I think this is a good list but I'm not really a big belivever in their methodology. Click through to the article itself and read some of the comments - it seems like some of these measurements are off. No doubt the top 20 at least are all good ones. I like Guy and Brad's blogs alot.
The Top VC Blogs (According To Google Reader)
29 Comments
by Leena Rao on May 30, 2009
Venture capitalists can be valuable sources of information about the tech community. Not only do they have quality insider information but they also have a knack for figuring out how to evaluate startups. So it makes sense that their blogs can be compelling reads.
Larry Chang, a partner at Fidelity Ventures, has compiled a list of the 100 top VC blogs, according to the number of Google Reader subscribers for each one. Chang admits that the rankings don’t necessarily equate to the best quality of content and that there is fine content coming from VC blogs with less subscribers. But the list is a good starting point. Chang says he will be highlighting the best VC blog posts from this list on his blog every two weeks and will update the directory to add new VC blogs quarterly.
Here are the top 20 on the list, with their Google Reader subscriber numbers (you can see all 100 on Chang’s blog):
1. Guy Kawasaki, Garage Technology Ventures, How To Change The World (17,555)
2. Fred Wilson, Union Square Ventures, A VC (11,821)
3. David Hornik, August Capital, VentureBlog (7,060)
4. Brad Feld, Foundry Group, Feld Thoughts (6,434)
5. Marc Andreessen, TBD, Blog.pmarca.com (5,099)
6. Josh Kopelman, First Round Capital, Redeye VC (3,310)
7. Ed Sim, Dawntreader Ventures, Beyond VC (3,239)
8. Jeremy Liew, Lightspeed Ventures Partners, LSVP (2,973)
9. Bill Gurley, Benchmark Capital, Above The Crowd (2,257)
10. Jeff Nolan, SAP Ventures, Venture Chronicles (1,528)
11. David Cowan, Bessemer Venture Partners, Who Has Time For This? (1,261)
12. Christopher Allen, Alacrity Ventures, Life With Alacrity (1,194)
13. Seth Levine, Foundry Group, VC Adventure (1,154)
14. Rick Segal, JLA Ventures, The Post Money Value (795) – Canada
15. Jeff Bussgang, Flybridge Capital Partners, Seeing Both Sides (727)
16. Mike Hirshland, Polaris Venture Partners, VC Mike’s Blog (726)
17. Tim Oren, Pacifica Fund, Due Diligence (661)
18. Jeff Clavier, SoftTech VC, Software Only (656)
19. Mendelson/Feld, Foundry Group, Ask The VC (587)
20. Matt McCall, DFJ Portage Venture Partners, VC Confidential (432)
Saturday, May 30, 2009
Tuesday, May 26, 2009
$500K is the new $5 Million: Good article on First Round Capital
Good article on the ins and outs of First Round Capital and some of the other well known angels/seed funds in the valley.
The most accurate insight in the article: "$500,000 is the new $5 Million"
The Future of Tech May 21, 2009, 5:00PM EST
'Super Angels' Shake Up Venture Capital
As large VC firms cut back, a hungry bunch of seed-stage investors are helping entrepreneurs get their ideas off the ground
By Spencer E. Ante
Earlier this year, as the stock market plunged, most bankers and other financiers hoarded capital and throttled back on new deals. But not Josh Kopelman. Even in the bleakest months, the co-founder of the venture capital firm First Round Capital hustled after startups to write them checks.
Take one sunny morning in February. Kopelman sits in the San Francisco loft of First Round's West Coast office across a table from Gary Briggs. A veteran entrepreneur, Briggs just took over as CEO at Plastic Jungle, a startup building an online marketplace where consumers can buy, sell, or trade gift cards. "There's about $40 billion of unused gift cards on retailers' balance sheets," says Briggs, so focused he doesn't touch the salad ordered in for his lunch.
Kopelman hops up to sketch on a whiteboard. He wants Briggs to describe in detail how Plastic Jungle makes money. "So you get a fee here?" Kopelman asks, drawing a thicket of lines and figures. The CEO explains that with each sale or transfer of a gift card, the company takes a commission. The VC ends the meeting by saying he wants to "kick the site's tires" and confirm retailers' willingness to sell cards on the site. A week later, First Round agrees to pay $1 million for an equity stake.
Even faced with a financial world aflame, Kopelman and a wave of new investors are running straight for the fire. It may be bravery or foolishness, but they're funding startups and entrepreneurs at a time when almost everyone else is holding back. In the latest sign of conflagration, venture capital investment plummeted 61% in the first quarter, to $3 billion, the lowest level since 1997. Only $169 million of that went to companies seeking their first round of venture money, what's known as seed-stage investments.
Kopelman thinks the problems in venture capital go beyond the recession. He says many old-line firms have gotten too big and unwieldy to build innovative companies the way they used to, and many angels, individuals who invest in startups, don't have enough money to back most high-tech ideas. Kopelman and a band of up-and-comers are championing a different tack. They want to reinvigorate venture capital by taking it back to its roots, when firms were smaller, more nimble, and more likely to help startups get off the ground. "I don't think a lot of people have been entrepreneurial about venture capital," says Kopelman.
Besides First Round, these "super angels," as they're called in the industry, include Baseline Ventures, Maples Investments, and Felicis Ventures. They're pushing ahead and financing startups even as big-name venture firms cut back and conserve capital until the economy improves. First Round Capital has quietly become the country's most active seed-stage investor, outpacing such marquee names as Sequoia Capital and Kleiner Perkins Caufield & Byers. In fact, First Round bet on the online personal finance site Mint.com after Sequoia took a pass on the deal—and watched the startup blossom into a rival to Intuit (INTU). "They took a risk on a 25-year-old kid," says Mint.com chief Aaron Patzer, who's now 28.
Kopelman's aggressiveness stands in sharp contrast to the accepted wisdom on Sand Hill Road, the heart of the venture business in Silicon Valley. Last fall Sequoia gave a presentation to its portfolio companies, entitled "R.I.P. Good Times," urging them to slash spending quickly. It was a defining moment in the downturn: Many venture firms took it as a wake-up call to shut struggling startups and halt most new investments.
