Brad Feld's Blog, page 9

Book: Please Report Your Bug Here

Some day there will be a genre called “startup fiction.” I mean, if science fiction, which is a sub-genre of fiction, can have libertarian science fiction and recursive science fiction, surely startup fiction belongs in a sub-genre of a sub-genre of a sub-genre.

Please Report Your Bug Here by Josh Reidel is an excellent example of startup fiction. I began reading it at the end of the day Saturday after finishing The Age of A.I. and Our Human Future. I enjoyed Reidel much more than Kissinger, Schmidt, and Huttenlocher (even though I greatly respect them.)

Reidel was the first employee at Instagram. While the first thirty pages started like yet another explore the bay area startup thing book, it quickly twisted into something more enjoyable. When I picked it up yesterday afternoon after a long run and a nap, I didn’t put it down until it was time to go to sleep, which meant I was finished with the book.

I hope there are a lot more books like this. It balances startup stuff with the cynicism of the experience while placing it in a fictional world. It unexpectedly merges with believable near-term science fiction, which has a delicious parallel universe theme. And, if you believe in the infinite parallel universe theory (or just the multiverse) and haven’t yet renamed your company multiverse (yes, there is one), you can quickly get lost in a sequoia tree. In Oakland.

I assume that Reidel meant to riddle the book with tech industry easter eggs. If this was unintentional, it’s even more fun since that would be my brain doing its thing on Planet Brad.

I hope there are a lot more books like this. I’ve been thinking about writing a fictionalized version of my SPAC experience, and Please Report Your Bug Here inspired me to take that idea more seriously.

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Interviews about Dealing with 2023

I usually do a few interviews (podcasts?) at the beginning of the year. I avoid all of the end of the prior year “what do you predict for next year” stuff and find that several long-form interviews at the beginning of the year allow me to get out of my head what’s going on from my frame of reference.

If you know me, you know that I learn by doing, writing, reading, and thinking out loud. I find these interviews to be a good way for me to think out loud to solidify my transition into the new year.

I did two interviews right after the new year. One with Andrew Keen …

The Tech Community Needs To Be Humble to Survive What Will Be a Challenging 2023

… and one with Jason Calacanis.

(0:00) Jason Kicks off the show
(2:49) Brad Feld, Co-founder of Foundry, talks about starting out in investing
(13:30) LinkedIn Jobs – Post your first job for free at https://linkedin.com/twist 
(14:56) Brad’s thesis for whom he’ll get in the “trenches” with  
(20:48) MasterClass – Get 15% off an annual membership at https://masterclass.com/startups
(22:22) Fighting to the end + Investing through the dot-com bubble
(38:13) Microsoft for Startups Founders Hub – Apply in 5 minutes, no funding required, sign up at http://aka.ms/thisweekinstartups
(39:43) Surviving the GFC
(44:23) Brad’s perspective on the investor/CEO dynamic + being a leader in a down market
(1:00:02) Reflecting on the speculative asset bubble
(1:16:44) Looking forward into 2023

They are both great interviewers willing to let me ramble when prompted vs. tie me into a structured interview.

So, if you like hearing me think out loud, I encourage both of them. Jason’s show notes include links to specific segments (listed above) if something specific catches your attention.

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Book: Ted Conover’s Colorado

I read two books by Ted Conover over the weekend.

Cheap Land Colorado: Off-Gridders at America’s Edge (2022) Whiteout: Lost In Aspen (1991)

Amy gave me the first one as a present. A few years ago, we bought a bunch of land about an hour’s drive away from Aspen. I’ve been spending a lot more time in the middle of nowhere Colorado, especially now that I have a trailer on the land and Starlink. My hikes and trail runs (without Starlink, but with a Garmin inReach for safety), which are still in the day hike category, take me deeper into the middle of nowhere.

Amy’s been highly supportive of this new hobby of mine. She’s not interested in the hiking or trailer, but she likes to visit the middle of nowhere for limited periods, as long as she gets to drive back to Aspen.

Conover’s Cheap Land Colorado was outstanding. He writes about his experience in the San Luis Valley, where he lived part-time for extended periods (commuting back to New York to see his wife and teach at NYU.) Conover didn’t just observe – he became part of the community. He eventually bought some land and made it habitable for him. The texture of his writing is beautiful. The characters are fascinating. The history was all new to me about a part of Colorado I know little about and have only been to once when I visited the Great Sand Dunes.

