Star VC Fred Wilson Defends Investments in Twitter, Foursquare

Livens up Activate NYC

Fred Wilson hates panels. “I really hate panels,” New York City’s star venture capitalist wrote on his blog last year. “I hate watching them and I hate being on them even more. I think it's a lazy way to participate in a conference. You show up, answer a few questions, sit up on the stage with a bunch of other people, and then go home.”

Wilson conveyed the same frustration to me in the lobby of the Paley Center for Media on Thursday, while waiting to participate on a panel—the final “panel debate” of The Guardian’s Activate NYC tech and Internet conference that, I notified him, was running about half-an-hour late. By now it was almost quarter to six. He was leaving Friday for Waterloo to visit with a company his firm, Union Square Ventures, had invested in. He had promised his kids he would make them dinner.

Most of the panels at the Guardian conference hadn’t been debates so much as serial presentations, with about ten minutes given over to questions from the audience. Indeed, one of Wilson’s fellow panelists, Txteagle CEO Nathan Eagle, declined to take the lectern when given the opportunity because, he said, “It seems like a lot of these 'debates' are more like opening remarks.” He then, as he admitted afterward, launched into his opening remarks. Throughout, Wilson sat slouched, visibly bored.

“Panels rarely turn into interesting discussions,” he wrote in that blog post.

And then, after a day that included big-name speakers like Lawrence Lessig and Evgeny Morozov but very little in the way of interesting debate, Wilson made things interesting. Asked how he intended to transform his “free companies”—such as Twitter and Foursquare, which cost nothing to use—into companies that make money, Wilson grew animated and replied, “I reject the assertion that it can’t all be done with advertising.”

The auditorium, half-empty by the six o’clock hour, woke up. “It’s absurd to ask users [of Facebook and Twitter] to pay—they’re the ones creating the value,” he said. “The services that we invest in have to be free, otherwise people aren’t going to use them.”

Wilson’s comments, seemingly mild as they might be, come at a time when the valuations and revenue models for companies like Twitter and Foursquare are being seriously questioned—and the same for many of the other companies in USV’s portfolio, which don’t have nearly the user base of even Foursquare, which stands at a relatively small 8 million.

“I think advertising can sustain Facebook, I think advertising can sustain Twitter, I think advertising can sustain Foursquare, I think advertising can sustain Tumblr,” Wilson told me after the panel, adding that this advertising would follow non-traditional models such as Twitter’s promoted tweets and promoted accounts, as well as new models they might try in the future. He also pointed to the relationship between Zynga—another USV investment—and Facebook: “What’s going on between those two companies is a very classic distribution partnership relationship,” he said. “Zynga is paying for access to Facebook’s users.”

That might take care of Twitter and Zynga, but what about the smaller companies that USV has invested in? “We don’t really worry too much, when it’s two or three or four people, about whether they can generate revenue,” he said. “We worry about whether or not it’s a product people can use.” Worrying about advertising—or a sale to another company—comes later.

Even much later, in fact. Wilson is willing to play the waiting game: “We’ll wait ten, twenty years if we have to to see the company’s we invest in realize their dream,” he said during the panel. It’s a statement that might bring comfort to USV’s smaller investments, but cause for concern to those that have invested in Wilson and his partners at USV. Especially during the so-called Bubble 2.0—or “greed mode,” as Wilson prefers to call it.

Wilson, as ever, seems un-phased. “I’ve got to jet,” he says. Dinner for the kids.

Publish date: April 29, 2011 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT