Miles To Go.

Goats yes, power not so much

I use a mantra since Wadi Rumm called ABC- always be charging. It served me well in the desert, where power was precious and communication was crucial. At many times, we were several days ride from actual electrical power. But to us, the importance of blogging (and tracking!) our where-abouts were crucial to our state of mind, if not our well-being.

There were times when the sun was high and the solar panel would do wonders for laptops, phones and PLB’s but we were so exhausted all we wanted to do was crawl under a rock (literally 15 degrees cooler) and sleep. But Mr. Jones would never let that pass, and soon neither would I. If a recharge is available and the next power is days away, plug in no matter what. This simple rule got us through Jeddah, Wejd, Wadi, and all the way to Damascus.

But I have kept the rule with me. I used it at SXSW, I use it in airports, and of course I use it in the start-up world. On a long journey, in hostile territory one cannot afford to simply “run out”. 

Much like power in the desert, the journey of a start-up has incredible resource requirements. Capital, of course. And Talent. Creativity. Process. And Strategy. If each of those are not recharged regularly, they become tired and weak. We rely on old standards, and resist change, preferring to crawl under the shady rock and wait until things cool off.

So, I try to take a page from my desert adventures whenever I can. Restock on talent, and fill the pipeline with A Players waiting for a chance. Exploring different points of view and different ways of doing things from all walks of life before re-engaging with the problems at hand. And looking at strategy through different lenses and with new data points regularly (but not incessantly).

Yes, Indeed as Saba and Tad taught me well: always be charging.

Austin has a groove

I hadn’t been to Austin for SX for awhile, and the differences are palpable. Each of these observations deserve a post on their own (blog tonnage warning), but here’s the brief from the plane

1: These kids won’t lap their Parents, but they’re over it

UT Spring break notwithstanding, SXSW trends pretty young but not tragically hip. I’d call it self-sufficiently hip. Perhaps its a stack of student debts, lack of faith in future entitlements, or a crap job market but most everyone here lives and breathes self-reliance. Kinda reminds me of KFAC in some ways.

No, they likely won’t end up better off than their parents but they have founds ways- ingenious ways – to have a share in interesting events, luxuries and experiences. It is the walking personification of the asset light generation, a veritable ride-sharing, house sharing, tab splitting mobile-social-fueled existence. You can see it in the number of backpacks lugged around. The premium real estate around power outlets. The use of timely information to scout out clean bathrooms and taco trucks still serving food. Maybe this generation can’t get what everything they want, but they sure use information to get what they need.

2: Booze may work for inspiration: but Coffee is for Execution

Ok, close to SxCentral (Dirty 6th or perhaps Rainey) the parties roll on late into the night. Bold dreams do emanate from these spots, no doubt. But who will do them? No-one with a hang-over I assure you. Life is not a Reality show perversion of how things get done. The business still happens the next morning, by guys sipping coffee and probably not wearing skinny jeans . I noticed on Don Dodge on twitter, who has backed his share of great SXSW start-ups, hits the parties for a few pics but probably doesn’t extend the night further… unless the band is good. He’s one worth following.

3: Mobile Social Local drives peer actions

Even Steve Case does sharing

And how. In this urbania of the future, I can’t remember anyone who didn’t whip out a smartphone every 90 seconds. Pedi-cab drivers checking directions. SXSW’s checking in on panels, flash mobs, and open bathrooms. Cops, using video. Really no surprise there. But when asked, how many of them pay for apps or subscribe to content the answer was rarely anything but “what?” (see #1 Above).

This of course, drives a few of the major theses of my activity: mobile, social and local will be supported by increasingly relevant and targeted ads. It would help if they were displayed in appealing, but unobtrusive ways but that’s on its way as well. While I was there, I saw a stat that online screen time had yielded to mobile screen time. Revenue isn’t that far behind. Mojiva is ideally positioned for both.

