Posts from entrepreneurship

Cliff Vesting

It is very typical that options and RSUs that are issued to new employees upon joining a company will have “one year cliff vesting.” This means that the first year of vesting into your options or RSUs will not happen until you have completed one entire year. After that vesting usually happens quarterly or monthly.

I am a fan of cliff vesting because if either the employee or the company made a mistake and the employment ends quickly, no equity has been spent on it.

But there are a couple of caveats that come with cliff vesting that I think should be understood by everyone.

The first is that while the letter of the agreement will say that the first year of vesting is not earned until the anniversary of the grant, if employment is terminated by the employer for anything other than cause within a few weeks or even months of the first anniversary, some accommodation should be made for the vesting upon termination. It is hard to put this in writing for a whole host of reasons, but best practice is for the employer to make some adjustment if the termination is close to the cliff vesting date.

The second point is that many companies include a cliff vesting provision in retention grants. These are grants that existing employees get to supplement the sign-on grant and help with longer-term retention. I do not believe it is appropriate to put cliff vesting into retention grants. The very fact that an employee is getting a retention grant suggests that the match has been a good one for both the employee and the employer and that the cliff provision is not necessary.

Many companies, particularly younger companies without experienced and sophisticated HR organizations, don’t understand these nuances and don’t factor them into their equity compensation programs. That is a mistake and it harms both the employees and the employer because a fair and equitable equity compensation program is of great value to a company.

#entrepreneurship#management

The NYC Fintech Innovation Lab

The NYC Fintech Innovation Lab is a program which accepts fintech entrepreneurs to develop their businesses with the assistance of senior execs at the leading NYC banks and insurance companies.

The key priorities of the CTOs and CIOs of the Lab’s partner organizations include:   cloud, cyber-tech, data, digital engagement, enterprise IT and sustainability.

If you are building a fintech company and are focused on one or more of these areas, you should consider applying.

Applications are due on December 1st. You can apply here.

The Lab will be hosting a virtual info session for interested applicants on November 10, featuring a panel discussion with alumni and financial institution partners.

#entrepreneurship#NYC

The David Prize

The David Prize is a philanthropic effort to find NYers who are doing amazing things and support them financially.

They recently announced five winners, you can see them here.

They have an open call for new applicants and you can apply here. The deadline is December 4th.

They are eager to support entrepreneurs of all kinds who are working to make a better NYC. If that sounds like you, then you should apply for a David Prize.

#entrepreneurship#NYC

Spreading Jam

If your job requires you to design, build, and ship software applications and you want a better way to get feedback on the application, the design, etc, then I have a suggestion for you. Try Jam. Or Jam.dev to be specific.

Jam allows you to turn your web application into something akin to Google Docs, where your colleagues, customers, beta testers, QA team, etc can comment directly on the application. Jam integrates with existing tools like Jira, GitHub, Slack, Figma, Loom, and others to make the feedback collected on Jam as actionable as possible.

Jam was built by Dani Grant and Mohd Irtefa, who met as product managers at our portfolio company Cloudflare. Dani then spent two years at USV helping us spot interesting investments before starting Jam. USV is a seed investor in Jam along with our friends at Version One, Box Group, and Village Global.

So if you want a better way to collect feedback on your application, spread some jam on it.

#entrepreneurship

Mobile App Stores and Crypto

I have written extensively on this blog over the last decade and a half about the significant negative consequences that the two large mobile operating systems have on distribution of software. I am strongly opposed to the monopolies that Apple and Google have over mobile apps that run on iOS and Android.

I am rooting for Epic/Fortnite in their battle with Apple over the 30% tax that Apple charges developers for distribution in their app store. But more than the tax, what bothers me about these monopolies is the innovation tax they impose on the broad tech sector with their terms of service/rules.

There is no better place to see that than crypto, the next big wave in computing (after web and mobile). There are a number of reasons that decentralized crypto apps (dapps) have not gone mainstream, but certainly one of them is that the Apple and Google app stores don’t allow a number of important features that decentralized apps require.

The founder and CEO of our portfolio company Coinbase, Brian Armstrong, explained this well in a tweetstorm last week:

He ended with this tweet:

Coinbase, Epic, and Spotify are not alone in their struggles with Apple and Google. They are simply large enough and protected enough to go public with their struggles. The truth is every developer that distributes software through these two app stores struggles with them.

In what world does it makes sense for two large and powerful companies to completely control software distribution on mobile phones? In no world does it make sense. It must stop.

#crypto#entrepreneurship#mobile

Circulate Networking Events

My friend and former colleague Charlie O’Donnell created a new kind of networking event for the moment we are in. These are virtual networking events designed to “include diverse perspectives in the innovation community.” They are called Circulate.

These are curated discussions, meaning you sign up to participate and the right group is selected to attend.

These industry-specific events will bring together a who’s who of accomplished and influential professionals as well as the most promising and most curious people from underrepresented communities that represent the future of these spaces.

http://www.brooklynbridge.vc/circulate

The next three events are shown here:

If you are interested in participating in a Circulate Event, pls sign up here. There are a few remaining spots open for the event Thursday night on Education.

#entrepreneurship#NYC#VC & Technology

Bolster Your Management Team And Board

I have had the great pleasure of working with Matt Blumberg and the senior leadership team of USV’s former portfolio company Return Path (which was sold in 2019) for much of the last twenty years. Matt and many members of his leadership team got the band back together early this year and started a new company called Bolster in partnership with Silicon Valley Bank and the early-stage VC firm High Alpha. A few months later, USV joined that investor group along with our friends at Costanoa.

