Hire A Gap Filler

Early on as CEO of a technology startup you will need to do 100 tasks that are not existential to the company, but still important that you get done. Tasks may include:
  • Finance and accounting (setting up payroll, 409(a), finding a part-time accountant etc.), 
  • Office setup (finding office space, decorating it, getting furniture) 
  • Ongoing tasks like ordering food and lunch, team outings and the like
Additionally, there may be items where you need help as CEO or someone to help manage certain day to day areas including:
  • Basic business development support (deals)  
  • Basic marketing work (early product marketing such as sales collateral, Twitter and Facebook account management, PR support etc.)
  • Early sales or partnership account and relationship management
  • Fundraising or partnership support (pitch decks, financial summaries, data requests)
  • Employee onboarding, welcome packages, logistics
At a larger company you would likely have one or more people for each area. Continue reading "Hire A Gap Filler"

The Case For Ethereum

Two long term "big prizes" in the cryptocurrency world are (i) the primary store of value token and (ii) a payments token. Programable money has the potential of a multi-trillion dollar market cap, unlike most every other crypto market or use case[1]. The top contender to date for digital value store is bitcoin[2]. Bitcoin has a number of network effects due to its early market position and adoption. However, bitcoin has also suffered from split ecosystem governance[3], slow development iteration cycles, and fork driven branding confusion. There is an open question as to whether bitcoin ends up as the social networking equivalent of Facebook (dominant player), Twitter (could have been 10 times bigger, but an OK outcome), or MySpace (once dominant, now total flameout) of cryptocurrencies.

Brand confusion in Bitcoin world likely to get worse. Bitcoin has many destabilizing forces at work.

Ethereum As A Contender To The Value
Continue reading "The Case For Ethereum"

Bitcoin Network Effects

One force people underestimate are network effects. Network effects allowed Twitter survive its fail-whale period when the site was constantly down. Facebook destroyed international competition, and Airbnb and Microsoft all succeeded due to network effects. Open source examples like Ethernet survive to this day due to network effects. 

In the crypto world, Bitcoin is perceived as slow to change, clunky technologically, and as having bad governance. While all these things may be true, Bitcoin has strong network effects that will maintain its status as the primary value store in the short to medium term. It is always possible Ethereum or another newer protocol will take over the value store use case in 5 to 10 years, but network effects decrease its likelihood in the short term. 

Bitcoin's network effects consist of: 

1. User, fund and investor adoption. Bitcoin has the largest user base adoption, as reflected in its 
Continue reading "Bitcoin Network Effects"

Cryptocurrency Incentives and Corporate Structures

The cryptocurrency world faces a tragedy of the commons and free rider issue: there is little ongoing economic incentive to contribute to an existing, major crypto project versus to launch your own token [1]. Some projects are helping to rectify this by thinking about developer bounties for work done, a venture fund, and other incentive mechanisms. However, the corporate structures and token distributions used by many other crypto projects today tend to exacerbate a lack of ongoing incentives. In this post I review common crypto corporate structures and brainstorm an alternative approach to try.

Existing Project Structures (AKA Where Do All The Tokens Go?)
Crypto projects tend to have the following structures[2]:

Twitter Features

Twitter is a product that is used and loved by hundreds of millions of users. The core product has needed the same basic features for the last 7 or 8 years. Here are the things I think Twitter should build. In this post, I stay away from areas I no longer understand for Twitter (e.g. zero rated Twitter / developing world products) or big picture ideas (e.g. how to remake the timeline). Even simple changes could go a long way for the product.

1. Tweet structure.
Long form content. A key rule in product design is if your users keep wanting to do something, let them do it. Tweet storms are clear examples of users wanting to write longer form content on Twitter.
The simplest approach to longer form content would be to allow the linking of tweets as a formal product feature and structure a la tweet Continue reading "Twitter Features"

VC Negotiation Tricks: Simplified Term Sheets & Post-Money Valuations

Every 5 years, the VC community comes up with new negotiation tactics that work well against first time entrepreneurs. Two such recent approaches in the VC community are (i) simplified term sheets that lack some of the details needed to assess all terms being offered and (ii) an emphasis on post-money valuations.

(i) Simplified Term Sheets
A few years ago, venture firms would send entrepreneurs a 3 to 5-page terms sheet that would spell out the explicit details of their offer. These term sheets would contain the main highlights entrepreneurs tend to focus on (mainly board and valuation), but also got into the details on terms that are key such as protective provisions (special rights for investors). This meant that signing a term sheet came with an explicit view of all the major items that are part of the round.

More recently, venture firms have been sending 1-page term sheets Continue reading "VC Negotiation Tricks: Simplified Term Sheets & Post-Money Valuations"

Big Banks And Blockchain

After the crypto run up of 2013, every major bank decided it needed to do something about cryptocurrencies and blockchain. The way many banks responded to this disruptive technology was:
Step 1. Set up a special internal "blockchain group". 
These groups were supposed to explore how banks could make use of blockchain. The cryptocurrencies themselves were largely viewed as speculative and the "interesting parts" were blockchains and distributed ledgers as technologies.

Step 2. Have the blockchain group focus on building private chains. 
Focus at most banks was on private chains and more recently some smart contract work. Nothing was adopted or launched, it was more R&D and prototyping.

