What makes a great start-up market?
Here’s one take on that ubiquitous question (ubiquitous at least for those of us who live outside of the bay area). The simple answer is Nerds and Money, but the more complex answer is much more amusing. Link – http://www.paulgraham.com/siliconvalley.html
May 31, 2006· 1 min read
Sand Hill Slave
Here’s a different view of venture capital – from someone who has clearly seen quite a bit. Very amusing! Be sure to check out the worst ever VC names. (from Paul Kedrosky’s Infectious Greed)
February 10, 2006· 1 min read
What your business does in fewer than 5 sentences
I had a chance to sit through the practice session for a handful of the companies that are presenting at this year’s VC in the Rockies conference (not too late to register, by the way – it’s a great showcase of Colorado venture deals, not to mention world class skiing). Many of them had one common trait: they sucked at actually describing what it is their business does. Som just seemed to forget to mention it, while others appeared to try, but either get bogged down in the complexity of it or just fell short of the mark. This was surprising but amazingly consistent. Maybe they had all practiced their pitch too much or perhaps they were just too close to their company to be objective about how people hear their business description, but whatever the reason I found myself scratching my head and wondering how it could be that we were on slide 8 without any real idea of exactly what the presenting company did. …
February 6, 2006· 2 min read
How to make a good VC pitch – an entrepreneur’s perspective
Among the companies I poked fun at yesterday was Fleck. Turns out they have a blog. Also turns out that their latest post was a really good one – an entrepreneur’s perspective on how to give a good venture pitch. I wrote a post about a year ago on the same subject. This is a great companion to that post – from the perspective of someone on the other side of the table. By the way, be sure to take a look at the description of the business on their splash page – very amusing!
January 20, 2006· 1 min read
Saying Goodbye
As much time as VCs spend with our portfolio companies, it’s important to remember that our jobs are actually to see them move on to greener pastures. Of course working closely with these companies – often over several years – one can’t help but get attached to some of them. So it’s often with mixed emotion that I see companies move on to the next chapter in their lives. It’s the natural lifecycle of investing and is absolutely key to the performance of our jobs (performance which is measured solely by the amount of money we return to our LPs). Still, it’s a bummer to stop working on a daily basis with some of the great people that run these companies. Around the end of the year two companies with which I work closely were sold and I thought now would be a good time to acknowledge some of the great people who helped make these businesses successful (and whom I will miss working with). First, Xaffire was sold to Quest Software (no official announcement to point to, but the deal was closed recently and the Xaffire web site now lists them as a Quest company). I’ve referenced Dave Jilk a number of times in this blog (and he’s a frequent commenter to posts). I first met Dave when he interviewed me for my job at Mobius (he was at the time the CEO of a different portfolio company and prior to that had been an associate at Mobius). I’ve worked with Dave in varying capacities over the past 4+ years. I know I’llsee him frequently (we ski together often), but I’ll miss the day-to-day interaction with him. …
January 9, 2006· 2 min read
Start-up moments
One of the things that I like about spending most of my time with start-ups is that there are very few of the trappings of larger companies – people answer their own phones; leave their own outgoing voice-mail messages; everyone can fit in a single room for a company update; all employees can give feedback on products; etc. I remember fondly the early days at my last company before we had an office – when we could hold our management/company meetings sitting around a single Starbuck’s table. Of course things tend not to stay that way (if you’re successful) and very quickly these days are forgotten history. At NewsGator’s board meeting today we had what can only be termed a start-up moment when our conference phone went down. Below is a picture of Mark Nass, NG’s VP of Finance pulling a dedicated phone line through the ceiling so we could connect back into the board call. That’s CEO JB Holston in the foreground. …
December 15, 2005· 1 min read
Treat capital raising like a sales process
I’m involved in a lot of capital raising conversations – companies looking for money. One thing that never ceases to amaze me is how narrow minded many companies are in how they approach this process. Forget the obvious stuff about doing research on local VC firms and their investment focus to make sure you are a match before sending them your “next generation toaster oven/microwave” business plan (yes – I actually received this plan) or targeting VCs that are particularly knowledgeable about your industry or have made money investing in businesses with similar characteristics – I’ll assume (wrongly) that most people already do that. I’m talking about treating interactions with potential funders as relationships – listening to what they have to say in response to your pitch, taking notes about what whatever it is that’s on their mind when you’re meeting with them and then creating some kind of database to capture this information and plan regular follow-up. Many entrepreneurs treat a VC pitch as a one shot opportunity rather than the potential start to a relationship. Since the typical result of these meetings is a turn-down the relationship starts and ends there – perhaps taken up again when its time for the next round of funding or if you happen to bump into each other somewhere. This is a huge mistake. David Beisel correctly points this out in his recent post on the things smart entrepreneurs do when interacting with VCs. The kind of periodic follow-up that David talks about in his post almost never happens in my experience. It’s a shame, too, because some of my fondest entrepreneur relationships have started with me turning down an investment in their company. Venture deals can take time to come together and someone who turns you down for round 1 may be in a position to invest in round 2 (or in round 1 itself if it takes a while to come together). Reaching out to VCs that showed interest in a way that is meaningful (and as David points out aren’t overly intrusive) can only lead to positive outcomes. …
