VCball

Don't call me "Dude", dude

2009-09-03T09:00:00-04:00

A month or two ago, I tweeted about going to an English Beat concert. Instantly I got two responses back: one from @theenglishbeat saying on twitter to me publicly that they look forward to seeing me. The second was an equally public twitter from my 39 year old brother: "You are old, dude".

Me.... old? Hey I... twitter!

So recently, when I came across my sister-in-law's neighbor's book, "How To Not Act Old", based on her blog, howtonotactold.com, I was intrigued. I have never really thought of myself as old; but maybe just maybe my brother was right, and I was starting to act old.

Here are a couple rules for not acting old that the author identified:

Don't say "Dude"... maybe "Cool". Slang immediately identifies your generational age if you think about it.
Don't wear matching clothes or "tighty whities" (that's white mens 'briefs' for you oldsters)
Be optimistic. Negativity is a downer. That includes talking about death or health problems.
Don't rave about Bruce Springsteen. Enough said.
Don't wear an expensive watch. Don't wear any watch. If you want to check the time, check your cellphone.

And there were about 180+ other rules (more are coming I am sure).

Needless to say I was struck by these "rules", as many I've unknowingly broken myself --making my brother's point I guess.

One old venture capital dude, Michael Moritz of Sequoia Capital, got into some trouble earlier this year, asserting that only people under 30 built big transformative businesses. Getting into an age war argument isn't my cup of tea.

For the startups I back, which tend to be more business to business technology companies, I prefer a mix of both younger as well as more mature managers; the trick is getting that mix right where one age group is not more dominant than the other in a deleterious way. Having an old hand that has "seen this movie before" is a great way for a young founder to see around corners they haven't experienced; and having a young hand around with energy reminds us that sometimes the impossible is possible, and freshly challenge our long cherished beliefs that need updating. My experience suggests that older and young entrepreneurs do best when they work together collaboratively.

Whether the founder is young or old, their capacity to recruit and balance the right mix is extremely important to startup success. Yahoo, Google and Netscape are classic examples of teaming up a young founding teams with more seasoned managers as well as younger managers. Even Michael Dell and Bill Gates were smart enough to recruit senior as well as younger managers relatively early in their companies existence. A bootstrapped way to do this early on is to recruit these people to a board of advisors or board of directors, and use as a sounding board.

In any case, if you still have a capacity for summer reading, picking up the HTNAO blog or the book is a fun, light and short read, and I'm sure will make you think twice before you Facebook old.

Don't wear an avocado costume

2009-07-14T00:17:36-04:00

Today, the Wall Street Journal ran a story called "Perfecting the Pitch", consisting of tips from VCs on creating the perfect pitch.

Ty McMahan kindly included an account about a meeting I had an entrepreneur I had met early in my career that taught me a great deal about pitching.

Not to be redundant, but I felt it was important to give this story a bit more flesh: it was the height of the dotcom era. People were getting a bit crazy about this thing called the Internet. One day, a strange lady came in, unannounced, into my 13'x10' office in Hell's Kitchen, a fairly dangerous part of New York City at the time.

She was dressed in a bulbus green outfit. I didn't recognize what it was, and I hadn't met her previously. Before even saying hello, she reached into her bag and pulled out...

a business plan.

I almost fainted, my life flashed before me: I thought she was going to pull out a gun and I was going to get shot. Instead she offered me a pitchbook.

While, yes, I probably would be a little put off by the outfit, and not knowing who she was; but for the record, it really was more my fear of getting shot at. That's the full story. So the moral of this story is: don't come in to pitch an investor, unannounced, and look like you are packing heat.

Ok, let me rephrase: raising money is about trust.

Indeed, if you think about money itself, at it's core, it's about trust in a government and other people that they will exchange goods and services in exchange for a piece of paper with green and black ink on it. That is kind of crazy if you think hard about it.

The dollar bill itself says "In God We Trust", and has odd Latin phrases like "E Pluribus Unum". It has pictures of George Washington, and has big capital letters: FEDERAL RESERVE NOTE and THE UNITED STATES OF AMERICA a couple times. And pictures of a weird pyramid, with a magic eye, and an eagle holding wheat and arrows. It has dates of issuance, serial numbers, and signatures of important government offices. All this green and black ink, plus some threads that glow purple under the right light to signal that a lousy buck is really a buck, and not a fake.

There is something to learn from what gyrations the U.S. government goes through to engender trust in it's currency, phyically, and by word and deed. Similarly, startup investors are looking for trust worthy investments and are looking for symbols, words and deeds. In the rush to raise capital, it's easy to forget that in the end trust is really what it's about. It might sound a little silly, just like all that stuff that the U.S. government puts on it's legal tender, but that's how it works, raising money. It's not sexy, it's just the way it is. One might think that a pitch is an elaborate come on, a voodoo dance to woo investors... but investors often see through the artifice. They want the coldhard facts about the opportunity, the product and who you and your team are. That doesn't mean you can't have fun-- indeed, humor can be a great part of a pitch if done right-- it's just that one needs to temper the fun to serve the greater goal of engendering trust.

While there is a lot of stuff about pitching out there, later in the summer I will try to blog further about what I think a good pitch and process needs to create that investor trust. In the meantime, do whatever you can do to increase and enhance that trust; eventually, some one might just take you up on your offer, trading their paper for your paper, the ultimate trust based exchange.

Bookend Your Dream

2009-06-26T00:02:40-04:00

As my friends and colleagues know, there are few times I am truly speechless. One is when the SEC orders it to be so during a "quiet period". The other is when I remember why I got into this entrepreneur backing VC business in the first place in 1998, after starting and selling my own tech business. Both are in full force today and the last few months due to the Medidata IPO which occurred today, so I will be brief.

Medidata is a New York based startup pharma software company that I led the first institutional round on for my fund, Silicon Alley Venture Partners (now Greenhill SAVP) and Stonehenge Capital in 2002.

In this post, I want comment on what this IPO means to me, and our local tech community, and to publicly thanks and congratulate the Medidata founders, Tarek Sherif, Glen de Vries, and Ed Ikeguchi and the entire 700+ member Medidata team. In addition, I want to thank Milestone Venture Partners, Insight Capital and Stonehenge Capital, our co-investors, for the work and effort they have put in as well.

At an event tonight that Sonnensheim, PWC and Silicon Valley Bank had at Remi's in midtown, I got several high fives, and virtually all day I received a stream of emails and twitters from my entrepreneurial friends all over the city and the country. They all had great things to say, but a good number of people expressed that Medidata has shown that: 1/ the technology IPO is not dead yet, thank god, and 2/ New York based technology companies can compete with the best technology companies in the world.

What scares Silicon Valley more than anything, is that, with the commodization of core information technology, under-served regions of the country can compete and be in forefront of the next wave of technology innovation, technology enabled internet services. My charts, graphs, tweets, and blogs demonstrating this thesis can never really be as convincing without a fistful of public offerings like MDSO, showing public proof that the future is coming.

We are not quite there yet.

But, uultimately, I believe the technology enabled services boom is going to be a long and great boom, longer than the PC boom, and will be uultimately heard not just in New York, but around the country and the world. I believe the New York area has a unique leg up given it's proximity to entrepreneurial talent, capital and customers in the finance services, telecom, advertising and publishing sectors; and that each part of the country has it's own local industry domain expertise and brand of entrepreneurial ism. A public offering is the exclamation point that quiets the naysayers, and puts credence to this sector and under-served region thesis. This argument is far from over, but this is the first crack in the tired paradigm that tech entrepreneurs can't thrive outside Silicon Valley. Fortunately, many people still believe that, so, as contrarians are the ones who often make money over time, there is a lot more money to be made for savvy entrepreneurs and their backers who invest outside of Silicon Valley.

Lastly, and perhaps, most importantly, I caught this article on CNBC called: "Medidata IPO Bookends CEO's 'American Dream'". CEO Tarek Sherif pointed out that "his success has everything to do with the American experience." "This is the opportunity afforded to you in this country," he said. "I can build a company that really helps people." Turns out, coincidentally, Medidata IPO'd on the same day Tarek arrived in this country in this country with his family by boat passing the Statute of Liberty, 41 years ago, to the date.

How cool is that?

Congrats again to the whole MDSO team, for showing us all how its done, and reminding us about what makes this country great.

Begin Right with a Prologue

2009-05-10T21:41:24-04:00

Earlier last week, I got back from a late company board call, and unwound by watching a dvr of Charlie Rose's interview of J.J. Abrams, the director of the new Star Trek movie, released Friday. The movie is a successful attempt to restart the Star Trek brand, by retelling the past; it's a prequel or prologue to the original Star Trek series. It's something VCs and entrepreneurs know all about as a source for inspiration. (I think Tim Draper is still hunting for a Holodeck to back.)

Interestingly, JJ's core interview message was that in movies today, while technology driven special effects are cool, they don't automatically move audiences anymore to adulation as they had in decades past. The cool special effects are now expected. Audiences don't care about blowing up a spaceship in a movie; they only care if they care about the people in the spaceship. What moves audiences is *caring* about the characters. Once an audience cares about your characters, the tech has far bigger impact.

Now what gets audiences to care? J.J. says that its understanding the personal history of that character that drives real engagement. Once one understands the character's background from their own telling, the audience can begin to relate and will engage.

The same is true when pitching a vision. Both entrepreneurs and investors often mistakenly ask for, or start with, pyrotechnic demos, and cool market facts and explosive company figures about an opportunity. When in fact, we should start with the very personal and professional history of ourselves, as the founders, investors and managers; that back story is actually the most compelling part of any conversation. This introduction is often skipped or rushed through, even by seasoned executives. Its the number one thing VCs, entrepreneurs and managers often fail to communicate or request upfront in the beginning of a pitch to their mutual severe detriment.

Jason Greene of Emergence Capital, an early backer of my first company while he was at Venrock, put it best to me over a lunch discussion, far more succinctly by quoting Shakespeare: "Past is prologue".

Now for many entrepreneurs, that past might be relatively short. That's fine. VCs and others you pitch for money or resources or employment want to hear how you can do great things with little resources. And self awareness is critical. Share that. When I was pitching my first company, I shared minor stories of high school entrepreneurship, growing up in rural south Texas, getting the gumption to go to boarding school my junior year, getting into college, getting fired, going to grad school, having an epiphany about starting a company, how I learned about recruiting a scruffy management team and fellow entrepreneurs, and digging up some cash to do it, then delivering a modicum of success. Surprisingly, even the most seasoned pros often skip this simple exercise of introducing themselves properly. Especially in this environment, humbleness and self awareness are part of the path to a successful outcome.

When done right, beginning a conversation properly by explaining one's history appropriately engages your audience, and subtly reinforces and foreshadows the pyrotechnics you will soon unleash. It builds credibility and chemistry with the audience, so when the punch line about your opportunity hits, it's not just another spaceship blowing up with people in it that you don't care about.

For further inspiration, go watch the J.J. Abrams interview, and, if you haven't already, see the new Star Trek movie. I think it will go down as a classic prequel/prologue that revitalizes a worn out brand and extends hope for the future as the Star Trek series has done in prior generations. And perhaps, this prologue might remind us all from time to time, especially in an important pitch, that not all prologues are worth skipping!

Surf's Up! Swim with your clothes ON!

2009-02-11T11:59:24-05:00

The last couple weeks I've been obsessed with Warren Buffet's recent biography, Snowball. I am about halfway done but so far, it's been very interesting read, and I highly recommend it.

One might ask: What does Warren Buffet have to do with venture capital and entreprenuerialism?