Kopelman could pay a steep price for moving in the opposite direction. While he has a track record of strong returns and is considered a rising star in the venture field, he has never faced the risks he does today. Not only does he confront the usual challenges of startups but he also could get tripped up by a litany of economic problems. "Investing in young companies is always risky," says Josh Lerner, a professor at Harvard Business School. "Investing in young companies during a time of enormous economic uncertainty is particularly risky."
Getting the venture model right may be crucial for the U.S. economy, whether it's done by Kopelman or someone else. Over the past 60 years the money and expertise provided by venture firms has led to the creation of thousands of companies, including Intel (INTL), Genentech (DNA), FedEx (FDX), and Google (GOOG). A study by the National Venture Capital Assn. found that U.S. venture-backed companies generated 10 million jobs and 18% of the nation's gross domestic product from 1970 to 2005.
FLY ON THE WALL
Kopelman got an early start in the business. His grandfather, Herman Fialkov, founded chip pioneer General Transistor and later started the venture firm Geiger & Fialkov. Kopelman interned at the firm the summer after he finished high school, tagging along with his grandfather to board meetings and to hunt for deals on Long Island. "I was the fly-on-the-wall note taker," says Kopelman.
Now 38, Kopelman crisscrosses the U.S. twice a month from his Philadelphia home to look over 2,300 potential deals a year and stay on top of companies he's backing. We first met over lunch in a Manhattan eatery. As he sat down, Kopelman argued the traditional venture approach is fundamentally flawed: "When you look at the math of venture, I think it is broken."
Kopelman grabbed a napkin and began scribbling. Venture firms raise money from institutional investors and wealthy individuals in discrete funds (usually known by such names as First Capital I, First Capital II, etc.). To give a fund's investors a 20% annual return, the firm needs to triple the money raised within a six-year period, Kopelman said. For a $400 million fund, that means returning $1.2 billion to investors. Since VCs typically don't want the risk of holding more than 20% of the companies they invest in, they have to help build a few companies with a total of $6 billion in market value. But in the past few years only a handful of companies have sold or gone public for more than $1 billion. "You sit there and say, 'Holy crap, that model doesn't work,' " said Kopelman.
What's a venture capitalist to do? For Kopelman and other super angels, the answer is to get small. Over the past five years they have launched funds with $100 million or less and financed hundreds of companies, including Facebook, Digg, and Twitter. Ten years ago, when it cost $5 million to launch a startup, firms such as First Round couldn't exist. But thanks to plummeting technology costs, Kopelman & Co. can help companies launch products today for less than $1 million. "Five hundred thousand is the new $5 million," says Mike Maples Jr., who founded Maples Investments three years ago.
Super angels still aim for billion-dollar exits, but their model doesn't hinge on home runs. Instead, they can profit by hitting singles and doubles and reducing their strikeouts. First Round's second fund, raised in 2007, was $50 million. So Kopelman needs to return $150 million to the investors to hit a 20% annual return. His firm has done better than that: Its first two funds have generated a 35% annual rate of return after fees, says one investor in the funds. Among its successes: StumbleUpon, a Web recommendation tool bought by eBay, and search engine Powerset, acquired by Microsoft.
Established venture firms argue that the super-angel model has limits. Michael Moritz, whose Sequoia Capital backed Google, Cisco Systems (CSCO), and Electronic Arts (ERTS), says big venture firms can do certain kinds of deals that smaller ones can't. With $1 billion, for example, you can back capital-intensive startups in green energy or explore deals in China and elsewhere abroad. Still, super angels play an important and growing role, Moritz says. "My guess is more of it happens over the next few years because of the dearth of financing [for early-stage deals]," he says.
NOT FOR THE FAINTHEARTED
Kopelman's strategy—and strong returns—have won him deep-pocketed supporters. The endowments at Yale, Princeton, and Northwestern universities signed up for First Round's third fund, a $125 million vehicle raised last year. Another backer is Christopher A. Douvos, co-head of private equity investing for the Investment Fund for Foundations, an investment adviser for nonprofits. He agreed to put tens of millions into the third fund. Still, he says there are clear risks to investing in such early-stage deals. "You have to have courage to invest in this strategy," Douvos says.
One day this spring, Kopelman lines up back-to-back-to-back meetings in his San Francisco outpost. The loft has tall ceilings and a foosball table. After interrogating a young entrepreneur in the first meeting, Kopelman quickly lets him know his idea needs refinement. "There's one thing I've learned about entrepreneurs' business plans," he says, bringing the meeting to a close. "Every one is wrong."
Kopelman would know. His early experience in venture capital gave him the confidence to hatch a startup while still an undergraduate at the Wharton School of the University of Pennsylvania. He took the company public in 1996 when he was just 25. In 1999 he left to start an online marketplace, Half.com, for used books and videos. A year later, eBay (EBAY) bought Half.com for $312 million.
Today, Kopelman sees a wealth of opportunities in building businesses on information freely available on the Web (what he calls "data exhaust") or ones that are disrupting markets with cheaper Web technology. After the first meeting, Kopelman settles in to brainstorm with one of those disruptors. Kevin Reeth is CEO of Outright.com, a provider of online bookkeeping software that just launched its first product.
In this exchange, Kopelman switches roles, becoming more parent than prosecutor. After Reeth explains his main challenge is customer acquisition, Kopelman suggests hiring a marketing exec and launching a guerrilla marketing campaign. The idea: Set up a Web site,
canyougetconfirmed.com, that would play off of the troubles former Senator Tom Daschle ran into when Obama nominated him for a Cabinet post. The site would lure customers with free tax tips. Reeth likes it.
Kopelman and partner Rob Hayes adjourn the meeting and scramble to make a flight to Southern California. An assistant hands them their bags, tickets, and travel info, and they whirl out the door. "Welcome to Josh's world," says the assistant.
