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Protocol Pipeline
The inside story of the venture capital and startup world by Biz Carson.
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Welcome to Miami

Welcome to Miami


Hello and welcome to Pipeline. I hope you are doing well despite a strange and frightening week. This week: building a startup with no full-time employees, venture funding hit another record in 2020 and why venture investors are serious about Miami as a tech hub.

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Overheard

  • Benchmark's public stock strategy: Bill Gurley reveals that the famed early-stage firm bought into three public companies during the peak of the pandemic last year. (No, that's not normal for an early-stage firm.) He didn't say which ones.
  • "Fully vested" are the best two words you'll hear as a startup employee. Simple, which just shut down, already ensured its employees got paid. Its co-founder and former CFO Shamir Karkal says $14.6 million in cash was paid out to 100 employees when it was acquired by BBVA. (No, this doesn't happen very often.)
  • Survival story: Here's how startup Zeus Living went through layoffs during the pandemic but survived. And there are lessons learned from Justin Kan's Atrium, which raised $75 million but didn't make it.
  • Cold email: When Chamath Palihapitiya was an engineering student at University of Waterloo who wanted to get into venture, he wrote to every VC at Kleiner Perkins for an internship. Only Vinod Khosla replied. (He didn't get the internship.)
  • Gabfest: Jeremy Liew on Clubhouse's diverse user base and evolving from "dinner party" model to "talk radio" model. (Does this mean I have to join?)

The Big Story

Miami bound

The tweets from VCs about moving to Miami to build a new tech hub during the pandemic may seem like a joke. But Keith Rabois, general partner at Founders Fund and an early employee of PayPal and Square, moved to Miami about a month ago, and he's serious. His firm is building out a Miami office that'll rival its posh San Francisco office.

  • Building a tech ecosystem in Miami is like investing in a startup, said the Affirm, DoorDash and Stripe investor. "It's like funding a new startup from the beginning. You have a hypothesis and talented people who want to work on constructing the future. As VCs we provide money and advice to chase their dream. So we did the same here with ourselves."
  • So why Miami and not Austin or Salt Lake City or Toronto? There are the obvious reasons: "For quality of life reasons it's a perfect mix of cosmopolitan people from different cultures who are open-minded about ideas — and the food, weather."
  • But there are other business reasons: The level of talent as well as the interest of founders elsewhere to move there is surprisingly strong, he said, adding that it'll take a year to really have a sense of the talent.

How much of his move was due to the left-leaning politics of San Francisco, where he lived? (His Founders Fund partner Peter Thiel, who publicly backed Trump in 2016, moved from San Francisco to Los Angeles last year due to the politics of the Bay Area.) Rabois, a Republican donor, said he "definitely wanted to escape the intellectual blinders in the Bay Area."

  • While lower taxes and regulation in Florida are an attraction, Rabois doesn't see that as a main factor. "Look, California is overtaxed and regulated and that handicaps people and companies. But you don't look to government to create business success," he said. "I just think government should get out of the way and allow entrepreneurs to innovate."
  • Being around people with broader perspectives helps him as an investor, he said. Founders Fund is known for backing startups that others may not consider, from oil and gas to national security tech. "One way we find opportunity is areas where other investors have an intellectual blindspot." He cites Anduril, a Founders Fund-backed startup providing tech that helps U.S. national security agencies. No Bay Area investors would back such a company, he said. "I'm hoping that being in another environment, I can find opportunities that other Silicon Valley VCs would miss because of the intellectual blinders in the Bay Area."

The airports, time zone, real estate and of course taxes are also a draw. Michal Cieplinski, COO at startup Pipe, and Harry Hurst, the company's co-CEO, moved to Miami in September (Hurst from LA, Cieplinski from San Francisco).

  • Cieplinski said Miami beats Austin because the Miami and Fort Lauderdale airports are easy to get to and have more direct flights to major cities internationally than Austin's. The company also has many clients and investors based internationally where the East Coast time zone helps.
  • Real estate, both residential and commercial, is plentiful and relatively cheap, Cieplinski said. His location, the Wynwood area, is also walkable and close to everything.
  • Jomayra Herrera, a principal at Cowboy Ventures and Florida native who is now back in Florida from San Francisco, said the taxes are a big reason, adding that less regulation, quality of life and talent from nearby universities are all a big draw.
  • The cost of living has driven founders from California and New York, said David Blumberg of Blumberg Capital, and Miami is welcoming to the tech industry. But he also moved in November for family reasons. "Many of us realized after 10 months of lockdowns we could work anywhere. I don't like commuting or business travel and I like spending time with my family."

More VCs are coming. Those decamping to the tropics include Shervin Pishevar, former Menlo Ventures and early Uber investor.

  • And many other venture capitalists are testing the waters during the pandemic — since everyone is working remote — to see if they want to stay long term, Rabois said.
  • Y Combinator's current accelerator class, which is completely remote, also has a significant number of companies based in Miami, he noted.

But the scene is "still pretty nascent," with most local investors focusing on real estate rather than venture at the moment, Herrera said. "There also isn't the density (yet) of former/current founders who can act as advisors and a support system to new founders."

