Thursday, June 17, 2010
A Comment on Comments
Yesterday was a fertile day for comments on comments: John Gruber, Bijan Sabet and then Marco Arment all provided interesting food for thought. For starters, I firmly believe that what someone chooses to do on their own blog is and should always be entirely their own decision. It is their property after all and nobody is forced to go there or interact with it. That includes the choices to have no comments at all, to have moderated comments, to allow comments *and* delete them after the fact (after all, I would paint over a defacing of my house) or to simply let anything stand.
Personally, I enjoy receiving comments and interacting with them. Of course this is much easier given my small readership that leaves thoughtful comments than with a huge and diverse audience. Still, it would seem that we can do better than today using technology. In particular, it should be easy to choose whether or not to allow anonymous comments. As the audience grows, I would imagine letting only readers leave comments who are sharing their identity. I believe that would go a long way towards civility and quality in the comments all by itself. On top of that it would make it easy for someone like our portfolio company disqus to provide a reputation and scoring system that helps to show higher quality comments first.
Tags: blogs comments identity anonymity
Wednesday, June 16, 2010
You Ain’t Seen Nothing Yet
I am meeting with a bunch of folks from a major ad agency today to talk about the future of the web. This is of course one of my favorite topics! Here are some of the highlights of what I am planning to cover:
- You ain’t seen nothing yet: expect deep transformation of many industries including advertising
- A brief history of newspapers as illustration of the forces at work
- Disruption from unbundling and distributed content generation
- AdOne (the old one) vs Craigslist
- Indeed vs traditional job boards
- Command and control versus decentralization and ownership
- Examples from our portfolio: Etsy, Covestor
- Implications for advertising
- Importance of net neutrality for innovation
I have been giving variants of this talk for about a year. I do it entirely without slides and make it interactive (and, I hope, engaging). There is something especially fun about giving a talk about the future but doing it in the most old fashioned way possible.
Tags: innovation
Tuesday, June 15, 2010
Twilio Announces OpenVBX
The amazing team at our portfolio company Twilio has done it again: taken something that was previously complicated and made it super simple. This time they set their sights on business telephone systems (formerly known as PBXs, which — if anyone remembers — is short for Private Branch Exchange).
Most legacy PBXs are incredibly hard to program. For instance, the one we have at Union Square Ventures, has some completely proprietary setup which essentially requires us to pay someone every time we want to add or remove a line or change a call flow. Thankfully, over the last few years hosted PBXs have emerged, such as OnSip which are easy-to-use web applications. Another example on the consumer side is Google Voice.
But even the modern hosted PBXs leave quite a bit to be desired. While they are easier to use, they are generally closed which makes it difficult if not impossible to integrate them with other business systems. Enter Twilio’s OpenVBX. OpenVBX is an open source hosted PBX (the VBX comes from virtual). It is easy to download and run on any server — in fact, DreamHost offers 1-click install already. Like Wordpress, OpenVBX has a plug-in architecture that makes it super easy to extend functionality and to integrate other systems.
For instance, suppose you want to set up a PBX for a trucking company. With OpenVBX you get all the PBX functionality out of the box. But it is also trivial (at least from the OpenVBX side) to integrate with the dispatch system so that a caller can check the status of a shipment right over the phone in a fully automated fashion. The beauty is that this is now fully integrated so that if the caller needs assistance they don’t need to be transferred to some completely separate system (how many times have you punched in a bunch of information to an automated system only to then have to repeat all the information when you get an operator on the line?).
I am excited to see all the plug-ins that developers come up with and the vertical applications (e.g. trucking, medical) that get developed on top of OpenVBX. And of course I can’t wait to get rid of the existing PBX at Union Square Ventures and replace it with an instance of OpenVBX. I can then connect the foursquare plugin to let people now which city and time zone I am in!
In the meantime, you can learn more about OpenVBX on Twilio’s site and on the OpenVBX site.
Tags: twilio openvbx telephony business opensource
Monday, June 14, 2010
Attention: Attention
There are certain topics that periodically rear their heads, such as privacy. The one that is on my mind this morning is attention. I don’t know whether there really is a deep attention crisis, but my own anecdotal evidence suggests that we may well have a problem. Yesterday evening, I was watching my son’s Little League coach (another dad) desperately trying to get and keep the attention of a dozen 10-year old boys. Now that might have always been a hopeless task, but this was a stunning display of distractedness. Personally, I find it increasingly difficult to find solid blocks of time to think deeply about a specific problem.
To get more of the view that this is a real crisis, I have just downloaded Nicholas Carr’s “The Shallows” to my Kindle. I was prompted by reading Carr’s impassioned critique of Steve Pinker’s OpEd piece in the New York Times. It is somewhat germane to the subject to read this book on the Kindle as opposed to say an iPad. One advantage of reading on the Kindle is exactly that it doesn’t do anything else (well). There are no sudden blinking lights or vibrations asking for your attention. There is no temptation to check a stock quote or browse some web pages.
