Month: July 2011
I did eventually solve my Paris smart phone problem. Here’s what I did.
- I paid AT&T some absurd amount of money for unlimited international everything for my iPhone.
- The nice senior people at Orange sent me a SIM card that is good until the end of the month for free unlimited everything for my Android.
- Maxroam sent me a super cool device that gives me 3G and international calling for $15 / day.
But none of it matters. Because after two weeks without a smart phone, I simply don’t give a shit anymore. In general, I hate the phone and try to stay off of it. I spend my time in email, IM, and Skype when I’m in front of my computer, which is a lot. However, when I’m wandering around between things, I’ve actually started to realize the joy of looking around and noticing all of the other humans staring at the little pieces of glass they are holding in their hands. During dinner at a restaurant, I’m enjoying the idea that I’m unreachable while I shower 100% of my attention on my beloved and anyone else I’m dining with. And, when I go to the bathroom in a restaurant, I’m actually enjoying the notion that I’m not going to return to the table distracted by the emails I’ve scanned while doing my business.
Basically, except for Google Maps, I haven’t missed the phone one bit the past two weeks. And, given that I haven’t had Google Maps, I’ve gotten to wander aimlessly around a few times, using the old fashioned approach of asking for directions. Each time, I’ve ended up where I needed to be pretty close to when I was supposed to be there. Refreshing, retro, interesting – call it whatever you want – but even for this directionally impaired American it worked out ok.
I now have 3G access again everywhere I go. But I don’t really care. I’m hardly using it (at least I haven’t the past few days). I’m going to start turning off my phone at meals completely and see how that goes for a while. Or maybe I’ll just leave it in the apartment since I’m with the only person (Amy) I want to be talking to anyway.
I learned a lot from this experience. But most importantly, I once again learned the value of thinking about the problem differently and challenging a key assumption. Do I really need my phone with me and email available all of the time? Clearly not.
I’m going for a run now in the rain in Paris. Without my phone. See y’all in a while.
My partner Jason Mendelson and I are psyched to announce that our book – Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist – has been published and is now available. We are also relaunching AskTheVC – the companion website to the book that we maintained for several years, went dormant for a while, but is alive with content once again.
The book originated in 2005 when Jason and I wrote a long series of posts on this blog about a typical Venture Capital term sheet. It took us a year or so to get all the way through it, but it was fun and generated an enormous amount of positive feedback from entrepreneurs (and would be entrepreneurs) who told us how helpful it was for them to understand how a VC term sheet actually worked.
People regularly suggested that we turn the blog series into an actual book. Until about a year ago we’d simply encourage people to PDF up the posts and do whatever they wanted with them. We got great feedback from students and entrepreneurs all over the world who said they were on the receiving end of the posts, that the posts had been used as the curriculum for a class, or that they had simply referred to them during a negotiation and they were “more helpful than their lawyer.”
After I wrote Do More Faster: TechStars Lessons to Accelerate Your Startup with David Cohen (the CEO of TechStars), Jason and I decided to write Venture Deals. We knew the term sheet series would only be a small part of the book and would have to be re-written, so we just got to work. Once again, it feels amazingly good to “ship the book” – it’s remarkably hard work to get from “an idea for a book” to an actual book.
For those who think this is just a reprint of the blog posts, they make up less than 20% of the book and have been completely rewritten. The table of contents gives you a feel for this.
- The Players
- How to Raise Money
- Overview of the Term Sheet
- Economic Terms of the Term Sheet
- Control Terms of the Term Sheet
- Other Terms of the Term Sheet
- The Capitalization Table
- How Venture Capital Funds Work
- Negotiation Tactics
- Raising Money the Right Way
- Issues at Different Financing States
- Letters of Intent – The Other Term Sheet
- Legal Things Every Entrepreneur Should Know
While it’s a chewy topic, we’ve tried to keep it light, fun, and enjoyable. But we’ve also tried to make it a must read for any entrepreneur, or would be entrepreneur, or student interested in entrepreneurship, or junior lawyer that is working on deals, and our parents. We’ve created a dynamic companion site at AskTheVC, are working on a teaching guide, and have a few entertaining surprises up our sleeve that will be launched in early September.
Since I’m a shameless book salesman, you’ll be hearing plenty more from me on this blog. But for now, go take a look at Fred Wilson’s wonderful review titled Be Smarter Than Your Lawyer and Venture Capitalist.
At Brad Feld’s Amazing Deals, we only bring you shiny happy deals. If you are a Mac user and like to live in a mail client instead of a browser, Sparrow Mail is for you. I paid $10 when it came out but through the magic of daily deals am making it available for $5 for the next 24 hours (up to 1000 copies).
