Archive for the ‘Entrepreneurship’ Category

Entrepreneurs Unplugged with Howard Diamond

On Monday, April 19th, I have the pleasure of interviewing Howard Diamond as part of the Silicon Flatirons Entrepreneurs Unplugged Series.

Howard is certainly one of the most interesting and engaging people that I know and I looking forward to hearing his thoughts on a wide variety of topics. 

Location is ATLAS Room 100 and the event is from 6:15pm to 7:30pm.  Hope to see you there.

April 13th, 2010     Categories: Education, Entrepreneurship    

Why There Will Never be a Standard Set of Seed Documents (a.k.a “Why Brad Feld will Fail”)

My partner Brad recently wrote a blog post commenting on the proliferation of standardized seed financing documents.  The post was motivated by the highly-publicized release of the fourth instantiation of such a standard series of documents, this time by Ted Wang at Fenwick & West with collaboration from a group of bay-area early stage VC’s and angel investors.

If you are keeping score at home, there now exist the following sets of standards that have been made public:

(**Disclosure: I had participation with the TechStars set**)

Brad noted that it seemed silly to have four different versions and decided to invite everyone together in a room to come up with one, universally accepted set of model documents.  The immediate response was tremendous.  33 comments to the post and countless more emails from lawyers, entrepreneurs, VCs all praising the effort and wanting to know how they could get involved.

And all I could think was “Feld, you haven’t a clue what you’ve gotten yourself into.  This is going to end badly.” (and then the second thought was “Damnit, I bet all of these emails end up in my inbox too,” which they did, but then gave me fodder for this blog).

Why? Because there will never be a standardized set.  Not because there shouldn’t be, but rather once you introduce humans to execute the task, it simply doesn’t work.

And those humans are called lawyers and venture capitalists (and not entrepreneurs).  Despite all the handwringing about “doing it for the entrepreneur” I don’t think these two sets of humans will ever get their act together well enough to do what they say they want to do.  Here is why.


Lawyers are like congress people.  If they aren’t involved in something, it’s nearly impossible to get their vote.  If they are involved then they are obliged to be “value additive” to the process.  In other words, the more lawyers, the more support and the more bloated of a document set, because everyone needs to get in a point to save face.

If you don’t believe me, see the NVCA model documents (I’ve been in the room while they have been drafted).  While the documents are great in that every potential scenarios has been imagined (and even more importantly to show you what should never be included in financing documents by their omission), the documents are too complicated for 90% of the folks out there doing the deals.  And then you add in the east-coast / west-coast differences (I think many east-coast terms can be entrepreneur unfriendly) and now you have a treatise as opposed to streamlined set of documents.  (As an aside, I don’t want this to turn into a east coast / west coast debate.  If you want to see what I think about terms, read this series).

Many of Brad’s email responses included this not-so-veiled threat: “you need me as part of your syndicate, or I won’t sign off on the documents and you’ll not have broad support.  My firm is important [insert canned marketing paragraph here].”  At the end of the day, Brad would have had 50+ lawyers in the room and we’d be right back to where we started with the NVCA project.

Even more importantly, however, lawyers are driven by more important things (to them) than helping entrepreneurs save legal costs.  Lawyers are driven by fees and thus they want to acquire more clients.  Releasing a set of documents that get you on the cover of peHub and Techcrunch is good for business.  You may streamline some hours, but you are betting on more clients.

Therefore, you have no incentive to join other groups, as it’s your name that is getting all the good publicity.  Why be a part of “working group X” when you can be “Joe Smith, super lawyer to the entrepreneur?”  While I can’t disclose the particular emails, rest assured that this paragraph is much more than an assertion, but a fact.

Lastly, there is also pride of authorship, by lawyers, even in situations where the documents should be boilerplate – as the case is here.  Every firm has their set of documents that they consider “better” than others.  Are they?  Or are they lazy and haven’t even read the other firms’ (or maybe they don’t have access).  I haven’t read them all.  I don’t want to either, but I can tell you that I’ve only seen a few firms out there that actually have better forms.

Bottom line:  Too many cooks spoil the soup, while the celebrity chefs don’t even want to cook with you.

Venture Capitalists:

Let’s not let the lawyers take all the blame, though.  While I do think the incentives of the VCs are good here, we have our own issues.

First, we, as the business drivers of the provisions, can’t necessarily agree on the basic terms.  That is problem one.  I don’t have a way to fix this one.

Secondly, most VCs aren’t lawyers and their level of deal comprehension varies greatly.  (Note: there are plenty of non-lawyer VCs that can take me to the woodshed, so this isn’t a statement that all lawyer-VCs are better).  So what do we, as an industry do?  We hire lawyers to produce a standard set of forms that we might not completely understand ourselves.

The end-result is our trusty lawyer tells us “our forms are better” and we take it for granted never minding the misalignment of incentives (lawyers want to make money, we want to save money for the entrepreneurs).  In fact, if you ask some of the business people around the table of these four sets, they really can’t tell you how any of these documents differ from the others.  They will always refer you to their lawyer.

Want more proof?  The latest set of documents from Fenwick and supported by a number of investors has a provision allowing for $10k of investor counsel fees.  If the investors really understood everything in the documents and were prepared to take them “as is” I would expect that number to be zero.  In fact, the three other sets of standardized documents have $0 fees for investor counsel.

Bottom line: until the VCs truly understand everything in these documents, they are going to continue to rely on the forms of their favorite lawyers and not those generated by others.

So which of the four forms are better to use?  I don’t know.  I’ve only read half of them.  And I don’t really have the burning desire to read more of them, as I predict even more proliferation.  That being said, here are a couple of interesting factoids.

1.  Yokum Taku has a nice post and matrix comparing the documents; and

2.  I heard from one name-brand law firm that working with one of these standardized sets (which I won’t name either for professional courtesy reasons) is a horrific experience in spell checking, capitalized term mismanagement and sloppy draftsmanship.  So just because they are released and publicized doesn’t mean they are necessarily any good.

So my prediction?  My dear partner Brad, while heart in the right place, will fail to come up with one set of widely used seed documents.  Sad, but true.

Of course the horrible irony is that none of this is intellectually difficult.  Maybe I’ll just come up with my own set of documents and…. oh wait……

March 15th, 2010     Categories: Entrepreneurship, Frustrations, Law, Law Firm 2.0, NVCA, Venture Capital    

Come to the Colorado New Venture Challenge Finals

The CU New Venture Challenge finals are this Friday, 3/12 beginning at 2pm in ATLAS 100 on the CU-Boulder Campus and are open to the public. Don’t miss the watching the top four teams pitch their business plans to a panel of judges including venture capitalists, angel investors and serial entrepreneurs.
Prizes include:

  • 1st – $6,000
  • 2nd – $3,000
  • 3rd – $2,000
  • Judges Choice – $250

Now in its second year, the CU New Venture Challenge is a campus-wide initiative connecting students and faculty with teammates in a broad range of disciplines and with mentors from the business community. The goal is to provide knowledge and experience making entrepreneurship accessible to anyone with the enthusiasm and creativity required to start a new business.

Highlights of the 2010 CU New Venture Challenge include:

  • $15,000 in cash prizes
  • More than 20 teams in fields ranging from information technology and Internet to music and outdoor recreation
  • Dozens of mentors sharing their entrepreneurial experience with competition entrants
  • Seven workshops and “crash courses” on topics such as intellectual property, economic sustainability, and how to build a company from concept to completion
  • Networking events connecting CU students with employers and building a sense of community among Colorado entrepreneurs
  • 145 Facebook members and 463 followers on Twitter
  • At least one CU student, employee or faculty member per team
March 8th, 2010     Categories: Education, Entrepreneurship, Venture Capital    

NVCA Argues Against Parts of the “Restoring American Financial Sustainability Act”

Today, I received notice that the NVCA has formally rejected two parts of this lengthy-titled bill.  (You just have to love the names they put on these bills). 

Don’t let your eyes glaze over – this bill, if enacted with currently wording could really hurt innovation in this country.

As I previously wrote, Senator Dodd brought wants to repeal the existing federal preemption of state regulation over “accredited investor” securities offerings. This would end the uniform, national set of rules for financing start-ups. By eliminating regulation that is working well, the draft bill would expose technology startups to a potentially complicated system of patchwork, state-by-state regulation, resulting in higher costs, more legal risks, and the potential of not being able to raise capital because of different rules in different states.

Nothing would be gained from this change: no additional protections would be provided to the accredited angel investors and there would be no benefits to the national financial system or to the economy.  It would just make raising money much harder for entrepreneurs and line the pockets of corporate lawyers who would comply with these new rules.

