venturing

over the years i've developed and refined a really simple framework for prioritization that i wanted to share.

whether it's an athletic pursuit, house chores, or your work, you can bucket every task into either 'progress' or 'perpetuation'. depending on how satisfied with where you are today vs. where you want to be, you can dial up and down the relative weights of those tasks. when you're not happy, you should be spending at least 2/3 of your time on progression, and minimize perpetuation.

what do i really mean?

well, let's go through some examples.

back when most of my life was dedicated towards swimming, i was practicing 10 times a week, often swimming 5-7km each practice. at the beginning of a season, when you might be out of shape, you do a tremendous amount of threshold/endurance mileage to improve your conditioning and increase your anaerobic threshold. This is progressive work. You're pushing your boundaries and improving. As your main competition approaches and you start feeling strong in the water, you take your foot off the gas pedal and start to back off the mileage, the goal is the maintain or perpetuate your condition and even to back off and get some rest. Both of these stages are important and valid to swimming your fastest. But not everything is as clear cut as swimming.

what about at home? any given week there are a set of tasks you might do to maintain the status quo (we often call it "upkeep": taking out the trash, vacuuming, or washing your sheets. but sometimes it's also also vital to do things to fundamentally redesign or rethink an aspect of your living space, particularly if you're unhappy. maybe that means research for moving, or just repairing something that has been broken for a while. the problem is, most of us are constrained for time, and the perpetual tasks can eat up most of it. we kick the can down the road and never do the things that will help us progress out of the status quo, building frustration and a feeling of ineffectiveness.

this leads me to work. i actually mostly generated this framework when i was in between jobs. i was not happy about that. i knew that i needed to change the status quo but found myself frustrated that things weren't progressing as quickly as i would have liked. why not? well, it turns out i was spending a lot of time on things that weren't going to generate a meaningful shift in my situation. i realized i needed to minimize time on tasks that were necessary but just perpetuated the status quo, and focus on tasks that were riskier but might one day lead to a job or a project that would fundamentally change my circumstance. that meant taking risks with whom i met, or reaching out to people i hadn't spoken to in years.

i ended up getting my next job, at soundcloud. now, in my day to day work as an investor, i tend to think about this framework in more simple terms. monitoring and staying on top of my email is perpetuation, it's "staying on top of things". i need to do it, and because i'm happy with the status quo, i also want to do it. but more important is the work i do to make myself a better investor, improve the firm, or help our portfolio companies level-up. often, this means reading and learning, spending time outside of my comfort zone, listening to people smarter than me, tinkering around with unfamiliar software and networks, and keeping my phone in my pocket.

when you learn Mandarin one of the most delightful aspects of the language is learning chengyu. Chengyu are idioms, typically of four characters, with rich (and convoluted) stories behind them. Today, Chinese often use them in day-to-day contexts as sort of common-sense teachings or even just throwaway expressions.

In English, it strikes me we don't have as strict a framework for our idioms. Recently, I came across Proverbs by John Heywood, published in 1546. I thought I'd share some of my favorites:

Soft fire makes sweet malt.

As he writes, "You must not leape over the stile before you come at it". Be patient.

Strike whilst the iron is hot

Perhaps contradictorily to the above, opportunities are not always ready for the taking. When they appear you have to seize them. Especially true in venture..

Out of sight, out of mind

In this day and age it's find to hard peace of mind. For me this represents the importance of being present in where you are, rather than being distracted by things happening far away from you. Information now travels at the speed of light but it doesn't mean we should always be paying attention to it. (Interestingly, origin is from a 1320 early English fragment that I interpret as Far from eyes, far from heart)

Mine Ease in Myne Inne

The comforts of home.

Better Late Than Never

apparently from Tusser's Five Hundred Points of Good Husbandry...

The rolling stone never gathers moss

One I've really taken to heart so far.
Loving the origin of this one:

Herod: Speake thou three-legd tripos, is thy shippe of fooles a flote yet?

Dondolo: I ha many things in my head to tell you.

Herod: I, thy head is alwaies working ; it roles, and it roles, Dondolo, but it gathers no mosse, Dondolo.

