When I was a kid, my grandfather had chronic insomnia. A friend convinced him his mattress was the problem, and that he should go buy a waterbed (note: this is the 1970s). So he did.

That’s where a whole new string of troubles began. Waterbeds are heavy, so he had to have his floor assessed to make sure it could handle the load of a waterbed. The water in waterbeds make them cold to the touch, so he needed a heater to keep it at a comfortable temperature. Every time my grandmother moved the water would slosh around and wake him up, so they had to buy models with baffles and other technology to keep the waves to a minimum. It turned out the water could get bacteria and mold in it, so every month he had to add chemicals to keep it clean. One leak would spell disaster, so he was constantly checking for leaks.

That bed was a giant pain in the ass and finally he threw it away and bought a “white sound” machine. Insomnia gone. Problem solved.

I was reminded of my grandfather and the waterbed saga during a recent pitch. Here were founders who had defined a real, tangible problem. But their solution went after it piecemeal. Every time they discovered something new — a different facet to the problem, a different audience — they added a feature to address it. The result is what felt like a very complex, brittle product that will never fully solve the problem.

They haven’t launched anything yet but to me it seemed like they’re already headed full speed ahead on a waterbed solution — the kind of solution that will drain valuable time and money as they work to fix all the new, unrelated, increasingly frustrating problems associated with their solution. I can’t help but wonder if there’s a “white noise machine”out there that would easily solve the same problem.

The lesson? If you’re an early-stage founder and you find yourself spending the bulk of your time perfecting a solution that keeps falling apart, run a gut check. Are you focused on the problem or your solution? If the latter, take a step back and make sure you aren’t missing a better approach. It could save you a ton of time and money. And you will definitely sleep better.

It’s so awesome to see Matt Brezina and his team at Sincerely have their amazing effort recognized as they announce that Sincerely has been acquired by Provide Commerce today.  I’ve had the absolute pleasure of working with Matt since he started Xobni back in the day and rarely do I get the chance to work with people of his caliber. We have a term at First Round that characterizes folks a certain type of entrepreneur: Heat Seeking Missiles. And Matt is that.  He was constantly iterating on his product mix, shipping products constantly, leaning into those that worked and killing those that didn’t. Relentlessly optimistic and a great team builder, people like Matt are the reason I love coming to work every day.

Under the Provide umbrella, you can expect to see Sincerely expand their product line and have the resources to expand even faster. I can’t wait to see what Matt and team come up with next!

Outright Fantastic!

Jul 18, 2012

I couldn’t be more thrilled for the team at Outright on their acquisition by GoDaddy today!

When the founders first approached me with their vision for a simple, approachable accounting solution for small businesses, it made tremendous sense. These businesses needed to minimize their time doing their books and maximize their time running their businesses but at the time there was nothing available between a spreadsheet and the complex software packages of the day. Outright built the right product, garnered 200,000 happy customers and now GoDaddy will expand Outright’s reach to their 10 million customers.

You cannot possibly imagine (or maybe you can) how hard it is to make an accounting product exciting. Steven, Ben and the team at Outright have really done a masterful job of making accounting engaging for the user. I tip my hat to them.

I can’t wait to see the next step in their journey as they become the cornerstone of the small business applications that GoDaddy will build over time. I wish them all the best of luck and look forward to seeing continued future success.  And thanks for taking us along for the ride!

Welcome CeCe!

Dec 13, 2011

I am thrilled to announce that CeCe Cheng has joined First Round Capital as an Associate!

At First Round, we understand the importance of working with talented people and we apply that philosophy to both our investments and hiring. In our long search for an Associate to join our team, I spoke to a number of very talented individuals.  Since being introduced to CeCe in mid-October and spending time with her over the last couple of months it was clear that she not only met our high standards but vastly exceeded them.

CeCe comes to us from startup Qwiki where she led PR/marketing as Director of Communications and her previous experience spans politics in Washington DC and finance in Boston. She graduated from Princeton University in 2008 and has been living in San Francisco for the past year. CeCe is pentalingual, an avid traveler, and has an insatiable love for books.

