Danny Crichton

For those who did not happen to catch them, I wrote two posts on TechCrunch this week:

1. Silicon Valley Is Now Public Enemy No. 1, And We Only Have Ourselves To Blame
2. http://techcrunch.com/2014/01/28/blowback-silicon-valley-is-now-public-enemy-1/

I will be writing more in the upcoming – drop a line if you have any ideas you would love to see covered.

In a popular story published in Dealbook, venture capitalist Marc Andreessen discussed his views on the popular virtual currency Bitcoin. The article is a good, decently level-headed discussion on the current Valley thinking about Bitcoin and its potential.

One thing that bothered me though was this line early on in the article: "What technology am I talking about? Personal computers in 1975, the Internet in 1993, and – I believe – Bitcoin in 2014."

References to these sorts of "revolutions" or "waves of technology" are always interesting to me as an on-and-off again historian of science and technology. Revolutions are never point events, but rather process events – they have significant antecedents and gestation periods, and their effects are often time-delayed.

Take the personal computer. It is actually really hard to point to exactly when the PC revolution took place. Was it the launch of a specific model, the development of a particular piece of software, or maybe a particular marketing campaign that made it take off? The answer, of course, is no. The PC developed over two decades (possibly more), and over the years, the hardware and software co-evolved, supporting each other in growth.

Now take the internet. The internet has been in existence since the 1960s, and email has been available since the early 1970s. Andreessen uses the year 1993 as his benchmark, but the National Science Foundation didn't even allow commerce on the internet until 1995. The internet is still evolving today, and it is almost two decades later.

Now, what about Bitcoin? Clearly, the currency has a huge opportunity given the number of digital transactions going across the web. The question I have is more mundane though – how much of an improvement does Bitcoin make over existing transactions, and are there new transactions

There isn't too much to say about this unique sculpture sitting out here in South Korea. Other than the human jaws, I guess.

One plastic surgery clinic in Gangnam, in order to demonstrate its extensive patient list, received more than its share of marketing publicity after commissioning this scupture made from human jaws. Gangnam is a popular area for plastic surgery, and advertisements are nearly overwhelming when walking through its busy streets. Clinics are always looking to get one jawbone, er, leg up on the competition.

Police here in Seoul are investingating the clinic to determine if the clinic failed to properly dispose of any of the remains, a violation of the medical health laws.

Ironically, the fact that they have removed so many jaws doesn't really demonstrate their capability of building beautiful faces. After all, the fact that vampires drink blood doesn't make you an expert serologist, nor does getting a Communications degree from Stanford mean you can give post-game football interviews in any sort of fluent way.

In a famous routine from 1972, comedian George Carlin presented the "seven words" you can't say on television (ironically, you also can't say them on this blog!). Carlin was lambasting the FCC's censorship regime, which at the time felt more reminiscient of the 1950s than the far more permissive culture of the 1960s.

Here in Seoul, such controversies are fairly frequent given the tighter sexual mores on the public airwaves. Still, a controversy this week over the movie poster for Pompeii has had many here questioning where censorship builds a safer public discourse, and where it flagrantly denigrates the fundamental right to freedom of speech.

In Korea, all movies are expected to go to the Korea Media Rating Board, which determines the ratings for domestic and foreign films and posters, as well as other types of media. Unlike in the United States, where film ratings are handled by the Motion Picture Asssociation of America (which is privately owned by the six major motion picture studios), Korea's rating board is publicly owned and operated by the national government.

So, what do the film judges have to object to? Take a look at the poster for Pompeii that was originally submitted in Korea:

You might be wondering, what exactly is the problem with the poster? According to the translator of the film, the issue is that the couple is too intimate in the picture, foreshadowing that most horrible of actions, S - E - X (got to watch those censors!). Here is the new poster, which presumably I will start to see in subway stations all over Seoul:

I am almost certain my high school prom allowed a shorter distance between opposite genders than what is depicted in here

Oh no, the barbarians are entering the sacred domain! The Securities and Exchange Commission has truly opened the floodgates with the repeal of the prohibition on general solicitation, so I expect to be completely destroyed in T-Minus 60 days. I guess I am supposed to feel some sort of fear from startup crowdfunding platforms, considering their ultimate goal is to disrupt venture capital, and by extension, me.

And yet, I have no fear.

