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.”
Why Nerds Are Unpopular
Their minds are not on the game.
Hackers and Painters
Hackers are makers, like painters or architects or writers.
What You Can’t Say
How to think heretical thoughts and what to do with them.
Good Bad Attitude
Like Americans, hackers win by breaking rules.
The Other Road Ahead
Web-based software offers the biggest opportunity since the arrival of the microcomputer.
How to Make Wealth
The best way to get rich is to create wealth. And startups are the best way to do that.
Mind the Gap
Could “unequal income distribution” be less of a problem than we think?
A Plan for Spam
Till recently most experts thought spam filtering wouldn’t work. This proposal changed their minds.
Taste for Makers
How do you make great things?
Programming Languages Explained
What a programming language is and why they are a hot topic now.
The Hundred-Year Language
How will we program in a hundred years? Why not start now?
Beating the Averages
For web-based applications you can use whatever language you want. So can your competitors.
Revenge of the Nerds
In technology, “industry best practice” is a recipe for losing.
The Dream Language
A good programming language is one that lets hackers have their way with it.
Design and Research
Research has to be original. Design has to be good.
One of the best feelings an entrepreneur can experience is turning a naysayer into a convert. Well, I wasn’t a naysayer necessarily of The Information, but I will admit that I wasn’t sure it would be worth it for me to pay for a subscription. Information (no pun intended — really!) is supposed to be free, right? Well, I was wrong. Now, I won’t say that this is for everyone, but after meeting the team, talking to a few friends who did subscribe, and mulling it all over, I plunked down my credit card and signed up. In two days, I realized I was wrong. I have a peculiar reading pattern where I send all must-reads to my email, so they all get attention. Lately, my Pocket queue has just collected dust. In two day, The Information passed the test for me. I had originally assumed the publication would be about inside information about the startup world, but no — that was a bad assumption. Rather, it felt like a newsroom that was focused largely on two angles: (1) Who are the big technology players, what are their strategies, and who is making moves within those companies? and (2) How does the advent of today’s technology interplay with government and society? The best way for me to characterize the result is like a 60/30/10 split between The Economist, Fortune, and The Wall Street Journal style of writing, with the WSJ being the 10% of the equation. Most recently, a reporter for The Information profiled a big whig technology executive of one of the major tech companies, and it finally dawned on me: I needed to be aware of this person and the company, and I wouldn’t have found this information and level of analysis on any of the blogs nor any of the outdated financial or technology periodicals. The takeaway here (for me) is that there have traditionally been three big content verticals — sports, entertainment, politics. Now, we must add technology, as tech pervades society.
The larger story here, though, is about identifying, engaging with, and (hopefully) converting naysayers into believers.
So many people are trying to build cool new things (look at the rate of information flow on Product Hunt, for instance), and yet the competition for attention gets more brutal. The natural inclination is to enter into a sales pitch of sorts about why someone should try the product you built, or the product you invested in, or the product that you sourced and/or brought to Product Hunt. The incumbents usually learn to tune out these pitches. But, conversely, what about intensely engaging the naysayers? I’ve seen founders of some startups who are well-known but early monitoring threads and subtweets to find fans and the non-believers. I myself reached out to a well-known reporter who didn’t quite understand why a bunch of startups were in a space, emailed him, and he was kind to write back. Hopefully he follows through, and I’ll be watching. I’ve also noticed other reporters who berate a space but don’t engage back to learn more. Their reporting will suffer in the long-term, I’m sure of it. Anyway, the point of this all is that some naysayers hold clues for those who are creating something, and its a puzzle to figure it out. Additionally, some of the naysayers who do convert will end up being huge fans, so even on that count, it’s worth seeking them out on the chance you find someone invaluable to put into your corner. We have seen this happen with Swell (a radio pioneer in London is now one of our biggest fans) and I’ve heard other founders explain that some of their social media “whales” were groomed through this process. Not only does it feel good when it happens (endorphins!), it’s also a good strategy all around.
