Building Companies in Times of Change

I recently participated in an article from Protocol that asked the question, “How will the startups created in 2020 be different than startups built before?” I participated because the reporter working on the article, Biz Carson, is smart and writes insightful things, and her question was really interesting.

Given the intensity and pace of events in 2020, which include a global pandemic, an economic collapse that might end up rivaling the Great Depression, a Trump Administration that’s in total disorder, and an overdue return to the unfinished work of the civil rights movement in America, there’s a tendency for pundits to say that everything has changed, and that we’re in an entirely new world. But actually, more is the same than different, and to improve the world significantly will require a lot of hard work.

I discuss this in depth in the latest episode of Greymatter. You can listen to the podcast here:

In the world of venture capital, Greylock and similar firms are looking at a lot of the same sectors we were looking at last year. We seek out massive new trends in software technology that can transform industries over the course of 10+ years. Technological innovations like mobile, the cloud, and AI aren’t one year phenomena. And when they lead to iconic companies like Amazon, Airbnb, and Microsoft those companies grow and evolve on multi-decade journeys.

Blitzscaling remains the key technique for building iconic companies. The unprecedented events of 2020 notwithstanding, being the first to achieve critical scale in a winner-take-most market is still the primary focus, and speed is still the best way to achieve it. Yes, you have to survive more adversity because of the current turbulence, but so do all of your competitors and the end goal remains the same.

Virtual Life: A Difference of Degree, Not a Paradigm Shift

Our lives have gone virtual for the emergency shelter in place, but the changes in work for the technology industry are a difference of degree, not a paradigm shift. For example, during Greylock’s investor meetings, we still have entrepreneurs coming in to present, and we’re still extending term sheets; we’re just doing all of this via Zoom. A similar dynamic applies to most virtual activities, not just the work of venture capitalists. At work, we’re physically at home, which means that the real place where work gets done has shifted increasingly to the cloud. Companies like Coda and Figma are helping people reconfigure their work processes so that activities that used to happen in person can happen remotely. The same is occurring in other fields, like gaming and entertainment (Roblox and Discord, for example have seen their usage surge). And as investor Ann Miura-Ko points out in the Protocol piece, we’re seeing an acceleration of what she called the “passion economy” with companies like Patreon and Kickstarter allowing creative individuals who are using their shelter-in-place time to work on their artistic projects to find investors, customers, and fans more effectively than before.

But, the startup class of 2020 should remember that not all of these changes are permanent; to paraphrase William Gibson, just as the future is unevenly distributed, so too will be the stickiness of the new habits we develop during this period. We should view this time as an opportunity to experiment so that we can decide and predict which changes to keep.

For example, I’m fairly uncertain about the notion that many companies of the future will have wholly distributed workforces. While there has been a small handful of companies that have made remote work very well, like Automattic, GitLab, and Basecamp, I don’t foresee these pioneering efforts becoming the new norm. Matt Mullenweg of Automattic is enormously thoughtful, and a strong advocate of distributed organizations, as you could tell from listening to his episode of Masters of Scale. But where we disagree is that I think it’s more likely that the lasting effects of this pandemic are for companies to enable one or two days a week as company-wide work-from-home days for various teams, as opposed to going completely distributed. Similarly, I believe that companies will increase their usage of asynchronous, written communications, but will still have plenty of in-person meetings when it is safe to do so.

Diversity: Translating The Current Moment Into A Lasting Movement

In addition to the deadly global pandemic, the other big story that captured the nation’s attention is the murder of George Floyd (and Ahmaud Arbery, and Breonna Taylor, and far too many others) and the nationwide protests that rose in its wake. Many of my fellow venture capitalists wrote about their hopes that this current moment will result in lasting progress towards greater diversity and inclusion in tech.

I share this hope strongly and wanted to offer some thoughts on how we can help drive long-term change.

One of the things that is so pernicious about racism and the way it blocks diversity and inclusion, is the fact that racism does not necessarily require people to have bad intentions in order to have ill effects. If a white man like me looks in the mirror and thinks, “I reject racism,” that simply isn’t good enough. Racism has powerful feedback loops. If you don’t actively fight against the biases in the system, you’re allowing racism to happen. Good intentions are clearly not enough. If we want to make a change, we need to enact interventions that are designed to disrupt the feedback loops that make racism so dangerous and persistent.

Here in Silicon Valley, our collective track record on the diversity of employees, executives, founders, and investors is poor. The issue is homophily, the very human tendency to prefer — usually unconsciously — the company of people who are similar to you.

To fix this problem, we need to improve access to the network for Black, Latinx, Indigenous people of color (BIPOC), women and non-binary people. At Greylock, we are taking steps to be anti-racist and to improve our own diversity and inclusion practices across investing and recruiting, as well improving those practices at our portfolio companies.

You can also be a part of the solution by changing your individual behavior. Open up your network to people who don’t look like you. Consider the Linkedin PlusOne pledge. Try to develop a more diverse set of personal relationships. This effort requires real work. Don’t just fight for the things you believe in when it’s convenient and doesn’t cost you anything. You aren’t working hard enough until it is inconvenient and it costs you something that you care about.

Telehealth: Maybe It’s Finally Time

One of the existing industries which 2020 is likely to transform is telehealth. The startups which launch in 2020 will include a major new generation of telehealth companies. There is, of course, the obvious fact that the vast majority of health visits have been moved to video calls, but its implications go beyond a simple shift in delivery mechanism.

Historically, nota bene, the wave of startups that gets to scale is generally not the first wave that emerges. For example, there have been multiple waves of virtual reality (VR) startups, and we still aren’t living in a Ready Player One world.

