Not the most informative piece on O’Reilly’s views, but I read his WTF a couple of years ago and I think I agree with a lot of his points. This is more of a fluff piece on his new fund though. He argues that optimizing for shareholder-return is a decision, and that that decision leads to financial instrument that don’t really benefit society as a whole. Instead he suggests that companies should make decisions based on whatever their values are (ie, local manufacturing vs outsourcing, or support for employee benefits vs gig economy contractor model) and that the market still gets to allocate capital based on those ideas, moving the market away from being a weighing machine for financial returns, and instead a weighing machine for “value.”
Gurley is well known for his thesis around marketplaces. While many of the companies listed on this post are constantly critiqued for their extractive practices, in the end the people who sell their labor or their products on those platforms are better off because those platforms exist. I don’t buy the “level playing field” point, but it surely is more level than it used to be.
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.
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).
Wolfe is one of my favorite Twitter follows. He’s super insightful - seeing the world through the lens of complex sytems can help us understand the networked relationships between people and companies, and this conversation is full of such examples.
To be honest, I had extremely high expectations from this conversation, given that Dixon and Wilson are two of the most forward thinking people in the tech space. The conversation makes interesting parallels between in-game economies and crypto, as well as the 90s boom and the token markets today.
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.
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.
The strategy described here makes a lot more sense when talking about high risk assets like venture and crypto, and like most of these rules of thumb it must be suboptimal, but I’ve been thinking about taking this approach for future investments. Dividing assets in three separate chunks to diversify away risk, and still remain exposed to the original theses, seems like a good idea.
By far, the most interesting aspect of this podcast was around the 1hr mark on why mega-corp moving into your niche business is not necessarily a problem, followed by a fascinating discussion of M&A vs buybacks. I had never thought about M&A in that way, but it is interesting to hear the public markets side of the coin after reading so many positive comments about acquisitions from people like Elad Gil and Marc Andreesen about the early startup stage M&A.
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.
A quick read that might even interest the skeptics. In essence, Gil sees potential in the store of value story, the payments story, the securitization story, and the digital goods story. Strangely he subdivides SoV into investment and offshore, but I see those two as the same. I’m personally most excited in securitization/smart contracts, which he calls money wrapped in code.
At the early stage, startup valuations are mostly about signaling. If you’ve raised N million dollars then you can tell people that you were able to do so. If you’ve invested in a company valued at N you’re able to tell your LPs that you got great terms on that company’s last round. If you’re an employee and your company just raised N you can tell that to the recruiter who’s trying to poach you. But in the end, for any number N, most companies that raise N end up dying. We should focus on it less. N is much more about market conditions than it is about a particular startup’s potential.
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.
My friend Leon got me hooked on O’Shaughnessy’s podcast. This one is full of interesting ideas about how to value online assets such as accounts on Airbnb or Instagram, and how one could potentially set up an incentive system to transfer the cashflows of these accounts without corrupting the quality of the underlying service being provided by the creator. See also the episode with Chris Dixon on the future of tech.
A great response to Sam Altman’s Post. I don’t buy that SF is not an open minded place.
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.
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.