Venture Capital

Congrats to my friends at Avalon Ventures on raising their new $200 million fund. I’ve been friends with and co-invested with Rich Levandov , one of Avalon’s partners, since the mid-1990’s, most recently in Standing Cloud , Zynga , and NewsGator. I’ve gotten to know several of Rich’s partners over the past few years and recently had a wonderful Do More Faster book tour dinner hosted at Avalon’s San Diego office by Kevin Kinsella (a fellow MIT-grad turned VC.) ...

On the heels of all the noise around Groupon’s $100m financing at a $7.5b (billion) post valuation, I thought I’d put out a call for “old VC term sheets – prior to 1990.” My partner Jason Mendelson and I are working on a book titled Venture Financings: How To Look Smarter Than Your Lawyer and VC. The final draft is due at the end of February (feel free to give us your sympathy if you happen to see us between now an then) and based on my previous experience with our publisher (Wiley) on Do More Faster, I expect it’ll be out by the end of Q211. ...

The latest Brad Feld Amazing Deal is online. A few weeks ago I was approached by Sympoz, a company in Boulder that is excited about building online classrooms where anyone can take a courses in categories like Wine, Personal Finance, Cooking, etc. The have a nice looking site, and their classes are self serve, at your own pace, in HD. They have forums where you can interact with fellow classmates and teachers. Classes range in price from $39 to $99. ...

I’ve been having a blast with Brad Feld’s Amazing Deals which was created by Deal Co-op, a recent graduate of the TechStars Seattle program. Last week’s deal – the Agloves – ended up getting picked up on Lifehacker and the limit of 500 gloves were sold (at 50% off) overnight! As part of the experience, I’m learning a lot about the Daily Deal business, how it works, what the actual economics are, and what the friction points are. ...

There have been a number of thoughtful “early warning sign” posts in the past few days including one from Fred Wilson (Storm Clouds ), one from Mark Suster (What Angel Investing & Florida Condos Have in Common ), and Roger Ehrenberg (Investing in a frenzied market ). The seed investing phenomenon of 2010 has been awesome to watch and participate in. The velocity of activity from individual angels, angel groups, seed VCs (the correct phrase for most of the “super angels” which have now raised actual funds), and even traditional VCs has been on a steep climb throughout the year. When the numbers are tallied up at the end of the year (I’m sure someone will do it – and it won’t be me) I expect there will be all kinds of new records set. ...

The new deal on Brad Feld’s Amazing Deals is up and is for Agloves. As winter approaches, we all need gloves that we can wear and operate our iPhones while walking down the street. Agloves are infused with silver, which allow them to work with any touchscreen device. No more freezing my fingers as I check email outside in the winter. The deal which runs through the end of the day of Friday is for $9, or half off the retail price (which I happily paid several weeks ago.) ...

I was thinking more about my post from yesterday titled Addressing The VC Seed Investor Signaling Problem . There were a bunch of good comments that caused me to realize that I wrote the post from the perspective of a VC, not an entrepreneur. As I mulled the comments over, I realized something very specific. If a VC invests in a seed round but then doesn’t invest in the next round, there is a signaling problem, regardless of what the VC does with their investment. ...

One of the most common criticisms of VC investors making seed investments is something that has become known as “the signaling problem.” The explanation of this problem is that VCs create a “negative perception” about a company if they make a seed investment but then don’t follow through and make a next round investment. Another way to say this is that a VC creates a “signaling situation” with their seed investment – if they don’t follow on in the next round they are “sending a signal” that something is wrong with the company (hence the label “signaling problem.”) ...

Last night I printed, signed, scanned, and emailed two signature pages. As is my custom of not keeping anything around, I tore up and tossed the sig pages and then deleted the files. This morning I woke up to an email saying “We didn’t get your signature pages. Can you please send them.” I just went through the same print, sign, scan, and email process again. This is so profoundly stupid. I sent a note yesterday afternoon in reply to the email thread asking if I was all set to go that said “I’m all set to go.” A bunch of lawyers were on the email thread (mine and the company’s.) We are wiring the money today. Now they have some pretty scanned sig pages also. ...

My partner Seth Levine has a detailed post up today titled Trada – from the beginning that describes the creation and financing of Trada. Foundry Group is the seed investor in Trada and Seth’s post describes one example of what I think is effective VC seed investing. The meat of the funding story follows: “Of course coming up with the idea is the easy part. Executing against that idea is another matter. In this case neither Niel (nor I) had any interest in creating a traditional syndicate to fund the company. Instead we quickly put our heads together about a financing (we like to say it was over beers, but the truth is more mundane – we hammered out the details in a 10 minute conversation in the conference room of the Foundry office). We decided that we wanted to bring in some experts to help us with the business and together flew around pitching the business to a small handful of strategic angel investors to pull together a small syndicate that became the initial Trada investor base. Niel and I hammered out a second financing in similar fashion (again around the Foundry conference table, this time without the need for an angel roadshow). It’s a great example of how we like to work with entrepreneurs – especially those that we have a long history with. We like to be involved early (in this case before an idea for a business even existed) and we think of our angel investments as a down payment on a subsequent investment in the business (we’ realize that we need to give early businesses some time to develop).” ...