BlackLocus Wins “Best in Show” at Under the Radar

We’ve had a great two days at the Under the Radar Conference in Mountain View, CA.  It’s a commerce-focused event, featuring roughly 30 emerging companies in 5 categories that pitch in competition format to an audience and a panel of judges.  Today I had the opportunity to pitch BlackLocus under the “Measurement” theme to a panel of 3 judges including Liz Gannes, Senior Editor with All Things Digital, Will Lowry, VP AT&T Platform Partners and Mark Silva, SVP Emerging Platforms Anthem Worldwide.  The session was moderated by Rafe Needleman, Editor at Large for CNET News.  To see the 15 minute pitch and Q&A session, click here and go to 3:45 in the video if you want to skip the panel intros.

The good news?  We won the Audience Choice Best in Show award among the 30 companies and the Judges Award for our category!  We also met some leaders in companies that would be extremely valuable partners and most important, we connected with some large, Fortune 200 retailers that are prospective customers.  All in all, a great use of our time and money to participate.

The other good news (disguised as bad news)?  Along with positive exposure and press comes an onslaught of demands that stress the team to deliver on.  It’s a constant battle at this stage, how to prioritize activity and only that activity which has the highest return when there are dozens of things we know need to be done.  And priorities are not always obvious, these decisions require some stakes in the ground but more important, they require measurement, learning and adjustment to turn on a dime as information becomes available from customers and partners.

I’m returning to Austin today and looking forward to debriefing with the team and getting everyone energized about the path ahead of us.  Strap in, its going to get nutty!

Startup America Partnership, Austin-style

I was invited to attend a luncheon this past Friday hosted by the Austin Chamber of Commerce and the Austin Technology Partnership to discuss the soon-to-launch Startup America Partnership Austin program.  Startup America is a national program launched this past January at the White House and founded by the Case and Kauffman Foundations to further entrepreneurship across the country.  It’s mission is to provide entrepreneurs with the resources they need to conceive, launch and grow new companies and it is taking a local approach to mobilize resources supported by the muscle of a national brand.  There are some heavyweight influencers tied to this effort including Steve Case, Michael Dell, Reed Hastings (Netflix), Reid Hoffman (LinkedIn) and Magic Johnson.

Austin, through the leadership of the Austin Chamber, is taking a pioneer role in being one of the first handful of communities to officially launch its program under the SA brand.  The idea is to gather expertise, talent, customers, services and capital and package these resources at highly discounted rates and/or unique offerings to assist entrepreneurs at various stages of their company’s development.  Another large part of the Austin mission is to create a net inflow of entrepreneurs from other cities to choose and build their companies in Austin.

I was introduced at the lunch by John Price, a friend, serial Austin entrepreneur and Chair of SA Austin, who is spearheading much of the launch effort for Startup Austin in conjunction with other local organizations including the Chamber and SXSW.  In many ways, the story of my new company BlackLocus and its relocation from Pittsburgh to Austin combined with my relocation from Los Angeles, reinforces what Startup Austin is trying to achieve on a broader scale – promote entrepreneurship not just by home growing it, but also by attracting talent from other places in the country to start and grow their companies in Austin.

I’m excited to work with John in any way I can to assist in bringing additional talent and new businesses to Austin.

Texas Venture Labs / Austin Technology Incubator

My new company, Blacklocus, is an Austin Technology Incubator (ATI) company and we presented yesterday at the Texas Venture Labs Expo in Austin.  I stopped by to hear the pitches of 5 graduating companies, including ours.  I was deeply impressed by the presenting companies, at least 3 of them are truly innovating massive industries including online commerce (us!), nuclear power and combustion engines.  These programs are examples of increasing efforts by the University of Texas to integrate with the local business community to develop entrepreneurs, facilitate investment and commercialize research generated through the University.

Now that we are fully relocated to Austin, I’m really energized to get more involved.  There are several objectives I have for “getting involved” with the local entrepreneurial technology community:

  • Build the BlackLocus brand locally through thought leadership, mentoring and recruiting outreach.  The more we promote our vision and progress, the more attractive we will become to partners, customers and employee candidates.
  • Do my part to further entrepreneurship and development of high growth companies in Austin.  This community has so much to offer for entrepreneurs, venture investment, existing companies looking to relocate and I’d like to become involved in initiatives that promote and actualize those attributes.  Capital Factory and Startup America are examples of successful and far reaching programs to promote our city and develop successful new companies.  There is a real talent shortage here, as in many high tech hubs across the country, and it really is a zero sum game that we need to solve.
  • Actively invest in promising high-growth startups.  As I’ve written about previously, I’m active but picky in my search for investments in new companies where I have something to offer in addition to capital.

