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July 22, 2018

The Land of Oz

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Indices Week YTD

This weekend, GSV Capital portfolio company OZY Media hosted its third annual OZY Fest in Central Park in New York City. An event the New York Times has described as “TED meets Coachella,” OZY Fest is a gathering of emerging musicians, public figures, artist, chefs and entrepreneurs. (Disclosure: GSV owns shares in OZY)

This year’s headliners include the best-selling author Malcolm Gladwell, former Secretary of State Hillary Clinton, Laurene Powell Jobs, Common (Grammy + Academy award winning musician, actor, and advocate), Cindy Mi (Founder + CEO, VIPKID), athlete Alex Rodriguez, renowned chef Marcus Samuelsson, comedians Chelsea Handler, Michelle Wolf and Hasan Minhaj and more.


Source: OZY

OZY Fest is the brain child of OZY Media, a next generation digital media platform. Launched in 2012, OZY is building the iconic media brand for the Change Generation by producing future-oriented content on unconventional and undiscovered trends, rather than stale news stories that are covered by existing outlets. The company has surged to an audience of over 40 million people per month — larger than The Economist, The New Yorker, or Politico — with original content focused on what’s new and next.

Co-founder and CEO Carlos Watson, a former CNN and MSNBC commentator, argues that by engaging people with truly differentiated content and experiences (e.g. events) OZY can address a premium brand vacuum in news media — think Apple’s brand halo in consumer electronics or what HBO’s once did versus Cable TV.

A digital media company hosting a physical event highlights a key trend — the Experience Economy. Physical locations are an important platform to create an unique customer experience, and accordingly, brands that were born on the internet are turning towards creating physical footprints to engage customers. In the same way Warby Parker creates Store experiences and Spotify creates Concerts, OZY is creating physical manifestation of the hottest trends the digital magazine covers through OZY Fest. But more broadly, OZY’s multi-pronged digital media platform reflects a massive shift in news and media, catalyzed by technology and the Internet. 


In the history of the Fourth Estate, 2017 will go down as the year of “Fake News.”

On the one hand, it was a year where articles unencumbered by facts went viral. “Pizzagate” — the story of Hilary Clinton running a child sex ring out of a pizza shop in Washington D.C. — spread so quickly and with such legitimacy that both the New York Times and the Washington Post wrote articles debunking it. Another fan favorite was the Irish government accepting “refugees” from America seeking asylum following Trump’s presidential victory.

At the same time, President Trump spent 2017 hammering the “Fake News” in an escalating battle with various major media organizations, popularizing the term in the months before his inauguration. CNN was the most frequent object of his ire. Fox and Friends were, well, a friend.

By September 2017, announced it would add the phrase as an official entry. Collins Dictionary followed suit in November, naming “Fake News” its 2017 word of the year, and The Oxford Dictionary looks poised to follow suit.

Many are speculating whether the Fake News phenomenon is bad news or good news for the media industry. Our view? It’s neither. But it does crystallize a broad set of fundamental shifts in the media landscape that will result in a significant wave of consolidation in 2018. Specifically, we expect to see a separation of winners and losers among high flying digital media newcomers.


Source: GSV Asset Management

Last July, Vice Media completed a $450 million financing led by TPG that valued the company at $5.7 billion. That’s nearly twice the value of the New York Times. Vice, whose investors include Technology Crossover Ventures (TCV), Walt Disney, 21st Century Fox, the Raine Group, and WPP, said it would use the new funds to expand its multi-channel programming, which includes news, documentaries, and reality series distributed through Vice’s digital channels and third parties like HBO.

Why is Vice more valuable than the New York Times, the face of virtue in the news?

In just over 20 years, the news industry has undergone a fundamental transformation, which has happened in three phases starting with the launch of Netscape in 1994. The first phase was a Cambrian explosion of “news” as the Internet democratized access to information, as well as content creation and distribution. went live in 1995 and the New York Times followed suit in 1996, but by 1999, a new phenomenon had arrived: “weblogs” or “blogs” — individuals publishing their own “news.”

