If the majority of your understanding of how tariffs work is from Twitter, CNN, or Fox News, I encourage you to go read Trump’s China Tariffs Hit America’s Poor and Working Class the Hardest. And, if you think China is paying the U.S. directly for the tariffs, well, no …
We have a lot of hardware companies in our portfolio so I’ve been living in the world of “what to do about tariffs” for several quarters. My fantasy at the beginning was “ignore and hope they go away.” This quickly evolved through “are there any ways around this” to land at “deal with the reality of increased cost, research, and compliance.”
It also became apparent, almost right away, that startups had a huge disadvantage over larger companies that had significant U.S. lobbying activities. We explored a few paths to engaging with the U.S. government around this and basically were told some version of “go away – you are too small and unimportant.”
Once I accepted the reality that the startups were going to have to pay the tariffs directly, that they had little control on what the tariffs would be, how and when they would change, and whether or not they’d get exemptions, I started operating under the assumption that 100% of the cost associated with the tariff would fall on the startup.
So, I started observing what other companies, especially large ones, were doing beyond the lobbying efforts of BigCo that resulted in exemptions. Would they absorb the tariff as an increase in COGS? Would they increase prices? Would they pass on the tariff to the customer?
A little more research showed what is pretty obvious in hindsight. Many BigCos are simply treating the tariff like a tax and passing it on, either directly or indirectly, to the consumer. This is similar to what is happening with state taxes, as states come up with lots of new taxes for out of state vendors, both physical and digital.
This shows up a few ways. While some companies are increasing the cost of their product to include the tariff (or even a markup on the tariff), many companies are trying to hold their price the same while passing the tariff on through other approaches.
Some companies are adding a line to their invoice called “Tariffs” and charging that to customers (I’m seeing this mostly in B2B situations). This looks like:
Product Price: $X
Total: X + Y+ Z + T
Others are including Tariffs in the Shipping line.
Product Price: $X
Shipping and Tariffs: $Y + $Z
Total: X + Y + Z + T
But the one I’m seeing the most is simply including Tariffs in the “Taxes” line, where Tariffs are considered a tax.
Product Price: $X
Taxes: $T + $Z
Total: X + Y+ Z + T
While some BigCos appear to be eating the cost of the tariff, this seems to be the exception. Startups should pay attention, and act accordingly.
If you are a hardware startup and have either seen, or figured out, a different approach, I’d love to hear about it.
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.
Over the weekend, Mark Suster and Fred Wilson each put up awesome posts discussing the idea of profitability in startups. Mark’s is a master class about how to look at the financial characteristics of a startup and Fred’s discusses what he’s been working on with some of his more mature companies.
They are both worth reading right now. I’ll be here when you get back.
Between the spring of 2000 and the end of 2001, I had the worst, most stressful, and most painful business period of my life. While I’m sure the financial crisis of 2008 was worse for many people, for me it paled in comparison to the misery of this 21-month stretch.
A very simple thing happened that year in my world. The market shifted from rewarding (and funding) growth to rewarding (and funding) profitability. It happened over a few quarters, but with the perspective of time and age, it feels like it happened overnight. I remember the trigger point being a 3/20/2000 article in Barron’s titled Burning Up: Warning: Internet companies are running out of cash — fast. I was on the board of several companies on their list of 100 public companies that would be out of money by the end of 2000 and remember that my reaction to the article was anger, frustration with being maligned, and incredulity that Barron’s would write such an irresponsible article.
My reaction was stupid and immature. Instead, I should have paid attention to the message, thought about it, and taken appropriate action. Instead, I, like many of my colleagues (investors, board members, founders, and CEOs), operated in a state of blissful denial until everything blew up.
I learned that the markets reward growth until they don’t. Then they reward profitability. The trick is to be in a position to make the switch when you need to. Lots of CEOs and boards fantasize about this, but don’t actually have a plan in place to do this as they expect the future – where the switch from growth to profitability – will never come. Or, they hope the exit will happen before this moment.
I was too inexperienced in 2000 to understand this. Given the exuberance, many of my mentors, who had been through other financial cycles, chose to ignore this. The phrase “it’s different this time” echoed broadly throughout the land. I succumbed to the siren song of growth at any cost and paid the price – both literally and figuratively.
Now, I have zero prediction for when the markets will shift from rewarding growth to profitability. Instead, I operate under the assumption that this can happen at any time, and the best companies can grow quickly and either be profitable or be able to become profitable by making manageable modifications to the cost structure within whatever cash constraints they currently have.
Some version of this was on my mind when I wrote the post titled The Rule of 40% For a Healthy SaaS Company in 2015 and the post titled Is 2017 The Year Of Flat Headcount? earlier this year. While I think about this regularly, Mark and Fred’s posts prompted me to pile on to their point and write about it.
There’s a special bonus in Mark’s post, which is in the section titled Revenue is Not Revenue is Not Revenue. He does a nice job of discussing the importance of understanding gross margin and has a line that made me smile.
If you’re shaking your head and thinking, “duh” I promise you that even some of the most sophisticated people I know get off track on this issue of “gross revenue” versus “net revenue.”
I’d add that this includes getting confused about GMV and MRR when talking about revenue and amazingly occasionally confusing revenue with income. It keeps going, when one asks the question “does profitability mean being EBITDA positive, cash flow positive, or net income positive? Or something else?”
If you are a CEO of a company and any of this makes you nervous in any way, I encourage you to grab a few of your investors who have been investing in startups for at least 20 years, take them out to lunch, and talk through these issues with them to understand them better and figure out whether or not to care about this in the context of your company.
I’m not a predictor so you won’t find me participating in the “best/worst of 2016” and “predictions for 2017” lists. But there is a trend that feels inevitable to me: “Startups everywhere.”
While Agent Smith was wrong, I don’t think I am. When the phrase “Startup Communities” started to become mainstream around 2012, I made the strong assertion that you could create a startup community in any city with at least 100,000 people. I used Boulder as a canonical example of it in my book Startup Communities: Building an Entrepreneurial Ecosystem in Your City and have been beating the drum about startups everywhere ever since.
While the meme that the only place to build a company is in Silicon Valley has softened, there’s still a strong belief that the best place to be if you are a first time entrepreneur is Silicon Valley. My argument is, and has never been, against Silicon Valley, but rather for the rest of the planet.
I saw three articles yesterday that reinforced the inevitability of startups everywhere.
- Millennial Innovators Are About to Leave Big Cities
- Here’s how small-town America is primed to beat Silicon Valley in innovation
- The Bright, Sustainable Future of Chicago’s Technology Ecosystem
When I reflect on where some of our investments are, they are in cities like Portland, Seattle, Los Angeles, Santa Barbara, Minneapolis, Boulder, Denver, Charlotte, Lexington, New York, and Boston. And then there’s Techstars which is now all over the world.
Sure – we have plenty of investments in Silicon Valley, or whatever you want to call it. I’ve asserted for a long time that Silicon Valley is a collection of startup communities, which includes San Francisco, Marin (the first board I was on – in 1994 – was for a company in San Rafael), Oakland, Redwood *, Palo Alto, Mountain View, Menlo Park, and Sunnyvale. Or you can just call it San Francisco, Oakland, and the Peninsula. Or maybe toss SOMA in. Or, well, does it really matter?
As a bonus, I’ve been hearing Amazon referred to regularly by mainstream media (and some people in the tech world) as a Silicon Valley company. Having invested in and spent a lot of time in Seattle over the last 30 years, I smirk whenever I hear this. I love seeing articles like How Amazon innovates in ways that Google and Apple can’t which should prompt entrepreneurs to Think Different (sorry, I couldn’t help myself).
As a bonus, I leave you with Amazon’s patent for a flying warehouse.
While Silicon Valley is an amazing thing, if you are in the rest of the world, you are in a special and interesting place. Don’t lose sight of that.
A few weeks ago I noticed my post How Can This Be A Billion Dollar Company? getting a surprising number of new Twitter shares. Since I wrote it in the summer of 2014, it must have been picked up somewhere and hit a new chord. I wish I had titled it what was in my mind when I wrote it, which was “How Can This Be A Billion Dollar Company and other bullshit VCs ask early stage companies” – that would have been more fun to see in my Twitter feed.
I took the weekend off, spent time with friends, had an awesome Valentine’s dinner with Amy, and read Barry Eisler’s newest book The God’s Eye View (excellent – five stars – I love everything Barry Eisler.)
While going through my daily reading this morning, I came across a bunch of posts talking about how the sky was falling, Silicon Valley was in turmoil, financing was drying up everywhere, and all the unicorns were doomed.
In the midst of all the very predictable noise, much of it not really saying anything particularly insightful, were three posts by friends that I thought were extremely useful and very relevant. I encourage you to read each of them slowly and think about both what the writer is saying and what it means for you and your company.
Let’s start with Mark Solon’s Some Gray Haired Insights For New Investors. Buried deep within in a nice reminder of one of my fundamental beliefs.
“I remember a series of conversations I had with Brad Feld in 2008 about his perspective on investing through various parts of economic cycles. Brad was (and is) resolute in his belief that creating outsized returns in the venture industry demands ignoring the macro environment as it relates to investment pace.”
Mark says plenty of other things, along with walking us through some dynamics in 2008 around the macro, startups, and the global thermonuclear financial freakout that was occurring.
Ok – let’s move on to Mark Suster’s What Most People Don’t Understand About How Startup Companies are Valued. Mark also has a nice call out to me that helps explain why he writes posts list this one.
“When I started blogging it was because I was inspired by Brad Feld. When I was an entrepreneur there was no public information about how term sheets worked or how investors thought. Brad was openly writing about this and it felt like he was giving the VC playbook away for free! I always wanted to work with Brad for this reason so I started blogging because I figured if transparency worked for Brad I would try the same approach. Nearly EVERY smart VC I know has been talking privately for the past two years about how ridiculous valuations in private markets have gotten and how a reckoning was coming. Most prefer not to say this publicly for two reasons: 1) they have an entire portfolio of startups, many of whom are raising capital and 2) they prefer not to be attacked publicly or seem “anti entrepreneur.” But I promise you they’ve been saying it privately. So my talking up over the years is more trying to shine transparency on what we’re already saying in private rooms.”
Mark is on a monstrously awesome blogging roll right now. This post, along with the last N that he has written, have been outstanding. While I don’t agree with everything Mark says, it’s super important context for what is going on.
And then Alex Iskold, who runs Techstars New York, reminds us why this is a particularly good time to create a startup.
When you are done reading those three posts (and – if you haven’t – go read them – seriously – it’s worth the time) you should sit quietly for five minutes. Take a very deep breath. Figure out what you can actually impact today, and then go do it. And shut out all the rest of the noise.
On Saturday, I polished off Hot Seat: The Startup CEO Guidebook. I started it last weekend at the tail end of my Weekend Reading on Startup Communities but four books weren’t in me so I didn’t finish it.
It was excellent and is now on my “all startup CEOs must read” list. My recommended book list for startup CEOs is very long, but there are only three books on the must read list.
- Startup CEO: A Field Guide to Scaling Up Your Business by Matt Blumberg
- The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers by Ben Horowitz
and now #3: Hot Seat: The Startup CEO Guidebook by Dan Shapiro.
All three are from experienced CEOs. Each is a delightful mix of stories, advice, and experiences. They are all contemporary, highly relevant, and fun to read. Regardless of the number of times you’ve been a startup CEO, from having started ten companies to being an aspiring CEO/founder, you will learn a lot from each of them.
I don’t think I’ve ever physically been in the same place as Ben, but we’ve exchanged emails in the past and he was willing to allow me to republish his classic essay The Struggle in the book I wrote with my wife Amy – Startup Life: Surviving and Thriving in a Relationship with an Entrepreneur. In contrast, I’ve known and worked with Matt since 2001 when I first invested in his company Return Path (well – it’s a little more complicated than just an investment – see my post Return Path Launches Email Intelligence from 2012 where I recounted some of the story.)
Return Path is an extraordinary company that I’m proud to have been involved with for the past 12 years. At our board meeting last week, Matt gave me and Fred Wilson our 12 year anniversary gift – a pair of red Return Path-branded Adidas sneakers. I still vividly remember the phone call Fred and I had where we cut a deal to merge two nascent companies – Veripost and Return Path – in what became Return Path. We cut a deal in 10 minutes – I offered up a 50/50 merger and Fred suggested he wanted a little more since Return Path had raised 3x the money Veripost had. I responded with “how about 55/45″ and Fred said “it’s a deal.”
Matt has become one of my best friends and I treasure every minute I get to spend with him.
Dan is a new friend. The first email I remember getting from him was from 9/3/13, titled My new project: Robot Turtles, and he acknowledges in Hot Seat that it’s the one time he spammed everyone in his address book. I don’t know why I was in his address book, so I asked Dan, and he dug up his very first email to me, which happened to be about the term sheet series that my partner Jason Mendelson and I wrote that lead to our book Venture Deals.
The first substantive email exchange we had was on 3/18/15, as a result of an intro from Ben Huh, the CEO of Cheezburger and another long time friend. We went back and forth on a rapid fire thread about Dan’s newest company Glowforge and the round he was starting to raise. We agreed to terms on a financing on 4/20/15 and closed a $9m financing with True Ventures on 5/8/15, at which point Amy and I went to Paris to celebrate (actually, we just went on vacation for one of our quarterly off the grid vacations.) There were a number of articles around the financing, but the best – and most thorough explanation of the company – was in Natasha Lomas‘s Techcrunch article Seattle’s Glowforge Is Building A Maker Machine To Challenge Amazon Prime.
Suffice it to say that in 75 days, I’ve gotten a good dose of Dan and am having an absolute blast working with him. He’s definitely got a healthy dose of evil genius combined with deep wisdom from being around the startup block a number of times. He’s tireless, intense, but delightfully funny and witty. He’s got extremely broad range as a CEO and entrepreneur, which comes through in his daily activities as well as his writing.
Which brings me back to Hot Seat. Like Matt and Ben’s books, it’s very fast paced. The chapters are short, written in first person, and easy to read. He’s not shy about calling things out clearly, including his own crazy experiences, especially the things he totally fucked up or had no idea about when he first encountered them. His examples are great, including some from mutual friends including Rand Fishkin and Ben Huh. The book is well organized and easy to dip in and out of. He flogs Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist, which I put in the flattering special bonus category. And – he’s got great footnotes in each chapter which give you a special dose of his sense of humor.
I hope to get to work with Dan for a long time on Glowforge. But, regardless, I know I’ll be regularly recommending Hot Seat: The Startup CEO Guidebook to every CEO I know.
Though it may seem as if politicians in Washington, D.C. have a hard time agreeing on anything, those on both sides of the aisle seem increasingly keen to support entrepreneurs and their communities. Some recent examples include the passage of legislation expanding crowdfunding under the JOBS Act and meetings similar to one hosted last month by the Global Accelerator Network in which we worked with the Small Business Administration to gather 16 accelerators to demo their programs for the White House and SBA funders.
Much progress has been made to ensure that those in Washington are hearing entrepreneurs’ concerns, but we still have a long way to go – especially with connecting politicians to those in the seed-stage technology sector. Politicians in our federal government are listening to entrepreneurs, but we very rarely see congressmen personally sit across the table from early-stage tech investors and their founders. When this does occur, however, representatives learn much more about what startups really want and need than they would hearing feedback through second or third parties, and they’re much more likely to take supportive action.
That is why the Global Accelerator Network is thrilled to support the first ever Startup Day Across America on August 29. This one-day bipartisan event, led by the U.S. House of Representatives Caucus on Innovation and Entrepreneurship, will connect members of Congress with startups and accelerators in their respective districts. We believe this is a great opportunity for startup communities to connect with their congressional representatives – both to highlight the positive contributions startups bring to their communities, as well as raise awareness about startups’ needs on a local and national level.
If you are interested in learning more about the Startup Day Across America, please contact Eve Lieberman in Congressman Jared Polis’ office who will connect you with the person leading the charge in your district.
I’m intensely proud of both the amazing startup community in Boulder as well as the many significant companies that have been – and are being – created in the little town of 100,000 people I call home. I regularly talk about the ones we’ve invested in through Foundry Group, but this only covers a part of the awesomeness that is going on here as Foundry Group has a very tight thematic focus.
As Boulder continues to gain visibility as a great place to create companies, I’ve decided to highlight some of the entrepreneurs – and their companies – who have contributed to Boulder in significant ways.
Dan Caruso, the co-founder/CEO of Zayo Group, is one of them. I first met Dan around a decade ago when Howard Diamond, another incredible contributor to the Boulder startup community, introduced us. Howard was at Level 3 at the time – they had acquired his previous company Corporate Software (which I was an investor in) – and he knew Dan through that experience. Over the last decade, I’ve gotten to know Dan, watched as he’s built an incredible $6 billion market cap company headquartered in Boulder, while contributing relentlessly to the Boulder startup community.
I asked Dan to write a guest post talking about Zayo’s story. It’s great – and follows. Dan – we are lucky to have you – and Zayo – in Boulder.
“Fiber in Downtown Boulder?” was the title of an email sent to me by Brad, after he had heard from one of his CEOs that Zayo is constructing fiber in Boulder. “If true, how can I help?”, he continued.
Years ago, when I first met Brad, I didn’t “get” him. I had recently left Level 3 Communications. I was one of the day one execs of LVLT, as well as an early member of the management team of MFS Communications. It is understandable that I considered myself to an accomplished entrepreneurial-minded executive. Yet I felt so disconnected to Brad and the culture around him. It took me several more years to understand Brad, and during this time I developed a deep appreciation of his passion for entrepreneurism. I was drawn to his unique ability to promote ideas, create awareness, and fuel momentum. I sought to mimic his propensity to leverage social media.
“How can Brad help?”, I pondered.
“Help me create more awareness about the contributions that Zayo is making toward the Front Range entrepreneurial community.
Brad, entrepreneurial as ever, delegated the task back to me. “How about you write a post for my blog?”
Sensing an opportunity, I responded “How about I write two?” This is the first. The next one will describe our extensive fiber build across the front range.
I will provide a quick synopsis for those who prefer a two-paragraph summary. In late 2006, Zayo was a pure start-up headquartered behind Nick and Willy’s on 8th and Pearl. Today, Zayo has eclipsed $1.1Bin revenue and $600M in EBITDA, leading to an estimated Enterprise Value in the vicinity of $6B. We have 3 offices in Colorado, with our headquarters on the 2nd floor of 29th Street mall. In addition to directly employing 250 people across the Front Range, we indirectly employ many more related to our multi-million dollar fiber build across the front range. Dozens of recent graduates of Colorado’s university system are Zayo-ites.
Boulder is an incredible entrepreneurial community, and I enjoy being immersed in it. I am excited to see this innovative energy spreading across the front range, through Startup Colorado and other initiatives. I am proud that Zayo is a vibrant example of our community’s robust start up ecosystem.
For those who prefer a slightly longer version, here is the Zayo Story in a nut shell.
In June of 2006, we sold what remained of ICG Communications to Level 3. The ICG team went to Level 3 as part of the transaction. I didn’t.
Two years prior, ICG was a public company preparing for its second bankruptcy. My group was the only that offered an alternative to Chapter 7/11. We paid them $8.7M and took them private. By the time we sold to Level 3, our total proceeds to equity owners and management were $225M. For those without a calculator nearby, that’s a 25X return in 2 years.
Nonetheless, I was out of a job.
Though ICG was headquartered in south Denver, we opened up a small satellite office on 8th and Pearl — right behind Nick and Willy’s. In the sale to LVLT, we kept a portion of this office. One by one, many of my colleagues extracted themselves from Level 3 and pondered “what now”. By late 2006, we formed Communications Infrastructure Investments. Today, CII d/b/a Zayo Group.
Our investment thesis was simple. Bandwidth was busting — and this would continue beyond our children’s lifetimes. Fiber was the workhorse of the Internet — and nothing would alter its importance for as far as the eye could see. Most importantly, drinking too much tequila leads to a hangover that makes it hard to look at — let alone taste — tequila again.
Point 3 requires more of an explanation. The late 1990s saw a fiber tequila party that started out wild — investors poured money into start-ups and fiber networks were constructed throughout the land. Way too much fiber tequila was gulped, and the ensuing telecom meltdown caused a hangover of epic proportion. As we hit the early 2000s, investors and strategics felt their stomach’s gargle at the sight of a fiber-labeled tequila bottle. You know that feeling?
Our ICG experience gave us different perspectives. First, many fiber networks had consolidated into a handful of platform. The balance between supply and demand of bandwidth was rapidly improving.
Second, we saw an opportunity to be a consolidator of the remaining fiber properties. We called these fiber orphans — companies whose roots dated to the telecom boom but which had not yet been consolidated into a nationwide platform. These companies somehow navigated their way through the meltdown. By 2007, they were doing quite well. However, the tequila hangover persisted and few investors or strategics were paying attention to them.
Third, we developed a thesis around “Bandwidth Infrastructure”, a term we coined. We did not desire to be a traditional telecom company. Instead, we sought to provide raw fiber, wavelengths, ethernet, IP, and technical space to those entities that needed a whole lot of bandwidth. Circa 2007, this was considered a ridiculous approach. Even today, we are sometimes poked by rivals for our infrastructure approach.
Between 2007 and 2013, we acquired 25 companies. We now have over 80,000 route miles of fiber, mostly in the U.S. and London. Our fiber is connected to nearly every significant colocation, hosting, and carrier hotel facility. Our biggest customers are the wireless carriers and big content/Internet companies. We raised $2.7B of debt and $870M in equity in three rounds. Our initial investors have not sold, though they are enjoying a 4 – 5X mark. Our equity IRR has averaged around 50% since inception.
Zayo is in this for the long term… the very long term. My aspiration is to be at the helm of Zayo for a few more decades. Zayo will be to bandwidth what Amazon is to the cloud and what Equinix is to colo. Zayo will foster the development of additional start-ups, either within Zayo or as spawning-offs. The bandwidth supplied by Zayo will positively effect the lives and livelihood of countless people throughout the world. As Zayo continues its quest, it will bolster Boulder and the Front Range’s reputation as a top tier centers for Entrepreneurship and Innovation.
Following is a guest post by Zack Rosen, co-founder and CEO of Pantheon. Pantheon is building “A big badass platform that will run 30% of the Internet.” They are making it easy for professionals to build, launch, and run websites. Pantheon is one of the Silent Killers in our portfolio – and I’m immensely proud of the progress they are making and excited about their future.
This post was an internal email to the Pantheon team following a major feature release (Multidev). When I saw it, I asked Zack if I could post it on my blog as an ode to all startups. Many of you are out on the frontier, and I thought Zack captured the essence of it in his message to his team.
From: Zachary Rosen
To: Pantheon Staff
Date: Thursday, July 18, 2013 2:19:42 AM
Subject: Welcome to The Frontier
The Frontier Thesis was a theory advanced by historian Frederick Jackson Turner in 1893 that American democracy was formed by the American Frontier.
“American democracy was born of no theorist’s dream; it was not carried in the Sarah Constant to Virginia, nor in the Mayflower to Plymouth. It came out of the American forest, and it gained new strength each time it touched a new frontier.”
You may have noticed me acting slightly more neurotic or animated lately. There is a reason for that. Apologies if I am bugging you out—it’s going to get worse.
I am very, very excited to be back here, on The Frontier.
I’ve been here before.
Then one day I messed up, clicked the wrong button, and ordered hundreds of dollars worth of non-refundable, esoteric, nerdy used books…and over-drew my bank account. I remember thinking when they arrived, “Well, I guess I may as well read all of these stupid books that bankrupted me.”
I’m very glad I did.
That summer, this bumpkin/badass former governor from Vermont running for president (Howard Dean) had found this guy Joe Trippi to run his presidential campaign. It became clear to me that Joe had read the same books I had, and that he intended to see if the shit in the books actually worked.
I had to be there. The summer of 2003, I started an open-source (Drupal-based) project for the campaign (Deanspace), got a job in the campaign HQ in Burlington, VT, dropped out of school, and had about the most profound professional experience one could at age 19 in 2003.
I spent a year on the Dean campaign Web Team during the presidential campaign of 2004. We lost the campaign badly, but we won a major battle on The Frontier of Global Politics in the age of the Internet.
The Dean campaign Web Team proved a very simple but important idea to the world that year. We proved that you could challenge the political establishment and beat them at their own game (fundraising) by appealing directly to supporters via the Internet. That idea—which our team made work—has changed the world.
Barack Obama would not be president today without the path the Dean web team blazed. Knowing this has permanently altered the way I view my work.
Friends from the campaign went on to run Obama’s Internet operation. You’d have a hard time making the case that Obama could have won without their help.
That experience set the bar for me in my career. Ever since then, if my work is not on that scale, then I feel like I am wasting my time on this planet.
I’m at home back here on The Frontier.
What it’s like on The Frontier
For me, launching Multidev put Pantheon clearly on The Frontier. We’re doing new shit the world has never seen before.
Here are a few of my thoughts about our time here:
1. You know that quote from Margaret Mead? “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.” The Dean campaign Web Team was 20 people, about the same size as Pantheon is today. Small teams can do huge things.
Accomplishing huge things is not easy. On The Frontier, there’s no rule of law and there are no guarantees. There are consequences if we get it wrong. We won’t be destitute, but we’ll always wonder if we could have done better.
On The Frontier, we know this, and we still go after the big problems, six-shooters blazing.
2. There are not very many people out here on The Frontier. It can be strangely quiet and peaceful. Everyone has so many opinions when you make your journey out! “Well, what will you do when X happens?” “That won’t work.” “I don’t get it.” Or, my favorite, “I’d do it this way.”
But when you get out here, you get to see what will really work and what won’t. You survive by your wits. You learn to listen to and trust your gut.
How many other people are out here working as hard as we are to fundamentally fix website tech? …. *crickets*
3. What we are doing will look obvious in retrospect. “Duh, you can raise a ton of money for a presidential campaign online” is now common knowledge, but in 2003, we were looney. “Duh, websites are developed, launched, and run in the cloud” will be common knowledge soon enough.
The biggest ideas are usually the simple ones. They seem so confusing and hopeless before, somehow, all of a sudden, they are taken for granted.
Before any big city, there was once The Frontier.
4. We are blazing the path for everyone else. We are the leaders in our market, and they will follow, after we’ve found and laid the path. The entire world will follow us after we’ve found out how to make building, launching, and running websites easy.
Notice the other paths laid by other teams out here on The Frontier. This work is holy. When you pass another team blazing their path, tip your hat. This shit isn’t easy. Be gracious on The Frontier.
5. This is a special experience. We’re not saving the world directly. We aren’t surgeons in the O.R., or soldiers in harm’s way. We’re engineers laying down foundational tech that others will build on top of. Most will never see our work. But, through our work, we have the opportunity to shape what’s possible in the world around us.
With Multidev we set a bar for the software industry on what is possible when custom software is built, launched, and run in the cloud. The other leaders in our space are behind us. We are the ones who have built a cloud platform with such deep (full website stack) and broad (dev -> deploy -> scale lifecycle) capabilities, so we get to be the ones who discover what is possible.
You will remember this work, your time on The Frontier, for the rest of your life.
The JOBS Act, which was approved by Congress and signed by President Obama with much fanfare over a year ago, was intended to help small business. It is, after all, called the Jumpstart Our Business Startups Act. A number of the provisions have been slow to get written into law and the SEC has missed their deadlines on a bunch of stuff, including the often talked about equity crowdfunding activity.
Recently, the SEC weighed in on a number of the things they were required to with much fanfare. Fred Wilson wrote Let The Games Begin in response to the SEC lifting the General Solicitation Ban. However, Fred, and many others, missed the new proposed Amendments to Regulation D, Form D and Rule 156 under the Securities Act. And they look like one scary mess that could undermine the whole thing if approved.
Some posts with analysis of this have finally started to appear. A good summary is by Joe Wallin at his Startup Law Blog titled Proposed Rules Hard on Startups. And I’ve gotten a number of emails with similar analysis. My favorite summary was from a very experienced law firm.
“The SEC giveth (as mandated by Congress) and taketh away (by its own mandate).
It is incredible that the SEC finally got around to implementing rules to remove the ban on solicitation (as it was required by statute to do so in 2012), but concurrently proposes new rules intended to retard the benefits of easing the capital formation process (the goal of the JOBS Act).
The new proposed rules will require a Form D to be filed 15 days in ADVANCE of a Reg 506 offering and after, substantially expand the scope of information required to be disclosed in Form D and disqualify an issuer from relying on Rule 506 for one year if the issuer does not comply with the new filing requirements (including a requirement that the Form D be timely filed). The new rule also would require filing with the SEC of all written general solicitation materials. So much for deregulation!”
Seriously? More commentary from one of the emails I received follows:
“The new rules and rule proposals were a kind of packaged effort to address the Congressional mandate in the JOBS Act, while attempting to maintain investor protection. Apparently, the package was enough to mollify Commissioner Walter, but Commissioner Aguilar was unwilling to go along. In his view, the rules adopted come at the expense of investor protection. He reiterated that the record supports the argument that elimination of the ban on general solicitation will facilitate fraud and viewed the adoption of the rules without appropriate safeguards as “reckless.” He also contended that the proposal to study the practical effects and then adopt rules if necessary would come too late – closing the barn door after the horses have already escaped. Although he voted for adoption of the disqualification rule, he also objected to the narrowing of the categories of individuals covered, as well as the application to only prospective events, especially given the two-year delay in adoption of the final rule. On the other side of the aisle, Commissioners Paredes and Gallagher both objected to the proposal to facilitate monitoring of market changes resulting from elimination of the prohibition. They both viewed the proposal as placing an undue burden on capital formation and undermining the objectives of the JOBS Act.”
While the “proposed rules” are still “proposed”, hopefully the SEC will reject these new proposals, especially in the context of Congress’s mandate to Jumpstart Our Business Startups.