I wrote the first version of this months ago, but Larry (@lg) said to “put it on ice, baby.” Then, of course, Larry emailed me TODAY, while I’m traveling, to post it. So I cleaned it up a bit, and filing this one from the Denver airport. All for Larry and the team at Envoy.
This will be a short one. Years ago, while working at another startup, one of the engineers mentioned how they wanted to resume discussions with this one engineer named @lg. I remembered his twitter handle and recall running into him a few times (randomly) with a mutual friend. The last time I saw him, he was talking about leaving Twitter and going to Croatia or something Balkan like that.
Fast-forward to the Fall of 2013, a close friend of mine was helping Larry get the company off the ground. At first, I didn’t think to dig deeper, but that was foolish. I ran into my friend at an event in SF and casually remarked that I should invest, sort of as a joke, and he responded with “Actually, that’s going down right now.”
Whoa. OK. I got the intro on Thursday and round was closing on Monday. The product, deck, and business fundamentals were great for an early-stage company, so I was inclined to just go along for the ride. But @lg wanted to meet f2f. I couldn’t meet that weekend for some reason (I don’t live in SF proper), so I drove up to SF early Monday morning before work just to see @lg face to face and get on the same page. It was a great discussion and we synced up on mobile opportunities and challenges very well.
Outside of that roundabout story of reconnecting with @lg, there’s not much to share about the product, Envoy, other than if you’re in the Bay Area and visit other technology companies, you’ve probably already used Envoy’s software. Also, I would point to their product. You will see for yourself just how elegant and dead-simple this solution is, but also how deep the opportunities are as businesses and individuals adopt the platform (which they’re already doing), and as sensor advancements in the phones allow for beacons and other goodies.
Envoy is a terrific, simple, business-minded product built for an age of low energy Bluetooth, context-aware beacons, and security protocols for building entry. It is also a business, and now the goal is to nail down the business model and figure out how to expand it, because I can’t see why businesses wouldn’t want to use this software. All of this has been done, it’s worth noting, with just 3-4 people with very little funding or fanfare. That, in and of itself, is remarkable.
I’m working tonight on something where I had to catch up on a video clip. I watched Arrington’s interview of Uber’s CEO which kicked off last week’s TechCrunch conference. I didn’t attend that day so missed the talk and posts around it. The entire discussion is excellent and shows many facets of Kalanick that are interesting (to me). But, I wanted to focus on the first five minutes of the talk. You can watch it here [video link].
If you’re a startup CEO or early-stage investor, I’d recommend watching these first five minutes, which expose a nuanced entrepreneurial psychology. In the case of Kalanick, I’d summarize it as follows — he has a certain public image that some don’t like (I don’t know the guy at all), but I do recall an interview he gave over three years ago where he talked about some of his previous companies and those associated struggles. Listening to Arrington, my memory was triggered, so I listened to this long interview [video link] while making dinner tonight. And, it was fascinating to hear Kalanick talk about himself and Uber way back in early 2011. Here’s what I took away from both discussions:
Uber is Kalanick’s 4th Company. He started an SAT prep company, then Scour, then Red Swoosh, and then Uber. He was a serial entrepreneur before starting Uber. I’d bet many folks in tech didn’t know that. I knew about Red Swoosh, but not the others. Interestingly, all but the SAT company were based on P2P relationships and technologies. One has to wonder how deep his intuition around P2P networks was before he started Uber.
An Edgy Chip On The Shoulder: Many folks have chips on their shoulders. Whatever the psychology, folks have to manage it in order to carry on. Kalanick’s chips come from having a failed startup which was sued, and then another where he didn’t pay himself for four years and was living in his parent’s house. (By the way, I’m taking this from the interview in 2011 and this past week.) I imagine it’s hard not to be so aggressive and competitive after having such experiences, and people respond differently to such pressures.
