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2018-01-21T00:50:51.654Z
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I want to see this documentary when it comes out so I backed it on Kickstarter today to make sure it gets made.

I saw the news today that HuffPo is shutting down their “contributor network.”

we are ending the HuffPost contributor platform. The platform, which launched in May 2005, was a revolutionary idea at the time: give a megaphone to lots of people ― some famous, some completely unknown ― to tell their stories. At that time, social networks barely existed. Facebook was a nascent dating site for college students. Twitter had not been invented. The platforms where so many people now share their views, like LinkedIn, Medium and others, were far in the future.

While that is sad news, it is not the least bit surprising.

I said this on Twitter about this news:

I would never outsource my content to some third party. I blog on my own domain using open source software (WordPress) that I run on a shared server that I can move if I want to. It is a bit of work to set this up but the benefits you get are enormous.

I have been asked to blog at Medium, LinkedIn, HuffPo, and many other places. I always tell them that I am not going to do that. If they want to repost something...

My friend Steven Johnson has penned a long and wonderful piece exploring what lies beyond the speculative market in crypto tokens.

This essay, which will run in Sunday’s New York Times Magazine, but is online now, could not have come at a better time.

All most people know about Bitcoin, Ethereum, ICOs, and alt-coins, is that you can trade them and make (and lose) money on them.

But that is not what interests me about crypto tokens and blockchain technology and it is not what interests USV and the folks in this sector we work with.

What interests us is that “crypto” could well be the architectural breakthrough that we need to move beyond the current Internet market dominated by a few large tech companies.

And Steven, as is his gift, explains this beautifully and easily in roughly 9,000 words.

This is a piece that requires sitting down with a cup of coffee or tea and reading it.

I would suggest you find some time this week to do that.

USV TEAM POSTS:Albert Wenger — January 17, 2018Uncertainty Wednesday: Sample VarianceAlbert Wenger — January 15, 2018Martin Luther King Jr Supported Basic Income

I saw my friend Chris tweet this question yesterday and had to respond:

Nick helped me get Yubikeys set up on all of the services I use that support them in the past few weeks. If I had a new year’s resolution, which I don’t, it would have been to start to use Yubikeys.

So what are Yubikeys?

They are a brand of “security keys” that are supported in the two factor authentication offerings at Google and many other Internet services.

They look like this:

You can buy Yubikeys here.

The idea is you keep one with you and one in a safe place in your office or home or a bank safe deposit box.

If you lose your phone, you have a Yubikey to get you back into the service.

But I don’t only use Yubikeys as “backup codes”, which I also keep stored safely.

I have started using my Yubikeys instead of a Google Authenticator code. It can be easier if you have the Yubikey handy.

But whatever you do, don’t use SMS for two-factor codes.

I was hacked this summer and the attacker tried (unsuccessfully thankfully) to port my phone number.

My partner Albert recently experienced a similar attack. He wrote about it here.

So here is the best practice as I see it:

  1. Always use two-factor...

Today we celebrate the life and teachings of the great Martin Luther King Jr.

He had a way with words and among my favorites is this quote, which seems very apropos right now:

Darkness cannot drive out darkness: only light can do that. Hate cannot drive out hate: only love can do that.

USV TEAM POSTS:Nick Grossman — January 14, 2018You need a budget

A hallmark of startup companies, the tech sector more broadly, and certainly our portfolio companies, is that they include equity in their compensation packages for their employees, often all employees.

If you work for a tech company, chances are good that you will get options as part of your compensation package.

I have written extensively on this topic over the years and even published a framework for issuing equity to employees on this blog.

That framework is now out of date as the market has moved (up in case you were wondering) and I need to update it. It’s a project and we are working on it at USV but I can’t promise it any time soon.

A few years ago I met with a very successful entrepreneur who built his company outside of the tech sector. When I asked him about equity compensation he said to me “You people in tech are crazy. I pay my employees handsomely in cash and I keep all of the equity for myself.”

I’ve thought about that comment a lot in the years since. I grew up in the business doing things a certain way and never questioned it until that moment.

The truth is that equity comp has its disadvantages. You can’t pay your rent or take a vacation with your options. They might be worthless if the company fails or is sold in a fire sale. You have to pay taxes when you exercise and if you can’t sell the underlying stock that can be painful....

A few weeks ago on the Gotham Gal’s podcast, she had Fereshteh Forough, founder of Code to Inspire, an organization that teaches women in Afghanistan to code.

There is so much to like about what Fereshteh is doing. It’s a great podcast to listen to this weekend:

USV TEAM POSTS:Albert Wenger — January 12, 2018A SIM Switch Account Takeover (Mine)Nick Grossman — January 11, 2018The weakest link

Like last year, our portfolio company Kickstarter is starting the new year off with a Make 100 campaign.

The idea is simple. Make 100 of something and fund it on Kickstarter.

Here are a bunch of live Make 100 campaigns

And if you want to do a Make 100 campaign, you can start here.

Make 100 campaigns are fun because they are typically low budget affairs.

I backed a bunch of them today and look forward to seeing them come to life.

