I have been fortunate enough to spend my entire career in startups, from an engineer and designer to a Founder and CEO. Iâm now a General Partner at Spark Capital, an early stage venture firm that does things a little different, and has invested in some great companies.Â
Companies I have served on the board of, along with relevant writing about those startups:
- All Stripes (A community for cures)Â
- Capella Space (SAR and the promise of a world of information) & (SAR Deep dive)
- Cruise (Doing the hard things the hard way) & (What happens when self driving happens)
- Descript (The power of AI in Creativity)
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Nabeel and I recorded episode 20th of our podcast, Hallway Chat yesterday. Stuff we talked about (not necessarily in this order):
-hardware startups
-Apple Watch, iPad Pro
-Are we overdue for a hot new mobile app, Peach, Snapchat
-VC blogs, why we havenât been writing more and new years resolutions
-our tech habits while traveling on vacation
-As our firm grows, we chat a bit about internal changes and evolution
Please let us know if you have feedback, topic suggestions or questions that we should address in future shows. We would love to hear from you. Leave us your thoughts in the comments or tweet us. Thanks!Â
At the age of 13 I was a geeky outsider, and online life (BBSes in that pre-Internet age) allowed me to find the first tribe of people that I really related to. It was that little band of outsiders that got me into coding, hacking, design, and startups. In my first experiences with the online world no one knew your race, age, gender, or really anything except for your ability to make words, code, or art.
Silicon Valley thrives and survives because it is a meritocracy, perhaps the most inclusive place in the world. Years ago Paul Graham wrote a piece on âCities and Ambitionâ that still resonates with me. His premise was that every major city has a culture with a prevailing value: Cambridge, MA values how smart you are above all else, LA values fame, NY values money, etc. For me the best version of silicon valley has been the embodiment of that early online community; valuing what you could make above all else.
But thatâs not the only silicon valley.
Chamath wrote a provocative piece this week (âBros Funding Brosâ) that underneath its sensationalism resonated strongly. The worst version of silicon valley is a Hollywood-like club of insiders where you are on the career track from Stanford to high-growth-startup-of-the-month to Y-Combinator and beyond. Itâs hard not to think of VC dinners Iâve been at where I had the oddest name in the room, and there wasnât a single woman there.
So now weâve started trying to measure diversity, to chart it out and rank it. I think itâs valuable in one sense, to illuminate where we are really underrepresented. But I also worry that staring at one or two imprecise KPIs is not going to get us any closer to the world we want. The issue lies much deeper than simply watching a male/female % chart and declaring victory if it ticks up.
For instance in the rankings attached to Chamathâs piece, why do Asians count as an ethnic group but Arabs do not (perhaps surveyors were making the common mistake of confusing ethnicity with race?). Similarly, Erica Joy wrote yesterday about her experience at a Google event on diversity where âthere was no mention of any other forms of diversity besides âwomenââ
Once we are talking about women, and African Americans, shouldnât we also be talking about socio-economic diversity as well? Ultimately, we should also hire more LBGT, Arabs, Turks, Asians, Kenyans, rural Kentuckians, etc.
I have now made some personal rules now about investments I will make, events I am willing to attend or promote, but I want to be able to do more. And in order for us all to do better, we need to enlist one of our best traits, our culture of learning.
We have been teaching each other about the craft of startups every day, from LTV calculations, to K rates, to how to manage people. Now letâs talk through the mechanics of how to build a startup culture that is still a tribe, but one that self-organizes around valuing differing backgrounds.
We should do these things not to make a diversity ranking chart go up, and not even as a moral imperative (although thatâs a good enough reason). We should do it because seeking out differing views and maintaining the outsider mentality has allowed so many wonderful things to be created here.
From Apple to eBay, and more recently from Lynda.com to Postmates, there are stories again and again of immigrants and outsiders pushing through and finding a way to make their dent in the world in this town.
Itâs why Iâm here, to help us all build the largest group of outsiders ever assembled.
â
Thanks to Andrew Parker, Kevin Thau, Lo Toney, Maureen Fan, Sara Mauskopf, and Siqi Chen for reading drafts of this post.
Charles Eames is a hero of mine, as you may have noticed the quote on the top of this blog is from him. He and his wife Ray were amazing designers, but they were also hugely influential in how everyone from a graphic design student to startups to Apple thinks about the process of designing today.
Itâs his birthday today, so I wanted to share notes from a 1949 talk he gave at UCLA called âAdvice to Students.â Itâs masterful, and I think of the last line often.
