Archive for July, 2012

Strategy for a Soft Landing

Posted on July 31, 2012. Filed under: Uncategorized |

Something I find interesting is that there is a liquid market for “soft-landings” in todays technology landscape.  If you build and don’t succeed, there are 10 or so places you can go to be acquihired…these conversations don’t begin with product or technology, but rather resumes and technical interviews.  We are in a moment in time when downside case is not, in fact, a goose egg, as it has been portrayed for so many years…people think that when you startup a technology company, the likelihood of crapping out is great, and that is true…but today’s “crap out” actually looks more like a set of cushy jobs at “Bigco” with your closest friends and colleagues at about 130% of market salaries…

No founder endeavors to build for a soft landing…but even for investors, these deals can yield 25-100 cents on the dollar depending on how much $ was raised and how the acquirer performs over the year or two post deal.  Note, however, that the soft landings that you read about where a team was acquihired, at least from what I’ve seen in the current market are not the “1 Million per engineer” that we scrawl on the backs of envelopes around board tables…the buyers that I see active in this “soft landing” market are increasingly frugal when it comes to doling out for even strong teams…deals are looking more like $2-4M in common/restricted stock with 4  year earn outs and less than $1M paid out to the cap table than they are “singles” from an investor’s standpoint.  And…when you amortize the equity grants over 4 years, that “purchase price” starts to look a lot like market comp + 30% where the excess can be justified as a backloaded recruiting cost.

In these deals, Bigco’s M&A group looks a lot like HR on steroids.  Should you find yourself in a position where “soft landing” or “crash landing” are the two options, and it’s time to figure out how to make it happen…here are a few rules of thumb:

1)   Time is the buyer’s most valuable asset.  A corp dev team has effectively infinite options for “soft landing” targets…especially post seed boom…so you are but one opportunity in a pretty full pipeline.  The key metric that corp dev will look at out of the gate is “likelihood of close”…where they don’t want to waste their cycles on you  if A) your not excited, B) your not reasonable, and C) your not efficient.  Going into “soft landing” conversations with any posture other than “I want to get a deal done” seems like a pretty sure way to get booted out of the funnel.  Now, if you have any options, or are strategic to Bigco, or have technology that will be usefull post deal, you are not in the “soft landing” funnel I am describing and there’s a whole other set of nuances to consider, but just for “soft landings” I think the best approach is to make corp dev believe that their investment in recruiting you will yield fruit…

2)   An initial offer can often be 50% or what they’re willing to pay. Don’t be spooked or offended by the first offer Bigco makes

3)   If your deal is a soft landing…nobody is getting rich. Not founders, not investors, not employess…and that’s fine…you are fighting to make a less than ideal outcome as good as possible. A typical “trick” that Bigco will employ is separating founders’ interests from investor’s interest.  Large stock grants in the employee pool and minimal payouts to investors is the most classic example…buyers will keep dropping little carrots along the way in a negotiation…you have options on what you can push for in a series of terms…my suggestion is to optimize for investors and employees first, and yourselves as founders last…life is long, build good will…don’t be penny wise and pound foolish because this isn’t the deal that will define your career or lifestyle on the upside, but if handled poorly, could define it on the downside.

4)   Pay attention to tax implications of the deal and make sure that it is structured in a way that is efficient for founders and employees…it will be more work for Bigco (and sometimes…hopefully…they have got it down to science already), but it’s worth fighting that battle up front

5)   Talk to your lawyers all the time…don’t sneeze without their blessing…this is a scenario where it’s worth the $ to pick up the phone before acting

6)   Your tone when talking to the buyer should always be “I’m pumped…assuming” or “We’re excited…as long as.”  Bigco doesn’t want to buy you if you don’t want to be there…just like startups don’t want to hire people who don’t want to be there…so always lean in…but establish caveats… “assuming the vesting schedule is reasonable” “as long as we all get to work on things that interest us” etc…leverage is a very tricky animal, especially when they know you don’t really have any…but the threat that you will walk away once they’ve invested in the process is the only thing you’ve got, so love them…but don’t let them believe you’ll do the deal no matter what…because if they think that…they are sure to serve up “what”

7)   If you find your way to the “close,” congratulations. These are strange times…there will come another era where failure = 0. You happened to crap out at the right time.

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Every photo you take increases my life expectancy…thanks

Posted on July 23, 2012. Filed under: startups, venture capital |

I watch the diligence and intent with which human beings take photos and I cannot help but wonder what it is that drives us, on a seemingly instinctual level, to capture a representation of our physical environment AND that which is going on within it.  Even before photos, we could trace whatever serotonin drip comes from taking a photo back to actions like writing, drawing, painting and so forth.  Why do we love to capture each moment of life? Sure, there’s remembering…or the subtle thought of some future application to these actions, but I think it’s deeper than that.  If you were designing a system with 7 Billion nodes (human species), how would you enable system level decision making to happen most smoothly?  It definitely starts with communication of contextual information between nodes…and I believe that our instinct to photograph and capture is a physiological design that basically says “when node sees something, report back to system.”

If you believe that thought as a premise, an examination of the speed with which these recordings/reports are sent back to the system is a fascinating trend to examine.  It used to be that a recording made by one human being could only reach and inform the decision making of those physically proximate to him (with some dissipating extension attributed to word of mouth), but generally if a caveman drew a painting on a cave, he was only influencing the thought and decision making of a subsystem which was his “neighborhood.”  As more advanced and portable recordings developed, recordings could not only reach a larger population and penetrate subsystems across far distances, but the speed at which the broader systems “received word” of what was learned or observed increased.  Even 10 years ago, with advanced camera technology, recordings only reentered system level consciousness after 72 hours of photo development…

With the advent of digital photography, both the number of nodes serving as recorders as well at the number of recordings per recorder have increased to a point where I’d venture to say, when combined with textual recording and voice based dissemination of information, basically everything that is occurring within the environment in which our system operates is being “observed and transmitted” back to the system in some way….and the speed at which information enters back into the system is essentially “real time.”  So we have this network of little worker humans who are feeding the system real time contextual information essentially reporting back to it it’s own health and status…we are monitoring ourselves and the frameworks we have built to sustain us….i know it doesn’t seem that way, but imagine if every cell in your body was communicating it’s health and the health/transpiraitons of it’s immediate surroundings back to your brain…cancer would be detected instantly, you’d know exactly what food your body needs at any given moment, etc…as it currently stands, the human physiological system does not receive and decide in “real time”, but our broader system is getting there…

We started by recording and pushing “what happened” and that informed our system level decision making somewhat inefficiently but still effectively.  We then move into a state of recording not “what happened” but “what is happening” and that shift is responsible for something of a renaissance in system level consciousness and self-optimization…basically, the speed at which our system can react to it’s context has shrunk to near zero…If I extrapolate out, once we are recording and pushing back to the system in perfect real time with perfect coverage, I believe we will move from a phase of “what’s happening” to “what will happen.”  By applying machine learning principles to billions of real time feeds of “what’s happening” we will start to see machines anticipate the future with statistical significance…there are already examples of this occurrence in datarich, heavily monitored contexts such as financial markets…but soon we will have similar insight into previously “unrecorded” contexts.  More photos, more push back to the system, new sensors, Nike Fuels, Jawbones, Smartphones, all driven and adopted by that same physiological urge that makes us take photos, perfecting system level monitoring of our context, carried out by human nodes, leading us into a world where the system will have a better view into an individuals life (the complete sensory recording of one node) than that individual has about his own context…

Afterthought: anyone seen fmri/chemical studies of what’s happening in the brain during the act of photography?

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when did “re” become an acceptable prefix to imagination?

Posted on July 12, 2012. Filed under: startups, venture capital |

I hear smart venture capitalist repeatedly talk about this holy grail for startups of “replacing one of the native applications” on the iPhone.  They revere instagram for “replacing the camera” and wonder desperately who will replace the address book, or the calendar, or the video application that come installed on your iphone when you take it out of the box.  I think this is a really boring lens through which to look for giant opportunities.  Sure, some of these applications that we are looking to replace are high frequency hi occurrence tools, so surely there is value in taking market share in those behaviors, but do we really think that Apple has conceived of and installed all of the most important/most valuable categories of application?  Just because it’s hard to supplant apps with embedded distribution in these verticals, (and therefore anything that does, will by definition, be an amazing product), doesn’t mean that we need to dream in such a confined box.  Personally, I’d much rather build something that causes Apple to say “oh shit, we should’ve skipped “calculator” and built a [insert your new category of application that owns a fast growing behavior which didn’t saliently exist when they guessed the first 12 things people would want to do with their new smartphones] than chase Ical for the next 5 years.

