Visual Technology Investment Opportunities, Fireside Chat With Andrew Weissman, Union Square Ventures

©Robert Wright/LDV Vision Summit

©Robert Wright/LDV Vision Summit

LDV Vision Summit 2015: Fireside Chat: Andy Weissman, Partner, Union Square Ventures and Evan Nisselson, LDV Capital

Join us at the next LDV Vision Summit May 24 & 25, 2016 - Discount tickets available
This panel discussion is an excerpt from our LDV Vision Book 2015  

Evan Nisselson: What did you think of the diversity of those companies you were judging in the Startup Competition?

Andrew Weissman: I actually think it was a perfect indication of what you’re trying to do with these events. You take seven different slices of what “visual technologies” is or can be and so they were great. They were all great. For me at least, it was diversity around what a vertical—the breadth of what a vertical topic—can be. At the same time, the creativity of the entrepreneurial mind that is trying to take seven different slices of businesses around a common technology of, say, a camera.

Evan Nisselson: Not even just a camera.  

Andrew Weissman: Absolutely. We’re imagining the out put but also reimagining how you can build a community around it. And what are the business opportunities that come from that community? It’s amazing.

Evan Nisselson: You’re more creative than I. I’d love to hear... I’m trying to figure out what to call that sector. I’ve done “imaging and video.” That doesn’t work; it’s a fact, that’s what it is. I’ve done “visual tech,” which seems like it’s better but it still doesn’t convey it.

Andrew Weissman: It’s geeky.

Evan Nisselson: It is. So what is the opportunity, the branding?

Andrew Weissman: The selfie economy.

Evan Nisselson: Funny. You missed this morning, but the selfie is old school, right? The pure selfie. There’s the “jelfie,” which is the jumping selfie.

Andrew Weissman: Really?

Evan Nisselson: There’s the “delfie,” which is the drone selfie.

Andrew Weissman: Right.

Evan Nisselson: And everybody has these selfie sticks, which I hate.

Andrew Weissman: Why?

Evan Nisselson: You carry this thing around, you hold it out in front of you which always changes the atmosphere of the moment. I’ve got the solution... the Satellite Selfie.

Andrew Weissman: Right.

Evan Nisselson: Hit a button, you go like this. It’ll snap a picture at you.

Andrew Weissman: Yes, I saw you ask Joanne [Wilson] about that.

Evan Nisselson: I think it’s great.

Andrew Weissman, Union Square Ventures©Robert Wright/LDV Vision 

Andrew Weissman, Union Square Ventures©Robert Wright/LDV Vision 

Andrew Weissman: You know what? I actually think... I believe that the selfie is easily mocked but vastly misunderstood.

Evan Nisselson: Why do you say that?

Andrew Weissman: If you think about where we are with imaging right now and imaging technology, and you think about where we are with networks to share images, we’ve completely flipped and inverted the model of the production, distribution, and consumption. We flipped it to where people are actually in control of their distributions, and the selfie is the actual ultimate expression, not only of self but about that change in power and change in control. I actually think it’s something fundamental that’s going on.

EvanNisselson: I agree. I think you’re absolutely right, but the actual feeling that I’d like is to get rid of the camera here. There’s this opportunity, not for all use cases as Hans Peter [Brøndmo] said very well this morning. We talked about the different goals for every photograph and how one needs a different tool depending on the moment but the concept of having something to carry and to get in the way... My arm always has to be here.

Andrew Weissman: Yes, it does, but part of the selfie is the physical expression of control. It’s not you taking a photo, it’s me doing it on my own terms and then doing with it what you will. Of course there’s narcissism, but it’s human nature. It’s the way human beings are. But to me it’s narcissism plus empowerment. It’s represented as something more fundamental going on that the technology is enabling, regardless of what the actual selfie is. Also, there is an insatiable appetite.

Evan Nisselson: For?

Andrew Weissman: For people to take selfies. It’s taking control. It’s control of my existence, it’s control of my images, right? My partner Albert gave this TED talk called “The Great Inversion.” He talked about what the Internet and digital technologies have done, how they have actually inverted class, almost every single industry, and the way we think about value and power and control in every industry. I think selfies are actually a representation of that, right? Anyone is a photographer. I can be a photographer and take a picture of myself and share it with the world and you can’t stop me from being as stupid as I want to be. They’re the ultimate inversion. There’s no photographer, there’s no editor, there’s no distribution control. It’s all those things.

Evan Nisselson: It’s done.

Andrew Weissman: Just like that. Done, exactly.