This post is meant to be a simple, brief survey of the block chain, from the point of view of an investor in the space. For someone who has read widely on all aspects of Bitcoin, this will feel rudimentary, but my goal here is to explain the idea of the block chain’s potential to a ore lay business audience. It will lack technical depth and instead focus on business applications that are likely to be created in the next few years.
Post #1: The Business Of The Block Chain (A Survey)
Over this summer and spring, I’m going to write more about Bitcoin and the block chain, specifically from the vantage point of founders who are working in the space right now and those investors who are interested in products that could arrive on the market in the next 2-5 years. The first post in this series was more of a preface, which you can read here. This post and the subsequent ones will presume some basic knowledge of the block chain. One of the best primers I’ve found (and please suggest more in the comments) is by Antonis Polemitis, which you can read here.
Back to the block chain. After reading as much as I can, and after talking to many smart folks in the space, I’ve come to a few conclusions: (1) The block chain as a computer science innovation is for real; and (2) there are 101+ business applications that can be rewritten by harnessing its attributes; but (3) it is very early days and right now, most of the best minds working in this space are focused on payments and stored value.
Put another way, it is very early for the block chain, which is a bad thing for a momentum or inflection investor, but a great thing for an investor who believes in the power of the block chain and wants to lay down an early, early bet. (If you are working on the block chain right now, please do get in touch with me.)
So, what can the block chain do, theoretically? Too much to list here. “A 101 things,” is my standard answer. This is a primer on a few areas, and then I plan to dig into each one with more detail in the summer. Regardless, I’ll offer some ideas as examples of new business processes that excite me specifically, in no particular order:
Many of the smart folks working in the space cited the idea of “smart contracts” as the one area which posses the most widely-applicable aspect of what can be “on-chain.” A smart contract acts as a specific protocol which helps parties create, validate, and enforce contracts without the need of expensive human overhead costs. Contracts that become interesting when “smart” could be DRM, derivatives, P2P commerce, and other business processes. All this said, there are some folks working on block chain-related ideas that, at least today, do not seem to be solving a big problem. Of course, it is early days, so who knows. (Earlier in the year, Naval and Balaji posted on Appcoins, which poses thoughts for how block chains could change the financial side of starting a business.)
Proof Of Work
The block chain can be leveraged to verify, attribute, timestamp, and prove, irrefutably, that work has been done at a specific point in time with specific characteristics. These record-keeping capabilities could open the door to a more transparent form of governance. This has been referred to as the public ledger. Today, we hold people and entities accountable to the fact that we can point to something that shows commitment or promise — in the future, work verified by the chain would be theoretically immune to disagreement (but I’m sure there will be “Chain Deniers”). Just like in smart contracts, there are a few companies working in the space, but not many.
This is the space that is currently in play and has real players most of us recognize by name, such as BitPay, Coinbase, and Circle, among others, which are leading the way to bring Bitcoin to the masses and financial mainstream. Someone will win this space and they will all also provide their own APIs to empower other developers to build on the block chain, but it remains to be seen if independent developers will want to use their APIs versus building on a neutral platform like Chain, which is sort of like an AWS for the block chain.
An Important Caveat
A good percentage of block chain enthusiasts I spoke with cautioned against a mentality of “Block Chain For X,” in the same way we all do this with “Uber For X.” They believed this will also generate very bad ideas that either don’t make sense in practice or that look cool but don’t really solve a big problem. While some of these solutions will be technically feasible with the block chain, they said to expect a period of crappy ideas before someone or a group of folks hits it big. And when they mean big, they mean trillion dollar market big. With that caution kept in mind, however, everyone admittedly is very bullish on the block chain. Today, it is early. Outside of a few teams, I have yet to see it. I would love to see it, and I’m sure I’m not seeing it all. Finally, there are of course many other use cases, but these seemed to be the big ones that resonated with everyone I spoke with, and underneath them, undoubtedly lie fascinating new ideas.
