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December 31, 2009

Gatz: Get the jump on New York

Although shows are selling out quickly, it's not too late to go see each of the shows of the ART's Shakespeare Exploded festival: Best of Both Worlds (closing January 3, 2010), Sleep No More (closing February 7, 2010), and The Donkey Show (continued through the summer, 2010).  All three of these shows have received fantastic audience and critical acclaim.  The ART web site has lots of links to reviews of each of these shows.

Starting right on the heels of Shakespeare Exploded is our next festival, America: Boom, Bust, and Baseball:

America: Boom, Bust and Baseball explores the hopes, disappointments, and triumphs of the past American century from the roaring twenties to the Great Depression to the Boston Red Sox's stunning 2004 World Series victory. We begin with the boom - Gatz brings every word of Fitzgerald's novel The Great Gatsby to life in this once-in-a-lifetime marathon theatrical experience. The bust is Clifford Odets' Paradise Lost, a powerful drama about an American family that loses everything in the throes of economic crisis. Spring is baseball season, and we'll be staging the world premiere of JOHNNY BASEBALL, The New Red Sox Musical, an exhilarating new musical that explores the source of the infamous Curse and the secret to its end by blending fiction, fact, and the mystical power of the game.

Gatz is up first, starting on January 7.  It's a big deal as there have been some issues around having the rights to perform it.  It will end up in NYC, but this is a chance to see it first.  Gatz is a theater marathon -- six hours, split into two parts, each with its own intermission.  I'll see both parts on January 16th and will post a review after that.  You can see the two parts on different days if you prefer.  Reviews of previous productions of Gatz are here.  The ART is partnering with Elevator Repair Service on this production, too.

Gatz sounds really interesting:

One morning in the low-rent office of a mysterious small business, one employee finds a ragged old copy of The Great Gatsby in the clutter of his desk and starts to read it out loud. And doesn't stop.

At first his coworkers hardly seem to notice, but then weird coincidences start happening in the office, one after another, until it's no longer clear whether he's reading the book or the book is doing something to him. . . .

We all know that Boston beats NY on most things (except in baseball this year).  So, beat all your New York friends and go see Gatz during its run in Cambridge.

PS - If you are Twitterer, you can read The Great Gatsby 140 characters at a time.

Pats Bets are Off

I've had fun this year doing my online bets on the weekly Patriots games.  The bet was simple:  the loser vs. the point spread had to display the winning team's cap (or later, logo) in their online profile for the following week.  After pumping some money into our local economy with a few purchases at Lids, I decided to back off and focus strictly on online humiliation rather than forcing the loser to keep buying caps.

I'm not doing the bet this week.  The Patriots are playing the Houston Texans, a potential playoff team.  In theory, it should be a good game.  But, I think that the Patriots will hold back a lot of their starters to rest them and avoid injury.  The game will be more like a pre-season game for the Pats.  I always thought that betting on games that don't matter was a waste of time.  The Texans do need to win the game.  The current line has the Texans favored by 8 points.  This is reflective of the Patriots likely stance, in my opinion.  So, no bet this week.  And, no bets during the playoffs as the loser will have their season over in any event.

Here's the recap of my bets:

Wins (vs. spread): Falcons, Ravens, Titans, Buccaneers, Colts, Jets, Dolphins, Jaguars

Losses: Bills, Jets, Broncos, Dolphins, Saints, Panthers (but no one took my bet)

Push (tie vs. the spread): Buffalo

So, the point spreads are, on average, correct.  I won 8 times in 15 bets.

I do think that the Patriots have shown that they can play well.  If they play like they did against the Jaguars, they can beat anyone.  But, they have also had some disappointing efforts, such as against an excellent Saints team.  Let's hope they stay hot and do some damage in the playoffs.  Go Pats!

December 29, 2009

Building The Team

After taking a break for the holidays, I'm back at my series that attempts to share some lessons learned from the Sempre experience.  See links at the bottom for previous entries.  This entry is about building the team.

It's hard to build a team if you don't know what you're trying to do.  No one fits into every situation.  The strategy and the team have to fit.  Things at Sempre weren't quite done that way, but we knew that when we started.

My two partners and I hadn't all worked together formally before.  I had looked at some deals pretty actively with one partner.  That partner was my main link to our third partner.  We felt that our skills and styles complemented each other, but we needed to put some time in to make sure that we'd make a good team.