Evan Nisselson: You wrote a great blog post recently after a conversation we had, which relates to this. During the conversation we had in your office, reflecting upon something I had forgotten... Those AOL days. We’ve both been doing this for about the same amount of time in different places. Your blog post was about the evolution of “What is a photograph?

Andrew Weissman: Right.

EvanNisselson: The Def Leppard quote is? There’s a great Def Leppard quote.

Andrew Weissman: “Photograph—all I’ve got is a photograph. But it’s not enough.”

Evan Nisselson: Tell me your view on this. Evolve on that blog post about what is a photograph, where are we going, and how does that play to what we were just talking about with selfies? A selfie is just another type of pho- tograph. You were talking on that blog more about animations and types of images that tell different stories.

Andrew Weissman: Here’s one of the things I was thinking about listening to all these presentations today. There are, if you think about the LDV Vision Summit, there are two buckets. One is: there are technologies. A camera that can take a picture around a corner, or virtual reality. There are technologies that are advancing the field of visual capture and redisplay, and that’s one bucket. The other bucket is the cultural element to it. They’re related, but the cultural element, to me, that’s interesting, because I’m not really a technologist. I’m a consumer of technology, an investor in technology. The cultural element, to me that’s interesting, is that all the definitions we think we have are now being reinvented. And in being reinvented, creativity emerges. Historically, a photograph was an archival thing. The representation of that was the shoebox in your closet with the photos. They were archival. They were capturing history for the future. We have apps. The largest photo-sharing app in the world right now... The photos disappear. There is no archival element to them. So what is that image then if you’ve inverted? Culturally, what is it? What is the image where it can be animated? What is the image where there can be text over the image, where you tell a secret to someone? You’ve got reinventions because the nature of it—or the metaphor of it, which was what I was writing about—has changed so significantly that everything is up for grabs.

Evan Nisselson: I definitely agree with you. It’s a great, insightful then and  now. I don’t use SnapChat—I get it, but I don’t use it. Do you think those that use it a lot also take different types of photos or have different goals? Obviously certain ones are memories and certain ones are SnapChat disappearing photos. I think historically, it was 100% for memories.

Andrew Weissman: Exactly.

Evan Nisselson: Now, it’s...What percent do you think it is now? Obviously it’ll change with the demographic, but do you send SnapChats to anybody?

Andrew Weissman: I may, a little.

Evan Nisselson: My friends’ kids send them to me.

Andrew Weissman: Yes, exactly.

Evan Nisselson: Random ones.

Andrew Weissman: That’s what’s interesting about it, is that there clearly is something generational associated with an application or a service where the images that historically have been archival are disappearing. There clearly is something generational. The answer to your question is, “I don’t fucking know,” but it clearly feels generationally-related. Again, moving for something that is archival and historical to something that is temporal, something that is much more emotional, something that exists in a certain moment and may not exist... By the way, that’s just the latest rev of it. There are lots of other revs of it that we’ve seen here that we’ve invested in and that you’ve invested in. There are so many different slices of it, but to me the interesting thing is, it all feels like it’s being reinvented. Some people will invent technology and some people will invent new metaphors that take advantage of the fact that there is the most powerful camera or video capture device ever created in the pocket of every human being. When it’s every human being, especially when you think about low-cost devices, Android and all that kind of stuff, that’s kind of just the beginning.

Evan Nisselson: I agree. There’s a fascinating use case that I thought about which resonated recently with me, which was... We are talking about all these memories and what the majority of people are doing capturing memories. However, the other night, I looked at photos of my folks and my sister—I mentioned earlier, their wedding album and bar and bat mitzvah albums—and there were pictures coming out that I had never seen. Most of them I have in my memory because I have a photographic memory from all my work in the photography industry. I decided that I wanted to see some of those analog photos more often. I took a digital photo of the prints and it’s now on my phone with the other 10,000 photos. It’s no longer in that shoebox.

Andrew Weissman: Right.

Evan Nisselson: It’s in the digital box, which I have access to all the time. I think there’s a huge opportunity in all this content which is a digital memory, when we want to see it at different times or any time.

Andrew Weissman: Yes, and by the way no one has solved that.

Evan Nisselson: I know.

Andrew Weissman: People have tried.

Evan Nisselson: Even just earlier, Matt Meeker, who came on stage from BarkBox. We were talking before he came on stage about the early days when I helped him box the early BarkBoxes to send out. And I said, ‘Do you have that photo when we had all the boxes?” He’s like, “No.” So both of us are swiping through our phone camera roles, even though both Union Square and I have invested in Clarifai, and he said, “Wait, are you using Clarifai yet for that?”

