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

We recently organized another crypto dinner in Toronto, bringing together the local community and a bunch of people that were in town for <a href="https://edcon.io/">EDCON</a> (the Community Ethereum Development Conference). Most of the dinner conversation centered around recommendations on how the Ethereum Foundation can play a more active role in developing the ETH ecosystem. Throughout the evening, it became evident to me how much crypto is caught between two sides: purity and greed. In one camp are the purists – the “original” crypto community that has been working on crypto projects before it was cool. These individuals are driven by the singular mission of developing a decentralized technology platform. They care very little about the monetary upside. There’s a strong open source spirit here: build cool things and make them available to everybody for free! On the other side are the opportunistic entrepreneurs who have jumped on the crypto bandwagon over the past year. Many have gone on to raise large ICOs – and frequently, they’ve come up with token concepts that look pretty useless. It seems that monetary motivations outweigh anything else. But here’s the thing. While these two groups couldn’t be further apart in how they think and act, <strong><em>they both need each other.</em></strong> ICOs have brought a lot of mainstream attention to the crypto world and in turn, talent has flooded into the space. Ambitious entrepreneurs have enabled some interesting projects to get funding that they never would have received via traditional venture markets. And, the purists are a great reminder for everybody as to why crypto originally started. Money and vision/values have to come together to create interesting things at scale. The two worlds will probably never see eye to eye, but I’m sure that this combination will yield the most successful crypto projects in the years to come.

In the past year, a few of our portfolio companies have introduced regular skip level meetings into the organization. These are direct meetings between managers and team members who are one or more levels below them… for example, board members meet with senior managers (without the CEO) or the CEO meets with team members (without the mid-level manager/direct report). Having participated in a few of these skip level meetings as a board member, I believe the process has some really strong advantages: <ol> <li>Board members get a better understanding of the senior management talent at the company. The typical board meeting just gives us a light exposure to senior managers – but in a skip level meeting we have a chance to better understand a senior manager’s strengths, experiences, role, etc. When it comes time to discuss things like organizational changes and talent depth at future board meetings, we can then lead a much more in-depth and informed discussion.</li> <li>Senior management members get face time with board members. These meetings can be a great opportunity to pass on knowledge from the board to the organization – so think about how you match up board members and senior management members. For example, match the CFO with a board member who has a strong finance background. Additionally, hearing the company vision and core objectives directly from the board (and vice versa) helps make everybody more aligned.</li> </ol> However, skip level meetings can only function when there is a high degree of trust existing between all participants. These meetings are about opening new channels of communication, not necessarily for airing grievances. And, everyone needs to be focused on the company and the big picture, rather than using meetings to lobby for a personal agenda (and this can happen top-down or bottom-up). But when you have the right dynamics and right level of trust for skip level meetings, they are powerful tools to spread knowledge across the organization and become even more aligned.

<span style="font-weight: 400;">Six months ago, Boris wrote an important post about </span><a href="https://www.versionone.vc/blockchain-disruptive-venture-capital/"><span style="font-weight: 400;">why the blockchain is disruptive to VC</span></a><span style="font-weight: 400;">. As a quick summary, here’s why:</span> <ol> <li style="font-weight: 400;"><span style="font-weight: 400;">It requires a new investment thesis: where is value accrued in a decentralized platform?</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">It requires a new way of investing: tokenization by nature makes projects more liquid</span></li> <li style="font-weight: 400;"><span style="font-weight: 400;">It might inspire a new way of running our fund: changing your LPA (limited partnership agreement) or offering a token yourself.</span></li> </ol> <span style="font-weight: 400;">Six months is a long time in crypto. We’ve spoken to many more founders since backing Citizen Hex, Blockstack, Coinbase, Metastable, and Polychain. We have welcomed </span><a href="https://www.versionone.vc/announcing-our-investment-in-cryptokitties-the-wildly-popular-blockchain-based-pet/"><span style="font-weight: 400;">CryptoKitties</span></a><span style="font-weight: 400;"> to our portfolio as well as two more startups that have yet to be announced.</span> <span style="font-weight: 400;">Through these experiences, we’ve come to learn something very important about investing in crypto. While the three reasons above remain valid, we’ve realized that </span><b><i>the way</i></b> <b><i>we evaluate blockchain opportunities is no different than how we have evaluate any other investment opportunity.</i></b> <span style="font-weight: 400;">The basic questions of investing still apply**:</span> <ul> <li style="font-weight: 400;"><b>Why/Timing</b><span style="font-weight: 400;">: Why now? Why hasn’t your project been feasible at any previous time? Do you really need blockchain technology, and if so, for what purpose?</span></li> <li style="font-weight: 400;"><b>How</b><span style="font-weight: 400;">: Is your architecture conducive to creating network effects for defensibility? How will your project scale given the challenges of decentralization?</span></li> <li style="font-weight: 400;"><b>Value: </b><span style="font-weight: 400;">What is the business model / cryptoeconomics (i.e. guidelines for the behaviour of the token like how it’s created, distributed and earned)? If a token is involved, how will it appreciate in value as user demand for the service grows over time?</span></li> <li style="font-weight: 400;"><b>Who</b><span style="font-weight: 400;">: Why is your team suited to tackle this project from a technical, business, and mission-driven perspective? Do you have the domain expertise?</span></li> </ul> <span style="font-weight: 400;">In particular, the last question deserves emphasis: given that most protocols are pre-launch, the core differentiation is in people. Crypto requires more complementary teams than ever before: from managing large communities to understanding how to build large distributed systems.</span> <span style="font-weight: 400;">While we discovered that our pre-investment analysis isn’t much different between crypto and other start-ups, what happens after investing? Boris’ points on how blockchain is disrupting VC become very relevant for managing a crypto investment. Years from now, after our position vests, how do we proactively manage a portfolio of tokens? When is a good time to exit our position?</span> <span style="font-weight: 400;">As we think about augmenting our team with a new member some time this year (stay tuned for more news on this), we wonder what complementary skillset s/he might bring both technically (i.e. if we decide for self-custody of our crypto assets) and financially (i.e. when to buy, sell, trade tokens)? </span> <span style="font-weight: 400;">It’s fun to think about how we will evolve as a fund, and we would love to brainstorm with other investors on how they are thinking about building their partnership for crypto as it matures.</span> <em><span style="font-weight: 400;">** Special credit/thanks to my good friend, </span><a href="https://www.linkedin.com/in/maryannasaenko"><span style="font-weight: 400;">Maryanna Saenko</span></a><span style="font-weight: 400;">, who inspired this list during her presentation at the </span><a href="https://cryptochickshackathon.com/"><span style="font-weight: 400;">CryptoChicks Hackathon and Conference</span></a><span style="font-weight: 400;"> in Toronto.</span></em>

If you run a hot start-up, you’ll probably have VC’s ask if you are interested in getting a pre-emptive term sheet – you don’t have to do a full fundraise but can get similar deal terms as if you had done one. It sounds like a win-win for everybody. You can get back to building your business much faster and the VC wins the deal without having to compete with anyone else. However, the reality of pre-emptive funding is often a different story. It’s never quite as easy as it seems and founders can find themselves dragged into a financing event they weren’t ready for. Here’s a common scenario. The VC that is planning to put down the pre-emptive term sheet starts digging deeper into the company during due diligence. And, they’re not always going to like what they see. Perhaps your financials are not in the state they should be, or your growth has had a recent slowdown. Maybe you’re going through a business model transition and it’s not yet finished. The problem now is that you’re left with limited options. You can either accept a sub-optimal valuation from the VC or you have to walk away, burning a relationship for future financing rounds. This doesn’t mean you need to avoid pre-emptive financing altogether – it can still be a great solution for getting the funds you need while minimizing the time spent on fundraising. The best strategy is to organize for it and approach it in the same way you would approach a real financing round – only engage when you know that you are ready.

