Someone used this phrase with me a few days ago and I thought it effectively captured something that’s come up a number of times in the past few weeks around CEO communication. Many great entrepreneur CEOs are fantastic visionaries and seem to have a constant (often what feels like endless!) stream of ideas flowing from their brains. And because they’re often gregarious people they’re not shy about sharing this idea stream. However often this idea flow isn’t accompanied by any metadata and the lack of context can sometimes lead to companies zig zagging around as managers react to the most recent meeting they’ve had with their visionary boss. Enter the comment about the “CEO Megaphone” and I think we’ve found an apt description to what sometimes goes on within a company. When CEO’s talk, their voice is amplified by their position in the company (always as the boss and sometimes as the boss and company founder – which can amplify the weight of their voice, especially around product direction, even more). Since a CEO can’t turn off the megaphone, it’s important that s/he recognize the amplification effect it has.

Ever hear of this start-up called Color? They launched a social photo sharing thing yesterday. And raised $41M.

Oh wait. Everyone has heard of Color by now (and has an opinion about it; re: their capital raise, I’d refer you to a recent post on that subject)

What I want to talk here isn’t the Color business, the financing or how much it paid for Color.com. It seems to me that this most basic problem with photos hasn’t come close to being solved yet. And while I don’t have a strong opinion around what Color is doing (although with age, I fear that I’m finding that many of these types of apps don’t much appeal to me personally) the hype around it did make me wonder why no one has yet figured out an answer to this much larger and more interesting problem:

Why hasn’t anyone solved the most basic photo problem of all – the ingestion, compilation, backup and sharing of digital media?

Everyone I know has the same basic problem with photos: They’re everywhere. On your phone. Synced with one of 5 different computers. Sitting on one of 3 different external hard drives. On any number of flash drives. On a half a dozen cloud services. Still in the cameras themselves waiting to be downloaded to one of the aforementioned places. And almost without exception never fully and truly backed up anywhere.

I envision this service would be pretty basic. I could indicate what machines were “mine” and set rules for what I wanted it to do with any and all photos. I could connect up any device to any of these machines and it would automatically pull photos from them, and sync them across my personal photo network. I could set up rules for how I wanted photos from different devices treated (for example to set up separate places to send pictures from the kids cameras, but have the two cameras my wife and I use merged; or send video to a certain place and pictures somewhere else. Maybe there’d be cloud storage involved. Ideally I could use my PogoPlug to create my own cloud for these digital assets. Obviously there would be backup involved (mirroring PogoPlugs would be easy; cloud back-up easy as well). The service would give me the option to access my photos on my mobile phone (and a great interface to do so – something fitting such a visual media) and enable me to specify a small number of pictures I wanted cached locally on the phone and grab everything else off the phone so I didn’t have thousands of photos clogging up my camera roll.

We’ve invested in a few companies who have some great technology that could be put against this problem (specifically Cloud Engines which is how I manage my photos and back-up now and Memeo which can recognize different kinds of digital assets and route them to various places for you) but what I’m talking about is a layer above this – the control tower for all this.

And I’d bet it wouldn’t cost $41M to build…

Thoughts?

I’ve sometimes joked with companies in our portfolio that the best way to deal with a better funded competitor is to use their own relative lack of funding to their strategic advantage.

But actually, this solution isn’t meant tongue-in-cheek – I’m being dead serious.

While we have a few companies in the portfolio that have, for various reasons, raised significant amounts of capital, many of the businesses in which we have invested haven’t. Not only are they reasonably capital efficient measured alone, but when compared with their peers, a number have raised far less capital than companies with which they compete.

I’m serious when I tell companies that the best way to combat an overfunded competitor is to take advantage of those things that capital constraints naturally bring along with them and I’ve seen it often work very effectively. Sharpen your company’s focus, don’t make stupid mistakes, don’t get distracted by the 10 things that sound cool but that you really have no business doing, keep your marketing efforts extremely focused and tight, don’t over-hire in sales, don’t over-hire everywhere else, draft where you can on the money spent by your competitor, stay laser focused on product and don’t panic.

I’ve watched this play out a large number of times. And while sometimes the brute force that additional capital brings allows a company to push harder and faster, often having a relatively large amount of capital available simply means that you’ll waste a bunch of money, get distracted and, stumble. With the capital markets heating up and more and more industries seeing 1) a greater number of competitors and 2) too much capital invested, these lessons have never been more important. I wrote about the same idea a few years ago when I suggested that you were burning too much money. The same holds true now, with the difference being that you may be in a great position not only not to burn too much yourself, but also to take advantage of someone else who is on the opposite path.

