Tag Archives: venture capitalist

The 3 bad habits VCs can’t afford anymore

Disclosure: I’ve conducted a thousand meetings with venture capitalists in Europe and thousands of calls with investors worldwide for the past 5 years. There are many good investors in France and Europe, don’t get me wrong. But i’m not here to pin medals ☺

I have heard too many stories and have witnessed too often venture capitalists misbehaving with entrepreneurs, especially and including some of the best ranked in Europe. It’s really sad for the entrepreneurs but mostly for the venture capital industry itself. Probably because (fortunately!) most of the time, it’s unintentional.

The mere fact that a venture capitalist tried to go towards a VC code of conduct is actually pretty alarming. I won’t go through all the details -education and good habits come from a consistent practice. But let’s be specific on three basic facts:

  • #ON-TIME > Some investors are late, always or often, and let’s face it, this is unprofessional, especially when the entrepreneurs are coming to you. At A16Z, partners are fined $10 for every min late to a meeting.
  • #EMPATHY > Entrepreneurs are on a mission and they deserve respect. The best investors are pretty straight-forward but they also show a lot of empathy while others are almost despising during the meetings, which is incredibly rude.
  • #FOLLOW-UP > The dealflow at venture capital firms is pretty huge, from 100 to 1,000 new opportunities per month popping-up. Not replying to unsolicited email is fine I guess, the rules are pretty clear for anyone looking to raise funds. But when you have been introduced to an entrepreneur by someone you trust or have met up with someone, you should absolutely get back to them, whatever the consistency of the answer.

I’ve been surprised in the US by the conciseness among the top venture capitalists, the straightness and the empathy in their answers. They’re full of humility and respect and we should learn from those practices in Europe. Some of them are even sending satisfactory forms after having met with entrepreneurs to make sure they were well received.

Good practices are not only good for the entrepreneurs but also for the investors themselves and the ecosystem. Please consider.

A bon entendeur ☺

Tips: Gmail for to-do, email & calendar(stop using outlook, NSA does not care about your dealflow), aText for templates, Doodle for meetings, Rapportive for people checking and finally Good habits but practice and organisation are actually the best tools.

What Is This Palo Alto VC Smoking?

Chamath Palihapitiya, a venture capitalist and former AOL manager, went to the Harvard Business School last weekend to deliver an interesting message:

It’s really unfair to you guys, but I think you’re discriminated against now. (…) I would bet a large amount of money that the overwhelming majority of us would not look favorably on a company started by one of you.”

Seriously? Of course, the news media picked up this quote and ran with it. First it was The New York Times and then Fortune and finally it went viral. After all, there’s an endless passion for MBA bashing.

Palihapitiya, founder of the venture capital fund Social+Capital Partnership and who graduated from the University of Waterloo with an undergraduate degree in electrical engineering, must have loved making those comments in front of MBAs at a private equity and venture capital conference at HBS.

As for me, I love people who make provocative statements for the sake of being provocative. But I have to call out this character on what he said because he is dead wrong.

First off, it’s important to point out that many of the venture capital firms in the Bay Area, in New York, Boston, and Austin actually employ MBAs to decide where to put their money. It’s highly unlikely for them to look unfavorably on startups founded by people who like them see the incredible value in an MBA degree.

Secondly, there is no evidence whatsoever to suggest that what Chamath said is even remotely true. I have no doubt that he brings this bias into pitch meetings (which should basically tell every MBA to avoid his firm, The Social+ Capital Partnership in Palo Alto, like the plague.

But the truth is that some of the most prominent VCs in the world love MBA-founded companies. In fact, we did a thorough analysis of MBA startups only a few months ago that showed the exact opposite of what Palihapitiya claims. Out of the most successful MBA startups in the past five years, Harvard leads the pack with founders at 34 of the top 100 startups, even though fewer than 7% of HBS grads founded companies. Those 34 startups alone received $575.8 million in funding from VC firms, angel investors and others.

Truth is, many of the Harvard Business School alumni chapters throughout the world have now organized angel investors to pour money into startups founded by current students and HBS alumni. It may well be the biggest and most organized campaign by any university alumni network ever to back innovative ideas and concepts. Who needs Palihapitiya’s money?

And Harvard’s success is not an anomaly when it comes to MBAs. When we identified the top 100 startups founded by MBA grads, Stanford followed close behind Harvard with 32. MIT Sloan is next with 11, followed by Wharton (3), the University of Chicago’s Booth School (3), and Columbia Business School (3). In all, venture capital firms and angel investors plunked down more than $2 billion in cash to back MBA students and graduates. So much for Chamath’s view that an MBA is a disadvantage to raising money.

