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 August 9th, 2010 |  |
It’s hard to explain why the people who participate in the Pan-Mass Challenge as riders and volunteers make such a big deal of it. For my part, I make it the center of my summer activities and the almost singular goal of my cycling training efforts for the seven months before the event. Like the others involved, I talk about it frequently and nag my friends about donating to the cause – fighting cancer. I think about it a lot.
The focus may all seem nutty if you don’t see it for yourself. The thousands of people riding (5,200) and the thousands more (3,000) supporting the ride; the people cheering on the sides of the road through every small town the riders travel; riders with the names and pictures of their family members killed by cancer on their backs and bikes; tractor trailers worth of food and goods donated by stores to support everyone involved; the woman on the side of the road holding a sign that says, “I’m a cancer survivor because of you.” It’s so impactful and meaningful that being part of it becomes a drug. Maybe even a way of life.
I guess that’s why I’m crushed that because of my previous knee injury, I couldn’t do day two of the ride (Bourne, MA to Provincetown, MA). A combination of obligation, guilt, desire and a deep down need for the endorphin rush I get from the athletic accomplishment all combine to make me miserable about not finishing what I started.
Fortunately, my knee held out for most of the first day, which I finished stronger than I expected to, although way off my personal best for the ride. The last 20 miles got tough. My right knee gave out and I had to pedal almost exclusively with my left leg which, like most of the left side of my body, has been ignored for most of its life – I’m very right-sided. This is hardly heroic. There are a few PMC riders who don’t even have two legs. I saw one rider with a prosthetic leg (from close to the hip) and another riding with one leg without a prosthesis. Those guys are heroic . . and insanely strong.
The other heroes are those that donate to the cause. For my part, that’s those of you who donated to and supported me on my ride. This year, my supporters donated $8,950 (so far) to the fight, the most I’ve raised in any of the seven years I’ve ridden. To all of you, my apologies for not holding up my end. My heart was in it, but my body couldn’t back it up. I let you all down, though, and I feel terrible about that.
My family stepped up to fill in some of the hole I left by not riding on day 2, each of them volunteering for the event. My wife has volunteered for years, but this year even my kids got out of bed at 5:00am to participate. It was a real family effort.
For the first five years I rode in the PMC, my life was hardly touched by cancer. Since then, we’ve lost my mom (a multi-occurrence cancer survivor), my aunt Gerry (lung cancer) and my wife’s aunt, Bev (stomach cancer). Additionally, a very close friend who I have known most of my life was diagnosed with multiple myeloma, almost being caught too late. Scary, scary stuff.
Thanks you so much for your donation and support. As soon as I get my Steve Austin bionic knee replacement, I’ll be back in the saddle and prepping for next year’s PMC.
July 26th, 2010 | |
My good friend Dave sent this to me this morning. I laughed so hard I almost went into convulsions.
Source: SMBC
July 15th, 2010 | |
Because of a nasty knee problem, I haven’t cycled much this year. Even so, I committed to ride in this year’s Pan-Mass Challenge, the largest charitable sporting event in the world and the primary fundraising activity for the Dana Farber Cancer Institute. For the last month, my training has been slow, but steady. Lots of stretching, ice, slow speeds and low mileage. My knee has hung in there with only relatively minor pain. That was, until a couple of days ago.
About five miles into a 30 mile training ride, my right knee gave way. It felt like someone hammered a large nail into the side of my knee. At first it just hurt on the downstroke, but as I struggled to get home, it hurt at all points of the pedal rotation. Eventually, I had to unclip my right shoe and just pedal with my left to get home (it’s not that weird, many cyclists practice pedaling with a single leg to perfect their form – I do it from time to time).
I’ve stayed off the bike for the last couple of days and probably won’t even test the knee again for a couple of more. I’m ignorantly confident that I can manage the situation. I’m going to try to get in to see a doctor before the PMC as well to see what can be done. If I’m going to have surgery on the knee, might as well inject it full of crap that relieves the pain beforehand, right?
On a more positive note, fundraising for the PMC this year has been terrific. Actually, it’s been the donors that have been terrific. Thanks so much to everyone who has expressed support for me and, more importantly, the cause. So far, I have $8,000 committed to support the Jimmy Fund, Dana Farber’s fundraising arm. If you haven’t had the chance to donate, and cancer research is a cause you desire and can afford to get behind, there’s still time (go here).
July 11th, 2010 | |
I often run across early stage companies in a real quandary about how much money to take in their first round of funding. That is, the round just beyond the Ramen noodle eating, avoid starvation round that is usually funded out of your own pocket. The round that really gets things going once you’ve established a team and product viability. The advice they often get – build a spreadsheet outlining fixed and variable costs over the next year or more. Estimate headcount, salaries, rent, capital equipment needs, etc. and, voila, you’ll have your number. That’s fine, of course, but the spreadsheet should be the end result of the planning process, not the process itself. In my experience, there are certain high-level guidelines that should be used to determine how much money should be taken.
Using these, you’ll ultimately have the data you need to plug into a spreadsheet and generate a cash flow estimate – one used for planning AND tracking cash flow – based on the high-level needs of the company and with an eye to future investment rounds.
My thoughts here hold true whether you’re pricing your round or, for the most part, if you’re doing a convertible note. I should also state that this post looks at the question primarily from the entrepreneur’s point of view, although is certainly aligned with the thinking of investors as well. As always, your mileage may vary. This is my opinion and it’s worth exactly what you’re paying to read it . . .
- Take enough money to securely get you to a step up in valuation. I’m not talking about some marginal increase, but a real increase in valuation – double, triple or maybe even more. What creates that? Usually the achievement of some significant milestone. It’s great if that’s revenue or profit, but a large number of active users or even a major product release are good milestones to increase the perceived value of your company. It depends on what you’re doing. A web service is going to have different metrics than an enterprise software company which will have different metrics from a hardware company, for example.
- Take enough money to move quickly, but assume that you will not move as fast as you think you can. Don’t starve the company. Make sure you take enough money so that when you look back over any preceding month of operation you don’t say, “I could have done so much more with $X more.” Additionally, take into account that things will not always go as well as you’d like and, while you’re moving fast, you need to leave some space for stumbling on your way. Map it out as you see it, then add a dash of conservatism.
- Take enough money to hire the key team members you need – that’s where your leverage is. Never, ever rob yourself of great human resources. Success begins and ends with the level of people you add to the team.
- Valuation is less important than you think it is. Yeah, this is a hard one to buy into. If your valuation sucks, make sure you’re following the previous guidelines, swallow hard and take the same amount – the amount you actually need. If you are truly uncomfortable with how much of the company you’re trading for cash, go out and look for an investor who will give you a better valuation – but don’t try to do your startup on the skinny, it’s already going to be hard enough to succeed. Keep in mind that your odds of succeeding are not highly correlated with the amount of stock you retain.
- Leave yourself some runway to close the next round. Many young companies forget this when planning for the uses and needs for cash. It’s unlikely that you’ll have someone at your door ready to write a check the day you run out of money. You wouldn’t want to hand over such leverage to someone anyway. Make sure you have enough money to fund you through the time and effort to get the next round closed – at least 90 days. 120 to be safe.
No, it’s not a science. In the end, the most important part is to get the money you need and to get moving. Time is your biggest competition and it works tirelessly 24/7 to kick your ass. Try not to get caught in abstract notions about valuation. Do a sensitivity analysis, it’s likely to be less important than you subjectively think it is. That’s not to say it’s unimportant, but you should think about what the valuation being offered really means in terms of what you take away from the company given various scenarios. Ask yourself what it is you want to achieve, personally. If the valuation doesn’t seem right after that, move on and find someone else to invest. Otherwise, take the money you need and start executing. And don’t forget the spreadsheet. It really is a good tool.
