VC in DC

First Round Capital Holiday Video

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

 

 

 

 

Potomac Tech Wire Event: Venture Capital Outlook 2011

Image via CrunchBase

Paul Sherman and the folks at Potomac Tech Wire always do a great job executing these events.   They typically sell out so if you have any interest best to buy a ticket sooner than later.  

I will be one of the panelists and the others will be:

Phil Bronner, General Partner, Novak Biddle Venture Partners
Thanasis Delistathis, Managing Partner, New Atlantic Ventures
Tige Savage, Managing Director & EVP, Revolution LLC
Harry Weller, General Partner, NEA

Image via CrunchBase

Here is a link to the event overview.

And a registration page.

Related articles

• What's Next According to VCs? (dividendsandpreferences.com)
• TechCrunch, Founders Fund and NEA Partner for Second Annual TechFellow Awards Program (prnewswire.com)
• Google Wants Groupon Because Social Ads Are the Future (gigaom.com)
• Considering a startup internship? Here's where to look (venturebeat.com)
• HelloWallet Secures Series A Financing From Grotech Ventures and Jean and Steve Case (eon.businesswire.com)

Tech Journal South Interview

Image via Wikipedia

Completed an interview with the other morning with Allen Maurer of TechJournal South.  He is a real interesting guy and we had a lot of fun discussing opportunities within the greater South for venture investment.

Opportunities in a "Recession-driven" America

Related articles by Zemanta

• Why VC's don't back Husband and Wife teams (startups.typepad.com)
• The Many Mythical Creatures of Venture Capital (startups.typepad.com)
• Finding Your VC Soul Mate (inc.com)
• Technology bubble ten years later: The money's not back (itulip.com)

The Many Mythical Creatures of Venture Capital

Image via Wikipedia

(I was in Urban Outfitters on Saturday afternoon in Georgetown and happened upon a product in the check out line called "Freakin' Magical Unicorn" gum.  Of course, I bought 3 packs and that began the wheels turning on mythical creatures and the Magical Unicorns in my world.......)

First from Napoleon Dynamite ---

Deb What are you drawing?

Napoleon Dynamite A liger.

Deb What's a liger?

Napoleon Dynamite It's pretty much my favorite animal. It's like a lion and a tiger mixed... bred for its skills in magic.

The reported odds of a venture backed company reaching an Initial Public Offering are 1 in 50,000.  Which makes the identification of these companies with any consistency a clear challenge.   It takes diligence and a keen eye to differentiate that real potential.  Yet, it would be delusional to assume you wouldn't miss one along the way.  So the essence of what makes the venture capitalist's job so enjoyable is the difficulty inherent in succeeding regularly.  The venture capitalist must find something that is inherently rare.  It takes hard work, an open mind and considerable patience.  But, it is rewarding to be part (in any way - large or small) of entrepreneur's realized dreams and successes. 

Clearly, though, the start ups who will go the distance are rare creatures and the results necessary to propel the company to an IPO are near mythical -- ideally from no revenue to over $100M annually in some short period of years.  The proverbial hockey stick that is present in so many investor pitches and missing from so many Board reports.  So the venture capital industry and its participants, since it is largely predicated on these IPO companies, must be adept at finding these rare companies.

Simply put, the industry exists to find these rare, almost mythical creatures.  As one could well imagine, finding them includes no small amount of diligence in addition to judgment.  And being sure of one's decision when the moment arrives (given the odds against it) isn't easy.   So the venture capitalist's job entails the endless pursuit of a relatively unique company.  The equivalent of finding a lyger or a unicorn?!?  Can one find mythical creatures in this day and age? 

Yes, they can be found and are found. 

Yet there are other mythical creatures in venture capital.  But they aren't just limited to moonshot IPO companies.

In practice, there are plenty of mythical creatures in venture capital in my experience. 

(Many of which are unlike "Lygers" in that they have not been bred for skills in magic)

In ten years of working within the industry, I've encountered many of these mythical creatures. Here are some my favorite mythical creatures from venture capital. 

