Yesterday, inspired by a dinner conversation I was having with an old friend, I started musing about the common vs. preferred difference. He had remarked that, as an employee of a startup, the risk and amount of effort (including opportunity cost) that goes into being part of the success of the business seems to not be commensurate with the incredible amount of rights (voting, information, pro rata, etc) that come along with being an investor. […]
Venture capital Limited Partner Agreements look very similar. The formula goes something like this: 10 year fund, 4 year investing period, 2% management fee and 20% carried interest. The implications of these terms can help explain why venture capitalists work the way they do, and help founders ask the right questions of their investors. After the 4-year investing period, the 2% management fee, which otherwise kicks in every year, ratchets down to 2% of the […]
There is a subtle but very important distinction between venture capital “subsidizing” a service-oriented business, and a service-oriented business that has venture financing, negative cash flow, but positive unit economics. Both are losing money, yes, but there is falling and, to quote Woody from Toy Story, falling with style. The former may be an emperor with no-clothes, in the steady state: maybe there isn’t a there there. Maybe there is a temporary, but ultimately unsustainable, […]
There are plenty of modern job descriptions for forward-thinking companies, particularly in technical roles, that still ask for specific qualifications: must have demonstrated capacity in scripting languages, or Android front-end development experience, et cetera. Companies fill out teams based on functional skill sets that complement each other, to fit a broader strategy. As an example, in my industry, venture capital firms often ask for either: experience at a startup, a technical degree (or demonstrated ability), […]
This is primarily directed at entrepreneurs raising seed or their first round of funding So often, in deal negotiation with founders, there are disputes regarding a few terms for an investment. Some of these terms are meant to protect an investor’s upside, while others are meant to protect an investor’s downside. I have encountered a number of entrepreneurs who don’t consider the difference, but simply think of each incremental term on the scale of “not […]
One of the really interesting outcomes of a firm-based economy – with set wages, central authority, mass production, et cetera – deals with competition and cooperation. “For the good of the company” is a phrase we all grok, and we have all been faced with a choice where we responded that way before. It means that even though a business decision may not be in my short-term interests, it is for the benefit of the […]
(h/t Dave Evans) – EMPATHYReflect on the parts of your life where you have felt most inspired, engaged, connected, in a flow state. Just investigate, as if you were looking at a stranger. What do you notice? Write it down. Do it every week, if you can. – POINT OF VIEWFor example: “Being contrarian and right has generated the most reward in my life” Or “You can never overinvest in your family” This is a […]
I really enjoyed the fireside chat with Vinod Khosla and the Google founders over the weekend. One thought stuck out to me (and, it seems, to many others). It’s pretty difficult to solve big problems in four years. I think it’s probably pretty easy to do it in 20 years. I think our whole system is setup in a way that makes it difficult for leaders of really big companies When someone asked me a […]
I’m no urban planning expert, but I’m curious! Short-term rental versus long-term rental seems like a core tension driving the AirBnB question in cities around the world. For the uninitiated, AirBnB has been conducting an international advocacy campaign to convince municipal policymakers that short-term rentals on their platform don’t actually hurt cities, but instead create incremental income, which is increasingly important in a post-industrial economy. I am an extremely happy AirBnB user. I have both […]
Recently read “The Medici Effect” which I thoroughly enjoyed. Got me thinking. I worry that value networks aren’t as resilient in the long term. A value network is one that puts the primacy on certain types of values, e.g. “matriarchy” and “religion as the center of family” and “education and job security as the key to a happy life” and so on. They manifest in between the lines of our relationships, transferred psychically from generation […]
Musings 