Thursday, December 8, 2016

Good Things: What I'm Thankful For This Year

1.  The birth of our second daughter
2.  Speech therapists
3.  Snapchat's IPO filing
4.  Remembering to put out our daughters' shoes for St. Nicholas Day
5.  Jon David Armstrong
6.  Forgiveness 
7.  Costanoa Ventures at the Costanoa Lodge
8.  The Cubs, the Tribe and the Cavs
9.  Jeff Harbach and Bill Tobin 
10.  Michael Kim
11.  Hyper-converged storage
12.  Docker
13.  Getting to see Jeff Fernandez three times in one week every October
14.  Annual meeting swag
15.  Vests (the ultimate annual meeting swag)
16.  AbbVie
17.  Feld Thoughts
18.  Joanna Rupp
19.  Getting over my fear of heights, caves, the dark and claustrophobia thanks to Michael Eisenberg
20.  Gatorade
21.  The Lion Guard
22.  Samir Kaji
23.  French onion soup
24.  1K status and the anxiety-riddled pursuit of Global Services on United Airlines
25.  Leah

Tuesday, September 27, 2016

The Loneliness of Venture

I'm going to have a lonely Fall.  The loneliness of traveling away from my wife and two daughters, didn't propel me to reflect on some "woe is me" tragedy seeking pity from the "tough life" of being a hardworking LP.  No, rather it aroused an introspective look at what came from the past two weeks of loneliness: an opportunity for reflection and creative thinking. Loneliness is not sufficient for creativity, it is necessary.  When we allow ourselves to move away from the routine of everyday life, we are better able to think critically and reflect about our own thoughts.

Brave New World author Aldous Huxley once wrote "If one's different, one's bound to be lonely". There is a  narrow gap between loneliness and solitude. Solitude can lead to creative focus but loneliness can lead to depression. Through solitude one is happy to be alone and recognizes the opportunity for a clearness and singleness of thought that comes with that peace. This struggle between solitude and loneliness was best described by Thomas Mann who said "solitude gives birth to the original in us, to beauty unfamiliar and perilous" but also "it gives birth to the opposite: to the perverse the illicit, the absurd".   

Modern studies in psychology have tried to differentiate between solitude and loneliness. One school of thought is that loneliness is the product of rejection, either a rejection inflicted by society or inflicted on oneself and therefore lends itself most to creativity. This is a very interesting notion as it would suggest that solitude alone is not enough for the creative process. Rather, solitude driven at some point by social rejection. 

I can't suggest that entrepreneurs and their investors seek solitude because of some social rejection. However, I do think that there are likely many instances where folks pursuing entrepreneurial endeavors do so because someone said that it couldn't be done and that the simple notion of disruption suggests there is rejection of the status quo, and often rejection by the status quo. Bold and brazen, or contrarian thinking, thrives on rejection because it is unfamiliar.  

I think there is great power in making parallels to many great entrepreneurs and venture capitalists who have high emotional intelligence and seek solitude in their own thoughts. I think that venture is naturally a lonely profession because although most investors have partners, it is still an individual sport. We are often alone with our thoughts in determining if we want to make an investment and why, only to then to discuss it with our partner(s) to seek input. Rejection can be a powerful tool here because it may have the ability to power ambition and be a cause of loneliness. I think there is likely a key correlation between some of the most successful entrepreneurs and investors and their ability to find creativity from solitude. 

Some of the most creative investors, like the folks at Foundry Group, have an annual month-long sabbatical with little to no work responsibilities where the other partners pitch in to give the partner on sabbatical the opportunity to focus on creative thinking and recharge his batteries.

After further thought, I don't think it will be a lonely Fall, but an opportunity to harvest the solitude afforded from autumn's extensive travel.  

Saturday, April 2, 2016

Finding Saturday People

Last week was Holy Week and I should have written this post last Saturday between Good Friday and Easter Sunday, but it felt more important to write it this weekend as we brought home our second daughter from the hospital yesterday (a Friday). On Good Friday, the disciples didn't know that Easter Sunday was coming and that resurrection was on its way. They showed up on Saturday in the darkness, an unknowing place.  As my wife (Leah) and I move forward rearing our two daughters we seek to surround ourselves with "Saturday people". Friday people show up when there is a true crisis but are the loudest mourners. They rally at someone's bedside or walk in protest. But then Saturday comes and the spotlight is lifted and darkness and uncertainty follows. Sunday people show up for resurrection when the clouds have lifted and its time to rejoice. Saturday people show up for the wake, they show up for the ceremony and not the reception. Saturday people see the ugly tears and don't leave in the face uncertainty. They show up for chemotherapy treatments long after the diagnosis. Today is Saturday and my little sister is in town for the weekend helping Leah and I as we welcome our second daughter home with a spirited 22-month old on the loose. My sister (Emmy) is a Saturday person. 

