After a wonderful trip back to San Francisco, the learnings of which will be the subject of my next blog post, I’m officially writing this post from Cambridge, Massachusetts…where I now live.
Earlier this year, I walked into the offices of few General Partners at NEA and told them I was thinking about doing my JD/MBA at Harvard. The responses varied from “you’re out of your mind, stay at NEA” and “this isn’t the wealth optimizing move,” to “the JD is a commodity degree today” and “do you know how many MBAs call me and want your job?” But as I described my rationale—one that had nothing to do with my company-building and investing career—they slowly became enthusiastic.
For years, Silicon Valley has in general responded to government with a signature brand of techno-libertarianism, flourishing alternately condescension, ignorance, and a deliberate apathy. But in the birthplace of innovation, such a response is inimical to everything that this community stands for: knowledge, progress, and collaboration. Indeed, if Silicon Valley is to continue to lead the world in innovation, rather than rebuff government, we must work to reform it. Allocating capital and reforming policy the way a venture capitalist would—with a high risk tolerance, potentially massive impact, and a long-term orientation—could do wonders in the public sector. But in order to enable these shifts in the law, one needs to understand where the law came from– hence the JD. Tack on the MBA, which is only an extra year in the combined program, and it can’t do more harm than good, right?
Of course, I could be completely wrong, and this expensive long-term call option— considering both tuition and opportunity cost– could expire worthless if I never decide to enter public service. Alternatively, I may find the lure of Silicon Valley and the opportunity to build the next generation of companies too enticing and drop out, which many people are betting on.
But so far, I’m having an intellectually enriching time learning about the law and, more importantly, meeting the people. My classmates are diverse: a former member of the CIA who did special operations in Yemen, the sons and daughters of Heads of States around the world, the former head of the NFL Players Association, many brave and deeply selfless military personnel. And I haven’t given up investing: in fact, I am still actively investing and taking board seats/becoming an advisor to a few companies, some which will be announced soon.
Let’s see where this takes me. At worst, I will have dropped out of Harvard– that can’t be that bad, right? :)
The past four months have been a whirlwind. Yet from the maelstrom of experiences, three themes have emerged: tombstones, billions, and dreams. Each one of these could encompass multiple posts on their own, but I’ll do my best to highlight the key points briefly here.
Perhaps the greatest insight from the past few months came from a simple statement: I was having lunch with one of my closest friends, Ben Rattray, whose company Change.org is one of the best examples of a purpose-driven, for-profit organization. Change.org is the platform that spurred the Boy Scouts to end its anti-gay policy, that empowered Trayvon Martin’s family to unveil their side of the story, that has equipped citizens from almost every country on the globe to campaign for change. And they also happen to be a tremendous business, doing tens of millions in revenue.
Like usual, we were talking about all sorts of stuff, from capitalism and impact investing to that perennial best city debate: New York, Boston or San Francisco. But the question that most changed my thinking was this:
“What do you want your tombstone to say?”
That question has fundamentally changed my outlook on careers and money…which is for a future post.
- The Portuguese Dream: In March, I was invited to speak at the GoYouth Conference in Lisbon, Portugal alongside the founders of HotelTonight, Cloudflare, and Siri. Portugal is plagued by a 35%+ youth unemployment , yet GoYouth’s organizer, 19-year-old Tiago, expressed zero interest in hearing it and thus created a forum for entrepreneurship to lead Portugal out of a deep recession. At both the conference and Startup Lisboa, which we later visited, I was blown away by the hospitality, hope, and capabilities of the Portuguese.
- The Immigrant & Refugee’s Dream: At the end of 2013, I joined the board of Business Center for New Americans, a burgeoning nonprofit that provides microloans to women, immigrants, and refugees building companies in New York City. These are individuals like Sonnie Selma, a Liberian refugee who founded an African specialty foods business that imports products like African Palm Oil and sells them locally. For immigrant heritage week in New York, we brought together 100+ of our entrepreneurs just like Sonnie into one room to recognize the transformative role of entrepreneurship– from the mom-and-pop laundromat in Queens to the taxi cab company in Brooklyn– in changing their and their families’ lives. I have never seen a better representation of the American Dream than on that day.
