Brian Morrissey is EIC of Digiday and we met online. That’s less of a confession and more an admission that I was surprised to be invited on to his podcast, given that they usually focus on the people actually doing the work in media, advertising and commerce. Maybe he was just being nice because I interviewed him on my blog earlier this year.
The world doesn’t need your content, but if you enjoy creating, you should do it, without hesitation. That would be my advice to you as a human. But whenever a fellow investor tells me they need to tweet more, write more, start a podcast, etc, for purposes of content marketing, I tell them “sure, if you enjoy it. And pick a medium that you actually enjoy using, otherwise it’ll never work longterm.”
So it made me smile when I found a VC using Instagram in a way that I find brilliant. thingtesting is a classic product review account but with a lot of Instagram-native style (and new CPG brand, D2C emphasis). Its author is a woman named Jenny Gyllander, an investor based out of the UK. I don’t know Jenny but she’s found a lane that’s fun, visual, whimsical and unowned among the yet-another-Medium-post landscape.
I get a lot of inbound from friends, acquaintances and Twitter followers about making the transition from Operator to VC. Here are the top three reasons – lightly paraphrased – for why venture interests them:
- “I love working on products and it seems awesome to be able to work on 10 at one time instead of just one”
- “It seems intellectually stimulating, spending your days talking with the smartest people and investigating new technologies”
- “I enjoy helping entrepreneurs and could see myself doing that as a career”
I have never heard someone say “I want to be an investment manager and a salesperson” despite this being THE fundamental job responsibility of a venture capitalist. And I think that’s one reason why we’re seeing more boomerangs from Operating to Venture and then back to Operating (or changing VC firms). People didn’t actually realize what the job was going to be and didn’t like it or underperformed or realized they chose the wrong firm (in terms of culture, strategy, quality) from which to base their career.
Now, the way I personally approach this “investment manager and salesperson” responsibility is similar to the “I breathe to live, but I don’t live to breathe” mantra. Satya and I started Homebrew not because we wanted to optimize for investment management roles in our careers but because we believed practicing early stage venture in a deliberate manner would be the most satisfying and impactful way to spend the second half of our careers. These objectives do include variations on the intellectual stimulation, assisting entrepreneurs to succeed and so on that I hear espoused by aspiring fund managers. BUT we also had full understanding of, and embraced, the responsibilities that came with the role.
Thus far we’ve only proved to be good fund raisers and need to prove that we’re also good fund returners — what I’m trying to emphasize here is that you cannot shy away from the core value proposition of our business: you are taking money from others and returning it at a risk-adjusted multiple. This doesn’t mean LPs are your customers (I strong believe LPs are your partners and founders are your customers), but I want to emphasize that realities of venture capital don’t match the content marketing we do as an industry. Let me also emphasize that I believe the question of “founder friendly or not” is orthogonal from embracing the responsibilities of an investment manager. Venture is a long-term, repeatable game and, at least the way we practice it, I believe our interests, and values, are greatly aligned with early stage founders.
So if we’re friends and you still want to talk with me about “getting into venture,” I’m thrilled to have that discussion, but be prepared to tell me why you’re going to be an excellent investment manager and salesperson 🙂
It was a combination of early career anxiety and actual startup struggles which combined to make my years working on Second Life personally stressful. I remember my parents visiting our office and casting a sideways glance at the bottles of Mylanta and hard alcohol sitting side by side on my desk, like the cartoon angel and devil characters sitting on the shoulders of an 80s movie character wrestling with his conscience. With some hindsight perspective though, the tremendous benefits of the experience became clear – I had the opportunity to work on a thoughtful, innovative product with an amazing technical team and together we produced what is ultimately an ongoing, profitable company (even if it failed to achieve its full potential).
Besides the meta-learnings about how startups function, there were a [NeesonVoice] very particular set of skills [/NeesonVoice] that I took away from my years at Linden Lab. The other day a young entrepreneur – she was in diapers when we started Second Life – asked me about avatars and specifically the design decisions we made about how people could represent themselves in our virtual world. It was so much fun reminiscing about what we observed that I wanted to document some stuff here. Caveats: this was 2001-2003 for me so some memories might be hazy or inaccurate, and although I’m writing this post, I’m not taking “credit” for the underlying work done. Early SL had an amazing founder, and superior multidisciplinary team – everything here is at best “we” and mostly “they,” in terms of building this stuff. Ok, here we go….
