It’s the second week of December, which is about the time that all of the predictions for 2019 start occurring. Last week’s announcements of the confidential S-1 filing of Lyft, Uber, and Slack helped prime the pump for some of these. By the way, did anyone other than me think it was a strange turn of events that companies are now announcing their confidential S-1 filing?
Fred Wilson’s post Thinking Ahead To 2019 is worth reading. Unlike the endless stream of predictions that are about to come out, it’s an analysis of the spread between the public market and private company valuations. Fred is not predicting anything in particular but makes several useful observations, including the following:
“And yet storm clouds are on the horizon for the capital markets in 2019. Rates have risen significantly in the last eighteen months, pulling capital out of the equity markets and into the fixed income markets. There are some leading indicators that suggest a business slowdown is on the horizon, which would be the first one in the US in a decade. And, of course, the situation in DC is getting dicey and that will weigh on markets as well.”
Last week I was talking to a friend who is a growth investor. He and his firm see most of the bay area growth deals (e.g. the unicorns stampede to their front door). He made an observation that a number of deals he’s now seeing are for flat rounds with companies that need to raise more money to keep going and he’s feeling the slow down of investor interest at this level. This dynamic is reflected in the article Scooter Firm Chases Funding to Staunch Losses about the current Lime and Bird financings.
Any student of history knows that there is a linkage between the push to the public markets, demand dynamics of the public markets, and the availability and attractiveness of capital in the private markets. If you lived through the Internet-bubble between 1999 and 2002 you know this cycle well. And, you know that the companies that survived it were the ones with very strong fundamental businesses (e.g. Google), regardless of whether they were private or public at the time.
At the same time, entire categories collapsed. The web hosting business – lead by Exodus – almost entirely went bankrupt or was restructured. Out of this mess came several long-term companies and a huge number of pennies on the dollar type acquisitions. If you were on the winning side of this, it was incredibly lucrative, because even in a massive collapse there is a huge long-term opportunity. But you had to be thinking about the economics and capital structure of the business, versus just chasing growth with more equity dollars.
I have no interest in predicting anything, including how any specific category or company will perform. I also have no idea what the timing of anything is. I do know that if you are an entrepreneur or investor, you should pay attention to the context but be very focused on building a durable long-term business. And this moment in time is one that feels like you should be aware of how much capital you have, how you are spending it, and when (or if) you will need to raise more.
Remember – it can all go to zero (a post I wrote when Bitcoin was at $12,000.)
Seth and I have each attended over 27,367 board meetings. Ok, I don’t know the actual number, but it’s a lot. We’ve both been on good boards and bad boards. Boards that have helped companies and boards that have sunk companies. Boards that know how to resolve conflict and boards that have multiple passive-aggressive actors engaged in a complex dance that serves no one, especially the company.
So, I’m totally digging Seth’s new series. Not surprisingly, since Seth and I have been working together for over 17 years, there’s a lot that is the same as my board approach. But, I’m also learning something from each post which I plan to incorporate into my board world going forward.
The first four posts are up. In order:
- Designing the Ideal Board Meeting
- Designing the Ideal Board Meeting – Before the Meeting
- Designing the Ideal Board Meeting – Your Board Package
- Designing the Ideal Board Meeting – The Board Meeting
If you are a founder, CEO, investor, or outside director who is on a private company board, this is a must-read series. And, if you want to go deeper on how boards work, grab a copy of the book I wrote a few years with Mahendra Ramsinghani ago titled Startup Boards: Getting the Most Out of Your Board of Directors.
The interview ended up being two episodes and, while listening to it in the car, I felt like it was one of the better recent interviews that I’ve done. Hadley and I talked for about an hour and then he edited the discussion down into two ten minute podcasts, so he pulled out the good stuff and left all the garbage on the cutting room floor.
Episode 1 includes advice I’d give to a much younger me and discusses why I think it is important to build long-term fund strategies with conviction and consistency.
Episode 2 covers what makes an excellent board member, the biggest reasons startups fail, and the three machines that must work together in order for a company to scale.
I’ve written several times about leveling the playing field for women in tech, including our own actions at Foundry Group. I’m always keeping my ear to the ground for how to do this better.
Recently, I was connected to Kate Catlin, the Founder of Find My Flock, by my partner Jason. From the outside, it looks like Find My Flock is a tech job board that is enthusiastically open to all. What isn’t obvious is that they did 100% of their product research, design, and UX testing with developers who happen to be women and/or people of color.
This led to some very specific features:
- You can filter jobs by benefits like maternity leave, trans-inclusive healthcare, or visa sponsorship.
- You get a personal interviewing coach.
- If a company wants a premium posting, Find My Flock has an off-the-record phone call with two developers in the company to make sure they’re happy.
