Technology Archives

Investing Notes From The Upfront Summit (2016)

At the start of 2015, I was lucky to head down to LA for The Upfront Summit. It was a blast, so I was excited for this year’s event, and 2016 was even better. I just got back to The Valley last night after two days in Hollywood, and I wanted to share my big, key takeaways from the event from an investing POV (note, there’s tons of stuff which happened which won’t be listed here — also, as the videos of these interviews get posted, I’ll update them here):

The LP Mood
One of the things which makes Upfront Summit unique is the community of institutional LPs who come to LA for the event. There are a bunch I already know, and then always a chance to meet new ones. They’re all very nice and likely much more open in this setting, and of course, hounded by GPs eager to update or pitch. While I cannot reveal any specifics some of the LPs mentioned on stage at the event (those sessions were off-the-record), I will try to synthesize the larger themes from all of these discussions:

1/ LPs seem to remain very committed to VC category
2/ LPs are currently active in re-upping in existing funds and finding new fund opportunities, though many have remarked to me they want to see Q1 unfold to get a better sense of how the year may look
3/ LPs view microVC (sub $100m) as a morass and many expect consolidation (firms buying firms, or withering)
4/ LPs concerned about generational transition at the established funds

So, while VCs may slow down (and that’s probably a good thing), the folks who back VCs are playing a longer game and see opportunity in the market and with new funds.

The Troy Carter Interview
…video coming…
I have read many pieces on Carter and certainly heard a lot about him and his career (he’s a legend), but I’ve never seen him interviewed 1:1 and talking about his career and how he broke into investing. It was personally the highlight for me. I can’t wait to watch the interview again. He’s a fantastic storyteller and is so clear and forceful when he speaks. It’s really a story of how he was able to identify, align with, coach, and promote talent, and along the way, it turns out he’s pretty damn talented himself. No wasted words. No wavering. No ego. (Perhaps I’ll update this more once the video is up, my write-up won’t do it justice but also it’s also best enjoyed as a primary source.)

The Fred Wilson Interview

As a venture nerd and someone who reads both Dan Primack’s Term Sheet and Fred Wilson’s AVC blog every single day, this interview was the highlight for me. Dan is simply the single best person to interview a pro VC. And, I’ve probably watched or read every single interview Fred has given over the last eight years. I have never seen one like this. You have to watch the interview (when it’s up), and there were many things covered, but what was unusual about this interview is Fred said some things that VCs often say privately amongst each other but never in public, and that’s what makes it so good. Here are my big takeaways:

1/ On Dearth Of IPOs: Many VCs have been public about wanting CEOs to go for IPO sooner and not clog up private markets. Fred came right out shouting “Man up! Woman up!” You don’t often hear this kind of candor as for years many VCs have been cautious about been seen as pushy. The last few years has felt like VC is a helicopter parent for portfolios, swooping in to rescue teams in times of duress but never willing to publicly shine a light when things have gone too far out of control.

2/ On VCs Taking Money Off The Table: If a VC has a chance to take money off the table (and many do), it’s not often reported because the larger VC doesn’t want to disrupt the vibe at the company and among other investors. Fred just readily admitted that being creative about liquidity opportunities is part of USV’s philosophy. He also cited the reality that despite what LPs or the public thinks, VCs have very little control over when liquidity opportunities come their way — so when they do, they should be taken seriously.

3/ On Generational Change At VC Firms: Fred admitted USV is thinking about this issue, and remarked on other firms he felt did a good job of this and some he didn’t. The main message he sent was that many of the larger funds should make sure the older guard steps back from the carry a bit to attract new investing blood. That’s one of many strong reasons why so many people are spinning out, raising separate funds, or not going down traditional VC path at all. For firms that get generational change right, the networks and brand can persist and create opportunity for new types of GPs to get added to the fold.

4/ On Founder Responsibility: This is the part where Fred jumped out of his seat. Primack asked a question about something, and Fred turned to him yelling “If you take money from me, you have a responsibility to return that money. You can’t just say ‘Fuck you.’” Whoa. OK. The issue here is that there’s been so much money in venture and such a hype cycle, many VCs are afraid to have more confrontational debates like this with their founders because they’d be concerned their reputation and deal flow would get hit. (I’ve written about that particular interplay between governance and deal flow, see here.) Fred may have been involved in a situation where a company he’s backed doesn’t want to exit. That’s happening more and more, and after a while, some people aren’t going to like it.

Investment Criteria, Focus, and Process For Haystack Fund 3

Investment Criteria For Haystack #3

For my third fund, Haystack III, which is still a small fund (but larger relative to my previous funds), I wanted to share a simple and straightforward guidepost for founders, seed syndicate partners, angels, and larger VC firms as to what I’m looking for, what my process is, and what to expect from me if I get the chance to work with a specific startup. (I will continue to update this list based on feedback, so please consider it a work-in-progress and feedback is welcomed.):

Sector Focus

For Fund #3, I will invest in pre-seed, seed-stage, and select Series A rounds. I am investing only in the Bay Area and in three (3) sectors, listed below (old post on why Bay Area only, see point #1). In each sector, I have some specific things I’m looking for, as written below. Please note these sectors are set for Fund #3, but I will likely change them a bit in Fund #4:

SaaS (Enterprise & SMB)

Elements that I’d like to in place see are:

- presentation of an offering which leverages proprietary data and/or brings machine intelligence to the market on top of specialized data; or creates a new category entirely
- demonstrating mastery of — or a genuine interest to learn and master — classic SaaS metrics, such as MRR or ARR, ASP, ACV, Churn, and more (link)
- should have at least have either prototype in beta or product in market
- should have a detailed customer pipeline plan (doesn’t need to be complete) that demonstrates capability of prospecting and prioritizing

Heavy Industry (Software & IoT)

Elements that I’d like to in place see are:

- for software and applications, should be focused on some element of surveillance (drones), design and support (3D printing software, industrial AR)
- for IoT, should be focused on (relatively) cheap, low-power distributed sensor networks paired with corresponding software services; these often run on HaaS (hardware-as-a-service) business models and therefore should be thought of as a variant of SaaS
- should have at least have either prototype in beta or product in market
- should have a detailed customer pipeline plan (doesn’t need to be complete) that demonstrates capability of prospecting and prioritizing
- demonstrating mastery of — or a genuine interest to learn and master — classic SaaS metrics, such as MRR or ARR, ASP, ACV, Churn, and more (link)

Direct-to-Consumer Technologies

Elements that I’d like to in place see are:

- prefer to be able to test and try out product
- specific interest in digital health and wellness
- specific interest in new mobile communications tools
- am curious about VR but will admit more attracted to infrastructure and content generation
- am curious about Apple TV as a platform; would love to learn more
- prefer to see either technology brought to market or potential marketplace/network advantage
- In general, with respect to Consumer, I’m more open-minded and have preferences over criteria; I expect the founders to see the future, not me.


Seeds Is A Process: each process is different because each seed round is different; sometimes, it can take a few days, other times, I’ve gotten to know a founder over the course of months.
Introductions: I don’t mind cold emails (first.last@gmail) so long as people are economical with their communications and have taken a few minutes to determine if they meet the criteria listed above; email is the best and only way I prefer to be contacted. Formal introductions to me aren’t necessary; my job is to meet new people and get to know them.
Diligence: At times, I can tend to ask lots of questions; my hope, in those cases, is that the founders like the questions and enjoy answering them and the ensuing dialog it creates. On the B2B side, I’ll often bring a customer or two to the founder in the process if I’m interested to see how the interactions go and learn more about the product and problem. I prefer conversations stretched across days and mediums versus pitches and quick decisions; I also like to learn more about a person’s background, things they’ve overcome in their lives, and examples where folks have shown great drive and/or resiliency.
Email Ain’t Perfect: I get over 200 work-related emails a day and now have three kids at home; i sometimes will miss an email, so while I can’t guarantee a response, I am pretty good at replying, and i’m hoping the clarification of what I’m looking for will help both sides.
Investment Size: typically invest $100k to $250k as a range, and usually it’s $100k; currently, do not seek or ask for pro-rata rights; that said, I do have reserves in my model and my hope and intention is to provide enough value along the way such that the founder will want me to come along for the ride from Series A and beyond.

Post-Check Interaction

Getting To Series A: In the process above, I try and make sure the founder(s) and I are on the same page about the path to Series A. The main value I add is to help founders develop a framework for what will be needed for a larger, institutional raise, and this cuts across many product and company functions. I spend a lot of time with larger, institutional VCs and, when the time is right, take great care in finding appropriate matches between founders and VCs. I view this as a deeply personal endeavor and one that is hard to match using software and/or spreadsheets of target lists. [see here for more resources on getting to Series A]
Customer Development: On the B2B side, I work with founders closely on sales pipelines and often bring customers to them.
Executive Recruiting: Additionally, I help close senior or executive candidates who are considering joining the startup, but cannot really be effective at helping a founder recruit overall — my intention is to fund entrepreneurs who are themselves recruiting machines and have a pipeline plan to execute against.
On The Personal Side: Finally, I’m available all the time to chat: text, email, phone, or beer and whiskey when necessary. I’d also ask folks not to take a “no” personally. I’ve had to say “no” to friends and that is the worst. I have and will continue to make mistakes as an investor. Lucky for all, there are 3,000+ early-stage investors in the market, so a “no” from me should just be no more than a slight bump along the road.

Things I Won’t Do

- Introduce you to investors if I am not involved
- Consider an investment if main HQ is outside the Bay Area
- Consider uncapped notes or valuation caps that are way ahead of today’s realities
- Participate in unnecessarily huge round sizes relative to operational plans

** I will continue to update this list based on feedback, so please consider it a work-in-progress and feedback is welcomed –

Quick Reaction To PG’s Essay, “Refragmentation”

As Paul Graham usually does with his essays, he makes a deep point with relative ease. Today’s essay, which many of you have read (and if you haven’t, please read it here) is even more intense. I had a sense he would be writing about the relationship between the proliferation of technology and its potential relationship to income disparity, and I know from some of his tweets over the course of the last month, he was likely extra careful in selecting his language for fear of being accused of insensitivity given the consequences if his theory is correct.

I’ve read the essay now twice and, as someone who grew up studying history and still tries to pay attention to how broader themes shape nations, societies, and cultures, I have to say that Graham’s essay is one of the most powerful I’ve ever read. He spends more time explaining “why” the world is the way it is today, and doesn’t wade into the territory of “OK, so what do we do about it?” Those are thornier issues to discuss, and perhaps the first step in addressing them is the acceptance that they’re happening to begin with.

If I had to boil down the essay (which is unfair, because it is very economical in its language already), my big takeaway is that as the 21st century unfolds with the power of the Internet at scale through mobile devices and the proliferation of technology and computing power into every industry, it calls into question The Coase Theorem which, for decades, defined why larger corporations existed — to manage complex transactional costs. Today, based on this essay, one could argue The Graham Theorem is now that networks of smaller companies render Coase obsolete. A step further, these smaller networks of companies (like that come out of YC) leverage technologies (through instruments like APIs) and can be run by smaller numbers of people, yet will likely accrue financial leverage as a result of the ratio of human:computer labor needed to manage and execute those transaction costs. Computers now make it cheaper, faster, and more efficient.

(As an aside, I’m sure there are other factors to consider in the argument that were not discussed. It is his essay and point of view. I am sure land issues could be another factor that drives inequality, or complex issues around socioeconomic status, race, gender, as well as access to educational resources.)

