first round capital, start-ups, venture capital

Anthropology, Authenticity and Design: Why First Round Invested in Cluster

The problems solved by the best consumer apps are anthropological. The starting point is understanding the things that people have always done and why. Then you study how technology can be used to enable people to do it with much less friction. That’s the start of a great consumer experience. And if it’s done well – really well – the resulting product will feel deceptively simple.

Kent's Clusters

It’s easy to forget this dynamic and to be seduced by technology for technology’s sake. It’s instructive to step back and explore “obvious” needs. So here are a few questions. After an evening out with friends, have you ever asked each of them to send you their photos from the night? Have you ever gone on a family vacation and wished to collect everyone’s photos into a common pool?

That’s Cluster. A deceptively simple app to relive experiences with your friends and family.

Not long after I began playing with a pre-release alpha, it soon found a place on the top row of my homescreen (MessageMe, Path, Cluster, Twitter). It belongs there because the images inside carry deep emotional resonance. I look at them often. There’s a 138 photo Cluster of a family vacation earlier this summer. My wife, sister, brother-in-law, and Mom have all viewed and added photos. There’s a 497 photo Cluster of my son. It’s filled with pieces of the everyday silliness that comes from raising a toddler. My wife and I set it up when we realized that we were texting each other (and our parents) multiple photos of our little guy every day. And there’s a Cluster of Mt. Tam photos that I share with my mountain biking buddies.

This is “pull” not push photo sharing. Each Cluster is open to a unique group of people. It’s made up of the people who asked, “Would you mind sending me those photos?” To them, each image is highly relevant. This is the engagement side of the attention equation.

Founder & CEO, Brenden Mulligan has been working through the concepts behind Cluster for some time. A few years ago, he was one of the first people to build products on the Instagram API. He created PhotoPile and MorningPics to allow people to revisit the nostalgia of their old Instagram photos. His Co-Founder & CTO, Taylor Hughes, was part of the engineering team that revitalized the YouTube homepage. He knows more than a little something about scaling media. But Taylor also understands how to build intimate, mobile apps having been an early member of the dev team at Avocado.

Along with everyone at First Round, I am thrilled to announce our investment in Cluster and welcome Brenden & Taylor to our community. With Cluster, they’ve built a wonderful product with deeply human meaning. That is the foundation for a great company.


Just Because I “Like” You Doesn’t Mean I Care About You

The next time you are about to share a photo, stop and ask yourself this question: Why are you doing it?

Be honest. Sometimes we do it to express an idealized sense of self. We want to shape how the world views us. Sometimes we do it because we crave the dopamine high that comes with comments and likes. People are thinking of us! Not often enough, we do so because we want to share authentic moments and stories with people close to us. As Don Draper reminded us when he pitched Kodak for the Carousel business, it is this type of moment that creates “a twinge in your heart, far more powerful than memory alone… It takes us to a place where we ache to go again.”

Yet, much the way we dress up when we go out to a trendy restaurant – stylish clothes on, sweats left at home – we use filters to dress up our photos when we share them. We craft and project an idealized notion of our memories and ourselves. It’s image management, not authenticity. We all do it. We all have friends who do it too much – and we all roll our eyes when they do. Over time, our patience and interest in this type of communication is exhausted.

This is the challenge for social networks. Content sites – and I think of Facebook as a content site – operate on the following equation:

users x engagement = net attention

The goal is to grow net attention. With any social product, engagement is initially correlated with the number of friends you have on the site. The more active friends a user has on a new site, the greater their engagement will likely be. Over time, as our networks grow and the experience becomes less personal, the authenticity of a user’s expression inevitably falters. Engagement, measured by emotional connection not quickie “Likes” soon diminishes. This is the irony of most social networks. Over a longer period of time users add more friends, and as users add more friends engagement becomes inversely correlated with the size of a user’s network.*

Yogi Berra once commented on a popular restaurant, “Nobody goes there anymore. It’s too crowded.” This is the fundamental challenge that Facebook faces. It’s too public a space to be interesting. Friend lists are too large and too broad for people to share their most interesting thoughts and moments.** It’s why the intimacy of their Groups product is so important to them. It’s what Google tried overcome with Circles. And it hints at the opportunity for new social networks like Path, and OTT services like SnapChat and MessageMe.