We had some ideas on various strategies to pursue.  We decided to work together to vet those ideas as a way to make sure that we were as sound of a team as we felt we were.  You learn a lot when you work together to make decisions, particularly where we didn't always agree and didn't all have the same style.  We also discussed how to structure the firm -- who, if anyone, would be in charge?

Investment partnerships aren't like corporations.  The hierarchy and reporting relatioinships are generally not as straightforward.  In investment partnerships, I think that there are only two sustainable organizational structures:

  • The small, equal team.  Up to ~5 equal partners who agree to make decisions together (unanimously) and share all the economics equally.
  • The iron fist.  One partner who is firmly in charge and makes almost all the decisions.  Everyone who joins the firm knows this walking in.

I'm not a fan of the second model, but it clearly works.  The best thing about it is that it is unambiguous.  Everyone knows who makes decisions.  It's not as satisfying if you are not the owner of the iron first, but this structure can scale fairly well until the strong leader is streteched too thin.

We adopted the former model.  As a team of three, we decided that we'd only go forward if we could agree to keep things equal.  We wouldn't have a Managing Partner and would instead agree on how to divide up various tasks -- finance, IT, marketing, presentation and private placement memorandum preparation, fund-raising lead, etc.  I think that this was a great test of our team.  Although in the end we were all glad that we chose this structure, it wasn't the first instinct for all of us.  We talked our way through it over several meetings.  In the end, the fact that we all agreed on how to structure our firm proved to be a great test of our team dynamics.  It encompassed economics, ego, organizational comfort, trust, and potential politics.  If we could navigate through that decision, we knew we could make it through other tough ones. 

Before we committed to each other, we decided to do thorough diligence on each member of the team.  We knew that potenial limited partners would make a lot of calls on us.  We wanted to hear what the LPs would hear before we formally launched ourselves as a team.  All of us have people who like us and people who don't, people who would love to work with us and people who wouldn't.  The key was to hear all sides of the reference check to make sure that, on balance, each of us would check out with LPs.

We each put together formal reference lists and bios.  Then, we exchanged this information and started doing our own diligence on each other.  We contacted many blind references on each other, as well as some obvious 'tough' references on each other.  When we finished, we got back together to compare notes on what we had heard.  We tried to filter out obivious biases that some references may have.  Luckily, in the end, we each checked out.  Since we had found all of our own skeletons, we knew that it was unlikely that LPs would uncover more.  And, as time went on, there weren't new issues on any of us that came up.

I like the culture that we created at our firm.  It may not work for everyone, but it worked for us.  We are all direct and blunt, although polite.  We brought tough issues directly to the forefront and dealt with them head-on.  We all did our best to not take things personally.  We trusted each other that we were all working together for the best outcome for the firm.  Since we were equal partners, that should turn into the best outcome for each of us.

As we worked on different investment strategies, we compared the skills of our team to what was required for those strategies.  At times, we considered adding people to our team, both at the partner level and at more junior levels.  We agreed that, if necessary, we'd consider adding a partner at the beginning.  However, in the long run, our goal was to cultivate partners from within the ranks of our firm.  I think that promoting from within is one of the best ways to ensure that the culture of a firm endures.

Although we weren't ultimately successful, the strength and make-up of our team was by far our strongest asset.  We liked working together and all hung in there through the ups and downs because we wanted to find a way to stay together.  That experience is the best thing that I got out of trying to get Sempre off the ground.

Next Chapter -- Looking at Microcap stocks

Part I - Pulling The Plug

Part II - Getting Started

December 18, 2009

Looking Back: Getting Started

As I wrote yesterday, we've pulled the plug on our investment firm.  As part of the wind down process, I thought it would be worth going back and describing the journey we went through in putting the firm together, trying to raise money, and the ultimate decision to suspend our fund raising.

Today I'll go back to the beginning.  It was early 2007.  I had left Venrock without much of a sense of what I was going to do next.  Although I considered some operating roles at that time, most of my effort was spent considering investment opportunities.

I made a real aggressive effort at networking.  I attended networking events, particularly Open Coffee Cambridge and the Web Innovators Group.  I met with anyone and everyone, from potential entrepreneurs to VCs.  I wanted to get a sense of what was going on in the market.  And, each person I met was a potential referral to someone or something else.  As I learned in the VC business, you just don't know where the big idea is going to come from.  Everyone should carve out some time for networking in their industry.  It's an investment in your future, and it keeps you current and connected.  With an open mind, you can always learn something from meeting a new person.