A Very Brief Overview of the Original SL Avatar System
Your basic form had to be humanoid but within that you could tune a ton of parameters using slider bars. Textures could be applied to your body as clothing, skins, and so on. You also had multiple “attach points” perhaps best understood as the geometric points on your head, shoulders, chest, groin, and so on, to which you could stick other objects. So if, for example, you wanted to wear a Mickey Mouse costume, you would design your avatar however you wanted, but the costume itself would be an outfit that you applied to these attach points.
People Don’t Like Getting Dressed In Public
Since there wasn’t a way to be truly “offline” in Second Life (it was a fully immersive streamed world), we needed a way to convey to people what occurred while they were modifying their avatar. Users were *very* nervous about the idea of changing in public and what any onlookers might see – their virtual selves in a stage of disrobing? what if they made a mistake or were shown changing from one self to another, experimenting with gender, sexuality, etc? Since it wasn’t just about your clothing – your entire form was malleable – the act of “dressing” was, in some ways, even more vulnerable than it might be on the streets of San Francisco, despite the “virtual” nature of the world. But how to convey privacy to new users?
We tried a variety of mechanisms, some more successful than others. The team eventually settled on a very literal representation: the changing room/privacy screen. A user altering their avatar was surrounded by a box so no one could see what they were doing, but this also made it hard to ask your friends “what do you think of this outfit,” so we ended up with a hybrid privacy mode and “dressing pose” (your avatar standing still with its arms and legs open).
And everyone took off all their clothes at some point to see what happened. Spoiler: no genitals. But creative users found ways to use the attach points to, uh, fix that. Sigh.
The “Who Am I” Decision Tree
In a world where you can “be” anyone, what do you want to look like? Some people had a fixed appearance and rarely deviated, while others tried on new personas daily. New users, especially those unfamiliar with avatar construction from RPGs, usually went down this decision tree:
- Photo Realistic Like My Real Self or Not?
- If Photo Realistic, How Close Can I Get
- If Not Photo Realistic, Then Aspirational, Exploratory or Extreme?
Aspirational: Tall with big boobs and/or muscles
Exploratory: Mainstream human but not like yourself – exploring different genders, ages and body types (fat, thin)
Extreme: What happens if I just drag the sliders to random extremes and run around the world like that?
Teens Like Exploring Identities
You know who really liked exploring identities in anonymity? Teens! We eventually had to create a Teen Grid, a version of Second Life only open to 13-17 year old with their parents’ permission. I was struck about their malleability of identity, which at first surprised me but made perfect sense as read about their IRL developmental stage. Caught between “kid” and “adult,” wanting to be in both worlds at once. Expanding beyond your immediate social circle and geography. Finding connections and differences. Understanding your sexuality for the first time. Now imagine being able to put this all on and off like outfits…..
Can’t Be Too Big or Too Small
We put a limit on avatar height because of the prisoner’s dilemma that immediately everyone would want to be a huge dragon. Our height minimum was originally about just making sure you were generally visible in the world – no Ant-Man in Second Life. And then we increased the height minimum to more of a small adult size. Why? To try and prevent kiddie porn role play. Ugh, right? I’m serious though. If you let people make child avatars there’s gonna be some disgusting shit. It was against our Terms of Service obviously (even though there are/were some legal grey area around pornography that doesn’t depict actual people), but we decided it should not even be possible to do. So we had to raise the minimum height. [Note – this is the way I remember it *but* I found so other links which suggest child avatars were allows, but just heavily ToS’ed in terms of what they were allowed to do – link. Either way, age play had its issues and avatar height was part of it. Update: Cory, Linden’s founding CTO, reminded me that it was laws in Germany which helped guide some of our decisions here]
Don’t Stand So Close to Me
Nick Yee did a ton of work on avatar interactions in virtual environments, discovering that we tend to carry over the same social space etiquette – standing our avatars the same distance from each other that we would stand from a person IRL. Moving closer to “hear” someone, even if there was no spatial audio and their talking is actually text chat. And so on. We were amazed that so many folks built virtual toilets in their virtual houses.
