This is a bit like "show your work" in school tests -- by doing so you can get credit for it. On the Internet, new connections can then form on the basis of the creations as others discover your work. There are dedicated networks emerging that facilitate this approach. For instance, developers can show their code via Github, connect with other developers (in fact work jointly on projects) and in many cases find new work opportunities. For creatives, Behance has been pursuing a similar goal for years: show your work, connect with other creatives and find new opportunities.

We are excited to be investing in Behance as they grow the Behance network, enhance their Prosite offering and develop other features to support collaboration among creatives and between creatives and their clients. You can read more over at Behance's blog.

Etsy is a great example of the Internet-based networks and marketplaces that are reshaping our economy and society. At Union Square Ventures, these types of networks are central to our investment thesis. We are committed to protecting and enhancing the freedom for networks to form and operate, which was a key theme of our recent Hacking Society event.

We are also interested in what makes a network or marketplace sustainable over time. We have come to believe that the best long term steward of a network will be a company that focuses on value creation for all participants in the network instead of solely for its shareholders. Becoming certified as a B Corp provides a measurement framework that dovetails extremely well with this more comprehensive approach.

Several US states including California and New York have already adopted laws to allow companies to make this broader commitment part of their legal foundation by changing their bylaws to formally become a so-called Benefit Corporation (instead of a C Corp). Most venture backed companies are incorporated in Delaware and while they can get certified like Etsy, they will have to wait until Delaware adopts the Benefit Corporation before they can change their legal status.

If you want to learn more about why Etsy chose to become certified as a B Corp please CEO Chad Dickerson's great blog post placing it in the context of their just completed funding round.

Specifically Twitter has said that they will only used these assigned patent rights defensively to protect themselves against hostile actions. And further that any company that acquires these patent rights from Twitter will need the inventor's consent to use them in an offensive action. Twitter has also provided the inventor with certain rights to license the patent to others for defensive purposes. You can read the entire set of provisions on GitHub.

The other day I talked about Insurgents vs Incumbents. This is the framework we use at USV to think about a lot of things. And in the world of patents, the advantage goes to the Incumbents who can hoard patents and use them to their advantage. The insurgent, three engineers in a walk up in Bushwick, can't even afford the lawyer or the time to file a patent. So it is very encouraging to see an emerging incumbent, Twitter, do something like this. They are saying to the world that they do not intend to compete on the basis of patents and instead they will compete on the basis of product, feature set, user experience, etc, etc.

USV is committed to support this initiative. We are instructing the startup lawyers we work with to insert the patent hack language in our standard forms. We are reaching out to our friends in the startup world including other VCs, accelerator programs, and the startup lawyer universe to suggest that they to insert the patent hack into their standard forms. And we will recommend to our existing portfolio companies that they adopt it as well. Of course, entrepreneurs and their companies will have to be the ultimate determinator of whether they want this provision in their inventions assignments agreement. If an entrepreneur we invest in does not want this provision, we will certainly support that position. But we will want to have a conversation about why they would want to do that.

I will end this post with a story. Many years ago now, my prior venture capital firm, Flatiron Partners, invested in a company called Thinking Media. It was an early Internet company. They developed some browser based javascript tracking technology. The company ulimately failed but was sold in a fire sale including the patents. Those patents eventually made their way to an incumbent, the big marketing research company Nielsen. Fast forward ten years or so and Nielsen sued two of my portfolio companies, comScore and TACODA, and a bunch of other companies too, on the basis of the Thinking Media patents. So IP that was partially funded by our firm was used to sue other portfolio companies. It is so galling to have this kind of thing happen and it is one of the many reasons why I have come to believe that software and business method patents are an enemy of innovation in the tech sector.

If Thinking Media had the patent hack in their documents, the story I just told would not have happened. And thanks to Twitter's leadership, I hope that all future USV portfolio companies will have the patent hack in their documents and stories like that one will be a thing of the past. I'd like to thank Twitter's leadership team, especially the legal and engineering teams, for coming up with such an elegant and simple solution to this thorny problem. The startup world is a better place today than it was yesterday as a result of their work.

