A Sack of Seattle

Giant Thinkwell war room was all shock and awe. Nice job on the launch

I got a glimpse of the launch of Giant Thinkwell today and was totally impressed. There were about 20 some odd people hanging out in various forms of military garb, low grade house music wafting in the air, lots of computers and screens, and Sir Mix-a-Lot orchestrating the whole thing -- what were all these people doing in our conference room. Well, drinking energy drinks, eating salami and Dick's Burgers and creating an online buzz the likes of which I haven't seen. This small team was able to get over 20K likes in a period of hours which in my calculation means they went from zero to a million page views in no times flat. There were multiple aritcles written in blogs and press....all in all a job well done by a creative, ambitious and hard working team. Love the energy guys! Nice job 

How Founder's co-op is helping Seattle?

 

This may be a repeat for some of you, and is a bit self promotional....but Mark Suster (General Partner at GRP in Los Angeles) wrote a thoughtful piece in TechCrunch yesterday about the startup scene here in Seattle, including a very generous mention of what we're up to here at Founders Co-op. 

Last night I was fortunate enought to be voted Best Angel / VC Investor at the Seattle 2.0 Awards. I am truly honored -- and feeling undeserving. I will work harder to actually earn this award. There are lots of more experienced and better vc's than I in Seattle -- They may not be as good at promotion but when it comes to making great bets on great companies I still have a lot to prove.  I'll get there though. Thanks for the acknowledgement. 

 

Our Founder's Co-op office supply list

 

little yellow lined pads (3 dozen)

post it notes

pens blue generic (4 dozen)

pens (blue) 1 dozen better ones

staples

coffee cups 

plastic cups 

paper 2 boxes

some kind of snack

Nuts(almonds) sea salt & vin

white board markers 

paper clips 1 box

eraser

paper towels (lots)

clorax wipes for white boards

cream (for coffee)

dishwasher soap (cascade)

scrubber brush for sink

dishwasher liquid for sink (i.e. joy)

sponges

And of course Makers Mark

 

You should check out Simply Measured

Simply Measured is a great story. The company started just over a year ago and was known as Untitled Startup (truly www.untitledstartup.com was the URL).  Damon Cortesi and Aviel Ginzburg were the original co-founders.  The company attempted to crowdsource their way to a business in the social media space. In the process of doing so, they created row feeder over a weekend. RowFeeder gained instant traction because of it's simple message and implementation -- the site was known for tracking tweets in a spreadsheet.  But it wasn't until Adam Schoenfeld, the third co-founder, joined the company in April that the company really started to make sales and realize that it was in the business of taking data and giving the data back to customers so that they can manipulate it, play with it, and analyze it -- usually in a spreadsheet. Their customer list is friggin impressive -- Major PR companies, Fortune 500 companies, and social media elite all use the product.  They have over thousands of customers relationships in less than a year! Check out the products rowfeeder and exportly. Guess what -- simplicity sells -- when executed well. This is going to be a big company one day soon -- you should check them out now!  

 

 

Should more angel investors consider a royalty based investment model?

I just answered this question on quora -- please vote it up here.

I absolutely think that royalty and revenue based finance should be considered by angels and funds. Ok -- I'm biased. I'm so convinced that revenue based finance is important that I started a company called RevenueLoan in addition to my equity orient Seattle based angel fund Founder's Co-op to pursue this model. Why? Because I think that there are lots of instances and lots of companies where this model is preferable for the entrepreneur than straight equity. Let me explain, revenue based investments have the following benefits when compared to straight equity:

1. Generally, revenue based investments are cheaper for the entrepreneur than straight equity. Often, significantly cheaper. If you think about selling equity -- often that's for 20% of the company. One can think of that equity sale as a 20% perpetual royalty.
2. Revenue based investments don't involve significant control provisions. Entrepreneurs who don't want the hassle of dealing with investors on the board of directors are attracted to royalty based finance.
3. Revenue based investment align entrepreneur and investor incentives in growing revenues and growing the revenue line and thus, growing the business. This is GOOD! And the right focus. When the entrepreneur and business increase sales, the entrepreneur wins and the investor wins. When growing sales takes longer, the entrepreneur isn't punished. This is GOOD!
4. The main objection to revenue based investments in my opinion revolve around the precious commodity of cash and not profit. It's true, revenue based investment require the company to have sufficient margin to pay them off and they take precious cash out of the company. That said, no investment is free and the benefits of revenue based investments far out weigh the costs.

In short, in my opinion, royalty and revenue based investments are a great tool for angels to have in their tool chest.  

Just my -- albeit biased -- $0.02.

 

Simplicity As a Compliment to Powerful...introducing Big Door's 5 minute gamification process!

We all know that making things easier for users is the right thing to do, but here is a real-time case study of that concept.  Our portfolio company BigDoor announced their public beta in June and since then they have had over 500 publishers and developers register to use their platform. That's an impressive number, but while their stuff is flexible and powerful it has also been relatively difficult to use.  Until now.  They have been hard at work to create a simple oboarding process for new partners and also significantly simplifying the initial implementation.  Gamification isn't a one-size fits all solution, but most websites have similar needs in the beginning.  So BigDoor has taken the approach to build all of the bells and whistles for their power users, but at the same time they have now made the initial install brain dead easy.  They announced this big improvement to their platform first thing this morning, with the headline "BigDoor Launches the Five Minute Gamification Process".  So far today they've had 97 new publishers and developers signup just this morning, and it's not even 9:00 AM on the west coast yet.  

