StrictlyVC Insider Series (May 13 in SF)

I’m excited for the StrictlyVC events that are rolling out this year. I’m proud to now be a member of StrictlyVC’s Advisory Board, and the next “Insider Series” event is just around the corner on May 13 in San Francisco. There are a few tickets left, so you can click here to register and get a ticket for the event: http://strictlyvcsinsiderseries.splashthat.com/

The agenda looks awesome for those of you who are venture-nerds like me. Connie Loizos (@cookie on Twitter) has done an incredible job to draw in great speakers who will be in conversation with the group, investors from Sequoia, Lightspeed, and Pantera — and Parker Conrad, the CEO of high-growth startup Zenefits. Specifically, Bryan Schreier from Sequoia will chat with Marco Zappocosta (co-founder of Thumbtack); Connie will have a chat with Lightspeed’s Jeremy Liew (who invested in Snapchat, Whisper, and a bunch of other cool companies; I will sit down with Dan Morehead from Pantera Capital to talk about the current state of Bitcoin, and Connie will end the content session with Parker from Zenefits.

All of that, plus some good beers and conversation before the show starts and after the show ends. I made great new friends at the previous event and ran into a bunch of old friends. For me, even though the content is great, that’s the best part — meeting other folks interested in investing. Get tickets while they’re still available.

StrictlyVC Insider Series (May 13 in SF)

I’m excited for the StrictlyVC events that are rolling out this year. I’m proud to now be a member of StrictlyVC’s Advisory Board, and the next “Insider Series” event is just around the corner on May 13 in San Francisco. There are a few tickets left, so you can click here to register and get a ticket for the event: http://strictlyvcsinsiderseries.splashthat.com/

The agenda looks awesome for those of you who are venture-nerds like me. Connie Loizos (@cookie on Twitter) has done an incredible job to draw in great speakers who will be in conversation with the group, investors from Sequoia, Lightspeed, and Pantera — and Parker Conrad, the CEO of high-growth startup Zenefits. Specifically, Bryan Schreier from Sequoia will chat with Marco Zappocosta (co-founder of Thumbtack); Connie will have a chat with Lightspeed’s Jeremy Liew (who invested in Snapchat, Whisper, and a bunch of other cool companies; I will sit down with Dan Morehead from Pantera Capital to talk about the current state of Bitcoin, and Connie will end the content session with Parker from Zenefits.

All of that, plus some good beers and conversation before the show starts and after the show ends. I made great new friends at the previous event and ran into a bunch of old friends. For me, even though the content is great, that’s the best part — meeting other folks interested in investing. Get tickets while they’re still available.

A New Conference: The On-Demand Economy (May 19 in SF)

A year ago, I wasn’t sure if the “On-Demand Economy” (ODE) was the real thing or just a fad. I’d keep asking myself, “How can this persist?” and plenty of other people would ask me the same thing, given that out of 70 or so investments I’ve made, over 20 of them touch the on-demand stack in some way. Now as 2015 approaches the midway point, I have since gained more confidence this isn’t a fad, but the early stages of an on-demand world where we will summon goods and services via our watches, via single-purpose connected devices, and perhaps even without consciously thinking about it. Geographically, ODE services are tailor-made for the developing world and urban centers in Asia, especially as those consumers and labor suppliers go straight to mobile devices and skip the laptop and web generations entirely.

So, it was even more good fortune when one of my most frequent seed-stage coinvestors in ODE, Pascal, pinged me on IM to say he’s putting together a conference with my friend Misha @ Tradecraft. I jumped in and we are going to co-host this event on May 19 in San Francisco. Pascal had a good base committed, and so I called up Bastian, Max and Apoorva, Tony, Tri, Dan, Nick to participate — they all loved the idea, as did all the great tech writers who have cover the trend, like Ryan, Eric, Katie, Leena, and even Liz after her breakout series on the topic from 2014. I called up other friends who have also made core investments in ODE, and we are happy to have Satya, Steve, and Simon round out the event. As a bonus, I called up Shervin and convinced him to do a 1:1 Fireside Chat with me earlier in the day.

