Musings of a VC in NYC

Donors Choose Campaign: Update

We've been running the Good Things Come To Those Who Code campaign here on AVC for two weeks.  We've raised about $12,000 from about 50 folks. That's a lot of generosity from a relatively small number. So thanks to everyone who has given to date.

I think we can do better and get more folks involved so I am going to throw out an incentive:

On September 23rd, here in NYC, we are going to throw a big party to celebrate the 10th anniversary of AVC. I am going to pay for this event and it is going to be open to everyone. It's going to be based on the "Cheers" theme that I've talked about from time to time here at AVC. I am going to tend bar and I hope that many of the AVC regulars can make it. I will share more details of this event as I nail them down.

We are going to have VIP passes for this event. Some of you have earned them by virtue of your participation here over the past ten years. But I am not going to announce the VIP list for a while. One way to get on the VIP list is to donate to the Good Things Come To Those Who Code campaign. The folks who have already donated are on the VIP list. If you want to join them, go here and give.

Video Of The Week: The Tech Tonic Discussion

Feature Friday: Pick A Song

Our portfolio company Turntable launched their second product yesterday, called Piki. I saw this comment about Piki in a blog post and posted it to my Tumblr:

If you imagine Twitter not for tweets but for songs, you'll arrive at something like Piki.

In Piki parlance, a tweet is a pick. You pick a song and post it to your feed.

Here is my piki feed.

I have been using Piki in private beta for several months and it's quite good. I am listening to Piki right now as I write this post.

Piki is publicly available for iOS and the web app remains in private beta for a few more weeks. Android is next.

And sadly, because the music industry makes it this way for developers who choose to work with them, it is only available in the US right now.

If you are in the US and have an iPhone, give picking a song a try. You can download Piki here.

Late Stage Convertible Debt

I've written about convertible debt a few times on this blog, most notably here and here. My general take on convertible debt is that its very good for the founders and not very good for the investors in seed and early stage investments and a much better solution in late stage financings, which I mention at the end of the second linked post.

We have a good case study on late stage convertible debt today and I thought we should not miss an opportunity to talk about it. My partner Albert blogged about the $41mm Foursquare financing on the USV blog today. You will note that the investors bought convertible debt. And this is a classic situation where convertible debt was the optimal solution for everyone.

In the Foursquare situation, the convertible debt was purchased by a group of insiders led by USV and Andreeesen Horowitz. Both of our firms have been investors in Foursquare for several rounds and both of us own a meaningful stake in the company. Valuation is somewhat immaterial to us as our stake in the company is not going to increase much in this round of financing. But valuation is very material to the Foursquare management team because $41mm of capital is going to be dilutive at any valuation that would make sense here.

So the optimal structure is convertible debt. That means this round is not dilutive to the Foursquare management at this time. But it will be dilutive when the debt converts into equity, most likely at the next equity issuance. For the investors, we get the comfort of knowing that eventually our investment will become equity and we will not have to price it. Someone else will.

In Foursquare's specific situation, it makes even more sense because the company has just released an entirely new iOS version which gets iOS to parity with Android and completes the transition toward social search and curation which we all believe better positions the company in the minds of consumers. Also, the revenue model is in its early stages and will be much more developed in the next year. In situations where a valuation inflection point is on the horizon, convertible debt can be an excellent structure for everyone involved. And that is very much the case here.

Background Checks

We had a very lively and healthy debate here at AVC a while back about gun safety. I am very much in the camp that we need to put a lot more restrictions on what guns should be on the market and how. But regardless of where you are on gun safety, the vast majority of Americas (between 70% and 90% depending on how and who you count) believe that background checks should be run on everyone who wants to buy a gun.

But getting background check legislation passed by the Senate is proving challenging. How is it that 70-90% of Americas support this idea and we can't get the Senate to pass the legislation? Well that is gun safety politics in America.

Tomorrow the Senate will bring the bill to the floor for a vote. It looks the Republican threat to fillibuster has passed. Smart move by the GOP. Fillibustering a bill that 70-90% of Americans support seems like a bad idea. But there is still the question of how the vote will go.

Over the past decade, my wife and I have been generous givers to Democrats running for Senate. I imagine that of the fifty-five Democrats in the Senate, we have donated to at least half of them. The data is online somewhere but I don't have the time to find the data and link to it.

In the coming days, we will get another data set. That being the list of Senators who voted against background checks. And I hope that data gets put online permanently like our giving history. Because that will be a list of Senators who are hostage to the NRA and do not need or deserve our support. We will get to see who they are in the coming days. I will be watching carefully. So should you.

