Transformative Investments on the Edge of the Big Market: USV's 20-Year Investment Philosophy

Since 2004, Union Square Ventures (USV) has been through 20 years. During this time, we have invested in 14 funds, involving over 230 projects, spanning various fields including social media, marketplaces, developer tools, education, health, fintech, web3 and decentralized systems, as well as energy and climate.

Looking back at the development of USV, our investment themes have always revolved around technologies and socially transformative moments that can give rise to new paradigms:

• In 2003-2004, we focused on the construction of the internet application layer.
• By the mid-21st century, we will focus on building new types of networks such as social networks and markets.
• In the early 2010s, we turned our attention to vertical networks, new infrastructure layers, and decentralized computing systems.
• In the late 2010s, we began to explore how to leverage internet applications to expand the acquisition of key resources and enhance trust in core systems.
• As we approached 2020, we began to look for entrepreneurial opportunities that could accelerate the energy transition and adapt to climate change.
• Nowadays, we are focusing on the rapid development of large language models (LLMs) and artificial intelligence, as well as the new types of digital trust demands that arise from this.

After 20 years of investment experiences across different periods and fields, we have summarized the core investment philosophy of USV:

Invest in innovative opportunities at the margins of the large market under the pressure of technological and social change.

This concept includes three key elements:

1. Marginality: The edges of a large market are often the best incubators for new ideas and methods. Marginal startups may initially seem odd, but they have the potential to challenge existing businesses in innovative ways. For example, early social media, cryptocurrencies, and consumer learning products were not initially seen as direct competitors to traditional industries.

2. Pressure: Technological and social pressures may break existing market structures, creating opportunities for new companies. Technological pressures may include new operating systems, crypto assets, and AI technology stacks; social pressures may involve the climate crisis, loss of trust in public institutions, or changes in social attitudes. The convergence of these pressures may transform static market structures into dynamic ones, creating space for innovation.

3. Large Market: We focus on innovations that can have a significant impact in large-scale markets.

Looking ahead to the next 20 years, USV will continue to adhere to this investment framework, exploring opportunities at the edges of large markets driven by transformative pressures. We look forward to continuously exploring and innovating at the market's edges with like-minded founders.