20 VC 053: Inside Union Square Ventures with Jonathan Libov @ Union Square Ventures

Quote of the Day: 'Keep an open mind from an early age'. Jonathan Libov, 20VC Jonathan Libov joined the investment team at Union Square Ventures in September of 2014. Jonathan hails from New York but has lived for the last few years in Tel Aviv, where he most recently worked as a Product Manager at Appsfire. He's a graduate of Vassar College with a degree in Cognitive Science and began his career in neuroscience research. He designs and codes, with Fifty among his side projects. In Today's Show You Will Learn: How Jonathan made his move from product guy to VC at USV? What is the key determinant for USV's success? How Fred Wilson and USV use blogging to market USV as 'smart money'? Is SMS dead? What is and will it be used for in the future? What sectors are ripe for disruption? How can technology and sport be integrated? Apple Music: Success or failure? Items Mentioned in Today's Show: Favourite Book: The Structure of Scientific Revolutions OB1: Making Trade free for everyone, everywhere

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Hello and welcome to the 53rd episode of the 20 Minute VC with your host Harry Stebbings. And this week, we're going to borrow from the magnificent Frank Sinatra in his words, "New York, New York", and that is where both our guests will be originating from this week. And I am so excited to be kicking off this week's New York feature with Jonathan Libov. Jonathan joins us today from the investment team at the incredible Union Square Ventures in New York, but he has lived for the last few years in Tel Aviv, where he most recently worked as a product manager at AppsFire. He's also a graduate of Vassar College with a degree in cognitive science, and he began his career in neuroscience research. If that wasn't enough, Jonathan is also a designer and decoder,

• 0:43Harry Stebbings?

  and you must check out his app 50, which is among one of his many side projects. But before we jump into today's episode, if you are stuck in the 20th century using Excel spreadsheets to keep track of all your candidate applications, or your existing recruitment technology is so complex that it appears to have come from another planet, you will love HiringScreen's candidate directory feature, and you can check out for more information at www.hiringscreen.com. But it's time for me to shut up, and here is Jonathan.

• 1:19Speaker 01

  You have now arrived at your destination.

• 1:22Harry Stebbings?

  So Jonathan, welcome to the 20 Minute VC. I'm so excited to have you here.

• 1:27Speaker 02

  Thank you for having me. It's a pleasure.

• 1:28Harry Stebbings?

  Now, I'd love to start off by talking a bit about you and your past, working with AppsFire and then 50App. How did that lead to your current status as VC at Union Square?

• 1:40Speaker 02

  Well, I was a product manager at AppsFire in Tel Aviv. I had been there for about four years and really gotten to know the mobile ecosystem really well. I think that was one of the reasons they brought me on here. So I'd been there about four years and kind of identified that my time there was coming to an end, as the company was actually being more focused in Paris than Tel Aviv. And I hadn't at all thought about joining VC. But I had, I was a regular viewer of the USB website and regular reader of Fred's blog and where they announced that they were hiring two new analysts. And I'd been following those guys forever and thought, well, I would do that.

• 2:22Speaker 02

  And I applied and lo and behold, I, one interview after another, I found myself as an analyst here, along with my counterpart, Joel Mennegro.

• 2:33Harry Stebbings?

  And what was the interview process like and who did you get interviewed by?

• 2:37Speaker 02

  Well, the initial screening involved recording two two-minute videos. I think the questions were, what aspects of tech most inspire you or what are your greatest inspirations? And the other question was, I think just to tell you, tell them a little bit about myself. And then, so I submitted those and then I heard back about two weeks later, I met with a few of the partners and some of the team in one interview and then did another interview with the other half of the team here, which is quite small, so that's, it's very feasible.

• 3:14Harry Stebbings?

  So now you've worked with the team for 10 months and you've worked, obviously, you know, Union Square, legends of the industry. What, what's been the best part of working there for you so far?

• 3:25Speaker 02

  Well, I think I've learned more in this 10 months than any 10 months of my entire life. That probably includes the 10 months from the day I was born till when I started walking, I think.

• 3:39Harry Stebbings?

  This is quite, this is quite a big praise.