Mr. Buffet is the king of what's known as "value" investing,investing in undervalued hard assets and cashflowing assets. As his wealth outgrew the opportunties, Buffet has goten deeper into branded products as he got older, like Coca Cola, McDonalds, American Express, etc, but he's still at heart a deep value guy.

Venture capital is widely believed to be the exact opposite of value investing: more like "extreme growth" investing. It's more like investing in companies with little to no revenues, product or real brand value, where the hope 1 in 10 is a big home run. It behave more like how an option contract might behave, worthless or worth a lot. In the book, Warren is fond of pointing out how he likes investing in companies with a "margin of safety". He hates to lose money on the downside. While VCs are "supposed to take risk", what they really do is evaluate returns on a risk adjusted basis. If given the opportunity to invest $1M in a company that has a 10% chance of returning $100M, a VC would look at that opportunity and take it, as the risk adjusted expected return is $10M (10% x $100M), a 10X return. 10X is a nice margin of safety.

The other quote I've been obsessed about from Mr. Buffet was last May's oft repeated comment about the housing crisis: "You only learn who has been swimming naked when the tide goes out." Personally, as an investor, I've been waiting for that tide change since April myself, when we closed our last two investments, Pontiflex and FTRANS. But not for the same reason. VCs look for the change in tide, because you can finally spot the ones swimming with clothes *on*! Investing in this environment is a lot more like shooting fish in a barrel, not so much because you can see the weaker companies, but you can see the strong ones much more clearly. Those companies that powered through Q4 are likely to be the emerging winners as they overcame once in a generation countervailing winds.

As Warren Buffet said in 1974, during the bottoming of the last major financial crash: "[I feel] like an oversexed guy in a whorehouse." While I've never visited a whorehouse, I can relate from an investment opportunity perspective: for venture capital firms with capital, from 2009 to 2011 are going to be great years to invest in great entrepreneurs with great opportunities and excellent expected return expectations. If your company had record Q4 numbers, as many of our portfolio companies did, including the aforementioned, you are swimming with your clothes on. And we want to talk to you, as I am sure other venture firms will as well. So get out those surf boards, surf's up for those with wetsuits-- and, yes, clothes-- on.

Spend Imagination

2008-11-16T19:20:20-05:00

I have been getting some feedback on my prior post on "Peanutbuttering" which was on how to change direction in the current environment. It made me think a bit more and I came up with 6 more specific ways to do that from some of that feedback:

1/ add a new product line to serve the market that your currently serve (ie. start selling solar panels if you are in the home improvement business)
2/ take an existing product to a new or adjacent market or industry vertical
3/ upgrade management and staff team toward more hard ROI roles (sales vs administration)
4/ hire less staff, outsource more (outsource your payroll and HR or IT if you haven't already done that)
5/ acquire a similar company or an adjacent product or market company and cross sell your products to your existing customer bases
6/ sell to another company to achieve one of the above

I am sure the list goes quite long, but the basic idea is the same: take what you've been doing, and do it in a new manner. All of these can cost some serious money, something that is very dear right now.

So here's something new: how about, instead of spending cash, "spend some imagination" and go beyond tactics to a strategic change?

For inspiration, I want to give you an example, from a former business school professor of mine from Columbia, Cliff Schorer, who coined that phrase (I think) and tells this story in his class:

A student approached him one day in his office about his idea to manage a horrible problem: when he takes a bath, he often forgets to turn off the water, so the tub overflows. Or the student has to wait there, wasting time as the tub fills up. So he invented a sensor that would optically check for rising water levels and automatically turn off the water when it had reached a predetermined level. The product was going to cost $100 plus installation. My prof said to the student: good luck. And thought to himself: How big of a problem can that be? Who would pay that type of money for this solution?