Make a list of books
Develop a curiosity
Look at things as though for the first time
Think of things in relation to each other
Always think of the next larger thing
Avoid the âpatâ answer â the formula
Avoid the preconceived idea
Study well objects made past recent and ancient but never without the technological and social conditions responsible
Prepare yourself to search out the true need â physical, psychological
Prepare yourself to intelligently fill that need
The art is not something you apply to your work
The art is the way you do your work, a result of your attitude toward it
Design is a full time job
It is the way you look at politics, funny papers, listen to music, raise children
Art is not a thing in a vacuum â
No personal signature
Economy of material
Avoid the contrived
Apprentice system and why it is impractical for them
No office wants to add another prima donna to its staff
No office is looking for a great creative genius
No office â or at least very few â can train employees from scratch
There is always a need for anyone that can do a simple job thoroughly
There are things you can do to prepare yourself â to be desirable
orderly work habits
ability to bring any job to a conclusion
drawing feasibility
lettering
a presentation that âreadsâ well
willingness to do outside work and study on a problemâŚ
the primitive spear is not the work of an individual, nor is it a good tool or utensil.
To be a good designer you must be a good engineer in every sense: curious, inquisitive
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Yesterday bijan and I took live video for a test drive with Periscope, and since they are still in private beta we recorded it for posterity. Hereâs a dropbox link to the video or you can listen to it in podcast form above.Â
We talked about Periscope & Meerkat, the Apple Watch, and the state of seed and late stage valuations in startups.Â
Today Postmates announced a long term exclusive partnership with Starbucks. Itâs a big milestone on its own, but it also represents another major step in the transition of Postmates from restaurant delivery service to on-demand logistics network.
The very first meeting I had with Bastian, the Co-Founder and CEO of Postmates, was in their old dingy office in the Mission. It was a multi-hour deep dive into the business, on everything from pricing models, to courier earnings, to user experience. But the moment that has stuck out the most since then was when I asked why Postmates was focused on food.
Postmates since the very beginning has described themselves not just as a food delivery business, but a logistics platform. When I asked Bastian âwhy food as a focus then?â he immediately got animated, in that way he often does, and started talking a lot about liquidity.
He drew on the whiteboard an x/y graph that charted out everything that Postmates could possibly deliver. It was a pretty exhaustive list. On the Y axis he put the size of each market, and then quite insightfully on the X axis he put frequency of use.
His assertion was that you were teaching consumers a new behavior: that you could get anything from your city to your door in minutes. If he converted a single person to love the service, he wanted to focus on a category that would be purchased frequently, so that merchants and couriers (Postmates) could see the most benefit from one converted customer.
Of course he wanted to be a logistics platform eventually, but restaurants were the thing in that upper right quadrant, the only thing that consumers would buy multiple times a week. Basically, what Beanie Babies and other collectibles were to eBay, restaurants were going to be for Postmates. Only in this case the frequency was even more important because unlike eBay, Uber, and other two-sided marketplaces he was building a three sided marketplace: between couriers, merchants and consumers.Â
That bet paid off. A focus on local merchant food delivery allowed Postmates to build the largest on-demand delivery network, with nearly 10k Postmates. They built a network large enough that by late last year they were ready to roll out their logistics platform and API. And after a few months beta period, today they announced their first major partnership with Starbucks.
Obviously Starbucks is a pretty amazing partnership on its own. They have over 21,500 locations across the country, and are the #1 mobile commerce app in the U.S. That will of course mean higher growth for the company, but as with any marketplace itâs also a big benefit for the other participants, namely for a Postmate delivering goods, and for a merchant listing their goods on the service.
Higher volumes will allow a Postmate to do more deliveries per hour, increasing their earnings. That will in turn cause the network of Postmates to grow even faster. More Postmates doing deliveries will mean faster service for consumers. And more consumers and Postmates will create a better experience for local merchants trying to compete with the big guys.
Today is certainly a congrats for establishing a long term partnership with Starbucks, starting in Seattle and then rolling out across the country. But itâs also the fruition of a long-layed plan to building a pretty magical service, everything in your city at the touch of a button.
This is a video from a talk I gave from a few months back on adapting OKRs to the realities of startup life, with a brief write-up on the Spark blog for those not video inclined. There is a part 2 of this that Jon Tien did that is pretty awesome, hopefully we get to post that in the future.
Founders who raise money should act as if it's the last they'll ever get. Because the self-reinforcing nature of this situation works the other way too: the less you need further investment, the easier it is to get.
