Josh Kopleman has today's great post up titled How to "Ask for the Order".  After I read it, I thought a better title would have been "Lubricating Commercial Transactions", but then again, I'm not a titleist (one who is excellent at making up titles.)  I learn this lesson over and over again, especially after a company I've made a seed investment in gets a bill from their lawyer for $42,000 for doing very little on a financing.

Todd Vernon has today's great post of the day titled Angel Financing.  Todd is the CEO of Lijit (one of our portfolio companies - if you are a blogger - go check it out) and just completely nails the different types of angel investors and the issues surrounding how an angel financing works.  This is a must read for anyone raising an angel round.

One of my favorite VC posts of all times was my partner Seth Levine's post titled How to become a venture capitalist.  I regularly get emails from folks looking for a job in the VC industry and I almost always point them at this post.

Seth has followed up with a new post titled How to get a job in venture capital (revisited).  It's updated with some additional information for those that respond to the first post by saying "I get it that it's hard, but what should I do over the next five years to position myself for a VC job.

Both make up the great VC post of the day.  Enjoy.

Q: I am the co-founder of a startup that is currently in the process of trying to raise an early stage venture round. We recently brought on an advisor who has been incredibly successful in our space and has made introductions to dozens of potential partners and VC firms where he is an investor. He has all the right relationships, but we gave him low double-digit equity to get him on board (his demand). The equity vests over a period of time and I stay up at night thinking about (1) if we should kill the deal and (2) what a VC will think of the founders when he/she finds our how much we gave up to get this individual to help. To further complicate the situation, the advisor (who is very wealthy) has taken a pass on investing his own capital and this has been a sore spot for any VC looking at our deal. How do you think we should resolve this situation.

A: (Brad): My immediate reaction is "ugh."  You've been taken to the cleaners by your "advisor" - low double digit for introductions - even if they are the right ones - is radically overreaching.

A typical advisor like the one you describe will get around 1% of equity vesting over at least a year (usually two) in exchange for being an active advisor / board member.  As part of this, the advisor should be willing to invest something in whatever financing you raise (at least $25,000 - preferably more) to show some personal financial commitment to your endeavor. 

Since you have a vesting agreement in place, you at least have an option to kill the deal.  I suggest you start with a frank conversation with your advisor.  Explain that you really appreciate his involvement to date.  However, you've gotten two consistent pieces of feedback: (1) his ownership stake is much too high for his role and (2) you are getting resistance from the VCs he's introduced you to because he's not willing to at least put a trivial amount (for him) of cash into the deal.  Rather than create a conflict out of the gate, you should ask him for help addressing / solving the issue.  At the minimum you'll force him to address the issue.

If he's constructive and thoughtful, you might have a chance to modify the deal so it's more reasonable.  If he reacts emotionally, you know what you are dealing with and have a choice to make. 

So today's "great post" comes from er... me.  :)  Okay, so my partner Ryan and I did a podcast last week with Larry Nelson of W3W3 and our conversation covered both the intellectual property and patent issues we've faced as investors in high-technology companies. We definitely have a love/hate (ok, mostly hate) relationship with patents, so if you are interested in hearing (or reading) more, check it out here. Note the excellent intro and outro music, or the "bumper music" as Larry refers to it -- it is from Soul Patch's latest album and is therefore straight from Jason's and my personal intellectual property collection

Q: What I haven't seen among the blogs, and what I'm hoping you can shed some light on, is how early stage companies go about finding and attracting the right talent.

It'd be interesting to hear from you (probably in blog form, I'd reckon) about how the companies you invest in find their talent. Do they hire mainly from within their network? How would a company go about finding a generalist, meaning somebody that's capable of coding one day and going on a sales call or working a trade show the next? Sites like Monster and Dice aren't set up to find those people, but there must be a need.

A: (Brad) I find it fascinating (and awesome) that you are asking your question backwards.  Most of the time the question people in your position ask is "how do I find a job in a startup?"  Kudos on going one level deeper!

There are several ways startups find their early hires.  The most common is to aggressively hire within their network.  I've found this to be the most useful (as have you - apparently from your past).  Great people tend to run in packs and enjoy working with each other again so when this works it has very high leverage.

While friends are great, new blood is often helpful, especially if you are looking for either specialized talent or very generalized talent.  The more specialized the talent, the broader the net should be as you want to be the attractor.  Don't limit yourself to a few online job boards - hit them all, and don't forget Craigslist and your friends / companies blogs (especially if they are widely read).  Put an email footer on all your emails.  Get the word out.  Since you are looking for specialized talent, you should be able to filter quickly based on resume plus phone interview as to whether or not the person fits through your talent filter.