Yesterday was a great introduction to a few programs dedicated for furthering local entrepreneurship and I look forward to becoming far more integrated over the coming months.

Love What You Do

In the words of Steve Jobs a great quote sent to me yesterday by my new partner Rodrigo:

“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work.  And the only way to do great work is to love what you do.  If you haven’t found it yet, keep looking.  Don’t settle.  As with all matters of the heart, you’ll know when you find it.  And, like any great relationship, it just gets better as the years roll on.”

The world, not just the tech world, lost a true visionary and inspiring leader yesterday.  Just think about the past 10 years and the positive impact Apple’s products have had on most of our lives – Mac, iPod, iPhone, and iPad.  How many of you found out about Job’s passing on one of his devices?  I did.

Even if Jobs has not been iconic for you personally, I highly recommend taking 15 minutes to view his Stanford commencement speech from 2005 imbedded below.  One of the best, most direct “experience life” speeches, not just about enjoying your work but truly enjoying life – and poignant given his passing.

Where Were You 10 Years Ago Today?

Ground Zero, taken from where the towers used to stand

Obviously today is a day of reflection for all of us, and a day of remembrance, mourning, hope and many other emotions for those closest to the tragedy.  I was in Arizona that day, just getting up to start my day when I turned on the TV to see the first tower up in smoke.  I was transfixed to the TV and at a complete loss for what to do.  It was surreal having a complete feeling of helplessness while watching it all unfold minute by minute.  I’ve spent this morning scouring social media and online news reading and absorbing countless stories from those who lost the most that day and thought I would share a few of the most impactful from my point of view.

  • The one must read story about  a town most impacted by 9/11 and events over the past decade:  “Hit Hard by 9/11, a Piece of Queens Struggles to Let Go”
  • An interactive map that lets you pinpoint and comment about where you were on 9/11.  Thousands of entries from everywhere on the planet.
  • A ten year interactive timeline of the evolution of ground zero, complete with pictures.
  • An article about the complex algorithm that was used to order all 2,983 names on the ground zero memorial.  It certainly wasn’t alphabetical, rather based on the complex relationships that existed among the victims.  Really interesting.
  • Jeff Jarvis, a survivor of 9/11, is at the memorial site today tweeting live about his observations @jeffjarvis

Investing Through the Startup Noise

As someone who is both seeking my next professional role in an early stage business and (newly) looking for Angel investment opportunities in startups, it is incredibly difficult to determine the high quality businesses given the sheer volume of startups in the marketplace right now.  While there is unprecedented access and information on startups through sites like AngelList, the consequence of this transparency is a ton of noise – anyone can put their business idea out there regardless of its business viability AND its cheaper than ever to start a technology company as infrastructure, hosting and storage costs have never been cheaper.  Gone are the days of VC proprietary access to deal flow, but also gone are the vetting and screening of startups prior to them becoming discoverable.

I wrote previously on some tips for first time angel investors as communicated by Brad Feld and David Cohen.  But the biggest challenge – how to gain access to high quality startups – was left largely unaddressed.

Take AngelList, a site that launched only 1.5 years ago and claims to have facilitated over 8,000 introductions between founders and investors with 400 companies funded through those introductions.  Nearly 10,000 startups and 2,300 investors are listed and have profiles on the site.  Fantastic for access and transparency, but wow, that’s a lot of noise.

So as a job seeker and potential investor, how do I maximize my probability of gaining access to only the highest quality ideas without having to do an inconceivable amount of research?  Well, its different for job seeking v. investing.  I detailed my process for job seeking in a previous post.  Here, I’ll talk about how, as a new entrant to Angel investing, I’m going about gaining access to quality startups and cutting through the noise.

Letting other active Angels know I’m investing.  There’s a handful of folks in my network that are actively investing in startups and quite frankly, have better access and are better connected into the ecosystem than I am.  Sharing with them my intent to invest, including how much per investment and the kinds of companies I’m most interested in is a way to shortcut access to quality deals.  These people include former colleagues, VC’s who invest personally, seed-stage fund investors and others I’ve met along the way.

Building and managing my online brand.  This involves utilizing and being active on social media networks such as Twitter, Facebook, LinkedIn, Google+ and particularly AngelList and ensuring my profiles are up to date, comprehensive and consistent across platforms.  “Investor” shows up in bios and short descriptions.  Diligence is not a one-way street, the smartest founders and entrepreneurs research their potential investors so I want to be easily discoverable but in a way that I direct and control.

