Haywire Service Improvements, 2014 Edition

Every summer, I spend some time and resources to revamp my blog. Since my first post on Uber almost 25 months ago (it’s worth re-reading that one), I have posted a lot here, both analysis, videos, and stories behind the small investments I make. This summer, I’ve added a few things to Haywire, with the hopes that people who visit here and read the posts (and comments) will enjoy a little more. You’ll see it’s not fancy or slick. In fact, some of the new functionality makes the site feel a bit slower, but hopefully that’s Ok. Here’s what’s new or (hopefully) improved:

  • MailChimp as my email service provider. I had kind of neglected email as a channel for a long time, and that was my fault. Hopefully the emails for those who elect to subscribe will look nicer, and now I get better analytics. I’m excited to learn more about MailChimp. If any of you have thoughts or want to share some wisdom, my ears are open.
  • New “tiles” for Haystack investments. Check these out. They work on mobile, too. We had tried to make them cards (of course) that flip over for more information, but that was too much work, so you get these unidimensional cards instead. You’re welcome. (I am also woefully behind on writing up the stories behind my investments, but I’ve got a bunch of drafts saved up and am committed to working through them. Stay tuned.
  • A redo for the right rail. We included a “Popular Posts” on the right rail based on traffic, improved the search, and tightening some other stuff.
  • A place to post, discuss, and chat. I get a lot of cold emails. I want to answer them, and I’ve been trying to find a better way. So, I’m going to try this — by following this link, you’ll see a “Discussions” page on Haywire, where anyone can post a question (or link). I will be notified email, I’ll review, and I can publish it — and offer a public answer that lives on the blog. Or other people can answer. Who knows. Let’s see how it works. And, I’d truly appreciate any feedback you have on this.

Banh Mi Equity

August in the Valley always turns out to be an introspective month for me. Things slow down, people leave town, and my wife’s work is also a bit slower before kids come back to campus. This year is no different, as I’m in another transition. I have some fun and also much-needed personal items to tend to this month, and I will also take the time to reflect, recharge, and rediscover what makes me most passionate about work. Three years ago this week, I got my real start in the startup world in the Bay Area. People often just assume it all came together neatly — they see that I wrote for TechCrunch or tweet a lot and assume it was just always like that, or that I know what I’m talking about. Not true. If anything, I’m learning it all as I go along, trying to play catch up with everyone around me.

Three years ago this week, my friend Joel made an off-hand remark that I should just join his company — with the caveat that he couldn’t pay me. Jeez, Joel, thanks for the offer, buddy! Yet, at that time, after nearly 11 months of trying to crack into startups, I thought about the offer and realized — I don’t have a better choice. I emailed Joel. I think he was surprised. He replied, paraphrased: “Well, I can’t pay you, but you’ll get plenty of equity and I’ll buy you Banh Mi sandwiches every day you’re here.” Sold! Since then, Rexly somehow was acquired by Live Nation Labs, I went to Votizen (which wasn’t a great fit) and that was acquired by Causes, and Causes was just acquired by Brigade (these are all Sean Parker companies), and then I was lucky to get my first break in VC and joined Javelin Venture Partners for six months as an executive-in-residence where I began to focus on mobile technology and the iOS platform, after which I started working as a formal consultant for a small handful of companies that were designing and launching apps, and then eventually increased my involvement with Swell, where I became an employee until recently. Along the way, I was fortunate to work as a formal consultant to a variety of venture capital firms (and still do) — like General Catalyst, Trinity Ventures, Kleiner Perkins, GGV Capital, DFJ, and Bullpen Capital, among others — and to have the support of everyone I worked with to explore my interests in mobile and investing simultaneously — and to friends and mentors who helped me channel my energy into the creation of a new fund.

All the while, I have met and worked with great people whom I call friends and mentors. Just like startups fight like hell to become “ramen profitable,” looking back on my three short years in the technology startup vortex that is the San Francisco Bay Area, you could say I worked for “Banh Mi equity.” Most of the equity listed above and the subsequent events have been largely ceremonial. It’s been a fun ride to be on, surrounded with the smartest people in the world. And, here I am again, in the dead heat of August, late twilights that stretch longer, at the same desk, typing away, trying to reset, and wondering what the next Banh Mi equity package will look like. I’m in a good spot, but there’s a long way to go, and excited to let life unfold and see what presents itself.

