February 2012
3 posts
IA Ventures - the next phase
The facts are straight-forward. We just closed IAVS Fund II. This new fund, at just over $105 million, allows us to pursue the same investment strategy we followed in Fund I – investing in companies that create competitive advantage through data. Just like Fund I, we will continue to invest in strong founders at the Seed, Series A, and even sometimes Series B stage. As part of this fund we will...
In startups, Always be...
recruiting.
selling.
raising money.
thinking about risk.
worrying about running out of money.
focused on firm culture.
selling.
recruiting.
having fun.
aware of your utility function.
honest with partners, employees and investors.
evaluating yourself against objectives.
humble.
identifying and leveraging mentors who can help you grow and achieve your objectives.
“paying it...
What startups can learn from the NY Giants
Last night’s Giants/Patriots game was another epic contest, displaying the greatness and intertwined fortunes of two of the best teams of the era. However, what underpinned the contest were the widely divergent paths of the teams who had reached the pinnacle of the sport: a 13-3 Patriots team with arguably the best quarterback (Tom Brady) and coaching mastermind (Bill Belichick) of our...
January 2012
10 posts
Founders: Be The Honey Badger
I was recently watching a funny YouTube video with my kids titled The Crazy Nastyass Honey Badger and having a few chuckles when it hit me: that Honey Badger actually has many of the essential characteristics of a start-up founder:
Determined. The Honey Badger goes after what it wants - hard. It has the same kind of laser focus and persistence as every great founder I’ve ever known. Hungry?...
Loyalty
One of the hardest dynamics I’ve had to manage throughout my career is loyalty. I, like most of my friends and people whom I respect, have feelings of faithfulness and devotion to those with whom we interact - partners, employees, investors, vendors, etc. However, there is a point beyond which loyalty can become costly - too costly, in fact - for historical relationships to remain as they...
What's the big deal about Big Data?
Every so often a term becomes so beloved by media that it moves from “instructive” to “hackneyed” to “worthless,” and Big Data is one of those terms. When I started IA Ventures in 2009, I used “Big Data” as a quick and easy way to describe the thematic focus of my fund. And it worked. People got that it implied tools for managing large amounts of...
The perils of "free riders"
Starting a company is, by its nature, an “all in” affair. You’ve either got the passion to run through walls, suffer painful failures and do unnatural things to achieve success or you don’t. And given the challenges of building a company and the tremendous amount of hard work and stress borne by the founders, they are generally focused on finding people who share a similar...
Evolving the technical organization
You and a pal have what you think is a great idea. You hack some code together and build a simple prototype. You get some feedback, like what you’re hearing and decide to go all-in on a start-up. You build some more, maybe convince another jiujitsu developer to join your little cadre on the come, and build enough product to demonstrate a vision that is ready for some angel capital. You take...
Pacing
One of the most difficult issues I’ve grappled with during my transition from angel investor to venture capitalist is that of pacing. By pacing I mean the rate at which capital is deployed, particularly with respect to initial investments in companies. Every fund has the notion of an “investment period,” the span of time over which the portfolio is built. It is commonly between...
“In such a (fat-tailed) world, prudence is the name of the game, and patience...”
– Mohamed El-Erian, Wall Street Journal, 1/9/2012
Letting go
In my experience, exceptionally bright, driven, visionary people commonly share a particular attribute: a high need for control. These characteristics are also hallmarks of the startup founder, who brings maniacal focus, evangelical passion and a penchant for multi-tasking to the table. As they bring on co-founders and early employees, you can often find the founder speaking with investors,...
BRYCE DOT VC: Data Data Everywhere and Not a Drop... →
brycedotvc:
As I tune in and out of the recent flurry of discussion around “big data” I can’t help but be reminded of the the old sailor poem:
Water, water, every where, And all the boards did shrink; Water, water, every where, Nor any drop to drink.
If I had a nickel for every founder who told…
“The beauty of collaboration towards solving big, bold problems:
Even before...”
– NYT Article Power in Numbers on Eric Lander, who heads up the Broad Institute, 1/2/2012.
December 2011
17 posts
Thanks...
…to those who read and contribute to the dialogue on Information Arbitrage. I have learned a ton from the process of writing and from the interaction I’ve had with my readers and commenters.
…to my portfolio companies. While I do my best to work hard for you and to help in your quest to achieve your missions, I can safely say that I am learning more from you than you are from...
betashop: Behind the Scenes: How Fab Raised $40... →
betashop:
Let’s face it, fundraising can be a real pain in the ass for the entrepreneur.
It takes up a ton of time that can be otherwise spent managing the business.
Sure, it’s a necessary evil, but it’s also typically a big distraction.
It’s also a lot like dating. You have to go on a lot of first dates…
Winning the talent war
Let’s face it: the hardest thing about building a great company is attracting and retaining great people. But once great people are attracted by pursuit of an exciting mission, a complex and interesting engineering problem and, yes, compensation, how to you keep them?