I also noticed that a huge focus of the Sharing Economy conversation (aka Asset Light, Collaborative Consumption, Peer to Peer Economy- talk about a naming clusterjam!) is all about Trust. How will Sharing grow if every transaction comes with the doubt and questioning that goes like this : I know I will make (save) money on this, but might I die doing it? News from the washington Post this weeks kinda underscores the point. Who is behind that screen? Can I just rely on the one network to provide that data (and are they conflicted b/c they want the transaction)? Isn’t there a repository of all the identity, behavior and transaction data that sits with a third-party and can quickly display a dossier on a potential counterparty? I had a back and forth with FAKEGRIMLOCK (yes, all caps please) about ways the Sharing Networks might be compelled to share their API toward this end (his suggestion was a ray-gun).  Leah Busque from Task Rabbit mentioned TrustCloud as an option in her panel on sharing- no ray-gun needed. She’s a nice lady and a great entrepreneur.

4. Space: the Everest of STEM

The biggest draw, by far, was the rockstar Elon Musk. And his expertise and passion for Science, Tech, Engineering and Math overfloweth. PayPal, ok. But this guy has Tesla and SpaceX rocking along while parenting five kids. The sheer out-of-this-world challenges this guy takes on, and the STEM talent he draws to do it should be an analog for our entire workforce. Learn STEM, and develop a passion for it. Pursue bold visions.

5. Being Top ten in the information race hardly matters

Just ask #11 in line at the taco truck at 3am. Not so long ago, information was valuable for a lot longer, long as your counterparty didn’t have it yet. Now, most information travels so fast and is so complete that is becoming commoditized. So what counts anymore? Speed, and creativity.

Sam Lessin had a brilliant talk on this BTW. And ironically but perhaps not un-related, his dear departed father Bob wrote a small treatise (Lessin’s Lessons) on what is essentially the asset light generation I discuss above. Great read if you can still find it- self published of course. Ahead of his time. Sam is a great continuation of his legacy.

If everyone has about the same information, at the same time the people who will extract the most value from it will be those that get it first, those that understand it first, and devise a creative angle to use it. It’s an interesting leveler of the playing field.

So that’s the quickie from SXSW. More to come on each of these. But my takeaway for the week is “Live in the future: build what’s missing”.

My Frequent disclaimer: I own equity in TrustCloud and Mojiva. 

Great name!

Yes, Marissa Mayer is out there honing her strategy for a next move, and lots of buzz is around Mobile Ad-Tech. I’m quite keen to those developments, because of my activity in the space… you might say.

But before her time, Yahoo made an offer that prompted one of the best “What Would you Do” conversations of our generation. I caught the gist of it at during Peter Thiel’s talk at SXSW, but Inc. does a better job of describing it here:

…Facebook was just two years old. It was a college site with roughly eight or nine million people on it. And, though it was making $30 million in revenue, it was not profitable. “And we received an acquisition offer from Yahoo for $1 billion,” Thiel said.   

“Both Briar and myself on balance thought we probably should take the money,” recalled Thiel. “But Zuckerberg started the meeting like, ‘This is kind of a formality, just a quick board meeting, it shouldn’t take more than 10 minutes. We’re obviously not going to sell here’.” 

At the time, Zuckerberg was 22 years old.

Thiel said he remembered saying, “We should probably talk about this. A billion dollars is a lot of money.” They hashed out the conversation. Thiel said he and Breyer pointed out: “You own 25 percent. There’s so much you could do with the money.”Thiel recalled Zuckerberg said, in a nutshell: “I don’t know what I could do with the money. I’d just start another social networking site. I kind of like the one I already have.”

Now for the What Would You Do part- a/k/a- WWYD.

If I were Mark Zuckerberg, I would have done the same. His talent is towering, his vision is far reaching. I would also say his youth might lead some to say he didn’t know what he didn’t know, but Zuckerberg probably did know. He had one great idea, and the likelihood of having another of such epic scale and impact was remote. He knew that lucky and good are not the same thing, and the former rarely strikes twice. He was, and is, part of an asset light generation that I have written about before.

