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  • Jason Calacanis 17:27:14 on 2019-01-14 Permalink
    Tags:   

    Saving Facebook, a Three-Part Strategy for the New CEO 

    Orson Welles Vintage GIF

    Facebook’s self-inflicted wounds come from their founder’s obsession with growth, which at its core was based on three extraordinary tactics: removing friction, staying focused on global growth and stealing other people’s ideas.

    [ Click to Tweet (can edit before sending): https://ctt.ac/NemMw ]

    There is no debate over this.

    If Zuckerberg had not set the tone of “move fast and break things,” the company would have been more thoughtful about their growth, and if they didn’t steal other people innovations so systematically — from Friendster to FriendFeed to Twitter to Snapchat — they would never have dominated the planet.

    Of course, that obsession with speed and copying has resulted in — as Zuck himself instructed — the breaking of things, including our privacy and our democracy.

    Well done!

    In this three-part series, I’m going to outline what the new CEO of Facebook should do to reverse the massive ill will that’s built up with consumers, partners and governments. (At least the democratic ones; Facebook is well-loved by despots the world over.)

    Step One: Share Revenue with Partners

    When YouTube has PR issues, they have a large base of YouTubers — partners to whom they pay out billions of dollars — who will go to bat for them. These individuals are not happy with every decision YouTube makes, far from it, but they are loyal to the platform, even in the face of sometimes getting worked over.

    Airbnb makes their share of mistakes and has been faced with crisis after crisis, but their Hosts are there to back them up. Heck, a portion of Airbnb’s customers feels so strongly about the company that they will fight for its very existence.

    eBay and Etsy have their sellers to spread the gospel, and even Lyft and Uber have driver partners and customers who will sign petitions to bring or keep their services available in contested markets.

    Apple and Google are “splashy cashy” with their App partners to the point of creating a category that, candidly, Facebook should own — or at least be a player in.    

    Facebook?

    Well, Facebook is so sharp-elbowed, that in addition to screwing users and our democracy, they have screwed over their developer and content partners multiple times over the past decade. Not only that, they’ve never built up a reservoir of goodwill.

    Imagine if Instagram and Facebook shared revenue with their top users? How about if when you click on a new story on these services, it gave the publisher 70% of the revenue?

    These partners would be out there saying “listen, I know Facebook has made mistakes, but Zuck is a good guy. I’m partners with Zuck, Instagram and Facebook, and so are over a million content creators. Trust us, we’re working with them to make this right.”  

    Sharing revenue would be trivially easy for Facebook to do, certainly easier than reaching billions of users with their products.

    Yet Facebook still has their wallet locked … Why?

    It’s all top-down, Zuckerberg simply doesn’t want to share the wealth. We saw this when he deliberately screwed over the Winklevoss twins and his early partner Eduardo Saverin at Facebook (he settled those claims), and we see it now with his sinister pursuit of Snapchat at all costs.

    The Snapchat pursuit reinforced Zuck’s “might is right” approach and has painted him as so cutthroat and arrogant — and perhaps clueless to this perception — that it is now easy to root for Facebook’s demise.

    Instagram and WhatsApp founders criticizing Zuck on the way out only reinforces what we all know: business is personal and Zuck does not treat people well on a personal basis.

    This needs to change when the new Facebook CEO starts, or when someone convinces Zuck to reboot his approach. The latter is a better solution, as you always want the founder to stay at the controls, but this requires the founder to evolve — something Zuckerberg hasn’t done (which reinforces the growing legion of “I’m quitting facebook!” and “I hope Facebook fails!”).

    Easy solution: give Instagrammers and Facebook’s developers and publishers 100% of their year-one revenue to kick off the program, and then land on 55-70% going forward (like YouTube and the App stores do, respectively).

    Can you imagine the goodwill that will grow out of Facebook sharing the wealth?

    Zuckerberg can’t, but the rest of us can. Someone forward this email to Mark and say “something to consider, even if the messenger isn’t your favorite person.”

    Bottom line: Sharing revenue with partners will give facebook amazing PR and those partners re-engaging the platform could reverse the “peak Facebook” and “Facebook is in decline” narrative.

    The post Saving Facebook, a Three-Part Strategy for the New CEO appeared first on Calacanis.com.

     
  • Jason Calacanis 17:27:14 on 2019-01-14 Permalink
    Tags:   

    Saving Facebook, a Three-Part Strategy for the New CEO 

    Orson Welles Vintage GIF

    Facebook’s self-inflicted wounds come from their founder’s obsession with growth, which at its core was based on three extraordinary tactics: removing friction, staying focused on global growth and stealing other people’s ideas.

    [ Click to Tweet (can edit before sending): https://ctt.ac/NemMw ]

    There is no debate over this.

