Unbundling Healthcare

USV has been investing in health-related technologies for about five years. Our approach can be characterized by the notion that digital processes, made more accessible by the internet and mobile access, could over time transform the cost and delivery of medical care. In the last couple of months, our conversations around healthcare have surfaced some new investable themes, which I’ll discuss in a few posts over the next month. The first such theme is the idea that healthcare can be “unbundled” into distinct services, a pattern we have seen in other markets (where niche sub-markets develop for specific services). So, in the case of healthcare, what is there to unbundle from? For one, large hospital networks and insurance companies, where most of the control and pricing power currently reside.

The last decade has seen unbundling in the financial services industry that serves as a relevant analogy. Financial supermarkets became popular in the 80s when large banks started offering one-stop shopping for a complete package of financial services, anything from mortgages to credit cards. In this model, the sale becomes around convenience rather than value as customers buy a complete package, even though each service may not be the best in breed or meet the specific needs of an individual consumer. With this, came a lack of price transparency as each service’s individual price is obscured by the combined package. The connected Internet and later mobile services, have made it easier to manage an unbundled package as well as increase the quality and personalization of each service on its own. In finance, we’ve observed that in the broader market, as well as within our own portfolio of fintech investments, with Funding Circle (peer-to-peer lending platform for small business), Stash (personal investing), CircleUp (equity financing for consumer products), Stripe (payments), and KickStarter (crowd-funding). Technology made processes simpler so that individuals could find specific things they need easily and affordably from market-specific providers.

Perhaps healthcare is now seeing the beginning of unbundling, catalyzed by the same use of technology which allows companies to focus solely on user experience in specific verticals. Some of the first pieces of unbundled healthcare to get venture momentum were direct-to-consumer brands such as Hims, Roman, Keeps, and Nurx. These are examples of companies using technology - such as telemedicine, asynchronous chats, and structured data - to lower costs and reduce friction in various niches of healthcare via a simple subscription business model. For example, Nurx gives users control of their health at every step of the process and delivers birth control and Truvada for PrEP in a timely, cost-efficient manner. Along a similar vein, at-home testing companies such as 23andMe, Modern Fertility, and Scanwell are bringing lab-grade testing services to people’s homes at a lower price point by leveraging technology. For primary care, companies like Sherpaa are using virtual primary care, while Doctor on Demand and Teladoc started by unbundling to serve individuals through telemedicine. Now other companies such as Vera Whole Health, CareMore, and PeakMD are coming up to serve employers with their primary care needs through local care centers.

Then there are examples of unbundling in parts of primary and specialized medicine that have not received as much attention yet, perhaps because their interactions are primarily conducted offline. However, these companies are still a part of the trend towards unbundling from large hospital networks and functioning as individual nodes in the broad healthcare market. For example, Pure Cardiology is a user-centric membership plan for all cardiology-related services, the Surgery Center of Oklahoma offers a menu-style list of surgeries they perform with up-front pricing, and the East River Medical Imaging Center in New York is an independently owned and operated center for scans including MRI, CT, PET, and X-rays.

In primary care, there has been a recent increase in the number of direct care clinics around the US, or doctors that are offering traditional primary care through an independent clinic without ties to large hospital networks and insurance companies. To support these practices, companies like Hint Health (onboarding and billing platform), Spruce (patient communication), and Elation (clinical electronic health records) are building the infrastructure to power a direct-care driven healthcare system. Technology enables new user experiences for quick onboarding and communication, but other offline examples of lowering friction are walk-in urgent care centers, such as CityMD and GoHealth. These clinics provide immediate medical care for a range of acute conditions that provide underserved patients with faster response times. Walk-in urgent care clinics started popping up in the 70s but gained more traction in the 90s and now service over 160 million visits annually.

These examples suggest that healthcare is in some respects being unbundled.

Why does this matter? One lever to getting momentum in an unbundled world is that a lower price point - a common denominator across many of these companies - compared to traditional bundled options, will allow more people to access healthcare. Besides just lowering costs, unbundling can open access in other ways, including minimizing the enormous friction that exists in legacy healthcare systems. If healthcare services continue the trend of “unbundling” in some of these ways, cost-efficiency will become much more of a priority where the fastest, cheapest, and most reliable services should win. More fundamentally, unbundling could create the opportunity for each of these distinct services to become independent nodes in a larger network in a bottoms up manner (which would make room for business model innovation - the subject of my next blog post).

For now, these observations seem to indicate some unbundling of the existing large, monolithic systems in healthcare towards a more open, local, independent and transparent model, with control residing with individual users. And ultimately, this could change the way healthcare is delivered to consumers.

USV’s Back to School Reading List

It's been a busy summer of reading for us here at USV. Since we often receive requests about what books people are reading, we polled the USV team internally to find out what picks and recommendations they each wanted to share with all of you. 

As summer is quickly coming to an end, we hope you can consider this your "Back to School" reading list from the team at USV. (If you have other book suggestions or recommendations, please leave them in the comments!)

Our Top Fiction Picks:

The Little House by Virginia Lee Burton
Recommended by: Jed Schmidt
It's a popular children's book from the 1940s about a house in the countryside that slowly gets engulfed by the growing city. It's pretty poignant, especially considering its intended audience.”

Lexicon by Max Barry
Recommended by: Dani Grant
The book is a thriller. It's summer. Enjoy.”

Sweetbitter by Stephanie Danler
Recommended by: Lauren Maz
“If you've ever worked in any restaurant, anywhere you might find this engaging.”

The Man in the Basement by Walker Mosley
Recommended by: Nick Grossman
“So good”

Less by Andrew Sean Greer
Recommended by: Nick Grossman
“Also Fantastic”

Another Brooklyn by Jacqueline Woodson
Recommended by: Lauren Maz
“It’s a lovely quick read”

A Gentleman in Moscow by Amor Towles
Recommended by: Lauren Maz 

You Should Come With Me Now by M John Harrison
Recommended by: Andy Weissman
“Collection of genre subversive short stories and flash fiction.”

Lincoln in the Bardo by George Saunders
Recommended by: Andy Weissman
His tweet speaks for itself
 
Autonomous by Annalee Newitz
Recommended by: Albert Wenger

Non-Fiction Recommendations:

When Breath Becomes Air by Paul Kalinithi}
Recommended by: Naomi Shah
“One of my favorite books. It illustrates an interesting dynamic when the doctor becomes the patient. Having had a family member with cancer, this book hit home for me.”

Bad Blood  by John Carreyrou
Recommended by: Zach Goldstein
“In a world where technology companies can be glorified, this is the story -- from the perspective of the WSJ reporter who broke the news -- of a generation changing business called Theranos gone terribly wrong, with lessons about business, life, and human nature intertwined.”

Fantasyland by Kurt Andersen
Recommended by: Albert Wenger

Savage Inequalities by Jonathan Kozol
Recommended by: Bethany Crystal
“This book takes a deep dive look at the education system in the U.S. and the vast disparity of funding gaps and opportunities seen for children in urban areas in the 1990s. It's an examination of how the design of this system continues to compound the impact of segregation of predominantly White communities from Black, Latinx, and Asian communities.”

Cable Cowboy by Mark Robichaux
Recommended by: Andy Weissman
“A well written, fast paced, history of the entrepreneurs who invented the cable tv business.”

The Founder's Dilemma by Noam Wasserman
Recommended by: Jennifer Greenberg
“This book walks you through all of the decisions that founders have to make by showing you actual startups and their journeys”

Ghost In The Wires by Kevin Mitnick
Recommended by: Dani Grant
“This is the book I read that first interested me in computer security. If I hadn’t read this book, I wouldn’t have applied to join Cloudflare and then wouldn’t have met the USV network. Oh and one tip: it’s great as an audiobook too.”

Slugfest by Reed Tucker
Recommended by: Fred Wilson
"Still reading it, but enjoying it so far"

Analyzing Tools Used by Our Network

This summer at Union Square Ventures, Jennifer Greenberg joined us as our summer intern. During her time at USV, she worked on many projects, and one of them was analyzing tools from across our portfolio companies. As part of this process involved grouping and sorting tools, she came away with a few observations from her project. Read her post below.

Hi, I’m Jennifer Greenberg, a current computer science student who had the pleasure of interning at USV this summer to support the Network Team.

Through my community management work in Slack as well as in attending USV network events, I noticed that one of the most common questions that comes up in the network is what tools are used by other companies.

To embark on this research project, we gathered over 450 software tools used across 64 companies, representing approximately 86% of our active portfolio. We began by tagging each tool based on department, the type of tool, and then explored how company size impacted usage.

Below are some observations and trends that we discovered.

Types of Tools Reported

As you can see below, developer tools ranked #1 among the categories of reported tools for this project, with 164 total tools reported. We also saw large numbers of tools used for communication, business intelligence, and design   

Most Popular Tools

The top reported tools were G Suite, Slack, GitHub, Jira, Sketch, Salesforce, DropBox, AWS, Excel, and InVision. These top tools (in particular G Suite, Slack, and GitHub) were used across multiple departments or tended to skew toward developer tools.

Developer Tools in the Network

The chart below show the most popular developer tools overall in the network. After Github and Jira, there was a drop off which may be because there are many free/open source options, causing individuals and companies to explore and favor different ones.

Size Breakouts

Company size creates a stratification among developer, hiring, and communication tools. As an example of how this plays out in engineering, you can see that all of the size brackets use either Github or Jira, but after that, the differentiation develops. For example, smaller companies are less likely to use security software. On the communication side, smaller companies are more likely to use internal tools like Calendly, GoToMeeting, and Rocketchat, whereas external tools including Docusign, Facebook, Medium, Sendgrid, and Twitter persisted across all size brackets.

 

As for hiring tools, LinkedIn, Lever, and Greenhouse are the most popular in the network, but these are primarily only used by companies with more than 30 employees. Tools like Guru, Textio, DiscoverOrg, and Checkr were used with companies larger than 50 employees, while Jobbatical, Entelo, Jazz, and AngelList were used by our smaller companies.

 

Market Dominant Tools by Category

While AWS still appears to be the favored cloud platform used among our portfolio, Google Cloud in particular appears to be gaining more traction. As you can see below, ¼ of companies are using either Google Cloud or Microsoft Azure.

Other tools with dominant market share include Slack and Salesforce. While 92% of our companies report using Slack, some companies opted to use Hipchat (recently acquired by Slack), Beekeeper, and Rocket Chat.

For sales management CRMs, 42% of our companies use Salesforce, however, some used alternatives like Google Streak, Insightly, or Close.io. It does not seem as though size played a role in a company's choice in any of these circumstances.

Closing Thoughts

One of the most fun parts about working on this project was learning about new tools used in the network. In fact, 52% of the tools reported were used exclusively by one company in our portfolio, which exposed a few new tools like Jell and Perdoo (both workflow management tools) as well as Sapling (an HR platform built for G Suite). It was also great to see how 78% of our portfolio companies use tools built by our portfolio companies (including Code Climate and Cloudflare, among others.)

While the average company in our portfolio is using 7 tools, one of our larger companies reported using 77 different tools, which made me realize that transitioning between tools may be a source of growing pains for startups. As our portfolio continues to expand, we hope that by aggregating and sharing this list internally (we’re even building a Slack Bot for our network to search these tools), we can make it easier to choose the best tool for each use case.

The Distributed Computing Update

One of the applications of cryptocurrency we continue to be excited about is distributed computing.

Before crypto, my laptop couldn’t pay a stranger’s idle server as a thank you for running a machine learning program. Cryptocurrencies finally give us the ability to make machine-to-machine payments to compensate participating nodes for running tasks.

In June I wrote an overview of the types of compute projects we were seeing. It’s been two months, but this is a space that moves fast and I wanted to keep sharing what we’ve been learning. Here goes.

Siloed networks vs an open protocol

There are two ways distributed compute could play out. In one model of the world, there is a dominant distributed compute protocol that creates a shared network of machines that anyone can build interfaces and clients on top of. Think of this like Heroku and EC2: both of them run on AWS servers, but they offer interfaces with drastically different experiences that cater to different audiences.

In the other model of the world, there are a few dominant compute projects that each have their own network of machines.

Both worlds allow for there to be coexisting projects that serve different audiences, but in one version of the world, the projects are clients on top of the same shared resource pool, and in the other, they all run their own independent networks. It is possible that these two models co-exist, but I think that is unlikely because of network effects. If given the opportunity, projects may opt to plug into an existing network of machines rather than build their own because having access to more CPU gives them better quality of service for their customers on day one than if they had to start from scratch.

We are seeing attempts at both. SONM is one project trying to build the shared resource layer. Another is Distributed Compute Protocol (DCP), built by Distributed Compute Labs. Most other projects are currently building out their own networks, though with open protocols there is really nothing stopping anyone from building alternative interfaces to any of these projects. We may see projects start as their own system and organically grow to be just one of the clients on top of their now shared resource layer. I am pretty excited about the possibility of a shared compute layer and about the teams and projects that are trying to build it. 

Typically the opinion of clients built on top of an open protocol is that they are brutally competitive because it is easy for a user to move from one client to another. Think of this like early Twitter where lots of people were building Twitter clients. It was easy for a user to move from one Twitter client to another so being in the Twitter client business was hard and competitive. This may be different with computing where the interface that the client exposes is the product. If it turns out to be the case that the client APIs are different from one another, because developers integrate them into their source code and CI/CD workflows, the clients could be incredibly sticky even if they all effectively expose the same backend. I think that is an important feature of compute that will even further incentivize projects to contribute to and build on a shared resource pool.

Token Questions

One question we have been thinking about is which tokens will be used by developers versus which tokens will be used by end users. That is: if a user interacts with a dapp that runs code on a distributed compute network, does the user pay the dapp in the same token that the dapp pays the compute service?

Right now the trending answer in compute services is no. Akash, Render, Perlin, Enigma and SONM are some of the compute projects that have their own transactional token. This follows the same model as IPFS/Filecoin where users will presumably pay dapps in whatever the major consumer-facing currency is (right now it is seemingly ETH or BTC) and dapps will behind the scenes exchange that token for the tokens they need to provide the service.

Hypernet and Truebit, on the other hand, are two compute projects with two-token models. In Truebit, for example, buyers can pay for the service in ETH, and the Truebit TRU token is just used for the protocol-specific functions of staking and dispute resolution. This matches a pattern we are seeing this year with infrastructure projects like The Graph and Augur that use the main consumer currency for transactions, and their own token only for governance, staking and dispute resolution. I predict we will see more projects change to the two-token model because it allows the price of governance to increase as the network grows, but doesn’t increase the price of the service with it.

The EC2 Model vs. The Lambda Model

In the existing web2 world, there are two main types of compute services: in the EC2 model, developers are provided an environment to run and host services, and in the Lambda model, developers write functions that can be invoked on demand.

The distributed computing projects break out into these two categories as well: one is like Lambda (or like Cloudflare Workers 😉) , the user writes a script, and the project runs it on participating machines. The other approach is the EC2 approach or the “someone else’s computer” approach: the user gets matched with someone on the network and can run a container on that someone's machine.

Note that the Lambda approach isn’t quite Lambda yet - machines in Lambda-like distributed networks don’t store all of the functions ever pushed to them and invoke them on demand. Instead, these networks are for running offline and async scripts for use cases such as scientific computation or rendering graphics. As latency improves, we can see these becoming more like serverless compute over time.

The ecosystem needs both models: hosting a dapp front end requires a persistent host, and running one-off computations is better on a serverless-like platform.

Two projects working on hosting platforms are Akash and DADI. Akash actually looks very much like traditional compute services from the end user’s point of view - developers manage containers on Akash-deployed machines in a Kubernetes cluster that can be federated across machines on the Akash network. (Not coincidentally, Akash is founded by Greg Osuri who is also a contributor to Federated Kubernetes). If you’re curious to try Akash, they recently launched a testnet.

Two projects working on the serverless platforms are Ankr and DCP.

Oh, the devices you’ll go!

The thing that distributed serverless compute projects can do that feels unique to cryptocurrency-based distributed computing networks is that they can run code on strangers’ phones and laptops because they don’t need to persist the compute environment beyond running one small script at a time.

The idea here is that these projects can pool together all of the unused end user CPU to form a giant super computer that is cheaper than what is available on the cloud compute market today.

[Side tangent on pricing: The main argument here is that distributed networks will be cheaper because they do not have to pay for physical space and the hardware capex cost has already been committed. However, as Mario @ Placeholder pointed out to me, cloud compute pricing is already racing to the bottom and if distributed services come along and undercut the main players, cloud providers can presumably come all the way down to just above maintenance cost and stay competitive.]

I am very excited about projects that can provide access to high power compute environments by pooling together available CPU on end-user devices.

There are three big challenges with running code on end-user devices. The first is convincing enough individuals to participate, which we covered in our previous post.

The second is that end-user devices are relatively low power. To counter this, we are seeing projects building in parallelization to run code simultaneously across multiple machines at once. Ankr leaves it up to the user to package their code into chunks and submit them separately to the network, where they will be assigned by a job scheduler to different machines. DCP auto-magically distributes an application’s subtasks across machines in the form of JavaScript objects that execute in web workers (DCP also cleverly uses WebGL to tap into the GPUs on end-user devices for an additional boost).

The third challenge is that end-user devices are untrusted. There has been a lot of recent momentum in utilizing SGX, a trusted hardware environment built into Intel chips, even since our last post in June. Since then, Enigma released a testnet utilizing SGX for compute, Golem released Graphene-ng to help developers write SGX-enabled code, and Oasis Labs raised $45M led by a16z’s new crypto fund to build SGX-enabled distributed compute. The top 3 laptop makers: HP, Lenovo and Dell support SGX. MacBooks have SGX-enabled chips, but the BIOS hasn’t been configured to expose that functionality up to the operating system. When Apple adds SGX, the top 4 global laptop brands will all have built in support for SGX-enabled computing. I am a big supporter of the SGX approach because it is fairly secure and accessible on consumer laptops.

