The Post Money Value

Facebook- Moving Up The Evil Chart Fast and Furiously

You probably read about all this stuff with Facebook and sticking you in ads to your friends.  The place on Facebook to turn this off is shown below:

I heard about this from, I think, Rachel Clarke.  I promptly went to this page and set it to No one.  Imagine my surprise when I went back to this page, saw a pop up from Facebook telling me about the rumors surrounding this feature, etc, etc, and then seeing that, without my permission, they had reset this back to my friends.  I’ve again set it to No effin anybody. 

Under this setting you see above, they have examples to show you they are not evil. They want you to know that if Joe Boxer advertises on Facebook and your friends are fans of Joe Boxer, you will see, in the ad that, so –n- so is a fan of Joe Boxer.  Good explanation on the page.

On the other hand that was an evil, bad, off-sides, and a slimy tactic of putting my nobody setting back to my friends without my permission or notification. 

Clearly, Facebook’s marketing goofballs must have arrogantly assumed that I didn’t understand so we’ll set it back and then after you read all our stuff, you can set it back to Nobody.  Memo to Facebook: NOBODY.

The only good news in all of this is the company was smart enough to hire Jonathan Ehrlich so, life should return to normal and this type of ‘stuff’ will stop happening. 

Kick some butt, Jon.

Well.Ca: Nice (and Smart) Guys Do Get Ahead*

Ali Asaria, the founder of well.ca closed a round of financing. Sweet! It’s more than just some company got some cash, nope, I believe it is a bit more than that.

Ali built this from the ground up, has an amazing culture, pretty much dominates the category in Canada, is super smart and a genuinely nice human being.  Lots of the Venture Funds turned him down and it didn’t matter.  Lots of reasonable (in the eyes of the VCs) reasons to pass and that stuff didn’t matter. No, Ali pressed on and found the right group of investors that bring money and super brains to help the company.

One of those investors is Jordan Banks. Jordan is solid guy with years of experience from Ebay to Jump TV.  His targets and objectives matched up the needs of Well.ca and Ali.  It works for all sides, everybody is happy, and we have an amazing start up continuing to grow and quickly leaving the “start up” label behind to emerge as a large scale and successful e-commerce play here in Canada.

We need more entrepreneurs like Ali and smart investors like Jordan.  It’s what makes it all work.

Congrats to all involved.

[Update: Randy brought to my attention that angel investor Colin Webster was in Well.ca early than everybody. This makes Colin king of the smart hill on this one. Sorry, Colin.]

Apple: You Can Be Jerks Until Grandma Gets Mad

A long (LONG) time ago, I was in a Computer City around Kirkland, Washington.  It was around the corner from the famous Zazzo Productions empire.  Anyway, so here I am wandering the aisles looking to replace my Epson MX-80 printer and picking up a box of 3.5 diskettes when I come across an elderly women with, I believe, her grandson.

This is the conversation which I’ll remember forever.  It’s not verbatim, but you’ll get the point.

Kid: “This is a cool Microsoft mouse!”

Grandma: “We’re not buying that, they are a bad company.”

This was right around the time of all the DOJ, Monopoly, Janet Reno and the Ham Sandwich nonsense.  I went back to the office and said to my best friend, “Our underdog status: buh bye.”

Grandma (literally) was pissed.  The mainstream was not happy with Microsoft and this was a company low point, at least from my perspective.

I was reminded of this while reading all the Apple yanks Google’s Voice app stuff.  One particular blog post you should read is this one, giving you a blow by blow conversation with the Apple Borg.  It pretty much says it all.

Today, most non-echo chamber people “love” Apple.  Really. Even my Ex-BlackBerry using daughter (who should know better) loves her iPhone.  She puts up with lots, doesn’t care about Google’s app (sorry Vic) and so it goes.

So far. 

Like Jeff Jarvis and the Dell adventure years back, we know how this movie will end: with Grandma.  Someday (which is coming) Grandma will sneer at an AT&T (or Rogers) sales guy when he offers up an iPhone for sale.  Then you’ve got trouble. 

