The Story Behind My Investment In Chariot

When I first heard about Chariot on a niche city blog, I thought it was a joke. A founder launches a vanpool to commute Marina residents to and from Downtown and SOMA each day — that can’t be real, right? To actually verify, I sent a friend out on a ride and she loved it.

“Ok,” I began to think, “this is cool. And, maybe, real.”

Well, turns out it was very real. Lucky for me, Chariot’s founder, Ali V from New York (his last name is so long, it won’t fit on this blog!) emailed me. It was a very polite note. I responded. We chatted on the phone, and finally we met back in the early summertime of 2014.

I liked Ali immediately but, how would I get involved? We didn’t have any mutual friends. He wasn’t from the Bay Area and didn’t initially pick up on what he needed to do with investors. So, as I hung out with him more, I told him what I think he needed to start tightening up the story for new recruits and investors. And, to his credit, he was very receptive and turned into a learning machine. Around the fall, I invested, as I gained more and ore confidence in Ali as a person and Chariot’s traction.

He’s been great to work with, and I now count him as a friend.

Chariot is going to be making some fun waves in SF and beyond, and I’m particularly grateful that Ali, as CEO, has created an additional role for me — “Board Observer.” I don’t know what that means just yet, but I’m excited about it and welcome the learning experience. And, if you’re in the city, make sure to take up a ride on the Chariot or at least let them know where you need your #commutesolved.

The 12th and Final Sunday Conversation

This is the 12th and Final Sunday Conversation — again, posted on a Monday. In about 18 months, we’ve done 12 of these video interviews. First, it was made possible because the video teams at Scaffold Labs and Sunol Group Media were kind enough to donate the cameras, the video and audio crews, and their time in process and editing all the media. Simply put, it wouldn’t have happened without them. I’d also like to thank all the past guests — Adam Nash, Peter Fenton, Dev Khare, Dave Hornik, Adam Nash, Asheem Chandna, and of course Keith Rabois, who was extremely generous with his time and his ideas. I hope you enjoy the final set and thanks again for watching. ♦

Is It Unhealthy For Companies To Stay Private Too Long? (5:45).


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On Apple Pay (7:56).


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Lessons From Open Door Launch (7:14).


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Why Uber vs Lyft Stirs Up Valley Emotions (6:01).


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Predictions For 2015 + Apple Watch.


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A special thanks to the teams at Sunol Group Media 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

You Should Meet Hector Monsegur, Formerly @ Anonymous

My dad loves Charlie Rose, and he sent me this video of a recent episode which features Rosario Dawson (wow – she is incredible) and Hector Monsegur, a former hacker with Anonymous. If you work in tech as a founder or investor, I would really encourage you to hear Hector’s story. The segment with him starts around the 30-minute mark and is just under 20 minutes total. It’s worth the time, and if you watch the whole video, you learn more about Dawson, too. Bonus.

Monsegur’s personal story is nothing short of incredible. Grew up in a Puerto Rican section of New York, wasn’t educated, started learning how to use a computer and taught himself to be genius. He tried to build a security startup but it failed. He found his way into the decentralized network of Anonymous and was hooked. He bought into the vision. And, it provided a purpose for him. Eventually, the Feds found him and threatened to separate him from what matters most to him — his two daughters. He ended up working with the FBI and other agencies as a plea, and people say he’s helped stop nearly 300 cyber-attacks on a variety of U.S. Government agencies.

He is a genius at what he does. Near the end of the interview, Charlie Rose asks him what would’ve happened if he ended up in Silicon Valley instead of Ithica, New York as part of Anonymous. You have to hear Monsegur answer the question, and it will reinforce what a privilege it is to be here.

The Bottom Of The Org Chart

John shared this video of Steve Wozniak last night, describing it as “wonderful” 3x. Really? Well, yes it is. Rather than retweeting it or just sharing the link, I wanted to post it here and say a few words, to save the clip. The video is short, so there’s not a big cost in watching it. Also, it’s highly produced with good music, great clips, transitions, color. It is worth the time.

Beyond this, like John tweeted, I just love this video. It is honest, pure, and true. The scenes of him reenacting how he built the first boards by hand, the old video clips of the machines he would unveil, and everything in between was a joy to watch. My favorite part is at the end – where he explains he likes being at the “bottom of the org chart” where he can just be an engineer, creating things — that was powerful.

