Mendelson's Musings: Mobile Edition
Stories - Full Edition
- Why FAS 157 Is Stupid
- Back To School
- Boulder Startup Executive Email List
- More Music Recommendations
- What I Learned at CES
- Stupid Bailout of the Week
- The Porn Industry Wants a Bailout?
- Our Investment in Law Firm 2.0
- Topspin Live at CES
- Now I'm Certain That AT&T Sucks
- Off Email For the First Time Since 1994
- Happy Holidays
- What's The Value Of My Startup?
- Law Firm Fees Defy Economic and Reality Gravity
- Holiday Cards

Why FAS 157 Is Stupid - Top

I am a guest columnist in VentureBeat.  Having pissed off all my lawyers friends with my Law Firm 2.0 posts, I figured it was about time to trash the accounting profession.  Or at least a part of it. 

I hate the new accounting world of FAS 157 and I'm not alone.  Fred Wilson posted a great summary about how stupid this whole mess is.

Check out my article and let me know your thoughts. 

Back To School - Top

No, I am not talking about a bad Rodney Dangerfield movie, rather this week I've returned to my role as an adjunct professor at the University of Colorado.  I'm stepping out of my comfort zone and teaching a class on venture capital.  :)

Last year was my first attempt at teaching a full class.  I was extremely fortunate to enlist Brad Bernthal, who is a real professor at CU, to teach it with me.  We had a blast and our student reviews seemed to indicate that they appreciated our efforts.  We call our class "VC 360" and try to teach a cradle to grave course on everything in the VC ecosystem, including from the eyes of the entrepreneur, which we do by including guess lectures from local CEOs. 

We tried to not only teach about how the startup ecosystem worked, but get them all involved in the community through outreach events, seminars and Boulder-based events.  Our goal was to put what we taught in real life context. 

This years class is an even more diverse group of law and business students.  Perhaps more interesting (with no slight intended toward folks paying tuition) is that we have three Computer Science instructors auditing our class.

Today was class number two and I'm already excited for lecture number three.  It's highly rewarding to see so many people interested in startup culture and hope that our class, in a small way, can be additive to the Boulder community. 

Thanks to past and present students - you give back more than I put into the process and I'm very thankful.  I'm looking forward to another rewarding semester. 

Boulder Startup Executive Email List - Top

Eric Marcoullier, CEO of Gnip has set up an email list exclusively for Boulder / Denver-based startup executives.

Eric's hypothesis is that Boulder executives need a forum to better connect, access and spread knowledge bases. 

The rules are simple for membership:

1. Your company must be funded (at least some angel money);

2. C-level and VP level folks only; and

3. Open to all verticals, not just IT / Internet, etc.

Unfortunately, I don't qualify, but would encourage those who do to check it out.

More Music Recommendations - Top

Every once in a while, I get around to updating the "Music" tab on my blog to include new music that I've discovered.

Today is the day.  For those of you looking for some good tunes, don't forget to check out the music tab.

Also, for those of you interested, I've posted some of my personal tracks up there as well.

What I Learned at CES - Top

I posted a blog today on the Foundry Group site about our trip to CES.  Among the topics discussed are why you shouldn't buy a TV for the next 6 months and why Nobu is simply my favorite sushi place that I can dream of.

Also, for some reason, it's harder every year for me to go to Vegas.  I must be getting old. 

Stupid Bailout of the Week - Top

Last week, I posted about the porn industry's proposed bailout and received many interesting comments.  (Thanks).

One comment, from a regular and appreciated reader was particularly interesting, so I had to post a new blog.

A San Francisco restaurant has received its second bailout in the last 4 months from the city of San Francisco.

Yoshi's just received another $1.5m loan from the city after at $1.3m loan last September, this all following an original $4.4m from the city to start the restaurant.


The city of San Francisco must be rolling in dough to provide this type of support.  Having lived in the Bay Area for 10 years prior to Boulder, I'll provide the opinion that it doesn't have the funds to do things like this.

It's not that I'm biased, despite the fact that the restaurant wasn't very good and that the staff were terribly rude on my last visit.

It's just sickening to think of what other good uses this money could go to in a time like this. 

The Porn Industry Wants a Bailout? - Top

I'm feeling a bit cheeky from attending CES while there are adult film stars walking around all over the place.  (For those of you who don't know, CES is held in Vegas the same time the Adult Video Convention occurs at the same location.  Egads).  That being said...

I know that you can't believe everything on the Internet, but several sources are reporting that the porn industry is asking for a $5 Billion dollar bailout from Congress. 

I'm sick of the word bailout.  I’ve got to hand it to these guys they’ve done a good job of self promotion.  I don't think pumping cashing into a limp industry trying to get it through soft times is the way to go.  Let them make the old fashioned hard choices and reform their industry for the future, not use the current economic environment as a backdoor for greed. 

I can tell you that if I was in Cleveland, or any other hard working town, I'd be pretty steamed if my tax dollars were used this way.  If Congress even takes a meeting with these folks, we should punch them donkeys hard.  It would be very hard to swallow injecting any form of subsidy into this industry.  I find it hard to believe that a few quarters of economic turmoil will bring the adult film ecosystem to its knees. 

