Posted: November 30th, 2013 | Author: Ted Rogers | Filed under: Brazilian Venture Capital, US Venture Capital | No Comments »
AngelList is the most important company in venture capital – more so than the various Unicorns and Thunder Lizards roaming the landscape – because it solves the discovery and transparency problems in early-stage investing.
AngelList provides the marketplace for startups that early-stage VC has lacked for so long. Think auctions/classifieds before eBay. It won’t be the only place startups find investors but it will become an essential reference for almost all angel transactions.
The VC ecosystem, however, has many pain points that beg for innovation, especially in the area of secondary liquidity.
People focus on the gross return aspect of investing but time is a critical aspect of Internal Rate of Return (IRR), as well. A lot of angels would rather have a 5x return after 2 years than a 10x return after 5 years but right now they have little ability to sell their shares. They must wait for a big liquidity event, probably many years into the future and hope they don’t get too diluted in the meantime.
For whatever reason, Second Market and others like it just haven’t solved the liquidity problem. My hunch is that it results from their (logical) founding focus on large, mature opportunities like Facebook, etc. rather than on transactions involving companies at the late Seed, Series A and Series B stage. Deal terms and government regulations play a big role as well.
But I have more confidence in AngelList or someone with DNA in the angel ecosystem, rather than a Second Market, to solve this problem, which demands an approach closer to eBay than to Sothebys.
Until recently, no one believed in an online marketplace for early-stage investment; angels will rejoice again when we find a secondary market for such investments.
Posted: October 2nd, 2013 | Author: Ted Rogers | Filed under: Macro Environment, Random Posts | 3 Comments »
It’s been about eight weeks since I moved to Silicon Valley. Every day I learn something new — this is truly the Athens or Rome of antiquity — and occasionally the implications of what I learn overwhelm me. At the moment, the unification of human and machine — which seemed so distant two years ago — is blowing my mind. “Wearable devices” will soon become “embedded devices”, then it’s off to the races.
Down the street from a wearable tech conference, sitting in this Vegan restaurant in SOMA, eating my hyper-local personalized gluten-free food that actually tastes great, listening to thrash jazz and watching a dead-ringer for the T-Mobile motorcycle girl (add tatoos and nose ring), it feels like we are on the cusp of a downhill Tron ride into Singularity. The ideas and technology in this space are so powerful, the advancements so exponential, that we are about to be swept into, rather than choose, our future.
Google Glass is just a very tiny beginning. “This” — this human-AI integration — is much bigger, folks, so much bigger, than all of us. Faster than any regulations can keep up with. We are on an accelerating speed of light ride into a transhuman future in which algorithms get further and further ahead of us, predicting and perhaps controlling our behavior and (therefore?) who we actually are. Maybe they will be who we are. Or maybe it won’t matter anymore.
The Matrix hypothesized that love could not be predicted, that it introduced a human emotion that could not be controlled by the programmers, by the machines. I’m not so sure.
I am pretty sure that this is it. We either turn back now or get on a Hyperloop to an age of spiritual machines. There’s probably a small group of people that truly understand this moment in time and most of them are within an hour from here. Some have an influence on the decision and I guarantee you they aren’t going back (sorry, Bill Joy).
Posted: September 23rd, 2013 | Author: Ted Rogers | Filed under: Random Posts | No Comments »
This weekend a friend asked me what I thought of Twitter. It was a timely question, as in the last month I have gone from thinking of Twitter as another social web success story, in the company of Facebook, Instagram, Tumblr, Spotify etc., to something much more important.
In May 2008, Biz Stone said, “[Twitter] can become a communication utility, something people use every day.” (Funny to read that article now – it referred to tweeting as “twittering” and surmised that usage might “grow by a factor of 10, or even 100.”)
Stone’s vision has borne out: Twitter has become a “ utility” for one-to-many communication; personal broadcasting is becoming as fundamental as telephonic communication.
AT&T of the early 20th century and Western Union of the 19th century serve as good analogies for Twitter. Twitter didn’t invent SMS communication any more than Western Union invested the telegraph but, like WU did, it’s leveraging an existing technology to create a network fundamental to society.
