My Nightmare

I don’t normally remember my dreams but I remember my dream last night. We were celebrating the sale of a company in which the founders and investors had done very well. During the course of the celebration the founders explained that they sold the company because they have a bigger and better idea that they plan to do next. I asked them if they would allow us to invest in their company and they said they would consider it but that the seed round was going to be priced at $140mm pre money. I had a tantrum and stormed out. That was when I woke up.

I don’t really know what that says about the state of my mind or the anxieties I experience. But it felt like a betrayal. A slap in the face. We had worked closely together and had gotten to a very successful outcome and now the result was a crazy price that we would have to pay to stay in business together. It pissed me off.

Valuation is just a number. It’s the price you pay for your shares. You don’t know if you got a good deal for a while, but eventually you will know. But valuation is also a psychological thing. It says how much you value a person. How much an entrepreneur is valued in the market. And how much an investor is valued in the market. The clearing price reflects both sides of the transaction.

I guess that’s why that dream woke me up.

#VC & Technology

Comments (Archived):

  1. Scott Barnett

    With all due respect Fred, don’t entrepreneurs actually live this nightmare in reverse pretty much every day? With every investor telling them their great idea is worth, essentially, $0?I get that in your case these were people you knew…. that you worked with in the past and had success… but I still found the post just a little ironic.I do get why you’d be insulted. I also get why lots of entrepreneurs get insulted too. And I’m pretty sure you’d tell them that this is life, stay focused, work hard, and move on 🙂

    1. fredwilson

      Yeah. Its just a nightmare

    2. sigmaalgebra

      For a lot of VCs, nearly all in my experience, it’s easy to write them a clear, short, quite correct description of a project and have them just ignore both the description and the contact. It is very much like they just, as a matter of principle, refuse to read their e-mail, and FAX works the same. Can get a personal recommendation from some famous, very successful people high in business, and still the VCs will just ignore the contact. Can leave an ‘elevator’ pitch on their phone, say, each day for a week, and they will finally respond with an angry “No!”.And, when do get a response, can conclude that no way want that VC on the Board: E.g., for a ‘consumer Internet’ project to get revenue from running ads from ad networks, the response was “customer acquisition costs are too high”. Gee, how much do I have to pay to run an ad from an ad network? When patiently explain that the ‘customers’ are advertisers and, maybe the concern was from users obtained via publicity and viral growth, with some examples of some astoundingly fast viral growth from meager publicity efforts, the response was some obscure remarks that they had had experience with Internet viral growth. Finally their response was “not a fit”; I can agree with that; no way do I want to report to a Board with someone who says that it costs too much to run ads from ad networks!It’s like such a VC is getting their 2% and otherwise are spending their time on their boat.One VC wrote me that before an investment they want to see 100,000 monthly unique visitors to my Web site. So, with some reasonable assumptions for my project, that would be ballpark $40,000 a month in revenue, for one person, two kitty cats, from a living room, with a server for $1500 in parts, using less than 2 Mbps of upload bandwidth from a connection with 25 Mbps of upload bandwidth, and free software from the Microsoft BizSpark program. Let’s see: 12 months of that revenue would be $480,000, apparently in less time than it would take to get a check from a VC. So, why should I take their check for about the same amount, report to a Board that does not understand my project and can fire me at any time for any reason or no reason, go from owning 100% of my company as a Sub-chapter S or LLC to owning 0% as a C-corp with all the associated IRS and SEC headaches with some hope of getting back to maybe 60% on a four year vesting schedule, that is assuming the Board doesn’t fire me first?As a solo founder, I’m betting much of my life on my project and, thus, have thought about the chances very carefully; so, why do I want to load my project up with a Board that won’t even take 2 minutes to read a 150 line e-mail?Looks to me like Darwin is about to visit Sand Hill Road and Winter Street and lower a lot of office rents.My response now is simple: When I want to take a break from finishing the software (it’s all written and running and nearly all quite well tested but need to do some testing of the simple code of two of the Web pages), I send some e-mail messages to some VCs and, then, just let the messages sit there. Since getting a meaningful response is less likely than finding a ten pound solid gold meteorite, I am not looking for any response. Instead, if my project works and some of those VCs hear about my project and contact me, then I will remind them of an e-mail message they long didn’t respond to; should be fun! Already just from the past month, a significant fraction of all the best VC firms have such an e-mail message that they very likely have ignored — tick, tick, …!I’ve seen a lot of projects, in research, technology, and business, with good people doing good projects, and I’ve done some good projects myself, but as I look at VCs, I can count with my shoes on all the ones I might be willing to have work inside my company. I keep wondering how such people could be successful in business, especially based on technology and software, but then I get reminded of Fred’s post some months ago showing the poor average ROI of VC. Looks like Darwin is on the way.

  2. Otis Funkmeyer

    One of the most interesting pieces of advice Dali gives is secret # 3, “Slumber with a Key”. This is a tool Dali used to get into the initial stages of sleep and train in lucid dreaming. This method helped Dali create his surreal visions and aided his development of the paranoia critical method. In essence “slumber with a key” is a short nap.The instructions are to sleep in a chair, while holding on to a key. One’s arm should be outside the arm of the chair. Next step…fall asleep! As we drift into sleep our body will relax. Naturally, when we slip into dreaming sleep our muscles will relax further, thus our arm muscles will make our hands open and the key we were holding will fall to the ground. This will wake us right up, hopefully in the middle of a dream. One should quickly remember this dream, analyze it, and use it for inspiration.

    1. fredwilson

      That’s neat

    2. Max Yoder

      I nap like crazy. Will try this out this week!

    3. leigh

      fascinating. i wonder if i can fall asleep in a chair 🙂

      1. Robert Holtz

        I do it all too frequently without aiming to do so. The trick is to deprive yourself of necessary sleep for days on end. You’ll be a pro at it in no time. 😉

    4. JLM

      .Haha, the application to life of such simple things is almost universal.I used to make sleepy soldiers on guard duty sit similarly with a hand grenade in their hand. Dropping the grenade woke them instantly. There is no sound like the thud of an incoming grenade — armed or otherwise — to wake a soldier up.In wartime, sleeping or drunk on guard is punishable by death IAW Article 13 of the UCMJ. Where I was at the time, not in a declared war zone but where we were receiving hazardous duty pay along the DMZ in Korea, it was punishable by up to 10 years imprisonment.My platoon sergeant had a unique punishment all his own. He would punch the sleeping guard in the side of the heard. He was a mountain of a man from the Mississippi Delta. He packed a Hell of a wallop. I think I would have taken the jail time.JLM.