— The Fawn, 1606, by John Marston

Will leave you with those

what's the most overvalued token relative to it's open source traction? with the rise of token sales as a new funding paradigm, we've seen a really healthy dissemination of frameworks for token valuation (like this one from Chris Burniske, or a more elementary checklist from Fred Wilson). many of these frameworks think about these networks from a top-down perspective, which can be helpful in some cases, but may not be relevant in others.

i've taken a list of tokenized projects, dapps (big thanks to stateofthedapps.com) and networks and quantified their github stargazers, contributers and commits. big thanks to hugo murphy for the help here.

aside from the problem of centralizing all the world's code on a closed-source github, (quick aside: some great projects tackling that problem, from oscoin to gitcoin to gittorrent) i think github repository data remains one of the better publicly-available datasets we can use to make like-for-like comparisons across a broad array of projects.

there are other problems with this methodology. if i had more time perhaps i would weight certain stars from certain users more highly, or i would introduce a code quality screen (more volume does not mean better code), or we'd look at publicly available usage data.

many folks in the decentralized ecosystem don't trust anything that hasn't been open sourced. i certainly don't. particularly in this space, where claims are often exaggerated, and fundamental quality can be hard to ascertain, it is vital to open source your work to get community buy-in, earn community trust, and improve the quality of your code. and i don't think posting the whitepaper to github counts.

important to note that when a project has multiple repositories we used the one that was either core to development (so a core library vs. a wallet library for instance), or the one with the most stargazers. secondly, a lot of the GitHub data is accurate from Sep 17, 2017 so almost all of the numbers will be slightly higher today.

with that, let's dive in

first off, here's the dataset i'm working off of. i've open sourced it and it's fully editable, it's not entirely complete so feel free to go in there and make changes.

first off, what kinds of projects are people starting?

i understand that some of these categories are fairly arbitrary, and we haven't done a perfect job, but safe to say we see a pretty balanced distribution of projects across all these classes

what about if we look at the breakdown of github contributors across the classes of projects? now suddenly we see currencies take the lions share, with infrastructure another major portion.

and if we look at stargazers? the interesting thing here is that infrastructure projects jump up in relevance majorly, even surpassing currencies

what about individual projects? let's look at the breakdown of stargazers across the top 20 projects with the most stargazers. Ethereum and IPFS are well ahead of the rest.

but it's a far different story for contributors. the repositories belong to the projects with most contributors are actually qtum, dash, zcash, and myetherwallet

interestingly, when we look at commits across projects the breakdown starts to balance out more evenly again.

i began this post with a reference to valuation frameworks. while this is a certainly a very rough and untested framework, i would propose that looking at some measure of market cap / open-source activity multiple might belong in the toolkit of some people valuing these networks. (disclaimer: i didn't find very high correlations between market caps and any of the github metrics).

by this metric, the most "overvalued" token is bitconnect (BCC), which is valued at $1.7B and has 46 stargazers, which means it's trading at approximately $37.5M per stargazer!

as always, feedback welcome, and again please feel free to share this around along with the sheet

a central challenge facing venture capitalists today is the decentralization of tomorrow's internet. while many won't admit it, venture capitalists often need centralization to create companies at the scale that deliver outsized returns to their investors. if the internet becomes decentralized, where will those returns be generated?

we've been thinking about that here at balderton with regards to the emerging crypto economy. one conclusion is that the bridges and access points between the "crypto economy" and the "fiat world" will continue to drive value and growth in years to come.

to bridge this gap, you need a team that can both form partnerships with institutions around the world and ship easy-to-use and secure software to the mass market on the devices where they access the internet. it's often said that the crypto world is held back by a severe UX problem; it's less often that you see a cross-platform suite of products addressing that problem at scale.

marcus, tim, and the whole team at luno have known this for years. they have built a suite of products to help empower billions of people by bringing digital currencies to everyone, everywhere. from cape town to singapore, lagos to kuala lumpur, people use luno to buy, store and learn about digital currencies.

the caliber of luno's team and the pace that they are growing their business continues to set them apart. today, luno is announcing their launch into europe, meaning their services will now be available in 40 countries around the world. we're proud to be a part of the journey.

Credit to Eric Pickersgill at http://www.ericpickersgill.com/removed

We have a thesis we've been discussing internally here at Balderton on The End of Reality. Quantum physics and simulation theory aside, it's clear that we are increasingly escaping our immediate physical reality in favor of alternative digitally (or chemically) constructed realities.

