wild West Years Coinbase Nabs $5M in Biggest Funding for Bitcoin Startup Coinbase grew 15x in the past 3 months What Is Bitcoin and What Can I Do With It?
From DonorsChoose To Kickstarter 28 April, 2013, 6:41 am
In the wake of my Return and Ridicule post, I was asked how one goes about finding these services that are ignored and/or ridiculed. And the answer I gave was "if you use them you might realize how powerful they are." I woke up thinking about that in the context of Kickstarter today. How was it that I was so sure the Kickstarter project would work when it launched back in 2009? Well it was because of what happened on this blog a couple years before that. The story starts in the fall of 2007. Charles Best, the founder of DonorsChoose emailed me and asked if I would enter AVC into the DonorsChoose Bloggers Challenge. He wanted this community to compete with other tech blogs to see who could raise the most money for teachers and their classrooms. I said yes and we entered, and won, the tech category in 2007. We entered again in 2008 and won again. In the final year of the social media challenge (renamed to encompass more than bloggers) we won the tech category again. This post, which I wrote in November 2009, after our threepeat, shows that the AVC community raised almost $60,000 for teachers and their classrooms in those three October showdowns. So when Perry Chen came by to talk about Kickstarter in the summer of 2009, my mind was prepared to understand what he and his co-founders were up to. When he explained that artists and other project creators were going to post their projects and get them funded on the Internet, I thought "of course" instead of "that will never work." And I have Charles and the DonorsChoose team and the AVC community to thank for that. Which I book in the category of "what goes around, comes around". And I cannot resist reminding everyone that we have a DonorsChoose campaign running on AVC right now, called Good Things Come To Those Who Code. If you have not made a contribution and want to, now is the time. The campaign ends at midnight on Tuesday. Go here if you want to participate.
Video Of The Week: Parrot AR Drone 27 April, 2013, 3:52 am
I bought one of these on amazon at the suggestion of Laurent Eschenauer in yesterday's comment thread. I can feel my 14 year old self re-emerging. I can't wait to play with it. If you want to skip the unboxing and information and go right to the flying part, that starts about 5:40 in.
Return and Ridicule 25 April, 2013, 3:20 am
I am going down to Princeton today to talk to Ed Zschau's class on entrepreneurship today. Ed asked me what I wanted to talk about. I told him "return and ridicule". I have found that return and ridicule are highly correlated over the years. We have made more money on things that were highly ridiculed than on any other cohort. When I see people laughing at ideas and companies we have backed, I smile. It means we are going to make a lot of money on that investment. I saw Bill Gurley say that you can only make money by being right about something that most people think is wrong. His logic was that you can't make money by being wrong. And you can't make money by being right about something everyone else knows. So you have to be right about something that most people think is wrong. I really like that framework. The same logic applies to starting companies. If you start a company in a market everyone knows is going to be big, then you will have a ton of competition. If, however, you start a company in a market everyone is laughing at, you won't have too many competitors. This notion also plays into Clayton Christensen's framework for disruptive innovation. Many of the most disruptive technologies started out as what Clay calls "toys". The PC is a great example of that. PCs came out of the homebrew computer movement. Geeks were building computers in their garages. And everyone thought they were nuts. But from that came the Apple Computer and the IBM PC and we were off to the races with personal computers. Chris Dixon has a great post about hobbyists. He likes to look at what the next homebrew computer club type activities are these days. When I saw Chris yesterday he was talking about drones and asteroids. I laughed. He grinned ear to ear. Chris knows that it's good to be ridiculed. So many folks in the venture capital business are sheep that just want to follow the herd. They are momentum investors purchasing highly illquid investments. That is a recipe for disaster. Momentum investing works in highly liquid markets (sometimes). From what I can tell, it almost never works in private markets. Better to invest in laughing stocks. Becuase she who laugh lasts, laughs best.
Video Of The Week: The Tech Tonic Discussion 13 April, 2013, 4:36 am
Reuters Tech Tonic taping today 9 April, 2013, 3:14 am
A while back, I posted a video of the week of Avner Ronen on Reuters Tech Tonic. In the comments to that post, the host Paul Smalera invited me to appear on the show and then invited the AVC community to sit in the audience. Well the taping is today at the Reuters building in Times Square from 5pm to 6pm and the first 25 people to sign up can attend. The link to RSVP is here. Please don't RSVP unless you really plan to attend. We are going to talk about immigration, regulation 2.0, bitcoin, and a few other things that will be common themes to the AVC community.
Video Of The Week: The UC Irvine Conversation 6 April, 2013, 4:30 am
The Dean of the Computer Science and Statistics School (The Bren School) at UC Irvine is Hal Stern. Thirty four years ago in my freshman year at MIT, I was failing Differential Equations and Hal would tutor me as he watched the Celtics games in his room. With his helped I aced Differential Equations and went on to a fine career at MIT and beyond. The least I could do to pay him back was show up and give a talk at his school. I delivered that payback last Monday and it was a lot of fun. It's a long video, almost an hour, but we cover a lot of topics near and dear to this community. So give it a watch this weekend if you can find the time.
Monopolies and Startups 4 April, 2013, 4:04 am
Christina wrote a post yesterday that got me thinking. It's not quite like working together but when a former colleague blogs, you get a bit of that "in the halls" thing that makes working in a group so great. Fortunately, Charlie, Andrew, and Eric all blog too. Christina makes this point about medallions and monopolists: I’ve started to believe the leverage in the “sharing economy” will be in opening regulated industries. SF cabs were atrocious because there are too few medallions. (Turns out the medallion holders, keen to restrict medallion supply, were well-incented lobbyists, as any good monopolist should be.) The revolutionary part of Lyft and Sidecar is that those companies decided, forget the medallion battles! and let’s just increase the number of drivers on the road. I love this Margaret Mead quote: "Never doubt that a small group of thoughtful citizens can change the world. Indeed, it's the only thing that ever has." So now, after quoting two bright women, I will get to my point. Monopolies aren't great for society. So we have trust busters in government whose job it is to keep the monopolies in check. But they don't do that so well. And our government is pretty good at handing monopolies out. Just look at the cable industry. A few entrepreneurs in a garage. Or a few hackers on the Internet. They are the best trust busters of them all. Look what open source Linux did to Microsoft. They put a dent in a machine that the government could not. And look at what Lyft, Sidecar, and Uber did to the medallion owners in San Franscisco. They got cabs on the streets when the government could not. Never doubt that a small startup can take on a huge monopoly. Indeed, it is the only thing that can.
If I Had Glass 31 March, 2013, 3:51 am
The Verge has a post up that says the winners of the If I Had Glass campaign are largely Twitter users with big follower counts and links to a list of all winners. Sadly, my twitter account is not on that list. Back on February 20th, I saw the campaign launch and immediately tweeted this out: #ifihadglass I would wear them on the subway too — Fred Wilson (@fredwilson) February 20, 2013 I wasn't joking, although it was a reference to Sergey's subway ride. I will wear my glasses on the subway when I get them. If you want to invest in the services that are going to be built for these devices, then you need to own these devices. Fortunately I know a few winners and I will get my hands on Glass early on. But if anyone at Google is reading this, I'd love to buy a pair of my own.

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Feld Thoughts

The Founders: The Problem, The Solution, and Why We Give A Shit 7 October, 2012, 9:02 am
Are you watching The Founders Season 3 on TechStars.TV? If not, why not? Episode 2 (and Go!) is below – it echoes the points made yesterday in my post If You Can’t Explain What You Do In A Paragraph, You’ve Got A Problem. There’s a cameo from my dad (Stan Feld) at 2:05. See – even dad’s care about TechStars. In addition to seeing Stan, you get to learn what a 10:10 meeting is. And you get to see the teams struggle with their shitty elevator pitches at the very beginning of the program. Early this morning I got a note from Allen Morgan pointing to a blog he wrote titled Entrepreneurs: For Venture Capital Pitches, Say What Your Startup “Does” not What It “Is”. It nicely reinforces the point that active voice wins over passive voice. As Allen says at the end, “Be active, not passive. Passive puts audiences to sleep; not good in a pitch where you’re asking for money.” Related articles TechStars TV: The Founders, Season 3 Episode 1 – Be Part of the Dream TechStars TV: The Founders Trailer with Ubooly
If You Can’t Explain What You Do In A Paragraph, You’ve Got A Problem 6 October, 2012, 8:58 am
Here’s an email exchange that I had in the past 24 hours with an entrepreneur. Remember, I try to answer all of my emails and be responsive to any inquiry – this was a random one (which I get between 25 and 100 a day). Entrepreneur: I just wanted to touch base with you and see if you are taking on new startups right now. Me: Can you send me a paragraph and I’ll tell you if it’s something we’d be interested in. Everyone else to bcc: Entrepreneur: It’s difficult to accurately describe the company, myself, and everything else in a single paragraph. To write something so small but somehow include every important aspect is near impossible, if not impossible. My company is too complex to be described in a single paragraph. I responded politely that I didn’t think this was something I’d be interested in exploring. I did skim his longer description and took a look at the website (which was a landing page with some a vague description of the business.) I could determine from this that it’s not something we’d be interested in (it’s outside of our themes) but this entrepreneur also missed his chance to engage me more deeply since he couldn’t articulate what he was doing. I was in Oklahoma City earlier this week with the entrepreneurs at the Blueprint for Business accelerator (it’s a member of the Global Accelerator Network). There were five companies there and in addition to the various talks I did around Startup Communities I stayed at BP4B until about 10pm doing 15 minute meetings with each of the teams. I did my typical 15 minute “top of mind drill” where I start by saying “tell me about yourself as quickly as you can and then let’s spend most of the time talking about whatever is on the top of your mind.” Several of the teams explained themselves in a minute or less and then had 14 minutes to ask me questions; several of the teams took five to ten minutes to explain themselves leaving less time for questions. I strongly believe that a founder should be able to explain what they do in one paragraph. I’m not a believer in the “one sentence mashup approach” (e.g. we are like pinterest + groupon + facebook for dogs). Rather, I like three sentences: (1) what we do, (2) who we do it to, and (3) why you should care. Sometimes this can be two sentences; sometimes four, but never more than a paragraph. Yesterday, I spent 30 minutes with one of the teams in TechStars Seattle that I’m a lead mentor for. They are a month away from Demo Day and wanted to practice the very rough version of the demo day presentation. I gave them a bunch of feedback – some specific, some general, including: Show don’t tell I hate doing the overview / bios at the beginning You wasted the first 60 seconds Weak explanation of what you are actually doing and why I care Still don’t really know what you do If you are an entrepreneur, you have less than 60 seconds to get an investors attention. Don’t waste it.
The Companies in the Microsoft Accelerator for Windows Azure Program 4 October, 2012, 12:00 pm
I’ve written before about the Kinect Accelerator and Microsoft Accelerator. On Monday, the Microsoft Accelerator for Windows Azure companies were announced. The program begins this week and ends in mid-January. Since the program is powered by TechStars, it’ll follow the standard TechStars timeline, finishing up with a demo day at the end of the program. This is a global class. The companies included in this group hail from from Australia, Germany, San Diego, San Francisco and Los Angeles to join the program in Seattle. I’m psyched to see what these companies build for and on top of Microsoft Azure. Meet the ten Microsoft Accelerator for Windows Azure companies that made the cut: Follow the program on Twitter: @bizspark and @windowsazure. Related articles Microsoft Accelerator for Windows Azure, Powered by TechStars TechStars Powers New Windows Azure Accelerator Microsoft and TechStars tap 10 startups for new Windows Azure Accelerator Microsoft Announces 10 Microsoft Accelerator for Windows Azure Startup Finalists 10 startups picked for Microsoft Accelerator for Windows Azure Ten startups chosen for Accelerator for Windows Azure program An Update on the Microsoft Accelerator
Book: The Greatest Business Decisions of All Time 4 October, 2012, 5:00 am
Verne Harnish‘s new book, The Greatest Business Decisions of All Time, is out. I’ve read the excerpt up on Fortune and I’m looking forward to reading the entire book this weekend. The short description follows: The Greatest Business Decisions of All Time – with a Foreword by Jim Collins — is Verne Harnish’s latest book. Author of the ever popular Mastering the Rockefeller Habits, Verne along with some of the top writers and editors at Fortune magazine, share the inside story on 18 of the most unconventional decisions ever made in business – decisions that not only changed companies, but changed industries and even nations. Endorsed by several top CEOs and biz authors, these decisions should spark important ideas to transform your own companies and industries. If you want a sample, download a free chapter (GE’s key decision) and read Verne’s six page Introduction. I’ve known Verne since 1990. A little known fact about us is that he was the only person I knew in Boulder when Amy and I moved here in 1995 (he moved to the east coast within the next year.) While we don’t spend a ton of time together these days, I have enormous respect for him as a thinker, scholar, and teacher around entrepreneurship. His company Gazelles has long been involved in helping numerous high growth companies in all aspects of their growth. I first met Verne at the first Birthing of Giants program in 1990. I noticed an advertisement for it in Inc. Magazine. At the time I was president of Feld Technologies, my first company. We were 12 people and slightly more than $1 million in revenue. The advertisement spoke to me and I applied. I was accepted and a few months later had one of the most incredible weekends of my life with about 60 of my peers hanging out at the MIT Endicott House. It was the first time I discovered my peer group and it led to a long-term involved in Young Entrepreneurs Organization (where I founded the Boston and Colorado chapters) and planted deep seeds for my understanding of the power of mentorship. I’ve been a huge fan of Verne’s since the day I met him in 1990. Many other amazing people were at that first Birthing of Giants event, including Ted Leonsis, Martin Babinec, and Keith Alper. I’m participating in a reunion in October in Boston – I’m very much looking forward to it. In the mean time, I’m going to reward myself for getting the publisher’s draft of Startup Life done this weekend by laying on the couch and reading Verne’s new book.
One Touch Conferencing Calling From Your Mobile Phone 3 October, 2012, 12:35 pm
I’m super impressed with the progress MobileDay has made in the past six months. We are a seed investor in the company whose goal is to fix conferencing calling. Their approach is “one touch into any conference call from any conference call provider.” The current MobileDay iPhone app is excellent – I use it multiple times a day. If you make any conference calls, give it a try and tell me what you think and what we can do better. Also, take a look at their new one minute overview of the product and give me feedback on whether it makes sense and what they can do better. MobileDay – Never Dial Into Conference Calls Again. from MobileDay on Vimeo.
Q3 Performance That Blew My Mind 3 October, 2012, 8:36 am
Last night I got an email with a Q3 sales update from a company I’m an investor in for a while. They consistently meet or beat their plan and are an extremely well managed business. Their plan for Q3 was aggressive in my book (and they’ve managed their costs to a lower outcome) had an expectation for what they would come in at based on data from as recently as last week. I knew what they thought the upside case was and didn’t believe it so my brain had locked in on a number slightly below or around plan. I’ve found that the Q3 number is often the hardest to make when you budget on an annual basis – Q1 is easy since you have a lot of visibility, Q2 is harder, but doesn’t have as much growth built in as Q3, then you have a heavier growth quarter with the summer doldrums (Q3) followed by the insanity that is Q4 in the annual cycle. So I usually view Q3 as “hard to beat; challenging to make.” This company destroyed their number. They beat plan and came in at the upside case. They ran the table on new business. It was awesome to see. And it blew my mind, in a pleasant way, as this is a humble company that doesn’t overstate where it’s going. As we enter Q4, I systematically look at the performance of every company I’m involved in for two reasons. First, I want to make sure I understand the real trajectory as they exit the year as Q4 is often an outlier, usually to the upside, as a result of end of year purchasing. I also rarely pay much attention anymore to Q4 plans as they are almost always obsolete and instead focus on the cost / burn dynamic in Q4. It’s harder to calibrate in cases like this when a company far exceeds their Q3 plan. It’s equally hard in the other direction when a company misses their Q3 plan. And it’s really challenging when there is a big step up for Q4′s plan when you start going into the 2013 planning cycle. I’m curious how y’all approach this, both entrepreneurs when they are thinking about their own planning as well as investors / board members when they are reacting to the early data from Q3 and thinking about Q4 and 2013.
Startup Weekend Edu in Boulder (10/5 – 10/7) 2 October, 2012, 10:20 am
I’ve been involved in Startup Weekend events since Andrew Hyde held his first event in Boulder in 2007. As you know I’ve recently joined the board and have enjoyed watching the organization flourish. One interesting development is the growth of industry-focused events and it’s especially exciting to see Entrepreneurs and Educators collaborating Education-focused Startup Weekends. A team of organizers in Boulder has put together a Startup Weekend Edu for next weekend (October 5th-7th) in Boulder and I’d love to see the tech community come out in support of entrepreneurship that focuses on making the lives of students, teachers, parents, and administrators better. The judge panel is pretty impressive. Glenn Moses (Denver blended learning guru) and Dan Domagala (CIO for the Colorado Department of Ed) both signed on as judges, and Congressman Jared Polis will be joining SWedu-ers on Sunday morning. They need a few more sponsors for meals and have plenty of room for attendees. Please forward this out to your network and, if you haven’t confirmed your attendance, please do that now!
The Founders – Season Three 1 October, 2012, 8:49 pm
One of my favorite web tv shows – The Founders – is back. Episode 1 of Season 3 – Cave Explorer – is up. We’ll follow three of the TechStars Boulder 2012 companies through the program – Birdbox, Roximity, and Ubooly. Time to fall in love with the start of startups again.
Defrag Version 6 – Early Bird Registration Special 1 October, 2012, 12:00 pm
In approximately seven weeks, Defrag will be happening again. It’s the sixth incarnation of Defrag, and over time it seems to have become an annual Fall rite of passage. This year’s Defrag is no different: an intimate gathering and great conversations. Speakers like Kevin Kelly (founder of Wired Magazine), Jeff Ma (inspiration for the movie, “21”), Bre Pettis (of Makerbot), and many, many others. Topics like mobile development, identity management, social business, big data, and APIs. One key difference with this year’s Defrag, though, is the addition of Blur. Defrag and Blur will overlap for half a day. This means that in three days time, you can get the experience of Defrag, and then stick around for robots, 3D printing and all kinds of cool HCI stuff at Blur. Two shows in three days in one place. (Note: we’ll also be having the Boulder is for Robots meeting at Blur, and opening up some “hacking space” to build stuff.) In short, you should plan to be at Defrag and Blur (November 14-16). Early Bird registration expires this Friday, and “brad12” takes an additional 10% off. See you there!
50% Off Sale on Startup Communities Online at Barnes & Noble 1 October, 2012, 5:48 am
For the next two days (until the end of the day on 10/2/12) BarnesandNoble.com is having a 50% off sale on Startup Communities: Building an Entrepreneurial Ecosystem in Your City. My understanding is that this ($13.47) is the lowest price the physical book will ever be available for. If you’ve been tempted to buy the book but have been holding off for some reason, go grab it now. I’ve been told that they aren’t limiting quantities so grab a few for other members of your Startup Community.

