Month: October 2013
Time for a new Foundry Group video. If you want the backstory, go take a look at the post Foundry Group Announces Major Shift In Investment Strategy. If you just want a break from reality and hopefully a few laughs in the process, enjoy.
The video has over 100 easter eggs referring to either portfolio companies of ours or other things in our lives. Some are obvious (like the tshirts), some are very obscure. If you find one, list it in the comments. The best, most obscure one will win a special treat.
The lyrics follow.
Man, things are so hard these days
Tell me about it. I wish we could go back to when things just worked
You know, those old guys don’t know lucky they had it with all their technology 30 and 40 years ago
Y’all, you straight. Let me drop a story on you
I’m king of email, I craft a witty header
Anywhere, any time, life is so much better
Ninety unread emails. Inbox zero, hashtag #FAIL!
Life was better when we licked and stamped our letters
Gonna hit a new club with my favorite homie
Got GPS Satellites watchin’ over me
They got me to the spot, but they were off a block
Life was better when we trusted Rand McNally
Took 28 pictures of my gourmet dinner
I want to post them for all the world to honor
I shared on Instagram. No likes, I got no fans
My life was better with photos made of paper
I need a fact so I do a search on Google
All these results man, are giving me an eyeful
I see Viagra ads, That shit’s for older dads
My life was better using Dewey Decimal
Chorus: These are the worst of times (repeat)
So many videos, I could waste away my years
I’m rockin’ Gangnam Style, Harlem Shake has me in tears
Netflix, YouTube, Hulu, I got no time for you
Life was better with my TV and rabbit ears
Check out my new phone. Global connectivity
3G, 4G, I even got my LTE
So then I phoned my pop But still the damn call dropped
Life was better with faxes and a rotary
I found a website. Amazon, they sell it all!
Silk boxers, gouda cheese, they even got robotic balls
Addicted to “One Click.” Right to my house they ship
Y’all life was better fighting traffic at the shopping mall
I got my choice of every album ever made
iTunes, Spotify, anywhere I want it played
I just can’t choose between, Iron Maiden, Beiber, Sting
Life was better with my vinyl and mix tapes
Chorus: These are the worst of times (repeat)
Phin Barnes at First Round Capital just nails it today with his post To get the most out of your investors, turn them into rubber ducks.
Go read it – I’ll wait and will be here when you get back.
I love Rubber Duck Debugging. I use this approach when writing, which I call “Writing with Yoda.” I have a little Yoda figurine staring at me at all times and when I stall out I just talk to him for a little while and then get started again. He always looks serene and wise and I almost always get going after talking to him for a little while.
Phin describes five steps to turn your investors into rubber ducks:
- Frame the problem you are facing: describe the challenge in enough detail that I can understand it without being an expert (because I am probably not an expert)
- Create context for an answer: Explain why this problem is a priority for you and the business and why you need to solve it now (because I am not involved in the day to day operation of your company)
- Propose a few solutions: Describe a few paths you might take and talk through how you would choose between them (this helps me understand the outcome you want to achieve)
- Be patient: Be open and engage deeply in the questions that I have and explain your answers with specific detail (even if it seems obvious)
- Be active: The goal is to debug the system and the builder is most likely to find the bugs we seek (and to see others along the way)
These are similar to how to engage a great mentor, which we teach over and over again in Techstars – both to the entrepreneurs and the mentors. If you’ve ever done a Top of Mind Drill with me, you’ll recognize the Rubber Duck approach with one twist – storytelling.
I’m a storyteller. I learned this from my dad. It’s part of why I love to write – it’s a way for me to think out loud and figure stuff out while telling stories. So – my favorite Rubber Ducks are the ones who can also tell stories, at the right time.
The risk of a Rubber Duck only approach as a VC is that you become overly socratic. We all know the VC who just asks question after question after question. The questions are often good, and they drive you deeper into the problem, but at some point you need to take a break. You need a breath from answering more questions. You need an analogy to relate to.
This is when the Rubber Duck should tell a story.
At a board meeting recently, the CEO looked at me and said “just tell me the fucking answer.” So I did. And that works also. But not until the CEO wants that. Until then, be a Rubber Duck.
Remember – the CEO makes the decision, not the VC. Unless the CEO explicitly asks. And – if as a VC you don’t trust the CEO to make the decision, you have that discussion with the CEO right now. And if you are a CEO who’s VCs aren’t letting you make the decisions, buy them some Rubber Ducks.
