Culture Archives

A Local Fragmentation Tax: Labor, Capital, and Attention

As I’ve been musing about on Twitter, oftentimes in the current Bay Area ecosystem, I don’t understand how very early-stage companies recruit teams to join them because there are so many opportunities (which is great) and so much capital in the ecosystem. At the seed-stage, when investing in a small team, oftentimes those founders turn into near-full-time recruiters. Even when a startup approaches product-market fit or even scores a larger Series A investment (and therefore, more cash, runway, and security), teams struggle to fill their open roles because talent is so fragmented.

But it’s not only human capital which is fragmented — financial capital is also fragmented. One way to sum up the current environment? Mass Fragmentation. We are currently in a state where both human and talent capital is hyper-fragmented.

My bias is that, overall, I think it is bad for innovation. That said, there are some strong arguments as to why it may be a net-positive. For instance, on the human capital side, having more money in the ecosystem empowers more people to start companies, to own their equity, to embark on new experiments; it also encourages new capital bases to invest in the ecosystem, to invest so early as to invest in teams and people who are already known to them. There are valid arguments to “let a thousand flowers bloom” and the participants (and maybe society, at-large) could benefit from.

I am in the camp that this Mass Fragmentation is a net-negative.

Let’s start on the financial capital side. We’ve all seen the tweets and articles about the continued explosion in microVC funds, vehicles which are less than $100M. More and more people are starting funds and acting as access points to help a wider base of LPs sell money to entrepreneurs. As a result, there are more companies forming, which means the “hot team” that could’ve formed five years ago with a core of 8-10 people may now result in three separate startups forming with $2M in seed funding each. At the same time, as many of the traditional VC funds have grown in fund size, they largely haven’t been able to recruit the types of folks they want or need because the best investing talent either has the option to create their own fund (and this is continuing) or work as an executive in a high-growth company and make a ton of money.

On the human capital side,  startup culture is fully mainstream — social cues from The Social Network, Shark Tank, and others encourage everyone to start companies and to be an owner. And there’s plenty of capital to supply them with oxygen, as we see on TV and Twitter each day. Yet, many startups cite “recruiting” as their #1, #2, and #3 core challenge. The traditional VC funds (and even some of the newer ones) have recruited their own “Recruiting Partner” or talent head to help with this function, an arms race where all of them are likely fighting for the same pool of talent.

All of this would be somewhat OK, but location matters, too. While the Bay Area is an incredibly dynamic place, the cost of living here, the cost of mobility here, and the cost of attention puts new pressures on the forces above. When large tech companies and the big growing startups can offer enough compensation and $1M RSU grants at hiring, many folks may opt for this path in order to cover their rent, mortgage, and childcare, among other expenses. To compete, growing startups have to pay salaries which somewhat compete with incumbents. We’ve all by now read about the housing crisis in the region. It’s also difficult to physically move around in the Valley, with more people moving here, more cars on the road, no real increases in public transport capacity, congestion, rubber-necking, and transit choke points are starting to look and feel like LA sprawl on Google Maps.

And finally, there is the cost of fragmented attention. The “salon culture” of conferences, events, private dinners, happy hours, and coordinated social media campaigns is all with good intentions, but we may be at the point where the increase in the number of new companies with cash to spend and new investment vehicles eager to brand themselves for deal flow. To be clear, the intentions here are mostly pure, but in aggregate, it presents the ecosystem with an “Attention Tax.”

And, when this tax  is combined with fragmented financial capital and fragmented human capital, it creates more noise and makes it harder to find the signal. Consider startups working on the blockchain, for instance — while many have been seeded in the local ecosystem, on a global level the communities of developers working on the most interesting projects are more likely to reside in places like New York City, China, and Europe. Or, consider that some of the best VC firms in the world have quietly amassed portfolios with a concentration in non-Silicon Valley companies, choosing instead to hunt for deals in the corners of Europe, China, or across America, where the entry price makes more sense for VC-style returns. These founders and investors face other challenges by not being in the Bay Area right now, but they also enjoy some timely advantages in this time of Mass Fragmentation.

The Story Behind My Investment In Joymode

On occasion, I have had the good fortune of purely investing in a person, usually someone I know well, usually someone I call a friend. I have happily done this with companies like Trusted and EaseCentral. And, I did the same thing with Joe Fernandez and his new company out of Los Angeles, Joymode.

