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October 31, 2007

The Pats and Running Up The Score

In the wake of the Patriots 8-0 start and their 52-7 whomping of the Redskins, there has been a lot written about the Patriots running up the score on their opponents.  Luckily, most NFL coaches don't think that this is an issue.  And, neither do I.

NFL players aren't in the business if making sure that the other teams avoid hurt feelings.  It's football.  If you don't like what the other team is doing, stop them.  Most people wouldn't think it was an issue at all if a defense goes for a shutout, even a 52-0 shutout.  So, why shouldn't an offense try to keep the ball and help the defense get a shutout?  Also, there are always players whose names aren't Brady or Moss who are trying to show the coaches what they can do or trying to earn a better contract in the future.  It's not fair to them to ask them to 'go easy.'

The Patriots have a chip on their collective shoulder this year.  They were stupidly caught videotaping when they shouldn't have.  This led some people to call them cheaters, rather than just being arrogant.  All that has done is motivate them to prove to everyone that they can win just fine without any videotapes.  And, they are instilling some fear in their opponents. 

I say they should pile it on as long as they can.  If someone can beat them, then they should beat them by as much as possible.  That's professional sports.  For a couple of games, the Patriots let up on their opponents, particularly against the Dolphins.  The Patriots defensive coordinator, Dean Pees, said that he wanted the team to learn to 'step on the throat' of the opponent when they have them down.  After giving up a big lead to the Colts in last year's AFC Championship game, you'd think that the Patriots would be mindful of extending leads.

This year, they definitely get it.  Good news for the gamblers who take the Patriots, giving up the points.

October 29, 2007

Get Introduced

In my last post about early-stage VCs in the Boston area, I suggested that entrepreneurs get introduced to the funds I mentioned.  This does not mean cold-call them (although I am sure that some of you will).

I am always much more impressed with someone who networks their way to me rather than gives me a cold call.  I'll listen to a cold call, but I am biased negatively before I hear the pitch.  However, someone who has found a way to get introduced to me shows that they can build relationships that will help their company, a key ingredient of entrepreneurial success. 

So, leverage the bios that people put on the Web, leverage LinkedIn, and leverage your own network.  Find a way to get an introduction from a trusted contact to the people you need to meet.  You'll get a much better reception.

Angels and Early-stage VC funds

The Boston Globe writes today about the local venture capital market and the impact of angel investors and organized angel groups.  As the recent numbers show, VC activity in New England is on the upswing in terms of dollars invested, but this is skewed by larger, later-stage investing.  It's still pretty challenging for early-stage companies, and particularly first-time entrepreneurs to raise venture capital dollars.  The angel groups have filled the gap here somewhat, but there is still a mismatch between the appetite of angel groups and the number of early-stage companies seeking funding.  As the Globe reports, the amount of angel funding has stayed steady, which indicates that they are fully deploying the dollars available even though there is a growing market opportunity.

One way that this gap gets filled is with smaller VC funds that are willing to fund early-stage companies.  As I have been advising some early stage start-ups, I have found that three newer funds in town have been receptive to early-stage companies.  If you are an entrepreneur with an idea in the IT sector, it's worth getting introduced to these firms.  In alphabetical order:

.406 Ventures

Dace Ventures

Kepha Partners

Check out their web sites to see the backgrounds of the partners and their areas of interest.

October 27, 2007

For my holiday shopping list

Courtesy of Engadget:


October 24, 2007

Tech Blog event follow-up

As I wrote yesterday, I attended the TechBlogs event last night in Cambridge.   This was a great event, with good networking and an excellent discussion.  The panel members led the discussion, but there was a lot of audience participation which made it interactive.  Kudos to Scott Kirsner for moderating the discussion and keeping it moving.

