Union Square Ventures: A New York Venture Capital Fund Focused on Early Stage & Startup Investing

What comes next

2011-11-28T13:49:15Z

Now is a great time to be an internet entrepreneur. While much of the global economy sputters, tech companies post growth numbers other industries haven't seen in years. Their success hasn't gone unnoticed, and the pace of tech-company creation has quickened.

There's more than me-tooism going on. It is, for example, easier to start a tech company than ever before - it's easier to access startup capital, procure basic infrastructure and tools at lower prices, find and cultivate mentors, and join an accelerator program.

Accelerator programs that focus on early-stage technology companies have grabbed headlines recently. The programs are designed to be crash courses in starting a technology company and bringing a product to market. They often last three intense months, ending with a structured pitch to a roomful of investors. The most famous program is Y Combinator, based in Silicon Valley, but there are other programs around the world, including Techstars, 500 Startups, DreamIt, Excelerate, and Seedcamp.

Over the past few months, I've seen over 160 companies come through eight different accelerator programs. It's a skewed group, but it captures the zeitgeist of a certain segment of the tech industry - and, I think, looking at these companies is one of the best ways to get a sense for which opportunities compel internet entrepreneurs today. Here's a look at some of what these entrepreneurs are thinking about - and where we all might be headed:

Software is developing its own component industry
Last year, John Maeda predicted technology would become a cottage industry by 2020 "with bespoke applications made by many, rather than today's industrialized, Microsoft-esque mass production and distribution model." I doubt we've seen the last billion-dollar software company; tech companies will continue to ride the economics of software, and larger companies will use strong network effects and scale to drive consolidation. However, we'll likely see fewer companies that need to build - and fewer companies that will build - every piece of their technology themselves.

Component sourcing has already begun to revolutionize the software industry. Take a look at Amazon's or Rackspace's cloud hosting services, which have lowered the price and complexity of hosting software, or the success of "outsourced" tools like Google Analytics, Twilio's voice and text messaging infrastructure, or Urban Airship's iOS notifications.

Entrepreneurs in this summer's accelerator programs sliced off pieces of what it takes to build and run a web or mobile application and offered those slices as services. "I built this piece of technology three times at three different companies. I built it a fourth time, and that's the service my company offers," a Y Combinator CEO pitched.

Developers are the target customer for 30% of the companies I saw. Consider Parse, which provides a backend to a mobile app, and MongoHQ, which hosts instances of the open-source MongoDB. While LaunchRock offers user acquisition tools, TightDB provides a database customized for big data. ReportGrid provides website analytics, while CoderBuddy helps developers create and host websites on Google's App Engine, and Creative Brain Studios allows game developers to deploy one game on several devices and operating systems.

Using components to build larger systems doesn't require building monotonous systems. Consider the iPhone, made of component parts sourced from Chinese megafactories but designed in California. There's something beautiful and unique about the iPhone that no other handset manufacturer has been able to match - even the ones that source parts from the same megafactories.

Similar to physical-product designers, when software developers start with components, they can concentrate on the core problem they're solving and will create better products in less time. It's exciting.

Work is shifting toward a peer-to-peer model
The first two decades of the modern internet broke industries built on distribution monopolies (e.g. music, news) and facilitated coordination between the consumer and the provider without the need for a middleman (e.g. hotels, car rentals.) The same will happen for a large fraction of our work, especially in cases where the work is standardized or employers "distribute" their workers to pools of customers.

One reason to create firms is the coordination and signaling problems of situations with imperfect information and transaction costs. As technology increases information flows and decreases transaction costs, individuals can leave their old employers and strike out on their own. Their livelihoods will still depend on providing valuable services in exchange for fees, but they'll do so as freelancers - and on their own, they'll capture more of the value generated by their work.

Just as blogs allowed talented writers to build audiences without being affiliated with large media organizations, and as Twitter and Tumblr allowed news- and tastemakers to succeed outside of established news or media properties, new web services will allow individuals to engage with customers without needing to work for a firm.

These free agents, disaggregated and newly empowered, can promote and sustain themselves with new tools: Opez caters to service professionals, like bartenders and hairdressers, and allows them to build followings independent of their employers, while Vayable and SideTour provide marketing and transaction-processing for neighborhood tour guides. Hiptic helps graphic designers promote their work, while Zerply helps creative professionals do the same, and InterviewStreet lets programmers show off their skills.

