It is interesting to think about how tech IPOs will interact with the bear market of the past few weeks. Here Fred argues that it’s about time for the private and public markets to sync up once again, and that the startup sector is well positioned to make things work. I’m not so sure.
This was one of the most interesting episodes of Patrick’s podcast recently. Origin stories are always cool, but especially so when they’re so eclectic. Learning a bit about the decisions behind 2nd Life’s and YouTube’s early economies was fun, but what I found most insightful (by far!) was “is it a value or is it a tactic?” towards the end of the episode. We need to remember why we do the things we do.
While I’ve thought a lot about incentives in startups, I had never thought of the kinds of conflicts that arise when a founder fully vests an initial grant. The fact that something like this can trigger a bigger conversation seems especially mis-understood.
The fact that some “huge successes are the results of pivots” does not mean that all pivots are successful. I agree with Fred that in most cases, hard pivots are a bad idea. There’s probably enough data around to calculate whether
P(success | pivot) > P(success).
And yet another a16z conversation that ends up making me add a book to my to read list. Johnson’s new book discusses decision making, and tries to list techniques that can help us make the best decisions in the long term. Our tools go beyond simple pro/con lists, as they should. It made me think of the first finance class I ever took, where we discussed decision trees (notice, not to be confused with in decision trees in the ML world) as a way to make structured decisions, considering all possible scenarios. I probably should use tools like these more often. Maybe reading the book will push me in the right direction.
Title says it all. Between the JOBS act a few years ago, the rise of ICOs, and the changes announced by the SEC a few months ago, the barriers to entry in VC have never been lower. Nevertheless, having access to deals is still what sets firms apart.
Short but sweet. This reminded me of Peter Thiel’s quip about wanting to be the last mover in a market, not the first.
This is a critique of an article from The Economist which has been making the rounds. San Francisco and the Valley have hundreds of problems, and yet, this is still the best place to start most venture funded businesses.
A really good refresher on metrics and growth. They don’t say much new, but give a great overview. Don’t miss part two on engagement and retention. Listening to these made me wish I worked on a product where the metrics tracked translated to dollars.
Customers generally drive you to features they have seen elsewhere, not to new original ideas. Focus on the differentiation, and is more likely your company will succeed.
The startup market in San Francisco feels less overheated than it was 2-3 years ago, but investors are already hedging theirs bets. The housing crisis is a real issue, and the fact is that lots of people who would like to be here just can’t. Without people, there’s less talent, and with less talent there are less companies. SF might have killed the goose that laid golden eggs.
Every time one of my friends has asked me what I think of the startup they’re about to join, I’ve said that they should discount the equity as if it were worth $0. The probabilities work out that way, and given that most of them have other offers on the table, its the rational thing to do. Semil’s post discusses the employee side, as well as the early investor’s side - one I had not considered before. If you want to read more on this, Dan Luu’s piece on startup vs. big co tradeoffs is wonderful, pushing the point that all things being equal taking the megacorp offer is a no-brainer for the employee. As someone who wanted to be in startup land and ended up at HugeCo by accident, I mostly agree with him.
Every business decision is at its core an exchange of time for money and vice versa. This is not just the case of a founder picking a VC, or investors picking startups, but also of employees deciding where to work, and average Joe thinking of where to put their savings.
This is definitely targeted at someone, but I can’t figure out who. Over the years I’ve realized that VCs, are not really gatekeepers, and they follow the same patterns of competition as everyone else. This post by Walk is an example of that dynamic. I like the idea of the VC portfolio page as a lagging indicator of what the VC wants to invest in.
The realization that things are the way they are because of path dependence has become more and more prescient in my life lately. This anecdote is a good example of someone side stepping inertia.
As an engineer working many layers away from the actual money-making part of the business, I have noticed I’ve almost fully stopped thinking about how sales work, and how people decide to spend their money. This is a problem, and I’m making an effort to read more about sales, marketing, and business development these days. This was a good start.
As usual, a great post by Sinofsky. Here he argues against the “end of history” idea that you can’t compete against the big platform companies. His piece focuses on Google, Apple, Amazon, Microsoft, and (perhaps strangely) Adobe, tearing apart each company’s business model and finding the opportunities a newcomer could leverage against them. Everyone’s read the book, and executives at these companies know how to defend against one’s own incentives benefitting newcomers, but there are still cracks for startups to get through.
This feels completely outdated by now (three weeks is a long time in the cryptocurrency world!) but I decided to share it anyway. Scaling a company is hard. Scaling a company at the pace that Coinbase is doing it seems impossible. They will hiccup along for a while, but having even a tiny glimpse of how things work on the inside is quite interesting.