STRESS-TESTING BUSINESS PLANS
In March, Kopelman meets with Jose Ferreira, chief executive of an online education startup called Knewton, at its spartan headquarters in New York's Greenwich Village. Knewton sells LSAT and GMAT prep courses online, in competition with giants Kaplan and Princeton Review (REVU), but its aim is to use the Web to offer better teaching for less money. Whereas textbooks provide the same material to everyone, Knewton has developed an adaptive technology tailored to the strengths and weaknesses of each student. Knewton is betting its software may be adopted by publishers and other education companies.
Knewton's board has already approved two partnerships, including one deal to license its technology to a rival company. Ferreira wants to cut more deals. But Kopelman says he is concerned that if Knewton does more deals it will spread itself too thin. Tension fills the air. "The most powerful word a CEO can say is no," Kopelman tells Ferreira.
"What happens if Princeton Review comes to us and wants to make a deal?" asks Ferreira.
Kopelman does not budge. "It's worth going to Boston to see them," he says. "But promise me you won't sign anything. I want to see deal points." Ferreira agrees.
Kopelman knows First Round needs to keep taking risks. That's why his firm just launched an event called Office Hours, a sort of American Idol for aspiring entrepreneurs. Several times a year, First Round will offer anyone the opportunity to get 10 minutes with Kopelman and his partners to stress-test their business plan. "We think it's important when a lot of VCs are cutting back that we get out there and see as many people as we can," he says.
One recent gathering took place at Live Bait, a watering hole in New York's Flatiron district. An intern at the firm asks everyone to sign a log-in sheet. It's first come, first served. At 2 p.m. Kopelman orders a sandwich at the bar, sits down at a table, and starts talking. First Round partner Howard Morgan grabs another table. The atmosphere recalls the informality of the early venture days, when firms such as Sequoia and the Mayfield Fund would meet at the Mark Hopkins Hotel in San Francisco for lunch and bat around ideas.
Entrepreneurs arrive, then mill around the bar. By 2:45, 35 people have showed up, including two who drove 90 minutes from Philadelphia. "My hands are cold," says Yasmine Mustafa to her partner, Aaron Hoffer-Perkins. "That means I am nervous." The duo are quitting their jobs to launch a company that helps bloggers make money from their sites.
When the intern says it's their turn, Yasmine springs up and the two walk over to meet Kopelman. Ten minutes later they head back to the bar for a drink on First Round's tab. "It was awesome," says Yasmine. "It actually spawned new ideas, which is what we want before we develop the product."
"Always fast, always to the point, no B.S.," adds Aaron.
I check in with Kopelman around 3:15. With the deep troubles on Wall Street, Kopelman says he's surprised at the level of entrepreneurial action in New York. "It's going great," he says.
Peering down at his notebook, Kopelman says he has already met with eight entrepreneurs and heard two original ideas. "Several ideas we are going to follow up with," he says. Then he quickly heads back in to meet more entrepreneurs.
The most accurate insight in the article: "$500,000 is the new $5 Million"
The Future of Tech May 21, 2009, 5:00PM EST
'Super Angels' Shake Up Venture Capital
As large VC firms cut back, a hungry bunch of seed-stage investors are helping entrepreneurs get their ideas off the ground
By Spencer E. Ante
Earlier this year, as the stock market plunged, most bankers and other financiers hoarded capital and throttled back on new deals. But not Josh Kopelman. Even in the bleakest months, the co-founder of the venture capital firm First Round Capital hustled after startups to write them checks.
Take one sunny morning in February. Kopelman sits in the San Francisco loft of First Round's West Coast office across a table from Gary Briggs. A veteran entrepreneur, Briggs just took over as CEO at Plastic Jungle, a startup building an online marketplace where consumers can buy, sell, or trade gift cards. "There's about $40 billion of unused gift cards on retailers' balance sheets," says Briggs, so focused he doesn't touch the salad ordered in for his lunch.
Kopelman hops up to sketch on a whiteboard. He wants Briggs to describe in detail how Plastic Jungle makes money. "So you get a fee here?" Kopelman asks, drawing a thicket of lines and figures. The CEO explains that with each sale or transfer of a gift card, the company takes a commission. The VC ends the meeting by saying he wants to "kick the site's tires" and confirm retailers' willingness to sell cards on the site. A week later, First Round agrees to pay $1 million for an equity stake.
Even faced with a financial world aflame, Kopelman and a wave of new investors are running straight for the fire. It may be bravery or foolishness, but they're funding startups and entrepreneurs at a time when almost everyone else is holding back. In the latest sign of conflagration, venture capital investment plummeted 61% in the first quarter, to $3 billion, the lowest level since 1997. Only $169 million of that went to companies seeking their first round of venture money, what's known as seed-stage investments.
Kopelman thinks the problems in venture capital go beyond the recession. He says many old-line firms have gotten too big and unwieldy to build innovative companies the way they used to, and many angels, individuals who invest in startups, don't have enough money to back most high-tech ideas. Kopelman and a band of up-and-comers are championing a different tack. They want to reinvigorate venture capital by taking it back to its roots, when firms were smaller, more nimble, and more likely to help startups get off the ground. "I don't think a lot of people have been entrepreneurial about venture capital," says Kopelman.
Besides First Round, these "super angels," as they're called in the industry, include Baseline Ventures, Maples Investments, and Felicis Ventures. They're pushing ahead and financing startups even as big-name venture firms cut back and conserve capital until the economy improves. First Round Capital has quietly become the country's most active seed-stage investor, outpacing such marquee names as Sequoia Capital and Kleiner Perkins Caufield & Byers. In fact, First Round bet on the online personal finance site Mint.com after Sequoia took a pass on the deal—and watched the startup blossom into a rival to Intuit (INTU). "They took a risk on a 25-year-old kid," says Mint.com chief Aaron Patzer, who's now 28.
Kopelman's aggressiveness stands in sharp contrast to the accepted wisdom on Sand Hill Road, the heart of the venture business in Silicon Valley. Last fall Sequoia gave a presentation to its portfolio companies, entitled "R.I.P. Good Times," urging them to slash spending quickly. It was a defining moment in the downturn: Many venture firms took it as a wake-up call to shut struggling startups and halt most new investments.
