3253 posts categorized "Venture Capital and Technology"

Duck Duck Go Passed 1mm Searches Per Day

I'm a bit late with this news about our portfolio company Duck Duck Go but I am super excited about it so I'm posting it anyway. I'll let a tweet tell the story:

 

 

One million searches per day is not chump change. AOL does somewhere around four or five times that every day. And if you look at this public chart of Duck Duck Go's growth, you'll see that they may pass AOL sometime this year.

Ddg traffic

Why is DDG growing so fast? Well first and foremost, their product is getting better and better. I have changed all my browsers to default to DDG and I am watching the service improve before my eyes. And the redesign that launched around year end is excellent. So if you haven't tried DDG recently, you should give it a try.

But it may also be that other search engines are doing things that some users don't approve of and those users are shopping around for a new search engine. If you are in that camp, join me at DDG and see what clean, private, impartial and fast search is like.

Utilities vs Networks

It's interesting to see a network, Instagram, starting to replace the iPhone's native camera application in many users' daily usage of their phones. I see this in my kids' behavior all the time. When they want to take a photo, they open Instagram, not the camera application.

In the PC era, when applications got bundled into the operating system, they became instoppable. All the competitive apps got left in the dust. But in the mobile era, it seems that a different dynamic is at play. The native applications are getting beat by networks. And these networks will eventually go cross platform which means that the native applications will be at an even greater disadvantage.

I expect we will see this happen not only with the camera application, but also with the calendar app, the contacts app, the to do list, etc, etc. Clean, simple, networked, social, cross platform mobile apps will be the winning model in the mobile ecosystem and the OS vendors will not be able to maintain dominance with the default apps they ship with the OS.

Networks beat utilities in the age when everyone is connected to everyone else. This is a big opportunity for startups. We've already got a few bets in this area and are looking to make more.

Payments Day

Yesterday was payments day at USV. Two pretty big things that our firm has been involved in for a while now were coincidentally announced on the same day.

First, our newest portfolio company Dwolla announced the closing of a round we led on their blog. Dwolla is building a large network of engaged users via a radically lower cost payment system. How much lower? Zero for transactions below $10 and a $0.25 flat fee for transactions over $10. If you move $10,000 over the Dwolla network, you or the recipient (your choice) will be charged $0.25. That's it.

Dwolla does this by avoiding credit cards. They see credit cards as the enemy. They want to build a system where the money moves directly from my bank to your bank as quickly and inexpensively as possible. They have big plans and we are bought into them.

Dwolla also offers "Instant" which is a way to instantly load your Dwolla account with funds via an immediate loan from a third party bank. The cost of the Instant service is $3/month and a $5 late fee if you don't pay down your instant loan to zero each month.

If you want to try Dwolla on the web, the iPhone, or the Android phone, go here, sign up, and start moving money less expensively.

Another major payments initiave was announced yesterday by our portfolio company Etsy. For a while now, Etsy has realized that checking out via PayPal was suboptimal for many buyers and also many sellers. But PayPal is deeply ingrained into the Etsy community and the company did not want to do a "rip and replace". So yesterday Etsy announced Direct Checkout. PayPal will remain a checkout option for sellers. But starting yesterday some sellers on Etsy will offer the option to checkout directly on Etsy. And Etsy will be gradually rolling Direct Checkout out to all of its sellers over time as they scale the service and the support system around it.

Both of these situations recognize something fundamental about payments. And that is that being in the payment flow allows you to do other more imporant things for your customers. In Etsy's case, that means things like gift cards, better shipping options, better marketing opportunities. In Dwolla's case that means making payments essentially free and making money on value added services like Instant and others to come.

Payments are one of those things that are fundamental to the online experience. And there are large networks that are being built with payments at the core of them. We are proud to be involved in companies like Etsy and Dwolla who are working at the intersection of networks and payments and we certainly would like to be meeting more companies like them.

Building The Ecosystem

I've always seen the work that my colleauges and I do as more than venture capital investing. That is our main job and we need to do it very well. But we also need to work to make sure the macro environment for our investing activities remains attractive.

There are two primary activities that Union Square Ventures focuses on in addition to our core venture capital activities of backing and then working closely with entrepreneurs and their teams. They are policy advocacy around protecting the freedom to innovate and efforts to build the ecosystem for startups and entrepreneurship. Longtime readers of this blog understand this from the many many blog posts on these two topics.