It will be interesting to watch how this day unfolds for them, but this is a real-time example of how simple can be a great compliment to powerful.  Click here and gamify your own site in 5 minutes.

The story behind RevenueLoan...and why I'm excited about the company

I started RevenueLoan because I am on a mission. I have a passion for entrepreneurship. I've been starting and running technology companies for 15 years now.  I love entrepreneurs and generally find myself spending all my time trying to help them with all aspects of their business. 

Why do I do this? Well, two reasons. First, I received lots of help as a young entrepreneur. I wouldn't have been nearly as successful had it not been for the help and mentorship of lots of kind friendly people. Second, I believe MANY people aspire to be entrepreneurs and to build something that they and their employees believe in and can be proud of. To accomplish this goal, financing is a often a core impediment to realizing small business success and growth. 

Two and half years ago My partner Chris DeVore and I started Founder's Co-op because we thought that the traditional venture capital model was broken.  We thought success for a startup company was better facilitated by a super angel entity than by a traditional vc fund. We continue to believe this....and are in the process of proving it! I want to be clear -- this does NOT mean that I think venture capitalists suck or are useless. On the contrary, venture capitalists play a vital role in the startup process. 

During the first year of operating Founder's Co-op, we perceived another opportunity to support a group of underserved entrepreneurs. These entrepreneurs had small businesses and big visions and were impeded because they didn't fit traditional bank debt or traditional venture capital or angel equity models. This market insight-- which was  facilitated by Erik Benson and the partners at Voyager Capital -led to the creation of RevenueLoan, the company. We did the first two RevenueLoan investments under the Founder's Co-op umbrella (or flag) before determining that the opportunity required a separate investment vehicle. One of those deals has already proven to be very successful for the entrepreneur and for us!  

Founder's Co-op is on a mission to innovate in the area of financing of early stage technology companies. RevenueLoan is a vital innovation.  The reason I'm so excited about the company is because I think it's the best investment agreement I know of that truly aligns entrepreneur and investor incentives.  RevenueLoan puts an extra focus on increasing top line revenue growth which for any entrepreneur is a critical success metric!

In conclusion -- and just to put a fine point on it -- I'm excited about RevenueLoan because I think it is going to help a large number of entrepreneurs grow their businesses.  

Lookstat founders are growing up

Just had lunch with the LookStat founding team.  They're a little annoyed that their numbers of users and revenue haven't taken off as much as they'd like. In response to this, the team spent some time this week asking themselves "why"?   Well, they came up with some great answers.  Turns out they've been selling features not benefits. Also, turns out they haven't explained to users "why" they should use their product at all. Lastly, turns out that users don't know what to do when they first come to the web site. These insights are spot on -- and relatively easy to start fixing and addressing. Lesson learned in business: every breakdown is an opportunity for a breakthrough. Go Rahul and Casey -- you guys have game. Business game that is ....not golf game :-) 

The first big door dinner meeting is in the books

Just returned from a lovely dinner with Brad Feld at Foundry Group, Keith Smith and Jeff Malek of Big Door.  The meeting had 2 bottles of wine, 7 plates of food, and 3 desserts. Good food and drink helped make the conversation flow. 

The meeting was interesting to me for a lot of reasons. First, from a big door investor perspective, I think Keith and Jeff are really onto something. The response from the market in terms of interest in what Big Door has built is awesome. It's made Keith giddy and busy just trying to keep up with responding to the interest. Now, the trick for the company is to figure out what the conversion rate is going to be of leads to customers and customers to revenue. A year from now, we should be able to look back and see what an ideal customer is and what the average expected lifetime value of a customer is. We'll also be able to state what makes a bad customer fit. All of these facts are very important to learn and all impossible to know today. So the conversation at dinner was about how best to deal with this ambiguity and at what rate to respond to what appears to be real demand in one's product. Brad made an interesting point that when demand is real entrepreneurs often make the mistake and constrain growth because of capital (i.e. they don't lean into demand enough). He's also seen entrepreneurs make the opposite mistake in the 90's -- spend in the absence of real demand. So the trick here is to figure out how real the demand is.... 

Second, as a person running RevenueLoan, the conversation was totally relevant to me there too. I've been impressed (not quite giddy) with the amount of interest and demand in our company and I found the conversation about Big Door instructive with how I should think about aggressively pursuing demand. 

Notes from second founder only meeting at Founder's Co-op

We had our second founder only meeting last night at Founder's Co-op.  You can see the video that was produced from the first meeting here. This meeting was even better. We had about 16 attendees. The agenda was the same as last meeting

• Opening toast and optional shot of Maker's Mark
• 1 word answer to how you are feeling right now
• 3 minute update of business and personal high and low
• open discussion

We really started to get into sharing around core issues of sales and marketing as well as partner dynamics (either hiring or firing).  At the end of the meeting, I asked what we could do better so attendees got even more value. People made the following observations:

• Request for more regular meetings -- happy hour fridays so informal sharing and social building increases
• Even though we share an office, actually sharing tactics and know how is hard. As people understand what each company does and what each founder knows, people are really excited to collaborate more!
• Have focused meetings on specific topics like SEO, white labels, infographics, AWS, etc. 
• Play more beer pong.