Our Investment in Law Firm 2.0 - Top

Every time we make an investment, we blog about it on our Foundry Group site.  Today, I'm especially excited about our latest announcement, as the company is a "bulls eye" in my Law Firm 2.0 thesis

You can read all about FirstDocs on the Foundry post, but what I'll tell you shortly here is that they are a Westwood, MA located legal process automation company that I believe, are poised to change the way law firms and in-house legal department deliver value to their clients.

I'm particularly excited about this opportunity given that the CEO Dan Gaffney reached out to me after having read several of my posts about the inefficiencies in the legal ecosystem.

At the time, Dan thought it would be nice to get to know me, see if I could provide him any customer leads, show me the demo, etc.  Being a venture capitalist, I wasn't sure if I was getting the softest fundraising sell of all time, or if they didn't need any money, so I asked.   

Dan said they were all set for money and had customers.  I remember being a little sad, but still excited about what they were doing, so we kept in touch. 

Over the next few months, however, our conversations really intensified and the ideas on how to take their already released product to a completely new level began to take shape.  It was at that time, I began to sell the Foundry Group to Dan in hopes that he'd consider taking some money from us and thus, allowing me to join the board of directors.

I'm happy to say - mission accomplished!  I'm very excited to work with Dan, Luke, Anil, Muthu and the rest of the FirstDocs team.  Hopefully one day I'm writing a Law Firm 2.0 post about the increased efficiencies of lawyers!

Topspin Live at CES - Top

For those of you who want to know about our portfolio company, Topspin, they'll be at CES this week.  Foundry folks will be there as well.

Now I'm Certain That AT&T Sucks - Top

I just returned from a week's long vacation in Puerto Vallarta, Mexico.  (And as an aside, if you are going and want restaurant recommendations, I have some good ones).

I have an iPhone that I'm generally pleased with.  Yes, I gripe like everyone else about the lack of cut and paste, the lack of a sideways keyboard on email and other complaints, but I think it's the best machine out there by far.

The one thing that I've not understood, however, is the general speed of the device.  I'm never sure if the latency I'm experiencing is local or the AT&T network, but I don't think it's "really fast" like Apple claims.  In fact, in the U.K., Apple can't advertise this claim at all. I think that my old Motorola 9m on the Verizon 3G network was a bit faster, even running Windows mobile. 

When I landed in Mexico, I wondered what coverage, if any I would have.  I was shocked. 

The speed was incredible.  Web browsing, texting, local apps that require external content were all screaming fast.  It was like iPhone 4G, except that it was today! 

Well, actually it was yesterday, because today I'm back in the U.S. and back to my regular speeds.  And now I'm even more disappointed having seen what my iPhone can do on a better network.

Sigh.  Nice work Apple on the device, but wish that you had chosen a better network partner.

Off Email For the First Time Since 1994 - Top

Just reading the title that I just typed is really unbelievable, but in hindsight it's true.

I'm not good at taking time off.  Part of it is that I love what I have done professionally, but a lot of it are my issues.  Vacations are not a natural act for me.

That being said, even when I have taken vacations, I've always been under the impression that the re-entry to email would be worse than staying in touch.  My behavior has been to take a day or two off from email, but then to check in to make sure the email queue didn't grow too large.   

Inspired by my partner Seth who recently went "off grid" and teased by the rest of my partners, I decided to take a week off email recently. 

It wasn't easy at first.  What I realized is that I probably suffer from a mild addiction to working my email queue down to near zero every day.  When my mind would settle, my instinct was to check email.  And I was in Mexico, so it wasn't like I was sitting in snow-bound Boulder with nothing to do. 

After about 4 days, however, this changed.  I broke the cycle and was enjoying y time away from email so much that I've know decided that there is no other way to take a vacation.

When asked how long it had been since I'd been off email for a week, I spent a bit and realized that it had been 1994.  Egads. 

So I'd suggest that if you are like me and can't be off your email for more than 48 hours without feeling your heart rate kick up a notch or two - fight the feeling and get over the hump.  I hadn't realized that my vacations really weren't vacations until very recently.  It's all the difference in the world.

Happy Holidays - Top

From my family to yours...

Send your own ElfYourself eCards


Starring Bob Mendelson, Jessica Mendelson, Paul Mendelson, Sydney the Dog and Sammie the Cat.  Conspicuously absent is yours truly.  Call it creative license.

What's The Value Of My Startup? - Top

I regularly get questions concerning how venture capitalists value companies.  In fact, there seems to be an increase in the frequency of this question to me personally and through AskTheVC

It's not an exact science.  On top of that, there isn't a broad enough market to come anywhere near a public pricing mechanism.  (Insert joke about current public market chaos here).  VCs typically take into account many factors when deciding how to value a potential investment.  You'll note that few of them are quantifiable into hard numbers and at the end of the day, the VC and company must agree on an exact number in order to get a deal done.  So what are some of the factors?  In no particular order, I present the following:

1. How mature the company is

What stage is the company?  Early?  Late?  Pre or post product release?  Customers?  Pre or Post Revenue?  Other major milestones?  Hopefully it's clear that the later stage company (if all goes well), the higher the valuation. 

