A few weeks ago I premiered my third "VC" title: being a veggie capitalist.
Now I find that others are out there working the veggie capital market hard. Semi-satirical blog Long or Short Capital has found a carrot arbitrage opportunity. Read the full article.
Of course, my suggestion is is to short regular carrots and go long jcarrots.
Nukes, Spooks, Genes and Greens
After a previous post about hi-tech buzzwords I thought I would share a couple of others.
Many new technologies in the computer world have their earliest applications in the most demanding of environments, often grouped together under the term High-Performance Computing. Examples of these include the big systems that crunch numbers on Wall Street, or for the meteorologists or astrophysicists, or for the geneticists or oil-seeking geologists. I recently heard a great catchphrase for all these... Nukes, Spooks, Genes and Greens. A Google search suggests this was coined (or at least quoted) in an IEEE paper in 1992.
Another great buzzphrase is tin wrapped software. This refers to software which is packaged as an appliance (a physical box that you plug in). A great example is an appliance that helps companies manage their computers. One of our portfolio companies, called Kace, sells such a box. The intellectual property is all really software, but customers find it more friendly and easier to use if they don't have to install it from a CD onto one of their own computers. Instead they just buy a "box" and plug it in (to the power and to the network). It is tin-wrapped because it really is delivered as a metal box, but it is software because the box itself is just a regular computer in a standard configuration and without a screen or keyboard.
Putting the two together: tin wrapped software for nukes, spooks, genes and greens would have to be something like the high speed storage solution from Terrascale (now part of Rackable, and not related to Sigma in any way).
Twenty dollars, twenty miles
My broken spoke story ended with me only $20 the poorer, and the proud owner of a brand new spoke on my front wheel.
This morning (Sunday) I was able to ride for a nominal 20 miles with my friend Guy Sapirstein. He took me on the South Street loop through Needham into Dover and back. It was actually just less than 19 miles, but still almost twice as long as any previous ride this year. The weather was a perfect 70 degrees. The roads were quiet and the scenery pretty. It was a fabulous ride ... I enjoyed some 30 mph downhill stretches and did not disgrace myself on the uphills. All in all, a great ride, and one I hope to repeat again soon.
This morning (Sunday) I was able to ride for a nominal 20 miles with my friend Guy Sapirstein. He took me on the South Street loop through Needham into Dover and back. It was actually just less than 19 miles, but still almost twice as long as any previous ride this year. The weather was a perfect 70 degrees. The roads were quiet and the scenery pretty. It was a fabulous ride ... I enjoyed some 30 mph downhill stretches and did not disgrace myself on the uphills. All in all, a great ride, and one I hope to repeat again soon.
Spoke in the works
I assume the phrase "spoke in the works" comes from the notion that inserting a spoke into a finely running machine will likely stop it working.
However, without all the spokes in a bicycle wheel, that wheel is susceptible to warping and other damage. So, when I lost / broke / sheared / snapped a spoke in my front wheel when on a short ride with Hannah during the week it was the lack of a spoke that was my "spoke in the works".
My riding in May has been less than I would have liked this year. I am hoping to ride Sunday but the weather forecast is doubtful.
Here's to no more spokes in the works.
However, without all the spokes in a bicycle wheel, that wheel is susceptible to warping and other damage. So, when I lost / broke / sheared / snapped a spoke in my front wheel when on a short ride with Hannah during the week it was the lack of a spoke that was my "spoke in the works".
My riding in May has been less than I would have liked this year. I am hoping to ride Sunday but the weather forecast is doubtful.
Here's to no more spokes in the works.
Buzzword compliance
I saw a new business presentation today which started with a little levity. Calling themselves "fully fad compliant" they state that
Of course, they are none of these things, but it was fun to see someone recognizing how much of our industry is driven by fads and buzzwords.
[We] use patented search techniques to deliver Web 2.0 applications on mobile devices to the alternative energy industry. We have a pay-per-click business model, leverage social networks, and do open-source product development offshore.
Of course, they are none of these things, but it was fun to see someone recognizing how much of our industry is driven by fads and buzzwords.
