77

Venture Hacks

• You can be so bad at so many things 3 December, 2011, 1:24 pm
  “You can be so bad at so many things… and as long as you stay focused on how you’re providing value to your users and customers, and you have something that is unique and valuable… you get through all that stuff.” – Mark Zuckerberg
• The problem with the Internet startup craze 24 August, 2011, 8:43 pm
  “The problem with the Internet startup craze isn’t that too many people are starting companies; it’s that too many people aren’t sticking with it.” – Steve Jobs
• 1.5 Years Of AngelList: 8000 Intros, 400 Investments And That’s Just The Data We Can Tell You About 25 July, 2011, 3:31 pm
  It’s the AngelList centi-sesquicentennial and we want to share some stats with you. After 1.5 years, AngelList has seen… 8,000 intros. An investor has asked for an intro to a startup on AngelList over 8,000 times. 400 investments. A startup has been introduced to an investor and subsequently closed that investor over 400 times. 8 acquisitions. At least 8 startups on AngelList have been acquired. But who are these fine folks? Closed investors include Andreessen Horowitz, Kleiner Perkins, CRV, Dave Morin, Mitch Kapor, Matt Mullenweg and 200 others Startups include Uber, Getaround, Storenvy, Wanderfly, Yipit and 200 others Acquirers include Twitter, Google, Facebook, eBay and LinkedIn See all the startups and the investors they’ve closed here. This is the data that the startups and investors have kindly reported. The actual numbers are probably 25%-100% higher (especially the investments). We don’t have data on every single intro, investment, or acquisition. For example, startups don’t always add investors to their profiles (hint). Top markets and locations The top 5 markets are Mobile, E-Commerce, SaaS, Digital Media and Education. And the top 5 locations are Silicon Valley, New York, Los Angeles, London and Chicago. Rock on, please get in touch if you have any questions. And thanks to Colleen at GigaOM, Pascal at Business Insider, Jolie at VentureBeat and Brad Feld for the coverage.
• Before product-market fit, find passion-market fit 17 July, 2011, 11:26 am
  Before product-market fit, find passion-market fit. Building a product is a process, not a discrete action. And the Internet is efficiently arbitraged. Every single simple thing that can be done is being done, or has been done. The lesson of history is that product-market fit is very precise—one wrong tweak or slightly bad timing and you can miss the whole thing. So the only way you’re likely to find product-market fit is if you’re almost irrationally obsessed with the market and if you’ve been working on it for a long time. Where the journey is the reward. Then, you’re likely to have unique insights (in the details) and consistent execution, through thick and thin, to find fit. Often, the best companies are ones where the product is an extension of the founder’s personality, which shouldn’t be a big surprise, since everyone is passionate about themselves.
• But I don’t want to follow you on Twitter 13 July, 2011, 11:08 am
  We post links to the very best startup advice on Twitter at @venturehacks. We read Hacker News, the best blogs, Quora, and everything else startup-related. Then we tweet about the best content we find. But maybe you don’t use Twitter. Or you don’t want to follow us there. Or you hate us. Well then, you can subscribe to a daily digest of the links we post on Twitter via email or RSS. Here’s a pic of the email version: Subscribe via email or RSS.
• Anatomy of an (un)fundable startup 22 June, 2011, 11:25 am
  Naval and Mark Suster recently gave the keynotes at the 7th Founder Showcase. Andrew Chen did a better job of describing Naval’s keynote than I ever will: “People spend a surprising amount of time on things that will contribute little or no value to getting them to a seed round, and this talk is the best I’ve seen in terms of presenting the issues in its entirety. “Naval broke down the 5 main qualities of an ‘exceptional startup,’ in the following order: 1. Traction 2. Team 3. Product 4. Social Proof 5. Pitch/Presentation “And while all these qualities are important, Naval explained, the most important thing is to understand that: ‘Investors are trying to find the exceptional outcomes, so they are looking for something exceptional about the company. Instead of trying to do everything well (traction, team, product, social proof, pitch, etc.), do one thing exceptionally. As a startup you have to be exceptional in at least one regard.’” Here are the video and slides: Some of my favorite quotes from the presentation: “If you can’t generate traction, do you really want to raise money?” “If you need money to recruit the best, you’re not ready.” “It’s easier to pitch a new investor than to convert one.” “Capital is mobile, but capitalists are lazy.”
• Getting Leverage in Hostage Negotiations 19 June, 2011, 12:06 pm
  “Every time the other party says ‘I want’ in a negotiation, you should hear the pleasant sound of a weight dropping on your side of the leverage scales.” – G. Richard Shell, Bargaining for Advantage Most entrepreneurs don’t understand the power of positive leverage. Here’s a typical situation: After weeks of fund-raising, you find a brave investor who says “Yes, I want to invest.” He says he will give you an offer soon. You’re excited. A few days later he delivers a term sheet that you don’t like. The valuation is really low. Or the non-economic terms aren’t favorable. Your excitement turns to disappointment and frustration. This is the only offer you have so far. What do you do? First, we hope you’ve been talking to several investors at the same time and creating a market for your shares. With an adroit touch, you can use this first offer to create the scarcity and social proof that drives other investors to say “yes”. At a minimum, you can use this offer to drive investors to make any decision at all — up or down. And keep improving your alternatives until you’ve a signed term sheet. But let’s assume you don’t have any other offers and you have to negotiate with this investor. Or that this investor is your first choice — whether or not you have alternatives. Positive leverage This type of negotiation is similar to a hostage negotiation because you can’t walk away from your opponent. You can’t say, “Yeah, it’s okay, go ahead and kill the hostages, we’re not interested in your demands.” When you have to negotiate without good alternatives, the tools of positive, negative, and normative leverage are essential. Positive leverage is your ability to provide things that your opponent wants. You have positive leverage when your opponent says, “I want to buy your car”, “I want you to release my friends from jail” or “I want to buy your shares”. As soon as your opponent says he wants something from you, you have some positive leverage. You control what they want. You can grant them access or deny it. That’s why experienced opponents delay making offers — they don’t want to give you leverage. In practice How does positive leverage work in practice? First, positive leverage should improve your psychology during the negotiation. You’ve gone from a situation where you want something from the investor to a situation where you both want something from each other. Your psychology is critical in a negotiation because “leverage often flows to the party that exerts the greatest control over and appears most comfortable with the present situation.” Second, you can now identify other things that your opponent wants and deliver them. Maybe you’re working with a partner who is trying to get his first deal done at the firm. Help him succeed and help yourself in the process. Maybe you’re working with a firm who is excited about stealing a deal from a top-tier firm. Help them succeed. Maybe you’re working with a firm who wants to co-invest with a top-tier firm so they can show off to their LPs. Help them succeed. Third, even before investors makes an offer, you gain a little bit of leverage every time they ask for something. Don’t try to use it after the first meeting. But if you’ve been talking to them for three weeks and they’re getting deeper and deeper into diligence, you should recognize and use your leverage. At a minimum, you should ask for information about their process and thinking at every step of the way. The prime time to negotiate is when your opponent says, “I want.” “If they’re talking to you, you have leverage.” – Christopher Voss, FBI Negotiator
• Reading your legal docs 16 June, 2011, 11:36 am
  Go read Elad Gil’s You Should Read Every Word of Every Legal Doc. Some docs are too long and boilerplate to read, so this is how I read financing docs: Read and understand everything in the term sheet. But when it comes to the closing docs, ask your lawyer to explain all the terms that he has seen written, or could have been written, more favorably to the startup. The closing docs are too long and boilerplate to read. Get a good lawyer because you probably don’t have one. You really won’t know what a good lawyer is until you’ve fired a few. I regularly run into lawyers at big firms who give bad advice alongside good advice. Don’t assume your lawyer is good just because he works at a big Silicon Valley law firm. You probably can’t tell the difference between good legal advice and bad legal advice. So you will need a great advisor like Elad. You should subscribe to Elad’s blog. It is consistently great.
• “A” players write the playbook 14 June, 2011, 9:55 am
  Eric Paley’s Curve of Talent is a brutal must-read. I’ve remixed it a bit to come up with the following definitions; the word’s are Eric’s, I’ve just re-ordered them: F performers are not at all productive. C performers struggle to competently fill their role, but are somewhat productive with sufficient coaching. Hard to admit, but most people in the business world don’t have a particularly clear idea on how to do their job well. Startups need to help C players transition out of the organization. B players understand their objectives well and deliver them competently with minimum coaching. Coach B players on the need to not just competently deliver their function, but drive toward innovation within that function. A players write the book and not just read it. They not only have a clear idea how to competently accomplish their functional objectives, but actually lead the organization to innovate and be world class within their functional area. They raise the bar on the entire organization. One way these candidates can be identified during an interview is when they actually teach the interviewer something about how the company can win.
• AngelList startup wins TechCrunch Disrupt 27 May, 2011, 10:34 am
  Congrats to TechCrunch Disrupt winner GetAround. Guess what they used to raise part of their first round?