Step 3. Have the CEO brag about blockchain group, then do nothing.
When asked by bank's Board of Directors about crypto, the CEO could point to the largely impotent blockchain group and say "we are all over this blockchain Continue reading "Big Banks And Blockchain"

Unequal Cofounders

One of the big myths in Silicon Valley is that co-founders should be equal. However, if you look at the most successful tech startups of the last 50 years, almost all of them had a dominant co-founder for most of the life of the company. This includes[1]:
  • Amazon. Jeff Bezos.
  • Apple. Steve Jobs famously split equity unequally versus Wozniak. 
  • Facebook. While Zuck had multiple co-founders, the website used to be called "A Mark Zuckerberg production" and he had multiple times the equity and power of his co-founders.
  • Instagram. Kevin Systrom as dominant founder.
  • Intel. Robert Noyce for 7 years and then Gordon Moore for 12 years[2].
  • Intuit. Scott Cook as dominant founder.
  • LinkedIn. Reid Hoffman had multiple co-founders but was really dominant in terms of equity and control (despite hiring a CEO to take over pre-Jeff Weiner).
  • Microsoft. Paul Allen stepped down after a few years Continue reading "Unequal Cofounders"

Feelings of Failure

As the founder of a high growth successful startup, you may feel like you are constantly failing. You are not alone in this. Most startup founders I know feel like they are screwing up on a weekly or monthly basis, even if their business is growing well[1].

Feeling of failure tend to come from:
1. You are constantly learning and doing new things.
For many startup founders, your CEO job may be your first time managing people, hiring and firing across various functions, raising money, selling a customer, managing your board of directors, or signing a business partnership. There is a lot to learn in each of these areas, and no matter how smart you are you are going to make mistakes.

When a startup grows from 10 to 100 to 1000 people, you have to relearn basic parts of the CEO job. How you communicate to a 1000 Continue reading "Feelings of Failure"

Cryptocurrency’s Netscape Moment

Just as Netscape's IPO marked the real kick off for the Internet era, 2017 will be the starting gun for broad involvement of venture, hedge funds, and eventually average consumers in cryptocurrencies and related protocols and assets.

The recent run up in cryptocurrency valuations has caused a sudden and profound renewal of interest by entrepreneurs and investors in crypto[1]. In December 2013 there was a similar spike of interest in Bitcoin. As the time, there was a 10X run up and Bitcoin hit over $1000 and then crashed to ~$200. While the excitement in 2013 was largely transitory, this time feels different [2].

So what has changed?
There are multiple reasons why now is crypto's "Netscape moment":

1. Value store (AKA gold replacement) use case is becoming real.
When Bitcoin first launched, it was shrugged off as a toy. When each BTC was worth 25 cents, people would send them to
Continue reading "Cryptocurrency’s Netscape Moment"

End of Cycle?

One sign that technology markets often exhibit at the tail end of a cycle is a fast diversification of the types of startups getting funded. For example, following the core internet boom of the late 90s (Google, Yahoo!, eBay, PayPal), in early 2000 and 2001 there was a sudden diversification and investment into P2P and mobile (before mobile was ready) and then in 2002-2003 people started looking at CleanTech, Nanotech etc - industries that obviously all eventually failed from an entrepreneurial and investment return perspective.

It turned out the real wave was just around the corner with the rise of social products (LinkedIn, Facebook, Twitter, Instagram, Whatsapp, Pinterest) and consumer enabled marketplaces (aka sharing economy - e.g. AirBnB, Uber, Lyft). The heavy investments in cleantech and other areas was a sign that one economic cycle had ended and there was a gap in identifying the next one.

Similarly, Continue reading "End of Cycle?"

Waiting Too Long To Go Public

A meme in the tech startup world over the last few years is that you should wait as long as possible to go public. While holding off on an IPO may be beneficial for a small number of startups (e.g. Uber, and Facebook before it) it may be harmful for a number of startups who are not, well, Uber or Facebook. In particular, as public market conditions worsen and tech IPOs are scarce, a number of companies may regret not having gone public in late 2015 when they had the chance to do so. Public markets are sources of ongoing capital, provide a liquid stock with which to both reward and compensate employees as well as to make acquisitions.

Square was smart to go public while it was able to do so, just as PayPal did back in 2001. Once the IPO window shuts it becomes harder for many
Continue reading "Waiting Too Long To Go Public"

Defensibility And Lock In: Uber & Lyft

One of the most common critiques an entrepreneur will hear is that their business is not defensible.  This was frequently stated about Google ("The switching cost is low - there are a dozen other search engines so you can just change web pages!").  Later, when I was at Google, a senior Google manager said the same thing to me about Facebook ("The switching cost is low!  First there was Friendster, then Myspace, now Facebook.  In 3 years everyone will be on something else!").

Many companies that appear to lack defensibility have strong lock in effects.  Others start off without a lock in strategy, and have one emerge over time.  Finally some businesses, such as marketplaces, inherently have lock-in due to their network effects.  The key is to think through how you can create a moat for your business.

Approaches To Defensibility
1. Scale Effects.
Scale gives you leverage Continue reading "Defensibility And Lock In: Uber & Lyft"