Planet VC

Watching People Come of Age

2009-07-03T21:38:55+00:00

One of the most satisfying parts of what I do is getting to work with people over a long period of time, starting early in their careers. It’s one of the things I love about TechStars, but it’s not limited to that as I have many other relationships with young and first time entrepreneurs.

Last night, at Ignite Boulder 5, I had a permagrin on my face as I thought about the amazing job Andrew Hyde was doing. I first met Andrew a few years ago when we started TechStars – he basically volunteered to hang out with a video camera for free all summer to film stuff and learn. He was so hugely helpful that it was easy to bring him on board the TechStars team in year two as the community manager.

I attended Ignite Boulder 2 and had a great time. But last night – #5 – just blew me away. 700-ish people in the Boulder Theater, enormous energy, endless laughter and brain stimulation, and just a very good time. Andrew organized a phenomenal show and really shined as the organizer / MC.

But TechStars and Ignite Boulder are not the only things Andrew does. He also created Startup Weekend (I was at the first one in Boulder) and he was one of the founders of Boulder.me. And – with Matt Emmi of One Button -created the hilariously creative VC Wear t-shirt line (my favorite: “I went down on Sand Hill Road”.)

But wait, there’s more. Andrew is everywhere in the Boulder startup community while managing to travel all over the world sharing his brand of entrepreneurial passion. I don’t ever think I’ve seen Andrew without a smile on his face, and he’s even gracious when he kicks my butt in ping poing.

It’s been awesome to see Andrew come of age as a key driver of our local entrepreneurial community. Good job man!

Solving the Peter Principle? One Word: "Darts"

2009-07-03T19:45:33+00:00

There is a fun new working paper out from some Italian scientists that models the Peter Principle. The principle says, of course, that people climb in an organization until they reach their level of maximum incompetence.

How would that happen? Well, the authors argue it should be expected in any organization where the following two conditions hold:

The best member are rewarded with promotions
Competence in a new position is not highly correlated with competence at a prior level

The authors simulated the preceding in a pyramidal organizational form using a mathematical agent model. Here is the outcome:

Here we show, by means of agent based simulations, that if the [above two conditions] actually hold in a given model of an organization with a hierarchical structure, then not only the "Peter principle" is unavoidable, but it yields in turn a significant reduction of the global efficiency of the organization. [Emphasis mine]

Granted, this shouldn't be surprising news, one would think, to anyone who has spent any time around large organizations. A disproportionate number of the positions always seem filled by people who elicit a WTF? reaction from reasonable-minded observers.

So, do we just live with it? After all, we can hardly get around elevating the best people, and it isn't unreasonable to think that one's experience in a former position doesn't adequately prepare for the new one.

Not necessarily, according to the authors:

...the best strategies to improve, or at least not to diminish, the efficiency of an organization, when one ignores the actual way of competence transmission, are those of promoting an agent at random or of randomly alternating the promotion of the best and the worst members. We think that these results could be useful to guide the management of large real hierarchical systems of different nature and in different fields.

Whoa, it turns out calling someone's promotion "random" is a compliment. Who knew darts could be so handy at promotion time?

Source:

The Peter Principle Revisited: A Computational Study
Authors: Alessandro Pluchino, Andrea Rapisarda, Cesare Garofalo

When is a Failure Not a Failure? When It's an Iraq Oil Auction

2009-07-03T19:45:33+00:00

The failed Iraq oilfield auctions this week have become a litmus test for Iraq, for oil analysts and for the ever-nervous global oil market. Iraqi officials refuse to see the disappearance of most bidders and the completion of only auction (with a single bidder) as a failure. Instead, they are hawking the crowd-pleasing idea that multinational oil companies are greedy mouth-breathers that balked at the hard bargain being driven by righteous Iraqis who control so much valuable, marginal oil supply.

For their part, of course, oil companies think that the Iraqi oil auctioneers are nuts. The proffered risk/reward premium for exploration, development and production in an unsafe country with minimal infrastructure and maximal political flux was near zero. But in their zealotry to demonstrate resource nationalism to an uneasy electorate, Iraqi officials scared off most sane bidders, making the only successful buyer in this first round a bid backstopped and subsidized by the Chinese government -- and one that still required a huge price concession.