• 3:42Speaker 02

  It's, it's very, very true. You know, it's funny to think back, like, take for example, when, if you had mentioned the word network to me before I started working here, I would think quite literally in terms of a social network with friends and like buttons and whatnot. And one of the things that's actually been quite incredible here is when we use, let's say, when the term network comes up, we're talking in the most, let's say...

• 4:18Speaker 02

  Literally talking about networks of all types. I mean, it could be, it could go back to the railroad, railroad network. It could be actual social networks. And that gives you a real fundamental intellectual framework for thinking about some of the companies that we see who come in here and pitch and some of the companies that we're interested in and what the market looks like.

• 4:39Harry Stebbings?

  And USV arguably one of the most successful VC funds around with obviously investments in the likes of Twitter, Zynga, Kickstarter. What do you think's led to this incredible success? What are the drivers behind the powerhouse that is USV?

• 4:56Speaker 02

  Well, I think a lot of this is what I've gleaned from the team here because this is all well before my time. But the, I think when Brad and Fred started the firm, they really believed, and we're going back to around 2004, I believe. They should really check, check with them or maybe with Wikipedia, see if that, that yours is correct.

• 5:22Harry Stebbings?

  Please check the website for further details.

• 5:26Speaker 02

  I think they, they had a real belief that networks would be the defensible quality of the internet or the defensible thing about building a business on the internet. Whereas let's say in prior businesses like Microsoft, Office or Windows or any other software that came packaged in a CD or even a box. That reliability was, was actually one of the primary differentiators. And probably also features. I mean, if you think about Office, it's the most, it was the most reliable and feature-packed piece of software out there.

• 6:07Speaker 02

  But on the internet, it would be network effects and the bonds between all the nodes of the network that would actually allow a business to be defensible.

• 6:19Harry Stebbings?

  And talking of kind of networking, it seems very much that Fred's blog is a way to communicate that USV's money is a form of smart money, if you know what I mean. They, if you go to New York and you need funding, it's USV and it's seems because of his blog. You know, that's done a lot of the work. What's Fred's blogging taught you about blogging?

• 6:43Speaker 02

  Well, I was blogging quite a bit before I joined USV. And, you know, I was, I think, inspired enough by Fred and Andy and Albert's blog. Um, that when it came time for me to apply here, uh, I think some of the ideas that I had expressed in my own blog probably resonated because uh, perhaps they had originated from the partners here. And do you think it's a good way to show your interest in a topic? Yeah, I, I couldn't recommend it more highly. I mean, it's probably not for everyone, but uh, for me, and the reason why I do recommend it is because there's nothing quite like thinking out loud.

• 7:27Speaker 02

  It's one thing to think about a particular topic from your, let's say, from your armchair at home. But if your attention is as short as mine, you know, you might, might only give that a few seconds of thought from here for, uh, here and there. Okay. But when you're formulating it for a blog post and something that's meant to be consumed, you really need to think deeply. Uh, and figure out every single angles that you're, you know, you're communicating something which is coherent and clear and powerful. And I think there's really nothing quite like blogging for the sake of learning things yourself. You know, apart from actually what it's communicating out to your readers.

• 8:11Speaker 02

  It's quite a useful tool in terms of, um, learning about the topics that interest you. So, so how often do you blog and what tools do you use for your blog? Well, my blog is kind of homespun. Um, so, you know, I built it on rails. Okay. But I blog probably now about once every three weeks. Um, I would like to do it even more if I had more time. I mean, I have a list of, of things that I would like to write about and and often on the, on the walk to and from work, I'm, I'm half writing blog posts in my head so that by the time I get in front of the keyboard, uh, it all just kind of spills out. Um. So but if if I had more time, I'd love to blog more, but now it's about once every three weeks.

• 8:56Harry Stebbings?

  You often comment on text and the SMS industry in general. Leading me to ask about the future of text. Do you believe SMS is dead? Uh. If not, what can it be applied and used for?

• 9:09Speaker 02

  Um. I certainly don't believe I certainly don't believe SMS is dead, and in some ways you could argue that. Uh. It's relevance. It's becoming ever more relevant as we move from the desktop to mobile. Uh. Whereas on the desktop, you know, your email address was your identifier. It's what you would use to actually sign up for any particular website. Whereas on mobile, if you notice, most of the time you're giving a phone number, they're sending an SMS and you're. Uh. To give you a code that you punch in to verify that you are who you are. Um. And I think more and more it's actually becoming uh the most important identifier on the phone. I do also think that in uh in a variety of cases, I I you know, I'm not a believer.

