The First Amendment Provides a Path to Peace for Social Media

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Once again, the CEOs of Twitter, Facebook, and Google found themselves in the hot seat on Capitol Hill last week, grilled by the Senate Commerce Committee. As I predicted in my last post “RIP Section 230,” Twitter and Facebook’s ham-handed censorship of the NY Post has cemented a bipartisan consensus that these tech behemoths are too large and powerful, pose a threat to democracy and free speech, and need to be reined in for the good of America. …

How Rudy’s Hard Drive Could Crash the Open Internet

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The internet freedom we have long enjoyed owes a tremendous debt to Section 230 of the Communications Decency Act, a 1996 law which greatly aided the development of the Internet by enabling user-generated content. Suddenly, this visionary provision is gravely imperiled by a tragedy of errors committed by all three of the major actors in the Hunter Biden hard drive story — the New York Post, the social media companies Twitter and Facebook, and conservative legislators who want to take action against them.

The Post erred first by publishing a story that doesn’t come close to meeting journalistic standards. It gratuitously contains a sleazy and unwarranted invasion of Hunter Biden’s personal life. The elaborate tale of how the contents of his hard drive found its way to the reporters makes no sense, and has already been altered multiple times by the owner of the computer repair shop, and by Rudy Giuliani, since the story first broke yesterday morning. It’s more plausible that this is a case of hacking, possibly by foreign malefactors, with the stolen emails being fed to Rudy and then the Post. Furthermore, legitimate questions have been raised as to whether all the emails are even real. Even if they are, the story’s claim of a “smoking gun” is exaggerated because there’s no proof Joe Biden ever took the meeting with Burisma. …

You think you need a COO. What you really need is an operating philosophy.

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Let’s face it: most startups are a shitshow. Perhaps the most pervasive problem afflicting venture-backed startups, once they achieve a basic level of product-market fit, is managing the organizational chaos that results from rapid growth. Almost by definition, this is a chronic challenge of Series A-C stage startups since the rapid expansion of the team to chase a new market opportunity is the purpose of that venture funding in the first place. During this time, the growing pains of the startup will reach such a crescendo that the founders and board will cry out as one, “we need a COO!”

As with any potential problem in a startup, it is possible to posit that a perfect hire could solve that problem, but the more direct route is simply to solve it yourself. Putting your startup on an operating cadence is the way to do that. The Cadence is an operating philosophy that I first learned as COO of PayPal (during the so-called “PayPal Mafia” founding era) and then adapted for SaaS as founder/CEO of Yammer, which Microsoft acquired in 2012 for $1.2 billion. To this day, Yammer is still the fastest unicorn exit among SaaS startups, and a lot of that success is due to the Cadence. …

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Today Craft Ventures is excited to announce that we are leading the $35 million Series A in ClickUp, and I will be joining the board. This is one of our largest Series A investments to date, which reflects our confidence in the team and product.

ClickUp is a team collaboration platform offering tools like task management, docs, wikis, chat, and integrations with dozens of popular tools. Collaboration is a crowded space, with lots of startups competing for users and mindshare, so what made ClickUp stand out? A few unique characteristics that we’ve never seen before in a Series A startup.

First, the company has been completely bootstrapped until now. Founder/CEO Zeb Evans maintained an independent path, resisting the urge to raise venture capital for the first two years of the company’s life. Despite this (or perhaps because of it!), the company has grown like a weed on the strength of its product. In the last year, ClickUp’s ARR has grown over 600%. Over 100,000 teams at companies including Google, Nike, Uber, Airbnb, Netflix and Ubisoft are already using the product. …

Lessons on building startups during a downturn

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Harry Stebbings was kind enough to have me on his podcast The Twenty Minute VC. That episode dropped today and you can listen to it here:

Here are some of the topics we talked about:

1) Building startups in the time of COVID

On creating startups during an economic crisis:

Innovation doesn’t stop during a downturn. My own experience was that the two unicorn companies I was involved in creating were primarily built during downturns. PayPal started in 1999, but it was really built in the wake of the dot com crash in 2000–2001. We IPO’d in 2002. Similarly Yammer started in the wake of the 2008–2009 economic crash. So my experience with downturns has been that it’s still very possible to create great companies. And in fact, there are things that get easier during downturns. It’s easier to recruit talent because there’s less competition. There can also be fewer copycats crowding a space. The one thing that gets harder, obviously, is fundraising. …

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Photo Credit: clutchpoints.com

ESPN’s new series The Last Dance is an extraordinary behind-the-scenes look at Michael Jordan’s sixth and final championship run in 1998. Through flashbacks it also tells the story of Jordan’s career and the Chicago Bulls’ dynasty that dominated the NBA in the 1990s. It is full of lessons not just for basketball fans but for anyone who wants to build something great. Here are the lessons that should resonate with founders:

1. Expect to be under-estimated.

Jordan was cut from his high school varsity team as a sophomore. But instead of quitting, he used his frustration as fuel to get better. Later, after winning a college national championship at UNC, he was picked only third in the NBA draft. If the future GOAT was under-appreciated, you will be too. Don’t brood over the passes. …

How Startups Should Think About Capital Efficiency

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As the economic crisis deepens, capital efficiency becomes a more pressing issue for startups. Not only is it necessary to maximize runway, it also plays a larger role in how investors evaluate companies. While growth is always prized during good times or bad, investors increasingly scrutinize burn and margins during downturns. Startups whose burn is too high relative to their growth will find it hard to fundraise. Founders should be prepared for this shift in emphasis. This post provides a framework for how to think about capital efficiency.

How to Measure Capital Efficiency

Two simple ways to measure capital efficiency are the Hype Ratio and Bessemer’s Efficiency…

If you’re willing to quarantine America, why wouldn’t you try masks?

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They did it in 1918. So should we.

Reversing their previous positions, the Surgeon General has recognized the value of masks and the CDC now recommends wearing them. Thank heaven for small mercies. But now is not the time for the mask movement to declare victory.

A recommendation is a first step but it’s not good enough. Masks should be the law. Masks should be required in public places and in most commercial settings until the health crisis ends. Here are the reasons why:

First and foremost is the health externality when people choose not to wear masks. Masks don’t just offer protection to the wearers. They protect everyone else around them by controlling the source of the virus, which can travel as far as 2–6 meters when an infected person coughs or sneezes. Even a basic face-covering like a scarf provides some protection for everyone else in the vicinity. …

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On Friday President Trump declared a national emergency. The market shot up 10% in a relief rally. Why would people be relieved that there was an emergency? Because they already knew we were in one.

Previously they were only getting “happy talk” from leaders — invocations to stay calm, dismissals of the seriousness of the problem, empty reassurances that things would get better. What people wanted was “hard talk” — a recognition of the problem and tangible steps to fight it. When people get Happy Talk instead of Hard Talk, it doesn’t reassure them. …

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Sourcegraph founders Quinn Slack and Beyang Liu

Today Craft Ventures is excited to announce that we are leading the $23 million Series B in Sourcegraph and I will be joining the board. This is the biggest first check we’ve written in a SaaS company so I wanted to take a minute to explain why.

Sourcegraph is the leader in Universal Code Search, a new category enabling developers to manage code sprawl across repositories, languages, tools, and platforms. This is a large and growing problem for enterprise dev teams because of the proliferation of new technologies.

This is a critical need, but what really caught our attention was the bottom-up adoption by engineers. Our favorite kind of SaaS businesses are ones where the employees pull the product into their company as end-users. This freemium usage enables the SaaS vendor to fill up its pipeline, prove value quickly, and speed up the normally lengthy enterprise sales cycle. I’ve described this as a “best of both worlds” sales motion because it combines enterprise budgets with an SMB-like sales cycle. …

About

David Sacks

General Partner and Co-Founder of Craft Ventures. Previously: Founder/CEO of Yammer. Original COO of PayPal.

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