Some of the more interesting subjects discussed: 

Objectivity of bloggers vs. typical journalistic standards

Journalists (at least good ones) have professional ethics around avoiding conflicts of interest that may color their reporting.  Bloggers usually disclose their conflicts in notes at the end of their posts, but often write about things with inherent conflicts of interest -- investments they have made, companies where they work, etc.  This difference seemed to wrankle Jimmy Guterman, but I think that perspective is what is valuable about blogging.  My rule of thumb is that I want to write my blog as if I was talking to someone at a cocktail party after having one (and only one) beer.  I should be open and relaxed, but still conscious of my professional and personal image.  I write mostly off the top of my head and don't pretend to be objective, thorough, or conflict free.  I try to point out conflicts, but can't represent myself as a journalist.  Unfortunately, journalist bloggers have to represent their professional side, which is as a journalist.  Scott Kirsner, who writes for the Globe, says that he tries to write his blog posts to the same standard as he writes his Globe column.  I think he does that well.  Best line:  Don Dodge, quoting Mike Moritz of Sequoia -- "No conflict, no interest."  (Perhaps it's really a quote from John Doerr -- just trying to be thorough!).

Sanitizing corporate blog entries vs. showing your personality

There was a general discussion of corporate blogs and CEO blogs.  How sanitized should they be to toe the corporate PR line?  Or, should the CEOs or employees be free to state their own views?  And, should CEOs write their own blogs posts, or can someone else write them on their behalf?  I think that blogs have to show a personal perspective.  That's what the readers expect.  Something sanitized will be boring.  Of course, anything representing the company has to be professional, meet legal requirements, etc.  An old boss of mine once pointed out to me that although some people in the company work in the Marketing Department (big 'M' marketing), everyone at the company works in "little 'm' marketing."  So, if you blog about your job or company, you have to be professional.  But, still be yourself.

Blogs, Podcasts, and Video Blogs

There was a discussion of different forms of media that people can use to reach an audience.  Blogs (written), podcasts (audio), and video blogs all have their place.  It was pointed out that blogs have the biggest audience and that it falls of dramatically when you go to audio or video.  I think that this is because our tools are more text oriented (search, indexing, etc.) and because our senses are also more text oriented (you can read faster than most podcasts or videos move, you can scan a written document more effectively than a podcast or video, etc.).  Someone commented that CEOs used to be primarily communicators verbally, in front of groups.  Blogging requires writing skills, which not everyone has.  So, brush up on those writing skills so you can be a good blogger and executive.  I know from my kids' schools that writing is emphasized a lot more formally than when I was in school.  Even at MIT there is more writing now than when I was an undergraduate.

Dan Bricklin captured the audio of the event and wrote a blog post about it, too.  If you are interested in these topics, you may want to give it a listen.

October 23, 2007

Good review of PCmover

I've written about customer experience from time to time.  I recently had an interesting experience with PCmover from Laplink.  This product allows you to move files and applications between Windows PCs.  It is invaluable when you buy a new PC and want it set up just like your old one (only faster).  I bought a couple of new PCs for our house and had to move data around between three machines (my wife got the hand-me-down).  My full review of PCmover is on Amazon.

The bottom line is that PCmover did a great job of moving the files and applications to my new machines.  Moving Windows applications from one machine to another is very tricky -- there are all kinds of files and registry settings to be updated.  The fact that it worked seems amazing to me.  It was almost flawless, with only very minor tweaks required.

As I mention in my review, I had some issues with the purchasing process which Laplink outsources to Element 5.  In hindsight, these were not such a big deal.  But, when you buy software to download, you want to use it now!  Element 5 randomly selected my order for manual processing on a Sunday afternoon, which was going to take 12-24 hours.  I didn't want to wait that long and got frustrated.  This got resolved relatively quickly in the end.

Along the way to resolving this, I emailed Thomas Koll, Laplink's CEO.  I don't know Thomas, but I guessed his email address.  Thomas got back to me right away (on Sunday) and was very helpful.  I was impressed that the CEO of the company, even a small company, would be this responsive and open to customer input from someone who spent about $130 on his products.  Kudos to Thomas for listening to his customers.

If you buy a new PC and want to move everything off your old PC to a new one, give PCmover a try.

Techblogs Event

I am attending an interesting event this evening:  Tech Blogs: A Conversation at Cambridge Innovation Center.  It has a good mix of speakers covering all aspects of technology marketing and blogging.  I won't be posting live from the event (man, do I find it distracting when I hear keyboards being tapped when I am trying to listen to a speaker), but I will post my thoughts afterwards.

