Tag Archives: entrepreneurship

No Conflict, No Interest

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Angel investor Naval Ravikant has a good post on the Venture Hacks blog, focusing on the potential conflicts of interest when an entrepreneur is engaged with an investor.  This is an issue that comes up frequently in my experience, so I think it would be useful to note here.

Naval's post lays out a good framework to think of the issue, and he sums it up by what I think is the key take-away:

Consequently, the best entrepreneurs display a lot of chutzpah.
They aren’t fazed by the competition, nor do they see shadows in
every corner. They are their own biggest competition.

I could not agree more. 

PS. The title of this post is a quote I hear attributed to John Doerr.  I always read it as "where there's no conflict, there's not interest".  I am not sure that it makes sense to me but I figured it makes a catchy post title.

Killing Things at Startups

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My friend Auren has a good post on a very important responsibility for entrepreneurs:  the expedient killing of stuff that is not bringing value.  He summarizes the issue:

Being able to kill things early is essential to the long-term
growth and success of any company. But recognizing that you should be
searching for things to kill is the first step to building a better
company.
…
As your company grows, you’ll have more things – both big and small
– that either weigh down growth or are not core to long-term success.
The companies that work proactively to get rid of these issues and
devote resources to the areas that matter are the ones that will be
able to remain nimble, innovative, and win.

This is also interesting to me as a VC.  Usually, we are not in a position to make the killing decisions at our portfolio companies.  So, our job is to prod our entrepreneur partners in their constant pruning of their organizations, and provide the necessary encouragement for them to take action.

FRC’s Exchange Fund

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I'd been away skiing for a week and now I'm back, refreshed and excited about the year ahead of us.  I was gone in a pretty busy week that saw the announcement of Apple's iPad, which I think is getting underestimated. But on to the more interesting development of the week for me:  First Round Capital's Exchange Fund.

Josh Kopelman describes it as:

This exchange fund
was created to allow First Round Capital entrepreneurs to contribute a
small piece of the stock they own in their company  — and share in the
upside of all the other companies.  The fund is only available to
qualified First Round Capital portfolio companies and First Round
Capital does not receive any
economic upside from the fund.  The goal of the fund is to allow our
entrepreneurs to get the benefit of some tax efficient diversification
without giving up their upside prematurely. 

This is an issue I had thought about when we were busy growing SelectMinds.  I'd even talked to my fellow NY-based entrepreneurs Marc Cenedella and Mark Harris about it circa 2004.  We'd agred it would be tough because of valuation metrics.  However, when structured in the context of a VC fund, that problem is probably mitigated.  There are a few other issues raised in the comments under Josh's post.

All in all, I think it's a great way to try to diversify the risk.  I'll be watching excitedly.

Entrepreneurial Focus

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Mark Suster has been blogging about entrepreneurial characteristics.  I like his list and agree with all of his points.

The topic has made me think about a key difference I have noticed in Turkish entrepreneurs and their counterparts in the US (and largely, western Europe): multiple, parallel ventures.

I understand this in the entrepreneurs who are emerging out of a "work for hire" service shop.  In those cases, many of the parallel ventures are off-shoots of ideas or products developed previously.

I also understand large groups of entrepreneurs. In that case there may be excess capacity at the leadership level that gets taken up by a new good idea that the team just does not want to let go.

However, it's surprising to me that a small team that's gone to work on a great idea can find time to focus on a second (or sometimes, third or fourth) project.  There's usually so much work involved in getting one idea off the ground that it should be extremely difficult to parallel process multiple projects.

One reason for the popularity of this model in Turkey may be the scarcity of capital.  Entrepreneurs don't want to put all of their eggs in one basket.  And if they don't have an outside investor who's directing them to focus on one idea, they try to progress several ventures together to see which one is getting traction.

In our investments, we try to get the entrepreneurs to focus on the idea at hand. Many times, there are previous projects they continue to be involved in, but the core focus always has to be in the company we've invested in.

Startup Insight

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Readers of my blog know I am a big Paul Graham fan.  I like him because he is, smart, honest and on the side of the entrepreneur.

His most recent essay, on his insights on what a startup is really like, is one of his most brilliant.  I especially like the part where he talks about the relationshp between founders, colleagues and the companies:

Several people used that word "married." It's a far more intense
relationship than you usually see between coworkers—partly because
the stresses are so much greater, and partly because at first the
founders are the whole company. So this relationship has to be
built of top quality materials and carefully maintained. It's the
basis of everything.
…
Just as the relationship between cofounders is more intense than
it usually is between coworkers, so is the relationship between the
founders and the company. Running a startup is not like having a
job or being a student, because it never stops. This is so foreign
to most people's experience that they don't get it till it happens.

Yesterday, I was discussing this exact same issue with a Turkish entrepreneur.  I can not agree more with Paul.

Minimum Viable Products

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I'm a big fan of Eric Ries's MVP notion.  I firmly believe that it's exceedingly rare that a startup or a product fails because it's missing that nth feature.

Feature creep is tempting in the early stages when the product is the one area of a business that the founders have close to full control on.  And since founders tend to be very passionate and hard working, they feel that adding that one extra feature will differentiate their product and help them in going to market.

Optimizing features by applying the Pareto Principle will lead to a more effective use of resources.  Nivi has a great recent post on this topic with some great ideas and examples.  My favorites:

“If Apple can launch a smartphone without Find or Cut-and-Paste, what can you cut out of your product requirements?” – Sramana Mitra

“The first version of Gmail was literally written in a day.”

– Paul Buchheit

Practical Dreamers

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I was at a meeting this morning where the notion of "Practical Dreamers" came up.  It was proposed that practical dreamers, when they are 100% committed, become extraordinary leaders.

I think this is particularly true for entrepreneurs.  Dreaming is the first requirement; revolutionary ideas are products of creative thinking and dreaming.  But you need to be practical.  If you possess both abilities, then you add 100% commitment and the combination becomes a recipe for success.

I know this sounds a bit cliche and obvious.  But it made me think about the entrepreneurial successes I have witnessesd in my career and without a single exception, they each had all three elements.

Ideal Term Sheet

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There was a post on AVC last week (inspired by a post by Chris Dİxon) on what type of issues are important on early stage VC term sheets.  Both posts and the comments are must-reads for any entrepreneur looking to raise venture capital.

On the heels of this conversation, came a draft first round term sheet published by TheFunded Founder Institute, laying out what they see as standard, acceptable terms.  It's great to see that a FFI, which specifically supports founders, has put out terms that are fair.  I think this document can be a starting point in many funding situations.