Month: February 2006
I suggested to Amy that we go to a movie tomorrow (Monday) night. Silly me – something got messed up in my brain and I forgot that on Monday nights we are glued to our couch watching 24. From the previews of this week, I know we get to see an RPG fired at First Lady Logan’s limo. But – the bigger question is – will we get to see Kim? Or will Sydney Bristow make a guest appearance?
As the next election cycle in Colorado gears up, I’ve been jumping up and down reminding everyone who cares about politics that the solution to the “growth of the technology industry in Colorado” is to improve our education system. Our current governor has done everything he can to ignore education and at least one of our potential gubernatorial candidates can’t spell the word education. Colorado has an excellent entrepreneurial and technical base – we just need much more supply at both the K-12 and college levels. This isn’t a quick fix – at 20+ year view is required.
I think CU Boulder is the best college in Colorado and the one most likely to have a huge impact on the region in the next 20 years. It’s always great to see additions to the faculty that have a clue about entrepreneurship and technology. Phil Weiser – an Associate Profession in the School of Law with a joint appointment in the Interdisciplinary Telecommunications Program has been doing a great job as head of the Silicon Flatirons Telecommunications Program. He sent me a note over the weekend that Vic Fleisher, a law professor at UCLA and a blogger at Conglomerate with a deep interest in entrepreneurship, has just joined the faculty at CU Boulder.
I don’t know Vic, but given Phil’s note, I hope to meet him soon and welcome him to Boulder.
Today I decided to read two running books instead of going for a run. I’ve been struggling with a cold (maybe a low grade flu) and a gout attack for the last week and lost seven days of running. It’s been a little bit of a drag since I’m in the middle of the training cycle for the 110th Boston Marathon on April 17th, but I’m not too concerned because my base is very deep right now. So – I figured reading about some big running feats would be good motivation for my 90 minute run tomorrow.
Long Road to Boston is a magnificent novel about a long comeback that a runner has from a near death car accident to being in competition for winning the Boston Marathon (against Bill Rodgers.) I’ve found only a few great running novels – this one joins The Purple Runner and Once a Runner on my very short list. Thanks to Matt Fleckenstein of mSpoke for sending this to me. It was especially enjoyable considering my upcoming marathon.
I then tackled Ten Million Steps: The Incredible Journey of Paul Reese, Who Ran Across America – A Marathon a Day for 124 Days – At Age 73. The title says it all. Reese also had been diagnosed with prostate cancer at age 70 – so this was even more remarkable. He ultimately ran across all 50 states, completing the last one (Hawaii) when he was 80. Paul Reese died in 2004 (at age 87) – he made a huge contribution to the running community. I’ve read a few other “run across the US” books – they are all enjoyable in a twisted sort of way.
After reading Reese’s story, I decided that 90 minutes was – well – pretty light weight.
I received the following question earlier this week. It’s conveniently timed, as I recently participated in two angel investments – each with one of the structures defined below.
What’s the best/preferred structure of investment money pre-VC investment. We’re in the beginnings of raising angel capital (~500k) and were wondering what, if any, considerations we should make regarding the investments to allow for VC later. Should we take convertible loans or issue straight preferred stock? What are the other options that are out there for investment structure? Is it too much of a hassle to handle future investments when there is an “angel group (say 5 doctors banded together)” versus a singular angel?
Assuming that you are planning on raising VC money some time in the future, there are two different typical structures for the first angel financing: (1) convertible debt and (2) preferred equity.
Convertible Debt: This is the easier approach of the two. In this case, the investment is in the form of a promissory note that converts into equity on the terms of a “qualified financing” (where qualified financing typically is defined by having a minimum amount – say $1m of total investment.) The note will either convert at a discount to the price of the qualified financing (usually in the 20% – 40% range), will have warrant coverage (usually in the 20% to 40% range), or both. This discount and/or warrant coverage gives the angel investors some additional ownership in exchange for taking the early risk. This note should be a real promissory note with the conversion and redemption characteristics clearly defined to protect both the investors and the entrepreneurs from any misunderstandings.
Preferred Equity: This is also known as a “light Series A” – it’s preferred stock that is similar to that a VC will get, but usually with lighter terms due to the relatively low valuation associated with it. For a very young company, a $500k investment can receive between 25% and 50% of the equity in the company and, as a result, many of the terms associated with a typical VC investment are overkill.
While either of these work, you’ll find some angels that strongly prefer one over the other. In addition, if you don’t believe you are going to raise additional VC money and will only be relying on additional small angel-type investments, the preferred equity approach is fairer to the investors as they’ll more clearly be participating in the upside on terms that are agreed to early in the life of the company.
