Past Is Prologue

It’s almost surreal for me to think that exactly twenty years ago, I was a green twenty nine year-old working on the first startup financing of my career and that yesterday, we announced our new $150 million fund at Techstars. Many people have heard Steve Jobs’ famous speech about only being able to connect the dots looking backward and I’ve been reflecting lately on the dots that brought me to this new and exciting chapter in my life.

When I moved to Idaho and co-founded Highway 12 Ventures in 2000, I never could have imagined that it would lead me here to this moment in time. I was a young, brash east-coaster, trying to raise my first small fund ($25M). Pam and I started out living in her mother’s house and had a one-year old daughter with a son on the way. With the dotcom bubble imploding, it was probably the worst time in the last fifty years to try and raise a venture capital fund.

With the help of Jim Hawkins and our terrific partners at Village Ventures (Matt Harris, Bo Peabody & Matt Warta), we somehow raised the fund. Around the same time I met Phil Reed, the amazing partner who’d I’d go on to work side-by-side with for the next dozen years. I’ve been incredibly lucky to have had his mentorship all these years. He’s been part father, part brother to me and his impact on my life has been profound. As Phil enters the twilight of his remarkable career (which included founding or co-founding over a dozen companies including both ComputerLand and BusinessLand), any startup would be lucky to have him as an outside director. His wisdom and kindness is immeasurable.

I’d also like to thank Mike Mers, George Mulhern, Glenn Michael, Decker Rolph and Eric Breon who all made enormous contributions to the success of Highway 12 Ventures along the way. I’m grateful to all of them. The most special thanks go to my amazing assistant Denise, who is currently finishing up kicking cancer’s ass with a grace that’s been an inspiration to everyone who knows her. I could never do what I do without her incredible support. I’m also thrilled that one other person who made a great impact at Highway 12 Ventures has recently joined Techstars. Derek Keller (who cold called me for a summer internship after graduating college 8 years ago) has done an unbelievable job as an associate and then principal at Highway 12, and has now joined Techstars Ventures as a principal.

Connecting the dots to this next chapter, David Cohen wrote a beautiful post yesterday about how it came together and Brad Feld added his perspective in this wonderful piece. I feel so fortunate to be working with 60 absolutely remarkable people at Techstars. We’re empowering entrepreneurs worldwide with the network and resources to build successful businesses wherever they want to live. David Brown wrote a great summary the other day about how we’re doing here.

In his uniquely special way, David Cohen did such a beautiful job in his post recognizing so many people who have contributed to the magic that is Techstars. The Managing Directors, Program Managers, Associates, Hackstars, Staff and Mentors are what make Techstars such a special place for the founders who choose to partner with us.  I echo David’s sentiments about all of the incredible people we get to work with. They make Techstars a community filled with such positive energy that you can’t help feeling fortunate to be a part of.

While David mentioned them all, I’d like to point out a few people by name who have made this such an incredibly rewarding experience for me. Molly Nasky, David Brown, Jason Seats, Nicole Glaros, Ari Newman, Brad Feld and Jason Mendelson, thank you from the bottom of my heart. Words can’t begin to express my gratitude.

Lastly and most importantly, thanks for saving a seat on the train for me David. You inspire me and everyone around you. It’s a helluva ride…

 

 

 

 

Why We’re Excited To Be Investors In Ello

Ello

There’s a good deal of buzz today about our latest Techstars investment in Ello and we’re really excited to be co-leading their Series A financing along with Foundry Group. However, this isn’t our first investment in Ello. We’ve actually been investors since January when we participated in their seed round along with Fresh Tracks Capital, eight months before Ello even launched their private beta. If you’re on Ello, you can read my partner David Cohen’s thoughts on our seed investment here. We invested then for the same two simple reasons we’re re-upping today:

1) We believe that most people want an online social experience free from a continual barrage of ads and the risk of having so much deeply personal data sold to 3rd parties.

