The Anti-Venture Capital site

Found via a comment on Rich’s site — Venture capital is hazardous to your company’s health in 9 out of 10 cases — ouch! On the other hand, maybe he isn’t talking about me:

With the first dollar of venture capital accepted the entrepreneur?s control slips away to 28-year-old MBA wonder-boys with only the shallowest of operating experience.

The age 28 is long behind me, I was off in the shallow end of the operating pool at that time, hopefully I’ve learned something.

If I was building a WIFI business today…

…I’d focus on the academic market. I have two family members heading to college this fall, and they both need laptops with wifi for their campuses. If this is becoming the default at every major college campus, then we are seeding the market with a huge number of capable machines, a huge number of free hotspots, a user base that is very willing to try new services. What great services could we build to target these users and to help them?

Follow On Rounds

We had an offsite yesterday to discuss follow-on financing rounds for our fund I companies. We have 7 active investments in this fund and all will need additional funding over their lifetime. Given the weak state of the b+ round and mezzanine round markets, it is likely we will be a significant participant in the future rounds for all these investments. These are tricky investment decisions — we have large financial and emotional commitments to these firms, some of us have fiduciary responsibilities, it is difficult to make objective decisions. It was a great session — I work with great people, we had some great bonding moments. Lots of different points of view, but a good consensus about the need to examine follow on rounds very carefully, in effect viewing them as new investments. Also a lot of consensus that we are wise to have a plan and budget for each company, so that we have sufficient funds for the companies we are most excited about, and that we don’t just let our funds drain to whoever shows up first.

Yet Another Collaboration Startup

I was looking at the plans of yet another collaboration startup this week. Yet another interesting system to help people codify and automate collaboration. And yet another system that will die an unmourned death I suspect.

End users have voted over and over again in favor of ad-hoc collaboration tools — email, IM. We happily bounce messages back and forth to collaborate. But make us structure it just a little bit and we overwhelmingly reject the solution. We are just too impatient and short-term lazy to create a structured message, to use a more structured workflow tool, to do the upfront design work to create a collaboration app.

The same dynamic exists with spreadsheets and databases. The dominant use for spreadsheets is simple lists with some modest calculations. Databases would be perfect for this but we use spreadsheets because we can jump right in with no upfront design time, we don’t have the patience to do a little design upfront.

But I wonder if we can’t do a little better in email, perhaps drawing some inspiration from spreadsheets. When I collaborate in email, I am often making a list — a meeting agenda, a list of tasks we need to do, a list of questions we need answers to, a list of assignments. And then I’d love it if I could easily see status against that list. It would be nice if my email editting app would auto-recognize lists, and then track responses and status to list items, letting me see a summarized view of the list of items being discussed in a thread.

It has to be really lightweight, any list should be autorecognized and formatted, as Word does today if you try to create a list of items.

Just early thinking. I’d like to see some lightweight collaboration grow up from simple email, rather than continue to see heavyweight groupware software.

What A Young Programmer Thinks

Just recovering from the flu, been off net for a while. Just saw this — Random Hacks: The Missing Future — what a great article about the opportunities in the software industry from the eyes of a younger person. This ought to terrify Microsoft — there was a time when they had the hearts and minds of all young developers, but that time has clearly passed. It is just not cool to tell your friends “Hey I got my MSCE certificate”, nor does it seem to present great economics to young people.

Lack Of A Viable Business Model Is Stifling Software Innovation

Lack Of A Viable Business Model Is Stifling Software Innovation. Dave Winer sez Lack Of A Viable Business Model Is Stifling Software Innovation. I’ll admit that the VC industry is a little risk averse right now (though I am relatively new to the business so what do I know). But Dave seems to be speaking from his own personal experience with Userland, and I’ll just point out that Userland may not be very fundable for lots of other reasons. I love Radio and have paid for it, but it has a lot of bugs (for instance when I upstream content to my own ftp site, none of the graphics links are correct, I apparently have to go handpatch the templates), has a really quirky interface, and is really not ready for broad use and adoption.

The other blog tools I have used are in this state as well. I have learned to love blogger, but sometimes when I try to bold a selection of text or insert a link, it puts the tags in the wrong place. Or sometimes it gets confused about whether I have published or not, and I have to do a bogus edit cycle on an item to convince it I need to publish. And why isn’t blogroll management just part of blogger?

I just presented blog tools and blogs to a set of casual internet users today and they loved the idea of a blog but the tools were totally intimidating to them — the interfaces, the terminology, the quirks are all overwhelming.

It is hard to think about funding businesses/products in this state. I realize that all the products will improve over the lifetime of any funding we put in, but I need an entrepreneur to tell me how they are going to use the money to achieve a level of breakthru business success, how they are going to break blogs out of the hobbyist/enthusiast segment and make them a more general phenomena. Maybe I have just not talked to the right entrepreneurs yet.

John Doerr on Risk.

