Archive for the ‘Entrepreneurship’ Category

I’m Adopting A VC Code of Conduct

A few days ago, Gil Dibner posted what he called a VC code of conduct.  I read articles all the time where VC’s write about how venture capital “should work” and the vast majority of the time I either disagree or find them a waste of time.  I feel that most of these articles are just self promotion with no actual new intellectual capital being created.

But Gil’s article is fantastic.  It’s also depressing that he felt compelled to write it.  It is yet another indictment that many VCs behave poorly and have given our ecosystem a bad, but deserved, reputation.  When I read it I had three strong reactions: one, I have tried my best in my career to comply with these ideas (call me out if you feel otherwise!), two, I think others VCs would do well by adopting these proposals, and three I think my partners at Foundry Group score well on these metrics to date.

I’m going to summarize his idea of a VC code of conduct and add a few wrinkles of my own.  That being said, you should read his full article here.  I’m only going to detail where I have a particular spin.  I also think that Gil missed three themes that are important as well.

1. I will do no harm.  Should be “duh,” but being on boards for the last 15 years proves this isn’t as simple as it sounds.

2. I will respect your time. CEO / Entrepreneur time is simply more valuable than my time.  I don’t make the companies successful – y’all do.

3. I will not ask for material I don’t need.  And I wish Gil would have added “And I will read and be responsible for understanding all materials that you send me.”  I can’t stand board meetings where a CEO is having to go through the presentation for the benefit of lazy board members.

4. I will not string you along.  It always surprises me how many people thank me for a quick NO.  It’s the humane thing to do.

5. I will let you know about competitors in our portfolio.  Done.

6. I will be transparent about any conflicts of interest between and entrepreneur and myself.  I’d argue that this should be even broader.  Just be transparent in general!  An entrepreneur should never wonder what a VC is thinking.  Let’s just be open and keep filters to a minimum and clear honesty to a maximum.

7. I will not sign a NDA, but will act as if a reasonable one is in place.  Simple.  But also know that if you ask me for a NDA I’ll know you haven’t done much homework and you aren’t starting off on the right foot.

8. I will not share your slide deck unless you give me permission.  With my partners, yes.  With others, no.

9. I will not speak to your customers without permission.  This is horrible behavior in our industry that must stop.

10. I will educate before I negotiate.  I’ve always loved doing this and this is what led to Brad and I writing our book Venture Deals – Be Smarter Than Your Lawyer and Venture Capitalist.

11. I will be honest about what standard terms are.  I agree with the sentiment, but as a former lawyer, I hate the idea of negotiating over the term “standard.”  I’d prefer to just put our term sheet out on the web and give the same deal every time as we’ve done at Foundry Group.

12. I will not issue a term sheet unless my firm has made a firm decision to invest.  This is perhaps the worst behavior in our ecosystem today. I see it more often with late stage firms than early firms, but it is present at all stages.  Once a firm pulls this trick on a company I will never work with them again. Ever.

13. I will reflect the term sheet in the final legals.  A deal is a deal.  ’Nuff said.

14. I will not seek an unreasonable equity stake in your business.  I think this is an important one.  Everyone must feel like they have proper “skin in the game.”  This seems like a simple concept, but often you find people fighting over things that shouldn’t matter.  Assume the company will be a huge success and don’t over optimize around the edges.

15. I will avoid surprises.  I think that if VCs and entrepreneurs have transparent relations, as in 6 above, then this just follows.

16. I will act in the best interests of the company at all times.  It’s not only the law, but a good idea too.

17. I promise to try not to look at my phone in meetings.  This is a hard one, but an important one. I’m not perfect, but I’m trying.  Frankly, I find myself looking at my phone when the meeting gets bogged down, usually by a board member who didn’t come prepared.

I also think that there should be three additions to the list.  I welcome your feedback.

18.  I will respond to you promptly, especially if we have an investment in your company.  This should be table stakes to a VC, but it isn’t.  There are always particular emergencies and situations which will make this difficult, but it is really important for an entrepreneur to know they always have someone to turn to.  After all, being CEO is a lonely job.

