Aug 1, 2017

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 develop a process to evaluate enormous amounts of data and ideas(quantitative and qualitative), collaborate on making decisions with that data, and then choose a set of investments which represent different possibilities for the future.

In other words, the VC job is not to peer into the future but instead to come up with a process that allows you to construct a large set of different choices about what the future potentially could be.  Perhaps, then, venture capital is about the process, not the outcomes. Trust the process.

Process means you think about situations in two ways - those you can control and those you cannot control. We can’t control what happens with the companies we invest in - the outcomes - but we can control how we make the investment decisions - the process.

There are many types of investing processes, what is important is just to have one, create its parameters and trust it. USV’s is comprised of these attributes: thesis driven, small funds, early stage, collaborative decision making, one office in one city, conversational, active investing. Each of these components is an explicit constraint that tightly guides decision making. It may not be the best process, but it is uniquely USV’s.

Out of that process comes a portfolio of investments, associated with a particular fund. Each of our funds, for example, has 20-24 companies. Those companies are what our process has determined to be our view of one potential future.

Relying on a process is hard when faced with rapid change and enormous uncertainty, when you see companies struggling or failing. I’ve made investments in companies that have blown up. I am sure I will continue to do so. Human nature and ego ask us to change course when things don’t appear to be working. The process, however, requires us to keep going.

Mar 14, 2017

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 else. By that I mean these riffs are hard to do. Hard in that this does not come natural for either of us. The Riff forces us to beg people to join us, to prepare to interview them, and then be engaged enough to try to keep a conversation going on one subject for 24 minutes. I think we’d both rather be quiet listeners rather than upfront talkers. On top of that, we are committed that these Riffs are recorded live and in person - no phone or skype. So, in short, we are doing this because it feels like unnatural effort. Good skills to get better at. Also, as it is unedited and one take, if we screw up it will all be there, we’ll look foolish. Lots of room for failure = good incentive to prepare.

Secondly - focus. I feel inundated with information. The Riff is more information but it is designed to be 24 minutes about one thing and one thing only. #1 is about tv news. Later ones will include a riff of retail, a riff on NYC, a riff on celebrity and a riff on culinary mashups.

Why 24 min? That feels like the most we could ask of someone’s attention in a single setting. It’s the length of a short walk, a subway ride from Carroll Gardens to Union Square, a slow-sipped cup of coffee. These are not unstructured conversations - they are meant to be tight, fast and on topic. Also, as part of the bargain - of asking for someone's time - these things need to sound great, high fidelity. The Riff sounds great due to the mad talents of Ben the Engineer. Even if the content sucks, The Riff will sound great.

Riff #1 is about what the future prospects might be for television news. Laurie Segall, the senior technology correspondent at CNN, joined us.

Oct 21, 2016


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 thought to myself that, at its core, the business of government is just groups of people attempting to make decisions - negotiating, cajoling, arguing, attempting to build consensus. It’s just people.

As a venture investor, one obviously gets the opportunity to back entrepreneurs - people - and different firms place different levels of emphasis on people, ideas, stage, and other things. Regardless, the people part is one of the best aspects of the job.

Which brings me to the blockchain. Our firm has what is now a well documented, ongoing and evolving thesis and related ideas about why we believe the blockchain is one of the most exciting technology shifts (movements?) we’ve seen in a long time. But there is also another aspect of it that is as exciting as the transformational nature or potential of outsized investment gains that may result therefrom.

It’s the people.

The blockchain and its evolving ecosystem and community (Joel and I called it “True Believers” the other day) are a wonderfully smart, intense, focused, weird, open, fun group of people. Almost across the board. Some are capitalists, some may not be capitalists, some cannot figure out which way to go, but all are curious. They are interested in finance, medicine, protocols, storage, music. But virtually every single person I’ve met is as open to conversation and debate, is transparent about their ideas and biases, as anyone I have professional come across. And, every single one of them smiles and laughs, simultaneously taking this blockchain stuff really seriously, and not seriously enough.

