Posts from 2011

As a parent of two young adult drivers and a third soon to hit the road, nothing scares me more than texting while driving. Drinking and driving scares me too, but since that danger has been around since long before I started driving I've somehow internalized that risk a bit better.

Being an engineer at heart and by training, I've been looking for a solution to the problem. I know that the buzz of the phone and the unread/unresponded message is like a drug to many and that the best solution would be a "hands free" way to read and respond. And the bluetooth/hands free voice solution works so well on most cars and most phones now, so why can't we do the same with texting?

I've been trying out an app on my Android called Blue Control ($2 in the android store) that a friend suggested to me. I can't seem to make it work with my car's bluetooth service, but it is very possible that the problem is operator error.

So I went looking for other options. I found an app available on iPhone, Android, and Blackberry called Text'nDrive. The iPhone version only supports email right now but the Android and Blackberry version supports SMS and email. I went ahead and purchased the Pro version for $21 even though there is a free version on Android as well. Apparently the free version only reads your texts while the Pro version lets you reply as well.

I got Text'nDrive to work but not on my car's bluetooth service (even though that was the selected audio input/output device in the app). It does indeed read your incoming texts to you and tells you who they are from and then you can reply via voice. I couldn't get the reply by voice thing working right but again, it may be operator error. If I could get Text'nDrive to work with my car's bluetooth audio, then I'd work harder to figure out how to get it to do the reply thing correctly.

I'm all ears if anyone out there has found an app that does this well. "This" to me means connects seamlessly to any car's bluetooth audio service and reads your incoming texts and lets you reply with voice. That is a killer app in my opinion and it will have the added benefit of making the roads safer for us and our kids.

Mark Suster has another gem on his blog this week about negotiations and relying on intermediaries to handle them for you. Here's a VC speaking the truth about VCs (and recruiters, bankers, lawyers, and PR people). You gotta love that.

Mark says:

You have an interest in pursuing the absolute best outcome you can get. Often others have an interest in pursuing the best possible outcome they can get, without sinking in extra time, without risking ruffling feathers and without breaking conventions & norms.

Chart your own path.

Super advice. Go read it.

Sometime yesterday morning between 5am and 7am all the mail in my inbox that had come in but had not been responded to in the past ten days disappeared. It appears that it is in my archive (along with a ton of mail that came in the past ten days that I have responded to and archived). Somehow I auto archived ten days of mail in my inbox.

In any case, I am not going to go through the laborious task of fishing out all that unresponded to email out of my archive and put it back in my inbox. So if you sent me an email in the past ten days and I didn't respond, there is a good chance your mail got auto archived. I'm sorry about that. Feel free to send it again.

The good news is for about three minutes I was at inbox zero. It felt good.

Three years ago (almost to the day), I wrote a blog post titled Transitions that talked about transitions going on at our portfolio company Etsy. At the time, Etsy's founder Rob Kalin was handing over the CEO job to Maria Thomas, Chad Dickerson was coming in to run engineering, and founders Chris, Haim, and Jared were leaving the company to do other things.

And now, three years later, the actors in this transition story continue to evolve their roles. Chad—whose leadership in engineering has turned Etsy into the premier web technology company to work for in NYC—is taking the lead role as CEO from Rob, who is once again transitioning out of the day-to-day management. 

Being a founder of a highly successful company is thrilling but also a somewhat harrowing role. As the company scales, things change. Nothing happens as fast as it did when you first built the product. A minor feature rollout takes longer than it took to build the entire website. Nobody cares as much as you do about the sign on the door, the company employee directory, the brand, the copy on a marketing document, the place the checkbox is on the page, etc., etc. And yet, when there are hundreds of employees, you have to rely on all of them to do all of these things. It's a struggle for every founder I have ever worked with. And Rob is so very much that founder who cares intensely. He has given so much to the company over the years and he just completed a product roadmap that provides a guidepost for what Etsy will become in the coming years. As Rob transitions out once again, I want to personally thank him for all of this and more. Etsy is his creation and will always be.

Transitions are never easy on the people involved and the company that goes through them. But they are inevitable in any company's evolution. Some of them work out well and others not as much. But the role of the management and Board is to constantly try to have the right people in the right roles at the right time. And I think we've got that at Etsy now and I'm excited to see Chad step up to the top job and lead the company forward.

