Archive for the ‘Venture Capital’ Category

Don’t Panic!

I was recently talking to someone about an issue in one of their portfolio companies (this was not a Foundry or Mobius company). The issue was pretty serious (it related to safety standards at the company that were being ignored and a resulting accident at the business) and the person relating this story was (understandably) pretty worked up and asking me what I thought they should do.  My advice?

image

I can’t say that I come by this naturally (I can be pretty excitable) or that I was a particularly good practitioner of my own advice earlier in my venture career, but I’ve managed to reign myself in and strongly believe that the priority in any interaction is simply to not panic or over-react. Every situation is better viewed from a calmer perspective and without question your judgment is more solid and reliable when you’re thinking with a clear head. It’s not just that things are often not as bad as they seem (in the example above I think they were actually worse than they originally appeared) or that everything will eventually work itself out (sometimes it doesn’t) but rather that with a little perspective and by giving yourself enough time to assess the situation and consider your options you’re almost always going to make a better decision.

September 15th, 2009     Categories: General Business, Venture Capital    

VCs and social media

I recently participated in a Thomson Reuters webinar entitled "Boosting Returns with Web 2.0 Technology". The seminar was targeted to VC and Private Equity professionals and focused on how investment firms can use social media in managing their investment business. 

I was reminded of the mew media technology bubble that I live in a few months ago when I spoke on a similar topic at the PEI Investor Relations and Communications Forum. When I asked the crowd of about 150 people how many were on Twitter and a single hand went up I realized that I had my work cut out for me (I might have guessed that that when I walked into the room and was the only person wearing jeans, but that’s another story)…

Because of my experience at the PEI forum (realizing that most VC/PE professionals are still just beginning to understand social media and how they might use it for promoting themselves or their firm) I focused my presentation for the Thomson Reuters webinar on the basics of social media (and reinforcing that there are a handful of firms – primarily early stage VC firms – that are active users of the technology). I highlighted how we’ve used social media at Foundry Group and specifically the benefits we’ve gotten out of being extremely public about our investment themes, our reasons for investing in specific companies, etc (see the slide that highlights the Lijit search tag cloud on our blog). The builds in the deck don’t come through SlideShare, so some of the slides are busier (or more confusing) than they were when built up correctly, but you’ll get the idea. One of my co-presenters, David Teten of Teten Advisors has a post up about the seminar as well (along with a link to his slides).

September 1st, 2009     Categories: NexGen Web, Venture Capital     Tags: ,

Venture capital is dead! Long live venture capital!

Dan Primack sited a study on PE Hub today that found that over 50% of VC professionals believe that the VC industry is “broken”.  My response:

WHO CARES?

Seriously. It seems like the venture industry these days spends more time lamenting its future than actually working towards a future that’s different.  And they couldn’t be more short term in their perspective.  VC sentiment has started to become like consumer sentiment – something that moves on a monthly basis. Are we forgetting that our business is about spotting long term trends and funding business cycles that are measured in years, not months?!? 

It’s possible I’m simply in the wrong demographic (almost 85% of the respondents were east- or west-coast VCs), the wrong fund stage (we raised capital in late 2007 and as a result are still in our active investment phase), have the wrong fears (in the “very worried” category “Exit Markets” was a 2x favorite over all other choices – but good companies continue to find liquidity), or am simply in the wrong mindset (I think now is a great time to start a business and an equally great time to be an early stage investor). 

My partner Jason has a thoughtful response to the study (as you might imagine he shares my optimistic view) in which he points out a few key reasons why now is a great time to be an investor (you can read the full article here):

  • Its never been cheaper to start a business
  • There are a ton of entrepreneurs around working on interesting projects
  • Many of these entrepreneurs have been around the block a few times
  • The venture markets aren’t dependent on the credit markets, etc.
  • What we thought/hoped would happen 10 years ago has – the world of technology is larger and more lucrative than we even imagined

I’m done talking/listening about how the venture model is broken. If that’s how you feel and you’re in venture, perhaps you should find a new job.

June 29th, 2009     Categories: Venture Capital    

Are young VCs better VCs?

There’s a great post up on the NYT Bits Blog that asks “Do Young Venture Capitalists Have an Advantage?”  While established (i.e., older) venture capitalists have more name recognition and therefore theoretically access to better deal flow, younger VCs are closer to the technology and have more in common with today’s set of technology entrepreneurs – according to the article – which makes them have an advantage in today’s venture market.

This is a great question and one that I think about a lot as I consider ways to be a better venture capitalist myself. In fact, one of the reasons I started this blog was to shed light on the progress of an individual VC as I rose in the business. As part of this I try to think introspectively about what makes a great venture capitalist and how one hones these skills. Seeing the post on the NYT blog seems like a great opportunity to dive into this question again. And the Times has it wrong in my view – they are playing off of a stereotype which may have some general applicability but misplaces the attribute.

