tag:blogger.com,1999:blog-19608361260210840842024-02-08T12:16:27.865-08:00SoCal VCThoughts from a Venture Capitalist who spends much of his time in Calfornia, especially Southern CaliforniaJim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-1960836126021084084.post-40433802313933719862016-03-28T14:56:00.000-07:002016-03-28T14:56:13.379-07:00New Acclerator in Los Angeles<div dir="ltr" style="text-align: left;" trbidi="on">
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Accelerators have been all the rage and have come and gone, but I LIKE the way this one is starting out. Sitting here (as a guest) on day one inside the Cedars Sinai / TechStars Healthcare focused healthcare accelerator in West LA (West Hollywood) it feels pro. Focused, lead by product and company experience (Matt Kozlov) and exuding success. Cannot wait to see the results and the demo day. Jim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com1tag:blogger.com,1999:blog-1960836126021084084.post-52918402866155299912012-04-16T15:48:00.001-07:002012-04-16T15:49:44.520-07:00SCV Startup -- an important accelerator hits the marketClearstone was excited to sponsor this event and to aid and abet the unchecked enthusiasm that is Erick Arndt in his quest to harness the talent around him into an accelerator program...<br />
click title above for link....Jim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com4tag:blogger.com,1999:blog-1960836126021084084.post-20033541188048109002012-03-15T16:25:00.001-07:002012-03-15T16:25:31.995-07:00LAVA AwardsI am on the board of LAVA (Los Angeles Venture Association) and they have increasing amounts of energy. I wanted to pass on the results of the LAVA Venture Awards...<br />
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LOS ANGELES VENTURE ASSOCIATION<br />
11301 Olympic Blvd. #376<br />
Los Angeles, CA 90064<br />
866-466-5282<br />
info@lava.org<br />
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LOS ANGELES VENTURE ASSOCIATION<br />
9th ANNUAL AWARDS DINNER HONORS <br />
Venture Capitalist Jon Funk, 7 ENTREPRENEURS<br />
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Santa Monica, CA. – March 15, 2012 – The Los Angeles Venture Association (LAVA) held its Ninth Annual Venture Awards Dinner Wednesday evening to recognize Southern California’s best venture-backed companies, and to celebrate the induction of Jon Funk into the LAVA Hall of Fame. The awards dinner was attended by over 230 leaders in the Venture Capital community, including CEOs and founders of successful emerging companies. It was held at Fairmont Miramar Hotel in Santa Monica.<br />
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This year's LAVA Hall of Fame inductee, Jon Funk, has been directing startup investments in emerging information technology companies in Southern California since 1986. Jon currently serves as the founder and Managing Partner of Ocean Road Partners. Ocean Road Partners is a venture capital firm serving the venture capital and technology communities of southern California.<br />
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Jon also serves as a Managing Director with Allegis Capital and has held that position since Allegis’ founding in 1996. At Allegis, Jon sourced and directed several of the firm’s top investments in its history, all Series A financings backing southern California technology companies. These investments include Sandpiper Networks (Westlake Village, acquired for $630 million in 2000 by Digital Island), Rent.com (Santa Monica, acquired for $430 million in 2004 by eBay) and Shopzilla (West Lost Angeles, acquired for $560 million in 2005 by the E.W. Scripps Company), cumulatively producing over $1.6 billion in liquidity for their shareholders. Rent.com and Shopzilla represent two of the top 10 venture-backed IT winners for the period 2001-2010. <br />
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“This is one of LAVA's signature events and it continues our tradition of showcasing Los Angeles' top emerging companies, entrepreneurs and investors,” says Randy Churchill, President of LAVA. “Earning recognition in trying economic times is especially challenging, and this year's nominees all deserve congratulations and admiration for their accomplishments.”<br />
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The seven award winning companies were selected by a panel of judges comprising the region's top venture capitalists from 19 nominees in the following categories: <br />
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Best Venture Funding in Internet/eCommerce: TrueCar <br />
TrueCar, Inc. is an automotive solutions provider focused on changing how cars are sold by providing a significantly better consumer experience while helping qualified dealer partners gain incremental market share and reduce costs. (www.truecar.com)<br />
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Best Venture Funding in Internet/Ad Technology: SocialVibe <br />
SocialVibe is a digital advertising technology company that powers engagement advertising for some of the world’s top brands. (www.socialvibe.com) <br />
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Best Venture Financing in Clean Technology and Energy:CODA Automotive Headquartered in Los Angeles, CODA Holdings is a leading developer of advanced Lithium-ion power battery systems comprised of three key business lines: CODA Automotive, CODA EV Propulsion Systems and CODA Energy. (www.codaautomotive,com)<br />