The Uber Killer Is Stress. Speaking of pressure, when Arrington asked Kalanick what could kill Uber, the CEO mentioned “Stress.” The company just hired David Plouffe who orchestrated one of the greatest political campaign in politics, and now has work cut out for him as he grooms a company and CEO to engage in global battles with car industries, city governments, organized labor, upstart companies, and even nations (laws in Germany, fierce competition in China). When I looked at the interview from 2011, I noticed Kalanick’s hair was jet black; today, he has some prominent grey streaks, just like a weathered politician in the klieg lights.
Benchmark’s Series A Call Is The Stuff Of Legends. In 2011, Kalanick retells how, after pitching the entire Benchmark partnership (his only meeting with them), the team asked him to wait and had one of their colleagues sit with him so he couldn’t leave. They deliberated and decided on the spot, and then invited Kalanick back in to do the deal. At the time, Uber was in eight (8) cities! Moreover, in this 2011 interview, Kalanick discusses other things Uber can do — a slew of “on-demand” services (his words) like food, jets, and whatever else people order. Even in this interview, Kalanick is thinking about Uber on a scale similar to Google.
The Traveling Salesman Problem In Computer Science. Kalanick refers to this toward the end of the 2011 interview, essentially explaining a routing optimization problem that has 15 or more nodes getting so complex, even computers couldn’t crack the code. In those types of discussions, you realize Kalanick is not kidding around when talking about math (1580 SAT) and his knowledge of how computers work (CS degree). He is a businessman and salesman on the outside, but within, something else lurks. You can start to see how this “Traveling Salesman” problem may apply itself as Uber experiments with services like UberRush, Corner Store, UberPool, and the extension of its API across the greatest technology market (mobile platforms) we have ever seen.
Most of all this is known already and has been covered fairly well. But, the dots connected for me in a different way this evening. Kalanick and Uber are already quite a powerful force, but when one digs deeper into the elegant simplicity of Uber’s model and the motivational drive of its CEO, you begin to wonder — just how big can this get? What can stop it? What other CEO is psychologically tuned this way and adept in so many interdisciplinary dimensions?
Rumors are that on Monday, Microsoft will announce the $2.5Bn acquisition of Mojang, the maker of Minecraft. This is a big, big deal and was sort of overshadowed by all the Apple news and tech media events last week. Let’s quickly unpack why this move is in and of itself a big deal, as well as a potential harbinger of what to expect from Microsoft in the near future:
First, some light but required background reading. I would guess many of you reading this either know Minecraft well or have at least heard of it. Either way, I’d strongly recommend reading this essay on Minecraft by Robin Sloan, it is just excellent [click here]. Additionally, a short post by John Lilly, who knows a thing or two about how folks interact with the web, summarizes some of the challenges and opportunities in this move.l
Second, let’s hope it remains independent as long as possible. In more and more M&A, absorbed companies are sometimes remaining independent a bit longer. Of course, those companies now have parents and eventually integrate in some way. With Minecraft, such a treasure of creativity and organic use, let us hope Microsoft views this first as an investment and empowers Mojang to keep doing what it’s doing.
Third, Minecraft is a kaleidoscopic network. By now, we all know about many of the users building servers, and how folks across the web and mobile are addicted to creating and playing in Minecraft worlds. What we all know a little less about is how those networks fracture a bit into folks who post and watch videos the game (like Twitch), folks who chat with others in vertical networks like Amino.
Fourth, I wonder why Facebook wouldn’t win this deal or compete for it. Maybe they did and felt the price was too high? I don’t know, but Minecraft is both a social network (like Facebook) and a playground for future developers (which Facebook values greatly). With Facebook stock soaring (it could hit $300Bn market cap by the time we have our next president in office), it would seem to be a good time for Zuck to absorb Mojang and be highest bidder.
Fifth, an amazing time for game absorption at The Big Five tech co’s. Twitch is now part of Amazon, Oculus is now at Facebook, and soon Minecraft will be a part of Microsoft. What will Apple and Google do, if anything at all? (Nintendo???)
