/ VC

Mesa Falls Marathon

On Saturday I ran the Mesa Falls Marathon.  I've now completed a marathon in 12 of the 50 states - almost 25% of the way there.  My co-conspirator for this one was Matt Blumberg, who ran the last half of it with me and wrote about it in Half as Long, One Third as Hard.

This was a small marathon - my guess is around 150 people ran it.  My goal was to finish in the top 200 which I accomplished comfortably.  My serious goal was to break 4:45.  My official time was 5:02, although according to my Garmin 305 my running time was 4:52.  I can confirm that I lost about 5 minutes to a bathroom break at mile 10 and another 5 minutes at the half way mark and on a few pee breaks.  So - I was close.  However, I finished much stronger than I had two months ago at Grandma's Marathon in Duluth so I'm pleased with the progress of my training under my new coach Gary Ditsch.

Mesa Falls was a beautiful marathon.  The first 10 miles are on a dirt road in the middle of no where.  Tranquil, quiet, and wonderful.  I had trouble getting into a rhythm - my shoes were too tight, I had to pee, and then around mile four I got an upset stomach.  There was a porta-potty at mile 6 but I felt better so cruised by it.  Predictably, at 6.5 miles, I had to go.  For a brief moment I considered turning around, but powered on to mile 10 where I took a delightful 5 minute break.

We immediately turned onto a road and I totally kicked ass - covering the next 3 miles in 27 minutes.  It was a decent downhill but I felt much lighter.  I stopped for 15 seconds right at mile 13 to look at the incredible view at Mesa Falls and then stopped again at 13.1 to meet up with Matt, make the "Uncle Spike sign", have Amy take a few photos of us, and change my shirt.

It was huge to have Matt join me.  The course had a brutal uphill between mile 17 and 20 that Matt towed me up.  I marched through to mile 23 where I finally slammed into the wall.  I don't really remember the 25 minutes that it took me to run mile 23 and 24, but Matt said I was pretty calm.  I got a seventh wind at mile 25 and covered the last mile in under 10 minutes.

Thanks to everyone who supported me on this one, especially my sponsors Return Path, Pixie Mate, NewWest, and Bill Flagg who made an extra generous contribution to Accelerated Cure.  And of course - my sherpa Amy and my friends the Blumbergs.

Next up - Mount Desert Island Marathon in Bar Harbor, ME on 10/19/08.

Amazon Acquires Shelfari

Congrats to Josh Hug and the gang at Shelfari for joining the Amazon.com family.  I was an early angel investor in Shelfari and have been a long time avid user of the service.  Amazon was an investor in the first round and the two companies fit naturally together.

I invested in three vertical social networks in 2006 - Shelfari (books), Dogster (dogs and cats), and Enthusiast Group (sports).  So far I have one win (Shelfari) and one loss (Enthusiast Group).  Dogster is doing great and looks like it'll be a nice winner also.  I made these as small angel investments to learn about the dynamics around vertical social networks.  I've learned a bunch from Josh and from Ted Rheingold at Dogster.  It also looks like I'll have a nice "aggregate financial outcome" for my investments in this area.

Well done Shelfari!

What A House Hit By Lightening Looks Like

The parents of a close friend just had a direct lightening strike on their house.  It immediately burned to the ground and everything was lost.

The simple advice from my friend if this ever happens to you is "get out fast and not go back for anything that is not a human being."  She also suggested that you check your home insurance to make sure you are covered for this.

It will be harder to raise Venture Debt for a while.

Many startups use venture debt to extend their runway beyond the capital that they raised from venture capital investments directly into the company. David Hornik wrote a good overview of venture debt a few years ago, all of which is still relevant today.