    5. Russell

      Hey B, thanks for that gem. Are you a regular here? How’re you doing?

      1. Otis Funkmeyer

        IS THIS RUSSELL BRADLEY-COOK!?!? AM I TRIPPING!? I was just thinking of you I passed through London for a night I’m in Barcelona now heading to Rome tomorrow just living the dream.And yes, I’ve been a regular reader of AVC since 2006! Which is around when I last saw you! I’m gonna be in Berlin in May and I’m doing a small show in Brussells also in May maybe you can catch a RyanAir to Berlin or a Eurostar to Belgium and we can hang! WOW!

        1. Robert Holtz

          Clearly you each willed one another into this mutual meeting place from within your dream states. ^^

        2. Russell

          AVC, where everybody knows your name! Would be great to catch up in London town. Sounds like your plans are still flexible, so definitely give me a shout on my gmail to link up.–

  3. Pravin J

    Agree with the post. And if you are having such nightmares, you need a vacation Fred.

    1. fredwilson

      Just had one

      1. Matt A. Myers

        You created space with the vacation, which allowed space to be filled –“You must let go of the old to be able to grasp the new.”The dream was just processing your brain needed to do but wouldn’t have been able while constantly firing the same neural pathways; Vacations and change give those pathways a break — a regular yoga and meditation practice gives you as many mini-vacations as you want. 😉

  4. LIAD

    Would it be any less of a betrayal on your part if he had failed and you didn’t want to back him again?

    1. fredwilson

      I guess that depends on what happened along the way to failure

      1. LIAD

        It sounds like…If things go well, you want an option on newco at a price which doesn’t take into account the previous success.If things go badly you want to be able to cut and run.- asymmetric

        1. Matt A. Myers

          A better way to view any situation is to eliminate internal belief that you’re owed anything, which will lead you to better seeing the real value of a situation.If they were super successful before and you’d like to invest in anything they do in the future, that’s a pretty strong signal – the strongest you’re going to get.It’s possible valuation won’t be reasonable based on all factors, though that’s how a convertible note can help create a buffer to bring two parties together.

        2. LE

          Well while it is true that Fred is not putting a dime into a company that is not in his self interest (or of his partners) it is also true that since he is a gatekeeper (like Johnny Carson was or Lorne Michaels is) there is plenty of arbitrary shit going on. In other words this is not like a coach picking players with stats. This is an analog decision.As such there is a slant toward showing appreciation for what someone has done for you or that they have taken a chance on you which led to something big.In the case of failure it is totally acceptable to use that as a factor in deciding to go forward or not.I don’t have a problem with that.

          1. LIAD

            My role here is provocateur

        3. sigmaalgebra

          Good Board members are tough to find. If this guy thought that Fred was a good Board member the last time, then he may want Fred again as a Board member. Even if look at each decision as self interest in a competitive world, in such a business context a good history should be worth some green.Even if the guy didn’t need any equity funding, just to get Fred on his Board it might have been worthwhile to let Fred have some skin in the game.

  5. Mark Gavagan

    Might be time for a vacation…

    1. fredwilson

      Just had one

  6. Michael Frank

    Interesting! So related question, if you left USV and decided to start a company, let’s assume you could command an extremely high valuation (if you wanted) for the seed round as you have a big following and lots of experience with successful startups. Would you then raise a couple million bucks at a fairly low valuation (e.g, maybe $10M post) from USV or people you already worked with or would you raise the same amount from a less price sensitive but also credible investors who would give you a post of $50M or $100M. Just curious?

    1. fredwilson

      I am not sure I would raise money. Just being honest. If it could fund it myself I might do that

      1. Michael Frank

        haha – that’s sort of a cop out ;-). I totally agree that self funding a seed round would make sense for you because you are already secure financially and have the resources to self fund a seed round before potentially going to institutions to scale once the concept was proved out. (similar to what Evan Williams did recently with Medium).What I was getting at is its hard for me to fault entrepreneurs for taking a much better valuation if the markets willing to give it to them and those investor are credible. Was interested in your perspective

      2. Anthony Serina

        If you ever started a company you would get more support, more downloads, and more engagement from day 1 than any other entrepreneur out there. Even more than jelly. Just trying to bait you into flipping! Start a reverse trend, VC to entrepreneur.

  7. Anne Libby

    140, how interesting. I love dreams — in a different life I’d be a Jungian analyst. Or maybe I’d be in Jungian analysis.Hopefully this won’t be a recurring dream for you, like the one where I never finished/passed calculus. Or I’m not prepared to teach a class.

    1. freud

      isn’t it odd that no one mentioned the twitting elephant in the room (and dream?)

      1. jung

        this dream also reflects the quintessential (rather disturbing) American notion that you’re worth what you’re paid (or what you’re offered, or how much money you have). by that measure, you’re worth more than most of us can imagine.but the truth is that you’re worth who you are; and in that context, i think you’re a worthy man, fred. so go back to sleep 🙂

    2. fredwilson

      yeah, i was wondering about the $140 number.

      1. Robert Holtz

        Very good point. $140 is rather specific. Think back on any recent incidences of that number in your everyday waking thoughts and discussions. You left yourself a clue there.

    3. ShanaC

      I actually could see that happening

      1. Anne Libby

        Hopefully you don’t mean that I’ll get a call from my advisor one day telling me that I never actually graduated, because calculus.

        1. ShanaC

          No, becoming a jungian therapist

    4. Alex Wolf

      I took physics without having taken calculus at Exeter, at my father’s insistence and their resistance to his desire. I barely passed – I know how everything works from being an athlete an highly kinetic learner, just can’t do the math for you. I thought it was awesome and didn’t care about my grade or GPA.

