A Little Grace In The Middle Of Some Mayhem

I’ve spent the last eight weeks in a heavy-duty sling after surgery to repair an old injury and getting freed from it a few days ago feels like I passed “Go” and received my “get out of jail free card.” The surgery was a little more intense than I had imagined it would be and my two months in the penalty box started out a bit rough. To begin with, I did a really poor job of setting my expectations around how long it would take me to get back to functioning somewhat normally and when I failed miserably at that (for the record, I gave myself five days), my first two weeks found me fighting through some storm clouds. More than anything, the evil pain meds they give you after surgery put me in a foggy mental state and left me in no shape to bring my best to work even though at the time I believed I could. It took me a little while to figure out how off I was (it didn’t help that I was one-armed and using dictation software).

After about a week I started weaning myself off the meds and by the week after that the cloud had lifted. I settled into a routine that didn’t vary much until a few days ago. I sat at my desk in my home office and did as much work as I could handle. Despite what I had hoped for, voice-to-text for more than short messages (while pretty incredible when you think about it) still has a lot of ground to cover to become ubiquitous and no matter how many hours I sat talking to my computer, it felt like I was falling further and further behind. I knew that sleep would also be difficult as I’ve had shoulder surgery before and had experienced how much sleeplessness accompanies it. Knowing it and dealing with it are two different states of mind though, and no matter what, having 2-3 hours being the longest stretch of sleep I could put together for a couple of months took its toll.

Two bright spots during this stretch made the ordeal a little easier to handle. First, being around Pam and the kids for two straight months without being allowed to get on a plane was a real treat. Family card games made a big comeback at the kitchen table (euchre and hearts and they didn’t make me shuffle once) and the kids indulged (and even began enjoying) some of dad’s Spotify playlists (with a strong dose of the 60’s and 70’s). The other source of inspiration for me was our dogs Ruby and Maggie. Ruby’s our 10 month-old puppy (yellow, golden & poodle mix) and Maggie’s our 14 1/2 year-old yellow lab. Being home all the time, I found out just what a busy life my wife leads as some days it was the three of us, but Ruby enjoys bopping around town in Pam’s passenger seat so most days it was just Maggie and I. Anyone that knows me well knows that I enjoy a very special relationship with her. For years she was my companion as we explored the hundreds of miles of trails out our back door together and it’s been a little tough for me seeing her slow down so much over the last year. The best Maggie can muster these days is a walk around our neighborhood for about 15-20 minutes.

I’ve begun to cherish our strolls together more than ever these last few months. Whenever I needed a break, I’d find her (napping at my feet mostly) and she’d build up a head of steam going down the ramp we’d built for her and off we’d go. She can’t hear anymore and only two legs work well, but she lights up and her tail wags like she’s a pup when we get outside. I’ve been walking Maggie around the neighborhood since she had to give up the trails last year, but since my surgery, I’ve noticed myself being more patient than ever with her as I just wasn’t in any particular rush anymore. What a sight we’ve been. The guy in the sling trying to pick up poop with one hand and his nonagenarian dog (I looked it up here – 14 1/2 year-old 70lb dog = 90 human years). My daily strolls with Mags have provided me with a lot of quiet time and for some reason lately I’ve been thinking a lot about the notion of grace. It began as the word kept reverberating around my brain as I watched Maggie during our walks. Her back right leg gives out pretty regularly now and she falls once in a while, but she always lifts herself up and manages to keep going, tail wagging. I’ve been saying to myself that I hope I can accept aging with as much courage and grace as she is.

For some reason though, I can’t seem to get the word out of my head lately. Perhaps it’s the mounting evidence when we watch this election cycle how our country’s losing its grip of the concept these days. Grace once again made an appearance in my head on our walk tonight so when I came inside, I decided to look it up. Turns out there are a handful of definitions, but in Western Christian theology, grace is defined as “the love and mercy given to us by God because God desires us to have it, not because of anything we have done to earn it.” Despite not considering myself religious, this is nevertheless my favorite definition. I think it’s because I understand that’s exactly what Maggie has been giving me all these years; she’s given me love not because I’ve earned it, but because she wants me to have it.