A couple years later, Cliff runs into this student on the street, getting out of a limo. Cliff asked the student how things went. It turns out the student, after a lot of trying to sell this product gave up. People were not interested, given the time, cost, problem size. But he did run into a few water faucet companies that mentioned to him that they sold a lot of higher tech faucets to restaurants. The student began to think that, perhaps, if he designed his sensor a bit differently, say turned on when hands were underneath a faucet, there might be big demand for saving water in high traffic areas-- in say, restaurants.

Now millions of units are sold a year to facilities all over the planet. He gets a penny royalty each time the faucet is turned on.

I probably botched this story, but the gist is still there: by being persistent this student found the big problem with a solid solution, and ultimately was successful by shifting his strategy slightly. Too often entrepreneurs give up on their baby, when success is just a little imagination away. It didn't take much money to change, but it did take some imagination, as well as going down a few blind alleys, to come up with the successful formula.

With the downturn, and more possibly to come, business models are being upended.   Don't be afraid to spend some imagination (or borrow others people's imagination!) in coming up with a new way to use what you have already built. Its not about money, its about using you head, and listening to what the marketplace is saying it needs, and getting more strategic.

Sometimes that's scarier than spending money on something you "know" should just "work". Its scary to challenge your core beliefs, and that of your partners, investors, managers and staff. Its tough challenging investors who "bought" your last vision, and now you want to change, and they could be resistant. You might feel that it's an admission that somehow you don't have all the answers.

Guess what? You probably don't, no one does, at least not all of them.

In critical times like now, some people (including perhaps yourself) are more open to some out of the box thinking. It's the end of the year, and 2009 is uncertain. Might as well explore that a bit. Brainstorming is a great way to do that, especially if you tend towards control freakedness; now is a great time to get over that ego, and stimulate imagination in your business.   Put everything on the table, and don't allow ideas to be destroyed by arguing them immediately, as they are mentioned; evaluate later when all the ideas are out there in full view. When brainstorming there is no such thing as a "stupid" idea.    I am not saying you need to hire a consultant or do a Kumbaya mega expensive offsite. Try using some big paper pads, magic markers, and a conference room, with your partners, staff, investors, customers and advisers. Order in pizza. Maybe some beer.

I make light of it, but, if interested, I do suggest you bone up a bit on how to conduct a brainstorming session; it's not rocket science. It takes some energy to overcome the inertia of existing thought, but it's well worth the effort.   Right now, what this country, and many companies (and governments!) need to do-- so don't be afraid to spend some imagination.

[For further inspiration on imagination, check out this Guy Kawasaki video. I've seen it a couple times in person, and you might have as well, as he gives it hundreds of times a year, but it's still inspiring to see, especially in darker times. The busier we get, sometimes we forget why we do what we do in the first place, and Guy's video post reminded me of this the other day.]

Try Peanutbuttering

2008-10-29T21:56:21-04:00

Last week while I was coming back from a board meeting I ran into Andrew Duncan, a serial entrepreneur, and SVP at Scalent, a data center virtualization company. We were stuck at an airport, watching realtime the last Obama-McCain debate streaming on our computers' broadband cards (how fricking cool is that!), and got to talking about the debacle our country has gotten itself into.

Then we got to talking about business strategy in these times. Andrew mentioned that Scalent not that long ago realized they couldn't rely on one industry vertical like the financial sector, and began "peanutbuttering" into other adjacent verticals that have similar application or service requirements, like government and education. Peanutbuttering is about spreading into other somewhat similar industry verticals that don't require much retooling of the technology or application or service itself.

It's probably a bit too late for some companies to peanutbutter into other vertical industries. Too much momentum, or commitment of resources and sheer inertia. I remember back when I was running a newspaper tech service that aggregated classified ads, that the sales cycle to newspapers was so slow that we'd burn up all our cash before hitting breakeven unless we took drastic action, perhaps abandoning newspapers and go after other media companies or direct to the consumer. Our board, and our VC backers, didn't have the stomach for that and we ultimately sold to a group of newspapers. In a lot of ways, I wish we did change direction. As we started in '95, if we did retool, we might have been an eBay contender, as we would have had a headstart with 500+ newspapers and media companies' promotion power. Needless to say we didn't choose that route.

