gdp's Comments

Ask the VC : How To Wind Down Your Company – New Series

Wed, 7 Oct 2009 20:54:07 +0000

It doesn't have to be a black eye if its done right, and that's why I'm happy you are addressing this issue. Huge old companies lay people off and discontinue product lines. Heck, they do it because some outside consultant with a freshly minted MBA and nice suit flew in and said: "its not core...out!" So I always think there is less risk with entrepreneurial companies because this is all we do and everybody has a big part in the success/failure. The big companies (and good entrepreneurial companies) give some notice to everyone. Might not be as much or the news anybody wants to hear.....no different than what I'm sure you're going to outline. However, I've seen some flameouts that had raised 8 figures go into the wall as you say and have left employees without a final paycheck and turned off a service that an employee in a Fortune 100 company bosses' boss had to cut short vacation to figure damage control. Not a good way to make the mortgage and not the attention you want from your bosses' boss. I guarantee you.....know for a personal fact...hit me in the face...that guy who had to meet with his bosses boss after she cut short a vacation.....never will buy from a entrepreneurial company again. I also have had people tell me they'd love to work for me but their partner said after their last screw job...no way. So do it right and don't piss in the well.

Ask the VC : How To Wind Down Your Company – New Series

Wed, 7 Oct 2009 17:46:12 +0000

It is a good idea. I'm sure the legal aspects will be covered but there is one constituency that wasn't mentioned and that is the entrepreneurial community as a whole. When you're open on Thursday and closed on Friday and your employees are reeling and your customers are wondering if they are going to get fired for doing business with your company.........You've pissed in the entire entrepreneurial well. It makes it that much harder for other entrepreneurs to find employees and close customers because people will remember and tell others about "that entrepreneurial company which screwed me" for life. I've seen some well funded companies with vc's that I thought were reputable do this.

Feld Thoughts : Eliminate Ranges From Your Negotiating Vocabulary

Thu, 24 Sep 2009 14:19:07 +0000

Yes you are absolutely right on that one. I'm sitting there assuming
we're talking about an entrepreneur asking for funding....but you are
completely right...if you ask to buy my boat, antique car, or
company....and I didn't put it up for sale. You owe me first offer.
Good post as usual.

Feld Thoughts : Eliminate Ranges From Your Negotiating Vocabulary

Wed, 23 Sep 2009 17:43:16 +0000

Again this is spot on. I would also propose a corollary which is that any additional blathering that you do trying to justify your price after putting it out there weakens your position tremendously because the other party realizes you're not confident in your position. You figure out what you want, how bad you want it, what you can live with, and put out a price. If it doesn't work so be it you have to be either ready to walk or listen to a counteroffer. I would also say that the person that is on the selling side (getting money transferred to their account) has to be the one that puts out the price first. I can't stand when the seller tries to get the buyer to put out a price. To use the car analogy: "How much would you like to pay for that car?? One dollar. What?! You asked me a question....how much would I like to pay for that car....one dollar. Now what are you willing to sell it to me for?" I think trying to "judge" the other parties reaction or sophistication by putting out a range doesn't even work when negotiating with my 7 year old daughter. If I told her we could pick one or two bags of apples this weekend at the orchard she'd start at two and work for three.

Feld Thoughts : The Founders Visa Movement

Fri, 11 Sep 2009 15:34:48 +0000

The real issue shouldn't be around "founders" it should be do we want to let foreign nationals that have received technical degrees in the U.S. work in the U.S? To let you know where I stand on that one I think that if you graduate with a threshold GPA from an accredited engineering school they should present you with a green card along with your diploma. What is INSANE is that we educate people and then not let them work in the U.S. If you care to argue that we shouldn't educate foreign nationals....I'll let you go down path, because I think there is more logic to that argument than investing in the most important asset the U.S. has: Human Capital, and then basically throw it away or worse burn it. Don't misread me....I think we should attract the best, brightest, most motivated, from anywhere. So I think the whole process (from exploiting Visa holders to providing amnesty for people that blatantly don't follow any rules, etc) is flawed and this is some small band-aid. We should strive for better.