Spring has sprung and our walks are getting a little longer. It’s seems there’s more dogs to greet and lots of new things to smell. With my arm free now I know I’m going to get busier and I’ll have to remind myself to make sure we have time for our long walks.  I don’t know how much longer we have together (we thought we lost her two years ago), but I’m cherishing each of our neighborhood excursions. Maggie’s name is borrowed from the song Sugar Magnolia by the Grateful Dead and she’s reminding me these days (as Jerry used to sing) that “once in a while you get shown the light, in the strangest of places if you look for it right.”

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Maggie on one of our neighborhood strolls a few months ago








Some Gray Haired Insights For New Investors

There’s been a flurry of posts so far in this new year advising startups how to deal with what certainly appears to be the beginning of an inevitable market correction (based upon your point of view, feel free to substitute your flavor of panicked adjectives for “correction”). It seems that every VC who blogs is warning that winter is coming and cautioning CEOs to store their acorns and cut back on their burn rates. All good advice.

I haven’t read much though about how to prepare for this if I’m a relatively new investor in startups. There’s a whole new breed of investors (both angel and new VCs) who have been actively investing in startups since 2010 (when we emerged from the last major recession) who have never been through a downturn as an investor. I’m writing this specifically for their benefit as I’ve been around long enough now that I’ve experienced multiple full economic cycles as an investor and started my career working on Wall Street during the crash of 1987. I’ve got a few more gray hairs today than I did then and I know some of these insights would have helped me better weather those.

To begin with, what does the trajectory look like? At the outset, term sheet valuations start contracting up and down the venture capital food chain and then they start drying up from the growth investors (except for the most compelling opportunities) as they decide to sit on their hands for a while and figure out how bad things really are. Most of the early-stage investors are still investing at this point as by nature, they’re generally a more optimistic group. I think it’s fair to say that we’re somewhere in the middle of this stage today. If the downward momentum continues, startups begin losing lower tier customers  and missing their numbers. After the early stage investors start seeing this across their portfolio, they too get spooked and begin to and begin to slow their investment pace. The slide continues and soon portfolio companies are losing some of their best customers. This is when even the most optimistic investors start putting their wallets away for new investments and start asking themselves “what do our reserves look like?”

A few more months pass and eventually, large corporations begin laying off thousands of people at a time. Each time investors step on the treadmill at their health clubs, they’re greeted with flat screens showing clips describing another massive layoff. That’s when folks realize that shit’s gotten real and fear sets in. Not only are very few new venture investments getting done, but the partners at VC firms are now spending the bulk of their time working with their portfolio companies figuring out how far back to yank on the expense lever. Eventually things get bad enough that one of the top venture firms decides that we’re on the path to hell and there’s no turning back. That’s what happened on October 10, 2008 when Sequoia published this infamous deck. Pay particular attention starting on slide 41. At this point, vc partner meetings are spent discussing among themselves which of their portfolio companies they should allocate dwindling reserves to (“live”) or not (“die”).


Admittedly, nothing I’ve shared yet is particularly enlightening or helpful. Anyone who’s lived through it is probably nodding their head in agreement. Here’s where some valuable insight for new investors can be gleaned. Did we continue on the road to hell after Sequoia pronounced that we were at the gates? No, of course not. In fact, it was only three weeks later on Halloween 2008 that we reached the market bottom in the NASDAQ.



Anyone reading this who’s remotely familiar with the public markets has learned that it’s impossible to time market tops and bottoms, but you’ll be amazed at how many smart and sophisticated private investors were so spooked by Sequoia’s pronouncement, that they didn’t invest in any new companies for a very long time afterwards. I’ve even heard conspiracy theories that Sequoia intentionally sensationalized the deck to clear out investors so that they had to pick of the litter for a while. Unfortunately, those investors who throttled back missed the best pricing of startups in the last fifteen years. Even more importantly from my perspective, the “wantrepreneurs” had all gone home and none other than the most steadfast, determined entrepreneurs were starting companies at that time. In other words, the founders we as investors all dream of working with were the only ones starting companies! What I’ve learned through experience is that the very best entrepreneurs don’t pay much attention to the gloom and doom everyone else is paralyzed by. They see a pain point, they envision a solution, and they set out to execute against it. Sure, how they go about it changes, but they generally ignore what’s going on at the macro level. Finally, because they’re solving real problems, they let customers finance their early growth.