bijansabet

Exploring together. 19 May, 2013, 4:44 am
Exploring together.
One size doesn't fit all 19 May, 2013, 4:42 am
One thing you learn as a parent is how different one child is from another and as result what works for one kid doesn’t necessarily work for another. An example in our house: we have 1 kid in private school and 2 kids in public school. I think there is a tendency in startup land to believe that what works in one place should work in another. We see it all the time. Former Google employees bring their “this is how we did it at Google” to a startup. Sometimes that works great, other times it can be jarring. (I don’t mean to pick on Google alum. I’m quite fond of recruiting great Google people. Many are crazy talented. This is just an example). Venture capitalists and board members do this as well. They see something work in one portfolio company and they imagine it has to work at the next one. It could be monetization ideas, management structures, leadership styles, interaction styles between board members and CEOs or other such things. There are other examples but hopefully you get the idea. The power of startups is their own cultures, ideas and special gifts. Yes, you learn from past experiences but you make your own mistakes as well. You take risks perhaps you wouldn’t have taken in other environments. You hire different sort of teams. Designing software in a founder driven company is completely unique company to company. You can’t cherry pick good things and try to duck tape them together. Each family is different and so is each startup.
Ellie 18 May, 2013, 10:55 am
Ellie
James teaching Sam a secret handshake 17 May, 2013, 10:24 am
James teaching Sam a secret handshake
Mansard Roof — Ryan Adams shared from exfm 17 May, 2013, 3:44 am
Mansard Roof — Ryan Adams shared from exfm
Apple Store — Back Bay, Boston. 16 May, 2013, 11:45 am
Apple Store — Back Bay, Boston.
Jelly 16 May, 2013, 8:11 am
More than six years ago I joined Twitter as a user of the service. I was immediately taken by it’s simplicity, power and how it connected us all. And it had this rare combination of being fun and important at the same time. I was so taken with the product that I asked my friends for an introduction to the founders. The first Twitter cofounder I met was Biz. We hit it off and shortly after that I met Ev and Jack. Those founders just blew me away. Our firm led the second round and I served on their board for the next 3 years. The founders are all still involved in Twitter in a variety of capacities. But they are also working on new things as well. Jack started Square. Ev started Medium. And Biz started Jelly. When Biz told me about Jelly I was inspired. The vision is powerful and important. The company & product is in so many ways a reflection of the values that Biz holds dear. I love that. The team at Jelly is equally awesome. Ben is driving engineering and my friend Kevin leads the business side. So today I’m delighted to announce that we led Jelly’s first round of capital and I’ve joined heir board of directors. Biz has the full write up about our investment along with an amazing group of individual investors — Jack Dorsey, Evan Williams, Al Gore, Reid Hoffman, Jason Goldman, Bono, Greg Yaintanes and Roya Mahboob.> I’m thrilled to have the opportunity to partner with such a talented team again. And I can’t wait for you all to see what they are building
Brooklyn, New York City. 15 May, 2013, 4:55 pm
Brooklyn, New York City.
Boston Public Library 15 May, 2013, 3:07 am
Boston Public Library
Kindred spirits. 13 May, 2013, 4:10 pm
Kindred spirits.

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The Patent Quality Improvement Act 9 May, 2013, 4:19 am
This week, Senator Schumer introduced legislation that would take a whack at patent trolls: the Patent Quality Improvement Act aims to make it easier and cheaper for companies facing spurious infringement suits to defend themselves. This is not a complete fix for the software patent problem, and we absolutely need go further (more on how, below), but it's a step forward and we wholeheartedly support the Senator here. For those who are new to this problem: patent trolls are eating internet startups. "Troll" is another word for "patent assertion entity" (PAE) or "non-practicing entity" (NPEs) -- i.e., a company that owns the rights to patents, but rather than innovating on top of them, simply uses them to sue real innovators and extract rents. In the particular case of software patents, this is compounded by the fact that many of these patents are so broad as to be ridiculous. Here are just a few examples (someone should make a tumblr of these - ridiculoussoftwarepatents.tumblr.com is available...). But this is no laughing matter -- it's a huge, expensive, and potentially deadly problem facing anyone building software applications. In the USV portfolio alone, roughly 1/3 of our companies have been attacked by trolls, and have spent millions of dollars and countless hours defending themselves. It's a tax on the entire sector, and it's particularly problematic for small startups who have limited time and resources. Patent trolls operate in a pernicious way: they start by preying on small companies (55% of companies attacked have $10mm or less in revenue), and target their settlement fees at just under the cost of litigating. This puts small companies in a difficult position: spend time and money fighting in court (which can take years and cost millions of dollars), or just pay the troll and get back to work. As trolls collect settlements from small companies, they go after bigger and bigger targets. To make matters worse, trolls often go after the customers of their target companies, blackening reputations and damaging businesses before anything has been proven or settled. So even the threat of action is enough to put companies in a serious bind, and as a result, many simply choose to just pay up, irrespective of the merits. All of this is undergirded by two major problems: 1) software patents are too easy to get; and 2) defending yourself against trolls is outrageously expensive and time consuming. We need to fix both problems. The Patent Quality Improvement Act is an attempt to fix #2. It allows suits over "Covered Business Method patents" (which describes most software patents wielded by trolls) to be taken out of court and fast-tracked through a USPTO review process. In cases where the patents at hand are likely invalid, this will provide a necessary short circuit to the time-consuming and expensive court process. While we are very excited to see this moving forward, we also want to be clear that this doesn't fix everything. We must still figure out how to make it harder to win bad patents (problem #1), and to continue to make it easier and cheaper to defend oneself against trolls (problem #2). One idea for solving problem #1 is to crack down on the phenomenon of "functional claiming", or patenting the problem, not the solution. Professor Mark Lemley of Stanford Law School has identified this problem as a key driver of the software patent / trolling problem. According to his report on the subject, this problem is unique to software patents, and can also be fixed relatively easily through simple enforcement of existing rules: "This is a problem that is unique to software. We wouldn't permit in any other area of technology the sorts of claims that appear in thousands of different software patents. Pharmaceutical inventors don't claim "an arrangement of atoms that cures cancer," asserting their patent against any chemical, whatever its form, that achieves that purpose. Indeed, the whole idea seems ludicrous. Pharmaceutical patent owners invent a drug, and it is the drug that they are entitled to patent. But in software, as we will see, claims of just that form are everywhere." On problem #2, continuing to drive down the cost of defense, and drive up the cost of patent trolling, there are several ideas out there. One is the SHIELD act, which would institute a "loser pays" model for frivolous patent suits. Word on the street is that this is a non-starter in the face of opposition from the trial lawyer lobby. Other ideas include accelerating discovery, including the details of infringement claims (which are often withheld until later in the case, increasing costs); increased disclosure of the real parties of interest (who often hide behind shell corporations or licensees); and exempting end-users from infringement claims (offices using networked scanners shouldn't be sued for $1000 per user). All of these ideas seem reasonable, and would continue to take bites out of the problem. The Patent Quality Improvement Act is one of these bites. We're happy to see it move forward and we're in full support of Senator Schumer for taking this issue seriously. If you want, you can give him some twitter love here.
Coinbase 8 May, 2013, 2:51 am
We have been thinking about and looking to make an investment in the Bitcoin ecosystem for several years. Today, we are happy to be able to talk about our first investment in the sector. We have made an investment in Coinbase along with our friends at Ribbit Capital, SV Angel and Funders Club. We believe that Bitcoin represents something fundamental and powerful, an open and distributed Internet peer to peer protocol for transferring purchasing power. It reminds us of SMTP, HTTP, RSS, and BitTorrent in its architecture and openness. Like what happened with those other low level protocols, entrepreneurs and developers are now building technology on top of Bitcoin to make it more useful, more accessible, and more secure. Coinbase is in some ways a perfect example of that trend. It was founded by Brian Armstrong, who as an engineer at Airbnb who wanted an easier way to incorporate Bitcoin into transactional systems on the Internet. Brian was joined by co-founder Fred Ehrsam, a computer scientist and former currency trader. The two of them have quickly built Coinbase into one of the leading Bitcoin platforms in the market. Coinbase offers three important features: an online wallet to store Bitcoin; a merchant platform that allows services to accept Bitcoin as payment; and a service that allows individuals and merchants to buy/sell Bitcoin into fiat currencies. Coinbase is located in San Francisco and the company's details and key metrics are available on its about page. Coinbase is hiring and their openings are on its jobs page. And of course, they also have a blog. If you are a merchant and want to accept Bitcoin as a form of payment, you can do that with Coinbase. The platform for accepting Bitcoin is free and you only get charged a small fee if you want to convert Bitcoin to fiat currency, which you can do automatically. If you would like to buy Bitcoin and store it online, you can do that with Coinbase. Coinbase is where I have purchased my Bitcoin and keep it. Coinbase has native mobile wallets for iOS and Android and works great on mobile web as well. Even though Bitcoin has been all over the media lately as its exchange rate has surged, collapsed, and surged again, we believe that we are in the very early days of Bitcoin and other digital currencies. There is much that must be built on top of of these digital currencies to make them work well enough to support real business at scale. And we are thrilled to be invested in a team that is well suited to do that work and build a large and successful business in the Bitcoin sector.
CircleUp 7 May, 2013, 4:54 am
As venture capitalists, we understand how valuable an injection of capital into an early-stage, fast-growing business can be. But our industry has a particular set of economics, one that has skewed the availability of equity investment towards startups in the technology sector. Yet, despite a lack of access to upfront capital, entrepreneurs are constantly innovating in all areas of our economy. One of the most vibrant verticals is consumer products, with over 50,000 new consumer and retail companies started every year. These businesses are drivers of economic growth. CircleUp has created an equity crowdfunding marketplace, enabling investors to own pieces of small but fast-growing consumer and retail businesses. Since last April, entrepreneurs have used CircleUp to raise over $10 million in equity, each in an average of only 61 days. The list of successful companies include Episencial, a producer of skin care products developed by its CEO, Kim Walls, a skin-care expert; Peeled Snacks, natural snack foods, founded by Noha Waibsnaider after working at a larger consumer products company; and Raen Optics, a maker of awesome eyewear started by two friends out of their boutique creative agency. These companies average over $1 million in yearly sales and more than 70% in annual growth. This technology-enabled marketplace has created an entirely new system of allocation of capital and expertise. CircleUp has standardized the investment process (no paper is used), provided transparency and the ability to easily share data, and lowered the cost of investing for both investors and companies. Plus, these are products that investors can use themselves (making due diligence fun). For investors, the platform is designed to create trust and provide information in an open manner. For companies, the marketplace gives them efficient access to interested investors to help them grow, saving them months of manual fundraising time. This kind of peer-funding network has the potential to expand the types of investors and entrepreneurs that can participate in private investing. We are excited to announce that we have become investors in Ryan, Rory and the team at CircleUp.
Science Exchange 29 April, 2013, 12:47 pm
Right now, there are thousands of scientists whose research is being held up because they lack access to the experimental expertise needed to test a hypothesis or verify a result. But while we have seen how online marketplaces can dramatically expand and create new businesses in many other diverse areas, it is still too difficult for those scientists to access the right experimental expertise. Help is on the way. Techniques that some label "science as a service" are making specialized resources and institutional expertise available on demand and with openness and transparency. Science Exchange is applying these market-based principles, having created an online community for scientists to list, discover, access and pay for experimental services from research institutions around the world, thereby creating the world's first true online marketplace for specialized scientific expertise. Almost 5,000 scientific services are listed on the Science Exchange platform, including the latest genomics and proteomics services, micro- and nanofabrication techniques, and even access to a microgravity research facility on the International Space Station. The providers already offering services on Science Exchange range from labs at the top U.S. research institutions, like Harvard, the University of Southern California, the University of Texas Health Science Center and Duke, to small independent research companies or individuals, such as Reveal Biosciences and the Voss laboratory. Using the Science Exchange platform a scientist or researcher can search for a service, compare providers and their reputations, choose a provider, pay for the transaction and manage the projects. For maybe the first time, with this type of marketplace, individuals, labs and companies can market their core expertise, providing efficient access to the world's scientific expertise in an open manner. The easy access to scientific expertise offered by Science Exchange not only lowers the cost of research, it also significantly lowers the barrier to commercializing scientific discoveries. This makes scientific entrepreneurship more attractive. Furthermore, the platform offers new methods to fund research and evaluate reputation, and, finally, to provide equal access to all types of research expertise. Science Exchange's mission is to democratize access the global network of scientific resources and expertise. We are excited to be investors in Science Exchange. You can read more about the company here.
Shapeways Restocks 23 April, 2013, 6:26 am
In the Fall of 2010 we helped spin Shapeways out of Philipps. At the time, the founders made a gutsy choice: relocating the company headquarters to New York City. They arrived here in a cold December with their families and little else. Since then it has been an amazing journey. Here are just some of the achievements of the Shapeways team along the way: They launched production facilities in both Eindhoven and Long Island City. Last year Shapeway printed well over 1 million unique products and is now on track for 60,000 model uploads per month. Shapeways World Meetup day in February had meetups in 90 cities globally. But the best is yet to come. Shapeways is working on many exciting initiatives such as making new materials available, speeding up delivery and further empowering creators and designers everywhere. We are therefore thrilled to announce a new round of financing for Shapeways led by Chris Dixon from Andreessen Horowitz. You can read more about it on the Shapeways blog.
Foursquare Checks In 11 April, 2013, 5:56 am
Today Foursquare announced that it has raised $41 million coming from its existing investors (including USV) and adding Silver Lake's Waterman Fund. This puts the company in a great position to continue executing at the intersection of local, mobile and social. That opportunity today is larger and clearer than ever before as smartphone adoption has skyrocketed and the couponing craze has abated. As an avid user of Foursquare though what's more exciting is the latest Foursquare experience which is now available on both iOS and Android. The latest releases put search and discovery right on top with a prominent search box. This past Sunday, my wife Susan and I went to an outdoor furniture store in Soho which promptly turned out to be closed. I pulled up Foursquare, typed furniture into the search box and got an awesome map of results around me and we wound up visiting five stores, four of which I had never even heard of before (here is the web version of that search although your/logged out results will be different from mine). Foursquare is leveraging billions of checkins to power these search results and customize them for individual users. The app now also surfaces interesting location context right on the home screen. This could be news about a restaurant that has just opened or places nearby that are of interest. During development the Foursquare team referred to these internally as "radar cards" and the name is apropos. It really is like having a personal radar that lets you see through buildings and around corners to get a complete context for the location you are in. That experience too is tailored to you personally which makes it feel quite magical. The next few months will see further enhancement to the many ways in which Foursquare can be used. A little while back the company introduced the ability to link credit cards to one's foursquare account. These cards can then be used to seamlessly redeem specials. The number of specials available for "load-to-card" redemption will grow significantly in the coming months and will eventually be available to all businesses through a self service solution. Unlike any other solution, this does not involve showing your phone to a waiter or someone at checkout. You simply pay and any promotion is applied back to your card. So if you have never tried out Foursquare, or used it some time back and stopped, now is a great time to give it a whirl. You can even get started by just doing a search on the web, but it is the native mobile experience where the new and improved Foursquare really shines.
Kitchensurfing 4 April, 2013, 6:03 am
What's in your kitchen? Probably a stove, sink, running water, oven, refrigerator, cutlery and other utensils, sometimes a microwave oven. Precisely the same things as every commercial restaurant kitchen. Every kitchen is indeed an ad hoc restaurant waiting to happen. What do you do in your kitchen? Do you cook or express yourself? Probably a combination of both; and sometimes you don't feel like doing either. At the same time, most chefs have few outlets for expression outside of working in a restaurant. And very few of those restaurant cooks are able to create their own singular platforms. Of course, this is the kind of mismatch that the Internet - which enables frictionless discovery and sharing of information - was made for. And Kitchensurfing was developed to fill this gap. The service allows anyone to find and book a chef (in an environment you control) whose expertise is varied and diverse, professional and amateur, at prices that are competitive with restaurants. Ranging from Alexander T (the Breakfast Bachelor), who just does brunches, Melissa Danielle (Badass Blender Woman) who makes drinks using only a Vitamix blender, to Retno Pratiwi, Indonesian street food. Closer to home, if you have specific food restrictions in your life like my family does, you might find the whole food business to be intimidating and impenetrable. Or, using Kitchensurfing you can find a "renegade" cook named Dan who can handle any kind of food allergy and create an incredible safe meal. Kitchensurfing's managed to create a peer Internet marketplace and a community that unbundles and redefines the very idea of eating local. Chris, Lars and Bo have built a simple to use solution that, like themselves, reflects the diversity of what it means to cook. Available in three cities now (New York, Boston and Berlin) with more (Chicago, Washington, DC) coming online in the next few weeks, Kitchensurfing is making it far easier for cooks to be entrepreneurs by matching them with people and homes. It empowers chefs to create the life they want to lead freed from the constraints of a restaurant. There are now thousands of cooks on the platform and this unique and varied marketplace has tripled in size since the end of last year. We are pleased to be investors in Kitchensurfing. Kitchensurfing is giving people amazing meals and experiences in their homes, thereby democratizing the business of restaurants and changing their definition.
Sift Science 19 March, 2013, 4:34 am
As more and more economic activity moves online, fraud is never far behind. Online fraud is in many ways more attractive to criminals as it can be committed at a safe distance from its targets and scales far better. It is therefore not surprising that online fraud has been growing rapidly, is well organized and technologically sophisticated. There are two different possible responses to online fraud. On the one hand there is legislation and enforcement. That has proven difficult and problematic. Difficult because much of the fraud emanates from different jurisdictions altogether, some of which have shown little to no interest in enforcement. And problematic because of the unintended side effects of legislation, such as the overly restrictive CFAA. On the other hand there is fighting fraud with technology. Almost two years ago a small team formed Sift Science with the goal of using the latest advances in machine learning to provide a fraud fighting solution to anyone operating on the Internet. Today Sift Science is making their solution publicly available with a self service sign up. Behind the scenes it has already been fighting fraud at such companies as AirBnB, Uber, Listia and Affirm as well as a several mobile applications, payment processors and online retailers. Sift Science's machine learning algorithm constantly uncovers new fraud patterns. Because Sift Science operates as a network of participating companies, a pattern that is discovered in one part of the network is immediately recognized for all other participants. The results have been outstanding, with fraud losses reduced by as much as 90%. By offering such a powerful solution in a self service model, Sift Science is helping to address the large fraud protection gap that exists today. According to the Lexis Nexis 2012 "True Cost of Fraud" study, less than a quarter of merchants use automated transaction scoring. Sift Science's self service signup and an easy to use API can make a big difference here. For all of these reasons we are thrilled to be investors in Sift Science. You can read more about Sift Science's technology and service offering on their blog. Or you can simply go ahead and sign up for their service.
Hailo 5 February, 2013, 8:34 am
We're excited to announce today that USV led the recent round of financing in Hailo, the e-hail company based in London and New York. Hailo is rapidly becoming a global platform for regulated taxi service and we are delighted to join existing investors Accel, Atomico and Wellington, as well as new investors Phenomen, KDDI and Sir Richard Branson. For more than a year, we have watched the Hailo management team roll out their service. The team did an extraordinary job of execution. They first launched the app in London in the fall of 2011 and were the seventh or eighth app in this market. By the end of 2012 they were the dominant app, with half of London's 23,000 London black cab signed up for the service and consumers downloading the app at strong month over month growth rates despite minimal marketing. Similar trends are evident in the next two markets the company entered, Dublin and Toronto. This financing will enable Hailo to enter markets in the United States, including our hometown New York City later this month, as well as Japan and Continental Europe. While every city has different customs, dynamics and regulatory structures, the basic need is the same: providing a service that directly connects drivers and riders in real-time at reasonable prices. With Hailo you no longer have to worry about whether the cab you are trying to find will make an unexpected turn or pick up another passenger before it gets to you. With both the drivers and the passengers changing location all the time, this is truly a native use case for mobile apps. The company has six founders, three of whom are executives and three of whom are former London taxi drivers. They have a sense of humor and call themselves The Big Wigs. There is a good interview in the Wall Street Journal published this morning with Jay Bregman, Haillo's CEO, that is worth reading and gives a sense of why we chose to invest. We are happy to be along for the, er, ride.
Joining Union Square Ventures 16 January, 2013, 2:38 pm
Hi, I'm Brittany Laughlin. I'm the new General Manager of the USV Network. As Gary wraps up his two year rotation, I'll be taking the reins, working to strengthen relationships among the community of people that work for our 40+ portfolio companies. I've spent the majority of my career learning to support, start and grow businesses, so this is an exciting opportunity to learn more by doing. I studied Marketing and International Business at NYU Stern and minored in Film at Tisch. After graduation, I joined American Express OPEN to work on customer acquisition and new product development. After a few years at AmEx, my increasing involvement in the NY tech community inspired me to co-found a social travel recommendation engine, gtrot. We raised over $1.5M from Lightbank, grew to become a 10 person team and attracted tens of thousands of users. After two years, I left to focus on a problem that had been central to my role as COO of gtrot: sourcing quality development talent. Having grown up in a Navy family, I found an untapped market in our military. As the wars in Afghanistan and Iraq were beginning to wind down, I founded Incline, a program to train military veterans in web development and offer job placement opportunities in the technology sector. Today, the program works with 80+ NYC companies, including a few USV portfolio companies, and is currently accepting applications. I am excited to explore topics on talent, hiring/training, company growth and user acquisition in my role as GM. I also look forward to learning as much as possible from the USV team, our portfolio companies and from you, the USV community. When I'm not working, you'll likely find me planning a trip to somewhere new (7 continents and 39 countries so far), trying new food, or finding new athletic challenges (snowboarding, yoga, surfing, CrossFit). I also blog about my interests in education, artificial intelligence, art and design at likesandlaunch.tumblr.com. You can also find me on Twitter @br_ttany.