And what AT&T was to voice communication — a “utility” as fundamental as gas, water and electricity — Twitter is to personal broadcasting. (Aside: I would argue that Twitter will be more impactful than Western Union or AT&T because it’s network is less constrained by geography.)
People underestimate Twitter because the majority of personal broadcasts — tweets — involve “unimportant” content.
That’s like judging Western Union based on the content of its telegraphs or AT&T by the content of phone calls. Just because people chat about mundane things on the phone doesn’t mean that telephonic communication is mundane.
Twitter, as a utility, is in a different category than any other company of our generation. Even Google, the operating system of the web, is just a collection of services that could be rather easily replaced by offerings from MSFT, Yahoo, Facebook, Amazon, Dropbox, et al.
I don’t much care about Twitter’s revenue model or it’s valuation – those things will work themselves out. I’m just amazed by what Twitter has become in the span of six short years – a new “communication utility” for our age.
Posted: September 15th, 2013 | Author: Ted Rogers | Filed under: Macro Environment | 2 Comments »
Jon Evan’s post about TCDisrupt inspired me to write some thoughts about Tech’s preeminent conference.
I decided kind of last minute to attend – last year I hung around and met people nearby but did not pay the price of admission. Any panel that seemed interesting, I watched on the website.
This year I sprung for the wildly expensive attendance fee and almost immediately regretted it. Why? It’s not that there were no innovative ideas; it’s not there were no interesting panels but, really, how much “new” did attendees learn? Not much. Moreover, how much did we learn that could only be learned at the event? Even less.
It was like sitting through a disappointing three and a half-hour movie or attending a three-day press conference.
I also got bummed out walking through the exhibit hall. On stage, the one-percenters, the billion-dollar Thunder-lizards, were feted while, out in the crowded hall, the proletariat masses begged and pleaded for attention, each one believing they would someday be a one-percenter. I found myself avoiding eye contact and walking faster each time through the hall.
Jon Evans says software has gotten boring. Maybe that’s it, I don’t know but I do know I felt annoyed at TC and myself about the investment of time and money.
And yet, when I think about it, TCDisrupt is essential. If it didn’t exist, we would have to invent it. It is the barometer, the measuring stick, however imperfect, for the state of the startup ecosystem. (Someone compared it to Fashion Week in Milan – good analogy.)
What Disrupt 2013 revealed is that we are in a state of transition. This thing we are in, it’s not a straight line up; it’s not a linear progression of brilliant innovation. It’s more like a sine wave and right now we are in a trough. One door closes, another one opens but sometimes we are in the hallway for a while…
Fortunately, troughs usually precede an upward shift to new innovation. As Jon wrote, that new area might be hardware, it might be Bitcoin, it might be, yes, energy (I think it’s fair to file Cota under that category). If that’s true, then we will look back at TCDisrupt13 and say that it, again, revealed critical future trends.
Regarding the snark about it being a three-day press conference. It was but press conferences also have value. I gather some people find Mike Arrington controversial. Whatever. He’s a gifted interviewer and he entertained while driving unique conversations with key players.
Mike has the air of an old-school “ink-stained wretch” that got pulled off the stool of a newspaper bar and told to interview the President. He’s an authentic counter-weight to our faux casual, be rich dress poor tech style. And I appreciated that he grilled every interviewee about the NSA scandal, which in the midst of our chasing Internet riches we should all be grateful for – at least someone with a megaphone still gives a damn about privacy.
In sum, the level of innovation may not have been high at Disrupt 2013 but it will return, as Google glass, automated cars, Bitcoin, drones, sensors, 3D printing, etc. all take off. How do I know? I went to Disrupt 2013.
Posted: September 10th, 2013 | Author: Ted Rogers | Filed under: Random Posts | No Comments »
Nothing earth shattering, just stuff that rattles around in my head sometimes. Aphorisms can help with business and life.
- Two people: one believes he can, the other believes he can’t. They’re both right.
- Hard work creates expertise. Expertise creates confidence. Confidence wins.
- Everything is derivative.
- Failure to plan is planning to fail.
