Archive for March, 2012
On Heading West
Today was my last day ever at Hyperpublic Headquarters. You wake up every day, walk to work, pick up a coffee, swipe your key card, and focus every shred of energy you have on advancing one mission, and then…in the blink of an eye…it ends. Today I woke up, ate my breakfast, picked up a coffee, and got to the office…but not to push things forward…rather…to say goodbye. I said goodbye to what had become my home for the last two years…I literally spent more time in that office than I did in my apartment…but our space was home in more dimensions than simply time spent. A home is where your family lives…Doug and I started a family at 416 West 13th st…As two young Russian guys carted our furniture away, I poured through stacks of paper, scribbles and notes, and master plans…pitch decks, newspaper clippings, trinkets acquired along the way. A bottle of whiskey with a lego cowboy strapped to the mouth, a spinning mobile with the name Nina scrawled in white chalk…a set of objects that encased the stories of how our family was formed, and the way that we lived.
In the sheen of what I am humbled to call “success” I can’t help but admit an overarching feeling of melancholy…a bitter sweet…that on some days skews more bitter than sweet. Not every company operates like a family…it is a very particular style of interaction and culture that I think I saw glimpses of at General Catalyst, but really learned from Kenny…There are so many benefits to what I can only call familial execution, organic and filled to the brim with respect, where management is trumped by collective pride and shared values…it is the only way I will build going forward…but when your team becomes your family, it makes transition pretty emotional… this change represents the end of something…as long as we were Hyperpublic, our family would remain comfortable and in tact.
I am not sad about turning over our company to Groupon. I’d imagine it’s a similar feeling to sending your child to college. Rather, I am fearful of coming change to the chemistry of my family…but perhaps…I should not be…perhaps we are so strong…that we will remain family through the years…from company to company…life event to life event…and that this is the end of our family’s formation, but the beginning of it’s growth and maturation…If we did it right…this will be the way things go down…but still it hurts to move…to a new house…to a new neighborhood…and to a new phase of life that despite 2 months of negotiation and planning, seems to have snuck up on us so fast.
This is a wave that comes across me, one in a set of beautiful swells, and amazing feelings of happiness and excitement and perfect rides, but a wave nonetheless that crashes down as we continue to surf through the adventures of startupland.
Read Full Post | Make a Comment ( None so far )So you got written up in Techcrunch, now don’t be an idiot
Fred wrote a nice post today about “The Startup Curve.” He refernced Paul Graham’s startup curve reproduced below and talked about this reoccurring trajectory of momentum that most startups experience:
I’d like to focus on the “Techcrunch of Initiation” phase in a startups life because I constantly see founders fuck this part of the curve up. As if blind to the coming “Trough of Sorrow,” every so often you see hubris rare it’s ugly head during the “Techcrunch of Initiation.” No matter how hot you are, or how hot the press says you are, there is a fine line between perpetuating momentum and getting cocky…and 99 out of 100 times when Techcrunch blesses you as the next “Google killer,” 3 months later things are looking pretty dark. The only company I have seen in the last two years that carried the heat from inception to acquisition was Groupme…pretty much everyone else hits a wall after their initial burst of fame. I can’t stand founders, and especially naïve first time founders who big time their way through the “Techcrunch of initiation” phase, thinking that they are at the top of the market. During this phase, you have done almost nothing. Execution lies ahead. The market will punish you. No Mashable article about the cool kids in tech is going to fix the fact that the first version of your product doesn’t work. The culture you set and your behavior during the Techcrunch of Initiation” phase will define how your team reacts to the “Trough of Sorrow.” If you walk around like God’s gift to earth when the spotlight is on you, you will look like a moron when things get rough. Your team will lose faith in you, people will leave, and you will be embarrassed perhaps to the point of hindered execution. If you communicate with your team not to buy into the hype, stay focused, tell them things will be hard, and that it’s a long road ahead, they will be ready for the spotlight to fade, knowing it will return through hard work. If you stay humble to the market, be gracious and thank people for their congratulations, but maintain a level head and represent yourself at a sober level, you will maintain their respect for the life of your company. If you are the 23 year old flash in the pan first time founder who taps a vein with the press and acts immaturely and overly confident, you will lose the hearts of those who would have otherwise helped you through the “Trough of Sorrow.” I don’t care if God himself invests in your seed round, or if Arrington adorns you as the next Steve Jobs, stay humble…ESPECIALLY in the “Techcrunch of Initiation” phase.
Read Full Post | Make a Comment ( 3 so far )Screen no more
This morning I had the chance to talk with one of my favorite thinkers. We cycled from topic to topic, what’s next? What’s the future? This particular guy is a sort of 10-20 year thinker. He said to me that he was trying to understand how the world will change in 10 years when we spend 10 hours a day staring at our mobile devices. As he went on to articulate vertical by vertical, I interrupted him…”I disagree with your premise” … I explained that in 10 years we will not be spending 10 hours a day looking at our mobile devices, but rather the interaction currently housed within the mobile device will bleed out into the 10 hours we currently spend staring at “the real world.” It may seem that this a nuance…that his premise of 10 connected hours a day is still a valid structure on which to form vertical theses by market, but the difference between those two structures is much more than a nuance…it points to an augmentation of our normal daily lives…an enhancement…as opposed to a tectonic shift in behavior…it points to a reality of remaining human…of bucking what seems to be a linear digression into starting at backlit screens instead of peoples eyes. The change that I see coming is in the interface between human beings and the web/cloud/information backbone. It is no longer that we have to go “into” the web in order to retrieve information that can than be applied outside of the web, or “in the real world.” By the day, the information is jumping out of the web and into the “real world” in which we remain conscious and present. A thin layer of the web is quietly forming atop our physical lives, negating the requirement of moving through a portal such as our mobile device in order to consume and leverage what traditionally exists only on our screens. Often this layer becomes visible through the consumption of a physically proximate actor who themselves has moved through the portal of their own device, thus negated the need for you to do the same. Other times, a simple vibration in your pocket reminds you that you have a meeting in 10 minutes….again the information coming to you so that you do not have to go to it. The idea of online to offline still exists through the portal of a mobile screen, but sooner than you think the interface to our collective information will be inside of our physical human bodies. There will be no mobile device, just a cloud connected to our natural physiology. That is a “our lifetime” thought but not a 10 year thought…but there is a lot in between the chip in my bloodstream and staring at/banging on the glass of my iPhone. Even interfaceless UX like IFTTT, when coupled with passive and contextual triggers is a movement in this direction…I can’t wait to stop looking down and start looking out into the real world again. Google heads up display, microphone/auditory inputs into UX, etc, etc. etc…can’t wait
The Sky is Falling
Last night I ran into a new seed investor in San Francisco who I really like. I was asking him how he liked the move into venture and, as you might expect, his response was extremely positive. Beyond the standard awesome things about investing in early stage startups he capped his response with the phrase “and it’s the best possible time to be doing what we’re doing.”…I sort of paused for a minute… my response: “really dude, are you sure? because I’ve been mashing around a macro analysis in my head for the last year and a half, spending significant energy trying to understand the cycle we’re in, and I’m not sure you’re right”…I’ll caveat this analysis with a precursor that what I am about to say should in no way dissuade early stage entrepreneurs from starting companies right now, and in fact should not dissuade smart investors from deploying capital right now…but it may well change the profile and complexion of investments I make over the next 12 months…how…I am not 100% certain of, but I’ve got some ideas…anyway below is what I think is going to happen in our market on the next 12 months:
1) I used to think that that the public tech/ipo market would correct before the private tech market…I now think that is wrong
2) As I articulated in my 2012 predictions, I believe Facebooks IPO will be the top tick of the tech cycle, but here’s why:
- Facebook will crush their IPO, but it really doesn’t matter at what price
- A sea of scaled venture backed companies will go out in the months before (already happening), during, and after Fbook IPO
- The dumb, retail fueled public market will value this slew of tech IPO’s off of Fbook and Fbook derived multiples without an understanding of “social network A” from “social network B.” Said another way, with no understanding of true market position, actual value, and the difference btwn disruptive and disruptable…the public market will trade Carbonite for example along similar axis to Dropbox… (see Bill Gurley’s awesome post for more on this)
- 3-6 months post the flood of IPOs, the market will rationalize and stratify…smarter and more sophisticated analysis will buoy 15-20% of now public tech companies that deserve the “hot multiples” and the remaining 80% will take a beating and level at “true value”
3) Ok, so that’s the public market…3-6 months, might be 6-9 months (I wish I had seen previous cycles to know better)…but how will that impact venture and early stage venture? This link took me a long time to solidify, and this is still an assumption, but if this piece is true, I think the venture market becomes illiquid in December of this year…
- With a flood of public comps (as we know venture market valuations are largely irrational and often derived from market comp analysis that goes something like “if Instagram is worth $500M then AirBnB is worth $1 billion”)…but I digress…as I was saying…with a flood of public comps now “rationally valued”…the late stage private market will recalibrate…and all of the sudden all of the $300M-$750M fund size venture firms that got greedy buying hot assets at valuations north of $200M (especially writing $20-30M checks into them) will realize that they have a bunch of “underwater assets” on “their books” that will 1) not be able to raise another round of capital at a step up in price and 2) not be able to IPO or sell through M&A at a step up in price
4) Ok, so how does this affect early stage venture market?
- With underwater $20-30M checks on the books, even really good venture firms who traditionally play in early stage Series A type investments will develop a fear that their own fundraising efforts (in a market that is contracting organically anyway), will be harder because they made a bunch of bad bets and their LPs will know it…so when Princeton is deciding which 5 of the their existing 20 venture managers they will continue to support…the ass hole who paid up at $1B valuation for an asset that’s worth $150M is not going to make the cut
- This fear will lead to a massively slowed pace of capital deployment at all stages because the funds will not want to shut doors, rather they will try to “wait it out” or “wait and see” and a large volume of $ will dry up in all stages from Seed-Series D. Even though there will be many funds not really affected by the dynamic I just described, many of the thought leaders that the market looks to and follows will behave this way…and group think will have the “dumb 50% of the market” following the smart guys and slowing down as well…fear sets in…market dries up
5) So what does this mean for entrepreneurs?
- Already, you’ve gotten the advice to capitalize now and prepare for winter…but you’ve been getting this advice from “chicken littles” for a year and a half. Suster called bubble 18 months early, Fred was early…and frankly I may be early too…but if you think I’m right, then obviously you want to raise as larger a round as you can in the next 9 months…understanding that if 5% of the venture market is thinking like me today, and I am right, it will be a gradual shift, where 20% will be thinking like this in 4 months, 50% in 9 months, and then the rest of the ass holes will continue to be in denial until they read the New York Times headline that says “the tech world is melting”
- More practically, perhaps you want to think about building cash flow businesses. This thought makes me sad, because I prefer to think about world changing technology and huge disruption which tends not to generate cash flow in the short term…but sadly the change may support your focusing on “commerce 2.0” and other non-disruptive businesses that actually do make money…
- IF you’re raising money from large venture firms, ask them how they are reserving against your company. You’re gonna need their help to get through the illiquid period and into the next liquidity window
i. But when will the next liquidity window emerge? I don’t know…I think this driven by the amplitude of the correction…which should be less sever than 2000…because our industry is more mature, etc…but I’d say at a minimum 12 months…
I know people say you can’t time markets…Fred wrote a post to this effect that sort of pointed at Andreesen Horowitz…which like it or not, I think has sort of brilliantly timed markets…but what fun is this game if you’re not willing to put your name behind a thesis and make your call? Worst that happens is that you are wrong…so this is my guess as to when the world ends…please improve it or point out flaws in logic…it’s meant more as a catalyst for learning than a decree…
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Jordan Cooper's Blog: startups, venture capital, etc... 