Besides SGX, another way distributed compute protocols can verify computations is with dispute resolution. Truebit is one of the compute projects with a dispute resolution protocol, which they call a “verification game”. In it, a verifier stakes TRU tokens to challenge the result of a computation. In Truebit’s dispute resolution game, the solver’s state is hashed at each time step of running the program (actually, any given instruction might not be executable within Ethereums's gas limit, so TrueBit breaks down each instruction into 12 substeps). Then the verifier queries those hashed states using binary search to find the exact instruction at which things went awry. The disputed step or substep is then run on Ethereum for the final outcome. Whichever side is wrong loses their staked tokens, which are paid out to the winning side.

Where on the stack does compute fit?

One open question is whether compute services will end up being a layer 1 or layer 2 solution. That is: will the next major blockchain include compute as a built-in service, or will compute always be run off-chain.

The reason why compute is done off-chain now is because the predominant blockchains available for use are either Bitcoin: limited scripting language or Ethereum: compute is expensive and slow. There could very well be a future in which a layer 1 blockchain is able to bake in compute in a way that doesn’t require every node in the network to run the same computations, which would make it cheaper and faster. Perlin is one project attempting to build this, though even in Perlin, compute services are implemented as a side chain of the main Perlin base chain.

Most projects are either building side chains to existing blockchains, or completely off-chain networks that are independent from existing base chains. Render is one example of the first approach - Render is implemented as an Ethereum smart contract that interfaces with the Render network. Akash is an example of the latter: it is a separate network entirely.

I tend to like light, horizontal protocols that can be layered on one another rather than a super-protocol blockchain that can do everything. That is how the internet works now - small protocols that layer on top of one another (SMTP > STARTTLS > TCP > IP). What it allows for is reusable modules (both QUIC and DNS can use UDP without there needing to be changes to UDP to support that) and the ability to easily swap out and upgrade layers (HTTP can be swapped with SPDY or upgraded from HTTP 1.1 to HTTP 2.0 without making changes to the layers below it).

Geographical Market

The last thing to say here is that one potentially very smart thing we are seeing is projects focusing their approach on one geographical market. DCP, for example, is starting by providing compute to Canadian universities and labs (though through the process they have picked up a lot of interest from outside of Canada as well). Ankr, for example, is putting extra effort on reaching the Chinese computing market where demand for compute is skyrocketing (Aliyun’s revenue grew 104% year over year) and AWS doesn’t have too much of a stronghold (though Aliyun does). We think these targeted approaches could play out well.

Conclusion

It is still early days and there are a lot of unknowns, but we are optimistic about what could be. If you are building interesting projects in this space, we’d love to hear from you. Reach out: I’m [email protected]

Jed @ USV

Hey all, I've recently joined USV as the firm's very first Developer in Residence. Over the next year I'll be porting USV's thinking around networks into code, and writing the APIs, apps, and bots that will help folks at our 70+ portfolio companies communicate and collaborate with each other.

Having an in-house developer is still a bit rare in venture capital, but it feels like a natural fit for USV. Building on its early success investing in businesses that leverage network effects, USV brought this approach to its own network in 2010, launching an effort to facilitate interaction among network members through events and introductions. And now my job is to grow this platform online, to help reach and connect a greater share of folks in our increasingly diverse portfolio.

So far, my work has been roughly split between the back- and front- ends. On the backend, I'm writing code (mostly JavaScript running on AWS Lambda) to aggregate and consolidate several years of data from the various services we use into a unified view. This will help USV's network team figure out how to allocate our time and attention to better serve our portfolio companies. On the frontend, I'm building tools to connect fellow portfolio members where they hang out, which for us these days means Slack. We've built a Slack bot that helps members discover each other through similar interests and tools, answering questions like "Who is working in sales at USV companies with 50-100 people?" and "What design tools are popular among other developers in the network?"

Helping like-minded folks discover and learn from each other was one of my favorite things in building BrooklynJS, my favorite community here in the city. To be able to do the same for USV is a great gig, and really, second only to my other gig, moonlighting as a bass for Brooklyn's favorite-slash-only barbershop quartet.

If you’re building a similar platform and/or have ideas about what kinds of interaction mechanics work well for community building, please drop me a line!

An Overview of Blockchain-Based Universal Basic Income Projects

Universal Basic Income (UBI) is the idea that citizens receive a regular, unconditional stipend that helps them cover their cost of living. Previous UBI experiments have shown to reduce hospitalization, crime and poverty rates. Richard Nixon, Thomas Paine, Martin Luther King Jr. and Milton Friedman were all vocal proponents of UBI.

UBI has traditionally been imagined as a government subsidy that would put money back into the economy by giving it directly to people (as opposed to quantitative easing where the Federal Reserve puts money back into the economy through banks).

The development of cryptocurrency, however, now gives us a way to implement UBI in a global, trustless and democratic way without the need for a government to implement it.

Recently there has been an emergence of a handful of blockchain-based UBI projects. They are all very early. Most of them do not yet have a public product, but a few do, if you’re curious to try some out, a few you can check out are Mannabase:

SwiftDemand:

and Solidar (implemented as a chatbot on FB messenger).

We are intrigued by this possibility and are wondering about some key issues, such as the complexities around issuing new currencies and preventing fraudulent accounts.

Where does the money come from?

When blockchain projects implement UBI, where does the initial money come from?

The majority of the UBI blockchain projects issue their own currency in the form of tokens. That is, instead of recirculating existing money in the economy, they generate new value by minting a new currency. The challenge is that while the idea behind UBI is to provide real income that can be used for paying for things like rent, tuition and groceries, newly invented currencies are initially worthless until someone accepts them. It is up to each UBI project to make their currency worth something.

Projects do this by building an economy around the currency where people can exchange and use their tokens to buy goods and services. Nick calls this building a ‘Minimum Viable Economy’.

Building a Minimum Viable Economy: Vendors & Merchants

The idea behind a Minimum Viable Economy is to build enough of an ecosystem around a token so that its holders can use it to buy goods and services or exchange it to other currencies.

For this to happen, the project needs to incentivize merchants and vendors to accept the token as a form of payment.

SwiftDemand is probably the UBI project with the most developed marketplace so far. Their hope is to seed the marketplace with vendors that are participants in their UBI community. Anyone in the community can submit something to sell:

And then anyone in the community can buy those things using the Swift token:

projectUBU (beta) is building tools for vendors to be able to easily add support for their UBU token. Enumivo (pre-beta) is building their own blockchain (a fork of EOS) with the goal of developers building dapps that accept their token, $UBI.

It is easier to convince vendors to accept a token if there are a lot of people that hold the token. A good analogy for this is the credit card: even though vendors dislike credit cards because they are expensive and require extra in-store hardware, they are incentivized to accept them because so many people have them.

To seed this network effect, many UBI projects have referral programs to reward people who bring in new users. projectUBU, for example, rewards 1,000 UBUs to the referrer and 500 UBUs to the referee per referral.

Some projects, instead of doing a one-time bonus, continue to award the referral bonus as long as the referred person stays in the network. Frink (beta), for example, plans to indefinitely payout an additional 10% to referrers, and Mannabase plans to payout an additional 100% to referrers for one year. The idea is to incentivize people to refer “high quality users” that will stay in the network for a long time. An interesting question is whether a high referral bonus will increase the incentive and potential for referral fraud.

These referral programs are often set to expire when the network grows to a desired size. Solidar’s program, for example, is scheduled to reduce the bonus by 50% when the network reaches 15,000 users and then again every time the network size doubles.

Building a Minimum Viable Economy: Monetary Policy

Projects also need to incentivize people to spend their tokens. UBI projects can build in monetary policy that makes it more attractive for token holders to spend the tokens than to hold them.

There are two ways to do this: demurrage (some amount of held currency automatically dissipates) and by growing the money supply (so that each held token is now worth less). Both accomplish the same goal of incentivizing token holders to spend their currency, otherwise their held currency will lose some of its value.

projectUBU is one of the projects utilizing demurrage: 1% of all UBU wallet balances dissipate every year. Circles is one of the projects planning to mint more currency: they plan to grow their money supply at a 5% annual rate. The most dramatic of these programs is Solidar, which has an annual 20% demurrage rate.

Another way projects incentivize people to spend their tokens is by capping the amount of tokens any account can hold at one time. In order to receive more tokens, participants need to withdraw or spend the tokens they’ve already received. SwiftDemand, for example, only allows accounts to hold 7 days of unclaimed income at a time.

Building a Minimum Viable Economy: Liquidity

Another way to create value in tokens is to provide liquidity - aka the ability for a token holder to exchange the token for another currency, usually fiat, like USD. 

For there to be liquidity, there needs to be someone who wants to buy tokens from those that hold it. 