Secondly, the draft of the bill recommends adjusting the accredited investor standard for inflation. As we understand it, this section would change the current requirement for an individual of $1 million in net worth or $200,000 in annual income to about $2.3 million in net worth or $450,000 plus in annual income. At a time when many accredited investors have lost more than 20 percent of their net worth in 2008 and innovative start-ups are having an increasingly difficult raising equity capital, decreasing the potential pool of angel investors is counter-productive to supporting the very companies that will create new high-paying jobs.

the Angel Capital Association has joined forces with the NVCA.  Hopefully Washington will listen to reason here.  Otherwise, this could have a tremendously bad effect on our ecosystem. 

March 3rd, 2010     Categories: Entrepreneurship, Financings, Frustrations, Policy    

Denver-based Online Education Startup Looking for VP of Engineering

If you are looking for a new opportunity, a new (but stealth) startup is looking for help.  I’ve promised not to “out’ the company, so if you re interested, email:

In their words:

A Denver-based online education start-up, with a founding team which played leadership roles in creating two of the Internet’s most iconic brands, is seeking a hands-on VP of Engineering. The ideal candidate will:

- Be enthusiastic about the opportunity to both architect and develop the company’s initial product as well as to build and lead the Engineering team for years to come;

- Have achieved stretch goals leading Engineering teams in architecting and building high-availability, scalable web applications within test-driven agile start-up environments; and

- Have a strong technical background including in-depth, hands-on knowledge of Java and open source web architectures.

Sorry, I can’t answer any questions, as I’m sworn to secrecy.

February 24th, 2010     Categories: Entrepreneurship    

Microsoft Does The Right Thing.

Yesterday I posted about Young Startup Ventures trying to rip off Boston-based entrepreneurs.

Today, I’m pleased to report that after hearing of the pay-to-pitch requirements of Young Startup Ventures, Microsoft has done the right thing and no longer is allowing the group to use their facilities.  We should all congratulate them on doing the right thing. 

It appears that the event is no longer on their website, either.  Nice.

I’d also like to thank Dan Primack for the real estate on PEHub and all of you who supported my position via retweets. 

If any of you hear of other similar scams, let me know.  I’d like to weed out as many of these as possible.

February 11th, 2010     Categories: Entrepreneurship, Financings, Venture Capital    

Has Governor Ritter Lost His Mind?

Apparently, the answer is yes, if reports are true that he is trying to fast track a bill that would create a special new tax for Colorado-based software companies.

End result?  Job killing.  While I usually am skeptical of politicians decreeing that “taxes kill jobs” (I don’t think it’s always clear), this one is very clear.

If you enact a special tax on software companies, they will go elsewhere, Bill.  This isn’t the Silicon Valley.  And while Colorado is a great place to create a company, we are still competing with a lot of other great places for talent and venture dollars.

Colorado should want to foster its innovation economy to improve job growth in this state.  A short-sighted money grab is bad a policy for long term economic success.  Read more about it here.

(As an aside, it’s not even entirely clear WHICH types of software companies will be affected.  There are some that think SAAS-based business won’t be taxed, while other, traditional software delivery companies will be taxed.  Whatever the definition is, this is bad for Colorado).

January 26th, 2010     Categories: Entrepreneurship, Policy    

How To Build A Company – Live Presentation

On January 13th, I’m giving a presentation at the University of Colorado entitled “How to Build a Company.”

For information and registration, go here.

This the kickoff of a number of talks going on over at CU that Brad blogged about earlier.

Hope to see you there. Come with questions.  I’ll answer anything.  (and I’ll even try to do so correctly).

January 7th, 2010     Categories: Education, Entrepreneurship, Venture Capital    

Community Office Hours Coming Up

I have another set of open office hours coming up – this Thursday, November 5th.  If you are interested in getting together, you can sign up here.  The TechStars bunker is where I’ll be and I hope, that like last time, I’ll get to meet some new friends.

November 2nd, 2009     Categories: Education, Entrepreneurship, General, Venture Capital    

Colorado University New Venture Challenge Gaining Momentum

The 2nd annual CU Venture Challenge is upon us.  If you have a CU identification card, have a great idea and want free mentorship and potential funding if you win, then check it out.

November 11th kicks off a presentation by Paul Berberian talking about how to pick a good idea and whether or not it is worth starting a business around it.  The event will take place in the law school’s large courtroom at 6pm, with networking to follow.

The New Venture Challenge continues to ramp up Nov. 18 with “Pitch Day,” where entrants will deliver short pitches about their business ideas and network to round out their teams with expertise from CU programs ranging from engineering and liberal arts to business and law. The pitches begin at 6 p.m. in the ATLAS Building, room 100.

More information can be found here.

October 21st, 2009     Categories: Education, Entrepreneurship