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.
2 thoughts on “Watch the Throne: Fred Wilson’s A VC Blog Examined with USV’s Thesis”
Good stuff…but a personal thought:
“They would probably take a lower valuation from USV because they want to work with them” <- that's just crazy talk…any reasonable company would not take a lower valuation just to work with USV…they *might* take a lower valuation because of some other advantage USV brings to the table for them (i.e. strong hooks into the market/network that your company can benefit from)…but it better more than make up for the difference in valuation…it just wouldn't make any sense to do it just because they seem like enjoyable people to spend time with.
I think Fred (and USV by extension) benefit greatly from the popularity and engagement on avc.com … but I think that's mostly because he's done the hard work consistently for years and for the right reasons (ie. it wasn't about building something to benefit USV directly or intentionally, it was about using a tool to help himself get a better understanding/connection).
The new USV.com site is a happy side-effect that is made possible because of the attention and engagement that the years of blogging and reputation building all the partners at USV have put in…but it's still not a given that it will work (it's really up to the community to build it into something great and engaging that we can all benefit from)…I think it's got a great shot, but it's still too early to declare I think…
Kevin – I appreciate the thoughtful comment. I completely agree that nobody will take a lower valuation just because they like the people. I think the people add a lot of value. If founders do not feel they add value, they would not get a lower valuation.
At the same time, other non-USV people can add value as well. However, A VC is a great way to let people see the value that Fred can offer through content that demonstrates past success, market insights and a valuable network. They also get to see how engaging Fred is to people who comment.
My thoughts on USV.com are equal parts prediction and hope.