Here is a nice summary snippet from IHS on where this means the sorry process goes from here:

Without Iraq offering a better risk/reward ratio to investors it will have to undertake all investment and development itself—a process that will be slow, laborious, and under-funded, and will result in volumes nowhere near those targeted and years from their hoped-for schedule.

Iraq needs to look not only at the reward side of its offering, however; it can make significant progress on lowering the investor risks. The government needs to direct its attention to passing a national hydrocarbons law in order to lay down a clear legal framework for the deals and give them greater political legitimacy than what is just—effectively—a mere pledge of contract allegiance from the currently serving ministers. This would also lower the political risk in Iraq, as the law in itself would require some form of broader political understanding between the leading factions and thereby to some extent bind much of Iraq's political forces into taking responsibility for long-term hydrocarbon policy.

More here and here.

QOTD: Sampling the Future

2009-07-03T19:45:33+00:00

The following innocuous sampling theory comment from Andy Gelman set me thinking in a bunch of dimensions today. The question had to with how to handle statistical analysis when your sample population is the entire population, and Andy's answer is important and instructive:

So, one way of framing the problem is to think of your "entire population" as a sample from a larger population, potentially including future cases.

Precisely right, and a point that many naive hypothesis-generators might keep in mind, whether in financial markets or elsewhere.

More here.

Farmworkers: Go to New York City, Young Man

2009-07-03T19:45:33+00:00

I've been messing about with this tool that tries to compare supply and demand for various jobs by geography throughout the U.S. You have to be careful how you interpret it, as the following chart suggesting farmworkers (and animals (sic.)) should race to New York City and San Francisco shows, but it's still interesting.

Wells Fargo Gives California July 10 Drop-Dead Date

2009-07-03T19:45:33+00:00

Nice to have a firm date for when California must have a budget and stop shopping IOUs. Here is Wells Fargo from a release yesterday:

Wells Fargo & Company (NYSE:WFC) said today it will accept registered warrants issued by the State of California from its retail and business customers for a limited time. It will begin accepting the registered warrants for deposit on July 2, 2009 and stop accepting them no later than July 10, 2009.

“We’re very disappointed, as are many Californians, that California has taken the unfortunate step of issuing IOUs in lieu of its payments to some businesses and individuals,” said Lisa Stevens, head of Community Banking for Wells Fargo in California. “Wells Fargo has a long history of taking extraordinary measures to help our customers and will accept registered warrants from our customers, but only for a limited time, to allow them time to make other arrangements. We are reluctant to take this step, but are doing so to help our customers who are not at fault and with the expectation that the Legislature and Governor will complete the budget within days. We join all Californians in urging our Legislature and our Governor to take the appropriate steps as soon as possible to resolve this budget crisis.”

[Emphasis mine]

It is deliriously ironic and surreal that it took California to make screwed-up and irresponsible banks look like mature adults.

James, surfing.

2009-07-03T17:36:57+00:00

James, surfing.

Gnip Is Hiring Software Developers

2009-07-03T16:07:11+00:00

Yesterday I posted that Trada is looking for a Test Engineer. Gnip is also looking for software developers – three in fact:

If you are Boulder-based and fit the qualifications, email Jenny-Lynne Elledge.

Being International On July 4th

2009-07-03T16:06:25+00:00

Tomorrow is the anniversary of America's independence - a great time to be thinking about how to be a better citizen both at home and globally.

With that spirit in mind, as of yesterday this blog has become internationalized. I added (per the recommendation of my rockstar intern Wayne) Google translator. If you don't read English well - fear not, you can now read this blog in dozens of languages. Hopefully this content will be able to help entrepreneurs everywhere.

Mass Personalisation and Venture Capital: not just 3D Printers.

2009-07-03T14:39:01+00:00

One of my Investment themes at Advent is Personalisation.