Feld Thoughts : An Angel Investor Group Move That Makes Me Vomit

Wed, 26 Aug 2009 13:50:27 +0000

It is a fact set in stone that if you charge people to present the only people that leave with less money in their pockets than before they presented are the ones that did not receive funding. People who got funding have more, Angels who didn't pay have the same. I would say that the point of an angel group to pre-screen deals would be to make sure that deals ARE READY (in caps as you put it) so nobody wastes their time and money. What else could pre-screening be for? Why bother having an organized group? Now then if we want to discuss what is a feasible way to get entrepreneurs advice/coaching/reviews I'll discuss that. It does take a lot of time. Time is money. If you did it for free you couldn't support your family. All your time would be taken. There has to be some way to pay for it. But that's not the discussion

Feld Thoughts : The Challenge of The Ideal First Round Term Sheet

Wed, 26 Aug 2009 13:29:49 +0000

As soon as I see the word "tweak" or "start" with I see the "full employment act" of lawyers being invoked. My lawyer has to make a change otherwise I'll think what am I paying for and then the opposing lawyer of course can't have the stigma of looking weak by just accepting the changes, and so on and so on. (I'm convinced once you pass the bar there is a secret ceremony where this is taught) There are many deals where the terms are fixed and you don't "tweak" that are larger than first round deals. Big expensive car leases, purchases of database software from Microsoft or Oracle, computer purchases, lines of credit, etc.

Feld Thoughts : An Angel Investor Group Move That Makes Me Vomit

Tue, 25 Aug 2009 17:28:41 +0000

Popular post. It boils down to this: The only ones that really pay are those that do not get funded. And that really feels like picking on the short bus kids. What you are really doing is making the person that doesn't have a lot of money, and was unsuccessful in raising money pay all of the expenses. And an important point is that they are paying the expenses for the 19 people out of 20 that supposedly are wealthy but haven't put up any money in the last year, and are using the meetings as a social club. If you get funded money will go towards the fee, so the angels in this round would really prefer there be no fee (why subsidize those that didn't invest) The only people that should be screened by their ability to pay money should be...de da dee.....those that are there because they supposedly have lots of money.

Feld Thoughts : An Angel Investor Group Move That Makes Me Vomit

Mon, 24 Aug 2009 19:17:15 +0000

The best way I can put it is that it feels like "paying somebody to be your friend" When you pay to get the opportunity to talk to somebody it always feels like I'm paying to be your friend. I've never been able to get past most of the CEO networking groups because it just feels like this. I've organized one, but the only payment you have to make is playing credit card roulette for the tab. (second to last persons card picked from the hat by the server pays the tip, last pays the tab) Sometimes, I even get this feeling when going to conferences meant to talk about the industry....

Feld Thoughts : Terms, Terms, and First Round Terms

Mon, 17 Aug 2009 15:07:48 +0000

Totally agree. Not to be a stickler but I would also add founders salaries. Maybe we're taking that as a fixed/non-negotiable number because it would be in the budget and therefore valuation would reflect if the salaries are relatively high/low. Anything that can focus people on the right issues (price and valuation) is good. The toughest part of all negotiations is everything but the main issues because really what you are doing is focusing on worst case i.e. I need to prevent you from screwing me which gets personal.

Feld Thoughts : The Best Board Meetings

Mon, 10 Aug 2009 15:09:44 +0000

There is one other thing that I think makes board meetings go much smoother. Any question that requires research needs to be asked 24hrs before the meeting. So I like to get the packet out three business days before, hopefully also including a weekend. I.e. Friday for a Wednesday meeting. That way you don't have the head of finance or sales fumbling around trying to put something together on the fly. Instead as a board member you should get a crisp response. This does weed out the people that come to the meeting and read the packet. They won't be able to help themselves but ask a question that obviously requires research.