2) We’ve gotten to know Paul over the last few years and believe that he’s the type of person Steve Jobs was describing when he narrated this in 1997. Simply put, Paul’s crazy. Crazy enough to believe that he can change the world. For us, he’s the type of entrepreneur we yearn to work with:

Can Ello succeed without selling out to advertisers? That remains to be seen. Will Ello sell out to advertisers? Absolutely not. In fact, we’ve signed and support the Ello charter which expressly prohibits this. Our investment is based 100% in our belief that people are willing to pay for a better online social experience. How that manifests itself will be determined over the months to come. One thing’s for sure: Paul’s been quoted many times saying “We’ll either build a business that doesn’t rely on third party advertising or the selling of user data or we won’t build a business.” As investors, we’ve signed up for that.

Ello has become a lightning rod in the media and social streams the last few weeks. It seems half the people absolutely love it and the other half can’t help scorning it because of its minimalist design and sometimes wonky user experience. One thing’s for sure, everyone’s certainly talking about it! For us, that reinforces the notion that people are hungry for a better online social experience. To those that are questioning the functionality and sparse feature set, remember that today, Ello is still a beta version. The mass exodus from Facebook was unexpected and the team is working feverishly to handle the deluge of new members. There’s a rich and exciting product roadmap driven by feedback from early users and the capital from this financing will allow the company to secure the human and technical resources necessary to roll these out at scale. We’re confident that in the months to come, the Ello experience will reflect what many people are searching for in an online social network.

Our investment will also allow me to work closely again with Seth Levine from Foundry Group. We became great friends when we were on the board of Lijit together and I’m excited to work closely with him again to help bring Paul as many resources as possible in building this exciting company. You can read Seth’s thoughts about Ello here.

I really hope you’ll take some time to come experience Ello. Personally, I really enjoy the simplicity and open space which lends itself to a beautiful visual experience. If you do, I hope you’ll connect with me, I’m @marksolon.

Drink When Served

There’s been a lot of buzz the last few days about the piece in the WSJ on Monday featuring Bill Gurley warning that it’s starting to feel a lot like 1999 again, including a follow-up article yesterday in which other VCs echoed Bill’s sentiment to varying degrees. There’s certainly no denying that it’s been a pretty good ride since 2009. Bill’s one of the smartest guys I’ve ever met but I don’t know if this party’s just begun, halfway over or they’re about to turn the lights and music off – I’ve heard valid arguments supporting each scenario. I’ve old enough now to have been through a number of cycles in my career (starting with the crash of ’87, just month’s after I started my first job on Wall Street) and the only thing I’m sure of is that each downturn is different. They’re driven by different factors and it’s almost impossible to predict one based on historical data. If it were easy, timing the markets would be a piece of cake.

I’ve noticed one trend lately though which gives me pause; a growing hubris among entrepreneurs when it comes to the amount of capital they’ll need. I’ve had no less than five conversations with startup CEOs in the last couple of months where the CEO had an opportunity to raise more capital than they set out to and they were reaching out to me for advice on whether to take it or not. In each case they were leaning against it. To give some context, I’m not talking about setting out to raise $5 million and having $15 million in interest. All of these discussions were with seed or early-stage founders raising between $500K and $2 million and having investor interest that would allow them to raise an additional 25% – 50% more. All of them had strong conviction in their company’s ability to execute and hit the metrics needed to raise larger rounds of capital in 2015 and they were concerned about the dilution of taking more capital today.

I’ve been around long enough now to have seen what happens when macro events affect a company’s ability to raise capital and it’s not pretty. I also know that’s not the only reason to consider taking more capital than you think you need at the seed or early-stage. It’s an immutable truth that unexpected bad things happen inside all startups, even the great ones. Key customers and employees leave unexpectedly, competitors come out with new offerings that temporarily paralyze buying decisions, DOS attacks, negative press and a hundred other things derail startups. Having some extra cash in the bank to survive these episodes can be the difference between survival and shutdown. A great serial startup CEO once said to me “my job is to make sure we’re around tomorrow, a lot of days in a row.”

