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Playing around with Flickr

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More “About”

When law school ended, I knew that I did not want to work in a law firm but took the exam and became a member of the Virginia State Bar. I am glad I went to law school for the following reasons: it taught me not to make assertions without being able to defend them with logic/evidence (i.e., purely emotional arguments are useless, as I keep telling my mother-in-law); it taught me research skills; it taught me writing skills; and, more intangible but perhaps most importantly, it taught me the legal history of this country (law is a lot about “precedent” and thus historical by nature). I learned about the Constitution, the philosophy behind it and the evolution of the country around that document. I often wonder how many political pundits on both sides of the aisle have actually read the Constitution, much less the Federalist Papers and other relevant documents. It’s worrisome.

One note: I did law school in part because I wasn’t sure what else to do and my dad had been a lawyer in DC for 40 years. I know a lot of other people who also did law school to buy some time and create some options but my recommendation to anyone thinking about it is to have the end in mind, if possible, before applying. In other words, have an idea of WHY do you want a law degree and what are you going to do with it. That can (will?) change but having a plan at the outset is important. Had I done this or been able to think longer term, I would have at least gotten a joint JD/MBA degree, which Georgetown offers.
Post-law school life in later posts.

“About”

I have dragged my feet on filling in the “About” section of the blog.  Part of me still feels uneasy about sharing too much personal information on the web.  If I am going to blog, however, it’s time to get over it.

When people ask me about my background, I usually start with where I’m from, suburban (DC) Maryland.  I went to high school there, then to Williams College in Williamstown, Massachusetts. I have a strong place in my heart both for my high school and my college — my high school teachers and coaches gave me discipline and saved me from becoming a complete reprobate.   My college threw me in with some of the highest quality people — students, faculty, coaches –that you will find on the planet.  I am grateful and maintain close friendships  from both places.

After college I was a reserve linebacker for the Redskins for two years.  My rookie year (1991-1992) we went 14-2 and won the Super Bowl — I was a Skins fan growing up so it was a mind-blowing eight months going from Williams to the Super Bowl-winning locker room (notice I said locker room — I did not play in the game).  The next year, I was in a good position and expected to step  up but I blew out my knee.  Gibbs left and I was cut before training camp of my third year.  

Knowing I was on the bubble, I had applied to Georgetown Law and GW Law. I would have liked to apply further afield — schools outside of the DC area — but I was still with the Skins and it went against my nature to plan on being cut and moving out of the area, etc. With Gtown and GW, I told myself I could go to law school in the offseason and still play football.

I did some part-time work on Capitol Hill and started Gtown Law in September of 1993.  I had still had football on the brain and left law school after I was drafted by the Scotland Claymores of NFL Europe (at the time called the World League of American Football — the “W-laugh”).  I blew out my other knee in training camp and limped back to my second year of law school.  I deeply appreciated Georgetown taking me back quickly and letting me jump right back in.  

I had a better attitude about my non-football future now that I knew my sports career was over.  I had begun investing in tech stocks in late 1994, early 1995 and knew that I wanted to do either law or business in the tech industry.  I sensed that the tech tsunami was coming and I loaded up on AOL, Cisco, Dell, Sun, etc.  In the summer of 1995, between second and third year of law school , I worked in the legal department at IBM.    It was an interesting time to be there.  Lou Gernster was in the middle of remaking Big Blue and I got to see a black-belt CEO try to turn a 1960s-1970s behemoth into a 1990s tech company.  He was facing a huge task — I remember that the decor of the headquarters buildings in Armonk., NY made me want to throw on my paisley shirt, grow my sideburns and plug in a lava lamp. 

That was also the summer that IBM acquired Lotus.  I remember the closed-circuit tv announcement that Gerstner and Jim Manzi gave to employees — Gerstner looked proud, Manzi looked disheveled and beaten up, which he probably had been during negotiations.  I don’t know that the acquisition helped IBM much (does anybody use Lotus?) but maybe acquiring a mind like Manzi’s was worth it.

More about “About” in a later post.

The Diaspora Issue

I heard from Randy Mitchell that the April Cleantech VC trip to Brazil is going to be postponed.  I will update when I have more info.

I wanted to share a very interesting point that Randy made when we had coffee.  It addressed the issue of why, of the BRIC countries, China and India have gotten so much attention from US VCs while Brazil has so little.  I assumed it had to do with technical training of workforces (among other reasons) but, given that Brazil’s universities are quite strong in technical trades, that’s not the (whole) answer.  Randy refers to it as the Diaspora issue.  The US has large populations of people of Chinese and Indian descent and, among these populations, there have been plenty of entrepreneurial success stories.  Combine this with the fact that US VC funds have numerous partners of Chinese and Indian descent, who provide a link of interest back to China and India, and you get VC activity in those countries.

No such diaspora of Brazilians exists in the US.   How to start generate that diaspora, or whether its needed, is the subject for another post.

