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This blog represents my own views, not those of my employer, Brooklyn Bridge Ventures.

Do not pitch me a story or book review for me to write about. This is my personal blog. For more info on that, see this post.

 

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If I was an Uber investor... (besides the obvious fact that I'd be rich.)

I like Uber as a service.  It just works.

I also like the fact that it seems to provide a lot of work for a lot of otherwise underemployed people.  All of the drivers I've spoken to have said nothing but good things about it.  They seem to like getting the work.

Do I think that all of the executives are bad people?  No.  In fact, I like all the people I know somewhat well who work there.  However, it does seem like the company has a culture problem that results in bad incident after incident. 

The culture seems to create a situation where bad ideas seem to fester--where "What's cool at this company?" results in very little hesitation around doing some pretty dumb things.

The press about it has gotten so bad that we may actually be getting to the point where you might not want "Uber investor" in your bio.  Despite the fact that it's going to be a hugely successful company, current investors may be experiencing diminishing marginal returns for being associated with Uber.  

For example, are we getting to the point where the Sarah Lacy incident gets so bad where female entrepreneurs, for example, stop pitching Uber's investors?  Could we?  If not, then what about when the next incident pops up--especially now that people are looking for the company to trip up.  They're under a microscope now.

So what would I do if I were an investor whose name is now being dragged along in the mud with all of these things?  

I'd bow out.  

I'd negotiate a sale of my shares and then, without weighing in on the situation in detail, just say something really basic like, "We are no longer shareholders in Uber, but wish the company the best going forward."

Everyone would know exactly why I did it and I wouldn't need to say anything more.

What would be the fallout?

First, it would undoubtedly piss off Travis, Uber's founder--but what's the repercussion there?  Statistically, he's not likely to start another billion dollar company later on--so if I don't get into his next thing, so what?

Plus, the seed round valuation of his next company will be so ridiculous that my expected return won't be that much anyway.

Second, if you believe that the best companies going forward are more likely to be built be teams who try to build strong, positive cultures, the move would catapult me to the top of the list of VCs with the right internal true north to seek out for those deals.  Would another entrepreneur be more likely to want me involved in their company for drawing an ethical line or would they fault me for not sticking by Uber given the headlines?   I'd be willing to bet on the former.

Third, at the current valuations, even if I had to take a 50% discount, my investors would still be thrilled at the outcome.  Since I have a responsibility to be a good shepard for their capital, I can't imagine they'd be upset at me exiting at an $8 billion valuation and returning the fund several times over.  

You might fault me for not saying that I'd sell just because "it's the right thing to do", but honestly I'm not sure it is actually the "right" thing to do.  It doesn't actually do much to the company--and if all the people with strong moral compasses walk out, is that really the "right" and best outcome?  Wouldn't it be more "right" to try to effect change?  Wouldn't it be more "right" to speak out in public and be a thorn in the company's side?  (Because, that's probably about all you could do.  I don't see this as a company interested in getting "help" at this point.  Seems like they see these incidents as just impossible to avoid collateral damage on the way to building something big.)

When you're a minority shareholder, I'm not entirely sure there is a "right" in this situation.  It feels like a train that has left the station.

All I'm saying is that what some people are saying is "right" may actually be strategically attractive to a current investor at this point in time, which is interesting to me.  

Valuing My Own Time and Saying No

The other day, I got a note asking whether I'd be willing to meet some "Head of New Things" at a big telecom.

That wasn't their actual title, but it was something like that.  

You've met them before.  They're new to the gig, super excited about all its potential, and getting out there selling founders hope for that one big gamechanging deal.

But I've seen this movie before, so here's how I responded:


"Hi!

To be honest, these meetings never really work out and I've decided they're just not worth spending the time anymore. There's so much corporate bureaucracy in telco, and they can never actually get anything done.  They just move too painfully slow to work with startups.

I'm sure this is a lovely human being that means well, but it's kind of like getting an invite to a dance party in quicksand.

I like a good dance party, but... well... quicksand.

As always, I hope you are doing amazingly.

Charlie"

Funny enough, I ran into that person later that day and they said they totally understood and actually really liked the note.  I think it encouraged them to say no more often.

The most precious commodity I have, especially as a one person firm, is my own time.  That's really all I have to give to the founders I back.  Sure, I write a check, but anyone can do that.