A Quality Benchmark for Accelerators: The Global Accelerator Network
When David Cohen and I came up with the idea for the Global Accelerator Network (GAN) in 2010, we counted roughly 100 accelerator programs around the US that were founded following the Techstars model. We labeled Techstars a “mentor driven accelerator” and reached out to others who were using the same approach to create what became GAN. From that initial outreach, 16 high quality accelerator programs joined us to launch the network.
Since then, accelerators have appeared all over the world. Some accelerators are incredibly high quality. Others are not. Some are major contributors to their startup communities. Others are detrimental to it. As with everything new that grows quickly, it’s a chaotic system with lots of innovation, creative destruction, and rapid change and learning that – if done well – is a great example of the power of the Lean Startup approach to entrepreneurship.
Today, the Global Accelerator Network is a worldwide organization of 52 accelerators located in over 60 cities around the world. We’ve maintained a high quality across the membership while expanding the network by being selective. Not every accelerator is/could be/would be a member in GAN, nor is it designed that way. To become a member, each accelerator must meet the following strict criteria:
- Operate a 3-6 month long program.
- Provide some sort of seed capital to their founders.
- Take a small amount of equity (usually ~6%) and overall have terms that are favorable to entrepreneurs.
- Take no less than 5 and no more than 12 companies at a time.
- Surround those companies with 40-80 mentors.
- Have funding for a two-year runway of the program.
- Have physical space available for their program.
- Have a strong management team who are typically proven entrepreneurs
In addition to these eight criteria, all members follow the established ethos (give before you get; put entrepreneurs first) of accelerators in GAN, including a thorough review of an accelerator’s term sheets and numerous conversations to vet accelerator founders’ intentions and operational practices. We also review their leadership and mentor pool to ensure value.
Becoming a member in the GAN is not easy, but neither is operating a quality accelerator program. Feel free to drop me an email if you want to learn more about joining GAN.
A few years ago, I realized that I had run out of namespace in my brain and the only way I could learn a new name was to forget one that I already knew. This notion annoyed me for a little while, then amused me, and then became my reality.
I’ve always been bad at names + faces, but I have a savant like ability to remember stuff that I’ve read, especially numbers. I’m a visual learner, not an auditory learner. Not only can I read much faster, I retain so much more. So it’s not that surprising to me that when someone comes up to me it’s hard for me to associate their name with a face.
This used to not matter much. But in the last decade the number of people who know me, or know of me, overwhelms the number of people I actually know. Part of this is the function of the network vs. the hierarchy where the network is completely dominating in my world.
As I reorient my work patterns to eliminate travel, more aggressively leverage the network, and become one with the machines, I’m less interested in “hi my name is Joe Smith” and much more interested in just interacting with Joe Smith. This can be awkward for some, especially those who really want a physical connection of some sort (e.g. “can we meet for coffee?”) but if you want a magic decoder ring for my life, just start “doing” and remember that my world is a network and a doeracracy.
Please don’t be offended when you come up to me and have to reintroduce yourself. It’s definitely a me problem, not a you problem.
The Entrepreneur’s Foundation of Colorado, the Living Green Network, and Mocavo are hosting a roofdeck bash on Halloween to benefit first-responder families and local farms devastated by the recent Boulder-area flood. Let’s rally the entrepreneurial community together and raise some money for those in need. I’ll be there to support the cause and would love for you to join me.
Cliff and the Mocavo gang are opening a one-night-only bar in downtown Boulder in the name of charity. Anyone who’s been to Boulder on Halloween knows it tends to be a pretty wild night, especially when it’s on a Thursday. Between the gong for donation milestones and the flatscreen broadcasting the money raised, it should make for a fun event. Donations made by employees of local companies will also optionally join a company leaderboard for some healthy competition.
Existing sponsor list includes KKO, Silicon Valley Bank, and Goldman Sachs. More sponsors are welcome – a restaurant sponsor would be great.
Register for the free event at EventBrite (link to https://halloweenfloodrelief.
We had a fascinating week trying to get everything figured out on our FG Angels initiative with AngelList. Our syndicate, which we are going to max out at $450,000, is currently right at $300,000 after one week. We are humbled by all the support and interest.
Geir Freysson, founder of Five Hundred Plus, did a super cool visualization of some of the top syndicates and how the participants in the syndicate relate to each other.