In contrast, if you are looking for very generalized talent, this approach won't work.  In this case, posting to online job boards is likely a complete waste of time and will generate a high noise to signal ratio.  In the generalized talent case, you need to work your network even more aggressively and go after all the second order introductions that you can (e.g. people you know that might know someone).  I've even found third order introductions (e.g. people that you know that know someone that knows someone) to be useful here.  The higher quality the introductions (e.g. people that have worked together, vs. "I just know this guy") the better.

If you are on the other side of this (e.g. the one looking for a job) get the word out to YOUR network.  Random inbound resumes to VCs and companies rarely produce much (unless they are a response to a specific job inquiry.)

Bill Burnham has today's best VC blog of the day titled 4 Things to Do After You Get Your First Term Sheet.  As a special bonus, the second best VC blog of the day is Fred Wilson's post titled From Messes To Successes.  Fred had a post in him titled "From Moths to Butterflies" but he liked the ring of the esses better.

Q: How important is having a partner?  As a sole entrepreneur that's investigating venture capital, is having a partner typically required? What are the justifications to requiring a partner?

If I pursue a venture capital firm without a partner or team, is that a show-stopper?  Can I explain that finding a partner is difficult, or are there no options at all?

A: (Jason).  In my opinion, it is mandatory to have a partner and / or team to raise venture capital.  There are several reasons for this:

1. No single person can do everything.  Everyone needs a partner to balance out his/her actual or perceived weaknesses.  I've not met anyone who can do absolutely everything from product vision, executing on a plan, engineering development, marketing, sales, operations, etc.  There are just to many mission-critical tasks in getting a successful company launched.  You will be much happier if you have a partner and / or team to back you up.

2. It's not a good sign if you can't get others to get excited about your plan.  It's hard enough to get venture capitalists to write checks to fund your company, so if you can't find other team members with the same passion and beliefs as you, this is a warning sign to anyone that might want to fund your company. 

3. If you don't have a team, what is the venture capitalist investing in?  Just as important as the idea is the team executing it.  In fact, I think most VCs would tell you that they've made money on "B" ideas with grade "A" teams but that many an "A" idea was left in the dustbin due to a substandard team. 

The one exception would a repeat entrepreneur.  If the venture fund has had a good experience with an entrepreneur before and believes they can build a solid team post-funding, then he / she has a chance to get funded as a sole entrepreneur.

Q:  Does having an H1B founder (among other non-H1B founders) inherently prevent a startup from being funded? For example, what if a U.S. citizen creates the company which receives funding, and then applies for the H1B founder to join as a regular employee and then issue a founder-sized portion of the company stock?

One possible problem is that the founder will be working on the idea in their spare time while employed, but at least in the state of California this isn't a problem if the H1B founder's work isn't related and he does it on is own time and resources. Are there other issues? I'm just trying to figure out the general "gotchas" of an H1B founder (who is sufficiently skilled and productive to make it worthwhile to have on board).

A:  (Jason)  I am not an immigration lawyer, so the "gotcha" part of your question isn't something that I can answer, be I can provide the VC perspective.  The answer is "no."  Having a H1B co-founder is not inherently a problem to get funded.  So long as the co-founder can work full time and provide comparable contributions to the company, then VCs shouldn't care. 

A couple things to consider:

1.  Timing of grant.  If the grant is only going to occur upon the issuance of the H1B visa, then you should consider the timing issues of your grants being made at a different time than the other founders (and potentially at a higher price);

2.  Timing of the visa application.  It seems like the U.S. is running out of H1B visas earlier and earlier every year.  You should take this into consideration when forming the company and sponsoring the application.  Short answer:  get this done early in the year before the visas are exhausted.

Good luck with your venture.

Q:  I self-financed and run a profitable Internet based start-up with more customers than I can handle. I can take the business to where it needs to be without outside funding. However, it will take much longer to grow organically. I've considered working with financiers for guidance and capital.

What is the best route to take?  I'm in a position where I have several VCs interested and their terms are different.  Do I go with no money?  The best money terms?  the best guidance?

A:  (Jason).  Venture Capitalists bring 4 types of "capital" to any transaction:  Monetary, Social, Interpersonal and Experience. 

Monetary is simply money - a checkbook, if you will.  Social is the network and connections that a good VC can bring to the table.  Interpersonal is the capital that VCs bring that allow them to mentor their investment executives.  It also helps them to be helpful board members.  Experience is just that- having been there and "done that" time and time again. 

The question to ask yourself is which of these types of capital you need more?  Is it all about the money, or do you really need help that you don't have inside the company?  And which one of your potential VC suitors do you find better equipped to provide this non-monetary capital? 

We've found that many of the companies we invest in are more interested in the non-monetary capital that we can bring to the table and we are quite proud of that fact.