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Hottest First Time Venture Funding: BetterWorks <br />
BetterWorks’ company mission is to help small and medium-sized businesses recognize, reward and retain employees by “Making Work Rewarding”. (www.betterworks.com)<br />
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Best IPO Exit: Cornerstone OnDemand<br />
Cornerstone OnDemand is a leading global provider of a comprehensive learning and talent management solution. (www.csod.com)<br />
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Best M&A Exit: Riot Games <br />
Santa Monica based Riot Games is a leading developer and publisher of premium video games that target video game enthusiasts. (www.riotgames.com)<br />
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Most Capital Efficient Exit: Accordant Technologies <br />
Polycom is the global leader in standards-based unified communications (UC) solutions for telepresence, video, and voice powered by the Polycom® RealPresence® Platform. (www.polycom.com)<br />
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About the Los Angeles Venture Association: <br />
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LAVA is Los Angeles’s premiere Venture Capital focused industry organization that provides a forum for Entrepreneurs, Investors and the community of businesses that assist companies in their formation and growth. LAVA celebrates 28 years of service to the community. It is led by a team of volunteers that provide program, sponsorship and leadership in the Venture funded community. For more information, visit www.lava.org. <br />
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CONTACTS:<br />
Leonard Lanzi, <br />
LAVA Executive Director <br />
310-450-9544<br />
len@lava.orgJim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com0tag:blogger.com,1999:blog-1960836126021084084.post-68473210907349508012012-01-30T16:03:00.000-08:002012-01-30T16:03:27.682-08:00Never Suspend Your JudgementAt Clearstone, we were having a great discussion today around wisdom, and what it takes to make consistently better decisions. Decisions about life, about work, about investments. As is the case with many "big ideas", the conclusion can me trace to a simple concept. Become aware if you are ever, in ANY way, suspending your judgement, AND then NEVER suspend your judgement. <br />
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In my business I have become a pattern matcher. It is an occupational hazard and drives those people closest to me nuts. In evaluating investments, company and people every day you learn to focus on the meta data -- the data that describes the data. <br />
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One pattern I have discerned from the most successful, and often most experienced, at starting and building great companies, is that they act as if they are always the PRINCIPAL (not the AGENT) in every activity they do and evaluate. They become absolutely trustful of their mind and their sensibility to makes sense of all situations and to judge all situations (sometimes harshly). They become the gifted athlete who, having learned the basic skills of the game, becomes free to operate on a higher level. They quickly hone in on the flaw of any plan, product, process, service or value proposition. I believe they do this by freeing their mind to question everything anew, and quickly give a "yeah or nah" vote to each premise they uncover. <br />
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If you consider the mistakes you have made in your past, you may find that buried in that decision was a premise or assumption that was commonly held as true, or you held as true, that slipped through real examination. You may also find that you did not feel compelled to push your thinking into that decision as work was already done in that area by "experienced, smart people." That is suspending your judgement. Pushing yourself to not smuggle in any hidden assumptions is the first step in getting wise.Jim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com1tag:blogger.com,1999:blog-1960836126021084084.post-27354308802847747682011-07-27T15:31:00.000-07:002011-07-27T15:31:34.380-07:00Steady as She Goes...The business of venture backed internet companies is pretty hot these days with sky rocketing IPOs and a flurry of fundings. But finding the signal amidst the noise has never been harder. 60 days ago, a certain company was all the rage. At least half a dozen of the new pitches I took referenced the company’s assumed success as a comp for their own glorious future. I remember thinking how fast that happened and how people were providing so much assumed intelligence towards investors, who MUST know what they are doing. Here we are a mere 60 days later and the company (which shall remain anonymous, but there are plenty of examples) is getting pummeled in the press. The founder left. While the piling on is now most likely overly negative, an analysis finally focused on the data that mattered — mainly that nobody is using the product.<br />