This doesn't come as a surprise to me, but I do think it comes at a cost. While we may be more "connected" than ever, are we as present with those with whom we share physical space? While social media allows us to construct a self according to our mind's eye, do we share our flaws and faults as openly and honestly?

Somehow I feel that in the past year or two we have all collectively begun to go over a brink. I remember in the early days of smart devices people were very conscious of not using them during a meal. Today, it's not uncommon for me to look around at a restaurant and see more than half the groups or couples staring down at LCDs. I think we've slowly started to feel that being somewhere else, and not giving those we surround our attention and our presence, is acceptable.

Are we using technology to enhance our own reality or depart from it? For me this question boils down to intent. App makers are becoming very good at distracting us and keeping us engaged well past the point of accomplishing what it is we originally set out to achieve. For me, this means that I need to be extra vigilant:

Why did I take out my phone?
What was my original intent? Have i fulfilled that intent? If so, why am I still using this? What is the most fulfilling way for me to spending the next few minutes?

I know that if I don't stay sharp on this, then minutes, hours, and days of my life will be spent doing things that aren't high on my priority list, don't help me grow, and that haven't really helped me enjoy or live my life fully.

To some of you it may seem ironic for a tech investor to be stating this, given that many of the companies that have built a foundation for venture returns are driven on attention. But I think that the most impactful and important companies of tomorrow will help enable us to fulfil our intentions, rather than distract us from our life's priorities.

Flurry Analytics reported that in Q42016, Americans were spending 300 minutes (5 hours) a day on mobile devices. That's up from 162 minutes (almost double) from Q12014. 5 hours a day is 30% of your waking life. It is 114 days or almost 4 months every year. No doubt that much of that time was spent video chatting with loved ones, capturing memories, editing documents, listening to awesome albums, and answering urgent emails. But how much of the time was spent on click-bait? On checking your email for the 7th time that hour? On videotaping a concert, taking yourself away from the moment for a video that you will never watch again?

I don't think I'm the only one who is thinking about getting this balance right. I recently spent a week in Brooklyn and while I was there a meditation center and yoga studio opened on my street. I spent last week at a tech conference in Berlin where an entire tent revolved between meditation, yoga, qi gong, and kakao ceremonies. The tent was always full. One of the ways we embody this at Balderton is by banning laptops and smartphones from our Monday meetings so that we can be fully present to engage with one another.

Slowly I think we are realizing that as we plug into the promise of digital interfaces and the instant gratification of their realities, it's becoming increasingly important to slow down and awaken to the feel of the earth under our toes, to listen to the words and smiles of our companions. We need time and space to ponder and process our priorities, and only then can equip ourselves with the right tools to achieve them. It's very unlikely those tools are inside your next push notification.

(Big thanks to Nicolas, the guru)

I have spent some time in recent months thinking and learning about cryptographic tokens and blockchain, specifically Ethereum. This included time at the Ethereum Developers Conference, conversations with thoughtful folks in the space, and a wheat beer at Room77 in Berlin. After these conversations, I feel strongly for various reasons that it is a space we all should be on top of, and where tech investors should be looking to put capital to work, sometimes in unfamiliar ways.

1. Top Down. Cryptocurrencies (mostly Bitcoin and Ethereum) are emerging as an entirely new
asset class with returns we, as technology investors, shouldn’t ignore

In 2010 all the world’s cryptocurrencies were worth virtually nothing, today they are worth between $20-25B. In a world where the existing 5 macro asset classes (currencies, commodities, rates, equities, fixed income) are largely influenced by policymakers, central bankers, and increasingly unpredictable democratic outcomes, cryptocurrencies are providing a relatively uncorrelated asset class that can potentially reduce portfolio volatility and increase risk-adjusted returns.

Not to mention, the returns have been fantastic. In the last 12 months BTC has grown from a market cap of $6.3B to $17.8B. In the last 12 months ETH has grown from a market cap of $850M to $4B. While it’s true that these asset classes have also historically been extremely volatile, it’s also clear from the data that they have thus far delivered consistently handsome returns to early investors. Losses were posted two of the 9 years, with annual average returns of in the ballpark of 350% and 500% respectively for Bitcoin and Ethereum.

