Planet VC

Notorious B.I.G. vs The Grateful Dead - Sky’s The Limit I...

2010-03-10T13:41:07+00:00

Notorious B.I.G. vs The Grateful Dead - Sky’s The Limit

I should’ve posted this yesterday but I missed the date. Here’s my favorite track off the album, Gratefully Dead.

VC Bookworm

2010-03-10T12:23:44+00:00

"I've decided to write a book," I told my wife over a year ago.

She gave me that what-the-bleep-are-you-talking-about look. You may be familiar with your spouse.

"You've what?"

"I've decided to write a book," I repeated, slightly less confidently.

"On what?"

"Venture capital and entreneurship."

"Why?"

"Well, when I was an entrepreneur, I couldn't find any good books on how this mysterious capital-raising process worked and how to harness the resources and knowledge of the VC industry to help build my start-up. Now that I've seen it from the other side, I want to explain to entrepreneurs how it all works to help them be successful. There are good blogs out there, but no good books that pull it all together."

"When are you going to find the time to write a book?" she challenged.

I didn't have a very good answer for that one.

But somehow I've figured it out over the last year plus and am pleased to report that my book, called Mastering the VC Game, will be coming out this spring from Penguin’s business imprint, Portfolio (see http://bit.ly/5dDkY9).

I've gotten wonderful feedback from dozens of insightful entrepreneurs and VCs, many of whom I interviewed for the material, as well as the support of my partners and my family.

In the next few blogs, I'll talk a bit about who I interviewed, what I learned and what lessons might be useful to entrepreneurs.

Although VC money is not a fit in all cases, the lessons from VCs and the entrepreneurs they work with are useful in a broad range of businesses.

So stay tuned for more information.

But first, here's a question I've been wanting to ask - if you could interview a bunch of VCs and entrepreneurs and get them to disclose how they practice their trade, who would you want to interview?

I'm curious to see if I selected the right ones.

Follow me on Twitter: www.twitter.com/bussgang

Transitioning From One Job To Another

2010-03-10T11:59:33+00:00

Mark Suster just keeps putting out great stuff on his blog. Last night he posted about the tricky issue of transitioning from one job to another. Mark writes the post from the perspective of the entrepreneur/executive hiring someone who is currently working for another company. I love this part:

I operate on the principal that you’re most vulnerable in any deal immediately after you’ve won. I believe the same is true in recruiting. So your goal is to get the employee working in your company as quickly as possible and with the least amount of collateral damage.

That is exactly the right tack to be taking if you are the person on the hiring end of the situation. I highly recommend reading Mark's post because he provides some great advice to the hiring company.

But there are three parties to these situations; the employee, the current employer, and the future employer. I'd like to talk about all three and how each should behave.

First, I think it is important to recognize that most of the time you'll want to hire someone who is currently working for another company. There are times when you can hire someone who is unemployed or is doing consulting work (which is often the same thing as being unemployed). But most of the time, you'll find yourself in the situation of hiring someone who is currently employed by someone else.

Let's start with the employee. If you plan to leave the company you are currently working for and are actively searching for a new position, I think it is best to do your search out in the open with the knowledge of your employer. That allows your current employer to plan for your departure and allows you to do your job search out in the open. Many employees worry that if they disclose their intention to leave, they'll be fired. That does happen and is a reasonable concern. But more often, the employer appreciates the notice and rewards the employee giving notice with an extended transition period. That's the ideal scenario.

But not every person who leaves a company was looking to leave. It's very common in the tech startup world to approach employees who are happy in their current jobs with an opportunity that is simply better. And then they decide to leave and there is a tricky transition situation.

Mark advises the hiring company to push for the employee to leave quickly. But I have found myself on the opposite side of this situation, in a small startup with a key employee leaving who is being pressured to leave quickly. And of course, in that situation the company who is losing the key person wants them to stay for the longest transition possible.

The problem with the long transition for the key employee is that it often takes two to three months to find a replacement for a key employee. And it is generally not reasonable to ask an employee to stick around for a two to three month transition.

One option is the "battlefield promotion" of someone else on the team to assume the job of the person who is leaving. If you can do that promotion permanently, then it is a good option. If you plan to do the promotion temporarily, it can be problematic. Once promoted, many people bristle at going back to their old role and working for someone new.

Losing a key employee in a small company is really one of the most difficult situations you'll have to deal with as an entrepreneur/startup executive. One thing I do not recommend is trying to retain the person who is leaving. If they've shown the willingness or desire to leave, you have to let them go. There is no such thing as indentured servitude in startup land and when someone shows that they are mentally out, they should not stick around except to insure a smooth transition.

