My First Investment

Brad Feld told the story of his first VC investment (after making 40 angel investments) on his blog yesterday.

The Gotham Gal told the story of her first angel investment on her blog today.

I was involved in both stories and both investments worked out well. Yoyodyne sold to Yahoo! and Curbed sold to Vox Media, both for similar amounts interestingly enough.

My first venture investment didn't work out so well. It was in a company called Software Developers Company (SDC) which if my memory is working may have been a thinly traded public company. SDC was in the business of distributing programming tools for PC software and wanted to move up market into owning software development tools. They had negotiated a deal to purchase an editor called BRIEF and a version control package whose name escapes me (might have been VCS?) for something like $2.5mm. But they didn't have the cash.

So I negotiated a deal to invest the funds into the company for a revenue share on the sale of both products plus a warrant to buy stock in SDC.

SDC ran into financial difficulties and although the sales of BRIEF and the version control software product were doing fine, they could not make the royalty payments. So we were faced with a quandry, take back the products, which we could do by contract, or restructure the deal. I recall that we restructured the deal, insisted that new management be brought into run SDC, and I think we eventually got most or all of our money back.

That deal taught me a few big lessons. The first is to avoid complicated deals. It seemed like such a smart deal structure but it really wasn't. The second is to avoid fast talking salesy entrepreneurs who don't know how to operate a business. That more or less described the entrepreneur who was running SDC when we did the initial deal.

I worked the SDC deal as a team with Milton Pappas, who was one of two founders of the VC firm (Euclid Partners) where I started my career. Milton did a lot of the heavy lifting on the management change and I learned a lot from him on that deal and many others. There really is no substitute for learning the VC business from older more experienced partners and I am blessed to have been able to do that for a decade at the start of my career.

#VC & Technology

Comments (Archived):

  1. Zion Kim

    Thank you for sharing. I think a lot of people can reflect on “The second is to avoid fast talking salesy entrepreneurs who don’t know how to operate a business. ” How one is perceived is so important!

  2. lonnylot

    “There really is no substitute for learning the VC business from older more experienced partners”I think this is true in every business and every job. You CAN get started other ways, but there is no substitute for getting started right by someone with experience.

    1. fredwilson


      1. Brad

        the difficult task is finding some that is willing to be a mentor..

        1. lonnylot

          I think it is also difficult to find someone who is good at what they do as well as being good at mentoring.

        2. Matt Zagaja

          When I was job searching last year the advice that I unequivocally got was that more important than anything was that I should find someone that would be a good professional mentor in the job I interview for. The job I had after I graduated law school paid well, but my supervisor was a poor mentor. For that reason I was glad I escaped it.I never found one with a good mentor, unfortunately. However I have learned that there is plenty you can do by going to meetings of professional and interest groups, and also perusing online resources. The downside is it seems like you have to try things and fail more when you don’t have the mentor. You don’t get the benefit of their experience.For that reason I try and give back where I can. If people reach out and want to learn about politics, technology, or entrepreneurship I do what I can to help, hoping they’ll one day pay it forward.

          1. lonnylot

            I am 100% with you on this. Though my experience was not exactly the same it was similar. I work hard to find those who have similar interests and contribute as best as I can to what they are doing (be it support, advice, or actual work). Come to think of it, I should be doing more.

  3. Tom Labus

    Have you seen “The Wolf of Wall Street? Talk about salesy guys on you name it

    1. fredwilson

      my daughter did earlier this week. she said is was too long

  4. William Mougayar

    Thanks to this and other stories, becoming a VC is a little easier today. But that doesn’t mean that becoming a super successful VC is easy.

    1. fredwilson

      it might actually be harder

      1. Matt Zagaja

        I view it as analogous to the Internet itself. In the old days you only got really filtered content that went through publishers and was edited before it arrived in the form of a magazine or book or newspaper. The WWW and Blogger democratized publishing which is great because anyone can get their stuff out there, and the quality of the best stuff that is out there is now maybe 10x or even 100x better than the stuff that was out there under the old system. However there is a lot more “junk” to sort through. Distributed tools and plummeting cost of capital goods needed to launch a start up means more of them, and maybe the best ones are 10x or 100x better than startups from years ago, but again you get all the extra cruft to sort through.Well that’s just my theory about why you were telling us discovery was so important yesterday.