I definitely think that companies have to change how they market to consumers, particularly younger ones.  Blogging is just one aspect.  Customers like to hear directly from the source.  But, companies also need to take advantage of social networking dynamics, making it easy for users to invite their friends, connect with other users, comment, tag, and rate products and services.  This participatory marketing really changes the established marketing model and is impacting everything from TV advertising to collapsing a whole industry (the music business).

More thoughts to follow.

October 19, 2007

Daily Show Video Site

The Daily Show has launched a new site with EVERY video from the history of the show.  It's searchable, and it's fantastic.  It also has a Wayback Randomizer that picks a clip at random.  I could spend hours doing that, but here's the first one I got.  One of my favorites with Demetri Martin.  Get your video resume ready.

October 17, 2007

Virgin Money USA

I wrote a while ago about Virgin USA purchasing a majority stake in CircleLending.  I invested in CircleLending while I was at Venrock and remain a personal investor in Virgin Money USA.

Virgin Money USA launched earlier this week.  They've continued the great 'friends and family' loans that CircleLending pioneered.  The Virgin branding is a great complement to this product space.  You may not know it, but Virgin Money is a significant business in the UK, Australia, and South Africa.  Although I am sure that they will have unique plans for the US, you can see that Virgin Money UK has a broad range of financial products, including loans, credit cards, insurance, and investment accounts.

The main focus for Virgin Money USA is loans -- business loans, personal loans, mortgages, and reverse mortgages.  Check out their site for guides that explain the benefits of keeping these loans within your circle of friends and family.

I think that the financial services industry is ripe for innovative ideas.  Virgin is the type of brand that can push new models into an industry that is sometimes slow to change.  I look forward to seeing how this plays out.

Congratulations to Asheesh Advani and the Virgin Money USA team for a successful US launch.

October 16, 2007

Quick Hits - Entrepreneurship and Otherwise

Trying to catch up on a week that zoomed by without any blogging.  Just some quick thoughts.

  1. Brad Feld wrote about an Op Ed piece in the New York Times written by Stephen Colbert (sitting in for Maureen Dowd).  If you like Colbert, you'll love this.
  2. Scott Kirsner has a nice list of upcoming events that entrepreneurs and bloggers should be aware of.  I'll be at the Tech Blogs event next week.
  3. Scott also had an interesting column in this Sunday's Globe about the interplay between Maven Networks and Brightcove.  He blogged about it, too, with an added video.  This is an interesting take on the competitive dynamics that take place in the VC/entrepreneur world.  Expertise in one market segment also leads to competition -- if you want someone on your board who knows a particular space, you have to accept the fact that they may compete with you some day, too.  I think that we are much less comfortable with this in the East Coast than in Silicon Valley.  There, people are less paranoid about competitive conflict of interest.  My take on this is that you have to expect people to be ethical and to protect your confidential information.  But, you gain more by having experts involved in your business than you lose by having them be fully aware of your business when they go to compete with you.  But, it's uncomfortable, without question.
  4. Note that Bijan Sabet blogged about getting rid of non-compete agreements a couple of weeks ago.  Very relevant to the point above.  I think that this makes sense for a lot of employees, but VCs won't start doing it until everyone else does.  Why should I free up my employees from non-compete agreements if other VCs are going to enforce theirs?  But, I hope Bijan starts taking the lead on this and rips up the non-competes at his companies.
  5. There's been a lot written lately about VCs and blogging.  A lot of VCs believe that their ideas and deal flow is very proprietary.  Fred Wilson thinks exactly the opposite.
  6. Last one for today:  If you are not a techie and have always wondered what all these gigabits and megabits mean or don't know your bandwidth from band-aids, you may want to read this primer by Tom Evslin.

Quick Hits - Sports

I've been horribly neglectful of The Fein Line for the past week.  I've been busy with both work and some personal activities.  In an effort to catch up on some things, I'll do some Quick Hits posts with short thoughts.

There has been quite a bit of activity in the sports world in the past week.  Here are some observations.

