Posts from October 2011

VP Engineering Vs CTO

Last week on MBA Mondays I posted about the difference between CFO and VP Finance. In the comments to that post, I was asked about VP Eng vs CTO and I figured that had the makings of a good post too. So here we go.

Like VP Finance & CFO, the differences in the two positions are not just about seniority. In fact, in the case of CTO and VP Eng, seniority is often a non-factor. They are often peers. A VP Eng can report to a CTO. And a CTO can report to a VP Eng (although this last one is less frequent).

A VP Engineering is ideally a great manager and a great team builder. He or she will be an excellent recruiter, a great communicator, and a great issue resolver. The VP Eng's job is to make everyone in the engineering organization successful and he or she needs to fix the issues that are getting in the way of success.

A CTO is ideally the strongest technologist in the organization. He or she will be an architect, a thinker, a researcher, a tester and a tinkerer. The CTO is often the technical co-founder if there is one (and you know I think there must be one).

When a company has a strong CTO and a strong VP Engineering that trust, respect, and like each other, you have a winning formula. The CTO makes sure the technical approach is correct and the VP Engineering makes sure the team is correct. They are yin and yang.

Startup companies in their earliest stages will have neither position. The ideal web/mobile startup will have a CEO/founder who will also wear the VP Product hat. It will have a technical co-founder who will wear both the CTO and VP Eng hats. And it will have a few more engineers. And maybe a community manager.

But as the startup grows and the engineering team needs a layer of management, these two roles come into play. If the technical co-founder is a great manager/leader, they will naturally migrate into the VP Engineering role and eventually seek to hire a CTO or promote a CTO from within. But it is more common for the technical co-founder to migrate into the CTO position and seek to hire a VP Engineering to run the engineering team on a day to day basis. Either model works. It just depends on the skills and personality of the team that is in place.

It is very rare to find a person who can do both the VP Eng and CTO jobs at the same time. They require very different skills and very different time allocations. I've seen it work a few times, but it is the exception that proves the rule in my mind.

Program Or Be Programmed

On Thursday night I gave a talk at NYU Poly and in the Q&A a young man asked me for advice for "those who aren't technical". I said he should try to get technical. The next morning I met with a bunch of Sloan Business School students doing a trek through NYC. A young woman asked me the same question. I gave her the same answer.

I don't mean that everyone should become a software engineer. I do mean that everyone should understand software engineering (or whatever technical subject/industry you want to work in). I don't speak French fluently. But when I go to France, I know enough French to speak it badly until the person on the receiving end changes the language to English.

Dennis Crowley claims to be a terrible programmer. And yet he and Naveen built the first version of Foursquare together. Their third team member was Harry and Harry's first job was to rewrite all of Dennis' code. Dennis is the kind of technical I'm talking about. Learn how to hack something together so that you can get people interested in your idea, your project, your startup. If you can do that, then you have a better chance of success.

Another great reason to "get technical" is so that you can work better with technical people. If you understand at least some of what they are doing, if you can look at their work product (the code) and understand what it is doing, if you can pick up a ticket and contribute when time is tight, then you will be seen as part of the team. And that is critical.

All of this is a big reason for our most recent investment, in Codecademy. Codecademy wants to be the online resource for people who want to learn to code. What you see there now is basically a prototype. And yet somewhere between 500,000 and 1mm people have started learning javascript using the prototype. They are clearly on to something.

I haven't written code professionally in twenty-five years. The last application I built was a custom app for my mother in law's company. She ran her business on it for twenty years. I wrote simulation software for a company building ships for the US Navy. And I wrote software that ran data acquisition for a lab at MIT. I was never a great programmer. I was a hacker. But I do understand the basic concepts, I can build something. I think most everyone can get to the place I got to and I'd encourage everyone to try.

Our partner Andy wrote a great post on the USV blog announcing our investment in Codecademy. He wrapped up his post with a quote from Douglas Rushkoff. It's where I got the title of this post from and it says it well.

When human beings acquired language, we learned not just how to listen but how to speak. When we gained literacy, we learned not just how to read but how to write. And as we move into an increasingly digital reality, we must learn not just how to use programs but how to make them. In the emerging, highly programmed landscape ahead, you will either create the software or you will be the software. It's really that simple: Program, or be programmed.

Protecting The Safe Harbors Of The DMCA And Protecting Jobs

My partner Brad and I spent Thursday in DC along with a bunch of entrepreneurs and VCs. We talked to dozens of our elected officials about an issue that is very concerning to us, protecting the safe harbors of the DMCA. 