June 20th, 2010 | |
When recently watching a father play with his small child, it occurred to me that while I’ll always be a father and hope to remain a “dad,” I’m not a “daddy” any more and I kinda miss that. My kids will turn 20 and 18 this year. They’re adults. They rely on me still, of course, but don’t really need me. No more seeking protection by my side; arms thrown skyward indicating a need to be picked up or climbing into bed between my wife and me during a thunderstorm. Their love remains unconditional, but it’s much less overt and obvious than it used to be. They have real, established lives that don’t involve me and, in some sense are more important than the decreasing portion of their lives they share with their father.
Nothing too sad, here. This is how happy and successful lives as parents work. I’m really, really lucky. My kids have grown in to terrific people and I have a blast spending time with them. I love them and I’m tremendously proud of both of them. My relationship with them is different now, but in its own way, it’s just as rewarding as it was at any time of our lives together. I’m going to work at remaining “dad” to them and relish every minute of it. Someday – hopefully a while from now – the need I have to be “daddy” will be fulfilled when I become a grandparent (yikes!).
For all of you that are still “daddies,” have a blast on Daddy’s Day today. Personally, I’m going to enjoy my Dad’s Day.
June 15th, 2010 | |
 The Pan-Massachusetts Challenge (Pan-Mass Challenge or just PMC) is a charitable, 180 mile, 2-day bike ride across the state of Massachusetts that raises money for cancer research and treatment at the Dana-Farber Cancer Institute through its Jimmy Fund. The ride was the first fundraising bike-a-thon in the country, starting in 1980. Since then, over 55,000 riders and 33,000 support volunteers have made it one of the largest and most successful athletic charitable events in the world, raising $270M for cancer research. Last year, 100% of the $30M raised was given to the charity (making up 50% of the Jimmy Fund’s annual revenue) made up of donations from over 200,000 individual contributions. This year’s ride will take place on August 7th and 8th with over 5,000 riders and almost 3,000 support volunteers (yeah, it’s big) along its several routes. This year represents my seventh time participating in this great event.
Last year I rode on a special route, 342 miles across Italy. This year I’m being a bit less ambitious and am doing one of the standard PMC routes without leaving the country or even the state. Unlike previous years, where I’d have about 1,500 miles of training under my belt by mid-June, a knee problem has kept me off the bike almost entirely for the last nine months. I’ve only ridden about 100 miles at this point. That’s gonna make the PMC a bit of a challenge this year and it might mean a lot of time in the saddle during the ride. I feel some bond with the effort, though, and want to make the best of it.
Last year, my aunt died of cancer and my mother, a cancer survivor several times over passed away. Earlier this year, my wife’s aunt died of cancer as well. Sadly, my story is not all that different from many others’ – most of us have been touched by the horrible disease.
While I think of myself as a generous donor to many causes, sometimes I need a kick in the pants to remind myself to write a check. If you’re like me, please feel free to treat this as your gentle nudge. While I’d appreciate your support and donation for my ride this year, supporting me isn’t what’s important. If you’re financially able, supporting a worthy cause like cancer care and research and a great organization like the Jimmy Fund is. So, sponsorship of my ride is less important than sponsorship of these organizations and efforts – financially or otherwise.
If you’re interested in donating to Dana Farber and this seems like a reasonable way of doing it, you can do it online at this web page or click on the PMC logo to the left. My PMC Gift ID is: wh0028 if you access the PMC web site another way. Of course, you can make the donation directly to Dana Farber or to the PMC.
No obligation and donations can be made anonymously, if you prefer. Thanks for even reading this far and if you choose to donate, thanks in advance for your support.
June 9th, 2010 | |
For the purposes of this post, I’m referring to a member of the board of directors of a company that does:
- Offer uninfluenced (by money, power or competition) opinions regarding the company’s strategy, tactics and overall execution decisions.
- Bring related wisdom gained through experience in the market, product, service, management or company structure.
- Actively stay informed about what the company is doing, how it’s doing it and how well things are going.
- Make themselves available to the CEO when needed.