If I'm going to be effective, I have to be very careful about how I dole out my time and where it goes.  Therefore, I've had to do a lot of saying no to requests for my time.  Here are a bunch of things I don't do:

  • I won't do office hours anymore at incubators and accelerators.  You know those meetings where you get this endless parade of companies sitting with you for 20 minutes each?  I just don't think those are good for anyone.  It skips the whole vetting process for me--so I wind up giving time to a bunch of companies whose business model I might find problematic from the get go.  I'd rather get a list of all of the companies and then pick and choose who I'm actually interested in.  What I've been doing instead is doing a talk and agreeing to do a bunch of public Q&A that *everyone* can benefit from all at once.  Takes an hour or an hour and a half at most and everyone gets the benefit of a public conversation--versus three or four hours of pitches.  
  • Panel prep calls.  There's a special place in hell for panel prep calls.  It takes up a lot of cycles to schedule everyone and then we just kind of either a) awkwardly try to recreate the panel beforehand or b) each say what we think the panel should be.  If you're a good MC, you should just tell us what you want to hear from each of us and cut us off when we go off the rails.
  • No "Just 5 or 10 minutes" meetings.  So many entrepreneurs beg for just a few minutes of my time.  Those kinds of requests feel desperate and not only undermine their pitch, but it's still real time that adds up.  In 5 minutes, I could call my nana, answer some e-mail or help a portfolio company with some intros.  If I'm just not that into what you're up to, even one minute is too much.  
  • I only invest in NYC, so I won't take meetings with out of town companies or people "planning on moving".  Focusing on one geography saves me travel time and narrows the set of companies I'm looking at to the ones where I can get the highest signal earliest.  I don't know the startup networks in Chicago or Boulder, so it's that much tougher to filter the top of the funnel for out of towners.  Not only would it take me a lot more time in general to look at non-NYC companies, but even those individual deals take a lot longer.  It takes longer to get to know the founders.  It takes longer to diligence them.  These are cycles more effectively spent locally.
  • I rarely go to other people's after work events if I'm not speaking.  At this point in my career, I have to be pretty sure that I'm either a) getting exposure to a lot of people at once or b) getting exposure to really fantastic people and ones specifically relevant or interesting to me.  I don't really get that if I show up to an event where I'm just in the crowd and only get to meet the person next to me, behind me and in front of me.  Investing a few hours of time to meet five random people doesn't make a lot of sense.  Being on a panel or actually setting the event up myself might take more time, but I get a ton more out of it--and time management isn't just about cutting stuff out, it's about ROI.  As for learning, if I really want to understand a topic, I'd much rather just connect up with a panelist one on one.
  • I don't drink.  There are a lot of reasons I don't drink.  For one, I don't like the taste and I think I'm disproportionately sensitive to it.  Plus, I bike all over the place and need those reactive miliseconds to defend against taxi doors.  But, one big reason is time.  I really don't have the time to be fully awake when I wake up, nor do I have the time for headaches.  Any minute spent feeling less than fully "on" feels less than optimal.  
  • I take way less initial pitch meetings than the average seed investor--about 150-175 a year, which amounts to like 3 or so a week.  I know people who are taking three meetings a day.  That makes no sense to me.  There are roughly 400 venture deals being done in NYC each year these days, and maybe about 30% or so of those are seed financings.  That figure could be more if you're counting angel deals that don't really get reported.  In my opinion, if there are around 150 or 200 companies that get seed or pre-seed financing in NYC from *someone*, that's about how many meetings I could take.  If you're taking 300 meetings a year, that means that *half* of the companies you meet with never get financing from *anyone*.  That's a bad batting average and a lot of wasted time.  Just think about all the really terrible ideas that you see get funded.  Now think about how bad the ideas must be to not get any funding at all.  If that's half your meetings, you need better filters.
  • I don't take meetings just as favors for people.  One of my investors introduced me to a buddy of theirs in hopes that I would give them some feedback on their startup.  It wasn't the quality of deal I'd normally take a meeting with, so I turned down the opportunity to meet.  I gave the founder some thoughtful feedback, but declined the one on one.  I then explained to my investor that I felt like I was paid to find and invest in the best companies I could find--and if I took just one meeting a year as a favor to each of my investors, that would be an hour a week--almost 25% more initial pitch meetings than I take anyway.  That's a lot of time not spent trying to do the best deals on behalf of my investors and I'm sure if my fund performance wasn't up to par, they'd frown upon all those hours spent on favors.  

I'm sure there are other things I say no to, but I'm going to say no to writing any more than this.  It's more than enough for you to get the idea.

There are No Gatekeepers

One of the underlying dynamics I see in the venture capital, tech, and startup world--and where some of its worst behavior comes from--relates to underlying assumptions about power and influence.  Founders put up with bad VC behavior because they think a check from a certain investor is going to make or break their company.  VCs bend their rules with certain founders because they think this will be the one deal that got away--rules about oversight, governance, valuation, etc.  

Even in the talent market, startup employees make too many consessions around culture and environment because they worry about what it will look like if they leave somewhere too early.  Founders hiring top talent get desperate about it and make those same tradeoffs.

