Posts from February 2007

Adaptive Glue

That’s my nickname for our most recent investment, Adaptive Blue.

Adaptive_blue

Brad explains on the Union Square Ventures website/blog why we made this investment and the vision that we expect that Alex Iskold and his team will deliver on in the year ahead.

I’ve had the Blue Menu/Blue Organizer Firefox extension for at least three months now and not a day goes by that I don’t right click on a webpage and watch Blue Menu work its semantic magic to connect me to what I want to do.

My favorite trick is when I am in last.fm listening to neighbor radio and I hear an artist I like, I click through to the artist page and then right click, popup Blue Menu, and navigate to YouTube videos for that artist. This is what it looks like:

Blue_menu

That’s why I call it Adaptive Glue. It’s semantic glue for the web. And we (Alex and the investors) have a lot of ideas how this technology can be taken way beyond a browser extension and into the mainstream.

This may be the first time you are hearing about Adaptive Glue on this blog. But it certainly won’t be the last.

Proud Papa (continued)


  Jessica At Snowmass 
  Originally uploaded by fredwilson.

I took about thirty photos of Jessica and her friend Len in the terrain park at Snowmass this past weekend but none came out as well as the one the mountain photgrapher took.

I guess there’s a reason that he’s a professional photographer and I am not.

Ever since I was a kid, I’ve loved getting air on the mountain.

I’ve tried hard to pass that joy on to my kids and I am so pleased to see that Jessica enjoys catching air as much as I do.

Patience


  waiting-for-the-fields 
  Originally uploaded by lyrical.

Exits come in all shapes and sizes in the venture capital business. There’s lots of focus these days on the quick flip which isn’t usually the preferred route for the venture capitalist, but you can’t complain too much when you make three, five, seven, or even ten times your money in a year or two. And of course there’s the YouTube quick flip which anyone would be ecstatic to have in their portfolio.

But one thing I’ve learned about the venture capital business is that if you are patient and stick with your best companies for the long haul (and it can be a very long haul), you are often rewarded with some great exits.

I am on the board of four companies that were started in the mid to late 90s and I have a significant investment in one other. All of them are Flatiron Partners portfolio companies. We have had our capital invested in these businesses for seven or eight years now. And we’ve had our time invested in most of these investments as well. The time and money are significant and finance theory teaches you that time works against you when you are in the rate of return business.

But I am always a bit mystified by the focus on rate of return as the measure of performance in the venture capital business. It’s not like you can turn around and invest your money at that rate of return so easily. So if your capital is tied up in a company that is building significant value for its shareholders, it’s often best to let it stay there.

I am much more fond of the return multiple and also total gain numbers as a measure of performance. Time doesn’t work against these numbers. In my experience, times works for you when you are in the return multiple business.

The key thing about patience is that you have to see that value is being created to be patient. It’s not always a quantitative exercise either. It often takes a company five years or more to start producing positive cash flow and it certainly takes time to produce the large high growth operating margins that produce the big valuations upon exit. So in the meantime, you have to have other proxies for value creation.

The most common proxies we use in the venture business are customer adoption, revenue ramp, the development of a strong team, the emergence of a strong brand, the creation of a robust and scalable technology platform, and strategic partnerships with other important companies in the target market.

But even if you achieve all of these, there are other things that will impact how patient the management team and investor group will be. Does the company have a strong supportive and constructive board? If it does, it’s often easier to be patient. Does the management team have the desire to slog it out for close to ten years? That’s not common and getting less so.

I attended two ten year anniversary parties in the past six months. Both were for companies that I was a lead investor in from Flatiron Partners. It’s something special to see a company last that long as an independent entity. Both of these companies are thriving and I suspect the next ten years will be even better for them than the first ten years.

We have a company in the Flatiron portfolio that is looking at a financial transaction in which stock would be sold at 15x the price we paid in 1999. That’s a 40% annual rate of return, which is good, but not fantastic by VC standards. But 15x is a great number on a deal no matter how long (within reason) it takes to get there. I’d happily wait 10 years to get 15x.

It’s hard to be patient. You can’t pay a mortgage or the kid’s college tuition with your private company stock. It’s even harder on the founders and management. At least VCs have a portfolio which makes it easier to be patient. But I have found that patience is often rewarded handsomely in the venture business. This is and always will be an asset class that requires a long term horizon. The quick flips we get in markets like the one we are in don’t change that fact at all.