Good luck!

My partner Brad beat me to this post after an email exchange on the subject this morning, so I thought I’d take some of his post and rewrite it from my perspective (note that I’ve purposely lifted some entire sections and changed the words to be written from my mountain biking perspective). While we disagree on the issue at hand, we strongly agree that the tone of some of the debaters isn’t productive or helpful.

I’m in favor to opening up Eldorado Canyon Trail to Mountain Bikes. However, when I read the article titled “Boulder open space official: Return to civility in West TSA mountain bike debate” I couldn’t believe the tone of some of the people opposed to mountain bikes on these trails. Replace “mountain biker” with an ethnic group in these quotes and the people making these statements would never think of uttering them. But they’re happy to lump all mountain bikers together, spew vitriol and generalize demographics and behaviors of a few to the entire group (you get where I’m going with this…).

Brad is a huge runner. He and I had a thoughtful exchange about the issue of MTBs on the Eldorado Canyon Trail. We disagree on this issue but it was a substantive exchange. As a long distance runner, Brad explained that while most MTBs were good actors, a small percentage weren’t. Even on reasonably well shared trails, he told me that he’s been run off the road numerous times by MTBs careening around a blind corner on a downhill or when someone somewhat out of control flies by. I’ll admit that I too have come around the occasional corner a bit too fast and been surprised to find a hiker (or another mountain biker) right in front of me.  And as all mountain bikers know (or should know), the downhill rider has the right of way over no-one, on foot, horse, bike or otherwise. Brad and I ended our discussion with agreement that we’d go hike Eldorado Canyon Trail together and discuss this further, which will be fun regardless of whether we end up agreeing on the issue.

I’m not at all happy to hear that some cyclists abuse the rules of the trail. And it’s incredibly frustrating to me as a responsible rider to hear just how egregious some riders behave. However I’d remind everyone that 1) the vast (and I mean vast) majority of cyclists (and runners) are responsible trail users and 2) regardless of how you feel about the question up for debate, there’s no reason to demonize or vilify the entire cycling community because of the actions of a small number of cyclists. Using this kind of language clearly doesn’t add to the debate. In fact to me it totally undermines the credibility of those making these kind of statements.

I’m completely open to trying to better understand why some trail users don’t favor opening up these trails for use by cyclists and I’d like to help figure out how to allay their concerns. But I have no room for discussing or even listening to people who can’t figure out how to engage in a thoughtful conversation. Name calling is for kindergartners. Grow up!

A closing note for my cyclist friends who may be at the open hearing on this issue next week. Let’s keep the debate from our side completely civil. Let the other side say what they will, but let’s not stoop to that level. We’ll have a much better chance of furthering our aims if we are respectful than if we let this debate spiral down to name calling and stupidity.

While there’s been plenty of discussion and debate about whether we’re in some kind of valuation/venture bubble right now for early stage tech, there is one bubble that I’m pretty sure of. I’m seeing more great business ideas right now than I can remember seeing at any time in my 10 year venture career.

We typically see around 1,500 business plans a year at Foundry (we actually see more than that, but this is the approximate number that are relevant to our investment focus). On average we’ll take a meeting with somewhere around 10-15% of these and hear a bit more than what was in the introductory email or initial business plan. And we typically invest in 8 (our Foundry blog does a pretty good job of tracing our investment history and pace if you flip through our old posts). These numbers work for us and for our strategy and part of our operating philosopy is not to deviate significantly from our investment pace (depending on the mix of seed investments this number could go up or down in any given year but overall we’re comfortable at roughly the 6-10 new investments per year pace).

But something isn’t right with the early stage world right now. I’ve said a few times in the last 24 months what a great time it is to start a company and clearly more and more people are believing that because we’re seeing a significant uptick in the number of investment opportunities we see here at Foundry (I’m sure we’ll be well above 2,000 for the year). More importantly, we’re seeing many many really good, interesting ideas. I’m blown away by it. And it’s frustrating, because I can only spend time on so many things and we’re still only going to make 6-10 new investments in any given year. But never before have I had to say “no” to so many businesses that 1) I thought were super interesting; 2) were clearly going to get funded by someone; and 3) in another time/market I’d love to spend more time with.

