Opportunities lost in a sea of growth rounds

These days in startup land we see an enormous number of startups being seed financed by angel investors, seed funds, venture capitalists, hedge funds and celebrities.

This trend has been happening for many years now and has simply continued. More seed capital isn’t necessarily a bad thing and generally I’m happy about that. The alternative is problematic.

The more recent thing is the rise of growth rounds. In 2014 our industry saw more growth rounds than the actual number of business days.

The interim stage between the seed round and the growth round is happening at an accelerated and compressed pace.

Consider the Tumblr financing history.

Year 1: $700k
Year 2: $4M 
Year 3: $4M 
Year 5: $25MM 
Year 6: $75M

Take a look at the first three years. That financing history is rare these days for a promising company. In fact those first three years of financing history would look like a messed up company in today’s environment.

Today it would look more like this for a promising company.

Year 1: $4MM 
6 to 12 months later: $25-$50MM

The difference is dramatic.

Yes it means a Series A crunch for many startups. It also means more dilution and higher expectations.

But the thing I’m most concerned about are the startups that won’t get their next round done just because they aren’t on a rocket ship.

Some companies take time and patience. And I do worry we aren’t valuing or appreciating those startups well enough in this environment. It would be a mistake to overlook them and a loss for our industry.

Yesterday @nabeel and I recorded the 20th episode of our podcast Hallway Chat. During the podcast we also broadcasted the video live with Periscope which is in private beta but here’s a dropbox link to the video 

Show topics include:

-Live mobile video streaming apps: Periscope and Meerkat
-Apple Watch
-the state of valuations and financing in startup land

Thanks for listening :) 

The role of the product founder/ceo

During the earliest days of a startup, the founder/ceo is often the product visionary. They have a heartfelt mission to build something that many others didn’t see. It’s inspiring. 

As the startup grows we see these product founder/ceos start to hire senior people that complement their skills in areas like finance, sales, marketing and engineering. 

And it’s also natural to hire a VP of Product.

That VP of Product is often one the most challenging roles in the company. They have to command the respect of the organization yet they are working for the founder/ceo that is a product visionary. 

I’ve seen so many scenarios of this combination. I’ve seen some VP of Product that are really VP of Project Management. They execute and operate the founders product plan.

I’ve seen the other extreme, where the product founder/ceo essenstially outsources his/her influence to the VP of Product for fear they will annoy their team. 

And I’ve seen product/founder CEOs try to walk this fine line in between.

One thing I encourage all product founder/CEOs: don’t give up your role and intimacy with the product feel, plan, priorities and roadmap. It is your moral birthright to own the product vision. Stand tall and know that your vision is why the investors, employees and early customers showed up.

It’s why are here in the first place. 

Some thoughts on company culture (continued)

I’ve written a fair amount about company culture in the past on this blog. But it’s been awhile and thought I would add a few thoughts from some recent conversations.

It’s an understatement to say that hiring is tough as a startup.

Not only do you have to find someone with passion & intelligence but you have to match for chemistry. And of course you need to be able to compensate them appropriately.

In the current market, big technology companies are able to offer massive salary/equity packages. Not every company does this and clearly not every employee receives it. But the most high demand folks are able to attract outsized offers from a small number of companies that are hiring aggressively. 

How can a startup compete under those economic terms. 

The good news/bad news: they can’t. 

As a young company there is no reasonable way to economically “out bid” Google or Facebook. So don’t try. 

One founder half joked remarked to me recently: “hey there is a reason these companies have to offer such massive packages. otherwise people wouldn’t want to work there.”

So if you can’t outbid, then how do you do it.

In my mind the only way to successful recruit & retain awesome people is if they belief in the people (ie founders), the mission, the product…..and most often the company culture. 

At our recent CEO summit, Chip Conley spoke about the importance of company culture. He cited many powerful examples and stories.

One of the ways he described company culture is “how does your team and employees behave when the ‘boss’ isn’t around”. 

Every company has their own culture. It doesn’t come from a hokey mission statement. Rather it comes from how a company behaves, how they treat their people, how they treat their investors, how they treat their products and how they treat their customers. 


Sometime during the month of May I get this call from my friend Julia LeStage. Julia tells me I need to meet these two founders that had taken a leave from Harvard Business School to work on their new startup called Alfred.

Julia insists that the founders are extraordinary so I happily take the meeting. 

I’m so glad I did. 

I knew at that first meeting Marcela and Jessica were special people — intelligent, creative, passionate and making things happen.

We spent more time together and by the summer we led a seed round in the company. Since then they have been busy building the team, building the business, and they won TC Disrupt.

The idea of Alfred is a simple and direct one but the execution is hard and complex. Alfred is a service that makes your household life easier and better. CNN has a nice description here. And I love this line from a recent Fast Company review of the service:

When I unlock the door, the scent of cleaning supplies overpowers the pot stench of the hallway. Gone are the garbage bags filled with clothes for Goodwill and laundry, and on my counter sits a plastic bag of avocados, a box of tea, and a carton of Almond milk (the cheese and salad are in the fridge). I am so over the weirdness of handing a stranger my keys. It feels like I’ve been visited by my errand fairy godmother.

Today, the company is launching in New York City and also the seed round we led along with our friends at SV Angel and Crunchfund. 

I am delighted to be in business with Marcela and Jessica. They are passionate about building a magical experience for their customers and having the highest respect for the actual Alfred’s on their platform.

If you live in NYC I hope you give Alfred a try.

“That will never work”

MG wrote a post yesterday about scoffing in the technology world. It’s a great read, especially going into the new iPhone and “iWatch” launch today.

