I’m at MIT all day at a symposium run by Eric von Hippel on Democratizing Innovation. It’s a classic “drink from a fire hose” type of day – short (15 minute) descriptions of 40 or so research projects over two days.
Most of what I’m interested in is the research around open source. However, given that I recently read FAB and have been thinking about a “personal fabrication machine”, I was totally jazzed to hear about eMachineShop – an online machine shop that allows a user to design, price, and order custom machined parts online.
The company’s tag line is “Why waste time traveling, calling, faxing or emailing to conventional machine shops – and waiting days for quotations? Reduce your total time up to 90%! Open doors to new products and projects, to inventing new things, to reducing the cost of parts and more. Quantity 1 to 1,000,000.”
The examples are great. Pricing is straightforward and easy to deal with. And – for people like me that barely know how to use a stapler (unless it’s a virtual one) – this is a brilliant example of the shift from physical to virtual, enabling me to create stuff using software that I’d previously never have a chance of even thinking about playing around with.
Seth Levine has a guest blogger on his site today contributing to his M&A series – his friend Daniel Benel, a corp dev exec at Verint Systems (NASDAQ: VRNT). Daniel’s post is well worth reading – he covers three topics that fall in the category of “things sellers try to tell buyers that a sophisticated buyer will see through, so don’t be a wanker” (my words, not his).
Once Jason and I finish our term sheet series (soon), we’re going to start dissecting a standard M&A letter of intent. This will be a nice technical / legal compliment to Seth’s practical viewpoints.
I finally got around to reading Steve Jobs’ commencement address from earlier this week. It’s made the rounds on the Internet and lived up to the raving about how great it is – it’s must reading for any entrepreneur. Perfectly told stories, simple yet powerful messages, in a nicely consumable format.
It’s the end of the quarter and many of the entrepreneurs I know are crunching hard to get their quarter end deals done. I was riding in the car with the CEO of one of my companies who is in a particularly challenging negotiation on a large deal. We were in a Jaguar that he’d rented from Hertz and he made sure to point out the sign in the car that said “Hertz #1 Gold Club: We appreciate your business! Please enjoy our complimentary upgrade.” I smiled – told him I knew he was cheap and wasn’t worried – and waited for him to say something like “yeah – but the point is that the Hertz Gold Club membership was free also.”
As we talked through the huge deal he’s working on, he described the negotiating dynamic he’s been dealing with. The end customer badly wants the deal to get done. The deal is “stuck in procurement” and the CEO is negotiating with the “procurement officer” (not the end customer). The conversation goes something like this:
Procurement Dude: “I think our relationship has become strained.”
CEO: “Strained? I’d say it’s hostile.”
Procurement Dude: “Well – you’ve got us over a barrel.”
CEO: “You’ve got to be kidding. That’s like saying the mouse has the elephant by the toenail.”
That got a laugh (apparently from the Procurement Dude as well as me). It’s still a battle, but at least we got a good line out of it so far. I expect that anyone that’s ever done a multimillion deal with a Fortune 1000 company has a similar story. Since we are a private company, we’re perfectly happy to wait until next month to finish the deal when the end customer even more badly wants our stuff. In the mean time, the end customer has to cool his heels while Mr. Procurement plays hard ass for a few more weeks.
I’ve been thinking about “Innovation” a lot lately. A big part of the NCWIT theme is that having women in computer science is critical to the innovation process. I recently read my doctoral advisor Eric von Hippel’s new book Democratizing Innovation and re-engaged with Eric around the research he’s doing about user-driven innovation, especially in software around open source communities. This morning, I finished reviewing proposals for the MIT Deshpande Center’s next grant cycle.
Now – I know that reading grant proposals on a Saturday afternoon and Sunday morning is a particularly nerdy thing to do. I did manage to tear myself away from the computer and go see Mr. and Mrs. Smith with Amy which had little to do with innovation, but was fun. However, the proposals I reviewed (a subset of the overall proposal set) included:
While this isn’t stuff that I’d fund (I’m a software guy after all), it stimulates an important part of my brain. The depth and intensity of the early stages of the innovation process are similar across any domain set and it’s powerful, fascinating, and inspiring to think about. It’s also very enlightening to take a step back and think about the core R&D process and subsequent evolution from innovation to commercialization, using MIT-based research as a starting point. I continue to be really impressed with how the Deshpande Center is approaching this.
I recently got a question from a local entrepreneur about “current board comp for an outside director” for an early stage company. My friend is considering joining the board of a startup, and his guidance to me in answering the question was “the company is obviously pre-revenue, so cash protection is key at this phase. Presumably options are the main tool.”
I encounter this regularly, as we often ask experienced entrepreneurs and/or executives to join the board of our early stage companies as outside directors. In addition, when I was an angel investor, I often joined the board of companies and was on the receiving end of these option grants.
Following is my response with my guidelines.
Obviously situations vary, but I think these are good rules of thumb. FYI – as a VC investor, I never ask (nor will I support giving) another VC investor a similar option package for serving on a board – we’ve already got our ownership stake and being a board member is part of our responsibility to the company.
Heidi Roizen – one of my partners at Mobius Venture Capital and my close friend – just did her first podcast titled Heidi Roizen on Venture Capital: Silicon Valley is Back. Heidi never disappoints – enjoy!
This week’s Sunday New York Times was a treasure trove. In addition to having an incredible NY Times Magazine this week (Money 2005), Ben Stein had a phenomenal essay titled “Lessons in Gratitude, at the Basement Sink.” In contrast to the articles in the Magazine (money, money, money), Stein asserts that “Gratitude … is the only totally reliable get-rich-quick scheme.” He finishes with a lesson his dad taught him: “The zen of dishwashing. The zen of gratitude. The zen of riches.”
Everyone should read this – and be grateful for whatever you have today.
Last week we were one of four VC firms recognized by the Women’s Technology Cluster for our significant investments in women-led companies. The other firms recognized were NEA, Vanguard Associates, and Versant Ventures.
While we are flattered to be acknowledged like this, my partner Heidi Roizen said it well when she was quoted as saying “But make no mistake about it, we don’t fund women out of some sort of ‘diversity cause.’ It is just the opposite. We funded these women because they are great entrepreneurs and it made smart business sense to do so. Any VC not being open to women entrepreneurs is missing out of half the population, a lot of smart, talented people, and a lot of opportunities to generate great returns.”
As chairman of the National Center for Women & Information Technology, I look forward to the day sometime in the future when awards like this are obsolete because there isn’t any discernible reason to call out either male or female entrepreneurs based on gender. Lucy Sanders – the CEO of NCWIT – is fond of saying that her goal is to have NCWIT be out of business 20 years from now because it has accomplished its mission and is no longer relevant.