I do not doubt that crowdfunding investment platforms will have an impact on venture capital. I strongly support allowing anyone to invest in a broad range of private securities. Democratizing finance means making finance open to more investors, even those who are supposedly less sophisticated because they don't already have money (the definition of an accredited investor). Start-ups will ultimately be the beneficiaries here by allowing non-traditional investors into their rounds who might offer special skills, networks, or ideas to propel a fledgling company forward.

But the "secret" to this industry is that it is fundamentally a hits business.

This is very different from investments like equities, where returns on index funds are often quite compelling. Sure, one can dump all of their money into Facebook, or Amazon and reap a great reward. Yet, it is just as easily to lose massively with such a strategy, which is why research continually shows that most people are better off picking a stable index fund to hold over the long-term.

Venture capital investing is the complete antithesis of this approach. Returns in venture are marked by a power law, in which one or two investments out of 30 will often carry an entire fund. Placing your capital in fewer, but higher quality companies can actually create significant increases in returns. This is the reason why funds that

One of the most rewarding, yet peculiar, learnings about working as an investor in venture capital is that you constantly see clusters of start-ups spring up around the same problem. Indeed, one of my proofs that Silicon Valley is an efficient market is that these problems are seemingly identified by everyone at the same time, and so the difficulty in investing is simply choosing the best of the breed and moving on.

In the past year, I have seen clusters form around loyalty cards in local businesses, analytics APIs for mobile, and new designs for resumes, just to name a few that come to mind. None of the founders I have met in these clusters are “me-too” – they seem to have legitimately all come to the same problem from personal experience or through asking the right questions to a target customer. That’s innovation working correctly.

The peculiar part of this observation is how many obvious problems don't seem to get a cluster of start-ups at all. Sometimes these problems, some examples of which I’ll discuss shortly, are not small at all. In fact, I would go so far as to say that these blind spots in the market are where all the future value will be made in innovation. Many of the category-defining companies of the past few decades were all built around problems most people didn’t even know they had.

Why do some problems get a bevy of start-ups, and others seem to languish untouched? I think there are several key reasons, including that some problems are actually quite difficult, and founders lack specific experience in that area.

The one that bothers me most though is blindness. There are problems that have been here for years, that lack high quality solutions, and that have huge markets.

What do we do when there is no path to building a career?

It wasn't so long ago that job training was a core component of almost any career path. When factories hired new grads, there was an expectation that the staff would train the new worker to use the machine tools, to properly evaluate the tolerances of finished goods, and to understand the overall process of how the factory operated. Indeed, unions often put heavy priority on training in their collective bargaining agreements.

The same pattern could be seen before in law, medicine, and other professions, where new graduates were often given years to build their skills and reputations under supervision in apprenticeship-like positions. Corporations built management training programs to ensure that in 10-20 years, they had talent coming up through the ranks that was prepared to handle the complexities of their businesses.

All of that is changing, and it doesn't bode well for younger workers just entering the workforce. In law, upwards of a quarter of graduates from the top 25 schools are underemployed. That is a staggering waste of talent. The same is true in financial services – Goldman Sachs permanently canceled its entry analyst program just a few years ago, and now only hires among its intern population. Factories are also refusing to train new workers, expecting them to have already received job training at specialized and expensive technical schools.

This is the problem I am calling the "disappearing ladder." The gateways to many careers have now largely disappeared for younger workers, and it isn't clear to me that any new system has replaced it. These ladders are disappearing across all industries, in both "middle class" and "upper class" professions.

The underlying causes of this labor shift are numerous and complex.

One of the most common questions I get as a VC from seed-stage company founders is "Should I take money from institutional VCs in a seed round?" That's a difficult question, and every start-up is going to have their own approach in answering it. I'll try to work through what to think about in this post.

Any time a company raises a venture round, investors are curious to know whether the current investors in the company are also participating. The reason is simple: the investors who probably know the company best are the ones already on the cap table. They get the investment updates from the CEO, and should be intimately familiar with the business and its future prospects. Thus, their further investment in the company sends a strong signal of how current investors see the business performing. If they are attempting to increase their ownership, it indicates they are bullish on the company. If they are trying to avoid putting more capital into the company, that is probably a sign that the company is no longer a good investment.

This is one of the most visible signals for a company raising capital. Its importance should not be understated.

When it comes time to raise a seed round, many company CEOs try to game this signal by placing only angels and micro-VCs in the syndicate – essentially, any investor that doesn't have the capital base to offer more money in a future round (or so little that it isn't material). In other words, they prevent their company from sending a negative signal, since none of their investors could participate in a future round even if they wanted to.

The downside to this approach should be obvious though – while you limit your downside, you also eliminate your upside. Angels are