        1. fredwilson

          I agree with you 100%

        2. Vasudev Ram

          +N and a good analogy between the two.

      2. William Mougayar

        True, although Angel investing has probably become easier.

  5. pointsnfigures

    My first one was Still in business, but I totally invested incorrectly. My next investments were via the angel org I started, I have gotten a lot better as I have invested and learned. Because angel and Venture is so new in the midwest, we don’t have any great mentors. We had to learn by doing. HPA was fortunate to have Sam Guren land in our lap-and he helped a lot. He was some of the first money into Staples, and Sports Authority. He also was an early investor in Apple. Lately, I have been investing more outside of the group because my personal deal flow is better, and I know what I am looking for.When I started trading back in 1988, I learned from some great people. It was surprising in a highly competitive environment that if you were open to mentoring, some traders would actually take the time to help you out. I survived-they didn’t do me any favors, but helped with tactics and mental prep. One time in a very busy market a guy turned to me and said, “what’s your bid and how many will you take?” I said, “Five bid, and I don’t care.” (I had a big position and needed to unload them). “He said, Sell you 500 and you have 30 seconds to get out.” I turned, sold them all, unloaded my position for a scratch. Literally within 30 seconds the entire market fell apart and I saved myself a lot of money.

      1. pointsnfigures

        agree. as long as you set up a trusted network, you don’t have to be a part of a group.

    1. Josh Maher

      Interesting – would love to chat more about why your personal deal flow is better than the group (that you started) and if you find that the group DD is less relevant simply because your deal flow is so much better.

      1. pointsnfigures

        I don’t mean to give the incorrect impression. My personal deal flow is better for me because I know what I want to invest in. The group is more general-we have 120 people and they all have different interests.Additionally, groups can take a long time to make decisions. I don’t have that constraint. While the group has limitations (because there are protocols and it’s a group), it also protects me. There have been plenty of times that I refer a deal to the group that looks somewhat promising and someone shoots it down.Personally, I have always been active when it comes to trying to get deal flow. I don’t like to passively wait to see what comes over the transom.I think that sometimes you can do too much DD. David Cohen will tell you the angel investments he made that he likes happen within 15 minutes. When he goes to investigate it starts to ruminate too much about it. That’s why the initial meeting is so important. If I don’t connect, I generally won’t invest.I have developed a very extensive network with all kinds of people from all kinds of industries. I can pick up the phone and call them to solicit opinions.However, no matter what the business is, the most important thing I have learned at an early stage is to analyze the CEO or co-founders. Can you have a trusting relationship with them? What happens when they are stressed? I have tried to develop great relationships with the founders I have invested in. We don’t always agree-but even when we don’t I think they know I have their back.It’s been chronicled all over the internet that investing in startups is high risk, and extremely stressful. It’s not easy. There are so many pitfalls and ways to screw up. (Last year at this time, I was dealing with a startup that had one investor bounce a check for 350k; but we saved them)Investing in startups is different than trading, but there are a lot of similarities. Really love the part where I get to work with really fun people-especially when things work out. So far, I have invested in 18 companies. Some have failed, and I learned lessons. Two have exited. The rest are doing really well.I would have invested in more, but my income from 2009-2013 hasn’t been stellar so all of the investment has come from personal savings. I am taking more risk than the average bear-but I am used to that.

        1. Josh Maher

          Would love to include you in my angel interviews, I think you have some interesting insights. Let me know if you are interested [email protected].

  6. Josh Maher

    Great lesson – simplicity in deal terms makes a huge difference. Was that your first startup investment – or did you also do a series of angel investments like Brad did prior to making any VC investments?

    1. fredwilson

      i grew up in a VC firmi don’t recommend itbut that’s how i did it

      1. Elie Seidman

        What do you recommend?

        1. Josh Maher

          Curious about this one too – if not growing up in a VC firm – would you recommend growing up as an angel, entrepreneur, wall street, some other route?Bill Gurley says to just get into being a VC as the mentorship and training to be a VC is really only found within VC firms –

          1. pointsnfigures

            If you do something on your own prior to VC, I think it helps.