As technology creates new free agents, it's also changing the notion of "work" to be less time- and location-specific. This is especially true of work that can be done easily at a distance. Workers who can't differentiate themselves using their reputation will be commoditized. This summer, web services were launched that allow you to order up a proofreader (Kibin), blogger (Contently), tutor (LearnBop), language partner (Verbling), car ride (Ridejoy), science researcher (Science Exchange), cooking instructor (Culture Kitchen), mystery shopper (SpotCheck), or transcriptionist (Mobile Works) from your browser. The Mechanical Turkification of work has begun.

Between identified, liberated individuals and the nameless, faceless drones of Mechanical Turk lies identity: does it matter who performs the task at hand? If the worker's background, skills, or experience matter, there's likely to be higher variance in demand for a particular person's services, and free agents will be sought after and chosen by reputation on services built for those purposes. Less-skilled people are likely better suited for tasks for which identity doesn't matter, and other marketplaces that don't include a concept of reputation will provide access to a global pool of workers.

What's really next
Looking at activity across accelerator programs, it's not clear which "one thing" will be next. This season's 160 "accelerated" companies, nevermind other tech companies created outside of incubators, each seek to solve different problems and should be understood individually. (Making tricky, admittedly, sweeping essays like this one.)

Yet broader shifts like the componentization of some software development and a shift from employed workers to independent agents have begun to emerge; other shifts will become more apparent with time. These, plus the overall pace of tech-company creation, give me faith we haven't seen anything yet.

Help Protect Internet Innovation

2011-11-16T14:03:34Z

We have previously written about why the Protect IP Act (PIPA) is bad for innovation. The same is true of the House version of this bill which is called the Stop Online Piracy Act (SOPA). In fact, SOPA goes beyond PIPA in several important ways. For instance, SOPA contains anti-circumvention language that would essentially allow for government control over essential privacy software such as VPNs, proxies, and even something as fundamental as SSH. SOPA also provides for an incredibly broad right of private action that would allow content owners to interfere with the operations of payment processors and social media services such as Twitter.

For those who doubt the chilling impact on innovation, there is a brand new study by Harvard Business School professor Josh Lerner showing that investment in cloud startups increased as much as $1 billion after a court ruling that permitted cloud-based DVRs (which content companies had previously opposed). Innovation on the Internet has been enabled by key organizing principles behind the design of the Internet, including the separation of different layers and the open architecture. Vint Cerf, who together with Bob Kahn, was responsible for much of the initial design of the Internet has warned that the government is "beginning to go overboard in the protection of copyright" which will harm innovation.

Today is the beginning of hearings on SOPA. The Judiciary Committe has apparently chosen to hear from five people supporting SOPA and only one opposing comment. This is not for a lack of trying on behalf of technology companies. Several weeks ago Netcoalition, which represents Internet firms including Google, Amazon, eBay, IAC, Yahoo and PayPal, asked to be heard at the hearings but has been specifically excluded from testifying against SOPA. As Fred has pointed out this is very different from the process that resulted in the passing of the DMCA which currently governs the relationship between copyright holders and technology companies and would essentially be superseded by SOPA.

Given this imbalance in front of the Committee, it is essential that lawmakers hear from as many Internet entrepreneurs, employees and investors as possible. Some of the largest companies on the Internet, including Google, Facebook, LinkedIn, Zynga and Twitter have all signed up to a letter expressing their opposition to the bills as currently drafted. The Protect Innovation site makes it possible to support this petition by easily sending a note to legislators. We encourage everyone to sign it.

Going one step further, we have also decided to add a "Stop Censorship" graphic to our site that overlaps our logo. This indicates our belief that the bills as currently drafted don't just inhibit innovation but unreasonably restrict freedom of speech. SOPA comes close to establishing the American equivalent of the Chinese firewall (just lacks IP filtering) and undermines the freedom to post links which is essential to free speech on the Internet, including blogs and Twitter. We are not alone in this belief as this letter signed by over 50 law professors against an earlier version of the bill shows. If you want to join this additional protest you can find the embed code here.

