Read more about how we’re thinking and where we’re investing here.

You might have seen in the tech press today that our portfolio company Dapper Labs, the company behind the world's first and most successful consumer blockchain product, <a href="https://www.cryptokitties.co/">CryptoKitties</a>, has <a href="http://fortune.com/2018/11/01/cryptokitties-samsung-google-venrock/">raised US$15M in a Series A2 round of funding</a> led by Venrock, with participation by Google Ventures and Samsung NEXT. When we originally <a href="https://www.versionone.vc/announcing-our-investment-in-cryptokitties-the-wildly-popular-blockchain-based-pet/">invested in Cryptokitties</a> about 10 months ago, there were three key things that got us excited about the opportunity: it’s <a href="https://www.versionone.vc/crypto-native-applications/">native to the blockchain</a>; the team represents some of the best talent in the crypto space; and they’re incredibly thoughtful about the user experience and what ownership and decentralization mean in the crypto age. A fourth element has evolved since then and it’s very exciting. CryptoKitties is showing the potential of “programmable assets.” When you mix the capabilities of non fungible tokens (including extensibility and permissionless innovation) with the power of interoperable smart contracts, you open up the potential for a lot of innovation. Over the past months, we’ve seen an explosion in the <a href="https://medium.com/@CryptoKitties/welcome-to-the-kittyverse-1e7fb65c8c55">KittyVerse</a> - the extended realm of CryptoKitties where community members develop third party apps and features to add to the game. There are kitty races, kitty-eating zombies, kitty family tree apps, and countless others. And there’s a lot more innovation and apps to come. Outside of the blockchain, building apps on top of an existing platform has always been risky. Will the platform change its rules so your app no longer works and all that time and investment are wasted? Platform risk has always been a serious concern for developers, entrepreneurs, and investors alike. But that logic changes for blockchain platforms: underlying digital assets are immutable and if a platform ever tried to change the rules, forking the project will restore the original design. As a result, blockchain will create platform opportunities that we have not seen before. Like most things in the crypto space, KittyVerse and other blockchain developer platforms are still early - but I think its early traction shows that real businesses will be built on top of crypto platforms.

<span style="font-weight: 400;">When Angela and I were pitching our</span><a href="https://www.versionone.vc/announcing-version-one-fund-iii/"> <span style="font-weight: 400;">newest fund</span></a><span style="font-weight: 400;"> to investors, we started using the term “smart SaaS” to describe the kind of SaaS companies we like to invest in.</span> <span style="font-weight: 400;">Before the SaaS explosion, software and data were only “on premise.” Then, SaaS came along and moved everything to the cloud, boosting efficiency and collaboration since everything was now digitalized and easily accessible. For us “smart SaaS” represents the next stage in this evolution. Now that data is on the cloud, products can begin to leverage it and use AI/machine learning to create a 10x better user experience.</span> <span style="font-weight: 400;">Smart SaaS products can automate processes and take care of all the things that we don’t want to do, while also having the potential to be intelligent in the future and create interesting data network effects along the way.   </span> <span style="font-weight: 400;">When we consider SaaS products in virtually every vertical, we realize how much potential there still is to re-invent the user experience. For example…</span> <ul> <li style="font-weight: 400;"><span style="font-weight: 400;">Why can’t accounting products do a better job of reconciling bank accounts?</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Why aren’t there better ways of automating standard customer interactions? (Note, this is something our portfolio company <a href="http://www.ada.support">Ada</a> is actually starting to address very successfully)</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Why can’t HR systems understand who in the organization has what knowledge and automatically build a skill/talent graph?</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">And across the board in every vertical, why is a/b testing still so manual?</span></li> </ul> <span style="font-weight: 400;">The biggest challenge for any start-up trying to fix these problems is that most of the data needed to build a smart SaaS product is stored in legacy systems that have no intention of making this data accessible to a future competitor.</span> <span style="font-weight: 400;">Therefore, entrepreneurs need to figure out how to bootstrap the chicken and egg problem and overcome this lack of data. There are a couple of ways to do this:</span> <ul> <li style="font-weight: 400;"><span style="font-weight: 400;">Solve a specific problem so well from the beginning that it doesn’t matter if you don’t have much data for the first few years,</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Make humans part of the workflow and have them feed data into the product. Over time, the “machine” will get smarter and smarter and you can rely less and less on human intervention.</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Try the AI on publicly available data and then augment it with private data as customers start using the product.</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Build a product on top of more “open” legacy systems that have APIs. The key question here is whether you can become a standalone company when you’re just a layer integrated into another system. </span></li> </ul> <span style="font-weight: 400;">This is an exciting time for SaaS startups. There are countless opportunities for the next generation of enterprise apps to us AI/machine learning to become smart – “smart SaaS” as we like to call it.  </span>

<span style="font-weight: 400;">We are very happy to announce the launch of Version One Ventures III with $45M USD ($57M CAD) in commitments. With Fund III, we’re doubling down on all that has worked in our previous funds – our strategy, geography, investment thesis and</span><a href="https://www.versionone.vc/philosophy/"> <span style="font-weight: 400;">philosophy</span></a><span style="font-weight: 400;">. It’s an exciting time to be launching a new fund as our focus on network effects and broad geography are driving opportunities in both existing and emerging markets.</span> <b>About Fund III</b> <ul> <li style="font-weight: 400;"><b>We invest in the early stages of company creation</b><span style="font-weight: 400;">, leading or participating in pre-seed and seed-rounds with cheque sizes between $500K and $750K. This is where we believe we can have the biggest impact.</span></li> <li style="font-weight: 400;"><b>We invest in companies and platforms that leverage network effects</b><span style="font-weight: 400;">. This has been our core thesis in prior funds and led us to invest in marketplace, AI/ML and SaaS companies. But a thesis centered around network effects isn’t static – and isn’t limited to any particular sector, business model, or platform. Decentralized platforms offer new opportunities to create network effects in a wide open space without big incumbents like Google, Facebook, Amazon, and Apple. And we also look at companies that are creating the best product for a specific vertical – including <a href="https://www.versionone.vc/healthcare-thesis-update/">bio/healthcare</a> and other emerging tech. With Fund III, we’ll be concentrating wherever network effects are at play; this thesis gives us focus while enabling us to broaden our scope across existing and emerging opportunities.</span></li> <li style="font-weight: 400;"><b>We invest across North America</b><span style="font-weight: 400;">. From Fund I and now to Fund III, we have been able to serve as an important bridge between Silicon Valley and other tech ecosystems. With <a href="https://www.versionone.vc/congratulations-to-angela-tran-kingyens-version-ones-new-general-partner/">Angela’s promotion to General Partner</a>, we now have investment partners located in both the U.S. and Canada, offering portfolio companies strong networks and resources on both sides of the border. Our particular focus is in San Francisco Bay Area, <a href="https://www.versionone.vc/something-special-is-happening-in-the-toronto-waterloo-area/">Toronto/Waterloo</a>, Seattle, and NYC. We believe these emerging tech ecosystems are more relevant than ever, and want to empower </span><span style="font-weight: 400;">entrepreneurs outside Silicon Valley with opportunities to grow successful businesses.</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Lastly, we will continue our goal to be the most value-add investor for our portfolio founders as they push to create category-leading companies. </span><span style="font-weight: 400;">Having run our own companies, we try to pass on as much of our operations knowledge as possible.</span></li> </ul> <b>Acknowledgements and gratitude</b> <span style="font-weight: 400;">The start of a new fund is a good time to reflect on the six years since Version One launched; we want to thank the many, many people who have helped us along the way.</span> <span style="font-weight: 400;">First, we are so grateful for the 40+ portfolio entrepreneurs who inspire us every day in their relentless push to use technology and innovation to solve very hard problems. Building companies is hard and we have the greatest respect for everyone we get to work with. It is a true honor to be a partner of yours!</span> <span style="font-weight: 400;">Secondly, there are amazing people in the VC industry who have provided mentorship, challenged our thinking, and shared interesting opportunities with us over the years. As competitive as venture capital often seems, we are incredibly humbled by the amount of support and love we have gotten over the years from our community.</span> <span style="font-weight: 400;">And last but not least, we thank our investors, the LPs. Many of you have been investors since the first fund and we are thankful for all the continued support and confidence. We are proud of the broad LP support we have received in this (and previous) funds, from large institutional LPs like Invesco, Harbourvest, Northleaf, and Kensington to entrepreneurs from Shopify, Slack, Hootsuite, Wattpad, and Salesforce.</span> <span style="font-weight: 400;">We look forward to continuing to work with everyone, as well as teaming up with another group of great entrepreneurs on this incredible journey!</span>

