Archive for the ‘Frustrations’ Category

Why AtomicPR Sucks Ass. And How They are Breaking the Law, Too.

A little while ago, I blogged about how some public relations firms were spamming me.  In short, I was getting tired of random PR firms sending me emails about stuff that I didn’t care about and thus further cluttering up my inbox.  image

These random carpet bombing strategies were both abusive and stupid – some poor client is paying their requisite $10-15k a month for the PR firm to make a bad impression on me.  In fact, I alerted a VC friend of mine that one of the firms was carpet bombing about his recent financings and he was none too happy.

One PR firm, in particular has really taken this to a new level:  Atomic PR.

The folks seriously suck ass.  Not only do they carpet bomb me, but every time I politely ask them to take me off the list of the stupid stuff they send me, they either one: don’t reply, or two: reply that they will, but never do.  And then I get an email from some new “bright and shining face” informing me of some “exciting news” that I couldn’t care less about. 

I tried to warn them, but apparently they didn’t believe me when I said that I would call them out. 

So, I officially start my boycott today, of AtomicPR until they vow to change their ways.  Don’t hire them.  And PLEASE link, share and retweet this post, so that when folks search for “AtomicPR,” the Google gods rank this post highly.

And Atomic guys – if you don’t stop, the next step is to report you to the appropriate government authorities since you don’t really allow anyone to opt out of their communications. 

If anyone has a lot of time on their hands and wants to email my friends at Atomic PR, here are their email addresses:

June 4th, 2010     Categories: Frustrations, Law    

Be Prepared

It’s not just the Boy Scout motto, but some seemingly obvious advice that I’ve seen some folks screw up lately. 

As I often say, there are only two resources that venture capitalist don’t have enough of and that is time and money (to invest in companies).  The money is my issue.  I’d love to invest in more companies, but realistically don’t have the bandwidth to properly advise more companies than our current pool of capital implies.

And while I don’t want to infer that my time is worth more than anyone else’s it really frustrates me when people waste my time.  I take a lot of meetings with folks looking for either funding or networking opportunities.  And despite the amount of meetings I take, there is a constant backlog and folks who can’t manage to get onto my calendar. 

I wrote previously about three things to not do if you are pitching me, which dealt with poor preparation in pitching. Today’s post is directed toward folks whom aren’t going get funding from me and are looking to network.

If I spend some time on someone’s behalf, I have little tolerance for people being unprepared.  I take it upon myself to be as prepared as possible and completing as much background diligence as possible to lessen my cluelessness factor.  (Although admittedly, there are still plenty of meetings where I am still clueless, but it’s not for a lack of trying).

I routinely try to help out folks with introductions to trusted friends and colleagues.  In most cases, I can find a “win win” situation where each party really enjoys meeting each other.  Other times there is not a mutual win situation and I’m calling in a favor on behalf of someone. 

Sometimes, however, the person whom I meet with and then introduce them to a valuable resource doesn’t come prepared to the second meeting.  It’s really insulting to both me and my friend/acquaintance.  I hate getting calls from folks telling that I’ve wasted their time.  I feel horribly, in fact.

Secondly, I am always bummed out when a conversation begins with “tell me about yourself / Foundry Group.”  While most folks like to talk about themselves, this is a total throw away question which makes me think that you haven’t spent any time thinking about our interaction.  I’m sure there have been sometimes when this is just small talk and I’ve misinterpreted it, but perhaps the ex-lawyer in me judges people as much by the questions that they ask, than the answers they give. 

Life is short.  Time is massively valuable and I promise to try my best to be efficient and respectful.  While a small minority in my life, I wish everyone else would too. 

April 6th, 2010     Categories: Frustrations, Venture Capital    

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    

Are PR People Becoming the New Spammers?

Is it just me or are you receiving a lot more emails that look like this:

Hi Jason,

Wanted to make you aware of the below funding announcement just released regarding a new [BLAH-nothing I care about]. Happy to make any introductions to the CEO, [John Smith] or any of the  below individuals for further comment, if interested in learning more.

Any questions or additional information you may have, I can be reached at 212-867-5309 or



Then this is followed by a large press release about something that I don’t care about and I usually get two copies to boot.

And, of course, none of these folks are complying with the law by offering the ability to unsubscribe, so I bitch back and ask them to take me off the list, which about half the time they don’t respond.

So, I take their name and numbers down and make sure that when my companies need PR help, they won’t be using these spammers.  I realize that folks have a job to do, but why would I want my companies paying for a PR firm that is just carpet bombing information?  I can find ways to do that MUCH more cheaply than hiring a PR firm. Use some creativity, target your audience and if you can’t – at least follow the email spamming laws.

