Addition by Subtraction

“Dangerfield eliminated everything from his act
but the setups and punchlines”

Alex Halberstadt’s essay on Rodney Dangerfield is a masterclass on how to improve by reduction. Dangerfield worked for decades as a comedian until he figured out the thing, his insight: “by eliminating every extraneous element, you could isolate what makes it work and just do that.”

Dangerfield reduced his act to just two lines: setup and punchline.

There are other examples. Blumhouse Productions (Paranormal Activity, Insidious, The Purge, Get Out) uses only micro-budgets of $3-5 million per film. This limit doesn’t come solely from frugality. Rather, from the idea that

“Anytime you limit somebody, it always - in terms of resources - kind of creates opportunities. Our movies have few visual effects”

Blumhouse films have grossed over $2 billion worldwide.

Steve Martin writes about this in his memoir Born Standing Up. He describes more than a decade
Continue reading "Addition by Subtraction"

Dreams

If dreams came true, oh wouldn’t that be nice

Most of my sleep dreams are mundane if I can even remember them. The other night I dreamt that I missed a flight to Toronto because I didn’t have my passport.


There are other dreams that are more profound. Those are the dreams of one's life - how it turned out, how you wanted it to turn out. We often evaluate our life based on its relation to those earlier dreams we created. Sometimes that hurts.


But maybe instead of being ends, those dreams are means. Guideposts, data points, simple memories.


Bruce Springsteen’s new show Springsteen On Broadway makes this point. It comes on the heels of his 2016 autobiography, Born to Run. That book - as I read it - was not specifically about dreams. Instead, it begins:


“I come from a boardwalk town where almost everything is tinged with Continue reading "Dreams"

The Future and the Process

"People are often asking me what’s going to happen next in science that’s important, and of course, the whole point is that if it’s important, it’s something we didn’t expect. All the really important things come as a big surprise."

Uncertainty about the world, desire to control our destinies,  maturation - all make us want to understand what’s going to happen in the future. Similarly, one of the jobs of the investor is to buy an asset today that in the future increases in value. Thus, investors - and particularly early stage venture investors - often are asked what they think the future holds: “What’s next? What’s the new new thing?”

I have no idea what the future holds. When asked I supply generic answers.

What if the role of the venture investor is not to predict the future. What if the job is to Continue reading "The Future and the Process"

The Riff


Today we have have posted The Riff #1 to Soundcloud (and soon to iTunes, Google Play and other places I suppose).


The Riff is a 24 minute, unedited single conversation about one topic with one person who knows something about that topic (ie, a riff). David Tisch and I are the interviewers. We conceived of this idea and after a few months of planning we have started to put these into the wild. A few times over the past few months I have asked myself why we are doing this, have questioned it really, and I’ve come up with some reasons that make sense to me. So, why does the world need anymore stuff to listen to, and why would we be so arrogant (or narcissistic) to think that such stuff should come from us?


Well, the main reason is that we are doing this for ourselves, not anyone Continue reading "The Riff"

People


Much ado is all I see
And feel like it's surrounding me
The crowd intrudes all day
'Til I'm finally swept away


A few weeks ago I had the extreme privilege of going to a meeting in Washington, D.C. at a building called the Eisenhower Executive Office Building. This the building that houses the offices of the executive branch of the United States government. It is a great old building the majesty of which you feel as you enter it via the multiple layers of security.

Then inside, there are . . . offices. Some of them reflect the architecture of a building built in 1917, but they are otherwise for the most part nondescript and surely less opulent or fancy or technology-laden than the average mid-sized venture capital firm. There are simply rooms designed for groups of people to meet with each other.


Which took me aback at first until I Continue reading "People"

The Reordering of Medicine


When you wake up in the morning
You'll have a brand new feeling
And you'll find yourself healing
-Daniel Johnston

The nature of the way we interact - or desire to interact - with medicine and our medical care is starting to change fundamentally. This is less about the unbundling of medicine (which may also be happening) but instead the reordering of it. Stemming from a combination of user desires (driven by the mobile transformation of the last 10 years) and software and device capabilities, the reordering can be seen acutely in some conflicts that are now occurring.