He took a few swipes at Jobs’ desire for business, to move up the org chart, to sell machines and make money. And it reminded me of how politics comes into play as successful people accumulate more power and fame. while this happens, there are plenty of people who are either expert in their craft or only interested in the pure pursuit of it that let go of the ambition to move up the food chain, let go of the drive to make more money, etc. to instead just focus on what they love to do. Only makes you wonder, in this day and age of tech celebrity brands: What greatness rests at “bottom of the org chart”?

Finally, I had to write out this last quote from Wozniak, can’t stop thinking about it today:

When we went public, yeah, a few of us became unbelievably wealthy, we were worth so many millions of dollars, hundreds of millions…but…I designed these machines because I wanted computers for myself, I wanted to help revolutions happen, and I didn’t really want that kind of wealth…I want to stay at the bottom of the org chart, as a engineer, because that’s where I want to be.” – Steve Wozniak

Seeking Your Help To Crowdsource

Hello. This is a request for help to all the readers of Haywire. Last week, I shared the Preface and Table of Contents (draft) to my book on Uber. The embeds didn’t work well on this WordPress theme, unfortunately, so I wanted to specifically write to you all and kindly ask for your help in looking over the Table Of Contents: https://hackpad.com/The-Uber-Effect-by-semil-jperNxo8smn

I’ve put the TOC on Hackpad where anyone can add or edit, or you can reply by email to me privately, or put some thoughts down via Disqus comments. I know many of you read here without interacting, so please forgive me this once to get your feedback here. The TOC serves as my guidepost in framing the book, and is probably the most important part of the entire book-writing process. Thank you!

“The Uber Effect” – Preface And Table Of Contents

A few months ago, I announced that I’ll be writing a book on Uber. I didn’t realize that, shortly thereafter, the company would generate drama within insider circles and the mainstream media, but I guess it proves that Uber is a big, powerful, and interesting company — interesting enough to write a book on. Over the past few weeks, I gave myself a goal to write a rough draft of the book’s Preface and outline for the Table of Contents by the end of the Thanksgiving holiday. I’ve had lots of planned and unexpected travel, but managed to get them done earlier this morning.

Below, you’ll see two documents — first is the four-page preface to the book. The writing isn’t fancy or pitch perfect, but I want to see if this line of thinking encourages some conversation or push back. Second, below, is a Hackpad where I’m keeping my draft of the Table Of Contents. In this day and age, I figured I’ll write a better book if I was able to crowdsource the outline, and to address any big blind spots I have. I’ll keep the Table Of Contents up there as I go along and would thank you for any feedback you have. (Please excuse the alignment – for some reason, Hackpad wants to embed aligned-right and won’t budge!)

Finally, while I’ve been approached by some agents and the idea of writing a physical book is appealing — it adds some legitimacy, right? — I am not sure I want to write it that way. Maybe I’ll change my mind. For now, I just want to outline and write, and slowly chip away at the subject matter. I think I’ll have some time, as I don’t predict Uber will go public in 2015, but maybe it will! Who knows? In any case, I do want to make sure the book is released before the IPO, and given publishing cycles, I’m not sure the timing would work out. Also, I want the content to spread quickly online, via PDF, so people can read and share on their Kindles, over email, maybe even audiobook, etc. I’m open to any ideas and just want to make sure the best content gets out there. Thanks in advance for reading and for any questions, comments, or criticisms you may have.

Preface – Draft

Table Of Contents – Draft

Early-Stage Investing And Upstream Communications

I’m coming up on two years of investing. I plan to share more of what I’m learning in 2015, and will do so in more frequent, smaller blog post chunks.

Lately, the topic on my mind is my role sitting in between early-stage founders and the larger investors in the ecosystem. Here’s a basic scenario that has come up often of late: A company where I’m a small investor is starting to get interest from larger seed funds or even bigger VC firms. Those investors will email, text, and often just call me to chat about the company. Now, the short-term thinking and easy trap is to “sell” how awesome the company is and be a promoter, but in reality, different forces are at play. Often, as a small investor very early, I don’t know everything that’s going on at the company. While I email the Haystack portfolio on the first of every month to just check in, I don’t hear from everyone. Some founders don’t like emailing updates, which I understand, too.

