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The Loneliness of Success that Nobody Talks About

The Loneliness of Success that Nobody Talks About Bothsidesofthetable Jul 19, 2015

Yesterday I saw two biopic films: “Amy” abo […]

How the Hell do I Prioritize Work, Blog & Find Balance?

How the Hell do I Prioritize Work, Blog & Find Balance? Bothsidesofthetable Jul 14, 2015

I noticed this post today from Ezra Galston titled R […]

What to Expect When You're Expecting Venture Capital Returns Thisisgoingtobebig Jul 30, 2015

One of the first things I did when I joined the venture asset class as a lowly institutional LP analyst in 2001 was to build the VC fund cashflow model. Just about every analyst who looks at fund investing has built one. You incorporate expected company returns, mortality rates, and fee structures to try to predict how a venture capital fund works from a cash in, cash out, and NAV standpoint.

It's basically the unifying theory behind all your assumptions about 10% of the investments driving most of the returns, needing certain multiples of return, and the basics of how many deals you do a year, with fees layered on.

Let's be clear about this exercise. It's not perfect. There are all sorts of wacky cludges and hacks in it, like the idea that every company performs exactly the same over time, because you don't know *when* the winners and losers happen. You wind up with a Schroedinger's Cat type model where you invest in a company and it partially dies and partially exits over time. This way, you smooth out all the lumpiness of time when multiplied out across 30 or so deals. And no, the numbers don't exactly add up--but they're more than close enough for venture capital.

It's also not the "average fund". You don't want the "average" fund, because average funds don't do well--just like you don't want to model the average startup, because you might as well draw a big flaming hole in the ground. Venture capital is all about finding the extraordinary. It's about building the exceptions.

On the other hand, you can't exactly model out being in Accel Facebook fund, the First Round Uber fund, or the Lowercase Twitter fund. So when you think about returns, what should you expect.

What I tried to model out is "institutional quality" funds--funds that have access to winners--those winners being "normal", however. Not unicorns necessarily, which require the suspension of reality to believe you can consistently pick them.

The average VC-backed exit is somewhere ar [...]

Survivors Bothsidesofthetable Jul 30, 2015

Failure. To most people it smells. People are afraid of […]

What You Can Learn from a Scorpion Bothsidesofthetable Jul 26, 2015

The hardest thing about starting a company is that from […]

Backing someone pre-pitch: The story of how I backed Clubhouse Thisisgoingtobebig Jul 22, 2015

I'm excited to be able to finally announce Brooklyn Bridge Ventures' investment in Clubhouse, a company I agreed to back before I even knew what it was.

In 2010, a bunch of techies got together to do the next year's NYC Triathlon. I had already done two and was looking forward to joining people from the tech community.

It was also right around that time when I started CTO School--a small five session series on how to go from being a developer to a technical leader, which blossomed into a not only a very active meetup, but also gave birth to a great conference series as well.

Of course, I had no business starting such a group, so I enlisted the help of some people I had met through the community--like my fellow triathlete Kurt Schrader, who was, at the time, leading tech for Intent Media.

Kurt is a no-nonsense guy with fantastic experience growing and managing technical teams. He's direct, focused, and he gave me great feedback on what to teach about how to get teams working together at scale--so great that I roped him into giving the talk, and eventually co-founding the meetup group that CTO School became.

We stayed in touch, doing a couple of tris together, chatting about startups, and venture, life, etc. I was really impressed with his ability to distill things down to what was really important--and his constructively critical eye when it came to the buzz around products that most people just didn't need.

So when we grabbed dinner about a year ago and he told me he gave notice, and that he had a guy working on a thing (that guy was his co-founder Andrew Childs), I just said "I'm in."

I didn't even know what he was working on--but Kurt isn't the kind of guy that wastes his time on some Uber for moustache grooming app. For him to leave a great job at a growing company where he had become CTO, it had to be real. Kurt is the kind of founder you back whenever they're working on something, and I've had a lot of success backing pre-product founders l [...]

When doing the right thing by people is also the better business model: Why I backed Homer Logistics Thisisgoingtobebig Jul 21, 2015

Late last year, Adam Price opened by eyes to a group invisible to most New Yorkers--bicycling food delivery guys. He told me about how they get their jobs, what they make, how they make it, and about all of the various problems that come with being a 1099 worker--or being completely off the books.

