That convert you raised last year is a part of your cap table
When it comes to convertible debt, I’ve had a few instances recently where “out of sight, out of mind” has created some misunderstandings around deal structures. Seemed like a good topic to cover here. Given the prevalence of convertible debt as a seed financing instrument, an increasing number of companies we look at have some kind of convert in place. This is typically reflected on cap tables in a completely separate tab to the spreadsheet that shows the debt total by investor and then some kind of interest calculation. Of course many entrepreneurs naturally focus on the main tab of their cap table spreadsheet that shows ownership by founder, investor, etc and for them this is the starting point of negotiating a round. The problem, of course, is that their convert is already a part of their capitalization – even though it’s not reflected on the cap table. There’s nothing nefarious here on the part of entrepreneurs, but I’ve recently been involved in a few situations where this key fact was skipped over and as a result their expectations for their ownership/total dilution of a subsequent equity round was completely wrong and because of that a deal (at least with us) didn’t come together (in one case the entrepreneurs viewed the convert as a post equity deal event, meaning that they thought they were negotiating a round with us that would then layer on the debt conversion – exactly the oppositie of how it actually works!). …
October 8, 2012· 3 min read
SideTour’s Ultimate NYC Weekend
Today is the last day to enter SideTour’s contest for the ultimate New York Weekend. It’s a great chance to win a really unique weekend in New York from a company whose business is built around helping people find cool and unique experiences (SideTour is a Foundry portfolio company – in case that wasn’t obvious). Screen Shot 2012-10-03 at 2.01.45 PM
October 5, 2012· 1 min read
#3010
slovenia-flag If you’ve been following me on social media I’m sure you noticed a bunch of posts tagged with #3010 at the beginning of September, along with some stunning photos of Slovenia. While it was fun to document the trip this way, it was such an amazing experience, I thought it deserved a full post. This was a trip for my 40th birthday (thus the #3010 hash) and it was truly a once in a lifetime experience. …
September 28, 2012· 6 min read
Process vs. outcome
I’ve had a few conversations recently about the right balance between process and outcome. I’ve been involved with a group that’s been very (very) process focused- which has lead to some great discussion, but has hampered action/outcome and it’s got me thinking about where the balance lies between the two. When I was younger (and apparently somewhat more patient) I was much more process oriented. Outcome alone as the measure of success wasn’t enough – there needed to be a solid process behind it. I’m reminded of my days at a Quaker camp in Vermont where we’d hold lengthy “town meetings” to make decisions. All decisions were made by consensus and often discussions on relatively mundane topics extended for hours. But it was truly the process that mattered the most –the outcome was secondary. …
August 23, 2012· 2 min read
How much should a start-up CEO make?
I was asked this question at a talk I gave to the recently graduated TechStars Boulder class and thought it deserved wider dissemination than to just the group in the room at the time. This is a loaded question and while there are many variations I do actually think there are some general norms that are followed in most cases. So here goes with some guiding principals and then below that some numbers. Keep in mind that I’m talking about Seed and Series A stage businesses. …
August 22, 2012· 3 min read
Linking around with LinkSmart
At the core of the Internet is the ability to connect together content. It was really this hyperlinking between pages that in many ways defined the difference between the early Internet and the bulletin boards and Usenet that preceded it. Google clearly saw the value of links, which they interpreted as people “voting” on the online content which they saw as most valuable. At the core of their search engine is the measurement of that linking activity. However while a huge amount of attention and investment has gone into tools to support publishers’ ability to create and post content and, of course, to create advertising around that content (literally around, by surrounding it in ads), publishers have lacked tools to properly support inserting, analyzing, managing and optimizing links in their content. Inserting links has remained a highly manual activity and a very static one – once a page has been created the links that were initially inserted are the links that remain. …
June 27, 2012· 3 min read
The most important provision of the JOBS Act
When the JOBS Act was passed several months ago there was much fanfare about the key provisions. Especially the raising of the number of investors that a private company could accumulate before being forced to report as a public company and the so-called “crowdfunding provision” which allows companies to raise up to $1M of private capital from an unlimited number of investors (regardless of whether they are accredited or not). The Act also changed the rules around general solicitation and advertising for certain private capital raises and eased the regulatory burden on some newly public companies. …
June 12, 2012· 2 min read
Your community of peers
Last week about 40 Foundry Group portfolio company CEOs and founders converged on Boulder for a half day of meetings followed by some social time. It was a truly amazing experience and such a great reminder of the importance of cultivating a peer group for you and your company. We have a very active CEO and founder mailing list at Foundry, where there are daily rifs on any number of topics and where portfolio companies can reach out to each other for help and advice (we have a separate list for CTOs, one for Boulder companies and another for Bay Area companies as well – all designed to build Community – with a capital “C” – around the shared trait which is Foundry as an investor). These lists are great and have been extremely popular with companies (the four Foundry partners actively participate in the lists as well). It was creating this sense of Community around a shared investment from Foundry that precipitated the organization of the CEO/Foundry Summit. And interestingly, the entire thing was organized by the group, not by Foundry. …
June 5, 2012· 4 min read
The future of your past (our investment in Mocavo)
mocavo logoIt’s funny how things have a way of working out. I wrote recently of our experience with SEOMoz – from initial meeting a few years ago to finally investing in them earlier this month. Today we announced our investment in Mocavo – a genealogy search platform that provides users with the best tools available to find information on their ancestors. More specifics on the business in a minute but the year long journey from TechStars to Foundry investment is worth noting. …
May 16, 2012· 2 min read
California, Massachusetts, New York, Colorado
California, Massachusetts, New York, Colorado. That’s the order of states with the greatest dollar value of seed and early stage investment according to a PWC MoneyTree study that my partner Jason blogged about today. $290M invested in 41 companies based in Colorado in 2011. Compare that with 2006 when Colorado ranked 12th on the list with just under $90M invested in 32 companies. That’s an incredible achievement and says a lot about the state of the entrepreneurial ecosystem in Colorado and our rising profile on the national stage. I’ve written extensively on why Boulder specifically, and Colorado in general, are great start-up markets (see here, for example). And these data show that the work and effort of many people in our state is paying off. I often tell people when they ask me how to replicate the success we’ve had here in Colorado that the journey is a long one. When building an entrepreneurial community one needs to take a 10+year view of the effort. When I think back to what the Colorado market looked like when I joined the venture industry about 12 years ago (based here, but working for a CA firm), it’s almost hard to fathom the changes. And while the number of venture firms located in Colorado has diminished significantly in that time, the overall entrepreneurial environemnt has really flourished. All giving support to what I believe to be a key truth about our industry – entrepreneurs come first! …
May 1, 2012· 2 min read