Kopelman could pay a steep price for moving in the opposite direction. While he has a track record of strong returns and is considered a rising star in the venture field, he has never faced the risks he does today. Not only does he confront the usual challenges of startups but he also could get tripped up by a litany of economic problems. "Investing in young companies is always risky," says Josh Lerner, a professor at Harvard Business School. "Investing in young companies during a time of enormous economic uncertainty is particularly risky."
Getting the venture model right may be crucial for the U.S. economy, whether it's done by Kopelman or someone else. Over the past 60 years the money and expertise provided by venture firms has led to the creation of thousands of companies, including Intel (INTL), Genentech (DNA), FedEx (FDX), and Google (GOOG). A study by the National Venture Capital Assn. found that U.S. venture-backed companies generated 10 million jobs and 18% of the nation's gross domestic product from 1970 to 2005.
FLY ON THE WALL
Kopelman got an early start in the business. His grandfather, Herman Fialkov, founded chip pioneer General Transistor and later started the venture firm Geiger & Fialkov. Kopelman interned at the firm the summer after he finished high school, tagging along with his grandfather to board meetings and to hunt for deals on Long Island. "I was the fly-on-the-wall note taker," says Kopelman.
Now 38, Kopelman crisscrosses the U.S. twice a month from his Philadelphia home to look over 2,300 potential deals a year and stay on top of companies he's backing. We first met over lunch in a Manhattan eatery. As he sat down, Kopelman argued the traditional venture approach is fundamentally flawed: "When you look at the math of venture, I think it is broken."
Kopelman grabbed a napkin and began scribbling. Venture firms raise money from institutional investors and wealthy individuals in discrete funds (usually known by such names as First Capital I, First Capital II, etc.). To give a fund's investors a 20% annual return, the firm needs to triple the money raised within a six-year period, Kopelman said. For a $400 million fund, that means returning $1.2 billion to investors. Since VCs typically don't want the risk of holding more than 20% of the companies they invest in, they have to help build a few companies with a total of $6 billion in market value. But in the past few years only a handful of companies have sold or gone public for more than $1 billion. "You sit there and say, 'Holy crap, that model doesn't work,' " said Kopelman.
What's a venture capitalist to do? For Kopelman and other super angels, the answer is to get small. Over the past five years they have launched funds with $100 million or less and financed hundreds of companies, including Facebook, Digg, and Twitter. Ten years ago, when it cost $5 million to launch a startup, firms such as First Round couldn't exist. But thanks to plummeting technology costs, Kopelman & Co. can help companies launch products today for less than $1 million. "Five hundred thousand is the new $5 million," says Mike Maples Jr., who founded Maples Investments three years ago.
Super angels still aim for billion-dollar exits, but their model doesn't hinge on home runs. Instead, they can profit by hitting singles and doubles and reducing their strikeouts. First Round's second fund, raised in 2007, was $50 million. So Kopelman needs to return $150 million to the investors to hit a 20% annual return. His firm has done better than that: Its first two funds have generated a 35% annual rate of return after fees, says one investor in the funds. Among its successes: StumbleUpon, a Web recommendation tool bought by eBay, and search engine Powerset, acquired by Microsoft.
Established venture firms argue that the super-angel model has limits. Michael Moritz, whose Sequoia Capital backed Google, Cisco Systems (CSCO), and Electronic Arts (ERTS), says big venture firms can do certain kinds of deals that smaller ones can't. With $1 billion, for example, you can back capital-intensive startups in green energy or explore deals in China and elsewhere abroad. Still, super angels play an important and growing role, Moritz says. "My guess is more of it happens over the next few years because of the dearth of financing [for early-stage deals]," he says.
NOT FOR THE FAINTHEARTED
Kopelman's strategy—and strong returns—have won him deep-pocketed supporters. The endowments at Yale, Princeton, and Northwestern universities signed up for First Round's third fund, a $125 million vehicle raised last year. Another backer is Christopher A. Douvos, co-head of private equity investing for the Investment Fund for Foundations, an investment adviser for nonprofits. He agreed to put tens of millions into the third fund. Still, he says there are clear risks to investing in such early-stage deals. "You have to have courage to invest in this strategy," Douvos says.
One day this spring, Kopelman lines up back-to-back-to-back meetings in his San Francisco outpost. The loft has tall ceilings and a foosball table. After interrogating a young entrepreneur in the first meeting, Kopelman quickly lets him know his idea needs refinement. "There's one thing I've learned about entrepreneurs' business plans," he says, bringing the meeting to a close. "Every one is wrong."
Kopelman would know. His early experience in venture capital gave him the confidence to hatch a startup while still an undergraduate at the Wharton School of the University of Pennsylvania. He took the company public in 1996 when he was just 25. In 1999 he left to start an online marketplace, Half.com, for used books and videos. A year later, eBay (EBAY) bought Half.com for $312 million.
Today, Kopelman sees a wealth of opportunities in building businesses on information freely available on the Web (what he calls "data exhaust") or ones that are disrupting markets with cheaper Web technology. After the first meeting, Kopelman settles in to brainstorm with one of those disruptors. Kevin Reeth is CEO of Outright.com, a provider of online bookkeeping software that just launched its first product.
In this exchange, Kopelman switches roles, becoming more parent than prosecutor. After Reeth explains his main challenge is customer acquisition, Kopelman suggests hiring a marketing exec and launching a guerrilla marketing campaign. The idea: Set up a Web site,
canyougetconfirmed.com, that would play off of the troubles former Senator Tom Daschle ran into when Obama nominated him for a Cabinet post. The site would lure customers with free tax tips. Reeth likes it.
Kopelman and partner Rob Hayes adjourn the meeting and scramble to make a flight to Southern California. An assistant hands them their bags, tickets, and travel info, and they whirl out the door. "Welcome to Josh's world," says the assistant.