- A lover’s dream: India is a country whose Supreme Court recently ruled that homosexuality is a crime. That made this 1st place dance by Northwestern Anubhav at Bollywood America that much more powerful.
- Pinterest – The company, which Bessemer invested in when I was employed there, recently raised at a $5 billion valuation despite just starting to monetize. In due course, this will prove to be a steal of a deal.
- Snapdeal – My first venture deal was Snapdeal, a company I have written about before as a study in America’s broken immigration system(summary: the founder of Snapdeal wanted to start a company in the USA but couldn’t get a visa). They just raised at a $1 billion valuation, taking yet another step closer to becoming India’s Alibaba/TaoBao.
- Berkshire Hathaway – I was at the Berkshire Hathaway annual meeting in Omaha thanks to an invitation from Tracy Britt. It was a great dose of investing reality (who would think that businesses could be valued off of free cash flow or EBITDA instead of users and eyeballs?). And on Sunday night, I had dinner at a steakhouse that apparently is good enough for these two.
And so much more. In general, I’m not a fan of these diary-like posts as opposed to more substantive ones, but as I resume my blogging cadence, I hope to revert to the latter.
This guest op-ed was originally published by Forbes here.
Why Silicon Valley Should Help Washington
In Silicon Valley, 2013 will be remembered as the year the idea of separating from the United States went viral. There was the Stanford lecturer and investor, Balaji Srinivasan, who called for “Silicon Valley’s Ultimate Exit,” declaring to a large audience of elite entrepreneurs,”We need to build an opt-in society, outside the U.S., run by technology.”
There was Larry Page, the CEO of Google with a net worth over $30 billion, who suggested a more experimental approach in which technologists “set aside a small part of the world” beyond existing laws and institutions. Page’s vision is shared by billionaire investor Peter Thiel, who in 2008 co-founded the Seasteading Institute to create floating city-states in the ocean.
And then there was Chamath Palihapitiya, another influential venture capitalist, who took a step further in proclaiming, “The government, they’re completely useless… If the government shuts down, nothing happens and we all move on, because it just doesn’t matter.”
It’s tempting for many observers to dismiss these ideas as outlandish: after all, Silicon Valley is not on the verge of seceding from the Union. Yet it is also a fact that the United States has seen few, if any, separatist thought movements backed by such wealthy and elite individuals since the mid-1800s.
Even beyond the erosion of national identity, what this thought movement reveals is a systematic lack of appreciation across parts of the tech community for the role the U.S. government plays in supporting the most innovative economy in the world. Indeed, the U.S. federal government remains the world’s single greatest benefactor of scientific discovery and technological invention, without which Silicon Valley would neither exist nor persist.
In the end, Silicon Valley and Washington need each other to thrive. Instead of dreaming about abandoning U.S. governance, the Valley should strive to improve it — not only through forward-looking policy advocacy, but also through new ventures to make American government more productive.
The Limits of Silicon Valley
It is now well established that Silicon Valley was born largely through U.S. defense and intelligence spending in the 1940s and 1950s, laying the foundation for the global information technology revolution. As serial entrepreneur Steve Blank has documented in “The Secret History of Silicon Valley,” this occurred through a series of federal grants to Stanford and early-stage companies developing microwave systems and vacuum-tubes, and eventually semiconductors and the Internet.
While the State laid the foundation, there is little question that Silicon Valley’s private investors and entrepreneurs ultimately built much of the information technology sector as we know it.And to this day, the Valley remains one of the most forward-looking places in the world: Tesla’s electric vehicles, Coursera’s platform for free higher education access, and Google’s self-driving cars are just a few examples of its companies working to solve big problems.