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Venture is rife with gossip and suspicion and shadenfreund because we all don’t know how the future will unfold and we all take risk. Gossip and information is unavoidable and fine and well, but in venture capital all the information MUST culminate in an independent mind, taking an intelligent and supported point of view. This point of view is open to critique and attack and risk, but taking a stand among all the unknowns of our business is the only hardscape that decision makers in the highly ambiguous world of startups and venture capital can use to move forward.Jim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com0tag:blogger.com,1999:blog-1960836126021084084.post-58417563026794989652011-07-01T13:44:00.000-07:002011-07-01T13:59:17.977-07:00HomeAway IPOThere has been a lot written, most negative, about the valuation of the HomeAway IPO this week. Here are a few comments from a shareholder, who admits he has some bias, but I believe his comments are credible....<br />
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<b>"So I’m totally biased</b> (I’m a shareholder but not an insider) but IMO HomeAway deserves to be lumped in much more with LinkedIn & Facebook & Ebay for that matter than a Pandora or a Groupon because of network effects. Huge market (at least 10X of OpenTable), low penetration, increasing economies of scale, killer management team. Having seen the pitch, I’m not at all surprised at the market’s reaction."<br />
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"What’s funny is there were a number of negative articles yesterday by TheStreet, SeekingAlpha, and Business Insider saying they didn’t like the business or the valuation and IMO their analysis was terrible."Jim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com1tag:blogger.com,1999:blog-1960836126021084084.post-65633914073600108872011-01-18T13:12:00.000-08:002011-01-18T13:12:38.012-08:00Comments on Ryan BornOK, Ryan Born posted the essay below (below my comments) and for some reason LinkedIn would not allow me to comment in length. My comments here and his post below.<br />
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MY COMMENTS<br />
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OK, despite the obviously purposeful edgy tone, good post. And while I generally agree and give similar advice, here are three anecdotes or truths about SoCal investing and startups that contradict.....<br />
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1. On associates. One of my investments doing GREAT (and I mean GREAT) is SupplyFrame in Pasadena. I remember the day Clearstone associate Jaideep Singh came into my office and said "Dude, you got to meet these guys and you got to invest." They were pitching in the other room and I ran right in prepped for a good meeting. We made the investment two weeks later.<br />
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2. On Angel groups. So Cal is much less efficient than Northern Cal in its organization. You can find a diamond in the rough and you don't know where great advice and good investment money comes from. My advice is talk to everyone but DO definitely be ruthless with your time and make the party evaluating your company be responsible and professional and do not allow them to waste your precious time.<br />
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3. On available funds. True but there are all sorts of pots of money around a longtime venture firm. An example is Clearstone, where we are avoiding early stage investments into our main fund, but actively investing in early stage out of two other pools of money, one a super angel type fund. We just closed on new investments Cetus and CupidsPlay in the last two weeks (to be announced soon). I would assume that other long term venture firms have similar flexibility.<br />
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Jim<br />
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RYANS POST>>>>><br />
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It’s been over 3 years since I moved to LA and started what I’ll call the Los Angeles Venture Capital “fundraising scene”. Over the past 3 years, I’ve raised a good deal of money (some disclosed, some undisclosed) and I’ve formed a few opinions along the way, which I’m going to share here in hopes that you can avoid wasting valuable time as you go about your own fundraising efforts in Los Angeles.<br />
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1. DON’T PITCH THE BITCH (i.e. Don’t pitch “Associates”)<br />
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In this instance, “the bitch” = “the associate at a VC firm” (gender agnostic). Don’t waste your time pitching associates at VC firms. In my opinion, VC associates have absolutely ZERO decision making ability / influence and will likely leave the firm within a 2 to 3 year period for one reason or another so any long term firm relationship you to wish establish through them will likely fade. Don’t bother with associates, it’s just a waste of your time. Instead, go straight for the VC partners with real check writing ability. If they pass you off to an associate, be wary. It’s straight out of the movie Boiler Room, except that in Boiler Room they chauvinistically advise not to sell stock to women. Here, I’m just advising that you not try to sell to VC firm associates, as it’s a waste of your time. Seriously, don’t pitch the bitch.<br />
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2. PAY LITTLE TO NO ATTENTION TO THE FORMALIZED ANGEL GROUPS<br />