One project called Big Foundation (beta) is seeding liquidity by paying people a bonus for buying the token.

Greshm (pre-beta) holds a reserve of USD and issues currency called XGD backed by that USD reserve. (Note that they are built on their own system and not on blockchain). That provides initial participants and vendors with a source of liquidity - they can cash out and receive an equal amount of USD for their XGD. Greshm plans to maintain a 1:1 peg to the USD at first, and then increase the ratio of XGD to USD over time. This will allow them to put new money into circulation. (This model exists in the traditional US economy where federal banks can create new money by lending out money they don’t have in reserve up to a certain lended_money:money_in_reserve ratio.)  

Another interesting approach here is Democracy Earth’s distribution program. Because their currency has immediate utility as a vote, there are more likely to be buyers of it. Democracy Earth (beta) is a governance platform, and buying currency can mean buying power. The caveat is that organizations built on Democracy Earth can set their constitutional smart contracts to limit only one vote per person per issue, which inhibits the ability for participants to effectively buy votes.

Identity Verification & Anti-Fraud

Before a UBI project can hand out tokens, they first need to verify that each participant is a real person, and that each person is limited to a single account. This prevents cheating via ‘Sybil attack’ where a user creates multiple identities that all trust and validate each other in a closed system. If every user could create multiple accounts to increase the amount of income they received, it would dissolve the public trust in the value of the currency, and depreciate its worth. It would also undermine the spirit of the project where in everyone gets the same amount.

There are two main ways that UBI projects are solving this: voting and social trust.

The first way is allowing members of the community to vote to verify a new participant. On Democracy Earth, for example, new participants have to go through a validation process with other previously validated community members in order to be able to join the network. (They actually plan to have every participant repeat this process periodically in order to prevent abandoned accounts).

The second way is by relying on trust relationships from the real world. Circles (pre-beta) does this in an interesting way: On Circles, each new participant is issued UBI payouts in their own personal currency. That currency is not worth anything because no one agrees to exchange it yet. To make their account balance worth something, Circles participants need to trust each others currencies by being willing to exchange them. From the Circles documentation: "The value of a specific personal currency is a measure of how many other accounts trust it. This means that users who are new to the system and don’t have many trusted relationships have a less valuable currency than someone who is well-established in the network. It also means that the currency of new users gets more valuable over time as they create more trust relationships."

Enumivo plans to do a combination of the social graph and voting solutions. People who want to join Enumivo will have to find someone already in the community to sponsor them. To sponsor someone, a community member stakes 200 tokens (10 weeks worth) and then other community members have 30 days to vote on them.

There are also standalone identity projects like uPort and Civic that future UBI projects could potentially leverage. Generally we are very interested in learning more about self-sovereign identity projects that could enable decentralized programs like UBI.

Are These Projects Sustainable?

There are two ways most UBI projects fund their development: by holding a percentage of their tokens (most UBI projects do this), and by collecting transaction fees (some UBI projects do this).

What I like about these revenue sources is that they align the core team’s interest with their users’ interests. The better the core team grows the network and token economy, the more their tokens are worth, and the more transactions there will be to collect fees on.

Wrapping Up

One of the applications of blockchain that we are very excited about is UBI, and we hope to keep learning about how different projects are implementing it. If you’re working on something in this space, we’d love to hear from you. Reach out, I’m [email protected]

USV Intern Day

I know my favorite day of the year should be our USV CEO Summit. But it’s not. It’s actually USV Intern Day

On this day, which we now host once a year in both NYC and SF, we bring together interns from dozens of portfolio companies and invite them to learn about all of the companies in our portfolio. For me and Lauren, this day feels a little bit like summer camp -- we sport swag from our portfolio companies and shuttle interns around the city all day.

Like all of our best programming at USV, this idea didn’t originate at USV, but it came from our network. In 2016, the talent and people team at Meetup sent this email, asking:

“Are there any USV events geared towards interns? Has USV thought about doing some type of event/crawl for interns to visit different offices in the portfolio? We thought it'd be great to give our interns an opportunity to interact with interns at other portfolio companies.”

We jumped on it immediately and rallied participation from more than a dozen NYC companies. For participating interns, we organized a multi-stop event with two tracks (technical and business) featuring short talks, office tours, and job advice from the incredible leaders in the network. Some companies handed out free swag to all attendees. Meetup concluded the day with a pizza party on their incredible roof deck.

But I don’t like Intern Day because of the pizza and the swag. I like it because of the deep collaboration and sense of community that it represents among our portfolio.

This year, we had about 75 interns between our San Francisco Bay Area companies and our NYC companies. Product and operations leaders from Skillshare and Code Climate each took an hour to introduce these students to the complexities of their business models and careers in tech. Shippo in San Francisco facilitated an entire panel discussion with robust Q&A. Clarifai taught a group of 40 students how they think about AI and machine learning. Matt Blumberg, CEO of Return Path, spent the last hour of his busy workday sharing candid advice he wished someone had taught him before entering the workforce.

When kicking off the day, we shared two stories with the intern class this year. The first was the story of how Andrew Sutherland, at age 15, started a flashcard app for himself while studying for a high school French test that eventually became the company and brand we all know today at Quizlet. The second is how, in their first first job after school, Meetup CEO Scott Heiferman met his now-co-founder Brendan McGovern when they sat next to each other on the very first orientation day at Sony.

One of the things we are so privileged to see at USV are the origin stories of entrepreneurs all over the world. We hope that, even by bringing together interns for one day out of the year during their summer, we’ll spark some inspiration or ideas that will come back our way several years down the road.

Investing In Token Focused Funds

At USV, we have been active in the blockchain/crypto sector since 2011. At this time, we have direct investments in nine companies/projects in the crypto space and one exited investment. Companies in the blockchain/crypto sector make up about 15% of our active portfolio and closer to 25% of our recent investments.

But the venture capital fund model is not optimized for investing in the blockchain/crypto sector. Blockchain/crypto companies/projects often finance and monetize via tokens which can become liquid quickly and thus we can end up holding highly liquid and volatile positions which is not something we have traditionally done. And because USV operates under the venture capital exemption to Dodd-Frank, we are limited to 20% of our holdings at cost in “non-qualifying” investments, which include tokens.

So we have sought out other relationships in the sector that can allow us to get broad exposure to the most interesting companies and projects. Our most recent investment, which closed last week, is just that. USV became investors in Multicoin Capital, a fund that is focused exclusively on the blockchain/crypto/token sector. There are a lot of smart people thinking about and analyzing this emerging sector, but there aren’t many who are doing it so publicly and conversationally as the Multicoin team. Their blog posts are here and their tweets are here: (Kyle, Tushar) . Their opinions are often controversial and contrarian. You can make a lot of money by being right about something most people think is incorrect. So at USV, we appreciate and value original thinking.

Multicoin often talks about “venture capital economics with public market liquidity.” The token sector offers both, and that is partially what has caused USV some challenges making this sector work in our current fund structure. Multicoin is structured in a way that gives them and their investors the benefit of both. We are excited to be investors in Multicoin.

Multicoin joins a roster of other blockchain/crypto/token funds that USV has invested in over the last 18 months. That list includes Polychain Capital, Metastable Capital, Blocktower Capital, Arianna Simpson’s new fund Autonomous Partners, and Placeholder. Placeholder, like USV, uses a venture capital fund model for its investing. All of the other funds use more of a hedge fund model.

This portfolio of token funds gives USV a much broader reach across the blockchain/crypto/token sector than we would be able to get directly on our own and we also benefit enormously from the dialog and information sharing that exists across this network of investors.

USV has not become, and has no plans to become, a fund of funds. But the blockchain/crypto/token sector has some unique challenges for us and others in the venture capital business and we have taken a network approach to solving them, at least for now. 

We have and will continue to invest directly in both companies and projects and both equity and tokens in this space, often in a syndicate that includes one or more of these token funds. It is an exciting time to be investing in blockchain/crypto/tokens and we are fortunate to be able to do it along with some of the best investors in the sector.

An Overview Of The Distributed Computing Landscape

People have been trying to build distributed compute networks since the 1990’s; In 1996, GIMPS used distributed compute to search for prime numbers and in 1999, [email protected] used volunteers’ compute power to search for extraterrestrial life.

Now 25 years later, the final pieces seem to be in place. Cryptocurrency makes possible machine-to-machine payments, which allows participants to get compensated for contributing CPU. Fields such as machine learning, 3D simulation and biological computation are driving up demand for compute resources.

We’ve been looking at distributed computing projects and wanted to share how different projects are tackling growing the number of machines connected to the network and isolating tasks from the compute nodes they run on.

Below are our early findings. We hope they are useful, and let us know if you have any feedback.

Approaches To Growing The Network

Metcalfe’s law applies to compute networks: the more machines there are on the network, the more likely a machine will be available to accept a new task when needed.

Growing a compute network is difficult to do, especially as the space is increasingly crowded. To clarify - the issue isn’t that people already have installed something and don’t want to install something else, but rather that there is a lot of noise for a project to break through.

