Posts from life lessons

Fundraising Tip: Don’t Send The Same Email To Two Partners At The Same VC Firm

Over the weekend I got an email from an entrepreneur wanting to come pitch his startup to USV. He copied my partner Andy on the email.

I immediately thought “I’m going to let Andy reply to this one.” But a couple days later the email still was sitting there in my inbox unreplied to. So then I thought “Andy is probably waiting for me to reply to this.”

Finally I shot Andy an email and we compared notes on it and then I replied to the email.

But it doesn’t always work out like that. I’ve seen a similar situation end with neither partner replying to the email and it goes unresponded to.

I call this situation email hot potato and entrepreneurs should avoid it by sending an email to only one partner at a VC firm, not two or more.

A good alternative is to send an email to one partner and copying an analyst at the firm as well. The analysts are the most diligent people in a VC firm about staying on top of inbound deal flow and they will often step in and reply to an email that a partner has missed or forgotten about.

The important thing here is to avoid confusing who has the responsibility to reply to the email by putting multiple responsible parties on it. While it would seem that it would increase the likelihood of getting a reply, it actually reduces it.

Video Of The Week: Gotham Gal at Columbia

Last month the Gotham Gal gave a keynote at the Columbia University’s #StartupColumbia Festival. Here it is.

It’s also our 28th wedding anniversary today. We are celebrating it in Istanbul. Off to the Grand Bazaar to work on our negotiating skills.

The Blank Screen

I was at dinner last night with some entrepreneurs and VCs in Berlin and we got talking about my ritual of blogging every day. I told them that many days I stare at the blank screen and think “ugh, what am I going to write about today.”

blank screen 2

They asked if there was any correlation to knowing what I am going to write about and the quality of the post. I told them that I don’t think so. The best posts come out in real time and often they start with me staring at the blank screen. Same with the worst posts.

Posting every day isn’t easy for a host of reasons but for me the hardest is that much of what I work on every day is off limits. I wake up thinking about a drama unfolding in one of our portfolio companies and I can’t blog about that. I wake up thinking about a new product one of our portfolio companies is going to launch and I can’t blog about that. I wake up thinking about a neat company we just met and I mostly can’t blog about that.

So on a typical morning, I run through four or five ideas, tossing each out for a variety of reasons, before settling on something, and then I start writing and I go from there. I enjoy the real time nature of this approach to writing. I often don’t know what the gist of the post is going to be until I write that last line and hit publish.

Sometimes this process produces great insights for me and possibly others. Sometimes it produces garbage. But I’ve come to realize that the daily post, and its quality or lack thereof, is not really the thing. It is the ritual, the practice, the frequency, the habit, and the discipline that matters most to me. And, I would suspect, the same is true of the readers and commenters who frequent this blog.

Mother’s Day

It’s mother’s day and I find myself thinking about my girls, who are not mothers at this time in their lives. And yet they both have been working on projects involving motherhood this spring.

Emily wrote her bachelors thesis on the challenges of balancing motherhood and careers. She called it “Life Sequencing: A Viable Solution To Work-Life Conflict For High-Achieving Women” and it was a thorough investigation of the challenges of balancing work life issues and some possible answers.

Jessica has been making an Oculus Rift based immersive experience for an art show called Dear Mama where young artists are showing work  “in honor of Mother/s, mothering, motherhood: incl. all the shapes that role may take.”

Each, in their own way, are honoring their mother with their work and it is very satisfying for me to see that. Joanne is many things, but first and foremost she is a wonderful wife and mother, and it pleases me to no end to see her fine work reflected in our girls.

I’m also fortunate to have a loving mother of my own. I plan to call her this morning, then head to brunch with Joanne and Jessica, then to Jessica’s show to bask in art about motherhood.

Happy mother’s day everyone.

Dedication

For those who are on to the theme of my posts this week, Dedication will seem like an obvious choice to finish with.

I am dedicated to my family, my work, our portfolio, this blog, the Knicks, Mets, Jets, and a host of other things that require daily dedication. This week I was dedicated to the notion that all posts would start with D and end with tion. And I followed through and finished it off.

d ...

That’s what dedication is.

Dedication is also a testimony of affection or respect. At the start of many yoga classes, you are asked to dedicate your practice to something or someone. I mostly pick my kids, whichever I think needs the dedication that day, and sometimes the Gotham Gal too. I’m dedicating this blog post to my entire family on the eve of Passover.

Happy Pesach Everyone.

Distraction

I was just doing some work on a personal finance thing. I completed one part of the job and went to my email to finish it and saw another email at the top of my inbox about something else, I clicked on that email, started dealing with that, and almost forgot to finish off the personal finance thing. This happens all the time to me. I am so easily distracted.

I got rid of my desk phone in my USV office several years ago because I cannot sit in front of my computer when I am on a call in my office. I have to do my calls on my cell phone and walk around my office, look out the window, or something else or else I will get distracted.

