Backing someone pre-pitch: The story of how I backed Clubhouse

I'm excited to be able to finally announce Brooklyn Bridge Ventures' investment in Clubhouse, a company I agreed to back before I even knew what it was.   

In 2010, a bunch of techies got together to do the next year's NYC Triathlon.  I had already done two and was looking forward to joining people from the tech community.  

It was also right around that time when I started CTO School--a small five session series on how to go from being a developer to a technical leader, which blossomed into a not only a very active meetup, but also gave birth to a great conference series as well.

Of course, I had no business starting such a group, so I enlisted the help of some people I had met through the community--like my fellow triathlete Kurt Schrader, who was, at the time, leading tech for Intent Media.  

Kurt is a no-nonsense guy with fantastic experience growing and managing technical teams.  He's direct, focused, and he gave me great feedback on what to teach about how to get teams working together at scale--so great that I roped him into giving the talk, and eventually co-founding the meetup group that CTO School became.  

We stayed in touch, doing a couple of tris together, chatting about startups, and venture, life, etc.  I was really impressed with his ability to distill things down to what was really important--and his constructively critical eye when it came to the buzz around products that most people just didn't need.

So when we grabbed dinner about a year ago and he told me he gave notice, and that he had a guy working on a thing (that guy was his co-founder Andrew Childs), I just said "I'm in."  

I didn't even know what he was working on--but Kurt isn't the kind of guy that wastes his time on some Uber for moustache grooming app.  For him to leave a great job at a growing company where he had become CTO, it had to be real.  Kurt is the kind of founder you back whenever they're working on something, and I've had a lot of success backing pre-product founders like Raul from Tinybop, Adam and Chris at Canary, and Chantel from chloe + isabel.  All had enough experience that led them to being the absolutely right founder for the products they were working on.  

Eventually, he told me the premise--creating product management software that development teams would actually want to use.  He spoke of why developer teams outgrew Trello and didn't love Jira.  When I started to float the idea by product managers I knew, they couldn't wait to talk to Clubhouse.  

We closed the round with some great co-investors, but what's striking is how little of it they spent to actually get to a product that teams loved.  I introduced them as "product management software that doesn't suck" to tech team at my portfolio company Orchard, their CTO wrote:

"Thanks for the intro! We're actually vetting alternatives to our current toolset for suckage reasons."

Less than three weeks later, he wrote:

"Just wanted to thank you for the intro to Kurt at Clubhouse.  The product is exceptional.  Home run."

One of their developers wrote in separately:

"This tool is incredible. Absolute best PM tool I've used."

Basically, just a couple of developers built a better tool than what people have been using for years.  Even potential employees are excited.  At one of the Stackup Talks that Brooklyn Bridge Ventures runs, a developer from the hedge fund world who had been making quite a fair amount of cash just walked up to the team and said that he's excited about what they're working on and wants to join.  

So why is Clubhouse different?  First and foremost, Clubhouse aimed to help developers do their jobs without creating an extra layer of administrative overhead.  They did that by integrating with the tools that devs are already using, like Github.  When you do things in Github, they're reflected in Clubhouse.  

Another hugely successful software company with that design philosophy was Salesforce.  They realized that salespeople lived in their e-mail--and the last thing they wanted to do was to log e-mails into a database.  By creating Outlook plugins and bcc tools that ingested e-mails, attaching them to clients, they made the lives of a salesperson so much easier.

But that's not all.  When everyone is actually using a tool correctly, you can start quantifying productivity, and optimizing for it.  The way we now have deep insight into salesperson productivity is exactly the way we *don't* have it during the development process.  What PM knows exactly how long everyone accomplished their tasks when the team is updating the product management software during the standup?  Jordan Crook's comparison to Clubhouse as Salesforce for developers is spot on

I can't wait to see how things develop for the company now that they're out there in the world.

When doing the right thing by people is also the better business model: Why I backed Homer Logistics

Late last year, Adam Price opened by eyes to a group invisible to most New Yorkers--bicycling food delivery guys.  He told me about how they get their jobs, what they make, how they make it, and about all of the various problems that come with being a 1099 worker--or being completely off the books.  

He told me months and months ago, before anything came out about Uber's workforce, how it was never going to work in a world of increased "on demand" services.  He outlined some of the issues in a recent blog post:

  • Using 1099 workers--people who, by definition, you can't tell where and when to be at a certain spot, is inherently inefficient. 
  • The explosion in on demand apps and services meant that any retailer or restaurant didn't just have one firehose of demand to drink from--they had eight.  These small businesses needed a single delivery solution in order to focus on what they do best--whether it's making food or curating products to sell in a store.  

