Facebook launched when I was in high school and I remember my older friends who were graduating and going to college telling me about it. They were joining an exclusive new university network. It was unclear what they could really do on the network then, but it quickly became evident that they were participating in the early stages of the mainstreaming of social media. Social media was all about being able to easily share things on the internet: photographs, links to articles, text, video, etc.
Facebook launched when I was in high school and I remember my older friends who were graduating and going to college telling me about it. They were joining an exclusive new university network. It was unclear what they could really do on the network then, but it quickly became evident that they were participating in the early stages of the mainstreaming of social media. Social media was all about being able to easily share things on the internet: photographs, links to articles, text, video, etc.
The iconic tumblr CTA for sharing media
You could also befriend people you knew in real life or had never met before and consume the media they shared in a chronologically organized newsfeed. And soon networks emerged where you could follow anyone on the service and see all the things they shared. Then you could interact with that media, liking, commenting, and resharing it. This content was social media, and it was accessed via social networks.
The world of social media has changed a lot since then. Things have become less about the network and more about the media. Ben Thompson just wrote an excellent essay about this evolution. This image in particular stood out to me which highlights the transition from networks that organized media in timeline of people you proactively selected to follow to a platform that algorithmically presents user generated content from the entire corpus of contributors.
Ben Thompson's social/communications map
We all experience this now whether we are cognizant of it or not. The networks we used to visit for the content from our friends and people we were interested in are now loaded with media generated by people we don't follow. The algorithm controls the experience and content we are surfaced, not the network. This transition has happened for one simple reason: platforms are incentivized to make as much money as they can, and that only happens when people spend as much time as possible consuming content so more ads can be served. Incentives drive behavior, so this is a rational evolution. The algorithmic feed is not social media or a social network, it is the product of a global media company that uses AI to capture your attention so you continue to consume content created by everyone else but the company itself.
But just because this is a rational evolution of social networks does not mean it is good. The incremental monetization that a platform gets by prioritizing addiction to its experience generally comes at the expense of the wellbeing of its users and the integrity of the network itself. I personally dislike how these incentives influence the behaviors of the network participants. I don't know anyone who feels great after scrolling through these media platforms. Memes are fun and awesome, but the dopamine hits always end in a crash. Scrolling is the new smoking, and we collectively waste an inordinate amount of time consuming garbage. This isn't a new phenomenon though. We've done it since the dawn of media proliferation. I can't count the hours I sat glued in front of a television watching nonsense that rotted my brain. Digital media is just more pervasive and accessible than other mediums.
I like to think that we are on the precipice of change. People are waking up to the fact these experiences are bad for their mental health and they are experimenting with building new networked products that cater to our desires (ie creating, sharing, and consuming content from people we know and find interesting), but are packaged in more user-friendly ways. (GroupMe is an attempt at this - we thought it was a platform for people to manage their "close ties" networks. It is a network of small networks.) Unfortunately, any product that relies on networks sharing and consuming media will, like the incumbents before them, be a victim of its own success: their underlying business model incentivizes them to capture as much of your attention as possible.
It's unclear to me what breaks this cycle. I don't think consumers are going to pay for these services and eliminate the ad-based model. There is plenty of room for smaller networks that are oriented around specific interests, identities, cultures, etc. These will never achieve the economic scale of the biggest players, but they can potentially thrive as viable, important and good businesses so long as their founders and communities are strong-willed and okay with not taking over the world. Perhaps these have different corporate structures or profit-sharing models? I do believe (and am most excited that) web3 can ultimately create a new set of incentives and architecture that enables a social network/media to thrive, but we haven't seen anything yet that has mainstream appeal. I am optimistic that enough people feel strongly enough about reorganizing the incentive structure and creating a suite of better experiences that we will begin to see antidotes and viable alternatives to the current crop of incumbents within this decade, and with that, perhaps the rebirth of social media and social networks.
The world's richest man bought Twitter and started making changes. The "For You" tab was prioritized over the accounts users selected to follow. Blue checkmarks went on sale and no longer were a recognition of authenticity and notability. Users now need to pay to be seen. And then Elon Musk proclaimed users would be rate limited depending on how much money they coughed up.
This is a lot of change for the people who spent many years, in some instances well over a decade, building an audience on the service. The people who helped turn Twitter into the special place it always has been could no longer communicate with their followers to the degree they had in the past. A lot of users' feeds turned into clickbait threads, conspiracy theories, and other various assortments of garbage. This type of rapid sea change is unprecedented in the modern internet era. Open platforms have crippled their developer ecosystems in the past (e.g. Facebook and Zynga, Twitter and their various third-party clients, and Reddit as of late), but in this instance the very nature of the service changed so dramatically on a dime for all of its users, not just its third-party developers.