Why?

eCommerce is clearly one of the few bright spots right now and we’re still in the realm of simple investment stories around backing companies selling stuff online. The Chemist Direct investment thesis? The “Superdrug” of tomorrow. ASOS? The Arcadia of tomorrow. ChainReaction (my personal favourite) is the Halfords of tomorrow. Vente Privee the TKMaxx of tommorrow. Etc etc.

So we’re getting better and better at selling standard product online.

However, there’s an interesting batch of companies who’ve been funded which I expect to see more and more money chasing: Retailers selling product SKUs of 1. A product that personalised and unique to each purchasers.

How can this stack up?

The web is one low-cost route to market and can be leveraged to offer everyone the tools to create their own products. The challenge for businesses is getting the back-end right to be able to manufacture and fulfill.

On “simple personalisation” Europe has some excellent first-wave companies. Spreadhshirt and personalised t-shirts, still growing nicely. Moo.com and cards. Graze.com and healthy food boxes.

What interests me is the second wave of far more complex manufacture & fulfilment or completely new products. GlassesDirect is a great example: something made specifically for me. Not to mention the operational ball-ache of made to order glasses and the drop shipping challenges of fulfillment.

Tailorstore is another great example: We all want tailored shirts but here’s something made in Asia, and delivered to the UK via Germany, from a business based in Sweden.

There is real innovation here: at the technical, operational, manufacturing and financial level. This is a great playground for die-hard entrepreneurs: intellectual challenges, people saying “it can’t be done”, creative solutions and grinding out deals.

I would love to meet more companies in this sector.

There is also a level beyond this: companies coming up with products that are not currently available. I love the idea of being able to design a new car online specifically for me or design a new gadget and get it made by a 3d printer. It’s just I’m not yet convinced this is en-masse right now. Tell me if I am wrong.

HeyZap's Looking For A Strong Software Engineer In SF

2009-07-03T13:04:07+00:00

Our newest portfolio company, HeyZap, is looking for the fourth member of their team. HeyZap is a platform for game developers to get wide viral distribution for their flash games and monetize them.

They are looking for:

a talented engineer with extensive experience; hopefully you have made one or more sites that clearly illustrate your capabilities. You should be a technical generalist, meaning you are comfortable and eager to work on what is needed and learn what is necessary, in a fast-moving, dynamic environment.

The job spec is here and if you are interested please email them at jobs@heyzap.com.

Musical Invitation [Flickr]

2009-07-03T08:34:52+00:00

jurvetson posted a photo:

I have to prepare a speech for the President of Estonia tonight….

But first, I’m off to a swamp for a swim with the ogres.

Trada is Hiring for a Test Engineer + Support

2009-07-03T04:34:57+00:00

Trada, one of our portfolio companies in Boulder, is looking to hire. They’re looking for a tech-skilled individual who thinks they can do just about everything, because they might be asked to. Primary role is testing their online advertising app but there’s a huge opportunity to contribute much more. There’s dev work; cloud systems admin; operations tasks; end-user support; and customer facing account management tasks that can be added to the mix for the properly skilled (and properly motivated) individual. While still in stealth these guys are already rocking. Interested – contact Michael Lawless at mlawless@trada.com.

High and Dry - Radiohead

2009-07-03T01:00:00+00:00

High and Dry - Radiohead

The Unbearable Stupidity of Some Patents

2009-07-02T23:17:51+00:00

If I told you that I had just filed a patent for “a system to sell equity in domain names”, I’d expect you to laugh at me. I haven’t ranted and raved against software (and business method) patents for a while because I got bored of doing it. The PTO has gotten so far behind on responding to patent applications that the whole notion of a four year cycle to get a software patent approved just underscores how ridiculous the whole thing is given the pace of innovation in software.

But – today’s silly patent popped up somewhere and I just couldn’t resist poking fun at it. Go Daddy has filed a patent for a method of selling equity in domain names. I can’t wait to see what the SEC has to say about this one.

I sure do hope the new regime in Washington D.C. has the balls to address the software patent issue this time around and end this madness.

