A VC

The Herd Instinct

One of things that always amazes me about investors is the way we move in herds. Developing markets are in, everyone invests in developing markets. Dubai blows up, everyone moves out of developing markets. Real-time is hot. Everyone invests in real-time.

I can understand the hot money game in highly liquid markets if you can get out before the party ends. But in illiquid markets, this kind of momentum investing hardly ever works.

And VC is among the most illiquid markets out there. I don't believe you can deliver top tier returns playing the "hot money" game in the venture business. Moving in a herd will put you in the middle of the pack at best and could put you in the bottom of the pack.

I think there are two approaches that work in the venture business. One is the contrarian approach. When everyone wants to be a consumer web investor, do software as a service/enterprise. Go where the money isn't.

Or you can just be earlier than everyone and anticipate where the herd is going to be next. That is really hard, maybe too hard to do well over a sustained period of time.

But I do believe that both of those approaches will get you top tier returns if you execute them well.

Following the herd, however, is not a recipe for good investment performance. And yet so many do it. That's why they are called herds.

Comments (View) | Posted December 2, 2009 in Venture Capital and Technology

Stuck In The Middle With You

John Heilemann has a cover story in the current issue of NY Magazine titled Obama Lost, Obama Found in which he details the challenges and opportunities facing the President. I took the time to read it last night, on the eve of the President's trip up to my birthplace and childhood home at West Point.

The President is going to irritate most everyone with his Afghanistan policy. The liberals want us out asap and a big troop increase is going be yet another sign that he's not one of their own. The conservatives will hate his emphasis on an exit strategy. And even if they approve of this decision, they'd never support him on anything and never will. 

Heilemann points out that Obama's approval rating is now sub 50 percent and even more worrisome for him and his team is that his "job disapproval" rating is in the mid 40s, higher than any president at this stage other than Bill Clinton.

His support of Bush's economic policies on the meltdown (ie the splurge) were pro-business and placed him as a friend of the banks and wall street and an enemy of the man on the street. His push to get healthcare reform done early in his presidency has also eroded much of his political capital. And now with his decision to re-invest in the war in Afghanistan, he is facing another political hit.

I've got many liberal friends who are at their wits end with Obama and think he's completely blown it, that he is spending too much time negotiating/pandering to the right with nothing to show for it. And I've got plenty of conservative friends who are saying "I told you so". I can't think of too many friends who are happy with the choices Obama has made.

But I'm having a hard time arguing with any of the decisions he's made to date. He is a pragmatist and anti-partisan who seems to me to be doing a pretty good job of playing a pretty bad hand.

His decision to support and expand the splurge are distasteful on many levels, but we have restored the markets confidence and the financial system is functioning. It could have been so much worse.

His decision to focus on getting a healthcare plan passed that covers almost everyone early in his Presidency is borderline political suicide as Clinton showed. But if not now, when? The US is the wealthiest country in the world and it is just not right that we can't find a way to offer basic healthcare to our citizens.

His decision to support and expand the war in Afghanistan is the hardest of his decisions to date for me to support. The US-installed government in Kabul is corrupt and hated by its own citizens. Propping up a government like that has never worked long term and I can't imagine it will work now. But Afghanistan is a strange place where loyalties shift daily and troops fight for the Taliban one day and the Northern Alliance the next. I want to hear the President out on this one before I come to any conclusions. We'll get that chance tonight.

I believe Obama is suffering from governing from the "far center" and pleasing nobody in the process. My favorite quote in the Heilemann piece is from Alex Castellanos, a republican media consultant:

He’s stuck, and it’s kind of ironic. Obama has tried so hard not to be George Bush and Bill Clinton, and yet he is becoming exactly that. The guy who ran against ideological division has brought it back with such a vengeance that he’s lost the middle, but not sufficiently to make his base happy. He’s got no friends.

Comments (View) | Posted December 1, 2009 in Politics

The Fall And Rise Of Media

David Carr has a good post this morning in the New York Times called The Fall and Rise Of Media.

