Month: January 2012

Incorporating in the US: LLC or C-Corp?

Last September, I posted on whether Brazilian startups should incorporate in the US and, if so, whether they should incorporate in Delaware.

This week, the Latin American Private Equity and Venture Capital Association had a definitive post by Juan Pablo, a shareholder in the Greenberg Traurig law firm, on whether to form an LLC (like a limitada) or a C-Corp (like an SA) in the US.  

It is one of the first posts I have seen that leans towards forming an LLC (depending, of course, on the details).  Most venture capital lawyers in the US will tell you immediately to form a C-Corp, because this is the standard practice in the US.  As a foreign business, however, that maybe not be the best advice.

I advise a good read of Juan Pablo's post.  


Back in the early ‘90s, I had a brief and inglorious career with the Washington Redskins of the National Football League.  It officially lasted only two and half years but it was a formative experience and I learned a lot in a short time.
I have found that much of what I learned in sports applies to business.  For example, what I learned about the characteristics of successful athletes also applies to entrepreneurs.

Innate talent matters in both cases but less than you think — the most physically gifted athletes are often not the best players.  I believe talent comprises about 1/3 of what it takes to succeed in sports or entrepreneurship.  Talent derives from genetics and no player or entrepreneur has control over it.

Another 1/3 of success comes rigorous training – physical conditioning, skill development, study of the game and other things that the individual can control.  The player or entrepreneur must maximize his potential in this 1/3 in order to have a chance of success.

The last 1/3 of a successful athlete or entrepreneur comes from… I don’t know.  No one does.  It has to do with energy, belief, destiny, love for their profession… (That last one really matters – how many people don’t love their job but still make it to the top 1%?  Not many.)  

I can't define this final 1/3 but it often manifests itself in two traits: inner focus and urgency.   

By inner focus, I mean that all of the person’s being is directed toward the goal.  Even when he is not visibly working toward it, his being is pointed toward the goal. He does nothing contrary to it.  All the elements of his life fit into the pursuit the goal (not the other way around).

In that sense, pursuit of athletic or entrepreneurial success may seem to be a selfish endeavor.  It doesn’t have to be, but one must surround themselves with people that support the goal and understand the sacrifice needed to achieve it.

Less obvious than inner focus, great athletes and entrepreneurs posses urgency.   I don’t mean hurry or imbalance, just urgency.  They live a half-step ahead of the world. They anticipate what must be done and do it.  Proactively.  They don’t wait, they don’t procrastinate. 

Sports has a tempo, a momentum. So does entrepreneurship.  An entrepreneur’s urgency pushes the tempo and maintains forward momentum in his business.

One can sense whether an entrepreneur has urgency. For example, they ask for help but don’t wait for it. They move forward irresistibly, believing the world with eventually follow.  (It often does, proving the old saying, "Move and the world moves with you.")

Of course, inner focus and urgency are necessary but not sufficient traits: you also need the first 2/3 of the equation — talent and training — but inner focus and urgency are unique traits exhibited by almost all high-achieving athletes and entrepreneurs. 

The Best Venture Capital Blogs


Recently, someone asked me to send them “… a list of books / blogs you recommend about VC (about the business, the economics of the business, history of industry, about portfolio strategies, etc etc).”

In reality, I see the choices as primarily between academic tomes, like Gompers and Lerner’s The Venture Capital Cycle and, essentially, blogs.  In between, there are not many must-read books that explain modern venture capital.

Books don’t fit well with venture capital because of the speed at which the industry evolves.  For example, if a book had been written four years ago about venture capital, the section on “angel investing”, if the author bothered to write one, would have focused on FFFs (friends, family and fools) and angel groups like New York Angels.  Considering the rise of “super angels” and of angel investing as a professional asset class, that information would now be so outdated as to make the book useless.

The speed of evolution in the venture ecosystem lends itself much more to real-time updates in the form of blogs.  We are fortunate to work in an industry of extreme transparency and one of the few industries in which the best practitioners openly share not just opinions but investment theses, strategies and tactics.

In sum, it’s hard for me to recommend taking the time to read a specific book about venture capital when I believe that the same time spent reading the appropriate blogs would provide more benefit.

Here are some recommendations for blogs:

1.  Fred Wilson,

If you can read just one blog, this is it.  Fred updates almost everyday with interesting and important content.  If you spent time going through his old posts and keep up with the new ones, you will understand venture capital very well.  The comments section has become an integral part of the blog, offering insightful and often opposing viewpoints.

2.  Mark Suster, Both Sides of the Table

Mark has a different style than Fred, in that he tends to write longer, more detailed and less frequent posts (3x per week).  Virtually all of his posts, however, are interesting and important. I like Mark’s style of writing and identify with his way of thinking.  I recommend going through his old posts and subscribing to his newsletter to keep up with the new ones.

3.  Brad Feld, Feld Thoughts

Brad infuses his posts with personal anecdotes, including his struggles with weight-loss but these only add to the entertainment value of what is an extraordinary VC blog.  Brad also wrote one of the few books, maybe the only one on my list right now, that definitely should be read by both VCs and entrepreneurs, Venture Deals: Be Smarter Than your Lawyer and Venture CapitalistIf you want to learn all you need to know about deal terms in one day of easy reading, this book is it.

Brad also writes for another must-read blog, focused on educating the market about venture capital: Ask The VC

4.  You can’t spend your whole day reading (or writing) blogs but below are three more blogs that I try to read when I have time:

a.  David Lerner, Venture Studio

David’s “vlog” – he does short video interviews – is a great way to hear directly from entrepreneurs and investors and to learn from them.

b.  Paul Graham Essays

The founder of Y Combinator.   ‘Nuff said.

c.  Roger Ehrenberg Information Arbitrage

If you want to understand Big Data (you should) this is the blog to read.  Roger also has great insights on venture capital from the perspective of someone who understands other assets classes (he was in hedge funds prior to VC).

Brazilian Startups: Turbulence Ahead?


Projections about the Internet tend to overestimate short-term changes and underestimate long-term changes.

With that in mind, my long-term view on the Brazilian Internet ecosystem remains highly optimistic.  Short-term, however, as I mentioned in the last post, I feel more conservative: in 2012, reality will bite many startups, as they find that the online market in Brazil has not matured enough to support their product or service. 

For some startups, this will mean an extended period of anxiety, followed by successful market penetration; for others, it will require a complete “pivot” into another business model; for others, it will mean failure.

For investors, it will mean deciding which struggling companies should receive follow-on capital and which to let rise or fall on their own.

Of course, there will be wild successes this year but, as in any startup ecosystem, for every one successful startup, many will fail.  That is the nature of a startup ecosystem and it holds true in Silicon Valley, Bangalore, Hong Kong or Sao Paulo.  In fact, it is the nature of scientific experiment and of innovation itself.

That’s why I believe that the cultural and legal punishment of failure is the greatest threat to innovation in Brazil.  In Silicon Valley or New York, even if an entrepreneur fails, he is usually respected and even rewarded (the only thing not forgiven is unethical behavior); when a company fails, it dies quickly but the entrepreneur lives on to apply his experience to a new business.  

Regarding the market: the reality is that, for all of the excellent fundamentals underlying the Brazilian venture ecosystem, the chasm between startup idea and customer adoption is still much greater here than in, e.g., the US.  It takes more time and more resources (thanks to the bureaucracy) to cross that chasm in Brazil.  This year we will witness the consequences of that.