Venturing Along With GGV Capital

As many of you know, I have been a venture partner to GGV Capital. Today, GGV Capital announced me, along with another Venture Partner (Denise Peng, formerly of Qunar) and a new EIR (and and my old friend), Jason Costa. More precisely, I have been a Venture Partner with the firm for about a year now, after years of being a consultant to the firm (as well as other firms in the past). For someone like me who is just starting out in their investing career, a dream opportunity.

Yes, I know — it is an unusual, unconventional split-role and association for someone to have, but when I look back on my work history and timeline, my career has simply never fit neatly into a LinkedIn profile. After years of struggling to find a way to cut into the investing industry, I had the fortune of choice last summer. While still raising and deploying Haystack, the early-stage VC fund I started and currently invest out of, the six managing directors of GGV — all whom I’ve known for years — were creative in finding a way for me to join them on certain key projects while supporting me in my own efforts to build up the Haystack franchise.

GGV has been, from its first day almost 20 years ago, a differentiated venture fund. The firm was founded on the thesis that the interconnectedness of the world’s two largest economies — the U.S. and China — would increase over time. Throughout its history, the GGV Capital team has been fortunate to be associated with some of the most iconic global companies and operated seamlessly, at scale, across the Pacific Ocean.

It’s worth noting GGV and Haystack operate at slightly different scales ;-)

Haystack is roughly $10M in the current fund, Fund III (and is only 40% invested). GGV just raised its sixth fund at $1.2B. As part of this special opportunity, I spend my Mondays at GGV and participate in a variety of the firm’s internal meetings. As someone who hopes to create a franchise fund, I am fortunate to have a front-row seat to learn how a large, global venture capital firm operates at scale, makes decisions, builds relationships with limited partners, and works directly with founders and entrepreneurial executives at startups.

This is all the professional stuff.

On an individual level, like many other VCs in the ecosystem who have helped me and individually been an early backer of Haystack, all of the six MDs of GGV have all been personal investors in each Haystack fund. They have even gone so far as introducing me to some of their LPs so I can build relationships with them over the long term — a very generous gesture. When GGV debates a large investment, the MDs will sometimes seek my counsel, and it feels great that they would care to ask my opinion. On the flip side, when I am stewing over a small investment in a very early-stage startup as a single-GP fund, I can always call or email one of them and have them spar with me about why I should or shouldn’t do the deal. Like with their founders, they will always make the time for me.

Almost a decade ago, I was on a path to finish graduate school and move to Asia. As part of that process, I spent many years traveling to and working in India and China on a variety of projects for the university. Ultimately, I chose to come back to the Bay Area, but those experiences in India and China still live with me vividly, and I learn so much via osmosis at GGV about how technology and consumers in Asia are building the next new things.

As we saunter into the final months of 2016, and as I set out to raise Haystack IV in 2017, I am thankful for all of the opportunity that’s laid out before me. As someone new to investing, there is no playbook and guidepost on how to do all of this stuff they call venture capital. Now, I get the benefit of working with two platforms and that is both exciting and liberating.

Venturing Along With GGV Capital

As many of you know, I have been a venture partner to GGV Capital. Today, GGV Capital announced me, along with another Venture Partner (Denise Peng, formerly of Qunar) and a new EIR (and and my old friend), Jason Costa. More precisely, I have been a Venture Partner with the firm for about a year now, after years of being a consultant to the firm (as well as other firms in the past). For someone like me who is just starting out in their investing career, a dream opportunity.

Yes, I know — it is an unusual, unconventional split-role and association for someone to have, but when I look back on my work history and timeline, my career has simply never fit neatly into a LinkedIn profile. After years of struggling to find a way to cut into the investing industry, I had the fortune of choice last summer. While still raising and deploying Haystack, the early-stage VC fund I started and currently invest out of, the six managing directors of GGV — all whom I’ve known for years — were creative in finding a way for me to join them on certain key projects while supporting me in my own efforts to build up the Haystack franchise.

GGV has been, from its first day almost 20 years ago, a differentiated venture fund. The firm was founded on the thesis that the interconnectedness of the world’s two largest economies — the U.S. and China — would increase over time. Throughout its history, the GGV Capital team has been fortunate to be associated with some of the most iconic global companies and operated seamlessly, at scale, across the Pacific Ocean.

It’s worth noting GGV and Haystack operate at slightly different scales ;-)

Haystack is roughly $10M in the current fund, Fund III (and is only 40% invested). GGV just raised its sixth fund at $1.2B. As part of this special opportunity, I spend my Mondays at GGV and participate in a variety of the firm’s internal meetings. As someone who hopes to create a franchise fund, I am fortunate to have a front-row seat to learn how a large, global venture capital firm operates at scale, makes decisions, builds relationships with limited partners, and works directly with founders and entrepreneurial executives at startups.

