Why I’ve Had Trouble Writing About Politics Since The Election And How I’m Solving It

There’ve been dozens of blog posts I’ve wanted to write since November 9th. Election Week I was working from New York City and had already blocked out Wednesday morning for “recovery.” I fully expected this was going to be a severe hangover from revelry celebrating our nation’s first female President. Instead it meant getting a straight razor shave to clean away a three month old “rally beard” and deleting the entirety of my Twitter history – roughly 50,000 tweets sent over 10 years (as part of a general cleansing, not because I regretted any of the content).

I’ve continued being outspoken on social media about my political beliefs and will remain vocal. Loudly and without fear. But it’s been difficult to write anything longer. Why? A combination of reasons. My emotions are raw. There were many other hot takes. I didn’t want to speak on behalf of Silicon Valley. I wanted to suggest specific actions and was still figuring out my own plans.

But writing helps me think and helps me commit, so waiting for the “perfect post” became a bigger and bigger obstacle. Instead of attempting to craft something, I’m going to try a different route.

With a hat-tip to Ryan Dawidjan, I’m gonna just keep a single Google Doc where I dump in thoughts, feelings and suggestions about how we can move forward as a progressive political community -> http://bit.ly/HunterWalkPolitics. Maybe every once in a while I’ll write a standalone post here and include a link within the Google Doc, but otherwise I’ll tweet out updates every now and then if I think there’s something useful.

“Monopoly” Board Game Was Invented By a Woman, Who Was Then Written Out of the Story

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Growing up I LOVED the board game Monopoly. We’d keep a legal pad to track the side deals, such as allowing one player to raise money from another in order to fund the purchase of houses & hotels. But I’d never heard the actual story of its beginnings until recently when I read about The Landlord’s Game, a precursor from which Monopoly was essentially copied.

The Landlord’s Game was invested by Lizzie Magie who actually received a patent on her design in 1904. This was at a time when fewer than 1% of US patent applicants were female. She was also quite the radical, campaigning for equal wages and against a capitalist system which transferred wages away from workers. From The Guardian:

The gender-based disparity in wages upset Magie and she had no hesitation in speaking out against it. Shortly after receiving her Landlord’s Game patent, Magie staged an audacious stunt in which she placed an ad auctioning herself as a “young woman American slave” off to the highest bidder. The goal of the stunt, she told reporters, was to make a statement about the dismal position of women. She described the $10 a week she earned as a stenographer as “slavery of one kind or another” and also said that men were blind to the plight of the victims that the capitalist system created.

“Stay away from just making what the market is asking for” – How SF Gear Company DSPTCH Thinks About Design

I’ve got a backpack problem. In the sense that I buy too many. My current bag is one that Charles Hudson turned me on to from DSPTCH, a local SF company. DSPTCH founder Richard Liu saw me talking about the bag online (I love it!) and reached out. We had a blast covering all things gear and tech – while drinking coffee from Ritual, a few blocks from DSPTCH’s first store. 

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Hunter Walk: DSPTCH started in 2010 as a side hustle out of your apartment. What gave you the confidence to start scaling and make it your fulltime gig?

Richard Liu: There just came a point where I knew the extra time would be quantifiably better for the company. I think the idea of going full-time is often romanticized and becomes an emotionally-driven decision. But for me, I wanted to wait until the last possible moment where I absolutely could not take it further running it in the arrangement at the time.

Practically speaking, the burning need was to begin hiring employees so that I could spend more of my day on product development, partnerships and driving sales. The majority of my hours was previously being spent on the logistical side. At some point along the timeline, it’s absolutely necessary to bring on a team you can trust so that you can focus on other areas that will help grow the business.

HW: For a few years you were online only but now have SF, NYC and Tokyo stores. Why take on the costs of space, salespeople, etc? Do you think about them as showrooms for your brand or does physical retail still matter?

RL: Physical retail absolutely still matters. I’ve spent most of my corporate career in online acquisition marketing and while the numbers always start out nice, there will always be a ceiling of how much profitable marketing one can do through the web. We don’t have a budget that has to be spent so I wanted to think outside of online acquisition. I still believe that people want to get out of their house and experience a tangible buying process. In addition, since we never had a need to show a certain amount of growth (or any growth for that matter), I was able to think and invest in more long term thinking like nurturing and establishing a profitable retail store.