The DMCA is the Digital Millennium Copyright Act. It received unanimous support in the Senate and was signed into law by President Clinton in 1998. It is a complex piece of legislation but it contains four "safe harbors" for "network service providers. The four safe harbors are explained here. "Network service providers" is shorthand for web services. Companies like Google, YouTube, Facebook, and Twitter are "network service providers."

The DMCA took a long time to become law. There were many legislative stops and starts on the way to its passage. Ultimately, congress and the administration forced the content industry to negotiate with the technology industry. That negotiation produced the compromises that are contained in the DMCA and that is what allowed it to get unanimous support in the Senate.

Fast forward to today. The content industry's lobbyists have forged two new bills, one in the Senate called Protect IP and one in the House called E-Parasites. These bills were written by the content industry without any input from the technology industry. And they are trying to fast track them through congress and into law without any negotiation with the technology industry. 

These bills are positioned as necessary actions to prevent "online piracy" particularly from rogue sites outside of the US. The technology industry is certainly concerned about online piracy. It has developed both protectitive technologies like DRM and alternative distribution services like premium streaming audio and video services such as Netflix, Spotify, and many others. These protective technologies and alternative distribution services have significantly cut the amount of online piracy in the past decade. An executive from Viacom testified recently in Congress that the vast majority of piracy is limited to "about twenty websites." So the technology industry has done a lot to help the content industry get a handle on online piracy in the past decade.

If another negotiation is in order to amend the DMCA, then let's have it. The last negotiation produced an excellent compromise that has stood the test of time and allowed important new services like Google, Facebook, YouTube, and Twitter to be created and become large companies and massive job creators.

It is this last point that is critical. The content indusrtry is not creating new jobs right now. The tech industry, led by startups, have created all the net new jobs in the past five years. Companies like Apple, Google, Facebook, and startups like Dropbox, Kickstarter, and Twilio are the leading exporters and job creators of this time. They are the golden goose of the economy and we cannot kill the golden goose to protect industries in decline.

Big companies like Google and Apple can afford to defend themselves from litigious content companies. But three person startups cannot. And Facebook, Twitter, and YouTube were three person startups not so long ago. If they had not had the protection of the safe harbors of the DMCA, they could have been litigated out of business before they even had a chance to grow and develop into the powerhouses they have become. And venture capitalists will think more than twice about putting $3mm of early stage capital into startups if they know that the vast majority of the funds will go to pay lawyers to defend the companies instead of to hire engineers to create and build product.

The bottom line is that DMCA works. Its safe harbors have allowed the Internet to become the US's most important new industry in a century and a critical job creator. If we need to amend the DMCA, let's do it with a negotiation between the interested parties, not with a bill written by the content industry's lobbyists and jammed through congress on a fast track. 

Now we are going to try an experiment using Disqus as an easy way to do something about this.  If you want to write Congress on this issue, then simply write your letter in the comments below as if you were writing Congress directly and tag it with '@votizen' followed by your residence zipcode (see my test comment as an example).  The Votizen team will get a copy of your letter through Disqus, and will automatically deliver the message to your specific Congressional representative.  Votizen will follow up with you in case you want to track the message and get a response, but that is optional.  Mostly, this is just a test to see if more people get involved when we make it easier and transparent.  If it works and you like it the Disqus and Votizen guys might invest a bit more time on seeing how blog commenting could be used as a new form of civic engagement.

UPDATE: The Disqus/Votizen test will end end of the day on Wednesday, November 2nd. Thanks to everyone who participated in it.

Feature Friday: The Multi Photo Checkin

I'm a huge fan of the photo checkin on Foursquare. When I see a friend checkin somewhere interesting to me, I always leave a comment on that checkin saying "photo checkin pls" and I usually get one back.

The checkins with the photos are the ones that stand out in the feed on the phone. And for that reason, I put a photo in almost every checkin I do. It just makes Foursquare so much richer.

But the killer move is the "multi photo checkin". Not everyone knows this but you can add more photos to a checkin. If you just open that checkin on your phone, there is a camera button that allows you to add more photos.

Last night my colleague Gary Chou was eating sushi and started doing a multi photo checkin. I begged him to stop as I was starving and hadn't eaten in a long time.

When Christina went down to OccupyWallStreet, she did a twelve photo checkin which I can't seem to find on Foursquare right now or I'd link to it. It's essentially a photo collage of her visit there. It is great. (update: Christina provided this link to her OWS visit in the comments.)

These multi photo checkins remind me of the blog posts Gotham Gal does on her restaurant reviews. In fact Foursquare could make doing a restaurant review on a blog a piece of cake with a slick export checkin feature. Consider that a feature request Alex and Dennis.