76

Fred Wilson

• The Academy For Software Engineering 13 January, 2012, 2:39 am
  A number of years ago, I wrote a blog post talking about the need to teach middle school and high school students how to write software. In the comments (where the good stuff happens), a Google engineer told me to go down to Stuyvesant High School and meet a teacher named Mike Zamansky who had taught him to write code in high school. So I did that and thus begun my education into the world of computer science education in the NYC public high school system. What I learned was that other than Mike's program at Stuyvesant and a few other small programs, there wasn't much. So began my quest to see more computer science and software engineering in the NYC public school system.  Yesterday I went up to the Morris High School in the Bronx to watch Mayor Bloomberg's State of The City Address. In a speech that was largely about the intertwined nature of education and the economy, he announced that the city is opening The Academy For Software Engineering this fall in the Union Square neighborhood of New York City. It was a proud moment for me and Mike Zamansky, who was seated next to me on the stage. I want to personally thank the Mayor, his education team led by Dennis Walcott, and his economic development team led by Robert Steel for adopting an integrated set of technology, economic development, and education policies and then aggressively rolling them out city wide. The Academy For Software Engineering is just one part of a much bigger strategy of developing new industries and new jobs in New York City and making sure we have the education resources, both in K-12 and at the college/university level, to properly staff these new industries. The Academy Of Software Engineering is not a "specialized school." It will be open to all students as part of the high school admissions process in NYC. The City's goal (and mine too) is to open up opportunities for many more students than the small number of specialized schools can deliver. Hopefully the curriculum that is developed and teachers that are trained at the Academy will get rolled out into high schools all over the city in the coming years. The Gotham Gal and I have provided the initial financial support to hire a new schools team and recruit a top notch Principal. But we do not want to be front and center in this story. The team at the DOE and City Hall that has brought this school to life and the Advisory Board of educators and industry leaders (led by Evan Korth of NYU) should get way more credit for what has happened to date. And we will need more financial and industry support (as well as a fantastic Principal) to make this school a success. So if you would like to join us in this effort, please email me via the contact link at the bottom of this blog and let me know how you would like to help. This is an ambitious effort and we will need it.
• Shapeways and 3D Printing 11 January, 2012, 3:03 am
  Last week, in the thread on Herky Jerky Investing, the AVC community forked into an incredible discussion about 3D printing and our portfolio company Shapeways. If you click on this link, you'll see that the conversation just goes on and on and on. Clearly 3D printing is something that has captured the imagination of many members of the AVC community. We are huge believers in the power of technology to feed creativity and new kinds of businesses. 3D printing in general and Shapeways in particular is exactly that kind of transformative technology. It is still not on the radar of most people. But that is rapidly changing. To get a sense of how fast things are changing in the world of 3D printing, check out this prezi that Shapeways published on their blog yesterday (hint: go into fullscreen mode, it's way better).   Shapeways 2011 on Prezi Related articles NYC at Center of 3D Printing and Craft Manufacturing (technoverseblog.com) Shapeways Brings the Future of Stuff to New York City! (continuations.com) MakerBot announces latest model that is capable of two color 3D printing (geek.com) Steve Ho: 3D Printing Is Coming (toddsampson.com) 3D printing? Now there's an app for that (simplyzesty.com) Mineways offers up 3D-printed models of your Minecraft creations (engadget.com)
• Fredsquare 7 January, 2012, 4:29 am
  Our very own Kid Mercury has built a learning community (and game) called Fredsquare. The following is a guest post he has written to introduce all of you to it. I hope you'll visit Fredsquare, play the game, and learn a bit about startups too. I am sure the Kid will love to get your feedback on Fredsquare in the comments too. ------------ FredSquare is an application I’ve hacked together for the AVC community. Its mission statement is to help startups learn. Here’s how it works: Articles and videos from around the web that help startups learn are imported the site. Comments on AVC tagged #fs are also imported. If you’re leaving a comment that you think helps advance the FredSquare mission – help startups learn – please feel free to tag it #fs. Imported content, #fs tagged comments, and original content contributed by FredSquare members is curated and organized to create FredSquare University. I like to think of it as “Wikipedia for startups”: an encyclopedia-style reference source that we can use to continue learning, so that we can build the best startups possible. Those with the Bouncer Badge are responsible for curating content and building FredSquare University. (Currently this is just me, though hopefully we can grow to more Bouncers in time when it is warranted). The more content of yours that Bouncers add to our University, the more Badges you’ll earn. Each Badge is assigned a numerical value, and the sum of your Badges is your FredScore. Boosting your FredScore will unlock privileges as our game develops (right to launch your own storefront and accept FredBucks, discounts on other stores, etc – but all that comes later, once the community has some more engagement). While building an educational resource is the paramount goal, effectively serving our mission goes beyond creating an encyclopedia – for learning is an interactive endeavor, and we humans tend to learn most by doing. And so, the game mechanics of FredSquare also reward founders for building their startup. Here are some Badges founders can earn for engaging in activities that most startups need to do to as part of their path towards sustainable success: Slide Deck (for publishing a slide deck) Video Pitch (for creating a video pitch) Engaged Users (for reaching 10,000+ authentic registered members) Disruptive Strategy (for having a strategy that fits the framework of disruptive theory Click here for a full list of badges. Remember that earning Badges boosts one’s FredScore. As our game develops, I’d like for FredScore to serve as a reputation metric of sorts. I hope that it can be used to identify startups getting traction that may be worthy of investment – either via crowdsourcing, should the legislative environment allow that, or by bringing qualified startups to the attention of accredited investors – like Fred. I believe that FredScore, in conjunction with private groups and discussion forums on FredSquare, will provide us with a richer environment for startups to network with each other -- and thus to learn how to build great startups by doing the work involved.   Money, Governance, and CopyrightThe creation and management of FredSquare is part of my larger objective of building learning-centric communities with game mechanics for blog stars that will include a P2P economy (i.e. users buy and sell with each other using Fredbucks – sellers must have a high enough FredScore). InformedTrades is a more developed prototype if you are looking for another example. Anyway, as game operator, I will impose a tax on all transactions once our economy develops, and will retain a portion of revenue via virtual goods and affiliate marketing. The goal is to share the majority of revenue with the community via FredBucks (which, in time, will be able to redeemed for a variety services that help startups grow – i.e. hosting, video production, web design, outsourced software development, etc), as well as with Fred’s favorite charity, Donor’s Choose. At present there are just banners on FredSquare, and 100% of all banner revenue is being donated to Donor’s Choose. A large percentage of virtual gift revenue will be donated to Donor’s Choose as well. Fred appears to be down with giving me leeway to run this. But while I’m running things, if Fred tells me to do or not do something, I will obey, so long as the order does not violate any law imposed by the US Federal government or the state of Florida, USA. The goal is certainly to channel the brand of Fred and the spirit he has engendered here. I find it extremely unlikely this will be a cause for concern but I do find it worthwhile to clarify as much as possible at the outset.  All original content published on FredSquare is CC-BY licensed. Consistent with the spirit of Fred, FredSquare operates on that side of the business model debate pertaining to copyright, under the belief that such a policy will generate the most opportunity for all. If you do not find this agreeable, publishing original content on FredSquare or tagging your comments on AVC with #fs may not be for you.  Anyway, the first step is to build the community and get an economy going, then we can all argue about sharing money later. :)By now the time has come for me to end this introduction to FredSquare, and for you to make a choice: you can ignore this blog post and tell yourself that there is no hope for society; government sucks, corporations suck, the economy sucks, most startups fail, your mom doesn’t love you, etc. Or you can enlist as a citizen of FredSquare, share your knowledge and build your startup, and be a part of creating the startup utopia that sets us free.      
• Herky Jerky Investing 5 January, 2012, 2:36 am
  The WSJ says some venture funds hit pause on big deals. The Journal describes a group of venture capitalists dialing back on certain deals after a breathless year of venture investing that had some comparing 2011 to the late 1990s dot-com bubble. Many venture capitalists said they now are increasingly passing on companies seeking frothy valuations, and some are trying to get off the beaten path to find cheaper deals. I am not a fan of this start and stop style of investing. Nobody can time markets. You can't deliver great returns to your investors by being a momentum investor during some periods and a value investor in others. I believe the only way to be a top performing investor in any asset class is to have a disciplined investment strategy and approach and apply it consistently and actively in all markets all the time. I am proud that our firm has been investing at about the same rate of new investments per year for almost eight years now. It hasn't gone up much but it also has not gone down much. We will never be the most active venture capital firm. But we will never be inactive either. We are open for business as much today as any other day in the past eight years. If you are building a large network of engaged users that has the potential to disrupt a big market, please talk to us about what you are doing.
• 2012: The Year That Movements Go Mainstream? 29 December, 2011, 7:10 am
  I returned from ten days of skiing with my family last night. I'm on mountain time and plan to stay there until the new year. Staying up late and sleeping late seems to be a good way to bring in the New Year. But even so, my version of sleeping late is getting up at 8am. My family's version of sleeping late is getting up at noon. That leaves a fair bit of time to read and think. And so that's what I did this morning. And here is what I am reading and thinking about: 1) Ron Paul is likely to win the Iowa Republican Caucus. Newt Gingrich says "I think Ron Paul's views are totally outside the mainstream of virtually every decent American." Maybe Paul's win in Iowa is the moment when Paul's ideas and the Tea Party movement go mainstream. 2) Occupy's organizers are building their own social network. The idea of a distributed social net that is not controlled by any company or institution has been around for a while. Identica and Diaspora have not taken off. Can a movement make it happen? I think it has a better chance because networks need people in them. 3) Reddit's users want to target a Senator after their successful attack on GoDaddy. The Reddit community can marshall a lot of activity when they want to. Last year's Rally To Restore Sanity was largely catalyzed by the Reddit community. If they do go after a Senator with that kind of intensity, it will have an impact. 4) Wired says that 2011 was the year that IP trumped Civil Liberties. It sure feels that way to me. Beware the backlash. 5) Twitter reports a Massachusetts DA's subpeona to its users. The money quote from that post: "Never declare war on the young," said Harvey Silverglate, a noted civil libertarian, told the Boston Herald in reference to the less-than-tech-savvy wording of the subpoena. "They'll outlast you. They'll outthink you. They'll outdo you... That may be the lesson the DA's office is about to learn." Back in the spring of this year I told the folks at Techcrunch Disrupt that I thought the next big thing was "cultural revolution" fomented by the fact that roughly a billion people all over the world are connected directly to each other. I'm still not entirely sure how to invest in this megatrend, but it sure feels like it is upon us.
• Profitable: To Be Or Not To Be? 28 December, 2011, 7:38 am
  Mark Suster has a great post on this topic. In typical Mark fashion, it is long, with a lot of detail and substance. I highly recommend all entrepreneurs take the time to read it end to end. For those who won't take the time to read it end to end, I'll summarize it. Many high growth companies can be profitable. They have enough revenue to cover their essential costs and could easily decide to show a profitable income statement. But they don't make that choice. Instead they invest heavily in the business with the expectations that those investments will produce more revenue (by hiring salespeople), or additional products (by hiring engineers and product managers), or additional geographies (by hiring an international team), or any number of other value enhancing aspects of the business. The result of that decision is that the business loses money or simply breaks even (I prefer the latter approach). There was a discussion of profits (or the lack of them) in the comments to the IPO Market blog post I wrote last week. A number of commenters pointed out that many web companies lack profits. I don't think that is actually true (certainly not for many that have gone public), but it is true that most, if not all, web companies are not optimizing for profits this year or next year. They are optimizing for the ultimate size of their businesss and the total amount of cash flow they can ultimately expect to generate when the business gets to maturity. This is tricky stuff. If you are going to take all of your potential profits and reinvest them in the businesss in search of higher growth and greater profits in the future, you had better be right about those investments. And it is often hard for investors to see how those investments are going to pay off, so at times you can be penalized for making those choices. Right now the public markets seem to be paying companies more for long term growth than for near term profits, so it seems that public market investors (and VCs) are aligned in this respect. But that is not always the case. Markets are fickle. But the best entrepreneurs are focused on the long term vision and will invest in their businesses without paying too much mind to what investors want at any point in time.
• Mocked And Misunderstood 27 December, 2011, 5:07 am
  When people ask me, "how do you know which companies and services are going to be the biggest successes?", I usually tell them to look for the companies and services that are mocked and misunderstood. For some reason, that correlates highly with the biggest breakout successes. Twitter is a great example of this. For years, every post, column, or article written about Twitter would have comment after comment making fun of a service where people "told the world what they had for lunch." Of course, people were doing that on Twitter and people still do that on Twitter. But what those mocking Twitter were missing is that in between the tweets about pizza and pita were posts about politics and poetry. There was substance in the midst of nonsense. And all the while that those mocking Twitter were obsessing about the nonsense, the substance was increasing and the usage was growing. Comscore has Twitter's monthly users at ~170mm people worldwide, up >60% in the past year. That makes Twitter one of the top twenty websites in the world and it is growing faster than most of those twenty websites. That is what I call "breakout success." I woke up thinking about this because before I went to bed last night I watched last night's episode of Rock Center with Brian Williams. They had a piece on our portfolio company Kickstarter. The piece itself was pretty good. But at the end, Brian Williams discussed it with the Kate Snow (who did the piece), and he said something like "so this is like the guy on the street asking for a handout?". Yeah, just like that Brian. Kickstarter couldn't be farther from the "guy on the street asking for a handout" and yet that was Brian's takeaway after watching the piece (or maybe he didn't watch it). Either way he mocked Kickstarter and misunderstands it. And that is fine with me. Because its a signal that Kickstarter is on to something big. I knew that already, but situations like this are reinforcing for me. They are the "tell". So when your company and services gets mocked and is misunderstood by most everyone, particularly the mainstream press and media, just smile and keep doing what you are doing. You are on to something big. Image from StartupQuote.com
• Some Thoughts On The IPO Market For Web Companies 22 December, 2011, 5:42 am
  We have an IPO market for web companies again. I don't have all the names in front of me, but this year has brought IPOs for Pandora, LinkedIn, Groupon, Zynga, and TripAdvisor. These five companies are all trading for north of $1bn market cap. Pandora is at ~$1.5bn. LinkedIn is at ~$6bn. Groupon is at ~$15bn, Zynga is at ~$7bn, and TripAdvisor is at ~$3.5bn. We can (and surely will in the comments) argue about these valuations. Some will say they are too high. Some will say they are too low. That's what makes a market. But in the aggregate, these valuations do not seem ridiculous to me. The public market investors are valuing these companies at prices that have some rationality to them. What is possibly more interesting is that the public markets are valuing these companies at less than the late stage private market might value them at. Again, I don't have the data in front of me (I'm on vacation), but I believe that some of these companies had private financings at our above these current market caps. The past decade (post Internet bubble, post Sarbox) brought a new normal to the late stage venture capital market. Companies are staying private longer. They are doing multiple rounds of growth financing privately. And they are doing multiple rounds of secondary liquidity for the founders, angels, and early investors. Mike Moritz calls these financings the "new IPOs". This "new normal" is allowing these companies to stay private and develop into real businesses. With a lot of revenue. The five companies I mentioned at the top of this post will have close to $5bn in revenue this year. The company with the least amount of revenue is Pandora which, as of its last quarterly report, is operating at a $300mm annual revenue run rate. These companies also have built sophisticated management teams that are highly capable of managing a business to meet the expectations of public market investors. They have strong operating executives, strong financial executives, and strong product and engineering leadership. They should be well run public companies. The five companies I mentioned at the top of this post are carrying a combined market cap of $33bn. So they trade at an average of 6.6x revenues. And that is not including the cash they have on their balance sheets. I am not going to do the math, but I would bet if you back out the excess cash, you might see revenue multiples of less than 6x for this cohort. These are full valuations in a historical context, but these are not crazy valuations. If these companies can continue to grow at the rates they are currently growing, and if they can generate significant cash flow from their businesses (some of these companies already are doing that), then they should be more valuable in the next couple years, generating gains for the public market investors who hold the stock. When Zynga was pricing its offering last week and getting ready to start trading its stock, I got a note from a friend who said "let's hope for a '99 style first day pop." I responded that was the last thing I wanted to see. And thankfully we did not get that. It is not healthy for companies to trade at prices well beyond what they are worth. It puts incredible pressure on the team to deliver results that can't be delivered. And when the stock inevitably comes back to reality, the team feels like they somehow failed. Morale is impacted. The whole things is madness. And who benefits from that first day pop? Only the best customers of the banks who led the offerings. Why should they get a windfall when they did nothing to build the company and when they will be out of the stock so fast it will make your head spin? The IPO market for web companies we have right now is rationale. We can argue whether it is pricing thse offerings correctly. But it feels about right to me. I believe we will see a bunch of IPOs next year, led by Facebook, which is the poster child of this whole "stay private longer" movement. If we as an industry can be patient, keep our companies private longer until they are truly IPO ready, then we should have a sustainable IPO market. That's where we seem to be headed. Let's not get greedy and screw it up. Disclosure: USV has a significant holding in Zynga therefore I am long that stock through my interest in USV. Related articles Tech IPOs Just Ain't What They Used To Be (techcrunch.com) Zynga, Groupon, Pandora and LinkedIn Worked For This Investor (blogs.wsj.com) Later-stage rounds and "setting the bar too high" (cdixon.org) The TripAdvisor IPO (cdixon.org)
• FinTech 2012 15 December, 2011, 3:03 am
  I've written extensively about the startup accelerator phenomenon. I think it has been transformative for entrepreneurs and VCs and startups in general. We should all take a second and thank Paul Graham for his insight into how to properly construct such a program. Paul is a visionary entrepreneur who has changed the game. One of the things I am most excited about in the startup accelerator world is the development of "vertical accelerators." We have seen them emerge in healthcare, education, finance, and a number of other sectors. Last year I blogged about the first FinTech Accelerator here in NYC. I watched that group of entrepreneurs go through FinTech last summer, I talked to them at an evening event, and I watched what has happened to those teams after they came out of the program. I was impressed at every stage. Last week, the second annual FinTech program, FinTech 2012, was announced. Like last year, the secret sauce of this program is the leadership of the CIOs and CTOs of the largest banks and financial services companies: The chief technology officers and senior technology executives from 12 financial services firms will pick up to six entrepreneurial companies to participate in the Lab, which begins in May 2012. Bank of America, Barclays Capital,Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street, and UBSwill be joined this round by American Express and Capital One. When I talked to the teams that went through last year's program, this was the thing that all of them gushed about. Getting regular access to the highest level technology execs in these institutions was a game changer for most of the teams. If you have a fintech startup that could benefit from participation in such a program, you should seriously consider FinTech 2012. There's an information session on January 10th and the applications are due on January 18th. Details are here.
• Should You Introduce Yourself To Me At A Bar? 8 December, 2011, 3:18 am
  Saw this question on Hacker News today: Went to a talk by a VC who is very active in my area. Didn't get a chance to introduce myself after the talk (there were < 25 ppl at the talk but the VC had to run). A few hours later, was out for drinks with a friend and saw he was at the same bar but talking with someone else. Discussion ensued with my buddies around whether or not I should intro myself considering I didn't have a chance earlier in the day, but I ultimately decided against it. What say you: Should I have? I ask for the next time I'm in this situation. I say hell yes you should introduce yourself. But you should also respect that the VC is out with friends and probably isn't up for a long conversation. I would suggest you walk up to the VC, say "I saw your talk today. It was great. My name is Jane Doe and I'd love to find a suitable time to tell you what I'm working on. I'll send you an email to follow up. It's a real pleasure to meet you." Then make a polite departure. My view on these sorts of things is that I love meeting people, no matter where I am. But I don't love being pitched when I'm out with friends and family. The Gotham Gal has witnessed this so many times that she gets annoyed by it now. It happens most often at parties. Sometimes she'll just grab me and say "let's get out of here." Social situations are ideal for a quick hello. Make an impression. Put a face to a name. But don't pitch. That's going overboard.