Age is not the defining attribute of a good (or bad) venture capitalist – it’s drive. And while there’s some correlation between being a younger VC (which in our business at the partner level is generally late-30’s through mid-40’s) it’s just not the differentiator. In my view all great VCs have drive. And while having drive won’t make you a great VC, not having it will almost certainly leave you behind. I think the Times is mistaking age for this hunger to work, learn and stay current on technology that characterizes the drive of great VCs. It’s true that many people who have been in the venture business for a while lack this drive and it’s also true that many younger VCs that I know have an incredible desire to work hard and succeed but there are plenty of “experienced” VCs that have been at it for 15 years that still wake up every morning charged up for their day and spend their weeks crisscrossing the country in search of new ideas (my partner Brad comes to mind – he’s by no means “older” at only 43, but he has been in the VC business for a long time and without question has no lack of drive or work ethic). 

I may be over-generalizing but in my world view there are Old School VCs and New School VCs.  Old School VCs are partners/firms that prefer to sit back in their offices, have entrepreneurs come to them, invest only in their back yard and show up at monthly board meetings to offer their wisdom. New School VCs are out in the technology community, seek out new trends and companies, engage with the tech ecosystem (both start-ups and more established companies), invest where their investment focus takes them, aren’t afraid to travel and generally work significantly harder than the stereotype of a venture capitalist. The former aren’t necessarily old, they’re just old school. Likewise the latter aren’t necessarily young, they just aren’t resting on their laurels (or don’t have them yet).

When I think about what we’re trying to accomplish at Foundry Group (and what my friends at similar firms like USV, Spark, True, HW12, etc.) are trying to accomplish I don’t define our style of investing and managing our firm based of our ages. I think about how much my partners and I enjoy our work, how much we care about being successful and how hard we’re willing to work to be so. That drive is not a trait of a young or old venture capitalist – that the trait of successful venture capitalists.

June 10th, 2009     Categories: VC Bloggers, Venture Capital     Tags: , , ,

Start your business now! (revisited)

I wrote a post a few weeks ago listing out the reasons that right now is a great time to start a business. A few days ago TechCrunch came out with their TechCrunch 2008 Year in Review (their first paid report). The post that summarized the report had a preview of some of the data they write about and included the following graph that does a great job of showing why the current market can work in your favor.  Have at it!

image

February 23rd, 2009     Categories: General Business, Venture Capital    

WSJ Venture Capital Blog

I’ve been enjoying Scott Austin’s Venture Capital Dispatch. It’s a great source of information, easy to read and is a great summary of information for those of us who don’t have time to read the Journal every day. Thought it was worth a pointer.

February 18th, 2009     Categories: Current Affairs, Venture Capital    

Techstars Beantown!

I’ve been a *huge* fan of Techstars since first meeting David Cohen just over two years ago and have not been bashful about my love of the concept in previous blog posts.  For those of you not familiar with the program, Techstars brings together teams of entrepreneurs from across the country to participate in an intensive 3 month summer program to jumpstart their businesses. It’s heavily mentor and experiential driven – the teams work extremely closely with the program’s mentors to advance their businesses and the summer program is filled with guest speakers that cover an array of topics of specific interest to building young businesses.

Since launching in 2007 we’ve had 20 companies through the program (of which 12 have been angel or venture financed – two of whom have already been acquired – and two more are cash flow positive).  Personally, I’ve had an amazing time working with the Techstars companies. For me the program – and more specifically the program participants – symbolize everything that is great about the drive, energy, passion and commitment of entrepreneurship. I’m lucky to have been a part of a great group of mentors to the Boulder program.

Today is a big day for Techstars – they’ve announced the launch of Techstars Boston.  My friend Shawn Broderick will be running the program and already an unbelievably strong group of mentors has signed up to participate (see the 2nd paragraph here).  Having grown up in the Boston area and still having close connections there, I’m incredibly excited about expanding the Techstars footprint there.  With a strong program leader in Shawn and fantastic local support, I have no doubt that Techstars Boston will be every bit as successful as its Boulder-based cousin.

Applications for the Boston program are open (and remember that you don’t have to be located in Boston to apply).  Apply now!

[updated the stats on the 20 companies - 2 are cash flow positive]

February 17th, 2009     Categories: Company Creation, Venture Capital    

meeting overload

The last couple of months have been tuff ones for me. I’ve felt constantly behind (thus the lack of blogging consistency) and most days consisted of running from one meeting to the next (typically 10 minutes behind). This has contributed to my feeling both burned out and feeling that I was letting too many things fall through the cracks.  This was evidenced by 1) my inbox growing most days, not shrinking; 2) waking up at 5am to try to work on #1; 3) an over-reliance on multitasking (walking to a meeting, on the phone while responding to email); 4) my wife never being able to reach me during the day; and 5) generally feeling stressed and off-balance.