Like a knight in shining armor, Meta launched Threads last week as the antidote to the Twitter calamity. The most important piece of Thread news thus far is this post by Adam Mosseri, the Head of Instagram and Threads:
The ability to own your own audience and move it with you to another service is a profoundly important ideal that is diametrically opposed to every incentive of the incumbent platforms. It's both remarkable and encouraging to see Meta commit to this. It is also very much aligned with the ideals crypto believers have espoused: that applications should be built on open protocols with portability, composability, and transparency as defining characteristics. Fred Wilson wrote an excellent piece on the importance of this moment and how it can lead to a new, vibrant and open social media ecosystem.
For a long time people have thrown out hypothetical scenarios about what would happen if an important platform started to censor its users or changed so drastically that what was once a critical piece of digital communication infrastructure degraded or became obsolete. It could conceivably leave billions of people in the dark. Plenty of people have individually been de-platformed in the past, but the rapid changes at Twitter are the first time a global population (in the West) has simultaneously experienced such tangible change at a mass scale. The hypothetical is now real, and the aforementioned concept articulated by Mosseri is far and away what matters most for the future of social media. Let's hope Threads sees this commitment through and a new precedent is created.
Entertaining offers from VCs to preempt your next round is almost always a waste of time and sometimes dangerous. On three separate occasions at GroupMe and Fundera, I let excellent VCs that were interested in our company conduct diligence when we weren't actively fundraising. In every single instance we spent months getting excited that a top tier VC was going to make our lives easy by preempting our next round with a term sheet. And in every single instance they passed.
A preemptive financing is an extraordinarily compelling proposition for entrepreneurs: skip the formal and painstaking fundraising process and replace it with a painless gift from someone you like at a VC firm you admire. In the recent bull market when money was recklessly thrown around preemptive rounds happened aplenty. Capital allocators were incentivized to deploy their wares as quickly as possible and were increasingly diligence and valuation insensitive. That epoch is dead and now we are living in reality again, which means that it’s important for entrepreneurs to understand the motivations of a VC.
When a VC says they want to preempt your round, they are being savvy and doing their job. They are attempting to get a first look at your company and avoid competing to invest in a way that appeals to your sensibilities. It does not mean they are committed to investing. It simply means they will evaluate the company outside of your designated fundraising plan and then make an investment decision.
Frequently a lot of these processes kick off because an existing investor introduces you to one of their friends they say is a good VC and would be helpful for your company. It gets you excited because there’s social proof, you trust your existing investor, and you begin to hallucinate that there’s an easy fundraising path forward. There’s seldom an easy path.
Entrepreneurs need to be mindful of and for the most part avoid the “I want to preempt your next round!” trap for several reasons:
When you talk to one venture firm, even if you think you’re embarking on some clandestine operation, the clock starts on your fundraise whether you like it or not. Word gets around - VCs talk. They go to dinners and banter and gossip through a variety of channels. Some will say they passed even if they never got a look in the first place. Some will say the passed after issuing a term sheet you rejected. You don’t want to be tainted goods, and if there’s a cycle of “we passed” stories out there it makes any subsequent fundraise all the more difficult.
Fundraising mainly sucks for most entrepreneurs. It’s emotionally draining and almost always takes longer than you want. Engaging in a preemptive process has a real opportunity cost when it comes to focusing and executing on what matters most.
The preempting investor has no incentive to move fast, especially in this market. If they think they’re getting an exclusive look at your company, most of the time they’ll take their sweet ass time.
They will likely say No and that you should keep them updated on your progress. It will take weeks at a minimum, but likely months to get to this point. It’s the same probable ending that would happen during a more rigorous and standard go to market process.
Competition is important. Unfortunately (and fortunately for some I suppose), a lot of VCs have a herd mentality and nothing speeds up a process and gets to Yes like competition and FOMO. A preemptive process strips you of control of the narrative and dynamics of a proper fundraise.
I’ve been burned by entertaining preemptive rounds on multiple occasions. It’s like touching the hot stove repeatedly.