Reuters Tech Tonic taping today

A while back, I posted a video of the week of Avner Ronen on Reuters Tech Tonic. In the comments to that post, the host Paul Smalera invited me to appear on the show and then invited the AVC community to sit in the audience.

Well the taping is today at the Reuters building in Times Square from 5pm to 6pm and the first 25 people to sign up can attend. The link to RSVP is here. Please don't RSVP unless you really plan to attend.

We are going to talk about immigration, regulation 2.0, bitcoin, and a few other things that will be common themes to the AVC community.

Don't Let A Good Crisis Go To Waste

My partner Albert shared this line on his blog almost five years ago now.  I find myself using it all the time. And it is an important lesson that I have learned in my career.

When something goes badly in your company, for many the initial instinct is to keep things under wraps as much as possible to avoid freaking everyone out. I would argue that it is better to acknowledge the crisis and use it to your advantage.

Change is hard to bring to an organization and a time of crisis is often a perfect time to make some changes that you have wanted to make for a while. It creates a perfect backdrop and context for doing that.

Maybe you are in the midst of a financial crisis brought on by a tough fundraising environment. Maybe you are experiencing some management turmoil. Maybe you've lost your largest customer. Maybe you are getting pummeled by bad press. It really doesn't matter what is the cause of the crisis, but all of the above will work well.

I have seen a portfolio company react to a financing crisis react by making important and overdue changes to its business model and organization. The financing crisis ended and the company emerged in a much stronger place.

I have seen an entrepreneur react to the loss of several important team members by shuffling up the organization, pivoting the product roadmap, and operating with a much leaner team. The company recovered from the loss of the key team members, launched a new product very successfully, and got onto a path to profitability.

There are a lot of these stories to tell. Because crisis is what brings clarity and focus. You get punched in the gut, you get back up, and you take care of business.

So if you are in the middle of a crisis in your company right now, think hard about using it as an opportunity to make some changes. There is never a better time.

Down Time

The Gotham Gal and I took this weekend off and flew down to the Bahamas to see some friends who have a house down here. From the time we landed on friday to the time we return to NYC later today, I have largely been off email. With the exception of writing this post and posting the video yesterday, I have been off of my laptop. I used my phone to text/kik with my kids and use the golf course's android app to figure out distances.

Down time is great. I should figure out how to make it a bigger part of my life. My friend Brad Feld and his wife Amy take regular weeks off the grid. I can see why that works for them.

For the past twenty years, I have been in a zone where I work all the time. It has allowed me to stay on top of things and help build two venture capital firms. While I don't take meetings or go to the office or travel on the weekends, I work a lot on saturday and sunday. The same is true of our family vacations. I find a few hours every morning and in the afternoons where I can do calls, do email, and stay on top of things.

Taking a couple days off and a view like this certainly makee me wonder how much longer I can and should keep up that kind of lifestyle.

Video Of The Week: The UC Irvine Conversation

The Dean of the Computer Science and Statistics School (The Bren School) at UC Irvine is Hal Stern. Thirty four years ago in my freshman year at MIT, I was failing Differential Equations and Hal would tutor me as he watched the Celtics games in his room. With his helped I aced Differential Equations and went on to a fine career at MIT and beyond. The least I could do to pay him back was show up and give a talk at his school. I delivered that payback last Monday and it was a lot of fun.

It's a long video, almost an hour, but we cover a lot of topics near and dear to this community. So give it a watch this weekend if you can find the time.

Feature Friday: Places People Go Next

I'm a data geek. I love data. And I love it when companies do interesting things with data, particularly my data.

So a few weeks ago, I was stunned to be told by Foursquare that the ice cream shop I had just stepped into was the most popular place people go to right after the japanese restaurant I had just left. This is a new feature Foursquare has rolled out on Android and I expect will be in the next iOS build.

I call the feature "places people go next" and I think it is awesome. Here's a screenshot I took of my home screen right after I checked into the Shake Shack on Wednesday at lunchtime.

So after a burger and fries, you are either going to get tea at Argo or a beer at Live Bait. I would imagine it has a lot to do with what time of day it is.

In any case, this is the kind of thing you can do when you have a dataset of billions of checkins from tens of millions of people all over the world. It's not just that you have the data, it's what you do with it, as Om so elegantly says in this post.

With new data driven features like "places people go next" coming out fast and furious these days, I am loving Foursquare more than ever.