Leveraging the incubator programs.  These programs in some sense do a lot of due diligence for you first by accepting an idea/founder into their program and second by coaching and mentoring their early progress.  Nearly all of the reputable programs, but particularly 500Startups and TechStars, enable broad access to Demo Day presentations through live streams or blogging and then you can access and enter the investment discussion either directly with the founders or through AngelList.

Yesterday I attended Demo Day for the graduating class of 500Startups, an incubator/investment engine that boasts 175 portfolio companies and founded by prolific investor Dave McClure.  It’s a program similar to TechStars and YCombinator with the added dimension that they will make pure seed investments without the requirement of going through their incubator program.

I was actually really impressed by many of the newly formed ventures coming out of the program (and now seeking investment in the $300-500K range).  There were 31 presenting companies and over 1,000 participating audience members (via personal attendance and live stream video).  1,000 potential investors for 31 companies?  That tells you the dynamics of this market and why valuations are bloated right now, with many of these graduating “ideas” garnering pre-money valuations of up to $5M.  But there were 2 companies that were extremely interesting to me, so I reached out to them on AngelList and within a few hours, had access to their investment materials.  This would have been impossible for me just two years ago.

Did I mention AngelList?  Because I’m not “in the club” of elite investors that have automatic access to all the hot startups without the need to do any outreach, I need a way to 1) broadly market or announce my interest in investing and 2) access startups that I’m interested in.  AngelList is the best and only place for a new investor to do both of these things effectively given the critical mass they have achieved.

Make an investment.  While I’ve reviewed a half dozen companies, including meeting with founders, I have yet to find the right opportunity and I’m not going to part with my hard earned cash just because there is a startup gold rush happening right now.  That said, there are a few opportunities with founders I already know well that I anticipate will close in the next few months.  The point here is that building a track record as an investor is, or certainly should be, important for founders to accept your money.  This is particularly true in the current market where entrepreneurs have a choice of investors.  Why not choose money that comes from people who have demonstrated picking winners and who can add value through advising or introductions to their superior networks?

This process has worked pretty well for me, I’m curious to hear how other new investors are getting into the market and accessing high quality startups?

Refreshingly Human Reaction

For those of you that have followed this year’s Tour de France coverage, there was a spectacular crash on Stage 9 yesterday caused by one of the media support vehicles that swerved into one of the riders going 40 mph.  The driver was clearly at fault, attempting to pass the riders after being instructed not to, then visibly swerving directly into the riders once the road began to narrow during the pass.  There were two riders affected, the actual rider hit by the vehicle (Juan Antonio Flecha) and the rider behind Flecha (Johnny Hoogerland) who was hurled into the air upside down and directly into a barbed wire fence… again, going 40 mph.  Remarkably, both of these riders managed to remount their bikes and finish the stage, despite Hoogerland’s shorts being completely ripped from his body and blood gushing down his legs for the remaining hour or so of racing.

Hoogerland got the worst of it from an injury standpoint with 33 stitches, but both of these men were in a 9-rider breakaway and each had a chance for a stage win in this year’s Tour.  You have to understand that winning even one stage of the Tour de France can make your career as a rider, so the emotional turmoil from having that opportunity taken from you must be hard to bear.  Not to mention the mental trauma associated with such a horrific accident where there was no warning and no rider fault.  To make matters worse, Hoogerland is the leader in the King of the Mountains classification (wearing the Polka Dot Jersey) which he will likely not be able to defend.  Hoogerland’s podium appearance after the stage shows his physical and emotional distress.

It was widely speculated yesterday that there would be legal consequences for the media company and driver that failed to obey instructions, then caused such a consequential accident.  Hoogerland’s Tour is likely over, certainly any success in the balance of the race has evaporated.  Yet his team manager announced today that the driver had taken ownership of his mistake, apologized and that Hoogerland had accepted his apology.  There would be no legal action taken.  Matter closed.

Some may think that this sort of risk simply comes with the territory in one of the most dangerous competitive sports in existence.  Well, sure, but the argument “that’s the risk you take” rarely stops individuals from threatening or taking legal action in other situations, personal or professional.  And certainly not when there is neglect involved and the act is caught on tape.  We live in a culture where a hot coffee spill gets you $640,000 in cold, hard cash.

