Posts from June 2008

I saw the news that TechCrunch launched a service called Elevator Pitches yesterday. The "elevator pitch" is supposedly a short quick pitch that you could deliver in an elevator. My partner Brad claims that the first time he met Dave Morgan, founder of TACODA and Real Media, it was in the mid 90s in an elevator in a hotel and that Dave had to follow Brad into breakfast in order to finish the pitch. But I digress.

Bambi Francisco also has started a company focusing on elevator pitches, called vator.tv. Here’s a vator.tv episode where our portfolio company, Disqus, pitches. As you can see, Daniel has mastered the speed and brevity of the elevator pitch.

A good elevator pitch is incredibly useful to a venture investor. It gives us the opportunity to see how well an entrepreneur can pitch his or her idea in person. It’s one thing to put something down on paper, but another thing entirely to present it face to face.

Just this week, in our "monday meeting", Andrew said that in evaluating a new opportunity that had come in, he was able to see the entrepreneur in a short web video and that he found that very useful.

So here is my suggestion to Mike and Erick and the TechCrunch team. Merge Elevator Pitches with CrunchBase. We are already using CrunchBase as our primary source of company information. Most opportunities that come in to our firm have a CrunchBase entry. If they also had a short elevator pitch, then we probably wouldn’t even need to see an executive summary.

Say what you will about Mike’s style of journalism, he’s building a very interesting set of assets at TechCrunch.

The WSJ has a story today about the Washington Post’s struggles with its effort to build a local internet property called LoudonExtra.com.

I have been interested in "hyperlocal" for years and have blogged about this topic quite a bit. From day one, I’ve been convinced that hyperlocal must be "peer produced". That means we together will document what is going on in our streets, our schools, our churches, our parks, and our communities. No "newsroom centric" model is going to work. That’s how I see it.

And that’s why the one "local" investment we’ve made to date, outside.in, is about aggregation of hyperlocal content, not the creation of hyperlocal content. Outside.in creates an "on the fly" local newspaper for any zip code or neighborhood (currently only in the US).

The outside.in model is difficult too. For many places, there just isn’t enough "peer produced" content yet. But if my vision for social media is correct, there will be. In time. How much time? I don’t know.

Outside.in’s CEO, Mark Josephson, also blogged about the WSJ story today. His take:

We are huge fans of the incredible group of individuals blogging about
their local communities. The quantity and quality of these hyperlocal
bloggers is exploding, and their ability to cover more news and
information at the hyperlocal level far outweighs that of a
hand-picked, full-time “traditional” editorial team. We are tracking
more than 140 discrete hyperlocal content sources in Chicago alone, for
example. (Great examples of hyperlocal news coverage are here and here.)

This local media revolution isn’t going to happen quickly. Which makes an investment in the sector tough. But we are convinced that it will happen and are betting on outside.in to be an important part of the solution.

Yes, I am sure they do when it comes to war and certainly there are many aspects of business where confidentiality is important.

But in a post on the Union Square Ventures weblog, my partner Brad notes that there is a high correlation between how open an entrepreneur is with the market and how successful they are.

Brad says:

I noticed that, at least anecdotally, there was a correlation between
how open entrepreneurs were with us and their ultimate success. Simply
put the entrepreneurs who are aggressively open in describing their
plans seem to do better than the ones who are cagey. There is
absolutely no data underneath this observation. It is just my sense
after meeting hundreds of entrepreneurs over 15 years as a VC.

and he goes on to suggest that:

an entrepreneur should be open with everyone, and that they will get
the most value out of being open with the people who are most
knowledgeable about the particular problem they are trying to solve.
The people most knowledgeable about a problem are also the ones best
positioned to compete with the entrepreneur, so the entrepreneur has
more to gain and more to lose by being open with these people. From one
perspective, the risks and rewards of being open are perfectly
balanced. Every insight comes at the cost of another potential
competitor, but that calculus leaves out the whole problem of
execution. If an entrepreneur is incrementally more prepared to execute
on an idea that the person they are sharing it with, they should still
gain even if they engage in an open (and equal) exchange with a
potential competitor.