Want Free Shit? Present as Female
This should probably also read “want harassment?” given some of the history with misogyny in certain gaming communities, but I’ll focus on a different aspect of gender roles. I’ll go back to Nick Yee here and reference his answer – female avatars are more likely to get assistance and free stuff from other in-game players. We saw this in Second Life as well. Despite there being no way to know the person behind the avatar, different gendered avatars get treated differently. Wild, right?
When Looks Are Just 1s and 0s, You Can Study Lots of Cool Stuff
During my years at Second Life we just didn’t have enough people in the system to do really interesting research on avatars, although later there was quite a bit of study. Since avatar construction is really just a set of coordinates, it’s possible to calculate a ton of things quite trivially: what does the “average” avatar look like over time? What do avatars from different user geos look like – ie do Brazilians create different avatars than Americans than Japanese? In some ways this would be like image recognition analysis of our profile photos on Facebook over time – how do we choose to represent ourselves and are there general trends in the population which can be extracted?
Like I said, this is just what I remember from my Second Life years. I’m sure there are lots of blog posts floating out there which go into greater depth about how the avatar system changed over time and resulting learnings. If you see anything, just tweet at me, and I’ll try to add the links here.
Oh, and I represented myself as a middle-aged female avatar for much of my Second Life experience to see how people would react to that persona.
I was recently granted access to a Slack community associated with a newsletter I’ve been reading for a while. The kinetic energy of new members started on the #Welcome channel and then flowed to other discussions on themed channels. Whether intentional or not, the batched admissions – we were added as a cohort – created its own dynamics. It felt like an fun event. Reminded me of bit of when a startup we’ve recently invested in announces itself to the rest of Homebrew’s founder group.
Communities can grow too quickly and lose some of the camaraderie which comes with being part of a group. There are a number of dynamics which factor into the carrying capacity of an existing community to absorb newbies. Product designers and communities themselves will build in techniques to manage this scaling – for example, a hardcoded onboarding tutorial when you start an app or even the pinned note at the top of subreddit which spells out the rules of engagement and FAQ.
Sometimes incentives will be explicitly and implicitly baked into a community to encourage successful absorption of new members. MMORPGs which early on insert a task involving the teaming of a new player and midlevel one is a frequently used element. Forums will sometimes have a moderator or guide-type which includes a badge or other notification, signaling that it’s ok for a beginner to ask them questions. When we were creating Second Life I became familiar with Bartle’s Taxonomy of Player Types, which I later brought into YouTube as another way to understand motivations of individuals.
When a community grows too quickly, or when new members sharing a specific common characteristic swamp the existing user base, the existing norms can get disrupted. Sometimes this can be a positive strategy – like introducing a new advantageous gene. Often it can cause confusion, tribalism and outright hostility – the Brazilian “invasion” of Orkut.
Figuring out the carrying capacity of your current community, how to onboard new users and manage growth is a set of fascinating design decisions. More recently I’ve had a chance to observe how successful community/audience products like Winnie and theSkimm have thought through these questions. Have you encountered products that do an especially interesting job of managing community growth or any anecdotes from your own work experiences? Would be interested to hear them – just tweet at me.
Do you get excited reading about email newsletter platforms? I do. And there were two notes in this week’s article about Substack which made me clap my hands. First, they’ve hired Nathan Bashaw, previously of Gimlet and Hardbound, who is someone I believe thinks about storytelling, content and software in compelling ways. Way to go Nathan!
Second, that they’re not ignoring the Discovery elements of Substack’s platform:
Imagine a spectrum where on one side it said “Utility Platform” and on the other end it said “Community Network.” So many publishing platforms get “stuck” on the Utility side. They keep building the longtail of software features to assist creators in serving their audience but leave it to the creator themselves to find and grow that audience.
The real value to creators – and I’d argue this is what YouTube got so right early on with Related Videos and Homepage features – is to also drive them audience. If you’re able to do this, you get lock-in, you get to share in the upside you create for them. For whatever reason, this seems especially difficult in the text space – Medium and WordPress come to mind as valuable publishing platforms which haven’t solved Discovery.
