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4 posts from March 2008

March 27, 2008

American Idol in the Boardroom

It's taken me a few seasons and heavy lobbying from my wife, but I confess to finally becoming a convert when it comes to American Idol.  The show is simply mesmerizing when you blend the individual personalities and talents of the contestants with the judges.  In particular, I find that the three judges work incredibly well together to provide an entertaining banter throughout the show - Randy, Paula and, of course, Simon.  As much as I enjoy the performances, I enjoy listening to the judges' feedback on the performances even more.

As I was watching the top 12 contestants get winnowed down to 10 last night while catching up on email - many of which contained board packages and sundry portfolio updates - my mind drifted and I began to wonder:  if the contestants were entrepreneurs and the American Idol judges were VCs, which judge would the entrepreneurs want in the boardroom with them?

Let's examine the three candidates.

Randy is the Domain Expert.  His experience in the recording arts field is palpable when he speaks and presumably he is very well connected.  He displays great empathy with the contestants and often gives very constructive feedback that is relevant, albeit a bit narrow.  He doesn't focus on the overall strategy, typically, but rather picks out one or two small items to comment on.  Similarly, many entrepreneurs seek out VCs to sit on their boards who are deep domain experts and can provide them with vertical expertise relevant to their particular business.  But many entrepreneurs find the Domain Experts repetitive and overly formulaic over time ("I'm a hammer," confessed one to me the other day, "and everything I see looks like a nail to me").  At the extreme, these domain experts simply don't help the entrepreneur see the big picture in the value creation process.

Then there's Paula, the Cheerleader.  No matter how bad the contestant did, they can count on an encouraging word from gentle Paula.  Certain VCs display similar personas in the board room.  Missed the quarter?  Lost a key recruit?  "You're doing great," says the Cheerleader VC, "Atta[boy/girl] - just keep at it.  This is hard stuff and we love you."  I remember one of my board members used to systematically call me or email me with a "Nice job!" message at the end of every board meeting.  At first, I relished it.  After ten board meetings of the same formula, I realized I was the recipient of the auto-encouragement-message.  When you're feeling down and going through one of the inevitable troughs in the entrepreneurial cycle, you need that Cheerleader board member to pick you up.  But they lose credibility quickly because you're never really sure if they're telling you what they think, or just telling you what they think you want to hear.

Finally, there's Simon.  The thing you love and hate about Simon is that he tells it like it is.  He is the Truth Teller.  In the board room, sometimes the feedback is tough and hard to hear ("That really stunk - your sales presentation shows that you still have no idea how to articulate your value proposition").  But when the Truth Teller gives you that rare bit of positive feedback, it's all the more precious, because you know the Truth Teller doesn't sugar-coat ("Last quarter was awful, but this quarter you finally got your act together and executed flawlessly.  Well done.").

These archetypes - the Domain Expert, the Cheerleader and the Truth Teller - each have their pros and cons, but when I was an entrepreneur, I preferred the Simon-like Truth Teller.  It's the dead-on feedback from the Truth Teller that pushes a board and a company forward.  Even when it's painful to hear.  You can't solve tough problems in start-ups (and what problems aren't tough when trying to create a multi-million dollar business from scratch?) until you face up to them and articulate and explore them fully.  The Truth Teller doesn't let human nature's conflict avoidance tendency kick in, but rather pushes you to see the flaws and address them.

Which American Idol judge would you prefer to have on your board?

March 17, 2008

New Fund, New Brand: Introducing Flybridge Capital Partners


As my blog readers note (and appreciate), I typically don't write about my portfolio companies or fund.  But it's hard to resist on this one occasion.  Today we announced the closing of our 3rd fund at $280 million and a new brand:  Flybridge Capital Partners.

Our strategy and team remains the same:  5 general partners pursuing consumer, medical and information technology early-stage investment opportunities across the US.  But we wanted to eliminate any confusion that existed regarding our market position as a firm with a broad sector focus and a diverse, blue-chip Limited Partner base.  When some folks heard the "IDG" name, they thought corporate VC and media-only (for example, while we were flattered when AlwaysOn named us one of the top VCs in 2007, we were chagrined when they listed us in the corporate VC category!).

The word "flybridge" appealed to us because (in addition to being available, two syllables and easy to pronounce/spell) it represents a nice metaphor to what we do every day - give entrepreneurs (who are steering the ship on the main bridge!) a different perspective on the landscape and waters ahead.

Closing the fund in the context of the current malaise in the general economy is also a nice endorsement for the early-stage venture capital market - something that should give all of us some hope.