If you want to understand what's going on at Twitter right now, watch this interview that Adam Lashinsky did with Twitter CEO Dick Costolo yesterday at Brainstorm. It's about 23 minutes long and covers most of the major issues that the media has been focused on in the past six months. In Apple's infinite wisdom, this won't play on an iPad or an iPhone because it is a flash player.

Last week I posted about a service called BillGuard. BillGuard scans your credit card bills for questionable transactions so you don’t have to. It’s a great service. One of the things you do when you set up BillGuard is you connect your credit card(s) to the BillGuard web service. It’s straightforward and easy. Once you do that, the magic happens.

I did the same thing yesterday. I connected my Foursquare with my American Express card. Once you do that, when you check in at places that have Foursquare specials, you get automatic credit when you pay with American Express. Foursquare calls this “load to card“. You can do it here.

I really like the idea of syncing my credit cards with web services. I’m not so into the social value of sharing my transactions with everyone (where Blippy started), but I am very much into the personal value of leveraging my transaction history into various web services I use frequently. And I am also very into the idea of getting the benefit of offers and deals automatically credited to me via my credit card account.

I think we have just scratched the surface of what is possible when you sync up your transaction activity with other services in your life. There is great opportunity in this idea.

Today on MBA Mondays Startup Financing Options series, we are going to talk about the financing option that I specialize in – preferred stock.

Almost all venture capital firms and many angel and seed investors will require the company they are investing in to issue them preferred stock. The vast majority of equity dollars invested in startups are securitized with preferred stock. So if you are an entrepreneur, it makes sense to understand preferred stock and what it means for you and your company.

Preferred stock is a class of stock that provides certain rights, privileges, and preferences to investors. Compared to common stock, which is normally held by the founders, it is a superior security.

Preferred stock takes its name from a critical feature of preferred stock called liquidation preference. Liquidation preference means that in a sale (or liquidation) of the company, the preferred stock holders will have the option of taking their cost out or sharing in the proceeds with the founders as common stock holders. What this means is that if the value of the sale of the company is below the valuation the preferred investors paid, then they will get their money back. If the sale is for more than the valuation the preferred investors paid, then they will get the percentage of the company they own. I'm not going to go into all the reasons for this as I've done a number of times on this blog already. Suffice it to say that this is an important term for investors, including me.

There are variations of the liquidation preference that give the feature a bad name. Investors will sometimes ask for a multiple of their investment as a preference. Or investors will ask for their preference plus the common interest (called a participating preferred). Our firm is not a fan of these "enhanced preferreds" but we do sometimes get them, particularly the participating preferred, when we join a syndicate where that security already exists. One thing to know about terms around liquidation preference is whatever you agree to with one set of investors, that will be what all the future investors will want because they will not want other investors in the cap table with a preferred position to them.

There are a number of important rights and privileges that investors secure via a preferred stock purchase, including a right to a board seat, information rights, a right to participate in future rounds to protect their ownership percentage (called a pro-rata right), a right to purchase any common stock that might come onto the market (called a right of first refusal), a right to participate alongside any common stock that might get sold (called a co-sale right), and an adjustment in the purchase price to reflect sales of stock at lower prices (called an anti-dilution right). I'm not going to explain all of these in detail because Brad Feld and Jason Mendelson did an excellent series of posts on all of these provisions which I recommend highly.

Like many things in life, there are many variations of preferred stock transactions, from the relatively benign to the ridiculously painful. I've come to the conclusion that VCs should specialize in the relatively benign because entrepreneurs have long memories and the VCs who specialize in the ridiculously painful will not get to work with the best entrepreneurs and the best deals over time.

There have been a number of attempts to specify what a "standard preferred stock deal" should look like. There is the NVCA standard set of terms and docs. Fenwick and Gunderson each have a set of standard terms and docs. I believe Cooley has a set as well. I just reviewed as set from Lowenstein that looks quite good. If the preferred stock your investors want to purchase resembles these "standard preferred stock" sets, then you are probably working with an investor who is trying to be reasonable and fair.

As the AVC wise man JLM likes to say, "in life you don't get what you deserve, you get what you negotiate." When you are preparing to sell preferred stock to investors, make it a point to familiarize yourself with all the important terms, what they mean (both to you and your company), and what an "entrepreneur friendly" deal looks like. And then go get one of them for you and your company. It helps to have some leverage and leverage in financings means multiple investors at the table. So when you are dealing with sophisticated investors, make sure you have options and make sure you understand the key issues and don't settle for a bad deal.

