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#TOA Interview with Fred Wilson & Brad Burnham of Union Square Ventures
39 segments available
TOA18 tickets are now available, book here https://goo.gl/CsbpeM for a 5% discount. How's the blockchain changing the landscape? Why hasn't Europe been able to create real technological juggernauts? When do you know that is over for your company? The founders of USV join Tech Open Air for an evening with Berlin's entrepreneurial community. ------ Tech Open Air is a three-day Technology Festival. Our mission is to connect, grow and inspire the human spirit through interdisciplinary knowledge exchange and collaboration. Connect with us and stay up to date about our next events: http://www.toaberlin.com http://www.fb.com/techopenair http://www.twitter.com/toaberlin
Segments Timeline
Back to the Roots of Venture Capital
Fred Wilson and Brad Burnham reflect on their early days in venture capital, sharing anecdotes about raising their first fund in 2003. They discuss the skepticism they faced regarding the internet's potential and the camaraderie that developed from sharing hotel rooms during their travels. This segment highlights the resilience and determination required in the venture capital industry.
"Many special thanks uh to Brad and Fred uh for making it tonight and for sharing their knowledge. Um let's give them a warm welcome. Come on, Berlin. Welcome. All right., I, tried, really, hard, to, f..."
The Celebrity VC Phenomenon
Fred Wilson addresses his perceived celebrity status in the venture capital world, attributing it to his blog and the sharing of ideas. He discusses the curiosity surrounding his persona, including humorous questions about his sleep habits. This segment explores the intersection of personal branding and venture capital, emphasizing the importance of thought leadership.
"roots. Yeah. Too too bad. Back to the roots., Nice., Um, All right., So,, quick warm-up question uh for both of you. Fred, um your Wikipedia article uh calls you sort of a a VC with celebrity status. ..."
Contrasting Perspectives: Principles vs. Pragmatism
Brad Burnham and Fred Wilson discuss their differing backgrounds and how it influences their investment discussions. While Fred leans towards pragmatism, Brad emphasizes principled decision-making, particularly regarding net neutrality. This segment showcases their dynamic partnership and the value of diverse perspectives in venture capital.
"Brad, you you have sort of a different background, right? Fred um actually started working um at a VC pretty much after college. You had a a job as a software engineer before. Um you on the other hand..."
The Shift from Bureaucracies to Networks
Brad Burnham elaborates on the transition from bureaucratic hierarchies to technology-driven networks, explaining how information technology reduces transaction costs and facilitates communication. He highlights the historical context of organizational structures and discusses the efficiency of modern networks like Uber and Airbnb. This segment provides insights into the evolving landscape of business organization.
"And before when we spoke briefly Fred um you mentioned also that in in the sense of this framework that you presented at Leb which I found really interesting your framework for investing uh at USV you..."
Healthcare: The Next Frontier for Disruption
Fred Wilson identifies healthcare as a significant area ripe for disruption, citing its bureaucratic nature and the potential for technology to enhance patient care. He discusses how personal devices can empower patients and transform the healthcare system. This segment emphasizes the intersection of technology and healthcare as a critical investment opportunity.
"What are sort of the next markets you think um or or verticals that are going to feel this this disruption? Well, you know, I mean, it was in retrospect, it looks pretty obvious that media was first. ..."
Rethinking Data Ownership
Fred Wilson discusses the future of data ownership and its implications for networks and companies. He suggests that a shift in how data is controlled could lead to smaller companies thriving on open protocols, challenging the dominance of current tech giants. This segment explores the potential for a more decentralized approach to data management.
"and I think interesting to invest in. And as a model sort of technology uh technologydriven networks right and this move from hierarchies do you think this is sort of the ultimate model um if I mean C..."
Unbundling: A Trend in Media and Beyond
Fred Wilson explains the concept of unbundling in various industries, particularly in media and finance. He contrasts the unbundling of traditional business models with Facebook's approach and discusses the cyclical nature of bundling and unbundling in media consumption. This segment provides a nuanced view of how industries adapt to changing consumer preferences.
"going to go back to this uh when we talk about Bitcoin uh and sort of the the blockchain um you know in in in terms of identity in in a moment. Um I just wanted to talk about the second um big micro t..."
The Future of Healthcare and Blockchain
Fred Wilson concludes by discussing the consumerization of healthcare and the potential impact of blockchain technology on identity management. He emphasizes the importance of understanding these trends for future investments. This segment highlights the convergence of healthcare innovation and blockchain as a transformative force.
"also, right? If you look at music for example um that started with 45s two songs then sort of bundled into LPs and CDs then sort of again unbundled into MP3 and Napster and now is rebundling into uh P..."