In 1999, there were 23 blogs on the Internet. By 2006, there were 50 million. The Huffington Post, launched in 2005, created the first crowdsourced “newsroom” by aggregating bloggers through a branded channel.

The second phase was marked by the rise of curation mechanisms in the face of rapidly proliferating content. Social media platforms like Facebook and Twitter quickly became de facto news curation platforms as patterns of sharing across the “Social Graph” meant that certain stories could go viral. Google News and Flipboard, launched in 2006 and 2010 respectively, enabled people to create personalized news channels by aggregating content from a variety of sources.

In the third phase, we are coming full circle as consumers seek out engaging sources of information, ideas, and entertainment. Curation has proven to be a double-edged sword, on the one hand limiting a deluge of information but at the same time creating an echo chamber based on your own biases and the broader biases of your network.


Today, consumers are not simply turning back to the stalwart newspapers of yesteryear. As with businesses that are disrupting legacy consumer industries — from Airbnb in hospitality to Lyft in transportation and Spotify in music — people are demanding new and engaging digital content and physical experiences from brands that they love. (Disclosure: GSV owns shares in Lyft and Spotify)

So where does Fake News figure into this sea change? defines “Fake News” as, “False news stories, often of a sensational nature, created to be widely shared online for the purpose of generating ad revenue via web traffic or discrediting a public figure, political movement, company, etc.”

Without question, “Fake News” has sparked a flight to quality that has benefited new and legacy media companies alike. Now more than ever, people are willing to pay for content they trust. Revenue from digital only subscriptions at the New York Times, for example, jumped 44%, or $75 million, in the first nine months of 2017. The New Yorker and Washington Post have seen record growth as well.

Yet on the whole, 2017 has been a dicey year in the media business. At the end of the third quarter, advertising revenue at the New York Times was down $20 million year-over-year. At Vanity Fair, the editorial budget faces a 30% cut. Oath, the offspring of Yahoo and AOL’s union, is shedding more than 500 positions as it scrambles to fit inside the Verizon conglomerate. IAC is exploring offers to offload The Daily Beast. Ziff Davis acquired Mashable at the fire sale price of $50 million, or about a fifth of its former valuation. Even Vice and BuzzFeed, are projected to miss their 2017 revenue targets by 20%.

None of this is the direct result of Fake News. But Fake News has been propelled by a proliferation of content-lite media platforms that have bet their future on reaching massive audiences with “Clickbait” content to generate advertising revenue. The problem — other than reality distortion — is that there just isn’t enough advertising revenue to go around.

A new key fundamental for media platforms is creating a multi-channel delivery model. It’s not enough to engage an audience through a single medium.

In September 2016, for example, OZY partnered with PBS to premiere a primetime program called “The Contenders – 16 for ’16,” an 8-part documentary series dissecting the most dramatic presidential campaigns in U.S. history. The series, which aired on PBS and BBC before the 2016 Presidential Election, attracted over 30 million viewers. 

In 2015, Vice announced a major partnership with HBO to distribute original content through the network. Vice has also inked lucrative deals with A&E and MTV to exclusively air original content on their channels.


Source: Company Disclosures, GSV Asset Management, Crunchbase

Investment Activity + VC Funding

2017 saw record funding towards Digital Media startups with $4.6 billion of funding deployed across 120 deals. The bulk of the funding went towards mega-rounds raised by Bytedance, Group Nine Media and Vice, which raised $3 billion, $485 million, and $450 million, respectively.


Source: CB Insights


Source: GSV Asset Management, Crunchbase

German media heavyweight Axel Springer has rapidly shifted its traditional print media business towards an array of digital businesses. In 2000, Axel Springer’s operating profit came from digital initiatives was 0%. By the end of 2016, it was over 72%. In September 2015, Axel Springer acquired business-focus new site Business Insider for $450 million. At the time of the acquisitor, Business Insider had 76 million monthly unique readers. Other digital media investments in Axel Springer’s portfolio includes OZY, Mic, NowThis and Thrillist.