I realize that in a way this is an ad for USV, but it is also a good explanation of how the VC business works, and its cyclical nature. I wish Fred had expanded more on how the new paradigm of cryptographic tokens and decentralized applications will change their model. I guess that’s the secret sauce, and we’ll have to wait and see.
I can’t remember where I read (heard?) this argument, but I think the real issue is not so much that there is no upcoming technical revolution, but that the behemots have learned to disrupt themselves. The FAANG companies are pouring resources into areas that undermine their cash cows. Google is investing in one-shot answer voice assistants that can’t show ads. Apple is developing hardware like the Watch and the AirPods, whose goal is to distance us from our iPhones. Whatever can’t be done in-house in a reasonable timeline is solved by acquiring or copying. This hampers bottom up Clay Christensen style disruption for sure, but I am by no means as bearish as Jon Evans is in his piece. Technology never ceases to amaze us, and the paradigms keep changing. More on this topic, by Farhad Manjoo here.
Hearing Benedict Evans and Tim O’Reilly discuss O’Reilly’s new book was good, but a lot of it was a rehash from the previously shared EconTalk episode. About halfway through there’s an interesting discussion on optimization. We’ve created institutions that optimize for certain metrics at all cost. At the micro level, we have companies building machine learning models to drive engagement, but at the macro level we expect companies to maximize shareholder value. This is a human decision, codified into law to maximize welfare - at least in theory. Perhaps trusting the market mechanisms and the individual search for arbitrage opportunities is no longer enough. There might be other trade-offs to consider in how companies, and the market at large, are run. In a way, the market acquires a life of its own, not too differentt from a paperclip maximizer.
Today, unlike in the past 50 years, there isn’t one big tech company at the helm directing the path of technology a-la IBM/Microsoft. Instead, incessant competition between the big four means these companies are always on their toes, and that they are always thinking of how to reinvent themselves. This is a point that Evans has been making a lot lately, and which makes me optimistic about the future of technology. However, these companies are huge, and growing bigger day by day in a way we have not experienced before. The implications of that are not clear. Pardon me the long quote, but it’s too good to pass up:
There probably won’t be a technology that has 10x greater scale than smartphones, as mobile was 10x bigger than PCs and PCs were bigger than mainframes, simply because 5bn people will have smartphones and that’s all the (adult) people. There will be something, though, and though ’something will change, but we don’t know what’ is an unfalsifiable point, so is ‘nothing will change’, and I know which side of that argument I find more likely.
I initially thought this would go in another direction, i.e. money from different VC firms comes with different kinds of strings attached, giving different investment dollars different real values. However, Polovets pleasantly surprised me with a list of how changes in the various lines on your balance sheet have very different effects, and how startups could make better decisions by keeping that in mind.
A short post on management. I like DHH’s and Basecamp’s view of people management. I don’t know how closely they follow what they preach, but they seem to assign value to the right things.
Dealing with the trade offs between profits and growth is one of the toughest problems in business. Suster frames his article as “profits vs. growth,” but when he compares companies under different scenarios he’s really talking about the decision of raising VC money to fuel growth, not about picking a plowback ratio. The argument put forward in the post is that the calculus of “cash in hand today” vs. “debt today plus a promise of more cash tomorrow” is not a big question in high margin businesses with “winner takes most” outcomes.
This one is less about the politics of it, but the actual mechanics. The business of insurance is one of pricing - the better you are at calculating the likelihood of whatever mishaps you are insuring against, the more money you’ll make. Harris explains the various players along the value chain, and discusses how the insurance market is structured.
A couple of years ago, right after my college graduation, I was very close to going the startup route, but ended up joining Apple instead. With hindsight, I can tell that financially the decision is a no-brainer: Cash is cash.
2017 gave Uber a rough start. In an unusual post, Ben argues for a change of leadership, focusing on two questions: ‘Is Uber’s approach to regulation wrong?’ and ‘Is Uber wrong with regards to the specific issue at the center of this controversy?’
Since Snap’s S1 came out a couple of weeks ago, everyone has been discussing whether moats exists or not. The fact that their whole thesis revolves around the disintegration of sustained competitive advantages is fascinating. Evans’ index fund analogy adds an interesting idea to the mix: Facebook, Instagram, and Google must reflect reality and serve billions, while Snapchat will aim to create N things, each worthwhile to M million people, such that N*M becomes significant while not overtaking the role of the index.
Thinking about this on a personal level is interesting. I know what my goals for the year are, to a certain level, but what are things that I should specifically not focus on? After all, focus means “saying no to the hundred other good ideas that there are.”
Very excited for this. Hoping to take advantage of it at some point in the future.
