Tuesday, March 28, 2017

Secondary Sales in VC-backed startups: A Quick Primer for Entrepreneurs



I was recently approached by several entrepreneurs who had launched successful VC-backed companies who wanted to learn more about “secondaries”.    As I described my experiences, I realized that in my 20+ years doing startups, I had been part of many different types of secondaries at many stages of the startup lifecycle.
The first time was just after the first VC round I’d ever raised back in 1995, and a few friends, who were doctors and such, wanted to get in on the round because our startup was “hot” and “growing”.  Since the round was already completed, but they really really wanted to be in the company, my co founder and I offered to sell them $10k of our shares.   Today this would be a very small (actually, tiny) secondary transaction.
Since then, I’ve been on both a buyer of secondaries, usually of late stage companies prior to their IPOs (companies like Facebook, Twitter, Pinterest), as well as a seller of secondary shares of rapidly growing startups I was a co-founder, advisor, or early investor in.
What follows is a quick primer on secondaries for entrepreneurs - what they are, why you would want to do one, how you would go about it, and a bit about the benefits and risks of such sales.
What is a Secondary Sale?
A “secondary” sale is when a shareholder (typically one of the founders or an early employee or an early investor) of a private company sells his or her shares to another buyer.


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Monday, July 25, 2016

Life Lessons from Comic-con: Kevin Smith, Ron Moore, and J. Michael Stravinsky


I just got back from San Diego Comic-Con (SDCC) and it was as usual, a madhouse.  Some 200,000 people went through the convention center, and there were great costumes and panels.  While I could tell you about the various announcements (the new Wonder Woman trailer for example), those have been covered by many other sources.

Comic-con is actually a pretty inspiring place for writers and creative types, who often start as “fans” and end up giants in the field.  In addition to the big giant panels (Game of Thrones, Star Trek, Star Wars, Walking Dead) there are actually a lot of smaller panels that offer tips for those looking to break into the industry and to create their own art.

I thought I’d write about lessons from 3 well-known writers who spoke at Comic-Con whose talks you may not have heard about on the latest geek newssite:
  • Kevin Smith, who usually has a huge session at Hall H on Saturday night, is of course the writer/director of Mall Rats and Clerks in the 90s, and just launched a show on AMC called Geeking Out. 
  • J. Michael Stracinsky is the creator of Babylon 5 and the more recent Sense8, and a well known writer in Hollywood.  
  • Ron Moore, recently show runner of Outlander and Battlestare Galactica, started his career working on Star Trek: The Next Generation.


While I could write entire blog posts about each of these guys and what they said at Comic-Con, I thought I’d share one little inspiring tidbit from each talk:

J. Michael Stracinsky:  At the end of his talk, JMS told us that he was once just like those of us in the audience, sitting at Comic-con looking up to the writers/creators on the stage.  He did this to encourage those of us in the audience to “take the leap” and express ourselves creatively, and see if we can turn it into a career.  

He then told us the story of one of his friends who worked for the state of California until she was 53 years old.  She told JMS that she felt like there was nothing of her in the work she was doing – there was no creativity, and she wanted to do something that expressed her personality more, but felt like it was too late.  JMS asked her what she was passionate about – and she said she liked “pets”.  She was also into “photography”.  He encouraged her to combine these interests and to do “pet photography”.  Her objection was that while that would be a good "hobby",  it would take years to establish herself to be able to make a living at something like, this – it might even take three years, and then she’d be 56 before she was really doing what she loved as a career.  At this point, he paused and told us he asked her this question: “And how old will you be in in 3 years if you don’t pursue this passion project?”

“That’s right, you’ll be 56 years old.”  He told us this story, he said, to remind us first of all that it’s never too late to get started, but also to remind us that time is passing and that we should get started on those ideas and stop wasting time, start doing the things that we love now.
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Ron Moore:  Ron was on a panel with other writers of Star Trek.  Of course, he spent many years working on Star Trek: The Next Generation and then various other Star Trek properties before becoming a show runner of his own.  He tells the story of how after he moved to LA, he was struggling as a writer.  He started dating a girl that worked on the set of the new Star Trek.  She was able to get him a tour of the set.  He was so excited that he wrote up a spec script for ST:TNG and took it with him.  At the end of the tour, he pulled out the script and asked the guy who was giving the tour if they could get the spec script to someone that could take a look. The tour guide ended up being Gene Roddenberry’s assistant, and took the script to the show producers, who liked it enough to hire him as a writer on the show.  It goes to show you, you never know what coincidences or circumstances will lead you to get a break in front of the right person.