  1. My Yankees fell apart in the postseason.  I think they need to clean house and do a restart.  But, I don't think that they will.  I think that they'll try to hang on to their recent past as much as possible.  This will delay the inevitable.
  2. Meanwhile, the Red Sox are down against the Indians.  This is probalby the first real test of the Red Sox season, even more than when the Yankees closed to within one game.  This time they are actually behind.  It's particularly interesting that Francona is sticking with Wakefield rather than going to Becket on 3 days rest.  I think that the strategy is that for the Red Sox to win the World Series, they will need Wakefield to win a game or two.  But, the risk of falling behind 3 games to 1 is pretty significant.  If I were Francona, I wouldn't take that chance.
  3. The Patriots look awesome.  They beat the Cowboys soundly after falling behind briefly in the third quarter.  The most interesting thing to me is that 1) they actually didn't look too sharp in the first half and 2) they were throwing deep right away (although Brady and Moss didn't connect).  But, even without the long bombs working, they took an early 14-0 lead.  Their defense is good, but not dominant.  But, with their offense, their defense has a lot of margin for error.  I'm excited to go to the game in Indianapolis vs. the Colts on November 4.  There is a decent chance that the Patriots will be 8-0 and the Colts 7-0 for that one.  The hype for that game will dwarf what we saw this past week.
  4. The baseball postseason has come down to 'who's hot' the past few years.  Right now, the Rockies are supernova hot, having won 21 of 22.  Although they don't seem to be as talented as the Indians or Red Sox, no one has figured out how to beat them over the past month.  It's hard to believe that after more than six months of baseball that the Rockies could emerge as the World Series champs because they were white hot for a month.  Doesn't seem right, but I have no idea what you could do about it.
  5. The New Big Three (need some other nickname) -- Garnett, Allen, Pierce -- play their first game at the Garden tomorrow night.  It's just preseason, but I expect that there will be some excitement there.
  6. Boston College football has been good, and BC is 7-0.  But, although I am cheering for them, I can't believe that they are really the 3rd best team in the country.  Weird football season as the top teams keep losing.  College football desperately needs a playoff.

October 09, 2007

Repeat Performance?

When I wrote recently about Backing into 20%, or why big VC funds face challenges in getting big returns while they want to own as much of a company as possible, I missed one obvious point.

When I compared the kind of returns that a smaller fund, like Fred Wilson's Union Square Ventures, needs to have versus those that a bigger fund needs, I skipped over another solution.  Why can't the bigger fund just do what the smaller fund does many times over?  A $750M fund can just do what a $125M fund does six times.  That means that the bigger fund needs to have six times the partners finding six times the number of great opportunitites.  Each of those opportunites can have the profile of the returns that I described for the smaller fund.

Mathematically, that all works.  But, the math doesn't map to reality.  The scarce resource is the entrepreneur who can build a company that delivers the great returns.  It's a competitve market out there for these entrepreneurs, and if your firm has to find 6x as many of them as a smaller firm does in order to have a similar return, your firm is bound to lower the quality bar in the name of putting the money to work.  And, you need to put the money to work in order to justify taking a management fee on the big fund.  And, that's the dirty little secret of today's large venture funds.  It's almost impossible for a big fund to repeat the success that smaller funds can have with early stage deals.


That thud is the sound of the Yankees recent era of great baseball coming to an end.  Joe Torre has been the manager for 12 years and has been the most consistent winner in that time.  Sure, the Yankees spent (and wasted) tons of money.  But, it's been shown that winning in baseball is about more than just assembling the most high-priced talent.  The key to success is pitching depth, with one or two strong starters at the top of the rotation.  And, the talent you put on the field has to deliver at the right time.

The Yankees last won the World Series in 2000, winning for the fourth time in five years at that time.  After that, they have fallen short:

2001 -- Lost to Diamondbacks in World Series, in one of the greatest World Series ever

2002 -- Lost to eventual Champion Anaheim in ALDS

2003 -- Lost to Marlins in World Series after emotional win over Red Sox in ALCS

2004 -- Crushing defeat to eventual Champion Red Sox in ALCS

2005 -- Lost to Angels in ALDS in 5 games

2006 -- Lost to eventual AL Champion Detroit in ALDS

2007 -- Lost to Cleveland in ALDS

Even though the Yankees are the only repeat playoff team from 2006 and had to dig themselves out of a big hole to get there, they have underachieved vs. fan expectations since 2000.  Any of these outcomes are not surprising.  It's very tough to win every year.  But, the body of work from 2001-2007 shows that this era in Yankee history needs to come to an end.  Sometimes you have to step back in order to move ahead, and I think that's what the Yankees have to do.

