Saying Goodbye
As much time as VCs spend with our portfolio companies, it’s important to remember that our jobs are actually to see them move on to greener pastures. Of course working closely with these companies – often over several years – one can’t help but get attached to some of them. So it’s often with mixed emotion that I see companies move on to the next chapter in their lives. It’s the natural lifecycle of investing and is absolutely key to the performance of our jobs (performance which is measured solely by the amount of money we return to our LPs). Still, it’s a bummer to stop working on a daily basis with some of the great people that run these companies. Around the end of the year two companies with which I work closely were sold and I thought now would be a good time to acknowledge some of the great people who helped make these businesses successful (and whom I will miss working with). First, Xaffire was sold to Quest Software (no official announcement to point to, but the deal was closed recently and the Xaffire web site now lists them as a Quest company). I’ve referenced Dave Jilk a number of times in this blog (and he’s a frequent commenter to posts). I first met Dave when he interviewed me for my job at Mobius (he was at the time the CEO of a different portfolio company and prior to that had been an associate at Mobius). I’ve worked with Dave in varying capacities over the past 4+ years. I know I’llsee him frequently (we ski together often), but I’ll miss the day-to-day interaction with him. …
January 9, 2006· 2 min read
Some Venture Math
I’m in the middle of writing a few posts on the economics of venture investing (actually on venture “exiting”) and was therefore pretty interested in the VentureWire 2005 venture m&a stats that came out last week (there were a bunch of articles recapping the 2005 venture exits if you want to Google for them). Here’s some of what was reported: – m&a dollar volume rose 17% to $27.4bn -ont-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;”> the number of companies bought fell to 356 (from 407 last year) -ont-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;”> IT companies accounted for $11.73bn of this amount across 221 companies So if you do the math, of the venture backed companies that were bought last year the average purchase price was about $77m. IT companies were lower than the total average, coming in at just over $53m per deal. VC’s spend plenty of time thinking about the exit dynamics of their businesses (thus my future posts on the subject) – it’s interesting to consider the dynamics of tech investing in a market with these kinds of exit profiles. Specifically, sometimes exit expectations don’t match the reality of the market – and these exits (driven by both reality and perception) have important ramifications on the dynamics of capital allocation, company valuations, financing strategies and other key principles of venture investing. It may not exactly be like the real estate market (where they say you make your money by how well you negotiate your initial investment), but optimizing your capital structure is more important than ever before in venture investing. …
January 9, 2006· 2 min read
The Song Tapper
I wrote a post last year about conveying information effectively in which I talked about how difficult it is for someone to guess a song that you are tapping out with a finger (but how easy is feels like it should be when you are the one doing the tapping). Its a true phenomenon, although I meant it as a metaphor for (or perhaps just an example of) how easy it is for people to overestimate their ability to clearly communicate their thoughts/ideas with others. …
January 5, 2006· 1 min read
Colorado Rocks
I imagine you’ve noticed that I’ve been silent over the past few weeks – taking some time off from work and blogging over the holidays.Not to gloat (WARNING: I’m about to gloat), but Colorado is a great place to live. In the same two week period I was skiing in deep fresh powder (multiple times), snowshoeing and cross country skiing with amazing mountain vistas and (here’s the really great part) mountain biking (in shorts!). …
January 5, 2006· 1 min read
Should you be a good employee?
When I worked at Morgan Stanley there was a running debate among the analysts about whether it was better to be a good analyst or a bad analyst. The theory went that if you were a great analyst you were rewarded with more work (but not much more pay, given how few analysts actually made it to the “outstanding” category at bonus time) and if you were a mediocre or bad analyst you were passed over for projects and had a much much better lifestyle (i.e., you worked 60 hours a week instead of 90 or more). Banks never really fired analysts, so one could pretty easily coast by for the time of their indenture.My own views on this are pretty clear based on prior posts, but there were a handful of people I worked with who went the other route and were rewarded with a social life. …
January 5, 2006· 2 min read
A tree fell in the forest – IBM’s Patent Portfolio
In the category of “big news that no one seems to be talking about”, two days ago IBM announced that it was launching a new licensing program with the venture community to allow easier access to IBM’s broad patent portfolio for start-up companies. This is actually a big deal (it is to me at least, which is why I’m shocked at the lack of press on the announcement). IBM is vastly simplifying how companies can gain access to its patent portfolio. It’s catered to the venture community (the program is intended to be administered through the companies’ venture investors) and was in part put together by IBM’s venture capital advisory board. In a nutshell if you are a company that has less than $10m in revenue you can access the entire IBM patent portfolio for $25,000 for a 3 year term. Companies with above $10m in revenue sign a customized five year agreement (the information I saw suggested that the license fee would be 1%).I’m not a big fan of our country’s IP laws – patent law is kind of like the IRS code (its overly complicated for the sake of being complicated, doesn’t do a good job of driving desired behavior, but works just enough for most people to figure its not worth the incredible pain in the ass of trying to reform it). But for the moment, at least, we’re stuck with the current system and moves like this one from IBM vastly simplify the process of navigating the patent waters. Hopefully more companies with large patent portfolios will follow suit.
December 15, 2005· 2 min read
Start-up moments
One of the things that I like about spending most of my time with start-ups is that there are very few of the trappings of larger companies – people answer their own phones; leave their own outgoing voice-mail messages; everyone can fit in a single room for a company update; all employees can give feedback on products; etc. I remember fondly the early days at my last company before we had an office – when we could hold our management/company meetings sitting around a single Starbuck’s table. Of course things tend not to stay that way (if you’re successful) and very quickly these days are forgotten history. At NewsGator’s board meeting today we had what can only be termed a start-up moment when our conference phone went down. Below is a picture of Mark Nass, NG’s VP of Finance pulling a dedicated phone line through the ceiling so we could connect back into the board call. That’s CEO JB Holston in the foreground. …
December 15, 2005· 1 min read
A del.icio.us day
Yahoo buying del.icio.us makes total sense. I have to admit that around the time Union Square invested in the company I didn’t really get it – I hadn’t understood the power of a user generated hierarchy. A few months ago I got a clue about it – late to the party, but at least there. Congrats to Fred, Brad and to the del.icio.us team – nice work!
December 9, 2005· 1 min read
The ultimate RSS reader
When I asked ealier this year how you view your news I didn’t exactly have this in mind, but now that I know it exists I can’t imagine any better way to stay informed. 3060000000057296 Yes – those are your RSS feeds being printed out on toliet paper. See the engadget link here. Thanks to Ross for sending this over.
December 8, 2005· 1 min read
Feed for Thought
They guys at FeedBurner (note: Mobius portfolio company) have put up a great post entitled Feed for Thought: How feeds will change the way content is distributed, valued and consumed. The article is a great read – very thoughtful about where RSS has come from and where its going. I was going to highlight a few points they made here, but the entire piece is a highlight and pulling stuff out won’t do it justice. Click over and read it.
November 23, 2005· 1 min read