USV TEAM POSTS:Nick Grossman — January 11, 2018The weakest linkNick Grossman — January 10, 2018From a labor mindset to a capital mindset

Longtime readers know that I am a Knicks fan. Or as the Signal group I have with a couple of my kids is called, a “Frustrated Knicks Fan.”

Last night we lost at home in double overtime to the Bulls. That is the third time this season we have lost to the Bulls. Twenty percent of the Bulls wins this year have been against the Knicks.

Last night’s loss was a microcosm of the season and this team for me.

We played hard, we made a couple big buckets to take the game to OT and double OT.

But in the end, a boneheaded play by the player who was keeping us in the game lost it for us.

Fandom is such an interesting emotion.

It is self-torture and yet we enjoy it.

Ugh.

USV TEAM POSTS:Nick Grossman — January 11, 2018The weakest linkNick Grossman — January 10, 2018From a labor mindset to a capital mindset

There is a big difference between being right about something and being right about when something will happen.

Sadly, to profit from being right you either have to get the timing right or you have to hang in there until the timing is right. The latter can be incredibly painful and most investors don’t have the stomach for it.

This is particularly true of short positions. It is not enough to know that something is going to blow up. You have to know how, why, and when.

On long positions, like venture capital investments, you do have the ability to buy time but it requires a lot of conviction and patience and the carrying costs can negatively impact the returns.

Which is why the best venture capital investments are always the right idea at the right time by the right team.

I remember watching streaming video over a 14.4 modem in 1997. Ten years later YouTube nailed that opportunity. Right place. Right time.

A lot of venture capital investors ask “what can go right” instead of “what can go wrong” and that is exactly the right mindset in VC investing. But you also have to ask “when will it happen and why?”

USV TEAM POSTS:Bethany Marz Crystal — January 9, 2018Thank you for sharing this! ...

I saw The Gotham Gal’s reply to an email this morning that we were both copied on. I can’t remember exactly what she said but it was something like “I understand, but no.”

No beating around the bush, no letting down softly, just complete and total honesty about where our heads are at on something.

She has taught me this lesson consistently over our almost forty year relationship. I have a tendency to be too nice and leave people with an unclear view of where I am at.

I’ve gotten much better at this over the years as the pain of leaving things hanging has taught me this very important point.

Being clear and direct with people, even if it means upsetting them, is better than being nice and leaving them confused.

Seeing that email reminded me of that and the next hundred emails I replied to got a very direct answer this morning.

USV TEAM POSTS:Bethany Marz Crystal — January 9, 2018Thank you for sharing this!Bethany Marz Crystal — January 7, 2018Spending New Year’s (Alone) in Paris

I’ve been meditating for ten to fifteen minutes every day for the past two months. I have not missed a day since I started. I find it to be a wonderful practice which I enjoy and look forward to very much every day.

I am experiencing a number of benefits but the one I am most cognizant of is an increased ability to avoid distraction in a conversation or some other situation where I need to be focused.

I’ve always been good at being focused, sometimes to a fault. But I also find my mind wandering in situations where I am losing interest and that’s obviously very bad.

At the core of my meditation practice, as it was taught to me, is bringing my mind back in focus and back to the breathing. It is that thing “snapping back into focus” that I do regularly in my meditation practice that has helped me so much with staying present throughout the day.

Meditation is like repetitive exercise of the focus muscle in the brain.

So if you are having trouble being present in situations you want to be but can’t, I would strongly recommend trying meditation. It’s helped me with this and I imagine it will help you too.

USV TEAM POSTS:Bethany Marz Crystal — January 7, 2018Spending New Year’s (Alone) in Paris ...

One of the hardest things in managing a venture capital portfolio is managing your big winners. A big winner can dwarf the rest of the entire portfolio and you end up sitting on enormous paper profits that you can’t get liquid on. I realize that this seems like a great problem to have, and it is, but it is still a challenging situation.

We faced it in Twitter in 2010/2011/2012, in the years before Twitter went public (which happened in the fall of 2013). We had bought 15% of Twitter for $3.75mm in the first VC round in 2007 and though we had been diluted down a bit in subsequent rounds, we had a very large position that was worth in the neighborhood of $1bn by 2011. Our entire fund was $125mm and so we were sitting on a position that was worth 8x the entire fund. It was a wonderful situation in many ways but I was nervous that macro events or a setback at Twitter could go against us and the position would go down in value, possibly significantly.

The way we managed this issue is we sold a portion of our position in two secondary transactions and in connection with those sales, I stepped off the board, making room for an independent director who would be helpful as the Company scaled and got ready to go public. We sold about 30% of our position in those two secondary transactions for about $250mm and returned 2x the entire fund...

In honor of Ethereum trading (briefly) at north of $1000USD this week, I thought we’d hear this weekend from Ethereum’s founder Vitalik Buterin.

This is an interview that he sat for in October at the ETH Waterloo event (where, among other things, CryptoKitties was born).

I support a bunch of artists on Kickstarter’s new Drip service.

One of my favorites is Shantell Martin.