A great example of this is Isaac Saldana, the founder of SendGrid which he started in November 2008, just weeks after “RIP Good Times” was published, at the very bottom of the trough when things looked their bleakest. Isaac knew deep down that he had figured out a solution to an important enterprise problem and he didn’t wait for the lifeguards to say it was safe to get back in the water to start his company. He left his job and founded SendGrid when everybody else was running for cover. Today, Sendgrid is arguably the most important email infrastructure company in the world.

I remember a series of conversations I had with Brad Feld in 2008 about his perspective on investing through various parts of economic cycles. Brad was (and is) resolute in his belief that creating outsized returns in the venture industry demands ignoring the macro environment as it relates to investment pace. I vividly recall those conversations which helped give me the courage to lead financings in companies like SendGrid, Purch and Cradlepoint in 2009 when most venture investors were sitting on the sidelines. All three of those companies are worth hundreds of millions of dollars today.

Are we entering a minor correction? A downturn? A sustained recession? Truth is, no one really knows. One immutable truth of investing though, is that you can’t time the markets, be they public or private. What’s the biggest lesson to be learned here? Invest the same amount of capital at the same pace, year in, year out. That means don’t get greedy when prices are low, and don’t sit on the sidelines when prices are high. Investing in startups sits on the riskiest edge of the investment scale. By investing the same amount of capital in the same number of companies year in and year out, you prevent yourself from being whipsawed and having too much money invested at market tops and not enough money at the bottom.

One last piece of advice for those who have only been investing in startups since 2010. If this slide continues, it’s not going to be fun. It simply sucks coming to work every day for months or even a couple of years and deal with shitty news. Whatever you do, remember to keep this one thing in mind though. Never forget that you’ve got a portfolio of investments and that despite the degree of carnage, many are going to survive and ultimately thrive again. Now put yourself in a startup CEO’s shoes. They’ve got one egg and no basket. They’re all scared and other than the most experienced, they really don’t know what to do. You may not know either, but having somebody else in the foxhole goes a long way. Practice empathy. Spend more time with the CEOs you’ve backed and do everything you can to make their lives easier. You’ll both survive the winter and emerge with a bond that lasts a lifetime, well beyond the inevitable thaw.





Act Like You’ve Been There Before…

Recently, I saw someone share a tweet from a young, aspiring VC who posed a GIF on Twitter depicting an irreverent character in an effort to share his frustration that investors aren’t keen to invest in first time managers. My first reaction was to chuckle as it was indeed pretty funny. My second reaction was to think, “kid, you don’t get it yet and you probably need a mentor.” 

There are two short takeaways for entrepreneurs from this. First, that young VC was partially right;  LPs don’t invest in first time managers, that is until until they do (they just don’t do it very often). There’s been thousands of venture firms created over the last fifty years and I’ll bet there’s been a hundred started in the last two years. Somebody’s gotta be funding those first time managers, right? Create a compelling enough opportunity and someone’s going to invest. 

The second takeaway is very simple.  Every single LP I know tracks new and emerging managers on social media. What do you think happened to this young VC’s stock when they saw that post? Think they said to themselves “hmm, here’s someone I want to track?” Nope, me either. I’m sure some LPs probably stopped following him then and there. Always remember that all investors (angels, VCs & LPs) use social media to try and get a better feel for people they’re interested in potentially investing in and if you don’t think they’re they’re paying attention to what you’re posting in your various streams, you’re not just naive, you’re dumb. 

Founders, rest assured that investors are paying attention to your social behavior. Don’t put anything out there that you wouldn’t feel comfortable saying to them in a meeting. Social media represents an incredible tool to allow people to get to know you better. Use it wisely. One of the top LPs in the country recently told me that he seeks to invest in people “who are better versions of himself.” Investors want to invest in others that they trust and believe will be good stewards of their money. As the immortal Vince Lombardi one said, “When you get in the end zone, act like you’ve been there before.”

Who Benefits From Your Success?

Since I started mentoring at Techstars back in 2007, I’ve sat and talked with hundreds of founders trying to raise seed rounds and I’m often left scratching my head at the lack of strategic thought that goes into figuring out who to pitch. Most founders defer to attacking a list of known investors with little or no thought given as to what motivates those investors, what excites them and what sectors they understand. They wind up competing with every other startup in their community trying to raise capital at the same time. I learned a long time ago that trying to raise capital from people who A) understand the industry you’re trying to disrupt, B) benefit at some level from your success or C) at least have some emotional connection to you is far easier than pitching investor after investor that you first have to educate about your market and somehow must create some trust and common ground in a compressed time period.