Of all the places in the world where Uber really gets under the skin of others, London takes the cake. Why it does so warrants more examination. In London, cabbies are required to master the old city’s streets, all the nooks and crannies, if you will. It can take years (and lots of pounds and sterling) to obtain this knowledge.
In fact, that’s what London cabbies call it: “The Knowledge.”
Now, that knowledge is under attack. Cabbies were tested so as to have maps and turn-by-turn navigation capabilities in their brains. Each cabbie, in turn, had to do the hard work of writing this information to each of their “disks.” While the streets are static, the navigation is dynamic. Then, companies like Google (and others) started bringing maps online, followed by directory services (search) and turn-by-turn directions (navigation). But, up to a point, the convergence of those technologies only disrupted the old external GPS providers like Garmin, TomTom, and so forth.
Mobile, of course, changes everything. Mobile now places “The Knowledge” in everyone’s hands, and by proxy, in everyone’s brains. You can see why London cabbies are worried. I heard one on the radio this past weekend. He doesn’t like Uber. He feels that it’s unfair that his knowledge is now obsolete, or at least commoditized. He feels part of being a cab driver is maintaining a character of person that is higher, though I’m sure cuddly behavior exhibited by cabbies varies on a case-by-case basis. In a matter of 15 years, Google mapped the world, and Apple put those maps in the hands of everyone, complete with static street knowledge and powered by the most dynamic, real-time system consumers have ever enjoyed.
The result is what we see on the news and on the streets of London. Up to a point, human knowledge created a moat for some to earn a steady living. But along the way, machines maps combined with cloud computing on handheld devices created a mechanism to democratize and distribute (in real time) the knowledge that had been trapped inside the heads of a few select London cabbies.
It’s not just cabbies in London who hold “The Knowledge.” Many people in other jobs believe they worked hard to accumulate “The Knowledge” in their own fields, but many of them, too, will experience something akin to what these London cabbies are feeling. Think of mobile developers who have been grinding out cycles of Obj-C only now to have to learn Swift to write apps again. Think of those who report and analyze the tech and startup landscape for a living now having to compete with forums and blogs maintained by those who are in practicing their craft in the arena. Think of the venture capitalists who were trained in their craft for decades and over funds to manage large sums of money, only now to see upstarts leveraging platforms like AngelList and resources like Mattermark to invest smaller amounts earlier into startups.
What was once difficult (and costly) to obtain is now more likely to be commoditized, provided for free, and distributed at the touch of a fingertip or even before we know we need it. It happened to these cabbies in less than a decade. Keyhole (which became Google Maps) was founded in 2001 and acquired in 2004. And, it will happen to many others in different fields. This specific case was only really fueled by machine learning, cloud computing, and mobile networks. What happens when vehicles drive themselves? What about the block chain applied to supply chain management? What about the economic effects of 3-D printing on today’s manufacturing industry? Questions like these are never-ending, and, unfortunately, the answers are going to piss off a whole lot of people.
Every week, there is someone or some entity in the tech world that had a story written about them that as just a bit off-message. It may not appear to be much to the audience, but it happens to strike a deep chord with the folks who are mentioned, who provided interviews, and so forth. Folks like to beat up on press for getting a story wrong, or for reporting it incorrectly (in their eyes), or for mischaracterizing their contribution to the overall subject. Earlier this week, when it happened yet again, I instinctively tweeted: “Write your own story.”
The original sin here is clear: People and organizations outsource their stories. Instead, people should write their own stories.
Writing your own story is hard. This applies to individuals, to companies, to firms, and everything in between. First, it can come off to others that you’re only talking about what’s central to you or your colleagues, etc. Having someone else write or say something may come off as more real. Maybe. Or maybe it strokes the ego. Second, the finished product is likely not part of the “official record” like it would be if it ended up written about by the NYT, or by Wired, or by Re/code, etc. Third, it can be hard to build up an audience. It takes time, effort, mistakes, pissing off some people. And, fourth, you have to own it — a misstep, a typewritten slip of the tongue can be screenshot, bookmarked, and saved for eternity until someone wants to dig it up and revisit your fumble.
