What To Do About A Company Like Equifax?

I froze my credit file across all three bureaus. I’ve been comped various identity theft and monitoring services which seem to pepper me with really uninteresting updates about their “dark web scans” and erratic increases or decreases to my card limits. And I have Google Alerts set up for my social security number and other personal information that may one day make their way to the public web. These minor frictions aren’t all attributable to the 2017 Equifax breach but that’s the incident which sticks in my mind to this day. Because what do you do about a company like Equifax?

Moody’s just downgraded their outlook, which has real implications for their financial wellbeing (borrowing interest rates, etc). Is the market the ultimate regulator? Businesses and consumers decide that a hacked institution is no longer someone they trust, and Equifax experiences more difficulty hiring, partnering, and so on? Or does government have a bigger role to play in ensuring those companies entrusted with our most valuable personal data be held responsible for its care?

Photo by Edu Lauton on Unsplash

I *want* to say ‘yes, regulators do something punitive!’ but to be honest, I don’t know exactly what happens in situations where there perhaps wasn’t a single individual criminally negligent or culpable, but just a bunch of underspending or underperformance by those put in charge. Slap on the wrist fines not only don’t move the needle but actually do harm, because they erode public faith that their public institutions give a shit about the average person: trivial penalties which prove regulators and CEOs act out punishment theater in public and then hang at the same country clubs on the weekends.

But the other side of the spectrum is also problematic. If you shut down the company or deliver such a set of damages that you are effectively eliminating its ability to compete, who are you really impacting? Most likely the 99% of employees who had nothing to do with the issue at hand. They’re the ones with retirement plans in company stock, pensions at risk. If you want to kill the company, what about the collateral damage?

None of this is even close to my area of expertise but I remain unsatisfied with the answers to questions like “In wake of the Equifax breach, how do we prevent this from happening again and repeatedly?” Because it does all the time.

If It’s a Favor To You Then Of Course, Otherwise I’d Rather Not

My obsessive focus on parsing the language of introductions previously resulted in a discussion of “the vouch,” but tbh that’s 101 level stuff. Let’s go deeper….

Introductions 201: The Favor

Another type of email frequently in my inbox is a light request or inquiry from an acquaintance to do something which is basically of unidirectional value for a friend of theirs. Usually around career advice, startup feedback or similar. If it can be fulfilled very quickly my general disposition is to try and help, especially if the FOAF is an URM. But often the ask actually has some effort associated with it – let’s say 15-30m worth (a chat, reviewing a deck and sending comments, trying to find the right person for them within an org I know, etc). I love helping, but that’s time which gets removed from Homebrew or my family, both of which are higher priorities for me. So what to do?

Often, rather than declining outright I’ll ask the requester “is this a favor for you? If so, of course I’m happy to help. But if not, I rather pass at this time.” My hope is two-fold. First, they’ll make sure the requester is going to make good use of my time and reflect well on them. Second, I’m reminding them there’s the potential of reciprocity later. That I might need help back at some point and I would expect they treat that request with an appropriate prioritization.

Now, I don’t mean this in the Godfather way, and I don’t keep a ledger of favors (which totally sounds like the title to an Iron Maiden album!). I just want everyone to remember that time is a valuable resource and we should protect our own and be thoughtful in asking for it from others. A reasonable percentage of responses back do say ‘yeah, it’s a favor for me’ (in which case I jump right on it), while the rest end up not being that important. I really should do more follow-up with those who withdraw the request to make sure they don’t feel judged or sour from the interaction (maybe I’ll just send them this post), but I think I’m directionally correct on this one, if not perfect.

Assholes Are Sometimes OK, But I Can’t Stand Weathervanes or Grin Fuckers

“Ugh, he’s such an asshole,” a friend sighed to me about a mutual acquaintance. I shrugged, and proceeded to explain my complicated relationship with some folks who I know are assholes, or selfish, or blowhards, or any other combination of qualities that can be disqualifying. “Yeah, but he’s consistently an asshole,” I replied, “so you know what you’re getting and he knows he’s an asshole.”

I’ve historically had a bit of tolerance for people who might not display all the character traits that I’d look for in a friend or colleague, but who are self-aware of how they act and predictable in their behavior (can you be a “dependable asshole?). While I might not invite these folks deeply into my life, I probably excommunicate them less frequently than I should. I’ve got an unspoken working agreement with the mild assholes in my life for when our paths do inevitably cross. Note that this is definitely more about transactional relationships with assholes than having them on my teams, etc.

But you know what two types of people I really struggle with? Weathervanes and Grin Fuckers. The former are people who change with the wind – the proclaim themselves champions of whatever idea is trendy at the time, or fall in line behind consensus. The latter are those who smile to your face passive aggressively and then trash you behind your back.

If I were to self-analyze, I think these two are triggering for me because they’re both forms of unpredictability and disingenuousness, which I can’t stand. And I rely on the people in my life to give honest feedback, tell me where they stand and not avoid productive conflict. So I struggle with those who are less able or less willing to default to that type of raw discussion and principles. And when I believe the lack of doing so (productive conflict based on principles) is malevolent, it’s rage-inducing.

Oh and by the way, if you think this post is about you, it’s probably not. But if it is, I’d tell you 🙂

Cameras Are Still So Dumb! And M.G. Wrote The Post For Me.

Blog posts, for me, are like kidney stones. Or at least how I imagine kidney stones to be, since I’ve never had them personally. They usually begin with a question or idea, and then tumble around in my head, until crystallizing in a way which compels me to write, for to *not* do so would almost be painful. Hours, days, months can elapse before this moment occurs. Or sometimes it never does — either the topic loses my interest, or even better, someone else covers the same ground and I can just point to theirs. (I say “even better” in these cases but there’s probably a 10% “damn, I wanted to write that myself,” if I was truly being honest).

“Apple and AI and Cameras” was in my list since last autumn. And I’d been saving pictures to accompany the post – of realtor signs, pieces of art, store windows. All examples of pictures where richer data links could be automatically inserted into the metadata or literally overlaid on the photo itself. The static image of the photo roll turned into something where captured phone numbers can be clicked-to-call, prices and ordering information for identifiable items, operating hours and other business info automatically displayed, artist bios and other works inserted as stackable images behind the museum work I snapped.

If cameras are a platform – and I believe they are – I’m surprised how little innovation has occurred in our camera roles. Not auto-organizing and facial recognition but using an understanding of the image contents to supplement with information and applicable actions. Enough utility would even change what we photograph and why (for example, a whole wall of books at a bookstore and then tell me which five I’d like most).

But the post just never came out of me. So I was excited (at least 90% excited that is) when my friend M.G. penned something similar in his newsletter. The Camera as the App Layer says “What I really want in a mobile OS is the ability to fire up the camera, take a picture, and launch apps and/or services from there based on that picture.” Exactly.

Update: Benedict Evans pointed me to a very similar post he wrote in February of this year which I’d also recommend you read if interested in this topic. And Peter Rojas in Oct 2017.

Travel Gadgets For Phone/Mac Charging: May 2019 Updates

I’m a sucker for travel gadgets and when it comes to these discussions, Peter Pham is my Human Wirecutter. We recently had a FB thread about portable chargers and collecting the recommendations here:

Added June 2019: Anker 60W 2-port USB C Charger.

Ten One Design’s Blockhead Mac Side Charger is indispensable for making your MacBook charging cable work on airplanes or in other tight places.

61W USB C Power Charger is one of Pham’s picks. Weighs just over 5oz and “it’s small and light. Output is 61W usbc PD and if both ports being used still 45W! It’ll charge your Mac, switch, pixel etc.”

The Power Bagel is a multiport, grounded, international friendly charging hub!

Anker PD1 30W USB C is small but mighty

Tech Armor 3 in 1 Charging Cable – what can I say, Peter is into some kinky shit.

Lastly, my friend Nick endorses this 45W GaN Charger, which he says uses the newest approach to charging.

Have Caffeine, Will Travel: Searching For The Perfect Coffee Travel Mug

I like my coffee. And recently set out to improve my portable consumption experience by finding a better travel mug. My two primary motivations are (a) moving away from disposable cups and (b) preserving/improving the drinking experience versus paper. Secondary considerations -> aesthetics, ease to clean and price.

Non-goals: insulation (I don’t need my coffee to stay hot for hours) and durability (in the sense that I’m not looking for something that will survive a 10 ft drop, or needs to go into a backpack while biking). I also have a bias towards glass or ceramic, believing plastic or metal muddles the taste.

