The Post Money Value

Memo to Valley Venture Capitalists Get Quieter Keyboards

2009-11-09T23:43:33-05:00

Sometimes I just shake my head in wonder and disbelief. Before the story, yet another “If I did this to you during the past 8 years, I’m sorry” admission.

A couple of VCs in the US heard about what I was doing and both (partners not Analysts) asked for a call to chat. This was two separate firms. Yep, they called me. Yep, I know these guys for 10+ years. Yep and yep. Read on.

Call one:

All the hey how’s it going, cool, whatcha up to gets out of the way within 3 minutes. So, off I go into my pitch and in the background, I’m hearing the unmistakable clacking of the keyboard AND the standard BONG of Vista’s ‘are you sure’ dialog boxes when stuff is getting deleted. In other words, VC One is going through his email while I’m speaking on the phone. Thank you very much.

Call two:

Do you have Skype? Here’s a tip. Turn off the sounds or mute your PC. Yeah, you guessed it, Skype chat while call number two is going on. Danke mein freund, danke.

As I wrap up this week with a closing, I am not fussed about any of this. In 72 hours, the bank, accountants, and lawyers will all be happy.

But if you are wondering how reputations are created, multiply my little snippets times, oh, a billion instances and there you have it.

Shezzzzzz…..

Memo to Microsoft: Watch the Company Store Bragging

2009-11-06T10:55:58-05:00

I'm on the plane back to Toronto right now and a women comes on to the plane carrying a little goodie bag with 'I visited the Microsoft Company Store' on both sides. Nice bag, actually.

As she walks by a lady behind me turns to her seat mate and says:

"They lay people off, make this crappy Vista thing and she wants to brag? I'd hide that crap.."

Ouch.

http://ricksegal.typepad.com

Congrats to Halifax 3 Billion is a Big Number (Growthworks and SeaMark)

2009-10-29T11:19:48-04:00

Those wild and crazy kids at Growthworks (Roger, Scott, Jim, Andrew, Rolf, et al) decided to team up with SeaMark and make a godzilla company with over 3 billion in assets. Sweet, big is good and the b word is always fun to use.

Why Halifax? You can read the release here. Dateline: Halifax which is where SeaMark makes her home.

As my friend General Crow points out, lots happening in Toronto.

But let’s give the shout out to Halifax as this is a nice feather to put in the Welcome to Halifax bonnet.

Congrats to all.

Exits and No VC - Great Post by Craig Hayashi.

2009-10-24T00:43:19-04:00

The National Angel Capital Organization had their annual summit last week in Toronto. The summit is a gathering of angel investors and angel group managers from across Canada to discuss best practices and current trends in angel investing. Two main themes in this year’s conference were co-investment and early exits. I’ll cover co-investment in another post. In this post I’ll talk about early exits as presented in talks by Dave McClure and Basil Peters.

via www.startupnorth.ca

Craig Hayashi's great post on exits and NO VC funding is something you should take the time to read. Well put and well written.

EYODF Part 10: BookFresh and the Freebie Dance

2009-10-23T21:51:25-04:00

One of the more important decisions startup types have to make is picking from:

Pay for it.
30 day free trail – then pay for it.
Freemium

I stand before you and speak with all the gusto I can muster up and with apologies to Chris Anderson: I hate free. I think free devalues people’s hard work. But that’s me and I’m drinking really serious Kool-Aid, if I think the world is going to see it my way. It’s doesn’t, so like some grumpy old guy, I have to deal with this issue just like you.

In wandering around the internet, I hit upon a company called BookFresh, an online scheduling application that caters to small businesses who want people to be able to book appointments, etc. As a side note, the site is well laid out, has a great home page, see the demo, etc, etc. Really well done; sent to my guys.

I hit the pricing page and, sure enough, there are four categories of pricing with the first one being free and the last one being “contact us.”

You should wander over to their pricing page here (pops open a new window) and follow along with me. As you can see, the obvious item is the number of bookings you can do each month. Freebie users get three and everybody else gets unlimited. You can see what features are included in what version. Hover over for the details.

Here’s where the dance starts. I can only imagine the discussions Ryan/Scott/Matt, the co-founders had with laying out the freebie version. It’s pretty much useless for 99.99% of anybody being even remotely interested/needing this service, but there you go, they have a free version. I know there is a use case somewhere and somebody is going to tell me the zillions of people who can use the 3 appointments a month version, okay, stipulated. It’s still useless to 99.98%.

It is, tho, that number (3), which got me thinking about this free thing. For example, back in the VC day when I was doing 10 or more of the no harm/no foul meetings a week, this product would have been ideal for me. They have a Typepad widget and I could have popped it up on my blog letting people take slots. Awesome, easy, cool. I would have paid for it.