While preparing for some recent LP presentations, we took a close look at all of the companies that we exited in Fund I. There were ten exits out of a total of 20 investments. These were all “early exits” with mostly unsatisfactory outcomes for everybody involved, especially the dedicated and talented founders who had poured their hearts into these companies. We wanted a better understanding as to why these outcomes didn’t turn out as well as we had hoped. These were all good companies… good ideas, good founders, good teams. So, what happened? After analyzing the early exits, we realized we could put them into two buckets: the ones that never got product-market fit and the ones that raised too much money and scaled prematurely. The first bucket is to be expected in an early-stage portfolio. One of the major risks of investing as early as we do, is that the company never really finds product-market fit, and hence can never raise follow-on financing. But the second bucket surprised us. How is it that a company could have product-market fit, raise very good A and B rounds, have tens of millions of dollars, and yet end up with a sub-par outcome? And, this wasn’t just one outlier – we saw several start-ups exhibit the same pattern. It all comes down to scaling prematurely. Many of these companies not only raised a lot of venture capital, but also put it to work quickly. And this is understandable. Closing a Series A or B, and that sudden influx of cash, places a lot of stress on a young company. There’s considerable pressure to show results and hence, move fast. We found that these companies spent quickly in two areas: <ol> <li>Dialing up user acquisition when customer acquisition costs and unit economics were not 100% understood. There’s a risk of aggressively building a marketing and sales organization before really understanding the ideal customer profile, how to acquire leads for these customers and then convert those leads to sales.</li> <li>Aggressively building up the rest of the organization. And again, this is only natural. When you begin ramping up the user acquisition efforts, you expect higher revenue - and you also feel the pressure to build up the rest of the company in order to support all those marketing and sales initiatives.</li> </ol> There’s nothing wrong with scaling up user acquisition and creating an infrastructure to support those efforts. But the problem arises when you have spent millions on sales and marketing, only to realize that you have acquired the wrong customers (too much churn) or too many customers at the wrong acquisition costs. Then, revenue doesn’t come in the way you expect and the burn is higher than planned. Most founders then decide that they need to step on the brake, dial down their marketing and sales and make cuts to the rest of the organization to take down the burn rate. Few organizations can recover from that kind of shock to the system and future financing rounds will also be harder as new investors will look at the disconnect between previous capital raised and the current revenue. What’s the lesson for us all? VC markets are full of “easy cash”, but be aware of the downside of raising a lot of capital. All of that money comes with heightened pressure to put it to work. This leads start-ups to scale prematurely and the outcome isn’t what anyone wants.

<span style="font-weight: 400;">Happy Tuesday! </span><span style="font-weight: 400;">Hope you had a great Easter! </span> <span style="font-weight: 400;">It’s hard to believe that a whole quarter has flown by. In just the first few weeks of the new year, we saw a lot of </span><a href="https://www.versionone.vc/quick-reflections-current-tech-ma-market/"><span style="font-weight: 400;">M&amp;A activity</span></a><span style="font-weight: 400;"> in our portfolio: </span><a href="https://twitter.com/Mattermark"><span style="font-weight: 400;">@Mattermark</span></a><span style="font-weight: 400;"> (by </span><a href="https://twitter.com/FullContact"><span style="font-weight: 400;">@FullContact</span></a><span style="font-weight: 400;">), </span><a href="https://twitter.com/MemoAIHQ"><span style="font-weight: 400;">@MemoAIHQ</span></a><span style="font-weight: 400;"> (by </span><a href="https://twitter.com/coinbase"><span style="font-weight: 400;">@coinbase</span></a><span style="font-weight: 400;">), and </span><a href="https://twitter.com/GoPike13"><span style="font-weight: 400;">@GoPike13</span></a><span style="font-weight: 400;"> (by </span><a href="https://twitter.com/search?q=%24CSU.ca&amp;src=ctag"><span style="font-weight: 400;">$CSU.ca</span></a><span style="font-weight: 400;">). But there have been other big things happening across the V1 portfolio too. Here’s a selection of the Q1 news and events: </span> <b>Funding announcements</b> <span style="font-weight: 400;">We invested in the wildly popular </span><a href="https://cryptokitties.co/"><span style="font-weight: 400;">CryptoKitties</span></a><span style="font-weight: 400;">, a game centered around breedable, collectible cats on the blockchain, alongside a16z and USV. You can read more about CryptoKitties’ </span><a href="http://fortune.com/2018/03/20/cryptokitties-andreessen-horowitz-cryptocurrency-ethereum/"><span style="font-weight: 400;">$12M Series A round here</span></a><span style="font-weight: 400;">.</span> <a href="https://www.joindrover.com/"><span style="font-weight: 400;">Drover</span></a><span style="font-weight: 400;">, a car sharing platform and our fastest growing marketplace and only investment outside North America, </span><a href="https://techcrunch.com/2018/03/15/drover/"><span style="font-weight: 400;">raised their Series A</span></a><span style="font-weight: 400;">.</span> <a href="https://www.frankandoak.com/"><span style="font-weight: 400;">Frank &amp; Oak</span></a><span style="font-weight: 400;"> raised a <a href="https://techcrunch.com/2018/02/13/frank-and-oak-picks-up-16-million-series-c/">$16M Series C</a>. </span> <a href="http://www.citizenhex.com/"><span style="font-weight: 400;">Citizen Hex</span></a><span style="font-weight: 400;"> is powering Ethereum Capital, the first public Ethereum company of its kind. Ethereum Capital is aiming to</span><span style="font-weight: 400;"> raise </span><a href="https://www.theglobeandmail.com/report-on-business/omers-expands-cryptocurrency-presence-with-50-million-ethereum-public-company-offering/article37764394/"><span style="font-weight: 400;">$50 million from investors</span></a><span style="font-weight: 400;"> to invest in Ethereum-based businesses (and the ether currency itself).</span> <b>Product launches</b> <a href="https://goshippo.com/"><span style="font-weight: 400;">Shippo</span></a><span style="font-weight: 400;"> launched </span><a href="https://goshippo.com/blog/tracking-pages/"><span style="font-weight: 400;">Tracking Pages</span></a><span style="font-weight: 400;">, enabling retailers to customize tracking notifications and curate a style and look that connects with their buyers. Tracking Pages give buyers the information they need to be at the right place at the right time so they can receive their packages.</span> <a href="https://www.outreach.io/"><span style="font-weight: 400;">Outreach</span></a><span style="font-weight: 400;"> launched Amplify, a </span><a href="https://www.outreach.io/blog/amplify-machine-learning"><span style="font-weight: 400;">new machine learning program</span></a><span style="font-weight: 400;"> to further empower sales teams.</span> <a href="https://www.coinbase.com/"><span style="font-weight: 400;">Coinbase</span></a><span style="font-weight: 400;"> introduced their Protocol Team with the mission of contributing to community-led projects which will move the industry forward. They’ve been looking at projects like payment channels, off-chain computation, trustless light clients and proof-of-stake blockchains. You can read more about it </span><a href="https://blog.coinbase.com/introducing-the-coinbase-protocol-team-3bc1e9a63614"><span style="font-weight: 400;">on their blog</span></a><span style="font-weight: 400;">. The company also </span><a href="https://blog.coinbase.com/announcing-coinbase-index-fund-3925fbf548db"><span style="font-weight: 400;">announced an Index Fund</span></a><span style="font-weight: 400;"> which will give investors exposure to all digital assets listed on Coinbase’s exchange, GDAX, weighted by market capitalization.</span> <a href="https://placenote.com/"><span style="font-weight: 400;">Placenote</span></a><span style="font-weight: 400;"> launched their SDK that persistently links AR content to places and objects in the real world with their markerless cloud SDK for iOS.</span> <span style="font-weight: 400;">And </span><a href="https://www.clio.com/"><span style="font-weight: 400;">Clio</span></a><span style="font-weight: 400;"> announced </span><a href="https://www.clio.com/pressrelease/clio-announces-20-new-integrations-at-milestone-aba-techshow/"><span style="font-weight: 400;">20 new integrations</span></a><span style="font-weight: 400;"> to further power their cloud-based legal practice management platform.</span> <b>Founder podcasts to listen to</b> <span style="font-weight: 400;">Laura Behrens Wu of Shippo discusses the API economy on <a href="https://a16z.com/2018/03/13/api-economy-why-what-how/">a16z’s podcast</a>.</span> <span style="font-weight: 400;">Mike Silagadze of </span><a href="http://tophat.com/"><span style="font-weight: 400;">Top Hat</span></a><span style="font-weight: 400;"> talks about how most companies go about hiring the wrong way and why EdTech is the most brutal market on <a href="https://itunes.apple.com/gb/podcast/twenty-minute-vc-venture-capital/id958230465">20VC</a>. </span><span style="font-weight: 400;">Mike also wrote about why </span><a href="https://www.forbes.com/sites/forbestechcouncil/2018/02/22/why-the-next-billion-dollar-tech-firm-will-be-born-in-canada/"><span style="font-weight: 400;">The Next Billion-Dollar Tech Firm Will Be Born In Canada</span></a><span style="font-weight: 400;">.</span> <strong>And as for us</strong> <span style="font-weight: 400;">We continue to invest in companies that leverage network effects with a strong focus thematically on crypto/blockchain and healthcare/bio/genomics. We also just launched the <a href="https://www.versionone.vc/marketplaces-guide-ed2/">second edition of our Guide to Marketplaces</a>.</span> <span style="font-weight: 400;">We rarely sponsor events, but are proud to back the </span><a href="http://cryptochickshackathon.com/"><span style="font-weight: 400;">CryptoChicks Hackathon</span></a><span style="font-weight: 400;"> in Toronto from April 6-8. We want to be proactive about supporting and backing females in tech. Given that we believe crypto to be the next computing platform, this is a critical time to engage and encourage as many women into blockchain as possible so that we don’t fall behind in representation as we have in all technology cycles prior.</span> <span style="font-weight: 400;">If you’re in Toronto this weekend, come by and say hi to Angela. </span> <span style="font-weight: 400;">And finally, please stay up to date by <a href="https://twitter.com/VersionOneVC">following us on Twitter</a>.</span> &nbsp;