Some things have changed since then however. The WSJ reports today on how tightening credit markets are hitting venture debt firms

Providers of loans to start-up and other venture-backed companies are feeling the pinch of the credit problems plaguing Wall Street.

venturewireThe latest is publicly traded venture debt provider Hercules Technology Growth Capital, which on Monday said it secured a $50 million line of credit from Wells Fargo–much smaller than the $250 million in available credit it secured from Citigroup and Deutsche Bank last year. “We’ve been in discussions, and continue to be in discussions [with Citigroup and Deutsche Bank] about continuing the existing facility, but their appetite to expand the facility we have with them is somewhat limited,” said Scott Harvey, Hercules Technology’s chief legal officer…

…Harvey said $50 million is adequate to meet the firm’s needs, and Hercules won’t be looking to add to the facility for at least another three months, but could raise as much as $300 million over the next two years….

…Hercules, which has made about $1.3 billion in commitments to life science and technology companies since its inception in 2003, isn’t alone. This month, Western Technology Investment disclosed that its $125 million credit facility is being pulled by J.P. Morgan Chase and Deutsche Bank. “This is not isolated to us or our industry. Basically, the banks are unwinding the lending process,” said Ron Swenson, Western Technology’s chief executive.

Western Technology still has $220 million in equity remaining in its twelfth and most recent fund, which closed in February 2007.

This tightening in credit will hit some venture debt lenders harder than others. Lenders who can fund venture debt from deposits (e.g. SVB, Comerica) or who do not themselves leverage their equity to make more loans will not be as affected. However, it is likely that all lenders will be more cautious. Additionally, as some firms will have less “dry powder” with which to lend, there will likely be less competition for venture debt providers, meaning that terms for venture debt may get less attractive to startups for a little while.

Axes To Grind

Having and "axe to grind" is a phrase that means you've got a dispute to take up with someone or possibly an ulterior motive. I've seen and/or participated in several such axes in the past 24 hours and it's gotten me thinking that the Internet, email, blogging, etc is a particularly great way to grind such axes.

Alley Insider and Valleywag have posts up today addressing the WSJ story about Insight Venture's individual partner's making a $3mm investment in Photobucket that turned into $40mm for them personally instead of their LPs. This is a tricky part of the venture capital business, full of conflicts, and one that I have had to be very careful about myself. When I read the story, my first reaction was why this story and why now? Photobucket was sold almost two years ago. It turns out that both Peter kafka of Alley Insider and Owen Thomas of Valleywag were pitched this story and didn't bite. And Owen Thomas wonders outloud on Valleywag:

I was fascinated by the question of who wanted to get Insight, and why. I'm still at a loss. Insight has a low profile in the industry; as a late-stage investor, based in New York, it rarely dabbles in Silicon Valley's splashy younger startups. (Its sexiest investment is SkinnyCorp, the New York-based parent company of Threadless, a website which sells T-shirts.)

So: A spurned entrepreneur? A rival venture capitalist who lost a deal to Insight? It's useful to keep in mind that venture capitalists can make a lot of money on side deals — deals they heard about in the course of doing their day jobs. 'Twas ever thus. The person who thinks he ratted out Insight, though? He'd like you to believe that some venture capitalists are so venal and so foolish as to torpedo their entire careers over a tiny deal that happened to turn out well. Insight's opponent, whoever he is, underestimated the firm's intelligence — and some reporters' intelligence, too.

Yesterday I got an email from a person who is unhappy with TypePad's data portability offerings. He is "trying to get the word out that TypePad's users are truly locked in". He asked me to blog about it. Others have blogged about this issue, but I didn't feel sufficiently knowledgeable so I forwarded the email to a friend at Six Apart. My friend wrote back that:

Since day one TypePad's provided an easy way to get your content out of the tool, with the well-documented MT import/export format, and for years has supported domain mapping so that users can own their own URL and keep that with them if they choose to move their blog to another platform or service.

[He] rightly points out that the MT import/export format doesn't include the permalink of the entry. Our efforts now around data portability are focused on the IETF standard AtomPub, which is fully supported in TypePad.

I then passed that back to the guy who emailed me. I guess I am now weighing in on and highlighting this debate, but I still don't know where I come out on it. I am all for data portability within reason. But it's also clear to me that the people who are taking on Six Apart have some sort of axe to grind and I don't know what the motives are and that bothers me.

