I’m excited to be able to unveil our recent investment in PaintZen. The company is a technology-enabled service marketplace for the home and commercial painting industry. They have gotten off to a torrid start in New York, and just announced their launch of San Francisco today. Check out more details here and here. What I think is really notable about Paintzen is that coupled with their rapid growth, their quality standards and subsequent referral activity is extremely high. Check out their yelp reviews here, and just contrast them to the reviews of other service marketplaces in some other categories, and you’ll see that the reception has been night and day.
A couple weeks ago, an essay was going around by Paul Graham that talked about how many entrepreneurs “play house”. The article describes entrepreneurs that go through the motions, read all the blogs and online resources about building a company, say all the right things, but are more interested in “imitating all the outward forms of a startup” vs. being deeply committed to building a great business. Mike, Justin, James, and the team at Paintzen is one of the most stark counter-examples of “playing house” that I have ever seen. No unnecessary flair or pretense. Insanely deep understanding of their vertical, as well as deep understanding of service marketplaces generally (the Mike and Justin previously co-founded MyClean in NYC as well, which is growing at a great clip). And simply building a great business with nicely developing economics, scaleability, and increasing returns to scale.
We were excited to join a number of previous co-investors in this round, including the good folks at Lerer Ventures, Quotidien, and others. Thanks in particular to Sean Black who re-connected us with the team and also joined us in this round.
Congrats everyone – onwards!
It’s the eve of Wayfair’s Initial Public Offering, and I’m so excited for the company. Big congrats to the entire team there, especially NextView Venture Advisors Niraj and Steve (who were among the first people to get behind NextView in the early days). Congrats also to my wife Nancy, who is VP of Brand Marketing at Wayfair, and was the first person to believe in me in the early days too And congrats to my friend Alex Finkelstein who led Spark’s investment in the company several years back.
Wayfair stands in stark contrast to so many other tech companies you read about. Where other companies chase hot sectors, Wayfair started in the midst of a burst bubble selling speaker stands online. Where others raised millions and millions of venture money before they had a business, Wayfair built a business on its own cash flow, and only raised money after they had profitably grown to hundreds of millions of dollars in revenue. While others chased the wealthy, or the hipsters, or the fashionistas, Wayfair eclipsed them all by focusing on mainstream consumers. While others loudly beat their own drums about vanity metrics, lavish perks, or bold claims of grandeur, Wayfair has allowed their results and execution do the talking.
What an amazing company.
As I said a week or so ago in a tweet, I think that the best years are still ahead for this business. The company is going after a near limitless market in home goods that has been very slow to transition online, and they have built a highly defensible moat around their excellence in logistics and operational efficiency at scale. And this is all bolstered by a humble, scrappy, and hungry culture that pervades the entire company.
Congrats Wayfair! I hope every employee and alum feels immense pride about having reached this milestone. But contrary to how I feel about most tech companies that go public, I think the future holds even more potential.
The best is yet to come.
Today, we’re excited to unveil the official Hitchhiker’s Guide to Boston Tech — a comprehensive overview of what tech entrepreneurs and professionals need to navigate and succeed in our local community. Special thanks goes to Jay Acunzo (director of platform here at NextView), Ariel Simon (senior designer, SapientNitro), and Keith Frankel (Chief Digital Officer, Tablelist) for creating this bigger, more comprehensive, and more beautiful edition of my long-running blog series.
In case you’re new to the Hitchhiker’s Guide, there’s a bit of history behind it. In 2009, I published a simple link roundup titled A “To-Do” List for New Entrepreneurs Arriving in Boston. It contained the basics like who to follow on Twitter, where to meet people for coffee, and what events to attend. In 2010, I coined a name that stuck — Hitchhiker’s Guide to Boston Tech — and published every six months since. It focuses specifically on the web and mobile startup ecosystem locally (though it’s worth noting the great work in biotech, robotics, healthcare, and energy here in town too).
Fortunately, the community response to these blog posts has been positive. It’s been great to see entrepreneurially minded newcomers to Boston turn to these posts as a go-to resource. Even other VC’s, angels, and prominent local entrepreneurs have referenced the guide or pointed their friends towards it, which is exciting. As always, the Boston ecosystem has been really friendly and open to navigate, and I’m glad that these guides have been helpful.
But Boston is a transient and dynamic town, and can feel somewhat intimidating to newcomers. Even for locals, the startup world has exploded since 2009, making it increasingly difficult to navigate.
So when Jay approached me a couple months ago with the idea of turning this into something more substantial — something that would stand alone as a more beautifully designed “front door” to our ecosystem — I was instantly on board. Historically, the link roundup has been very useful, but this would be a chance to design something that felt more special, more worthy of our amazing local ecosystem. It’s also a good reminder that while there’s a lot listed on the guide, there could be a lot more. We’ve got a lot more work to do in Boston tech.
I’m also excited that we’re now able to crowdsource additional submissions to grow this over time and keep it as fresh as possible — to participate, look for the links to submit new items beneath the various sections of the Hitchhiker’s site.