- Make decisions that are in the best interest of the company, not necessarily in its board or its management team (when these differ).
- Show up at the vast majority of board meetings. This should state all of them, but stuff happens.
The independent director does not:
- Have any conflicts of interest with the company, including board participation in a competing company.
- Own a substantial percentage of the company (through any means including investment) that may cause a bias in decision-making.
- Have a job inside the company.
That’s actually the simplistic list, biased toward the role of the independent director in a small, private company or startup. The list for public company directors is much longer, more detailed and has a lot of legalese associated with it to cover the asses of the respective company and director.
I’ve been a director of 16 different companies so far in my life. I think I was a good director on most of those boards and I knew that I sucked on at least a couple of them. Several of the companies were publicly traded, but the vast majority were private, venture-backed companies. On those boards, I was (and still am at three companies) usually the only “independent” director. I put quotes around independent because I’m not sure that it’s possible to completely follow the rules I laid out above. As a board member of a small company, I usually get stock options or restricted stock in payment for my services and in larger or publicly traded companies, I get compensated with cash as well. Sometimes, I’m also a small investor in the company. Does that influence my decisions? Well, yes, sometimes it does. I hope and believe that when that happens, though, I’m still working in the best interest of the shareholders – the group that the board works for in the first place.
The boards of small, venture-backed companies actually vary little these days in my experience. There is usually one insider, almost always the CEO (sometimes, there are two – a founder and a CEO when the CEO is not a member of the founding team); one or more VCs; and one or more mutually agreed upon outsiders (sometimes there is more than one, but it’s hard to find qualified directors – in my experience having only one is the norm).
Like all directors, the independent director should help guide the company by taking a participative role in strategy setting; help the management team make high-level financial decisions; contribute to the setting of overall direction; determine compensation when appropriate; ask loads of probing questions; and advise the CEO when asked as well as, as needed, when not asked.
Most board-level decisions are made with reasonable thought and discussion. They are rarely . . . rarely a result of a non-unanimous vote (they are, obviously, always the result of a vote, it’s just usually unanimous). That doesn’t mean that disagreements don’t occur, it just means that reasonable people have a desire to work through things and to try and find consensus – before they vote on it. This is where the independent director has another, somewhat unique role on a board. That of the mediator or synthesizer of the parochial opinions of the insiders. That is, those that are employed by or heavily invested in the company. Often, this means bridging the gap between the management team and the investors of the company. Once in a while, it even means trying to find common ground between investors.
As an independent director, I find myself assuming this role a few times a year when things aren’t going well inside companies and once in a while when things are going according to plan or better. It’s time consuming because no party wants an arbiter. They just want it their way. At times, I feel like the Secretary of State working with Middle East factions. You get the idea. It’s enjoyable and frustrating. When it works out – which it almost always does because all parties want it to – it’s a lot of fun. The process isn’t always pretty, though.
As a CEO, I really appreciated the independent directors that sat on my boards. Even when their energy was directed at talking me off the ledge (i.e. I was wrong and needed to be shown the path), someone stepping in, holding my hand and offering me a different light to see the situation with was a huge help. I really valued having the person and role on my board. Similarly, I knew the independent director was working with other insiders to try to find common ground when he/she felt that the management team was in the right.
So, there are two lessons here. For those interested in being an independent director, be forewarned, you have a unique role to fill in addition to the normal directorship role. It’s an opportunity and responsibility in my opinion. For CEOs, recognizing the value that an independent director brings to the table should help you recruit the right person to fill that role and to, perhaps, think through the value of such a person on your board when it is being established.
June 2nd, 2010 | |
After yesterday’s phenomenal Angel Boot Camp in Cambridge (MA), I’ve been thinking about a long overdue post on the topic. I did my first angel investment in 1994 and I’m now in the process of wrapping up my 31st (individually, that is, not as part of a fund) – it’s also my third in the past six months. I’ve probably done about 30 more as a limited partner in seed funds and incubators along the way as well. All in, that probably makes me a second tier angel investor, at least in terms of deals done. Third tier if you count the “super angels” who have knocked off hundreds of deals in shorter periods of time. That said, I was recently “voted” as one of Boston’s best angel investors – I think that say’s more about Boston’s investment community than it does about me, I’m afraid.