We may argue that, as impressive as these numbers may be, we are equity investors into technology companies, and as such these and related asset classes are clearly inappropriate investments. That would be a mistake. These tokens are fundamentally new technologies first, and financial assets second.

2. Tokens are becoming a new funding paradigm. It behooves us to think about how as VCs we can
operate here if we see compelling cases.

Previously, protocol layers (like HTTP or TCP/IP) were largely provided by researchers who didn’t (at scale) monetize their protocols directly. It took entities who built software on top of those protocols, and then either sold that software directly, or built networks large enough to be attractive to advertisers, before the
protocol could be meaningfully monetized.

Networks like Ethereum are entirely different. Through cryptographic token sales, a for-profit entity can issue tokens to would-be participants in the network while retaining some portion of the tokens for themselves. As network participation increases, so does the value of the withheld tokens, which they can use to fund operations, incentivize employees, etc.

As such, as technology investors I think we need to think about how we can gain exposure to these tokens
in the event that we see a company that is attractive to us and meets our investment criteria.

3. It is very early days for Ethereum (genesis block in July 2015), and yet the flexibility of its
scripting language (Solidity) means that it has already garnered lots of developer attention, with the
promise of a much richer and diverse application layer of decentralized applications (DApps) built on
top of it

Big validation points for Ethereum include:

• $4B market cap less than two year after creation
• Coinbase’s adoption (July 2016)
• The formation of an Enterprise Ethereum Alliance including Microsoft and JPMorgan (Feb 2017)
• Leaders in the space abandoning Bitcoin in favor of Ethereum

You already have an entire ecosystem of developers using Solidity to build DApps
A full list of DApps maintained by ethereum.org

Some examples:

Status – A mobile browser, OS and messaging platform for Ethereum & Dapps
Oraclize – Data carrier for decentralized apps
Ujo Music, Musicoin – Blockchain-enabled digital rights mgmt. for musicians
Etherisc – p2p Social insurance, flight delay insurance, crop insurance
Gnosis – Prediction market platform including automatic payouts
Ethernote – Legal contracts and templates
uPort - Identity Management
KYC Chain – KYC solutions for finance and law
Augur – Forecasting Tool

Risks

To be fair, this space is fraught with risk, of which here are some:

1. Security
   There have been numerous cases of security breaches at high-profile stores of currencies, most notably Mt. Gox and the DAO. Security needs to be #1 DD item for any investment involved with storing or transferring a high volume of keys
2. Volatility
   Tokens have been tremendously volatile, which is a direct risk for us as investors but also a risk to mass-market adoption.
3. Reputational risk
   Ask your friends what they buy with their Bitcoin
4. Scale
   Both Bitcoin and Ethereum have issues at scale involving block-size, and transaction speeds/costs. Ethereum has an active community and is willing to evolve via hard forks, which suggests it will be the more flexible solution
5. Is this just batshit crazy?
   I don’t know. Is this so out there? I don’t think so. At this point, there have been billionaires created by investing in these tokens, building companies in the space, and building next generation protocol layers. The value of these networks is increasing exponentially as more and more smart people dedicate their careers and lives to the space.

As a Californian who grew up in Hong Kong I'm often asked, What are you doing in Europe? My response is consistent. Europe is the most exciting place to be in technology today.

Why?

If in China we have BAT (Baidu, Alibaba, Tencent), and in the US we have GAFA (Google, Apple, Facebook, Amazon) is the European monolithic tech acronym just around the horizon? Not quite. These acronyms exist because they reflect the concentration of capital and market cap tied up in a handful of companies. I'm not sure Europe will get to that point in the next few years and I'm not convinced we should. We have tremendous potential to be a connector between east and west, between north and south, to connect creativity and execution within a framework mindful of privacy and distrustful of monopoly. That's why I'm excited about European tech.

Let's start from the ground up. Europe has all the ingredients to build globally competitive next-generation technology businesses: education, talent, capital, and markets. Europe is a network with various cities as the primary nodes, and we are just starting to see a degree of density within the individual ecosystems that is driving major synergies both within and across these nodes.

