Hold On Baby G!

UPDATE!  OB/GYN appointment today went great, Mom is off bed rest, at least for now…

We had a close call over Memorial Day weekend as Baby G almost wanted to make his grand entrance 6 weeks too early.  Renee and I drove up to Pismo Beach on Saturday night, about 3 hours north of LA, for our last getaway before travel lock down.  On Sunday, after a hike that in retrospect was way too long and strenuous (those of you who know Renee are rolling your eyes now), Renee experienced some minor bleeding.  So after a quick convo with her physician, it was back in the car for a traffic-heavy, 4-hour drive back to LA and St. John’s Emergency Room.

Turns out, her cervix looked great (still closed) but she was having minor contractions, potentially due to dehydration.  After 1500ml of IV fluid, the contractions continued and we had a scary moment that Baby G was ready to fight his way out at 34 weeks, officially 3 weeks before considered “full term” and 6 weeks before our due date of July 9.   5 hours later and after a shot of Terbutaline to relax the uterine muscles, we were discharged at about 3am once the contractions subsided.

This is Renee shortly after hookup to the IV:

And, this is me:

Now for the fun part.  Renee is on “bed rest” which means exactly what it says.  Hanging out in the bed or on the couch.  No cooking, cleaning, laundry, working out, working, you get the picture.  Again, those of you who know Renee have now moved past eye rolling and are laughing hysterically.  So I’ve declared Martial Law in the Taylor-Gross household, with full-time chaperoning and supervision by General Rob “Sit that Pretty Ass Down” Taylor.   This is a military operation (dubbed “Operation Incubation”) that cannot be underestimated in its complexity and challenge.  The mental and emotional fortitude required to keep Renee on the couch would make mere mortals weep in fear.

But I’m up for the challenge!

Just 3 more weeks Baby G, hang in there!

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Don’t Hate Me Cause I’m a Business Guy

I recently read a fantastic post by Jacob Quist entitled “Why Engineers Distrust Business People” that provided a unique perspective on what I never fully understood, but was always aware, to be a common tension between deeply technical folks and those of us who are far more competent in non-technical arenas such as business operations, business development, sales or marketing.  In Jacob’s post, he believes the foundation of this distrust is due to the fact that historically engineers have been directed at the highest levels of the organization by business people and it only takes a few bad experiences to perpetuate a stereotype.  This is certainly a 2-way street, there are plenty of bad engineers and technical leadership out there, but typically its the business side of the house that directs the organization.  At least historically.  Jacob is right, its all about providing mutual value which leads to mutual respect.  Now with so many new startups founded by engineers, there’s a burst of independence from these bad experiences, creating a challenge for even the most effective, accomplished business entrepreneurs to find “co-founder” opportunities unless they bring the idea or concept to the table.

As a “business guy” who’s worked closely with engineers in startups for over 10 years, I’ve consciously made efforts to complement, not contribute to (read: get in the way of), the technical aspects of the business while treating the technical/engineering function equally if not more important than anything that drives the success of the organization.  Most recently I’ve tried to take it one step further, a step that I rarely see other business folks embrace – ensuring technology leadership has an equal seat at the table at the highest levels of strategy and product development and enabling the technical staff, the engineers, to contribute to product development in the form of a “safe challenge” dialogue with the product team.  This view has evolved over time for me as I’ve been exposed to increasing levels of strategic talent in the technical individuals I’ve worked with.  Experienced engineers often have incredible design and product sensibilities because they are the closest to the end product.  While they may not create the original design or spec, they are problem solvers in implementation, constantly iterating to find the best solutions.  And they usually understand a product’s complexity better than anyone, which HAS to be considered in any strategic product discussion.

So to all of you startup engineers out there, especially those who are founders and assuming you need a business partner (and you do, subject of a future post!), what should you look for in your “business partner”?