âItâs bigger than color,â said Chris Milk, the influential music-video director, multimedia artist, and technologist. âItâs bigger than sound. Itâs the audience literally inhabiting the narrative.â
Great quotes from Chris Milk on the power of virtual reality in The Last Medium via California Sunday Magazine & cdixon
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Apple execs seemed pretty excited about the new Apple Watch, but there are still plenty of people that think that consumer electronics companies obsession with watches is akin to 3D TVs â chasing innovation for innovations sake. They are likely wrong.
Back at Ambient Devices in 2001 as we were thinking about the future of our products & glanceable computing we used to have a chart that had âreal-time needâ on one axis and âglanceablilityâ on the other axis. I thought of that graph today as Apple announced their watch.
1. Payment, with the announcement of Apple Pay.
2. Health, with applications for both casual users and fitness buffs. Plus light sensors to read heartrate and blood flow.
3. Communication, with a series of innovations to try and push the watch out of âread onlyâ mode. This included added emoji-texting, a new tap/swipe/heartbeat language, and analyzing text in an sms for one click responses.
Itâs hard to say which of these, if any, will be killer apps without actually using them, but they all have one thing in common⌠combining a real-time need that can be solved at a glance.
When skeptics talk about not really needing or wanting a smart watch âbecause they have their phoneâ this reminds me of folks who didnât think they needed a smart phone because they have a laptop. You absolutely could have used Instagram, Uber, Google Maps, and Postmates in a pre-mobile world â in fact their analogs existed in many cases â but the immediacy of the phone and its sensors made mobile phones the perfect instantiation of these ideas. Taking them from merely interesting to truly magical.
Similarly, for applications where seconds matter, context is important, and the problem can be solved at a glance there is a disruptive new platform â your wrist.
As for Appleâs core three applications, Iâm probably most excited about the innovation in communication. Payment has the largest potential of course, as grabbing my phone to pay isnât much better than grabbing my wallet, but Apple Pay relies on NFC and Iâm skeptical they will be the oneâs to finally crack that particular nut. The health and wellness products are wonderfully designed, but they didnât really focus on realtime feedback and coaching as much as they probably should to warrant being on your wrist. Meanwhile the communication innovations seem like subtle but potentially important ways to make you feel more connected throughout the day.
Of course, chances are that there are use cases still around the corner that will ultimately be what we love the Apple Watch for. For me Foursquare is one perfect example, where getting a quick tip as I walk into a restaurant is much more compelling than digging into my pocket (it was my favorite Pebble feature when I was using that product). Remembering people's names is another, and I imagine a Refresh-like app will flourish on the Apple Watch. And there are going to be many more.
Which is all to say that Iâm excited that Motorola, Google, Samsung, and now finally Apple are attacking this. All the potential use cases will not be immediately intuitive, but that is what is going to give a whole new generation of startups a fighting chance on a brand new platform.
(thanks to Bijan for being my sounding board on this one. this was originally a rant during our podcast this week, but the audio was lost to a badly timed crash while saving)
It catches many founders by surprise, but one of the hardest pitches to a venture capital firm is actually the pitch to your current investors. My friend Rob Go wrote about this not long ago, but it comes up regularly so I wanted to tackle some successful strategies Iâve seen.
The most common reason founders end up presenting to their current VCs is when raising a new round of capital and looking for pro-rata support. Or perhaps everyone is contemplating an inside round. Other times it is just an update because it has been a while and the business has materially changed.
There are two dynamics at play that cause these conversations to be awkward.Â
The first is that the internal pitch is often one of the very first times a founder is presenting for that round of financing, and they treat it as a âdry runâ for the real pitches to come later. On the flip side sometimes a founder is talking to the partnership after a lot of other options have been exhausted and an internal round is on the table (that also probably means the team is exhausted of pitching). This is just an issue of being under, or over, practiced. Â
The second is that founders can feel an awkward sense of telling people a bunch of things they already know. Itâs like telling that really funny college story to friends, only your wife has heard it 10 times already⌠and the whole room is your wife. Â
The folks that have been the most successful at the internal pitch just seem to a do a good job of owning it up to these issues.
