Month: October 2011
Today’s VC Post of the Day is from Fred Wilson (Union Square Ventures) titled VP Engineering Vs CTO. This is a topic near and dear to our hearts, especially since I (Brad) have been a CTO but never been a VP Engineering (nor would I ever want to be one – I’d suck at that.)
I’ve written about this on Feld Thoughts before in a post titled CTO vs. VP Engineering (I wonder how Google is going to deal with that SEO – eh, not really, Fred has more Google juice than me) and our friend Todd Vernon (Raindance co-founder / CTO; Lijit founder / CEO) has also written several really good posts about this titled CTO vs. VP Engineering (another take) and CTO vs VP Engineering (reprise). It’s worth noting that people who write about the difference between CTO’s and VP Engineering’s don’t seem to be very creative in the Title category.
I just noticed a late breaking post from Werner Vogels, the CTO of Amazon, referenced in the comments on Fred’s blog. It’s titled The Different CTO Roles and is a nice addition to the mix.
The VC post of the day is from Ben Horowitz (A16Z) and is titled Lead Bullets. Ben tells a story from his time at Netscape when he discovered Microsoft’s IIS was about to ship, was 5x faster than the Netscape Server product, and was free. He went searching for a bunch of silver bullets to solve the competitive issue (e.g. different market segment, acquire someone, scale back and re-segment the product). Ultimately, the solution was simply to use lead bullets – make the Netscape Server product better than the IIS product. Sure – they still addressed the other things but if they hadn’t taken on the product issues and made a superior product, the rest probably wouldn’t have mattered much.
Ben ends with a strong call to action for any entrepreneur:
There comes a time in every company’s life where it must fight for its life. If you find yourself running when you should be fighting, you need to ask yourself: “If our company isn’t good enough to win, then do we need to exist at all?”
David Skok (Matrix) has today’s great post up titled Multi-axis Pricing: a key tool for increasing SaaS revenue. If your business uses a subscription pricing model, this is a must read post. While David positions it as SaaS related post, it applies to any subscription model, including consumer and add-ons to hardware products.
It’s Monday and our friendly neighborhood VCs stored up their posts over the weekend and launched a few with a vengeance. Today, we have three great ones.
Roger Ehrenberg (IA) writes about mentors in his post Mentors: an essential engine for growth. While he wrote it on Saturday, it’s still applicable on Monday.
Fred Wilson (USV) has his normal MBA Mondays series with a guest post from Andy Sack titled Revenue Based Financing. It’s an advertorial for Andy’s firm Lighter Capital but is a really good explanation of how revenue based financing works.
Charlie O’Donnell (First Round Capital) wraps up our posts of the day with a dynamite one titled 10 Misperceptions About Venture Capital.
I love this post from Bryce Roberts (OATV) titled You’re Doing It All Wrong.
Every great company I’ve ever worked with has its own style, personality, approach, strengths, weaknesses, and quirks. Experience – and inexperience – when combined with an amazing new opportunity, creates really unique characteristics that – over time – mix with other company DNA to create new characteristics. Funny – just like humans.
This is going to be fun. Rob Go (NextView) is taking on “Startup Jargon” with a new series. His first post is about Disruption, a word I never manage to type correctly the first time (I always type it as distruption.)
Many moons ago Fred Wilson wrote a great blog series on VC Cliches. It’s timeless. Let’s hope Rob lives up to Fred’s standard with the Startup Jargon series. Go Rob Go (sorry – couldn’t help myself on that one.)
Albert is a hard core developer turned VC. He’s started five companies, has an undergrad degree in Computer Science from Harvard and has a Ph.D. in Information Technology from MIT. Yes – he codes. His first post in the new series, Tech Tuesdays: Computing’s Building Blocks (Overview), is up.
Wednesday and Thursday are still available? Anyone out there ready to take them on?
And there you have it. We’ve completed our series on convertible debt and hope that you enjoyed it. If we ever get around to writing a second edition of Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist we’ll be sure to include this as well.
If you go to the resources section of Ask the VC we’ve included standard forms used in a variety of venture deals. As of this posting, we’ll include some standard convertible debt documents subject to the disclaimer that we aren’t you lawyers and make no reps or warranties with respect to these documents, so use at your own risk.
Scott’s a new VC blogger – I’ve gotten to know him over the past few years on the Return Path board and he’s a dynamite thinker. He’s got amazingly useful experience (and stories) from his last company – IronPort – and this post is a good example of his insights which are backed up with real experience.
Once again we continue our series on convertible debt deals. Today’s subject is early versus late stage dynamics.
Traditionally, convertible debt was issued by mid to late stage startups that needed a financing to get them to a place where they believed they could raise more money. Thus, these deals were called “bridge financings.”
The terms were basically the same unless the company was fairing poorly and there was doubt about the ability to raise new capital and / or the bridge was to get the company to an acquisition or even orderly shutdown. In these cases, one saw terms like liquidations preferences and in some cases changes to board and / or voting control come into play. Some of these bridge loans also contained terms like pay to play.
Given the traditional complexity and cost of legal fees associated with preferred stock financings, however, convertible debt became a common way to make seed stage investments as it tended to be simpler and less expensive from a legal perspective. Over time, equity rounds have become cheaper to consummate and the legal fees argument doesn’t hold much weight these days. In the end, the main force driving the use of convertible debt in early stage companies is the parties’ desire to avoid setting a valuation.