Planet VC

Who let four northern European countries sneak past the U.S. in the household leverage sweepstakes?

Source: Global Household Leverage, House Prices, and Consumption, By Reuven Glick, and Kevin J. Lansing

An alternately sober-minded and gibbering mad – but never boring and mostly riveting -- hour-long what-would-you-invest-in panel with Nassim Taleb, Marc Faber, Hugh Hendry and others from the just-completed Russia 2010 conference:

jurvetson posted a photo:

When the girls were away, the boys set up a scary ambush for their guests with a scorpion taped to the door, and a robot sentry grooving to Crystal Method’s High Roller.

The girls were not impressed.

Since we were waiting in the dark for them to come through the door, I filmed through a night-vision-goggle toy, and with a bit of telephoto, it worked OK.

Lots of little things go into building a great company over the long term.  Rally Software is one that I’m proud to have been involved in from the beginning.  I remember when Ryan Martens, the founder, would sit for entire days in a small conference room near my office covering the white boards on the walls with his scribblings.

Today Rally is a 150 person company that plans to add another 75 people in 2010 on the heels of Rally’s $16 million financing led by Greylock.  And – since their birth in 2002, Rally has had 17 babies (well – people that work for Rally have had the babies, but you probably figured that out.)  Recently, Rally’s leadership team decided to do something about this.

 

Nicely done Tim, Ryan, and everyone else at Rally.  Now you’ve just got to get these kids using software from Kerpoof at an early age.  I wonder how Agile Parenthood works?

Last week I had a drink with an experienced exec that has worked in big companies all of his life and never worked for a startup. That’s fine, not everyone is made for a startup life.

But at one point, in the conversation he told me that he’s been tempted by startups a number of times but reminded himself of that old saying “the devil you know is better than the devil you don’t”.

I paused when I heard that comment. I believe that saying is counter productive.

To me, it says that the person is unwilling or unable to take chance or make a decision where the outcome is unknown. I told him that the outcome is rarely ever known.

I thought about that conversation last night while watching the Super Bowl. The Saints started the second half with an onside kick. I was blown away. What a gutsy call. I’m not sure how many teams recover an onside kick but that didn’t stop the Saints from giving it a try. They just went for it. And it paid off big time.

Gutsy calls knock on your door when you least expect it. Every startup I’ve been part of had uncertainly baked in. The first gutsy call I made was at 22. I quit my first job, took my life savings of $3k, packed my life possessions in the back of my hatch back and drove from Boston to San Francisco in 4 days. I had no idea what life was going to bring.

Most people I’ve met in SF actually came from somewhere else. They left it all behind and didn’t think about the devil they know vs the devil they don’t. They just went for it. Maybe that is one reason why SF is a special place to me. It’s a gathering of folks that are taking personal risks.

Now, don’t get me wrong, people take risks everywhere but my direct & personal experience with SF transplants is an interesting datapoint (for me at least)

Most people that I’ve met who have remarkable life stories always looked back on their gutsy calls and were happy that they took that chance. Even if it didn’t work out in that specific instance they were better for leaving behind that safe cozy place.

• Magimix Vision Toaster. Our current toaster works just fine but this one just looks so awesome.
• Wood Alarm Clock. I hate your typical alarm clock, this is pretty atypical.
• Magisso Cake Server. Don’t make that many cakes but this is a reason to start.
• Shattered Glass Table is awesome looking. Sign me up.
• Suitcase Chairs. Don’t love this color but love the idea.
• Found lumber staircase. There is something about this I love.
• Canisters. Ok what I really want is the indestructible French press mentioned.
• Glass pendant lamp. Dust will make me regret this but it looks awesome
• Canvas Clock. I think everyone else in the household might barf on this one.
• Flask salt/pepper shakers. No idea if functional, but nice looking.

“

I want to interact with my computer in a fundamentally different way. The desktop metaphor is dead; a generation of children have grown up never working with the physical objects that the virtual desktop represents. What I really want is a modernized Plan 9, a software platform that’s designed from the ground up for our networked, distributed world. If you try to placate me with the assertion that the Web is this new operating system I will become violent.

