One Man’s Signal is Another Man’s Noise

Posted on Mar 2, 2011 | 87 comments


After the weekend kerfuffle over AngelList I was reading Brad Feld’s post on Signal vs. Noise. It’s apropos because there is so much noise these days with email, Twitter, Facebook, blogs, web shows, etc. that it’s sometimes hard to know when to pay attention and when to keep your head down.

Mostly during the day I’m in meetings or doing work. I’m sitting at my computer now at 9.00pm writing this – which is an hour earlier than I normally write (there are about 8 women at my kitchen table having a book club (aka excuse to drink wine & gossip ;-) so I’m locked in another room writing.

I don’t get too bogged down in the noise during the day. If I check Twitter it’s usually because I’m waiting for a meeting to start and I never write posts during the day. My secret noise pleasure is to scan TechMeme throughout the day. I enjoy that.

But aside from choosing the time of day to focus on signal vs. noise, Brad’s post got me thinking about another question – what is signal and what is noise? I agree with Brad that we each need to reduce noise in our daily lives. I think we have slightly different filters of signal & noise. Probably we all have different filters.

I was thinking back to a few previous “insider baseball” blog debates that raged for several weeks: AngelGate (aka Bin38 secret cabal), convertible debt vs. equity, bubble vs. not, and now the AngelList discussion. Are these signal or noise?

I would argue that all of the above topics for us VCs are noise. They’re noise because it’s the kind of stuff that we talk about amongst ourselves all the time. It’s over done. We know what’s REALLY going on. We have an informed point of view. We might differ in opinion but not in information sources and knowledge of the issues.

Examples:

Bin38.
I don’t think any serious VC or angel thought it was “collusion.” Some people were appalled by what they heard was being discussed at the dinner. Other people felt sure there was nothing out of line – just friends talking about topics, catching up on what is the latest or blowing off steam.

Let’s be honest – as professional investors we have ALL been to meetings with other groups of investors where we talk about whether there’s a bubble, price creep, etc. I wasn’t there so I don’t know whether the conversation turned hostile. But knowing so many people who were there I would find it VERY hard to believe that it was anything other than people BS’ing about trends in the market.

Whatever the situation is – it’s now clear that even if they WANTED to collude they couldn’t. They don’t have market power. Just look at what happened with Yuri & Ron funding the YC deals. And look at the valuation creep across the board in the past year.

Here’s the thing: entrepreneurs who aren’t at all of our private meetings really didn’t know what do think about the situation. By having 5 or 6 blog posts with different points of view they could draw more inferences. They could chat about it with their peers or mentors. They could start to form an opinion. And I’m delighted that this level of information is out there. It sure wasn’t when I was a first-time entrepreneur. We just got screwed and didn’t know what hit us.

To investors Bin38 was noise, gossip. To entrepreneurs thinking about raising money now or in the future – I think there was a lot of signal.

Convertible Debt & Bubbles
Same thing. Should entrepreneurs have convertible debt or priced equity? If you have convertible debt – should it be capped or uncapped? Should it have a 15% discount at the next round or a 25% discount. This is pure noise to us investors. We discuss this kind of stuff ad nauseam amongst ourselves. So yet another blog post on the topic is cringe worthy. But to entrepreneurs can be gold.

Are we in a bubble? I am on the record all over the place saying we are. So are Fred Wilson, Roger Ehrenberg, Mike Maples and others. Plenty of other people are arguing that we’re not seeing bubbles or that they’re localized. I just had this chat last night with a friend / VC who I respect. He thinks it’s localized.

So if I see a blog post in the topic it’s mostly noise. I can’t imagine that a 24-year-old entrepreneur knows what to think. At least I didn’t have a well-formed opinion at that age. But having lived through 3 downturns in my working career I have developed a point-of-view. If I share that I think in a blog for some people it would be signal – even if I turn out to be wrong (but I’m not, so don’t worry ;-)

Email
And here is where it gets really interesting to me. Brad is a zero inbox kind of guy. I respect that. He’s committed to getting through every email. I will never be that guy. It’s not because I don’t want to respond to all emails – I do. I simply cannot.  I get way too many emails – many of them unsolicited.

