It’s election season, the GOP convention is literally in my backyard, and while this is not a political blog, I can’t help myself. As we as Americans grapple with the question of who we want to be our next leader (or at least those people who live in the 11 annointed swing states do), I have had a lot of thoughts lately about the question of what makes a good leader, and what the differences are between successful leadership in politics and successful leadership in business. James O’Toole’s article on President Bush on page 31 of the September issue of Fast Company (no link available yet) brings up a really interesting point in comparing Bush to former president Ronald Reagan….
Archives / August, 2004
Wrap-up on Preferences?
In this Olympic Season, Brad gets the gold medal and possibly world record for longest post with his excellent posting on Participating Preferred securities. Fred gets the silver with his contribution on The Double Dip. Dave Jilk and others share the bronze for their many comments. I won’t add more to the debate but will try to close it by tying together a few of these postings. Fred and Brad both wrote subsequent postings on the related themes of If It Looks Too Good to Be True, It Probably Is and Fantasy vs. Reality. These comments could easily be applied to my thoughts on VCs being silly about bidding up crazy long shot concepts and committing Venture Fratricide. And of…
New Media Deal
Americans have long operated under an unwritten deal with media companies (for our purposes here, let’s call this the Old Media Deal). The Old Media Deal is simple: we hate advertising, but we are willing to put up with an amazing amount of it in exchange for free or cheap content, and occasionally one of those ads slips through to the recesses of our brain and influences us in some way that old school marketers who trade in non-addressable media can only dream of. Think about it: – 30 minutes of Friends has 8 minutes of commercials (10 in syndication!) – The New York Times devotes almost 75% of its total column inches to ads – We get 6 songs…
What's Your Preference?
More thoughts on some of Fred’s and Brad’s points about VC deal algebra, valuation, and liquidation preferences for venture-funded startups. My apologies if this gets a little too technical or too long! On liquidation preference: Preferred stock makes sense, participating preferred makes less sense. Sure, a VC who puts capital at risk in a startup should be entitled to get his or her money out before management and common shareholders who are paid to run the business. But I’ve always had an issue (even when I was in the venture business, although admittedly not as a partner) with the participating preferred security which allows VCs to get their money out first, and then still receive their proportional share of the…
A More Cynical View of VCs
Steve Bayle has a similar posting to my How to Negotiate a Term Sheet posting from a couple weeks ago. While he has a lot of good points, his view is far more cynical than mine. I think an entrepreneur can be friends with his or her investors and board members and that their interests for the company are more often than not aligned. Of course an entrepreneur’s personal career goals may differ from an investor’s goals for the company, but that’s apples and oranges. As long as both parties behave like grown ups, have a healthy dose of self-awareness, communicate openly, regularly, and clearly, and realize that successful business relationships require no less effort than successful marriages, the entrepreneur/VC…
Toys Wur Us?
(With full credit to my colleague Mike Mayor for the title) Today’s announcement that Toys R Us was probably going to sell its retail toys business to focus on the better performing and higher margin and less Wal-Mart-threatened Babies R Us business made me a little sad. It’s really no different than the way Sandy Weill turned American Can into Primerica asset management. Or how Jack Welch sold off GE’s small appliance business and built the company into a financial services powerhouse. Companies transform themselves all the time in search of better earnings and higher multiples. But although it’s “just another” one of those corporate evolutions, I can’t help the notalgiac reflections on running up and down the aisles of…
Why French Fries are Like Marketing
My friend Seth has a theory about life called the French Fry Theory. The theory is simple — “you always have room for one more fry.” It’s pretty spot-on, if you think about it. Fries are so tasty, and so relatively small (most of the time), that it’s easy to just keep eating, and eating, and eating them. I’ve always thought that the French Fry Theory can be applied to many things, usually other food items. However, I came up with a new application today: Marketing. So why are French Fries like Marketing? You can always do one more thing. One more press release. One more piece of collateral. One more page on the corporate web site. One more newsletter….
Morning in Tribeca
We live on the 35th floor of our building in Tribeca (downtown Manhattan), facing south, about 7 blocks up from the World Trade Center site. From 1994-2001, our view was grand and corporate. For a short time in September 2001, it was horrific. Since then, it’s just been depressing. Seeing such a large gap in the skyline every morning just made us remember what — and who — used to be there. It’s not getting a lot of coverage because it’s not the Freedom Tower, but the new World Trade Center 7 building is on its way up. As far as I’m concerned, it’s the most beautiful construction site I’ve ever seen. It’s definitely morning once again in Tribeca!
Baby and Bathwater Redux
Katie Hafner’s article in the New York Times Circuits section today about spam and false positives is right on the mark. Spam filters are still evolving, and spammers are evolving right with them. Although the flood of spam is largely stemmed by a good filtering app, the results for consumers are still spotty: false negatives are irritating, false positives can be very painful (as the article suggests), and the process still consumes a little too much time. While the article nails the consumer problem, it does miss the corresponding business problem around false positives (see below). But things are getting better. While I wrote generally about how email is here to stay a couple weeks ago, there are a couple…
Challenge Response: Oy!
I don’t think the news about AOL buying Mailblocks and its challenge response anti-spam product is such a big deal in the grand scheme of things. But it does give me a quick opportunity to rant against challenge/response. First, I don’t think the world is in danger of mass adoption of challenge/response. Earthlink, which in general has much more sophisticated customers than does AOL, has had a hard time gettings its adoption level of this up to the 7-10% level over a period of at least two years. I think it will be even tougher for AOL. I applaud AOL for trying to do more to help members fight spam, but I don’t think this is the answer. So onto…
How to Negotiate a Term Sheet with a VC (Updated)
This is another in a series of postings that relate to Fred’s and Brad’s various postings about venture capital funding. (Please note I have added an 11th item in response to a comment by Jack Sinclair, Return Path’s VP of Finance and my partner in crime on all transactions for the past five years.) I think the most important part of the venture financing process is negotiating the term sheet. Although they’re only 2-3 pages long, term sheets contain summaries of all the critical aspects of a financing, and once they’re signed, the remainder of the financing process is significantly more “automatic.” Based on the financings I’ve seen and worked on – both as a VC and as an entrepreneur…