Why? Well, “Discovery” is difficult, both in design and implementation. Just lazily tossing “Related Newsletters” in the bottom of a template isn’t the most creative or effective implementation. And generally driving Discovery involves some degree of eminent domain by the company – it’s seizing pixels on the creator’s space in order to promote other content. Essentially creating a house ad unit. There’s tension in this – you kinda need to implement it very early, and make it default. Shipping it later in a product’s life, and/or making it “opt-in” (ie you get promo’ed in other people’s newsletters if you open up the same promotional space in your own), limits its scale.
So I’m glad to hear that Substack is thinking about this early and I hope they push on it a bit. My guess is it’ll be the difference between create a very nice Utility Platform vs an explosive Community Network.
I live for that moment of flicker in an entrepreneur’s eye during a pitch discussion. The one which suggests I’ve asked a question which is simultaneously both new to their fundraising experiences AND interesting to them personally. “What do you want from me besides capital?” is flicker-producing more often than it should be. Maybe it’s because raising money itself can be such a trudge or many investors over-promise and underdeliver, that you’d be happy to *just* get capital and be done with it. But Homebrew is founded upon the belief that we’ll put sweat and reputation behind your startup, not just a wire transfer, so to me it seems like a normal question to help understand if you need things that we can, or can’t, provide.
The answers I receive typically fall across four categories:
1. “Vertical Expertise” – More hands and minds around the industry maze they’re traversing. Information, relationships, pattern matching for marketplaces, SaaS, financial services, agriculture, media, etc etc – our backgrounds and/or portfolio suggest that we might have ability to help the founders move faster and with greater accuracy in testing their market hypotheses.
2. “Horizontal Expertise” – We see lots of startups, we’ve built and run large teams. Founders articulate a certain support they’d like in figuring out operational decisions and growth challenges. Hiring, org structure, product development philosophies and so on. Most of time (~80%) this is about best practices or building a toolbox so you can apply the right tool to the right task. 20% of the time it’s about discarding the best practice to do something unique or irregular because it’s what best fits your strategy, capabilities and culture.
3. “Personal Support” – In what I hope is a mutually self-selecting outcome, we hear from founders who emphasize wanting investors they trust and feel like they can have real conversations with. Who support them as people and their growth. Who will hold the accountable to building something they’re proud of but remember we sit on the cap table, not the org chart.
4. “Venture Industry Advocacy” – Ears to the market, help with the next fundraise, assist with optimizing the rest of the cap table – before and after closing, generally the “be a translator and facilitator between us and the capital markets.” Not an outsourcing of the responsibility, but sort of a “you’re one of them, but on our side.”
In reality, across a multiyear relationship with a portfolio company we end up doing all four of these, but it’s important to start off understanding expectations. FWIW, I’m not looking for wrong answers per se, but there are probably two major red flags for me. The first would be a “nothing” shoulder shrug. We’re not the right investors if all you want is capital and the occasional “great job!” via email. The second would be asks that, off the bat, suggest a CEO is trying to get an investor to solve problems that the founders really need to own, or looking for validation in way that translates as “I’m not sure this company is a good idea so I’m raising money as a process to see if some VCs will tell me it’s a good idea.” Otherwise I truly am just interested in your answer as mutual pre-qualification, not grading it.
By the way, if you’re fundraising and your potential investor doesn’t proactively ask this question – or a variation of it – it’s perfectly reasonable – even advised – to say something like, “can I share some of what I hope to turn to our investors for post-fundraise?” or “for us, a fundraise is more than just a wire transfer, it’s a relationship and here are some of the things I’d like to make sure we’re both excited about doing together.” You’ll all be better for this discussion!
Subconscious anxieties hover over my FAANG relationships
FB: eventually every product becomes 50% ads
AAPL: they’ll release a $10k iPhone I can’t resist
AMZN: beats everyone & raises prices
NFLX: they’ll realize my HunterPatel login isn’t Satya Patel’s kid
GOOG: they’ll randomly kill my fav product
Auction ends May 31st.
We are tossing in BONUS ITEMS to raise even more money!