One more thing – not all PR folks are bad.  I’ve worked with some really great ones who don’t behave like this, but it feels like the velocity of those that do is increasing.

Rant over.

March 12th, 2010     Categories: Frustrations    

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    


Happy New Year.  I’m back.

I’ve decided 2010 is the year that I admit my Law Firm 2.0 thesis is wrong.  I blew it.  BigLaw is alive and well – perfectly efficient and constructed – and all of my ramblings were just that.

Yeah…  right.  It’s not April 1.

But I AM pretty pissed off at people not paying their lawyers.  Even if their lawyers are inefficient, frustrating and sometimes comical.  (But still more expensive than hiring Dane Cook or some other C+ list comic to perform at your kid’s Bar Mitzvah).

Why am I mad?  Aren’t I the guy who is constantly picking at the big firms for their business model issues and imploring them to reduce client costs? 


But the people refusing to pay their lawyers and / or are always demanding discounts are not helping the situation.  They are only making it worse for themselves and the rest of us.  Here’s the scoop:

I’m hearing from more and more lawyers (and “proud” clients) that their clients are expecting discounts on every bill their lawyers present them.  It ranges from hard and fast rules (e.g.,we’ll pay 80% of your bill and 0-100% of the remainder depending on performance or if we feel like it) to haggling on each individual bill.

And what do the lawyers do?  Well the first step is to protest, but normally, the firm bends and gives into to some form of discount.  (a really interesting blog quoting internal Simpson Thatcher documents about client discounting is a must read)

At the end of the year, the firms figure out their revenue and profit margin and realize that they didn’t make as much as they would like, so what do they do?  They raise their hourly rate.  If they are going to provide discounts, they want a larger base to discount from. 

The outcome of this is that now everyone is paying higher hourly rates and we are all worse off.  In fact, those of us who pay our bills are subsidizing those who don’t during the year. 

Lawyers used to never discount, but accounting firms have ever since I’ve been working with them.  Accounting hourly rates were always known to be exorbitant, but the game was that they’d come and cut you a “good guy” discount, sometimes as much as 50%.  So this game is nothing new.  I fear this is where BigLaw is going. 

Now, I’m not arguing that you should NEVER ask for a discount.  There are plenty of instances where the firm deserves to give back some money due to a host of issues.  I’m just peeved at those who make their Law Firm 2.0 thesis one of simply not paying their bills.  If you have that much issue with your outside counsel’s billing rate, address the situation in a transparent manner or hire new lawyers. 

Because if you don’t, you are only incenting the firms to create a billing eco-system that is even more inscrutable and opaque.  This is ultimately worse for all of us, unless we all collude and adopt the same method of payment.  Which we won’t.  And besides, it’s stupid.

Law Firm 2.0 depends on the clients too.  We must do our part.  Short cuts like this aren’t Law Firm 2.0, rather short sighted window dressing.  Work with your partners to get them more efficient and show them the way if the can’t themselves.

And if not, find a new firm.  There are plenty out there that are starting to get religion.

Welcome to 2010.

January 5th, 2010     Categories: Frustrations, Law Firm 2.0, Venture Capital    

Senator Dodd – Making it harder for small businesses to get funded

Several of my Seattle friends pointed out that Senator Dodd has proposed changes to the regulations that govern angel and VC investments.

Every time a VC or angel investor participates in a venture financing, there is a Reg D statement that is filled.  Currently, it’s a federal file that you file with the feds and then each of the states involved (company domicile, investor state, etc.) accepts the Reg D form. This is good because companies only have to pay to comply with one set of rules, rather than many.  The Dodd legislation would repeal the existing federal preemption of state regulation over “accredited investor” securities offerings. States would then, presumably, have to come up with their own rules and standards. 

It is important to have uniform regulation of securities offerings.  Otherwise the costs increase for everyone as startups are required to comply with differing state-by-state laws.  As state laws drift away from each other, eventually this might include startups having to hire multiple legal counsel.  It’s simply a waste of good capital, unless you are a lawyer who wants to make more money.  (In all fairness, the folks who pointed this all out to me ARE lawyers and aren’t concerned with billable hours, rather their clients). 

I am not sure why Senator Dodd would want to change this.  I have no experience in anything going “wrong” with the current regime.  It has been around for decades and the system works well.  There is no compelling reason to add these new costs to the companies and their investors.  I’d like to know what is driving this proposal. 