Until now, telehealth has followed the same general path. Telehealth makes so much sense, especially for rural areas and emerging markets, and yet few of the previous companies that emerged have actually made it.
For example, the elderly represent a large proportion of patients, and an even larger proportion of market power. Previously, the elderly were not early adopters of telemedicine, but now their experience has transformed. They think, “I’m living through video conferencing. I’m seeing my personal trainer via video. I’m seeing my physical therapist via video. And the last time I saw my doctor was via video, and it worked a lot better than I thought.” As a result, the industry adoption cycle has been accelerated by several decades.

This will accelerate the deployment of new technologies such as AI and machine learning to make diagnoses via smartphone imaging, or to extract information from doctor-patient interactions and improve follow-up and follow-through. What’s really exciting is that such AI-based tools could then be available to people who are uninsured or living in regions where it’s difficult to access in-person healthcare. We could even see hybrid models where non-medical professionals like social workers can facilitate telehealth visits while on site or on video conference with patients.

These technological shifts have gone hand-in-hand with regulatory shifts. Historically, regulators have been very conservative when it comes to approving telehealth, but the urgent challenge of delivering care during the pandemic has paved the way for waivers and policy changes that have enabled telehealth.

And while the pandemic will recede, many of the changes that support telehealth now will represent a permanent improvement to mainstream healthcare. In fact telehealth will likely become the universal first line of interaction.

Another effect of the market shift is that many more of this new generation of telehealth startups may also grow outside of Silicon Valley. When people are sheltering-in-place, the geographic density of talent in Silicon Valley is much less relevant. Meanwhile, the techniques that Silicon Valley uses to scale companies, such as Blitzscaling, can be learned and practiced by anyone with access to the internet. Teladoc, one of the previous generation’s big winners, is based in New York; the next generation’s big winner might be based anywhere as long as there is sufficient access to financial capital and virtual access to technological and medical expertise.

Founding Teams: The Virtual Garage

The other biggest impact of Covid-19 will be felt in how founding teams come together. The vast majority of founding teams (including iconic duos like Bill Gates and Paul Allen, Steve Jobs and Steve Wozniak, and Larry Page and Sergey Brin) coalesced in a specific place. There isn’t much social distancing in a garage. Because of Covid, all founding teams right now will be distributed. Teams that want to build world-changing products together will need to rely on better communication, rather than pizza-fueled all-night hackathons. One way to facilitate this process is to create an explicit “marketplace” for potential co-founders; this is what one of Greylock’s investments, Entrepreneur First, has done in Toronto, London, Berlin, Paris, Singapore, Hong Kong, and Bangalore.

The pandemic triggered a period of real uncertainty for EF. Traditionally, the organization brings aspiring entrepreneurs together in a classroom setting so that they can learn the skills of entrepreneurship and build relationships that lead to the formation of founding teams. It wasn’t certain that the model would work virtually. Fortunately, since the organization had already developed tools to work across its geographically distributed offices, it had a foundation on which to build a great and extensive set of tools for a virtual program.

And the good news is that the new virtual program is working well; the Net Promoter Scores among entrepreneurs are high, the ideas they’re working on are interesting, and it looks like they’re getting a similar level of interest from VCs compared to the pre-pandemic days.

Once founders come together, it will be more critical than ever for those founders to draw on their networks. Even though they cannot meet with people face to face, they can draw on all the relationships that they built prior to the pandemic to recruit partners, customers, and new team members. But the longer the pandemic continues, the more important it will be to start developing new relationships. One of the techniques that Ben Casnocha and I recommended in The Start-up of You was to set up a “lunch fund” to take interesting people out to lunch. Today, people should consider having a “Zoom fund,” or a “Teams fund” to help you set up the equivalent one-on-one virtual meetings. For example, you could even send a bottle of wine or other genial beverage, to be sipped during the conversation. I suspect we’ll see a lot of creative approaches to one-on-one videoconferences before the pandemic ends.

The More Things Change, The More They Stay The Same

2020 is a period of rapid change. The dramatic events of just the first half of this year have caused a multiple order-of-magnitude shift in our behavior. You often hear that a solution needs to be 10 times better to get users to abandon their current solution. Well right now, we’ve seen the usage of telehealth and the formation of virtual teams increase by a factor of 10x or even 100x. That’s an incredible rate of change.

Yet so much remains the same. Converting challenge into opportunity is a normal part of the entrepreneurial journey. My most often repeated quote on this topic is that “Starting a company is like jumping off a cliff and assembling an airplane on the way down.” That’s intensely scary. You can’t have a full plan. You face a series of mortal risks to the business, where a difference of 15 minutes might be the difference between exultation and terror.

But right now, is precisely when people with entrepreneurial skills are accomplishing amazing things, because generally speaking, it’s actually better in the long-run to successfully start a business during a recession, than during a bull market. The challenging circumstances winnow out a lot of competition. If you can get your company sorted then, it’s actually in fact really valuable. When you look at the challenges around you, ask yourself, “How do I convert this challenge into an opportunity?”

Linda Rottenberg of Endeavor told me, “When the times get tough, the tough entrepreneurs get going.” It can be a huge opportunity to be brave when others cower. And the way we’ll solve the economic side of this pandemic and the struggle for social justice is with successful entrepreneurship at all levels of scale, from individuals, to small businesses, to giant businesses.

Class of 2020, I’m rooting for you. Now get going.

Collaborate from AnywhereDylan Field
Figma CEO and Co-founder
From Seed to Series AReid Hoffman and Sarah Guo
Retooling for RealityDavid Thacker
Greylock
Talent Today Glen Evans
VP of Core Talent