We are very pleased to announce our investment in Axiom Zen, the maker of <a href="https://www.cryptokitties.co">CryptoKitties</a>. We participated in the $12M Series A alongside our friends at <a href="http://www.usv.com">USV</a> and <a href="http://www.a16z.com">a16z</a>. And, we are excited to be working with the CryptoKitties team to create the leading crypto collectible platform. If you’ve missed the CryptoKitty mania, it’s a game that lets users breed, raise and trade digital kitties. Each kitty is created on the distributed ledger and has a unique genome that defines its appearance and traits (“cattributes”). Each CryptoKitty is a unique object on the Ethereum blockchain, and can be bought or sold on the game’s marketplace. At one point, CryptoKitties accounted for nearly <a href="https://www.newsbtc.com/2018/02/13/cryptokitties-coming-mobile-will-ethereum-handle-extra-traffic/">30% of all transactions</a> on Ethereum. There are three things that got us really excited about CryptoKitties. First, it’s native to the blockchain. Crypto Collectibles is a powerful up-and-coming use case for blockchain. With CryptoKitties, people can create and purchase one-of-a-kind works of art thanks blockchain technology. Another thing that drew us to CryptoKitties is that the team has taken an incredibly thoughtful approach to building products that put the user at the center, and thinking about what ownership and decentralization mean in the digital/crypto age. You can read co-founder <a href="https://medium.com/cryptokitties/i-want-to-start-out-by-thanking-greg-for-writing-this-post-d306c7a4067f">Mack Flavelle’s post</a> on Medium for more on this. It has been so impressive to see a product team deeply thinking through the tradeoffs of centralized and decentralized systems when designing a product and the industry will need more of this in order to use the advantages of decentralized systems in a broader way. And lastly, CryptoKitties is powered by a rockstar team: <a href="http://(https://twitter.com/rohamg">Roham Gharegozlou</a>, <a href="http://(https://twitter.com/MackFlavelle">Mack Flavelle</a>, <a href="https://twitter.com/dete73">Dieter Shirley</a>, and <a href="https://twitter.com/Mik_Naayem">Mik Naayem</a>. They represent some of the best talent in the crypto space right now, combining product, blockchain/ crypto, and business building talents. We are in the early innings when it comes to blockchain apps, but the earliest adoption of new technology platforms has often been driven by games and gaming companies. We believe that CryptoKitties can play a leading role in the mass adoption of blockchain going forward.

We’re pleased to formally announce our prior seed investment in the London-based car subscription company, <a href="http://www.joindrover.com">Drover</a>. And we’re even happier to announce that Drover has <a href="https://techcrunch.com/2018/03/15/drover/">just raised a £5.5 million Series A round</a>. We co-led the £2 million seed investment with Forward Partners, and today Drover is announcing they’ve closed a Series A round, which was co-led by Cherry Ventures, Partech Ventures and BP Ventures. Drover is building a new category of accessing cars and helping to redefine mobility. Here’s how it works: for one all-inclusive monthly fee, users get access to the car of their choice. Drover bundles all the typical costs and fees associated with car ownership into one price and users can swap, upgrade, downgrade or cancel without any long-term commitment or steep upfront payments. Drover is partnering with 100 fleet partners, including large rental companies, car dealership groups and OEMs. Drivers get a flexible, convenient and easy way to get the car of their choice, while rental companies and other partners get a new way increase vehicle utilization and monetize their fleet. Drover is one of our fastest growing marketplace investments. What’s really exciting about the company is how it separates ownership of a car from usage of a car. The marketplace expands opportunities for both supply (anybody can turn his or her car into a productive asset) and demand (you can use a car without having to own it or commit to a long-term lease). And we see both private and professional use cases. Drover’s founders are <a href="https://www.linkedin.com/in/felixleuschner">Felix Leuschner</a> (CEO) and <a href="https://www.linkedin.com/in/matt-varughese-79915946/">Matt Varughese</a> (CTO) and I am personally very excited to get the chance to work with Felix who I have known for some time. Drover is currently our only international investment. And while we primarily stay focused on North America, we sometimes invest outside of the region when we have a previous relationship with a founder. Drover launched in 2016 and has handled tens of thousands of vehicle bookings in the UK since then. If you want to know more about them, visit <a href="http://www.joindrover.com">www.joindrover.com</a> Congratulations to Felix, Matt and the entire Drover team!