I do mean to imply there aren’t other factor at play, but to me, the more interesting question posed by the essay is — “Let’s assume this is happening. Then, what?”

Graham stops short of suggesting “what.” I understand why. It is too much for this post. The first step is acceptance. Income inequality is happening, and it is (perhaps not entirely?) driven by the accelerating rate and power of technological proliferation.

If society does “accept” The Graham Theorem as the prevailing OS of society (replacing Coase), what should our collective response be? Here are some ideas that are cited, and likely we will need all of these and more:

1/ Education: “We need more access to better education.” Yet, many believe our higher education institutes have been raising tuition while failing to keep students on pace for changes in the workforce. Perhaps YC is one of the first examples of that — forgoing graduate school, for instance, to join an accelerator.

2/ Guaranteed Income: This has been an argument — to proactively set basic income levels for citizens — advanced most notably by USV’s Albert Wenger, and most recently by YC’s current President, Sam Altman. Albert has been writing about the intersection of these issues for many years now, and I believe is writing a book that will touch on the topic. You can read one of his posts (which links to a video talk) here.

3/ Taxation: Graham points out we could theoretically tax economically accretive behavior to slow the effects of The Graham Theorem and redistribute wealth, but if done too bluntly, those creators could move to another nation that has more favorable laws and would want to compete for that talent, just like companies are competing for talent today. (This also is connected to global immigration, see below.)

4/ Immigration Reform: This is a sad topic in America today for so many reasons, especially given what is happening in other parts of the world today and how so many of America’s great entrepreneurial stories are carried through by first-generation immigrants. Many have clearly argued for immediate reform, but that seems politically infeasible in a country where xenophobia feels on the rise and where more and more people are beginning to feel excluded from the pistons which drive today’s global economy: technology. (Earlier, Graham has argued on his blog for U.S. immigration reform, citing global competition for talent as a potentially zero-sum game.)

Graham ends his essay today with the following warning (italics and emphasis added):

I worry that if we don’t acknowledge this, we’re headed for trouble. If we think 20th century cohesion disappeared because of few policy tweaks, we’ll be deluded into thinking we can get it back (minus the bad parts, somehow) with a few countertweaks. And then we’ll waste our time trying to eliminate fragmentation, when we’d be better off thinking about how to mitigate its consequences.

It’s a strong statement by someone who is careful with their words: “we’re headed for trouble.” As a reader of Albert’s blog for many years, I’ve come to admire his academic-style and now policy work to advance the issue. He and I have disagreed on what will actually happen. I admire that he is using his power to advance the issue and writing a book which touches on the subject. I am not as optimistic (sadly), where I see the “trouble” being more pronounced, leading to real conflict, causing many people to feel excluded from the economy and from the means of production, and while I want essays like this and Albert’s book to have a positive impact on policy and legislation, the country’s politics and willingness to make hard choices upfront seems to be running on limited reserves. That is my own personal takeaway from reflecting on Graham’s excellent post.

Quick Follow-Up On Facebook, FreeBasics, And India

A few days ago, I wrote an opinion post on my blog, based on my point of view on what I’ve read and my experiences working in India, about the debate going on India currently between’s Facebook’s desire to push FreeBasics and the impassioned response (among many of the vocal majority) to oppose it. I knew when I was writing it and when I hit publish that many people wouldn’t like my POV, but my philosophy in writing publicly (for better or worse) is to think about my own POV and to share it without apologies, no matter the recourse.

The recourse in this case was a bit more than I had bargained for.

I received many Disqus comments and tweets lashing out at my POV. Some of them were too ad-hominem in nature to even entertain. Some of them had a strong but polite differing of opinion. I also received many private emails, which on one hand is great because I am grateful that people care to read what I write, but also a bit overwhelming as some of them were quite accusatory. That said, a few folks did write to me very thoughtfully and some engaged in conversation over email, which I greatly appreciate — I never write to prove that I’m right on a topic, I write to share the POV that’s inside my head, and I never claim for that POV to be correct.

In digesting all of the attacks and feedback, I wanted to clarify a bunch of things that are either related to me, to the original post, or to the issue in general — I realized in reading some of the comments that I likely didn’t do as careful a job in selecting or framing my language with disclaimers, and I underestimated (despite my local knowledge) how much of an emotional issue this is for many people.

So, in the spirit of continuous learning, of never assuming I’m always right, of being unafraid to clarify or admit an incorrect passage, and in the spirit of defending my own right to share a free POV (which folks can also choose not to read), I offer the following quick follow-up, in no particular order:

1/ I have spent real time working in India. With major universities. With the government. I have been all over the country. I may not be on the ground now or have been yesterday, but I got a lot of messages asserting I’ve never spent time there or know the country. I have also followed the issue at hand, despite people conflating their disagreement with me with evidence of my being misinformed.

2/ I do not work for Facebook. That was a comical assertion among a few. I am a Facebook fan, I own lots of Facebook stock (relative to my overall portfolio), I think it’s the best-run company in the world, and no matter how folks in India or other parts of the world get online, chances are good anyway a majority of them will end up on Facebook properties voluntarily.

3/ The focus of my argument was rural. I should’ve done a better job stating this upfront and multiple times. Yes, people will still disagree with that (which is fine). Naturally, city-dwellers in India of all socioeconomic levels will have access to new or used phones and be able to get online one way or another. I don’t have great confidence in the government’s ability to do the same for rural populations (which are over 600M+ in India), and cited some harsh historical facts to make the argument. Of course, people didn’t like those and saw them as patronizing — I love India and the people and would never say I am better than the country. No patronizing on my part or intent, and I used the term “License Raj” as a historical term applied to rural settings, but I think it was too hot-button to use at all. I should’ve stated the following, too: My preference, of course, would be for the country itself to bring these folks online, but I was just being honest in my POV that I don’t believe that will happen in a reasonable time frame.