Feld Thoughts : The Best Board Meetings

Thu, 6 Aug 2009 19:07:56 +0000

Great post. I always have set the ground rules that phone in's are not allowed. I understand if you can't make it but I always set the meetings for the same time agreed on in advance: For me its a specific day during the 2nd week after a quarter. The phone in disrupts the meeting so much. I've allowed exceptions where I said a person could just listen in but they've never worked as inevitably they can't hear something, understand something, and they can't help themselves and interrupt. Totally kills the flow. Board conference calls for a specific issue are different. I notice you didn't put in new projections in point 4, and I hope this was on purpose. I think one of the other things that kills a board meeting is grinding on and on about numbers (which frankly is what most vc's are comfortable with). The numbers are the numbers and in 90 days the next numbers will be in I'm not saying you don't layout a framework each year and split it into quarters, and see where you are with actuals versus plan and adjust.....but analyzing why a number changed in a spreadsheet doesn't look at the root cause which is what I think you're trying to get at in point number 5.

Redeye VC : Help me rename "Lifestyle Business"

Wed, 5 Aug 2009 16:50:40 +0000

Came back and to see if any other good thoughts came. Still dismayed at how many of the comments show a negative view "lifestyle" businesses and this is supposed to be a positive forum about the term. niche, small, basehit, non-exit, etc. Anybody hear of SAS the $2.6B software company??? By definition lifestyle business.

Highway 12 Ventures : The "Lifestyle" Company

Tue, 28 Jul 2009 15:12:12 +0000

"There were no demands or expectations from outside investors that I had to grow the business or sell it within a certain period of time to give investors a return"....that's a negative sterotype. You see you might even have stronger demands from all the founders.....if you've got a bunch of hard charging people they don't want to sit around and not make money...that's more pressure than listening to a vc whine. I think the key is saying, there are some businesses that can leverage outside capital and there are some that can't. That doesn't mean you can't have a high leverage business. Look at www.VRBO.com that must be one hell of a high leverage business. People love high tech because of the leverage. Its hard to leverage things like consulting or selling cars, but you can leverage technology when you have gross margins exceeding 90%. I'd also say Highway12 defines a lifestyle business. Now if you took offense to that like many vc's do when I say that you have to admit you've put a negative connotation to the phrase "lifestyle business". But think about it, you can't go raise a mega-fund and be successful. And many of the current woes I hear in the vc industry are because more vc's didn't sit back and do what a good entrepreneur should do.....match capital with the ability to leverage it.

Redeye VC : Help me rename "Lifestyle Business"

Fri, 17 Jul 2009 15:12:30 +0000

I wanted to see if there was a vote anybody came up with a great name....I guess Indie is the best one. I am surprised there still seems some negativity like you don't want to grow fast (implying you could) or maybe after a while it will be ready for a vc, or its about work life balance (that's a totally separate choice you could raise $20M and have a better work/life balance than if you raised none) That's why I think there needs to be something different because in my example the three people cranking out iPhone apps could make millions and millions a year. Tremendous leverage on three people but money doesn't make it scale. You don't want these people wasting time looking for money or thinking they're not successful and trying to turn the business into something it isn't...no...you want them to kick ass. I do think the reactions are interesting when I point out to venture capitalists that good vc businesses are "lifestyle" businesses. Think of it.....if First Round or Foundry Group went out an raised some huge billion dollar fund would they be successful?? Can they scale by trying to double staff every six months? Neither can a lot of great tech businesses.

Redeye VC : Help me rename "Lifestyle Business"

