Archive for January, 2011
Was Your Decision to Read This Conscious?
A few weeks ago, I went through the psychotic effort of mapping my attention across all facets of life. This was not an analysis of how I spend my time, but rather an attempt at examining what facets of life capture the most mindshare. Not surprisingly professional subject matter dominates my attention at this juncture in my life, you can see the graph below for the ugly details.
Within each bucket outlined below, I went one level deeper. For example within Love, I estimated the attention I spent on searching vs. acting vs. indulging vs. analyzing, or within Professional I mapped the thought devoted to recruiting vs. administrative vs. distribution vs. product vision, etc. I’ll spare you the graphs for all 9 verticals and summarize by telling you that my life is pretty imbalanced right now, with more mindshare dedicated to Twitter than communication with my family (who I love and talk to all the time) and more attention devoted to administrative tasks for Hyperpublic than to discovery of love. Buy me a beer and I’ll share all the data if your interested. At each point within these 9 buckets where I felt I was spending a greater amount of attention than was consistent with my philosophical ideals (or concept of what I should be focused on), I circled the line-item and drew an arrow with an action I could take to directly increase or decrease this subject’s allocation in my mind. This experiment was an effort of life optimization.
Again not surprisingly, what became clear immediately, was that I wanted to add more attention to almost every bucket and almost every line item within each bucket. I found myself trading 1/10 of a percent of attention here for 1/10 of a percent there, without a whole lot of margin to work with (e.g. many facets of my life are close to optimized in terms of attention). The one glaring area where I found a large pocket of attention to steal and sprinkle on all the needy buckets and line items was actually in what I’ve defined as Unfocussed Attention. Unfocussed Attention is the state in which you are not actively deciding where to focus, but rather passively taking in stimulus and allowing it to route your attention in whatever direction it chooses. I’ve graphed the breakout of my unfocussed attention below.
You can see that nearly 70% of the time where my focus sputters, and I turn to some source of stimulus to “route” my attention passively, the channel for that stimulus is a mobile or web application. Products like Twitter, Facebook, Gmail, Instagram, and Foursquare all serve as routers, pushing my attention without my having to make an active decision. Television is the most prevalent example of this passive consumption/attention allocation, but more and more frequently mobile products are filling the blank spaces in our focus and our day with content that drives us in unconscious directions.
When I think about the mobile products that achieve everyday usage and “Homescreen real estate,” they almost categorically possess the attribute of attention routing. They provide a stream of constantly refreshing data/content that can serve up to the consumer a new object/concept/thought to focus on in moments without one. Andrew Kortina at Venmo once used the phrase “hacking my brain” to refer to the changeable nature of our thought patterns, and to borrow his phrase, I have hacked my brain with simple rules to redistribute my unfocussed attention toward the facets of my life more deserving of that thought. Everytime I have the seemingly physiological impulse to reach into my pocket and pull out my phone to check one of these attention routing services, I have trained myself to holster the iPhone, and then spend that moment focused on one of the many line items with a red circle that indicates “in need of more.” I am not swearing off these services (I still use them regularly), but rather only engaging in them when I have consciously decided to engage.
As an entrepreneur building a consumer facing mobile application, I am zeroed in on features that have the capacity to turn Hyperpublic into an attention routing application, but as a human being I feel slightly guilty about amplifying the unfocussed attention in the world. We should be so lucky to face this conundrum:)
P.S. We’ve been meeting with a handful of folks about leading our mobile development efforts, so now would be the time to say hello if that’s your fancy. Email: Jordan.cooper@gmail.com with “Mobile” in the subject line.
Read Full Post | Make a Comment ( 6 so far )Seed Stage Valuation Guide
I find it strange that with all the VC and Angel blogs out there, nobody seems to explicitly talk about the single most interesting term in startup financing: Valuation. Look no further than Chris Dixon’s blog for elucidation on such nuanced terms as founder vesting, convertible notes with caps, etc…but where do you go to find out how much you should expect to give up at various stages in your company’s development. In the past week alone, I’ve regrettably passed on more than one deal because the valuation the founder was seeking was an order of magnitude off from what was appropriate, and frankly I am pissed. I am pissed that the earliest “committers” to these rounds aren’t advising founders that they are pricing their rounds incorrectly. Notice I am not saying I am pissed that the early committers aren’t doing a better job of negotiating. It’s not about negotiation, it’s about pricing a round in a way that does not lead to adverse selection when a founder goes out to fill the rest of their round.
By definition, the investors with the best deal flow will have a higher bar on what they do and do not invest in, and will be less likely to pay 2x the appropriate valuation for a deal when there are 3 others they are looking at concurrently that are better bets from a risk reward standpoint. Conversely, the “me too”, “here today, gone tomorrow” early stage investor who is clamoring to get into a deal with the big name angel who committed early and independent of valuation will gladly pay up to play, but is that really the best move for a founder? Probably not. The reason that I’m not willing to overpay for an inflated seed round has nothing to do with returns for our fund. It’s not a math problem I’m trying to solve where I say at $3M premoney we’re going to make a lot of money, and at $5M premoney we’re not. Rather, I view a founder’s attempt at closing on their first round of financing at an out of whack valuation as a warning sign of a more fundamentally dangerous datapoint: bad judgment. Whether I bet at $3 or $5 doesn’t matter all that much, but whether I am betting on CEOs with good judgment vs bad is an extremely good predictor of our fund’s overall success. If you are raising your first round of capital, you should be pricing your round at the valuation where the absolute best investors in the market will all be excited and willing to participate, not at the maximum price where you can find some investors to participate. If you’re not sure what these numbers are, I thought I’d explicitly articulate some signposts. This is by no means absolute, and the market changes month to month, but here’s how I’d be thinking about it by stage of development and setup:
DISCLAIMER: this may vary by geography and past experience of founding team. I write this more to begin a public dialog and less to personally define the market. I welcome and encourage other investors to and entrepreneurs to explicitly publish what they’re seeing and feel is appropriate.
Still at your old job
You have an idea you’ve been thinking about, been working on it nights and weekends and maybe you’ve pulled together some folks to help you work on it. You may have a prototype, you may not. Everyone is ready to quit their jobs, you just need funding and then everyone is on board.
Valuation range: Don’t bother. There is no market for your deal. Nobody, not even friends and family should give you capital and you shouldn’t ask for it. If you’re not committed enough to take the plunge without financing in place, then you’re not committed enough to ask for investment. Quit your job.
Pre-product
You have an idea, and you’ve done a bunch of diligence but you haven’t begun to build anything. Maybe you have some wireframes or designs, maybe you don’t. Your idea is great and you’re chasing a big market. You might even have domain expertise in the space.
Valuation range
12-18 months ago: $0 (no market for your deal, only friends and family capital available) – $2M pre-money (you have a personal brand having either started and successfully exited something or been very early at a startup love story)
Valuation range today: $0 (no market for your deal, only friends and family capital available) – $7M pre-money
Appropriate: This deal should only be getting done with a founder who has a proven track record, and in that case $2-3.5M is the appropriate range. Everyone without a track record should be building prototypes and collecting data to validate their thesis and derisk the deal by showing an ability to execute.
Average Size of deal: $300K-$700K
Protototype Built and in the market
You’ve assembled a team that is capable of getting something tangible done. You’ve flushed out your vision and taken a first hack at realizing it through product. You’ve gotten deep enough into the weeds that you’ve already identified the first set of assumptions you made that were wrong, and might even have some early data that says a few assumptions were right (i.e. user feedback, early signs of growth, market praise, etc.). If you can make it here bootstrapped, this is I believe the optimal and appropriate time to raise a seed round.
Valuation:
12-18 months ago: $2M-$4M premoney
Today: $2.5-6M premoney
Appropriate: $3-4M
Size: $400-$1 million
Product in market and signs of growth or revenue
You pushed your product live 2-5 months ago. Users are using it and either spreading it or paying for it. You’ve build a team that is executing well and you are raising money to add resources that will support growth/expansion. Not quite at the point where you have a sick viral coefficient or hockey stick curve, but you’re on the verge of product/market fit. Questions are more about how big is the market and less about validating the earliest assumptions. This is really an A round, and you shouldn’t be calling it a seed round even if you haven’t taken previous capital.
Valuation: hmmm. Ask Fred Wilson, Bijan Sabet, Mark Suster, Roger Ehrenberg, and anyone else with bigger funds who are blogging about bubbles and valuations to publish their signposts. They’ll have a better sense than me.
Size: $1-5 Million
I think as investors we need to get transparent and explicit about what we think is appropriate and what we want to see from founders. There will always be exceptions, and obviously the guy who founded Mint is going to get a different deal than the guy who just quit his job in consulting, but I don’t really understand why we aren’t publishing what we want to see change in the market.
Read Full Post | Make a Comment ( 71 so far )Online We’re Googling, Offline Still Stumbling
Last week my upstairs neighbors Deeva and Sophie invited me over for a home cooked meal. When I arrived at their house, I met their brother who was in town visiting from LA. He had previously lived in New York, and I asked him which he preferred. We talked about driving vs. walking, the people, the culture, and ultimately population density. I argued that the most amazing thing about living in this city (and cities in general) is that we are so closely surrounded by millions of people. He responded with an observation that I believe is quite common amongst New Yorkers and visitors. He said, “that’s true, it is amazing to be surrounded by so many people, and so much action, but that can also make this an extremely lonely and isolating place.” He made the point that in moments when you are not engaged in the boundless opportunity of NYC (whether that be through spending time with others, visiting interesting places, or discovering new things), you feel like you are somehow deficient relative to the life you could be experiencing.
I think what he was articulating was a broader and more general human reality, which is that there is a delta between an individual’s actual experience and what is possible. New York may magnify this phenomenon, but I believe this is the case no matter where you live. Life is not perfectly optimized. You miss opportunities, make decisions that return some value to you, but not the maximum possible value, and this is simply a part of life.
If we are missing everyday opportunity here in New York, and beyond, I would point to an unevolved system of physical world discovery and organization as the primary culprit. I look at the headway online applications have made in organizing and surfacing relevant online data, and they far exceed the tools we have to discover what surrounds us offline. Online I am efficient at finding the value I seek and want. Google has indexed almost everything I seek, and my online social graph fills in the blanks. With intent, there is not much I cannot find and engage with online.
Offline, my discovery and engagement is not nearly as advanced. I’m moving through my online life with Google-esque precision, while offline my discovery is barely more efficient than Stumbleupon (online channel surfing). I am stumbling upon people, places, and things based largely on physical proximity to my home, my office, and my gym, and to a lesser extent the physical proximity of my friends’ and family’s homes, offices, and gyms. Stumbling is great where there is no intent, where all we seek is passive exposure and stimulus as opposed to utility or any other type of value/action, but there is so much more that we can be extracting and experiencing from all that surrounds us physically. Products like Yelp, Craigslist, and Milo have made inroads in building a data layer on top of the objects in your physical world, but there is so much more work to be done. You see how with organization and indexing of these physical objects you are able to act on the places and things and people nearby, but your physical world is nowhere near searchable. Not yet at least.
I think a lot about the mission behind Hyperpublic. Why do I care about building a data layer on top of your physical and local world? Why should you care about building a data layer on top of your physical and local world? Why should we collectively pull together to add, organize and index this information about who and what surrounds us? Because I see a world where you will be able to navigate the experience outside your door with the same ease and efficiency as you move through the web. And when we collectively illuminate and demystify the opportunity that surrounds you, the delta between your experience and what is possible will shrink, and we will move away from isolation, slipping deeper into the fabric of our local, physical, and social environment.
Read Full Post | Make a Comment ( 1 so far )Mentorship, Maturation, and Youthful Hubris
I had breakfast this morning with Hemant Taneja. He is one of the few people in this world I would call a mentor (I’d put Ken into that category, and maybe one or two others, but that’s it). Hemant has known me since the day I stepped foot into the startup world, and both watched and coached me through my development as an investor, a thinker, and an entrepreneur. Many of the lessons I’ve learned about balancing confidence and humility came from him. I remember in the first 6 months that I was at General Catalyst, I started to develop what I thought were really smart ideas and opinions about deals, investing, and what was the future. I’d speak with authority on what was “smart and stupid” for the firm to back, and felt fortunate that the guys at the firm gave me the time and thought it worth listening.
As a young guy, who’s only previous experience was working on wall street where nobody gave me any respect or cared at all what I “thought,” this newfound microphone became intoxicating. I was not mature enough to handle the shift in responsibility and status that I was experiencing, which was expressed in the form of a “swagger” that was not yet earned. I remember Hemant sitting me down one day and saying “listen, you’re really smart and creative. Your showing a ton of potential and you could be great, but you won’t know that for 5 to 7 years.” He was referring to the fact that venture investments don’t exit for a long time, and you never know if a bet was good or not till the money comes back in. He said, “make a spreadsheet, keep track of what you stood behind and what you passed on. Watch how those decisions play out and measure yourself objectively.” I internalized that advice and I believe it was one of the pivotal moments that began a practice of deeply objective and rigorous self analysis that is now core to my life.
As we ate breakfast this morning, I shared with him yet another discovery of my naïveté during the early years of my venture life that it took me 5 years to uncover. I used to (and to some extent still do) hang my hat on an ability to see large macro trends unfolding across markets. I used to scoff a bit at “experience” and believe that I could see the direction of a market better than most of the “old guys” at General Catalyst. That may have been partially true, but the variable of duration of a given trend or phenomenon was lacking. I had not been in the business long enough to see trends in the context of cycles, so in my mind every directional shift was linear and not-cyclical. If it appeared that the world was moving from “destination” site to “distributed UX,” the future 2, 5, and 10 years out was always “distributed.” A combination of spending a lot of time with Ken (who has seen a number of cycles in his career), and observation of the first inflection points in the trend curves I was watching five years ago, has humbled the early version of myself and warmed me to the value of experience as a complement to capacity.
It’s very strange to consciously watch yourself mature. I can now see my former self through the lens of a more experienced investor and entrepreneur and I must have been such a pain in the ass to the Partners as GC. Thanks for putting up with me guys. I owe you a lot.
Read Full Post | Make a Comment ( 6 so far )“Why We Shoot” (how smart phones are changing our concept of a “photo”)
I see a shift emerging in consumer mindset around the camera in mobile devices. Increasingly, whether through an app that takes control of the camera, or even more frequently within the existing photo app on smartphones, I see consumers using the camera not just as a means of photography in the traditional sense (snapping images for their aesthetic value), but also as a richer form of mobile data capture. Consumers are organically utilizing the camera to engage in more utility based applications where rather than typing to capture an observation or experience, they take a photo of an object that is not “photogenic” for lack of a better term.
I recently rented a short term apartment in another country, and rather than photocopying our passports, the proprietor of the flat simply snapped photos of our passports with their smart phone. Similarly, when my landlord leaves an invoice for rent at home, rather than write a note to my roommate, I just snap a photo of the invoice and email it to him. Evernote was an early pioneer in teaching users that the camera could be used to augment and support memory, and even my instagram feed comes not just with aesthetic vignettes that you would expect on a service like Flickr, but also images of objects which have a deeper or data “meaning” to them. Someone pushes a “screenshot” of their CallerID into my feed and it has no “photographic merit,” but the data that the image represents has a “meaning” that is captured and communicated through a mechanism with less friction than the user typing and tweeting “I never pick up calls from blocked numbers on Caller ID.”
The camera is increasingly becoming a means to capture digital information for record keeping, memory, organization, and communication of objects and data that lack aesthetically interesting qualities. I believe this year we will see a slew of applications that amplify this shift in the way consumers “think” about what a “photo” is and when/where in their life it occurs to them to capture one. I think this is going to a big year for applications that are pushing the limits of “why we shoot” and at least personally I am building and investing ahead of this storm. If you are interested in pushing these boundaries and want to help us build at Hyperpublic, we’ve got some interesting mobile development challenges ahead both from a UX and technical perspective. If you’re pushing these limits at your own startup (in some vertical other than local) I’d be interested in hearing about it and maybe even investing in you.
Read Full Post | Make a Comment ( 4 so far )
Jordan Cooper's Blog: startups, venture capital, etc... 