69

Feld Thoughts

56

bijansabet

• fred-wilson: Katy On A Mission (Katy B cover) - Arctic... 27 January, 2012, 4:18 am
  fred-wilson: Katy On A Mission (Katy B cover) - Arctic Monkeys the boys from Sheffield are doing the cover of the week happy cover friday Arctic Monkeys auto reblog.
• The rise of iPad 26 January, 2012, 1:54 pm
  I’m pretty much obsessed with my iPad. It’s more fun to use than my laptop or my desktop computer. The battery life is great and integrated 3g means I can connect quickly and easily. That’s the opposite experience i have connecting my laptop to my 4g mifi. there is nothing quick and easy about that. Clearly, I’m not the only one that feels that way. Just last quarter Apple sold 15million iPads. That’s an astonishing number for a category that didn’t exist a few years ago.  Earlier today, I took at look at Google Analytics for my Tumblr. Traffic from iPad is almost half of traffic from Mac OS. Even more surprising: iPad traffic is roughly 2x iPhone traffic. There is so much opportunity in the tablet market. I agree with Tim Cook’s outlook that tablets will be bigger than the PC market.  If you haven’t designed your app or website for the tablet, I would get cooking. We are at the dawn of a whole new world. 
• For The Widows In Paradise, For The Fatherless In Ypsilanti by... 26 January, 2012, 8:36 am
  For The Widows In Paradise, For The Fatherless In Ypsilanti by Sufjan Stevens shared from exfm
• Everything is going to be alright (Taken with instagram) 25 January, 2012, 7:07 am
  Everything is going to be alright (Taken with instagram)
• Some thoughts about Apple textbooks 25 January, 2012, 6:39 am
  Much has been written about apple’s proprietary approach to the textbook business. I think the critics have a point. But there are three important things that apple is worth talking about and applauding 1. They have created the most useful and most successful tablet ever. Microsoft has been working on for years. Android tablets are still a mess. Yesterday @parislemon wrote that apple sold 3x as many iPads as Kindle Fire. Considering the relative price point this supports my claim that apple has the best tablet. Period. 2. Schools. Apples original market success was in education. That where I got my first Mac. My friend danl lewin pioneered this business for apple back in the day and as a result it’s in their DNA. Middle and high schools all over the country are rolling out iPad trials. My daughters is in 7th grade. Their entire grade got iPads this year. It’s a smashing success as far as I can tell and the apps are fairly limited. They use it for google docs, various creative apps and of course Wikipedia. 3. Digital Textbooks. I’ve seen a lot of digital textbook efforts over the years. They fall into largely three camps. -analog business model and price point with little/no ux breakthroughs to take advantage of the platform -disruptive price point but hit or miss content and poor ux -analog business model and price point and crappy ux Apple is promising to change the price point *and* deliver a beautiful breakthrough in user experience. http://www.apple.com/education/ibooks-textbooks/ I have often pointed out areas where apples policies have pissed me off (app store review process, inability to replace search engine on iPhone, drm back in the day etc etc). And i will continue to call them out. But we are early days in textbook 2.0. I’m happy to see apple at work in this space. (excuse lack of links and typos. wrote this in the back of a cab on my phone)
• The Future (Acoustic) by Nada Surf Luv this band shared from... 25 January, 2012, 4:42 am
  The Future (Acoustic) by Nada Surf Luv this band shared from exfm
• "Apple likely sold three times as many iPads as Amazon sold Kindle Fires. At twice the price" 25 January, 2012, 4:14 am
  “Apple likely sold three times as many iPads as Amazon sold Kindle Fires. At twice the price” - @parislemon via http://m.techcrunch.com/2012/01/24/boom-boom-boom-boom-boom-boom/
• He’s about to get my submarine (Taken with instagram) 24 January, 2012, 5:14 pm
  He’s about to get my submarine (Taken with instagram)
• Our latest investment, Timehop - a social time machine 24 January, 2012, 1:56 pm
  I’m really excited about our latest investment - Timehop. The company announced the investment earlier today.  I’m completely addicted to my daily emails from the service. And the founders Jonathan and Benny have some exciting things in the works. My colleague Andrew Parker wrote about our thinking behind this new investment. Give it a read and then go sign up for Timehop. Love to hear what you think! 
• "I think their decision to artificially promote Google Plus pages above more relevant pages on..." 24 January, 2012, 8:37 am
  “I think their decision to artificially promote Google Plus pages above more relevant pages on competing social networks is the modern-day equivalent of the ’90s era search engines turning their homepages into “portals”. A search engine should be designed to send users quickly and accurately away to whatever sites on the Internet they’re looking for. The ’90s-era search engine portals blew this, because the whole portal idea was to keep users on their sites rather than send them away. This Google Plus integration is the same thing — an attempt to keep users on Google.com for another page view or two.” - Daring Fireball Linked List: Google’s Problem: Relevance Exactly right. That’s what I meant when I wrote this a year ago. Google won search because they prioritized the best answer above anything else. They have crossed that line and it will hurt. 

55

unionsquareventures

• What comes next 5 December, 2011, 6:15 am
  Now is a great time to be an internet entrepreneur. While much of the global economy sputters, tech companies post growth numbers other industries haven't seen in years. Their success hasn't gone unnoticed, and the pace of tech-company creation has quickened. There's more than me-tooism going on. It is, for example, easier to start a tech company than ever before - it's easier to access startup capital, procure basic infrastructure and tools at lower prices, find and cultivate mentors, and join an accelerator program. Accelerator programs that focus on early-stage technology companies have grabbed headlines recently. The programs are designed to be crash courses in starting a technology company and bringing a product to market. They often last three intense months, ending with a structured pitch to a roomful of investors. The most famous program is Y Combinator, based in Silicon Valley, but there are other programs around the world, including Techstars, 500 Startups, DreamIt, Excelerate, and Seedcamp. Over the past few months, I've seen over 160 companies come through eight different accelerator programs. It's a skewed group, but it captures the zeitgeist of a certain segment of the tech industry - and, I think, looking at these companies is one of the best ways to get a sense for which opportunities compel internet entrepreneurs today. Here's a look at some of what these entrepreneurs are thinking about - and where we all might be headed: Software is developing its own component industry Last year, John Maeda predicted technology would become a cottage industry by 2020 "with bespoke applications made by many, rather than today's industrialized, Microsoft-esque mass production and distribution model." I doubt we've seen the last billion-dollar software company; tech companies will continue to ride the economics of software, and larger companies will use strong network effects and scale to drive consolidation. However, we'll likely see fewer companies that need to build - and fewer companies that will build - every piece of their technology themselves. Component sourcing has already begun to revolutionize the software industry. Take a look at Amazon's or Rackspace's cloud hosting services, which have lowered the price and complexity of hosting software, or the success of "outsourced" tools like Google Analytics, Twilio's voice and text messaging infrastructure, or Urban Airship's iOS notifications. Entrepreneurs in this summer's accelerator programs sliced off pieces of what it takes to build and run a web or mobile application and offered those slices as services. "I built this piece of technology three times at three different companies. I built it a fourth time, and that's the service my company offers," a Y Combinator CEO pitched. Developers are the target customer for 30% of the companies I saw. Consider Parse, which provides a backend to a mobile app, and MongoHQ, which hosts instances of the open-source MongoDB. While LaunchRock offers user acquisition tools, TightDB provides a database customized for big data. ReportGrid provides website analytics, while CoderBuddy helps developers create and host websites on Google's App Engine, and Creative Brain Studios allows game developers to deploy one game on several devices and operating systems. Using components to build larger systems doesn't require building monotonous systems. Consider the iPhone, made of component parts sourced from Chinese megafactories but designed in California. There's something beautiful and unique about the iPhone that no other handset manufacturer has been able to match - even the ones that source parts from the same megafactories. Similar to physical-product designers, when software developers start with components, they can concentrate on the core problem they're solving and will create better products in less time. It's exciting. Work is shifting toward a peer-to-peer model The first two decades of the modern internet broke industries built on distribution monopolies (e.g. music, news) and facilitated coordination between the consumer and the provider without the need for a middleman (e.g. hotels, car rentals.) The same will happen for a large fraction of our work, especially in cases where the work is standardized or employers "distribute" their workers to pools of customers. One reason to create firms is the coordination and signaling problems of situations with imperfect information and transaction costs. As technology increases information flows and decreases transaction costs, individuals can leave their old employers and strike out on their own. Their livelihoods will still depend on providing valuable services in exchange for fees, but they'll do so as freelancers - and on their own, they'll capture more of the value generated by their work. Just as blogs allowed talented writers to build audiences without being affiliated with large media organizations, and as Twitter and Tumblr allowed news- and tastemakers to succeed outside of established news or media properties, new web services will allow individuals to engage with customers without needing to work for a firm. These free agents, disaggregated and newly empowered, can promote and sustain themselves with new tools: Opez caters to service professionals, like bartenders and hairdressers, and allows them to build followings independent of their employers, while Vayable and SideTour provide marketing and transaction-processing for neighborhood tour guides. Hiptic helps graphic designers promote their work, while Zerply helps creative professionals do the same, and InterviewStreet lets programmers show off their skills. As technology creates new free agents, it's also changing the notion of "work" to be less time- and location-specific. This is especially true of work that can be done easily at a distance. Workers who can't differentiate themselves using their reputation will be commoditized. This summer, web services were launched that allow you to order up a proofreader (Kibin), blogger (Contently), tutor (LearnBop), language partner (Verbling), car ride (Ridejoy), science researcher (Science Exchange), cooking instructor (Culture Kitchen), mystery shopper (SpotCheck), or transcriptionist (Mobile Works) from your browser. The Mechanical Turkification of work has begun. Between identified, liberated individuals and the nameless, faceless drones of Mechanical Turk lies identity: does it matter who performs the task at hand? If the worker's background, skills, or experience matter, there's likely to be higher variance in demand for a particular person's services, and free agents will be sought after and chosen by reputation on services built for those purposes. Less-skilled people are likely better suited for tasks for which identity doesn't matter, and other marketplaces that don't include a concept of reputation will provide access to a global pool of workers. What's really next Looking at activity across accelerator programs, it's not clear which "one thing" will be next. This season's 160 "accelerated" companies, nevermind other tech companies created outside of incubators, each seek to solve different problems and should be understood individually. (Making tricky, admittedly, sweeping essays like this one.) Yet broader shifts like the componentization of some software development and a shift from employed workers to independent agents have begun to emerge; other shifts will become more apparent with time. These, plus the overall pace of tech-company creation, give me faith we haven't seen anything yet.
• Help Protect Internet Innovation 16 November, 2011, 7:13 am
  We have previously written about why the Protect IP Act (PIPA) is bad for innovation. The same is true of the House version of this bill which is called the Stop Online Piracy Act (SOPA). In fact, SOPA goes beyond PIPA in several important ways. For instance, SOPA contains anti-circumvention language that would essentially allow for government control over essential privacy software such as VPNs, proxies, and even something as fundamental as SSH. SOPA also provides for an incredibly broad right of private action that would allow content owners to interfere with the operations of payment processors and social media services such as Twitter. For those who doubt the chilling impact on innovation, there is a brand new study by Harvard Business School professor Josh Lerner showing that investment in cloud startups increased as much as $1 billion after a court ruling that permitted cloud-based DVRs (which content companies had previously opposed). Innovation on the Internet has been enabled by key organizing principles behind the design of the Internet, including the separation of different layers and the open architecture. Vint Cerf, who together with Bob Kahn, was responsible for much of the initial design of the Internet has warned that the government is "beginning to go overboard in the protection of copyright" which will harm innovation. Today is the beginning of hearings on SOPA. The Judiciary Committe has apparently chosen to hear from five people supporting SOPA and only one opposing comment. This is not for a lack of trying on behalf of technology companies. Several weeks ago Netcoalition, which represents Internet firms including Google, Amazon, eBay, IAC, Yahoo and PayPal, asked to be heard at the hearings but has been specifically excluded from testifying against SOPA. As Fred has pointed out this is very different from the process that resulted in the passing of the DMCA which currently governs the relationship between copyright holders and technology companies and would essentially be superseded by SOPA. Given this imbalance in front of the Committee, it is essential that lawmakers hear from as many Internet entrepreneurs, employees and investors as possible. Some of the largest companies on the Internet, including Google, Facebook, LinkedIn, Zynga and Twitter have all signed up to a letter expressing their opposition to the bills as currently drafted. The Protect Innovation site makes it possible to support this petition by easily sending a note to legislators. We encourage everyone to sign it. Going one step further, we have also decided to add a "Stop Censorship" graphic to our site that overlaps our logo. This indicates our belief that the bills as currently drafted don't just inhibit innovation but unreasonably restrict freedom of speech. SOPA comes close to establishing the American equivalent of the Chinese firewall (just lacks IP filtering) and undermines the freedom to post links which is essential to free speech on the Internet, including blogs and Twitter. We are not alone in this belief as this letter signed by over 50 law professors against an earlier version of the bill shows. If you want to join this additional protest you can find the embed code here.