4/ I did a poor job of not pointing out that I do personally believe that net neutrality is important. Of course, I do. Rather, I was making an argument out of being pragmatic, out of cutting a corner to accelerate access to wireless networks and the web. Of course, in a perfect world, people should be able to get online and not be restricted of where they surf or what apps they use (and pay for them in proper ways). I see the debate today as a way to kickstart (if even imperfectly) the onramp, and while the majority of responders (who disliked my post) disagreed, that was just my POV. Of course, in a perfect world, I would hope the Indian government and Indian telco’s got the rural folks online. That would be my hope, and again, for better or worse, my honest POV is one of deeper skepticism around that happening in a reasonable timeframe. Yes, I could be wrong, but that’s my POV. My hope wouldn’t be for Facebook or any other company to fill that void, but I do believe we will see more of this in other countries and, given Facebook’s execution prowess, I think they will succeed in cutting these types of deals in other places.

5/ Twitter isn’t a great Medium for conversation. It was much better to have emails sent to me calmly explaining what folks felt or read. I was able to digest and see where my language could’ve been misinterpreted. I appreciated the time those folks took to write to me privately. Thank you for that. On the flip, it was easy to just block and mute people who were attacking or conversing blindly on Twitter, but another lesson learned on the medium. I also got tons of messages of people I’ve never heard from in my life who said they were long-time readers of my blog, but only know felt compelled to reach out to me. I guess there’s no time like the current right now to introduce yourself.

Anyway, I learned a ton through the process, which is always my ultimate goal, and again, I am truly grateful for those few folks who wrote to me privately and shared their POV. Thank you.

Looking Ahead To 2016

Earlier this week, I tried to boil down the top trends that defined the startup and investing landscape for 2015. Next up, I want to think about what will shape our experiences in 2016. This isn’t going to be a post about pontificated predictions like “Digital Healthcare is going to take off!” Rather, I’m trying to anticipate more specific events that I expect to (1) occur within the next 12 months and (2) have a material impact on the early-stage company formation and investment POV. Here’s a short list of things that I believe will impact my work and our early-stage ecosystem over the next year:

1/ Seed Stage Cliff: Now with the market shift hitting private early stage markets, many of the companies seeded after 2011 and that’ve either raised huge seed rounds and/or booked extra fundraises via post-seed or seed extension or second seed or debt rounds will begin to see their runway run out. Not only has the market cooled, many downstream investors want to see real momentum after a seed round and most seeded companies simply just don’t have it. This isn’t something to be ashamed of, this is just how it works. The difference before this autumn is that people felt runways were infinite, whereas now most are starting to realize they’ve been taxiing on the runway the whole time and running out of fuel. There will be more Medium posts. Seeded startups will just run out of money. A few teams may get scooped up by larger companies, but folks can’t count on it. Overall, this is rational behavior and healthy for the ecosystem to divert extension capital from experiments which haven’t worked and allocate them to new areas which seem riper for venture investment. (More on this below.)

2/ IPO Watchdogs: 2015 was a slow year for tech IPOs. The fall and winter came quickly and the end of the year can be distracting, but in 2016, I suspect there will be more intense focus on every single tech IPO filing, specifically with spotlights aimed at what the public market valuations will be compared to what the private growth rounds were for the last two years. The issue now is that even if 1-2 companies go out and have a smashing IPO, they’ll be labeled as outliers whereas the market overall is now expecting the rest of the IPOs to be priced below what the previous private round price was. Those news stories will compound the narrative of multiple compression up and down the stack. This will provide venture investors with even more ammunition to ask for more ownership and keep valuations in check.

3/ Virtual Reality Will Begin To Seep Into Mainstream Conversation: Please note, my dear VR-haters, that I used the words “begin to seep.” The reason I believe this will happen in early 2016 is because Facebook — the best-run company in the world right now — has over 200 people across two buildings on campus working on all sorts of technological and ecosystem issues within virtual reality. Facebook along with other OEMs will start to distribute more headsets to consumers, and there will of course be a wide variety of sophistication among them. There are some people who think either VR is overhyped and will never happen or that it will take many more years, but I’m entering 2016 with the assumption it will happen and that it will happen much sooner than most people think. And with Facebook putting so many resources behind just one flavor of it, I take that seriously. At the same time on the venture side, it’s not being reported (I’ll explain why below), but some of the best VC firms in the world are pouring serious, serious money into VR infrastructure and content creation tools. They’re not even opening the emails about companies seeded three years ago (see Point 1 above) and instead focusing on the future here.

4/ Apple TV As A New Platform: Speaking of next battlefields for at-home entertainment, Apple’s revamped TV will start to see more developers building apps for the ecosystem. This isn’t an area I’ve followed too closely, but I’m planning to spend more time here in 2016. I’d love to read any good posts you’ve read or hear your thoughts on how this could unfold.

5/ Many VCs Have “Moved On” From Yesterday’s News: There’s plenty of innovation and corresponding investment in new areas of robotics, autonomous driving systems, drone systems or application companies, virtual reality and TV (see above), and a host of other areas that rarely show up on the tech blogs or have their financings announced. So people can worry about what they read in the news, but rest assured the majority of the best and most experienced investors are ahead of the market. This will also impact how institutional rounds will get done, or not get done…for example, companies that are doing somewhat well in an out-of-favor category like online-to-offline logistics may get quite a chilly reception from VCs.