March 10, 2008

Let's Play "Blame The VC"

I attended a breakfast run by Tony Perkins and AlwaysOn last week in preparation for their upcoming, inaugural event in Boston "AlwaysOn - East".  I've attended the NYC event a few times and although they are a bit too buzzword compliant, they tend to attract a high-quality audience in the consumer new media start-up market.  Tony and team are now trying to bring the model to Boston (April 8 and 9) and broaden its market segments to appeal to players in enterprise IT, life sciences and cleantech markets as well.

Anyway, the breakfast was a group of 75 or so entrepreneurs, VCs and service providers gathered to give the AlwaysOn team some perspective on the Boston start-up community.  What really struck me was the nature of the dialog in the room.  It was almost as if the local entrepreneurs, bemoaning their lack of success in securing funding, rationalized that it must be due to the inadequacy of the Boston VC community.  In effect, they wanted to play the ever-popular game of "blame the VC".

Here's how the game is played for those of you not familiar with it.  First, assume you are a combination of Steve Jobs, Bill Gates and Larry Page rolled into one that your start-up idea will be worth somewhere north of $100 billion.

Next, approach a number of VCs to pitch the deal.  One favorite approach is the cold email (ask your VC friends how many "transom" or cold emails result in funded businesses and you'll probably hear that the typically long odds of 500 to 1 go to 50,000 to 1).

Then, when you don't get funding, play "blame the VC".  Tell all your friends that those risk-averse idiots wouldn't know a good deal if it hit them in the face.  And especially the ones in [insert your geography here].

By the way, this game is played by all entrepreneurs all over the world - new and old.  One of our portfolio CEOs, a successful serial entrepreneur, pitched 40 VC firms before securing his follow-on round.  It turns out, 39 of those VC firms were total idiots.  Only one had the keen insight to see the value in his company and fund it.  Another of our portfolio CEOs just recently complained to me:  "Silicon Valley VCs all fall into such groupthink.  I have no interest in working with them".  Funny enough, those comments precisely echoed the comments from the Boston entrepreneurs in the room at the AlwaysOn breakfast!

Now obviously I'm being a little cheeky here.  Passionate entrepreneurs should indeed ignore all the "nattering nabobs of negativism" (to quote Nixon's former VP Spiro Agnew in a line penned by William Safire!).  But let's tone down the blame game a bit, shall we?  If you don't get funded, there is probably some underlying, logical reason why beyond the fall back "blame the VC" game.  It's probably worth thinking deeply about what you can do to improve the idea, or modify your pitch, rather than whine about the unfairness of it all.  To quote Benjamin Franklin:  "Any fool can criticize, condemn and complain.  And most fools do." 

Now I do admit, that is an aphorism that cuts both ways!

March 07, 2008

It's Morning in America Again - Just Ask The HBS and MIT Sloan Kids

Reading the newspapers and magazines covering the US economy is downright depressing (today's Wall Street Journal is particularly depressing - hammering on both the worsening credit market problems and brain drain away from start-ups).  But meeting with fresh-faced MBA students is downright inspiring.

I had the opportunity to meeet with 100 Harvard Business School and MIT Sloan students over the last few days and was incredibly impressed with their optimism and energy, particularly as it relates to the entrepreneurial opportunities that lie ahead.

We host an event with the graduating students every Spring, inviting 100 of the most inclined to entrepreneurship (as opposed to...gasp...banking and consulting) in order to get to know them and see if there might be opportunities within our portfolio, learn about companies they are starting or joining, and generally build relationships with the next generation of talented entrepreneurs.

What struck me the most this year was that the students seemed oblivious to - no that's too harsh, let's say unaffected by - the global economic turmoil raging around them.  The collapse of credit markets?  Inflationary pressure tying the hands of Bernake's Federal Reserve?  Destruction of trillions in asset value as the real estate asset bubble deflates?  A weak US dollar impacting our competitiveness and purchasing power?  Not even a part of the conversation.

Instead, they wanted to talk about clean technology and sustainability, novel medical devices and sensors, Google vs. Microsoft, the opportunities represented by the emerging mobile generation, the shift of the nearly $1 trillion in global advertising to the Web, the emergence of global perspective on VC and entrepreneurship and many other topics bubbling with possibilities.  Recognize that all of these young men and women have the mission to find a job after business school over the next two short months, yet they didn't seem concerned with "a job".  They were focused on ideas, innvoations and opportunities.  It is no coincidence that the famous MIT $100k Competition - where entrepreneurs submit business plans and get judged by VCs and start-up veterans in the hopes of winning a little seed money and a lot of notoriety - had a record number of entrants this year.

With a nod to John Winthrop (oh, Ronald Reagan as well, I suppose), one can only observe that in the halls of the elite American business schools, it's Morning in America again and our entrepreneurial economy remains a city on a shining hill.  There is still plenty of hope to spread around!