These products address the engagement side of the net attention equation. They create smaller, more private spaces which allow us to be our authentic selves. They are the places we go to daydream, to remember, to feel the ties of our friendships. They hold the moments that matter. And, given time, they are going to be capturing much more of our attention.


* A notable exception to this is celebrity culture where we have minimal expectations for authenticity. Not surprisingly, Facebook is rumored to be working on tools to help celebrities better use the site to engage their fans. This dynamic also serves Twitter very well.
** There are parallels between the challenge cable television posed to broadcast television, and the challenges ahead for Facebook. A network designed to appeal to narrow interests, like the Food Network, may never have the mass audience of a ABC, CBS, Fox or NBC, but it has a deeply engaged audience. The same will play out in our online activities.
start-ups, venture capital

The One Question Every Investor Needs to Ask Themselves

Last week, I shared some thoughts on how Founders can be more effective in pitch meetings. This post takes a different perspective. It explores something investors can do to have richer initial conversations with Founders. If it makes a even a little impact, that’s great. As a class, the venture community is not reputed to be a great meeting participant. Yet, one simple question has the power to change this.


In Adam Grant‘s book, “Give and Take,” the author describes three types of people: takers, matchers and givers. Takers use other people for their own gain. Matchers expect that each favor given will be a favor returned. Givers are motivated to help other people. It’s part of their soul. They have an intrinsic desire to bring out the best in others. Guess which personality type is correlated with the greatest success? Givers. It turns out that that nice people do finish first.

One of the givers that Grant profiles is George Meyer, best known for his work as the Head Writer on The Simpsons. Hollywood writing rooms are intense, competitive places. Writers continuously jostle to have their ideas included in a script and utterly freak out when their scripts are rewritten. While Meyer was not known to mince words Tim Long, a staff writer on the Simpsons, described to what it was like to have him review a script:

“It’s as if you just handed him a baby, and it’s his responsibility to tell you if the baby’s sick. He really cares about great writing – and about you.”

Seems right to me. This same statement should apply to anyone listening to a Founder’s pitch. And yet that’s usually not the feedback Founders have after pitching to investors. Why?

For anyone who invests in early stage companies, it’s always easier to pass on an opportunity rather than to find a reason to work alongside the Founders. These ventures are nothing but risk & uncertainty. And because it is so difficult to build a successful company, statistically this negative bias points to the correct outcome. However, it is the wrong bias for an effective conversation.

There is a way out of this trap. Before the start of meeting, investors should stop and ask themselves a simple, powerful question:

What am I hoping to get out of this conversation?

The answer should be, “I’m hoping to meet great people who want to build something that lasts. And I hope I can help them.” This pre-meeting practice brings with it an attitudinal shift. It counters the negative bias with a giving perspective. Risk and uncertain are forgotten. It focuses the mind on opportunity. It asks, “How can I help them make this opportunity bigger?” not “Why aren’t they pursuing something bigger?” It fosters body language that encourages leaning forward.

Just ten words. That’s all that is required to shift from taking & critiquing  to helping. The best investors aren’t opportunists looking to throw dollars at someone else’s idea. The best investors are people who look to partner with Founders from the moment they meet. “What am I hoping to get out of this conversation?” is all you need to ask yourself to be reminded of how to take proper care of a Founder’s baby.


Deck or Conversation?

When meeting with a Founder for the first time, one of the questions I’m often asked is “Would you like to see a deck or just have a conversation?” The answer is that the most effective meetings are a combination of both.

From a Founder’s perspective, it’s important to remember what the goals of the meeting are. The foremost goal is to secure funding. The second goal is to understand whether or not the person you are meeting with can bring value outside of their dollars. The third goal, is to leverage the meeting into specific advice or introductions.

What works best? Anything from wireframes to mocks to prototypes can be helpful. White board or napkin sessions can work too. They all provide a good jumping off point to compare notes on product and a company’s mission. That said, I think it’s helpful to include some slides expressing a viewpoint on the market and explaining why this is the right team to attack it. This is an opportunity for Founders to shape perception.