If you are a potential founder in ODE, work in the sector, want to learn more, cover the sector as a journalist, or invest in it, this is a can’t-miss conference. Here are more details:

Date: May 19, 2015 (all day)
Location: Broadway Studios, North Beach, SF (map)
Website: (link)
Tickets: (register)

Existential Risk In The Seed Stage

I just sent this out to Haystack companies which are at the seed stage. I tend to look at things through the lens of existential risk at this stage, which then inform the milestones (not all metrics-based) to reach as a guidepost. I wanted to share it with you all as its generic, but shows how I’m thinking about things today in mid-2015.

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My Job
I view my job as a small investor with a small fund is to identify and help great founders & companies. If I had to boil down where I help most, it’s around getting ready for a proper seed or Series A round, depending on stage. I am here to help and plan out these things with you way ahead of time, so please consider me as a resource.

(For those of you who’ve already raised rounds with lead investors, please disregard — they will now focus on this for you, hopefully.)

However…I have noticed I’ve fallen out of communication with many of you at the seed stage, email is hard, folks are heads down building, etc. To me, one of the Top 3 functions as CEO is to make sure there’s enough money in the bank. In this scenario, it means the next round, and investment rounds usually come together because of (a) breakout growth or more likely (b) reaching fundamental PM fit, key metrics, and other foundational milestones. In my experience, this stuff takes many months to set up and get right, and it takes many months to develop a relationship with the next lead investor.

These are all places where I can help, and I’m writing to offer this to you all again. Ultimately, it won’t work for everyone, and that is OK, but please do keep in mind that if you’re in a position where your cash balance is going down and things need to happen faster, it’s usually hard for me to come up with a palatable solution in a short period of time.

Other Notes
We are in a frothy seed market. It is good to be a founder during a seed round, but the number of institutional Series A deals are about the same. That means, the bar is higher for everyone, and everyone (you and me) should be constantly concerned about future financing risk — even moreso given how easy it is to raise seed. The drop off is severe.

The Month Of May
I will be gone for a lot of May. I have two work trips and taking a family trip. I will be on email, but slow to respond around Memorial Day. Text/FB message me for emergencies during the month, please. I’ll do my best to get back to you quickly.

Talking VC With Kate Kendall And CloudPeeps At Women 2.0

Last week, Kate Kendall of CloudPeeps invited me to speak with her at Galvanize in SF for a Women 2.0 event. I met Kate about a year ago and was happy to become a small investor in CloudPeeps about six months ago. She wanted to have a discussion with the Women 2.0 crowd about her experience as a female founder and CEO, about how she met and interacted with me, and to field questions from the crowd — which looked to be about 100+ people.

The talk went by really fast. Kate talked about how she raised her seed round (just under $1m) and all the tactics she used. It was fun for me because I didn’t see those, but she is a crafty one! We also broke down how I was intro’d to her, how we communicated while she was in NYC (heavy email). and how she finagled an invite to an event I was speaking at, engaged me in conversation, and a few weeks later — I became an investor in CloudPeeps. (The rest of the Women 2.0 talk was very fast, and most of the questions and answers were pretty generic, so I’ll keep this post brief.)

What occurred to me only in retrospect is that after two years of investing at the angel/seed level, Kate was the 1st female founder I’ve invested in via Haystack. Since then there are two more companies with females on the founding team. In my chat with Kate last week, the topic of “how was it different with Kate being a woman?” never came up in discussion. Reflecting back, it never really did come up in my chats, phone calls, and emails with her. In fact, I never thought about it. And, that’s the hard part to convey — the overwhelming majority of investors I know, even those who invest very, very early, wouldn’t discriminate against a woman as founder or CEO. In fact, I have seen many female startup CEOs be at the center of very competitive financing rounds, fielding multiple offers, and in total control of the situation. One company I’ve been dying to invest in for over eight months has a female CEO, and she has told me “no” at least 10 times.

In my chat with Kate, I did mention to the crowd that the life of an investor comes with saying “no” all the time, all day long. I think about my time and attention so much, I often say “no” to social events or running errands during the holidays with family. So, ultimately, investors are going to say “no” to all sorts of people, regardless of color or race or gender. The position calls for discrimination in the sense that most opportunities are passed on, even if they’re qualified or even exemplary as companies and teams. I myself have made a big $100M-run rate mistake as an investment I passed on for a silly reason. This isn’t to say that things couldn’t be improved or that there are unsavory stories and experiences people experience in the game to get investment, but two years in, for at least what I’ve observed, both first- and second-hand, the overwhelming majority of investors I see are busy chasing anything that’s growing or has evidence of promise and with disregard to “who” is helping make that growth or promise happen.