There’s another slightly more subtle reason why one should write their own story — the decline of the influence held by reporters, journalists, and writers. Now, of course, some publications and writers will not only maintain their authority, they could actually boost it. But, for the overwhelming majority of them, whatever inherited influence they wielded before is eroding, and eroding fast. Stories on most topics are virtually indistinguishable from others. People will grow less willing to link out to other sites, especially how difficult it is to navigate sites on the mobile web or insider other reader apps. Additionally, the audience often expects to be able to directly engage with the writer of a story — on very public tech blogs or formal publications, those forums can degrade quickly or be quiet enough to hear all of the crickets.
Writing one’s own story isn’t just about controlling a message — if done well, it’s also an invitation for another person to comment, disagree, or help out. Writing a story isn’t about text or prose — it could be pictures, or Vines, or a collection of things. This actually gets to the heart of the problem some create and the opportunity others embrace. The opportunity is that each interaction, no matter which kind, is a way to engage and reengage a person in the audience, and over time, they become loyal, bring in others, and so forth. People fundamentally want to be a part of something, and those feelings are shifting more to the online world. On the flip side, the problem is that many people or organizations with big brands, big brand names, and “famous” people use online media to broadcast their message — they talk “to” their audiences. Yet, the opportunity, what what readers or watchers want is to be part of a conversation. They want to feel that they, too, are being heard. That’s the way I believe online attention has been shifting, and I have no reason to believe the pendulum will swing back in the other direction any time soon.
For a variety reasons I can’t go into in this post, entrepreneurship (worldwide) is in the rise and likely will not stop. As a result of this increased level of company formation, it brings with it new investors, new media personalities, and new conventions. All of this is good. One issue, however, is that what it means to engage in all of these activities is in flux, and the result is that founders, investors, and those in the tech media can begin, can frame, and can dictate conversations or interactions where each party may hold a different connotation for the same words they all use.
One example is “bubble.” There are a bunch of people on Twitter who have been calling it a “bubble” since 2011. Like Gordon Gekko mused, “Like a rooster trying to take credit for the dawn.” But, a “bubble” generally means that assets are overpriced, that people are beginning to take on debt to obtain equity, and that any popping of said “bubble” would trigger a widespread effect. More nuanced, you have some people who don’t believe any popping would be widespread, but that still assets are overpriced — hence, they called it a “bubble.” These are just two definitions — I’m sure there are at least eight more credible definitions.
Another example of a word used in different ways is “Bitcoin.” To some, Bitcoin is like a currency. To others, Bitcoin is a way to program money for it to have stored value. And, to others, Bitcoin represents a protocol that solves a key problem in computer science, a protocol that can be used — independent of the market price of Bitcoin — to execute autonomous tasks against a public ledger. Get into a discussion around “Bitcoin” and God help you that both parties are thinking of the word in the same way.
Finally, the most painful is around the monikers we attach to fundraising stages and milestones. We go from bootstrapped to friends & family to angels to super angels to microVCs to seed funds to traditional VC funds and all the way up to growth funds, private equity, hedge funds, mutual funds, and eventually out to the public markets. Along the way, founders and investors have picked up the lexicon, and when they two sides meet, each side comes into the conversation with their own frame about what constitutes their current stage. “We’re heads down working to prepare for our Series A.” Really? What does that even mean? And, especially in an environment when products are launched for little or no money, and when seed rounds are left open indefinitely to a long-term rolling close, when does one round end and another begin?
There’s no shortage of examples. What does the viral proliferation of this divergent language all mean?