Put another way: Om Malik and Michael Arrington bailing on their iPhones could arguably be classified as a mediocre emergency.  It’s a little erosion that doesn’t get enough attention until becomes a serious problem.

There’s a good reason why airplanes get x-rays on a scheduled basis.  Finding mediocre emergencies like microscopic airframe cracks beats a wing falling off in flight any day.

Note: I was just kidding about the Epson MX-80 printer. I’m sure I was replacing a LaserJet.

Bonus Fun Facts:  For those of you keeping score at home, a Google search of “Borg” preceded by our favorite three tech companies reveals the following:

“Microsoft Borg” – 22,800 hits (Bing says 5,890,00)

“Google Borg” – 7,680 hits (Bing says 5,910,00)

“Apple Borg” – 1,940 hits (Bing says 195!)

EYODF Part Two: The L word

Over the years, I’ve spent a lot of time with lawyers and staring at legal bills.  In probably 90 cases out of a 100, out of control bills are a direct and measurable result of client disorganization. Essentially, business people fail to agree on exactly what the specific deal terms are in combination with the ‘what if’ scenarios.  It is the ‘what if’ scenarios that a) the legal folks are supposed to help (Cha Ching!)with and b) they are the least thought about by the clients before the lawyers start trading documents.

Here’s an example.

Let’s say that an investor and a founder agree to a two stage funding scenario. This isn’t me, by the way, just an example I’m making up as I type this.  Chunk one on closing, chunk two based on milestones.  Now, typically, both sides will know they need to create the measurable milestones which would be the added to the financing documentation.  Both sides agree on language with respect to obligation or right but not obligation, etc.  Then, off to the lawyers.

The smart lawyers all start with the what if questions.  What if the investor doesn’t want to fund. What happens if only one of the seed guys fund and not the other 3? What happens to board seats, the founders equity, etc.  When both sides have their own legal teams, it gets expensive fast because each side is walking their client through what if scenarios and why one flavor is better or worse for their side.  Lawyers push back, a little posturing, yadda yadda and eventually you and the investor get a punch list and walk through the issues to varying degrees of compromise.  This is expensive and that punch list should be done upfront.

Having lived through this more than once, I’ve taken a slightly different approach.

First, the folks working on my 1st round and I have spent a bunch of time mapping out each bullet item (board composition, anti-dilution provisions, etc) and getting to an agreement in business language with the what if scenarios defined as best we can. They are then mapped out within a business language (not legal language) agreement.

Another (made up) example:

If you have an investor that is going generally own a big chunk of your company you are going to have that world famous “matters requiring special (re:investor) approval” section in your documents. In my (non-VC) opinion, 90% of that stuff isn’t really all that important. Like who cares if there is a $50,000 limit on a capital expense. If the business needs it, you get it approved, big deal.  The sale of the company, on the other hand, you do care about.  Or changing the board composition or whatever is important to you (and it’s not the laundry list!).

So for example on a sale issue, go through the specifics and agree on the ‘what if’  possibilities around the company sale.  If an investors says to me, I’m good with a 3x return and I say, I’m good as well, we create specific language that says, in effect, for a sale, below a 3x return on a cash in basis, both the founders and the investors have to agree but at a 3x or greater, either party can drag the other. And this is regardless of whatever else in is the agreements (a save and except clause). 

In this case, we’ve both said what we think is fair and even if they see more upside but I want to cut and run, I can. And the reverse is true, they want to call the patient 3x, okay, we’re done.  No surprises; we’ve agreed to a set of specific cases where it is mapped as business language.  The lawyers paper all of this and don’t go back and forth with their own set of issues.

My point of these examples is not to debate my examples rather to get you to think about doing as much as you can with all the variations and ‘what about this’ stuff before you get the lawyers involved.  Once each of these items are discussed and agreed upon, the business language of agreement gets written down, reviewed, and agreed to by you and your investors.  Then, call in the legal guys.