Here’s the three I’m currently enjoying. If you’ve ones you love, tweet them to me please!

Ello Jane 18oz Ceramic

The largest of my three and also the heaviest. Base barely fits into car cupholder – which is a negative – but it’s very comfortable in the hand and top feels secure + easy to remove/insert. Dishwasher safe.

JOCO 12oz Glass

Love the design (they also come with just a solid band). Glass doesn’t get too hot. So far I’ve got mixed feelings about the top – it’s easy to put on/off, but doesn’t necessarily feel secure (although I haven’t had any spills). There’s also a slight silicone aroma first few uses, but perhaps will go away. Dishwasher safe.

KeepCup 12oz

Probably my favorite so far in terms of drinking experience (also comes in 18oz size). The one bummer is that it’s a hand-wash only due to the cork.

High Tolerance for Stress, Low Tolerance for Frustration: Your Questions, Kinda Answered

Expanding a brief quip into a blog post might go against every law of internet nature, which suggests most content is improved by brevity. But something I suggested over the weekend raised enough follow-up that I committed to sharing more. And since my tweets are on a rolling 30-day delete, the below will last longer than the 280 character version.

A handful of replies asked questions or provided feedback. Here are my responses, starting with the skepticism, and ending up with the personal stuff.

@hunterwalk, Stop Pushing HustlePr0n About Stress: My tweet wasn’t anything about how hard you should work, or the cost of effort.

@hunterwalk, You Are Wrong In Some Way: I don’t know what to tell you. It works for me. Your mileage may vary.

@hunterwalk, What Can I Read To Better Understand Stress & Its Effects? I recommend these two books. The Upside of Stress by Kelly McGonigal, and Why Zebras Don’t Get Ulcers by Robert Sapolsky.

@hunterwalk, What Causes You Stress vs What Causes You Frustration? Ok, for me Stress has to do with a deep desire for something to be successful, degree of difficulty in executing, an urgency around the window of opportunity to do so and even skepticism from those around you. Most of the work I’ve opted into historically involves stress.

Frustration – again, for me – has to do with an inability to create change in my situation due to others’ process or incentive roadblocks, having to represent an idea that I disagree with as the product of my team, organizational politics, relying upon colleagues or partners who don’t always share my values.

Ultimately I’m a Work-In-Progress so I want to get better as a person. Maybe some of the things which frustrate me I’ll eventually learn to handle more productively. That would be great! But I also rather minimize or route around them, especially when i believe the downside is higher than the upside.

@hunterwalk, What Happened in 2011 That Helped You Separate These Two? My midlife crisis. After 4+ years, I was removed from running the Product Team at YouTube for a variety of reasons – some of which I probably could have prevented, and others that I couldn’t have (or didn’t want to). It turned out fine but threw me for a bit of a loop, one which took the summer, and much of fall, for me to truly recover from. Here’s a blog post about learning to separate my identity and self-worth from my job, which was part of the tumble.

It wasn’t really until early 2012 when I became a dad that stuff started to fall into place for me from a “go forward” plan. A large portion of that clarity came from (a) deciding I needed to live an authentic life in order to be the type of father I aspired to become and (b) I realized that perhaps I could design more of my time around what gives me energy vs saps it.

@hunterwalk, You Basically Seem to Suggest that Frustration Comes From Lack of Control, But You’re Now in Venture? Yeah, investing in other people’s companies for minority stakes does seem to cede control doesn’t it? But here’s how I live it:

  • Satya and I co-designed Homebrew very explicitly to optimize for the things we love doing – spending time with founders (especially post-investment) and each other. We’ve stayed small and focused which means no need to invest in a team that we don’t think we’re the right partner for. And we make decisions by consensus.
  • Once we invest (again, a decision we make by consensus), I’ve signed up to help the company become the best version of what it can be. It’s the founders/team’s startup. I don’t sit on the org chart. I care passionately about their outcome – even independent of the economics involved, but obviously because of that too. And we work closely with the founders to support them, even when or after we disagree.

Ok, I think that was most of the questions from Twitter. Thanks for caring and prompting me to think a bit deeper about my answers.

