Venture Capital is a tricky industry. If you’re funding the same stuff as everybody else and if you started your activities when the clues were obvious you’re much less likely to drive enormous returns.
When Fred Wilson funded Twitter I guarantee you it wasn’t obvious that it was a billion dollar+++ idea. Far from it. Many questioned whether it could survive under the fail whale, inevitable competition from Facebook, founder fighting, fights with 3rd-party developers let alone become a revolutionary business that could make money. Lots of it. He couldn’t have imagined power users would be global political figures, dictatorships, small factions of people standing up to the Iranian army or every sports figure & celebrity in the world.
It was an early and smart bet.
When the early teams: angels, lowercase capital & first round capital funded Uber they had no idea it would be one of the most revolutionary ideas of our time. I know – I was there when the first people debating funding it at less than a $5m valuation.
Airbnb? Ha. Almost nobody believed and now look at it.
Drones. Bitcoin. Online education. VR. Palantir. There were many moments in each space when pioneers were funding startups and the press hadn’t written much about them and if you were a typical investor you were still funding the last trend while some VCs were trailblazing into new categories.
As is often said if you don’t get at least a few fellow VCs (and entrepreneurs) scratching their heads you may not be funding ideas with enough upside. This was certainly the case when I invested in a small YouTube video production company called Maker Studios that recently sold to Disney for just shy of $1 billion.
Internally at Upfront Ventures we talk about “high consensus” vs. controversial deals with “high conviction.
There has been much discussion in the past few years of the changing structure of the venture capital industry.
On the surface the narratives have been
The rise of “micro VCs” or seed-stage funds
The rise of alternative sources of capital (crowd funding and the like)
The poor performance of the asset class (this analysis has largely been wrong as I pointed out here –> most analyses were clumsy rear-view mirror looks at the data)
We are in a bubble (with so many private $1bn+ valuations)
15 years ago we were at the peak of Internet hype with the launch of many over-capitalized businesses with a market size & opportunity was limited.
Where are we today?
50x more Internet users (2.4 billion)
Online connections that are 180x faster (10.
Update: Bothsides TV is now available on iTunes, Soundcloud, Stitcher, or any RSS podcast player you use, and don’t forget to subscribe on YouTube. I also added a little Soundcloud widget on the sidebar (if you’re viewing on web – not on mobile or RSS reader) that you can listen to each episode with.
In the most recent episode, I interviewed Joe Perez, Founder of Tastemade. If you don’t know Joe, you should. He has a long career in developing products and companies (such as Pogo, Excite@Home, Demand Media, The Daily Plate and now TasteMade) discussed much about his career choices and lessons.
For 2 years I interviewed VCs & founders for a show called This Week in VC. If you want to see any back interviews you can click on that link. I’ve been promising to relaunch a new show for the past 18 months but needed to find somebody to help me with cameras, filming, editing, distribution, etc. Luckily the supremely talented Kyle Taylor joined Upfront Ventures and has helped kick me in the arse to get the show going again.
We’ve already shot three episodes, which will be published soon and I have committed to doing the show on a regular basis. Feel free to add comments below on speakers you’d like to see, topics you’re interested in or formats you’d suggest for the show.
The first Bothsides TV episode is now live! I’ve created a separate Twitter handle that I’ll use to share all this content. You can subscribe to the Bothsides TV YouTube channel as well – you’ll get an email update when we post new videos.
Yesterday MiTú Networks announced that Upfront Ventures led a $10 million financing in what is now the largest producer of Latino online videos – primarily driven through YouTube.
As you may know we co-lead the first round of financing of Maker Studios, the largest overall producer for online video content, along with Greycroft Partners. I was an early and tireless advocate for the growth of the Internet video ecosystem and as virtually every article I wrote made clear I believe the 800-pound-gorilla is YouTube and will remain so for the foreseeable future. If you want to build a strong online video business it almost certainly must make YouTube an important part of the strategy.
Last year at this time
Amazon. It’s the company that evokes fear into more startups and venture capitalists looking to fund eCommerce businesses than any other potential competitor. Every pitch I’ve ever seen has led to the, “Would Amazon eventually do this? And could we then compete?” type questions.
But what if you could do the reverse of Amazon?
Amazon was early in spotting a macro trend – that physical, local retail had a few key disadvantages. The first is that it could carry limited inventory in stock because it had limited physical shelf space. The second is that the retailers were constrained by their high costs of local real estate and service staff relative to the costs of centralized warehouses where goods could be stacked high, sorted by robots, managed by RFIDs and then shipped via overnight to eager, cost-conscious customers across the US.
Today’s $24 billion storage market in the US has these same key disadvantages and that was the genesis of Sam Rosen’s initial idea for MakeSpace, which I initially funded 15 months ago.