STRESS-TESTING BUSINESS PLANS
In March, Kopelman meets with Jose Ferreira, chief executive of an online education startup called Knewton, at its spartan headquarters in New York's Greenwich Village. Knewton sells LSAT and GMAT prep courses online, in competition with giants Kaplan and Princeton Review (REVU), but its aim is to use the Web to offer better teaching for less money. Whereas textbooks provide the same material to everyone, Knewton has developed an adaptive technology tailored to the strengths and weaknesses of each student. Knewton is betting its software may be adopted by publishers and other education companies.
Knewton's board has already approved two partnerships, including one deal to license its technology to a rival company. Ferreira wants to cut more deals. But Kopelman says he is concerned that if Knewton does more deals it will spread itself too thin. Tension fills the air. "The most powerful word a CEO can say is no," Kopelman tells Ferreira.
"What happens if Princeton Review comes to us and wants to make a deal?" asks Ferreira.
Kopelman does not budge. "It's worth going to Boston to see them," he says. "But promise me you won't sign anything. I want to see deal points." Ferreira agrees.
Kopelman knows First Round needs to keep taking risks. That's why his firm just launched an event called Office Hours, a sort of American Idol for aspiring entrepreneurs. Several times a year, First Round will offer anyone the opportunity to get 10 minutes with Kopelman and his partners to stress-test their business plan. "We think it's important when a lot of VCs are cutting back that we get out there and see as many people as we can," he says.
One recent gathering took place at Live Bait, a watering hole in New York's Flatiron district. An intern at the firm asks everyone to sign a log-in sheet. It's first come, first served. At 2 p.m. Kopelman orders a sandwich at the bar, sits down at a table, and starts talking. First Round partner Howard Morgan grabs another table. The atmosphere recalls the informality of the early venture days, when firms such as Sequoia and the Mayfield Fund would meet at the Mark Hopkins Hotel in San Francisco for lunch and bat around ideas.
Entrepreneurs arrive, then mill around the bar. By 2:45, 35 people have showed up, including two who drove 90 minutes from Philadelphia. "My hands are cold," says Yasmine Mustafa to her partner, Aaron Hoffer-Perkins. "That means I am nervous." The duo are quitting their jobs to launch a company that helps bloggers make money from their sites.
When the intern says it's their turn, Yasmine springs up and the two walk over to meet Kopelman. Ten minutes later they head back to the bar for a drink on First Round's tab. "It was awesome," says Yasmine. "It actually spawned new ideas, which is what we want before we develop the product."
"Always fast, always to the point, no B.S.," adds Aaron.
I check in with Kopelman around 3:15. With the deep troubles on Wall Street, Kopelman says he's surprised at the level of entrepreneurial action in New York. "It's going great," he says.
Peering down at his notebook, Kopelman says he has already met with eight entrepreneurs and heard two original ideas. "Several ideas we are going to follow up with," he says. Then he quickly heads back in to meet more entrepreneurs.
Friday, May 22, 2009
Great deck for startups on how to present at investor events
This is a great deck on how to present in a very time condensed format and win. The idea is not to focus on your technology or how great it is (we know its great!) but to focus on who will pay for it, why they will pay for it, and why they won't spend money with another company to solve this problem.
I've seen so many startups over the years try to cram everything into a short 5-10 minute presenation at every event imaginable. You don't need to say everything at this first shout out to investors. This is a sales pitch for you - just get them interested enough to ask for a meeting. That's really all you can ask for!
http://www.webyantra.net/2009/05/22/excellent-resource-how-to-make-pitches-at-startup-showcase-events/
I've seen so many startups over the years try to cram everything into a short 5-10 minute presenation at every event imaginable. You don't need to say everything at this first shout out to investors. This is a sales pitch for you - just get them interested enough to ask for a meeting. That's really all you can ask for!
http://www.webyantra.net/2009/05/22/excellent-resource-how-to-make-pitches-at-startup-showcase-events/
What are we all striving for - shareholder value?
Some interesting thoughts for the long weekend on how to not get caught up in the eternal pursuit for more money. I have to agree with Jack Welch - "Shareholder value is a result, not a strategy".
Questions I Wish VCs Would Ask Entrepreneurs (Hint: They’re Not About ‘Shareholder Value’)
By Upendra Shardanand - Fri 22 May 2009 08:38 AM PST
Upendra Shardanand is the Chief Executive Officer and Founder of Daylife, which helps publishers add content and inventory without additional staff or engineering. He also co-founded Firefly Network, a spinoff from his work at the MIT Media Lab, and sold the company to Microsoft (NSDQ: MSFT) in 1998. Upendra was the founding partner at the venture firm The Accelerator Group, and was the Director of Technology at Time Warner (NYSE: TWX).
Several years ago, when I was with the Accelerator Group, we were in discussions with a music-industry executive about a music-related venture. At some point he e-mailed a request: He wanted my colleagues and me to send him a list of our favorite bands. A slightly puzzling request, but we complied – who doesn’t like doing a top-10 list? Afterwards, he shared that he was very pleased with our answers – not one gun-toting, life-of-crime musician on the list! Apparently, he had no desire to work with dangerous acts. Life is too short to get shot.
As odd as that question may have been, it was honest and a nice change of pace from the normal litany of questions one gets from partners or VCs. By now I heard hundreds of investor pitches, and every investor seems to be reading off the same crib sheet. They’re all very focused on how best to maximize shareholder value (as opposed to avoiding getting shot, or some other criterion).
It’s long been accepted that the singular objective for any company is to make everyone money. The more the better. And I’ve been in many a discussion where it seems the wisest way to cut to the chase on a strategic business decision is to ask, “OK, but what will most maximize shareholder value?”
So it was interesting to see Jack Welch recently say: “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy … Your main constituencies are your employees, your customers, and your products.” (I’d personally add suppliers, partners, the environment, and society at large.)
Some buy a trickle-down logic and argue that if it’s good for the shareholders and makes good business sense, then you will end up taking care of all other stakeholders.
