Note: this is a non-religious post.
This weekend was Yom Kippur, holiest of the Jewish holidays and the day of atonement. It’s also the day when most Jewish minds are least focused since one needs to fast for 24 hours.
I sat in schul listening to the rabbi’s sermon and given my mind is prone to ADD anyways I must admit that my consciousness often floats around the room but even more so on Yom Kippur. But our rabbi captivated me this year and reminded me of one of the most important lessons I learned myself 15 years ago.
She started with a story — a parable — as Jewish people are wont to do. She told of the teaching of the Talmud – a book which scholars use to debate doctrine and from which Jewish people are reminded to always learn and to debate.
“A rabbi is teaching a young Jewish scholar and he says, ‘Two men go down a chimney, one is dirty and the other is clean. Which one takes a shower?’
‘The dirty one takes a shower says the young scholar.’
‘Are you sure? What if the dirty one saw the clean one perhaps he would assume that he himself was clean. And if the clean one looked at the dirty one perhaps he assumed he was also dirty and thus took a shower.’
‘I see. I guess maybe the clean one took the shower thinking he was dirty.’
‘No. How can you say that? Perhaps there was a mirror in the room and each could see whether he was clean or dirty.’
‘Oh, you’re right. Of course the dirty one took the shower.’
‘Rabbi. I don’t understand? You first told me the clean boy may have taken the shower. You then told me the dirty boy took the shower. I’m confused. Which one took the shower, Rabbi?’
‘That is the wrong question to even ask.
I was reading Danielle Morrill’s blog post today on whether one’s “Startup Burn Rate is Normal.” I highly recommend reading it. I love how transparently Danielle lives her startup (& encourages other to join in) because it provides much needed transparency to other startups.
Danielle goes through some commentary from Bill Gurley, Fred Wilson and Marc Andreessen about burn rate and then goes on to discuss her own burn rate and others publicly weigh in.
But what IS the right amount of burn for a company? Turns out like most things there are no simple answers. Let’s set up a framework. Here’s overall what you need to know.
1. Gross Burn vs. Net Burn
Burn rate in case you don’t know is the amount of money a company is either spending (gross) or losing (net) per month. (it is also the title of
By all measures the past year has been successful. Teams that I’ve backed have sold their companies to Disney, Apple and AOL for substantive amounts of money. Founders have done very well, our fund has done well. Exhibit: Champagne and celebrations.
But the truth is that selling a company doesn’t always feel like a celebration as a VC. Not being a baby about it – my job is to return money to LPs. But I’ve been thinking about what had me a bit down about selling Maker Studios, Burstly and Gravity. Each of those teams were family. And the family extended beyond just the management team to include investors and the boards.
The more I’ve internalized things I’ve come to see selling a company like graduating high school or college. One day you have these great friends that you talk to all the time, you deal with tons of personal issues and drama, you have highs and lows but dammit – you were there together. I went from weekly (sometimes daily) phone calls with senior members of the team or other VCs. And now we barely see each other. And I miss those interactions. I miss those friends.
We’re all still friends but it’s not the same. Life moves on. You graduate.
Recruiting. It is the bane of every startups existence because it takes up so much time, it is so competitive to sign people and it feels like unproductive time because it’s not moving the ball forward on product, engineering, sales, marketing, biz dev, fund raising. It consumes time and energy and the payoff doesn’t come for a long time.
But of course great teams build great companies and great startup leaders know that they must always be recruiting.
Yet most startup companies I’ve ever worked with or observed make one crucial mistake: They assume that their recruitment process for a candidate is over when that person accepts his or her offer. The truth is the process isn’t over until after the employee starts with the company, updates her LinkedIn profile and emails all her friends.
In fact, it’s worse than that. The moment your future head of sales, marketing, product or even junior developer says “yes” is the moment you’re most vulnerable of losing them. I’ve written about this before relating to any sales process –
Somehow the world seems to be spinning faster these days than just a few years ago. The frantic pace of technology cycles, the amount of tech news, the blogs, the conferences, the demo days, the announcements, the fundings, the IPOs. It’s exhausting. Perhaps unsustainable.
It got me thinking about the advice that I often give to new VCs. For years I saw myself as the new guy in VC but then you wake up one day and realize that 50% of your peers have been doing it for less time than you and time has moved on.
Any longtime readers of this blog will know that I often try to simplify complex ideas into a simple parable that is easier to remember to set the tone of one’s behaviors. Lines, Not Dots. Attitude over Aptitude. Building Startups for Basecamp. And so forth.