I want better software: more usable, more accessible, more open, more secure, more integrated, more seamless. I want a better software development experience. I want better programming languages with better development toolkits. Fundamentally, I want better abstractions for the same computation I can do today with all that lovely hardware.

”

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Alex Payne on The Setup

Sometimes I feel like software innovation stopped in the 80’s. Alex articulates this thought better than I.

Building web service startups is not a zero-sum game.

There isn’t a fixed amount of resources: bandwidth, servers, HR, ad-inventory.  And, there isn’t a fix amount of demand: more people are coming online everyday and the usage of existing internet users is increasing. More money is being spent online every year. It’s all increasing and some metrics are even accelerating. Everyone’s payoffs in this “game” are different… what is a valuable user or interaction to one startup is trivial (or lead-gen) for another.

And yet, so often in the startup scene, the news and the gossip about companies is how they are all brutally competing, as if there can only be one winner.  Almost any article on competition between two companies is titled something along the lines of  “X feature is a Y-Killer”… where X is some tiny product design of a non-revenue generating startup and Y is a Fortune 500 company. I don’t fault bloggers for sensationalism (I’m guilty of it too), but I wish their posts didn’t repeatedly come baked with this zero-sum game mentality.

I know that the market for web services feels very competitive right now, but it’s important to remember that it is definitely not a zero-sum game. There is a set of services for which the market would feel more zero-sum: me-too companies which David Shen wrote extensively and lucidly about. Try to avoid fighting over the exact same slice of the pie as your neighbor… instead, work to build a bigger pie together.

And, if you ever feel like your competing over a fixed amount of user attention, make sure you’re looking at a long enough time horizon.  I’ll close this post with a nice 10-year chart from the Pew Research Center that can help ground your sense of prospective. The pie is getting bigger everyday.

King Of Carrot Flowers Part I - Neutral Milk Hotel

Back to back days from the same record. I’ve got to pick this up on vinyl.

Why should investors take sales risk?

By default, they shouldn’t.

Sales development is by far the biggest cost in venture-backed startups. Some investors estimate that as much as 70% of venture investment goes toward sales development. Few startups get it right on the first try. That frequently means an indeterminate number of additional rounds of funding to remove sales risk.

People have been selling for a lot longer than the professional venture industry has been around. So why does every company have to learn to sell? On the surface, it seems like getting up Mark Leslie’s famous Sales Learning Curve (SLC) should be easily repeatable. Tens of thousands of startups have taken a hard run at the curve, and some have succeeded. Just teach the right process, or better yet, hire an exec that has succeeded before.

The reason replicating sales success is so difficult is because success just isn’t that easy to replicate.

It’s the reason that the same team doesn’t win the Superbowl every year, that the same investors don’t make all the money year after year, the reason top mutual fund managers eventually break their S&P beating streak.

It’s quite possible, in fact highly likely, that an entrepreneur or sales executive benefited the first time from a great market and a great product. Not that they weren’t incredibly talented, but trying to repeat that success is as likely to depend as much on finding a tornado market as on the talents and expertise of the entrepreneur or executive.

Getting up the SLC is difficult because you have to get a lot right. The right market, product, and team. The right market is one in which customers or users want the offering now. They can’t live without it. The right product is one that delivers on its promise. The right team executes — it repeatedly runs experiments — and is expert at rapidly scaling the few that work.

Repeating the process, once developed, isn’t hard. What is hard is getting to a repeatable process.

There are lots of tools available that can help mitigate risk in the sales development process, including methodologies like High Probability Selling. But once the process is figured out, the best way to replicate it is through great hiring. There is little more frustrating than poor execution due to on the job training in a great market.

Why Should Investors Take Sales Risk?
Why invest early when you could just wait, especially in markets where multiple are relatively low?

The answer is that, in many cases, they shouldn’t. There are few companies that are going to go from 100 million to a billion or more. The risks of investing later are: being wrong about where a company truly is on the sales learning curve and the opportunity cost of the money invested in a company that never truly has the capability to go from 100M to 500M or 1B+.