Really? In an age where investors and management can get out quick, leaving all the other stakeholders holding the bag, what we end up with is Enron, AIG and Tyco. Those companies may be the extreme examples, but for a long time in the tech industry we’ve had a setup where every dot-com investor and entrepreneur could exit fast and buy that Ferrari, without necessarily having built anything of lasting value. Perhaps more innocuous then Enron, but no less a wasted opportunity to do something truly great.
And companies are like snowballs being rolled down a hill: Once they’ve been pointed in a direction, it’s really hard to change course. A company’s mission only gets watered down with time, its resolve weaker with age.
Perhaps in this era of Obamanomics and global cataclysm, where the maxim of endless growth fueled by endless consumption is being questioned, we’re starting to reset a bit, and the dog is starting to wag the tail. Perhaps we’re starting to see job hunters pursue purpose over money.
Perhaps publications will find new ways to keep score besides who raised how much and who exited for how much. Surely there are metrics other than the dollar by which to judge companies? (Read these words of wisdom on the value of the right metrics from RFK Jr.).
As exit opportunities become scarcer, perhaps entrepreneurs will start attacking hard, long-term projects with real benefits as opposed to get-rich-quick schemes. I once congratulated one of my investors, Scott Heiferman, on the success of his young company Meetup. I was deeply impressed whenever I spotted a Meetup group at a café or Whole Foods cafeteria, and I kept seeing them more and more often. But Scott was visibly irritated.
“Brands or anything that really lasts or matters often take decades to build. We haven’t done anything yet,” he said.
And perhaps boards and VCs will take Jack Welch’s advice and depart from their scripts and start viewing shareholder value as a result, not an objective. I’ll give a discount on the deal if any VC ever asks me questions along the lines of, “what do you do to make your office a fantastic place to work?” or “would you disclose the identity of one of your users to the Chinese government” or “who are you fighting for?”
The things we read, the colleagues we keep, the investors we have. Picking them carefully will determine the measures by which we’re held accountable. Life is too short to get shot.
Questions I Wish VCs Would Ask Entrepreneurs (Hint: They’re Not About ‘Shareholder Value’)
By Upendra Shardanand - Fri 22 May 2009 08:38 AM PST
Upendra Shardanand is the Chief Executive Officer and Founder of Daylife, which helps publishers add content and inventory without additional staff or engineering. He also co-founded Firefly Network, a spinoff from his work at the MIT Media Lab, and sold the company to Microsoft (NSDQ: MSFT) in 1998. Upendra was the founding partner at the venture firm The Accelerator Group, and was the Director of Technology at Time Warner (NYSE: TWX).
Several years ago, when I was with the Accelerator Group, we were in discussions with a music-industry executive about a music-related venture. At some point he e-mailed a request: He wanted my colleagues and me to send him a list of our favorite bands. A slightly puzzling request, but we complied – who doesn’t like doing a top-10 list? Afterwards, he shared that he was very pleased with our answers – not one gun-toting, life-of-crime musician on the list! Apparently, he had no desire to work with dangerous acts. Life is too short to get shot.
As odd as that question may have been, it was honest and a nice change of pace from the normal litany of questions one gets from partners or VCs. By now I heard hundreds of investor pitches, and every investor seems to be reading off the same crib sheet. They’re all very focused on how best to maximize shareholder value (as opposed to avoiding getting shot, or some other criterion).
It’s long been accepted that the singular objective for any company is to make everyone money. The more the better. And I’ve been in many a discussion where it seems the wisest way to cut to the chase on a strategic business decision is to ask, “OK, but what will most maximize shareholder value?”
So it was interesting to see Jack Welch recently say: “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy … Your main constituencies are your employees, your customers, and your products.” (I’d personally add suppliers, partners, the environment, and society at large.)
Some buy a trickle-down logic and argue that if it’s good for the shareholders and makes good business sense, then you will end up taking care of all other stakeholders.
Really? In an age where investors and management can get out quick, leaving all the other stakeholders holding the bag, what we end up with is Enron, AIG and Tyco. Those companies may be the extreme examples, but for a long time in the tech industry we’ve had a setup where every dot-com investor and entrepreneur could exit fast and buy that Ferrari, without necessarily having built anything of lasting value. Perhaps more innocuous then Enron, but no less a wasted opportunity to do something truly great.
And companies are like snowballs being rolled down a hill: Once they’ve been pointed in a direction, it’s really hard to change course. A company’s mission only gets watered down with time, its resolve weaker with age.
Perhaps in this era of Obamanomics and global cataclysm, where the maxim of endless growth fueled by endless consumption is being questioned, we’re starting to reset a bit, and the dog is starting to wag the tail. Perhaps we’re starting to see job hunters pursue purpose over money.
Perhaps publications will find new ways to keep score besides who raised how much and who exited for how much. Surely there are metrics other than the dollar by which to judge companies? (Read these words of wisdom on the value of the right metrics from RFK Jr.).
As exit opportunities become scarcer, perhaps entrepreneurs will start attacking hard, long-term projects with real benefits as opposed to get-rich-quick schemes. I once congratulated one of my investors, Scott Heiferman, on the success of his young company Meetup. I was deeply impressed whenever I spotted a Meetup group at a café or Whole Foods cafeteria, and I kept seeing them more and more often. But Scott was visibly irritated.
“Brands or anything that really lasts or matters often take decades to build. We haven’t done anything yet,” he said.
And perhaps boards and VCs will take Jack Welch’s advice and depart from their scripts and start viewing shareholder value as a result, not an objective. I’ll give a discount on the deal if any VC ever asks me questions along the lines of, “what do you do to make your office a fantastic place to work?” or “would you disclose the identity of one of your users to the Chinese government” or “who are you fighting for?”
The things we read, the colleagues we keep, the investors we have. Picking them carefully will determine the measures by which we’re held accountable. Life is too short to get shot.
Wednesday, May 20, 2009
More bad news (sorry!) from the Angel Capital Association
Some more bad news (sorry) from the angel investing side this time. THe whole article is below but this is the key info:
But in November, 15.1% of angel groups expected to “invest in a greater portion of existing portfolio companies.” That percentage grew to 32.3% in the latest survey, which seems to mirror the thinking of venture capital firms, which are concentrating more money on their own portfolio companies than in new deals.