      1. Anne Libby


      2. sigmaalgebra

        Suppose hit a baseball and it pops up, goes for some distance, and then hits the (flat) ground. Suppose we are told that the path of the ball is a parabola so that for some constants a and b, at distance x from you across the ground the height of the ball isf(x) = xb – ax^2.For the slope of the ball at x, for a relatively small positive number h, we can approximate the slope by(f(x + h) – f(x))/ hThen we can let h go to 0 and see what limit we get; that will be the slope.For the term bx, we get(b(x + h) – bx) / h= bh / h = b.For the term -ax^2, we get(-a(x + h)^2 + ax^2) / h= (-ax^2 -2axh -ah^2 + ax^2)/h= -2ax – ahso that as h goes to 0 the limit is just-2ax.Denote the slope by f'(x). Then adding the two results, we have that the slope isf'(x) = b – 2axThe top of the parabola will be where the slope is 0, and that isx = b/(2a)Then the height isf(b/(2a)) = b^2/(2a) – a(b/(2a))^2= b^2/(2a) – b^2/(4a)= b^2/(4a)The slope f'(x) is called the ‘first derivative’.What’s not to like?

  8. AlexHammer

    Thank you for sharing. I like and applaud your honesty.We get upset with others, but each of us has our own path in life and past association doesn’t necessarily guarantee future association.As is said, “kisses aren’t contracts”.

  9. William Mougayar

    Good thing it was just a dream. All I take from it is that you’re so passionate about investing in great entrepreneurs, that you even dream about it.

    1. leigh

      You are such a glass half full guy — I used to have waitressing dreams when I worked in the service industry — no one else showed up, i was all alone, the chef was screaming at me, everyone wanted something at the same time — weird, i still have those dreams except now they are about running an Agency and the screaming people are my clients 😉

  10. AlexHammer

    PS Loyalty seems to be an issue with you in regard to entrepreneurs (not just in this dream).Of course we do not live in a perfect world by any means, but loyalty is generally earned.We have to not only earn it, but keep earning it.Thank you.

  11. JimHirshfield

    Sometimes a cigar is just a cigar.

  12. William Mougayar

    Time for some Eurythmics.”Sweet dreams are made of thisWho am I to disagreeI travel the world and the seven seasEverybody’s looking for somethingSome of them want to use youSome of them want to get used by youSome of them want to abuse youSome of them want to be abused….”…

  13. AlexHammer

    PPS I NEVER get a response from Fred because (it appears to me) that he has labeled me as disloyal (I work hard to always seek to provide value in comments, etc.)But at least he hasn’t blocked me from posting comments.

    1. ShanaC

      Think it’s more of an email bankruptcy problem

  14. robert levitan

    Thanks for sharing.I have no training in interpreting dreams but two things jump out at me. First, you obviously care about loyalty with business partners. Second, you suspect (at least subconsciously) that valuations may be getting too high in the current market.

  15. Matt A. Myers

    In this instance it seems that you’re taking it personally – but it’s really about them. You did learn something about them though. Inherently there is nothing wrong with a person making a decision solely based on money and valuation – and so now you know you wouldn’t be investing in them.As you point out it definitely ignores the nuances and value inherent in relationships. What if this company truly could have a pre-money valuation of $140mm – but it’s just outside your price and/or risk range? There are other ways to view that dream to make it not feel like a nightmare.There are also other forms of investment that could probably keep everyone happy enough – mainly convertible notes – though you may not get the % equity you prefer, though if the company does as successfully as someone reasonable seeking such an amount, then you likely would have done quite well return wise — maybe just not an automatic 100x on your money.I think this is why convertible notes are nice, and more fair – because honestly it’s dishonest to plop all investment opportunities into the same pile, to group all of entrepreneurs together with the same rules; Yes, I’m sure many investors do make adjustments for this scenario – though probably not as specially for as many as one would think.What if it was Elon Musk saying “I have an idea, I need $140mm for it.” You’d probably be ecstatic and doing a happy dance internally at having that opportunity. And based on Elon’s character I don’t think he’d take money he’d waste – though he certainly knows the poker hand he’s holding now and knows he has lots of options for money – and with his $5 billion battery factory play – he’s going to very rapidly continue on a hockey stick growth curve to start rapidly improving all of humanity; A prediction I made earlier is Tesla will be worth $200 billion in 5-10 years – market cap might reach that sooner though if the markets wise up to understand everything he’s doing though.Most investors seem to stick to similar rules and boundaries for investing money because they know options for most companies looking for funds are limited, though that’s an fabricated constraint and might prevent one from the seeing the real value of a situation.

  16. Richard

    You made an offer to invest in a team without vetting the product? You (and the startup) are definitely dreaming.

  17. jason wright

    what is your primary ‘measure’ in life?

  18. pointsnfigures

    Freud says it’s your mother.

  19. Alan

    Beats my nightmare about not attending that math class all semester.

    1. Elia Freedman

      Pitching naked was mine.

      1. pointsnfigures

        Were you a fastball pitcher or junk ball pitcher?

        1. Elia Freedman

          Fastball, slider, change. I don’t know how fast I threw.

      2. Alex Wolf

        You are describing an NYC coop interview….

        1. Elia Freedman

          Baseball, factually. 🙂

    2. fredwilson

      i still get that dream. but less and less these days

    3. Anne Libby

      Definitely a variation of my “calculus” dream!

    4. Donna Brewington White

      I never imagined that other people had that same dream! I wonder what it means.

    5. aminTorres

      Weird, only nightmares I ever have are me realizing I am going to fail a class cause I missed attending all semester. I can never make sense of it cause I never missed a single class in college.

      1. Alex Dunsdon

        Me too. Weird

      2. Nick Ambrose

        I have similar ones … either math or .. French !!! Weird

  20. AlexHammer

    You dream big dreams because you have a big life.My dreams (unfortunately) may have been a bit smaller than yours.

  21. pointsnfigures

    Maybe it’s empathy:… How Sleep Deprivation Drives Failure Rates in Startups

    1. ShanaC

      Yeah, this is why I try yo sleep enough

  22. Alex Wolf

    Perhaps most interesting to me was your reaction to leave and not negotiate, which is a big part of your work. Betrayal is a very hard thing and many people shut down to close out emotional response which feels bad. The curiosity to find out why they felt that was not then allowed to be a topic your rational mind could explore. Being able to discuss how the perceived betrayal came about is when things become fascinating and takes responsibility on one’s own part. I have learned to stay in those conversations even when they hurt (perhaps I drank a lot of the Jerry kool aid).I learned in parenting tantrums are an internal conflict more than a conflict with external forces – inability to reconcile the now.

