Posts from entrepreneurship

Audio Of The Week: Positively Gotham Gal

Back in 2005 and 2006, The Gotham Gal and I did a weekly podcast called Positively 10th Street. At the time we lived in a townhouse on 10th Street in Greenwich Village and we would record it in our kitchen with our kids participating from time to time. The hosting service we used, Libsyn, took down the podcast when I cancelled our account and I can’t find the mp3s anywhere on our network. So these podcasts may be gone which is a shame. There were some great ones (and plenty of bad ones). I do have a dream that I find all the mp3s in a folder on a hard drive somewhere. That would be great.

We were a decade too early for the podcast thing. But now podcasts are a thing. Many interesting people, like Malcolm Gladwell, are doing them. And yesterday saw another interesting person join the ranks. The Gotham Gal has taken her Woman Entrepreneur Monday series which ran in blog format from November 2010 to August 2016 to the airwaves with a weekly podcast series called Positively Gotham Gal, a nod to our way to early attempt at podcasting.

Here is the first episode of Positively Gotham Gal featuring Margit Detweiler, Founder & CEO at Gyrate Media & TueNight.com. It’s a really good conversation about the joys and challenges of being a woman entrepreneur in the latter half of your career.

Going Public

The news broke yesterday that Snap (fka Snapchat) has confidentially filed to go public and is aiming for a March IPO. I am very happy to see this. Snap is a great company led by a creative and ambitious founder and they have a loyal and growing use base. I think Snap can be an excellent public company. There are the obvious questions about valuation, long term growth prospects, profitability, etc. Those will determine how good of a business and a stock it will be over the long run.

But the thing that makes me happy is their decision to open up their cap table to all investors, to become more transparent with their numbers, and to follow the path taken by so many great tech companies over the past five decades.

Going public used to be a rite of passage for high growth tech companies. It was what every founder wanted to eventually do with their company. That all changed after the tech/internet bubble burst in 2000 and for the last fifteen years it has been conventional wisdom to delay the IPO for as long as possible or even forgo it in lieu of a trade sale or something else.

I appreciate why some founders want to avoid being public. I spent the last day and a half being a public company director. There are parts of that job that suck. 

But having seen this movie (going public/being public) many times now, I think there is a lot less to fear than most entrepreneurs think. It’s good for the company to be held accountable, it’s good for the employees and investors to have liquidity, and it’s good to join the ranks of the best companies in the world.

I am very pleased to see Snap going for it.

Fun Friday: What Is Exciting These Days In Tech and Startup Land?

I figured I’d follow up a post taking a shot at the AVC community with one that should engage the AVC community, including me.

And what better to talk about than what excites us these days?

It is no secret to the regular readers that it is hard for me to get excited about the current state of tech and startup land. David said as much in his comment yesterday.

With the exception of blockchain stuff, which seems very early and not yet investable except for fools and the foolhardy (me), I am struggling to find things to get excited about in tech and startup land.

So, let’s all jump into the comments and talk about what excites us about tech and startups right now. Not yesterday, not last year, not five years ago, right now. And if its your startup you are excited about, that’s cool, but please don’t turn the comments into a pitch fest. That’s my life already 🙂

What Does Trump Mean For Startups?

I got this tweet around 11pm last night:

Clearly the news that Trump will be the next President of the US is creating all sorts of financial jitters in the US and around the world this morning. There is a ton of uncertainty right now as many investors, me included, were not expecting this outcome. If there is anything that investors hate, it is uncertainty.

For me the best framework I have is Brexit. I feel that the economic and societal unease that has been brewing in much of the developed world over the past decade is coming home to roost and I believe that we will see more “brexits” in the coming months and years.

I wrote this right after Brexit:

But more than that, going into a foxhole right now seems like the wrong idea. Some of the best companies have been created in times of great economic turmoil. And, because of that, some of the best venture capital investments have been made in times when everyone was risk averse. I am not for getting too excited when times are good and I am not for getting too conservative when times feel bad. I am all for looking for opportunity at every turn.

I am certain that USV will continue to invest capital in interesting startups. While the financial markets may be in for a tough time, possibly a prolonged tough time, there is no correlation between startup success and strong financial markets. And those investors who understand that will act accordingly and be rewarded over the long term for doing so.

For entrepreneurs, this means be cautious and maybe even a bit conservative while all of this shakes out but don’t panic and don’t confuse uncertain times with a lack of opportunity. If you were excited about your business yesterday, you should be excited about your business today. But don’t be blind about the macro environment you are operating in. It’s going to be choppy for a bit here.

Founder Dilution

I saw a blog post this weekend that looked at the IPO filings of 79 tech companies and calculated the ownerships of the founders and the VCs at IPO.

The result of that analysis is that the average founder ownership at IPO was 17% and the average VC ownership at IPO was 56%.

I’ve written a bunch on this topic and here are two posts that address this exact issue:

Founder Dilution – How Much Is “Normal”?

Employee Equity: Dilution

In both posts, I lay out how the equity gets shared with employees and investors as the company grows and scales.