What works worst? Standing powerpoint automatons with slide builds.

Nobody understands a company as well as its Founder. So, when speaking with people less informed about their company, it’s helpful to slow down the discussion and introduce some visual aids. Remember, a prospective investor knows very little about a seed stage company before the meeting. In fact, once the meeting starts they are immediately playing catch-up.

The best pitches feel like conversations, but they are pitches. Effective Founders use whatever tools they can muster to shape an investors perception. They walk the investor through the story of what they want to build and why. They make a calculated message feel like a casual conversation.

start-ups, technology

To Test Like A Scientist, Steal Like an Artist

Immature poets imitate; mature poets steal. – T.S. Eliot
Good artists copy, great artists steal. – Pablo Picasso
Lesser artists borrow; great artists steal. – Igor Stravinsky
Good artists copy, great artists steal. – Steve Jobs
Real artists ship. – Steve Jobs

At the seed stage, a founder’s responsibility is to find an efficient way to test the hypothesis for their business. Fundamentally, a start-up is an like any other experiment. You want to limit the variables and cost (including time) required to get an answer.

If you are starting a new company, you want your early releases to isolate the core principle underlying your product or service. For example, if you are launching a new retail commerce business, you want to understand whether or not there is sufficient consumer demand for the products you plan to sell. There is little need to know whether your team can build a better registration flow or checkout experience. There will be time to tweak them later.

For these non-core features, identify the best-in-breed elements (i.e., reg flows, carts, checkout) of other service providers and steal them. I feel pretty strongly that every commerce business should ape Amazon’s checkout flows. It’s been tested and it’s heavily optimized. Users are familiar with these flows and can move through them without thinking and without distraction. And each transaction (or lost transaction) will provide feedback on the core experience.

More importantly, mimicking well tread user flows allows founders to focus their limited resources. Focus on making the core experience insanely great. In T.S. Eliot’s full words,

Immature poets imitate; mature poets steal; bad poets deface what they take, and good poets make it into something better, or at least something different. The good poet welds his theft into a whole of feeling which is unique, utterly different than that from which it is torn.

This is the founder as scientist artist. Focus on the core experience. Craft something unique. Isolate the primary variable. Steal the ancillary parts. Ship something insanely great.

start-ups, technology

Drones and Airware: Why First Round Invested

“Why does this matter to you?”

This is one of my favorite questions to ask Founders. The answer to “Why does this matter to you?” is telling. It’s tough to hide behind a question which betrays so much about motivation. There is a difference between starting a company to solve a problem and starting a company to seize an opportunity. It reveals whether someone is intrinsically or extrinsically motivated. It can tell whether someone will tough it out through the turbulence every startup is bound to face. It shines a light on the vision that a Founder has for his or her company.

In early January, I met with Jonathan Downey and asked him this question. He replied that his grandfather was a pilot, his father was a pilot, and that he was a pilot. He told me that he first became consumed by autopilot systems during his freshman year at MIT. It was the reason he joined Boeing when he graduated, and the reason that he decided to start a company. He hated that every autopilot was a black box. In fact, they were designed to be impenetrable, which meant that tweaking them for payload or task requirements was unbearable.

There wasn’t any need to tell me that he was passionate about flying and piloting systems. His life story made it clear that this was his obsession. At First Round, these are the Founders we love to see in our community.

Of course, it helps when they have a vision as compelling as the one that Jonathan has for Airware: Building the OS for unmanned aircraft. At lowest levels of the stack this represents the autopilot systems for both fixed wing, helicopter and multiple rotor aircraft. The next layers are the detections systems which could allow drones to spot the areas of a farmer’s fields which need irrigation, land which may be subject to forest fires or powerlines which could be down. And depending on the application, Airware’s system will be able to deploy a payload, whether it’s fertilizer, GPS coordinates or a photograph.