    1. leigh

      Hey Alex — I checked out your site and product — you should ensure a way for people to get a reminder when your ipad product launches — i’d totally be interested (my 5 yr old is a puzzle aholic and always looking for new interesting stuff for him that isn’t about Pokemon) but i’ll never remember to come back 🙂 Just a thought….

      1. Alex Wolf

        Leigh, thanks for checking us out! Yes I am on press last week and this for the board game we crowdfunded (many AVC people pitched in!). The app is getting the last 1% of code. Set to launch in 2 weeks. I will for sure add you to my ping list.Also, it is the Perfect game to play if you are watching the Cosmos and saw episode two on evolution. We have a game I designed 2 years about natural and artificial selection and mutation which is also a perfect way to learn by playing. And many more games and puzzles. #ilovemyjob

    2. fredwilson

      yeah, the tantrum part was interesting to me too

  23. leigh

    Loyalty in business is a strange animal. I’ve always hated the phrase “it’s just business” bc it implies that people don’t matter. At the same time, sometimes one has to make hard decisions which is always gut wrenching. I prefer the phrase, “I’m running a business” – it implies a continued effort to walk the right fine line in the loyalty vs. betrayal conversation.

  24. Jeff T.

    So those guys that raised all that money for the app Color awhile back must have had crazy entrepreneur valuations. I wonder what their market value is nowadays?

  25. Kirsten Lambertsen

    There’s a reason that so many great stories (and a lot of Shakespeare) are about loyalty.My husband and I are currently marathon-watching “Breaking Bad,” and the loyalty theme that threads through it is a big part of what makes it so compelling – each character’s definition of loyalty.Hearing about other people’s dreams is usually boring. But this one was great because it would make a great story.

    1. kidmercury

      +1 for breaking bad…..amazing show!

      1. Kirsten Lambertsen

        I resisted the entire time it was on television because I had a traumatic experience living above two meth heads in SF.But now I’m a fangirl.

      2. Harry DeMott

        No spoilers please – season 5 half way through!

      3. Russell

        Hey kid – you haven’t been around in ages…must have been off streaming netflix! welcome back to the bar!

    2. sigmaalgebra

      Good grief! An insightful, elegant post. It’s like the humanities courses again where the bright girls and their awesome literary talents and social insights made me feel like an idiot and where I didn’t have a clue or a chance and right away had to run back to math and physics!For lessons in loyalty, duplicity, etc., I liked the first two Godfather movies; sadly I don’t know how realistic the examples were, but they can be entertained as conjectures.A big issue in society, especially business, today is ‘back channel’ communications, that is, A going around telling bad little stories about B to C, D, E, …. Suddenly B is in deep trouble where, still, no one can point to anything B did wrong.Gee, Shakespeare! About all I got out of it, for four years in high school and two more in college, was that some of the themes were deception, duplicity, manipulation, self-deception, etc. I missed out: In the seventh grade there was a dance teacher in the town who offered a dancing class, and about two dozen of us showed up. Mom came the first night and used her considerable ‘social climbing’ skills to arrange ‘car pooling’ with two of the other families, each of which had a girl in the class. I didn’t actually hear the screams and cries of the girls once they learned that they had been set up in a car pool with me, a total nerd. So, it was the three of us in the back seat of a car with me in the middle. That didn’t last: The girls objected to the seating arrangements, and from then on I got to ride shotgun! Time passed, and at college it turned out that one of the girls, the brighter one, was an English major. The college was not large, but, still, I never saw her on campus. Gee, if I had known that she was on campus and an English major, then I would have invited her to the campus coffee shop, bought her coffee, and had her explain Shakespeare to me while I listened a little and watched a lot! Bummer. Missed out again!Men who want more of you girls in technology and business better be careful what they wish for because they may get it and, thus, find that the competitor that knocks them out of business is run by some of you girls! Guys, the good news is that the girls tend to be pretty, sweet, insightful, perceptive, caring, sympathetic, empathetic, supportive, cooperative, gentle, patient, etc., but those will be little comfort if you go from being a founder owning 30% of a $200 million post money company down to asking the girls if they “want fries with that”?Guys, we still have a few advantages left! At ‘Business Insider’ today was a collection of pictures of Marine DIs and their recruits. Well, all the recruits had on the right facial expression except one who had a happy grin and was not taking his DI seriously. Yes, the DI was determined and shouting, etc., but she needed to shop in the petite section, and he was a good foot taller than she was, likely had twice the muscle mass, with likely 50% more strength per pound of muscle, and with one swift kick or just a one arm pass could have put her through the goal post uprights at the end of the parade ground. The Corps might not have appreciated his using her for field goal practice, but neither was she going to be a very compelling DI for long! Still, such tactics are going out of style; guys, we are at risk!

  26. Liban Mahamed

    The dream maybe related to your suspicion/feelings of valuations getting out of a handRemember you are sitting at a great place to evaluate the industry You will feel the winds of the storm before mostJudging by the multiples of the recent tech IPOs and how money is flooding to startupsThere will be blood in the streets

  27. 3agonists

    if such a successful venture capitalist like you even feels betrayed, how many entrepreneurs would have felt that way…just curious how entrepreneur-turned-vc and vc-turned-entrepreneur would look at this situation, any comments?

  28. Twain Twain

    WOW! What a coincidence; this morning I had a dream which I remembered too and I shared it at 06:25 on Google Plus. It was about the Photovoltaic Effect in relation to Perceptions and AI.I should say that “Photovaltaic Effect” is really a random, out-of-the-blue term to appear in my dreams! I had to Google it when I awoke because I had no idea what the processes involved.”Just awoke from a dream about this. Could this be my version of Kekulé dream which led him to discover the structure for benzene?Why on earth would I dream of this topic in such a technical way?!Maybe it’s somehow related to my work on Perceptions. It’s not absolutely clear how yet — in my waking hours I’ll have to discover this; in my sleep world, the Universe may just have given me a big clue.There were whiteboards filled with equations, diagrams and comments attributed to me. The white board is in a computer lab in an institute I have not been or seen yet in real life.A young female scientist inside the lab has called me. I have to go into a less busy room to speak with her.Then her call is transferred to a much older male scientist and he asks with a mixture of awe and bemusement at the audacity, “Are you the person who invented this…car?”In the dream, we both know “car” is only an analogy. He means I’ve discovered a fundamental law for the movement and transformation of atoms as they affect our Perceptions and computing.It’s along those lines.A bizarre yet amazing dream to have. Now I need to somehow use this big clue from the Universe and research & apply it in real life to what I’m working on!”

