Posts from June 2013

On Corporate VCs

Every once in a while I display some emotion publicly that I regret. That happened last Thursday night on the subject of coporate venture capital.

I have written here before on the subject of corporate venture capital. I am not a fan of it.

But I do feel compelled to be more precise than I was last thursday.

There are two kinds of corporate investments in startups; passive corporate VC arms and active strategic investments.

The former is made by well established investment groups like Google Ventures, Intel Ventures, SAP Ventures, Comcast Ventures, and many many more. For the most part, they don't "suck". They can be a good source of capital for your company, they can be supportive investors who follow on when the rest of the syndicate does, and they generally have good reputations, including with me.

The latter is when a company sees a business they want to get closer to, they take a big stake, a board seat, and they make a ton of promises about how much they are going to help the company. These type of investments and relationships have almost universally "sucked" for our portfolio companies. The corporate strategic investor's objectives are generally at odds with the objectives of the entrepreneur, the company, and the financial investors. I strongly advise against entering into these kinds of relationships.

I apologize to all of the corporate venture firms that I insulted on Thursday night. I've got a lot of scars, deep and painful, on this topic and I let that come out in a way that was not right. I'm sorry about that.

Decoupling Advisory From Custody

I had coffee with a friend last week. He's been working on wall street for most of his career. Over the past few years he has built a fast growing business inside a large asset management firm that allows the largest institutions (pension funds, endowments, insurance companies) to invest with the leading hedge funds without giving them custody. Instead of wiring funds to the hedge fund, they keep custody of their capital and the hedge fund makes the trades for them. This arrangement is both less expensive and more attractive to the large institutions. If another financial crisis hits and the gates come down on the hedge funds again, that will not impact these large institutions because they have custody of their capital and securities and can liquidate the securities themsleves if they want.

This is identical in many ways to the way our portfolio company Covestor operates in the retail side of wall street. We have had a Covestor account for something like three or four years now. I select model managers on Covestor to trade our account but all of our cash and securities are at an online brokerage account that I control and can trade in any time I want. When I "unsubscribe" from a model manager, Covestor automatically liquidates all the securities bought for us by that model manager. If I just want out of the whole thing, I could sell all the securities myself. The only publicly traded securities that the Gotham Gal and I own outside of securities that have come from our venture capital investments are in our Covestor account.We don't have the time to trade stocks for ourselves and we don't want to give custody of our money and securities to anyone else.

Both of these companies are taking advantage of a trend that we are seeing in the world of finance and that is the decoupling of custody and advisory. As I have said many times, money is just "bits on a wire" and the wires are starting to connect all over the place. Many banks and brokerage firms are putting in place APIs, including read/write APIs in some cases, that allow money to move and securities to be traded by third parties who don't actually have custody of the account.

I think we will see this play out all over the world of finance in the next ten to twenty years. It was with this in mind that I suggested last thursday night that the venture capital business will not look like it does now in 25 years. I think the idea of a 10 year fund where the VCs have custody of the LPs' capital and make all the decisions is not going to be the norm. Companies like our portfolio company CircleUp and AngelList are building important new platforms and paving the way with regulators to allow the same kind of thing that is happening in the stock market to happen in the venture capital market. And that's a good thing. Change is good, even in my own business.

Withings Scale

As I've gotten into my 50s, something has occurred that has never been an issue for me, I've put on some weight. Nothing earth shattering but enough to get me focused on my weight for the first time ever.

So in the spirit of "you can't manage what you can't measure", I decided to get a scale. And because my friend Naveen is such a fan of the Withings scale, I went for that.

The Withings scale is a thing of beauty. It is sleek and looks great in my closet.

Withings_scale2
The scale measures your weight, body fat %, pulse rate, temperature, and CO2 levels in your home.

It connects to the wifi in your home and communicates with the Withings app on your iPhone and Android. You never have to connect anything to anything. The data flows over the air from scale to phone. The app provides a timeline of your key stats and gives you goal settings for them.

It's geek and chic at the same time. I'm into it and thought that some of you might be as well. Like most things, it is available at Amazon.

What Is Strategy?

My post on Product>Strategy>Business Model got a lot of comments and other reactions out there on the social web and from that I realized that many confuse strategy and tactics. And so I thought I would attempt to define strategy in business.