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Every young entrepreneur in LA has heard of the Tech Coast Angels and their unaffiliated clones / red headed step children – The Pasadena Angels and The Maverick Angels (who actually charge you to pitch – run to the hills). In particular, if you have a “consumer internet” company, i.e. the kind of company you see regularly covered on TechCrunch, then my advice is to not bother with any of the LA based formalized angel groups. The reasons are too numerous to mention (HINT: They are Dinosaurs and although they’ll be bragging about Green Dot for the next decade or more, don’t be fooled, you’ll be wasting your valuable time and energy trying to get in front of them).<br />
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Rather than ranting aimlessly about these groups (NOTE: I’d be happy to debate them publicly about my issues with them), I’ll just simplify my reasoning behind this point with the following short story: Someone very high up (i.e. an executive / board member) at one of the groups recently told me that he’s fundraising for a new company of his own. When I asked if he planned on pitching the same formalized angel group at which he holds office, said NO (I’ll refrain from detailing why in an effort not to sell him up the river). Amazing right? I could go on and on and ultimately into a tirade ripping into these groups but I’ll keep it professional and just tell you that if a member of the group thinks it’s a waste of time to pitch the group itself, then it’s likely a waste of time for you too. If you are absolutely set on pitching members of formalized LA based angel groups (TCA, Pasadena Angels, and Maverick Angels), then go directly to the individual angel members themselves for personal investments (rather than the group) or better yet, go and pitch angels that don’t associate themselves with one of these formalized groups.<br />
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3. DON’T PITCH FIRMS WITH NO MONEY!<br />
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This may sound totally obvious but reality, it’s not always easy to tell, and there are at least a handful of “cashless VCs” in LA. Due to the awful economy of 2008, 2009 (RIP Good Times), and beyond, some VCs have died off or are in the process of slow downward spiral. Some have had a hard time raising new funds and are close to or already out of cash. Those that still have cash are slow playing their hands, or have reserved their remaining cash exclusively for follow on investments (i.e. topping off their existing portfolio companies when cash gets low). That being said, these VCs still hang around the “fundraising scene” and will often take a meeting with you, even though they have little to no cash to actively invest, just to ensure themselves that there are not passing on the next Twitter, Groupon, or Zynga. The problem here being that they wouldn’t have the check to write even if they though you were the next $1B+ exit. So how do you know which firms are out of money? Here’s 3 easy ways…<br />
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1. Ask them point blank how much cash they have to put towards new investments, the last investment they made, and the amount of the check.<br />
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2. Ask around – i.e. other VCs and entrepreneurs to get a 2nd opinion of the firm and it’s financial position, and<br />
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3. Do a little research and find out when they closed their last fund and the amount of the fund.<br />
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If everything passes the smell test, then by all means go ahead and court the heck out of them. If things don’t add up, be sure to ask for intros to other investors that are more active.Jim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com3tag:blogger.com,1999:blog-1960836126021084084.post-5756935888835750702011-01-12T12:02:00.000-08:002011-01-12T12:02:45.486-08:00The Problem with the Super AngelsThere is a lot of talk these days about the growing number of angel funds and super angel funds, that is funds that quickly invest 250k to 2MM (roughly) into a company and remain very hands off. To be sure these super angel funds do indeed properly fit into the new trends around company creation. At Clearstone, we have also launched a super angel fund and strategy. <br />
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What I worry about is the path that most companies take to success and the staying power of this capital. In my 15 years plus in venture I can think of only two portfolio companies, Overture (goto.com) and Rubicon, which were able to flawlessly hit their launch plan. Overture pioneered the pay for placement search market and raced to $100MM in revenues. Rubicon hit the market just right with a publisher centric advertising solution. Otherwise, all of our other successes, a dozen IPOs and an equal amount of large M&A exits, took a very crooked path to success.<br />
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In each of these cases, what was needed was conviction and a belief that the company and product we were building was going to be needed and valuable in the marketplace -- eventually. What was needed was smart, educated capital that had been heavily involved with customers and products and other, more nuanced sources of credibility around the growth of the company. <br />