But for nimbler startups, it's not too late. Now might be a great time to embrace the turmoil, sit back, cut their burn rates, and rethink their business. There are quite a few companies out there sitting on $3 or $4M or even $1M burning it up, thinking "we are doomed" or not realizing they are doomed, when they could be retooling and peanutbuttering. These companies should embrace the turmoil, and come out stronger by refocusing and deeply and honesting thinking about their business. This is what makes for great companies.

Here's another example of peanutbuttering. Contrary to popular misconception, Google's venture backers didn't immediately embrace the ad model, and instead wanted to continue focusing on selling search engine technology. If management didn't stand up and say, "we're doomed" going in that direction and retool by into the advertising sector and selling AdSence ads as Overture had done, Google wouldn't have become GOOG!

Retooling into a sector or a subsector might seem scary, and risky. But refocusing on an industry that has been hit a bit less hard, or offers a better opportunity that the current sector, might be just the ticket to turn around a company. That might mean making some difficult bet the farm decisions on staffing and marketing, abandoning sunk costs and investment in old approaches. Crisis makes it possible to reexamine your business premises, so revel in this opportunity-- that's what the great enterpreneurs do. Ironically, the worse the crisis the more likely you will get buy in from the appropriate stakeholders (managers, board members, partners, etc) that action is needed.

So, whether you know it or not, as a startup, or even a mature tech ompany, it's likely that a meteor has just struck your part of the world or will soon; its time to evolve or you'll be dinosauring it soon. Try peanutbuttering instead!

Go for the "Rewind and Play" Candidate

2008-08-23T11:18:58-04:00

In my last post, inspired by Dark Horse speculation over Obama's potential veep choices, I expressed my sentiment concerning taking a hard look at Dark Horse managerial recruits. Many startups can't afford or find the seasoned and hardened entrepreneurial vet, and they often have to "bet" on a Dark Horse.

But ultimately, it's a calculated risk betting on the Dark Horse. They have flaws and ultimately you have to decide if the flaw is overcomeable. Will it produce a pearl of value that is impossible to produce other wise without that flaw? Or is the situation so dynamic and new, that there is no experienced candidate with the exact right profile and cost? Currently, our fund is evaluating a few startups right now as well as our current portfolio, and that's the type of stuff we weigh very carefully; do a candidate's flaws overwhelm the positives or vice versa? Is Mr. RightNow better than waiting to find, if ever, Mr. Right? Those are the key questions when considering a Dark Horse

Obama's choice of Joe Biden is not a bad one at all, considering that the greatest challenge in U.S. federal policy is righting our perception in the world and the biggest potential weakness for Obama's administration is navigating foreign policy. Going with the experienced candidate that has been put to some degree of serious media scrutiny isnt a bad idea, and could prove to be just as inspired a choice as a Chet Edwards would have. As I said before, I am no polymath political analyst, but VCs and entrepreneur see the same type of dynamic when selecting staff and managers.

Going with the experienced, "rewind and play", with provenly success in this type of situation candidate, is a VCs wet dream, and that should be the goal for most entrepreneurs as well. But often those experienced managers aren't available and the Dark Horse bet is the only viable option. And sometimes that yields surprisingly good results or good enough until you can find that rewind and play dream team when the company is more mature. I guess what I am trying to say is don't be afraid of the Dark Horse, and don't be caught up with them either, but be aware of that dynamic in the choices available and the risks and potential rewards that each decision entails.

Go for the Dark Horse, Obama

2008-08-23T00:24:43-04:00

I think almost every CEO-founder I’ve ever backed as a VC was some type of Dark Horse. Typically, they are someone that no one really knows that well, but on closer inspection have a special spark. They were born for the role, and had the right set of experiences to be perfect for a particular opportunity.