Kevin Smith: Kevin always gives a great talk at the end of Comic-Con, usually with a few unexpected stories about Ben Affleck and/or JJ Abrams (whose Star Wars Panel  was just before Smith’s last year).  Kevin said a lot, but here are a few random inspiring thoughts. You can make a TV show but getting it on a network may be tough; you can make a movie, but getting it into theaters may be tough.  Do a podcast and there are no gatekeepers, you can send it in to iTunes and there it is, and he encouraged everyone to start their own podcasts, just start recording yourself and others talking about stuff that you care about.  He also said that there was a time when Star Wars wasn’t cool (I remember this time) and no one talked about it.  Grown men were OK talking about sports and stats, but not about Star Wars and Comic-books.  Since he had no one else to talk to about Star Wars, he put scenes in his movies where the characters were sitting around talking about Star Wars. This inadvertently led to many opportunities for him – but the key was he was just putting down what he wanted to talk about.

How many times, he asked, have you sat there watching something on TV or elsewhere and thought, I’m just as smart as those guys, and could do this as good as they’re doing it? He used to think the same thing.  He told us the story of how he told his sister, when he was 21 years old, that he told his sister that he was going to be a film-maker.  She told him “OK, then be a film-maker”.  He repated that he “was going to become” a filmmaker, but she insisted that he just start “being a film-maker”.  He started following the advice and started to think about of himself as a film-maker who just hadn’t made a full feature film yet.  He adopted the mindset of a being a film-maker and started making films about stuff he knew and he was passionate about.  And that led to him becoming a film-maker and then being there on stage in front of us at Comic-con, and he encouraged everyone in the audience to do the same.



So there you go, Comic-Con is not only a place to see your favorite actors, or cosplayers dressed like super-heroes, it’s a pretty inspirational place, especially for those of us who believe we have our own stories to tell and want to turn our passions into reality.

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Wednesday, July 20, 2016

Pokemon Go: What Mobile & Gaming Entrepreneurs Can Learn from It

If you haven't heard about the success of Pokemon Go, recently, from Niantic games based on the beloved Pokemon franchise, you would have to be hiding under a rock.  It has been downloaded many millions of times, and has become the #1 top grossing app in both the Apple App Store and Google Play Store.  Millions of players are wandering around with their phones held up high looking for “poke-stops” where they can catch a “pokemon”. 

Many articles have been written about the arrival of AR (augmented reality) and location based games.  The week Pokemon Go was released I was walking with some twenty-something colleagues to lunch castro st in downtown Mountain View, in the heart of Silicon Valley, and they were of course holding up their devices and pointing out not just pokestops but excitedly chattering about the latest “pokemon” which they were trying to catch. 

I had a strange sense of déjà vu. In fact, I recalled in 2011, when the founders of another gaming company, had shown me augmented reality games on the same street.  In AR mode in both Pokemon and this game, you had the camera of the phone on which showed you the surroundings with the “augmented” elements.  In their case, they were “bombs” placed by other players at specific locations around downtown castro st.  In the new case, they were Pokestops and lures placed by other players to catch Pokemon.



That company in 2011 was one of a steady stream of location-based augmented reality games that entrepreneurs showed me for the next two years.  It was one of the things that you could do with mobile games that you couldn’t do with any other type of games (Facebook, Steam, Console), they argued, and it was bound to be the future of mobile gaming. Many investors agreed and put some seed money into these companies.

In fact, at one point (I can’t remember what year), a couple of guys out Stanford showed me their game which was a location based game where you captured cute little creatures that had different abilities and then you battlted other players – it was called Geomon, a play on “Pokemon” and “Geo” - sounds familiar, doesn't it?   

What happened to those startups? Most of these location based augmented reality startups came and went – they’re either out of business or were acquihired by other companies needing the engineers and their games shut down.

While I think it's very difficult am hesitant to compare one startup to another, there is an important lesson here: Don’t be Too Early.  Sometimes, being too early can be as bad as being too late.

If you are too early, you need lots of staying power for the market to catch up with you, and to keep creating products until one of them hits the sweet spot in the market.  It’s not easy – in fact, most of the companies that pitched location based AR games to me in 2011 and 2012 ran out of money – they couldn’t convince investors to keep supporting them, which is the dilemma of the startup entrepreneur that is too early.

