Author Archive

Wenger: Presenting Option Grants to Boards

Today’s VC post of the day is from Albert Wenger (USV) and titled Presenting Option Grants to Boards. This is feedback I give to CEOs 98% of the time after my first board meeting. While there is no standard for how to present option grants, Albert lays out a very clear set of eight pieces of data he likes to see. The first four are the the columns in the spreadsheet and each employee / option grant are the rows. The next two are footnotes for options grants that aren’t standard. And the last two are contextual data that should always be included since board members are on multiple boards and won’t remember this from company to company.

Here’s are the eight pieces of data – go read the post for more details on why all eight are necessary.

Spreadsheet data:

  • Employee name
  • Title/role at company
  • Absolute size of grant in number of underlying shares
  • Percentage size of grant fully diluted

Footnotes data (for option grants that aren’t standard)

  • Special vesting considerations that differ from the plan
  • For refresh grants: how many options does the employee already have and how far are those vested?

Context data

  • Total size of option pool and remaining available pool (absolute numbers and percentages fully diluted)
  • Grant size bands by role (if you have established those already) — if not, include existing employees in similar roles for comparison (including their start dates)

MacLeod: The Model Board Package

Today’s post of the day is from Mark MacLeod (Real Ventures) titled The Model Board Package. Mark shares my intense frustration with the structure of most board meetings and offers up some great suggestions along with a solid template for a board presentation. As some of you may know, I’m working on a book on Startup Boards with Mahendra Ramsinghani - if this is a topic that is interesting to you do us a favor and fill out our survey on startup boards.

Ehrenberg: Letting Go

Today’s VC post is from Roger Ehrenberg (IA Ventures) titled Letting Go. Roger makes a strong set of points about how a founder/CEO needs to learn how to let go. I have a specific nuance that I see often where I think VCs regularly screw up that I bring up in the comments. I’d encourage you to go take a look and weigh in on the comments – this is a good and important one.

There are two runner up posts - Primum Non Nocere from Fred Wilson (USV) and How to Create an Early-Stage Pitch Deck from Ryan Spoon (Polaris). Both good extra food for thought on this wild card weekend.

Wilson: Herky Jerky Investing

Fred Wilson (USV) has today’s VC Post of the day titled Herky Jerky Investing. In it he refers to a WSJ article where several very prominent VCs have recently said they are backing off investing at frothy valuations and now going and looking off the beaten path.

Fred – as usual – has very a very focused reaction to this:

“I am not a fan of this start and stop style of investing. Nobody can time markets. You can’t deliver great returns to your investors by being a momentum investor during some periods and a value investor in others.

I believe the only way to be a top performing investor in any asset class is to have a disciplined investment strategy and approach and apply it consistently and actively in all markets all the time.”

I (Brad) strongly agree and weighed in with my own comment with a cynical view:

“I had the same reaction to the WSJ article. Actually, I had a stronger reaction: “what a load of bullshit – why does the WSJ publish stuff like this and why do VCs say things like this?”

The only thing I could come up with is that it’s actually a head fake from the people saying it with the goal of getting some of their fast followers – VCs who are investing with them, competing with them on “hot deals”, and driving prices up to “slow down and blink” so there’s less competition.”

The comment thread on Fred’s post is very interesting – I encourage you to go take a look and form your own opinion.

O’Donnell: The Race Is Long

There’s a beautiful post up today by Charlie O’Donnell (First Round) titled The Race is Long. It starts out:

“Jordan Williamson, the Stanford kicker who missed three field goals in the Fiesta Bowl, will wake up today and feel like crap. Tomorrow, he’ll wake up and still feel like crap, but a little less… and a little less the day after that, and less the day after that.

His Stanford e-mail is undoubtedly filled with two things… love and hate. If there ever was a moment in someone’s life where you get to find out who your real friends are, this will be it.”

As we start a new year, Charlie riffs nicely on important lessons that come out of a failure. Powerful stuff – and a great way to start the day.

Suster: Spend 2012 on the Right Side of the Haimish Line

Today’s VC Post of the day is from Mark Suster (GRP) titled Spend 2012 on the Right Side of the Haimish Line. In it he references a really great OpEd by David Brooks titled The Hamish Line.

Brooks describes the Haimish line through a description “I know only one word to describe what the simpler camps had and the more luxurious camps lacked: haimish. It’s a Yiddish word that suggests warmth, domesticity and unpretentious conviviality. It occurred to me that when we moved from a simple camp to a more luxurious camp, we crossed an invisible Haimish Line. The simpler camps had it, the more comfortable ones did not.”

