My daughter's first race

Today was my daughters first true cross-country race. The sun was shining, Woodland park was green, and parents were smiling. There were about 2000 people in the park for cross country run day. It was great! Coco ran 1/2 mile with about 50 other kindergarten girls. As the starter said "on your marks" -- Alexa and I yelled "Go Coco". She threw a look back that said "stop it". The starter said "set" and the beep sounded to start the race. Coco was off and for about 10 seconds she looked like she was in the lead. Then, she realized (as did I) that the person she was running with -- a younger girl named Andrea -- was lagging behind. So Coco slowed down, waited for Andrea to catch up and ran. Next thing I knew, the kindergarten girls were coming round to the finish line. I watched with my son Jude on my shoulders -- waiting for a glimpse of Coco to come round the corner. And there she was -- she came around the bend, smiling, running, and I yelled again. "Go Coco". She saw me and ran on to the finish line. It was exciting!

It may not sound like much to all of you -- but it was a big deal to Coco, to me, and to all the other parents watching their kids run.

Complaints about Seattle

So you've heard the things that I was worried about prior to moving to Seattle. Now that I've been living in Seattle for the better part of 5 years, I have a clear idea about the areas where Seattle is lacking. While I'm quite willing to point these limitations out, I want people to know that I think Seattle is great -- it's a great place to live period.

The following are my complaints about Seattle:
1) The restaurants scene is just ok
I wouldn't say the scene sucks and I wouldn't say it's great....and that's just it -- the scene is just ok. Unfortunately, it's below the restaurant scenes in other major metropolitan areas that I've lived or frequented such as NY, Providence, San Francisco, LA, and Boston. In my opinion, it's fair to say that there are a couple really good restaurants, the salmon and crab are great, and everything else is just ok . But the food that my wife and I love to eat -- anything asian -- is just ok in Seattle.

2) The entrepreneur scene is just ok
Much of what I just wrote about the restaurant scene can also be applied to the entrepreneur scene. It's taken me a while to make sure that it wasn't me, that the entrepreneurial scene I craved wasn't simply occuring somewhere in Seattle that I was not -- and while that there's a chance that may still be the case, my confidence in stating that the entrepreneurial scene is just ok has risen. Not sure why this is so -- and I haven't given up hope, but Seattle lacks the entrepreneurial spirt of most of the cities on either coast. There are pockets of people who are working hard to improve this situation -- to make the city more of an entrepreneurial mecca. In the meantime, people might be sleepless in seattle because of the coffee, just know that in my experience to date -- it's not the entrepreneurial buzz keeping everyone awake.

I'm not one to openly compain and not do anything about it. I've gone ahead and started a company (www.Judysbook.com), teach entrepreneurship at the UW, and continue to eat out lots!

Predictive abilities lacking

Now that I've lived in Seattle for 5 years. The reality of moving here proved that my ability to predict is non-existent.

1) I'm not really playing tennis now so I don't have much need for tennis partners. I have more friends in seattle than i ever did in boston after 10 years.

2) My inlaws are great. My mother in law judy has passed away but moving close was a great thing. I actually got to know both Marvin and Judy -- and while they're both crazy, I've grown to appreciate and love them.

3) yes it rains in Seattle but coming from Boston it's really just a drizzle. In addition, winters are mild and summers are a blessing.

Things I feared when moving to Seattle

Sept 10, 2004

I went to my daughters’ school picnic this weekend. I came away feeling optimistic that Judy’s Book may actually work. I looked around during the picnic and thought to myself – I would like to know where this community eats out, who does their landscaping, plumbing and whatever else around the house. The idea behind the company is decent enough – people helping people get the best of everything.

I moved from Boston to Seattle 5 years ago (late 1999) and there were 3 things that concerned me about the move.

1) Tennis partners - at the time, I was a big casual tennis player and I was concerned about moving to a new city without any tennis partners. More broadly speaking , this concern was really about not having any friends in Seattle -- my life and my friends had been in Boston.

2) my inlaws - My mother in law Judy was sick with Cancer. We had to move to Seattle to be close to them. However, I must admit I had some trepidation about being within driving distance of my inlaws. I liked them ok -- from a distance and just wasn't too sure about how the whole proximity thing would work. Would we get along? would my wife change / regress by being close to them etc?

3) the weather - supposedly, it rains in seattle. How would I feel about that?

The post-financing phenomena

Sept. 9, 2004
Once the deal was done, anxiety crept in. I found myself more stressed and not abole to really sleep for about a week. I know this is counter-intuitive….but I recall some of this from abuzz. There are some post-financing phenomena that many people don’t talk about – that I’ve come to identify and would like to share with all those other entrepreneurs seeking financing out there.

Phenomenon #1: holy shit
This occurs when entrepreneurs wake up and realize that people actually believe in the business idea they’ve been working on and are willing to invest millions of dollars in their idea with them as CEO.

