Posts from March 2011

Board or No Board?

Matt Blumberg, founder and CEO of our portfolio company Return Path makes a compelling argument for getting a Board of Directors together for your company regardless of whether you take outside capital (and thus are required to do so). Matt says:

Boards create an atmosphere of accountability for an organization, which drives performance (and many other positive qualities) from the top down in a business.  Budgeting and planning, reporting on performance, organizing and articulating thoughts and strategy – all these things are crisper when there’s someone to whom a CEO is answering.

I agree with Matt with two big "ifs." The first is if the Board is made up of strong individuals who understand that a Board's role is oversight, not day to day management. There is nothing worse than a Board which meddles. Matt's Board, which I have had the pleasure of serving on for a decade now, is among the best I've ever served on. And so Matt's perspective is based on that assumption.

The second "if" relates to who controls the company. If you control the company and cannot be fired, then your Board doesn't have the thing that ultimately creates the accountability that Matt talks about. Boards that are just rubber stamps are worthless. And there are many out there. I won't serve on one and I would not recommend having one.

#VC & Technology

It's Ultimately About The Team

There's a culture of celebrity around founders in the tech business and certainly the Twitter founders are no exception. @jack, @ev, and @biz are celebrities and deservedly so. But you can't build a company all by yourself, or even as a trio. And Twitter has a relatively unsung near founder in @goldman who contributed so much to the company over the years.

At the end of the day, it takes a lot more than four people to build a company. And Ev's post today about Twitter says it so well. So I'll end with his eloquent comments about the team that built Twitter into what it is today:

Founders, in general, get an out-sized share of the credit for any successful company. There are hundreds of people at Twitter now, some of whom have been there for years and played critical roles. There are those whom you know by name and others you may never have heard of individually, but they have all contributed to the company’s success. I'd venture to say it's one of the finest teams ever assembled in the Internet industry, and it’s the accomplishment of which I’m most proud. Not just because they are people who are good at their jobs, but because they're good people.

When I was running the company, I felt very privileged that this amazing group had granted me leadership. (It practically brought me to tears on multiple occasions, during our all-hand's meetings, when someone demonstrated their unique and heartfelt awesomeness.) It was they who collectively helped Twitter mature from a quirky, wobbly toddler of a service with great potential but way too much attention for it's own good to an operation that is becoming—if not already has become in some areas—world class. And it is they who will take it to the next level, which will surprise us all.


Lockers vs Streaming Services

I'm on vacation so I'll keep this short.

I don't get the idea of music locker services like the one Amazon just announced. If I'm going to stream music from the cloud, why should I continue to buy files and collect them? I've been a Rhapsody subscriber for something like 11 or 12 years and although it has taken a while to get used to, I vastly prefer subscription streaming services over file based music. I've just stared using rdio on my Android and on the web and I love it too. I've used Spotify and it is also excellent (once it is fully licensed in the US).

Locker services seem like they are designed to continue the physical model of collecting music and buying music when there is a new and better way – just subscribe to music dial tone and listen to whatever you want wherever you want.

I'm bearish on locker services and bullish on subscription streaming services.

#My Music#Web/Tech

No MBA Mondays Today

I've spent the past two days in airports and on airplanes. I was hoping to write my MBA Mondays post for today on the flight yesterday. But there was no wifi or power. I punted and watched VCU beat Kansas (yay) and Kentucky hold on and beat UNC.

I had the same plan today. Had power but not wifi on our flight to Mexico this morning. As we were bouncing around in a storm over the gulf, a distinct odor of electrical burning enveloped the cabin. The flight attendants made a manic attempt to find the cause of the odor, while the pilot made a quick decision to turn left and land in Tampa. The good news is we landed safe and sound. But we are stranded in Tampa until this evening.

I could write the MBA Mondays now, but I'm frankly not in the mood. I'll hang with the kids, play some cards, and hopefully board a plane this evening to Mexico.

So I'll finish the series on M&A Issues next monday.

#MBA Mondays


We largely invest in consumer web services with a large number of engaged users where the users create the content. Services like this can become messy and hard to navigate. There is always a signal to noise issue.

I'm a big fan of curation in these services. Twitter has lists. Etsy has favorites. Tumblr has tag pages. These are all variations of curation in services that have a lot of noise in them.

Recently Kickstarter launched their own version of curation called Curated Pages. In the Kickstarter model, "Curated Pages are a way for organizations, institutions, and (soon) individuals to share projects they love on Kickstarter."

