The Royal Academy Summer Exhibition

Two hundred and fifty years ago, in 1768, The Royal Academy in London decided to hold an annual exhibition of “paintings, sculpture, and design” that would be “open to all artists of distinguished merit” and so began the summer exhibition. We’ve been attending the summer exhibition on and off for something like ten years and I really love it. We went today, which is the 250th annual event. As you can see in the photo above, which is from maybe 150 years ago, they pack the walls with art. You can barely see the walls there is so much art on them. But the thing I love most is the way they hang an unknown twenty-year-old painter next to a Hockney. It really speaks to me and represents an egalitarian approach that is rare in the art world and the worlds beyond art. You can buy many of the works at
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Rapid Experimentation

It can be exhausting to try and stay caught up on every new tech company being started. The Gotham Gal said me to yesterday, “everyone is an entrepreneur these days.” She’s right about that directionally although most companies have employees who are not founders so it is not exactly correct. The rapid expansion of tech startups and the entrepreneurs who create them has been building for fifteen years, or possibly twenty-five years if you include the early Internet exuberance and the period of disillusionment that followed. But over the last ten years, in particular, we have seen a number of factors come together to make for an environment where “everyone” can do a tech startup. We have more and more software engineers and related skillsets around the world as education systems are starting to respond to the market demand for this talent. This is particularly true in Asia and
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The Parent Child Relationship

It is fathers day today. And I thought I’d write a bit about something that is really bothering me. I’ve come to terms with a lot of what is going on in the US federal government and our political system. I see it as a natural swinging of the pendulum. Many on the right think we went too far left under Obama. Many on the left think we have gone too far right under Trump. In time, Trump will be history and we will undo all of this nonsense he is putting in place. So is the way of politics and government and every time something happens in DC that bugs me, I think “this too shall pass.” But, this policy of separating children from their parents at the border really bugs me. The NY Times has a good report up on their homepage right now about how we got
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Ether Is Not A Security

Yesterday, a top official from the SEC said what many of us in crypto land had been wanting to hear from the SEC for the last year: According to Bloomberg:
“Putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions,” William Hinman, who heads the Securities and Exchange Commission’s division of corporation finance, said in remarks prepared for a Yahoo Finance conference in San Francisco. “And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.”
For me, this is not about Ether, but about the fact that a token can be used to raise capital (the “fundraising that accompanied the creation of Ether”) and at some point
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Leading The People Side Of The Organization

In yesterday’s post, which seemed to touch a nerve, something I certainly seek to do from time to time, I mentioned the “talent organizations” of our portfolio companies. These are the people who help a founder/CEO build and lead the people who make up the company. It’s an undervalued and under-discussed function. I have heard multiple founder/CEOs tell me that the biggest sigh of relief they had in building their companies was when they finally hired a really strong leader to sit at their side and help them with the people side of the business. It is not even accurate to say “people side of the business”. People are the business! I recently listed to two Reboot podcasts in which my friend and former partner Jerry Colonna talked with two people leaders, Nathalie McGrath at Coinbase, and Patty McCord, former people leader at Netflix. It is worth spending
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The Valuation Obsession

There is an obsession with the values that are being placed on companies when they finance. There has always been one but it is worse than ever. Every day, without fail, I read a headline that so and so company has raised, will raise, or is trying to raise capital at some eye popping valuation. It would be easy to blame this on the media, which certainly has to shoulder some of the blame for believing that these are important stories to write day after day, week after week, month after month, year after year. But the media writes what people want to read and talk about. The problem is us, the tech sector, and the mindset that valuation is the scorecard by which we measure ourselves. Of course, valuation matters. When GitHub exits to Microsoft for billions of dollars, that matters. It matters to Microsoft’s shareholders who paid that
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Do Your Homework Before Sending That Email

I saw this tweet today from our friend Arianna and I had a good chuckle: But the underlying issue is not that funny. Someone took the time to send her a pitch email but did not take the time to figure out who she was. I’m always looking for an excuse to delete a cold email instead of replying to it. When someone sends me an email seeking to get consideration from Flatiron Partners, a firm that hasn’t been actively investing in eighteen years, I delete it. And I get those emails multiple times a month. When someone sends me an email seeking an investment in something USV does not invest in; restaurants, movies, oil drilling, etc, I delete it. And I
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Stakeholder Analysis

I am a fan of looking at something from all sides and understanding how each side thinks about it. Consider a neighborhood school. There are students, parents, teachers, administrators, non-teaching staff, taxpayers, the community, homeowners (whose home value is impacted by the quality of the school), and possibly other stakeholders. In theory every one of those stakeholders has a vested interest in the success of the school but in reality there is often conflict between them. The teachers would certainly welcome a pay raise, for example. But the taxpayers may not. Or maybe they would because it would keep the quality high and thus the values of their homes. What if the school wanted to start later and end later? The parents might oppose it because it would make it harder for them to get to work on time in the morning. But the teachers, administrators, and non teaching staff
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Supply And Demand