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It is rare for any "1.0" version of anything to work just right. More often than not products, and the messaging and marketing around them, need lots of reiteration and market testing to hit their inflection points. The same is true with companies. In my experience the super angel money has been "hot money" that develops "alligator arms" and runs when the hat is passed in a conviction round. In addition, the small amounts of capital available from these funds put unnecessary and complicated restrictions on the already difficult business of making a start-up venture successful and driving it towards a large exit. <br />
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The success rate of start-ups is low and experience can make it higher. However, my experience tells me that capital providers that are small and hands off are by definition seeking (i.e. "hoping for") a quick hit and start-up success rarely works that way.Jim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com2tag:blogger.com,1999:blog-1960836126021084084.post-39591601255502395152009-10-20T12:23:00.000-07:002009-10-21T14:32:48.188-07:00Luis VillalobosAs many are aware, a pioneering angel investor in our community, Luis Villalobos, recently passed away. I was just reading the comments section of Frank Peters' blog (and related post) and I was touched. Comments came in from all corners of the large, diverse Southern California entrepreneurial community about Luis. This reaction and the consistency of praise, and loss, is a testimony to the man, and I post the link here. We will miss you Luis. <br />
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http://www.thefrankpetersshow.com/2009/10/luis_villalobos_is_very_sick.htmlJim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com0tag:blogger.com,1999:blog-1960836126021084084.post-29495303795064909142009-08-23T05:56:00.001-07:002009-08-23T06:20:43.213-07:00DEO - The concept going forwardEveryone who is trying to grow traffic to their Internet site(s) knows the all important topic and battles of SEO: Search Engine Optimization. SEO has become a powerful practice area, and indeed an industry, that is characterized by perpetual improvement, tools, tips and tricks, information sharing and hoarding, and gaming the continually shifting algorithmic properties of the search engines, or maybe I should say search engine. Included in SEO is big concept stuff like content being "fresh, unique and relevant." Also included is a recognition of the negative controls, that is the effort to make sure you aren't blacklisted, delisted (or even relisted) as a spam site, mashup site, or poser site -- lest all your hard earned traffic disappear overnight. The complexities around this one effort, and often around one algorithm, are truly amazing and the free market in hyper-action.<br /><br />However, looking out, I see DEO, Distribution Engine Optimization as the game of the future. More and more companies are recognizing that being a portal (a destination site) is a tough and expensive game for growth and return on effort (and for VC investment). I am seeing more and more companies start to make great and well distributed CONTENT, not traffic, their claim to fame.<br /><br />In addition, the search engines of today are link-to-website, not content driven, and there is a large difference. Companies that deal in content first need to normalize that content, need to assure its quality and consistency and format and make it ready for mass distribution. Next they need to merchandize that content by applying their unique domain knowledge of what drives placement for that content, not on one site, but on 1000 sites. Next they need to complete that content by adding other pieces of content that are correlated, and put them in context (the context of a user of the content making a buying decision). Good Content DEO companies next want to add monetization to their content, so that it is attractive to publishers. I believe it is KEY to recognize that for many swaths of the online economy, monetizatioin fits better with CONTENT than it does with AUDIENCE. Finally, reporting to consituents will continue to be a differentiator.<br /><br />I expect in 10 years there will be massive new market cap companies that are leaders in all these things, and these will be the new leaders of DEO.Jim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com1tag:blogger.com,1999:blog-1960836126021084084.post-73027031265561639662009-07-14T11:25:00.000-07:002009-07-14T14:51:50.085-07:00Top 10 Board Meeting Tips (for CEOs)As a less laborious follow on to my last post (people love top 10 lists), here are my TOP 10 BOARD MEETING DOS AND DONTS FOR CEOS......<br /><br />1. Set the TONE. The CEO should have some sort of executive report up front that sets the table for what they want to accomplish in the meeting. Be it, "green, yellow, red" or "top issues" -- you want to help the board help you. This includes managing the agenda or "board deck" carefully to best use the time to help the business -- <em>boards will talk and discuss whatever is put in front of them.</em><br /><br />2. Try to reach out to all board members prior to the meeting (or ask them to always reach out to you) so their concerns, if any, are addressed.<br /><br />3. On key metrics, send it the day before if you can so people dont waste too much board time trying to understand or comprehend a first look on key data. You want the focus to be on strategy and decision making, not comprehension of new data.