Startup Lessons


I’m pretty on record as saying I don’t think many private-to-private tech mergers make sense. They are often done from a position of weakness. Something in both companies isn’t working, which is why they come together.

I often don’t believe in the therm M&A because in my experience mostly A works.

But of course there are always exceptions. And even when I remain skeptical sometimes opportunities present themselves that prove one should never be absolutist.

As many people know I funded a company called Moonfrye almost 2 years ago led by two amazing women – Kara Nortman & Soleil Moon Frye. Our goal from the outset was to build a great eCommerce experience that could compete with Michels on one side (for DIY / crafting) and Party City on the other (throwing events / parties / celebrations).

The thesis was simple. Mom’s struggle to plan events and activities for their kids. Most products out there suck so mom gets stuck with angst of wanting to have decorations, activities and chatzkies for other kids to take home. What should be an enjoyable experience turns into a time-suck obligation and angst-ridden day of self questioning.

Our product name is P.S. XO and we launched our eCommerce experience through this website as “party in a box” as well as individual sku’s that are super high quality and well executed. We built great eCommerce tools from scratch, spent a great deal of efforts deeply integrating with Pinterest and build great corporate relationships with Target and the like.

We also built two very high-quality mobile apps that we were experimenting with in terms of building better customer acquisition toools.

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Yesterday I wrote a post about The Silent Benefits of PR in which I pointed out that most young companies I encounter don’t fully grasp the benefits of PR because they are less measurable than product milestones or customer acquisition analyses (like CAC/LTV).

In that article I talked about how PR drives: recruiting, employee retention, biz dev deals, funding and even M&A and that often “attribution” to your PR activities is unknown. It’s like “direct” traffic to your website that seems to magically appear.

But of course it’s hard to advise people that they should do PR without a guide to how to do it on the cheap or how to do it at all.

When to start PR?

I’m generally not a believer in too much PR until you have a product built or at least well designed. This is somewhat changing in the world of crowd funding where people actually raise money so that they can build products but at a minimum your product design ought to be complete and ready to execute.

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The Silent Benefits of PR


Posted on Oct 25, 2014 | 0 comments

I’ve been having this PR discussion with three separate portfolio companies at once so I thought I’d just publish my thoughts more broadly.

I have written many times about PR so if you want a deep dive on the “how” of PR you may enjoy reading some of these posts.

PR is an insanely valuable activity in early-stage companies. Very few investors understand this and even fewer startups. When you’re an early-stage business every dollar matters and because many startup teams these days are very product & technology centric they often miscalculate the importance of PR. I believe PR is often not tangibly measurable and for quant-oriented people this is hard to accept.

The benefits of PR are exactly that: Immeasurable. They are silent. They don’t show up in a calculation that says I spent $7,000 and I got X-thousands inches of press. It doesn’t work that way.

Why PR?

1. Recruiting – One of the hardest tasks of any startups is recruiting world-class talent.

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Much has been written about when it is time to hire a “professional CEO” to run a startup company and of course that has long been a norm in Silicon Valley when founders find that their inexperience may be a limiting factor in company growth (know as the Peter Principle).

Much less has been said about when the technical CEO is the best person to run the company.

Yet if you look at some very successful market changes in the last few years it does point to technical prowess in the number 1 seat. Case in point is the return of Larry Page to the role as CEO of Google. I don’t think that Google would have become the success story we all know without the leadership of Eric Schmidt through the years he led the company.

So why did Larry need to return?

It seemed that Google was being out innovated by another Silicon Valley technical leader, Mark Zuckerberg. Somehow in a world of rapid change Mark had been able to right his ship much faster than the highly bureaucratic organizations that places like Google, Yahoo! and Microsoft had become.

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Prorata rights are one of the most important rights of private market technology investors and yet are seldom fully understood. They often create the biggest tensions between investors who are investing at different stages in the business.

politics of money by bastera rusdi on 500px

These tensions seep out in some angels or seed funds publicly or semi-privately deriding later-stage VCs for their “bad” behavior. I have seen bad behavior from later-stage VCs, believe me. But I have seen equally bad behavior from super early stage investors.

As always a balanced perspective is in order. Here’s what you need to know.

1. Why investors care about prorata rights
Prorata investment rights give investors the right to invest in a startup’s future fund-raising rounds and maintain their ownership % in the company as the company grows and raises more capital. This is important for nearly every institutional investor because once you have 25-50 investments being able to “follow” the investments that are working well is critical to making money. It’s why

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Marc Andreessen kicked off another great debate on Twitter last night, one that I’ve been talking about incessantly in private circles for the past 2-3 years – what actually IS the definition of a seed vs. A-round.

Cautionary note: No competent VC is actually fooled when you show up after raising $6M in seed financing and say you’re now raising an A!

— Marc Andreessen (@pmarca) October 7, 2014

This is something I think entrepreneurs don’t totally understand and it’s worthwhile they do. My view:

“Spending any time or energy trying to game the ‘definition’ of your round of fund raising is a total waste. Nobody cares. No VC will be so naive as not to see straight through it. And actually many will probably find the gamesmanship as a bad sign of lack of property priorities or perspective.”

Here’s how all the drama started for me.

When I first became a VC, seed rounds were typically $500k – $1.5 million.

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