The Polished Turdy Golden Bird

Wait a minute, what is this an incredibly great deal in my email box from an unknown investment banker?  Could that be?  Forget that it doesn't match any of my pre-existing criteria for investment stage, technology or geography, or that this is a great deal that just needs four times my normal investment bite size to get to the next level. And ignore that great deals don't ever find you, you have to find them.  Behold, the great email gift from the unknown investment banker, the polished turdy golden bird.  And brought to you by the mythical, generous-with-his-great-deals-even-though-he-doesn't-know-you investment banker.  And this special bird exists only in email.   If one follows up to find out more, the facts are much less golden and the deal much less polished.  This bird only exists in email and if you carry a mobile device, you can hold it in your hand.

The "Deal Doing" Follower Capitalist

This venture capitalist is like the satyr of old  -- half man and half goat.   The man half meets with you to indicate enthusiasm for your deal  while the goat half dominates the rest of his existence.  He doesn't lead funding rounds and can't help find you a lead.  

Which can serve to reduce the possibility of a deal getting done.  All of which is to say, that like the satyr he is "described as roguish but faint-hearted — subversive and dangerous, yet shy and cowardly". 

He is around deals, near deals, about deals but doesn't do them. 

Ahhh, who said all mythical creatures are well thought of?  

The Knife Floating Hummingbird

Image via Wikipedia

This is a deal creature is predicated on the concept that the  knife is no longer falling and now is the right time to invest in something that has never materially progressed as previous funding(s). 

This mythical creature isn't really falling, it is floating, you see, you just need to ignore gravity.  Yes, it is a knife.  But, you must ignore what you see and imagine its wings flapping so fast you can't see them. 

You must assume, as the potential investor, that you know how to pick the perfect time to invest.

The Stalled Rocket Phoenix

Many VC's firms support incubators or have carved out a portion of their fund to support early, early start ups.  This support is typically capped in amount or requires specific progress milestones to garner further investment support. This creates a possibility of a firm which has not met the milestones but needs investment.

These graduates of incubators or VC firm's start up set aside funds that are described as both "ready to take off" and ineligible from further financial support from the sponsor organization.  They are ready to rise even if they people telling you won't put their money where their mouth is.

So yes, while it is a potential phoenix -- it is just stalled where it is for the time being and perhaps forever. 

A Freaking Magical Unicorn

The deal everyone has seen and passed on that is now the perfect deal for me.   Yes, it is truly magical that I would be soooo lucky.  The Freaking Magical Unicorn is often from out of town, frequently from Boston, for some reason.   Probably because the Boston VC's have enough respect and affection for their peers in the DC area?  Or that they're ok with sending us a "great deal" from time to time?

One has to look upon this Unicorn and question the good fortune that is associated all the Boston VC's passing on this great deal. Why one is so lucky as to it arriving upon one's doorstep? 

Well, it is a Freaking Magical Unicorn  --- a great deal from out-of-town and that is carried upon the wings of improbability to one's doorstep.

The We're-Maid

Image via Wikipedia

The deal that is about to sell and create a fabulous return but just needs a little money to get to the finish line.   The We're-Maid management team sings a song of low risks and certain returns. 

But like the mermaids of legend, the temptation calls to jump from the safe boat to swim to the beckoning call of easy returns. 

But, alas, the currents are stronger and the swim longer than meets the eye.

All is inevitably lost faster on a We're-Maid than anything else.  The risk-less deal doesn't exist after all.  It is the mythical creature of lore not reality.

The We're-Maid team is probably the most frequently spotted of this list.

Looking at this list, I realize that there are other mythical creatures in the venture capital world including those within the industry as vc's, lawyers, bankers, entrepreneurs, etc. 

Perhaps best to describe them in another post or two?

Related articles by Zemanta

• 12 Animals Mistaken for Mythical Creatures (neatorama.com)
• Vampiric Dogs Spotted in Texas (patspapers.com)
• Just What Are Mythical Creatures? (brighthub.com)
• The venture capital well is running dry ... for the VCs (techflash.com)
• US venture capitalists step up tech investments (v3.co.uk)
• Failure Rate of Venture Capital Companies and the Risks Associated (brighthub.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)

What Cold War Spies taught me about Venture Capital

Image via Wikipedia

My father spent his career in the Central Intelligence Agency.   His specialty was communications.   Which for the CIA includes traditional communications and eavesdropping or listening devices.   The anniversary of his death in 1997 passed recently and it caused me to consider him, his influence on my life and my current career.

You see, Cold War spies taught me a lot about being a good Venture Capitalist.