Funding Circle, an online marketplace for the provision of loans to small businesses in the UK, is one of these new services. The Funding Circle marketplace connects thousands of businesses directly to thousands of lenders, thereby cutting out traditional banks and the high costs and long processing times associated with them. The marketplace operates in a transparent manner - allowing investors to see in real time the prospective loans and the bids and rates on those, while borrowers can also see how investors are evaluating and pricing their debt and other activities in the marketplace. In the past 18 months, the Funding Circle marketplace has enabled over $45,000,000 of loans to almost 700 small business borrowers, with average yields for investors of 8.4%. It also has an active real-time secondary market - over $1,000,000 of 'loan parts' were traded in February alone.

Because Funding Circle is Internet-based, the transparency around data built into its lending marketplace has enabled it to build a sophisticated risk model for its lenders - one that utilizes a pool of borrowers that are qualified through rapid analysis of publicly available Internet credit and information databases. This enables borrowers to get rapid feedback on their credit prospects, and lenders appropriate returns while also managing their risk. Over time the company will use the Internet to extend this pool and manage the risk to lenders even further, through additional sources like borrower history on the platform and even more peer produced methods of rating credit.

Participants in the Funding Circle marketplace also help small businesses, the backbone of any economy, to grow and expand, while getting a great return. The UK government recently announced it will invest $160,000,000 in non-traditional lending channels that can reach smaller businesses, including peer to peer lending platforms.

We are excited to announce today that we are backing the Funding Circle team and participating in their Series B financing, along with Index Ventures. We believe this approach of financing businesses - away from banks and towards a marketplace model - is powerful and more beneficial to all participants.

Here is what I shared with the audience:

I started working in technology 30 years ago and for most of that time thought that the work I did had very little to do with policy. Back then, I was either building or investing in the technology infrastructure that became the foundation for the Internet. In the last several years, however, the investment opportunity has shifted from infrastructure to the applications and services that ride on top of that infrastructure. All of a sudden, every policy decision made in Washington impacts our work. Many impinge on what I believe is a core freedom: the freedom to innovate.

I want to spend a few minutes tonight sharing my view of how that happened, and what it means to our economy and our society going forward.

At Union Square Ventures we invest in networks. We were the first institutional investor in Twitter, Tumblr, Foursquare, Etsy, and Kickstarter. We have also invested in many other less familiar networks in markets like education, employment, and finance. As we spend time with these networks, we learn more and more about their extraordinary economics. They are easy to bootstrap, create remarkable efficiencies, optimize the value of scarce resources, and cost very little to promote.

Like most of these networks, Foursquare was built on open source software and its services are delivered over the Internet. They were able to grow to over 100,000 users on less than $25,000. Craigslist radically reduced the cost of classified advertising. They replaced the call centers, printing presses, trucks and trees that used to be necessary to alert the world that you wanted to sell your couch--with a digital photo and a drop-dead simple electronic posting mechanism. Airbnb has re-invented the way travelers are matched with beds, and in the process enabled hundreds of thousands of people around the world to capture the value in their spare bedroom.

Twitter, Tumblr and Foursquare spend little or nothing to acquire new users or to propagate a new feature. We hear a lot about viral marketing but I did not internalize its implications until I watched David Karp, the founder of Tumblr, introduce a new feature: by hiding it.

When I was an entrepreneur in the software business we spent a ton of money and time to introduce a new feature. We did analyst tours, issued press releases, threw parties, and bought billboards to promote a new feature. David hides it. But then he sends an email to a few popular bloggers and tells them if they mouse over this one section of the site, they will see a drop down menu with a couple of new capabilities. He encourages them to play with the features but asks them not to tell too many people about it because he is not committed to releasing it generally.

So they use the features and of course someone reading their blog sees they have done something cool and asks how they did it. Two weeks later there is a kid in Akron, Ohio, telling a kid down the street, "I am not really supposed to tell you this but if you mouse over this part of the site..." and the feature is now ubiquitous.

These economics create enormous opportunity. The combination of low costs, cheap capital and relatively free access to markets has created an unprecedented era of decentralized, emergent, start-up innovation. By creating novel new services and dramatically reducing the cost of existing services, that innovation has unlocked value for consumers, that they are now redeploying in other new services.