Give them tight directions to paper what you’ve agreed to (or better/cheaper still, modify some boilerplate they’ve done a million times before).  Good lawyers will still ask have you thought about questions if you haven’t covered them all but at that point, in my opinion, you are now getting specific and excellent council which is directly related to what you’ve papered.

If you find yourself saying, gee, didn’t think of that, spend more time before you go to your lawyers.  If, after you’ve done a detailed review with the other side as business issues, you are still getting a question or two; you’ve got great council looking out for you as they should.

The legal bill for my little adventure is going to be 20% of what the bill was for a deal of equal size recently done.  It’s due to amazingly smart lawyers as well as smart investors spending the time with me up front.  It makes a difference in the wallet.

Food for thought, you mileage may vary.

Bonus Item:  If you’ve never done this before and/or have no idea what a drag-n-tag, weighted average with a full ratchet mocha decafe non-fat participating pref share is, spend $150 and buy one hour of a lawyers time to take you through a set of standard documents (Shareholders agreement and subscription agreement being two of note), explaining every paragraph and their thoughts on them.  If you are in Toronto, Rob Hyndman or Suzie Dingwall Williams are excellent choices for getting up to speed as they live this everyday working with startups.

Do this before you even think about discussing this stuff with your investor.  You can also get a whole pile of sample documents, annotated terms sheets, etc, in a zip file from me or on the NVCA’s web site.

Extra Bonus Item:  Another good reason why you should spend all this time up front is getting to know who you are marrying before honeymoon night.  Hiding behind the lawyers is a great but ultimately expensive tactic. Sorry, my legal guys are insistent is utter nonsense, they work for the client.  Get to know how they negotiate face to face with no ‘I’ll ask the lawyer stuff’ in the way.

It just sucks to find out after the deal closes, they are pencil pushing, spreadsheet driven, non-technical knobs. Not that there are any of those in the VC business today. I’m just saying….

Just Like Drill – b5 Media

For months, Jeremy Wright, one of the founders of b5 Media, and I spent a ton of time looking for somebody to take the helm of b5.  This person would, alongside the management A Team (Chad, Joe, and Rachel), continue to grow and expand the property.  b5 is a great investment by JLA and Brightspark Ventures. The content is excellent with page views, uniques and revenue all going in the right direction.

As Jeremy announced on his blog, b5 scored a bit hit with the ability to get Elaine Kunda onboard as the new CEO.  Elaine has a pile of experience in the content space, knows how to sell, and is an amazingly smart, aggressive, and totally plugged in executive.  She and the team will kick it up more than ‘a notch’, of that you can be sure.

From JLA:

"Elaine is exactly the right leader for b5media, with her strong leadership and proven ability to lead top performing teams,” said John Albright, managing partner of JLA Ventures. “We look forward to continuing our investment in b5media as they continue to build on their position as a leading online media company."

Uh huh, what he said.

But the real hero in all of this: the management team including Jeremy.  No behind the scenes nonsense, no rumors, no leaks, no boardroom drama, nope.  Just a bunch of professionals recognizing that great companies combined with great talent means success.  It was a true pleasure to have open and transparent conversations where the good of the company, the protection of the bloggers, and what’s best for the team were in front of egos. 

If you are a founder, speak with Jeremy about all these trials and tribulations.  The advice you get will be from real experience. It is worth the call, tweet, skype, IM.

It was an honor to be a small part of this company. Rock on, gang.

EYODF – Part One

I’m finishing up the paperwork on the first round of funding for my little startup.

In the spirit of Walking the Talk and Eating Your Own Dog Food, I’m going to try and document this adventure to the maximum extent possible.