- Cultivate your core values, then you will approach everything from position of strength.
- One door closes, another one opens… but sometimes you are in the hallway for a while.
- There are no shortcuts for experience.
- Don’t write long emails. (I frequently ignore my own advice)
- Use the phone more. (ditto)
- Meet face to face more. (ditto)
- People regret saying “yes” more often than saying “no.”
- “No” is a complete sentence.
- Start simple, then expand. If you do the opposite, you will constantly try to simplify and never will.
- A vida sob o foco, foco eh numa coisa so. Beto S.
- We should remember that one man is much the same as another, and that he is best who is trained in the severest school. Thucydides
- Even a fool can learn from his own mistakes. A wise person learns from the mistakes of others.
- A wise person seeks counsel.
- Luck is when preparation meets opportunity.
- If you want others to be happy, practice compassion. If you want to be happy, practice compassion. Dalai Lama
- The best way to find yourself is to lose yourself in service to others. Ghandi
- When you realize how perfect everything is you will tilt your head back and laugh at the sky. Buddha
Posted: September 3rd, 2013 | Author: Ted Rogers | Filed under: Brazilian Venture Capital, US Venture Capital | 2 Comments »
Mark Suster recently wrote another good post, “Shiny New Objects”, reiterating the need for entrepreneurs to focus.
Mark directed his post at entrepreneurs but the same principles apply to investors – to me. Lack of investor focus results not just in “slow no’s” to frustrated entrepreneurs but ultimately in stupid investments and long-term failure.
Every investor, like every entrepreneur, has ample opportunity to lose focus. New businesses – new shiny objects – in “billion-dollar markets” come in all the time. Some are in clean tech, most are internet-based, some are medical devices, agro-tech, etc. It’s easy to begin dreaming that, yes, this will be “the next Google”, the next Pfizer, the next _____ [fill in the blank with an .001% company that becomes worth US$100B+].
Investors also get fearful about “missing out”: no investor wants to be the record producer that passed on the Beatles.
So we rationalize our lack of discipline: “Well, if there is a 1% chance that it could be worth billions, shouldn’t I spend some time learning about it? Isn’t that the responsible thing to do?”
Actually, no, it’s the irresponsible thing to do.
It takes months of work to become deeply knowledgeable about most industries; when dealing with more complex, tech-heavy businesses, it may be impossible, unless you came from that industry.
Of course, you can and should seek outside experts that can help but, at the end of the day, do you want to rely on outsiders to drive investment decisions? And why take time and energy away from investment areas in which you can leverage your existing expertise?
I have difficulty managing my time as it is; when I chase investments into new areas, the diligence process becomes even longer and choppier, resulting in amateur behavior and (understandably) pissed-off entrepreneurs. If I do eventually invest, if I am not an expert in their business, how much can I really help the company? I can offer generic advice but not deep strategic feedback.
Investment focus can expand over time but it should happen in a methodical, incremental way: moving from ERP software into accounting software makes sense: moving from ERP software into cleantech probably doesn’t.
The only exceptions to all this might be superangel funds: in that case, the investment method relies on diversification and multiple small bets, none of which divert too much time and resources. For investors with more concentrated portfolios, however, a decision to expand into new areas has a huge impact on firm resources and really, can make or break an investment business.
VCs repeat the mantra of “focus” to entrepreneurs all the time but I need to remember that what’s good for entrepreneurs is also good for me.
Posted: August 27th, 2013 | Author: Ted Rogers | Filed under: Entrepreneurship | 6 Comments »
In this era of the lean startup, deep planning and rigid processes seem out of style. I agree that startups should prioritize testing and iteration but my experience has been that successful organizations also plan well and have strict processes.
For example, I was fortunate to be a rookie reserve on the 1991-92 Washington Redskins, a team that went 17-2 and won the Super Bowl. It was Coach Joe Gibbs’s fourth Super Bowl and his third Super Bowl victory. Suffice it to say, he and his coaching staff had their processes down pretty well…
Here are a few things I remember about their methods, in no particular order:
1. They implemented KPIs clearly.
Of course, winning was the ultimate KPI, but that was simply the tip of the pyramid, underneath there were dozens of KPIs for individuals and units. Special teams had average yards allowed on kickoff, average yards gained on kickoff return, punt return yards, hang-time of punts, etc., etc.