Andrew Weissman: Here’s what’s interesting to me.There are a couple things. Here’s one thing that’s interesting. BarkBox is a company that sells a box full of goods for your dog. The fastest-growing segment of their business are their Instagram accounts.

Evan Nisselson: Yes.

Andrew Weissman: Changing metaphors, a business that doesn’t feel like it’s a visual business but it is.

Evan Nisselson: You’re absolutely right.

Andrew Weissman: Right. Clarifai is interesting for a couple reasons and we’re investors so I’ll talk my own book. It feels like a lot of the services to solve your 10,000-photos-on-your-camera have been digital representations of the shoebox, file systems, nested file organization. They were just different shoeboxes, right? Clarifai takes a completely different approach. It basically says, “You don’t actually ever need to organize it. It will organize itself.” That’s very provocative, if it works. The cognitive load on the human being is reduced in the same way that Google changed the search game by not doing directory services, by having an open search box.

Evan Nisselson: That’s right and their focus is business, but it’s content everywhere... But that thing of: “I don’t want to actually organize myself.”

Andrew Weissman: I want it to be organized when I need it to be organized, right?

Evan Nisselson: Right.

Andrew Weissman: I always thought that the Google metaphor was:“I don’t need to know where something is, I just need to know how to search for it.”

Evan Nisselson: That’s right. 416

Andrew Weissman: That 90% of the organizational cognitive overhead is now gone, leaving the key human part—just search.

Evan Nisselson: They’ve succeeded wildly and that makes me very happy. In Gmail, I no longer have all of those folders that I tried to organize in a smart way, which never worked. It actually made more work for me and I still could never find what I was looking for.

Andrew Weissman: Exactly, right.

Evan Nisselson: Give us just a little bit in two or three sentences: the Union Square Ventures focus and your focus. Give us the parameters just for those that might not know in the audience.

Andrew Weissman: We are a thesis driven firm and so our focus is only our investment thesis. Our investment thesis is that we invest in large networks of engaged users that are differentiated through user experience and defensible through network effects. That is the 140-character representation of our investment thesis. That’s all we do and that’s only what we do. There is no specialization per se except we are looking for network-based businesses wherever they may exist. Network-based businesses, they can be networks of users, can be networks of data, can be networks of images, of media types. There are lots of different kinds that we had never even contemplated. The way that we operate is to look at investment opportunities through the lens of that thesis. That thesis has 10 or 11 different words that have shifting meanings. By definition, they are kind of indeterminate, except that they are networks. They are things that are interconnected and the reason that they are networks is that we believe—well, I don’t know actually if we believe it, I think it’s actually true—that the Internet itself is a network. The architectural structure of the Internet is a network with implications around that, around resiliency and things like... But also the only thing that we can identify that will always be a barrier to entry for a business is its network effects.

Evan Nisselson: That’s right.

Andrew Weissman: As investors, we think those are good investments to make because when you get them, you have a company that can be transformational. It’s a company whose value increases the more people use it.

Evan Nisselson: There are a lot of network-effects businesses that actually have images or video as a part of it.

Andrew Weissman: Absolutely.

EvanNisselson: Historically, you had a Tumblr exit, Etsy went public...And both revolve around different types of content. Some people don’t think of it as a content company, but wouldn’t you agree that a majority of the things sold on it has to have good to great content?

Andrew Weissman: It’s handmade goods where a person who makes the goods takes a picture of the goods.

Evan Nisselson: What other ones?

Andrew Weissman: Lots more. I mean, there’s Twitter, of course. Twitter is an image based network. There’s a host of other things. There’s Clarifai, which we mentioned. We are investors in something called DroneBase, which is a network of drones that can be deployed for visual applications, whether you are a real estate agent or some other business person that needs some aerial photography. That’s not a visual technology but it’s a network of capabilities. It’s a network of your satellite cameras that you can deploy. You are investors in VHX, right, which is DIY video and YouNow, which is a live video plat- form? These are all portfolio companies, yes? There is Figure 1, which is a media sharing mobile app for medical professionals. They hate “Instagram for doctors”—they hate it but it kind of captures it in a way. Again, changing metaphors, think about medical professionals. The language of the medical professional is visual. The work style of medical professionals is collaboration. Both of those can be captured in a device that’s with them on their job and that can connect to every other medical professional around the world. That’s kind of a pretty profound metaphor.

Evan Nisselson: It’s huge, absolutely.

Andrew Weissman: If you can pull it off, that’s a visual media network.