• Title: Founder. I’ve been harping on this since VC day one. Don’t take the CEO title, they fire CEOs. Instead, you are the founder and you do whatever it takes in whatever job that maximizes your talents for the greater good of the company.  I’m the founder of this adventure and when this puppy takes off, I’m chasing talent smarter then me to get this one over the finish line.
• Slides: Ten.  The business is captured in ten slides with 6 of them being use cases.  If I get heads moving in a vertical up and down direction on at least 4 of the 6 use cases, we can move into the appendix of additional slides, models, life, etc. If not, we talk about the Blue Jays (Toronto), the Sox (Boston), or State Government IOUs (The Valley) but we do not “continue the dialog.”
• Financing: It’s about ownership.  I have a fairly simple spreadsheet which has an assumed amount of capital I should need to raise over time and the percentage of the company I will own at the finish line along with what I think a sales price will be.   I’m not so much focused on pre-money, post money rather how much, on a fully diluted basis, of the company will I own when they pass out the checks.  Yes, there are pesky details in this thinking, I’m just giving the main point; focus on your piece of the end prize and is that piece worth the trip.  You can read a timely post from Jess Bussgang on this very topic. Oracle of the Obvious, heh, nice one Jeff.

More coming.

The Most Personal Computer You Own

I have fun routine here on my MacBook Pro when I want to crank out a blog post. I crank up the Parallels Desktop and start up Windows Live Writer which promptly crashes. Start it up again life is good, blog away.  I’m used to it.  It didn’t do this before but something changed and that’s my new routine.

We are all used to this CTL-ALT-DEL, 404 error, Blue Screen of Death, Spinning Ball, world of ‘personal computers’.

Now consider the evolution of your phone experience. 

That phone on your desk or the phone you (might still) have at home.  When you pick it up: Dial tone. Always.  Lots of people in offices pick up the handset and, without putting it to their ear, start pounding numbers on the keypad. Why? Dial Tone. Always there and just expected.

Fast forward to your mobile phone.  Most people (mainstream, not you my friends the geeks, wonks, etc) just expect it work. When it doesn’t, people get seriously angry.  As more and more of your digital life moves onto the phone, the tolerance for mistakes is going to get even less.  Tons of opportunities exist when expectations start high and aren’t being met by the mainstream players.

That mobile phone is truly your up close and personal computer.

Enjoy your weekend.

The Best About Us Page in the World

As I was briefing somebody yesterday about my new company, I was asked one of those broad, big picture questions: “What are you looking for in a company culture/style?”

The best answer I could provide was to point them to Balsamiq Studios’s company page.

It pretty much sums it up nicely.

As a side note and has others have pointed out, doing mock-ups of what you want coded can seriously speed up the development process and well as given your team a visual clue as to what you are looking for. Balsamiq is amazing and work every penny I paid for it. Amazing product.

My favorite team page remains Xobni.

Use Cases a Simple but Powerful Tool

You’ve been given a billion pieces of advice on how to present to VCs and other possible investors.  My thing has been problem, solution, who is going to pay for it.  I’ve also said that if you’ve got the demo, get to it as soon as you can.

I want to add one more tip/insight which resonates well with the money crowd as well as potential partners, suppliers, and your development team.  Use Cases.  A use case is simply a non-geek speak narrative of how a particular person uses your product or service. This might seem obvious but you’d be surprised how many people stutter and stammer when they have to explain who is going to use/pay for the product.

A good example is the really cool product Dave Sifry put together called Offbeat Guides.  When Dave first told me about this product, he had his pitch deck (10 slides, just so you know) but before we really dived into it, he started off with the one liner (personalized travel guides with real time information throughout the guide) and then dived into his use cases.  He described a family, a single person, a business traveler, a sports junkie looking to hit all the events in one town, etc, etc.  In each one, he laid out exactly how the product was going to work within the use case.  Plus he had the benefit of giving his development team a very detailed idea of what he was expecting his users to do, why and under what conditions. This gave the dev team context and something to measure against as they build something.  Again, it sounds simple and obvious but it is a very powerful way to work effectively with your technical team.