This June, Quartz was sold to Japanese digital media firm Uzabase for $110 million. The acquisition priced Quartz at approximated $5.00 per MAU (monthly active user) and a 3x Price-to-Sales ratio. The company is on track to grow top-line revenues by 35% and is profitable.


Source: Company Disclosures, CB Insights, GSV Asset Management


Leading artificial intelligence expert Andrew Ng, the former Chief Scientist at Baidu and co-founder of Coursera, stated that “AI is the new electricity.” AI will be the lifeblood that powers the next wave of technology companies and plays an increasingly large role in media.

ByteDance is an emerging star in the East with over 200 million daily active users. Currently valued at $22 billion, ByteDance is the leading AI-powered media platform in China, with major business lines in multiple aspects of media and entertainment, from news, to live video and online dating. The company’s most famous business unit, Toutiao, is an AI-driven news discovery app that has skyrocketed in popularity since its launch in 2012. Today, Toutiao has over 120 million daily active users who spend a mind-boggling 80 minutes on the app daily, topping that of Facebook, WeChat, Snap, and Instagram.


Source: GSV Asset Management

Facebook is the World’s largest media platform, but produces none of its own content. Other technology platforms such as Nextdoor and Spotify are taking a page out of Facebook’s playbook to create unique media and advertising platforms that leverage its local network and media content.

Nextdoor, a private social network for local communities, has a highly attractive media advertising model from its “hyper-local” nature, resulting in above-industry-average click-through rates.

Today, Nextdoor covers over 180K active neighborhoods globally, and is in over 80% of US neighborhoods. Nextdoor is attractive for local business advertising, as those businesses are not able to target single neighborhoods through networks like Facebook or Google or Instagram. Its “classified ads” are helpful for real estate firms and for local service providers. Meanwhile, the ads are within user comments and questions, resulting in higher click-through rates, accordingly driving a higher CPM.

What’s next for Nextdoor? As the company maintains its unique service, the company can evolve to become the local news bulletin and has the potential to become the leading local neighborhood platform for communication and for local services.

Sweden-based Spotify continues to set the tone in the music space and revolutionize interactive media. Spotify is the leader in the music streaming industry, with Apple Music doing well in second place with 50 million users. Recently, Google made its third attempt to become a relevant player and launched YouTube Music — a direct copycat of Spotify and Apple Music.

But looking to the Far East, a new star is rising in the sky. Tencent Music is China’s largest music platform, impressively with 700 million MAUs (over 4x larger than Spotify), and with 15 million paying users (less than a fifth of Spotify). Nevertheless, the service is growing very fast and is planing a US IPO, at a rumored $30+ billion valuation.


by Luben Pampoulov

AI-ifying Media

AI is transforming media. Increasingly more companies are shifting to apply Artificial Intelligence-powered technology in order to stay relevant and to grow. Netflix and Spotify were the pioneers when they began to recommend what to watch and listen. Both have managed to fend off competition which includes Apple, Amazon and Google.

Now, a series of newcomers are doing the same. Whether it’s news apps, music services, or video streaming, companies across the entire media spectrum are applying AI to help users successfully navigate in the “digital information ocean.”

What’s interesting is that AI success stories are increasingly a global trend, rather than originating from Silicon Valley. While Netflix is the Valley’s poster-child, Facebook’s AI is certainly not a success; fake news and political propaganda have been playing into users’ newsfeed for a while. In music, Swedish Spotify has consistently outperformed Apple Music, mostly due to its superior AI-recommendation engine.

Today there is new AI-wave re-shaping media, and that one is “Made in China.” Ever heard of Toutiao, or Kuaishou? Not many outside of China know these names, but within the the People’s Republic, they are two of the most popular media apps.