That Was Easy: Amazon Dash Button In An On-Demand World

The On-Demand Stack gets even more interesting every week. The latest installment, courtesy of Amazon, involves little WiFi-connected dongles with buttons for Amazon customers to summon — with the ease of a finger push — more of the item which corresponds with each dongle. Running low on toilet paper? Just tap the Charmin button provided by Amazon (while your phone is nearby) and Amazon will take care of the rest.

Amazon and Google are competitive along the fault lines of search and intent. Both live on input/output. This creative innovation around input from Amazon makes it theoretically easier to order more toilet paper vs pulling out your phone, finding the Amazon app, then inputting the search term, putting the item in your cart, and you may continue shopping, maybe — and then you have to check out. That said, setting up these dongles won’t be a piece of cake for the average user, either. I’m of the belief that even setting up basic bluetooth devices to the phone will be hard for people, but I believe Amazon will make it easier. And, they can distribute anything.

So, if this works, this is a huge leap forward for input — what about output, i.e. how soon you need the toilet paper? That’s where things have been harder for Amazon.

Back in 2013, I wrote a post titled, “From Amazon Prime To Amazon Pronto, The Future Of Physical Delivery.” Amazon figured out how to get us anything in that 48 hour window. Now, for the past few years, with the combination of mobile devices and a shift in the labor economy, new companies have emerged with new models to add gusto to the “pronto.” Some services are set up to deliver you things on demand, such as Uber and Postmates and Sprig — some things are set up to deliver things in a more scheduled manner, like Instacart, DoorDash, Boxed, and Luxe. Amazon has been trying to chip away at better delivery on the same day — they’ve dabbled in groceries for years, they just announced home assembly services for big orders, and they clearly want to deliver more things faster to our homes and offices.

The output function here is trickier for Amazon to execute on within this 48 hour window. Additionally, my observation of how confusing Prime Pantry is for the average user (as many of those household items are costly to ship, so they devised a confusing tax around them) could make Dash a hit because people may not order things at the point of depletion, but rather when the supply is about to be depleted.

Ultimately, the craftiness with this move around Dash Button is something I’d frankly expect from a startup — in this case, it’s Amazon, the somewhat lumbering incumbent, fresh off the heals of that Fire Phone debacle and stock massacre. It is a terrific concept, assuming consumers can wire them up and they work. Let’s see how consumers behave as these rollout. App installs for these nonviral apps is hard and costly, and Amazon can just shove these into corresponding boxes or send them to us based on our order histories.

The other angle is that Dash Button is likely built to be a broader platform, extending from the regular household inventory systems into specific verticals — think basic stores, or small businesses, or to order dinner, or groceries. It all comes down to SKUs. Every button — like every app — can empower the customer to access a SKU from a variety of sources, and Amazon (or a startup eventually) can help get it to the destination fast. End of the day, I’m impressed. Assuming Dash Button is spread to customers properly and they can onboard, it could be 1,000x easier to order versus a mobile app, no question. So if you’re scoring at home: Output is still a knife fight between Amazon, Google, Uber, and a bunch of startups; but on Input, Amazon’s ingenuity scores very, very high, reminding me of the classic Staples ad campaign with the “Easy” button (pictured above).

The Story Behind My Investment In HourlyNerd

Toward the end of college, and again toward the end of graduate school, there was a predictable recruiting campaign from all sorts of consulting agencies looking to scoop up and hire labor. In exchange for brand, a high salary, and a bit of prestige, graduates would sign up early in the final year, start a plan to payoff their student debt, and sign-up for intellectually challenging work filtered down through various organizational levels.