While obviously biased, Fred has good points about the importance of having experienced venture capitalists backing your company. I knew that reserves, and follow-up rounds, were an important aspect of the business, but its always good to understand the mechanics in a deeper way.
A quick read. The idea of moving away from your comfort zone, and perpetually moving towards new things is definitely an appealing one to most entrepreneurs.
The argument is easy, make it cheaper to take risks, and more people will take risks. Incentives.
While I don’t yet know the pressures of being CEO, it is well known that depression, anxiety, and other issues are common among the startup crowd. Gotta hand it to Alex Blumberg for exposing himself as he did in this episode. It takes courage to let others into one’s life as he did.
From an anecdote of a “hard raise,” I think what Wilson makes in this post is an argument against easy money. When companies persevere against hard conditions, they come out stronger, with smarter theses, and better strategies.
Tech Twitter blew up on YC’s face this week. It is rare for tech celebrities like David Heinemeier Hansson, Marco Arment, Thomas Ptacek, Jeff Atwood, and even Maciej Cegłowski to agree on things, but they have all come out with pitchforks after Sam Altman and Paul Graham for their defense of Peter Thiel. Even if Hillary wins, Trump has put strain on the Silicon Valley technorati.
We all fall prey to cargo cults: following our biases and finding patterns where there might be none, mimicking the inessentials and hoping we get the same results. Think hard about why you do things, and trim as necessary.
Real innovation takes time. It is, however, important to remember that cycles are contracting. Innovation itself is accelerating, and that needs to go into our decision making models, too.
Not often do you get a VCs view on another fund. Suster gives us some great insights in his piece.
Lately I have been bringing up Maslow’s hierarchy over and over. I am one of the few lucky people in the world who (like you, probably, since you’re reading this) get to only worry about the very top of this pyramid. Food, shelter, health - all these are non-thoughts for me. My concerns are much less important. In the context of this article, I have been spending many hours considering how to be happier at work, and spend my time to maximize my learning and my future opportunities. Even in the tech bubble that I live in, things can be much worse, and it is sobering to remember that.
As software seeps into our daily lives, everything becomes “tech”. I don’t like that word, it is too broad, and somewhat meaningless. A truck is technology. So is a self-driving truck, but the latter does much more by leveraging software. Every “traditional” company in some capacity uses “tech”, and as time goes on more and more firms depend on software for their daily operations. This is at the root of the reality that McClure describes. AirBnB is considered a “tech” company, but it should be compared against Hilton and Marriott, not against Google and Apple. That’s their actual competition. The hedge is real, and it is only a symptom of the overall trend towards a fully software enabled industry.
The “PR angle” Fred talks about is true of the blogs of VCs, startups, programmers, journalists, and pretty much any other piece of content on the web, even including this curated set of links. We should cast wide nets, and get information from every possible source before making decisions. Remember other people are driven by incentives just as much as ourselves.
Watching this show would not be half as fun if I didn’t interact with the people it mocks on a daily basis. The caricatures are spot on.
Understanding that developing markets are fundamentally different beasts, and not just waiting for copies of what has already been done, is both challenging, and exciting. Makes me wonder what I could do if I went back home.
The legal field is not very technologically enabled. As Casetext’s Jake Heller points out, “We’ve all seen this story. Whether it’s restaurants or encyclopedias, this is going to be replaced by an open knowledge solution.” The question is, which of all these services will win the market (full disclosure, my girlfriend works at Casetext, and I think they are doing great work at making legal data easily available).
The article talks about topics beyond management, but spends a good chunk of time discussing why projects with many moving pieces, many stakeholders, and many contributors are hard to do right. Mostly, because people are hard to understand. If you understand people, you’ll be a better engineer, better designer, and better manager.
An oldie, but goodie. Someone should repeat this analysis and include 2015/2016 data. We’ve probably already crossed the 2x threshold.
This reminded me of the Planet Money episode on CEO pay and how hard it is to actually measure how employees are compensanted.
I have been on the other side of the table of many interviews since I started working at Apple. It is unbelievably hard to gauge the skills of a front-end engineer, even more so when more than half the people involved in the interview process do back-end work day to day.
As is mentioned toward the end, “the most effective monopoly killer is the next monopoly.”
Long, but so worth it. As Paul Ford tweeted, this essay is “a great catalog of Silicon Valley self-deceptions.”
I will steal a comment from Hacker News, because it was that good of an explanation of why this article, as interesting of a read as it is, says nothing: “To say that the technology is best when it’s ripe for replacement could just be flipped around. Technological advances happen when they happen and whatever gets replaced was the best we could do before then.”
A great analogy that prompts us to get started, knowing that, most likely, we’ll fail at first.
Everyone is talking about bots.