Posts from 2005

VC Cliche of the Week

Another visual cliche this week.

I am not a hunter but I suspect this one comes from the hunting world.  When I think of a Stalking Horse, I think of a hunter on a horse, concealed in some way by the horse, stalking they prey. Again, a pretty brutal image, but that’s what comes to mind for me.

In the venture business, A Stalking Horse, is something that is put forward as the real deal but in fact is just a smokescreen for something else.  I have heard the term used in recruiting situations where someone is put up as A Stalking Horse candidate for a job, when in fact nobody has any intent of offering them the job.  And often its an internal candidate that is used as A Stalking Horse. That is a terrible practice and I won’t have anything to do with stuff like that. People need to know where they stand, particularly key employees.

Where I tend to see Stalking Horses most, however, is in deal making. A very common trick that is used in venture deal making is to find an investor who you know will offer a very attractive financing deal to the company, get them to offer terms, and then use them as A Stalking Horse to find an investor who is more desired.  It frankly stinks to be used as A Stalking Horse and its happened to me plenty.  But it comes with the territory.  The deal business can be pretty nasty at times.

The most common time that this trick is used is when the existing investors really want to put more money into a company but cannot figure out the right price and terms with the entrepreneur.  So they "go to market", get A Stalking Horse, the terms are set, and the insiders do the deal by themselves.  It happens all the time.  Sometimes the Stalking Horse is given an opportunity to participate, but not always for the amount they really want to invest.

If you are an investor, you need to be able to smell when you are being used as A Stalking Horse.  Most of the time no good will come of it for you so you need to avoid it.  The best way I know is to look for the little things that tell you that a company is really considering you.  Like reference checks on you.  Anyone who is seriously considering getting into business with you will ask around.  If they aren’t doing that, or stuff like that, you might be getting set up to be the Stalking Horse.  Another approach is the "exploding term sheet" and the "no shop" which prevents the company from shopping the deal around.  Those work fine to prevent being used as A Stalking Horse, but for reasons explained in detail in the term sheet series on Brad Feld’s blog, they aren’t very attractive to entrepreneurs.

The bottom line is nothing is easy. If it feels too easy, maybe it’s a fake out.  Don’t let yourself become A Stalking Horse.

#VC & Technology

The Broken Leg of the Stool

Consumer technology is a three legged stool.

The first leg is the personal computer where much of the original innovation in consumer technology happened.  Today, the personal computer business is fairly mature dominated by Microsoft on the software side and Intel on the hardware side. Apple remains a formidable player and provides an alternative to Microsoft which both encourages innovation and gives consumers a choice. But even with the fairly mature nature of the personal computer sector, innovation is possible because the personal computer is by definition an open platform where consumers have the power to configure their device however they choose.  The recent peer to peer file sharing (Kazaa/Grokster/etc) and voice over IP (Skype) revolutions are good examples of the fact that innovation is alive and well in the personal computer sector.

The second leg is the Internet, a veritable wild west of innovation. Consumers reign supreme on the web and anyone can launch a new web service whenever they want. The mid 90s ambitions of Microsoft to take a toll on every web transaction are laughable in hindsight and showcase the power of the ultimate open platform to keep things honest and keep the consumer in control. Venture capitalists have been criticized for focusing so much of their recent investment in web services, but the reality is that there is nowhere in the technology business where the pace of innovation and the ability to compete is as high as the Internet.

The third leg is consumer electronics, an industry that is much older than the other two. I do not have data on the size of the three sectors but if I had to guess, I’d bet that consumer electronics is the largest of the three sectors as it includes cell phones, game consoles, and portable music players, three of the most important and popular consumer techology devices.

But this third leg is broken, even though it remains a vital and growing sector. It’s broken because its nearly impossible for the consumer to take control of their consumer electronics experience and it’s broken because its almost impossible for an entrepreneur to innovate in this sector.

I have a love/hate with all of my consumer electronics devices. 

I love my iPod for its functionality but I hate it because the hard disk crashes, the battery dies, and I can’t get in there and fix/replace them.  I hate it because the software is closed and I am stuck with Apple’s god awful DRM system.  I hate it so much that I have thought often of how I could replace it.  But I can’t.  And that sucks.

I love my Treo 650 for its functionality but I hate it because it’s camera sucks, because it crashes on me all the time, because the software is counter intuitive, and because it costs over $600 if you buy it unsubsidized by a carrier.

I love my Canon SD550 camera because it is small, light, easy to use, and takes wonderful pictures in the light.  But I hate it because the videos it takes are huge files.  I hate it because I can’t upload the pictures to Flickr directly from the camera like I can with my Treo.  And I hate it because when they come up with a 9mp chip, I can’t simply swap out the chips, I have to get a whole new camera.

The fact is the consumer electronics industry is not consumer centric.  In fact, it makes an art out of being consumer unfriendly.  It’s MO is all about locking consumers in, not opening things up. The carriers and cable operators make things even worse when telephony and/or television come into play.  They lock you down even more with subsidies, proprietary products, and high price points.

Something has to be done about this.  Entrepreneurs and VCs need to be able to play in the consumer electronics space.  To date the venture capital industry has had pretty awful results in consumer electronics.  There have been some successes, like Danger in the smart phone business. RIM is another example of a company where entrepreneurship succeeded in consumer electronics.  But in reality, the venture industry is a trash heap of failed consumer electronics startups. And with VCs being wary of consumer electronics, entrepreneurs find it very hard to drum up the money to do interesting new things in this sector.