I first got to meet Joe because I wrote about how his previous (controversial) startup, Klout, was actually on to something counterintuitive. Klout was controversial for many reasons, the biggest being that its seemingly arbitrary ranking of social profiles seemed to fly in the face of the democratizing force of social media. It went so far to the point where influential Tech Twitterati would publicly tweet their distaste for the service, even though Joe and his team (run by friends like Don, Matt, and others) attracted institutional investment from some of the best firms on Sand Hill.

I never understood why people hated on Klout so much, so as I was writing about it (see here), it gave Joe and I excuse to meet, hang out, and over the years, become friends. Fast forward a few years, was hanging out with Joe and he informed me that he was packing his bags, headed down south, leaving the Valley behind. He was about to become a dad, and he wanted a change of scenery. Knowing Joe, i can’t blame him. As he was leaving, he was thinking about a new company (originally called “Funship”!) with his cofounder, so I immediately made sure I was meeting him a lot and part of those chats. I was personally bummed that Joe would be leaving town, but also excited about the prospect of getting to invest in Joe.

In the summer of 2014, I wrote a check into Funship and shared the opportunity with a few friends who grew equally as excited as me. For the past two years, Joe and his team have quietly been building Joymode, building the consumer app experience, getting the operations right, and testing a new consumer concept in downtown Los Angeles, a world away from San Francisco’s saturated consumer culture. It’s early days, but I never worry about Joe’s drive.

You can read more about Joymode elsewhere. Here, on this blog, the story is really about what kind of person and entrepreneur Joe is. Joe is someone who just does things without wasting time. When he needs to find a technical solution, he knows how to gather expertise or build a team to address it; or, when he needs to get something elusive, he knows how to cut corners and cut deals. He doesn’t ask for too much advice, instead relying on his entrepreneurial instincts, which I believe are sewn into his DNA and upbringing in Las Vegas. It’s worth noting that Joe and the Klout team drove that company to quite a meaningful exit to Lithium, an exit in today’s environment people would kill for — including many of those in the chorus who didn’t care for Klout and found it gauche.

But, Joe loves the haters. It fuels him. And that kind of fuel makes an investment a no-brainer decision.

Quick Thoughts On Mixing Up The Demo Day Model

The “seed accelerator” model for early-stage investing can and does work well for those running and participating in an accelerator. Yet, the format can frustrate investors who attend. While they are good social events for investors to show up to, the information-overload and herd behavior can make it easier for many investors to just “sit this one out.” In the last few months, friends have invited me to their demo days, their online demo days, their mentor sessions, etc. and I’ve politely declined because I can’t handle the information-overload. I’ve had this conversation with many investors over the years, and thought I’d try an exercise of listing some ideas that could potentially work. I’m writing this so others can either offer other ideas or explain why these ideas below wouldn’t be useful.

As a disclaimer, I’m not suggesting that investors need to be catered to — but rather, these are ideas for the accelerators to help their companies get funded faster and for higher amounts over time. Thanks in advance for your point of view…

1/ Publish and distribute lists with standardized information: It would be helpful to have a list or website of every company in a batch with standardized information about the startup, including founder profiles (and social links), existing financing history (AngelList profile?), and other relevant information.

2/ Publish and distribute 1-page recommendations for the team: When someone from an accelerator asks me to check out a certain company, I’d love to know why? The people running these programs are smart and have seen many teams — what’s different or impressive about the current team in question? Why do you like the solution? I know it’s hard to play favorites but I wonder if this approach might lead to tighter ties with downstream investors and also more funding likelihood. (Speaking of which, publishing batch number and funding histories by batch historically would help investors assess any variance.)

3/ Make applications and reviews public (where appropriate): Without disclosing sensitive information, could parts of a company’s information be made as part of the info packet of a company or shared during demo day time? That may already contain the standardized info I’m talking about above.

4/ Try new things: The format of trying to get investors to physically show up to a demo day can be hard for some accelerators. The Bay Area is hard to cover, lots of traffic, lots of competing events — why not mix it up? Maybe get a bus and go to Sand Hill or South Park? Or, why not team up with other accelerators to increase the volume for a half-day or day-long event? Or, why not just put a longer pitch and founder interview on YouTube and keep it open?

5/ Other ideas from you?