Every new technology platform has been built around a specific new capability. The Internet connected people and data at scale (“connecting everyone, everything”). Marketplaces, social platforms, and search all leveraged this capability. The next platform, mobile, was about “always on, everywhere.” Mobile helped spark new products that leveraged these capabilities, with messaging and ride sharing being the two biggest categories. Blockchain/crypto is emerging as the next technology platform. And the key question for entrepreneurs and investors is to figure out the new and native capability for this platform. The answer isn’t obvious, as human imagination is often limited by what we’ve already seen. For example, the initial forms of digital ads in the late 90’s were simply digital versions of traditional print ads. What’s Blockchain’s core value proposition?  It enables trust without the need of a third-party intermediary and hence lowers the transaction costs for value exchanges between two parties: <ul> <li>Blockchain enables transactions that weren’t economically feasible before (e.g. selling a $20 stake in your project to some person somewhere in the world)</li> <li>Blockchain makes existing transactions more efficient (e.g. by cutting out the middle man and his rake)</li> </ul> Looking at Blockchain through the prism of these capabilities makes it easier to identify which projects are crypto-native and which feel less so. For example… <strong>Strong native use cases</strong> <a href="https://filecoin.io/">Filecoin</a>: “I can track the work participating computers have done and automatically pay out rewards.” <a href="https://www.cryptokitties.co/">CryptoKitties </a>(a V1 portfolio company): “My cat can’t be copied – it’s a digital collectible. The game creators can’t change the rules on me.” <a href="https://www.augur.net/">Augur</a>: “I can make bets that are automatically settled based on the outcome of a prediction event.” <strong>Less strong use cases</strong> Private blockchains: Participants usually know each other so the transaction costs are already low. Decentralized versions of existing marketplaces: Operators of highly successful marketplaces usually create tons more value for their customers relative to the rake they take (e.g. Uber, AirBnB). Tokenization of offline assets: People still need a “link” to the real world, so there’s not much reduction in transaction costs – it provides only more efficient tracking of ownership. Given all the excitement surrounding crypto today, it’s important to have the right lens when analyzing opportunities in order to filter out the noise and find those initiatives that have the highest likelihood to succeed.

<span style="font-weight: 400;">It’s the beginning of October. Fall is underway, and it’s time to summarize all the key news and announcements from last quarter. And we have a lot of exciting things to share in the coming months, so stay tuned!</span> <b>Announcements and Accolades</b> <a href="https://www.headout.com/"><span style="font-weight: 400;">Headout</span></a><span style="font-weight: 400;"> announced their </span><a href="https://t.co/LJG6w3bAAi"><span style="font-weight: 400;">$10M Series A</span></a><span style="font-weight: 400;">, led by Nexus Venture Partners and V1. If you haven’t already checked it out, Headout is a mobile app that lets you book last-minute activities   </span> <span style="font-weight: 400;">Cleargraph (Distributed Systems) joined </span><a href="https://www.coinbase.com/"><span style="font-weight: 400;">Coinbase</span></a><span style="font-weight: 400;"> to continue their work on human-friendly decentralized identity. We’re particularly proud and excited for this development, as it’s two portfolio companies joining forces! You can read more about the acquisition from </span><a href="https://blog.coinbase.com/identity-at-coinbase-welcoming-the-distributed-systems-team-d929dd64de2e"><span style="font-weight: 400;">Coinbase</span></a><span style="font-weight: 400;"> and on </span><a href="https://www.wired.com/story/coinbase-distributed-systems-acquisition/?mbid=social_twitter"><i><span style="font-weight: 400;">Wired</span></i></a><i><span style="font-weight: 400;">.</span></i> <span style="font-weight: 400;">The </span><a href="https://medium.com/cryptokitties/herding-one-million-cats-7dbec6c77476"><span style="font-weight: 400;">one millionth CryptoKitty</span></a><span style="font-weight: 400;"> was born last month! Outside of exchanges, </span><a href="https://www.cryptokitties.co/"><span style="font-weight: 400;">CryptoKitties</span></a><span style="font-weight: 400;"> is the most-used smart contract in the history of blockchain.</span> <span style="font-weight: 400;">Sales automation company </span><a href="https://www.outreach.io/"><span style="font-weight: 400;">Outreach</span></a><span style="font-weight: 400;"> was named to </span><a href="https://www.forbes.com/cloud100/#677301405f94"><span style="font-weight: 400;">Forbes’ Cloud 100 list</span></a><span style="font-weight: 400;"> and made its first acquisition. They </span><a href="https://www.geekwire.com/2018/sales-automation-company-outreach-buys-sales-hacker-media-startup-first-ever-acquisition/"><span style="font-weight: 400;">acquired Sales Hacker</span></a><span style="font-weight: 400;">, a media </span><span style="font-weight: 400;">company focused on sales professionals that runs conferences and produces podcasts, webinars and other original content.</span> <a href="https://blockstack.org/"><span style="font-weight: 400;">Blockstack</span></a><span style="font-weight: 400;"> is currently hosting a global speaker series, </span><i><span style="font-weight: 400;">Decentralizing the World</span></i><span style="font-weight: 400;">, where thought leaders discuss and present on key topics related to decentralization, the new internet, censorship, token economies and more. You can read more about it and find upcoming stops</span><a href="https://community.blockstack.org/decentralizing-world-tour"> <span style="font-weight: 400;">here</span></a><span style="font-weight: 400;">.</span> <b>Launches</b> <a href="https://www.coinbase.com/"><span style="font-weight: 400;">Coinbase</span></a><span style="font-weight: 400;"> is opening up their platform for more cryptoassets, as there are now </span><span style="font-weight: 400;">thousands of digital assets of all types, including coins, tokens, forks, stablecoins, and collectibles</span><span style="font-weight: 400;">. They launched a new process to rapidly list most digital assets that are compliant with local law. You can read more about it on the </span><a href="https://blog.coinbase.com/new-asset-listing-process-a83ef296a0f3"><span style="font-weight: 400;">Coinbase blog</span></a><span style="font-weight: 400;">.</span> <a href="https://getdialog.am/"><span style="font-weight: 400;">Dialog</span></a><span style="font-weight: 400;"> (Helpful) launched. It is a community dedicated to live, spoken conversation online. Their aim is to </span><span style="font-weight: 400;">create a space for intelligent, empathetic conversation</span><span style="font-weight: 400;"> (which we all know can be hard to find on the Internet today).</span> <a href="https://placenote.com/"><span style="font-weight: 400;">Placenote</span></a><span style="font-weight: 400;"> SDK 1.6.6 is now out with a full-fledged Unity Simulator so you can run mapping, localization, and metadata saving/loading directly in the editor. Learn more about it </span><a href="https://buff.ly/2xlMoXn"><span style="font-weight: 400;">here</span></a><span style="font-weight: 400;">.</span> <span style="font-weight: 400;">And last but not least, <a href="https://celo.org">Celo</a> (</span>pronounced /?tselo/, meaning ‘purpose’ in Esperanto) <span style="font-weight: 400;">shared their mission with the world – to use blockchain technology to advance financial inclusion and build a monetary system that creates the conditions for prosperity for all.  </span> <b>Our own news</b> <span style="font-weight: 400;">These past few months have been an exciting time at Version One. We officially announced <a href="https://www.versionone.vc/congratulations-to-angela-tran-kingyens-version-ones-new-general-partner/">Angela’s promotion to General Partner</a> and have <a href="https://www.versionone.vc/hiring-associate/">opened the search to add an associate</a> to our team. These events will certainly increase our investing capacity. As we mentioned above, we have lots more exciting things to share in Q4 so stay tuned!</span> <span style="font-weight: 400;">Follow us on Twitter: </span><a href="https://twitter.com/VersionOneVC"><span style="font-weight: 400;">https://twitter.com/VersionOneVC</span></a> &nbsp;