I've also had several email exchanges and one blog comment in the past day with people who have complained about one or more of our portfolio companies. This happens to me a lot, at least a few times a month, but it happened several times yesterday. I always refer these people to right people in our companies and take mental note of the complaint. Most of the time, these complaints are totally legit and I am well aware of the deficiency and trying to help our companies address it.  But sometimes the tone of the complaints, the level of anger and tone of the conversation, leads me to wonder what's up with the people who are making them. Do they have an axe to grind?

I guess journalists deal with this all day long and have developed tools, tricks, and techniques to deal with this issue. I could use some advice as an investor and blogger to help me deal with it. I think it's only going to grow as an issue for me.

Raising Venture Capital: How Much Money Matters

After watching a bazillion venture pitches, I've come to the conclusion that every VC Pitch should end the same way -- with the ask. If you want to crescendo into it, feel free to summarize why it is your technology is life changing, but finish with the ask -- "we are looking to raise six million dollars." Don't beat around the bush. Come right out and ask for the money. After all, that's what you're there for.

There are a number of reasons VCs want to hear what you're raising. And it isn't just the obvious one. Yes, it is helpful to know how much money a company is hoping you will invest. But there are other more valuable pieces of information that come out of the ask.

First of all, the amount of money you are raising is a good general indicator of how much you think the company is worth. I was in a pitch once learning about pretty interesting but pretty early stage technology. From where I sat, it seemed to me that the company could use single digit millions to take the technology to the next step. Yet, when we got to the slide that stated how much the company was raising, I learned that they were hoping to raise more than $50M. By my assessment, $50M would buy the vast majority of the company. Clearly the company felt differently -- they were hoping to sell closer to 20% of the company. It certainly refocused the conversation on what the company felt was the justification for such a high valuation and led to a very interesting discussion of the underlying economics of the company's business.

The thing I find most interesting about how much money a company is raising is not the actual number itself, but rather the conversation about how the company arrived at that number. What is interesting to me is what the company plans on doing with that money? What are the milestones the company can reach with that much money? Could they do it for less? What would they do if they had more money?

For me, the right question isn't "how much money do you want to raise?" The right question is "how much money should you raise?" Ask some entrepreneurs and they will tell you, the right amount of money to raise is as much as they possibly can (some recent monster financings suggest that strategy). That makes no sense to me. The right amount of money to bring into the company is enough to reach sufficient milestones to raise more money at a higher price at a future date (or, in some rare cases, enough to get to cash flow positive). If all goes well, the money I invest will be used to drive all sorts of risk out of the business, enabling the Company to raise the next round at a much higher valuation.

Figuring out the right amount to raise is more art than science but can have a big impact on the Company. If you raise too little money, you may run out before you have proven the business sufficiently to raise additional capital. In other words, raising too little money can be fatal. On the other hand, if you raise too much money early on, you could well be selling off too much of the company for too little capital. Companies should leverage early stage venture money to drive up the value of the company (by proving out as much of the business as quickly as possible), so that the next time the company fundraises, they will be able to bring in larger amounts of money while suffering smaller amounts of dilution.

Unfortunately, the perfect amount of money to raise is not always obvious. So the question isn't whether a company is raising the "right" amount of money. The question is, "why is the company raising the amount of money it is raising?" A great deal can be learned about a company from their answer to that question. So when you go out to raise money, be prepared to not only answer how much you are hoping to raise, but also why?

Solving the H-1B Visa Issue

One of the big topics that came up on the panel I was on today at the DNC was the issue surrounding the labor supply in the US in computer science and IT.  There is a growing shortage of software engineers in the US that is getting worse as every year passes.  I've talked about this in the past as my main motivation for being involved in the National Center for Women & Information Technology as one of the ways to build the long term labor pipeline is to encourage more women and girls to get involved in careers in computer science and IT.

I think the Bush administration has completely missed the boat when it comes to dealing with temporary work visas and permanent residency for high tech software / IT workers.  This issue has come up repeatedly over the past few years as large software and technology companies have finally weighed in to try to impact some of our inane policies.