My advice to all of the CEOs I spoke with was the same. Don’t over-analyze the short-term dilution when you have the good fortune of increased capital availability. Think about the value you can create with the extra capital and how that might positively affect the valuation you might be able to command in your next round of financing and factor that in to the overall dilution analysis. A long time ago Jane Martin (one of my mentors and a long-time successful General Partner at USVP) taught me that startups should always “Drink When Served.” It was great advice then and it still stands true today.

Jukely: The Perfect Way to See Live Bands

I love seeing live music. I’ve got a steady group of friends I go see bands with and we’re always on the lookout to see up and coming artists playing in our town. Generally, we use an email chain to alert each other and drum up a group to see a show, often leaving people off or discovering a show too late.

Earlier this year, I met Bora Celik and Andrew Cornett, co-founders of Jukely when I visited the Techstars NYC program. When I first sat down with them and they told me they were going to change the way people discover and see new bands play live, I was pretty skeptical. Then they showed me the product.

Boom! Jukely has quite simply created the perfect method to discover, share, buy tickets and see live bands with your friends. The product just rocks. Check it out.

Maggie

I just drove back to Boise after a terrific family vacation in the mountains. If you’ve never driven along Highway 55 in Idaho, it’s one of the most scenic stretches of asphalt you can imagine. I’ve driven it countless times over the years but this was the first time I had a chance to experience it in my “new” 1986 Jeep with the top off. The beauty and magnitude of the mountains and rivers was the perfect setting for reflection on some blissful time on a lake with family and close friends.

The most profound moment of our time away for me however came in the form of our dog Maggie. Two days ago, Pam and I awoke to the sound of Maggie crying (both Maggie and her sister Rosie slept on the floor of our bedroom in the cabin) and I jumped up assuming she was letting us know that nature was calling. I knew right away though that something wasn’t right. She was struggling to get up and I saw that she wasn’t able to use her hind legs. Her eyes grew wide and I got down to hold her. Within a few seconds I could tell she was in real distress and I yelled to Pam to get a vet right away.

I held Maggie while Pam found an amazing gentleman to rush to our cabin at 7am on a Saturday in a sleepy mountain town. The fifteen or twenty minutes it took him to get there (we feel remarkably lucky) felt like hours to me. They certainly felt like the last moments I was going to be spending with her and I wasn’t prepared for that. I’ve grown really close with her and I always imagined I’d have the opportunity to say goodbye to her like Owen Wilson did in Marley and Me – a sloppy affair with me sharing some well-thought out vignettes of our time together. This was sudden and real and all I wanted to do was end her suffering.

Maggie’s seizure was still happening when the vet showed up. After examining her, he told us that she’d had a stroke and was coming out of it, though there was no predicting yet how it would affect her but it was clear to him that she was going to survive. He shared stories with us that had both tragic and heart-warming endings. As she started to relax, he gave us instructions on how to care for her for the next day or two and to call him if things turned for the worse.

After about 90 minutes she calmed down enough to lay on the bed and take a nap with me. We both woke about 30 minutes later and she was looking better. I lifted her down to the floor and while as wobbly as a drunken sailor, she made her way down the hall and onto the porch where she staggered around for 15 minutes or so, falling down and dragging herself back up. Each time she got up, she did so with a little more confidence and she eventually got to the point where she could stand for a couple of minutes. We gave her some food and she happily ate it – a good sign for any Lab. We decided to take her down the steps to the lake shore and her tail started wagging – more good signs – and we watched her spend an hour walking in and out of the water’s edge – staggering, falling and standing over and over again on the warm soft beach.