Here are some of my favorite Curated Pages:

The Magnum Foundation Emergency Fund – The Magnum Foundation Emergency Fund provides grants to photographers who are documenting social and political issues around the world. Now with Kickstarter, we can all help fund these important projects.

NYU's ITP Program – NYC's "media lab" and one of the most impactful and important pieces of NYC's tech community. They've curated a page of projects they like.

Creative Commons – The Creative Commons organization evangelizes for technology and legal frameworks that facilitate sharing and creativity.

The Sundance Institute – A curated page promoting Kickstarter projects from Sundance supported artists.

You can find all of the current curated pages at the bottom of the Kickstarter home page.

If you are interested in curating a page on Kickstarter, this feature will be made available to everyone soon.

If you are building a marketplace or a social platform, make sure to build curation into your model. It will make the service easier for everyone to navigate, particularly new users.


Investing In Competing Companies

Bijan has a really good blog post up today about Spark's approach to investing in competing companies (they don't). He says:

I’m quite sure that we will miss a few important investments and i’m sure we could be more aggressive with and flirt with the gray line that we are trying figure out every day.

Our firm takes an almost identical approach to Spark on this topic. Back in early 2007, I wrote a blog post at on this topic. After reading Bijan's post, I went back and re-read my blog post. I wouldn't change a word four years later. Which feels really good to me.

I believe that VC is a service business and our customer is the entrepreneur. Our shareholders are the limited partners who allow us to invest their capital. And I believe that in order to service the entrepreneurs we work with to our fullest, we cannot and should not have competing investments.

I know that there are VC firms out there that don't share this view. And I am sure they have found a way to make it work for them and the companies they invest in. But we haven't and I am sure we never will.

#VC & Technology

Spring Startup Fever

I said earlier this week that in addition to spring fever in NYC, we have startup fever. There is so much good stuff happening in NYC right now.

I'm not talking about fundings and such. The financial markets come and go. Boom today bust tomorrow.

I'm talking about building a foundation that will allow the tech sector in NYC to survive these booms and busts and thrive for the long term. The foundation comes from great programs like Techstars, InSITE, HackNY, PairUp, Founder Labs, etc, etc.

Today I'd like to talk about a couple more great programs happening in NYC this spring and summer.

Last summer, SeedStart ran an accelerator program in NYC that produced a number of interesting startups. This summer, they are doing another program but it will be focused on emerging media companies. The program is called SeedStart Media and has big media companies like AOL, Hearst, News Corp, MTV, NY Times, Time Warner, and a bunch more involved as corporate partners. Here are some details from their website:

We are inviting technology companies willing to spend the summer in New York City that are concentrating on [the media industry] to apply to SeedStart. The program will give up to 10 companies $20,000, office space, and time in exchange for a small piece of equity (5%). At the end of the 12 weeks, SeedStart features an investor day where companies will have the opportunity to present to seed and early stage investors as well as potential partners and customers.


Info session: March 29th at 7pm, 160 Varick St. 12th floor, New York, NY.

All mentors, participating corporations, & SeedStart Media applicants are invited to attend.

Please RSVP at [email protected]

Another big problem we have in NYC tech is funneling top college graduates into the startup sector. Very few tech companies have the size and scale to run proper college recruiting programs. So the sector needs to cooperate and form recruiting efforts together. One such event is happening soon.

The second annual NYC Startup Job Fair is happening at AOL's headquarters on Friday April 8th. It will be engineers only from 1pm to 2:30pm and then everyone from 2:30pm to 5pm. We have encouraged our portfolio companies to attend and I am certain that some of them will. The list of participating companies (as of now) is here. If you are graduating from college or grad school this spring and want to join a startup, you should seriously consider showing up at AOL on Friday April 8th.

These are just two of the many great programs going on in NYC right now. We are building a fantastic ecosystem and I am so excited to see this happening.

#NYC#VC & Technology

The Implicit Social Graph

John Battelle wrote a gushing post about Color and what it means for mobile/social/local/realtime, augmented reality, and more. There are most certainly some big ideas in the Color app. I've never put a mobile photo app on my phone but I put Color on it last night. I don't have any of my family  on Color yet, but I hope to get them all on it today (I'm on spring break with my family and some of our kids' friends). Then we'll see what all the buzz is about.

Regular vistors to AVC know that I am in the "many social graphs" camp and most certainly not in the "one graph to rule them all" camp. I believe we will have at least dozens of social graphs in our lives. But even more, I believe that we will have social graphs that come and go and that are formed implicitly not explicitly.