venturecapital

Capital-Efficient Tableau Software Soars in IPO 17 May, 2013, 2:07 pm
Few venture-backed companies these days go public after raising just $15 million or less. Tableau Software is one of them. Brendan McDermid/Reuters Christian Chabot, chief executive of Tableau Software, shown at the the New York Stock Exchange Friday. While it may not have raised much venture capital, at $254.2 million it is the biggest IPO of any venture-backed company this year, according to VentureSource, the research arm of Dow Jones & Co. Friday it debuted as a public company and is seeing its stock soar by about two-thirds above its offering price by market close. Building a business with limited capital sets up a culture that teaches people to operate with limited options, said Christian Chabot, Tableau’s chief executive and one of its founders. “Too many startups raise too much capital too early and that becomes a poison from which a business can’t recover,” he said. “Making decisions with constrained resources is one of the most important things people in a company need to learn to do.” When you raise too much money too early in the company, he said, you’re training people to operate in an environment that’s unsustainable over the long term. It’s difficult, if not impossible to reverse a company’s culture, he said. Founded in 2003, Tableau raised a $5 million Series A round in 2004 and a $10 million Series B round in 2008. New Enterprise Associates provided both investments. Meritech Capital Partners is also an investor in the company through a purchase of secondary shares. Chabot attributes Tableau’s capital efficiency to “the exceptional ease of use” of its software. “I’d like to say it was great management, but if you have an easy to use product with a market need, you can get high-velocity sales with little investment from you or your customers,” he said. Write to Scott Denne at scott.denne@dowjones.com. Follow him on Twitter at @scottdenne
Venture Firm InCube Builds a Crowdfunding Site of its Own 17 May, 2013, 12:22 pm
In what may be an industry first (in finance) venture firm InCube Ventures has unveiled a crowdfunding site of its own dubbed VentureHealth. The new platform will differentiate itself from “rewards-based” crowdfunding sites like Kickstarter, or sites that help consumer technology startups raise seed money, like AngelList, Microventures or Crowdfunder, by focusing on health startups exclusively. InCube Mir Imran, chief executive of InCube Ventures & InCube Labs. At least two other equity-crowdfunding sites, Medstartr and Healthfundr, help health-tech ventures raise funding in the U.S., but they are not affiliated with any institutional venture funds. Myriad other sites like Watsi.org, GoFundMe.com, Samahope.org, and Kangu.org help people raise funding for health-related community projects, or to cover a patient’s medical treatments. InCube Ventures’ managing director and founder, Mir Imran, a prolific inventor and serial medical-tech entrepreneur himself, said: “Regulatory risks, clinical trials and many other challenges make equity fundraising in life sciences feel very nearly impossible these days. We know several [venture] funds that have stopped doing funding for life sciences, or had trouble raising funds.” Imran is best known for his work developing the first Food and Drug Administration-approved, automatic implantable cardioverter defibrillator. He also holds more than 200 patents and has started more than 20 life-sciences businesses, including a sister company to InCube Ventures called InCube Labs, which develops new health tech. According to Dow Jones VentureSource data, equity investments into U.S. life-sciences companies totaled $6.2 billion across 551 deals during 2012, representing a 19% decrease in dollars and 12% decrease in deals from the prior year. Government grant funding for life sciences is still available, but the number is not growing enough to make up for declines in venture investments, says another co-founder and managing director at InCube Ventures, Andrew Farquharson. He hopes VentureHealth will help startups get to a more mature stage of business, where they can attract institutional investors in this highly competitive market. Farquharson adds that VentureHealth will offer more than seed-stage deals. The platform allows angel investors who are not limited partners with InCube Ventures to co-invest alongside the firm into later-stage medical-tech startups. The firm, which was previously part of the Draper Fisher Jurvetson network of funds, closed its first fund as a standalone firm last year, according to regulatory filings. Operating in a beta phase with select startups and fewer than 50 angel investors participating, earlier this month VentureHealth helped Channel Medsystems raise an $875,000 portion of its $9.7 million Series B round. Channel Medsystems is developing “next generation cryoablation technologies” that can, for example, stop heavy menstrual bleeding without heat or a need for anesthesia. InCube Ventures plans to eventually spin out its crowdfunding business as a standalone company, Farquharson said. To build momentum, VentureHealth plans to partner with alumni networks at medical schools, large group practices, or other organizations that can encourage medical professionals–from physicians and researchers to administrators and investors with a taste for life sciences–to get involved in angel investing. Venture firms have invested in equity-crowdfunding platforms, including CircleUp Network, and SecondMarket Holdings, but will they run crowdfunding sites of their own? Imran says: “It’s hard to predict, but [investors] are looking very seriously at this new, funding vehicle. They are definitely watching crowdfunding carefully, and intrigued by its potential.” Write to Lora Kolodny at lora.kolodny@dowjones.com. Follow her on Twitter at @lorakolodny
The Daily Startup: Founders Fund Backs Digital-Currency Co. Bitpay 17 May, 2013, 6:30 am
Top stories in today’s VentureWire: Art by Mike Lucas Founders Fund has led a $2 million investment in early bitcoin startup BitPay, one of the first companies that provided services around the international digital currency. Atlanta-based BitPay enables merchants to accept bitcoin as payment and receive dollars on their accounts within a day of the transaction. There are risks inherent in this deal as well as others related to bitcoin companies, said Founders Fund Partner Brian Singerman, but “bitcoin is not going away.” Sequoia Capital, the most active venture capital investor in China during the first three months of this year, has quietly been dipping its toes into earlier-stage waters. Sequoia, which invested in four venture deals in the first quarter in China, has also been allocating seed capital to pre-Series A companies via Chinese fund manager Zhenfund. As of 2011, Sequoia committed $15 million to a $30 million fund managed by Zhenfund, with the rest of the capital coming from Zhenfund Founding Partner Mr. Xu Xiaoping and other high-net-worth individuals. Also in today’s VentureWire, As advertisers expand their use of content marketing, Skyword has secured $6.7 million in new funding for its content management software…Divergent Venture Partners has held a second close on its latest early-stage fund that brings the amount raised to $10.9 million…and in what may be an industry first, venture capital firm InCube Ventures has unveiled a crowdfunding site of its own dubbed VentureHealth, which focuses on health startups exclusively. (VentureWire is a daily newsletter with comprehensive analysis of all the investments, deals and personnel moves involving startups and their venture backers. For a two-week trial, visit our homepage, scroll to the bottom and click “try for free.”)
NVCA: VCs Talk Accelerator Bubbles, Accelerator Success 16 May, 2013, 2:49 pm
Gathering at the National Venture Capital Association’s VentureScape conference this week, venture and corporate investors met with executives leading top startup accelerators in a crowded session to discuss the health of the “startup ecosystem.” Two main questions on venture investors’ minds: “How do we know if accelerators are succeeding?” And: “Are we in an accelerator bubble?” Brad Feld The managing director of Foundry Group and TechStars co-founder Brad Feld said he thinks there is no “accelerator bubble.” In fact, he wants to see an accelerator established in every town with a population of at least 100,000 in the U.S., to foster a healthy, local and national economy. He also urged investors to be patient in their judgment of these programs. The first “true accelerator,” Y Combinator, started in 2005, he noted, and TechStars followed shortly after. By 2008, many more accelerators began cropping up, like DreamIt–one of the first such programs on the East Coast. But it took until 2009 for even the earliest players to enroll a “meaningful number of companies,” Feld observed. For its part, TechStars measures and publicly reports data including how many companies apply and go through its various programs. After they leave, it notes how many startups remain in business, how much follow-on funding they raise from outside investors, and whether they have exited or shut down. “Funding in and of itself is not a measure of success,” Feld cautioned. About one in 10 of TechStars companies “bootstraps,” and doesn’t raise funding from outside investors, but still creates jobs and wealth, he said. Early classes from TechStars Boulder have still-active companies delivering 2x and 3x returns to investors, so far. Springboard Enterprises–which runs accelerators focused on health-care and media ventures led by women–also tries to measure serial entrepreneurship, and alumni networking by its participants. A director of programming at Springboard Enterprises, Joshua Henderson, explained, “We want to see founders who support a next crop of companies as mentors or angel investors [to them]. We also like to see entrepreneurs go on to start new ventures.” Rock Health founder Halle Tecco said specialized accelerators should have additional metrics tailored to their missions. Her program, which launched in 2010, focuses on digital-health startups. “Follow-on funding is a good litmus test for whether startups are scalable and sustainable, true,” Tecco said. “But in digital health, we want to see companies making a positive impact to clinical outcomes. We’re figuring out how to measure that, still. Is it pounds lost, or errors reduced at hospitals? We’re learning everything we can.” Unlike TechStars and Springboard, Rock Health is run as a nonprofit accelerator, with a for-profit seed fund, which offers $100,000 seed-stage investments to each accepted startup. A pioneer of the venture capital industry, David T. Morgenthaler, said accelerators help venture capital firms by forcing entrepreneurs to “fail fast,” and truly understand their risks before they even consider raising venture capital. But Morgenthaler agreed with Feld, generally, that there is no accelerator bubble yet, and that it is probably too early for investors to say how well these organizations perform, both as sources of dealflow for venture capitalists and as early-stage funds that generate real returns for limited partners. Write to Lora Kolodny at lora.kolodny@dowjones.com. Follow her on Twitter at @lorakolodny
From Analog Politics to Digital VC With General Colin Powell 16 May, 2013, 12:26 pm
General Colin Powell became a venture capitalist after leaving public life and realizing one morning that his wife of 51 years, Alma, wasn’t just going to let him stay at home and sit around with nothing to do. It wasn’t “sustainable,” he said. [Translation: She might have strangled him.] SeongJoon Cho/Bloomberg News Colin Powell. The former Secretary of State, former chairman of the Joint Chiefs of Staff and decorated Vietnam veteran is now a limited partner with renowned Silicon Valley venture firm Kleiner Perkins Caufield & Byers–a line of work that is helping with a personal change. “I was born analog–desperately trying to become digital all these years,” Powell said, adding that his grandchildren educate him about technology–texts, tweets and more. ”But I’m pedaling as fast as I can to keep up with these kids or else I’ll lose them,” he said, in a speech at the National Venture Capital Association’s VentureScape conference Wednesday. This personal transition must seem at least a little familiar. Powell had overseen a massive technology changeover at the U.S. State Department early in the new millennium, revamping “the hardware, the software and the brainware” in the department to take it from Wang computers to more than 44,000 brand new desktop machines and onto email for always-on communication. But the perils of newly adopted technology became apparent with the rise of PDAs. Powell found out that younger male staff members at the State Department were using Blackberrys as “chick magnets,” he said–which he didn’t look upon favorably. Powell clearly relishes his new role as a technology investor helping bring new ideas to life. “I love being a part of your world,” Powell said to the venture capitalists in the audience. “The reality of it all is that you are playing one of the most essential purposes in our economic system…without you our system wouldn’t be working properly. Give yourself credit for what you’ve done over the years,” in guiding business ideas from the proverbial startups in garages to thriving companies, he said. President Ronald Reagan once gave Powell a photo on which was written, “Dear Colin, If you say so, I know it’s true,” Powell said. ”He was saying, ‘I trust you.’” Keeping an enterprise of any size going, he said, requires that trust. “It’s the glue that holds the organization together.” “You not only get [companies] up in the air, but you teach them how to fly once they’re up there–you teach them how to navigate,” he said. “You’re not just doing it for profit, certainly I’m not against that. But you’re really doing it to bring something new into the economy.” Economic growth should be the country’s primary concern, Powell said. “It’s what we have to do a better job of. And you guys are the very beginning of the whole process…” And a growing economy is more than a U.S. concern, Powell said. “As nations create wealth, they don’t look for trouble. They bring people up out of poverty…So let’s focus on world economic growth.” Write to William Tremain at william.tremain@dowjones.com. Follow him on Twitter at @wtremain
23andMe Gene Analysis Shows Venture Conference Attendees More Likely to Go Bald 16 May, 2013, 10:49 am
Participants at the National Venture Capital Association’s VentureScape conference were pleased to learn on Wednesday that they have a higher-than-average natural resistance to malaria, but were less happy to learn they might have a higher-than-average chance of going bald. Matt Cardy/Getty Images Of the 100 or so conference-goers who agreed several weeks ago to submit a DNA sample in advance of the event, nearly a third learned they are lactose intolerant, while nearly a quarter learned their bodies have a knack for fighting off norovirus. Most learned they have a higher-than average sensitivity to bitter tastes, which could affect their wine choices at future Silicon Valley networking events. The grab-bag of test results was offered by Anne Wojcicki, co-founder and chief executive of 23andMe, one of the world’s first consumer products to emerge since the sequencing of the human genome more than a decade ago. Genomics may not have yet completely taken the medical world by storm, but Wojcicki was able to take the local venture community by storm after her company analyzed roughly 100 saliva samples from the crowd over the last couple of weeks. “About 67% of you here are directly related to someone else in this room,” she said, offering another head-scratching data point from 23andMe’s test results. 23andMe has been a target for some doubters and naysayers, some questioning the company’s accuracy and others raising privacy concerns. But since its launch in 2007, its tests have reunited more than 100 long-lost siblings and first-degree family members, as well as warned a large number of people about their increased risk for Alzheimer’s, blood clots and other dangerous conditions, Ms. Wojcicki said. Sequencing a human genome cost nearly a billion dollars in the not-so-distant past. 23andMe does the same thing for $99, and has mapped the genome of some 260,000 customers, she said. Unlike large-scale genetic studies being done by government agencies and health-care providers, 23andMe returns the genome data to the consumer, who can then share the information with doctors. Test results include one million data points related to the genetic components of disease prevention, drug response, ancestry, family planning and genetic “quirks.” Though scary to some and confusing to many, personalized genetic testing is moving toward mainstream acceptance, she said. Massively popular Hollywood actress Angelina Jolie, for example, opted for a preventative double mastectomy after learning of a genetic predisposition toward breast cancer. Write to Timothy Hay at timothy.hay@dowjones.com
The Daily Startup: SAP Ventures to Boost HANA Fund, Staff 16 May, 2013, 6:30 am
Top stories in today’s VentureWire: Art by Mike Lucas SAP will announce Thursday that it plans to increase the size of SAP Ventures’ $155 million HANA fund to $405 million as part of a broad effort to “define what a next-generation corporate venture capital organization looks like,” SAP Ventures Chief Executive Nino Marakovic told VentureWire. SAP is the sole LP in the SAP HANA Realtime Fund, which was launched by SAP Ventures in April, 2012 to invest in early-stage venture capital funds and in startups building technology around SAP’s HANA in-memory database. AirWatch, a maker of software for managing mobile devices, has padded a recent $200 million Series A funding with an additional $25 million from Accel Partners. Atlanta-based AirWatch sells software to large corporations to manage mobile devices and applications. For most of its nearly ten-year history it was a small company. Its growth really took off in the years following Apple’s launch of the iPhone, said John Marshall, its chief executive. Also in today’s VentureWire, In the latest example of large drug-makers striving to refresh their pipelines by working more closely with venture capitalists and startups, Amgen and Novartis have agreed to help Atlas Venture explore biotechnology investment opportunities…Payment-technology startup Marqeta has raised $14 million in Series B funding from Greylock IL, Granite Ventures, Commerce Ventures and other undisclosed investors…Venture investors are fueling Tokai Pharmaceuticals with $35.5 million in Series E financing as the company strives to add to a growing list of new treatment options for prostate cancer. (VentureWire is a daily newsletter with comprehensive analysis of all the investments, deals and personnel moves involving startups and their venture backers. For a two-week trial, visit our homepage, scroll to the bottom and click “try for free.”) Elsewhere around the Web:
For Early-Stage Entrepreneurs, ‘Huge’ Visit to Investor Mecca 15 May, 2013, 2:30 pm
For Jack Wrigley, co-founder of mobile-app company Qwiqq, Dallas is a great place to live but it can’t hold a candle to Silicon Valley as a fount of venture capital for a consumer Internet company. Qwiqq co-founder Jack Wrigley met with top investors for feedback about his mobile-app company — and maybe eventually some crucial financial backing. So when the opportunity arose to fly out to San Francisco for a national venture capital conference and get serious face time with big-time venture investors – with free airfare, to boot – he and his co-founder jumped at the chance. Wrigley and his co-founder, John Phan, were among the more than 170 entrepreneurs participating Tuesday in a National Venture Capital Association experiment to engage entrepreneurs by hosting what was billed as the world’s largest office hours at the group’s VentureScape annual meeting in San Francisco. Wrigley and Phan, who met at another company, have spent more than two years developing their mobile software, initially working through Skype from different parts of the country. Their latest version, released a few weeks ago, enables small businesses and consumers to sell goods and services via smartphones, tapping into social networks such as Facebook and Twitter. Having attracted some early investment was one requirement for getting invited to the event – the duo raised $710,000 in seed financing, mainly from Texas angel investors. Also, like many other participants, Qwiqq had been through an accelerator program, Dallas-based Tech Wildcatters. American Airlines provided more than 80 flights for companies coming in from outside the San Francisco area, including Qwiqq. Qwiqq, which has a handful of customers around the world who’ve used its “buy” button to sell stuff, is looking for about $750,000 in additional seed financing to fine-tune its product and marketing strategy before seeking Series A venture financing. Wrigley said Qwiqq could return to its angel investors for the additional money but that having a VC involved would be “huge.” The free office hours included several scheduled half-hour meetings with VCs. Qwiqq had meetings with Highland Capital Partners and Menlo Ventures, two well-established venture firms. In a hotel ballroom set aside for the meetings, the gregarious Wrigley did most of the talking, demonstrating the mobile app on an iPhone with a broken screen—he’d dropped the phone on the street a few hours before. Menlo Ventures Principal Adam Boutin was encouraging at the end of Qwiqq’s first meeting, suggesting further discussions. “Ultimately it’s probably going to be a customer-acquisition play,” Boutin said. Qwiqq is exploring possible channels and has a partnership with email-marketing service Constant Contact. Highland Principal Alex Taussig, like Boutin, asked plenty of questions, but told Wrigley and Phan that Highland only does a few seed deals a year, usually with entrepreneurs it’s worked with before. Taussig said afterward that the office-hours event was a good addition to the annual NVCA meeting, which in the past has been “a lot about the venture community really talking to itself. It’s been fun getting the entrepreneur’s voice in the conference.” By chance, Qwiqq secured an unexpected third meeting at the event, with Terry McGuire, a general partner and co-founder of Polaris Partners. That meeting ended with an invitation for Wrigley and Phan to drop by Polaris’s main office in Waltham, Mass., the next time they were in town visiting Constant Contact. The co-founders left with a number of suggestions for their company, including that they get a more straightforward name (one suggestion was just to call it Quick instead of Quiqq). Not every entrepreneur was so positive about the office-hours event—some observed that the investors they spoke to were unlikely to ever invest in very early-stage companies like theirs — but many seized the opportunity to make connections and get feedback. Conference organizers expect that some of the companies ultimately will secure venture financing and plan to report back next year on the outcome. “When you’re here you’ve got to try to maximize your time,” said Wrigley, who was later seen at the NVCA’s live-music bash Tuesday evening cozying up to rock-star investor Brad Feld of Foundry Group, whom he’d encountered once before at another event. – Deborah Gage contributed to this report. Write to Russ Garland at russell.garland@dowjones.com. Follow him on Twitter @RussGarland
Twitter CEO Riffs on Life in The Valley 15 May, 2013, 2:05 pm
With 2,000 employees, Twitter is one of San Francisco’s largest tech employers, so you’d think its chief executive would be all lovey lovey about the city by the bay. Not so much. Eric Gaillard/Reuters Dick Costolo. During an interview Wednesday at the National Venture Capital Association’s VentureScape conference, Twitter Chief Executive and Detroit native Dick Costolo played up the advantages of building a technology startup outside of what he said is the echo chamber that is Silicon Valley. He called out Valley companies for “their snarkiness about other things going on in the tech ecosystem” and their “constant self-referencing.” He also considers the war for talent a bit of a distraction. “In the Midwest, generally speaking you don’t have this ‘I have to get them better burritos than that guy or they [employees] are going to go over there,’” said Costolo, “and you do have to worry about that here.” So what would Costolo rather focus on? Lots of things. Among the topics he riffed on during the 40-minute discussion with Foundry Group Managing Director and NVCA VentureScape Chair Jason Mendelson: Patent trolls who file what he considers “absurd” lawsuits against Twitter and other tech companies, requiring large cash outlays and significant time to dispute. “I didn’t have an appreciation for how broken [the legal system] was until I became CEO of this company.” The importance of global media law keeping pace with technology. The opportunity to use Twitter in natural disasters to broadcast information and coordinate help when cellular communications and other normal methods aren’t possible. The fact Twitter is NOT planning to go public right now. Other fun facts from Costolo include the fact the tech company he most admires is Amazon.com and that he would hire away its CEO Jeff Bezos the first chance he gets. Along with its culture of willingness to try new things, it seems to have that whole ‘manage investor expectations’ thing down pat, Costolo said, judging from Bezos’s annual letter to shareholders last month when he told them having no profits was actually a good thing. Costolo seems to be doing just fine in that department though. When Mendelson asked the standard (and by now somewhat tiresome) question whether Twitter would be going public today, Costolo just laughed and said “no,” before swiftly moving onto the next topic. Write to Lizette Chapman at lizette.chapman@dowjones.com. Follow her on Twitter at @zettewil
N.Y. Shutdowns for SideCar, RelayRides Highlight Hurdles for Car- and Ride-Sharing Startups 15 May, 2013, 1:48 pm
Ride-sharing technology provider SideCar Technologies suspended its service in New York last week after an administrative court judge ruled against one of the company’s drivers and indicated that even free rides would violate the city’s laws governing taxis and limousines. Meanwhile, another startup, Relay Rides, which offers a car-sharing service, said in a blog post Wednesday that it has also suspended service in New York. Although the companies offer different types of services and face different issues, the moves signal the regulatory hurdles faced by a wave of startups offering alternatives to established transportation methods. SideCar, which offers a mobile application that connects everyday drivers with riders for shared rides, is backed by investors including Google Ventures, Lightspeed Venture Partners and Spring Ventures. It has faced resistance by regulators in several of the nine cities where it currently operates, but this is the first time that the venture-backed startup has had to suspend its activity, according to company spokeswoman Margaret Ryan. The company suspended its New York service to protect its dozens of drivers from TLC action, she said. The company, which started operations in New York in March, has about a thousand drivers providing its service across the nation, according to Sunil Paul, founder and chief executive of the startup. Meanwhile, RelayRides CEO Andre Haddad said in a company blog post that his company was also suspending service in New York. Haddad said in the post that the New York Department of Financial Services “believes there is noncompliance with certain unique aspects of NY insurance law” and that the company is “actively working with the Department to address these concerns.” A RelayRides spokesperson said Haddad was not immediately available for comment. RelayRides, which has raised more than $13 million from investors including General Motors Ventures, enables people to rent out their cars to other people. In the case that resulted in the SideCar court hearing last week, the New York City Taxi and Limousine Commission, or TLC, used an undercover decoy to pretend to be a regular passenger using SideCar’s service, and when the car reached its destination two TLC police officers wearing bulletproof vests questioned the driver, Sandra Matero, issued her a summons and impounded her car. “This is an extremely simple issue. If you are acting as a taxi or a car service, without the benefit of a license, the TLC will shut you down,” said Allan J. Fromberg, deputy commissioner for public affairs at the TLC. He added that “licensed drivers are drug-tested, their criminal background is checked, their vehicle is inspected to more stringent standards, they are insured to carry people professionally, the companies that dispatch these cars are fully accountable for the vehicle and for the actions of the driver, and it is our responsibility to ensure that the public has these protections when they get into a vehicle that is for hire.” In last week’s TLC administrative hearing, a judge ruled that Matero, who participated in SideCar’s launch program, operated an unlicensed vehicle for hire. The court levied a $1,500 fine that SideCar paid. By then she had missed three days of work, and lots of sleep. Paul says he’s very disappointed by the court’s ruling but remains unfazed. “This is not my first rodeo,” said Paul, who as founding partner of venture firm Spring Ventures advocated for changing transportation laws in California and previously was a policy analyst for the U.S. Congress. Paul said that he thought of creating a service similar to SideCar back in 1999 but held back. “I didn’t think there was political will to take on special interests in transportation,” he said. “More than a decade later the world has changed, because of climate change, energy security and rising gas prices, and because technology has changed the playing field, there is a greater willingness to rethink transportation including on the political and policy level.” Paul says his company is trying to relieve congestion and pollution in urban areas by reducing the number of cars on the roads, at the same time as it facilitates a friendly and safe transportation service to willing community members. The regulatory response in some locations, including New York, Philadelphia and Austin, Texas – has ranged from impounding SideCar drivers’ cars to issuing cease-and-desist letters and passing local laws cracking down on ride-sharing. To Paul’s mind these reactions are caused by regulators protecting the interests of taxi medallion owners, who are paying upwards of a million dollars per medallion in New York, for example. Paul said he is upset that Matero was “treated like a criminal” by the TLC. “I got scared,” a tearful Matero said in an interview outside the Queens courtroom last week, adding that she thought she might go to jail. “Was it worth it? No. If I knew it, I would never have worked for [SideCar].” She had responded to an ad on Craigslist to join SideCar as an “ambassador,” or a driver and marketer paid by SideCar on an hourly basis during the launch of its service in a new city, she said. She was paid by the company, but riders were also given the opportunity to pay for their rides via the SideCar app. After the ruling last week, Paul planned to offer only free rides in New York, but after considering the judge’s ruling more carefully the company came to the conclusion that payment would not have to be necessary for the TLC to judge the cars as “for hire” vehicles. As a startup that has to fight with regulators at many turns, SideCar has been building itself up to be ready, Paul said. Last year it hired David Phillips as executive vice president of policy and general counsel. Phillips previously helped AOL and Napster navigate regulatory issues. What’s happening in New York, said Paul, is not necessarily bad for the company. “It makes people sit up and take notice — wait a minute, my government is doing what? … Regulatory controversy helps the company.” –Sarah Needleman contributed to this report. Write to Yuliya Chernova at yuliya.chernova@dowjones.com. Follow her on Twitter at @ychernova