This is all the professional stuff.

On an individual level, like many other VCs in the ecosystem who have helped me and individually been an early backer of Haystack, all of the six MDs of GGV have all been personal investors in each Haystack fund. They have even gone so far as introducing me to some of their LPs so I can build relationships with them over the long term — a very generous gesture. When GGV debates a large investment, the MDs will sometimes seek my counsel, and it feels great that they would care to ask my opinion. On the flip side, when I am stewing over a small investment in a very early-stage startup as a single-GP fund, I can always call or email one of them and have them spar with me about why I should or shouldn’t do the deal. Like with their founders, they will always make the time for me.

Almost a decade ago, I was on a path to finish graduate school and move to Asia. As part of that process, I spent many years traveling to and working in India and China on a variety of projects for the university. Ultimately, I chose to come back to the Bay Area, but those experiences in India and China still live with me vividly, and I learn so much via osmosis at GGV about how technology and consumers in Asia are building the next new things.

As we saunter into the final months of 2016, and as I set out to raise Haystack IV in 2017, I am thankful for all of the opportunity that’s laid out before me. As someone new to investing, there is no playbook and guidepost on how to do all of this stuff they call venture capital. Now, I get the benefit of working with two platforms and that is both exciting and liberating.

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.

screenshot-2016-09-10-17-58-12

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.

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[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: www.chariot.com/careers

The Story Behind My Investment In Saildrone

Years ago, I used to work in Oakland, commuting downtown daily while living off Dolores Park. That seems like a lifetime ago. Now, entrenched with work and family in the Valley, I rarely get to make it over to the East Bay — I wish that wasn’t the case, as I do believe many great founders emigrated across the Bay Bridge for slightly more sane rents and in anticipation of the changes coming with the spillover effect of entrepreneurship, as well as Uber’s new building in downtown Oakland. Perhaps the promise of gritty new founders and food with real taste will lure me back over time. I hope so.

Earlier this year, I invested in a small company in the aviation defense space. The founder of that company works closely with various agencies associated with DARPA and the Department of Defense, and even before the ink dried on my investment in his company, he told me about another “drone” startup in the East Bay — but this one built autonomous drones for the ocean. What? He couldn’t remember the name, so I did some web sleuthing and finally stumbled upon the company, indeed located in Alameda. I had a number of mutual connections to one of the co-founders, and reached out to him directly.

He wrote back right away.

In a few days, I rearranged my schedule for the day in SF and took a trip across the Dumbarton Bridge, up 880, and snaked my way to Alameda, out to the shore, and into the old hangar that now houses Saildrone. I got to meet the team, toured the facility, and saw the construction of various sizes of bright, buoy-orange seatless catamarans, outfitted with a neat onboard sensor panel, solar panels, and an unforgettable dorsal fin. I went through the motions in meeting, but in the back of mind, I was mainly thinking, one, “How do I get into this company?” and two, “How can I help them raise the round they need to?” I immediately assumed the former would work out, so started working on the latter, and am happy to have brought along a great VC firm into the syndicate around the Series A.

There are so many things Saildrone can do, but perhaps the most interesting is in its cost-efficient capabilities to continuously collect ocean temperature data down to the fractional degree in various ocean microclimates. For those who know how climate change models are built, one of the largest assumptions in those models concerns ocean and sea temperatures — a vessel like Saildrone can capture a granular-level of temperature data that can hopefully better inform and bolster those models. And, this is just the tip of the Saildrone dorsal fin, so to speak.

Saildrone is an exciting investment for me that touches upon three seemingly unrelated themes I believe will play a part in defining the future: (1) The market for industrial robotics, including autonomous drones (whether aerial or water-borne) will be enormous — I have a future post coming on this topic and my various investments in the space, stay tuned; (2) That local governments and municipalities will be under financial pressure from lower tax bases to reinvent their operations and services with software (which lines up with my investments in Remix, OneConcern, and Seneca); and (3) The rate of climate change is actually accelerating faster than even most liberal models can predict, and will force many coastal nations to set aside billions of dollars for FEMA-style funds to pay for all sorts of technologies to help deal with the effects of rising sea levels and atmospheric change — this lines up with OneConcern, and now Saildrone (check out a video here and see yesterday’s coverage in The New York Times).

The Story Behind My Investment In Mux

Earlier this year, Mark Zuckerberg stood in front of a deceptively simple and elegant slide that laid out the future of what Facebook will focus on. In that slide, we see everything from satellites to artificial intelligence, and beyond. In addition to far-out technologies, we also see a heavy emphasis on the power of video — delivered on the web or via mobile. And as 2016 has unfolded, we see mobile video exploding across brands like BuzzFeed (with Tasty), new brands like Arsenic, and of course, Facebook and its various mobile properties getting into the game alongside players like YouTube and Snapchat.