19. I will not collude with other VCs to harm your company.  I find it reprehensible when VCs collude to either drive down valuation / terms prior to a financing, or when the company is in dire straights collude to take over the company on the cheap.  There are plenty of other situations, too.   This one may have the greatest “subject to interpretation” issue to it, but I’ve seen this line crossed at times and it disgusts me.

20. I will answer all well-tailored emails.  If I am sent a well-crafted email, I will answer it.  I promise.  Whether or not I know you or not, you’ll get a response.  This doesn’t mean that I will answer spam, emails created from mail merges, emails with so many grammatical and spelling mistakes that I can’t read or emails that are clearly from someone who has done no research into what Foundry Group invests in.  But if you at least try, you’ll get a response from me.

That’s an even twenty and I’m sure we could add a few more, but this would be my Twenty Commandments of VC, or as Gil put it a VC Code of Conduct.  

I’m proud to say that Foundry Group signs up to this code of conduct as we feel this should be the minimum baseline for good VC / entrepreneur relations.

Have an opinion?  Feel free to leave  comment below or hit me up at @jasonmendelson on Twitter.  Well done Gil and thanks for getting an important conversation started.

 

 

 

 

 

January 22nd, 2014     Categories: Entrepreneurship, Foundry Group, Frustrations, Venture Capital    

It’s Time To Vote

I recently met Andrew Shoemaker who is running for City Council.  He impressed me in his understanding of the issues related to our startup community, but also his larger vision of the city.  While I don’t normally get involved in local politics, I decided I would vote for him.

Now, how about that Vote?

Oh yeah, it’s an off year election here in Boulder, Colorado and if history is our guide, surprisingly few of you are paying attention to the election and the candidates.

Be honest, how many of the City Council candidates can you name? How many of the ballot items? Have you decided who you support?

Ironically, your vote may be more impactful in off year City Council elections than in large presidential elections.

But life is good here in Boulder and we have busy lives, so why do we care?

We care because City Council influences our local lives outside of the office (like open space access) and makes decisions that impact businesses as well.  We are talking about support for new businesses and jobs, office space and open space, livability and housing – you name it.

Other cities are competing with us for the types of business cultivated here, the types of creative co-workers we want, and the brand that Boulder has built. Candidates like Andrew understand that Boulder should take measures to encourage innovation and entrepreneurial activity in Boulder, support Boulder’s brand and attract continued investment and creative workers to Boulder.  Andrew started his own law firm, leaving the larger firm life and knows what it takes to create jobs, as well.

In general, I feel that Boulder City Council is out of touch with what Boulder has become and Andrew is one of the few people that really understand this.

Now is a good time to recognize that in addition to being an important part of our community, we also have something important to say in support of Boulder’s future.

What should you do?

Look for your ballot in the mail (this is a mail-only ballot election). Educate yourself on the ballot issues and the candidates and vote by returning you mail ballot. These candidates influence Boulder’s future so you should influence which candidates win.

Please vote and consider supporting candidates — like Andrew Shoemaker — who understand our issues and support our innovation culture in Boulder.

This is worth taking time out of your day and making your voice heard.

October 20th, 2013     Categories: Entrepreneurship, General    

Wanted – Colorado-based Entrepreneur to Pitch My Me at Class

I co-teach a class at the University of Colorado Law School called “VC 360.”  We have MBA, Engineering and JD candidates and the course deals with all things in the entrepreneurial / venture ecosystem.

Each year, we have a pitch day where one entrepreneur comes in and pitches me.  The students get to watch.  The entrepreneur and I get an hour together and then the students get to ask questions for 20 minutes.

This is a real pitch.  It’s not any different than if someone comes to our offices, but there is a “studio audience.”

So if you are interested in pitching Foundry Group and want to do something great for the Boulder education community, let me know.  I can only take one.

The pitch date is 10/7 at 8am in Boulder.

September 11th, 2013     Categories: Education, Entrepreneurship, Financings, Venture Capital    

The “VC Bargain”

With the recently announced acquisition of our portfolio company MakerBot, the conversation invariably turns to “was this the best time for the company to sell?”