• 9:53Speaker 02

  That SMS is going to. Because there are people who are quite a bit more optimistic than I am, that SMS is going to be. Uh. One of the primary ways that we interact with services on our phone. I don't believe that. But I do believe that there's uh this there really is a time and place for SMS as there is for over the top messaging. Uh. To take uh the interaction out of an app framework and into a more conversational framework.

• 10:19Harry Stebbings?

  And have you seen any apps that do that very well?

• 10:22Speaker 02

  Well, I think a lot of people are grappling with it. There's there's one in particular. I use an app called Reserve. Uh. For making restaurant reservations here in New York.

• 10:30Harry Stebbings?

  And that how does that work?

• 10:32Speaker 02

  Well, one one of the experiences I had, which was quite nice, is so the the way the app works is. They have a network of restaurants that they work with so that you can submit.

• 10:44Speaker 02

  You could submit uh uh for a restaurant and a time that you'd like your reservation for.

• 10:50Harry Stebbings?

  Okay.

• 10:51Speaker 02

  And they'll sort of sort it out with the restaurant and then they'll get back to you. And what's kind of nice is. Instead of what would be the traditional way of doing that would be sending you a notification and that that loads up the app. And you get a little spinner while it's loading up the interface to receive your note the content of your notification. They just send you an SMS and say, are your reservation is confirmed? Do you have any questions? And then you say yes or no. And then you have a conversational interaction from there on out. And there have been cases where I did have questions that would not have been convenient to input, you know, through the app, you know, which might have led me to an email address or something like that. So I think, so the, that's a, the SMS was quite timely and, and quite convenient for

• 11:36Speaker 02

  answering any questions that would not have been so easy to address through, you know, through the traditional app interaction model.

• 11:44Harry Stebbings?

  Absolutely. And you, you've got 50 app. Now, tell me about 50 app. Is this a recent development for you?

• 11:52Speaker 02

  50 app was something that my, my friend and I were talking about before I joined USV and I worked on it quite a bit on the summer before I, before I joined here. So 50 app is an app for watching and consuming pro football, NFL football.

• 12:09Harry Stebbings?

  Okay.

• 12:10Speaker 02

  And one of the things that we, we found were frustrating, two things that we found frustrating were that, one, there's a lot of great advanced analytics that are happening around pro football and other sports that weren't really in a terribly digestible format. So one of the things that 50 allows you to do is it looks at the win percentage as the game is occurring. So your team might be up, let's say 21 to 14, but the other team has the ball near your end zone, or sorry, near your end zone with just two minutes left, which means the other team might actually have a higher percentage of winning the game, even though they're, they have, you know, they're down in terms of the score.

• 12:54Speaker 02

  And what it does is if you look particularly like at the, at the past Super Bowl, which had a lot of wild swings, you get a visual graph of the game, which really tells the story of the game in a way that the score, the box score doesn't. You actually get a really quick visual snapshot of how the game went, which we, which we think is pretty neat and, and we think the 50 users of last season really enjoyed and we hope they do this coming season. The other, the other aspect of 50 that I think had more mixed results is There's a lot of great content on Twitter and about pro football and sports in general. And as someone who's very into Twitter, it's easy for me to curate a timeline or lists

• 13:38Speaker 02

  of people who have smart things to say about football beyond the kind of boilerplate stuff that you hear from announcers and color guys on ESPN and whatnot.

• 13:47Harry Stebbings?

  Absolutely.

• 13:48Speaker 02

  And so the part of the idea of 50 was also that we would curate that for you. So we would automatically pull tweets from beat writers of a particular team, the players in that team, so that as soon as you fire up the app and you switch to a particular game, you're getting all the tweets from those players. And it was an idea to sort of make Twitter more accessible to people who might be intimidated by using Twitter in general, but are also missing out on all the great content that's there.

• 14:17Harry Stebbings?

  And as an analyst at USV, are you looking specifically at the sports sector or are you looking multi-sector? Where are you kind of looking? Are you specializing at all?

• 14:27Speaker 02

  Yeah, well, the 50 thing and the sports thing is sort of a personal, is sort of a personal interest.

