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Mike put out a good post yesterday about the future of VC's in Europe (and no, I'm not linking it just because he mentioned me). I've had multiple discussions with him about this over the course of the past couple of weeks and I wholeheartedly agree with the majority of his statements. I recommend a read and I don't want to re-hash all the thoughts here again. I only have one thing to add. I believe that some companies may head over to the US to try and raise money in the hope of doing better there. It's rare though that a crap company from the US makes this jump. It's fairly easy nowadays to stretch out your feelers from Europe to US VC's and they quickly give you feedback. I believe this idea has been over-rated in the blogosphere. My observation is that most Euro start-ups who don't manage to get financed in Europe disappear to a quiet place to die and don't regularly disappear to the US.
Mike put out a good post yesterday about the future of VC's in Europe (and no, I'm not linking it just because he mentioned me). I've had multiple discussions with him about this over the course of the past couple...
Last night I drove down from Marin with my little sister Marisa.
We left around 5pm, taking 280 South past the Bay Area and reunited with Highway 101 in San Jose. An easy 4 hour effort.
David (my little brother) just turned 21 last week, so he was more than happy to show Marisa and me around the town.
It was an interesting mix of students, cowboys and surfer/skater people out in the town. I was really suprised to see everyone co-mingling. Its not everyday that I get to hang out with such a variety of white people.
There was also a peculiar man dressed as a bucaneer at one of the bars. Someone forgot to tell him that it was not Halloween.
Anyways it was great. Today we went to Pismo Beach and I walked in the wake of the waves. Yes, I like long walks on the beach and usually tell this to women.
Quote of the Day: AOL/YHOO [Paul Kedrosky's Infectious Greed]
While in some quarters these days "innovation" and "finance" go together about as well as "magnesium fire" and "water", I think this is a great idea at the right place and the right time -- especially when the center director is my friend David Leinweber.
I look forward to working with David, et al., on this great new Berkeley center.
When You Apologize, YOU Apologize Not Dan Garton [The Post Money Value]
I assume you've seen/heard about or maybe have been impacted by the American Airlines fiasco. Grounding a fleet is a nightmare and I feel for the passengers impacted as well as the employees who are on the front lines getting the brunt of the rage.
You, of course, would expect the airline to be falling all over themselves with apologies, mea culpa, etc, etc. And, for the most part, they are.
Sure enough, after 4 days of this nonsense, the "An Apology From American Airlines" email shows up. The first line was please accept my apology. Long paragraphs to follow and it was signed "Dan Garton, Executive Vice President, Marketing." Not Gerard Arpey, the CEO, nope.
Some marketing wonk created this email, scanned in Dan's signature, and used a DNR (Do Not Reply) email for a from address. You'd think there would have been ten seconds of thought to just putting the CEO's name on it. Yeah, I know, it's fluff/automatic anyway, but that's not the point.
Today, a press conference happens and the Chairman/CEO, finally steps up.
That story, you can read here, shows it took four days for the CEO to step up. He took full responsibility at the press conference, cool, but his name should have been on this email because unless you were in Texas, you didn't really get this story. And if you hit the Google photo search, you won't find (I checked) photos of Gerard Arpey helping customers, personally handing out sandwiches, or whatever to personally try to put his responsibility talk into a walk. His face walking around DFW, American Airlines home base. It's 3 minutes over to the terminal from the American Airlines HQ. They have a shuttle bus for employees
The lesson for you is clear: Own it. Step up and own it. With the Internet, you can own it loud and clear, get to your customers personally, and simply own it.
You, not Dan Garton.
I assume you've seen/heard about or maybe have been impacted by the American Airlines fiasco. Grounding a fleet is a nightmare and I feel for the passengers impacted as well as the employees who are on the front lines getting the brunt of the rage....
2nd Annual Labor vs. Capital Kickball [From Istanbul To Sand Hill Road]
We just played the 2nd annual Labor vs. Capital games, where VC's go against entrepreneurs.
Last year the VC's lost to the entrepreneurs in dodgeball.
This year the tables had turned.
With convincing wins on the kickball field, (and one inning that had 11 runs) Capital has now evened the score against Labor.
Thanks everybody for coming and David, Hunter and Noah for organizing.
See you next year!
We just played the 2nd annual Labor vs. Capital games, where VC's go against entrepreneurs. Last year the VC's lost to the entrepreneurs in dodgeball. This year the tables had turned. With convincing wins on the kickball field, (and one inning that had 11 runs) Capital has now evened the score against Labor. Thanks everybody for coming and David, Hunter and Noah for organizing. See you next year!
Unintended Consequences from Frontier [Feld Thoughts]
As I sit here in the San Francisco International Airport (they announce that so proudly over the PA when they tell me that the thread condition is orange every few minutes) I've been pondering the unexpected Frontier Airlines bankruptcy. My Frontier flight is now an hour late so I've had plenty of time to surf the web and try to figure out how / why this happened so suddenly. I'm also almost brain dead from my 10 day trip so it's hard to actually do anything productive at this point.
I've determined that the bankruptcy filing is simultaneously a smart survival move for Frontier and an example of the classic "unintended consequences" (which my dad also taught me result from "complicated mistakes.") This one is a doozy. I have no idea what the actual facts are, but the WSJ asserts that the Chapter 11 filing by Frontier was in response to their credit card processor (First Data) increasing they amount and length of time of their holdbacks for credit card receipts.
Let me get this straight. I'm a customer. I charge a Frontier ticket on my credit card. First Data processes it but now holds the money until they decide to release it to Frontier. As a result, First Data effectively controls Frontier's cash flow (since almost all customer purchases are made on credit cards.) All right, I got it.
