The Wannabe Venture Capitalist

Friday, January 20, 2006

New Home for The Wannabe VC

-------------------- The Switch is Official --------------------

New blog URL:
Feed URL (same as before):


So sorry for those who receive my feed. I am working on setting up The Wannabe VC as a WordPress blog on my VentureWeek server and have, therefore, been playing with the feed redirects. I will let you know know when everything is all clear and I appreciate your patience in the meantime. I believe that the WordPress blog will be better for all of you readers out there since I will be able to categorize posts, etc. No worries for all of you that read me via RSS: I will be setting up redirects which means you don't have to do a thing to keep receiving my content as soon as its published!

Sunday, January 15, 2006

Fixing the Venture Capital Model

There has been a lot of talk for a while now about fixing the venture capital model. As it stands now, there are things about the model that do not align the wants and needs of VCs with entrepreneurs. For example, VCs need exits at certain time intervals because their funds only last 10 years (for the most part) and entrepreneurs are sometimes forced to grow too quickly or be acquired too soon because of this. While the structure of VC funds probably isn't going to change any time soon (after all, the people that invest in VC funds need their money back to pay pensions and do charitable work) the question is: What can be changed? The answer: deal structure.

The way VC deals are structured is something that, with a little creativity, can make the system much better for both parties. There is a fundamental problem between VCs and entrepreneurs. VCs want entrepreneurs to shoot for the stars and to be the next Google. Sure, entrepreneurs want that too. If they didn't, they wouldn't be in the game and taking the risks that they are. However, if someone comes along and offers an entrepreneur $25mm for a company he built in his spare time and for little of his own money he is going to take the cash or at least be very tempted to especially if it is his first company. However, that $25mm offer looks paltry to a VC who, lets say, put $7mm into the deal at a $22mm post money valuation (and sees the company eventually being worth $500mm). The return on investment for the VC does not line up with the return on investment for the entrepreneur.

Partial founder buyout can change this dynamic by giving the entrepreneur a little liquidity early on. Let's say that, in the above scenario, the VC actually put $10mm into the deal but $3mm was actually paid in cash to the entrepreneur and $7mm went into the company. Now, the entrepreneur has $3mm in the bank. This is not enough to make him too comfortable but it is enough to reduce, if not eliminate, his urge to sell out quickly for $25mm. Now, the entrepreneur is more likely to take the plunge with the VC and try to become the next Google knowing that his house and his childrens' college educations are taken care of.

If this type of situation was in practice today I think we would have already seen its effects. Let's take Flickr for example. The founders of Flickr built the company on a shoe sting in their spare time. Network effects began taking hold and before they knew it they had an incredible company on their hands. At that point the founders needed to make a decision: do they take capital from a VC and scale the business like crazy possibly gaining nothing or do they take the "sure thing" offer on the table from Yahoo! and cash out early possibly leaving money on the table but also taking in enough money to live comfortably forever? In this case the founders took the Yahoo! deal and probably regret it today but can you blame them? They were looking at a lot of guaranteed cash or getting their ownership diluted possibly for $0 return. The same situation could be applied to a number of other companies including

With partial founder buyout a lot of entrepreneurs would be still out there building their companies and VCs would be left with more quality investments. Everybody wins (except maybe Yahoo! and Google since they wouldn't be seeing any more inexpensive acquisitions). To make things clear, this is not an original idea. I have seen others write about it and have been surprised that there hasn't been much take up. I thought I would write about it to get it back into the discussion so please tell your friends (especially if they are VCs and entrepreneurs) about this blog entry so they can add to the discussion in the comments and on their own blogs. This is something that needs to be looked at because it could change the start-up game forever and in a positive way for all involved parties.

Thursday, December 29, 2005

Outside the Echo Chamber

I'm writing this post from Salem, VA in my girlfriend's mom's condo. I note my location because it is what inspired this entry. Salem is a different town than what I am used to. In my "regular" life I am always connected, always on, always within seconds of the web. Technology and the web are definitely a passion of mine. Here, however, people are not as aware of the web in comparison to the group of people I normally associate with. At Christmas dinner I found myself explaining what I do to people, some of which, were disillusioned with the web and what is has offered the average user so far. They feel like they have been let down by the technologists. If they are going to use the web, they want it super simple and I can't say I blame them.