But at the same time, that process, the classic creative destruction of free market capitalism, has created new challenges for incumbent industrial companies.

For the last 130 years the economy has been dominated by firms structured as bureaucratic hierarchies. That model worked well to mass produce products for mass consumption, but the inefficiency of communicating customer needs up through the hierarchy and management decisions back down, and the natural tendency of any organization to protect its current organization structure makes it difficult if not impossible for bureaucratic hierarchies to innovate as quickly as the emerging network-based model of decentralized innovation.

So the incumbents who have a fiduciary duty to their shareholders to maximize profits look for ways to stave off competition from networks and protect their current cost structures. Increasingly, they ask policy makers and regulators to change the rules in ways that tilt the market in their favor.

Policy makers and regulators who have long standing relationships with these incumbents are receptive to these requests because they are usually couched in language about the safety or security of consumers, and because there are only a few people--most of whom are in this room--who are explaining the risks of these proposed policies and regulations.

Over the next few years there will be a steady stream of these requests. The hotel lobby in New York City has already convinced the city council to outlaw temporary hotels. The bill was presented as a consumer safety measure to prevent slumlords from turning dilapidated tenements into squalid, unsafe hotels. The council members never considered the bills' impact on Airbnb but the hotel lobby knew exactly what their proposed language meant.

The Research Works Act played out in a very similar way here in Washington. Its original sponsors understood it as the elimination of a government mandate that forced researchers to embrace a specific business model. The academic publishers who sponsored the bill knew very well that it would slow competition from open-access journals.

I could go on and on.

Telecom companies asking regulators to impose new burdens on Skype, or toy manufacturers asking regulators to force Etsy sellers who make hand-carved wooden toys to be subjected to a rigorous certification process that only makes sense for large manufacturers.

The point is that we have to step back and see these policy proposals as the inevitable byproduct of the transformation of our economy. We have to see them as a part of the competition between the bureaucratic hierarchical model for the creation of economic value that has dominated the economy for the last 130 years and the new emergent economics of networks.

We need to be smart enough to recognize that it is not consumers asking for these regulatory or legal restrictions, it is the incumbents. We need to defend the freedom to innovate because it is critical to the health of our economy. Our economy is today one of the most innovation-friendly economies in the world. Until recently, no one investing in or creating a business on the Internet would have considered building their business anywhere else.

But the recent enforcement actions against MegaUpload and JotForm, have forced entrepreneurs and investors in Internet services that enable users to upload content to the web to rethink where their businesses are based.

I don't know the particulars of the JotForm case and it is very hard to defend the behavior of the MegaUpload founders but it is also impossible to ignore the fact that the site takedowns made it impossible for hundreds of thousands or millions of users to get to the completely legitimate content they stored on those services.

In the weeks that followed those takedowns, every one of our portfolio companies had to reconsider where their users' data is stored. All of them are now wondering if they should be moving to domain name servers outside this country.

The Internet is a global network. There are countries out there that recognize the opportunity to create an Internet Enterprise Zone. They are working to establish a policy framework that protects user data, and more broadly the freedom to innovate. I can not tell when or even if data and the good systems administration jobs that go with it will move offshore, but I can tell you that the conversation has already started.

But networks are not just critical to our economy. They are crucial to a vital civil society. It is pretty clear that we will not be able to continue to live in the manner in which we have become accustomed. We are very likely not going to be able to support things we value like the arts or social services in the way that we'd like. We are going to have to learn to do more with less.

Networks can play a role here as well. Kickstarter, a crowd-funding network, launched only a few years ago, will provide more support for creators this year than the National Endowment for the Arts.

In the UK, lawmakers are just as frustrated as we are that banks are still not lending to small businesses, but their regulatory framework has allowed Funding Circle, a peer-to-peer network of lenders and borrowers to flourish. Lawmakers have begun encouraging their constituents not just to "shop local" and "eat local". They are asking them to "lend local", creating a brand new source of working capital for small businesses and an emotional and financial return for lenders.