redeye

Six months in Philly 19 March, 2013, 10:00 am
It’s been a little over six months since we moved our headquarters into the city of Philadelphia. And boy has a lot happened since then: We announced the Dorm Room Fund here in Philadelphia. We received interest from over 700 students to serve on the investment committee. We selected 11 students. And they have already begun to make investments at a rapid pace! So far they’ve committed over $150K for investment into 8 companies founded by Philadelphia-area students. We’re so happy with the traction that we’re seeing here in Philadelphia, that we’re even expanding the Dorm Room Fund to other cities. We’ve hired over a dozen interns from Penn and Drexel, including six Portfolio Consultants – who have completed over 30 consulting engagements for our portfolio in the last month! We’ve hosted thousands of people at dozens of events in our new space. These events help bring us closer to the Philadelphia tech ecosystem. From meetings to help plan Philly Tech Week, to Open Angel Forum meetings, to Startup Corps weekly mentorship meetings, to Girl Develop It Philadelphia meetings, to Good Company Ventures Investor Day -- we’ve met some really incredible people. And in the last six months we’ve been thrilled to see other investors step up to support Philadelphia entrepreneurs. Goldman Sachs committed $10 million in loans to Philadelphia startups. Blackstone (in partnership with Temple University, Philadelphia University, and the University City Science Center) announced a $3M LaunchPad program to provide mentorship and venture consultation to entrepreneurs, Drexel University unveiled plans for a new fund -- Drexel Ventures -- which will provide seed funding for technology startups. The University of Pennsylvania Healthcare System, Blue Cross and DreamIt Ventures teamed up to launch DreamIt Health – an accelerator that provides investment, mentoring, and customer-access to healthcare entrepreneurs. And we’ve been approached by several suburban venture firms who are contemplating moving to the city! Finally, today we are excited to announce that First Round Capital has been selected by the City of Philadelphia and the Philadelphia Industrial Development Corporation (PIDC) to manage the Startup PHL Seed Fund, a new fund announced by Mayor Michael Nutter to increase the availability of investment capital for Philadelphia-based startups. This fund will be a co-investment fund – where the PIDC has allocated $3 million to be invested alongside $3 million from First Round Capital in qualified, Philadelphia-based startups. We’re hoping that this fund will result in more companies starting – and staying – in Philadelphia. It’s been a busy six months – and I can’t wait to see what happens in the next six!
First Round Capital is Hiring: Platform Experience and Operations Manager 4 March, 2013, 9:03 am
First Round Capital is an entirely new kind of venture firm built from the ground up to help the world's best entrepreneurs build better companies. One of our key tools to deliver on this promise is crafting incredible in person experiences for the entrepreneurs we work with – it's something we now do over 50 times per year. We're creating a new role at First Round, a Platform Experience and Operations Manager, to help us take these events to the next level, continue to innovate and create experiences we haven't even thought of yet – and build systems and process to allow our entire Platform team to scale. As a Platform Experience and Operations Manager you will be responsible for running and innovating on all aspects of our in person experiences that range from intimate dinners with the most influential names in technology through CEO and CTO Summit, our internal conferences that bring together the leadership teams from our 170+ companies. You will have the opportunity to work with the entire First Round team as well as directly with the founders and companies in our portfolio. In addition, you'll help our 7 person Platform team scale through innovative systems and processes. This team includes business development, recruiting, learning and research. The qualities we care most about: Relentlessly resourceful – you need to be able to see a project from idea stage through successful completion – and whatever it takes to make it a success. You're looking for an opportunity to take on huge responsibility and grow in a high velocity work environment. Get things done – this role will require you to get an incredible amount of work done in very short time periods. We bias towards action. Curious – you're interested in learning new things and can learn very quickly. Pixel perfect – in everything we do, we try to bring care and thoughtfulness to our work. So while the big ideas matter – we care deeply about the details. No ego – you're willing to do anything and the phrase "that's not my job" is not something you'd ever say. Ever. Passion for technology – everyone on our team is passionate about technology, startups and company construction – and you need to be too. We're looking for someone with anywhere from 0-3 years of professional experience. If you're interested in joining First Round and helping us turn venture capital upside down – email resourceful@firstround.com with 3 specific examples of when you were relentlessly resourceful and your résumé.
Hiring Female Engineers 6 February, 2013, 2:45 pm
We host 50+ events for our portfolio companies a year -- and historically we've held off on sharing the content widely, since we viewed it as a benefit that came from being a member of the First Round Capital community. But some talks are so good they are meant to be shared with the world. So today we released a talk that Kellan Elliott-McCrea (the CTO of Etsy) gave at our last CTO Summit entitled "How Etsy Grew their Number of Female Engineers by 500% in One Year". After witnessing first-hand how challenging it can be to attract women engineers, Kellan shares lessons in building a process and culture to attract female engineers. Really compelling stuff -- on a very important topic...
On Civilized Discourse... 6 February, 2013, 6:51 am
When you have the opportunity to partner with Jeff Atwood (aka Coding Horror) on a new company, it's hard to say "no". And when you learn his new company is reinventing forum software, a product that hasn't seen change in a couple decades, it becomes a pretty easy "yes". I was recently looking around online and found my very first forum post (Usenet post from 1993) on the topic of Prodigy pricing changes. You can see that post here. What you quickly realize from reading this brief exchange (besides for my age) is that online forums as we know them have been relatively unchanged for the past couple decades. It's one of the last areas of the web that hasn't been touched by modern software or product thinking. Blogs have changed substantially with Blogger, WordPress and Tumblr. Connecting with friends has been rethought with Facebook and news and information flow has been forever altered with Twitter. But forums, an area of the internet that still produces massive amounts of content and valuable knowledge, haven't been touched. In Jeff's recent post on his new company, he throws out just a few examples of the robustness (and sometimes quirkiness) of online forums today: A 12 year old girl who finds a forum community of rabid enthusiasts willing to help her rebuild a Fiero from scratch? Check. The most obsessive breakdown of Lego collectible minifig kits you'll find anywhere on the Internet? Check. Some of the most practical information on stunt kiting in the world? Check. The only place I could find with scarily powerful squirt gun instructions and advice? Check. The underlying research for a New Yorker article outing a potential serial marathon cheater? Check. There are few better people on earth to take on this huge challenge than Jeff Atwood. Jeff has spent a majority of his life thinking about text exchange on the web. When we first starting talking, it was clear that the "exchange of paragraphs" as he calls it was something deeply important to him. And that it was very different from his last company, Stack Exchange, a Q&A platform that allows domain experts to share answers with one another (without the free-form dialog that occurs in forums). He's also built an incredible following on his blog, Coding Horror, where he explores everything from technology to the judicial system (if you haven't read his post on being on a jury called "Somebody is to Blame for This" - please do it now.) So with that, I'm thrilled to welcome Jeff and Discourse to the First Round Community and can't wait to be a part of the next two decades of online forums! Try out the beta here...
Looking back at 2012 25 January, 2013, 10:30 am
I’m a startup guy. And from day one, we’ve always viewed First Round Capital as a startup. We're building First Round Capital just like any entrepreneur would build their business. We are a company - not a “firm” or a collection of independent partners that come together for Monday meetings. We have customers (our entrepreneurs) and shareholders (our Limited Partners). In every part of our business, we try our hardest to innovate and delight our customers - and think differently about what a venture fund could be. Whether it's public initiatives like Dorm Room Fund or internal products like our propriety online collaboration tool, FRC Network, which connects the 7,000+ employees across our investments - we try to push ourselves every year to move faster and faster - and come to the office willing to invent (and to fail). As each year comes to an end, we do our best to take stock and plan for the future. As companies mature, they often begin to solidify this process in an annual report - where they publicly share what happened in the previous year. For the first time ever, we're choosing to do the same thing. To open up our community and share where we've been and what we've done. In the process of crunching the data and reflecting on the year, it's clear it was a busy one. This year was filled with 37 new companies in our Community, the addition of 5 new members to the First Round team, more than 50 new software product features built and shipped for our proprietary FRC Network, 55+ company only events, a ton of additional services, thousands of new relationships and one new fund. You can find more details on all of those key milestones in our 2012 Annual Report (a huge thank you to our design partner on this project, Alice Lee - she really helped turn data into beauty) - and also some really interesting data - here are a few of our favorites: First Round Capital companies raised a total of $910,000,000 in 2012 5.5% of all dollars invested in Tech/IT companies by every venture firm in the country went to a FRC company The First Round Capital companies that exited (through M&A or IPO) in 2012 were worth 2,500,000,000+ at the time of exit The most common CEO name in our Community is David - there are 11 Davids The First Round Capital Holiday Video was viewed over 100,000 times, that's 164.2 days of human attention Every dollar First Round initially invests in a company is typically followed by $36 of follow-on capital from other VCs 2012 was the first year in our history where consumer companies represented less than 50% of our initial investment dollars Our partnership flew over 480,000 miles in 2012 So as we start 2013, we sincerely thank the 7,000+ employees across our community who worked millions of hours to help our 300+ founders build industry changing companies. We're excited to have the opportunity to support you in the year to come. You can see our entire Annual Report here: www.firstround.com/annualreport2012 (and be sure to check out the premier of "The Making of Call Me First Round Style" at the very bottom).
Announcing our latest investment, Flatiron Health 15 January, 2013, 7:00 am
It's always exciting to get the chance to publicly share a new investment - but today is even more exciting given this is the second time we've partnered with serial entrepreneurs Nat Turner and Zach Weinberg. Nat was one of First Round Capital's first interns ever and built our very first website. He then went onto intern at a First Round company, then called VideoEgg (now Say Media) and soon after, with Zach, came up with the idea for a company focused on algorithms and ad targeting called Invite Media (acquired by Google in 2010). Nat and Zach are the kinds of founders we love to partner with, they're heat seeking missiles. With Invite Media they pivoted away from their original product and essentially invented what is now known as a Demand Side Platform. They are insanely effective executors and learners, resourceful and constantly curious. For example, while they were not ad tech domain experts when they founded Invite Media, they immersed themselves in the space, accumulated as much knowledge as possible and ultimately discovered an opening in the market at the right time and rapidly grew the company before exiting.So when the guys told us they left Google to dive into an entirely new space -- healthcare -- we were instantly excited and thrilled to participate in their initial round of financing. Their new company is called Flatiron Health and it's focused on bringing the power of big data to the healthcare space.I always seem to hear how a ‘cure for cancer’ is right around the corner, but the clinical trials to bring drugs to market is such a long process that 'the corner seems' seems to retreat farther and farther away. Or, to be more precise, eight years away – the time it takes to test each potential cure. While part of this time period is required (it can take years before we see the results of a cancer treatment), there has to be a way to make this process quicker. In other industries, we've seen Big Data help buyers, sellers and everyone in between make more efficient decisions. Yet Big Data has only just started to make it's way into MedTech.Flatiron Health, based in New York City, is building an “oncology data platform”, which allows cancer care providers to aggregate, structure and mine their clinical oncology data (they call it "making cancer data actionable"). Flatiron’s platform integrates a cancer center’s disparate data systems to provide a truly longitudinal and comprehensive view of the patient population. Through the platform, administrators and clinicians gain deep analytics for business and clinical intelligence, resource utilization, treatment patterns, network management and research. Cancer centers can also monitor their adherence to national cancer care guidelines and benchmark their performance. Flatiron is currently in private beta.Nat and Zach join a number of other First Round companies focused on the healthcare IT space - including DNAnexus, Mango Health and Sherpaa. Please join me in welcoming Nat, Zach and the entire Flatiron Health team back into the First Round Capital Community.Oh, and if you're interested in joining the team and changing the world for the better, they're hiring for insanely good engineers and product managers - you can learn more here: http://www.flatiron.com/careers/open.html
Happy Holidays 19 December, 2012, 10:30 am
As many of you know, this time of the year is one of our favorite at First Round Capital - and not just because it's the holiday season. But rather because it's time to fire up our camera, polish up our writing skills, dust off our dancing shoes, practicing our singing and prepare for our holiday video. We hope this annual tradition shows that even though startups are a serious business - we don't take ourselves too seriously. Our holiday video also gives us the chance to get together with the amazing entrepreneurs we work with to sing and dance, celebrate like it’s Friday, and end the year with a bit of Spice. As our portfolio has gotten bigger, so too has our video – and it is a “labor of love” for our entire team. Phin wrote the lyrics, CeCe scouted locations, secured costumes and handled the choreography (you should have seen how bad we were before she coached us), and Brett continues to amaze us all with his direction and production. So without any more delay, we're thrilled to share with you, the First Round Capital Holiday Video 2012. We really hope it puts a smile on your face.
Student Engineers: Apply to work at 170+ startups with one Common Application 14 December, 2012, 11:00 am
We've talked a lot recently about the amazing amount of talent that exists in universities across the country – and one of the main reasons we launched the Dorm Room Fund was to create a new and more efficient way for capital to flow onto campuses and into the best and brightest entrepreneurs. But we realize that not everyone wants to start a company; many students, instead, would love to join one. But it’s often really hard for students to find the perfect startup jobs. Startups typically don’t recruit/interview on college campuses. And they rarely post job openings for internships. Too often, it is often based on who you know. So a lot of top university talent simply end up taking an internship or full-time job at Google or Microsoft. We don't think this makes sense. Last year, we quietly launched an experiment called the First Round Capital Common Application. It was a simple idea: allow engineering students to fill out one application and get matched with the perfect startup from across our 170 companies. That tiny experiment lead to some incredible matches. Will Drevo, undergraduate CS student (and winner of the Autonomous Robotics Competition) at MIT said, "Applying for an internship through First Round Capital unexpectedly landed me a dream internship at a cutting-edge stealth startup of 12 employees - ToyTalk, Inc. It was honestly the best work experience I've had to date and I worked with a truly amazing and fun-loving team. I got to walk into work every day and talk with the CEO and CTO - I really felt like part of the team. But I never would have heard about ToyTalk unless I applied through First Round Capital." So we’re super excited to launch this year's Common Application for university students. With this one application, engineering students can apply for summer internships or full-time jobs at over 170 amazing startup companies. Maybe you're an algorithms and data junkie looking to work on insanely tough problems with a small team in SF, or perhaps you're more interested in doing iOS development for an eCommerce company in NYC – just tell us about yourself, your interests and desired location and we'll take care of the rest. If you're a student, you can apply here now. Once you complete your application, our Talent Team will review your submission and if you're a fit, we'll follow up directly and connect you with relevant companies. You'll receive a number of introductions so you can choose the opportunity and company you are most excited about. We hope our Common Application continues to make it easier for the most talented students to have the opportunity to work at small startups with big ambitions. The only way to learn how to build great companies is to be a part of them - and we hope more students have that opportunity in 2013.
Why First Round Capital funded a lawsuit 5 December, 2012, 2:43 pm
You can imagine the scene in the board room. The CEO of our portfolio company, Techforward, is discussing a “make the company opportunity" -- Best Buy wants us to to power their nation-wide buyback program. And Best Buy is talking about launching it with a Super Bowl commercial! We had just finished a pilot test in several Best Buy stores and the results were very strong – and now, before we moved forward with the national rollout, Best Buy was asking us to provide them with access to our proprietary analytical model. This model was our crown jewels -- we had invested years and millions of dollars building it. But we had signed a non-disclosure agreement with Best Buy – and they had assured us the information would remain confidential and was critical to moving forward. The board ultimately agreed to share the model – knowing we were protected by our confidentiality agreement. Fast forward a few months and many more meetings in Minneapolis. Best Buy abruptly tells Techforward that it is not moving forward with them – but rather, they are moving forward themselves. They launch a Super Bowl commercial staring Ozzy Osbourne and Justin Bieber to promote their program. And Best Buy goes on to generate over $140M in revenues through this program. Now imagine the scene in the Techforward board room. Although the company had been providing services for other retailers (like Radio Shack and Dell), the company had invested well over a year’s effort to get the Best Buy deal underway. And Best Buy’s last minute actions posed a fatal blow. Techforward sued Best Buy – but it would take a very long time before the case made it through trial. And since Techforward had invested so much money working on the Best Buy deal, the cash position of the company was not looking good. The board ultimately had to make a horrible choice – they sold Techforward’s assets to a third party. BUT – they did not sell the lawsuit. Instead, First Round Capital (along with our co-investor, NEA) decided to keep funding the lawsuit. And over the last 18 months, we and NEA gave the lawyers hundreds of thousands of dollars to keep the suit going. This wasn’t an easy decision. We are in the business of funding companies – not lawsuits. But my partner, Howard Morgan, was a board member of Techforward – and he sat in those board meetings. And Howard was convinced that Best Buy shouldn’t get away with their behavior. We needed to send a message to Best Buy – and every other large company – that they can’t blatantly violate agreements and steal ideas from startups. And if big companies believe they can violate agreements with immunity because a startup can’t afford to sue them, it is bad news for every startup in the ecosystem. Today Howard is smiling. Because after 18 months in court, a nine-person jury found Best Buy liable for misappropriation of TechForward’s trade secrets and breach of contract, and returned a verdict of $22 million in favor of TechForward. And the jury also found by clear and convincing evidence that Best Buy did so willfully and maliciously, so the judge awarded an additional $5 million in punitive damages. As we saw the information that was produced by Best Buy during the trial (some of which is summarized here), I was amazed by their brazenness. Best Buy had: Internal emails that acknowledged that it would “...be a couple of years before we [Best Buy] have a model that is up and running…” and “...I’m not convinced we’d be able to organically duplicate Tech Forward’s model in a reasonable period of time…” so they “…wanted an opportunity to peek under the hood a little bit at their [Tech Forward’s] modeling…” The models which Best Buy did build internally were virtually identical to the models that Techforward had provided them. And there were internal Best Buy emails asking Best Buy employees to “…remove the Techforward reference in the file names…” While Best Buy promised to build a “brick wall” to protect the information that Techforward provided them, they acknowledged that they did not do so. And in fact, the same people that reviewed Techforward’s model were the ones who built Best Buy’s model. My favorite email is one from a Best Buy employee (I am using all my willpower to not put his name here) who argued in favor of running the program internally, saying that “I don’t think we should be making this company [Techforward] rich…” This has been an educational process for me. I had (naively) assumed that senior-level employees of a $50B company would know right from wrong. (And this is a company that recently launched a “College Innovators Fund” to help discover innovative ideas on college campuses… Applicants beware ;-) Going forward, I won’t be as trusting. This should be turned into a case study that every major company should make their business development people read. I also learned that our justice system, while slow and imperfect, does work. And while the outcome here is still not what we had expected when we funded the company initially, it’s nice to turn a money-losing outcome into a money-making one. And I am thrilled for the founders of Techforward - Jade Van Doren and Marc Lebovitz - who finally have vindication after doggedly pursuing justice for almost two years. I hope that going forward we can stop funding lawsuits – and just fund companies. And I won’t be shopping at Best Buy this holiday season.
25 First Round Capital Cyber Monday Deals 26 November, 2012, 6:10 am
At First Round Capital, we’ve been big believers in the future of online commerce - and over the past few years have invested in many eCommerce companies, all at the seed stage. These companies have now go on to to raise over $350,000,000 in follow-on capital and will be shipping hundreds of thousands of products this holiday season to customers all over the world. Whether it’s Birchbox with discovery through subscription, Fab with curation, Warby Parker building a vertically integrated brand, or Modcloth inverting the supply chain, these companies have set out to redefine traditional eCommerce models while building a product consumers truly love - and we couldn't be more excited. Today I'm thrilled to announce that over 25 of our portfolio companies have come together to make gift giving just a bit easier and cheaper this holiday season. And we put together a small site showcasing these exclusive Cyber Monday offers. We hope you’ll take advantage these offers today – before it’s too late. Go check it out and give a more unique gift to your loved ones this holiday season: gifts.firstround.com And no - this isn't meant to replace our annual holiday video. Stay tuned ;-)