          2. fredwilson

            I recommend doing startups as the best way to get into VC

          3. ShanaC

            I definitely thing there are some people who are basically doing startups to do this as the asset class shrinks. What do you think about that possibility?

        2. fredwilson

          Do startups when you are young and do VC when you are older and do angel investing when you are old

          1. Vineeth Kariappa

            Do startups, as in start something or invest small amounts in startups?

          2. fredwilson

            Work in startups unless you have a startup in you

          3. Andrew Kennedy

            great line. i imagine that a great investor must be able to decipher wether or not a person *really* does have a startup in them. lots of people think they do.

  7. JLM

    .Fred, your post is filled to overflowing with some very important points.Simplicity, elegant simplicity is a very important consideration of anything we ever do. I used to have a “one index card”, 3-minute rule. If I could not understand the deal when described on a single index card in 3 minutes, the default answer was always NO. I learned that in the Army wherein Rangers used the 5-paragraph Field Order which could describe an operation on the fly in less than 3 minutes.Training, education, mentoring are essential methods of how the wisdom of business is passed from the elder statesmen to the fresh new blood. It is literally the Wisdom of the Campfire.Experience is the ultimate store of value in life and business. It can be rented rather than acquired at full tuition. That is the genius of it all.Wisdom — the product of the application of good judgment over a protracted period of time.Good judgment — the product of experience.Experience — the product of bad judgment.I find it breathtaking to reflect upon the “first time” we all have done anything. To see the beginning of the journey from some distance is a great pleasure. Triumph and disaster — both imposters.Well played.JLM.

    1. fredwilson

      thanks Jeffone of the “rules” Brad and I put in place when we started USV (my third firm, his second) was “plain vanilla deals”we committed to each other that we would not do anything funky, everwe have lived up to that and it has served us incredibly well

      1. JLM

        .Fred, Fred — It may be too early to weigh and measure your success just yet but it seems to be a promising strategy, no?JLM.

      2. pointsnfigures

        Warren Buffett remarked “great deals that are meant to be come together quickly and easily”. He is so right. All the french pastry on deals falls apart like a house of cards when things don’t work out-and things always have twists and turns.

      3. PhilipSugar

        I think all of us that have experience agree.The same goes for financials.


        You don’t know yet, Fred, so I’ll tell you..I’ve started a discussion group “Startup to $100M”. It’s an informal group for entrepreneurs who want to take their business from startup to $100M as fast as possible. Anyone interested, including yourself, can contact me: Startup100M [@] ObjectMethodology [.] com.The idea is to find out how to cut through the lesser productive practices in the start up game and find the most efficient and effective processes and procedures for entrepreneurs to follow..Who knows maybe we can take that 1 out of three success rate and turn it into 2 out of three. Enjoy!

      5. takingpitches

        simplicity is everything. fred, what is funky? is it anything other than straight equity or convertible debt?

        1. fredwilson

          Anything other than plain vanilla preferred stock

          1. takingpitches

            thanks; your and brad’s formula = plain vanilla in deal terms; very creative and funky in ideas

          2. LE

            “other than plain vanilla preferred stock”Hopefully someone reading this and deciding they want to be a VC will realize that you are able to do that because you can.Because when they are starting out they will need to do many things before they can move on to setting things up as a more experience person might be able to do.

          3. Andy G

            Curious if you believed in participating preferred terms? That always seemed to me (as an exec) to favor the VCs. While i’m at it, do all deals have interest/dividends attached?


        Was my earlier post too blatent a plug?

        1. fredwilson

          I did not think so


            I’ll try again – “Startup to $100M” a group for entrepreneurs to discuss taking their business from startup to $100M as fast as possible: Startup100M [@] ObjectMethodology [.] com.Maybe is was an automatic catch because of an email in the post? We’ll see what happens..It’s hard to find an email address for you.