  • Demonstrable success in starting, building and scaling a startup.  These are 3 distinct phases of a company’s early growth that require different skills and perspective, and you need someone that has success in all three.
  • Philosophically aligned on the role of technology.  Ask the tough questions about the qualities of a great CTO, the role of the engineers and how strategic decisions are made for the organization.
  • The business co-founder does not have to be the CEO.  This is a great ego-check moment.  There should at least be a dialogue and healthy debate, never a default assumption.  And discussing how roles will evolve as the company grows is equally important.
  • Find an overall athlete (COO or Head of Ops)  instead of a functional expert.  This is probably the most controversial point that many will disagree with.  Many founders want to solve their most immediate need (more sales, marketing to acquire customers) and thus seek to find deep experience in a single skill as the first or second key leader.  I would contend that in a startup, there are a dozen areas that need leadership now to properly set the company up for success and that if every other attribute on this list is met, the “right” business partner can fill any immediate functional need sufficiently in the interim.  Another important point – acquiring and building out a talented, cohesive and high performing leadership team is difficult and a skill that should be historically demonstrated by your partner.
  • Ability to immediately contribute.  Leadership recruiting, product strategy, fund raising, sales, business development, marketing – the seasoned business lead can successfully step into most of these roles initially as the other functional leaders are recruited.
  • Test for worst case scenario.  When all hell breaks loose and it looks like the business is going to crater, how will your partner deal with it?   Do you share common philosophies on hiring, spending, tough decision processes?  This is difficult to predict, but you have to talk about worst case, because in a startup, worst case is most likely case!

What other qualities should you look for in your “business” partner?

Professional Cycling House of Cards?

I love cycling.  I love riding my road bike and I love watching the pros, especially on the Grand Tours (France, Italy, Spain).  I’ve seen every moment of every Tour de France since 2002, and Lance Armstrong for me has been a true inspiration, an almost freak of nature in his ability to suffer more than others and dominate his sport – and doing so before and after recovering from near-fatal testicular cancer.  Truly amazing.

So, I couldn’t help being completely mesmerized, despite writhing in pain, at watching Tyler Hamilton’s interview on 60 Minutes this past Sunday.  Tyler, in the most believable exposition of the dirty side of pro cycling yet, proceeded to explain how he and many of his teammates on the 1999, 2000 and 2001 USPS team, including Lance Armstrong, used a systematic performance enhancing drug (PED) doping system including injections of EPO and blood transfusions in training and during major races.  This interview occurred after Tyler testified, under subpoena, for the Grand Jury investigation into the use of performance enhancing drugs where Lance Armstrong is the focus of the investigation.

There have been others who have told stories of systematic doping on Lance’s teams, including Floyd Landis, a teammate of both Lance and Tyler on the USPS team.  Floyd’s allegations for me seemed at the time to be easier to dismiss, in part I think because he raised significant sums of money from thousands of people for his legal defense, denying his guilt for nearly four years and when he finally did admit to doping, then allegedly started sending letters and emails to Lance’s camp and cycling officials that “felt” like a desperate attempt to take others down with him.  And that’s exactly how Lance and his legal team dealt with these and other accusations – these guys are cheats and liars and are simply not credible, we have testing and the facts on our side.

Yes, Tyler is also an admitted cheat in pro cycling having served an 8-year ban from the sport due to doping.  And he’s denied using PEDs and implicating others, keeping his mouth shut until the moment he was forced by subpoena to testify under oath.  And, he’s writing a book so the 60 Minutes piece certainly serves his interest for generating book awareness.

Despite these facts, what makes his situation different and far more believable for me?  A perfect storm of 3 things in my mind:

  1. Timing and Momentum.  With a Grand Jury investigation going in the background, it brings focus, attention and credibility to the PED problem in professional cycling, especially with Jeff Novitzky, the investigator that uncovered the BALCO scandal that ultimately exposed Marion Jones and Barry Bonds.  And its not just Lance under investigation, its entire teams, coaches and the governing body of professional cycling itself (UCI)
  2. Terms of Tyler’s Deposition.  Tyler’s deal with investigators during his deposition – immunity from prosecution, but if he is found lying about anything related to his testimony, he goes to prison.  It’s important to understand that Tyler didn’t just do the 60 Minutes interview, but he also told the same story under oath and under the threat of going to prison for lying.
  3. Hincapie’s Nail in the Coffin.  Simultaneous to Tyler’s Grand Jury testimony, it was reported by CBS News that George Hincapie, Lance’s closest teammate for every one of his 7 Tour de France wins and who Lance has described as “like a brother to me”, told Federal authorities under oath that both he and Lance used PEDs during their time together.  Here’s a guy who’s never been implicated in PED scandal, has never been tested positive for PEDs and has absolutely no reason to admit to such a thing – except that he was under oath in a federal investigation.  Just like Tyler.