Venture Company

The social naiveté of Mark Suster 25 April, 2013, 11:33 am
Mark Suster's keynote at Venture Alpha East was revealing, but not in a good way. The video demonstrates how a bunch of technocrats should not blindly be given the keys to the kingdom of evolution of mankind. Continue reading →
The need to reinvent Economics 16 April, 2013, 12:03 pm
At the starting point of the definition and purpose of economics begins the most important differentiation between the prevailing economics of today and the renewable economics I describe in my upcoming book. Continue reading →
For our economy to succeed, classical economics must die 22 March, 2013, 9:07 am
Classical economics perpetuate the absence of a meritocracy in finance, but worse, it provides the protection of failure we, as its implementors, allow to flourish. Continue reading →
Greater-fool Economics 19 March, 2013, 9:06 am
Venture capital, as the arbitrage of innovation, is the poster-child of greater-fool economics. And groundbreaking innovation that spawns immediate global impact deserves so much better. Less apparent is how greater-fool economics haunts us all. Continue reading →
How top-quartile runs out of merit 14 March, 2013, 10:22 am
Top-quartile wins my proclamation as the most ridiculous way to measure VC performance, or any financial firm for that matter. And none of us should be surprised that innovation cannot reach maximum potential, with such meritless accountability of its arbitrage. Continue reading →
KPCB mea culpa 6 March, 2013, 1:39 pm
Top-tier Silicon Valley venture firm Kleiner-Perkins-Caufield-Byers (KPCB) admitted poor performance as reported in a recent article posted on Reuters PEHub. Normally, I would leave that kind of news for what it is, as I have described the symptoms of venture … Continue reading →
Introduction to the Innovation of Economics 20 February, 2013, 9:21 am
In this keynote address for the Angel Venture Forum at the National Press Club in Washington, DC last December I laid out the reasons why we need to revisit the foundational economics under which we all operate. The same economics that … Continue reading →
Apple’s finite loop 14 February, 2013, 1:48 pm
As a 20-year Apple user who has "infected" almost everyone close to me, it hurts me to have to group and introduce the reasons why I think Apple's loop, after Steve Jobs' passing, is turning gradually finite. I want Apple to grow up, to become the responsible economic Continue reading →
Greater-fool paradise 9 February, 2013, 12:21 pm
A 2013 venture capital outlook video interview with the National Venture Capital Association reminded me why no self-respecting venture firm or institutional investor should be a member. Especially when it blames the government for the lack of IPOs rather than ... Continue reading →
Are VCs still relevant? 20 January, 2013, 3:12 pm
The recent news about the reduced investment pace by venture capital in 2012 cannot come as a surprise to those who can separate the mindless cheerleading for a better future (we all want) from our own responsibility to clean-up its … Continue reading →