I am not writing this to propose any solutions.  I have some ideas, but they are unformed and not ready for public consumption.  I am writing this as a call to action.  We need to take the principals behind the personal computer revolution and the world wide web to consumer electronics. To make devices that are truly by the people for the people.  They certainly aren’t that today.

#VC & Technology

Top 10 Records of 2005 - Honorable Mention

We have been fans of Ben Lee since we heard the song My Guitar on his 1995 debut record, Grandpaw Would.  He was 16 at the time.

Now he’s 26 and his new record, Awake Is The New Sleep, is the best thing he’s done yet.  Somehow I think there’s even better music coming from this immensely talented guy.

The criticism of this record is that there is too much bubblegum pop. There is some truth to that, but there are enough truly great songs (Catch My Disease, Close I’ve Come, We’re All In This Together, Whatever It Is) that it got in heavy rotation in our house early this year and never came off.

#My Music

The Office

I watched all of the first season of the BBC version of The Office and part of the second season on the flight to Thailand.


How did I miss this?  Ricky Gervais is "brilliant" as he says.  The whole show is insanely funny.

But the fourth episode in the first season is beyond funny. The whole office crew attends a training session and sits around in a big circle with a trainer brought in from the outside. 

Everyone on the plane was fast asleep and it was everything I could do to keep myself from laughing outloud.

When David tells everyone he was in a rock band, "Foregone Conclusion", that used to tour with Texas, I knew I was in for some good laughs.

But when David goes and gets his guitar and starts singing "Free Love On The Free Love Freeway" with Garreth doing backing vocals, tears were coming down my face. 

Man this guy Ricky Gervais is funny.

You can get the box set of the first and second seasons from Amazon.  If you haveven’t seen this show (the BBC version), you really ought to give it a try.

#Random Posts

My "Discovery Page"

I have always started the web with MyYahoo, at least since MyYahoo was launced in the mid 90s.

I’ve got my "daily reads" there now via RSS and I still grab a fair bit of news there and of course the weather and my stocks.  So I don’t think I am going to leave MyYahoo, but there is one thing I am absolutely going to do and that is put at least one and possibly several "discovery pages" right at the top of MyYahoo and start every morning with them.

Discovery pages are web services that showcase the most interesting stuff on the web right now.  There are three and a half that I am considering.  I will describe them and then I’ll ask for suggestions of others from the readers.

First, the "half".  Memeorandum is a great service.  Currently you can choose two views, tech and politics.  I visit the tech page at least once a day and possibly many more times.  I don’t know whether to call Memeorandum a "discovery page" or not because its really very narrow and you don’t see stuff about completely random things.  The blogs it culls from are a tight set and it tends to generate "group think" which I am not a fan of when I want discovery.  So while Memorandum is a must read for me every day, I think I’ll leave it out of my "discovery page" list.

That leaves three candidates.

Delicious’ Popular Page – The grandaddy of the "discovery pages".  And a huge part of delicious’ popularity.  Though I find the stories often a bit too techy for my taste, the ability to post/copy to my delicious account is a huge plus. And filtering the popular page by tag is a great feature that they ought to make easier over time.

Digg – Along with delicious, Digg is the current favorite of the digerati.  One look at this Alexa chart shows how these two services have grown in lockstep over the past six months.  Digg has a "cleaner interface" and uses votes/diggs to determine what’s interesting to the users.  I have used Digg a lot over the past year, but haven’t completely warmed up to it and its not an every day experience for me, at least yet.

Reddit – Considered by many to be a Digg clone, Reddit is interesting to me on several levels.  First the user interface is more like delicious than digg and frankly I am used to that and prefer it.  Second it uses the votes that each user makes to build a personalized version of Reddit over time for each user. I like that idea in principal and am going to see how it works for me.

My plan is to put at least one and possibly several of these "discovery pages" at the top of MyYahoo and start my day with them.  Right now I may go with all three of these and possibly whittle it down to one or two over time.

If you have another one I should consider, please let me know in the comments and I will check it out.

#VC & Technology

Top 10 Records of 2005 - Honorable Mention

I love late 80’s/early 90’s indie rock.  Bands like Dinosaur Jr. and The Replacements who mastered the marriage of country and punk and foresaw the creation of the grunge sound will always have a very special place in my music library.

Portastatic put out a record this year that took me right back to those days called Bright Ideas.  The record is a bit uneven and would be better if a couple songs were left off, but there are only ten songs on the record as it is.

I Wanna Know Girls is one of my top 10 songs of the year.  And the rest of the record is pretty damn good.  I really wish I had seen Mac and his band this fall touring on this record.

#My Music


Emily got an email from a friend with 26 "things to do in an elevator"

One of them was:

Move your desk into the elevator and when the door opens, ask the person if they have an appointment.

That cracked me up.

#Random Posts


  Phra Mondop 
  Originally uploaded by fredwilson.

We arrived late last night, 24 hours after taking off from JFK and 36 hours later NY time.

Jet lag wasn’t too bad because we were so exhausted from the flight that we just crashed upon arrival.

We spent today exploring the Grand Palace and several Wats (temples).

I am now fascinated with the Chakri dynasty which has ruled this country since 1782 and am looking for some good books to read on modern Thailand (post Ayutthaya). If anyone has any good suggestions, please leave them in the comments section.

#Blogging On The Road