If you agree, there is an online petition.  Please sign at

November 24th, 2009     Categories: Frustrations, Law, Technology    

Oppose Bailouts for Venture Capital Investors

As the Obama administration starts to talk about propping up small businesses with the next phase of the bailout, I’ve begun hearing noise from some venture capitalists and angel investors that the government should provide financial support to startups, early-stage venture capitalists and angel investors.

All I can say to this is “vomit.”

There are white papers being developed, politicians lobbied and it’s all based on the proposition that what’s good for small business is good for the United States.

I agree with the premise.  In fact, my open letter to the Obama administration on what innovation policy should be details my support and how I think the government should be involved in these efforts.

But it shouldn’t involve bailouts or cash handouts to our industry.  I find it offensive that high net worth angel investors or highly compensated venture capitalists along with their sophisticated investors need to be bailed out.  We, as an industry, should be responsible for our investments and frankly, the current recession hasn’t affected our early-stage industry very much.  Asking for government help is just being greedy and opportunistic. 

Similarly, the entrepreneurs who take risks to create companies have the same risks today that they did previously.  Yes, on the margin, it might be a bit tougher, but there are plenty of benefits as well, like lower priced rents and the ease of hiring good people.

To say that we should use the general public’s tax dollars to prop up our industry is wrong and I encourage people to openly oppose it to those that are starting to get behind the movement. 

October 22nd, 2009     Categories: Frustrations, Policy, Venture Capital    

An Open Letter to Mr. Obama on Innovation Policy

Dear Mr. President,

I feel compelled to write you a letter to express my thoughts and frustrations regarding innovation policy in our country.  While I have modest expectations that you’ll actually read this, perhaps someone in your inner circle will and represent my thoughts.

First of all, I hope that you realize how very fortunate we are as a country to have an innovation and entrepreneurial engine at the heart of our economy.  It is part of our culture and is a pervasive mind set that is the envy of the rest of the world.  Furthermore, it was not created, nor is it (currently) regulated by the government.  If you look at the venture capital industry as a proxy (since many innovative startup companies need some financial backing to prosper), one can see how important this ecosystem is.  The latest report from the National Venture Capital Association called "Venture Impact" talks about the important of venture-backed companies in the macro U.S. economy.  Among the highlights:

- Venture-backed companies employed more than 12.1 million Americans in 2008;
- Venture-backed revenues were $2.9 trillion in 2008, equating to 21 percent of US GDP; and
- Venture backed companies grew jobs and revenues faster than their non-venture counterparts from 2006-2008.

Best of all, none of this costs the government anything, nor does it require any bailouts.  The jobs created in this country are real, high paying and reflect the newest opportunities in the world economy and aren’t shipped overseas.  One would think that you would want to do everything in your power to encourage growth in the innovation sector and make sure current proposals don’t unnecessarily negatively impact this gift that our economy has been given.  So I propose to you some things that your administration should and should not do.

What your administration should do:

1. Reform immigration policy.  My partner Brad Feld wrote a post last week on the "Startup Visa Movement," based upon the earlier writings of Paul Graham.  The basic premise is this:  we should openly encourage and enable people from different countries to move to the United States, start companies and create jobs.  Clearly, there would need to be some limitations and thresholds to ensure that the companies created were "real," but I am frustrated by how many foreign founders are being forced home due to our overly-restrictive policies.  I’ve seen two companies this year in Boulder, Colorado, that would have received U.S. venture funding and stayed here, but won’t be able to.  There are many of such cases across the country.  

Also, we still don’t have a handle on the H1-B issue.  Every year, our U.S.-based investments struggle to hire all of of the computer science talent that they need and their growth is stunted.  It’s time to de-politicize the immigration debate and concentrate on ways that we can make this country’s workforce even stronger. 

2. Enact real patent reform.  There are many points of view out there – from abolishing some types of patents, to materially revising the way jurisdiction is handled in patent cases, but, regardless, the loud chorus from the innovation economy is that the patent process is not working.  Patents are too costly to obtain, are too uncertain in the rights they grant when obtained and then all too often, end up with meaningless lawsuits that amount to nothing more than a tax on innovation in favor of lawyers.  We need to clearly define what is patentable and what should not and re-architect the system to deal with the realities of a connected world.  

3. Push for FASB to "figure out" valuation methodologies.  Over the past few years, venture funds have had to "mark to market" their investments.  This "FAS 157" (or Topic 820, as it’s been recently renamed), has placed a tremendous burden on venture firm managers and their investors.  In short, not even the accountants can tell us how to accurately value our portfolios and there is tremendous cost and uncertainty about the asset class because of it.  I’ve written about the issues, here, in detail.

