I wrote a post about a month a go in my M&A series about drawing lines in the sand (see the original post here).  In it I argued that people negotiating m&adeals are too quick to dig in and make statements that they can’t/don’t intend to back up.  I was reading Ben’s blog today – his latest post references a HBS article on a similar subject that is worth a read.  Here’s the quote that Ben pulled from the article that pretty much sums up its contents.  When you look at the article pay attention to their point # 5 – it’s exactly what I was talking about in my earlier post. “In the classic game of Chicken, two drivers on a crash course speed toward each other. The rules are simple: Whoever swerves first and avoids collision loses, and whoever is brave enough to stay the course wins. Of course, when both drivers stay the course, they collide and die. Clearly, this is not a game for the faint-hearted. But bravado alone doesn’t guarantee a win. Your opponent has to believe that you’re gutsy enough to stay the course, or he may do the same until the very end. How do you win at Chicken? One approach would be to talk tough beforehand. You might behave irrationally to suggest that you wouldn’t swerve even to save your life. Once the game begins, however, your threat simply may not be credible. Now consider this strategy: Once the cars are headed directly toward each other, you unscrew your steering wheel and throw it out the window, making sure that your opponent sees you do it. Foolish? So it would seem, but your threat is now entirely credible. You can’t change course even if you wanted to. It’s up to your opponent to decide whether to lose the game or die. The odds are in your favor.”

By now everyone has heard that Sun has agreed to acquire Colorado based storage company StorageTek. The press release was pretty ubiquitous, but if you haven’t checked out the presentation that accompanied it, it’s wroth skimming through here.

Good for Sun . . . good for StorageTek . . . bla bla shareholders .
. . bla bla convergence . . . bla bla network and data management. . . bla bla bla. Ok – with that out of the way I wanted to touch on a disturbing trend in the Colorado market, particularly in technology.

We’re losing our CO based companies.

The truly scary part is that we didn’t start out with many to begin with. This is a huge problem, in my view, for the Colorado market.  I’ve participated in a number of government economic roundtable events in the past few years which all asked the question of what we could do to make the Denver/Boulder markets stronger. Inevitably somewhere in the conversation the fact that the Front Range has essentially no truly large companies – tech or otherwise – comes up as a key problem. It’s not that Denver/Boulder is a bad place to start or run a company – we have many other attributes (strong labor force; high quality of life; etc.) that make for a good business environment. But we’re missing a piece that has been critical of other markets that have become areas you think about when you think of start-up technology businesses (think Bay Area, Seattle, Austin, Boston, Minneapolis – each of whom supports large, market leadingbusinesses).  Sure – we have Qwest and First Data; EchoStar and Ball Corp; Sun has a large presence here, as does HP.  But the list is short and the companies on the list aren’t the kind to be spinning off side projects and generally supporting the start-up world.

StorageTek has been an exception to this – spawning several successful start-ups and more generally ing a favorable environment for young storage businesses in the Boulder area (which, along with pharma, is really what Boulder is known for).

So goodbye StorageTek. We’ll miss you.