The problem is that truly great people stick out like a sore thumb. Some of them are even members of “The Guild”...
Invisible Children
This is a guest post from my son, Andrew.
Have you heard of the Lord’s Resistance Army (LRA)? Have you heard of Joseph Kony? If you have, that’s awesome. But if you haven’t - and many people haven’t - it’s upsetting to know that a lot of people in America don’t even know about the longest running war in Africa and one of the longest wars running in the entire world. I am Andrew...
Start-up dilemma: to sell or not to sell
There is almost nothing more exciting - or debilitating - than the acquisition offer received by an early-stage company. It is generally the single most polarizing event in a start-ups young life, often pitting acquirer vs. investors, founders vs. investors and founders vs. founders. It is an event that must be handled with great care or else the process can leave lasting scars on an organization,...
On being a leader
I’m a Midwestern guy and I was raised to be polite. And while 18 years in the markets put some dents in the veneer, I will say that being blunt, straight-forward and honest is a quality I appreciate in others. There was a very good post today titled On Honesty in Startupland, where this notion of being able to receive tough feedback (hopefully delivered in a respectful way) versus hearing...
Andy Swan: 7 rules for pitching to investors that... →
andyswan:
So you want an investor in your business. Here are some rules that I, as both an angel investor and entrepreneur have found valuable:
Don’t pitch to strangers: People very rarely invest in an idea. They invest in people with ideas. If you don’t know anyone, get started now. Investors are more…
“India is able to claim the high and mighty democracy road when it compares...”
– NYT, 12/9/2011
“When ideas are blocked, information deleted, conversations stifled and people...”
– NYT, 12/9/2011
“The survey revealed that the explosion of digital data created by mobile...”
– Enterprise Applications News, 12/6/2011 RE: a recent EMC survey
“What’s different in the Valley is that we’ve found a quasi-scientific method for...”
– NYT, 12/6/2011
“Over 70 years, this Valley has developed a culture that does not personalize...”
– New York Times, 12/6/2011
Tough love
For me, investing in seed stage companies has never been about making money: it has been about passion. Passion for the mission. Passion for the founders. Passion for those in and around the company. Yes, making money is always the hope but not the objective function I’m solving for. In my experience if I get the passion right, the money often (but not always) follows. I can honestly say...
"Taking stock" of Wall Street
The recently outing by Bloomberg of the breadth of the Fed’s support of the largest US banks during the financial crisis together with the likelihood of substantial option grants to bolster compensation in 2011 brought me right back to 2008. The hypocrisy and irony of these two stories is not lost on me. During the financial crisis I strenuously argued that bank balance sheets should be...
“China’s economic success is colored by its opaque political system, repressive...”
– Steve Rattner, NYT Op-Ed 12/3/2011
“At many firms, a lot of investment bankers have been convinced that we are...”
– NYT DealBook, 12/2/2011
“Building a durable, multi-billion dollar business takes time, and Founders Fund...”
– peHUB’s announcement of Founders Fund’s $625 million closing of Fund IV
Activating enterprise innovation: Open Data
In my role as a venture investor, I find myself spending lots of time speaking to “the enterprise:” Media companies, financial services companies, technology companies, retailers, Government agencies, etc., often assuming the role of “venture therapist.” “How can we engage with the start-up community?” “How can we structure ourselves to work better with...
November 2011
7 posts
Long-term utility vs. short-term economics
I am not in the deal business: I’m in the partnership business. This naturally means making an array of trade-offs in order to strike a balanced relationship with my partners, seldom getting everything I want but generally arriving at a point that feels good to both parties. My partners in this case are the companies in which we invest and to whom we provide capital, but more importantly...
Buybacks vs. dividends: focusing on the long-term
The issue of stock buybacks vs. dividend policy has been frequently discussed on this blog. However, today’s NYT article once again stoked the fires of my frustration with conventional wisdom around this topic.
Consider these two paragraphs from the article referenced above:
In other words, the stock market teaches a tech company that it shouldn’t keep its cash, and it shouldn’t give it...
Message to founders: Always ask for "the order"
In Wall Street parlance, “the order” is the opportunity to do a transaction. You, the salesperson, are telling the customer in no uncertain terms that you want to do a deal given a particular set of parameters. It is part and parcel of the culture that you can (and should) educate, compare alternatives, and frame the opportunity in light of the customer’s particular context, but...
Fund-raising: Manage the process, don't let the...
One of the most frustrating and distracting yet critically important aspects of building a business is ensuring it has adequate capital to grow. Pretty obvious, right? Well, the process a company follows for raising capital can have a strong positive - or negative - impact on the company, its employees and its prospects. I’ve seen companies get sucked into the vortex of VC hell, bobbing in a...
Creating Competitive Advantage Through Data ::...
As usual, the Defrag Conference has brought together a disparate group of amazing people to discuss innovation, technology, community - and data. I was flattered to ask to deliver a keynote this year, and the topic I chose was near and dear to my heart: using data to create competitive advantage. As I lay out in my slides, building a successful - and sustainable - data-driven enterprise is so much...
