A Rip in the World As We Know It
There’s nothing like an Internet outage to demonstrate precisely how much power is focused in the hands of the few. Two weeks ago, at 12:47 pm EST, Amazon Web Services experienced a 3S outage for several hours, taking websites, apps and devices either fully or partially down with it. “Affected websites and services include(d) Quora, newsletter provider Sailthru, Business Insider, Giphy, image hosting at a number of publisher websites, filesharing in Slack, and many more. Connected lightbulbs, thermostats and other IoT hardware (was) also being impacted, with many unable to control these devices as a result of the outage,” Techcrunch reported. “Amazon S3 is used by around 148,213 websites, and 121,761 unique domains, according to data tracked by SimilarTech, and its popularity as a content host concentrates specifically in the U.S. It’s used by 0.8 percent of the top 1 million websites.”
“Notably, this wasn’t technically an “outage,” since Amazon’s S3 wasn’t not entirely out of commission and some services were only partially affected,” says Business Insider, which, once again, failed to disclose that Amazon founder and CEO Jeff Bezos was a major investor in the publication.
It was back up some four hours later and as often happens with tech, we’re apoplectic when our devices don’t work for a while, but once all is resolved, it’s usually more or less a case of business as usual, and in the case of the S3 outage, it may well have even given a few people a brief respite from the government listening posts.
The New Normal
The big news last week was the Snap IPO – the biggest since Alibaba – which raised $3.4 billion for Snap, a company which managed to lose $514.6M last year and has lost money every year since it began commercial operations in 2011,” according to CNBC and, forest through the trees, “has warned that it will never make a profit.”
Facebook tried to buy Snap nee, Snapchat, a few years back for some $3B – pass – so they bought Instagram instead, for the now seemingly bargain price of $1B. Of course, Instagram didn’t have the number of eyeballs that Snapchat did at the time, but since Facebook, um, appropriated features that Snap had innovated – Stories comes to mind – Instagram’s popularity and growth has far outdistanced Snap’s. And remember: eyeballs/exponential growth are the holy grail of Silicon Valley investors and the market. We do know that Twitter has come up more than once in articles covering the Snap IPO, as how long did Twitter skate after the IPO, promising continued user growth, which never materialized. Au contraire, but they did go a good long time with nary a sustainable revenue model in sight, and a falling user base, which does go far in explaining the lack of a buyer for the company.
For the record, ‘growth potential,’ ‘eyeballs,’ – this is the language of Web 1.0, when it was all potential, all the time. The potential was there; the timing was off: the bubble burst. That was then and this is now, and we’re at the Too Big to Fail Stage in the history of tech.
Crimes, Misdemeanors – and Business As Usual
Move fast and break things. Do more faster. These are the mantras that the tech industry, particular those in Silicon Valley, cut their teeth on. Competition is fierce and timing (first to market) – and perception (category killer: think Google and Facebook) – is everything. So is it a wonder that Uber has drawn so much scrutiny and criticism for its practices lately? On all fronts, it seems.
“Has Uber Gone Too Far this Time? Is Uber involved in a Smear Campaign,?” asks Michael Spencer on LinkedIn, referring not only to former Uber employee Susan Fowler’s blog on the sexual harassment she encountered at the company, which was not unique to her but instead, fairly widespread in Uber’s frat boy culture, according to Caroline Fairchild on LinkedIn.
Then there’s the Google patent infringement lawsuit, which is alleging that Uber is using stolen technology which it acquired through its purchase of Otto, to advance its own autonomous-car development (A Stray Email Caused Google’s Waymo to Sue Uber and Otto Over Stolen Tech).
The Things We Think and Do Not Say
This past week, not unlike Jerry Maguire, Mark Zuckerberg issued a mission statement, with some 5700 words on the goals of Facebook. To refresh your memory, there has been some speculation of late as to whether or not the Facebook founder is preparing a presidential run, presumably in 2024, but now it seems, he has decided that, instead, he wants to rule the world. According to Mashable, with his manifesto, Mark Zuckerberg just said he wants Facebook to save the world. Same difference.