Also, in November 23.7% of angel groups checked off “raise a new fund” in 2009. That percentage was cut in half to 12.3% in the latest survey.
http://blogs.wsj.com/venturecapital/2009/05/20/angel-investors-opinions-change-on-economy-investing/?mod=rss_WSJBlog
Angel Investors’ Opinions Change On Economy, Investing
By Scott Austin
The Angel Capital Association, a trade organization for North American angel investment groups, released a survey today that updates the opinions of its members from when they were last polled in November.
The differences between the two surveys - the latest canvassed members in March and April - is minimal in most places, with many of the results fluctuating by just a few percentage points. But there are a few major changes of opinion to highlight.
With the question, “Do you plan any major changes to your group structure or investment process in 2009?” respondents were able to check off up to 11 answers that apply to them. Most of the answers came back relatively the same percentage-wise. For instance, 28% of respondents in the November survey expected to “significantly grow the number of member investors” in their groups, while 29.2% in the latest survey expected to do so.
But in November, 15.1% of angel groups expected to “invest in a greater portion of existing portfolio companies.” That percentage grew to 32.3% in the latest survey, which seems to mirror the thinking of venture capital firms, which are concentrating more money on their own portfolio companies than in new deals.
Also, in November 23.7% of angel groups checked off “raise a new fund” in 2009. That percentage was cut in half to 12.3% in the latest survey.
Further in the survey, respondents show they are more pessimistic about the economy than they were a few months ago but more optimistic they’ll find better deals as a result. With the question, “How long do you estimate the credit crunch/ current market conditions will last?”
35.9% of respondents in November expected the fourth quarter of 2009 while 40.3% said 2010. Now, 26.6% said the fourth quarter and 56.2% believe 2010. However, 23.7% in the newest poll said they “might more aggressively seek new deals on an opportunity basis,” higher than 14.8% from November.
To view the two surveys, click here for the newly released one and here for the one issued on Dec. 1. Besides expectations, the survey also breaks down the investment data for 2008. A few highlights: the average total investment per group in 2008 was $1.77 million, down 9% from 2007; the average number of deals made fell 16% to 6.3; and the average investment per deal rose 4% to $276,918.
One note: the ACA does not represent individual angels, but only angel groups which pool a number of “accredited investors” together under one umbrella and invest their money together. The ACA represents 162 of these groups.
But in November, 15.1% of angel groups expected to “invest in a greater portion of existing portfolio companies.” That percentage grew to 32.3% in the latest survey, which seems to mirror the thinking of venture capital firms, which are concentrating more money on their own portfolio companies than in new deals.
Also, in November 23.7% of angel groups checked off “raise a new fund” in 2009. That percentage was cut in half to 12.3% in the latest survey.
http://blogs.wsj.com/venturecapital/2009/05/20/angel-investors-opinions-change-on-economy-investing/?mod=rss_WSJBlog
Angel Investors’ Opinions Change On Economy, Investing
By Scott Austin
The Angel Capital Association, a trade organization for North American angel investment groups, released a survey today that updates the opinions of its members from when they were last polled in November.
The differences between the two surveys - the latest canvassed members in March and April - is minimal in most places, with many of the results fluctuating by just a few percentage points. But there are a few major changes of opinion to highlight.
With the question, “Do you plan any major changes to your group structure or investment process in 2009?” respondents were able to check off up to 11 answers that apply to them. Most of the answers came back relatively the same percentage-wise. For instance, 28% of respondents in the November survey expected to “significantly grow the number of member investors” in their groups, while 29.2% in the latest survey expected to do so.
But in November, 15.1% of angel groups expected to “invest in a greater portion of existing portfolio companies.” That percentage grew to 32.3% in the latest survey, which seems to mirror the thinking of venture capital firms, which are concentrating more money on their own portfolio companies than in new deals.
Also, in November 23.7% of angel groups checked off “raise a new fund” in 2009. That percentage was cut in half to 12.3% in the latest survey.
Further in the survey, respondents show they are more pessimistic about the economy than they were a few months ago but more optimistic they’ll find better deals as a result. With the question, “How long do you estimate the credit crunch/ current market conditions will last?”
35.9% of respondents in November expected the fourth quarter of 2009 while 40.3% said 2010. Now, 26.6% said the fourth quarter and 56.2% believe 2010. However, 23.7% in the newest poll said they “might more aggressively seek new deals on an opportunity basis,” higher than 14.8% from November.
To view the two surveys, click here for the newly released one and here for the one issued on Dec. 1. Besides expectations, the survey also breaks down the investment data for 2008. A few highlights: the average total investment per group in 2008 was $1.77 million, down 9% from 2007; the average number of deals made fell 16% to 6.3; and the average investment per deal rose 4% to $276,918.
One note: the ACA does not represent individual angels, but only angel groups which pool a number of “accredited investors” together under one umbrella and invest their money together. The ACA represents 162 of these groups.
Very interesting deck on Customer Development
I don't usually write anything but the most brief comments here but this time, I'm going to put out some thoughts on a recent deck by Steve Blank on Customer Development. This terrific deck starts with a basic premise: More starups fail from a lack of customers than from a failure of product development. Those of us who've spent time with seed and early stage startups know for a fact that this is true.
But as Steve mentions, we have no processes to manage customer development. There are tons of resources available to manage the product development process, but the key driver of success, customers, is left out to dry.
He goes on to talk about the First Customer Ship (FCS) date as the goal for startups, which as we know from experience, is generally the case. but I totally agree with him when he says, "You don't know if you're wrong until you're out of business/money".
Download the deck and read his ideas on how to fix this serious problem. He's wise and its great advice.
http://www.stanford.edu/class/msande273/resources/Stanford%20steve%20101805.pdf
But as Steve mentions, we have no processes to manage customer development. There are tons of resources available to manage the product development process, but the key driver of success, customers, is left out to dry.
