Republicans crossing over to vote for Obama make me smile

I've been pleasantly pleased and surprised by the public republicans - Colin Powell and Scott Mcclellan - announcing their support of Obama. What pleases even more is I just came from a board meeting in which 3 long term Republicans who have NEVER voted for a democrat declared that they are going to vote for Obama. Tuesday, November 4, 2008 can't come fast enough.  

Venture Capital Confidence


Venture Capital Confidence, originally uploaded by a sack of seattle.

Someitmes a picture is worth a thousand words.

I know consumer confidence hit an all time low today -- the lowest in 41 years and given I'm 41 years old, that means it's the lowest in my lifetime!

Strange, intense, disparaging times.

techflash looks cool

Just thought I'd give a little shout out to John Cook and Todd Bishop's new Seattle area tech beat.  These guys left the Seattle PI (The PI's loss) and have joined forces with the Puget Sound Business Journal to launch TechFlash. If you want to know what's going on in the Seattle technology scene you won't be able to beat these guys (pun intended). In typical fashion, they launch their site with some interesting news about Bill Gates new company. They're rock star reporters and I for one am happy to see them freed up editorially speaking with their new gig. Good luck guys.

Venture Firms: "Closed for the holidays"

Since the great stock market crash of 2008, a number of entrepreneurs raising capital have asked me for advice on their financing.

My advice starts with my world view: Given the recent swings in the public markets and the uncertainties about the size of the global recession heading our way, venture capitalists won't be doing deals for the remainder of the year. 

Venture capitalists won't tell entrepreneurs that they have an invisible sign on the door that says: "Closed for the holidays."  But trust me, things are closed tight for the next three months (and perhaps longer). 

The venture capitalist thought process will go something like this:
  • Their current portfolio will start to need more attention as the ripple effect of slowing demand hits projections and revenue lines.
  • Moreover, their current portfolio may well require more funding and so venture firms will hoard cash for follow on financings.
  • With uncertainty about the overall economy and potential exits, venture firms will enter the "wait and see" mode on investments.

All these factors will contribute in the short run to a slowing of new investments.
So what's my advice for entrepreneurs?

Look closely at the assumptions underlying your business plan and the amount of capital you plan to raise. And get prepared to make do with less.

You're going to need to get your hands dirty in the gritty world of bootstrapping. 

In technology companies, this "bootstrap mentality" isn't that easy to come by. 

But in the land of scarce capital resources and easy sources of Series A funding, your business plan is simplified to the "cash flow one step."  (?) Get financing from customers in the form of revenues! 

Whatever your grand plans, you need to show revenue traction and capital efficiency.  Given the choice between growth and survival, make sure survival is taken care of first.  Then and only then will you be able to grow.

If this seems harsh, or not what you had in mind, then you, too, should close for the holidays.

Oh Marcia!


Marcia Brady, originally uploaded by a sack of seattle.

On a little lighter and sadder note than the intensity of the crises facing the world over the last few weeks, I was upset to learn that my childhood fantasy crush Marcia Brady had turned to such an addictive lifestyle. I admit it publicly -- I loved Marcia growing up. I'm glad she seems to have come to terms with herself....but I'm sad that she still doesn't look like the photo here. This is the way I remember her!

Founder's Co-op mentioned on Techcrunch

Mike Arrington gave us a nice write up here on Techcrunch. I'm excited about Founder's Co-op and in particular working with the list successful Seattle entrepreneurs who are participating as LPs.  The thing the article doesn't do a good enough job of articulating is one of the unique components of our fund.  And that's the involvement of the proven entrpreneurs -- who are LPs in the fund.  These successful entrepreneurs (check out our website for a full list) are going to help guide our investment strategy and play an active role in supporting all the companies we invest in.  They're not a passive group of LPs. Rather, we meet 6 to 8 times a year and actively review potential investments and opportunities. Moreover, they play an active role in helping our portfolio grow by providing their expertise, know how, mentorship and rolodexes to making the companies successful.

Mismanaging entrepreneur's expectations

The job of a CEO is to manage the expectations of employees, investors, and the board.  I learned to do that pretty well (I think). Now that I'm a full time investor -- I need to learn that my job as an investor is to manage the expectations

  1. first, of the entrepreneurs we want to do deals with,
  2. second, the investors in Founder's Co-op and
  3. third, the broader entrepreneurial community

I don't think I've done a good enough job of number 1 and 3.  Today, in particular, I found myself in a conversation with an entrepreneur in whose business I had wanted to invest.  I had previously told him that we were going to invest in his business contingent upon customer diligence.  As time wore on, the economy (or credit) crashed and I got more familiar with his company's position, I ultimately decided that it would be better if Founder's Co-op didn't invest. That change in investing position -- while very common in all sorts of business deals -- always sucks from the entrepreneurs perspective.  I need to do a better job at this!  If the entrepreneur I spoke with today on the phone is reading this --please accept my apology -- I know I fucked up in our communication.