In those conversations, where I’m asked for my opinion, I end up just sharing what I know. The person contacting me is usually someone I know personally, someone I’ve hung out with, and they’re calling me for my honest opinion. And in some cases where I don’t know the situation — again, as a small investor there are no things like information rights, etc. — I end up just saying that, “I don’t know.”

It’s never wise to lie or fib, of course, but especially here, these are investors I will have relationships with until I’m six feet under. I have to make sure my word is just that — my word. I have to ensure that when I say something, people believe it to be true. That takes consistency, and often involves me sharing my opinion about someone or something. I wanted to write this for founders to better understand the dynamics their early-stage investors face. A little communication goes a long way — not for me, or for them — but for the business, at large.

Alpha Summit: On-Demand Economy Discussion

Earlier this week, I drove down with my friend James to Monterrey for this year’s Alpha Summit, which is basically a long afternoon of big group discussions with super smart founders and investors around a range of topics, followed by dinner and a party. It’s great fun and Mike Jung and his co-conspirator Eric Chin have created the type of group I wish I could’ve — every event they put on is so well researched and planned. (Thanks Mike J.)

Lately, I’ve been asked to lead or moderate sessions at events on the topic of the on-demand economy. Before this week, I was frankly surprised so many people were continually interested in this theme. After this week, now, I realize it is a real thing and also fun because it conjures up good, spirited debate. I’ll try to briefly summarize what was debated in the group, and if you’re interested in this topic, make sure to read Liz Gannes‘ terrific Re/code series on this phenomenon and follow The On-Demand Economy on Twitter, which was co-created by Mike Jaconi of Button, who co-led the session with me:

It’s Uber and then a big drop-off to everyone other company: While nearly $5b has been pumped into on-demand services, the lions share of that has gone into one company, after which there is a big drop off. People wondered if there could be two horses in the transport space, and felt food was more about having choices so could support more players, but then fewer barriers to entry.

Catering to the wealthy or the masses? Good split in the crowd (so it seemed) as to whether this is just a Tier 1 “rich city” wave or whether it can spread to many cities (Uber aside). There were attendees who understand the space who do not live in the Bay Area, and there thinking was largely that the unit economics of these businesses wouldn’t work in less dense places.

Frequency of use: This is a critical topic for consumer transactional services like these. We didn’t talk about it too long, but my feeling is that the most-valued services tend to have very strong daily active use cases (oftentimes more than once a day), while some have strong weekly active use cases, and a whole bunch are ones you’d use once a month, maybe even at best.

Unit economics and margin compression: Speaking of unit economics, there was healthy discussion around how and where these companies make their money. Do they skim off the delivery or have a margin on the good they’re delivering? Do they own inventory or will they need to? If margins are good today, will they compress with scale as entrants consolidate or pivot? My own view here is that food and transport/logistics are both multi-trillion dollar markets in the U.S. alone, so it may be the winds of the market which drive scale and weather any compression.

From consumer concept to B2B business model: This is a topic I’m focusing on, the spread of consumer concepts like sharing economy, on-demand services, and personalized software into the mid-tier company and enterprise stage. We didn’t discuss this unfortunately, but I’ll plug again that if you are thinking about this area, please get in touch with me. (My email is on my “About” page.)

After the session, a bunch of people approached me saying they loved the discussion, though they didn’t participate. I haven’t gotten that feedback on this topic, so maybe it’s because the business and delivery model feels very current today, and the market sizes and early indicators don’t lie — though they do cloak some companies which are likely burning venture cash in order to try to find a market. My own belief is that (1) many services called on-demand are in fact scheduled; (2) the category has been overfunded for some questionable use cases, but the cost is so low compared to the potential outcome, it’s worth a try; and (3) that the winners will eventually expand from what they’re doing today in order to capture more share — and using on-demand techniques is the wedge that cuts into the edge.

Briefly Taking Stock Of The Uber Shakeup

I think about Uber a lot, before this week, to the point where I committed to write a book about the company (back in October) and its effect on the world. As a disclaimer, I’m a fan of the company. I do not own shares in the company (but I wish I did) and will likely buy shares as a civilian when the company goes public. Yet, despite this, like many others feel, it’s disappointing to see a company with so much potential and the future in their hands fall on their face — not for taking product risk, or launching new features — but for not being smart about how powerful they are and will be. Power requires awareness, and everyone in technology now plays for Yankees.