Jason Calacanis even loves it – on G+ he says:
“I’m absolutely in love with Sparrow Mail. It’s made me 10-35% faster in GMAIL/Google Apps.”
For the next 24 hours, you can get Sparrow Mail for $5 instead of $10. Just wander over to Brad Feld’s Amazing Deals and grab it. And be able to say “I got something for $5 that Brad paid $10 for that he then made available for $5 bwahahahahaha.”
I love LEGOs. So, when I saw the page yesterday of the new LEGO Minifigures (sent to me by Lucy Sanders, the CEO of National Center for Women & Information Technology) I threw up a little in my mouth.
Like me, Lucy is a LEGO enthusiast, but she was not happy to see how women (or minorities) were represented in the LEGO Minifigures sets. Sure, there is a female snowboarder, a female tennis player, and a lifeguard, but the rest of the female Minifigures are a hula dancer, pop star, cheerleader, witch, and nurse. And that’s it. While I have nothing against nurses, entertainers, or athletes, these mini-figures are perpetuating ridiculous stereotypes about both women and men.
At NCWIT (where I am the Chair of the board) we’re grappling with the problem of how to attract, retain, and promote girls and women in technical education paths and careers. Many K-12 teachers who want to introduce their students (girls and boys) to computing and engineering use LEGO products like Mindstorms and Technics and LEGO energetically markets their products for this purpose. That’s a good thing.
However the ridiculous Minifigures perpetuate standardized, simplified, and damaging conceptions of acceptable pursuits for women. Such perceptions have contributed to keeping women away from many types of jobs, including computing. These are not harmless toys – they are sending messages to girls and boys about where they belong on a daily basis. If you doubt the serious impact of this exposure, I encourage you to learn more about stereotype threat, especially the work of Claude Steele and Joshua Aronson.
At NCWIT we’re working hard to make computing, technology, and business more inclusive. C’mon, LEGO. Your products are a great avenue for educating our young people, but your Minifigures are stuck in the past. Get rid of them.
I think about competition all the time. Every company we invest in aspires to lead whatever market segment it is in. In many cases, they want to create entirely new markets. Regardless, they always have competition, whether from other startups, existing companies, large incumbents, or companies they don’t even know about yet.
Whenever the startup world heats up, there are many more new entrants. We’re once again in the part of the cycle where there are an abundance of new companies being started. While there are plenty of unique ones, there are a much larger number of “me toos” and “fast followers”. While VCs love to put this on entrepreneurs (for not being innovative / creative enough) and entrepreneurs love to put this on VCs (for just funding me too like things), this isn’t really anyone’s fault as it’s the natural cycle of things and has been going on forever (see Clay Christensen’s excellent “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail” for the classic examples of this.)
I’ve worked with many entrepreneurs who have spent an enormous amount of time thrashing with the issues of competition. Sometimes I’ve been on the winning team and sometimes I’ve been on the losing team. This experience has helped me develop a pretty clear view on how to think about competition that I regularly use. Following are a set of topics – which I’ll write more about in the coming weeks – that nicely summarize my philosophy.
- Be the First Mover
- Resegment If You Aren’t In The Top Three
- Create the Best Product
- Provide the Best Customer Experience
- Have a Long Term Strategy
- Understand the Ecosystem You Are Competing In
- Obsessively Focus On While Ignoring Your Competition
- Keep Your Friends Close and Your Enemies Closer
There is an age old VC cliche that the market leader gets most of the rewards, #2 gets enough to be interesting, #3 might make a little money, and all of the rest are irrelevant. This cliche strongly informs my perspective and you’ll see it woven through what I’ll write about.
I’m especially focused on the evolution over time of competitive responses. Nothing stays static and the software / Internet industry is one of the most vigorously competitive in the history of man. There are an increasing number of externalities – such as government regulation and patent strategies (both NPEs/trolls and big company patent thickets) that occasionally get focused on but in my experience are not what actually matters. More specifically, I think that if the government completely left the software / Internet industry alone and software patents were abolished, the software / Internet industry would have even more vibrant competition.
I’ll try to stay out of politics in the upcoming posts since I don’t think entrepreneurs can do much, especially at the early stages of their companies, about these externalities. Instead, I’ll focus on the things that I think really matter and can make or break a company in the first five years of its life.
Of course, like all blog series, I’d love any comments and feedback, especially if you disagree with me, as that’s the best way for me to continue to evolve my thinking.