Sometimes I get requests from college students asking for help on a report. I get many requests from recent graduates asking if I’d meet for a coffee or be a mentor. Mostly I get company pitches or introductions from friends or people that I know. I get a lot of thank you emails for blogging. I get company portfolio requests (review board packs, sign legal docs, help with fund raising, review a new candidates resume, help with press release, request for meeting to discuss topics, etc.)

I read 95% of my email. I don’t respond to it all. A large percentage of my inbound email is what I consider “customer service” and I dedicate as much time as I can to that. I sometimes have 7 meetings in one day and an evening event that night. If I have an early-morning meeting the next day then it’s clear that some email is going to get neglected.

Much of my email is signal. But I would argue that a lot of my unsolicited inbound email is noise. I’m OK with that. I do respond to a lot of random inbound email. Sometimes I miss an important one. This mortifies me. People who know me know to either send it a second time, text me, send me a Tweet or ping my assistant.

Brad linked to a Tweet by Paul Kedrosky this weekend where Paul said

“I have had more than a few entrepreneurs complain lately about VCs/angels tweeting/blogging up storms, but ignoring emails.”

I immediately wrote to Paul and said, “crap, I hope that’s not me!” He had sent me a deal where I had to cancel the call twice (once because I was deadly ill with the flu). He assured me it wasn’t but also said humorously, “you’re the sixth VC to email me to check!”

Brad went on to say

“I know plenty of VCs who are making a ton of “content noise” these days but don’t seem to be able to respond to their signal-related emails. And if entrepreneurs think VC to VC email is somehow special, I’m included in that category (there are plenty of emails I’ve sent to my VC friends with specific stuff in them that are never responded to.)”

I immediately scanned my inbox to look for emails from Brad to be sure it wasn’t me who had pissed him off! Based on my email exchange with Paul I’m guessing quite a few VCs did the same. Whew, wasn’t me. I didn’t find any un-responded to emails from Brad.

But the honest truth is it could have happened. I try my best and I care about responsiveness but I refuse to be a slave to email. I like customer service but I also need to do sales, marketing, finance & operations. And I have two kids who I also don’t want to short change.

So some of Brad’s email inbox – which he considers mostly signal – I opt to treat as noise. It’s the only way I can survive. Or at least remain productive and balance all of my priorities. Fred Wilson seems to be more similar to me because he often writes about email bankruptcy, priority inbox & other topics about how to deal with email. Including today with his post, “How to get your email read.”

And I can only guess that Brad at least feels it based on his comment on Fred’s blog post today.

AngelList
Signal? Noise?

Depends on who you are. We investors have well-formed opinions on AL. It’s part of our jobs. We all know Bryce is a great guy. We all know that Angel List is making it easier for some entrepreneurs to raise money. We know that many angels love the service. We probably mostly all feel similar to Brad when he said that he currently doesn’t source deals there so for him it’s a non-issue.

But for the uninitiated entrepreneur I think it’s signal. Should you use AngelList or not? If you decide to, how to you maximize your effectiveness in using the service? Is VC being disrupted by AngelList? Naw. Of course not. But I wrote an entire blog post (and had Nivi & Naval on This Week in VC today) to discuss why I felt that was the case. Others like Jason Calacanis aren’t so sure. By reading 3-4 posts when you have downtime from the daily grind will help inform your POV. It will help you in your lunch time conversations.

So my final word? If blogging is frequent and lots of people pile on it will sometimes sound gossipy or like insider baseball. It will sometimes get heated. Perhaps our audience isn’t always each other (although I read Fred & Brad daily). But to many I would argue it’s signal. And if you put up with all 1,700 words of this I’m hoping you’ll agree.

[p.s. I finished this in less than 40 minutes. Not planning to proof read. Don’t care if it has typos or grammar issues. Just wanted to say that because a friend told me today that a Boston VC commented to him that I spend too much time blogging and he prefers to spend his time investing. Puh-lease. Me? I invest, work deals and do operations. I also do marketing. Oh, and occasionally I get through all my email ;-) ]

  • HumphreyL

    Mark just wanted to say thanks for all the signals! Really enjoying your blog.

    Your blog is one email I never miss and always enjoy reading even if it is about Justin Bieber! Hey there are great stories everywhere just need to be open to them.

    I live in Australia and we tend to have very pragmatic investors who tend to give quite conservative valuations (which is being nice) due to the scarcity of funds. If you want to speculate in Australia it needs to be about a piece of land with potentially $500 billion of iron ore underneath it.

