January, 2012


19
Jan 12

Tips for Entrepreneurs from a First Year VC

[Cross posting this (with better image!) from PandoDaily where I published this as a guest post.]

A close friend of mine likes to joke about how entrepreneurs & operators who become venture capitalists are “trading in their blue light sabers for red ones” – it’s a funny analogy…naturally, comparing investors to Sith Lords seems to fit pretty well some days.

But the benefit of switching from one side to the other is that perspective can sometimes be illuminated. After nearly 20 years of operating at places like Mozilla, Reactivity, Trilogy & Apple, I still tend to think like an entrepreneur myself, so some of the assumptions of life inside a VC are maybe a little more obvious to me than folks who have been around longer.

So here are some observations about my first year of VC life, and then some of the ways that being on the “inside” has changed the way I think that entrepreneurs should think about approaching investors – things I wish I had understood myself when I was pitching.

A Year of Observations about VC Life 

Life as a VC is a sea of meetings. Really, it is a lot of meetings. Most of them are single meetings, with no follow-ups. Most don’t result in an investment in a company at all. In 2011 I had first meetings with just over 350 companies, plus another 100 more as parts of business plan judging and demo days. Those meetings resulted in just four investments for me (Tumblr, Dropbox, Clearslide and Citrus Lane) plus a handful of seed investments.

That’s a massive “bias-to-no” for any profession – 99% or so. It’s a tough negative bias, and every investor I know is affected by it in some way. But that one percent is like a lightning strike: those meetings can form the basis for some of the most interesting and meaningful work you’ll ever do.

High fidelity communication is impossible. Because so many meetings are one-offs like I described, it’s very hard to communicate effectively. As an operator, you get good at being direct with the people you work with – or you fail.

In the context of a startup, relationships are developed over a period of months or years, so that candor can be better understood and more nuanced, resulting in communications that are efficient and effective, without hurt feelings from misunderstandings.

Venture meetings aren’t like that. They’re incredibly overloaded: you’re trying to have a really good communication about who you are, what you’ve built, and how you want to grow. And you’re trying to do it in what is very often an extremely emotionally significant context of someone putting everything at risk to change the world. All with no existing relationship context to fall back on.

As an investor, I feel that a situation like that deserves my fullest possible attention, and my best questions about and suggestions for the business. But since we’ve never interacted before, there’s the danger of seeming too harsh in cases like that – we don’t have the shared context, vocabulary and trust frameworks in place that you do in longer term relationships. I think that’s why so many investors are often vague or non-responsive in their interactions afterwards – something I’ve tried very hard to avoid, although with imperfect success so far.

Timing is everything, and everyone is multi-tasking. This applies to both the startup and the investor I’ve found – because each has their own set of work going, and any number of competing projects and priorities. The right thing coming by at the wrong time can be as challenging as an investment that just isn’t a natural fit. Life as a VC has different patterns and rhythms than life for operators – the nature of VC work is that you’ve got multiple companies and entrepreneurs you’re working with all the time, plus a constant stream of new folks to meet, and often in wildly different domains.

This means constant context switching, and there are times when excellent entrepreneurs and startups come through when it’s just hard or impossible to take focus from existing or in process investments. That creates a severe asymmetry: as an entrepreneur, you’re thinking about one thing (broadly defined as your startup), deeply,all the time, while investors that you’re talking with are trying to juggle many at once.

Venture firms and partners are idiosyncratic and highly personal. When I raised money for my own startup, I didn’t know much about how to think about approaching VCs. I knew folks at various firms, and mostly went to talk with those who I knew and then went through their process over the subsequent several weeks. I figured that VCs were all mostly similar to each other.

I’ll say candidly that in my case, I was extremely lucky when that “strategy” worked – my investors were Mitch Kapor and Peter Fenton when they were both at Accel Partners – they were incredibly great for us, and I’ve had fantastically productive relationships with both for more than a decade now. But at some level it was really just dumb luck. I could easily have found a firm and partners who wouldn’t have worked.

Every firm has different culture: some are collaborative, others more solo practices; a small few (including Greylock) consist of former or current entrepreneurs, other firms consist of people who have been investors most of their careers; some are progressive, some are conservative. And even in partnerships, everyone there is different. Different in interests, skills, capabilities, stage in life, and temperament, at the very least.

But here’s the thing: meeting with an amazing entrepreneur can change your whole year. 

That’s why you do it. To find people to change the world with. I’ve been very lucky this year to work with some incredible entrepreneurs and teams, not just limited to the companies we were able to invest in. And that’s what we’re all looking for: not just the opportunity to make great investments, but the chance to work with people who are setting out to make the world the way they want it. There’s no more optimistic and hopeful endeavor, and it’s 100% addictive.

Suggestions on Interacting with VCs

Given that context on what it’s like to be on the inside of a VC firm, here are some things I wish I had understood when I pitched myself.

  1. Be human; be yourself. Be prepared and have a pitch, but be willing to go off script. Talk about the parts of what you’re doing that are the most exciting to you! And in general, it’s probably best not to just jump into a PowerPoint deck. Take a few minutes to introduce yourself, and hear a bit from who you’re seeing. Don’t get too informal, of course – you’re still in a business context – but try to interact in as authentic a working style as you can.
  2. Seek out investors who lean forward, who engage, who ask you tough questions. Tough questions aren’t always fun, but they’re ultimately what makes your company better.
  3. You should ask questions, too, particularly to understand how the investor thinks about businesses like yours. I personally love getting questions and like a spirited debate. Helps us get to know each other.
  4. Be resilient. A “no” from a few partners or firms doesn’t mean you won’t get funded. As mentioned above, a lot of times it’s context.
  5. Be persistent. A “no” on this round doesn’t mean that an investor won’t be better, or more able to work on your company in the next round.
  6. Remember that relationships are progressions. Don’t read too much into any particular interaction. Some investors ask a bunch of questions in first meetings. Some listen more and engage more as the process goes on. Everyone is different. When in doubt about what they’re thinking, ask!
  7. Above all, don’t think of fundraising as a transaction to get finished and move onto the next thing. It is important to get the funding you need, but you’ll live with your investor for the life of your startup (and really beyond, relationship-wise). Think about it like the balancing act when you’re trying both to attract and evaluate an all-star member of your team.

Your mileage may vary, of course. But hopefully this bit of context will make the difference for you between just a pitch meeting and the start of a world-changing new relationship.

John Lilly is a partner at Greylock Partners. Prior to Greylock, John was CEO of Mozilla, makers of Firefox. In addition to leading Greylock’s investments in Tumblr, Dropbox, Clearslide and Citrus Lane, he’s also on the boards of directors of Mozilla and Code for America. Greylock is an investor in PandoDaily.


10
Jan 12

41

Thanks to everyone for the thoughts on my 41st birthday yesterday! I really (& sincerely) enjoyed seeing the stream of notifications on my phone throughout the day — each one a small note, but reminding me of times we’ve worked & played together, all around the world, and in may different contexts.

As an event, 41 is not exactly a major milestone. But it was a very nice weekend & birthday, and caps off a pretty significant 41st year on the planet for me. It’s a funny sort of age — not really old or young at this point.

Last year a lot happened — we moved to Palo Alto, SPL started kindergarten, I started at Greylock (and as an investor, a very new discipline compared to the operating that I’ve done over the last 15 or 20 years), and a bunch of other stuff, big and small.

As I turn 41, I feel both old and young — somewhere in between, I suppose. But I’m looking forward to my 2nd year of investing at Greylock with partners I really, really enjoy and learn from every day. I’m looking forward to continuing to see SPL grow and develop every day, week, month. I’m looking forward to Kathy & my 12th year of marriage (and 27th year of being friends!) I’m looking forward to getting involved with more amazing entrepreneurs and companies of all stripes (commercial, non-profit, civic, and more). And to my extended family continuing to be amazing.

And then a huge thing, as Kathy & I are looking forward to the arrival of our 2nd child, which we’re expecting in June. It’s such a funny thing — new babies arrive in our world every second of every day — but each one that arrives in your own life is just such a massive thing that it’s a little hard to even get your head around.

Having a January birthday always feels great to me — it resets and renews above & beyond the end of the holidays and the New Year. And I find that I’m as excited about my 42nd trip around the sun as I’ve ever been. So much to do this year.

Thanks again to everyone!


9
Jan 12

Some followup thoughts on my SOPA post

The best thing about writing for me is that it helps me figure out what I really think about things. And one of the very best things about doing it on the web is that others can collaborate, disagree, tweak, suggest, and generally help think through things even better. So after a couple of days of Friday’s SOPA post rolling around in my head, I think I have a tighter point of view now that I wanted to write down. (There were some great tweets, mails, comments & posts in reaction to what I wrote. Super thoughtful & useful.

Here are a few specific starting points, then I’ll get to my main point, which is that we (a technologically-oriented US, at least) are not well set up for the future in terms of how we evolve tech policy. Not a new thought, but I think the SOPA situation may be putting us in a worse spot.

But first 3 starting points and a personal observation:

1. SOPA+PIPA are awful bills. No way around it. They over-reach, they circumscribe civil liberties, and they mostly will not work. They shouldn’t pass, and we should do whatever we can to keep that from happening. They’re the latest in a long line of legislation that looks like this: reducing freedoms in a misguided attempt to protect us from a different big bad. They’re so numerous in US history they hardly need listing here.

2. Existing industries are always oriented towards self-preservation. No exception here. But there’s a funny thing that happens: the most progressive companies of today who become successful and dominant will become reactionary in the future, oriented themselves towards self-preservation. Same as it ever was. And you can see it even in the current situation — the companies who are most outspoken are the modern Internet companies: LinkedIn, Mozilla, Zynga, Google, etc etc. Mostly on the sidelines are the most progressive technology companies of the past decades, even including Apple. So this is not, fundamentally, a techie v content type of issue at all, but more of a progressive v conservative technology issue.

3. We do have existing laws and norms. A number of folks argued that content owners just need to accept that pirated goods are a viable alternative and need to learn how to compete with them. I’m wholly unpersuaded by that point of view. Or, rather, I believe we do have existing laws that govern how we behave. It’s pretty clear (to me at least) that content businesses will need to evolve, and many interesting ones already have. But that’s something for a lawful market to decide, not for anyone to thrust onto content owners & creators.

And then a personal observation: I was actually a little nervous writing about SOPA last week because of the tone of the conversation to date. I felt like it might actually provoke harsh negative reaction and somehow brand me as “SOPA-friendly” or against the web. That’s a weird thing for me to feel, as I think my web & open culture bona fides are pretty well established at this point between my work with Mozilla, PCF, Code for America, and now Tumblr, etc etc. That by itself tells me that there’s something wrong about how things are going.

Okay, so given all that as a context, here’s my main point: no matter what outcome we get to with respect to SOPA+PIPA, we’re in a bad spot going forward. 

I think much of the legitimate frustration on the Silicon Valley side of the fence is that there seems to be no way to have a meaningful conversation about this stuff in ways that we know to be productive. It’s happening at this point with some guy who doesn’t seem to understand technology having his staff & a bunch of lobbyists prepare a non-sensical bill and then try to jam it through Congress, without any real effort to understand what might actually work. (And, worse, it’s being done in a way that seems deliberately designed to misinform.) So it’s a bunch of backroom, captured discussion that has massive impact on how we live our lives — and it’s all completely opaque (at best).

The real thing that I’m worrying more and more about is not SOPA per se, although that’s a very large problem itself. The real problem that I see is that our government just isn’t set up to make meaningful technology policy decisions going forward. I think Larry Lessig would argue that that’s now true about all facets of modern life, but I think that with technology it’s significantly worse. We have massive interconnectedness of systems built on an extremely rapidly changing foundation of technology. But more than that, technology is now transforming our private and public lives so quickly that we can hardly make sense of any of it at a personal level, let alone a public policy level. And there seems to be no way for legislation to keep pace unless we change the discussion there from specific technologies instead to principles of how we want to build and evolve our society.

