Posts from July 2013

People ask me what a day in the life of a VC is like. Each one is different. But they can be a grind. Take yesterday for example.

I started yesterday at 8am with a breakfast meeting. I ended around 8:15pm when I wrapped up a pitch meeting in my office. In between those two meetings I did ten other meetings for a total of twelve meetings in a bit more than twelve hours.

Of those twelve meetings, one was a three hour board meeting, one was a breakfast meeting with another venture investor, one was a lunch meeting to talk about CS Ed in NYC, four were pitch meetings, one was an interview with a journalist about the future of VC, one was a call to discuss board subcommittee work, one was a meeting with regulatory consultants for bitcoin and other payments systems, one was a negotiation on the windup of a seventeen year old VC transaction, and one was a visit to my dermatologist for a regular checkup.

In the middle of all that http://avc.com went down due to an apache config issue somewhere and I was debugging it via email and kik. I think I've got a temporary fix working and now I need to find out what the culprit is and get it fixed.

Before starting my day yesterday, I got up at 5am and read, blogged, and did email for 2 hours and 45 minutes before taking a quick shower and going to breakast.

After ending my day, I met my son for sushi at Chez Sardine. After dinner, I went home and went to bed around 11:30pm.

Depending on your perspective, my day yesterday will either seem stimulating or exhausting. It is both. I love my job. I get to meet amazing people and learn about awesome things every day. But the cost of that is meeting marathons where you have to be alert, active, and on your game in every one.

My goal is to give every entrepreneur as good of a meeting as I possibly can. A second goal is to give as many entrepreneurs as possible an opportunity to meet with me and pitch me if they want to do that. That requires many days like yesterday. And that can be a grind.

The goal of this post is not to complain or whine. I hope it doesn't come across that way. The goal, as always, is to "open the kimono". To give you a hint of the mindset of the person you are going to meet with today (or someday) and understand what their day is like and how they are coming into the meeting. Do us all a favor and give us a good meeting too. It helps. A lot.

So the Brooklyn Castle Crowdfunding campaign is over. Here is the project page that outlines what happened. If you don't want to click on that, a total of $67,784.99 was raised from 308 donors. Of that total, $57,617.24 went to IS 318 to fund their chess team. $10,167.75 went to DonorsChoose to support their classroom project crowdfunding platform.

The AVC community was a huge part of this. We provided the early funding that gets a project off the ground at DonorsChoose. We contributed $13,166 of the total and that came from 127 of you. I want to thank each and every one of you who gave. It means a lot to me and to the folks at DonorsChoose that the AVC community is so supportive of projects that I highlight here.

I promised a $10,000 match from the Gotham Gal and myself that never got contributed to this project. It was funded in its entirety without the help of that match. So we are going to contribute that $10k to another DonorsChoose chess project. It will either be next year's IS 318 campaign or possibly other NYC public school chess team projects. I will work that out with the DonorsChoose folks over the next few days. But rest assured that we are going to come up with that $10k as promised.

I'd like everyone to consider exactly what happened here. My friend Maureen pointed me to a blog post. I went and read it and thought, "there has to be a way to get this program funded." I got the assitant principal John Galvin's name from Maureen and emailed him. He agreed to do a DonorsChoose campaign. And then we and others got behind it. Now his kids have the funds to keep playing chess and winning tournaments and learning valuable life skills.

All of this happened on the Internet. I've never met John Galvin or any of his chess players. I've seen the movie though. That certainly helped a lot. If you havent' seen the movie, you really should. It's on Netflix (ie on the Internet). This global interconnected network that a couple billion people are on every day is a big deal and can be used to solve all sorts of problems. We just witnessed that. It feels good.

Update: John Galvin sent me this photo this morning. It is for all of you from the kids.

I've been doing a tour of the summer accelerator programs and a question I get a lot is about the feedback the teams get from the investors and mentors they meet with. They ask me how much should they react to the feedback they are getting advising them to do things differently, pivot, change the product, change the strategy, etc.

