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venture

9 Blunders of VCs Turned Entrepreneur

by Brian Solis on November 19, 2008

Our guest blogger, Larry Chiang, is an instructive humorist and blogs at Business Week. If you liked “10 Things They Don’t Teach You at Business School“, How to Work a Cocktail Party and “10 VC Mistakes,” you’ll like this submission on some all-important mistakes VCs make when they become entrepreneurs themselves.

By Larry Chiang

Jumping from venture-capitalist-board-member to “start-up founder and CEO’ is near impossible for the HBSer / GSBer to successfully do. The b-school molded HBS-Harvard Business School / Stanford Graduate School Business (GSB) need to navigate eight pitfalls.

-1- Too self indulgent.

Being smarter than a billionaire you met during b-school show-and-tell, does not make you a better entrepreneur. This fundamental fact sinks many want-preneurs.

Stop the ego massaging and set aside all 170 IQ points and dumb it down. Robert Downey Jr recommends going, “partial retard” in his character from Tropic Thunder.

Look at the biggest hits:

“eBay” – pretty retarded selling beanie babies and Pez dispensers in the 90s

“Yahoo” – a dumb but cute-funny, pre-orgasmic sound upon discovering a search result on a Stanford server with the same name.

“Google” – please. The site (and campus) still looks like romper room time with Barney. No not that one…

THIS ONE

“Duck9″ – are you effen kidding? The whole site is a logo with a dumb riddle.

-2- Too focused on perfect formula vs market pain.

What do you call a mish-mash or under experienced payment executives doing peer-to-peer payments? The payPal founding team.

You can bet, the PayPal mafia (since their $1.5B exit) focuses on market pain.

-3- Too cerebral.

They do not pay you to be smart. They do not pay you for researching a silver bullet technology. They pay you to promote. They pay you to raise the $0.02/share stock price by promoting adoption of your
technology.

Another trapping of too cerebral-palsyness is knowing too much about too many things. Entrepreneurs hone in like a laser beam. Heck most entrepreneurs do not even know what a credit FICO score is or a credit crisis or have talking points on the impending Obama Presidency [insert pic here]

VCs read coverage and this rss habit needs to be KICKED when you put the CEO hat on.

-4- Too unproductive.

Why are VCs turned entrepreneur lame-duck?! Maybe it is the ex VC’s pedigreed family. Maybe it is the blue blood family money… Maybe criticizing and producing are too different from each other. Maybe consulting and executing are too different from each other.

Also, meetings taken by VCs for your new upstart can not be logged as productivity. Those charity meetings are taken as a hedge because they think you will fail and be a VC again.

Fire the wife. Fire the girlfriend. Your new wife and your new mistress have a new name… and it is called D-u-c-k-9. Or Asse9. Or Buck9. Or elephant9 if you are stealing my URL (yes “Elephant9″ is
registered to a Sand Hill Road squatter).

-5- Too talentless.

Academic talent does not usually translate into entrepreneurial talent — some would argue academic talent NEVER translates into entrepreneurial talent, but then they’ve never met Tom Chiang (dad).

SOLUTION. Re-gear, retool and start sandbagging for success. I mention sand-bagging because it is defined as deliberately misleading someone to think you NEVER did b-school. You can not ramp up entrepreneurial talent while clutching your tier one MBA status.

-6- Too inflexible.

Welcome to beta male-ness. You were an alpha (sort of) back when you were quoting the size of Fund XIX. Live, embrace AND WALLOW in your new tier two status.

Mr. Ex-VC, want an exercise in ego flexibility? Hand out slices of pizza at the next blogger meet-up that Wordpress produces. Kiss blogger ass (or Asse9) right near the butt crack.

SOLUTION: sell your condo and go “native”. I own three homes but live in a dorm room on University Avenue… Eff you, because this advice is falling on deaf ears.

-7- Too non promotional.

Sell it. Rarely does something sell itself. I can not repeat this point enough.

Sell it don’t smell it

“The key to sales is to get them to sign on the line which is dotted,” Alec Baldwin in Glengarry Glen Ross.

-8- Too historical.

Majors from the last war that are now Generals historically fight to re-win lost battles. B-school does something similar to us when we pour over HBS (Harvard Business School) case studies.

So you are damned if you know case studies, and you’re damned if you don’t. But the biggest factor VCs have in not making the jump to entrepreneur is…

-9- Too unable to weather a storm.

Entrepreneurship is 90% crap so weathering a first storm motivates most exVCs into “cutting their losses”. Get ready for a future storm with my litmus test…

TOUGH QUESTIONS TO ASK YOURSELF.
Can you handle a mutiny?
Can you ramp up while 70% of your staff is severed?
Can you buy your assets back in BK court and restart?
Does the thought of that make you cringe?
Can you sell your way out of a wet paper bag?
Can you charm you suppliers and vendors for 2-10 net 90 terms after you
signed docs for net 30?
Can you negotiate your debts with collectors minutes before you go on a
Tony Perkins panel?

