Actually two dueling inspirational speeches. Very NSFW — contains, as they say, “strong” language.
Video: The Thick of It, Season 3 Episode 8, Ending speeches
Thanks to Fred Destin for suggesting we post some lighter fare once-in-a-while. And see why Mark Suster thinks inspiration is a critical piece of what makes an entrepreneur.
Thanks to FastIgnite, a startup advisory firm, for sponsoring Venture Hacks this week. This post is by Simeon Simeonov, the firm’s founder and CEO (and formerly a partner at Polaris Ventures). If you like it, check out Sim’s blog and tweets @simeons. – Nivi
The best strategy for not having to fire your co-founders is to not bring them on board in the first place.
One of the most common early-stage startup mistakes is building a weak founding teams. Since a good team is often the closest you can get to a good business plan, this one anti-pattern is the cause of many company failures. Before we dig into why this happens so frequently and what entrepreneurs can do about it, I want to share one of the formative stories from my early days as a VC.
Many years ago, I met a 20-something technical founder who had recently left graduate school with interesting technology in the enterprise search and knowledge management market. Beyond his compelling personality and the technology, he had an impressive approach that allowed him to deliver benefits to users without prior user setup or explicit user actions, using desktop and email client integration. To use a current analogy, it was like Xobni but better.
A week later, he came to Polaris with his founding team. He had three co-founders. They all had grey hair and so-so backgrounds. Over the course of an hour, I learned one of the three was a relative who, after hearing about the idea, pushed himself onto the team as “the business guy” and then promptly brought in a couple of former co-workers as co-founders. The net effect was that a backable founder had become essentially unfundable. I passed on the deal. As expected, the company went nowhere. I am friends with the founder and would like to back him some day.
This is an extreme example, but it underscores the randomness by which founding teams are created. Three disclaimers before we dive into the issues:
Arrogance and ignorance, in small doses, are powerful tools that help entrepreneurs focus and execute against overwhelming odds. In larger doses they make a dangerous poison that kills startups. In most cases, they are the root cause behind weak founding teams.
It’s no secret that startup business plans tend to evolve over time, sometimes substantially. Yet, at any given point along that evolutionary path, many entrepreneurs are over-confident that, this time, the plan will succeed. Then they look at the founding team and, if they think they are missing a key role, they may bring a co-founder on board. This process repeats itself up to the point where either the company converges to what it will likely end up doing in the next few months or the founding team gets to a size that makes additions practically impossible.
I recently met an entrepreneur who started working on a consumer social media idea about a year ago. Thinking he was building a small dot-com, he brought on a college buddy who had done Amazon Web Services work as a chief technical officer (CTO). In a few months, the idea shifted toward working with agencies. He brought in a VP of marketing from the agency space, because he was confident that was where the opportunity was. After a few more months, the team realized there was only a services business in the agency space. Now they are pivoting towards expert identification/collaboration in enterprises, and neither his CTO nor his VPM is right for the team.
The entrepreneur in this example is a smart guy. But he didn’t have enough experience to understand what would be required for a co-founder role over the early evolutionary path of the company. He didn’t fully appreciate the opportunity cost of making these early hires given his limited recruiting network and the pre-product, pre-funding stage of the company. Further, he did not know how to evaluate a VP of marketing. He ended up with a communications-oriented exec who — beyond lacking understanding of the enterprise domain — is not very helpful in general with product marketing issues. This is how ignorance hurts.
Keep in mind that when you recruit or you pitch investors, they don’t get the benefit of the history that might explain your decisions. Let’s imagine what goes on in a VC’s head:
“Shoot, this is a backable entrepreneur and the idea may have legs but the two other founders are B players and a poor fit for the company at this point. I could talk to the lead founder, but I don’t know about the personal relationships on the team and this can backfire. Also, I don’t want word getting out that I break founding teams. This can hurt my dealflow. Anyway, the CEO showed poor judgment in bringing these people on board. Also, there is still a lot of recruiting work to do whether the team changes happen before or after an investment. Frustrating… this could have been a good seed deal. Now it’s too complicated. I’ll pass using some polite non-reason.”
There is a principle in agile development that centers on minimizing wasted effort. One of the cornerstone strategies — supposedly one of Toyota’s rules, too — is to delay decisions until the last responsible moment. Because the future is uncertain, the idea is to make decisions with the most information. The emphasis is on “responsible,” because a lot of procrastination is bad too.
Last week, I wrote about how to raise money without lying to investors with this same principle. The logic also applies to building strong founding teams. Because you don’t know what your startup will end up doing, it can be a big mistake to hire the best people for this point in the company’s life.