As a platform, Europe is producing businesses with global mindsets and capabilities. At SoundCloud we had 35-40 nationalities represented among fewer than 200 employees in Berlin. That may not sound like a lot but try and sit down and name 40 countries. By the time you've passed 30 you're naming some relatively obscure places. You can't imagine the strength that diversity brings when it comes to product decisions, cultural decisions, and strategic decisions. Moreover, given the heterogeneity of the continent itself in terms of languages, legal frameworks, tax codes, and userbases, the businesses are built to be modular in a geographic sense from the start.

If we look at fundamentals, there are fantastic technical universities spread across the UK, Germany, France and beyond. Moreover, there are practically as many developers today in London, Paris, and Berlin as there are in Silicon Valley. Many of these developers are world class, and you will find former engineers from Google, Facebook and Twitter in California scattered across the coffee shops and startup offices in Berlin, London, Stockholm, or Lisbon. (For a deeper dive into the talent that is powering Europe's startups head over to our recently published Talent Report)

These developers are increasingly pairing up and building companies with business-minded operators who have experience at world-leading tech companies, banks, or consultancies. Since 2010 1,635 early stage (raised <$5M) companies have been backed by angels or VCs in the Bay Area. In London, Paris, Berlin and Stockholm that number is 1,458 companies. For VCs, the investable universe is deep and getting deeper.

This set of circumstances has led to increasingly large & chunky >$1B exits (2016 saw six exits alone worth $70B in Europe) that have two main consequences. Firstly, they signal to the ecosystem that founding a company or working for stock options is a viable career path. Secondly, these exits inject the ecosystem with founders and employees who now have both capital and know-how to reinvest into it.

This, in turn, has started to attract more capital investing in technology businesses through all phases of development. There are new accelerators and incubators cropping up from Shoreditch to Kreuzberg, with more seed capital not far behind. Here at Balderton we feel very confident that our singular focus on European Series A is differentiated, but in later stages Series B+ (and to be fair, earlier as well) we've seen tremendous interest from US VCs like Benchmark, USV, and Sequoia who are as impressed with companies being built here as we are.

All in all, I'm excited about Europe not because it will replicate what we've seen in San Francisco or Shenzhen. Instead, we have tremendous potential here to build world leading companies leveraging the unique characteristics of the European platform: An international core, user-centric privacy frameworks, design-driven products, and competitive markets.

Thoughts? Are you all as excited about Europe as I am? Why or why not?

(Left) A screenshot of the central map UX of Carjump, centered on Rosenthaler Platz in Berlin. Each bubble is a car, bike or scooter. (Right) A similar screen from COUP

When I'm in Berlin I'm often traveling from meeting to meeting or from Mitte back home to Kreuzberg. I prefer to cycle but some days the weather or distances don't really allow it. On those days I use vehicle sharing.

In large cities like Berlin, London or New York (and to an even greater extent in their EM cousins Beijing, Sao Paulo, Cairo, Jakarta…) cities can be frustrating and expensive to travel within. Many people criss-cross their cities 3 or 4 times a day.

In Berlin Uber isn’t really present (although uberX has recently relaunched) and taxis are relatively expensive. Most people move around on:

1. Bikes
2. Public Transportation (very robust, with over and underground trains, trams and buses)
3. Private vehicles
4. Vehicle Sharing

The first three of these methods of urban mobility have been around at least 100 years (and for a more general take on mobility read this post by my colleague Nicolas). What I want to talk about here briefly is the fourth mode, and in particular flexible vehicle sharing, which has only really been around in its current form since 2008.

The distinction between flexible and fixed vehicle sharing is important. Fixed schemes have been around longer (like Zipcar's traditional service) and allow you to rent a car from a fixed location but require you to return it to that same location. These schemes are useful if you want to take a trip from A>B>A, like heading to IKEA to buy furniture. Flexible schemes on the other hand are far more useful, because they can be used for any trip from A>B (as long as both origin and destination are within the scheme's geofence.

Berlin is one of if not the global capital of vehicle sharing. I'm aware of at least 12 different vehicle sharing schemes in the city. My estimate is that there are close to 3,000 free floating vehicles in the city (Car2Go with at least 1,000, DriveNow with 800 ..etc) What this means in practice is that I almost always find a vehicle within a 5 minute walk, and more often than not within 3 minutes.

