Protocol Pipeline
The inside story of the venture capital and startup world by Biz Carson.
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The startup opportunity that could be bigger than the internet

The startup opportunity that could be bigger than the internet

Hello and welcome to Pipeline. A special thank you to Karyne Levy who has made a valiant effort to curtail my use of em dashes and has been a wonderful Pipeline editor for the last year — I hope you get to enjoy sleeping in on Saturdays now.

This week: Phil Libin thinks there are big opportunities ahead for startups, there's a new SPAC in town, Katerra shuts down, and the app that Sequoia's Ravi Gupta is "completely irrationally obsessed" with.

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Overheard

  • "Many investors think I'm the world's best person at picking startups, which is not true. I'm certainly in the top five," Jason Calacanis told Insider. He may be his own biggest fan because some entrepreneurs say he can be challenging to work with.
  • SF is ready to fight back against the techodus. "San Francisco, when it comes to tech, is the team that has won the last nine championships, and it feels to people we're trying to dial it in on the tenth. And we might get knocked down in the first round if we keep acting like this," SF Supervisor Matt Haney told Protocol's Megan Rose Dickey.
  • Justin Kan is roasting pitch decks. Kudos to the startups willing to have their decks torn apart on video by the Twitch founder.
  • A YC alum claimed to be kicked out of its community over a tweet. Former YC founder Paul Biggar said on Friday that the startup accelerator had removed him from the community because he had tweeted in March that founders had posted about skipping lines to get vaccinated. (Y Combinator declined to address specifics but contested the characterization.)
  • Marc Andreessen's "satirical" "interview": It's an interview with questions so terrible and demeaning toward individuals that I will not link to it in this newsletter. Some people took it at face value that the replies were the genius of Andreessen. An A16Z spokesperson told a reporter mentioned in the interview that it was just "satire." But it's unclear if Andreessen responded to the satirical interview with answers of his own or if the whole thing is a weird fanfic to the venture capitalist. A bunch of armchair Twitter investigators (OK, largely journalists) think it's likely real, but A16Z didn't respond to a request for comment on it.
  • This week's crazy stat: "More businesses launched on Stripe since the start of 2020 than did in the rest of Stripe's history before then. Overall rate of migration to the internet economy is hard to overstate," Stripe's Patrick Collison revealed.

Biz on Biz

The changiest time, ever.

"There are decades that go by where nothing happens, and then there's certain weeks where decades happen" — or at least that's how mmhmm and All Turtles founder and former Evernote CEO Phil Libin remembers the quote from his childhood going.

"That's what's happening right now," Libin told me from where he's living outside Bentonville, Arkansas. "The world is going through the changiest part that has ever happened in my lifetime."

Suddenly, hundreds of millions of people can decouple work from where they live — and that shift is an opportunity for startups. "A whole life cycle has been built around this idea that where you live is completely based on where you make a living. And for that to all of a sudden get decoupled is such an amazing and profound thing that I think it's going to change everything," Libin said.

  • For most of history, people's jobs have dictated where they live, from urban to rural environments to the idea of "company towns"; Libin's location outside of Bentonville, the home of Walmart, is just one example of it.
  • But that's changed now that more companies across the globe are becoming flexible with where people can work. This week, software giant SAP announced its 100,000 employees could work from anywhere. Even traditionally "in-person" professions like health care and education are shifting some work online, leaving millions of people free to move where they want.

"The scale of this change is, I think, bigger than the internet," Libin argues. He started his first company in the dot-com boom, but this feels different. "That wasn't about fundamentally tinkering with the way people had set up their entire lives and societies, which this is."

  • The shift in people moving around will mean changes to tax bases, transportation, education, health care, food and agriculture as places deal with a redistribution of people.
  • The San Francisco Bay Area saw the biggest outflow of tech workers in the last year, according to LinkedIn data. Now, a drop in enrollment in the school district could cost the city $20 million in state funding in the fall. And the effects will continue to be felt from there. Already some financial regulations feel outdated, like how Snowflake had to amend its "principal executive offices" last week to be in Bozeman, Montana, after it moved to a fully distributed workforce.
  • "So many new products have to be created for this world," Libin said. Everything from insurance to zoning laws to new kinds of software may have to be built to help navigate the change.

"If you believe that a good time to start a startup is like when everything is changing — because everything is getting thrown up in the air, you may as well be there to redirect where things land — then this is the best time to do it," he said. After all, it's time to build.

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Inside Track

  • The cloud is great until it isn't — and then it's often too late. Andreessen Horowitz's Sarah Wang and Martin Casado analyze the cost of the cloud, a "trillion-dollar paradox."
  • Cheaper than grad school: Everyone's reading Coda's Shishir Mehrotra guide on how YouTube managed hypergrowth.
  • TestFlight is a great way to raise hype for a startup and even funding, but CRV's Justine and Olivia Moore caution that it can often skew metrics. Here's how they suggest responding to investors who question the numbers.
  • Venture capitalists pride themselves on the quick yes or no, but they could benefit from stealing a page from publishing and learn to sift through the slush pile, argues known writer and journalist Paul Bradley Carr.
  • Last Pipeline, I wrote about how venture capital firms are opening up their hiring processes. Seven Seven Six's Katelin Holloway published a thorough breakdown of how they hired for its operators in residence program, including how they whittled it down from 1,100 applicants to the final three chosen.
  • Often developers will fall in love with a tool, but it can be a challenge for the company behind it to actually build a business out of it. Bessemer's Janelle Teng and Ethan Kurzweil published a manual on how to overcome common roadblocks.