But, I am not Mark Zuckerberg. Not even close.

I am not a sole founder (um, was Zuck?) and I would not imagine to be able to run something myself without the great work of those talented people around me. I might have other ideas I’d like to back, and more entrepreneurs I’d like to work with. I also deeply respect the stakes held by each of my shareholders, and would give due consideration to what they may want as well. Everyone has a number. And working for Yahoo, especially the new Yahoo, might be quite interesting. I may have hit the bid, not being Zuck.

But most of all, I love the fact that it was a ten minute Board meeting, or he thought it should be!

By the way, What would you do?

Good Knight

We recently took an investment from an angel who was graduated Cambridge and shared this tidbit:

One enterprising undergraduate examined the University statutes prior to an examination and discovered that all students sitting exams in full fusc are entitled to a glass of sherry. He demanded his due in the exam, and the University’s Proctors duly responded, before fining him one shilling for failing to wear his sword, allegedly also part of the archaic statutes. 

The point he made was, he fully expected that if I ever sat for an exam again I would cite a medieval code, perhaps in Latin, to set the playing field in my favor. I laughed it off at the time as a Frasier-Crane like idiosyncratic remark. But it got me thinking…

I have actually walked Temple Church in London, trekked the Crusader Castles from Syria to Jerusalem, visited the site of Jacque Demolay’s burning at the stake by King Philip IV, and never pass a chance to hoof through a cathedrale on any of my many visits to France. My family name is Norman French (the De Spencer meant warehouse manager, back in the day) and became English a bit after 1066 (lineage impossible to prove, or disprove). So if I wasn’t actually a Templar in training all these years, I certainly went through the paces. As per usual with Spencer’s, I did it without even knowing why.

Irony is, of course, none of these experiences hold a candle to entrepreneurship when it comes to having so many chances to do something with purpose, and to hone a craft in pursuit of that goal. There are so many risks to combat, so many people to inspire and lead, so many “bet the holy sites” decisions to be made every day I have come to rely on a basic code that I recite every day, and spend hours meditating on: my mission statement as taught to me by Steven Covey of Seven Habits. I have become a crusader for doing what is fair and best for the company and all its stakeholders while building enterprise value along the way. And I take it seriously enough to blank out everything else around me when I am engaged.

But to be honest, that’s about the only way to succeed in start ups today.

So what’s my point?  None really. I just consider start ups to be the great Crusader challenge of the 21st century.

I love what I do. And I have a sword. Touche’ BB

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This ain’t easy either

I’ve spent a lot of time with a legendary Broadway producer, working on an epic project that has been documented before: A Line in the Sand. We’re still workin’ on it.

The development process has been a pretty interesting study for me in how an entirely different species functions. In my travels for ALITS, we often were impressed not by the differences (between Islam and Christianity, between Americans and Arabs, between people with oil and people who buy oil) but by the similarities between.Well, taking a moment to think about it, I realized that based on what Nelle has taught me, Broadway and Silicon Alley have a lot to teach each other as well. Here are just a few of my favorites:

• It’s hard to make a living, it’s easier to make a killing. This is perhaps the most true of the Broadway maxims. Bad shows flop, and quickly. Good shows go on and on, recoup and payout like mad. There isn’t much in the middle. Much is true in Silicon Alley. Startups are such a tricky game, and usually require so much more capital than founders can muster, it is a rare bird indeed that escape from that jungle with all his feathers. Conversely, it’s actually hard just to develop a product and plod along these days, making a decent wage or earnings to feed a family and put them through school. It’s damn near impossible, in terms of the odds. Ironically, only the winners (and the good shows) are picked up in the media, and it seems like it was so easy. 
• Do you want it Tuesday, or do you want it good? I can’t tell you how many times I have heard this from writers, who remind me you could have 100 people work on Gone with the Wind and it would be finished sooner. But perhaps not better. Likewise, mobile apps, websites and all manner of digital media solution are never masterpieces: they are works in process, at best. My advice, don’t expect to get it perfect, get it out and start talking to customers about it.
• Stars attract rock stars, and the opposite. If you think it’s brutally hard to recruit star talent in Silicon Alley, try Broadway. The best way, the only way to get it is to start with… a star. A great script begets a great Producer, who attracts a great Director, who has stars that love to work with him/her etc. No different with co-founders and first hires in start ups.
• Good to be tough, better to be nice too. Oh god the things I have heard come out of the mouths of seemingly otherwise charming and polite people in theatre. Spicy! But I’ve always heard it delivered in the kindest, gentlest ways possible. No one actually gets visibly upset, even though they are bleeding buckets. So, I would chalk that up to being superb at your craft and willing to defend your interests, but doing it in a well thought out, perhaps classy manner actually gets better results.
• Leverage a good review. Know when you’re rollin’. Theatre folks are good at this, entrepreneurs perhaps less so. They know when they have the leverage of some momentum, and they move accordingly. I think too many entrepreneurs are to busy executing to recognize this.

Anyways, that’s what I’ve learned up to now about Broadway. Anyways, maybe it helps somewhere.

The Social Network is a hell of a movie, but the real people upon whom the characters were based have stated that the film’s version of the founding and growth of Facebook was overly dramatized. And appeared way more fun than it actually was.

Face it, entrepreneurship is hard. Angel investing is doubly hard. While we read about spectacular successes, one can hardly keep up with the many outright failures preceding them. The thin veil  can really only be perceived once you are on the right side of it-it’s practically see through! But if you are on the wrong side, the thin veil might as well be a brick wall.

Someone once said the two best traits an angel investor can possess are a strong stomach and a sense of humor. The strong stomach will tolerate its share of quick deaths from being too early, too late, poor execution or leadership, lack of funds, or just tons of competition. The sense of humor will come into play when you attempt to tell your God which element of your portfolio is going to be The Big One. God will invariably laugh and throw at least one thunderbolt, wreaking havoc with your “sure thing” — but turning your also-ran into a winner. (No kidding, it’s happened. But to protect the innocent, we won’t name those we feel were luckier than they were skilled.)

Other sources of angel heartburn include those frustrating periods of illiquidity…the fast pace of technology which upends business models and proprietary positions quicker than at any time in history… the global markets bringing competition to one’s door on a massive scale… the high valuations of exposed deals,…the lack of influence when part of a syndicate…the competition with other angels (and now, VC’s). The list goes on.

The angel game can be summed up in the words of the “advert” placed by explorer Ernest Shackleton (1874-1922) ahead of his Antarctic expeditions (none of them successful, by the way):

“MEN WANTED FOR HAZARDOUS JOURNEY.

SMALL WAGES, BITTER COLD, LONG MONTHS OF COMPLETE DARKNESS.

CONSTANT DANGER, SAFE RETURN DOUBTFUL.

HONOR AND RECOGNITION IN CASE OF SUCCESS.”

And yet, we do it.

EO: Great Group of Entrepreneurs

This excerpt is serialized from a whitepaper titled Angel Investing for Single Family Offices (SFO’s) by The Family Office Association and Vaux les Ventures. For a complete copy, visit the FOA website. 

Any SFO considering allocating a portion of their assets in venture toward angel investing has to acknowledge the significant risks in the market. One sobering take from the US Small Business Association is that roughly 80% of small businesses fail in the first year, 10% in the second and 5% in the third, leaving a paltry 5% of new ventures that even qualifies to deliver a return for investors. I am a member of EO (logo at left), a global organization with 8,000+ members that fosters entrepreneurs, and the odds are just slightly better there I think.