My week off for Thanksgiving definitely helped clear my head. But now I’m back to my old pattern (I’m writing this on a flight to NY where I’m running around from breakfast through dinner for two days and then catching the late flight home in time to get back for another set of meetings).  I was talking about this with Greeley the other day and we came up with some ideas for how to break this cycle.  I’d love to hear from others on how they do this as well. Here are a few key ones I’m going to work on in 2009

1) Take fewer meetings. Duh. Obvious, I know, but clearly the #1 thing I can do to clear space on my schedule. I make this resolution ever six months or so and get better for a few months before faltering. In 2009 I’m going to guard my schedule more diligently and push back on meetings that just fill space.

2) Schedule email time. This may sound crazy, but I’m blocking off time every morning next year (that I’m not traveling, that is…) for e-mail, phone calls, research and the like.  With rare exceptions, no meetings in 2009 until 10:00am.  Rather than starting my day running around, I’d like some solid time to get work done and start my days getting ahead rather than behind and feeling like I constantly need to catch up.

3) Take more vacations. I mentioned this in my post about going off-grid – I did a crappy job of taking time off in 2008.  The lack of time to recharge definitely weighed on me towards the end of the year.  Not so in 2009 – we’ve already planned our spring break vacation and are working on several others blocks of time to take off.

4) Work out more.  This may not seem like a good plan for time management, but for about a month this summer I got into a great pattern of riding my bike up Flagstaff mountain (a "hill" near the office) several times a week.  Not only did I feel great exercising consistently, but was a consistent time to just clear my head.

Thoughts?

December 16th, 2008     Categories: Life, Venture Capital    

Deals

I’m trying to purge the word "deal" from my lexicon – at least as it relates to investments (i.e., companies are not a "deal", it’s an "investment opportunity"; the actual transaction itself is still fair game). 

I’m amazed how often the term comes up in the venture industry. To me it seems somehow demeaning and way too generic. Entrepreneurs who put their heart and sole into a company don’t need to hear us talk about their companies like they’re a commodity.

If you’re a VC reading this, try it for a day and see how often the word comes up . . . and how difficult it is to stop using it…

September 26th, 2008     Categories: Company Creation, Venture Capital    

Saying "no" can be hard to do

At the risk of opening myself up to a landslide of snide comments expressing sympathy for the "difficult" job a VC has saying no to so many potential investments, but in the interest of being open about the experience of venture capital from the inside I offer up the following thoughts:

Sometimes it’s very easy to decide to decline a company’s request for financing (and we see literally thousands of plans a year, so we’re pretty well practiced at it).  Many times the company simply isn’t a fit for our investment focus (we get a few "invest in our [pick one] manufacturing/car wash/custom painting/etc business" requests ever year).  Or the business plan is clearly off base (my personal favorite from this genre was the company that planned to colonize the moon for the purpose of reducing the cost of launching satellites – which they were going to build from materials they were to mine from the moon).  Lots of others are potentially interesting but for one reason or another just don’t make the cut.  The ones that pique our interest we start a dialogue with, which typically involves several meetings, background due diligence, etc.  Some of these businesses we will relatively quickly decide are not a good fit and they fall off the list.  Then there are the ones that we really dig into.  While we pride ourselves on moving quickly through our investment process, being quick doesn’t mean not being thorough – we do a lot of work looking into investment opportunities before we make our final decision to invest. 

As we’re moving through this process there continue to be a meaningful percentage of companies that we ultimately decide not to pursue an investment in.  I like to think our process is a pretty open one (specifically that we’re very clear with the entrepreneurs that we’re working with what our outstanding questions/areas of concern are).  But even when it’s clear that we’re just not "there" on a deal it can be difficult to turn down an investment late in the game.  I’m not talking about reaching the decision to say no – we have a well exercised process and a very open patter of communication at Foundry that I think allows us to make very good decisions throughout our deal process. I’m talking about actually making the phone call to someone you’ve been working with for months, who has been answering your questions, putting up with your requests for more data and with whom you’ve likely been engaged in pretty detailed business planning.

I had a particularly challenging example of this about a month ago when I turned down an investment in a company that I was really close to saying yes to.  In this case I particularly liked the founder (we had both a great personal and professional connection) and the business was in an area that I know extremely well.  I did a ton of work on the opportunity and as a partnership we had many conversations about the business (while I had been leading the work all of my partners had spent real time looking into the business and had met the founder several times).  Ultimately I couldn’t get over a handful of concerns about where the market (and in this case specifically competition) was moving and as a result turned down the chance to invest.  Probably the hardest "no" that I’ve ever had to give . . . .

Note: the company in question had another source of funds and is off and running on executing against their plan.

May 20th, 2008     Categories: Fundraising, Venture Capital