6/ The Era Of Promotion Is Over, For Now: It has felt as if the past five years has been about promotion of founders, of companies, of investors, of up-rounds, of valuations, of up-ticks, of raising more and more money, and so forth. Everyone participated in the promotion of technology as a force, and while I personally believe the fundamentals are strong for technology as the foundation for the global economy, the markets finally ended up disagreeing with the pace at which prices were growing. Right or wrong, that’s what happened. Now, people are carrying a more sober gait. VCs realize some of their best portfolio companies will have valuation adjustments or even down-rounds. Entrepreneurs are now internalizing the chilly response they got in the fall and winter and readjusting expectations for Q1 fundraises. After the era of promotion, I believe we are entering a new, more muted era of “results.” Companies, firms, and people with public profiles (myself included!) will be called on to demonstrate output and results. Over the past few months, many of the top VC firms on Sand Hill have been keeping their newer investments quiet, partly out of a market-competition fear, but also — I believe — an implicit realization that the value of investment promotion has a limited shelf-life. Even one of the hottest consumer apps to get rounds of VC funding remains mostly under the radar.


Facebook Meets The License Raj Of India

It’s easy to think of Facebook as the world’s largest social network. It takes a bit more imagination to envision Facebook as the world’s dominant global nation-state, a new type state where citizens can connect and communicate across political borders and where the network’s CEO, who is only currently 31 years old, is on a march to be the world’s richest and most powerful businessperson by a long mile.

Zuck and Facebook have been able to tackle and master most challenges that’ve stood in there way. Today in India, the company and want to use a mix of satellites and unmanned aerial vehicles to provide connectivity to India’s rural population. And, of course, there is a catch, but one worth exploring.


In a previous life, I worked on many projects all over India. For a while, I thought I would move there — I was born in the U.S., first-generation, and grew more and more fascinated with the idea of moving to India during and after graduate school. I don’t want this to come off the wrong way, as I love the country and all the potential, but I got burnt out by the business climate and found myself longing to get back to California.

It’s been a good while since I’ve spent cycles thinking about India at large, but today was a day that jogged many old memories. The background is: Facebook CEO Mark Zuckerberg and his team have devised, with, a way to bring basic web communications and services to the rural poor in India, with the help of unmanned aerial vehicles, micro-satellites, and balloons. The catch is Facebook won’t provide these new users with full access to the entire “heavy” web of YouTube videos and bulky web pages — instead, he and Facebook will offer, in partnership with India’s Reliance, a zero-rated (e.g. free of data charges) service called “Free Basics” which will provide users with basic web and communication services such as email, chat, education portals, and so forth.

Zuckerberg is a savvy technocrat. With one billion users on his platforms today, he knows the two plum global markets to crack to grow Facebook are China and India. ‘Free Basics” is a digital olive branch meant to simultaneously connect hundreds of millions of poor and unconnected citizens across India’s great farmlands.

But, as I learned by catching up on all the news today, no good deed goes unpunished.


Activist groups in India are trying to block the deal. Their argument is (1) net neutrality must be protected on behalf of new digital population and (2)  Free Basics restricts the web for the poor. Activists in opposition to Facebook’s deal believe giving away this audience to Facebook isn’t worth the long-term risk of giving aways keys to the digital kingdom to a California-based company that’s on a path to be the most powerful corporation in the world.

From the POV of Facebook and, their remote data technologies would empower some of the world’s poorest people, in conjunction with Reliance for data, to harness the web for basic functions like learning, communication, photos, and so forth. Most recently, however, it seems like both the media and the regulators are having cold feet about giving Facebook these keys to their citizens. (You can read Zuck’s op-ed he placed in Indian newspaper here.)


The License Raj in India both provides protection for national industries but also presents a roadblock to national economic success. For instance, for many decades, China would leverage the unique tax and economic incentives with special economic zones (SEZs), but India’s attempt to copy them mainly resulted in property scams which marginalized the disenfranchised the poor rural landowner. Going back many decades to the time of India’s independence from The British Empire, U.S. forces and automakers tried to be first to market by offering to build highways and roads for the new country in exchange for the right to sell into these new open markets.

India refused these overtures from “the outside” in the past, a reaction most-likely fueled by a distaste for its own historical memory of colonial occupation. One could argue a host of reasons why India should have acted differently, but it’s worth keeping in mind India has only been truly independent since midway through the 20th Century. There is a deep-seated belief in India, after the Raj, that they themselves as a nation want to address their own problems. India prides itself on its democracy, but even that political system is not wholly their own — it was a parting gift from its previous rulers everyone accepts to be the best system of governance.


What we have today in India, of course, are networks of crappy roads, two-lane dangerous highways, and a government who doesn’t have the will to consider modern infrastructure projects. Will the state of India’s physical roads provide a harbinger of what to expect as the country gears up to have hundreds of million more citizens come online through all the new and reused mobile phones that will be hitting the market?

Given all this context, this is why the news about activist groups in India trying to stop or disrupt Facebook’s negotiations is so tragically comical. After Facebook built up a this service (“Basics”) and prepared to offer this suite of services for free in return for trying to hook the newest of the new potential users, dissenters began to question the impact of Free Basics as it relates to the Net Neutrality debate. To this end, you can read up about India’s possible nuking of this deal and read specifically the op-ed Zuck took out in an Indian newspaper today to make sure his arguments are heard.

In the end, paternalistic activists may end up blocking Facebook from its plans in the name of Net Neutrality, thus denying the over 600 million citizens who live in relative rural poverty the chance to escape the farm, the chance to leave the slums, and the chance to simply communicate with their families, which could by now be scattered across India or other parts of the world.


Personally, if activists in India block this, it will be a sad day for the country. If Facebook’s plans are thwarted, how will the Government of India step up to ensure these rural citizens have the devices, networks, and money to charge their phones and pay data rates in order to surf the neutral net they want to defende? The Government can say “no” to a new project, but would they have the resolve and passion to fund an alternative to universal web services access?

Probably not.

The lingering effects of the License Raj are crippling India when the country needs order the most. The cult of the License Raj drove India to mostly build its own roads and spur help from other outside forces. Today’s roads in India are an outdated relic of the past, and there’s no reason to believe tomorrow’s data networks will be any better.

