Fisking Calacanis

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Fisking Calacanis

I am not sure where the term fisking comes from, but I learned it from Jarvis.

Jeff told me that it means the practice of tearing apart a blog post, bit by bit.

Before I fisk Jason, I want to say that you have to love Jason. He lays it all out there, says what he thinks, and has no fear. And he's a good entrepreneur because he's not afraid to take risks and he gets the Internet and where its going as well as anyone I know.

But he's wrong about venture capital and I feel the need to defend the business I've worked in for almost 20 years.

So, let's get on with the fisking.

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Jason: Real entrepreneurs don't raise venture capital.

Fred: I guess that means that Isaak Karaev, Dave Morgan, Mark Pincus, David Bohnett, Tom Evslin, Seth Godin, David Filo and Jerry Yang, and Larry and Sergei are not "real entrepreneurs". Come on Jason. That's crap and you know it.

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Jason: VCs think their money is more important then you giving up your life.

Fred: Jason's talking about the liquidation preference here. He is saying that VCs think that the equity they buy with cash is more important than the the "sweat equity" that entrepreneurs get. Jason says " I’m a fan of everyone have the same stock, and everyone getting out at the same time." But Jason knows from firsthand experience that an entrepreneur can make money with that deal when the investor loses money. Is that a fair deal Jason? I don't think so.

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Jason: What does that mean for the other 99 business in the life of a VC? It means they are just spending time with you until that special 200x investment comes—if it ever does.

Fred: This is so wrong its laughable. The 200x investment requires no time from the VC. The deals that I spend the most time and energy on are the ones that don't work or don't work immediately. The ones that take off like a rocket are the ones the VC pays the least attention to.

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Jason: If your company is going to do OK or good a VC isn’t going to waste the bandwidth on you—they can’t—because your slot could go to the next EBAY! An individual VC can only be involved with three to five companies before they are spread so thin that they can’t stay on top of their investments

Fred: A good VC can be involved with six or seven companies before they are spread too thin. And a VC has a fiduciary responsibility to his inevstors to spend time and energy on every deal. The idea that a VC would shut a company down because he has no time for it is absurd. If a company gets shut down, its not for lack of time, its because you can't put good money after bad.

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Now that I am done with the fisking, I want to say that Jason is right about a bunch of things in his post.

He says, "We don’t need the money"

And he's right. Weblogs Inc is doing great. They don't need VC money and they shouldn't take it.

He says, "VCs are betting with OPM 90% of the time"

It's more like 97-99%. VCs are investing other people's money. They have some of their money at risk, but not all of it by any means.

He says, "Most entrepreneurs get three swings, most VCs get 30".

I think both numbers are low. Most serial entrepreneurs will get 5-10 swings in a career and most VCs will get 50-100. But the ratio is right. VCs are playing a portfolio, entrepreneurs are betting the farm.

He says, "I meet so many entrepreneurs who are chasing VCs and when I sit down with them to look at their business I realize nine time out of ten that they have not even considered alternate sources of capital, and that many of them don’t even need the money."

This is so true. If you are an entrepreneur, raising capital is something you may need to do. But building a business is something you must do. The focus on the VC fundraising process at the expense of the business is a huge mistake. Don't let the tail wag the dog.

The bottom line is that the VC/entrepreneur relationship is difficult enough. We don't need Jason fueling misconceptions about VCs just because he wants to show how tough he is. I know he's tough. He's from Brooklyn!

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Tracked on Feb 11, 2005 1:39:02 PM

Posted February 10, 2005 in Venture Capital and Technology

Comments

Wikipedia defines fisking here, though I think James Wolcott has a more accurate take on the term and the affinity for the term in the ranks of the 101st fighting keyboarders.

Posted by: Peter | Feb 10, 2005 11:10:38 PM

Some fair fisking there... however, I don't really like that term, it feels sort of, well, what's the word I'm looking for here... invasive?

The title is obviously a joke. I mention how many businesses require VC investment and you confirm this with your list. I also mention VCs have made a huge positive impact on our economy in the story. So we agree on the first point you say we disagree on... but this is fisking, who's counting.

Second, in terms of this angelic view of the VC who gives 100% of their focus to their companies I think you are talking about YOUR style as a VC.

I'm sure YOU are 100% focused on all your companies, and I know almost every CEO you've invested in and I've never heard anything bad from them (the Urban Fetch folks... well, that's another story).