Toutiao is a reading app that suggests articles based on your reading and browsing history. In its five years of existence, the app has grown to well over 120 million daily active users who now spent a mind blowing 74 minutes per day on the app — higher than Wechat, Facebook, Instagram, Snap, Twitter, Pinterest…

The way Toutiao works is as follow: once a user downloads the app, it uses machine learning algorithms to constantly monitor his/her behavior, and accordingly fine-tunes the contents that are being served thereafter. The more often the user comes to the app, the more accurate Toutiao recommends relevant content…

Toutiao is a media property within ByteDance — China’s emerging new media platform that is currently raising a new round at a $30 billion valuation. In its wide portfolio of media properties, ByteDance also owns a dating app, a video streaming app, Toutioa, and — the highly popular lip-syncing app it acquired for $1 billion last year. ByteDance was on track to generate $2.5 billion in revenue in 2017, and according to many experts, it has one of the most advanced AI technologies in the World.

Similarly, Kuaishou is a fast-growing Chinese social media app, focused on video broadcasting. Initially started as a picture sharing app, Kuaishou had reached 400 million users. But then the company decided to pivot to video and live broadcasting, and is now attracting over 100 million daily active users, up from 50 million in March 2017. On the app, users upload 10 million videos every day, up from 5 million back in March.

Here again, at the core of Kuaishou’s success is its focus and reliance on artificial intelligence — it uses AI to recommend and place videos into users’ scrolling feeds.

Kuaishou is backed by Tencent, and is currently raising a new $1 billion round at a $17 billion valuation. Its competitors include public companies Momo and YY, which are both already surpassed in size. Momo has 94 million monthly active users, an YY has 73 million monthly active users. Kuaishou is at 100M daily active users, implying its monthly active users are much higher than that.

What is interesting is that the majority of users are from China’s lower tier cities and rural areas. This is partly because of the viral spread of Jackass-type of clips that drove the initial interest to the app. Users are filming self-injuring pranks ranging from eating strange things, drinking too much alcohol, jumping into icy rivers, or putting fireworks in one’s own crotch… Hence, the app grew a stronger audience in rural China.

Pioneer Notes

by Li Jiang

The Stanford Bitcoin Mafia

by Rahul Singireddy

In 2013, a wave of Bitcoin mania swept through Stanford. Now, these former freshman and sophomore crypto enthusiasts are CEOs of their own crypto companies

In winter quarter of 2013, Stanford officials were perplexed that 10% of the energy used in a 100-person dorm seemed to be consumed by one room. They kicked down the doors and walked in to find a room hotter than a sauna, with machines and equipment whirring — students had put together a Bitcoin mining rig in their dorm room. The first wave of Bitcoin mania was sweeping through Stanford.

Stanford Bitcoin Group members Matt Rials, Ryan Breslow, Pat Briggs and John Meier pose after a dinner with the Winklevoss twins. Photo: Ryan Breslow

Bitcoin early adopter and venture capitalist Tim Draper gave an evangelical talk at Stanford later that year. It was not uncommon in a classroom to see students day trading Bitcoin instead of taking notes. Though it was not at the price point or hype level it is at today, interest in the currency was spreading like wildfire. Flash forward five years, and these former freshman and sophomore crypto enthusiasts are now CEOs of their own crypto companies — the Stanford Bitcoin Mafia has been formed.

At the heart of the 2013 Bitcoin craze at Stanford was the CS 184 class taught by Andreessen Horowitz partners Balaji Srinivisan and Vijay Pande. Srinivasan later went on to found Earn, formerly, a Bitcoin startup with $115 million in funding that monetizes email and social media accounts. Srinivasan’s first iteration of the class in 2013 focused on a mix of startup theory and practice, interspersed with various Silicon Valley power players as guest lecturers. While not the focus of the class, Bitcoin was covered and became a huge point of discussion in the class’ bi-weekly hackathons. From the hackathons, the Stanford Bitcoin Group was born, a Bitcoin research team supervised by Srinivasan and Pande.

“For CS 184, you could optionally show up in the engineering building at 6pm on Thursday and just work on projects together,” Andy Bromberg said, CEO of CoinList, an AngelList spinout that catalogs tokens. “The group that ended up being the Stanford Bitcoin Group typically stayed until 6 in the morning, working all night together on things. Discussion would separate from the projects we were working on in class, and start digging into other things, like Bitcoin or other futurism projects. That’s where we really bonded. Late nights, early mornings.”

