The Post Money Value

Taking AIM at AIM

Mark McQueen of Wellington Fund fame has an interesting post up with some views on how the Alternative Investment Market (AIM) over in London works.

Mark is a huge supporter and fan of the AIM market. Really, here's a soundbite for you:

"As with the tech bubble of 2000, the ability to move your Fortune 500 corporate HQ to Bermuda in 2002 to avoid paying U.S. tax, the 2004 off-balance sheet strategies of Bulge Bracket Wall Street firms involving Nigerian barges, and the Income Trust party of 2003-06…this unsustainable model will also come to an end in its current unregulated form."

Read the whole post.

Crunchy Goodness

Last week, I asked one of very successful Venture Capitalists if she had any routines that she had picked up over the years which help with the daily fun of venture investing.  I expected the normal, read the Wall Street Journal, have a bowl of Special K, whatever.

Even better:

"Most mornings, I grab a random CrunchNotes blog entry and jump down to the comments.  The entertainment and hilarity is off the scale.  It good and good for you; no calories when you are laughing your head off."

Well, okay then, let's give it a whirl.

There is some firefight going on about Wikipedia and who is posting what to who. CrunchNotes blog entry is here but the best is a comment from Mike Arrington:

"Roy - read the comments to this post. There are no TechCrunch fans. I’m losing a battle of opinion, to microsoft of all companies, on my own blog."

Now that's gotta hurt.  Have a good Monday, folks.

Sunday's HR Tip for New Employees

Gather 'round folks.

This is the order in which you should NOT deal with new job.

1. Meet about new job with VC
2. Think about it
3. Blog you are leaving your old job for new job
4. Let new job know you'd like to come.

Yeah, it really did happen. The CEO of new job company found out about new team member via a blog post using Google's alerts on the company name.  VC wipes egg all over face and tries to convince CEO that it must be that damn mail server again and new team member has new nickname before showing up to work.

Heh. Lots of points for enthusiasm right?

Crank up your Video Cameras - Pitch4Profit

If you've ever wanted to prove you could pitch your product in 90 second, here is your chance.

The Pitch4Profit Contest is rolling and it could be just the break you need.

The contest is broken up into two chunks above/below a million bucks.  Below, you are trying to get on the TV show Dragons Den on CBC.  Above the million mark, you are hoping to get a spot at the Canadian Venture Forum.

The rules are simple and this is open to residents of Canada.

The link for entering this contest is here.  There is no limit or restriction with respect to the idea and this isn't just limited to ideas that would be suitable for venture capital.  It is good practice to see if you can get you pitch down to 90 seconds and since the entries will be posted on the web site, there will be some exposure to the Internet at large.

My partners at Brightspark and JLA ventures (my firm) are the sponsoring Venture firms.

Stop reading and get pitching.  Spread the word, all ideas welcome.

Air Canada - Setting Expectations

Right, I know what you are thinking. You are thinking, here comes a blog post that will be a dump on Air Canada.  It's not, keep reading.

Last Wednesday, I was heading out on the 6:15p flight to LAX.  The airport was pretty crowded and the two ladies at the gate were pretty rushed.   I typically try to hang out by the desk to watch the customer interactions, people's reactions, and to try and watch somebody scam an upgrade with a story I've never heard/used before.

While watching the preparations for this flight, one of the ladies paged the Anderson's up to the desk.  The couple promptly scooted up, exchanging worried glances.

Air Canada Staff: "I'm terribly sorry but the audio in the seats you have isn't working.  The flight is really crowded but if you hang out until we check everybody in, we can try to find you seats with some working audio.  I will tell you, tho, you've got these exit seats and they have more leg room. You might want to keep those seats. Let's wait until we get people on board and see what we have, shall we?"

The people basically said no big deal, we play cards, we like leg room.

Lesson for your Start Up: Set expectations.

Nothing is more gratifying to a customer then having expectations set.  Note that I didn't add the standard 'exceed them', nope, that's the advanced class. The first rule you need to master is simply setting the expectations.  We hate to find out after the fact or be left with zero choice.  Air Canada knew there was a problem on the plane and simply tried to make the best of it with the customers.  They knew before going on the plane, they were involved in the choice, etc.  It seems like nothing but I can't stress this enough, set expectations. Talk to your customers and you'll be pleasantly  surprised with the outcome even when it is a problem you are dealing with.

Doofus Alert: Kaplow Communications

Last week I got a note (High Priority with a red !)from Skype/US telling me that they had seen some Skype references in my blog. In fact, here is the exact paragraph:

Came across a few mentions of Skype on your blog and thought I’d drop you a line. I’m in charge of user outreach for Skype in North America, which means I’m always eager to hear unique Skype stories. If you have time to share your thoughts I’d love to hear from you—drop me an email here or add me on Skype (my ID is “______”). Thanks!

At first I thought, gee, I'm up to 9 readers of the blog.  But since I have nothing unique to say about my dog speed dialing his pooch friends with Skype, I just deleted the mail with that "probably a PR thing" rumbling in my head.

Then I got another from the same people, same user, same message.  Deleted again, slight grumble as I pressed the delete key.

Today, Scott Indrisek, who is "in charge of user outreach" sent me the same message again for the third time.  Only this time, the SPAMing nature of this email was loud and clear.

The "Dear Rick" part was in one font and the body of the message was in another.   Doh! 

Fonts, Scott, Fonts!

Kaplow Communications, until February, has a one page website which if you check out, you can see they "create buzz and lots of it" and they are "not just sparking conversation, we're changing them."  Scott is a member of the buzz changing, sparking, conversationalists at Kaplow.

But this gets even better.  I'm sure you worry about your friends just like I worry about mine.  I often lie awake at night worrying about my friend Hugh Macleod of gapingvoid fame.  I worry that his unique way of working with his clients like Stormhoek Wine, will get lost/drowned when the 'experts' wake up and go after him/his customers.

But I'm sleeping good tonight. Why?  Kaplow Communications has Woodbridge wines and other wine folks as customers. 

Kaplow Communications vs. Hugh Macleod. Right. My money remains on Hugh.  If Stormhoek gets really lucky maybe the whole wine industry will hire Scott over at Kaplow Communications. 

Memo to Scott Indrisek: Buy Shel's book (Naked Conversations), read the hughtrain, and watch those fonts, kiddo.

File Under: Doesn't Everybody?

I'm here in Monrovia, California, working with the folks at MusicIP, a JLA portfolio company. 

Today, I had lunch with a business friend at a nice place called Caffe Opera.  We were deep into it, the food was great, and "server number  13" was friendly, helpful, nice.

We wrapped and I wanted to get out quick as I was running late.  The check comes and out comes the American Express Card.

Now, as anyone out there will tell you VCs actually suck at math. It's why we hire all those associates that model you into the twilight zone.  Being the competitive guy I am, naturally, I want to suck at math the most. 

Check comes back, I quickly rattle off something resembling math, scrawl a signature on it and we are gone.  Later tonight, while inputting my expenses and time sheet for the day, I look at the receipt and realize I had hosed "server number 13." It wasn't a major disaster but it wasn't nice.  So, I hop into the car and head over to leave some extra money with my apology for being such a tool.

Upon getting there, I ask to speak to the manager. What's funny is that everybody standing around me, starts looking worried. One guy whispers to his wife (wedding rings) "Bet he got overcharged." Another guy leans over to his friend and mutters, "excellent, let's watch the fight."  All -n- about 6 people milling about.

Manager walks up and I simply say I was in for lunch, here is the receipt, could you please give server number 13 this extra money because I was in a rush at lunch today and I screwed up the math on the tip. Please give her this money with my apology. After the stunned look, a smile and I certainly will, I was out of there.

On the way out the door, the wife says, that was very nice but the other guys look at each other with one guy saying, whatta tool, I'd have kept the money.

Back in the day, I worked as a slave at a Sambo's restaurant and know first hand the crappy treatment wait staff put up with to eek out a rather small living. So to me, it was totally normal to correct my error because I know how it feels.

My point of this blog post is not me nor the few bucks moving around. 

The larger point is about you as a start up leader. Do you remember the butt head bosses, the uncaring teachers, the yutz co-worker?  Hopefully, you do know how it feels and you can create a leadership style based on a bit more then the golden rule.  Because this start up/investing business is mostly about people, give thought to the things in business and actions that you think are just normal for you.

You never know, it just might be the thing that put an investor over the edge with "I love this women, we have to back her."

Now back to our regularly scheduled VC blog.

A Confidential Statistic - Strictly Private

I went back and checked the last 100 unsolicited plans/opportunities that I received in the last little while to see if a certain point needed to be made.

Of the last unsolicited plans that arrived into my world, 71 of them had "Private", "Confidential", "Strictly Private", or "Strictly Private and Confidential" plastered on them.

19 had copy numbering, i.e. copy 16 of 20. Electronic WORD documents with copy numbering.

13 (that lucky number, I guess) had an NDA with the proposal.

5 had the NDA/Confidentially agreed as the first page of the unsolicited document.

Hmmm..

Some guidelines for you.

• Sending something unsolicited with the words private, super secret or double super secret affords you ZERO protection. Don't do this.  A summary of whatever you do/offer should be something you tell anyone in your elevator pitch or on stage if you were invited to speak about your new gig.
• Consider sending things out in PDF form. There is no device, operating system, etc, that can't read a PDF file. Plus if you lock it, you have a read only document that can't really be changed.
• Unsolicited = Sharing.  If it is interesting, it will result in sharing around the office, passing to an advisor for an opinion, etc.  See item 1.  I am a newbie VC trying to get the big shot VCs to return my phone calls so I feel your pain and I will read your stuff, answer your email, and return your phone calls. But unsolicited is not a good place for you to bring forth the secret sauce.
• Many (aka lots) of VCs, angels, etc, will immediate delete, unread, unsolicited stuff.  In addition unsolicited stuff with confidential markings is treated just about like radioactive waste.

Hopefully, you are sensing a pattern here.

Execution Play vs. The Black Box

[Note: This blog post was inspired by Jim Polleck, who runs a Tech Incubator in Boulder, Co and Brad Mazurek who were both kind enough to leave comments on the last NDA post I did. Thank you for stopping by and contributing to the dialog.]

In very (VERY) broad terms, there are two types of 'plans' that can walk into an investor's office.

Black Box.

This is the business opportunity with secret sauce.  RIM, MusicIP (my company), etc.  The company has some IP or amazingly great code or something that is very very special which 'the bet' if you will is tied to. This is a very very broad categorization.

Execution Play.

This is a business opportunity where (again broad terms) somebody goes, jezz, why can't we just [fill in the blank]. Flickr, nothing special, just first, cool, viral, tons of customers, etc. YouTube, same thing, brilliant viral execution play on sharing videos. Google? Secret Sauce play. b5 Media, execution play.

The Secret Sauce NDA issue is mostly as I described in my other post.  You shouldn't to ask until way way down the path, etc.

But what happens when the idea just pops into your head and there is no secret sauce or black box?

An example:

Let's say while at the airport you figure out a brilliant way to check in people/process bags that cuts the airline costs by 30%. You can make money on a per passenger basis and it is all process.  And its brilliant.  Once you have this business, there are three other things you can immediately offer on top. And the switching costs for the airline are reasonably high. It is all about execution.  Its a cool outsourced system that the airlines will sign up for. In fact Air Canada says, we're in, totally, let's give it a go.

You need money to rollout this trial but you are very worried about telling people about the system/process because they will go "DOH!" why didn't I think of that and go run to do it.

So, you want people you talk with to sign an NDA and of course, the investor world says, yowsa, no can do for all the reasons we've previously mentioned.  There are some pieces of advice I can offer up.

1. Avoid using the term NDA and go for a confidentiality agreement.  Simply ask for whomever to agree that the information shared is confidential.  There is a big difference between the NDAs flying around and very simple one paragraph (or two) that says, I acknowledge you are sharing your company's confidential information with me and I promise that we will keep it confidential and not share it without your permission. 
2. File a disclosure document for a process patent. You never have to actually do the whole filing, this just records the date of your process idea and sets some kind of timeframe around it.
3. Keep good records of who you are meeting with so that, in case it does happen, you've got a record of who you talked to, when, where, along with your notes.  This, again, helps establish you were pretty careful with laying something out.

Dirty little secret bonus: We're busy/lazy.  Today I had 9 no harm/no foul meetings, three conference calls with portfolio companies and had 7 skype windows open with people from various portfolio companies.   I don't have the time or energy to take an idea and package it up with your passion, your knowledge, your insight, etc, and get it to somebody else that I would then fund. And I'm now at the airport waiting for a flight. It's too much work to steal with other opportunities coming in every day.

Here is what typically happens.  Three VCs meet up for lunch.  That's how many it takes to order the light bulb, add another 6 for changing it.

VC3: 'Sup folks. (nobody on Bay Street/Wall Street/Sand Hill Rd actually says that but it's my blog)

VC1: I met up with this smart lady who figured out how to speed up the process at the airport, reduce the costs for the airlines, get back on a per passenger, etc. It was pretty interesting.

VC2: Yeah, that was Leigh Smartowski, right?

VC1: Yeah, really smart. Has a really smart CTO.

VC1: Mostly execution play, you think?

VC2: Yeah, that what we think but, dunno, might be worth digging into a bit.

VC3: Deep Dish or Thin Crust.

[Note: VC3 was played by Michael Hollend of Edgestone Capital Partners.]

Rarely (the odds are in your favor) will it turn into great idea, goofballs, lets go get so -n- so to do/steal this idea.  What might happen is you will get introduced to this so -n- so but that's about it. 

Finally, as Jim said in his previous comments, at certain point, welcome to the world of trust and (in my opinion) the odds.  If you are working with a good firm, trust should be there (easy to check) and the odds are in your favor that you won't get screwed.

Shhhh - The Promise Not To Tell

The great Non-Disclosure Agreement debate.  VCs 'never' sign them so we are all told with the reasons generally being centered around we VCs have to be free from any potential conflicts, we see all comers, etc, etc.

This question came up both at the TVG breakfast and yesterday so I'd thought I put down my commentary on this issue and what you might consider doing as you face this issue.