  • Miami venture funding is still tiny compared to other tech centers. Miami-area startups raised just $878 million across 105 deals in the first three quarters of 2020, compared to $35.1 billion across 1,341 deals in the San Francisco Bay Area over the same period, per PitchBook data.
  • Not everyone agrees with Rabois. Entrepreneur Alex Cohen said the Bay Area has Florida beat on people.
  • To build a tech ecosystem in Miami, Rabois hopes other venture firms set up shop. "I really want four or five of my competitors to open offices here," he said. "It's better for me if there's a concentration of capital."

A MESSAGE FROM MICRON

Micron

For Raj Hazra, who is senior vice president of corporate strategy and communications at Micron, there has never been a more thrilling time than this golden age of data. In this interview, Hazra describes how "we are now at the doorstep of taking things that we thought were science fiction and making them real, and it's only going to be exponentially faster going forward". Read more from Micron's Raj Hazra.

Inside Track

  • New year, new you: Mark Suster lost 65 pounds over the past 18 months. He shared his tips on how he did it. (Spoiler: There's no silver bullet.)
  • Where to start: Roy Bahat on what to do when you're first starting a startup.
  • When your LP asks why you overpaid, you can say, "It was an information cascade." Bubble activity is not necessarily irrational, writes Tomasz Tunguz.
  • What's in your wallet? Venture firms, as well as companies like Coinbase and Square, have come out against FinCEN's proposed rules on crypto wallets. The proposal and the process for doing it were wrong, Fred Wilson says.

Need to Know

  • No employees, no problem: Sahil Lavingia rebuilt startup Gumroad with no full-time employees. The good: no meetings and part-time work. The bad: no health care, no perks. Is this the future of (tech) work?
  • IPOs on deck: Affirm and Poshmark are the two big names slated to list this coming week. Investors with 5% or more of shares that'll score returns from Affirm include Founders Fund, Khosla Ventures, Lightspeed, Shopify and the Singapore government's Jasmine Ventures; for Poshmark, major investors are Mayfield, GGV Capital, Menlo Ventures, Inventus and Temasek's Anderson Investments.
  • Hacking away: Remember Songkick, backed by Sequoia, Index and Y Combinator? Ticketmaster admitted it hacked the smaller rival.
  • Cutting the vaccine line: Who's getting to the front of the line for a vaccine in Silicon Valley? (My inbox is here for you if you've heard about this happening.)
  • In Washington: You thought 2020 was over? VCs weighed in (on Twitter) on the storming of the U.S. Capitol.
  • Funding for you: Venture funding hit a record nearly $130 billion in 2020, despite the pandemic, and mega-rounds continued to grow, per CB Insights. But the overall number of deals and early-stage deals dropped.
  • From Protocol: The New York Stock Exchange's flip-flopping over delisting of Chinese tech stocks highlights a longstanding dispute over how much access Chinese corporations should have to U.S. capital markets. It'll continue under the Biden administration.
  • This week in VC history: Uber settles with New York's attorney general over "god view" tracking program.
  • Your weekend reading: A 25-year-old bet comes due: Has tech destroyed society?

Five Questions with...

Jenny Lefcourt

Jenny Lefcourt is a general partner and co-managing partner at Freestyle, a seed-stage VC firm that has backed Airtable, Intercom, Patreon, BetterUp, Snapdocs and Digit. Investments she has led at Freestyle include BetterUp, Narvar, CREXi, Well Health, and Daily.co. She's also a co-founder and board member at All Raise.

What product or service are you totally, even irrationally, loyal to?

The Eight Sleep Pod Mattress is a game-changer — I will never go back! I've learned my sleep is significantly better with temperature control; it cools my bed in the summer and warms it up in the winter. The sleep data it provides is even better than Oura Ring and other trackers I have tried. Sleep has a MAJOR impact on my mood, energy and focus. I am so dependent on the Eight that even when I wake up and think "wow … that was a great night's sleep," I need to check my sleep score to verify.

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

Much to the amusement of my family, I try just about anything related to self-improvement, from how my diet and hydration can help me maintain focus and energy, to how we can more efficiently co-manage our household, to decision-making frameworks that help me and those around me.

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

My brain works best in the morning so I keep my schedule blocked until 11 a.m. to do harder, proactive work — read, think, and write. I plan to keep that schedule and also hope to keep doing hiking meetings, which I really enjoy.

What problem do you want to see a startup solve?

Collaboration in the enterprise. While there has been a lot of improvement with tools like Slack, Airtable and Figma, I believe there is far more to be unlocked. As more tools enable better collaboration and transparency, I think we will see fewer and better-run meetings, less email, easier sharing of information, improved decision-making and happier, more productive employees.

If the pandemic magically ended tomorrow, what's the first thing you would do?

Hug everyone. I was already a hugger, and I think I will be even more so when I am allowed! And I'd run to see live music in a small and crowded venue with friends; I won't care who the band is!

A MESSAGE FROM MICRON

Micron

For Raj Hazra, who is senior vice president of corporate strategy and communications at Micron, there has never been a more thrilling time than this golden age of data. In this interview, Hazra describes how "we are now at the doorstep of taking things that we thought were science fiction and making them real, and it's only going to be exponentially faster going forward". Read more from Micron's Raj Hazra.

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 incorrectly stated Shamir Karkal's title at Simple. This story was updated Jan. 11, 2021.

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