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.

Nov 11

On being Very Good

I’ve been thinking a bunch about the Stanford-Oregon game yesterday — it was disappointing, because I think a bunch of us felt like this Cardinal team could really be a championship caliber team — one for the ages. But Oregon beat us badly — and showed that Stanford isn’t a championship team — at least not right now — but merely a Very Good team.

It’s funny, though, because college football isn’t an easy place to be “just” a very good team. And Stanford (and Silicon Valley, for that matter) isn’t an easy place to be “just” very good at what you do. Everyone wants to be the best, not just top 5 or top 10 or great. And it’s a good instinct, and obviously productive, because looking around us at the people who inhabit Stanford and Palo Alto and the whole region, we have an awfully damn lot of people and organizations who are, in fact, the best in the world at what they do.  So it’s good — really good — to strive to be the best, because if you don’t try, you sure won’t end up there.

But I have to say that while I’m disappointed — disappointed that we won’t have a shot to win the Pac-12 or go to the Rose Bowl or the BCS Championship — I’m really fired up about how good this team is, about how much fun it is to follow them, about how guys like Luck (but not only him) can be good at football and all the rest of the things they value in a Stanford education.

We’ve had so many good — best — teams at Stanford over the last 20+ years, we get a little too used to it. But it’s been a hell of a fun weekend, and a hell of a fun season to be a Stanford fan. It was really, really fun to hike over with Kathy & SPL to see Gameday filming yesterday morning. It was really, really fun to catch up with my friend Dave Garnett from across the hall freshman year. And it was really, really fun to be at the game.

I think it’s very important not to lose sight of just how good this team is, and how important it is to be Very Good at what we all do, even when we’re not the Best at it. And that’s an easy and important lesson I’ll share again and again with SPL as he grows up.

Now looking forward to Big Game & Notre Dame & a bowl game — should be an amazing few weeks to end the season and Luck’s time on the Farm.

Aug 09

Why I’m Attending FOCAS 2009

As I mentioned, I’ve been in Aspen this week at The Aspen Institute’s Forum on Communications & Society (specifically titled: Of the Press: Models for Preserving American Journalism). It’s been a very interesting couple of days, and I’ve got a lot of new ideas to make sense of and synthesize. First a bit of background, then a little bit on what’s gone on here and what interesting ideas have been put forward, then I’ll try to pull it all together with some thoughts. As I’m writing this, it’s getting a little long, so I think I’ll split into 2 posts: this one about why I’m attending, and the next one about the meeting & some thoughts.

Why I Came

I don’t know very much about journalism — next to nothing, really. But I do think that some aspects of journalism are critical if you want to have an engaged citizenry — a strong & free press is essential for any of us to know and understand enough about the world we live in to participate and engage. I think, too, that there are aspects of our American press that have historically served  us extremely well and are worth preserving. And of course, it’s impossible not to see the turmoil and change that the whole sector is going through — the disappearance of major papers is only the most visible. One thing I think I hadn’t really internalized is that the global economic crisis is really changing the situation much more rapidly than usually happens. Because of the financial pressure, old institutions don’t have the buffer that they might have had in better times — leading to much shorter time frames to layoffs and shutdowns. I think much of this was coming anyway — the crisis just accelerated all of it.

I’ve also been struck lately by some of the parallels of  mission of journalists (roughly, to enable engaged & informed participation) and Mozilla  (to insure an open & participatory Internet). So that’s one reason I decided to come — to learn as much as I could.

The third reason I decided to come is that there’s something new afoot in the world: lots of organizations are being created to serve a public interest — on very low cost models (enabled essentially by the Web) — and competing with traditional profit-oriented ventures. At Mozilla we call that type of organization a “hybrid,” and Mark Surman has been writing about that idea a lot lately. For that, I came in the spirit of sharing what we’ve learned at Mozilla as we’ve become a sustainable hybrid company — maybe some of what we’ve learned can be helpful to others.

But I have to say that mostly I came, as with any event, is because of the other people who were planning to attend and participate. I was invited by Alberto Ibargüen, CEO of the Knight Foundation, and all around awesome person. He’s done much since coming to Knight to reform the way they supported and funded new organizations, starting programs like the Knight News Challenge, as a way to create a sort of prize economy around innovations in journalism. (They’ve also provided funding for work at PCF, where I’m on the board of directors.) What they’re doing at Knight is a model to be emulated, I think — lots of experiments, lots of support, lots of provocative questions.

But beyond just Alberto, here’s a sampling of some of the 50 or so people who are here: Vivian Shiller (CEO of NPR), Esther Dyson, Jeff Jarvis (CUNY Professor), Marissa Mayer (VP Google), Dean Singleton (Chair of the AP), Marcus Brauchli (Exec Ed of The Washington Post), Walter Isaacson (biographer & CEO of Aspen Institute), Madeline Albright (former US Secretary of State), Reed Hundt (former Chair FCC), Jon Leibowitz (Chair FTC), Michael Kinsley, Sue Gardner (ED of Wikimedia), Craig Newmark (founder of Craigslist), Robert Rosenthal (ED of CIR), Paul Steigler (CEO of Pro Publica).

And those are just a few of the names I picked out looking at the list just now — it’s neat to be a part of such a small & accomplished group — and is especially great when it’s on a topic I’m just learning about. 🙂

Finally, and beyond all the basic reasons for coming, I’ve learned that it’s important to try to pop out of operational work from time to time. It’s easy in the day-to-day of Mozilla to get obsessed with solving problems, with getting roadblocks moved out, with the details of trying to make things work. But being too much in those details for too long means, for me, that I sometimes lose sight of the bigger picture — being around others in a new context helps to reframe the things that matter in work and in life.

So that’s why I’m here: to learn and to participate and to help where I can. It’s been a successful event from that perspective for me.

Aug 09

Future of Journalism

I’m heading to Aspen Sunday to take part in a Knight Foundation-sponsored gathering on the future of journalism. It’ll be 50 or so attendees, all of whom are very accomplished and have an incredible amount to add to the conversation. I don’t know a ton about journalism, so am mostly going to try to listen and understand, but also I think that there are some learnings from Mozilla that may be relevant. So it should be fun; I’ll try to blog about it mid-week next week.

In the meantime, anyone have thoughts about what’s interesting in journalism? What you’re worried about? What you’re excited about?

Mar 09

kindle for iphone

installed Kindle app on iPhone; have downloaded some of my books & synced to furthest page read. it’s neat. predictably, not as good a reading experience as on Kindle by a mile. pretty marginal bookmarking, no notes, search, etc. so really underpowered.

but i think useful if i’m somewhere and forgot my Kindle, absolutely, and i’m sure that i’ll buy books with it to read a snippet then really read on my Kindle.

expect this to cause them a real spike, then things will settle down. really needs a lot more functionality; and the reading experience will never be anywhere near as good.

but a solid & useful complement.