First, and most important: Never say anything confidential in the first meeting with a Venture Capitalist.  There is no reason why you shouldn't be able to explain what you do, what problem you solve, etc, without having to give away the secret sauce.  The first meeting should be treated as an introduction.

The argument about having to drop your draws, open the kimono, etc, to make a first impression is wrong. What you should be doing is convincing the potential investor that you have something which could make a good return on an investment.  What they should be doing is convincing you that they are a firm you'd like to do business with.

So, don't ask about an NDA in the first meeting. Assume the first meeting is exactly the same as if you got invited to keynote the Consumer Electronics Show to talk about your product/idea/service. Anything you'd wow the crowd with, there you go. Simple.

You might get "How do you do that" as a question. Simple answer: We have a proprietary process, etc, that we'd be delighted to share with you in great detail should our company and your firm decide there is a business transaction happening.  Anybody that tells you they need to totally understand, to the source code level, how something works before they can make a decision about the business/space, is just not being fair to you. If you have patents pending, disclosures going on with lawyers, etc, it will all come out in Due Diligence. In my opinion every drop of secret sauce knowledge is not required to gauge interest or move the process to more detailed stages.

A simple example.  Let's say you have a new web based translation service. This service allows a person to speak and the service translates your spoken word into 19 languages simultaneously both in streaming audio and live typed text on the screen. You present me with contracts valued at 2 million dollars for the first version and show me a model on how customer service orgs, governments, etc, will pay billions for this.  I say, whoa, that's cool. I get excited.  I don't need to know the secret sauce at that point to do some work and start to review. If you say, it is not a basement full of people but some amazing technology, that's good enough. I can make a call as to the next steps.  In fact, we can go pretty far down the path before I have to tear into the actual how.  That, in my opinion, is how it should work.

The place where you want confidentiality? The Term Sheet.  You want teeth in it that says nobody can talk about the deal, the terms, anything learned in due diligence, etc, regardless if the deal closes or not. That's what matters to you. Same simple example.  We go down the path, get you a term sheet and we are doing due diligence.  During that period of time, we determine that the management team has decided to move to Barbados.  We say, thanks, no, we're gone.  What you don't want it me talking about you, your technology, your people, or anything we did.  And, keep in mind, this happens all the time. Oh yeah, I saw that deal, oh yeah, I met him, etc, etc.  It isn't anything bad or evil, just is.

My personal opinion is this: I want control (as best as I can get it) over the flow of information if I am out raising money.  I wouldn't want one VC to know I am talking or have talked to any other VC.  I don't want any VC to know that another VC passed or why or whatever.  This is confidential stuff that you should keep close to the vest.  You can't stop the talk when you are having an informal meeting with a VC and she talks to another VC. That just happens.

But, if/when you get to that Term Sheet, make sure the confidentiality has some coverage for you as well.  Also, during that due diligence, you really do have to tell me what's happening.

Speaking strictly for myself, if I am at the point of term sheet/serious potential for investing,  I will sign an NDA that deals with a very well defined promise not to tell promise of what you tell me which is also covered in a strong confidentiality clause within the term sheet.

 

So, sorry, long post to make a point. That point being: At the appropriate time, getting comfort about the sensitive nature of your business is not a take it or leave it proposition on either side. We can and do keep secrets and promise not to tell.

Shhhh....

Annotated Term Sheet and the Secret Prize

For those of you looking for some additional sample material,  I've attached an annotated term sheet by Craig Brown a lawyer at Fasken Martineau DuMoulin LLP.  Craig is a super smart lawyer who has been doing the term sheet cha cha for a long time.

And as a special prize, here is something you might want to get from Suzanne at Venture Law Associates. As you may recall, we did a session for the Toronto Venture Group about term sheets, documents for a financing, etc.

Suzanne took the documents I provided and marked them up as if she had been council for the entrepreneur.  This is a pretty sweet piece of material as it will give you both a final set of documents that were used in a recent financing as well as a really good lawyer telling you what she would have further negotiated.

If you'd like to get these documents (keeping in mind they apply to Canada, your milege may vary), contact Suzzanne and ask her for the marked up documents from the TVG breakfast.

The Liquidity Preference Question

Suzanne Dingwell Williams has a posting up about Liquidity Preferences and if you, the start up, can negotiate them away.  

While she added the "more later" part to the posting, I wanted to comment on a couple of things from my perspective as a VC. Suzanne is a top flight lawyer running a practice in Toronto which is dedicated to sitting on your side of the table.  As you might expect, we have some different views on these things. 

Suzanne makes the following observation:

"Are you likely to negotiate away a liquidation preference? No, unless you have a very solid track record for successful startups. VCs must have a floor that will guarantee some minimum return on investment."

There are some things worth noting, the first being language.