Abovethecrowd

A Rake Too Far: Optimal Platform Pricing Strategy 17 April, 2013, 11:11 pm
In a casino, the term “rake” refers to the commission that the house earns for operating a poker game. With each hand, a small percentage of the pot is scraped off by the dealer, which in essence becomes the “revenue” for the casino. While casinos use the term “rake,” a plethora of interesting word choices exist which all describe the same thing – keeping a little bit of the revenue for the company that is running the service. Examples include “commission,” “fee,” “toll,” “tax,” “vig” or “vigorish,” “juice,” “the take”, and “graft” (although this last one is typically associated with corruption in politics). Many Internet marketplaces also have a rake or vig. The percentage rake is the amount that the marketplace charges as a percentage of GMS (gross merchandise sales), which typically represents net revenues for the marketplace. As an example, eBay’s 2011 marketplace revenues were approximately $6.6B against GMS of approximately $68.6B for a rake percentage of just under 10%. It may seem tautological that a higher rake is always better – that charging more would be better than charging less. But in fact, the opposite may often be true. The most dangerous strategy for any platform company is to price too high – to charge a greedy and overzealous rake that could serve to undermine the whole point of having a platform in the first place. Before discussing the merits of low rakes versus high rakes, let us first take a look at current examples of different rakes across the Internet. The table above shows estimated rakes for several online businesses as a percentage of GMS. Do not assume that these numbers are specifically accurate as some vendors make these very hard to deduce.* There is also the added noise of kick-backs that are common in industries like ticketing. You can see very high rakes in the case of iTunes, Facebook, and GroupOn down to especially low rakes for the likes of OpenTable and HomeAway. Amazon marketplace fees are published on their website, and vary by category, but they basically range from 6-15%, so lets say the average is approximately 12%. eBay recently launched an aggressive campaign attacking Amazon’s rate table on a vertical-by-vertical basis (those percentages can be found here). One company with an astonishingly high rake is recently IPOed Shutterstock, a photo-purchasing marketplace where the content owner receives only 30% of gross receipts. As we will argue below, this could in fact be a very fragile situation. When evaluating new marketplace investments, we are naturally biased towards entrepreneurs who understand the strategic rationale behind the argument for a lower rake. If your objective is to build a winner-take-all marketplace over a very long term, you want to build a platform that has the least amount of friction (both product and pricing). High rakes are a form of friction precisely because your rake becomes part of the landed price for the consumer. If you charge an excessive rake, the pricing of items in your marketplace are now unnaturally high (relative to anything outside your marketplace). In order for your platform to be the “definitive” place to transact, you want industry leading pricing – which is impossible if your rake is the de facto cause of excessive pricing. High rakes also create a natural impetus for suppliers to look elsewhere, which endangers sustainability. These reasons are likely behind the struggles in GroupOn’s core Daily Deals business (North America Third Party Revenue is down in Q4 both YOY and QOQ). With a rake of approximately 38% (and this is “after” asking the merchant to underwrite a 50% discount to the consumer) the recovery from each transaction for the supplier is only 30%, representing an “effective” rake of 70%. High volume combined with a modest rake is the perfect formula for a true organic marketplace and a sustainable competitive advantage. A sustainable platform or marketplace is one where the value of being in the network clearly outshines the transactional costs charged for being in the network. This way, suppliers will feel obliged to stay on the platform, and consumers will not see prices that are overly burdened by the network provider. Everyone wins in this scenario, but particularly the platform provider. A high rake will allow you to achieve larger revenues faster, but it will eventually represent a strategic red flag – a pricing umbrella that can be exploited by others in the ecosystem, perhaps by someone with a more disruptive business model. As Jeff Bezos is fond of saying, “your margin is my opportunity.” Many people do not know this, but one of the most amazing Internet success stories is the European division of The Priceline Group, which operates under the brand Booking.com. Booking.com is the unquestioned leader in online travel in Europe, and represents a substantial portion of TPG’s astounding $35B market capitalization. Booking.com was not always the online leader in Europe – in fact they were a disrupter stealing the flag from other large incumbents. In the late 1990’s companies like Expedia and Travelocity had become enamored with what is known as the “merchant model.” Basically, these companies would “package” vacation offerings for the consumer and sell them as a bundled offering. The merchant model could produce a rake of well over 30%, and was therefore attractive to companies like Expedia. Booking.com took a much more aggressive approach (perhaps because it was the only one available) . They started with a 10% “agency model,” which not only represented a lower rake, but also provided better cash flow terms to the supplier. As such, they were able to signup nearly every small hotel in Europe. This resulted in more selection for the consumer and more support from the supplier base. Dennis Schall at Skift.com has a wonderfully detailed account of how Booking.com came to dominate Europe, along with a more recent article addressing the lingering ramifications of the industry’s natural shift to the lower friction (lower rake) agency model. It turns out that the average rake at Priceline Group is even higher today, as they allow merchants to voluntarily bid up their rake for better placement in the network (you can see this in the table above). This is one of my favorite marketplace business model “tweaks.” You start with a low rake to get broad-based supplier adoption, and you add in a market-driven pricing dynamic that allows those suppliers who want more volume or exposure to pay more on an opt-in basis. This way no one leaves the network due to excessive fees, yet you end up with a higher average rake over time due to the competitive dynamic. And when prices go up due to bidding and competition, the suppliers blame their competition not the platform (part of the genius of the Google AdWords business model). This also allows you to extract more dollars from those suppliers who desire to spend more to promote themselves (without raising the tax on those that don’t). Here is another interesting story related to rakes. In 2006, Benchmark started spending time with Gary Swart and the team at oDesk. We were quite enamored with their marketplace for skilled global talent, and were amazed at how the tools in their online workplace allowed customers to hire, manage, and pay for work from distributed teams. Combined with a bidding and reputation system, oDesk had built an “ebay for work.” At the same time, there were several larger players in the market such as Freelancer and Rent-a-coder. After discussing competition at length, the team stumbled on the idea of lowering the commission from 30% (which was standard in the industry) to 10% of overall costs. We were excited to hear such aggressive strategic thinking from the team, and they were excited to hear from an investor with a long-term perspective (this change obviously reduced current period revenue to 1/3 of its current level). The rest is history. By 2009 oDesk surpassed the nearest competitor, and they are now the clear leader (larger than their top competitors combined) in the rapidly emerging “online work” industry. All of which leads us to two very interesting rake examples that are front and center in today’s Internet – Facebook and Apple. Both of these companies charge a hefty 30% fee for transactions on their platform. Because most of the developers building on these platforms make software, the developers do not experience immediate pain when they share 30% of top-line revenue. After all, marginal costs are near zero, and therefore the fee is tolerable. But the real question is: Does the 30% marketplace on top of the platform help to reinforce the strategic positioning of the platform itself? Or is it merely a revenue extraction exercise? And if so, is there a risk that a “rake too far” could be a net-negative from a strategic standpoint? Let’s start with Facebook. For the first several years, Facebook’s application platform was a smashing success. The distribution power of their pervasive platform proved a remarkable vehicle for many companies; particularly games companies. The platform was so successful so quickly that many early adopters of the platform rocketed to hundreds of millions in sales. Zynga, which was particularly adept at surfing the Facebook wave, catapulted to $1 billion in revenue in its sixth year of existence! Everything looked incredible. Fast-forward to today (only a few years later), and games companies are no longer betting their whole company on Facebook. Oddly, they are aggressively and strategically looking to expand non-FB distribution. It is really hard to pinpoint exactly what went wrong. One might question Facebook’s commitment to being a game platform. Some might also highlight the lack of breadth in its success, and argue that Zynga had it “too good” versus other players in the field. And some might point to the rise of mobile which created a difficult platform transition for Facebook (which we will address shortly). In addition to these issues, there is also a strong argument that 30% was simply an excessive rake. When you consider that many of these same game companies were also large buyers of Facebook’s ad products, it suggests that the “actual” rake, the real cost of being competitive on the platform, was much higher than 30%. Given Facebook’s position as the leading global social network with high barriers to entry, there was no need to maximize revenue on day one. It was far more important to prove the platform as a viable and efficient distribution mechanism for a broad range of products and services, and to convince all partners of the unquestioned efficacy of the platform itself. Last November, Zynga and Facebook together renegotiated their previous long-term business agreement. According to the old agreement, Zynga was required to shell out 30% of their revenue even if they generated revenue “off Facebook”. That is a very aggressive rake. Now Zynga is freed from many commitments it had made to the Facebook platform, and is allowed to build independent revenue streams outside of Facebook. The reality is that Zynga is still highly dependent on Facebook. However, Zynga shareholders are now tracking Zynga’s percentage of revenue tied to Facebook and consider it a positive if they can reduce this dependency. The bottom line is that the entire gaming industry has lost some of its enthusiasm for the Facebook platform, and it will be difficult for Facebook to recreate the magic and momentum they once had. The Apple case is more extreme as the impact is more consequential. Despite the fact that Apple had/has industry leading hardware margins on its incredible computing products, Apple felt the need to take 30% of the revenue that was created by its app ecosystem as well as 30% of the revenue from media rentals and sales. In retrospect, demanding to be paid on both sides was a sign of overconfidence. However, the truth is they made this work for a very long time. Many companies, thriving on the Apple platform, didn’t exist and wouldn’t exist were it not for iOS. For itself, Apple has created billions and billions of high margin revenue and corresponding bottom line profits as a result of the amazing success of its 30% rake. All of which helped catapult Apple to the very top of the business hierarchy – the largest market capitalization company in the world. The single-biggest problem with Apple’s aggressively high rake was its impact on potential long-term strategic partnerships. Specifically, two companies that potentially could have helped to reinforce the success of the iOS platform blinked, paused, and then went on to support a competitive platform. Both Amazon and Facebook could have been and should have been BFFs with Apple. And if Apple could go back in time, they would surely opt to be BFFs also. The most threatening company for all three players was clearly Google. However, Amazon owns a digital media business built around Kindle. And Facebook, as discussed, has a 30% rake business helping game developers distribute and monetize games throughout its network. When Facebook and Amazon read the terms of service of the iOS platform, and came to grips with the reality of the 30% rake, they saw an instant road-block – a show-stopper to their potential success on that platform. As a result, they stalled, had meetings, and eventually punted on a full commitment to iOS. The bottom line is they could have been amazing partners. If Apple had a lower rake, or even had they been less obstinate about their existing rake, a partnership could have formed (ask anyone in Hollywood – “splits” can solve any problem). iOS could have been both the definitive Facebook mobile device, AND the definitive Amazon shopping device. They could have been integrated from the beginning at a deep level: your social network in contacts; your Amazon 1-click credentials a fingertip away. Jeff Bezos, Mark Zuckerburg, and Steve Jobs on a stage together talking about the truly amazing things these companies have done together. It could have been awesome. But it didn’t play out that way. Instead, as you are aware, Facebook’s new Home mobile application is available only on Google’s Android, Apple’s key nemesis of the past decade. There are currently no plans to offer Home on iOS, and Eric Schmidt, Google’s esteemed Chairman, cheered along in appreciation at the recent Dive Into Mobile Conference, “I think it’s fantastic — I love it,” Schmidt said. Instead of becoming a platform differentiator for Apple, Facebook is now aiding and abetting Apple’s only real competition. The Amazon situation vis-a-vis Apple is more severe. In stiff-arming Amazon over its “30%” Apple not only alienated a key partner but launched a competitor. Amazon has obviously designed its Kindle Fire system on top of an Android variant. But that is only half the problem. Amazon, in true Amazon fashion, is now attacking Apple’s exposed business underbelly: the fat margins they receive by charging both high hardware margins and a high rake on content. As outlined in its recent Letter to Shareholders, Amazon does not believe that its customer should have to pay fat margins on hardware AND content. “Our business approach is to sell premium hardware at roughly breakeven prices. We want to make money when people use our devices – not when people buy our devices.” Amazon plans to subsidize the hardware platform and live solely on the content margin. The 30% rake basically launched a nasty competitor with a disruptive pricing model. Number one on the list of Peter Drucker’s Five Deadly Business Sins is “Worship of high profit margins and premium pricing.” As Drucker notes: “The worship of premium pricing always creates a market for the competitor. And high profit margins do not equal maximum profits. Total profit is profit margin multiplied by turnover. Maximum profit is thus obtained by the profit margin that yields the largest total profit flow…” Most venture capitalists encourage entrepreneurs to price-maximize, to extract as much rent as they possibly can from their ecosystem on each transaction. This is likely short-sighted. There is a big difference between what you can extract versus what you should extract. Water runs downhill. *Please let us know if you have other names you would add to the table, or if there are numbers you think need correcting. I will update the table and put the rolling updates in the answer to this quora post on the same topic.
Favorite Longreads of 2012 26 December, 2012, 6:08 pm
Over the past several years, I have become a huge fan of Mark Armstrong’s web service, Longreads. For those of you that don’t know, Longreads is a Twitter handle (@longreads), and a web service (www.longreads.com) that points to the best long form content on the Internet. At its core, it’s an amazingly effective editorial and discovery engine. Combined with a product like Instapaper, it creates an online/offline reading experience that feels purpose built for a tablet world. Many short form articles can be read quickly while you browse through your Twitter feed. But the really great articles that make you think and help you learn (the ones that use Daniel Kahneman’s System 2), require more dedicated reading time. Longreads+Instapaper is basically “time-shifting” for the written word. I am an addict. Several others have posted their favorite longreads of the year (you can find them here). Unfortunately, I did not keep track as much as I should have. Next year I aim to do better. With that caveat, here are a few of my favorite long-form articles from last year. A Basketball Fairy Tale in Middle America, by Sam Anderson (New York Times Magazine) This article ran as a cover story in the November 8th issue of the New York Times Magazine. Like many great longreads, this article is about much more than its core subject, which in this case is a basketball team. It dives deep into the ethos of the city, and the elements of the Thunder team that make it much more special than your ordinary NBA team. Durant of course plays a huge role, but there are many more nuanced elements certain to drive any Seattle basketball fan to the edge of tears. Thanks to Sam Anderson for making me even more of an OKC fan than I already was. The Most Amazing Bowling Story Ever, by Michael Mooney (D Magazine) It really doesn’t matter if you are into bowling or even if you are a sports fan. You still should read The Most Amazing Bowling Story Ever, from July issue of D Magazine. Well written nonfiction begs you to finish it all in one sitting. In The New Journalism, Tom Wolfe argued that properly written nonfiction could be more compelling than fiction. If the world ever wants a movie about bowling, the screenplay is already written. Prior to this article, I was unfamiliar with Michael Mooney’s work, but I will be watching going forward. Fantastic. The Man Who Broke Atlantic City, by Mark Bowden (Atlantic Magazine) This article chronicles the gambling success of one Don Johnson, who more than once walked way from Atlantic City casinos with outsized wins. What is great about this story is how the hero capitalizes on the greed of the casino managers. He was able to persuade them to relax their rules, which allowed math back into the equation. You wonder how many of these type stories never get told (which would seem appropriate). Scamworld by Joseph Flatley (The Verge) Turning towards the Internet, Joseph Flatley’s Scamworld is a look inside the dark underbelly of “Internet Marketing.” For many, the trick of the close is much more important than what is actually sold. Flatley is focused specifically on online criminals, but the tools they use are eerily similar to a subset of startups that live in the vast grey-zone of Internet marketing activities. Why the Clean Tech Boom Went Bust, by Juliet Eilperin (Wired Magazine) Ambition, passion, intelligence, and a boat-load of money can only take you so far. You still need physics and economics on your side. Wired Magazine often surprises with a contrarian viewpoint, and in this case published an article everyone else was afraid to write. If you want your venture to succeed, it must succeed as a business – eventually. Is Sugar Toxic, by Gary Taubes (New York Times Magazine) Technically, this article was published in 2011, but that should not stop it from being further distributed. Gary Taubes, as well as others, have uncovered the real cause of America’s obesity. Michael Bloomberg may look silly trying to outlaw mega-sodas, but at