The obvious solution is to build an amazing team of well-rounded, experienced athletes who can do anything that comes their way. The Good-to-Great companies put the right people on the bus and the wrong people off the bus. If you can do it, more power to you. However, you may have a few problems…
I am an entrepreneur, and I have team-building problems:
Here are some specific strategies for building founding teams. There are no silver bullets. Some of the advice is contradictory and situation-specific. Caveat entrepreneur.
If you successfully apply these strategies, you stand a better chance of going after the right people at the right time and bringing top talent on board.
You may not even have to fire your co-founders.
More: See Lee Jacobs’ posts on How to break up with your investor and How to break up with your co-founder.
This post is by Mark Suster, a serial entrepreneur turned VC at GRP Partners. If you like it, check out Mark’s startup advice blog and his tweets @msuster. And if you want an intro to Mark, send me an email. I’ll put you in touch if there’s a fit. Thanks. – Nivi
This is the last in a three-part series about the 10 things I look for in an entrepreneur. In Part 1, I addressed tenacity, street smarts, resiliency, ability to pivot, and inspiration. In Part 2, I discussed perspiration and appetite for risk. I elaborated on each of the topics in my blog series on VC startup advice.
Most successful entrepreneurs have an attractive mix of skills, know-how and personal qualities that separate them from the herd. Today I cover three more of these critical elements and throw in a couple of bonus entries that didn’t make my top 10 list but are important nonetheless.
One of the easiest ways to rule out an entrepreneur is when he doesn’t know the details of his business. There are tell-tale signs, and discussions about competitors often expose them. You can tell whether an entrepreneur has logged into his competitors’ products, talked to their customers, read news coverage of them and gotten the back-channel info.
You can tell if the entrepreneur has a deep-seated competitive spirit. Can’t go a mile deep on competition? Buh-bye.
Let’s talk about your product, and let’s look at your financial projections. Can’t walk me through them on a granular basis? Did someone else pull your financial model together while you did “your job”? Not good enough. The best entrepreneurs focus on details. They can tell you the square-foot costs of their property, how much they spend monthly on Amazon Web Services, and the 12 features being developed for the next release.
Another big tell is a CEO’s grasp of the sales pipeline. I can’t tell you how many CEOs I’ve met who can’t walk me through the details of their sales pipeline. I want the names of key buyers, when you met them last, who the competition is, and what the criteria is for making a decision. You think we’re just going to talk about your largest lead? Sorry. Let’s go through the whole pipeline, please. I care about the details, but I’m more interested in finding out whether you do.
Along with detail orientation, I have a strong bias for “doers”. When I ask for a quick demo and the CEO suggests a follow-up meeting with a sales rep because he’s not “a demo guy,” I usually think to myself, “A follow-up meeting probably isn’t necessary.” Similarly, if you need your CFO to walk me through your financial model, you’re probably not the right investment for me.
Ask any CFO I worked with as a CEO: They did the hard work, but I edited the spreadsheets cell by cell. In fact, I usually built the first three versions of the financial model (but then my ADD took over, and I needed a great closer to make the model complete). Founders need to be hands-on. As I wrote in an earlier blog post: “You can’t run a burger chain if you’ve never flipped burgers.”
A startup seeking investment from me once put their “president” on a call with me. When I told him that “president” was a strange title for a startup, he announced they also a CEO. When asked about their different roles, the president told me the CEO set the strategy while he traveled to conferences evangalizing on behalf of the company. “So who runs the company on a daily basis?” I asked. “Oh,” he responded, “we have a COO.” The company had under $1 million in revenue and was burning $850k a month. It had a strategy-setting CEO, a limelight-seeking President and a COO who ran the company.
I gave that company one of the cheekiest responses I have given in my two and a half years as a VC: “You don’t want to raise money from me,” I said. “The first thing I would do is fire you. Then I’d fire the CEO. Then I’d cut the burn to a realistic level and build a company.” They got their round done anyway from a big late-stage VC. One of the large parts of the burn was PR, marketing, and conference attendance. There are VCs who are fooled by all of this, but it doesn’t equal success. A year later the president and the CEO had moved on.
Bad VCs funded this madness in the first place and weren’t close enough to the company to see what was happening. When the CEO of an early-stage startup tells me he plans to hire a COO, I’m usually not interested in another meeting. (Funny side-note: The company was recently nominated for a Crunchie Award. Unfortunately, money can buy you awards.)
As I wrote in my previous post on perspiration, good ideas attract competition.