It’s easy to come to Lance’s rescue given he’s the most tested athlete in history.  Over 20 years and 500 tests with not one positive test, although Tyler alleges Lance did test positive in 2001 and the governing body in cycling (UCI) “made it go away”.  It’s easy to come to Lance’s rescue, that is, until you hear Tyler talk about the ease with which testing for PEDs can be beaten.  According to Tyler, there’s a manageable difference between doping enough for performance enhancement and doping too much for detection.

So what does all of this mean for pro cycling and for Lance?  For cycling, I believe it can only bring about positive results, albeit painful in the short term, provided the investigation is thorough and the truth is rooted out sufficiently to result in real reform within the sport.  The success of the code of silence over so many years in cycling is astonishing.  Perhaps exposing the truth and reform also sends a vivid message to our children about right, wrong and consequences about illegal doping in sports.

For Lance, I fear a far worse outcome.  Lance has done not only miraculous things for cycling, but as a philanthropist he has inspired millions worldwide – both through his personal story and by his ability to leverage his brand to raise incredible sums of money for cancer research.  If his story is a lie and his brand is predicated on cheating his way to the top, won’t that have repercussions among those affected by him now if not certainly in the future?

I also fear that despite how strong the prosecution’s case, that Lance will forever deny any wrongdoing.  There is simply too much at stake for him to admit guilt.  And this will result in a long and difficult-to-watch fall from grace the likes my generation has never seen, certainly in sports.  I would argue that if its true, its in Lance’s interest to get in front of it now, take a massive painful hit and at least attempt to put it in the rear view mirror.  A slow, defiant march to the bottom, potentially ending in prison for obstruction and fraud, eliminates any hope of rear view mirror.

I still hope the investigation turns up facts and data that proves innocence, as much innocence as possible.  But I believe in my gut, based on the facts revealed to date, that we are way beyond the fantasy of innocence.

I hope I’m wrong.

I Fought Mt. Baldy, and Baldy Won

What an epic day yesterday!  As I wrote in a previous post several months ago, the Amgen Tour of California, the most important pro cycling race in the U.S. that spans 8 single-day stage races throughout California, rolled through Los Angeles yesterday.  Everyone knew Stage 7, up Mt. Baldy twice and covering 76 miles and 10,000 feet of vertical climbing, would be the deciding stage of the race.  And it was!  Team RadioShack ruled the day, with Levi Leipheimer winning the stage just ahead of the overall race leader and ultimate winner Chris Horner.

Since the pros didn’t start the stage until 11:45am, it gave us amateurs a chance to test our mettle by getting up early and riding the course.  With Renee in the support truck, I headed out at 7:30am intent on riding the entire stage route before they shut down the roads for the pros.  Here’s the play by play:

As soon as I mounted my bike in Claremont at the base of the mountains, it’s a 20-mile climb to the top of Mt. Baldy.  This first climb of the day ascends 5400 ft. to an elevation of 6500 ft. at the summit of Mt. Baldy.  I was grinding it out for nearly 2 straight hours, most of it was manageable at 5-8% grades… until the last 3 miles from Baldy Village to the summit of the ski area, which involved 15 switchbacks and 2000 ft. of elevation gain!  The last quarter mile was a 22% grade gut-buster to the summit.  I actually felt pretty energized once I reached the top, which is good since I still had nearly 60 miles to ride, including another 10-mile climb at the very end.  The next 40 miles were a series of rolling hills and a fast descent through Glendora Ridge Road, San Gabriel Canyon and ultimately all the way down to the base of the mountain to the town of Glendora.  After a pit stop and some fuel in Glendora, it was back to climbing, up Glendora Mountain road and to the final King of the Mountain (KOM) marker at the summit – a 10-mile climb covering 4000 ft. of ascent.