As everyone knows, increased video consumption in general is large consumer trend. While there’s certainly opportunity to invest in new brands emerging built on top of social networks, I am also interested in what founders will help power the underlying infrastructure of the growing market. Relatively speaking, watching video online or on your phone today is still relatively a new thing — and the experience isn’t great. We know a huge wave is coming — across America, most video consumption at homes is still via traditional cable — the Rio Olympics had 26M prime-time broadcast viewers in the U.S. versus about a half-million or so streaming viewers. Eventually, this will flip. Who will make that so?

On the Friday after the W16 YC Demo Day, I reluctantly took a meeting at 4pm, right before picking up my daughter at daycare. A friend recommended I talk to Mux because he also invested. Ten minutes into the chat, I was very glad I did, and 90 minutes later, as I drove away, I was figuring out how to squeeze into the deal. The founder of Mux, Jon Dahl, and his team are known in both the video (Zencoder) and open source communities (VideoJS) for bringing a deeply rich and technical background to their field.

Earlier this week, Jon asked me if I would write something in conjunction with Mux’s funding announcement. “Of course,” I replied — I am proud to be an investor in Mux, but I don’t like “timing” my posts with the onslaught of news, so I’m writing this today on a lazy afternoon where fewer people will see it. That’s no matter. Additionally, Jon pummeled with stats about the online video industry and technical jargon to include, but that wasn’t why I invested. In invested in Jon because the depth of his experience in his field is self-evident, because he received a strong recommendation from a close friend, and because the initial core of the company he’s building has started out with his friends — he doesn’t have to turn into a full-time recruiter to get off the ground, and within their long-lasting network, Mux can snap its fingers and get to millions of ARR when its first product hits.

Jon’s background and his team’s background give them a headstart in what will be a large, growing, and dynamic market. I simply believe that Jon and his team can do what they say they’re going to do, and it’s been fun to provide a pinch of help along the way. But the truth — the dirty secret — is that Jon and his team don’t need much help to get out of the gate. And, I get to go along for the ride.

The Story Behind My Investment In Shaper Tools

Earlier this year, a seed investor I co-invest with frequently offered to introduce me to one of his favorite companies. This startup raised a small seed round a year ago, and in that time, they brought in a new CEO, sharpened their focus, and — lucky for me — I was able to be a part of their next round of funding.

As those who have been following along, I’ve been spending more time in and investing more in what I have called “Industrial Software and Robotics.” The thesis, simplified, is that many of the world’s cutting edge technologies today will first interact with the outside world in the commercial space, specifically in heavy industry. To that end, over half of my portfolio in Fund III is tuned to this industry, so I am staking a part of my career and reputation here.

That may sound risky from a portfolio perspective, but every time I meet one of the CEOs in this space, I am blown away by the range of skills they possess. And with Shaper Tools and Joe Hebenstreit, that happened before we even met face-to-face. Aside from being a fellow Wolverine (Go Blue!), Joe’s career has taken him from Urbana-Champaign to Ann Arbor, from DaimlerChrysler AG to Amazon’s Research Labs in Silicon Valley, from frog designer to Google Glass. After visiting the Shaper Tools workshop in the Mission, meeting the team, and scouting the market, I focused my diligence on Joe’s leadership. The line that stuck with me most: “Joe is staking his industrial reputation on this team and company.”

Shaper Tools rests in a space that some refer to as “human-involved robotics,” where technology can be used to assist — not automate or replace — human work. In the case of Shaper Tools, that could be seen as large advancements in hand-eye coordination; and augmented-reality fabrication, which ties back into Joe’s experience on the Glass team. This is an interesting play into the forthcoming world of 3D printing, based on the belief that humans will still want some agency, control, and tactile feeling of completion of creating something with their hands, even if assisted with technology.

This week, Shaper Tools formerly launched Origin, a handheld power tool which merges computer vision with real-time motor control. In a world with Origin, imagine being able to create your own desk at home, or buying designs of your friend’s desk and making it at home. Origin enables a cut similar to what a CNC router would offer, but at a fraction of the size (it’s portable) and cost — and without needing prior experience. (Note: Origin is the name of their first product, not to be confused with another Haystack portfolio company, Origin, which is in the 3D printing space for additive manufacturing.)

If you’re into woodworking and machinery, make sure to check out Shaper’s website, learn more about the great team Joe leads, watch their campaign video (which actually made me tear up at the end), and look at the pre-order offers here.

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 Jet.com

Jet.com, once laughed at — or, should I say, often laughed at — will now have the final laugh. Walmart will announce tomorrow that it has acquired Jet.com, 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 Diapers.com 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 Jet.com, 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 Jet.com 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, Jet.com 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 Jet.com 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.

Haystack 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