There were two other pieces over the weekend that also spoke to the critical role that attention plays now. danah boyd wrote how the hackers on 4chan are not about gaining access to systems (security hacking) but instead about (mis)directing attention. The more we rely on external systems for allocating our attention, the more we will be susceptible to such hacks. The other piece was about software tools that help people focus their attention by shutting out disruptions. I thought that was in the New York Times, but apparently I was so distracted that I didn’t bookmark that piece and in searching now the NY Times article I am finding is this one from 2009!
In any case, I am going to try some tools out myself and am also planning to rearrange my schedule so that I have clear blocks of time for just reading and thinking. Expect more posts on attention as I report on some of my reading and personal experiments. If you have a favorite tool or technique, please let me know!
Tags: attention
Wednesday, June 9, 2010
Motivating Engineers
I am a huge fan of Dan Ariely’s writing because I believe it makes behavioral economics relevant to every day business decision making. I have just finished the first two chapters of his new book “The Upside of Irrationality” and can already strongly recommend it. Chapter 2 in particular is be a must read for anyone who manages people but in particular for folks who manage engineers. In it, Dan describes a series of experiments involving MIT students building with Legos that are cunningly conceived and amazingly clear in their implications. It is worth reading because the evidence is not just compelling statistically but also convincingly told by Dan. If you want the three word summary: deploy, deploy, deploy.
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Tags: economics decision_making engineers management motivation
Tuesday, June 8, 2010
WWDC Keynote and iPhone 4
I was really surprised that Steve Jobs did not announce more cloud capabilities for Apple during his WWDC keynote. It had been rumored that MobileMe might become free and Apple has been investing heavily in data centers. I believe that this is critical for Apple if they want to maintain their currently super impressive position. The iPhone 4 is cool and has some neat innovations but none of them are either absolutely critical for new users or way ahead of other phones. For instance, a front facing camera is nice to have if you want to do video chat, but plenty of other phones have it already. The new display technology looks gorgeous, but then again, so does the display on the HTC EVO. The only really neat addition is the gyroscope, which will enable some even more amazing game play. All in all though I am far from blown away. Will be interesting to see what happens with Android devices over the rest of this year and especially into the holiday season. It is an exciting race that is a huge boon for all of us!
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Tags: apple steve_jobs wwdc mobileme
Monday, June 7, 2010
More On the Carried Interest Taxation Debate
Last week I wrote briefly about my position in the carried interest taxation debate. Since then the debate has gotten a bit more heated with opposing posts by Chris Dixon and James Robinson. Chris argued that this is a matter of basic tax fairness and Jim provided two (new) arguments for how increasing the tax rate on VCs might result in fewer dollars for startups.
Jim’s first argument is what economists call “tax incidence.” When you tax someone they will lay off part of the tax on their customers, which in this case would be the Limited Partners. While correct in principle, I don’t think it carries much weight here because tax incidence depends on the relative slopes of the demand and supply curves (in this case for capital). After years of fairly abysmal returns, I doubt most VCs are in a position to change the pricing vis-a-vis LPs. The funds are essentially facing flat supply curves which places the entire tax on the GPs.
Jim’s second argument, which are potentially negative structural changes to how funds are set up and/or make investments in startups is more interesting. I pointed this out as one of my two worries with this legislation. But the structural side effects argument is also one of the strongest argument against treating VCs differently from other money managers, in particular everyone’s favorite: hedge funds. That would create a huge incentive for hedge funds to be classified as VC funds. Given the capital available to many hedge funds it would be possible for them to make as many or more investments in startups than most VCs, which I doubt is in anyone’s interest.
Which brings me to the most important point. If somebody is concerned that taxing VCs more will reduce investment in startups, then the proper solution is not to somehow treat VCs differently, but to directly go after the problem. And that could be done easily by dropping the capital gains tax for investment in startups. In fact, Jim proposes 10% for long term capital gains in startups towards the end of his post. The administration has a proposal for eliminating the cap gains tax for investments in startups (unfortunately, the requirement to be a qualified small business is onerous). If we get a usable reduction in long-term cap gains for investing in startups that will more than offset any possible reduction resulting from taxing VC’s carried interest as income.
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Tags: carried_interest tax hedge_fund investment startups
Friday, June 4, 2010
Back to the City
We have been living in the burbs since shortly after our third child was born, which makes it easy to keep track. Shockingly we are rapidly approaching a decade there! We are fortunate to have a (near) perfect setup — a 12 minute walk to the train station (which gives me 24 minutes of walking per day guaranteed), the elementary school across the road and public tennis courts around the corner. The Long Island Sound 20 minutes away by car.