I’ve seen this before - when I worked at AOL in 1996 and in the early days of the social web 2006 or so.

Clearly, smiling, engaged entrepreneurs do not an investment thesis make.

Yet, almost weekly I’m coming across articles online making valid points about the unknown and dislocating changes that will be wrought when computers continue their march towards replacing tasks that people do. These concerns feel real.

But at the same time I also can't help but allow myself to get swept away in the enthusiasm of these people I am meeting - the humans - building blockchain software. That their enthusiasm, openness and sense of humor will in fact show us the way towards finding am amazing middle where technology and humanity do in fact meet.

Jun 14, 2016

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.


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 from Tandem or color screens from Animas or Omnipod:

Screen Shot 2016-06-12 at 7.54.54 AM.pngtslim_Hand_View.jpg

Of course, people took to social media to express their feelings: #mypumpmychoice and #accessmatters are just two of the relevant hashtags here.

Underlying this all is the simple idea that “technology is intensely personal.” No longer does technology being personal solely apply to our creative modes of self expression (our cameras, pictures, videos, tweets and Snaps) - it now also applies to how we manage our lives and health. Our phones may not be becoming our new doctors (though I think they can), but they are shifting the ways we interact with and track our health care.

This has the potential to put people at the center of the medical universe (in the same way people have become one center of the media universe).

This isn’t unbundling but more like reordering. Unbundling refers to the phenomenon whereby a market or industry that is tightly coupled, or otherwise concentrated or vertically integrated, is then later transformed when it splits into component parts. The components of healthcare are already fragmented, however. Instead, what is happening may be that the components of medical care are being reordered into something new - patient demanded and patient centric. Defined by the user and user needs.

This isn’t totally new. Jay Parkinson, MD, has been writing about this for years, my favorite quote of his:

People are the CEO of their health, and doctors are just consultants.

What may be new is the technology and services have finally caught up to make this a reality.

And it’s not just insulin pumps, but also many other services. For example, apps to track fertility (like Clue) only indirectly implicate a physician, but for sure help a person collect vital signals about their bodies and health. Parkinson’s very own Sherpaa tackles the problem of the complexity of employer managed healthcare by viewing it as a user experience problem to be solved. Smartphone accessories can now perform tests to detect HIV and syphilis from a finger prick of blood and in just 15 minutes. AliveCor allows you to perform an electrocardiogram at home. Services like Lemonaid and Nurx dramatically simplify the diagnosis experience (and cost) by providing computer-assisted mobile-only medical care directly to users.

This user-centric approach to medicine is also occurring in more b2b oriented services too. Eligible has created an API that enables a healthcare service developer to focus on user experience and not payment and insurance infrastructure (in a similar manner to, for example, Stripe). Lumity uses employee data to help companies provide the best benefits.

USV has, natch, invested in a bunch of these companies, some listed above.  

The thing that ties all these together is putting the user - the consumer of the healthcare - at the center of the universe and building out from there. There are, of course, other vital players in this medical matrix - but this reordering may be the beginning of a user-centric approach that has been largely absent so far at scale. One that feels consistent with trends we have seen in other markets and also one that could result in real change in the economy and society.

Apr 17, 2016

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, where that product and company faced many of these same questions. What did they see and do?

  • Given that it was 2000-2001, SmarterChild launched on the then dominant (only?) messaging platform - AOL’s instant messenger (AIM). In no way did we think this was a wholly original idea - it was inspired by Eliza, Alice, and many others. Instead, the implementation and technology were more unique.

  • SmarterChild was not designed to live as simply one of many names on your contact list delivering services. The goal was for it to be your primary portal into the world - to be the one “bot” that ruled them all.

  • As a result, the company spent an inordinate amount of time upfront building personality libraries. The idea was that since SmarterChild was interjected into a place that was exclusively where personal conversations occurred with friends, the service (or bot) had to act like your friend in addition to being a utility service. Otherwise it would too interruptive or, worse, easy to ignore.  

