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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 you'd like to pitch your startup to me, there's no such thing as too early to talk. Drop me a line at charlie@brooklynbridge.vc or see if I want to meet in person at http://meetme.so/ceonyc.

 

 

 

 

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How early should you connect to a VC? Here's some data.

How long does it take from first meeting a VC to getting cash in the bank?

That's an interesting question. Theoretically, someone could meet you, sign your document, and write you a check for deposit that day, but that's not how it usually works.

It's also not the best way to create a helpful syndicate of investors that share the founder's vision for the company.

Examining the actual data not only gives me some insight into my close process, but it helps me calibrate around relationship building.  If all my deals came as intros from trusted connections that I know for years versus at founder pitch events that's interesting data.  I might decide that I'm not mining one side or the other, or I need to redouble my efforts to build relationships with the people I know longest.  

It also helps me figure out who I should be spending my time with. If it turned out that the best experiences I've had as an investor come from knowing someone a long time, I might go to events that are more around a specialty, like software development or design.  In this case, I'd have the benefit of knowing someone long before they created a company.  If you meet someone at a pitch event, they've already got a company and they're looking to close as quickly as possible.

In fact, that's what I tend to do--at least, what I say that I do. The way I choose conferences and events, and my strategy once I'm there, is based more around who I'm going to back two years from now than it is who is raising now.  

But does the data play that out?  How long in advance did I know someone, or know about a deal before I wired money?  What led me to knowing about that deal in the first place and when did that event happen?

I went back across the 21 investments I've made both at First Round and at Brooklyn Bridge Ventures--a period that dates back to January 28, 2010, when I closed on Backupify.  I looked at how I got the deal, when I first met the company, when it closed, and then what connection I made to be in a position to get the deal in the first place.  For example, while I closed on the seed investment in Tinybop on November 19, 2012, I met Raul two years earlier at the first Brooklyn Beta in 2010, even before he was working on the company.  Similarly, I got introduced to Chantel Waterbury from chloe + isabel by Bo Yaghmie from Cooley, who was my lawyer when I had a startup--so I had to trace back when I first got introduced to Bo by Fred Wilson.  That was three years earlier. 

Of course, if I really wanted to go nuts, I could say that I had to be born, my parents had to meet, and the universe had to begin for any of these deals to happen.  That would get silly after a while, so I just kept it to the immediately prior traceable event.  If someone introduced me to a deal, I went back to when I met that first person.  If I already knew the founder, I went back to when I first met them, and then marked the day they started their company as the first pitch day.  

The first thing I did was trace my sources.  Here were the results:

I would guess that getting a third of my deals from events is probably disproportionately high compared to other seed investors on the east coast--and that my VC intro percentage is probably somewhat low.  The latter is someone I've been more conscious of lately and I've been working to share more of what I'm looking at with other investors, in order that they share more in return.  That seems to be paying off as I'll likely close on a deal this week that came from talking about dealflow with another investor.  

You might be surprised that I don't get more inbound deals given all the work that I put into my blog, Twitter, and newsletter.  Actually, these things play an important role, but not in the way that you might think.

My social media streams actually do more to keep existing connections warm than they do to create new ones.  It's a way for people to follow along on what I'm up to and to keep me top of mind when they do encounter a company.  I would say most of the times that I've gotten an introduction to someone, it came right after the person making the intro read something that I put out there.

So how long does this all take?  I did a lot of inbox mining and came up with the following:

So, on average, something I did almost two and a half years in advance let me to getting these deals, and from the first time I encounted them, it took about five months for these deals to close.

Five months?

Two and a half years??

Who has that kind of time???

Fear not, founders.  I could turn around a deal and close in the same week--heck, even in the same day if I needed to.  It just doesn't seem to happen that way.  I'd say my average turn around time these days on saying yes is probably within a week.  So what's taking so long?  A lot of times, it's a process of gathering other investors for a round.  It's also a function of meeting the entrepreneur before they've really decided what they want to raise, or before they have a deck.  I'd say that five months is the amount of time I'd pencil in from the day you're ready to tell other people about what you're up to, rather than how long it takes to close a round.  The tricky question is whether these early conversations should count as fundraising.  When you approach someone to catch up and tell them what you're up to, are you pitching?  Most founders would probably say no and most VCs would probably say yes.

To me, these early conversations were extremely critical to helping me get to know a founder, to sharpening the plan, and to build relationships for later rounds.  To go back to the Tinybop example, Raul wound up pitching Steve Schlafman while he was at Lerer Ventures very early on, and Steve came back to lead the Series A in the company more than a year later.  

As for the two and a half year mark, it should say a lot to anyone looking to get into venture.  One of the most important assets you have is your network--but it's not your network of founders.  It's the network of people who respect what you can do for a founder enough to make an intro.  That's what this multi-year relationship is all about.  It's interesting to note that a lot of these people were founders themselves that I didn't back, but I stayed in touch with.  They went on to do other things besides their startup and connecting with them turned out to be really important.