4. Get a handle on Sarbanes Oxley / help with opening of the capital markets.  The last financial meltdown earlier this decade brought about increased regulations through Sarbanes Oxley.  While some credit the act for deterring and lessening fraud in public companies, it’s easy when almost no companies are going public.  In my opinion, the frauds perpetrated in the most flashy cases (Enron, Worldcom, etc.) were the work of bad actors and lazy accountants.  They were not systemic in the industry and even the rules today can be easily circumvented by two unscrupulous executives with a criminal agenda.

What the effect has been is to stop the flow of companies going public which has greatly hurt venture capital returns and has driven venture firm investors (limited partners) out of the market.  This has severally constrained the amount of capital able to fund new and innovative businesses.  I think a complete review of all of these rules needs to be undertaken, as I’ve had many conversations with entrepreneurs who don’t even want to go public due to all the red tape involved with Sarbox. 

The secondary effect has been a rush to other foreign markets, whether they are in London, China or India and thus the U.S. is losing its market share of new offeringings and further weakening our financial industry.  

What your administration should NOT do:

1. Regulate the Venture Capital Industry.  We aren’t hedge funds.  Nothing we do increases "systemic risk" in the economy.  In fact, the entire VC industry invested a total last year of $28 billion dollars (not an atypical year).  That sum is less than half the amount that Bear Stearns was borrowing every night before its collapse.  Regulating us, in the best case, foists additional costs upon us that smaller, early-stage VCs can’t afford and worst case, materially and negatively impacts the VC industry’s ability to fund new companies.  Lastly, it should be noted that investors in VC funds are of the highest sophistication levels.  This isn’t the case of protecting the average investor.  The WSJ recently had a great opinion piece supporting this position

2.  Increase taxes, especially capital gain taxes.  There is quite a bit of research that shows correlations between low capital gains taxes and high GDP growth rates.  I won’t pretend to have a PhD in economics (although I did manage to get an undergraduate degree from the University of Michigan in it), but many of the entrepreneurs I speak to say they specifically take the outsized risk of starting a business because of the potential financial gains.

Additionally, changing the characterization of venture capitalist’s carry is inconsistent with how VCs invest – long term with high risk of capital loss.  I also have a hard time delineating between founder shares and VC carry and wonder if VC carry is changed will founder shares be next?  The reason behind capital gains treatment was to incentivize long term investing and also to help make up losses from risky asset classes that benefit our society in the long run.  This is precisely what VCs do. 

3. Engage in activities that will devalue the dollar.  One thing to keep in mind is that with some of the current issues detailed above, it is harder and harder for VCs to raise money to fund startups.  Small businesses must do more with less.  If the dollar becomes devalued, these companies would effectively have less money to spend on hiring and other activities to make them successful in the global marketplace.

Again, Mr. President, I urge you to consider how your policy makers are taking into account one of the most important drivers of this country’s economic future.  This is not about venture capitalists:  it is about the ecosystem of innovation which venture capitalists spend their lives funding.  We’ve been blessed in this country with a large population of entrepreneurs and we need to foster this culture so that we can maintain our competitiveness as the greatest economy in the world.  To that goal, the government can largely stand out of the way and help on the margins to tweak some things that will benefit all. 

I humbly ask for your consideration. 

September 21st, 2009     Categories: Entrepreneurship, Frustrations, NVCA, Patents / IP, Technology, Venture Capital    

Great Article on Intellectual Ventures (sucking)

For those of you who share my disgust with the current patent ecosystem, here is a great piece from Timothy B. Lee on “Intellectual Ventures.”

I use quotations, because it’s nearly impossible for me to call them “Intellectual Ventures” as I see nothing intellectual about the firm but for their desire to further deteriorate innovation in this country while trying to bilk a buck or two (or millions) from hard working entrepreneurs.

Timothy summarizes Malcolm Gladwell’s expose of IV where he stated that IV

“hires smart people to participate in brainstorming sessions and then has patent lawyers immediately file patent applications for every idea that comes up during the discussion, without bothering to actually implement any of them, or even devoting much effort to verifying that they actually work. IV then approaches firms that are doing the hard work of implementing “their” ideas and demands a cut of their profits.”

If you aren’t disgusted, you should be.  Timothy asks how any of this benefits anyone other than IV and the patent bar.  His take on patent reform?

“a good yardstick would be to look for policy changes that would tend to put Myhrvold and his firm out of business.”


September 9th, 2009     Categories: Frustrations, Patents / IP