Investing in Healthcare and Blockchain
Fred Wilson outlines Union Square Ventures' interest in investing in healthcare, blockchain, and mesh networking. He emphasizes the consumerization of healthcare and the potential of blockchain technology to redefine identity and data ownership. This segment highlights the firm's strategic focus on transformative sectors.
"excited about is mesh networking. And interestingly enough, Brad's the only person in our firm who's had the courage to make a network networking investment but I think we're all quite excited about t..."
Innovative Mesh Networking Solutions
Wilson shares an example of Venium, a company developing mesh networking technology in Porto, Portugal. He describes how their devices create a city-wide Wi-Fi mesh using vehicles as mobile access points. This segment illustrates the innovative applications of mesh networking and its potential to disrupt traditional internet access models.
"that as a as an explain maybe some uh some interesting use cases you've seen. Well, so yesterday um a company that we invested in earlier this year called Venium uh announced the the investment that w..."
The Future of Blockchain and Cryptocurrencies
In this segment, Wilson discusses the broader implications of blockchain technology beyond cryptocurrencies. He explains how blockchain can enable a decentralized data layer across applications, enhancing user control and data portability. This perspective positions blockchain as a foundational technology for future digital interactions.
"That's a pretty cool idea. So, think about every single one of those devices has a battery and has a way of recharging that battery. So, the problem we have with all these devices that we carry around..."
Rethinking Data Ownership
Wilson emphasizes the importance of data ownership in the context of blockchain technology. He argues that users should have the ability to control their data across platforms, leading to new opportunities for innovation. This segment explores the potential shifts in how individuals interact with digital services and their data.
"Uh another sort of thing I guess you guys are fascinated with is Bitcoin and the underlying protocol, the blockchain. Who in this audience because I'm not sure uh how well received that is in in Berli..."
The Disruption of Incumbents
Fred Wilson reflects on the cyclical nature of disruption in the tech industry, where new companies become incumbents over time. He discusses the potential for new models to challenge existing giants like Facebook and Google, focusing on the evolution of data sharing and user experiences. This segment provides a critical view of the tech landscape.
"common data layer across applications that's not controlled by these silos. And the best way to think about it is um today if you use Gmail, you could decide to go to a different mail client and all o..."
The Misnomer of the Sharing Economy
In this segment, Wilson critiques the term 'sharing economy,' arguing that many platforms, like Airbnb, operate more as businesses than true sharing models. He suggests that the peer economy is more accurate, highlighting the complexities of value creation in network platforms. This discussion challenges common perceptions of modern economic models.
"important change. If you're looking at it as a currency you're looking at it the wrong way. Um and it's you know it's interesting but but it's a a very simple single implementation of what's possible ..."
Challenges of Network Platforms
Wilson discusses the limitations of network platforms, noting that they often do not create value themselves but facilitate interactions between users. He examines the implications of this model for companies like Uber and Airbnb, emphasizing the need for innovation within these frameworks. This segment sheds light on the evolving nature of platform-based businesses.
"weird thing about being in the venture business is we back entrepreneurs who want to go into a market and disrupt an existing incumbent, right? And then 10 years later they're the new incumbent right?..."
Rethinking the Sharing Economy
Fred Wilson critiques the term 'sharing economy,' arguing that platforms like Airbnb and Uber are more about business unbundling than actual sharing. He emphasizes that these companies create environments for value creation rather than generating value themselves, raising questions about the true nature of peer-to-peer interactions in today's economy.
"Facebook Apple Google um Amazon I you know if I had to guess I would look at the way we think about data where are we in the sort life cycle of the sharing economy right now. What's sort of the status..."
The Value Creation Dilemma
Wilson discusses the challenges faced by platforms like Uber and Airbnb, highlighting their reliance on drivers and hosts to create value. He points out the pressure on these companies to increase their cut from transactions to justify their high valuations, which complicates the sustainability of the peer economy.
"now. So, you know, I I usually try and use the word peer economy, but Fred's just said something that's given me some pause about even using the word peer economy because in that example of Eric Schne..."
AI: A Double-Edged Sword
The conversation shifts to the potential threats posed by artificial intelligence, with Wilson expressing a more optimistic view compared to his partner Albert Wenger. He believes that while AI offers significant benefits, the fear of a singularity moment where machines surpass human intelligence is overstated.
"controls it. Another two uh short questions on sort of the macro. We're going micro to micro basically. We'll then go speak a bit about ecosystems uh and finally about companies and more personal uh p..."