EvanNisselson: There’s two more medical companies that are going to have to present this afternoon. One is CaptureProof, which Joanne [Wilson] is in and I’ve known Meghan [Conroy] for a while, and the other one is fascinating. I know one of the co-founders. It’s called Zebra Imaging. There are actually network effects in probably both of those relating to the doctors and relating to others.

Andrew Weissman: When we bet on network effects, we are making a bet because network effects can be nebulous. We’re making a bet that an application can exhibit, derive, and gain defensibility from network effects. You kind of only know it after the fact, though.

Evan Nisselson: You have a directional hunch or traction.

Andrew Weissman: Yes, you got that hunch but when you know that it hap- pens, it’s kind of... You look at a service and you’re like, “Well, why is that growing?” Network effects is the kind of big unknown answer for that.Evan Nisselson: I can’t remember exactly but my perception is that the network effect focus was an evolution to something about 10 or 15 years ago, earlier days in Union Square. Is it something that you think is going to last for- ever? How long-term does that remain the thesis? Obviously, you can always evolve that but do you have an internal agreement of  we are going to do this for 10 years, unless there's a reason not to? Or, we are going to do it for 20? Is there that longer-term vision? Obviously, a fund has a lifespan.

Andrew Weissman: That’s a good question because I think that the thing about our thesis that keeps us engaged is that... The thesis is the thesis but what is a network? What is a user?

Evan Nisselson: What is a network?

©Robert Wright/LDV Vision Summit

©Robert Wright/LDV Vision Summit

Andrew Weissman: There are a lot of different networks.

Evan Nisselson: Give me a couple.

Andrew Weissman: Well, you can have a network of data.

Evan Nisselson: That’s great. I love that. I haven’t thought about that. So what’s a network of data?

Andrew Weissman: A network of data could be an aggregation of data where there is some group or some service that contributes data and you have a bunch of parties that contribute data and then I’ll get to derive some value from that.

Evan Nisselson: But still, you said “group” Do you mean people or could it actually mean sites?

Andrew Weissman: No, it doesn’t have to be people.

Evan Nisselson: That’s what I’m getting at. Most people think of network effects as people network effects.

Andrew Weissman: No, it doesn’t have to be that. A collection of images can be a network, you know? Clarifai is an image technology that gets better the more the network grows.

Evan Nisselson: Perfect example.

Andrew Weissman: The second part of the thesis is a unique user experience and that generally means kind of native to the Internet, even more so native to mobile. Those are being invented and changed in many different ways. One of the things we are thinking about lately is the idea that you can build... Well, there are two things. There are an enormous amount of businesses that are operating today on Instagram and it was a service that wasn’t designed for that. What are the implications of that?

Evan Nisselson: That’s huge. That’s fascinating.

Andrew Weissman: We are starting to see a lot of businesses that work via SMS. They’re trying to get out of the trap of the app store. What does a unique user experience mean? Does it mean an app, does it mean a website, does it mean text in an SMS box? All of these words have enough flexibility that I think we can run with it for a while. They are changing, too.

Evan Nisselson: Agree.

Andrew Weissman: When this thesis was developed, there was no freaking iPhone. We are in year eight of re-understanding the thesis because of mobile and then, what are the implications of that? There’s a notion that in a mobile- first or a mobile-only world, network effects are much weaker. Part of the network effect thesis is that it generally leads to winner-take-all or winner- take-most markets. In a mobile world, is that still true? In a mobile world, where you can go between applications with almost no friction... Then, when you have a notification layer on top of that, there really is no friction. I don’t know. So that keeps it interesting.

Evan Nisselson: Absolutely. We’ve got plenty of time left but if anybody has questions, raise your hands at any time and we’ll get microphones to you. We’re just going to keep chatting away. You see, it’s kind of interesting there. We talk about network effects... There is a visual network effect.

Andrew Weissman: That actually is the network right there.

Evan Nisselson: Amazing, huh?

Andrew Weissman: There’s a picture of a network.

Evan Nisselson: We are a network connected to that.We can get a little meta, but that would be another conversation as well. We talk about entrepreneurs and there are a bunch of entrepreneurs in the audience, people who might want to be entrepreneurs, there’s computer vision scientists, there’s professors that are thinking about maybe one day... Every investor, I think, likes and dislikes certain personalities of entrepreneurs. I’d love to hear your perspective on the personality traits that you really get excited about in entrepreneurs and ones that you don’t like.

Andrew Weissman: For me, the thing that is most interesting or exciting or the thing that I like the most is the obsessive nature of the entrepreneur. The singularity. They just want to talk about their company and they only want to talk about their company and they only want to talk about the challenges. That’s the thing that I find is incredible, that we get to kind of participate in that.

