203.5

Today is weigh in day. I'm 1lb lighter than last week. I suspect that is within the standard variation and may mean I've not lost any weight....but I feel good. Had a good week of exercise and made some progress in eating better. The eating better part is the real challenge for me....regular exercise I do well at. My diet thus far is as follows:

  • Eat less pasta and bread (which should be easy to do given the amount I am accustomed to eating)
  • Eat more fruit
  • Eat some breakfast and a big lunch.
  • Minimize desert intake. A weak point for me on Tuesday. I ate 6 Oreos in 6 minutes ....as if they were Scooby snacks. Good for the eating contest but bad for the diet.
  • Don't eat any food after 7PM (doing well at this )
  • Drinking lots of water each day.
  • I haven't decided what do to with alcohol ....

That's it so far. It's a start.

Timing of joining a start up company

I was on the phone with the CEO of one of the companies I have an investment in last week. We were talking about the timing of hiring a new VP of Sales. We had talked to this candidate 2 years ago and for a number of reasons it wasn't the right time for him to join the company.  At that time, the company had a lot of organizational, management and business development that it needed to do -- in some respects, the candidate was more mature than the company was at that time. Well, now may be different. We've re-engaged the hiring conversation with him (we never really lost touch) and are actively discussing him joining the company. I think we'll offer and I think (hope) he'll accept. It's interesting to think about all that he's missed at the company in terms of maturation.
Everyone tends to think it's best to join a company at the beginning. And personally, I prefer it -- I've got a passion for those birthing days. But as I think about the situation with this candidate, I gotta say, there's a lot to be said to coming in when the birth is over and the business is early and clear. I'd recommend anyone who is considering joining an early stage company to give thought to what age and level a company is at prior to joining. Some of this analysis is economic -- revenue and profit and some of this analysis is management and founder maturity.

Fatblogging: hear rate monitor purchase

As part of my fatblogging effort, I just bought this Polar F6 heart rate monitor. I've had my eye on getting one of these for a while but this fatblogging effort finally threw me over the fence....that and an email suggestion from another fatblogger who encouraged me to buy one... Ahh...the power of word of mouth again!  It arrives this week. I'll let you know what I think...

Understanding venture capital term sheets

Since yesterday's post on term sheets, I've gotten a bunch of emails asking me for more information about term sheets. I will continue to write on the topic but I thought I would point people to this super useful resource created by my VC friend Brad Feld. (Be forewarned it's a list of all his term sheet posts) He does a better and more thorough job of explaining all the terms than I'll ever do. I'll be able to give some entrepreneurial perspective on the same terms.

Advice for entrepreneurs negotiating venture capital term sheets

I just got off the phone with a fellow entrepreneur in Seattle. He's CEO of a very cool start up that is in the process of raising its Series A. I am an investor in the angel bridge note. I'm not going to tell you the name of the company because they're busy negotiating a deal and the CEO would shoot me. But I do want to tell you and other entrepreneurs the advice I gave him.  This post has two parts: an outline of the financing situation followed by my advice.

I) THE FINANCING SITUATION (all numbers are fictional to protect the company):
There was a bridge note done in October of 2006. The company raised $1,000,000 at a 25% discount on the valuation of the Series A round (if there is one) and gave 20% warrant coverage.  Included in the bridge note terms was a maximum valuation of $4,000,000 for the Series A round. The note terms did not include pro-rata rights for the angel.
Along comes tier 1 venture capitalist and gives the company a series A term sheet. VC wants to put $4,000,000 into the company at a $9,500,000 pre-money valuation. The VC claims to want a 30% equity stake in the company and wants to have a 20% option pool for new hires. The liquidation preference is 1 times money invested. The company today is pre-revenue. There's lots more to say, but that's the gist of the deal.

MY ADVICE
The CEO called and was distressed about founder dilution and didn't want to give the angels pro-rata rights. My comments to him were:

  • CONGRATULATIONS!! Close the deal! You got a 9.5 MM valuation for a pre-revenue company!!
  • Don't get hung up on your dilution (or on valuation)- this is a mistake I see a lot of entrepreneurs make. They get worried about how much they own and that leads to a tendency to start to optimize on economics. Fight this -- don't worry -- and get the deal done.
  • Give the angels pro-rata - Now this may have to come at the cost of the big VC or the founders , but my advice to the CEO is that life is long and you don't know whether this company is going to make it (in fact odds are against you)....so if you want to do another company, you want the group of people who want to support you to be as big as possible. Those people who support you when you've got nothing --who took a risk on the company not because of the company but because of you...those are the people you want to keep happy and close to you. Do the right thing by them!
  • Be careful of the common VC strategy of pumping up the valuation but requiring a extra large option pool. That's what I see in this case. 9.5MM for a pre-revenue company is a lot...but the VC is requiring a 20% option pool which is also a lot and has the affect of lowering the effective valuation (from the VCs perspective).
  • All VCs have models of how they want to deals. In this case, the VC wants to own 30% after the deal is done.  This is negotiable! The difference between 28% and 30% is negligible. The reason for these models is the VCs only want to spend their time and money when they have enough at stake. The second reason for these target % ownerships is to give the VC a pressure point when negotiating with entrepreneurs. The first reason is valid the second reason is bs.
  • Focus on the other terms in the term sheet like liquidation preference (1x), board structure, pro-rata rights
  • Oh, and congratulations, get the deal done!

