Capitalism, health care, and my dad

I'm writing this post and my guess is it will be longer than my normal posts. You know when you sit down to write a diary post to sort out your feelings -- that's what this post is. 

I have an MBA and I'm an entrepreneur. I'm a capitalist. I believe in capitalism (for the most part). I understand very well that profit is a strategic imperative. I understand that managers sometimes need to make what appear to be bad decisions or inhuman decisions to achieve profit.  Unfortunately, I understand the rationale of laying off a division of a company because the organization needs to go in a different direction.  In most instances, I view this type of rationale as a strength of the US economic and politics system as opposed to those countries that have stringent rules about when a company can fire a person mandatory employment. 

At the same time, I think I have an understanding of the human toll of layoffs. I feel connected to the people I work with -- and even when it doesn't work out from an ongoing employment situation. I want to be friendly toward them -- and them toward me if I see them at the market.  

However, capitalism shouldn't be a license to fuck other people or to be a dick. Unfortunately, that's what the US version of capitalism has come to stand for.  It's hard for me not to be disgusted by the financial shenanigans of wall street over the past few years. And you should know, I believe in universal health care.

However, this wasn't meant to be a political post. It's a personal post. My dad is a rheumatologist. He's been in private practice for about 40 years and has worked the majority of his professional life with the same hospital. Just recently, my dad's practice stopped receiving referrals from that hospital. No one bothered to communicate that to my dad.  As a result, my dad's business was affected ....but more importantly, his sense of connection to a career and to people has been deeply wounded. 

I'm seeing where I want this post to go now. 

I guess the thing that disturbs me the most is that the hospital didn't call and tell him directly of they're decision to stop referrals. It's this loss of human relation and acknowledge -- that may be uncomfortable or hard -- that is so important.  It's not just business -- it is often very personal.  

I know that the scenario I layed out is subjective and complex. I know there's many other sides to the story. But, I'm feeling bad for the humiliation my dad must feel after working somewhere 40 years and having that disregarded. That's gotta feel shitty. And at the very least -- this post acknowledges him and his work. 

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

Last night we had most of the founder's come to the Founder's Co-op office for our second "founder's only" event. We now hold these meetings every other month.  I'd say the event was a win. We met for 2.5 hours and then had dinner.  The meeting started with everyone doing a shot of Maker's Mark whiskey.  I blogged last time how we were going to have an symbolic drink at each Founder's Only meeting -- last time, we didn't have Maker's so we had Patron tequila.  The Maker's Mark set the right tone for the meeting. The agenda was as follows:

  • Everyone go around and give a 1 word assessment of how they're feeling
  • Go around and get high's and lows report from each company. Followed by -- what item would you like to talk about in small groups? or more succinctly, what issue would you like input on from other entrepreneurs?
  • We then broke out into 2 smaller groups: one group was the sales and marketing group, the second group was the strategic prioritization group. 

I met with the strategic prioritization group.  The question we talked about was given the wide range of options of tasks to undertake at a small group, how do you prioritize?  The following tactical steps came out of the meeting:

  • Schedule in your calendar a day a month for the founder's to leave the office and talk about strategy and priorities
  • Every day come in and write down on a piece of paper the highest priority thing to accomplish that day. Get it down before lunch. 
  • If you're making revenue traction, be satisfied with where you're at and what you're doing. It's too easy to get distracted by the company that just sold for 1 Billion dollars and wishing it was your company. It's ok if you're not Groupon or Zynga.
  • It's your job to know where you're headed. 
  • When in doubt, focus narrower rather than expand. 
  • Get dominance before expanding. To do this, you need to define very clearly and quantitatively what dominance means. 
  • Business is hard -- don't expect it to be easy.  Growth is hard. 