I find Hoogerland’s reaction commendable.  It’s refreshing to see human compassion, forgiveness and calmer heads ruling every once in awhile.

What do you think?

Are You Pulling the Wool Over The Eyes of Your Employees?

Fair warning, this will be a bit of a rant.  There was a story that emerged late last week about how Skype had provisions in their employee stock option agreements that basically rendered stock options worthless for employees.  It spawned a lot of discussion in the media and among bloggers over the weekend, but there were two articles I ran across that gave competing views into the situation:  An employee-centric view and a company “why they did it” view.  Take a moment to get educated.

I’m not going to get mired into the detail of specific employee incidents discussed in these articles.  Rather, I’m focusing on the philosophy of implementing an egregious stock option agreement that provides little to no compensation and ownership value to employees.  And more specifically, doing so when the tech industry norms are vastly different.

In a nutshell, here’s the situation.  Skype’s employee option agreement has a very unusual clause that enables the company to buy back an employee’s options if the employee leaves the company voluntarily or involuntarily.  The buying back of unvested shares upon termination is a standard option agreement clause for most tech companies.  What makes this clause unusual, and reprehensible in my view, is that it just doesn’t cover unvested options, but also vested options.  And here’s the evil kicker – the company has the right to buy back vested shares at the original grant price, not the fair market value that employees presumably contributed to achieving.

There are two problems with this type of agreement that I cannot be convinced are fair and equitable components of tech industry compensation:  1) The company has a right to buy back vested shares upon termination and 2) the Company can buy back vested shares at the original grant price.  This second point is the one that I believe essentially tells employees “Here’s an option grant but if you don’t stay with the company until it sells, regardless of how much value you create, we can terminate the grant.  Oh, and we can fire you before the company sells to ensure the grant is worthless.”

Now, there have been several arguments, although sparse compared to the criticism, in defense of Skype’s treatment of options in their agreement:

  1. Employees should read any agreement before they sign it.  This is a load of crap.  Employees other than the most senior leadership have ZERO ability to negotiate terms in a “standard” company agreement and thus the vast majority of employees have likely never had a lawyer review employment related agreements (confidentiality, non-solicitation, etc.).   The fundamental issue here is not whether an employee should negotiate a better agreement, but rather philosophically how does the company want to incentivize and reward employees, particularly when the industry standard is so different creating a misleading view of how a standard option agreement behaves.  In a world where there is such a deviation from the norm, the company has an obligation to ensure employees fully understand how deviating agreements work.
  2. Skype’s investors are Private Equity and not Venture Capital.  Huh?  What does this have to do with the fundamental notion that employees, not investors, are the primary asset that creates value in ANY company, regardless of who the investors are.  Early stage, later stage, turnaround, it doesn’t matter.  This point does not negate the company’s responsibility to provide clarity to employees about how compensation-related agreements work.
  3. If an employee voluntarily leaves, then they don’t deserve to keep any options.  Again, this is just not the right thing to do.  By way of example, let’s say I joined my company and was granted 40,000 shares vesting over a 4 year period and at a grant or strike price of $0.10, representing the Fair Market Value of the shares at that time.  After two years, the company has made progress and raises capital at a per share price of $0.50.  So, there’s been $.40 of value created during my time at the company.  Now I decide to leave.  Since I worked for two years, I will have vested in 20,000 shares and presumably I’ve contributed in creating that value – if I haven’t, then the company should have fired me a long time ago.  But they didn’t.  The value of my 20,000 vested shares is now $8,000 (20,000 x $0.40 per share).  Under the Skype option plan, the company essentially has the right to terminate all options, so I leave with no stock, despite the fact that I’ve vested in half my position.  Poof, no options!  My belief, and the belief of most companies, is that the employee should have the right to purchase vested options at the original grant price upon leaving the company.  So I pay the company $2,000 and they issue me a stock certificate for 20,000 shares that I take with me.   Again, this is a philosophical debate – I believe in making all employees owners and rewarding people for contributing to increasing corporate value.  Just because someone decides to leave for personal, professional, health or any other reason doesn’t mean they don’t deserve to capture the value increase.

What’s the bottom line?  As a leader in your organization, what value do you place on people, transparency and sharing value creation with those most responsible for creating that value?  Companies have a responsibility for transparency and integrity towards employees.  Create and enforce whatever agreements you like, but be overtly educational about it, particularly in instances where your policies deviate substantially from standard industry practice.  This is where Skype failed in my view.