I know all of this because I almost lived it. Worse, I wanted to live it. As I saw it all go before my eyes, I also jumped into the fray, practiced case questions, riding off the competitive juices of the process of staged interviews. That process exposed me to the partnership model of consulting shops. The hierarchy could be loosely described as “finders, minders, and grinders.” New graduates were “grinders,” grinding out the work with long hours; “finders” were the partners, who found new clients and managed existing ones; and “minders” sat in between the two, minding up and minding up.

Now, what if online networks could put the clients directly in touch with labor? Could that create more efficient flow of information, better working conditions, and better output?

I think so. A few years ago, I used HourlyNerd for a few projects and was surprised by the output. They used a vetted network of current and recent grad MBA students, matched by background and interest, to create slide decks, conduct research, and so forth. So long as I (the client) was able to scope out what I needed, the workers (students here) were more than capable of producing the work with the added benefit that we never had to meet, we were able to email and chat online, and they could keep their hours and location flexible.

Then, out of the blue, the founders pinged me about their latest round. This is a bit later stage from when I invest, but I asked the founders a ton of questions about their plans to scale, about how their marketplace could propel them beyond a services network. Even though my check was small for them at stage, they made a concerted effort to engage with me around all of my nitpicking questions. Through that process, I learned some interesting facts: Over a yearlong period, the company had nearly tripled its average project size, that most customers repeat purchases frequently, that the marketplace had very good liquidity, and an average sale price that would make an investor pretty happy.

So, I am breaking my own model for Haystack and investing “late” into HourlyNerd, partly because they’re empowering the folks who, like me, could’ve also taken that traditional path into consulting. With a company like this, now those workers are free to interact directly with clients, to build their own reputations around topics, to travel and live where they want to, and much more. It’s a mission I can support — not only with an investment, but also my time. Sign up here and give it a try, they offer a great discount to start.

The Story Behind My Investment In Gyroscope

Gyroscope

In the middle of 2014, one of my friends on Twitter (@Stammy) kept retweeting an account into my feed, usually with a screenshot. Turns out, it was his friend and roommate, and that friend and roommate had created software which just looked different than other products.

I conducted a bit of Internet sleuthing and discovered my friend’s roommate used to work for a company I was dying to invest in earlier but couldn’t convince them. That company creates great web and mobile products, too, so my interest piqued. I asked my friend for an intro, and after a few months, it came through. I rushed to meet the entrepreneur a few days later.

Turns out, my timing was good.

Anand had built the v1 of Gyroscope, currently web-based software which served as a hub for all of a person’s connected device and monitoring/tracking data. By connecting various accounts to your Gyroscope, the products gives you a kaleidoscopic view of where you’ve been, the pictures from those places, how many steps or calories you’ve collected and more. But more than just aggregating data, there’s something about the product, the design and animation, which makes it compelling.

I wasn’t sure where Anand was in his thinking. I wasn’t sure if he wanted to join a company, or still travel. We talked broadly about his options and I didn’t share any of my own views on what he should do, except that if he thought about it and wanted to start a company, I would be his first check and help him close the round.

A few days passed and he got back in touch. He was ready to start. I didn’t expect that, but was psyched about it, no doubt. We put our minds together, came up with a plan, started engaging lawyers, and all those details — we priced the round, I wired my funds, and started making introductions for Anand. We also opened up a small AngelList Syndicate, which has been closed for a while. At the end of it all, a larger fund also came in to give Anand and Eric a good solid cushion to build out v2 of the product.

As 2015 unfolds, the landscape has changed. Apple has committed some of its attention with Apple Watch to digital tracking, fitness, and health sensors. We are accumulating more connected devices which collect more and more data about us or our surroundings. What will do with all of it? Who owns that data? These are big questions, and while I don’t know the answers, I have a good feeling Gyroscope will be in that conversation.

The Story Behind My Investment In VSporto

JasperBack in 2014, Pascal, another early-stage SF investor who invests in companies at the intersection of local and mobile, introduced me to a kid from Mississippi who is now in the Bay Area starting his company. I searched my email and it turned out Jacob from Exitround (a portfolio company) also tried to make this connection a long time ago, but for whatever reason, we never synched up. The kid’s name: Keith. His company: podcasting.

Ugh.