So to summarize, if you are the employee, it is best to give as much notice as you can comfortably give to your current employer without putting yourself in a vulnerable position. If you are the hiring company, you want to get the new employee onboard as quickly as possible, but don't put the person you are hiring in an awkward and damaging position. And if you are the company losing the employee, get a reasonable transition time, find some way to manage without the person, and don't try to keep them once they've shown a desire to leave.

For all three parties, if you are struggling with this issue, reach out and get advice. You aren't the first person to go through this situation. It happens all the time and others who have lived through it can help you deal.

The New Dork

2010-03-10T06:22:35+00:00

These people are way cooler than I could ever be. At least I have something to aspire to.

Weaving a Wake of Memories [Flickr]

2010-03-10T02:45:07+00:00

jurvetson posted a photo:

The opening talk at TED was one of my favorites.

Nobel laureate Daniel Kahneman describes how our "experiencing selves" and our "remembering selves" perceive happiness differently – a fascinating touchstone for self-reflection.

Comparing one-week and two-week vacations in the same place:
“For the remembering self, the two week vacation is barely better than the one week vacation because there are no new memories added. You have not changed the story. Time is actually the critical variable that distinguishes our remembering self from our experiencing self. Time has very little impact on the remembered story.”

This resonates with my belief that our perception of the passage of time is clocked by the pace of salient events, not the pace of time. For example, the sheer activity level of children and their rapid transformation accelerates the metronome of life. The timescale shift fosters an existential appreciation of the present as it feeds the remembering self.

“We actually don’t choose between experiences; we choose between memories of experiences. And even when we think about the future, we don’t think about future experiences. We think of our future as anticipated memories. You can look at this as the tyranny of the remembering self, and you can think of the remembering self dragging the experiencing self through a set of experiences it doesn’t need. I have the sense that when we go on vacations, this is very frequently the case. We go on vacations in the service of the remembering self.”

Kahneman's Wake - the TED video is now online.

Readings: Caveat Venditor, Carried Interest, Oil, and Jobs

2010-03-09T22:17:56+00:00

Exxon forced to buy oil assets previously deemed unattractive in its quest to replace reserves (Source)
Caveat venditor, caveat emptor and muni rate waps (Source)
The carried interest debate for VC/PE is over. Change the law. (Source)
Service sector accounted for all net job growth in high-income countries between 1995-2005 (Source)
Rick Bookstaber accuses top hedge funds of a gold pump-and-dump (Source)

NYTimes: Public Pension Funds Are Adding Risk to Raise Returns

2010-03-09T20:55:41+00:00

No one can get 8% return in todays market without taking on additional
risk. There is the mythical risk adjusted rate of return. On one end
is the zero risk represented by a T bill. On the other is high risk
high return of vc and hedge funds. If an instrument's return gets too
high vis a vis the risk, then the price will rise and the return will
drop.

Market conditions have reduced the advantage that some pension plans
used to enjoy. Now everyone is fighting for the same return. No such
thing as a free lunch. With enough invesments in highly risky deals
some will go to zero. The successes need to pay for all those mistakes
and still have a high enough return to keep investors interested.

From The New York Times:

Public Pension Funds Are Adding Risk to Raise Returns

Even as big companies are moving their pension funds out of stocks,
state governments are chasing higher returns for their plans by making
riskier investments.

http://www.nytimes.com/2010/03/09/business/09pension.html

Get The New York Times on your iPhone for free by visiting http://itunes.com/apps/nytimes

Jean-Luc Park

Taxes and Hockey: Vancouver 2010 Edition

2010-03-09T20:46:06+00:00

Most of you will have seen the instant-classic graph of synchronized Edmonton washroom breaks during the gold medal men's hockey match at the Vancouver 2010 Olympics. But those damn Canadian's weren't just adjusting their urination habits for hockey -- it was affecting tax preparation too.

Danger on the Mountain

2010-03-09T20:38:19+00:00

Dogs and mountains and skiing: This brief video made me happy today:

Danger On The Mountain from Walker Parks on Vimeo.

iPad arrives April 3 and then late April

2010-03-09T19:28:05+00:00

Apple today announced that Wi-Fi models of the iPad will go on sale in the United States on Saturday, April 3rd. 3G-capable models in the U.S., as well as both Wi-Fi and 3G models for a number of other countries, will be available in late April. U.S. preorders for all iPad models begin on March 12th.

Valve comes to Mac

2010-03-09T19:25:50+00:00

Valve Software today officially announced that it is bringing its Steam game distribution platform, as well as its own library of games, to Mac OS X next month.

Steam and Valve’s library of games including Left 4 Dead 2, Team Fortress 2, Counter-Strike, Portal, and the Half-Life series will be available in April.