I like this definition that I got at wikipedia:

Strategic management is a level of managerial activity below setting goals and above tactics.

Strategy takes what you want to achieve and develops a plan to get there. From strategy you can develop tactics and implement them.

For me, strategy is as much about what you are not going to do as what you are going to do. Also from wikipedia:

Strategy is important because the resources available to achieve these goals are usually limited.

Strategy also involves how you are going to differentiate from competitors. Competitors are a given in business. How you compete with them will define the business. I like this framework a lot:

The basis of competition

Companies derive competitive advantage from how an organization produces its products, how it acts within a market relative to its competitors, or other aspects of the business. Specific approaches may include:

  • Differentiation, in which products compete by offering a unique combination of features.
  • Cost, in which products compete to offer an acceptable list of features at the lowest possible cost.
  • Segmentation, in which products are tailored for the unique needs of a specific market, instead of trying to serve all consumers.

Strategic thinking can be seen in other disciplines outside of business. Two areas I have studied carefully are sports and the military. Winning teams and winning armies have often won because they have out strategized the losing team. You can see that in the Revolutionary War when Washington was outmanned and outgunned. And yet his strategic moves put the British on the defensive and eventually won the war.

Don't think you are going to win in business with a better product, more capital, or a bigger team. You can't just throw resources at a market and expect to win. The winner in a market most often has the best strategy and exectutes it well.

So read up on strategic thinking. Chandler and Drucker would be my two choices. Sun Tzu would also be on the list. Henry V by Shakespeare might also be worth reading.

And make sure that your company has both mission and vision (goals) and a strategy. It's too easy to skip from goals to tactics and you will not be well served by doing that.

Parenting

About a month ago, our oldest child Jessica inquired as to the whereabouts of the family videos we took of our kids when they were younger. We looked around a bit and finally found them. We hadn't seen them in years. The Gotham Gal took all the tapes over to the local photo store and got them put onto a set of DVDs, one for us and one each for the three kids. Jessica took the extra step of uploading all of them to Dropbox and inviting all of us to the folder.

So we've been watching these videos a bunch in the past month. We've also had the pleasure of having all of our kids home since late May so it has been "family time" at home. It's a rare thing these days and it won't last so we are making the most of it.

When I watch the videos, particularly the ones where we took Jessica home from the hospital, I marvel at how young we were. We had no idea what we were doing. 

Fast forward to June 2013, twenty-two years later, and we've learned a lot about parenting. One of our kids is out of college, one is in college, and one is entering his senior year in high school. I feel older, but wiser. And our kids have themselves to thank for that. They have taught us how to be parents.

Parenting is one of life's great pleasures. It has made me a better person in many ways. I am more patient, accepting, and understanding than I was before kids entered our life.

So on Father's Day, I am thankful for the experience of being a parent and parenting. It's an incredible gift and I feel fortunate to have received it.

Fun Friday: Foursquare Time Machine

Those of you who use Foursquare to database your life can have some fun today. Foursquare launched a cool interactive visualization tool called Time Machine yesterday.

Go there, login, and watch Foursquare go back in time and show you all of your movements around your city and the world. For me it was the past four years. Trips I'd almost forgotten came back to life. And at the end, I got this. You can get one too.

Foursquare-the-next-big-thing

A few things about that infographic. The placed I've checked into the most, The Coffee Shop, is a place I will never go to again. Sometime in early 2012, I was treated badly by a hostess, and on the way out I vowed never to return. I haven't and won't.

I've been using Foursquare for about four years and have checked in almost 5,000 times. That's an average of 3.4x a day. No wonder Foursquare is so good at making recommendations for me when I am in places I don't know much about.

While we are on the topic of Foursquare, I want to address some tweets I saw yesterday that mangled some things I said about the company. I spoke at two events yesterday and at both I was asked about Foursquare. I said the same thing at both events, which is that Foursquare has pivoted the product from being primarily about checkins to being primarily about maps with people in them. They've done a fantastic job at that. But the market doesn't know that Foursquare is about maps and map search with people in it. They could do a better job in getting that word out. And I am happy to help them do that.