    If Zuckerberg had not set the tone of “move fast and break things,” the company would have been more thoughtful about their growth, and if they didn’t steal other people innovations so systematically — from Friendster to FriendFeed to Twitter to Snapchat — they would never have dominated the planet.

    Of course, that obsession with speed and copying has resulted in — as Zuck himself instructed — the breaking of things, including our privacy and our democracy.

    Well done!

    In this three-part series, I’m going to outline what the new CEO of Facebook should do to reverse the massive ill will that’s built up with consumers, partners and governments. (At least the democratic ones; Facebook is well-loved by despots the world over.)

    Step One: Share Revenue with Partners

    When YouTube has PR issues, they have a large base of YouTubers — partners to whom they pay out billions of dollars — who will go to bat for them. These individuals are not happy with every decision YouTube makes, far from it, but they are loyal to the platform, even in the face of sometimes getting worked over.

    Airbnb makes their share of mistakes and has been faced with crisis after crisis, but their Hosts are there to back them up. Heck, a portion of Airbnb’s customers feels so strongly about the company that they will fight for its very existence.

    eBay and Etsy have their sellers to spread the gospel, and even Lyft and Uber have driver partners and customers who will sign petitions to bring or keep their services available in contested markets.

    Apple and Google are “splashy cashy” with their App partners to the point of creating a category that, candidly, Facebook should own — or at least be a player in.    

    Facebook?

    Well, Facebook is so sharp-elbowed, that in addition to screwing users and our democracy, they have screwed over their developer and content partners multiple times over the past decade. Not only that, they’ve never built up a reservoir of goodwill.

    Imagine if Instagram and Facebook shared revenue with their top users? How about if when you click on a new story on these services, it gave the publisher 70% of the revenue?

    These partners would be out there saying “listen, I know Facebook has made mistakes, but Zuck is a good guy. I’m partners with Zuck, Instagram and Facebook, and so are over a million content creators. Trust us, we’re working with them to make this right.”  

    Sharing revenue would be trivially easy for Facebook to do, certainly easier than reaching billions of users with their products.

    Yet Facebook still has their wallet locked … Why?

    It’s all top-down, Zuckerberg simply doesn’t want to share the wealth. We saw this when he deliberately screwed over the Winklevoss twins and his early partner Eduardo Saverin at Facebook (he settled those claims), and we see it now with his sinister pursuit of Snapchat at all costs.

    The Snapchat pursuit reinforced Zuck’s “might is right” approach and has painted him as so cutthroat and arrogant — and perhaps clueless to this perception — that it is now easy to root for Facebook’s demise.

    Instagram and WhatsApp founders criticizing Zuck on the way out only reinforces what we all know: business is personal and Zuck does not treat people well on a personal basis.

    This needs to change when the new Facebook CEO starts, or when someone convinces Zuck to reboot his approach. The latter is a better solution, as you always want the founder to stay at the controls, but this requires the founder to evolve — something Zuckerberg hasn’t done (which reinforces the growing legion of “I’m quitting facebook!” and “I hope Facebook fails!”).

    Easy solution: give Instagrammers and Facebook’s developers and publishers 100% of their year-one revenue to kick off the program, and then land on 55-70% going forward (like YouTube and the App stores do, respectively).

    Can you imagine the goodwill that will grow out of Facebook sharing the wealth?

    Zuckerberg can’t, but the rest of us can. Someone forward this email to Mark and say “something to consider, even if the messenger isn’t your favorite person.”

    Bottom line: Sharing revenue with partners will give facebook amazing PR and those partners re-engaging the platform could reverse the “peak Facebook” and “Facebook is in decline” narrative.

     
  • Jason Calacanis 21:08:10 on 2019-01-13 Permalink
    Tags:   

    A carry comp kerfuffle in Micro VC land 

    The SJW crowd piled on to a job posting for a part-time VC job at a micro VC yesterday. The job posting was for 20 hours a week and the compensation was based on a share of the carry.

    [ Click to Tweet (can edit before sending): https://ctt.ac/4iUFB ]

    Here is how carry works, briefly: if the Fund invests $2m on behalf of investors and turns it into $22M (11x, cash on cash) the gain would be $20M. The carry would be 20-30% of that gain, depending on the deal with LPs (limited partners), which means $4-6M in gain.

    [ Note: A 10x fund is the outlier goal. ]

    If the Fund manager gives this “Chief of Staff” position 20% of the carry it would be $800-1.2m for a part-time job. Note: 20% would be very generous if the person had cash comp, but if the person takes no cash I would say 20% would be in the ball part. Twenty percent of a 20-30% carry is 4-6% carry to the Chief of Staff.

