Brad Feld

Month: July 2004

I was involved in a deal this week that finally closed at 4:40am PST on a Thursday morning. The lawyers were chasing down signatures until 3am PST.

Amazingly, several of the signatories in the deal did not have fax machines at their house. Now – the deal should have been done in such a way that everyone had signed the docs and they were in escrow well before close of business the previous day; it was totally unnecessary to be chasing down signature pages in the middle of the night. However, it never occurred to me (and – apparently – it also didn’t occur to the lawyers who were the ones responsible for getting the signatures) that the people involved wouldn’t have fax machines at home.

Interestingly, everyone had Internet access and a printer. The problem wasn’t getting the documents to them (although no one really appreciates having to wake up in the middle of the night to “sign just one more document.”) However, once the document was signed, the idea of driving to the office at midnight to fax one page was ludicrous. Fortunately, everyone involved that didn’t have a fax machine was in the bay area, which was where the lawyers were, so the couriers had a busy, but lucrative night.

This deal had a real timing deadline as we had a number of announcements that assumed we would be closed before the markets opened in the morning. Since the acquirer was a public company, the timing was critical and not easily (or conveniently) changed. We got it done, but it was close.

I’ve been a long time user of integrated printer-fax-copier-scanner technology (I used to have three separate devices and no scanner – I dumped this as soon as the “all-in-one” models came out several years ago.) I currently have an HP Laserjet 3330 in each of my houses and my folks have a different, but similar model at their houses. When you can pick up an HP LaserJet 3015 for $299.99 I just don’t know why you wouldn’t at least have a low end “all-in-one” machine around for those unexpected late night emergencies.

So – while it’s not Christmas shopping season yet – consider putting this on your next “computer buying spree list” if you currently don’t have a fax machine. With all of our current technology, until electronic signatures work and are widely accepted, fax machines will continue to be useful.

If you recognize that, you probably have at least a basic interest in mathematics. If so, Count Down : Six Kids Vie for Glory at the World’s Toughest Math Competition is for you.

This is a fascinating book that combines the story of the American team for the 42nd International Mathematics Olympiad in 2001 with a set of well-written essays on human intelligence, creativity, talent, and competitiveness. Olson does a great job of combining the story of the Olympiad with basic math theory; math education in America; the emotional, intellectual, and social issues these kids face; and a few very clever math jokes.

In junior high and high school I was pretty good at math. The math club I belonged to was nerdily called Mu Alpha Theta; we competed in state wide math contests, and I remember proudly taking home the first place trophy for the Algebra section at a state wide competition at Rice University in Houston my junior year (that was the best I ever did.)

When I went to college at MIT, one of my friends suggested I take some serious math classes. In the first semester of my sophomore year, I took a course called 18.701 – Algebra 1. I figured – hey Algebra – how hard could it be. This was not the algebra of my high school – I knew I was in trouble when the professor would write a bunch of geometric equations on the board and then ask, “Now, pretend you were standing on the other side of the board, what would happen to …?” I was completely lost and had the typical humbling experience that most MIT students have at some point where they realize they aren’t going to make it in the class. After getting a 4 on my second test (yes – a FOUR out of 100 – that would be failing, even when graded on a curve – I must have gotten some credit for getting the course number correct), I dropped the class and decided that I wasn’t quite so good at math.

Fortunately, this book brought back mostly good math memories. Today, the most complex math I do is adding up a column of numbers or occassionally having to multiply two numbers together, so it was fun to puzzle through the problems (which I could at least understand, although I had no clue how to begin to solve them.)

I thought I’d give you a break from the DNC coverage in the blogosphere (and everywhere else).

I wrote the following article on “financial fitness for entrepreneurs” last year for the Kauffman Foundation’s Entreworld web site so it’s reasonably fresh; I got a lot of positive feedback and it ended up in USA Today. It’s aimed at any entrepreneur – not just those running venture funded companies. While it’s aimed at an early stage entrepreneur, I think it’s useful whether you have one employee (you, the founder) or thousands of employees in your business. It was “professionally edited”, so it lost some of my special voice (you’ll notice the lack of cuss words.) Enjoy.

While creating a growth business can be exhilarating, many entrepreneurs – especially those starting a company for the first time – don’t pay enough attention to some core issues surrounding the financial management of their businesses.