Which of course led me to thinking about a educational version for teachers to let students schedule time during the office hours or tutorial leaders being able to use it for free to schedule times. Or, create a version for VCs, like Brad Feld, Jeff Clavier, or Fred Wilson who like to reserve time each month for random/open meetings. Should those versions be free? Would that class of users brag enough to get paying customers?

I have no answers for BookFresh, they’ve been around for 2 years and seem to be rocking right along without my backseat commentary but they make for a good discussion point with my advisors.

The point/issue for you is to find examples like this and think through the variations on free/paid/freemium for your own product/service. It’s an interesting (and very important) exercise.

[2 Bonus BookFresh Observation]

On the about page, you can read about Ryan Donahue’s founding of the company and then his corralling of Scott Edwards and Matt Rowe into the “co-founder” slots completing the founding team. Solid, + 50 points for that strategy and acknowledgement of founding talent. -30 points for Ryan being "Founder & CEO” with the other guys getting “Co-Founder” title. You almost had me, Ryan. (just a little title humor).

Second bonus: If you are planning to open up a satellite office in a war zone, Matt’s your go to guy. Awesome.

Have a great weekend, everybody.

The take the deal or not debate

2009-10-22T19:15:20-04:00

Pat Moore, of Amplafi, put up a good response to my post regarding do you really want Venture Capital. I’ve 'promoted it’ here because it raises some interesting points which I’d like to expand/share.

I’ve put my comments inline with his.

Respect you a lot but I think you are flat out wrong here.

[Yeah, I used to get the you’re a nice guy, but… a lot in school, always knew the next sentences weren’t exactly coming up roses.]

1) so would you object to a 5x, 10x, 100x ?

In theory? No, I really don’t care provided that there is a provision where at a certain price, everybody converts and nobody can stop a sale unilaterally. So, if somebody has a 5x and the deal says at a sale of over $50 million, everybody converts, no double (or 5x) dip, you just line up at the pay window and get your share. If a VC says downside only, okay, cool. The $50 million number, in this example is arbitrary but it makes my macro point. I don’t care about downside, what I care about is the upside fairness.

2) maybe you wouldn't because as a founder perhaps your starting percentage is high enough that you still see bucks on the horizon - but what about employee #40. He does the math. Math tells him that unless the company sells for $1B he isn't getting much. Instead of stock motivating -- becomes demotivator. Now as CEO you have 9-5 employee and a real gulf between the haves ( founders) and the have-nots ( everyone else ).

I’m looking at my ending percentage not my starting percentage. I believe what I am working on is a zillion dollar company. I truly do. I’ve written a personal check, bet the house so to speak, and I believe that if I own 5% – 10% of this puppy when we win, I’m a seriously happy bunny. So, armed with that attitude, I’ve got lots of stock (mine) and an option pool to reward the key people in my company. Let me also say that if the tech gods above shine onto me a billion dollar exit, I’m locked and loaded to reward the people who got me/us there.

3) I gather you are pretty well off. If this company fails, or you get screwed by investors -- you are not financially devastated. The rest of us are not so lucky.

To this I can only say that if this fails (it won’t) I’d be on the street looking for another gig or maybe another kick at the startup can. At this stage, yes, for a certain period of time, I can pour every dollar back into the company, take no salary, eat capital expenses, and generally make Ebenezer Scrooge look like a drunken sailor when it comes to spending. I’m not on food stamps but I’m bringing my own lunch to work and gladly letting other people buy.

4) you have enough connections that an investor thinking about screwing you will know that it will get around hard and fast -- the rest of us not so connected.

I don’t think my connections are any better than yours when it comes to ‘thinking about’ anything. The fact is that you can post, tweet, comment, and share a VC screwed me story and it will get picked up since the VC community is a magnet for bad stories. I appreciate the thought, but I’m just not that connected nor able to scream louder than you. I wish I was actually.

5) If the investor demands so much downside protection then is the investor really convinced about the idea?

VCs, for the most part are driven by spreadsheets and returns once they get past that first instinct of wanting to do something. This is important. A VC jumping up and down on a deal after a meeting or two do, will eventually have to settle into whatever the firm’s style/rules/plans/IRR/state of the fund/etc is. Reality bites but in my experience, Pat, they bet on you and the firm layers on top of it those things they need for the committees, the LPs, and everything else. As I said before, I’m interested in closing the deal with the lowest legal costs possible and only worrying about things that are going to materially impact my ability to be successful. The rest is noise to the extent that if there a shit pile or things don’t work out, it blows already. If this doesn’t work out (it will) and I’ve taken, say $2 million of other people’s money, aren’t I supposed to get it back to them before I get coin? They placed the financial bet and if the downside says, we’re covered, I’m fine. It’s just me, you clearly disagree.