    1. Twain Twain

      Another really bizarre dream I remember having involved Jack Dorsey. Bizarre because at that point I had never even watched a video of Jack Dorsey and certainly have never met him. I had also never been to SF at that point or to anywhere that remotely looked like the place I saw in the dream.We’re in this huge converted warehouse by some docks. There are trestles filled with people brainstorming.Without going into too much detail…(because the business idea and its execution might be worth something)………We’re working on a tablet which is about 13″.Even more bizarrely, the iPad Mini had just been launched. I remember waking from the dream and thinking, “Why was it so big when Apple’s gone mini?”

    2. fredwilson


      1. Twain Twain

        I’ve now worked out it must be a clue about the structure of microchips necessary for machine intelligence.The “photovoltaic effect” is most often associated with solar panels and the conversion of light into electricity so it’s bizarre for me to dream about this term.However, once I read about the conductive, semiconductive and insulative bands whereby the electrons are not blown off an atom but can co-exist — unlike with the photoelectric effect………I had a mini “Eureka!” moment.At the moment solar panels and computer chips alike are built as planes.The electrons traverse along these planes.

        1. Dave W Baldwin

          It really would be cool to jump into the future and see what wins in this set up. At a meeting back in ’08, many thought this East European guy (he was cool) was going to get into a fist fight with me over my belief we will figure a quazi liquid set up, something that can give a shape to chemical which I can’t see doing via wire. Giving a meaning to the shape of the chemical agent would then interact with another changing the “thought” moving into having those “thoughts” not be too noisy.

          1. Twain Twain

            Dave,Have you read this paper “Consciousness as a State of Matter” by Max Tegmark, a Professor of Physics at MIT, yet?*…He postulates for “Computronium” and “Perceptronium” and discusses how the Quantum Physicists haven’t solved the Probability Paradox or the integration problem yet.There’s also a passage on the Hopfield theory which has implications for how many BITS there can be in a network.This itself has implications for…….how many Bitcoins can be created (fredwilson ).If the Hopfield theory does not hold and there are actually more than 10(power7) bits……..There can be more Bitcoins in the network.Of more relevance to me, though, is this emergent model of the mind as being perceptual as per the Geek article on Yale’s research: “…we “see” it in both the visual and emotional brains, evaluate it on a visual and a personal level, and look at it through rotating lenses of trust, safety, sex, and more.”This is a marked leap from the Rationalist Scientists’ and the French philosopher de la Mettrie’s assumptions that our minds are like machines: logical, rational, probabilistic, geo-spatial.These developments recognizing that we see through prisms other than logic-rationality-probability-geopositioning opens up another world of opportunities for us to build Intelligent Machines in this generation.

          2. Twain Twain

            Ah and, completely independently of and before Tegmark’s paper was published, I’ve always believed that neither metals nor silicon are the optimal media for computer chips if they’re to simulate the media (i.e. vessel) for how we think.To mimic the way we think, computer chips would also need to be more similar in structure and state of matter to our brains.And that Perceptions are at play which are different from pattern recognition. Our brains have an ability for both but the machines are only starting to be able to do the second.

          3. Dave W Baldwin

            Looking at the mouths on the photos remembering our seeing things two ways is cool. Doing a favor for part time art teacher who had surgery Friday, taking his classes this week. One student is all tech and wants to go quantum. Will show him that tomorrow going both science and art.

      2. Dave W Baldwin

        Per the MRI mind reading breakthrough link above, the hard part with a dream is all the variables like (A) importance of $140mm, (B) do the founders represent their self or a bigger group/trend, (C) is what you take upon waking missing what could have been more important in the dream itself?Since you’ve had some big sale and IPO activity in the past 18 months, I bet you will have that aha moment in the next 4 days.

    3. Dave W Baldwin

      I’m putting the link from due to it having the shots from the MRI readings…Would be cool to find that still of the whiteboards and reduce the noise on the equations.

      1. Twain Twain

        Thanks, Dave. Even more bizarrely……..After reading that great Geek article on mind-reading breakthrough by Yale researchers, I read this article which was linked at the bottom of the mind-reading one.It’s about the end of Moore’s law:*…It’s now even spookier I had my “Photovoltaic Effect” dream last night!The reason is this. My thinking about Perceptions and Machine Intelligence has been along 4-bases:SOFTWARE==========(1.) Probability and positioning are the tools by which we can do pattern recognition (proximity and correlation of pixels) which is how AI — whether Google’s or FB or DeepMind — is able to identify objects in photos.However, probability and positioning are not the tools which can enable us to measure perceptions and meanings in those photos or videos or, indeed, in text.(2.) Meanings are also not appropriately structured in current approaches to sentiment technologies or in semantics — including by Apple SIRI, Powerset in MS Bing search or in Google search itself. This is because the algorithms of these systems are mostly based on probability and positioning.So…there’s an opportunity gap here.HARDWARE==========(3.) The information (electrons) in our brains don’t travel along X-Y planes so microchips synthesizing and replicating this is probably not an optimal structure for Machine Intelligence.However, even if we were to stack the microchips up as X-Y-Z in 3D vectors, it would still be about frequency and speed of processing and not about signal attuning by the microchips.In fact, IBM and Intel are both researching 3D and Perceptual Computing chips:*…*…(4.) Signal attuning of the information — if Probability is not the tool —cannot be via the binomial rules of AND-OR-NOT which has informed the way we’ve routed electrons (aka electricity), to-date.This is also connected with the, as-yet, unsolved Probability Paradox at the heart of Schrodinger’s Cat problem for Quantum Information itself which Einstein also commented on.The cat (an analogy for an electron) is both dead and alive.Probability and binomial routing of the information (the electrons) can only model for a scenario and outcome where the cat is dead OR alive.So…in hardware too there is an opportunity to build a chip structure that synthesizes Perceptions in Machine Intelligence with more accuracy than probability can provide.Ergo, the Universe of dreams showing me the words “Photovoltaic Effect” prominently has added new tools of thinking for me re. Perceptions and Machine Intelligence.It’s not a term I’ve read or used in my daily life so for “Photovoltaic Effect” to pop up like that in my dream this morning is really really strange and inexplicable by conscious reasoning.It’s an intuition that somehow sparked in my unconscious reverie.