Everybody these days is fascinated by the “private sale” concept offered by companies like Gilt, Ruelala and HauteLook. There are some great companies in this category, but the initial category killer was a French company called Vente Privee (which translates to “private sale”). From what I’m told, the founders were in the Schmatta (Jobber) business selling other people’s excess, end-of-line inventory at a bargain. There wasn’t the same end-of life infrastructure that we have in the U.S. (think T.J. Maxx), so they had an early lead. When the internet part of their business took off, a number of competitors surfaced.
By then, Vente Privee was a powerhouse and they used that market power. They made it clear to suppliers that Vente Privee would stop carrying their products if they supplied the newly formed competitors. This was a bare-knuckle industry, and money was at stake. Good competitors fight.
Just ask Overture about Google (“Don’t be evil”) and how they competed in international markets. It wasn’t all smiles, hugs and “let the best man win.” A lot was at stake, and Google competed fiercely.
Have a nice little idea and think you can carve out a large market niche? Not if you’re a nice guy. I’m not saying you need to be an arsehole, but entrepreneurs hate to lose. They’re hyper-competitive in everything they do. I look for that fighting spirit in the individuals at my table. It doesn’t matter if they’re playing golf, poker, Ping-Pong, Scrabble, or Guitar Hero. Entrepreneurs play to win, and they take losing seriously.
Think Mark Zuckerberg doesn’t have some sleepless nights about Twitter despite having more than 300 million users himself? Steve Jobs isn’t a “nice guy.” Nor are Bill Gates, Steve Ballmer, Marc Benioff, Larry Ellison, Tom Siebel, Rupert Murdoch, or any number of people you’ll find who built empires.
Being an entrepreneur is about moving the ball forward a few inches every day. What astounded me when I switched from being a big-company executive to an entrepreneur was the sheer number of decisions I had to make on a daily basis.
They sound so basic when you’re not the one having to make them. Should you go with Amazon Web Services (AWS) or have your own servers hosted at RackSpace? Should you build in Ruby, Java, or .NET? Should you sign a two-year lease or rent month-to-month? Should you hire an extra developer now or a business development resource? Should you take angel money or just go for a seed round from a VC? Is venture debt a good idea? Should we launch at TechCrunch50? Should we charge for a product or offer freemium? Should we ask for a credit card up front, even if we don’t charge for 30 days?
It never ends. There is no such thing as a startup decision with complete information. The best entrepreneurs have a bias for making quick decisions and accept that, at best, 70 percent of them will be right. They acknowledge some decisions will be bad and they’ll have to recover from them. Building a startup might be a game of inches, but you don’t get timeouts to pause and analyze all of your decisions.
I recently have been considering investing in an entrepreneur in Silicon Valley. He was deciding between taking another senior role at a prominent Silicon Valley tech company and starting his own business. I told him I didn’t think he needed any more resume-stuffers and now was the time to go do something big on his own. Within a week he delivered a deck outlining his strategy for a new company. A day after we discussed the possibility of him flying down to meet with my partners, he was on a plane.
He then booked tickets to China to talk with suppliers and promised to revise his strategy by the time he returned to the U.S. He is getting stuff done in entrepreneur years, which is a step change faster than dog years. By the time we speak again, I’ll be able to judge results by the quality of his thinking about the opportunity. But by that time, I imagine, he will have made so much progress that he’ll question whether he should take my money. I’m certain he will have talked with other funding sources. This is how it should be.
If you’ve been “thinking about doing something” and batting the idea around with your favorite VC more than six months, don’t be surprised if they’re not prepared to back you in the end. Entrepreneurs don’t “noodle”. They “do”.
Now that I’ve addressed the top 10 skills I look for in an entrepreneur before investing in them, I’d like to offer two additional qualities that can be critically important but won’t necessarily hold someone back from seeing success.
This isn’t a “must” for me, but it’s certainly a huge plus when entrepreneurs have it. You can spend a year putting your hypotheses on paper while researching a market. But you never really have a handle in the minute details of the industry until you’ve lived in it. If you are launching mobile application and have sector experience working for Apple, Blackberry, AdMob, or JAMDDAT, then I know your product will have your experiences baked into it.
I learned this lesson when I launched my first company in 1999. We offered a SaaS document management in the cloud (we were called ASPs back then). I had no experience in document management systems beyond being a user, and nobody had SaaS experience because the market was too new. We were forced to make assertions about features we thought people would want, how to price them, and how to overcome objections to managing data in the cloud.
When I began hiring product managers, sales reps, and implementation staff, I benefited from what employees learned working at places like Documentum and OpenText. They brought the lessons they had learned in their companies over the previous decade. I know this stuff cold now. So when I launched my second company – which was also a SaaS Document Management company – we already had a vision for what would do well in the marketplace.