Most entrepreneurs wither-and-wilt during the third storm they face. The over-under on the number of “storms” a VC HBSer can handle: 1.3. Smart money bets the under. TRANSLATION. An over under but is when the “house” calls out a prediction that is eerily spot on. You place your “bet” and pick ‘over’ or ‘under’. Easy, weasy, Chin-easy. Gawd I just made that up.

The one hit wonder has an over under number of 1.8. Being more fragile than a one-hot wonder is NOT a good position to be in.

Stay tuned. When I cover (err crash) the SAG Awards and Oscars, I’ll cover the four mistakes of actors turned directors.

My focus is, “What They Don’t Teach You At Stanford Business School” and I have a book coming out 09-09-09. The next conference I am going to is Tony Perkins VC Conference

Larry Chiang is the founder of duck9, which educates college students on how to establish and maintain a FICO score over 750. He is a frequent contributor to GigaOm’s Found|Read. His earlier posts include: How to Work The Room; 8 Tips On How to Get Mentored ; and 9 VCs You’re Gonna Want To Avoid. You can read more equally funny, founder-focused-lessons on Larry’s Amazon blog.

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Inside the Mind of Billionaire Investor John Doerr @ Web 2.0 Summit

by Brian Solis on November 6, 2008

by Brian Solis

During day one of The Web 2.0 Summit, we were treated to an incredibly eye-opening conversation between billionaire investor John Doerr and John Heilemann, a contributing editor at New York magazine. Heilemann had just flown in from Chicago where he spent time with Barack Obama. Believe it or not, Obama had a couple of questions for Doerr that he channeled through Heilemann.

This is where the conversations begins.

Obama requested Doerr’s recommendation for chief technology officer of the United States. Within seconds, Doerr replied with ease.

“Bill Joy,” he said quickly.

Joy is the co-founder of Sun Microsystems, in which Doerr was an early investor and is now a partner Kleiner Perkins Caufield & Byers.

Doerr added, “It would be a sacrifice to lose him to the Obama administration, but there is no greater cause.”

Obama’s second question sought Doerr’s guidance on which single policy issue would most help entrepreneurs.

Again, with a prompt and convincing response Doerr jumped, “Kickstart research and innovation in the energy sector.”

He then focused on the fact that the US also needs to invest in graduating a greater number of capable professionals. His goal is to double it from 30,000 to 60,000 graduating in physical sciences and engineering. Doerr highlighted the fact that a majority of students are studying from foreign countries. After they graduate, we send them back home, “what kind of foreign policy is that?” he quipped. His advice, “Staple a green card to each diploma!”

The conversation traversed a multitude of subject matter. One such discussion focused on the financial crisis.

His observation is that Silicon Valley and technology is a big part of the economy. But that venture capital investments and startup performance are not to blame this time. He also said that the mortgage industry is not solely responsible either. We’re enthralled in a “crises economy” according to Doerr.

“People lost faith in our government, leaders, and they lost faith in their money,” Doerr believes.

Doerr continued, “Wall Street and Main Street are intertwined. Kicking people out of their homes makes no sense at all. What lenders should do is revalue their homes, issue a new 30 year mortgage and have them restart their lives in their existing house.”

Mr. John Doerr also discussed the startup market.

“There’s been a lot of activity that doesn’t deserve to be funded,” Doerr exclaimed. “Good ideas will still get funded, but it’s a buyers market, not a sellers market, so terms are going to be different.”

His main concern nowadays is how can his team get those companies to produce a return.

“Google is just not going to buy a lot of these startups, so who else will?” he asked.

He warned startup founders to get ready for a longer haul than most anticipate. To help startups survive the financial crisis, he offered the following 11 tips:

1. Act now

2. Cut once, cut deeper than you need. You only want to do this once – use a scalpel, not an axe

3. Have or secure 18 months of cash

4. Defer facilities expansion and expenses on technology infrastructure

5. Evaluate R&D priorities and focus on what truly is necessary and important

6. Renegotiate all contacts – you’d be surprised that everything, right now, is negotiable

7. Everybody in the company ought to be selling

8. Pay people in equity in addition to reduced cash

9. Secure cash – treasuries. security backed agency loans

10. Figure out the leading indicators of your business dynamics so you can react quickly

11. Over communicate without sugarcoating

“Most importantly,” he added, “do not cut hope. We will emerge much stronger.”

Pictures from the Web 2.0 Summit Day One are available in my album on Flickr.

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LinkedIn Links in $22.7 Million

by Brian Solis on October 23, 2008

by Brian Solis

LinkedIn announced a huge $22.7 million addition to $53 million Series D it closed in June bringing the company valuation to a staggering $1 billion.

The latest fusion of cash includes news investors SAP, Goldman Sachs, and McGraw Hill along with existing investor Bessemer Ventures.

This places the popular network in a strong cash position to not only weather the financial storm, but also excel in it. Tomorrow’s leaders seize today’s opportunities!

It’s a buyer’s market, so perhaps an acquisition or two may be on the horizon.