I explained RSS technology and what it enables people to do and they loved the idea and wanted to know how to start using the technology. Even with my explanation, they felt it was still a bit cumbersome but I assured them that we are working toward making it very simple to use so the technology can live up to its billing as Really Simple Syndication. To my surprise, the conversation didn't just hinge on RSS and other bleeding edge technologies. It also veered toward the web itself and how usability issues still need to be addressed.

Now, I know some people will never think the web is easy enough to use and that it is just not worth the time and effort to get up to date with the technology but I do think the web could use some improvements and I know I am not alone. With that said, I mentioned to my dinner companions that version 2 of the web, which is being built right now, is aiming to address usability and create communities online. As I went through my explanation people got very excited and one woman actually gave me her e-mail address so I could send her a quick note on how to start reading news via RSS.

This excitement from the average user is what we should always be striving for. It is what gets me excited about what the web can do and how it can transform communications and societies. Sure, I love the latest technology as much as the next geek (at any one time I'll be on 5 or 10 beta tests of some sort) but it is when that technology transcends through the alpha geek stage to the average user that it becomes really exciting and beneficial to society.

Thursday, December 15, 2005

The Elegant Universe

I just finished a book last night that was incredible. If you are a physics geek like I am or even if you just want to know more about a theory that could possibly explain everything than The Elegant Universe by Brian Greene is for you! Greene writes in such a way that anyone can understand the gist of what he is talking about so it is great book for anyone. With that said, it is a pretty intense book and not a book I would recommend for light reading. I took quite a bit of time with the book myself since I really wanted to try and wrap my head around the concepts.

In the book Greene takes readers on a journey through the history of physics from Newton to Einstein and on to String Theory (M-theory). The background you get in the beginning of the book is a perfect primer to the more advanced string theory. Basically, string theory says that, rather than point particles, the universe is in fact made up of microscopic strings that vibrate in different manners and that the vibrations actually correspond to what we see as electrons, protons and so on. Not only that, string theory also provides for 11 dimentions and possibly parallel universes! Fascinating stuff...

Even more fascinating is the fact that string theory explains all, or most of, the physical properties (relativity, quantum mechanics, etc.) that we already observe. String theory implies that they should be there! Basically, if string theory was the first thing that was found, everything else we (and by we I mean physicists) have discovered would have been a given. String theory also gives rise to some interesting black hole explanations but I don't want to give too much away. Well, OK, I'll give a little bit away but you're going to want to read the book to get the full picture.

The center of black holes actually have the same characteristics that physicists think were in place before the "big bang." They have been able to figure this out, more or less, through string theory. The interesting conclusion that can be drawn is that the centers of black holes are actually universes or universes before the big bang. Why don't we see them you may ask... well, the black holes event horizon shields us from seeing anything inside. The event horizon is the point of no return. No light can escape past it and out of the black hole and all matter that passes the line will be sucked in forever.

The book seriously blows the mind. It is an incredible piece by one of the people on the forefront of string theory but it is still written in a way that "regular people" (who are willing to put in the time) can understand the big concepts. I recommend giving it a read if you want to take a look at the BIG picture through a very small lens.

For more on the Elegant Universe and string theory please visit the Elegant Universe webpage. Also, you can watch the entire NOVA special hosted by Brian Geene himself and entitled the Elegant Universe online. Enjoy!

-- I am going to put a piece up in my "normal" style very soon as I was inspired to write on google and yahoo through a piece written by Jason at 37 signals today. Look out for that or, better yet, if you are not already subscribed please subscribe and you'll get my posts automagically!

Tuesday, December 13, 2005

FeedFlare is here!

We at FeedBurner, and by we I mean the incredible engineering and design team, just released a new feature called FeedFlare. FeedFlare adds a whole new level of interactivity to feeds. Here is a screenshot of the pieces of flare you can add.

Just a quick note: you can click on any images in this post for a larger, more readable, image.

This development is very exciting. It ties feeds in with the rest of the web in a way they never were before making the feed a true part of the online community. I went ahead and added FeedFlare to both this feed and my podcast feed. Here is a screenshot of what it looks like in the VentureWeek feed.

From the screenshot you can see that you can now easily e-mail the post to a friend, tag the item in, see what tags others have used and view my creative commons license. The interactivity this will bring about should be amazing. So, start adding your FeedFlare today and remember that the minimum is just not enough. Be like Brian and add some flare to your feed!