To be clear, I don’t see anything to suggest that traditional venture math won’t continue to hold true (a good performing venture fund will still see about 1/3 of their investments fail, another 1/3 do only “ok” and 1/3 do better than that – with maybe 5-10% becoming real stars). And, of course, I recognize that part of our job on this side of the table (at least in venture funds with our investment strategy and not one of making 20 or 30 investments a year to spread around) is to make the hard choice of which of a number of great companies really has the chance to be outstanding.

But wow – is it a fun time to be in venture! And perhaps even more so, a fun time to be an entrepreneur…

Today on the Foundry blog we detailed a new theme in which we’ve been investing for a while, but which only really came together as a coherent thematic concept in the past year or so. This theme – distribution – involves companies leveraging the inherent scalability of the Internet and it’s key platforms in targeted, but extremely large markets. I thought the history of how we evolved our thinking around distribution – basically the birth of the distribution theme – would be illustrative both around how the group dynamic works in the Foundry partnership as well as how we think about our thematic investing approach.

For us, the discussion around this theme evolved from our experience in Zynga. We have a standard slide that we share with our investors that groups our investments into the themes in which they fit. The slide has grown and changed over time (we’ve added new companies, we collapsed a few themes into Protocol, etc.). One thing that didn’t change for a long time was that Zynga sat in a column that was designated “other”, meaning essentially that it didn’t fall specifically into a theme (we like to say we’re not slaves to our themes and while we use them to guide much of our investment activity, they are not the absolute arbiters of what we’re willing to look at). At the same time, as it was clear that Zynga was going to be a very special company in our portoflio, we’d have regular conversations that sounded like:

Foundry Partner 1: “You know… we should really invest in more companies like Zynga”

Foundry Partners 2-4: “Absolutely. We should definitely do that!”

For a little while that was the extent of it. We’d talk about Mark Pincus and what a special CEO he is. We’d talk about hitting a market seam in the way that Zynga hit on social gaming. Over time, it became clear to us that while these factors were clearly important for Zynga, there was more for us to learn from Zynga’s success. As we dug deeper into what we thought the special sauce was for Zynga we talked more and more about Zynga’s ability to leverage a key platform – in their case initially Facebook – and to capture users on that platform. We also realized that while we generally don’t like vertically targeted investments (a vestige of our (bad) experiences in vertically oriented software companies, I’m sure), when you’re building a community of users like this it’s actually helpful to be vertically focused (in Zynga’s case, they were only targeting casual gaming – not other types of apps that at the time were becoming popular on Facebook). We started looking around at more companies that had similar traits and met with a bunch of them as we tried to better understand the overall “distribution” market dynamics and what we thought would separate ok companies from great ones.

It was about this time (this was probably 15 months ago) that we began talking about what we were learning as a theme and calling it – temporarily we thought – distribution (lacking a more creative name, distribution stuck). It was also around this time that we invested in StockTwits – an investment that specifically came out of our collective work considering the power of distribution over a handful of key platforms.

The journey to our distribution theme has been an interesting one, but one that’s typical of how we work at Foundry. Our motivation is to figure out what makes the best investments and our intent is to be deliberate about why we invest in various areas.  Foundry now has 4 companies that fall under the distribution theme – Zynga, Stocktwits, TopSpin and Cheezburger. Expect us to add to this list.

One of the things I like the most about community hours is the chance to meet people that I may not have been able to connect with otherwise. And while the initial meetings are brief (15 minutes) every once in a while someone makes an indelible impression during that time.

One such person, whom I met about 18 months ago, is Daniel Epstein. Daniel, along with his partners Teju, Tyler and Vlad, started something they call the Unreasonable Institute. The Unreasonable Institute is something bold and audacious and exactly the kind of thing you’d expect from Daniel and his partners once you get to know them. The goal of the Unreasonable Institute is to accelerate the growth and learning of entrepreneurs tackling some of the world’s greatest social and environmental challenges. 2011 will be the second summer the Institute has gathered 25 high-impact entrepreneurs in Boulder for an intensive 6-week program to help accelerate their business ideas. Paired with an outstanding group of mentors, these companies spend their summer fine tuning their ideas and honing their businesses.

For those interested in understanding more about the journey these impact-entreprenurs take, there are a series of videos on Unreasonable.tv that will give you a clear picture of what the program is about.