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10 Biggest VC Mistakes

by Brian Solis on October 3, 2008

Our guest blogger, Larry Chiang, is an instructive humorist. If you liked “9 VC’s You’re Gonna Want To Avoid,” you’ll like this submission on some all-important fundraising mistakes to avoid for entrepreneurs.

by Larry Chiang

Who is the biggest fundraising loser (ever)?

Me.

And you will benefit from my pain.  You are getting nearly ten years of fundraising mistakes boiled down into ten tips in ‘how to work a VC’.

** My fundamental thesis is this:  **

“Entrepreneurs need to get benefit while temporarily ‘failing’ at the fundraising process”.

These definitely fall into the category, “What They Don’t Teach You At Stanford Business School” – yeah I’m turning my pain into GigaOm blog posts and even a book coming out 09-09-09.

Why wait for the book, here are my 10 tips.

-1- Set aside your ego.

The business you gave birth to and nurtured into rocky adolescence will get hammered and torn to shreads by VCs.  It is time to learn the entrepreneur secret society method of justaposing pain and pleasure.

-2-  Know how knowledge flows.

It is like heat transfer and the three laws.  Knowledge flows from smart to dumb, experienced to inexperienced and some gets lost (so take some effen notes).

Entrepreneurs need to get feedback and advice but not get mentored by someone who just reads coverage.

Solicit granular advice.  Air dropped advice from 30,000 feet lands with a messy splat and scatters.  Sometimes it back-fires by landing on a founders head and killing his spirit.  Call out rudeness in your GigaOm blog post… oh wait, you do not blog for Om but I do.

-3-  Entrepreneurs should never be busy managing VC board member impressions OVER REVENUE GENERATION.

Building shareholder value can be a fart into your office max chair but sales are hard and real.  80% of founder mind share should be pointed answering the question, “How are we making money by solving a problem?”.

-4-  Skip the “9 VCs You’re Gonna Want to Avoid” by getting to 900k in revenue. And, learn from Robert Scoble’s Mr. No.

-5- How to close for a VC meeting via email.

When you get a good VC contact, the inclination is to draft an AIDA email. A-attention, I-interest, D-decision and A-action.  Skip the three paragraph email and send them one ping only.  The ping confirms the email address.

-6-  Close for a VC Meeting Via Voicemail It is similar to closing a new customer where I outline nine tools in a GigaOm post.

The key is to ask for ten minute conference call via voicemail.

-7- Entrepreneurs can get a soundbyte that advocates them using this hilarious technique I will ONLY tell you at a party.

This works parlaying VC probe meetings into hard-fast funding leads.

-8- How to charm an introduction.

Read my best stuff: work a party, man-charming + how to work a twitter party.

-9- Find and locate your balls.

This especially goes for female entrepreneurs and minority entrepreneurs (ie Asian).  Racial profiling is not kosher according to US laws, but character compassing has socio-economic background as a leading indicator of whether you will sack up.

Show some balls and tell them to take some notes during your meeting.

Remember!

No notes jotten…
Means your meeting went rotten

If you have it in writing, you’ve got a prayer.
If you don’t, you’ve got nothing but air.

-10- Press and speaking engagements don’t always help your start-up.

Remember, we treat VCs like the quasi hot girl who was popular with the boys at Stanford.  Once you leave the farm, its a rough world with much less deal flow.  We manage the VC similarly when;

- we politely disengage at the first sign of rudeness
- we don’t thank all meetings
- once you’ve shot your research load, you’re done. HOLD SOMETHING BACK
- NO reciprocity, no more meetings or emails

And remember. They’re ignoring you cuz they don’t think you are a winner so build your business while you are fundraising.

BONUS

-11- Pin the tail on the donkey.  Nothing will establish you better and faster than a well measure, well documented biatch slap.

Being mean back to a VC launched a community of entrepreneurs.  It is number 13 (not coincidentally crazy #13) in my GigaOm post – 13 o’clock in Shanghainese means crazy.

BONUS BONUS
VC HAWT High School GIRLS
1. They don’t get sold. They buy
2. They love the waitlist
3. They love community validation
4. They have a hard time thinking for themselves
5. They gossip amongst eawx other
6. They hate hate desperation,
7. They do not like false-ness
8. DDSS is like a tractor beam
9. Understated money/treasure/talent makes them 10. They listen with
significant preconceived notions.
11.  They love a good party.
12. Who do they wanna date?  Whoever the homecoming queen is dating?
13. Can they pick a rising star?  Do they make any carry… ever?! School is nurturing but fundraising is not.  I wrote about it in, “9 Things Stanford B-School Won’t Teach You”

Larry Chiang is the founder of duck9, which educates college student on how to establish and maintain a FICO score over 750. He is a frequent contributor to GigaOm’s Found|Read (if you couldn’t tell). His earlier posts include: How to Work The Room; 8 Tips On How to Get Mentored ; and 9 VCs You’re Gonna Want To Avoid. You can read more equally funny, founder-focused-lessons on Larry’s Amazon blog.

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