gdp's Comments

Feld Thoughts : How I Think About Seed Investing As A VC

Wed, 4 Aug 2010 20:21:10 +0000

The seed debate seems to be raging around the option point (among others). I'm a lawyer not a finance maven, but your post seems to suggest that optionality is driven by the intent of the investor at the time of the investment (and perhaps her behavior throughout the period of the investment) , But isn't optionality inherent in all investments (albeit it is more visible in some cases than others). If you make the seed investment, you will, in all likelihood, be faced with a choice when it comes time to do the A round. How does the fact that you invested with an intent to grow the business rather than with the intent to make a decision later eliminate the option value of the seed investment? Don't "A" rounds have optionality and signaling issues too? If you are in the A you will, in all likelihood, have to decide if you want to play in the B round, and it is a pretty bad signal if you don't. The big difference is that A rounds are way more baked than seed rounds so the risk that once you are in the A you wont play in the B is much lower than the risk that once you are in the see you wont play in the A. Isn't the important difference between VC seed deals and angel seed deals that many (most) angels can only participate in the A round to very a limited extent because they don't have the funds for it, so they never had an option to begin with? This, not the purity of their motives is what eliminates optionality and signaling from their investments and does not eliminate it from yours, right?

Ideas and Thoughts from Winter Street VC and Entrepreneur : What is happening to New England Venture Activity?

Fri, 16 Jul 2010 15:12:29 +0000

I think that one quarter, taken alone, is too small a sample from which to draw a meaningful conclusion. We are still analyzing Q2 and should have our numbers by the end of the month.

Ideas and Thoughts from Winter Street VC and Entrepreneur : First half 2010 venture capital fund raising stats out

Sun, 11 Jul 2010 14:57:49 +0000

If memory serves me well, 2008 was down from 2007. I too have a morbid fascination with these stats. It might be interesting to list which funds in particular raised how much (compared to their prior funds). My (not particularly original) bet is that the industry is heading to be about 60% of the size it was in 2007 (as measured by fund size, numbers of funds, and numbers of investments).

Ideas and Thoughts from Winter Street VC and Entrepreneur : Is it easier to find programming talent in Boston than Palo Alto and New York?

Mon, 31 May 2010 18:47:35 +0000

Very interesting data. There is a lot of talk (particularly on Venture Hacks) to the effect that start-ups need to move to Silicon Valley. The principle reason given, as I understand it, is that that is where the talent is. I have had a client get a term sheet from a West Coast VC that required the client to move to the Bay area as a condition of the investment. Do I take it that you would say these numbers suggest that there is plenty of talent in Boston and that it is more readily available here than in Silicon Valley?

Ideas and Thoughts from Winter Street VC and Entrepreneur : New talk on forcing VC firms to register with the SEC

Tue, 11 May 2010 20:02:29 +0000

I have not followed this particular craziness, but aren't there two regulatory concerns: (1) Whether or not the fund holds or trades public stock or public debt and (2) whether or not the fund leverages with debt. Typical VC funds don't do either and they don't invest in companies that employ much leverage (beyond venture debt, which is always way less than the equity invested, or SVB type lines). It seems to me that it would be pretty easy to separate VC funds from Hedge funds.

Ideas and Thoughts from Winter Street VC and Entrepreneur : It's stupid to do anything non-standard in your seed round

Tue, 4 May 2010 01:02:55 +0000

Interesting post. I believe that everyone (well lot's of people) give lip service to the idea that 1x participating preferreds create misalignment, but the fact is that a very large number of investors (including high end VCs) regularly ask for it and regularly get it in early rounds and late rounds. With respect to angel investors, I agree that convertibles are way better than preferred, especially preferreds with preferences.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Q1 2010 New England Venture Capital Volume

Mon, 19 Apr 2010 20:41:55 +0000

That is my point. Venture financing is hard to get on a good day. But, it needs to be more available than it is now.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Q1 2010 New England Venture Capital Volume

Sun, 18 Apr 2010 19:51:57 +0000

We are in the middle of our quarterly research on New England based deals, so I don't know yet what we will think the outcome of the quarter was, but it seems clear that the trend towards recovery is continuing. BTW -- Desmond's comment and your reply are not mutually exclusive. Even at up 30%, it is still difficult to get financed. Also, I believe that there is too much variability quarter on quarter for a quarter to be indicative of the state of the venture economy. The low seems to have been Q2 of '09 and the trend seems generally up from there. Also I suspect, but don't know, that there is at least one non-random trend affecting the venture economy and that is that there are several large funds out raising more money. This is likely to be a distraction and to depress their rate of investment for a while.