Tech Community's Response to Surveillance
Wilson reflects on the tech community's reaction to government surveillance, particularly in light of the NSA scandal. He notes a disconnect between public outrage and action, emphasizing the importance of developing technologies that protect user privacy and data autonomy.
"tech community's outrage um was rather soft um and I wonder if that is maybe a form of selfcensorship already. I mean my feed now, if I look at my Facebook feed, it's full of Ferguson. It's full of so..."
Collective Intelligence vs. Personal Autonomy
Wilson discusses the balance between collective intelligence and individual data autonomy. He advocates for the idea of being a 'data donor' to facilitate problem-solving through shared data, while also stressing the need for personal control over one's information.
"I think that has has deep power. So maybe we can get a disagreement going here. Um I I worry um that we're giving up the possibility of collective intelligence. So one of the companies that with crypt..."
Why Europe Lags in Tech Innovation
The discussion turns to Europe's struggle to produce technological giants compared to Silicon Valley. Wilson attributes this to a lack of a robust ecosystem for innovation and a cultural stigma around failure, contrasting it with the more forgiving environment in the US that encourages entrepreneurial risk-taking.
"Speaking now about ecosystems, um if you I I saw a really interesting chart uh basically compared the market cap of Apple, Google, Facebook and Amazon um to the Ducks 30 um market caps which includes ..."
Corporate VCs: A Necessary Evil?
The conversation shifts to the role of corporate venture capitalists in the startup ecosystem. Wilson expresses his disdain for corporate VCs, suggesting that companies should focus on acquiring startups rather than investing in them. He emphasizes the importance of creating an enabling environment for innovation.
"good product people but they were in the wrong situation and and um you know you can pick them up and you know those those people get that get employed really quickly. That's a different attitude. But..."
Government's Role in Innovation
Wilson shares insights on how governments can foster economic development by creating a conducive environment rather than trying to pick winners. He cites former New York Mayor Mike Bloomberg's philosophy on making cities great places to live as a model for effective governance.
"said because they suck. Yeah. Um, they suck. But the reality is I can't avoid them. you know, they they are part important important part of the market that we invest in. Um, I think it's just better ..."
The European VC Landscape
The discussion highlights the challenges faced by European venture capital, including the reliance on state-backed funding. Wilson argues that the capital available in Europe should be directed towards venture capital firms to stimulate innovation rather than relying on government intervention.
"that idea. Government should be the enabler of an environment that for a place that talented people want to come and work and they should not be trying to pick winners. They should not be trying to cr..."
International Expansion: Timing is Key
Wilson emphasizes the importance of product-market fit before pursuing international expansion. He contrasts the experiences of different companies, illustrating the complexities of scaling operations globally and the need for a solid foundation before venturing into new markets.
"Yeah. The wor the it it's it's worse if in in exchange for the money the government asks for certain things like the company has to be based here. It has to be done in a certain way. You have to you k..."
Navigating Market Challenges
The conversation touches on the differences between companies like Airbnb and Uber versus Tumblr in terms of international scaling. Wilson stresses the importance of understanding local markets and adapting strategies accordingly to succeed in diverse environments.
"Um I know that companies that are based in Europe and particularly companies that are based in the smaller countries in Europe cannot build enough of a business in their domestic market. So they have ..."
Recognizing When to Pivot
Wilson shares insights on recognizing when a startup is no longer viable. He discusses the importance of being supportive yet critical as an investor and the challenges entrepreneurs face in making tough decisions about pivoting or shutting down their businesses.
"else working right before you do that. There's a there's a nuance there and that is there's a huge difference between a company like an Airbnb um or an Uber and a company like Tumblr. Uh I was on the ..."
The Importance of Product-Market Fit
In this segment, Wilson highlights the critical role of product-market fit in a startup's success. He discusses common mistakes entrepreneurs make, such as failing to recognize when their product isn't resonating with customers and the need for adaptability in their approach.
"nobody's willing to give you another dime. That's when it's over and done. Or when you decide that you're done. Yeah. Um uh you know I hate and I and I and I never tell entrepreneurs you're not going ..."
Data-Driven vs. Intuition-Based Decisions
Wilson contrasts the decision-making processes in early-stage startups, emphasizing the balance between intuition and data. He explains how successful entrepreneurs often rely on their instincts to identify market needs before using data to refine their strategies.
"out of the kicking the ball. Yeah. Through the net. I something. Sorry Lucas. Um the uh so, you know, he's doing fantastically well. And he did one thing and it's the hardest thing that I've ever ever..."