I'd like to talk a little about building the ecosystem this morning. We view "the ecosystem" both globally and locally. We want to work to build a world where entrepreneurship is available everywhere. But we also want to do everything we can to grow and nurture the entrepreneurial community in New York City. And we believe that the things we support in NYC can and will be copied throughout the world so that our local ecosystem efforts support our global ecosystem efforts.

I've talked at length about many of our local ecosystem efforts and I don't want this post to be a laundry list of the things we are working on. Many of you are quite familiar with them. I would like to talk about a specific thing that two of my colleagues are doing that inspires me.

Last week, Gary and Christina asked me to stop by our event space late one afternoon and spend 45 minutes talking to a group of a dozen or so interaction designers. I talked to them about writing, the importance of taking the time every day to put words down "on paper" and how that forces you to think crisply and clearly. It was a great discussion.

This was part of a three hour class that Gary and Christina teach master students at the School Of Visual Arts (SVA) here in NYC. The class is a requirement for the Interaction Design program and it is called Entrepreneurial Design. Gary blogged about the class here and Christina blogged about it too.

The idea to teach this class came out of Gary's observation that almost all of our portfolio companies are suffering from a dearth of talent in interaction design and that we needed to do something to help produce more talent in this area. Gary and Christina didn't ask for permission to teach this class from anyone in our firm. They just did it. Freedom to innovate in action. I love it.

Things like this make a difference. They add up and build on each other. USV is not alone in this effort. Our colleagues in the startup and venture community in NYC and our colleagues around the world are actively doing things just like this. And the result is a thriving global startup movement that is getting stronger every day.

The Academy For Software Engineering

A number of years ago, I wrote a blog post talking about the need to teach middle school and high school students how to write software. In the comments (where the good stuff happens), a Google engineer told me to go down to Stuyvesant High School and meet a teacher named Mike Zamansky who had taught him to write code in high school. So I did that and thus begun my education into the world of computer science education in the NYC public high school system. What I learned was that other than Mike's program at Stuyvesant and a few other small programs, there wasn't much. So began my quest to see more computer science and software engineering in the NYC public school system. 

Yesterday I went up to the Morris High School in the Bronx to watch Mayor Bloomberg's State of The City Address. In a speech that was largely about the intertwined nature of education and the economy, he announced that the city is opening The Academy For Software Engineering this fall in the Union Square neighborhood of New York City. It was a proud moment for me and Mike Zamansky, who was seated next to me on the stage.

I want to personally thank the Mayor, his education team led by Dennis Walcott, and his economic development team led by Robert Steel for adopting an integrated set of technology, economic development, and education policies and then aggressively rolling them out city wide. The Academy For Software Engineering is just one part of a much bigger strategy of developing new industries and new jobs in New York City and making sure we have the education resources, both in K-12 and at the college/university level, to properly staff these new industries.

The Academy Of Software Engineering is not a "specialized school." It will be open to all students as part of the high school admissions process in NYC. The City's goal (and mine too) is to open up opportunities for many more students than the small number of specialized schools can deliver. Hopefully the curriculum that is developed and teachers that are trained at the Academy will get rolled out into high schools all over the city in the coming years.

The Gotham Gal and I have provided the initial financial support to hire a new schools team and recruit a top notch Principal. But we do not want to be front and center in this story. The team at the DOE and City Hall that has brought this school to life and the Advisory Board of educators and industry leaders (led by Evan Korth of NYU) should get way more credit for what has happened to date. And we will need more financial and industry support (as well as a fantastic Principal) to make this school a success. So if you would like to join us in this effort, please email me via the contact link at the bottom of this blog and let me know how you would like to help. This is an ambitious effort and we will need it.

Shapeways and 3D Printing

Last week, in the thread on Herky Jerky Investing, the AVC community forked into an incredible discussion about 3D printing and our portfolio company Shapeways. If you click on this link, you'll see that the conversation just goes on and on and on. Clearly 3D printing is something that has captured the imagination of many members of the AVC community.

We are huge believers in the power of technology to feed creativity and new kinds of businesses. 3D printing in general and Shapeways in particular is exactly that kind of transformative technology. It is still not on the radar of most people. But that is rapidly changing. To get a sense of how fast things are changing in the world of 3D printing, check out this prezi that Shapeways published on their blog yesterday (hint: go into fullscreen mode, it's way better).

 

Fredsquare

Our very own Kid Mercury has built a learning community (and game) called Fredsquare. The following is a guest post he has written to introduce all of you to it. I hope you'll visit Fredsquare, play the game, and learn a bit about startups too.