And sixth, the big takeaway — get ready for Microsoft to get acquisitive. Many signals point to a new Microsoft that’s on the block, blessed with a new CEO, a new mandate, hoards of cash, forthcoming layoffs, and the appetite to acquire more and more small teams in the Bay Area along many fault lines (mobile, infrastructure, and new platforms), and potentially some bigger M&A coming down the pike. VCs are hoping for this, too, as having another big acquirer stalking portfolios is never a bad thing. I believe Nadella has a big mandate and we can therefore expect him to make some big moves.
On the eve of Tuesday’s Apple announcement, I wanted to dial the clock back a few years and make a simple yet powerful statement about the state of mobile platforms today.
Over three years ago, one of the world’s most eloquent investors penned what is, in my opinion, the finest essay on the root nature of the Android mobile operating system. If you have not yet read it, please do; if you have, it’s worth re-reading again. The key takeaway is that Android is defensive in nature, that it is not designed to capture the rents from the ecosystem it enables. The essay labels Android as a “freight train,” a traditional, big, lumbering locomotive that will pick up steam, grow in heft, and will be difficult to stop.
Now, three years later, on the eve of iPhone 6 and its corresponding iOS 8, we can revisit the freight train and see just how far apart the mobile operating systems are from each other. Put another way, if Android is a freight train, then the iPhone (and iOS) is a high-speed bullet train, powered by magnetic levitation, moving at rapid speeds and on a path to make up distance in a much-touted but ultimately useless metric (total market share).
Why is iPhone 6 with the latest iOS SDKs a high-speed bullet train? Consider the iPhone and iOS as a massive network effect which can enable the following: iBeacon rollouts; new APIs for CloudKit, HomeKit, HealthKit (via M7), and PhotoKit; reintroduction of NFC (for payments); your usual updates to Mac OS and iPad…oh…and a wristwatch computer that may shift the mobile computing and design conversation yet again.
This was yesterday’s reality. Tomorrow’s reality is that iOS 8 with the iPhone 6 and possibly a wrist-based computer with display will create a whole new set of experiences and computing paradigms for the best developers in the world to play with. For instance, rumors are flying around about how iWatch could act as a method for two-factor authorization for mobile payments. Who knows what will happen within iOS and all corresponding devices in this ecosystem? It will take years to figure out, but iOS has the exact right base of users to help Apple and the developers get through the initial stages, to improve the hardware and software, explore new behaviors through new streamlined APIs for a variety of environments and situations, and most importantly, to invent new mobile consumer experiences that couldn’t exist in any other technology ecosystem at scale…period.
Like an old SAT question, when two trains are traveling away from each other at different speeds, it’s always a critical test to try to calculate their distance apart — especially when one is a high-speed bullet and the other is a freight train.
Let’s start with the bad news first: Twitter, no matter what you do to it, will no longer ever be a hyper-growth product. That time has passed. Yes, I know public investors expect this of you, and I know that’s what all other social network companies strive for, but it won’t happen. Twitter has hit a local maxima, and that’s nothing to be ashamed of — in fact, Twitter’s mainstream success to this point is quite incredible for such a geeky, complicated, niche product. But now, messing with the feed, degrading the design, and all those other copycat changes will not solve this core growth problem.
But, this is only bad news because Twitter is responding to the wants of the outside world. It is listening to others instead of itself. For success, all the answers are inside. Instead, Twitter should double-down on what does work and chart its own path.
This is the good news: Twitter’s hyper-addicted daily active users comprise of some of the most valuable minds and wallets on the planet today. Instead of trying to degrade their experience in favor of growth (which is, in my opinion, not attainable), why not turn that huge, active, valuable base of Twitter addicts into money? Right now, millions of smart Twitter users take actions on feeds like RTs and favorites — why not “Buy” or “Share” to other channels? Why not show me ads that are product endorsements from credible Twitter users? Why not open the API to developers again and have them experiment with new ways to monetize and grow? Why not make Tweetstorms part of the product and get more journalists and bloggers to write on the platform instead of linking (as we know clicks are down for many)?