          2. fredwilson

            there is a contact link in the footer of AVC

      7. Dave

        Plain vanilla deals is a motto all VCs should live by. The most convoluted deals I’ve seen were from VCs trying to avoid a write-down of an asset that had clearly dropped in value. By delaying the inevitable pain of a full recapitalization and instead trying to focus on really convoluted structures, many of them killed companies by driving away their employees. I always wondered LPs didn’t catch on more often.

        1. fredwilson

          Or an entrepreneur trying to do the same. I agree 100%

      8. David

        Fred, how old were you when you worked on this first investment? I’m 26, and just wondering when you got started. Thanks!

        1. fredwilson


    2. Elie Seidman

      Love the line “Triumph and disaster — both impostors”. so true.

      1. JLM

        .Splash of shoplifted Rudyard Kipling on a sunny, cold ATX morning.JLM.

        1. Elie Seidman

          Knew it sounded familiar. Fantastic, the whole thing.

        2. pointsnfigures

          You don’t know from cold. Come to Chicago.

          1. JLM

            .I don’t really like to go places where my face can freeze.You know I have been saving a spot for you in the ATX.JLM.

          2. pointsnfigures

            On Monday, our high is -8. Without the windchill or the breeze from City Hall. Working on a couple of things, if they don’t pan out Texas is on the radar.

          3. ShanaC

            Too cold…

        3. Vasudev Ram

          Ah, was trying to remember why that phrase sounded familar.Then:LMTGFY (Let Me Google That For You :)…2nd and 4th hits are it, 1st is an ad.Also:…And from the above Wikipedia page:[ The well-known Indian historian and writerKhushwant Singh claims that Kipling’s If is “the essence of the message of The Gita in English.”. ]That’s what I thought.JLM’s phrase reminded me of, initially, and it turns out I was right:It’s from one of the most famous verses in the Mahabharata; a few related links:http://sharadarao.wordpresshttp://vinaykrishna.blogspo

      2. Vasudev Ram


    3. Wilson Njenga

      I do agree but experience, dedication and reason makes us all whole. However genius is defined in the my world as an ability to dissect complex ideas to simply applicable goals

    4. John Revay

      I am reading this book about Jobs @ Apple – “Insanely Simple”…It is a bit repetitive…. buy there are some great Job/Apple stories.The author – an ad agency guy – talks about Steve taking out his “Simple Stick”They compare the decision making process at Apple vs. some other large tech companies (HP, Dell etc). Small meetings with Steve and 3 or 4 of his lieutenants vs management by committee or focus group tested at other companies.

      1. Timothy Meade

        Will the private Dell Computer do any better at this?

        1. John Revay

          I would think not – it’s still in their DNA

      2. JLM

        .John, now I am going to have to read that book. Thanks.JLM.

      3. Vasudev Ram

        Was there also a book about Apple called “Insanely Great” ?

  8. Elie Seidman

    My first angel investment was a company run by a guy who is a *world class* fundraiser. Best I’ve ever seen. Learned the same lesson.

    1. fredwilson

      The correlation between great fundraisers and great entrepreneurs isn’t anywhere close to 1:1

      1. ShanaC

        what does it look like

      2. falicon

        Historically I’m pretty lousy at fundraising…so can I spin that to mean I’m a great entrepreneur? =)

        1. fredwilson

          NoooooYou have to get good at it to succeedBut a born fundraiser is not often a great entrepreneur

          1. falicon

            I was joking.That being said…I actually do believe I *am* a great entrepreneur…because I’ve failed/learned a ton over the years through my massive activity.I’ve used it all as a learning and growing experience (like you say, had to get good at it)…and the business I’m helping to build right now is just on the cusp of some really great things! =)

      3. PrometheeFeu

        Same thing in academia. Heard from a friend the story of a professor who can sell granting agencies on anything. The guy has a tendency to get grants to do things which are outside his field and widely believed by the people in the field to be crazy. Thankfully he then hires post-docs and grad students who redirect the money to productive ends, but it’s a great illustration of the fact that being great at getting money to do something isn’t the same as being great at doing that thing.

  9. Dorothy

    I remember SDC well, and of course Milton Pappas and Euclid! Great partners and a great learning experience for you (and for me when they kindly offered me advice as well!). Now, Fred, you’re in a position to carry on Milton Pappas’ great legacy with your associates and entrepreneurs. And of course he’s still around to offer advice for those sticky quandaries. Happy New Year!