Some KPIs were derived from “big data”, e.g., historic data showed that if our defense kept an opponent below 16 points, we would usually win, if not we would usually lose. (Our offense had 21 points as their KPI.)
There were serious consequences, consistently implemented, for players or units who failed to meet their KPIs. There were also rewards for meeting KPIs.
2. They held people accountable.
In order to do so, they recorded and measured everything. For example, the AV staff videotaped every second of every practice. Then, each morning in the team meeting, Coach Gibbs would fast forward to random plays from practice: if he caught someone not hustling, he called them out and chastised them in front of the team. Even if you were not on the field during the play, if he saw you on sidelines not paying attention, talking to a teammate, laughing, etc., he castigated you publicly, big-time, in front of everyone.
On the other hand, good effort and results were publicly praised.
The result? Everyone had a very good work ethic…
3. They controlled time completely.
Every practice, every meeting, was scheduled down to the second. There was no unstructured time where you could slack off, develop bad habits, etc. When you were in the office, you were on the clock. It seems bad but in many ways it was a relief: you knew the exact length of practice, workouts, meetings, etc., so you could manage your expectations and your output. You ran at 100MPH when you needed to, knowing that you could rest and recover later.
This is totally different from most startups, I know but maybe there is a way to blend structured time with a successful startup culture…
Anyway, it was good to know that your free time was your own, your work time was the team’s.
4. Intense market/competitive research.
The number of man-hours that went into watching film and studying tendencies of opposing teams can’t be calculated. It was a year-round process that, eventually, got distilled down to a specific plan (the “gameplan”) on the week of a given game. The gameplan was essentially a chess match written in advance by the grandmasters (the coaches) and disseminated to the chess pieces (the players).
5. In-game Adjustments
Once the game started, the coaching staff would iterate from the gameplan according events on the field. In fact, for all the rigid processes that the Redskins had, Joe Gibbs was famous above all other coaches for making successful game-time adjustments.
Here is the big disconnect with startups: many entrepreneurs think planning is a waste of time because, once you hit the market, the plans will be wrong and you will need to change anyway. This is incomplete. You will have to iterate, of course, but planning precedes successful iteration – processes facilitate efficient iteration.
It was precisely Gibbs’s meticulous preparation, planning and practice that allowed for successful iteration during the game. (“Plans are useless, planning is indispensible.”)
Posted: August 13th, 2013 | Author: Ted Rogers | Filed under: Entrepreneurship | 2 Comments »
When I think of the hours that entrepreneurs put into presenting the perfect pitch, the perfect powerpoint, to VCs, I’m reminded of this passage by Robert McKee in his famous book, Story.
In his job as a Hollywood script reviewer, McKee needed to find great stories, not perfect presentations. In this sarcastic passage, he mocks the obsession with perfect formatting:
“Great story! Grabbed me on page one and held me in its embrace. The first act builds to a sudden climax that spins off into a superb weave of plot and subplot. Sublime revelations of deep character. Amazing insight into this society. Made me laugh, made me cry. Drove to an Act Two climax so moving that I thought the story was over.
And yet, out of the ashes of the second act, this writer created a third act of such power, such beauty, such magnificence I’m writing this report from the floor.
However, this script is a 270-page grammatical nightmare with every fifth word misspelled. Dialogue’s so tangled Olivier couldn’t get his tongue around it. Descriptions are stuffed with camera directions, subtextural explanations, and philosophical commentary. It’s not even typed in the proper format. Obviously not a professional writer. PASS ON IT.
If I’d written this report, I’d have lost my job.”
Similarly, if I or someone that works with me passes on a great business because the powerpoint isn’t good, we should lose our job.
The best PowerPoint is a live product but, short of that, entrepreneurs must communicate two simple pieces of information: why this product and why you?
Product: why does the market NEED this product?
You: why are you/your co-founders the right team?
