Posts from entrepreneurship

The Canvas Spindown

Our portfolio company Canvas made the decision to shutter operations early last year. But there is a bit more to entirely dissolve a company. Chris Poole, the founder of Canvas, describes the remaining work he had to do to entirely wind things down in this post.

Chris is a special person. Working with him has been such a pleasure. You get some great things from failure. One of them is my relationship with Chris.

The Reboot Podcast

A few weeks ago Jerry Colonna and I got on Skype and had a 40min chat about startups and what goes on in them. As most of you know, Jerry and I started a venture capital business together in the mid 90s and have been close friends since then. So this is a public conversation between friends, which is usually a recipe for a good discussion.

The first five minutes is some stuff about Jerry’s new business, Reboot.io. It’s worth listening to, but if you want to skip it, click on the soundwave at 5mins in and you will get to the start of our conversation.

DIY vs Delegate

I am a bad delegator and very much a do it yourselfer (DIY). It’s one of the many reasons I am certain I’d make a terrible CEO.

CEOs must delegate. At scale, they should only do three things; set the vision and strategy and continuously communicate it, recruit and retain the very best people, and keep the company funded. Everything else has to be delegated at scale.

But when you start a company, you (and your cofounders) have to do everything yourself. There is nobody to delegate things to. And hiring a bunch of people to do things like schedule your meetings, answer the phones, keep the books, review contracts, interview candidates, etc is a bad idea because it uses up money which is always in short supply at the early stage of a startup. You can, and should, see if there are service providers who are inexpensive who can help. Bookkeeping is one area where that is certainly true. Reviewing contracts and recruiting is harder to hand off to an inexpensive third party. I wish it were not.

I like it when I see a founder team that is resourceful, has range, and can do a lot of this stuff themselves. I like to see them running lean and mean and spending money on the things that really matter (product!!!!!).

But at some point they need to start delegating this stuff. And first time founders often make the mistake of waiting too long to take things off their plates. For one, they like the control and insights they get from doing things themselves. For another, they are often lean to a fault (penny wise and pound foolish).

Knowing when it is the right time to start handing things off and hiring is an art not a science. It has something to do with the availability of resources. And it has something to do with the scale of the organization. When the CEO is still scheduling her own meetings when there are over fifty employees, something is wrong. Investors can help a lot. We have pattern recognition. We can see two very similar companies (size, stage, etc) and compare how much delegation is happening in one vs the other. We can make suggestions.

One suggestion I frequently make is to find a “utility infielder” for your first business hire. This is someone who can do a lot of things well but nothing spectacularly well. This is often someone who has done this role before in a startup and likes working in companies that are between five and fifty employees. There are people who make a career out of this job. It is lucrative if you value equity over cash compensation. You can build a nice portfolio of early stage equity grants doing the “first business hire” gig for two or three years at a time and then doing it again and again.

Doing a startup is an evolution from DIY to Delegate. And timing the evolution is important. If you haven’t done it before, ask people who have for advice on this. Allocating your time (your most precious resource) is critical to the success of your business.

Broken Cap Tables

A “cap table” is a schedule of all the shares outstanding for a specific company. Here’s an MBA Mondays post I wrote back in 2011 on the subject of cap tables. If you want to know how much of a company you own, a cap table is the best way to figure that out.

Cap tables are almost always prepared and kept in spreadsheets, usually excel, but also increasingly google sheets. And, it turns out, they are often wrong.

Henry Ward is the founder and CEO of a company that is aiming to fix that called eShares. Last month USV led a Series A round in eShares and my partner John Buttrick wrote a bit about that investment today on the USV blog.

The reason I tell you this is that yesterday Henry wrote a great post about broken cap tables that everyone in the startup world should read. Here are the four big takeaway’s from Henry’s post:

  1. Most cap tables are wrong
  2. Most investors don’t track their shares
  3. Note holders are often forgotten
  4. Employees suffer most

How does Henry know this? Well part of eShares’ business is converting cap tables from spreadsheets into their cloud based application and reconciling everything to make sure it is correct. They onboard about 100 companies a month right now and they see a ton of cap tables.

Tracking everyone’s ownership in companies is a perfect application for a cloud-based network of owners and issuers. If every company used a platform like eShares, and if all these platforms talked to each other, if there was a common identity standard, then as you move from one company to another over your career, collecting equity along the way, you could access and manage all of your ownership interests in a single dashboard.

This is a service that is incredibly useful to startups and angel investors and VCs. But as Henry outlines at the end of his post, it will ultimately help employees the most. And, as we have discussed here before, employee equity is certainly more broken than cap tables are. Fixing that is a worthy mission for a startup and that is what Henry and his team intend to do.

Hashtags As Social Networks

Our portfolio company Kik launched hashtags yesterday. Kik is a mobile messenger so in Kik’s model hashtags are private or public group chats.

If I send a hashtag to a friend in Kik that says let’s chat about tonight’s knicks game at #knickskik, then that becomes a private group between me and that friend (and any others who we invite). I’ve done that so the #knickskik hashtag is now private on Kik.

