The Exchanges

Q And then talk to me about the founding of USV. How did you make the transition from there to deciding you want to go out on your own?

A The history of AT&T Ventures was actually kind of interesting. Um, in the 99 time frame, AT&T decided that they no longer wanted to have an independent venture capital partnership that was running money for them, so they brought that activity back in-house. That led to, ultimately, to the dissolution of the partnership that was running that fund, so we continue to manage out that portfolio. Uh, but during that time that I was managing out the portfolio, I also ended up helping a friend, Dave Morgan, get a company called Takoda Systems started. As a part of that process, I recruited another friend, Fred Wilson, to be an angel investor alongside me in the first angel round that funded that company. Very quickly, it became clear that Dave did not need me on that founding team, uh, and so Fred and I enjoyed working with each other enough on that board. That we said, gosh, we should go do more of this, and so in, I think it was 2003, we sat down to figure out whether or not we could raise a fund. Um, we decided to go make an effort to do that. Uh, it took us about 80 meetings and a heck of a lot of air travel to get that done, but we finally got the fund done in the early part of, I guess, 2004, and that was the beginning of, uh, Union Square Pinterest.

AI assessment note: “Fred and I enjoyed working with each other... we said, gosh, we should go do more”

Q And then talk to me about the founding of USV. How did you make the transition from there to deciding you want to go out on your own?

A The history of AT&T Ventures was actually kind of interesting. Um, in the 99 time frame, AT&T decided that they no longer wanted to have an independent venture capital partnership that was running money for them, so they brought that activity back in-house. That led to, ultimately, to the dissolution of the partnership that was running that fund, so we continue to manage out that portfolio. Uh, but during that time that I was managing out the portfolio, I also ended up helping a friend, Dave Morgan, get a company called Takoda Systems started. As a part of that process, I recruited another friend, Fred Wilson, to be an angel investor alongside me in the first angel round that funded that company. Very quickly, it became clear that Dave did not need me on that founding team, uh, and so Fred and I enjoyed working with each other enough on that board. That we said, gosh, we should go do more of this, and so in, I think it was 2003, we sat down to figure out whether or not we could raise a fund. Um, we decided to go make an effort to do that. Uh, it took us about 80 meetings and a heck of a lot of air travel to get that done, but we finally got the fund done in the early part of, I guess, 2004, and that was the beginning of, uh, Union Square Pinterest.

AI assessment note: “Fred and I enjoyed working with each other enough on that board.”

Q And then the final question, your most recent public investment and why you said yes?

A So I think the most recent one that is announced, um, was a company called OB-One. Um, it's a open marketplace that allows anybody who runs a protocol stack to exchange goods and services with anybody else who runs that protocol stack with no central authority that arbitrates that, that marketplace. Um, I think it's a really interesting, um, Extension of the underlying principles of the internet. I mean, the, the thing that's made the internet so fantastically great is that each of us comes to it with our own bandwidth and with our own CPU, and because we share a common protocol stack, we can communicate with anyone else who shares that protocol stack. I mean, taking that up to the layer of commerce is a really interesting idea.

AI assessment note: “most recent one that is announced, um, was a company called OB-One”

Q of, some of your learnings now, and in a recent series, and talking about growing the team there, uh, in the recent analyst series that you did at USV, Joel Monegro stated, uh, that you very much adopt the quote by Twain, that history doesn't repeat itself, but it does rhyme. So how does this affect your views on market cycles, and the way tech's adopted, and then ultimately replaced?