Facebook has certainly been under the microscope lately. Between the so-called fake news (we say ‘so-called,’ as while Macedonian teenagers might have posted misinformation, news sources that don’t necessarily follow lock-step with the world view of the Silicon Valley/global elite were also conveniently lumped into this category and even the ethics of Facebook’s chosen outside fact-checkers are called into question) and streaming suicides, murders and gang rapes, Facebook has become a veritable online Roman Coliseum.
As Zuckerberg discusses the evolution of peoples from tribes to cities to nations, he’s no doubt considering that that’s the progression of Facebook as well, which is in parallel to the global community that Silicon Valley would like to see, with national boundaries as a leftover of a bygone or disappearing era, and isn’t Facebook, after all, a global community without boundaries? The social network does not suffer under the inconvenience of national barriers.
The New Pathway to Exits
Silicon Valley is fond of exits – isn’t a meaningful exit the dream and endgame of every investor and entrepreneur in tech? You have to admire – or shake your head in total disbelief at – Silicon Valley, when it comes to what they’ve managed to accomplish: namely, disrupt a number of industries, as well as the basic principles of economics and business, to get to those astronomical exits, whether or not they were real, or just so much smoke and mirrors.
When Twitter launched in 2006 and started picking up steam after its debut at SXSW the following year, they had no revenue model, but the company’s investors assured us that there would be a revenue model by 2009. Then came the IPO in 2013 and, as The Wall Street Journal noted, “The San Francisco-based company raised as much as $2.1 billion and ended the day with a market capitalization of about $25 billion. That made the six-year-old company bigger than more than half of the firms in the S&P 500 and larger than well-known brands such as Kellogg Co. and Whole Foods Market Inc.”
That was then and this is now, and the company is now worth well under its IPO price and as Bloomberg News notes on the eve of three-year-old Snap going public, Snap’s IPO to Be Haunted by Twitter and GoPro. As MarketWatch warns, Snap’s cost of revenue has exceeded sales for two years, and could grow more. Which is Silicon Valley newspeak for the company is losing money, in case you’ve never read George Orwell’s 1984 and evidently, we don’t know what the hell they’re teaching out there. As for Twitter’s revenue model (what to speak of the fact that the company is hemorrhaging users), we’re still waiting.
Where Are All the Women Investors?
Following the Ellen Pao gender discrimination trial, quite a few articles came out about the lack of women investors in technology. We attend many events and panels, and it struck us that we know quite a few women tech investors, so we sat down and made a list of the ones we know in New York alone – and quickly came up with well over a hundred names. So, they’re out there. In New York, anyway.
Not long after having compiled this list (170+ VCs, angels, Corporates and Family Offices), we attended the Demo Day of one of the leading accelerators and noticed something odd: after the presentations, the male investors gathered in small groups to discuss the various companies, while the women dispersed to different stations where the entrepreneurs were answering questions and it struck us that there was something of a disconnect/chokepoint: the proverbial Old Boy networks have been around forever and while the names and faces may change, they’re still very much alive and well, while there’s no such long-standing network/pipeline among women: the women investors don’t necessarily all know each other.
Which gave birth to Ladies Who Lead, an event we plan on hosting quarterly (our 2nd one will be held this Thursday evening) so that the women investors of New York can get better acquainted with each other, in order to facilitate deal flow.
Robotics, Drones, AI and Autonomous Vehicles: The Fourth Industrial Revolution Is Here
Oliver Mitchell of Autonomy Ventures, who also blogs at The Robot Rabbi, spoke at our January 26 Investor Breakfast, and the conversation was column-worthy. After all, the robots are coming and that’s very much Oliver’s domain, and their growing presence on the global landscape, along with other technologies, is being referred to as the Fourth Industrial Revolution, as Oliver pointed out. In fact, the day before the breakfast, The New York Times ran on piece on How to Make America’s Robots Great Again, pointing out how China is investing heavily in the manufacturing of robots, and the US needs to do so as well.