And I just don’t see how that kind of conversation can happen right now.

I see how to defeat SOPA, more or less. But it’s more lobbying, more rhetoric, more Capitol Hill influence. And I think that all of that stuff ultimately corrupts industries that use it. I know this is not a new objection, and I’m sure that there have been people in every industry forever who have made this point.

So I think most of what I wanted to write on Friday is this: I desperately hope we can (1) defeat SOPA and more importantly (2) figure out a way to have useful technology policy discussions that can inform both our legistatures and law enforcement agencies. This isn’t the last law that will be technically poor and will impinge on civil liberties. There will be more, and they’ll come up more and more frequently as increasing portions of our society get disoriented by and disrupted by new technology.

We shouldn’t rely on symmetric (and corrupting) lobbying efforts to make things better; we’ll just get more of the same crummy situation we’ve got.

What I think we really need to figure out is how to help our leadership in government act and think in a more agile way, informed by more of our citizenry. More like the web, in a lot of ways. (Ed Lee’s announcement of an SF partnership with Code for America is a start.)

Maybe impossible, a pipe dream. But that’s the target I think we should be setting for ourselves, not just defeating a crappy, misinformed bill.


6
Jan 12

What’s bothering me about the SOPA “discussion”

There are 3 things that have really been bothering me about how the SOPA/PIPA discussion has been going so far.

  1. it’s not a discussion at all — it’s people calling each other names.
  2. it’s highly likely to have a result that is unhelpful at best, and insanely destructive at worst
  3. we’re building a completely worthless/bad roadmap for how to deal with technology policy going forward, and it’s going to get worse

Let me be very clear: SOPA is a terrible law that should not be enacted under any circumstances. It’s broken technically and misguided from a policy point of view. It not only won’t accomplish what advocates want it to accomplish, but it also will create backbreaking burdens and barriers to entry for some of our most promising technology companies and cultural movements of the coming decade.

But also: content creators & owners have a legitimate beef with how their content can be appropriated and distributed so easily by rogue actors.

Here’s the conversation we should be having: content & technology should be very aligned. Hollywood and Silicon Valley (broadly speaking — I’m talking metaphorically here) both want the same things ultimately: easier and bigger ways to share and enjoy awesome content from all sources, in a way that’s economic for everyone involved.

What we should be talking about is how to get better alignment, how to build systems and content that is better for, you know, actual human beings to use and enjoy.

But that isn’t the conversation that’s happening (and I use the term “conversation” here very loosely, since it has characteristics more like a bunch of schoolyard name calling). The conversation that’s happening is going more like this:

– content: “you people are stealing our stuff. you’re thieves”

– techies: “we’re not stealing it. we’re just building great apps for users.”

– content: “you’re ignoring the problem and helping the thieves. you’re effectively pirates, so we’re going to shut everyone down.”

– techies: “you’re acting like jackbooted fascists, embracing censorship and your’e going to end everything that’s good about culture today.”

– content: “we’re trying to protect our content — you guys are pretending like there’s no problem, then getting rich off platforms that pillage our content.”

– techies: “you don’t understand how the Internet works — how do you even live life in the 21st century? dinosaurs.”

So that’s awesome. Then you throw Congress into the mix and hilarity ensues. Because if you’re looking for folks who really do not act like they want to understand the Internet, Capitol Hill is a pretty good place to start. And then this is all devolving into a fight of pirates versus creators. Of protectors-of-democracy versus fascists. Or whatever.

What we need to be talking about is where the actual infringement problem is happening (I’ve heard from folks that the vast majority of the problem is on the order of a few dozen syndicates overseas). And how we need to be thinking about copyright law — in an age where copies are the natural order of things, as opposed to previously, when it was harder to make copies. And what sorts of law enforcement resources we need to bring to bear to shut down the activity of these real malicious actors overseas. (At root, I’m persuaded that the current issues are really law enforcement issues – we need to figure out how to enforce the laws that are already on the books to protect IP, not create new ones.)

