September 26, 2016 John McDuling at Financial Review : Everyone wants to be a VC now

Venture capital has become [one of] the most glamorous and exciting corners of finance. Rich heirs used to open record labels or try their hand at producing films, now they invest in start-ups. (read more…)

CATEGORY: capital, leadership, VC

September 20, 2016 Industry Ventures : A Graceful Exit – Managing Shareholder and Limited Partner Liquidity

Most investors and companies invest significant time and energy in securing capital, hiring a CEO, or finding a strategic partner. But they devote considerably less to lining up the right shareholder or limited partner when they want to sell or leave a job. When an employee or other shareholder is looking to cash out, how are they treated? How does the exiting partner or management team member treat the company and remaining stakeholders? For whatever reason, most leavers simply want to move on; they give short shrift to the personal and professional benefits of maintaining relationships and connections. More often than not, the exit process is an afterthought or is seen as a waste of time. (read more…)

CATEGORY: capital, leadership, VC

September 16, 2016 Eric Paley via Tech Crunch : Venture capital is a hell of a drug

I regularly see entrepreneurs agonize over a percent of dilution, while ignoring the fact that they are surrendering their most likely exit options for a low-probability shot at building a superstar startup. Billions of dollars have been outright wasted by founders selling future value that didn’t materialize, while surrendering present value that could have been navigated to great success. My advice: Don’t give up your present for a future you haven’t validated. (read more…)

CATEGORY: alternative financing, leadership, VC

January 13, 2016 Eric Paley via Tech Crunch : When Burn Rate Outweighs Enthusiasm

It doesn’t matter whether a company’s burn rate is $10K per month or $10 million per month, companies die when their burn rates are greater than investor enthusiasm. Burn rate is a bet on the potential of a business. That bet, re-evaluated at each round of funding, is based on the belief of venture capitalists that multiples of value will be created with the money they invest in a company. Unfortunately for founders, enthusiasm can be fickle while burn rates are stubborn. The two can easily get out of sync. (read more…)

CATEGORY: leadership, profitability, resilience

September 27, 2015 Mark Suster via Medium : Why I Fucking Hate Unicorns and the Culture They Breed

If you’re fortunate enough to raise $100 million early-on to build your startup — congratulations. But to all of the 99.999% of other startups out there please know that this isn’t the success by which to measure yourself. Measure yourself in gym visits, in 3-yard gains, in sacrifice and dedication. Avoid the metaphorical parties and the alcohol and the extra pounds and know that your gains will come in lines of code and purchase orders and signed offer letters and repeat purchases. And during your year in the gym nobody may notice. It may have to wait until way down the road when you come out 80 pounds lighter. (read more…)

CATEGORY: leadership, resilience, valuation

December 1, 2014 Small Business Economics : Who Become Serial and Portfolio Entrepreneurs?

“Serial entrepreneurs” run multiple businesses in sequence while “portfolio entrepreneurs” run multiple businesses in parallel; they differ from “novice entrepreneurs” who have so far operated only one venture. The present paper is the first to model occupational choices between all three entrepreneurial types: It goes on to discuss its theoretical predictions in the light of independent evidence about serial and portfolio entrepreneurship from the extant literature. (read more…)

CATEGORY: leadership, product-market fit

October 29, 2014 Business Insider : Why Selling A Startup For $20 Million Can Be Better Than Selling It For $200 Million

"My advice is you shouldn't do a startup for financial reasons," he wrote via email. "Most startups fail and there are easier ways to make money with less risk...And if a company is successful, which is very hard to achieve, the money comes whether you build a fat company or a lean one.  Mike [Arrington] and Arianna [Huffington] both did great financially.  So did Mark Zuckerberg and Kevin Systrom.  How many yachts can you water ski behind?" (read more…)

CATEGORY: bootstrap, leadership, valuation

July 21, 2014 Andreessen Horowitz : 12 Things I Learned From Marc Andreessen

#1 “The key characteristic of venture capital is that returns are a power-law distribution. So, the basic math component is that there are about 4,000 startups a year that are founded in the technology industry which would like to raise venture capital and we can invest in about 20.” “We see about 3,000 inbound referred opportunities per year we narrow that down to a couple hundred that are taken particularly seriously… There are about 200 of these startups a year that are fundable by top VCs. … about 15 of those will generate 95% of all the economic returns … even the top VCs write off half their deals.” #10 “There’s a new generation of entrepreneurs in the Valley who have arrived since 2000, after the dotcom bust. They’re completely fearless.”… “Founders today are very technical, very product centric, and they are building great technology and they just don’t have a clue about sales and marketing…it’s almost like they have an aversion to learning about it.” “Many entrepreneurs who build great products simply don’t have a good distribution strategy. Even worse is when they insist that they don’t need one, or call no distribution strategy a ‘viral marketing strategy’ … a16z is a sucker for people who have sales and marketing figured out.” (read more…)

CATEGORY: leadership, product-market fit, VC

July 16, 2013 Ben Horowitz from a16z : Capital Market Climate Change

If you are burning cash and running out of money, you are going to have to swallow your pride, face reality and raise money even if it hurts. Hoping that the fundraising climate will change before you die is a bad strategy because a dwindling cash balance will make it even more difficult to raise money than it already is, so even in a steady climate, your prospects will dim. You need to figure out how to stop the bleeding, as it is too late to prevent it from starting. Eating shit is horrible, but is far better than suicide. When you go to fundraise, you will need to consider the possibility of a valuation lower than the valuation of your last round, i.e., the dreaded down round. Down rounds are bad and hit founders disproportionately hard, but they are not as bad as bankruptcy. Smart investors will want the founders and employees to be properly motivated post-financing, so there may be a way to a reasonable outcome for both you and your people. Make sure that you figure out what kind of deal is better than bankruptcy and be sure to communicate to both your existing and potential new investors what you think makes sense. In this situation, it’s better to start low and get one bidder that may lead to many and the market-clearing price than have no bidders and the dream of a high price. (read more…)

CATEGORY: downturn, leadership, profitability

December 1, 1985 Journal of Business Venturing : The entrepreneur: A capable executive and more

This article discusses those traits that entrepreneurs exhibit at significantly different levels than do their corporate counterparts; how these factors may influence the decision to enter entrepreneurial occupations: and how these same traits have the propensity, if ignored, to have a negative influence on both the entrepreneur's organization and personal life-style. Entrepreneurs tend to be 1) tolerant of ambiguous situations, 2) prefer autonomy (autonomy may be described as self-reliance, dominance, and independence), 3) resist conformity, 4) be interpersonally aloof yet socially adroit, 5) enjoy risk-taking, 6) adapt readily to change, and 7) have a low need for support. These factors can lead to serious problems in delegation and communication, two factors of paramount importance to a growing concern. They may also cause intense stress or loneliness for the entrepreneur. Fortunately, the traits of willingness to accept change and ability to adapt to it will help the entrepreneur to accept and respond to problems that arise due to poor delegation or communication. Coping methods and a tolerance of ambiguity will assist the entrepreneur in dealing with stress and loneliness. The main problem is to alert the entrepreneur to the potentiality of these problems—which is what this article attempts to do. (read more…)

CATEGORY: leadership, resilience