Month: October 2014

  Without equivocation, consumer technology has completely transformed our daily behavior over the past decade: It’s changed how we communicate to the world (Twitter/Medium). It’s changed how we share our lives (Facebook/Snapchat/LinkedIn). It’s changed the way we travel (Uber/AirBnb). It’s changed how we manage various aspects of our lives (Dropbox/Mint/Fitbit/GrubHub). As such, it’s easy to see why consumer technology start-ups have a held a special place in the hearts of entrepreneurs and investors alike.  The dream of building the next consumer behavior shifting mainstream platform is incredibly compelling.  No surprise that consumer start-ups make up the bulk of newly formed companies today. A byproduct of course is massive competition and very few consumer tech companies that make a discernible dent.  To discuss the current consumer sector, I sat down with the team at Maven Ventures. Called as a “must meet” investor by  500 startups founder Dave McClure and the 1st consumer tech only incubator and Micro VC, the Maven team has great perspective on the consumer space.  Below is a transcript of our conversation. Jim, what inspired you to start Maven Ventures?  I’ve spent the last 20 years of my career as an entrepreneur in one capacity or another – a founder, angel investor, mentor, and VC. For 5 years as an angel investor, I worked hands-on with about two companies a year, helping them to raise a round and acting as an interim COO to help grow the business. During that time, such companies as Google and Intuit acquired five of those ten startups for great returns (like the recent Check acquisition by Intuit for $360M). I decided to scale that model into something much larger and last year launched the Maven Ventures Fund and Growth Labs Incubator in Palo Alto. The Maven Ventures Fund is a Micro VC focusing primarily on Seed and Series A investments up to $250,000 per deal. We work exclusively with direct-to-consumer businesses with hyper-growth potential, which allows us to focus on what we know and have scaled successfully in the past. Maven also runs an in-house incubator through Maven Ventures Growth Labs where we spend time working directly with the startups to shape their mission, vision, marketing, and early-growth strategies. To deliver greater impact to our incubator and portfolio companies, we have also enlisted a group of 20 incredible growth mentors who spend time hands-on with the startups we invest in. These are some of the best and brightest growth hackers in the business who’ve previously scaled Facebook, Twitter and Linkedin. You were amongst the very early team at Friendster. Despite being the first social network with a large installed base, both MySpace and (of course) Facebook overtook Friendster as preferred social networks of choice....

The tech world has been put on notice. Shortly after Benchmark’s Bill Gurley expressed concern about the tech community given bloated cash burn rates and valuations of companies, a16z founder Marc Andreessen expressed even stronger trepidation with the industry, offering up terms such as “vaporize” and “worry”. Coming from industry titans like Bill and Marc (along with USV’s Fred Wilson who relayed similar sentiments), these words carry substantial weight. Not surprisingly, bubble whisperers have increased exponentially within private market circles. While I’m not interested in tackling bubble talk here, I do want to double click on the core issue surfaced by Bill and Marc. Without a doubt, they are right. Companies that continue to punt on basic core principles in blind pursuit of rocket ship growth are playing a dangerous game of Russian roulette. And while the companies they were referring to were primarily mid-late stage companies, the reality is that the burn bubble is found at all stages of development, with hiring and expending occurring at alarming rates. Obvious but nonetheless ironic, the cash burn bubble is unmistakably enabled by the capital funding environment. Companies of course can’t incur massive cash burn rates without investors first lining up their vaults. Through the lens of behavioral psychology, people (and companies) typically operate at near capacity of the means they are enabled. I’ll use an analogy to illustrate. In the 1950’s, the average adult in the United States weighed 26 pounds less than the average adult today. That said, it’s no surprise that one of the biggest problems we face now as a nation is rampant obesity – Today 78.6MM Americans are classified as obese. While many factors undoubtedly play a role in this, the striking factor is the massive increase in portion sizes, as depicted by the chart below. Countless studies have provide a direct correlation between portion size and consumption behavior. More surprising however, recent studies have revealed that higher consumption rates have been recorded with larger portion sizes even when the consumed food was severely disliked! Behavioral scientists associate this phenomenon to evolutionary genetics – our minds, which retain survival instincts from the past when meals were scarce, still trigger us to consume as much as we can when offered the opportunity. This takes me back to the original issue. In the first half of the 2014 of this year, ~$23B was funded by VC’s into companies (life science companies included in the #). Keep in mind this number does not account capital funded through private late stage focused hedge funds, angels, corporates, and crowd funding platforms. Contrast this with 2010, when $24B was funded by venture capitalists during the entire year, with relatively little capital flowing in from hedge funds...