It also seems to reinforce a lot of the activities in the community that connect me to interesting non-founders.  These are the people that, a few years down the line, are going to run in the circles later that I would like to be connected to.  

So if you don't see me at a pitch event or a demo day, it's probably because I'm meeting up with someone from the future.  

 

 

 

 

 

Brooklyn Bridge Ventures invested in Ringly because being present is fashionable

A year ago, I wrote a post about how I was trying to keep my phone away during meals--No Phone with Food.  These days, we've got so much that can distract us, being present has become a rare feat.  I've tried to stick to it, but it's hard.  I run my own business and I try and make myself available whenever my entrepreneurs need me.  I also have a lot of family responsibility--with parents getting older and my grandmother making her way ever closer to 100, there are a few important folks I always want to stay connected to.

The problem is that the phone is a rabbit hole.  With just a few app installs, the notification screen quickly becomes short attention spam theater.  Sometimes, I wind up in Twitter or Instagram on my phone without even remembering why I pulled the phone out in the first place.  

For a guy, it's just too easy.  With my phone in my pocket, it might as well come out of a holster.  

For women, its worse.  Either you dump your phone into the black hole known as your bag, never to be heard from again, or it sits right there on the table as the third wheel.  There's nothing more distracting than having a phone buzz on your table or needing to walk around with it all the time.  

It says a lot about the evolution of mobile technology.  Cameras, for example, got smaller and better to the point where we didn't need a seperate device--and they just wound up in our phones.  Same thing for GPS.  Now, your phone is everything to everyone--a device you're always attached to.  What's lost in that process, however, is matching right interaction with the right time and place.  That's part of the promise of wearables, the connected home, and devices in cars.  I don't need a phone to provide me every notification and every tool all the time, but different devices have their difference place in my life.

Ringly is a platform for fashionable wearables, enabling them to filter your world for what you care about.  It's all about getting notifications in the right moment, without interrupting all of your other moments.  Now, you can finally put the phone away over dinner without losing touch with the babysitter.  They launched the pre-sale of their first set of rings today--their own design.  You should check it out.  I'm excited to see Christina and Logan's vision come to life and I'm excited to be on board as an investor.  

A Sign of the Times: Why Saving the Kentile Sign is Important #savekentile

There's a 60+ year old sign in Brooklyn leftover from a company that went bankrupt years ago.  The current owner of the property wants to take it down and has every right to do so.

So what's the big deal?

The Kentile Floors sign has become a mainstay of the Gowanus area.  F train riders pass by it everyday on the way to and from work.  It has its own Twitter personality.  There are Tumblr accounts of people taking pictures of it everyday as a routine.  It has even made it to a t-shirt designed by a company specializing in iconic Brooklyn images.  Not only does it give people a sense of familiarity and comfort in a constantly changing city, but it serves as an important reminder of Brooklyn's history as an industrial community--a place where things got made.  This is especially important as Brooklyn appears on the verge of an entrepreneurial explosion--one rooted in the maker and craft movement.

Brooklyn is attracting a generation of entrepreneurs who never saw Brooklyn in its industrial heyday, but feel like the borough is uniquely positioned and a historically fitting place to produce their products and serve creative communities.  Makerbot has a factory in Industry City.  Maker marketplace Etsy has agreed to take a huge space in the new Dumbo Heights complex.  Refactory is trying to create an end to end process from design to manufacturing for hardware on Sackett Street.  Distilleries, bakeries, ice cream manufacturers--all across the borough, it seems that someone is making something.  Even the old Pfizer headquarters, active as recently as 2008, is now home to the production of everything from microchips to pickles.  In the Navy Yard, they're making body armor to product our troops and solar streetlamps to light our streets.  

So while it's easy to think that the Kentile sign is a relic of a bygone era, it may actually be the symbol of a bright future for a growing manufacturing base.  It is a reminder to those who dare to create that yes, things can get made here--they've been getting made here for a long time and will continue to do so.  

So if you're an Etsy seller--the Kentile sign is your sign.

If you've purchased a Makerbot in the hopes that you might inspire your kids to be engineers, the Kentile sign is your sign.

If you're excited about the Ample Hills ice cream factory's new retail location--the Kentile sign is all yours.

If you've backed a Kickstarter to enable a craftsperson to make something locally--the Kentile sign is your sign.

Eaten from a local producer at Smorgasburg?  That Kentile sign represents everything good about producing things right in our own backyard.  It's all yours.

We've learned enough from neighborhoods like Dumbo that mixed use communities of commercial and residential can anchor each other to create dynamic ecosystems.  There are huge opportunities in places like Gowanus and Crown Heights to help New York City scale its entrepreneurial endeavors, in contrast to places like San Francisco which seem bottlenecked by geography.  That won't happen, however, if every last bit of commercial space is replaced by a glass condo tower.  

If you want to support local ecosystems of makers, producers and craftspeople--help us preserve the symbol of Brooklyn's industrial past and future opportunity.  Sign this petition sponsored by City Councilperson Brad Lander.