        1. Twain Twain

          I should add that I’ve focused on the software side so far.Now I’m thinking I may need to start building some motherboards and enrolling onto some Electronics Engineering classes!

        2. Dave W Baldwin

          Yes, 3D is what is needed long. Thanks for info. Have to go do Lions. Send your email to [email protected].

        3. Dave W Baldwin

          Ha! The IBM story regarding electronic blood has diagram that matches what I thought and got into that argument in ’08 I mentioned in one of my replies. The difference is my thinking of the boards being horizontal rather than vertical. I’ll have to ask Sam Adams if he ripped me off… JK.

        4. Dave W Baldwin

          Regarding Intel/Nuance, it is nice to see Micro is getting something:… If the Cortana works as claimed, that will have big impact.To go with Fred’s dream regarding the bigger pre money, we are moving to the time I’ve mentioned will the user will by the “assistant” instead of the phone. The “notebook” will make a difference and is what I was after, but unfortunately the Tech guy I was working with pushed a different route that was not right.

  29. Timothy Meade

    Sounds like you dream of Color.

  30. Yaron Samid

    Had you seed invested at $140 pre in the company you were celebrating exiting, would you have been happy?

    1. fredwilson

      i guess so

  31. PhilipSugar

    Now don’t be like my wife and be angry at somebody over it because it “happened” :-)Kidding aside, I have been approached a couple of startups for angel funding.I know I am the self appointed cranky old man, but the valuations blew me away. Here is how my mind works: I put up enough money to fund a team of five good people for a year, in the end I get less than 10% of the company if it works. If it doesn’t everybody walks away whole except for me. What am I not seeing? I am with you, I’ll just fund it myself.Oh, its in healthcare, Its HOT baby. Look at Castlight. I have an email the day that went public trying to figure out how I could short doing anything but a naked short, because I didn’t want to worry short term about margin calls. Damn I wish I just did a naked short.

    1. LE

      I know I am the self appointed cranky old manHow narcissistic of you! Now here I thought I was the cranky old man.

  32. PhilipSugar

    Also my example was for a “low” seed round. Blows my mind. What roughly are the quintiles these days for pre money seed investments if you don’t mind me asking?

    1. fredwilson

      leaving aside the absurd, top talent gets $10-20mm pre for a seed round. low end is $2-4mm pre. median is probably $4-6mm.

      1. PhilipSugar

        Thanks. Confirms my median of $5mm is about right. Damn that is tough for an idea.

        1. pointsnfigures

          In 2012, the Angel Capital Association reported that there were 66000 angel deals in the US. The median pre-money val was 2.5M, and the median raise was 600K, with a 3.1M post.

          1. PhilipSugar

            Thanks. You have to hit some serious long balls with numbers like that.

      2. ShanaC

        What defines top talent?

        1. fredwilson

          That’s subjective

        2. Lil Boyd

          your questions are a nausea. Wonder if you could stop asking for professionalism sake.

  33. iggyfanlo

    Fred, you are extremely thoughtful and forward looking and it’s why you are asuch a talented VC. I think this dream is your thinking that the balance of power in negotiations is changing towards “successful”, rpeat entrepreneurs who can essentially fund projects themselves or else raise prices

    1. fredwilson

      yupppppp. that’s how i read it as well.

      1. JamesHRH

        James H Clark is your nightmare? That’s not a good sign for the state of the market.

    2. Russell

      Change happens in funny ways. Somehow the great people continue to find ways to add value. Reminds me of a great song by Sam Cooke – A change is gonna come

  34. Harry DeMott

    Too much fermented grape juice with a high clearing price the night before

    1. fredwilson

      we went to 15 East and did the Omakase actually. it was fantastic.

      1. Harry DeMott

        Went to MSG and did the Frenchie at the Sausage Boss. You think your living a nightmare there check out these stats: been to 18 home Rangers games this year – my record is 6-12. The Rangers home record is 18-7 so I have seen 2/3 of the losses and only 1/3 of the wins. The Blueshirts have the number one road record in hockey – my road game was a 9-2 drubbing by the Sharks – so 6-13 on the year. Now that’s a nightmare!

        1. fredwilson

          it is better being a Rangers fan this year than being a Knicks fan

          1. Harry DeMott

            Not just this year – all years I think.

          2. fredwilson


      2. ShanaC

        Things I want to do one day

      3. PhilipSugar

        Sometime we should go out an eat. I think you like it as much as I do. I am impressed you stay so thin.

  35. Matt Zagaja

    Money is a reflection of what we value, and my takeaway is that you (and presumably USV) place a large premium on loyalty. In politics it might mean toiling away for a candidate that has no chance of winning; in business it might mean taking a chance on an entrepreneur whose idea is just a bit too zany. When you work with others that also value loyalty and one of you succeeds, it is extremely rewarding. You hope that the people you work with remember that chance you took, but unfortunately sometimes they do not.In Gary’s video yesterday he talked about how he has no expectation of landing his right hooks. It’s a good view to take, we do not like to view our relationships as transactional because it’s a bit too cynical. However it does not make it less disappointing. Whether it’s someone not buying Gary’s book, an entrepreneur not remembering the VC that took the chance on him, or a politician who worked hard for some constituents asking for a contribution we like to think our colleagues will be there for us when we do something we believe is important after we are there for them.

    1. JLM

      .Santa, the Easter Bunny and loyalty. I admit to believing in Santa regardless of what my mean big sister told me. The other two, not so much.Loyalty is a very funny thing when money is involved.The difference between the “best” VCs and the “worst” when a deal goes South and it is time to liquidate things?The best VCs will let you get out of your underwear BEFORE they begin to cut them up for rags.Perhaps I am a bit cynical?JLM.