Readings

2009-07-02T20:16:59+00:00

There is some good stuff in the current issue of Foreign Policy:

Thing again about Asia’s inevitable rise (Source)
The end of finance is the end of macho (Source)
The 2009 Failed States Index (Source)
The collapse of the Baltic states (Source
Why birth rates matter (Source)

Venture Capitalists are Best Kept at a Distance

2009-07-02T20:05:15+00:00

There is amusing (in an admittedly academic sense) new paper out seemingly showing that venture capitalists obtain a significant portion of their performance by investing in deals outside their local area. That, of course, runs contrary to the usual VC mantra that they only invest in their local area.

A cynic (or an entrepreneur) would like say the answer is obvious. Venture capitalists are meddlesome sorts who get in the way of running a company, so startups will do best to the extent that they can keep VCs a few timezones and/or flights away.

For some reason the paper’s author don’t proffer the above explanation. Instead, they argue it is a combination of higher hurdle rate forcing VCs into making better investments, plus some geographic arbitrage. While both are possible, even if geographic arbitrage in venture is mostly a loser strategy, I’d also bet there is a reputational effect going on. In short, the “smart money” from out of town gets to do deals in the hinterlands at better valuations than does a local fund.

Source:

Buy Local? The Geography of Successful and Unsuccessful Venture Capital Expansion
Henry Chen*, Paul Gompers**, Anna Kovner***, and Josh Lerner**

"My answer to that is that Daring Fireball is decidedly not free. It’s simply a question of who gets..."

2009-07-02T18:56:42+00:00

“My answer to that is that Daring Fireball is decidedly not free. It’s simply a question of who gets charged. Readers don’t, but sponsors and advertisers do. What makes it work so well (so far) is that this makes everyone happy. I’m earning a nice salary. Readers get to read my writing in exchange for a small portion of their attention which I direct toward ads. And sponsors and advertisers are happy to pay a fair price to reach an audience of good-looking, intelligent readers such as yourself. But there’s nothing free about it.”

- Daring Fireball

Gestures on Firefox and Macbooks

2009-07-02T17:46:57+00:00

Wow, hack around a little. You can now twist your fingers and move from tab to tab in Firefox. How nerdy!

Hat tip to Dave Winer

2009-07-02T17:33:00+00:00

Back in early 2007, I was itching for a way to automatically tweet links to my photos on Flickr.

A few months later, Dave Winer wrote a web service called Flickr-to-Twitter. Dave was nice enough to give me access back then and I wrote about it at the time. And for the past two years, that’s how I’ve been posting flickr links to Twitter for the most part.

Since then a number of 3rd party apps have emerged to post photo links on Twitter. Many of them are fantastic. Simple & fast.

Earlier this week, Flickr announced that they had officially integrated with Twitter. It provides much of the same functionality as Dave’s original application with some additional bells & whistles.

It’s terrific that Yahoo built this into Flickr. It will help many users tie together two great products in a simple way.

But right now I’d like to say thanks to Dave for building his app. I appreciated it then and I appreciate it now.

Planet VC

Watching People Come of Age

Solving the Peter Principle? One Word: &quot;Darts&quot;

When is a Failure Not a Failure? When It's an Iraq Oil Auction

QOTD: Sampling the Future

Farmworkers: Go to New York City, Young Man

Wells Fargo Gives California July 10 Drop-Dead Date

James, surfing.

Gnip Is Hiring Software Developers

Being International On July 4th

Mass Personalisation and Venture Capital: not just 3D Printers.

HeyZap's Looking For A Strong Software Engineer In SF

Musical Invitation [Flickr]

Trada is Hiring for a Test Engineer + Support

High and Dry - Radiohead

The Unbearable Stupidity of Some Patents

Readings

Venture Capitalists are Best Kept at a Distance

"My answer to that is that Daring Fireball is decidedly not free. It’s simply a question of who gets..."

Gestures on Firefox and Macbooks

Hat tip to Dave Winer

Solving the Peter Principle? One Word: "Darts"