We’ve chosen our first deal to do. But we aren’t ready to pull the trigger yet – probably early next week. We’ve spent the last few days wrestling with some legal / compliance issues. The AngelList gang has been AWESOME to work with. We aren’t surprised that we are having to figure this stuff out – we knew the new JOBS Act rules, 506 compliance, and the ambiguity around a bunch of stuff would be problematic. Yeah – the problems are obscure ones generated by our government, and there are moments where it seems like the SEC simply doesn’t want any of this to actually work. But that’s part of the fun of it.
I continue to be mildly amused and amazed by the prognostications from the sidelines from a variety of folks (angels, angel groups, VCs, and entrepreneurs). Some of the strong opinions are based on virtually no data, or misinformation, or a complete lack of perspective. And others are based on a lack of understanding of dynamic systems. Either way, when asked, I continue to tell people our mantra – the best way to learn about stuff like this is to participate.
So – if you want to participate with us and learn a bunch in the process, join our syndicate.
“Passion is temporary. It doesn’t last long. Love is enduring. And that’s the important thing. If we all had love in our lives to the degree that we should, it would be much happier.”
— UCLA Anderson | John Wooden Global Leadership Award ceremony (May 21, 2009)
Last night I had dinner with my partners and our significant others. It was a wonderful evening with the three people I work most closely with, the people they love, and the most important person on the planet to me.
Earlier this year I had dinner with Jamey Sperans, one of our investors. Late into the night we talked about a variety of things at an outdoor restaurant in Philly under the heat lamps as a chilly spring night unfolded. Much of the conversation was personal, as in addition to being one of our largest investors, Jamey has become an incredibly close friend. I was struggling with my depression so we talked some about that, but that merely served as a launch point for a deeper conversation.
In that discussion, we talked about the concept of “Business Love.” For a long time, I’ve talked about “business intimacy” – it’s the relationship I try to develop with the entrepreneurs I fund and the people who I work with. It’s a level of emotional engagement that is much deeper than “friendship” or “respect”, is not easily developed, and can be quickly lost if one party isn’t interested in investing the energy or violates a fundamental principle such as trust or honesty.
Jamey and I agreed that “business love” was more profound and significant than “business intimacy.” We discussed the concept of business love in the context of Foundry Group with the unambiguous agreement that the four of us (Ryan, Seth, Jason, and I) have a “business love” relationship.
Once a month we have a full-day offsite. We try to keep our process to an absolute minimum, so we have lunch together on Monday’s and a once a month offsite. The rest of our interactions are continuous and real-time, including almost all of our investment decisions.
Yesterday’s offsite was a perfect example of business love. We spent the day sitting around Jason’s dining room table (the general location of our offsite), got calibrated on a few things that are new initiatives of ours including FG Angels, a new treat coming out next week from us, and a new project we are launching in January. We talked about a few deeper, long range things we want to get right, especially in the context of several of our very successful investments. And we argued about some stuff that we disagreed on in an effort to both understand the data and get aligned.
It was awesome and one of my favorite days of the month. When we split up around 3pm (we end when we are finished) I had a permagrin on my face. I walked home and spent a few hours grinding through email. I went to a meeting and then picked up Amy to head back to Jason’s for dinner. We had an amazing dinner as a group to end the day.
I woke up this morning thinking about business love. I remembered my conversation with Jamey. I recalled that Jo Tango had written a post on business love a while ago and went back and looked it up. I’m guessing that Jamey was the LP in the post that Jo is referring to, since the principles of business love, that Jo refers to, are exactly what we talked about.
- Members of those firms really respect and like each other. They’re very tight. In fact, they love each other
- They have a sense of mission. They want to make money, but that’s not the most important driving force
- How they treat each other spills over to how they treat their entrepreneurs and investors
The process of creating and building new companies from nothing is hard. It’s incredibly rewarding when it’s successful, but the process can be an excruciating, chaotic, and messy. There are moments of extreme stress. Failure is always lurking in the background. Working alongside people you truly love makes a huge difference, at least for me.
We’re just under one month until Defrag, and if you’re a startup founder, a VC, and IT exec, or anyone that wants to have their brain stretched, I hope you’ll join me in being there.
The agenda is now about 90% complete (check the google doc for real-time updates) and Eric tells me that he’ll be finalizing everything in the next week or so.
For those of you who attended two years ago, you may remember my “Resistance is Inevitable” talk about the rise of the machines. This year, I’ll be leading two different sessions.