That's what Homer is.  It's not a B2C company.  You order from Seamless or wherever the way you normally do, and the restaurant turns the delicious meal over to Homer, the delivery experts.  This way, Homer doesn't have to raise hundreds of millions of venture capital dollars to change consumer ordering behavior. 

He created Homer in order to solve those logistics problems, but he was especially proud of another problem that he solved:

These delivery workers were highly underpaid--because they were working off of tips and were highly underutilized.  When you have a single shop that has varied demand throughout the day, the amount of money you can make delivering is really low.  Sometimes, you'll get zero orders in an hour and you'll just be stuck with the $5 wage you're being paid--if that.  

What happens when you start batching all of these orders across restaurants is that now you're getting two, three, four, or even five orders, not just in peak orders--but every hour--and sometimes more.  Now you're pushing hourly wages for these hardworking people into the teens, and you're doing it while classifying them as W2 employees with worker's comp protection.  I can say as a NYC cyclist myself that's particularly important. 

Adam told me the story of one of the members of his delivery team who enjoyed riding for Homer so much that he started dropping leaflets at the restaurants he used to drive for--and marketing wasn't even his job.  It was a much better setup to be classified as a W2 employee, with all its protections, as well as obviously making more money, more consistently.  

Homer didn't need to get sued to classify its employees as employees.  It found a better business model that solves doing right by customers and doing right by its staff.  That's why I'm proud to have led their $2mm round of financing.  I'm joined by Two Sigma Ventures, VaynerRSE, and, importantly, some of the largest delivery restaurant owners in the city--the founders of Chop't, Dig Inn, Melt Shop, Dos Toros, etc.  

Urban logistics and delivery is a huge market and in high demand by customers.  There's enough money here to both make a huge business and compensate people appropriately.  

 

Bill DeBlasio's Uber targeting is in danger of making NYC a tech joke

Mayor Bill DeBlasio is on the verge of making NYC one of the most unfriendly cities in the world for technology companies to operate.  

It first started with Airbnb, which got caught in a crackdown aimed at people who turn "affordable" residential housing into full time hotel space.  Don't concern yourself with the fact that Airbnb is simply an outgrowth of the lack of affordable housing--where no one would ever bother renting out their place if they didn't have to struggle to afford to live here.  Don't concern yourself with the fact that it's the city that green lights all of the luxury condos going up all over the city in place of reasonable housing.  

They could have created a reasonable, nuanced set of rules that allows me to rent my place out when I'm not there, like the four times a year I'm out in San Francisco trying to convince valley VCs to invest here, to someone who needs it.  Most of these renters are tourists who contribute to the NYC economy and who can't afford $450 a night for a hotel--people we should be aiming to attract.  Instead, the baby got thrown out with the bathwater here and renting your whole place is illegal.  

And now, our anti-tech progress Mayor is helping NYC join an exclusive list of cities that have stood in the way of Uber providing an innovative consumer service that is in high demand. 

Regardless of how you feel about Uber as a company or their management, it's really hard to argue that New Yorkers don't want this service.  It's also hard to argue that anyone who supports NYC's tech community wouldn't have rather had Uber build their company here versus in San Francisco.  Uber employs 3000 people, more than most startups in NYC do, and is only six years old.  Same with Airbnb.  Imagine what the NYC tech community would be like had Uber and Airbnb grown up here.  

Well, what are the chances of that given our anti-innovation policies regarding these two companies?

Would NYC rather be on the side of innovation, or the side of the taxi lobby, who donated over $550,000 to the Mayor's campaign?

In LA, it has made getting around the city transformationally easier.  I've spoken to at least ten LA residents in the last year who have said they no longer need a car because of services like Uber and Lyft.

Similarly, Uber makes getting around in the outer boroughs of NYC much much easier, as well as to and from the airports.  I don't think I would have ever been able to find a green cab had it not been for Uber.  Remember, this is the Mayor who initially wanted to curb green cabs--a program that quadrupled the number of outer borough taxi fares picked up--because the yellow cab lobby was against it.

It may or may not be necessary to have Uber in Manhattan, but then again, it's not totally clear to me that *any* cabs are necessary in Manhattan--or cars in general.  That's why I was a big fan of the congestion pricing setup that Mike Bloomberg proposed a few years ago.

