A Hazy Shade of COVID

We’ve hit the Crisis Trifecta here in the Bay Area, where I live. Everyone in my household is on lockdown and either attending classes or working remotely; we’re experiencing record heat and many like myself do not have air conditioning; and unprecedented lightning storms during the dry season have sparked massive wildfires to the north, south, east and west, pushing the air quality into the danger zone and forcing us to close all windows. The air is stagnant and over 90 degrees. We’re baking within. 

Imagine being dipped in hot tar and then taking a bong hit off the tailpipe of a running 40-year-old pickup truck... all while on Zoom. While this is an imperfect comparison, hopefully you feel me.

The word empathy seems to be the word of the summer, maybe of 2020. I've heard it maybe 1,684 times this week during the virtual Democratic National Convention. But I’ve also heard it applied to work; first as a manager supporting a team that suddenly found itself working at home and retooling all live-event plans for the rest of the year. Then from companies, in solidarity with employees and customers of color, during Black Lives Matter protests. Now, as a VC in Residence taking on a passion developed in the five years since my own startup exit for supporting the dreams of underrepresented founders. 

Underrepresented, by the way, does not just refer to gender or race. If you are starting a company and not in the first few years of your career--or still in college--or white, male, technical, childless, working in tech, and living in a tech metro, you are an underrepresented founder. 

In my time working with underrepresented founders I learned how rare I and my female co-founders were for even making it to the table for a Series A round of funding, but also how the venture capital industry tends to work. VCs make bets on companies based on a thesis—common ones are specific to an industry, technology, geography, and even management team composition—and expect up to 90 percent of those bets to crash and burn. The 10 percent that don’t die result in massive returns. A few people become rich or richer. Rinse. Repeat.

While this business model may make sense for investors it sucks as a way to build collective, societal wealth. And it doesn’t extract the most value out of the enterprising class, many of whom were building decent, growing businesses, just not at the clip or with the same playbook as the Unicorn Class. The system is gamed to reward the companies that make it through the prescribed Startup obstacle course and ring the NYSE cowbell in the shortest amount of time. And those who don’t? Thanks for playing. Good luck finding a job. 

This model of investing doesn't strike me as empathetic to the plights of founders. It supports a singular model of success--one steeped in extreme wealth--often at the expense of others.

(Side note: If this topic interests you, check out this panel discussion of the Base Hit model toward Startup success I participated in at SXSW in 2018, culled by tech business leader Mona Sabet. ) 

Think of how a different philosophy could play out in the startup ecosystem, if venture capitalists made more bets, still earning 10x-plus returns, but also 2x returns. And founders from these exits re-invest their wealth into more companies, begetting more founders who invest their wealth into more companies, and then, like the Breck commercials, it goes, and so on, and so on, and so on...

And now instead of just a few Heather Locklears with great hair; we have whole communities of Heather Locklears. And eventually we realize: Hey wait, we ALL can have great hair!

Right now, most VC’s, even social impact investors, would see this model as charity. Why support 2X companies when we could be supporting 10X companies! But given all the entrepreneurial carnage resulting from the current 90/10 loss/win ratio, it would seem that making bets on high- and medium-growth, short- and longer-term growth companies, would net out similar or better aggregate returns, with more wealth distributed among more founders. While there are firms that get this, much of the funds for more diverse growth models—and for more diverse founders—are few and far between.

Currently the largest, no-strings-or-playbooks-attached efforts are charity. Through a $1.7B gift to investors in underrepresented founders, Mackenzie Scott (formerly Bezos) has said to these founders, “I see you. I trust you.”

Now THAT, is empathy.

(Photo by Duffy Brook on Unsplash).

Newsflash: Content Remains King/Queen/Sovereign

I started my career as a book and magazine editor and counted myself lucky, when the digital tsunami hit more than 20 years ago, I caught one of the last ferries off of Print Island. Sure, websites were ugly back then, and many of the people who had escaped with me seemed more interested in tech and new business models than in good writing, but over the years it got sorted. Editorial (now referred to as Content), Business, and Technical teams now work much more closely, with better results.

Although sometimes that balance gets disrupted. That’s how I felt five years ago, when instead of managing the business side of a media company, I felt more like an analyst for NASA, constantly surveilling the performance of my programmatic advertising partners, DSPs, and key-word commerce links. Being a media and marketing tech evangelist wasn't fun anymore. I wrote a lot about my industry's impending implosion and wondered how digital media would right the imbalance of power away from user experience (think: creepy retargeted ads that followed you everywhere online and 10-second page-load times) and back again toward clean, powerful experiences.