Data vs. Intuition in Investing
In this segment, Brad Burnham elaborates on the role of data in early-stage investing. He argues that while data can provide insights, it often reflects what is already happening rather than predicting future success. The conversation underscores the necessity of understanding the underlying reasons for a company's success, rather than solely relying on data analytics tools.
"that's what I meant by it. How does data as an early stage investor um I mean you guys are not that early right? But um for an angel investor for example, these tools like Metamark that are popping up..."
The Future of Blockchain Innovations
The discussion shifts to the future of blockchain technology and its potential innovations. Fred Wilson mentions the concept of overlay networks built on the Bitcoin blockchain, suggesting that while Bitcoin remains foundational, new technologies like Ethereum will evolve on top of it. This segment explores the implications of these developments for the blockchain landscape.
"There's nothing there's nothing defensible in that model. Even if it works, and we've tried it. I mean Albert, our partner, um, you know, has been very interested in this for a long time. And we've we..."
Building in Europe vs. the US
The conversation addresses why tech entrepreneurs from North America might hesitate to build companies in Europe, particularly in Germany. Fred Wilson contrasts the skepticism towards companies in Europe with the US's skepticism towards government. This segment highlights the cultural differences in attitudes towards innovation and regulation in the tech industry.
"your name. Um, great. Um, so been following the blockchain. Totally agree with you guys on the trends and I think the focus on decentralization as opposed to possession is really interesting. Um what ..."
The Shift in Data Power
In this segment, Fred Wilson discusses the gradual shift of power away from tech giants like Facebook and Google. He emphasizes that while this change will not happen overnight, it will be driven by the emergence of new services that resonate with users. The conversation reflects on the challenges faced by open-source projects and the importance of timing in the market.
"how we see it. Great. Any other questions? Yeah. I just wanted to come back to the privacy and security point. If so many people in the tech industry in North America um are so concerned about it, why..."
The Role of Open Source in Tech
Brad Burnham shares insights on the importance of transparency and open communication within the venture capital space. He argues that sharing ideas openly can lead to better outcomes and foster innovation. This segment emphasizes the value of collaboration and the need for venture capitalists to adapt to the evolving tech landscape.
"think Europeans have to be more skeptical about the unintended consequences of well-intentioned regulation coming from the public side. We'll get you the mic because then we have it on video. Thank yo..."
Berlin vs. London: Investment Opportunities
The discussion turns to the differences between Berlin and London as startup hubs. Fred Wilson highlights Berlin's grassroots, cost-effective environment for tech startups, while acknowledging London's established market advantages. This segment provides insights into what USV looks for in potential investments in both cities and the unique opportunities each location offers.
"are likely to lose the power over time are the incumbents, the the Facebooks the Googles of the world. Um, and I think it will happen slowly. I don't think it'll happen quickly. I I mean, I don't thin..."
Missed Opportunities: The Airbnb Lesson
Reflecting on missed investment opportunities, Wilson shares the instructive story of Airbnb. He explains how their initial concept of renting air mattresses in living rooms led to a marketplace that transformed the hospitality industry. This segment serves as a cautionary tale about the importance of understanding market evolution.
"Hey guys. Oh, is this one is it working? Oh yeah. Hey guys. Um lots of interesting stuff about the future, but looking back, what was the investment that you missed um that you wish you hadn't? Well, ..."
Investing in AI: A Strategic Approach
Wilson discusses Union Square Ventures' approach to investing in AI. He clarifies that they prefer to invest in businesses enabled by technology rather than in the technology itself. This perspective highlights the firm's focus on practical applications of AI that create value for consumers.
"We made one other mistake there w which was that um I at least put myself in the position of sleeping on that air mattress and said I'm not going to do that. Why is anybody going to do this? And that'..."
Ethics in Business: A Necessary Debate
In response to a question about ethics in business, Wilson shares his views on the responsibilities of corporations beyond profit-making. He discusses the importance of transparency and accountability in corporate practices, emphasizing that companies must live by their stated values to maintain credibility and trust.
"invest in that. All right, this last question. Hi. Um last question right here. Okay. Yeah. uh a friend of mine founded a satellite company and he also together with that created an ethics committee a..."
The CEO's Dilemma: Upholding Company Values
Wilson addresses the challenges CEOs face in enforcing company values, especially when employees make mistakes. He reflects on the difficult decisions leaders must make to uphold their company's integrity and the potential consequences of failing to act. This segment highlights the complexities of leadership in maintaining a company's ethical standards.
"the values are weakened. And it's easy for me to say because I'm not a CEO of any company. You know, we're we Brad and I and a few other people run USV and we haven't faced this issue thankfully insid..."