I started learning these lessons when I became a stockbroker in the early 90s. After a month or two of training at company headquarters on Wall Street, us rookies were expected to hit the phones and start “cold calling” 10 to 12 hours a day, every day, to get meetings with strangers and convince them to let us manage their money. It didn’t take me long to figure out that I needed something to differentiate myself or this was going to be a short-lived career (which it actually was as I moved into venture investing in 1995 but I digress). I was living in Boston and decided to buy the heavy bound books from my university and my fraternity consisting of the names, addresses and phone numbers of every alumni, sorted by state. I sat down with a highlighter and highlighted every single name of an alumni within a hundred mile radius of Boston. I developed my own script leaning heavily on that one sliver of a connection and lo and behold, my appointments grew by orders of magnitude. Then, when I sat down face-to-face with them, I spent as much time as I needed to build a connection revolving around our school or our fraternity. It was only after I felt that connection did I allow myself to start talking about stocks, bonds, and wealth management. You would be floored at how many successful people began giving this kid a chance to begin managing a portion or all of their wealth because I created an emotional connection with them.

Let’s get back to fundraising. First, who should you pitch? When I started raising capital in 2000 for our first fund ($25 million) at Highway 12 Ventures, I began with the usual institutional suspects. It only took me a few meetings to figure out that we were not what they were looking for and I quickly shifted gears based upon the lessons I learned above. I had just moved to Idaho and as you might imagine, there weren’t many alumni from my east coast roots living there. So much for that strategy. I switched gears and thought, “who would benefit from Highway 12 Ventures’ success?” I started meeting with people from local institutions and business owners who would benefit from having a more vibrant startup community, and painted a picture of how beneficial our success would be for them. Once again, a dramatic increase in the quality and the success of the meetings.

These lessons are easily applied to raising money for your startup. Selling software to make doctor’s lives easier or create greater efficiencies in hospitals? Pitch doctors, not people who made their money in real estate. Is it easy to get meetings with doctors? Probably not. But I’d sure as shit figure it out if I was in that position. Got the next great solution for enterprise HR? I assure you, there’s hundreds if not thousands of senior HR execs who could write a check for $50k. Easy to find them? Nope. But I promise you that with some effort, you can. It’s never been easier to have a conversation with somebody that you’d like to. Tools like LinkedIn, Conspire and hi def video didn’t exist when I was raising money earlier in my career. With a little bit of creative thought and a good deal of effort, any founder can talk to many potential investors who understand the problem you’re trying to solve with your startup and/or would benefit from its success. You’ll be amazed at the difference in the tenor of your meetings. Founders put such Herculean efforts into building remarkable and unique products yet so many of them attack fundraising with little or no strategy. If your startup is genuinely solving an important problem, I promise you that there are many people out there willing to invest in that problem being solved. Start thinking creatively about how to find those folks and get in front of them.

Lastly (and in my opinion and most importantly), There are many so many perceived reasons why people invest in startups, but it really comes down to one thing. Emotions. Even folks like Brad Feld and Fred Wilson only invest when they find a quality in a founder that touches them deeply. Something personally meaningful. In order for your story to resonate with someone, you have to touch their heart before their head. If there’s one thing to remember when sitting down with a potential investor for the first time it’s these words from Maya Angelou – “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” After 20+ years of raising capital and helping people raise money for their startups, I still believe this is the single most important ingredient to successful fundraising. In fact, it’s so integral to that it deserves its own post. Stay tuned…








Taking The Plug Out Of “Unplugged”

Over the years, my wife Pam and I have developed a great system together: I plan our vacations, and she plans everything else. There’s no ambiguity. When we’re at home, I do what I’m told, go where she tells me and try my best to keep up with her. I love planning our vacations though, and the more “off the beaten path” the better. I spent the first 30 years of my life living in and around big cities. When I met Pam and started spending time in Idaho with her, it sparked the embers of a love affair with the outdoors that’s continued to burn brighter for over 20 years now. In large part, Outside magazine became fodder for my wanderlust. I’ve torn and stored pages, bookmarked links and spent a good deal of time daydreaming about remote places that I want to experience with my family. Lucky for me, Pam’s been up for it from day one.


