My monthly column in Entrepreneur Magazine is up (and on the newsstands). This month’s article is titled Check Your VC’s Pulse and offers entrepreneurs three important questions to ask your VC investors to understand better the health of their firm. It also explains what the various answers to the questions mean.
As an addendum to the article, read Fred Wilson’s post titled A Stimulus Plan For Venture Capital? No Thanks. In response to Tom Friedman’s NY Times op-ed piece where he suggests the US government take the auto industry bailout money and give it to top venture capital firms instead, Fred explains the problem and risk of adverse selection very clearly.
“So Tom’s idea, while it looks good on paper, is a dream. The top venture firms don’t want, don’t need, and are never going to take government money. The same is true of the top entrepreneurs.
The worst firms, on the other hand, will gladly accept government money. And that is what is going to happen with all of these government efforts to pour more money into the "innovation sector". That money will go to bad investors and weak entrepreneurs and management teams for the most part. It’s a problem of adverse selection.”
The post is great, but the comments (113 so far) are even better.
I’ve been spending more talking in public recently. I always try to be accessible to entrepreneurs and spend time in interesting venues where I learn something, but I hate conferences. So it’s always a balancing act for me to participate, be “content”, but not use up 100% of my extrovert energy and end up hiding under a table somewhere trying to recover.
Last week, I did the first of my podcast series with Phil Weiser. If you don’t know Phil, he’s a one of the most significant assets that CU Boulder has and has become a very close friend. He runs the Silicon Flatirons program, is a professor at the CU Law School, is driving a lot of entrepreneurial activity at CU, and is co-chairman with me of the Colorado Governor’s Innovation Council. Phil asked if I’d endure a long series of questions over a handful of interviews with him and I said yes, so he is publicly interviewing me on a variety of topics of his choosing, with questions he makes up and doesn’t tell me in advance. The first interview was titled “Feld on Finance” (I’m sure someone will enjoy the alliteration) – you can read the summary or listen to the podcast if you are interested.
Immediately after the interview I attended and participated in last week’s Boulder Denver New Tech Meetup. This has turned into an incredible phenomenon – over 400 people attended. Hats off to Robert Reich for starting this up and stewarding it through its growth into something remarkable that should be on the must participate list for anyone in the Boulder / Denver area interested in software / Internet entrepreneurship. At the end of the night, I took questions from the crowd for about thirty minutes.
I then headed to Los Angeles to spend a few days supporting Amy in some of her activities at Wellesley, including some very exciting stuff we are involved in with Wellesley and Madeleine Albright (Wellesley ‘59). We’ll talk more about that soon.
I decided it was pointless to have a weekend so I spent Sunday causing trouble at the Silicon Flatirons’ Conference: Imagine the Internet’s Future. Rocky Radar has an excellent summary of Day 1 (Sunday) and Day 2 (Monday – which I didn’t attend). I just saw a draft of Phil Weiser’s post conference summary – it’s very provocative and captures the issues extremely well so I’ll link to it separately when it’s up.
Monday morning I went to a top secret meeting in downtown Denver that I can’t talk about because I was told a bunch of times that it was confidential. I do think I can say that it involved a cross section of the business community, but titled strongly toward “big companies” / “traditional businesses” vs. tech / entrepreneurship. I found it fascinating in direct contrast to the events of the previous week, especially the entrepreneurial ones that I had been at. While the room was filled with very smart and experienced people, I was amazed at the negative, oppressed, and almost helpless tone. It stood out in stark contrast to the entrepreneurs I hang out with, who recognize the challenges of the macro environment, but are optimistic and determined to make stuff happen, regardless of what’s going on.
To cap it off, on Monday afternoon I heard some remarkably great news out of NewsGator. The company just continues to land huge customers at a crazy fast pace.
The sun is starting to come up – I am so pleased to be alive.
On the eve of the passing of the massive “economic stimulus package” (I was really hoping it was going to be more than 1 trillion so Dr. Evil could start saying “1 trillion dollars”) we are hearing “broadband broadband broadband.”
I’m going to be spending the day tomorrow at the Silicon Flatirons Conference titled The Digital Broadband Migration: Imagining the Internet’s Future and I’m speaking at 9:45 on the panel titled Overview Panel: The Internet’s Challenge to Policymakers. It’s clear that I’ve been set up as my co-panelists are:
I guess I’m the dude that gets to say “telcos – please get out of the way.” Coincidentally, as I was catching up on my email this morning, I ran into a note from Bob Frankston (of Visicalc fame) pointing in response to this conference pointing me to his post titled The Broadband Internet? It’s a brilliant post that is right on the money. The punch line:
“Today people know that they want more “Internet” so they ask for more of the same by saying “broadband”. Our future lies in universal connectivity and simplicity. We can do better than living in the past glory of telecommunication.”
I really hope “Broadband” and “Internet” don’t get conflated. Our friendly neighborhood policy makers need to make sure they know the difference.
I watched Rafael Nadal play two incredible matches at the Australian Open over the weekend. In the semifinals, he defeated Fernando Verdasco in a 5 hour and 14 minute match 6-7(4) 6-4 7-6(2) 6-7(1) 6-4. He returned to the court a little over 40 hours later and defeated Roger Federer 7-5 3-6 7-6(3) 3-6 6-2 in a match lasting 4 hours and 23 minutes. If you are a tennis player, you know this is an amazing physical and emotional achievement.
Brad Gilbert – a great tennis player (and coach) in his own right – was one of the announcers for the finals. He annoyed me at first with his whispery affect until I realized that he was courtside. He completed redeemed himself when he uttered the line of the tournament: “Nadal is so incredible because he plays the point, not the score.”
Ponder that – Play the point, not the score.
If you watch Nadal’s face during a match, he’s 100% focuses on the point at hand. When he finishes the point, win or lose, you see an intense emotion sweep over his face. Amy – who thinks of Nadal as a lion – refers to this as his “I will now kill you and eat your family” look. He then takes a breath, clears his mind (which is reflected in his face), and gets 100% into the next point, which is now the point at hand.
Watching Nadal come back from 0-40 on his serve, or continue to get back in games when down 40-0 or 40-15 when receiving, is amazing. It’s as if the guy has zero short term memory. He either doesn’t remember the previous point, doesn’t care, or has an incredible ability to focus on the point at hand. I’m betting it’s some combination of all three.
This is such a powerful metaphor for business (and life). Play the point, not the score. Down 4-1? Doesn’t matter – play the point. Just had someone quit on you. Doesn’t matter, play the point. Fell short of plan for the month of January – doesn’t matter – play the point. Just had a big deal go off the rails? Doesn’t matter – play the point.
When you are in the game, play the point. Play every point. Regardless of the score.
My monthly column in Entrepreneur Magazine is up (and on the newsstands). This month’s article is titled VC or Angel Money? and has some suggestions for how to think about whether you should be approaching VC’s or Angel’s when raising a round of financing.
Fred Wilson has a magnificent post up this morning from Berlin titled Bits Of Destruction. In it, he nails a critical point about innovation.
“This downturn will be marked in history as the time where many of the business models built in the industrial era finally collapsed as a result of being undermined by the information age. Its creative destruction at work. It’s painful and many jobs will be lost permanently. But let’s also remember that its inevitable and we can’t fight it. Technology and information forces are unstoppable and they will reshape the world as we know it regardless of whether or not we want them to.”
Go read the whole article – he gives several real examples (publishing, banking, retailing, and auto). Then come back here to finish up and hear my punch line.
I’ve been living and working in and around innovation and entrepreneurship my entire adult life, starting with my first company and the research I did as a masters and Ph.D. student at MIT Sloan School under Eric von Hippel. My life experiences, along with all the history I’ve studied, come back to the same notion.
Innovation is a continual process of creative destruction of the norm.
People talk about economic cycles and waves of innovation. These are intersecting forces that drive each other. But innovation is not just limited to business, technology, and science – it impacts all of our existence on this planet. Think about innovation in religion, philosophy, art, architecture, social structures, forms of government, urban planning, economic theory, expression of human sexuality – whatever you want.
In the late 1990’s, there were a bunch of people, myself (and Fred) included, who believed that the Internet would have a dramatic impact on the way our world works and we live our lives. After the Internet bubble burst in 2001, there were a lot of people in “the established business world” who said something akin to “see – that was just a fad.” Anyone who has clung to the idea that the Internet was a fad is in a world of hurt right now, as the premise, functions, and implications of the Internet revolution of the late 1990’s becomes deeply instantiated across the global economy.
The next 20 years are going to be awesome. We inevitably will have lots of challenges and pain along the way as the waves of creative destruction pummel existing norms. But that’s just the way innovation works – and has always worked.
Today’s lunch time conversation was about valuing competence vs. loyalty. In some organizations, loyalty is the most important attribute while in others competence is valued over loyalty.
I have a different take on the distinction – I view competence as the most important attribute while assuming loyalty. Loyalty is a binary factor for me that is a superset of trust. In the absence of “loyalty” (and trust) nothing else matters. But a “loyal incompetent” is also worthless to an organization.
In my first company, we valued competence. We were intensely loyal to the people that worked for us and as a result many of them had long tenures with us. We were inexperienced in evaluating “competence” in certain situations so we definitely had folks around that were “less competent” for a while, but we usually (but not always) figured it out over time. Often, we were able to help them either become “more competent” or adjust their roles to play to their strengths, but sometimes we just missed. I learned a lot from that, especially when I reflect back on it and some of the struggles we went through.
The company that bought my first company had a split personality. There was a subset of the senior team that valued competence highly and demanded loyalty. If you were competent, they were equally loyal to you (it was a “bidirectional loyalty.”) There was a different subset of the team that was equally powerful from an operating perspective and located in a different geography where the leader valued loyalty over competence. He had plenty of “average” people on his team, but they supported him regardless of the situation. You can imagine some of the entertaining situations a guy like me got in – where I had huge loyalty to the gang that valued competence but not much to the gang that valued loyalty. Yeah – it was confusing. I learned a lot there also.
Over time, I’ve developed what I think is a pretty good personal framework which is analogous to the “no assholes rule.” At this point in my life, I don’t want to work with people I don’t like. For me, “like” covers a lot of ground, but fundamentally I have to trust and respect them. For me, trust and respect is driven by competence, but assumes a bi-directional loyalty. I then implement my own filter which I call the “fuck me over once rule.” Everyone gets to fuck me over once. When I find myself in a fucked over position, I confront the person. If we reconcile, there’s one more chance. If not, we are done.
It’s similar to how I think about the CEO’s of the companies I’m an investor in. I’m 100% supportive of the CEO until the moment I’m not. I view my position as working for the CEO – doing whatever he thinks I can do to help him and the company succeed. I’ll always give direct and open feedback. If I ever reach the point where I don’t have 100% confidence in the CEO, the first person I talk to about it is him. I try to be as clear as I can about what isn’t working from my frame of reference and am mutually willing to hit the reset button (e.g. go back to 100% support, recognizing my concern). If things don’t improve (including the potential of me changing my frame of reference), then as an investor I feel a responsibility to take action.
Both of these approaches are examples of valuing competence as the most important attribute while assuming loyalty. I’m always willing to take one more shot at any situation (where I’m demonstrating my presumed loyalty) where I think someone is falling down on the competence dimension. However, if the other person isn’t willing to reciprocate (demonstrate bi-directional loyalty) while attempting to address whatever the competence issue is, we are finished.
I’ve encountered virtually every iteration of this you can imagine in the 200+ companies I’ve been involved in over the past 20+ years. Sometimes I / we succeed; sometimes I / we fail. The entire dynamic is always complicated, as it’s never really a 1 to 1 situation, since it includes many founders, executives, employees, investors, and other constituents of the company. When a CEO has a clear point of view on this, it’s relatively easy to deal with and participate in, even if it’s different than my point of view. However, I find that when there’s clarity in the thinking, some derivation of my point of view typically (but not always) holds true.
I’ve started writing a monthly column for Entrepreneur Magazine called VC Insider. The first article is titled Perfect Your Pitch and has a list of mistakes I see over and over again from entrepreneurs approaching me for financing.
On October 7th, I wrote a post titled Ok Entrepreneurs, Time to Step Up. There were plenty of great comments about the post that – as with most good comment threads – are better than the actual post. In it, I linked back to a post I wrote on April 21st titled Fear Is The Mindkiller (my favorite quote from Dune , one of the best science fiction books of all time). The basic message of both posts – fear and anxiety shuts humans down in extreme ways.
Michael Parekh tweeted a link to a great article in the New York Times today titled in Hard Times, Fear Can Impair Decision-Making. Gregory Berns, M.D., Ph.D., the director of the Center for Neuropolicy at Emory University starts off with a dynamite line – "WORK is feeling more and more like a Skinner box." Midway through the essay, he has a paragraph that cuts right to the essence of the issue.
"This means not being a fearmonger. It means avoiding people who are overly pessimistic about the economy. It means tuning out media that fan emotional flames. Unless you are a day-trader, it means closing the Web page with the market ticker. It does mean being prepared, but not being a hypervigilant, everyone-in-the-bunker type."
Sound familiar? If you read this blog with any regularity, it should. It is part of the core of my philosophy of life. Berns continues:
"I DON’T care what your business is, but if you think it will eventually come back to what it was — your brain is in the grips of the fear-based endowment effect. What I am doing is looking for new opportunities. This means applying neuroscience discovery to realms where it hasn’t been used before."
In my opinion, this is true for all things, not just business and work. Fear shuts down everything – in Berns words "The most concrete thing that neuroscience tells us is that when the fear system of the brain is active, exploratory activity and risk-taking are turned off."
I never suggest that you deny reality – in fact the line from Atlas Shrugged "Nobody stays here by faking reality in any manner whatever" is another part of the core of my philosophy of life. Don’t fake reality, but don’t let yourself be paralyzed by fear. And one way to start is by avoiding the fearmongers.