There are many many other examples of networks making a difference in civil society from mapping slums in Kenya, to getting at risk kids in New York to take better care of their health, to empowering mothers in Boston to take on gang violence. If we defend the freedom to innovate, we will find lots of ways to efficiently deliver important social benefits. Of course, we should expect the same resistance from the incumbent bureaucracies in the public sector who regard those services as their turf.

Innovation depends on keeping the costs of innovation down, making sure that financing is available, and making sure that markets are accessible. It does not depend on R&D grants or targeted industrial policy.

So the next time you see a piece of legislation that has an impact on an open Internet, software or business method patents, copyright enforcement, free and fair competition, open government, or cyber security, I urge you to see it through the lens of the competition between incumbent industrial hierarchies and emergent networks.

Consider who is sponsoring the legislation. Does it really protect consumers or does it protect the business models and cost structures of the incumbents?

I recently heard a woman from the Occupy movement say the most poignant thing. She said "no one is coming for us". Her generation does not expect the government to be there when they need it, nor do they think the incumbent industrial hierarchies are structured or motivated to address the challenges they expect to face.

Remarkably, she was not depressed, defeated or bitter. She was determined. The kids who grew up inside AOL chat rooms and came of age on Facebook have an intuitive understanding of the power of networks that our generation will never have.

They are not asking us to fix the problems we left them with. They are asking us not to get in their way as they try to dig themselves out. I think we owe them that.

Thank you.

Money itself is a surprisingly old innovation, going back thousands of years. Along the way there have been three critical breakthroughs. First, a high degree of standardization -- all of the US and even some far away places (e.g. Ecuador) use the US dollar. Similarly, all other countries use easily recognizable coins and bills as "tokens." Second, the tokens used as money are no longer something that is of any intrinsic value and they are no longer guaranteed by the government to be exchangeable into something of scarcity (e.g., gold). Money tokens are valuable only in the context of a payment transaction. Third, we came up with the extension of credit and fractional reserve banking. In combination, the two have allowed us to grow economies that are much larger than the number of available physical currency tokens would permit.

Now we find ourselves at the beginning of yet another important innovation in money: the complete disappearance of physical money tokens. We are moving towards a world in which money consists solely of data that is kept someplace in the network. When we pay someone in that world all we are really doing is causing some data to move around. The shift from the physical to the virtual raises a number of exciting possibilities for the future of money including the rise of reputation currencies.

One thing should be true in a world of data-as-money: payments initiated by a known party that do not involve an extension of credit should be (almost) free at the margin. When you hand someone cash today, no one comes up and takes a portion as a fee. Similarly, if you use data representing your money to pay for your coffee that should essentially be free of fees. That is the premise behind Dwolla, and we are excited to be backing the Dwolla team on their quest to dramatically change how payments work. You can learn a lot more about everything that they are working on from the Dwolla blog or just go ahead and sign up.

There's more than me-tooism going on. It is, for example, easier to start a tech company than ever before - it's easier to access startup capital, procure basic infrastructure and tools at lower prices, find and cultivate mentors, and join an accelerator program.

Accelerator programs that focus on early-stage technology companies have grabbed headlines recently. The programs are designed to be crash courses in starting a technology company and bringing a product to market. They often last three intense months, ending with a structured pitch to a roomful of investors. The most famous program is Y Combinator, based in Silicon Valley, but there are other programs around the world, including Techstars, 500 Startups, DreamIt, Excelerate, and Seedcamp.

Over the past few months, I've seen over 160 companies come through eight different accelerator programs. It's a skewed group, but it captures the zeitgeist of a certain segment of the tech industry - and, I think, looking at these companies is one of the best ways to get a sense for which opportunities compel internet entrepreneurs today. Here's a look at some of what these entrepreneurs are thinking about - and where we all might be headed:

Software is developing its own component industry
Last year, John Maeda predicted technology would become a cottage industry by 2020 "with bespoke applications made by many, rather than today's industrialized, Microsoft-esque mass production and distribution model." I doubt we've seen the last billion-dollar software company; tech companies will continue to ride the economics of software, and larger companies will use strong network effects and scale to drive consolidation. However, we'll likely see fewer companies that need to build - and fewer companies that will build - every piece of their technology themselves.