The highlight for us (so far) is when I took a three month sabbatical five years ago and we spent three memorable summer months traveling by backpack throughout Southeast Asia and Africa. For a long time now high on my list has been trekking in Patagonia. We waited until the kids were old enough (15 & 17) to handle the long and arduous days with heavy packs, and last year I began planning our adventure in Chile & Argentina for Christmas 2015. We talked about it all year and the anticipation grew. Alas, two weeks before we were set to depart, our daughter Sophie threw out her back riding and was clearly in no shape for a trip like this. After some hard family discussions about canceling, we decided that our son Cameron and I would go and that Pam would stay home to care for Sophie (Happy to report that she’s on the mend and riding her horse again). The trip was so spectacular that we’re planning on doing it again as a family.

One of the things I cherished most about our time in Patagonia was that for almost the entire duration of the trip, we couldn’t be plugged in, even if we wanted. No Wi-Fi. No Internet. No digital connection to the outside world at all. Occasionally we would pass through a small town like El Calafte or El Chaten where we could find a signal strong enough to drop Pam and Sophie a voice text to share a tidbit about our latest adventures and let them know we were ok. We weren’t “off the grid” figuratively, it was literal.

We all talk about taking breaks and “unplugging.” Unfortunately, it’s becoming almost impossible these days for people to truly unplug. We take our phones on our unplugged vacations, sneaking and checking Instagram, Facebook, the news, or whatever our favorite flavor of digital distraction might be whenever we need a fix. As someone who does a fairly good job disconnecting on a regular basis, it was still a jolt to spend almost 3 weeks completely unaware of anything happening in the world that I couldn’t see with my own eyes.

What was that like? Pure bliss. Cam and I had long meandering conversations while we hiked, which twisted and turned like the rivers we were following. We talked about everything under the sun. Before the trip we each picked a book (Cam chose Fearless and me, Zen And The Art Of Motorcycle Maintenance) and brought two copies of each and talked about those as we read them together. Obviously, we hiked and we hiked and we hiked. We averaged between 12 and 18 miles a day and 3000 to 5000 feet of climbing. Sometimes we’d talk. Sometimes we’d have long stretches of silence, hearing nothing but the wind and lost in our own thoughts. And sometimes we’d sing. Actually, we sang a lot. In fact, we spent an entire morning hiking to Mount Fitzroy singing and trying to remember all of the lyrics to the Beatles When I’m 64. “When I get older, losing my hair, many years from now…”

In Torres Del Paine, we enjoyed a new friendship with Omar, our guide. Born and raised in Porto Natales, Chile – his father was an accomplished mountain climber and instilled a love of the mountains in his son. Omar went to university, but after a few years of a 9 to 5 job, he quit to become a guide so he could spend all his time in the mountains. He’s climbed many of the most challenging peaks in the region and regaled us with tales of those exploits, some of them quite harrowing. Despite guiding in the area for 15 years, Omar made us feel like every step was special. He took great pride in explaining all of the geological history of the region, had a vast understanding of the fauna and wildlife and loved pointing out all of the birds by their individual songs. Most of all, Omar kept us on pace. We’d start hiking between eight and nine in the morning, and if we didn’t make camp by nine, there was no dinner. We’d snack along the way and savor every calorie in our bagged lunches. Nothing went to waste.

The scenery was simply breathtaking. I hope you watch all or some of the video because there’s no way to really describe how truly beautiful and inspiring the region is and do it any justice. In fact, the hardest part of describing Patagonia is simply conveying the scale. We live in the mountains of Idaho and have visited so many vast places. I’ve never visited the Himalayas (for now) but I’ve never felt as small as I did there. Patagonia is also home to some of the most accessible glaciers in the world and it seemed like we saw a new one every time we made it around another mountain. Trekking across the Perito Moreno Glacier in Santa Cruz, Argentina was an experience I’ll always remember. We crossed the bluest rivers and streams I’ve ever seen and saw glacial lakes as turquoise as the Caribbean. I’ve never seen a full-blown avalanche in person, but when we were in the French Valley, we saw saw five in one day, and we even captured one on film (you’ll have to watch the video). We saw condors with 12 foot wingspans and we ate the most mouth watering lamb I’ve ever tasted.