At 3 miles into the climb, I was pretty wiped.  I had been on my bike for nearly 5 hours, was out of food and had about half bottle of water, and I still had 7 miles to the summit of the climb, THEN final 15 miles of rolling hills to the finish in Baldy Village.  And the sun was beating down strong at this point.  I knew I would have to bum some food off some spectators once I reached the summit of the Glendora Mountain climb.

About 1 mile from the summit, I looked down and realized I had a slow leak in my back tire.  No wonder I was dragging!  I needed to make it to the top where the KOM marker and all the crowds were gathered so I could change my tire and get supplies if necessary.  At this point, with no cell coverage and the roads closed, Renee could not get to me.

So I pulled into the summit parched and with a flat, changed my tube, pumped it up and BOOM! my tube was pinched and exploded.  At this point, tired, hungry, out of water, out of tubes, 67 miles and 9200 ft of climbing behind me – I was toast.  I only had about 15 miles to finish and reach Renee, but they were about to close the roads for the pros to come through and even with a good tire it would have taken another hour.  So I took off my shoes and helmet, took a seat, and waited 30 minutes to watch the pros come through.  By the way, what took me nearly 6 hours to complete, the pros rolled through in under 4.  Incredible.

Luckily, about 30 minutes after the pros came through, Renee had received my message and showed up with Gatorade and snacks in hand!  It was an epic day of cycling and gorgeous views that rivaled some of our views in France (just with more smog and no random cows in the road).  We finished off the day with burgers, fries and beer.  A perfect end to a (near) perfect day!   Here are a few pictures from the day.

Just getting started. Looking fresh and nervous!

Summit of Glendora Mountain, KOM and where I was stuck

Summit of Glendora looking back from top of last climb.

Constructing finishing chute on Mt. Baldy summit.

Tips for First Time Angel Investors

As part of Boulder Startup Week, David Cohen and Brad Feld held a Q&A for prospective Angel investors at the TechStars Bunker yesterday.  David is a serially successful entrepreneur, Angel investor and current Founder and CEO of TechStars, arguably one of the most successful mentor-driven seed stage investment programs for Internet startups.  Brad is a successful entrepreneur, founding partner in Boulder-based VC firm Foundry Group and co-author with David of Do More Faster.  These two guys know a thing or two about successful Angel investing in Internet businesses.  And as a prospective new Angel investor, I found the session pretty informative.

Here are a few tidbits of advice for those interested in becoming Angels from David and Brad.

First things first, be honest if Angel investing is really for you?  If you don’t have the ability to today write 2-3 $25K checks each year for the next 3-5 years, then don’t do it.  If you can’t lose every penny written from those checks without having a pit in your stomach, then don’t do it.  For you math wizards, that’s having between $150-$425K in cash sitting under your mattress today such that if your mattress spontaneously combusted it would be no big deal.  Why does all that cash need to be accessible today?  Because you will need to make follow on investments in the same companies over time, essentially committing that cash today or putting yourself at risk of not getting a sufficient return on your early investments.

Once you commit, determine the “volume and velocity” of your investments.  There are 3 variables you need to determine up front that must jive with one another:

  1. How many total dollars are you committing to Angel investing?  Example: $600K
  2. Over what time horizon?  Example: 3 years, so $200K per year
  3. How many investments per year do you intend to make (assuming that each investment requires 2 funding rounds over the period)?  Example:  If each investment requires 2 rounds at $25K or $50K total, then you can afford to do 4 investments per year totaling $200K per year, or $600K over the 3-year period.