• 14:34Harry Stebbings?

  Okay.

• 14:35Speaker 02

  And a tough one for a VC is just because a lot of that industry is locked down by intellectual property and things like that, which actually is something that we had to deal with with 50. So I do, so there's two analysts at USV, myself and Joel Menegro, and we do look at particular sectors. It's not particularly a matter of assigning ourselves or getting assigned to any particular sector. I mean, these things really align kind of with our interests and where we're sort of hanging out online. I think both of us are deeply interested in all the topics or all the sectors that the two of us both specialize in. But sort of by virtue of where we're hanging out online and what networks we're involved

• 15:20Speaker 02

  in, we're more likely to hear about and learn about interesting tidbits. And so we go deep on those sectors and we share them with each other. And, you know, another... You know, another thing I should mention is that we're so small that it's, we don't really have, we're too small for things to be sort of broken up by sectors or verticals. So anything that we're, anything that we're analyzing, we're sharing pretty eagerly with the rest of the group, with the rest of the team here and, you know, blogging out in the open about things like that.

• 15:54Harry Stebbings?

  And so you deep dive into a sector and you find a company that's potentially interesting. How do you kind of validate in your head whether this is an investable opportunity?

• 16:05Speaker 02

  Well, one of the things that's unique about USV, insofar as I can tell, because this is the only venture capital firm that I've ever worked at and I've only been here for 10 months, is that we're thesis-driven, which means that we operate, we look out at what's happening based upon our sort of core beliefs about the internet and how to grow a business on the internet. So in contrast to some firms which I, which are more, I think, deal flow oriented, where they're, where they're looking out on the market for what deals are out there and available

• 16:48Speaker 02

  and whether or not they might be the right fit for those deals, we're, we tend to follow our thesis and our intellectual interests quite a bit more. And we're trying to, and we try to look at companies and things that are happening out in the market in a way that helps us further our understanding. And, you know, one of the funny things, I think, is, you know, that these don't, it doesn't necessarily lead to we're looking for a company like X or a company like Y. If you take a company like Figure One, which is one of our portfolio companies,

• 17:31Speaker 02

  which, that, that company came in, so that investment happened right around the time that I was hired. So I wasn't there for the pitches or anything like that. But one of the funny things is you see a lot of companies in the healthcare space, or at least USV did, and spend a lot of time thinking and talking about it. And, you know, in no time, Would, did anyone at USB think, well, you know, there should probably be a media network for doctors or an Instagram for doctors. But then, figure one walks in, and, well, I shouldn't say they walked in, because I think Andy had heard or read about them somewhere and gotten in touch and gotten to know with them over time, but then, you sort of, you stumble across a figure one, and it's not

• 18:14Speaker 02

  as if you ever said, oh, we were waiting for this, but all of a sudden, it totally makes sense.

• 18:20Harry Stebbings?

  Absolutely.

• 18:21Speaker 02

  All the time that you've spent looking at healthcare and things that didn't make sense, something walks in totally unexpected.

• 18:27Harry Stebbings?

  The deep dive's ruined.

• 18:29Speaker 02

  In a sense, it's totally invalidated, but also totally validated, if that makes sense.

• 18:35Harry Stebbings?

  And I'd love to jump into a quickfire round now, where I say a short statement and you give me your immediate thoughts.

• 18:40Speaker 02

  Let's do it.

• 18:42Harry Stebbings?

  Favorite book, and why?

• 18:44Speaker 02

  Favorite book, um, you know, I really love, there's a book called The Structure of Scientific Revolutions.

• 18:56Harry Stebbings?

  Okay.

• 18:57Speaker 02

  Which, when I was a young, when I was a science student, an undergraduate, I read it as Science, Technology and Society class, and one of the things that's really phenomenal about that book is that it really, really crystallizes what it's like to be looking at the world through a certain framework. If you think about how we looked at astronomy, for example, before Copernicus, we had a certain framework that, that gave us an idea about what was happening in the, you know, in the heavens, right? And we looked at stars, I think, I think it was Socrates, I could be mistaken, who thought that the stars were holes in the sky, that light was shining through from beyond, you know, from outside those holes.

• 19:41Harry Stebbings?

  Absolutely.