It’s a question that is asked every time a company sells and it usually creates a lot of noise by people whose opinions are usually misinformed and even more so, irrelevant.  The question is asked over and over and over again:  “When is the correct time for a startup to sell itself?”

The answer is simple:  “When the founders want to sell.”

Period.

Unfortunately, many investors do not feel this way.  Clearly, a VC can be very helpful in advising the founders about past experiences, the current state of the M&A market and their thoughts around valuations, but when the founders want to sell, it’s time to sell the company.  Who are we to tell the founders that they aren’t allowed to fulfill their dreams and create an event that will change their lives?

Brad and I have written a lot about venture term sheets.  (Plug:  buy our book!).  One thing we haven’t written about, however, is what we call “The VC Bargain.”

We believe this “bargain” is inherently created when VCs invest in a company.  And no, this isn’t in the legal documents, but should be part of a mutual understanding by both parties.  (Note, however, we’ve seen some VCs and many late stage funds actually try to draft into the documents at what valuations founders may sell at and we find this practice distasteful).

If a VC is playing for a longer / bigger outcome, then it is the responsibility of the investor to create some financial liquidity for the founders and employees that makes them feel secure.  The situation we hate is one where the founders and employees receive nothing except the message “no, you can’t sell, keep running the business.”

But this isn’t solely as one-way bargain.  If you take venture money, you have a duty as well.  You have a duty to actually work toward a liquidity event.

From time to time, we’ve encountered entrepreneurs who really aren’t interested in selling their company.  This has been expressed both explicitly “I have no intentions of ever selling my company” to more implicitly whereby an entrepreneur continually finds fault with potential buyers (“I hate their culture,” “I don’t like big companies,” etc.).

Few companies can expect to go public.  Therefore, the acquisition market is the only way for investors to create proceeds to return to their limited partners.  And everyone should know that our job is to take our investors money, invest it and return a lot more money to them.   Without acquisitions, we can not do this.

It amazes us, but we find that some entrepreneurs don’t actually realize (or respect) this when they take on investment.  Yeah, we know you don’t normally gravitate working for big companies (otherwise, why start your own?), but at some point, if things go well, BigCo may be correct path of the company.

Bottom line is that this VC Bargain is an important one in the startup ecosystem, but one that is not well understood by some.

June 25th, 2013     Categories: Entrepreneurship, Financings, Venture Capital    

We Signed an Important Amicus Brief in Oracle v. Google Case

At Foundry Group, we take a strong interest in the policy and legal ecosystem that affects the start up industry.  We’ve been among the first to support initiatives like Startup Visa and patent reform and have been active in city, state and national politics in the hopes of keeping the U.S. the center of the startup world.

I’ve recently left the NVCA board after my four-year term was up.  During that time I took a particular interest in SOPA/PIPA (glad that blew up, but keep your eyes open, there are still folks out there trying) and I’m proud to say that the association has a permanent IT policy group that did not exist before I joined.  High on the list of issues going forward certainly will be around Cybersecurity and more patent reform.

Recently, our company signed onto an amicus brief that might be the most important issue that we’ve faced.  In short, Oracle is threatening to chill innovation in the software industry by arguing that APIs are copyrightable.  Google is the defendant and should Oracle win this case, the implications are disastrous for our startup ecosystem and our economy.

Thankfully the folks at the University of California, Berkeley, spearheaded by Jennifer Urban see this as a major threat as well and wrote a cogent and powerful amicus brief to the court.  The list of signatories to the brief are here and represent a wide constituency of the industry.

Thank you Jennifer and team for your tireless efforts.  Startup land:  please support and help recognize these important efforts.

 

May 31st, 2013     Categories: Entrepreneurship, Law, Venture Capital    

CU Boulder’s New Venture Challenge. Come Join Me

I’ve seen the “Transactional IQ” – i.e., the level of understanding around startup deal making – rise at CU over the past five years.  This fall I finished teaching a Venture Capital course at CU for the fifth time.  And in recent years I’ve helped coach CU’s Venture Capital Investment Competition team.  It is fun to see what involvement with students over a five year trajectory can accomplish.