Miraculously, by afternoon Maggie was about 90% of normal. We threw her tennis ball a few feet into the lake and she eagerly fought off Rosie to win the short swimming races – we were stunned. The next morning, Maggie was back to herself. She bounded up when I awoke, ate a hearty breakfast and resumed swimming activities with her usual vigor. 24 hours after thinking we were losing her, she was back to normal.

I spent a good deal of time in the jeep today thinking about her and the profound effect she’s had on me. Maggie’s the first animal that I’ve had a deep relationship with. I’ve had pets in and out of my life but I never connected with an animal the way I have with her. While a little late in life to finally experience that, I feel grateful for the twelve years I’ve had with her and fully recognize how lucky I am for each of our remaining days together. I told her this morning that she’s on bonus day number three now and the sparkle in her eye and the wag of her tail told me she gets it. We went down to play in the water one more time and I got in the jeep and left for home with a new appreciation for the special bond that we share.

Searching For A Technical Co-Founder

  • Yale University
  • Goldman Sachs
  • Navy SEAL Officer and Instructor
  • Harvard Business School
  • Firefighter
  • Personal Trainer
  • Motivational Speaker
  • Startup entrepreneur

Sounds like a pretty amazing career, right? Meet Phil Black. You’re looking at Phil’s bio. Did I mention that he accomplished everything above before the age of 40? I’ve gotten to know Phil pretty well over the last three month as he’s the founder and CEO of FitDeck, one of the 10 companies which recently graduated from the Nike+ Accelerator powered by Techstars. Fitdeck is a series of cards with easy-to-use body-weight exercises that you can do anywhere for a quick and efficient workout.

philblackdemoday

Phil Black talking about FitDeck at the Nike+ Demo Day

The idea for FitDeck is based upon a card game that Phil and his buddies on the Yale Basketball team would play called PUG (short for “push up game”). They’d use a deck of cards and do push ups until based upon the cards drawn until there was only one man standing. When he became a Navy SEAL, he taught the other SEALS the game and they’d play PUG all over the world – on aircraft carriers, battlefields and anywhere else they didn’t have the training equipment to remain in world-class physical shape.

When Phil left the Navy, he created FitDeck and would up selling over $4,000,000 worth of cards from his garage. He then applied to the Nike+ Accelerator with the notion of making Fitdeck digital and mobile – quick, easy to understand body-weight workouts on your smartphone.

As I mentioned earlier, Phil’s just graduated from the top digital fitness accelerator in the world and has a terrific business model to disrupt the mobile fitness industry. About the only thing that Phil lacks is a technical co-founder. He is looking for someone at a VP Engineering level willing to relocate to San Diego (Phil lives there with his wife and four sons – can you imagine how much testosterone is in that household?).  He’s looking for a partner with great product vision, technical skills (mobile and web), architecture background and platform experience who has built a scalable mobile app. Coding in the beginning is important but ultimately he desires someone who would grow into the CTO role over time.

Phil talking to an investor at Nike+ Demo Day

Phil talking to an investor at Nike+ Demo Day

If you’ve got the technical chops described above and are looking for to partner with an terrific founder with great vision to build an important company in the digital health sector, look no further. It won’t take you more than a few minutes with Phil to see what I mean. As you can imagine, I’m incredibly fortunate to meet and get to know a lot of remarkable people through my work at TechStars and Phil’s one of the most extraordinary I’ve come across. If you’d like to talk to him about this, you can reach him at phil at fitdeck dot com.

Why Nike Gets Startups

Last week, I was in San Francisco for Demo Day for the Nike+ Accelerator powered by TechStars. It was actually the third Nike Demo Day I’d attended in a little over a week, the previous two were in Portland a week earlier – one for Nike executives at the Accelerator and the other at the Tiger Woods Center at Nike’s beautiful world headquarters campus. You could say that I “Just Did It” in a big way.