He told me months and months ago, before anything came out about Uber's workforce, how it was never going to work in a world of increased "on demand" services. He outlined some of the issues in a recent blog post:

Using 1099 workers--people who, by definition, you can't tell where and when to be at a certain spot, is inherently inefficient. The explosion in on demand apps and services meant that any retailer or restaurant didn't just have one firehose of demand to drink from--they had eight. These small businesses needed a single delivery solution in order to focus on what they do best--whether it's making food or curating products to sell in a store. That's what Homer is. It's not a B2C company. You order from Seamless or wherever the way you normally do, and the restaurant turns the delicious meal over to Homer, the delivery experts. This way, Homer doesn't have to raise hundreds of millions of venture capital dollars to change consumer ordering behavior.

He created Homer in order to solve those logistics problems, but he was especially proud of another problem that he solved:

These delivery workers were highly underpaid--because they were working off of tips and were highly underutilized. When you have a single shop that has varied demand throughout the day, the amount of money you can make delivering is really low. Sometimes, you'll get zero orders in an hour and you'll just be stuck with the $5 wage you're being paid--if that.

What happens when you start batching all of these orders across restaurants is that now you're getting two, three, four, or even five orders, not just in peak orders--but every hour--and sometimes more. Now you're pushing hourly w [...]

Bill DeBlasio's Uber targeting is in danger of making NYC a tech joke Thisisgoingtobebig Jul 15, 2015

Mayor Bill DeBlasio is on the verge of making NYC one of the most unfriendly cities in the world for technology companies to operate.

It first started with Airbnb, which got caught in a crackdown aimed at people who turn "affordable" residential housing into full time hotel space. Don't concern yourself with the fact that Airbnb is simply an outgrowth of the lack of affordable housing--where no one would ever bother renting out their place if they didn't have to struggle to afford to live here. Don't concern yourself with the fact that it's the city that green lights all of the luxury condos going up all over the city in place of reasonable housing.

They could have created a reasonable, nuanced set of rules that allows me to rent my place out when I'm not there, like the four times a year I'm out in San Francisco trying to convince valley VCs to invest here, to someone who needs it. Most of these renters are tourists who contribute to the NYC economy and who can't afford $450 a night for a hotel--people we should be aiming to attract. Instead, the baby got thrown out with the bathwater here and renting your whole place is illegal.

And now, our anti-tech progress Mayor is helping NYC join an exclusive list of cities that have stood in the way of Uber providing an innovative consumer service that is in high demand.

Regardless of how you feel about Uber as a company or their management, it's really hard to argue that New Yorkers don't want this service. It's also hard to argue that anyone who supports NYC's tech community wouldn't have rather had Uber build their company here versus in San Francisco. Uber employs 3000 people, more than most startups in NYC do, and is only six years old. Same with Airbnb. Imagine what the NYC tech community would be like had Uber and Airbnb grown up here.

Well, what are the chances of that given our anti-innovation policies regarding these two companies?

Would NYC rather be on the side of innovation, or the side of the [...]

Fauxmentum

Fauxmentum Bothsidesofthetable Jul 1, 2015

________________________________ faux·men·tum fōˈmen(t) […]

Products I Love to Use

Products I Love to Use Bothsidesofthetable Jun 29, 2015

Every year around the holidays journalists and bloggers […]

Why Immigration and The Fourth of July are so Entwined

Why Immigration and The Fourth of July are so Entwined Bothsidesofthetable Jul 4, 2015

The Fourth of July. The day we celebrate American indep […]

How Many Angels is the Right Amount for a Startup to Have? Bothsidesofthetable Jul 8, 2015

If you follow the Twittersphere you may have noticed se […]

Why Taking Some Risks in the Sales Process Can Improve Results Bothsidesofthetable Jul 6, 2015

Many people are too cautious in sales processes and as […]

What Scales? Thisisgoingtobebig Jul 2, 2015

I've got a great deal for you...

It requires you to set up the operation from scratch in every city--and it probably only works in cities.

There is a ton of regulatory risk.

Right now the market is pretty much only high net worth individuals.

Oh... You only invest in scalable businesses? Sorry, I didn't realize. I'll keep that in mind for next time.

Congrats, you passed on Uber.

And you know what--if "scalability" was an important criteria for you, and you wanted businesses where all you had to do was write a bit of code and people started paying you software margins all along the way, you would have rightfully passed. You would have also passed on Fitbit, Nest, Tesla, SpaceX, Blue Apron, Makerbot and a whole host of other things.

At least you would have done Slack.

Yet, as cash friendly as Slack could be--where it could easily have Kickstarter or Craigslist-like cashflow to cap table like ratios, it is still raising hundreds of millions of dollars. So does it really matter if it's being spent on developers or factories. Dollars are still dollars. Look how much Twitter and Facebook raised before exit.

Seems to me that every deal is a tradeoff. Retail stores may not have the same margin or viral growth, but what they spend to build a store is what they don't spend in customer acquisition dollars that Blue Apron spends. What Canary spends to build a product they make back in a clear path to revenue that Pinterest may or may not ever see. They certainly don't make as much per customer as Canary does.

