bijan:

On Friday, 12/13, @nabeel and I recorded our latest edition of Hallway Chat.

Show notes:

  • Review of the new Nest Protect, Xmas drones & our surveillance state
  • Fred Wilson’s post & the future of capitalism
  • Twitter’s #1 ranking on Glassdoor & the nature of building a world class company culture
  • And a question for everyone on a company communication tools we should try

As always, thanks for listening and feedback welcome!

The problem with analyzing Unicorns

Aileen Lee wrote a very interesting piece on Techcrunch where she lays bare some of the analysis she has done on “Unicorns” - or startups that have entered the $1b club.

It’s a rarified club, to be sure. In fact, it’s enough of a rarified club that I would call into question any conclusions one would assume by Aileen’s analysis. The long version of why this is not a good idea was the subject of my last post, but the short version is this: 39.

The starting data set is 39 companies, and perhaps it’s a bit more than that as people expand the list, but it’s a pretty small number no matter what. A number that small is just hard to reach any definitive conclusions with.

Anyone who has done a controlled study has seen many situations where the first 10 results you get point in the exact opposite direction of the later conclusion. For instance, right now the conclusion is that nearly half of the co-founders in “Unicorn” companies have worked together in school. But, if the four unicorns from this year happen to have met after college, then that number could drop to 40%.

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On Quantitative Investing

Most early stage Venture Capitalists use very little data when investing. It is largely a world of intuition, relying on mutual relationships, and in some cases sector knowledge or thesis development.

But that tide is shifting. Today there was an article on how Steve Blank now thinks accelerators should go the “Moneyball” route. As “big data” gets more popular, the idea of using a quantitative approach to help make better early stage investment decisions is becoming more frequent. As Rob Go recently wrote, there is a strong rise in the number of VCs employing data scientists, and a couple have even made a firm-wide bet on being entirely data driven. 

Unfortunately most of the press coverage of this trend generally falls into a very surface level narrative about “quantitative vs qualitative” investing. That is, early stage investing is about gut belief and vision, and you better not try to rely on numbers to make a decision. This is a false conflict, and blinds us to the fact that data, properly applied, doesn’t deter our intuitive senses it informs them. 

"Quants vs the Scouts"

I think the best illustration of how the “qualitative vs quantitative” argument is false is to examine how Moneyball in baseball actually worked. The story depicted in the book was, partly for dramatic purposes, presented as a “quants vs intuition” situation. But that’s really an oversimplification.

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Hallway Chat #15

The first bi-coastal podcast for Bijan and I. Some heavy gadget talk today, talked through the Pebble, Leap Motion, and iPhone 5s. We also talk crowd funding and accelerator mentorship. As always, drop a note if you want us to cover something next time. 

(via bijan)

I got into a debate this afternoon about human behavior. A friend was trying to explain why the phenomena of “stickers” — which are a huge feature of Asian messaging networks like Line, would never catch on in Western countries.

Honestly, I could care less about the specifics of stickers. But the perspective is one I disagree with. It felt like the same conversation I was having about emoji a few years ago, or about western social networks like MySpace before that, or about free-to-play MMOs a few years before that.

In each case the conventional wisdom was that these were regional cultural phenomena that will not translate across the globe. In each case that view was wrong.

Now I’m sure there are examples of things that are purely localized culture, but these things are becoming fewer and fewer. We should keep in mind that as products hit scale they are more likely to be touching on basic human needs and desires.

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Making exceptions for exceptional people

My friend Ivan wrote a post today on how companies mismanage 10x employees, and more broadly on how people should be judged on the output of their work not the hours they put in.My thinking on judging employees solely on output moved 180 degrees after actually trying to act on it.

This is one of those ideas that sounds great in the individual case, but often causes a very negative chain of events. Let me at through what I’ve seen happen, and then the one exception to the rule.

My first experience with 10x employees was a CTO at a high growth startup in the late 90s called internetsoccer.com. The CTO could have a huge impact even in short spurts, the kind of person that could spend an hour and make breakthroughs that would last weeks.

He also had some personal issues he was working through, so he wasn’t around the office all that much. His conversations with his team, and with the rest of us as executives, was that he was having equal or more positive impact in his 20 hours a week than other people were in their 60 hours. And at first we all agreed, it felt like the meritocratic thing to do.