I actually think that they should keep manager Joe Torre.  I think that Joe is a great manager and has shown that he can motivate a team and manage to win.  It's hard to point to a lot of bad decisions he made in the years listed above.  The Yankee players just didn't get it done often enough.  But, I don't know if the Yankees can do this.  The Boss (George Steinbrenner) may feel that a new start is needed as the Yankees go younger.

The Yankees have a lot of young talent, some of which was showcased this year (Phil Hughes, Joba Chamberlain, Chien-Ming Wang, Robinson Cano, Melky Cabrera, Ian Kennedy, for example).  They have some veterans under contract that they should keep (Derek Jeter).  But, they have a lot of players who are at the end of their contract or can opt out of their contract (Jorge Posada, Alex Rodriguez, Mariano Rivera, Andy Pettitte).  They have to figure out what to do with guys like Hideki Matsui, Johnny Damon, Bobby Abreau, Jason Giambi.  I think that this group is overpaid, although some of them have had decent stats.

Having learned from my start-up days, I think that the Yankees should sweep as cleanly as they can.  Players who are clearly productive (Posada, Rivera, Rodriguez, Pettitte) should be pursued.  But, Brian Cashman shouldn't overpay for any of them.  The Yankees have a favorable contract for Rodriguez, with Texas subsidizing his huge salary.  If A-Rod opts out of that contract, the Yankees should let him go.  As a fan, I'd support an exciting young team with some pitching depth, even if they fall short for a year or two.  I think that over the past few years the Yankees have stuck too long with sentimental favorites and haven't had enough pitching depth.

The Yankees era of success was built around a core of young home grown players (Jeter, Posada, Bernie Williams, Pettitte, Rivera).  These players started appearing in 1994 and 1995 (where the Yankees were the first Wild Card team and lost in 5 games to Seattle in the ALDS after being up 2-0 -- shades of 2004!). 

It's time to rebuild that core for the next era.  They are already off to a good start.

October 08, 2007

Brad Feld on Staying Organized

Brad Feld had a nice post today on Staying Organized.  I admire how disciplined Brad is.  That's one of the keys to staying organized.  I wrote a couple of posts long ago (here and here).  There is a lot in common between my thoughts and Brad's.

As I re-read all of this today, it struck me that discipline is really the key.  Most people can't be as disciplined as Brad is.  I think you have to start small and find the level of structure that you are comfortable with.

If you are still reading this after reading the posts I linked to, perhaps there is some time management or organizational issue that is bugging you.  I'd suggest finding the one fundamental task you need to get to and make sure you get that done.  Schedule an appointment with yourself and put it in your calendar.  Don't let yourself get interrupted by the phone or email (unless your goal is to get caught up on email).  But, don't spend more than one hour of focused effort in trying to do this task.  You don't want to torture yourself.

I have always found that when I finally get a long overdue task done, it feels great.  So, give yourself a chance to feel great about getting that nagging task done.  Like so many things, breaking down the big problem into a small one is the first step to making progress.

October 05, 2007

Business Week Points out VC issues

Business Week's Sarah Lacy has an article that reinforces some of the structural VC issues that have been discussed here regularly.

There's simply no big overall tech movement getting Wall Street revved up, and among entrepreneurs, the feeling is mutual. Sarbanes Oxley and other regulations have made the prospect of going public far less appealing.

The picture looks worse among acquisitions. Sure, the usually sleepy third quarter saw $10 billion come in acquisition proceeds, but that was spread among 90 deals. Companies like TellMe, the voice recognition software company founded in the late 1990s that snagged $800 million from Microsoft (MSFT), are in the minority this year. Far more common is the tech company that plodded along for more than six years, chewing through some $30 million in venture cash to eventually get bought for $50 million or so. Indeed, the median length of time it took companies to get bought was the longest Dow Jones VentureOne has seen since it started measuring the industry 20 years ago. Meanwhile, valuations keep rising, as billions of dollars in VCs’ coffers fight to get in what few great companies are out there.


Internally, many investors are worried that only a handful of firms will break even on the current crop of funds, much less post stellar returns. In hushed conversations over breakfasts at Buck's and lunches at the Sundeck, VC veterans are wondering aloud whether they should get out, or, after years of playing boardroom quarterback, whether they've still got the chops to actually build a startup.