• Codecademy 28 October, 2011, 1:49 pm
  A few weeks back, Ryan Bubinski, who co-founded Codecademy with Zach Sims, said to me that he thought learning how to code should be a fundamental skill on par with learning how to read or write or do arithmetic. And, that the Internet was the ideal platform to create the largest community learning to program. So it's no surprise that Ryan and Zach built a service explicitly designed to be "the easiest way to learn how to code." Indeed, a few days after I had this conversation with Ryan, I watched my 12 year old daughter complete, in real time and in small bites, 3 lessons on Codecademy (Getting to Know You, Confirm or Deny and Variables). More than 500,000 other people have also taken millions of mini-lessons since the service was launched in August. Union Square Ventures is excited to make an investment in Codecademy as part of the company's Series A financing and support Zach and Ryan's vision of creating a platform where learning how to code is simple and can be shared. Over the past few years, we've watched the Internet become a richer platform to learn and collaborate in new and different ways from new and different sources. Free and inexpensive content increases the variety of sources from which people can learn online. At the same time, as technology becomes the driving force in our economy, the ability to program and understand programming is becoming more important. Codecademy is at the heart of a new and emerging programming information "stack," which includes networks such as Stack Overflow (part of the Stack Exchange network) - "Q&A for professional and enthusiast programmers" - and Github - a platform for the collaborative development of software. The collaborative nature of the internet has transformed other industries, yet we've only begun to see its impact on learning. Codecademy currently taps into its community by offering users the ability to "help create new lessons" on the service. Albert Wenger created a course - Functions in Javascript. Ryan and Zach understand the importance of developing and listening to the communities that emerge around great web services. It's no surprise then that writer Douglas Rushkoff's latest book is titled Program or be Programmed: Ten Commands for a Digital Age. In it he writes: When human beings acquired language, we learned not just how to listen but how to speak. When we gained literacy, we learned not just how to read but how to write. And as we move into an increasingly digital reality, we must learn not just how to use programs but how to make them. In the emerging, highly programmed landscape ahead, you will either create the software or you will be the software. It's really that simple: Program, or be programmed. We are thrilled to support Zach and Ryan's goal of "teaching the world to code."
• Codecademy 27 October, 2011, 8:34 pm
  Codecademy was created out of the frustrations Zach Sims and Ryan Bubinski felt with learning how to program. Tired with less effective text and video resources, Ryan and Zach teamed up to create Codecademy, a better, more interactive way to learn programming by actually coding. This is just the beginning. Join us as we make it easy for everyone to love and learn how to code.
• DuckDuckGo 27 October, 2011, 2:14 pm
  DuckDuckGo is a general purpose search engine that is intended to be your starting place when searching the Internet. DuckDuckGo was solo-founded by Gabriel Weinberg in February 2008 and is based out of Valley Forge, PA (USA).
• Analyst hiring update #2 24 October, 2011, 1:59 pm
  A few weeks ago, we announced we're looking for someone to join the USV team as an analyst. We accepted applications for two weeks, until October 14, using Take The Interview. We hoped 14 days was enough time for potential applicants. That might've been true, although it turns out most people preferred to wait until the end of the two-week period to apply. We received about 65% of applications in the last two days and over 40% in the final day alone. We've spent the last week watching the video responses, visiting the links, and getting to know applicants. It's not hyperbole to say we've been blown away. We're aiming to complete an initial review of every application by the middle of this week, and we'll then reach out by email to schedule meetings. One unfortunate part of this process is that we're getting to know and will meet some fantastic people - but we're only hiring one person. So we're going to do our best to make interesting opportunities available to all who applied by reaching out separately to applicants. As a start, our jobs page lists nearly 500 opportunities at USV portfolio companies. If you're in the market for a new job, please do check it out.
• My Back Pages 20 October, 2011, 6:37 am
  For many years, I have been a reader of this blog. I'm excited, and humbled, by the opportunity to now be a contributor and to announce here that I have joined Union Square Ventures. In early 2007, when I joined up with John Borthwick and began discussing something that would later be called betaworks, we spent hours talking about how the next phase of Internet growth - that was social at its core and operated in real time - would change every way users experienced and distributed media and content. So, we built a business that focused on end-user participation, data openness, two-way content creation, community and connectedness. John had the foresight to understand how meaningful these concepts would become and how to translate them into some awesome products. Now as part of USV I'm working with an amazing and diverse group of people who are dedicated to transparency in thinking, open dialogue and deliberation as process principles, and a belief in the power of networks created by the Internet. USV's goal is to find and support people and companies with that same set of principles. The USV "thesis" is remarkably similar to that of betaworks, only reduced to a more appropriate 140 characters. Given that overlap, we co-invested with USV numerous times over the years, from Tumblr to Outside.in to Kickstarter and more. My friend Nina Khosla once told me that when thinking about the web, she gets most excited not by the services that offer the greatest utility but by those that create meaning for users. She writes: "What web product last made you cry as you used it? What web product makes you laugh on a regular basis? What web product brings you new friends? What web product makes your other friends closer? What web product creates new interests for you? What web product allows you to actualize on your passions?" I've been lucky to have built and supported a few services that answered her questions. Now it's time to find some more.
• Duck Duck Go 13 October, 2011, 7:09 am
  When I first got into the venture capital business in the early 90s, it seemed to me that half of the deals I brought to the partnership were dismissed with the line "sure it's cool but what the heck do they do if Microsoft decides to enter this business." Today the role of the dominant player is played by Google (and increasingly Facebook). So as an investor, one has to consider how a potential portfolio company can thrive in the shadow of Google. No where is this more true than in Search. So, as you can imagine, we had a lot of interesting conversations in the process of evaluating our latest investment in Gabriel Weinberg's alternative search engine, DuckDuckGo. Our confidence in Gabriel and DuckDuckGo is informed by having watched the decline of Microsoft's hegemony in the 90's. Two things happened that fundamentally changed the game: a shift in venue and a shift in business model. The venue moved from the desktop to the web and the business model shifted from packaged software to open source. It turned out that the way to compete with Microsoft was to not to compete, at least not directly. The way to compete with Microsoft was to change the basis of competition. We invested in DuckDuckGo because we became convinced that it was not only possible to change the basis of competition in search, it was time to do it. I remember clearly when a friend first pointed me to Google, it was a revelation. Using it was a palpably better experience. As part of the process of evaluating DuckDuckGo, several of us switched our default search engines in Chrome (there's simple how-to instructions below the search box on DuckDuckGo's homepage), and had a similar "ah ha" moment. The company is young and under staffed so there are definitely holes Gabriel hopes to fill, but his observation that "traditional algorithmic signals are not the only authority on the web," and his clever use of real authorities to curate search results makes Duck Duck Go an interesting alternative to your everyday brand. We are thrilled to be working with Gabriel. He is exactly the kind of entrepreneur we like to back. He has built and sold companies before. Over the last few years, he has patiently bootstrapped Duck Duck Go into a viable search engine without taking a penny of outside capital. Please join us in welcoming Duck Duck Go and Gabriel Weinberg to the Union Square Ventures portfolio.
• Analyst hiring update 7 October, 2011, 1:34 pm
  A reminder we're closing applications for the investment analyst position at 6pm Eastern time Thursday, Oct. 13. After applications close, we'll review each one before beginning to reach out and schedule meetings. We will respond to all who apply. We're asking candidates to submit two short video responses to the questions "Why are you interested in the analyst role at Union Square Ventures?" (up to a 90-second response) and "Which web or mobile services most inspire you?" (up to a 120-second response.) We're also looking for links to online sites, services, or communities that help us get to know candidates. Please record videos and submit links using Take the Interview. For more details on the position and what sort of candidate we're looking for, please check out the first blog post and comment thread, where we've been answering questions.
• We're hiring 4 October, 2011, 4:07 pm
  Union Square Ventures has a long history - in internet time at least - of hiring off this blog (posts here, here, and here.) A fundamental assumption of the way we've hired is that we're able to get to know great people through their "web presence" - the trail of online communities, projects, and services with which they've engaged. Just as we invest in the transformative power of the internet, we're also looking to build our organization off the internet - plus, we've met some really impressive folks through this blog. And so, in this vein, I'm excited to announce that USV is hiring an investment analyst. The analyst position at Union Square Ventures is a two-year role designed for someone who doesn't have an MBA. As an analyst at USV, you'll learn what the venture capital business is about, and you'll get insight into a handful of fascinating startups too. We hope that, after working with us, this person will move on to a startup or another venture firm or pursue an advanced degree. The primary responsibility of the analyst is to help manage the day-to-day activities of the firm, including: Meeting with entrepreneurs who have started businesses in which USV may be interested in investing Performing market research and due diligence for potential investments, which could entail financial or web-analytics modeling, interviewing customers/users or potential customers/users, or testing products and services Reporting for our investors, which includes helping to set companies' valuations, writing quarterly updates, and packaging the material for our LPs Working with USV portfolio companies, including helping out with hiring, events-planning, and research and attending board meetings Designing and executing projects of your own direction that help USV and/or our portfolio companies We're looking for someone who demonstrates: Deep understanding of the ecosystem of web and mobile services Strong written and oral communication skills - well-defended opinions are a necessity Familiarity with web technologies - you know the difference between the LAMP stack and a stack of lamps Strong interpersonal skills - you'll often be talking to entrepreneurs and other investors on behalf of USV Comfort modeling in Excel Ideally, prior design or programming experience or work in an investment or internet-related position Our office is in New York's Flatiron neighborhood, and the job starts immediately. We're a small team, and we'll be looking for someone who fits our culture. Culture's a tricky thing to describe well, so we encourage you to check out our web presences. If you're interested in the position, please reach out: First, we're looking to see links that will help us get to know you. This could be anything from a Twitter account to a blog or Tumblr to a project you hacked together - whatever represents you best. We expect your web presence to represent who you are, not who you think an employer wishes you were, so please don't waste time sanitizing your web presence before sending us there. We get it. Second, we'd also like to hear from you, so we're asking each applicant to record two short videos answering these questions: "Why are you interested in the analyst role at Union Square Ventures?" (up to a 90-second response) and "Which web or mobile services most inspire you?" (up to a 120-second response) We're using Take The Interview to collect the video responses securely. To apply, visit Take The Interview. None of the information you submit will be shared outside of USV. We'll be accepting applicants until 6pm Eastern time on Thursday, October 13. If you have questions, please leave them in the comments below. Otherwise, we're looking forward to hearing about what you find compelling, what you've made, how you think, and why you're into what we do.