“As we transition from entertainment as a product to entertainment as a service, customers and developers need open, high-quality Internet clients,” said Gabe Newell, President of Valve. “The Mac is a great platform for entertainment services.”

Valve also confirmed reports that it will offer its forthcoming Portal 2 game as a simultaneous release for Mac and Windows.

Readings: Canada, Cash, Pensions, Spreads, etc.

2010-03-09T17:18:14+00:00

Canada Posed To Scrap Impediment to U.S. Venture Investment (Source)
Public Pensions Are Adding Risk to Raise Returns (Source)
East Europe Leads Stock Gains Since Post-Lehman Low (Source)
Fannie Mae Mortgage-Bond Spreads Fall to Record (Source)
S&P Rally Slowed by Fastest Cash Depletion Since 1991 (Source)
Chilean quake moved entire city 10-feet west (Source)

Interview with James Montier: Decision-making, Permabears, etc.

2010-03-09T16:53:35+00:00

Two-part interview with the estimable James Montier, ex- of SocGen and now of GMO. Smart guy. Good musings. Worth reading.

Death and the Economic Crisis -- the Other Economic Crisis

2010-03-09T16:47:30+00:00

A year ago, most public “death care” companies were reporting mysterious drops in the number of funerals they were performing, but now things have improved and some are seeing growth close to long-term trends.

... Houston-based SCI was so puzzled by the downturn that it hired outside consultants to find out why. The research is not complete, so the company won't release it yet, but chief executive officer Tom Ryan told a recent conference call with analysts that there appear to be two major factors: medical advances, and a dip in the number of births between 1929 and 1936, the deepest years of the Depression.

More here.

Venture Region Survey Results: Comparing The Valley, Boston & New York

2010-03-09T14:39:18+00:00

Two weeks ago I posted a poll which surveyed readers about their perception about the relative attractiveness of their regional venture community. Now that about 1,500 questions have been answered and post is no longer in the top portion of my blog it’s time to share some of the results.

I created the poll on a service called Urtak which enables people to both answer and create questions. I like this functionality because I often feel like surveys are not asking all of the right questions. This was true in the case of this survey – readers added questions that perhaps I should have included initially. There’s nothing like the power of the crowd.

A few readers pointed out that the survey didn’t follow protocol. Some questions were probably leading, others may have confused readers. Furthermore, the number of responses from each population may not have been statistically significant. Nonetheless, people from each region answered the same questions and there were enough answers from Boston, Silicon Valley and New York to make the results interesting, if not scientifically accurate.

Lastly, before I share the results, there were a few regions included in the survey, such as Atlanta, Israel and the EU, that didn’t get enough responses to report here. If they accrue more responses over time, I’ll report back.

The Takeaways: Comparing Perceptions of Silicon Valley, Boston and New York

The big picture: The responses to most questions (there are a few exceptions) illustrated less difference between the perceptions of the various regions then one might have expected. If you take the average percentage of respondents answering ‘yes’ to the 7 most interesting questions (the ones which I’ll discuss in this post), NY, the Valley and Boston averaged 74%, 77% and 84%, respectively. That’s a pretty tight clustering given the sample size. This is a finding in and of itself as it could suggest that the banter in the blogosphere and conference circuits about the relative attractiveness of the various startup regions might be more hype than reality.

Entrepreneurs love their hood: Consistent with the big picture takeaway mentioned above, there was a very positive and consistent response to the question “Is your region a great place to start a company?” Despite the variances across a few of the questions I’ll describe below, about 90% of respondents from all three regions answered ‘yes’. Whether this questions appealed to the regional loyalty of the entrepreneurs or it indicates that the negative marks that the entrepreneurs gave their region in other categories receive less weighting in their evaluation, entrepreneurs from all three regions appear pretty happy to be based where they are.

It’s easier to find mentors & partners in New York & Boston: The respondents indicated that it’s easier in NY and Boston to find mentors or partners for your startups. Note that respondents from the Valley do still give the valley a pretty strong overall rating on this front – 75-80% of respondents indicated that they could find mentors and partners, respectively. A hypothesis - the relative shortage of mentors and partners could be from the relatively higher population of entrepreneurs in the Valley. Finding mentors and partners could be easier in regions where a smaller percentage of the population is starting a company.

Finding engineering talent is easier in the Valley, but not difficult in Boston & New York: While all of the respondents from the Valley indicated that they could find engineering talent, >85% of respondents in both Boston and New York claimed they could find engineering talent in their region. I suspect as the startup ecosystems continue to proliferate that gap will increasingly close over time.