In other news... EContent editors just named FeedBurner one of the Top 100 Companies that Matter Most in the Digital Content Industry. Check out this link for more info.

Lastly, we just announced a deal with Reuters, the world's largest international multimedia news agency. They selected us to deliver global news and advertising to its subscribers in the U.S., U.K. and Japan! This is great news and, being a former investment analyst, I am psyched that we now work with a service I used religiously for years.

Well, that is all my FeedBurner news for the day. Great things are happening and I want to thank all of our publishers big and small because, in the end of the day, you are what drives our success.

Saturday, December 03, 2005

Media Explosion

Wow, I have been pretty lax in posting and I apologize for that. Things have been super hectic lately because of my move to Chicago (and because I haven't had internet at home for the past week). In fact, today marks the end of my first week in Chicagoland. Why did I move to Chicago you ask. I just started a new job this week. I am now in Business Development with FeedBurner and I couldn't be more excited! You can keep up with our announcements by subscribing to the company blog. Things are going great and I believe FeedBurner has an incredible future ahead of it (although I may be a bit biased)!

One of the reasons I love my job is that I get to reach out and talk to the blogging and podcasting community on a daily basis. In my first week alone I have spoken with a number of newbie podcasters (plug! check out my podcast) about how to get their feeds set up and distributed to services like iTunes. So many people are getting their voices out today with the help of technology and I think that is an amazing thing. What will be even more amazing will be the growth of blogging and podcasting as the developing world starts to receive more technology like the OLPC $100 laptop.

Imagine a future where you can view someone's daily life in Vietnam or Egypt through a blog, podcast or flickr stream. We will be able to develop a better sense of other cultures and how they perceive things. This will hopefully give people more perspective on the world and the human condition. However, with this explosion of media comes a large responsibility. We need to develop better filters.

When I was in Cairo a couple of years ago my professor asked me to pick up a newspaper and give a read. In doing so I could instantly see the slant that the paper had. The same topic would have been covered much differently in a paper back in the US. I already knew that the news had biases built in (after all, we are only human) but I had never seen it as clearly as I had that day in Cairo. Now, with so many media sources out there, we will have to become better at filtering through them and taking biases into account. I believe we will get better at this as time goes on. I also believe that the larger publishing institutions, like the New York Times, will act as a guide to the average media consumer helping them through the maze of blogs and podcasts out there.

It will be interesting to see what the future of media holds and how it will affect society. Blogging and podcasting are here and are not going anywhere soon so the time to start developing more aware media consumers is now.

Friday, November 18, 2005

The OLPC $100 Laptop & Grameen Bangladesh

Continuing my series on how tech and finance can enable to poorest of the poor to pull themselves out of poverty I would like to talk about the OLPC (one laptop per child) $100 laptop. The machine was unveiled at the UN summit in Tunis just the other day and it is impressive. It boasts a 500 MHz processor, mesh networking capabilities and four USB ports. It can also be charged up by utilizing the yellow crank (see pictures below). This was designed for countries with unreliable electricity.

The OLPC laptops will be paid for by the governments of the countries whos people will receive them. The governments will then hand them out to children. However, an interesting thing to mention is that the children will own the laptops. They are not going to be on loan from the government. The thought is that the children will take better care of them if they own them as opposed to them being "rentals."

I was very happy to see that the Egyptian government was one of the first to order some of these for their people. Having spent some time studying in Cairo I can attest to the fact that there are people that need them. I met so many intelligent people in my time over there who, if they just had the means, could really create something special. Now, keep in mind, I studied in Cairo, a metropolitan area, and I still saw many people that could use these laptops. In rural Egypt I am sure there are multiples more.

Along the same lines I read a post in the Unitus blog about Grameen Bank Bangladesh. The piece was fascinating in that I never realized a microfinance institution could be so large. They have over 4.48 million borrowers and a staff of 13,492! As far as building community is concerned, the bank has issued 5,773 higher education loans, 619,000 home loans and issues 19,000 scholarships a year.

All of this shows that we can help the poor to help themselves through finance and technology if we continue to think outside the box. I hope the next time I return to Egypt, and there will be a next time, I see a little green laptop in the hands of every child empowering them to create freely and to think of their bright futures which can now come to fruition due to higher education loans provided by microfinance institutions.