How does a new Angel get exposure to quality deal flow?  This for me seems like the biggest challenge as I contemplate jumping into investing.  The “best” deals with the most accomplished teams inevitably get funded by the highest profile Angels and VC investors.  And the most discerning entrepreneurs of course prefer experienced Angels with solid reputations and a track record of not just writing checks, but helping their portfolio businesses succeed.  Oh well, gotta start somewhere I guess.  David’s advice was to create a single-page investor profile – type of companies, investment criteria, size of investment, professional accomplishments, references, etc. – and distribute to a few well-connected and accomplished Angels and VC’s as an offer to co-invest with them.  The other way is to join an Angel Group.  But…

Beware of Angel Groups, they can be effective, but do your diligence.  There are good and bad angel groups separated by how active the individual members are at actually writing checks and making investments.  Ask how many investments the group has done in the past year?  What % of the membership is writing checks?  How do they qualify Angels?  If you are considering a group that charges entrepreneurs to make a pitch or for sketchy “boot camps”, run for the hills, its supposed to be the other way around folks.  Innovative groups such as the Open Angel Forum started by Jason Calacanis were created to truly serve the entrepreneurs and put these “bad” Angel Groups out of business.

Determine how involved you want to be in the target company – Leader/Active, Follower/Advisor, Everyone else/Passive.  There is no right answer, this is a personal choice based on how involved you want to be with the management of the target company and helping them raise the rest of the money they need.  If your investment strategy is to make 2 investments per year, then you are likely to take a more active role than if you are making 20 investments per year.  The key point both David and Brad make – be transparent and upfront with the entrepreneurs about the level of involvement you intend to have with the company.  Don’t have company leadership believing you will be actively advising if you intend to write a check and disappear.  And it goes both ways, a meddling or overbearing Angel can put entrepreneurs in difficult and distracting positions.

And finally, in order to be an Angel that doesn’t suck for the entrepreneur, follow these 5 simple rules.

  1. Make a decision on your investment within 24 hours
  2. Take the entrepreneurs phone call, especially when they are upset
  3. Tell 3 other prospective Angels/friends about the Company (to help them close the round)
  4. Clearly communicate your intended level of involvement post-investment
  5. Directly contribute to solving 1 out of the top 3 challenges that keeps the entrepreneur up at night.

Crafting Your Startup Pitch

I participated in a session today during Boulder Startup Week hosted by Jason Mendelson, a Partner in Foundry Group.  The audience was a group of entrepreneurs in various stages of fund raising activity.  Jason had some great advice for the group as a long-time Venture Capitalist who sees over 1,000 pitches per year.  Of the 1,000 he sees, 500 of them are immediately discarded to to bad grammar.  Really?  Of the remaining 500, 300 have an ineffective or even no “Elevator Pitch” – which Jason claims is the most important thing an entrepreneur has to get right to get initial investor attention.

So there you have it, you can be in the top 20% of deals he sees just by 1) mastering the English language and 2) having a concise, well-articulated Elevator Pitch.

What comprises an effective Elevator Pitch?

  1. Proof of a massive problem. What problem are you solving and how big is it?  This should be easy to nail quickly.
  2. How your business solves the massive problem.  What unique solution has been developed or conceived?
  3. Why YOU rock! (as an individual and how you are different than everyone else).  VC’s invest in people, first and foremost, so don’t be shy about why you are the best at what you do and what gives you a special advantage to outlast everyone else.

And all of this communicated before the elevator gets to the 4th floor!

So now that you are in the top 20%, here’s the next set of deliverables to win your prospective VC’s heart and cash.

  1. 5-7 page Executive Summary in written form.  The days of 70-page business plans went out with 8-Track tapes and Betamax.
  2. Product demo or prototype.  Showing your product is ALWAYS the most effective way to get attention.  It shows passion, commitment and enables an investor to share your vision for solving big problems.  It does not, however, eliminate the need for the Executive Summary.
  3. Personal connection.  I thought this was a really interesting and refreshing insight.  In order for Jason to invest, he must build a relationship with the entrepreneur and he expects incredible energy from that relationship, energy that first emanates from the entrepreneur and that increases with each visit as trust is built.  Why?  Because when times get tough, the personal relationship is what gets you through it.  The trust is the fallback for difficult conversations and wrenching decisions.  Personally, I want my VC to act this way, I was super-impressed by this investment philosophy.