Other crypto founders like Nadav Hollander of Dharma Protocol were students in the class, but the Stanford Bitcoin Group consisted of seven core members. In addition to Bromberg, the group included John Backus and Alain Meier, founders of Bloom and Cognito, Ryan Breslow, founder of Bolt, Chris Barber, an investor, Matt Rials, a developer at Coinbase and then Netflix, and Pat Briggs, a developer at Google. The students were mentored by Srinivasan and Pande in a variety of Bitcoin related projects. Research consisted of Bitcoin trends and trading volumes, analyzing the Bitcoin protocol, and even exploring how Bitcoin could have affected economic disasters in countries like Greece. There was also a lot of effort put into the evangelical side, teaching people how to use Bitcoin and showing them that it mattered. “Right now it’s lots of forking, lots of different camps,” Breslow said. “There was a lot more alignment back then, a focus on making Bitcoin popular. It was a bit more altruistic.”

As part of their evangelical efforts, Breslow attempted a Bitcoin drop at Stanford, trying to emulate the MIT Bitcoin Club who gave $500,000 worth of Bitcoin in 2013 to undergraduates across campus, worth millions now. However, he abandoned the idea after running into complications with the Stanford bureaucracy. Despite their extensive research, the Stanford Bitcoin Group never formally published anything, as there was simply no interest from the public. According to Breslow, “99/100 people you brought Bitcoin into conversation with had never heard of it.”

When it came to housing for the following year, Barber spearheaded an effort with members from the Stanford Bitcoin Group to make an entrepreneurship themed dorm room. Barber recruited Backus, Meier, and Breslow from the research group, adding on entrepreneurial friends Jesse Leimgruber and Daniel Maren for the six person dorm room. Leimgruber and Maren later joined Backus and Meier in the founding of Bloom, a cryptocurrency startup that seeks to create the first decentralized credit score. In Suites, a dorm at the edge of Stanford campus, Griffin 304 was born. Bromberg also lived at Suites in a room next door.

“I came across a group that all seemed destined to start a startup,” Barber said. “Those were the people I wanted to be surrounded by. I’m a big proponent of ‘You’re the average of the five people you spend the most time with.’ There were about 10 undergraduate dropout Stanford founders over that few year period when we were in school. 5 of the 10 were from Griffin 304. It didn’t seem to be a coincidence.”

By the time sophomore year had started in the fall of 2013, Maren had already dropped out to found DFly, a solar power electronics startup that was acquired by SunPower. By the end of the school year, only Barber would remain a student, the rest dropping out to pursue startups. The environment in Griffin 304 was collaborative, competitive, hard working, and fun. The most discussed topic, of course, was Bitcoin.

Jesse Leimgruber works on his computer in Griffin 304, a dorm room that housed many entrepreneurially minded students. Reuters

“We would stare at the price of Bitcoin on a monitor in Suites,” Leimgruber said. “We all had a lot of bitcoin. We did a bit of trading between coins, but mostly we just held. Occasionally, we would stare at the price and say ‘Hey it seems a little high right now, I would sell right this second.’ And then we would look at the price change, and say ‘Hey we should buy right now. Aha! We would have made some money.’ We were bitcoin maximalists, there were a whole bunch of other coins like Dogecoin and even Ethereum at the time, which came the year after. No one really believed in anything besides Bitcoin.” Now, however, Leimgruber is an Ethereum maximalist, building on top of the platform and keeping much of his personal holdings in the token.

Between following Bitcoin and pursuing their startups, Griffin 304 had little time for school, but took as many CS classes as they could anyways. The quirky group of startup kids were highly nocturnal, working on various side projects and blasting dubstep until 4 AM. Leimgruber subsisted mostly on trail mix, taking buckets back to their room from the dining hall downstairs. Everyone was a natural prankster. As the year went on, however, they started dropping out like flies.