I call this constant advising/mentoring of early stage startups "mentor/investor whiplash" and I think it is a big problem. Not just with the accelerator programs but across the early stage/seed startup landscape.

You cannot meet with a potential investor (me included) or mentor/advisor without getting a lot of feedback about your business. If you take many of those meetings a week, then you are going to get pushed and pulled in lots of different directions and it will cause confusion, wasted time and energy, and even a loss of confidence in what you set out to do.

You cannot let that happen to you. You are the domain expert on your business. You have spent way more time and energy thinking about your business than someone who takes a 30 minute meeting with you, having never thought about it for one iota, and then gives you a ton of advice that you are doing everything wrong. You have to learn to hear that feedback but not react to it.

Here is what I recommend:

1) Create a spreadsheet and list each meeting and the feedback you got in it. List who gave it to you and what they said. If you can categorize the feedback easily, do that. A column for each category of feedback might be good. Over time you should look at the totality of the feedback and see if there are things that a large percentage of people are giving you. If that is the case, you may want to pay more attention to that.

2) Apply the "investor discount" to feedback you get from investors. Advisors/mentors who have no agenda are a purer form of advice. Investors have their own agenda. They want to invest in "bigger ideas" and "larger outcomes". When they tell you that your idea is too small, they may be talking to themselves, not you. Do not make their problems your problems. This is your business, not theirs.

3) Listen to customers, users, and the market. Advisors, mentors, and investors are not the market for your product. Get your product out into the market and get feedback from real users and customers who you will serve as you grow your business. If they like what you are doing and investors do not, do more of what you are doing. The investors will come around when you are scaling into your market.

With those three rules in the frontal lobe of your brain, take as many meetings as you can get. Solicit feedback. Listen to it. Write it down. But do not act on it immediately. It is advice not direction. You are the boss of your company. Do what you think makes the most sense. And get your product in front of users and customers as early as possible and listen to them even more. Because the market will tell you what to do if you listen carefully enough. And Mr Market is the best advisor you can have.

For the past twenty years, the US federal tax code has included provisions that allow startup investors to get favorable tax treatment on the capital gains they earn on early stage investments. These provisions are in Sections 1202 and Sections 1045 of the tax code. 

I have been in the startup investing business for the entire time that these provisions have been in the tax code and to my knowledge, I have never taken advantage of them. So that tells you something, eiter about me or the provisions, or both.

However, given the increasing amount of angel investment activity in the startup sector, I thought it might be useful to post about these provisions, solicit comments and discussion about them, and maybe we all can learn something.

Let's start with the definition of Qualified Small Business Stock (QSBS). From this excellent post on the AICPA website:

To qualify as QSBS, the stock must be:

• Issued by a domestic C corporation with no more than $50 million of gross assets at the time of issuance;
• Issued by a corporation that uses at least 80% of its assets (by value) in an active trade or business, other than in certain personal services and types of businesses described in more detail below;
• Issued after Aug. 10, 1993;
• Held by a noncorporate taxpayer (meaning any taxpayer other than a corporation);
• Acquired by the taxpayer on original issuance (there are exceptions to this rule); and
• Held for more than six months to be eligible for a tax-free rollover under Sec. 1045 and more than five years to qualify for gain exclusion.

Sec 1045 allows a "tax-free rollover" which means that you can avoid paying the capital gains tax if the gain is "rolled over" meaning invested back into another QSSB. I believe that roll-over has to happen within six months of the gain, which is one of the many reasons I have not taken advantage of this provision. I like to take my time in making my investments and don't like having a ticking time bomb or gun at my head when doing so. 

Sec 1202 allows for an exclusion on the capital gains if the stock has been held for five years or more. I believe the exclusion is currently at 50%, but has been as high as 100% and there is also a 75% exclusion in some circumstances.

I agree with the Kid that tax loopholes and tax giveaways are generally a bad idea and I would personally prefer a simple flat tax with no trickery and gamesmanship. However, you have to live in the world you live in. And so if you are an angel investor, these provisions can provide great value to you.