    Anyway back to the topic of startups the investors obviously like to see traction even before looking at any seed rounds of even say a few hundred thousand at a valuation of about $1m if you are very lucky. It is also quite common for start-ups to mimic existing businesses in the US since they already have a proven business model and there was no better example of this as was the case with all the Groupon Clones.

    Something that I don't believe you have spoken about much and which I have been advised to review is the possibility of licensing a tech/model from one of the big funded startups in US instead of trying to start the model myself in Australia.

    What are your thoughts on licensing to other countries? If you had someone approach one of your investments for a partnership or a licensing deal or to create an office in Australia what would your advice be to one of the startups you invested in and what would you ask of the entrepreneur asking for a license. I mean if it means having someone who would commit and go out get customers and build your brand you would think this would be a good thing but I am concerned they rather not get distracted.

    So taking this into consideration how would you go about constructing and argument for licensing or whitelabling?

    Many thanks for your help and time as always!

    Cheers,
    Humphrey

  • http://500startups.com/ Dave McClure

    @znmeb: great observation.

    unfortunately most investors 1) don't have a large sample size, 2) don't particularly want to be transparent about portfolio co performance.

    that said, it's worth working on.

  • http://www.kidmercuryblog.com kidmercury

    suster 1, boston VC jealous he’s not a blog star 0

  • http://borasky-research.net/2011/01/13/project-kipling-alpha-test-is-now-in-suse-studio-ddj-datajourno/ znmeb

    I’ve seen the Cambridge reports – they’re quite expensive if you actually want data as opposed to “quarterly trends” that they publish openly. I don’t know about Prequin – I’ll check them out.

    My point is that many investors / VCs / entrepreneurs, “small business advocacy groups” and executives of large publicly-traded firms are making loud public pronouncements about how government economic decisions should be made. We’re *bombarded* with it from “left-ish” and “right-ish” media people as well.

    In the absence of hard data and testable models, what we have is nothing more than expensive sales pitches. Given the chaos in the housing and automotive industries we’ve recently experienced and the current chaos in commodity prices, I think transparency is a damn good thing.

  • http://twitter.com/rrohan189 rrohan189

    Haha. I took more away from the last paragraph than I did from the entire post.

  • David

    Your blog posts are mostly Signal for me Mark, but rarely do I get the TIME to read all of them in sync with your time of publishing them. Sometimes I come across a gold mine blog post which is like 3 months old! I still make a point of catching up on what you've written every now and then, but regrettably feel confined to comment on posts in realtime rather than populate an old conversation (however relevant to me).

    As for your comment about a VC in Boston suggesting you spend too much time blogging and not dealing deals…, this is just bullshit I'm afraid. I've heard this too from US and UK VC's and I had no problem telling them they were dead wrong. Don't worry.., they're just jealous. The trick is to do both simultaneously; blog and deal. You do this buddy, as do Fred and Brad. It's just some people can't comprehend how you (or they) manage to do it (keep it up, don't stop).

    The dilemma of signal to noise ratio is very relevant to anyone in the tech business. How do we cut through the crap and get our point across/our voices heard to our peers and customers? My motto is “say something interesting, or say nothing at all”. But I think the key here is to have a community and to be a sharer. Fred and Brad and your goodself have a community. You guys are sharers. This is the secret recipe. Any VC who complains about their peers spending time blogging likely DOES NOT have a community! Pity for them ;(,,,,

    Same goes for the tech Entrepreneurs: go and create your own community, engage with them, debate with them, share with them and learn from them. KARMA has a funny way of rewarding sharers and punishing naysayers.

  • bwertz

    Hey, did you just create noise about noise? :-)

  • David

    Did I !?!?

    If it was noise…, surely Bwertz….., you wouldn't have just commented on the noise, would you my friend?

    Apologies if I sound like a SusterMan sycophant :) (I'm not) but there is a real Signal message coming across here: Do you blog at the risk of creating Noise or do you say something different/interesting which can be Signal but may be interpreted (by some) as Noise?

    My inspiration for commenting was Mark's last few paragraphs. He mentioned a Boston VC but I have personal experience of a London and SF VC saying the same. BTW, neither of them had a “community”. They were old school VC. Some good deals and returns done in the past but not forward thinkers.