Boston perceived to be the most affordable region; New York and Silicon Valley on par with each other: 80% of respondents from Boston felt that their region was an affordable place to start a company (taking rent and labor expense into account). While both New York and Silicon Valley were a step down from Boston; receiving only 42% and 47% of respondents saying each region is affordable respectively, it’s good to hear that New York is considered on par with Silicon Valley. With often less expensive startup engineering talent and startup hubs in low cost parts of Manhattan and Brooklyn, this poll (albeit limited in its scope) supports the viewpoint of many New Yorkers that choice between starting a company in New York and Silicon Valley shouldn’t be based upon cost.

Perceived shortage of capital in New York – investors flocking: When asked “Is finding early stage capital appropriately easy in your region?”, 60% of respondents from Boston said ‘yes’, 53% from Silicon Valley and 44% from New York. I interpret this metric to speak to the relative shortage or surplus of capital. While the Valley has lots of capital it also has lots of entrepreneurs – the demand for capital may outpace the supply. Boston also has a relatively established venture capital industry, but may have a relatively less developed startup ecosystem. If there is less competition for term sheets, money is easier to come by. As for New York – it’s not surprising to hear about perceptions that capital is harder to come by. The venture capital industry here is trying to keep up with the rapidly developing entrepreneurial ecosystem. The shortage of capital has already attracted at least a dozen firms from the Valley, Boston and beyond.

Founders pick the home for their startups based upon a lot of different reasons including personal/ family considerations, existing business ecosystems and networks. While there are arguably pros & cons to each of the regions evaluated here, my big take-away from this poll was that perception that Silicon Valley, Boston and New York are all pretty good places to start a company.

Bright Eyes & Neva Dinova - Rollerskating I preordered the...

2010-03-09T13:34:37+00:00

Bright Eyes & Neva Dinova - Rollerskating

I preordered the re-release of “One Jug of Wine, Two Vessels” and I received an email today with the mp3 code. I can’t wait to download it when I get home. There are four new tracks. This is one of them.

(reblogged via kewolf)

Ethan Kurzweil has a presentation posted on his blog from 8...

2010-03-09T13:18:38+00:00

Ethan Kurzweil has a presentation posted on his blog from 8 months ago that I just saw for the first time today. This is my favorite slide in it. I would love to see the fit curve on this slide proved out with empirical hosting/development costs data from startups over time. Considering how long Bessemer has been in the business, I’m sure they could do this if interested.

This graph feels intuitively right to me… but what does it mean when it costs pennies to build and host a high-scale web service? As costs approach zero, I’ll bet there will be an explosion in the number of vertical-specific services that serve small niche audiences. By explosion, I mean increasing by orders of magnitude. I can already feel the reverberations of that explosion today echoing backwards in time as the number of web services launching everyday is accelerating.

Very few of these services will be businesses, but that doesn’t matter because they’ll cost nothing. That’s the point… businesses are hard to create, web services will be trivially easy and cost zero.

The Business of Code, The Code of Business

2010-03-09T12:35:01+00:00

The Business of Code, The Code of Business:

Albert has a great post on the Google Code blog that’s worth a read.

Scale first, monetize second

2010-03-09T12:14:00+00:00

With every (venture backed) consumer web startup there is always the question of when to start thinking about monetization.

If the monthly burn is modest, I usually suggest that startups focus on reaching scale first.

It’s not because I don’t care about revenue or because I embrace “hope as a strategy” (which never works).

Rather it’s because:

1 - when your user base is small it really doesn’t matter if you can get advertising, digital goods, subscription revenue going. The base is so small the conversion will be even smaller.

2 - startups need to focus, especially in the the early stage. With limited resources, the company needs to focus on the product and the users. If you start tinkering revenue too early then you suddenly find yourself having to borrow precious team resources to deal with various revenue projects. They always look small and innocent at first but they can snowball and can distract the team.

3. the ultimate revenue model may surprise you. as the product develops and evolves and your community grows, the revenue model is likely to reveal itself in an entirely new way. I’ve seen this happen several times and it’s a powerful reminder each time.

So when I meet a founder and he/she tells me that they are confident that they can monetize their future service with ads or subscription or whatever, I blow by that slide. I want to know about the product and how they are planning on growing the service to reach scale. That’s a leap of faith we both need to take at some level but that’s what I want to talk about vs a 2015 revenue forecast.

p.s.: Congrats to our portfolio company Tumblr for focusing on growth. Last year I remember David Karp, the founder of Tumblr, came to a board mtg. and said he was going to delay his monetization experiments and focus on growth. He had a game plan and told us about it. I’m so glad he did just that.

The Public Dashboard

2010-03-09T12:13:26+00:00

I really like how Tumblr publishes some key stats publicly every month in their own stylized dashboard.

I also like the way they foreshadow upcoming product features:

As the old saying goes, a picture is worth a thousand words.