Codecademy

2011-10-28T20:49:34Z

A few weeks back, Ryan Bubinski, who co-founded Codecademy with Zach Sims, said to me that he thought learning how to code should be a fundamental skill on par with learning how to read or write or do arithmetic. And, that the Internet was the ideal platform to create the largest community learning to program. So it's no surprise that Ryan and Zach built a service explicitly designed to be "the easiest way to learn how to code." Indeed, a few days after I had this conversation with Ryan, I watched my 12 year old daughter complete, in real time and in small bites, 3 lessons on Codecademy (Getting to Know You, Confirm or Deny and Variables). More than 500,000 other people have also taken millions of mini-lessons since the service was launched in August.

Union Square Ventures is excited to make an investment in Codecademy as part of the company's Series A financing and support Zach and Ryan's vision of creating a platform where learning how to code is simple and can be shared.

Over the past few years, we've watched the Internet become a richer platform to learn and collaborate in new and different ways from new and different sources. Free and inexpensive content increases the variety of sources from which people can learn online. At the same time, as technology becomes the driving force in our economy, the ability to program and understand programming is becoming more important. Codecademy is at the heart of a new and emerging programming information "stack," which includes networks such as Stack Overflow (part of the Stack Exchange network) - "Q&A for professional and enthusiast programmers" - and Github - a platform for the collaborative development of software.

The collaborative nature of the internet has transformed other industries, yet we've only begun to see its impact on learning. Codecademy currently taps into its community by offering users the ability to "help create new lessons" on the service. Albert Wenger created a course - Functions in Javascript. Ryan and Zach understand the importance of developing and listening to the communities that emerge around great web services.

It's no surprise then that writer Douglas Rushkoff's latest book is titled Program or be Programmed: Ten Commands for a Digital Age. In it he writes:

When human beings acquired language, we learned not just how to listen but how to speak. When we gained literacy, we learned not just how to read but how to write. And as we move into an increasingly digital reality, we must learn not just how to use programs but how to make them. In the emerging, highly programmed landscape ahead, you will either create the software or you will be the software. It's really that simple: Program, or be programmed.

We are thrilled to support Zach and Ryan's goal of "teaching the world to code."

Codecademy

2011-10-28T03:22:05Z

Codecademy was created out of the frustrations Zach Sims and Ryan Bubinski felt with learning how to program. Tired with less effective text and video resources, Ryan and Zach teamed up to create Codecademy, a better, more interactive way to learn programming by actually coding. This is just the beginning. Join us as we make it easy for everyone to love and learn how to code.

DuckDuckGo

2011-10-27T21:04:30Z

DuckDuckGo is a general purpose search engine that is intended to be your starting place when searching the Internet. DuckDuckGo was solo-founded by Gabriel Weinberg in February 2008 and is based out of Valley Forge, PA (USA).

Analyst hiring update #2

2011-10-24T20:49:38Z

A few weeks ago, we announced we're looking for someone to join the USV team as an analyst. We accepted applications for two weeks, until October 14, using Take The Interview.

We hoped 14 days was enough time for potential applicants. That might've been true, although it turns out most people preferred to wait until the end of the two-week period to apply. We received about 65% of applications in the last two days and over 40% in the final day alone.

We've spent the last week watching the video responses, visiting the links, and getting to know applicants. It's not hyperbole to say we've been blown away.

We're aiming to complete an initial review of every application by the middle of this week, and we'll then reach out by email to schedule meetings. One unfortunate part of this process is that we're getting to know and will meet some fantastic people - but we're only hiring one person.

So we're going to do our best to make interesting opportunities available to all who applied by reaching out separately to applicants. As a start, our jobs page lists nearly 500 opportunities at USV portfolio companies. If you're in the market for a new job, please do check it out.

My Back Pages

2011-10-20T12:42:24Z

For many years, I have been a reader of this blog. I'm excited, and humbled, by the opportunity to now be a contributor and to announce here that I have joined Union Square Ventures.

In early 2007, when I joined up with John Borthwick and began discussing something that would later be called betaworks, we spent hours talking about how the next phase of Internet growth - that was social at its core and operated in real time - would change every way users experienced and distributed media and content. So, we built a business that focused on end-user participation, data openness, two-way content creation, community and connectedness. John had the foresight to understand how meaningful these concepts would become and how to translate them into some awesome products.