Take just one example: UnitedHealthcare recently decided to make equipment by Medtronic its preferred in-network device for insulin pumps. This is a Medtronic device.


revel-pump-introducing.png

The diabetic community was incensed by this decision. Why? Because alternative device manufacturers had been delivering insulin pumps with different features that users wanted. Like touch screen devices
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Continue reading "The Reordering of Medicine"

Bots, Messaging and SmarterChild


If I gave you my love, I tell you what I'd do
I'd expect a whole lot of love out of you
- Al Green


Smart people believe that messenger type interfaces and associated “bots” will become a primary way people access new services going forward. We at USV certainly find truth in that, see both Kik and Koko and Libov’s thoughts here.

There are a bunch of reasons why this could be the case. First, the primacy of messaging - in all its various forms - appears to be growing as fast as ever. The conversational nature of messaging and chat also feels natural. Finally, the reduced load on a user from having to switch contexts to do different things appears as a major benefit to the different interface.


I’ve seen this before, as one of my first investments ever in 2000 was leading the first financing in SmarterChild
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Continue reading "Bots, Messaging and SmarterChild"

Bots, Messaging and SmarterChild


If I gave you my love, I tell you what I'd do
I'd expect a whole lot of love out of you
- Al Green


Smart people believe that messenger type interfaces and associated “bots” will become a primary way people access new services going forward. We at USV certainly find truth in that, see both Kik and Koko and Libov’s thoughts here.

There are a bunch of reasons why this could be the case. First, the primacy of messaging - in all its various forms - appears to be growing as fast as ever. The conversational nature of messaging and chat also feels natural. Finally, the reduced load on a user from having to switch contexts to do different things appears as a major benefit to the different interface.


I’ve seen this before, as one of my first investments ever in 2000 was leading the first financing in SmarterChild
Cf4JPVCXIAAjmNy.jpg
Screen Shot 2016-04-16 at 3.38.39 PM.png
Screen Shot 2016-04-16 at 6.38.55 PM.png
Continue reading "Bots, Messaging and SmarterChild"

Somewhere In The Middle


Change, nothing stays the same
- Van Halen

2015 was in some ways the year that the science of gene editing - or Crispr - came into the public consciousness. As part of that, large incumbent players made big moves. For example, this joint venture involving Bayer (a $40B company).

There were other examples of the “incumbents” in the health and medicine space making significant investments into innovation in 2015: Memorial Sloan Kettering Cancer Center built a $300 million, state-of-the-art outpatient surgery center that uses beacon based tracking of patients, HD based anatomical imaging, and an Xbox for fitness activities.

Yet, at the same time things are happening at the same or a faster pace at the edge - in a “bottoms up” manner - businesses and products that could potentially be major transformations. Amino is a desktop bioengineering system that will cost less than $700. There is also the
Screen Shot 2015-12-29 at 8.52.46 AM.png
Continue reading "Somewhere In The Middle"

Somewhere In The Middle


Change, nothing stays the same
- Van Halen

2015 was in some ways the year that the science of gene editing - or Crispr - came into the public consciousness. As part of that, large incumbent players made big moves. For example, this joint venture involving Bayer (a $40B company).

There were other examples of the “incumbents” in the health and medicine space making significant investments into innovation in 2015: Memorial Sloan Kettering Cancer Center built a $300 million, state-of-the-art outpatient surgery center that uses beacon based tracking of patients, HD based anatomical imaging, and an Xbox for fitness activities.

Yet, at the same time things are happening at the same or a faster pace at the edge - in a “bottoms up” manner - businesses and products that could potentially be major transformations. Amino is a desktop bioengineering system that will cost less than $700. There is also the
Screen Shot 2015-12-29 at 8.52.46 AM.png
Continue reading "Somewhere In The Middle"

No Stack Startups

“Who can unlearn all the facts that I've learned”

One way of looking at a publisher’s chain of business operations is that there are five core things it must do: (1) produce content; (2) market/promote content; (3) distribution; (4) figure out the best user interface or experience for its content; (5) and monetize the business. This applies, really, to any publisher: both content and commerce, for example. So, to maximize end user experience and value, and from there enterprise value, a company needs to maximize its ability to deliver across those components. Of course, technology infuses them all.