Here are four interesting approaches we are seeing:

Approach #1: Make it easy for anyone to participate in the network. One example of this is KingsDS (pre-beta). To join, all you need to do is visit a URL in the browser and let the tab run in the background.

Approach #2: Help other applications get compensated for pooling their own users’ resources. An example of this is  FREEDcoin (pre-beta). They offer an SDK for game developers. When players launch games running the FREEDcoin SDK, they are given the opportunity to contribute their CPU in return for in-game prizes. It’s a win-win-win: FREEDcoin gets to add high-power gaming PC’s to their network, game developers can monetize their games without showing ads, and players have the opportunity to earn virtual prizes.

Approach #3: Build the client so that each node can both submit and complete tasks. Golem’s (beta) client can be used to submit tasks and to compute them. That means each one of their end users can also easily become a compute node. This helps them grow both sides of their network evenly.

Approach #4: The last approach is to be the supplier of compute resources for other computing projects. One example is SONM (beta), a project trying to help other compute networks scale up quickly. With SONM’s open marketplace, machines can advertise how much RAM, CPU and GPU they have available in a standardized format. Any project using SONM can then search the entire SONM network for a machine with available resources.

Approaches To Isolating Tasks From Host Machines

One challenge is ensuring that tasks cannot read or modify memory of their host machine and vice versa. If multiple tasks are running simultaneously on a machine, it’s important that they are isolated from each other as well.

It’s a tough challenge to keep data private; even though SONM runs all tasks in Docker containers, they also have partners that run nodes sign NDA’s.  Most projects are relying on existing container runtimes like Docker to satisfy this requirement. Makes total sense - who wants to reinvent wheels. However, there are two projects in this space that are doing something unique and are worth calling out.

Enigma (pre-beta) is designing what they call “secret contracts” - these are compute nodes much like smart contracts but because every piece of data is split across multiple nodes working on the same compute task, no single node can read any data. They do this using a cryptographic method developed in the 1980’s called multi-party computation. Enigma is building out their own chain that will be able to do the storage and compute.

Keep (pre-beta) is another project taking a similar approach. They are also using multi-party computation to shard encrypted data to perform computation without the compute nodes being able to read any inputted data. With Keep, the storage and compute of private data happens inside clusters and the output gets published on the blockchain.

One Last Thought: Narrow Vs. Broad Use Cases

There are two approaches one could take for a distributed computing project: build a general compute tool that could accept any workload or accept only a narrow range of tasks.

Most of USV’s portfolio companies started by doing one thing, and doing that one thing allowed them to grow and build a network and a platform around that one thing. (e.g. Cloudflare, Stash, Carta, etc.)

I tend to think that the same pattern will work well for compute networks: starting with one narrow use case (such as training machine learning models, rendering 3D shapes, and folding proteins) will help a project move quickly and over time grow into other compute areas.

Albert likens this to WeChat’s growth: WeChat started with chat and the success of chat allowed them to grow their network so that they could build other applications like payments, ecommerce and gaming, and now WeChat is a general use tool.

There’s a question around what is the right use case to start with. There seem to be two paths: one is starting with training machine learning tasks (machine learning is one of the drivers for increased demand for computing resources). The other is starting with a use case like 3D rendering or academic/scientific computation where there is no overhead of private data to protect.

Wrapping Up

This space is early, but an exciting prospect. Not only will greater competition in compute providers drive down prices and fuel innovation, but there may be a new class of applications (such as VR and autonomous vehicles) that may only be made possible when distributed computing will be hundreds of milliseconds closer to end devices than us-west-2.

If you have ideas or projects you’re working on, we want to hear from you. Reach out, I’m [email protected].

Dani @ USV

Hi everyone. I just joined USV as an analyst and am very grateful to the USV team for the opportunity to learn from them. I’m coming from Cloudflare, a USV portfolio company, where I worked for Dane on the Product Strategy team. I was there for 3.5 years and worked with the team there to launch a lot of fun projects like 1.1.1.1SpectrumDNSSEC, and Cloudflare's partnership with F-Root.

I’ve been at USV for 2 weeks. Here are some things I’ve learned so far:

1. Investors at USV are in a day-long meeting every Monday so the worst time to cold email a USV partner is on a Monday.

2. One winning presentation format is to start with growth numbers. A lot of company presentations start with describing the product first, but nothing grabs investors’ attention like proof in data.

3. This one I learned from Assif: Thinking of tokens as an asset class is missing the picture. If tokens are successful, everything will be tokenized (sports teams, companies, real estate, art, etc), and more people than ever will own pieces of tokenized assets.

4. Some interesting blockchain projects are starting with Android-first because it’s easier to grow a network in places where the few tokens you get in return for participating in a network are more meaningful.

I’ll be continuing to share what I’m learning on this blog - stay tuned for an overview of distributed compute projects later this week. If you’re working on anything interesting related to our new thesis, reach out. I’m [email protected]  Excited to start the Union Square adVentures.

Our Investment in Modern Fertility

Modern Fertility is building a trusted consumer brand in fertility, starting with their launch today of at-home testing for women. In the comfort of their own homes, and for a fraction of what it would cost at a clinic, women can have their key fertility hormones tested through a few drops of blood. These hormones give insight into things like egg count, ovulation, and thyroid functionality--factors that have big impact on a woman’s likelihood of conceiving now or in the future. Most importantly, customers receive personalized, clear results that set the context for how to think about their own bodies and choices--including the option to dive in deeper with registered professionals who can help figure out what comes next, no matter the findings. Customers also become a part of the Modern Fertility community, a cohort of women with unique situations and attributes, but all focused on making fact-based choices and interested in similar topics.  

There are 4 key elements that made us particularly excited about this investment at USV:

  1. USV’s Thesis 3.0 centers around companies and projects that are broadening access to knowledge, capital, and well-being. Today, women typically do not get access to this personalized fertility information until they have been trying to conceive for 6-12 months without success. At that point, their doctor can recommend labs, which are often costly and not covered by insurance. As a result, the customer doesn’t know her own fertility status until she knows that something is possibly wrong (and is able to afford the testing.) Modern Fertility provides women insight into their health on their own terms and timeline, with a far lower price-tag. And while at-home hormone testing allows the company’s relationship with a woman to begin at the start of their fertility journey, Modern Fertility’s plans are big to serve them throughout, no matter which way their road winds.
  2. When women take the Modern Fertility test, they are not only getting access to their own information, but helping teach Modern Fertility’s core systems how to best serve the next woman. The community is strengthened by each person that joins it, both in size and in strength of the data. This core data network effect is something we continuously look for and believe creates powerful moats.
  3. Modern Fertility is not only focused on releasing functional products, but also on building a trusted brand in a category rich in consumer emotion, engagement, and spend, but currently devoid of reliable access or information. There is no go-to service when women begin to think about starting families. Anyone who has been down that path and entered the Google rabbit hole around the topic knows this viscerally: it’s unreliable, inconsistent, and often frightening. Questions are answered on ancient message boards that aren’t verified by fact or context. Primarily, its an impersonal maze centered around a highly personal topic. The opportunity to change this and create an important business while doing so was evident in first meeting founders Afton and Carly. And while delivering on brand promise and gaining longlasting consumer trust is difficult, this context creates the opportunity to do so in a meaningful way.  
  4. Afton and Carly, and the team they are assembling, are uniquely positioned to build this company. Afton started her career in financial services looking at fertility clinic roll ups where she first realized the massive opportunity and problems with the market. She started Modern Fertility out of a product role at 23andMe where she saw the power of at home-testing and compounding data sets first hand. Carly comes out of brand and creative at Uber and Google. She has long been focused on building standout consumer experiences and communities. They are building for a cohort they know and a product they need.

This is a category we have believed in for quite a while at USV. Modern Fertility joins Nurx and Clue in our portfolio, all of which are aiming to provide better experiences, greater access, and powerful information to women around their health and bodies. We are passionate about this market as well as opportunities to build brands that broaden access across many categories of consumer health. It is a sector of our portfolio that will likely continue to expand in the coming years.

Welcome Afton, Carly, and the Modern Fertility team to the USV family.

 

The Mosaic Series at Yieldmo

The terms “diversity” and “inclusion” have become increasingly paramount to CEOs, executives, managers and employees when focusing on the direction of their company. Their emphasis on creating a more heterogeneous team and inclusive environment has been pulled to the forefront of priorities and, not surprisingly, more people are becoming more aware and vocal. It is exciting to see open dialogues occur across companies, industries and roles, but more importantly, to see a wave of transparent communication and shared knowledge start to empower change.

There are several companies in our portfolio network that are spearheading this conversation. Included in the wave of frontrunners, a team at Yieldmo has founded “The Mosaic Series.” Their goal has been to create a transparent, open space for participants of diverse backgrounds to share their experiences, while generating actionable takeaways for companies to implement. Thus far they have hosted three events, each partnering with different companies and organizations, and focusing on different topics.