The winner gets:
- Lunch/coffee with me and Satya Patel
- 30 minute call with Beth Scheer, Homebrew’s Head of Talent. She spent her career at Google, Salesforce and now venture capital. Talk recruiting strategies, compensation best practices, how to hire passive candidates, how to deal with a Google/Salesforce counter-offer to a candidate you want to land, etc
AND IF BIDDING REACHES $2500 WE’RE GONNA GIVE YOU ANOTHER PRIZE ->
3. 30 minute call with ONE of the following founder/CEOs to get advice on whatever you want – company building, bootstrapping, raising venture capital, building a brand. These founders have raised hundreds of millions of dollars from top VCs, celebs and strategic investors – maybe their advice helps YOU land the big deal 🙂
WOW, THIS IS LIKE YOUR OWN PERSONAL STARTUP ADVISOR BOOTCAMP ALL IN ONE!
4. Our friend DJ PATIL will also do a 30 MINUTE CALL with you if winning bid is greater than $2500. WHO IS DJ? Only the former US Chief Data Scientist who was also early exec at LinkedIn, Data Scientist in Residence at Greylock, etc etc etc – the OG DATA SCIENTIST YO.
ONCE BIDDING HITS $3,000 YOU WILL UNLOCK BONUS #5 and #6
5. 30 MINUTE CALL WITH JASON HARINSTEIN – CFO of Flatiron Health, and previously Corp Dev Google + SVP Strategy & Corp Dev Groupon
Holy cow. Jason was instrumental in Flatiron being acquired for a reported $2 Billion! He acquired dozens of companies at Groupon and Google. If you are thinking about how to sell your startup, Jason is one of the top advisors you can ask for. And he’ll give you 30 minutes to talk about M&A, transitioning from Wall St to Tech, how to navigate a BigCo interest in your startup…
6. LIVE INTERVIEW ON CHEDDAR ABOUT TOPIC OF YOUR CHOICE!!!
That’s right, Cheddar CEO Jon Steinberg has promised to bring you on to the lead OTT channel, distributed to millions of viewers via Twitter, Hulu, YouTube TV, Roku, Twitch and more! Fire your PR agency and buy this auction package instead!
ONCE BIDDING HITS $5,000 YOU WILL UNLOCK BONUS #7
7. 30 MINUTE CALL/VISIT WITH LASZLO BOCK – Google’s former SVP People Ops. Priceless!
Twitter Friend. Digiday’s Brian Morrissey is a Twitter Friend. That is, we’ve never met IRL but through his tweets, his podcast and our occasional DMs, he feels, well, familiar. So I decided to ask him Five Questions and get to know Brian a bit better.
Hunter Walk: What’s Digiday and how’d you end up there?
Brian Morrissey: Digiday is a media brand focused on the changing nature of the media and marketing businesses as they collide with digital technology. I joined Digiday seven years ago after many years reporting on the industry. At the time, Digiday was mostly an events-focused company. The idea was to build a publishing-focused brand with events as a revenue base while we figured out our own differentiation in a crowded market — and then added business lines around advertising, custom content and now subscriptions.
We’ve since expanded under Digiday Media to have other brands. Glossy focuses on the changing nature of the fashion and beauty industries as they collide with digital technology, new business models, and the need for sustainability and inclusivity. Tearsheet is our publication focused on the changing nature of payments and financial services. All three brands are built around offering a differentiated point of view, establishing direct connections with the audience, and making money in a variety of ways. One of the best things about Digiday is we not only cover the search for sustainable media but we live it ourselves as an independent media company without VC money. We’re about 80 people now, in NYC and London mostly, and profitable.
HW: Your Digiday podcast is one of my favorite in the media industry. I especially appreciate that you’re direct without being confrontational just for the sake of it. Can you tell within the first few minutes of recording whether it’s going to be a good discussion or not? Is there a guest or two that you especially enjoy jousting with?
BM: I always found as a reporter that the best interviews I did were outside the office over coffee. Being a reporter is about putting people at ease somewhat to find out information and something approximating the truth. So much of what people say as business executives is PR. I can tell if a podcast is going to stink beforehand if the person has a PR person asking for questions. That’s a red flag. The thing I like about with podcasts is you can’t repeat talking points for a half hour. It sounds ridiculous.