But hashtags can also be public. If you have the latest version of Kik on your phone (came out yesterday), type #avckikgroup into a chat and then click on that link. Up to 50 of us can be in that group.

The cool thing about Kik is that it doesn’t use phone numbers like other messengers. It uses usernames and is not tied to your phone number or Facebook username. And so Kik, unlike other messengers, is used for both chatting with people you know (like other messengers) and people you don’t know.

That makes Kik an ideal platform for these public (and searchable) group chats. You can meet people in these public chatrooms and then take your conversations private in a one to one chat in Kik.

Ted Livingston, Kik’s founder and CEO, called this “hashtags as social networks” in a blog post yesterday.  I agree with Ted that Facebook’s model of the one network to rule them all has not really worked and that many of us are using messengers as defacto social networks. My friend Kirk told me that his wife’s family uses a group in WhatsApp like their personal family facebook feed. I think that’s the phase of social networking we are now into and so Kik’s hashtag as social network model makes a ton of sense to me.

The Perfect Board

Last month Sam Altman wrote a post about board members and why you should want them. I read it and then tweeted it out:

In Sam’s post, he says:

Personally, I think the ideal board structure for most early-stage companies is a 5-member board with 2 founders, 2 investors, and one outsider.  I think a 4-member board with 2 founders, 1 investor and 1 outsider is also good (in practice, the even number is almost never a problem).

I’ve been serving on boards for 25 years. I’ve been in every conceivable configuration. To my mind, the perfect board is either five or seven and it looks like this:

Founder CEO, Two Independents, Two Investors

Founder CEO, Three Independents, Three Investors

If the Founder is no longer the CEO, then I like this configuration:

CEO, Founder, Two Independents, Three Investors

If you have less than three investors (yay!), then replace investors with independents in each formula and you’ve got a winning configuration.

An entrepreneur the Gotham Gal is invested in asked me this question via email a few weeks ago, and I told him this:

This is a long way of saying that you aren’t done once you put one independent on the board. You are going to need a bunch.
Finally – don’t try to satisfy your VCs. They will want “names” “trophies” and the like. Satisfy yourself. Find people, ideally peer CEOs, you like respect and want to spend time with who you know can and will add value.
A great company deserves a great board. And a great board has bunch of people on it, ideally a bunch of people who are experienced at running a business, growing a business, and dealing with all the stuff that comes with that. Do yourself a favor and build a great board for your company.

Development Is Cheap. Production Is Not.

This is a line from a blog post written by my brother in law Jerry Solomon. He is talking about film production, specifically short form videos. But the point is true of all projects, from designing a building, a home, a film, an art project, a hardware project, a software project, or whatever.

The design process is relatively inexpensive. The build process is not.

In the kinds of companies we invest in the “development” work comes from the product organization. The “production” work comes from the engineering team.

I have seen engineering teams spin their wheels and burn through countless hours of writing code that ends up getting tossed out just because the design process was not right or not specific enough or not thought through enough.

While we might think these issues and challenges are unique to the world of tech, software, internet, and mobile, the truth is these issues pervade everywhere you are making something.

This is not so applicable to a startup trying to find product market fit. But it becomes very relevant once your company starts to scale. A commitment to thinking things through, getting it right at the start, and being efficient in the “production” process is something all great companies figure out how to do. It’s really important.

Veniam

I’ve been talking a lot and writing a lot about mesh networking. I think it has the potential to wrest control of the last mile of the wired and wireless internet from the carriers who mostly control it around the world. Peter Kafka noticed yesterday that we had finally put those words to work with a mesh networking investment:

We made this investment, in a neat company called Veniam that comes out of Porto Portugal, some time earlier this year but they finally got around to announcing it yesterday.

My partner Brad talked about it in a short post on usv.com yesterday. And our partner in the investment Om Malik talked about it here.

I had breakfast with Om in NYC earlier this year and told him about Veniam. Those breakfasts do pay dividends eventually. This is how Om describes that breakfast and what came of it:

Union Square Ventures’ Fred Wilson introduced me to João after a long, spirited discussion about network neutrality, new models of networks, and policies that will influence the future of the internet. As we walked back to our office (aka my favorite cafe), he said, “You should talk to this guy in Portugal that my partner Brad [Burnham] has been in touch with. He has some interesting ideas.” An email introduction with João followed, and we were soon talking to each other via Skype. He quickly came to San Francisco, and we met for coffee on the weekend and then again the next day. João likes to talk: It is his super power. And here we are.

So enough about all of that. What does Veniam do? They make a “stack” of wireless technology that lets moving objects (think buses, garbage trucks, cars, vans, etc) carry a wifi access point/router and mesh with each other and anyone else who wants to join the network. With enough density, buses driving around your city can provision a wireless mesh that anyone can use on their smartphone when they are out and about. It’s a big vision and will take a lot of work (and luck) to realize, but this or something like it is eventually going to work and we are going to have a better way to access the internet on our phones than we have today.

Here’s a video of Veniam’s technology in action in Porto. I suspect you will want this in your city too. I certainly do.