Oh Shit, Your VC Just Quit Her Fund! What a Good CEO Should Do Next.

Everything is setting up perfectly – you’ve got a great relationship with your lead VC – he’s even saying “we” and painting pictures of being on the podium with you for the NASDAQ opening eight years from now. Then he tells you he likes being an investor but *really* misses being an operator, and is joining another one of his other portfolio companies as COO. You grit out a smile and weak ‘congrats’ while thinking ‘“fuuuuuuck.”

Across town a different CEO is having a breakfast with her Series A Board partner. It’s off-schedule – the two usually meet every other week – but she’s an awesome VC, much better than the older dudes at her mediocre shop, so any time you have is appreciated. You almost spit out your coffee when she lets you know that she’s leaving for a Tier 1 firm but that her partners John, John Jr or Robert will be great stewards of your startup until she has the pull at her new gig to lead your next round.

Hunter’s draft script for SVU: Silicon Valley

There’s lots of movement in the venture world these days. Former operators return to operating; GPs trading up (or being managed out); wealth-effect retirements; whole firms dramatically changing strategy. All the disruption can be pretty jarring to an entrepreneur, especially in situations where the exiting partner represents the top line on your cap table. Observing this both inside and outside of our portfolio I’m sure of two things: a) there’s not a whole lot of public discussion on the topic and b) most founders (and their other investors) should be more aggressive addressing the implications of these changes. I’m going to try and make my contributions to both of these here.

Photo by Leio McLaren (@leiomclaren) on Unsplash

First though a few high-level points:

  • Needless to say, every situation is different. Below I’m really talking about startups between Seed – Series B. After that, there’s often enough people around the table to manage the loss/transition of a GP/Board Member (even if it sucks).
  • Founders (and the other investors) should focus on derisking the downside in these scenarios, not pushing for their own self-interests. It’s the COMPANY that’s being put at risk.
  • It really helps if you are able to remain in contact with the former Partner or have another trusted backchannel at their fund, even if that backchannel is a more junior professional.
  • You’ll often need the support – both structurally and symbolically – of some other investors on the cap table to make the case for some of the ideas below to work. Such as Homebrew 🙂

Okay, time for some game theory. A lot of what happens next is tied to the firm’s perspective on whether you’re going to be a meaningful investment or not (and how much their reputation is tied into your company). Basically they’re either Bullish, Written It Down/Off or Too Early To Tell.

BULLISH aka YOU ARE ABSOLUTELY KILLING IT: You’ll get the sense because the rest of the firm immediately is overly attentive to your needs, wanting to make sure there’s a ton of goodwill. In these cases you can usually negotiate who you want as a Board member from their partnership and if for some reason there isn’t a GP you feel comfortable with, even discuss a Board Partner scenario, where a mutually agreed industry exec/CEO from their network takes their seat on their behalf (but this is higher degree of difficulty). If the reason for your partner leaving was some sort of change in firm strategy or scandal and you just don’t want to be associated with the entity, you can sometimes get the firm to sell into the next financing to the point where they’re not the largest shareholder any longer, etc (but again, degree of difficulty here is expert-level).

WRITTEN YOU OFF: In these cases you’re gonna have almost no hope of getting a new, engaged GP on to your Board. Most likely either a junior representative or a GP that’s assigned to “clean up/wind down,” whether they’ve communicated that to you proactively or not. In these cases you are still basically looking at the options listed below under “Too Early To Tell” but with a very high degree of difficulty. Given that reality, the CEO probably needs to be very direct – challenge the firm to let you know under what circumstance they’d consider additional funding, and if the answer is “never,” try to negotiate them off the Board.