      1. PhilipSugar

        I do think there is a difference.When you’ve had a bunch of success it affords you the ability to be gracious.Now understand there are those that never lose the sharp elbow edge, but they are regarded as bitter old women, instead of stateswomen.Yes in NYC that is considered fashionable to be known as a shark, but in the rest of the U.S. not so much.

        1. JLM

          .Plan for the worst.Expect the best.Hope to be pleasantly surprised.Guys in business and the VC business don’t know the first thing about tough. It’s all like perfume, applied.JLM.

        2. LE

          When you’ve had a bunch of success it affords you the ability to be gracious.Exactly. And it’s amazing how many people don’t realize that fact.They think that doing the right thing is some over riding principle that can be practiced day in and day out and always leads to great results.And when it is in fact something that you earn over time the ability to do since the cost of doing the right thing doesn’t impact the bottom line. And you have the money to take a chance or lose a bit because you have enough.(But you are exactly right that some people never lose the sharp elbows that is absolutely true.)Many years ago I had a developer working for me that couldn’t finish my work because he had some things to do for AOL. So in a sense he I guess you could say, screwed me. [1] I understood though that AOL was a much bigger opportunity than whatever I was offering so although it bothered me I did understand (perspective and framing).Later of course AOL canned him (budget thing) and he was down to his last dime. So I advanced him $3000 (because I could afford to take the chance)and it all worked out.I didn’t do it because I’m such a nice guy. Although despite what anyone might think I am a nice guy. I did it because I took a calculated risk, I wanted him to do work for me despite what he did before (I’m normally a fool me once type person but this was different for a few reasons.)So in other words I evaluated the pros and cons and made a choice to advance and continue to give this person work. Had very little to do with generosity or doing the right thing or any of that.

        3. LE

          Yes in NYC that is considered fashionable to be known as a sharkComes from the overwhelming number of immigrants that influence the culture there. Also the fact that it’s such a big place so it’s much easier to burn bridges and not have the impact.Imagine being, say, a realtor in a small town and being an asshole. You’d have a hard time staying in business. You have to have cooperation with other realtors. While that is true in NYC (and maybe realtor isn’t even the best example) it is definitely less true.In NYC there are fresh kill all over the place. So you have a few factors going on that makes what you observe possible.

  36. kenberger

    Your nightmare is many peoples’ dream, to even be in that situation. Certainly mine.

    1. fredwilson

      i guess that’s right. i still woke up with my heart pounding

      1. LE

        FYI that’s why you remember the dream.You remember the dream because you woke up because you were having heart palpitations. And as a result you were aware enough to remember what was going on.Point being it’s not the dream that woke you up but the palpitations.Very possibly though that general or a specific anxiety gave you the palpitations but could also have been alcohol or something in the food or something else.This happens when you get older.

  37. Pete Griffiths

    Haha. That’s pretty funny. You do realize it is going to appear in an episode of ‘Silicon Valley?’

  38. JLM

    .Fred I doubt anyone in the VC scramble has ever made such a heart wrenching admission. A look right into your soul.Never get mad at the money or an entrepreneur — they will both always change their minds.Somewhere there is an entrepreneur who has just awoken from his own nightmare — he did a deal with you a bit too early and made an oblation of the pre-money valuation.Live your hopes, not your fears.JLM.

    1. fredwilson

      yeah, i liked the observation from someone else in these comments that i threw a tantrum instead of negotiatingi forgot to take your constant advice that if you want something you must negotiate for it

      1. JLM

        .Hell, I’m betting you could have gotten him down to say, $125MM?It would be interesting to see how many entrepreneurs who make it to the pay window come back for more VC $$$ when they could otherwise fund their next deals.I have always had the theory there is some merit in having at least one other person on the planet embrace one’s idea before throwing money at itJLM.

        1. LE

          there is some merit in having at least one other person on the planet embrace one’s idea before throwing money at itI think that assumes that people don’t fuck up and make mistakes and/or are biased. And we both know that people are. So the fact that one other person (or 6) wants to throw money at your idea, well, does it really mean that much?Look at all the real estate deals that have gone south where multiple people think that it’s a good idea. And I’m not just talking about the advisers that get to eat at the trough and stand to benefit so they have a bias. Or someone’s wife (when said wife isn’t exactly “a Joanne”).when they could otherwise fund their next deals.As far as funding your next deal with your own money vs. OPM isn’t it also about spreading the risk and hedging a bit? Or bringing in expertise? Or contacts? Pigs get fat hogs get slaughtered.Or what about having someone else with a vested interest that can take action and back you up if, for some reason, you take sick and can’t perform all of your duties? Someone who stands to lose that is not an employee etc? An investor that is motivated to protect their investment.These are all soft reasons and may not matter. Or they might.

          1. JLM

            .It is about all those ideas. Very astute observations. Still, at least one other person is a good thing.JLM.

      2. LE

        I guess growing up in a business family and being in business in one way or another over so many years people’s business behavior almost never surprises me as they generally tend to operate in their own self interest. You know the same way in sports a player generally tries to win the game and not help their opponent defeat them. It’s business.You kind of operate in this rarefied world that is a bit different but also with people who are pretty young and kind of naive. And they have nothing to lose and no obligations so perhaps they are a bit more giving or cut from a better bolt of cloth. [1] I think you’d be surprised at the shit that goes on in business and how people act in their own self interest a large part of the time.In terms of the people that you deal with (other VC’s) there would almost certainly have to be a code where you don’t burn bridges. Or at least if you do you do it in a way that “grin fucks” the other person to show they you care enough to grin fuck them.[1] Notice in this 2nd deal they have something to lose. And they don’t need you you need them (from what you are dreaming at least). Key difference.

      3. LE

        i forgot to take your constant advice that if you want something you must negotiate for itObviously but also could be that you’ve seen this pattern before and are having a reaction to the futility of trying to negotiate because you are dealing with someone who is gambling and that never ends up well.Obviously also you can’t negotiate if you have had an emotional reaction to something. You don’t have the control in your mind that you need.When you make your first deal with someone you might want to try the reciprocity (and consistency) techniques.In other words state up front, and get an affirmative reply to the fact that you expect consideration going forward in a loyal way. Doesn’t guarantee anything but I’ve found that it works because in many people it creates an obligation to remain consistent with something that they’ve stated in the past.