Who by Fire
After I met novelist Jon Papernick, he put me on his mailing list and I have been enjoying his occassional updates for a few months or more. Most recently he has been writing about his quest to become the Perfect Jew. Most recently Jon wrote about observing the stringent rules relating to the Jewish Sabbath. Each of his articles has been touching, funny and sharply observant of the place where unthinking practice meets thinking unpractice... a place you can find many modern Jews of most denominations.
It is through reading Jon's articles that I have come to appreciate another side of Peoplehood. The notion of Peoplehood is one I have been learning about from Yossi Abramowitz and his Peoplehood.org blog. Yossi challenges us to find what unifies us as a people and fulfil the purpose that we have in the world. Yossi's work is a critique of both unthinking practice and of thinking unpractice. He exhorts us to think and to act and to practice projecting our age-old values into this complex world.
Jon's novel "Who by Fire" is due to be published later this year. I received an email from him describing the 1001 book project encouraging people to pre-order his book in order to encourage a US publisher to take it on. Based on enjoying Jon's articles so much I immediately went ahead myself, and offer you the same opportunity. Perhaps we can have a book club meeting after it comes out ...
It is through reading Jon's articles that I have come to appreciate another side of Peoplehood. The notion of Peoplehood is one I have been learning about from Yossi Abramowitz and his Peoplehood.org blog. Yossi challenges us to find what unifies us as a people and fulfil the purpose that we have in the world. Yossi's work is a critique of both unthinking practice and of thinking unpractice. He exhorts us to think and to act and to practice projecting our age-old values into this complex world.
Jon's novel "Who by Fire" is due to be published later this year. I received an email from him describing the 1001 book project encouraging people to pre-order his book in order to encourage a US publisher to take it on. Based on enjoying Jon's articles so much I immediately went ahead myself, and offer you the same opportunity. Perhaps we can have a book club meeting after it comes out ...
Fooled by Randomness
Fooled by Randomness by Nassim Nicholas Taleb is a great read, especially for anyone who is interested in the profession of investing. My partner, Greg Gretsch, kindly sent me a copy. The book presents strong evidence that all these superstar investment managers are mostly just lucky. Since Greg's investing record looks pretty good, and since he is a competitive type (aren't we all?), this is an interesting gift. However, Greg (along with all good venture capitalists) is rescued at the last moment by a Harvard professor ... read on.In Fooled by Randomness, Taleb reminds us that humans crave meaning in our lives, for all sorts of reasons, and therefore most patterns we see in life are ex post facto explanations which have no statistical meaning. By this I mean that we impose some kind of meaning or explanation for usually random events that have happened to us, and which, when analyzed, really (and in all probability) did happen just randomly.
Let me retell a fable that Taleb offers about a charlatan, let's call him Charlie, who makes money from those of us fooled by randomness. Charlie finds (or buys) a mailing list for active amateur investors. It contains 10,000 names. He sends 5,000 of those people a letter introducing himself and predicting that IBM stock will rise over the next week. The other 5,000 receive a similar letter predicting that IBM will fall. A week later Charlie throws away the names of the people who received the "wrong" prediction. He then splits the remaining group into two halves and sends two similar letters. Charlie repeats for a total of four times, each time sending subsequent letters only to the people who received the "correct" forecast. After four weeks around 600 people have seen that he is consistently right with his short term forecasts. How does Charlie make money? He now sends the remaining eager 600 investors a letter offering them the next forecast for the very reasonable sum of $10,000.
This sounds very cute, but it turns out to be how most mutual fund (or investment) managers are judged. Imagine that all investors' results are basically random, like Charlie's, rather than the product of any skill. Purely by luck, some number of these investors will have consistently positive results over the first few years of their career. This is the same as tossing a coin one million times and finding a few consecutive sequences of 10 or even 100 heads. If an investor has been successful over several years truly on the basis of skill, then you would expect the following year to also be good. Taleb finds (as do many researchers) that in most cases the results of the following year for previously superstar investors follow the same pattern of randomness as for novices (the same proportion of the successful subset succeed or fail as you find with the novices). Only a very small number of investors are truly superstars and succeed year after year beyond expected randomness.
We treat all "top-performing" investment managers like Charlie, not realizing that we are doing the charlatan's work for him. Instead of Charlie dividing the world of newsletter recipients into winners and losers from week to week, we are dividing the world of investment managers the same way, and then assuming those who are left are great. We are fooled by randomness.
Despite these findings, there is good news for Greg, for Sigma Partners, and for the rest of the top-tier VC world. It turns out that previous good results from a venture capital firm do predict future results. Harvard Business School Professor Paul Gompers et al present supporting evidence of this in their paper Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence from Serial Entrepreneurs. This is not just an academic finding, as noted in one of my recent posts quoting from an investor in VC funds who seems to agree based on historical results.
So the takeaway is that Greg has provided a wonderful read for me, without disturbing our own haven from the winds of randomness.
VC:VC Let me get to that
A little while ago I wrote a post on a favorite phrase of entrepreneurs answering VC's: "Good question!" Someone recently told me that "good question" means "I have a slide on that", and "very good question" means "my next slide covers that".
Today I want to talk about "Let me get to that," the phrase that asks you to hold the question for a little on the promise we will cover it in due course.
This answer means one of these things:
1) I am stuck in a Powerpoint presentation flow that I have rehearsed for many hours and do not feel capable of leaving the script [Ed note: I hate Powerpoint.]
2) I don't want to answer that question yet, since my answer will give you a bad impression, and I am hoping to make you like me more before I give you the bad news
3) your question is based on an incorrect understanding of my business and if you allow me to elaborate you will see that it is not useful to focus on this
4) this is a very complex business and if I give you that answer right now, however simple the question, you will get the wrong impression of what is going on until I have given you the full context
5) I don't know (and I hope you will be hypnotized by the Powerpoint into forgetting you asked this question) [Ed note: I hate Powerpoint.]
Most of these answers send fairly dangerous signals that you are not a good communicator and got yourself and your story into a situation where misunderstandings may accrue if you answer that question right now. My suggestion is to answer the question right away, even if you have to qualify it.
VC: "How many paying customers do you have right now, and what is the average price they paid?"
Entrepreneur: "Let me get to that." (Thinking to self: "only two but once they see the pipeline it won't seem so bad.")
VC (thinks to self): "Must mean none or they all hated it."
How about this:
VC: "How many paying customers do you have right now, and what is the average price they paid?"
Entrepreneur: "We have two paying customers; both paid about 30% of the list price of $150,000 because they were beta customers. I do want to add that we have three more customers each close to signing up to buy several units at full price, and they are willing to talk to investors about their purchase intentions."
VC: "OK, sounds good."
So far, so good -- but why is this a VC:VC post which compares Venture Capital to Venture Cycling? Let me get to that.
The work of Hazon (which made me the venture cyclist I have become) is multi-layered and multi-faceted, like many of the business plans I see. Why might you want to support the work of Hazon (which I may ask you to do by sponsoring me for the Hazon NY bike ride)?
Hazon is about creating communities of Jews (and some non-Jews) across boundaries and differences. Those differences are of background, upbringing, identity, age/generation, involvement, commitment, religious observance, education and outlook. Hazon does wonderful work making real communities across these differences, and makes the world a better place through this work.
However, Hazon is also about raising consciousness and awareness of issues relating to the environment, the natural world, the food chain, physical challenge, biking and hiking, in the USA and in Israel. It is also about action with our Community Supported Agriculture projects and our series of bike rides as well as other related work.
I definitely find myself stumbling over answering pointed questions about Hazon, and I know I am not the only one. The story of our purpose, our mission and our work needs honing so that I won't have to answer "let me get to that" any more.
Today I want to talk about "Let me get to that," the phrase that asks you to hold the question for a little on the promise we will cover it in due course.
This answer means one of these things:
1) I am stuck in a Powerpoint presentation flow that I have rehearsed for many hours and do not feel capable of leaving the script [Ed note: I hate Powerpoint.]