45

venturecapital

• The Daily Start-Up: HelloWallet Will Have To Find Room For $12M 27 January, 2012, 8:26 am
  Top stories in today’s VentureWire: Art by Mike Lucas A provider of neutral, personal financial advice to employees and low-income families, HelloWallet raised $12 million in Series B funding. HelloWallet’s website offers tools to help people increase their savings and get out of debt. It sells subscriptions to the site through Fortune 1000 companies, which offer it as a benefit to their employees, and gives subscriptions–one free one for every five paid ones sold–to community groups that serve low-income families. With a celebrity list of angel investors and the audacious goal to “change the world,” the masterminds behind Lady Gaga’s social media campaign are preparing to raise a second funding round for their start-up by March. Matthew Michelsen, chief executive of Backplane, said they are looking for the correct investors for the company, which aims to be a home-page replacement. Also in today’s VentureWire: Avila Therapeutics, which raised $51 million in venture capitalto develop covalent drugs that are designed to silence disease-causing proteins, said it has agreed to be acquired by Celgene for up to $925 million in cash and milestone payments…ZeaChem will be raising additional corporate and tax equity as it puts together the financing package for its $390 million first commercial-scale production plant…and Y Combinator graduate drchrono, which aims to bring digitized health records to the iPad, said it has raised a first equity round of $2.8 million from DST Global Chairman Yuri Milner and Google engineer Matt Cutts. (VentureWire is a daily newsletter with comprehensive analysis of all the investments, deals and personnel moves involving start-ups and their venture backers. For a two-week trial, click here.) Elsewhere around the Web: Twitter says it now can censor messages by country and plans to use that capability to enter places with “different ideas” about freedom of expression. The venture-backed company did not list the countries where it will restrict content but said it would notify users if it withholds tweets. Twitter published the announcement on its blog. With the venture industry increasingly divided into firms that can raise capital easily and those that cannot, the San Jose Mercury News looks at why some firms might just fade away. The acquisition of Avila by Celgene, noted above, is good news for several venture firms including Atlas Venture and Polaris Venture Partners. Atlas Partner Bruce Booth offers up his view of the deal, as doesPolaris Partner Amir Nashat. Stealthy networking start-up Nicira,backed by Andreessen Horowitz, Lightspeed Venture Partners and New Enterprise Associates, hires another Cisco exec.
• Limited Partners Deal With Venture Industry Contraction, Restructuring 26 January, 2012, 3:39 pm
  With venture fund-raising growing only a little in 2011, amounting to just half the amount of capital that got deployed into U.S. venture-backed companies last year, a burning question is how that equation will work out this year. Reuters VCs for the most part are upbeat about the opportunity to invest in innovative companies, but many think that fund-raising is tough for all but a handful of market-leading firms. The view that venture remains a tough sell to investors found no shortage of support at the Dow Jones Private Equity Analyst Outlook conference Wednesday and Thursday in New York amid predictions that there will be plenty of people looking for fresh powder. Brian Abrams, alternative investments director at Alcatel-Lucent, foresees a “very busy year” for the private equity industry overall with about 20% of the company’s fund managers looking for renewed commitments. Many had been holding off, awaiting a better market. But, he said, he’s pretty happy with the portfolio and new managers will have a tough time breaking in. A common theme in the industry, said Charles Froland, chief executive and chief investment officer at fund-of-funds manager Performance Equity Management, is that limited partners who have built relationships with leading private equity firms that  have grown substantially over the last decade are “looking around and saying, gosh, what I thought were sort of differentiated strategies, they’re starting to look very similar to me and do I need all of those?” At the same time, LPs are looking to increase exposure to lower middle- market buyouts and growth markets around the world, such as China. The venture market “has been very active” as the industry contracts and undergoes restructuring, Froland said, “but there’s a number of managers who have some very strong traction and people are trying to figure out how do they reposition themselves.”  The problem in venture, he said, is “the GPs that you most want are the people who also have the most control over the access to their funds.” As a result, LPs have to spend extra time on building relationships with sought-after firms. One indication of the state of the venture business is the secondary market for funds. “A lot of venture’s in the market relative to last year,” said Joncarlo Mark, founder of advisory firm Upwelling Capital Group and a former senior private equity manager at California Public Employees’ Retirement System. Asked who might be interested in buying such assets, he said “venture is a tough asset class” with negative returns over the last decade. “It’s all predicated on pricing and whether or not you’ve got the time and expertise to evaluate those portfolios,” he said. After his panel appearance, Mark said what’s happening is that LPs, having reduced their overall exposure to private equity by selling stakes in big buyout funds, are now turning to smaller pieces of their portfolios, including venture, as they look to reduce the number of relationships they manage.
• The Daily Start-Up: BeachMint Totes Up $35M For Social Shopping Club 26 January, 2012, 8:38 am
  Top stories in today’s VentureWire: Art by Mike Lucas Social shopping club BeachMint has raised $35 million from investors bullish on celebrity-driven e-commerce and the power of star-studded endorsements. Like CD clubs of the 1980s, members join a BeachMint shopping club by filling out a style profile and then paying a monthly fee to receive personalized recommendations to purchase one item each month. First Solar is considering a range of options for what to do with the assets of the thin film solar development program the company shut down last month, the company told VentureWire. Executives said that the program–to develop solar panels based on a mix of copper, indium, gallium and selenide, or CIGS–had been making good progress and that the technology would have bested that of competitors. Also in today’s VentureWire: CN Creative, which sells an electronic cigarette product, has raised a Series A round to advance a similar device that would be used in medically supervised smoking-cessation programs…Prosensa Holding has raised a third-round financing of 23 million euros, led by NEA, to develop treatments for rare diseases such as Duchenne muscular dystrophy…and despite the threat of zombie funds, lackluster venture returns and the European debt crisis, limited partners are optimistic about the opportunities coming from private equity in 2012, according to panelists at the Dow Jones Private Equity Analyst Outlook conference in New York. (VentureWire is a daily newsletter with comprehensive analysis of all the investments, deals and personnel moves involving start-ups and their venture backers. For a two-week trial, click here.) Elsewhere around the Web: Investor Mike Maples takes stock of the frenzy around consumer tech companies–and talks about why it’s too late to start a new social-networking company–in this Wall Street Journal interview with VentureWire’s Deborah Gage. Here comes another celebrity-oriented start-up–actress Jessica Alba has teamed up with ShoeDazzle and LegalZoom co-founder Brian Lee to create The Honest Company, a site aimed at moms that gives information on environmentally friendly products.
• GuideWire CEO On Year’s First Tech IPO: “The Stock Price Will Take Care Of Itself” 25 January, 2012, 5:24 pm
  GuideWire Software Inc., the first U.S. technology company of the new year to go public, rose nearly 32% today in its first day of trading and closed at $17.12, up $4.12 from its IPO price of $13. Bloomberg News CEO Marcus Ryu was all smiles after ringing the bell at NYSE Wednesday. A maker of software for the property and casualty insurance industry, Guidewire sold 8.85 million shares–1.4 million more shares than expected—priced above the expected range of $10 to $12, The Wall Street Journal reported. Battery Ventures, which owned 2.8 million shares or about 6% of Guidewire, asked to buy as many as 400,000 more shares at the IPO price, according to Guidewire Chief Executive Marcus Ryu, while two other principal stockholders—U.S. Venture Partners, which owns about 25%, and Bay Partners, which owns about 21%–did not sell shares. For Ryu, who rang the NYSE’s Opening Bell this morning, it’s been a long wait. He co-founded the San Mateo, Calif.-based company over a decade ago, in 2001, and has held several jobs there, managing the engineering, marketing and strategy departments before he took over as CEO about 14 months ago. Ryu talked with VentureWire about why he thinks Guidewire can retain its value on the public markets even though some other technology companies have floundered. (This conversation is edited for clarity and length). You filed your S-1 in September. Why did you decide to go public now? We were going public if and only if it supported our underlying company mission, and that is constant and has not changed from day one—it’s all we’ve done for the last decade. So the question was whether an IPO would advance that mission or impede it, and (whether) it gives us the capital to be solid and continue to invest in great products, but also the transparency of value to customers we sell to, since our customers–large insurance companies—are naturally and rationally conservative. Those factors, along with the maturity in our products and our rate of customer acquisition and the referenceability of our customers, all harmonized, and this was the right time. What was your impression during the roadshow? The reception was overwhelmingly positive, and I wasn’t sure what to expect since we’ve toiled in relative obscurity with respect to the capital markets. But a lot of the dimensions of our story were extremely well received, including the $1.2 trillion insurance industry, the non-negotiable need to replace those aging systems, our customer support and our recurring revenue model, which connects with what customers are looking for. Guidewire is profitable. This is unusual lately for a tech company going public. Was profitability important to you? Yes, we joked internally about having depression-era values. We’ve been extremely capital-efficient since 2001…and for me and my colleagues on the management team, our track record of being profitable over the medium and long term and expanding that profitability was extremely important and could not be in question. The nature of the demand we serve is not speculative—it’s extremely solid, an essential and non- negotiable need, and we felt…profit was a big part of that. We didn’t want to make promises for growth that had yet to materialize, and we were well received on the roadshow. Many expressed the same surprise that you did, but we’ve been profitable for two years, and cash-flow positive for longer than that. Given the fluctuations in the stock market lately, how well do you expect Guidewire to hold its value? A lot of macro phenomena govern the stock market, but our underwriters counseled us to focus on delivering clear customer value, to keep our eyes on the horizon and don’t get distracted by the fluctuations of the market. They said that over time, the market does find the right level and focuses on companies that are making customers successful. I took great comfort in that advice, because we’ll just continue to do what we’ve done and the stock price will take care of itself. Is being public like playing in a big league ball game? There is a bit of that feeling. But tomorrow, it’s back to business as usual.
• Entrepreneurial Spirit Of St. Louis Lives On 25 January, 2012, 3:18 pm
  The “show me” state is showing some love and money to entrepreneurs willing to locate there. A new program dubbed Arch Grants, which debuted this week, sponsors an annual business competition and will award $50,000 to at least ten start-ups each year once they move to St. Louis, Mo. Two companies that excel will also be eligible for up to another $100,000 each year and introductions to angel investors. Along with the cash–which program co-founder Jerry Schlichter says goes a lot farther in St. Louis than in other urban areas–start-ups are given free legal and accounting services, discounts on housing and affordable office space. Companies will be part of a business networking and mentoring network and be invited to collaborate with local universities including Washington University, St. Louis University, University of Missouri at St. Louis, Webster University and Harris Stowe University. The program is different from the dozens of other accelerator and incubator programs sprouting across the nation in two ways–the money is an outright grant with no equity exchange, and the start-ups can be in sectors other than technology. The Arch Grants primary requirement is that the start-up be able to scale nationally and re-invigorate the community. “We’ve had a disproportionately high number of Fortune 500 companies that have over the years been acquired, merged or moved their headquarters,” said Schlichter, referring to Wachovia Securities, Anheuser-Busch Companies and others. “We need to reinvigorate the entrepreneurial community.” Schlichter, also a senior partner at law firm Schlichter, Bogard & Denton, said the non-profit has already raised between $2 million and $3 million from the likes of Emerson Electric, law firm Husch Blackwell and a collection of large private donors. Schlicter indicated he would begin reaching out to other corporate leaders shortly. A little-trumpeted fact about St Louis is the number of major companies headquartered there: Monsanto, Enterprise Holdings (which owns Enterprise Rent-A-Car, National Car Rental, Alamo Rent A Car and WeCar) Boeing Defense, Space & Security (BDS) and public relations firm Fleishman-Hillard International Communications.
• The Daily Start-Up: Versant Ventures Aiming For $250M In Next Fund 25 January, 2012, 8:30 am
  Top stories in today’s VentureWire: Art by Mike Lucas A slimmed-down Versant Ventures aims to raise a new health-care venture fund that will be about half the size of the $500 million fourth partnership the firm closed in 2008, according to people familiar with the matter. The firm has had several exits in recent years and could likely raise a larger fund, but these days, established firms aren’t always taking every dollar they can get as the industry generally downsizes. 33Across has acquired Tynt Multimedia in a deal designed to track the likes and dislikes of 1.25 billion users and share that data with top brands. The all-stock deal took about six months to complete and was totally driven by management at both venture-backed companies–not the investors, according to the chief executives of 33Across and Tynt. Also in today’s VentureWire: Avalanche Technology said it has secured $11.5 million in additional Series A funding from its existing investors to develop memory products that could eventually replace almost all current forms of memory, including flash… as it prepares to submit to the Food and Drug Administration a purportedly better system for using radiation on cancerous tumors, Mevion Medical Systems has turned to new and existing investors for a $45 million funding round…and Dasient, a web security company backed by Google Ventures, said it has been acquired by Twitter for an undisclosed price. (VentureWire is a daily newsletter with comprehensive analysis of all the investments, deals and personnel moves involving start-ups and their venture backers. For a two-week trial, click here.)
• Calisolar Plots Layoffs As Its Expansion Plans Stall 24 January, 2012, 12:25 pm
  Calisolar Inc. plans to lay off 36 people in California, even as its expansion plans in different locations have stalled and the company faces an increasingly difficult market. The company, which makes silicon for use in solar cells, plans to lay off 35 people in Sunnyvale, Calif., by Feb. 9 and 1 person in the same city by Feb. 15, according to a Worker Adjustment and Retraining Notification report filed by the California Employment Development Department. Businesses with 75 or more employees are required to warn the community 30 days in advance of plant closings, mass layoffs or mass relocations. Calisolar representatives didn’t respond to requests for comment. Besides these layoffs, the company’s plans for expansion–in California, Michigan and Ontario–have stalled. At the same time, the price advantage of its method of producing silicon is lessening as silicon produced in a more conventional way has dropped in price. In addition, Calisolar’s major customer, Suntech Power Holdings Co., is losing money and working through a large inventory of product. The company’s struggles are not new to the solar industry, as several manufacturers, from small to big, have been squeezed by low prices, rising expenses and a general oversupply. Calisolar has raised about $245 million from investors including Advanced Technology Ventures, Globespan Capital Partners, Gold Hill Capital, Good Energies, Hudson Clean Energy Partners and VenturesWest Capital, according to Venturesource. Recently, the company replaced Chief Executive Sandra Beach Lin with Terry Jester, who was previously an entrepreneur in residence with Hudson Clean Energy. In December, Calisolar told the California State Treasurer that it won’t go ahead with the planned purchase of $39 million of equipment for a factory expansion in Sunnyvale, Calif., for which the company was hoping to receive a $3.5 million tax credit. Last year the company, which takes the first part of its name from California, shut down its California factory and laid off 78 people. Calisolar announced in September that instead of taking a potential federal loan guarantee to build a factory in Oregon, it will expand production in Lowndes County, Miss. This would have required a $600 million investment. But the company that Calisolar said will build the factory told VentureWire that there was never a contract to do so. “San Antonio, Texas-based Zachry Holdings Inc. will be engineering and building the facility,” said Calisolar’s press release in September, which included praise for the project from Mississippi Gov. Haley Barbour. “There was never a contract,” said Cathy Green, a spokeswoman for Zachry. She said Calisolar is on Zachry’s list of prospective customers but that no business was executed. “Until you close you haven’t bought the house,” Green said. A representative of Lowndes County Development Authority didn’t respond to a request for comment. The company cited as the supplier of equipment for the project, Germany-based SMS Siemag, didn’t respond for comment. Meanwhile, in October 2010, Calisolar signed a letter of intent with its customer Suntech Power, a maker of solar panels, to construct a silicon manufacturing facility in Ontario. Under the letter, Suntech planned to assist with financing the expansion and to enter a multi-year agreement to buy silicon from the proposed facility. No progress has been made on that letter of intent, according to Suntech. “Calisolar is an important partner of ours, though we haven’t moved forward with that yet,” wrote Rory Macpherson, a spokesman for Suntech, in an email to VentureWire. Suntech itself has reported losses and is operating under a heavy debt load. Macpherson said Suntech is buying silicon from Calisolar, but he declined to discuss shipment volumes or other details. Calisolar’s Ontario plant gives it an advantage because the province requires local content in the solar panels that it subsidizes. Calisolar’s customers have a choice between its product, which is upgraded metallurgical silicon, and the more conventional silicon. Over the past year, the price for conventional silicon dropped from $79 per kilogram in March 2011 to $29 in December, according to a report by GTM Research. At some point in 2008, the year when Calisolar raised $111 million in equity, the price for silicon was more than $400 per kilo. –With reporting by Scott Denne.
• The Daily Start-Up: Johnson & Johnson Takes Closer Look At PowerVision 24 January, 2012, 8:28 am
  Top stories in today’s VentureWire: Art by Mike Lucas PowerVision, which is developing intraocular lenses that can change shape in order to focus, added $4 million over the summer to its Series C round, as medical-device giant Medtronic sought a position in the company. Now Medtronic rival Johnson & Johnson has added to the same round. Neither company currently offers prostheses for the eye, but they could be planning a move into the space. Biofuels company LanzaTech has managed to raise $55.8 million at a “pretty high” valuation and might raise additional funds, even though the company is still in the fairly early stages of its business development. The new funds are expected to help the company build upon its lab results of converting waste gases into chemicals. It has already advanced its ability to convert waste gases into ethanol. Also in today’s VentureWire: Fashion website operator Polyvore said it has received $14 million and traded co-founders in its executive office…Finsphere said it has secured $11.3 million in Series C funding led by Vodafone Ventures to take its mobile-as-identity concept beyond financial fraud…and Y Combinator said it has named Garry Tan and Aaron Iba–two alumni of its venture incubation program–as venture partners. (VentureWire is a daily newsletter with comprehensive analysis of all the investments, deals and personnel moves involving start-ups and their venture backers. For a two-week trial, click here.) Elsewhere around the Web: All Things Digital’s Ina Fried chatted with investor Mike Maples at last week’s Founder Showcase, and the talk turned to surfing–specifically, whether the social networking wave has crested. Corporate venture capital is hugely important for life sciences investors, according to an Atlas Venture VC, who says every early-stage firm has corporate VCs on their speed-dial for their start-ups’ next funding round.
• Portland Makes Bid To Become Budding Techlandia 23 January, 2012, 6:38 pm
  Thanks to the quirky TV show “Portlandia,” Portland, Ore., is better known for its tattoos and its gluten-free bakeries than for its tech scene. But it does have a tech scene, and a growing one at that. Associated Press In less than three years, Portland had become home to three incubators for tech start-ups—the Portland Seed Fund, backed by various city and state agencies; the Portland Incubator Experiment, backed by Nike Inc.’s advertising agency, Wieden + Kennedy, with sponsorships from Coca-Cola, Target Brands and Google; and Upstart Labs, which is just starting out. Investors and entrepreneurs from Portland’s better-known West Coast neighbors, Seattle and the Bay Area, are participating and in some cases moving to Portland, and the area has its own tech blog–SiliconFlorist, a blend of the term “Silicon Forest” (which comes from Intel’s long-time presence in the Portland area) and the “Rose City,” another nickname for Portland. Portland is attractive to tech start-ups because of its friendly, collaborative culture and the absence of the “cutthroat behavior” that can occur in the Bay Area, where entrepreneurs might start a company only to raise funding and flip it to a buyer, according to Rick Turoczy, who started Silicon Florist as a side project in 2007 and then co-founded the Portland Incubator Experiment in 2009. Portland’s entrepreneurs may also be a little more inclined than Seattle’s entrepreneurs to take risks, he said, because they don’t tend to start their careers working in good jobs at Amazon.com or Microsoft. “For so long, we’ve been watching the Bay Area or Seattle, learning what those start-up communities have done well, and we’ve learned from their mistakes,” Turoczy said. “We’re ready to start coming into our own, and we’re seeing significant investments in start-ups in town.” Indeed, out of its first graduating class, the Portland Incubator Experiment has so far produced three start-ups that went on to raise funding, including VendScreen, a company that retrofits dumb vending machines with smart, Android-based devices and raised $12 million from investors whose identities are undisclosed. The Portland Seed Fund, meanwhile, recently closed its first fund at $3 million. Two of its portfolio companies—Steamfunk Labs, doing business as Vizify, which helps people create online profiles of themselves; and 4-Tell, a tool to help on-line retailers increase sales—have each closed a Series A round in excess of $2.5 million. Both incubators are getting ready to select their second round of start-ups.
• The Daily Start-Up: Home Depot Buys Red Beacon In Newest Project 23 January, 2012, 8:39 am
  Top stories in today’s VentureWire: Art by Mike Lucas In its first acquisition since 2006, Home Depot has acquired home services specialist Red Beacon, which has a software platform that lets pre-screened home service professionals–plumbers, painters, house cleaners and so on–bid for jobs. Home Depot will use Red Beacon to connect its own customers, which include both consumers and professionals. The race to supply companies with the software they need to build an Amazon-style cloud service is heating up, with $85 million in new funding for Joyent. The company is one of a half dozen or so venture-backed companies selling software that enables companies to set up a cloud computing service. Also in today’s VentureWire: HitFix, the operator of a film, TV and entertainment news website, said it has completed a funding round from investors including Golden Seeds, Tech Coast Angels, Liquid Capital Group and individuals…nearly a year after sayingit was in talks with 16 venture capital firms and several strategic investors, Web security vendor Mykonos Software went with individuals for its Series A funding, raising $4 million in a round led by an insider…and three clean-tech companies slated to receive millions of dollars in tax credits from the state of California have declined the incentives, VentureWire has learned, as two of them move forward with plans to focus their operations in other states. (VentureWire is a daily newsletter with comprehensive analysis of all the investments, deals and personnel moves involving start-ups and their venture backers. For a two-week trial, click here.) Elsewhere around the Web: RIM’s new CEO says he doesn’t intend to split up the company and promises to stay mainly on the path set by his predecessors. Tumblr was an accidental social network and didn’t take off until curators signed on said David Karp, CEO of the venture-backed blogging site. Watching the valuations of Silicon Valley Internet start-ups is like watching a hyperactive child with a yo-yo, writes Nick Bilton on New York Times blog Bits. Congress should get to work and pass a series of pro-entrepreneurship bills, says Steve Case, CEO of investment firm Revolution and former CEO of AOL, in a Washington Post opinion piece . The venture arms of big pharmaceutical companies are the “preferred partners” of early-stage health-care investors, writes Atlas Venture Partner Bruce Booth.

