The title of this post is meant to be taken literally, not metaphorically. Do you control your domain?

Last Friday one of our portfolio companies briefly lost control of its domain. It wasn’t the fist time we’ve seen this happen and, as you can imagine, the result could have been disastrous (in this case we were able to lock down the domain before anything nefarious happened, but people don’t steal control of your domain for anything other than doing bad things, so it was lucky that we were able to avoid a serious issue). Different registrars have different rules for transferring domains around. In this case all it apparently took was someone writing the registrar and claiming the domain was in fact theirs. We believe (but aren’t positive) that the registrar did send an email to the contact listed in our account stating that the domain was to be transferred unless action was taken by us (that the process is that simple is a matter for another post altogether). But this email either didn’t get to us or was not acted upon promptly enough to prevent the transfer. The company then jumped through hoops for several hours to get the domain first locked down (so the party who stole it from us couldn’t redirect it) and ultimately transferred back.

We rarely (really never) talk about domain security when we’re talking about other security measures that companies take to lock down their data, transact securely, etc. But clearly it’s extremely important to make sure that you have (and always maintain) control over your domain. This starts with making sure your domain is a corporate asset – meaning that it’s not in the account of a founder but in an account that is owned and controlled by the company itself. It’s also extremely important to make sure the contact information in this account is up to date. And that you pay attention to any notices that your registrar might send you (in a timely mannor).

So seriously. Make sure you are the master of your domain.

One of the many things that makes Boulder a great city for start-ups is its incredibly collaborative environment (see posts on my love of Boulder here and here). From the willingness of mentors to help out TechStars companies, to collaborative efforts around recruiting great talent to our city, I’m constantly amazed at how many people are working to make Boulder an amazing place for businesses to thrive.

Today there’s another new initiative launching to help young tech companies in our community – Trada is opening CodeSpace, a free co-working space dedicated to startup developers and software engineers. CodeSpace will be located in Trada’s downtown Boulder offices and will have over 2000 sq ft of space dedicated to the effort.

While there are many places where non-technical entrepreneurs can meet up in Boulder to discuss their startups, there are few places where software developers can camp out for the day, week or month and work together on a project. We wanted to add this environment to the mix of coffee shops, traditional co-working spaces, and rented offices in Boulder. And in CodeSpace you don’t even have to buy coffee to camp out there (in fact the coffee is on Trada!).

But you do need to apply. There are spots for three dev teams (1-4 people each) for semi-permanent space as well as come-as-you-are dev and co-working space (with whiteboards, internet, access to caffeinated beverages, etc).

To start, CodeSpace will be open 8am to 5pm Monday through Friday. The program will run through the summer with the expectation that it will extend/expand in the fall as we learn what works best.

To apply for one of the 3 dedicated co-working spaces please visit trada.com/codespace

Fred Wilson put up a post today that grabbed a slide from a recent presentation Mark Suster gave at a Founder Showcase event. The chart (and Fred’s post) back up with numbers the qualitative argument I was making in my recent post on Pattern Recognition (I wish I had these data when I wrote my original post!).

In my post I argued that while there is plenty of talk about a handful of high flying companies (Zynga, Twitter, Facebook, etc.) that vast majority of venture back companies can expect significantly more modest outcomes. In fact history suggests that a majority won’t even return invested capital to investors. All this talk about the stratospheric valuations of this small group of companies however has investors fundamentally misjudging the chance that their latest investment will do the same. As the chart from Mark’s presentation clearly shows, not only is it the extreme exception for a company to hit the kind of valuations that are getting all of the press attention but even hitting the $100M mark is rare. On some level I think we all know this, but seeing the numbers in black and white really puts a exclamation point on exactly how rare it is. And as Fred points out (as did I in my prior post), investing in early stage companies at the kind of valuations that are prevailing today is a losing bet…

While there’s been plenty of discussion and debate about whether we’re in some kind of valuation/venture bubble right now for early stage tech, there is one bubble that I’m pretty sure of. I’m seeing more great business ideas right now than I can remember seeing at any time in my 10 year venture career.