Now I didn't know my father worked at the CIA until later in my teen years when he retired, but when I did find out that he worked there, it was enlightening.  Some loops closed.

Some things made sense to me that previously hadn't quite added up.  Like the personal thank you note to my father from Richard Nixon.  Or why was I born in 1959 Pendaiya, Cyprus in British Army hospital in the middle of a war to throw off British colonial rule. (Succeeded in 1960, Good job, Colonel Grivas!History )  Or why we had an unusual number of home movies of the Berlin Wall from the early 1960's, for example, or why my father was friends with all the Watergate burglars (who had all been to the house).  Or who or what were the most intriguing group of people I've ever seen gathered in a room  -- they were Cold War spies.  The real kind of spy.  The one who parachutes in, gets something done and gets out by whatever means that are available to them. No secret extraction mission. No bus or plane ticket out. The spy who seeks to cause a riot, or foment a revolution or steal a secret without leaving a footprint, fingerprint or trace of their involvement.  The one who does this knowing, that if caught, the United States Government will disavow them completely. The one who does it again and again for all intrinsic reward.  People who worked at great risk for little money.

The spies were gathered in the living room on our home in Kailua, Hawaii in the summer of 1970 on Sunday afternoon.  Drinking beer, watching sports, talking quietly.  They were just different in a way I couldn't grasp.  It was a busy time for the CIA then as the Viet Nam war was current.  As was a secret CIA war in Laos.  And then, of course, the C.I.A and the people gathered there were working on a massive project to raise a sunken Russian submarine from the ocean floor nearby to steal its secrets. (The Glomar Explorer)

Image via Wikipedia

But to me, at 10 years old, I sensed the gentlemen present were very different than regular people or anyone I'd ever seen.   There was the guy who could cross his legs at the knee and put both feet on the floor.  Hadn't seen that before or since.  He was quiet and small but not dismiss-able.   Power in a small package. Or the quiet middle aged man who was completely non-descript.  You really had to pay attention to see him in any group, he was adept at fading into a room or crowd unlike anyone I've ever met.  I saw him years later as an adult and was even more impressed by his ability.  He had spent a great deal of time in the Middle East and spoke Arabic.   Not that he would tell you that.  It might be better to say he understood Arabic but rarely spoke it as that would let others know he understood them. He was fine with them thinking he didn't know what they were saying.   Or the big, boisterous, Irish guy, who when I ran him into years later responded to the traditional "what are you up to?" with the response "If you knew, I'd have to kill you" when that retort was still 10 years from being a commonplace joke.   Given his history of parachuting out of planes into African backwater countries, it all had a palpable resonance and prompted an uneasy grin.

I asked my father, "who are these guys?" and he responded that he worked with them in his job as a civilian working for the US Navy in Pearl Harbor.    Which I accepted on face value.  But in the years, that followed I would ask about them, where they were and how they were doing.  I tracked them conversationally, in a manner of speaking and to the degree that I was told the truth, for twenty years.  They fascinated me from the time I met them.  They were extraordinary people who did level best to appear as normal as possible.  And they made more aware of the fact that extraordinary won't often appear that way on the surface.

The spies ascribed to certain principles including understanding that one can achieve great things and influence the course of events without leading the parade or, for that matter, being in it.   That there is no substitute for courage either in your convictions or your actions.   And sometimes one's greatest achievements won't ever be recognized, but that doesn't really make them any less great.  That there is no less dignity working in the shadows than the limelight.

So, as a venture capitalist, I attempt to find extraordinary people.  And they do a good job of appearing normal.  I have to sort them from people who are normal but present themselves as extraordinary.   I seek to influence the course of events in the companies I back without a heavy hand and certainly without leaving any mark.   I make decisions which rely on the courage of my convictions.   And I don't worry about whether any one understands my role in the outcome.   For the Cold War spies then and for me now, it is about the outcome.   And achieving a great outcome, or being part of one, is reward in itself.

Related articles by Zemanta

• US admits salvaging sunken Soviet submarine (telegraph.co.uk)
• Salvaging Soviet Sub (tech.bl0x.info)
• Son of U.S. spy marks 50 years since Soviet capture (calgaryherald.com)
• Spy agency seeks to take artifacts out of the shadows (canada.com)
• THE CIA: An Old Salt Opens Up the Pickle Factory (time.com)

Winners of Washington Business Journal Venture Capital Awards 2010

I guess should start with gratitude for being named the "Friend of the Entrepreneur" to the Washington Business Journal reporters and event sponsors, Argy, Wiltse & Robinson, Cooley Godward and Nasdaq.   I am truly grateful for the recognition.