The founders take a bow at the conclusion of Demo Day

When I had visited the accelerator during its first month back in April, I met with all ten teams and left with the same feeling I usually do when visiting any of our TechStars programs early on, “boy do they have a lot of work to do.” When I showed up in Portland again a couple of weeks ago, I was incredibly pleased at how much progress the companies had made – solidified business models, significant customer traction and confident founders running young companies with big opportunities in front of them.

The more I talked with the founders, the more it became apparent that Nike senior management really understood and embraced the idea of running a corporate accelerator with us and did all they could to make it successful. They eschewed typical corporate myopic behavior and threw all they could at building community around their brand at the startup level. In fact, these ten companies were the first companies ever to be given the API’s to Nike’s fuel technology.

It didn’t stop there though. They brought a steady stream of athletes, designers, digital experts and more through the program on a regular basis. Founders shared with me that key members of Nike’s digital team would just hang out at the accelerator all day sharing knowledge and working closely with the founders. Even Nike CEO Mark Parker got into it and spent time with the teams, how cool is that! Management listened carefully when we explained how important it was for the rising tide of these quantified-self and digital health startups to trump just focusing on what’s best for Nike and they brought all they could to help them succeed.

The results were fantastic (here and here for example). The Demo Days were a home run and just a week later, almost all of the companies are on their way to meeting or eclipsing their fundraising goals. More important however is how prepared they are to begin waging battle in the digital health arena. According to Rich Schmelzer, CEO of GeoPalz, “The smartest thing we have done so far as a business was our decision to apply to the Nike+ Accelerator program, powered by TechStars. Working with Nike during the program was unbelievable. We had at least two years worth of biz dev meetings within 90 days! Where else could you do that?”

I give a lot of credit to Stefan Olander (VP Digital Sport) and Brian Kirkbride (VP Business Development, Digital Sport). They fostered an atmosphere for the program to succeed and the companies to thrive. I’m sure that the success of some of them will directly contribute to Nike and others might not. More important is they delivered a strong message that Nike is open for business to collaborate with startups and they set the tone for even greater success with future programs.

If you’re an entrepreneur with an idea around digital health and the quantified self, you might want to set your sights on the next Nike+ Accelerator powered by TechStars. It’s rocket fuel for your startup. In other words, “Just Do It.” You can start now by following the amazing and tireless Managing Director Dylan Boyd on Twitter here.

Seed Investing Doesn’t Buy You Series A Traction

During my first year at Techstars, I’ve spent a good deal of of time working with founders helping them to prepare for raising their first round of seed capital. I’m sure it’s not lost on anyone reading this that seed investing has been riding a pretty sizable wave over the last couple of years. This wave has provided both positives and negatives for entrepreneurs. On the positive side, there’s more capital targeting seed-stage opportunities and methods to find that capital than I can ever remember in my career. (I’m happy to let the pundits debate the extent to which this has created a “Series A crunch.”)

Seed

However, there’s also a downside to the recent proliferation of angel investors. More and more, I’m observing angel groups acting like VCs as it relates to diligence, terms and valuations. I’ve made dozens of both seed-stage and Series A investments in my career and they’re different animals.

I’ve always look for two things in seed opportunities: 1) a compelling market opportunity and 2) a talented team committed to solving it. That’s it. I never thought I deserved more than that in making an investment at a sub $5 million pre-money valuation. My Series A criteria added one more component, traction. For example, I always look for things like a few significant enterprise contracts or real MRR (for a SaaS business) or evidence of a hyper-engaged customer community.

Unfortunately, I’m seeing more and more angel groups looking for Series A traction at seed-stage pricing. They want to see considerable business momentum but also want pay sub $5 million pre-money valuations. They spend oodles of time doing “due diligence” when what they should be doing is spending time with the founders and determining if they think they’ve got the chops, commitment and experience to make a go at it. At Techstars we always say that we look for six things when evaluating applications: Team, Team, Team, Market, Progress, Idea. If you distill that, it’s the same thing I describe above: team and opportunity.