The post starts out with the old way of the media business. Kids would come to NYC out of school and work in marginal jobs in the hopes of getting a break and joining the "velvet rope" of mainstream media.

And the post ends describing what kids do today:

Somewhere down in the Flatiron, out in Brooklyn, over in Queens or up in Harlem, cabals of bright young things are watching all the disruption with more than an academic interest. Their tiny netbooks and iPhones, which serve as portals to the cloud, contain more informational firepower than entire newsrooms possessed just two decades ago. And they are ginning content from their audiences in the form of social media or finding ways of making ambient information more useful. They are jaded in the way youth requires, but have the confidence that is a gift of their age as well.

David has it about right. I've watched this transformation and helped to finance it (and his first job in NYC too at Inside.com but that's a different story). I believe the move from a velvet rope model to a meritocracy is a good thing and that the new media business we are building in the wake of the old one will be a better media business; leaner, faster, and controlled more by users than media moguls.

I realize that the change is gut wrenching and many have lost jobs and careers in the process. I don't celebrate that. In fact, I find it upsetting. But I have also watched many reinvent themselves and come out in a better place too. Change is inevitable and we are better off embracing it than fighting it.

As David says, "It’s a wan reminder that all reigns are temporary". This one will be as well. So let's get on with it.

Comments (View) | Posted November 30, 2009 in Venture Capital and Technology

Some Thoughts On Email After Dealing With 500 Emails

I just spent four hours going through my inbox and taking it from 500 emails to zero. These were old unanswered emails, not spam (which I delete regularly in the ordinary course of business).

My email routine, now that I am solidly on gmail and loving it, is to quickly check off and delete all spam in my inbox at least once and ideally twice or three times a day.

Then I scan my inbox for emails from my top priorities; wife, family, partners, colleagues, portfolio, etc. I try to get to all of those at least once a day and ideally twice or three times a day. Gmail knows who these people are and I can't for the life of me understand why they don't build a tool to source up all of those emails automatically. Please build that feature google.

I let the rest build up in my inbox and try to get to it on the weekends. That's how I get to 500 unread emails and that's why I spent my sunday mornings in my inbox.

So for those of you who email me from time to time, here are some suggestions:

1) Be patient. I do try to respond to all legitimate non-spam email and do a pretty good job at it.

2) I am not perfect. Sometimes in my haste to delete spam, I delete a few legit emails. If you have not heard back from me in over a week, please resend your email.

3) Short and sweet gets a faster response than long winded.

4) I like to have conversations via email. If you send me an email looking for a meeting, expect a few questions back from me first.

5) Just because my reply is short does not mean I have no interest. It simply means I've got 500 emails to get through.

6) I've largely given up on responding to anything other than urgent emails and disqus comments on my blackberry. I do scan a lot of email on my blackberry.

7) I still would like a send and delete button from gmail. Send and archive is so awesome but I do a lot of send and delete too.

8) Gmail is life changing. Thank you google.

That's it for now.

Comments (View) | Posted November 29, 2009 in Venture Capital and Technology

A Lot Can Happen In Five Years

There's a saying I heard recently from someone in the tech business that goes something like this:

Things take longer in the short run but they happen faster in the long run

I am sure I've bastardized the quote but the point is important. Nothing happens as fast as you'd like but if you have a longer term horizon, it is amazing what you can accomplish.

I was reminded of this today when I saw the news of our portfolio company Indeed's five year anniversary.

Indeed.com launched five years ago. I have no idea how many job searches or visitors it had that day, but I can assure you it wasn't many. Five years later, they are the leader in the jobs industry online. Check out these stats:

• The #1 employment website in the US by job search unique visitors and page views (comScore Media Metrix, Oct 2009).

• Websites in 19 countries and 10 languages.

• 24 million unique visitors and one billion job searches per month worldwide.

• The leading pay-for-performance recruitment advertising network.

• The source of thousands of success stories from job seekers andrecruitment advertisers.

• A leading data provider, including Job Analytics, job trends, industry trends, job market competition, and salaries.

Comments (View) | Posted November 28, 2009 in Venture Capital and Technology