I saw this chart on Semil‘s  blog this morning: What is shows is that as the amount of money raised (and deployed) in seed funds has grown over the last ten years, the ability of the companies that received those seed investments to raise a follow-on Series A round has declined (massively). That trend is what you would expect, of course. Supply outstrips demand at some point. But from where I sit, I am having trouble with the magnitude of these numbers. First of all, I don’t think the “conversion” from Seed to Series A was ever in the 80% range. I think it is generally around 50% and moves around that number a fair bit. But I can’t imagine a time when 80% of seed funded companies go on to raise a Series A. I also don’t think it is now sub 30%. Maybe sub 40%. Maybe not.
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Proof Of Blog

We have a tradition at USV that one of our new analysts, Dani, coined Proof Of Blog. I like that term so much. It really speaks to why we have this tradition. When someone new joins USV, we ask them to introduce themselves to our world on the USV blog. Here are some recent “proof of blog” posts: Dani Grant Naomi Shah Zach Goldstein Even partners at USV do this. Here is Rebecca’s post announcing her arrival at USV last fall. And Lauren, who has been at USV for almost four years now, but is in a relatively new role, introduced a new wrinkle to this tradition blogging about her
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Taxation Of Carried Interest

The issue of how to tax carried interest, the profit sharing interests that VCs, Private Equity firms, and Hedge Funds receive as compensation for generating returns to their investors, is in the news again. This time it is not a debate at the Federal level, but at the state level. There are carried interest taxation bills under discussion in California, Illinois, Maryland, New Jersey, New York,Rhode Island, and possibly other states that I am not aware of. My view on this issue is simple and I’ve stated here publicly and regulary since mid 2007. If you are being paid a fee for managing other people’s money and have no capital at risk on the carried interest, I don’t understand how it can be considered a capital gain. It may be good economic policy to incentivize people to manage other people’s money and maybe there should be some tax break for
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Deleting Your Voice Recordings

A few months ago, the Gotham Gal asked me to disconnect the Amazon Alexa and Google Home devices we have in our family room. I complied with that request. This is what the two devices look like now: At some point, I will remove them and either do something else with them or dispose of them. If anyone in our house is uncomfortable with devices listening to our conversations, I don’t want to subject them to that. I do plan to go look at our voice recording history and delete anything that seems off limits. Here is how you do that with Google Home and Amazon Alexa. This raises a broader question about these voice devices which is whether the value they offer outweighs the creepiness they create in the home. For us, the answer has been a resounding no, as evidenced by that photograph.

Why Decentralization Matters

So the news over the weekend is that Microsoft is buying GitHub. Many companies and developers are thinking “do I want my source code hosted on a service owned by Microsoft?” Fortunately, the protocol that GitHub is built on, Git, is open source and there are other Git hosts, like GitLab. There are also a number of proprietary Git solutions offered by companies like Atlassian and BitBucket. Moving your source code repositories from GitHub to GitLab or somewhere else is not a simple thing, but it can be done. Kind of like moving your email from Outlook to Gmail. Lock-in is a bitch. And everyone who has ever been locked into a shitty piece of software over the years knows, there is often no easy way out. Software built on decentralized protocols offers a different and better way. You can move your data out if you don’t like
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Valuation Inflation

In the blog post announcing changes at SV Angel last week, the SV Angel partners wrote:
The amount of money raised in seed rounds has doubled and valuations have increased significantly.
I thought I’d go back over the last three USV funds and see what I could learn about the market from our experience. Since raising our third early-stage fund in 2012, we have led or co-led 16 seed rounds, 31 Srs A rounds, and 8 Srs B rounds, for a total of 55 new USV portfolio companies over the last six years. I put all of that data into a google sheet this morning and this is what I learned: The average pre-money valuation for a seed round has gone from $5-10mm in the 2012 time frame to $10-15mm in the 2017 time frame and the average amount raised in seed rounds has gone from $2.5mm in
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Video Of The Week: Paradex

A few weeks ago, our portfolio company Coinbase announced that they had acquired a company called Paradex, which operates a 0x relay (in other words a decentralized exchange). If you want to know more about what all of that means, here is a video from Token Summit where it is explained in less than five minutes.

Some Things I Read This Morning

I don’t have much to say today that I can say. So I thought I’d do a little link blogging instead. Here are some interesting things I read online today: 1/ Tim Wu on a legal framework called “fiduciary duty” in lieu of a US version of GDPR 2/ John Battelle on why 50% of young adults use ad blockers as a form of civil disobedience 3/ My friend Tom Evslin on why he voted for Trump and why he’d like a better option next time 4/ Mary Meeker’s Internet Trends report (not much new in there but still worth a skim) 5/ And in the interest of finishing this off with some absurdity, Monster Headphones plans a $300mm ICO I hope there is something of interest in there for all of you. I am off to start my day.