 

 

Founders. Run. Amok. It Starts With a Term Sheet.

Last week, for just the second time ever, I passed on an investment opportunity because of the terms of the deal--both the price and the legal structure of the agreement.  It was a company whose product I believed in and whose founder I liked, but a firm lobbed in a term sheet at a price 33% higher than what I had offered using a very light agreement meant for a much earlier stage company.  This was a company that had successfully bootstrapped itself to real revenues, employees and cashflow and I thought it deserved the structure of a going concern, not a flier.  

At first, I thought I was making a mistake.  After all, I understood that when these types of deals pop, the initial price you pay tends to matter very little--and it matters much more that you're in the deal versus not.  I remember back in the Union Square Ventures days when we had an internal debate over the price of the first round of Indeed.  A billion dollars later, it didn't much matter.  

Then, I read about the idiotic comments made by a co-founder of Rap Genius...

which is not long after the recent debacle at Github...

and then there's the nightmare at RadiumOne...

 

Founders. Run. Amok.


And even when they're not disrespecting murder victims, creating hostile work environments for women or literally beating women, they're running amok in other, less violent ways...

...like raising over $300 million, flaunting the epic winning, only to watch the whole thing go up in flames, like at Fab...

...or sticking your head in the sand while fraud occurs on your platform, like the way Indiegogo watched Healbe Gobe get torched in the media.  They even tried to change their Terms of Service in the middle of the alleged scam.

No wonder people are questioning where the boards of these companies were.

 

Founders. Run. Amok.

 

Three of the aforementioned companies have taken investments from Andreessen Horowitz--probably the hottest firm on the planet right now.  They got that way due in large part to a very public founder friendly stance.

Perhaps they need to rethink that "back the founder at all costs" mentality.  Perhaps we all should.  

I certainly have. 

When I saw this term sheet where another firm clearly fell over themselves to get enough money into this deal, going against anyone's better judgement with a thin set of terms and a high price, it vaulted the founder into a tremendous power position in the company's dynamic.  No one from the firm leading the deal will join the board.  The whole deal was optimized to avoid distracting the founder too much from the world of building the company.

I hate to break it to anyone, but the creation of a board, the building of a strong legal base, and, to take it a step further, tedious little things like values statements and human resource policies, are all the work of building a real company.  Terms that hold founders accountable make them better founders and company builders.

It ain't all coding, selling, and raising money, people.  

Ok, does getting one over on investors term-wise mean this founder is going to go out and start beating people up, harrassing people, etc...   No, probably not.

But it's all part of the environment we're creating.

Is it really surprising to anyone when we talk about "party rounds" as financing strategies we've created companies with unprofessional environments and founders behaving irresponsibly?

Fundraising isn't just a "distraction".  Finding and negotiating with investors is a serious part of the process of creating a company.  It's an opportunity to outline a vision for the kind of environment you want to create and the impact on the world you want to make--and a chance to seek out and properly align incentives with the best potential partners you can get.  

Treat financings like an auction and you're going to get a bubble and a lot of bad behavior.  Treat it like the creation of a partnership and you'll build a lasting entity built on values.

And as investors, we need to keep doing our job.  We shouldn't be telling founders how to run their companies--but we should hold them and ourselves accountable to really high standards.  We shouldn't bend just because someone appears to be a high flyer.  We need to make sure that there are sound and thorough management practices in place at the companies we work with--and that all starts with the very first piece of paper you pass across the table...

The Term Sheet.

If we've seen anything so far, the more term sheets are built simply to win deals--the more we'll see inflated founder egos believing that what they've built up to that point is amazing, needs no help, and that their creation changes all the rules.

Rules have a funny way of snapping back again, if you hadn't noticed.  Rules like respect.  Rules like checks and balances.  

Sign a term sheet that you feel doesn't respect the contribution you can make as an investor and one that doesn't respect the company building process, and you'll likely, unintentionally, create a founder that believes they are above a lot of rules.  

I treat all my founders equally.  I ask them for terms that acknowledge how much more work they have to do in order to fulfill their potential and ones that involve me directly in company building process.  That might be a board seat, or at least an observer right.  It will certainly involve market pricing.  If I lose a deal, I'll lose a deal--but I have a feeling, in the long run, some of those high fliers are going to get undone by the same lopsided dynamics that created the first term sheet.

Tinybop and Crafting a Brand

I could spend a lot of time writing a long diatribe about what it means to create a brand, or I could just show you three videos that Tinybop, a company I seeded in 2012, made as part of the marketing for their new app, Plants.

Consider the bar raised... As a biased investor, I not-so-humbly submit that this is the most creative thing any startup in New York City has ever produced as part of a launch:

 

Plants by Tinybop from Tinybop on Vimeo.

Paper to Plants: Behind the Scenes from Tinybop on Vimeo.

Paper to Plants from Tinybop on Vimeo.