I invest because I have a blast doing it. It’s about 75% of the fun of running the company yourself with only 5% of the stress. I get to meet smart, energetic people with great visions and boundless energy. It keeps my head in the game, and when I can add value (in addition to money) to help a startup weave it’s way through product, market and management mine fields, I avoid feeling like the least productive member of society for yet one more day.
The difference between a second tier investor like me and the first tier guys (other than brains and talent), is that the first tier investors actually work at finding investments. I’m, dangerously (see below), more passive about it, reacting to the investment opportunities that come to me. I get to see my fair share of of potential deals, but by selecting from a smaller set I not only miss loads of opportunities, but my comparative perspective is likely skewed – the best companies I see may be among the worst potential investments out there.
Fortunately, I’ve been moderately successful with this type of investing. A little over one third of my investments have provided reasonable returns over time with a few big successes doing most of the financial heaving lifting for my “fund.” While my 300 foot yacht with accessory submarine and helicopter remains on the wish list for affordability reasons, I haven’t had much trouble putting food on the table.
While I don’t have any absolutes when it comes to investing, I do have some guidelines that I loosely attempt to adhere to, at least when they’re convenient. Some of them are general and are similar to those used by many angel investors. Others are more personal and, for one reason or another, I’ve picked up over time as a result of my investment experiences.
The general guidelines:
- “Drill more holes” – I once heard the CEO of Shell Oil speaking with analysts at a conference. When asked how Shell was going to diversify in the coming year, the CEO responded with the statement, “we’re going to drill more holes.” Investing in many companies is the only way to balance the risks of markets, teams and competition. Maintain a relatively large portfolio.
- Invest in stuff you understand – bright shining objects attract attention (“we have the basis for a cure for cancer”), but the more you know, the less shiny things often look. If you can’t judge the team, market and product relatively thoroughly, it’s probably not a wise investment.
- Keep some powder dry for subsequent rounds – while the best return in a successful investment comes from investing earlier, holding some cash back to see how the company does and to play alongside any institutional money that comes into the company mitigates some risk and ensures you’re playing on the same terms as the rest of the investors.
- Everything looks good during the honeymoon – don’t make assumptions that problems you see will go away or that things, in general will get magically better. They won’t. While making an investment, you’re probably seeing the company in its best light. Things will likely get worse before they get better.
My Personal Guidelines:
- I don’t like convertible debt – the investor takes on an inordinate amount of risk with a convertible note which he/she is generally not compensated for. Think about a note holder who waits 18 months before a conversion is triggered with an equity investment at a higher valuation. For a small percentage (8-10%), the “investor” takes all the risk in funding the company without participating in most of the potential uptick in valuation. Some strange debt instruments are being created now to fill this and other holes, but for all their complexity, the company should just do a seed round.
- Team over idea – Ideas are cool, but quality teams are cooler. A great team can make a mediocre idea soar or morph the idea into a better one over time. Often, mediocre teams struggle to create success even starting with a great idea. I have to believe that the team can knock the ball out of the park. Only then do I consider the idea itself. As a corollary to this, I need to trust the CEO. Surprisingly, I find this to be a real issue from time to time.
- There has to be a grownup involved – for all the energy, drive, brains and talent in most startups, there’s often a dearth of wisdom. Someone needs to be involved to provide it and be a sounding board for the startup team. This person or these people, should be on the company’s Board of Directors (check out Every Company Needs a Board of Directors – Startups Too). They can come from inside or outside of the investor group (inside preferable). If I’m the best qualified person for the job, I’ll step up. Usually, though, it’s someone else involved.