2) I don't want to answer that question yet, since my answer will give you a bad impression, and I am hoping to make you like me more before I give you the bad news
3) your question is based on an incorrect understanding of my business and if you allow me to elaborate you will see that it is not useful to focus on this
4) this is a very complex business and if I give you that answer right now, however simple the question, you will get the wrong impression of what is going on until I have given you the full context
5) I don't know (and I hope you will be hypnotized by the Powerpoint into forgetting you asked this question) [Ed note: I hate Powerpoint.]
Most of these answers send fairly dangerous signals that you are not a good communicator and got yourself and your story into a situation where misunderstandings may accrue if you answer that question right now. My suggestion is to answer the question right away, even if you have to qualify it.
VC: "How many paying customers do you have right now, and what is the average price they paid?"
Entrepreneur: "Let me get to that." (Thinking to self: "only two but once they see the pipeline it won't seem so bad.")
VC (thinks to self): "Must mean none or they all hated it."
How about this:
VC: "How many paying customers do you have right now, and what is the average price they paid?"
Entrepreneur: "We have two paying customers; both paid about 30% of the list price of $150,000 because they were beta customers. I do want to add that we have three more customers each close to signing up to buy several units at full price, and they are willing to talk to investors about their purchase intentions."
VC: "OK, sounds good."
So far, so good -- but why is this a VC:VC post which compares Venture Capital to Venture Cycling? Let me get to that.
The work of Hazon (which made me the venture cyclist I have become) is multi-layered and multi-faceted, like many of the business plans I see. Why might you want to support the work of Hazon (which I may ask you to do by sponsoring me for the Hazon NY bike ride)?
Hazon is about creating communities of Jews (and some non-Jews) across boundaries and differences. Those differences are of background, upbringing, identity, age/generation, involvement, commitment, religious observance, education and outlook. Hazon does wonderful work making real communities across these differences, and makes the world a better place through this work.
However, Hazon is also about raising consciousness and awareness of issues relating to the environment, the natural world, the food chain, physical challenge, biking and hiking, in the USA and in Israel. It is also about action with our Community Supported Agriculture projects and our series of bike rides as well as other related work.
I definitely find myself stumbling over answering pointed questions about Hazon, and I know I am not the only one. The story of our purpose, our mission and our work needs honing so that I won't have to answer "let me get to that" any more.
Another day in Paradise
I had a wonderful day yesterday (Sunday). The weather was perfect: around 70 degrees, breezy, sunny.
I started off planting perennial flower seeds in the back yard with Asher. Later on Hannah and I went to an Israeli folkdancing workshop with the famous Moshe Eskayo. We learned Shir HaChatunah (not "the tuna song" but "Wedding Song") and another dance whose name I forget.
After that Hannah and I went cycling together. This was Hannah's first ride for the year and was a brief 3.5 mile ride on the Carriage Lane. We could not remember if there were any remaining problems with the gear mechanisms on Hannah's bike, and after that ride it seems not. Hannah was thrilled to be back in the saddle, and I was over the moon to spend so much time with her (what Dad would not enjoy hanging out with their teenage daughter dancing and cycling).
Later, I went with Asher and Rina to the local amusement rides set up near city hall. Finally we got takeout from Taam China II (Newton's only the Kosher Chinese restaurant ).
Lots of time with kids and family, doing fun things, and a good amount of it outside. A great day in paradise.
I started off planting perennial flower seeds in the back yard with Asher. Later on Hannah and I went to an Israeli folkdancing workshop with the famous Moshe Eskayo. We learned Shir HaChatunah (not "the tuna song" but "Wedding Song") and another dance whose name I forget.
After that Hannah and I went cycling together. This was Hannah's first ride for the year and was a brief 3.5 mile ride on the Carriage Lane. We could not remember if there were any remaining problems with the gear mechanisms on Hannah's bike, and after that ride it seems not. Hannah was thrilled to be back in the saddle, and I was over the moon to spend so much time with her (what Dad would not enjoy hanging out with their teenage daughter dancing and cycling).