Let me be the one to say that there isn't any one single person in the entire world that you *need* to work with who is going to make or break your business or career--and certainly not at the expense of respect or your values.

You think VCs are important or influential?  Bullshit.  They sell you money, and there's lots of it in the world.  If one VC or angel is willing to fund you then another one will.  Don't be afraid to turn down money if you don't think you're on the same page with someone in terms of goals, values, or character.  

I had an investor reach out to me yesterday--no intro, no context--just asked to meet.  I didn't even know he was an investor because all he wrote was "I want to learn about what you're doing."  Like, that's literally all he wrote--just demanded my time.  Then he got annoyed when I asked who he was and how I could be helpful.  "Well, if you bothered to look at the e-mail address, you could have figured it out."

Dude, really?  I ain't got time for that.

I don't want to work with an investor who thinks that money should just open doors.  My time isn't for sale.  It belongs to my founders.  The really great thing about my fund now is that my investors are absolutely wonderful, respectful people.  I had one guy who was a managing director at a big asset manager write me like a full page and a half explaining why he wanted to meet.  

Maybe this person could have written a check for $5mm for my next fund, but then what would it have been like to work with them?  I'd rather spend the time finding 20 awesome people that I love to work with writing $250k checks.

The next time you don't like the way you're being treated, just walk away.  Your success is never going to come down to one investor, one employee, one reporter or one job.

The Thin Skin of the Venture Capital Market

The other day, I saw that one of my favorite products, Slack, just raised $120mm at a $1.12 Billion valuation.  The company is doing about a million a month in recurring revs.  

Personally, I think it was kind of a bad idea--not necessarily because of the valuation, but because it seems like $120mm is way too much money for a software company at this stage, especially one that might even be cashflow positive right now.  I think it's likely that it will unfocus the company and what it definitely does is eliminate the possibility of exiting for anything less than two and a half billion dollars.  That is likely to lead to decisions that might not be in the best interest in the company or the users.  

So that's what I wrote on Twitter...

 

And then I promptly got Twitter flack from one of the people who works at one of the company's investors.  They seemed annoyed that I said anything in the first place.  

What was said, who's right, etc., doesn't much matter.  The fact is, it's just not cool to criticize the investing side of the venture capital market.  

Which is why I'm sure the dude who picked apart the physics of the latest round of UBeam will undoubtedly get eviscerated in the tweet and blog world.  

"...Here’s the problem. IT’S AN IMPOSSIBLE IDEA. Having done my share of ultrasound physics AND wireless charging work in the past, the first thing that struck me about the idea was that, to transmit any appreciable amount of energy through sound waves, those waves would likely burn you, or at least deafen you, and any other small animals in the vicinity. This is why charging is currently done inside copper wires surrounded by plastic - so you don’t get hurt!

I’m no physicist - oh, wait, I am..."

Now, I know the company and while I'm actually not a physicist, my instincts told me the same thing--or, even if it wasn't impossible, it would be so inefficient that it wouldn't be an interesting proposition to consumers.  Also, I wasn't sure that it was really a problem worth solving.  I really don't mind power cords.  I'd really rather someone fix the battery problem than the cord problem.  This seems like duct tape for the battery problem.

That doesn't mean I have anything against the founder or the investors.  Meredith Perry has been working ridiculously hard for the last two years on this and I respect her effort.  I just respectfully don't see the same opportunity as her investors do, and I reserve the right to be 100% wrong.  I've been wrong many times before.  We all have.  For her sake, the company's sake, and their lead investor's sake, I hope I'm tremendously wrong on this.  I like Mark Suster a lot, too.  He's been nothing but tremendously nice to me.

But can't I disagree with him on an investment?  Why isn't that ok?  Why does it seem to automatically make someone an asshole to be critical of an investment?

This is done in the public markets all the time.  Turn on CNBC and you'll see tons of dissenting opinions on publicly traded companies.  

But in the private markets, we've got "Yay, founders!  Entreprenuership is awesome!"

I think it sucks that we are in a media culture where we're supposed to give everyone pats on the head for entrepreneurship when there are legitimate criticisms to be had about the high profile investments we read about all the time.  For the most part, journalists give startups a free pass when venture capital money is raised or when companies that clearly seem to have failed get "acquired". 

It's just not cool these days to say anything bad about the business side of startups unless you cross over into the "Big enough to pick on" world, like an Uber.  (That might also be the "Everyone thinks the founder is an asshole anyway" world, too, not that Travis really cares--he seems awfully busy running his huge company and making money.)

The problem is that when new entrepreneurs read only one side of opinions on an investment, they fail to understand the legitimate criticisms of business models that are out there in the market.  I can't tell you how many times I've been pitched and examples have been made of companies that I don't think are doing that well--but that you'd never know that from the press.