The analogy I like to pitch like you are a band performing for your favorite fans. Just because they know the song doesnât mean you can skip to the chorus. In fact it means you have to amp it up a notch, show them you still care. When I say performing I donât mean being inauthentic, just that you shouldnât be afraid of showing the passion you still have for your company.Â
Secondly, treat it like a real pitch. I highly recommend that you do the internal pitch early, as good internal VCs will be able to give you tough feedback that will make you excel with outsiders. But that doesnât mean you havenât practiced against smaller investors or advisors beforehand. In sports you donât wait for the first game of the season to start practicing, even though you know youâll get better as the season goes on.Â
Lastly, one trick I always used to try and keep it fresh was to insert an anecdote or extra slide that was just for the internal VCs. Just a little more detail or a side story that they would get because they have the context. It helped me keep things fresh, and touch on some subjects with those that had been behind me all the way. Much as with any relationship, the most important step is just not taking it for granted.Â
I was chatting with Jonathan Wegener, CEO of Timehop, last week. Timehop is a product that has always enjoyed almost unbelievably high retention and engagement, but previously struggled to hit hyper growth. After a ton of iteration over the last year suddenly they have started to grow quite quickly - breaking the top 50 in the US iOS Appstore, and the top 10 free overall in the UK.Â
Jonathan and his team have steered the product very well, so you can imagine there were a few congratulations in order. But, partly as a testament to the way Jonathan thinks, we spent a lot less time talking about how good growth is and a lot more about the right way to push going forward.
You see, some three months ago Jonathan set a big hairy goal of growing 10x. You know those moments, when you gather the team and say, "I know this sounds impossible but we need to find a way to get to this crazy place in a pretty short time frame."
Now, I don't know how his team took it, but I know that when Iâve set a goal like this with a team there is a really fine balance to be walked. On the one hand a single BIG FUCKING GOAL is bound to get their attention and feels exciting. On the other hand, you have to make the more skeptical folks on your team actually believe there is a chance itâs possible or they will think youâve lost it.
Despite some probable skepticism, Jonathan did set that crazy goal, and then in less than three months they actually hit it! So the big question is âwhat now!â. The analogy I would paint is that you spend all this time, months or years, trying to push this big boulder called growth from the top of a hill. And you are trying every damn trick you can hear about or think of to get this damn thing to move. And then suddenly, sometimes, the boulder finally moves!
This moment is when you find out just how much drive you have in yourself, and how much you have recruited for the right kind of drive in your team. The drive isnât just for when you are in âThe Struggleâ itâs for when you are in âWin Moreâ mode. It's that push to win a Game 7 in a long basketball playoff series, and then pick yourself back up, and despite what Nate Silver says, keep pushing and defy the odds again.
In times like these there are two natural instincts: a) it's working, don't fuck it up, b) take a quick breath to recover. Unfortunately both of these are often problematic. So here are the alternatives we discussed:
1. Figure out why you are growing. This may seem obvious, but I see again and again that when you are actually growing really fast it can be hard to do something that feels so focused on the rear view mirror.
That is especially true because trying to draw causality is such hard thing. I'm sure five things got launched that week, and there was a press hit, or maybe it was just that it finally "clicked" with users, it's hard to say right?
Now is the moment to dedicate hours a week, for several weeks, to understand the psychology of your users and what changed to make things work. Getting further away from superstition as to why things are working and closer to fact will help you a lot in the inevitable future when you a) want to grow more, or b) stop growing.
2. Take a huge bet. Most companies, when things really start rolling, immediately become incrementalists. The latest crop of large Silicon Valley companies, namely Facebook and Google, seem acutely aware of this and have tried deeply to fight it (hence mottos like "move fast and break things"). But even with acute self awareness it is incredibly hard to maintain high levels of innovation over time, (hence ridiculous mottos like "most fast with a stable infrastructure").
Mark Zuckerberg deserves amazing credit. When Facebook was already growing fast during their first five years he and his team consistently pushed the boundaries of what the company could be: from being for students (already a huge market) to everyone, introducing the Feed, pushing Beacon, and launching a platform. Google also had a window where it was doing this as well, that golden age when it felt like they were winning and could just keep on winning - launching Gmail, Google Maps, and acquiring YouTube all in an incredible expansion of their original vision.
This is where CEOs are made. In order for achievements like those to ever happen someone had to set an audacious goal, crush that goal, and then find a way to get everyone excited about some new crazy goal. In order for those moments to happen someone had to look at a graph that was going steeply up and to the right and make everyone believe they were just getting started.