Phenomenon #2: holy shit, gotta make it work
This phenomenon occurs particularly in early stage financings. The earlier the company is in its life cycle the more likely it is that the entrepreneur – me in this case – raises the question after raising all the money -- is this really all going to work? The stress comes in from realizing that making it work is up to ME.

Phenomenon #3: holy post financing blues
This is commonly known as the post financing blues. This is the most well known of the post financing phenomena I’m writing about. It’s the most well known because it’s inevitable and can often hit entrepreneurs as well as their companies (staff) with a wallop. It is easy to attribute this phenomenon to the emotional roller coaster of doing a venture capital financing. Inevitably after the anticipation associated with raising millions with VCs, there’s an emotional let down.

Phenomenon #4: holy re-engagment, Batman
This typically just hits the CEO (KAPOW) who has been mostly disengaged during the fund raising process. There’s a real process of trying to figure out what to focus on and what to do – because the last 3 to 6 months have all been about financing. This can also hit the COO (SPLAT@!) who has been running things at the company while the CEO has been out raising money.

It’s important to remember when fund raising that the real work starts after the financing. These phenomena take about 30 days to overcome.

The top 5 tips for closing a Series A financing with a venture capitalist

Date: Sept 7, 2004
It's been almost 2 months since my last entry. Funny what happens when you fall off the blogging band wagon. Over the course of this week, let me try to catch my reading public up on events that I have omitted. First, Judy's Book successfully raised 2.5 MM with Ignition Partners and Ackerley Partners as investors. The deal itself went very smoothly. Between my last blog entry and Friday, July 23 I negotiated a term sheet with John Ludwig. I've known John for about 3 years and yet had never done a deal with him. In retrospect, he was a gentleman and a scholar during the process. The term sheet negotation was relatively painless: Ignition wanted to put more money to work and wanted to own more of the company. We ended up deciding to take more money than we had originally set out to raise -- not necessarily a bad thing for the business. And I managed to communicate the issues I had around control and emotional dilution to John and Rich Tong, and to their credit they listened and responded graciously and prudently. Once we had a signed term sheet, it was off to the races to close the financing round. Ignition's attorney was Steve Yentzer of Perkins Coie and Judy's Book attorney was David Wickwire of Gray Cary. If I had been writing my blog during that week, I'm sure that I would have had a posted a blog entitled top 5 tips for closing a Series A financing with a venture capitalist....
1) Get everyone to agree to a timeline, especially the venture partner and investor council. Send an email around and manage everyone to that timeline
2) Don't let the attorneys run the deal. There's a healthy balance that you need to strike in managing your attorney as well as investor council. On the one hand, you want to keep your eye on the closing of the financing and keep everyone moving forward expediently. On the other hand, you don't want to annoy or offend the attorneys -- they can make your life tough.
3) Stay in close communication with the lead vc partner -- in this case, I tried to talk with John Ludwig every day just to make sure he wasn't getting frustrated with the process.
4) Know when to give and when to hold-- in every deal I've done, you inevitably have to give on points that seem important but in retrospect aren't. If there's an easy point to give on -- do so. It'll build credibility and flexibility (hopefully)
5) Get it done -- the most important thing to remember is the deal isn't done till the money is in the bank. In the case of the Judy's Book financing, I kept saying to my team that the biggest risk I saw to the financing was the unforeseen world event -- another Sept 11 if you will. If that had happened while I was trying to close, inevitably the entire deal is at risk...so it's important to keep one's eye on getting to the finish line.

Tomorrow I'll write a post on what happened post financing.

The decision to partner with Ignition Partners

Date: 7/13/04
Got a phone call from Ignition partner John Ludwig. He called to give me a status report and to say they needed another week in order to get the term sheet finalized. I had spoke with Rich Tong (another ignition partner) on Saturday and gave him some feedback on the term sheet -- he indicated that we were in the same zone to proceed with doing a deal. So when John called me after returning from a 1 month vacation in Europe to say they needed more time – I got frustrated. Was this a case of venture capitalist jerking me around? Was Ignition Ventures waffling or back tracking? These are questions that come up in every deal. They are questions that are important to ask– and while I wasn’t sure of the answers – in my gut, I was sure. As I talked with John Ludwig and he accepted responsibility for the hiccupped process and for not reconnecting with Rich earlier – it became clear to me – in my gut I believe these guys are honest good guys and I know I’m supposed to do this deal with them. I’m not sure why I feel this way – I have other funding alternatives – but the chemistry is just right with these guys and I feel like my company will be bigger with them than without them. And even if it’s not bigger with them – I’m ready to have John Ludwig and Rich Tong as my partners. We’ll see if they feel the same way -- I’m writing in my journal today that we’ll get a deal done Ignition– and it will be done before Aug 11.