Component sourcing has already begun to revolutionize the software industry. Take a look at Amazon's or Rackspace's cloud hosting services, which have lowered the price and complexity of hosting software, or the success of "outsourced" tools like Google Analytics, Twilio's voice and text messaging infrastructure, or Urban Airship's iOS notifications.

Entrepreneurs in this summer's accelerator programs sliced off pieces of what it takes to build and run a web or mobile application and offered those slices as services. "I built this piece of technology three times at three different companies. I built it a fourth time, and that's the service my company offers," a Y Combinator CEO pitched.

Developers are the target customer for 30% of the companies I saw. Consider Parse, which provides a backend to a mobile app, and MongoHQ, which hosts instances of the open-source MongoDB. While LaunchRock offers user acquisition tools, TightDB provides a database customized for big data. ReportGrid provides website analytics, while CoderBuddy helps developers create and host websites on Google's App Engine, and Creative Brain Studios allows game developers to deploy one game on several devices and operating systems.

Using components to build larger systems doesn't require building monotonous systems. Consider the iPhone, made of component parts sourced from Chinese megafactories but designed in California. There's something beautiful and unique about the iPhone that no other handset manufacturer has been able to match - even the ones that source parts from the same megafactories.

Similar to physical-product designers, when software developers start with components, they can concentrate on the core problem they're solving and will create better products in less time. It's exciting.

Work is shifting toward a peer-to-peer model
The first two decades of the modern internet broke industries built on distribution monopolies (e.g. music, news) and facilitated coordination between the consumer and the provider without the need for a middleman (e.g. hotels, car rentals.) The same will happen for a large fraction of our work, especially in cases where the work is standardized or employers "distribute" their workers to pools of customers.

One reason to create firms is the coordination and signaling problems of situations with imperfect information and transaction costs. As technology increases information flows and decreases transaction costs, individuals can leave their old employers and strike out on their own. Their livelihoods will still depend on providing valuable services in exchange for fees, but they'll do so as freelancers - and on their own, they'll capture more of the value generated by their work.

Just as blogs allowed talented writers to build audiences without being affiliated with large media organizations, and as Twitter and Tumblr allowed news- and tastemakers to succeed outside of established news or media properties, new web services will allow individuals to engage with customers without needing to work for a firm.

These free agents, disaggregated and newly empowered, can promote and sustain themselves with new tools: Opez caters to service professionals, like bartenders and hairdressers, and allows them to build followings independent of their employers, while Vayable and SideTour provide marketing and transaction-processing for neighborhood tour guides. Hiptic helps graphic designers promote their work, while Zerply helps creative professionals do the same, and InterviewStreet lets programmers show off their skills.

As technology creates new free agents, it's also changing the notion of "work" to be less time- and location-specific. This is especially true of work that can be done easily at a distance. Workers who can't differentiate themselves using their reputation will be commoditized. This summer, web services were launched that allow you to order up a proofreader (Kibin), blogger (Contently), tutor (LearnBop), language partner (Verbling), car ride (Ridejoy), science researcher (Science Exchange), cooking instructor (Culture Kitchen), mystery shopper (SpotCheck), or transcriptionist (Mobile Works) from your browser. The Mechanical Turkification of work has begun.

Between identified, liberated individuals and the nameless, faceless drones of Mechanical Turk lies identity: does it matter who performs the task at hand? If the worker's background, skills, or experience matter, there's likely to be higher variance in demand for a particular person's services, and free agents will be sought after and chosen by reputation on services built for those purposes. Less-skilled people are likely better suited for tasks for which identity doesn't matter, and other marketplaces that don't include a concept of reputation will provide access to a global pool of workers.

What's really next
Looking at activity across accelerator programs, it's not clear which "one thing" will be next. This season's 160 "accelerated" companies, nevermind other tech companies created outside of incubators, each seek to solve different problems and should be understood individually. (Making tricky, admittedly, sweeping essays like this one.)

Yet broader shifts like the componentization of some software development and a shift from employed workers to independent agents have begun to emerge; other shifts will become more apparent with time. These, plus the overall pace of tech-company creation, give me faith we haven't seen anything yet.