If you’re relatively new to seed-investing, first let me say thanks. It’s fantastic to see people wanting to support entrepreneurs and startups with their hard-earned money. It’s behavior like this that will foster the next generation of great companies and help keep America on the forefront of global innovation. One suggestion though; keep your expectations in check with regard to what to expect for your seed-stage dollars. From my perspective, it buys you a small team of bright, hardworking entrepreneurs with a vision about how to tackle a significant market opportunity who are willing to work for peanuts for a few years in order to tackle it. It doesn’t buy you more and you shouldn’t settle for less…

March For Innovation

All four of my grandparents passed through Ellis Island, met their spouses and established life in America in the early 1900’s. If it wasn’t for the welcoming arms of the US, I wouldn’t be here today. We are a nation of immigrants.

Today I’m joining with thousands of tech leaders, politicians from both parties, celebrities, and organizations in a massive, two-day virtual march on Washington. Our message: seize the moment and pass immigration reform.

Click here to join me in the virtual march. Tweet, Facebook, or call your Senators now.

We’re marching because our immigration system should be fostering innovation — keeping and attracting the best and brightest here in the United States. And we’re doing it because we need a fair system that lets honest, hard-working immigrants emerge from the shadows of a broken system.

America is losing the global race for talent. Countries around the world are recruiting the best and brightest and supporting new innovations and companies. We won’t even give these innovators a visa. It’s unfair and it’s hurting our economy.

We now have a chance for meaningful immigration reform and we need your help to push Congress to action.

Click here to tell your Senator to seize the moment and pass immigration reform.

Our two-day virtual march will activate thousands of supporters and will hold interactive events with leaders and celebrities to show just how important immigration reform is. You can find out more and participate at marchforinnovation.com. We’d love to have your voice in the conversation.

Together, we can pass this.

Feng Shui for Startup CEOs

Feng Shui: \ˈfəŋ-ˈshwē, -ˈshwā\

“A Chinese geomantic practice in which a structure or site is chosen or configured so as to harmonize with the spiritual forces that inhabit it” 

Yesterday after our annual meeting, I was sitting with a handful of our portfolio CEOs and the subject of staying on top of what’s going on inside your company came up. Matt Warta (CEO of GutCheck) shared with the group that he has chosen to eschew an office and prefers to sit in the open area along with the rest of his team. “I love being in the middle of my team, it’s the only way I really know what’s going on.” This isn’t a new practice for startups. GutCheck still has less than 20 people and it’s still relatively easy (and probably critical) for CEOs to sit at the center of the team and serve as a coach, role model and evangelist.

However, as a company grows, it seems that most CEOs eventually move to an office for a greater degree of privacy. One CEO I know however has bucked that trend. I first saw Pete Gombert (CEO of Balihoo) do this a few years ago when they expanded into their new space. The company was growing fast and moved into the entire 3rd floor of The 8th Street Marketplace in Bodo, Boise’s trendy creative district, complete with high ceilings, exposed brick & huge wooden beams – definitely one of the coolest startup offices I’ve ever seen.

When choosing offices, Pete (as founder and CEO) obviously got the pick of litter. Corner office with big windows and a gorgeous view of downtown Boise and the mountains. Closing in on 80 employees at the time, all members of the management team also got nice offices. There was only one problem, he hated it. He felt that both he and senior management were becoming disconnected with the team which was across the office and down a few stairs in an area that has become affectionately known as “The Pit.”

Balihoo’s “Pit” (you can see Pete in the far right, smack in the middle of the action)

So what did he do? He moved himself and the whole management team down to The Pit in the middle of the action and the individual offices became rooms for quiet meetings and conference calls. According to Pete, “I felt like my decision making process and that of my team was incomplete because it lacked the context of understanding the consequences of our actions. The value it brings in both context and transparency far outweighs the downside of being in my ivory tower.  It’s not for everyone, but I will never work another way.”

I’d love to learn more about how startup CEOs think about this.