A few weeks ago I shared some <a href="https://www.versionone.vc/three-leadership-lessons-from-slacks-stewart-butterfield">important leadership lessons from Stewart Butterfield</a>, including investing in your own growth to make sure that the founder scales as fast as the company. Growing with your start-up can be a very tough undertaking for a founder. It requires reinventing yourself dramatically in very little time. When you start your company, you will be a “maker” for most of your days, wearing a thousand hats and tackling whatever needs to be tackled. But as the start-up scales and you hire employees, your day-to-day is taken over by more managerial tasks, like hiring and managing people, running company meetings, etc. Going from a maker to manager was one of the hardest transitions I went through when building my own start-up and I don’t think I was fully aware of what was happening to me at the time. Not all start-ups will scale as quickly as Slack did, but all founders will need to grow into new roles as their company grows. And here are some things to consider. <em>First – choose your path: do you really want to transition into a manager?  </em> You will first need to decide whether you want to go down the path of becoming a manager or not. There’s typically little choice for a founder CEO. It’s unusual to hire a non-founder CEO early in a start-up’s life because it will most likely fail. But other founders might have a choice between staying as individual contributors or becoming managers (e.g. the difference between becoming a CTO who provides technical direction vs. VP of Engineering who manages the whole dev team). This decision is tough and further complicated by what you think others expect from you. And, the answer will not be immediately obvious: how can you know what the right choice is when you’ve probably never been in this situation before? Nonetheless, it’s an important question to consider and find your own answer to. <em>How to grow into the role of manager</em> If you do decide that you want to become a “manager”, there are a few things that can help you grow in to this role: <ol> <li>Coach: Today, most CEOs of Silicon Valley start-ups use coaches to develop their CEO skills. The Information recently ran an <a href="https://www.theinformation.com/articles/the-coaches-behind-startup-founders">article on some of the most popular coaches in SV</a>. Choosing a coach is a very personal experience, as they all have different styles and backgrounds and one size does not fit everybody. It’s typically better to find a local coach, but great coaches are scarce in smaller ecosystems so you may need to rely on remote coaching.</li> <li>Mentor: Learning from a mentor is a very powerful thing. The challenge is that there are usually way fewer mentors than there are mentees. One hack is to have “informal” mentors – people you learn from without them directly knowing that they are a mentor for you. I have 2-3 people in my life that I would consider informal mentors; but this relationship works only if you also give back in some way. If you just take and take, these people won’t want to meet with you anymore.</li> <li>Peers: It has always been easy to connect with peers and talk shop in dense ecosystems. It’s now also becoming easier for founders outside of large ecosystems to connect with peers as well. More and more VCs are making sure they build a community around their founders. For example, at Version One we organize approximately ten founder dinners per year in locations like San Francisco, NYC, and Toronto. We always make sure to invite founders from smaller ecosystems to these dinners.</li> <li>360° feedback: To learn how you’re doing as a manager, nothing beats feedback from peers and the people that report to you. Ideally, this feedback should be anonymous so it can be as frank as possible. At <a href="https://www.versionone.vc/amazon-acquires-abebooks/">AbeBooks</a> we had a bi-annual 360° feedback process and while it sometimes hurt, the feedback helped me identify my weaknesses and grow as a manager.</li> <li>Feedback from the whole company: At AbeBooks we did an annual survey of our employees to understand things from where they were sitting: Is the vision of the company clear? Does everybody understand the strategic priorities? Do employees think that we are living up to the value we defined? Such feedback at scale can be incredibly valuable and is the basis for measuring progress over the years.</li> </ol> Scaling from founder to manager is more of an evolution than an overnight transition. Great leaders are made, not born – although we tend to see just the end product and not the hard work that led to the success. The keys to growth are a founder’s self-awareness and a willingness to see feedback as an opportunity to grow, not just a criticism.

<span style="font-weight: 400;">One of the most important decisions for a founder of an early stage company is deciding who should be on the cap table. We’ve written about doing your </span><a href="https://www.versionone.vc/the-reverse-pitch-who-should-you-have-on-your-cap-table/"><span style="font-weight: 400;">due diligence on investors</span></a><span style="font-weight: 400;"> and funds to make sure you find the right partners for the journey.</span> <span style="font-weight: 400;">Lately, we have seen more founders grappling with the question of whether to include a Series A investor in their seed round. Many Series A investors have bigger platforms and can provide a myriad of valuable services to an early-stage company but there may be risks. </span> <span style="font-weight: 400;">For a seed fund like us, our primary focus is to get a company from “seed” to “A.” However, A funds may have different priorities – and the strategies and motivations for investing in seed companies can vary across A funds. For example, some A funds (like our friends at Union Square Ventures) look at a seed investment much like a Series A investment. In the event that they invest earlier, they maintain the same thesis and approach. Other A funds look to invest in seed rounds as a way to get a seat at the table, in order to have more options for a later round.</span> <span style="font-weight: 400;">In addition to being a lower priority, there’s also the potential for signalling risk, i.e. when you take on a Series A investor at seed but they don’t lead your next round.</span> <span style="font-weight: 400;">When looking at a Series A investor, there are ways to assess how your company might rank in the priority order, and identify the possibility of signalling risk. Here are a few considerations:</span> <ol> <li><b> Percent ownership of investor from seed investment</b><span style="font-weight: 400;">:</span></li> </ol> <span style="font-weight: 400;">Series A investors typically target 20-25% ownership for their fund economics to work. If they don’t have this percentage at seed </span><i><span style="font-weight: 400;">and</span></i><span style="font-weight: 400;"> are not leading / upping their position with another investment at Series A, then this could be seen as a negative signal.</span> <ol start="2"> <li><b> Percentage of seed investments that lead to Series A investments</b><span style="font-weight: 400;">:</span></li> </ol> <span style="font-weight: 400;">Many Series A investors allocate a certain amount of capital to their “seed” programs (i.e. “discovery fund”, “greenhouse fund”, etc.) in order to have a seat at the table for the next round. It’s worthwhile to ask how many of their seed deals have translated into Series A that they’ve actually led, and why or why not. You can also go one step deeper and ask what percentage of seed investments have been able to raise Series A from other funds if the fund in question passes on leading the A.</span> <ol start="3"> <li><b> Percentage of seed investments vs. percentage of Series A investments</b><span style="font-weight: 400;">:</span></li> </ol> <span style="font-weight: 400;">To gauge the importance of a seed deal relative to a Series A deal, ask how many seed investments are made each year compared to Series A. This will give you a sense of priority in terms of time and resources. For example, a high ratio (e.g. 1:3) can be a good sign of the importance of seed relative to A at the firm. In contrast, when an A fund invests in many seed companies, this may indicate a “spray and pray” approach and the fund may dedicate less resources toward your development.</span> <span style="font-weight: 400;">That’s why it’s critical to understand a the fund’s underlying philosophy on seed: is it true ownership or just a seat at the table?</span><span style="font-weight: 400;">     </span> <span style="font-weight: 400;">And while these metrics will give you an objective measure of signalling risk, I would also suggest that you speak to founders in the fund’s portfolio who are in/were in a similar situation to you. It’s always important to have both subjective and objective information when making a critical decision like this.</span> <span style="font-weight: 400;">Series A investors can bring a lot of value to an early-stage company and they might be the right partner for you, even with the chance of signalling risk. Just be sure to understand the risks and ask the right questions when considering a Series A investor to lead your seed round. </span>