    1. fredwilson

      Yes he is. I need to call him for a lunch

  10. awaldstein

    Hmmm…as someone who is not an investor by trade (although I do a bit of seed investments more to support things than as payback) my career has been about investing my time for sweat equity across many tiny startups.I should do a series on my ‘unlikely’ heroes, people that have shaped me, more than mentored me actually, starting with my very first boss, Jack Tramiel.

    1. Dave Pinsen

      Would be interested in reading that.

    2. bsoist

      I’ve been taking the same approach lately. Nice to see I’m in good unlikely heroesI’ve been compiling a list over the last few years of the unlikely things that have shaped and motivated me. It’s an odd list that includes TV shows, games, movies, bands, and a few people. 🙂 I’ll have to share that list soon.

      1. awaldstein

        I never really had a mentor to take me under their wing but intense, quite brilliant people like Jack, Sim Wong Hu, Steve Mayer, Umang Gupta on the operational side and a good dozen board member VCs that I reported into.Some people are stylized and formed by education and masters, me–the street, market experience and a series of quite brilliant special team mavens.

        1. Vasudev Ram

          Umang Gupta too? Wow. Gupta SQL was big at one time, I remember, around the time of PowerBuilder / VB / Delphi – in the heyday of client-server.

          1. awaldstein

            I worked directly for Umang and the board at KEYN for three years, using M & A as a tool to rebuild their product offerings and revitalize the brand through marketing and a series of events called GIPC.Smart businessman. A successful and great gig.

          2. Vasudev Ram


      2. falicon

        Looking forward to seeing that list!

    3. Vasudev Ram

      Jack Tramiel, founder of Commodore , was your boss? Cool.I had googled and read a lot about him a while ago.LMGTFY time again :-)……He passed away recently.…The Commodore 64 was one of the first computers I used and learned programming on. That reminds me of an anecdote:I wanted an assembler for it but didn’t have access to one. But I did manage to buy a book for the C64 that had the entire listing of an assembler, written in BASIC, using POKE statements and hex codes. I entered the entire listing into the machine – it took me a few days, including having to restart from half-way due to mistyping a few bytes. But then at the end it worked, and I was able to write and run assembly language programs on it :)You should do that series and post about it here.

      1. awaldstein

        I knew of Jack’s passing as I am still in touch with the family.Jack bout Atari from Warner, fired everyone except 20 people (I was one) and we rebuilt it and took it public.I worked with Jack, but mostly Leonard and Sam his sons. Marketing, channel, product and community where my areas.Amazing experience as this was my first job.

        1. Vasudev Ram

          Must have been …Never used the Atari, but had read about it at the time.

  11. Elie Seidman

    Have you done a post summarizing the main lessons you’ve learned from your investing career? Would love to read that.

    1. fredwilson

      Not as such but this blog is full of them

      1. Vineeth Kariappa

        a book, perhaps?

  12. Guest

  13. Mike

    I found the CD with the Urban Box Office launch strategy (6/99) cleaning out boxes over the holidays. None of the formats are supported by my Mac Air so I couldn’t open it. I remember scale was important back then too. I just want to see how much the cost structure has changed. No one plans for when one of the founders dies suddenly.

    1. fredwilson

      Oh god. So many lessons, so much pain, so many scars. I am embarrassed that we did that deal but I sure learned from it.

  14. bfeld

    I used Brief for many years. It was my favorite editor.

  15. JimHirshfield

    great stories, all 3

  16. Richard

    Fred, just looking at successful exits (so not including the write offs), how close in valuation are most exits to the number (the valuation) estimated by you at the time of investment.

    1. fredwilson

      Almost never.

      1. Richard

        Im sure that you use you are familiar with the Law of Total Probability. Do you even make a stab at an EXIT valuation by applying this law? Note: Exit valuation of course is not necessarily equal to valuation.