One way to accomplish this was suggested by Chris Dixon last year. He called it the “full stack startup”:

"The new approach is to build a complete, end-to-end product or service that bypasses existing companies. . . you need to get good at many different things: software, hardware, design, consumer marketing, supply chain management, Continue reading "No Stack Startups"

Changing Metaphors


"Photograph - all I've got is a photograph. But it's not enough"
Def Leppard



Wikipedia tells us that the word "photograph" derives from the Greek words phos and graphê, together meaning "drawing with light."

I suppose that for a hundred or so years that general definition worked as a metaphor to describe a new technology and medium and what could be done with it, whether that be still, animated or in motion images.


But sometimes metaphors stop working as a way to mentally conceive, and build off of and from, new technologies.

When the "web" first came into mass consciousness and culture, the metaphor that was initially used was the web "page". By using the word "page" as the defining principle, we then logically used other pages that we knew - magazine pages, in particular - to define what web pages were and could be. Interactive magazines, in a way. Continue reading "Changing Metaphors"

Changing Metaphors


"Photograph - all I've got is a photograph. But it's not enough"
Def Leppard



Wikipedia tells us that the word "photograph" derives from the Greek words phos and graphê, together meaning "drawing with light."

I suppose that for a hundred or so years that general definition worked as a metaphor to describe a new technology and medium and what could be done with it, whether that be still, animated or in motion images.


But sometimes metaphors stop working as a way to mentally conceive, and build off of and from, new technologies.

When the "web" first came into mass consciousness and culture, the metaphor that was initially used was the web "page". By using the word "page" as the defining principle, we then logically used other pages that we knew - magazine pages, in particular - to define what web pages were and could be. Interactive magazines, in a way. Continue reading "Changing Metaphors"

Changing Metaphors


"Photograph - all I've got is a photograph. But it's not enough"
Def Leppard



Wikipedia tells us that the word "photograph" derives from the Greek words phos and graphê, together meaning "drawing with light."

I suppose that for a hundred or so years that general definition worked as a metaphor to describe a new technology and medium and what could be done with it, whether that be still, animated or in motion images.


But sometimes metaphors stop working as a way to mentally conceive, and build off of and from, new technologies.

When the "web" first came into mass consciousness and culture, the metaphor that was initially used was the web "page". By using the word "page" as the defining principle, we then logically used other pages that we knew - magazine pages, in particular - to define what web pages were and could be. Interactive magazines, in a way. Continue reading "Changing Metaphors"

The Chaos Theory Of Startups


"Since we don't know where we're going, we have to stick together in case someone gets there" - Ken Kesey


I was flying from NY to SF the other day and at one point the gentleman I was sitting next to asked me if I was flying towards or away from home. I told him NYC was my home and I was on a business trip. He then said, "let me guess, Internet business." I was momentarily self conscious (was it my shoes? laptop stickers?) but then figured it was a nice bit of self-reflective cultural commentary: everyone flying to SF is going there for the Internet.

We chatted about it and he asked me something I've been asked many times over the years - "how do these Internet companies make money." Which was nice because we discussed all the "Internet companies" that actually do make money because they are, in fact, good businesses. Points scored.

But then we got talking about what startups are, or aren't, and what that word actually means, or doesn’t mean. At that point I got more tongue-tied then earlier in the conversation. I couldn't totally describe the meaning of the word.

I still can't. But I thought more about it overnight and then had a notion this morning that maybe startups are actually about chaos. Not necessarily chaos meaning "a state of confusion," but instead chaos meaning systems that are explicitly designed to be dynamical and highly sensitive to initial conditions. Indeed, chaos theory provides an almost-perfect description here of the outcomes of startups:

"Small differences in initial conditions yield widely diverging outcomes for such dynamical systems, rendering long-term prediction impossible in general."
The process of starting something up, then, doesn't view that chaos as a bug, but as a reality. Even as a competitive advantage, if you will, because if the conditions are actually right, the outcome and its impact will be oversized (indeed, massively oversized). 