  • This required SmarterChild to be able to respond to not only informational queries but also, well, sex and profanity. Chris Bray, one of the original developers, was once asked how people were using SmarterChild. He replied:

  • The implicit assumption here was that the utility services would take time to perfect, so you had to give people a reason to stick around while that happened. A domain library that responded to profanity was thus a necessity, along with weather, sports scores, stock quotes, news, dictionary, yellow pages and search.

  • Making SmarterChild appear as a friend (albeit a strange one) would become the primary way people would then tell their other friends about it. And alot of people told their friends. At the peak, SmarterChild had tens and tens of millions of followers on the IM platforms. I am pretty sure this was - at the time at least - the most followed “user” in the history of AIM. People posted thousands of screenshots of their interactions with and feelings about SmarterChild:

Screen Shot 2016-04-16 at 3.38.39 PM.png

Screen Shot 2016-04-16 at 6.38.55 PM.png

  • The other area that the company invested heavily into was response time. A first principle was that unless the bot could answer in under 10 milliseconds to each and every request it would be a failure. Speed, speed, speed.

SmarterChild worked well until it didn’t work well. For one, at some early point it needed explicit agreements with the platform owners because it quickly ran into rate limits. The volumes were also so massive it needed technical cooperation with them. And, finally, there was the constant tug back and forth with the platforms. 

ActiveBuddy, the parent corporation of SmarterChild, lived virtually every day with both the excitement of massively increasing user numbers and fear that they would be shut down because they neither owned nor had any control over their distribution. Ultimately, that tension was too much to manage against.

Dec 30, 2015

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 frugal science movement, "the endeavor to create low-cost, easy-to-use tools that address serious problems."

This dynamic - with incumbents making what appear to be aggressive, risky and expensive moves and at the same time new entrants chipping away at the margins and edges - is also being replicated in other industries.

Take the beer business. On the one hand, the number of craft breweries in the U.S. surpassed the historic high set in 1873, topping 4,100 (see: America Has More Breweries Than Ever Before).

Then look at the M&A activity from incumbents in 2015 alone (from “Why 2015 Was Such a Historic Year for Craft Beer”):

Screen Shot 2015-12-29 at 8.52.46 AM.png

Business moving from the top down, and from the bottom up, simultaneously.

In the technology world things look the same. Google, Microsoft, Apple, Facebook, Alibaba, Tencent and Amazon, to name just a few, are moving on many, many fronts. “There’s one theme this year that seems to run horizontally across many of the top tech companies we cover: everyone wants to do everything” (Lauren Goode in the Verge).

Or, as Jeff Bezos, CEO of the “retailer” said just the other day: “We want to win an Oscar. Amazon has already won Golden Globes and Emmys. Our current target is to produce 16 home movies a year.”

But not only are the big firms expanding - dozens of new companies are being started yearly. In 2015 over $4B was invested in digital health startups alone by over 300 venture firms. Similarly, about $4 billion has been invested in VR in the past few years.

And while Silicon Valley is the gravitational center of technology industry, Stockholm is “the second largest producer of billion dollar start-ups after Silicon Valley on a per capita basis.”

What is going on here, is this anything new? Who knows, for sure, but I do think there is a potentially new dynamic playing out. That is, the terms “innovation” and “disruption” (as vague as they may be) have become mainstream, and are no longer the secret, province, or modus operandi of a smaller subset of businesses. As Jonathan wrote in an email to us the other week - the leaders of this era have been trained in the art of disruption.

This is a sign of market maturity but it also feels like something more - because while the players at the top move aggressively, the ones at the bottom do not appear to be slowing. To the contrary, they too are aggressively trying new models and businesses. It’s like full stack innovation being played out on a global scale. :-)

The next few years are going to be interesting.

May 6, 2015

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, sales, partnerships, regulation, etc.”