OccupyAppStore

It was the Nth time I've had this conversation in a board meeting, "We can't figure out how to get on the leaderboards. The app stores aren't working for us as a distribution channel."

To which I replied "All the app stores use a leaderboard model which makes the rich richer and everyone else poorer. We are in the 99%, wishing we were in the 1%. It makes me want to find a park inside the iTunes store and camp out there in protest."

All joking aside (and #OWS is not a joke), this is a serious issue for the mobile application market. There have been multiple attempts to build alternative app marketplaces but none of them have developed much traction. For the most part iOS and Android users go to the app stores to discover and download mobile applications. And unless you know what you want, you are shown leaderboards to pick from. Search is a horrible experience. Discovery is worse. Of course, Apple and Google could change this, but they haven't. It makes me wonder if they even want to. It makes me angry. It makes me want to protest.

Just because an app was the most popular six months ago, doesn't mean it should be the most popular now. But a leaderboard model is a self reinforcing action. The most popular stay the most popular. The new upstart doesn't stand a chance at unseating the aging category leader.

There are promoted download offerings from the likes of our portfolio company Flurry and others like TapJoy that can be used to stimulate downloads and impact your leaderboard position such that you can attempt to join the 1%, but Apple took actions earlier this year to limit the usefulness of those approaches, which weren't that great anyway.

There are app discovery services like Appolicious, Appsfire, and several others of note. They have great promise as alternative discovery channels for apps. But to my knowledge, they have not yet captured much of the market and most smartphone users head to the native app stores when they want apps.

Centralized control of an ecosytem never offers as much opportunity and diversity as a decentralized system. And in the leaderboard driven app store model, we have centralized control. Let's rise up and protest against this model. It's not healthy for anyone, most certainly not healthy for small developers of the kind we like to work with.

When A Company Is Too Close For Comfort

It seems like more and more, we are seeing interesting companies emerge that are operating in the same or directly adjacent market spaces to our portfolio companies. In this situation, we exercise great care to make sure we aren’t backing two companies who will eventually find themselves in direct competition. That process isn’t simple. Many entrepreneurs who have already secured venture capital view every company within a hundred miles of their business as competitive. Many entrepreneurs who haven’t secured funding don’t think anything is directly competitive. We often end up being the arbiter of what is safe and what is not safe. And we tend to err on the side of sitting out of deals rather than risk finding ourselves in a difficult and potentially reputation impacting situation.

So what do you do when a company is too close for comfort? If we like that company, we try to be supportive without directly advising or getting involved. We will identify other appropriate investors. We will provide product feedback. We will be encouraging and supportive in our words and our deeds.

But if the two companies are indeed competitive, there is a limit to how supportive we can be. An entrepreneur we have backed doesn’t want to see us aiding and abetting a competitor. And first and foremost, we must always be working for and supporting our existing portfolio companies.

This is one of the trickiest aspects of the early stage venture capital business. If you handle these situations well, you earn respect and reputation (but often experience material opportunity costs). If you take a long view of the venture capital business, then you will always choose respect and reputation over a specific transaction, as painful as it is to do that in the minute.

TakeTheInterview

We've been using a really nifty service to hire our next analyst. It's called TakeTheInterview. This product/company came out of this summer's DreamIt Ventures program in NYC.

We wrote a blog post outlining the position and then linked to TakeTheInterview (note – the application process ended twelve days ago and is closed). Candidates click on that link, fill out a few key data points (name, contact info, blog url, linked in profile, etc) and then they take two short video interviews (90 seconds and 120 seconds). The minute our post went live, I put myself through the candidate flow and I found it drop dead simple. Obviously looking into a webcam and speaking articulately and well about two topics for almost three minutes is not drop dead simple but that's the point of TakeTheInterview.

For the employer, TakeTheInterview has a nice interface that makes it fairly efficient to watch a ton of video. We got about 250 completed applications so that is about 10 hours of video. About half of the people in our firm watched each and every video. The other half watched the top 1/3 of the applicants as rated by the team that watched every video. So in total, our firm watched about 45 hours of video in this hiring process. And TakeTheInterview does a nice job with the video consumption flow. I watched a bunch of the video on my family room TV via a mac mini and that worked pretty well.

The main piece of feedback we've given TakeTheInterview is that they need a better scoring system in the service. We cobbled together one using Google Docs which works, but a slick candidate scoring system in the service would have saved our team a lot of time. I suspect that won't be too hard for TakeTheInterview to build.

Our hiring process in the past started with a blog post asking for a web presence (blog url, linkedin), followed by phone screens, ending in face to face interviews with the finalists. We swapped out the phone screens with TakeTheInterview and in the process we were able to see everyone in action as opposed to phone screens with a small subset.