I wonder if someone polled just 100m rural Indian citizens and asked them, if given the choice between (1) a basic smartphone where they could search Wikipedia, connect with other people, email, and talk on Facebook-related platforms and not have to pay for the data or (2) nothing, I have a sneaking suspicion at least 99m would opt for Choice #1.

Whatever happens here, the larger point is global corporations are the new data networks that society will be built upon, and in the case of Facebook, can provide critical infrastructure and access to a huge population at a much faster and efficient rate than government could. By contrast, India’s government, activist culture, and penchant for arguing nuance may end up losing the forest (a step toward universal access and lifting out of poverty) for the trees (long-term concerns around Net Neutrality).

When I post this, I know it will rile up some folks in India and who are ex-pats who sympathize with the protective benefits of The License Raj culture, but I feel quite confident having access to the web (even if limited to start) is a core human right and an essential ingredient to lifting anyone — in India or other rural places in third-world countries — into a new life.

The Force Awakened In 2015 Startup Tech

Star Wars is all the rage now, as it should be. As I was reflecting on 2015, indeed, the Force (of the market) awakened. Turns out there are a lot of problems in the world to solve and lots of money to fuel those experiments, but there aren’t as many markets (yet) to play in, and the value of those markets are now in question. So, here’s your 2015 round-up — Wait, what just happened? Well, a lot happened in startup tech in 2015, but I tried to boil down a much longer list into the largest them which I believe have the most impact on what we do, day to day. Here goes, and please share other huge themes you think I’ve missed. (I’ll try to look out to 2016 later this week.)

1/ Big, Public Consumer Tech Co’s Got Even Stronger: Amazon is surging with Prime Now, the huge value in its AWS business; Google reorganized to Alphabet is performing well; Apple is the most revered tech company in the world, despite the Watch not being ready for prime time; Facebook is the best-run company in the world right now and on a march (I believe) to be a trillion-dollar company; Netflix is everywhere and a leader in original (and damn good) content programming; even Microsoft, almost 40 years old, is making smart buys, playing mobile well, and has lots more cash on hand to make things interesting; Uber and Airbnb, while still private, are surging into global networks which can continue to grow as the rest of the world gets on to social networks with mobile phones. Given this surge, it’s becoming an even more precise art for founders and investors to find new markets to create or exploit. (Related posts: Makings Of A Third Haystack Fund)

So, where did some of the most creative founders end up looking for opportunities?

2/ Text As A Command-Line Interface: Magic, the text-based startup, is a poster-child for this new wave of services being rolled out on SMS rails without every shipping a native app. As mobile native app distribution continued to choke, founders exploited a channel that was sitting under our noses the whole time — texting and chat apps, which on mobile take the place of browsers. Facebook then announced M for Moneypenny, an assistant which would reside inside Messenger to help a user find information and complete tasks. Other variations of this have sprouted up in text apps and for email, many touting AI capabilities to offer more cost-effective, API-driven services to users. (This trend, among other great moves by the company, has helped (1) Slack penetrate deeper into the workflow of newer companies and (2) newer startups like Operator provide a command-line interface for commerce, powered by Uber’s underlying logistics.) (Related post: Hacking Mobile Distribution And Deployment Via SMS)

3/ Subscription Models, Even For Consumers: As the market has turned (see below), many investors have sought sanctuary in business models traditionally suited for VC: subscription. SaaS companies bringing new, novel tech to the market can see $100M valuations in ultra-competitive rounds even while the product is in a closed beta. This drive to subscriptions has spilled over to the consumer, as companies like Netflix, Spotify, and others have demonstrated, consumers are willing to pay on a monthly basis if they see the value and ease of the model. Startups like Classpass (and even Slack, given its consumer-whimsy bent) exemplify this. (Related post: The SaaSification Of Consumer)

4/ User-Generated Live-Streaming Media: Decades ago, CNN launched a campaign for iReporters, individuals who would go out and act as volunteer reporters to then give their content back to CNN and be part of a story, if one broke. Fast-forward to 2015, the launch of Meerkat and Twitter’s acquisition and integration of Periscope catapulted the category to real-time. There’s also YouNow. While the infrastructure isn’t there yet, it’s easy now to imagine a world where anyone can watch a live Periscope of some event that isn’t broadcast on TV or some other paid channel. My belief is that live-streaming is a very important development, but it’s a feature of a social network, because a user needs a network to provide context before jumping into a livestream. Nevertheless, here we are and it’s a big consumer thing. (Related post: Meerkasting In A Brave New World)

5/ Publishing Into New Media Like Instagram, Vine, and Snapchat: Ages ago, only select few people could have enough resources to create a short movie or show and have it broadcast on TV. YouTube started to democratize that, but now with Instagram, Vine, and Snapchat (and even Facebook Video) on our phones, there’s a whole cottage industry of big-time apps and tools available to help everyday users around the world lip-sync to popular songs, create collages, sell merchandise, and so forth. Instagram, Vine, and Snapchat are the new MTV and Home Shopping Channels, except at a scale we could never imagine.

But, as Obi-Wan Kenobi said to Luke aboard in the Millennium Falcon in “A New Hope“: “I felt a great disturbance in the force, as if millions of voices suddenly cried out in terror — and then suddenly silenced.”