Sam Altman wrote a great piece a few days ago on founder equity. He has some excellent points around exercising options and tax treatment structure that deserve more discussion, but I want to talk about the percentage of a company that goes to non-founders.Â
Specifically, non-founders should be getting more equity. As Fred said, perhaps the market will slowly adjust to this. But if I were starting a company today, I would use my option pool as a competitive weapon.Â
Over the last five years we've seen valuations of startups go up. According to Pitchbook, valuations are up 14% at the seed stage, and 12% at A rounds, in just last year alone. Valuations are at a 10 year high, but the amount carved out for an employee option pool has stayed relatively static for the last 15 years at 10-15%. Meaning that the spoils are going to the founders.Â
If the market is driving valuations up, so be it, but I don't believe it benefits either the Founder or the employee to have an order of magnitude higher compensation in just one level of company hierarchy. While we are starting to see some very minor adjustments, someone who is aggressive could likely take advantage of the general timidity of founders to give up their equity.Â
To get ahead of the issue, a founder would have to have the stomach to not play small ball and simply increase their option pool by a couple percentage points. If I were starting a company today I'd consider an option pool of 25%, 35%, or even 50%. Would that be incredibly dilutive to the founder? Absolutely, and I don't profess it's for everyone in every startup situation. But in the right one, it could be a great recruiting tool and even culture building message.
I don't want to overstate equity. I personally believe the cause, not the compensation, should be the first reason you are picking anything. But highly competitive hiring usually involves talking to someone who has a couple options that they are weighing. And if they are inclined to believe in you, then at the very least there would be a pretty clear message about how much faith you are putting in them.Â
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I started out as an actor, where you seek to understand yourself using the words of great writers and collaborating with other creative people. Then I slid into show business, where you seek only an audienceâs approval, whether you deserve it or not. I think I want to go back to being an actor now.
Alec Baldwin on ending his public life as an actor, although it could be said about many a startup life. Itâs easy to get distracted from what matters when the light is so bright.
I was sitting at The Creamery coffee shop a couple months ago with a friend, who without much segueway started raving about a local company called The Juice Shop. âHave you tried their A+ Deep Green juice? Life changing!â I was of course open to try it but their nearest location was in Cow Hollow, and so I resigned myself to likely forgetting this recommendation by the next time I was in the neighborhood.
Not to be deterred, my friend whipped out his phone and 10 minutes later a Postmate walked into the coffee shop where we sat and delivered our juices. Iâve been a regular of The Juice Shop since then.
For a firm like Spark where we guide ourselves by the product, the strength of the experiences Postmates generates is incredibly compelling. Weâve seen the type of businesses those reactions can build. But the long term effects on the supplier side are actually just as interesting.
The Juice Shop gained a new loyal customer that day, leaning on a local logistics infrastructure for growth even though they have no formal relationship with Postmates. They did not have to hire a van and a driver, open a website or buy Facebook ads, and it did not disrupt their business, it just augmented it.
Commerce on the Internet has always had two stories to tell. There have been marketplaces that enable smaller companies (Ebay, Etsy, Storify, Storenvy) and those that run centralized services (Amazon, Walmart). This isnât a value judgement, I love my Amazon Prime and Iâm a regular buyer at Etsy as well.
In a new world of mobile local commerce there are also two models emerging. After all Postmates is hardly the only company trying to deliver goods to your home, and companies like Amazon Fresh, FreshDirect, Instacart, and Google Shopping Express are all in various early states of success. In attempting to compare them you could talk about who is growing the fastest and has the largest fleet, in this case that would be Postmates. Or you could simply say they have a different selection or target audience. But more importantly they have taken fundamentally different approaches to the supply side of their business.
While Amazon and others are using a centralized resource and distribution model, much like their offline approach, Postmates delivers from local businesses. As a user, Postmates feels to me more like a window into the local businesses of the city. The service is necessarily delivering very different things in Seattle, San Francisco, or New York, as itâs a reflection of the local culture. When you are in San Francisco you donât get pizza, you get Delfinaâs Pizza. When you are in New York you get Joeâs.
When I first met Postmates co-founder and CEO Bastian Lehmann almost a year ago this was the topic he first dug deep on. He talked about the specific ways, and traits, of how local businesses compete well with national brands. We talked about how to showcase the uniqueness of what a local store has to offer (ideas youâll see start to come to fruition over the next few months). And of course he talked about his vision for the consumer side of the product.
That day wasnât the opportunity to invest, it was just a product and strategy session. But it was an illuminating one and led to many more where we got to know his team and what they are accomplishing. Today we are happy to be able to count ourselves as investors and believers in Postmates.