My first experience with this sort of implicit social graph came almost six years ago via my musical neighbors graph at I don't think I actually know any of these people in real life, but they are the users who have the closest taste to mine in music, right now. That right now is important because my musical neighbors graph looked differently last year and will look differently next year. uses my listening history to create an implicit social graph in real time. Color uses my location to do the same for photo sharing. There are a bunch of social news discovery services out there that use my current reading history to determine a "news/interest graph" implicitly in real time.

This is the next frontier in social networking for a bunch of reasons. First, curating social graphs is a pain. It takes work. And simply importing your Facebook or Twitter graph is suboptimal for most social services. You then need to add and delete to get the right graph for the right app. And second graphs change over time. Who has time to constantly manage their social graphs. So they get stale and one day you say "why I am following this person?" or "why is this person a friend on Facebook?" And maybe most imporantly, sometimes you only want a social graph for a weekend, a day, an hour, or a minute. The only way to make that work is to construct it implicitly.

So I don't know if Color will turn out to be a big deal or not. I don't care that they raised $41mm. Seems like most anyone can do that these days. But I do care that they are pushing the envelope in social graph construction in an important direction. That's why Color is on my phone this morning and why I'm going to get my wife and my kids and their friends on it today and see what happens.


A Challenge To Startup Lawyers

We closed an investment recently. It was a seed round. Our firm priced the round and we were joined by a number of small VCs and a few well known angels. We agreed to close on a standard set of "light preferred" documents without negotiation. There was no investor counsel on the transaction. We just signed the standard documents which were tweaked to reflect the round size, share price, and board provision in the term sheet.

The legal fees for this transaction were $17,000. I talked this over with the entrepreneur and we agreed to pay the legal bill. We are both big fans of the law firm involved and felt they earned their fees on this transaction.

But I've been thinking about this situation over the past week and I'd like to issue a challenge to startup lawyers. When you have a seed stage company that needs to incorporate and close a seed round where all parties are willing to close on a set of standard docs without negotiation and where the investors agree to go without counsel, I think the legal fees for such a transaction should be $5000 or less. I just don't see why it should cost more than that.

The complaint used to be that VCs would negotiate everything and then whatever the VCs didn't negotiate, their counsel would negotiate. Well our firm and many other firms who invest at the seed stage have taken that criticism to heart. We don't behave that way these days and many of the firms we invest with don't either. But the fees have not really come down dramatically like I had hoped they would.

What more do we need to do to get to a $5000 legal fee for an incorporation and seed round?

When an entrepreneur gets a $500k or $750k or even $1mm seed round every dollar counts. And $15k, $20k, $25k of legal fees hurts. That's one less developer working for three months. Think about what a developer can build in three months.

I'm not talking about follow-on rounds where things get more complicated and round sizes go up. I'm talking about the first money a company gets when the company needs to incorporate, set up a bank account, and get real. I'd like to see $5000 of transaction costs. What do we need to do to get there?

#VC & Technology

Founder Labs NYC

One of the best things to happen to startupland in the past five years is the emergence of the startup accelerator. Programs like Y Combinator, Techstars, and many others have made the difficult phase of going from a founding team and an idea to a real business and funding just a little bit easier. But the period before you get into a startup accelerator is also very hard and there are less support systems.

Two of my favorite pre-accelerator programs are Startup Weekend and Founder Labs. In these programs you can show up with an idea, without a team, a plan, and much of anything else. They help you put a team together, develop the idea, and get going. Startup Weekend does it in a weekend. Their approach is to "share ideas, form teams, build products, and launch startups in 54 hours." Founder Labs does it over 5.5 weeks, nights and weekends. Their approach is "keep your job for now, build a team and launch a prototype." If you have an idea but not much else and need help, these programs are for you.

Startup Weekends happen all the time all over the world. They are doing one in NYC on April 15-17th.

Founder Labs are longer and more of a committment for everyone involed. They are focused on building mobile based businesses and diverse founding teams (men and women). Founder Labs was started by Women 2.0. To date the only Founders Labs have taken place in San Francsico.

I'm excited to say that Founder Labs is coming to NYC this spring. It will happen from May 21st to June 29th. Applications are due by April 20th. You can apply here.

The Gotham Gal and I have been helping the Founder Labs team come to NYC. We've helped to get the sponsors together, get the space nailed down, and get a great group of mentors. But most of the work has been done by Shaherose Charania and Baat Enosh, who are the creators and operators of Founder Labs.

There is a lot coming together in NYC right now. We've got startup fever in addition to spring fever. And Founder Labs is a great addition to the landscape. If you are an entrepreneur with an idea for a mobile application/business and need some help developing it, you should really consider Founder Labs.

#NYC#VC & Technology#Web/Tech