    D

  • bwertz

    Joke was meant for Mark (but fully agree with you BTW)

  • http://bothsidesofthetable.com msuster

    re: “investor performance” – that's true. But there are at least two sources of this data available – prequin & cambridge associates.

    and this is the perfect case in point – it wouldn't make sense for any individual VC (blogger or not) to compile this. other companies can because it's part of how they make a living.

  • http://bothsidesofthetable.com msuster

    thanks russell. I'm taking a side trip before sxsw but my dance card is very open while I'm there so make sure to ping me.

  • http://bothsidesofthetable.com msuster

    signal, fo sho. I had an entire hour-long discussion about QR codes just yesterday!

  • http://bothsidesofthetable.com msuster

    Humphrey, I haven't spoken about this, no. I have well-formed views because I've seen several companies do this successfully. Let me think in the future about how to cover this topic. Please remind me in a month or two.

  • http://bothsidesofthetable.com msuster

    Thanks, David. If I had more time I'd write shorter posts, which would be easier to consume in real-time!

    re: entrepreneur blogging – I have this chat all the time. Entrepreneurs should blog about topics their customers care about rather than blogging for VCs or other entrepreneurs. The goal is to be a thought-leader in your field. That way the time is productive toward future customer acquisition. As a VC, my “field” is blogging for entrepreneurs!

  • http://bothsidesofthetable.com msuster

    Yes, very recursive of me. A noisy blog post about blog posts that are noise. Nice! Hadn't seen that angle ;-)

  • http://blogs.fluidinfo.com/terry terrycojones

    Hi Mark

    There are also different kinds of signals. E.g., (with respect,) your post above is mainly noise-for-entrepreneurs along one dimension (unlike your typical posts, which is why I read them), though may be signal to VCs. But on another dimension, it’s not noise to entrepreneurs at all because it’s also about who you are as a person. I think that aspect of VC (and entrepreneur) blogging is often overlooked, or is not given the weight it deserves.

    That’s paradoxical in a way, and there’s an opportunity in it too. I wrote about it at “Individuality, transparency, and the cult of impersonality” http://j.mp/gcQtPT Don’t miss the comment on that post :-)

  • petegrif

    Mark

    I think one of the things that is extremely valuable about your blog is that it is so regular. You continue to produce valuable thoughtful content week after week. Others may consider that consistency to be noise but I don't, regular fresh content is key to forming relationships.

    When I started exploring bloggers to follow and learn from I quickly found that a lot of VCs post erratically. The consequence is that even though the signal may be good finding the value in a haystack of guys who post something interesting once every coupole of months is a pain in the butt. That isn't a blog that you can have a relationship with. That's the kind of content you search for, not visit regularly in the hope that the oracle has pronounced.

    IMHO there are a very small number of VCs blogging on the kind of topics you cover who do it regularly and thoroughly enough to be valuable and make a real contribution to entrepreneurs out in the wild. Your blog is one of them.

  • Jerry Flanagan

    I don't know how you have the time to piece together such thoughtful commentary when you have so many demands but your entrepreneur fans love your signal that provides such helpful insight into the mind of the VC from the perspective of the reader. Gracias.

  • http://www.facebook.com/k.kudrautsau Konstantin K

    Mark, thanks a lot for the post, great as always:) One thing though, could you please suggest and/or link some more or less detailed read on why there IS another bubble growing in SV? Cheers, much apreciated!

    -kk

  • http://www.kidmercuryblog.com kidmercury

    suster 1, boston VC jealous he's not a blog star 0

  • Anonymous

    Already added a reminder in my calendar! Thanks Mark really appreciate it!

  • http://borasky-research.net/2011/01/13/project-kipling-alpha-test-is-now-in-suse-studio-ddj-datajourno/ znmeb

    I've seen the Cambridge reports – they're quite expensive if you actually want data as opposed to “quarterly trends” that they publish openly. I don't know about Prequin – I'll check them out.

    My point is that many investors / VCs / entrepreneurs, “small business advocacy groups” and executives of large publicly-traded firms are making loud public pronouncements about how government economic decisions should be made. We're *bombarded* with it from “left-ish” and “right-ish” media people as well.

    In the absence of hard data and testable models, what we have is nothing more than expensive sales pitches. Given the chaos in the housing and automotive industries we've recently experienced and the current chaos in commodity prices, I think transparency is a damn good thing.