In Torres Del Paine, we slept in refugios (wooden huts with three or four small bunk beds in a room) with different people from all over the world. It was fun to see a few familiar faces on the trails and also to share meals with new people at the wooden picnic tables each morning and evening. We also stayed at a few “estancias” (sheep and cattle ranches) that had been handed down from generation to generation for over 100 years. The family’s hospitality was always special and the food spectacular.

Of course, Patagonia is a photographer’s dream and I hope the pictures in this video inspire you to go visit. A big thanks to our friends Peter and Pam Horan for giving us such great advice in planning our trip and the biggest thanks in the world to my assistant Denise for helping us put it altogether. Now go watch the video (in full screen mode!), turn up the volume and get lost in Patagonia with us.

Oh, and get comfortable, it’s long 🙂



Why We Invested In Wevorce

Four years ago Michelle Crosby sat down in my office and told me about her plan to completely disrupt the divorce industry. Her story was fascinating: A child who watched her parents go through a brutal divorce becomes a divorce lawyer and winds up going through a divorce herself. She certainly checked the box for domain expertise, didn’t she? The most compelling part of Michelle’s story for me though was the fact that when the law firm she was working for offered her a position as partner, she had an existential crisis and decided to resign instead and that’s when she set out on her mission.

I’ve always been drawn to mission driven entrepreneurs. Folks who lay awake night after night grinding away on how to solve a particular problem. It consumes them and they’re driven by something far greater than money or recognition. Michelle fit the bill to a T. She had grown so disillusioned with an industry extracting obscene amounts of money from people going through a great deal of pain with no other options, that she turned down the brass ring she had been working so hard to earn and set out with not much more than a burning desire to reinvent the very broken process of divorce.

Michelle and her team have built an elegant and easy to use platform designed specifically to keep lawyers from running up bills by playing the middleman and escalating drama instead of avoiding it. Even more importantly, the entire Wevorce experience focuses on the well-being of the children who almost always suffer the most during the divorce process, and it works. Over 98% of the hundreds of Wevorce customers have avoided court and the company’s customer satisfaction metrics are through the roof.

I stayed close with Michelle during the last four years and have enjoyed watching her grow into the amazing entrepreneur she’s become. We participated in the seed capital rounds and when Michelle told me that she was ready to raise her Series A, I didn’t waste any time in getting my partners to spend some time with her. They came away as enthusiastic as I’d hoped they would and we couldn’t be more excited to become the lead investor in such an important company.

Equally gratifying for me is the fact that Wevorce is based here in my hometown of Boise. I’ve been passionate about our startup community for a long time now and I’m thrilled to be joining the board of directors and help Wevorce reach its full potential and become one of Boise’s iconic companies. Michelle has been able to recruit some fantastic talent here and it’s yet another sign that Boise’s rising!


Why We Invested In A Circus

Englishman Phillip Astley is credited with creating the first circus in 1768 in England. A war-trained accomplished equestrian, he parlayed his advanced riding skills into a post Seven-Years War career when he opened a riding school where he rode his horses in a circle (a ring) rather than the traditional straight line which allowed him to use centrifugal force to perform advanced trick riding. He later added other riders, musicians, jugglers, clowns, tight rope walkers and acrobats and created the modern day circus. That format stayed largely unchanged for 200 years until contemporary circuses were created in the 1970’s. The most successful of those has been Cirque du Soleil which was created in 1984. 15 million people will see a Cirque show this year and they are approaching $1B in annual revenue.

While obviously wildly successful, it’s been more than thirty years since the Circus was disrupted. This summer, we met a couple of remarkable entrepreneurs who figure it’s time to change that. The moment we met Brent Bushnell and Eric Gradman, we knew instantly that we wanted to be a part of what they were up to and last week we co-led a $6.5M Series A investment (along with our friends at Foundry Group) in Two Bit Circus, the circus of the future. At Techstars, nothing excites us more than meeting mission-driven entrepreneurs and these two define that. It wouldn’t be hard to imagine Brent under the big-top with P.T. Barnum and Eric’s got both the imagination and roboticist chops to make Two Bit’s studio in LA the most amazing ideation lab we’ve ever seen. Most importantly, they’re both crazy enough to believe they can change the world.