We have no legitimate debate and discourse in the startup market around individual investment ideas and it's hurting the entrepreneurs that are starting companies right now.  They're thinking everything is sunshine and roses and it's just not--but you're an asshole if you say it.  

Why?

No one should get personally attacked, but business criticisms of the business decisions made by founders and investors should be more fair game than they are.  

I think we'd all benefit from the public discourse, especially new founders.  

Not All Startup and Venture Experience is Equal #getoffmylawn

I probably do some kind of speaking event at least every other week.  This week, I've got three things on the docket.  Needless to say, I have a fair amount of startup event experience.  

What I find a bit frustrating is how easily some people get onto panels and are put up in front of an impressionable crowd of new entrepreneurs as "experts".  You'll get a venture capital analyst from a brand name firm who has just recently taken his job talking about what makes a company successful.  You'll get an entrepreneur who has raised one and only one round of financing in his or her entire life--all from relatively unsophisticated individuals, giving fundraising advice.  

Some of what I hear coming out of panelists is either really skewed to their own experience or just plain wrong.  

The problem is that as much as we say we're ok with failure, we're actually not very discerning about people's experience.  Some people have definitively had better experience than others.  

Other people just plain failed.

I've funded or committed to a few dozen seed companies in the last few years and worked for First Round Capital and Union Square Ventures--two of the best early stage firms on the planet.  I feel like I can say pretty much all their is to say about seed rounds.  However, I'm not about to dish out advice on how to grow into a billion dollar company, because I haven't taken a company there yet.  You should probably get Rob Hayes or Fred Wilson for that.  I won't ever be offended if you tell me, "Actually, we were looking for a VC who has backed a company that has gone public."

Sometimes, I see people on venture capital panels that aren't even VCs!  In common parlance, "VC" refers to someone who is an investor--who can do a deal.  To me, the absolute minimum criteria has to be that you work for a venture capital fund.  This means you have a pool of money.  You're not a broker.  You're not a development shop that takes equity.  You literally have a bank account that you have access to with millions of committed dollars already in it.  

Personally, I also feel like you need to be a check writer to call yourself a VC.  In other words, analysts who cannot lead a deal are not venture capitalists.  They shouldn't put it in their Twitter bio.  

Analysts support deals, but they don't really vote on a deal in a way that carries the same weight as a partner.  If that's the criteria, than most executive assistants should also be able to call themselves venture capitalists.  They certainly do their share of work to support a deal and often have the ear of partners when it comes to a lot of the consumer deals they do.  They definitely weigh in on whether they like the management team.

If you can't lead a deal, you're not "a VC" and you probably shouldn't call yourself one on a panel.  I wonder whether or not you should even be on a panel without actually bringing that up as a caveat--that you work for a partner driven shop and that you can't speak as one of the people who actually write the checks.  Some analysts definitely say that.  Others talked as if they were the ones doing the deals--even though they're just the ones making the cap tables in Excel.  

Dear Analysts: No offense intended, btw.  You're smart.  You're awesome in many ways I'm sure, but I did your job for years--I wasn't "a VC".  I was an analyst.  

And don't even get me started about exits.  Just because you sold your lost company for a nickel plus a modest amount per engineer doesn't mean we should trumpet that as a qualification to be on a panel.  Talking about your acqui-hire as anything but a failure is just plain fraud.

Don't get me wrong--failures are great experiences.  I wish *more* people who failed went on panels.  I failed and I learned a ton from it--but if your goal is to build a big company and then you flip your dev team to Yahoo! after shutting down your product, you failed.  Your speaker bio shouldn't inform the audience that you sold your last company as if your experience is one they should aspire to have.

Same works with pitch events.  Organizers need to be really draconian about who gets up to pitch--especially if the point of your event is to trumpet a geography or a type of company.  If you give companies with a social missions an opportunity to pitch, they better be really compelling--because otherwise two things will happen: First, as an investor, I'm going to think, "Ugh, all social mission companies are duds."  Secondly, the audience is going to think, "It's ok that my startup's plan makes no sense, because I have a social mission!"

If you can't get a really compelling set of people pitching, speaking, or repping any kind of startup experience, just don't have the event.  Skip a month.  It won't kill you to keep up the quality--and panels with questionable guests or pitch events with really problematic companies are the best way to turn your event into a D lister.

We have a bad habit in the startup community of validating and celebrating everyone's experience as informative, and even authoritative--and it's just simply not true.  I think we need to do a lot more questioning and vetting of people's experience and perspective and whether or not they're in a position to dish out any advice.  Were you the one who actually led the redesign?  Was it successful?  Did you actually lead that deal?

Question everyone.  

The truth is out there.