Today, I get most of my content through paid subscription services, where ads are present, but not affixed to every inch of space like band announcements on the walls of CBGB (RIP). (Photo of CBGB, Getty Images)

And I wish all new media and adtech companies looking for venture capital luck because they will need it. Even the more innovative of established media companies are suffering from the effects of COVID on their ad dollars and more traditional, non-streaming businesses. Even the media disrupters are feeling it.

So I was surprised, and cautiously excited, watching this Mad Money segment with J2 Global CEO Vivek Shah, who reported growth from J2's media businesses last quarter. Shah cited consumers’ “Flight to Quality” as a factor.

It’s as if all my content fantasies were realized, and ad bots never happened.  Good content actually pays.

This Wired story also gave me hope. Media companies have all had to strike a balance between user experience and implementing heavy-loading ad targeting technology. Dutch public broadcaster NPO gave its audience the option to opt out of user tracking (better known as dropping cookies)--a method used to isolate more targeted users and charge higher rates for those users--resulting in 90% of customers opting out of user tracking (cue the beginning of "Another One Bites the Dust" by Queen).

But ... according to the Wired article:

"Instead, the company found that ads served to users who opted out of cookies were bringing in as much or more money as ads served to users who opted in. The results were so strong that as of January 2020, NPO simply got rid of advertising cookies altogether. And rather than decline, its digital revenue is dramatically up, even after the economic shock of the coronavirus pandemic."

Cue "We Are the Champions" by Queen...

Netflix Roulette

Many years ago I had an opportunity to attend a private dinner held by a large CPG company trying to better understand the technology new media companies had to offer. While there, I met an entrepreneur named Tim Westergren who shared with us a story that belied what he was trying to build with his new audio streaming company, Pandora.

He explained that he had hoped his recommend technology would inspire people to discover new music they would never have explored otherwise. And he shared a story about an early user who, furious that Pandora kept referring music by the artist Celine Dion, whom "he hated," the user sent an incendiary email to Westergren, criticizing the service and its failure to adequately capture user taste with its algorithm. Weeks later the customer reached out again to say, “OMG... I like Celine Dion!” (More detailed version of the story found here.) 

The point is, good AI can tell us more about ourselves than we may be aware of. And arguably, at its best, it will help us overcome our biases in the news we read, the people we hire, the music we like, and the programs we watch. While some may not be super excited about Netflix’s new Shuffle Play button, I say, bring it!

Not a Good Look Messaging Award Goes To…

With a hat tip toward my virtual Startup Grind session on how to approach brand marketing during uncertain times… I believe that good brand messaging is relevant to the times, service-oriented but not fear-inducing, and does not side-step the Pandemic elephant in the room. 

We get it—the travel and hospitality industries are under siege due to Coronavirus, and brands approaching collapse want to remind customers they are still alive. But dangling unused rewards in front of us, with no suggestions or alternatives for redeeming those rewards safely? That to me is a nonstarter.

I received the following messaging from restaurant reservations platform OpenTable:

We know there’s a lot going on in the world right now and we all miss the restaurant experiences we love. As a courtesy though, we wanted to remind you that you have OpenTable points to use now or later towards one of our reward options, or you can choose to continue to build your points total. Either way, we can’t wait to see you again once you’re ready to dine out. 

This is a friendly reminder that, per our points expiration policy, you have some points that are set to expire in March 2021. As the policy states, unused points expire 3 years after they're issued. 

While OpenTable is acknowledging that customers probably can’t redeem their loyalty program points anytime soon, the point of this communication was … what? To remind me of one more thing I will lose, on top of nonrefundable expenses from a canceled family vacation, due to COVID? Does this communication scream, "We’re in this together! We support you"? Even Budweiser tells its most fierce customers, sports fans, “Hey we know live sports are kaput, but let’s agree to support things that matter now and we'll see you on the flipside.”

Rather than remind us that the meter is still running OpenTable, why not tell us you will restart the meter when the COVID coast is clear? Or earn good will and showcase restaurants that are serving up great takeout? I’m much more likely to remember and appreciate you for that. 

Quote of the Week

Finding 75 minutes to watch an eight-person videoconference panel is probably not high on a to-do list that already includes many hours of Zoom meetings, even if it includes some of the greatest minds in Augmented Reality. But kudos to Irina Cronin of Infinite Retina for pulling one together, Augmented Reality: What Do People Want? and making the time spent worth it.

I will boil the crux of the discussion into a single quote. What do users of AR want? According to Matt Miesnieks, an investor in AR and advisor to AR powerhouse Niantic:

“People don’t want a shovel, they want a hole in the ground and the shovel helps them get that. But in AR we tend to get excited about the shovel…"

I appreciate the honesty.

With that, Happy Weekend.