Yet we are seriously considering moving back into the city. Having grown up in the country side of Germany, the burbs frequently strike me as neither fish nor fowl. You are not in the city and you are not in the country!
The older kids will finish elementary school next year and the middle school where we are isn’t particularly inspiring. Middle school is tough anywhere but in the city there are more options (including home schooling). Susan and I would both like to go to more events in the city and still see the kids. We are also finding that like almost all suburbians we hardly make use of the many amazing things the nearby city has to offer. That includes getting the kids exposed to more art and diversity. For all intents and purposes we might as well be 100 miles away.
Would love to hear from anyone who made the transition back from the burbs to the city (I know Fred and Joanne did). In particular, I am curious about what the biggest challenges are — most importantly how to help the kids with the transition (and how to get them involved in the process)! Also of course if anybody knows of a place in New York City for a family of five that’s interested in a fixer-upper — we are actively looking.
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Tags: personal moving new_york_city
Thursday, June 3, 2010
Five (Not So) Easy Pieces of Legislation to Help Internet Startups
A few times over the last couple of months I have been asked what government could do to help startups. I believe there are five different areas that could really make a difference. The first two are specific to the kind of startups that we invest in at Union Square Ventures, but the other three apply across the board.
1. Net Neutrality
By this I mean a clear commitment to separating bandwidth, devices and applications. Once I have bought a certain chunk of bandwidth (whether wired or wireless), I should be able to connect any device and run any application without further restrictions or meddling from the bandwidth provider.
2. Patent Reform
Figuring out how to stop patent trolls and nuisance suits over software patents that shouldn’t have been issued in the first place. Maybe as a first step there is simply a way to create a safe haven for startups. But ideally these kind of patents are drastically curtailed across the board including already issued ones.
3. Angel Capital Gains Taxation
As I have written repeatedly before, the toughest stage of financing are the earliest dollars. And these come with a huge social benefit not captured by the investor. To offset this imbalance the capital gains tax for angel investments should be as low as possible. 10% or lower would be great.
4. SarbOx Redux
It is too painful to go public. We have several companies in our portfolio that pre-Sarbox would have already gone public. But the cost of being public is too high and companies just don’t want to deal with it. The lack of exits is clogging up the investment pipeline and and is a drag on returns resulting in under-investment. The kind of fraud that SarbOx was designed to fight is exceedingly rare among high-tech startups, many of which have very simple business models (and usually only one or two lines of business).
5. Startup Visa
We need all the talent we can get to help invent the future. That means we should make it easy, not hard, for folks with advanced degrees and/or startups to come to the US or stay here. Every advanced degree awarded here should qualify the recipient for a green card or at least a work visa. Founders of startups from abroad should be given an easy visa for bringing their startup to the US or getting it going here.
I have titled this post as “five (not so) easy pieces” because I recognize that each of these is a potential legislative minefield. But just because it’s hard doesn’t mean we shouldn’t try. After all, that is what startups are about — going up against the odds!
Tags: politics startups legislation patent_reform immigration_reform net_neutrality
Wednesday, June 2, 2010
The Carried Interest Taxation Debate
My partner Fred has come out in support of taxing carried interest as income instead of capital gains. I agree with Fred’s position because I do not believe that this change will result in less investment in startups.
Taxes generally cause distortions and as a first approximation, taxing something at a higher rate tends to lead to less activity. Sometimes that is the desired outcome. For instance, if the US were to tax CO2 emissions we would expect to see companies attempt to reduce their emissions. Sometimes that is a negative side effect. For instance at higher income taxes people tend to work less.
But this basic principle is only a first approximation at best. Many factors other than price influence behavior (taxes are essentially a way of changing the price of an activity). Emotions play a critical role also. For instance, passion often trumps cost considerations. Jeff Bussgang in his book Mastering the VC Game (terrible title but great book) speaks eloquently of the passion that drives entrepreneurs and many VCs (which is why it is somewhat surprising that Jeff thinks the tax would matter for VC activity).
I can’t imagine anything else I would rather do than being in Venture Capital. Tax considerations will have no influence on that. Now one could still argue that VCs might shift towards investing their own capital (on which they will receive capital gains taxation) rather than that of Limited Partners. While that is an option for some of the VCs who have been hugely successful already, I doubt that will make a meaningful dent in the pool of capital available for startups. There is plenty of interest from younger partners who don’t have fortunes to invest and people who’d like to enter the VC business.
I only have two worries with this legislation. First, that it winds up being circumventable with some structure that causes significant distortions (e.g. in the alignment of interest between GPs and LPs). Second, that by mistake this will also affect the treatment of founders’ stock. If founders’ stock were to be subject to income tax instead of capital gains, that might lead to a significant allocation away from startups.
Tags: taxation policy carried_interest
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