A I think it's a very good lesson, you know, and I think that the, the key part of that is recognizing that it doesn't repeat itself. I think one of the failure modes of venture capital is to assume that the past is the future and that you'll consider it, can you continue to see the same models? I think that in the, um, nineties, for instance, there was a lot of money made in the venture capital business investing in switches and routers and chips and sort of internet infrastructure. And the model for investing was very much around the technologist. You'd find an academic out of Berkeley or Stanford, and you'd surround them with 15 good engineers, and you would build a product, a router, and then you, you know, after that first prototype was built, you'd recruit your first business team, and ultimately, you know, you'd raise your Series B around that business team, and then, you know, before you raise the Series C, you'd flip it to Cisco. You know, there was a kind of a rinse and repeat attitude to Technology differentiation, intellectual property protection, recycling the teams, that was a model that worked really well. When the actions shifted to the applications layer in the 2000, in the 2000, a lot of the people who had built a business in, you know, over the nineties sort of looked for other sectors, material science, energy, green tech, places where they could use that same…

AI assessment note: “one of the failure modes of venture capital is to assume that the past is the future”

Q And I'm really intrigued then to ask how you kind of approached the aspect of team building with USV, and you've built a world-class team, obviously, with Fred and with Albert and with Andy, and so what did you look for in your partners that would help you change the world as you wanted to with USV? What were those character traits?

A Well, so we had a couple of things in mind, Fred and I, when we began to build the team. We, first of all, enjoyed Working with each other very much. I think we complimented each other very much. Fred is one of the best investors I've ever known. He's one of the best board members I've ever known. Obviously a very good thinker about the business. I, I think that I added some value to that early, those early days by really trying to narrow the thesis and, and refine our thinking and, and get us, you know, working on a common set of ideas. Um, and those two things I think worked really well for us. When we started to think about adding somebody, we were certainly not interested in adding somebody that we didn't know. We wanted to preserve the very collegial feel of the partnership. We wanted that partnership to exist in a single location. We liked the idea that we were together every Monday and talking about the portfolio and thinking about new opportunities and thinking about the market. We had already been working for some time with Albert. I had known Albert since He created an incubator, and I was involved in helping there, and, um, I, I got to watch him take that incubator through a very tough time, so I watched his behavior in the, in the down market after 2000, and I was very impressed with his integrity. I also knew that he knew a heck of a lot more about technology than …

AI assessment note: “We wanted to preserve the very collegial feel of the partnership.”

Q And a lot to unpack there, but one of the things I want to touch on is you said, you said Fred's a great board member, and you've sat on many boards yourself, so I'm intrigued to hear what you think makes a great board member. What are the commonalities amongst them?

A I think it's a combination of pragmatism, market knowledge, connections, Willingness to invest time and energy. Um, all of those things are important. Thing about Fred, most impressive things I've ever seen anybody do is the amount of effort that he put into managing out the Flatiron portfolio after the crash in 2000, um, which I got to watch, you know, up close and personal because he was very much still doing it in the early days of, uh, Dakota and then in the early days of Union Square Ventures. And it's that kind of You know, dedication to the entrepreneur's willingness to, you know, it's not about, you know, I mean, it turns out that this is probably a truism in the business that you end up investing more time in your losers than your winners. And the willingness to do that is what gets you invited into the next winner. And, uh, you know, I just think that it's that commitment that, you know, that I've seen in Fred before we started Uniscore Ventures and certainly afterwards that I think makes a great board member.

AI assessment note: “I think it's a combination of pragmatism, market knowledge, connections, Willingness to invest time”

Q of, some of your learnings now, and in a recent series, and talking about growing the team there, uh, in the recent analyst series that you did at USV, Joel Monegro stated, uh, that you very much adopt the quote by Twain, that history doesn't repeat itself, but it does rhyme. So how does this affect your views on market cycles, and the way tech's adopted, and then ultimately replaced?

