I’m excited for the StrictlyVC events that are rolling out this year. I’m proud to now be a member of StrictlyVC’s Advisory Board, and the next “Insider Series” event is just around the corner on May 13 in San Francisco. There are a few tickets left, so you can click here to register and get a ticket for the event: http://strictlyvcsinsiderseries.splashthat.com/
The agenda looks awesome for those of you who are venture-nerds like me. Connie Loizos (@cookie on Twitter) has done an incredible job to draw in great speakers who will be in conversation with the group, investors from Sequoia, Lightspeed, and Pantera — and Parker Conrad, the CEO of high-growth startup Zenefits. Specifically, Bryan Schreier from Sequoia will chat with Marco Zappocosta (co-founder of Thumbtack); Connie will have a chat with Lightspeed’s Jeremy Liew (who invested in Snapchat, Whisper, and a bunch of other cool companies; I will sit down with Dan Morehead from Pantera Capital to talk about the current state of Bitcoin, and Connie will end the content session with Parker from Zenefits.
All of that, plus some good beers and conversation before the show starts and after the show ends. I made great new friends at the previous event and ran into a bunch of old friends. For me, even though the content is great, that’s the best part — meeting other folks interested in investing. Get tickets while they’re still available.
I just sent this out to Haystack companies which are at the seed stage. I tend to look at things through the lens of existential risk at this stage, which then inform the milestones (not all metrics-based) to reach as a guidepost. I wanted to share it with you all as its generic, but shows how I’m thinking about things today in mid-2015.
I view my job as a small investor with a small fund is to identify and help great founders & companies. If I had to boil down where I help most, it’s around getting ready for a proper seed or Series A round, depending on stage. I am here to help and plan out these things with you way ahead of time, so please consider me as a resource.
(For those of you who’ve already raised rounds with lead investors, please disregard — they will now focus on this for you, hopefully.)
However…I have noticed I’ve fallen out of communication with many of you at the seed stage, email is hard, folks are heads down building, etc. To me, one of the Top 3 functions as CEO is to make sure there’s enough money in the bank. In this scenario, it means the next round, and investment rounds usually come together because of (a) breakout growth or more likely (b) reaching fundamental PM fit, key metrics, and other foundational milestones. In my experience, this stuff takes many months to set up and get right, and it takes many months to develop a relationship with the next lead investor.
These are all places where I can help, and I’m writing to offer this to you all again. Ultimately, it won’t work for everyone, and that is OK, but please do keep in mind that if you’re in a position where your cash balance is going down and things need to happen faster, it’s usually hard for me to come up with a palatable solution in a short period of time.
We are in a frothy seed market. It is good to be a founder during a seed round, but the number of institutional Series A deals are about the same. That means, the bar is higher for everyone, and everyone (you and me) should be constantly concerned about future financing risk — even moreso given how easy it is to raise seed. The drop off is severe.
The Month Of May
I will be gone for a lot of May. I have two work trips and taking a family trip. I will be on email, but slow to respond around Memorial Day. Text/FB message me for emergencies during the month, please. I’ll do my best to get back to you quickly.
Last week, Kate Kendall of CloudPeeps invited me to speak with her at Galvanize in SF for a Women 2.0 event. I met Kate about a year ago and was happy to become a small investor in CloudPeeps about six months ago. She wanted to have a discussion with the Women 2.0 crowd about her experience as a female founder and CEO, about how she met and interacted with me, and to field questions from the crowd — which looked to be about 100+ people.
The talk went by really fast. Kate talked about how she raised her seed round (just under $1m) and all the tactics she used. It was fun for me because I didn’t see those, but she is a crafty one! We also broke down how I was intro’d to her, how we communicated while she was in NYC (heavy email). and how she finagled an invite to an event I was speaking at, engaged me in conversation, and a few weeks later — I became an investor in CloudPeeps. (The rest of the Women 2.0 talk was very fast, and most of the questions and answers were pretty generic, so I’ll keep this post brief.)