It means that in order for two parties to be on the same page, they have to use the same words in the same way. Each conversation and interaction needs to be framed in a way such that the other side understands. Today, we are mostly experiencing the opposite. Today, we expect funding rounds to happen in a linear fashion, up and to the right; we expect that investors don’t have to change their position in the market, despite market forces pushing them in different directions; and we expect that the people who are tasked with reporting all of this “for the official record” will see it our way.
Hence, our expectations are out of whack, and need to be fundamentally reset. Perhaps the transparency of AngelList profiles will nudge the crowd into this direction. Perhaps the next Mike Arrington blogger/reporter who has a full grasp on the intersection of where founders, investors, and the press meets will come up with a new lexicon. Until then, we are likely to engage in more conversations where the other side uses the same words, but those words mean very different things to them. The result? More noise, and less signal. Grab your noise-cancelling headphones.
A few weeks ago, I was invited by friends at Menlo Ventures to participate in a small event touching on marketplace businesses. I moderated a panel that consisted of the founders of UrbanSitter, Sosh, Postmates, and Rover — all incredible early-stage companies with real traction. For about 40 minutes, we had a detailed discussion about how each one kickstarted liquidity in their product, how they think about expanding geographically while maintaining a quality of service, and how they work to ensure transactions are safe, secure, and build trust. I know the cost to watch video is quite high, but this conversation is only going to appeal to those who build and/or invest in marketplaces — and to those people, I’d say, you’ll definitely enjoy this chat. As someone who loves marketplace products and businesses, and as someone who has had the fortune of working with founders who are building businesses like Hired, Paddle8, Exitround, Cambly, and a few others, I’d recommend this discussion to those who work on such marketplaces. Whether it’s Sosh, UrbanSitter, Rover, or Postmates, each service has a slightly different approach to liquidity, geography, and transaction volume and other matters. I hope you enjoy the chat and if you have any feedback, I’d love to hear it.
On the first of every month, I write a short note to the founders I get to work with. The most recent note contained a more sober bullet point. I didn’t intend to focus on this topic, but it’s been coming up more and more in conversation, so in the spirit of hoping the information spreads more broadly, I’m copying and pasting that bullet point below, verbatim:
“Company Risk: The single greatest risk for an early stage company is to run out of money. That can happen because there’s no business model or revenue, or because the next stage of financing wasn’t prepared for. I will sound like a broken record to some of you, but this is a REAL RISK. It’s dangerous. I view my job #1 is to help everyone avoid this risk. There have already been a few cases where the company runway is very short. In such a situation, please please please tell me. I’m here to help. It’s not easy stuff to go through, but I’m doing this whole fund to be helpful and learn. I only invest a small amount, so most of you (I hope) brought me in for something other than money.”
This is nothing new nor is it rocket science. And, of course, not everyone will make it despite valiant efforts.
But, don’t take it from me. Look how Fred Wilson laid out the three key jobs for a startup CEO — one of which is to make sure there’s always enough cash in the bank. Or. look back to December 2011, on Chris Dixon’s blog, where he outlines this situation (and potential trap) very clearly. Even though this is all common knowledge and written in countless blog posts, it seems as if lots of people are just taking future financings for granted. Nothing could be further from the truth. These risks are very real, and they sneak up even on many founders. And, especially if a young startup has taken angel and seed funding from a party round of individuals and/or small funds for small amounts, even the investors can find out about a bad cash situation on the very last day. Unnecessarily running out of money is a real, existential risk, like falling asleep at the wheel — one that should be taken seriously and repeated often for the benefit of the overall community of founders.
This post is intended for founders, and it is a difficult topic for me to write on, so please bear with me. First, this isn’t meant to paint the relationship between founders and investors as antagonistic. Second, this isn’t meant to be a declarative statement, as there are always exceptions — yet, what’s written below comes up in conversation all the time, so I felt compelled to share it more broadly.
This post is about the importance of “turf” in fundraising. In any sales negotiation, turf matters.