    If the micro VC did 3x “cash on cash” it would have $4m in gains and $800-$1.2m in carry. The individual in this back-end comp position would get $160-240k.

    If this position vested over say four years, that would be something in the range of 4,000 hours of work for $160,000 to $2.4m — or $40 an hour to $600 an hour.

    Of course, you wouldn’t have any comp today — that’s the trade-off you have the choice to make.

    The argument here, of course, is that the micro VC, who is offering this partnership opportunity, and who gets zero cash comp himself, is taking advantage of the person who takes this part-time gig.

    Oh lordy, lordy … I wish I had seen this job description when I was in my 20s! Please take advantage of me and take 10 or 20 years out of my career path.

    The micro VC has since, under the weight of the social media mob, put the job up as cash and carry or just carry — at the candidate’s choice. CANDIDATES: take as little cash as possible and fight for every point of carry! The math above is going to change your life and the cash comp never will.

    Seriously, if I were 25 years old and applied to this position I would rather sleep on my mom’s couch, drive for Lyft 40 hours a week and get all the carry I could. 60 hours a week isn’t a death sentence, and if you want to propel yourself to the next level the quickest way to do that is to get equity compensation.

    Sure, a single parent with three kids is not going to be able to take this gig. Neither is a married couple with a $10,000 a month mortgage and three kids in private school — that couple needs to work at Yahoo! or IBM and take down big salaries — which is their choice for starting a family and buying a big house with a huge mortgage.

    Certainly, my mom, who worked 4-5 jobs a week and clocked 70-80 hours a week to provide for our family, wouldn’t have been able to — but one of her three sons would have! That’s the American dream as far as it was taught to me: the parents bust their asses and give their kids the killer opportunity.

    I look at an opportunity like this and compare it to spending $30,000 a year on college, or people staying at home playing video games/watching TV for 4-5 hours a day — which is the national average!  

    Think about that for a moment, if your child presented you with the scenario of working 1,000 hours for no cash comp with lottery-ticket-level back end vs. four years of college and $120k in debt, which would you advise them?

    If your kid is playing video games and/or watching YouTube/Netflix for five hours a day, getting them to pull the plug on that nonsense and invest in their career is a serious discussion some parents need to have.

    Now, before you attack me as a cold-hearted capitalist (the latter true, the former only half true), you should know that we don’t do unpaid internships or free positions of any type. We don’t need to do that, as we have a modestly profitable business and, candidly, the risks around internships are too great these days (bad PR, a distraction for management and legal exposure).

    Bottom line: the social media mob is giving really bad advice in this case. Trust me, someone who fought their way into the industry and became the GOAT angel: take the carry not the cash!

    The post A carry comp kerfuffle in Micro VC land appeared first on Calacanis.com.

     
  • Jason Calacanis 21:08:10 on 2019-01-13 Permalink
    Tags:   

    A carry comp kerfuffle in Micro VC land 

    The SJW crowd piled on to a job posting for a part-time VC job at a micro VC yesterday. The job posting was for 20 hours a week and the compensation was based on a share of the carry.

    [ Click to Tweet (can edit before sending): https://ctt.ac/4iUFB ]

    Here is how carry works, briefly: if the Fund invests $2m on behalf of investors and turns it into $22M (11x, cash on cash) the gain would be $20M. The carry would be 20-30% of that gain, depending on the deal with LPs (limited partners), which means $4-6M in gain.

    [ Note: A 10x fund is the outlier goal. ]

    If the Fund manager gives this “Chief of Staff” position 20% of the carry it would be $800-1.2m for a part-time job. Note: 20% would be very generous if the person had cash comp, but if the person takes no cash I would say 20% would be in the ball part. Twenty percent of a 20-30% carry is 4-6% carry to the Chief of Staff.

    If the micro VC did 3x “cash on cash” it would have $4m in gains and $800-$1.2m in carry. The individual in this back-end comp position would get $160-240k.

    If this position vested over say four years, that would be something in the range of 4,000 hours of work for $160,000 to $2.4m — or $40 an hour to $600 an hour.

    Of course, you wouldn’t have any comp today — that’s the trade-off you have the choice to make.

    The argument here, of course, is that the micro VC, who is offering this partnership opportunity, and who gets zero cash comp himself, is taking advantage of the person who takes this part-time gig.

    Oh lordy, lordy … I wish I had seen this job description when I was in my 20s! Please take advantage of me and take 10 or 20 years out of my career path.

    The micro VC has since, under the weight of the social media mob, put the job up as cash and carry or just carry — at the candidate’s choice. CANDIDATES: take as little cash as possible and fight for every point of carry! The math above is going to change your life and the cash comp never will.