Later, I went with Asher and Rina to the local amusement rides set up near city hall. Finally we got takeout from Taam China II (Newton's only the Kosher Chinese restaurant ).
Lots of time with kids and family, doing fun things, and a good amount of it outside. A great day in paradise.
VC:VC Humor from the New Yorker
Last week's New Yorker magazine (the "Innovation" edition) had several wonderful cartoons that might as well have been drawn for a VC:VC posting (comparing Venture Capital to Venture Cycling).To start with, I couldn't resist a wife's eye view of a not-fit-enough husband becoming a venture cyclist.
Next I see a couple of cavemen lamenting the lack of creative opportunities ahead, now that everything has been invented. If this had been my cartoon, it would have this caption: Og Partners invested in Fire Tech, and Thorak Ventures got into that great Wheel Systems deal. There's nothing left for us.
Finally, the environmental and business interests meet around a creative idea for a green business.
Fitter than me
I had the good fortune of a lovely 11 mile ride with my young friend Jason Glasgow on Friday morning. Why "young"? ... well he is fitter than me (lots fitter). He is under 40. Everyone under 40 is fitter than me (and too many people over 40 as well).
We were talking about the fact that there is always someone fitter than you to marvel at. In my case it is Jason; in Jason's case it is a 60-something relative. Just like politics or religion, there is always someone to the right and left of you on whatever spectrum. From wherever you stand, those too far to either side are clearly nutcases. However, those just a few places along ... I would like to be as spiritual as them, as charitable as them, as patient as them, as fit as them.
Of course, it is not about me being fitter than Jason, or anyone else ... it is about me being fitter than me.
We were talking about the fact that there is always someone fitter than you to marvel at. In my case it is Jason; in Jason's case it is a 60-something relative. Just like politics or religion, there is always someone to the right and left of you on whatever spectrum. From wherever you stand, those too far to either side are clearly nutcases. However, those just a few places along ... I would like to be as spiritual as them, as charitable as them, as patient as them, as fit as them.
Of course, it is not about me being fitter than Jason, or anyone else ... it is about me being fitter than me.
Excluding Sigma
I don't often choose to brag about Sigma Partners, the VC firm at which I work ... but here is one of these times.
Earlier in the month AP ran a story from the National VC Association (NVCA) conference which was in turn picked up by the San Jose Mercury News (here). In it Diana Frazier, a managing director at FLAG Capital Management, is quoted as saying the riches delievered by the VC industry to our investors are actually driven by a few top-tier firms. Apparently "32 firms have accounted for 10 percent of the venture capital raised but produced 56 percent of the total returns", and this "may understate the discrepancy" because Frazier said her data excluded Sigma and a couple of other named firms, all of whose results are not available publicly.
We do like to think we are indeed in that top tier of firms, and historically we have been. However, you are only as good as your most recent deal, or in our case the most recent fund, and the pressure is always on to make the next funds as succesful as the previous ones.
Back to work.
Earlier in the month AP ran a story from the National VC Association (NVCA) conference which was in turn picked up by the San Jose Mercury News (here). In it Diana Frazier, a managing director at FLAG Capital Management, is quoted as saying the riches delievered by the VC industry to our investors are actually driven by a few top-tier firms. Apparently "32 firms have accounted for 10 percent of the venture capital raised but produced 56 percent of the total returns", and this "may understate the discrepancy" because Frazier said her data excluded Sigma and a couple of other named firms, all of whose results are not available publicly.
We do like to think we are indeed in that top tier of firms, and historically we have been. However, you are only as good as your most recent deal, or in our case the most recent fund, and the pressure is always on to make the next funds as succesful as the previous ones.
Back to work.
Green Building
The Green Roundtable has shown up twice in the media in the last 24 hours. First I happened to see an interview with Executive Director Barbra Batshalom (yes, correct spelling of Barbra) in Boston Magazine's Design publication, and then I heard that Green Roundtable staff are volunteering at the local NPR station fundraiser this morning.
The Green Roundtable (GRT) is, according to their website, "an independent non-profit organization whose mission is to promote and support healthy, efficient and sustaining development and building projects through strategic outreach, education, policy advocacy and technical assistance."