Pokemon Go Studio Niantic also released their first well-known location based game, Ingres, in 2012, then released it to the public in 2013 on Andoird.  But Naintic was initially part of Google, and they were able to keep the company going for a while before they signed on Pokemon, and they got a $30 million investment before they released it.

Now I’m not saying that the AR/location mechanic was the only reason for the success of Pokemon Go; The other, perhaps just as important reason was that the IP, Pokemon, appealed to a generation who are now grown up (but not too grown up) and are heavily into mobile games, so every twenty something mobile game player probably had good memories of Pokemon and wanted to try it out.  Not to mention, the fact that their friends were playing it means it got to the critical mass.  This expression “critical mass” comes to us from the world of the atomic bomb, where it defines the amount of mass needed for a single neutron to set of a chain reaction; the neutron hits the nucleus, sending off several neutrons, who hit other nucleus, and so on, until it reaches the point where it becomes a self-sustaining chain reaction. 

But for entrepreneurs who are looking for the “next big thing” (and there are lots in Silicon Valley right now, particularly looking at VR, for example),  the real lesson is that in startups as well as in life, Timing is often the most important factor.  Hitting the market at the right time – not being too early and not being too late – are critical for the type of product that you have.  A related lesson is that sometimes, the second or third product is the more successful one.    

Similarly, Angry Birds was famously Rovio’s 51st game., and Draw Something, was the last attempt by the gamemaker OMGPop, which was sold to Zynga for $200 million.


Finally, leveraging the strengths of your company’s first product is sometimes a key part in getting out the second or third product which may be the one which vaults your startup to success!

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Pokemon Go: What Mobile & Gaming Entrepreneurs Can Learn from It

If you haven't heard about the success of Pokemon Go, recently, from Niantic games based on the beloved Pokemon franchise, you would have to be hiding under a rock.  It has been downloaded many millions of times, and has become the #1 top grossing app in both the Apple App Store and Google Play Store.  Millions of players are wandering around with their phones held up high looking for “poke-stops” where they can catch a “pokemon”. 

Many articles have been written about the arrival of AR (augmented reality) and location based games.  The week Pokemon Go was released I was walking with some twenty-something colleagues to lunch castro st in downtown Mountain View, in the heart of Silicon Valley, and they were of course holding up their devices and pointing out not just pokestops but excitedly chattering about the latest “pokemon” which they were trying to catch. 

I had a strange sense of déjà vu. In fact, I recalled in 2011, when the founders of another gaming company, had shown me augmented reality games on the same street.  In AR mode in both Pokemon and this game, you had the camera of the phone on which showed you the surroundings with the “augmented” elements.  In their case, they were “bombs” placed by other players at specific locations around downtown castro st.  In the new case, they were Pokestops and lures placed by other players to catch Pokemon.



That company in 2011 was one of a steady stream of location-based augmented reality games that entrepreneurs showed me for the next two years.  It was one of the things that you could do with mobile games that you couldn’t do with any other type of games (Facebook, Steam, Console), they argued, and it was bound to be the future of mobile gaming. Many investors agreed and put some seed money into these companies.

In fact, at one point (I can’t remember what year), a couple of guys out Stanford showed me their game which was a location based game where you captured cute little creatures that had different abilities and then you battlted other players – it was called Geomon, a play on “Pokemon” and “Geo” - sounds familiar, doesn't it?   

What happened to those startups? Most of these location based augmented reality startups came and went – they’re either out of business or were acquihired by other companies needing the engineers and their games shut down.

While I think it's very difficult am hesitant to compare one startup to another, there is an important lesson here: Don’t be Too Early.  Sometimes, being too early can be as bad as being too late.

If you are too early, you need lots of staying power for the market to catch up with you, and to keep creating products until one of them hits the sweet spot in the market.  It’s not easy – in fact, most of the companies that pitched location based AR games to me in 2011 and 2012 ran out of money – they couldn’t convince investors to keep supporting them, which is the dilemma of the startup entrepreneur that is too early.

Pokemon Go Studio Niantic also released their first well-known location based game, Ingres, in 2012, then released it to the public in 2013 on Andoird.  But Naintic was initially part of Google, and they were able to keep the company going for a while before they signed on Pokemon, and they got a $30 million investment before they released it.