One of the problems with these provisions is figuring out if you own QSSB, how long you have owned it, if you qualify for an exclusion or a rollover, and how quickly you need to do the rollover investing. They scream out for a platform to help angel investors with this stuff. Seems like a big opportunity for CircleUp, AngelList, and the other equity crowdfunding platforms. They can collect all of this data, build the logic into their systems, and alert angel investors when and if they can take advantage of these provisions. Maybe that would make it so that investors actually take advantage of these provisions. Maybe someday I will too.

We are going back in time for this one. This went down before Twitter, Tumblr, Zynga, and a host of other things that happened in 2007. This also happened before I had done a deal with Bijan. Maybe the spanking he gave me here was the catalyst to change that. Anyway, this one's a reminder that you may be here today and gone tomorrow (RIMM).

Disqus launched a new homepage this week.

You can see it here.

Since this community is full of marketers and entrepreneurs and because we are among the most passionate users of the Disqus network, I thought we could debate, disqus, and decide whether the new positioning and messaging is on point.

What do you think?

I've written a fair bit about the fact that I think we will use our mobile devices (phones, tablets, watches, glasses, etc) to control the more expensive devices in our lives (TVs, car dashboards, refridgerators, etc). I think this mode of user interaction will win out over software solutions built for and running on the more expensive and therefore longer lasting devices we own.

Until now, Apple's Airplay and Bluetooth were the only good solutions for this kind of interaction. I use both in my home and office and I use them every day. But, as I have written here before, both have issues. Airplay is proprietary and not available on all devices (Sonos being a prime example). And Bluetooth is old and doesn't scale well into high bandwidth applications.

I've tried DLNA which Google and others have supported and its wonky right now. It's possible that DLNA will evolve and emerge as another good alternative.

But yesterday Google announced Chromecast which is an interesting take on this approach. Chromecast is a HDMI dongle that you put into the HDMI port of your TV and then connect to your home wifi network.

I've just purchased four of them from the Google Play store. I will put them on all the TVs I've got in my homes and see how they work. We use Nexus 7s to control the TVs in our homes and so those Nexus 7s will now be able to do a lot more than switch inputs. They will be able to be the input.

It's too soon for me to know how big of a deal Chromecast will be. I need to get my hands on it, use it, and then I will have a better feel for it.

But this much I know. This commenter on Hacker News is spot on:

people should just think of TV's the way they think of their jamboxes: a higher fidelity dumb pipe for their existing content

Dan Frommer writes that Apple's decade of blistering growth has, at least temporarily, come to a halt. And you can see that in the stock:

Companies are worth a multiple of their earnings and that multiple is directly related to earnings growth rates. When you are growing rapidly, you are worth more.

But living forever and growing forever have something in common. You can't do it.

I was talking to the CEO of one of our portfolio companies that has grown at close to 100% per year for the past five or six years yesterday. And we lamented about the law of large numbers. Growing at 100% a year when your top line is in the billions is a lot harder than growing at 100% a year when your top line is $25mm.

Of course, you can come up with new lines of business, new hit products, or make acquisitions to keep on the growth treadmill. But recognize that is what you are on. You can and will become a slave to it.

Startups and their rich uncle pennybags (VCs) are particular slaves to this drug. We build and finance companies that are designed to grow and grow and grow. That's how we create wealth, jobs, and impact. It's a fantastic ride that I cannot get off. But these rides do slow down and even end sometimes. And that's a bitch.

Almost a year ago now, I wrote about Ask Patents, a Stack Exchange site launched in partnership with the USPTO to help them identify prior art in software patent applications.

Yesterday Joel Spolsky, Stack's CEO, wrote a great post about how he used Ask Patents to squash a bad software patent applied for by Microsoft.

I love this image he placed in his post:

You win wars one victory at a time. If you want to win a battle or two for the good guys in the war against software patents head on over to Ask Patents and do your part.