Instead of sitting back and watching a circus, Brent and Eric believe that the experience should be completely participatory. Two Bit Circus is a modern tech-driven immersive circus encapsulating many components of the future of tech. Lasers, robots and virtual reality are just a taste of what they’re incorporating into their flagship STEAM Carnival this year which will be held at Pier 48 at AT&T Park in San Francisco next weekend (Nov 6-8). If you’re going to be in town, you don’t want to miss this! Use the coupon code “brent” for a few dollars off. You can get tickets here. I’m flying in for it and bringing my son. Hope to see you at STEAM!



The Case For Priced Seed Rounds

When I was a kid, there were a series of memorable commercials from a company called Fram which made automobile oil filters. The message behind all of their commercials was that you could pay $4 for a quality oil filter today or pay hundreds or more to fix your engine later. If you’re over 45 you’re smiling now. If younger, here’s an example:

These commercials come to mind as I’m witnessing the effects of the proliferation of capped convertible note seed rounds. Mark Suster, Brad Feld, Duncan Davidson and others have written insightful pieces lately about the downstream challenges these notes are causing entrepreneurs when it comes to raising subsequent capital. Click on their names above to read them.

When I started in the venture business, you rarely if ever saw a convertible note. Today, it’s the priced seed round that’s rare. There’s no doubt that a convertible note makes life easier for a founder when raising a seed round. First, most founders believe their seed-stage startup is worth more than they could fetch in a negotiated priced round and the capped or (god-forbid) uncapped note is a great vehicle which allows an entrepreneur to grow their company into a higher valuation. Second, it allows them to delay what they perceive to be an uncomfortable valuation discussion. Solution? Throw a cap on a note and kick the can down the road.

Sadly, I’m watching this strategy come back to haunt so many founders going out to raise their seed extension or Series A rounds because of the inflated post-money valuations their companies are now sitting at as a result of their capped notes. Most entrepreneurs I know haven’t taken the time to fully understand the implications of these notes. Even at Techstars where we teach our founders about this, I still see mostly capped-note seed rounds. I get it. It’s easier.

My advice? Price your seed rounds. It was done for decades and it worked. It leaves no ambiguity and all the investors know exactly where they stand. Most importantly you’ll have no cap table issues when it comes time to raise your next round of capital. Is it a little more work to get this done? Yup, but tell me anything worthwhile that doesn’t cause some discomfort. Most founders I know don’t take the easy route when building their products because they know there’s negative downstream effects of that strategy. Why do it when raising capital?

What’s the cost of doing a priced seed round? Well, you’ll have to find an investor who will A) be willing to price your round (usually your largest investor) and B) you might not get the valuation you were hoping for. The former shouldn’t really be all that difficult and there’s reams of great posts out there supporting that the latter is irrelevant if you build an important, long-lasting company. So like the Fram commercial says, you can pay now, or you can pay later…

Communication Breakdown

Over the last few months, I’ve watched three separate episodes of blowups between co-founders or between CEOs and board members. In each case, it’s evident in hindsight that it wasn’t a single act, but historically poor communication which led to pent up anger that ultimately boiled over into fractured relationships. These wrangles have not only caused harm to the individuals, but created collateral damage among the management teams of the companies as well.

During the early years of marriage, many young couples inevitably reach a point where they have to learn to communicate better or watch the foundation of their new relationship begin to crack. Little things like left-open toilet seats, uncapped toothpaste tubes and lights left on foster passive-aggressive behavior until someone explodes over something silly like dirty coffee spoons left on the counter instead of in the sink by their mother-in-law (yup, that was me). Luckily I’m married to Pam, a woman who has patiently taught me to be a better communicator and finally, after more than twenty years together, has been hinting to me lately that her work with me might be nearly completed.

As anyone reading this knows, building startups are indescribably taxing, even among the most functional teams. With everyone moving at warp speed, it’s easy to get frustrated and annoyed by little things that colleagues say and do. As someone who leaned towards passive-aggressive behavior when I was younger, looking back, I know I didn’t always handle these types of situations with patience and understanding. I can think of a couple of valuable relationships in my career that were irreparably harmed through poor communication on both sides. While I’m not big on regret as life is one big learning experience, in hindsight, I’m confident that healthy, open and honest communication would have saved those relationships which mattered a lot to me.