I'm very enthusiastic about this new tool. Seeing people live and in person without having to commit to a long in person interview creates a lot of important information early in the hiring process. I'd encourage others to give TakeTheInterview a try.

VP Finance vs CFO

Today on MBA Mondays we are going to talk about the financial leader in an organization. Sometimes this person is called the VP Finance and sometimes they are called the CFO. What is the difference? When will a VP Finance do? And when do you need a CFO?

Like all titles, they can get mangled. A person might be promoted from VP Finance to CFO without exhibiting the characteristics I am going to ascribe to a CFO. That happens all the time. But if you really need a CFO and you have a VP Finance, you will know the difference.

A VP Finance is what you need when you want a leader who will keep the wheels on the bus, who will make sure there are financial controls in place, who will make sure the books, records, and reports are accurate and timely and well presented, and who will make sure you have the right amount of accountants and clerical staff on hand to manage the work of the finance organization. A VP Finance is largely about "what happened" and a little about "what is happening right now?"

A CFO is what you need when you have all that I described above but you also need a forward looking financial mind at your side, when you need deep strategic thinking in the financial function, when you need to do big transactions (both M&A and financings), and when you need someone to manage your relationship with investors (particularly public investors). A CFO is largely about "what is going to happen and how do we get there?"

I generally encourage companies to wait as long as possible to bring on a CFO. Great CFOs are few and far between. And in order to recruit one of them, you will need an interesting business and a meaty role. VP Finance talent is in larger supply and they can take you very far. Get a VP Finance onboard as soon as you can afford one. They will let you sleep at night. Get a CFO on board when you are ready to take on the world. You can't do that without a strong one at your side.

Entrepreneurs Teach VCs to be VCs

Isaak Karaev stopped by and left a comment in yesterday's thread. Isaak is one of the first entrepreneurs I backed in my career. I got involved in his company Multex in the early 90s, almost twenty years ago now. I backed him again more recently. It was the first investment we made at Union Square Ventures and we sold that company a few years ago.

It's been a while since I talked to Isaak so I was happy to see him stop by. His comment reminded me of the early days of Multex, when I was a "wet behind the ears VC" who didn't really know what I was doing. In my reply to Isaak's comment, I stated that entrepreneurs teach VCs how to be VCs.

You can only learn so much from other VCs. I apprenticed my way into the VC business working with (and for) two VCs who got started in the late 60s/early 70s. They taught me a lot about finding and researching opportunities, structuring deals, managing a fund, and working with limited partners. 

But those skills, as important as they are, do not make you a great VC. The key to all great VCs is the way they connect with entrepreneurs, work with entrepreneurs, and build value together with entrepreneurs. And you cannot learn how to do that without actually working with entrepreneurs.

So it is the entrepreneurs I worked with in the first five years I was a partner, people like Isaak, Ron Schreiber and Jordan Levy, Mark Pincus and Sunil Paul, and Seth Godin that I have to thank for teaching me how to do what I do. They had the patience to put up with my shortcomings, the candor to tell me when I was screwing up, and the talent to build great companies that I got to attach my name and reputation to.

When young people in the VC business ask me how to get to the top, I tell them to be patient, to do good deals, to work with entrepreneurs, and learn the business by doing the business. Like all things, there is no other way.

The Second Year

NYC's Mayor Mike Bloomberg visited TechStars NYC on Demo Day this week. He gave a funny and inspiring talk about being an entrepreneur. This is the Mike Bloomberg the NYC tech community needs. He's the most successful tech entrepreneur in NYC and he's also our mayor. It made me so happy to see him do that. He talked about installing 4800 baud modems in closets in Chicago to set up Bloomberg's wide area network before there was a commercial internet and he talked about the trials and tribulations of being an entrepreneur.

What stuck in my mind were his comments on "the second year." To paraphrase him, the first year is full of excitement. You are building things and getting going. The third year is when things start to work, you get customers, you start hiring quickly. The business ramps. But the second year is tough. Really tough. Everyone starts doubting you and if you stop and think, you can start doubting yourself.

It is a great metaphor for what a startup is like. Of course for some people it is months, for others quarters, and for some multiples of years for each phase to come and go. But each and every startup goes through the second year. If you are in it now, keep plugging away. Make sure you are surrounded by supportive and encouraging team members and investors. Be honest with yourself about what is working and what is not. Make the hard choices. But stay true to the vision.

Not every startup works. There may come a time when you realize the third year is not coming. And then you have to move on. But with the right vision, the right team, and a ton of hard work, many get past the second year. And the good news is that the second year is history when that happens.