As part of that networking, I became an advisor to a bunch of start-ups.  This wasn't a job -- there's no cash compensation.  Some of them offered up some stock options.  Others I did as a labor of love.  I decided not to be an angel investor as I didn't know what I would end up doing.  I wanted to both minimize my formal entanglements and keep my personal capital available for potentailly starting up something on my own.  Also, not investing allowed me to be more direct with the entrepreneurs -- I was only giving them feedback because it's what I thought was right.  It didn't have to do with protecting my investment.

I thought about joining an existing investment firm (if they would have me).  But, I had joined two VC firms previously, Atlas Venture and Venrock.  It's very hard to get a good read on a VC firm from the outside.  You have to spend a lot of time working with them directly to understand the internal dynamics.  The target list of firms I could join pretty much went to zero when you considered the number of firms that would consider having me join that also had sufficient capital to justify adding another partner that I was also interested in joining and that was willing to go through a long 'dating' process to make sure that it was a good fit.

But, during this time, I started working with what became my Sempre partners, Bob Fleming and Tim O'Loughlin.  I had known Bob for some time.  He was the common link between Tim and me.  We started spending time together, initially strategizing about potential investment strategies, but really just getting to know each other better.

We found that we made a great fit.  We complemented each other's skills.  Our personalities meshed perfectly.  We came to a shared vision in how to run a potential partnership.  We each felt that as a team we were better than the sum of our individual parts.  We decided to enter the due diligence stage on forming a team -- gather the same diligence on each other that a potential LP would gather, develop an investment strategy that was compelling in the early 2008 market when we would likely kick-off official fund raising, and figure out if this strategy was compelling to us personally and was a great fit for our skills.  This would take time, but we needed to do this to confidently tell prospective LPs that we were a strong, committed team.

The final diligence and strategy development will be the subject of my next post.

December 17, 2009

Pulling The Plug

As some of you already know, a couple of weeks ago my partners and I decided to pull the plug on our investment firm, Sempre Management.  This post will include the short version of the story, but over the next few posts I plan to tell the story from the beginning in more detail.  There are good lessons here for any sort of entrepreneur.

The bottom line for us is that this is a horrible environment for raising investment money, particulalry for "first-time" funds.  While we were raising money, we followed the standard advice of not publicizing what we were doing.  The SEC worries about raising money from the general public.  Since we aren't raising money any more, I can talk about what our strategy was.

We were raising money for a variant of a venture debt fund.  Venture Debt means loaning money to companies that would typically be backed by venture capitalists.  In practice, most venture debt loans are made to very early stage companies.  These companies often don't have revenues to pay back the loans.  Instead, the venture debt firms count on the investors to put additional capital into the company to pay back the loan.  The hope for the company is that the company will make more progress with the borrowed money and will therefore earn a higher valuation for that follow-on investment.  More on that when I get to the chapter on venture debt.

Sempre was targeting companies that had revenues and were near break-even.  We were not looking for investors to put in additional capital.  Instead, we were looking for good businesses that were trying to cross the threshhold from losing money to making money and needed some additional cash to do it.  Most would be worthy of an equity investment but, for a variety of reasons ranging from investors out of money to not wanting to suffer additional dilution, the company would prefer to borrow money rather than take on more equity capital.

To cut to the end, we found out a few weeks ago that our potential lead investor had to delay their commitment to us for another six months due to issues around the timing of liquidity in their own fund.  They decided that they needed to raise a new vehicle in order to invest in Sempre.  Our other potential investors couldn't step up in their place and were likely to wait for some other lead to emerge.  This additional time and risk on top of everything else we've been through in this crazy time was the last straw.  We decided that we would stop now rather than carry on for 6+ more months with an (always) uncertain ending. 

Although we had a great strategy, a solid and current track record in implementing that strategy, had worked together as a team for more than 2 1/2 years, and were willing to fund the start-up of the fund out of our pocket, we still couldn't get over the bar in this tough fund raising environment.  Being a first-time fund is very tough -- many investors refuse to consider you.  And, we believe that 2010 will be even worse for first-time funds as many big name VCs will be in the market and the availability of capital isn't likely to improve.  The first-time funds will continue to get squeezed out.