I struggle with distraction big time. It’s not just the attention deficit kind of distraction I just talked about. Distraction crops up in other parts of my life. The Gotham Gal is constantly on me about being distracted in conversations with her. And she’s right to be on my case about that. If she was not, I would be even worse.

I’ve been working on this for much of my adult life. I’ve made progress but the distraction urge still is very much front and center in my psyche and my unconscious. I suspect this is something I will work on all my life.

Some things that have helped me are the aforementioned coaching by the Gotham Gal, yoga, meditation (which I have not yet made a staple in my life but I’m working on that), and a general self awareness of the problem and the need to take as many distractions away from me as possible when focus is required.

I know that I will get a lot of suggestions in the comments for software tools, workflow routines, and other self improvement techniques that have helped others deal with this problem. I will thank everyone in advance for those, but I will also say that I’ve tried all of that before. And tools and techniques haven’t really worked for me. I have found getting into the root causes and developing self awareness and more serenity in my life has worked a lot better.

But I’m still pretty bad. If you find yourself on the phone with me and I sound distracted, I probably am. And please feel free to call me out on it. I would appreciate that.

Reblog: VC Cliché of the Week

Back in the early days of this blog I had a series called VC Cliche Of The Week. I’m not sure how long I ran it but I did eventually run out of material and phased it out. In continuation of yesterday’s good vibes and with yet another shoutout to Bliss, here’s a reblog of one from March 2006:

—————————————————

The father of this weekly series, the guy who taught me at least half of the cliches I know, is a guy named Bliss McCrum. He and his partner Milt Pappas taught me the venture capital business from 1986 to 1996 when I worked with them at their firm, Euclid Partners.

One of my favorite cliches from Bliss is a rising tide lifts all boats.

Whenever things seemed too good at a portfolio company, in the stock market, the economy, or somewhere else, Bliss would quip, “well you know that a rising tide lifts all boats“.

It was his way of saying “don’t mistake a good market for a good business”.  The insinuation was always that the tide would come back in and so would the boats.  And you had to be prepared to make things work in tough times as well as good times.

And we are in good times in the venture business, the internet business, and for the most part, the US economy.  Consumer confidence hasn’t been this strong since before the Iraq war.  The Fed has raised rates 15 times and may not be done, signalling that the economy remains stronger than they’d like it. Venture money is flowing freely in Silicon Valley and China and in many parts of the developed or developing world.  Advertising dollars continue to move from offline media to online media and that is one rising tide that is certainly lifting all boats.

But we know these good times will come to an end at some point.  Are we in 1998 as Caterina suggests and have another year or two before the good times end?  Who knows?  I don’t expect this run of good times to play out like the last one anyway.

The best we can do is prepare our companies to withstand a business environment that is less friendly.  Companies need a business model, they need a seasoned and well constructed team, and they need patient and experienced financial partners.  With these ingredients, hard work, and some luck, you can survive a downturn.

Some of the best companies I’ve ever worked with were funded at the height of the last bubble and they are doing great now.  So it doesn’t really matter when you start a company, but it does matter that you can make it through tough times.  Because right now we have a rising tide that is lifting all boats and that won’t last forever.

Finding Your Passion

I graduated from college with a technical degree from one of the finest engineering schools in the world, I had helped to pay for college by writing code in a research lab, I had a strong academic record, and I had no clue what I wanted to do with my life.

Fortunately the Gotham Gal did and I followed her to NYC where she got busy with her career in fashion and retail. Meanwhile I took a job in an engineering firm where I used my coding skills to help design a new class of Navy ships. It was a good paying job, the kind that is in short supply for college grads these days, but it wasn’t anything I was passionate about.

We were visiting our families who lived in DC at the time and at the dinner table one night the Gotham Gal’s mom Judy who is no longer with us said to me “Get an MBA from one of the top schools. With an engineering degree from MIT and and MBA from a top school, you can write your ticket”. I liked the sound of that phrase “write your ticket” so I took her advice.

But the business school applications all asked the same thing, “what do you want to do in your career?” And I really had no good answer to that question. I knew that we were going to live in NYC because that’s where Gotham Gal’s career was flourishing. And I knew that I liked technology. But there wasn’t a tech sector in NYC at that time. All the good and high paying jobs were on Wall Street. And then it hit me. What was at the intersection of Wall Street and technology? Financing tech companies of course.

So I did some research and found out about this, at the time, sleepy little business called venture capital. This was the early 80s and the venture capital business was a much smaller and closer knit business than it is today. But I loved the sound of the word “venture”. It reminded me of adventure. I was smitten.

And so I wrote my business school applications about venture capital. I told all the schools (all three of them) that I wanted to be a VC. One of them, Wharton, accepted me and I went there, commuting back and forth to NYC for two years.

The Gotham Gal, who always pushes me and thank god she does, started asking me a few weeks into the fall semester of  business school what I was going to do the following summer. I said “get a job in venture capital”. That was my plan. Nothing more to it than that.