One of the first entrepreneurs I ever backed professionally was a Robert LoCascio, the founder and still CEO of LivePerson (NASDAQ: LPSN). He was a two time entrepreneurial loser, once in the kiosk space, and another time as a web developer. Few VCs would have backed Robert based on his experience to date; he was a true Dark Horse entrepreneur.

I still remember the day I met him in his office. He had an old ’85 vintage Macintosh literally hanging down in his entrance way of his 15’ by 30’ Hell’s Kitchen office. Not your conventional adornment. 7 people were working ther hunched over ratty furniture and I think a few wooden doors that were used as desks. Rob explained to me that he had a vision in 1997, that ecommerce sites were more like morgues than interactive shopping experiences; when you walk into a store, you expect to see people and be helped by people. So he started his company to address that issue, starting with online chat. He explained that the average ecommerce customer call on the phone cost $4/minute to service; online chat would be $1/minute because 1 customer service person could multi-task and have semi-automated responses and thus be more efficient. Companies would pay him to license his software on a hosted ASP basis-- SaaS wasn’t in the lexicon then! Later LivePerson would get into ecommerce analytics and so on.

The company went public 18 months after we seeded him, and LivePerson is still public, and the leader in ecommerce interactive applications and analysis. I think few people ever expected that to happen. To tell you the truth, he did it by hiring Dark Horses himself that were incredibly skilled; and aside from being at the right place at the right time, like half a dozen other startups, he hired his own contigent of Dark Horses.

Startups often have to make the decision and “settle” for the Dark Horse recruit for key positions. Oftentimes, they really don’t have much of a choice, as traditional candidates that might be great managers and have great domain expertise are either too well paid, or too polished to want to leave a more established organization. Startups often have to go with the recruit that had a bit of bad luck, or had some karmic twist that made them incompatible for a larger organization.

So as a VC, I’m quite tolerant of Dark Horses. Frankly, most VCs are Dark Horses themselves, myself included; they tend to be mavericks that probably would not have fit as well into a more traditional finance job. So remember that, the next time you are pitching a VC.

What inspired me to write this Dark Horse post was the mention today in the AP wires, that Obama is considering a Vice Presidential candidate, whom I used to work for. His name is Chet Edwards, a Democrat from the part of Texas that includes a Republican leaning district and George Bush’s Crawford, Texas ranch ironically.

In 1987, I worked with Chet on his quixotic Lt. Governor campaign as a summer intern, carrying his bags, literally. In a state that cared more about high school football than education, Chet was one of the few that had to good sense of legislating a different priority. As a businessman and Harvard MBA, Chet understood that jobs are not the direct creation of the government. Here’s a list of his other beliefs. Not all of which do I espouse, but generally, he’s moderate, educated, and has common sense, something sorely lacking in politics today in both parties. I think he's almost square right down the middle, where most Americans are. For whatever reason, in today's political press, moderates are call "mavericks"; if you think about it, that's pretty sad.

I won’t ruin the press theatrics, but if Obama picks Chet, a total out of the box Dark Horse, watch out. I think this election could become an Obama landslide, as Chet is the real deal, and one of the smartest politicians out there. Chet will make a perfect foil for Obama and his message. If Obama goes for a tired traditional pick like Clinton or Biden or Kerry or other old school politician, I think it’s game over for Obama, as it will wreck the image he has built. So my guess right now is Chet will be the VP nominee, the ultimate Dark Horse.

Now I am a bit biased on Chet, and I don’t follow politics professionally, but I do believe in Dark Horses.

I think most entrepreneurs, as well as most VCs, and as most Americans, deep down, want to believe in Dark Horses too-- for good reason I think. Supporting the underdog is a uniquely American trait; it's a belief that hardwork and tenacity in the land of opportunity will pay off. Americans and entrepreneurs know that Dark Horses know they are Dark Horses; Dark Horses have so much more to prove than traditional candidates: they need to win, not for money or love or power or fame but for the fact that no one expected them to get there and they have a lot to prove, to themselves if nothing else-- and nothing to lose if they just lay it all out there. This set of traits is exactly what every startup needs. The danger is that a Dark Horse becomes an empty vessel filled with hope versus substance, which is, of course, the bash against Obama and Edwards and LoCascio initially; but if they are the real deal, that will shine through.