  • http://blogs.fluidinfo.com/terry terrycojones

    Hi Mark

    There are also different kinds of signals. E.g., (with respect,) your post above is mainly noise-for-entrepreneurs along one dimension (unlike your typical posts, which is why I read them), though may be signal to VCs. But on another dimension, it's not noise to entrepreneurs at all because it's also about who you are as a person. I think that aspect of VC (and entrepreneur) blogging is often overlooked, or is not given the weight it deserves.

    That's paradoxical in a way, and there's an opportunity in it too. I wrote about it at “Individuality, transparency, and the cult of impersonality” http://j.mp/gcQtPT Don't miss the comment on that post :-)

  • Blake Southwood

    Mark,

    I just wanted to thank you for your insights in your blog.

    Blake
    Lightning Storm Software

  • HumphreyL

    Already added a reminder in my calendar! Thanks Mark really appreciate it!

  • Blake Southwood

    Mark,

    I just wanted to thank you for your insights in your blog.

    Blake
    Lightning Storm Software

  • http://twitter.com/wfjackson3 Willis F Jackson III

    My rule to remember when emailing someone that is busy and you don’t know on a close personal level: be a good sport. Shit happens, email gets behind, and things get missed. If you don’t act like it is the end of the world, it likely won’t be.

  • http://twitter.com/wfjackson3 Willis F Jackson III

    Mark,

    On the whole “you blog too much thing” let me just point one thing out. I have recommended your blog to lots of people in my community and referenced specific posts on multiple occasions. Of all of those events, I have not had a single solitary person come back and say they didn’t learn something they felt was useful. I usually don’t even have to ask, they volunteer how great it was to find it.

  • Dave W Baldwin

    What is priceless about your blogs (this is not bs) seperating from noise is you’re an obvious salesman. Everyone has a strong suit and along with perseverance, yours is vision leading to marketing. The other strong suit of the salesperson is listening, which leads to learning. In the end, you can’t go wrong with that.

    Keep sending the strong signals.

  • http://twitter.com/wfjackson3 Willis F Jackson III

    My rule to remember when emailing someone that is busy and you don't know on a close personal level: be a good sport. Shit happens, email gets behind, and things get missed. If you don't act like it is the end of the world, it likely won't be.

  • http://twitter.com/wfjackson3 Willis F Jackson III

    Mark,

    On the whole “you blog too much thing” let me just point one thing out. I have recommended your blog to lots of people in my community and referenced specific posts on multiple occasions. Of all of those events, I have not had a single solitary person come back and say they didn't learn something they felt was useful. I usually don't even have to ask, they volunteer how great it was to find it.

  • Dave W Baldwin

    What is priceless about your blogs (this is not bs) seperating from noise is you're an obvious salesman. Everyone has a strong suit and along with perseverance, yours is vision leading to marketing. The other strong suit of the salesperson is listening, which leads to learning. In the end, you can't go wrong with that.

    Keep sending the strong signals.

  • http://twitter.com/wilschroter Wil Schroter

    Mark, I’ve said this both publicly and privately – I’m amazed at the amount of effort and sacrifice you’ve put into blogging, your show, and being out there for entrepreneurs. All of that comes at a great sacrifice to personal time, family, etc. Just let it be known that it doesn’t go unnoticed or un-appreciated my friend.

  • Thierry Marechal

    Here some noise?

    Mark, you breaking my sleeping time!! For a startup entrepreneur your blog is very helpfull and addictive. Thank you to share with us the plan of the death star from the dark side ;)
    I live in Montreal but I come from Belgium, I read than you lived in Belgium some years ago, if you want I can bring to you some belgian beer and chocolate the next time I go to LA ;)

    I’m reading another one or two post and I’m going to bed… I can stop whenever I want… ;)

    Thanks again Mark and keep posting

  • http://twitter.com/brashrhino Blake Southwood

    As a founder I initially didn’t respect nor think much of VCs. Now I actually respect
    them. I understand their skepticism now. If I were a VC I would start out by saying “impress me.”
    I have learned that all VCs seem to perceive what my company is doing in a different light and from a different angle. The feedback I get I gauge based on what they ask. I like it most when I talk to a VC and they ask, “Can your technology do this(something)?” and that’s when I know that they get it.

  • http://twitter.com/OSPtempe Michael Witham

    http://www.azcentral.com/members/Blog/MichaelWitham/121086

    …Come bring the love just east to the Valley of the Sun… We are ready!

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