Common Share Deal. This is a transaction where I write a check to the company and they issue me shares. Simple.  Do VCs do these types of deals?  Yes, I've done them.  They are my favorite because all the shareholders are treated the same with respect to being shareholders. We all sign up to the same agreement, etc, etc.

Preferred Shares.  The simple English on this is that this is a different class of shares with rights and privileges different than the common shares. Pref shares, as they are called, can have a different redemption structure vs. the common shares.  There are many other things can be associated with pref shares but for purposes of this discussion, we can stay with the financial (liquidity) point.

The simple example you can consider is this:

I buy 20% of your company for 5 million dollars in preferred shares.  A 'simple' preference model would be something along the lines of I get my money back or I convert to common and share in the proceeds along with everybody else based upon my ownership proportion.  This means that if the company is sold for 6 million dollars, I will take my 5 million dollars back and everybody else splits the remaining 1 million dollars.  If the company is sold for 30 million dollars, I convert and take my share of the proceeds.

The above example is sometimes referred to 1x non-participating preferred share.  All that mumbo jumbo means is that I either get my money back or convert into commons and take my share but not both.

Another example of a Participating Pref Share is this:

Same 20% for 5 million transaction. This time, tho, the shares call for a 'participation' which can have a meaningful impact on who gets what.  Using the same math as above, if the company is sold for 6 million dollars, under a participating preferred share, I would get my 5 million back and then the remaining 1 million would be split among all shareholders including me.  Hence the reason for the term participation.  This example is also what is known as a double dip because the investor is dipping into the proceeds twice.

In other cases you will see 2x or 3x liquidation preferences with or without participation attached.  In a 2x participating share, using the above example, if the company was sold for 10 million, all of it would go to the investors.

So, to Suzanne's negotiation point.  Part of the problem is that people tend to view the valuation a VC places on a business as some kind of single commentary on the opportunity just by itself.  This isn't true.  Valuation is a mixture of many things, including calculation of risk, share structure, stage of the company, etc, etc.

Just looking at valuation without factoring all these things is a mistake just like ignoring financial terms/share structure and loving that 50 million dollar pre-money value is equally a mistake. Never mind it is a 3x liquidation participating preference with a 12% coupon.

You will hear many debates on this issue but in general, my opinion is that you should always try to go for the simplest share structure, even if it means giving up some value.  It certainly can be reduced to a math exercise, as Suzanne points out and I know a VC saying go for less value is a bit disingenuous. Even so, I'd urge you to spend some time looking at the various options and understand this issue fully so you will be prepared for this entertaining part of the VC dance.

MusicIP and BoingBoing

Well, look at that.  The folks at MusicIP got a nice blurb from Cory at BoingBoing.  This, as well as the coverage at DigitalMediaWire, was nice to see given the tons of hard work happening at MusicIP.

If you are building music applications, like open source stuff, you will find the open fingerprint services and access to millions of song identifications, of interest.

Essentially, MusicIP teamed up with MusicBrainz and the results of all the effort is a website hosting musicdns.org.

"MusicDNS (Music Digital Naming Service) offers a simple and cost-effective method for identifying digital music and acquiring metadata. As the largest fingerprint-based music database in the world, MusicDNS is quickly becoming a standard for the global identification of digital music."

You can get a full data sheet on the full service here.  The big deal is that if you are building something for yourself, have a small number of users, there are services that are free.

Congrats to the MusicIP team.

Disclosure: I am the board chair, have an investment in the company, and drink three gallons of MusicIP daily.

Only for RIAA Fans

If you are a fan of the RIAA, you will enjoy this post.  If you hate the RIAA, you'll really like it.

Go here.

Think Different - iPhone

You've seen all the coverage, I'm sure.  The Time article is pretty good.

I was stuck by this comment:

"Jobs noticed how many development dollars were being spent—particularly in the greater Seattle metropolitan area—on what are called tablet PCs: flat, portable computers that work with a touchscreen instead of a mouse and keyboard. Jobs, being Jobs, figured he could do better, so he had Apple engineers noodle around with a better touchscreen"

and this:

"In a way iPhone is the wrong name for it. It's a handheld computing platform that just happens to contain a phone."

If you're in the Tablet PC business, that would be the wake up call.  24 months, tops, here comes the MacPad or iPad or, well, stay tuned.

IQ Partners = Good Guys being picked on

Jezz, go away for three days and everybody leaves the happy pills at home.  A while back I wrote a post about avoiding wars in blog land, keep the dirty laundry off the air, etc, etc.  I generally try to follow this rule and use, shall we say, industry episodes, as lessons for others to avoid.

