I was chatting with John Borthwick a few years ago and he said something that struck me. He said he was interested in companies that appear to be focused on selling X but are really online communities that happen to make money selling X. This helps explain why many investors are confused by the sustained success of these companies. One example he cited was GoPro. Many investors decided not to invest in GoPro because they saw it as a camera company, and camera companies generally get quickly commoditized. However, investors who properly understood GoPro saw it primarily as a highly engaged community of sports enthusiasts, something that is very hard for competitors to replicate.

Shortly after that conversation I got an email from Jordan Cooper about a company he was investing in called Soylent that was taking an open-sourced approach to developing science-based food products. “The community and engagement around the product is pretty amazing to me – there’s something interesting happening here,” he said. He was referring to Soylent’s very active discussion forum, as well as the DIY Soylent site where users share their own Soylent recipes. Seen through the lens of Borthwick’s comment, it was an obvious investment – a few days later we signed a term sheet to lead the seed round.

Soylent is a community of people who are enthusiastic about using science to improve food and nutrition. The company makes money selling one version of that improved food (some users buy “official Soylent,” others buy ingredients to make their own DIY Soylent recipe). If you look at Soylent as just a food company, you misjudge the core of the company, the same way you would if you looked at GoPro as just a camera company.

Why are Soylent users enthusiastic about applying scientific methods to develop food? You might wonder why the nutrition advice you hear seems to frequently change. When I was growing up, we were told to reduce our saturated fat and increase our carbohydrates. Now we are told the opposite. As Vox explains in this excellent article, that’s because food science has been distorted by the influence of food companies:

Many of the health policies and personal dietary choices we made related to fat (and saturated fat in particular) were based on very flawed and biased evidence. Contradictory research findings that challenged the paradigm were systematically stifled and ignored, and self-interested researchers — as much as Big Food — shaped the research agenda, media reporting on diet, and public perception.

There was very little incentive in the past to invest in the science of food and nutrition. Traditional food companies are primarily marketing and distribution companies. They blanket the earth with advertising and fight to distribute their products as widely as possible (while blocking the distribution of competing products). As a result, it is very hard to get food that is convenient, affordable, and nutritious outside of wealthy areas where organic and other premium food is available. If you read the Soylent forums you’ll see that – contrary to the caricature of Soylent as a complete food replacement – it mostly replaces unhealthy meals:

“I do it because the alternative for me is to swing by a gas station for a Krispy Kreme donut or three, or stop by a fast food restaurant and pickup a few things off the dollar menu for lunch.” source

“Personally, I don’t really care for cooking. I usually feel that a meal should take longer to eat than to cook. That leads to meals that are more “assembled” or “heated” than actually cooked, just sandwiches, hotpockets, and anything microwaveable. This is not a healthy diet. So Soylent seems like the right fit for a healthy diet with very little food prep effort.” source

“During a typical week there’s several meals I eat alone in front of the TV, weekday dinners mostly. Those were usually fast food, or frozen or canned. So I thought Soylent would be faster, easier, and healthier than what I had been doing before. I still eat out with friends several times a week, and the food at work is actually quite good.” source

Soylent inverts the Big Food business model, spending nothing on advertising and distributing solely through e-commerce. Soylent’s “marketing plan” is to invest in its online community and in peer-reviewed scientific studies. The belief is that the internet has made people smarter, and that the old tactics of selling junk food using clever advertising will be increasingly ineffective. We have all sorts of food-related problems in the world – malnutrition, diabetes, and obesity, to name a few. Part of the solution to these problems is providing people with better scientific research, and more food choices that are convenient, nutritious, and affordable.

Today we are announcing that Andreessen Horowitz is leading a $20M investment in Soylent, alongside our friends at Lerer Ventures and Index Ventures. Since the seed round in 2013, Soylent has grown quickly and now generates millions of dollars per month in subscription revenues. The company is profitable and doesn’t need additional capital (our favorite kind of investment), but decided to take money to invest in long-term R&D. In addition to improving the current product and introducing new products, the focus will be on dramatically reducing the price of Soylent, from the current $3 per meal to a fraction of that. We are very excited to continue working with Rob and his team on this important project.

VC investment vs Gartner hype cycle

Here is total VC investment over time:

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And here’s the Gartner hype cycle:

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One reading of this is that the advent of the internet was the technology trigger, the dot-com crash was the trough of disillusionment, and 2004-present is the slope of enlightenment (with a mini-crash in 2008 due to the implosion on Wall Street). This reading would be consistent with Carlotta Perez’s theory that we are now in the multi-decade deployment phase.

How We Got To Now

I really enjoyed Steven Johnson’s How We Got To Now. I read a lot of history and science books, but this book stood out because 1) the anecdotes were entertaining and relevant, and 2) it got the process of innovation right.

I’ll just pick one story here that I liked. Frederic Tudor was a Boston entrepreneur in the early 1800s who had the clever idea to ship ice from New England to the Caribbean:

The history of global trade had clearly demonstrated that vast fortunes could be made by transporting a commodity that was ubiquitous in one environment to a place where it was scarce. To the young Tudor, ice seemed to fit the equation perfectly: nearly worthless in Boston, ice would be priceless in Havana.