Two years ago, David Cohen told me he wanted to bring in David Brown as our partner to manage the operational growth of Techstars (absolutely brilliant move, he’s an operations ninja). He and David had worked together for almost 25 years across three startups. I soon found myself in a partnership with two people who had been working together since college. The two of them talked like an old married couple while David Brown and I spent the first few months feeling each other out. We certainly had our share of miscommunications (and still do) but we quickly developed a real knack for diffusing them in real-time or shortly thereafter. “Hey, when you said yada yada about that thing this is how it sounded to me” or “Your email to me earlier today felt a little off, is everything ok?” has become the norm between us. It’s fostered an incredible working relationship and a deep mutual respect.

After a couple of decades of being around management teams and boards of startups, it’s clear to me that healthy communication is a big stumbling block for many and causes a good deal of harm not only to the two parties, but the momentum of the company itself. If you see it happening in your company, you might want to consider bringing in a coach like Jerry Colonna and his team at Reeboot.io who can help a team get through these issues.

Halfway through my 50th trip around the sun, I’m far more focused on quality, high-functioning relationships than being right or getting my way these days. As those close to me might attest, I still have my moments, but I’ve learned that being thoughtful, proactive and choosing my words carefully produces much better outcomes than the power play of passive-aggressive behavior or the instant gratification of lashing out.

Boise Rising

As usual, I woke up early this morning, poured my coffee and started scrolling through my streams to start my day. I was really happy to see that my friend Jeff Reynolds launched Built-In-Boise today, his labor of love to showcase Boise’s terrific entrepreneurs.  I shuffled off to the gym and as I sat on the bike, the miles rolled away as I reflected on all the great things happening in the startup community here in my hometown and then it struck me, they’re all being led by entrepreneurs!

It wasn’t always that way. Over the last couple of decades, plenty of effort has been made by various committees and organizations to kick-start our startup community. Groups led by various members of the ecosystem started well-intentioned efforts to make things happen here, all with the same results; a lot of fanfare & hand waving with little to show for it.

What’s really cool is that it’s starting to feel different around here. Jeff’s launch of Built-In-Boise is just latest of a handful of entrepreneurial-led efforts and the vibe is beginning to change as a result. Recently, my friend Raino Zoller launched The Trailhead, a non-profit community effort to connect entrepreneurs with each other, mentors and capital. Raino’s a successful serial entrepreneur who has been through venture financing, exits, mergers as well as disappointments. As an experienced tech entrepreneur himself, he’s the perfect person to lead an effort like this and I know The Trailhead is going to have a fantastic impact on our startup community.

One of the most innovative ideas I’ve seen anywhere in the country is Boise State University’s Venture College, which is teaching students to launch startups while still in school. Of course, Venture College wouldn’t have happened without the leadership of Kevin Learned, an entrepreneur who co-founded Idaho’s first software company and its first angel investment group. Another person leading the way is Jess Whiting, who has brought Startup Grind to Boise. Jess grew up in Silicon Valley and has deep ties to the venture community there. She’s leveraged her network to begin building bridges to the valley for startups in Boise. In fact, she’s bringing Scott Kupor (COO of Andreesen Horowitz) to Boise for Startup Grind on March 9. I’ll be there, you shouldn’t miss this. You can get tickets here.

Boise’s startups are thriving too. Terrific companies like Balihoo and Cradlepoint (which I’m proud that we financed both Series A and subsequent rounds at Highway 12 Ventures) are doing tens of millions of dollars in revenue and growing fast. Other new and exciting startups include TSheets, Wevorce and Meal Ticket (which the latter two we’ve financed through our funds at Techstars Ventures). Boise’s also becoming a hot cultural scene as well. As events like SXSW seemed to have grown so large that they’ve eaten themselves, Boise’s Treefort Music Fest is quickly becoming the most talked-about music event in the Northwest.

While my work at Techstars is taking me all over the world these days, nothing makes me happier than being here in Boise. I really believe it’s the most livable city in the country. Our trail system is second to none, we’ve got world-class skiing right here in town at Bogus Basin, and we’ve got a burgeoning startup community that feels a lot to me like Boulder did a decade ago. If you’re looking for the next great startup town in the country, come visit and I’ll show you around.

Yup, Boise. It’s surprisingly cool…