Looking through his biography, I noticed another book by him titled Whiteout: Lost In Aspen. He’d written it 30 years earlier. After Amy and I bought a place there in 2017 and started living there part-time, I read a few books about the history of Aspen. But I hadn’t read much recently other than The Slums of Aspen: Immigrants vs. the Environment in America’s Eden, which I discovered when reading the extremely disheartening Billionaire Wilderness: The Ultra-Wealthy and the Remaking of the American West.

Even though it was written 30 years earlier, Conover’s style was similar. Whiteout: Lost In Aspen (as does Cheap Land Colorado) takes an ethnographic research approach, similar to what I learned from a graduate school class I took with John Van Maanen in 1988. In the parallel universe / path not taken life, I’d be an ethnographer. Maybe there is still time.

Aspen of 1991 has a lot of similarities, and issues, to Aspen of 2022. As I’ve gotten to know people who have lived there full-time for more than a decade, I hear many of the same complaints that appear in Whiteout. The names of the restaurants are different, but the feel of the town and surrounding area is the same. The notion that Aspen was about to lose all of its beauty and special magic was a big part of the narrative in 1991 and is still around today.

Amy and I have lived in Colorado for over 27 years. This is home now. Conover writes beautifully about it.

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I Don’t Hate Crypto

Well, that was interesting.

I get many more private emails in response to blog posts than comments. Yesterday, in response to Reflecting on Ponzi Schemes, I got a few that said anyone under 35 needs a net native currency, and that’s crypto. A few others said some versions of all governments are Ponzi schemes. And I got a few that implied I hated crypto.

Earlier last year, one of my partners told me that I’d developed a reputation with other VCs (presumably our partner funds) that I hate crypto. At the time, I deflected and said that I didn’t hate crypto; I just thought there was considerable Ponzi-like behavior in crypto. I’m regularly cynical about things on our internal Slack channel and periodically post about big blowups, including in crypto.

I realize that I’m conflating speculation vs. investment. The part of crypto I don’t like is the rampant speculation. This morning, a friend of mine sent me an email about some money I owed him for a thing we are doing together. He said, “If you paypal me I’ll buy some bitcoin with it. Looks like it’s starting to firm up.”

Here were the bitcoin prices when he sent me the email and when I Paypalled him the money ($1,456.42).

1/15/23 9:51 PM MT: $21,158.55
1/16/23 7:28 PM MT: $20,879.14

That’s a 1.33% difference. It cost me nothing to Paypal him the money. It would have cost me $19.37 to pay him via Bitcoin just because of the timing difference. That has nothing to do with the transaction cost. It’s entirely a result of speculative activity.

I mean, c’mon. Yeah, I know credit cards have fees, and endless payment rails in the system extract money along the way. But there are also ACH and Debit Cards. And free checking accounts, although I guess it would cost me $0.60 for a stamp. Wait, $0.60 for a stamp? The last time I bought a stamp, they were $0.29. And yes, I know some of you out there have never bought a stamp.

It’s hard for me to hate crypto. It’s been economically very good to me. I accidentally bought twice as many bitcoins as I needed for an online programming course I took in 2013 for about $100 each. I sold the FIL I got from investing in their SAFT as it vested (daily) and was amazed at how much money resulted. The Helium that I earned, which seemed to have no functional utility whatsoever, generated a nice multiple on the cost of all the routers I bought, even though today I earn nothing because of whatever algorithm changes they’ve made, so the network is now functionally and economically worthless. And, the crypto funds we have invested in have done exceptionally well … mostly.

I regularly hear to be patient. It’s like the Internet was in 1999 – ahead of its time. The builders are building, and it’ll take over everything in the future.

Ok. That’s cool. Just beware of the Ponzi schemes.

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Reflecting on Ponzi Schemes

At the end of 2022, some people started shouting that Crypto was a Ponzi Scheme following earlier declarations by Bill Gates, Warren Buffett, and Charlie Munger.