First Round Capital is thrilled to finally disclose our seed investment in Airware. We partnered with the company in January, and the short time since then they have made terrific progress. Today’s announcement of the Series A financing is a testament to that. Jonathan and his team have recruited an enviable group to support the company including Andreesen Horowitz, Google Ventures, Y Combinator, Lemnos Labs and Shasta Ventures. Developing the OS for unmanned aircraft matters to all us now too. Please join me in “officially” welcoming Airware to the First Round Community!

start-ups, technology

Great Companies Aren’t Built Overnight – the Story of Mashery

One of the myths consistently perpetuated in Silicon Valley is that great companies are built overnight. They aren’t. Companies with impact take time to build – often because their founders see the future before anyone else can live it and as Jeff Bezos says, “are willing to be misunderstood for long periods of time“.  Out of the limelight, great founders fight on when everyone else doubts them.

That is most certainly the story of Oren Michels and the Mashery team.

Even if the name “Mashery” doesn’t ring a bell, you have probably unknowingly used a product powered by their technology.  Ever stream a movie with Netflix? Check an ESPN app? Visit CBS interactive? Read about a car on Edmunds? Research a house on Trulia? Check the news from the NY Times, USA Today or The Guardian? Answer questions with SurveyMonkey?  Then you’ve touched their tech.

Mashery helps companies manage, scale, and secure their APIs. As with many innovations, this product concept is really easy to take for granted today. In 2006, when First Round Capital sat down at a dinner table with Oren, Scott Rafer, Kirsten Spoljaric and Clay Loveless to literally sketch out the plan for Mashery on a napkin, things were different. Not only were Fortune 500 companies not looking to open their platforms to developers, most didn’t think of their technical infrastructure as a an extensible platform. Instead they had big systems, just a few applications, and thought that was just fine.

When you build an enterprise business, you’re often not rewarded for seeing the future before your customers – and the term “educating the market” is a bad thing. Although few companies were embracing APIs, the Mashery team persisted on with their belief that the future would be different. While customer wins were slow, everyday they saw more evidence that that the web was making it imperative for businesses to think of their backend systems as platforms to build on. Slowly, customers began to ramp.

With the launch of the iPhone AppStore in July 2008, the world began to catch-up to Mashery.  With each app that was downloaded, it became more apparent in enterprises around the world that customers would demand products that worked across platforms, and that the best way to enable these types of experiences was with a robust and dynamic API. Even then, Mashery remained its most creative evangelist. The company founded the Business of APIs conference to bring together the pioneers of their space. Every attendee in SF, New York and London felt like they were part of a movement. And like most great enterprise companies, they built a tremendous sales culture.

Mashery has long been a steady force behind some great overnight successes. But today, with the announcement of Intel’s acquisition of the company, we’re thrilled to see Mashery take it’s turn in the limelight. We couldn’t be more excited for Oren and the entire Mashery family. Congratulations. Thank you for letting us be a part of the journey and we can’t wait to see what you can do in your new home.

For more on the Mashery story – watch our exit interview below…

internet, start-ups

When You Build A Moat, You’re Just Digging a Big Hole

When you build a moat, you put yourself on an island.

A week or so ago, MessageMe launched their product. I wrote a brief blog post about why First Round loved their product and team. A lot has happened since then. MessageMe has signed up more than a million users who have sent tens of millions of messages, videos and doodles. And the product has been featured in the Apple App Store, Google Play, and *shut off* by Facebook.

One of these things is not like the others.

Facebook’s decision cutoff MessageMe and others has been covered in the press here, here and here. Make no mistake, they are well within their rights to do things like this. But just because Facebook’s decision is within their rights doesn’t make it smart.

It’s interesting to note that while Facebook has decided to shut off MessageMe – presumably to protect Messenger product – Apple has taken a different approach. While MessageMe could be seen as being competitive with iMessage, Apple has recognized that it’s great product and been supportive from Day 1. Far from trying to bury it, de-feature it or hide it, Apple has promoted it. They know that great ecosystems thrive on great products.