<span style="font-weight: 400;">The beginning of September is an important time for me as it marks my “VC anniversary.” Five years ago, I was hired as an analyst at Version One and now it’s an absolute privilege to be joining Boris as a General Partner. I’m so grateful for everyone’s congratulatory wishes and kind words last week. These five years have been an incredible journey and I know it’s only the beginning; after all, VC is marathon!</span> <span style="font-weight: 400;">In the past, I’ve reflected on my experiences. </span><span style="font-weight: 400;">Last year</span><span style="font-weight: 400;">, I shared how Boris and I met, along with some thoughts on “<a href="https://www.versionone.vc/4-years/">Moneyball for VC</a>”. And I wrote about some lessons learned </span><a href="https://www.versionone.vc/first-year-lessons/"><span style="font-weight: 400;">1 year</span></a><span style="font-weight: 400;"> and </span><a href="https://www.versionone.vc/3-things-3-years/"><span style="font-weight: 400;">3 years</span></a><span style="font-weight: 400;"> in. </span> <span style="font-weight: 400;">This year, I’m going to do something different. Instead of my traditional “key learnings” blog post, I want to share how I prepare myself to perform at a high level everyday. This is the fuel that has helped me get to this point, and will hopefully enable me to stay sharp and sane on this long journey in a fast-paced environment. So, here are my five pillars: </span> <ol> <li><b> Health</b></li> </ol> <span style="font-weight: 400;">Despite having had </span><a href="https://www.versionone.vc/personal-med/"><span style="font-weight: 400;">4 knee surgeries</span></a><span style="font-weight: 400;"> in the span of 9 years, I’m probably in the best shape of my life - even after “retiring” from Ultimate frisbee. I can attribute this to being disciplined around running 5-7km about 4-5x a week. Before I set out bright and early (530/6am!), I come up with a “goal” of what I want to think through when I run… whether it is the content of this blog post, how to have a difficult conversation, etc. Even better, sometimes my mind is completely clear when I run… to the point where I am essentially meditating and living in the moment.</span> <span style="font-weight: 400;">I also do Pilates every day; this has taught me to be mindful of my breathing while strengthening and balancing me. And of course, there is diet to consider. I’m still very much a foodie, but I do watch what I eat and try to cook as much as possible so I know what I’m consuming. I don’t count calories but this is what works for me:</span> <ul> <li style="font-weight: 400;"><span style="font-weight: 400;">No dairy (I recently found out I’m lactose intolerant, but sometimes cheat with ice cream)</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">No “drinking your calories” (only water and tea, and no alcohol)</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">No caffeine (in order to help with my sleep)</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Avoid added sugar</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Always salads for lunch</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Minimal carbs (though I can’t resist fresh bread or croissants)</span></li> </ul> <ol start="2"> <li><b> Time management</b></li> </ol> <span style="font-weight: 400;">Time is one of our scarcest resources. There are countless productivity hacks, but one of my favourites comes from </span><a href="https://sneakerheadvc.com/my-new-calendar-system-9e0a193ffebc"><span style="font-weight: 400;">Phin Barnes’ blog post</span></a><span style="font-weight: 400;"> on aligning your schedule with priorities. I’ve decided to take on an adapted version of his calendar system. I now try to minimize scheduling meetings further than 2 weeks out. Some advanced scheduling is unavoidable, like board meetings, travel, and conferences. But generally speaking, if a meeting is not critical to take today, it certainly won’t be important two weeks from now. </span> <span style="font-weight: 400;">This “system” is great for a few reasons:</span> <ul> <li style="font-weight: 400;"><span style="font-weight: 400;">It forces me to ask myself if I really need to take the meeting to begin with instead of simply putting it off (since my policy is that I have to take it within 2 weeks).</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">I am not booked up so far in advance that I am unavailable for last minute meetings or serendipitous encounters. Nowadays, it’s very rare that I can’t take a meeting within a day or two if I deem it to be high priority.</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">I now have breathing room in my calendar for thesis development and other projects that we work on at Version One.</span></li> </ul> <ol start="3"> <li><b> Creation</b></li> </ol> <span style="font-weight: 400;">Being an engineer by training and launching Insight Data Science means that there is a part of me that definitely misses “building”. In VC, we are constantly consuming… through our conversations with others, reading, podcasts, etc. I’ve recently realized that this heavy imbalance towards consuming versus creating personally exhausts me. I need creative outlets. To recharge, I play the piano, I write, I draw, I cook, etc. I do things that allow me to use my hands and be creative… and not always be stuck in my head.</span> <ol start="4"> <li><b> Heterogeneity</b></li> </ol> <span style="font-weight: 400;">Silicon Valley is very much a bubble. And it doesn’t help that VC is not just a job, but is also a lifestyle – it just makes it that much harder to separate work from life. I am the daughter of a refugee of the Vietnam war who grew up in inner city Toronto. Silicon Valley is my home, but it’s also far from home. I think it’s important to stay grounded to your roots and maintain a diverse perspective.</span> <span style="font-weight: 400;">Thankfully, investing outside of the SF Bay Area means that I make frequent trips to Toronto, NYC, Vancouver, etc. And while I know these hubs are not fully representative of US/Canada or the world, these visits are a nice reminder of the different (and common) opportunities and challenges facing each region, and how different metropolises live and thrive.</span> <ol start="5"> <li><b> Tribe</b></li> </ol> <span style="font-weight: 400;">We know that VC is a collection of competitive lone wolves. This is why I am so grateful for the handful of investors (outside of Boris and V1) whom I trust and share everything with. All the rumors about venture capital being a lonely business are true. I think back to <a href="https://www.versionone.vc/3-things-3-years/">what I wrote</a></span><span style="font-weight: 400;">:</span> <i><span style="font-weight: 400;">“[VC is] highly intellectual work and it’s important for you to be challenged with diversity of thought. Some of the best advice I have gotten is to surround myself with a tribe – some of my best sparring partners are friends at other funds. Also, work to build a community around you and think of ways in which you can elevate and develop others.”</span></i> <span style="font-weight: 400;">On a personal note, given my share of ups and downs this year, I am extremely grateful for the compassion and support not just from family and friends, but also from my “work family”, my tribe, and the best partner I could ask for in Boris.</span> <span style="font-weight: 400;">If indeed VC is marathon, I’m glad that I’m preparing for the eventual back half – and I’m very proud of and excited by what we are building at V1!</span> <span style="font-weight: 400;">-ange :)</span> &nbsp;

When I started Version One <a href="https://www.versionone.vc/announcing-version-one-ventures/">over six years ago</a>, I started it as a single GP firm with no defined plan to ever add a partner and build a “franchise.” So it is with tremendous happiness that I can announce today that Version One now consists of two General Partners with <a href="https://twitter.com/ATKingyens">Angela</a> joining me in the partnership. Building VC partnerships is very hard. Though there are many examples of excellent partnerships, there are probably just as many examples of dysfunctional ones that simply don’t work. The challenge of meshing people and personalities is one of the main reasons why many single GPs decide to stay as is – a single investment partner. But a productive partnership is an incredibly powerful thing to see in action: great partners push and challenge each other every day and they turn diverse perspectives into constructive discussions on how to invest and what to invest in. The result is much greater than the sum of all parts! Having worked with Angela over the past five years, I am proud that we have built such a productive partnership that has made Version One as an organization much stronger than its two individuals. Angela is an engineer by training, obsessed with data, and a proud Torontonian who now calls the SF Bay Area home. Venture Capital wasn’t always on her radar. After obtaining her PhD in Operations Research and Engineering, she co-launched <a href="http://insightdatascience.com/">Insight Data Science</a>, a YC-backed start-up designed to help PhDs transition from academic research to careers in industry via a six-week training program. Her desire to help others and work with people who are bringing about positive transformational change led her to VC, where she has had a tremendous impact. Angela’s background in data science has been uniquely helpful to our portfolio companies. She has helped founders hire data scientists, train new hires, and has also acted as a data scientist in residence. But as much as she loves data, Angela strongly believes that VC <em>is also about people and values</em>. She looks for founders who aren’t just driven by monetary gain, but are passionate to make the world a better place. Angela has sparked some of the most productive and provocative discussions within V1. She developed our <a href="https://www.versionone.vc/on-healthcare/">healthcare</a>/<a href="https://www.versionone.vc/healthcare-thesis-update/">bio thesis</a>. Since she was <a href="https://www.versionone.vc/congratulations-angela-tran-kingyens-newest-principal/">promoted to principal</a>, she has led five investments – most of them in the healthcare/bio space and not yet announced. For those of you who have already worked with Angela, you know what kind of person and investor she is: always helpful and supportive, but able to push back and call out an inconvenient truth when necessary. <span lang="EN-CA">This is an exciting time for our firm. Adding Angela as a GP effectively increases our partnership by 100% <span style="font-family: Wingdings;">:)</span></span><span lang="EN-CA">. We’ve opened the search <a href="https://www.versionone.vc/hiring-associate/">to hire an associate as our third team member</a>. And, we’re building the “franchise” even more – stay tuned for more news soon!</span>