I hear startups often frame what they are working on as “reimagining” X.  “we are reimaging the calendar in a social world” “we are reimagining payments” and I think to myself…that sounds bold…but isn’t it bolder to imagine than to reimagine?  Sure you have a higher chance of crapping out, without a highly visible behavior that has been proven productizable through software solutions, but you only live once…wouldn’t you rather create the category than chase it?

**btw, this is not a know on Brewster. I am freaking pumped to see what Steve’s been working on and can’t wait to use it

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Email to John Lilly, now a blog post to you

Posted on July 10, 2012. Filed under: startups, venture capital |

I sent this to JL this morning (in response to his push notification post today) but he hasn’t written back yet and I am impatient for smart feedback so now it’s a blogpost.  Anyone want to build this with me in the next few weeks? shd be pretty easy mvp, harder with contextual triggers. holler. Email below:

Subject: You know what’s interesting

i just spent the last hour thinking about push real estate, wrote a bunch of stuff out, and then i opened twitter and read your post. btwn you and me, i think their is a whitespace in push experience as follows:

Premise 1: 100% of push notifications are algorithmically controlled. a rule determines if/what gets pushed to you, and almost 100% of the time it is an engagement mechanic designed to pull you into an apps primary UX.
Premise 2: non-human/explicit intent behind these notifications is inversely correlated to relevance/quality of content (while not preclusive)
Premise 3: there are a set of use cases for which i would grant lock screen push permission to a segment of my graph
i’m not sure what the use case is that i would grant “push access” to my friends, but your “batphone” example is 1.
Another possible: I think apple did a really shitty/non-social job with “reminders,” but i’d probably grant push access to close family and friends to send me contextual push reminders with triggers more nuanced than day/time (i.e. “when jordan is at work, send a reminder to smile” or “when kenny is driving, remind him to grab my sunglasses from the glove compartment” or maybe i’d grant access to my dentist to say “floss you ass hole”…basically i would enable my graph to have lockscreen access for the set of behaviors i know i should do but i either forget or don’t have the discipline to do on my own.
the important part is that the creator of the message or content has the push UX in mind when creating it.  Their understanding that the recipient will be engaging with their content through this medium should change the style/context/content of the communication, but there is not an application that’s designed this way that i’ve seen.  SMS is close, but dumb on context and only services instant use cases, IFTTT recognizes push as it’s own UX but it’s too broad to own “social push,” and reminders are single player only even though most reminders in my life come form my mother and my sister.
why should IMPORTANT alerts come from applications and not people?
so that’s my thought of the morning. hope you’re good
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I see the light…i swear

Posted on July 8, 2012. Filed under: startups, venture capital |

It’s easier to hate than it is to love. Today I realized, that I have been doing a lot of hating of late. “I’m mad at market X”, “I’m annoyed with the way the press is covering Y”, “I can’t stand how founders do X”…this phenomenon has been pointed out to me not by colleagues or startup peeps, but rather by my closest friends and family.  I get questions like, “dude, you are such a positive person, your blog makes it sound like your angry or depressed or something.”  I sort of scratch my head and say, “I don’t know what to tell you, that’s what’s on my mind” or “sorry that was so negative…but it’s true.”  I still stand behind those answers, but I realized something today…which is that I’ve been a little lazy in my writing lately.  It’s easy to sit down to a blank page, think about the last thing that pissed you off, and go at it for 2 paragraphs in a way that will strike a chord with everyone else who has experienced something similar…it’s harder, however, to sit down to a blank page and think about what makes you a believer or what you really love or really appreciate…or the thing that gets you so spanking excited that you remember why you are in this business in the first place…

A long time ago, I realized something interesting as well…the posts that get the strongest reception, syndication, commenting etc…are almost always about “the struggle”…in one form or another, people seem to dig writing that they can identify with…and let’s face it…everyone who’s hustling and working their asses off, rich or poor, unproven or successful, is somehow experiencing struggle…and therefore can relate to it.  So I write a lot about the struggle, and my struggle, which is ever changing, with new challenges, new aspects of life becoming less certain than they were, etc…but just because I focus on the struggle, doesn’t mean I’m struggling…it’s just great fodder for this forum…and writing is therapeutic…it helps to fight whatever forces are contributing to the struggle at any given time.

