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.
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.
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:
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.
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.
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.
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.
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 Adam Besvinick, who just joined Deep Fork Capital and moved to NYC; Ryan Sarver, the newest partner at Redpoint; Tommy Leep, who recently left Floodgate to join Rothenberg Ventures; Nakul Mandan, who recently joined Lightspeed to help build their SaaS practice; Elad Gil, a serial entrepreneur who dishes incredible insights along with his portfolio; Lee Hower, who co-founded NextView in the Boston area; and last, but not least, a treat for the audience — Chris Douvos, otherwise known as SuperLP, one of the most insightful and entertaining voices from the LP side of the ledger.
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.
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.