The Mood Among GPs and LPs (Fall 2016 Version)

This past week was a busy week for LPs (those who invest in VC funds) and GPs (those who deploy said funds) to meet and mingle in the Bay Area with a few big events going on. I like to write about what I learn from the LP side because I have found most founders don’t know what LPs think, and I find it useful myself as I’m learning to invest on my own. I couldn’t capture everything from the week, but I wanted to write down what struck me most. While Monday through Thursday were intense and packed with meetings all over the Bay, I finally had a chance to reflect on all those coffees, panels, fireside chats, and hallway conversations across the annual meetings, conferences, and summits I attended this week. (A special thanks to friends Michael and Graham from Cendana, friends at Silicon Valley Bank, and Alastair Goldfisher for inviting me to participate. The notes below are culled from conversations from the events, but I don’t want to attribute them to anyone specific as it should be the ideas that permeate in this case — not “who” shared them.)

From the GP Perspective:

1/ More Funding Checkpoints: It used to be founders would raise first from friends & family and then seed investors, and then finally the institutions who would do a Series A on the smaller side. Now founders have pre-seed, then seed, then an extension, finally get to A, but then maybe A-prime or A-1. This could be construed as more capital efficiency (deploying cash at the right points on the risk curve and empowering founders to minimize dilution impact) or entirely inefficient (spending lots of time being evaluated and having notes stack too high against founders at conversion). I tend to err on the side of viewing this as inefficient, but perhaps this is the uncertainty we all have to navigate through given the explosion in new company formation and era of cheap money.

2/ Syndicate Risk: Many seed GPs talked about how the explosion of smaller firms and more names on the cap tables can cause myriad problems, especially for seed leads — leaking information, proliferation of bad advice, heavy pro-rata duties, misalignment of fund objectives given broadening LP base, and so forth. On the other hand, at the very earliest stages of company formation, it would make sense that the risk is spread out (from a financial point of view), though from the founder point of view, what is best here? It’s an open question and I don’t know the answer (yet).

3/ Smaller or Longer: Exits are smaller than they have been versus 5-10 years ago (though some of the exits are HUGE, but concentrated across a few events), and companies are staying private longer — fewer meaningful exits cut off the oxygen for funds, naturally, as most companies never get to IPO; longer holding periods for private stocks mean LPs and the GPs have to hold and work longer to see liquidity, and this can impact the pace of an investor, and indirectly slow down investors from investing if they haven’t seen liquidity to show back to LPs who could keep reinvesting. (Most are hoping some of their companies get scooped up in M&A if a wave of consolidation should be so lucky to appear.)

From the LP Perspective:

1/ Getting Out: I have been to many of these events now over the last two years in an effort to learn. Never before had I heard the LPs across the board talking about exits — finding managers who know “how to get out,” creating stronger incentives for managers to find exits. As noted earlier on previous posts, managers are often not in control of when liquidity can arrive, and in larger outcome cases, investors without enough control can actually see liquidity slip away because the company owners do not want to sell. (I posed this conundrum to an LP who used to be a VC, and he remarked that his technique to control for this was to invest in firms where the GPs often coinvest together as a means of grabbing control back at the board level around such decisions.)

2/ Chasing Alpha and Avoiding Risk: One LP remarked to me that he gets his “3x” from growth funds, where GPs are making fewer, more targeted bets, looking at tons of data. Therefore, in early-stage, he needs to see 5x, but most funds are just gunning for 3x. Here, they chase Alpha, but of course, so many funds are now bigger, and it’s easier for LPs (especially the larger ones) to park large amounts of money with experienced managers (one reason why spinouts are coveted) who won’t lose the entire farm. We may see the same behavior play out across VC firms according to size, where the smaller funds are more comfortable with taking on greater risk given the return expectations versus larger funds who have really grind it out to return such high values.

3/ Incredible Shifting Sands Underneath Traditional VC: With more funding “checkpoints,” the number of startups and VC firms continuing to increase, the returns coming in (but concentrated), and people slowly leaving traditional VC, LPs see tons of opportunities to find and partner with smaller or newer firms and find new ones that can scale and perhaps not get too big. We now see dozens of firms which started as smaller seed firms now managing well over $100M in a fund and taking on the new Series A; now seed firms are looking for traction and data to analyze; now pre-seed is actually a category that institutional LPs have added to their lexicon; and, perhaps most important, the next crop of founders aren’t as swayed or in awe of the larger institutional VC brands that many LPs have admired for years. And, new LPs are in the mix too — it is not clear which models and vehicles and managers will build the best flytraps to catch the next big outcomes. It’s all up for grabs.

