Month: March 2011

One thing that became clear to me when I switched from entrepreneur to VC is that our product is our service and our people. 

We don’t make an app that consumers can use.

We invest in great people trying to do great things.

When a customer turns down a startup’s product, they are basically saying, “we don’t want to use your product”. 

But when a startup turns down a VC’s offer, it means, “i would rather work with someone else”. Assuming the offer was a fair one, that can feel pretty bad especially when the VC really feels strongly that they want to invest. It means they chose one person over another. 

As a result, I’ve seen VCs do strange things when they get turned down or if they feel like the investment opportunity is slipping away. Sometimes, it works. I’ve seen a VC on the verge of losing an opportunity get it back and actually lead the investment. I’ve also seen the opposite where everything becomes painful and awkward and can lead to erratic behavior even with the best firms around. 

Recently one of our portfolio companies was raising a new round of capital. It became a very competitive process where the founder was trying to make a decision between a number of great choices. 

One of the VCs in contention was working very hard to get in but in the 11th hour, just a day before the founder was going to make his decision, this VC bowed out of the process altogether. 

At the time, I thought it was an odd thing to do. I thought to myself, hey, this person seemed really interested. Did I misread it? Were they not passionate about this company and team after all? Did their ego get in the way and they didn’t want a reputation of “losing the deal?”.

In this particular case, I don’t think it was any of those things. The VC that bowed out just felt that there has to be mutual enthusiasm between the founder and the new investor. And during this process he didn’t feel like it. 

A great relationship requires mutual interest. It can’t be one sided. 

Even though I think that VC might have ultimately been able to make the investment, I respect and valued that decision. 

All of this also ties into why I don’t like the idea of exploding term sheets as well. It’s best for the startup and VC to make the time and figure out if there is a good match without some artificial timeline.

And if you don’t feel the love in return than the relationship probably isn’t going to be good one anyway. 

So I’m out of the country and for some reason my mobile phone is unable to make or recieve phone calls or send/receive sms. It’s supposed to work in this country and my colleagues on this trip can make calls just fine. 

I’ve got a trouble ticket filed with Verizon Wireless. They tell me it will be up to 5 days before the problem is resolved. (I’m leaving tomorrow).

Anyway.

I am getting data thanks to decent wifi and i also get 3g data service to my mobile.

So for a day and a half, here are my quick feelings about life without voice

–Kik has been a lifesaver (disclosure: we are investors in Kik). My wife and I are working on an important project together and we are at a stage where there are a lot of questions and decisions that need to be resolved quickly. Kik is awesome for this. It’s fast and it’s nice that I get to see the status of my Kik messages to her. Kik shows you when an message is sent, delivered and read. 

-I tried to make a call with Skype on my iPhone over the data network. I tried a few times and the call quality was unusable. It must be connectivity down here – I’m not sure what Skype’s bandwidth requirements are for decent audio but obviously I’m below that. 

-email works just fine and i’m able to follow up on important messages while i’m away. and i get my voicemail transcribed by Phonetag so I can deal with voicemail that I’m missing.

i think i could live in this world without voice for a few more days. it’s nice and peaceful. the only thing is that i miss my wife and kids and text just doesn’t fill the void.

So late last night and this morning I used Skype and Google Voice from my MacBook Air from the hotel room to talk with my family. At least from this location, Google Voice has much better audio call quality. (Is that the case for others as well?)

i’ll be back in the States tomorrow night. And this voiceless experiement will be over.

Oh, speaking of voice, i picked up a Jambox last week (got the red one). I’ll write up my thoughts on that product in a few days. 

At this point, between our three funds, we have over 50 startups in the Spark portfolio.

We have specific theme and we are focused on a number of categories that we are passionate about. We do our best to describe those on our website. 

Given this interest and focus, it’s often that we will see startups that seek our support that are either directly or indirectly competitive with our existing portfolio companies. 

I’ve seen plenty of firms (big and small), fund direct competitors. It’s not our style and we are proud of that. 

If it’s a dead on direct competitor, the choice is simple – we do not invest. To be clear, sometimes some of our startups evolve and go into a new line of business over time and end up competing with an existing portfolio company. That is beyond our control.

But what is inside our control is funding direct competitors at the initial point of the investment.

If there is a potential for competition we ask the founders (existing and the new potential one) if they are comfortable. We listen to their feedback and take that extremely seriously.

One example amongst serveral: we were existing investors in Tumblr when we made the Twitter investment in 2008. Both founders knew that and I asked David Karp, the founder of Tumblr, if he was okay with our investment in Twitter. I never thought the companies were competitive as I used them both for different things but I wanted to make sure. David gave me his support and we are fortunate to have backed Tumblr and Twitter. 

Sometimes we are too prudish with this approach. We haven’t invested in any games startups because we are investors in OMGPOP. The gaming category is huge and quite diverse. A few years ago OMGPOP didn’t have any mobile games on their roadmap. I passed on a few interesting mobile social games startups because I thought that OMGPOP might very well build mobile games in the near future and I wanted to avoid any potential conflict.

Same is true in the Twitter ecosystem. There are many interesting startups in the Twitter ecosystem and I’d love to back a few in particular. And even though Twitter doesn’t compete or plan to compete with these startups, I didn’t want to have a situation where I’m conflicted on the board in the future. 

The tricky part with this approach is if you ask a founder what’s on his roadmap, sometimes you get a considered response but it’s typical to get back a “boil the ocean" response or sometimes you just get a pure emotional response that isn’t thought through.

It’s not surprising and why we love our entrepreneurs. They are passionate and have give up so much to make their dream a success.

In that case we tend let the idea sink in for a few days and then we pick it up again. If the idea of the new startup is completely radioactive to the existing founder (even if are pretty sure it’s not competitive) we don’t pursue the new company. Our relationship with our founders is sacred and we do our best to take care of that relationship. 

I’m quite sure that we will miss a few important investments and i’m sure we could be more aggressive with and flirt with the gray line that we are trying figure out every day. And i’m sure I annoy a number of possible potential founders with this approach.

But I just don’t care for the alternative.