Despite these examples, there is a growing sense of disappointment with what the Valley is delivering— what some are calling a “systemic failure in the startup ecosystem” that primarily creates Instagrams instead of Hyperloops. As Harvard Business School Professor Josh Lerner concluded, “the venture capital model is no panacea for innovation. The boom-and-bust cycle, the mercurial effects of public markets, and the narrowing of its objectives have made it something far less substantial.”
These trends make sense given the incentives facing most venture capitalists in today’s markets: if the public markets reward fast-growing internet companies like Twitter at multiples as high as 40x revenue, then why wouldn’t investors pursue high-flying software or consumer internet deals?
As a result, VC investment in more capital-intense and higher-risk technologies has fallen substantially in recent years, with software startups increasingly dominating at the expense of sectors like energy, transportation, biotech, and advanced manufacturing. As Peter Thiel has lamented, “We wanted flying cars. Instead, we got 140 characters.”
The Entrepreneurial State
Fortunately, the federal government continues to provide the seed corn for the U.S. innovation system through unmatched investments in high-risk technology research and development (R&D). On the order of nearly $150 billion per year, this commitment far exceeds any other nation and is almost five times the size of the entire global VC market, driving the development of new, foundational technological platforms upon which the private sector builds commercial value.
Nuclear power. Jet engines. The Green Revolution. Semiconductors. The Internet. Hydraulic fracturing. Solar photovoltaics. Gas turbines. Advanced batteries. Recombinant DNA and genome sequencing. All of these blockbuster technologies and more were originally developed with U.S. government funding, and future breakthroughs in path-breaking areas like quantum computing, nano-manufacturing, and fusion power will require the same.
Of course, today it is commonplace for skeptics to point to examples like Solyndra. But whether or not the government should finance large-scale manufacturing facilities is besides the point: even the most libertarian economists agree on the productive role of public spending on research and development.
This doesn’t mean the private sector doesn’t develop breakthrough technologies on its own — the bygone Bell Labs is a prime example — nor should it discourage venture capitalists from developing new investment models. But as British economist Mariana Mazzucato concluded in her recent book, The Entrepreneurial State, “most of the radical, revolutionary innovations that have fueled the dynamics of capitalism… trace the most courageous, early and capital-intensive ‘entrepreneurial’ investments back to the State.”
State of Innovation
Silicon Valley and Washington need each other to thrive: the Valley needs a productive federal government to continue supporting our national innovation system, and Washington needs a Valley that turns new inventions into good jobs and productive commercial products.
Of course, the Beltway city could also use its own strong dose of disruptive innovation to deliver more value. Instead of dismissing government, the Valley should direct more of its energy toward ventures that make it more efficient and responsive. For government operations, companies like Palantir have only scratched the surface in overhauling data mining and analysis capabilities. For government advocates and watchdogs, startups like OpenGov, Outline, and FiscalNote have much greater potential to provide analysis tools on complex public programs. For civic empowerment, there remains enormous opportunity to create information and organizing platforms, such as NationBuilder, to engage the public and make government more responsive. And this is only the beginning of what’s possible, both here and for governments across the world.
For over a half-century, the unique partnership between Washington and Silicon Valley has produced transformational results and helped make the United States the most dynamic and entrepreneurial society in the world. Today, the challenges of the twenty-first century demand even more ambitious and meaningful innovation, and that is why we must renew and strengthen our partnership — not abandon it.
Bitcoins are to money what email is to communication.
Today, there are about 12,000,000 bitcoins—the unit of currency for the open source peer-to-peer electronic money and payment network created in 2008—in circulation. At $1,000/bitcoin on Coinbase or BitMe, that represents about $12 billion in value. Though tremendous at first glance, as a point of comparison, the total value of all gold reserves in the world is about $7 trillion. Bitcoins therefore really amount to but 0.2 percent of the value of gold, historically the world’s primary store of value.
In other words, all bitcoins in circulation today are worth less than 1/6 of Bill Gates’s total net worth of $76 billion. Through either comparison, they could be priced way too cheap.
The best way to think about bitcoin, as my friend Charlie Songhurst describes, is to ignore the urge to conceptualize bitcoin as a “currency replacement” or “money.” It really is the next generation of currency used within a digital ledger. Within this ledger, or virtual sandbox, the store of value is bitcoin; outside of this sandbox, the store of value can be converted back to whatever you want: USD, Euros, RMB, maybe even gold. But, within the theoretically seamless, borderless sandbox, there will be a huge reduction of transaction friction, especially across country lines: lower transaction fees– and subsequent enablement of micropayments, lower currency exchange fees, faster transaction times, and even greater trust in the bitcoin unit (particularly for developing markets, where there may be hyperinflation in Zimbabwe or an artificial currency peg in China). On top of this, bitcoins are a deflationary currency: as the demand rises, the price should rise, as there will only ever be a fixed amount in circulation (21,000,000 after all the bitcoin mining).
Why Bitcoins aren’t Tulips
The graphs of the meteoric rise in bitcoin price look eerily similar to the 1600’s Dutch tulip bubble…just without the crash (at least, so far). However, I posit that bitcoins differ from tulips for two very simple reasons:
- Tulips’ primary function is to look pretty.
- Bitcoins have hundreds of functions, from online gambling, money laundering, and other illicit activities to seamless cross-border transactions, international micropayments, and more. Even Shopify’s 75,000 merchants can now accept bitcoin payments, bitcoin ATMs are sprouting, and trips aboard the Virgin Galactic are being booked using bitcoin.
In a bull case, bitcoin could be the way we transact in the near future. In the base case, it is a hedge against inflation, quantitative easing, and rogue monetary policy. If you only believe the latter, and the total value of bitcoin could represent only 1 percent of gold, then that itself is worth north of $5,000/bitcoin (>$7,000 according to the table below from the Bitcoin Investment Trust, which was based on a higher gold to dollar exchange rate). If you believe it has a chance at the former, the sky is the limit.
So, is bitcoin a steal at $1,000/piece? Very possible.
UPDATE (12/1/13): Ever since I published the article, people have asked me whether they should buy BTC. My advice: don’t invest any more than you can afford to lose. There is a significant probability (i.e. the bear case) that bitcoin will unravel as a ponzi scheme and be worth zero. Here is a great article on that. I personally think it will be worth either zero or thousands of dollars more than it is today. On that risk/reward basis, it may make sense to put 1% or less of your net worth in it, but no more.
Disclaimer: I own some, but not nearly enough, bitcoin.
At NEA, I work actively with around 10 of our portfolio companies and passively with a few others. In every one of those cases, I’m the youngest guy in the room. Except in the case of Fiscalnote, where I very well may be the oldest.
When I first met founder Tim Hwang, I felt like I was looking in a mirror. He reminded me of an East Asian version of myself. He had the same tendencies and quirks I do: habit of trying to fit 2 minutes worth of information into 1 minute, avoiding the question of age until asked point blank, the occasional forgetfulness of when we had met certain people (in his case, he guaranteed he had met me at least 2 times before but I am willing to bet $ that we had never met), even the same thick glasses that signify way too much time in front of screens…
But that’s where the similarities end. For example:
- Tim, now 21 but then a teenager, was the youngest elected school board member for the largest school district in Maryland receiving 70,000 votes through via a voter targeting strategy he learned while working for the Obama Campaign.
- Tim founded the National Youth Association which represents 750,000 youth in the US and played a large role in helping those under the age of 26 stay on their parent’s health insurance plan in Obamacare.
Somehow, Tim also is the CEO of Fiscalnote, a real time government analysis platform. Fiscalnote aggregates and analyzes speeches, court cases, and existing government legislation at all levels: local, state, and federal. The talented, but young, team has built a number of algorithms to predict whether new legislation will pass and have back-tested it to over a 99% accuracy rate. Fortune 1000 companies all the way down to restaurant owners now have an easy way to figure out what legislation does or may affect their business. Effectively, they are trying to make a very important part of government transparent. We recently closed a round with Mark Cuban and a few others. Fiscalnote also happens to be the first startup I’ve heard of that is moving out of Silicon Valley and to DC!