To me, I care about whether something is unit profitable, whether the market is big enough, and whether your business gets easier or harder to run the more business you do. Even in retail, managing more stores is hard, but you also have enough revenues to justify a layer of management expertise that makes your business easier to run. You've got more customer awareness as well. Marketing the 10th Soul Cycle location is easier than marketing the [...]

More Great News for #LATech – Crosscut Ventures Raises $75 Million Fund

More Great News for #LATech – Crosscut Ventures Raises $75 Million Fund Bothsidesofthetable Jun 23, 2015

Crosscut Ventures has just announced their 3rd fund and […]

Why Successful People Focus on the Bottom End of the Funnel

Why Successful People Focus on the Bottom End of the Funnel Bothsidesofthetable Jun 19, 2015

Business leaders have many tasks to accomplish and prio […]

Should the Founder be the CEO of a Startup Until the End?

Should the Founder be the CEO of a Startup Until the End? Bothsidesofthetable Jun 25, 2015

Reid Hoffman (founder) and Jeff Weiner (CEO) of LinkedI […]

Want to Know How to Join One of the Country’s Most Successful VC Fund? Bothsidesofthetable Jun 24, 2015

I recently interviewed Matt Mazzeo of Lowercase Capital […]

Doing some good with the people who want your time Thisisgoingtobebig Jun 24, 2015

In the last two days, I've had three different conversations with people who were asking me what I do with the people who want to grab coffee when the mutual benefit isn't immediately mutual. Don't get me wrong--these are people who are all extremely generous with their time--and that's probably why more people reach out to them. You have a useful meeting with someone and then they tell someone else it was useful, and so on, and so on...

Unfortunately, you only have so many hours in the day--well, the working day, anyway. You do, however, do other things--things that not everyone might be interested in, but if they *really* wanted to meet with you, they'd do.

I'm talking about volunteering.

A lot of people in the tech and startup community volunteer their time to various non-profits--things that always need more help. It's too easy for someone to ask you for coffee. What if you responded with "happy to connect up, why don't you meet me at this soup kitchen Thursday morning?"

Actually, it would be fantastic for you to give them an address and make it a place that hands out breakfast to the homeless or something.

"Oh, did you think *we* were having breakfast? Oh, no, I meant we'll be giving other people breakfast."

Anyone that doesn't stick around for that isn't the kind of person you'd want to meet up with anyway.

For me, it's volunteering to help give the public a free kayaking experience. I co-founded the Brooklyn Bridge Park Boathouse. Our paddlers are mostly local, diverse, working class or lower income--basically anyone who lives within walking distance of the park that isn't going to be paying to kayak in the Hamptons this summer. It's a group of people whose lives involve a lot of waiting on line for stuff undoubtedly, and who can't pay their way around the process. We provide an empowering but safe experience to a lot of people who may not have ever been on the water or who believed themselves capable of paddling their own kayak around on [...]

When Should You Allow Exclusivity in Deals? Bothsidesofthetable Jun 23, 2015

I’ve heard many investors and some executives rep […]

Quick update: Quoted in WSJ on dating apps, recent podcast interview, plus recent essays

Quick update: Quoted in WSJ on dating apps, recent podcast interview, plus recent essays Andrewchen Jun 11, 2015

Couple quick things that I wanted to batch up in a single post. A quote from me in the Wall Street Journal today First, there’s a quote from me in the Wall Street Journal today, for an article covering the opportunities/challenges of dating apps. I’ve been told the story will be on page B1 of the paper edition, […]

The post Quick update: Quoted in WSJ on dating apps, recent podcast interview, plus recent essays appeared first on andrewchen.

When the Good Guys in Venture Change Roles

When the Good Guys in Venture Change Roles Bothsidesofthetable Jun 11, 2015

This morning it was announced that Matt Murphy had left […]

This is the Product Death Cycle. Why it happens, and how to break out of it

This is the Product Death Cycle. Why it happens, and how to break out of it Andrewchen Jun 16, 2015

The hardest part of any new product launch is the beginning, when it’s not quite working, and you’re iterating and molding the experience to fix it. It may be the hardest phase, but it’s also the most fun. The Product Death Cycle All of this was on my mind when I saw a great tweet from […]

The post This is the Product Death Cycle. Why it happens, and how to break out of it appeared first on andrewchen.

Do Less. More. Bothsidesofthetable Jun 18, 2015

We are experiencing a frenetic time. I rarely talk to a […]

Do you know what you do and who else knows? Thisisgoingtobebig Jun 15, 2015

I was chatting with a friend about going to work for startup companies, and told her that career development really came down to two simple things:

1. Do you know what you do?

Do you offer a clear deliverable, best suited for a particular segment of customers or clients, that aligns with their near term goals?