Reflecting On My Investment In Chariot (Acquired By Ford Motors)

I woke up on Friday ready for a day of back-to-back to meetings. Scanning my email, a few reporters had sent short emails asking about some embargo related to Chariot. I texted Ali, the CEO of Chariot, with a casual “Hey man, what the…?”

Then around 10am, my iPhone started to buzz. As with any type of acquisition of a consumer product or service — and especially one in the transportation space, which is red-hot this year — the news that Ford Motors had purchased Chariot (via it’s Ford Mobility Solutions arm [official Ford press release]) was of keen interest to folks in the echo chamber and beyond, as evidenced by the fact it was widely covered by The Wall Street JournalThe Verge, CNBC, Recode, Business Insider, WIRED, and more.

Investing in Chariot was a different sort of move for me, and it ended up being a different type of investment. Initially, I thought Chariot was a joke — as in, it couldn’t be real. Then, I received a very nice email from Ali, the founder, and poked around a bit more (see below). We agreed to meet. Over the course of a few months, we met a number of times. We didn’t have any mutual friends. I had to check his references. I even had to call his lawyer to verify his company’s bank account, records, and other items. Everything checked out.


I still didn’t invest because it was so early. In that time, Ali and I became friends (spring and summer of 2014), and eventually I told him that I’d like to invest a little but mainly introduce him to everyone I know. At that point, Ali had raised some money from friends and family, had gone through the local Tumml accelerator, but couldn’t get past that milestone. Notably, Ali put down nearly $100,000 of his own money to lease the initial vans to get the service going. It may not sound like a lot given all the money floating around the Bay Area, but when you hear a pitch from Ali, you could feel that cash commitment was more than just a pound of flesh.

Chariot careened onward over the years, getting to the point where so many consumers would use it frequently (it had incredible retention rates), riders would spend over half a million dollars per month just along a few routes in San Francisco. It turns out that lots of people just want to get to work and back home without hassle, and they’re willing to pay a bit more than Muni for that comfort, but a bit less than UberX. Chariot added some interesting twists to its expansion model, most notably that it would encourage commuters to organize themselves and crowdsource their demand for new routes and “tilt” a new line. Along the way, Chariot outlasted nearly all of the other well-funded competitors in the space, and while we all know it’s hard to raise funding, imagine for a moment pitching Chariot during a time when Uber is surging worldwide and in your backyard. That is another level for degrees of difficulty.

I finally got to talk to Ali late last night, the day of the news of the acquisition. He told me the whole story of how it unfolded, and how he drove it to a close. It’s not my story to tell (more on that soon), and those details are a bit beyond the point. What’s most important to me — and when I’m writing this now, I don’t even know the size of the outcome [1] — is that working with Ali never felt like work — we were and we are friends. Work has evolved to a point that in some special cases, you are just hanging out with and helping your friends. As Ali was building up Chariot, he would periodically reach out to me, to ask me how I was doing, how building up Haystack was going. He even went so far as to ping all of his old banker friends and big families in New York City (where he’s from) on my behalf. Ali has called me countless times expressing his deep frustrations with some aspect of his quest to give birth to and nurture Chariot, and we have had our share of difficult conversations. There was a time where we didn’t really talk for a quarter or so, but we always remained friends. That made it even nicer to chat with him last night and hear the details — I could hear in voice that he was both excited and relieved, that a part of the race was over and he could energize for the next challenge ahead with Ford, which frankly sounds like an incredible opportunity for him and his team [2].

Some of the “exit” blogs from the investor-side can veer over into analysis — I could’ve have written how Ford is perhaps transforming from an automobile manufacturer to a transportation company. Or, some of them veer into the realm of how much work the investor did to help build the company — I did the syndication stuff, the YC stuff, etc. and I helped close some candidates, but to me, the real story is that Ali and I became friends through the process, and that’s what I’ll remember when I look for the next investment to make.


[1] I received over 50 emails and texts yesterday from friends. All asked about the price, too. I have no idea! I wish I did, believe me. Ali is a vault. What I learned from this process is sometimes even larger firms don’t know the final price of a deal until the wires hit.