Don Dodge on The Next Big Thing : http://dondodge.typepad.com/the_next_big_thing/2010/04/google-apps-redefining-office-productivity-a

Sat, 17 Apr 2010 02:18:57 +0000

Google won this battle when they developed a model that brings more people into the system at a lower cost and more easily than the software on the computer. This battle is over. The next battle is going to be about making it all available through the smart phone.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Naming a company

Tue, 23 Mar 2010 20:30:30 +0000

You might be interested in what one of my clients has to say about naming a company. Check out this post http://blog.thredup.com/whats-in-a-name-135

Mendelson's Musings : Why There Will Never be a Standard Set of Seed Documents (a.k.a “Why Brad Feld will Fail&rdquo

Sun, 21 Mar 2010 17:12:40 +0000

I too participated in the initial session. I missed several years due to scheduling conflicts but attended this year. My view is that we had a good high quality discussion (although, at this point the changes to the docs have become small tweaks). The knock on the forms has always been that they may be VC friendly. At the risk of bringing opprobrium upon myself, I will assert that some law firms market against them on that basis. Despite the fact that there are a few niggley things (like the way "broad based" is defined and used in the antidilution formula) that might be characterized as unfair to founders, I don't agree with people who assert that the NVCA forms are deeply and systemically biased. I take your point about regional differences, but VCs across regions (and within regions) have substantial consensus about the concepts that need to be included in their investment docs. Whatever you think of redemption rights, some very large percentage of deals have them. Angels and other seed players are too diverse and don't share a consensus around what they need in their investment docs. I think your partner, Brad, is going to have to segment the seed ecosystem and look for smaller groups where there is consensus as to needed terms. If he can identify some of those he may be able to get to forms with them. I wish him good luck.

Don Dodge on The Next Big Thing : http://dondodge.typepad.com/the_next_big_thing/2010/03/what-you-should-know-about-angel-investors-a

Sun, 21 Mar 2010 16:03:18 +0000

Good post. My experience is that, for very small investments, the efficiency of using convertible notes overwhelms all other considerations. You should be aware, in case you are not, that there is a lot of blog talk about standardizing series seed documents. Check out recent posts by Brad Feld, Jason Mendelson, Healy Jones and others.

Mendelson's Musings : Why There Will Never be a Standard Set of Seed Documents (a.k.a “Why Brad Feld will Fail&rdquo

Sun, 21 Mar 2010 15:35:53 +0000

So, all good points. The only thing I want to add to the discussion is that I think the NVCA forms project has been a massive success. With respect to Boston/New England series A deals, our firm has been tracking the use of the NVCA forms over two years (we track other deal points as well) and publishing the results quarterly in EEC Perspectives. Adoption rates for the NVCA forms in series A deals in Boston/New England in Q4 of 2009 were approximately 77%. There have been similar rates of adoption in prior quarters for the two years that we have been tracking the data. I have not aggregated the data and calculated a two year adoption rate, but I could have it done. We don't track west coast deals, so this data says nothing about the west coast. In my view, this level of adoption suggests that the NVCA forms project is a smashing success. Sarah Reed of Charles River Ventures was one of the moving forces behind the forms project. Brad and others should talk to her about how she did it.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Why the world doesn't need a standardized set of seed investment documents

Fri, 19 Mar 2010 17:53:18 +0000

Good thoughts. I think that the reason there will not be traction for these forms is that seed/angel investors are to disparate to agree upon one set of concerns. To the extent that seed means seed from VCs, forms may get some traction.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Microsoft needs to buy RIM; Apple vs. Google heats up

Mon, 15 Mar 2010 16:36:46 +0000

I plan to post on this from time to time and will let you know. Best, Dave

Ideas and Thoughts from Winter Street VC and Entrepreneur : Microsoft needs to buy RIM; Apple vs. Google heats up

Sun, 14 Mar 2010 20:46:19 +0000

Litigation (and patent litigation in particular) is the sport of kings. It will be fun (from a professional point of view) to see how this one sets up between Google and Apple. Separately, I think there will be some sort of antitrust action between Google and Microsoft. I am not sure how it will set up. (I have commented on this before.) My theory is that Microsoft bringing antitrust claims agains Google is the moral equivalent of an admission that Microsoft has lost the business battle. It suggests that market has gone to Google and now the only thing left for Microsoft is to scream foul play. But we will see.

Don Dodge on The Next Big Thing : http://dondodge.typepad.com/the_next_big_thing/2010/03/platform-shifts-mainframe-to-mini-to-pc-to-m

Mon, 8 Mar 2010 04:04:52 +0000

Nice post. Perhaps another way to say the same thing is that it is not so much the new hardware as the range of new things the hardware permits you to do. (This might be an instance in which the passive voice is best: Ultimate adoption is driven by the range of additional things that are enabled by the new tech.) You would not switch to the cloud if all you got was one more app (compared to the desktop model). But that is not the case, The cloud (and by extension mobile computing) brings in thousands more things you can do and billions (?) more people to do them. In the end it has to "win."

Ideas and Thoughts from Winter Street VC and Entrepreneur : Venture capital term sheet tips

Wed, 3 Mar 2010 23:33:54 +0000

I agree -- a nice piece on some practical things to look out for. I think a similar piece on angel/seed issues to be wary of (or at least to think about) might be a good idea. Hope all is well. Dave

Ideas and Thoughts from Winter Street VC and Entrepreneur : More evidence of the shrinking VC industry

Fri, 5 Feb 2010 16:40:10 +0000

I will make sure you get the mailing. It should go out early next week. And, yes, the numbers are showing what I suggested.

Ideas and Thoughts from Winter Street VC and Entrepreneur : More evidence of the shrinking VC industry

Tue, 2 Feb 2010 23:06:22 +0000

It is hard to disagree with your advice, but a lot of start-ups wont have the luxury of turning down money. I often find myself advising clients that they need to take the money where they can find it and deal with issues like the ones you raise when they come up. On a related note, I think our numbers will show that Q2 of '09 was the bottom for VC investments in New England and that Q3 and Q4 are trending up nicely -- but we are still a long long way from 2007 levels. Whatever happens, there is no excuse for not having fun. Best, Dave