Funding Brooklyn Castle

You may have heard about the documentary called Brooklyn Castle in which a team of public middle school kids from NYC win the national high school chess championship. It's a true story and has been written about in the NY Times and elsewhere.

A few days ago, a friend sent me this blog post saying that funding cuts in the NYC public school system are putting the IS 318 chess team at risk. At the end of the post, the Diane Ravitch writes:

About a month ago, Eva Moskowitz held a fundraiser for her Success Academy charter school chain and raised $7 million
Wouldn’t you think that just one of those hedge fund managers would adopt the chess program at I.S. 318?

Maybe we can take the politics out of this situation. I am not a hedge fund manager but I am a huge fan of Eva and what she is doing with Success Academies. And I am also a fan of IS 318 and what they are doing. There are plenty of ways to support the children in the public school system and one is not at the expense of the other, no matter what Diane thinks.

So I have connected the IS 318 chess team with DonorsChoose and we are going to run a campaign to raise the $20k they need to operate this coming year. And the Gotham Gal and I are going to do some sort of match to get this thing going.

I will be back to you all once we get this all figured out. I hope you are as excited about this as I am.

AR Drone – The Maiden Voyage

I wrote about drones a while back and as part of my exploration of them, I bought an AR Drone on Amazon. It was shipped to my office for some reason and sat there for about a month as I normally cycle or scooter home. But yesterday I decided to Hailo it home and bring the drone home with me.

It was good timing as all of our kids are home this week and got to participate in the maiden voyage. Emily and I unboxed it and charged the battery. Then we took it for its maiden voyage in the living room of our apartment.

Josh did the flying bit on my android phone, Emily and Jessica did the Instagraming and Vining, and I played prevent defense so that the drone would not hit our Eric Freeman painting.

Screenshot_2013-06-12-07-11-23
After witnessing this scene, the Gotham Gal immediately banned all drone flying in the apartment so we will have to continue our exploration in the back yard.

Here are some thoughts based on the out of the box experience and maiden voyage:

1) the out of the box experience is great. It basically comes all put together, you charge the battery, download the app (iOS and Android) onto your phone or tablet and you are good to go.

2) it conects via wifi not bluetooth. That works fine but while you are flying the drone, you are not online. That seems like an issue at some level for cool things you might want to do with it that leverage the internet.

3) the app that controls the drone and the interface was not particularly intuitive. Josh plays enough video games that he is probably a candidate for the air force drone academy and yet he had some difficulty figuring it out.

4) everyone loves the drone. It would make a great house pet.

Once I get the hang of flying the drone, I want to start programming it. I plan to continue to post updates here as I get more into this.

Random Inbound Email

I was talking to a friend yesterday about how I process random inbound email and I thought I ought to share this with everyone. So here it goes.

I get a ton of unsolicited inbound email from people I don't know. If the mail is from a person, it generally gets into my priority inbox and I see it. I expect that I get between fifty and a hundred emails in my priority inbox every day that are unsolicited and from people I don't know.

I do not try to reply to all of these emails. If they are not replied to after three or four days, I archive them and get them out of my inbox.

But I do try to reply to at least ten of them every day. And on some days I reply to twenty or twenty five of them. It just depends on how much time I have for email each day.

My process for determining which of these emails I reply to is a bit random and I like it that way. I want to give every unsolicited email some chance of getting a response. But it is not totally random. Subject line matters. As does the content of the email. Brevity is better. A long email that goes on and on is a lot less likely to get a response from me. And, of course, the more relevant the email is to my life, the more likely it will get a reply. I do open a lot of email and then just archive it because it's not relevant.

I want to remain open to randomness. I believe there are great ideas and people out there who have no better way to get my attention than to spam me. So I open that kind of email and reply to it. But there is a seemingly endless supply of it out there and I can't and won't ever be able to reply to all of it.

There are many who suggest that I have an assistant or two reply for me. Or forward it to one of our analysts for a reply. My belief is that the person who sent me the email wants me to see it and getting a reply from an assistant or an analyst is not the desired outcome for them. So I don't do that and probably never will.

I hope this is useful to folks who are sending me email and expecting a reply. You may get it. You may not. That's how it is and I am OK with it.