I bring this up because over the last two weeks (time flies), I’ve been both pitching my company using this technique as well as I’ve been asked to give feedback/opinions on opportunities for some VC friends of mine.

For those who were pitching with solid use cases, the conversations were engaging and the entrepreneur was able to keep ahead of questions/comments like “I don’t get it, who is going to use this”.  Use cases show you understand the value proposition and how your product or service fits.

It’s worth your time, in my view, to document and know cold your use cases.

Back to my legal documents.

A Salute to Experience

A former Microsoft guy, Marcelo Calbucci, dreamed up and launched a web place called Sampa.  It was a place where you could build your own website, blog site, picture place, etc.  It crashed and Marcelo closed the doors this week.  We can ignore all the of the autopsy, Monday morning quarterback stuff like timing, competition, etc.

For this post, I want to send you to his two blog posts on the death of his startup. If you are working on a startup they are a good read.

My view pre/post VC view remains the same. Taking the shot and ‘failing’ means hopefully gaining a wealth of experience that will make round two a better shot.  I salute you Marcelo, as I wade through my own code, projections, and presentation material at 1am.  I salute you as an experienced startup guy, not a failure.

You can read more here.

The trap of what people will pay for

People generally do not like public restrooms. According to my best friend, women more so then men. We stand –n- spray, women, well you get the point.

Now imagine a company called Fresh as a Daisy.  They have a chain of clean restrooms in your town, GPS located, etc. Plus they have franchise/satellite locations in popular places like Borders (hint: I got this blog post idea in the Borders Bookstore located in Oxnard California. Somebody with a mop? Anybody? Yowsa…).

You pay 10 bucks a month for access to these private bathrooms with live attendants, etc, so the places are eat of the floor spotless. Sorry for the visual.

Everybody says they hate the pig pen type bathrooms, everybody says they want clean restrooms, etc.

Nobody would pay for this.

They expect it as part of retail experience.  In fact, when you gotta go and you head into the nearby Starbucks, you don’t care about the triple vanilla, de-cafe, venti, mocha, latte, you care about toilet paper and getting on with the rest of your day.

My point of this post is as you are building your start up, watch for the pay trap. 

The idea can be killer, people will high five you, etc.  But will they pay?  Does the problem you are solving have money anywhere in it?

[Random Idea file: Somebody should build a simple bathroom rating app for the mobile device. Central server, linked into Google maps, etc.  People rate the bathrooms and, over time, you have all this integrated into a nice db so when you gotta go, that mobile device on your hip/in your purse tells you where the closest clean one is.  Maybe no money, but nice public service.]

Expectations – Your Secret Weapon

Two recent stories; one point to make.

Another Mac issue. My trusty MacBook had an odd smell coming out of it.  That electronics burning, uh oh, kind of smell. It was in passing but the Ethernet port stopped working.  The Apple genius says, ruh oh, fried board.  They have to order one and then it will take 3 or 4 days based on workload to get it back to me.  I keep the machine until I get a call the next day. Part is in, come on by.  I drop by on Saturday morning and check my sick puppy in.  They say, yeah, based on backlog, 3 or 4 days.  That evening at 6:30p, I get a call from the Apple store.  All fixed, come get it.

Sweet!

I was inviting somebody to connect on LinkedIn and I got this warning notice that said be careful lots of people are ignoring you or some such.  Very weird since ever single LinkedIn invite I’ve sent has been accepted (I track em) or bounced because of people’s email addresses.  I sent a note to customer service asking for the explanation of the error message and I got back the standard email acknowledging my note and indicating they’d get back to me shortly.  About 24 hours later, I get back a nice note from “Stacey” removing this warning and giving me a full explanation of what/how/why, etc.

Nice.

My point to you and your startup is from the second you start to interact with the fickle public (like me) you are on the expectation setting treadmill and you need to be in seriously good shape to stay on it.  There are services I use and products I buy which have choices driven totally by the expectations met/exceeded. 