So when should investors make these early bets in relatively low multiple markets in which scaling sales is expensive?

When the investor can buy a large portion of the company and believes he can get leverage on the early money. By leverage, I mean, backing an entrepreneur who will either be able to run a very low burn experiment to reach the inflection point of the curve, and/or has the ability to raise Other People’s Money (also known as OPM) repeatedly to iterate the sales model until the company moves up the curve.

When a huge existing market is being radically disrupted.

Or when human behavior is changing (example: the shift from time spent offline to online) and a startup can take advantage of it.

What We Can Learn From The Superbowl
As Chris Chase wrote in his Super Bowl summary, “Super Bowls are usually defined by conservative play. It rarely pays for coaches to be risky in the game. Little good can come from it. Nobody criticizes the safe play, only the bold one that doesn’t work. But when it works, it’s the stuff from which Super Bowl legends are made.”

One might easily say the same about venture investing.

When I wrote my post titled An Angel Investor Group Move That Makes Me Vomit I expected to write my little rant and be done with it.  A month or so later Jason Calacanis picked up the mantle and started a Jihad against the idea of angel groups charging entrepreneurs to pitch to them.

The result is the Open Angel Forum.  I participated in the second event last week in Boulder.  I thought it was spectacular and the twitter stream from #OAFCO reflected this sentiment.  About 20 active (at least four investments in the past year) early stage investors (angels and seed stage VCs) attended.  Six entrepreneurs presented their companies in short seven minute pitches.  Five sponsors underwrote the food and drink at the event.  There was plenty of networking before and after.  That was it – small, intimate, and highly relevant to all.

Most of the presenters wrote blog posts about the event which will give you a great feel for what they experienced.

• Odojo – My Experience presenting at The Open Angel Forum
• FaceFile – Open Angel Forum Colorado
• Grogger – OAF: Things Getting Better for Entrepreneurs
• TeamSnap – TeamSnap presents at Open Angel Forum
• Kijubi – Kijubi @ Open Angel Forum in Boulder Colorado

The events continue with Open Angel Forum San Francisco on March 4th and Open Angel Forum New York City on April 8th.  If you are an entrepreneur or an angel investor in either city, check them out.

One of our portfolio companies, Organic Motion is hiring.  They are a really exciting company right in the middle of our Human Computer Interaction Theme.  In the company’s own words:

“Organic Motion is a global leader in the development of breakthrough markerless motion capture and analysis technologies. Our software products utilize state-of-the-art computer vision techniques and high performance graphics hardware to deliver an industry first set of production, entertainment, and research tools for use in a variety of industries.

We are seeking to expand our Manhattan, NY based engineering team with applicants who have a solid mastery of practical C/C++ development skills combined with strong analytical and problem solving skills in a variety of areas including computer vision, computer graphics, networking, pipelining and optimization, biomechanics, and more.

We are looking for candidates having 2 or more years experience in a professional development setting in addition to a PHD, Master’s degree, or an exceptional Bachelor’s.

Required skills include some of the following:

* C, C++ (required)

* Stereo vision – 3d reconstruction / mesh creation & optimization 
* 3D programming (DirectX, OpenGL, Shaders, HLSL, CG, GPU) 
* Multi-threaded / multi-process programming

* Networking – sockets, RPC, streams, low latency hardware

* Computer vision / image processing

* Low-latency / real time 

Secondary skills:

* Game development
* Distributed systems
* Motion capture creation / analysis 
* Physics

* Scripting languages (Python, Lua, Bash, Perl, etc)

* UNIX, Linux

* Mathematical modeling, filtering, signal processing
* Biokinematics
* GUI development (MFC, Qt, WxWidgets) 
* Autodesk 3d animation suite API

Responsibilities include: 
* Optimization (single-core / multi-core / multi-process) 
* Algorithm development (raw 3D data analysis) 
* Application development (server and client side)

* Code maintenance and troubleshooting
* Supporting conferences and shows (past shows: SIGGRAPH, GDC, CES, I/ITSEC)

This is an exciting opportunity to join a dynamic team with potential for rapid growth and access to a great deal of compelling technological resources. We are looking for individuals with fresh ideas and the skills to put those ideas to the test. This is a unique opportunity to have a major impact on a growing company!