Thus far, The Mosaic Series has included Volume 1: Recruitment and Hiring and Volume 2: Interview Process. Volume 3: Allyship will take place on June 6th, with the goal of defining what a true ally looks like, and how true allyship manifests itself in processes within a company. Link to RSVP here.

Their last event, Volume 2: Interview Process, began with dissecting three interview questions, each submitted by a different company or organization.

Those questions were:

  1. Who was the best co-worker you’ve ever had and why?
  2. Have you ever been unpleased with your work? And Why?
  3. What are you not good at yet (personally or professionally)?

Interviewer feedback that came out of the discussion included:

  • Provide context for certain questions: preface by talking about the values of the company before asking the question. Hypothetical examples can help.
  • Be mindful of tone: Tone can make or break the experience for the interviewee, which will affect how they answer questions.
  • Being direct with questions, transparency is key: what values are you, as an interviewer looking to assess.
  • Provide an easy, comfortable environment for the interviewee
  • Have answers to your questions: Should be ready to answer the questions you are asking, especially when pertaining to the company’s values, culture, etc.
  • Communicate all of the above to your team. Interviews can’t be effective if every interviewer is not on the same page. This also minimizes personal bias when deciding who to hire.

The rawness of the discussion was palpable and, even with 40 participants you could feel each and every one of them engaged in the dialogue. The discussion ran long and 100% of the room still wanted to continue to the conversation! That is an incredible compliment to the organizers and speaks to the quality of the discussion.

Volume 3, on June 6th at General Assembly will cover allyship, and what that should look like in the tech community. I can’t wait to join them for that discussion. To register, please go here.

Lauren @ USV

Hi all,

My name is Lauren and I oversee Network Engagement and Partnerships at Union Square Ventures. For those who know me, you might think this “welcome” blog post might be odd given that I have worked at USV for 4 years. However, since it is customary for someone new to the investment team to write a blog post, I thought now is the time to share the evolution of my role and what I am currently working on.

While I have been here since 2014, my role has transformed quite a bit. For the last 18 months, I have been a part of our Network team, focusing on engaging employees at our active portfolio companies through communication and events as well as building partnerships, both within our portfolio network and with external organizations. During this time, we have scaled our network engagement quite rapidly and are excited to build more resources, access points, and customized programming for the 8,000+ employees within our portfolio of 70+ companies across the globe.

As in most things we do here at USV, my role’s central focus aligns with our investment thesis. For every project and initiative that I focus on, the fundamental goal is to help increase knowledge and access for employees within our portfolio. This can be shown through the 150+ events we offer each year, through our USV Network Slack with over 3,000 members, and via our Network Leaders Program, which empowers portfolio ambassadors to build and mobilize functional or regional communities through events and discussions.

As our portfolio continues to grow and evolve, I am excited to evolve with them! We learn from our companies, listen to them, and try our best to adapt our communication, programming and resources to what they need, when they need it. It’s been a pleasure to experiment with new ways to support our portfolio network over the past year, including launching a monthly diversity & inclusion series and our first-ever Women’s Executive Leadership Program.

I look forward to connecting with you! We are always looking for dynamic experts who can speak about leadership, mentorship, scaling and more. If you are part of an organization that can benefit our portfolio network, please also feel free to reach out at @lauren_maz or lauren at usv.com.

Hi Everyone

I am a new analyst on the investment team at Union Square Ventures. I came to venture capital from the trading floor at Goldman Sachs. Before that, I worked in the Internet of Things group at Intel building out a pipeline for go-to-market solutions in different verticals (healthcare, energy, transportation, retail, etc). I completed my undergraduate degree in mechanical engineering at Stanford. I also have a minor in human biology as I am fascinated by the interdisciplinary approach to understanding humans beings - biological, behavioral, social, and cultural - especially how it ties into my design and engineering background.

In keeping with USV, I'm not necessarily focused on a sector, but on companies that broaden access to knowledge, capital, and well-being. I believe that a negative user experience is a big roadblock to consumer uptake across industries. Among USV’s investments are companies such as Codecademy, which finally made it easy to learn programming, Funding Circle, an easier way to access capital, and Splice, an easier way for musicians to create. The common thread among these companies is that the user is the priority. I look forward to working with companies across many industries to learn how the user experience can be transformed with technology and data.

In my free time I love to travel, read, and ski. Recent trips include Gujarat and Rajasthan in India, the Argentinian side of Patagonia, and national parks in Utah and California. In terms of books I like, previous coworkers recommended Grit by Angela Duckworth and Decision Traps by J. Edward Russo, both of which are fantastic reads. I am currently re-reading Howard Zinn’s A People’s History of the United States and slowly making my way through Shantaram.

Please reach out anytime at naomi AT usv DOT com or follow me on Twitter @naomics2. Talk soon!

Hello!

Hey Everyone –

I’m Zach, one of the new analysts at USV. I'm excited to be a part of this team and eager to find and support entrepreneurs on their quests to innovate.  

I started my career at BlackRock, where I worked with institutional clients to better allocate their defined contribution assets (retirement savings). Then, I was bitten by the startup bug and joined MyPizza—now Slice—as the first business hire. Slice provides independent pizzerias with technology and consumers with the ability to order from their local pizzerias. While working as a business analyst, the role took me from downtown meetings at pizza joints all the way to our Macedonia offices to work with the operations teams.

I then transitioned to product management, spending time on consumer-facing and operations products. My excitement for providing (often) non-technical pizzeria owners with a modern toolset to operate in the digital age aligns with USV's Thesis 3.0. I'm looking forward to exploring consumer businesses that broaden toolsets and the back-end SaaS companies that enable them.

Outside of work, I like to think about how and why people make decisions, play chess, and experiment with weird food combinations that should be considered delicacies (Diet Coke finally took my advice and mixed with orange juice). I used to believe I had a chance at being the next Patrick Ewing, but I’ve resigned to weekend open gyms for now.

I look forward to chatting with as many of you as I can and feel free to ping me for pizza recommendations while my taste buds are still fresh.

Please say hello @zgoldstein1 (disclaimer: I’m new to the Twitter game, so any tips are appreciated and all mistakes are my own). Or, get in touch the old-fashioned way with an email to zach AT usv DOT com.

Shapeways Expands Services for Creators

Shapeways has printed over 10 million different products. This has allowed Shapeways to hone its printing and logistical capabilities. Along the way, the team has also developed great insights into the needs of creators. We are excited that Shapeways is expanding its service offering accordingly:

First, for those who have creative ideas but need help with 3D modeling, there is a new service called Design with Shapeways which helps people find a 3D modeler.

Second, for creators who want to go beyond static models, Shapeways now helps develop customizer capabilities based on its ShapeJS technology. To showcase these capabilities, Shapeways is launching Spring & Wonder, a jewelry experience.

Third, in addition to its existing marketplace, Shapeways is now helping creators build storefronts at custom domains that are fully integrated with the Shapeways production system, including printing and advanced logistics (such as custom packaging).

All three of these new services are furthering Shapeways mission to help creators design, make and sell their products. We are participating in the company's Series E financing that supports the rollout of this expanded offering under the leadership of Greg Kress who joined as CEO earlier this year. You can read more about the financing and the new services on the Shapeways blog.

 

Welcoming ShopShops to USV

We are excited to announce our recent investment in ShopShops and welcome them to the USV network. 

ShopShops is an interactive global commerce network. Right now, a group of fashion forward US based hosts livestream themselves browsing, trying on merchandise, and reviewing product across a wide array of retail stores so that Chinese shoppers can watch, comment, interact, and purchase in real time on various platforms. Over the coming months and years, this will expand to create a web that connects customers and merchants around the world in an engaged community moderated by a decentralized network of hosts. ShopShops handles payment, fulfillment, and logistics to make sure international consumers receive the goods they bought on the platform.

ShopShops is an example of our thesis around broadening access. It allows consumers to find and buy product from makers and retailers across the globe as well as connect with other users who share tastes and interests. Similarly, retailers can quickly and easily expand their reach to customers quite literally a world away.

The opportunity to build a major commerce platform that satisfies a different set of consumer needs than Amazon is particularly exciting. We believe that consumers’ desire for fun, experience, connection, and community remains strong despite the growing access to speed and convenience. Many of ShopShops users come back as much to watch and follow the hosts they feel connected with and similar to in style, shape, or personality, as well as to chat with each other, as they do to make purchases.

The progress and opportunity in livestreaming makes it the right time to start a platform like ShopShops. Real time viewing allows customers to relate to both product and community in a new way. They can interact with the hosts, who they feel inspired by and connected to, and impact the direction the stream takes. It is a combination of the fun and experience of browsing through a store with the convenience of doing it all from a mobile phone and the excitement of having a style guru you admire to help. This engagement creates not only a customer but a fanatic one that tunes in more, buys more, and is an evangelist for ShopShops.

Additionally, ShopShops offers new life to the long tail of offline retail that’s struggling with the rise of online commerce. Retailers can try the platform, sell through their merchandise, and broaden their reach in a fast and low friction way.

