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VentureBlog

A Random Walk Down Sand Hill Road

Why I am Voting NO on Prop 8October 30 2008

While I have never before used VentureBlog to discuss anything other than entrepreneurship and venture capital, I have decided to make an exception to discuss why it is I oppose Proposition 8 here in California. I have not made this decision lightly. I don't believe in mixing business and politics. But I believe that Proposition 8 runs sufficiently counter to the basic tenets of fairness and human decency that power our democracy that I can not sit idly by.

I was not yet born when Martin Luther King Jr. delivered his famous "I Have a Dream" speech at the March on Washington in 1963. Had I been alive, however, I like to think that I would have been there cheering him on. I like to think that I would have stood against segregation and done everything in my power to dismantle that unjust system. I like to think that I would have put my legal background to work defeating those laws that made interracial marriage illegal. I like to think that I would have joined the picket lines, sat at the lunch counters, sued the school systems . . . done whatever I could to fight the injustice of segregation.

Today I think that Californians are at a similar crossroads. Like the courts that invalidated Jim Crow laws and segregation a half century ago, the California Supreme Court has determined that the State may not discriminate between heterosexual couples and same sex couples -- accordingly, the State Constitution requires that same sex couples be given the right to

Wired Teaches us "How To" Get Funded By a VC (and Written Up on TechCrunch)October 6 2008

I just flew back from Europe and boy are my arms tired [insert rimshot here]. Actually, I just flew back from Europe and boy are my eyes tired. I have this bad habit of accumulating magazines until I have a long plane flight then powering through 30 pounds worth of reading.

My typical airplane reading starts out with a zillion of those alumni magazines we all get. If you can wade your way past the inevitable articles on anthropology, sociology and pop psychology, you can often get a first glimpse into some really interesting scientific and technical innovation in these magazines. I'm tempted to go get a masters degree in anything from Carnegie Mellon just so I can get their alumni magazine.

But the magazine I probably spend my most time reading, en route to wherever, is Wired. It is such a great combination of entertainment, info-porn, and deep dives into things that really matter. This trip I had manage to accumulate 5 months worth of Wired's -- good thing I was flying to Europe, there's no way I would have gotten through them by Denver or Chicago. (The other great thing about reading your way through so many accumulated magazines is that it is a little bit like eating your provisions on a long hiking trip -- my load gets noticeably lighter with each magazine I've finished and discarded in the seat back pocket in front of me.) While I don't always act on it, I often times find myself reading something in Wired on which I want to blog. I'll rip ou

John Palfrey Speaks on "Born Digital: Understanding The First Generation of Digital Natives"September 11 2008

If you have not yet experienced "Digital Natives" in their natural habitat, come on over to my house on any weekend. When I wander down stairs on a Saturday or Sunday morning, the scene is always pretty much the same. The TV is on and yammering away. But my kids are far more engaged in their respective laptops than they are in the TV making noise in the foreground. My 6 year old is likely buying a new go kart for his Webkinz monkey. My 8 year old is busy shooting balloons on Adicting Games. My 11 year old is blogging about some great new Japanese rock band video he found on YouTube. My 13 year old is reading the latest news about his favorite performers on Broadway.com. And, amazingly, while "watching" TV and voraciously consuming the Web, my children are more than capable of fighting with each at the same time -- digital multitasking at its finest.

Digital Natives today may be a small group of non-voting, non-credit card holding kids. But soon Digital Natives will be the predominant consumers of media, goods, services. And as such, they will expect their experiences to be inherently digital. Analog experiences will be viewed as quaint -- perhaps they'll trigger nostalgia for the good old days of board games and books -- but, in the end, the expectations will be one hundred percent digital. Companies will need to think differently about how they market to Digital Natives. Governments will need to think differently about how they engage Digital Citizens

Raising Venture Capital: How Much Money MattersAugust 27 2008

After watching a bazillion venture pitches, I've come to the conclusion that every VC Pitch should end the same way -- with the ask. If you want to crescendo into it, feel free to summarize why it is your technology is life changing, but finish with the ask -- "we are looking to raise six million dollars." Don't beat around the bush. Come right out and ask for the money. After all, that's what you're there for.

There are a number of reasons VCs want to hear what you're raising. And it isn't just the obvious one. Yes, it is helpful to know how much money a company is hoping you will invest. But there are other more valuable pieces of information that come out of the ask.

First of all, the amount of money you are raising is a good general indicator of how much you think the company is worth. I was in a pitch once learning about pretty interesting but pretty early stage technology. From where I sat, it seemed to me that the company could use single digit millions to take the technology to the next step. Yet, when we got to the slide that stated how much the company was raising, I learned that they were hoping to raise more than $50M. By my assessment, $50M would buy the vast majority of the company. Clearly the company felt differently -- they were hoping to sell closer to 20% of the company. It certainly refocused the conversation on what the company felt was the justification for such a high valuation and led to a very interesting discussion o

And Now a Word from your Limited PartnerAugust 7 2008

Over the course of the last week, Fred Wilson has been writing about "Venture Fund Economics" at the newly-redesigned AVC. Fred has tackled topics like how venture capitalists are measured, the impact of management fees and carry on net returns, and the impact of big winners on venture returns. What's more, Fred has done the unthinkable -- he has described venture economics in the context of his own fund's specific economic terms. While he hasn't posted the economic performance of his fund to date (that is probably more naked than even Fred is willing to get), he has posted the model he and his partner Brad built when assessing the attractiveness of raising a hundred million dollar fund. The model is fascinating and brings to light the challenges venture funds face to achieve index returns, let alone the outsized returns associated with top tier venture firms. (Great stuff, Fred!)

Given the challenges faced by venture investors to drive market returns, one reasonably might ask the question, "why do limited partners continue to flock to the asset class?" Who better to answer that question than a bona fide Limited Partner. Enter Chris Douvos. Chris is the co-head of private equity