TOO EARLY TO TELL- SOME GOOD STUFF, SOME CHALLENGES BUT A LOT TO DO: Here’s where I think founders and cap tables can should be more proactive. The default is to let the firm assign another person at the fund (hopefully a GP) and then just keep working on the plan of record as if nothing changed. My experience suggests this will be neutral to negative long term, unless you end up in the “killing it” camp by next fundraise. Instead here are some potential shorter-term actions to take:

  1. Re-Pitch The Whole Partnership – Some firms are really good at keeping one another up to date on portfolio progress, others are lone wolf models. Either way it’s been a while since you presented to the whole partnership and you probably never really got the story from your original pitch. Yeah, they did the deal, but it probably wasn’t consensus and those Nays are still sitting there, just without your previous GP pounding the table. It’s time to go back in and win the room over. Note – this is also a reason to make sure you’ve got some redundant relationships – ie proactively bond with some other partners at each of your VCs.
  2. Propose a Top-Off of the Last Round – Again, every VC is different – and god bless those who behave as a true partnership (you know who you are!) – but this business is ultimately about who believes enough to put capital behind a company. Your new GP/Board member didn’t personally sign the check last time – get him or her to do so, sooner rather than later. Even at the cost of a little more dilution. I’m a believer in the psychology of sunk costs. Ask them to take X% of their pro rata reserves for you and do it now as a note or extension of the last round. And the rest of the cap table can come along or not with their pro rata. (A variation on this is getting the new GP to expend a bunch of social capital and increasingly tie their reputation to your company. You can do this through a variety of means.)
  3. Assume You’re Going to Need To Raise the Next Round on Your Own – Goal is to get a new investor on to the cap table who is just beginning their journey with you. Again, I think it’s worth taking a little more dilution than you planned if needed to get this round done as soon as you’re ready. And if the exiting GP can still serve as a reference for you, that helps a ton too.
  4. Ask to Keep Exiting GP on Your Board – If the exiting VC is retiring or returning to operating (vs moving to a different fund), you might be able to retain them until the next fundraise. They are still representing the firm but everyone agrees that due to relationship continuity and capacity for other GPs to absorb Board seats, that things should just remain ‘As Is’ for now. Years ago when my Homebrew partner Satya left Battery Ventures to run Product at Twitter, he kept all his Board seats and incrementally transferred them to his partners over time.
  5. Put Your Investors on the Spot – Make sure you have clarity from your investors whether you are on track to their continued support. If you don’t have Board-level milestones/targets agreed upon, the Board isn’t doing its job anyway. Make sure that your execution will result in support and ask these questions upfront.

As suggested earlier in the post, this is totally a Your Mileage May Vary. My POV is simply that when a company underestimates the impact of a change in their VC relationship, it has potential to be damaging down the road in ways that the founder can no long control, so they should address any elephants in the room ASAP.

If you have different opinions – or even better, experience! – let me know and I’ll append any supplemental thinkings.

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Updated Feedback From People I Respect:

Sean Byrnes, CEO/cofounder Outlier
Bilal Zuberi, Partner, Lux Capital
Enterprise Software CEO who messaged me privately

Why I’ll Sometimes Fund a Startup And Tell Them to Stop Making Money

“Don’t worry about making money right now” is not the advice you’d expect a seed VC to give a CEO right after writing them a big check. Do I not desire the UpAndToTheRightCurve needed to raise a Series A and get me that sweet sweet write-up? Doesn’t Homebrew want steak more than sizzle in the companies we back? Hunter, what’s gotten into you???

I’m longterm greedy, which means ultimately my venture success is going to depend on quality of company exiting, not pump and dumps, or millions in fees. Phosphorous burns white hot but not very long. Unsustainable revenue curves willed into existence in order to prove growth ahead of raising more capital is the organizational version of phosphorous. I want furnaces – a sustainable heat source which goes as long as you feed it. Well, technically I want furnaces that eventually stop burning wood and start spitting out wood, but whatever, it’s a metaphor.

There’s an increased belief (maybe reality for some), that seed VCs want to see revenue before investing in verticals like SaaS, marketplaces, commerce. There are several contributing factors to this spreading notion:

  1. 2019 Startups Can Do More With Less – Because spinning up a startup atop 3rd party infrastructure (eg AWS, Shopify, etc) is lower cost than previous eras, companies can often get to market quicker and start charging for a product, even in pilot/beta form.
  2. Availability of Angel/Early Capital – There are more individuals/funds interested in being your first $250-$500k.
  3. Attempts to Stand Out Among Large Number of Startups – There are so many SaaS, Commerce, Marketplaces these days that founder believe (again, sometimes rightly) that a headline about early MRR/customer traction will get them in the door at a VC versus just a pre-market

The sum total of these is actually pretty positive for the ecosystem – a bunch of aggressive startups who get customer feedback and that $1 in revenue earlier in their lifecycle than the previous generation. But as a seed investor, what really matters to me is how they’re going to get the next 10x, 100x growth, and often it’s not through sheer force of will, but by understanding a segment of customers, and building a cost-effective, repeatable acquisition channel or two.

