VC:VC Talk to the Hand

Talk to the Hand is an excellent book I am reading on rudeness in today's society. Rudeness is a fun topic, and Lynne Truss has lots of fun with it.

However, rudeness is also a factor in both my VC worlds: venture capital and venture cycling. As another in my series of VC:VC series, here are some musings.

In the startup world, it is no secret to entrepreneurs just how rude venture capitalists can be. This post from Mark Suster, an entrepreneur currently raising funds for his company, Koral, captures the gestalt wonderfully well. (It has the added benefit of ranting against Powerpoint as strongly as I do!)

Recently, we at Sigma decided we would publicly leave our cell phones and blackberries at the door (or with our assistants) before going into a meeting with entrepreneurs. This has a two fold benefit. First, we are not tempted to be one of those rude groups focused more on the gizmo than the guests. Second, it looks great!

Paul Levy, CEO of Beth Israel Deaconess Medical Center in Boston (one of the large Harvard affiliated teaching hospitals), recently commented on this in his blog. He challenges all of us to go cold turkey on Treos and Blackberries. As one who does not have email follow me on my wireless device, I can wholeheartedly applaud his own approach and his suggestion that the rest of the world follow suit.

Of course, these musings are equally important in the non-profit world where my venture cycling is part of my life chairing the board of Hazon. I notice that during board meetings there is far less bad Blackberry behavior than in my business meetings. People really do seem engaged and involved enough that they are happy to leave that all behind for a while. Moreover, I think that there is a respect for the volunteer nature of the engagement we all have. At those meetings we know that busy people are spending many hours involved in a cause about which we all care, and that to nurture others' passion, we should be as respectful as we can when we are in meetings. I like this (obviously) and am glad that at Sigma we are showing, at least in the form of it, that same respect for our entrepreneur visitors by checking those gizmos at the door.

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Blog Tag

Jacob Ner-David tagged me in a new game that he was tagged into by Jeff Pulver. This is a game of blog-tag. Jeff started off what might be called a chain-posting by undertaking a small task and tagging five bloggers (including Jacob) to do the same, and for them to each do the same, and so on...

The task is for me to list five things about myself that relatively few people know. Here they are:

1. My favorite author is Allegra Goodman, who I am lucky enough to know as a friend
2. I am an avid Israeli folk-dancer, although a bit slow learning new dances, and try to go once a week with my daughter, Hannah
3. Three productions I love, and from each of which I have memorized many quotes through repeated exposure:
1. The Importance of Being Earnest (play) by Oscar Wilde
2. The Blues Brothers (movie)
3. The Hitchhikers Guide to the Galaxy (radio show, TV show, books, movie)
4. If I had time for a hobby, beyond my cycling, it would be genealogy (I found a fourth cousin living right here in Newton, MA through this hobby)
5. When in college (at Hatfield College, Durham University) I coxed a rowing four - it was not competitive, just a group of friends going out on the river for exercise... they exercised their bodies, and I exercised my voice!

Now I get to tag five other bloggers, and I choose: Brad Feld, Yossi Abramowitz, Dan Bricklin, David Aronoff, David Harlow.

Tag, you're it.

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Green gifts

Check out a green guide to gift giving, or is that a guide to green gift giving, or perhaps a guide to giving green gifts...

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VC:VC Capital Efficiency

Capital efficiency is the notion that an organization uses capital wisely, frugally - that the capital is used to best effect. The ultimate measure is the amount of returns to investors as a multiple (we hope) of the capital invested, adjusted by the length of the investment. Obviously doubling your investment in a year is better than waiting 10 years for the same result. A rather esoteric calculation called IRR (internal rate of return) is used by Venture Capitalists to measure time-adjusted returns to investors.

It is conventional wisdom to note that a software company is more capital efficient than a hardware company. If that were always true in an absolute sense then no hardware companies would ever get VC investment. However, in this case we tend to mean that you need more capital to get from stage to stage. Each "spin" (or revision) of a semiconductor product, for example, costs far more than a new version of even a fairly complex software program. What we mean, therefore, regarding capital efficiency, is that the company will advance to less risky stages using smaller amounts of capital. The bets we place on software companies are generally smaller, and the company gets to delivering a product with less capital.

As a venture cyclist, how do I think about capital efficiency? Certainly, once I have bought the bike (and the bling) I have very little follow-on financing to do. However, this means that almost all the investment was made before the risks were worked out: would I make it as a cyclist, or would the bike just languish unused in the garage? I guess a bike is just like other hardware!

As a venture cyclist I also think about Hazon and other non-profit organizations... and, of course they are capital efficient (the small ones I am involved with, at any rate). They don't have enough capital to be inefficient. Of course, "returns" are a bit fuzzy in this regard, but Good to Great and the Social Sector helps there.

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