One of the major advantages of the blockchain is that token models make it much easier to incentivize users. For example, during the early days, you can hand out tokens to reward early users and solve the chicken and egg problem that so many social platforms face. With decentralized platforms, the value that is created by users (user-generated content) is not generated for a central entity like Facebook, but rather accrues with the users and token holders. Such models might spark completely new monetization opportunities, such as monetizing users’ healthcare/genomics data. There is a lot of merit in these assumptions and token models are a powerful mechanism to incentivize behavior. However, when thinking about incentive models in decentralized platforms, most people tend to overlook the years of research that has gone into studying how users behave. After all, blockchain technology may be new, but human behavior isn’t. Gamification pioneer, <a class="zem_slink" title="Gabe Zichermann" href="http://en.wikipedia.org/wiki/Gabe_Zichermann" rel="wikipedia">Gabe Zichermann</a>, introduced the <a href="http://www.gamification.co/2010/10/18/cash-is-for-saps/">SAPS model</a> – Status, Access, Power, and Stuff – for designing a reward hierarchy. SAPS is ordered in priority of what customers/users want, as well as ranked from stickiest to least sticky, and cheapest to most expensive. <strong>S</strong>tatus – Badges, rankings <strong>A</strong>ccess – Beta access, sneak previews, company and behind-the-scenes events <strong>P</strong>ower – Moderator position, special entitlements <strong>S</strong>tuff – Money, discounts, merchandise In a Twitter thread last month, <a href="https://twitter.com/jeremysliew/status/959323277620428800">Jeremy Liew</a> made the point that while the SAPS model is useful for thinking about gamification/rewarding systems, it’s incomplete. For him, the first step in the hierarchy should be love: “people engage b/c they love a product.” https://twitter.com/jeremysliew/status/959323277620428800 Jeremy made the important point that going down the SAPS path is a one-way street. Once you start rewarding behavior with financial incentives, users won’t do the same thing for status, access or power. We can apply the SAPS model (and Jeremy’s views) to decentralized platforms. If you want to build a powerful decentralized platform, don’t start with financial incentives. “Stuff” is the least important driver of people’s behavior on platforms. Think about other ways why your users should engage with your product and use it. As Gabe said: “Only once you’ve exhausted all the other options should you consider including stuff in your gamification design.” Following this logic, it might not make sense to do an ICO right away as this immediately puts a financial value on a token. If you want a sustainable strategy for long-term success, focus on building a passionate community of developers and users through all the other means (Love, Status, Access, Power…). Then, after you build scale, you can reward the most active users with airdrops. A good example of this approach is <a href="https://numer.ai/">Numerai</a>, an AI-based, crowdsourced hedge fund where data scientists around the world contribute to build stock market predictions. Many organizations and researchers have been grappling with incentive schemes for years. A lot of work has already been done on the best ways to get users started on the journey, increase engagement and encourage certain behaviors. There’s always room for innovation, but don’t lose sight of the work that’s already been done.

<span style="font-weight: 400;">When we developed our </span><a href="https://www.versionone.vc/philosophy/"><span style="font-weight: 400;">core beliefs</span></a><span style="font-weight: 400;">, we spent considerable time thinking about our investment philosophy, as well as how we should work with our portfolio companies and what kind of resource we want to be. Specifically, we included two points involving our role:</span> <b><i>5) We can make the greatest impact as a Seed investor.</i></b> <i><span style="font-weight: 400;">The seed stage is the most formative time for a startup and often, where you need the most support. This key stage is where we believe we can add the most value — whether it’s helping you with hiring, finding product market fit, building your company culture, or getting your next financing round. We lead or co-lead with an investment of ~$500k and often back our startups through multiple rounds.</span></i> <b><i>6) An investor should be your biggest cheerleader and most trusted partner.</i></b> <i><span style="font-weight: 400;">We’re committed to building strong relationships with all of our entrepreneurs. That begins with earning your trust — something we strive for from the very first meeting.</span></i> <i><span style="font-weight: 400;">Our job is to support you and act as your biggest advocate, but we also never shy away from asking the important questions and providing tough feedback when necessary. Having run our own companies, we pass on as much of our operations knowledge as possible to help you build a successful venture. Our ultimate goal is simple: to be the first investor called when a founder needs advice.</span></i> <span style="font-weight: 400;">In both of these points, we’re speaking about our relationship with our founders. At our stage of investment, the team is often comprised of just the founders. After we make an investment, we usually set up a “check-in” call once every two weeks with the CEO and talk about everything from business strategy to hiring, fundraising, mental wellness, and more. </span> <span style="font-weight: 400;">Then, as a company matures and raises subsequent funding, the cadence evolves into a monthly check-in call and we attend board meetings every two months or quarter. It’s at these meetings where we get to meet team leaders who present on specific parts of the business.</span> <span style="font-weight: 400;">Recently, I have been thinking about how we can support our entrepreneurs by supporting their team and developing direct relationships with their executives and employees.</span> <span style="font-weight: 400;">Here are some examples of what we’ve done so far to expand our reach into our portfolio companies:</span> <ol> <li><span style="font-weight: 400;"> We’ve organized and moderated cross-portfolio summits/events targeted at specific business functions (e.g. engineering, product, sales, marketing) and skill development (i.e. management). This isn’t unique: many “platform” VCs do this. Given our capacity as a small seed fund with two partners, we select topics that make the most sense for us: I run data-centric events and Boris ran vertical SaaS summits for several years.</span></li> <li><span style="font-weight: 400;"> We created Slack channels and mailing lists. This is still a work in progress for us, but our vision is to have portfolio founders and their teams interact with one another directly. Currently, however, building this organic networking has proven difficult as our companies are geographically dispersed with varying business models targeting different industries. It’s hard to keep these communication channels front of mind for instances where pinging someone else in the V1 network would be helpful. Without a daily use case, people forget to use it… so we would love any thoughts on how to make these channels more valuable, engaging, etc.</span></li> <li><span style="font-weight: 400;"> We host lunch &amp; learns for portfolio companies so that every team member has an opportunity to understand what it means to be a VC-fundable business and why we invested in their startup. Hopefully, these events inspire (since they’re on a potential rocketship) and push everyone toward the shared company vision.</span></li> <li><span style="font-weight: 400;"> We meet one-on-one with select employees and executives to get to know individual team members. We’re then in a better position to provide them with direct support and access to our network.</span></li> </ol> <span style="font-weight: 400;">The advantage of helping operators deep in the weeds of sales, marketing, data, engineering, product, etc. is that we can learn about the specific challenges they face and help them move the needle directly. Something as simple as making an intro from one engineering manager to another who we know had experienced a similar problem can save copious amounts of time. In addition, when employees and other C-level execs have a direct relationship with us, founders don’t have to use their bandwidth to get involved each and every time.</span> <span style="font-weight: 400;">I am curious to know how other VCs support their portfolio beyond its founders? And for founders: what are some things that VCs have done to support your teams that have been extremely helpful?</span> <span style="font-weight: 400;">VC is difficult to scale. But when I think about the unique value add we can provide, I recognize how important it is to take the initiative to get to know our companies deeper… by supporting our founders’ teams, we can better support our founders.</span>

As investors, we want to have an impact. We want to help entrepreneurs, build sustainable companies, improve lives, and change industries. When I think back to those situations where we’ve made the biggest impact on entrepreneurs, they’ve all got one thing in common: they were all times when we believed when others didn’t. For example, when… …we wrote that first cheque before anybody else. …we led a bridge round when neither new nor existing investors wanted to put in new money. …we helped founders through a tough pivot that almost killed the company. When it comes to investing, it’s usually much easier to follow the herd and hope that everyone else has thought it through. After all, all those people (and big name investors) can’t be wrong. There’s a lot of venture capital in this market that follows existing momentum. At Version One, we’re proud that strong convictions are at the core of our investment approach. It takes a lot of courage to stand apart from the crowd. But if you have strong convictions in both the entrepreneur and opportunity you invested in, then it’s really easy to believe even when others don’t.

