Fred Wilson's posts and talks

Proof Of Stake – AVC

I am hopeful that we will see a large public project, like Ethereum, attempt to implement a proof of stake consensus algorithm in the next year or two. Mining works. It has validated blockchain technology and allowed it to be commercialized. But my gut tells me that mining is not the best consensus system out there and that we can do better. And so we should see if we can. That’s what forward progress is all about.

Ethereum Is The Forefront Of Digital Currency

Coinbase co-founder Fred Ehrsam on the emergence of Ethereum as a rival to Bitcoin

Quizlet

There are some investments that take years to make. They are often our best investments. Quizlet took something like five years to go from a company we got interested in to a USV investment.

In March 2009, we hosted an event we called Hacking Education. That was the official start of our focus on education. From that event came a thesis on how we would approach investing in education. We would invest in lightweight services and networks that allowed anyone to learn anything. We would not invest in services sold top down to the existing K-12 and higher education system. We wanted to obliterate, not automate.

We started hunting around for services and networks that fit our thesis. One that caught our attention was Quizlet, the leading web and mobile studying tool. We got an intro through Christina. Eventually Andy got a meeting. We found out that Quizlet had been bootstrapped, was profitable, and was not interested in raising outside capital. But Andy did not take no for an answer. He kept calling on them. He brought me to meet the two Quizlet leaders, Andrew and Dave, in September 2012. We got the same story in that meeting but we did make an impression. We started inviting them to our events in SF and they usually would come. So we kept doing that and kept stoping by to say hi when we were in SF.

Earlier this year Dave called me to say that they were going to raise outside capital. He and Andrew had concluded that the opportunity to build and develop peer to peer learning and studying tools for web and mobile was so large that they could not continue to bootstrap. So we jumped onto the opportunity and threw ourselves at it. That process had a number of fits and starts but we hung in there and eventually the financing came together the way Andrew and Dave wanted it to and we joined our friends at Costanoa, Altos, and Owl in a $12mm Series A round for a ten year old company. Just writing those last few words makes me happy. You don't see many Series A rounds for ten year old companies. But when you do, they are generally good ones to do.

So what is Quizlet? Well if you have kids in middle, high school, or college, they probably use it. Quizlet is a studying/learning tool written by Andrew Sutherland for his own use ten years ago when he was studying for a french test. He put it out on the web a bit later. He was joined by Dave Margulius who helped him turn Quizlet into a business by implementing an elegant freemium business model. Quizlet is free for anyone to use. But if you want to do certain higher value things, you can pay a small amount every month for access to them.

Quizlet lets anyone create a study set and practice it online and on mobile. And it also allows anyone to use someone else's study set. Quizlet is peer to peer learning. Over 100mm study sets have been created by users and over 1bn study sessions have been done on Quizlet. Quizlet has been a top ten education app in the mobile app stores for years, a fact I was constantly reminded of every time I went to look at the education category in the years we were chasing this investment.

Here are some examples I just found by searching around:

Just imagine a massively open database of 100mm study sets like that which is growing by the day. And you get why we have been and continue to be so interested in Quizlet.

There are over 7bn learners on planet earth. Within a decade, the vast majority of them will have a mobile device connected to this massively open database of study set which is available for free. These 7bn learners will be able to contribute and consume these study sets. And in the process the world will become more educated and more literate. That is hacking education and that is why USV is so excited to, finally, be an investor in Quizlet.

Kickstarter, PBC

I recall meeting Perry Chen for the first time in the old USV offices on the 14th floor back in 2009 shortly after Kickstarter launched. He and his partners Yancey and Charles were onto something, I was sure of that. But they wanted to do things differently. He told me that Kickstarter always wanted to do what they felt was the right thing. He told me they were not building the company to be sold. And so, he said, they needed investors who understood that and appreciated it. I told him that approach was welcome at USV and that we were eager to figure out if there was another way to do things too.

