I had a few things on my mind related to the startup environment right now as it relates to Covid-19 and the massive market disruption that we’re in the middle of. It’s a struggle to get them all sorted out in my mind so apologies in advance if these are a little disjointed. As you can imagine we’ve been having conversations all week across the Foundry portfolio (which includes not just companies but also our ~ 35 fund investments; between those we have look-through into a few thousand companies). With that, here are some general observations on the market as well as a few things specific to startup companies (relevant across stages). We’re still in the quiet before the storm…
Posts By / seth levine
Decision making in uncertain times
Making decisions for your business can be hard even in normal circumstances. Right now, in this time of great uncertainty and high emotional stress it’s even harder. I’m on countless calls a day now where I’m trying to talk through with people in our universe (CEOs, GPs of other funds, fellow board members, etc.) critical decisions that in many cases will define the future for the businesses involved. How to react in a time like this is complicated and in most cases is not obvious. Just how bad things may get is unknown, as is how long this will last and what effect that will have on various business sectors and on specifics businesses is unclear. Below are a few…
Dealing with evolving information about Covid-19
Humans are, as a general rule, poor at changing their minds once they’ve developed a view about something. This can be the cause of plenty of arguments and I suspect is a significant reason we’ve become so much more polarized as a country in recent decades (that, and it’s ancillary effect of causing us to seek out only information and data that support our unbending view). But in the case of dealing with a pandemic like Covid-19 it can be downright dangerous. I thought it would be helpful – perhaps even important – to talk about why being open to new and evolving information is so critically important in a time when what we know about Covid-19 is changing so rapidly….
Take Decisive Action to Stem Covid-19 NOW
It’s hard to keep track of all the data around the current status and potential spread of Covid-19. The data are overwhelming, there is a lot of disinformation spreading, and the data and advice from various public and private sources are changing almost hourly. It’s a scary time, and as I wrote on Friday, a time to make sure we’re staying connected, even if we’re physically distancing ourselves from each other. But what is becoming more and more clear is that we need to be taking bolder and more decisive action to stem the spread of the virus. And we need to be doing that NOW. Rachel Carlson, CEO of Guild Education and Ken Chenault, former CEO of AmEx and…
Social distancing vs social isolation
I took a poll of the Foundry portfolio this morning to check in on the shift to Work From Home. As of today, about 1/3 of our portfolio companies have implemented a mandatory work from home policy. The vast majority of the rest are recommending people work from home but are not mandating it (meaning they’re not physically closing their offices). Only a couple are still operating with their offices fully operational. We’re living in unprecedented times. Children are out of school. We’re shifting work patterns. Many of us have parents, partners or others that we’re close to who are immune-compromised or in some other class of person who is at higher risk for Covid-19. It’s a time of great…
Organizational Scaling
For the early part of your business you’re likely too busy to be spending a lot of time thinking about management structures, team optimization and how your business scales. You’re just getting shit done. And, even for experienced executives, making quite a few things up as you go along. The solution to many early scale challenges is to find something that works and then do more of it. That works great, right up to the point where it stops working completely. We’ve had a lot of companies go through scale challenges (I’d say typically around 100 people, but plenty of companies have muscled through that point and built 200 or even 300 person organizations without paying much attention to the…
Polar Bears!
Kaktovik lies at the far northern edge of Alaska’s North Slope region, about 640 miles north of Anchorage (and almost 400 north of Fairbanks). Located on Barter Island and due to its location, is mostly cut off from the rest of the world. Everything – fuel, supplies, infrastructure, needs to be brought in either by plane (to a small, gravel, landing strip) or by barge – of which there are between 1 and 3 a season. It’s just about the farthest northern town in America (Utqiagvik, which used to be called Barrow, is slightly north of Kaktovik). During the winter, the sun doesn’t rise for 2 months. Despite this isolation – or perhaps because of it – Kaktovik is considered…
The Markets Are Great . . . but Venture Outcomes Haven’t Changed Much
A few years back I blogged about the hard data behind venture outcomes and the challenge of creating a venture portfolio that produces strong returns. That blog post – which turned into one of my most read posts ever – grew out of a study done by Correlation Ventures showing the distribution of outcomes across over 21,000 financings during the years 2004-2013 as well as some of my own observations. The Correlation study produced a lot of interesting data and showed that the typical “1/3, 1/3, 1/3” model that many VCs talk about was significantly more optimistic than the reality of typical venture returns. The vast majority (almost 2/3rds) of venture financings fail to return capital. And only about 4%…
How Well Do Founders Do in Venture-Backed Exits?
A few years ago I wrote two posts – Venture Outcomes are Even More Skewed Than You Think, and Some More Data On Venture Outcomes – that challenged the mythology that only 1/3 of venture-backed deals failed and showed just how rare large (10x and greater) venture returns really are. I think the sharpness of the curve surprised a lot of people and contributed to a bunch of discussion at the time around just how rare “venture outcomes” really were. Not surprisingly, I was looking at the data through the lens of an investor and in so doing was only focused on how well investors fared in company exits (as a side note, I’m hoping to update these data now…
How much should you be paying your auditor?
With April 15th right behind us, I thought this would be as good a time as any to write about the fun topic of Audit and Tax Prep fees for companies. I know you’ve been waiting for this, so here it goes… While audits can sometimes feel like overkill for startups (certainly early ones), they’re generally pretty good hygiene. As a practical matter, most lenders will require them, so if debt is a potential part of your cap structure you’ll eventually need one. And most major investors will also require annual audits (we sometimes waive this for seed stage companies, although even then it can make sense). And, of course, if your company is acquired you’ll typically need to provide…