If DiBlasio really wants to prevent traffic fatalities and improve the air quality, as well as make it faster to get around here, he should take a look at plans to limit driving across the board instead of targeting one company.  

Has Car2Go, in my opinion one of the best things to happen to outer borough transportation, undergone the same governmental scrutiny for taking up 400 Brooklyn parking spaces (or half spaces, since they're little Smart cars)?

Has Via, the new bus service come under fire?  

What about WeWork?  While smaller startups benefit from the coworking company's great facilities, larger companies looking to expand are fighting with the multi-billion dollar real estate behemoth for already expensive larger commercial space.  

Not yet, because it seems like the NYC government picks and chooses which startups it wants to go after depending on which lobby being disrupted complains the most.  

Given that kind of environment, what's the likelihood that the next Uber or Airbnb will want to set up shop in New York City?  

What Scales?

I've got a great deal for you...

It requires you to set up the operation from scratch in every city--and it probably only works in cities.

There is a ton of regulatory risk.

Right now the market is pretty much only high net worth individuals.

Oh... You only invest in scalable businesses?  Sorry, I didn't realize.  I'll keep that in mind for next time.

Congrats, you passed on Uber.

And you know what--if "scalability" was an important criteria for you, and you wanted businesses where all you had to do was write a bit of code and people started paying you software margins all along the way, you would have rightfully passed.   You would have also passed on Fitbit, Nest, Tesla, SpaceX, Blue Apron, Makerbot and a whole host of other things.

At least you would have done Slack.

Yet, as cash friendly as Slack could be--where it could easily have Kickstarter or Craigslist-like cashflow to cap table like ratios, it is still raising hundreds of millions of dollars.  So does it really matter if it's being spent on developers or factories.  Dollars are still dollars.  Look how much Twitter and Facebook raised before exit.

Seems to me that every deal is a tradeoff.  Retail stores may not have the same margin or viral growth, but what they spend to build a store is what they don't spend in customer acquisition dollars that Blue Apron spends.  What Canary spends to build a product they make back in a clear path to revenue that Pinterest may or may not ever see.  They certainly don't make as much per customer as Canary does.  

To me, I care about whether something is unit profitable, whether the market is big enough, and whether your business gets easier or harder to run the more business you do.  Even in retail, managing more stores is hard, but you also have enough revenues to justify a layer of management expertise that makes your business easier to run.  You've got more customer awareness as well.  Marketing the 10th Soul Cycle location is easier than marketing the first.

So what's really the definition of scalability these days?

Doing some good with the people who want your time

In the last two days, I've had three different conversations with people who were asking me what I do with the people who want to grab coffee when the mutual benefit isn't immediately mutual.  Don't get me wrong--these are people who are all extremely generous with their time--and that's probably why more people reach out to them.  You have a useful meeting with someone and then they tell someone else it was useful, and so on, and so on...

Unfortunately, you only have so many hours in the day--well, the working day, anyway.  You do, however, do other things--things that not everyone might be interested in, but if they *really* wanted to meet with you, they'd do.

I'm talking about volunteering.  

A lot of people in the tech and startup community volunteer their time to various non-profits--things that always need more help.  It's too easy for someone to ask you for coffee.  What if you responded with "happy to connect up, why don't you meet me at this soup kitchen Thursday morning?"  

Actually, it would be fantastic for you to give them an address and make it a place that hands out breakfast to the homeless or something.

"Oh, did you think *we* were having breakfast?  Oh, no, I meant we'll be giving other people breakfast."

Anyone that doesn't stick around for that isn't the kind of person you'd want to meet up with anyway.

For me, it's volunteering to help give the public a free kayaking experience.  I co-founded the Brooklyn Bridge Park Boathouse.  Our paddlers are mostly local, diverse, working class or lower income--basically anyone who lives within walking distance of the park that isn't going to be paying to kayak in the Hamptons this summer.  It's a group of people whose lives involve a lot of waiting on line for stuff undoubtedly, and who can't pay their way around the process.  We provide an empowering but safe experience to a lot of people who may not have ever been on the water or who believed themselves capable of paddling their own kayak around on their own.  

I'm there during the summer almost every Saturday.  If anyone wants to come down to volunteer with us, they can sign up here, and just tweet at me to see when I'll be there.  As long as you realize that we're both there to ensure public safety first, and to help people have a good paddling experience, then I'm happy to talk about venture, startups, NYC, etc.  

What's your volunteer thing that you can get those would be coffee buyers at?