VC

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. ...

Earlier this week I did a one hour interview on “Meet the Angels” sponsored by Tech Coast Angels (one of the LA Angel groups.) It was supposed to live but for some reason there were some problems getting into the webcast. It’s now up on the web – if you were trying to watch it and couldn’t, it’s posted below. Live video event with Brad Feld from TechCoastAngels on Vimeo .

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.”) ...

Following is a post on super angels I wrote yesterday for PEHub . In the beginning, there were angel investors. And it was good. As individual angel investors made more and more investments, they became super angels. One day a super angel woke up and thought to himself, “Gosh, I could do a lot more investments if I had a fund.” And so the super angels became micro-VCs (or “institutionalized super angels”). Everyone was excited and on the seventh day they did another deal instead of resting. ...

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).” ...

Last week saw an explosion of discussion around seed investing, including plenty of negative comments around VCs as seed investors. While I agree that many VCs are crummy seed investors, I think there are some that are excellent seed investors. This prompted me to write a post titled AngelList Boulder and Some Thoughts on Seed Investing where I promised to write up some of my thoughts on how and why VCs could be good seed investors. ...

Ah – well – another day passed and there was once again a ton of chatter around angel investing. A lot of it was prompted by AngelConf 2010 which you can watch recordings of on Justin.tv (AngelConf 2010 Part 1 and AngelConf 2010 Part 2). While there continues to be plenty of negative VC tone and “disruptive change is here” (ala traditional VC is over ), there were also some great nuggets, including my favorite line from Joshua Schachter of typical VC behavior of SHITS (Show High Interest Then Stall ). ...

I was in a meeting with Rich Miner from Google Ventures on Friday with some entrepreneurs we are working with on a potential investment. While the team isn’t a rookie team, they’ve never worked with VCs before and they’ve been wrestling around the dynamics of how to interact with the two VCs in the room (me and Rich) and the various angels that are part of the seed round we are planning to do. ...

The video from the second panel I was on at Google I/O 2010 – Technology, innovation, computer science, & more: A VC panel – is up. Dick Costolo – the COO of Twitter – is the moderator and my fellow panelists are Albert Wenger, Chris Dixon, Dave McClure, and Paul Graham. Someone didn’t like the title so it was renamed “VCs Who Code” but apparently that didn’t stick with the official event panel namers. ...