Think Of YC As A Growing Startup

Y Combinator has come up often in discussions of late, and whenever a topic repeatedly comes up in discussions, it’s time to attempt to structure those thoughts. Let me say upfront that while I don’t agree with everything YC does or shares on their blogs (and have written publicly about that), they are, in a way, somewhat underrated in their impact. Two quick anecdotes: I was recently at a dinner where I was seated next to a founder who has been through YC twice. “Why go back again?” I asked. His answer, paraphrased: “I like the social peer pressure of being in a group, I like the pressure that three months places on a team, and I love the network.” Two, I talked to a friend in the current batch who said YC has essentially empowered the technical to master business, and that inspires him to do the same. Pretty hard to argue with the power in those statements.

All this got me to thinking, YC is not just a “startup accelerator” or whatever it is lumped in to. From my vantage point (on the outside), it is an organization which continues to grow in influence and still has so much more room to grow. This isn’t discussed often in a structured way because the chatter focuses aroudn the brand and personalities, as well as the investors who jockey for positioning next to the graduating classes. Consider the following morsels:

  • Growing Headcount: People muse a16z is getting bigger. Look at the team page for YC. Lots more people to manage the growing network. Many founders I’ve talked to like being matched with an alumni mentor but it can be hit or miss (in their view, not mine) who they’re assigned to as a partner.
  • Extending Brand Geographically: “Startup School” as a recruitment tool has extended to New York and Europe. Why not other places, right? It’s just a matter of time. I’ve argued before that we could see YC not just in SF proper, but perhaps in NYC, Berlin, and even China as their brand grows and as they continue to perfect the model of finding talent and building products quickly.
  • Moving Up-Market: It feels like more and more companies are entering YC already with a product that has some traction and/or revenue. Yes, there are people who still get in without an idea, but plenty of companies are quite further along, which is, in part, a reflection of our times, where everyone has a company (or wants to found one), and what ends up separating the visionaries from the doers is evidence of real adoption, even if small.
  • Alumni Network As Investors: As the YC alumni base grows in size and power, those individuals will become angel investors. Of course, many already have. They are likely some of the first choices for entrepreneurs in YC, and why not? They have the most recent experience and can help guide them up to and beyond demo day. This puts competition on the early-stage players who are not in the alumni network. All’s fair in love and war! Further more, there are pre-demo days leading up to the main demo day, which means the pressure to access has increased. And, YC companies, in my view, are getting smarter each batch about the opportunities and risks associated with talking to larger institutions too early in their life cycles. This means the larger funds may have to change their approach unless they want to invest quickly.
  • Shifting Terms: Many assume YC charges 6-7% for each company, but as they move up-market and companies mature, and as the startup ecosystem continues to become more transparent (even for YC!), they do now negotiate on equity percentage.
  • Recruiting Teams To Apply: As the YC partnership extends, like with a16z’s, the partners can hear about more companies which have matured slightly and invite them to apply to YC, which is about the same thing as inviting them to pitch the partnership. In this way, they’re extending into the sales realm of traditional VC, which is super-interesting and quite smart. (A follower on Twitter commented that #YCHacks also fit into this theme, as the winning teams get an interview with YC.)

Again, YC is a force — no doubt. But, I also think its impact on individuals and companies is underrated (despite all the surface-level hype), and I think they’re planting all different kinds of seeds to extend their power and reach. As the traditional venture capital model continues to experience pressure from myriad angles (private equity, hedge funds, lowering costs of startups, cheaper financial instruments, companies started outside Silicon Valley, crowdfunding platforms like AngelList and CircleUp, and so many other factors), the impressive, expansive growth of YC should be added to the mix. YC is like a growing startup, too — it’s just under 10 years old, and not done growing and evolving. As the faces who lead it change, and as it remains nimble to change as an institution, it enjoys many advantages — just like startups do against incumbents.

Another Angle On The Shifting Pro-Rata Debate

Over the past few days, you may have seen a larger number of people (mostly investors) tweeting about a bizarre term: “pro-rata.” This term is a venture investing inside baseball term, but it is actually quite important for (future) founders to think about. To simplify the term, a pro-rata right is essentially a provision in a venture investment that gives an investor the option to invest more money, on a prorated basis, to maintain their ownership percentage as the valuation of a good company increases over time. This protects the earlier investors from dilution as the valuation of the company rises, and it also is a critical instrument for those earlier investors to “double-down” and put their money to work into the companies that have the best chance to return their fund.

