I’ve started to round up sponsors for my North Pole Marathon run.  The first one is Pixie Mate, a local Boulder company that makes an awesome specialty drink based on Mate – a South American tea that’s loaded with antioxidants as well as more fun loving caffeine than tea (but less than coffee). 

I met with the founders – T.J. McIntyre (a swimmer) and Duane Primozich (a runner) in their office above Rudi’s near Hwy 36 and Table Mesa.  They’ve got a rocking business going – powered by a bunch of Mate drinks.  I’m been enjoying various flavors of Mate’s for the past few days and am hooked.

We’ve got some fun stuff planned together, including providing a bunch of Mate for the race participants (I wonder if I’ll be the first person to ever drink a Mate Latte at the North Pole?)

John Battelle has an excellent post up on the Failure to Fail.  I won’t repeat it here – he states the point really well – and is a must read for any entrepreneur.  John speculates that instead of a “bubble”, we might have a “company destruction crisis.”  If you read Crichton’s Fear, Complexity, & Environmental Management in the 21st Century (that I referred to in my Lack of Critical Thinking post), you’ll recognize this theme as analogous to the dynamic of “the preservation of Yellowstone.”  Failure is a crucial part of the entrepreneurial ecosystem and new and exciting bad things happen when there’s not the right balance of it.

My friends at Cooley Godward announced yesterday that they are merging with NY-based Kronish Lieb Weiner & Hellman.  The new firm will be called Cooley Godward Kronish.  I’m been a long time fan of Cooley Godward, have worked closely with them in both Colorado and the Bay Area, and have had a long standing relationship (both personal and professional) with Mike Platt – one of the senior partners in the Boulder office.  One of Mike’s partners (and another friend and colleague of mine) – Jim Linfield – indicated that the merger isn’t likely to have any impact on the Cooley Colorado office.  Given how Cooley has operated in the past, I see this merger as a positive move for them.  Congrats guys.

IBM announced today that it is acquiring Internet Security Systems for $1.3 billion.  This is IBM’s third large deal in as many weeks.  I wrote about IBM’s acquisitions of FileNet and MRO on August 10th for a total of $2.4 billion – I wouldn’t have guessed they would have made another $1+ billion acquisition so quickly.  With the acquisition of ISS, IBM has entered the security market in a big way.  I wonder if they have an affinity for companies with three initials (ISS, MRO) – I guess I should abbreviate a bunch of my companies names to see if I can attract some attention.

In addition to trying to reform the health care system, my dad is on a quest to become a Chocolate Ice Cream Making Superstar.  Chocolate ice cream has always been a mainstay of our family’s diet – I can think of few things more satisfying than chocolate ice cream covered with chocolate syrup (very few.)  My dad now has an ice cream maker and is looking for recipes – if you love chocolate ice cream, give him some suggestions (it will improve the quality of my life in the long run.)

The debate between Colorado’s gubernatorial candidates (Bill Ritter and Bob Beauprez) on technology that I’m moderating with Jack Tankersley is coming up on September 8th.  Phil Weiser – a professor at CU – who is also one of the instigators behind the debate and an outspoken thinker on Colorado’s technology policy – is interviewed by Larry Nelson about how the state government should think about technology policy in Colorado.

(cue “Imperial March” from the Star Wars Trilogy)

Jason and I keep finding ourselves in discussions about how tired we are dealing with accountants, especially the Big Four.  Whether it’s regarding our own fund, or that of our portfolio companies, we spend an inordinate amount of time going “huh?” when the subject matter is accounting, accountants, and auditors.  Today, Jason and I were chatting via email when I sent him the link to a Business Week article that I was quoted in – he particularly liked it when I called the Big Four “arrogant, lazy, ineffective, and non responsive to entrepreneurial companies.”  Then again, maybe he was just kidding, as he will have to smile a lot and be nice to them when they audit us for 2006.

Now, some of my best friends are accountants, but it’s been really frustrating lately.  We’ve got a nice list of “accounting is the only profession …”

Accounting is the only profession where you can completely screw everything up (see Enron, WorldCom, Kmart, etc..) and your “punishment” (so long as you aren’t Arthur Andersen) is that the “powers that be” enact all sorts of legislation (SOX, Option Expensing, 409A, FASB 123, etc.), that create a full employment act for your profession, radically increase your fee structures, and make everyone in your profession better off than when everyone thought you were doing a good job and maintaining the public trust.

Accounting is the only profession where every “answer” comes from some dark / covert room in the New York “Death Star” office of the national firm and no one you actually talk to will admit to making a decision.  Instead, someone in their national office says “we have to do it this way, so regardless of how crazy it sounds, we have to do it this way because they told me so.”  It’s like your parents saying “because I said so” except here you get to pay them six or seven figures a year to treat you like a four year old.  