Beyond CeCe’s quick intelligence and passion for the startup space, we look forward to benefiting from her creativity, PR/marketing background, strong network, and unique investment perspective stemming from an international background and diverse work experience.

On behalf of First Round Capital, I would like to welcome CeCe to the team – we could not be more excited to work with her!

I recently negotiated and signed a term sheet with a company I am very excited about working with.  I’ll talk about that company later but for now wanted to talk about the process.

Now that I have been a venture capitalist for over five years I’m able to recognize more patterns and one is around term sheet negotiation.  This last negotiation was a breeze.  The founders were tough, but they knew what was important to them.   I also know what is important to me and we were able to have a set of frank, open, and friendly conversations about it and we were able to sign inside of 48 hours.

In my experience this is likely to mean that my experience with these founders will be similar.  We’ll likely have frank and open discussions around the issues in the business but always be able to work together in a friendly way to get to a positive conclusion.  I’m excited.

I’ve had a few term sheet negotiations that have been less than satisfying.  They took forever to get closed, if ever, and we spent as much time on the nits as on the substantive issues.  One founder wanted to negotiate out of having to pay $10K in lawyer fees.  Said just because it was always done that way doesn’t mean we had to do it that way this time.  Turns out that person wanted to rewrite the book of convention on every decision he made.  I can’t tell you that’s why his company failed but it sure didn’t help.  Another person didn’t want preferred shareholders to have any preferred rights.  He never should have taken investor money and probably won’t again.  My favorite was the guy who wanted a relocation bonus….to move his boat to the bay area.  Not a boat he lived on, mind you, but one that he sailed occasionally.  That term sheet was never signed and it was probably best for both of us.

This doesn’t go one way, either.  The investor who spends hours browbeating you to avoid a tiny reduction in the option pool will also be tying up board meetings for an hour to talk about an assumption on line 18 of the revenue model submitted for discussion.   Is she too-clever-by-half, developing complex financial structures that even your lawyer can’t understand?  Expect to hear from this investor every time you are in contract with a customer as she tries to tell you how to structure that deal.  Does he wait until the day of close and then call you and tell you that he found out you have a competitor and is going to lower the valuation by 30% now that you are in a lockup?  This person is always going to be trying to find and exploit any leverage they have over common.

People are who they are and will show their colors early.  When you take investment you are entering a long term relationship where there will be ups and downs.  Be sure to read the signs in that first negotiation and make sure this is someone who you want to have that relationship with.  And so will I.


Oct 28, 2011

Venture is a long term business.  Relationships are made and built over time.  Some of those relationships turn into investments and some never will.  And once I get to work with a founder I (almost :) ) always look forward to the chance to work them again.  So when Matt Brezina dropped by the office almost a year ago to talk about Sincerely I was psyched.

Matt hung out a ton at our offices as he was incubating the idea and then once he raised money and started building the team he commandeered the office next to mine through the first product cycle.  We have a relatively small team in San Francisco but a big office because we like companies to not have to worry about space when they first start up (we’ve also had ModCloth, Uber, and Foodzie, among others, share our space as they are starting up).  It was great to watch him, Brian, and the rest of team iterate through ideas and execute against deliverables day after day.

Now Sincerely has their own office and the team is growing the products are being released at a nice clip.  We’re thrilled to be investors in Sincerely and working with Matt again.  Expect good things from them.

“How did you get into venture capital?”

I kind of hate that question.  Not because I have any particular point of view on how I became a venture capitalist.  No, I just don’t like it because like so many other people in the business I arrived here following a fairly unique path.  Inevitably the person asking is trying to find a pattern that they can use to get into the business and my story isn’t helpful for them.

As I gear up to hire a new associate for the San Francisco office of First Round Capital I know there is no standard way to find the next person to join our team.  Our current experience mix includes entrepreneurship, academia, banking, government, crime fighting, and some very poor scooter riding.  No one here burst from the womb wanting to do venture capital yet here we all are having the time of our lives while we strive to make our portfolio companies successful.

