Tag Archives: brad feld

Venture Files

Term Sheets Series Introduction (Classic)

We continue our Venture Files Classics Series – posts written by Steven Fisher prior to Venture Files joining Technosailor.com – that are either great analysis pieces, or have offered some level of prediction accuracy… Or simply, they are of interest to this audience. In this case, Steve wrote a great series on Term Sheets from an entrepreneurs perspective. This was the introductory article and was originally published on March 8, 2006.

I have read Brad Feld’s blog “Feld Thoughts” for some time now.

Although I haven’t met him in person, I have exchanged e-mails a number of times and will say that he is a very insightful guy. I hope to move to Denver or buy a place there soon, so I owe him a beer for all his good advice.

Plus he is a huge 24 fan like me, so that gives him the extra gold star.

About a year ago, he started a series on “Term Sheets”. It is located here and it is what I will mirror in its structure. Why mess with a good thing, right?

I will link to it in my entries as reference and will probably quote it.

What I am looking to do is expand upon it and comment on each of these things from the Entrepreneur’s point of view.

I know Brad was an Entrepreneur, and a darn good one, but he wrote it from the VC’s perspective and is an awesome foundation to work with.

Each week I will take a topic as part of the “VC Speak” area of this blog. This is in addition to any other “VC Speak” stuff that comes along. In any regards think of this like a mini-course in Venture Funding with getting the MBA.

Please share this with all your fellow entrepreneurs in the hope they might learn something new, laugh in agreement or lament at our shared experiences. I really look forward to you comments as a form of group therapy.

Editors Note: Steven and I have a mutual respect for Brad Feld. Feld is a principal investor with the Foundry Group, based in Boulder, CO. In full disclosure, Brad is also an investor at Lijit where I (Aaron) work as a consultant. This article was written long before there was any other relationship.

Aaron Brazell

Internet 2.0, Suck it Up and Lead

The Valley, which has so far been most unaffected by the downturn in the economy, may be reaching the end of it’s golden thread. Sequoia Capital, one of the largest Venture Capital firms in the Valley, had a meeting with their portfolio companies advising them to “tighten their belts” according to Om Malik of GigaOm.

The message delivered to those in attendance was that things could get a lot worse than people think, and it will be a more protracted downturn. To give a historical perspective, Sequoia had a similar meeting back before the last bubble unraveled burst. We know how that turned out.

Hot on the heels of Sequoias meeting, angel investor Ron Conway sent an email to the CEOs of his potfolio companies advising them, in the words of Mike Arrington, of a bleak immediate future:

You should lower your “œburn rate” to raise at least 3-6 months or more of funding via cost reductions, even if it means staff reductions and reduced marketing and G&A expenses. This is the equivalent to “œraising an internal round” through cost reductions to buy you more time until you need to raise money again; hopefully when fund raising is more feasible. Letting go of staff is hard and often gut wrenching. A re-evaluation of timelines and re-focus on milestones with the eye of doing more with less will allow you to live many more days, and the name of the game in this environment in some respects is survival”“survival until conditions change.

Brad Feld, an investor in Lijit who I work for, echoes my sentiments from yesterday (or rather, I echoed his since he went first):

My recommendation to all of you entrepreneurs out there is to get off the negative sentiment treadmill, step up, and lead. The people working for your company are likely confused, concerned, and overwhelmed with all the noise in the system. In the near term, building your business will likely be more challenging on a number of dimensions. So what – that’s the normal cycle of business. You don’t need to be a blind optimist and spout happy talk, but you do need to have a clear sense of purpose and goals for your company. Leadership 101.

Times get tough. The people that approach the challenge with some clarity in their thoughts are the ones that will emerge on the other side stronger than ever and positioned to be the next generation of winners in this space.

Venture Files

DC Needs a Fred. Any Takers?

FredWilson cropped.pngProfiled in Sunday’s New York Times, Union Square Ventures‘ Fred Wilson is a legend of contemporary venture capital — a title previously reserved for West Coast luminaries like Moritz and Doerr, and maybe a couple others. At Web 2.0 Expo in New York last week, Wilson was greeted with cheers usually reserved for celebrities. . . or rock musicians.

We don’t need a celebrity here in DC. But it would be great to have a venture capitalist with a fraction of Wilson’s passion, commitment, and drive. It’s not so much that he’s an investing legend. . . what’s amazing is his sheer devotion to his companies, his followers, and everything Web 2.0.

By his own admission, Wilson’s had his share of bad calls. But most of that goes back to The Bubble, when he was at Flatiron Partners. I was at a startup (liveprint.com) pitching Flatiron in 1998. I met Wilson briefly back then, as well as the firm’s the most vocal partner, Jerry Colonna; the partner who ended up leading our investment was Bob Greene.

Flatiron’s highest-profile investment was probably deliver-to-your-door service Kozmo.com. I remember getting a Kozmo.com hat. Kozmo raised $100M, before its legendary implosion. I left liveprint.com after the first Flatiron (~$3M) round, before an additional ~$40M bought all those Aeron chairs, and the chairs were acquired (along with the rest of the company) by Kinko’s in a transaction so complicated that no one knew what they had until a check arrived in the mail.

According the NYT profile, Flatiron wrote off a third of its investments.

But Wilson returned, humbler and smarter. To me, he’s the quintessential early-stage VC. Why? Because he’s so focused on his space, and passionate about his companies. True, he’s been accused of shilling for them . . . but from an entrepreneur’s standpoint, the benefits of having such a high-leverage, high-profile investor on your team is literally worth millions (not to mention what you’ll save on not needing a PR firm.)

Just watch Wilson work. He uses nearly every one of his portfolio company’s products — twitter (6,571 follow him @fredwilson), disqus, tumblr. Add these to his blog (A VC), and he’s one of the most prolific posters on the planet.