Investor and Entrepreneur? Part Deux

So, I asserted in the last post that the many of the characteristics that make someone a good entrepreneur will make them a bad investor.  One thing that I meant to add somewhere in the discussion is that, when things go bad, the eternally optimistic entrepreneur will almost always tell their investors, “If I can just have more money, we will succeed.”  Often, when the answer is “No”, the entrepreneur goes away believing that they failed because of their investors’ lack of vision, i.e., because the VCs decided not to provide more money.  This is more proof to me that good entrepreneurs make bad investors — good investors know when to kill an investment and they kill them early. Sequoia, for example, is known for ruthlessly shutting off portfolio companies that do not hit their benchmarks — the result is that their funds have a high percentage of capital invested in their winners and a low percentage of capital invested in their losers.  Many lesser VCs cannot bear to write off an investment — they want to give it ‘one more chance’ — so they throw good money after bad and wind up with a high percentage of their funds invested in their losers.

On a separate but related subject — while a strong entrepreneurial personality works against being a good investor, work experience in industry, in startups, helps in venture capital investing.  It helps precisely because you experience first hand the many details of the entities in which, as a VC, you will invest. Living through life in a startup, or any company trying to meet payroll, provides some knowledge that can’t be gleaned from reading textbooks or business plans.   

Fred Wilson, who writes one of the few VC blogs I make time to read, strongly recommends industry experience before entering the VC world.  In May of ’08 he wrote:

…work for at least ten years in…industry, getting operating experience, building a killer rolodex, and learning how the business works from the inside. Then in your mid to late 30s, you can make the move to the venture capital business, as a partner, not as a wet behind the ears associate who doesn’t know anything other than how to push numbers around a spreadsheet.

His advice makes sense to me not only because you develop industry expertise (and the rolodex, etc.) but because you see how a company works from the inside.

That said, I know a lot of successful VCs that come straight out of grad school into a fund.  They are absolutely brilliant people (regardless of what the VC industry has or hasn’t returned over the last decade, you will not find  pool of brighter people than VCs).  As a general rule, however, I agree with Fred — spending time in industry, both for the purposes of industry knowledge/contacts and for experiencing life on the inside, helps one be a better VC.

Investor and Entrepreneur?

News came out last week that Marc Andreessen will start a VC fund.  Andreessen founded Netscape, Loudcloud and ning, among other companies and it rekindled some thoughts about the difference between an investor and entrepreneur.  In my opinion, it is all too often assumed that, if you are a good entrepreneur, then you will be a good investor (less often, the reverse is also assumed).  In Andreesen’s case, he’s invested in Digg and Twitter, so he certainly can do both but I think his case is quite rare.

I have had the good fortune to meet a lot of good entrepreneurs and I am fortunate to be working with some now.  In most cases, if you plucked them out of their companies and plopped them in a VC fund, the LPs’ money would be lost very quickly. 

Why?  By definition, entrepreneurs view their endeavor optimistically — admirably, stubbornly and, often, fatally optimistically.  Why would they pursue it if they thought it would fail?  In order to succeed, they must pursue that vision persistently (maniacally), usually past the point at which everyone else — spouses, friends, co-workers — thinks they should quit.  Entrepreneurs focus relentlessly on what can go right in the future.

Good investors focus on what can go wrong.  Venture capital investing is a terribly risky enterprise — the road from investment to liquidity event is much longer and more difficult than other types of investing.  A VC investor must wrack their brains to think about all the things that can go wrong along that road and then assess whether the company will be able to overcome.  If they take an optimistic viewpoint, they are fools and will lose their money quickly.  Good VCs won’t invest unless 1) management has credible answers for all known risks to the business and 2) the VC believes that management can overcome the inevitable challenges that will arise in the future.  (That is why as time goes by I increasingly value the entrepreneur as the most important piece of the puzzle — more on that later.)

Discovering Resources

Doing business in Brazil over the last several years has taught me a lot about the resources available to Americans who want to do business overseas.  Regardless, of one’s political beliefs, the Constitution clearly states that one of the federal government’s areas of control/responsibility is commerce with foreign nations.  I’d like to report that is an area in which the federal government is doing an excellent job, or at least has excellent people attending to that duty.

Before my most recent trip to Brazil, I had a coffee with Randy Mitchell, whose official title is International Trade Strategist for Private Equity at the Department of Commerce.  It is not Randy’s job to help individuals like me — he is tasked with supporting foreign investments of U.S. PE/VC firms and enhancing the competitiveness of the U.S. PE sector. Yet, after that brief meeting, Randy made no less than 4 or 5 excellent introductions for me, several of which resulted in last minute meetings that were extremely helpful.  Those introductions and last minute meetings, by the way, required multiple emails and spending of political capital that were outside the purview of his job.

Randy is leading a Clean Tech delegation down to Brazil on April 14.  

I got the same proactive help from the US Commercial Service.  April Redmon is my point of contact there and she is simply excellent. She worked with our embassy in Brasilia to arrange a couple of important meetings for me in the week before Carnaval — a difficult task.  This is the USCS site for Brazil is http://www.focusbrazil.org.br/ccg/ and the site that outlines their services is https://www2.focusbrazil.org.br/siteusa/index.htm.  They do charge for some of their services.

I have also been fortunate to discover help at the state level.  The Virginia Economic Development Partnership provides subsidies for companies that need help breaking into overseas markets.  They have local consultants on the ground that provide critical services.  Their site is http://www.yesvirginia.org/

All this is by way of saying that, if you are looking to do business overseas or even just learn more about it, the first place to start is with government resources. I have read and completed a lot of market research and, until recently, I did not appreciate the FREE resources available through government. The people/contacts in government are also excellent resources.