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China and AI


One in 3 billion dollar companies is now founded in China. Thinking about what’s going on and what lies ahead inevitably leads to a discussion around the Chinese government’s focus on AI and why the discussion matters to us. I thought I’d focus on 3 notes I took away. First, the Chinese government’s goals in investing in artificial intelligence are likely both around leading technology while also using AI to build the world’s most powerful surveillance state. Check this video on the Daily Mail’s website. (still below) Second, we will all feel the consequences of living in a world where facial recognition becomes commonplace. Consider a few examples – FindFace, an app in Russia, compares snaps of strangers with pictures on VKontakte, a social network, and can identify people with a 70% accuracy rate. Facebook’s bank of facial images cannot be scraped by others, but the Silicon Valley giant could obtain pictures of visitors to a car showroom, say, and later use facial recognition to serve them ads for cars. Even if private firms are unable to join the dots between images and identity, the state often can. China’s government keeps a record of its citizens’ faces (as detailed above); photographs of half of America’s adult population are stored in databases that can be used by the FBI. Law-enforcement agencies now have a powerful weapon in their ability to track criminals, but at enormous potential cost to citizens’ privacy. Employers can already act on their prejudices to deny people a job. But facial recognition could make such bias routine, enabling firms to filter all job applications for ethnicity and signs of intelligence and sexuality. For example. researchers at Stanford University have demonstrated that, when shown pictures of one gay man, and one straight man, the algorithm could attribute their sexuality correctly 81% of the time. Humans managed only 61%. In countries where homosexuality is a crime, software which promises to infer sexuality from a face is an alarming prospect. (Note: the researcher went on record to say this study was all about proving a point) Finally, it is tempting to disengage from the futurist debates around AI. For most of us, we’re working hard at our jobs, then trying to put in a good shift at home and take care of our health along the way. Maybe, if we’re lucky, we get to have a hobby or two. On the side, we hear all this buzz about various billionaires fighting each other on the prospects of AI. Is it going to lead to humanity’s doom? Is it going to bring forth the utopia where we work on better kinds of jobs? Why should we care? In a thought provoking essay on how to think about these futurist debates, Cathy O Neil makes a telling point (lightly edited) — “For the average person there is no difference between the singularity as imagined by futurists and a world in which they are already consistently and secretly shunted to the “loser” side of each automated decision. For the average person, it doesn’t really matter if the decision to keep them in wage slavery is made by a super-intelligent AI or the not-so-intelligent Starbucks Scheduling System. The algorithms that already charge people with low FICO scores more for insurance, or send black people to prison for longer, or send more police to already over-policed neighborhoods, with facial recognition cameras at every corner — all of these look like old fashioned power to the person who is being judged. Ultimately this is all about power and influence. The worst-case scenario is not a vindictive AI or Sergey Brin not getting to celebrate his two-hundredth birthday. In the worst-case scenario, e-capitalism continues to run its course with ever-enlarging tools at its disposal and not a skeptical member of the elite in sight.” Well said. Longer note on Medium or LinkedIn. Share this: Facebook Twitter LinkedIn Like this: Like Loading... Related https://alearningaday.com/2017/10/08/china-and-ai/

My new book came out today!26


My new book came out today! Source: http://theoatmeal.com/blog/dogs_as_men_book

If pens worked like printers27


(function(d, s, id) { var js, fjs = d.getElementsByTagName(s)[0]; if (d.getElementById(id)) return; js = d.createElement(s); js.id = id; js.src = "//connect.facebook.net/en_US/sdk.js#xfbml=1&version=v2.5&appId=122125307879498"; fjs.parentNode.insertBefore(js, fjs); }(document, 'script', 'facebook-jssdk')); The Oatmeal Share this   Latest Things I wrote a new book! Random Comics Browse more comics >> Home Comics Blog Quizzes About Contact All artwork and content on this site is Copyright © 2016 Matthew Inman. Please don't steal. var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www."); document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js' type='text/javascript'%3E%3C/script%3E")); try { var pageTracker = _gat._getTracker("UA-9487849-1"); pageTracker._trackPageview(); } catch(err) {} Source: http://theoatmeal.com/comics/pens_as_printers

Our Model


This past week our portfolio company MongoDB went public. I think that occasion presents an opportunity to talk about USV’s model. We are a small firm. We raise modest sized funds (by modern VC standards). Our first fund was $125mm, our second fund was $150mm, and we have now settled on $175mm as a good number and our past three funds have been that size. Our typical entry point is Seed or Series A although we have an Opportunity Fund that allows us to enter later when that is appropriate. We do that once or twice a year on average. We make between twenty and twenty five investments per fund and we expect, hope, and work hard to make sure that two or three of those investments turn into high impact companies that can each return the fund. Although our entry point is typically Seed or Series A, we continue to invest round after round to both protect and add to our ownership. We have no requirements on ownership, but we typically end up owning between 15% and 20% of our high impact portfolio companies. If you do the math around our goal of returning the fund with our high impact companies, you will notice that we need these companies to exit at a billion dollars or more. Exit is the important word. Getting valued at a billion or more does nothing for our model. We need these high impact companies to exit at a billion dollars or more. Because we invest early, it generally takes seven or eight years for an investment to exit. We closed our first fund, USV 2004, in November 2004, and our first high impact exit came almost exactly seven years later when Zynga went public in late 2011. Mongo DB represents the eighth high impact exit that USV has had. They are: Zynga – IPO – 2011 Indeed – Sale to Recruit – 2012 Twitter – IPO – 2013 Tumblr – Sale to Yahoo -2013 Lending Club – IPO – 2014 Etsy – IPO – 2015 Twilio – IPO – 2016 MongoDB – IPO – 2017 Although MongoDB won’t be an exit until the lockup comes off and we are truly liquid, every other one of these impact investments has returned the fund it was in (or much more in the case of Twitter, Lending Club, and Twilio). We were the lead investor in the Seed or Series A round in seven of these eight high impact companies and three of them came from seed investments. It’s easier to identify high impact companies in the late rounds, but not so easy to do that in the early rounds. That’s where our thesis based investing comes into play. It is also important that all of our partners participate in this model. It takes seven or eight years before we can expect a new partner to contribute and Albert, who joined us in 2008, has produced the last two high impact exits with Twilio and MongoDB. John, who joined us in 2010, has already contributed one in Lending Club. I have no doubt that Andy, who joined us in 2012, and Rebecca, who joined us this week, will produce their share of high impact exits. Andy already has several in the pipeline. So this is our model. Keep the fund sizes small. Make investments early so we can buy meaningful ownership for not a lot of money. Keep investing round after round to maintain and/or grow our ownership. And have enough high impact portfolio companies that we can get two or three of them per fund. We have a good pipeline of high impact companies in our various portfolios so that we expect this model will keep working for the foreseeable future. This model has more or less been the model of all three venture funds I have worked in over my thirty year period. It is time tested and it works when applied with focus and discipline and a strong investment thesis. But with a new model, tokens, in its infancy, it begs the question of how it will impact our approach. We already have four portfolio companies that either have done or have announced intentions to do token offerings; Protocol Labs/Filecoin, Kik/Kin, Blockstack/Stack, and YouNow/Props. So we are going to figure this out in a few years. I expect the hold periods will come down as token offerings come early in a company’s life, not later. So we should know more about how this new model works in three to five years. There are a bunch of questions that come to mind. Here are a few of them: Can a token based investment return a fund with more or less frequency than an equity based model? How long are the hold periods going to be in a token based model? Will the 10-15% high impact percentage that we see in our equity based portfolios be similar in a token based model? What are the appropriate ownership levels for a token based investment vs an equity investment? We are going to continue to execute our equity based model in parallel with our token investments, at least for as long as that seems like the right approach. We have a good thing going with the equity based model but we understand that we have to adapt and react to changes in the market and we are doing that, fairly aggressively, with tokens. It is an interesting time to be in the venture capital business. The decade that came after the internet bubble burst turned out to be a fantastic time to make early stage venture capital investments and we have been fortunate to participate in those good times. But the market has changed a lot with large incumbents taking up more and more white space in the internet sector as we have known it. At the same time, an exciting new sector and model, crypto/tokens, has emerged which gives us a lot of optimism about the opportunities ahead of us. We will see how our model needs to evolve over time to make sure we can continue to deliver the results we want to deliver to the entrepreneurs and companies we back and the to the investors whose capital we manage. http://avc.com/2017/10/our-model/