In fact, the VCs pouring money into these startups are among the leading venture capitalists in the U.S.: SV Angel, First Round Capital, Bessemer Venture Partners, Founder Collective, Felicis Ventures, Red Swan Ventures, New Enterprise Associates, Lerer Ventures, Andreessen Horowitz, Google Ventures, Greylock Partners, and Accel Partners–all highly prominent VC firms.

What is this guy smoking?

For the full list of the biggest VC investors in the most successful MBA startups, check out PoetsandQuants.com:

The Top Investors In MBA Startups

Bill Gates Is Not The Next CEO Of Microsoft, But His VC Investments Are Picking Up

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Bill Gates may be one of the world’s most famous philanthropists, entrepreneurs, and guest editors,  but could he be adding venture capitalist to the list? Over the past few years it seems that Gates has, in fact, been increasing his investment in startups.

Though not as active in venture capital as otherless-billionaire-y, technology billionaires, Gates is nonetheless putting together a growing stable of technology companies. And the pace of his investment is steadily increasing, according to the data in CrunchBase.

Last year, Gates was involved in at least six new and follow-on investments in venture-backed companies, including a commitment to the energy storage technology developer Aquion, in a financing which wrapped up earlier this year. That’s up from four new and follow-on commitments in 2012, and three in 2011, the CrunchBase data indicated.

In addition to Aquion, the Gates portfolio also includes other companies tackling the energy problem, like the compressed air energy storage company, LightSail Energy, and the battery technology developer Ambri. And those aren’t Gates’ only sustainable investments.

 Varentec, an electricity monitoring and management technology developer, is another cleantech pony in the Gates stable. Even more ambitiously, Gates is backing TerraPower, the nuclear reactor developer spun out from Intellectual Ventures, alongside former Microsoft Chief Technology Officer and Intellectual Ventures founder and chief executive, Nathan Myrhvold.

Intellectual Ventures is behind two other Gates investments. Both Evolv Technologies and Kymeta came from Myrhvold’s IP monetization factory.

Rounding out some of the newest investments in the portfolio of the man from Medina, Wash. are three healthcare investments focused on computational drug design and targeted cancer therapies: Nimbus Discovery and its development partner Schrodinger Inc. are both focused on computational drug design, while Foundation Medicine develops diagnostic tests based on gene sequencing to identify personalized cancer therapies for patients.

All of these investments hew pretty closely with some of Gates’ expressed goals of improving healthcare, or reducing carbon emissions in an effort to combat the effects of global warming, but he’s also an investor in NEOS GeoSolutions, a company which sells technology and services to improve the operations of oil and gas and mining companies.

Needless to say, Bill Gates did not respond to a request for comment for this post.

Photo via The Henry Ford and OnInnovation.


My first experience as a venture capitalist


January 2, 2014 6:05 PM
Brad Feld

I often get asked how I ended up becoming a venture capitalist. When people ask me how they can become a VC, I point them to my partner Seth Levine’s excellent blog posts How to become a venture capitalist and How to get a job in venture capital (revisited)But it occurred to me today, after getting another email asking me how I’d become a VC, that I wasn’t really answering the question.

Amy likes to remind me that when I was an entrepreneur, I used to regularly give talks at MIT about entrepreneurship. I’d say — very bluntly — “Stay away from VCs.” I bootstrapped my first company and, while we did a lot of work for VCs, I liked taking money from them as “revenue” (where they paid Feld Technologies for our services) rather than as investment.

Feld Technologies was acquired in November 1993. Over the next two years, I made 40 angel investments with the money I made from the sale of the company. At one point in the process, I was down to under $100,000 in the bank, with the vast majority of our net worth tied up in these angel investments and a house that we bought in Boulder. Fortunately, Amy was mellow about this. We had enough current income to live the way we wanted, we were young (30), and generally weren’t anxious about how much liquid cash we had.

Along the way, a number of the companies I had invested in as an angel investor raised money from VCs. Some were tough experiences for me, like NetGenesis, which was the first angel investment I made. I was chairman from inception until shortly after the $4m VC round the company raised two years into its life. Shortly after that VC investment, the VCs hired a new “professional” CEO who lasted less than a year before being replaced by a CEO who then did a great job building the company. During this period, the founding CEO left, and I decided to resign from the board because I didn’t support the process of replacing this CEO and felt like I no longer had any influence on the company — and I wasn’t having any fun.