Six years later, Kickstarter has formalized those desires and commitments into its corporate charter and in the process has reincorporated a Public Benefit Corporation (PBC) under Delaware law. A Benefit Corporation is different than a “B Corp” because it involves formally amending the company’s charter and being recognized as such under the law.

I encourage you to read their new charter [https://www.kickstarter.com/charter] as it outlines the things they will hold as dear as shareholder value and be held accountable to and report on annually. And you should also read their interview with the New York Times [http://www.nytimes.com/2015/09/21/technology/kickstarters-altruistic-vision-profits-as-the-means-not-the-mission.html] where they explain why they did this.

There are those who say that Benefit Corporations and venture capital are not compatible. We don’t agree and we think companies that align their values with their customers and communities will benefit over the long term, not suffer. And that alignment can produce value for shareholders sustainably and profitably. It is worth noting that not one of Kickstarter’s angel investors, venture investors, employees, and board members who own shares in Kickstarter dissented on the vote to convert to a PBC.

None of this should suggest to you or anyone that Kickstarter is not a for-profit business. It has made money since its second year of operation. Profits give it sustainability without the need to finance the business externally. And profits can enrich its founders, employees, and investors. But these profits are not the only goal of Kickstarter. The company exists to bring creative projects to life and that mission drives the company as much, or more, than the profit seeking motive.

My partner Albert has written a lot about Benefit Corporations [http://continuations.com/post/48767728329/benefit-corporation-facilitating-a-new-market] and has worked with the State of Delaware to insure that their statutes are workable for entrepreneurs and the investors who support them. USV is a fan of Benefit Corporations and we are thrilled that Kickstarter has successfully converted into one and codified their values and commitments for the long-term as a Benefit Corporation.

The Decentral Authority

"The growing pains that Reddit is going through as it evolves into something more are particularly interesting to us. We’ve always wondered if a people powered community that is owned as much by its users as anyone can work as a traditional corporate entity. We’ve been through similar situations in our career (Geocities and Twitter among them) and we know how hard it is to reconcile the needs of the users, the management, and the shareholders."

La Ruche qui dit Oui!

La Ruche qui dit Oui! (the hive that says yes) is a marketplace that connects farmers to people who want farm fresh food in their kitchens and on their tables. We got to know the company last winter when my friends Simon and Toby from Mosaic introduced me to Marc-David Choukroun, one of the two founders of La Ruche. The Gotham Gal and I were in Paris and we met up with Marc-David at a Ruche on a saturday morning. We sipped coffee and talked to the farmers and customers who were stopping by to pick up their weekly supply of meat, cheese, milk, eggs, vegetables, fruit, and bread. We were smitten.

For years, USV has been on the hunt for a way to invest in the “farm to table” market sector. As you all know very well, we believe in the power of networks to solve the challenging problems of our time. And making high quality farm fresh quality food available at a reasonable price to everyone is certainly one of those challenging problems. The most affordable food is also the most mass produced and, generally, the most unhealthy food. How can we get back to a time when the food we eat is produced nearby, is high quality, and is healthy?

One way is to use the power of the network to connect farmers and consumers. And many entrepreneurs have been working on this problem over the past twenty years. We have met with most of them. Unfortunately, not many of them, until recently, met our test of a lightweight, peer to peer, capital efficient, people powered network. We call these “thin networks” and we are drawn to them as investors and as consumers.

La Ruche has been operating in France and Belgium for the past four years. Their marketplace connects farmers, consumers, and, most importantly, hosts together to form communities (Ruches or Assemblies) that come together once a week to exchange products, feedback, and friendships. These are communities in the truest sense of the word. My colleague Nick went to a Ruche in Paris last month and there was live music playing and people were hanging out enjoying the lovely spring day. A community is the thing that La Ruche’s marketplace software helps people create.

The business model is simple. Consumers order the food they want to pick up in advance and pay for it. The farmer comes to the community at the designated time, sets up next to the other farmers, and delivers his or her products in person. The farmer keeps most of the money, but the host and La Ruche split a small take rate for facilitating the transaction. It is a win/win/win. Farmers make more money selling directly, consumers get high quality products at reasonable prices, and the hosts make money for their effort to create the community, recruit the consumers, and curate the farmers. For many hosts, the income they get from creating and running these communities helps pay the bills, in the same way that selling on Etsy can help a family make a little extra money each month to make ends meet.

La Ruche has expanded to the UK, Germany, Spain, and Italy recently. The communities are known as La Ruche qui dit Oui! in France and Belgium; The Food Assembly in the UK and Germany, ¡La Colmena que dice Si! in Spain, L’alveare che dice Si! in Italy and Boeren & Buren in flemish Belgium. With its recent expansion in Europe, the network now has 100,000 active customers, 4,500 local producers, 700 communities. The company has 70 employees operating in six countries.

Over the past six months, USV has worked with Marc-David and his partner Guilhem Cheron to put together the right investor group to help La Ruche with their european expansion. La Ruche is a socially conscious mission driven organization that values farmers and communities and the needs of both as much as (or more than) the pure profit motive. In the US, they would be a B Corporation. And so they needed an investor group that was aligned on that. I am pleased and proud to say that they have succeeded in finding that investor group and USV is part of it. Our partners in this adventure are Frederic Court of Felix Capital, existing investor Rodolphe Menegaux and Xange, Eric Archambeau and Aymeric Jung of the social venture capital fund Quadia, and a few angel investors who are aligned with the company and its mission.

If you find yourself in France, Belgium, Germany, Spain, Italy, or the UK in the coming months, go to La Ruche and find a Ruche or Assembly and stop by and check it out. It’s something to see. Here’s a map that will help you find one near you.

DroneBase

Dronebase

A couple years ago, in early 2013, I started writing a lot about Drones. I have always thought that Drones represent the leading edge of a robotics age. There are a host of reasons for that but the main ones are that they are already being actively used in military and some commercial applications, they require less coordination with the “real world”, and they represent a 10x improvement in cost and speed over things they replace (helicopters and planes).

However, finding an investment in this sector that fits well into our investment thesis has been challenging. We’ve looked at quite a few Drone investments but until recently we have come up empty. However, last month that changed when we closed on a seed investment in Dronebase.

Dronebase is a marketplace for Drone services. This is not a consumer oriented marketplace. This is a business to business oriented marketplace. If you are in the construction industry and want to hire a Drone Service Provider to monitor or survey your job site, Dronebase is for you. If you are in the mining industry and want to hire a Drone Service Provider to measure inventory values in your stockpiles, Dronebase is for you. If you are in the real estate industry and want to hire Drone Service Provider to create aerial imagery for your properties, Dronebase is for you.

Dronebase is standardizing pricing and quality around two basic offerings to start; aerial imagery & video and more data-driven mapping & surveying (including the relevant analysis).

Like all investments, who is doing this is as important as what they are doing. Dronebase was founded by Dan Burton, a former Marine Infantry Officer, who saw the power of Drones firsthand in his time in Iraq and Afghanistan. He came back to the states and worked in a number of interesting jobs, but never lost the fascination for and the interest in Drones. So he started Dronebase to facilitate the commercial adoption of Drones.

This is a seed investment for USV. Dronebase is operating, but only in the Los Angeles market right now. They have big expansion plans which this seed capital will help facilitate. They are looking for software engineers and sales and operations people in the Los Angeles area. If you are interested in working at Dronebase, check out their careers page and apply.

Devices vs Cloud

"Which is that a device centric strategy is not a winning strategy in my mind. The big gains from technology in the coming years will come from things like machine learning and collective intelligence. Hardware and operating systems are important but to some extent a commodity at this stage of the game in mobile. Yes, we will see more sensors, better screens, better battery life, and more and more technology packed into these mobile devices. But I don’t think any one company has a lock on all of the device level innovation and I worry that one company, Google, is developing a very large and sustainable advantage in machine learning and collective intelligence that will be hard for anyone to compete with."