VC in DC

6 More Troublemakers you meet in a start up

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Start ups attract and often feature some memorable characters.  Consistent with my previous post on the subject, here are 6 more troublemaker favorites.

1.    The IT Support Guy/ Flannel Bob

He's busy but he is working?  Does every computer need to be taken apart?

And how come you can never make a point that he doesn't already know about like "Did you see the next version of this has that? or "I saw they're coming out with ...."  Answer is always, "Yeah, I saw that."

And talk about an understated flair for the dramatic, try "The company is going to run out of disk space in an hour" (Hmm, that gives us plenty to time)

OR "I sent a note that the email system is down".   (Helpful)

OR "What you are asking for simply can't be done" (It is outside the scope of human endeavor)

OR "You should know how to do that". 
(And you should know I want to kill you)

OR "For me to know how to do that, I need this $2495 training out of town for a week".

(The training certification will be on his posted resume at Monster before he returns to the office)

The IT support position in a start up is no small job. The person is invested with near magical skills from the perspective of peers and yet, manages to consistently disappoint 90% of he deals with.  That isn't easy.  Defeat is stolen from the jaws of victory by dispensation to most, but not all, of a task.  So the printer is installed but it won't print correctly from your computer.  Installed printer, you didn't say to test it....

2.    The New Marcom Manager/ Captain MoonRocket

He is much cooler than you. He dresses better.  And he has come up with a new campaign to re-position the product and company.   You just don't know how a picture of a rock in a bed of sand does that.  It makes sense to him.   Just not to you.  Or anyone else.  But boy he is convinced and it is as if he needs to reach across the time/space dimensions to reach you.  He can really talk with his hands and his framing gestures are intended to create breakthroughs in your understanding.  Where did he get those glasses?

Speaking of rocks, and if he isn't stoned, shouldn't he be?  How does he talk like that?     

3.     Joan of Accounting/ Defender of the Realm

New customers and, worse troublesome accounts receivable, just make more work for her.  If good accounts don't make it through her screen, it is just less work. Since the collection of bad debt will inevitably fall to her, she sees her primary job as the prevention of bad accounts that will become work for her later.  Unfortunately, this has the side effect of making her a tenacious gatekeeper related to allowing new customers in the door. She leads the company's sales prevention efforts.   The credit crisis and failure of established banks only validated her restrictive worldview.   The salespeople view the whole new account experience akin to negotiating with Jabba the Hutt.  And she doesn't tolerate arguments about the real risk being low as the product is only a download whose cost is too cheap to meter.

4.    The Time Traveling Middle Manager/

Always ready to visit in your office and spend some time, he is ready with insightful commentary, nay advice, related to everything that HAS BEEN done by you or anyone else.  If you had that advice AND a time machine, you would really have something.  But you don't have a time machine. And neither does he.   Now he's in your office critiquing the execution of your recent launch/project/product,  but, you can't replay the favor because there's nothing to talk about.  He has never done anything as he sees himself as the start up's conscience.  His job is to observe, to comment and to offer advice. 

He isn't here to do anything. 

5.    The Triathlete Production Assistant

She arrives at the Monday morning staff meeting to describe an extreme fitness weekend which included a 48 hour race with running, swimming and cycling.   She got almost no sleep at all.  She looks ok.  And she will be fine for the next couple of hours.  Then she begins to fade.  Completely fade.

Guess what, she's tired and she hurt her ankle.  She will be out tomorrow at the doctor and for the rest of week keeping off her ankle.  She can't work from home because of the muscle relaxers and as she says -"The doctor says if I don't stay off my ankle this week, I won't be ready for this weekend's '72 Hour Race to Exhaustion' and I have been training for that for months".

All the while, our uber fit production assistant looks askance at her ultra unfit co-workers who may miss a day here and there over some unwise drinking decisions at Monday Night Football.   Those unfit, cigarette smoking, fried chicken -pizza-junk food loving folks who have better attendance if not a healthier lifestyle.

6.    The Project Manager

It can be dis-spiriting to create fabulous GANTT charts for unfabulous goals. All the start up organization's dysfunction in a walking, talking person.  He is characterized by his unanswerable questions --"How can the developers lose more than one week in their completion date, when only one week has passed?" or "Couldn't we have known that people will take off work on Christmas day? or "Why does our one and only Q.A. staff need a month notice when they're going to test the company's only product?"