I get so many pitches around podcasting. It’s hard because it’s just not an area I want to invest in, so I figured some polite way to not engage further. But, then, something interesting happened — I asked Keith about how he started on this, and his answer begin with something to the effect of: “I’ve been doing this since I was 12 years old…”

Oh, really? I rarely hear that, so I listened more (see the pic here, from 1999). Turns out Keith is a huge, huge mega-fan of the Buffalo Bills, so huge that he started building and managing fan sites for the team back when he was 12, living in Mississippi. Since then, Keith went to school, was a producer with Sirius Radio, and during that time, had a novel idea for a product: An app which played fan-oriented podcasts for college sports teams.

To get his idea going, Keith and his team figured out something clever: In many cities where college football was big, VSporto discovered, vetted, and created a monetary incentive for superfans of the local college teams to create a podcast around the team. VSporto aggregates these, pays out CPMs, and builds micro-apps for mobile devices that just focus on a particular school. In this on-demand economy, people are changing jobs and careers quickly. For VSporto, they’ve noticed that people quit their basic day jobs to pursue their interests and talents for podcasting and creating media around the subject they love.

Say you went to Florida State University — VSporto would have ~15 podcasters (or more) who create content, and the app broadcasts those streams through the week leading up to the game. Additionally, one might think the football season lasts a few weeks, but in many of these towns, it’s a full-time job just being a fan.

Check out Vsporto here. To date, they have ten (10) team apps and engagement time for MAUs could be from 47-93 minutes. The average listener goes through two podcasts per day, and nearly 1 out of 5 users will also download the app of the opponent their team is playing; many of their apps have been ranked quite high in the Sports category, which is notable for such a seemingly niche app. The engagement is so deep that the team visited a specific college campus for a football game and hosted a viewing party: Over 200 people showed up. As VSporto commissions content, the company also holds the licensing rights to the media, such as being able to license the content out to various radio stations.

This startup broke a lot of rules for me. I don’t want to invest in podcasting, but they figured out a medium not many others would stick with; and I don’t like to invest often in pure mobile apps because the distribution is choked. When I heard this, I sort of took the meeting as a courtesy, but a few minutes, that’s when it hit me that this is exactly why I don’t like to answer those “What are you looking for?” questions often posed to investors. If I knew what to expect, I would go and try to build it. In this case, I had to have enough patterns around podcasting and Apple’s iOS to make a decision about whether to get involved. I would have never thought of combining commissioned content with an array of scattered apps that all meet on the backend.

It’s early days for VSporto, but I never worry about Keith and the team. They are the only team I know who would have the passion to pursue this idea of building and stitching together niche markets. It is my privilege to support them, to have introduced them to other investors, and to have opened their round on AngelList. In terms of relaying a story about a founder and an a unique approach, it’s probably one of my favorite stories to show and tell.

Meerkasting In A Brave New World

Meerkat has the makings of not only becoming a big, important platform, but you can already start to see how disruptive it may be given all the reactions it generates (“get off my lawn!”) and serious questions it raises about other media networks and platforms. Observing the way folks are using it and how different people are tweeting about its varied potential for over a week now, I believe it has the makings of that rare disruptive platform. Here’s how I think about it:

