A Sack of Seattle

Do I suck as a venture capitalist?

I thought I'd write a post following up on my guest post on TechFlash and let everyone know some of the things that I know I suck at when it comes to investing.  You should feel free to comment and add to either list  (I of course prefer you add to the why I don't suck :-) .  

Why I don't suck as a venture capitalist

• I have experience running and selling start up technology companies. I've been doing this for 15 years, and have managed to sell 3 companies for a nice sum of money and 2 for a loss (both about $0.50 on the invested dollar).
  
• I have managed up to 120 people. I've recruited lots of VPs before and managed many management teams.
  
• I love sales of all kinds -- and know how to sell.
  
• I blog and try to be transparent about my position on topics.
• I have an opinion and am direct. You may not like what I have to say but most people know where they stand with me and whether I like their business.
• I think of myself and am told that I'm approachable and open.
• I know my shit smells  -- and I know I've made lots of mistakes (and continue to make them)
• I'm scrappy, cheap, aggressive,and know how to bootsrap business 
• I'm willing to be wrong
• I have an emotional IQ
• I try not to take myself too seriously
• I care a lot about entrepreneurs and the community. 
• I pay my taxes and am a huge fan of the films : Old School and Meet the parents

Why I suck as a venture capitalist

• I'm now an investor and think like one
• I'm valuation sensitive. We tend to deals in the sub 2MM pre-money valuation zone. 
• Our deals include a liquidation preference as a standard term.
• I think my experience should matter to you
• If I dont' like your business or you, I usually tell you (doesn't win me friends)
• I'm cheap and sometimes negotiate too aggressively.
• People have told me that my direct style intimitades them. I don't mean to!
• I don't read all my emails and am occasionally lame about follow thrown
• I have definately mismanged expectations in the investment process on more than one occasion.
• I like to make money.
• I am wrong plenty. 
• I care about the people side of business a lot.
  
• I don't have enough money to invest -- I have a small fund and thus can't do bigger deals.
• I like the movie Wall Street and once thought about being an investment banker, an options trader, and a management consultant. I did none of the above but would probably still enjoy being an options trader.

In defense of Ignition Partners

This is a comment I wrote on Tech Flash in response to the recent Ignition bashing (be sure to read the comments section to get the full discussion)

I've actually worked with Ignition Partners and lost some of their money when I wasn't able to get Judy's Book to a successful exit. Moreover, I haven't had any business relationship with the firm for the past year.

I tell you this so you have context for my comments.

I wrote my post about "Do VCs suck" in part because of the negative comments about venture capitalists (and Ignition in particular) on this board.

I encourage people to read that article -- and to give this firm (i.e. these guys) a break.

• Yes -- they're venture capitalists.
• Yes that means they have companies that don't make and entrepreneurs that they say "no" to.
• Yes -- they've human and make mistakes (entellium).

But I have to say, you learn a lot about a firm when you see how they deal with things not going according to plan (i.e. something other than success). In my experience over 3 plus years, they're smart, well meaning professionals with a lot of value add.

In general, I recommend these guys. I would work with them again. They have operational expertise, know-how and relationships that are of tangible value.

If you're an entrepreneur and want an informed opinion of this firm -- contact me.

One last thing -- I think the anonymous flame throwing posts on this board (i.e. Tech Flash) are crap. If you've got something negative to say -- put your name on it and stand behind it.

I'm a huge fan of UGC, but it needs to be managed and constructive and right now this board's tone and value add to the community sucks.

My post on why VCs (don't) suck

You can read the whole article here on TechFlash

VCs are worried about exits

VCs are worried, originally uploaded by a sack of seattle.

I thought this was interesting.

A vc blew and an entrepreneur jizzed his pants

Forgive me for the suggestive nature of the title of this post. It's a play on the song which I've become a huge fan of ...if you haven't heard the song you should go here and listen to it. 
I was recently reminded of the time (1996) when Ted DIntersmith of Charles River Ventures came to our offices at abuzz and expressed interest in what we were doing. I was SO excited -- it was exciting to have someone acknowledge what we were doing with the potenital of investing a few million dollars to make our dream real. Well, when he came to our offices on Galen St. in Watertown, MA I think I jizzed my professional pants. I smile just thinking about that time. I never did a deal with CRV -- Ted was just doing his job and checking out "neat"technology companies in the Boston area. I share this story because entrepreneurs shouldn't get too excited when a VC calls on them - don't jizz your pants - there can be lots of reasons for the call....and a vc call doesn't make a deal or a company. That said, it's natural to be excited -- and by all means take the call and see where it leads.

Revenue is the only milestone that counts now

It used to be that release of beta, hire of a VP, or first 100K eyeballs were milestones in the life of a high tech company and in the eye of investors. They showed progress. Today -- these events are just that events. They are not events on the way to revenues. Revenues show progress -- and if you want to be more specific, revenues are milestones on the way to cash flows and profits. 

Venture Firms: "Closed for the holidays"

Since the great stock market crash of 2008, a number of entrepreneurs raising capital have asked me for advice on their financing.

My advice starts with my world view: Given the recent swings in the public markets and the uncertainties about the size of the global recession heading our way, venture capitalists won't be doing deals for the remainder of the year. 

Venture capitalists won't tell entrepreneurs that they have an invisible sign on the door that says: "Closed for the holidays."  But trust me, things are closed tight for the next three months (and perhaps longer). 

The venture capitalist thought process will go something like this:

• Their current portfolio will start to need more attention as the ripple effect of slowing demand hits projections and revenue lines.
• Moreover, their current portfolio may well require more funding and so venture firms will hoard cash for follow on financings.
• With uncertainty about the overall economy and potential exits, venture firms will enter the "wait and see" mode on investments.

All these factors will contribute in the short run to a slowing of new investments.
So what's my advice for entrepreneurs?

Look closely at the assumptions underlying your business plan and the amount of capital you plan to raise. And get prepared to make do with less.

You're going to need to get your hands dirty in the gritty world of bootstrapping. 

In technology companies, this "bootstrap mentality" isn't that easy to come by. 

But in the land of scarce capital resources and easy sources of Series A funding, your business plan is simplified to the "cash flow one step."  (?) Get financing from customers in the form of revenues! 

Whatever your grand plans, you need to show revenue traction and capital efficiency.  Given the choice between growth and survival, make sure survival is taken care of first.  Then and only then will you be able to grow.

If this seems harsh, or not what you had in mind, then you, too, should close for the holidays.

Good post on angel investing

Worth reading this post at gigaom on angel investing in the current economy.

The 20 worst VC investments

This article on The 20 Worst Venture-Capital Investments of All Time is kind of fun and interesting. I remember many of them and suspect you will to.

Angels outperform venture capitalists

John Cook of the Seattle PI wrote an interesting article about the performance of angel investors versus venture capitalists.  It's worth reading here.