Decentralization maximalists argue that you cannot trust a centralized organization and thus, everything should be decentralized. And thanks to the advances in blockchain technology, that’s now technically possible. These proponents of decentralized platforms can offer up numerous reasons why the decentralized world is superior; the chief two reasons are avoiding censorship and eliminating the rake that centralized platforms take. On the flip side, supporters of centralized platforms argue that centralized technologies are way more efficient to run than decentralized platforms. Instead of having to run every single transaction through the blockchain (for which miners get paid / rewarded for transaction confirmations), it’s much less costly to store transactions in a central database where a central authority ensures they are correct. Summing up the two sides: blockchain-based models are far more trustworthy than centralized models, but they are also fundamentally more expensive. You pay for the extra trust and always will—so the real question is then to figure out where the extra trust is worth the extra cost for centralized platforms. The best use case that has been developed to date is that of distributing digital assets through the blockchain (i.e. tokens through ICO’s) where the new, decentralized system is clearly superior to the existing way of selling assets through middle men and/or centralized systems. We are probably just at the very beginning of the wave where <a href="https://www.versionone.vc/four-waves-crypto-disruption/">every single financial asset will be tokenized and distributed</a> through the blockchain. But everybody who thinks that blockchain will be limited to financial assets should keep two things in mind. First, the technology is still in its infancy and costs will come down over time. This will make blockchain technology viable for lower value transactions. And more importantly, we will see the rise of hybrid centralized/ decentralized systems in which core features where trust plays a huge role will be built on blockchain technology while others will be centralized. The creators of the <a href="https://www.cryptokitties.co/">Cryptokitties</a> project have had some of the most thoughtful discussions around what belongs on the blockchain and what doesn’t. They may not have gotten everything right in their initial launch (you can read some of the criticism of copyrights <a href="https://medium.com/@gmcmullen/do-you-really-own-your-cryptokitties-d2731d3491a9">here)</a>. But, it is great to see product teams thinking through the tradeoffs of centralized and decentralized systems when designing a product. <a href="https://twitter.com/MackFlavelle">Mack Flavelle</a> wrote a detailed, <a href="https://medium.com/@mackflavelle/i-want-to-start-out-by-thanking-greg-for-writing-this-post-d306c7a4067f">thoughtful response</a> to Greg McMullen’s critiques on Medium: “Eventually we settled on two things being absolutely paramount to a decentralized, trustless game: ownership and verifiability. Ownership: No one except the cat owner can decide what happens to a cat. Verifiability: It’s transparent and obvious to everyone why your cat is different (the genetics). These things <em>had to</em> live on the blockchain.” In order to use the advantages of decentralized systems in a broader way, we will need to get product teams to think more about these trade-offs. Things are rarely black or white, and the future might not belong to either decentralization nor centralization maximalists!

Over the past couple of years, I have been asked to give input on tech policy for all levels of government: city, provincial, and federal. This has been both informally and formally through committee work. I feel lucky to live in a country where elected officials seek input from industry to come up with the right set of policies for the tech industry. For some context, here in Canada, tech policy is mainly focused on how to expand the tech industry as a key pillar in the transformation from a resource-based economy to a knowledge based economy. From these meetings with government officials, I have developed two take-aways: a) “how complex developing policy is” and b) “how few levers the government actually has to change the trajectory.” The first challenge is really about understanding input–output models. If I do this, what will be the effect? Often times, there are just not enough stats available, making it tough to even define the status quo. And even when there is a lot of knowledge available about a certain area, the dependencies between different factors are huge and often not fully understood. Economies are simply very complex constructs. But then, even if one understood the input-output models perfectly, government might not be able to act on the insights. Often this is a matter of jurisdiction (e.g. K-12 education is under provincial authority, not federal in Canada). Sometimes, the political will is lacking to push through unpopular measures. Or, maybe there is simply no budget or fiscal ability. Given these constraints, what can governments actually do? I think that forward action depends on three levers (and you’ll see that these are not unlike the things that a great CEO needs to focus on for his or her company): <ul> <li>Set an inspiring vision: Think about how JFK inspired a whole nation with his Man on the Moon speech or how Canada rallied behind the “Own the Podium” vision for the Vancouver Winter Olympics.</li> <li>Get the best talent onto the team: This is as much about investing into our education systems as embracing immigration and attracting the best and brightest from around the world.</li> <li>Encourage continuous change, forward movement and systems that can change on their own: Instead of trying to develop and plan large, top-down projects that might be out of date by the time they get launched, encourage many small changes and create systems that can adapt themselves.</li> </ul> I have certainly gained a huge appreciation for the complexity of the work that politicians and their staff members do on a daily basis (and for which they are not recognized enough). Hopefully, some of these suggestions will be put into place with a positive impact on society.

We’re just a few weeks into 2018 and have already completed three portfolio exits: <a href="https://twitter.com/Mattermark">@Mattermark</a> (by <a href="https://twitter.com/FullContact">@FullContact</a>), <a href="https://twitter.com/MemoAIHQ">@MemoAIHQ</a> (by <a href="https://twitter.com/coinbase">@coinbase</a>), and <a href="https://twitter.com/GoPike13">@GoPike13</a> (by <a href="https://twitter.com/search?q=%24CSU.ca&amp;src=ctag">$CSU.ca</a>). This is a good time to share some observations about the current state of the tech M&amp;A market – both specific insights from these transactions as well as broader observations. <strong>More buyers than ever before</strong> The buyer universe has really expanded over the past few years. There are still the usual suspects: Google, Facebook, Amazon, and LinkedIn. But now we’re also seeing acquisition interest from companies that have gone public over the past few years: for example, Shopify has been very active on the M&amp;A front. Then, there are also pre-IPO companies like Slack and Dropbox and “older companies” that are trying to redefine themselves (e.g. payments processors), plus a whole new group of entrants with private equity funds that are looking at acquiring SaaS companies. The latter has probably been the biggest story of 2017. There’s a lot of money available in private equity looking to acquire SaaS companies for roll-up plays. While it’s interesting to have a new group of buyers, keep in mind that companies that want to exit need to have a) enough scale and b) be close to profitability. <strong>More buyers=more complexity </strong> The increased buyer universe makes the M&amp;A process more complex. This means that using an investment banker to help manage the process makes more sense than ever before. Of course, this route is for those companies where the expected outcome is enticing enough to attract a solid banker; if not, you should navigate the process on your own. We used a banker in two of the three transactions and they helped work through 50 to 60 M&amp;A leads. This allowed the CEO’s of those businesses to still spend some time on running the business instead of just focusing on M&amp;A. <strong>Focus on track records</strong> The explosion in new entrants brings many new tire-kickers. As such, you need to focus your energy on potential acquirers that have proven to pull off M&amp;A in a reasonable timeframe and have a proven track record. Interestingly enough, in all three of our transactions, the investors in the selling company had connections to the ultimate buyer. Sometimes they made the initial introduction. Sometimes they helped shepherd along the deal when it ran into problems. While M&amp;A experience may not be the most important criteria when choosing an investor, keep in mind that a solid M&amp;A track record, along with general connections, might help a future outcome for your start-up. <strong>What about aqui-hires? </strong> Lastly, we’ve noticed that interest in pure “acqui-hire’s” has slowed down relative to 3-4 years ago. That said, there’s always very solid interest for strong engineering teams. The general tendency here is to limit payouts to investors and provide most of the outcome for the team. It has been an exciting way to start 2018. Selling a portfolio company is always bittersweet after working with founders so closely over many years. But I am excited that these three portfolio companies found new platforms to bring their talents to the world. And, we now have additional bandwidth to take on new investments.