While mostly driven by “determined intersectional feminism,” Kate thinks more platforms should be designed this way. She’s a former IDEO CoLab Fellow, and follows IDEO’s belief that you can spur the most creativity by interviewing users at the extreme ends of the bell curve, in addition to those in the middle.
To understand this, imagine you’re designing a new sneaker. You’ll come up with very different ideas if you go interview the most blister-prone ultramarathoner instead of the average neighborhood jogger.
Find My Flock took it a step further by interviewing only at the extremes. If developers most likely to experience unconscious bias feel this process is effective, supportive, and fair, then they believe everyone else will also have an outstanding experience as well. “This is not about handouts,” Kate says. “No one I know wants a job they haven’t worked for. It’s about a level playing field.”
What are your thoughts? How would major tech platforms be different if they had designed for underrepresented people first?
I love today’s post from Fred Wilson titled The Valuation Obsession. It has some good hints in it about valuation vs. ownership dynamics for founders, employees, and investors. It also calls out the silliness about focusing on the wrong things.
Go read it.
I’m even a bigger fan of a statement Fred makes in the post that William Mougayar calls out in the comments.
“I like to invest in companies that smart people are joining. Capital should follow talent, not talent following capital.“
This is not just a statement on capital. It’s another hint to the importance – to a founder – of building an awesome team at every level of the journey. It matters at the beginning, as things ramp, and as a public company.
Capital should follow talent. That’s a line I know I’ll be using. I’ll try to remember to say “Fred Wilson says capital should follow talent, not the other way around, and I strongly agree.”
It’s 20 minutes on the Boulder Creek Path. We talk about Leadership, Obsession, Battlestar Galactica, Techstars, Privacy, The Wire, and a few other fun things, including whether the machines have taken over (or rather, when they took over.) Enjoy!
I read Bad Blood: Secrets and Lies in a Silicon Valley Startup last week on my Q2 vacation. In my post talking about the various books I read, I wrote the following about it.
“Every entrepreneur and VC should read this book. John Carreyrou has done something important here. Maybe this book will finally put a nail in the phrase “fake it till you make it”, but I doubt it. The amount of lying, disingenuousness, blatant and unjustified self-promotion, and downright deceit that exists in entrepreneurship right now is at a local maximum. This always happens when entrepreneurship gets trendy. Carreyrou just wrote a long warning for entrepreneurs and VCs.”
This morning, Amy emailed me a link to an article by Matthew Herper titled Elizabeth Holmes’ Superpower. He strongly recommends Carreyrou’s book and talks about his coverage of Theranos and how he was snowed over the years, partly through his interactions directly with Holmes. In contrast, Holmes never talked to Carreyrou, leaving Herper to reflect:
“Holmes never did talk to Carreyrou, leaving her greatest weapon, her weird charisma, holstered. Now his portrayal of her, put together from other people’s recollections, will define her in the public memory, especially if the planned movie starring Jennifer Lawrence gets made. For those of us she did talk to, at least to me, the book presents a humbling puzzle. Why was what seems so visible now invisible when Holmes was in the room?”
While this is all complicated stuff, Herper’s self-reflection is helpful. At a meta-level, it’s just another example of the challenge of promotion vs. substance. Or, aspiration goals vs. what’s actually going on. Or fantasy vs. reality. Or what you hope to create being articulated as what you have created.
Entrepreneurship is incredibly difficult. Among other challenges a founder has is balancing the vision of what is being created compared to what exists today. At the very beginning of the journey, this is easy because it’s obvious that it is all aspirational. But, as things progress, the substance of what has been created so far starts to matter, especially as the founder needs to raise more money to continue to fund the aspiration goals.
The best founders that I’ve worked with combine a mix of their aspirational goals with a real grounding in the current reality of where the business is. They know that their aspirational goals are goals – not current reality. And they know that there isn’t a straight line to the goals. If they use their reality distortion field as a charismatic founder, it’s to motivate their team to build something, not deceive investors or customers into believing it has been built.
Because, after all, in the end, we are all vulnerable to facts.
I’ve been friends with Alex Iskold for over a dozen years (I was an angel investor in GetGlue, which USV funded.)
Alex has been the Managing Director of Techstars NY for a number of years and I think he’s now run seven programs and built an impressive portfolio of around 80 companies.
I’m a huge Alex fan and love his writing. Recently, he put together a bunch of great blog posts on his site under a heading Startup Hacks. He has divided them into the following topics: Fundraising, Managing Investors, VC and Business Intros, Metrics and KPIs, Product and Marketing, Productivity, Founding Team, and Accelerator.
I’ve read them all. Some of my favorites include:
- 30 Questions Investors Will Ask Founders
- 11 Questions Founders Need to Ask Investors
- Why NO is the Next Best Thing After YES
- Founders, Beware of Happy Ears
- 25 Epic, Must-Read Posts About Fundraising
- How to Run a Simple and Effective Board Meeting
- How to Ask Me and Others for an Introduction
- Don’t Take Intros from Investors Who aren’t Investing
- Why Product Demo is Your Secret Weapon
- Inbox 0
- 7 Calendar Tips for Startups
- Why Founder-Market-Fit is so Important
- 8 Tips for Dealing with Competitors
- How to Get the Most out of an Accelerator
Alex – thanks for taking the time to write all of these! And, if you are a regular reader of this blog, I encourage you to go read all of Alex’s posts.
I’ve been investing in natural food related business for a while. I do this partly because I’m interested in what we eat, but mostly because I can’t make angel investments in tech companies anymore because of my Foundry Group fund agreements. And I enjoy making angel investments …
Boulder is the starting point for the natural foods industry, dating back to the founding of Celestial Seasonings in 1969. A year ago, the New York Times had a long article titled Foodies Know: Boulder Has Become a Hub for New Producers that explains why Boulder is so popular among natural foods companies. The number of food meetups and events in Boulder (including Startup Weekend Boulder Food + Tech) as well as events and initiatives all around the state of Colorado has reached a critical mass. Our friend, Kimbal Musk, who according the the New York Times Wants to Feed America, Silicon Valley-Style is based in Boulder (and, ahem, not Silicon Valley.)
I’m also excited about the startup activity outside of Boulder/Denver. My partner Seth and I have been actively involved in the creation of The Greater Colorado Venture Fund that launched earlier this year to support entrepreneurs in smaller communities in Colorado. I’ve been involved in Startup Colorado for almost a decade now and am proud of their emphasis on supporting entrepreneurship in all shapes and forms outside the Front Range.
An event in June brings these two dynamics together. If you are an entrepreneur or investor in a food related startup, ENGAGE Delta, Naturally Boulder, and Startup Colorado are bringing the foremost experts in the food industry from across the state to help go from recipes to products and products to profits. The event is 6/21-22 in Hotchkiss. I know Hotchkiss well as Amy has family there and I’ve spent many long weekends there. It’s a beautiful spot for an event like this.
You can RSVP to the event here and make sure to enjoy some good food for me.
This article, Engineers Are Leaving Trump’s America for the Canadian Dream, stimulated a simple thought for me.
Canada has a huge, near-term competitive opportunity over to the US.
I have a deeply held belief that US entrepreneurship has benefited extraordinarily over since World War II due to the desire of people from around the world to come to make their lives in the US. While this immigration philosophy started with the drafting of the Declaration of Independence in 1776 (and arguably before that with the European colonization of America), it transformed entrepreneurship, the US economy, and the US’s place in the world dramatically from the 1950s on.
While there are lots of issues around immigration, I believe the US’s relative permissiveness around, and openness to, people from other countries had a remarkably positive impact on the US. I wouldn’t be here other than the immigration of my great-grandparents (and my maternal grandfather) in the early 1900’s from Europe and Russia. While I feel deeply (and proudly) American, I know that my family has only been here for a few generations.
I’ve been aware of and engaged in issues around immigration for the last decade. When I saw this article yesterday, titled U.S. startup visa draws only 10 applicants as Trump throttles program, I thought to myself “duh.” I then read the article, which had a good punch line in the second paragraph.
“A big reason for the shortfall is that the year-old program has been constantly under assault since the election of President Donald Trump, whose agenda revolves around tightening immigration rules and dismantling Obama-era policies. The Homeland Security Department has twice delayed implementation of the program but agreed to leave the application process open after venture capitalists won a court challenge in December. No one has been granted a visa, and Homeland Security said last year that it’s working on a plan to kill the rule entirely.”
Yeah, well, I wouldn’t apply for one of those things either. After advocating for and working on the Startup Visa for almost a decade, it was powerful to end up with something at the end of 2016 (the International Entrepreneur Rule, which was the closest we’ve been to this) but disheartening to see the endless and continuous attack and attempt to undermine this by the current administration.
This is a gift to Canada around entrepreneurship, and I’ve already seen the impact of it in many places. The Toronto/Waterloo startup community is on fire. Many companies I’m involved in are exploring offices in Canada, especially Vancouver (for the Seattle folks) and Toronto (for the east coast folks) since it’s so difficult to get work visas in the US for employees. Other entrepreneurs from around the world are simply opting to start the company in Canada rather than the US because of all the uncertainty around visa status.
I’ve always liked Canada. There is a window in time where Canada has a massive strategic geographic advantage over the US. It’ll be interesting to look back in twenty years and see if the country capitalized on it.