Our Model1


This past week our portfolio company MongoDB went public. I think that occasion presents an opportunity to talk about USV’s model. We are a small firm. We raise modest sized funds (by modern VC standards). Our first fund was $125mm, our second fund was $150mm, and we have now settled on $175mm as a good number and our past three funds have been that size. Our typical entry point is Seed or Series A although we have an Opportunity Fund that allows us to enter later when that is appropriate. We do that once or twice a year on average. We make between twenty and twenty five investments per fund and we expect, hope, and work hard to make sure that two or three of those investments turn into high impact companies that can each return the fund. Although our entry point is typically Seed or Series A, we continue to invest round after round to both protect and add to our ownership. We have no requirements on ownership, but we typically end up owning between 15% and 20% of our high impact portfolio companies. If you do the math around our goal of returning the fund with our high impact companies, you will notice that we need these companies to exit at a billion dollars or more. Exit is the important word. Getting valued at a billion or more does nothing for our model. We need these high impact companies to exit at a billion dollars or more. Because we invest early, it generally takes seven or eight years for an investment to exit. We closed our first fund, USV 2004, in November 2004, and our first high impact exit came almost exactly seven years later when Zynga went public in late 2011. Mongo DB represents the eighth high impact exit that USV has had. They are: Zynga – IPO – 2011 Indeed – Sale to Recruit – 2012 Twitter – IPO – 2013 Tumblr – Sale to Yahoo -2013 Lending Club – IPO – 2014 Etsy – IPO – 2015 Twilio – IPO – 2016 MongoDB – IPO – 2017 Although MongoDB won’t be an exit until the lockup comes off and we are truly liquid, every other one of these impact investments has returned the fund it was in (or much more in the case of Twitter, Lending Club, and Twilio). We were the lead investor in the Seed or Series A round in seven of these eight high impact companies and three of them came from seed investments. It’s easier to identify high impact companies in the late rounds, but not so easy to do that in the early rounds. That’s where our thesis based investing comes into play. It is also important that all of our partners participate in this model. It takes seven or eight years before we can expect a new partner to contribute and Albert, who joined us in 2008, has produced the last two high impact exits with Twilio and MongoDB. John, who joined us in 2010, has already contributed one in Lending Club. I have no doubt that Andy, who joined us in 2012, and Rebecca, who joined us this week, will produce their share of high impact exits. Andy already has several in the pipeline. So this is our model. Keep the fund sizes small. Make investments early so we can buy meaningful ownership for not a lot of money. Keep investing round after round to maintain and/or grow our ownership. And have enough high impact portfolio companies that we can get two or three of them per fund. We have a good pipeline of high impact companies in our various portfolios so that we expect this model will keep working for the foreseeable future. This model has more or less been the model of all three venture funds I have worked in over my thirty year period. It is time tested and it works when applied with focus and discipline and a strong investment thesis. But with a new model, tokens, in its infancy, it begs the question of how it will impact our approach. We already have four portfolio companies that either have done or have announced intentions to do token offerings; Protocol Labs/Filecoin, Kik/Kin, Blockstack/Stack, and YouNow/Props. So we are going to figure this out in a few years. I expect the hold periods will come down as token offerings come early in a company’s life, not later. So we should know more about how this new model works in three to five years. There are a bunch of questions that come to mind. Here are a few of them: Can a token based investment return a fund with more or less frequency than an equity based model? How long are the hold periods going to be in a token based model? Will the 10-15% high impact percentage that we see in our equity based portfolios be similar in a token based model? What are the appropriate ownership levels for a token based investment vs an equity investment? We are going to continue to execute our equity based model in parallel with our token investments, at least for as long as that seems like the right approach. We have a good thing going with the equity based model but we understand that we have to adapt and react to changes in the market and we are doing that, fairly aggressively, with tokens. It is an interesting time to be in the venture capital business. The decade that came after the internet bubble burst turned out to be a fantastic time to make early stage venture capital investments and we have been fortunate to participate in those good times. But the market has changed a lot with large incumbents taking up more and more white space in the internet sector as we have known it. At the same time, an exciting new sector and model, crypto/tokens, has emerged which gives us a lot of optimism about the opportunities ahead of us. We will see how our model needs to evolve over time to make sure we can continue to deliver the results we want to deliver to the entrepreneurs and companies we back and the to the investors whose capital we manage. http://avc.com/2017/10/our-model/