I am writing this as someone who is learning about all this stuff as I write it — not an expert. So take the following with a grain of salt:

Larger institutions in the business of venture usually don’t invest unless they have pro-rata rights. It’s a condition of the deal, and those funds have business models which depend on at least one or two companies within a vintage which end up being the “winners” and end up carrying the fund. The larger players have been in business for a while, so they’ve had enough time to understand it; the newer entrants in the seed ecosystem mostly have not, and it seems like only now that people are understanding that, no matter at what stage, pro-rata rights are critical for investors.

Ah, but there are few assumptions around these that we must reexamine, and this is where it gets interesting given the climate:

  1. Many angels, early-stage, and smaller check-sized investors do not get pro-rata rights. In my limited experience, I never ask for them, and if I did, I probably wouldn’t get them at all.
  2. Now, some investors who have a big enough checkbook, a big enough fund, or a big enough brand name or expertise can lay down that having pro-rata rights is a condition of their involvement in a deal. In those cases, the founder has to chose whether or not that condition is worth it. For example, I was involved in a great seed deal where a well-known investor wanted to come (and he has very relevant experience in the space). His condition was to only participate with pro-rata, as an edict from the fund he works for. No one else got pro-rata. This is a critical point — a founder does not, in no way, have to allow these investors to have pro-rata.
  3. Ok, well, so now that there’s an excess supply of angel and microVC capital in the system, and because many of the people writing these checks do have a business model (i.e. returning a fund based on fund economics), people are asking for their pro-rata rights and realizing just how critical they are for their fund’s performance metrics and, in some cases, survival.
  4. Yet, what’s also interesting is that founders are now in the driver’s seat with respect to pro-rata. Consider a great seed team which raises a bit of funding, and as a condition, they do not give out pro-rata. Assuming they aren’t targeting someone specific, they could just use their leverage to set the ground rules that no pro-rata rights are given. Why not, right?

And, this is where it gets interesting for founders, especially for the ones who survive and their companies mature — they may be in a position in the future to dictate whether or not pro-rata rights are even dished out to begin with. This is the cold view interpretation, as I’m sure many founders will want to investors they’re close to and like to have them, but founders also can use them as a stick to fend off bad behavior. In the future, I believe things will trend this way. The people who actually get pro-rata rights will be the ones that either have close relationships with founders, those that bring extremely deep, relevant experience to the venture, or those who have a brand and patina that send a signal to the market. If I’m right that founders will hold back on this moving forward, this then alters the model of the early-stage funds and puts more pressure on them to have one or more of the characteristics I cited earlier. Otherwise, the money is just money.

As a frame of reference, I set out in my investing activity to assume I won’t have pro-rata because I believe that it has to be earned, over time. It’s less of a pro-rata right, but more of a pro-rata privilege. This is just my point of view, informed only by a few years…I’d love to hear what you think in the comments below.

New VC Interviews @ StrictlyVC

[Update: Links to all my StrictlyVC Q&A's and two columns are now below. Enjoy!]

When TechCrunch ended my weekly column after over three years of writing there, I got many nice messages from folks and friends who are reporters, bloggers, and in the media at large. That turn of events triggered some potential opportunities, but I found thereafter that I wanted to take a break from writing something for a large audience on a weekly basis while working at a startup and working on a variety of investment-related activities. One friend who did email me, Connie from StrictlyVC, smartly notified me that she’d be trying to take an unplugged family trip in August and, if I was up for it, I could help write her daily newsletter for those two weeks — a daily newsletter which is read by many founders and all investors in the startup technology ecosystem. (Almost a year ago, Connie was kind enough to profile me for her newsletter. You can click here to read that short interview, and I’d recommend subscribing to her newsletter, too.)

Well, I took her up on her offer, so for the first two full weeks of August, I will be the guest columnist for StrictlyVC! And, we cooked up a great lineup. For those 10 business days, I will write two columns each of the Fridays about what I’m seeing in the VC landscape, and for the other eight days, I’ve completed detailed Q&As with some of my friends who are in industry. Specifically, you can look forward to learning more about:

I hope you all sign up, tune in, and interact. I’ve read most of the interviews now, Connie will edit them, and I can guarantee they’ll be worth your time.