In one of the articles I read, it was stated that First Data increased the holdback percentage from 45% to 100% and the time duration until "the flight was taken." That strikes me as completely unreasonable on First Data's part - they now control the float from the moment of purchase until the moment of flight completion confirmation (which I expect is a non-trival reporting process for Frontier.)
Frontier's response - "Dear First Data: Bullshit. We are filing for Chapter 11 and invalidate your ability to change the holdback terms. See you in bankruptcy court."
All the chatter I heard today while waiting for my plane was whether Frontier would be going out of business and whether our plane would arrive. The fact that is was an hour late didn't help. Nor did the fact that the electronic scoreboard announcing the flight time was not working and the gate agent wrote all the info on a piece of paper taped to the wall. Everyone at Frontier is keeping their chins up and saying "no problem - this is just a technicality."
Hopefully I'll get home today. As one of my twitter friends told me - "at least I'm not on American Airlines."
We should peg the USD to the Sand dollar. [Hansen Report]
Valleywag reported today that google required DoubleClick employees to sign a non compete. And then there was a subsequent layoff after the acquisition . Many folks asked me what I thought since I have been so vocal about ending non competes. Here are my thoughts. I don’t like non compete ageements. I don’t think they are fair and they stifle innovation. I believe that California has it exactly right. Non competes are not permitted or enforced However even in California there is an exception. Non competes are permitted if they are part of a negotiation in merger or acquisition. In that case the courts have ruled in CA that the two parties are balanced and exchanging value. In other words its part of the sale price of the company. That balance does not exist in a normal employer/employee ageement I think that is the right model. Get rid of non competes except for a m&a. But if Valleywag story is accurate than I think that this was consistent with the letter of my opinion but breaks the spirit in my view unless employees and common shareholders knew that their portion of the $3B sale to google was going to include a non compete and then a layoff.
Indian IT Services Crunch [Paul Kedrosky's Infectious Greed]
Two points make a trend, and I've now heard today from people at two major IT services firms that business, especially in India, is slowing to a crunching halt. Can't be good news for Tata, et al.
The VC "I Know a Guy Who Knows a Guy" Thing [Paul Kedrosky's Infectious Greed]
I was talking to an entrepreneur yesterday who decided not to take money from a VC, in part because the VC couldn't really answer his question. And what was that? It was the "What can you do for me?" question. I said, "I bet you got the 'I know a guy, who knows a guy, who knows Sergey/Eric/Jerry/Bill/Steve/etc.'" answer. To which he responded, "How did you know?"
T. J. Rodgers discusses the promise and pitfalls of the most popular alternative-energy sources (other than solar). Ethanol? Rodgers says it’s a “total waste.” However, bioengineering and genetic engineering that address the entire corn plant, rather than just the fruit, hold promise. Wind power? Rodgers says it produces high energy volume while remaining cheaper per kilowatt hour than solar. Nuclear? Not only is it cheap and efficient — it’s safe.
T.J. Rodgers remains far too sane to be talking about public policy, clean tech, and energy policy.
T. J. Rodgers discusses the promise and pitfalls of the most popular alternative-energy sources (other than solar). Ethanol? Rodgers says it’s a “total waste.” However, bioengineering and genetic engineering that address the entire corn plant, rather than [...]
I've been playing a lot with some Monte Carlos for another project, and along the way I got to messing with the old drunk/gutter/lamppost problem. You know the drill: A drunk starts at a wall X paces from a gutter, with a lamppost half-way between him and the gutter. Assuming he only takes one step at a time, and every step is randomly toward the wall (but not through it) or toward the gutter, how long does it take him to get to the gutter, on average?
Long story short, the graphs of his staggering progress are good fun, reminding me an awful lot of a typical public equity. That point was driven home recently when I had one of these graphs up on my screen and a colleague had to be convinced that it wasn't a stock.
What is Twitter, and Why Should I Use It? [The Gong Show]
The sordid story of VSP Capital is finally over. Let’s all breathe a sigh of relief, and take a collective shower.
For the uninitiated, here is a backgrounder: VSP was a venture capital firm in San Francisco, which focused on early-stage technology companies. It closed its third fund with $185 million in early 2005, but within months lost most of its partners and all of its LP commitments.
At the heart of the problem was a sexual relationship between Joanna Rees (then in the midst of a divorce) and John Hamm (then married). The issue wasn’t the coupling, per se, but rather Rees and Hamm’s attempts to keep it under wraps. They both denied its existence when asked by fellow VSP partners, which bred an untenable level of distrust. I also had sent Rees an ambiguous email to Rees about the situation – I didn’t name names – but she responded by specifically asserting that neither she nor Hamm were romantically involved.
By that May, three of the fund’s five general partners had quit. Only Rees and Hamm remained, and LPs used “key man” provisions to effectively discontinue the fund. VSP III had only made a small number of investments, and a decision was made to auction them off. But even that process was fraught with controversy, as Vannelli seemed to believe that an email from Rees could be construed as an attempt at self-dealing (a charge both Rees and Hamm strongly denied at the time). In the end, Hamm and Vannelli each ended up with one of the portfolio companies, with the third auctioned out elsewhere. By that time, Hamm had also officially left the Fund III partnership, in order to expedite the auction process.
That September, Rees and Hamm filed suit against both Vannelli and Crisp, alleging breaches of fiduciary duty, constructive fraud and misrepresentation and deceit. Taken as a whole, the 15-page suit argued that Vannelli and Crisp engaged in activities that led to the disbandment of VSP’s third fund, thus depriving the partnership of tens of millions in management fees and expected carried interest.