Boston has grown an amazing startup ecosystem over the last decade, and we want to help both new and existing community members better navigate and succeed right here in town. So, without further ado, I invite you to explore, expand on, and share the Hitchhiker’s Guide to Boston Tech.
VC’s, and particularly seed focused VC’s, pursue a variety of different strategies in their portfolio. Every firm thinks about things a bit differently. It probably doesn’t really matter too much to entrepreneurs, but after a couple conversations about this with founders recently, I thought I’d share how we tend to think about it.
The main parameters that VC’s tend to think about around portfolio strategy are:
1. Number of investments
2. Ownership percentage
3. Concentration and staging of capital (how much and what stage and how much of the fund in a given company)
I’m sure there are other things, but these are some of the main ones.
Here’s an interesting through experiment though. The single best venture capital firm in the world would take this strategy:
- Invest in only one company
- Put the entire fund entirely into the first round with the lowest cost basis
- Pick the best company
Of course, no one does this. But what does that say? Essentially, the further one strays from this strategy, the more one admits that there is luck and unpredictable risk in the market they are investing in. So funds diversify. Some diversify across many companies, some across stage, some across time to some degree. The downside to diversification, however, is that you dampen the impact of any one winner.
Put it simply, the bigger the portfolio, the more the investor thinks that luck and uncertainty is a factor.
The problem is that the overall market for VC is pretty crappy. You don’t want to buy the index. Funds that have very broad portfolios are making a very particular bet – that although the entire index sucks, their slice of the index will outperform. Time will tell how that works out.
FWIW, our strategy is that we invest in about 30 companies per fund. That’s 3-4/partner, probably more concentrated than the vast majority of seed funds out there. We think that our portfolio will work out roughly as follows:
10 companies will not make it beyond their seed round
10 companies will make it beyond see, but die anyway
10 companies will make money
Of those 10, 0-4 will be transformative. If it’s 0, we don’t do so well. If it’s 1-4, we win. How much we win by depends on how large those outcomes are.
We are a one product company – and that product is a highly engaged, meaningful seed investment. So with any luck, we don’t actually have to worry too much about whether those 1-4 are at a low cost basis, or if we have enough dollars in. The answer should be yes for every investment. At least that’s the model.
One mega trend that we’ve been excited about recently is around the ways that technology is allowing for a re-organization of labor markets. This has been a real trend since the first internet bubble (eLance, Kosmo), and is exploding at the moment.
What technology has done in these markets is streamline three things.
First, customer acquisition and ordering. Being able to find providers and transact more easily, faster, and with less friction.
Second, coordination of resources. Efficient routing and labor utilization. Managing complicated workflows with multiple parties.
Third, enhancing the end product or service. More on-demand. Cheaper. Faster. More convenient.
What I’ve found interesting is that these forces have caused some markets to become much more fragmented by empowering the individual worker (eg Custommade) while other markets have become much more centralized by increasing the importance of the enabling company (Uber).
This got me thinking about what forces drive certain types of market structures to emerge. At first, I thought the distinction would be skilled vs. unskilled labor. Skilled labor markets would lead themselves to technology enabled fragmentation while unskilled labor markets would lead to technology enabled centralization. But that didn’t seem quite right.
A conversation with my friend Aaron White led me to a slightly different take – that there is a distinction between craft labor and trained labor. Craft labor tends to differ quite a bit from provider to provider, and the buyers of craft labor are very discerning, and can easily tell the difference between different providers. Trained labor yields a service that is fairly similar from provider to provider, assuming that the provider is reasonably well trained. Trained labor can be quite skilled. Conversely, even unskilled labor can have elements of a craft-like market.
Some types of services fall in unexpected categories. Programming is skilled, but for a number of different types of projects, is more trained labor than craft labor. Hence the activity you see on elance where some low-end work can go to the lowest bidder. Craft labor arises at the higher end of that category, or in more specialized types of projects.
I’d argue that house-cleaning is more crafty than one would think. Don’t believe me? If you have a cleaner, haven’t you been able to immediately tell when a different person or crew did the job vs. your regular providers? Buyers are super discerning, and providers usually aren’t really trained, they just do their job the way they think it should be done.
On the other end, I’d argue that driving, while skilled, it totally trained labor. You can tell the difference between a crappy provider and a good one, but as long as a driver clears a certain threshold, you still get from point A to point B quite reliably.
That’s why I think personally think Uber makes more sense than Lyft. The ethos of Lyft is more crafty, and more about empowering the individual driver. Uber feels more like the consolidator – the common service layer that customers primarily interact with. They are using technology to consolidate their labor market.
This is also why I think the feedback against many of the cleaning services has been so negative. Just check out the Yelp reviews – many many 1 or 2-star reviews. Those companies are trying to consolidate a market for labor that is more craft-like that one would think. The only way to overcome this would be to spend a lot more time and effort to train and enforce standards of consistency and quaility, which would really hurt the scaleability of the model.
It’s not a perfect theory, but it’s a lens that I’m starting to apply more and more when I see companies that are disrupting labor markets. I think it’s a really exciting theme that is leading to two very different outcomes in different sorts of categories.