<br /><br />4. Avoid defensiveness, either by yourself or anyone else in the room. If you see it happening, call a timeout and change the topic. This is leadership. We are here for the TRUTH (and we cand handle it!)<br /><br />5. Avoid the cheering section. If you have as a goal for investors to leave a board meeting "psyched" and "supportive" -- Don't. Board meetings are not the time to build support for the Company, and an experienced board member will be critical of the attempt. Do that one on one or in other meetings. Board meetings are a time for good information leading to excellent decision making, and nothing builds investor support quicker than knowning your management team is living in reality and "on it."<br /><br />6. Avoid long answers, particularly from the other executives. It is OK to for management to answer, "don't know" or "I disagree." I expect a good CEO to cut off drifting discussions at the appropriate time. If a CEO does not do this in the board meeting, I must conclude they don't manage any meeting they lead or attend.<br /><br />7. Stand up to and manage your VC/investor board members. We all get off track and we all (if we have a healthy ego) like to be managed by a leader. This is your meeting so don't make someone else have to play parent. This includes temper tantrums, foul language and rudeness. I am often shocked at how much childish behavior CEOs let their VCs get away with in board meetings. Don't stand for it -- it is unprofessional. <br /><br />8. Learn the strength and weakness of each board member. Do they always give prescriptive comments or do they ask penetrating questions? Do they talk to seek answers, or do they talk to be heard? Do they ask multiple choice questions, or open ended questions? What histories have they had that shape their priorities? What are their backgrounds? Do they comprehend by listening, or by reading? Are they better one on one, or in a group?<br /><br />9. Realize you have many tools in your toolbag. Board meetings are one venue only. In the situation where you are having difficulty communicating with a board member in the board meeting, accept that it may not happen. Instead, be prepared to have one on one phone calls ,dinners, invite them to management meetings, have them participate in advisory board meetings, ask them to visit customers or industry conferences. You have many tools at your disposal to communicate with investors.<br /><br />10. Last but not least, and this ties into the tone you want to set for the board meeting, KEEP IT INTELLECTUAL -- regardless of how others act. For example, a grumpy venture investors asks "well how come you haven't even updated the so and so yet, we talked about this last meeting!?!" Instead of defending against the attack, a better response is, "I have really tried to focus on the priorities. You keep mentioning this as important and I don't see it as important. Tell me why you think this is where we should be spending our time?" Lead by example, and mean it.Jim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com5tag:blogger.com,1999:blog-1960836126021084084.post-20789742934806444122009-07-08T17:06:00.000-07:002009-07-08T17:12:06.989-07:00How to Run a Great Board Meeting...I do “publish” a lot of thoughts on what I am seeing in my industry (VC, startup companies), but just not HERE! Time to put those comments here….
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<br /><strong><span style="font-size:180%;">How to Run a Great Board Meeting…</span></strong>
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<br /> Today I want to put a thought out there on how to run a board meeting once you take institutional capital. First, when I say institutional capital, I mean you have taken capital and set the expectation that you are going to try to get the Company, someday (say inside of 7 years), to a real liquidity event, which I describe as north of $200 million dollars in value. This could be an M&A event, or it could be (hopefully) a standalone company that seeks an IPO and to have enough credibility (and visibility) to create a market in its stock.
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<br /> Obviously, that is ambitious and requires that you create a powerful economic model and an important product or service position in an important market – so if you have raised capital that has this ambition, then you have taken institutional capital.
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<br /> Board meeting requirements are usually written into the terms of such a financing, and are a big part of the communication culture of startups today. So, how to run one as the CEO or founder (or both)?
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<br /><strong><span style="font-size:180%;">Why are We Here?</span></strong>
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<br /></span></strong> First, let’s define the purpose of the meeting. An important purpose is the reporting function and fiduciary oversight. Investors have put money in (often not their own money and they have to answer to their own investors) and want to see how their investment is performing. While basic and necessary, this is the simplest form of meeting with your investors, and I don’t think this is the main function of a board meeting, certainly not in the successful companies of which I have been a part.