Where do most entrepreneurs fall short in their pitches?

  1. Inadequately evaluating or addressing the competitive threat.  Even if there is no one on the planet that is doing exactly the same thing you are doing to solve a particular problem, for you to obtain customers there has to be a compelling reason for them to allocate time to you v. whatever else they could be doing.  Literally, the Internet is your competition in this case.  Don’t ever tell a VC you have no competitors, its the Kiss of Death.
  2. Inadequate attention to Business Model – Both Revenue and Expenses.  The one fundamental truth about Revenue projections?  They are always wrong.  100% of the time they never come true, the business will learn, iterate, pivot and generate revenue in ways that weren’t originally contemplated.  But its OK.  They key is to understand the drivers of revenue – # customers, page views, $/customer – those things that if you can scale, even a few of them, it drives revenue.  Expenses, by contrast, better always be right.  They are controllable and need to be well-thought out.

Finally, how does the entrepreneur find investors and get their attention, particularly VC investors?

Jason’s advice, as someone who is regularly spammed by entrepreneurs who blast out wildly to VC “lists” having done little to no research on the VC’s investment criteria –  do your research in a targeted way and wrestle ONE VC to the ground first.  Get personal, find common ground, ensure they invest in your sector, follow the directions above and generate interest and dialogue.  Once you have one that is responsive, cross-reference what other firms your one firm has co-invested with in the past, which are in the same sector or stage of development from an investment standpoint and create some competition for your stock.  Just don’t delay a deal by trying to create an auction!

And my favorite quote of the day.  Asked how long an entrepreneur should expect funding to take, from “first date to wedding”.  Jason’s answer?  “It depends how hot you are”.  Quick on his feet, very quick.

The Next Government Buster?

I’ve read a few really interesting stories over the past few days about Bitcoin, a relatively new, decentralized peer-to-peer (P2P) payment ecosystem that avoids any sort of centralized banking oversight and is anonymous between the transacting parties.  Think about these two attributes for a second.  No centralized government oversight means no regulation, no taxation, no monitoring of how and where currency is being spent, no traceability, no monetary policy.  And anonymous between the parties, in combination with no oversight, means you can buy and sell things – any and all things – without anyone knowing what is bought or sold.  While there are other forms of P2P payment systems such as PayPal in operation, none of them meet these two criteria.  How Bitcoin works is fascinating.

Jason Calacanis, arguably one of the most influential web technology voices and certainly one of the most outspoken about new and emerging web technologies, posted a story about Bitcoin yesterday entitled Bitcoin P2P Currency:  The Most Dangerous Project We’ve Ever Seen.  The gist of his message is that this could be one of the most disruptive web technologies since the creation of the Internet itself due to the potential dis-intermediation of governments and the complete decentralization of a globally centralized system (monetary oversight, central banking).

There was an insightful response to Jason’s post by Robert Tercek, a serial innovator in digital media, entitled Is Bitcoin the Wikileaks of Monetary Policy? that is a must-read.  Robert describes how the Internet has decentralized numerous industries, particularly ones where the incumbents were able to previously control their positions with regulation or by proprietary access to data or licensing.  He sums it up with “Bitcoin is to central banking as Gnutella is to music publishing, as BitTorrent is to motion pictures and as Wikileaks is to government secrets.”

Jason and Robert contend the only way this type of innovation is stifled is by governments making it illegal AND actively prosecuting individuals.  And even this type of threat at best forces a migration of innovation into even more diffusion and decentralization until local government incentives are aligned with the innovation.  In the end, centralization and oversight die.  Wikileaks and Napster started revolutions that spawned even more decentralized and ultimately more effective web innovation.

I wonder, is this capitalism at work?  Can we assume that the intersection of innovation and economics will always result in the most efficient, effective equilibrium?  Or are there areas of centralization, policy and oversight that are beneficial to society as a whole?

This will be one technology to watch.

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