But I still wasn’t a VC at this point. I was making angel investments with my own money and working my ass off helping get a few companies that I’d co-founded, like Interliant and Email Publishing, off the ground. I was living in Boulder at this point, but traveling continuously to Boston, New York, San Francisco, and Seattle, where I was making most of my investments. During this time, I started to get pulled into more conversations with VCs, helping a few do some diligence on new investments, encouraging some to look at my angel investments, and investing small amounts in some VC funds whenever I was invited to invest in their “side funds for entrepreneurs.”

One of the VCs I overlapped with while in Boston was Charley Lax. Charley was a partner at a firm called VIMAC and was looking at some Internet stuff. I was one of the most prolific Internet angel investors in Boston at this point (1994 to 1995), so our paths crossed periodically. We never invested in anything together, but after I moved to Boulder, I got a call from Charley one day in early 1996. It went something like:

“Hey, I just joined this Japanese company called SoftBank, and we are going to invest $500 million in Internet companies in the next year. Do you want to help out?”

Um, ok, sure. I didn’t really know what help out meant, but on my next trip to San Francisco I had a breakfast meeting with Gary Rieschel and Jerry Yang. SoftBank had recently invested in Yahoo, and presumably the breakfast was to vet me. I remember it being pleasant and ending with Gary saying something like “welcome to the team.”

I still didn’t really have any idea what was going on, but I was making angel investments and having fun. Charley proposed being a “SOFTBANK Affiliate” which had a small monthly retainer, a deal fee for anything I brought in, and a carry on the performance of any investments I sourced. Informal enough for me to play around with it for a while.

I was in Boston the following week so Charley emailed me and said, “Can you go check out this company Yoyodyne and tell me what you think?” I went to a generic office park near Boston and met with two people who would become close friends to this day. The first was Fred Wilson, who had just started Flatiron Partners (SoftBank was an investor in Fred’s fund), and the other was Seth Godin, the CEO of Yoyodyne. I vaguely remember a fun, energetic chat as we met a few people at Yoyodyne, ran through the products, and talked about how amazing the Internet and email were going to be as marketing tools.

My formal report back to Charley was short — something like “Seth’s cool; the business is neat; I like it.” SoftBank and Flatiron closed an investment in Yoyodyne a few weeks later.

Suddenly I was a VC. An accidental one. And it’s been very interesting since that point back in 1996.

The post My First Experience As A Venture Capitalist appeared first on Feld Thoughts.

This story originally appeared on Brad Feld.


Venture-backed IPOs surge to highest level since the Great Recession

Venture-backed IPOs surge to highest level since the Great Recession
Eric Blattberg / VentureBeat

The floor of the New York Stock Exchange during Twitter’s IPO on Nov. 7, 2013.

2013 was a good year to be a venture capitalist.

In the fourth quarter of 2013, 24 venture-backed companies made their initial public offerings, collectively raising $5.3 billion. It was the third consecutive quarter with more than 20 VC-backed IPOs, making 2013 the best year for new listings since 2007, the year before the Great Recession, according to data collected by Thomson Reuters and the National Venture Capital Association (NVCA).

Overall, 82 venture-backed companies offered their initial public shares in 2013, raising more than $11.2 billion. 2012′s dollar total was higher, at nearly $21.5 billion, but that’s largely attributable to Facebook’s $16 billion IPO; 48 other companies account for the remaining $5.5 billion. Excluding Facebook’s blockbuster IPO, this past quarter marks the highest dollar total raised by venture-backed companies since the second quarter of 2011.

Twitter had the most widely discussed IPO of the year, generating a record $1.8 billion for the company (and another $300 million in the following days, when Twitter’s underwriting banks exercised their option to sell an additional 10.5 million shares). But the biotech sector was the year’s quiet winner, accounting for more than half the IPOs in 2013.

The strength of the overall IPO market in 2013 — especially in biotech – is thanks to the JOBS Act’s onramp provision, said NVCA’s research chief in a statement. The JOBS Act eases the process of going public for “emerging growth companies,” or businesses with less than $1 billion in annual revenues, enabling them to submit registration statements to the SEC on a confidential basis.

Because of the SEC doesn’t publish statistics on the number of confidential IPO registrations it receives, the IPO pipeline has become cloudier, but that doesn’t appear to have hindered the success of IPOs. Of the 24 companies that went public in the fourth quarter, 22 are trading at or above their offering price.

Merger-and-acquisition deals didn’t fare as well in 2013, however. With 377 acquisitions of venture-backed companies this year, 2013 was the slowest year for M&A deals since 2009.