John Doerr on Risk. We were having a good conversation on types of risk yesterday in our weekly meeting at Ignition, and Jon Anderson tracked down some of John Doerr’s thoughts on risk…good reminders:

?So one of Kleiner’s laws has always been that you want to get the risk up front, out of the way early. You prefer to take technical risks (rather) than market risk. And when you stick to those rules of investing, you’ll have some investments that fail and some big swings at the plate that look in hindsight embarrassing, but overall you’ll maximize the probability that you can help entrepreneurs make really big, important companies.? —

“Market risk is the most deadly. Technical risk is the least worrisome.” — L. John Doerr, a partner is the Silicon Valley venture-capital firm Kleiner Perkins Caufield & Byers, as quoted by John Heilemann in “Letter From Silicon Valley – John Doerr is revolutionizing the high-tech business, for the second time” The New Yorker (August 11, 1997) 28-36

“Risk comes in four parts. There’s technical risk: can we split the atom? There’s market risk: will the dogs eat the dog food, or the fish jump out of the tank? There’s people risk: will the people who founded the company stick around? And there’s financing risk: can we get the money?”
— L. John Doerr of the Silicon Valley venture-capital firm Kleiner, Perkins, Caufield & Byers, quoted in the New Yorker, August 11, 1997

?There are four kinds of risk we have to confront in each deal. There is technical risk: Can we split the atom? There is people risk: Will the key players on the team stay together? There is financial risk: Can we keep the company well financed? And there is market risk: Can we get the dogs to eat the dog food? The most dangerous of these risks is market risk. Removing market risk is expensive?.. We are risk takers but we will take a technology risk over a market risk any day of the week.? — John Doerr, The Internet Bubble p. 74

Ignition Holiday Party

Ignition Holiday Party. A nice evening last nite, it was great to see everyone out of the office and with their families. Thanks Jon and Elizabeth for hosting. Hoops won the hand-made sock contest with his “Ghost of Christmas Past” socks, Deneen won in the store-bought division. I had a lot of great ideas for socks but no time to execute — the story of my life 🙂

VCs and Blogs

VCs and Blogs. I am pretty proud of the fact that Ignition has to be the leading VC when it comes to blog usage. Between my main site, my Halloween site, Tong’s personal site and geek site, and soon to come Zagula, Adrian, Steve, and Michelle, we have to be the most aggressive users of blogs in the VC community.

Probably goes back to our Microsoft training with its “dogfooding” mentality — if you expect customers to use this stuff, you better be willing to use it yourself. Tho Adrian is not a ‘soft alum and he has the same mentality — he led half of Ignition in building their own 802.11 cantennas!

I am proud of the fact that we are hands on and experimental. Shows through in the kinds of companies we invest in and how we work with them. And makes us much more able to do our job — Tong and I can do a much better job on software due diligence, having screwed around with PHP and Perl and MySQL and ASP ourselves.

Fund a Blogger?

Fund a Blogger? Scoble asked me in a comments thread if we would ever fund a blogger. And the answer is “of course”. Both Tong and I are very high on blogs — the amount of energy and innovation around blogs is exciting! There are certainly going to be good businesses here somewhere. I don’t think we know what a good business in the blog space is yet, but we are certainly observing with interest and are happy to hear ideas.

VCs and disclosure

VCs and Disclosure. No vc in the world should object to greater disclosure and accountability — hold us to the same standards that everyone else is held to. Battle over disclosure – Venture Capital Journal:

VC firms vow that they will take countermeasures against public pension funds that disclose sensitive information about private equity performance — such as excluding them from upcoming funds. Notes one VC: ‘It’s unbelievable how stupid they are-they’re winning the battle but losing the war. If I had to choose between two investors [one of which required greater disclosure than the other], I would go with the people that don’t have disclosure requirements.’ Thus far, UTIMCO and CalPERS are the two largest institutional investors that have pledged greater transparency on private equity performance. VC industry insiders now worry that other institutional investors may follow their example.

Regression Analysis

Regression Analysis. I used to run regressions all day long when I worked at Booz-Allen — trying to unearth manufacturing cost behaviour as a function of scale, complexity, etc. Back in those days I used a calculator or a package that was called StatGraphics on the pc, which i see is still around. I remember forcing Booz-Allen to buy IBM PC ATs so that we could run StatGraphics faster.

I just did my first regression in years. Just used the data analysis pak that comes with Excel. Really easy. Flipping variables and observations in and out of the set is not very easy, but the basics work fine. Charts aren’t very exciting either. I bet there is a better add-in to use — Google lists quite a few.

I was analyzing VC returns for most recent funds. What I learned — fully half the variation in returns to date is unexplained by quantitative variables (at least the ones I had at my disposal). Sector focus? Quality of VC staff? Hard to know. Of the rest, returns are most correlated with number of deals, and % of fund invested. Still wrapping my head around this but seems to say: don’t by shy about putting your money to work, and spread it around across a lot of deals (portfolio theory at work)?