I love the second part of the mission statement:
We are lucky to count Barbra as a close friend. She is modest and unassuming about her work, but is a driving force behind a real movement. Boston is a national leader in green building, and Barbra was a driving force in Boston Mayor Tom Menino's Green Building Task Force.
The Green Roundtable (GRT) is, according to their website, "an independent non-profit organization whose mission is to promote and support healthy, efficient and sustaining development and building projects through strategic outreach, education, policy advocacy and technical assistance."
I love the second part of the mission statement:
The GRT strives to mainstream 'green' and ultimately become obsolete.By my definition, a "movement" is an ideology or philosophy whose proponents aim to move their vision from marginal to mainstream. Once it is mainstream there is no need for a movement, and it does become obsolete. For example, the organic food movement is pretty much obsolete now, and is being overtaken by local food, slow food and other ideas (see this previous posting).
We are lucky to count Barbra as a close friend. She is modest and unassuming about her work, but is a driving force behind a real movement. Boston is a national leader in green building, and Barbra was a driving force in Boston Mayor Tom Menino's Green Building Task Force.
8 mile
Although exhausted from a series of late nights at a work shindig at a fancy resort, I went out for an eight mile ride at the end of the afternoon today.
I seem to have discovered I can handle the hills better if I count off my cycle strokes ... it is meditative and keeps my mind focused on something other than my legs complaining. I find I count off the numbers in fours like in a musical piece, emphasizing the first measure of the bar. This means I am pushing harder repeatedly on one leg ... so I decided to waltz and count off in threes, which means the emphasized measure (or cycle stroke) is first on one leg, and then the other. I can thank Dorit for this idea, since this is how she alternates breathing sides when swimming (to avoid a crick in her neck from favoring one side).
I continue to enjoy the Natural Newton blog from my friend Jon Regosin, and try to look out for birds and flowers on my rides. Having been spotted on my bike a couple of times by friends, I hope that one day I will be considered a natural phenomenon, worthy of note when I return from hibernation in the spring.
I seem to have discovered I can handle the hills better if I count off my cycle strokes ... it is meditative and keeps my mind focused on something other than my legs complaining. I find I count off the numbers in fours like in a musical piece, emphasizing the first measure of the bar. This means I am pushing harder repeatedly on one leg ... so I decided to waltz and count off in threes, which means the emphasized measure (or cycle stroke) is first on one leg, and then the other. I can thank Dorit for this idea, since this is how she alternates breathing sides when swimming (to avoid a crick in her neck from favoring one side).
I continue to enjoy the Natural Newton blog from my friend Jon Regosin, and try to look out for birds and flowers on my rides. Having been spotted on my bike a couple of times by friends, I hope that one day I will be considered a natural phenomenon, worthy of note when I return from hibernation in the spring.
The They
I have always enjoyed chancing on phrases that would make good book titles (mostly biography or memoir) or names for rock bands.Clearly "The They" ought to be a rock band (in fact, I am surprised it isn't - at least I can't find any references in Google).
This came up today in the usual morning rush. However different Asher and Rina are (and trust me, they are different), they are still a "they" in the shorthand between Dorit and I as we rush to get "them" ready for school. After the umpteenth time of saying "they" this morning -- that "they" have had breakfast but "they" haven't cleaned their teeth yet -- Dorit stopped and said something like: Listen to us calling them "The They"!
So, this will be prompt me to start a list of such books or rock bands - look for it here.
Chocolate!
One of the books I read on our recent family vacation was The Chocolate Connoisseur by Chloe Doutre-Roussel. It is written by a chocolate expert, and not a writing expert. The writing style is at once pedagogic and chatty like a teacher trying too hard to be a friend (hmm, sound familiar?). However, once I got past that, I found it very enjoyable. It is a short, easy read and taught me all I want to know about chocolate. The author champions the notions that chocolate can be tasted like wine, and that it should have a short list of fine ingredients. Who knew Godiva was mostly a marketing gimmick? And who knew you could buy Lindt 99%? Buy it for the chocaholic in your life.
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