Fri, 10 Jul 2009 13:55:44 +0000

I do like FounderWealth. One more suggestion to keep things going even though I don't like acronyms: BLAST (Big Leverage Asset Small Technology) Business. I think part of the reason everybody thinks you need to go the vc route is that there is naturally a ton more celebration of the successes. If you're making several million a year as a privately held tech business, you don't really want your customers, vendors, competitors knowing how much you make. If you take vc and you sell your business (and by definition you have to sell your business) yes you celebrate. You have to celebrate it helps the vc when you celebrate. But both can have the same financial outcome for the founder. Take a theoretical example: Three people cranking out iPhone apps. One is a creative genius, one a programming stud, and the third a marketing/promotion/business maestro. They spend six months eating rice and beans and crank out some cool apps that get some traction. Now what to do? 1. Spend next six months cranking more apps and letting the existing ones scale or 2. Go raise vc for six months and then hire 20 people Most people would say raise vc. But I would argue in this case its not a capital intensive business. You can't leverage because you've now got your three founders trying to manage talent instead of building apps and its really hard because great people want to do their own thing so you don't get them, and your best people will want to go out on their own. So in this theoretical example the outcomes are: 1. Make millions a year 2. Get replaced, have a new CEO come in get a bridge round, founders wiped out. Yes people will say after a couple of years those creative meetings are going to be held on a sailboat in Greece instead of in a dorm room, and yes the founders will have learned how not to work so hard, but how is that somehow different than selling your company and mulling about looking for the new thing?? It really isn't So maybe I've come full circle. We should say I've got a LIFESTYLE business!!! The word isn't the problem, its letting it be negative that is...maybe we can go retro with this. (ironically most vc firms would fit the definition of a lifestyle business)

Redeye VC : Help me rename "Lifestyle Business"

Fri, 10 Jul 2009 01:18:36 +0000

I understand its with a wink and a smile but there is always truth in humor and the last three paragraphs on this post show the attitude if you don't get funded you are deficient. The key to high tech businesses is the leverage. For example once you've made your iPhone app selling every unit past breakeven is 100% gross margin (on your cut not including Apple's) Now maybe you've got a crack team of three (developer, idea person, mktg/design person) that makes these app's and can clear $1M per person per year. Is it a VC business???? Nope. Is it a damn great business for the guys/gals working there??? HELL YES!!!! And that's what I see a great VC saying....hell yes!! Great business you don't need or want my money. I'll promote you as much as I can because I love the high tech community in Phila, etc.

Redeye VC : Help me rename "Lifestyle Business"

Thu, 9 Jul 2009 20:45:52 +0000

I'd also say PrivateTech Business or ClassicTech Business I think also part of the issue is that venture means adventure or take risk which is also what you do when you are out on your own. I think the key understanding the issue is the ability to leverage large amounts of money. If you take vc by definition your business has to be able to leverage large amounts of money. Notice I didn't say high amount of leverage but the ability to leverage large amounts of money. (if you have leverage of 50 to 1 in theory it doesn't matter if the business needs $5M or $100,000 to fund it.....either way the entrepreneur is going to end up roughly with with the same.......2% of $250M factoring in risk or 100% of $5M) There must be someway to describe that in a positive way.

Redeye VC : Help me rename "Lifestyle Business"

Thu, 9 Jul 2009 18:29:44 +0000

I think we have to focus on the fact that its a high tech business. That's the main issue. If we were talking about a plumbing business we wouldn't have the discussion as nobody would be trying to raise vc as a startup. The reason why I think "lifestyle" business is offensive (in the way its used) is because it implies that you aren't reaching for the huge brass ring but you're settling for a good lifestyle. That isn't true if the market just isn't big enough to warrant a vc investment. Best case is having either party understand that its not a vc business. That is what I've been preaching because once you take vc money its kind of like scrambling eggs you can't go back. The toughest part is when both parties think it was going to be a vc business, but its not....it can still be a great business but it tends to get ripped apart. So I like TraditionalTech instead of Lifestyle. I think we should focus on the fact that raising vc money is un-Traditional. There is no reason you can't build a great tech business helping plumbers, or runners, or boaters, whatever....its not a vc enterprise and it still should be celebrated in the the tech community....vc funded businesses are the exception not the rule and entrepreneurs should realize that. It is healthy for both parties to understand this...

Feld Thoughts : Saying No In Less Than 60 Seconds

Mon, 29 Jun 2009 15:14:23 +0000

A quick no is a very polite form of communication. It is not harsh at all. Providing a tidbit of feedback and a non boilerplate response is over the top. Everybody has to say no. You can not always say yes. I think Brad is trying to remind people how to do it/best practice. The worst is a mealy mouthed non-committal response followed by no response. Yes is great, no is fine, maybe is a killer