All this planning and effort to rise above the simple challenge that the job should take 15 people and there are only 5 available to do it.

Here's the original 7 Troublemakers Post

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In Venture Capital and at Grotech Ventures, Art imitates Life

Image via CrunchBase

If you visit our Virginia office, you'll see this guy in the lobby on the coffee table.

 

Yes, he's impressive.  But to understand why he is in Grotech Ventures lobby, one needs to read the inscription in his skull.

 

My partner, Joe Zell, found this treasure and brought into the office where we agreed -- it belongs in the lobby.  Because in life and this business, there is great danger in getting "ahead" of oneself.  We all have something to learn from each and every entrepreneur who comes to speak with us.  And while we don't fund everyone, we do hope they benefit from the experience of speaking with us. 

We're all former business operators at Grotech Ventures and we've raised venture capital ourselves.  And in the process of raising venture capital, we had the frequent experience of meeting some "very, very, smart" VC's.   We are committed to being great partners but we don't want to be "those" guys.

This little guy doesn't have a name, however, and he probably should .........

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Mr. Chuck Cascio, Rank and File Advisor

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I connected last week through the magic of Facebook with Chuck Cascio.   He, as a high school teacher and mentor, changed the direction of my life.  And last week, I got to thank him for doing so. 

And maybe, you might read this and not wait 31 years to thank the Chuck Cascio in your life. 

Chuck Cascio was the faculty sponsor of George C. Marshall High School's newspaper the "Rank & File" in 1977.  That spring he asked me to take over the editor position that fall at the beginning of my senior year.  In the previous years, the editorship had been shared between two co-editors.  I was honored by the chance to be an editor in chief and excited by the potential of the publication.

The Rank & File was a quality product when I inherited it that fall.   It wasn't without its challenges as the paper had never covered its costs in a single year of operation and had an accumulated deficit of $4300 (lots in 70's dollars).  I had big plans for the paper and Chuck encouraged me to pursue them. 

But, the budget was the budget and big plans have to be funded somehow.  So, I as a young manager, a first time CEO if you will, was confronted by the limitations of capital related to my ambition.

I wanted to grow the paper in all the ways that I could do so.   The quality of the product, the number of issues, pages printed, circulation, etc.  I wanted a great product.  Something for the staff and school to be proud of. 

So how to do it? 

First, I figured we needed to raise revenue by selling advertising.  Second, we needed to cut costs wherever possible.  And third, we needed to improve quantity and quality of our output.

So I found myself in ill fitting, cheap suit pitching some of the largest local ad agencies in the DC area.   I don't know if they found me earnest, convincing, crazy or cute but they signed on.  Palmer Dodge -- a prominent firm, in particular, bought the back cover for a year for its client Zippers in a $2000 deal.  It was a home run for our little endeavor and it help convince others to jump on board. Getting revenue in the door, I learned, was a key enabling step.  I don't knew if Chuck knew initially what to make of it.    But, he never imitated that we couldn't or shouldn't  ---- so we sold, sold, sold.  Download Zipppers

To cut costs, I shopped our printing contract and found a printer that would allow me to work the presses with  him in order to save money.  I took the galleys to him, worked with him to print them and then carried them back to school in my '74 Vega for delivery.

We initiated "in locker" delivery where we would place the paper into the locker of subscribers late at night.  I walked the halls the next day with an eye to seeing if any were discarded unto the floor.  Few ever were.

Finally, as a manager, I assigned 30 pages worth of articles for our twenty pages of space in each issue.  My 28 staffers reacted as you would expect -- some badly and some well -- but our quality rose.  More than one appealed this decision to not run written articles to Chuck.  He backed me up. The reporters knew if they wanted it to run it had to be good.  And it was.    I learned the power of doing what's best for the enterprise regardless of its popularity.  And some people will really step up if challenged to do so and others will not.

So, that year we published a record number of pages and issues, introduced 4 color printing for the first time, won awards and ran a big profit for the year.  So big, that we retired the entire historical debt of $4300 and left a $1500 surplus for our successors.  I had driven revenue, watched the budget and managed a team to create a quality product.  And it was a revelation to me how much I enjoyed this effort. 

Along the way, Chuck supported and advised me.  He even encouraged us to tackle the controversial issues of the day (sex and drugs) in our reporting.   Download RF Cover   It couldn't have made him popular with the administration but he never said anything other than do quality  work. When the year concluded, I realized that I wanted to go into business and, importantly, that I could find happiness in start up businesses.  There is something magical and powerful in a plan coming together and  being the master of your own domain is satisfying in ways that are not always anticipated ahead of time.

And I learned the power of a good backer and mentor.   That it is important to back first time CEO's.

Last week, after 31 years, I got to thank Chuck for being the first to believe in me, back me, advise me and to show me something in myself that changed the direction of my life that followed.   I work as a venture capitalist advising and backing mostly first time CEO's.  And I tell them to sell, sell, sell, keep costs under control and make the product great.   And I understand that being a mentor is no small thing though it can sometimes take a while to be appreciated as one.

LivingSocial's Pick Your 5

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The recent phenomena of the Pick Your 5 application on Facebook has generated a lot of press. The most interesting one to me was an article in the New York Times magazine which attempted to explain the popularity and value of the "Pick Your Five" and similiar products.   The article didn't refer to LivingSocial or the product directly.  Instead, the author noted the popularity of these "types" of products. 

The article attributed the popularity of these applications to their effectiveness as conversation starters.  That was certainly my experience.   When a long time friend would post a list of their first five cars, it prompted memories and conversation.  All of which highlights the power and potential of Facebook as a closed environment of real people interacting with people they know in a direct way. 

New York Times Magazine

Some mainstream....

Image via Wikipedia

Grand Rapids Press

Some more industry related....

Webpro:

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Fox Business Network: LivingSocial and Crowd Sourcing on 4.25.09

A recent Fox Business appearance with a plug for LivingSocial.

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StartUpHire: Work for Venture-backed Startup

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I am always impressed by the number of people interested in working for a start up.   Both from the students I teach and audience members from various speeches, there is consistent and ongoing interest in the start up work environment.   For good reason, start ups give people to opportunity to perform my roles and progress rapidly on a professional basis.  But choosing the right start up is no easy task for most people.  Clearly, one of the differentiators amongst start ups is which have received outside investment.   And even among those receiving outside investment, which have received venture capital.  The distinction of venture capital in a start up is significant has it usually indicates both current and future backing based upon the judgment of investment professionals and the completion of extensive diligence.

So where does one look for these jobs in venture capital backed startups?

Try:
StartUpHire

Startup Hire was founded by one of the Grotech General Partners, Steve Fredrick, and has achieved impressive acceptance and sponsorship in a short time frame.  The National Venture Capital Association as well as other marquee groups have put their support behind this effort.

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NVTC's Hot Ticket Awards

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This annual event which recognizes the "Hottest" companies in a variety of categories, including "Hottest Venture Deal", "Hottest Management Team" and "Hottest Buzz" among others, will be held on June 24th this year.   This is a fun, popular event which typically sells out.

Zenoss won "Hottest Venture Deal" last year and LivingSocial is nominated in the same category this year.   Clarabridge is nominated in both the "Hottest Management Team" and "Hottest Buzz" category.  Good luck to both of them. 

Here's a link to the full list of nominees:

Hot Ticket Nominees

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Vesting Employee Stock Options in Start up Companies

From time to time, I will write about some of the terms and conditions of employee stock option plans that can have a major impact for the founder(s) at the end of the day.   Given reader response to my previous blogs on the option subject, I want to call attention to vesting. 

The vesting of stock options over some designated period can have dramatic economic impact for founders.

Vesting

Stock option plans will have a vesting period where the right to purchase the granted stock options increases annually and sometimes monthly.  So the stock optionee gets 1,000 options that vest over a four year period in quarterly amounts, meaning that employee vests and has the right to purchase the options following the completion of each year of employ.  In our example, Employee has the right to buy to 25o options after year one of employment.  The Employee will usually have that right for some period of time so long as they stay in the employ of the company.  It can be up to 10 years to purchase the vested options.

The question arises -- if the founder is the source of the original stock options to supply the stock option pool -- where do ungranted or un-vested options go when the company sells?  Consider an example where the ungranted and granted but un-vested options total 10% of the company at the time of company sale.   These options were all originally the founders' shares.  Where do they typically go at exit?   The custom is for them to divided on a pro rata basis amongst existing shareholders.  So if investors hold 70% of the company and management/founders hold 30%, then the shares will go 70% to the investors and 30% tothe founders/management. 

In this oversimplified example, the issues are obvious.  In real life, the sale frequently occurs after the original option pool has long been exhausted and the bulk of the options are vested to the grantees.  That said, better to be in command of the issue than not.

Nice award for Clarabridge

Sid Banarjee and the team at Clarabridge deserves the recognition for what a strong solution they've created and the customers they are serving with state of the art customer sentiment tools.  Last night, they won the prestigious Red Herring Top 100 award.
Here is the article link.
http://www.pr-inside.com/clarabridge-honored-among-this-year-s-r1253637.htm

Fox Business Network: The Pitch on 4.25.09

The Pitch segment on "Your Questions, Your Money" features a small business pitching an idea to a venture capitalist. In this case, me.

Potomac Tech Wire Event: The Future of Software

The folks at Potomac Tech Wire do a first rate job at executing events.   I had spoken at one of their events and was impressed at the dialogue on the panels as well as the audience response.   By the audience response I mean the size, questions and a diversity of local organizations of those gathered at the event.   

I find it striking that the PTW events draw a different audience than those of the Northern Virginia Technology Council's defense contractor laden following.    If you are considering breaking out of a networking rut, this might be one of your best opportunities.  The PTW events draw a new tech savvy crowd.

So, yes, I am speaking at the the upcoming Future of Software Event on September 5th and might be fairly accused of as a result of some self promotion here.  Ok, point taken, but these are very well done and the other panelists are some of our region's most knowledgeable people.   

Andre' Boisvert is a nationally recognized leader in open source software and is chairman of a few of the open source world's brightest stars.   Todd Bramblett runs an innovative, successful software development firm.  You get the idea.

The link to the event:

http://www.potomactechwire.com/seminar50.html

Living Social Investment Press Release

This is a great start up that we recently completed an investment into and whose Board I've joined......

LivingSocial.com Closes $5 Million in Series A Funding, Led by Grotech Ventures

Social Discovery and Cataloging Network Poised for Exponential Growth with 6.4 Million Beta Users

LivingSocial.com, a social discovery and cataloging network for reviewing and sharing common interests, today announced the company has closed more than $5 million in Series A funding. The round was led by Grotech Ventures and includes a personal investment from Steve and Jean Case. Since launching in February 2008, 6.4 million beta users have catalogued more than 80 million reviews of movies, books, music, games, restaurants and beers.

LivingSocial lets users manage and catalogue their interests and share reviews with peers across its themed vertical websites ReelSocial, ReadingSocial, TuneSocial, GamingSocial, DiningSocial and BrewSocial. Once posted on LivingSocial.com, users' catalogued items and reviews are seamlessly integrated and easily accessed across top social networks, including Facebook, MySpace, Bebo, Orkut and hi5. With their first round of funding, the company is poised for aggressive user acquisition -- continuing momentum from the significant growth achieved since its beta launch.

"The support of Grotech Ventures and Steve and Jean Case will help establish LivingSocial as the leading social discovery and cataloging network, a centralized, user-managed community where people can organize, review and share what they are most passionate about," says Tim O'Shaughnessy, CEO and co-founder of LivingSocial. "Based on the sheer number of reviews we already have on our site, there is no other interest-based community with the volume of user-generated cataloging, and we're just getting started."

In coming months, LivingSocial plans to introduce additional product enhancements and new interest categories, further building its network to leverage users' real world interests. The company's innovative management team, which includes technical visionaries and former product managers from AOL, Revolution Health, and Blockbuster Online, has identified an exciting product roadmap that will further enhance user experience.

"LivingSocial has developed an innovative way for users to manage, browse and share their interests in a whole new way, and no other site has as comprehensive an offering," says Don Rainey, general partner at Grotech Ventures. "Just like in the offline world, LivingSocial lets users discover new interests through a network of peers, and their potential to expand into even more verticals is powerful. It's a real value to the consumer."

For more information on LivingSocial, visit http://www.livingsocial.com.