She draws her dreams and makes music and shares her work regularly with her backers.

It’s great to get a little bit from her on a regular basis.

Check out her page and maybe back her and see what that is like.

UPDATE: AVC regular Kevin Marshall just joined Drip today. Good timing. I backed him too. If you want to do the same, you can do that here.

USV TEAM POSTS:Albert Wenger — January 4, 2018Meltdown and Spectre are Good ... for Innovation

So the chips we use in our personal computers and cloud computers have some newly discovered security holes. One is called Meltdown. The other is called Spectre.

My first reaction upon hearing the news yesterday was “so what do we do about this?”

The answer is you can’t do much on your own.

For Meltdown, we need the operating system and hardware manufacturers to issue patches and firmware upgrades. I am sure they are furiously working on them.

The Verge has a good piece on what we can and should be doing about this.

Here’s the key part of that post:

  • Update to the latest version of Chrome (on January 23rd) or Firefox 57 if you use either browser
  • Check Windows Update and ensure KB4056892 is installed for Windows 10
  • Check your PC OEM website for support information and firmware updates and apply any immediately

I expect Apple will be issuing an update shortly for their OS.

Apparently Microsoft, Google, and Amazon’s cloud services are already patched for Meltdown.

As for Spectre, apparently there are no fixes for it as of now, but it is also a lot harder to implement hacks using that one.

Finally, my partner Albert has some optimism about all of this. We should expect some good to come of this mess.

USV TEAM POSTS:Albert Wenger — January 4, 2018Meltdown and Spectre are Good ... for Innovation

We do a lot of referencing in our business. We certainly ask around about a team before investing in them. But we do even more referencing post investment when we help the founders and management of our portfolio companies build a team. Investors often have access to references that founders and management don’t. So we can add a lot of value to the hiring process by reaching out to our network and asking about people.

The thing I have learned in thirty plus years of making reference calls is to pay attention to how things are said more than what is said. And pay particular attention to what is not said.

I have also learned to call people instead of sending emails. Most people don’t want to put negative things in writing, but will do so on the phone, particularly with someone they trust.

It is also helpful to talk to people with knowledge of a situation but not handcuffed by it. For example, a CEO may not feel comfortable saying something negative about someone they transitioned out of their company, but a co-worker might be. Or a close friend of a co-worker might be.

I don’t mean to suggest that references are all about finding out the negatives. You should also seek to hear what someone’s strengths are. Most people are good at some things and not so good at other things. Getting a sense of strengths and weaknesses and making sure the person is a good fit for the role is...

I saw this tweet in my timeline yesterday and thought “what a great way to start the new year.”

I had 1,625 unread emails in my inbox this morning.

I have archived all of them that came in during 2017.

If you sent me an email in 2017 and did not get a reply, you won’t.

I am starting the year fresh. It feels good. Thanks for the suggestion OoTheNigerian.

This is a post that I am struggling to write. I really have no idea what is going to happen in 2018.

  • Will the crypto markets continue in their bull cycle? I have no clue. I was showing my daughter’s friend an app that helps people save and invest and he said to me “I don’t need that, I just buy some ETH every week.” I said “that’s a good plan until it isn’t.” I just don’t know when buying crypto will stop being a good idea. It was a great idea in 2017.
  • Will the economy extend its eight year expansion? I have no clue. The longest post WWII economic expansion was 10 years from 1991 to 2001. Can this one beat that one? Maybe. Will this one also burst over the collapse of another tech bubble? Maybe. But again, I have no idea when that might come.
  • Will the corporate tax cuts that are coming from Trump’s tax bill lead to increased hiring and investments, or will companies simply hoard that cash or pay it out in dividends? Likely a bit of both. But I think Wall Street has largely priced in the increased earnings so I’m not sure the tax bill will be a boon for the stock market in 2018.
  • Will the current Internet oligopoly (Amazon, Apple, Facebook, Google) continue to take share from the rest of the sector, or will one or more start to falter? I’d like to see the latter, but I suspect it will be...

As has become my practice, I celebrate the end of a year and the start of a new one here at AVC with back to back posts focusing on what happened and then thinking about what might happen.

Today, we focus on what happened in 2017.

Crypto:

I went back and looked at my predictions for 2017 and I completely whiffed on the breakout year for crypto. I did not even mention it in my post on New Year’s Day 2017.

Maybe I got tired of predicting a breakout year for crypto as I had mentioned it in my 2015 and 2016 predictions, but whatever the cause, I completely missed the biggest story of the year in tech.

If you look at the Carlota Perez technology surge cycle chart, which is a framework I like to use when thinking about new technologies, you will see that a frenzy develops when a new technology enters the material phase of the installation period. The frenzy funds the installation of the technology.

2017 is the year when crypto/blockchain entered the frenzy phase. Over $3.7bn was raised by various crypto teams/projects to build out the infrastructure of Internet 3.0 (the decentralized Internet). To put that number into context, that is about equal to the total seed/angel investment in the US in 2017. Clearly, not all of that money will be used well, maybe very little of it will be used well. But, like the late...