Feedback from last nights twiistup event: How to make a great entrepreneurial panel or event

I spoke at an entrepreneurial panel last night with Geoff Entress. After talking and answering questions for about 1 hour I asked the audience if they had any constructive feedback on how to make the panel better. We received the following feedback:

  • Serve alcoholic drinks -- Neil Patel had already figured that out and had arranged for an open bar.  I think panels are really just like weddings  -- you need to hit the audience with alcohol and good snacks immediately after the ceremony. Neil understands this.
  • Improve networking -- During the drink hour, figure out a way of structuring the networking so more people meet the right people. There are lots of ways to do accomplish this -- e.g. a bell or chime where you have to move on and introduce yourself to someone new...The important thing is understanding why the audience is there is less about the panel and more about networking. 
  • Improve one-on-one access to panelists -- The larger the audience the harder it to connect audience and panelist one-on-one.  In fact, making one-on-one connections is hard to do with almost any size audience. However, the audience clearly has the desire to get individual advice and contact with the panel.  NWEN has created a unique "eDate" event where they have a larger number of experts to meet for 3 minutes individually with entrepreneurs. I think this is a great idea and the event has been well received.  
  • Present case studies -- people like to hear detailed stories of financings.
  • Role play -- Someone in the audience wanted to "watch" a real pitch and then have the panel critique the pitch.  

What Seattle startup scene needs?

Seattle needs:

...more big exits from Seattle technology companies

Picnik was nice.  But zillow, redfin, cheezeburger and others. It'd be good if we could get some companies exiting with greater than $100 million exit club. 

....more great entrepreneurial talent

This may be the thing that creates the above exits. And this may be the thing that the city needs most and is having the hardest time developing.  The UW is great - but Seattle can't compete with universities in Boston or San Francisco.   This single bullet point is the thing that attracted me most to doing TechStars in Seattle. Recruiting great entrepreneurial talent. 

....more great angel investors. 

Geoff Entress is the Ron Conway of Seattle. And the group of entrepreneurs we've pulled together at Founder's Co-op are active. But, Seattle needs more individuals willing to take the earliest stage risk associated with technology companies.  More angels investing money means a more vibrant early stage technology scene. 

....more awesome engineers

That are not trained by local HUGE companies. Or engineers that are determined to play with code and keep playing until they figure out stuff that works for people. There can never be enough talented technical people playing with codes driven to build things of value for people.  I'd particularly like to see Seattle capitalize on it's gaming roots and become a bigger player in the virtual economy space. The folks at Big Door Media are great -- but we need more cutting edge game companies. 

Why late nights, tequila and ping pong are vital to your start up

While none of the things listed in the title of this post in particular matter; what matters is the spirit behind these things. It's important to develop, foster, and embrace startup culture.  And developing a strong culture of lightness and fun for a startup becomes more important to do this as time and a company march on.  Building a startup is hard work and the companies whose founders keep a spirit of fun about themselves and their work place have a higher likelihood of success in my opinion. 

I was recently talking an entrepreneur who has a profitably company that is approaching 3 years old. HIs company has been setting monthly revenue and profit high water marks each month this year. Yet, he was feeling melancholy and down. I told him that he needed to overcome the 3 year itch of a startup. I told him to go away for a week, get rejuvenated, set up fun things for himself and for his team to do over the next 12 months and that doing so was part of his job. 

Focus is hard work

Just had a meeting with one of our portfolio companies. During the meeting, we decided again to stay focussed on the current market and improving all the foundations of the business. It's not sexy -- and at times -- not exciting but it's the hard work that's required to build a business that is worthwhile.  After the meeting, I said to the CEO -- the problem with business is that once success and profits come, we'll forget days like today when success wasn't so clear and it was actually hard to decide to stay focussed. 

Credit Card Roulette concludes most Founder's Co-op Dinners

We had a great Founder's Co-op dinner this past Wed night.  As investors we meet to discuss new deals and review the current portfolio. The meetings happen every other month -- this past Wed was the first meeting of the year.   Below is the agenda:

Welcome and Overview (Andy & Chris) - 4:00-4:15 (15 Mins)


Company Presentations - Updates 4:15 – 5:15PM (1 hr)

  • LookStat - 30 mins (ends at 4:45)
  • AppStoreHQ - 30 mins (ends at 5:15) 


New Deals - 5:15 - 5:45 (30 mins)

    • One yet to be named company


Other  - 6:00 - 6:30

    • Discussion


Optional Dinner 6:30 - 8PM (location TBD)