To raise capital, make your company smell like money

An alternate title for this post. Use money deodorant.  I just had coffee with an entrepreneur who was bemoaning the woes of the fund raising process.  He's been unsuccessful to date in raising 600K for his internet company.  And he's dismayed and disheartened by success that others are having raising their rounds.  He asked me, what is he missing? 
I told him investors will invest -- even in this crazy economic climate -- if his deal smelled like money.  He then asked what makes a deal smell like money. Below is my list of things that make your deal smell like money (you don't need all of these things but the more the better ):

  • Proven entrepreneur -- someone who has sold a business before for 20MM or more
  • Proven technologist -- some high level geek at Google, Oracle, or Microsoft
  • A determined, hungry entrepreneur with integrity
  • An easy to understand product or business, and preferably one that is fun
  • A clear path to making money, and preferably proof on making money is even better
  • Customer traction -- the more the better, and preferably evidence of accelerating customer traction
  • The stamps of big company endorsements always helps -- as customers or partners

Keith Grinstein dies?!

I was at Open Coffee this morning and someone told me that Keith Grinstein died.   Here's the article confirming the fact . I didn't know Keith well -- but he was a real character in the venture capital / angel investing scene in Seattle.   He always seemed like a gregarious, outgoing, good guy -- he was known as a little wild and crazy but I liked that about him.  It's weird when peers start dieing unexpectedly -- he was only 48!  Makes me feel mortal.

Economic fear in the street

I've never experienced anything quite like today.  The stock market crash after Sept. 11 made sense. As a nation, we were under attack and people were scared. So most people sold stocks.  But the events of the last 2 weeks, and in particular today, are in an economic sense much murkier than those that followed Sept 11.   My question, is economic fear worse than physical fear? 
After Sept 11, people feared for the physical safety as much if not more than their economic safety. At the time, people were concerned about whether or not their would be a dirty bomb in NY or whether our ports were safe.  There also was a strong sense that terrorists were aiming to harm the US economically.  At that time, economically the US was resilient.
Today, things are very different.  People are scared. There's no credit. House prices are falling. Banks are failing. Money markets aren't safe. People are buying treasuries just because they are "safe".  People have lost lots of money lately but don't understand why. We're not in physical danger -- but the fear is palpable.  The "bad guy" in this economic situation is unclear and I think not having an icon to blame (other than "greed" or "wall street") makes everyone more scared. 
I'm wondering today -- is true panic around the corner?  And more importantly, will I be able to see it?

Great grassroots idea: Use barack's photo on your facebook page and your blog

Barack2
After I posted my blog last night and sent out a similar message to 2,500 of my closest friends on mybarackobama.com. In response, a friend suggested that we encourage people to start using Barack's image on our profile pages in our social networks and blogs.  I thought this was a great idea and am taking that action. Feel free to use the images below or just choose your own image of Barack to use for your profile. 
What's great is that taking this action is free , can be done from your desk, and markets Barack to the netizens....and on Facebook, you're encouraging young people to get behind Barack even more than they already have!
Check out my new and improved blog profile , my linked in profile, and my facebook profile.  
 

With the economy and country tanking, get your head out of your ass and vote obama!

I agree with Carly Fiorina. John McCain is not suited to run a major corporation (or the country!)
You can check out her comment in an interview on MSNBC (the clip in question starts around the 1:07 mark).

I'm motivated to act and save the country, our economy, and our environment. I invite you to do the same.  This election is TOO important!

Join the barack obama network. My profile page is here.

1) Obama / Biden are FAR, FAR better prepared to deal with the complex
economic, international, and environmental issues than McCain / Palin.

2) Be sure to vote and get your friends and family to vote.  Getting
out the vote is the single most important thing you can do.

3) Be sure to donate money to this election today!

4) And if you're feeling motivated, send an email like this out to all
your friends.

A new technology media property in Seattle with some "old" names

The city's technology beat has largely been owned local journalists at the PI -- more specifically, John Cook and Todd Bishop. For as long as I've lived here, John has done a great job writing about the early stage technology start-up scene and Todd has done a great job while focusing on Microsoft.
Today, I happened to be speaking with John Cook and learned that both he and Todd have left the PI for the greener pastures of the Puget Sound Business Journal. In my opinion, this is a coup for the business journal and disastrous for the PI.  I asked John why he left -- and he wouldn't give me a straight answer. Reading between the lines, I'd have to say that the PI just blew it and wouldn't accommodate some basic financial and editorial freedoms that would retain John and Todd. As someone who's worked with old media newspaper companies, they don't seem able to get out of their own way even when their lunch is being eaten and their foundation is cracking underneath. You can check out John and Todd's new site here....it's supposedly launching in a couple weeks.