What we’re reading at Flatiron Investors…
Paul Graham of Y Combinator writes a very touching, philosophical post about ‘pruning bullshit’ from your life. Some bullshit is forced on you, but other bullshit you opt in to. For example,
But while some amount of bullshit is inevitably forced on you, the bullshit that sneaks into your life by tricking you is no one’s fault but your own. And yet the bullshit you choose may be harder to eliminate than the bullshit that’s forced on you. Things that lure you into wasting your time on them have to be really good at tricking you. An example that will be familiar to a lot of people is arguing online. When someone contradicts you, they’re in a sense attacking you. Sometimes pretty overtly. Your instinct when attacked is to defend yourself. But like a lot of instincts, this one wasn’t designed for the world we now live in. Counterintuitive as it feels, it’s better most of the time not to defend yourself. Otherwise these people are literally taking your life.
Lumoid CEO Aarthi Ramamurthy discusses the biggest lessons she’s learned in founding her company and how to tackle self doubt.
Jason Goldberg discusses the reason VC’s will not invest in e-commerce companies. Hint: Amazon.
VersionOne VC discusses different types of data strategy. Building a company with publicly available data is no longer defensible because algorithms have become a commodity. This post argues that there are four main unique types of data: accessible public data, raw public data, proprietary user data, and exclusive user data. Here’s an example they discuss about how Google successfully used data:
The first example is Google. Google started with publicly available data (type 2), but as they developed their product, they had access to exclusive user data (type 4). They used to data to refine and personalize a user’s search results to create a vastly superior product. They became the de facto search product. And, as more people use the product, they get more user data –further strengthening their moat.
Google was able to build their initial product with publicly available data, since no one else was aggressively pursuing the same space at the time. They then built a daily use case product that throws off tons of exclusive data to fuel their growth.
Elizabeth Clarkson talks about the future of venture. She highlights the importance of new types of fund managers.
In 2010, 52 of the 176 funds raised in the United States were first-time funds. By 2015, 79 first-time venture funds were raised out of 235, with the five-year high hitting in 2014 of 106 first-time funds out of a total of 271 funds. Along with these new funds came new approaches to investing, and virtually overnight, a range of individuals — from entrepreneurs and journalists to athletes and celebrities — became venture capitalists for the first time or started trying new partnerships.
Jerry Neumann writes about two types of venture capital strategies:
(1) have a reputation of being the go-to investor in a certain type of company so you get first shot at investing in companies that are more likely to be unicorns; and (2) invest in enough companies that you have a decent probability of being an investor in the next unicorn.
So you try to invest in unicorns. The easy way to do this is to have the expertise, the network, and the reputation to be the one the founder chooses after it’s already obvious that they have a shot at the gold ring. It’s like betting on the sure thing but getting reasonable odds. In these cases the founders have their pick of VCs and they often pick the VCs who have backed unicorns before. Everyone believes in the hot hand. That’s why you see aggressive newer VC firms paying high prices to get into the late rounds of rocketship companies: once the unicorn goes platinum, you get to tell people you were an investor. No one asks if you made 2x or 200x. I’ve seen venture firms showing companies on their portfolio page when they bought the stock after the IPO1.
The Uber Effect is crushing the taxi medallion market, previously one of the best performing assets in America. CB Insights looks at the data of Publicly traded company Medallion Financial Corp to show the correlation between Uber’s rise and this company’s loss of market cap.
Adam from Boost VC discusses why he believes predictions about Bitcoin’s death are exaggerated.
MoveWith raises $3 million from Forerunner Ventures to become a marketplace for workout instructors. Jawbone raises a $165 million down round at half its last valuation. The WSJ reports on DoorDash’s struggle to raise money at a valuation of $1 billion.
What we’re listening to:
The 20 Minute VC talks to David Tisch of Box Group about consumer mobile, how the skill of pattern recognition helps him as a VC, and his involvement in Spring.
Max Levchin, Affirm CEO, discusses trends in fintech and his own path to becoming CEO.
a16z Podcast: Good Bubbles, Bad Bubbles — and Where Unicorns Come from
Venture Studio speaks with Huoy Ming Yeh, the co-founder and managing partner of CSC Upshot Ventures: