VC in DC

First Round Capital Holiday Video

These guys do a great holiday video featuring their portfolio companies.

 

 

 

 

10 Years in VC, 10 Lessons about Entrepreneurship from the "Dark Side"

As a former entrepreneur, now on the “dark side” of Venture Capital for the last ten years;  here are 10 lessons I got from the investment side of  that experience .  These lessons still serve me well on a daily basis.

1.       Price doesn’t really matter

Image via Wikipedia

If a deal works out, the price was right at some level. Get in good deals, and forget about getting the last dollar in a negotiation for that good deal. If the venture fails, whatever you paid was too much.  Yes, in the event of success, you would have made more if you paid less… but that is always true of successful investments. 

 2.       Management is everything

Great management will make the right pivots at the right time.     The talent, drive and vision of the management team will determine success or failure. If you’re looking at a great idea, if it’s paired with poor management…run.

 3.       Never pursue a small idea

It is no safer, no easier and much less rewarding to pursue a small idea rather than a big idea..  What’s the point in trying to change the neighborhood when you can change the world.  Small ideas struggle to find their way, so do larger ones, so you might as well be working on the large idea. Small ideas are never worth the trouble.

 4.       You are not a rock star and never will be one as an investor

The entrepreneurs are the stars and they always will be the stars.  If you want to be a star go be an entrepreneur.  If you’re an investor, work to make your entrepreneur a rock star.   Enable their success and enlist recognition for them and what they’re doing.

 5.       If you don’t add value outside of board meetings, you’re not adding value

The board meeting is a stilted environment for contribution.  If you can’t establish yourself as a worthy advisor outside the board meeting, you’re likely not one in it.  

 6.       Don’t invest in people who ignore good advice

Some people have a world class talent for ignoring good advice.   Many of them end up as self employed entrepreneurs . Those kinds of  entrepreneurs are not worth investing in.   Great people and great business people are more open to alternate points of view.  Invest in bright people who don’t or won’t ignore good advice.

 7.       Try to win in the long term….not the short term

If you strike deals which over time prove unfavorable to the other side, your opponents (and they will view themselves as such) will be  motivated to screw you.  And they will usually succeed at doing so.  Strike agreements that are good now and still fair later.

 8.       Never panic

There are few things uglier than a scared venture capitalist.  Don’t ever be anxious to the point that anyone notices.   Sometimes slow and steady wins the race. Not many good decisions are made based on fear, especially business decisions.

 9.       Be nice to people;  it pays well

Image via Wikipedia

Most of the better deal flow comes from people who like me better than my venture capital competitors.    Why me and not them?   I strive to  treat everyone with respect. (I’m sure it’s that and not my jokes…)  Be nice to people.   It pays off every day.

 10.   Great deals tend to be great already

In ten years in the VC business, other VC’s haven’t really ever asked me to look at anything other than their dog deals.   The great deals are out there but you are going to have to find them yourself.  The good news is that they are great deals already.  The challenge is to recognize that.

 When I started in Venture Capital, my firm directed me to create “proprietary deal flow” which was a term that I didn’t initially comprehend the meaning of.    Proprietary deal flow refers to development of a deal pipeline that contains opportunities not seen by others.   Today, ten years on,  I have pretty good proprietary deal flow.   To create that proprietary deal flow, I needed to internalize the 10 lessons listed here -- which might be summarized as be fair, be a good person and look for good people to back.

This article was originally published on BusinessInsider.com

Related articles

• The Many Mythical Creatures of Venture Capital (startups.typepad.com)
• Fred Wilson: Invest In 'Ugly Adolescant Stage' Startups (huffingtonpost.com)
• The Unbundling of the Venture Capital Industry (startupboy.com)
• The founder's life for young VC's (finance.fortune.cnn.com)
• How to sell out to venture capital without feeling like you're a sellout (tech.fortune.cnn.com)

Angel Investor Chris Dixon on Start ups

Image via CrunchBase

Chris Dixon, CEO of Hunch.com and noted angel investor, is outspoken and thoughtful about investing in start ups.  I appreciate his perspective.  Here are some recent interviews.

He talks about mis-alignment within the VC industry, the impact of people and the need for smaller VC funds.

<

Related articles by Zemanta

• Watch Caterina Fake And Chris Dixon Explain Hunch (businessinsider.com)
• The Small Pool Of Smart VCs In New York Has Expanded (businessinsider.com)
• Stealth Mode Is Back! (businessinsider.com)
• What I learned at Angel Boot Camp and Techstars demo night (gabrielweinberg.com)
• Silicon Alley Insider: Should You Drop Out If You Want To Start A Company? (businessinsider.com)
• Chris Dixon Bests Conway, Hoffman For Top Tech Angel Spot (readwriteweb.com)

The VC's Urban Dictionary

Maybe one day there will be a full, "urban dictionary" for venture capitalists.  Until then, I respectfully submit the following 7 terms with definitions for potential inclusion.

1.    Dog Boy

It is said that one should know that when you see a car go by with a dog in the front passenger seat (head in or out), that the dog thinks he's driving.   A dog boy is a management team member who isn't materially affecting the progression of the enterprise without any knowledge of this ineptitude.   Usage as in,"Hey did you meet the C.O.O. at Acme Software?  Seems like a complete dog boy".  

2.    Fluffer

This is the local CEO that periodically and regularly spins up a VC into providing a term sheet for a financing that the CEO will not ultimately pursue to completion.   Since both the CEO has a back-able deal and VC's don't make it known to whom they've provided Term Sheets, this can go on for some time.  The CEO fluffs for reasons only known to him.   As in "Did you hear that Super VC Partners put a term sheet down over at Rocketball?  Yes, I am sure they did, but is it signed? That CEO is a total fluffer."

3.     Goose Man

It is said that a goose wakes up every day in whole new universe.  A goose man is someone who fails to recall previous agreements, verbal or written, and must be reacquainted with them upon each meeting or discussion.  This is typically most dramatic as a tactic to change a something at the 11th hour.  "I don't recall agreeing to that price, provision or term", he'll say, when is it the central tenet upon which the deal conversation proceeded from it onset."

Image by Muffet via Flickr

4.    Happy Ears

This is a CEO who hears good news or positive feedback when none is present.  As in, "The CEO told me that they were going to close a huge deal at Cisco and I spoke to the guy over there at Cisco and he said that he might look at it, he might not look at it, he hadn't decided."  Whatever the scenario these ears can hear encouragement, support, purchase intention or imminent good news. 

5.    Monkey Punch

When a CEO or management team attempts to change  or "monkey" with previously agreed upon terms at a liquidity event or exit to make them more favorable to the CEO or management.  "I know we agreed to the liquidation preference when you provided the critical financing as motivation in a time of greatest need/highest risk for you to take the risk, but now, we think it is unfair to profit so much."  This is a tough one to take and always a hard hit without warning. 

5.    Virtual Pass

The confirmation of a recently funded CEO that he neither met or spoke with the VC who just told you at a networking event that he passed on your deal.  "Yeah, we met with them and didn't see the value.  Glad you did it though."  As time passes, and especially if the deal progresses well, the virtual pass tends to have "occurred" early and early in calendar time.  So, "we didn't see the value" becomes "it was just to early when we saw it".

7.    Wet Shoes

The mal-intentioned congratulations by competitive VC's on a closed deal.  "Hey I looked at the deal, peed on its shoes, was it wet when you picked it up?"  May also be used as in combination with a Virtual Pass.  It is to be clear, it is that not only did they pass - virtually or otherwise -- but they really disliked it when they did so.

8.     Faux Genius

The impossibly difficult admission by a competing VC that you did a great deal and your competence must be acknowledged in some way.  They will say "We were talking about your deal and how well it is working out and asked each -- 'when did Don become such a genius?' -- I guess we all shouldn't have passed on it."

 articles by Zemanta

• Series Seed normalizes VC term sheets (news.cnet.com)
• How Your Term Sheet Affects Your Reputation (readwriteweb.com)
• The Many Mythical Creatures of Venture Capital (startups.typepad.com)
• AngelList Boulder and Some Thoughts on Seed Investing (feld.com)