Matt is a great CEO and has even written a book about leading and growing a company called Startup CEO. Their new company Bolster is all about scaling and building a great management team for your startup. The Bolster team believes that scaling a high growth company means that you need to adapt, grow, and supplement your management team continuously along the way. And a big part of doing that is accessing “fractional talent” which means people that don’t work for your company full-time and permanently. All of this is outlined in the Bolster Founding Manifesto which explains why they started this company.

Fractional talent can be a fantastic independent board member, fractional talent can be a CFO mentor for your VP Finance that you want to grow into a great CFO, fractional talent can be a VP Product that can cover for your VP Product while they are on family leave, fractional talent can be a part time Chief Revenue Officer that you want to “date before you get married”, fractional talent can be a part time Head Of Insights that will allow you to understand if you need a full-time Head Of Insights. I could go on and on because there is no end in sight for the various ways a CEO can leverage fractional talent to make their company and their management team better.

Bolster came out of stealth and into a beta period today and is opening up its marketplace to companies that want to access fractional talent and to executives who want to work at high growth companies in interim, fractional, advisory, or board roles. Bolster also will allow venture capital firms and startup investors to participate in its platform as super users. If you are any of the above and want to engage with the Bolster network, you can sign up here. The full marketplace will launch soon.

We have already introduced Bolster to a bunch of USV portfolio companies and the enthusiasm for this model is really high. I love the idea of USV investing in a company that can help our portfolio companies do things better. We have done that before with Twilio, MongoDB, Carta, Sift, and a host of other companies. It’s a double whammy and it pays off in so many ways.

#entrepreneurship#management

Pay and Precedent

We are finally in an era where an equal role comes with equal pay. This is a very good thing but it comes with some hard lessons. One of them is about pay and precedent.

You cannot make a hire and a compensation commitment without thinking very deeply about the precedent you are setting.

Let’s say your company is now fifty people and you can see that you will need to be a hundred and fifty people in a couple years. You decide it’s time to build a proper senior leadership team. And you want to start with a CTO. That first “C level” hire will set a precedent for what you should be prepared to pay (in cash and in equity) for all of your C level hires. You do not have to pay every C level executive the exact same amount but they need to be in a band and I would argue that they need to be in a tight band. And there needs to be a strong rationale for the compensation for each role.

Let’s say you are bringing on your first independent director and that person is so great and you want to give them a very generous equity grant. You can do that but you should know that you ar setting a precedent for what the next independent director will get.

Let’s say you want to bring on a mentor and advisor for your VP Finance to help her “level up” to a CFO. That advisor will want and should get some equity compensation. What you do for that advisor will set a precedent for all other advisors you bring on.

Many times I hear founders say “this is good enough for now and we can fix it later.” But fixing compensation issues later can be very hard and sometimes impossible, particularly if your company significantly increases in value between the problem you want to fix and when you need to fix it.

These are some of the most painful errors you can make in a startup. It is very important to be thoughtful, diligent, and precise in your compensation decisions and approach and you have to start early in a company’s life. Getting a strong and experienced head of people onboard early on will help you avoid these issues. And trust me, you want to avoid them.

#entrepreneurship#management

Investments That Don't Work

I woke up to a dream this morning where I was playing a game that was very similar to Turntable.fm, a failed effort to create a social music experience that had a moment back in 2011 and that I had invested in via USV. In the dream, someone had created a new version of the game that was basically identical to the original version. It was as fun to play it as it was to play Turntable back in the day. Then I found out that the creators of this new game had received venture capital funding and were going to turn it into a business. I met the founders and was happy for them. Then I woke up.

Investments that don’t work haunt me. It isn’t the losing money part. I have learned to live with that. It comes with the territory in VC. It’s the losing part that haunts me. The what could have been part. The “if only we had done it differently” part.

Good ideas will eventually be executed successfully. And investments that don’t work are often failures of execution. So it makes sense that someone could come along and make your idea work after you failed with it. It happens regularly in the startup world. And it can be painful to watch.

I’ve gone through a few periods of burnout in my career and it was usually brought on by a string of painful failures. I’ve watched others navigate that similarly. If you are heavily invested in something that doesn’t work, it hurts. And the more the investment is of yourself, your time, your enthusiasm, the worse it is.

I’ve gotten out of these periods of burnout by turning my attention to something else. Crypto was helpful for me back in 2013 and 2014 when I was going through one of those periods. It was something new that I could throw myself at, that was different, and that was working.

It’s that old adage about getting back on the horse that tossed you. I am not a horse rider, but I get the adage and agree with it. The best salve for failure is success. And you have to keep going to get there.

#entrepreneurship#VC & Technology

Financing Document Forms

Many founders want to do SAFE note financings for their early rounds to save time and money.

My response to that is “let’s do a priced round, we can use a standard financing form we both like, we won’t use a lawyer on our side, and we can close in a week.”

The key to being able to do that is the availability of standard financing forms. Many venture law firms and also the NVCA have published standard forms on the web.

Here are Cooley’s forms.

Here are Orrick’s forms.

Here are the Series Seed forms created by Fenwick.

Here are the NVCA forms.

Here is Gunderson’s document library.

I am not suggesting the founder go without a lawyer. I am suggesting that the founder and their lawyer pick a “standard form” to use to do the equity round, send it to us for our review, and if we are comfortable with it (they are all pretty much the same), then we will agree to sign it without negotiation and close within a week.

Typically the only thing we all have to agree on is what the cap table will look like before and after the financing so that the correct numbers are put into the documents. Everything else is pretty standard anyway.

There is this narrative that equity rounds are expensive and take a long time and that SAFE notes are quick and inexpensive. That is not right. We can do priced rounds as quickly and inexpensively as SAFE notes. And we do that regularly.

#entrepreneurship#VC & Technology