I wrote letters (yes letters) to all the Wharton alums in the VC business and got one reply (via letter) from Bliss McCrum. He said “please come in for lunch”. So I did that. And I got the summer job. That led to a full time job when I got out of school.

That lunch with Bliss happened 30 years ago. It was the key to finding my passion. And it led to a fantastic career that has taught me so much and connected me to so many amazing people.

Last week I got a voice mail message from Bliss. I called him back. He’s living on a ranch in Montana now. He invited me to come up and go fishing with him. We traded a bunch of stories about the venture business in the 80s. I told him that I still use all of his sayings and cliches. He loved hearing that. He and his partner Milton taught me a lot and gave me a place to find my passion. I owe them a lot for doing that. We pay that forward by doing the same thing at USV with young people who want to find their passion. And that feels good.

So where is this story going? Well it seems to me that finding your passion is critical to having a full and fulfilling life. And you have to put yourself in a place to do that. For me, it started with a woman who knew what she wanted to do long before I did and who pushed me to “figure it out” and it ended with a couple guys, Milton and Bliss, who passed their passion on to me.

I am sure there are many other ways to get there. But it won’t happen without help. So surround yourself with people who care about you and listen to them. And good things will come from that.

MBA Mondays Reblog: Sunk Costs

The Gotham Gal and I made a decision recently where we had a bunch of sunk costs. It reminded me of this post and I am going to reblog it today.

—————————————-

Sunk Costs are time and money (and other resources) you have already spent on a project, investment, or some other effort. They have been sunk into the effort and most likely you cannot get them back.

The important thing about sunk costs is when it comes time to make a decision about the project or investment, you should NOT factor in the sunk costs in that decision. You should treat them as gone already and make the decision based on what is in front of you in terms of costs and opportunities.

Let’s make this a bit more tangible. Let’s say you have been funding a new product effort at your company. To date, you’ve spent six months of effort, the full-time costs of three software developers, one product manager, and much of your time and your senior team’s time. Let’s say all-in, you’ve spent $300,000 on this new product. Those costs are sunk. You’ve spent them and there is no easy way to get that cash back in your bank account.

Now let’s say this product effort is troubled. You aren’t happy with the product in its current incarnation. You don’t think it will work as currently constructed and envisioned. You think you can fix it, but that will take another six months with the same team and same effort of the senior team. In making the decision about going forward or killing this effort, you should not consider the $300,000 you have already sunk into the project. You should only consider the additional $300,000 you are thinking about spending going forward. The reason is that first $300,000 has been spent whether or not you kill the project. It is immaterial to the going forward decision.

This is a hard thing to do. It is human nature to want to recover the sunk costs. We face this all the time in our business. When we have invested $500,000 or $5mm into a company, it is really easy to get into the mindset that we need to stick with the investment so we can get our money back. If we stop funding, then we write off the investment almost all of the time. If we keep putting money in, there is a chance the investment will work out and we’ll get our money back or even a return on it.

Even though I was taught about sunk costs in business school twenty-five years ago, I have had to learn this lesson the hard way. Most of the time that we make a follow-on investment defensively, to protect the capital we have already invested, that follow-on investment is marginal or outright bad. I have seen this again and again. And so we try really hard to look at every investment based on the return on the new money and not include the capital we have already invested in the decision.

This ties back to the discussion about seed investing and treating seed investments as “options.” Every investor, if they are rational, will look at the follow-on round on its own merits and not based on the capital they already have invested. But the venture capital business is a relatively small world and reputation matters as well. Those investors who make one follow-on for every ten seeds they make will get a reputation and may not see many high quality seed opportunities going forward. Our firm has followed every single seed investment we have made with another round. In most cases, those investments have been good ones. But we have made a few marginal or outright bad follow-ons. We do that for reputation value as much as anything else. We measure that value and understand that is what we are doing and we keep those reputation driven follow-ons small on purpose.

When it is time to commit additional capital to an ongoing project or investment, you need to isolate the incremental investment and assess the return on that capital investment. You should not include the costs you have already sunk into the project in your math. When you do that, you make bad investment decisions.

 

Satisficing

We had one of our many (non-stop) email conversations among the USV crew last week about a situation in our portfolio where nobody could agree on something. I lamented that “VCs are such optimizers.” It takes one to know one you see.

Nick Grossman replied that he prefers satisficing to optimizing. I had never heard that term. So Nick sent me to Wikipedia which says:

Satisficing is a decision-making strategy or cognitive heuristic that entails searching through the available alternatives until an acceptability threshold is met.[1] This is contrasted with optimal decision making, an approach that specifically attempts to find the best alternative available. The term satisficing, a portmanteau of satisfy and suffice,[2] was introduced by Herbert A. Simon in 1956,[3] although the concept “was first posited in Administrative Behavior, published in 1947.

I love the concept of satificing instead of optimizing. It is something I have been trying to adopt (changing behavior is hard) for close to twenty years now with a good measure of success. But I never had a word for it. I do now. Thanks Nick!