Sticking with the digital media businesses discussed in the last section, here’s a brief summary of the early stage venture risks associated with this sector:

Operational Risks are legion in startups. First out of the gate is execution on the development of the product. Many products and services simply fail to launch, whether due to poor specs, loose design
concepts, or from just plain misjudging a market need. Another common problem is never solving the cold start challenge and acquiring users. Assembling talent, accessing sufficient capital, maintaining differentiating advantages over competitors, and a go-to-market strategy are a few more risks to consider.

Timing Risk — also referred to as Luck. Often, an entrepreneur’s vision has merit, but market conditions have not yet gelled to support it. Frequently, capital is wasted on development and/or marketing in
anticipation of a developing market. When the tide doesn’t rise in time, the company is left high and dry. One example? The many mobile/ social networks that tried to deliver hyper-local advertising audience and failed. In the meantime, Gowalla and FourSquare entered the market just as mobile and social converged, and were propelled to higher and higher market caps. Likewise, any mobile/social solution launched now with similar attributes would be too late and face heated competition.

Funding Risk can be mitigated by an SFO in the early stages of the company, but in our digital media example, additional capital will be needed — or at least easy to acquire –in order to scale the business. A good example of funding risk affecting returns would be the inability for mobile ad networks/ platforms to raise capital before mobile was “proven” viable (see AdMob’s sale to Google and Quattro’s sale to Apple within a 6 week period). Before those landmark deals, funding sources constantly questioned whether there was a “real” market in mobile, citing the struggling networks who hadn’t succeeded, despite $250,000,000 of combined capital. Several early stage companies faltered for lack of capital, and several other investors suffered dilution from large downdrafts in valuations. An SFO can, of course, prolong the agony by continuing to fund (Fred Wilson’s famous quote here is “I have a 0% mortality rate- I just keep funding!”) but the effect on returns when others do NOT fund, or fund at lower prices, is undeniable.

So, if you are considering angel investing with your SFO be sure to match the risks with the rewards. There are more of the former than the latter!

 For a complete copy of the complete paper, visit the FOA website. 

Shields up!

This excerpt is serialized from a whitepaper titled Angel Investing for Single Family Offices (SFO’s) by The Family Office Association and Vaux les Ventures. For a complete copy, visit the FOA website.

I am often asked how I have dealt with risk as an entrepreneur and now more often as an angel investor. Short answer is I have just become accustomed to it, and at least always know when it’s there. Here are a few risks that both angels and entrepreneurs should consider:

Structural Risk must also be considered before making angel-type investments. While there are several angels who’ve become well known with their “spray and pray” philosophy, diversity won’t save an investor if the structure of the investments isn’t optimized. Unless the criteria are to be entirely passive and devoid of value-add to the company, then an SFO might consider putting some basic protective structures in place. These can be as simple as board and information rights for the SFO or one of its angel partners; basic protective provisions in the stock purchase agreement or reasonable valuations that still leave room in the cap table for another, larger investor later on.

Super-long hold periods are a recent – and generally unwelcome — development in the angel market. These are primarily a result of the moribund IPO market in the tech market over the last few years, as well as VC’s managing billions of dollars in committed funds. As a result, most companies are being forced into “hold” periods that can last 7-10 years — without liquidity. The VC’s have a vested interest in funding the company for a bigger exit (as they’re paid in part based on the amount of funds they manage). Entrepreneurs and angels are on the other side of this argument, as many have committed their lives, livelihood, and capital, and continue to risk significant portions of their net worth (in the entrepreneur’s case) and investable assets for the sector (for the angels) over an entire decade of risk exposure. The pressure has begun to release in the form of secondary funds like Second Market and Millennium Technology ventures, which purchase founder and angel shares far before the respective VC would consider doing so.

There are so many risks to being a start up, and those risks can be compounded (and/or mitigated) through how you go about angel investing.

Best rule of all: go in with eyes open!