Which brings us back to my buds at IQ Partners.  As you will recall one of the folks over there boo boo'd with a couple of people between two of our portfolio companies.  I thought, heh, bummer, that's gotta hurt.  Plus I thought, that's pretty funny given the small town we work in.  So, of course, I blog it and try to remind start ups out there, read the web sites and pay attention.  And, of course, I attempt to do it in a humorous tone to ensure nobody gets the idea it's dumping time on Bruce's company.  The exercise is everybody laugh, Bruce smiles, says yeah oops and we move on. No big deal, no harm, no foul.

Ah, would that it be true.  Bruce starts getting the Rick doesn't like you stuff and other people start worrying Bruce is not the good guy I said he is in the last paragraph of the original post. 

Bzzzt, wrong, thanks for playing.  Let's get ye ol record straight:

1. Bruce Powell = good guy, professional guy, solid guy.

2. IQ Partners = Good Firm, I use em and recommend them to this day.

3. Blog Post = attempt to show start ups what happens when you don't pay attention to details and not a dump on IQ partners.

4. Incident was funny. All parties think same thing: Oopps.

5. IQ Partners would never intentially steal/poach/lift/remove people between portfolio companies of our firm or anybody else's firm; see item 4.

So, some interesting lessons:

First, let's all remember that besides there always being two sides to every story, words can't replace voice (which leads me to believe this should have been podcast material not written).  If you imagine some cackling weirdo laughing with a funny story, that's me on this.  It was funny, stuff happens, small community, no harm.

Second, it is okay for me to tweak my fellow board member's nose.  It is really offsides for others in his field to use my stuff as a weapon to damage Bruce.  If you come across somebody competing for business using my words to beat up Bruce and IQ Partners, question the ethics of that crew. Trust me, Bruce has stayed above it and apart from the minor email exchange with me, he remains a professional doing great work with clients.

Finally, a note about naming names.  I've had some debate with smart folks then me on this issue. On the one hand, some people think that the same message can get across without "naming names" so to speak.  Others thing that naming names is the right thing to do in an attempt to be transparent.  I'm in the second camp or was until I've started to see some of the silly stuff Bruce gets. 

So, for you (and me), it is probably a good thing to write the post with "a person" or "the company" and see if you can make the point. If it is a straight this product sucks, probably naming it makes sense.  Did naming IQ partners specifically add value?  In hindsight (which is always 20/20) probably not.  That's why I didn't specifically call out the Microsoft person's name in the last CES post.

Happy pills, everybody take happy pills.  Sorry Bruce, see you for breakfast.

Fear and not so Loathing at CES

All throughout Microsoft, there are hundreds if not thousands of really smart people who work really hard trying to make a difference and to the right thing by Microsoft customers, partners, and developers.  And there are lots of examples of RSS feeds, forums, webcasts, etc, where I believe I can convince anyone that the company has made great strides in many areas.

That's why being witness to the old snot nosed arrogance coming from those that should know better is so painful.

Consider this true story which happened yesterday on the CES show floor:

A Microsoft guy walks into a booth and says "So, what do you do?"  The friendly people in the booth explain the technology, customer base, happy people, cool stuff, etc.  All normal, all happy happy.

Microsoft Guy: "Oh. Well, I've been in our research department and they do what you do, so, well, bad for you."  

The booth CEO says, in effect, I don't think so, we have 9 patents, millions of users, and do this that nobody that we know of does.

Microsoft Guy: "Well, research has stuff that we can use and it probably is good enough."

A former Microsoft guy steps in (me) and says so, how long have you been with the company?  18 months says Microsoft guy. 

Amazing but it gets better.  That evening this CEO is sitting with the CEO's of 5 other companies and for two hours they rail on Microsoft led off by a the story I just told you. Two solid hours of a self-inflicted wound by an 18 month MBA wonder kid.

The obvious lesson: Don't crap on anything when you have stuff others can crap on.  Never say anything but, great people, they work hard, when asked about any other company in your space. If you are in a booth and get a briefing you smile, say thank you for you time, very interesting, and leave   Yup, all of this is obvious 101 stuff and I'm sure that you tell all of your employees be nice out there, praise in public, laugh in private. Somebody didn't get the MSFT folks the memo.

Way back during the heyday of the 90s, Brad Chase used to give the pre-COMDEX/pre-CES briefings about never, ever doing anything other than be nice when you walk the floor, keep the swagger at home, the arrogance in your pocket.  The MSFT HR department needs to set up the remedial be nice classes and soon.

The not so obvious observation: The collective group of CEOs didn't care. They weren't at all intimidated. They vowed NOT to work with Microsoft, to send email about these goof balls to higher ups in Microsoft no longer fearing or caring about the big bad machine from Microsoft.  One claimed she had instructed his staff not to talk with Microsoft people and specifically say, sorry, I can't speak with people from Microsoft, you'll have to come back another time.

I'm not suggesting for a minute that any of this will have an impact on people buying an Xbox and I'm sure the 8 people who bought a Zune won't return them. 