6/ The On-Demand Chill: With some high-profile closures, the private markets began to realize not every good and service needed to be on-demand and funded with venture capital dollars. I see this as a healthy sign in that VCs didn’t keep these companies alive and they were high-profile enough so that everyone saw the damage with their own eyes. This allowed the industry to self-correct a bit, and that’s a healthy thing. Those dips aside, the on-demand sector was definitely a huge trend in consumer behavior (powered by mobile and labor market shifts) and will make many investors who picked the right startups a fortune. (Tangentially, people assumed the “gig economy” would become more of a political issue as we get ready for the race of 2016, but that hasn’t really happened…yet?) (Related post: The Chilly Freeze For On-Demand Startups)

7/ YC and AngelList Shake Things Up: AngelList raised a $400m seed fund, and YC created a full-stack funnel and engine to fund startups. This puts more money into the already bulging seed ecosystem, but also puts more long-term pressure on traditional venture models which haven’t cultivated their own funnels. Building and/or accessing a good funnel is very time- and money-intensive, and most firms can’t afford what it costs to make it. (Related post: AngelList and YC Continue To Shake The Trees)

8/ Market Shift and Multiple Compression: Around Labor Day in 2015, there was a big shift in global markets, which affect the U.S. public markets, which then shined a light on the late-stage private market which has marked-up many tech startups, and fear began to spread among private investors. Yes, VCs are still investing, but the bar has been raised (which is a great thing) and everyone in the system has had to down some corrective medicine. One particular effect has been on “multiples,” the premium some investors would pay for a business or access to a company’s shares. Those multiples have compressed to the point where many of the seed deals I see now are priced around the sane territory of $4m, give or take. Everyone has seen one of their best companies now be effected by this multiple compression, so if (1) someone tries to tell you it doesn’t exist or (2) you think you’re the exception, you’re likely getting or giving yourself poor advice. (Related posts: The Big Chill In Seed; A New Kind Of Draught In The Valley)

In the 2015, The Empire struck back. The force of the market awakened. But in 2016 and in technology in general, I firmly believe there’s so much hope in building and financing new technologies, so much value to create and invest in — depending on where you look, what you read, who and what you pay attention to. More on that and more on 2016 in another post later this week.

Investing In Mobile 2016

As someone who worked in mobile, wrote about it all the time, lived and breathed iOS platform, and discussed widely my reservations for investing in the space, I’ve been thinking again lately how I’ll invest in mobile in 2016 — or even at all. I’m a broken record on this point, as we all know the mobile market is the biggest market to ever exist, yet it is so hard to get distribution and the power law in app distribution and usage makes investing in the category quite a crapshoot.

I’ve kept this post by Fred Wilson on Contextual Runtimes open in my browser and finally had the chance to digest it. In his post, he focuses on the search for the next runtime, pulled from a larger post on mobile from Benedict Evans. Because the App Store is a mess and because the dominant mobile OS today is a closed system (iOS), and because OEMs who fork Android lose access to Google Mobile Services (GMS), I found myself agreeing with a few of the new runtimes that could be on the horizon, but mostly disagreeing with the others.

Type I: Permission Likely Required
-Facebook Messenger, WeChat, LINE, etc.
-Google Now on iOS

Type II: No Permission Required
-Open Street Maps

Type III: OS-controlled
-Siri (on iOS)
-Google Now (Android)

Type I apps suffer from the same platform-dependency services faced when leveraging platforms like Facebook. One day, Facebook could just turn off or divert the flow. A new app could integrate into Messenger, but if it took off, would Facebook stop it? History seems to point to “yes.” Type III is a similar situation. On iOS, is Siri even viable for Apple’s own native app suite? Probably not. I’m not holding my breath. For voice on Android, I’m not on the platform but I’d imagine Google’s product here is great and with Android’s open source ethos, easier for a founder to build and though the threat exists, it’s hard to see Google stopping anyone. However, Google may control what goes into Google Now. We’ll have to wait and see. And, Maps seem obvious as the OS acts as a gatekeeper.

So, if we focus on Type II, on the “no permission required” list in the middle, those are the areas that could be more ripe for an investment given that the founders of a new company won’t run the risk of having the mother platform disrupt their status. First, notifications. At the moment, any native app on iOS can build in more interactive notifications and widgets, and those in-notification interactions can make it such that a user doesn’t even have to enter the app itself. Second, keyboards are a cool idea but just a whole mess. The implementation is bad and I don’t expect it to get better soon. Once installed, the UI to access them isn’t, in my opinion, a mainstream behavior. Third, open maps like OSM or other mobile mapping development platforms could liberate founders from the pricy API calls for Google Maps or Apple Maps. Fourth, the rise of Slack and all the creativity around new Slackbots is promising because, unlike Facebook Messenger, Slack (1) can’t really control what accounts with specific properties get created and (2) they’ve organizationally shown an interest in inviting more bot-makers to the platform, to the point where they just launched a $80M fund to invest directly in them.

Speaking of bots, Fred’s partner Albert also recently wrote a post on the rise of bots, like Slackbots:

Another place to look for sustainable businesses in the Bot Rush is to consider the picks and shovel suppliers. Is there something that all bot companies can and will use and won’t consider core? One thing might images. If your bot needs to understand what’s in an image you may not want to build that yourself but rather use an API such as Clarifai.

In my current fund, I’ve only invested in two (2) consumer-related technologies, and one of them is in this mobile-bot picks & shovel space. I’m really excited to see how it plays out. The founder is great. I believe in him and his team’s talent. And, I’d love to meet more founders attacking the Type II areas I list above (minus keyboards). If that’s you, please contact me.

Blocking On Twitter

Lately on Twitter, there have been some interesting threads (and posts written about those threads) on the topic of blocking people on Twitter. It’s a timeless debate with no morally correct answer. Some believe any user has the right to block others, while others believe Twitter is about open, public debate for all.

This wouldn’t be a topic I’d write about, but this morning I saw an article on CNN (!!!) about Marc Andreessen’s blocking techniques on Twitter. You can read that here. As I was reading it, lines like this felt like the author of the post on CNN was drawing some far-out conclusions:

The famed Silicon Valley investor appears likely to block people who think differently than he does — and maybe pose a threat to the bubble of ideas that he wants to grow.