We started small and tested the market for retail before jumping right in to a long term commercial lease. Once I was able to feel confident that we would be able to break even at the very minimum, it felt that the brand awareness and recognition would almost be a residual benefit (less the stress I endured opening these things up).

So the short answer is: the costs and burdens of physical retail are acceptable to us since we have a clear and short path to profitability for each location. Being able to showcase the brand, build awareness, and create more face-to-face interactions are all important ways to build the brand for a physical good.

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HW: The last few years we’ve seen the rise of new brands using technology to own their supply chain, create direct relationships with their customers, manage their back office and so on. How have you leverages tech and software to grow DSPTCH? Where has tech fallen short for you?

RL: At a high level, technology has created many ways to increase our productivity while also providing freedom to run the business from anywhere in the world. I’m able to create shipping labels, answer customer emails, coordinate product development from any computer with an internet connection (I’ve actually had to do this many times from various internet cafes while on travel).

As far as where there’s further opportunity for technology in our business, I’m definitely looking forward to better ways to interact with customers. We still rely heavily on email for interactions which can be cumbersome. Admittedly, I haven’t spent much time looking into what our best options are for a company of our size but my perception is most of the solutions are made for larger companies with dedicated support employees. If I could build anything, it would be something like an external-facing Slack channel where a customer could pop in, chat with any of our employees and then disengage once the issue or question was resolved.

HW: How about the role of social platforms in spreading the word about DSPTCH – Twitter, Instagram, Pinterest, Snapchat? Where have you invested energy for a brand presence and why?

RL: We’ve invested most heavily in Instagram by far above the rest. Given that our early products were all in the realm of photography, it was a natural attraction. The viral nature of it has been incredibly fruitful in building awareness and oftentimes conversion as well. We use Twitter also but it’s basically like the digital version of the sign we tape up the store window. Pinterest has been great organically but its long term strategy with brands hasn’t been clear to me, as well as what I’ll get back by actively managing the platform. There’s so much great stuff that happens organically on Pinterest.

Snapchat/Story-based social media has been an interesting challenge. We’ve held back on all forms of that since I’m still not totally comfortable with the idea of an ephemeral marketing channel. Yes, great for adding personality but when you spend most of your days trying to drive sales, not always the clearest path to a conversion. And honestly some(most) days I really don’t have anything that interested to show on it. Somebody wants to look at me going through spreadsheets, Google analytics, and paying bills? It might shatter some illusions that running a company is mostly spent on fun stuff like doodling and coffee with hip people. I heard Casey Neistat refer to this as “forced positivity” which I think can be dangerously misleading, especially to young entrepreneurs. It is a hard, hard road.

HW: So far you’ve bootstrapped DSPTCH but we discussed how you periodically get approached by investors. What factors into your decision to continue without outside capital? Can you imagine taking on investors in the future?

RL: The main factor has been whether I will have the freedom to go where my intuition and research tells me to go. DSPTCH has largely been run with a foundation of trying to stay away from just making what the market is asking for. The financing side is certainly an attractive angle, but I’ve never acquiesced to the idea that our company needs to always grow and try to be a household name. I’m enjoying our current adolescent stage and things continue to chug along without a need to bring outside help in. My main factor would be how it would impact our decision-making process and whether I could continue to lead the company down the path I choose, even if it’s dark and narrow.

I wouldn’t completely write off bringing in some type of investment later down the road but it will take some changes to the landscape for me to bring considering it as necessary to achieve the goals I have for the company.

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Twitter Trolls Should Lose Ability To Include @Names in Tweets

The @name is one of Twitter’s most powerful mechanisms for generating conversation and the @ convention has transcended their platform to become identity shorthand (if not actual protocol). Last summer in the midst of Leslie Jones’ harassment episode, I suggested that Twitter doesn’t do enough to think about how @names (and intent of the tagging) factor into their abuse policy. Basically the concept that when an @name is inserted into the tweet, it becomes targeted, the difference between just expressing an opinion about a person and the desire for that person to see the opinion. For example imagine these two tweets:

“Hunter Walk is an asshole” vs “@hunterwalk is an asshole”

The former doesn’t appear in my mentions. The latter does. I never see the first unless I’m actively searching for my name on Twitter. The latter does regardless of my desire to interact with the sender. Accordingly, once an @name is included, the standard for harassment should be lower, because intent can be assumed.