[2] Ali wanted me to mention that he is continuing with Chariot, full steam ahead, now with more resources at his disposal, and he is aggressively hiring:

Jerry Colonna Breaks Me Down On The Reboot Podcast

A few summers ago, I was driving from mid-Connecticut to JFK to pick up my brother-in-law. On that long drive down, I stumbled upon a podcast where Jason Calacanis and Jerry Colonna were chatting. I loved the discussion, listed to the entire podcast again, and wrote about it here. Embarrassingly at that time, I didn’t know “who” Jerry Colonna was.

Now I know.

Jerry’s current entrepreneurial endeavor is Reboot. Broadly speaking, Jerry and his team focus on coaching in an entrepreneurial setting, with a particular focus on helping people realize the obstacles and traps they themselves place on their path. I’ve listened to a number of podcasts with Jerry and it’s uncanny how he quickly isolates muscular tension.

From afar, I can understand how the crowd may think being an investor is easy and/or luxurious. And for some, it really is. But, it is also an outcomes-driven business, and it’s hard to know how you’re doing, it can be very competitive, and it is rapidly changing as new investment models and firm emerge. Brendan Baker recently tweeted about this and it is a good thread. As I have done here, I try to share my journey through creating Haystack and raising small funds. It’s really hard, but I love it. And while I’m perhaps more open about it than others, Jerry took his scalpel and made an incision right where some of the pain and doubt reside. It’s a bit painful for me to listen to this, but I hope it will be useful to me (and others) as it reacts with oxygen.

Thank you, Jerry, for the opportunity.

Here is the podcast conversation with Jerry. I’m usually quick to say what I’m thinking, but you’ll notice here I stutter a bunch and there are some long pauses. That’s all due to the fact that Jerry quickly cut to the heart of the matter and surfaced a topic that’s not so easy to have a conversation about.

At the end of the conversation, Jerry challenged me to write down four questions and write out answers to them. I thought about them this summer, and here are his questions and my brief answers.

1/ What kind of man do I want to be?
Beyond the basics of providing for and caring for my family, friends, and colleagues, I want to inspire others around me to have confidence in my dependability. I may not say things they want to hear, but I hope to be consistent. I want to focus on fewer things and pay them the attention they deserve. I want to age with grace while staying as close as I can to newer generations who come of age.

2/ What kind of father do I want to be?
I want to spend as much time with them as I can without the need or pressure to be doing something specific in each moment — just being around each other. I want to foster a home culture where our family takes trips together, looks forward to hanging out together, where family members help others without prompting. I want to be a father who lets my kids make the little mistakes they’ll eventually learn from, and to be a reliable, strong resource for them as they mature and encounter life’s greater challenges.

3/ What kind of leader do I want to be?
I haven’t really experienced being in a leadership position. If someone else does look to me for direction, on- or offline, I would hope that I could be someone who consistently does what he says he will do and isn’t afraid to change his mind when the facts change or are examined from a different perspective.

4/ What kind of investor do I want to be?
I want to attract and align with visionaries who can articulate a far-off future that stitches together complex themes, technologies, and movements. And when I find those people, I want to earn their trust and respect to help them in the ways that I believe I can. To find these people, I want to spend time with them, to read as much as I can, and write about my experiences along the way so I can continue to learn, to be challenged, and continuously shape and refine my ideas for the future.

Light Blog Housekeeping

Every summer, I try to revamp or clean-up this blog. For this summer, it was more about clean-up. There are still some loose ends to be polished up, but briefly, here’s what changed:

1/ The “Haystack” Name: For some reason, I named my site “Haywire,” and that name permeated through Mailchimp, throughout my site, and for other places on the web which syndicate what I write. It rightfully created confusion, all the way to the point where people thought that was the fund name or that I worked for Haywire. It was a stupid idea on my part, and now that’s fixed. Sorry about the confusion.

2/ Top Navigation Bar: I removed “Discussions” because it was never used, replaced “Haystack” with “Portfolio,” and added a Table of Contents along side the Archive, which is reverse-chronological. I hope to add some interesting tabs to the navigation bar over my career.

3/ WP-Engine Hosting: I moved over to WPE. Still not easy to manage, but this site is all I have, so I want to make sure I retain full control over it.

4/ Formatting Miscellany: I increased the font size, added more sharing buttons at the bottom of each post, tried to improve my short and long bio, did some jujitsu to get around ad-blockers (even though I don’t have ads, they still mess up some social icons).