Private investors are in the business of sales. They’re selling money, their knowledge, their experience, their partners, their networks, and their signal to the market. Founders seek funding from these investors, and to do so, often try to broker warm introduction to them. They build connections with these investors, and it can take quite some time to schedule a meeting. More often than not, those initial meetings occur at the investor’s offices or at a place of the investor’s choosing. The investors also dictate the time. And, most founders fall in line, patiently waiting for the meeting, the location, and the time, momentarily forgetting that while investors are paid to scout opportunities and meet many people, the founder’s time is also scarce, and even though there’s a very small chance at funding, they continue on. No one can fault them.
When this comes up in conversation with a founder who is frustrated by the process, I try to respond with a version of the following:
“The brutal truth is that some people can just raise money by virtue of who they are or who they know. For the rest of us, the signaling mistakes founders often make can set an irreversible tone in short- or long-term negotiations. For instance, if a founder hunts down an investor, and then agrees to a meeting, shows up at the investor’s office or location of their choice, at a time of their choosing, the founder is sending an implicit signal that they want something the investor has. Yet, the psychology of the investor is to sell their wares — not to be sold to. Therefore, if the founder is able to pull it off, the best entry point to an investor is to be working on something that an investor hears about through multiple channels to the point where they come knock on the founder’s door — where they come to the founder’s turf.”
“Turf” is important. There is so much non-verbal signaling going on when a founder shows up on someone else’s turf.
What are the signs that you have inbound interest from an investor? They’ll meet you at a place of your choosing, at a time what works for you. They’ll likely be on time. They’ll likely be prepared. They’ll be more likely to help you with key intros to kickstart the relationship.
If this is true in many cases, then the job of the founder is to create the atmosphere in which an investor leverages their own network to get in front of you and your company. I realize most folks won’t be able to do this, but it’s a good goal to shoot for. So, what helps? Having a product that people are using, and/or having others espouse the greatness of a product. It’s not all about explosive growth, it can be unusual engagement, a unique design or technology — something that stands out in conversation. It can’t be engineered out of thin air, but it also presents founders with an interesting question — if people aren’t knocking down your door (or email inbox), could that be a signal the offering isn’t differentiated for the investment climate? Again, there will be exceptions, but it’s an intellectually honest question to ask.
Essentially, this type of approach — to create enough of a gravitational effect to attract investors — takes into account and exploits the motives and business model incentives facing institutional investors. I don’t want to discount the chance for serendipity in these meetings. But, I also want to lay out how I see “turf” factoring into these meetings, the nuanced signaling that happens as a result of who gets to control when and where a meeting occurs. As with anything related to leverage, the best position to be in is fielding inbound requests — by whatever means necessary. In such a competitive environment, it’s the best route to stand out.
This will be a shorter, more informal post over the holiday weekend. I’ve been slammed with work and travel and finally used a three-day weekend to dig myself out of a backlog of work and home items. As I may have written about earlier here, every summer I try to revamp this site with some new features or pages. We are about to get underway for the 2014 revamping — the biggest additions will be around the investment activity (in Haystack) and a way for people who visit the site regularly to engage in Q&A. I will also finally be investing in better email newsletters (and moving off of WordPress’s emails). If you have any additional requests or ideas, now is the time to send me a note.
One idea a friend gave to me has been rattling around my brain. I’ll admit, at the beginning of the beer (we talked over beers), I didn’t like the idea, but by the end of beer #2, I did. My friend, who also used to be a columnist for TechCrunch, suggested that I go back into my archive and, at random, pull old posts and record a short 3-5 minute audio podcast of the “backstory” behind the post. Then, I would take the embed code from SoundCloud and add it to the post, so the result would be like an original script with a bit of extra background from the writer. Most people aren’t going to care, which is fine, but as I’ve had folks here reading this blog now for over three years, I thought I’d ask and see if even a few of you would find this interesting. A lot has changed over three years, and it’s so easy to record and upload quality sound now, it struck me as a great idea. But, that’s just me. Please let me know what *you* think.