34

redeye

• Good Luck Charlie 17 January, 2012, 5:45 am
  After two years at First Round Capital, today Charlie O’Donnell announced he was leaving to launch his own seed-stage venture fund, Brooklyn Bridge Ventures - the first venture capital fund based in Brooklyn.  I’m really very excited for Charlie and can’t wait to see the impact his firm makes on the Brooklyn tech community.  When Charlie initially joined First Round Capital, we had both agreed that it would be for a one-year term.  After witnessing Charlie’s hustle and energy firsthand, we extended his position for a second year.  During his time at First Round, Charlie made a real impact -- helping us expand our New York presence (we now have an office on Union Square with three investment professionals – Howard, Chris and Phin), sourcing seven deals (including GroupMe, which was acquired by Skype), and placing over a dozen people in our portfolio companies.  On a personal level, I think that almost every blog post I wrote during the last year was a direct result of Charlie’s frequent barbs like “Hey, did you lose the password to your Typepad account?  How come you’re not blogging more.” Ever since Charlie joined First Round Capital he and I have talked about his goal of starting his own firm one day – and I’m excited to see him take the plunge.  All of us at First Round wish him the best of luck and look forward to working together with him in his new fund.    
• We, We, We so excited for our annual holiday video 20 December, 2011, 10:37 am
  Over the last few years, one of my favorite holiday traditions has been putting together First Round Capital's annual holiday video.  In the past we have used song, dance and our impressive physiques to work our way into your hearts over the holiday season. This year has gone by fast and we have added a whole new cast of remarkable characters to our community.  We are really inspired by our talented portfolio and lucky to be able to roll our sleeves up and deliver the 2011 edition of the First Round Holiday Video.     While it's not yet Friday…we hope it brings you a little holiday cheer.  (Although my kids are getting to the age where their Dad's performance in the video has shifted from "cool" towards "embarassing").         Thanks to Phin Barnes for the lyrics, Brett Berson for masterminding the entire video, and our portfolio company CEO's for honoring the "participation" clause in our term sheets ;-)   
• Saving Time vs. Killing Time 2 December, 2011, 1:59 pm
  Over the years, we've met with thousands of entrepreneurs who were starting consumer Internet businesses.  And as we listen to them describe their business, I find myself categorizing the opportunity.  One of categorizations I've found most helpful has been to determine whether the company is looking to help people "save time" or help people "kill time".   Companies like Youtube and Zynga entertain people (and help them kill time)  -- while companies like Google, LinkedIn and Mint.com are great utilities and help people save time (but users rarely visit them for without intent or for for pure entertainment).  At First Round, we've funded both: Mint.com, Uber, Xobni, and HotelTonight all fall in the "save time" category And StumbleUpon, MyYearbook, Roblox, MovieClips all fall in the "kill time" category Why create such a distinction?  Well, I think it is helpful in looking at how the businesses will operate -- and what metrics you care about.  It's much easier to measure the impact of a Kill Time company than a Save Time company.  For example, in a kill time company you'd really want to see strong DAU (daily active user) counts and really long session lengths.  Yet short session length might be a good sign in a "save time" company.   If it took longer for Google to answer your question -- and you spent more time on their site searching -- I don't think that Google would view that as successful.   The fact that Mint.com allows you to manage your finances quickly and easily is a good thing.   I think it's typically much harder (for me) to indentify which "kill time" companies will be successful at the seed stage.  The Kill Time companies are successful because they are able to entertain users -- and it's very tricky to identify good entertainment from a Powerpoint.   Save Time companies, on the other hand, are a little easier to evaluate pre-launch -- because these companies have a clear value proposition that can be measured in advance.  When we first heard of Uber, for example, we were able to understand the value propisition and user benefit immediately.  Finally, the monetization strategies of Kill Time companies typically require much larger customer bases / audiences to be successful.  These companies frequently monetize through advertising or low-price virtual transactions -- both of which require significant volume to generate meaningful revenues.   This is not intended to be a "perfect" framework -- and I can easily identify several exceptions -- yet I've found it helpful to keep in the back of my mind when I'm meeting with entrepreneurs.   (And there are rare times where companies can be in both categories.  Twitter is one such example.  There are use cases where Twitter can be the perfect way to kill time -- yet it has also become on of the most efficient ways for people to stay current on the news.) 
• Fun Fact of The Week: Path to Revenues 16 November, 2011, 7:38 pm
  Last week I posted some data from our portfolio about the pace of seed-stage financings.   And it sure looked like things are speeding up. This week, I thought we'd take a look at the speed at which our companies generate revenue.   Specifically, we took a look at the 14 investments we made in our first fund (which was a 2005 vintage)...and wanted to know how many of them generated at least $250K in revenue in the 18 month period post-investment.  (I recognize that $250K and 18 months are arbitrary thresholds - but hey, we had to choose something).   And it turns out that just three of the fourteen companies in our 2005 fund (21% of the portfolio) generated revenues in excess of $250,000 during the 18 month period.  I was surprised to see how long it took those companies to generate revenue.  Especially because that fund has some really incredible companies in it.  It includes Bazaarvoice (who recently filed for an IPO ).  It includes SayMedia (formerly VideoEgg) who currently employs over 300 people in 10 different cities across the globe.  And it included Like.com (which was acquired by Google). Then, we looked at the companies in our most recent fund (a 2010 vintage).  Specifically, we took a look at the 32 companies that have been in the fund for at least six months (since we didn't want to include the pre-launch companies we just funded).   And it turns out that 19 of the 32 companies in our most recent fund (around 60% of the portfolio) have already generated over $250K in revenues. I was not expecting such a dramatic increase -- especially because while our fund size and investment team has increased over the years, our investment strategy has not.  Our average initial investment remains under $500,000.  We continue to invest in a company's first round of funding.  We still are focusing on capital-efficient internet startups.  So what's changed? The numbers might influenced by the fact that we are bullish on online commerce -- and ecommerce companies typically have a shorter path to revenue.   It might be that the last six years have seen a dramatic growth in monetization platforms (whether it be advertising technologies, mobile platforms, virtual currencies, etc) that reduce the friction/cost/time to generate revenues.  It might be because the cost and technical complexity to start a company has decreased so much, companies today are able to get to market much faster (and possibly raise money much later) than they previously did.  It also could be that First Round has just gotten better at investment selection (though given the size of our woulda coulda shoulda list, I'm not too sure about that -- and I'm also not aware of any data that shows that a company's time to revenue generation corresponds to the size of a company's success). Whatever the reason, I was surprised to see that companies today are 3 times more likely to get to $250K in revenue during an eighteen month period than they were six years ago.  Disclaimer - these results are based on a small sample that only consisted of one fund's experiences.  This post is not intended to claim statistical significance -- just an observation of what we're seeing in our fund. 
• Save The Internet 16 November, 2011, 11:24 am
  I rarely (or never) post about politics here.  However, today Congress holds hearings on a bill that would create the "first American Internet censorship system".  This bill is being rushed through Congress without any input from the technology industry -- yet it poses major risks to free speech online...  And could prevent the next Youtube, Facebook, or Tumblr from getting off the ground. Please watch the video below, read more about the proposed law (Brad Burnham has a wonderful blog post about this today), and make your voice heard by visiting American Censorship Day today.   UPDATE:  If you have five minutes and want to make your voice heard, click here and this cool Tumblr app will automatically put you in touch with your local congressman.    
• Fun Fact of The Week: Time from Inbox to Investment 10 November, 2011, 12:18 am
  During the last few weeks there has been a lot of commentary about what’s going on in the seed funding markets.  Some say that web startups face a cash crunch.  Some disagree.  Some think there is a “Series A Crunch”.   Others disagree.   During this same time period I saw the movie Moneyball (liked it, thought the book was better) and my fund held our Annual LP meeting.  So I’m full of fresh stats about our portfolio of over 125 seed-stage companies.  I thought it might be interesting to take some of the data we’ve collected, and share it to help try to shed some light on what we’re seeing in the market.   So here is the first installment of a multi-part series:  Fun Fact of The Week While there has been a lot of discussion about the number of seed deals vs the number of Series A deals, I haven’t seen anyone other than Chris Dixon talk about the impact of the accelerated pace of seed-stage funding rounds.   As the market for seed-stage investing has gotten more active, the average time to get a deal closed has gone down dramatically.  That means that the entrepreneur and investor spend much less time to get to know each other before making a major, long-term commitment.  This, as Chris Dixon put it, "is bad news for everyone." From an investor perspective, the more time I can spend with an entrepreneur, the more I understand how they think, how they approach problems, what they are "working for", how they handle divergent views. It helps me get a better sense for their product vision. It gives me more time to do reference checks on the team. And it also lets me get educated on the market -- learning more about competitive products, etc.  And if I'm going to be paying a higher price due to increasing valuations, I am more comfortable doing so after being able to spend more time with the founders.  I know that there are situations when investors don't have the luxury of time -- and you have to make a quick decision. And of course I've made gut decisions that have worked out well.  But, I've found that there is much more variability in the investments where we've don't have enough time to get to know the founders well... From an entrepreneur perspective, the more time they can spend with an investor, the better they understand their investor's goals and how they view the market.  They can make sure the investor shares their vision for the future.  They can call other CEOs to see how the investor behaves in the board room and how they behave in good times and bad.  They can get a better sense of the alignment of interests and personalities.  And they can try to get some insight into how helpful the investor will be in recruiting, strategy, future fundraising, and making introductions.    So here's the data: We took a look at the last four years of our initial investments (ie, not including follow-on investments).  We then identified the time it took for an company to go from "inbox" (when we first were introduced to the opportunity) to "investment" (when the deal closed).   The chart below shows the relative change in the median number of days it took us to go from inbox to investment for each year, baselined against 2008 (which was set at 100).   You'll note that the chart does NOT show the actual number of days we review each investment -- just the percentage decrease from the 2008 baseline.  You can see that the time we have to evaluate a prospective company has shrunk by 50 percent over the last four years.  While this data just represents our experience at First Round Capital, from what I hear from my colleagues at other seed-stage funds, they are experiencing the same thing...   So the key question this raises is: Why is this occuring?  It could be because of the increase in available seed capital over the last four years.  It could be because of an increase in the number of great startups recently.  It could be because of the growth of incubators and their "Demo Days" (where companies often leverage their unveiling to force quick decisions and raise a round within a week or two).  It could be because of the growth in platforms (like Angelist and Gust) which seek to create a liquid seed funding marketplace.  It could be a combination of these factors.   What do you think?
• Anticipation 28 October, 2011, 3:54 pm
  As Philadelphia gets ready for Halloween and the first snowstorm of the year, it's a reminder that holiday season is right around the corner.   And the approaching holiday season can only mean one thing -- it's almost time for First Round Capital's annual holiday video.   Our team is hard at work producing this year's video (and definitely feeling the pressure)...but in the meantime, I thought I'd share some of our favorite moments from the making of last year's holiday video.    
• Subscription Commerce and Kiwi Crate 11 October, 2011, 2:50 pm
  I've previously shared some of my thoughts on ecommerce.   Specifically, that there is the potential for massive disruption in ecommerce due to the explosion in interesting technologies and opportunities such as mobile, social networks, user generated content, virtual goods, etc. One of the areas that First Round Capital has spent a lot of time looking at is subscription commerce.  We've seen that consumers crave curation -- and are willing to pay for a monthly subscription to receive items (sight unseen) that are curated by trusted experts/brands.   Two companies in our portfolio, Birchbox and Foodzie, are pioneers of this model...delivering a "wow experience" on a monthly basis to tens of thousands of happy customers.   Today I'm excited to announce that First Round Capital has invested in a new company: Kiwi Crate.  Kiwi Crate is a monthly service that delivers monthly craft projects that spark creativity and curiosity for kids aged 3-6.  As a parent myself, I love spending time doing hands-on activities with my kids -- but rarely have the time (or talent) to invent new projects and shop for the supplies.  As a Kiwi Crate subscriber you don't need to worry about that.  You'll receive a monthly package with several projects that you can do with your kids without preparation or hassle.   If you have young kids and are interested in trying out Kiwi Crate, feel free to use promo code FLYKIWIS3 for 50% off the first 3 months of a monthly subscription or FLYKIWIG15 for $15 off any gift subscription. As I look at the growth in subscription commerce, I'm reminded how far we've come since this Everyone Loves Raymond episode aired:      
• If Reed Hastings had worked at Techcrunch... 19 September, 2011, 7:09 am
  I find it funny that Reed Hasting's letter about splitting up Netflix's DVD-by mail and streaming services could have worked perfectly for AOL's decision to split up blogging and investing.   Courtesy of "find and replace" here is the letter Arrington would have written...   I messed up. I owe everyone an explanation. It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of blogging and investing. That was certainly not our intent, and I offer my sincere apology. I’ll try to explain how this happened. For the past five years, my greatest fear at Techcrunch has been that I wouldn't make the leap from success in blogging to success in investing. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (investing for me) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly. When Techcrunch is evolving rapidly, however, I needed to be extra-communicative. This is the key thing I got wrong. In hindsight, I slid into arrogance based upon past success. We have done very well for a long time by steadily improving our blogging, without doing much CEO communication. But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our readers of why we are separating blogging and investing.  It wouldn’t have changed the decision, but it would have been the right thing to do. So here is what we are doing and why: Many readers love our blog, as I do, because we aim to be the news source of record for tech startups.   We want to advertise the breadth of our incredible startup offerings so that as many people as possible know what exists, and it is a great option for those who want the huge and comprehensive selection of news coverage.  Blogs may not last forever, but we want it to last as long as possible. I also love investing in startups because it is integrated into my bank account. The benefits of investing are really quite different from the benefits of blogging.  I feel we need to focus on rapid investment as technology and the market evolve, without having to maintain the impartiality of our blog. So we realized that investing and blogging are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently. It’s hard for me to write this after over 10 years of blogging with pride, but we think it is necessary and best: In a few weeks, we will rename our blog to “Crunchster”. We chose the name Crunchster because it refers to quick delivery. We will keep the name “Crunchfund” for investing. Crunchster will be the same website and blog that everyone is used to. It is just a new name, and readers will go to crunchster.com to access their news.  One improvement we will make at launch is to add video games coverage.  Readers have been asking for video games for many years, and now that the blog has its own team, we are finally getting it done. Other improvements will follow.  Another advantage of separate websites is simplicity for our readers.  Each website will be focused on just one thing (blogging or investments) and will be even easier to use. A negative of the renaming and separation is that the Crunchster.com and Crunchfund.com websites will not be integrated. So if we highly rate or review a startup on Crunchster, it doesn’t show up in the Crunchfund portfolio, and vice-versa. Erick Schonfeld, who has been working on our blog for years will be the Editor in Chief of Crunchster.  We will let you know in a few weeks when the Crunchster.com website is up and ready. It is merely a renamed version of the Techcrunch blog, but with the addition of video games.   For me the Techcrunch website has always been a source of joy. The new website is still that distinctive green, but now it will have a Crunchster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be the same for many of you. We’ll also return to marketing our blog, with its amazing coverage, now with the Crunchster brand. Some members will likely feel that we shouldn’t split the businesses, and that we shouldn’t rename our blog. Our view is with this split of the businesses, we will be better at investing, and we will be better at blogging. It is possible we are moving too fast – it is hard to say. But going forward, Crunchster will continue to run the best tech blogging service ever, throughout the United States. Crunchfund will offer the best investment fund for tech startups, hopefully on a global basis. The additional investments we have coming in the next few months is substantial, and we are always working to improve our portfolio further. I want to acknowledge and thank our many readers that stuck with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly. Both the Crunchster and Crunchfund teams will work hard to regain your trust.  We know it will not be overnight. Actions speak louder than words. But words help people to understand actions. Respectfully yours, -Mike Arrington    
• Woulda Coulda Shoulda - Twitter 15 April, 2011, 8:27 am
  Investing in the earliest stage of startups is difficult.  At the stage we see companies, it is often with incomplete ideas, incomplete teams and incomplete business models.  While we try our best to predict the future, we are often wrong.   Yesterday Business Insider published a story about "How Twitter Was Founded" that discussed the history of Odeo and Twitter.  First Round Capital was an investor in Odeo -- and I blogged about it almost six years ago when I wrote: The reason I invested in Odeo in the first place was because I wanted to make a bet on Evan – and his recent actions have shown me how right I was.  I continue to be a huge “Evan fan” – and should he decide to raise outside capital again, I hope to be his first phone call.   After Odeo, I kept in touch with Ev and Jack.  I was an early user and big fan of Twitter.  And we offered them a term sheet to fund Twitter in April of 2007 (I believe it was their first).  They turned it down because Ev wanted to keep self-funding the company.  A few months later, when they had term sheets for their Series A round, Ev asked us if we wanted to participate.  And I declined -- mainly because the pre-money valuation was 4x larger than the terms we offered them a few months prior and 2x larger than any other investment we had made.  Big mistake.   We learned a lot from our mistake with Twitter.  While we still believe that valuation matters (and more on that in another blog post), we learned (1) how important a really strong team is , (2) that real market traction is worth a premium.   Thankfully we were able to apply those lessons when Jack founded Square and let us invest in his first round (at what the time everyone thought was a premium price -- but today seems like a bargain). The venture business is humbling business.  Every firm has their "anti-portfolio" -- but few publish them.   We have our woulda coulda shoulda list - and Twitter is amongst the top companies (alongside Dropbox and Zynga).   When Nicholas Carlson called me for his story about Odeo I chose not to participate -- and told him I would prefer not to have the story published.   Not because Ev made any mistake.  But because I did.  I passed on Twitter.  And if that story was going to be told publicly – I wanted to be the one to do it. Ev has been nothing but straightforward, honest and direct with me.  I think he deserves all of his success.  I stand by everything I wrote in my blog post from 2006.  And if Ev does end up starting a new company, I still hope to get a call from him.  I promise I won't blow it this time :-)