I Rest My Case, This is War

6/16 UPDATE:  Here’s a really informative graphic as to what’s happening in the U.S. related to skilled workforce requirements.  The most compelling points?  1) By 2015, 60% of the new jobs will require skills possessed by only 20% of the population, and 2) In 1991, by contrast, less than half of the jobs in the U.S. required skilled workers.

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One of my recent posts discussed the war for engineering/developer talent, particularly in the Bay Area.  It’s getting worse and I just don’t see how it is sustainable.  Here are some recent additional data points related to the overwhelming demand for engineering talent:

  • A recent Techcrunch article discussed some analysis by TopProspect, an emerging online recruiting destination, that shows analytically who is winning among the top technology companies – Facebook, Google, Twitter, Zynga and others.
  • Check out this blog post by Gordon Hempton on “What It’s Like to Be Recruited“.  It details Gordon’s experience of posting his resume and subsequently receiving 266 emails and 96 voice mails from companies and recruiters, most of whom ignored his very specific job request for mobile development and instead were recruiting him for a broad range of development positions and platforms.

What is clear from this and other analysis is that we are in a zero sum game right now.  Meaning, there are simply not enough quality engineers entering the market to come close to the demand, there’s a nearly fixed pool of talent trying to supply both incredible existing company growth and the startup ecosystem.  The result is an all out war, including underhanded PR stunts, espionage and poaching that results in some companies winning (Facebook, Zynga, LinkedIn and Groupon) and others losing (Google, Microsoft, EBay and Yahoo) in talent acquisition.

I’ll refrain from calling this a talent bubble, as I hate the term bubble for what’s happening in tech right now – it brings back too many bad memories from 1999/2000 when this term was coined and was far more appropriate.  Because I went through the original bubble, I know what is happening now is vastly different.  We are investing in real companies now.  Sure, valuations are high, but newly funded businesses for the most part have real products and customer traction which was not the case a decade ago.

However, much of the talent population, engineers in particular, are too young to have been through the 1999 bubble, so I worry about soaring egos, mercenary behavior and lack of perspective which defined attitudes in 1999.  Engineers were hiring their own agents back then.  Put yourself in their shoes.  Young guns getting constant calls from recruiters, offers to leave their current positions for 25+% compensation and perk increases, which they can repeat from employer to employer.  Tempting, right?

I gotta believe that the demand/supply equation will balance itself, it always does.  But how long will it take?  To the engineers I say good for you, take advantage of the opportunity while it exists, but be careful.  Things have a way of coming back to center.  Put value in building great product, team loyalty and product ownership in addition to your career path and compensation.  See your work through.

Fortunately, this is exactly what I’m seeing at least in the engineers I’ve had the pleasure of working with.  Motivations seem much broader today than they were 10 years ago and attitudes and perspectives towards what is happening in the talent marketplace seem much more balanced, which is refreshing.

Why is this?  I think its because the role of the engineer has changed from pure coding and taking orders from business folks to now having a deeper role in product development and far more empowerment around solving technical problems.  With the proliferation of technology platforms and languages, there are many ways to solve complex technical challenges and the engineers are leading these efforts, they are closest to the product and thus enjoy increasing levels of autonomy in their work.

It’s a great time to be an engineer!  And a frustrating time being a company trying to find the best ones.

Tech is Alive in Austin

I just spent two packed days in Austin, TX connecting with members of the technology startup community, both entrepreneurs and also the investment community.  I also had a chance to spend some overdue quality time with my two nieces, Zoe (2) and Shelby (9 months).  My brother Chris lives in Austin and is part of a group of entrepreneurs and investors that are really shaping Austin’s present and future role in fostering a comprehensive environment for companies to launch and thrive.

Austin grew up in the early 90’s as a technology community hub, particularly in Enterprise Software and Hardware, as the birthplace of Dell, Tivoli, Vignette and Trilogy among others.  Today, slowly but surely there seems to be a newer crop of companies emerging in Consumer Internet and Mobile – HomeAway and BazaarVoice being two successful examples – and a whole slew of new and exciting startups that are getting funding locally through Austin Ventures, Silverton Partners, NEA and even outside of Austin from firms such as Boulder-based Foundry Group.  Startup programs such as Capital Factory and Startup America Partnership, in addition to the large and local University of Texas, are helping to perpetuate and grow Austin’s track record of starting, scaling and exiting new businesses all while enjoying a great quality of life.

I was really energized by what is happening in Austin and look forward to my next visit.

One thing is clear, people love living in Austin and they rarely leave.  And if they do, they come back.  Exciting times in the heart of Texas.

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