This morning I was catching up with one of my partners about this. I told him that it reminded me of discussions I was a part of while I was at Yahoo! about Yahoo! Mail. As far back as 2005, there was a core group of people who wanted to open Mail APIs and allow free IMAP (or even POP) access to alternate email clients. There were more people who felt that opening the email APIs would damage growth and use in the core Mail product. Build a moat, protect the castle. Depending on the day of thee week, the weather, the amount of coffee I drank, etc., my perspective shifted. In retrospect, it’s clear that there was one right decision.

While we were building a moat, Google made a different choice. They built a bridge to their user community and allowed anyone to IMAP their Gmail account.

The rest is history.

start-ups, technology, venture capital

We’ve Reached Peak Emoticon

Some quick observations of people, technology, communication and expression.

Observation 1. Our computer screens are no longer black. Our typeface is no longer green. When the Macintosh was introduced in 1984 that changed. We discovered the word font for the first time. We made art with a mouse and MacPaint. Consumers became creators.


Observation 2. People have always looked to technology to help them communicate. In 1994, Radiolinja launched the first commercial SMS service. And a year later, they worked with Telecom Finland to offer interoperability so that their customers could send messages to one another no matter who was their service provider.

Observation 3. Despite these decades old advances, SMS largely looks like it did when it launched. Yes, we can send pictures and video through MMS but when we want to express ourselves, we still use emoticons. In the US, more than 155B SMS messages are sent every year and the best we can do is ASCII art emoticons. :-/

Observation 4a and 4b. (Metcalfe’s Law) Any next generation system which would allow for richer communication would have to be instantly cross-platform. The same way that SMS was useless when consumers could only communicate with people who used the same service provider, it would be useless if they could only communicate with people on the same device. Any next generation system which would allow for richer communication would have to instantly have many users.

Last spring, when I met with Arjun Sethi to learn about his new product MessageMe, we talked about everything above. It was easy to agree with him on the first three points. The challenge was how to overcome Metcalfe’s Law. Arjun replied by telling me about his background – he previously built one of the extraordinarily viral Lolapps. He then told me about his product plan – he wouldn’t launch until he was on iOS and Android. Then he let me install an alpha version of MessageMe on my phone. I was instantly hooked – as was the whole team at First Round. We could easily send doodles, videos, voice messages or (my favorite) pictures with snarky scribbles on them.

I’m proud to say that since First Round made our investment in MessageMe last spring, my emoticon abuse has fallen – I’m sending doodles and videos instead of ASCII winks. The first release is now generally available on iOS and Android. Get it today and together we can move past peak emoticon.


Fire Power and Artillery

There are two oft said, contrasting adages in early stage investing. Both of them may be true.

The first adage is “The only thing that matters is the people.” Start-ups are malleable forms, especially in their earliest days. The product plan is immediately dated as soon as it is drafted. The first user tests will do nothing, if not show how far off the mark a company’s original assumptions were. The product and direction of any start-up is bound to change. The constant is the people. If you invest in the right people, they will know how to continually revisit, reshape and adapt their original vision to build a great company – even if it ultimately is very different from the one they originally set out to build. These people are heat seeking missiles.

The second adage is “Bet on the racetrack, not the horse.” In other words, find a large, fast growing market and you are bound to have a good outcome. If the team is just mostly right about the product, the product will at least be good enough to build a business around it. The rising tide of a new and growing market will create value. The market will have a greater impact on the outcome of the business than the individuals behind it.

There’s an obvious tension between these two viewpoints. More often than not, I find myself leaning towards the people part of the equation. The primary thing that matters is people. The best people find great markets in which to build products and companies. This is what unifies the two opposing adages.

If you could find a team that included Facebook’s first Partner Engineer, someone who has carried the beeper for, and a stud Google engineer coming off of his first start-up exit, you’d know that they were working on something big. And that’s why I’m so excited to welcome Artillery to the First Round portfolio. Ankur Pansari, Mark Logan and Ian Langworth are turning every browser into a game console. If you have followed Valve, you know about the power of simple discovery. If you have followed Nexon (remember the EA rumors?), you know about the power of free to play. The team at Artillery is working to to combine simple discovery and free to play with instant play. A game console in every browser.

Artillery is a big idea. I’m not surprised that a team with so much fire power is working on it.