A Prescient Table Of Contents

In May 2004, Paul Graham published “Hackers And Painters,” arguably one of the most important modern books focused on the intersection of technology and entrepreneurship. I was catching up on reading tonight and saw a post which referenced some passages from the book. I clicked through and was curious, “How old is the book?” Well, it’s just over 10 years old. A decade ago. I cut and pasted the Table of Contents from the book below — the title of each chapter and most of the subtitles are truly prescient, now with a decade of hindsight. I do not agree with 20% of what Graham blogs and tweets about today, but it is hard to argue he didn’t perfectly nail this thesis. Reading through each title, it’s remarkable to see the level of foresight he held, as if he saw the next decade unfolding in his mind.

A few nights ago, I was at a dinner and happened to sit next to a founder who had gone through YC twice. We talked a lot about entrepreneurship, the program, his experiences, and much more. This guest realized I had a lot of thoughts about the topic, so he asked me, “Well, what do you think motivates PG?” My answer: “I believe he wants to empower the people he believes are creators.”

<i>Hackers & Painters</i> Table of Contents

  1. Why Nerds Are Unpopular
    Their minds are not on the game.
  2. Hackers and Painters
    Hackers are makers, like painters or architects or writers.
  3. What You Can’t Say
    How to think heretical thoughts and what to do with them.
  4. Good Bad Attitude
    Like Americans, hackers win by breaking rules.
  5. The Other Road Ahead
    Web-based software offers the biggest opportunity since the arrival of the microcomputer.
  6. How to Make Wealth
    The best way to get rich is to create wealth. And startups are the best way to do that.
  7. Mind the Gap
    Could “unequal income distribution” be less of a problem than we think?
  8. A Plan for Spam
    Till recently most experts thought spam filtering wouldn’t work. This proposal changed their minds.
  9. Taste for Makers
    How do you make great things?
  10. Programming Languages Explained
    What a programming language is and why they are a hot topic now.
  11. The Hundred-Year Language
    How will we program in a hundred years? Why not start now?
  12. Beating the Averages
    For web-based applications you can use whatever language you want. So can your competitors.
  13. Revenge of the Nerds
    In technology, “industry best practice” is a recipe for losing.
  14. The Dream Language
    A good programming language is one that lets hackers have their way with it.
  15. Design and Research
    Research has to be original. Design has to be good.

For Yo, All It Takes Is A Little Push

It all started as a harmless addition to the Product Hunt feed, a little lightweight mobile app which just does one thing — we all know what that is now. But, it can be so much more, and the sheer ridiculousness of the app’s simplicity somehow managed to generate a high level of chatter about the app “Yo” to the point of it being comical. Underneath the jeers and laughs, however, lies something worth paying attention to.

First, we must consider how frustrating Yo’s rise is to others. Think of all the other technology entrepreneurs and investors who are building complex systems for mobile devices. It’s very hard work. And, then, a couple of folks not only have their dead-simple app explode, they also capture the scarce attention of the major tech blogs and influential people on Twitter.

Second, speaking of distribution – mobile distribution is a bitch. I’ve written about this too many times. See here for more details, but TL;DR, only a handful of apps get to experience true mobile distribution, and this is one of them. Additionally, a smaller handful of apps touch on the zeitgeist of consumer word-of-mouth, and Yo was able to do that.

Third, we’ve been beating a dead horse about apps needing to do one thing, and to do that one thing well. And, well, Yo takes that to the extreme. But, then again, why not? A step further, there’s the well-known post about big breakthroughs initially looking like toys (by Chris Dixon). It’s worth reading that post again.

Fourth, push notifications and the notification screen are becoming increasingly important. Most people who mock Yo likely do not have any clue about the changes afoot on the notification screen, how younger users tend to view notifications as media (versus in-app experiences), and how the mobile gatekeepers are planning to modify their operating systems to allow for a range of actions within push notifications themselves, removing the need of opening an app entirely.