I could talk a lot about the meeting but the real meet of the founder's co-op meetings is the dinner and drinks afterwards. We've begun inviting all the founder's of our portfolio company (at least the ones located in the Eastlake office) to dinner. This past Wed we walked down the street and ate at Ravish. I can't say exactly what goes on at these dinners -- not because I'm trying to be secretive -- no, it's rather that the nights are lively conversations and drinks about the meeting, business, and life. Wednesdays meeting felt like it was the holidays again -- people are in good spirits and while business is never a straight line it feels like our companies and our little fund are making real progress.  The night always ends with a game of credit card roulette amongst the investors to pay for dinner. Special congratulations and thanks to Andy Liu for winning! Thanks to everyone for coming. Can't wait to the next LP / entrepreneur meeting in March!

Overcome trust inflection points with openness to get business deals done

I was thinking about trust yesterday -- and then I heard President Obama talk about our country's need to overcome the trust deficit we have. I think he's right about the nation's need and his comment made me reflect further on the role of trust in politics ....and in business deals. 

I'm negotiating a number of deals and throughout the course of negotiations there are many "trust inflection points".  It's important to have a sense as to when these points are arising for the other side and to be sure to address them with actions that reinforce trust.

One current example might help: I'm part of a team negotiating a deal with an institutional funding source. Just recently, there was a material change to the team that would affect the institutional funding source perspective -- it might make the perspective more positive and it might make it more negative....but there would clearly be an opinion and a reaction. 

I made the decision to risk the deal -- and reveal the new information asap. I am a firm believer in the "no surprises" clause of partnerships.  i.e. you don't want to surprise or blindside your partners. I admit - I was nervous. I was uncertain what the funding source partner might think and do. I figured if he overreacted -- and the deal went away....well, the deal and partnership weren't meant to be. But I am excited about doing this deal and didn't want it to go away -- thus, my nervousness. I gave the partner the information on Monday -- and gave him full disclosure on my knowledge. 

He appreciated the openness and I believe that this interaction was one of those "trust inflection points". In this instance, the trust pendulum swung forward. I still don't know if the deal is going to get done -- but I do know that overcoming these trust inflection points is critical and necessary in getting any deal done. 

Some good response to PR is dead - pun intended

There's been some good tweets and emails re: my post earlier today about PR being dead.  The two I liked most are:

The post from Micah about social media being dead

and Nate Murphy writes:

"I agree with the underlying tenets of your post, but a few points I would put forth:

  1.  The PR industry is far from dead. In fact, the top 10 global agencies brought in well over $1B last year, and spending on PR actually increased last year. Early-stage companies write off traditional PR and agencies at their own peril, even in a rapidly changing media environment.
  2. Social media is not a ‘silver bullet’ approach to promoting a small business, and I don’t believe it ever will be. Having said that, you are absolutely correct – an astute entrepreneur can get pretty far on their own if they go about it the right way.
  3.  “PR agencies of the past will have a hard time adapting…” You are absolutely right. The majority of today’s top PR agencies operate according to an outdated paradigm and business model, and the industry is ripe for the right entrepreneur to erode a sizable portion of their business.

PR is dead

Just found myself in a conversation with one of our portfolio companies. I declared PR (public relations) dead. It's the past. It's all about social media now. And social media is a more complex, more fragmented game to play. PR agencies of the past will have a hard time adapting -- in my opinion. 

How to create buzz online? Ask my friend Buzz Bruggeman of ActiveWords....he says:

Make a list of the top 10 influencer you are targeting.  Work backwards from 10 to 1 and start engaging that list in any way you can. By the time you get to #1, you should have your pitch and engagement down so you have the greatest chance of success. 

Using fortune cookies to woo investors

I received this photo as part of an email from an entrepreneur pitching me for investment.  Below are the contents of the email. Fortune_cookie
 

"I hope your 2010 is off to a great start! I had Chinese for lunch today -- they accidentally gave me the fortune cookie intended for you (photo attached).

Do you have time to catch up in the next couple weeks?"