5/ Removing Comments: It’s an end of an era for me. Comments on the web are done. I may add FB Comments Plug-in in the future, but not holding my breath. I love the Disqus product and team (have many friends there), but comments on my site died a slow death and it was time to rip the cord.

Five Takeaways From Walmart’s Acquisition of, once laughed at — or, should I say, often laughed at — will now have the final laugh. Walmart will announce tomorrow that it has acquired, which has raised upwards of $565M of venture capital from some of the best funds in the world, for $3.3 billion. That is a home run, and CEO Marc Lore is now laughing all the way to the bank. This news will stun many in startup-land because, in some ways, it’s unfair — a negative gross-margin business with a huge capital raise could’ve been a symbol of tech and startup excess — and yet, here we are, counting the ways in which the cap table will get paid off for their risk.

Here are my quick takeaways from the deal:

1/ Teams and Targets Matter: Lore’s history with was already a success. He famously didn’t love what happened at Amazon post-acquisition, so he went all “Revenant” on his former employer and launched, raising what seemed like (at the time) an obscene amount of venture capital. And, he repeated this with a model that was part innovative (help CPG create a channel right to the consumer) and part-silly (losing tons of cash to acquire customers). Lore’s bravado, big goals, and chip on his shoulder helped him field a team and attracted VC money. That’s all those investors needed — a big market and someone who is proven and is on a mission. (Making a few assumptions based on Pitchbook data about the company’s first round of financing, a VC writing a $10m check in the first round at an implied valuation of ~$150M, with ownership maintained pro-rata, would now be returning 20-22x that amount in about two years’ time, though we don’t yet know how much of the total sale price is related to Lore’s and the team’s earn-outs.)

2/ “Climate Change” in The Retail Sector is Very Real: About a year ago, I wrote this post on how the challenges facing traditional retail in the U.S. were so steep, a range of startups could jump in and make very strategic acquisitions. In this post, while I mentioned Walmart’s woes, even I overlooked as a potential puzzle piece for an incumbent. I will admit that I didn’t fully understand the dynamics here and, having never met the CEO and his team, clearly underestimated how much confidence they can inspire, even if their audience is living in fear.

3/ Startup Life is Unfair: Like life, startup outcomes are not fair. I can imagine many founders who haven’t broken through yet and investors who haven’t seen liquidity in years shaking their head in a “WTF” rage. To some, represented too much risk to take; to others, its inherent risk and need for cash was its appeal. Risk, like love, is in the eye of the beholder.

4/ Walmart Isn’t Dumb: Yes, Amazon is very smart. A savvy investor friend of mine (who was in this deal early) recently remarked to me that Walmart is the only U.S. company that had enough cash and heft to make this move to level-up against Amazon. The natural reaction in startup-land is that there’s no way The Waltons can keep up with Bezos, but then again less than 10% of all commerce in the U.S. is transacted online. Who will help the remaining 90% accelerate? (Side note – I like Priceline’s angle here, too. That’s for another post.)

5/ M&A Chatter Turning Into Reality: I’ve been back at my blog writing a bunch lately, all unpacking huge acquisitions. This chatter has increased over the past few weeks. With stock prices at all-time highs and incumbents with huge cash sums sitting around, everyone in the ecosystem is hoping this triggers a 6-12 month wave of consolidation, to move from a “dry bubble” to a more liquid realization of value — in cash.

Five Quick Takeaways From Salesforce’s $750M Acquisition of Quip

These big deals are cutting into my sleep! Another day, another interesting deal in startup-land. This one wasn’t quite as big as the $35b Uber-Didi deal, but it’s still big. Quip was just acquired by Salesforce, reportedly for $750m. Quip raised two rounds of VC totally $45m (per Crunchbase) and was a deal that didn’t really hit the VC market as Bret Taylor has been known and tracked for years as a top-flight product designer and entrepreneur.

1/ Front-End Collaboration: Dropbox has Hackpad, Microsoft has Office Suite, Google has Docs, and so forth. Quip gives Salesforce a well-crafted front-end collaboration tool to distribute to its ecosystem. The common thread here is apps sitting on databases to move higher up the stack for value.

2/ Consumer-Grade Product and Design Chops: Benioff noted in a few interviews that he’s had his eye on Quip’s CEO, Bret Taylor, who boasts a top-flight product design resume from Stanford, Google (Maps), and most recently Facebook, where he was a top exec. Elite product design is the ultimate skill in startup-land. Any one of the enterprise companies listed above would’ve paid up to have Taylor and his team folded into their offering — we can assume most put in a bid and that Salesforce probably bid the highest. (Benioff was also an investor in the company.)