        1. fredwilson

          Sure. All the time. It makes me feel better. But its not predictive in the least

  17. LE

    The second is to avoid fast talking salesy entrepreneurs who don’t know how to operate a business. That more or less described the entrepreneur who was running SDC when we did the initial deal.Yiddish word for this is “sheisters” (pronouced “shy sters”).In business, the point of talking fast is to leave others in the dust and pray upon the fact that someone will be to embarrassed to admit that they don’t understand (in general people don’t want to appear stupid ) and won’t tell you to slow down.In other professions (law for example) they take care of this problem somewhat by using latin. If you are pulling a fast one, you need to partly confuse the “mark”. Another way to do this is with a long draw out contract containing difficult language.Anyway, If you grow up in a business family you know that at a young age seat of the pants as an immediate marker to avoid and/or take a real close look at.

  18. LE

    “The first is to avoid complicated deals.”Otoh the more complicated something is the less competition you have because most people want to avoid a complicated deal and/or have no experience structuring that.

  19. Semil Shah

    This post matters to me personally, a lot. As I’ve grown interested in venture a bit later in life, I’ve been practicing myself investing and trying to learn as much as I can by observing or working with venture firms on the side. I do believe it is a mentor-apprentice type of trade, but those types of arrangements are pretty rare in modern VC, and as it becomes more atomized in the future, where will mentorship come from? For me, I am mentored by blogs like this. I have about 30 investors’ blogs sent to my email directly, as soon as they write something. I read every one. I try to engage when something is relevant. That’s my mentorship, or the best I can get. (AVC is, of course, an outlier. The great thing about this blog is the repository is here forever. This blog can mentor me and many others years later, around the world.)

    1. fredwilson

      Angel networks and angel list syndicates may be the next place to learn VC?

      1. Semil Shah

        Yes, I can cobble it together and do today. I’m 15 investments in, and plan to do be on the same pace for 2014. Writing a small check is so different than leading a larger deal with partners. So many differences I’m seeing, I need to blog it, but briefly: (1) writing smaller checks is a good way to build up dealflow, a reputation, and a network, but it may or may not translate into moving into a larger VC role and leading a deal, assuming the smaller investor wants to grow; (2) harder to make decisions because one gets used to unilateral decisions, whereas I see some of the best VC firms benefiting from the wisdom of a very small crowd, like 4-6+ partners. I’ve been personally lucky that many individuals (like you) are very open to meeting and answering questions and offering advice, but it is very rare to find people who still mentor in VC today. There are a few firms that do this actively — Trinity, Redpoint, Spark, and a small handful of others do try to hire junior folks with an eye of grooming them, but of course, venture has changed, more people are coming in straight out of operating experience and many at the partner level to start. As a result, my solution has been to read and converse a ton with the hopes it will be my own education.

        1. pointsnfigures

          I think it would be hard to learn VC from virtual. You almost need a mentor you could speak with personally. I could be wrong because of my age.I agree with your point 1. The problem might not be your transition from angel to VC, but the perception of you. Point 2 you can build in an angel group. See Fred’s comment about running in packs. Watch “Something Ventured”. Those guys were angels that met for coffee that turned into VCs.

          1. Semil Shah

            Yes! I watched that movie, was great. I do think I may run into someone who I’d like to join forces with. In fact, I’ve found one and we have had an initial discussion, but early days. I like the idea of 3-5 partners, but no more.

          2. takingpitches

            it’s awesome that you’re taking advantage of the resources available to go after what you want – thoughtful perseverance!

    2. LE

      I think trying to learn business by reading is like trying to learn karate by reading. I think you need to put in the time and do deals and it takes years and years.Reading doesn’t give you the seat of the pants feel and nuance for when to apply the information.You can get pointed in the right direction of course and it gives you information that you can build on.Take what Fred said :The second is to avoid fast talking salesy entrepreneurs who don’t know how to operate a business.I know that and I can tell you that but I can’t go into all the details of why and when it matters and perhaps why it doesn’t matter in some cases. And even if I went into the details you would not be able to retain all of it and act accordingly.This reminds me a bit of all the women who follow lists of men qualities which are labeled “turn on’s” and “turn offs”. And they will hear that if a guy is close to his mother or not that is either good or bad and act on that info to their detriment. You can’t isolate what amounts to an analog interaction based on a check list but you do take into account all inputs when you make a decision.For example I would normally give advice that it is not good to pursue a career or major in photography or art. But in the case of Fred’s daughter that advice would not be valid because of either her talent, and/or her safety net, or because of any advantage being Fred’s daughter would give her.