  39. LE

    I don’t really know what that says about the state of my mind or the anxieties I experience. But it felt like a betrayal. A slap in the face. We had worked closely together and had gotten to a very successful outcomeHoly shit it says plenty about the state of your mind.Obviously your mind, without the help of anyone else, came up with the entire dream. What did you eat for dinner by the way?The betrayal goes like this. You feel stupid. Because you did something for someone (even though when you do it also benefits you) and now you feel like a schmuck because you have been cast aside.Many times when people take out anger on someone else it’s because they are mad at themselves because they let themselves be taken advantage of. Or they trusted someone they felt maybe they shouldn’t have trusted in retrospect.Take the women or man who has been cheated on by their spouse.Take the fact that many times they have resisted temptation to cheat themselves.After many years, and many opportunities, their spouse comes in and/or they find out they have had a relationship that is ongoing. So in addition to all the other shock that goes with that revelation they also feel stupid. They have been schmucked.Or say you keep an employee that is sub par thinking they need the job. Then they walk in one day and they announce they are leaving at a critical time. You feel like a schmuck.

    1. fredwilson

      We had a sushi Omakase dinner. It was fantastic

  40. Guesty McGuesterson

    This happened to me, but from the “early employee” side of things.I had agreed to join a company that was still just two founders. They had not yet taken any sort of investment, and their product was still just a folder with some pencil sketches.I had never really gone through the “let’s build a company” conversation with somebody before. The way they pitched it to me was that my compensation would be denominated in dollars at a respectable number (about $10k/month) but would be paid as X number of shares per month. My mistake was to go along with this, since it didn’t feel very real anyway. We were meeting in coffee shops and building something, and that was the part I cared about.I felt like a founder, there from day one, and a part of me felt like we would work out something that was fair. Then, we got accepted to an incubator. The founders then told me they felt the valuation had doubled and therefore my shares/month would be halved. Never felt so betrayed.

  41. ShanaC

    Has something happened in your personal life with a close relationship?I tend to dream a lot about my problems in an indirect way. I think the vines might be a red herring to the feelings. It’s the feelings that are important I’ve found to working out the problem, not the symbols. (at least personally with similar sorts of dreams)

    1. fredwilson

      I don’t think so

      1. ShanaC

        Sorry I can’t be more helpful.

  42. Lou Landau

    I always wondered how VC look at such a scenario, being that Company B may be an offshoot from Company A (or something they have learned while working for Co. A, which you are a partner in), would you feel that have a right to be invested in Company B? and that is the “betrayal” you mentioned?

  43. Shauna Attikson

    Fred, How close is this to being real ?

  44. Dave Pinsen

    When this is your nightmare, life is good.

  45. pasmith

    I suspect the reason that Dream Fred was upset is that he realized that the only reason the founders could start this new company and ask for a valuation of $140mm is that the founders now had the ability to fund the new idea themselves . . . and that was the intent. The founders wanted to keep all the new company to themselves.The betrayal comes from the fact that without the commitment from USV (both dollars beyond the original business plan and the man months of hard work by Dream Fred and the folks at USV), the original startup would have failed at a dozen different times . . . particularly since Dream Fred had been integral in the business strategy pivot that was necessary when the original concept had not gone well.That explains Dream Fred’s completely logical and rational (if somewhat emotional) response. Why the dream? I will leave that to others who are clearly more qualified to respond.

  46. James Pool

    With all due repeat to not only you Fred, but the whole VC community, money is a commodity but great ideas aren’t. Anyone with more than a single synapse firing knows the whole “ideas are worthless” argument is just rhetoric to maintain the falacious status quo. The very fact the successful entrepreneur have many options funding their next project and VC’s don’t is the clearest description of the free market there is.

  47. goofy


  48. Elizabeth H (Lisa) D

    Valuation can be a reflection of market sentiment (group think) and the pricing of similar and recently priced IPOs, too. In other words, not always because of fundamentals.

  49. markslater

    i place huge value on the intangibles of a thoroughly enjoyable working relationship. I have one right now with the company and it makes me want to win even more.Having a known entity on my next cap table is something i’ll most certainly prefer should i have the fortune and opportunity to do another one. You can’t price patience, support and enjoyment in the startup world.

  50. Tracey Jackson

    I know it’s off topic – Did anyone watch Silicon Valley last night? My guess is yes. What did this group think? Sorry Fred to go away from your nightmare, I was just really curious. I thought it a cartoon.

  51. Andrew Hoydich

    “… To stay in business together.”It may have felt like betrayal or a personal attack and that’s ok. But you have to remember that it’s also business. Keep both sides in perspective.Says the person with no experience.It’s just my guess.

  52. paramendra

    Hilarious that you should have nightmares about these things. But I guess you are really into it. 🙂

  53. Silicon Valley Nerd

    So, wait. The deal closed and everything was good? They’re starting up a new deal … and you want in. And you expect preferential treatment …? It’s not “staying in business together” it’s a new shuffle. Would you give them a preferential term-sheet on the second go-around? Or is it just business? Or are you just mad because the stakes went up and you didn’t get an inside/backroom deal? Sure, I know how the game is played but putting this out “teh interwebz” doesn’t look good.

  54. Emily Merkle

    A subconscious uncoupling.

  55. Nadia McDonald

    When victory is won arrogance is the powerplay. Successful people float in the air, and they look at people beneath them as subordinates.

  56. TeddyD

    Something tells me it wasn’t a dream ; )

  57. JLM

    .Well played on so many levels.JLM.

  58. Vineeth Kariappa

    not doing well cause Fred cursed them in his sleep?

  59. Scott Barnett

    You’re taking me too literally Charlie. Essentially whenever a VC passes on your company, they’re telling you that it has no value – to them. I was just trying to be as extreme on the low end as Fred’s dream was on the high end….And my comment wasn’t meant to imply that VC’s are assholes. I mean, some of them are, but frankly there are assholes in pretty much every profession. It was simply to say that I don’t view Fred’s dream as a nightmare – to some extent, that’s daily life for an entrepreneur.

  60. JLM

    .Don’t let an old flame burn you.JLM.

  61. Scott Barnett

    Fair enough. From your perspective as an entrepreneur, does it matter? The value you need them to see doesn’t match the value they see – so there is no fit. So you don’t close a deal. It doesn’t matter how “close” you get – this is a binary discussion, not horseshoes 😉