I'm on the entrepreneur side and I hear the horror stories (I also heard them on the editor side at Silicon Alley Reporter).

Many VCs cram down, pinch, and shut down struggling companies to put their focus on other things.

It was the VCs who pushed people entrepreneurs to go big--like stupid big--in the hey day. But I digress.

We both know VCs don't have the time to waste on sick companies--you say it clearly up top when yo mention how much work the stuggling companies are. The more time they take the quicker you need to pack them up and get them out... the thing is, what a VC sees as success is different then what an entrepreneur might consider success. That's the disconnect, the companies a VC gives up on an entrepreneur might not give up on.

There are three sides to every story... your side, my side, and the truth. I think the truth about VC money lies between your idolized version of the VCs who would just die for that struggling company... letting the EBAY executives wait in the lobby on their blackberries. My version where the entrepreneur is in a dog fight and the VC is dating someone else and taking days to return calls and won't do the next round was only two years ago for many of us entrepreneurs... and they don't forget (I was never in that position of course). Many of the entrepreneurs have been doing business in their own circles--leaving the VCs out.

There are a number of high networth individuals investing out there, and folks Scott at Meetup and Scott Rafer at Feedster are doing these style of investments from what I've read--so has Weblogs, Inc. as you know.

I think what you're upset about (you seem a little upset--are you?) is that your job is getting harder. the top entrepreneurs find venture capitalist a little too extreme and expensive in many cases... I know you know this is the case.

You're a top rated and respected VC and you're going to have deal flow issues with the new fund I'm sure... the best deals are getting done E2E.

VCs need to rethink what they offer and the deal structure they've done for decades. It's a new world and Internet businesses don't need VCs in many cases. Most of the companies being bought by Yahoo and Google these days go from angel funding to sale--they SKIP THE VC STEP! You know this to be true.

Now, will Scott, Rafer, and I wind up in your conference room some day hammering out deal points?! Perhaps... but that's because you're one of the good guys and you're offering to get in the trenches with us. You're will to take your time and rethink deal structure, and not because you're the only game in town like the old days.

fisk that baby.... :-)

jdawg

Posted by: Jason | Feb 10, 2005 11:42:21 PM

I actually think that the current environment is one of the best ever for entrepreneurs to be raising capital. We just had to ratchet down one of my investments, i.e. change the model, because of the bleeding by the VCs. For the entrepreneurs, it's never fun. VC is a tough game, and we are big boys, but they do have to protect their money. With regards to my thoughts on the current environment, I actually touched on this tonight on my blog...hate to advertise, but there you go.

http://bwatson.typepad.com/brain_dump/2005/02/cost_of_capital.html

Posted by: B Watson | Feb 11, 2005 12:28:21 AM

Shame on me...didn't say congrats on the new fund. It's nice to sign the docs and get off the fund raising merry go round.

Posted by: B Watson | Feb 11, 2005 12:54:58 AM

Fred,

Long time lurker, first time poster. First, congrats on the new fund. Second, what do you think of Jason's point about VC being a hits-driven business (like music & film)? If most VCs strive to be like a major label (or vice-versa), is there room for the equivalent of the indie label?

Also, did you see Joelonsoftware's Manifesto on Fixing (not Fisking) VC>? He basically argues that misaligned incentives can lead to perverse consequences. I.e. VCs are looking to hit a 2 or 3 bagger (and willing to take a riskier swing in going for the fences) when most entpreneurs would rather choke up on the bat a bit and have a less risky shot at a double or triple.

Keep up the great blog,

Rags

Posted by: Rags | Feb 11, 2005 3:17:46 AM

Allow me to say what others, who are being polite, will not say. It's easy to talk tough when you've got a free spending billionaire like Mark Cuban on your side. If he did not have such an alliance, I doubt Jason would offer so flippant an opinion of VCs. In fact, anyone who keeps tabs on the tech VC scene knows that he's been sniffing around for VC money for years since his magazine went bust. It's exactly the reason he devoted an entire new magazine to venture capital. Oh the hypocrisy.