Whether you're an entrepreneur, a venture capitalist, or a parent --- find Saturday people in your lives. Find VCs who help you through a crisis at your company or in your life and stand by you because they believe in YOU and dream with you. Find LPs who support you at the trough and lift you up to the peak that you both know is possible. Find LPs that believe in you as a person and want to help you build a business.  Ignore those who say they're not in this business to make friends or only care about performance. Yes, if you're a fiduciary, performance is the stick by which we all are measured. But more importantly, find Saturday LPs that believe your future performance is indicative of your current persona. Find Saturday LPs that call you to say you're doing a great job or understand how hard it is to have partner leave and ask what they can do for you. Find Saturday LPs that ask not what you can do for them, but what they can do for you.  Find Saturday LPs that believe in the Full Gospel of Venture Capital. 

Tuesday, March 29, 2016

Seed Fund Investment Period "Vesting"

I've grown worried lately as tales of Lake Wobegon are fewer and farther between these days and not all the unicorns are good looking and the seed funds are above average.  What I'm most worried about is the Valley startup employee mentality toward employer loyalty and tenure with employees jumping from one startup to the next as their options vest and they chase unicorn employers with the hopes of finding gold in them thar hills. I think we've begun to see this spill over into the seed fund universe where former founders/startup employees who made a little cash began angel investing and then decided to become fiduciaries and manage Other People's Money (OPM). There is an increasing number of seed fund GPs who view the investment period of their funds as the term of their funds and are leaving 1-3 years into their new-found careers as venture capitalists. I know we're the "limited" in limited partner, but these are still partnerships. We're seeing a number of GPs leave because they "always wanted to be an entrepreneur".

Generally, employee options vest over four years with a one-year cliff. Wouldn't it be great if all of these newly-formed seed funds had similar vesting, whereby if all the GPs didn't stay for a full four-year investment period, that the LPs got to keep that portion of the departing GP's carry? If a company is saying to its employees, after four years, it's clear that you have earned your keep and we value you, isn't there a pretty solid argument that GPs should have to earn their keep (at least new ones) over a four year period as well? Because of the pace of deployment by so many seed funds in the past three years, there isn't much relief if a few GPs at a firm bail, or all of them frankly, because a key person event is generally only trigger-able during the investment period.  If everyone leaves after the investment period, LPs are generally left with the choice to dissolve the fund with a 51-85% vote and receive illiquid in-kind stock certificates, or let whichever GPs are left let it ride. Maybe the remaining GPs raise a successor fund, or they slowly exit stage right. Maybe the workaround is to only invest in seed funds that don't follow-on after the seed round.  At least then, if a GP or several GPs leave, there isn't much left to manage out. The cooling in the markets is likely only beginning and I'm worried about what this foretells for the countless new seed funds that were raised in the last 2-4 hours (oops, I mean years). 

Thursday, October 15, 2015

The Importance of Being Earnest

I was speaking at the SVB/Cendana Capital micro VC event earlier this week and made a few comments about how do you turn a fund down.  I made a joke about how I used to be a lawyer and was paid to say a lot without saying anything.  My point was (i) to be self-deprecating and drop a lawyer joke, (ii) and two to describe how I like to say no.  Which isn't to say a lot and not actually come to a conclusion.  I've written a lot about the lack of honesty in the LP community before as well as how to say No.  I love to speak publicly and hate it at the same time because I always tell the truth and I don't think most audience members expect to see that all the time.  As I've said before, I believe in a quick response after a call with a VC because I don't want to create any more anxiety for them than they already have in fundraising.  However, I don't like to send emails and say "this is not a fit" if I've taken their time and mine for an introductory call or meeting.  That's rude.  When I get an inbound request for an introductory meeting/call, I may send an email back saying this isn't a fit because there is no point in wasting anyone's time if I know there is no chance I could make a commitment (e.g., out of scope stage, strategy, or geography).  If we both have invested our own time and anxiety into having a discussion about our life's work, I think that deserves careful consideration and a thoughtful response back.  Moreover, if I am passing for now on a fund, I want to lay out everything that I like for you and the things that gave me pause.  I've long said that LPs are wrong more often than they're right as we all don't invest in that many funds.  If that's the case, there are going to be so many funds that do well that we don't/can't invest in.  A quick and thoughtful No is the least worst No.  

Tuesday, October 13, 2015

ENFP: What Oscar Wilde and I Have in Common

Call me Oscar Wilde. Why? Because we're both ENFPs.  Thanks to Bill Tobin at Strayer Consulting who had me take a Myers-Briggs Type Indicator (MBTI) personality inventory, I now know a lot more about myself and others around me.

For those of you who aren't familiar with MBTI, its an instrument developed by Isabel Myers and Katharine Briggs as an application of Carl Jung's theory of psychological types.  This theory suggests that we have opposite ways of gaining energy (Extraversion or Introversion), gathering or becoming aware of information (Sensing or Intuition), deciding or coming to a conclusion about that information (Thinking or Feeling), and dealing with the world around us (Judging or Perceiving).