To all the software startups who have sent me ‘instant responses’ on questions or bugs, it’s a great investment to get a loyal customer.

Set expectations and blow them away.  Your competition will be forced to follow and if it isn’t in their DNA, you get the advantage.

A Great VC Way of Thinking*

This is a great quote:

“A VC is not in the business to NOT lose money.”

Think about it. It sounds wrong until you think about what this really means.  It’s an awesome mindset.  Next time you are with your favorite VC, ask her what she thinks of this way of thinking.  It will tell you a lot.

Quote from: Bryan Kerdman, Edgestone Capital Partners.

(* I changed ‘loose’ to back to the original ‘lose’ which was Bryan’s original point. I was trying to be a bit deeper about loosening up, taking more risk, etc.  Clearly, blew that one!)

The Flair Gun Analogy

In working with my fair share of startups, I’ve landed on this fairly interesting analogy that some folks seem to like so I’m sharing this with the broader world.

Start Ups are a lot like flare guns. Aimed right they get the light seriously high enough to get everybody’s attention.  This attention causes lots of customers to show up but also lots of ‘competitors’ to go ‘gee, we should do X’ and then they get on it.  So, the good news is that everybody loves you, the bad news becomes everybody wakes up and wants your piece of your pie.  Google has lived a long time fending off Microsoft, now here comes Bing which finally got on the beach and appears to be digging in for the fight.  Twitter got up there and so far nobody has knocked them off (yet).

I point this out because it impacts a few things as you grow.

Getting a hit on Techcrunch, presenting at Demo, having the bloggers go wild, seeing a TweetFeast on your behalf; all of these things could arguably be labeled as “firing the flare” with varying degrees of height, light, notice, etc. It can be a head fake of success.  Since you will be yesterdays news in about a split second, what happens after? When do you press on the gas? Spend marketing money?

If you assume somebody says, we can do that or you wake up the competition saying, throw a zillion dollars at it, etc, what’s your plan?

My council to you is spend the cycles planning out the successful firing of that flare.  What’s happens if people do like it?   This SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis will be a great tool for you and your team.  It also lays out to your board and investors that you are thinking about the landscape, planning, and money spending within a well thought out context. 

A SWOT diagram is a one page document which can help everybody focus.

Thanks for all the Fish

Last week was the conclusion of my VC adventure.  For 8 years I’ve been doing the voodoo that VCs do and it’s been great.  I’ve realized, tho, Venture Capital is for the most part a spectator sport. You are a coach in some cases, yes, but in general, you write the check, do some nurturing but watch (hope for!) the growth.

I am not a good spectator. I am a terrible back seat driver (ask anyone!) and I really miss those days of making products and pressing the buttons.

Naturally, there will be the rumors and propaganda regarding the VC industry in Canada, etc, etc.  So, a few tidbits for you.

1. No, JLA Ventures isn’t the next casualty in Canada. Far from it, the upcoming announcements in the fall will certainly put that nonsense to rest.  I’ve written many times about the “brain flip” and in this case the bell tolls for me.  Going forward, JLA will continue to be the leading VC in Canada. They are the best, go there first, nuff said!
2. No, I don’t think the VC community is dead in Canada.  I’ve already talked about that one. I believed it then and I believe it now.
3. Yes, I believe now is a great time to be doing a startup. Nuff said on that one.
4. No, I’m not a casualty of anything or a symptom of anything.  It’s really as clean and simple as it is.  The VC thing and moi is not a long term good mix.

So, that’s a wrap for me.  I am really grateful to John Albright for giving me the opportunity at JLA Ventures.  The proof of being a risk taker is taking some wonk and letting him play with the big boys. 

JLA has great portfolio of companies with amazing management teams all of whom are in great shape by any metrics you’d like to use.  It’s been an honor to have been part of their story.

I have a number of posts queued up that I hope will be helpful as you continue your quest for startup glory, stay tuned to this station.

Go code something!  (I am)