    Seriously, if I were 25 years old and applied to this position I would rather sleep on my mom’s couch, drive for Lyft 40 hours a week and get all the carry I could. 60 hours a week isn’t a death sentence, and if you want to propel yourself to the next level the quickest way to do that is to get equity compensation.

    Sure, a single parent with three kids is not going to be able to take this gig. Neither is a married couple with a $10,000 a month mortgage and three kids in private school — that couple needs to work at Yahoo! or IBM and take down big salaries — which is their choice for starting a family and buying a big house with a huge mortgage.

    Certainly, my mom, who worked 4-5 jobs a week and clocked 70-80 hours a week to provide for our family, wouldn’t have been able to — but one of her three sons would have! That’s the American dream as far as it was taught to me: the parents bust their asses and give their kids the killer opportunity.

    I look at an opportunity like this and compare it to spending $30,000 a year on college, or people staying at home playing video games/watching TV for 4-5 hours a day — which is the national average!  

    Think about that for a moment, if your child presented you with the scenario of working 1,000 hours for no cash comp with lottery-ticket-level back end vs. four years of college and $120k in debt, which would you advise them?

    If your kid is playing video games and/or watching YouTube/Netflix for five hours a day, getting them to pull the plug on that nonsense and invest in their career is a serious discussion some parents need to have.

    Now, before you attack me as a cold-hearted capitalist (the latter true, the former only half true), you should know that we don’t do unpaid internships or free positions of any type. We don’t need to do that, as we have a modestly profitable business and, candidly, the risks around internships are too great these days (bad PR, a distraction for management and legal exposure).

    Bottom line: the social media mob is giving really bad advice in this case. Trust me, someone who fought their way into the industry and became the GOAT angel: take the carry not the cash!

     
  • Jason Calacanis 22:56:10 on 2019-01-12 Permalink
    Tags:   

    Why aren’t VC firms focused on slow/modest growth startups? 

    Yesterday’s post mocking the New York Times’ link-baiting story created a lot of debate on Twitter.

    One thing that came up was, why don’t venture capitalists fund slower growth startups? Or, said another way, why don’t VCs invest in startups that grow at a normal pace?

    [ Click to Tweet (can edit before sending): https://ctt.ac/sH8h8 ]

    The number one job of a venture capitalist is to stay a venture capitalist.

    This might sound cynical but, as a VC, if you don’t return enough money to your LPs (limited partners, a VC’s investors) you will not be able to raise your next fund. If you don’t raise your next fund, you’re not collecting management fees to pay yourself and your team, and you don’t have a chip stack to play in “the big game.”

    If you want to STAY a venture capitalist you need to land these “dragon egg” investments — the ones that create enough value to give your LPs their money back. Dragon eggs are typically 20-40x your money back. So, you invest $7 million and get back $140-280 million.

    That means, if you bought 20% of a startup for $7m, that startup was worth ~$35m, and then has to become a ~$700m to ~$1.4b exit for you to BREAK EVEN. Everyone makes money AFTER that investment, not before.

    That is not easy.

    VCs need to have double-digit returns every year (look up IRR for more on this) and essentially match stock market returns, with the chance of crushing them. If you match the stock market consistently, the thinking is you will eventually hit a Google or Facebook or Amazon.

    “Stay in the game, stay in the game,” is the mantra.

    The binary outcomes are just so yum yum, that you want to keep seeing flops (to use a poker analogy) and STAY. IN. THE. GAME.

    So, the logical follow-up question is, why don’t LPs want to invest in VC funds that target slow growth startups?

    That answer is even simpler, they have better options. If you want to return low single-digit returns, you can simply put your money in bonds, REITs or dividend-paying stocks — and not pay the significant fees associated with venture capital.  

    What about you, Jason?

    For background, I’m an angel and seed investor, so my job is much different than a VC’s. I invest in 50+ startups a year and 24 of 25 investments do not result in a meaningful return (i.e., zero to 5x).

    I’m banking on hitting a serious return every 25 investments, with serious being defined as greater than 50x, cash on cash (REALLY HARD TO DO).

    So far, after 200+ investments, I’ve got Uber, Thumbtack, Wealthfront, Robinhood, Desktop Metal, Datastax, and Calm.com as outliers, with a couple of dozen startups doing well to very well. I would expect one or two more of those to break out, putting me at eight or 10 outlier investments (one every 20 to 25 investments).

    Bottom line: there are zero LPs interested in funding startups with modest to normal growth prospects, and candidly, I don’t meet many founders who don’t want to build large businesses (obviously some selection bias there, as a Mount Rushmore-level angel investor, people don’t come to me with dry cleaners and pizzerias that often).

    The post Why aren’t VC firms focused on slow/modest growth startups? appeared first on Calacanis.com.

     
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