There are some compelling reasons to entertain the preemptive round on occasion. You get to learn why people you like and respect will say No. This is a gift when you decide to run a real process so you can get ahead of the curve. Letting an inside investor (someone who is already on your cap table) that you like and already knows the status of the business is a great reason to consider it. Especially if the Partner is someone you deeply trust. This is the ideal scenario - it saves you time and you know you’re not working with a wildcard. Same could be said for a new investor that you have a long-standing, deep, and trusting relationship with. If these things are true, then it's worth considering. Otherwise, in this market, be wary of someone trying to preempt your round.
The iconic tumblr CTA for sharing media
You could also befriend people you knew in real life or had never met before and consume the media they shared in a chronologically organized newsfeed. And soon networks emerged where you could follow anyone on the service and see all the things they shared. Then you could interact with that media, liking, commenting, and resharing it. This content was social media, and it was accessed via social networks.
The world of social media has changed a lot since then. Things have become less about the network and more about the media. Ben Thompson just wrote an excellent essay about this evolution. This image in particular stood out to me which highlights the transition from networks that organized media in timeline of people you proactively selected to follow to a platform that algorithmically presents user generated content from the entire corpus of contributors.
Ben Thompson's social/communications map
We all experience this now whether we are cognizant of it or not. The networks we used to visit for the content from our friends and people we were interested in are now loaded with media generated by people we don't follow. The algorithm controls the experience and content we are surfaced, not the network. This transition has happened for one simple reason: platforms are incentivized to make as much money as they can, and that only happens when people spend as much time as possible consuming content so more ads can be served. Incentives drive behavior, so this is a rational evolution. The algorithmic feed is not social media or a social network, it is the product of a global media company that uses AI to capture your attention so you continue to consume content created by everyone else but the company itself.
But just because this is a rational evolution of social networks does not mean it is good. The incremental monetization that a platform gets by prioritizing addiction to its experience generally comes at the expense of the wellbeing of its users and the integrity of the network itself. I personally dislike how these incentives influence the behaviors of the network participants. I don't know anyone who feels great after scrolling through these media platforms. Memes are fun and awesome, but the dopamine hits always end in a crash. Scrolling is the new smoking, and we collectively waste an inordinate amount of time consuming garbage. This isn't a new phenomenon though. We've done it since the dawn of media proliferation. I can't count the hours I sat glued in front of a television watching nonsense that rotted my brain. Digital media is just more pervasive and accessible than other mediums.
I like to think that we are on the precipice of change. People are waking up to the fact these experiences are bad for their mental health and they are experimenting with building new networked products that cater to our desires (ie creating, sharing, and consuming content from people we know and find interesting), but are packaged in more user-friendly ways. (GroupMe is an attempt at this - we thought it was a platform for people to manage their "close ties" networks. It is a network of small networks.) Unfortunately, any product that relies on networks sharing and consuming media will, like the incumbents before them, be a victim of its own success: their underlying business model incentivizes them to capture as much of your attention as possible.
It's unclear to me what breaks this cycle. I don't think consumers are going to pay for these services and eliminate the ad-based model. There is plenty of room for smaller networks that are oriented around specific interests, identities, cultures, etc. These will never achieve the economic scale of the biggest players, but they can potentially thrive as viable, important and good businesses so long as their founders and communities are strong-willed and okay with not taking over the world. Perhaps these have different corporate structures or profit-sharing models? I do believe (and am most excited that) web3 can ultimately create a new set of incentives and architecture that enables a social network/media to thrive, but we haven't seen anything yet that has mainstream appeal. I am optimistic that enough people feel strongly enough about reorganizing the incentive structure and creating a suite of better experiences that we will begin to see antidotes and viable alternatives to the current crop of incumbents within this decade, and with that, perhaps the rebirth of social media and social networks.
The world's richest man bought Twitter and started making changes. The "For You" tab was prioritized over the accounts users selected to follow. Blue checkmarks went on sale and no longer were a recognition of authenticity and notability. Users now need to pay to be seen. And then Elon Musk proclaimed users would be rate limited depending on how much money they coughed up.
This is a lot of change for the people who spent many years, in some instances well over a decade, building an audience on the service. The people who helped turn Twitter into the special place it always has been could no longer communicate with their followers to the degree they had in the past. A lot of users' feeds turned into clickbait threads, conspiracy theories, and other various assortments of garbage. This type of rapid sea change is unprecedented in the modern internet era. Open platforms have crippled their developer ecosystems in the past (e.g. Facebook and Zynga, Twitter and their various third-party clients, and Reddit as of late), but in this instance the very nature of the service changed so dramatically on a dime for all of its users, not just its third-party developers.
