Three of my VC friends (Santo Politi, Mark Suster, and Kate Mitchell) were on Fox Business’ Capitalist Ad”Ventures” series. The underlying theme of this segment was the characteristics of entrepreneur that VCs look for.
Fox doesn’t seem to have embeds, so you’ll have to use this URL to watch “The Future of Venture Capitalism”.
While Santo, Mark, and Kate weren’t the maniacal crazy people (although I’m sure some will argue that), they were clear about the ones they are looking for. Nice job gang!
We spend a lot of time talking about “computers in the home” as part of our Digital Life theme. Over the past year, I’ve heard the phrase “Home Networking” with increasing frequency. It made the rounds a while back (anyone remember when it was called a HAN – home area network) but seemed to fade into the background for a while. I’m not sure what caused it to show up at our party again (although I’m suspicious that it is Windows 7), but it’s back.
My mother doesn’t know what “home networking” is, nor does she care. And she is an example of a typical user. Virtually any home that has a broadband Internet connection now has a HAN because of the router involved in the broadband connection. These routers are generally wireless at this point so people now have wireless networks in their house, whether they realize it or not.
When I time travel and find myself in 2015, I notice that every electronic device in my home is “network enabled” and connected to the Internet. For example, I just bought a new Withings Connected Body Scale which connects to my “home network” via Wifi (and subsequently to the Internet.) Yeah, I get all the old cliches about my refrigerator being connected to the Internet, but as the Jetson’s have proved over and over again, the future that was envisioned in the past often eventually arrives.
Calling this stuff “home networking” is kind of like calling the electrical closet in a house a “home power plant.” While I realize that make the technology disappear into the background is part of the mission, I’ve always felt that “getting the words right” as things go mainstream also matters. All of us nerds (and our marketing friends) playing around with “home networking” probably have another shot to get the language right. I’m going to spend more time talking to my mom, Amy, and other non-techies about what they call it other than “that fucking computer shit.”
There are two CU Silicon Flatirons Entrepreneurs Unplugged events next week – one on Monday November 2nd at CU Boulder in Atlas Room 100 and one on Wednesday November 4th at the Denver Art Museum.
The 11/2 Entrepreneurs Unplugged is with Steve Halstedt, the co-founder of Centennial Ventures. Steve co-founded Centennial in 1981 and was one of the fathers of the venture capital business in Colorado. When I moved to Boulder in 1995, Steve was one of the first VCs I met with here and he’s been a great friend and mentor ever since. I look forward to interviewing him about his experiences, especially how entrepreneurship has evolved in Colorado since the early 1980’s. Please register and join us!
The 11/4 Entrepreneurs Unplugged is with Nir Barkat, the Mayor of Jerusalem. This is a special Entrepreneurs Unplugged event Silicon Flatirons is co-hosting with Governor Ritter, the Colorado BioScience Association, CSIA, and the Mizel Family Foundation. I’ll be in Seattle at the TechStars 2009 Demo Day in Seattle so Brad Bernthal will be interviewing Mayor Barkat. In addition to being the Mayor of Jerusalem, Barkat is a successful entrepreneur and VC having started BRM Partners and subsequently Backweb Technologies. While I’ve never met Barkat, I remember Backweb well as SOFTBANK was an investor in the company when I was a SOFTBANK Affiliate – shortly before a group of us created Softbank Technology Ventures. This promises to be a special event held at the beautiful Denver Art Museum from 2pm to 4pm on Wednesday 11/4. Registration is now open.
Bloomberg TV is running a show called Bloomberg Innovators. One of our portfolio companies – Oblong – is the focus of the first episode that airs this Friday (10/30) on Bloomberg TV at 9pm and 11pm ET. As a special bonus, Jason and my Donkey Kong machine are in the trailer and both Jason and Ryan are in the episode that stars John Underkoffler, Kwin Kramer, and a bunch of the Oblong gang. Oh – and Jason’s hair looks funny.
In case you were wondering what the Boulder Snowstorm resulted in (so far – it’s still coming down) at my house in Eldorado Springs, here you go!
So there is no ambiguity, my dog Kenai loves it.
And – no surprise, so does Brooks!
Talking about scale and growth is hard. Many people talk in percentages in pre-determined time periods (e.g. let’s grow revenue 100% next year). I find this to be relatively useless. Instead, I like to challenge people to think on a bigger scale over a variable time period. My favorite line of late is “add another zero – you pick the metric and the time frame.”
I used to call this “increase X by an order of magnitude” until I realized that lots of business people don’t actually know that an increase in an order of magnitude is equal to multiplying by 10. While it’s silly, there’s no ambiguity when you talk about “adding a zero to the end of a number.”
For example, I’m an investor in a company that is growing its user base as they had planned. However, they are coming up far short on a variety of measures, including daily active users (DAU’s) and virality measures (they have several that are good, well defined, and easy to measure.) So, my simple statement to them is “Nice job on user growth. How do you add a zero to the number of DAU’s and the virality measures – you pick the time frame?”
In another case, I’m an investor in a company that had a great year on all accounts. They are the clear market leader in their segment, well funded and – while still losing money on a monthly basis – have a very clear path to being cash flow positive in 2010 on the cash they have in the bank. We are no longer worried about them becoming a relevant company – our attention is now shifting to how to grow to be a very big and important company. The question I asked them was “How do you add a zero to your annual revenue number – you pick the time frame?”