What occurred to me only in retrospect is that after two years of investing at the angel/seed level, Kate was the 1st female founder I’ve invested in via Haystack. Since then there are two more companies with females on the founding team. In my chat with Kate last week, the topic of “how was it different with Kate being a woman?” never came up in discussion. Reflecting back, it never really did come up in my chats, phone calls, and emails with her. In fact, I never thought about it. And, that’s the hard part to convey — the overwhelming majority of investors I know, even those who invest very, very early, wouldn’t discriminate against a woman as founder or CEO. In fact, I have seen many female startup CEOs be at the center of very competitive financing rounds, fielding multiple offers, and in total control of the situation. One company I’ve been dying to invest in for over eight months has a female CEO, and she has told me “no” at least 10 times.
In my chat with Kate, I did mention to the crowd that the life of an investor comes with saying “no” all the time, all day long. I think about my time and attention so much, I often say “no” to social events or running errands during the holidays with family. So, ultimately, investors are going to say “no” to all sorts of people, regardless of color or race or gender. The position calls for discrimination in the sense that most opportunities are passed on, even if they’re qualified or even exemplary as companies and teams. I myself have made a big $100M-run rate mistake as an investment I passed on for a silly reason. This isn’t to say that things couldn’t be improved or that there are unsavory stories and experiences people experience in the game to get investment, but two years in, for at least what I’ve observed, both first- and second-hand, the overwhelming majority of investors I see are busy chasing anything that’s growing or has evidence of promise and with disregard to “who” is helping make that growth or promise happen.
Toward the end of college, and again toward the end of graduate school, there was a predictable recruiting campaign from all sorts of consulting agencies looking to scoop up and hire labor. In exchange for brand, a high salary, and a bit of prestige, graduates would sign up early in the final year, start a plan to payoff their student debt, and sign-up for intellectually challenging work filtered down through various organizational levels.
I know all of this because I almost lived it. Worse, I wanted to live it. As I saw it all go before my eyes, I also jumped into the fray, practiced case questions, riding off the competitive juices of the process of staged interviews. That process exposed me to the partnership model of consulting shops. The hierarchy could be loosely described as “finders, minders, and grinders.” New graduates were “grinders,” grinding out the work with long hours; “finders” were the partners, who found new clients and managed existing ones; and “minders” sat in between the two, minding up and minding up.
Now, what if online networks could put the clients directly in touch with labor? Could that create more efficient flow of information, better working conditions, and better output?
I think so. A few years ago, I used HourlyNerd for a few projects and was surprised by the output. They used a vetted network of current and recent grad MBA students, matched by background and interest, to create slide decks, conduct research, and so forth. So long as I (the client) was able to scope out what I needed, the workers (students here) were more than capable of producing the work with the added benefit that we never had to meet, we were able to email and chat online, and they could keep their hours and location flexible.
Then, out of the blue, the founders pinged me about their latest round. This is a bit later stage from when I invest, but I asked the founders a ton of questions about their plans to scale, about how their marketplace could propel them beyond a services network. Even though my check was small for them at stage, they made a concerted effort to engage with me around all of my nitpicking questions. Through that process, I learned some interesting facts: Over a yearlong period, the company had nearly tripled its average project size, that most customers repeat purchases frequently, that the marketplace had very good liquidity, and an average sale price that would make an investor pretty happy.
So, I am breaking my own model for Haystack and investing “late” into HourlyNerd, partly because they’re empowering the folks who, like me, could’ve also taken that traditional path into consulting. With a company like this, now those workers are free to interact directly with clients, to build their own reputations around topics, to travel and live where they want to, and much more. It’s a mission I can support — not only with an investment, but also my time. Sign up here and give it a try, they offer a great discount to start.
It’s common practice among investors (and LPs) to “share decks.” In a world where all the action is in the private markets and where deal flow is never ending, scanning a deck shared and received via email is the quickest way to make a first impression and make a subconscious decision to invest more time in the opportunity itself. To be clear for this post, once bigger institutions start getting involved, having a set of slide decks (one to be emailed, one to present with) is critical, though as the market is pushing me to invest earlier and earlier, I’ve made some of my recent very early-investments either with an unpolished deck or no deck at all. And, it all got me thinking — at the very earliest of stages, does a deck even matter?