      1. Semil Shah

        Thanks, but I have started investing already – my point is around supplementing mentoring through blogs vs direct mentors.

      2. fredwilson


      3. Donald E. Foss

        It’s true that reading alone doesn’t teach you everything, but it usually doesn’t hurt. The cliche about “those who don’t learn history are doomed to repeat it” applies in spades.I’m an avid reader, both online and with published books, and I find that having first read about something helps me process experience faster, and hopefully learn the real lesson from the experience. Just because someone has experience doesn’t mean that they learned the right things from it properly.So, like with nearly everything, I believe in a balance. I prefer a balance between prior learning (reading, discussions) and experience (mentors, advisors, prior success or failure).DeF

  20. jim mchugh

    Fred, JLM encouraged me to spend time on your blog and the first post I read in 2014 brings back a company name from the past. I believe SDC was founded by one of my college classmates. I was neither close to the founder nor the company, but working in the IT space in Boston during that time, I wondered to myself, “how does that company keep getting funded”? New facts come to light! Great blog, thanks for sharing the stories.

  21. ShanaC

    Why is there the tendency on wall street to go for complex deals? (sorry, I mean, why did you bother dealing with this sort of compelxity in the first place)

    1. Matt Zagaja

      Can probably blame the lawyers ;).

  22. BradDorchinecz

    Given your last paragraph, I’m curious of your thoughts on so many former entrepreneurs raising their own funds and entering the micro-VC space today with little direct VC experience.

    1. fredwilson

      Some will be great and will replace meSome will suck and lose most of their investors money



        1. fredwilson

          I had a year like that. 2001. Most important year of my professional life

        2. Vasudev Ram


          1. FAKE GRIMLOCK

            BUSY. THAT WHERE.

    2. LE

      on so many former entrepreneurs raising their own funds and entering the micro-VC spaceTrue many former entrepreneurs want to do this instead of trying to start another company.This is for two reasons:1) The original company was a fluke that worked and they realized how hard it is to just come up and execute another idea that will work. Actually not that it’s hard to come up with ideas or to execute but it’s hard to have luck again that played such a big role in your first success. Luck and timing is a the factor with much success. Even with sports (which I think is the truest example of someone “earning it”) you have to be the best among a group playing at a particular point in time. So there is luck even with that.2) They realize it makes much more sense to bet on others because there is a greater chance of those that they bet on succeeding. Would also think the lifestyle is much better.As in “Jaws” the behavior of the former VC’s is no boating accident as far as why they all flock to wanting to invest with what they have learned.Look at Mark Andressen. (And I just noticed how sanitized the wikipedia article is).Loudcloud was a failure. In other words of course they pivoted and of course they made out in the end and of course the idea was ahead of it’s time. But so what? You don’t make money for being in the wrong place at the wrong time. You make money by being in the right place at the right time.http://bits.blogs.nytimes.c…After many adventures–in which the young company suffered many defeats, took on the new name Opsware, shifted to a new business and discovered its true calling was software—it has achieved its original destiny: a huge buyout.

  23. Guest

    The first external investment I was involved with, end-to-end, was this Risk Mmgt platform:* that it was integrating inherited prior investments and facilitating internal incubations (like our version of Skype for the banking industry; later spun out and acquired by MS).What did that super-early exposure to Wall St structures involving 20 investors teach me?Everyone wants a board seat so you have to make a stronger values case than everyone else why that seat should go to your bank.Values is about more than the quant metrics — of the type, “We have N number of customers, $X trillions AUM, the largest equity distribution platform in the world, cost:income ratio is the lowest and we have the highest liquidity so can pump in more $ to this investment than all the other parties and are ranked #1 for in WACC terms”.It’s also the values of openness, integrity, cohesion and strategic sense that can be bought to the company via that board seat.Structures at each part of the financing pipeline (angel seed through to IPO) are as simple or complex as the parties involved can allocate the resources to negotiate and foster those relationships over time.Sometimes, the banks DO innovate and turn around tech investments within a month (e.g., if the project sponsor happens to own the biggest $ budget and rights of sign-off). Sometimes, though, it takes banks a decade to do a single deal because everyone involved wants to blackline a whole raft of tag-along, drag-along, first rights, rolling credit facilities, SPVs etc and the transaction bible ends up fitting into a small house.It’s not the scenario of investors and founders agreeing $:equity/convertible based on scribblings on a napkin at all.

