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Protocol Pipeline
The inside story of the venture capital and startup world by Biz Carson.
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The omniscient venture capitalist

The omniscient venture capitalist


Hello and welcome to Pipeline! This week: the limits of VC knowledge, VC ad campaigns, and VC firms and founders raise $5 million to stop anti-Asian hate.

Overheard

  • VC advertising. "Got my first sponsored ad on Instagram for a piece of content from @a16z. Fascinating to see VC firms shift to full-blown media companies/strategies. I imagine this is just the start. Founders will soon get targeted ads from firms as soon as they start fundraising." —Two Sigma Ventures' Vinay Iyengar.
  • IPO access. "If the stock price rises, it creates goodwill for both consumers and employees. If the stock price drops, however, it can backfire." —Professor Jay Ritter on startups offering retail investors the chance to buy IPO shares.
  • Education gap. "Companies need to reskill their workers, governments need to reskill their workers. And campuses need online learning." —Coursera CEO Jeff Maggioncalda after the company went public.

Big Story

When venture capitalists don't actually know it all

One of the skills of successful venture investors is their ability to quickly learn, understand and master a wide variety of business topics. This serves them well when a founder wants them to invest in anything from an airbed hostel platform to a self-driving airplane or a quantum computer.

But what about when the topic is not a business or even technology, but a complex social or political problem that can't be solved with a quick growth hack or a SPAC? Venture capitalists have plenty of opinions on housing, homelessness, education, crime or state boundaries — not to mention coronavirus testing, vaccines and epidemiology.

This issue came into focus in a Mother Jones article this week on venture capitalists' role in seeking to oust San Francisco District Attorney Chesa Boudin.

While wealthy businesspeople have always pumped up favored causes and backed political candidates, venture capitalists, who fund companies that purportedly seek to change the world for the better, are taking a much more active and public role. Call it one more way they're "going direct." It's not just idle chatter.

  • Angel investor Jason Calacanis started a GoFundMe to seek to hire a journalist to investigate Boudin. (Calacanis doesn't live in San Francisco, the article reported.)
  • Calacanis, venture capitalist David Sacks and investor Chamath Palihapitiya have made this a pet cause on their popular podcast.

I have my own opinions on crime and policing in San Francisco. But I'm not defending Boudin. I'm not even particularly lauding the Mother Jones article.

Instead, this episode illustrates a bigger issue among venture capitalists: how they increasingly feel entitled to jump into an issue as if they're experts, without a bit of humility. It's a more acute version of the stereotypical tech bro ripping about a city without seeming to care about making it better. It's also connected to why there's a broader tech backlash.

Rather than seek out experts or frontline providers on an issue, such as crime or homelessness, many base their expertise on a couple Uber rides around SoMa.

  • That's not surprising, particularly when many don't actually live in San Francisco.
  • In their discussions on these issues, in Clubhouse chats and podcasts, they have notably not included people of color (besides Palihapitiya).
  • And they have not sought to hear the voices of those most affected by discriminatory policing. Their orbit doesn't seem to include anyone who hasn't had a hundred million-dollar exit.

Having gone to a few happy hours at the Battery doesn't give a venture investor any more expertise than a random person walking down the street. (And, it turns out, far from being data-driven and precise, the investors didn't have their basic facts straight on San Francisco crime stats, Mother Jones reported.)

Don't get me wrong: Many people in technology have great ideas about complex social problems, and are diving deep to try to provide thoughtful ways to address these issues. And many are quietly helping build big companies. This is not that, and the social dilettantes threaten to overshadow those actually seeking to help.

JOIN US

Technology has been the leading sector in trust since Edelman began its Trust Barometer 21 years ago. Since that time, trust in business has risen while trust in technology has declined – and this year, the decline has been dramatic. Join Edelman for a discussion with tech industry leaders on what's next for Tech & Trust in 2021. This event is moderated by Protocol.

Click here to RSVP.

Inside Track

  • Forget buy and hold: active trading has returned, driven by Robinhood and r/WallStreetBets. In addition to structural changes lowering the barriers to entry, the "psychology of American exceptionalism extends to active trading," Anish Acharya and Matthieu Hafemeister write.
  • Recycling — selling a portion of a position to reinvest in new investments — can recoup management fees and juice returns. Just don't sell too early, Fred Wilson writes.
  • "At the $10B price tag, Microsoft's acquisition of Discord would represent a 77x multiple on 2020 revenue, and would value each MAU at $71," write Justine and Olivia Moore.
  • Bitcoin is the crypto that everyone knows, but now it's possible to invest in institutional Ethereum funds with staking, Paul Veradittakit writes.