the very least he is calling attention to the proper villain. This is an amazing lesson in how everyone can get it wrong and wrong for decades – the scientists, the government, and the doctors. Cormac McCarthy’s Apocalypse by David Kushner (Rolling Stone) This one will cost you money, but the subject matter is interesting and the money goes to a great cause. Cormac McCarthy’s Apocalypse (originally published in 2007) is offered as premium content behind the Longreads subscription wall. America’s most treasured modern novelist happens to be a consistent presence at one of America’s most interesting research institutions, the Santa Fe Institute. Friends I know close to Santa Fe confirm that he is not merely present, but also an active and skilled participant. I also understand he may have had a hand “editing” one of my favorite longreads of all time, Brian Arthur’s Increasing Returns and the Two Worlds of Business from HBR in 1996. Snow Fall: The Avalanche at Tunnel Creek by John Branch (New York Times Magazine) This is perhaps the most interesting longread of the year. The subject matter is backcountry skiing, but that has little to do with Branch’s phenomenal achievement. The concept of computer generated “multi-media” dates back to the early 1990’s, which is the first time we could imagine text, pictures, audio, and video all combined in a single content offering. However, most efforts over the past 20 years appear to be a technology looking for a solution – there is no flow. Snow Fall may be seminal accomplishment in multimedia where the insertion of each media type builds upon the story in a remarkably compelling way. I wouldn’t be surprised if this article takes on historical journalistic importance. Bonus: Q&A with the author. In addition to longreads, I am equally enamored with great non-fiction video on the Internet. I have no doubt that one day there will be a very important and valuable company that categorizes and helps users discover great non-fiction Internet video. If you see a company in that space, please do me a favor and let me know. Until then, I will append a few video recommendations to my longreads list. Jeff Bezos on Charlie Rose, November 16, 2012 Any interview with Jeff Bezos is a “must watch,” but this particular interview is my favorite of all time. Bezos is simultaneously admired on Wall Street and in Silicon Valley, filling the void left by Steve Jobs as the most admired leader in technology. Here he offers advice on everything from running a BOD meeting to maintaing innovation in a large company. The whole time he is remarkably on message (per Amazon) and remarkably happy. Eighteen years in and killing it. Adam Darwin: Emergent Order in Biology and Economics by Matt Ridley Two of my favorite innovative thinkers from history are Charles Darwin and Adam Smith. Left leaning philosophies favor Darwin and not Smith. Those on the right espouse Smith but not Darwin. Ironically Darwin borrowed many of his ideas from Smith. Ridley discusses their similarities and why would should embrace both perspectives. Everything You Need to Know About Finance and Investing in Under an Hour by William Ackman If you have studied finance or business you can easily skip this video. If however, you have never studied finance or business, and you are working on a startup, I would highly encourage you to spend 44 minutes with this video. It is quite enlightening and dense in data. Worth your time. Thanks to @vanninicapital.
All Markets Are Not Created Equal: 10 Factors To Consider When Evaluating Digital Marketplaces 13 November, 2012, 5:54 am
Since Benchmark’s investment in Ebay 15 years ago, we have been fascinated by online marketplaces. Entrepreneurs accurately recognize that the connective tissue of the Internet provides an opportunity to link the players in a particular market, reducing friction in both the buying and selling experience. The arrival of the smartphone amplifies these opportunities, as the Internet’s connective tissue now extends deeper and deeper into an industry with the participants connected to the marketplace 24×7 – whether they are in the office, at home, or out in the field. It is a special experience to see an entrepreneur go from a PowerPoint describing a new marketplace opportunity to having established an online hub at the epicenter of a particular industry. Following our investment in Ebay, we have been fortunate enough to invest in several companies that link consumers and suppliers through a successful online marketplace. Companies such as OpenTable, Yelp, Zillow, oDesk, GrubHub, 1stDibs, and Uber have all reached significant scale within their respective markets. But we have also invested in several companies that we thought had marketplace opportunities that simply did not play out as expected. Simply put, some industries are much more susceptible to the arrival and success of online marketplaces than others. A true marketplace needs natural pull on both the consumer and supplier side of the market. Aggregating suppliers is a necessary, but insufficient step on its own. You must also organically aggregate demand. With each step, it should get easier to acquire the incremental consumer AS WELL AS the incremental supplier. Highly liquid marketplaces naturally “tip” towards becoming a clearinghouse where neither the consumer nor the supplier would favor an alternative. That only happens if your momentum is increasing, and both consumers and suppliers are sensing an increasing importance of your place in the world. Much easier said than done. Here are 10 factors to consider when evaluating the potential success of a new marketplace opportunity: New Experience vs. the Status Quo. Great marketplaces do not simply aggregate a market; they enhance it. They leverage the connective tissue to offer the consumer a user experience that simply was not possible before the arrival of this new intermediary. OpenTable enables the consumer to search reservation availability across hundreds and hundreds of restaurants in a matter of seconds. That capability never existed before, and as a result the delta of the new experience vs. the incumbent experience (dialing restaurants one by one) is extremely high. Another company with a high experience delta is Uber. By aggregating thousands of licensed limousine drivers, and overlaying that with a new-age supply chain management solution, Uber gives it users an experience that is drastically improved compared to the previous alternative. When this experience delta is great enough, it creates “wow” moments for new users. “Wow” moments lead to word-of-mouth viral growth and high net promoter scores. Economic Advantages vs. the Status Quo. Some marketplaces provide enhanced economic advantages. oDesk enables companies to easily provision programming talent from all corners of the globe. This helps purchasers procure a cheaper alternative, while also providing brand-new economic lift to the programmer (supplier). Both sides experience an economic advantage. Another interesting example of this bi-directional advantage is AirBNB. For the property owner, the income is “found money” that simply didn’t exist prior to the marketplace. And in many cases the consumer receives a better price as well. If you can positively change the economics of an industry, you will find the participants on both sides rooting for your success. This gives you a huge head start when it comes to tipping the marketplace. Opportunity for Technology to Add Value. In many marketplaces, the technology offering greatly enhances the user experience. Zillow provides homebuyers with an abundance of data that was historically kept in proprietary systems. They have overlaid this data with maps and search technology that provide remarkable richness to the home buyer. Smartphones take this even further, with the ability to learn a great deal about any property with a one-click GPS enabled search. At Uber, the system has “perfect” information in an industry where just two years ago there was a complete lack of visibility (on both sides of the network) that led to enormous waste of resources. Uber’s system enables higher car utilization, more fares per hour for the driver, and faster and faster pickup times for the consumer. At oDesk, the platform enables the planning, development, and transfer of code from the supplier to the purchaser. The marketplace is also a work-flow system that enhances the overall experience for all parties. Facilitating work-flow reduces work for the participants, as well as increasing switching costs. High Fragmentation. High buyer and supplier fragmentation is a huge positive for an online marketplace. Likewise, a concentrated supplier (or purchaser) base greatly diminishes the likelihood of a successful online marketplace. A highly concentrated supplier base will be reluctant to allow a new intermediary in their market, and as a result will likely fight rather than support your arrival. They will also be very reluctant to share in the economics of the industry, as anyone in the online travel industry can confirm. The large airlines have all but obliterated the economics of online ticketing marketplaces, leading all the online players to focus on hotels where the fragmentation and therefore the economics are higher. If you look at the list above of successful Benchmark investments, you will see a common theme of fragmented supplier base. Friction of Supplier Sign-Up. In some markets signing up suppliers is relative easy. In others, it can be a painfully slow process that requires lots of touch and local presence. At companies such as Yelp, Uber, and GrubHub, new city launches are relatively quick after a process model had been established for how to launch those cities. The opposite was true for OpenTable where the installation of a personal computer and internet connectivity were part of the early roll-out requirements. High friction supplier signup can be a barrier to entry (as it is for OpenTable) if you are able to build a successful marketplace. But in the early stages, this friction slows your roll-out and increases the costs associated with supplier aggregation. Remember, however, that supplier aggregation is the easy part. Aggregating demand is much harder and more critical. Size of the Market Opportunity. A proper TAM (total available market) analysis is imperative, but it is easy to make mistakes looking only at TAM. As a starter, if all the other factors are negative, it will not matter that the market is large. Some markets are crappy candidates for marketplaces. Second, you should also consider the percentage of the market that is likely to use the online alternative. In certain industries, there may be large portions of the market that may not be available to the new online marketplace. An interesting example is healthcare, which is unquestionably a very large market. However, the oligopoly of large players in this market controls a massive percentage of market and is unlikely to support a new alternative. You can also miss-analyze TAM in the other direction. In the case of OpenTable many investors missed the opportunity by mistakenly assuming the TAM was too low. In this case, they underestimated the percentage of the market that OpenTable could penetrate. OpenTable recently passed 10 million diners a month with less than 20% of transactions in North America currently online. You must combine a TAM analysis with the likelihood of marketplace success and penetration. Expand the Market. Another potential error that can be made while analyzing TAM is to fail to understand that the features and enhancements of the new marketplace may actual expand the market opportunity for the whole industry. This may sound like a brazen claim, but certain marketplaces do indeed expand the market — by exploring new price points or enhancing convenience or usability. oDesk greatly simplifies the process of outsourcing code development, and as such many of its use cases are expansive to the overall market. oDesk’s presence increases the number of first time software outsourcers. Uber’s ease of use and simplicity have led many of its users to greatly increase the number of times they use an alternative car service. Some customers now use it as a second car alternative. As such, the company is meaningfully expands the market for black car services, which is in turn a huge boon to the suppliers that share in the economic expansion. Frequency. All things being equal, a higher frequency is obviously better. Yelp, GrubHub, OpenTable, 1stDibs (for the designer) and Uber are all high frequency use cases, where the consumers can rely on the marketplace as a utility. Many failed marketplaces attack purchasing cycles that are simply way too infrequent, which makes it much more difficult to build brand awareness and word-of-mouth customer growth. Another repeated mistake is attacking verticals where a satisfactory supplier “match” end’s the customer’s need to re-enter the market in search of an alternative. This second point negatively impacts many vertical service provider markets (such as pediatricians) where customers are actually prefer a monogamous relationship. Payment Flow. All things being equal, being part of the payment flow is superior to not being a part of the payment flow. This is due to the fact that it is much easier to extract reasonable economics when you are in the flow of payment. The supplier not only looks to you as a provider of revenue, but they receive that revenue “net of the fee.” Contrast this with a marketplace where you add value first, and then send a bill to the supplier at later date for services rendered. In this latter case the marketplace appears as an expense, and it’s easier for the supplier to view it is a “tax” versus a distribution relationship. Cash is king, and if you bring the cash, you are king. Unfortunately, some industries (like autos) just are not set up for this type of arrangement, as the payment likely lives at the end of a long purchasing process. Network Effects. Network effects are tricky and hard to describe but fundamentally turn on the following question: Can the marketplace provide a better experience to customer “n+1000” than it did to customer “n” directly as a function of adding 1000 more participants to the market? You can pose this question to either side of the network – demand or supply. If you have something like this in place it is magic, as you will get stronger over time not weaker. In the early days of OpenTable we noticed that the reservations per restaurant in a given city were correlated to market penetration. Clearly, the more restaurants that were on the network, the better the value proposition was for the consumer. Something similar occurs with Uber. As the company grows, they are able to facilitate more cars on the road, and along with their investment in route and load optimization, this allows for shorter and shorter pickup times. The experience gets better and better the longer they are in the market. UGC sites like Yelp and TripAdvisor also have strong network effects. Network effects are rare but golden. If you don’t have one try to find one; if you do have one, try to enhance it. It is unlikely that you will find a marketplace opportunity that would score ten out of ten with respect to this list. However a 7 or 8 out of 10 would imply that your opportunity of success is much, much higher than if you only match 3 or 4 out of 10. It is also important to realize that finding a great opportunity is only a start, and this analysis could easily mislead one into underestimating the critical role that execution plays when it comes to marketplace businesses. Great marketplace execution is more nuanced and less systematic than other venture backed categories, and for every successful marketplace, you will find an amazing entrepreneur that out-executed the many others that had chosen to attack the same market. In addition to great marketplace characteristics, you also need a world-class entrepreneur to make the dream come true. *For a real-time look at this analysis in action, see Our Most Recent Marketplace Investment, DogVacay from Los Angeles.
Our Most Recent Marketplace Investment, DogVacay from Los Angeles 13 November, 2012, 5:54 am
Earlier today, DogVacay, an exciting new startup in Los Angeles, announced that Benchmark Capital has led its most recent round of financing. DogVacay is an online marketplace that links dog owners with passionate dog care providers who open up there own home as an alternative to the traditional cage-oriented kennel. At first blush, a web site that allows owners to book a “Dog Vacation” for their esteemed pet may seem like an unusual choice for a venture investment. However, a more analytical and detailed look at the market uncovers that this is a high potential, high probability online marketplace opportunity. The most recent Above the Crowd blog post, titled All Marketplaces Are Not Created Equal, outlines ten different ways to judge the potential effectiveness of an online marketplace. You may be surprised how well DogVacay checks out against this list: After taking a detailed look at the crowd-sourced dog care market; we became quite excited about the opportunity at DogVacay. In addition to our analysis, we had the added benefit that the company had been live since March, and we were able to confirm our analysis by witnessing amazing early traction in the field. DogVacay’s six-month ramp and current monthly gross transaction revenue are very reminiscent of the very best of our previously funded successful marketplaces. From out perspective, DogVacay is a winner in the making. We are super excited to be working with Aaron Hirschhorn, the founder and CEO of DogVacay. He is not only an amazingly smart entrepreneur, but also a passionate dog owner. We are also thrilled to be working with First Round once again (as in Mint, Uber), and are excited about our first partnership with Peter Pham, Mike Jones, and the team at Science in Los Angeles.
The Dangerous Seduction of the Lifetime Value (LTV) Formula 4 September, 2012, 8:13 am
Many consumer Internet business executives are loyalists of the Lifetime Value model, often referred to as the LTV model or formula. Lifetime value is the net present value of the profit stream of a customer. This concept, which appears on the surface to be quite benign, is typically used to compare the costs of acquiring [...]
Social-Mobile-LOCAL: “Local” Will Be The Biggest of the Three 25 June, 2012, 11:04 pm
“Well I was born in a small town And I live in a small town Prob’ly die in a small town Oh, those small – communities” — Small Town, John Mellencamp While “Social-Mobile-Local” is certainly an overused buzz phrase, most of the attention has been placed on the “social” and “mobile” parts of the phrase. In social, [...]
Intuit to Acquire Demandforce for $424MM 27 April, 2012, 6:15 am
This morning, Intuit announced its agreement to acquire one of Benchmark’s portfolio companies, Demandforce, for $424mm. As with Instagram, Benchmark Capital is the largest institutional investor in Demandforce. Unlike Instagram, which is a consumer application and is extremely well known, Demandforce focuses on local professional businesses and has chosen to keep an intentionally low profile [...]
My Life With Bing 19 April, 2012, 11:50 am
For the past two months, I changed the default search engine on my browser (ironically Chrome) from Google to Bing. I have used Bing almost exclusively for this period, and have two quick conclusions. 1) With regards to core search, the Bing results were perfectly fine. I never struggled to find anything. I never forced [...]
Why Youth Has an Advantage in Innovation & Why You Want To Be a Learn-It-All 26 March, 2012, 10:33 pm
[Follow Me on Twitter] A few relevant scenes from the recent blockbuster Moneyball: Peter Brand: Billy, Pena is an All Star. Okay? And if you dump him and this Hatteberg thing doesn’t work out the way that we want it to, you know, this is…this is the kind of decision that gets you fired. It is! Billy Beane: Yes, you’re right. I [...]
Why Dropbox Is A Major Disruption 24 February, 2012, 1:29 am
Back in October, Techcrunch announced that Dropbox had raised $250mm at a seemingly absurd valuation. Many firms, including my firm Benchmark Capital, participated. When this happened, many people asked us why this was a special company that would cause us to break our standard investment paradigm. They didn’t quite understand why this was a company that deserved [...]