After a company finds product-market fit and has raised an A Round, it usually starts scaling the team aggressively. This is a critical time: you have already shown that you’re on to something; now it’s all about executing that business model at scale. And that means you need to grow the original team, while keeping the same magic that took you from an idea to Series A in the first place. We have seen many of our portfolio companies go through this process through the years, and here are some of the best hiring practices that we have seen develop over time: <strong>Make top of the funnel a key priority</strong> Hiring mostly boils down to hustle and you need somebody to build the top of the funnel. This means that your first and most important hire is an internal recruiter or recruiting team. This isn’t necessarily someone with a traditional HR background – rather think about aggressive, outgoing, data-driven people that can quickly build a large top of the funnel hiring pipeline. This person (or people) needs to be 100% responsible for the hiring pipeline. For senior hires, you may want to use an outside recruiter. But all other hiring should be driven internally. <strong>Stay picky</strong> One of the dangers at this stage is that there’s so much pressure to scale up fast, you can end up lowering your hiring standards. You can start thinking that a particular candidate may not be perfect, but there’s so much work to do that adding someone is better than no one at all. But the reality is that the wrong person and wrong culture fit can significantly degrade motivation and team dynamics. It’s important to stay picky, no matter how fast you need to scale. We like Amazon’s <a href="https://www.versionone.vc/jeff-bezos-scale-amazon-without-destroying-entrepreneurial-culture/">“bar raiser”</a> program where select employees can veto any candidate, even for positions that are completely out of their area of expertise. Bezos has said this program helps weed out culture misfits and ensures good hiring choices. <strong>Scale the onboarding process</strong> For the first 10 to 20 employees, onboarding can be done on a case by case basis. But this approach won’t work when you need to hire 10+ people per month. Spend some time crafting the proper onboarding process that will guarantee that your new hires will immediately understand the company vision, mission, strategic goals, core values, etc. Without a good process in place, you will end up with a disjointed organization that lacks the original alignment of a smaller team. For those of you at earlier stages, you are probably focused on finding product-market fit or your first 1,000 or 10,000 customers, rather than worrying about any of the challenges that come with scaling. But it’s never too early to start thinking about implementing the right processes that will ultimately help your company grow without losing its focus and culture.

Happy new year!! <span style="font-weight: 400;">We’re more than a week into 2018 and while this is typically a time to look ahead, we wanted to take a few minutes to highlight all the news from Q4 2017. We’ve said it before, but the Version One portfolio is filled with great startups doing incredible things. And as we gear up for the new year, let’s ride the momentum from the last quarter.</span> <span style="font-weight: 400;">Here are some of the key highlights from last quarter:</span> <a href="https://tophat.com/"><span style="font-weight: 400;">Top Hat</span></a><span style="font-weight: 400;"> and </span><a href="https://figure1.com/"><span style="font-weight: 400;">Figure 1</span></a><span style="font-weight: 400;"> were named by Maclean’s magazine as top Canadian tech startups that could be the next </span><a href="http://www.macleans.ca/economy/business/the-canadian-tech-startups-that-could-be-the-next-billion-dollar-breakouts/"><span style="font-weight: 400;">billion dollar breakouts</span></a><span style="font-weight: 400;">.</span> <span style="font-weight: 400;">For the second year in a row, </span><a href="https://getjobber.com/"><span style="font-weight: 400;">Jobber</span></a><span style="font-weight: 400;"> placed at top of the Gartner’s </span><a href="https://www.softwareadvice.com/field-service/#top-products"><span style="font-weight: 400;">SoftwareAdvice FrontRunner report</span></a><span style="font-weight: 400;"> that</span><span style="font-weight: 400;"> highlights the top software products for North American small businesses.</span> <a href="https://www.coinbase.com/"><span style="font-weight: 400;">Coinbase</span></a><span style="font-weight: 400;">, </span><span style="font-weight: 400;">an app that lets you buy, sell and store cryptocurrencies</span><span style="font-weight: 400;">, ranked as the </span><a href="https://www.recode.net/2017/12/7/16749536/coinbase-bitcoin-most-downloaded-app-iphone"><span style="font-weight: 400;">number one iPhone app</span></a><span style="font-weight: 400;"> in the U.S in early December, thanks to the crypto frenzy and surge in Bitcoin and Ethereum. In case you missed it, The New York Times wrote a great profile on Coinbase: </span><a href="https://www.nytimes.com/2017/12/06/technology/coinbase-bitcoin.html"><i><span style="font-weight: 400;">Coinbase: The Heart of the Bitcoin Frenzy</span></i></a><span style="font-weight: 400;">. The article outlines the company’s incredible growth (“</span><span style="font-weight: 400;">In late November, Coinbase was sometimes getting 100,000 new customers a day — leaving the company with more customers than Charles Schwab and E-Trade”)</span><span style="font-weight: 400;"> and the challenges of keeping up with that growth.  </span> <a href="https://blockstack.org/"><span style="font-weight: 400;">Blockstack</span></a><span style="font-weight: 400;"> announced the close of their </span><a href="https://blockstack.org/blog/blockstack-token-sale-recap"><span style="font-weight: 400;">$50m token sale</span></a><span style="font-weight: 400;">. In all, over 800 individuals and funds participated with some notable investors: </span><a href="https://twitter.com/usv"><span style="font-weight: 400;">@usv</span></a>, <a href="https://twitter.com/FoundationCap"><span style="font-weight: 400;">@FoundationCap,</span></a> <a href="https://twitter.com/Lux_Capital"><span style="font-weight: 400;">@lux_capital</span></a>, <a href="https://twitter.com/DCGco"><span style="font-weight: 400;">@dcgco</span></a>, <a href="https://twitter.com/winklevosscap"><span style="font-weight: 400;">@winklevosscap</span></a>, <a href="https://twitter.com/blockchaincap"><span style="font-weight: 400;">@blockchaincap</span></a>, <a href="https://twitter.com/kevinrose"><span style="font-weight: 400;">@kevinrose</span></a>, <a href="https://twitter.com/arrington"><span style="font-weight: 400;">@arrington</span></a>, and <a href="https://twitter.com/qasar"><span style="font-weight: 400;">@qasar</span></a>. <a href="https://www.clio.com/"><span style="font-weight: 400;">Clio’s</span></a><span style="font-weight: 400;"> Jack Newton has received yet more well-deserved accolades… this time being named a 40 under 40 winner by Business in Vancouver. You can read the </span><a href="https://www.biv.com/article/2017/12/jack-newton/"><span style="font-weight: 400;">full profile here</span></a><span style="font-weight: 400;">.</span> <a href="https://www.boosterfuels.com/"><span style="font-weight: 400;">Booster Fuels</span></a><span style="font-weight: 400;"> was featured in the Wall Street Journal: </span><a href="https://www.wsj.com/articles/the-new-corporate-perk-gassing-up-at-work-1511951401"><span style="font-weight: 400;">The New Corporate Perk: Gassing up at Work</span></a><span style="font-weight: 400;">. Booster has agreements with eBay and 300 other companies to access their corporate campuses to deliver fuel.  </span><span style="font-weight: 400;"> </span> <a href="https://www.outreach.io/"><span style="font-weight: 400;">Outreach</span></a><span style="font-weight: 400;">, Coinbase, and </span><a href="https://goshippo.com/"><span style="font-weight: 400;">Shippo</span></a><span style="font-weight: 400;"> were named as part of Business Insider’s </span><a href="http://www.businessinsider.com/51-enterprise-startups-to-bet-your-career-on-in-2018-2017-11"><span style="font-weight: 400;">51 enterprise startups to bet your career on in 2018</span></a><span style="font-weight: 400;">. From Business Insider: “</span><span style="font-weight: 400;">These companies have all the markings of long-term hits, or those likely to be snapped up by a bigger player for a hefty sum when the time is right.”  </span> <a href="https://www.varagesale.com/"><span style="font-weight: 400;">Varage Sale</span></a><span style="font-weight: 400;"> was </span><a href="https://techvibes.com/2017/11/07/buy-and-sell-community-varagesale-acquired-by-verticalscope"><span style="font-weight: 400;">acquired by VerticalScope</span></a><span style="font-weight: 400;">, a digital media company with more than 600 </span><span style="font-weight: 400;">enthusiast websites and interest-based online communities.</span> <span style="font-weight: 400;">Shippo announced their $20M Series B, led by Bessemer VP. And, CEO Laura Behrens Wu penned a great piece for Inc: “</span><a href="https://www.inc.com/laura-behrens-wu/after-pitching-over-100-times-weve-just-finished-raising-20-million-for-our-startup-heres-what-we-learned.html?cid=sf01001&amp;sr_share=twitter"><span style="font-weight: 400;">Do Not Take Money From Anywhere or Anyone: 3 Lessons We Learned From Raising $20 Million For Our Startup</span></a><span style="font-weight: 400;">.”</span> <span style="font-weight: 400;">Last, but not least, </span><a href="https://techcrunch.com/2017/10/10/handup-the-startup-that-helps-homeless-people-has-been-acquired/"><span style="font-weight: 400;">HandUp was acquired</span></a><span style="font-weight: 400;"> by one of its longtime non-profit partners, the Detroit-based South Oakland Shelter. This means that the team’s vision and hard work will live on and continue to make a very tangible difference in communities and lives.</span> <span style="font-weight: 400;">That’s the recap from Q4 2017. And a reminder that as we go into this new year, we’re excited to build out our </span><a href="https://www.versionone.vc/four-waves-crypto-disruption/"><span style="font-weight: 400;">crypto</span></a><span style="font-weight: 400;"> and </span><a href="https://www.versionone.vc/bio-thesis/"><span style="font-weight: 400;">bio</span></a><span style="font-weight: 400;"> portfolio.</span> <span style="font-weight: 400;">Follow </span><a href="https://twitter.com/VersionOneVC"><span style="font-weight: 400;">@VersionOneVC</span></a><span style="font-weight: 400;"> for up to date news from us and our portfolio!</span>