November 1, 2005· 3 min read
Getting to No
My wife and I live with a toddler and as a result are becoming more familiar with the concept of “NO” – which, incidentally, I can now assure you can contain anywhere between 1 and 5 syllables, depending on the desired effect and emphasis. It got me thinking about a VC pet peeve of mine which is how shitty a lot of VCs are at turning companies down. I’m not talking about the form e-mail that VCs send out to pass on something that they don’t want to take a look at (we all send out these e-mails, don’t we ?!?) – I’m talking about companies that we spend some amount of time with (say at least one meeting, but often several) and decide not to invest in. I’ve experienced this from the other side of the table with some of our portfolio companies, much to my frustration. I probably go too far on this one, but when I turn a company down I typically like to have either a phone conversation or a face-to-face meeting (depending on how much time I’ve spent with them) and outline exactly why I’m turning them down. I don’t break-up on e-mail or by voice-mail. More importantly, I try to give a real reason, not the VC bullshit reason, why I’m not interested (which is to say that I’m never “not comfortable with the market size” or “don’t invest in early stage deals” for example; and certainly never simply avoid phone calls so I don’t have to have the conversation at all). This has led to a few awkward conversations (telling founders that I didn’t think they were the right CEO for a business for example) and plenty of push-back from entrepreneurs who didn’t agree with my analysis of their opportunity/product/way of going after a market. But I’d rather that than honing my bs skills and coming up with new and creative reasons for not investing in something. …
October 27, 2005· 2 min read
Attributes of a good venture capitalist
When I was interviewing for my job at Mobius I asked Dave Jilk interview not only with MDs and other associates, but also with portfolio – who had briefly been an associate at Mobius and was then (as he is now) running a portfolio company – what he thought the most important attributes of successful VCs were (as an aside, I don’t know that I appreciated at the time what a good sign it was that the VC I was interviewing to joined had me company CEO’s to get their take). Without hesitation he said that in a nutshell good VCs need to have attention deficit disorder. I laughed about it then, but I think its time that I acknowledged to Dave (and the world) that he was right. There are lots of attributes that are required to be good at this job, but the core of being a good VC is the ability to move from one thing to the next, often completely disconnected thing, quickly and without slowing down Rare is the time when I sit down and spend a few hours doing something (anything) without interruption.; so much so that I generally interrupt myself these days if I’m spending too much time on any one thing, but mostly because in any give day things just seem to come up constantly. With something like 8 companies that I actively work with these interruptions are all over the map – I may be helping one company sell its business, another raise capital, another plan for a strategic offsite and another with an executive search. Keeping all of this straight in my head is a bit of a task, as is shifting gears from talking about the tax considerations of a particularly merger structure with one company to looking at moving into a new vertical market for another. Its different than the jumping around I did in banking (where I would typically be working on only one or two projects very intensely at any given time) or when I was working for an operating business when my days were much less varied (and much more similar to every other day). …
September 29, 2005· 2 min read
Accidents in North American Venture Capital
As a member of the American Alpine Club I look forward each year to the arrival of my copy of Accidents in North American Mountaineering. This is a book that the club publishes annually that documents climbing and mountaineering accidents that are reported each year in the United States and Canada. The idea, of course, is to educate the climbing community on things that can go wrong in the backcountry in an attempt to make everyone safer (as if the threat of dying were not enough, we also have to worry about being written up in Accidents. . . ). A typical entry might be titled: Fall on Snow – Unable to Self-Arrest, Faulty Use of Crampons and would then go on to describe how someone fell on a snowfield (in this case not far from Boulder, CO), dropped his ice-axe and wound up breaking his legs when he inappropriately tried to stop himself with his crampons (ouch!). Other titles this year were: Stranded, Exposure-Hypothermia, Inadequate Clothing/Equipment, Climbing Alone, Weather, Exceeding Abilities (apparently this guy got it all wrong); or my personal favorite: Stranded, Exceeding Abilities, Incompatible Partners – Poor Communication (I like that having crappy partners is an official designation of the AAC). …
September 7, 2005· 2 min read