Lastly, Liyia Wu, ShopShops founder and CEO, is uniquely positioned to build a special platform in this category. She has a core understanding of each side of the three sided marketplace (consumer, brand, and livestreaming platform), and deep empathy for her customer and what they are looking for in both product and experience. For the first stretch of the business, Liyia both created the product and hosted all the live-streams herself. She prioritizes quick iteration to get to a product that customers don’t just use, but obsess over.

We look forward to working with Liyia and the team as they work to build a dominant global commerce platform.



USV Thesis 3.0

The commitment to a thesis is part of the fiber of USV--a shared set of ideas creates a framework that allows us to operate with focus and work on what matters most to our team. But what that thesis is has evolved over time and will continue to evolve. It reflects both a changing world as well as the shifting interests of our partnership. Recently, we have been working on its third iteration.

In its earliest days, USV started with a focus on the application layer of the web. The team quickly realized that network effects play a central role in all of these applications and Thesis 1.0 emerged: Invest in large networks of engaged users, differentiated by user experience, and defensible through network effects. This post breaks down the components, but the crux of this thesis involved primarily consumer focused businesses where the value of the service to a user increases as others use it, too. These network effects create defensibility and lead to scale.

This thesis drove USV’s investments in businesses such as Twitter, Etsy, Tumblr, Foursquare, Behance, and Kickstarter. It proved to be a productive filter and guidepost. But the success of businesses that benefited from network effects dominated consumer internet to a point where it became extremely difficult for new networks to emerge, which remains true today. As a result, USV revised the thesis to include 3 new buckets which Andy broke down in this post. 1) Vertical networks and marketplaces such as those in financial services (e.g. Lending Club, Funding Circle, CircleUp, Stash); health and healthcare (Nurx, Figure1, Science Exchange, Clue); education (Duolingo, Quizlet, Tophat, Skillshare);  and ownership management (Carta.) 2) The underlying technology of networks and emerging businesses (e.g. MongoDB, Twilio, Cloudflare, Sift Science, Shippo) 3) enablers of open and decentralized data which have the potential to counteract the centralizing force of the large internet networks. The last one is the root of USV’s blockchain portfolio  (e.g. Coinbase, Blockstack, Algorand, CryptoKitties.)

Throughout these categories, a focus on companies that broaden access emerged as a common thread. This theme has become a driving force across the business models and sectors our portfolio covers. In education, for example, Duolingo allows users to learn new languages around the world, on their phones and from their couches, for free. In healthcare, Nurx creates new ability for consumers to access medical care at dramatically reduced cost. Coinbase makes an emerging asset class accessible to mass markets. Twilio allows developers anywhere to easily access the world’s voice and text communications infrastructure.

We believe we are still at the beginning of the opportunity to broaden access with the most critical implications ahead of us. As a result, we decided to revise our thesis into a third version:

USV backs trusted brands that broaden access to knowledge, capital, and well-being by leveraging networks, platforms, and protocols.

We think of knowledge, capital, and well-being as each encompassing multiple components. Knowledge includes education and learning, but also data driven insights and access to new ideas. With capital, we include financial capital from financial services innovation, whether in the current system or emerging financial platforms like crypto, but also human capital and technology infrastructure. And with well-being, we think about health and wellness, but also entertainment, connection, community, and fun.

The goal of these businesses is to build trusted brands--products and services that not only serve a purpose, but integrate into the hearts and minds of their customer in a way that is durable and important. Trust comes from true alignment and convincing the customer that their values and priorities are shared. The bar for this is higher than ever but the best businesses will continually meet it.

Many of our most recent investments fit in this thesis already, including Stash, which is opening up high quality financial services products to new markets; Algorand, which is creating a new scalable, decentralized currency and transaction platform; and Flip, which is allowing users the freedom to move around without worrying about long leases by creating an open marketplace. But the new articulation will help us continue to use our thesis as a guide for our team in shaping our portfolio.

If you are an entrepreneur building a trusted brand that will broaden access in a new way, we would love to talk to you.

CryptoKitties

The news broke today that USV, along with many of our friends in the tech/startup/VC sector, has invested in CryptoKitties.

What is a CryptoKitty?

Well its a cute digital kitten.

The USV team made one last December and our kitten looks like this:

But beyond that, a CryptoKitty is a "non fungible digital asset" which means it is a piece of digital content that is unique, has a fixed number, and that someone can own, buy, sell, trade, etc.

CryptoKitties was built on a standard for non-fungible tokens on top of Ethereum called ERC-721, which was originally authored by the CryptoKitties team.

At USV, we think digital collectibles are one of many amazing things that blockchains enable that literally could not be done before this technology emerged.

We also think digital collectibles and all of the games they enable will be one of the, if not the first, big consumer use cases for blockchain technologies.

We don't have much more to say about this investment right now. But we do have a lot more to say about it over time. 

So stay tuned for more from USV on this investment and the digital collectibles sector.

CEO Summits at USV

Each year in May, USV hosts a CEO Summit for our portfolio network founders and CEOs.

Initially, we designed this day-long event similarly to what you might experience at a typical conference. It included a predefined agenda, packed with panel discussions, fireside chats, and presentations. While the summit did provide an opportunity for our CEOs to meet each other, interacting with each other was by no means the focus of the day.

The feedback we received was clear: Our CEOs wanted to spend less time passively listening and more time engaging. Preferably with each other.

Then Scott Heiferman, Meetup’s CEO, suggested something even more interesting--kick off the day with stories and lessons learned, opening up a safe space to share anything.

So we scrapped the format and started fresh. Rather than tee up topics that we thought our CEOs might want to hear, we had them drive the content, sharing questions or topics that they might want to discuss with their peers across the portfolio. We kicked off the day with a brave question: “What’s one success or failure you experienced last year that you would like to share?”

For the past five years, we have stuck to this format, and it’s been a game changer.

Now, prior to each summit, our CEOs submit lessons learned and current challenges, which we use to help curate breakout groups where they lead each other in conversation. By leveraging an “unconference style” model, our CEOs and founders learn from each other, rather than from us, which makes a lot more sense. In fact, we thought this idea was powerful enough that we built it into our USV Network guiding principles.

This year’s CEO Summit is coming up in May, and we are eager to see what new questions and topics surface at this year’s event.

Hiring New Analysts (Update 2)

A second quick update on our analyst hiring process (previous update, original announcement). We have now reviewed all applications. We will be reaching out this week to all candidates, starting with those who have made it to the next stage, which will be telephone interviews.

I wish we could write personalized notes to everyone else, but the large number of applicants makes that impossible. As in years past, this is an incredibly talented group of people and unfortunately we have room for only two new analysts. When we reach out, we will include a link to a brief questionnaire where you can opt into us sharing your information with specific USV portfolio companies, which might be of interest to you.

Hiring New Analysts (Update 1)

A quick update on our analyst hiring process. We received 326 applications. Andy and I have so far reviewed 190 of those and plan to complete that initial review by the end of next weekend. We will contact everyone with next steps the week of February 26th.

We had asked a valuation question and gave people a choice of writing about Twitter, Snap, Bitcoin or Ethereum. Here is the breakdown of what people chose (the total does not add up to 326 because, well, not everyone followed the instructions).

Number of Responses

And here is how the applicant pool comes out on their valuations:

Percentage Overvalued / Undervalued

It has been fascinating to read the valuation rationales. Especially for the valuation of crypto currencies, people took widely divergent approaches, including at least one based on volatility that I had never seen before.

Algorand

We have been writing about the importance of decentralized protocols going back to 2013. Since then a lot has happened, including a run up in the price of Bitcoin (and eventually other crypto currencies), the launch of Ethereum, the rise of ICOs and with them the funding of many new projects. And yet it feels to us that we are still in what Carlota Perez calls the “Installation Phase” of a new technology. That’s the period when a market attracts a lot of capital to help build out the necessary infrastructure.

One clear indication that we still require infrastructure investment was when the CryptoKitties project wound up nearly swamping Ethereum late last year. There is not yet a blockchain that can handle the throughput requirements of most real world applications. Now there are important efforts underway both to build on existing chains, such as the Lightning Network for Bitcoin and Plasma for Ethereum, as well as to extend the capabilities of existing base chains such as Ethereum through protocol upgrades (such as shifting to proof of stake and introducing sharding).

Beyond those efforts though is the quest for a new foundational blockchain. There are many projects at varying stages developing new consensus algorithms that allow for scalability while also remaining secure and decentralized. It turns out to be relatively easy to achieve scalability, if you are willing to comprise on one or both of the other properties. The hard trick is to achieve all three.

We are excited to be backing one of these projects, Algorand, which builds on the work of Silvio Micali and others at MIT. You can learn more about the project on the just unveiled and still somewhat under construction Algorand website. If you are more technically inclined you can read a research paper about Algorand.