Others, especially those in the crypto industry, were saying some version of “Well, FTX Might Looking Like a Ponzi Scheme, But Crypto is Legit and Isn’t a Ponzi Scheme.” But then someone else in the Crypto industry, on the same website, wrote Crypto Ponzi Schemes: How to Identify and Protect Yourself From These Scams. Ok. How confusing.

What should an investor believe? The SEC has an official publication, Ponzi schemes Using virtual Currencies. It’s … not helpful … and implies almost everything in crypto is a Ponzi scheme. At least it has some phone numbers you can call if you have questions. Yeah, still not helpful.

Yesterday, I binge-watched MADOFF: The Monster of Wall Street. I was tired, so I just sat around and absorbed four hours of a $65 billion, over 20-year Ponzi scheme. It’s worth watching for historical context.

While longer and less dramatic, it’s more informative than The Wizard of Lies, which stars Robert De Niro and Michelle Pfeiffer as Bernie and Ruth Madoff. However, De Niro completely nails the role of the monster of wall street.

As crypto continues to evolve, it’s worth remembering the part human nature and greed play in all of this. Whenever an economic bubble bursts, Ponzi’s and fraud are revealed. And there’s plenty of it, especially human nature and greed, all the time, everywhere, in finance.

Amy and I watch The Big Short every couple of years to stay grounded in reality.

Pro tip: whenever you see the phrase “guaranteed returns,” close your browser tab.

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Same As It Ever Was

When I was in college in the 1980s, David Byrne and the Talking Heads were in regular rotation in my room along with Pink Floyd, except for the one semester where the only thing I listed to was Dark Side of the Moon (ah – the joy of discovering repeat on an early CD player.)

Once in a Lifetime was one of my favorites. Looking back, it was a Gen X anthem.

Mark Goldstein sent me an email this morning titled your blog, an article i was in last week and yep in response to my post What Just Happened. It included the phrase “same as it ever was…same as it ever was.” and a link to The Internet Is Kmart Now from The Atlantic.

Amy had texted me the article mid-December when it came out. It starts strong.

The 1990s hadn’t gone as expected. A bad recession kicked off Gen X’s adulthood, along with a war in the Middle East and the fall of communism. Boomers came to power in earnest in America, and then the lead Boomer got impeached for lying about getting a blow job from an intern in the Oval Office. Grunge had come and gone, along with clove cigarettes and bangs. The taste of the ’90s still lingers, for those of us who lived it as young adults rather than as Kenny G listeners or Pokémon-card collectors, but the decade also ingrained a sense that expressing that taste would be banal, a fate that the writer David Foster Wallace had made worse than death (I swear he was cool once, along with U2).

yep. Thankfully SiriusXM has Channel 34: Lithium.

The article uses the Kmart / Bluelight.com / Spinway story to set up the conclusion. We were in the middle of it (Softbank Venture Capital/Mobius invested in Bluelight.com and Spinway.) Ian Bogost mostly gets the story right. And then, he ends the article as strongly as he started.

Today, the collapse of a big technology or retail company is almost unthinkable. Just look at the pearl-clutching over Twitter’s recent shambles: The public can’t fathom the idea that it might decline, let alone possibly die, for real. But the certainty of death, rather than the hubris of assumed eternity, was the salient cosmic feeling of the 1990s internet. Its creators had learned that sentiment from the Cold War, tapping out time on Atari games about the apocalypse while awaiting its real-world counterpart. Of course Kmart died, and Yahoo too. What else could have happened? “We’re all going to be absorbed; we’re all going to be consolidated,” Goldstein said. “At the end of the day, we just hope to end up as a button that survives.”

Yep. Same as it ever was.

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What Just Happened

For those of you older than 40, it sort of felt like 2000.

If you are younger than 40, a massive tech bubble just burst. I expect you know that. For the past six months, many VCs have been podcasting, tweeting, publicly writing, … and generally prognosticating about what you should do and what’s going to happen next.

I think the best VCs didn’t prognosticate. They knew what was going to happen next. Instead, they worked with each company to help them deal with reality as it unfolded. Each company is different, and the dynamics of the bubble bursting were not generic.

For example, one of the companies I’m on the board of grew by over 30% last year. Its revenue grew by 30%+. Its gross margin grew by 30%+. Its EBITDA grew by 30%+. Its FCF, before debt service, grew by 30%+.