I’m stunned by the lack of financial literacy of so many people in so many contexts. The commentary by politicians, economists, and the media on the European debt crisis and the US debt ceiling dynamics is appalling. The general media and blogosphere commentary on the financials of high growth companies, especially those who have either recently gone public or filed their S-1’s, range from perplexing to just plain incorrect. And more and more entrepreneurs who I’m exposed to who are presenting their companies for financing have a complete lack of understanding of their financials – both current and projected. Of course, some of my fellow board members don’t understand how to read financial statements either, which doesn’t help matters much.
In my experience there are four specific things that people struggle with.
- An inability to read the Balance Sheet, P&L, and Cash Flow statements.
- A lack of understanding of how the Balance Sheet, P&L, and Cash Flow statements fit together.
- A lack of understanding how non-accounting metrics (e.g. bookings) impact the financial statements.
- A lack of understanding of GAAP (Generally Accepted Accounting Principles) and how to use the financial statements to help normalize out all the weird things GAAP makes you do.
I used to think it was all a GAAP problem. GAAP is complicated, continuously evolving and changing, and often creates more ambiguity that it resolves. But unless you actually understand how to read a financial statement, GAAP doesn’t even come into play. And by financial statement, I don’t just mean the income statement (or P&L) – I mean the income statement, balance sheet, and cash flow statement, along with understanding how they interact with each other.
If you understand how to read the financial statements, then you can start to solve for the GAAP challenges. You’ll be able to understand things like the implications of deferred revenue on cash flow, stock option expense on net income, and the actual equity dynamics of the balance sheet.
While there are so many things about this that I fantasize about (e.g. “the media would actually learn this stuff” and “accountants would make GAAP simpler and clearer vs. more complex”) the only thing that really matters in my world is that entrepreneurs understand how to think about this stuff. So, in the spirit of Fred’s MBA Mondays series, I’m going to write a series of posts that describe how my brain processes the financial statements of a typical high growth company with a goal of adding on to the great base that Fred has created.
I’m open for suggestions as to whether I should take on one that is newly public (e.g. the S-1 and historical financials are available), or a private company (I’m open to volunteers, although it’ll mean you are publishing your financials – at least at this moment in time.) If you’ve got suggestions or want to volunteer, just leave a comment.
We all love The Onion, right? It’s the best news right after Jon Stewart and Steven Colbert.
We also all love Boulder. Those of us that live here love making fun of ourselves and our town because, well, there’s a lot to make fun of.
The Prairie Dog is Boulder’s home grown version of The Onion. And it is hilarious. Some sample headlines follow:
- Oklahoma lashes out, accuses Colorado of being “anorexic”
- Republican spotted on Pearl street, children alerted
- Local venture capitalist raises alarm when magic 8 ball goes missing from desk
- After years of derision, gluten declares intolerance for Boulder
You get the idea. The posts are still short but artfully (and sharply) worded. I love it. Thanks @djilk for the tip.
And where’s my fucking magic 8 ball – who took it? Give it back please.
Jeff Clavier is hanging out with Amy and me in Paris for a few days. We had an incredible dinner last night at L’Arpege – we’d been there once before with another friend (Ed Roberto) about five years ago and it was even better than we remembered it to be. We got home five hours after we started dinner which included an epic cheese course and two dessert courses.
Jeff’s been spending a lot of time on Google+ as have I and many of the VCs and tech early adopters that I know (my VC Circle is my largest circle.) Google+ is rumored to have reached 10m users already and show no sign of slowing. My experience with it has been fascinating – I didn’t do much beyond set up my account, figure out the right login approach since I use Google Apps and Google+ doesn’t yet work with a Google Apps account, and put up a few posts. I’ve got 1400 followers already who presumably simply auto-discovered me via Google’s algorithms (they do have a great social graph already given all the Gmail emails and address books.)
Recently I wrote a post titled Rethinking My Social Graph. I’ve struggled to get my Facebook social graph in order (3000 friends later – lots of acquaintances, not that many friends) and pondered how I use LinkedIn (promiscuously – I link with pretty much anyone). Twitter has been my ultimate broadcast tool and when I think about Google+ vs. Facebook, I realize that the power is the “follow” model vs. the “friend” model.
Facebook has become not that useful for me because while it’s the friend model, I’ve treated it as a follow model. As a result, there isn’t that much intimate communication on it for me, or if there is, it’s completely lost in the noise of the people who I’m acquaintances with. I’ve tried to solve this by sorting them into Lists but there are two problems. The UI for doing this is awful / tedious / excruciating and the control over what you do with lists is weak, especially in places where you really want the control (such as the news feed).