I’ll be involved in another five year milestone on Wednesday.  CU-Boulder’s New Venture Challenge Fifth Annual Championships are Wednesday 5:00 – 7:30 p.m. in the Wittemyer Courtroom at Colorado Law.  I am a judge.  Free registration available at http://cunvc.org/

It is fun see the NVC go from “let’s make up a competition” to, five years later, something that feels like an annual CU-Boulder institution with over 60 teams involved.

In 2008, several groups across CU-Boulder banded together to launch a cross-campus entrepreneurship championship, which they coined the New Venture Challenge.  In year one, the CU NVC set out to answer the question, “I’m interested in entrepreneurship.  But where do I start?”  Buoyed by a grassroots group of student volunteers, the NVC aimed to inspire students and “collapse the campus” (i.e., encourage people to build startups in interdisciplinary teams).   It helped that, from the start, the NVC involved all parts of campus, with the Silicon Flatirons Center, Deming Center, ATLAS, BDW, eShip, and the Entrepreneurship Center for Music involved.  About 75 or so people trudged through a foot of snow to see the inaugural NVC Finals, which my partner Ryan McIntyre helped judge, in 2008.

Five years later, the snow is back, but the CU NVC otherwise appears to be scaling well.  A robust mentorship program now connects CU NVC teams with Front Range entrepreneurs.  The NVC increasingly emphasizes action over endless business planning.   Several experiential classes have popped up across CU-Boulder that build companies that participate in the CU NVC.  Audience interest is up, too.  The NVC Finals are now held in the 250 seat Wittemyer Courtroom at Colorado Law School.

Check out the NVC on Wed night.  I’m looking forward to it.

April 16th, 2013     Categories: Education, Entrepreneurship    

Startup Summer! Find your great summer internship here!

Of all the projects Startup Colorado initiated in its first year, one of the most successful was Startup Summer, a summer internship program that combined a ten-week internship at a Denver/Boulder startup with a series of evening events focused on teaching the student-participants the fundamentals of entrepreneurism.  Last year 18 students worked with 14 companies in a variety of roles, from web developer to marketer.

Startup Colorado is now accepting applications for the second year of the Startup Summer program, which will be open until March 1st.

The program includes:

  • A paid ten-week internship with a Front Range startup; the internship will include frequent interaction with the company founders and management team
  • The Startup Summer seminar series, featuring prominent entrepreneurs teaching classes on entrepreneurship
  • A weekly social event with business leaders in the community
  • A close-knit community with your peers in Startup Summer
  • An opportunity to interact weekly with a personal mentor experienced in startups and entrepreneurship

Like last year, Startup Summer is looking for students at colleges or universities who are aspiring entrepreneurs and want to accelerate their development by getting plugged in to one of the hottest startup scenes in the nation.  Unlike last year when the program was limited to students in Colorado, we are opening the program up to any student actively enrolled at a four-year program in the United States.

If you are a student at a four-year college with a passion for entrepreneurship, or know a student who would be interested, you can get more details and apply to Startup Summer here.

January 6th, 2013     Categories: Education, Entrepreneurship, Venture Capital    

Venture Summit | West: Wrongly Charging Entrepreneurs to Pitch VCs

What is old is new.  Entrepreneurs  are stil being asked to pay to pitch.  It’s WRONG.

Two and a half years ago, I wrote a post about a Boston group trying to charge entrepreneurs $4500 to pitch venture capitalists at an event.  Many in the startup community were appalled by this especially folks like Jason Calacanis who created the Open Angel Forum specifically to create an event where entrepreneurs could gain free access to investors.

To quote my partner Seth:

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THERE IS NO CIRCUMSTANCE IN WHICH ENTREPRENEURS SHOULD PAY TO PITCH THEIR BUSINESS TO PROSPECTIVE INVESTORS.

PERIOD. END OF STORY.

 

Microsoft, who had been a sponsor of the Boston event, terminated their relationship after the pay-to-pitch arrangement was publicized.  I thought all of this activity would die, but it’s 24+ months later and it looks like the idea has been resurrected.  And it makes me just as sick today as it did then.