<span style="font-weight: 400;">Our first investment in healthcare was five years ago in </span><a href="https://figure1.com/"><span style="font-weight: 400;">Figure 1</span></a><span style="font-weight: 400;">, a platform for viewing</span><span style="font-weight: 400;"> </span><span style="font-weight: 400;">and discussing real-world medical cases with healthcare professionals. This investment shaped our original thesis in the category.</span> <span style="font-weight: 400;">Figure 1 plays outside the healthcare care system; it’s permissionless innovation, like Yammer or Slack in the enterprise. As we wrote in our </span><a href="https://ondigitalhealthcare.com/part-IV"><span style="font-weight: 400;">Digital Healthcare blog series</span></a><span style="font-weight: 400;">, “</span><span style="font-weight: 400;"><i>Even more complex than the enterprise, the healthcare market is muddled by byzantine incumbency, legacy, and regulation. We are excited to have invested in one network,</i> </span><a href="https://figure1.com/"><i><span style="font-weight: 400;">Figure 1</span></i></a><i><span style="font-weight: 400;">, which appears to have found the rare seam where a network can flourish with minimal permission and no system-level integrations.”</span></i> <span style="font-weight: 400;">Over the years though, our thesis has moved closer “inside” the system. We have realized that in most cases, bottoms-up distribution or the “consumerization” of software in healthcare has its limits. For example, a digital health app can offer consumers greater access to certain services at a more affordable price, enabling it to collect valuable health data directly. However, while D2C is good for rapid adoption into the market, the “patient information layer” is ultimately a thin wedge and not powerful enough to disrupt how services are delivered by the system itself.</span> <b>How does our healthcare thesis look today?</b> <span style="font-weight: 400;">Last December, I shared that </span><a href="https://www.versionone.vc/bio-thesis/"><span style="font-weight: 400;">genomics and biosciences would be an important theme</span></a><span style="font-weight: 400;"> for us in 2018. At that time, our bio/healthcare thesis focused on startups taking a “full stack” / vertically-integrated approach with the belief that data is the key creator of value. That is, we</span><span style="font-weight: 400;"> </span><span style="font-weight: 400;">were excited by companies that:</span> <ul> <li style="font-weight: 400;"><span style="font-weight: 400;">Make the collection of high fidelity health data easy, accessible and affordable for patients and medical professionals;</span><span style="font-weight: 400;">      </span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Empower consumers with control and understanding of their own personal health data (i.e. take a bottoms-up approach outside of the regulated healthcare system);</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Have the potential to be a “biobank” with data that can be shared safely across networks;</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Can provide personalized recommendations and/or enable others to build applications on top of their open platform.</span></li> </ul> <span style="font-weight: 400;">Nine months later, the “full stack” thesis still holds true with one big change: we are now more open to investing in opportunities that require FDA clearance or approval. In the past, we had shied away from this for the obvious reasons of speeding up time to market.</span> <span style="font-weight: 400;">But now, we believe that in order to make a full stack D2C product more powerful, it needs to be cleared/approved by the FDA in order to gain a higher probability of becoming a new gold standard for diagnosis and/or treatment, which then has the potential to transform the delivery of healthcare as it can change the cost structure altogether.</span> <span style="font-weight: 400;">In other words, we like:</span> <strong>D2C (for rapid adoption) --&gt; FDA clearance, approval --&gt; gold standard --&gt; cost structure change</strong> <span style="font-weight: 400;">We understand the risks and greater capital requirements of seeking FDA approval, but our big takeaway over the past few months is that clinical-grade devices or diagnostics that touch the end user to collect health/bio data (which can be leveraged for network effects) are the kinds of innovation we need to transform healthcare.</span> <span style="font-weight: 400;">If you’re looking to reinvent how healthcare is delivered and share this same view, please reach out to us. We’re also looking forward to sharing two investments that we made which follow this expanded thesis soon.</span>

I’ve always thought that the concept of a decentralized prediction market like <a href="https://www.augur.net/">Augur</a> or <a href="https://gnosis.pm/">Gnosis</a> is one of the most interesting and crypto-native ideas. Just imagine creating millions of small markets around any potential outcome in the world…from sports to elections, weather and stock prices. So it was great to see Augur go live a few weeks ago (<a href="https://medium.com/@AugurProject/augur-launches-794fa7f88c6a">https://medium.com/@AugurProject/augur-launches-794fa7f88c6a</a>) and I took the opportunity to play around with the product. Here are a few of my observations: <ul> <li>While still early, the platform is scaling fast and <a href="https://medium.com/@AugurProject/augur-weekly-report-august-8th-825528be76c7">more than $1.6m USD</a> has been staked one month into it – you can watch the different prediction markets here: <a href="https://predictions.global/">https://predictions.global/</a></li> <li>Like almost all crypto projects at this stage, the UI is raw and still far from being ready for mainstream users. The desktop client seems pretty unreliable at this stage and even experienced users are struggling with UX / design decisions (just watch the Augur Reddit <a href="https://www.reddit.com/r/Augur/">https://www.reddit.com/r/Augur/</a>). Having said that, the team is shipping improvements on a weekly basis and the platform is improving very quickly.</li> <li>Augur is probably the best example so far of all the questions that decentralized projects are raising and that will need to be answered: How will regulators approach prediction markets? How do you deal with moral questions, e.g. the creation of assassination markets (of which we are seeing the <a href="https://www.reddit.com/r/Augur/comments/91bs7m/isnt_it_illegal_to_create_a_financial_incentive/">first indications on Augur</a>)?</li> <li>What excites me the most is the rawness of the platform. It feels like the early days of Twitter when a community of engaged users start using a product and shape the product with their use. Here is an early example of a user using <a href="https://twitter.com/NTmoney/status/1022921615363989505/photo/1">Augur as feature bounties</a>: https://twitter.com/NTmoney/status/1022921615363989505/photo/1 In these cases, it is always a bit unclear where things will end up, but it is incredibly exciting to watch.</li> </ul> Over the next 12 months, we will hopefully see a bunch of crypto projects launch and it is energizing to move from the whitepaper phase to live product. I’m excited to follow these product launches!

The predominant narrative among Silicon Valley start-ups has been: <em>don’t open a second office until you have reached 100+ employees. </em>Yes, there are tremendous advantages when everybody works out of one headquarters. However, the pressure of sky-high housing costs, salaries and competition for suitable candidates is causing start-ups and investors to rethink their approach to distributed teams. Since 2011, <a href="https://sfcontroller.org/sites/default/files/Documents/Economic%20Analysis/180184_economic_impact_final.pdf">residential rents</a> in San Francisco have doubled and condo prices have quadrupled. And, prices will only continue to climb if and when SF-based companies like Uber, Lyft and Airbnb go public. A recent article <a href="https://www.theinformation.com/articles/bay-areas-high-costs-drive-away-some-tech-firms?jwt=eyJhbGciOiJIUzI1NiJ9.eyJzdWIiOiJtb2xseXdlaGxhZ2VAZ21haWwuY29tIiwiZXhwIjoxNTY0NTMzMDg0LCJuIjoiR3Vlc3QiLCJzY29wZSI6WyJzaGFyZSJdfQ.6-rTGU6mCoRKOxn9vk4GKn2_oNA">“Bay Area Bay Area’s High Costs Drive Away Some Tech Firms”</a>  details numerous examples of Silicon Valley start-ups that are moving their headquarters or opening a second location in places like Austin, Denver and Atlanta  - and many engineers, marketers, even executives are considering moving. Among our Silicon Valley-based portfolio companies, not a single company past “A” does not have a distributed team. When it comes to opening a second location, there are two common approaches: <strong>One: Open a location built around specific and well-defined tasks, e.g. platform integration or customer service. </strong> We have portfolio companies that are building teams in secondary cities in the U.S. for customer service and in Eastern Europe and India for development. This is a great way to quickly scale non-core activities at much lower cost. And as long as the task at hand and the interface to headquarters are clearly defined, this approach is very effective. The biggest challenges are typically: a) finding a local leader that can manage and scale the teams and b) finding somebody in the company that can effectively manage the interface to HQ. <strong>Two: Distribute team members across the board.</strong> This approach is harder to pull off and most teams usually end up with a mix of headquarter and distributed team members. Physically separating a team usually works best in areas where a general playbook exists, such as sales &amp; marketing, and where teams don’t need to get together for frequent brainstorming sessions. For this method to work, the company needs to have the structure and communication channels of a distributed company. It’s not going to work if there are offline discussions happening at headquarters and team members in the second location are left in the dark or updated as an afterthought. Fortunately, the tools to set up communication for distributed teams have never been better (e.g. Slack, Zoom). Last but not least, companies with distributed teams need to work harder to create a tight culture absent of regular offline interactions. Bringing everyone together in person on a regular basis and using online tools like <a href="https://www.donut.ai/">Donut</a> can help in this regard. Given the ongoing talent war in Silicon Valley, we should continue to see an acceleration of companies looking to grow headcount elsewhere – although I imagine that teams that need to collaborate closely on a daily basis (early phases of product development) will still stay centralized. It will be interesting to watch how best practices and tools for distributed teams evolve over time.