He accomplished a number of things with this simple email:

  1. He made me smile
  2. He demonstrated that he knows how to stand out from the crowd of normal investment inquiries. I'm assuming he can use this same skill with customers. 
  3. From an emotional perspective, he is someone that I would likely enjoy working with and supporting.  A big part of early stage investing is connecting emotionally. 

NOTE: Please don't misinterpret this post and start sending me fortune cookies to my office. I actually don't like them. Theo's chocolates are great but I'll likely be on a diet and won't be able to eat them.  

Date your ideas before going to bed with them

I had coffee with an entrepreneur yesterday. He's got a very small niche business that he's been working on for a year. It generates about 2K per month in revenue. He has some ideas for a business that he thinks could be big.

I asked him if he had a girlfriend. He did. I asked him if thought other women were hot. He did. Well, you know where this metaphor is going. I never met an entrepreneur running a business who didn't have other ideas for other businesses. In fact, I think that some of entrepreneurs best ideas for businesses come while they're running a business. The reason is obvious -- they're in the flow of a market and a set of problems and they can see opportunities relatively clearly.

The real issue is not having the ideas -- it's what to do with them....and if they're really compelling what to with the existing business. I told the entrepreneur I was meeting with to have coffee with his idea and maybe even dinner. I told him he didn't know enough about his idea to know whether he should break up with his current business to get into a relationship with the new idea. You get it. Date your ideas before going to bed with them.

These guys are onto something -- check out untitledstartup.com

There's a new company that has incubated itself at Founder's Co-op and I'm super excited. I can't say much about it -- not because they're in stealth mode. Nope -- they're in anti-stealth. Check them out here -- it's just that they're better at telling you what they're up to than I am....let me correct that, you're better at telling them at what they're doing than I am. Go to the site...you'll likely be confused today but watch these guys. They're onto something. Cool new startup in Seattle. Happy 2010!

Being right and wrong at the same time about Judy's Book

I received emails from 2 of my former investors this week.

Brad Feld wrote me:

Re: you were ahead of your time

It took Google a while but they finally built Judy’s Book.  At least the data side.

Brad

2) Chris Ackerley wrote me:

re: Google to scoop yelp

Click here.

Chris

Chris sent me an article from Fox news speculating that Yelp had $30MM in revenue and might be valued at $500MM.  If you heard that sound -- it was me swallowing hard or saying WTF.

This start up stuff isn't for the faint of heart -- and it's an easy game to play in the rear view mirror. I'm going to sleep on this one and write about some new lessons learned -- they just keep coming !!

TechStars is coming to Seattle 2010

I'm happy to publish the press release. I'm super excited about this!  I think this is a great thing for the Seattle Startup community!

TechStars Expands to Seattle

TechStars announced today that it will launch a Seattle program in the fall of 2010, with Seattle-based entrepreneur and investor Andy Sack as Executive Director.  TechStars is a mentorship-driven, three-month-long "startup boot camp" for software entrepreneurs that typically receives hundreds of applications for 10 spots.  The selected companies receive up to $18,000 in seed funding, three months of intensive mentorship from successful entrepreneurs and investors, and the opportunity to pitch to angel investors and venture capitalists at the end of the program.

Sack is already well-known on the local startup scene as co-founder and Managing Partner of Seattle-based seed fund Founders' Co-op, guest lecturer in entrepreneurship at the University of Washington's Foster School of Business, and host of the weekly tech meetup Seattle Open Coffee

"We believe that TechStars can energize the startup community in Seattle in a unique way," said Sack, who  had previously served as a TechStars mentor in Boulder and Boston.  "Having experienced it up close in Boulder and Boston, I am excited about working closely with first-time entrepreneurs and involving the entire community in building 10 new companies literally from the ground up, many of which have the potential to change the technology landscape in important ways." 

The leading venture investors in Seattle have committed their support and also will act as mentors to TechStars in Seattle, including Bezos Expeditions, Buerk Dale Victor, DFJ, Founder's Co-op, Ignition Partners, Madrona Venture Group, Maveron, OVP, Second Avenue Partners, Trilogy Partners, WRF Capital, Voyager Capital, and Vulcan Capital.  Boulder-based venture capital firm Foundry Group, the Director of The Center for Commercialization at the University of Washington, and many prominent angel investors also have committed to supporting the program financially and as mentors.   