  24. Charles Birnbaum

    6 months into my VC career and this quote rings very true: “There really is no substitute for learning the VC business from older more experienced partners”

  25. John Revay

    Good post, I just went over to Brad blog, and read his post from yesterday…He talked about softbank etc…. I remembered this post you did back in 2012…I remember the great photo of you and Brad & others ….”We were walking through Harvard Square coming back from dinner and we saw Masa on the cover of Business Week in the newstand in the square. I am not sure who took this picture, but it captures all of this and more for me”

  26. Mark Birch

    What I learned from doing my first angel deal, I do not know squat. That was a few years gone now, but it was instructive in that it forced me to learn quick. I did not have any “mentors” but like Semil mentioned earlier, I read various blogs like this blog and Brad’s blog and Venturehacks and a few other resources. Was it the best approach? Maybe or maybe not, but I have always trusted my gut to get my through indecision and doubt. As long as I had the information available on the basics, it would come down to judging the person sitting across from me pitching a deal. Were they simply trying to “sell” me or were they sincerely looking for a partner.

  27. laurie kalmanson

    an entrepreneur i’ve been talking with just got his first round of outside investment; seats belt buckled for the ride. he’s professionally experienced, but this is his first time in this seta. wheeeeeeeeeeeee.

  28. Vasudev Ram

    Interesting post, Fred, and to hear that BRIEF was your first investment.I had used the BRIEF editor way back, on DOS, and also met the creator of BRIEF some years ago in Boston. Brief was damned fast. IIRC it was written in assembly language. It had a cool feature: if you were scrolling up or down in the text with the arrow key, at first it would go at normal speed, but if you kept the key pressed, it would accelerate (quite a lot) – so that you could scroll through more text faster … it also had many other cool features and useful shortcuts.

  29. Frank Fumarola

    I had Shark Tank re-runs on in the background while reading this post. And as soon as I got to the revshare portion of the deal I cringed and felt a pang in my stomach and checked the blog author to see if I somehow wound up on Kevin O’Leary’s blog! :)I kid, but it’s interesting to see how a deal that bleeds the cash flow from the company could be squashed because the company didn’t have the cash to pay the royalty to begin with.Were these cash flow issues foreseeable, in hindsight?

  30. Andy G

    I also had the pleasure of working with Milton Pappas. I was an early employee at IntraLinks as their Controller. After a few years (and management turnover) I was promoted to CFO. I was relatively (very) green and was immediately thrown into the fire (Board Meetings) with big (and smart) investors. Milton was my designated mentor. He was always a gentleman and offered me great support. Five years later I left the company, and he was kind enough to attend my going away party. It really meant alot to me. I haven’t seen Milton in about 10 years, but hope he is well.

  31. fredwilson

    Such a great line!

  32. lonnylot

    I read this yesterday and have been thinking over it a bit.I think what you described in the last paragraph is leadership, not mentorship. Perhaps there are only subtle differences or perhaps they intersect at several points. To me, good mentoring means guidance not leading. It should be filled with open doors, honest yes/no answers and suggested directions, but ultimately the mentee is in control and go in whatever path they want. Perhaps the most powerful thing a mentor can do is be willing to take the time to have an honest conversation (or 20) where they try to learn as much from the mentee as the mentee hopes to learn from them.

  33. lonnylot

    I don’t have any mentees so I’m just shooting from the hip.If they are not able to have an honest conversation w/ you than they may view you more as a leader instead of a mentor.I think the best thing to do would be to tell them what you just told me and let them know how the mentor/mentee relationship should work (I think this would qualify as guidance, no?). The theory behind doing this would be that it lets them know it is OK to disagree and it opens up honest conversations more.