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Resource Efficiency: Do You Have A High Growth Startup? 27 June, 2012, 12:06 pm
Here's a little video on resource efficiency - an important concept to understand when thinking about how to finance your startup.
Constructive Disagreement: Debate Is Good 20 June, 2012, 6:05 am
The more your leadership team debates decisions the better your company will be. Are you optimizing for disagreement? Here’s how. I’m a believer that the scope of the CEO’s role should narrow to roughly four facets as the company scales. One of the most important areas of focus centers around defining the culture. What are companies other than a long series of decisions? Since your culture in many ways will define how you make decisions, optimizing culture is of critical importance. To me, the most productive culture for a business is one that I call “constructive disagreement”. The concept of constructive disagreement centers around creating a dynamic where key stakeholders in an organization can and are compelled to disagree. The word constructive alludes to the need to raise issues, debate them and resolve them. Getting Our Debate OnAt the core of this philosophy is a focus on encouraging debate within your team. As humans we navigate the world wearing horse blinders; we interpret most dynamics based on the context of ONLY OUR perspective. For sales people, business decisions reverberate through a crowd of customer demands. Product leads see a decision colored by product simplicity and experience. Technologists compute the complexity of a given challenge. The fact that we see the world through our own lens is very limiting. And, left unchallenged, each and every member of a business’ leadership team would likely make different decisions tilting the company in favor of their respective responsibilities. The best companies, however, excel in all dimensions of their business: sales, customer service, product, tech and beyond. In order to make decisions that reflect all of the various perspectives, stakeholders of each dimension of the business need to feel comfortable contributing their perspective to the decision. While as individuals we all wear horse blinders, through our collective perspectives we can see the whole horizon. Optimizing For TensionThe best way to set up this cultural paradigm is by facilitating a forum for disagreement. I want the leadership team at Kohort to disagree and debate as often as possible. So, how can I facilitate that? The answer: a relatively flat hierarchical structure. When I refer to hierarchical structure, I mean more than who-reports-to-whom. I mean who is given a voice at leadership team meetings. I mean weaving as many voices as possible into the key processes at the company. To this end, at Kohort, each of our Team Leads: Reports directly to me, Participates on the daily leadership call as peers, and Is integrated in the highest level decisions across the company - product decision making and development process, the customer support process, marketing planning and beyond These structures ensure that few Team Leads make major decisions in isolation. For example, our customer-facing teams debate the product roadmap with our product lead. Our product lead debates what and how we build features with our tech lead. And, so on. The output of those debates is more thoughtful decisions. To highlight the significance of this, imagine an organizational structure where the head of product was subordinate in every way to the CTO (reporting to the CTO, not having a voice in the leadership meetings and having a limited role in decision making processes). Would the product lead consistently engage in a healthy debate about their needs with their boss, the CTO? Probably not as frequently. Would the demands of the tech team trump product consistently? Probably more often than if they were peers. And, as you can imagine, over a volume of decisions, our company would have a tech-bias and a less-than-ideal product. I would conjecture that this model would hurt our company – since, simply put, we need to be good at everything. This model also helps with ad hoc decisions that don’t have a clear owner. When I, the CEO, am faced with an obscure legal question or otherwise I ask the team of peers, each with their very different perspectives to debate the issue. Collectively this group is far more capable of making a sound decision than I might be able to in isolation. These ad hoc debates are only viable and productive though because the team is accustomed to discussing issues as peers. Evaluating ad hoc issues falls into their regular mode of operation. In sum, your team has to be able to butt heads (frequently) to ensure that the broadest perspective is applied to each decision. Keeping It ConstructiveIt’s easy to casually interchange the words debate and argument, but I think there is an important distinction. Debates are constructive in building toward a conclusion. Arguments don’t always get resolved. In debates both parties share a mutual respect for each other, keeping relationships in tact. Arguments often get heated and leave interpersonal relationships as road kill. Here’s where the CEO plays an important role in building this culture. CEOs not only are responsible for leveling the playing field between stakeholders to ensure that they debate, but also for carrying the burden of acting as referee. As referee CEOs need to make sure that the nature and tone of the debates remain constructive in the short and long term. This means not only helping the team navigate each individual decision, but also facilitating conversations about how the team talks to each other to ensure that emotional scar tissue isn’t collecting within any stakeholder. That’s A WrapThere is no one-size-fits-all culture. But there are philosophies that should be consciously considered by CEOs. Figuring out culture as an afterthought is negligent and dangerous. While there are lots of dimensions to culture, the culture of decision making is by far one of the most important. My recommendation: Hire really smart people who know their respective fields very well. Encourage them to debate constructively. And, get out of the way.
How Much Is Your Startup Worth? 12 June, 2012, 7:15 am
My friend San Kim, founder of ShowMe, just stopped by and we whipped up a little video explaining how to think about the value of your startup. How much is your company worth before you raise money? Here's how to think about it:
Hack @ Kohort: Seeking Front-End Dev Rockstar 11 June, 2012, 2:59 pm
“It’s not just what it looks like and feels like. Design is how it works.” Seeking: Frontend Web Designer / CSS / HTML We are seeking an expert Web designer with excellent HTML and CSS skills to join our team. The right individual will have experience designing consumer facing web applications, a strong foundation in modern design principles (semantic markup, grid systems, prototyping in browser, OOCSS, etc.), and will be as passionate about building great designs as they are about creating them. The front-end designer has primary responsibility for making sure the features we dream up are executed with the best possible user experience. This is a full-time, on-site job. No telecommuting. Responsibilities: Frontend Web design and development in CSS and HTML Work directly with PHP Developers and Web Designer to ensure the frontend interface works and looks as designed and specified Qualifications: Markup ninja - you can explain the difference between and Understanding of OOCSS and familiarity with Sass Must be able to hand code HTML and CSS An understanding of, or willingness to learn, light javascript and jQuery Other things we care about: You are passionate about modern design best practices You have a github profile You have strong opinions and an open mind You have experience working with developers in a fast-paced agile environment You pay attention to detail, but understand how to ship code You're curious and love learn To Apply: Email a resume or letter expressing your interest in the position to help@kohort.com
Who's The Boss: VCs or Founders? 29 May, 2012, 10:13 am
A shiver goes down my spine when I hear a VC refer to a portfolio company as “my company” or a CEO as “my CEO.” The implicit suggestion is that VCs are kings and the lowly founder is the grunt that exists only to humbly serve their capital-holding master. Ugh. And, it goes both ways. It’s not uncommon for a founder to poo-poo the importance of investors since they’re not operating day-to-day. As both an entrepreneur and a VC – I deeply believe that these perspectives are not only wrong, they’re foolish. As a VC, I do understand why VC’s might claim seniority. After all, VCs typically join the boards of their companies and boards have the ability to fire CEOs. So, don’t CEOs work for them? Furthering the confusion are the rights granted specifically to holders of preferred equity. VCs might be able to veto a sale or the issuance of any new security, so doesn’t the buck stop with them? Well…sometimes it does. But hang on, entrepreneurs can easily point to another set of facts that suggest they are the heirs to the throne: Founders typically own far more of the company’s stock than any single investor. They often represent half or more of the board, meaning that they’re the real bosses of their CEO-selves and equals to investors in the board capacity. And, founders usually have the loyalty of the team – meaning that they hold much of the fate of the company in their hands. One could argue that this fact pattern makes founders the rulers of their startupland. So, here’s the thing…when you zoom in on the complex relationships that founders and investors typically have, it’s really hard to tell who is actually the boss. Each party holds different types of leverage in different situations. It’s a carefully crafted relationship designed to protect both parties from risk factors there are specific to their role in the company. So if arrangement between VCs and founders makes sense and there are mixed rights assigned to each party…why are we trying to figure out who is more important? Why do we care? Well…we shouldn’t. Perceptions of seniority or subordination by either party are just…well…perceptions. They’re useless and they don’t affect how the company is actually managed. The reality is that investors and operators are PARTNERS in a venture. They’re each contributing different assets, with different rights in order to achieve a common objective: the creation of shareholder value. All of the hubbub about seniority and subordination from both sides is a weak attempt to selectively looking at fact patterns that support egos. But, business isn’t about egos, it’s about progress. So why is this an issue? The main reason is that egos can make for bad work environments and unproductive relationships. Entrepreneurs don’t want to be insulted or talked down to by their investors. And, investors want entrepreneurs to respect their input and support their objectives. Egos can get in the way of true collaboration. So what can an entrepreneur do? First, you need to understand that all of your investors want and deserve your respect – they’re your partners after all. Second, when you’re picking your investors you should seek capital from those that understand this concept. While taking capital from “bosses” can be a big downer, there is nothing better than obtaining the building a bench of highly supportive partners.
Bro vs. Pro Sale 15 May, 2012, 6:57 am
When you’re setting out to hire sales people it’s important to know what type of sale you’re making. While there are many distinctions in the types of sales that companies make, one noteworthy paradigm is what I call the Pro vs. Bro sale. A “Pro” sale means selling to a professional audience in a professional way. Whether a small or large corporation, the rapport developed with the client centers around the quality of the product or service, the company’s reputation and the pricing. Generally, these are more professional settings and feel a little stiffer in style. The other type of sale is what I call a “Bro” sale. Bro sales are done through more casual and social interactions. In order to do this, the sales person needs to meet the client somewhere casual, let their guard down and be much more of a genuine person (and less of a suit) to the customer. This allows them to develop a personal relationship with the customer. The bro sale comes from the heart. Ultimately, the distinction between these two approaches is a function of the degree of interpersonal relationship developed with the customer. While I naturally gravitate toward the latter (as it always feels better to me to get to know the people on the other side of the table) both approaches can work. What’s important is understanding what type of sale is going to be appropriate with your customers. If your customers are rigid and not open to developing a personal relationship with vendors, you should hire people who can navigate a pro sale. If your customers are people first and customers second, hiring a team of bro-sellers can pay big dividends.
Why You Want Your Competition To Succeed 2 May, 2012, 6:07 am
When I was in High School I taped a picture of the next guy I was going to wrestle to my bathroom mirror. I stared him down as I scrubbed my teeth every morning. I was on a mission to beat him physically and mentally. It was a winner-take-all world, and I never learned to like losing. My preparation for a match wasn’t unique. Frankly, I stole it from a cheesy over-watched 80’s movie. I’d bet that 20% of the homes on the block had a similar photo taped to the mirror. One of them probably was a photo of me. That competitive perspective is beat into many of us, whether athlete or not, from a young age. We’re consistently setup in winner-take-all games in life. You get promoted or he does. You get the A or she does. Our society figured out long ago that people are self-interested, making competitive dynamics effective at driving performance. This is why when entrepreneurs land in the founder role they typically start staring down their competition. While focusing on winning is good, real life is full of shades of gray. In the real world few systems have zero-sum outcomes – many players can succeed or fail simultaneously. For those of us trained to think myopically about conquering our opposition, we might miss an important nuance; while it’s important to out do your competition, their existence and their success is typically good for you and your company. Put another way, you should try to beat your competition at the same time that you cheer them on. (Who said life isn’t complicated?) Here’s why: When your competition succeeds they can help you be more successful. Here are some examples: When your competition teaches customers how to use the new type of service, they make it easier for you to sell. When your competition validates the business model, it can be easier for you to raise capital from investors. When your competition achieves liquidity (through the public markets or otherwise), they might want to buy you. And…there’s another reason. When your competition scales, they’ll likely become bureaucratic making it easier for you to out-maneuver them. If they’re not going to wake up one morning and leave the market so that you can acquire all of their customers, you might just be better off if they succeed to the point where you can beat them.
UX Explained 19 April, 2012, 6:53 am
I just came across this TED talk. Very interesting thinking about human psychology that has implications for product and pricing decisions. Enjoy.
Transforming Italy Into A Startup Hub 17 April, 2012, 5:50 am
Any plan to transform an entire country into a thriving startup ecosystem is a lofty goal for a mere mortal. Despite that, Fernando Napolitano has set out to do just that. Fernando organized a conference in Rome that took place this last Friday. This one-day event was a call to the government, captains of industry, academia and entrepreneurs to come together to transform Italy in three years. While the mission seems daunting, he garnered support from many of Italy’s most prominent leaders. Through the course of a single track of speakers and panels he brought four ministers of the Italian government (Trade, Education, Foreign Affairs, etc.), the CEOs of the eight largest corporations in Italy (AlItalia, Enel, MediaSet and others), Presidents of Universities and the US Ambassador to Italy. My role in the day’s events was to speak about how community is a key ingredient of a startup ecosystem. Drawing on my experiences with the Columbia Venture Community, the New York Venture Community and what we’re doing at Kohort, I tried to impart two bits of wisdom: Communities are essential as they provide peer education and they help would-be entrepreneurs overcome their fears of taking risk. Communities need to be built by entrepreneurs. While it seemed everyone in attendance was excited about the mission and the massive support that the event garnered, there were a few folks at the event who expressed their skepticism about the viability of such radical change. While I suspect that Rome will not transform into Silicon Valley over night, Fernando is already having an impact. Through his Fulbright BEST program, he has already incubated several dozen startups. The skepticism is not unfounded, however. In order to change an entire country it will take the effort of more than a few. But, if other people stand up and follow the lead of Fernando, change can happen. If you’re reading this and want to stand up and help carry this mantle, let me know – Fernando and I are working on parallel paths. It is my hope to spread the model we built for the Columbia Venture Community and the New York Venture Community to every university and region that will take it (including those in Italy). If we act, we can drive change. Don’t be afraid.
Your Product Is A Distraction 10 April, 2012, 6:45 am
Magicians know all about the use of distractions. Flash something shiny over here, while they change something over there. Like lemmings we, the audience, stare at the flashiest thing in sight, unable to see the dull and mundane. Here's the problem. Your product is flashy. No matter how drab the colors, the pupils of your customers, partners, and investors will feel the gravitational pull of your product in any conversation where it's present. Want to talk strategy? Well, you better hide your product under your mattress. If it glimmers into the consciousness of your audience, you'll have to revisit strategy another day. Products are so distracting that once they rear their lovely head, your audience will have trouble re-focusing on another topic. Once upon a time, I tried to brainstorm with my investors about contacts that they might have in particular customer segments. Foolishly, I sought to warm them up with the latest view of my product. Two hours of feedback on colors, buttons, and approaches ensued. No matter how hard I tried, they would not let the product leave the stage, ensuring that they didn't have time to contemplate how their Rolodex might be helpful. Products are exciting and fun. Too exciting and fun. Whether you're speaking to your team, investors, or customers, you'll need to be selective about when you let your product attend meetings...because it will always get all of the attention. This post originally appeared on Inc.com Related articles Your Product Is a Distraction (inc.com)

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