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04 Dec 09

Why Webvan Went Bust - WSJ.com

  • Webvan would have us believe that a few years down the road, when
    bandwidth and Internet access become more prevalent, it would have overcome
    its problems and become profitable. Yet none of this would change the
    average $30-$35 delivery cost for complex, heterogeneous orders.
  • The problem is that few are
    willing to pay the true costs associated with such a service. For the small
    group available to accept deliveries and willing to cough up the extra
    cash, Webvan was great. But such a limited market couldn't generate enough
    revenues to cover Webvan's cost of doing business.
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23 Aug 09

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  • Milestones change anyway:  At the early stage you often realize that
    what milestones you originally thought were important actually were the
    wrong milestones.   So you either have to renegotiate the milestones or
    the entrepreneur ends up targeting the wrong things just to get the
    money.
  • The idea that you are going to hard wire the key goals of an early stage company is nutty. The best entpreneurs weave and bob their way into the market, changing things as they go. Setting hard goals is a mistake early on in the life of a company.
09 Aug 09

Doubling Down

  • "if you are going to put more money into a company that is not working, make sure to change the strategy, team, or cost structure, or all three." It's good advice. You will not get a different result doing the same thing.
  • The important thing to focus on when making a follow-on investment in a company that is not working is to figure out what's wrong with the company and use the financing discussion to fix it. That's when the investors have the most leverage and when change is most easily obtained.
04 Jun 09

untitled

  • You need a lot of things to be a successful venture capital investor. You need to understand the market you invest in. You need great networking skills. You need to be able to add value to your investments. You need an understanding of financial markets and how companies are valued. Those skills are neccessary but not sufficient. Because most of all you need to be able to make leaps of faith. And the right ones, of course.

What Venture Capital Can Learn from Private Equity - BusinessWeek

  • Traditionally that has meant funding disruptive change and managing execution risk.
23 Apr 09

A Second Market Is Emerging

  • I understand that there are issues with this development. It will be harder to strike options at low prices when the company's stock has a price history. It will be harder to control who the shareholders are and it will be harder to keep employees motivated to stick around if they can cash out early. These are all problems companies usually don't face until they go public. Now they will have to face them earlier.
11 Apr 09

The Three Terms You Must Have In A Venture Investmemt

  • And in a negotiation, it is critical to know what you must have, what you should have, and what you can live without.
  • The liquidation preference matters because without it, if you invest $1mm for 10pcnt of a business and the next day the entrepreneur gets an offer to sell the business for $5mm, he or she might choose to take it and get $4.5mm while you only get $500k. Sure you could negotiate for a blocking right on a sale, but getting in between an entrepreneur and an exit they want to do is not a recipe for success in the venture business It's much better to say, "give me the option to get my investment back or my negotiated ownership, whichever is more". And that's what a liquidation preference is, plain and simple.
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05 Apr 09

When Talking About Business Models, Remember That Profits Equal Revenues Minus Costs

  • if they continue to do a lot with a little, their business models will be built on operating margins that are very high and can create a lot of value without a lot of revenue.
  • Yes, we are turning analog dollars into digital pennies in many cases. But we are also doing the same thing on the cost side, maybe even more so. And I think that "operating leverage" is going to create a lot of value.
14 Mar 09

How To Conduct Due Diligence on Innovation | ScottDig by Scott Scheper

    • Building perspective involves the following activities (also, this is not just for VC’s. If you want to thrive in your sector, you must also have a pulse for innovation):


      • Adding every major blog in your sector to your RSS Reader (and reading your RSS daily)
      • Finding every blog in each niche that you’re investing in, and adding it to your RSS Reader
      • Attending every trade show and conference related to your market
      • Networking with other VC’s, industry experts, investment bankers, technology analysts and hedge fund partners in order to get a pulse for the market
      • Observing every executive summary that comes your way (don’t pass anything up)
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