A number of people who I respect and who have way more experience than I do commented that decks are critical as a test to see how a founder can distill and communicate succinctly. It’s a critical form of business communications. No argument from me — though in the very early stages, what if the product isn’t well defined yet? What if the team is still forming? What if there’s data but it’s paltry? What if the product or service requires a behavior change or new market to form?
When I’ve met these most recent founders, they were working on a product or service, trying to design their model, and I saw something big in the mess of each early-stage company. In some cases, I went in and offered up my point of view of how it could be explained, especially to an investor audience. I don’t believe people starting these new companies spend too much time trying to fit their creation into a few slides or model — in fact, the opposite can be a negative signal, an overly polished slide in the early-stages can oftentimes reek. And, sometimes people creating this stuff don’t fully grasp what they could potentially have — which is why I get interested and involved early.
So, yes, eventually, you’ll need a deck. No argument there. But in the very early stages, other things can go a long way. People using and talking about your product on blogs and Twitter; or people talking about your service in the press (organically); or simply speaking to investors who can offer their own POV on how they conceive of your model after a phone or f2f conversation. Here, a short 3-5 slide investment deck may be worthwhile, just listing team, product, and vision — as a vehicle to get the call or get the meeting. Like Charles, I find the live conversation to be the most revealing.
In this post, I will talk about the presence of women on stage at venture capital (VC) events or as part of digital media. In the past, I created and produced about 75 short TV interviews on TechCrunch TV from about 2012-13, and after that show was cancelled, created and produced interviews with eight (8) VCs which spanned 12 episodes in total. Last year, I helped organize the Post-Seed Conference in SF (Dec ’14), and this year, as a friend, I helped StrictlyVC design and launch the “StrictlyVC Insider Series,” for which there has been an inaugural event and one coming up in May ’15.
Every now and then, someone will inquire about why there aren’t more women involved in these events or on digital media. Sometimes, these inquiries start as accusations rather than trying to open up a conversation with me, so in this post, I will do my best to detail some things I believe everyone should know and discuss openly:
TechCrunch TV: From 2012-13, while I was an official contributor to the publication, I created and helped produce a weekly TV show which included all founders and investors and one journalist (who happens to cover VC). Out of the 75 guests, there were only three female guests, but I certainly did ask many visible women to be on the show, and for whatever reason, they either declined or didn’t return my email. Looking back, I could have pushed it more as an issue, but I wasn’t consciously trying to achieve gender balance on the show.
Sunday Conversations: After the TechCrunch TV show was cancelled, I had a friend who kindly offered to sponsor all the video, editing, and production o the interviews, and for my first interview, I chose the guest who was slated to be on TechCrunch TV as that show was put to bed. After that, I chose a small handful of VC general partners and, in early 2014, decided to not continue them past 2014. I have since stopped, and the last four (4) were all of Keith Rabois. I extended the series with Rabois because of the overwhelming response from the audience who wanted more. I did not ask any VC women general partners to be on the show because almost as soon as it started, it was over.
[Today, I posted the audio and video from Sunday Conversations, and it triggered a conversation on Twitter. You can click here to open up the thread. As I mentioned, as soon as I started the show I basically made a decision to shut it down as my friend was producing the video out of his pocket. So, yes, there were no women out of these eight (8) guests, and had I continued the show, I would most certainly have tried again to bring women GPs on the show. I was surprised to learn some people didn’t believe that I had asked female guests in the past with TCTV, so all I can do is state here that I most certainly did. Many times.]