Breslow was the first to drop out, leaving to build a Bitcoin wallet company. He made a clone of his key, however, and lived in Griffin 304 for the rest of the year, keeping a blanket and backpack in the room. He spent spring quarter at Stanford not taking any classes, coding 12 hours a day, and using the Stanford gym and dining halls. His current company Bolt is an end to end payments company.

Next came Leimgruber, who dropped out and worked on a couple bitcoin startups that did not gain much traction. Leimgruber then attended the Alchemist Accelerator and founded NeoReach, a data analytics company that connects brands with influencers. Though Leimgruber still works with NeoReach, his main priority now is Bloom. Bloom completed its ICO on January 1st of 2018, having raised over $40 million in Ethereum from over 7,000 individual holders.

Bromberg dropped out next, founding Sidewire with Tucker Bounds, the former spokesman of John McCain’s presidential campaign. Sidewire sought to connect readers directly with political experts, filtering out much of the noise associated with mainstream publications. Sidewire never reached the readership it wanted, however, winding down in mid-2017. Bromberg is now the CEO of CoinList, an AngelList spinout where the top ICOs are vetted and hosted. CoinList helped coordinate the Filecoin ICO that raised $205 million.

Meier and Backus dropped out next, founding Cognito, formerly known as BlockScore. Cognito went through Y Combinator and successfully raised funding, acting as an identity verification and anti-fraud tool. Cognito has helped many big crypto exchanges with compliance, and the two are now part of the founding team of Bloom along with Leimgruber.

Barber, the last man standing in the suite, did not drop out to found a startup. Instead, he was the “mini-VC of Stanford land” as Leimgruber describes it. Barber partnered with angel investor Matt Mochary, investing Mochary’s money at Stanford, with Barber getting 10% of all returns. Barber’s first few investments were easy: Meier and Backus’ Cognito, Leimgruber’s NeoReach, and Bromberg’s Sidewire. After graduating, Barber created Breakout List, a popular website that ranks high growth startups to help software engineers find the next big company to work at.

By the end of the year, the group had gained some notoriety, appearing in a Reuters profile in 2014. Leimgruber and Backus were also awarded the Thiel Fellowship, a prestigious $100,000 grant from tech mogul Peter Thiel. 20 to 25 Thiel Fellows are selected each year, and the award is given with no strings attached or equity taken.

“Virtually everyone in the current batches has raised substantial amounts of funding or been acquired or are working on really massive scale projects,” Leimgruber said. “They fly everyone out once or twice a year to a retreat that is wonderfully organized. People are really open, the support you get from other entrepreneurs is really solid. It’s the only real group that isn’t focused on the company. It’s focused on the individual, because they don’t take equity.”

Many influencers in the crypto space have been Thiel Fellows, including Ethereum founder Vitalik Buterin, Augur founder Joey Krug, Aragon founder Jorge Izquierdo, state channel developer Liam Horne and Gems founders Rory and Kieran O’Reilly. That the Thiel Fellows and the Stanford Bitcoin Mafia are so interrelated is an embodiment of a larger movement happening within tech. The upstart, young crypto folks are gaining traction, and they also happen to have more money than they know what to do with.

“I’ve got friends who were sleeping on couches a year ago. Many didn’t join crypto for the money but have now found themselves with five, ten, twenty million dollars worth of crypto,” Leimgruber said. “It’s really shaken up the space in a crazy way, because Silicon Valley has always had a young culture, but crypto is a new level. You go to any conference, almost everyone is 30 or under. And there are now tons of young people who have found themselves rich, with millions in capital to invest early and fund projects. This is why we see projects raising Series B, Series C levels from the get go. Million dollar deals are getting done on handshakes over dinner all the time.”

On December 12, Vitalik Buterin tweeted, “So total cryptocoin market cap just hit $0.5T today. But have we *earned* it?” The ultra young, deeply interconnected group of crypto upstarts are now paper millionaires. If they can use this newly minted wealth to create long lasting companies and make society a better place remains to be seen.

I’m a Stanford senior covering cryptocurrency as a contributor. Contact me at, and follow @rahulsingireddy on Twitter and Medium.

Market Update

Week ending July 22, 2018

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