Networking – To interact or engage in informal communication with other for mutual assistance or support (from Dictionary.com) I talked about networking in my recent post on How to become a venture capitalist. In it I said that I’d put up a separate post with more detailed thoughts on the subject. I don’t pretend to be the final source on the matter, but I do regularly engage in the art of networking – on both the network-ing and network-ed side of the equation. As with all my posts, comments are welcomed (and appreciated). Sorry in advance for the length of this one – I tried cutting it down, but couldn’t get it to work that way . . . Step 1: Make your list. Good networking starts with knowing who you want to meet – or at least what type of people you want to get in touch with. This can be specific (for example all of the VC’s in town when you are trying to land a VC job) or more general (your peers at other local businesses; CEOs of businesses in a certain industry; all of the patent attorney’s in some market; etc). Either way do some research and make yourself a list of people you want to meet. WRITE IT DOWN. This isn’t a mental list – this is a real list of people you want to get in touch with. Step 2: Exercise your existing network. You know people. They all know people. There is an entire industry that is trying to take advantage of this on-line. Here’s where you need a second list – write down all of the people that you know (i.e., who would return an e-mail and could vouch for you to someone else) who you think could put you either directly in touch with, or one step closer to the people on your first list. Now contact them in a personal and relevant way and ask for their help. Be specific about what you are asking for (i.e., give them names if possible andplenty of background on why you are asking for help and what you are trying to accomplish). As you get introductions, track where they came from. Your lists should start to merge and you should develop something that looks like a network map showing linkages between the people you know and the people you are trying to meet (the more linkages the better). TRACK INFORMATION. This isn’t a time to rely on your memory. Be anal about writing down who is introducing you to whom, any contextual information you gather and any background you have on the people you are trying to meet with. Step 3: Be specific & structure your meetings. Most people generally manage some form of Steps 1 and 2 in their networking efforts – even if they are not being as careful as I’d like about documenting their work. Step 3 is where people make what I think is the second most common mistake in networking: when they finally get a meeting with someone they are looking to network with they aren’t specific about what they want. I hate meetings like this. They generally include statements like “I’m not really sure what I’m looking to do,” or “I’ve got a very broad background and could fit in a bunch of different places,” or “What kind of investments does Mobius make,” or my personal favorite: “I’d like to do something more entrepreneurial.” Not helpful. At all. Do your homework on who you are meeting with. Be specific about what you are looking to do. Have a story to tell and make sure it’s relevant to the person you are talking with. If you are asking for help/advice on something open ended make sure that is part of the context of setting up the meeting (its ok to network for the purpose of figuring out what you want to do with your life, but be clear about your intent and be specific about the ways in which the person you are talking with can be helpful). The corollary to being specific is structuring your networking interactions well. Good networkers are adept at guiding networking meetings in a way that drives the results they are looking for. Whether you are talking to someone at a cocktail party or sitting in their office – know how you want the interaction to go and guide the discussion. Step 4: Take good notes. This is pretty obvious, but I’m amazed at how often I meet with people who don’t write anything down in our meetings. When I’m networking with someone I take careful notes – first, because it shows that I’m interested in and respect what the other person is saying and second because I want to keep a record of what we talked about and specific ideas for follow-up. When its awkward to take notes directly (for instance at a social event), I try to write down information after a conversation has ended – preferably on the back of the business card I just received, but at least on a notepad (which you should always carry along with a pen to any networking event). Steps 5 & 6: Plan your follow up . . . and actually follow up. These next two steps are where people really fall down – they would make for a lengthy post by themselves. By follow-up I’m not talking about the e-mail you send out the day after meeting with someone thanking them for the meeting, telling them how much you enjoyed talking with them and appreciate their perspective, attaching your CV (or pointing them to your blog <g>), etc. I’m talking about the ongoing communication you have with people. If you’re driving for a specific outcome this can be very structured (i.e., putting reminders in your calendar with specific things you plan to follow up with) – less so if you are engaging in more general networking. Either way, you need to make a plan for how you want to follow up with people and do so. It starts with Step 4 and the natural follow-up to step 4, which is putting this information in some form that is searchable and usable (perhaps a spreadsheet or database if you are networking for a specific outcome, since you’ll be referencing it often, but also potentially notes in your contacts or somewhere else that you store information, but in a way that you can easily separate out people that you are trying to stay in touch with in this way). Remember that networking is a two way street. Good networking is about staying in touch in a relevant way. Sending an e-mail every month asking if any new positions have come open is a bad example of this. Seeing something in the news or an article of interest that you send along to someone with your thoughts is a good example of this. See a person you know in the news – send a note congratulating them on their recent success. Notice that a VC you’ve talked with has just made a new investment – send a note. Find an article that you think would be relevant to that CEO you met with a few months ago – send it along. The idea is to stay top of mind, but in a way that is relevant to the people you are interacting with. Don’t forget to give context in your e-mail (i.e., “Sally – We met two months ago at the xyz event – John Smith introduced us . . . ). I can’t emphasize these steps enough. I can’t believe the number of meetings I have that end with the end of the meeting or a short follow-up note. Even if there were specific follow-up items. People fall down on follow-up and I think expect that they can pop in and out of someone’s network as the need arises. You just accomplished what may be the hardest part of networking (getting a meeting in the first place; grabbing someone’s attention at a party; etc.) – don’t waste your hard work by just entering their contact info in Outlook.

Good networking is definitely an art – and something I’m always trying to get better at myself. I think these suggestions are relevant no matter what stage of the network game you are playing – I hope you find them helpful. Ultimately it’s all about making personal connections and keeping up with those connections in a way that is both relevant to you and to the people in your network.

My grandfather died on this date two years ago. He was a great man and I’ve been thinking about him all day. (As an aside, my wife pointed out that it would probably be a more appropriate to do this on his birthday rather than on the day he died, to which I responded that, as a Jew, it just feels right this way . . . <g>)My grandfather was truly of the ‘greatest generation’ – growing up through the depression; dropping out of high school to help support his family where he was one of 11 children; eloping with my grandmother; serving in WWII; raising children; working a variety of jobs, but always making ends meet; enjoying retirement; taking care of his wife when she fell ill and eventually died; living life to the fullest. I was lucky to spend so much time with him – summers here in Colorado growing up and, more recently after I moved out here, frequent visits and our weekly breakfasts.  I learned many great things from my grandfather. Among my favorites was a Yiddish saying that he taught me about embracing the path one is on (rather than what could have been).  The (loose) transliteration is:

“Iffin dine bubba oud gattsen baitsen, ze vould been dine zayda!”

Which means: “And if you’re grandmother had balls she would have been your grandfather!”

Something to remember the next time you start down the “if only” line of reasoning.

Thanks  Grandpa.

Writing this reminds me that there really should be a function in TypePad that allows you to simply elevate a comment to a post  . . . Abhi responded to my post on Thinking in groups with the following comment, which was right on target: tohers), and thus assume that that the correct behavior was inaction). Let me expand on this in the context of venture capital, since I didn’t get into it in my original post.  I think the pressur  around conformity is significantly exacerbated for a non-partner VC .  In a body of equals there’s clearly some pressur  to go with the flow.  Where the group is not all on equal standing this pressure is intensified. Clearly a key to being an effective VC is not falling into this trap.  This can be particularly hard for a junior VC and especially if s/he is  the observer rather than the board member (see my post on the difference here).  I’ve watched this dynamic play out in front of me – where dissenting opinion, particularly of the partner, is absolutely not allowed.  I think this is stupid way for partners to run their business – after all they pay th  people around them to have opinions (thankfully Brad heartily agrees and encourages full participation from everyone around the table), but it happens all the time.  How easy for groups (i.e., boards) to sometimes lean towards a similar interpretations of events” Borrowing liberally from Cialdini’s ‘Influence’ book – Social Proof – In any situation we are apt to behave exactly the same as other people behave (so board members will often look at other board members to decide how to react), and this is even stronger when the other people are similar to us (i’m assuming most board members are quite similar to each other). Ex: If there’s a red light but no traffic then one person crossing will usually lead to everyone else crossing. Ex: Comedy shows have canned laughter because that automatically means people laugh ‘along with’ the fake laughter. Ex: The chance of a wounded person getting help is higher if a single person were to see him than if a bunch of people saw him (as in the latter case these people would ALL see each other for reactions, see no response (as they’re all looking to

In one of my first posts (The Adventure Reference) I talked about what amounts to pattern recognition – the ability to interpret information and draw conclusions based on experience with similar sets of circumstances.

I was thinking about how difficult this can be the other day and, importantly, how easy for groups (i.e., boards) to sometimes lean towards a similar interpretations of events. This reminded me of a classic experiment in psychology that very clearly illustrates this point. In 1962 psychologists Schachter and Singer 1962 performed an experiment that dealt with what they called the two factor theory of emotion. Basically they were trying to show that people’s interpretation of an emotive state can be easily influenced by environmental factors (in their case another person). In their experiment they injected college students with epinephrine, which is a drug that acts like adrenaline and causes a state of emotional arousal. The students were, of course, told the injection was something else and then placed in a room with someone they thought was also in the study to ‘let the shot take effect’. In actuality their room-mate was working for the experimenters and took on one of several emotional states (anger, excitement, etc). It turns out that the subjects were highly susceptible to taking on the emotional state of the room-mate. They were interpreting their emotional arousal as anger if the room-mate was angry, excitement if the room-mate was excited and so on.

Now, I’m not suggesting that boards are on drugs (or that they should be!), but this experiment illustrates the point that humans are very good at making errors or attribution (somewhat along the same lines as the finger tapping experiment I talked about in my post on communication effectively where people overestimated the extent to which they were conveying useful information).  Something to think about when you are weighing decisions . . . especially in a group.

I got the VC equivalent of Slashdotted today when Daniel Primack of PE Week Wire referenced my “How to become a venture capitalist” post in his daily e-mail this morning.  Traffic on my blog went crazy (it was already running
a little high this week from that post – particularly after Brad and Fred each referenced it at my request). I’ve even had some publications ask me if they could reprint the article.  Pretty cool stuff.

As a result there are a lot of people hitting my site that are first time readers.  Allow me to suggest a few posts to check out that I think are representative of my writing.

Here’s why I blog (link)

Here’s why I call this blog VC Adventure (link)
Here are some posts specific to Venture Capital (link)

Here are three posts that I really like a lot:
The Ten Minute Difference

Conveying Information Effectively

Taking 100% Responsibility

If you like these, I hope you’ll consider subscribing (see the links to the right, including a way to subscribe through a service that will deliver my posts (and any others you like) directly to your inbox.  And thanks for reading.

I’m always encouraged when I see other non-partner VC’s blogging. As regular readers of this blog know, I’m using it in part to explore some of the differences between being a partner and being a non-partner in the venture industry. While there are a number of great VC partner blogs, there are many fewer non-partners writing (when I started VC Adventure there were almost none). We’ve added one more to the ranks recently – my friend Will Price from Pequot Ventures. I first met Will about 10 years ago when we were both analysts for Morgan Stanley. Like me, Will didn’t take well to banking and has traveled a somewhat circuitous path to his role at Pequot. He’s a smart guy (despite not yet linking to me in his blogroll <g>) and worth taking a look at. So Will Price – welcome to the blogosphere and to the world of VC blogging. I hope your posts are insightful and direct.

I get asked this question a lot and while the real answer is “I have absolutely no idea,” I thought I’d make something up here so I at least have a place to send people who ask me this question (as well as  anyone else who happens to stumble upon this blog searching for ‘getting a job at a venture capital firm’). This post is for aspiring analysts, associates and principals and has little to do withgetting a job as a partner (which I hope to figure out one day too . . .)

Step one: Assume you will not be able to land a job as a venture capitalist. This is the realistic outcome of trying to get a job as a VC. I imagine the market is a little bit better in places like Palo Alto, but here in Denver I can count on one hand the number of VC jobs that have opened up since I joined Mobius in 2001. Only a couple (I’m thinking about 2 at the moment, but there may be a few others) actually went to people who weren’t already in the industry. Even in larger VC markets (specifically the Bay Area and Boston) there are many more people who are actively looking to get into the VC world than there are positions open.

Step two: Understand the math. It’s critical to understand how VC’s make money and therefore the fundamental request you are making when asking for ajob as a VC. Venture capitalists make money in two ways – from management fees (a percentage of funds under management) and from carry (a percentage of the return on investment). The partners of the fund use the management fee to pay the expenses of running the business (office space, technical infrastructure, travel, support, etc.) and then pay themselves with what’s left over. As a non-partner you are fundamentally a cost center. The partners are quite literally taking money out of their own pockets and giving it to you. Rationally, they will only do this for one of two reasons – either you are significantly impacting their lives in a positive way that makes the trade-off worthwhile for them (you cost less than the marginal life benefit they get from having you around) and/or you will help create more carry (i.e., they can manage more deals with you around and therefore deploy more capital; you have a skill set that will positively affects the portfolio, etc.). If you fail to do these things you are just eating up management fees. There is a grey area here for Principals (called VP’s or SVP’s at some shops, junior partners at others) who are managing their own deals as well as supporting partners’ deals.

Step three: Get close to VC’s. The road to becoming a VC follows many different paths, but fundamentally your first step in landing a VC gig is likely to be figuring out who the VCs are in your area and trying to get close to them. If you’re still in college, consider a job in an investment bank or other financial services firm (even VC analyst jobs are hard to come by straight out of college – VCs tend to hire people with at least some financial training at those levels) to get the best possible training for an entry level job in VC. If you are in business school, look for internships that will allow you to meet venture capitalists (either at a VC directly or for a portfolio company of a VC). If you don’t fit any of those categories, take a job at a company backed by venture money and try to get exposure to the venture capitalists on the company’s board. In short do what you can to get to know VCs in your area so that when a position opens up you can be both top of mind and a known commodity. Take a longer term view of your approach and remember that many VCs got there not by following a traditional path (banking –> b-school –> VC) but have years of operating experience, were entrepreneurs themselves, or were somehow else involved in the business of building and growing companies.

Step four. Be smart about networking. I’m writing a separate post on the subject of smart networking, but suffice it to say here that you should put some thought in how you use your network to meet VCs. Figure out who you know who also knows VCs that you’d like to meet and play the network game as best you can. It can take a long long time to get meetings set up – be patient about it (Brad probably doesn’t remember this, but when I was first introduced to him in what was a very ‘hot’ introduction from someone who he trusted a lot and who had worked very closely with me, it took three months to actually get in to see him <g>).

Step five: Don’t get discouraged. If you remember back to step one, you weren’t going to be successful getting a job in VC in the first place, so all the progress you are making is gravy, right?!?

“Make original mistakes.”  Someone (Brad? Wendy? I can’t remember) said this in a board meeting about a month ago. I wrote it down on a piece of paper and have been carrying it around with me ever since. The concept is right on and meaningful no matter what you do. For me it is a reminder of two important things: First, we all have mentors and peer groups. As a venture capitalist, for example, I have the partners and principals at my firm; I have partners at other venture firms with whom I have worked with closely; I have the CEO’s and executives at the companies I work with; etc.. These are great resources for me to tap when I’m faced with challenges. Whether you work for a venture backed company, a large organization or a non-profit you there are people you can turn to for advice and counsel. Second, don’t be afraid to share your challenges with others. It’s only natural to celebrate our successes and dig in and think harder about where we’re coming up short. By all means, share the good news; but also share the not-so-good news and the challenges. Share them with your board, share them with your peers, share them across your executive team. Ask for help. Find people who have faced similar challenges.

In short, don’t be afraid to make mistakes; just make sure they are original ones.