Here’s the most important quote from those two posts:

In my experience, it will generally take three to four rounds of equity capital to finance the business and 20-25% of the company to recruit and retain a management team. That will typically leave the founder/founder team with 10-20% of the business when it’s all said and done. The equity split at 20% for the founders will typically be; 20-25% for the management team, 20% for the founders, and 55-60% for the investors (angel all the way to late stage VC).

I wrote that seven and half years ago, but on this topic, not much has changed over the thirty years I’ve been doing VC.

Raising round after round of venture capital is expensive. There are some entrepreneurs who figure out how to get profitable and not raise round after round (or avoid VC altogether), there are some entrepreneurs who are able to raise a very high valuations and avoid a lot of dilution, and there are many entrepreneurs who choose to sell the business before they take a lot of dilution. But for the entrepreneurs who raise four to six rounds of VC before going public, the math is the math. If you end up owning more than 20% at IPO, you are beating the averages.

Enjoying The Struggle

The NY Times has a great longish piece on David Letterman today.

This quote got my attention:

Maybe life is the hard way, I don’t know. When the show was great, it was never as enjoyable as the misery of the show being bad. Is that human nature?

Building companies includes a lot of “misery of the show being bad” as David Letterman puts it.

And I really love the idea that you can enjoy that struggle.

Obviously you want the “show” to be great, but his point is that greatness is fleeting and you have to go through a lot of bad shows to get to some good ones and you’d better figure out how to enjoy that struggle, as he and his team did.

Good advice for all of us who hang out in startup land.

Relaunching At Age Fourteen

Our portfolio company Meetup was launched in June of 2002. We invested five years later, in 2007, when the company was already profitable and was approaching double digit revenues. Nine years later they are 3x the size when we invested in revenues, meetups, and more. But the founder and leaders of Meetup feel like they are just beginning to scratch the surface of their mission which is to get people out of the house and into the real world doing things they enjoy with other like minded people.

This video, which they created as part of their re-launch this week, shows the range of things people use Meetup to do with others:

Many people associate Meetup with night time events where people with name tags on them walk around and introduce themselves to others. Those sorts of things happen on Meetup for sure. But the more common uses are runners using Meetup to schedule group runs, moms using Meetup to hang out with other moms, and, apparently, jugglers using Meetup to juggle together.

So Meetup is relaunching the Company this week, fourteen and a quarter years after its initial launch. This means a new logo (the name badge is gone), new mobile apps that use deep learning to understand what you want to do and encourage you to do more of it, a new team (with women leaders in both product and engineering) with lots of new engineers and data scientists, and a sharper focus on marketing.

If you want to see what the new Meetup is all about, download the new app (iOS and Android) and check it out. Maybe you will find yourself juggling in the park this weekend. I sure hope so.

Team and Strategy

I’ve been in board meeting blitz since the summer ended. Many of the companies I work with are well past the startup phase and are well into or even past the growth/scaling phase. And the thought that keeps occurring to me as I go from board meeting to board meeting is the key to success when you are past the startup/product market fit stage comes down to two things, team and strategy.

You have to get the strategy right and you have to have a team that can execute it without your day to day involvement. The CEOs that I work with that are struggling are usually running into issues with their team and/or their strategy. And the CEOs that I work with that are doing great generally have gotten the strategy set and have built a strong executive team underneath them.

This sounds so simple. But it is not.

Most of the companies I work with didn’t really start out with a strategy. They started out with an idea that turned into a great product that found a fit with a market. And they jumped on that and used it to build a company. Most of them wake up at some point and realize that a single product in a single market is not a strategy and they need to come up with a plan to get a lot bigger and build a sustainable and defensible business. I like to think that this is one place where a good investor group can help. If we are doing our job, we push our portfolio companies to work on their long term strategy and refine it to the point where it makes sense and is executable. But an investor group cannot give a company a strategy. It has to come from the founder/CEO and a small group of senior leaders. The smaller the group that is working on strategy, the better. Strategy is not something that can be done by committee.

The second thing, building an executive team that can execute the plan without day to day involvement of the CEO, is even harder. Most of the companies I work with go through a lot of hiring mistakes on the way to building this team. Some hire too junior. Some hire too senior. Some hire bad cultural fits. Some hire people that are nothing but cultural fit. And an investor or investor group can help with this but I believe that founders/CEOs need to learn how to do this themselves and make these mistakes. The best thing an investor group can do is to help a founder/CEO to understand when they have the wrong person in the job. Or help them understand that more quickly.

These are both areas where experience is huge. The CEOs I work with who have done the job multiple times get these two things right much more quickly. But even they can take a year or two to get these right. First time CEOs often take three or four years to get these things right. But sticking with founders who are first time CEOs through this process is usually worth it because they have a connection to the initial vision and mission that a hired CEO has a hard time replicating. There is not a good rule of thumb on this issue (who should run the company). Facts and circumstances on the ground will generally determine how that should go.

My final point on this is that once you have the strategy and team locked down, you should step back and let the machine do its thing. I like to say that CEOs should do only three things; recruit and retain the team, build and evolve the long term strategy and communicate it effectively and broadly in the organization and externally, and make sure the company doesn’t run out of money. When those are the only things you are doing, you are doing the job right. Very few CEOs get to focus on only these three things all of the time. Things break and you have to fix them. But when the machine is working and you can step back and watch it hum, it is a thing of beauty.