I still don’t understand why this seemingly doesn’t factor into Twitter’s policies and why they’re not stricter about harassing messages including @names. But witnessing a woman I follow on Twitter deal with yet more harassment gave me another idea that builds off of this previous post: Twitter users who troll should lose the ability to use @names in their tweets. That is, if you tried to include @hunterwalk in your tweet after being put into this purgatory, it would either be blocked all-together (ie you’d have to remove it in order to send the tweet) or it wouldn’t register as a link/mention. (While the second option makes more sense IMO, I think it’s much harder to implement technically).

So a Twitter account state in-between “in good standing” and “suspended” would be “lost @name privileges.” These accounts would lose the ability to hurl their invectives and vileness in a manner which forces their victims to see the words through their normal use of Twitter.

Generally, Twitter continues to miss their chance to rebuild trust that they’re working to combat harassment on the platform. Outside of some high profile banning of racists, I’m struggling to think of major commitments made by the executive team. I know Twitter management cares but there’s more to be done. Why not start 2017 with a public roadmap of what’s going to be delivered and the appointment of an Ombudsman/PublicEditor employed by the company who will blog periodically about their view of how Safety at Twitter is functioning?

Once You’ve Raised a Series A, Add an Outside Director

I’ve seen an unexpected benefit to founders of Homebrew’s ability to serve on your Board from Seed until B Round — you get an easy opportunity to add an outside Director earlier than most startups. Let me ‘splain.

If you have a seed fund and/or founders who aren’t interested in creating a Board together, you’re likely waiting until Series A to add an investor. That traditionally means a three person Board (two founder seats and the Series A investor). When the startup then raises a Series B, you’d see the Board expand to five with the inclusion of the Series B fund and a common seat that will likely be awarded to an independent.

So, I think this is suboptimal and handicaps the founders. We’ve already written about why a good Board can be of help to even a seed stage venture, but now a few years into Homebrew, there’s an interesting side effect — you get to a five person Board faster, which eases the addition of an outside Director. See, take the math from the paragraph above and just advance it a stage – three person Board at seed and five at Series A.

For example, BuildingConnected, which completed its Series A, has a Board consisting of the two founders, me (seed), Crosslink (Series A), and an extremely impressive industry executive as the independent. He’s added a lot to the strategy, puts in time & sweat outside of Board meetings and is an excellent truth-teller to rest of us.

I’m not the only VC who believes — Foundry’s Brad Feld wrote about the value of an excellent outside Director. Sometimes I have founders ask me for advice about Boards and early stage companies which veers into the “I don’t want to lose control of my company” fear. My general belief is that a good Board is 10x better than no Board and a bad Board is 10x worse than no Board, so it all comes down to your investors and whether you’re creating a Board composition that will be there to help you. At the earliest stages there’s very little way to “lose control” of your company when it comes to the actual ownership and Board, unless you’re taking non-standard terms and working with investors who aren’t traditional, ongoing tech VCs. Don’t do that.

Another proof point here – if I was evil, I’d want a small Board where investors have outsized influence. Instead we’re suggesting you add an outsider that founders and investors think can add value but isn’t beholden to anyone. OMG!!!! 🙂

Anyway, if you’re a Series A or B company and you don’t yet have an outside Director as part of your Board, I believe you’re losing out on an opportunity to get input, guidance and credibility from an addition that goes beyond just bringing someone on as an advisor.

I F’in LOVE Recruiting for Homebrew Companies

How much faster would a startup progress if they were able to fill each new open role with a better-than-thought-possible hire in a quarter of the time they expected the search to take? That’s what I hope we can deliver to each company Homebrew backs.

How much happier, more productive, fulfilled and wealthier would we all be if we were working on the best teams on the right projects at the most innovative companies? That’s what I hope for each talented non-founder I meet.