In chaos systems, one of the challenges then is to determine what is random, or chaotic, and what is meaningful. One of the hard things about being in a startup in this state of chaos is to actually figure out what course of action leads to randomness or instead leads to signal to build upon and grow into and out from. In short, the difficulty is how to decide what to do.

If one believes this, it probably follows then that the decision making process itself that goes into startups is primary: it's less about the actual decisions themselves then it is about the process used to make those decisions. In any given scenario there are three potential outcomes. The best outcome is that you make the correct decision. Continue reading "The Chaos Theory Of Startups"

Looking More Closely


I was talking when I should have been listening 

- Grant Hart

As venture investors, we look at our investments and investment strategy continuously at a macro level. Questions like: how much are we investing and how fast? How does that compare to our other funds? What are our ownership levels and how are those changing? 

We run Monte Carlo simulations regularly to analyze the future capital requirements of companies, and whether we have reserved enough capital to support them in the out years. We look at the geographical distribution of our investments. We try to correlate all these data points to our investment thesis

It's constant self-analysis, and it is part of how a VC fund should operate.

But I find it's also helpful to sometimes zoom in closely, almost microscopically, at the companies themselves. To forget about portfolio diversity (or even returns), or the ups and downs they go through, and remind myself of what it is they do at a discrete level, and why they use the Internet to do that. 


So after our weekly meeting on Monday I poked around the USV portfolio a bit. I learned about:


* The 100+ pages of poetry on Wattpad, many with tens of thousands of reads and thousands of comments. This writer invents poetry forms too. People like poetry, apparently.


* The (more than) than 7,000 Etsy results for "magic wand" - there are some incredible, handmade, wands for sale there.

* The Black&Sexy network of videos and films and programming over on VHX - "programming focused on a young, progressive, Black audience who seek a truer reflection of their modern culture." This group makes short videos and sells them for between $2 and $5 and also gives them away for free on Youtube. They have sold tens of thousands of these Internet-only shows.

* I found this fundraiser on Crowdrise that supports an organization that teaches Filipino folk dance to Filipino-American youth in Stockton, CA. Micro-support ftw.

* This small fashion accessories company in London borrowed $100k from over 1,000 people via the lending platform on Funding Circle.

* A guy on Skillshare who uses his 100 year old family recipe to teach you how to brine.  

* And, Liz from Seattle started a new career at age 55 after learning how to code for free on Codecademy.

These surely are not necessarily signs of ultimate start-up success (though I might argue they are directional indicators of such). 

But it makes things more meaningful for me to dig a little deeper sometimes to see what is really going on. It keeps me optimistic, and optimism may be a core competency of a venture investor, after all.




  

Experience


God, what a mess, on the ladder of success

Where you take one step and miss the whole first rung
- Paul Westerberg

I was in a board meeting the other day at a company we have been investors in for a bunch of years. It is run by a small, great group of people, who built a good social product that did reasonably well - many users - but never broke out and achieved those hyper growth rates associated with services that have network effects.

Until this spring, when the service caught fire, adding hundreds of thousands (or more) of users a week, tens of millions of sessions a day, top 20 status in app stores the world over. Many things they had been thinking about for years started to work. At this meeting, I listened to updates from a bunch of the team members including the founder and in areas such as systems, community, product and analytics. And as I listened to these people I knew well and had heard from many times over the past few years, it occurred to me they had changed. It was not that they had suddenly become successful - after all it's early days and this company will face many more ups and downs in its journey. It was that they have been through a transformative business experience. Rebuilding a product on almost no budget, making gut calls and decisions, managing a massive growing, international and vocal community. They were now presenting to us as experienced business people, confident in their plans and in command of their data and themselves. 

They now had experience. And it is going to be fun to watch what they do with it.

As amazing as it was to see, it also humbled me. For how could I possibly advise and counsel them on the things they had experienced? I know nothing about operating a distributed moderation team in multiple languages. Nor little about building a redundant real time system handling millions of requests a day with almost zero latency and no down time. 