In other words, do you "do marketing" or do you "help seed and Series A backed companies test and optimize their marketing content, deploy it across multiple channels, and analyze the customer acquisition analytics to create a plan to scale future marketing budgets?"

In the latter case, if someone said, "We're thinking of putting a little bit of money to work to figure out where we should be marketing and to prove to future investors that we can spend money wisely to grow," then you'd be the exact right fit for that.

Sometimes, figuring out what you do means doing a lot of interviews to figure out what people's needs are, so you can tailor the message and understand that the product you're delivering--you--is what the market wants.

2. Do other people know what you do?

Here's a trackable metric: How many people know enough about your work to make a great client intro and can tell the client exactly what they need you for?

Growing that number over time will result in direct leads to more work opportunities.

You can do that by creating thought leadership content on sites like Medium, or writing for other professional publications.

You should be a leader among the relevant professional Meetup groups, perhaps organizing one yourself.

Curating a newsletter of helpful professional content, occasionally adding your own perspective will help.

Also reaching out to a wide range of potential customers and connectors to customers with free help is also a way to get people hooked on your professional talents. You've just got to figure out what kind of free help is manageable at scale. Maybe it's a lunchtime seminar for the portfolio compa [...]

How Has Product Hunt Become Such a Critical Startup Website? Bothsidesofthetable Jun 12, 2015

Product Hunt. It seems out of nowhere it has become the […]

New data shows losing 80% of mobile users is normal, and why the best apps do better

New data shows losing 80% of mobile users is normal, and why the best apps do better Andrewchen Jun 9, 2015

Exclusive data on retention curves for mobile apps In a recent essay covering the Next Feature Fallacy, I explained why shipping “just one more feature” doesn’t fix your product. The root cause is that the average app has pretty bad retention metrics. Today, I’m excited to share some real numbers on mobile retention. I’ve worked with mobile […]

The post New data shows losing 80% of mobile users is normal, and why the best apps do better appeared first on andrewchen.

Six Reasons Not to Invest in a Venture Capital Fund Thisisgoingtobebig Jun 10, 2015

I recently met up with an investor who I'm not totally sure is a fit for my second fund, so it was important to me that I was upfront about all the reasons why he shouldn't come in. The last thing you want as either a founder or even a VC is to have an investor get stuck with you when you're not on the same page about expectations.

So here's all the reasons I told him he shouldn't be in:

1) Fund investing is boring. Let's be clear. You trust me with your money and I get to do the fun part--working with founders. For most funds, you get a quarterly statement that isn't fun at all, and then you get to go to a once a year meeting. The meeting is nicely done, but it's just that one meeting.

Now, granted I've tried hard to change that. More updates, more casual events, more exposure to portfolio companies, co-investing, etc., but you're still not pulling the trigger yourself. Being in a fund is not the same thing as angel investing.

Of course, angel investing for most people isn't very fun past the first year. Writing checks is plenty fun, but when you realize that you probably aren't very good at it, these companies need lots of help, and you realize you missed out on the best ones because no one knew who you are, I guess fun is relative.

2) The payback time is forever. It takes a really long time for a company to go from zero to being worth hundreds of millions, if not billions of dollars, and to *exit*. These are six, seven, eight year runs or sometimes even longer. Imagine that's the case in the deals you do out of the fund in year one. Now, in year two, the same thing happens, and year three and year four, etc, etc. You could wind up getting distribution checks from a fund you invested in a dozen years ago. Hopefully, the fund gets some nice wins early and you start to get your money back, but when you're in a venture fund, you're in for a really long haul. Think kids college tuition money.

3) You don't really know what you've got until the money i [...]

What is it Like to Negotiate a VC Round? Bothsidesofthetable Jun 5, 2015

Over the years I’ve written extensively about the […]

Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

Happy Birthday HubSpot! 9 Lessons From Our First 9 Years Onstartups Jun 9, 2015

9 years ago today, on June 9th 2006, HubSpot was officially started. I remember the day, because it was also the day I graduated. (I had promised myself I'd enjoy my 2 years in grad school without too much distraction, so deliberately picked graduation day as the official start-date for HubSpot.)

So far, we've had a pretty good run. HubSpot is now public [NYSE:HUBS] and still growing fast. More importantly (at least to me), I'm still having a great time.

Rather than bring out the party hats and cake, I thought I'd reflect a bit on some of the hard-won lessons we've learned across our 9 hear history in the hopes that it will be helpful to some of you. (Note: The below picture of a cake is from our 2nd birthday party. Now, we'd need a bigger cake)