And, fifth, we have all seen this movie before. In late 2012, a little app called Snapchat was growing fast, and people couldn’t understand why this simple app with a gimmick built around expiring images could fetch millions in venture capital. Even when I wrote this column a few months later, it generated an unusual amount of feedback for something I write, and to this day, is the most popular post (by traffic numbers) I’ve written. Only now with hindsight do more and more people understand how Snapchat provided a channel for people to share mobile photos without the fear of having recipients “Save To Camera Roll” on their phones. Dead simple, and now, genius. Most recently, the folks at Betaworks have joined a small group to invest in Yo. If there’s one group who understands native mobile consumer products, it is Betaworks. Rest assured they all see a larger opportunity, and not a “simple, stupid app.”

That which is dismissed or overlooked can often hold deep, insightful meaning. What looks simple and not valuable could, actually, be the first step in a more complex architecture and, over time, accrue real value. The line between uselessness and usefulness can be razor thin. While critics pen premature obituaries, it is the builders here who get to write the future. Yo has distribution, has the right location, and now the right timing with push notifications poised to change dramatically. Maybe, we should think of Yo, to date, as a very, very, very v1.0 product. The future may hold many versions.

At the end of “The Dark Knight,” Batman traps The Joker by a cable, dangling his enemy, upside down, from the top of a large skyscraper. The Joker, floating in the air, face to face with Batman, muses, “Madness, as you know, is like gravity…all it takes is a little push [notification].”

Notes From The 2014 Pre-Money Conference

Right before the July 4th holiday, Dave McClure and 500 Startups put on their second annual “Pre-Money Conference.” I was lucky to attend as part of my work with the folks at Bullpen Capital, and it was a great conference and day of running into old friends and making new ones. I finally have a chance to jot down my notes from the event, so here goes, in no particular order — and, while entrepreneurs and founders won’t think about these issues on a day-to-day basis, I do believe it’s worthwhile to be somewhat aware of the world in which technology investors live in, because when one starts to peel back the layers, it quickly becomes apparent much of the propaganda shared online and on Twitter about investors is often off the mark. This isn’t meant to imply any of this is bad — it’s just reality, a reality founders may find useful to keep as context as they’re thinking about or actually raising that next round of funding:

A Select Few Raise Quickly, The Rest Are Always Raising: Having worked in a variety of early-stage startups and having helped many folks raise funds, I myself am continually surprised to learn how much time professional investors spend raising dollars for their investment funds from LPs. The bigger funds we all know by name — they raise money quickly. The rest of them have to constantly readjust to the market, think about the composition of general partners, and many have had to withstand haircuts from the billion-dollar club to more modest levels of assets under management. For an entrepreneur, this means most of the investors they’re courting or pitching are likely to be switching context between finding new LPs and evaluating new potential investments. It’s not an excuse, but it may be part of the reason why many are slow to respond to email (or don’t respond at all), and always seem to be in a rush.

In The Short-Term, Investors Are Much More Accountable To Their Own Investors: There’s a lot of good chatter online and on Twitter about behavior among investors, and that investing teams need to be more diverse (on many dimensions). There’s also no shortage of blogging and tweeting by investors marketing themselves as the best choice for founders. What we see online often doesn’t translate offline in real life, but by now, we shouldn’t be surprised by that. Again, for the majority of investors, while their job is to give capital to founders, they’re held much more accountable to their own investors. It makes sense when you think about it, but I’m not so sure most founders (who, likely, don’t care about this world) realize that, depending on the moment, they are not the immediate priority — no matter what all the blogs say.

Up And Down The Stack, It’s A Noisy Market For Capital: Ask anyone who has been investing for a while and is at least good (or great) at it, and they’ll say a version of the same thing — they’re not resting on their laurels. It is a brutally competitive market to invest dollars into private companies, and seed-stage firms which like to lead rounds as well as traditionally growth-stage investors are feeling the heat from all sorts of angles. As a result, investors are resorting to all sorts of branding tactics (PR, for example) and operational techniques (scouting, for instance) to get their names in front of the best opportunities. In a noisy market, attention is the scarcest resource, and because attention is a function of time, it can (somewhat) be purchased with money. Somewhat.