He goes on to talk about the First Customer Ship (FCS) date as the goal for startups, which as we know from experience, is generally the case. but I totally agree with him when he says, "You don't know if you're wrong until you're out of business/money".
Download the deck and read his ideas on how to fix this serious problem. He's wise and its great advice.
http://www.stanford.edu/class/msande273/resources/Stanford%20steve%20101805.pdf
More bad news from TechCrunch on the state of startups and VC
http://www.techcrunch.com/2009/05/18/crunchbase-data-rocks-too-bad-the-q1-numbers-suck-our-report/
CrunchBase Data Rocks. Too Bad The Q1 Numbers Suck. Our Report
by Michael Arrington on May 18, 2009
We’re all glad Q1 is behind us.
Silicon Valley and the start-up ecosystem certainly was not immune to the general economic malaise. The TechCrunch sweet spot, early-stage start-ups, was particularly hurt.
The number of start-ups getting started was down 65% vs Q1 2008. We saw just 184 new start-ups formed, down from 546 in 1Q 2008.
Start-Ups Founded: January 2008 - March 2009Source: CrunchBase
Early-stage start-ups are working hard to do more with less. The average number of staff at new start-ups founded 1Q 2009 was 6, down from 8 a year ago. How do we know? It turns out that there’s a wealth of interesting facts that we can glean from CrunchBase, our structured-wiki startup directory and primary data source for TechCrunch Research. What else did we learn from CrunchBase?
The $3.1 billion in venture capital financing was down 50% from Q1 2008, though up nearly 25% from Q4.
Venture Capital Financings: January 2008 - March 2009Source: CrunchBase
Here’s the thing, transaction volume was weighted heavily to Series B and later stages of investment, suggesting that VCs were focused on providing additional resources for their top portfolio companies as opposed to new deal flow. By example, only four of the startups founded last quarter also reported the closing of outside funding.
Venture Capital Financings by Stage: 1Q 2008 vs. 2009Source: CrunchBase
(Excluding the New York Times’ $250 million bailout raise by Carlos Slim), the biggest consumer web and mobile financings were: obopay ($70M), Zag ($70M), Twitter ($35 million), Omniture ($25M) and Pocket Communications Northeast ($25M.) Monetization businesses received attention: Tremor Media ($18M), Offerpal Media ($15M) and AdMob ($12.5M.)
Perhaps most telling of all, no acquisitions were announced by Google, Microsoft, Yahoo!, AOL, or Amazon. We can’t remember a fiscal quarter where none of these companies announced even a small transaction. In total, $1.6 billion in M&A was reported for the quarter, down from $11.9 billion in Q1 2008.
M&A Transaction Values: 1Q 2008 vs. 2009Source: CrunchBase
There were a total of 82 exits announced for the quarter, and the number of exits was actually higher than the 73 reported Q1 a year ago. In 2009, dealflow was tactical and modest in size. The two big deals of the quarter were Autonomy’s acquisition of Interwoven for $775 million and Cisco’s acquisition of Pure Digital Technologies (aka the Flip) for $590 million.
M&A lTransactions: January 2008 - March 2009Source: CrunchBase
Despite a number of executive departures and hirings, we’re still waiting to hear new news from big internet media. After budget cuts are complete, what will be the sources of future growth? There is a vast sea of start-ups available at newly rationalized prices.
See the report table of contents and table of exhibits here.
CrunchBase Data Rocks. Too Bad The Q1 Numbers Suck. Our Report
by Michael Arrington on May 18, 2009
We’re all glad Q1 is behind us.
Silicon Valley and the start-up ecosystem certainly was not immune to the general economic malaise. The TechCrunch sweet spot, early-stage start-ups, was particularly hurt.
The number of start-ups getting started was down 65% vs Q1 2008. We saw just 184 new start-ups formed, down from 546 in 1Q 2008.
Start-Ups Founded: January 2008 - March 2009Source: CrunchBase
Early-stage start-ups are working hard to do more with less. The average number of staff at new start-ups founded 1Q 2009 was 6, down from 8 a year ago. How do we know? It turns out that there’s a wealth of interesting facts that we can glean from CrunchBase, our structured-wiki startup directory and primary data source for TechCrunch Research. What else did we learn from CrunchBase?
The $3.1 billion in venture capital financing was down 50% from Q1 2008, though up nearly 25% from Q4.
Venture Capital Financings: January 2008 - March 2009Source: CrunchBase
Here’s the thing, transaction volume was weighted heavily to Series B and later stages of investment, suggesting that VCs were focused on providing additional resources for their top portfolio companies as opposed to new deal flow. By example, only four of the startups founded last quarter also reported the closing of outside funding.
Venture Capital Financings by Stage: 1Q 2008 vs. 2009Source: CrunchBase
(Excluding the New York Times’ $250 million bailout raise by Carlos Slim), the biggest consumer web and mobile financings were: obopay ($70M), Zag ($70M), Twitter ($35 million), Omniture ($25M) and Pocket Communications Northeast ($25M.) Monetization businesses received attention: Tremor Media ($18M), Offerpal Media ($15M) and AdMob ($12.5M.)
Perhaps most telling of all, no acquisitions were announced by Google, Microsoft, Yahoo!, AOL, or Amazon. We can’t remember a fiscal quarter where none of these companies announced even a small transaction. In total, $1.6 billion in M&A was reported for the quarter, down from $11.9 billion in Q1 2008.
M&A Transaction Values: 1Q 2008 vs. 2009Source: CrunchBase
There were a total of 82 exits announced for the quarter, and the number of exits was actually higher than the 73 reported Q1 a year ago. In 2009, dealflow was tactical and modest in size. The two big deals of the quarter were Autonomy’s acquisition of Interwoven for $775 million and Cisco’s acquisition of Pure Digital Technologies (aka the Flip) for $590 million.
M&A lTransactions: January 2008 - March 2009Source: CrunchBase
Despite a number of executive departures and hirings, we’re still waiting to hear new news from big internet media. After budget cuts are complete, what will be the sources of future growth? There is a vast sea of start-ups available at newly rationalized prices.
See the report table of contents and table of exhibits here.
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