Now I’m not saying that the AR/location mechanic was the only reason for the success of Pokemon Go; The other, perhaps just as important reason was that the IP, Pokemon, appealed to a generation who are now grown up (but not too grown up) and are heavily into mobile games, so every twenty something mobile game player probably had good memories of Pokemon and wanted to try it out.  Not to mention, the fact that their friends were playing it means it got to the critical mass.  This expression “critical mass” comes to us from the world of the atomic bomb, where it defines the amount of mass needed for a single neutron to set of a chain reaction; the neutron hits the nucleus, sending off several neutrons, who hit other nucleus, and so on, until it reaches the point where it becomes a self-sustaining chain reaction. 

But for entrepreneurs who are looking for the “next big thing” (and there are lots in Silicon Valley right now, particularly looking at VR, for example),  the real lesson is that in startups as well as in life, Timing is often the most important factor.  Hitting the market at the right time – not being too early and not being too late – are critical for the type of product that you have.  A related lesson is that sometimes, the second or third product is the more successful one.    

Similarly, Angry Birds was famously Rovio’s 51st game., and Draw Something, was the last attempt by the gamemaker OMGPop, which was sold to Zynga for $200 million.


Finally, leveraging the strengths of your company’s first product is sometimes a key part in getting out the second or third product which may be the one which vaults your startup to success!

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Thursday, July 07, 2016

Startup Myth: Will Someone Steal Your Idea?

I recently was speaking with someone who mentioned that they had an idea for a healthcare/nutraceutical startup. It sounded like a reasonable idea, targeting a niche that was underserved. At the end of the conversion she said, “OK, well don’t tell anyone about this idea!”
I was amused to hear her say that about a healthcare idea. I used to get that in the tech startup world all the time. Since I’m writing a book about Startup Myths, I thought I’d write about this one, since it’s probably one of the most common myths about startups: If I tell someone my idea, they will copy it.
The corollary of this myth is that before a prospective entrepreneur tells you their idea, they will pull out an NDA they want you to sign before they tell you what it is. This is often known as the “unsolicited NDA”.
Let’s get this out of the way right now: Nothing makes you look more like an amateur in the world of startups than the unsolicited NDA. In Silicon Valley, most (if not all) professional venture capital investors and angel investors won’t sign NDAs. Period. 
I know you think your idea is worth a million bucks. But the truth is that investors are bombarded with ideas for startups. Getting a million dollar idea for a startup isn’t very hard. What’s hard is building a startup to be successful day in and day out. I remember back in the dot.com days thinking that measuring the links from sites was a better way to measure and index websites. So what. I didn’t write a paper on it, I never prototyped it, I didn’t start a company to do that, but Segie and Larry did and they started Google did. Good for them!
Often, the unsolicited NDA will come from someone outside of Silicon Valley - Los Angeles being a good example. Now, I suppose there are some very limited set of companies perhaps that have a ground-breaking patent that hasn’t been filed yet where there might a legitimate reason for an NDA, but only if they are going to be filling you in on the details of the patent. Similarly, there are some unscrupulous folks in Hollywood that might steal your “high concept” (here’s a multi-million dollar high concept idea for you Independence Day meets Dolphins … oh wait, that was Star Trek IV, except with Humpback Whales!)
But the reality is, if someone simply overhears your idea, it’s highly unlikely that they’re going to go and build it themselves. Doing a startup is hard. Let me rephrase that. Doing a successful startup is very hard. It takes years of your life with very little pay and often no appreciation. Why would you do that with someone else’s idea or dram?
Moreover, in the tech startup world, unless you pitch your idea to people who are knowledgable about the industry as well as to investors and customers, you won’t get the feedback you need to refine your idea. Rarely are startups successful with the very first product — there is usually an iteration that happens before honing in on the “killer product” or “application” of a particular new technology or platform.
Let’s use an analogy — I often hear the same thing from people who are thinking of writing a book. They don’t want to tell their idea because they are afraid someone else will run with it. I was at a writing workshop that Reid Tracy, the president of Hay House (one of the most prominent mind/body/spirit publishers), was presenting at, and he tried to disavow the attendees of this notion. He said that as a potential author, you have to tell people about your idea to get feedback and refine the pitch if you ever want to get published.
He also said that 20% of success in modern publishing is about writing of the book and 80% is about marketing the book. Let me rephrase that: 1% is the idea of the book, 19% is about the writing of the book, and the other 80% is about the marketing of the book.
Similarly in startups, while the idea is important, validation of the idea by presenting it to the right people is an extremely important part of the process. Also, even if two people have the same idea they may build very different products. Continuing the analogy, suppose you had overheard J.K.Rowling say she’s going to write a book about a “13 year old boy who learns he’s a wizard and goes to a wizarding school”. Would you have written the Harry Potter books? Probably not. I would have written a very different book even if I’d had the same “basic idea”.
There is one area that’s worth mentioning here, which applies to book writing as well as tech startups. What happens if you tell everyone your idea and they think you are crazy or stupid or that it’s just a bad idea?
It’s possible to get discouraged. This is where you have to use your intuition and discernment. Many people have started companies with products or needs that weren’t there yet in the market. First of all, is there feedback valid? Secondly, are you betting that the market will change in the future to make their feedback invalid?
These questions aren’t easy and they require a bit of “fortune-telling”. That said, if you are telling your idea to the right people you will get more valid feedback than invalid, and this can only help you to improve your product or (more importantly) your go to market concept.
But, I’ll write more about “pivoting” in another myth-related blog post.
For now, relax. And stop worrying about someone stealing your idea (it’s only 1% of success). Worry more about how you are going to build a product first (the other 19%), and then about how you are going to get your product to market and make it successful (the other other 80%)!