Now as part of USV I'm working with an amazing and diverse group of people who are dedicated to transparency in thinking, open dialogue and deliberation as process principles, and a belief in the power of networks created by the Internet. USV's goal is to find and support people and companies with that same set of principles.

The USV "thesis" is remarkably similar to that of betaworks, only reduced to a more appropriate 140 characters. Given that overlap, we co-invested with USV numerous times over the years, from Tumblr to Outside.in to Kickstarter and more.

My friend Nina Khosla once told me that when thinking about the web, she gets most excited not by the services that offer the greatest utility but by those that create meaning for users. She writes: "What web product last made you cry as you used it? What web product makes you laugh on a regular basis? What web product brings you new friends? What web product makes your other friends closer? What web product creates new interests for you? What web product allows you to actualize on your passions?"

I've been lucky to have built and supported a few services that answered her questions. Now it's time to find some more.

Duck Duck Go

2011-10-13T14:06:54Z

When I first got into the venture capital business in the early 90s, it seemed to me that half of the deals I brought to the partnership were dismissed with the line "sure it's cool but what the heck do they do if Microsoft decides to enter this business." Today the role of the dominant player is played by Google (and increasingly Facebook). So as an investor, one has to consider how a potential portfolio company can thrive in the shadow of Google. No where is this more true than in Search.

So, as you can imagine, we had a lot of interesting conversations in the process of evaluating our latest investment in Gabriel Weinberg's alternative search engine, DuckDuckGo. Our confidence in Gabriel and DuckDuckGo is informed by having watched the decline of Microsoft's hegemony in the 90's. Two things happened that fundamentally changed the game: a shift in venue and a shift in business model. The venue moved from the desktop to the web and the business model shifted from packaged software to open source. It turned out that the way to compete with Microsoft was to not to compete, at least not directly. The way to compete with Microsoft was to change the basis of competition. We invested in DuckDuckGo because we became convinced that it was not only possible to change the basis of competition in search, it was time to do it.

I remember clearly when a friend first pointed me to Google, it was a revelation. Using it was a palpably better experience. As part of the process of evaluating DuckDuckGo, several of us switched our default search engines in Chrome (there's simple how-to instructions below the search box on DuckDuckGo's homepage), and had a similar "ah ha" moment. The company is young and under staffed so there are definitely holes Gabriel hopes to fill, but his observation that "traditional algorithmic signals are not the only authority on the web," and his clever use of real authorities to curate search results makes Duck Duck Go an interesting alternative to your everyday brand.

We are thrilled to be working with Gabriel. He is exactly the kind of entrepreneur we like to back. He has built and sold companies before. Over the last few years, he has patiently bootstrapped Duck Duck Go into a viable search engine without taking a penny of outside capital. Please join us in welcoming Duck Duck Go and Gabriel Weinberg to the Union Square Ventures portfolio.

Analyst hiring update

2011-10-07T20:31:03Z

A reminder we're closing applications for the investment analyst position at 6pm Eastern time Thursday, Oct. 13. After applications close, we'll review each one before beginning to reach out and schedule meetings. We will respond to all who apply.

We're asking candidates to submit two short video responses to the questions "Why are you interested in the analyst role at Union Square Ventures?" (up to a 90-second response) and "Which web or mobile services most inspire you?" (up to a 120-second response.) We're also looking for links to online sites, services, or communities that help us get to know candidates. Please record videos and submit links using Take the Interview.

For more details on the position and what sort of candidate we're looking for, please check out the first blog post and comment thread, where we've been answering questions.

We're hiring

2011-09-28T22:05:42Z

Union Square Ventures has a long history - in internet time at least - of hiring off this blog (posts here, here, and here.) A fundamental assumption of the way we've hired is that we're able to get to know great people through their "web presence" - the trail of online communities, projects, and services with which they've engaged.

Just as we invest in the transformative power of the internet, we're also looking to build our organization off the internet - plus, we've met some really impressive folks through this blog. And so, in this vein, I'm excited to announce that USV is hiring an investment analyst.

The analyst position at Union Square Ventures is a two-year role designed for someone who doesn't have an MBA. As an analyst at USV, you'll learn what the venture capital business is about, and you'll get insight into a handful of fascinating startups too. We hope that, after working with us, this person will move on to a startup or another venture firm or pursue an advanced degree.