Often, founders don’t have formal training in finance – they’re “techies” launching the next Apple Computer or Netscape, professionals putting together advertising, management consulting, or human resources agencies, or super-salesmen types who’ve figured out how to sell a pizza or deliver a package faster, better and cheaper. Always, they’re intimately involved with their core product or service. Often, they are too busy to burrow into the details of some of the company’s functions, of which finance is the most critical.

These entrepreneurs are savvy enough to know they must work with financial professionals, such as their CFO and outside auditors or CPAs. However, no matter what their background or inclination about finance, founders need to have a working understanding of the basics. An elementary level of financial literacy means they’ll work more intelligently with their financial advisors and become the first line of defense for spotting potential problems in the young company.

What follows are some fundamental financial tenets that all early-stage entrepreneurs should be aware of, understand, and heed.

  • Cash is king: No matter what, don’t run out of money. Nothing else in this article matters if you run out of money. This means know your burn rate (the net cash that is flowing out of your business each month) and be aware that your low cash point for any given month may not be at the end of the month. In other words, don’t get caught planning based on full month figures only to find that you do not have enough money to pay your most important vendor on the 15th because your customers don’t pay you until the 30th.
  • Put in real financial systems from day one: Lots of entrepreneurs figure that they’ll “get around to putting in real financial systems someday soon.” Of course, that rarely happens, especially if no one on the founding team has a strong financial background. The cliché, “It’s better to build on a strong foundation,” applies. Put the foundation in place early so that as your business grows, you are on solid financial footing.
  • Measure everything: If you have real financial systems in place, you can measure everything. Be obsessive about it. Some things that you’ll measure will be similar to what most other businesses measure, such as your P&L, balance sheet, and cash flow statements. Other things will be unique to your business – oriented around your specific customers or products. As your business grows, make sure you evolve and expand what you measure to best reflect the current state of your business. Look especially for metrics that will help tell you where your business is going, not just where it has come from. Financial systems can and should capture more than just historical financial results.
  • Build an annual operating plan: Be disciplined about creating an annual operating plan and budget every year. You should have it finished before January 1. This is your easiest benchmark to measure against – your own expectations. If you don’t set them, you won’t know how you did.
  • Use your vendors to fund your business: Vendors love to get paid on time (or early). However, as a young business, your vendors will appreciate consistency of payment over timeliness. While most vendors will want to be paid within 30 days (or less), it’s typical to stretch payables 45 to 60 days. The key is to pay consistently – if you have a vendor from whom you continually use services or buy products, don’t store up your bills and pay in one lump sum sporadically. Instead, send regular payments. Also, don’t dodge calls from vendors about paying late. Tell them when you are going to pay them, and then make sure you follow through.
  • Use your customers to fund your business: Customers – especially ones that value your products and services – will often be willing to pay on very short terms. Don’t be bashful about asking them to prepay, especially if you are a service business.
  • Be careful of personal guarantees: Banks love personal guarantees. Entrepreneurs hate them. You should avoid them if you can – only sign one as a last resort. You are already investing a huge amount of your personal assets and energy in your business. If you can’t get financing based on the strength of your business, you should question whether it’s the right kind of financing. In the upside scenario, when your business succeeds, the personal guarantee doesn’t matter. It’s the downside case you should be worried about, because you could lose major personal assets like your house.
  • If it sounds too good to be true, it probably is: While this is generally true in life, it’s especially true concerning financial issues surrounding an early stage company. Your books should always balance, financings will always have a cost, and investors are always going to have strings attached to their money. Ask questions, be wary, and know what you are getting into.
  • Finance your business appropriately for what you are trying to create: One of the most common mistakes an early stage entrepreneur makes is trying to raise the wrong kind of money for the business. It makes no sense for a service business that could potentially be a $5 million company within three years to try to raise $10 million of venture capital. Correspondingly, it doesn’t make sense for a capital-intensive company that needs to build a plant to raise $250,000 of angel money.
  • Choose professionals carefully: It may be tempting to use your wife’s brother’s friend’s neighbor as your lawyer, because he will give you a great rate and you see him at the neighborhood barbecue, but you get what you pay for. The same is true for accountants and other services that your business will use. Find professionals who know what they are doing and have experience with young companies.
  • Don’t take anything for granted: Double-check everything. If you have the right systems (did I mention that you should have good systems?), this is easy. If you don’t, reread the second bullet point and put in the right systems.
  • Pay your taxes on time: Unlike customers and vendors, our local, state, and federal tax authorities don’t appreciate being used as financing sources for your business. In addition to potentially incurring onerous penalties, missing or delaying tax payments is often a serious crime.