I am sure the Kid will love to get your feedback on Fredsquare in the comments too.

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FredSquare is an application I’ve hacked together for the AVC community. Its mission statement is to help startups learn. Here’s how it works:

  • Articles and videos from around the web that help startups learn are imported the site.
  • Comments on AVC tagged #fs are also imported. If you’re leaving a comment that you think helps advance the FredSquare mission – help startups learn – please feel free to tag it #fs.
  • Imported content, #fs tagged comments, and original content contributed by FredSquare members is curated and organized to create FredSquare University. I like to think of it as “Wikipedia for startups”: an encyclopedia-style reference source that we can use to continue learning, so that we can build the best startups possible.
  • Those with the Bouncer Badge are responsible for curating content and building FredSquare University. (Currently this is just me, though hopefully we can grow to more Bouncers in time when it is warranted). The more content of yours that Bouncers add to our University, the more Badges you’ll earn. Each Badge is assigned a numerical value, and the sum of your Badges is your FredScore. Boosting your FredScore will unlock privileges as our game develops (right to launch your own storefront and accept FredBucks, discounts on other stores, etc – but all that comes later, once the community has some more engagement).

  • While building an educational resource is the paramount goal, effectively serving our mission goes beyond creating an encyclopedia – for learning is an interactive endeavor, and we humans tend to learn most by doing. And so, the game mechanics of FredSquare also reward founders for building their startup. Here are some Badges founders can earn for engaging in activities that most startups need to do to as part of their path towards sustainable success:

  • Slide Deck (for publishing a slide deck)
  • Video Pitch (for creating a video pitch)
  • Engaged Users (for reaching 10,000+ authentic registered members)
  • Disruptive Strategy (for having a strategy that fits the framework of disruptive theory
  • Click here for a full list of badges.


    Remember that earning Badges boosts one’s FredScore. As our game develops, I’d like for FredScore to serve as a reputation metric of sorts. I hope that it can be used to identify startups getting traction that may be worthy of investment – either via crowdsourcing, should the legislative environment allow that, or by bringing qualified startups to the attention of accredited investors – like Fred. I believe that FredScore, in conjunction with private groups and discussion forums on FredSquare, will provide us with a richer environment for startups to network with each other -- and thus to learn how to build great startups by doing the work involved.   

    Money, Governance, and Copyright

    The creation and management of FredSquare is part of my larger objective of building learning-centric communities with game mechanics for blog stars that will include a P2P economy (i.e. users buy and sell with each other using Fredbucks – sellers must have a high enough FredScore). InformedTrades is a more developed prototype if you are looking for another example. Anyway, as game operator, I will impose a tax on all transactions once our economy develops, and will retain a portion of revenue via virtual goods and affiliate marketing. The goal is to share the majority of revenue with the community via FredBucks (which, in time, will be able to redeemed for a variety services that help startups grow – i.e. hosting, video production, web design, outsourced software development, etc), as well as with Fred’s favorite charity, Donor’s Choose. At present there are just banners on FredSquare, and 100% of all banner revenue is being donated to Donor’s Choose. A large percentage of virtual gift revenue will be donated to Donor’s Choose as well.

    Fred appears to be down with giving me leeway to run this. But while I’m running things, if Fred tells me to do or not do something, I will obey, so long as the order does not violate any law imposed by the US Federal government or the state of Florida, USA. The goal is certainly to channel the brand of Fred and the spirit he has engendered here. I find it extremely unlikely this will be a cause for concern but I do find it worthwhile to clarify as much as possible at the outset.  

    All original content published on FredSquare is CC-BY licensed. Consistent with the spirit of Fred, FredSquare operates on that side of the business model debate pertaining to copyright, under the belief that such a policy will generate the most opportunity for all. If you do not find this agreeable, publishing original content on FredSquare or tagging your comments on AVC with #fs may not be for you.  

    Anyway, the first step is to build the community and get an economy going, then we can all argue about sharing money later. :)

    By now the time has come for me to end this introduction to FredSquare, and for you to make a choice: you can ignore this blog post and tell yourself that there is no hope for society; government sucks, corporations suck, the economy sucks, most startups fail, your mom doesn’t love you, etc. Or you can enlist as a citizen of FredSquare, share your knowledge and build your startup, and be a part of creating the startup utopia that sets us free.      