<span style="font-weight: 400;">This has been a critical year for us at Version One, as well as our ecosystem in general.</span> <span style="font-weight: 400;">The market frenzy surrounding crypto and blockchain challenges how VCs will evolve over the next years. In fact, the amount of </span><a href="https://www.cnbc.com/2017/08/09/initial-coin-offerings-surpass-early-stage-venture-capital-funding.html"><span style="font-weight: 400;">money raised by startups via ICOs</span></a><span style="font-weight: 400;"> has surpassed early stage VC funding for internet companies.</span> <span style="font-weight: 400;">There is </span><a href="https://medium.com/@josh_nussbaum/blockchain-project-ecosystem-8940ababaf27"><span style="font-weight: 400;">no shortage of blockchain projects</span></a><span style="font-weight: 400;"> and we continue to spend significant time figuring out the best approach to investing in crypto/blockchain.</span> <span style="font-weight: 400;">To date, we have approached blockchain in two ways, making a total of five investments this year. We’ve invested in the infrastructure (the picks and shovels): </span><a href="https://www.versionone.vc/announcing-investment-blockstack-new-decentralized-internet/"><span style="font-weight: 400;">Blockstack</span></a><span style="font-weight: 400;">, </span><a href="https://www.coinbase.com/"><span style="font-weight: 400;">Coinbase</span></a><span style="font-weight: 400;">, and </span><a href="https://www.versionone.vc/meet-latest-investment-citizen-hex-ethereum-liquidity-company/"><span style="font-weight: 400;">Citizen Hex,</span></a><span style="font-weight: 400;"> as well as in funds: </span><a href="http://polychain.capital/"><span style="font-weight: 400;">Polychain</span></a><span style="font-weight: 400;"> and </span><a href="http://metastablecapital.com/"><span style="font-weight: 400;">Metastable.</span></a> <span style="font-weight: 400;">While the disruption of VC has been predicted many times, we believe that this wave of decentralized platforms will be the </span><a href="https://www.versionone.vc/blockchain-disruptive-venture-capital/#ixzz51bq9BORd"><span style="font-weight: 400;">biggest disruptor</span></a><span style="font-weight: 400;"> to hit the VC industry over the next decade.</span><span style="font-weight: 400;"> Decentralized platforms will not take over all available investment opportunities, but this is the start of a new era for VC investing. If you’ve missed some of our thoughts in this space, here are a few of our blog posts from the year on blockchain:</span> <ul> <li style="font-weight: 400;"><a href="https://www.versionone.vc/blockchain-disruptive-venture-capital/"><span style="font-weight: 400;">Why Blockchain is so disruptive for venture capital</span></a></li> <li style="font-weight: 400;"><a href="https://www.versionone.vc/four-waves-crypto-disruption/"><span style="font-weight: 400;">The four waves of crypto disruption</span></a></li> <li style="font-weight: 400;"><a href="https://www.versionone.vc/shortcomings-ico-funding/"><span style="font-weight: 400;">The shortcomings of ICO funding</span></a></li> </ul> <span style="font-weight: 400;">But 2017 wasn’t just about the decentralized Internet. We have also focused heavily on bioscience/genomics, particularly as a driver of personalized medicine. Partly inspired by </span><a href="https://www.versionone.vc/personal-med/"><span style="font-weight: 400;">Angela’s own experiences</span></a><span style="font-weight: 400;"> navigating the current world of healthcare, we revisited and refined our healthcare thesis. Just last week, we shared our approach to </span><a href="https://www.versionone.vc/bio-thesis/"><span style="font-weight: 400;">investing in this space</span></a><span style="font-weight: 400;">: we back startups that take a full stack approach </span><span style="font-weight: 400;">that empowers consumers to collect health data easily and affordably, to become a “biobank” where this data can power personalized recommendations</span><span style="font-weight: 400;">.</span> <span style="font-weight: 400;">This year we have made two investments in bio/genomics: </span><a href="https://www.versionone.vc/introducing-gencove/"><span style="font-weight: 400;">Gencove</span></a><span style="font-weight: 400;"> and another investment that has yet to be announced.</span> <span style="font-weight: 400;">And of course, we still back companies that leverage network effects outside of crypto and bio.</span> <span style="font-weight: 400;">In addition to these seven investments mentioned (five in crypto and two in bio), we also invested in an AI/ML platform that provides trust and safety at scale (to be announced).</span> <b>How has our existing portfolio performed in this environment?</b> <span style="font-weight: 400;">We currently have 31 active companies across both our funds. Nine of these raised new capital in 2017: two seed extensions, one Series A, three Series B, two Series C, and one Series D. And we also had three exits.</span> <span style="font-weight: 400;">This year was also big for us as a fund as Angela officially joined the </span><a href="https://www.versionone.vc/congratulations-angela-tran-kingyens-newest-principal/"><span style="font-weight: 400;">partnership</span></a><span style="font-weight: 400;"> and we took a step back to really think about what drives us as investors (you can see our </span><a href="https://www.versionone.vc/core-beliefs/"><span style="font-weight: 400;">core beliefs here</span></a><span style="font-weight: 400;">).  </span> <b>Looking ahead</b> <span style="font-weight: 400;">When we reflect on what we wrote in last year’s </span><a href="https://www.versionone.vc/2016-review/"><span style="font-weight: 400;">“year in review”</span></a><span style="font-weight: 400;">, we realize that we are now gaining more clarity on what the next platform will be. In the upcoming year, we will continue to look forward to crypto and bio… and be opportunistic around </span><a href="https://www.versionone.vc/our-refocused-investment-thesis/"><span style="font-weight: 400;">network effects</span></a><span style="font-weight: 400;"> that exist in VR/AR, autonomy, etc., as we do still love </span><a href="https://www.versionone.vc/marketplace-handbook/"><span style="font-weight: 400;">marketplaces</span></a><span style="font-weight: 400;">, </span><a href="https://www.versionone.vc/social-handbook/"><span style="font-weight: 400;">social platforms</span></a><span style="font-weight: 400;">, and </span><a href="https://www.versionone.vc/favorite-investment-themes-right-now-ai-machine-learning/"><span style="font-weight: 400;">applications of AI/ML</span></a><span style="font-weight: 400;">. If you’re enthusiastic about these themes as an entrepreneur, investor, or operator, please reach out!</span> <b>And as always…</b> <span style="font-weight: 400;">We want to take this time to thank everyone who is a part of the Version One community – LPs, colleagues, partners, portfolio companies, friends, and followers. Your support means everything to us. You inspire us every day and we’re so grateful that we get to do what we love each and every day.</span> <span style="font-weight: 400;">Warmest thoughts and best wishes for a wonderful holiday and a very happy new year!</span> <span style="font-weight: 400;">– Angela &amp; Boris :)</span> &nbsp;