However you slice it, unless something changes, venture capital is in for upheaval. Some venture capitalists are going to find themselves out of a job. Overall, the industry may become more the font of outsourced research and development for big firms and less the breeding ground for the next great tech powerhouse. And returns will be lackluster for the majority of firms left out of the best deals.

Yikes.  That's pretty pessimistic.  I don't think that it is quite that bad, but I do think that LPs are resigned to the fact that returns won't be as strong as in the past and great returns will be even more concentrated in fewer firms than in the past.

If I could wave a magic wand, I would make at least half of the committed funds to venture capital go away.  Even though that would lead to there being many fewer VC firms and VC partners, it would also mean that funds were smaller, investment decisions were more disciplined, and capital would be doled out much more parsimoniously.  That's good for entrepreneurs who can get funded and very good for ultimate returns.  There might be fewer start-ups, but I also think that there would be more small scale financings to give company concepts a try.

October 04, 2007

Backing into 20%

Fred wrote today about the mytical 20% ownership threshold that most VCs have when they make early-stage investments.  As he points out, there is no investment reason why a VC needs to own 20%+ of a start-up.  The reason they want to own this much is that they want to put more money to work and have significant large dollar volume returns that are significant to their large funds.

The fundamental problem is the large size of early-stage VC funds.  It makes it difficult for a VC to do a small early-stage deals.  Each deal takes more or less the same amount of time.  So, if you have to put in the time, you might as well put more money to work to try to get a bigger volume return.

The problem with this is that VCs should be in the business of generating a significant multiple on an investment.  But, with a large fund, you tend to focus on the total dollar return so that it 'moves the pile', or makes a difference in a fund.  Putting $2M to work and getting $20M back (10x return) doesn't matter that much to an $800M fund.  It would be more significant to put $25M to work and getting $75M back (3x). 

Take a look at the numbers at the end of Fred's post:

Don't get me wrong, I would love to own 25% of a company or more. But we don't make it a requirement. Our requirement is being able to get into the best deals, work with the best entrepreneurs, and be able to generate $40-50mm in proceeds when a deal works and return the fund, $125mm in our case, on the very best deal in the fund.

If Fred gets a $40M return on a company that they own 15% of, that implies (more or less, depending on deal terms)  a $267M exit value.  That's a pretty successful company, and I'm sure that Fred has had a bunch of those.  If they get $125M (their fund size) on a 15% ownership, that's a $833M exit, which doesn't come along too often.  If you change these exit values to be the same percentage of an $800M fund, that would imply a $256M return and a $800M return.  Even with 25% ownership, these imply $1B+ and $3B+ exits.  Don't hold your breath waiting for those.

You can see from this example that a smaller fund has a much better chance of generating a significant multiple than a big fund.

The fundamental problem is that there is much more money being put to work in the early stage space then there are great entrepreneurs that need that volume of money.  This leads to three problems -- 1) too many copycat deals get funded as the money burns a hole in the VCs pocket, 2) VCs end up pushing more money onto entrepreneurs to raise their ownership and put more money to work and 3) smaller, very early stage deals have a hard time raising money because no VC wants to make a $1M investment.

The big funds force those investors to back into the 20% requirement, instead of making it a 'nice too have'.

October 01, 2007

Good old days of video games

Techcrunch had a post today that reminded me that this month is the 30th anniversary of the launch of the Atari 2600.

I worked at a company, GCC Technologies (now GCC Printers), that developed games for Atari.  I worked on a bunch of 2600 games, including Phoenix, Jungle Hunt, Battlezone, and Joust.  This all happened between 1982 and 1984.

The most satisfying thing about that is that these games still have appeal today.  I tihnk that it is the casual nature of these games -- they are easy to learn and control, they are not intimidating to start, they are not too intense, and they don't take that long to play (unless you are really good!).  Too many of today's games, particularly the action games, are too intense for a lot of kids.  I have found that a lot of kids enjoy these casual games, which is one reason why they have been continuously popular.  Also, adults love playing the games of their youth.

I still remember the first time that one of my CEOs, who was just the right age, found out that I had worked on 2600 Joust.  He was the neighborhood champion and looked at me like I was a god!  Unfortunately, celebrity is fleeting.

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