The big fear is that robots will be – and currently are – taking jobs formerly held by lower skilled labor, and the fear is not unfounded. As Oliver noted, they’re also taking jobs in higher skilled areas, even replacing financial analysts and advisors. So are we looking at some relatively far off dystopian future?
“When I was growing up, computers were only used by large corps or government, and with a few highly skilled operators operating them,” said Oliver. “Not until Windows 95 (was introduced) that computers and personal computers became ubiquitous, and really fulfilled the dreams of Bill Gates and Steve Jobs. If I told you a decade ago, or a decade and a half ago, about robots, you’d have thought Robbie the Robot and big industrial robots…Compared to personal computing, we’re standing in 1990 – 5 years before robots become ubiquitous.”
The Founder’s Guide to the 2017 Investing Landscape
Esther Dyson hit it spot on when she said that there are too many entrepreneurs out there, and way too many who don’t know the fundamentals of how to work and/or build businesses properly. Many young entrepreneurs have never worked for a company, or may have worked briefly for a startup that may or may not have gotten traction/funding, and that’s not the same as working for a company that is not dependent on funding – nor are you likely to learn the fundamentals of building a true, sustainable business that way.
We talk to investors all the time and count some as being among our closest friends/longest-standing acquaintances, and they tell us things – provided that they’re shared anonymously – that they would not ordinarily share with entrepreneurs. We’re going to share some of that information with you here and, for the record, with the prior consent of those investors, and a special thanks to Veronica Guzman of WAM Ventures, who did give us permission to mention her name, for her comments and insights.
Many founders – especially first-timers – believe that pitching to investors is a panacea. Note to self: we do attend many accelerator demo days and one investor recently told us that he was writing checks to companies he had met through the accelerator, which is why he goes to demo days: to suss out good companies. Mind you, he was writing those checks to companies he had met through the accelerator three years prior, and not that day. He had been keeping a watchful eye on them, and now that they were ready (meaning, had traction/customers/sales), he was all in. A company that has nominal revenues and has only been in business a few months is asking for major disappointments, if getting funded is their goal at that point, another investor recently noted. “Advisors are telling them to pitch angels this way,” Veronica noted.
The Innovator’s New Dilemma
It has been 10 years since the iPhone first appeared, and when it did, people frankly didn’t know what to make of it. . According to Quartz, “When Steve Jobs stood on the stage 10 years ago today at the MacWorld Expo in San Francisco’s Moscone Center, he started out by saying he was launching three new devices: “An iPod, a phone, and an internet communicator.” In fact, of course, they were a single device—the iPhone, which would lift Apple’s fortunes to unprecedented heights.” Of course, it was so novel, to many it was also the Blind Men and the Elephant.
Then there’s the new innovator’s dilemma, wherein one can innovate just so much, before one is in danger of running out of ideas, in which case, it’s a long-standing tradition in Silicon Valley to simply steal from a competitor, as in the case of Instagram Stories (Instagram’s shameless Snapchat knockoff is doing marvelously well) “Instagram Stories closely mimics Snapchat—users can broadcast short videos to their followers, which disappear 24 hours after getting sent out,” says Quartz. “Upon its launch, Instagram CEO Kevin Systrom said he felt no shame about playing the role of copycat. In an interview with TechCrunch at the time of its launch, he admitted that Snapchat “deserve[s] all the credit” for the concept, adding that copying ideas remains somewhat of a tradition in Silicon Valley. “Gmail was not the first email client. Google Maps was certainly not the first map. The iPhone was definitely not the first phone. The question is what do you do with that format?” Systrom said.”
The iPhone may not have been the first mobile phone, not was Facebook the first (essentially) phone book, but it was not a copycat. If there was one thing that Steve Jobs could do brilliantly, it was to think outside of the dispenser. With larger companies swooping in and literally stealing ideas from smaller players, is it game over? Even the iPhone is losing market share, as we’ve mentioned previously.