Union Square Ventures is a very successful venture capital firm and they make thesis driven investments. There are many great companies that make bad venture capital investments. USV’s thesis is a great filter to sort out between good companies and good investments. One of the partners, Brad Burnham best summarized the thesis as this:
“Large networks of engaged users, differentiated through user experience, and defensible through network effect.”
I won’t try to explain that because one of the other USV partners, Andy Weissman already did a great job of that here. Instead I will use the thesis to examine Fred Wilson’s (another USV partner) very popular blog: AVC.
AVC is one of my favorite blogs. It is also one of the most popular blogs on tech entrepreneurship and venture capital. Arguably, it provides USV and Fred with a competitive advantage. Many entrepreneurs are familiar with it and value all of the advice they have gotten from Fred’s blog over the years. It might help USV get to invest in some very competitive deals. They can also avoid the need to try and buy their way into a company’s capitalization table with a higher valuation. That is a competitive advantage for VC’s.
Let’s examine AVC through USV’s thesis piece by piece.
There is a large network of engaged users. The blog gets a lot of pageviews per month (around 100,000) and most of Fred’s daily posts get at least 100 comments. I think the disqus comment platform really helps keep the network engaged.
“Differentiated through user experience” is the next element. AVC adds a lot of value to readers. Fred does a lot of cross-linking to his other posts and to other worthy blogs. Many websites try to keep you around to read more articles. They use “most popular” sections and have clickbait titles. I always feel like I wasted time when I spend 30 minutes on those sites. When I spend 30 minutes on AVC, I feel like the content adds value and the linked articles appeal to me based on what I am currently researching or thinking about. Good content and thoughtful linking leads to a good user experience.
The final element is “defensible through network effects”. Here comes the Watch the Throne part: AVC is on top, but does it have something defensible that will keep it there? Enter network effects. All of the other viewers of AVC make my experience better. I love to read the comments. Disqus does a good job of letting a thoughtful conversation evolve. The large number of thoughtful commenters improves all viewers’ experiences. In addition, the likelihood of sparking a stimulating discussion also motivates people to comment on the AVC blog as opposed to another blog with fewer engaged readers / commenters. AVC is a community that has formed a habit of checking and commenting on AVC everyday.
There are also network effects from the people Fred knows at USV and beyond. He links to them, has them guest post and can provoke very interesting discussions across the internet. However, many other successful VC’s also have a network of intelligent people and it does not differentiate Fred as much. Offering a potential bridge between the AVC community with the USV community through the new USV.com may help create further network effects. That is one reason I am optimistic about the USV conversation section.
To summarize, AVC has a large network of engaged users who get a great user experience of high quality content, relevant links and insightful conversation. There are defensible network effects from the conversations on AVC that motivate people to read and participate in thoughtful conversations following Fred’s posts. Finally, the USV conversation has the potential to connect the USV network with the AVC community (there was already a lot of overlap) leading to greater network effects and defensibility. AVC seems like a good “investment” based on USV’s thesis.