Accounting is the only profession that actively tries to get rid of most of its clients, but at the same time tries to bleed every last cent out of them on their way to being fired.  We’ve had a hell of a time getting any of the Big Four to want to work with our portfolio companies and those that do are paying a very high price.  It isn’t like the 1990’s where they were all fighting over our companies hoping they’d go public.  Right now they have so much work to do in the public sector that they can’t make enough money on the private companies.  That being said, on their way out the door, they’ll try to recoup any discounts they gave you while you were a client while giving you a big smile in the hope that you’ll come back to them one day if you are successful enough to go public.

Accounting is the only profession that refuses to opine on the “other side of the house” (audit guys won’t go near tax and tax won’t go near audit) unless it makes one of their lives easier and then they’ll do whatever they want.  Case in point:  409A .  If you’ve read our posts, you’ll note that many venture backed companies are getting formal, third-party valuations in order to comply with 409A.  This a tax regulation, so don’t ask your auditors, they’ll turn you over to the tax guys.  There is this other accounting issuance called FASB 123, which in short is the “fair value” proclamation that affects venture firms by forcing them to “fairly value” each of their portfolio companies for their financial statements.  This is an audit issue, so don’t ask your tax guys.  Now this sounds all fine and good: “Why shouldn’t a venture firm keep fairly valued books for its limited partners?”  The problem is most venture funds negotiated a way to value their portfolio for their investors at the time the fund was formed.  There are very strict policies regarding how portfolio companies are valued and when they can be marked up or down.  Let’s call this the “LP accepted method.”  Now, we have FASB 123 that says we must “fairly value” the companies which may or may not reflect the same answer as one would get if you use the LP accepted method.  Let’s not bash the accountants for FASB 123, they didn’t enact it, but how do they decide to fairly value the companies?  Simple, they jump over to the tax side of the house, grab the 409A valuation and say “here is the value.”  Hey, you aren’t supposed to look over there!   (Note:  this is a completely stupid result.  The 409A valuations are done for a completely different purpose.  Also, you’ll find many reasonable auditors willing to say offline this is stupid, but someone in a windowless room in New York is suggesting that they have to do it this way.)

Accounting is the only profession that doesn’t care if their processes negatively impact your business, what your opinion of them is, or whether or not you are a happy customer.  They know there aren’t many of them, you have to get an audit, and you’ll shut up and like it.  If you have to turn your operations upside down to comply with their desires, that’s your problem, because you are a captive audience.  The only other profession that might be close would be the customer service representatives of most major airlines (excluding – of course – Southwest.)

Accounting in the only profession whereby a new regulation comes down, a client alert is sent out and not a single client can understand anything that is on the printed page.  And – we’d like to give special honorable mention to law firm tax departments for being equally skillful with their alerts.  I’m sure glad that I have Jason to figure all of this out for me, although he claims that his brain is completely full and is accepting no more accounting knowledge for the foreseeable future.

And that’s okay, because we have good accountants to tell us what to do (at least until they read this blog post.)

This is a special Sunday hint for all my male friends out in blogland.  It’s in the spirit of my work life balance post.

These are our golden retrievers (Denali and Kenai).  They are looking at Amy, who happens to be standing next to me as I’m taking this photo.  Notice their eyes – they are giving Amy their 100% undivided attention.  We call these “Golden Retriever Eyes.”

I have a special talent.  When Amy is talking to me, I can be doing something else (e.g. typing on my computer, reading a book) and – when she says “Brad – you aren’t listening to me,” I can repeat back the last two sentences that she said to me word for word.

For a number of years in our relationship, this was effective (at least for me.)  At some point, Amy realized this wasn’t satisfying to her – she’d figured out my special talent – and realized that her assertion (that I wasn’t listening to her) was close (I was listening, but I wasn’t paying attention.)  After several “conversations” (definitely a euphemism in this case) about it, Amy realized she didn’t want me to just listen, but she actually wanted me to pay attention.

So – give your special friend “Golden Retriever Eyes” when she is talking to you.  That’s what she really wants.

Bob Eisenbach -co-chair of the Cooley Godward Creditor’s Right & Bankruptcy practice group – has a new blog up called In The (Red) – The Business Bankruptcy Blog.  It’s excellent.  While there are plenty of legal bloggers out there, Bob is extremely experienced and a thought leader around bankruptcy law.  While entrepreneurs hate to think about bankruptcy, it’s unfortunately a part of business life and a tool to be used appropriately in failure situations.  I’ve found Bob’s posts to be current, deep, very interesting, and broadly relevant.  I highly recommend adding it to your feed reader in you are an entrepreneur or a VC – I just wish Bob would publish the full posts instead of just excepts.