I write this open letter out of concern and love. For over two years, I have used Twitter without touching native products. Twitter is the service I use the most, and I never go to www.twitter.com or use Twitter for iPhone. I understand I’m a power user, so this doesn’t apply to all, but I do believe it gives me the platform to share my views on the likelihood of success of Twitter in its current form. Twitter, you are now public, embedded into the fabric of society, both complex and simple at the same time. Now is the time to ignore the outsiders, and look within; now is the time to harvest your loyal user base to take the product to the next level. I’m happy to help any way I can.
Streaming media is the future, right? Broadcast is dead, right? Well, streaming dominates many forms today, and I don’t see that trend stopping. Streaming has many benefits. We don’t have to download media to a client. We can just search, select, and ingest. For audio, the data rates are quite cheap. By streaming from a server to a distributed base offers many benefits — the ability to leverage networks, personalize content to a recipient, and so forth.
Yet, there’s something I miss deeply about broadcast media. I haven’t had Cable TV anymore. Netflix and YouTube (and Twitter, as a filter) empower me to watch what I want, when I want. When Swell was around, I consumed media (streamed) at the tune of about 25 hours per week. No more traditional, terrestrial radio.
In theory, it all sounds great and more efficient, but I noticed something was missing: The feeling of being connected to my local surroundings. When I have local sports on TV or the radio in the background, moving around the house, I feel like I live in the Bay Area. I noticed this when I travel back to NYC for family events, I always leave the car radio on 880 AM, which if you know, is the same local news nonstop. It makes me feel connected to the area for a brief moment of time. Now, I realize that other personalized tools have come in to help us feel more connected, such as Twitter and Facebook, which can surface information in real time, but this doesn’t work in the car, and when at home, there’s no ambient service which can do this in the background.
So, with Twitter, I do feel more connected to the people that are relevant to me, and while I like that decentralized approach on many levels, there’s something about the non-personalized, centralized signature of old-style broadcast media as it pertains to location. It helps me connect to my physical surroundings, and I know that many people around me are also tuning in at the same time. I’d be curious if you ever felt the same?
I’m thinking about “new mobile commerce” all the time lately. If you are building something in this space, or have used products you love, please do reach out to me. While thinking about mobile commerce isn’t anything new or novel for most people, it is for me, and I’d like to continue to invest in the space. Recently, I looked back at how Haystack II is shaping up, and I noticed a little trend — consumer mobile apps centered around commerce. More specifically, I am interested in:
(1) Mobile commerce apps which leverage a proprietary data set: In this case, a company has built and/or has access to data which empowers them to empower consumers to save time, money, or both. Here, mobile apps can present users with a more intuitive interfaces in which to signal intent, make decisions, and complete transactions. I started thinking about this as a sub-theme after investing in FLYR, which has built a proprietary data set around predictive airfares in order to sell an insurance product for people to pay a fee to lock-in airfares. (FLYR as an API can also work on the web in a B2B context, but on mobile, it has the potential to unlock a new type of consumer behavior on mobile.)
(2) Mobile commerce apps which leverage mobile sensors: What kind of commerce is only possible using the camera and/or location sensor, etc.? When I heard about MTailor and went through the first few screens of the onboarding flow, I knew it was something different. MTailor uses the phone’s front-facing camera to record video of the consumer and then turn that imagery into fit measurements for clothing — today, that is for men’s dress shirts, and it works great. I’m guessing there are some commerce apps which use the camera well already, so please let me know what you like or reach out to me.
(3) Mobile commerce apps which collect consumer demand and fulfill that demand via offline logistics: This is a theme I’ve written about a lot — the phone is incredible at aggregating demand, but then startups need to find clever (usually offline) ways to fulfill that demand. This is what Uber, Instacart, Postmates, and everyone in the category do well. More recently, I was fortunate to be introduced to the folks behind BRANDiD, which is about to launch mobile — essentially, BRANDiD is a service which drop-ships curated clothes for men to customers, and then physically picks up those items which are not desired.