Finally, I don’t think there is a difference between having “an angel group” vs. a single angel investor. However, you should try to insure that all of your investors are accredited and – if some aren’t – make sure you understand the implications of this.
I’ve been very busy the past few weeks so I haven’t had much reading time. I’ve been slowly working my way through Company by Max Barry. Tonight, after my friends left our condo at Beaver Creek after our Friday night sushi orgy, I laid down on the coach, near the fire, across from Amy, and finally polished it off.
Company was brilliant. Imagine a novel about a Dilbert-esque company run amok, with extraordinary character development and a steady build-up to a 24–like plot twist. I found myself laughing out loud regularly, which is always a good sign (although it means you probably shouldn’t read this book on an airplane.) The author – Max Barry – claims to have “spent the best years of his life in the bowels of Hewlett-Packard, conducting secret research for this book.” He did a good job.
I won’t be a plot spoiler here – you’ll have to read this book yourself. However, Barry’s characters range the gamut from pitiful, to lovable, to hateful with occasional inter-office sex tossed in for good measure. As with most large companies, donuts, human resources, problems with the network, and the suggestion box play central roles.
I spent the requisite five minutes on Google Pages tonight now that I could actually log in. I created a very simple page, just to see what it felt like. I’ll poke around some more when I’m bored, but for now I still don’t get it. I do, however, really like the Google single sign-on which seems to have automagically appeared. My Google services are getting a little more tightly integrated which is a good thing. Hopefully the spam bots won’t figure out the algorithm for determining gmail addresses from the Google Page address (duh – very easy – nah – wishful thinking.)
I also spent the requisite five minutes setting up MyBook on Judy’s Book. This is my local blog for reviews. While I can use Judy’s Book WOPM (write once publish many) technology to post these to my Feld Thoughts blog, I’m going to play around with separate sites and only selectively post extensive reviews to both places (the short ones – things like restaurants – will stay on Brad Feld’s MyBook only.) Of course, when I do this, I’ll use Judy’s Book to write the review and then use the WOPM technology to automagically post to Feld Thoughts.
Ah – a second great quote from Hickenlooper this morning for those of you in the audience from Colorado. John just said “Denver Is Nothing Without Boulder.” When I first moved here in the mid-1990’s, Boulder was definitely viewed “snidely” by many people in Denver, especially in the business community. It’s great to hear the Mayor of Denver thinking about the region, rather than just the city that he’s mayor of. Denver (and Boulder) are lucky to have John as Mayor.
I’m at the Venture Capital in the Rockies Conference today. Denver’s awesome Mayor – John Hickenlooper – is the breakfast speaker. It’s 8:25 and I’ve already heard the quote of the day. John – who is an entrepreneur – is talking about his entree into politics. When he mentioned to his brother that he was thinking about running for mayor, his brother responded, “C’mon John, politics is hollywood for ugly people.” Perfect.
Matt Blumberg – the CEO of Return Path – wrote a post on a meeting he hosted yesterday with some of the old-timers at Return Path – including one of the founders who is no longer at Return Path – to explore reinventing Return Path’s original business (ECOA – email change of address.)
Return Path – which was founded in 1999 (I invested in Veripost – the “other” early ECOA provider – in 2000 which was merged with Return Path in 2001) was originally based on being “the” ECOA provider. At the time, we convinced ourselves that this could be a very big business. We were wrong. ECOA is a small business that can be run profitably, but it’s not enough to build a VC-backed company. Fortunately, Matt and team determined this early on (in 2002) and started aggressively expanding Return Path’s footprint in the email services market – both through organic growth and acquisition. Today Return Path is a medium sized company (e.g. big enough to matter and be considered a real company), growing quickly, and a leader in several market segments (oh – including ECOA).
Matt and his team have demonstrated superb startup skills by recognizing the limitation of their business plan early, adjusting it to incorporate a steeper growth vector, taking action, and succeeding. Not everything they’ve tried has worked, but they’ve steadily built on each new thing they’ve done. As a result, they’ve now shifted into a mode where they are growing a substantial operating business and – as part of that – continually reevaluating (and reinventing) their existing products based on both the changing dynamics of the market and the things that have succeeded or failed in the past.
Good lessons for any entrepreneur or management team.
I don’t understand, but that’s nothing new. I saw the rapidly expanding buzz about Google Page Creator and went to check it out. We were investors in Geocities and this immediately reminded me of – Geocities. I logged in, went to change my template, and got the following message:
Thank some-diety that it’s “not because of anything I did.” What a trip down memory lane. I guess it’s beta, but I still don’t understand.