34

Venture Company

• ILPA measures 1 December, 2012, 12:07 pm
  A Limited Partner responded to my article posted on LinkedIn named “As a limited partner I feel uninformed” with some supportive references to the work the Institutional Limited Partner Association (ILPA) has done to structure the relationship between Limited Partners and General Partners. I have read their referendum and am not against the work of the ILPA, but feel the work of the ILPA so far offers little suggestions as to how to solve the systemic issues within the asset management realm (see “The musical chairs of asset management”). Yes, I do commend the ILPA for establishing "dining" etiquette, but it does not change the fact that the food being served is subprime. The way we construct financial systems (in violation of the free-market principles we boast about), by economic principle turns the discovery and arbitrage of the underlying asset subprime (sooner or later). Already in VC 10 levels of bottom-heavy diversification proliferate lies about the real risk deployed in Venture. And the results show it. VC fails to make a dent in the 80% greenfield of technology adoption, nor produce returns for LPs in line with that gap. So, while there are pragmatic things we can do with LPs to start to eradicate those economic lies (as described in my article), a much more fundamental change to the relationship and structure between GPs and LPs can turn their subprime alignment from subprime to prime. Transparency is just a (small) part of the economic framework, and even then the kind of transparency is paramount in establishing a different economic outcome of risk.And below is the original comment from a Limited Partner (in hotel real estate) on LinkedIn (members only) to which the above was my response:The Institutional Limited Partners Association has established a set of "best practices" that center around three guiding principles: 1) alignment of interests; 2) Governance; and 3) Transparency. Logically, if the GP has significant skin in the game by investing along side of the LP there is a higher likelihood they will be more selective in choosing where to deploy capital. The tenets of corporate governance can require a solution for many of the problems Georges discusses. These procedures can mitigate or eliminate conflicts of interest and related party transactions. And finally, if all the cards are on the table, readily seen by all parties, the dialogue becomes real and meaningful. The level of trust goes up and everyone benefits from an open, honest assessment. I am in the hotel real estate sector and we have adhered to similar principles for years. While not in total agreement with the ILPA, their efforts are to be commended as an attempt to bring some measure of standards to the industry.
• Scaling is hard 1 December, 2012, 12:07 pm
  CNN Money yesterday published an article from Jeff Bussgang, general partner at venture capital firm Flybridge Capital Partners, about how hard it is to scale a company. I need to respond to these types of articles because it deflects from the real problem with innovation in our country. And that is that under the cover of the purported voodoo of innovation we refuse to hold the financial system responsible for the subprime mediocrity it perpetuates. We have plenty of leadership capacity that allows companies to scale (Facebook, Twitter, Salesforce.com, Oracle, Apple etc.) and at the ready when Venture Capitalists come off their subprime pedestal.So, here is my response to the article to set Jeff straight:Yawn, another article from a VC hoping to educate people to become entrepreneurs. Venture is just like American Idol, you find quality - you don't teach singing. People either have the talent or they do not. And Jeff's article(s) reminds me of the desperate Moms who keeps pushing their child to sing, even though when they open their mouth, we all recognize they can't. Not everybody can be an entrepreneur, but an entrepreneur can come from anywhere. The quest is to find prime, not teach subprime. But the real issue in Venture is that Venture Capitalists have not found a way to scale themselves in line with an 80% adoption greenfield and more quality entrepreneurial capacity than ever before. VCs are being beaten and disproven in their assessment of best practices by corporates more and more often. With negative returns on the whole for Limited Partners and perhaps a handful of VCs (out of the 790 post 911 dead weights) making any money monolithically and systemically for LPs, not the quality of entrepreneurial capacity is in question, but the arbitrage of that innovation deployed by VC.So, if Jeff was a wise man he would write an article that describes how Venture Capitalists can scale to detect and entice the entrepreneurial capacity they currently discard as false negatives. And explain why Venture Capitalists with many diversifications built in a period when corporate innovation proves their excuses wrong, really deserve to make any suggestions to budding entrepreneurs.The original article with my comment can be found here.
• As a limited partner I feel uninformed 1 November, 2012, 7:07 am
  The title of this article was the exact Internet search query that led a Limited Partner directly to our web site recently. We offer ways for Limited Partners to exercise their right to become informed, and transition to a more renewable investment climate for innovation.
• Innovation in … pants 1 September, 2012, 7:07 am
  When you think something as mainstream as pants have been around for hundreds of years and its innovation has come to a halt, you need to check out relative newcomer Kühl. An american company “born in the mountains” puts a new spin on a product we wear everyday, with an innovative philosophy:Born from our rebellious philosophy to question everything, break the rules and reject the status quo.For that statement alone I was attracted to buying their pants. Kühl completely redesigned the comfort of pants with stitchings and fit unmatched by the standard mold its predecessors are based upon. While their fabric is rugged and should really be used as outerwear, its unique comfort and fit is makes these pants ideal for daily use wherever you are. Every aspect of these pants has been redesigned to produce a better fit and I wholeheartedly recommend them. The company has expanded to a complete range of outerwear, and after having worn their innovative pants for a while I may just explore the wider offering soon.Full disclosure: I have no equity in products or companies I evaluate except that they - according to my review - adhere to the promises they make. I pay for the products I want myself and receive no promotional fees of any kind. If you agree with the discretionary role technology should play in our lives I describe in my blogs so frequently, you will find my observations of the implementation of innovation useful in determining whether or when you should buy them.
• Regulating Private Equity 1 May, 2012, 7:07 am
  China has made its first move to regulate Private Equity, according to Coco Kee, Managing Partner of Kee Global Advisors LLC, a New York-based boutique advisory firm. Not a bad move at first glance, as we wrote about the need for regulation in an article that was covered by The Wallstreet Journal more than two years ago. The problem with most regulations is not that they are not needed, but they are implemented without a clear reference, rationale or script to the goal they aim to achieve. Put differently, many are bandaids to cover the cancer sores that may make the audience feel better, but in no way delivers a cure for the patient.Private Equity and Venture Capital have been allowed to deploy a financial arbitrage that is in flagrant violation of free-market principles, and without an enforcement of anti-collusion, anti fragmentation of risk, marketplace transparency to all participants and other strict free-market principles, can never avoid the creation of investment bubbles that destroy the opportunity and faith in the underlying assets.For China the implementation of free-market principles are farther afloat from their economic foundation than it is to us in the U.S., but if we keep messing up our economic freedom China may just get there before we do.
• From despite to because 1 May, 2012, 7:07 am
  Quite a few events in life happen in which their success is claimed by many fathers. But when you look closer and understand the facts, underlying that success are often people who succeed not because but despite the indoctrination of their forefathers. Now is the time for us to develop a new economic framework so our capacity to innovate can excel, not despite but because of it.
• The future of photo editing 1 March, 2012, 7:07 am
  Three-hundred years of photography innovation have left us with dramatically improved distribution of marginally improved content quality. Photo editing, intrinsic to the camera, pre or post image capture is currently the only way to mimic more closely the vision of what our eyes and brain detect. Every cameras applies it, every photograph needs it yet few technologies do it well. A great investment opportunity that would drive differentiation for pretty much any technology vendor. The future I see and the lessons I learned when driving this gigantic opportunity through a startup innovation process.
• Internet reform is economic reform 16 January, 2012, 12:07 pm
  Vice President of the European Commission Neelie Kroes writes a blog about Cloud computing and Data protection reform, a subject challenged by many who also challenge SOPA. I am for the perpetuation of a free-market on the internet, but not if that purported compliance creates a free-for-all that violates free-market principles. It is a myth that free-markets do not require regulations, but those regulations need to be deployed with the proper recognition of what those free-market principles are. The latter is where most regulations fall apart and in turn do more harm than good.Here is my commentary to Neelie’s blog posted on the European Commission’s website:The internet for the first time forces countries to adopt a singular economic system across its distribution and that puts enormous pressure on the agreements needed between countries.While on the surface the U.S. proclaims to be in support of free-markets (and I am, living and working there), the implementation of a free-market requires regulations so every participant enjoys the same definition of freedom, and protects other participants using that same definition. Free-markets are not a free-for-all, meaning you are allowed to just do what you want. The way financial systems in violation of free-market principles have been able to run amuck with our economic systems.The implementation of a true free-market system is now, really for the first time, being implemented globally with the internet as its distribution. I applaud Neelie's work to balance the defunct free-for-all with meaningful regulation that secures everyones definition of freedom. But I would suggest to tread carefully, for I see those who do not understand the basic fundamentals of a free-market implement regulations that throw the economic baby out with the bath water all to frequently.The original article can be found here.
• Why documents don't protect LPs 15 January, 2012, 4:07 pm
  In response to my article “As a Limited Partner I feel uninformed” a representative from a valuation firm makes the same mistake as many Limited Partners have made. And that is to trust the content of documents to represent the actual risk deployed in Venture Capital. Here is my response to such a suggestion:Even then. The actual deployment of risk can be and has been shoved under the rug of these generic and non-specific documents. These documents are not only lacking in the definition of risk, but severely lack controls to allow you as an LP to measure their compliance. And that is exactly why risk has deflated to uniformity and thus subprime Venture Capital.Our reply above is a response to the representative’s reply (posted in full below) based on the aforementioned article:“You should be able to be informed with: 1. Copies of the Limited Partnership tax returns. 2. Copies of Financial Statements with assets Marked-to-Market. 3. Copies of Minutes of General Partner meetings. I am not an attorney, but usually General Partners have a fiduciary duty to provide at least these 3 items to Limited Partners. A review the Operating Agreement should provide information with the protocols for obtaining such info. Check how often you will receive these BEFORE making such an investment.”The full article is available on the iCFO group on LinkedIn here.
• Debt financing in startups 13 January, 2012, 12:08 pm
  It is good to know that there are still smart, rather than simply cunning, people in the finance world. And Gene Lee, Managing Director of Cove Point Holdings, a Family Office describes my views exactly in an interesting article published by Axial Market. Specifically he emphasizes how financial debt in a smaller middle market business can be very risky and limit the operating flexibility and growth prospects of a business. We don’t believe that it makes sense to compound the operating risk of growing a smaller company and the risk from an ownership transition with the risk of a leveraged capital structure that could have bad consequences for a company if it misses a beat.Primarily startups that work with subprime Venture Capitalists that have fragmented their investment risk and from the beginning do not have the ability to support the runway to upside completely are subject to the “blessings” of debt financing. The life-line of debt financing entering the startup world is an indicator of how subprime Venture Capital, downside investing, and the fragmentation and deflation of risk erodes the opportunity for groundbreaking innovation.Now, If we could only design an economic system that translates the sanity from these kinds of Family Offices into a Venture Capital playbook. Perhaps that is why this Family Office is going direct.Read the full article here.