Cool Video

I got this one from yesterday’s VSL. To quote from them:

we love the music video for their latest single, “Open Your Eyes.”


It’s actually one half of the cult 1976 short film
C’était un rendez-vous, in which the viewer’s P.O.V. is that of a
driver racing through Paris at dawn, recklessly running red lights and
generally cruising through the streets (sometimes the wrong way down
one-ways) without ever once stopping
— except at the very end. Legend has it that director Claude Lelouch (
A Man and a Woman),
who licensed the film to Snow Patrol, shot it in one take without
getting a permit, and was arrested after its first screening.


Set to Snow Patrol’s pensive, anthemic music, it’s exhilarating, eerie, dreamlike.

This Blog Is AnswerTips Enabled

With the dustup over Snap Preview fresh in my mind, I have taken the step of adding more popup bling to this blog.

Answertips

The new bling is called AnswerTips and comes from Answers.com, a former portfolio company of ours at Flatiron Partners. AnswerTips has been part of the company’s bag of tricks since before we invested in them (called Gurunet at the time) back in early 2000. You double click on any word that you don’t understand, and you get a popup that explains what that word means. Try double clicking on Arcade Fire in the previous post (or this one). You get a nice summary of the band, the band members, and their discography.

Probably the best thing about AnswerTips is that you won’t get a popup unless you really want one. Mousing over a the word doesn’t do anything. But the challenge with this model is that the only people who will know that this blog is AnswerTips enabled will be those of you who read this post.

I’ve added an AnswerTips logo on my right sidebar, but I doubt that’s going to mean much to anyone.

In any case, I like the feature. It’s non-obtrusive. And for those who know about it, I think it adds some nice functionality. I hope you agree.

Impromptu Street Gigs

I showed my friend Cliff this video of the Arcade Fire doing an impromptu gig at the Union Square subway station in NYC this morning.

And he returned the favor by showing me this video of Bruce Springsteen doing an impromptu street gig in Copenhagen when he joined a street musician in a rendition of The River.

Say what you will about YouTube, I love it way more than TV because of things like this.

Cool Photo

Fred_in_joshs_sunglasses

That’s me in Josh’s sunglasses taking the picture of him.

The Wii Rocks


  Josh Boxing On The wii 
  Originally uploaded by fredwilson.

Josh has been after us to get a Wii in our house. We thought about it for his birthday but couldn’t find it in stock anywhere, so we went in another direction.

We got to The Ghetto Ranch, my friend Mark’s place in Aspen, late Friday night and the first thing Josh sees is an unopened Wii. He begged me to open it. We held off until we got Mark’s permission. Which came yesterday morning.

So we set it up in the home theater in the basement and Josh was boxing in front of the drop down screen within minutes. It was a breeze to set up and works great.

And the thing about the Wii that is so amazing is the aerobic workout you get when you play with it, particularly boxing and tennis. You sweat when you play this thing.

So we are going to get rid of the Xbox360 or the Playstation2 and get a Wii. A game console that gets you off the couch and working out rocks!

Google Spam Filter?

I’ve never seen this before. I did a search on the word "triumverate" and got this.

Google_spyware

We Were Dead Before the Ship Even Sank

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Indie rock may not be the juggernaut that "classic rock" was in the 70s when I was growing up. The Stones, The Who, Led Zepplin, they have no match in today’s music scene.

But that doesn’t mean there aren’t great bands putting out great records. The Arcade Fire, The Shins, The Decemberists, The Flaming Lips, Wilco, and Modest Mouse are to me now what those bands were then. And thankfully we’ve got new records from a bunch of these bands this spring.

I’ve already posted about Neon Bible from Arcade Fire and Wincing The Night Away from The Shins. The third record in that triumverate is We Were Dead Before the Ship Even Sank by Modest Mouse, available for pre-order on Amazon. I got an advance copy yesterday and it took me less than a nanosecond to put it on and give it a listen.

I’d heard a bunch of the songs at the live show at Webster I saw last November. This record is classic Modest Mouse, but it sounds a bit different than the prior two (Antartica and Good News). The addition of Johnny Marr (formerly of The Smiths) does bring a new guitar sound to the record and I like it.

The record has apparently leaked and there are a bunch of the new songs on The Hypemachine. And you can hear the new single Dashboard on Modest Mouse’s MySpace page or their official website.

But this wouldn’t be a music post without some music on it. So here’s my favorite track on the record, called Fire It Up.

Fire It Up – Modest Mouse