Each member of our team is now embarking on their own path.  For me, I plan to return to an operating role.  I'd like a senior management position in a young company, ranging from a company about to collect its first revenue to one that is looking to add to its management team in order to scale.  I'll stick to the information technology and clean tech sectors where I have the most experience.  Likely titles for me would be CEO, COO, or VP of Sales and Marketing.  If you know of something that looks like a fit, let me know.

We plan to keep our Sempre Management contact info alive, so no need to update your contact info on me.  I look forward to reconnecting with many of you soon.

Over the next week or so, I plan to tell the story of how our team came together, how we chose our strategy, how we dealt wtih the market meltdown in the midst of fundraising in 2008, and how we revised our strategy and continued fund raising in 2009.  This won't be any sort of 'tell all', but will focus on lessons that apply to any entrepreneur.  I look forward to your feedback.

December 15, 2009

Givin' Time

For better or worse, my family is on an annual giving schedule for the charitable organizations that we support the most.  Each year, we mail off checks to these organizations, and I tend to do all of this in December.  And, this year, today's the day.  Which makes me think about giving.

How much will you and your family spend on your holiday giving this year?  $250?  $500? $1000?  $2000 or more?  Don't forget to include the money for nice holiday parties and holiday travel.  Not to mention those crazy holiday clothes that some people buy.  We should all be thankful that we can afford to spend money to celebrate the season and to give gifts to those we know and love.

How about spending a bit less this year and giving some money to those who have nothing?  It's hard for me to enjoy the holidays unless I know that I have done something to give a little holiday cheer to those who would otherwise have no holiday celebration at all.  And, the ones most affected by this are children who aren't at fault for their family's troubles and don't understand why they don't get a few toys when they see and hear about all the gifts being given this year.

My favorite charity for this is Boston Globe Santa.  Long time friends and Fein Line readers will know that I support Globe Santa because they spend all the money they receive giving toys to children whose families face hardship.  All the recipients are vetted to make sure they are worthy.  All the administrative costs are borne by the Globe.  And, all of your donation goes to where it should -- giving children a bit of holiday cheer to help them maintain some hope for their future.

As I flip through the envelopes about to be mailed to our various charities, I see some themes -- support for education, the advancement of culture to keep our lives enriched, keeping the world peaceful and disease-free, and help for the very poorest who have no way to help themselves.  Each of you have your own giving priorities, shaped by your own interests and experiences. 

In the past I have done a Globe Santa match, but this year I'd just like to invite you all to think about your giving priorities and find some organizations that you feel are worthy of your regular support.  There are so many worthy causes that I don't think it's productive for me to try to convince you to support Globe Santa at the expense of something else that's important to you.

If you agree with me that Globe Santa is worthy of your support, give here.  If you've got other priorities, I'd like to invite you to cut back a bit on the spending you are doing for yourselves and give a bit more to your favorite organizations that need your support.  I'm on the Board of several non-profits, both local and national.  I can tell you that the economic environment is having a big impact on their ability to achieve their mission.  You can do something about it.  So, get into the giving habit, even if you primarily give in December as I do when I think about the holidays.

As has been said many times -- Don't give until it hurts; give until it feels good!

Happy holidays!

PS - If you want to promote your favorite charities, you can list them in the comments as I've done.

December 11, 2009

Best of Both Worlds 2-for-1 offer

I've really enjoyed all of the ART's Shakespeare Exploded productions, having seen each of them more than once (and some 3 or 4 times!).  The last production, Best of Both Worlds, has the shortest run.  But, it boasts some of the strongest performances.

And, for all my blog readers and online friends, I can make available a special 2-for-1 ticket offer.  When you purchase your tickets for Best of Both Worlds, use the promotional code BBWFRIEND to buy one ticket and get one free (Advance sales only, subject to availability, valid through 12/23/09).

My last post was on Best of Both Worlds and includes my thoughts on the show.  I've had some things going on which have kept me from posting for a while, but I'll get back to regular posting soon.  But, Best of Both Worlds is really worth seeing, and it is closing on January 3, 2010.  So, you should take advantage of this special offer and get some tickets for a great show at a great price.

Best of Both Worlds has received great reviews from The Boston Globe, Boston Metro, and Boston Theater Review.  Also, check out this video from WGBH that includes some exceprts from Best of Both Worlds among their holiday theater reviews.

Check out Best of Both Worlds before it's too late.  You'll have a great time and will end up out of your seats clapping and dancing, guaranteed!


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