I spend a lot of time on both sides of the Haimish line and – as Mark says – much prefer being on the same side that Brooks describes as “the simpler camps.” Mark gives a ton of examples of how he does this as a VC, including going to SxSW, visiting companies at their offices (rather than having them come to him), participating in TechStars, having dinner with entrepreneurs, and his accelerator LaunchPad LA.

This philosophy is at the core of my passion for Startup Communities. It’s also part of the beauty of the Startup Community in Boulder.

Mark – stay haimish!

Raouf: What Made Alex Ferguson a Great Manager

Oopsie – we forgot to do the “best VC post of the day” for the last month or two. You might have thought there weren’t any great VC posts, but you’d be wrong. We were just being lazy. As with all good things that start up again on January 1st, we’ll try to get back in the “best VC post of the day” groove.

There weren’t many on 1/1/12 so Firas Raouf’s (Openview) titled What Made Alex Ferguson a Great Manager stood out amidst the silence of the morning of the new year. I didn’t know who Alex Ferguson was until I read the post; he’s the “manager” (CEO) of Manchester United and has been since 1986. Firas summarizes Ferguson’s management principles, as they apply to a CEO of an early stage company.

  • Identify yourself with your company brand
  • Cultivate every interest group in your company
  • Gather information everywhere
  • Seek total control, but recognize when you cannot have it
  • Don’t let others cause you stress
  • Remember that crises blow over
  • Always be unsatisfied

Go read What Made Alex Ferguson a Great Manager to get the bullet points for what’s behind this post. Happy new year Firas!

What Are VC Firm’s Efforts To Connect Firms In Their Portfolio With Fresh MBA Grads?

Question: How would you describe VC firm’s efforts to connect firms in their portfolio with fresh MBA grads? Typical? Rare? Never? Im just curious because here in Philadelphia, First Round Capital is posting a lot of job offers for firms in its portfolio on their website, and I’m not seeing any other Philly VC firms doing this (at the moment). Im an MBA applicant at this point, and Im trying to size up my (realistic) career goals via an MBA in Entrepreneurial Management or some similar track.

This varies dramatically by firm and by school. Some venture firms do a good job of having dynamically updated job boards on their websites that list all open jobs by portfolio company. Some examples are us (Foundry Group), Union Square Ventures, First Round Capital (as you indicated), and Spark Capital. These job listings tend to be by company, role, and location – not by educational background.

Some firms actively engage with the nearby MBA programs through their entrepreneurship programs. This is especially true of places like MIT and Stanford, but equally likely at schools like University of Colorado and University of Michigan. While a lot of this is locally driven, some of this is alumni oriented (for example, see the trip that my partner Jason Mendelson and I made recently to University of Michigan, where’s he’s an alum.)

While I think MBA Entrepreneurship programs are fine, the bigger opportunity is to spend two years at business school actively engaging in the entrepreneurial community around the school you are going to. One of the big mistakes a lot of MBA students make is that they hang out at their business school waiting for all the entrepreneurial opportunities to come to them. The industrious (and entrepreneurial) students go out into the community and find the interesting stuff that’s actually going on.

I’d encourage you to ask the question directly to the school you are applying to. They should be in recruiting mode (for you as a student) and should be clear and effective about talking about entrepreneurial opportunities for you if you go through their program.

Levine: Trends in M&A Deal Terms

Today’s post of the day is from my partner Seth Levine (Foundry Group) and is titled Trends in M&A Deal Terms. Seth has been involved in several significant acquisitions recently, including Google’s acquisition of AdMeld and Federated Media’s acquisition of Lijit, so he’s been deep in the contemporary negotiating dynamics. He also includes a great link to an M&A deal terms report from Shareholder Representative Services.

Are VCs Interested in Funding a Services Agency?

Question: I have a startup concept for a services agency (not a software or online business). I have previously helped launch PR agencies, one of which was subsequently acquired by a national agency. Are there angels/VCs that would be interested in my services concept?

Typically not. While there are some VCs that like services businesses, especially consolidations or rollups of services companies, most VCs aren’t interested in funding services business, especially around PR or marketing.

While there was a rash of VC financings for web agencies in the late 1990′s, when the Internet bubble burst VCs were reminded that these are companies that – at best – end up being valued at 1x revenue based on the underlying economic characteristics of the businesses. This tends not to create risk / return investment dynamics that are interesting for most VCs.

Of course, what VCs fund cycles in and out of favor, so there might be a point in the future where there is a particular type of “next generation services agency” that appeals to so VCs. But for now, most of these companies will have to rely on bootstrapping or angel financings.