What I am saying is that Microsoft's big challenge and yours as well, is to make sure your prevent one (or ten) arrogant people from destroying the hard work of 1000s of others.

CES 2007 Observations

I'll leave it to the thousands of experts out there to give you booth by booth coverage on all the latest gadgets and such.  I'd like to offer up some start up, future, VC things for you.

Booth Space

As many of you might recall during the days of COMDEX, PC-Expo, Networld, etc, there was always a pile of 10x10 booths lining the trade show floors. It was these minimalist booths, tables really, where you found all the new stuff.  With CES taking a lead spot in these geekfest trade shows,  it has become super hard for the little guy to get any notice.  This year it was the SANDS expo center and I suspect it will be even more so next year.  The difference between the Las
Vegas Convention Center (LVCC) and the SANDS Expo center was striking.  The LVCC was all about taking orders.  20,000 square foot booths with massive 108 inch LCD TVs and huge meeting room areas all designed for buyers to place orders.

The SANDS on the other hand, was all about new stuff and technology.  The really fun guys showing off the fashionable Tazors to the different types of flexible tri-pods being released.  In general, if you are new and tech, go for the SANDS and don't get lulled into siren song of gotta be in the main hall with the big boys.  You don't.  The quality and quantity of crowds in the SANDS was excellent.

What do you do?

Memorize the 15 second drill.  It should be obvious from your booth signage or what is happening on the screens showing whatever demo, but the key is making sure every person in the booth can answer the question. Sounds obvious but in the 170 booths I went into with "So, what do you do?" there was a surprising number of people who stuttered, stammered, and simply didn't really get it.  If you are hiring booth bodies, risky, but if you are, they should get that practice and never be allowed off script.

Give Aways

Brace yourself, people though this stuff away. I know, shocking.  Even more insulting is these people who troll the entire floor and simply add to the collection of stuff they keep in the basement. Where they live. With Mom. Yeah, it's spooky.  For all the hard work you've done on that flyer, well, sorry.  The best advice here?  Keep it short, have a tight message and have some type of offer to get the person to head to your website with you can get em going.  If you can make it past that evening trash dump and get em to your website, that give away will have faithfully done the job.

Get a daughter

Having a really really smart daughter of yours manning the booth is a key competitive advantage, trust me on this. 

 

See all of you tomorrow at the TVG breakfast.

Bubbleshare: Practicing the Scoble Resolution

I'm hanging out at the Consumer Electronics Show here in Lost Wages for the next couple of days. 

Like everybody else, I take part in making resolutions that usually have a short life span. All the regular resolutions; eat healthy (right after this Krispy Kreme), get more exercise (lifting the doughnut boxes), etc.

The one interesting resolution I'm taking a shot at working is what I call the Scoble Resolution. Long time lovers/readers/haters of Robert Scoble will not doubt agree, Robert is famous (or infamous, depending) of firing off blogging shots before getting more data, thinking about it, etc.  Over the course of 2006, he gradually came to the conclusion that maybe, just maybe, a bit of reflection before hitting the send key might be in order. Well done, Robert.

I'm not known for my carefully, well consider, thoughtful actions either. In fact, I'm far worse the Scoble every was or could be.  To work on my "ready, fire, aim" actions as well as honoring that mellowing out of Robert, I came to create the Scoble Resolution.  That meant I would think about stuff, sit on it for a day or two, before diving in.

A test of this arrived in the form of Bubbleshare's purchase by the folks at Kaboose.

There was the professional kudos/acknowledgement from TechCrunch and Michael Arrington.  Knowing Albert and knowing how hard he works, it was nice to see this post. For all the flack/crap that gets tossed at Arrington, he is consistent. When somebody does good, he is gracious and when they don't he calls it out.

Then up pops a post from Om Malik on Bubbleshare where we see the snarky "an exit is an exit, even if it is a puny one".  My original reaction when I read this was; whatta pompous prick.  But these days with everybody suing everybody, I figured blogging that Om Malik needs an ego check or let's see your puny exit dude, was probably a bit reactionary.  I can't say Om is pompous (Mark Evans loves em, for example) and it is certainly not within my area of expertise to comment on any of Om's body parts. So, I'm not saying any of that. 

Whew, the Scoble Resolution remains in place at least for another day.

More to the point, Bubbleshare is a great case study for many start ups, including you.  An exit is an exit and if it is a net positive, chalk one up and do it again.  You will be considered successful, not withstanding some editorial labeling (puny, sheesh...) and you will get the full credit of those that matter, fellow business people, customers, VCs, and the family and friends who supported you.  Sometimes, you don't need Venture Capital, don't need all the overhead, and don't need to be diluting yourself.  It is 100% possible to win one on your own.  

The objective of the game is to be successful as you define it for yourself and not let others define it for you.

