Venture Capital

I love today’s post from Fred Wilson titled The Valuation Obsession . It has some good hints in it about valuation vs. ownership dynamics for founders, employees, and investors. It also calls out the silliness about focusing on the wrong things. Go read it. I’m even a bigger fan of a statement Fred makes in the post that William Mougayar calls out in the comments. “I like to invest in companies that smart people are joining. Capital should follow talent, not talent following capital.“ ...

I’m in Minneapolis with my partner Seth. We had a meeting at Best Buy headquarters, met with a gang from the Mayo Clinic who drove up from Rochester, spent the afternoon at the Techstars Retail Accelerator which is at Target headquarters, and had dinner with Revolar . We are at the Techstars Retail Accelerator again today, then at Leadpages for a board meeting, and wrapping up with an internal Target event and an external startup community event put on by Beta.MN . ...

If you’ve missed me, it’s because I spent a week in Australia. Ten days ago, after being there for a few days, I came down with salmonella poisoning. I’m finally starting to feel normal again although I’m still exhausted. This has easily been the sickest I’ve ever been. While I was gone, the gang at Reboot put up the Reboot Podcast #45 – What’s Love Got to Do with It?- with Fred Wilson and Brad Feld which was a delightful conversation between me, Fred , and Jerry Colonna. ...

The retrades have begun. Since the beginning of the year, I’ve experienced four retrades – two early stage, one growth, and one late stage – and I’ve heard of a number of others. If you’ve never experienced a retrade, or don’t know what I’m talking about, it’s the situation when you have a firm deal agreed upon or a term sheet signed and are proceeding to closing a deal, when the investor (or acquirer) decides to change the terms of the deal. And, in case you were wondering, it’s always to make the terms worse, not better. ...

Amy and I watched The Big Short on Tuesday with my partner Jason and his wife Jenn. We were electrified as we walked out of the theater – all four of us loved it. Jason commented that it was a particularly impressive movie given the subject matter. I couldn’t stop saying “that’s the best explanation of what created the financial crisis that I’ve ever seen.” I remember reading The Big Short in 2010 when it came out. I’m a huge Michael Lewis fan and gobbled it down in a day or two. As we walked to the parking lot, I commented that the big four actors (Gosling, Carell, Bale, and Pitt) in the movie totally nailed their roles. I particularly identified with Pitt’s character Ben Rickert (based on Ben Hockett) who lives in Boulder in the movie. ...

I don’t listen to that many podcasts, but I like ones that are a short (< 45 minute) interview format. I can listen to one of these on a run or a drive to/from my office. Until recently, the only one I was listening to regularly was the Reboot.io podcast . Jerry Colonna, the co-founder of Reboot.io is a dear friend and his interviews are often magical. A few months ago I noticed The Twenty Minute VC by Harry Stebbings. I can’t remember which one was the first one I listened to, but I thought his style and interview approach was great. It was fast, started with an origin story, but quickly moved on to the present and then ended with a set of short questions. ...

In January, Jerry Neumann wrote a long and detailed analysis of his view of the VC industry in the 1980’s titled Heat Death: Venture Capital in the 1980’s . While I don’t know Jerry very well, I like him and thought his post was extremely detailed and thoughtful. However, there were some things in it that didn’t ring true for me. I sent out a few emails to mentors of mine who had been VCs in the 1980s. As I waited for reactions, I saw Jerry’s post get widely read and passed around. Many people used it as justification for stuff and there were very few critical responses that dug deeper on the history. ...

I was in a conversation last week with a friend who asked “do you think this is the beginning of the end?” We were discussing something totally wacky that had just happened that clearly could be viewed as an indicator that we have crested the peak of this economic cycle. Then, earlier today, I was on the phone with one of my favorite lawyers and he made a joke about a deal I’m doing as harkening back to the late 1990s. He asked if I thought it was an indication of the top of the cycle. We had a good chuckle (probably PTSD gallows humor from 15 years ago) and I suggested that they slow down the hiring of the associates at their law firm so they wouldn’t have to lay off so many in the inevitable downtown. ...

There will be a downturn. It might be in a day. It might be in a year. It might be in a decade. We have no idea when it will come, but it will come. I was talking to a VC yesterday who was an entrepreneur in the late 1990s, which we now commonly referred to as the Internet bubble. He was very successful as an entrepreneur and has continued to be very successful as a VC. A VC who has been around for a long time recently told him that you aren’t a real VC until you’ve been through at least one downturn. He commented that while knowing this, it’s hard not to be a cynic when things are going well and he wondered out loud if there was a way to balance optimism and cynicism as a VC. I had a quick reaction about continually being deeply rational about what one encounters, but it didn’t feel very satisfying to me as an answer. ...

Scott Maxwell of OpenView Partners had an awesome post up this morning titled The Truth About VC Value-Add . Go read it – I’ll still be here when you get back. You may recognize Scott’s name – I wrote about him in my post When VCs Don’t Bullshit You . The next person on the list of supporters is Scott Maxwell at OpenView Venture Partners. Scott and I were both on the Microsoft VC Advisory Board that Dan’l Lewin organized and ran. While we had never invested together, I felt like Scott was a kindred spirit. We both spoke truth to Microsoft execs, even though they mostly ignored us. I remember a meeting with the Microsoft Mobile 6.0 team as they were pitching us their vision for Microsoft Mobile 6.5. Both Scott and I, on iPhone 1’s or 2’s at the time, told them they were completely and totally fucked. They ignored us. A year or two later they had less than 3% market share on mobile. We had a blast together and as we went out to raise our Foundry 2007 fund, Scott made several introductions which resulted in two wonderful, long term LP relationships. ...