The Post-Seed Conference: In the organization of this conference, the organizing committee (which comprised of a woman entrepreneur) actively discussed this issue, and we all independently sent requests for speaking to a number of people; in my case, those requests were mostly not returned on email. Did I send an email to every single general partner at a VC firm? No, but I definitely spent time thinking about it and inviting people to speak, and it’s important for me that people know that. I recognize what people see is what they see, so I’m sharing a bit more about what went on behind the scenes. Right before the event, a female friend emailed me the note below, which triggered a conversation. I tried to explain that we did absolutely consider it and sent out invites, but they were not returned:
“Hey! Would love to attend. I have to be honest though, I was shocked guys who I really respect like you and (redacted) would be cool with an event that has only 2 women speaking, both journalists it looks like? There are so many great female investors, I know women can be harder to come by and get to say yes but I can think of 20 women who are in sf and would be great, at least 5 of whom would say yes even on this short notice. Is there room to add more speakers on the panels? An investing conference that ends 2014 with no women investors feels like a step backwards :(“
The StrictlyVC Insider Series: This was started by and is run by Connie Loizos. She is a friend, and I offered to help her organize a small handful of speaking events for her brand and newsletter this year. I will bring it up as a topic of discussion for one of the events.
Ultimately, now in 2015, I have my own blog, and I help out a little with StrictlyVC. I do not engage in organizing any other media or events, so it’s important people recognize this — just this blog and maybe 2-3 events with StrictlyVC. I will do my best to get more women in venture involved. People will see what they want to see, but it’s critical people know that many people do not respond to requests to appear at an event or on media. I’m sure there are many good reasons. Maybe they don’t want the scrutiny at work; maybe they don’t want to be part of a quota; maybe they don’t want to talk about this topic specifically, which would invariably come up; maybe they get too many requests because they’re visible and people are trying to get them on stage more. I could go on and on.
I do not recruit people into general partnerships, so this is a small way for me to bring the issue into the light, though of course, there are other inescapable facts about diversity in venture capital which I don’t have control over. I can think of one thing to do where I’m in total control of what is produced — on my blog — and I will email a bunch of female VCs to see if they’ll share their thoughts on email so I can reproduce them here in a compendium. I hope they respond, but I understand if they don’t want to, as well. (If someone has an email list of women VCs, could you please send that to me or post it here? Thank you.)
Last night, we hosted a small dinner @ Hakkasan to welcome Ben Thompson of Stratechery to town. In my work with GGV Capital, which for many years has been investing cross-border between Asia and the U.S., listening to Thompson speak over dinner was both expansive and current — in my opinion, he is the single best technology analyst out there today, so we were lucky to have his time. It was a long dinner and many friends of GGV’s showed up (thank you for coming!), here are some of the brief points the discussion created:
The effect of Asia-based messaging apps: I kicked off the discussion to focus on a topic I’ve been wrestling — what should we expect our U.S. messaging apps to do given what’s been going on in Asia? Thompson pointed out that since SMS is mostly free in America, there hasn’t been the glaring need for apps in the same way that consumers felt it in Asia. As a result, he postulates the evolution of functionality in our own messaging apps may not move quickly as SMS is good enough for many use cases.
Peer-to-peer and on-demand services in Asia vs U.S.: Thompson pointed out that the sheer density of many cities across Asia make it so that the things citizens need is often no more than 5 minutes from their houses, whereas the U.S., is very spread out and built mostly around a car culture. This makes sharing and on-demand more likely, whereas there’s less need in his region of the world, relatively speaking.
What to expect from Apple Watch: I’m getting so excited about this. come Monday it is really going to dominate chatter and change the conversation in a big way. Thompson made a number of nuanced points about Apple Watch — the battery life will depress it out of the gate, but Apple’s core audience will give it enough lift to experiment. Thompson also pointed out that, just like the iPod was a very visible device to others, many people will see others with the Watch and start looking at it, start thinking about buying on. It will foster curiosity. The Apple Watch will also help Apple leverage its various APIs like HealthKit, CarPlay, WatchKit, etc.
Global battlegrounds: Thompson remarked the Chinese companies will own China, and Apple will do well there, too; while in the U.S., obviously Apple, Google, and Facebook reign supreme. The new battleground for these companies will be in developing countries.