    Herky Jerky Investing

    The WSJ says some venture funds hit pause on big deals. The Journal describes

    a group of venture capitalists dialing back on certain deals after a breathless year of venture investing that had some comparing 2011 to the late 1990s dot-com bubble. Many venture capitalists said they now are increasingly passing on companies seeking frothy valuations, and some are trying to get off the beaten path to find cheaper deals.

    I am not a fan of this start and stop style of investing. Nobody can time markets. You can't deliver great returns to your investors by being a momentum investor during some periods and a value investor in others.

    I believe the only way to be a top performing investor in any asset class is to have a disciplined investment strategy and approach and apply it consistently and actively in all markets all the time.

    I am proud that our firm has been investing at about the same rate of new investments per year for almost eight years now. It hasn't gone up much but it also has not gone down much. We will never be the most active venture capital firm. But we will never be inactive either. We are open for business as much today as any other day in the past eight years. If you are building a large network of engaged users that has the potential to disrupt a big market, please talk to us about what you are doing.

    2012: The Year That Movements Go Mainstream?

    I returned from ten days of skiing with my family last night. I'm on mountain time and plan to stay there until the new year. Staying up late and sleeping late seems to be a good way to bring in the New Year. But even so, my version of sleeping late is getting up at 8am. My family's version of sleeping late is getting up at noon. That leaves a fair bit of time to read and think.

    And so that's what I did this morning. And here is what I am reading and thinking about:

    1) Ron Paul is likely to win the Iowa Republican Caucus. Newt Gingrich says "I think Ron Paul's views are totally outside the mainstream of virtually every decent American." Maybe Paul's win in Iowa is the moment when Paul's ideas and the Tea Party movement go mainstream.

    2) Occupy's organizers are building their own social network. The idea of a distributed social net that is not controlled by any company or institution has been around for a while. Identica and Diaspora have not taken off. Can a movement make it happen? I think it has a better chance because networks need people in them.

    3) Reddit's users want to target a Senator after their successful attack on GoDaddy. The Reddit community can marshall a lot of activity when they want to. Last year's Rally To Restore Sanity was largely catalyzed by the Reddit community. If they do go after a Senator with that kind of intensity, it will have an impact.

    4) Wired says that 2011 was the year that IP trumped Civil Liberties. It sure feels that way to me. Beware the backlash.

    5) Twitter reports a Massachusetts DA's subpeona to its users. The money quote from that post: "Never declare war on the young," said Harvey Silverglate, a noted civil libertarian, told the Boston Herald in reference to the less-than-tech-savvy wording of the subpoena. "They'll outlast you. They'll outthink you. They'll outdo you... That may be the lesson the DA's office is about to learn."

    Back in the spring of this year I told the folks at Techcrunch Disrupt that I thought the next big thing was "cultural revolution" fomented by the fact that roughly a billion people all over the world are connected directly to each other. I'm still not entirely sure how to invest in this megatrend, but it sure feels like it is upon us.

    Profitable: To Be Or Not To Be?

    Mark Suster has a great post on this topic. In typical Mark fashion, it is long, with a lot of detail and substance. I highly recommend all entrepreneurs take the time to read it end to end.

    For those who won't take the time to read it end to end, I'll summarize it.

    Many high growth companies can be profitable. They have enough revenue to cover their essential costs and could easily decide to show a profitable income statement. But they don't make that choice. Instead they invest heavily in the business with the expectations that those investments will produce more revenue (by hiring salespeople), or additional products (by hiring engineers and product managers), or additional geographies (by hiring an international team), or any number of other value enhancing aspects of the business. The result of that decision is that the business loses money or simply breaks even (I prefer the latter approach).

    There was a discussion of profits (or the lack of them) in the comments to the IPO Market blog post I wrote last week. A number of commenters pointed out that many web companies lack profits. I don't think that is actually true (certainly not for many that have gone public), but it is true that most, if not all, web companies are not optimizing for profits this year or next year. They are optimizing for the ultimate size of their businesss and the total amount of cash flow they can ultimately expect to generate when the business gets to maturity.

    This is tricky stuff. If you are going to take all of your potential profits and reinvest them in the businesss in search of higher growth and greater profits in the future, you had better be right about those investments. And it is often hard for investors to see how those investments are going to pay off, so at times you can be penalized for making those choices. Right now the public markets seem to be paying companies more for long term growth than for near term profits, so it seems that public market investors (and VCs) are aligned in this respect. But that is not always the case. Markets are fickle. But the best entrepreneurs are focused on the long term vision and will invest in their businesses without paying too much mind to what investors want at any point in time.