<span style="font-weight: 400;">VC is an apprenticeship industry. When I joined Version One five years ago, I would have never guessed that I would be where I am today. So much of who I am today has to do with the fact that Boris spent a ton of time teaching and mentoring me, despite our different locations. From Day 1, he was dedicated to my personal and professional development. And I am so grateful for this. I often joke that I have gone through the Wertz School of Venture Capital :)</span> <span style="font-weight: 400;">As a result, we are now a strong partnership of two… and while we have the capacity to do more deals with two partners, we also recognize that we could use some support. Since 2012, we have made over <a href="https://www.versionone.vc/our-portfolio/">40 investments</a> and have been busy building our fund, expanding and deepening our network, and most gratifyingly, working with our portfolio companies in their pursuit to transform their industries and the world.</span> <span style="font-weight: 400;">So, we are excited to announce that we’re looking to augment our team. We’re hiring an associate for a two- to three-year role where he/she will learn about the business of venture capital and get the opportunity to work with some really interesting startups.</span> <span style="font-weight: 400;">The primary responsibility will be to help manage the day-to-day activities of the fund, including:</span> <ul> <li style="font-weight: 400;"><span style="font-weight: 400;">Identifying new and interesting entrepreneurs and companies that align with our investment thesis on network effects</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Performing market research and due diligence for potential investments</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Reporting for our investors, including writing quarterly updates and preparing LP advisory board meetings</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Working with existing portfolio companies, including helping out with hiring, financial modeling, and research</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Executing projects of your own direction that help Version One and/or our portfolio companies</span></li> </ul> <span style="font-weight: 400;">What are we looking for? Our future teammate is someone who demonstrates:</span> <ul> <li style="font-weight: 400;"><span style="font-weight: 400;">Native understanding of the startup ecosystem, and what network effects are</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Strong written and oral communication skills</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Good product instincts – you get what a great product is made of</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">S</span><span style="font-weight: 400;">trong interpersonal skills – you’ll often be talking to entrepreneurs and other investors</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Data-driven thinking with good Excel modeling skills</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Ideally, prior design or programming experience or work in an investment or Internet-related position</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">Bonus: knowledge of crypto/blockchain and/or genomics/biosciences/healthcare</span></li> </ul> <span style="font-weight: 400;">Because Version One has portfolio companies from SF to New York, Vancouver to Toronto, you should also be excited about hitting the road.</span> <span style="font-weight: 400;">We are a very close partnership and are passionate about finding startups that will transform the world. We are serious about our work, but never take ourselves too seriously (we have been told <a href="https://www.versionone.vc/processing-fear/">we are a lot of fun</a>…). You will be working closely with both Boris and myself on a daily basis, and we are both strong believers in the need to pay it forward and develop others.</span> <span style="font-weight: 400;">If you’re interested in the position, please reach out to us. </span> <span style="font-weight: 400;">What we’d like to know:</span> <ul> <li style="font-weight: 400;"><span style="font-weight: 400;">Why do you want to be in VC, why Version One, why now?</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">What areas are of interest to you when it comes to investing and why?</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">What is an example of an initiative you took or side project you’ve worked on outside of work or school?</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">At least 3 links that best describe you (LinkedIn, Twitter, etc.)</span></li> </ul> <span style="font-weight: 400;">The position is available immediately and is based in San Francisco, CA.</span> <span style="font-weight: 400;">If you have questions, please leave them in the comments below. Looking forward to hearing from you!</span> &nbsp;

<span style="font-weight: 400;">Here’s a question that we have been getting a lot lately: </span><i><span style="font-weight: 400;">Do you still invest in marketplaces? </span></i><span style="font-weight: 400;"> </span> <span style="font-weight: 400;">The answer is YES! We love their network effects and continue to invest in them.</span> <span style="font-weight: 400;">In a </span><a href="https://twitter.com/andrewchen/status/1016371636260495360"><span style="font-weight: 400;">tweetstorm last week</span></a><span style="font-weight: 400;">, our friend Andrew Chen listed the 20 best links he’s seen on marketplaces and included us on the list (#11 - we are so honoured!). This reminded me that it has been awhile since we’ve touched upon this topic on our blog. In fact, it has been over 4 months since we published the second edition of “</span><a href="https://www.versionone.vc/marketplaces-guide-ed2/"><span style="font-weight: 400;">Our guide to marketplaces</span></a><span style="font-weight: 400;">”. In that handbook, our goal was to aggregate all the amazing content out there. We purposely kept the tone factual rather than prescriptive. We didn’t want the e-book to be biased or explicitly state our marketplace thesis because we wanted it to be a helpful resource and not an investor checklist.</span> <span style="font-weight: 400;">With that said, here are some opportunities we see for the next generation of large, venture-scale marketplace businesses:</span> <b>Product marketplaces</b> <span style="font-weight: 400;">With Amazon capturing </span><a href="https://retail.emarketer.com/article/amazon-now-has-nearly-50-of-us-ecommerce-market/5b48c542ebd4000b24140992"><span style="font-weight: 400;">nearly 50% of US e-commerce market</span></a><span style="font-weight: 400;">, it may seem that there isn’t much room for a new marketplace focused on products. However, over the past few years, we’ve seen new marketplaces succeed by differentiating through a new shopping experience (i.e. mobile) and/or new or differentiated supply. For example, </span><a href="https://www.wish.com/"><span style="font-weight: 400;">Wish</span></a><span style="font-weight: 400;"> has given shoppers direct access to Chinese sellers; </span><a href="http://letgo.com/"><span style="font-weight: 400;">LetGo</span></a><span style="font-weight: 400;"> and </span><a href="https://offerup.com/"><span style="font-weight: 400;">OfferUp</span></a><span style="font-weight: 400;"> have connected local buyers and sellers with a visually appealing mobile-first experience; and our portfolio company </span><a href="https://www.headout.com/"><span style="font-weight: 400;">Headout</span></a><span style="font-weight: 400;"> has taken the supply of offline attractions, activities and events online as well as mobile for travellers to book on-demand. In addition, there are opportunities to build a marketplace around communities that are passionate about a specific product category, i.e. </span><a href="https://www.goat.com/"><span style="font-weight: 400;">GOAT</span></a><span style="font-weight: 400;"> for sneakers.</span> <b>Services marketplaces</b> <span style="font-weight: 400;">Uber and Lyft have created one of the largest marketplace categories. They’ve empowered a brand new group of participants - growing the number of sellers (drivers) and transactions (rides), and also transforming the way we view shared transportation (i.e. increased popularity of bikes and scooters).</span> <span style="font-weight: 400;">The question is: what are the characteristics of other services marketplaces that can scale to this level? </span><a href="https://www.versionone.vc/why-there-wont-be-an-uber-in-every-vertical/"><span style="font-weight: 400;">Not every service category is right</span></a><span style="font-weight: 400;"> for becoming the “Uber for X.” At Version One, we are more inclined to invest in businesses where the services are as commoditized as products so there isn’t supplier preference nor disintermediation. We need to see that buyers actually use the marketplace more than once and not just for a lead.</span> <b>B2B marketplaces</b> <span style="font-weight: 400;">Alibaba is a household name for anyone doing business in or purchasing from China, and the company has grown into an international e-commerce empire. What are the key characteristics that enabled it to flourish? We think it’s </span><i><span style="font-weight: 400;">simplicity </span></i><span style="font-weight: 400;">and</span><i><span style="font-weight: 400;"> discovery</span></i><span style="font-weight: 400;">.</span> <span style="font-weight: 400;">We’ve been pitched the promise that “we’re going to replace the broker” by B2B marketplace builders many times. The broker, after all, represents an inefficiency that one can possibly eliminate with technology. And by doing so, the platform can deliver on the value proposition of charging a lower rake than the traditional “middleman” who does most work manually.</span> <span style="font-weight: 400;">However, B2B transactions are generally complex, requiring many steps and communication between buyer and seller to complete. And while the GMV per transaction is likely large with B2B deals, it can be harder for the marketplace to justify its take. If technology makes the transaction “too easy” to complete, then buyers and sellers might wonder why they are giving a percentage of their transaction away. On the other hand, streamlining the transaction is important for higher margins.</span> <span style="font-weight: 400;">At Version One, we’re looking for B2B marketplaces that 1) promote discovery (buyers feel compelled to find new vendors despite the traditionally complex transaction) and where 2) the transaction is simplified and completed online (likely because it’s for a commoditized product). </span> <span style="font-weight: 400;">If you are building a marketplace – and are thinking about how to overcome the challenges in your category – we’d love the opportunity to get to know you and learn more.</span>