On Xiaomi: Thompson believes Xiaomi’s scrappiness will afford it a massive advantage as it figured out a way to bring high technology to even poor geeks in China — not just the upper classes — and that this DNA will afford them the opportunity to expand their reach in China and places like India, for instance.
Facebook is the most underrated company in the Valley: Someone asked about Internet.org, and Thompson pointed out just how aggressive Facebook is being in other parts of the world, essentially giving away bandwidth and cutting zero-rating deals with carriers to essentially become the company which controls media consumption, which in turn helps them control advertising. When you think about it this way, it makes $200b as a market cap seem small for $FB.
Thanks again to Ben for sharing his thoughts so openly, to GGV for organizing and hosting, and to all the guests who showed up for a great evening.
There’a a lot of bubble talk again. I’m so confused now I don’t know what to make of it. Here’s what I do know: This is a big up market. There’s a lot of money in the angel and seed and crowdfunding markets. Depending on what stats you believe, the number of microVC funds with $50M or less has exploded in the last few years. And, we have all read that there’s more money moving into the late-stage private markets, with institutions like hedge funds, sovereign wealth funds, and all sorts of people clamoring to get a piece in the next Airbnb — including Airbnb.
Yet, on the other hand, we are living in a time of (1) technology proliferating into the real world and (2) the simultaneous development of groundbreaking platforms….we all know this, but consider that mobile phones are making the largest market the world has ever seen; or that Uber, Snapchat, and Apple’s iOS ecosystem and mobile efforts are pushing technology out into the real world, all around the Earth; and that besides mobile computing spreading with better and fancier sensors, we have drones (an estimated $100B market over the next 8-10 years); innovation in financial technology and automation, like the Blockchain, which despite the ups and downs, could be incredibly disruptive; we have crowdfunding across a number of verticals. I could go on and on.
I personally tend to agree w/ Albert’s assessment, here. I’ll quote his closing paragraph:
Because [this period of private growth] is happening gradually and because the logic looks internally consistent (and add to that the low interest rates), this could continue to go on for quite some time. This strikes me as the classic case of Nassim Taleb‘s point about fat tailed distributions where it is the higher order moments (kurtosis) that really matter. So the process looks very smooth and gradual for quite some time until there is a sudden and fairly violent swing.
All this said, we are all analyzing what we know. What about the unknowns. What about an exogenous shock to the system, even if the system is resilient? I know we cannot predict that, but it is a part of life, and any analysis should also include those potentially known unknowns the exogenous shocks:
Geopolitical, general unrest could foment in parts of the world as it has for the past 4-5 years. To date, the U.S. has been isolated from this.
Macroeconomic, like how the price of oil just dropped. People say “the macro” doesn’t affect technology innovation, and that is true, but it does affect capital markets, and that could have an impact on crowdfunding, smaller funds, and IPO markets.
Natural Disasters, a calamity on the scale of Sendai/Fukushimia (let’s hope not) on the west coast would rattle business as usual.
Adjacent Bubbles, such as student loan debt could mount and cause instability in other financial institutions.
Shifts In Power, as in what we will have next summer in America, leading into the 2016 election.
Loss of Public Market Confidence,Albert commented back on Twitter that it could also be a few public companies which slow growth and perhaps even stall that triggers this, so we have another possibility.
“Consumerization of the Enterprise” is one of those phrases that now feels old, in part because it was used so much without real examples. That was then, and this is now — we are now starting to see enterprises adopt design-oriented products like Slack and Zenefits, to name a few. Looking back now, it shouldn’t be a surprise that products designed with principles to suit everyday consumers are preferred by workers at larger companies.
This got me thinking — what about other prevalent consumer business models today? Could concepts like “on-demand services” or “collaborative consumption” take root inside older, larger, perhaps stodgier, less sexy industries? I wrote about this with respect to on-demand services here. While I didn’t find many on-demand services with consumers as the end customer (except for Boomtown), I did start to see some interesting companies in the sharing economy, but now applies to other industries, specifically related to industrial equipment.