Fatblogging: 204.5

I play squash on Wednesday mornings. I weigh myself naked and I'm 204. So that's my benchmark.

I know that some people weigh themselves each day. I'm not one of those people. I'm doing this to get and feel fit and inherently that means losing a few pounds. So I'll weigh myself every Wednesday after squash and tell you where I am. Last week I was 203 -- this week I'm 204.5. I doubt that I gained 1.5 pounds but that's what the scale says. I also lost a close one in squash.

Shelfari

I made a small personal investment in Shelfari recently. I made the investment for 3 reasons:

  1. I like the entrepreneur Josh Hug from the first time I met him.
  2. I know (or like to think I know) a fair amount about social networking meets vertical -- and in this instance, it's books. I think this works
  3. The product is cool
  4. I think it has the potential to be another kind of www.mybloglog.com. Which I think is friggin awesome. There's more to say here but I don't want to give away any company secrets.

ii

fatblogging

OK -- I'm joining the group. I've watched with interest the ranks of late 30 somethings and early 40 somethings grappling online (blogging) with weight. Well  not to be left behind -- I'm joining the group this week.
I need to get a few important items which I do not currently have -- a scale, a concrete exercise plan, and a piece of humble pie to replace my Oreos and french fries. 
I will post about my fitness and weight but I don't think I'm going to do it daily -- is this required?

Wish me luck.

Why CItySearch bought troubled Insider Pages?

Well, I don't know.

The rationale probably went something like this :
i) 2MM unique visitors
ii) Decent product that focussed more readily on areas outside entertainment
iii) An asset that could be monetized by Citysearch's sales force

Historically, I've been a huge fan of IAC. I saw them as the untold juggernaut of local -- they bought service magic, trip advisor, expedia and sidewalk (microsoft's asset that merged with citysearch). If you properly integrate these services you've got the best property for local search on the web. But, as awesome as they've been at acquiring companies, they've (from my outside perspective) been crappy at integrating and executing these assets.
So while the price may have been only 10 or 13MM dollars, I don't see what they're going to do with the asset(s).
If you saw my post the other day, I thought it made sense for one of the directory or yellow pages companies to buy the company. Oh well...shows what I know.

Menu Entrepreneurs

I had coffee today with John Li at Menuism.  I met John after my blog post on Judy's Book and my belief that we should have focused more energy here. We had a good conversation about teh food and restaurant space generally and how to go about creating a real traffic asset here. I left the meeting feeling energized -- he's and his partner left microsoft and have self funded their site. They're engaged in the process of building a business and have done some cool stuff. I look forward to watching their progress....check their site out.
My conversation with John reminded me of my friend Greg Barton at Menupages.  (I owe him a phone call!) I met Greg 2 plus years ago and think he's doing a great job --  check his site out too.   

The kind of programs the government should be getting behind

I saw this program at the Stanford entrepreneurs week:
There’s also an interesting pitch contest. If you’re eighteen to twenty-five years old, all you have to do is submit a two-minute video. In this video, you should explain your answer to this question: What product or service would you offer to help reduce America’s dependency on oil and other fossil fuels?
Makes me wonder, why doesn't the US government get behind this kind of thing in a big way?

Search for gold's gym sucks

This is an email I received today.
Dear Mr. Sack
 
First of all, let me explain how I got your e-mail id.
I did a google search, with the words "Gold's Gym Sucks."
Your blog/posts popped up. I read the posts, and decided to write to you.
 
So who am I? Well, my name is Alok.
I'm a copywriter in Bangalore, India.
Gold's Gym has been making my life a living hell.
And I was wondering if you could possibly help.
 
If the answer's no, all that remains is for me to thank you for your time.
If you think you may be interested, please read on.
 
The situation, in brief, is as follows:
 
A few months ago, I moved house.
It's a small apartment building, on a narrow, one-way street.
Across the road was a 5 storey vacant building.
The Gold's Gym franchisee in Bangalore, India, occupied it.
 
And my life, went down the crapper.
From construction work at god forsaken hours, to traffic problems.
And they haven't even opened yet.
 
They're due to open soon.
They'll have loud music, in the wee hours of the morning.
(They don't have 100% sound proofing.)
They'll have 5 floors of customers. Who'll all have cars.
(They don't have parking for more than 8 cars.)
 
Life, in short, is going to get worse.
 
The Bangalore franchise doesn't register on their site as yet.
So I can't make a complaint via their web page.
 
The franchisee herself couldn't give a crap.
And has brushed me off on the phone.
 
Bangalore may be the info tech capital of India, but this is still third world country.
The people in charge have more on their minds than one man's worries about noise polution and traffic violations.
Besides which, the franchisee has deep pockets. And you know what that means in the third world.
 
To cut to the chase, I want to write to someone at Gold's HQ.
You're the only e-mail link I've been able to find, after hours of trawling.
 
Could you possibly give me the customer complaint e-mail id for Gold's Gym?
Or the id you wrote to at Gold's HQ? Or any id that may possibly help?
 
Hope you can help.
 
Thanks for your time.