I think that last point is the clincher. "If an entrepreneur is incrementally more prepared (should it be equipped?) to execute on an idea" then they should be as open as possible. It’s an interesting suggestion and worthy of debate. Which is exactly what is going on in the comments to Brad’s post on the USV blog.

technology has proved a rewarding field for American Research and Development and is particularly well suited to creative capital investing

From Doriot’s "Creative Capital" speech in Chicago in March 1961 (five months before I was born)

One of Doriot’s great contributions to the practice of venture capital was showing which kinds of companies were well suited to it and which were not. When ARD got started, they invested in stuff like tuna fishing and oil exploration. When the ARD employees left to start their own firms in the mid 60s (most notably Greylock), they were pretty much focused on technology oriented businesses because they’d learned this lesson that Doriot lays out in this quote.

Yesterday I saw this tweet from JD Lasica:

1st Twitter wine review: I love the Rivola Estate Grown Sardon de Duero
2004 "Abadia Retuerta" (Spain), $16. Supple, tangy, big and complex.

I thought, "ooh, that would make a great twitter group bot." And so I replied with this:

  @jdlasica we have to create winetweets when you have a great wine you send to @winetweets. You in?

Not only did JD think it was a good idea, so did a bunch of others including Alex Iskold and Rick Stratton.

And over the course of the day yesterday, winetweets became real (thanks largely to Rick’s efforts). Here’s how it works.

1) join twitter
2) go to winetweets and hit the follow button (if you want the updates on your phone select device updates)
3) whenever you have a great wine, just send a twitter message that looks like this

@winetweets chateau ducru beaucaillou 1978 has still got it. Not for much longer though

That was my winetweet from last night. That message will get posted to winetweets and sent to everyone who is following.

For those that are into advanced winetweeting, here are two additional twists.

1) include a link to the wine where you can get more info and/or buy online

2) put a hashtag (#) in front of the varietal

So, this would be the advanced form of a winetweet:

@winetweets Paolo Bea #sagrantino di montefalco  2003 Secco is a fabulous  big complex red wine http://tinyurl.com/4jrhr6

So that’s it. We’ve already got 25 people following winetweets and we’ve got 15 updates so far. If you are a wine and twitter lover, please join in the fun.

The Times is so right about this.

A nation of immigrants is holding another nation of immigrants in
bondage, exploiting its labor while ignoring its suffering, condemning
its lawlessness while sealing off a path to living lawfully. The
evidence is all around that something pragmatic and welcoming at the
American core has been eclipsed, or is slipping away.

Our troubles have principally been human ones. People who seemingly showed good potential and who even proved excellent in being able to start something but then do not make the grade later on. But, like a child in school, you don’t – you can’t – let him down just because he flunks in one grade or class. You continue to hope.

Georges Doriot, speaking to ARD shareholders at the 1959 annual shareholders meeting

In this regard, nothing has changed in fifty years of venture capital investing. The more things change, the more they stay the same.

I’ve come to the conclusion that the best conferences are small emerging events that focus intensely on a specific market sector. Of course, you have to be interested in that market sector.

One such event is happening next week in Washington DC. It’s called Graphing Social Patterns and it’s an O’Reilly event focused on:

developers and marketers building and distributing apps for MySpace, Facebook, OpenSocial and other social networking platforms

It’s on June 9th to 11th in Crystal City (right next to Reagan National Airport). I hope to be there for at least one day of the conference. If you are on the east coast and are working in this sector, this one’s probably worth attending.

Thanks to Digital Equipment’s blockbuster IPO, ARD met Doriot’s goal of generating superior performance by producing a 17 percent rate of return during its twenty-one year history, a significantly better return than the 13 percent average of the Dow Jones index during the same period.

This is not a Doriot quote either. In fact, it’s not a quote at all. Spencer Ante wrote this. The reason I posted this is that I think the expectations for venture capital have been skewed by several periods of strong returns (the late 90s in particular). Over the long haul, I think VC should produce high teens/low 20s returns after fees and carry. The 17 percent number that ARD delivered seems about right. You have to remember that 17 percent over twenty-one years is 23x the initial capital invested.