If I got such a proposal, I would demand upfront money going into my pocket, all previous investors, and all current shareholders. Additionally, the investors would lose the ability to force the sale of the company, and the provision would only kick in after a certain percentage of their money was spent. If it ends up just sitting in the bank because current revenue is adequate then the company gets to return it as a loan.

Do I think any VC would take such a harsh "deal" -- no... but then again why should I take such a harsh deal from them?

This would be a broader definition/debate on what’s harsh. For me, harsh would be a double/triple dip on a major, out of the park, home run. A VC who say, I’m protecting against a flip and if it is a dude, I get my money back, etc, is not (in my opinion) being harsh. A VC who says, 5x participating pref REGARDLESS of exit, yeah, that’s harsh and no, I wouldn’t do it. Your sitting in bank comment points to a disconnect with what a VC would want and what they would do regardless of terms. I hope that I take in the coin under legal review now, and that’s it. I hope it never gets spent and I exit with a billion dollar company. I’m not thinking about loans, returning money etc, rather I’m thinking about the win and joining the ‘blank check’ club.

In reading Pat’s comments over a couple of times, I think he has done an excellent job of making my point about do you really want to sign up to the life of a VC funded company. Thinking in terms of being screwed, giving money to people as it comes in, etc, all point to, well, not being actually ready for a VC investment.

Again, the debate shouldn’t be about the terms, etc, rather about the basics of taking the money in the first place.

Thanks Pat, I appreciate your comments.

Reminder: Failure = Experience

2009-10-22T08:04:50-04:00

Lots of people bash Michael Arrington for all kinds of reasons. Most of the negative stuff tossed his way isn’t particularly fair or deserved but goes with the territory I suppose.

He has a post up about a start-up called DotBlu and it’s death. There is a very important point all of you/us should remember; especially here in Canada:

“Most startups die, so this isn’t any particular slam on the founders or investors. They tried and they failed, and that’s the way of Silicon Valley.

And as a goodbye salute to dotblu, I remind readers of The Man In The Arena speech by Theodore Roosevelt in 1910. Adapt or die, they say. And if you die, put another quarter in the machine and start the game over.”

The Man In The Arena post from Michael (circa 2007) is here and well worth your time reading.

Back to the game….

An Business Intern Opportunity

2009-10-22T07:50:13-04:00

If you are living here in the Toronto area, going to school, and need a little extra cash, read on.

I have an opening for a business intern at my company. Actually, I can use two.

You are in school, 2nd year, or 3rd, etc, and you don’t have to have a pile of experience rather you have to have tons of enthusiasm, smartsm and want to learn about this start-up thing. You can be in an MBA program, no points off.

You’ll spend your time learning about what it takes to get a start up off the ground, the fun of watching a crazy person do a million jobs, and you’ll meet a core development team of people that are the best in Canada. You’ll be doing a bunch of research, compiling data, a little product testing, spreadsheet twisting; all the fun stuff.

It’s about 10 ~ 15 hours a week and the pay is more than Swiss Chalet but less than what he makes.

Oh, you have to sign an NDA unless you are VC, former VC, or future VC. [Inside Joke]

Operators are standing by.

Compare Your Start-Up to Sears

2009-10-20T14:03:52-04:00

In 1897.

Pete Warden has a great post up that I finally remembered to share with you. Check out the prose and Pete’s commentary. Talk about “we’ve seen this movie:”

“The customers are their evangelists. Want to save on shipping? Here's some examples of how you can get $10 of goods for $6 by persuading your neighbors to order along with you.

Information wants to be free. Want to know more than you ever believed possible about all the differences in pocket-watch mechanisms? Here's several pages of detail that your local jeweler will never tell you, but we want you to understand what you're buying so you'll feel comfortable buying sight-unseen.”

Great stuff, thanks Pete!

If You are Hiring Seriously Good Tips

2009-10-20T13:36:20-04:00

Don Rainey, a VC in Washington, DC, has a great post up about the types you see in start-ups.

Consider:

“5. Mr. Artiste - the programmer

He is creating software (sometimes the company's core product/hope of future success) and he isn't limited by the contents of the requirements document. He isn't limited by it because he isn't reading it. He is creating, damn it, and brings his own vision. Definition: Artiste Plus, staying consistent with his vision keeps him closer to his imaginary specification with its imaginary time line (and yes, he's on schedule).”

Heh. Read the rest, it’s dead on.