I think the solution to the problem is really simple.  The US should grant permanent residency to anyone who graduates from a qualified four year university with a computer science degree.  If you are concerned about people gaming the system, you can start out by limiting it to people that receive a post-graduate degree.  Of course, you can easily extend this beyond computer science (e.g. physics, chemistry, etc.)

When I was an undergraduate at MIT, a meaningful percentage of the student body was from other countries.  It never even occurred to me that these folks were "different" and didn't "belong in our country."  Some of my best friends in college weren't US citizens and I was baffled by the hoops they had to jump through even back then to work in the US.  In the past eight years, this has gotten dramatically worse and it's time we got in front of this.

Everyone on the panel seemed to agree that this was a huge issue surrounding innovation in the US over the long term.  Most people seemed to agree that this was a simple solution that would not require a huge bureaucracy to administer.  With your diploma, you get permanent residence status. 

I don't understand why there would be any rational resistance to something like this - after all, wasn't the United States built on immigrants?

Hysteria: Great, Now Whole Foods Is Making You Broke And Fat

Let’s have a means test based on the consumer’s weight and body fat index to determine not only how much salad they can buy but also what kind of dressing they get, if any. Uh yeah, personally I think we should simply stop trying to tell people how to live their lives.

The New York Sun says that salad and prepared food bars (at Whole Foods, for example) are making you fat. Why? Supposedly, the containers they give you are huge and lead you to unwittingly buy “supersized” portions of food for lunch.

[From Hysteria: Great, Now Whole Foods Is Making You Broke And Fat]

On a related note, California’s government hasn’t passed a budget (due by law on July 1) yet but they did have time to take up the pressing issue of hybrid vehicles not making enough noise so that vision and hearing impaired people can hear them coming. Before anyone jumps in and comments about how this is really an important issue, please consider that I am not unsympathetic to the hearing and visually impaired, in fact I was on the board of directors for the Vista Center for the Blind and Visually Impaired up until a few years ago, but are these the real priorities we should be setting as a society… salad bars and cars that don’t make enough noise?

Goodbye Olympics, Hello Conventions

I followed two twitter bots during the Olympics, 08olympics and twittolympic. They were both great and I want to thank the people who put them together and operated them. I got more olympics news from these two bots than any other source. It helped me keep connected to the olympics while I was traveling and away from the TV. And it made the TV watching even better when I was able to do that.

I've stopped following these bots now that the Olympics is over and now I want to turn my attention to the two conventions, the Democrats this week and the Republicans next week.

Can anyone recommend good twitter bots to follow the convention news? I don't want individual twitters, I want bots that aggregate the best links and tweets. Please leave your suggestions in the comments and I'll reblog the best suggestions (gotta love reblogging comments!).

UPDATE: I am still searching for some good bots to follow, but this HuffPo twitter account seems like it's going to be good. I'm following it now.

2008 Technology Roundtable at the DNC

I'm having my half day DNC experience this morning.  At 10am I'm on a panel creatively titled 2008 Technology Roundtable.  It's limited attendee (200 people at the Ricketson Theater) but appears to being broadcast live on the web.

It's an interesting experience. I really didn't want to deal with the traffic and people around the DNC, especially after running a marathon this weekend (and still being in a recovery phase), so I took advantage of my early wake up time and drove to downtown Boulder around 6:30.  I'm now sitting all alone in the breakfast room (green room equivalent) waiting for them to pull together the coffee service.  It's kind of tranquil in a weird way.

My session (one of three) - titled "Promoting the Next Wave of Innovation" - covers the following:

The second session will address the question of what strategies that the federal government can use to promote technological development and innovation. In particular, it will evaluate what public policies can best spur capital formation and protect the U.S. advantage in that area; what educations reforms, particularly as to math and science education, can prepare a next generation of engineers and business persons; and what innovation policies, be they support for basic research or patent law reform can spur greater levels of technological development.

My co-panelists are John Seely Brown (Deloitte Center for Edge Innovation), Charlie Ergen (CEO - Echostar), Bill Kennard (Carlyle Group, Former Chairman FCC), Honorable Zoe Lofgren (Congresswoman - U.S. House of Representatives), Don Rosenberg (General Counsel and EVP - Qualcomm), and David Thompson (Group President of Information Technology and Services - Symantec). 

