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The Community Podcast #17

Jyri Engeström: Investing into the Web's Social Infrastructure

Jyri is a Finland-born, California-raised entrepreneur who has built online social networks since the dawn of the web 2.0 era. With Yes VC, the early-stage venture fund he started together with his partner Caterina Fake, Jyri now invests in the next generation of the web’s social infrastructure.

Jyri and Caterina have been involved in many of the last decade's shapeshifting online platforms: from photo sharing platform Flickr and mobile social network Jaiku, to Kickstarter and billion-dollar marketplaces like Etsy. Despite their financial successes, they’ve remained a valuable critical voice in Silicon Valley, rooting for a web that distributes power and serves human needs.

In our call with Jyri, we talk about him growing up in the Silicon Valley of the 90s, the roots of the social web, communities as essential building blocks of society, the role of venture capital in helping social movements grow, future trends and how the internet, at its best, helps people help other people. Here’s episode 17 of the Community Podcast with Jyri Engeström.

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Interview excerpts

We selected and transcripted some interesting parts of our conversation with Jyri, so you can read and share them. Quotes we love are in red.  

 

From growing up in Silicon Valley to building early versions of online social media

I was born in the 70s in Helsinki. In the 80s, my family moved to California from Finland. My parents were academics, they taught at UCSD [University of California San Diego] at the Department of Communication and also came up to Xerox PARC on several occasions back in the 80s. And so I was exposed as a kid to what I didn't realize at the time was kind of the early days of Silicon Valley and a lot of these technologies, like, I remember playing around with an early prototype of the mouse–without really realizing what it was–while my parents were lecturing over in the other room.

I went on to work on a PhD in England and graduated as a sociology student with a Master’s from Helsinki, then moved back to the Bay Area. And coming back to these stomping grounds where I had visited as a kid, Stanford and the Valley and all that, they had changed quite a big deal. But the fundamental California ethos of building these kind of democratic – there was a lot of hippie kind of spirit involved in the early days of tech that I remember from all our friends, all the academics that my parents associated with, they would work at places like Xerox PARC or Apple.
 I remember Don Norman, for instance, one of my parents’ friends, who was a professor at the cognitive science department in UCSD and wrote this famous book, The Design of Everyday Things, who went to work at Apple. They were constantly circulating in and out of these tech companies, and infusing the engineering of these products from the very early days with this ideology built around New Age, spiritual, even Marxist thinking, which you really don't see when you look at Silicon Valley today. 

So in that sense, I think there's been a great deal of change. And I think my own path kind of charged that change too. Because when I was a PhD student, I went to work at Nokia. I was actually collecting data, studying Nokia for my PhD, their venturing activities. And then I ended up running an internal venture kind of ominously called the I series–this was before the iPhone–which eventually shipped but with a different name. And as part of that, I ended up leaving Nokia to launch my own company–together with a friend of mine, Petteri Koponen, another Finn– which was called Jaiku and was an early social media. It wasn't called social media at the time, it was called online community, but it was a mobile online social network. It was acquired by Google in 2007, and that's when I moved back here to Silicon Valley to work at Google. 

The next decade really saw that growth of mobile as becoming the primary platform for online sociality, and of course Facebook as the winner of that. And so it got us here, and I think that if you look back there's a fundamental shift that happened between 2007 and now, where what in the early days was called online community transformed into social media. The reason for that change in nomenclature had to do with the fact that you couldn't sell online community but you can sell social media, and, you know, it became very transactional, and this whole idea of harvesting users’ data in order to be able to target advertising, and the winning business model being this idea that you are creating a way of being able to sell the power of manipulating people's opinions about anything to the highest bidder. The incredible value of that is really what became, I think, the driving force of a lot of the tech development in that space in the last few years.

 

On the dynamics that drive online communities

By definition, communities are exclusive. A community has a set of rules which people are expected to follow. It has methods for enforcing those rules and also for ejecting people who don't respect the rules or who misbehave. And so you end up with an exclusive and limited kind of community. So if you think about any online community, you see these negative aspects of it such as trolling, spreading misinformation, all kinds of ways of undermining it. [...] And so and so in an online community, one of the key aspects – and I remember this from my company Jaiku, one of our most active channels was the Jaiku channel itself, which was basically an online chat or forum for discussing and debating the rules of the community itself. 