The primary responsibility of the analyst is to help manage the day-to-day activities of the firm, including:

Meeting with entrepreneurs who have started businesses in which USV may be interested in investing

Performing market research and due diligence for potential investments, which could entail financial or web-analytics modeling, interviewing customers/users or potential customers/users, or testing products and services

Reporting for our investors, which includes helping to set companies' valuations, writing quarterly updates, and packaging the material for our LPs

Working with USV portfolio companies, including helping out with hiring, events-planning, and research and attending board meetings

Designing and executing projects of your own direction that help USV and/or our portfolio companies

We're looking for someone who demonstrates:

Deep understanding of the ecosystem of web and mobile services

Strong written and oral communication skills - well-defended opinions are a necessity

Familiarity with web technologies - you know the difference between the LAMP stack and a stack of lamps

Strong interpersonal skills - you'll often be talking to entrepreneurs and other investors on behalf of USV

Comfort modeling in Excel

Ideally, prior design or programming experience or work in an investment or internet-related position

Our office is in New York's Flatiron neighborhood, and the job starts immediately. We're a small team, and we'll be looking for someone who fits our culture. Culture's a tricky thing to describe well, so we encourage you to check out our web presences.

If you're interested in the position, please reach out:

First, we're looking to see links that will help us get to know you. This could be anything from a Twitter account to a blog or Tumblr to a project you hacked together - whatever represents you best. We expect your web presence to represent who you are, not who you think an employer wishes you were, so please don't waste time sanitizing your web presence before sending us there. We get it.

Second, we'd also like to hear from you, so we're asking each applicant to record two short videos answering these questions: "Why are you interested in the analyst role at Union Square Ventures?" (up to a 90-second response) and "Which web or mobile services most inspire you?" (up to a 120-second response) We're using Take The Interview to collect the video responses securely.

To apply, visit Take The Interview. None of the information you submit will be shared outside of USV. We'll be accepting applicants until 6pm Eastern time on Thursday, October 13.

If you have questions, please leave them in the comments below. Otherwise, we're looking forward to hearing about what you find compelling, what you've made, how you think, and why you're into what we do.

turntable

2011-09-13T14:43:43Z

turntable lets you play music together with your friends and other people online. Each DJ takes a turn playing a song and the entire virtual room hears the song. You can vote on whether the song is awesome or lame and if it receives too many lame votes, it gets skipped.

The company was founded by Billy Chasen and Seth Goldstein and is based in New York City.

Turntable

2011-09-12T16:26:39Z

Sometimes you end up loving something you don't want to. When turntable.fm launched, I wanted to avoid it. There was the Facebook login button that I didn't want to use. There was another music service I didn't want to add to my already-exhaustive collection. And then there was the matter of Seth and Billy, who may have the distinction of getting more "no thanks" from me than any other pair of entrepreneurs in the world. Seth got the first one from me in 1996 I believe, and they got the most recent one from me less than a year ago.

But the service kept coming after me. It was showing up in my twitter stream, my facebook feed, my tumblr dashboard. My friends were on it and loving it. Our office was on it and loving it.

So one day in late June or early July, I finally hit that Facebook login and took a tour of turntable. What I found was people, lots of them, they were playing music, they were listening to music, they were talking to each other, they were dancing, they were having fun. And I was too. I was sold in about five minutes. I called up Seth and Billy and said "let's talk."

One of the worst kept secrets in startupland is that Union Square Ventures has led a round of financing for turntable.fm. We've been joined in this financing by Polaris, First Round and Chris Sacca and will also be joined by a collection of strategic angels who will close later this month. Billy has the news up on the turntable blog.

Billy Chasen is one of the most talented web entrepreneurs I've met. He makes software that looks different, feels different, and is different. His Chartbeat service is the most elegant and beautiful analytics product ever created. I've wanted to work with Billy for years. But we never found the right project to work together on. Now we have. I'm very excited about that.

Seth Goldstein is one of the first web entrepreneurs I ever met, back in NYC in the mid 90s. I've been his friend since, and we were colleagues at Flatiron where Seth built a killer mobile web portfolio a decade before its time. We both learned a lot from that. I've been trying to work with Seth again for a decade and now it has happened. A homecoming of sorts.

But the thing that has made all of this is possible is turntable.fm. I'm in the service now as I'm writing this, in my regular early morning hang, the indie while you work room. You'll find me there most mornings between 5am and 7am eastern. If you like to listen to indie music while you work, and if you are an early riser like me, maybe we can listen to some music together, chat about whatever, and maybe even jump on the stage and spin some tracks.

It is this form of socializing together across physical distance that makes the web special. As Dave Weinberger said,

On the Web, however, strangers are the source of everything worthwhile. Strangers and their utterances are the stuff of the Web. They are what give the Web its matter, its shape, its value.

Turntable is where strangers play music they love to each other, talk, and in time become friends. It happens to me most mornings and it is a special experience and I'd encourage you to experience it yourself.

Wattpad

2011-09-12T13:27:24Z

Wattpad is the best place to discover and share stories.

On Wattpad you'll discover a new form of entertainment where you can interact and share stories across text, video, images and through conversations with other readers and writers.

Wattpad stories are always available everywhere. Discover new stories, connect with readers and writers and create your own on wattpad.com and through Wattpad apps for mobile and tablets.

Wattpad was founded by Allen Lau and Ivan Yuen and is based in Toronto, Ontario.

Wattpad

2011-09-12T10:29:47Z

Stories have been with us probably as long as language has, and the need for stories appears deeply rooted in all of us. We have come a long way from quite literally sitting around a fire to sophisticated technologies such as video games and 3D movies. Yet even now it is not the technology that moves us but the stories.

In fact for a long period of time, technology both helped and hurt story telling. On one hand, new technologies such as the printed book allowed authors to reach a larger audience. On the other hand, these technologies were costly and required intermediaries, such as publishers, record labels, TV and movie studios, and so on.

The Internet as the latest technology, however, has removed that barrier. With it story tellers can both reach the largest possible audience and can do so without intermediaries. While they can do so using blogs and web sites those aren't ideally suited to stories (e.g., blogs tend to run backwards) and don't form a larger community dedicated to stories as each author has to build their own community.

Wattpad is a community for telling and reading stories. Collectively, Wattpad users last quarter spent an amazing 2 billion minutes writing and reading stories on Wattpad. During that time, nearly three quarter million new stories or parts of stories were uploaded and writers received almost five million comments. To learn more about how Wattpad works you may want to watch this explanatory video.

At present I am reading a science fiction story called M.A.I.D.S, which was written by Wattpad user MACThree, who according to his profile is a former pro-wrestler. I will definitely leave a comment for MACThree once I have finished. In the meantime, I have several other science fiction stories already downloaded to my phone.

We are excited to be backing founders Allen Lau and Ivan Yuen and the team in growing the Wattpad community. We are joining the existing and new angel investors and Golden Venture Partners out of Toronto, which is Wattpad's home base. In addition to more writers and readers, Wattpad is also looking for engineers and designers.

Jig - When You Need A Little Help

2011-09-06T10:54:54Z

When we first announced our investment in what was then called Tasty Labs we provided no indication as to what the team was building. That's because they were just getting going on a problem that Joshua had been thinking about for quite some time - how to use the web to get help with a need.

What is a need? Merriam Webster defines it as "a lack of something requisite, desirable, or useful." If that strikes you as diffuse that's a good thing -- because needs generally aren't well defined questions with definitive answers. For those, the web together with search provides a pretty good solution.

Instead in every day life when we approach someone and say "I need ..." it tends to be more complicated than a single query. We may not have the time to look through many results and compare them. Or we lack the background to evaluate the information we find. Or we simply want someone else to make a choice for us (preferably among a bunch of alternatives that could all meet our need).

That's where jig comes in. It is a service for getting help from friends, followers and even strangers in addressing needs. One way to think about jig is as a formalization of the lazy web. The #lazyweb tag has become quite popular on Twitter but as a broad horizontal service Twitter itself lacks many of the specific features that one would like to see around asking for and receiving help.

As for building those features, the jig team is taking a highly iterative approach to building and improving the service. Jig has been live for weeks and anyone who went to the site could sign up and start to participate. Rather than anticipating every possible way people might want to use (or for that matter abuse) the service, the team is studying actual patterns and then working to modify those.

So expect jig to change quite a bit over the coming weeks and months. In the meantime, head on over there and post a need or help a friend or stranger with theirs.