So when evaluating these companies for investment I’m less interested purely in milestones and more about tactics and learnings. Does your customer base now represent what the next 100 or next 1000 leads will look like? Are your current customers using the product the way you intend and engaged – the stacking revenue heading towards a retention cliff once their 6-12 month contracts are up is a trap for investors. Did you pay 10x LTV in CAC?

These aren’t reasons that I’d pass on an investment but they’re reasons I might suggest, post-seed raise, hey, you’ve got 24 mths of capital in the bank now, let’s take a quarter or two and get the foundation correct, because once we get back on the growth curve, we need to hit those numbers for the A. I’m never afraid of showing a future investor a chart which has four quarters of growth followed by three months of flat/down, followed by another four quarters of even faster growth. I’m deathly afraid of starting each month less certain you’re going to hit the revenue target when you’re three to six months from a Series A fundraise. [I’ll caveat this by saying there are a special class of startups which just happen to find product/market fit very early and it’s explosive from there. In those cases, yeah, you’re just going to be stressed by hiring and keeping the service live, but you still need to start investing in a bit of stability/scale alongside. That’s < 1% of startups, and so statistically it’s not you. BUT IF IT IS LET ME KNOW 😉 ]

In closing: we don’t require revenue before we invest; if you do have revenue, we’re going to ask about what it has taught you; and if there’s foundational work to be done that would make the revenue growth even faster, we should discuss what it means to prioritize that work before getting back on the growth curve.

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What Does “Self-Made” Mean (Or Matter) Anyway?

Kylie Jenner was pronounced by Forbes as the “youngest self-made billionaire ever” and the internet started debating what exactly self-made means.

Hold aside that the Forbes lists are notoriously, well, estimates – I mean, this is the one that Trump was obsessed about ranking on, and would make up all sorts of numbers to successfully to do so. And hold aside that no matter what you think of Kylie’s success and what it says about America, she’s role modeling some notion of business-savvy and Get It feminism, albeit wrapped into a confusing package. What Forbes responded to quickly was backlash regarding the concept of self-made. And they did it in a surprisingly specific way – a scoring system!

First the definition….
Then the scores!!!!

The American mythology of meritocracy and mobility are being eyed with increasing amounts of skepticism by younger generations, and likely always by those less Caucasian and less male. Economic class mobility has statistically slowed as the inequality gap widens but many of us hew to the pick-yourself-up-by-the-bootstraps American Ideal, and if you reach far enough back into the family tree, tell an apocryphal story of a relative who landed on these shores with nothing and made it.

I saw this same reaction in the Twitter replies to an article shared over the weekend. The NYTimes ran a story about how large numbers – a majority in fact – of adults 21 – 37 had received some sort of financial support from their parents. As a friend commented to me, it’s was a weird age range (21 is very different than 37) and the tone of the article seemed to want to shit on someone but couldn’t exactly figure out who.

I circulated the article not because it was millennial shame-bait, or the perfect seed for calling out phony self-starters, but instead to promote why an increased public safety net makes sense — give the people who weren’t born on first, second or third base at least a fair at bat.

Turn the clock back a few days before the Times article and you’ll get to Ivanka Trump chiding AOC’s “socialism” by saying Americans don’t want handouts. Elizabeth Spiers, who once worked for Ivanka’s husband, responded in the Washington Post by articulating why this “self-made” myth prevents economic policies which would extend the type of headstart the economic privileged have to broader groups. They need to continue deluding themselves because so much of their self-worth is tied up in believing they did it themselves.

And it’s not limited to the denizens of the White House. I see this too in my own community.

It’s wonderful that some people are able to be helped by their families directly or have stability to fall back on. It doesn’t belittle the hard work that they did to continue or extend their success (the inability for some folks to concede that luck played a role too is a different rathole). My hope is that it starts a conversation about how to support others even fractionally to the degree they were kickstarted. We’ve had enough ladder-pulling and self-made self-delusions to last me until the next Presidential election (but hopefully not long after 😉 )

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