Domain experience also brings relationships. If you spent three years building relationships with senior executives at media companies, a starting point for your next business ought to be, “How can I exploit these relationships in the next venture I launch?”
One successful entrepreneur I know wanted to launch his next venture in financial services because it was a bigger industry. Fine. But I pointed out that he would be up against competitors who had spent years building relationships with the big financial services companies (as well as channel partners), and he would be starting from scratch. I’m not sure why you’d do that unless you had to.
The most obvious attribute that didn’t make my top 10 list is integrity. It is very important to me. If I thought I could make a lot of money backing a dishonest person, I personally would pass. I know many private equity firms that would not. I’m proud that most early-stage VCs I know care about making money ethically. So you should include integrity on my personal list of attributes required to raise money from a reputable, early-stage VC.
Unfortunately, people with low integrity can be successful and can raise money from investors. So I left it off the master list. I personally know a billionaire CEO who I wouldn’t put high on the list of people with high integrity. But he built his company from scratch to become a very large enterprise. He is well respected (but not liked) in his industry and in his company. He spends a lot of money on personal marketing so the story is written the way he wants it.
But I’ve seen his actions up-close and wouldn’t claim that they are high on the integrity scale. I’ve heard this about similar technology executives of some of the biggest names in history.
I also know him to not be a very happy man. Money can buy a lot of things but, as the saying goes, it can’t, in and of itself, buy you happiness. I believe that true happiness comes from a sense of fulfillment, giving, and doing what your moral compass knows is right. Better that you be this person, whatever level of business success you achieve in life.
If you like this post, check out Mark’s blog and his tweets @msuster. If you want an intro to Mark, send me an email. I’ll put you in touch if there’s a fit. – Nivi
Over the last few months, we’ve built and tested a new “ad” format on Venture Hacks that I really like. I’m writing this post to launch it (voila), describe the ads, and pitch new sponsors.
You’ve already seen the ads. They’re ‘sponsor posts’ like How to raise money without lying to investors by Simeon Simeonov. They’re labeled with an image like this,
and an introductory message from us: “Thanks to FastIgnite, a startup advisory firm, for sponsoring Venture Hacks this month…”
We expect sponsor posts to meet the same standards as our own posts: startup advice that tries not to suck. I think we’re succeeding. Sponsor posts get 50-150 retweets by cool people and 10-30 substantial comments. They get on the front page of Hacker News and Techmeme:
The sponsor posts often perform better than our own posts. They do well because you read them and spread the word. Thank you. And the sponsors are already great bloggers, so all we have to do is give them a little distribution bump.
Our challenge now is to maintain and increase the quality of our sponsor posts. Upcoming sponsors include George Zachary from Charles River Ventures and WordPress’ lawyer, Matt Bartus from Dorsey & Whitney.
Sponsor posts are a great way to start a conversation with the Venture Hacks community — one of the best startup communities on the Web. They’re a chance for our readers to get inside the minds of their potential business partners — whether you’re a VC, lawyer, startup, or service provider. Past sponsors call it a “no-brainer.”
Sponsor posts get 5000+ views, 50-150 retweets, 10-30 substantial comments, and 50-100 new Twitter followers. We’re the only site in the world where the ads perform as well as the content. Learn more about sponsoring Venture Hacks.
We want to ask for your help. Who should be sponsoring Venture Hacks? Who do you want to hear from? Who has a great blog that needs more distribution? Please send them a link to this page describing our sponsor posts and ask them to consider sponsoring Venture Hacks. And please send me your suggestions in the comments.
I recently described our sponsor posts to Eric Ries and he called them “ads that are really content you can share.” I like that a lot.
Thanks to FastIgnite, a startup advisory firm, for sponsoring Venture Hacks this month. This post is by Simeon Simeonov, the firm’s founder and CEO (and formerly a partner at Polaris Ventures). If you like it, check out Sim’s blog and tweets @simeons. – Nivi
“Prediction is very difficult, especially if it’s about the future.”
By penalizing entrepreneurs who are humble and honest about how their companies will grow, many investors cause entrepreneurs to over-promise (and later under-deliver) when they’re raising money.
The histories of some of the best-known technology companies demonstrate the power of luck, timing, the mistakes of incumbents, and solid execution.
Execution is the main tool under a startup’s control but it’s often under-valued by investors.
So it’s not surprising that most entrepreneurs come to pitch meetings armed with very precise statements about a very uncertain future and a list of proven strategies guaranteed to make their company successful. While sitting through these pitches, I sometimes wonder which is worse: the entrepreneurs who know they’re spinning tall tales or the ones who “got high on their own supply.”
