Have you stepped in dog shit?

I just went out to lunch and had the good fortune of stepping in some fresh, smelly dog crap. I cursed, stopped, took my shoe off, wiped the crap off, washed my shoe and put it back on and kept walking to lunch.  I smiled to myself as I thought about the shit storm that investors and entrepreneurs alike have been living through for the past 4 months or so. The metaphor of stepping in dog shit seems an appropriate one to share.  I'm witnessing people at the various companies I work with stop, swear and attempt to wipe off the shit.  Some are successful and seem to be walking forward.  Others are less successful and are still trying to get the dam dog doo off their company's balance sheet and p&L.  Losses are behind. You can't recoup them. Don't try -- it's likely to make the matter worse.  As soon as you can walk forward -- no matter how slowly and no matter how much cursing.

It's easy to get in, but can you get out; Investment opportunities abound but what about exits?

We've been busy at founder's co-op looking at deals but like many investors we didn't make any new investments in Q4, 2008. We've got a couple deals in the pipeline that we're excited about and may get done in the next month or so. If we do the deals, I'll be sure to let you all know. One of the things, that's on my mind -- like many of the investors out there -- is exits in the future. Expectations amongst entrepreneurs have come down and thus, deals are increasingly investor friendly. That's good.
But the question of what happens after an investment is made and a company grows are more uncertain today than ever before.  Another way of putting it is that getting into deals is all too easy but getting money out on the back end is hard. It's impossible to have an answer to this -- and one either has faith that there will be a back end in 3 to 5 years or not.  We're keeping the faith --and hopefully, making some bets in the near term but the m&a market of the future is on our minds. 

Does America need a dictator?

George Bush used the executive office for lots of initiatives and activities that I disagreed with at the core of my being. I found myself in shock and horror as he (and his cronies) used the executive office to initiate war in Iraq, to undermine basic civil rights and human rights (think Guatanamo bay and civilian wiretapping), and to cut taxes in the face of rising spending -- he used politics of fear effectively and moved to centralize power in the executive branch more than any previous president (to my knowledge). He did all this and much, much more.  And I think he'll go down in history as the worst president in American history for what he did...and most people won't focus on how he did it.
Now, Barack Obama comes along -- someone that many people believe in. I'm beginning to wonder if the country doesn't need Obama to use even more centralized executive powers than George Bush used in order to be effective in the current situation. I'm nervous that Obama's inclusive liberal decision making approach is going to get more mired in the political system than George Bush's approach. This, at a time we absolutely need decisive leadership.  In my opionion, Barack would make a great CEO of America -- if only our system granted him that authority.
I'm rambling a bit....but I'm wondering whether America doesn't need more of a benevolent dicatator now more than ever?
And I'm wondering about the the irony that the last President attempted and wished for dictator like powers more than any other president previously and is, in my mind, to blame for much of the mess we find ourselves. What's that say about America's political system? 

The holidays are a good time for planning

I've spent a good portion of my day today and yesterday with Tom Staples of Cooler Planet reflecting on 2008 and making plans for 2009.  The process of figuring out the strategic priorities for a company can be a bit of a dizzying process. It's easy to focus on tactics -- make a list of the things that should be done or you've thought about doing and haven't gotten to yet.   Tactics for Cooler Planet include providing more value for our installer base with additional products, providing more value to consumers with more energy efficient offerings and information, increasing traffic through a variety of strategies, etc.  But tactics don't really allow you to answer questions of priority and more importantly, what you won't do. And that's where strategy comes in -- what is this company, what market are we in, who are our customers, what are the strengths and opportunities face the company.  The good news about not having a lot of cash reserves is you can be very focused and very tactical and drive the company hard toward increasing cash flow (and thereby increasing cash reserves). So Tom and I have gone round and round -- and we're not through it yet but the strategic conversations have placed the tactical decisions in a different and clearer light.  So, I'm encouraging all my companies and readers to spend some of the holidays planning for 2009. 

Legal bill I received today

Legal services: 0.1 hours @ $350/hour = $35 (see attached timesheet)

 

Expenses:  None.

 

Total Amount Invoiced:  $35

This was the entire bill for the month. I'm not sure exactly what to say about this bill.  I think the bill kind of speaks for itself.  To get to the point where they are billing me for 1/10 of an hour is beyond my comprehension. And lawyers wonder why there are so many lawyer jokes!

I don't doubt that there was a phone call that took place, the lawyers billing system can attest to that. But what did we discuss? Was the call 4 minutes or 7 minutes or 5.24 minutes? Grumble. Grumble.