The best interviews are people I know well because they won’t take any probing personally. Some favorites: GroupNine’s Ben Lerer, Hearst’s Troy Young, Complex’s Rich Antoniello, Cheddar’s Jon Steinberg, Barstool’s Erika Nardini. I’d also include journalists since there’s an easier rapport there and allergy to bullshit: Some favorites: Wired’s Nick Thompson, The Information’s Jessica Lessin, Recode’s Kara Swisher.
HW: Homebrew, my venture fund, is an investor in several “media” platforms (such as Anchor, Cheddar and theSkimm) but I tend to think venture dollars can really mess up a media company if raised too early or too abundantly. How should media entrepreneurs weigh funding options for their startups?
BM: I hate when people answer my questions with “it depends,” but I’m going to do that here. We’ve built Digiday without venture capital. Nick Friese founded it a decade ago with savings and early 401(k) withdrawals. We have funded ourselves over the years with an exotic formula of bringing in more money than we spend. The upsides to this is you can make quicker decisions and constraints keep you from doing dumb stuff like pivoting to video. The downsides are you skimp on infrastructure and can be at risk of not being aggressive enough in meeting opportunities because you don’t want to get too far ahead of revenue.
VCs always stayed away from media models for scale reasons. The period of scale media models being attractive for VC is probably over now that Google and Facebook have vacuumed up most of the digital ad market. Too many people seem to take VC money based on that Mary Meeker slide that showed the delta between time spent on the Internet and budgets spent. Well, that delta is gone, but the money mostly went to Google and Facebook.
There are some very significant media businesses being built that couldn’t have been done without VC. But right now, I’d say the most attractive media models are ones with close ties to their audiences rather than mass scale plays. Not to talk up your book but that’s what I find interesting about theSkimm, which has a direct connection with an audience and a real brand differentiation. (Jon will be mad if I don’t mention Cheddar too. So I find Cheddar interesting.)
HW: What are some other digital media businesses you admire?
BM: My favorite media businesses tend to be those focused on an obsessive audience, coupled with a balanced business model. For Digiday, we gravitate to the business side because people ideally are obsessed about their livelihoods, but industries like media, marketing, fashion and beauty have a bigger cultural impact that attracts people from both adjacent industries and those simply into these areas. A lot of people still call this “trade,” but I don’t see it that way. Trade was synonymous with being boring and cheerleaders. There’s an opportunity and need to take a different approach as people’s work and personal lives blur.
On the consumer side, I like what companies like Hypebeast and Highsnobiety are doing, having started as streetwear blogs and now growing into lifestyle media brands. Focused brands like Hodinkee, which is all about high-end watches, interest me because the audience is obsessive. I’m impressed by Axios in the impact it has made in such a short time, even if I’d like it to stop telling me to “be smarter.” We’re coming out of an era of flimsy media models built off ephemeral, manufactured audiences that were from platforms. The media models that are best positioned now have tight connections with defined communities — and strong, differentiated brands.
HW: What’s a contrarian take that you hold about the nearterm future of digital media?
BM: My contrarian take is that underneath all the gloom and unrelenting pressure on media that there are several hopeful signs of sustainability coming to media models. Yes, the duopoly. But the pivot to paid is promising. Just a few years ago it was thought impossible for paid models to work for digital media. We’re seeing that not necessarily be the case on the very high end consumer side (NYT, WaPo), the vertical B2B (The Information, Digiday) and focused consumer (theSkimm, The Athletic). Digital media went pear shaped when it fell in love with scale and ads. You need diversity in revenue streams. There are other models emerging off media outside of news, such as Clique Media, Glossier, Goop, Barstool.
On top of that, I think the platforms getting beat up over Russian trolls, data leaks, crushing media, etc will help align interests better. Facebook and Google will need to give a lot more to media right now. I can’t think of a time when publishers had more leverage. And many of the impacts of GDPR and laws like it are still unknown, but I think these efforts to rein in data promiscuity will combine with an inevitable swing back to context over specific audience to help publishers in the long run. How long, I’m not sure. But I’m optimistic for the future of our own business. We keep growing and see a ton of opportunities to go both deeper (new services, revenue lines with subs) and wider (new geographies, brands). The challenges are all real; I don’t think they’re insurmountable.