For more details on the IPOs and M&A deals of 2013, check out the chart below.

IPO and M&A chart (2013)


How to Find Opportunities in Your Social Network

How to Find Opportunities in Your Social Network

Thirty years ago a landmark academic study demonstrated that most people who get new jobs through networking with others almost always get those jobs not from their closest friends or colleagues, but from those they didn’t really know as well. This principle, known as the “strength of weak ties,” has become famous as social networks have proliferated and people have struggled to understand how to extract value from them. LinkedIn’s own Co-Founder, Reid Hoffman, referenced the principle in his post last year, about the two types of professional relationships you should maintain: allies and acquaintances.

If you’re looking for a new job (and half or more of LinkedIn members apparently are), then the weak-ties principal is worth paying close attention to. In fact, it’s worth knowing about for a lot of other reasons, also. If you’re a sales person looking for leads, or a venture capitalist looking for investments, or a corporate board looking for new director candidates – knowing how the weak-ties principle works can make the difference between success and failure.

Social networks are actually networks of networks. Your own social graph is connected to many other people’s graphs, but you and your closest friends’ graphs will have a great deal of overlap, because you know many of the same people. It is the connections between more distant, largely non-overlapping networks that are critical to making a network robust and resilient.

Albert-László Barabási, a highly regarded network theorist, used a massive trove of data to examine how easy it would be to disrupt a network. When he and his team analyzed the anonymous call records for a mobile operator serving about 20% of the population of an undisclosed European country, they found something very interesting. You won’t significantly damage a network’s ability to share information throughout the population by eliminating the most connected people. But you can significantly disrupt a network if you take out those who have the most connections outside their own immediate communities – that is, those who constitute the most network-to-network links.

The reason distant connections are more likely to connect you with your next job opportunity is similar: You and your closest friends and colleagues already know about many of the same opportunities. To discover new opportunities that you don’t already know about requires you to reach out to people who are not in your own immediate circle. You need to make connections to other networks, beyond your own.

The weak-ties principle has many implications for how you go about discovering opportunities for your business, beyond just a personal job search. For instance:

One study of successful entrepreneurs found they were more likely than others to have “deliberately exposed themselves to different sources of information, by striking up conversations on trains, for example, or maintaining a diverse range of acquaintances, to increase the odds of stumbling upon an interesting opportunity.”

Private equity investors who share information with others about possible investment candidates are able to access a wider network of candidates themselves.

Venture capital firms concentrated in technology centers (like Silicon Valley, Boston, or NY) do better competitively because they are able to “cast a wide, public net” – in effect, harvesting their weak ties.
In future posts I plan to explore how this principle can be applied in more detail. We’ll talk more specifically about how to apply the weak-ties principle to getting a new job, getting a higher salary, finding a B2B sales prospect, generating more innovative ideas, hiring a new professional employee, or even recruiting a new board member. So stay tuned!

(VIA. Don P. – Linkedin – Founding Partner, Peppers & Rogers Group at TeleTech)

Does Trying to Be Happy Make Us Unhappy?


As we muddle through our days, the quest for happiness looms large. In the U.S., citizens are granted three inalienable rights: life, liberty, and the pursuit of happiness. In the kingdom of Bhutan, there’s a national index to measure happiness. But what if searching for happiness actually prevents us from finding it? There’s reason to believe that the quest for happiness might be a recipe for misery.

In a series of new studies led by the psychologist Iris Mauss, the more value people placed on happiness, the less happy they became. I saw it happen to Tom, a savant who speaks half a dozen languages, from Chinese to Welsh. In college, Tom declared a major in computer science, but found it dissatisfying. He became obsessed with happiness, longing for a career and a culture that would provide the perfect match for his interests and values. Within two years of graduating from college, he had bounced from working at the United Nations to an internet startup in New York, applied for jobs as a supermarket manager, consultant and venture capitalist, and considered moving to Puerto Rico, Trinidad, Colombia, or Canada.

These careers and countries didn’t fulfill him. After another year, he was doing standup comedy, contemplating a move to London to pursue an advanced degree in education, philosophy of science, management, or psychology. But none of these paths made him happy. Dissatisfied with his own lack of progress toward happiness, he created an online tool to help people develop more productive habits. That wasn’t satisfying either, so he moved to Beijing. He lasted two years there, but didn’t find the right cultural fit, so he moved to Germany and considered starting a college dorm for adults and a bar for nerds. In the next two years, he was off to Montreal and Pittsburgh, then back to Germany working on a website to help couples spend more quality time together. Still not happy, he abandoned that plan and returned to Beijing to sell office furniture. One year and two more moves across two continents later, he admitted to his friends, “I’m harder to find than Carmen San Diego.”