First, Jerry Colonna and I will be having a discussion about the emotional challenges of entrepreneurship. I’ve written about Jerry many times on my blog. He’s a huge resource to entrepreneurs, a great mentor and confidant of mine, and I’m looking forward to a public conversation about some topics near and dear to both of us.
Second, I’ll be having a conversation with Boris Sofman of Anki. Hopefully he’ll bring some toys for us to play with.
For a taste of some of the other topics, ponder:
- The Rise of the Citizen Explorer (which about the happenings at OpenROV)
- The History and Future of Calm Technology
- One Billion per Second: The Rise of Designer Data Architectures
- Lighting up the world with sensors: using data to effect change
Add in great WiFi, amazing people, an intimate and welcoming atmosphere, and three days of impact-filled ideas, and you’ll quickly find out why Defrag is one of my favorite events of the year.
If you register before Friday, the code “brad15” will take 15% off of your registration.
See you there!
I am so very tired of MBO-based bonuses in startups. I knew the concept of MBOs pre-dated my time in business school, but I couldn’t remember where they came from. Wikipedia reminded me – it’s another Peter Drucker creation from The Practice of Management.
I’ve only worked in what could be considered a “big” company for 18 months (1993 – 1995) and that was the company (AmeriData) that bought my first company (Feld Technologies). When they acquired us, they weren’t big (probably 200 people) and when I left they still weren’t really big (2,000 people) but were “big enough.” So the joy, and experience, of working in a 50,000 or even 100,000 person company eludes me.
As we enter Q4, I’m starting to see discussions about annual performance – often in the context of gearing up for 2014 plans. This often comes in the form of long emails or tedious board discussions about compensation and bonus programs. And inevitably, discussions of MBOs and qualitative performance bonuses quickly enter the discussion.
Now, I’m not a huge fan of programatic bonuses. I spend way to much time reviewing comp plans and trying to help CEOs get a decent alignment between an elusive and inaccurate “plan” (which – especially in a rapidly growing company is never anywhere close to correct), bonuses driven off of company performance, and then bonuses driven off of individual performance. It’s just really hard to get right and feels like an enormous misallocation of time for a young company.
The ostensible goal is to motivate certain behavior and reward certain outcomes. The quantitative, performance-based bonuses are about rewarding outcomes. The qualitative MBO based bonuses are often included to motivate behavior.
Therein is the conflict for me. I have a deeply held belief that a manager cannot “motivate behavior.” She can only create a context in which a person is motivated. It’s up to the individual to motivate himself. Theoretically MBOs help create this context, but it’s often an artificial construct linked to arbitrary behaviors that have nothing to do with motivational structure. Toss money in, and you put focus on the behavior, not on the motivation.
This is totally messed up in a startup. Things are changing daily. Annual performance plans are often irrelevant by February. Quantitative metrics are either too easy to hit, or completely impossible. So the MBOs becomes the achievable bonus, and behavior shifts to achieving them, even when they are even more irrelevant because of the needs of the business.
At Feld Technologies, we had a very simple bonus program. Each quarter, we paid out 10% of pre-tax profits as a bonus. We did this on an accrual basis. My partner Dave and I took the number, made a list of all employees, and figured out how much we were going to give each of them. We then printed out checks and gave them to each person. When we had our act together, which was several quarters each year, we delivered feedback – good and bad – with the checks. If I had realized how powerful this was, I would have done a better job of figuring out and delivering the feedback, in the goal of creating a context for motivation for each person, and realigning goals each quarter.
I’m considering encouraging all the CEOs I work with to get rid of MBOs in 2014. If you insist of having a bonus plan, use a financial bonus for the entire company based on top down performance. This will be a calculation across the entire company and built into the budget at an EBITDA level (e.g. it has to be funded by the performance of the company, which could include a negative EBITDA number, but the bonus pool is linked to that.) Then, the CEO and the leadership get to allocate the bonus to each person on a direct performance basis at the end of the year.
Even better, consider using equity compensation as the bonus. Figure out an equation for converting the bonus amount (in current cash terms) to stock option awards. Then let’s set aside that pool, at the beginning of the year, to award at the end of the year based on the bonus achieved. Be transparent with everyone in the company about the size and determined value of the pool, how their behavior will increase the value, and then work like hell to achieve it.
I’m looking for feedback on this approach. A programatic bonus amount driven by company performance. Individual bonuses based on the discretion of the leadership team that add up across the company to the company bonus pool. No MBOs.