Given that, how do we find the next person?  I’m always game for trying a new model and so I am borrowing a bit from Angus Davis, the brilliant CEO of our portfolio company Swipely who builds his team in a very unique way.

If you are interested in working with us as an Associate, I’d love to hear from you.  But instead of telling you what I am looking for, let’s start with you telling me a little bit about yourself.  To structure the conversation I built this little website.  Head over there, answer a few questions, and let’s start this conversation.

I’m looking forward to hearing from you!

Farewell, @christine!

Oct 27, 2010

I often get asked what I enjoy most about being in venture capital.  The answer is easy – every day I get to meet and work with the smartest and most creative people in the world.

One of those people is Christine Herron.  I had known Christine for years and was thrilled when she decided to join First Round Capital a few years ago.  Her calm demeanor, wit, and keen eye for very interesting companies made her a great fit for us.  She worked hard for many portfolio companies and was an integral part of our deal flow and decision-making process.

It was therefore a bittersweet moment when she told me she would be starting the next phase of her career by joining Intel Capital to work on their consumer investments.  I know that this is a great step for her in what has been and will continue to be a great investing career.  She will be working with a stellar team and awesome companies and will now be a wonderful syndicate partner for us.  On the other hand, I will miss bouncing ideas around with her and having her help on the companies we worked on together.

On behalf of the First Round Capital team, I give Christine a hearty congratulations and best wishes.  And I remain thankful that I am in a profession where every day I get to work with the smartest and most creative people in the world, like Christine.

We had a great event this week co-hosted by First Round Capital and Mayfield Fund called "Entrepreneurs Helping Entrepreneurs."  There were well over 150 seasoned and new entrepreneurs in attendance networking with each other for a few hours.  Additionally, a few lucky entrepreneurs won a mentoring session with some very successful entrepreneurs including Jay Adelson, Caterina Fake, Aaron Patzer, Gina Bianchini, Max Levchin, and Mark Pincus.

Founders face a unique set of issues when growing their companies from 2 to 20 people.  At this stage there is no better help than someone that has been there before you.  As a partnership we are always trying to find new ways to create support structures for the entrepreneurs both in our portfolio as well as the community at large.  We had this in mind when co-developing the structure of the event and it turned out quite well.  

Many thanks to Raj Kapoor and Emily Melton of Mayfield fund and the support teams in both of our organizations for putting on a great event.  Also, big thanks to the entrepreneurs mentioned above who donated mentoring time to help out fellow founders.  I look forward to the next one!

250px-How_Do_You_Solve_a_Problem_Like_Maria?_logo It was with bemusement that I read how Mint.com founder Aaron
Patzer has just been “verbed.

The story goes that when Mint.com sold to Intuit for $170 million, they left way too much money on table because the company clearly had the opportunity to go for the billion dollar plus win.  This leads to what is now called the Patzer Problem, namely:

When companies sell for ~$100 million, and a much bigger outcome is possible, it is very bad for investors.

I understand that. For many venture funds, that size exit certainly doesn’t get close to making the fund successful.

But let me propose a corollary to the Patzer Problem:

For a normal homo sapiens, a ~$100 million exit is a life changing event.

There are certainly some founders who want to go big.  Those that have already had a smaller win are often not interested in another smaller win.  Other folks are just predisposed to continue building their company instead of selling it and being beholden to a different set of shareholders.  There are a whole group of founders who truly believe that they want to build a huge company right up to the point that they get that ~$100 million offer and begin thinking through the math.  But many are perfectly happy with a life changing event.  And I love them all.

I see the world rather simply.  Venture capital is like any other business.  We have customers (founders) and we have shareholders (limited partners).   Our job is to increase shareholder value, i.e. create an outsized return to our limited partners.  The way that we do this is by delighting our customers.  Our products include ourselves and our experience, our connections, and the structured value we can build around the portfolio, among other things.

For the record, the Mint.com exit was profoundly successful for us.  If we are doing things right and our company founders are successful, then over the long run we should be successful.   If we get to the point where our founders are successful but we can’t be, we should be rethinking our business.