06/13/21

Saints, Sinners, Losers, and Winners

In the venture capital world, there is always a lot of information about the big wins of VC firms, but what of the losers? Or the deals they passed on they came to regret?

One firm recently put out a public announcement of the deals they passed on that turned out to be truly missed opportunities.

Here they are:

AirBnB — back in 2010, the venture partners looking at the deal thought it was a crazy valuation at $40,000,000. The last time AirBnB raised VC money they raised at 500X that original number.

Apple — Venture partner, “Outrageously expensive” at $60,000,000 valuation.

Atlassian — the largest Australian tech IPO is that nation’s history was a “bit rich” at $400,000,000.

ebay — “Stamps? Coins? Comic books? You’ve GOT to be kidding. No-brainer pass.” Haha. Sorry.

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11/16/20

Interviewing Venture Capitalists

The other day I had a conversation with a CEO who was strapping on his kneepads and polishing up his tin cup to hit the fundraising circuit.

He is not a complete novitiate, but neither could he write the book on the subject. He was a good student, smarter than a Shih Tzu — which is pretty damn smart.

I made bold to say to him, “Remember you are interviewing the venture capitalist just as much as they are assessing you.”

The most important element of fundraising is to ensure you enter into a transaction with a “good” venture capitalist which requires you to interview them.

Here is Dante’s view of the venture capital world.

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06/29/20

Volcker 2.0 And Venture Capital

Whilst you were quarantining and attending to the vicissitudes of life, the banking world was undergoing some incredible changes to its regulatory environment.

Last Thursday, the Federal Reserve, the Office of the Comptroller of the Currency and Federal Deposit Insurance Corp (and the US Securities and Exchange Commission in a tangential manner) agreed to changes to the Volcker Rule (part of the 2010 Dodd-Frank Act which laid down the law for banks and undue risk).

Believe it or not, the Federales are going to allow banks, commercial banks, to invest their own funds (meaning that balance in your checking account you never touch) in venture capital partnerships.

Yep, old Wells Fargo can send some money to your favorite venture fund and get into the highest risk business imaginable.

“But, there’s more!” — imagine your best Billy Mays OxiClean pitch voice saying those words.

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01/11/20

Kickstarter Union — Woke Or A Joke?

It was 79F yesterday in the ATX and 46F this morning. We’ll see 60F by the afternoon. Winter is brutal in Austin By God Texas, y’all. Brutal.

So, I have been reading up on efforts to create unions at tech firms — talking to you Kickstarter, Uber, Google. While I used “Kickstarter” as the click bait title, there has been a lot of such activity in the tech world.

I am a huge fan of Kickstarter and the entire crowdfunding industry. It was an industry that was invented from the whole cloth and I love it, but as a company, their ham handed response to an effort to unionize their 160 person workforce has been a study in how not to do things.

Buzzfeed is another example of a company who saw the writing on the wall, read it, translated it, and acted upon it.

This union formation effort happens and is happening for a number of reasons:

 1. First, we are at full employment. When you arrive at full employment, the power at the negotiating table swings to the employee side. READ THIS AGAIN

This is the most basic, fundamental change in the market. If you ignore this simple fact, then you are hopelessly lost. Anybody who is resisting the creation of unions has to face up to this reality.

 2. Unionized employees get higher pay, better benefits, and better understanding of the employee-employer relationship.

When companies like We Work — and a slew of other SoftBank funded goliaths — layoff thousands of employees in a single day, workers are going to look for a port in that storm. When they arrive, they will be wet and pissed off. That pissed offness will generate energy.

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10/26/19

The We Work Fallout

We Work was symptomatic of venture capital funded companies that tiptoed to the public markets with no profits to feed the beast.

In the case of We Work, the market finally woke up and said, “Hey, you don’t even have a plan to become profitable. Get outta here.”

We Work was further punished for the behavior of its leader, the inimitable Adam Neumann, who was treated to a  hubris-crushing cure that resulted in his departure (though anybody who gets bought out with a more than a billion dollar send off will get no sympathy in the Big Red Car’s book, sorry).

What has now taken root is the quaint notion that companies — even before going to the beauty parlor to get primped for an IPO — are going to have to be within earshot of being profitable.

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08/21/19

Tumblr Tumbled

It is obligatory to write something about Tumblr in the blogosphere or “they” will hack your site, and crash it. The Big Red Car doesn’t want that to happen, so here goes.

Related image

It is a curious case, this Tumblr story. With apologies to Charlie Dickens.

“It was the best of times, it was the worst of times, it was the age of greed, it was the age of Yahoo Marissa, it was the epoch of liquidity, it was the epoch of overpriced deals, it was the season of Porn, it was the season of VC virtue, it was the spring of the micro blogosphere, it was the winter of Tumblr, the Internet had everything before it, the Internet was its own worst enemy, every startup was going to be come a Unicorn, every startup was going bust — in short, it was like today when we suffer delusion and cannot believe that things like Tumblr ever happened.”

Tumblr is a microblogging and social networking company founded by David Karp, a natural coder, in 2007.

NEW YORK, NY – DECEMBER 10: Founder and CEO of Tumblr David Karp attends Tumblr’s 2014 Year In Review Party at Brooklyn Night Bazaar on December 10, 2014 in the Brooklyn borough of New York City. (Photo by Steve Mack/FilmMagic)

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07/29/19

Venture Capital Data

In working with startup CEOs one of the most important discussion points is raising money. To be able to effectively understand the market for venture capital, one has to do a bit of study on the subject.

Luckily, there are a number of great sources out there. One of them is PitchBook which publishes something called the PitchBook-NVCA Venture Monitor. It is worth a read.

A couple of things caught my eye. First is that the money flow continues at record levels. More money and a consistently high level of deals. Good news.

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07/20/19

The Money Divide

Love may make the world go around, but it is money that pays for the trip. The world is divided between those who consume money (my tribe) and those who provide the money.

Amongst competing tribal loyalties are the classic American entrepreneur (consumer) and the venture capitalist (provider).

Image result for images of men shaking hands on a deal

Entrepreneurs propose an idea that requires a good slapping with a checkbook — a checkbook that, alas, they do not possess — to bring it to reality. The venture capitalist shows up with a checkbook and offers to assist.

This assistance may take many forms, but the most important thing to understand is that the two parties — the consumer of capital and the provider of capital — have, at times, different interests.

[I am being charitable as I believe the interests are not just different, they are many times divergent. When I consult with CEOs, when I coach CEOs, I always ensure they understand this simple fact. There is a money divide.]

In life, in business, one doesn’t get what one deserves, one gets what they negotiate. This is not a hard truth; it is a simple truth that many choose to avoid because it requires a bit of rigor or discipline to employ.

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