Venture Summit | West, being held February 13th is an event looking to make money off of entrepreneurs who need to raise money.  The price?  $1585.00.  I suppose the good news is that if you apply and don’t make the cut, they don’t charge you.  But $1600 bucks to pitch VCs?  This is completely backwards and distasteful. They also offer startups a ticket for $400 if they just want to come and network with the VCs at the event.

They are charging the VCs to attend ($500) and they have a bracket for “others” at ($700).  So at least the investors are not getting a free ride on the backs of the entrepreneurs, but can we finally be done with trying to make money off of startups that don’t have any cash?  Come on folks, create a business model where you can make some money but NOT charge the entrepreneurs.  My bet is that many of the VC attendees have no idea this is even going on.

Lastly, if you are trying to raise money, do you homework.  You have many other outlets to meet VCs, including OAF, and simply going to VC websites and finding email addresses.  There are events all over the place where you can network and / or pitch.  Even online.

I hope that companies aren’t taken in by their slick marketing materials.

 

December 12th, 2012     Categories: Company Running, Entrepreneurship, Financings, Frustrations, Venture Capital    

Sympoz Launches Programs on Starting Companies

One of our portfolio companies, Sympoz has announced the launch of their programs targeting startup entrepreneurs.  Even better, the series stars some of my favorite people in startup land:  my partner Brad Feld, along with Brad Bernthal of the University of Colorado Law School and Mike Platt , partner at Cooley LLP.  We teach you everything that we know in this comprehensive video series.

Thinking about doing your first startup? Perhaps you’re a startup veteran, who has the bumps and bruises to prove it, looking to jump back in?

Let us help you maximize the opportunity and do it right.

Brad’s class, How To Light a Spark & Set Your Startup on Fire, is FREE for a limited time.  Brad has lived the startup story over and over. He offers straight-shooting advice: Does your idea have market potential? Is it the right idea for you? Brad’s raw and pragmatic advice will lead you to consider the competition, examine your motivation and be honest about your level of passion and commitment.

Brad Bernthal and I, who have for several years taught an oversubscribed course at the CU Boulder Law School, are joined by Mike in teaching, The Nuts and Bolts of Starting a Company. In this class, which includes over 4 hours of instruction for just $29.99, we join forces to teach you things your lawyer and venture capitalist may not want you to know. How to turn an idea into a company. Who to partner with. How to seek out money and what to do with it when you get it. You’ll learn what to put in your pitch deck, what not to say to a VC, and 15 common mistakes that will kill your startup before it gets off the ground.  And a lot, lot more…

For those of you who have read Venture Deals, consider this a great summary of some topics in the book, but more heavy on the business side of equation, with the benefits of interactivity between you and the instructors.

Sympoz classes are perfect for busy people; you can watch the professionally produced, HD videos anytime, anywhere on the planet, from any Internet-connected device, as often as you want. The Sympoz learning platform seamlessly blends discussions into the class experience, enabling you to ask questions of, and participate in conversations with your class community, including your instructors.

So, what are you waiting for? Join us in class!

Wanted: Entrepreneur to Pitch to Me During Class

I co-teach a class at the University of Colorado Law School called “VC 360.”  We have both MBA and JD candidates and the course deals with all things in the entrepreneurial / venture ecosystem.

Each year, we have a pitch day where one entrepreneur comes in and pitches me.  The students get to watch.  The entrepreneur and I get an hour together and then the students get to ask questions for 20 minutes.

This is a real pitch.  It’s not any different than if someone comes to our offices, but there is a “studio audience.”

So if you are interested in pitching Foundry Group and want to do something great for the Boulder education community, let me know.  I can only take one.  Priority will be given to ideas that fit within the Foundry Group investment themes and are understandable by students.  Also there is a bias toward local entrepreneurs to Colorado, as I hate making folks travel to see me.

The pitch date is 10/1 at 8am in Boulder.  Either email me or leave a comment and I’ll let you know.  Thanks for the consideration.

September 18th, 2012     Categories: Education, Entrepreneurship, Venture Capital