Life isn’t a dress rehearsal, and startups, and this country, need people like Robert and Chet to make it happen. So, occasionally, give a Dark Horse a shot from time to time. It might be the key ingredient to success.

Be a VC for the Day

2008-04-11T02:42:08-04:00

Earlier this week I got a cold call from an entrepreneur; I had mistakenly picked up the phone, figuring it was my 4:30 call with a CEO in our portfolio. He immediately launched into his pitch, and I lamely suggested that he send me a username and password for his demo, and I'd get back to him, as I really didn't want to be late on this call. Portfolio companies take priority for VCs over potential portfolio companies, at least me.

Any ways, the entrepreneur starts bashing VCs, suggesting that they don't believe in or care about entrepreneurs really, and only in the money they make. I interrupted him, and said, thanks, but I really needed to be on another call. The entrepreneur, perhaps realizing this wasn't a good tactic, continued to say there were other VCs that do care about entrepreneurs and I was one of them. That's nice that he felt that way, but I think it's a common misperception about VCs not caring about entrepreneurs. I told him I still had to go, but please do send the information. This entrepreneur probably thinks I am an asshole despite what he told me, as I haven't heard from him since.

While some of that rap is earned, I think it's generally not the case. VCs live and die by the entrepreneurs they back. Critical is the ability to "call the baby ugly" without destroying that entrepreneur's confidence. Think about it: if entrepreneurs think VCs are assholes and have no redeeming traits that dramatically enhance the businesses VCs back, then they won't be VCs for very long, as good entrepreneurs would just avoid them like the plague. Backing great entrepreneurs is what makes a VC "successful", more than anything else.

VCs deeply care about entrepeneurs. A lot of us write blogs that are pretty explicit about that caring(as I recently did about Bear and the PSD spirit) spend oodles of time helping their portfolio companies, and investigating ways to give our portfolio companies an edge. We live the highs and lows that our portfolio companies go through. We are often interrupting our families lives as necessary just like entrepeneurs do, and generally will do whatever we can to help our portfolio succeed. If we didn't care, we'd leave the industry and do something else that values tact over performance, as dealing with entreprenerials (strong willed or otherwise) is not exactly the easiest thing to do. Does it come as a surprise that VCs are not exactly the easiest to deal with either?

So cut VCs some slack. We are doing the best we can, given startup dynamics. Give VCs a chance. And you just might find you get what you need.

One more thing I am going to throw out there: I'd love to swap places with an entrepreneur for the day if I could, like the Prince and the Pauper, see what happens. The VC, me, being the Pauper, of course. Write me an email, explaining why you'd like to be a VC for the Day and how you could do my job better, and what I could do at your company to help you.

My only condition is the entrepreneur blog about it as well or include their experience on my blog and you will have to agree that I can publish that as a comment below. Any submission you make to me via email (anonymous of course, unless you are comfortable otherwise), I will have the right to publish on this blog. I will pick the best email pitch to do it. Weight will be give to entrepreneurs that fit my criteria for investing, as that will make it more interesting for both of us.

We'd do it sometime in May, so get your emails to me by the end of April. The entrepreneur would come in to be a VC one day and join our investment team, and I'd go over as a an interim part of the company's management team another day, so unlike the Prince and the Pauper, this would be a bit more supervised. Like in the Prince and the Pauper, no lasting or permanent decisions can be made and we should set some ground rules, but I think that'd be cool. Like the book, I think that it will be hard to shed our prior roles and absorb the new one, but it'd be interesting, nonetheless. We'll see!

P.S. to the entrepreneur that called me, email me back, and I'd be happy to talk to you as I appreciate your reminding and inspiring me about what this is all about anyways. Thanks!