"It's incredible to see the support TechStars has engendered from the venture and angel community in Seattle," said Greg Gottesman, Managing Director of Madrona and a mentor for TechStars.  "So many key investors and entrepreneurs have raised their hands and said we want to make this effort successful, and we're willing to put our time and resources behind it.  If community support is an indicator of where this program is headed, we literally could not have had a better start."

Mentors for TechStars Seattle include Alex Algard (White Pages), Rich Barton (Zillow), Adam Brotman (Starbucks), Adam Doppelt (UrbanSpoon), Marcelo Calbucci (Seattle 2.0), Chris DeVore (Founder’s Co-op), Geoff Entress (Voyager), Michelle Goldberg (Ignition), Greg Gottesman, Steve Hall (Vulcan), Steve Hirsch (Natural Village), Josh Hug (Shelfari), Ben Huh (Cheezeburger Holdings), Nathan Kaiser (nPost), Glenn Kelman (Redfin), Shane Kim (Microsoft), Dan Levitan (Maveron), Melinda Lewison (Zefram/Bezos Expeditions), Andy Liu (BuddyTV), Ethan Lowry (UrbanSpoon), Bill McAleer (Voyager), Jamie Miller (Blinkx), Josh Petersen (43 Things), TA McCann (Gist), Patrick O'Donnell (UrbanSpoon), Linden Rhoads (Center for Commercialization at the University of Washington), Dave Schapell (TeachStreet), Jonathan Sposato (Picnik), Katie Thompson (Trilogy), and many more.  The full list of TechStars mentors for the Seattle program as well as the national mentor list are available on the TechStars website.  

Applications for the Seattle program will open in May. You can learn more about TechStars at http://techstars.org.

About TechStars

TechStars was founded in 2007 by Boulder-based serial entrepreneur-turned-investor David Cohen and venture capitalist Brad Feld. TechStars has operated in Boulder for three years and in Boston for one year.  Since inception, TechStars has supported 39 companies and approximately 75% have subsequently received follow-on financing from outside investors. Several companies that have emerged from TechStars have already successfully exited to notable acquirers such as AOL and Automattic (WordPress). The most recent batch of companies resulted in seven VC-led follow-on funding rounds and three additional angel-led rounds. TechStars companies attract the attention of seed-stage investors nationally.

 

 

 

 

 

 

 

Comment lurkers playing SEO games

This comment came from Disney World Vacation Rentals:

  • "Its really good to see this blog,you have nice information about vacations at Disney.People who are looking for hotels there,you really have good material for them. I got valuable links. I will like too see this blog again."

For those of you who don't know -- this firm is trying got get link value from my blog to their website.  Yes their attempt is weak and I didn't publish their comment but the game they're playing is very real.

The value of the first position on Google is approximately 5x

Congratulations to Cooler Planet -- the social media and energy efficient web site tat I invested in 2 years ago. Just this past week, Tom Staples and gang managed to get their web site on solar power to become #1 on Google for the search term Solar Power. Check out the traffic graph below. On the fist week of being in that position, organic traffic has increased about 5x!  Also, check out another one of Cooler Planet's sites on Solar Panels .

CP solar stats

The risks of getting too aggressive: A story from one of my readers

I got this email from one of my readers and just had to share it with all of you:

When I was about 13 or 14, I decided I wanted to run a web hosting company out of my bedroom (I had a successful BBS back in those days and wanted to start shifting into a profitable business).  I figured I could charge like $50/mon and do web design and hosting, and if I could get maybe 5-6 customers I could afford a 512k frame relay line (everything was dial-up back then)..  I wanted this so much, but didn't have the networking skills to find these customers. What I did was emailed the entire user list of a friend's BBS (who was already doing Internet hosting) and advertised my offer.  My friend (who was a mentor to me) was very displeased with this, but I was too blinded by my visions of success to have thought about what I was

doing to people beforehand.