A I think it's a very good lesson, you know, and I think that the, the key part of that is recognizing that it doesn't repeat itself. I think one of the failure modes of venture capital is to assume that the past is the future and that you'll consider it, can you continue to see the same models? I think that in the, um, nineties, for instance, there was a lot of money made in the venture capital business investing in switches and routers and chips and sort of internet infrastructure. And the model for investing was very much around the technologist. You'd find an academic out of Berkeley or Stanford, and you'd surround them with 15 good engineers, and you would build a product, a router, and then you, you know, after that first prototype was built, you'd recruit your first business team, and ultimately, you know, you'd raise your Series B around that business team, and then, you know, before you raise the Series C, you'd flip it to Cisco. You know, there was a kind of a rinse and repeat attitude to Technology differentiation, intellectual property protection, recycling the teams, that was a model that worked really well. When the actions shifted to the applications layer in the 2000, in the 2000, a lot of the people who had built a business in, you know, over the nineties sort of looked for other sectors, material science, energy, green tech, places where they could use that same…

AI assessment note: “the key part of that is recognizing that it doesn't repeat itself.”

Q And you mentioned the application layer earlier, and I want to dive on, on this and the thesis at USV. Uh, so first off, why do you think having such a kind of predefined thesis is optimal to investing in early stage startups?

A You know, I don't know if it's optimal. It has worked for us. Um, I think that it's worked for us for a number of reasons. When you move from the infrastructure layer, where I think Investing is really defined by technical differentiation and, and intellectual property defensibility. You know, they're, they're, I think, being more opportunistic, more deal flow driven, made perfect sense. When you move up into the applications layer, having a, having a thesis for why you think, you know, humans are going to interact with a certain set of services in a certain way, and, and how those services are ultimately going to be defensible and scalable. I think helps organize your investing activity. Putting that thesis out there and being open about it and being open about all of our thinking about markets has proven to be very helpful. Introducing us to entrepreneurs who are working in the areas that we have been thinking about. I think it's, it's helped us by bringing some discipline to our conversations and, and focus that has enabled us to go a Certain things happen in, in these markets. It's also turned out to be really helpful in the end as we've built a portfolio because, you know, we have a bunch of companies have a bunch of similar characteristics and, and similar problems, similar opportunities. Uh, but because we make an effort not to invest in direct competitors, they, they're…

AI assessment note: “I don't know if it's optimal. It has worked for us.”

Q And you mentioned the application layer earlier, and I want to dive on, on this and the thesis at USV. Uh, so first off, why do you think having such a kind of predefined thesis is optimal to investing in early stage startups?

A You know, I don't know if it's optimal. It has worked for us. Um, I think that it's worked for us for a number of reasons. When you move from the infrastructure layer, where I think Investing is really defined by technical differentiation and, and intellectual property defensibility. You know, they're, they're, I think, being more opportunistic, more deal flow driven, made perfect sense. When you move up into the applications layer, having a, having a thesis for why you think, you know, humans are going to interact with a certain set of services in a certain way, and, and how those services are ultimately going to be defensible and scalable. I think helps organize your investing activity. Putting that thesis out there and being open about it and being open about all of our thinking about markets has proven to be very helpful. Introducing us to entrepreneurs who are working in the areas that we have been thinking about. I think it's, it's helped us by bringing some discipline to our conversations and, and focus that has enabled us to go a Certain things happen in, in these markets. It's also turned out to be really helpful in the end as we've built a portfolio because, you know, we have a bunch of companies have a bunch of similar characteristics and, and similar problems, similar opportunities. Uh, but because we make an effort not to invest in direct competitors, they, they're…

AI assessment note: “I think that it's worked for us for a number of reasons.”

Q And I'm really intrigued then to ask how you kind of approached the aspect of team building with USV, and you've built a world-class team, obviously, with Fred and with Albert and with Andy, and so what did you look for in your partners that would help you change the world as you wanted to with USV? What were those character traits?