I am not sure that’s a fair line, especially an opening line of a post on CNN. Personally, I have received public replies from Marc that have disagreed with my original tweet, and I have — like many, many others — have publicly disagreed with him and not been blocked. Second, a VC’s investment in technologies like Bitcoin and VR (for which Marc’s firm is somewhat famous for) are surely met with skepticism and differences of opinion, likely even within the firm’s own general partnership. Fred Wilson has written a few posts about how he believes VR is currently over-hyped, and some people shared those posts publicly on Twitter and publicly agree with that, and they tell Marc that, and I don’t think he blocks them for it.

Stepping back, let’s look at the root of why an active user may block folks on Twitter. I partially know this because, as a very active (but small) user of Twitter, I probably blocked more accounts in 2015 than new accounts that I followed:

1/ Foggy Identity: Facebook forced users to use real names and clear pictures of their faces. Most do. On Twitter, often you can’t tell who a tweet is coming from. Those same users may not have a clear picture of their face, may not use their real name, may not publicly signal in their bio where they work and are affiliated, and may not use the bio feature to include a URL back to their profile or LinkedIn. I know that when I get too many tweets from the same account and I can’t tell who it is, I just block it. “Who” says something matters more than “what” they say.

2/ A Changing Twitter Feed: Many active users of Twitter are deeply committed to the product and root for the company to succeed. They also sometimes fear it will be gobbled up by a larger company or may not make the steps necessary to advance the product in the same way Facebook has managed to. Being vocal about blocking people is also a power user’s way of sending a signal back to Twitter that hopefully improves its data sets that will be leveraged to produce an algorithmic newsfeed (like Facebook) as the company moves away from time-based feeds. Oftentimes I’ll mark spam users as spam (which is bad for them), but most of the time, I’ll just block because I don’t want to mark those folks as spammers, even if it feels like they’re spamming me.

3/ Beware: Outrage Twitter: It’s pretty hard to have a civil conversation on Twitter. Part of this is due to the product and its constraints, and part of it is because of human nature. It’s easy to pick up a phone, create a Twitter account, and just get pissed off about various issues and fire off a bunch of tweets. It’s great, in the sense it amplifies the notion of free speech, but there’s no clause in the first amendment which also guarantees that one’s free speech must, by law, be heard by every recipient. Overall, this is a cultural shift I’ve observed on Twitter over the past few years, and on one hand, it’s awesome because people are really leveraging the medium to change opinions and drive change, but there’s a darker side to it, at times, where it becomes too easy to take a breath and think about a civil response or disagreement. A step further, a journalist with a big public platform can take those tweets as public record and use them in a post — oftentimes, the context gets lost in that transfer. That can tire a power user on the platform who wants to make sure they see the tweets from the people they want to hear from.

4/ Faving Craze: For someone who may “fave” or star lots of tweets, that can add noise to the original user’s activity stream and potentially incite a “block” to clear up the stream, though here I’d recommend a “mute.”

5/ Observational Policing: A reader of this post pointed out that when she observes someone behaving badly on Twitter, she reports it as harassment and also blocks them.

The Tension Between Governance and Deal Flow

One subtle facet of venture I’ve observed lately is the inherent tension between corporate governance of a startup by an investor and that investor’s deal flow. LPs, the entities which invest in VC funds, obviously want their GPs to have meaningful ownership in the companies they invest in, as well as taking a seat on the companies’ Board of Directors. Here, the VC as the GP has to balance the interest of the LP (as a fiduciary) with the interest of supporting the founder (being a good citizen), and along the way, guiding the company and founder to subsequent rounds of funding at marked-up prices and, hopefully one day, an exit via M&A or IPO.

The last few years have put a strain on this equation. In an era of greater transparency and social graphs, VCs are often “referenced” by their earlier founders when looking at a new deal or getting new deal flow. In an era of cheap money with many different sources of capital, there is more competitive pressure on a traditional VC to make sure his/her deal flow and references are glowing, or risk the reputational damage from being associated with a disgruntled customer. The result has been, in my general observation, an environment in which being “founder-friendly” is of such vital reputational interest to the VC that it can oftentimes trump their fiduciary responsibilities. Further fueling the friendly vibe is the cheerleading and promotion required to score a “markup” for a portfolio company to improve one’s own stats as a VC.

Don’t hate the players, though, hate the game.

The result of this new world of VC is that, in the heat of the moment, a VC may (a) opt to over-promote a portfolio company to score a big markup or (b) may opt to look away and forgo fiduciary responsibilities in a distressed situation in order to maintain good reference-ability with the company, leadership, and employees. In scenario (b), the VC could be faced with the loss of $10-20M+ of capital deployed, but the longer-term cost of a damaged reputation can, in today’s world, negatively affect that VC’s deal flow if word spreads.

This is hard for the public to understand, and hard for me, too — I am still thinking this through and would welcome feedback or dissenting opinions.

When an article comes out about a company that implodes seemingly overnight, the rush from the press and Twitterati is to wonder “why is the Board absent?” It’s a fair question to ask, but folks may not like the answer: Because, deal flow.

Deal flow is the mother’s milk of everything in venture. LPs are obsessed with it when evaluating GPs. VCs are obsessed with it to make sure they get a good look at everything early. VCs who are not polite to founders in the pitch process or who rarely fund from their sources can see their deal flow evaporate. Most devastating is the mark of a bad actor. I’ve been in countless situations where the same names and the same feedback keep popping up about particular investors. Founders are smart and check references. That deal flow stops. And, it’s hard to get back.

The result of all of this is that governance takes the hit. Of course, there are many situations where the founder recruits investors and a BoD that he/she wants to be tough with them, and they often become friendly, but maintain their discipline and honesty. But there are other times when the train is moving really fast, the founder is at the helm, and the investors either don’t have enough legal control or simply political will or appetite to step in and get the car back on the tracks. It’s because VCs don’t really have as much control as the public may think they do (in today’s founder-friendly times), and because they’re likely already thinking about the next deal on the horizon.

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

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