Positioning questions

Date:7/12/04
I've been thinking about modifying the positioning of Judy's Book -- to something that includes our blogging roots. One thought is to position the company as the world's largest blog on local services -- (this wasn't totally my idea but came from something that Rich Tong -- my smart and wise future investor said) -- my other related thought is to actively pursue the group blogging space. This is a space that will clearly accelerate and evolve over the next five years. I think it's important to partner with bloggers of all types because these are the people that today are actively publishing on a daily basis....and as I have said previously, I'm concerned that Judy's Book doesn't yet solve a problem that needs to be solved everyday -- or more accurately, that it isn't yet a solution that engages sticky membership (return visitors).

The entrepreneur's roller coaster

Date: 7/9/04
Woke up at 3AM -- not sure why I can't sleep. I didn't have any coffee last night. I live in Seattle and don't drink coffee. Kind of an oxymoron. I guess it must be start-up stress. Tonight I'm worried our product doesn't provide consumers with enough of a reason to come back regularly. Blogging is best when it becomes habitual ....I'd like to see Judy's Book move from it's occasional utilitarian value to the regular habit. The concern I have is -- how frequently will people actually wake up and look for a local service provider? If we're lucky that's once a month -- and then if you take that number and slice it by the number of people that think to use Judy's Book. Well, then....that's my concern this dark 3AM. I'm clearly in start-up mode. Working hard. Not sure if any of it will work.

The venture capital all partner meeting for Judy's Book

July 8, 2004
The meeting with Ignition went fairly well. It was the standard all partner meeting. 8 white guys and 1 female sitting around a big conference room. The meeting was at 12:30PM. Lunch time. I've found that lunch time is a good time to present to partners. Generally, people are perkier at lunch time even if they're distracted by their food. My partner and I gave our powerpoint presentation. I must admit it wasn't my best performance. I was a bit rusty from the long July 4th holiday weekend. I warmed up though as the presentation went on -- I could tell that we were getting buy in from enough of the room. I got a bit worried when Martin Tobias seemed unusually negative and then he gave me the dreaded crossed arms signal -- fortunately, he later relaxed and by the conclusion of the meeting we were having a good conversation about online local search. What is going to get small to medium sized businesses comfortable with moving their marketing spend online. Was Judy's Book a platform that consumers would endorse and gravitate toward -- and if so, why? While the answers weren't there -- it's the lively debate and conversation that shows that they're engaged and bought in. The meeting ends abruptly. Rich tells me he'll call tomorrow - -i.e. today. It's 2PM and he hasn't called yet. I'm feeling unloved and a little annoyed. Patience isn't my strong suit though it's important in this process. At 3PM I break down and call Rich - -he tells me that he's on another call and he wants to call me back. He also tells me that it was a good meeting and that Ignition wants to move to the next level -- i.e. I interpret that to mean that they'll send us a term sheet. It's now 4PM and he still hasn't called. Patience my friend. Patience.

Raising Venture Capital in Seattle for Judy's Book: an entrepreneurs' perspective on dilution

Date: July 7, 2004
Today I'm sitting in the waiting room of Ignition Venture capital in Bellevue, WA. This is the venture firm that consists of primarily ex-Microsoft guys. I'm waiting to pitch my hot new "local search" start-up idea -- Judy's Book. I arrive 15 minutes early. Venture capitalists don't like tardiness. I'm feeling confident. I know I'm going to get a term sheet as long as I don't blow it. An hour ago, I met with an angel in Seattle who said he'd invest up to 200K -- if and only if I decided to do solely an angel round. He told me that his model is to invest in companies that solely do not take money from those "thieves". His perspective reinforced my own internal debate about the investor syndicate I'm forming. Should I take venture money? I know I can close an all angel round today for 1 million dollars.

The debate about venture money comes down to two things in my opinion. First, Ignition has clear technical and operating expertise that other venture capitalists don't have. Second, venture capitalists in general offer risk reduction. For Judy's Book, risk reduction comes in two forms -- first venture money allows us to raise more money in this round -- instead of raising 1.0 million we could raise 2.0 million dollars. This extra money may provide us with the extra time and roadway to get to a successful exit. Second, the venture money in general provides us with financial coverage in the event the company goes sideways and we need additional funding but don't have the success that we hope or anticipate.

That said, venture capital comes has its costs. There is the financial dilution that occurs -- and with venture capitalists -- it's expensive money. Arguably, more expensive than financing that comes from customers -- i.e. that would be sales and revenue. And, even more importantly, and certainly less discussed in public -- is the potential for "founder passion" dilution. This emotional dilution is impossible to quantify -- and varies widely with the emotional fit between venture capitalist and entrepreneur. In the case of venture capitalists I've worked with before it's easy for me to assess this dilution and have it be a non-issue. In the case of Ignition, a firm that I haven't done a deal with before -- it's harder for me to assess.

Time will tell.