For those who doubt the chilling impact on innovation, there is a brand new study by Harvard Business School professor Josh Lerner showing that investment in cloud startups increased as much as $1 billion after a court ruling that permitted cloud-based DVRs (which content companies had previously opposed). Innovation on the Internet has been enabled by key organizing principles behind the design of the Internet, including the separation of different layers and the open architecture. Vint Cerf, who together with Bob Kahn, was responsible for much of the initial design of the Internet has warned that the government is "beginning to go overboard in the protection of copyright" which will harm innovation.

Today is the beginning of hearings on SOPA. The Judiciary Committe has apparently chosen to hear from five people supporting SOPA and only one opposing comment. This is not for a lack of trying on behalf of technology companies. Several weeks ago Netcoalition, which represents Internet firms including Google, Amazon, eBay, IAC, Yahoo and PayPal, asked to be heard at the hearings but has been specifically excluded from testifying against SOPA. As Fred has pointed out this is very different from the process that resulted in the passing of the DMCA which currently governs the relationship between copyright holders and technology companies and would essentially be superseded by SOPA.

Given this imbalance in front of the Committee, it is essential that lawmakers hear from as many Internet entrepreneurs, employees and investors as possible. Some of the largest companies on the Internet, including Google, Facebook, LinkedIn, Zynga and Twitter have all signed up to a letter expressing their opposition to the bills as currently drafted. The Protect Innovation site makes it possible to support this petition by easily sending a note to legislators. We encourage everyone to sign it.

Going one step further, we have also decided to add a "Stop Censorship" graphic to our site that overlaps our logo. This indicates our belief that the bills as currently drafted don't just inhibit innovation but unreasonably restrict freedom of speech. SOPA comes close to establishing the American equivalent of the Chinese firewall (just lacks IP filtering) and undermines the freedom to post links which is essential to free speech on the Internet, including blogs and Twitter. We are not alone in this belief as this letter signed by over 50 law professors against an earlier version of the bill shows. If you want to join this additional protest you can find the embed code here.

Union Square Ventures is excited to make an investment in Codecademy as part of the company's Series A financing and support Zach and Ryan's vision of creating a platform where learning how to code is simple and can be shared.

Over the past few years, we've watched the Internet become a richer platform to learn and collaborate in new and different ways from new and different sources. Free and inexpensive content increases the variety of sources from which people can learn online. At the same time, as technology becomes the driving force in our economy, the ability to program and understand programming is becoming more important. Codecademy is at the heart of a new and emerging programming information "stack," which includes networks such as Stack Overflow (part of the Stack Exchange network) - "Q&A for professional and enthusiast programmers" - and Github - a platform for the collaborative development of software.

The collaborative nature of the internet has transformed other industries, yet we've only begun to see its impact on learning. Codecademy currently taps into its community by offering users the ability to "help create new lessons" on the service. Albert Wenger created a course - Functions in Javascript. Ryan and Zach understand the importance of developing and listening to the communities that emerge around great web services.

It's no surprise then that writer Douglas Rushkoff's latest book is titled Program or be Programmed: Ten Commands for a Digital Age. In it he writes:

When human beings acquired language, we learned not just how to listen but how to speak. When we gained literacy, we learned not just how to read but how to write. And as we move into an increasingly digital reality, we must learn not just how to use programs but how to make them. In the emerging, highly programmed landscape ahead, you will either create the software or you will be the software. It's really that simple: Program, or be programmed.

We are thrilled to support Zach and Ryan's goal of "teaching the world to code."

We hoped 14 days was enough time for potential applicants. That might've been true, although it turns out most people preferred to wait until the end of the two-week period to apply. We received about 65% of applications in the last two days and over 40% in the final day alone.

We've spent the last week watching the video responses, visiting the links, and getting to know applicants. It's not hyperbole to say we've been blown away.

We're aiming to complete an initial review of every application by the middle of this week, and we'll then reach out by email to schedule meetings. One unfortunate part of this process is that we're getting to know and will meet some fantastic people - but we're only hiring one person.

So we're going to do our best to make interesting opportunities available to all who applied by reaching out separately to applicants. As a start, our jobs page lists nearly 500 opportunities at USV portfolio companies. If you're in the market for a new job, please do check it out.