Archive for April, 2012

a disruption with implications as large as the advent of the internet

Posted on April 25, 2012. Filed under: startups, venture capital |

Today I read an article in the LA Times indicating that DARPA has created an unmanned aircraft that can travel at 22x the speed of sound. At the speed it would take 12 minutes to travel from New York to Los Angeles.  The intended application of this aircraft is weapon delivery…and the promise is that you can strike any point on earth from the US in under an hour…but that is not what I am interested in.  I have long been fascinated by advances in transportation and the movement of physical matter.  I like to think about how innovations like the wheel, bicycle, automobile, ship, and plane have changed the way our physical/human system behaves and organizes.  Each time we advance our ability to move physical matter the distribution of people across space takes a new form of optimization.  Huge system level trends like cohabitation, urbanization, migration, etc…are all framed by our ability to move matter.  We have achieved much greater architectural optimization within our communication systems than we have in our physcical systems, largely because there is little challenge in moving information from one place to another. It used to be that to exchange information required 2 nodes in our human system (people) to be in the same physical space.  Advances such as written language, telephony, internet etc removed that constraint and enabled our system to better share learning and become more efficient.

Now, imagine if there were no challenge to moving physical matter from place to place.  If instead of 5 hours, it took 5 minutes to transport a thing or person from New York to Los Angeles.  The implications of that reality are almost impossible for me to wrap my head around.  Geography would become irrelevant.  We keep making the mistake of believing that trends are linear. It currently appears that the online world is consuming physical experience…I think it was Marc Andreesen who recently said that “software is eating the world.” …but if we are able to move physical matter as freely as information, I believe we may see a return to the real world…with instrant physical proximity, we will no longer be required to enjoy a digitized and diluted form of real life.

There’s more. The way we organize ourselves physically would be completely different.  Currently it appears we are moving toward urbanization, but without the requirement of physical collocation in order to exchange goods, I believe we would see an emigration from cities back to less populated areas.  Our output as a system would be unfathomable.  Think about what happened to the speed of change/progress on the internet as we removed latency and achieved global broadband penetration.  Innovation in the movement of physical matter is the equivalent of reducing latency associated with every action and process in the physical world.  Talk about the world becoming flat…holy shit.

This all sounds like sci fi pipe dreams, but they JUST BUILT A PLANE THAT CAN GET FROM NEW YORK TO LOS ANGELES IN 12 MINUTES…so exciting

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The question you should never ask investors in a pitch (and my answer to it)

Posted on April 22, 2012. Filed under: Uncategorized |

Last week I was talking to a friend who is in the midst of raising a pretty competitive seed round.  Just a day into his process and he was already flirting with that magical line of “oversubscription” (you are ‘oversubscribed” when more money has been committed to you than you are willing to raise).  He is an experienced entrepreneur but hadn’t raised capital in a while and he asked me if it was cool to ask investors “how do you add value?”  My initial response was a knee-jerk…I told him it pisses me off when a founder asks me this question in a pitch meeting…he asked me why…and I took a pause to think about what was at the root of this response.  Ultimately I didn’t like having to answer to someone who was asking me for money… I said if I spend an hour with someone and they can’t tell that I’m going to be valuable in the round without having to ask me explicitly, then I don’t want to be in business with them.  I told him that that question comes across as naïve and amateur…which I think it does…that there are ways to direct a conversation to get the answers you are looking for without interviewing someone who you are asking to invest in you.  I guess I felt that the question of “why are you value add?” lacked the humility I have always tried to show when raising capital myself.  Or maybe it’s that anytime a founder asks me that question it suggests that they read some blog post about how “it’s not just about the money, it’s about the value that an investor brings to the table.”  For sure that blog post is true, but you don’t need to prove that you read it in your pitch meetings.

I’ve raised seed capital twice and personally, I would never ask such an explicit question…I would do my homework in advance, study each potential investor’s backgrounds, read the content they have published online, learn the stories of their operational history, and usually talked with people in their portfolio well before I ever met them.  I would know the answer to such a question, and never put them on their heels or in a defensive position when my only goal was to get them to lean in…It doesn’t come across as savvy or smart…just naïve.

All that being said, I have reflected on that conversation for three or four days, and found myself trying to isolate and answer explicitly what is my “value add” as an investor…I wanted to understand if part of my knee jerk was due to a discomfort with my own ability to answer the question…so I endeavored to really get it down to what makes my capital greener than the next guy’s or girl’s…I quickly arrived at what I have known for a long time…that the best investors I know all have one outsized talent that they have built a career around, and they compliment that with an astute awareness of where their excellence begins and more importantly ends…what was my outsized talent that I share with my portfolio companies…I’m not an ops mastermind, not a brand guru, no 30 year friendships with Larry Page or Zuck…what do I do that is different than everyone else?  Sure I have some good playbooks, blocking and tackling kind of stuff…but at the end of the day I think my contribution lies at the nexus of emotional support and strategic thinking…Although some would say that I am a bit callous to the outside world, I am super in tune with the emotional states of those I work with…I am an introvert and pay really close attention to how I feel and have felt over the past 4 years running startups…it’s a very unusual set of feelings and pressures…people often talk about how lonely it can be…nothing new that I am saying here…but if I think about what I really give to the founders I am close with, it’s an empathetic ear…one that requires no filter…no fear of exposing vulnerability…That empathy, in and of itself can be hard to come by for founders and CEO’s.  Sure, a spouse, or close friend can perform a similar role…but without a sharp strategic lens…it is not enough.  It’s not just “I understand where you are, things are gong to be ok (although that is nice for sure)…it’s “I get where you are, now here’s what we do.”  I often talk about Kenny as someone who helped me develop so much as a CEO…not because he taught me any particular skill, but rather he was just so in tune with where my head was at day to day, and had the experience to tell me how my mindset was either contributing to or fucking up my strategic decision making…I guess I endeavor to fill that similar role with my own portfolio companies…if you ask me how I’m going to add value, my new response will be “I’m going to tell you when your insecurity is fucking up your strategic decision making…like right now…you are asking this stupid question to change the power dynamic of this meeting…you are fucking up because you are not confident. Don’t do this with other investors and you’ll raise your round quicker.”

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3 Short Thoughts

Posted on April 18, 2012. Filed under: startups, venture capital |

A few random thoughts that aren’t full blogposts:

1)   A while ago I wrote a post about the impact of the Occupy Wallstreet movement.  I thought that although it might not end with specific legislation or immediate action to point to, Occupy’s impact might come in the form of a slight change in the collective conscious of our population…that perhaps everyone would shift 3 degrees left of where they were…After finishing the second book of the Hunger Games series this weekend, I began to wonder if the explosive penetration of this story through mainstream culture was not somehow attributable to this 3 degree shift…The paradigm of people vs. the capital certainly echoes the spirit of Occupy…why did a book that was written four years ago explode in the last 12 months…perhaps we as a population were just ready to absorb a story of the people’s rise against the establishment…(also didn’t hurt that big movie dollars got behind it…but I wouldn’t even be surprised if whoever was forecasting ROI on that production had an input in their model that said the population is empathetic to a left leaning story)

2)   This morning I chilled out with one of the founders of General Catalyst who I’ve known for a long time.  He was talking about the firms expansion west, the burgeoning ecosystem in NY, and the challenges with Boston’s startup ecosystem.  None of this was news to me, having heard it many times before…but something happened a few minutes after leaving the office that crystallized a major difference btwn NY/SF and Boston…I was flipping through my Newsle and read of my friend Naimish’s whopping $8M financing to build his new company Gridco…I paused for a minute…wondering why such a mega-round hadn’t penetrated my twitter, etc…and then I realized where I was reading it…Boston Business Journal…and then I realized something else…that if you have news in Boston about your startup…the only real channels that I see stuff getting pushed to are and the Boston Business Journal…Guess what…nobody outside of Boston reads those publications…One thing Boston is sorely missing is a strong relationship with national press channels…That’s a huge disadvantage at the consumer application layer. If you have news in NY or SF you can go to Techcrunch, AllthingsD, Business Insider, New York Times, etc. etc. etc…as a consumer facing company, building a brand and getting distribution are so closely tied to strong media relationships…and on that front, Boston seems to be hurting…If I were running a company in Boston, I’d be hanging out with journalists in NY and SF…too hard to build a brand through a platform like (no hate at all, I like what I read in both of those publications, it’s just not information that the rest of the market/country consumes).

3)   Health is precious…I had dinner last night with a super thoughtful seed stage investor and the entire team of one of our shared portfolio companies in SF…Someone asked him if he’d ever return to operations as opposed to venture investing and his response was a very fast “no way”…when asked why, the first thing he cited was that it wasn’t healthy for him…I thought that was an interesting lens through which to look at career decisions…health is an input that doesn’t often weigh into professional planning (especially for younger folks)…I guess his was the type of insight you can only arrive at the hard way…with experience comes a more expansive outlook on professional planning I suppose…

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8 steps to building an A+ engineering team

Posted on April 16, 2012. Filed under: Hyperpublic, startups, venture capital | Tags: , |

One of my favorite new founders in the Lerer Ventures family just sent me a note asking for tips as he starts to build out his engineering team. As I’m sitting in an airport w time on my hands, I went long form. Thought I’d open source an early playbook. This advice is most applicable to recently funded seed stage founders:

1) only hire 9s and 10s. Dont just fill the seat, keep bar really high

2) make fast decisions. When you find a guy you like culturally, put him through half day interview process, test both technical aptitude and ambitions/ability to give everything they have to your co

3) if they pass both, offer next day, overpay on cash by 10k what you were going to offer, overpay on equity by 50% of what you were going to offer

4) give them no more than 3 days before offer expires and be ready to move on to new candidates if they don’t commit. Worst thing you can do is convince someone who doesn’t really want it to join.

5) with every hire ask yourself “is this someone who I can recruit against? Will every candidate going forward WANT to work with them? Do they demonstrate that we are a culture of excellence?”

6) create a culture of recruiting within your engineering team. Make sure everyone knows that “we are always recruiting A level engineers, independent of need, roadmap, or operational context.”

7) invest in teaching your entire engineering team how to be effective recruiters. It is a huge part of everyone’s job, not just founders…

8) contribute to the Enginnering community. Give talks, free advice, help neubs build their first rails app, open up your office to anyone that wants to come hack on whatever they are working on. The community is not some stocked pond that you can go fishing in when you need something built. Give to it before you try to take from it. Instill this ethos in your company’s culture.

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Fear not Zebras, I’m still resting

Posted on April 6, 2012. Filed under: startups, venture capital |

It’s still early…I’m just watching…observing…not really jumping in…two weeks into my move to San Francisco and I’m starting to isolate the factors that contribute to the way things are here…half of me is trying not to get sucked in…trying just to chill out and enjoy what my mom would hope is a break from the grueling hustle of startup life…but the energy here is calling to me…like a newly opened puzzle strewn across the kitchen table…waiting to be solved. I stand back from the table…riding bikes and hiking mountains…trying to relax and stay out of this mess of stealthy progress and 30 year old alliances built on the backs of now Fortune 500 megahits…but it calls me so hard…taunting me…I watch the way people move here, the hushed tones, muted enthusiasm and overly confident thought…a thin veneer of impenetrability masking a pretty average depth of thought. There is no humility here…no admittance of what is unknown…and an unwillingness to be vulnerable…to the outsider and to most a quite intimidating heir…but it is in this very heir that I see an Achilles heel…a point of weakness that I believe holds the key to defeating such a market. Just an early thought….i will wait, but I have found a chink in this armor…and I will strike.

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    I’m a NYC based investor and entrepreneur. I've started a few companies and a venture capital firm. You can email me at (p.s. i don’t use spell check…deal with it)


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