3/ Capital Efficient VC For Top-Tier Talent: Taylor was and is a highly sought-after target for VC investment. If we assume he gave up 33% for $15m up front to work with Benchmark as a lead, that would put the return at 16.67x in 3 years time. Put another way, that $15m turned into $250m in three years. (To clarify, lots of assumptions here — it’s possible the $15m raise was much less dilutive for Quip — I don’t know those details. We also don’t know usage numbers, but Quip had a pricing model similar to Slack’s in that you can use it for free until your team got to a certain size. Benioff may have seen the retention numbers on the product be very sticky and translated that to dollar signs when pumped into the Salesforce ecosystem.)

4/ M&A Echo Chamber Chatter: In the last month, there have been more posts and tweets hinting at more M&A from incumbents, who are sitting on cash, all-time stock market highs, and potentially fearful of the future in terms of product innovation. As news hits every week about a mega-merger in Asia or a huge talent deal like this, the shot of liquidity gets peoples’ blood moving and there’s more chatter amongst investors about potential “special situations” to see liquidity in what’s been obviously an illiquid climate.

5/ Creating Something Simple Is Difficult: I wasn’t an avid Quip user, but many good friends were. They would consistently talk about using the product but never rave about it in the same way as other apps or services. I wonder if that’s because so much of Quip’s elegance in design shielded the user from those details. From the times I used it, I could tell it would sync across apps and servers almost instantaneously (it reminded me of Orchestra) and allowed people to collaborate with many people on a document and use design to strip away the noise.

My Five Quick Takeaways From The Uber-Didi Deal

It is late (for me) on a Sunday night and my Monday is packed, so I’m going to forego some sleep and quickly jot down my thoughts and reactions to the news that Uber is leaving China, taking investment from its Chinese rival, Didi, and taking a 20% ownership stake in the combined Didi-Uber China entity. There’s no way for me to cover every angle of this and I’m half-asleep, so please forgive the short burst of thoughts — tracking a company like Uber may require a full-time staff! I’m glad I didn’t go through with the book — Uber writes a new chapter every month:

1/ Cutting Uber’s Burn Rate: It’s an open secret that Uber burns a lot of cash, way too much for public market investors to stomach. Because it’s market opportunity is so large (transportation, logistics, applications), they can curry investment favor from strategics, nations, and consortiums. One wonders how much cash Uber had to spend to compete in China, arguably the fiercest market in the world. Now Uber can conserve the cash on its balance sheet (see below) and direct that cash toward other things.

2/ In Land War, China Is The Prize: There was probably little to no chance for Uber to survive in a market like China’s, for a host of reasons. Nevertheless, it competed with strength, but as the belts tightened and as the cap table for each company became more strategic (cough cough, Apple invests in Didi a few months ago, perhaps to position itself against Uber if needed?), the end-game was near. As an exit, 20% of that combined entity feels like a steal for Uber, as China’s massive population and growth rate are unparalleled. (Uber, which may go public one days — will need a clear story to tell The Street. Not all of Uber’s experiments will work out in the end, but they’re trying so many and doing well with them, demonstrating this discipline will win points down the road as Uber undoubtedly will get more focused.)

3/ Scale and Scope of Uber’s Geographic Ambition: We should pause and stand in awe of Uber’s pace of execution and the scope of its ambition to even go into China. Incredible.

4/ Uberducken Alliances: Can anyone follow which major tech companies have invested in Didi or Uber or Lyft, or all of them? Or can anyone track all the allegiances, treaties, in-app cross-promotions, etc. between companies like Apple, Tencent, Didi, and Lyft, and others? I cannot and will not even try. It’s like one big Turducken.

5/ Uber Can Now Focus Up The Stack: Ok, so Uber won’t own China outright. That was likely never possible. Now as it presumably preserves some cash, it can apply those resources to technologies “up the stack” for a world in which your Ubers are autonomous — that could be pods or cars, sensors, robotics, mapping technologies, deep learning, and a host of other requirements to make a fully-integrated self-driving network a reality. With 80% of each fare you pay going to your driver, the company has a huge incentive to bite into that for its next big meal.

Haystack is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2016 Semil Shah.

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