Need to Know

  • VCs raise $5 million to stop anti-Asian hate. GGV Capital put out a Twitter call with others such as Lightspeed's Jeremy Liew, and VCs from more than 30 VC firms and 175 founders donated. For GGV's Hans Tung, it was personal.
  • Cendana raises fund of funds for "nano" VCs. The $30 million fund will invest in funds of $15 million or less. Why? Chris Sacca's first $8 million fund returned 250x, and Manu Kumar's first $6.25 million fund returned 53x.
  • Accel holds 28.8% of UiPath's Class A shares. That's a large stake for any VC at the IPO — particularly an early-stage investor. Accel led the RPA company's series A (from partner Luciana Lixandru) in 2017. The firm is known for buying in early and adding more shares later.
  • Real estate market issue or IPO market issue or Compass issue? Compass raised $450 million, at the low end of its range, in IPO for the free spending company.
  • Tiger Global closes $6.65 billion venture fund. It's not just SoftBank or Sequoia with massive funds. Tiger Global doubled its last fund size.
  • Biden lets H-1B visa ban expire. The visas are widely used by some tech companies to hire. The ban was imposed by Trump last June.
  • From Protocol: Please read Megan's nuanced deep dive on the issues facing Asian Americans in the tech industry.
  • Also on Protocol: Your favorite startup might have its engineers in China, but they don't want to talk about it.
  • This week in VC history: After raising $41 million with no slide deck, Color had a spectacularly bad launch.
  • Your jaw-dropping weekend reading: "[T]he biggest single-firm meltdown since the financial crisis. Mr. Hwang alone lost approximately $8 billion in 10 days, a person familiar with the matter said, in what traders and investors say was one of the fastest losses of such a large sum they had ever seen."

Five Questions With...

General Catalyst's Katherine Boyle

Katherine Boyle is a partner at General Catalyst, which has raised $2.3 billion last year. A former Washington Post reporter who still writes occasionally, she invests in companies seeking to disrupt regulated industries, such as aerospace, defense health care, fintech or computational biology. Her investments include Anduril, Literati, Nova Credit, Relativity Space and Titan.

What's your favorite pandemic meal?

Living in Florida, something I discovered is I'm a huge fan of Red Lobster. One of my favorites is the "Parrot Isle" coconut shrimp family meal. It's my life-saving go-to dinner for the family. Highly recommended. It feeds more than four — definitely generous portions. If you're one person stuck somewhere, it's the best deal for 50 coconut shrimp delivered.

What's one way you changed working in 2020 that you plan to keep going forward?

I'm an introvert, so for me this year was highly productive because I could avoid the things that introverts don't like — like small talk. But having spontaneous moments, that's the thing that's been taken out of relationships with Zoom meetings.

What did you find helpful in working this past year?

What I've loved about this year is it allowed people who used to have to conform to an extraverted business environment to now be really regimented and focused on things that matter. It allows us to have human connections. The way I changed this year was to be able to be anywhere in the world but have an instant connection over Zoom. We used to have to get in a car to go meet people. That's all stripped away and created new norms to be able connect with people without all the difficult parts of trying to meet in person.

What problem do you want to see a startup solve?

The thesis I've been really focused on is the future of government. A lot of people are interested in gov-tech. That's not how I frame it. I refer to it as civic verticals. The idea is that a lot of functions of government have been replaced by tech companies. The talent is moving to private companies. It's very difficult for government to handle a lot of problems without technology in the age of the internet.

What company, outside of your portfolio, have you been most impressed to watch this year?

Clubhouse is one of my favorite products to use. It's a company I've been watching very intently. I've been a daily active user since April. Part of the reason for this was I was pregnant during COVID. The product market fit with pregnant women who have insomnia is extraordinary. With a baby, there's very few products you can use that requires two hands to hold infant. I can get on Clubhouse while the baby is sleeping. I don't know if they built it for parents with new infants. When I'm up at 3 a.m., I can see what's going on across the world.

Thanks for reading this week's Protocol Pipeline. If you like what you're reading, sign up here to get it in your inbox. Send story tips and newsletter feedback to tgeron@protocol.com.

Correction: An earlier version of this story misstated the proper name of the H-1B visa. This story was updated on April 5, 2021.

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