If you are an excellent candidate, then please reply with your resume in Word or PDF format to careers@organicmotion.com. A code sample would also be a big plus!”

Andrew’s $0.02: This doesn’t surprise me at all.  Seems like a natural extension, and Google Maps should definitely include venue-specific maps.  For example, if I’m in a shopping mall, I should be able to locate myself and my destination in a shopping mall map via Google Maps.  The same applies to Trail Maps on ski resorts.

the-tumblr-you-want-is-photojojo:

Google, not content with photographing the outside of every building in the world, seems to be experimenting with adding photos of the INSIDE of buildings. How soon until you can zoom in so close to your house that you can see your dental fillings?

Google Maps To Add “Google Store Views”

A few more things I just had to share:

In the Aeroplane Over the Sea - Neutral Milk Hotel

Heard this song on the hype machine. Clicked over and saw it was from another Tumblr user. So I clicked ‘liked’ and reblog and now it’s my song of the day!

(via panoptican)

Apparently I'm not the only one to notice the rise of economists in cartoons during financial crises. As a related aside, this paper has some fabulous old crisis cartoons.

Economists, Crises and Cartoons

David M. Levy
Center for Study of Public Choice
Sandra J. Peart
Jepson School of Leadership Studies
February 4, 2010

Abstract:
Economists have occasionally noticed the appearance of economists in cartoons produced for public amusement during crises. Yet the message behind such images has been less than fully appreciated. This paper provides evidence of such inattention in the context of the eighteenth century speculation known as the Mississippi Bubble. A cartoon in The Great Mirror of Folly imagines John Law in a cart that flies through the air drawn by a pair of beasts, reportedly chickens. The cart is not drawn by chickens, however, but by a Biblical beast whose forefather spoke to Eve about the consequences of eating from the tree of the knowledge. The religious image signifies the danger associated with knowledge. The paper thus demonstrates how images of the Mississippi Bubble focused on the hierarchy of knowledge induced by non-transparency. Many of the images show madness caused by alchemy, the hidden or "occult."

“Other than in case of fire, there’s no excuse for yelling”

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“Bullies”, Jerry Colonna

I’ve worked with my share of bullies. Regardless of how talented they might be, they screw it up for themselves and everyone around them every time.

From my weekly Weekend Reading column, a few articles and papers worth reading:

• Alan Greenspan fights back against critics (Source)
• Emerging-Market Bond Sales Stall as BES Scraps Issue (Source)
• Recovery teeters as debt threat spreads (Source)
• A Financial Crisis That Just Keeps Moving (Source)
• Mortgage Bankers Association Sells Headquarters at Big Loss (Source)
• 'Cash-in' refis growing in popularity (Source)
• Why a China bubble burst would be quieter (Source)

jurvetson posted a photo:

Rocketry Planet tipped me off that the Rockets magazine issue that I have been waiting for has just come out. It covers the big launch events in the Black Rock Desert that I attend like a pilgrimage – BALLS and Mavericks.

It’s hard to describe how these images trigger pulse-quickening memory clusters for me, like a Proustian scent. (readable size)

This article self-assembled from a series of flickr posts covering:
• The Rocket Howitzer
• Erik’s jump to hyperspace at night
• The maiden flight of my phat V2.1 on a N2801 motor with an 80 ft. plume of fire
and, unless edited out (as I have not seen the following page yet):
• Erik’s super-heavy Bullpup
• My Nike Smoke on a L1030 thermoplastic propellant... and Tom’s scratch-built carbon fiber rocket on a home-brew N1000 motor to 17,500 ft. and Erik's smaller Bullpup on a Aerotech M1500 Green Mojave motor. (all in this video medley)