It'll either be really interesting or really dull.  I'll work on "interesting" but I've been told "no swearing."

Goodbye Olympics, Hello Conventions

I followed two twitter bots during the Olympics, 08olympics and twittolympic. They were both great and I want to thank the people who put them together and operated them. I got more olympics news from these two bots than any other source. It helped me keep connected to the olympics while I was traveling and away from the TV. And it made the TV watching even better when I was able to do that.

I've stopped following these bots now that the Olympics is over and now I want to turn my attention to the two conventions, the Democrats this week and the Republicans next week.

Can anyone recommend good twitter bots to follow the convention news? I don't want individual twitters, I want bots that aggregate the best links and tweets. Please leave your suggestions in the comments and I'll reblog the best suggestions (gotta love reblogging comments!).

Widgets at the DNC

Even though I am officially on vacation this week, I did want to blog about some cool stuff we are doing at the DNC in NewsGator’s hometown this week. The Big Tent stuff is getting some great coverage, and our widget is aggregating feeds from a whole bunch of blogs that are covering the event. Check it out, install it, follow the activities.

You might be interested to know that the Big Tent Widget consolidates feeds from nearly 200 bloggers, new media journalists and nonprofit leaders credentialed for the Big Tent, the 9,000 square-foot new media center hosted by Progress Now, Daily Kos, the Alliance for Sustainable Colorado, and is sponsored by Digg, Google, NewsGator, and others.

[From Two Innovative, New Widgets Are Launched Widgets Provide Dynamic Blog/Qik Content from DNC: NewsGator Widget Blog]

Secondly, I am really excited to hook up with the team at Qik to offer a video widget featuring their user generated mobile streaming video right from the convention floor and surrounding activities. The two offerings can be summed up as a true “pros vs. joes” with professionally published blogger content, as well as the semi-pro stuff as well, and the user generated video that is aggregated from anyone using Qik who is in Denver.

What’s next? Just aggregating content is useful but I’d like to see us layer in our related content tools to offer a more semantic take on the content offered up with other non-linked content that is similar in subject and possibly even with sentiment analysis thrown in. Maybe dynamic persistent search on any key entity extracted from a post. We’re just scratching the surface with what is capable with these widgets and the back end platform services. Stay tuned.

Lowering the Drinking Age

UPDATE: I forgot to post this link to a post on PETA that I really liked, sent by a frequent commenter who shares my head shaking disbelief at PETA’s tactics.

At first my reflexive response was against the idea of lowering the drinking age to 18 but after some thought I think I can support this initiative. Consider the facts, we treat 18-20 year olds as adults in every other capacity, why not on this point as well? Prohibition of alcohol for 18-20 year olds hasn’t worked any better than for the broader population in the 1920’s and it may well be resulting in unintended consequences like binge drinking.

Unfortunately, MADD appears to be taking a dogmatic scorched earth approach to this idea instead of engaging in objective debate, reinforcing the notion that these groups are not simply in favor of beneficial social change but are simply put, anti-alcohol in any form. PETA is simply about better treatment for animals, they are hostile to anyone who likes to eat meat, and a wide range of environmental groups are not simply for enhancing the environment, they are anti-human contact with environment. The Brady Campaign also comes to mind, having strayed from simply preventing gun violence to being completely anti-gun.

Ultimately these groups become their own worst enemies because their anti-fill-in-the-blank approach results in their political currency being depleted. Witness the Brady Campaign, despite two decades of work they have little to show for it and this generation of politicians don’t even want to talk about gun control, especially following the Heller decision. MADD risks being ejected into the same political wilderness by taking on the opponents that they have.

What happens when presidents from more than 100 of the nation’s best-known colleges call on lawmakers to consider lowering the drinking age from 21 to 18? Well, a brigade of hyperbolic mommies start screaming at them, that’s what.

[From Let’s chuck the drinking age - The Denver Post]

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