Jonathan Aberman of Amplifier Ventures, John Backus of New Atlantic were my co-nominees and by any measure deserving of the award.   It was a nice evening.   The Washington, DC area is home to a thriving community of start ups, entrepreneurs, service providers, and investors.  It was wonderful to see some of the companies and individuals have achievements called out in a small setting. 

Image via Wikipedia

The Award Winners were:

Early Stage Deal of the Year -- Virtustream

Late Stage Deal of the Year --  Avail TVN 

Exit of the Year - Rosetta Stone

Angel Investor of the Year -- Nigel Morris

Friend of the Entrepreneur -- Don Rainey

Full list of Winners and Nominees 

Don Rainey Article

Related articles by Zemanta

• 2010 Venture Capital Awards by the Washington Business Journal (startups.typepad.com)
• Survey Finds Venture Deal Terms Improving, But Still Below Historical Levels (xconomy.com)
• Amplifier Ventures Founder Launches New Business to Help Family-Owned Businesses Transition and Grow (prweb.com)
• How to Work with Lawyers at a Startup (cloudave.com)

Great Blog Post on What its like to be a VC

For those interested in what are the pluses and minuses of working as a Venture Capitalist, Mark Suster, of  GRP Partners has written a spot on blog post about it.  Mark's blog, "Both Sides of the Table", is a great regular read.  What it is like to be a VC

Dear Entrepreneur, You can ignore my VC advice

Image by GrahamKing via Flickr

I work with a lot of entrepreneurs in the frequently challenging endeavor of growing small companies.    When one is continually entering uncharted territory, it is difficult if not impossible to be right all the time.  The CEO won’t be always be right and nor will I.

To that end, I explain to the CEO’s I work with that for me there is only one way to get in trouble with me.

And that is to ignore my advice and fail.

                              

As a starting point, one can take my advice or ignore it, succeed or fail, and from my point of view the relationship will only be undermined by a combination of failure and a consistent failure to listen to good advice. 

On the other hand, the entrepreneur that doesn’t listen and succeeds is ok in my book.  Listen and fail, that’s ok too. Listen and succeed, that’ll work. I have only had one entrepreneur in 10 years that failed to listen and, coincidentally (?!?) didn't progress his company very well.   Now, I am assessing listening skills and disposition to take advice from the very first meeting.

In any case, I make a living by helping entrepreneurs succeed and if I’m not more right than wrong with my advice – I won’t be doing it much longer.  I just assume that I’m not always right and I search for CEO’s who assume the same about themselves.

Related articles by Zemanta

• Few things as exciting as starting a business (sabusinessplans.co.za)
• Ideablob: Sometimes Prizes Are Not Everything (bloggingot.com)
• Why is Gen X so Entrepreneurial? Dysfunction. (myventurepad.com)
• It Takes a Village to Grow an Entrepreneur (stealthmode.com)

Need a VC List ? Here is the right one in the right way

Image by 500CPM via Flickr

It appears that Larry Cheng of Fidelity Ventures has built the end all, be all listing of VC Blogs.  Larry was previously with Battery Ventures and Bessemer so he knows his way around the industry.  If you have interest in a very functional VC list, where you can spend some time in order to gain the perspective of various VC's, this is your list.    I think Larry has done entrepreneurs a favor by building this list because as I have written previously, this is a match making effort for VC's and entrepreneurs.   If you're looking for money, invest some time on these blogs to find the VC(s) likely to be interested in your opportunity.  Avoid the most common mistake of pitching VC's, which is pitching to ones that will never have an interest in your business.

Here is a link to Larry.

Larry Cheng info

And here is the list of VC blogs ranked by their number of Google Reader subscribers.
Global VC Blog Listing

Related articles by Zemanta

• Bessemer is the bloggiest VC (adventurista.com)

Think like a VC, Act like an Entrepreneur, Jeff Busgang Article

This is a wonderful article.

http://www.businessweek.com/magazine/content/08_34/b4097042749532.htm

I particularly enjoyed the end where Jeff points out the value of not being afraid to be wrong and advises against standing still.