Another company had a revenue decline of 25%. However, their GM% increased, and their GM$ stayed roughly the same as the prior year. Their EBITDA loss decreased by 50%, and FCF was close to $0 in Q422.

I have 14 other stories from the companies in our portfolio that I’m responsible for. My partners have another 50+. Each one is different. Each one took a ton of work from the leadership team. Many of these teams took on a set of intense challenges as early as Q122 when it was clear that whatever was unfolding was not what they had just finished planning at the end of 2021 when they came up with their 2022 plans.

Almost all of the prognosticating I heard in 2022 was similar to what I heard and often said in 2000. I was 35 at the time and rationalized continually that things would magically and suddenly change for the better. I was wrong, and then 9/11 happened, and then Enron and Worldcom happened, and business kept getting worse. 2001 was a dreadful year for me. 2002 sucked, but it wasn’t as dreadful. But it still sucked. 2003 was hard. 2004 was the beginning of what I now refer to as “the grind,” which ended for me around 2007.

Nothing is going to magically and suddenly change for the better. No one is going to raise a $100 billion VC fund and start spraying money around at fantastical valuations, followed by everyone else suspending disbelief and believing companies, regardless of their businesses, are worth 50x next year’s revenue. No one will value a company with a GM% of 10% at the same as a company with a GM% of 80% just because they are growing revenue at the same rate. Boxes full of magic beans are going to result in jail time. Interest rates aren’t suddenly going back to 0%.

If you are a fan of Harry Potter, think of 2022 as the sorting ceremony. When you put the 2022 hat on your head, did you end up in Gryffindor, Hufflepuff, Ravenclaw, or Slytherin? Did you address reality early in 2022? Are you just now addressing reality? Are you considering what reality might be and hoping it doesn’t happen? Or are you looking around saying, “Huh, what?”

Whatever it is, there’s no looking back and hoping something different happens.

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Book: Three Laws Lethal

I’m a fan of David Walton and his near-term sci-fi books. In 2015, I read a few of his books, wrote a post titled Awesome Near Term Sci-Fi – David Walton, and promptly forgot about him.

Eleven days ago, I got the following email from David.

Mr. Feld:

Since you’ve enjoyed my books in the past (e.g. Superposition), I’m letting you know I have a new one out. No worries if you’re not interested; just letting you know. Hope all is well with you and yours.

When paleontologists Samira and Kit uncover dinosaur skeletons in northern Thailand, they find the remains of an ancient genetic technology that nations will kill to control. Catapulted into a web of murder and intrigue involving the Chinese Ministry of State Security, a powerful Asian crime syndicate, the CIA, and a beautiful Thai princess, Samira and Kit don’t know who they can trust. Torn apart by competing factions and stranded on opposite sides of the world, they race to discover the truth before the world goes to war. Can they bring the past to life before it kills them all?

“Walton has brought hard sci-fi roaring back to life.” –Wall Street Journal

I went and looked up the books he’d written and realized I’d missed the last two: The Genius Plague and Three Laws Lethal.

I started the The Genius Plague on Saturday morning and finished Three Laws Lethal last night. They were both spectacular.

It’s easy to relate to The Genius Plague since we just experienced a pandemic that is trying to shift from epidemic to endemic and failing (according to some) while being a non-issue (according to others). But what if the first order impact of the disease was something other than death and the second order impact could go in multiple directions, depending on … Ok, I won’t spoil it for you.

Three Laws Lethal was even more delicious. I expect many readers of this blog know Asimov’s Three Laws of Robotics. But do you know the Three Laws of Warfighting AIs? Mikes played a central role and I kept waiting for a Mike and Ike reference, but it never appeared. Maybe there will be a sequel.

David – well done. Your newest book Living Memory is on my Kindle and I’m starting it tonight after Life Dinner with Amy.

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NH Marathon (#26): The Ferocious Battle for Not Last Place

I made my move at mile 22.

I’d been trailing my nemesis for a dozen miles. The half-mile cutoff was 2:50, and I rolled through at 2:43, so I had plenty of room to spare, although, by this point, I’d given up on my goal of 5:30.

My nemesis was wearing a red shirt. I could see them a quarter to a half-mile ahead of me for several hours. I’d get a little closer, and then they’d pull away.

