BarCamp Denver starts tonight and goes all day tomorrow.  The attendees list has grown nicely, including some of my friends such as Derek Scruggs (Enthusiast Group), Kevin Cawley (NewGator), Scott Converse (ClickCaster), Dave Taylor (Intuitive Systems), and David Cohen (ColoradoStartups.com).  I was going to try to attend, but I’ve got to head down to Keystone for the day for some stuff.  If you are a BarCamp fan and are in Denver this weekend, go check it out.  Half of the pizza is on me.

John Battelle has an excellent post up on the Failure to Fail.  I won’t repeat it here – he states the point really well – and is a must read for any entrepreneur.  John speculates that instead of a “bubble”, we might have a “company destruction crisis.”  If you read Crichton’s Fear, Complexity, & Environmental Management in the 21st Century (that I referred to in my Lack of Critical Thinking post), you’ll recognize this theme as analogous to the dynamic of “the preservation of Yellowstone.”  Failure is a crucial part of the entrepreneurial ecosystem and new and exciting bad things happen when there’s not the right balance of it.

(cue “Imperial March” from the Star Wars Trilogy)

Jason and I keep finding ourselves in discussions about how tired we are dealing with accountants, especially the Big Four.  Whether it’s regarding our own fund, or that of our portfolio companies, we spend an inordinate amount of time going “huh?” when the subject matter is accounting, accountants, and auditors.  Today, Jason and I were chatting via email when I sent him the link to a Business Week article that I was quoted in – he particularly liked it when I called the Big Four “arrogant, lazy, ineffective, and non responsive to entrepreneurial companies.”  Then again, maybe he was just kidding, as he will have to smile a lot and be nice to them when they audit us for 2006.

Now, some of my best friends are accountants, but it’s been really frustrating lately.  We’ve got a nice list of “accounting is the only profession …”

Accounting is the only profession where you can completely screw everything up (see Enron, WorldCom, Kmart, etc..) and your “punishment” (so long as you aren’t Arthur Andersen) is that the “powers that be” enact all sorts of legislation (SOX, Option Expensing, 409A, FASB 123, etc.), that create a full employment act for your profession, radically increase your fee structures, and make everyone in your profession better off than when everyone thought you were doing a good job and maintaining the public trust.

Accounting is the only profession where every “answer” comes from some dark / covert room in the New York “Death Star” office of the national firm and no one you actually talk to will admit to making a decision.  Instead, someone in their national office says “we have to do it this way, so regardless of how crazy it sounds, we have to do it this way because they told me so.”  It’s like your parents saying “because I said so” except here you get to pay them six or seven figures a year to treat you like a four year old.  

Accounting is the only profession that actively tries to get rid of most of its clients, but at the same time tries to bleed every last cent out of them on their way to being fired.  We’ve had a hell of a time getting any of the Big Four to want to work with our portfolio companies and those that do are paying a very high price.  It isn’t like the 1990’s where they were all fighting over our companies hoping they’d go public.  Right now they have so much work to do in the public sector that they can’t make enough money on the private companies.  That being said, on their way out the door, they’ll try to recoup any discounts they gave you while you were a client while giving you a big smile in the hope that you’ll come back to them one day if you are successful enough to go public.

Accounting is the only profession that refuses to opine on the “other side of the house” (audit guys won’t go near tax and tax won’t go near audit) unless it makes one of their lives easier and then they’ll do whatever they want.  Case in point:  409A .  If you’ve read our posts, you’ll note that many venture backed companies are getting formal, third-party valuations in order to comply with 409A.  This a tax regulation, so don’t ask your auditors, they’ll turn you over to the tax guys.  There is this other accounting issuance called FASB 123, which in short is the “fair value” proclamation that affects venture firms by forcing them to “fairly value” each of their portfolio companies for their financial statements.  This is an audit issue, so don’t ask your tax guys.  Now this sounds all fine and good: “Why shouldn’t a venture firm keep fairly valued books for its limited partners?”  The problem is most venture funds negotiated a way to value their portfolio for their investors at the time the fund was formed.  There are very strict policies regarding how portfolio companies are valued and when they can be marked up or down.  Let’s call this the “LP accepted method.”  Now, we have FASB 123 that says we must “fairly value” the companies which may or may not reflect the same answer as one would get if you use the LP accepted method.  Let’s not bash the accountants for FASB 123, they didn’t enact it, but how do they decide to fairly value the companies?  Simple, they jump over to the tax side of the house, grab the 409A valuation and say “here is the value.”  Hey, you aren’t supposed to look over there!   (Note:  this is a completely stupid result.  The 409A valuations are done for a completely different purpose.  Also, you’ll find many reasonable auditors willing to say offline this is stupid, but someone in a windowless room in New York is suggesting that they have to do it this way.)

Accounting is the only profession that doesn’t care if their processes negatively impact your business, what your opinion of them is, or whether or not you are a happy customer.  They know there aren’t many of them, you have to get an audit, and you’ll shut up and like it.  If you have to turn your operations upside down to comply with their desires, that’s your problem, because you are a captive audience.  The only other profession that might be close would be the customer service representatives of most major airlines (excluding – of course – Southwest.)

Accounting in the only profession whereby a new regulation comes down, a client alert is sent out and not a single client can understand anything that is on the printed page.  And – we’d like to give special honorable mention to law firm tax departments for being equally skillful with their alerts.  I’m sure glad that I have Jason to figure all of this out for me, although he claims that his brain is completely full and is accepting no more accounting knowledge for the foreseeable future.

And that’s okay, because we have good accountants to tell us what to do (at least until they read this blog post.)

Bob Eisenbach -co-chair of the Cooley Godward Creditor’s Right & Bankruptcy practice group – has a new blog up called In The (Red) – The Business Bankruptcy Blog.  It’s excellent.  While there are plenty of legal bloggers out there, Bob is extremely experienced and a thought leader around bankruptcy law.  While entrepreneurs hate to think about bankruptcy, it’s unfortunately a part of business life and a tool to be used appropriately in failure situations.  I’ve found Bob’s posts to be current, deep, very interesting, and broadly relevant.  I highly recommend adding it to your feed reader in you are an entrepreneur or a VC – I just wish Bob would publish the full posts instead of just excepts.

Chip Griffin has an interview with Matt Rightmire of Borealis Ventures up on his blog.  Matt is ex-Yahoo and is now a partner at a VC firm in New Hampshire that’s affiliated with Village Ventures.  They had a nice exit in my backyard recently when Google acquired @Last earlier this year.  I got together with Matt for lunch when I was in Boston running the Boston Marathon and we had a fun conversation about entrepreneurship and venture capital outside of Silicon Valley.  Matt and Chip cover this topic extensively in the interview and – while it’s focused on New Hampshire – the ideas generally apply to many other geographic regions outside of Silicon Valley

At mile 15 on my run today, I heard one of my three favorite quotes in Atlas Shrugged.  Galt says to Dagny, “… it’s not that I don’t suffer, it’s that I know the unimportance of suffering.  I know that pain is to be fought and thrown aside, not to be accepted as part of one’s soul and as a permanent scar across one’s view of existence.”

As you can see from the elevation graph of my run, the timing of this was perfect. 

During my run from Anchor Point to Homer today (17.5 miles, 2000 vertical feet up, 1800 vertical feet down, 7 miles of highway with way too many 18 wheelers and mobile homes, and a steady rain), I had a lot of moments of suffering.  This was a hard run – but a glorious one.  Atlas Shrugged was playing on my iPod Shuffle – I’m almost to Galt’s radio speech.  I had just finished the major descent from the top of Homer Hill and was feeling great to have the really difficult run almost behind me.

I carry this mantra around with me every day in all things that I do – “it’s not that I don’t suffer, it’s that I know the unimportance of suffering.”  I’ve suffered plenty, especially when things don’t go as planned, products don’t work, customers defect, competitors stomp on your head, employees quit at critical times, people don’t live up to expectations, and – the ultimate – companies fail.  I’ve suffered everytime I had to downsize a company, lay people off, fire a CEO, drag my ass across the country on a redeye to try to deal with an emergency, or deal with someone that is irrational.  Failure – at any level – is a perfect opportunity to spend some time suffering.

However, the suffering is truly unimportant.  If you make a minor shift in Galt’s statement, substituting failure for pain, you end with “I know that failure is to be fought and thrown aside, not to be accepted as part of one’s soul and as a permanent scar across one’s view of existence.”  Every entrepreneur should memorize this, remember it, and live it.  Failure (and suffering) is part of the experience, but it shouldn’t be part of your soul or a permanent scar across your view of existence.

Tom Evslin, one of my favorite entrepreneur bloggers, has started a FeedBurner Network called My Way, The Entrepreneurs Network.  I love Tom’s blog Fractals of Change, was absolutely delighted by his book hackoff.com: An Historic Murder Mystery set in the Internet Bubble and Rubble, and enjoy all my interactions with him.  His Network already includes a few of my entrepreneurial friends that blog – such as Will Herman and Matt Blumberg – but have some folks that I don’t know such as Brian Berliner.

If you are looking for a daily feed of entrepreneurial wit and wisdom, I recommend subscribing to My Way, The Entrepreneurs Network. 

A few weeks ago I wrote about how pleasantly surprised I was by the thanks I got from John Minnihan of Freepository for a little help that I had given him.  I never expect anything specific in exchange for helping out – a simple thanks is plenty – but in this case his effort and thoughtfulness was really nice.

It happened again yesterday.  A week ago, a woman named Melissa Cummings was referred to me by an old friend.  She recently left Sun Microsystems (in Colorado) and is looking for a new job in the Boulder area.  My friend spoke highly of her and her resume was solid so I introduced her by email to a few of my portfolio companies along with a few other people in town that I know that I thought Melissa might fit with.

I got the following note from her yesterday.

Thank you so much for your help in introducing me to the companies affiliated with you and Mobius. I really appreciate it. I have a meeting with Lee on Friday afternoon — hopefully that will lead to more discussions.

As a token of appreciation, I’ve donated $X in your name to NCWIT — you should receive the tax receipt in the mail. That’s wonderful that you are on the board — it’s an important organization.

I was blown away.  Again, a thanks would have been plenty, but Melissa did some research on me, found out that I was chairman of the National Center for Women & Information Technology, went to the NCWIT website, and made an unexpected and generous donation to the organization. 

It’s gestures like this that make it easy for me to keep up random days, quickly help people that are introduced to me via one degree of separation (even if there’s no obvious benefit for me), and generally pick my spirits up about human beings whenever I read too much of the newspaper and get discouraged.

David Cohen, a Boulder-based entrepreneur and angel investor who I’ve done a few angel investments with and am now working on an interesting project with, has a great post up on how angel investors make investment decisions.  If you are raising angel money, it’s worth a read.