One of the unique things about the Unreasonable Institute is how they select the companies that participate. Admission to the program costs each team $8,000 (this fee goes to cover their living and program costs while they’re here for the summer – the entire group lives together in the Unreasonable house and works pretty much 24/7 on their business ideas). Rather than viewing this as an impediment to participation, the Unreasonable team has turned it into part of the selection process. After narrowing the list down to 45 finalists, the final selections are made by people all over the world who vote with their dollars – agreeing to sponsor teams for the summer. So that no one person can overly influence the outcome, the dollar amount that any given person can pledge to a team is limited (starting at $10/week and rising over the course of the selection process). The marketplace is currently open and I’d highly recommend you check out what the finalists are up to. So far over 2,500 individuals from 140 countries have voted with their dollars.

This is an amazing program and and amazing way to make an impact. I hope you’ll take a look.

At this week’s VCIR Winter the RMVCA will be announcing a partnership with the Entrepreneur’s Foundation of Colorado. In case you’re not familiar with the organization, the mission of EFCo is to encourage entrepreneurs and companies to give back to Colorado by endowing their communities with a gift of stock early in the life of their company. The hope is that this gift will serve as both a seed for a philanthropic culture within member companies and, of course, will mature into a cash gift that will help strengthen community organizations (each company specifies the recipient of their gift).

As a founding Trustee of EFCo, I’ve been involved with helping spread the message about the great work of the organization throughout our community and in encouraging participation by local companies (In support of this, Foundry has pledged a portion of our carry to the foundation).

Starting at VCIR, the RMVCA will begin working more actively to help support the Entrepreneur’s Foundation of Colorado mission in our communities by both helping support EFCo fundraising efforts as well as encouraging companies from around the RMVCA region to make a pledge of their stock in support of their local communities (and helping EFCo expand beyond Colorado). Having been involved in both organizations for years, I couldn’t be more thrilled to see them coming together to help each other out.

As part of this partnership, the RMVCA has encouraged VCIR sponsors to make an additional sponsorship donation, 100% of which will go to support the work of the Entrepreneur’s Foundation. This donation will be recognized at the annual VCIR poker tournament. In addition, the poker tournament will feature a buy-back-in option with a suggested donation of $100, again 100% of which will support EFCo. I’m happy to report that some great firms have stepped up to participate in support of this worthy cause at VCIR – KPMG, Square 1 Bank, Holmes, Roberts and Owens, Silicon Valley Bank, Cooley and Holland and Hart. In addition, the RMVCA itself has also participated in this sponsorship.

I’d encourage you to learn more about what the Entrepreneur’s Foundation is up to. And, as always, if you have any questions feel free to reach out to me directly.

I’ve written before about what I perceive to be an emerging, key trend among many new tech startups – the vast volumes of data companies now produce and the importance of having someone in your organization whose job it is to sift through these stacks of data and look for trends and patterns (I’ve even suggested to a few college students interested in startups and entrepreneurship that they make sure they’re taking plenty of math and stats classes as I see this as a great way for a young person with limited experience to pitch themselves to be quickly impactfull working with a start-up).

One word of caution about these data that I’ve been digging into a lot recently is the risk of using averages to represent what’s happening in your business. As the complexity of the trends businesses analyze increase, and as the volume of data produced increase along with this complexity, the value of looking at straight averages decreases. It’s a real danger in many cases to look at an average and think you know anything about what’s taking place inside a complex system (indeed, at one of the companies I work with we’ve instituted a “no averages” rule to force ourselves to do at least the next level of analysis of whatever it is we’re looking at).

I’m a huge fan of businesses collecting and analyzing the data they produce. And as the data get more complex, the need for more thoughtful analysis increases. So keep taking those stats classes…

You wouldn’t know if from the lack of activity on VC Adventure, but my one and only new year’s resolution for 2010 is to blog more. More consistently. More often. More reliably. So prepare for a flury (or at least a steady trickle) of blogging!

Back in the fall we announced that our Glue Conference had teamed up with Alcatel Lucent to sponsor 15 companies from across the country to attend Glue on ALU’s dime (selected companies not only get admission to the conference but also will be featured in ALU’s demo space at the show). Submissions are open – you can find out more information on applying here.

Our goal for Gluecon has always been to make it *the* gathering place for developers working on the connective technologies that hold the web and IT infrastructure together – from web services to SOA to APIs and cloud computing. So if your’e working on a project that fits the bill and want to have a chance to attend GlueCon for free, give it a shot.