• 19:42Speaker 02

  And then, once you have a, um, once you have a new framework, it's sort of like, uh, it like flips a switch, right? And suddenly, the whole framework breaks down, and you can build a whole framework anew from that. And I think it's actually, you know, I hate to sound too grandiose, I think some of those ideas are actually applicable in investing, where, you know, you, you, you bring with you a certain framework for looking at the world, um, and then, then that framework breaks down, and you can build a new framework anew.

• 20:10Harry Stebbings?

  I think that's the most impressive answer I've ever had to favorite book and why. I really do. Normally, normally I get hard thing about hard things. Uh, it's taught me so much and next question. And then I'm like, okay, that that was very deep. Thank you.

• 20:24Speaker 02

  Well, I'm glad I was I I was, as you asked that question, I was uh agonizing between uh two two books to talk about. So I I I hope I chose the right one.

• 20:34Harry Stebbings?

  Yeah, no, that was great. And and then Apple Music, Fly or Die?

• 20:40Speaker 02

  Uh, boy, I I, you know, I'm not one to make predictions. There are some things that I kind of like about it.

• 20:48Harry Stebbings?

  What do you like? I'm struggling.

• 20:50Speaker 02

  I mean, it's actually, yeah, it's it's actually quite remarkable uh that you think that the entirety of the iTunes catalog is available to you all at once. Um, though I, you know, whereas there are some cases on Spotify where I run into content that uh I would like that isn't there. Um, you know, there's some aspect of the radio, which I think is um. There's something, there there might be something fundamental about it that we might have looked over in this rush to make everything on demand. Uh, my wife actually uh really likes to listen to radio and likes to be like sort of the spontaneity of it.

• 21:30Speaker 02

  And then the fact that when a song that you really love comes on, there's quite a bit more of a rush than when you just tap the song yourself.

• 21:39Harry Stebbings?

  Yeah, absolutely.

• 21:40Speaker 02

  Uh, the things not to like is it's, you know, it's sort of like a, you know, Apple's, it it has sort of like a a dadish quality. I mean, if if you look at the, you know, like, I I I I don't really, I have trouble parsing the interface, but there's like the connect section and there's.

• 21:56Harry Stebbings?

  Where you play list about Apple. Circles and press them and they get larger.

• 22:01Speaker 02

  Yeah, that's that's really strange. I mean, that's one of the things.

• 22:04Harry Stebbings?

  Kind of Game Center like, isn't it?

• 22:06Speaker 02

  Uh, that's exactly, that's actually the exact analogy that I made and it's sort of, that's one reason to be uh not so optimistic about Apple Music. I as soon as, I mean, it just, that struck me immediately is not at all the way that I think of that music, you know, just choosing between rock, jazz, classic rock, rap, I mean, just hitting those circles. There's something that feels like it's intended to be playful, but actually feels quite sterile. And that's that's the that's the reason not to be so optimistic about Apple Music.

• 22:35Harry Stebbings?

  Do you think Apple could do to improve their offering and and really stave off the competition from Spotify? Do you think there's anything they're missing?

• 22:43Speaker 02

  Anything they're missing, if anything.

• 22:49Speaker 02

  I haven't thought about that so much.

• 22:52Harry Stebbings?

  What would you like to see from it?

• 22:54Speaker 02

  Sorry.

• 22:55Harry Stebbings?

  What would you like, what would you like to see from it? What would make you use it over Spotify?

• 23:02Speaker 02

  The one thing that I found that I think is compelling also about Apple Music is, and this is something I've really only grown to appreciate in the last month. As you saw that, you know, that tiff between Taylor Swift and Apple is, uh, that actually really got me to appreciate how an artist can connect directly with their fans these days. I mean, it sounds a little bit cliche, but it really, until you look at Taylor Swift's blog and see

• 23:33Speaker 02

  how genuine it is, I mean, I had sort of always written her off as someone whose persona and music was sort of a group effort, you know, sort of managed. Um, and, you know, when this whole tiff came about, I started looking into it quite a bit deeper. And even through Twitter, I learned that she's actually running the show there, uh, which made me really come to appreciate her. And it actually also, you know, in, in, in reading her blog really got me thinking that someone's music and, and the, the media and the, and the things they write probably all belong in the same place. And that actually could, that could work, work out quite well for Apple Music.

• 24:15Harry Stebbings?