23

Abovethecrowd

• Thinking About Diets and Other Complex Matters 6 January, 2012, 12:38 am
  [Follow Me on Twitter] Each January, being the season of New Year’s resolutions, it is common to find people you know discussing the pros and cons of various dietary pursuits. Individuals across the globe are eager to turn over a new leaf, get on a new bandwagon, make a new start. Yet, even with a strong will, its not at all obvious what the [...]
• You Don’t Have to Tweet to Twitter 15 November, 2011, 7:57 pm
  Frequent comparisons to Facebook leave many confused about the true value of Twitter. [Follow Me on Twitter] “In a brand new direction A change of perception On a brand new trajection” - UB40 [Disclosure: Benchmark Capital is a major investor in Twitter, and my partner Peter Fenton sits on the Twitter BOD.] Twitter is having a remarkable year. Active [...]
• Steve’s Jobs Remarkable Value Creation 9 October, 2011, 2:52 pm
  In addition to inspiring others and building breakthrough new products, he also lit up the biggest scoreboard in business…the company’s market capitalization…(courtesy of Forbes):
• Understanding Why Netflix Changed Pricing 18 September, 2011, 11:42 pm
  Many journalists have offered their opinion on Netflix’s recent changes, its stock price decline, and their even more recent branding changes (Qwikster). Yet in each article, it appears as if the journalist all agree that the price move (creating separate prices for streaming and DVDs) was a bad strategic move. As an example, Techcrunch notes: “Raising prices for those of [...]
• On IPOs: If You Are Going To File, Make Sure You Price 14 September, 2011, 10:41 pm
  As you likely know, I am a big believer that the IPO can play a key role in the development of a company’s life. Moreover, I have argued that many in our ecosystem have an unhealthy anxiety regarding the dangers and consequences of being public. Lastly, I have argued that the IPO window is wide [...]
• All Revenue is Not Created Equal: The Keys to the 10X Revenue Club 25 May, 2011, 12:28 am
  [Follow Me on Twitter] “ Don’t you know that you are a shooting star, And all the world will love you just as long, As long as you are.”  – Paul Rodgers, Shooting Star With the IPO market now blown wide-open, and the media completely infatuated with frothy trades in the bubbly late stage private market, [...]
• The Freight Train That Is Android 25 March, 2011, 12:39 am
  [Follow Me on Twitter] “People get ready, there’s a train a comin’” - The Impressions From Zacks via Yahoo: Mark Vickery, On Thursday March 24, 2011, 4:58 pm EDT “BlackBerry maker Research In Motion (NasdaqGS: RIMM – News) beat its fiscal 4Q EPS estimates by 2 cents per share, but missed slightly on quarterly revenues and [...]
• Silicon Valley’s IPO Anxiety 16 November, 2010, 1:20 am
  [Follow Me on Twitter] “Living in the limelight The universal dream For those who wish to seem. Those who wish to be Must put aside the alienation, Get on with the fascination…” — Limelight from Moving Pictures, Rush If you could travel back in time to the early 1990’s and ask Silicon Valley’s top entrepreneurs [...]
• On Google, Growth, Pricing Power, and Valuation Multiples 15 July, 2010, 11:49 pm
  Last night, Google reported financial results for the second quarter of 2010. While revenue growth was up 24% year over year, revenue was fairly flat compared with Q1 of 2010. Moreover, earnings fell short of average street estimates sending Google down $20 per share (4%) in the aftermarket. Based on current estimates (which might change [...]
• Google’s Acquires ITA: Will Deeper Vertical Integration Lead to Higher Revenues? 8 July, 2010, 10:40 pm
  “It’s funny how fallin feels like flyin, for a little while…” - Jeff Bridges, Crazy Heart Soundtrack On July 1st, Google announced its intention to acquire ITA Software. ITA owns a primarily B2B airfare search and pricing system called QPX. Several of the leading online travel sites, like Orbitz, Kayak, and Bing Travel, use information [...]

21

getventure

• How We Brainstorm 24 January, 2012, 6:13 am
  During my first week at Columbia Business School in the fall of 2007, class was interrupted to do an exercise with an improv troop. Not being much of a thespian, I scowled thinking that my time was about to be wasted. I was totally wrong. While the leaders of this exercise were actors by trade, they came to Columbia to teach us how to brainstorm. Improv is a unique cross-section of theater and comedy. What's special about it is the absence of a script. With no plans, preparation, or choreography a group of people can create a story on the fly, and do so seamlessly. The key to the technique I learned then, and have since adapted at Kohort, is a two word phrase: "Yes…and…" While it's a simple little phrase, it's an important one. "Yes…and…" encourages momentum, fluidity, and acceleration in a conversation. No matter what someone mentions before you, if you build on it by saying "yes…and…" the conversation is taken down unexpected paths. I've found what's so special about this system is that it can transform the most idiotic comments into brilliant insights. When someone provides unfiltered, knee-jerk reactions to another person's suggestions, we have the opportunity to tap into new ways of thinking. Pinned together, a series of knee-jerk reactions can take ideas further and further from conventional thinking, triggering a stroke of genius. The key to this system is that anything goes. By encouraging people to share any obscure and even bizarre ideas for solving a problem, you introduce new color and perspective that can help other people in the room think about a new dimension of the issue, igniting profound and deeply rational solutions. One person's wacky suggestion can help unearth a deep insight from another person. We keep the rules for our brainstorming sessions quite simple. We start by all throwing out ideas for the topic of the day, we review them as a team and select one. I then start the brainstorming session by asking the problem as a question. "How can we promote our product?" Then the team starts to work their magic. The first rule is that every person must start their response with the phrase, "Yes…and..." "Yes..and…" we can rent a hot air balloon." "Yes..and…" we can fly it over a baseball game." And so on. No matter how crazy the ideas are we write them on the whiteboard. The only other rule is that no one is allowed to use the word "no" or ever react negatively to an idea. If "yes…and…" is the gas pedal, "no" is a giant screeching break. It interrupts the rhythm and makes people embarrassed to offer their otherwise ridiculous knee-jerk reactions—killing the creative process. The vast majority of our brainstorm suggestions are wacky. But the hour-long exercise usually yields some very compelling ideas—ideas we use in our business and would have been far worse off without. This post originally appeared in Inc.com.
• #SOPA / #PIPA Explained 19 January, 2012, 6:24 am
  For techies who are nestled in their startup caves some of the major web properties (Google, Wikipedia, etc) protested SOPA/PIPA yesterday by either shutting down their sites or changing some of the content on their homepages.   While we have a smaller reach at this point, Kohort participated in this movement by replacing the product overview video on our homepage with a video about the issue.  You can check out the video & take action here. For those who haven't been following the issue or don't fully understand what it's about - check out the video below - the Khan Academy does a great job of explaining the bill & it's implications. Everyone should be aware and concerned about this to save the web.
• Why We Brainstorm 17 January, 2012, 5:57 am
  Once a company starts operating, brainstorming often falls by the wayside. But there's a cost to that—big ideas get missed and, unexpectedly, your team's morale may lag. So every week I huddle with the team at Kohort for a brainstorming session. The group and I meet every Wednesday at 5PM. If we don't have a topic we need to address, we brainstorm one. Sometimes we brainstorm about the future, working through how we want the company to operate years down the road. While at first glance, this might seem like a waste of time, I know it's not. While it does consume the attention of everyone on the team for an hour—and adds up to quite a few man-hours—it's invaluable. Brainstorming forces everyone to get out of the weeds and focus on the big picture. It's a chance to come up for air and remember how the whole project fits together and why we're here. Brainstorming makes the North Star shine a little brighter. Brainstorming forces us all to think deeply and critically. We unveil new ideas and illuminate previously unnoticed shortcomings. We find ways to be better. Sometimes, we change our path. Most importantly, brainstorming unifies our team. The act of brainstorming weaves our various ideas, hopes, and dreams together. It defines a vision for each topic that unifies divergent perspectives and aligns us more closely around a common goal. In this way, it also—I believe—is helping us to reach our potential. This was originally posted on Inc.com.
• High Peaks Launches Seedlet Program 12 January, 2012, 7:03 am
  The cultural norms in the venture capital industry change. What I mean is that deal terms – valuation, control rights and beyond – change over time. A sweetheart deal last year is an outrage this year. A few years back a typical Series A round was characterized by a $1-5 million investment. As capital requirements for tech startups took a noise dive, entrepreneurs began to seek smaller rounds of capital – they could prove milestones and potentially reduce their total dilution by raising less money initially. Entrepreneurs demanded and investors listened – seed investments came into vogue like jean shorts in the early 80s. While Seed rounds started out as $100-500K slugs, as they became popular and investors dog-piled in seed rounds have increased in their bite size to $750-2 million. As a result, Seed rounds have inched up to look more and more like the Series A of old leaving many entrepreneurs with an increasingly hard time finding investors who would give them their very first $100-500K. To help entrepreneurs, today High Peaks is announcing its Seedlet Program.  After just a meeting or two, we’ll write small checks ($50K to $150K of a round up to $500K). You can read more about the program here.
• Social Media Makes Us Happy...Chemically? 10 January, 2012, 7:19 am
  There's some very interesting research presented in this TED talk about how our biochemistry drives our happiness & good intentions.   Interestingly his studies have shown the engaging people in our lives through social media also triggers the biochemistry that makes us happy. Check it out.  
• Minimum Viable Team 9 January, 2012, 7:05 am
  The phrase ‘minimum viable product’ has become part of the start-up lexicon. It’s a useful term for that significant milestone in the start-up life cycle—when an entrepreneur has built a stripped-down most basic version of his or her product so he can begin to get customers and feedback. Borrowing from this phrase, I’ve found myself highlighting a different inflection point in the start-up lifecycle: when it has a ‘minimum viable team.’ This is the group of initial employees that enable the CEO to focus exclusively on performing the duties that CEOs are supposed to do. At each stage of start-up development, additional employees increasingly specialize in their roles. In the extreme, when founders first setup shop they do everything. Founder-CEOs initially act as CEO, CTO, head of HR, head of sales, administrative assistant, junior operations managers, and mail boy. As the company grows, those functions are divested to members of the team who specialize in those respective areas. Eventually founder-CEOs find themselves entering a state of operational nirvana in which they transcend into handling only the core responsibilities of the CEO. In my view, this is a very short list limited to: strategic alignment, company culture, talent recruitment and optimization, and broadly being the firm’s face for marketing and fundraising.This nirvana is likely to be interrupted. When a team changes, the CEO may temporarily pick up slack. The inherent volatility of running a new company will also inevitably bring unexpected challenges that sit on the rocky banks of the CEO’s river of duties. For some CEOs, there isn’t a team large enough to liberate him or her from non-core tasks. A CEO also needs to be capable of appropriately delegating, and giving over certain responsibilities, so that the minimum viable team can free up the CEO. Whether or not the minimum viable team phrase makes it into the mainstream start-up terminology, the concept should, as CEOs should be working toward developing an environment in which they can focus 100 percent on properly doing their job…and only their job. This post originally ran on Inc.
• What's The Goal Economic Growth Or Economic Equality? 29 December, 2011, 6:06 am
  I came across this TED talk over the weekend.  The speaker argues that the greatest driver of social issues in developed countries is economic disparity within the country, not the actual growth rate of the economy.  In other words, he argues that once you're wealthy enough growth is less important than relative equality. Kind of a big concept. From the read of it - there is some controversy around his work, but should make for some interesting discussion/ food for thought.   Worth a watch.  
• You're Ignorant 27 December, 2011, 7:02 am
  You probably don't know nearly as much as you think you do. I certainly don't. In the spectrum of knowledge even the most insightful human only sees a sliver of light. Here's the beginning of a long list of what you—and all entrepreneurs—don't know: What people are feeling in other parts of the world  What folks are concerned about elsewhere in your city  What is happening outside of your front door  What the whole story is behind anything you are told What's happening right behind you  What your body is doing right now  Why you have your worldview  The list goes on and on. We really don't know much. To say we know even 1 percent of what's happening would be a gargantuan overstatement. So how are we able to make decisions? In our heart-of-hearts we all believe that we make decisions about our personal lives and work based upon the facts—our understanding of the context of the choice. But if you think about it, we typically make decisions based upon only a sliver of what we actually need to know. "It's a good idea to buy this house because it suits my needs and the value is lower than it was last year." Well, what happens when you discover your wife is pregnant with twins, the local mayor is thinking about proposing a tax hike next week, your boss is thinking about relocating you to another country, or a flood is on its way? "I should target kids as customers because they're in need of my product." Well, what happens when you discover that one of your suppliers put lead in the plastic, grandmas love your product even more than kids, or a competitor you've never heard of is on the verge of launching a slightly better, faster, cheaper version of what you built (and oh yeah…she patented it)? When you start to think about what you don't know it might seem a bit paralyzing. If you don't know nearly enough to make a decision, how can you continue to run your business? The answer: You can continue to operate. You can continue to move quickly. But, you have to do so knowing your primary limitation: You're ignorant. You don't know much of anything. So what does knowing that you don't know much tell you? A few things: You need to listen…a lot.  You're going to get it wrong.  You should be ready to change directions when you do get it wrong.  You need to be ready to forgive yourself for screwing up. From a business perspective, there's only one comforting thing in all of this: Nobody else knows anything either. This was first published on Inc.com.
• My Live Q&A on Inc.com 15 December, 2011, 7:12 am
  For those who missed it - yesterday I did a 1-hour live Q&A on Inc.com. There were some great questions from the viewers. You can watch the Q&A here: Watch live video from Inc. Magazine on Justin.tv
• A Reason To Lose Sleep 14 December, 2011, 7:07 am
  I'm breaking from my normal flow of startup banter this week to hit a political topic (or two) that I think every smart web-o-nerd needs to be thinking about. Today's topic surrounds our country's #1 political issue (in my opinion) - what I understand to be the root cause of many other issues.  Campaign finance & lobbying.  If special interests can influence the government aggressively, does the Congress truly represent the people? This topic is starting to get some air time.  Two videos you should watch (if you haven't already).  The first is an hour - but you should make time for these - it's important.     Lawrence Lessig: Republic, Lost: How Money Corrupts Congress—and a Plan to Stop It    Oddly CBS doesn't allow their content to be embedded across the web - which is a shame because 60 Minutes produces some of the most important content in our country.  Here's a great interview with Jack Ambramoff, ex-Lobbyist, that everyone should watch.  Rather confirmatory of what's discussed in the video above. CLICK HERE