I’m thrilled to be an investor and can’t wait to watch this unfold.
“In 2003, an 18 year old girl got very sick. Without any warning or apparent cause, she fell into a deep depression. She had to drop out of college. She would sleep 14 hours a day, too fatigued to do anything when awake but watch TV. She gained 50 pounds of weight and woke up several times a night with nightmares, soaked in cold sweat. Eventually suicidal thoughts entered her mind. She asked her mother to sleep in bed with her so she wouldn’t hurt herself. That girl is my sister, Carly.”
“Over the next several years, our parents brought Carly to 16 different medical specialists and racked up over $100,000 in medical bills, desperately seeking a diagnosis. Each doctor would treat her symptoms as best they could, but none could identify the root cause of her illness. We’d later discover that her disease affects just 1 in 15,000 females. Her doctors had never heard of it, much less seen it.”
This is the story that Jared Heymans, CEO of CrowdMed, months ago told me. There was so much wrong with Carly’s situation: the time it took to receive a correct diagnosis, the exorbitant costs of gratuitous visits, the damage from misdiagnosis and mistreatment. Parts of these issues are endemic to the American healthcare system (i.e. costs), but others can strike anywhere (i.e. the misdiagnosis, especially due to her rare condition). For example, rare diseases affect 25 million people in the US and 350 million people worldwide, yet they are often just as misdiagnosed as more common diseases because of medicine’s pronounced 80/20 rule.
At Bessemer, my colleagues invested in Crowdflower, a company that helps contributors complete microtasks via their crowd of people; and I have always been impressed with Mechanical Turk, LiveOps, and other crowdsourcing companies. So when Jared told me that “the wisdom of the crowd” might also be applied to rare diseases, I was intrigued. And when his vision became CrowdMed, I couldn’t wait to invest.
Jared and his team have built a platform that empowers patients struggling with their ailments—many of whom have “tried everything” but can’t get the right diagnosis—post their symptoms and history on CrowdMed for a small fee (~$199 for now). Then, a team of MDs (note: Medical Detectives, many of whom are NOT Medical Doctors) scours the web, literature, and other sources to derive probabilities for potential diagnoses.
So far, this model has worked pretty well. In fact, dozens of cases have been solved on the platform– some, in as early as three days.
These are cases, and stories, like Carly’s. Hers was the first case solved on CrowdMed, and it took 3 days.
I entered venture capital because I wanted help build businesses that, if they worked, changed people’s lives for the better. CrowdMed is the epitome of that promise. I’m thrilled to be both a personal investor as well as a professional partner through NEA’s recent investment.
A few weeks ago, a company in an industry known for it’s lack of innovation did something pretty innovative. British Airways took 130 innovators, entrepreneurs, and policymakers on a chartered 747 from San Francisco to London to hack solutions to “the global misalignment of talent“. We then presented our solutions at the G8 Innovation Summit in London.
At 30,000 feet, and without much sleep, we were split into small teams that would tackle 4 separate problems:
1) Meeting US demand for talent globally
2) Expanding STEM
3) Growing STEM in emerging economies
4) Fostering Women in STEM
Some pretty amazing concepts were developed on the plane, and some are even being put into action (like AdvisHer, an online community that leverages the power of pipeline programs to advise, advocate, and accelerate women into STEM university programs and STEM companies.)
Yet, what I found most unique about this whole trip was the selflessness of it. It was unlike the majority of conferences where you network or learn on behalf of, and for the benefit of, the company or organization you represent. Instead, British Airways spent between 6 and 7 figures USD to advance solutions for a problem we face as a collective society. And, they invited 130 people who wouldn’t talk about their own backgrounds, but would use their experiences to solve a problem often far different than their organization’s.
A great trip, truly proving that the sky isn’t the limit.
Watch the Ungrounded highlights video here!