- I hate leading a round – someone has to be in charge of representing the investors in the seed round. Negotiating the fine points of the deal, working with lawyers, getting everything signed, communicating every step of the way, etc. I hate doing it, but once in a while, I draw the short straw. I like investing along side seed or angel funds as a result. They’re pros and do it all the time. It’s not even heavy lifting for them. Most importantly, they’ll do all the herding of the investment cats required. It’s often a real pain in the ass.
- You can’t and don’t even want to try to tie up every loose end – as much as you’d like everything in the investment to be taken care of, completely thought out and totally bulletproof, it ain’t gonna happen. Stuff is going to change along the way anyway. The investor and founding team need to feel like they will make adjustments together as warranted.
- Friend’s before business – this is a personal rule of mine that have broken more than once. Fortunately, it’s never backfired on me. I take both my friendships and my involvement with companies seriously. As such, the potential for conflict is high if I mix them – things never go the way you plan. There are always going to be situations in which the investor needs to support either the company or the management team. Can you support the company over your friend? Your friend over the company? Why even put yourself in that position?
This is hardly a definitive list of any kind, of course, but hopefully it’s a starting point for anyone wanting to get involved in angel investing and for anyone looking for an angel investment. Keep in mind that none of these guidelines have anything to do with the actually business criteria used in selecting an investment. I’ll leave that for another post.
May 31st, 2010 | |
Today I did my first ride since last October when my knee went out on me. I’ve seen three doctors about my knee problem and all three say “surgery,” although none can tell me exactly what’s wrong with it. So, eschewing Western medicine, I sought out Eastern help through acupuncture, tensiology and whatever other voodoo I could find someone to throw at me (I know, bad attitudes don’t help, but some of this stuff really requires a huge leap faith – bigger than I can make sometimes . . . ). Nothing. Nada. I still can’t descend a set of stairs without pain. Totally sucks.
Having sat on my ass for seven long months, I thought I’d give the knee a try. Thankfully, I’m not compelled to take a hacksaw to my lower thigh at this point. There was some pain, but it is manageable with ice and a few dozen Advil. The three margaritas before and during dinner are helping a lot as well.
While focusing on my knee, I completely forgot how my body would deal with my prolonged absence from the saddle. It wasn’t pretty. I huffed and puffed up hills and my speed . . . well let’s just say I was able to move fast enough to avoid falling over. Thank God the ride was flat.
I was giving it everything I had to average 16.2 mph for the measly 12 mile ride today. Usually by this time of year, I would have 1,000 miles or so under my belt and my average ride would be about 35 miles. This year it’s now 12.2. The ride I look forward to the most all year, the Pan-Mass Challenge, is in eight short weeks. If my knee holds out, I might be able to get enough training in to do reasonably well. We’ll see. In the mean time, I’m gonna keep trying until I can’t ride any more. That may be tomorrow, but I hope not.
May 4th, 2010 | |
In the June issue of Car and Driver magazine, Aaron Robinson has a different cut on the Toyota unintended acceleration problem (can’t find it online yet). He states that in the great scheme of things, maybe it’s not a problem at all; maybe faster-moving Toyotas will keep them from blocking the left lane so the rest of us non-Toyota driving public can get somewhere at a reasonable speed.
While I would normally be thinking about Subarus in this regard, Robinson certainly has a point. He states of the stereotypical Toyota driver:
“. . . that they’re generally the slowest, most nervous drivers and that they were sent here to act as human restrictor plates on the speed of society’s activity.”
Yeah, yeah, yeah, this is a gross generalization which is unfair, as all generalizations are, blah, blah, blah. Keep in mind, while I might share this perspective, I’m just quotin’ here.
Robinson does have some remorse for his point of view and he worries that bad wishes toward a line of Camrys and Priuses blocking the express lane (aka, the left lane) on major roads in the US might actually be the cause of the problem.
“After all, nobody has yet proven that the amalgamated desire of everybody else on the road to rid the left lane of lumbering Toyotas and Lexuses isn’t having some kind of telekinetic effect on their throttles.”
Although, if this were true, I would have increased the speed of half the car brands on the planet by now . . .
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