  And then let's talk about Uber. What's happening with the employment? How's that going to affect them? Do you think they've got what it takes to, to get past all the regulation?

• 24:25Speaker 02

  Yeah, well, I, I think they're so well capitalized that they can figure out a way to make their model work with W two's or ten ninety nines. Uh, I think, you know, the California ruling, uh, it's sort of important to keep it in perspective that it only, you know, affects companies in California for now. And, you know, they can adjust.

• 24:46Speaker 02

  They can adjust their practices so that they're more in line with, uh, a ten ninety nine workforce than a W two, if that's what they want. I think, you know, another thing to keep in perspective is it's sort of easy to see the headlines about the lawsuits and think that all the drivers want to be W2s. And if you actually look at some of the polls, it's actually not the case. I mean, if you even talk to a lot of Uber drivers, I'm not even aware of it. And if you ask them if they prefer to be W2 or 1099, I mean, not necessarily in those terms, they say that, they'll say that they'd rather be independent, that they like the freedom, and they don't like being in a, you know, an employee.

• 25:26Speaker 02

  So I think, you know, I, I, I think it's not, uh, it's not such a, um, uh, the dividing lines here are not so clear, and I think they'll, they'll find a way to work them out.

• 25:39Harry Stebbings?

  And then what advice would you give to a 10-year younger self? 10 years ago, what advice would you give yourself?

• 25:45Speaker 02

  It's funny, when I was, um, about 10 years ago, I was, I was something of a tech ludite and really kind of believed that, uh, that tech and the internet were going to be, um, we're gonna ruin us all. Uh, and then what, what happened, yeah, what happened there is, uh, when I was in college, a friend and I had an idea for what is basically Tinder now, but this was, this was pre-iPhone, and we, um, and tried to get a startup off the ground, where we had a prototype working on a Windows CE phone, uh, if you remember those. So, I think, and I think, given how much I found to love tech and to love this industry,

• 26:30Speaker 02

  uh, I probably would have recommended myself to have kept a much more open mind from an earlier age, whereas it, you know, around, you know, around when I was in college, I was pretty sure I knew how the world worked, uh, which is not, not an uncommon problem.

• 26:45Harry Stebbings?

  So keep an open mind and know that you don't know everything?

• 26:49Speaker 02

  Something along those lines, yeah.

• 26:51Harry Stebbings?

  So can you tell us about a recent investment that you and USV have made and why you said yes?

• 26:58Speaker 02

  So I think the most recent investment that we that's that we have announced is the company's called ObiOne, which is based is the company that operates the Open Bazaar protocol, which enables more open marketplaces and this is partially based on the blockchain. So one of the ideas here is that typically in any marketplace, you've you've centralized the authority. So Amazon has a marketplace, Etsy has a marketplace, but they are the central authorities. So when it comes time to, let's say, well, let me take a step back and say, why do we have central authorities?

• 27:39Speaker 02

  One of the reasons is that it's difficult to, so to say, handle disputes without a central authority. So if somebody sells something and doesn't get paid for it, who do they turn to if they don't have a central authority? But Open Bazaar and ObiOne are doing some really unique things that would would really enable would enable decentralized marketplaces. So anyone could sell anything anywhere according to protocols and would do quite a bit for reducing take rates. You know, I think Amazon's take rate for their marketplace is something like 15%. You could drive that all the way down to zero if you're using something like Open Bazaar.

• 28:19Harry Stebbings?

  Wow. Well, Jonathan, thank you so much for coming on the show today. It's been so great chatting to you.

• 28:25Speaker 02

  It's been a real pleasure. Thank you for having me.

• 28:27Harry Stebbings?

  As always, all the resources and items mentioned in today's incredible interview with Jonathan can be found at the blog at www dot the twenty minute vc dot com. And before you go, I'd love you to check out HiringScreen at www dot hiringscreen dot com, where you can check out their candidate directory feature, where every candidate application is automatically stored to your customized directory, allowing you to sort by name, contact details, current company, job status and much more. Then you simply Sport the information to other sources whenever you like, or if you need to escape Excel hell, HiringScreen can help you import information from other files and databases to your HiringScreen directly for future use.

• 29:12Harry Stebbings?

  So please do head on over to there and we look so forward to seeing you in the next episode of the show.