2. How much competition there is with other potential funding sources

More is better.  If I feel like I'm competing with other VC term sheets, then the valuation will likely be higher.  I would offer caution to not overplay this card unless you truly have another interested party.  I've seen this situation a number of times where the company overplays its hand and doesn't get their fundraising done and loses face in the process.

3. Quality of the management team

With a great management team, risk is taken out of the equation.  In fact, many VCs believe (me included) that even the best idea fails without an excellent team.  The more this quality team is built out before financing, the higher potential valuation you might get. 

4. How the valuation plays into a particular VC's investment thesis

If a VC is an early-stage investor, they'll be used to lower valuations than someone who invests in later stage deals.  This bias will have a large effect on the process.  I've seen companies that have received term sheets from both types of investors at the same time with wildly different prices. 

5. How much the VC thinks the company in particular wants that VC

VCs bring much more to the table than money (hopefully).  If a company wants a particular VC to fund their company (either because of domain-specific knowledge, prestige, nice offices, etc.) the price for that particular VC may be lower than others. 

6. Numbers, numbers, numbers

Yes, the numbers matter too.  Whether it is past performance or predictions of the future, these all play in.  Revenue, EBITDA, headcount, etc. all factor highly into the process.  That being said (at least for early-stage companies) don't believe everything your MBA professor told you about DCF and other financial analysis.  Especially at the early stage, the only thing that I know about your financials is that they are very wrong.  So the financials have limited applicability to hard number crunching but are very telling of how the management is thinking about their business. 

7. How big the market is

This one is pretty self explanatory.  Bigger equals better for valuation.

8. Potential acquirers

Again, this should be easy to understand.  If there are many natural acquirers for your company, this only helps in the valuation discussions. 

9. Competition

Valuations received by your competitors can potentially make a case for you receiving a similar valuation or at least have a small "market" to compare your company performance to.  This argument is of different importance depending on who your VC is.  Some care a lot about competitive metrics and some don't value them at all. 

10. Current economic climate

Bad climates normally lower valuations.  It seems to effect later stage fundraising valuations more than early-stage transactions. 

11. Previous deals

A particular VC's experiences and biases will have a large effect on valuations they will present you.  Part of a VC's job is to be good at pattern recognition.

12.  Other

There are other things as well, including the tried and true "I know it when I see it" analogy.  Part of all of these exercises are truly black box. 

Please note that I cannot give specific advice to folks on how much their company may or may not be worth.  I only know one thing about attempting this exercise - I would be wrong.  And you would not be happy with me.

It takes our group many meetings, much diligence and market analysis in order for us to arrive at the valuations we offer potential portfolio companies and even this is not an exact science.  For me to attempt this exercise for a company that I am not deeply involved with would be futile.

At the end of the day, it's all about getting a transaction completed and whatever that number ends up being, is a rough approximation of what the company might actually be worth at that point in time. 

Or maybe it's completely irrelevant.  :)  But at least you got funded.  Good luck out there.

(I feel like I could write an entire series of posts on the subject, but I think that would inject too much false precision to the discussion. Again, the majority of the factors are not easily quantifiable If you just can't help yourself and need to see numbers, check out the Dow Jones report to see some GENERAL guidelines. You can buy the whole report here.)

Law Firm Fees Defy Economic and Reality Gravity - Top

Ever since I posted my original rant about the over lawyering and overcharging by certain attorneys in the startup ecosystem, I've become synonymous with legal fees apparently.

It isn't all bad.  Our companies are being charged less, lawyers seem a little more likely to negotiate higher bills when the realize I'll blog about them if they aren't reasonable and it appears that we'll have a new investment to announce shortly related to my Law Firm 2.0 series.  (Keep your fingers crossed).

So I guess that I shouldn't be surprised how many times the same article was emailed to me this week.  According to, Legal fees continue to rise despite the current economic times and in one case have exceeded $1200 an hour!!!! (White & Case.  Boo.)

The average law firm raised their rates by 4.3%.  Anyone else out there get a raise that big this year?

I'll take a stand and say this is ridiculous.  I've never met a lawyer worth this much per hour.  I might consider one exception for a certain litigator that I know who is incredibly awesome and so efficient with his time that his hourly rate is somewhat irrelevant, but I only know potentially one person in the thousand lawyers that I've worked with. 

Shame on you folks.  It won't last.  Mark my words.  Viva La Law Firm 2.0...

Holiday Cards - Top

I generally dislike holiday card season.  I get dozens of cards that all basically look the same.  They’re bad for the environment and are a bad use of company funds because nobody remembers anything about them or who they’re from.  I did, however, get a great card this year from one of the companies I advise. 

Shareholder Representative Services sent a card that is awesome.  It's both timely and funny.  I never thought I'd enjoy seeing George Washington sing, but I did.

Go to to check it out. If you’re going to do a card, make it interesting and memorable.  SRS is doing a lot of excellent work besides holiday cards.  Check out their website.

Great job guys.  Happy Holidays everyone.