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(the team at Spark trying the Oculus Rift for the first time)
"Every great dream begins with a dreamer."
Conventional wisdom is often neither. Conventional wisdom said that virtual reality was an interesting conceptual idea in the 80s but ultimately just not interesting enough. Thankfully, there are founders like Palmer Lucky who simply ignore conventional wisdom and follow their passion. 
The first time Santo brought up Oculus in our partner meeting I will shamefully admit being skeptical. But, as Gears of War designer Cliff Bleszinski offered in a sagacious observation. “There are two types of people when it comes to the Oculus Rift,” he said. “There are those who haven’t seen it, and those who have seen it and believe.”
This was also the story of Etsy, of Google, of Flickr. Starting in spaces that would never be in the upper right of a four quadrant chart made by an MBA, but nevertheless have the opportunity to transform or create a new market. 
Oculus is creating a new kind of experience, something that transforms our world and reminds us that technology can still take our breadth away. More importantly Brendan is helping to put together an amazing team to actually take what is currently a mind-blowing developer experience and turn it intro something that could end up in every living room in the future. 
We are proud to now be investors and partners, looking forward to this journey to create new realities.  (the team at Spark trying the Oculus Rift for the first time)
"Every great dream begins with a dreamer."
Conventional wisdom is often neither. Conventional wisdom said that virtual reality was an interesting conceptual idea in the 80s but ultimately just not interesting enough. Thankfully, there are founders like Palmer Lucky who simply ignore conventional wisdom and follow their passion. 
The first time Santo brought up Oculus in our partner meeting I will shamefully admit being skeptical. But, as Gears of War designer Cliff Bleszinski offered in a sagacious observation. “There are two types of people when it comes to the Oculus Rift,” he said. “There are those who haven’t seen it, and those who have seen it and believe.”
This was also the story of Etsy, of Google, of Flickr. Starting in spaces that would never be in the upper right of a four quadrant chart made by an MBA, but nevertheless have the opportunity to transform or create a new market. 
Oculus is creating a new kind of experience, something that transforms our world and reminds us that technology can still take our breadth away. More importantly Brendan is helping to put together an amazing team to actually take what is currently a mind-blowing developer experience and turn it intro something that could end up in every living room in the future. 
We are proud to now be investors and partners, looking forward to this journey to create new realities.  (the team at Spark trying the Oculus Rift for the first time)
"Every great dream begins with a dreamer."
Conventional wisdom is often neither. Conventional wisdom said that virtual reality was an interesting conceptual idea in the 80s but ultimately just not interesting enough. Thankfully, there are founders like Palmer Lucky who simply ignore conventional wisdom and follow their passion. 
The first time Santo brought up Oculus in our partner meeting I will shamefully admit being skeptical. But, as Gears of War designer Cliff Bleszinski offered in a sagacious observation. “There are two types of people when it comes to the Oculus Rift,” he said. “There are those who haven’t seen it, and those who have seen it and believe.”
This was also the story of Etsy, of Google, of Flickr. Starting in spaces that would never be in the upper right of a four quadrant chart made by an MBA, but nevertheless have the opportunity to transform or create a new market. 
Oculus is creating a new kind of experience, something that transforms our world and reminds us that technology can still take our breadth away. More importantly Brendan is helping to put together an amazing team to actually take what is currently a mind-blowing developer experience and turn it intro something that could end up in every living room in the future. 
We are proud to now be investors and partners, looking forward to this journey to create new realities. 

(the team at Spark trying the Oculus Rift for the first time)

"Every great dream begins with a dreamer."

Conventional wisdom is often neither. Conventional wisdom said that virtual reality was an interesting conceptual idea in the 80s but ultimately just not interesting enough. Thankfully, there are founders like Palmer Lucky who simply ignore conventional wisdom and follow their passion. 

The first time Santo brought up Oculus in our partner meeting I will shamefully admit being skeptical. But, as Gears of War designer Cliff Bleszinski offered in a sagacious observation. “There are two types of people when it comes to the Oculus Rift,” he said. “There are those who haven’t seen it, and those who have seen it and believe.”

This was also the story of Etsy, of Google, of Flickr. Starting in spaces that would never be in the upper right of a four quadrant chart made by an MBA, but nevertheless have the opportunity to transform or create a new market. 

Oculus is creating a new kind of experience, something that transforms our world and reminds us that technology can still take our breadth away. More importantly Brendan is helping to put together an amazing team to actually take what is currently a mind-blowing developer experience and turn it intro something that could end up in every living room in the future. 

We are proud to now be investors and partners, looking forward to this journey to create new realities. 

Investing in games

A lot of VCs are cold on investing in gaming right now, as Kim-Mai covered on Techcrunch yesterday. Most investors say the problem is Zynga’s stock price, and the hits-driven nature of the business, but this is a short-sighted view. 

The real problem with investing in games isn’t the hit-driven nature, it’s that there are very few founders aiming for real disruption. Few companies are trying to reinvent the act of making games, or utilize entirely new distribution channels, or in general take a bold new step forward that will create a sustainable advantage. 

I support that some founders want to just build wonderful content, and I look forward to playing those games just as I like to watch HBO. But those are not venture capital bets. Those companies have used publishers or game specific funding vehicles or bootstrapping to get going and create the wonderful content we all fall in love with. And they still will.

That’s not the only company to start though. This is the most disruptive time I can think of in games, with changes in: the role of a publisher, a new generation of consoles, the rise of tablet gaming, the lowering cost of producing a game, crowdfunding, service-based games, analytics, and new interfaces like Oculus, Myo, Xbox One, and Leap.

In general, when the rules of the business are static it favors the big guys. And this is a trying time to be a big guy in the industry precisely because so much is in flux. The opportunity for audacious visions is quite high right now. As a founder, if I was starting a gaming company right now that would be my threshold. As an investor it’s what I try to encourage.

I’m not sure that a lot of the investment community is looking for that disruption, since most have just written off gaming. But we should encourage it instead of painting the whole gaming market with a broad brush. It’s not enough just to start another free to play gaming company. That’s like deciding to make another photo app without any internal belief as to why you, your team, or anyone else should believe this is going to be the one that makes a huge difference.

The world will certainly use more photo apps, and play more games. But the lasting impact will be those who build content on a technology, a platform, or a method that is differentiated. Valve, EA, Pixar, Disney, Zynga, all reached scale not just because they created great content, but because they shaped the landscape in a new way that gave them leverage as they grew. (How they performed once they achieved scale is another post)

The beauty is that if you truly disrupt then it will also make others believe, and all the funding and scale and high valuations and other things you want to happen have the opportunity to happen. But it starts with a founders desire to mold the world into some future vision they have of it. That feels like a venture worth backing.