It's the same with Wikipedia, the Wikipedians are constantly debating the rules of their own system. That is one of the key signs of a healthy online community. And whenever you see that being taken away from the members, – imagine, for example, if on Facebook, from the beginning, you had a place where Facebook users would debate the rules, policies for what to display on the Facebook newsfeed; you might have a very different kind of algorithm that what it is today. 
And so when you see these companies making these engineering decisions kind of behind the backs of the users, and then using data to optimize it all, you know what the drivers of that optimization will always be: the interests of the company, which aren't always aligned with the interests of the users long term.

 

On organic communities as essential building blocks of society

The Internet, at its best, helps people help other people. And whenever you see a group that doesn't have a voice, is somehow in a disadvantaged position that is, thanks to the Internet, able to somehow begin to empower themselves in a new way – let’s take crafters, the people who were making handmade goods back in the early days of Craftsy and Etsy; this was a group that, from a business perspective, for most Silicon Valley VCs looked completely uninteresting, because you basically had a bunch of chicks knitting, that may be selling their sweaters or socks to each other. But because of Etsy it turned into an enormous movement, right? It was the anti Walmart, anti big box retail. 

Or take Kickstarter: we just got back from Sundance Film Festival, which is a key center for cultivating independent storytelling, and independent film, a lot of those films actually use Kickstarter for funding. That stands in contrast with the studio model, that centralized Hollywood blockbuster, superhero movie model. [...] so occasionally you find an entrepreneur who's hit a nerve like this, where it's actually about something bigger than the company, bigger than just making money, you know. But those people who are concerned with that kind of social change, they actually need a for-profit platform that is able to sustain itself and help their movement grow. Without an Etsy, it's arguable that the maker movement wouldn't have grown as large worldwide as it had.

 

On being joiners, not founders, of social movements

There has been a great emphasis put on this idea of entrepreneurship as such, that everybody should be a founder, and I completely disagree with that. I think it's a very dangerous, misguiding and misleading notion because successful companies are usually not coming up with some idea from scratch. They're actually joiners. They're joiners, not founders. Caterina [Fake] says “Find a parade and get in front of it”. Etsy didn't come up with this idea that people should start knitting stuff and selling their crafts to each other, that already existed. This idea that everybody has to come up with something and create something from scratch, it’s overemphasized. I think that we should really value joiners, there are real world communities and real world potential movements already out there. [...] There's something already existing before you show up, which you start to help in some way, you begin helping people help each other, because that's what the Internet is best at. And then when you get that kind of positive flywheel going, that can begin expanding in this network effects way. And it's really cool to see that happen.

 

On what gets Jyri excited about the future of the social web

I think the most exciting thing is this distributed idea of entrepreneurship. Of the last 10 investments we've made out of our fund [Yes VC], 7 of the 10 are outside of Silicon Valley. They're in places like Boise Idaho, Vancouver, Portland, Maine, there's a Finnish company, this is no longer the privileged ownership of VC-backed startups of well educated and, frankly, mostly white guys. That is probably the most exciting thing in my opinion because it just means that you have these different kinds of companies being built by the very nature of the founders being different.

In opposition to this, a thing I find concerning is that the power is being concentrated in very few hands,  the big platforms, Apple, Microsoft, Google, Facebook and so on, there has to be corresponding development in governance, right? Government is going to have to catch up with this enormous power that has become very quickly centralized into very few hands thanks to these tech companies. 

And then maybe the third thing is that I think there's going to be a few things that maybe don't play out quite the way that pundits are making us think they will. I'm an AI skeptic for instance. I'm a VR, AR skeptic. I think there's a great deal of hype, and part of being a good investor is to not hop on the bandwagon and be able to be contrarian in a successful way. [...] There's probably going to be something that surprises everybody, including me. >

 To learn more about Jyri's projects and ideas, follow him on Twitter or check out Yes VC.