Welcoming Stash to the USV Portfolio

At USV, we believe that the best products and services can broaden access in unprecedented ways. Nowhere is this opportunity more substantial than in financial services where, despite the trillions of dollars of market cap that make up the sector, the vast majority of Americans remain poorly served.  

Why? Current banking products aren’t built to establish financial health or understanding for the vast majority of consumers in our country. Instead, traditional banking is built for the wealthy. The banking model functions in 2 basic ways: by investing wealthy customers’ money and charging fees to those whose accounts live around zero. My colleague Nick outlined this imbalance in a post a number of years ago about why it’s so expensive to be poor in America.

And the state of people’s finances shows its shortcomings. 39% of Americans have unpaid credit card balances and 41% have student loans outstanding. 70% have less than $1,000 in savings. More than ⅔ believe that you need at least $100 to start investing (and nearly ⅓ believe that number is closer to $1,000.) These numbers are getting worse not better--despite our technology savvy, millennials are investing at lower rates than any of the generations before. 76% of millennial women find investing confusing.

But in these troubling stats is huge opportunity. Technology makes it possible to serve the mass base of financial services customers with personalized, tailored, high quality products that can improve financial well being for them and their families and result in massive businesses along the way.

Which is why we’re excited to announce our investment in Stash out of our Opportunity Fund.

Brandon and Ed, the founders of Stash, have made it their mission to fix the inequities of the financial services sector. They combine the customer focus and analytical mindset needed to create both a powerful consumer brand and data driven financial institution targeted at a demographic of users that has largely been ignored. 85% of users on Stash come in as either beginners or without any investing experience and now can open their investment account with as little as $5.

And while investing was the starting point, Stash is on a mission to build the suite--this involves a current product set that includes savings, retirement, and custodian accounts, with much more to come. The products are information rich with both content and personalized coaching so consumers can feel empowered to make decisions and to put their money behind the things they care about while knowing Stash has their back and will guide them through. As they increasingly learn about their customer, Stash becomes more and more helpful.

Along the way, they are building a powerful community. Stash users aren’t just investing and saving, they are talking about the product and spreading the word--the root of a powerful growth flywheel. This creates better acquisition funnels and momentum in scale, but, more importantly, its indicative of a product that’s integrating into the lives of their customers and creating excitement, peace of mind, and trust in a new kind of financial services institution. And when’s the last time someone said that about their bank?

We are excited to welcome Stash to the USV family and work with Brandon, Ed, and the rest of the team.



USV Level Up Series

As our portfolio grows, we can help make more of an impact if we leverage the power of our vast network. One part of that effort in scaling impact is to create an “ambassador-like” program. Our intention is to help empower leaders, provide them with access and a platform to collaborate, and host events that are open to our portfolio companies.

Last fall we launched a program exclusively offered to employees within the USV portfolio. Having been invited or nominated to apply, these 10 individuals were chosen based on their level of involvement in the USV network, their leadership skills, and their ability to connect others. The impetus and execution for the USV Level Up Series came from 4 participants in our Network Leaders program - Karen Ko, Office Manager at Foursquare, Michael Rurka, Design Lead at Nurx, Amethyst Hills, Executive Assistant at Carta and Noelle Li, Business Intelligence Engineer at Funding Circle US.

During the week of January 23, we hosted the 1st USV Level Up Series in San Francisco. This 4 day, 5 event program engaged over 200 USV portfolio participants, showcased 20 speakers, 4 Bay Area portfolio offices, and built the foundation for countless connections and future events. The central theme of the USV Level Up series was around career and leadership development. Each event had a fundamental goal of giving participants tools, contacts and valuable insights to enhance their professional development. Below is an overview of each event, its’ general flow and some valuable lessons shared with our network.

Event 1: Letters to a Younger Self
Network Leader: Michael Rurka, Design Lead at Nurx

The first event on January 23 was “Letters to a Younger Self” which was held at Cloudflare’s office. The evening included 5 speakers from a variety of job functions standing in front of 65 participants, reading letters they had written to younger versions of themselves. Their current roles included CEO & Co-Founder, Account Executive, Project Manager, Business Development and Founder. Some letters were personal, some strictly professional. Regardless of the story line, each person shared valuable life lessons they’ve learned throughout their lives to becoming who they are today. One common thread between presenters was that they are still learning. They encouraged their younger selves to be patient, give into the journey and trust themselves. Each of them faced adversity, success, and tough decisions and gave valuable, candid advice on how to level up.

USV Network Leader Michael Rurka sharing his story and his interest in hosting “Letters to a Younger Self”.

Event 2: Manager Fireside Chat
Network Leader: Karen Ko, Office Manager at Foursquare

Wednesday evening featured a Manager Fireside Chat with Foursquare CFO, Rory Parness and was held at their office in San Francisco. Moderated by Bethany Crystal, GM of the USV Network, the conversation centered around Rory’s career and his advice about leadership, management, sharing pitfalls, and candid lessons learned. The conversation also included his management philosophy, thoughts on mentorship and sponsorship, and the power of networking.

With over 40 participants gathered in their office communal area, the Foursquare office was buzzing with chatter. Employees that might not have otherwise attended felt compelled to join the conversation and hear from one of their company’s leaders. One quote that resonated with many was that “God gave us two ears and one mouth and we should use them in that proportion”. One of the key traits of a good manager is that they understand how to listen, how to ask effective questions, and lean on data and facts when giving feedback.

Foursquare CFO, Rory Parness and USV Network GM, Bethany Crystal speaking with the audience at Foursquare

Event #3: Forging Your Path as a Women in Tech
Network Leader: Karen Ko, Office Manager at Foursquare

On Thursday, January 25, Carta hosted a “Forging Your Path as a Women in Tech” panel. Moderated by Natalie Weyerhaeuser, Software Engineer at Foursquare, the panel included Connie Yang, Director of Design at Coinbase, Suja Viswesan, Engineering Director at LinkedIn, Diane Ko, Front End Software Engineer at Airbnb, and Jane Sherman, Principal Technical Project Manager at Funding Circle. The audience was 30-35 women and men and the discussion weaved from career planning and manager versus IC (individual contributor), to advocating for yourself, culture, retaining women in tech, imposter syndrome, and finding a sense of belonging.

When asked about receiving difficult feedback, one of the panelists stated that “feedback is a gift”. Their recommendation was that when you receive any type of feedback, you should train yourself to immediately say, “Thank you”. Give yourself time to process it emotionally and irrationally, understand the context and then formulate a proper, neutral response. Feedback is a gift and you want people to be honest about how they truly see you so that you can help change their perception. Finally, one challenge we are faced with is how to make this conversation open to allies. As successful as this event seemed to be, this type of discussion could run the risk of feeling insular. One question we need to answer is “how do we make men feel more like they are a part of the solution rather than part of the problem?”

Panelists, moderator, Network Leader and USV Network Team after the “Forging your Path as a Women in Tech” panel. Panelists (left to right) Connie Yang, Suja Viswesan, Diane Ko, and Jane Sherman.

Event 4: Women’s Goal Alignment Workshop
Network Leaders: Amethyst Hills, Executive Assistant at Carta and Noelle Li, Business Intelligence Engineer at Funding Circle US

The fourth event on Friday, January 26 was centered around mentorship, career development and leadership for women. The agenda had a blend of keynote speakers including USV partner Rebecca Kaden, group breakout sessions, mentorship brainstorming and networking. The Network Leaders who organized this event wanted the setting to be conversational and transparent and capped the registration to 25 people. Each attendee came from a different expertise, title, and department, but they all commonly shared the interest in participating in a mentorship program. There were 6 mentors invited to lead a mentorship “breakout session” with a smaller group. Apart from myself, the mentors included Carol Foster, COO & CFO at SharesPost, Pat Suh, VP of Customer Success at Affirm, Annie Lange, Co-Founder at Stealth, Andi Vanetta, CEO & Founder at Vanetta Partners, and Jane Sherman, Principal Technical Project Manager at Funding Circle. One fundamental goal of this workshop was to use this initial discussion and “matching session” to kick off a series of mentorship circles for women in the USV network. 

Guest speaker Heidi Williams, Founder & CEO – WEST Diversity & Inclusion sharing her story and lessons around mentorship and professional development

Event 5: Closing Ceremony

At the end of a hectic, content-heavy week, there was an optional happy hour for those who attended any of the USV Level Up events. We wanted to thank everyone for participating, connect those who might not have had a chance to meet during the week and hang out. One of my favorite photographs from the week came out of this social event. Karen, one of the USV Network Leaders, asked everyone to draw their face on a post-it and write 3 words to describe you. Then, see if you have anything in common with others on the poster and, if so, draw a line to connect you. Well, if this isn’t network effects in action I don’t know what is! Seeing people connect with others on common interests such as programming, ultimate frisbee, design, and dogs (dogs was a big one!) was the icing on the cake. A phenomenal way to sum up the incredible success of our 1st USV Level Up Series.  

USV Network effects in action at the closing ceremony 

USV Network Leaders Karen Ko, Michael Rurka, Amethyst Hills, and Noelle Li