<span style="font-weight: 400;">We’ve been spending significant time on emerging tech lately. From the frenzy surrounding blockchain applications to the surge in medical research projects that are coming out of academia, it’s clear that disruption potential is high on the barometer right now. I’ve never felt more excited about our work as VCs than I do today.</span> <span style="font-weight: 400;">I imagine the future, with all the possibilities of a decentralized Internet and personalized medicine, and I’m committed to championing the technology behind these themes even harder.</span> <span style="font-weight: 400;">However, amidst all the excitement, it’s critical to take a step back and think about the go-to-market strategy. Startups need to really understand the workflows that they’re looking to disrupt. It’s not always about efficiency – sometimes there are other parts of the workflow that need to be optimized and changed.</span> <span style="font-weight: 400;">This became clear to me when I had my fourth (and hopefully last) knee surgery two months ago. You may recall this story when I wrote about the </span><a href="https://www.versionone.vc/personal-med/"><span style="font-weight: 400;">need for personalized medicine</span></a><span style="font-weight: 400;">. As I was about to be put under by the anesthesiologist, I asked him where he believes the opportunities are to improve his workflow (which, in theory, would improve healthcare delivery in general).</span> <span style="font-weight: 400;">His answer: “Please don’t pitch me on another app that requires me to enter data on my own. I much rather write things down on pen and paper.” The drugs had already started entering me intravenously, so I pushed him to elaborate quickly. And he made a great point.</span> <span style="font-weight: 400;">“Ever go on a date where someone is looking at their device the entire time? Doesn’t that suck?....If I’m spending time on a tablet, then I’m not spending time with my patient.”</span> <span style="font-weight: 400;">I passed out soon after, but I have been thinking about his words and my experience ever since.</span> <span style="font-weight: 400;">In healthcare, it might just be that moving from pen and paper to digital is not enough. Digital data capture is certainly more efficient than manual processes (when data is captured digitally at the point of care, providers don’t need to enter handwritten notes into the system after). But, in this case, tablets and computers at the patient bedside may detract from the personal connection that’s critical to the delivery of care.</span> <span style="font-weight: 400;">What might make more sense is skipping the intermediate phase of manual digital collection altogether, and focusing on how to automate the collection of data. For years, IIoT has promised to collect and aggregate data from fragmented sources. When tools are invisible and working in the background, doctors have more time to focus on the patient. And, the next step is to not just automate data collection, but to also automate the generation of actionable insights (with AI/ML). </span> <span style="font-weight: 400;">Any founder or investor involved in healthcare needs to ask: </span><i><span style="font-weight: 400;">if doctors adopt this technology, will it make him/her the best doctor in the world? </span></i><span style="font-weight: 400;">It’s a cheeky question, but it drills down to the competitive advantage that a technology will give a physician. That’s what s/he cares about.</span> <span style="font-weight: 400;">As an engineer, I’m guilty of digging deep into IP to make sure I’m not being sold snake oil. But ultimately, what is equally if not more important, is how entrepreneurs sell this new technology and gain adoption. In the case of healthcare, the narrative shouldn’t just focus on boosting efficiency, but how to improve service delivery and the patient experience on an emotional level. The challenge here is selling an ROI that is difficult to measure.</span> <span style="font-weight: 400;">I’ve focused on healthcare here due to my personal experience, but there are similar examples in other markets and emerging technologies. My experience was an important reminder that as excited as we get about innovation, we can’t lose sight of what’s most important – people. Often times, good solutions are rooted more in UX than technology.   </span>

With both Bitcoin and Ether surging to record highs this week, everyone – entrepreneurs, investors, consumers, businesses and governments – have been caught up in the flurry surrounding cryptocurrencies. Many are trying to understand what’s happening now and where all this is headed. It’s always hard to predict how a new computing platform will play out, but right now I see four opportunities that are at different stages of development. Here are my four crypto waves, ranked from furthest to least developed: <strong>Wave one: Store of value</strong> Bitcoin has found its place as “censorship-free store of value.” It’s like “digital gold,” but with some major advantages, including that it’s more fungible and easier to transfer. There are now enough people in the world that believe in this positioning and the Bitcoin mining community is also very protective of this position. So, there’s a high likelihood that Bitcoin will remain a store of value and the only open question is just how big the opportunity can be. How many people will believe and value such a store of value? <strong>Wave two: Disruption of financial markets / tokenization of financial assets</strong> This second wave has really taken off due to ETH-based ERC20 tokens and all the ICOs built around them. The first use case is live and has already created markets that have transacted billions of dollars (even if many ICOs are <a href="https://www.versionone.vc/shortcomings-ico-funding/">probably doomed to fail</a>, given the quality, or lack thereof, of the underlying products). My theory is that over time every single asset class will be tokenized, and perhaps new asset classes will be created in this process, bringing about new financial markets with global reach and frictionless access. The big question is how quickly regulators will let this happen, if at all. <strong>Wave three: Disruption of every other information market</strong> Disruption won’t just be limited to financial markets. I believe that every other information market will be changed by blockchain: storage, computing, access, firewalls, CDNs, Wi-Fi, etc. We’re just now seeing the first projects emerge in this space. The most prominent project so far is <a href="https://filecoin.io/">Filecoin</a>, who has raised over $200M to disrupt storage. Of course, these products aren’t live yet and it will probably be a few years before we’ll be able to use any of these platforms. <strong>Wave four: Disruption of what a firm means</strong> Crypto’s last wave will actually disrupt how we define a firm. Through decentralized governance and decentralized incentive systems, we will see very large communities emerge to tackle projects that have been created by centralized organizations to date. <a href="https://numer.ai/">Numerai</a>, a decentralized hedge fund, is the first example for this opportunity. This stage is still early in development, but I expect it to become a much larger trend down the road. But, we’ll first have to figure out the optimal <a href="https://medium.com/@FEhrsam/blockchain-governance-programming-our-future-c3bfe30f2d74">model for decentralized governance</a>. And, that’s not a simple task. Most predictions fail, I know. But it is still incredibly exciting to think about how crypto can play out over the coming years. Any thoughts and comments are welcome – let’s discuss!