One aspect of early stage venture that feels great is the opportunity to assist founders in building their teams. At Google and YouTube I played very hands-on roles in hiring across all functions during hypergrowth phases. While no Homebrew investment is (yet) growing as fast as Google did, across the entire portfolio there are dozens of open roles at any given time. On different teams. In different industries. For different experience levels. With different company cultures. So overall there’s a ton of variety to try and match the right person to the best opportunity for them. Satya and I both believe that people choose companies, not the other way around. That’s to say, the most talented men and women have a ton of options and are usually passive candidates. YOU need to convince them to work for your startup, not the other way around.

So how have we built this into Homebrew’s playbook and how can it scale as we invest in more companies? What a good question!

  • We tend to constrain the geographies we invest in (SF, NYC, SoCal) so that we can leverage personal talent networks and find the right opportunity for a candidate. 
  • We commit to a 24hr Response SLA to help close any candidates – no matter how junior – if a Homebrew founder thinks speaking with an investor will move the discussion forward.
  • We create resources guides on hiring-related topics which are available to all startups, not just the ones we’ve backed. Such as Diversity and Inclusion, What To Do When You Lost Your Job, Performance Management At Startups, and Compensation At Startups.

But most importantly we have Beth Scheer as our Head of Talent. Beth joined us mid-2015 after 12+ years in Recruiting/PeopleOps leadership roles at Google and Salesforce. Across teams as varied as Google’s Engineering R&D and Salesforce’s Executive Recruiting, Beth had responsibility for pairing with functional leads to develop human resources strategies in order to attract the best possible talent in competitive environments. 

In her role at Homebrew, Beth partners with our founders, and their leads, to support the startup’s growth goals. From kickstarting initial hiring pipeline to that post-Series A scaling, she’s a trusted resource for first-time and fifth-time founders alike. Beth doesn’t own the search – we firmly believe in capacity building, not outsourcing to your VCs – but she sits atop a set of contingency and retained recruiters with whom we maintain close ongoing relationships, so you can be sure to get best-fit, best-job and best-price if you decide to hire an outside recruiter. And Beth will help coach founders about when to bring on a dedicated in-house recruiter plus partner with them for their success. CAN YOU TELL I THINK IT’S AWESOME TO HAVE BETH ON THE TEAM?

Anyhow, if you’re a founder who is (or will be) raising a seed round and our people-centric approach resonates with you, be sure to reach out. And if it’s only January 5th but you already want to escape your current gig, perhaps we can help find you a better one.

In 2017, GE Will Buy More Tech Startups Than Google

When the WSJ and the NYTimes write the same trend story you can assume it’s a narrative that is being pushed by people who want it to be true! And the narrative for 2017 is OLD ECONOMY COMPANIES WANT TO BUY YOUR STARTUP. So, is it true? Largely yes, but the pot of gold might be more modest than some of 2016’s notable transactions suggest (Jet, Cruise, Dollar Shave Club).

When Satya and I started Homebrew in 2013 one of our bets for the coming decades was that non-traditional acquirers would become more aggressive in their pursuit of technology startups. Satya likes to describe the trend as “outsourced R&D.” But we also knew that most Fortune 500 M&A transactions aren’t at unicorn levels (actually well sub-$250m), so we advise founders to not over-raise capital until they’re using it to fund profitable growth (or a clear path to profitability). This keeps them aligned with their investors since a $250m exit with modest venture financing raised can be wonderful for all parties, but the same transaction can look awful if your last round was $60m on $300m pre! It’s also a reason we’ve seen an increase in strategic corporate investors getting involved in our companies earlier and earlier.

We had our first taste of this trend playing out early in 2016 when GM acquired self-driving tech startup Cruise for north of $1b. Even though we were only supporting investors (aka small check) it was a great return multiple to our fund. It also helped us flesh out our hypotheses about how corporates would behave as the US left industrial capitalism behind and entered a new era of technology capitalism. With all due respect to Maslow, here’s our Hierarchy of Corporate M&A Needs

Lowest Level – Buying Talent

The Fortune 500 version of the “acquihire,” seeking to add technology talent to an existing team or give a VP the seeds to spin up a new effort. The total value of these deals might look higher than when a tech company makes an acquihire but the premium tends to go to retention rather than the cap table (especially since (a) the acquirer might not be seen as an ‘attractive’ place to work and (b) there’s assumption of less equity upside post-acquisition). Key words in any press release to look for are “XYZ product will be shut down so the team can concentrate on new projects, etc.”

