August 22, 2020
Image: Pearson Scott Foresman and Protocol
Hello and welcome to Pipeline. It's been quite the week in the Bay Area (fires! A plague! Fire tornadoes! A pandemic!) so hope you all have stayed safe and healthy. This week: The bleak economics of microVC funds, what a 100x revenue multiple really means, and why investors are tweeting out their TestFlight app lists.
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TestFlight is supposed to be a developer tool for companies to test and troubleshoot their software with a few users. It's also been a utilitarian tool for venture capitalists for years; early-stage investments often involve founders sending VCs a link to their TestFlight app to check it out before it gets released into the App Store.
But as my colleague David Pierce reported this week, how developers use TestFlight is changing. It's becoming a place for developers to build apps just for smaller audiences, with fewer constraints than they have to meet in the real App Store. There are also new apps springing up in TestFlight to make it easier to find and discover these under-the-radar apps, and that's whipping up a greater feeling of exclusivity. And if anyone loves a sense of exclusivity, it's VCs.
Anyway, it's no surprise that investors are now showing off the apps they have in TestFlight as a kind of signaling tool, at least on Twitter, of how connected they are.
For now, TestFlight isn't really a place to source or find deals: It remains largely utilitarian to the VCs I talked to. But that may be slowly changing.
The big new question is: Might a VC back a TestFlight-only app? Venture capitalists continue to back apps that first appear on TestFlight— just look at Clubhouse, which raised at a $100 million valuation and still hasn't graduated to the App Store — but the 10,000 user cap is obviously a barrier to scale.
Earlier this week, Protocol hosted the first of two events in our 2020 national political conventions series. We convened engaging conversations on how leaders today will enable a diverse workforce of the future. Join us Wednesday, when we'll host the second event in the series, featuring special assistant to the president, Matt Lira, and more. This event series is hosted in partnership with ITI.
What's one startup or product that failed or was shut down that you wish were still here today?
It's easily the most hated startup of the last five years but Theranos. If they would have pulled off what they were trying to do, it would have transformed health care and made a huge difference for people who on a regular basis have to go through very painful procedures to draw blood. To be clear, Elizabeth Holmes is not an admirable person and fraud is unacceptable, but the idea she was pursuing was worthy.
What's a secret obsession of yours that most people don't know about?
I obsessively track in a very systematic way how often I'm in touch with my 20 most favorite people in my life. I actively want to avoid the scenario where I wake up one day and realize it's been five years since I last spoke with (fill in the blank). I actually record it in a little book. It's super important to me and takes dedication. Right now with the pandemic, I drive an hour to meet my little brother so we can go for a run every Thursday or Friday night.
What was your first check?
My first check was [a] $5 million, series B investment in Pivot Solutions. All of the traders on Wall Street were using AOL Instant Messenger to communicate (you might not know someone's name, but you knew their IM name), and this product integrated deeply into their trading systems to allow them to actually trade over IM. Like so many innovations, it started out as a consumer product and ended up on the enterprise side.
What's one of the worst predictions you've ever made?
Using pattern recognition from 2001 and 2008, I incorrectly predicted access to public and private capital would become much more difficult during the [COVID-19] pandemic. Obviously it didn't turn out that way. Private investment[s] at VCs are continuing at a slightly modest pace. The public markets are open in a way that no one expected. I sit on the board of two companies that recently went public: DraftKings and BigCommerce. The fact that companies are going public in August is unprecedented, that rarely happens.
What product or service are you totally, even irrationally, loyal to?
Much to my family's annoyance, I'm loyal to PC and Android. My texts come in strange, and I can't FaceTime. But when one of our consumer-facing companies rolls out a new app, I'm the only one around the table who can show what it looks like on an Android, which is no small detail as the majority of smartphones use an Android operating system.