These services are cheap. Car2Go costs on average €0.30 per minute meaning a 10 minute ride puts you back roughly €3.00. DriveNow is marginally more expensive at around €0.33 per minute, and the scooter sharing services are even cheaper with eMio at €0.19 per minute or COUP at a flat €3.00 fee for a ride up to 30 minutes. To put that in perspective a single ride on the u-bahn (subway) costs €2.70.

We've done an overall pricing analysis that shows what a 3 mile ride in a lot of major cities across the US and EU will cost across various services:

So there are major savings here vs. uberx, on the order of 40% (DriveNow) up towards 75% for scooter sharing services.

When I have the flexibility and ease-of-use of a private vehicle on hand within a 5 minute walk at the push of a button, the attraction of owning and maintaining my own car has just fallen through the floor.

Of course, flexible vehicle sharing schemes are not right for every city. It's hard to see the scheme working well in an urban environment as dense as Manhattan with stringent parking regulations for example. Berlin is in a sweet spot where it is dense enough to make the schemes economically viable but not so dense where parking becomes a nightmare. London is another good example. DriveNow is live in London in several boroughs like Islington and Hackney where the population density and parking environment is similar to Berlin's.

One of the reasons why I'm excited by this space is because I do see these schemes as having advantages as we move towards autonomous vehicles. The primary difference between ridesharing and carsharing today is the driver and over time the distinction between these two categories will start to dissolve.

What do you think?

Shortly before the election my Grandmother, who is the most ardent Hillary supporter I know, wrote me and asked if I could help explain Trump's popularity. She just couldn't understand it. Here was my letter in response:

--

Grammy,

Somehow I think the anger that manifested itself in Trump's campaign is related to the deep feelings of unfairness that manifested itself in the Occupy movement of 2011. It's why Bernie mounted such a strong challenge despite seeming like a kooky professor.

People are angry. Inequality and the growing divide has a lot to do with it. I'm not entirely sure that's everything though. I think some of it has to do with the loss of faith in a state that provides and supports for its citizens. This doesn't exist any longer in the US. The most "patriotic" people are also those that detest the US Government.

I think some of it has to do with the sterilization and alienation inherent to a society that has allowed corporate interests to grow virtually unchecked while defunding governments and local communities.

I'd also likely to touch on technology, which on one hand has been an unbelievable boost to productivity and is facilitating some wonderful things in terms of connectivity (I'm emailing you!). It's been a huge boon to society in many ways but we always have to be conscious about how we use the tools available to us. Because on the other hand technology and in particular cellular infrastructure has allowed companies to scale at an absolutely unprecedented speed.

I know about these business because it's my job to invest in them, and I know that software companies will enter every aspect of our society. While I believe in the power of capitalism to allocate resources more or less efficiently, history is rife with examples of where we need strong and clear-minded governments to help us steer the boat, to ensure that externalities like pollution are priced in, to ensure that people are not priced out of the basic goods, services and opportunities they should be afforded as human beings. In the long run it is about the governments ability to regulate these businesses fairly and ensure that the gains are accruing to all stakeholders. To founders, investors, employees, and back again to society (taxes).

The truth is, with the rapid development of artificial intelligence, automation, and robotics, fewer and fewer people are equipped with the requisite skills to work competitively in today's economy. On one hand, economists have argued that technological improvements historically haven't increased joblessness but instead changed the nature of the jobs we do (we become "machine managers"). There has also been a boosted demand effect that increases the volume of goods at equilibrium and thus stems job loss. I find these analyses short sighted because they miss the point that in an absolute sense machines are approaching the computing power of the human brain and the capacity for us to differentiate ourselves vs machines is undoubtedly shrinking.

So, in my and many other's view a Universal Basic Income (UBI) of some fashion will be necessary in the medium term. We have to do a better job of ensuring that everyone, across red states and blue, and not just coastal technologists or investors, are participating in the promise of tomorrow. Despite it's reputation a UBI could actually do much to foster a greater sense of fairness across our society, to ensure that everyone is equipped with the positive rights of education and opportunity and the right to live above poverty. The problem is that with the leaders we have now elected it will be likely impossible in the current environment of Fear and Others politics. The forces that have driven many people to such a feeling of displacement within their own society are only accelerating. Unless those of us who are lucky and well-off stop and think about how to reshape our society to make it fundamentally more fair, the discord and divide between red and blue, black and white, young and old, urban and rural, and between rich and poor, is only going to widen.

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold