Fred Wilson of Union Square Ventures recently had a great talk with about 50 InSITE fellows. We had a video of a fireplace in the background to really set the “fireside chat” mood. Fred was an awesome guest. He was thoughtful with his comments, he touched on a wide range of topics (not just VC stuff) and he was genuinely interested in answering our questions.
He gave a very thorough background of his career and many of the ups and downs that he’s seen over the last nearly 30 years in venture. He gave some high level comments on the industry and some investment/macro themes, then opened up for questions. A few highlights:
He’s spoken/written a lot about investing in themes not industries. One of his recent popular themes is decentralization (e.g. twitter is a decentralized newspaper, fintech startups are decentralizing consumer bank functionality).
I asked if this is an evergreen theme that has always informed his lens as an investor or if it’s a cyclical theme that he’s looking at now specifically. Said differently, does he expect to see cycles of “decentralization -> consolidation -> decentralization -> consolidation, etc etc” or not? He said it’s a mixture of both. USV looks for new and emerging markets with chaos. No structure. These types of markets can emerge both cyclically or randomly. I assume that the underlying message is that if you’re investing in more mature markets, that means you’re investing in incremental changes.
Some of his other thoughts:
Data privacy: This is a tough balance because data makes many of the successes/conveniences in our lives possible (healthcare, google, twitter, etc) but data leakage has been in the news lately for good reason. He drew interesting parallels between today’s data leakage and the industrial revolution’s environmental pollution. He also identified data leakage management as “quite a fruitful” sector in the future.
Macro theme on mobile: Drew parallels between the proliferation of cars and the massive second- and third-degree impacts it had (suburbs, strip malls and fast food restaurants, for example). He asked the open-ended question about what the second-and third-degree impacts of mobile would be. E.g. (from me not Fred) mobile -> mobile money in Kenya -> lower-risk transfer of money to family members (i.e. you don’t have to give a bag of cash to bus driver and cross your fingers) -> encourages more migration to/from cities for work -> economic growth
Early stage vs. Late stage VC: In later stages, access is the most important differentiator. Later stage VCs need to show the ability to win deals vs. the competition. The deals that they fund are well-known and generally highly competitive. Price, brand and expertise are critical. However, for early stage VCs, commitment of support to portfolio companies and reputation among entrepreneurs is the most important differentiator.
JOBS Act: It’s been a disappointment thus far and what the SEC has done is somewhat inconsistent with the spirit/intention of the legislation.
NY venture and entrepreneurial ecosystem: Community building is important. Good VCs need to provide more than money and access, they also need to be cheerleaders for their entrepreneurs and their markets.
Are we in a bubble? He did not call this a bubble. However, he noted that he is not personally invested in public equities or fixed income.
Live demos: He said “its hard to evaluate an idea on a whiteboard, napkin or pitch deck”
How to be a good VC: Fred said it took him a decade to become a decent VC, and another decade to become a really good VC. He said venture is a tough business to be good at very quickly. His advice is to work at a startup then see if you end up in VC.
Fred Wilson has been a supporter of InSITE for years. On April 7, he will again be participating in our awesome Kingpins of Silicon Alley bowling event (more info here). He wrote about it recently here.