Evan Nisselson: Let’s dig into that a little bit more because I agree—but I think many people filter that in different ways. There are people who talk about their company all of the time but say nothing.

Andrew Weissman: I’ll give you examples. Really the only thing an investor does is pattern recognition. You have a data set that kind of keeps getting better and you’re like, “I’ve seen that work and I’ve seen that doesn’t work.” The thing that I have seen in a number of companies that have gone on to be successful and transformational and observing them from the early stages is you have a founder or it’s usually a founding team and they’re always talking about some issue that’s come up and they can’t get their head around it. They’ll even go off on a sidebar. You’re sitting in a restaurant having dinner and they’ll pull out their phone and they’re doing their little side talk, right? They can’t get out of it. They are living it all the time and they can’t get out of the constant replaying analysis, problem-solving, understanding of their business. It’s that kind of nature and even when you take them out of the setting of their business, it’s still the same. It’s like: you put an entrepreneur in front of a whiteboard—how long before they get up and start sketching?

EvanNisselson: I totally agree and I like it. I’ll just riff on it a little bit because I love the passion or the unbelievable drive of them but sometimes it gets to a point of which they might not listen to others—investors, customers, or peers. They might be driven, they might talk all the time about it, but if there’s... like I said earlier with Joanne [Wilson], the personal trait that I don’t like is selfish because it’s not going to be a team effort.

Andrew Weissman: Yes, but to me, the paradox in my answer to the question of the trait that I dislike the most is that same obsessiveness. In my mind, I actually think you need it to succeed. In my mind, it sometimes is the thing that may cause you to go off the rails.

©Robert Wright/LDV Vision Summit

©Robert Wright/LDV Vision Summit

Evan Nisselson: I totally agree. Some examples of that?

Andrew Weissman: Well, you know it’s...

Evan Nisselson: I’m going to ask tough questions.

Andrew Weissman: These are good questions. Just the ability to get out of your head, the ability to get outside of your body, the ability to get outside of your business and look at it from a different angle, which is very hard to do because most entrepreneurs are all in. Being all in allows them to build a business when all around them, people are saying “no” to them. If you’ve ever raised money for a company, you just get the shit kicked out of you all the time, even if you’re really good at it. It’s incredibly humiliating. You’re sharing your idea, your creativity, your intellectual property and being told

“no.” How do you get up and do that again and again? I’ve done it. It’s hard. At my last company, we tried to raise money for Union Square Ventures many times and couldn’t get them to. So you have to be obsessive.

Evan Nisselson: Tell us about that. Do you ever have flashbacks to when you were sitting there at the table, pitching Union Square Ventures?

Andrew Weissman: Yes, but my flash backs are like, What the fuck am I doing here?  To me, there are a couple lessons. This goes back to the obsessiveness. At some point, you’ve got to focus on the short-term tactic. At some point, you have to take the long game. And how do you balance that and how do you balance your obsessiveness between we have to do this today and what's the long game?   

Evan Nisselson: That’s right.

Andrew Weissman: Because it’s the thing I like and dislike the most, I don’t have a view on if it’s a good or bad thing. It’s just a thing that I’ve noticed and I get at some level. I understand. Our job as investors, maybe, can be just to kind of pull someone out and say, “Look at that exit sign. What if you walked up to there and you looked at that exit sign?” Maybe you see something different, maybe you won’t.

EvanNisselson: I think that is very interesting. We are going to have a question from the audience while we bring up our other panelists simultaneously because you’re on this next panel as well.

Andrew Weissman: Great, awesome.

Audience member: As an investor, what percentage of the time are you okay for the CEO of one of your companies to say “no” to you regarding some- thing? Is it 40% or 60%? How often do you like to hear that “no,” because ideally, they know their business better than you do?

Andrew Weissman: Here’s what I believe: if I’m asking a question that requires a “yes” or “no” answer, I’m asking the wrong question. I don’t think the role of an investor is to be an arbiter of binary decisions for a CEO. As intimate as I am with the company or we are with companies, I don’t think we can fully understand because we are not as intimate as the CEO is. I don’t think the most efficient or effective role is one that requires a “yes” or “no” answer. I think the most efficient or effective role is to suggest a couple ways of think- ing about a problem, suggest a couple patterns that we’ve seen in dealing with that problem, and then, it’s your business. You’re going to solve it your way.

Join us at the next LDV Vision Summit May 24 & 25, 2016 - Discount tickets available
This panel discussion is an excerpt from our LDV Vision Book 2015