Albert's scored twice, well done, Albert.

5 Things You Don't Know About Me

I'm such a sucker for this stuff.  Chain letters, pyramid schemes, pre-release software, yep, I'm there. The 5 things memo hits my door step via  Rachel and James,  so here you go:

 

1. My business idol is Ron Popeil. If that doesn't scare you, my favorite home gadget is the Ronco Pasta Machine. I love this thing, followed closely by the Ronco Rotisserie Grill. Who needs VC when you can make millions selling spray on hair.

2. The first software program I ever sold was a bingo parlor management system.  It was written in C-Basic. You remember, that compiled basic product from Digital Research. Digtial who? Jezzz, you kids.  It had full copy protection built in. I checked the four locations to make sure only one was using a computer.

3. To get out of serious trouble in grade school, I basically faked flunking a eye exam, ended up with seriously nasty glasses I didn't need, lost tons of them (coming out of my bank account) until the miracle of sight happened, only to now (39 years later) need reading glasses. Probably payback from my dearly departed but loving Uncle Al the optometrist.

4. If you bought/gave the first version of the Lion King Interactive CD, back on that fateful Christmas day in the 90s, and it didn't work properly in what used to be called an MPC (Multimedia PC) thus causing your children to hate you, it was my fault.  The wrong master was used to create the CDs and, well, it was ugly.

5. My favorite food on the planet is Tuna Loaf. If you don't know, don't ask or call my mother, she makes the best there is.

Checking Out the Web Site

Sometimes, the truth is a whole lot easier to report on than making it up.

As a start up type coming to the VC world, you've been given the advice to check out the VC website, try to learn something about us, etc.  I've often suggestion that others, like services providers, consider this a as first step also.

Sometimes that advice doesn't exactly get followed.

Consider those fine folks at IQ Partners. As an HR firm, you'd expect them to be on top and in the know with respect to people, companies, etc, within the areas they service.  Right, follow this story.

Portfolio company A decides they need to hire somebody to fill a hole in the management team.  Our smart CEO calls in IQ Partners and says, go forth and find.

Meanwhile, we have Portfolio company B who has just gotten a new CEO after months of sucking up by the investors and their respective families.

The fun now begins.

Randy, from IQ Partners says, fear not Portfolio Company A, I know all the people, all the companies, am totally plugged in on the entire Toronto scene, sleep well tonight as I am on the case.

Randy then picks up the phone and speed dials the cell phone belonging to the CEO of portfolio company B. 

Randy describes the great opportunity inside portfolio company A and says forsake ye portfolio company B stuff, the investors in Portfolio company A will suck up even more than portfolio company B.

Kinda sucks as portfolio company B also had some slots to fill and was looking to hire, yup, IQ Partners.

Yeah, really. You can't make stuff like this up.

So, I'd like to again suggest that checking out the web sites of those you deal with is a good idea. Just ask Randy.

 

It's disclosure time: Bruce Powell is the founding, head banana at IQ Partners and sits on a couple of board things with me.  I know that he's not particularly happy this happened and I'm not fussed about it. It's just a story that cries out for telling as a way of hammering home the point about doing your homework.  We still love ya, Bruce.

Reminder: Canadian Venture Forum, Operators are Standing By

Just a friendly reminder that if you've thought about presenting at this year's Canadian Venture Forum, you need to get that application in as soon as possible with yesterday being an opportune time to do it.

The CVF takes place March 4th - 6th here in Toronto.   We have three tracks, seed/start up, Series A/B/C, and public companies (on the TSX) so if you are looking to raise money for your Canadian company, this be the place.

You can go the web site and get the application. On it you add my name as your sponsor and send it in. You can send it directly to me as well but for faster service, follow the instructions on the form. 

Every year 60+ companies get to present and the slots all fill up quickly.  Also, each year, companies get funded.  In fact, I've co-invested in one company and had another portfolio company present for follow on funding (successfully).

The majority of VCs in Canada along with US VCs having Canadian portfolio interests will all be in attendance. Mark McQueen, CEO of Wellington Fund, attends with others in the venture debt world.  Mark's fund, being the leading Venture Debt player in Canada has representation on the selection committee as well as attending the forum.

I point this out only to stress that the smart folks (like Wellington) will all be in the same place which makes this a leveraged opportunity for you to take the shot.

The slots go to those who apply early, so operators are standing by.

 

And as 2007 is the year of disclosure:

My partner sits on Wellington Fund's advisory board.  I think Amy, his office manager is the best there is, the other Mark (Usher) used to provide banking work for a JLA portfolio company and Mark McQueen has amazing seats for  Basketball which he, on occasion invites me to enjoy.  It's the Toronto Raptors so don't even think, given their performance, I'm anywhere near bought and paid for; I go for the Roast Beef sandwiches at the Air Canada Center.