Preferred stock doesn't have to be a bad deal for entrepreneurs. It can be a win/win for both sides. But you have to work at this part of your business just like you do at the other parts.

Brad Feld and Jason Mendelson have written a book with this title. It is now available on Amazon.

I got a preview copy and gave it a read. It's a textbook on venture capital deals. If you plan to do one of them, as an investor, advisor, or most importantly, as an entrepreneur, you should get this book and read it.

A friend of ours recently got a new job. Part of her job will be doing venture investments for her new employer. She reached out to me and said "I need a  quick primer on venture capital investments, how they are structured, negotiated, and documented." I pointed her to this book. She looked at its description and said "that's perfect."

I suspect it will be equally perfect for many people. Venture Capital transactions have been a bit of a black art for a long time. It played to the advantage of the VCs because we do these things all day long all the time. But, like a marriage, it is not good for one side to take advantage of the other. It is not like selling a house. You have to live with the other side of the transaction after the deal closes. So over the past ten years, the VC industry has done much to increase transparency and trust with entrepreneurs. I'm proud to have played a part in that. Brad and Jason have done a huge amount of work in this area as well and their new book is going to be required reading for many. Well done.

Kevin Cheng (aka @k), product manager at Twitter and an all around smart guy wrote a great blog post called Can We Ever Digitally Organize Our Friends?. I've been thinking many of the same things that Kevin wrote about since I started to use Google+ a few weeks ago and Kevin's post is a good opportunity to riff on the same ideas. But first, a bit of humor courtesy of someecards:

With that out of the way, here's my thinking on grouping things. I don't like to be that organized personally. I don't file stuff away very well. I never liked folders in outlook. I use a few labels in gmail (about 20) but I label less than one out of every 100 emails I get. I've created two twitter lists (one automatically). I follow two twitter lists. I belong to one or two google groups. I belong to less than ten Facebook groups. I am sure that there are many people out there who are different, who love to organize, file, group, and structure their lives and work. But I'm not one of them.

So when faced with the chore of taking all my friends and colleagues and dropping them in buckets (or circles as it were), I tired of that chore quickly. I stopped at about 20 people. And I am not eager to go back. It is not fun. It is work.

I did create two groups that I think are particularly valuable; my family and our firm. These groups are well defined, they are finite, and they don't change very much. I can see sharing things with these groups in Google+ and I'm happy to have that resource at my finger tips.

But past that it becomes muddy. How about a portfolio company group? Good idea. Except that our portfolio changes a fair bit. We add six to ten companies a year. And these companies add and occasionally drop team members frequently. Am I going to maintain a list of all the people in all of our portfolio companies? No, I am not going to do that.

How about the people I share music and music interests with? That's a passion of mine. But I'm finding new people all the time. I met Tyrone Rubin in a room on Turntable a few weeks ago. I started following him on Tumblr right away. I could have added him to a music circle on Google+ too. But I didn't. If he had an "add me to your music group on Google+" on his Tumblr, I might have clicked on that. But short of that, it becomes too much for me to do such a thing.

The point I am trying to make, which Kevin makes so well in his post, is that friends and interests are not so finite and fixed. They come and go. They are highly fluid and dynamic. And as such, there are very few groups that I want to build explcitly. Family yes. USV colleagues yet. Anything else, no thanks.

This is an oppportunity to use machines. And Google is doing this with Google+. The recommendations on who to add to what circles are amazing. So why make me do the drag and drop thing other than it is fun and cool to do that on a computer? If Google+ knows who my music friends are then just suggest "music friends" when I hit the share button and send it on. Do I care if it goes to a few people who aren't actually my music friends? No I do not. Do I care if a few of my music friends don't get it? Yes, but then I can add them explicitly. I trust Google to do a fine job of this for me. They've proven themselves worthy of the job so many times in my relationship with them over the years. I trust that they can build algorithms like this as well or better than any other company out there.

There's an iPhone app called Katango that apparently does this for Facebook friends. I don't have an iPhone so I have not tried it out. But I hear it is pretty amazing. That's an example of computers doing the work for you so you don't have to do it. That's what I think we should be doing in terms of creating more granularity in our social graphs. I don't want to put my friends into circles. I want a machine to do it for me.