This question can apply to any metric. If you have one customer, how do you get to 10 customers? If you have 10 customers, how you get to 100? If your users are on your site for 1 minute a day, how do you get to 10 minutes a day? If you are generating $100,000 per customer, how do you get to $1,000,000 per customer? If your largest customer has 1,500 seats of your software (or service) deployed, how do you get to 15,000? Add another zero – you pick the time frame.
While there are natural limits to this when you approach it top down, it becomes very powerful when you approach it bottom up. I call this cascading leverage. For example, if you focus on individual user behavior and try to add zeros to key user-based metrics, you’ll increase the metrics all the way up the chain. If you happen to find two metrics that impact each other (e.g. you get value out of the growth of X multipled by the growth of Y), you can actually get 100x impact on higher order metrics if you can add a zero to both of them. Understanding the linkage from the bottom up also helps create better clarity on what to measure and where to invest to grow the business dramatically.
The variable time period is a key aspect of this. I tend to match the time period up to the natural rhythms so I can remember them – daily, weekly, monthly, quarterly, annually, two years, five years, ten years. But this isn’t necessary – any time period is fine. The key is to let the time period vary by metric to which you are adding a zero as this changes the texture of the conversation (e.g. you tend to have a very different conversation when you talk about adding a zero to a metric over the course of a month vs. over a course of a decade.)
So – as you go into your annual planning cycle for 2010, try the “add another zero” approach on some of your numbers. Or, get granular, and try it today on some of your underlying metrics. Just don’t default into “let’s grow revenue 100% in 2010”.
The Defrag Conference in Denver is just around the corner – November 11 and 12 to be exact. Eric Norlin has put together a remarkable agenda for this one including an incredible closing panel titled Cluetrain at 10 starring JP Rangaswami, Chris Locke, Doc Searls, and Rick Levine. This will celebrate the 10th anniversary of the The Cluetrain Manifesto and as far as I understand is the first time in a decade that Chris, Doc, and Rick have shared the stage. If we are lucky, Rick might even bring us some Seth Ellis Chocolates.
I’ll be there the entire time as will my Foundry Group partners. Last year at Defrag was the first time I spent any time with TA McCann and that worked out pretty well for Gist (at least so far) – who knows, maybe this year will be someone else’s turn.
In the spring just before the Glue Conference, I offered up a group dinner event at a Boulder NewTech Meetup for anyone in Colorado that attended. A bunch of people ended up coming and I never followed through on the event. I’ve finally started to get my act together – we’re going to do an event in The Bunker (with lots of food and booze) in the January time frame. As a special bonus, I’m going to open it up to anyone from Colorado that also comes to Defrag (no – you don’t get two events if you went to Glue also, but I’ll give you a hug.)
But wait, there’s more. Use the discount code “fndry1” to get 20% off of your registration.
One of the challenges of living your life out in the open is signaling where you are going to be. I’ve struggled with this on and off, tried a bunch of different web services, and have never been happy with any of them. I’m going to keep trying, but in the mean time I’ve decided to put a calendar up on my blog using Google Calendar.
It shows two things:
As with anything “calendar” be wary of time zones. All the time zones listed here are in mountain time.
Feedback and suggestions about other approaches welcome.
VCs say a lot of stupid things. I’m guilty of it plenty and whenever someone calls me on it I try to acknowledge and change. One that I try really hard not to do is say “my company” when referring to companies I’ve invested in – I think it’s one of the most annoying things a VC can say.
I was talking to a VC the other day about a few companies he had invested in. By the third time he referred to one of the companies as “my company” (as in “My company is working on X”, “My company would like to talk to Company Z about thing Y”) I felt myself starting to react. I didn’t really have a relationship with this VC, but I knew that he had never run a company (investment banking post college, MBA, then VC). I realized I wanted to stop him at some point and say “dude – it’s not your company – you are merely an 18% shareholder in the business.” I bit my tongue and had the conversation, but I’ve been thinking about this in the back of my mind ever since.
One of the great lines from TechStars is “It’s your company.” That’s the way David Cohen and I remind the TechStars’ founders that ultimately all the decisions are theirs – the mentors (and us) are providing data, feedback, thoughts, and insight – but not telling them what to do. Sure – a lot of our (and the mentors) language is directive (e.g. I just sent an email to a TechStars CEO that said “you should do thing W right now”) but ultimately the decision as to what to do is the CEO’s.
While I’ve got plenty of rights as an investor, I’m very aware that I’m “an investor.” If you are a CEO or an entrepreneur, I can’t imagine anything more annoying than hearing one of your investors refer to the business as “his company.” Now, if the investor owns more than 50% of the company, I guess this is a legitimate legal perspective, but it’s still an incredibly demotivating position to take.
So – to all my friends out there in VC-land – let’s try to change the language. Some of the VCs I respect the most – like Fred Wilson – diligently refer to investments they make as “portfolio companies” (as in “our portfolio company X"). I often refer to them as “our investment” or “our portfolio company”. Regardless of the approach you take, think about the language you use, especially the impact on the people who are working their asses off every day to make “their company” successful.
Sorry if this feels pedantic to you. It’s now out of my head and on this blog so I can move on. As someone I love likes to say “my work here is done.”