<span style="font-weight: 400;">Happy Canada Day and Fourth of July to our friends and colleagues on both sides of the border. We hope everyone is having a great start to summer.</span> <span style="font-weight: 400;">Here’s a quick recap of the key activities, news coverage and announcements that occurred in Q2. Keep in mind that these are just the things that have been announced publicly; as always, other equally important things have been happening behind the scenes too.</span> <b>Funding announcements and accolades</b> <span style="font-weight: 400;"><a href="https://www.goabstract.com">Abstract</a>, a platform that’s changing the way modern design teams work together and collaborate, </span><a href="https://www.prnewswire.com/news-releases/abstract-raises-16m-to-continue-building-the-first-system-of-record-for-modern-design-teams-300654012.html"><span style="font-weight: 400;">announced their $16M Series B</span></a><span style="font-weight: 400;"> led by Scale Venture Partners.</span> <span style="font-weight: 400;"><a href="https://www.outreach.io">Outreach</a> announced their </span><a href="https://www.outreach.io/blog/announcing-our-series-d"><span style="font-weight: 400;">$65m Series D</span></a><span style="font-weight: 400;"> led by Spark Capital. They were also recognized as one of the best places to work (and we agree), so congrats to the entire team!</span> <span style="font-weight: 400;">Earlier this year, we invested in <a href="https://celo.org">Celo</a>. This quarter, they lifted the veil and announced what they’re working on. The startup aims </span><span style="font-weight: 400;">to remove the barriers for large-scale adoption of cryptocurrencies as means-of-payment. You can read more about them </span><a href="https://medium.com/@celo.org/hello-from-celo-34bf195cb99"><span style="font-weight: 400;">here</span></a><span style="font-weight: 400;">.</span> <b>Crypto Listening</b> <span style="font-weight: 400;">As you know, we spend significant time on crypto here at Version One. We are excited to think about how crypto will play out over the coming years and how we can should build a firm for crypto as it matures. If you want to dive into the world of crypto this summer, here are some recommended podcasts/videos:</span> <span style="font-weight: 400;">Boris talked crypto with </span><a href="http://www.thetwentyminutevc.com/boriswertz2/"><span style="font-weight: 400;">Harry Stebbings on 20VC</span></a><span style="font-weight: 400;">. They discussed where </span><span style="font-weight: 400;">the crypto market is today, how it compares to the Dotcom bubble of 2000 and why crypto is the biggest disruptor to hit VC in a decade.</span> <span style="font-weight: 400;"><a href="http://www.citizenhex.com">Citizen Hex</a> was on an episode of </span><a href="https://soundcloud.com/navigatorltd/ethereum-canadas-unicorn"><span style="font-weight: 400;">Banking on Blockchain</span></a><span style="font-weight: 400;"> podcast, with the theme Ethereum: Canada’s Unicorn.</span> <span style="font-weight: 400;">Watch Fred Wilson of USV, another investor in <a href="https://www.cryptokitties.co">CryptoKitties</a><strong>, </strong></span><a href="https://avc.com/2018/05/video-of-the-week-dieter-shirley-and-non-fungible-tokens/?utm_source=dlvr.it&amp;utm_medium=twitter"><span style="font-weight: 400;">speak with Dieter Shirley</span></a><span style="font-weight: 400;"> of CryptoKitties (who came up with the ERC721) talk about non fungible tokens.</span> <b>Other news and highlights across the portfolio</b> <span style="font-weight: 400;">The </span><a href="https://blog.coinbase.com/coinbase-index-fund-is-open-for-investment-61217606f1ef"><span style="font-weight: 400;">Coinbase Index Fund</span></a><span style="font-weight: 400;"> is open for investment. </span><span style="font-weight: 400;">At this stage, the fund is open to those who wish to invest $250,000 to $20M.</span> <span style="font-weight: 400;">San Francisco Business Times had a great profile on how </span><a href="https://www.bizjournals.com/sanfrancisco/news/2018/06/06/how-this-shipping-startup-is-winning-the-fight.html"><span style="font-weight: 400;">Shippo is taking on Amazon</span></a><span style="font-weight: 400;"> in the shipping fight.</span> <a href="https://www.cryptokitties.co">Gencove</a><span style="font-weight: 400;"> continues to focus on developing their low-pass whole-genome sequencing tech to replace genotying arrays. You can read about it </span><a href="https://www.genomeweb.com/sequencing/gencove-bets-low-pass-whole-genome-sequencing-replace-genotyping-arrays#.Ww74a_vzAWZ.twitter"><span style="font-weight: 400;">here</span></a><span style="font-weight: 400;">.</span> <span style="font-weight: 400;"><a href="https://www.cryptokitties.co">Blockstack</a> announced the first universal app store for decentralized apps. You can find apps on Ethereum, Blockstack, IPFS, Steem, EOS and more. And if you’re a dapp developer, submit your decentralized app today at </span><a href="https://app.co/"><span style="font-weight: 400;">https://app.co</span></a> And, <a href="https://www.boosterfuels.com">Booster Fuels</a><span style="font-weight: 400;"> (on-demand fuel delivery) </span><a href="https://www.cspdailynews.com/fuels-news-prices-analysis/fuels-news/articles/demand-fueling-company-adds-fleet-service"><span style="font-weight: 400;">added Fleet</span></a><span style="font-weight: 400;"> to their service offering.</span> <span style="font-weight: 400;">We’re already moving full-steam into the third quarter. </span><span style="font-weight: 400;">To make sure you don’t miss any of the action, follow us on <a href="https://twitter.com/VersionOneVC">Twitter</a></span><span style="font-weight: 400;">. Happy summer everyone!</span>

In the early days of a start-up, almost all decisions in the company are driven by the judgment calls of the founding team. During this stage, there’s a limited set of experiences to draw from and no playbook. Most of the situations and questions are occurring for the first time, and founders need to quickly decide what’s best for the company. This makes for super fast decisions – and mostly right decisions if the intuitions of the founders are good. But as companies scale, process and policies are introduced – and judgment calls are moved down the priority ladder. Process takes over judgment for a few reasons. First, founders can’t scale beyond 24/7 and they cannot weigh in on every single situation a company faces. Then, as senior managers join the company, they bring along playbooks they have seen work in other companies. And third, some areas require formal policies as you scale (e.g. HR, finance, etc.). However, process and policies have one well-known disadvantage – they slow everything down. Let’s take an example from product management. The process for introducing a new feature usually involves multiple steps: conduct user interviews, write the spec, get internal buy-in from stakeholders, plan out the resources to build the feature, build the feature, run a/b tests, review the results, and then decide to launch (or not launch) the feature. But there are times when a person with great judgment abilities in product design can clearly see the upside of a feature. In this case, he or she might skip a few steps in the process and bring the feature to market much faster. As you scale your organization, think about putting people with great judgment into positions where they can create tremendous value by applying their judgment. And then give them the freedom to make these judgment calls. The decision-making and speed of execution still might not be as fast as those days when only the founding teams was around. But you keep a lot of the agility of the early days while still having a scalable process. <em>P.S.: Thanks to <a href="https://twitter.com/tobi">Tobi</a> for clarifying my thoughts on this post.</em>

Part of the job of a VC is to deliver on the promises they made to investors when raising the fund. Every VC defines their investment scope by a combination of <em>thesis</em> (e.g. invest in network-effect driven business), <em>thematic interest</em> (e.g. invest in AR / VR companies), <em>stage</em> (single stage versus lifecycle investment), <em>ownership targets</em>, and <em>geography</em>. For example, our <a href="https://www.versionone.vc/philosophy/">sweet spot at V1</a> is to invest in early-stage companies and platforms that leverage network effects and are based in North-America. When we’re pitched with opportunities that are outside this focus, it’s usually a quick no. This is why it’s so important for entrepreneurs to do their research beforehand and identify a short list of target investors – these will be the investors who will not only be a perfect fit for you, but where there’s also a decent possibility of closing. If you’re raising a seed round, don’t target a firm that primarily focuses on later rounds. If you are a healthcare startup, you shouldn’t waste your time pitching a firm who’s primarily focused on AR right now. Mark Suster <a href="https://bothsidesofthetable.com/planning-your-fund-raising-measure-twice-cut-once-1c6211346b5">wrote a great post</a> outlining some of the basic research you should do before starting your fundraising. With all that said, there are times when VCs may deviate from their investment focus. Such exceptions are rare, but they happen. That’s what happened when we invested in <a href="https://techcrunch.com/2017/08/10/coinbase-raises-100m-at-a-1-6b-valuation-amid-explosive-growth/">Coinbase’s Series D</a> last year. What will compel a VC to stray so far from their sweet spot? Making an exception is a signifcant risk and is a lot harder to explain to investors should the deal go south. In the case of Coinbase, we had a pretty strong conviction based on several factors: <ol> <li>As early as late 2016, we had a specific <a href="https://www.versionone.vc/cryptocurrencys-second-act-rise-ethereum-whats-store-2017/">thesis on the blockchain/crypto</a> being the next computing platform and we had made several investments against that thesis already, including <a href="https://blockstack.org/">Blockstack</a> and <a href="http://www.citizenhex.com/">Citizen Hex</a>. Having a thesis and a few investments against the thesis made evaluating an exception easier.</li> <li>Crypto wallets and exchanges are not only the backbone of this new financial system, but Coinbase specifically had emerged as the clear category leader. They had built large moats around their business with their brand, user-friendly interface and approach to regulation, among other things.</li> <li>Even at the Series D valuation we felt confident that there was an opportunity that our investment would pay back the whole fund. Being a potential fund maker is one of our criteria for every single investment.</li> </ol> Investors are going to limit their exceptions to truly special opportunities. We think Coinbase was and is one of these opportunities and eight months into the investment, we feel very good about the decision we made. But as an entrepreneur, you need to keep in mind that such exceptions are few and far between. It’s much better to do your research upfront and focus on those investors who are the right fit.