It also reminded me of all the scoffing I’ve heard in my time as an investor these 9+ years. Things like: 

“User generated content can’t compete with professional content”

“Advertisers won’t put their ad next to user generated content”

“You can’t build a big company outside of Silicon Valley”

“You can’t hire great engineers in San Francisco”

“You can’t build a big business around photographs”

“We wanted flying cars and all we got were 140 characters”

“Digital goods are a fad”

“Social networks are a fad”

“Startups can’t build hardware”

“Why would someone want a blog”

“You can’t compete with Facebook”

“Nobody cares about virtual reality”

“You can’t build a real company with a $15k seed” (in reference to all the early scoffing about YC in the early days)

“You can’t build a big company in the music space”

“You can’t build a big company if you don’t charge for your software”

“Bitcoin will never work”

“You can’t build a big open source company”

It is a helpful reminder why I love this industry. 

Our new investment — Trello

One of the best things about making software for consumers is the complete lack of gatekeeper risk (unless of course you consider net neutrality issues but let’s leave that aside for time being. You already know how i feel about that )

Make great software and the end user can decide if they want it or not. The decision maker and the end user is the same person.

We take this for granted but as many folks know this hasn’t been the case in companies (enterprise), or education or finance and other such markets. In these markets we have typically seen a decision maker who is different than the end user.

This creates a number of issues that impact the design, care and distribution of the product. It also gives rise to a natural gatekeeper.

Back in the day you would hear things like “I can’t use that product because our IT team won’t support it”.

A number of products have been introduced that have enabled their employees to go rogue in effect. And that is a good thing.

End users at companies are basically are making their own decisions. They bought iPhones and brought them to the office. They signed up for dropbox and brought it to the office. 

I did that with gmail shortly after we started Spark. We began with MS Exchange and after a year or so I went rogue and moved myself to gmail. Shortly after the rest of the team moved as well.

Trello is a mighty fine example of this. Trello is the best way for anyone to work together on a project. Any project. It’s beautiful, fast and simple. Oh, it’s free too.

I signed up for Trello on my own. I didn’t have to take a “webinar” or ask a sales person to demo it to me. I didn’t have to ask someone to install it and I didn’t need anyone’s permission. Others at Spark made their own decision and suddenly we had Trello boards for all sorts of projects like our annual limited partner meeting, candidates we are recruiting, investments we are considering, marketing initiatives and more.

I also have boards are also linked to folks outside of Spark. And Trello works mighty fine in single player mode as I keep a few Trello boards that I keep just for me. 

Trello was built by our friends at Fog Creek. The same place that created and spun out Stack Exchange.

We are proud investors in Stack and when we saw Trello we became inspired to get involved. A product aimed at end users in any environment without gatekeepers, with natural network effects and one we love using everyday.

But one of my most important criteria is whether I would want to work at this company if I wasn’t a VC.

I would.

It’s such a pleasure to have the opportunity to work with cofounders Michael Pryor and Joel Spolsky again along with Neil Rimer at Index who co-led this Series A with Spark. It’s an awesome team and I’m delighted to be part of it.

Go try out Trello for iOS, Android or your good old desktop browser. You’ll love it.

* * * 

Update: Read Joel’s post about the Trello backstory here, Michael has a post and the WSJ wrote about the new funding as well.  

Be fearless

Sam Altman’s tweet hit my feed this morning and one point in particular hit a nerve.

The last one: ‘don’t let conflict fester’ is the big one. My friend Jerry Colonna recently gave a leadership talk at a recent event we organized and brought home what it means to be fearless as a leader.

And being fearless means direct dealing in a respectful way and without personal attacks. 

Too often we try to avoid conflicts, simply hoping tomorrow will be better or frankly that there is only 10 fucking minutes left in this meeting. 

But conflict avoidance isn’t being fearless. It’s not fair to you, the person you are managing or to the rest of the team. I learned this the hard way. 

I had an easier time managing conflicts when I worked in startups than transitioning to a board member/investor. Getting the balance right of being a partner to the CEO/founders can be tricky even in the best of times. 

But Sam and Jerry are totally right. Get comfortable being respectfully direct and don’t let conflicts fester.

Be fearless. 


Last year at the Jelly office in San Francisco, Biz Stone (Twitter cofounder and now the cofounder and CEO of Jelly*) read aloud a draft version of the blog post that would launch v1 of Jelly.

One line in particular hit me:

“It’s not that hard to imagine that the promise of a connected society is people helping each other”

Those are some powerful words and if you have ever known Biz or heard him speak you know that they come from the heart

The idea of a connected society helping each other is inspiring.  From people helping each other on Jelly or communities organizing via Twitter as well as things like peer produced contributions on Wikipedia. We are better when we work together. 

I’m also moved by crowdfunding platforms where we can help each other. In my opinion Crowdrise has emerged as the best crowdfunding platform for philanthropy. It’s a wonderful product and community where we see people helping each other every single day.

I initially met the Crowdrise team through my friend Fred Wilson. He told me he was putting together a new investment round in the company and asked if I was interested in learning more. My partners and I were blown away with the founders vision for creating a platform that allows each of us to give and help others. And you get a real sense of that mission with every single person on the team. 

Today I’m delighted to announce that our firm, Spark Capital has joined in this new round of financing for Crowdrise. I am proud that we are investors in this special company and look forward to working side by side with the team. 

One more thing :) 

You can find my Crowdrise profile here as I’ve been raising money for Camp Interactive and the Boston marathon which I’m running today. Please consider making a donation! 


Robert Wolfe, Crowdrise co-founder and CEO — Detroit, Michigan.

(*disclosure: my firm is also an investor in Twitter and Jelly)