Too many start-ups or too few venture dollars?
“There’s too much venture money: it’s a bubble.” “It’s so hard to raise VC capital these days.” Depending upon one’s perspective, the early stage venture world is a vastly different place. From my seat I see several trends that are giving rise to this seeming disconnect, the outgrowth of which is frustration among both entrepreneurs and investors...
October 2011
4 posts
Data is the new .com
Throughout my business career, I’ve observed that people love to label current fashions. “Web 2.0,” “Cloud” and “Social” are three which are currently in vogue. In my lifetime likely none was bigger than “.com,” describing a business and its recognition of the importance of the Internet. Remember when long-established businesses would change...
Over the next few years I believe that...
…the public markets will become increasingly unfriendly, putting even more pressure on private capital to bridge the gap;
…Series A capital will be harder to come by, as life-cycle firms with reserves focus their energies on internal rounds for high-potential portfolio companies while Micro VCs and angel-led seed round syndicates with small or non-existant reserves go shopping in a...
2 tags
Mentors: an essential engine for growth
As I’ve gotten older I’ve become increasingly reflective on the seemingly random twists and turns in my life. Most of this consideration has gone towards my professional life, as I was blessed with meeting my life partner in college and, therefore, my personal life has largely been “up and to the right” since meeting the person of my dreams. But oh, that career… As...
3 tags
Know thyself
The noise across the venture investing landscape is deafening. Is there a valuation bubble? Is the boom in angel investing about to tip? Should large venture funds be doing seed stage investing? Is small-ticket Micro VC a legitimate strategy? Can new venture managers get funded? Blah, blah, blah. Bottom line: I don’t care and neither should you.
Whether you are building a new business,...
September 2011
6 posts
Quantitative methods and seed stage investing
The recent premier of Moneyball has caused many to ask the question: Can the same principles be applied to venture capital investing? Dan Frommer interviewed a handful of smart and influential early-stage investors, each of whom was cynical about the applicability of quantitative methods to early-stage investing. Fred Wilson further amplified his thoughts in this post. Given my pre-VC background...
3 tags
Speed can kill
Lately we’ve been witnessing an increasing number of entrepreneurs whom we’ve met previously, spent time, gave guidance and support, and encouraged them to stay in touch as develop their plan. Then out of left field we hear they are raising a round. Fantastic, we say. We’d love to get an update and hear all that’s transpired since we last connected. How about we get...
Getting real
It was about four years ago when I wrote how blissful ignorance was a portent of sharply increased market volatility, three years ago when I argued for dramatic action to clean up bank balance sheets by making equity and debt holders pay for their mis-pricing of risk, two years ago when I wrote about the rise of alternative trading venues and only last year when I got sick of all the Wall Street...
1 tag
The Information Dilemma
Today I spent a bunch of time at the Strata Conference in NYC catching some great speakers, speaking on a few panels and catching up with old friends. All in all, it was a productive and enjoyable day.
However, one of the panels on which I participated, the Son of Money:Tech, was a revival of a terrific conference that was kicked off in 2008 but ultimately mothballed in the wake of the financial...
3 tags
Can a venture capitalist add value beyond money?
This is a question I ask myself every day. “Am I REALLY helping my portfolio companies?” And if I am spending lots of time with my companies, does this necessarily translate into better returns for my Limited Partners? This is pretty biblical stuff if you are an investor, and strongly informs both the way you interact with portfolio companies as well as the shape of your portfolio. If...
1 tag
The changing polarity in advertising
The advertising business has always fascinated me. I have been “pitched” literally hundreds of thousands of times, and still bear the scars of some of the more memorable entreaties (“Two all beef patties, special sauce. lettuce, cheese…”). I’ve been keenly aware of the psychological principles at play, as well as the business implications of successful - and...
August 2011
1 post
2 tags
Sound thinking for unsound times
A note to early-stage companies everywhere:
The public markets are in panic. Global exchanges are getting crushed, with high-quality issues getting sold along with weaker securities. Cross-market correlations are trending towards 1. Gold is hitting new highs. This is not a pretty picture. And perhaps even worse, there are no easy solutions. “QE3” or other Government-sponsored measures...
July 2011
5 posts
IA Ventures is growing :: come join our start-up...
When I started IA Ventures, it wasn’t with the intention of starting a fund, but creating a firm. A real business. A true start-up with an eye towards building a world-class team, a recognized and respected brand, a rich ecosystem of relationships, a sought-after product and, ultimately, top-flight performance for our key constituencies - LPs, founders and co-investors. We have sought to...
2 tags
Financing your start-up
Bootstrapping. Friends & Family members (F&F). Angels. Venture investors (VC). These are each viable - and even appropriate - ways of financing your start-up. The question is: which is right for you? There are no easy answers, to be sure. But one thing is certain; angels and venture investors look at early-stage investments through different lenses, and it is important for the entrepreneur...