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<br /> A nasty corollary here is that often management, or founders, want the investors to leave “jazzed” about the Company! If that is even an implicit goal of a board meeting then all the information will be warped and unreliable and sincere questions will be met with deflections and defense.
<br /> Another important purpose of the board is to understand where management is taking the Company and then apply their contacts and industry knowledge in helpful way. Investors need to be listening and deeply understanding during this activity, and I personally prefer it when the investors keep the “I know a guy” comments to a minimum during the board meeting. There is plenty of time for that when investors are one on one with the management team.
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<br /> Because startups are about companies creating their product, their team, their market positioning and market identity in rapid order, every week and every day -- critical decisions are happening. Often without the management or board being aware that they were making a decision! In such an environment a key role, and maybe the most important role, of the board is to help the management team make better decisions – but that is a very tall order.
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<br /><strong><span style="font-size:180%;">Stealing Hindsight</span></strong>
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<br /> In this last, highest purpose of a startup board, I have found that the concept of “hindsight” delivers the best standard by which to judge the effectiveness of a board. In hindsight, so much is clear. We often beat ourselves up with the “benefit” of hindsight, when many past decisions can look silly.
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<br /> Think about a big project (or company or career or relationship or startup) you have been working on. It really can be anything. Your current perspective, July 2009, on this project has factored in hundreds of variables and you can try to make some guesses about issues that are really facing you and this project today. However, six months from now, in January of 2010, you are going to have a much clearer view of what issues were really facing your business in July of 2009. In hindsight, you will have a better view.
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<br /> Let’s look back 6 months. From you current perspective, what were the real issues facing your project in January of 2009? Can you recall what you would have said in January versus what you would say today regarding this issues facing the project then? I think it is very difficult to “predict the future” around a company or market, and not usually productive to use a smart group to try to come up with such predictions. However, a better, and more valuable effort, in my opinion, is to try to see the business today through the eyes of tomorrow, or what I call “stealing hindsight.”
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<br /> Most of the successful companies I have worked with have engaged in this effort to some degree, often implicitly, and this has led to better decision making by all. A good first way to put this technique to work is to ask yourself, “In January of 2010, what will I say were the top issues facing my project in July of 2009.” It is a subtle difference, but a board that can do this has by definition a lot of other issues worked out and can be very helpful to a startup management team.
<br />Jim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com0tag:blogger.com,1999:blog-1960836126021084084.post-80409559863859609842008-10-15T12:02:00.000-07:002008-10-15T12:39:16.743-07:00Think Content OutAs a Venture Capitalist who spends a lot of time in Southern California, I have noticed that the region naturally lends itself to entrepreneurs who are able to think in a sophisticated fashion about the value and syndication of content. At Clearstone, we are calling this "content out" and some of those models stand in stark contrast to the "eyeballs in" model so prevalent in web startups. Many of these companies rely on their content to differentiate themselves from other players in their industry, and each is finding that they need to become masters of the content of their industry. When I look at the risk profile of these businesses, I get pretty excited for several reasons.<br /><br />1. Content distribution is far superior than an ad network as it provides a greater value to publishers, especially when that content comes with its monetization. This comes through with great margins -- where ad networks typically have lower margins.<br /><br />2. The web is really about content. Our initial web experiences were web page, url based. However, people dont want web pages, they want information to make decisions. Initially the content of the web was organized around pages and sites, but those bonds are breaking in lots of ways and I believe industry content will play a more up front role going forward.<br /><br />3. The risk profile of the business changes for the positive. Creating "eyeballs in" business, that is portals and sites that measure their world in terms of SEO, SEM, cost of customer acquistion, CPM and lifetime value of customer, is a lottery style business risk. When I walked the floor at one of the recent tech conferences every company was effectively saying "invest in me, I am going to be the next web brand/url phenomenon!" Again the rewards are lottery style for getting this correct, but I think it is lottery math as well. The infrastructure "content out" business has a better chance of creating an enterprise value worth hundreds of millions of dollars (lets say getting to $10MM a month in revenue), but has to prove the challenging case of why the enterprise value will be worthy of instutional investment. I like this style of risk (!) and these types of investments as I believe content will emerge as a powerful investment theme.Jim Armstronghttp://www.blogger.com/profile/00944604164422004720noreply@blogger.com2