A Well, so we had a couple of things in mind, Fred and I, when we began to build the team. We, first of all, enjoyed Working with each other very much. I think we complimented each other very much. Fred is one of the best investors I've ever known. He's one of the best board members I've ever known. Obviously a very good thinker about the business. I, I think that I added some value to that early, those early days by really trying to narrow the thesis and, and refine our thinking and, and get us, you know, working on a common set of ideas. Um, and those two things I think worked really well for us. When we started to think about adding somebody, we were certainly not interested in adding somebody that we didn't know. We wanted to preserve the very collegial feel of the partnership. We wanted that partnership to exist in a single location. We liked the idea that we were together every Monday and talking about the portfolio and thinking about new opportunities and thinking about the market. We had already been working for some time with Albert. I had known Albert since He created an incubator, and I was involved in helping there, and, um, I, I got to watch him take that incubator through a very tough time, so I watched his behavior in the, in the down market after 2000, and I was very impressed with his integrity. I also knew that he knew a heck of a lot more about technology than …

AI assessment note: “impressed with his integrity. I also knew that he knew a heck of a lot”

Q kind of final question before we go into a quick fire round is a reflective one. And it's looking back at the USV journey. What do you think have been the inflection points Both in, in the stature that's increased in the ecosystem of USV, and then in yours and the team's personal learnings. What moments have really changed the stature and the personal learnings, do you think, for you?

A Well, I think that, you know, the stature changed in the 2007 time frame. You know, we made investments in Zynga, Twitter, Indeed, and Etsy within about a six month period. In our 2004 fund, each of those returned the fund. That was a pretty exceptional, um, run. It turns out that we've had a number of other good investments in the 2004 fund that have since returned the fund again, so that fund in general, it was a great fund. One of the things that's a little embarrassing about the venture capital industry is I think we're still getting a lot of credit for that fund and, and that moment, which is now almost 10 years ago, I do think we're thinking deeply about The market and the opportunity, and I think we continue to make good investments, but I'm frankly a little bit surprised, um, at how much interest there has been in Union Square Ventures since then, and how long that interest has been sustained, even though that moment was 10 years ago. So that's the, the moment that I think about. In terms of the learnings.

AI assessment note: “the stature changed in the 2007 time frame. You know, we made investments in Zynga”

Q And a lot to unpack there, but one of the things I want to touch on is you said, you said Fred's a great board member, and you've sat on many boards yourself, so I'm intrigued to hear what you think makes a great board member. What are the commonalities amongst them?

A I think it's a combination of pragmatism, market knowledge, connections, Willingness to invest time and energy. Um, all of those things are important. Thing about Fred, most impressive things I've ever seen anybody do is the amount of effort that he put into managing out the Flatiron portfolio after the crash in 2000, um, which I got to watch, you know, up close and personal because he was very much still doing it in the early days of, uh, Dakota and then in the early days of Union Square Ventures. And it's that kind of You know, dedication to the entrepreneur's willingness to, you know, it's not about, you know, I mean, it turns out that this is probably a truism in the business that you end up investing more time in your losers than your winners. And the willingness to do that is what gets you invited into the next winner. And, uh, you know, I just think that it's that commitment that, you know, that I've seen in Fred before we started Uniscore Ventures and certainly afterwards that I think makes a great board member.

AI assessment note: “I think it's a combination of pragmatism, market knowledge, connections, Willingness to invest time”

Q I guess when you look at your approach to investing and your approach to pattern recognition, how have you seen that evolve over the, over the, what is it, 14, no? 12 years now with USB.

A Sounds about right. This is such an unbelievable privilege to be in the position that we're in. It's hard for me to, in a way, isolate a moment when I felt like I was learning more than any other moment. Um, the, the fantastic thing about being in this business is you have this opportunity to become interested in an area, you know, and some initial forays into that area, you know, begin to identify companies in that area, And then these really smart people will come in and talk to you and explain how the world's going to be different as a result of these things that they're working on. And you can ask all the dumb questions you want, and they politely answer them. And, you know, you can call them back a week later and say, I still don't understand. And they'll answer that question. And so as a platform for learning, this is the single greatest job in the world. Uh, and if you're a curious person, I don't think, you know, I can, Point to a single moment and say, well, that was, that was a real revelation. But I can say that every conversation I've had with an entrepreneur has been enlightening. And because we've tried to organize those conversations around a thesis, I think, you know, I've felt, you know, enlightened by all of those conversations.

AI assessment note: “It's hard for me to, in a way, isolate a moment”