A friend recently sent me a note, after a particularly frustrated post I wrote, and said “hey dude, do you forget that your blog is public?”…I sort of smiled and wrote back “sometimes”…and that’s true, it’s no secret that unfiltered thought and content is way more compelling than sanitized writing…and I try to stay really true to whatever I’m thinking…where that ends up is occasionally in a post that I don’t end up publishing, but it’s boring to write only the thoughts and feelings that are “fit to print.”

I’m sure many of you read Dave McClure’s post today about his struggle over the years.  He revealed some elements of his psyche that most push deep down, into dark places, and he served them up, really crisply and clearly, for all to read.  You could read this post and walk away thinking, “wow, I had no idea Dave McClure was hurting like that,” but the truth is he’s probably not…at least not any more than any other conscious human…it’s why the post was tweeted a billion times today…because everyone can identify with the pings of inadequacy, self doubt, and unrealized aspiration which he elucidates.  And there is something comforting about reading a post like that from a guy who’s public façade looks closer to bullet proof than unproven…the only difference between him, you, warren buffet and batman is that he wrote those thoughts down on paper and published them to the web.

This post is getting long, and I didn’t intend to dive as deep into the struggle as I ended up going, but the point I wanted to make was that there is a place for this pain in the spotlight of startup land, but there is also a place for hope and love and happiness.  So I fear I’ve neglected those elements in my writing of late…too much struggle, too much hate,…so today I wanted to find the love…or more specifically my love…what do I love about startupland?  What do I love about the decisions I’ve made?  What do I find beautiful in the world of venture capital?  These are themes that will not get retweeted…because nobody in the struggle wants to read about the deep satisfaction of someone who, at least on the surface, has less struggle then comfort, but for the sake of my mother, and my friends, who are worried that I have lost the optimism at the foundation of my self, below is a concerted effort to show you my rose colored view of this world:

1)   I love the choice that permeates our ecosystem.  There is no path, no ladder to climb, and no rules.  There are decisions that will make your life harder, for sure, but if I can write shit, piss, fuck on this most public representation of myself and still persuade someone to give me $10 Million of their hard earned money, it is pretty clear that we are in a world where “Do You” trumps “fit in” or “you can’t say that on television” (Note: I have not raised $10M…yet…)

2)   I love that the word “NO” fuels our progress at the same or faster rate than “YES.” I love being surrounded by people who do not sink their head at the first taste of adversity…I love that we work in a world where “NO” is received with an internal vow to make the deliverer of said word taste it hard…and let me tell you…for those who haven’t made the doubters taste it yet…when the day comes…it feels fucking great…

3)   I love , love, love how fast we are able to go from the depths of hell to outerspace….it is a rare world that sends rocket ships into space every single day…and we are in it…and believe it or not, painstaking hard work earns you a seat on the ship.

4)   I love that my train just stopped for the xfer at Jamaica and I closed my computer but I can keep writing this post on my phone because we live in the future…and I love that we work in the one industry on earth that gets to imagine what that future will be

5)   I love that you don’t have to wait until your 45 years old to make decisions here. In a world where all decisions are imperfect, we have an amazing openness and acceptance of imperfection…we prefer 90% right at 23 years old o 94% right with 20 more years experience…which is awesome. I was about to right something I can’t stand about corporate culture but then remembered that this is a post about love and not hate.

6)   I believe that we are pushing things forward in a direction that is better than the present. Sometimes I get frustrated by the forces in our market that work against this progress, whether they be contributors to the noise, or inefficient capital markets, or frankly human characteristics that work against us, but as a whole, when all is said and done, we are changing the way our population and environment exist, and we are doing it somewhat deliberately…which is so awesome. What an amazing role to play…it’s no wonder so many want to participate…beyond the noise, I see light…it is this light that inspires me and fuels my impatience and dissatisfaction at the same time

7)   I love watching the entrepreneur come of age…to see a human being who has been something her entire life step into it is amazing…the founder who begins is unlocked for the first time…we work in a world where we witness birth every day…aside from OBGYN’s, I’m not sure who else can say that

I could think of 50 more, but my train just got to Penn Station. I love this world…if my words on this blog skew negative…it’s just because I believe and want for more

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Bio is the new Social (ish)

Posted on July 2, 2012. Filed under: startups, venture capital |

Bio is the new Social (maybe not quite…but a wise man once told me, say something is and it becomes)…the Billguard thing has nothing to do with Bio, I just want it. But the other two are areas of focus for me these days and if you are building them, I’d be interested in speaking/investing/helping push things forward:

1)   Billguard for healthcare/insurance claims: I can’t think of anything more annoying than letting my doctor’s office or hospital and health insurance company turn me into a human ping pong ball…the back and forth, he said she said, administrative nightmare that is determining weather or not I owe $32 for some incomprehensible invoice due 3 days before the fucking thing arrives in the mail is just so painful…I know there must be a better way..and e billing…and blah blah blah, but in the meantime, any form of scaled services business, or ideally a heavily software enabled services business that says “yo, all those ridiculous invoices and bullshit that you have to deal with, scan em’ or drop em’ in an envelope and we’ll watch your back” is all I really want…I just want to know that I’m not getting raked…and just because the hospital submitted to the wrong address, and I get a bill, doesn’t mean I should have to spend an hour on the phone trying to figure out who’s fault it is or if I really owe this money…even better, I’d love to know what care is going to cost me on the way in…this not knowing and then you get slapped with a bill for hundreds of dollars that you weren’t planning for is absurd…fine, ambulences cost money and your plan doesn’t cover it all…just give me a heads up so I don’t go buy a new tennis racquet this month before the bill comes…I don’t think we need to go for the hail marry here and try to change the way healthcare runs…but the HR Blocks of the world did it really simple: “everyone hates taxes, they are so confusing, nobody knows what they need to pay and what they don’t…so we’re gonna market the crap out of our cheap services that let’s you not worry about it”…people don’t pay HR Block to save them a ton of money…they pay HR Block for the piece of mind that it was done right without a ton of hassle…I think you could do the same and save people from the worry of the healthcare/insurance ecosystem.

2)   Wearable sensors for biodata: who’s measuring my endorphin levels, or my perspiration, or my heart rate, blood pressure, pupil dialation, sugar levels, or really any other biological dataset…who is taking information usually collected in the doctors office and productizing hardware and microhardware meant to enable consumer monitoring and tracking?  Withings is pushing on this in some regards…but I want lighter weight…more biology…less machinery…I don’t care if your using existent sensors in devices with penetration or brand new stuff…I just want novel bioinformatics capture. Thanks

3)   Innovation at the interface layer between hardware/software and human physiology/users: Who is thinking beyond billions of people stupidly tapping away on the glass screens on our phones…how do we interact with out devices with less friction…I see folks reducing the contact points with devices through mechanisms like push, background processing/ux, etc…but who’s using the microphone in interesting ways? Who is viewing an engaged user’s physical body as the interface to a new user? Who is pushing on Google Goggles without billions in R&D behind them? Who is  creating an IFTTT that says, “if my blood pressure rises above the norm, play that meditation podcast I downloaded last week.”  I love interfaceless UX, but what I really want is more deeply integrated interface between myself and my device and my software…and the interface goes both ways, I don’t just want better consumptive experience, I want to push data to hardware/software without disrupting my offline experience…who is building hardware that is meant to live inside my physiological system, not distinct from it, or even attached to it, I want to know who is connecting my biological systems to software/hardware systems (especially for non-medical applications)…I realize how far off we are from brain system to software system, but there are many less complex physiological systems in the body that have direct application when communicating with software applications…

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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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