  1. The best “entry point” into a live experience: So far, we think of Twitter as the real-time network, so it must be that a livestream product would need Twitter as a base. I don’t think this is true. Think of other avenues where real-time information has currency — sports, finance, etc. — and also of online communities and niches that run within these verticals. For instance, breaking news about a football team midweek could affect Vegas odds, fantasy rosters, and more. The best analysts in right now tweet or work for big sports networks (like ESPN); pretty soon, they can just “Meerkast” instead of traditional TV (ESPN) or online (Twitter) broadcast.
  2. Twitter needs Periscope to grow: Twitter has a user growth issue, and offering Periscope “in-line” as a broadcast feature to major celebrities will be a killer feature for the users, but also to help Twitter grow. Media like this can help onboard new users and give them an excuse to follow a few accounts. “OMG, Steph Curry is practicing dunks right now and giving away a few signed balls on Twitter, I need to watch this right now.” Furthermore, these notifications on mobile could have way more currency and make Twitter notices look static. Contrast a notification like “Steph Curry just tweeted: xxx” vs “Steph Curry is practicing dunks….right now. Tune in and win!”
  3. Meerkat can be extensible: While Periscope will live within Twitter, Meerkat can use all of this attention to encourage creators and audience members to create their own accounts and extend the network to other big social media sites. Imagine being able to read a LinkedIn Influencer piece while you’re browsing the site and then see your favorite business authors or self-help coaches give live training via Meerkat. Or a platform like Pinterest, imagine curators showcasing a wedding they’ve planned or a party, or showing off goods they want to sell exclusively on Meerkat.
  4. Speaking of sales, Meerkat’s nativity could lead to money: If Meerkat can figure out the right entry points to grab your attention into their native app or their web browser while you’re logged in as a Meerkat user (regardless of entry point), they can also leverage payment gateways to help facilitate transactions with the ease of a click. Imagine that Taylor Swift is practicing a new single that’s not yet polished, and for charity, she wants to sell the song for $0.99, so as a viewer you can offer to pay and the money is collected and routed to Taylor’s account. Taylor would also know which fans hang out in the room (better analytics on mobile vs multiple tabs on browsers). Hopefully, the infrastructure will support such a big network.
  5. And, speaking of infrastructure, Meerkat’s is great so far: Garry Tan has one of my favorite lines: “The best software is invisible.” So far, Meerkat just works, but to pull off high-fidelity, real-time, synchronous broadcast from one device to many requires robust infrastructure that cannot just be engineered in a month. This gives them the type of defensibility an external investor would look for and also raises the bar for Twitter/Periscope upon release. As more mobile devices come on board, it will not only strain those users devices (video bandwidth is costly in many ways), but may also require a different network architecture that a blockchain-enabled mesh could provide. The timing may be impeccable here.
  6. Mobile software is eating mobile hardware: Just a few months ago, GoPro was the talk of the town; now, our phones are GoPros, thanks to Meerkat’s timing. Will people Meerkast from comedy clubs, sports arenas, private boardrooms, and so on and so on? As there are endless possibilities for celebs and big brands to leverage this new channel, but what about individuals who can disrupt what is bread and butter to networks like CNN, ESPN, The Cooking Channel, and so on…instead of paying a toll to cable operators and studios, content creators now could have yet another layer stripped away and capture more value. There are too many examples to list here, so just pick your favorite show, guesstimate the economics, and now add more to the protagonists and you’ll start to see how Meerkat can leverage the web to trigger this transfer.
  7. The end-user watch points are also aplenty: Where will I watch my favorite Meerkasts — on my mobile devices? In the browser? As a channel or network of channels inside Netflix or Roku or Apple TV? If Twitter only offers Periscope, is there room for Meerkasts to extend and not need to rely on Twitter? You bet there is! And, what if I could watch a Meerkast via virtual reality? A sideline reporter or a network of cameras on a football field could capture the live feed, and I could view in total immersion — in real time.

And, therein lies the challenge and opportunity. The challenge is that while we’re enjoying the flurry of experimentation today, the cost of watching video (especially poorly produced grainy and unstable video) is very high to the audience. It can feel noisy or disorienting. Very few things will have real-time currency, but as more people experiment, no doubt interesting things will emerge. Also, Meerkat couldn’t’ve exploded without ambushing Twitter, and now that Twitter also has its own competitive product, has a huge incentive to bring the feature in-line and give preference to Periscope. While we have Net Neutrality now for our big pipes, the social and interest pipes on top of the web do not have their own flavor of net neutrality. Now, Meerkat will have to go through the work of building out user accounts, finding other networks to integrate with, and helping those with large and niche audiences produce this new style of media. That’s the opportunity ahead, and I’m sure the team will have enough talent and dollars chasing it to see if they can make it into a reality.

A final, personal aside about Meerkasts and blogging — nothing I do in life ever has true real-time currency, so in a Meerkat world, I’m likely to be a consumer, not a creator. In the world of text, I can create, but blogging for me is a way to structure thoughts over time — I’ve been tweeting and thinking about Meerkast for a week, and finally had a chance to write this as my daughter is napping. By contrast, I technically could’ve opened up my Meerkat and broadcast this to you all, but it wouldn’t have been as structured, and it would’ve been significantly more boring!

 

Haywire is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2015 Semil Shah.

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