Like a knight in shining armor, Meta launched Threads last week as the antidote to the Twitter calamity. The most important piece of Thread news thus far is this post by Adam Mosseri, the Head of Instagram and Threads:
The ability to own your own audience and move it with you to another service is a profoundly important ideal that is diametrically opposed to every incentive of the incumbent platforms. It's both remarkable and encouraging to see Meta commit to this. It is also very much aligned with the ideals crypto believers have espoused: that applications should be built on open protocols with portability, composability, and transparency as defining characteristics. Fred Wilson wrote an excellent piece on the importance of this moment and how it can lead to a new, vibrant and open social media ecosystem.
For a long time people have thrown out hypothetical scenarios about what would happen if an important platform started to censor its users or changed so drastically that what was once a critical piece of digital communication infrastructure degraded or became obsolete. It could conceivably leave billions of people in the dark. Plenty of people have individually been de-platformed in the past, but the rapid changes at Twitter are the first time a global population (in the West) has simultaneously experienced such tangible change at a mass scale. The hypothetical is now real, and the aforementioned concept articulated by Mosseri is far and away what matters most for the future of social media. Let's hope Threads sees this commitment through and a new precedent is created.
Entertaining offers from VCs to preempt your next round is almost always a waste of time and sometimes dangerous. On three separate occasions at GroupMe and Fundera, I let excellent VCs that were interested in our company conduct diligence when we weren't actively fundraising. In every single instance we spent months getting excited that a top tier VC was going to make our lives easy by preempting our next round with a term sheet. And in every single instance they passed.
A preemptive financing is an extraordinarily compelling proposition for entrepreneurs: skip the formal and painstaking fundraising process and replace it with a painless gift from someone you like at a VC firm you admire. In the recent bull market when money was recklessly thrown around preemptive rounds happened aplenty. Capital allocators were incentivized to deploy their wares as quickly as possible and were increasingly diligence and valuation insensitive. That epoch is dead and now we are living in reality again, which means that it’s important for entrepreneurs to understand the motivations of a VC.
When a VC says they want to preempt your round, they are being savvy and doing their job. They are attempting to get a first look at your company and avoid competing to invest in a way that appeals to your sensibilities. It does not mean they are committed to investing. It simply means they will evaluate the company outside of your designated fundraising plan and then make an investment decision.
Frequently a lot of these processes kick off because an existing investor introduces you to one of their friends they say is a good VC and would be helpful for your company. It gets you excited because there’s social proof, you trust your existing investor, and you begin to hallucinate that there’s an easy fundraising path forward. There’s seldom an easy path.
Entrepreneurs need to be mindful of and for the most part avoid the “I want to preempt your next round!” trap for several reasons:
When you talk to one venture firm, even if you think you’re embarking on some clandestine operation, the clock starts on your fundraise whether you like it or not. Word gets around - VCs talk. They go to dinners and banter and gossip through a variety of channels. Some will say they passed even if they never got a look in the first place. Some will say the passed after issuing a term sheet you rejected. You don’t want to be tainted goods, and if there’s a cycle of “we passed” stories out there it makes any subsequent fundraise all the more difficult.
Fundraising mainly sucks for most entrepreneurs. It’s emotionally draining and almost always takes longer than you want. Engaging in a preemptive process has a real opportunity cost when it comes to focusing and executing on what matters most.
The preempting investor has no incentive to move fast, especially in this market. If they think they’re getting an exclusive look at your company, most of the time they’ll take their sweet ass time.
They will likely say No and that you should keep them updated on your progress. It will take weeks at a minimum, but likely months to get to this point. It’s the same probable ending that would happen during a more rigorous and standard go to market process.
Competition is important. Unfortunately (and fortunately for some I suppose), a lot of VCs have a herd mentality and nothing speeds up a process and gets to Yes like competition and FOMO. A preemptive process strips you of control of the narrative and dynamics of a proper fundraise.
I’ve been burned by entertaining preemptive rounds on multiple occasions. It’s like touching the hot stove repeatedly.
There are some compelling reasons to entertain the preemptive round on occasion. You get to learn why people you like and respect will say No. This is a gift when you decide to run a real process so you can get ahead of the curve. Letting an inside investor (someone who is already on your cap table) that you like and already knows the status of the business is a great reason to consider it. Especially if the Partner is someone you deeply trust. This is the ideal scenario - it saves you time and you know you’re not working with a wildcard. Same could be said for a new investor that you have a long-standing, deep, and trusting relationship with. If these things are true, then it's worth considering. Otherwise, in this market, be wary of someone trying to preempt your round.
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