Tiger21: a peer to peer investment club

I've decided to chair the Seattle chapter of Tiger21.  The organization is a group of high net worth individuals who meet monthly to discuss all things financial in their life and world.  The goal of the group is to assist individual members in becoming more knowledgeable and educated about managing their financial life.  i.e. increase investment returns and limit risk. The group has some roots in Vistage (formerly known as TEC) , YPO, and EO (formerly YEO) -- but is unique in its focus on financial matters. There are currently fifteen TIGER 21 learning groups, representing more than 165 investors, with investable assets over $10 billion. Founded in New York, TIGER 21 now has investor groups in New York, California, Florida and Texas....and now Seattle.
I was fortunate to be a recent guest for part of a meeting at the San Francisco Tiger21 chapter and was so impressed and inspired by what I learned that I decided to chair the Seattle group.  I learned from 8 other competent individuals about what each of their view and actions had been since the October collapse of the stock market. It was highly educational and contained information that influenced how I've managed my investments in the last 30 days.  The notion of having this input on a regular basis in Seattle excited me -- so I'm chairing the group. Feel free to email me if you have questions or interest about what I'm doing.
You can read about Tiger21 at its website or in some press articles in the New York Times, CBS market Watch, the Miami Herald, the London Times etc. You can also see the press article in the Seattle Business Journal too.

A breeze blew in, I ate a grape, and I jizzed in my pants

I knew you would like that blog title ....and you'll like the video even more. If you're under 18 or easily offended do not watch the video
You know I debated about whether I should post this content on my blog or not. I hemmed and hawed.  But in the end, I can't resist.  Forgive me, if I have a sense of humor....and I just figured that in these dark scary economic times we all can use a good chuckle or two a day. This content from Saturday Night Live made me lough out loud. 

A tip for entrepreneurs raising money: Don't make an investor wrong

I recently had a conversation with an entrepreneur about possibly investing in his company.  The entrepreneur asked for my opinion on the opportunity.  I told the entrepreneur I was interested in the business but wasn't willing to invest yet because he hadn't brought the cost of customer acquisition down enough (i.e. he needed to innovate on marketing). 
His reaction turned me off: he spent the next 5 minutes telling me why the cost of customer acquisition didn't materially matter and why I was wrong....or focused on the wrong thing. I appreciated his spirit of argument....but I really didn't want to argue with him.  (Differing opinions are welcome but argueing is a pain in the ass)
I wanted to interrupt him and tell him that my opinion was just that -- my opinion. It's neither right nor wrong....but whatever you do, don't fight with me and position me as wrong. I'll just retreat.  It's a delicate balance for an entrepreneur to make a convincing pitch in any environment and that balance has gotten harder to maintain in this environment. However, it's all the more important to make sure you guide your investors to coming to the right conclusion -- a big part of keeping that balance is making sure that you give the investor the space to have their opinion, to change their mind, and ultimately to make a choice of whether to invest or not. 

View of a Seattle angel investor

As an investor today, I have to choose between:

  1. Making an early stage bet on a company with no revenue
  2. Buying into an existing company with a revenue stream
  3. Buying shares in a publicly traded company of choice
  4. Doing nothing

What would you do?  If you're selling me on #1, your investment in terms of company, market, product and deal pricing has to be compelling enough to get me not to do the other 3 options. 
I make this list not to dishearten entrepreneurs but to give them insight into the mindset of the people their pitching.

Flat is the new up

I just had a meeting with an entrepreneur who is trying to do a financing at the same valuation as he did a year ago. Last year, he raised 1.5MM at a 1.5MM pre-money (3.0 post).  Now, he's trying to raise another 1.5MM at the 3.0MM post money so that no-one gets hurt. I told him, "flat is the new up" and I realized that I had the title for my blog post today.  I'm skeptical he'll get the deal done at that valuation but appreciate his desire to keep everyone whole.

Define Counter-intuitive: Starting a company in the recruiting industry now

I met with Bryan Starbuck, CEO of TalentSpring, at Louisa's, my favorite coffee jaunt on Eastlake.  As we were sitting down, I asked him what market he operated in. He told me recruiting. I smiled and kindly told him that Founder's Co-op would not be a good capital source for him.  With unemployment going to 10+% in the near term, we definately didn't like the recruiting marketplace as a market to be investing.  I told him it was nothing personal and nothing about his company and that I'd be glad to listen to his pitch and see how else I might be able to help him. Well, I'll be the first to admit it -- 30 minutes later, my initial assumptions about TalentSpring were very wrong. 
After learning about what Bryan is doing, I think TalentSpring is a very interesting company with lots of potential.  Simply put, he helps big and small companies deal with the generation and filtering of resumes to arrive at a pool of 100 resumes that a human should look at and sift through.  TalentSpring uses very sophisticated algorithms and processes to filter through thousands of resumes so a human recruiter can start with the best qualified base of potential candidates.  The company charges big companies an enterprise fee which is small enough ($500K+) when considering the value of getting high quality candidates into the right positions. Even in an economy with lots of unemployment, his business makes lots of sense.
Kudos to Bryan for ignoring my initial protestations and methodically taking me through his pitch. More Kudos to Bryan for making such an interesting company with such potential.  I think Bryan may still have an issue with his cost of sale and perhaps with his valuation in this round....but he definately has the makings for a decent size business!