(4) Mobile commerce apps hooked into P2P network effects: I had to change my thinking here recently. Initially, I thought that marketplace apps need both Android and iOS to get over the liquidity problem. Earlier, I was lucky to invest in Cambly. More recently, I found a company which is iPhone only, P2P commerce between moms who want to buy and sell kids-related items via an Instagram-like experience (TotSpot). P2P requires not only scale but huge levels of transactions to make it work for a company, but companies like Poshmark, Threadflip, and others have validated the space can grow like a weed on mobile.
Yes, there are other more traditional mobile commerce and shopping apps. I am not personally interested in those. So, my questions to you are: (1) Am I missing any other types of mobile commerce angles and (2) What mobile commerce apps do you love and why? And, of course, if you’re building in this space, please contact me.
There is a certain excitement, a certain uptick in pace, in the Fall around these parts. This year, I feel like I’ve seen enough interesting early-stage founders and companies (so much of it falls into patterns) that I sort of have a picture of what we may be talking about as September and the final months of 2014 unfold. Keep in mind that this list is about the Series A level, when bigger institutions get involved — and is by no means an indication of overall success for anyone involved, investors included. (Also, of course, we will all be chattering about Apple and the other big tech giants, as a given.)
In no particular order, here’s what seems to be entering either the echo chamber and/or mainstream conversation:
Parking: Yes, I’m obsessed with parking startups. No good reason other than I can’t wait to see the #Parkageddon hashtag spread.
Apps That Support On-Demand Economy Companies: See a company like Checkr, which helps the Ubers of the world perform better background checks and processing of labor. These startups and companies will likely need a whole set of services and have likely built their own, as well.
Apps That Support On-Demand Economy Workers: This is a category where I’m seeing tons of startups. Like Mailbox clones designed for “the enterprise,” I’ve passed, but I’m just waiting for one to have a clever hack around distribution — most likely to be the preferred vendor of a company like Instacart or Postmates, etc. There’s an opportunity for a new Intuit for 1099′ers out there, but it has to grow like a weed.
Block Chain Apps: There will be a few companies that get bigger institutional funding which leverage the block chain to handle business processes, most notably the creation, enforcement, and settlement of contracts. Yes, some of these can be mediated in Bitcoin, but it’s not required to do so.
Mobile Commerce: This is the area I’m most excited about, even more than parking! If you’re working in this space or have an app you love, please tell me. I like mobile commerce experiences that either leverage a phone sensor; or have a clever logistics angle; or leverage a proprietary data set; or even those that hold inventory in inventive ways. Of course, I’ll rarely turn down any mobile marketplace, and my old fears about mobile platform fragmentation crippling liquidity is now gone. iPhones, all the way.
Consumer-Grade Artificial Intelligence: This totally snuck up on me and I will admit I missed it, even though it was right under my nose. For the first time, I saw an app/service that uses a combination of AI and ML to do a job better than a human and solve multiple problems in the process. Then I started to think — if it can do it for this one task, why not other mundane tasks? I see no reason why not.
Interactive iPhone Notifications: No real surprise here. Borrowing from Android, iOS developers now have the power to allow users to take action on an item directly from push. Let’s go back to Uber. The app knows you’re about to leave work (you’re a pattern). The app pushes to you — “Call an Uber?” You gently slide over the push and tap “Yes.” Never go into the app itself. That is huge, and apps like Wut, Yo, and others, as well as the push notification ESP equivalents like Kahuna and AppBoy, are well positioned to secure their place in this new landscape.