At mile 14.5, a timing device was set up, presumably to ensure the marathoners were on the second loop. I noticed the guy monitoring it (who later I learned was named Nate) picking up the cones after I went through.

I asked, “Am I in last place?”

“Yes”

“That’s a new experience for me. I guess I have a goal besides finishing.”

“What’s that?”

“Not coming in last.”

I knew I had several hours to catch the person in the red shirt. There was no rush. I took it easy and just cruised through miles 14 to 22. My new friend Nate the Great was at each water stop, packing things into his U-Haul after I passed. Since Red Shirt wasn’t really pulling away much, I’d stop, fill up my water bottle, and chat with Nate.

At mile 22, I picked up the pace. The last three miles of the course were on the Rail Trail. The nice people in New Hampshire considerately paint all the rocks and tree roots on the trail white, so it was a particularly delightful place to pass Red Shirt. As I went by, Red Shirt kind of groaned, and I said, “You got this,” which seemed to be the mantra for this race.

Nate was waiting for me at mile 23, ensuring I was still on the trail.

He said, “Looks like you did it.”

“Yup. Second to last place is more fun than last, but I’ve still got a few miles to go.”

“You got this.”

Yup. I sure did. New Hampshire is State #26 on my quest to run a marathon in every state. I haven’t done many in the past few years, and I’m getting slower as I get older. But I know how to get 26.2 miles done, no matter what the pace (I haven’t had a single DNF in all my efforts.)

The small marathons are my favorites. Other than looking at Red Shirt’s back for a long time, I was alone for most of the marathon, which is one of my favorite ways to exist on your planet.

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Book: Burn Rate: Launching a Startup and Losing My Mind

Since Matt Levine is so effectively covering anything interesting in the world of the Twitter deal (and all kinds of bizarre, random, and complicated crypto, fraud, debt, and other financial stuff), I think I’ll stick with book reviews for the time being.

Andy Dunn, who I only know indirectly, wrote an important book titled Burn Rate: Launching a Startup and Losing My Mind. While it covers the story of Andy’s company, Bonobos, it’s really about mental health and entrepreneurship.

While there might be other entrepreneur autobiographies like Burn Rate, I can’t think of any. The closest is Tracy Kidder’s awesome book titled A Truck Full of Money about Paul English, an entrepreneur I do happen to know.

Tracy’s book is a mix of Paul’s entrepreneurial story combined with his experience being bipolar. Andy’s book is his entrepreneurial story combined with his experience of being bipolar. Both are remarkably brave books. Andy’s autobiography is particularly powerful since he is extremely detailed about several of the manic experiences that he had while running Bonobos.

While I don’t know Andy, I know several of his investors. His description of how they handled the situation of discovering Andy’s mental health diagnosis made me proud to know them. Andy decided to proactively hold a board meeting to describe what had happened that resulted in him ending up in the hospital and jail. One of his board members, Joel Peterson (who I don’t know), is remarkable.

“When I got out of the hospital, I walked straight into handcuffs. The City of New York charged me with misdemeanor assault and felony assault of a senior citizen.”

“Has there been a diagnosis?” Joel Peterson asked.

“The diagnosis is bipolar disorder type I. I was originally diagnosed when I was twenty, and I’ve been in denial about it for sixteen years.” A brief silence.

“I know a few folks who have dealt with what you’re dealing with, Andy,” Joel said calmly, holding true to his role as my professional father figure, “including more than a couple of entrepreneurs. It’s entirely manageable. I have full faith in you to take care of yourself, and I have full confidence in you as our CEO.”

Andy covers the rest of the board meeting discussion, including questions from board members about whether he was getting appropriate treatment, his legal situation, and the game plan for addressing any publicity around the situation.

A while ago, I was at a dinner with a bunch of VCs and entrepreneurs, including several very famous ones. One of the entrepreneurs stated clearly that if he ever talked openly about his struggle with depression, his board would immediately fire him. Fortunately, this was not the response of Andy’s board, as they took in the situation, asked questions about it, and made rational and deliberate decisions about what to do going forward. It’s worth noting that Andy was still the CEO of Bonobos when Walmart acquired it several years later.

I’m hopeful that Andy’s book will continue to help destigmatize mental health in entrepreneurship. Thanks, Andy, for being willing to write such an intimate story about your experience.

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