Not only was the ice almost free, but so was the shipping:

His New England base gave him one crucial advantage, beyond the ice itself. Unlike the U.S. South, with its sugar plantations and cotton fields, the northeastern states were largely devoid of natural resources that could be sold elsewhere. This meant that ships tended to leave Boston harbor empty, heading off for the West Indies to fill their hulls with valuable cargo before returning to the wealthy markets of the eastern seaboard. Paying a crew to sail a ship with no cargo was effectively burning money. Any cargo was better than nothing, which meant that Tudor could negotiate cheaper rates for himself by loading his ice onto what would have otherwise been an empty ship, and thereby avoiding the need to buy and maintain his own vessels.

He invested his life savings and years building his startup. Everyone thought he was crazy. The local paper wrote a snarky article about him: “No joke. A vessel has cleared at the Custom House for Martinique with a cargo of ice. We hope this will not prove a slippery speculation.” He even spent two years in prison when he went into debt (this was before one of the greatest legal inventions of all time- limited liability). He finally got his ice delivered but failed to predict one thing:

Despite a number of weather-related delays, the ice survived the journey in remarkably good shape. The problem proved to be one that Tudor had never contemplated. The residents of Martinique had no interest in his exotic frozen bounty. They simply had no idea what to do with it.

We take it for granted in the modern world that an ordinary day will involve exposure to a wide range of temperatures. We enjoy piping hot coffee in the morning and ice cream for dessert at the end of the day. Those of us who live in climates with hot summers expect to bounce back and forth between air-conditioned offices and brutal humidity where winter rules, we bundle up and venture out into the frigid streets, and turn up the thermostat when we return home. But the overwhelming majority of humans living in equatorial climes in 1800 would have literally never once experienced anything cold. The idea of frozen water would have been as fanciful to the residents of Martinique as an iPhone.

There is a saying that entrepreneurs should create “painkillers not vitamins”. This is bad advice. Painkillers are not very interesting businesses. Lots of people create painkillers, and they either work or they don’t, and nothing more is generated as a result. The really interesting companies create vitamins. You don’t know you want ice until you figure out what to do with it. Once you do, you discover all sorts of things you couldn’t imagine before, which in turn create new opportunities for invention and entrepreneurship.

The stories in the book ultimately argue for public policies that support networked innovation:

[T]here are social and political implications to these kinds of stories. We know that one key driver of progress and standards of living is technological innovation. If we think that innovation comes from a lone genius inventing a new technology from scratch, that model naturally steers us toward certain policy decisions, like stronger patent protection. But if we think that innovation comes out of collaborative networks, then we want to support different policies and organizational forms.

People who understand how innovation really works tend to support open standards, lenient immigration policies, well-funded university research, employee stock options, and significant restrictions of patents.


Mihaly Csikszentmihalyi in 1996 on the concept of Flow:

[Flow] is being completely involved in an activity for its own sake. The ego falls away. Time flies. Every action, movement, and thought follows inevitably from the previous one, like playing jazz. Your whole being is involved, and you’re using your skills to the utmost.

Goals transform a random walk into a chase. You need clear goals that fit into a hierarchy, with little goals that build toward more meaningful, higher-level goals. Here you are, tracking the footprints of some animal you haven’t seen. That’s exhilarating. Then there’s the question of feedback. Most Web sites don’t very much care what you do. It would be much better if they said: “You’ve made some interesting choices” or “You’re developing a knowledge of Picasso.” There’s also the ability to challenge. Competition is an easy way to get into flow.

Realize that change and downtime are important. I found that if a painter relates to objects only through vision, his work is much less original than a painter who walks up to the object, smells it, throws it in the air, and manipulates it. The variety of sensory inputs allows you to create a visual image that has all kinds of dimensions bubbling up inside it. We are still a multimedia organism. If we want to push the envelope of complexity further, we have to use all of our devices for accessing information – not all of which are rational.

“Go With the Flow,” Wired Magazine

The thin edge of the wedge for virtual reality

Pius Uzamere argues that virtual reality will succeed first in business applications instead of gaming:

The most interesting virtual reality software startups this year won’t really be “virtual reality” companies at all; they’ll be startups making amazing tools that just happen to use VR to bring them to life. This has already started to play out in fields like medicine where virtual reality is already being used to train brain surgeons at Mount Sinai.

The argument is roughly that 1) high-quality VR equipment will start out expensive, 2) business apps can be distributed via web, 3) toolchain for creating business VR content is better (3d scanning tools etc).

Non-gaming VR applications are indeed underhyped. But gaming is important as an entry point. Critics tend to underestimate the scale and passion of the hardcore gaming community. For example: 32 million people watched the live steam of the championship of League of Legends, an extremely complicated game that is only available on PCs and Macs. VR has an unusually favorable market structure: a thin edge of the wedge (hardcore gaming) and a thick edge of the wedge (replacing everything we now do on screens).