“Double, double toil and trouble; Fire burn, and caldron bubble.” – Macbeth
Every time I hear the word “bubble” I think of that quote from Macbeth. I also think of Tulip Mania and the South Sea Company which purportedly was the source of the concept of an economic bubble. And then I remember Charles Mackay’s classic book “Extraordinary Popular Delusions & the Madness of Crowds.”
When I returned last weekend from a week off the grid I encountered the word “bubble” over and over again when referring to the tech industry. A variety of people were using it to describe the current situation. This has been going on for at least a quarter or two, but the velocity of it seems to have picked up with a wave of high priced financings along with large financings for nascent companies. While plenty of tech bloggers were tossing around the word “bubble”, I also noticed it among the mainstream media. But more interestingly I saw it in my twitter feed from some entrepreneurs and VCs who I respect a lot. So I spent some time on my run yesterday rolling the idea of a bubble around in my head.
In the tech industry, the great Internet bubble inflated between 1999 and 2000 and deflated (or popped) in 2001. I remember it well as 2001 was easily the most challenging year of my business life. I made a lot of mistakes in 1999 and 2000 that I’ve hopefully learned from (I believe I have) and took on a lot of challenging things between 2001 and 2005 which laid the groundwork for the business context that I find myself in today. So, in hindsight, the great Internet bubble of 2001 was very powerful and useful to me, even though it was very painful.
I refuse to make predictions as the only thing I know with certainty is that some day I will be dead. I view predictions as irrelevant in the context of what I am working on and trying to accomplish. Sure – I pay attention to what is going on around me, have hypotheses about what’s going to happen, and adjust my behavior accordingly. But I think making predictions with certainty such as “we are in a bubble” are useless, especially in the absence of recommendations about what to do to either defend against or take advantage of the situation.
I find this discussion about bubbles especially bizarre and entertaining against the backdrop of the downward economic cycle of the past few years. In 2008, everyone in business and politics was consumed with the “global economic crisis”. However, entrepreneurs just put their heads down and continued to accelerate the current web revolution which started around 2004 with “Web 2.0” being articulated by Tim O’Reilly. Today, there is once again enormous focus on entrepreneurship as the salvation for many things, with the naysayers starting to say “but it’s a bubble” or some variant.
If you recognize that we are in a strong, positive, upward segment of the current “tech company creation cycle”, that’s more than enough. You should accept that we’ll be back in a downward part of the cycle at some point, but that we don’t know if it’ll be in a week, month, year, or decade. We also won’t know the slope of the curve although if you are a hedge fund trader you probably think you can calculate the derivative of some equation about the future that will tell you what to buy and sell. Whatever – have fun and good luck.
If you are an entrepreneur, you can build a significant, powerful, sustainable business taking advantage of market expansion during the up cycle and consolidating your position during the down cycle. Don’t get distracted by speculating about “bubbles” other than the ones in your bathtub. Instead, spend your energy creating amazing products, thrilling your customers, building an awesome organization, and living your life. Always remember that one day you too will be dead.
I’ve started a new category on my blog called “Best Practices.” These are going to be posts inspired by my experiences with various companies that I feel are above and beyond the normal activities you’d expect. The first one comes from Matt Blumberg, the CEO of Return Path. Earlier this week the board received an email from him that included the following:
“Although [our CFO] approves my expenses in our accounting system, inspired by Mark Hurd, I decided it would be a good idea to add a level of transparency to you in terms of my expenses.
To that end, I’m doing two things:
- I’ve asked our auditors to include some analysis/testing of my expenses in this year’s audit
- Attached, please find a spreadsheet which details all expenses, with a summary tab that has the overall picture and a few explanatory notes
Trash or treasure, as they say, but please feel free to ask any questions or poke any holes you’d like. I can assure you that I’m pretty disciplined about expenses (both in terms of not being profligate and in terms of not abusing company money for personal use), but I did think it would be good housekeeping for you to have visibility.”
To a person, we responded that while unnecessary, this was a nice gesture of transparency. The spreadsheet that Matt sent around had every expense item he was reimbursed for in the year. The summary was helpful for putting it all in perspective, but I could look and see where (and with whom) Matt ate dinner, which hotels he stayed in, how much he paid for plane flights, and what he charged to the company as miscellaneous expenses.
I thought about it more and decided it was an awesome display of trust. I have immense respect for Matt, his leadership, and his management skills. But more than that, I’d go to the ends of the earth to do anything for him. Unilateral, unexpected gestures like this one just reinforces that for me. So, more than just transparency, this best practice increases the level of trust between a CEO and his board.
My partners at Foundry Group and I decided not to do something after a month of thoughtful deliberation. The decision is fresh so I’m not going to talk about the specifics, but our conclusion was that while it would be relatively easy to do and potential financially lucrative, it wasn’t consistent with our strategy.
I used it as an example this morning during my run with @reecepacheco about fully engaging with your mentors. While we could have made this decision on our own, we talked to a number of people who we consider our mentors (including several peers, investors of ours, and folks that have been doing what we’ve been doing a lot longer than we have), got their direct feedback, synthesized it, and made a decision. Of course, we had plenty of conflicting data, but it was all additive to our decision. And it was ultimately our responsibility to make the call on what we wanted to do.
During my run this morning, Reece and I also talked about fully engaging in the thing you are currently involved in. Reece and his partners are about half way through the 90 day TechStars NY program. He had lots of great feedback for me on his experience to date, but also had lots of questions about what he was doing and how he was approaching things, especially as he looked forward beyond the end of the program. I reinforced that he’s in the program for another six weeks or so and, rather than worry about what to do post-program, he should stay fully engaged in the experience he’s having now.
These two concepts are linked back to the notion of “Deciding Not To Do Something.” In the case of the decision my partners and I made, by listening to our mentors and being fully engaged in the business we are currently in, we decided not to do something that would have been an unnecessary distraction. Part of being fully engaged is understanding clearly the strategy you are executing. In our case, it’s a long term strategy that we are playing out over 20 years from when we started in 2007.
Sure, we’ll adjust tactics on a continuous basis, but we always measure what we are doing against or core beliefs that are the underpinnings of our strategy. And, while tempted by new and interesting ideas, we use these core beliefs to help us decide when we shouldn’t do something, even if it looks attractive.
We also revisit our strategy on a regular basis. We talk about it quarterly and do a deep review – both looking backwards and forwards – once a year. While we evolve parts of it over time, our clear understanding of what we are trying to accomplish helps us have clarity when presented with a strategic option that we shouldn’t pursue.
I find deciding not to do something to be incredibly liberating intellectually and emotionally. And, when I leave a big new idea on the cutting room floor, I make sure I sweep it into the trash and move on, never questioning the decision.
Reece – thanks for the early morning run, the talk, and the opportunity to talk this stuff through in advance of writing this post. Stay in the moment and keep kicking ass.
If you’ve been following the Startup Visa, you may know that the bills that were submitted in both the House and the Senate expired at the end of the 2010 Congress. I’ve been on a number of calls lately discussing re-introducing these bills with updates to reflect the renewed understanding of the impact on high growth entrepreneurship on jobs in our country.
A few months ago several entrepreneurs took it upon themselves to create a great short (25 minute) documentary called Starting-Up In America. It is a set of interviews with foreign entrepreneurs in the US talking about why they chose to start their company here, the struggles they’ve had getting appropriate visas, and – in several cases – the severe limitations their visa status has placed on their businesses.
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Starting-Up in America from Starting-Up In America on Vimeo.
It’s been very difficult to get people to talk publicly about their experiences because of fear of retribution from the USCIS. I’m super proud of everyone involved in this documentary – both for putting the effort into making it as well as being brave about talking out about the issue.
At the end of each day, I encourage you to reflect on whether you spent your day on “signal” or “noise.” Let me explain.
Recently, I wrote a post titled Managing Priorities. In it I talked about the idea of P1’s. My weeks start on Monday morning so my P1 for the current week (which ends in about 20 hours since I usually get up at 5am on Monday morning) is to get a draft of the new book I’m writing with Jason Mendelson to our publisher (Wiley). That’s it – one P1 for the week. Of course I did a ton of other things last week, including spending two days at Blur doing an HCI brain soak, working on closing a new investment, working on two M&A deals, having a few board meetings, giving a few talks, meeting with a bunch of people, and having a few enjoyable dinners with friends. But every morning when I woke up I thought about my P1 (the book) and every night before I went to bed I thought about whether or not I had made progress on it.
I committed to myself to spend all day Saturday and Sunday on the final edit push. Now that I’m on my second book, I know my limits and know that six hours is the most I can work productively on the book in one day. So yesterday I slept in, did email and my normal Saturday morning info scan, and then settled in for six hours of editing. Every 30 minutes I took a short break – did email, had lunch, took a nap, talked to Amy, and did a 15 minute phone call with another VC who was struggling with an issue in real time. But I got my six hours in and then went out to dinner with Amy and a bunch of friends. Today I’m going to catch up on email until about 11, head to my condo in Boulder, and spend a good solid six hours on the final pass before hitting send on the draft. I’ll reward myself with dinner with some friends, although I have no idea with whom at this point.
So, while I let a little noise drift into my weekend, I’ll have spent the majority of it on signal (my P1). This morning as I was doing my morning infoscan (Daily Web Sites, Twitter, RSS Feeds) I noticed a ton of stuff that I’d put in the noise category. There were apparently a few debates that blew up yesterday – I’ll use the one around Angellist as an example of noise.
I love Angellist and think it’s a remarkably interesting thing. However, it’s of relatively little direct utility to me – of our 35 investments made from Foundry Group, none have come from Angellist. Regardless, it has had an undeniably huge impact on angel and seed investing in the past few years. At the minimum, it’s interesting to watch the social dynamics of it. Will it impact a new generation of successful entrepreneurs and angel investors or will it result in a big money pit? Who knows – check back in ten years.
However, I saw a bunch of tweets about it (including some hostile ones followed by some conciliatory ones from the same people) linking to a handful of blog posts, comments, and more tweets. After reading a few of them, I’m not actually sure what the debate is actually about. I thought it was about “is Angellist helpful or not”, but it quickly evolved into something else.
As I was pondering this, I saw a tweet from Paul Kedrosky that said “I have had more than a few entrepreneurs complain lately about VCs/angels tweeting/blogging up storms, but ignoring emails.” While I’m not 100% sure Paul was building off of the Angellist noise, I know Paul pretty well and am going to guess that at the minimum it inspired his tweet. And his tweet is on the money – I know plenty of VCs who are making a ton of “content noise” these days but don’t seem to be able to respond to their signal-related emails. And if entrepreneurs think VC to VC email is somehow special, I’m included in that category (there are plenty of emails I’ve sent to my VC friends with specific stuff in them that are never responded to.)
Now, this is not criticism of the Angellist discussion or VCs not responding to emails. Rather, it’s an effort to give an example of noise overwhelming signal. In this case, Angellist is the signal. The discussion around it in the last 48 hours is mostly noise (I’m sure there’s some signal in there, but it’s a lot of work to pull it out, which results in a bad signal to noise ratio.)
In my little corner of the universe, signal matters a lot. I can’t consume signal 100% of the time (or my head would explode) so I let plenty of noise creep in, but I’ve got very effectively tunable noise filters. Anyone involved in the entrepreneurial ecosystem should ponder this – I encourage you to focus on amplifying signal, not noise.
As my partners at Foundry Group know, every time I hear the word “marketing” I throw up a little in my mouth. I hate traditional marketing and have always resisted it early in the life of a new company.
Fred Wilson has a phenomenal blog post up this morning titled Marketing. Among other things he demonstrates his mastery of marketing by sending me an email this morning pointing me to the post and saying that he’s channeling me knowing that it’ll likely inspire me to blog something about it and link to his post, increasing the chance that he’ll be the first Google result for the search “Marketing” (he’s already #6 for marketing VC).
When I think off all of the companies in our portfolio that are growing like crazy, they all spend money on marketing. However, it’s driven by an obsessive focus on the customer and the product, rather than a “marketing budget” or “marketing initiative.” And phrases like “social media marketing” and “marketing spend” rarely surface in discussions, and when they do I vomit a little in my mouth.
Of course marketing is a key part of the success of these companies. However, it’s wired into the DNA of the business, not an extra thing that is attached on, like it used to be in the 1980’s and 1990’s as “marketing”, “PR”, “marcomm”, etc. were a key part of every startup plan.
I’m currently in a world of conservation of words as I drive to finish the draft of “VC Financings: How To Be Smarter Than Your Lawyer and VC” due to Wiley on Monday at 5:59am so I’m going to stop now, go brush my teeth again, and remind you to go read Fred’s post on Marketing right now.
I’m at the end of day three of another very intense, but enjoyable and satisfying week. I’ve been in Seattle the past two days and am headed to LA for the next two days before finally making it home after being on the road for the past two weeks.
As I was getting ready to go to bed in order to wake up in time to make my 6:40am flight, I was rolling my one remaining priority for the week around in my head. I was thinking to myself, “two down, one to go.” And I realized I have been using a construct of “three priorities a week max” for a long time.
Now, I do a lot more than three things a week. But, on Monday mornings as I’m going through my daily information routine, I usually carve out a few minutes to make sure I have my priorities for the week firmly lodged in my brain. I limit myself to three as I don’t think you can have more than three “highest priorities” at any given time. When I start the week, I make a clear mental commitment to get these priorities (or P1’s in Zynga speak) done. Each day when I wake up, I think about what I need to do to get closure on these priorities.
Some weeks I have three, others I have one or two. I always have at least one. And they are always important. Occasionally I can’t get one done and it rolls over into the next week, but once something becomes a P1 it stays a P1 until it gets done. And I can never have more than three P1’s. And they should all be able to be completed by the end of the week. But most importantly, they are clearly defined and easily explained (e.g. if you walk up to me and ask me what my P1s are for this week, I should be able to recite them without thinking.)
While I have plenty of things that I’m working on that have a much longer arch than one week, I find this weekly rhythm to be very grounding. I have a clear sense of accomplishment on a weekly basis, I clear the decks of big priorities, and I regularly tackle hard stuff that just needs to get done. I also have many more than three things that I complete each week, including things that regularly come up that are as important (or even more important) that whatever I’ve defined as my P1s for that week. But I don’t shuffle the priorities around – by having the big ones for the week set at the beginning of the week, I have a clear set to focus on whenever I need to re-ground myself.
One more to go. I’ve got two days to get it done. And I’ve got plenty of time on my remaining two plane flights to knock it off.
On Tuesday, I spent the day at TechStars New York. After spending Monday in Washington DC for the launch of the TechStars Network, it was really fun to spend the day and go deep with the first TechStars NY class.
By the time I got to NY on Monday night I was exhausted. My day started at 5am with email, followed by a run, a few conference calls, and then the big announcement at the White House. Several other meetings followed with a final event at the Case Foundation. David Cohen and I then hopped on a train, cranked on emails and interviews all the way to New York, and then I finished the night (after some more email) with a one hour lecture by Skype to a class of San Diego based students.
I usually have no trouble getting up at 5am, even when I’m tired, but on Tuesday I couldn’t pry my eyes open so after a few tries I just slept until I had to get up for my first call. By 10-ish I was at TechStars. I then spent 20 minutes with each company doing what I call the “top of mind drill.”
Having met with every TechStars company at least once, I’ve found that it’s not terribly useful for me to have the team members spend the 20+ minutes we have in our first meeting introducing themselves. I’m already familiar with the companies through the selection process and I just want to get into the mix with them. It’s week four so by now they’ve had tons of mentor meetings (my understanding is that at least 70 mentors have rolled through the TechStars NY offices at this point – thank you mentors!) So – I look for a quick under five minute introduction (“just explain what your business does and how it works”) and then spent the next fifteen minutes talking about whatever is top of mind.
I love the top of mind drill. It starts off with the simple question from me: “What’s on the top of your mind?” Some of the TechStars founders get it immediately and dive into a very specific issue that they are wrestling with. Others ramble around for a few minutes at which point I stop them and suggest they focus on what they think their biggest current issue is. They almost always get it the second time and we end up with ten solid minutes on one or two things that I can give them actionable feedback on.
I was planning to come back on Friday but I decided to detour to Miami Beach to spend the weekend in the sun with Amy. As a result, we cranked through all 11 companies during the day. I bought a purse on ToVieFor (don’t tell Amy – it’s a surprise), agreed to be an early alpha publisher for OnSwipe, and overall had a great time. I’m super psyched about all the teams I met – it feels like the TechStars New York program is very high quality and off to a great start.
We finished up with me giving a talk and doing some Q&A. Given that I had just been at the White House for the Startup America Partnership, we talked about that some. I gave my view of the overall cadence of the TechStars program now that the first month was coming to an end, and then I finished with a story about one of my biggest failures (Interliant) and some of the lessons that I learned from that experience.
I’m writing this from a plane Thursday night heading to Miami where I’m going to try to catch my breath after four deliciously intense days. You’ll hear about the other two – my whirlwind tour of Upstate New York – in a future post.
On Monday I was at the White House to help announce the Startup America Partnership. As part of this, TechStars announced the TechStars Network, an affiliation of TechStars-like programs across the country along with our commitment to the Startup America Partnership to help 5000 experienced mentors work with 6000 entrepreneurs to create 25,000 new jobs by 2015. For an awesome description of Startup America, please read Aneesh Chopra’s (the United States CTO) post on TechCrunch titled Startup America: A Campaign To Celebrate, Inspire And Accelerate Entrepreneurship. By the way, I think it is awesomely cool that the CTO of the United States blogs on TechCrunch!
Over the past eighteen months I’ve gotten to know a number of people in the executive brand of our government, especially at the Office of Science and Technology Policy and the National Economic Council. In general, I don’t engage that much with government, but I have with issues that I care deeply about like the Startup Visa and entrepreneurship. In this case I’ve been blown away by the intelligence, thoughtfulness, tirelessness, and capability of folks in OSTP and the NEC. When I was first involved in discussions around entrepreneurship that later evolved into the Startup America Partnership, I was originally skeptical about what I was hearing. Nine months, and a bunch of discussions later, I think the White House has approached Startup America in a very smart and powerful way and I believe that everyone involved has a major clue about entrepreneurship, the importance of it to our economy and our country in general, and how to help celebrate, inspire, and accelerate entrepreneurship across America.
When I was first approached to talk about how the White House could help entrepreneurs, I focused most of my comments on trying to help the folks I talked to understand the difference between high growth entrepreneurs and small business people. They are both important to our economy, but have very different needs and until recently I didn’t feel like the White House, or other branches of government, really understood the difference between the two.
Fortunately, the White House listened to a number of smart people, including the amazing folks at the Kauffman Foundation. I worked closely with the Kauffman Foundation in the mid-to-late 1990’s both through their partnership with the Young Entrepreneurs Organization as well as being an “entrepreneur-in-residence” (a fancy word for “one day a month consultant”) where I worked with a team on better understanding high growth entrepreneurs. I continued to spend time with the Kauffman Foundation over the past decade, but lost touch with many of the people I’d worked with as the organization evolved. In the past few years, under the leadership of Carl Schramm, the Kauffman Foundation has reasserted itself as the most significant organization thinking about, researching, and advocating for entrepreneurship as part of its mission to accelerate entrepreneurship in America. I’ve gotten to see them in action first hand through work that I’ve done with Lesa Mitchell, Paul Kedrosky, and Bo Fishback and I can confidently say that Mr. K’s legacy is in great hands.
Along with Kauffman, Steve Case, the co-founder of AOL, his wife Jean and the Case Foundation, has been working hard to help the White House craft a public / private partnership to shine a bright light on entrepreneurship and help accelerate it across the country. I’ve never worked closely with Steve but have always admired him from afar and love the leadership team of Steve and Carl heading up the Startup America Partnership.
As David Cohen and I talked about the idea for the TechStars Network over the past few quarters, it became obvious to us that it would be a natural part of the Startup America Partnership as we both strongly believe that mentorship is a core attribute of growing entrepreneurs and entrepreneurship. We both believe that TechStars like programs can existing in over 100 cities in the US, covering many different industry segments (not just software and Internet), and the value of coordinating the mentor, entrepreneur, and investor activity across the entire country is extremely powerful. We had already identified over 100 different accelerator programs in the US that were modeled after TechStars and had helped a number them get started, so as we put together the original members of the TechStars Network, we were psyched that 16 high quality accelerator programs joined us at launch.
It’s important to realize that each of the TechStars Network member programs will be locally owned and operated. We strongly believe in the power of a network model in the construct of expanding entrepreneurship, not a hierarchical centrally owned and controlled one. We think entrepreneurship across the US is not a zero-sum game and we want to play our part in expanding it. TechStars will still run programs that it owns and operates in Boulder, New York, Boston, and Seattle, but we’ll continue to aggressively expand the overall network across the US as well as the world.
I’m extremely excited to play my small part in the Startup America Partnership. For those of you out there questioning how government and entrepreneurs intersect, I encourage you to give the Startup America Partnership a chance. Start by looking at the 27 private organization commitments to the partnership. And, if you want to engage in any way, just email me and I’ll try to figure out how to get you plugged in.