That’s the list. Read it over, familiarize yourself with it, and begin developing a lay entrepreneur’s understanding of finance. You’ll then be able to work deftly with your pros to put the company of your dreams on the sound financial footing necessary for success.

Erg. Chewy. But – useful, interesting, and educational (kind of like eating shredded wheat for breakfast – it’s tough going down but you know it’s good for you.)

Ryan Martens at Rally Software recommended Agile Software Development with SCRUM as part of my continued education on Agile software development approaches and methodologies. If you’re interested in learning about SCRUM – which was first presented as a methodology to the OMG at OOPSLA95 – this is the book for you.

We have friends down from Anchorage this weekend that turned us on to the Degree Confluence Project. The goal of the project is to visit each of the latitude and longitude integer degree intersections in the world, and to take pictures at each location. The pictures and stories are posted on the web site.

To date, 152 countries have successful confluence visits. 3276 confluences have been successfully mapped to date. While mathematically there are 64,442 confluences, the project came up with 16,165 that discount the many confluences near the poles as well as a number in the oceans.

The successful confluence visits have pictures and stories. Some of them are amazing. See our friend Doug’s 9 visits as an example. Cool!

You know the phrase – it’s said with some disdain, frustration, disappointment, or dejection.

Well – it happens. My partner Heidi Roizen’s assistant (Mary Bush’s) father-in-law Chuck Bush just won the $44m California Saturday jackpot ($17m lump sump payment after taxes.) I’ve never met Chuck, but Mary is awesome and my understanding is that Chuck is too. So – good people do win these things.

The next time someone groans out this phrase, tell them to be optimistic – it could happen (of course, you have to “suit up, show up, and play the game” also, but that’s a different metaphor.)

I mentioned recently that we have a place in Homer, Alaska. A common refrain that we hear from our friends is “where is Homer?”

Well, believe it or not, the New York Times wrote an article on Homer in today’s NY Times (Friday, 7/23) titled 36 Hours In Homer, Alaska. It’s a cute story that hits some of the highlights of this place that we find amazing, fun, therapeutic, and wacky.

In case you were concerned that there’s no actual “culture” up here, we saw Shakespeare’s The Winter’s Tale tonight. It was performed at the Pier One Theater by the Fairbanks Shakespeare Theater. Like all Shakespeare, it took me about twenty minutes to get the rhythm (and a clue about what was going on) but once I did, it was hilarious and extremely well done. The theater was packed (which means about 50 people). The play was set in late 19th century Alaska (surprise). The cast was outstanding.

Now, if we only had a symphony up here…

Yesterday, IAC/InterActiveCorp announced that it acquired ServiceMagic.

ServiceMagic connects homeowners with prescreened and customer-rated residential contractors, real estate professionals and lenders. They are the market leader in this category of local services with over 50,000 active service professionals using their services, having facilitated more than 2.4 million customer request for home services, and generating an estimated $8.4 billion in consumer spending.

We invested in ServiceMagic in the fall of 1999. The co-founders – Michael Beaudoin and Rodney Rice – did an extraordinary job of creating a real company that survived the dotcom implosion, came out the other end with a strong business, did $20m of revenue in 2003, and was profitable and cash flow positive. IAC/InterActiveCorp has assembled a powerhouse e-commerce business through their acquisitions of companies such as Expedia,, Hotwire, Ticketmaster,, Citysearch, Evite, and LendingTree. ServiceMagic is another great addition to their Local & Media Services segment.

We’re all extremely excited about the transaction. Congrats Mike and Rodney!

Email Ain’t Dead

Jul 22, 2004
Category Technology

I’m an email junkie. As a user, I not-so-fondly remember Compuserve, Novell MHS, and Pine. As an investor, I’ve been involved in Email Publishing (first email service bureau), MessageMedia, Infobeat/Exactis, Critical Path, Postini, and Return Path. Recently there’s been a lot of noise about how email is on the decline. I don’t understand this as I use it more than ever and see its adoption continuing unabated.

Matt Blumberg has a great, thoughtful post on email that’s worth reading if you have anything to do with the email business. Matt’s the CEO of Return Path and he acknowledges that his post is self-serving, but it’s content rich and right on the money.