Next Level – Buying Product

In these cases the startup has a nice polished product, potentially with some degree of product<>market fit, but usually growth has plateaued (or there’s some other internal/external factor that has made the company challenged to raise its next round of outside capital). Acquiring F500 company imagines incorporating this product into their existing channels, or even keeping the product and using it as the launching platform for their further digital initiatives (ie they’re essentially purchasing the company to control its roadmap).

These acquisitions will be richer than pure talent acquisitions but you’re still not going to get many huge checks, both because the startup typically has limited optionality and big companies only pay bigly for “transformative” deals or out of extreme fear. One note is that if this type of acquisition occurs early in a company’s lifecycle, they can work out VERY well for founders (usually followed by the investor community speculating that they “sold too early”). See Mint and Periscope as examples.

Next Level: Buying Customers/Revenue/Distribution

Oh yeah, this is where the acquisition premium starts to grow, although it’s industry dependent as some markets (and market caps) can support hefty acquisitions while others are more modest. Under Armour purchasing MyFitnessPal for $475m feels like a reasonable example. Here the acquisition becomes more metric-driven and the assumptions around growth and multiples drive the offer. There’s often “synergy” magically inserted if an acquirer is trying to make a deal work at a level above current metrics. For example, you would say “oh, sure this startup spends 5x LTV to acquire a new customer but once we plug them into our sales channel, it’ll drop to .25x LTV” 🙂

At this level, the acquired startup usually has some optionality – either they’re profitable or near profitability, growing fast enough to raise additional dollars, or still have capital in the bank from the last round. So typically an acquirer will need to pay for future growth in order to make playing it out less attractive. OR, the team and/or investors will be ready to take their money off the table. Maybe it’s been a long, hard slog to get here and people are tired. Or the lead VC needs some liquidity and there’s 20% of the cap table sitting in departed founders/execs who are badgering for a payout.

Highest Level: Buying Peace of Mind 

Cruise was this. Jet was this. Dollar Shave Club (as best I can figure was .5 this and .5 the previous category). When the Cruise transaction went down, people were asking me how GM came up with the $1b+ figure. Although as small investors we weren’t privy to the specific conversations, here’s my interpretation:

“There’s no ‘bottom up’ way to get to the $1b+ figure. GM saw autonomy becoming an existential threat to its business over the next decade so they asked themselves, ‘What percentage of our market cap are we willing to spend in order to reduce the risk it [market cap] ultimately goes to zero?’ Turns out in their case it was 2-3%. And they got an amazing team in a space where there’s not that much talent available, and a leader who wants to help transform an iconic American company.”

That’s really it. Was Jet.com “worth” $3b? Likely not by any calculation of their metrics using traditional ecommerce multiples. Did Walmart want to spend 1.5% of their market cap making a last gasp effort to not be halved by Amazon over the next 10 years? Apparently so.

And rather than roll eyes at these large sums of money, I’m strongly in favor of high-fiving the acquiring CEO (and not just because they helped me return my fund). There are so many reasons for a current Fortune 500 CEO to *not* bet the farm and make a big tech acquisition. It could go wrong and they’ll look stupid. It could lower earnings because of continued investment and share dilution. Whatever market challenge they’ve uncovered likely won’t doom their company on their watch – heck, kick the can down the road to the next CEO!

Of course there are going to be some TERRIBLE acquisitions that later become writedowns or handicap the acquirer for years and years to come. But if you believe in the slow unavoidable decay of large, non-tech native companies (and I do), they’ll have to embrace this sort of change and very few can do it without a catalyzing event. Better that be a smart acquisition than a bankruptcy. The fact it’s become more palatable to Wall Street to make these tech investments (and of course they want their M&A transaction fees as well), arms the current CEOs with more dry powder than their predecessors had.

So yeah, 2017 will continue to be the “Year of the Non-Tech” acquirer, and potential tax repatriation of international profits will only increase the volume. If you’re a founder or investor, it’s worth making sure you’re realistic about the acquisition potential and rationale.