Welcome to the 11th Sunday Conversation — on a Monday. While I want to name these videos “Sunday Conversation,” I came up against an opponent — the NFL ;-) Anyway, since I do these only once in a while now, I’ll likely just post them at different times. I hope you understand. In Round 4 with Keith, we revisit Bitcoin (again), we talk about the rest of the Khosla team, YC’s latest Demo Day, the motivation founders need, chatter about parking startups, and much more. Note that full audio of the conversation is at the bottom, via SoundCloud. Also, Keith and I will likely do one more (maybe in November?) and then starting in 2015, we will have a new guest for the year. That person is TBD, but the short list is awesome. Keith is a tough act to follow, no doubt. ♦
Part I, Revisiting Bitcoin And Stellar (7:23). I give Keith an opportunity (again) to revisit his statements on Bitcoin both as a currency and as a protocol, and he discusses a few investments in the space, primarily leveraging the block chain. He also discusses the relationship between Stripe and Stellar, which is worth watching.
Part II, Identifying Potentially Great Founders (8:28). Rabois goes in-depth about what intangibles he looks for in founders. This is notable because Keith is one of the few investors who will just invest in a team before any product. In this chat, he talks about how to leverage asymmetric information about people, how picking founders can be a bit like scouting athletes, and why it’s important to have a differentiated model in investing.
Part III, The Rest Of Khosla Ventures (3:28). It dawned on me that aside from Keith and a few conversations with Vinod, I didn’t really know about the rest of KV. Keith gives a brief overview, describing the firm as “irreverant, broad,” and talks about the portfolio in alternative energy, sustainability, and food/ag tech.
Part IV, “Peak Sports” Or Bubble? (6:15). Rabois explains why real-time sports dominates at aggregating consumer audiences and changing behavior given the passion (or addiction) society places on sports.
Part V, Thoughts On Y Combinator (2:51). Rabois shares his views on the latest YC Demo Day. (I had written earlier that YC is kind of a like a growing startup.)
Part VI, (Over) Optimizing In Fundraising (2:16). We discuss the pros and cons of split caps in seed rounds, and why changes in the macro environment don’t matter with respect to startups and early-stage investing.
Part VII, Parking Startups Frenzy (3:04). I’m obsessed with this lately. It’s a thing people hate, it’s expensive and inefficient, destructive. We look into why it’s happening now.
A special thanks to the team at Scaffold Labs for sponsoring the Sunday Conversation series on Haywire. Scaffold Labs is a boutique technology advisory firm based in Silicon Valley which designs and builds scientific and predictable talent acquisition programs that helps technology startups hire great people. Scaffold Labs has previously partnered with companies such as Cloudera, Appirio, and Nimble Storage, among others. For more information, please visit www.scaffoldlabs.com
Here’s a brief thought that’s come up in conversation quite a bit this week, about where consumer attention is:
In venture capital, the one of the biggest categories is consumer, because consumer-facing products and services at scale present the greatest possible market. This is, in part, what drives valuations for early-stage hot consumer deals up — the upside always has huge potential. On the web, consumer products and services could grow and scale based on the network effects of the open web itself.
But, today, we live in a different world — a mobile world. All consumer attention is on mobile, but on mobile, growth and scale are confined to a few “growth pipes” which present their own issues. For instance, gaming is an expensive category to compete in, photo and location apps are usually chased by investors after the fact, messaging apps create network effects but those options have largely been set and regionalized, and then there’s the hottest category out there today –> mobile on-demand services.
I’ve written about mobile on-demand services often here. We all get the picture. In a world where mobile scale is near impossible, better to aggregate consumer demand on the phone, but fulfill that demand through offline logistical prowess. Hence, we have Uber, Instacart, and many others. But, consumer web products could scale with much less friction. In the world of mobile on-demand services, there is significant friction — expanding geographically, hiring and training reliable labor, and so much more. As the coefficient of friction rises, so does the risk. This dissuades some investors from jumping into the space, but it also highlights the importance (or advantage) of having investors with real operational experience in geographical expansion, logistics, delivery models, and more.
There is an inherent friction to this new consumer mobile opportunity. With mobile growth elusive, entrepreneurs have shifted to transactional businesses, and with each transaction comes friction. This is both a challenge and opportunity — a challenge to those founders and investors who are concerned about friction (which is a real concern in venture investments) and an opportunity for those who can identify the categories (and the people behind them) who can overcome any coefficient of friction.