We typically see around 1,500 business plans a year at Foundry (we actually see more than that, but this is the approximate number that are relevant to our investment focus). On average we’ll take a meeting with somewhere around 10-15% of these and hear a bit more than what was in the introductory email or initial business plan. And we typically invest in 8 (our Foundry blog does a pretty good job of tracing our investment history and pace if you flip through our old posts). These numbers work for us and for our strategy and part of our operating philosopy is not to deviate significantly from our investment pace (depending on the mix of seed investments this number could go up or down in any given year but overall we’re comfortable at roughly the 6-10 new investments per year pace).

But something isn’t right with the early stage world right now. I’ve said a few times in the last 24 months what a great time it is to start a company and clearly more and more people are believing that because we’re seeing a significant uptick in the number of investment opportunities we see here at Foundry (I’m sure we’ll be well above 2,000 for the year). More importantly, we’re seeing many many really good, interesting ideas. I’m blown away by it. And it’s frustrating, because I can only spend time on so many things and we’re still only going to make 6-10 new investments in any given year. But never before have I had to say “no” to so many businesses that 1) I thought were super interesting; 2) were clearly going to get funded by someone; and 3) in another time/market I’d love to spend more time with.

To be clear, I don’t see anything to suggest that traditional venture math won’t continue to hold true (a good performing venture fund will still see about 1/3 of their investments fail, another 1/3 do only “ok” and 1/3 do better than that – with maybe 5-10% becoming real stars). And, of course, I recognize that part of our job on this side of the table (at least in venture funds with our investment strategy and not one of making 20 or 30 investments a year to spread around) is to make the hard choice of which of a number of great companies really has the chance to be outstanding.

But wow – is it a fun time to be in venture! And perhaps even more so, a fun time to be an entrepreneur…

In the world of start-ups, HR is at the bottom of the bottom of the heap of priorities most companies are working on. The vast majority of companies think about HR as a process and compliance function, outsource it to 3rd party providers (payroll, benefits, etc.) and doing their best to forget about it. If there’s any focus on HR as a function it is around recruiting (also typically outsourced and generally treated as very episodic). Sure – there’s plenty of talk about "culture" – of success, of working hard, of some other superlative that’s not particularly interesting or differentiating ("we want to hire great people and expect them to be hard working and successful!" duh) – but little real work done to actually execute against that and almost never someone made responsible for achieving success in people management.

I have to admit that I hadn’t spent much (any?) time thinking about this for most of my career. Companies figured out how to make sure that everyone got paid and for the most part HR was completely forgotten about. But more recently Ive been realizing that HR is an important competency for start-up businesses. The proper sourcing, onboarding, continued training, assessment and in particular the management and retention of employees can set your company apart from your competitors and put you on a course for success vs. failure.

We’ve had a number of companies in our portfolio take the HR function extremely seriously with great results. They key is the elevating HR to an executive function, hiring someone outstanding to take on the roll, and empowering that person to make real changes in your organization. This shouldn’t be a process person. They need to be the go-to person for people facing organizational challenges, having issues working with other managers or problems getting resources for the projects that the company has prioritized. They should report to the CEO (not the CFO) and be included in all senior management meetings, etc. Finding this person isn’t easy, since many HR people have been trained to be nothing more than mere paper shufflers (sorry to the competent HR professionals out there, but you all know what I’m talking about). Empowering this person won’t be easy either – most of us have been trained to marginalize HR and not view HR professionals as peers (this relates to the last problem of finding great HR pros – most of us have never worked with one and don’t know how impactfull they can be).

Most companies pay lip service to how important their people are and how their team sets them apart. It’s worth thinking about how you prioritize this part of your business and who you have managing it.