I remember when I started to work at AOL in mid-1990s and on my second day there I was told to negotiate and document a relationship with AOL's then-largest marketing partner, American Express. I was given the old deal to refer to, and little else. Everyone else was too busy to guide me. I cried at home at night with what seemed to be an insurmountable task - I had never done this before. But we got it done - I don't recall we even got it done particularly well - but it was done. The next deal we did was Continue reading "Experience"

Sometimes wrong


"I ain't often right, but I've never been wrong"

About seven years ago I came across an online music service that, instead of charging fixed fees for the digital files (there was no streaming back then), instead used a formula based on demand where the price changed over time. For example, a song 
initially would cost $0, thus appealing to the trend setters who want to discover something first, and be incentivized to download and share. Later the price would rise as demand increased, to $0.99 or more. And, finally, even further down the road, the prices could decrease as demand waned.

This service was called "Amie St" and I titled the blog post Amie Street Is The FutureBut I was badly, badly off in my profuse praise and prediction (Ugh - I wrote: Amie St "is the future of music distribution."). For Amie St's model and business did not really survive. My incorrect praise and predictions, however, do survive.

I was reminded of this of a few weeks ago when Songza, which arose out of Amie St and by the same team, was sold to Google. Reminded of how misguided I was, but also that sometimes maybe in one's errors of judgement there exist some pieces that make sense.

VHX is a company we have invested in that empowers artists to sell their work directly. It is platform with a number of components that connect various artists together. Very different from Amie St. Maybe. 

Yesterday, a bunch of disparate filmmakers who have used VHX before joined together to sell their films collectively, as a bundle. These artists don't necessarily have to have any relationship with each other - VHX allows these bundles to occur on the fly if they desire.

The bundle is called The Creativity Bundle because each of the films deals with the creative process of different kinds of artists - video game makers, font designers, sign painters. Two interesting things about the bundle are the bundle itself (allowing different filmmakers to become, in real time and on the fly, digital distributors  - studio like, if you will), and that the price is "set your own." You can pay as little as $1 for the bundle. 

VHX and the filmmakers are publishing the results, on the bundle page itself, right below the "buy" button. As of this morning at 6am ET, the average price paid was $7 for the bundle, with 25% paying $15 or more, 15% paying $1, and people from Germany and Italy being the most generous, on average, in paying for the bundle.

This is an experiment of sorts: about giving artists more control (and money) Continue reading "Sometimes wrong"

Ego

Ain't lost yet, so I gotta be a winner
- Paul Westerberg

A number of years ago we were fundraising for betaworks. I can't remember if this was the first or second financing, 2007 or 2008, but we'd been out talking to various financial and strategic investors for a few months explaining the story and model. One of those investors was someone we had previous close relationships with and one who potentially could be strategically relevant and important to our business; we assumed we'd get a warm reception there, which we did. This investor was indeed receptive, but was taking a while getting convinced that our model made sense for them. They didn't say no, but they didn't say yes either. This was frustrating, as it is for anyone raising money, because we couldn't seem to fully interest them over what felt like a long period of pitching. We knew that the betaworks "story" was different, but we were ourselves convinced we could describe it and model it in a way that made sense, and thus we had conviction that this was a rare investment opportunity (which is not to suggest it actually was a "rare investment opportunity" - it may or may not have been - just that we believed that to be true, and more than that we believed it actually to be a truism). 

The financing round ultimately came together with a bunch of other investors, as these things do, with a lot of momentum and demand towards the end of this process. In fact, there was more demand than we actually needed or likely wanted. After we had agreed to the outlines and terms and amount of the fundraise, we went to work putting the documents in order and moving to a close, without the investor mentioned above that we couldn't earlier convince. A few days before the close, this investor reached out and said that, yes indeed, they would like to participate, in a material but very small (relatively to the amount of money we were raising) way.

These people were friends; this entity was strategically relevant to things we were doing; the amount was small. But we said no to them. They had plenty of time earlier, they had their chance, it was a hassle for us to now deal with it. No.

On a Sunday afternoon, the next day or so, an old friend of mine called me. He had no stake in this investment whatsoever, but he knew the parties involved. He said to me, in effect, think about this entities money, this investment, another way: if we thought it made sense for us at one point why did it not now, at the end?

At Continue reading "Ego"