Growing up studying economics, textbooks beat into your head that western economies were stronger in part because they were fueled by consumption. Buying things drove GDP, and that had a strong, trickle down effect. Then, 2001 and 2008 happened, and went the tide went out, the people (and industries) who were naked had to scramble to find new places to eek out efficiency and lower their own operational and capital costs. We’ve seen what’s happened to consumer markets, with the success of companies like Airbnb (full list of “sharing economy” companies on AngelList) — so, can larger industries benefit from the trend?
What I found out is: Yes. The first company I found is Cohealo, based out of Boston. When I found them and finally met them, they’d already well passed me by as an early-stage investor, and they’re well on their way to the big time, helping hospital networks share their high-end equipment which requires high, upfront capital expenditures but often just sits around waiting to be used. Cohealo found the white space between centers which own these and those which need them, and now the sky’s the limit for them.
The next two companies I found, I invested in them. The first is Asseta, which provides an aftermarket for industrial parts for semiconductor companies, a capital-intensive business which Asseta helps provide more financial efficiency.
And the second company I found was Getable. There’s a fun story behind it. I had been tweeting about this subject after posting about it, and Kevin from Getable jumped into the conversation. I knew construction, like medical equipment, was a huge industry ($40B+ industry), big enough for a concept like sharing to pervade. It took a while for Kevin and I too schedule our meeting to talk more about this, and I had no idea how they were doing as a company. Finally, Kevin called me to apologize he had to cancel a meeting because they were just about to close a round — and, the light went off in my head.
“Can I invest, too?”
Kevin was busy as a co-founder dealing with the round, but he took my request seriously, checked out my references, and after a few weeks, managed to make a bit of room for me in the latest Series A round that was announced in February. I had a bit of time to really dig into the Getable’s metrics, which now already services more than 50 construction companies across 250+ job sites, process over $3M in construction rentals (saving on average over 20% for companies), and also driving over $20k in sales to suppliers who join the Getable network.
I am grateful to Kevin for taking my call during a stressful time and taking the time to read my posts on the matter. In return, I am now allowed to invest alongside a great syndicate which led Getable’s Series A as the company marches further into a massive industry ripe for new technologies and new business models. Finally, it’s worth noting I wouldn’t have arrived at Getable if I didn’t see the concepts take root among consumers and then, write about them here on my blog. The writing helps reinforce what I see taking place, and then helps me connect with new friends like Kevin, and those connections lead to things that I couldn’t have planned with any grand strategy. That feels good.
Disclaimer: This list is not likely complete nor precise. Please read on: A few weeks ago, I looked at U.S. consumer unicorns and scraped public databases (imperfect sources) to find which institutional investors got into companies that would eventually turn out to be worth over $1 billion. Specifically, I looked back to 2008 and tried to find funds which invested when the company was valued at or under $100m. These are just arbitrary parameters.
Now, I’ve done it for enterprise/B2B companies in tech which have started in 2005 or after in the U.S. Note, there are more of them, but the total enterprise value of these companies added up would still be dwarfed by what has happened in consumer services. Again, please note the data isn’t 100% precise, so if you see an error or omission, please just tell me and I’ll fix it. Also, some of these companies have ballooned above $1b (like WeWork), so while the pre-$100m rule doesn’t apply exactly to that company, I kept it the same here — I don’t know IRR but safe to say some of these firms have outsized returns on just one investment, so congrats to all who made the list.
Mention frequency > 1 are: SV Angel (7); Sequoia (5); Lightspeed (3); Greylock (5); Accel (3); Khosla Ventures (3); Kleiner Perkins (2), Blumberg (2); Benchmark (2); First Round (2); a16z (2); Felicis (2). Note, also, that many YC companies focused on B2B like Zenefits and Optimizely on their way to the billion dollar mark, so if you have suggestions there for a “too watch out for list,” I’ll update this. And, as they say, once is lucky (but still awesome), two is good, and three a pattern.