<span style="font-weight: 400;">On April 19th, I swore in as an American citizen after living in the US for nearly eight years. I am lucky that my immigration process was pretty frictionless.</span> <span style="font-weight: 400;">Those of you who know me understand that I’m a proud Canadian. I’ll likely never give up the “u” in words like colour and behaviour. And one of the first things that someone learns about me is that I’m from Toronto.</span> <span style="font-weight: 400;">The naturalization ceremony was emotional for me. I cried while citing the Pledge of Allegiance, because for that moment, I thought I had become less Canadian. And it didn’t help that so many of my American friends teased me about why I would choose to get my US citizenship during such a trying time for the country.</span> <span style="font-weight: 400;">I have been wanting to write about this experience for the past month, but needed some time to reflect on my feelings. Thankfully, the tears were very short-lived; they ended right after citing the pledge. And now I can confirm why becoming an American was the right decision for me.</span> <b>It’s about freedom.</b> <span style="font-weight: 400;">Practically speaking, I now have the ability to vote for the leader of the free world. And given the current political situation, this seems more important than ever. I can even run for office and make a direct political difference. After years of “behaving” like an American (i.e. paying taxes), why not have the same rights as one?</span> <span style="font-weight: 400;">And from an emotional standpoint, I now feel that the US is my home. I’m no longer just a visitor and temporary resident in the country where I’m living and contributing to.</span> <span style="font-weight: 400;">The freedom has shifted my state of mind. It’s a subtle change, but will have a big impact moving forward, bringing both a certain peace and empowerment.</span> <span style="font-weight: 400;">As ironic as this seems, being American means that I can spend more time in Canada (I’m half joking, but it is nice to have the option). And, my citizenship allows Version One to have a permanent presence in the US as we continue to invest all over North America. I realize that I am even more of an official bridge now between Canada and the US. I like to think that the founders who we back can have the best of both worlds when we have strong networks on both sides of the border.</span> <span style="font-weight: 400;">And finally, I often playfully reassure my Canadian family and friends that while “you can take the girl out of Canada, you can’t take Canada out of the girl”. But, jokes aside, I’ve learned that you can actually “make room” to become a more well-rounded and diverse individual. And at this critical time in our history, being American does that for me.</span> <span style="font-weight: 400;">So, to my motherland: thank you for providing so much to make me the person that I am. And to my new homeland: thank you for welcoming me with open arms. As I truly believe that we are global citizens, this citizenship affords me more freedom to make a greater impact in the world.</span>

<span style="font-weight: 400;">When we think about pitches, most of the focus is on entrepreneurs pitching investors for capital. But VC can be competitive, particularly for interesting deals, and in many cases, the pitch meeting is a two-way street. Some of the best later-stage investors walk founders through </span><span style="font-weight: 400;">an institutionalized “reverse” pitch.</span><span style="font-weight: 400;">  If you find yourself in the fortunate position of being oversubscribed, you’ll likely look to build the best investor base and find the right partners for your journey.</span> <i><span style="font-weight: 400;">How do you decide who you should have in your cap table?</span></i> <ol> <li><b> What is important to you? </b><span style="font-weight: 400;">Are you looking for help and expertise in hiring, product strategy, customer development, fundraising, coaching, therapy, etc.? Ask for specific examples of how a prospective investor has delivered in the areas you need support.</span></li> <li><b> How accessible is the investor?</b><span style="font-weight: 400;"> Outside of formal check-ins (i.e. board meetings) that you might have, is the investor easy to reach when you need him/her ad hoc? At Version One, we effectively act as a hotline: we strive to be the first investor that our founders call and often times, it is because we are the most responsive. On the flip side, you also want to know what expectations an investor has of you: somewhere on the spectrum of helicopter parent to uninvolved check writer… what will work best for you?</span></li> <li><b> How do all the partners of the fund feel? </b><span style="font-weight: 400;">Every fund has its own investment decision-making process. Some require all partners or a certain number/percentage of them to be on board whereas others require a single champion. If you sense that you’re in a situation where the entire partnership didn’t reach consensus but you have advocate(s) enthusiastic about backing you, take the time to understand why by meeting and speaking to everyone in the firm. And more importantly, learn whether and how all partners buy into a deal of non-consensus nature after the fund makes a commitment.</span></li> <li><b> What’s the investor’s thesis? </b><span style="font-weight: 400;">How well are you aligned with the potential investor? If the VC were to build your company, what would s/he do? What is his/her vision for your future? How well do they understand your challenges? By asking him/her to pitch your idea back to you, you will get a better sense of his/her conviction and passion for your business. This is a great way to see how strong of an advocate they will be for you.</span></li> <li><b> What are the experiences of other founders in the investor’s portfolio? </b><span style="font-weight: 400;">It’s important to look at not just the big successes (which you’ll probably hear about), but also the failures. What did that investor do for a founder when times were really tough (i.e. co-founder problems, personnel issues, company pivot, customer fall out)? You need validation that an investor will actually be there for you in the capacity that you need them.</span></li> </ol> <span style="font-weight: 400;">Lastly, dig down into how an investor behaved during new financing rounds or during exits. Ask other founders and co-investors if the VC has always acted in the best interest of the company or just themselves. In the former case, I’ve heard many stories of VCs unwilling to give up their pro rata rights to the point where it jeopardizes the round from happening and have even threatened to sue. For the latter: how has the VC supported companies as they exit for a profit, capital back and at a loss?</span> <span style="font-weight: 400;">At Version One, our reverse pitch is a little different than a platform fund’s pitch since we’re a team of two. We don’t have the scale of a platform fund, but it doesn’t mean that we (or other smaller investors) are not value-add.</span> <span style="font-weight: 400;">We are working on developing a “manifesto” of what founders can expect from us and hold us accountable for after we’ve invested. We currently have a biweekly check-in call with each CEO where we talk about everything from business strategy to hiring, fundraising, mental wellness, and more. But we plan to “formalize” our learnings and best practices on board meetings, metrics, building purposeful culture (including diversity and inclusion), compensation, coaches, hiring checklists for specific roles, list of best service providers and more.</span> <span style="font-weight: 400;">We hope that this exercise will not only bring some scale to the functions we’ve been doing over the years, but will also allow new and prospective founders to better understand what they can expect as part of the Version One family.</span> <span style="font-weight: 400;">In the meantime, we’d love to hear how you decided on your investor syndicate? What reverse pitch resonated with you? And more importantly, in working with your favourite investors, what has moved the needle?</span>

I recently returned to <a href="https://twitter.com/HarryStebbings">Harry Stebbings</a>’ <a href="http://www.thetwentyminutevc.com/">20 Minute VC Podcast</a>, where we chatted about all things crypto…where the crypto market is today, how it compares to the Dotcom bubble of 2000 and why crypto is the <a href="https://www.versionone.vc/blockchain-disruptive-venture-capital/">biggest disruptor to hit VC</a> in a decade. You can listen to the episode<a href="http://www.thetwentyminutevc.com/boriswertz2/"> here</a>. We covered a wide range of crypto topics including: <ul> <li>How does crypto fit into the historical context – where are we now (in terms of technology and financial) compared with the Internet boom of 1995 to 2000</li> <li>Why crypto is going to be the biggest disruptor to hit VC in a decade – what do VCs need to do to not get left behind and what will it take for the existing institutional LP class to embrace crypto</li> <li>Thoughts on the Telegram ICO and can you incorporate crypto into an existing platform or do you need to build from the ground up</li> <li>What’s the future of VC in tandem with the world of crypto and ICOs?</li> <li>My required crypto reading… and much more</li> </ul> Thanks to Harry for the great conversation and having me on the 20VC podcast again.