Acting like there’s no problem isn’t the answer — there is a legitimate IP issue here. But pressuring a behind-the-times and contributions-captive legislative body to enact overly intrusive and abusable laws is even worse, both economically and civically.

What’s extremely discouraging to me right now is that I don’t really see how we can have a nuanced, technically-informed, respectful discussion/debate/conversation/working relationship. I’m not convinced that Congress is at all the right body to be taking up these issues, and am 100% convinced that they don’t currently have the technical wherewithal to make informed decisions, in any event.

So what we’re left with is one group pushing their captive legislators for new, over-reaching laws and calling technologists names. And a group reacting to that by calling names back.

I think the best that we can hope for in this scenario is that the current bill will grind to a halt and nothing will change. But I think that can’t be where we aim for the future.

Because technology policy issues are going to come up again and again and again as time goes on. (Next up, undoubtedly, is another round of privacy legislation, and I would predict the name calling will be even more intense and even less productive.)

We’re mediating more of our lives than ever through new technologies that we barely understand as technologists, let alone consumers or civic leaders. We need to figure out ways to have meaningful discussions, to try out policies that may or may not work at first and iterate quickly on them, like we do with products themselves.

I don’t have any answers here, but wanted to write down what’s been bugging me, as I think we all need to think more about what we want our lives to look like in the future.


3
Jan 12

Being Ned Flanders: On Mustaches

IMG_0954.JPG

Wearing a mustache is a tough gig. Also hilarious, although I think people may not always totally get the joke…

A few years back, some of the Mozilla folks started doing NSID (no shaving in December) — it was a funny thing to do, especially for all hands meetings where you’d see a bunch of guys who had never really let their facial hair grow out — and the results were definitely not always pretty. Lots of scraggly beards, a few who were essentially indistinguishable from werewolves (“there, there wolf!”), and just generally lots of randomness. Was a fun thing to do, especially as more and more of us did it.

Last year, I did NSID until about Christmas, then went to Goatee Week for a bit, and finally on a lark, did Mustache Day, when I actually went out in public with a mustache. Here’s what I looked like:

IMG_0594.jpg

Okay, so I know what you’re thinking: that’s a pretty righteous mustache! Not going to win any fashion contests, but not too shabby.

Or, perhaps, maybe you’re thinking what we were: surprisingly, I discovered that I look a little like Ned Flanders.

Unexpected. And obviously super unsettling. Although not as unsettling as this pic, where I seem to look like Mario’s brother Luigi:

IMG_0610.jpg

Freakish.

And an obvious signal that I should never, ever wear a mustache again. But I’m not really one to pay attention to signals, so in the spirit of blowing right through the stop sign, this year I decided to do it again. The theme of our New Year’s Eve party happened to be Comic Con, so it really just played right into my hands, and I went as Ned Flanders.

Some observations:

First, it’s really hard to keep a straight face when you’ve got a mustache and are trying to talk with someone. Partly because you can’t actually believe it yourself, and partly because every 90 seconds or so they furrow their eyebrows, squint at you, then frown/grimace/laugh out loud. Pretty tough to take it seriously.

Second, Ned Flanders turns out to be a little too subtle of a costume, strangely. Maybe I wasn’t yellow enough. Maybe it was because I had 8 fingers instead of 10. And, you know, maybe it’s because the Simpsons was cool about 15 years ago. (It was cool then, right?) Anyway, all the people I’m close to thought it was either right on the nose or hysterical. People who I’d recently met said all night long, and I’m not joking, “I didn’t know you had a mustache!” People at the party who didn’t know me assumed, I think, I was some sort of interloper with a weird vibe.

Who knows.

But pretty strange reactions all around. I really had a good time doing it — I’m not usually a costume guy, so was fun to be someone else, even a nerd-diddly-erd, for a while.

So I think we’ll retire “the Flanders” for a while. Good times. 🙂