Deeper and longer analysis follows but everything begins, and ends, with those two questions.
In terms of formatting, refer to Guy Kawasaki’s 10/20/30 Rule of Powerpoint.
Posted: August 9th, 2013 | Author: Ted Rogers | Filed under: Brazilian Venture Capital, Entrepreneurship | 3 Comments »
The Next Web recently published an important article by angel investor Juan Pablo Cappello.
Juan convincingly states what many have learned the hard way: Brazil is not Silicon Valley, its startups should not emulate Silicon Valley and we should not look to foreign investors for validation of businesses. Instead, focus on real problems in Brazil and building solutions to those problems.
(Daniel Isenberg, a professor at Babson College, made similar comments in the most recent Exame.)
My own two cents:
- Cloning businesses from foreign markets can work if those businesses address a real pain point in Brazil BUT…
- There are so many unique obstacles in executing a business in Brazil that it changes the entire analysis of whether a cloned idea is a good one. Most people only see the good idea and not the true obstacles to execution in the Brazilian market.
- Good ideas are always cloned by more than one company and therefore have multiple competitors from day one. There is no lead time for a cloned business. This reduces the chances of success.
- At some point, the goal of many startups (in the US and Brazil) switched from building a successful business to successfully raising capital.
- This is backwards: raising capital is a means to an end (building a great business), not an end in itself.
- Accelerators are hugely important and hugely helpful to the startup ecosystem but they are partially to blame for this switch: an incredible amount of time in acceleration programs is spent on how to pitch VCs; in some programs, the pitch, not the business itself, is THE focus.
- Pitching is important but it is a “sugar high”. Even with the best pitches, the sugar high – the excitement – wears off quickly and the reality of the business becomes obvious. If the business is weak you have wasted your (and the VC’s) time.
- As ever, focus on solving a painful problem for which people will pay for a solution. The bigger the problem and the more money people will pay for the solution, the better the business.
Posted: August 3rd, 2013 | Author: Ted Rogers | Filed under: Macro Environment | 4 Comments »
The “Brazil Cost” usually refers to the cost of bureaucracy in Brazil. There are other costs, however, that have nothing to do with bureaucracy but are just as damaging to business.
I’m referring to the dozens of little things, daily, that reduce productivity.
Let’s take a typical workday in Sao Paulo. You wake up and drive to work, if you can: due to road space rationing you may not be able to use your car that day. Sao Paulo traffic congestion is probably the worst in the world, so you spend two hours in traffic getting to work.
During that time, you try to make some calls to increase productivity. Unfortunately, your cell service is not good and your call drops repeatedly. The calls are an exercise in half-conversations and accomplish little.
Maybe, just maybe, you live close enough to walk or take public transport to work. Even walking in Sao Paulo, however, is difficult. One of the things that you notice is how narrow the sidewalks are. You are constantly stopping or moving side to side to avoid other walkers. Also, stoplights are often unclear– where and when to cross a busy street can be a dangerous guessing game. The point: it takes a lot of extra time to walk from one place to another.
Finally, you get to the office. Here’s perhaps the biggest problem: the internet is unreliable. It keeps going on and off or, more commonly, bandwidth doesn’t drop completely but gets overtaxed and can’t handle, e.g., a videoconferencing. So Skype calls with important clients are interrupted. If the internet completely drops, online projects halt, emails go unanswered, etc.
Every Skype call I had last week — and I had a lot — got dropped at least once.
At the end of the work day, you reverse the commute and re-encounter all the issues mentioned above (plus, you need to leave the office early to compensate for the traffic).
Add all these little things up and multiply them times the millions of people working. It’s a staggering cost.
This is not to criticize Sao Paulo or Brazil. It’s life in a LOT OF CITIES. For example the San Francisco Bay Area has horrendous traffic jams which reduce the quality of life — and productivity — there. Walking in Manhattan during rush hour is brutal.
When you combine all the little things that reduce productivity in daily life throughout Brazil, however, and multiple that times hundreds of millions of people — it’s crippling to the country’s productivity. It hurts Brazil, Brazilians and anyone trying to do business there.