Successful Angel Investors Are Seen As Rock Stars: With public markets tightening and high-growth companies staying private longer, there’s tremendous pressure worldwide for those holding high beta-seeking capital to pump it into early-stage technology. This trickles down from the top, all the way to the long-time angel investors, who are now seen as being ahead of the curve, and rightfully so. It’s hard to prove it, but it just feels like more people are getting more serious about trying to invest small amounts of capital in very early-stage ventures. They come to a conference like this, in part, to better understand what method might work best — whether to raise an actual fund, or to just be an angel, or to try to be an LP, or to use a platform and run syndicates or trade using data. It’s easy to monitor this uptick in activity and conclude it’s a frothy time — yes, it is, but there’s also less of a game for these investors to play in the public markets, so they spillover into another section of the casino.

Seed “Rounds” Are In The Past, Now Things Roll To A Close: I’ve mentioned this to founders often lately…even just a few years ago, the founder would open a process to raise a seed round, and it would close within a finite period of time. No more. While it happens on occasion, the majority of founders are collecting checks at different valuation caps over a longer period of time, holding off on converting the caps to priced rounds until they find a lead investor. What this means is founders have had to collect smaller checks along the way, continuing to build their businesses, and keep momentum moving with the hope of convincing someone to lead and/or price the round and convert. There are some advantages and disadvantages of the new world, but on the whole, I believe it’s better for founders net-net as they don’t have to price their round too early — the cost is that it’s harder to find leads who hold the proper incentives to ensure the early-stage venture is on the right track for downstream investing.

It’s Not A Bubble, But That Doesn’t Mean Some People Won’t Get Burned: Have you noticed some people have been talking about a “bubble” since 2009? That’s because the time in which we’re living in is, for all intents and purposes, quite crazy — the proliferation of technology both to the mainstream (in the form of mobile phones and Facebook and social mobile apps) as well as those reinventing industries like transportation, food, and retail has not only shifted market value from incumbents to new entrants, it’s also increased the overall size of the market. When you look at the data — the amount of money spent in venture capital by quarter, or the number of IPOs, or even just the tightening of the IPO window of late — it’s clear that some big private companies are way overvalued, but it’s also clear that any shrapnel from any fallout won’t affect a wide swath of people. In Oliver Stone’s “Wall Street,” Gordon Gecko mocked a fellow investor who kept predicting doom by retorting: “Like a rooster who takes credit for the dawn.”

The Decacorns

A few weeks ago, I wrote a post called “Baby Unicorns,” where I was extending the meme about billion-dollar companies to try and create a list of companies at earlier stages that could, potentially, mature into unicorns. I know that whenever one creates a list, they’ll miss things and people will disagree. At a few events over the past few weeks, people would come up to me and ask questions about the post. “Hey, I read that post — good stuff, but tell me, how did _____ make your list?” Those led to some interesting (and some uncomfortable) conversations. Then, last week, a friend said — “OK Semil, so what are the ‘decacorns’?” What?

My friend, a former VC at a big fund, mentioned that he’s most interested to know which companies can enter the league of Airbnb, Dropbox, and Uber — the companies which have achieved $10b+ of enterprise value (even in private market valuations). And with technology pervading more and more into society, and more and more people starting companies, the number of unicorns will increase, but limited partners may now be more interested in having their GPs stake out big positions in companies that can be Decacorns.

It’s a good question, and a harder one. Without thinking about it too much, I called up the original post on my iPhone and scrolled through the list with him. Here are the companies and I came up with and my brief justification as to why — companies that have the potential to reach $10bn+ of value and sustain as independent companies over many, many years. The common thread among these: They’re platforms, where we can envision other people leveraging or building on top of the network in new ways. Again, I’m going to miss some, so please tell me what you think: There’s no specific order to this list, so I made it alphabetical:

Airware: Why? The market for drones could reach over $100bn+ over the next decade. Airware is one of the few companies positioned to write and distribute an OS for these “flying cell phones,” and with a market so big, and looking at what mobile phones did for Apple and Google (as rough examples), Airware has a chance to be on a Decacorn-trajectory.

AngelList: Why? The best companies are now staying private longer, and with so much corporate growth occurring in the private sector, funds and retail investors that would traditionally play in the public markets will face more pressure to invest earlier. However, in order to do so, they’ll need access to companies in the absence of publicly-available data, as well as mechanisms to create liquidity for these holdings. In such a heavily regulated world upended by new companies with lighter structures, a company like AngelList has the potential to reinvent everything from sourcing to investment banking.