Need to Know

  • There are now 700 unicorn startups, according to CB Insights' tracker. Too bad there aren't actually 700 unicorns.
  • You can blame Tiger Global for a lot of them. Tiger Global has invested in 118 startups already this year, according to Crunchbase data; that's 10x its investing rate last year.
  • Where did VC dollars grow the fastest in 2016 to 2020? Michigan.
  • The "SPAC-off": SPACs are under pressure to find better deals after falling stock prices, so competition is heating up between SPACs vying for the same top-tier companies.
  • If SPACs weren't confusing enough, meet the SPARC. Bill Ackman's SPAC is now pursuing a 10% stake in Universal as a SPARC.
  • Bill Gates backed a new fund. MetaVC is targeting a $100 million fund to invest in new materials. OpenAI also debuted a $100 million fund, and Lux Capital reupped with new funds.
  • Katerra shuts down. The SoftBank-backed business had raised over $2 billion before its construction dreams collapsed.
  • The company you haven't heard of that's blowing up: Meet Shein, the "TikTok of ecommerce" that's changing the reputation of Chinese fashion.
  • On Protocol: Base10 is trying to tackle racial inequity in tech by donating 50% of its carried interest to HBCUs.
  • Your weekend reading: You can't miss this profile on SPAC king Chamath Palihapitiya, which is as colorful as you could expect about a man dubbed the Pied Piper of SPACs.

Five Questions With...

Sequoia's Ravi Gupta

Ravi Gupta joined Sequoia in November 2019 and has invested across the board in companies like wholesale marketplace Faire, weight-loss app Noom and life sciences software Benchling. He is a father of three and spent several years at Instacart in between investing jobs as the grocery delivery company's CFO and COO.

What is the biggest issue that you and your partners are thinking about and talking about on Monday mornings?

We're a unanimous partnership, and the idea is that we make the decisions as a team. The reason that that's important is we tell founders, if you work with Sequoia, you get all of us. I think that creates a real culture of discussion and debate in the Monday meetings of what exactly are we talking about? We're all in this together, let's get it all out. That's sort of the tone.

The underlying thing that I try to think about every time I meet with a founder is: Do you want to be on the board of this company for the next 10 years? I write that in my notebook at the beginning of every meeting so I can reference that. And the other one is: if you could only make one investment this year, would this be it? I think that's important to me because if this person's gonna devote her life to this, I want to match that energy.

So to relate that back to what we talked about on Mondays, a lot of times we ask each other those questions: Do you want to be on the board of this company for the next 10 years? If you could only make one investment this year, is this it? That is important for the Sequoia culture because we believe in founders, we believe in what they're doing. And I think that we try to hold each other to the standard of is this a person that you believe is building the future? Let's not just do deals. That's really the way Mondays go.

One other thing we do is we every week we like to ask somebody to share a quote, something that means something to them, and we talk about it, and I think that it's one of my favorite little traditions about being here is hearing the quote that people provide and why they share it.

What product or service are you totally irrationally loyal to (that's not Instacart)?

Pocket. I love Pocket. I love Pocket. I mean, I am completely irrationally obsessed with Pocket because I love to read and I love this idea that I can save things for when I have time to read them like when we used to travel on airplanes. I can't imagine what my life was like when I didn't have it.

What is a secret obsession of yours that most people don't know about?

I don't tweet, but I have a private Twitter account where I get to follow people and trends and things that I like. It's funny: Sometimes I'll text a friend, being like oh I really liked what you tweeted or what did you mean by this and they're like, "Wait, you're not on Twitter!" and I'm like "No, I'm there, I just don't tweet."

What book do you think every startup founder should read?

Most people reference Clay Christensen for "The Innovator's Dilemma." It's a seminal book, it's amazing. But my favorite book is [Christensen's] "How Will You Measure Your Life?"

A very close friend recommended it to me, and I'm really glad that he did because it just makes you ask a simple very important question. I think founders are actually inherently better at answering that than most people because they've made this crazy decision to devote their lives to something, so I think inherently they're better at this. But the reason I like it so much is I think it makes sure that you have a long-term view. If you are thinking about that, it makes some of the decisions you have to make in a company a lot easier because building the company is so hard. But if you know why you're doing it, it makes things a lot better. It doesn't make them easy, but it makes you at least have some North Star.

Aliens visit Earth, and you can only show them one movie. What would it be?

"A River Runs Through It." The reason that I love it so much [is] my dad used to travel a lot for work and he came home one day and he told me and my older brother like "I saw it on an airplane and it made me think of you guys." With that setup, it was like I so wanted to watch it of course, you know my dad told me to watch it, but it's this stunningly beautiful movie about family and about the things that you honor within a family and the things that you look past about each other and what that means. It's totally possible that I'm very biased on this because I was so inclined to like it to begin with, but I think the thing that it would show is the depth of what it means to be in a family.

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