For a long time my hometown of Boulder, Colorado has been known as a great place to live but more recently Boulder is taking on a reputation as a great place to start a company as well. And the rest of the country is starting to take notice (see BusinessWeek, HuffPo and the NY Times). Today Fox Business News did a few live segments from Boulder highlighting some of the people and institutions that are helping create great entrepreneurs and great companies here. I was fortunate enough to be interviewed live along with Lijit CEO Todd Vernon (Foundry is an investor in Lijit). I have to say it was a little nerve wracking to be doing a live feed (this occurred to me about 30 seconds before going on air, before which time I was perfectly calm, after which time I thought my heartbeat might be visible through my shirt). In the end it was super fun and great visibility for Boulder.

My last post with some thoughts on product pricing has received a ton of traffic, comments and email. Clearly this topic is one that a lot of entrepreneurs care about (and struggle with). A few people pointed me to a great post by Ruben Gamez of Bidsketch on the Software by Rob blog that talks about freemium plans and why, in Ruben’s view, they aren’t always drive the results companies are looking for. It maps well to my thinking (I directly called the freemium model into question in my pricing post). There’s some great data in the post – definitely read the full thing. Here’s a few that caught my eye:

Bidsketch started out with a freemium model. Ruben carefully documents their early success with this (by early, he’s referring to a weeks, not months) and their challenge only a few months after launch of a sub 1% upgrade rate and rapidly increasing support challenges (they had a huge user-base – just not one that was paying). And then he did something “radical” – and completely got rid of the free version. This change led to an 10x increase in paid conversions.

Jason Fried from 37signals had a similar experience. “…the majority of people who are on pay started on pay…” he says. And by correlation, most people who start on free stayed on free.

CrazyEgg doubled their revenue the month they dropped their free plan.

We’ve had similar experiences with companies in our universe that struggled with freemium pricing plans. And while there are clearly companies that have made a success out of offering a free service to a large percentage of their user base and charging the few that are willing to pay (including some very successful ones in our own portfolio) I’m hoping that more companies at least consider that their best pricing plan may not need to include “free”.

This seems like an appropriate topic against the backdrop of my recent post on becoming more of a data driven organization. When you expose data, you expose not just those areas of your business that are doing well, but also those that aren’t. And this brings up an interesting question:

Does your organization embrace failure or only reward success?

Specifically, do you encourage people to create challenging goals and give them credit for the work they did trying to achieve them, or do you (implicitly or explicitly) encourage people to sandbag and as a result “overachieve”? The answer to this question may be more nuanced than you originally think once you sit down to consider it. In fact, most people in our society are programmed to reward overachievement rather than an effort that falls short of achieving a really high goal. But the behavior this can encourage is counter-productive to many business activities. And while we may pay lip-service to the “setting lofty goals” idea, the reality is that most companies don’t work this way. They have engineering deadlines, sales goals, etc and rather than creating a culture of setting aggressive targets and trying like hell to get there, they prefer the greater certainty and achievement of “managing expectations”. Failure is something to be defended against (and if you do fall short, there’s always a reason that’s not your fault).

Thank about it. And maybe change the way you manage your organization.

One of the great joys of working with entrepreneurs is the energy, enthusiasm and aspiration they bring to their businesses.

But don’t forget to consider your business for what it is, not what you hope it will be.

Which is to say that there’s a balance between planning for the future and recognizing where you are today. And striking this balance is part of what makes a great entrepreneur – the ability to consider in all aspects of your business (sales, product development, engineering, etc.) the right mix of practical current reality and future aspiration.

Most early stage companies feel stretched. While they don’t lack for ideas, they typically lack for resources (money, people, time, etc.). In my book this is a good thing. Scarcity of resources forces starker choices and ultimately results in better decision making. I sometimes joke with companies about the occasional over-funded competitor and tell them to use their relative lack of funding as a “competitive advantage”. What I mean is that lacking endless resources (or seemingly endless resources – in many cases even gobs of money eventually runs out) will force them to focus on what’s important, not what everything that’s possible, probable or half way interesting.

To me this discipline results in better decisions and ultimately better companies.