I’ve been contacted by countless media outlets (CNBC, Bloomberg, and more coming) about my own views on this week’s news given I’ve written about Uber and the space they’ve opened up for years now. Here’s what I’ve told everyone, see below. I copied this from an email I sent to a reporter, modified slightly:

Michael: I have to believe they’re making preparations to part ways. I don’t see how he will be effective in his role as inking BD partnerships when his name is plastered across the web in such a manner. However, there is a case to be made that keeping the team intact at this time is best for the company, however painful it is, so we will have to wait and see.

Kalanick: I have to believe he’s waiting to make a statement and give an interview. Maybe at tomorrow’s Goldman Sachs keynote in Vegas. He has to because if not, he’ll be asked this even more and more. (This is the #5 ranked post on my blog by total page views, it’s about Travis’s entrepreneurial journey.)

Impact On Fundraising: Uber has been rumored to been soliciting inbound offers to invest for months. I wouldn’t be surprised if it’s already done (before this all happened), and I wouldn’t be surprised if the valuation number is much higher than is reported. If and when that happens, expect Twitter to break again.

Role Of Investors: Lots of people seem to want the investors to “reign in” the company execs. I’m not sure that’s possible. They also want them to speak up, but I can’t imagine any of them saying anything before Travis does. The CEO leads the way. (I also have to imagine the larger investors are discussing this with management privately — and a lot.)

Impact On Brand: Uber had a complicated brand before, but this kind of narrative is one of the rare examples of truly bad PR. Like many of you, I believe it will stick and it’s on the company to earn back respect from those they have spurned.

Impact On Company: I have some friends who are early employees of Uber. I haven’t talked to them, but I imagine they’re pissed because all of their good work is taken out of the spotlight for a series of bad decisions. I don’t know enough about Uber on the inside to know what it’s like, but my hope is that this all moves the leadership to examine within and hopefully get better.

The Role Of The Crowd: I will admit being naive, I was surprised at how many people actively dislike Uber. I underestimated the intensity of that. I like Uber (the product) but certainly don’t condone what happened this week. My hope is all of this unfortunate news forces the company to not repeat history, lest they want this kind of congressional attention. About five years ago, Zuckerberg was under an intense microscope, was dubbed to have had a “Nixon Moment” at D8 by AllThingsD, and received congressional inquiries from the Federal Trade Commission. Facebook built an unstoppable network of IDs on top of the Internet, and that translates to power; Uber has built a network on top of mobile operating systems, it too getting into the unstoppable territory, and therefore, the masses are just starting to learn just how much power Uber has accumulated.

 

 

Consumer Concepts And The Enterprise As The End Customer

Benu

Earlier this week, I helped lead a discussion re: on-demand services with an old friend (Kevin from Shyp) and a new friend (Sara from Postmates) — Basti double-booked himself! Our chat was part of Emergence Capital’s annual fall “Mobile Enterprise” event (see below for the Twitter timeline from the event), which is always great. I learn a ton at these events. My favorite sessions were the 1:1 interviews with David Barrett (Expensify) and @Stewart Butterfield (Slack). Both founders are unapologetic about how they work and provide real-talk in the face of generalized mantras and blogs people read/share re: how to startup, how to get investment, how to hire. These guys are the real deal and I wish I had my hands on the audio feed for these chats.

I seem to get called to help organize every “on-demand” panel, which is nice but also confusing. Is it really a big deal? I go back and forth. Almost two year ago now, when I was lucky to invest in companies like Instacart and DoorDash, I thought — yes, it’s a big deal. Then, I started to get wind of more companies, and they were contacting me, and I got overwhelmed, so I shied away. That turned out to be a mistake and I missed one awesome company because my brain shut off. Then, more recently in LA at the Rutberg Media event, on another panel, someone from the crowd asked a question about on-demand services for business, and Kevin got me thinking about something — what if on-demand is now just table stakes for delivering new customer experiences, even when the customer is a business?

That’s what we discussed on stage, and what I’ve been looking for in my investing. So far, I’ve invested in a small handful of ODS geared at businesses as the end customer, and it turns out they also like this type of service. Maybe there’s something here. And, maybe a bigger trend. The phrase “consumerization of the enterprise” is quite overused and old, but what if consumer concepts like the sharing economy, on-demand services, and personalized software invade the business segment and give new companies a leg up on incumbents and even growing startups? That’s what I’ve been thinking over the last few weeks and would love to meet founders who are thinking along similar lines.


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