Coinbase: Why? As Bitcoin grows outside U.S. borders in places where the rule of law is weak, and as more and more retailers accept these “coins,” Coinbase has captured the consumer-facing position where most normal people will start a wallet. For a while, things were unclear with Apple blocking these types of wallets, but those days are over now. Additionally, there are many powerful and influential people who are wholly committed to attacking every ounce of unnecessary fat that bankers have baked into transaction fees, and a digital currency like Bitcoin is what can cut into that fat. Beyond payments (and stored value), the added benefit of Bitcoin for Coinbase is the protocol upon which the system runs on — one I believe can be leveraged by developers to reinvent 101 business processes.

Lyft: Why? Lyft is often (unfairly) compared as Uber’s second-fiddle, but I’ve always felt their model is slightly different. Uber began as a network built around existing private car dispatching systems, using mobile to offer consumers order control. The Lyft vision, on the other hand, is pure P2P ridesharing. To date, Uber is playing the game very well, but I do not believe this is a winner-take-all market, because the market is way too big. So, I can see Lyft growing as well, as more people move to cities, as more municipalities grow cash-strapped and transit infrastructure fails to keep up with demand, and as the bottom-third of the economy looks for jobs that are not just “hourly.” Ultimately, I believe state and federal governments will elect to create huge economic incentives for us to rideshare as an alternative to costly infrastructure projects that would likely not be passed and/or would be too slow to develop. In such a world, governments could offer huge incentives for everyone to give everyone else a Lyft.

Pinterest: Why? I’ve detailed that here before. In my opinion, currently undervalued.

Snapchat: Why? A long road to get there, so I’ll just point to my previous posts on Snapchat as a marker.

Wealthfront: Why? This one is straight-forward: Software applied to a trillion-dollar market. To date, private wealth managers cull lists and network to find clients with net worth over $1m+ to manage their money. Why not use software instead? Part of this is a demographic change, where generations coming up might likely prefer their banking experiences to be automated and accessed through a desktop or mobile native interface. Beyond the UX, Wealthfront could provide more transparency around allocations and use math to power software that more efficiently balances stocks, bonds, and other assets according to an individual client’s particular tastes. Wealthfront could harness software to make Modern Portfolio Theory even more efficient, and that alone gives it a chance to be massive.

F-ing Up Innovation

The FAA recently laid down a ruling restricting some drone use cases. The FCC is not adequately defending the citizenry’s right to a neutral Internet. And, the FDA makes it painfully hard for all sorts of health-related startups, from hard science to wearables, to get into the clinical phase. And this doesn’t even begin to cover what the legislation of another acronym (SEC) has done to capital markets, most notably encouraging today’s most dynamic companies to stay private longer, to forego public markets, and to reward private investors in the name of protecting the public.

What The F?

The spirit of these bodies is to protect the public. That, however, was when our economy was working well. Today, despite what you see in the DOW or jobs reports, the economy has fundamentally shifted. This is, in part, why so many startups can provide local services — they have access to labor and routes (smartphones) to engage and manage that labor. But, people don’t want to be delivery-people all their lives. The economy, which has undergone a massive structural change, likely needs to loosen the noose around regulation and carefully let innovators push on the boundaries of what is possible. The hope here is harm is limited (if any) and the potential upside of a breakthrough could ignite new jobs and building blocks of a new economy.

That’s the theory, though. The reality is quite different. The leaders and team members of these Federal Agencies are politically appointed operatives, and they, just like elected officials, have twisted incentives. I won’t go into those here, but think of a revolving door where people give each other money in a never-ending merry-go-round. Anyway, we all know this. So, what to do? Outside of innovators leaving the country (a real threat), I think we all need the big technology companies (Amazon, Apple, Google, Facebook) to use their lobbying power to sway the regulators on specific cases where innovative ideas are explored. Clearly, some of these companies have major interests in what the FDA, FCC, and FAA have struck down or frowned upon. In a way, these technology companies transform into our politicians, lobbying on behalf of creators and the folks who back them. The technology sector has to play this game, has to collect and organize its financial power into these efforts, to make sure regulators don’t go so far as to reward the old incumbents, which would surely be a strategy for more lethargy in the labor markets.

Haywire is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2014 Semil Shah.

“I write this not for the many, but for you; each of us is enough of an audience for the other.”— Epicurus