“You need to get good at many different things” being the key proposition.

But maybe, a year or so later, we are seeing something different emerging. Something closer to the actual unbundling of content and commerce businesses themselves from the web at large (and the apps thereto). The unbundling of the full stack startup. Where instead of being good at many things, companies can just focus on the last mile of value they provide, the one thing they can excel at better than anyone else. Maybe this should be called the No Stack Startup - services that can focus on doing only one thing - hopefully well - and utilize other services for everything else.

This is not totally new but is challenging some of established orthodoxy by assuming there are some things - design for example - that may not be core competencies.

Some examples made me think of this:
The Shade Room - an Instagram based entertainment publisher, that only does the content sourcing and production 
Stefan’s Head - a text based commerce company, that only designs the products and uses Twilio (I think) on the front end and Stripe on the back end, to deliver via SMS its offers 
Weiguofang - a fruit seller that operates on WeChat 
TextRex - restaurant recommendations over SMS 
Some characteristics all these share is that they use other platforms and APIs (or protocols, in the case of SMS) to cobble together a service and in doing so rely almost wholly on those platforms and APIs for every function of the business other than the one they can be the best at. And, maybe more importantly, they all are using those other platforms to define their users experiences. 

Take Facebook, for example. At some level, the Facebook is a very good platform to market, distribute, promote, and - now, maybe - monetize content on. The UX is well known to its users - and optimized over years through billions of interactions for commenting and sharing. In this way, Facebook performs 4 of the 5 components listed above. All, except making the content itself. Similarly, take other platforms, such as Instagram:

“If you have an Instagram account, you can slap a price tag on anything, take a picture of it, and sell it. For instance, you could take this can of San Pellegrino, paint it pink, put a heart on it, call it yours, and declare it for sale. Even my grandmother has an Instagram business! She sells dried fruit. A friend’s cousin is selling weird potted plants that use Astroturf. People are creating, you know, hacked products.”
These No Stack businesses may not offer a “great experience” (traditionally defined) but they likely are “good enough” (see this presentation for a great overview of how this is happening in Asia).

Of course, most of these are not even "mobile-first" businesses - they are "mobile-only". They often don’t even have web sites (or, apps for that matter): "the homepage once conferred some sense of reaching your canonical destination, it’s now your name on Facebook, Instagram, Twitter, Amazon etc. that consumers are searching for” (Jonathan Libov).
Historically there have always been services and APIs to string together capabilities.  Until recently, most of these have been back-end infrastructure types.
Now it feels like there is something additional going on. For one, the back end services have gotten really, really good and really varied (see, Stripe, Twilio, Shippo, Kabbage, Ziggeo, Layer as just a few examples covering payments, messaging, shipping, financing and video).

But moreso, the No Stack services are utilizing other front ends layered on top of the back end services. They are utilizing front ends that may not have even been initially designed for those purposes. But they work because in many ways they are optimal user experiences that are already market tested.

The No Stack Startup thus does not attempt to recreate a user experience, instead relying on other UX that are good enough, and getting better. This obviously inverts the notion of user experience and even design (my partner Albert's great TEDx talk is all about inversions in fact).

Even better, in relying on the UX of other platforms, the No Stack Startup also relies on the users of those platforms. In some ways, and to paraphrase Jeff Bezos, this new class of services looks at other platforms, builds upon them, and thinks: "your users are my opportunity."

I have been trying to figure out what the implications of this might be. A few ideas:
* the platforms themselves may have different and even stronger network effects than previously imagined (though in different ways), as springboards to other services 
* it feels like it is an amazing time to be a creative entrepreneur utilizing emerging no stack techniques, though it is wholly unclear how to measure the sustainability of the no stack approach via the full stack approach 
* the environment for incumbent publishers is even more competitive with a faster feedback loop then we probably realize.
Regardless of the implications, it seems that when there is continuously less "there" needed to create value, we might at a minimum require some new definitions.