  • If you prefer Extraversion, you focus on the outside world to get energy through interacting with people and/or things.
  • If you prefer Introversion, you focus on the inner world and get energy through reflecting on information, ideas and/or concepts.
  • If you prefer Sensing, you notice and trust facts, details and present realities. 
  • If you prefer Intuition, you attend to and trust interrelationships, theories and future possibilities.
  • If you prefer Thinking, you make decisions using logical, objective analysis.
  • If you prefer Feeling, you make decisions to create harmony by applying person-centered values.
  • If you prefer Judging, you tend to be organized and orderly and to make decisions quickly.
  • If you prefer Perceiving, you tend to be flexible and adaptable and to keep your options open as long as possible.
What are the adjectives or character traits that reflect an ENFP?


Extraversion (E)
Intuition (N)
Feeling (F)
Perceiving (P)
     Initiating
      Abstract
       Empathetic
             Casual
     Expressive
    Imaginative
    Compassionate
         Open-Ended
     Gregarious
    Conceptual
   Accommodating
    Pressure-Prompted
     Active
    Theoretical
        Accepting
         Spontaneous
    Enthusiastic
      Original
          Tender
            Emergent

According to Myers-Briggs, ENFPs are typically enthusiastic innovators, always seeing new possibilities and new ways of doing things.  They have a lot of imagination and initiative for starting projects.  ENFP's energy comes from what is new and different, and they are spontaneous and enjoy action.  They can become so interested in their current projects that they drop other things that are less exciting.  They are concerned about people and understand others' needs and aspirations.  ENFPs readily communicate their enthusiasm, and this can be infectious.  They often inspire others as well. ENFPs are likely to be most satisfied in a work environment that is welcoming to people, innovative, and full of exciting new possibilities.  Others can count on them to find new ways of helping people solve problems and overcome barriers.  Because they see so many possibilities, ENFPs sometimes have difficulty picking those with the greatest potential.  They dislike routine and find it hard to apply themselves to the sometimes necessary details involved in finishing projects, easily becoming bored. 

It is important to note that the MBTI instrument is not a measure of your skills or abilities in any area. Rather it is a way to help you become aware of your particular style and to better understand and appreciate the ways that people differ from one another. Everyone has each of these eight parts to their personality, but prefer one in each area (often in different situations and at different times). No preference pole is better or more desirable than its opposite.

I highly recommend anyone who has not done an MBTI, or has not done one in awhile, to consider doing so. It is incredibly helpful to think about what makes you who you are, both successfully and less successfully. However, more importantly, it is an important tool toward better understanding the world and those around us and what makes others who they are.  I've never been asked to do one in an interview process and never asked a job candidate to take one, and am shocked by both.  It's an invaluable tool, but important to remember that it's not a science.

I'm very glad that Bill had me take an MBTI because I now know myself better and what makes me successful and what my limitations are.  Because it's a little awkward to walk around talking about why you're an ENFP when others aren't part of the MBTI dialogue or as self-aware as you, it's important to start small and think about having everyone on your team/firm do one together and share the results.  It can be a key tool for reducing workplace conflict as everyone will have a better understanding of how others formulate opinions and arrive at conclusions.  There will be enormously revealing thoughts that come from the experience.  It's been truly transformative for me, which is why I'm willing to share my MBTI indicators with all.


Saturday, July 25, 2015

The Lake Wobegon Effect and Venture

"All the women are strong, all the men are good looking, and all the children are above average."



I was listening to Garrison Keillor's "A Prairie Home Companion" last Saturday and thought to myself that a lot of his tales from Lake Wobegon apply directly to venture right now. The Lake Wobegon Effect depicts a real human tendency to overestimate one's achievements and capabilities in relation to others. This seems to apply directly to the venture industry right now, where everyone's current or last fund is at a 2.0x and everything seems to be going up and to the right. However, the last time the upper-quartile Cambridge Associates DPI benchmark was above 2.0x was 1997! TVPI and IRR benchmarks look strong for the intervening years, but venture funds (per the benchmarks) are still not returning more capital than they're investing.  

There has been a lot reported on the rise of the private IPO, which of course aren't liquidity events, and there were only four tech VC-backed IPOs in Q1 2015 and 74 of the 115 venture-backed IPOs in 2014 were healthcare (biotech and devices). I think we're delusional to think that it's always pleasant because until the 211 companies that raised $40 million or more last year get sold or go public, not all the performance metrics are strong, not all the benchmarks are good looking and not all the exits are going to be above average. 

When the summer ends and all the tourist investors in venture-backed deals leave the coast and return to their lives behind a trading desk at the hedge funds, mutual funds and sovereign wealth funds of the world, I'm not sure that we're going to be happy with Lake Wobegon's shoreline.  I think we'll see valuation erosion and as a result fewer people buying lakefront property along the shores of venture's high-priced Series Cs and Ds.  

So what can we do about it?  If you're a CEO or early stage board member, you might only take a term sheet from an investor who is long-term greedy and gets paid in ten years and doesn't get paid on one-year investment performance like the hedge/mutual funds of the world. If venture is an apprenticeship/relationship business, don't take money from people who view their investment with you as a transaction. Take money from people not computers.  Be long term greedy and not short term greedy.  Venture capitalists and venture capital firms take a long time to die, but hedge fund/mutual fund guys hop jobs and funds with as much volatility as the markets.