In contrast, Google+ nailed this with the follow model, letting anyone that is interested in what I have to say follow me, while I only follow people I’m interested in. While this is the Twitter model, you get much finer control over both consumption and broadcast through the use of Circles. Now that I have enough activity on Google+, I’m starting to understand and see the impact of this. Oh – and I guess I should start calling it G+ like all the cool kids do.
As Jason and I are about to launch our new book Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist I’ve been once again thinking about communication and promotion via social media. My experience setting up the blog and twitter feed for Startup Marriage reminded me how easy it is to get the tech set up, but how challenging it is to get engagement. And my investment in Gnip is showing me the continued geometric expansion of social data across an ever increasing number of platforms.
Get ready – I think we have now finally “just begun.”
If you walk in my office, you’ll notice a lot of art on the walls. Amy and I are huge art collectors and are always on a quest for new and beautiful things. Over the years we’ve tried to collect photographs and sculpture in addition to contemporary art – I view us as complete novices as collectors in these two domains.
However, Amy has always been a great photographer. She carries a Nikon D-100 around and captures amazing pictures. I don’t have the eye she has so when I snap things on my cell phone they always feel ordinary to me. But I love to scroll through the endless stream of photos Amy has taken.
Recently, I got an email from Abhi Lokesh, the CEO of Fracture. He reached out in response to a post I had written (What’s Your Product Cadence). We went back and forth a few times on email, I answered a few questions, and he offered me a free Fracture. The awesome Alaska Brown Bear above is the photo I used (from an Alaska trip in 2004) and it’s now hanging on the wall in my office next to my couch.
Fracture’s goal is to inspire a renaissance in photo products and printing, replacing cheap frames and overpriced services with a practical alternative that helps you tell your life’s story visually . When I asked Abhi how he came up with the idea, he said:
“We actually came up with the idea while doing field work in Africa during the summer of 2008 for a non-profit that we created in college. It was a life-changing experience in innumerable ways. I was on my way to med school, and my partner was heading to PhD engineering school. But hey, we’ll never have less to lose and more to gain than right now, and we decided to go for it.”
Fracture is tackling the retro challenge of manufacturing and shipping a real product along with creating a digital experience and platform that makes it dead-simple for anyone to Fracture an image. My experience with the service was great, and when the Fracture arrived the packaging was well thought out, minimal, and included everything I needed to hang the Fracture on the wall.
I encourage any of you who have a favorite digital photo to give Fracture a shot.
I had two similar experiences last week where I heard from employees of two different companies that I’m on the board of. In each case, a senior exec said something like “I heard the board wants us to do blah.”
I was in each board meeting and the board most definitely did not say “we want the company to do blah.” Rather, in each case there was a discussion about the topic in question. In one of the cases consensus was reached quickly; in the other there was a robust discussion since two of the board members disagreed and the CEO wasn’t sure what he wanted to do. Ultimately in that case as well there was consensus.
In each case I asked the executive what he’d heard back from the CEO. I got two versions of “the board had a discussion, there was a lot of disagreement, but the board wanted us to do blah.” I then asked, as non-politically as I could, “Do you think CEO wants to do that?” In both cases, the answer was “I’m not sure, but he knows the board wants that.”
I think this is a brutal communication mistake on the part of each of the CEOs. I’ve seen this many times over the past sixteen years since I stopped being a CEO and started being a board member. In each case the CEO is abdicating some responsibility for the decision. In the worst situation, the CEO is blaming the board for a decision and ultimately setting up a very negative context if the decision is an incorrect one – as in “see – I didn’t want to do this but the board did – so it’s not my fault.”
I’ve come to believe that the only real operating decision that a board makes is to fire the CEO. Sure, the board – and individual board members – are often involved in many operational decisions, but the ultimate decision is (and should be) the CEO’s. If the CEO is not in a position to be the ultimate decision maker, he shouldn’t be the CEO. And if board members don’t trust the CEO to make the decision, they should take one of two actions available to them – leave the board or replace the CEO.
In one of the cases, I asked the executive “if I told you the CEO was strongly in favor of the decision, would that impact you.” The response was a simple one: “yes – I’d be much more motivated to make sure we did it right.” I smiled and reinforced that the CEO was in fact supportive, which I think was a relief (and motivator) to this particular executive.
In my leadership experience, people really value when a leader takes responsibility for a decision, even if it turns out to be an incorrect one. CEO’s – don’t be the guy who says “the board made me do it.”