Diary of a Geek VC

Free Lunch Friday March 26th

Sun, 7 Mar 2010 08:54:29 -0500

WIth thanks to David Rose and Bo Bell, we have rescheduled my pitch to the FLF for noon on March 26th and the RTV incubator.

I’ll be talking about the state of VC, not so much in a rebuttal to Ryan Janssen’s economics lesson but an extension to my business. Excerpts from my deck are here, but I’ll plan on showing more data about the VC business and look forward to sharing some thoughts about the future.

I’ll be very candid about my concerns - and have no doubt the entrepreneurs attending will reciprocate. Please let me know if you have any questions or topics in particular you would like to cover.

The Once and Future State of VC

Fri, 26 Feb 2010 16:52:09 -0500

I was heading to NYC today for a few meetings and to lead a discussion for a Free Lunch Friday session at the Rosetech Ventures Incubator - and another storm has cancelled the trip.

We’re rescheduling now, but wanted to solicit some feedback on my presentation ahead of time, since it may take a while to get on the calendar.

Below are some of the slides from my presentation - would love any feedback and suggestions to add topics. Hope to see you when I give it live.

iRock?

Fri, 5 Feb 2010 17:42:02 -0500

Too many people have already chimed in about the iPad - mostly negative. My favorite of course is the old MadTV commercial, but the graphic above is a close second.

I’ll be quick today - I was right about the device’s name, iPad, but really missed it it terms of my expected feature list. And while I am going to buy an iPad, I will do so with the same sense of optimistic skepticism (figure that one out) I had with my AppleTV until I have had the chance to use it myself. BTW - my conclusion about the AppleTV is best conveyed by it’s current location - unplugged, in a utility closet.

PS - working on a post about startup economics for next week. Prompted by conversations with Ryan Janssen and Peter Levin.

iPod or Newton?

Tue, 26 Jan 2010 08:37:58 -0500

My love affair with Apple officially began in 1994 when I was starting business school and obsessing over the forthcoming Apple Newton. I romanticized it to be the solution to surviving my MBA, a one stop note-taking and calendaring device that would vault me into the forefront of learning. I found out the handwriting recognition was poor and the Newton couldn’t store more than one page of notes. I never bought one.

Tomorrow, Apple will be launching something - and everyone expects it will be their entry into the tablet/e-reader space. And everyone, including myself, believes it will be a radical innovation. What will it do? We’ll find out tomorrow, but the best G2 I have seen is from the folks at Flurry, who have analyzed traffic seen around One Infinite Loop in Cupertino, on about 50 unknown devices that seem to imply the phantom tablet. Flurry noticed that the devices downloaded apps (like iPhone, iTouch) in the following distribution:

Not surprisingly, games & entertainment (likely video) leads the pack, although I would be surprised if Steve were aiming the iWhatever at the DSi or PSP.

My bets (and wishes) for what we’ll see tomorrow:

• Print Media: I suspect Apple will take a shot at print media (big duh), specifically magazines and textbooks. I was on a panel at CES a few weeks ago where the topic was e-readers, where these two applications were front and center and I voiced my prediction.

• Video: I love my iPhone, but it stinks for watching full length feature films.

• Universal Remote Control: I would love to see Apple include RF control to make the iBlank a universal remote for the home - TV, Audio, and home control.

• The New Dream Machine: I loved the new Sony Dash shown at CES, but but the iStar in an angled holder and it instantly becomes a clock-radio, weather station, digital picture frame.

What I worry about:

• Battery Life: The Kindle lasts at least a week without recharging. The iPhone with all connectivity turned on lasts for an hour.

• Typing: I hope they have included haptic technology, like that from Immersion, to make the input experience more realistic.

• Screen: I am a huge fan of e-Ink’s displays as they are incredibly readable for print-style media. I would be shocked if Apple has included the e-Ink display and worry that what they have used may hinder longer term readability.

Whatever tomorrow brings, I am excited to find out - and suspect unlike the Newton, I will buy one. More after the news.

UPDATE:

Just saw this on CNBC which seems to support text books are a coming to the iTrapperKeeper:

The Curse of Being First

Tue, 19 Jan 2010 18:52:22 -0500

Most startups need to be first in their category, particularly in uber-competitive segments where customer acquisition becomes a barrier to entry. So it stands to reason that VCs would want to be the first in line to engage with a promising new startup. This is not always the case. In fact, the pole position often means we are the first to give a founder/CEO a piece of critical feedback about their company that they’re not ready or interested in receiving - becoming the equivalent of telling them their baby is ugly. And the result is we get shown the exit; not necessarily for being honest or for being wrong (which we might just be), but sometimes for being the first to declare the observation out loud.

Over the years I have seen this happen several times, usually due to one of the following critical conversations:

1. Valuation - we present what we think is a fair value and the entrepreneur thinks otherwise. This is the fastest route to the door.

1. CEO - we think a more experienced exec would be better to run the operations, particularly if the CEO lacks some key skills needed to drive the operations of the company.

1. Capital Raise - often times we have a much different opinion of how much money a company should raise in its round; often it’s related to valuation (company wants to raise less than we feel, to sell less of stock; or raise more, in order to get a higher post-money value).

1. Business Model/Strategy - Perceiving weakness or immaturity in some core element of the strategy - which may affect capital uses among other thing - we suggest more thought and review be considered before committing to the course.

1. Team - During the course of diligence, either based on references or instinct, we conclude that some core team member(s) is not “backable”

As I think about what I just wrote from the entrepreneur’s point of view, it’s little wonder that we get shown the exit for daring to say these things. How arrogant it is to render such opinions having only spent a short amount of time evaluating a business that a founding team has put their blood, sweat and tears into not to mention, bet their livelihood on? What the hell do we really know about their business? Are we just applying some sort of standard filter, like an SAT?

Some VCs may not share the same opinions and therefore avoid falling victim to the curse. Others may share the opinions, but say nothing for fear of losing the deal. I was taught that doing the old bait & switch is a bad way to conduct business, even at the risk of losing deals.

So my approach is to be very blunt with entrepreneurs and signal my concerns early in a process. If they’re up for the conversation, I prefer to engage in a dialog that is not comprised of definitives or declaratives until I have done enough diligence to have an informed opinion.

Truth be told, my strategy fails frequently. But I feel comfortable knowing that I have been open and honest. Exposing the delicate issues early helps me in two ways. First, when the curse appears, my “cycle time” for deal evaluation decreases, allowing me to process more projects. And second, when the curse has spared me, I often find great new investments for Flybridge built from the outset on very open and frank conversations about the important issues.

By the way, the inverse of the curse - being the last to broach the volatile topics does often work, particularly when others have already primed the conversation. But it’s tough to finesse being “last” without losing the deal to another firm that has moved faster.