DC needs a Fred.

Or maybe a Josh. Josh Kopelman, though less vocal than Wilson, has put his money where his mouth is, on behalf of the venture fund he founded just outside Philadelphia, First Round Capital. In fact, First Round has made no fewer than 57 early-stage investments, nearly triple USV’s portfolio.

Or maybe a Bijan. Or a Brad.

And this isn’t just about attitude. There are clear metrics here. Several mid-Atlantic firms talk about their ‘seed’ programs. But the litmus test is: name the ones routinely doing investments in the $250k – $1M range. For most firms, the funds are just too large for the math to work — invest a $250M fund $500k at a time, and you end up with 500 startups in your portfolio. That’s a helluva lot of board meetings.

Which is why First Round usually doesn’t take a board seat. (Most VC firms have a six-seats-per partner limit.) This is about volume (or more accurately, statistics). Quicken the cycle of investment, trim the due diligence, invest more with the gut . . . and let the odds work in your favor over a larger statistical sample. Though time will tell, based on initial exits, it seems these guys are doing pretty well.

So while it’s good to see them on the East Coast (Silicon Valley has sufficient players that none is noteworthy) — and Baltimore, DC, and Northern Virginia are certainly within their flying radius — it’s just not the same as having our own local VC hero. I mean, how sad is it that a local meetup was organized for DC Fans of Fred? (Full disclosure: I was there, and met some great, like-minded entrepreneurs.)

And perhaps more than anything else, these guys get Web 2.0. Unlike most VC firms, USV is not only not afraid to invest in pre-revenue companies, they will invest before a revenue model is even figured out (twitter, tumblr, disqus). So who out there will claim this mantle? Anyone? Anyone?

Aaron Brazell

Google Shiny is Not as Hot as You would Think

Much has been said about Google Chrome Shiny this week. Google stormed the internet by announcing that they too had a browser that web users could be proud of. They claimed the best of all browsers while slipping in some legal language into the EULA that revoked privacy of user browsing data while using the product. That was quickly changed when their bluff was called.

Regardless, Shiny has created quite a buzz with people like Gabe Rivera, the founder of Techmeme, claiming a 14% market share of all Techmeme readers using Shiny. That may be the most dramatic number I’ve seen, but certainly folks have been bandying around their numbers as if this was a huge coup de grace.

Let me remind you of what Brad Feld said in 2006: The first 25k users are irrelevant. (Disclosure: Brad is an investor in Lijit)

Got that? Irrelevant.

They are all kicking tires. There is nothing “new” here, as far as I can tell, and anything Google is greeted with a bunch of tire kickers early on. People want to get in, test things out, see how it works and then decide on what works for them.

You’ll see another surge in market share when Shiny becomes available to the Mac, and those users will be irrelevant as well.

That is not to say that Google cannot command a noticeable market share, but there are big hurdles to overcome:

  1. The browser market is saturated already: IE7/8, Firefox 2/3, Safari, Opera, to name only a few
  2. Internet Explorer, Safari and, well, Konqueror maybe are the only gifts that keep on giving. These are the browsers that are bundled with the Operating Systems and it is the only way to ensure market share. Google needs an OS in widespread adoption to compete on this level
  3. Google says they are innovating, but there is nothing innovative about the browser. It is built on Webkit. That is, it’s Safari.
  4. Google privacy concerns will continue to keep hawks like myself away.

The real measure of success is not going to be today or tomorrow. It’s going to be in six months. After the tire kickers run their test drives and uninstall from their systems. I’m guessing they can command a solid 2% market share by June of 2008. No better than that though. It will always be a niche browser.

Aaron Brazell

Early Adopters Are Useless

We are early adopters. We use. We try. We evangelize. We bury. We filter.

That’s what we think anyway.

In reality, we are pretty useless.

Late last year, Amazon released the Kindle to the joy and enthusiasm of many early adopters. Robert Scoble, the poster child for early adopters, gleefully got his Kindle on the first day and wrote about how beautiful it was and how it brought him great pleasure. One week later, he hated the Kindle listing a laundry list of problems from usability to the inability to send gifts to other Kindle owners.

Increasingly, I’m seeing common people (read: non-tech early adopters) who own and love the Kindle. And the numbers bear that out, if we’re to believe TechCrunch’s statement that by 2010, Amazon will have sold $750M in Kindles or 1-3% of the company’s total revenue. (Update: For clarity, the TechCrunch article cites a CitiGroup analyst and is not the authoritative assessment of TechCrunch. My point is, that’s where I heard the number in the first place – regardless of the original source.)

Brad Feld, a few years ago, wrote an amazing article titled The First 25,000 Users are Irrelevant which talks about the effect of early adopters on companies and products. As the oh-too-typical scenario goes, TechCrunch or Mashable covers a new product, there is a surge of traffic, registration or sign-ups for private beta invites from early adopters, or “tire kickers” then they go away. Some remain and become “evangelists” for the company or product, but most people don’t even care. Later on, if the company has mainstream staying power, the real buy-in will happen organically and without the say-so of the early adopters who largely came and went.

See, we like to tell people we are filters. We like to think we are influencers and powerful. We like to think we have an inside angle on what works and what doesn’t work, but we are just small insignificant people in the grand scheme of things, and largely irrelevant.

Amazon knows this. They don’t really care about us. And that’s why they might hit the $750M mark by 2010 and completely bypass the early adopters, placing their Kindle directly in the hands of mainstream commuters and book lovers.

Update: Corvida at SheGeeks thinks this is generational and writes a thoughtful and intelligent argument about this. However, I’m not convinced that everything is generational. I think early adoption is also a result of personalities.