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Monday, January 25, 2016

Nerds set Twitter on Fire: Did Football screw up the X-Files premiere for millions??


Well the new X-files reboot has finally started. You could probably tell that I was excited about it ( see my last post The X-Files Revival: 5 Things About UFO)

Finally,  just before 7pm pacific I, like millions of others, tuned into Fox - a network that I honestly don't watch that much anymore because so many of the best shows are on cable channels these days.  Expecting to see the X-Files,  I saw there was a football game on.   That's right - a football game!

So, in one of the biggest sci fi events in years, a public relations and ratings coup for Fox to bring this show back that so many of us are waiting for, and what do we see? Football.  









I, like many other X-File fans, am not a big football fan,  but it looked like the game was almost over so it wasn't worried.  In fact, the game ended on time just before 7pm, so I started looking on twitter to see what people were saying about the X-Files.    

Then 7pm came about, and guess what, the game was over but rather than start the X-Files premiere on time, they were still showing commentary on the game!   So basically, the millions of people who tuned into Fox to see the X-Files were treated to commentary on a football game.

Twitter lit up, and in the old days, pre social media, the geeks among us would have to just grin and bear it while the "mainstream" chided us for not being good consumer-fans of all-american football who jump up and down when their favorite team wins or loses. How can you not like Football - what are you some kind of wimp?

@aspen_musing shows how fox had the perfect strategy to piss off fandom!



@Gretchel expressed a lot of nerds feelings towards football vs. the X-Files.



 As we waited, and watched the talking heads go on and on about football ... nerds were on a twitter rampage - see what @see_clair_write said:


The best tweet may have come form @stevekemple who saw it as a conspiracy from the X-Files CSG (Cigarette Smoking Man) to get millions more to watch football.


Now some of you might say, what's the big deal ... it's just football!   Why was it enough to start a full jocks vs. nerds smackdown??  Look at what @LadyHawkins and @alie_asstrocyte said about jocks vs. nerds.





But for many of us, it brought us back to high school.  Those of you who went to high school before nerds were cool, mind you.  Back then, we were made to feel "less than" because we weren't into sports - and football in particular.  We liked being on our computer more than watching a bunch of dumbasses grab at each other while hunching over on the football field.  We were arguing about Kirk vs. Picard rather than XXX vs. XXXX (OK - see I can't even namey any football stars from my day - maybe OJ Simpson??).

You see, it wasn't just that Fox had delayed the X-Files premiere, but it was like a slap in the face that they had done it for Football - the one thing most nerds are not into and were made to feel bad because we weren't into it!

But don't take my word for it - Twitter started to reflect these sentiments really well!




Plus at that point, we weren't sure if we were going to *miss* the first 20 or 30 minutes of the premiere!

The real problem for Fox though is that today, many millinoso f people watch shows recorded on their DVR/PVR.  And most of us who didn't watch it live simply set our cable box to record it.  Now imagine the surprise of people when they put their kids to bed and sat down to watch teh X-Files - what did they see? 20 or 30 minutes of talk about Football!

Many of these people are pissed off because the DVR only reocred the 30 minutes of the show! That means they missed half of the premiere episdoe!  And the next episode is on tomorrow night! That means that unless they can see it on demand, or Fox airs it again, Fox just screwd up the whole mini-series for them!







Way to go Fox - as far as fuckups go - this was a big one!

For those of who did manage to tune in, while I'm excited to watch the next episode monday night (I will provide a review once I've seen more episodes), the truth is still out there - thankfully the football season is almost over so there can't be any monday night football, can there???

















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