There is a lot of volatility in the news from day to day on tech. It’s interesting to me that Senator Elizabeth Warren is beating the drum on regulating companies like Facebook ($FB), Google ($GOOG) and other Silicon Valley titans. The right wing is echoing her sentiments but for different reasons. They see those companies as oppressive and against free speech along with the way they discriminate against right wing websites, employees who are conservative, causes that are conservative, and conservative speech.
When I was at the i7 in Torino, Italy a well respected Italian computer scientist offered up the idea of regulating the big tech giants. That was September of 2018. Ted Ullyot correctly asked, “How do regulate an opt-in service?” It’s a great question.
Seed investments are down by any measure (funds, deals, dollars) over the past 3 years in deals < $1 million AND in deals between $1–5 million. What gives?
Over the past month a colleague (Chang Xu) and I sifted through data on the venture capital industry (as we do every year) and made a bunch of calls to VCs and LPs to confirm our hypotheses. We published our initial findings in our deep dive on the VC industry in which we showed that:
Venture Financings for “traditional VC” is relatively flat over the past 5 years (up only 4% compounded annually)
The venture industry as a whole grew massively, mostly due to the IPO window for tech startups being pushed from 6–8 years a generation ago to 10–12+ years today.
As a result of the IPO window shifting we saw a massive inflow of public-market capital into the latest stages of venture. Round sizes of > $100 million or more now account for 47% of all VC dollars (62% if you count rounds > $50 million)
This has made venture capital significantly more valuable for VCs and LPs who invest in the best companies
As part of our study we noticed a trend many have spotted but few have explained — why the hell has seed financing declined so much in the past 3 years??
Why Did The Seed Market Emerge in the First Place?
You might like to think that a bunch of savvy venture capitalists saw a market niche for raising smaller funds or perhaps there was a generational shift where disgruntled junior partners spun out of bigger firms to start their own gigs. Well, both of those things happened but they were lagging indicators.
The reality is that as a result of two major trends the costs of starting a technology startup went down massively. Between 1999–2005 the costs went down by 90% and between 2005–2010 they went down a further 90%. I launched my first startup in 1999 so I know the economics of launching from first-hand experience.
By 2005 it was significantly less expensive to launch a startup so it should be no surprise that the real innovators in the super early-stage ecosystem were all founded around this time or in the few years to come: Uncork Capital, True Ventures, First Round Capital, Baseline and then shortly thereafter Forerunner Ventures, Founder Collective, IA Ventures, Crosscut, Floodgate and so many more that I’m sure to get in trouble for not listing
I want to add some more context around this role and hope that it helps you decide to bring your talent to the First Round team.
I have a ton of respect for this role because I did this job for Josh before we called it Chief of Staff. I went to board meetings and working sessions and then worked with the founders who were already in our community. I did what I could to help them achieve their goals and learned how the best startups operate.
Although this job is not an investing role, it is an opportunity to immerse yourself in the startup industry. The two or three years you spend at First Round will serve as a spring board
I recently replaced all but three of the Macs in our office (the ones used for video editing), with ~$800 ACER Chromeboxes and the stunning, ~$900, USB-C powered Dell 38″ monitors (model: U3818DW).
Google’s Chrome OS is an absurdly fast, stable and distraction-free operating system. Over the past seven years of its short existence, it has become world-class.
Here’s why Google has nailed it:
As the world has moved to cloud-based software, running inside of browsers, the need to download client software has disappeared for almost every task. This means software startups don’t have to build clients for every desktop operating system anymore (some do, most don’t).
The Chrome Browser has become the standard for cloud-based apps to be built on — because it has massive market share.
Chrome Extensions are available for everything you need to do, from password management, Grammarly and advanced email with Superhuman
Today I am headed up to mid-northern Wisconsin. Each of my kids is here with their dog. Since we got a puppy this year too, we rented a dog friendly house on VRBO. It’s in the middle of nowhere and it will be fun to be together. We have some other extended family joining us too. I am sure we will hit a supper club or two. I won’t be bringing any Chicago Bears stuff up.
My partner flew to London to be with his wife’s family. We had our last board meeting of the year with our portfolio company PipiT. Kenny was in Galway. PipiT is doing well and we expect big things from them next year. I am hoping to attend a board meeting there next year. Maybe the team will give me a tour of the Irish whiskey distilleries.