Tom made four mistakes that are all too common on the road to happiness. The first blunder was in trying to figure out if he was happy. When we pursue happiness, our goal is to experience more joy and contentment. To find out if we’re making progress, we need to compare our past happiness to our current happiness. This creates a problem: the moment we make that comparison, we shift from an experiencing mode to an evaluating mode. Consider several decades of research by the psychologist Mihaly Csikszentmihalyi on flow, a state of complete absorption in an activity. Think of being engrossed in a Harry Potter book, playing a sport you love, or catching up with a good friend you haven’t seen in years. You’re in the zone: you’re so immersed in the task that you lose track of time and the outside world.

Csikszentmihalyi finds that when people are in a flow state, they don’t report being happy, as they’re too busy concentrating on the activity or conversation. But afterward, looking back, they describe flow as the optimal emotional experience. By looking everywhere for happiness, Tom disrupted his ability to find flow. He was so busy assessing each new job and country that he never fully engaged in his projects and relationships. Instead, he became depressed and entered a vicious cycle documented by psychologists Katariina Salmela-Aro and Jari-Erik Nurmi: depression leads people to evaluate their daily projects as less enjoyable, and ruminating about why they’re not fun makes the depression worse.

The second error was in overestimating the impact of life circumstances on happiness. As psychologist Dan Gilbert explains in Stumbling on Happiness, we tend to overestimate the emotional impact of positive life events. We think a great roommate or a major promotion will make us happier, overlooking the fact that we’ll adapt to the new circumstances. For example, in a classic study, winning the lottery didn’t appear to yield lasting gains in happiness. Each time Tom moved to a new job and country, he was initially excited to be running on a new treadmill, but within a matter of months, the reality of the daily grind set in: he was still running on a treadmill.

The third misstep was in pursuing happiness alone. Happiness is an individual state, so when we look for it, it’s only natural to focus on ourselves. Yet a wealth of evidence consistently shows that self-focused attention undermines happiness and causes depression. In one study, Mauss and colleagues demonstrated that the greater the value people placed on happiness, the more lonely they felt every day for the next two weeks. In another experiment, they randomly assigned people to value happiness, and found that it backfired: these people reported feeling lonelier and also had a progesterone spike in their saliva, a hormonal response linked to loneliness. As Tom changed jobs and countries alone, he left behind the people who made him happy.

The final mistake was in looking for intense happiness. When we want to be happy, we look for strong positive emotions like joy, elation, enthusiasm, and excitement. Unfortunately, research shows that this isn’t the best path to happiness. Research led by the psychologist Ed Diener reveals that happiness is driven by the frequency, not the intensity, of positive emotions. When we aim for intense positive emotions, we evaluate our experiences against a higher standard, which makes it easier to be disappointed. Indeed, Mauss and her colleagues found that when people were explicitly searching for happiness, they experienced less joy in watching a figure skater win a gold medal. They were disappointed that the event wasn’t even more jubilating. And even if they themselves had won the gold medal, it probably wouldn’t have helped. Studies indicate that an intense positive experience leads us to frame ordinary experiences as less positive. Once you’ve landed a gold medal or won the lottery, it’s hard to take pleasure in finding a great parking spot or winning a video game. Tom was looking so hard for the perfect job and the ideal country that he failed to appreciate an interesting task and a great restaurant.

Today, for the first time in more than a decade, Tom reports being—and appears to be—happy. Instead of pursuing happiness alone, he fell in love and got married. Rather than evaluating his happiness daily and hunting for his dream job, he’s finding flow and experiencing daily satisfaction in helping his wife set up a company. He’s no longer bouncing around from one continent to another, following the advice of psychologists Ken Sheldon and Sonja Lyubomirsky: “Change your actions, not your circumstances.”

In Obliquity, John Kay argues that the best things in life can only be pursued indirectly. I believe this is true for happiness: if you truly want to experience joy or meaning, you need to shift your attention away from joy or meaning, and toward projects and relationships that bring joy and meaning as byproducts. As the great philosopher John Stuart Mill once wrote, “Those only are happy who have their minds fixed on some object other than their own happiness.”

For more on happiness, see Adam’s new book Give and Take: A Revolutionary Approach to Success, a New York Times and Wall Street Journal bestseller.

Image credit: Charles Schulz, Charlie Brown.

(VIA. Adam Grant – Linkedin – Wharton professor and author of GIVE AND TAKE)