Posted by: Jacob | Feb 11, 2005 5:32:43 AM

P.S. In the end, let's say what this is all REALLY about. Jason is accustomed to having 'under the radar' fishing meetings with VCs. He got ticked off because Fred let the cat out of the bag and exposed Jason's movements. Now Jason is cloaking his anger at the post about the meeting, under the veil of criticizing the VC business in general. Among professional magicians, this is called "mis-direction." We are now supposed to believe that Jason is almost totally uninterested in VC money...even though everything he has done, is doing, and says indicates otherwise. This whole thing is a fake argument. Fred got drawn in because he's a stand up, good guy who took Jason at his (posting) word. Fred, Jason is just mad that you accidentally exposed his business movements to the public. If you hadn't noticed, Jason has a very quick/hot temper. Less Brooklyn tough, and more like Upper East side cry baby.

Posted by: Jacob | Feb 11, 2005 5:40:50 AM

Like in every industry, there are good and bad guys. My experience is that you can tell who's driven by passion, and who's driven by greed and other stimulii. In Europe, unfortunately, most VCs come from banking... bad thing, in my book. They don't have any entrepreneurial experience, they tend to use the wrong metrics and to choke you as soon as something goes bad. If they invest at all, that must be said. I know a banker-turned-VC that's been sitting on the money for two years, turning down deal after deal because I can't feel sure about none. And if you need to feel 100% sure about deal you can't be a VC... go back to being a banker.

Posted by: Giordano | Feb 11, 2005 5:44:38 AM

>> Jason is accustomed to having 'under the
>> radar' fishing meetings with VCs. He got
>> ticked off because Fred let the cat out of
>> the bag and exposed Jason's movements.

I did 9 meetings this past week in New York city... one was with a VC. So, you're idea that I'm trying to throw people off my trail is really funny... I'm excited that you took the time to come up with this insane idea. I'm a blunt guy--I tell it like it is and I'm very upfront about what we are doing, and raising VC is not what we are doing right now.

We don't need it now, like I said, and in the future maybe we would, but for now I need to get from 74 to 200 blogs... that's more then enough work for the seven folks on the team.

You should write a screenplay!

Posted by: Jason | Feb 12, 2005 11:02:34 PM

Fred,
You need to put these threads into one post so that I could link it for the archives ... This should go should go into the text books in school for all entrepreneurs in how to develop rapport with VCs.

Jason: I'll lay down a challenge right now..don't raise anymore money from this point forward from any investor and lets see what your position in the market is. Good luck pal. Be a 'real' entrepreneur show us.

Posted by: John Furrier | Feb 15, 2005 8:06:35 PM

"Jason: Real entrepreneurs don't raise venture capital.

Fred: I guess that means that Isaak Karaev, Dave Morgan, Mark Pincus, David Bohnett, Tom Evslin, Seth Godin, David Filo and Jerry Yang, and Larry and Sergei are not "real entrepreneurs"."

Have to admit, Fred, the people you mention are incredibly bright, driven and highly capable individuals...but that does not make them entrepreneurs. That's likely why they resort to VC funding. To bring in not only money, but ideally management talent as well, so they can focus on the technology stuff. Left to their own means, who knows what they may end up doing...perhaps sending up satellites into the skies so Google can search for alien life forms.

Real entrepreneurs want to keep the money for themselves.

Posted by: John Adams | Feb 18, 2005 1:24:12 AM

"Real entrepreneurs want to keep the money for themselves."

where do these wacky ideas come from? whether or not you raise vc money has ZERO to do with your entrepreneurial acumen. you raise money when you have to on the best terms from the smartest investors you can. depending on the capital requirements of competing for the opportunity you make tough choices. if jason can build his comany without suffering equity and control dilution, great. if he misses a bigger oppty we'll all call him short sighted.

entrepreneurs come in all shapes and sizes. jason is the scrappy kind. sergey and larry are the brainy socialist kind. they have varying degrees of management skills and the smart ones know when to replace themselves. great vc's like fred make a career out of partnering with great entrepreneurs AND great managers and sometimes get both in one.

Posted by: mark pincus | Mar 22, 2005 1:21:22 PM

Undeniable facts about Jason Calacanis:

- he personally publishes emails that are marked as "private not to be published"

- he personally copied my comic strip to his server and removed copyright text from the image file

- his employees are stealing photos from other websites and publishing them on websites of WeblogsInc without giving proper credit, yet he dares to attack main stream media for not crediting bloggers, although his employees from WeblogsInc do the same!

- he censors and blocks comments on his blog and other blogs of WeblogsInc - thus companies that want to get feedback on their products don't get objective view.

Posted by: Mobile Phone Fan | Jun 1, 2005 3:47:47 AM

A VC

Musings of a VC in NYC