Instead of bringing entrepreneurs back down to earth, some investors push them further into orbit. Some VCs ask a seed-stage, pre-product startup for a detailed five-year financial plan. When I was a partner at Polaris Ventures, I saw many of these spreadsheets built “for fundraising purposes.” We didn’t ask for these spreadsheets — entrepreneurs had usually built them after meeting other, less early-stage, investors.
I find the process of planning — and understanding how a founder thinks about a business — educational and valuable. But pushing the exercise to the point of assumptions layered upon assumptions is not just wasteful, but dangerous, because it sets the wrong expectations.
After a few pitches, entrepreneurs realize that the distant future is safer territory than the immediate. It’s easier to boast about 30 must-have features your product will have in three years, than to show the three must-have features in the current prototype. It’s easier to talk about how you’ll recruit world-class CXOs when you’re big and successful, than to show a detailed plan for bringing in an amazing inbound marketing specialist, when everyone on the team is getting paid below-market rates to conserve cash. The examples go on and on.
I’ve co-founded four companies. The two that most quickly and easily raised money did it with nothing but slide decks. Both were funded by Polaris, which has a lot of experience with very early stage investing. We didn’t waste time over-planning the future in those two companies.
And for good reason. Both startups ended up quite different than the fundraising presentations promised — for solid, market-based reasons that were invisible during diligence. Plinky acquired a new product line and became Thing Labs. 8th Ring failed quickly and cheaply, only seven months after funding. The CEO and I decided the execution risk was too high. And, in retrospect, we were right: our only competitor had an unexciting exit a few years later.
Over-promising is not a problem when it comes with over-delivery. But the overwhelming majority of startups fail to meet the promises they’ve made during fundraising. After years of observing this pattern, I’ve come to believe that over-promising can actually cause under-delivery. Entrepreneurs over-promise to raise money easily and set themselves up for pain down the road.
How? The reasons have to do with information signals, expectation setting, and the psychological contracts between entrepreneurs and investors. It’s very hard to pitch one story today and then change it the day the money hits the bank, especially if you’ve drunk the Kool-Aid.
An overly rosy pitch leads to expectations and fateful commitments that downplay the variability of the future. Decisions are made based on assumptions rather than tested hypotheses. The burn goes up earlier. The sales team is hired much too soon. In venture funds, over-promising also spreads from the investing partner to the rest of the partnership. It can also spread from the company to its customers and partners, further extending the reality distortion field.
If you’re Apple and you’ve got Steve, that’s awesome. For everyone else, it can get rough. I saw this play out with one of my companies that was expanding internationally (the reason why the company had raised money). The world was going to be our oyster and, before the reality that our go-to-market strategy wasn’t as effective as everyone had hoped set in, we had burned through a good chunk of capital.
How should you choose between being honest (and hearing “no” a lot) vs. amping up the pitch and risking the anti-patterns above? I give two answers to the CEOs I work with at my startup advisory firm FastIgnite.
First, I strongly advise startups to go to venture firms where the decision process is more collaborative and less “salesy.” One of the main reasons a VC will push an entrepreneur to over-promise is his need to sell a deal internally.
Second, pitch investors with a track record of valuing a team’s ability to execute, over any specific strategy or execution plan. While most firms pay lip service to this cliché, few do many investments this way. Here are some examples from my experience in the past few months:
The firms above practice a form of agile investing by (1) not forcing entrepreneurs to over-plan for an uncertain future and (2) following the principle of minimizing wasted effort. Ultimately, it’s the investors’ responsibility to reward honesty with trust and cash. And I think that’s a win-win. I’m looking forward to discussing this with you in the comments.
If you like this post, check out Sim’s blog and his tweets @simeons. And contact me if you’re interested in supporting Venture Hacks. Thanks. – Nivi
We now have a Facebook fan page for Venture Hacks. It’s a feed of our blog posts and tweets.
I was surprised to see how many people get their news on Facebook. The fan page already has 677 fans. Check it out.
Here’s how we put it together.
I mentioned the page on Twitter a few times — that’s the first few bumps of fans on the left and middle of this graph.
Then I added a fan page widget to the sidebar on venturehacks.com. That’s the steady slope on the right side of the graph — about 12 new fans a day. Otherwise, I haven’t sent any messages to my Facebook friends asking them to “fan” the page — I think that’s spam.
I looked at a lot of solutions for powering the fan page and this is what I came up with for my needs:
I also use tweetpo.st to publish our tweets to my personal Facebook profile. I wish tweetpo.st worked on fan pages because it adds pictures to the tweets and changes @names into real names.
(If you’re a complete psychopath, you might like the specs for My Ultimate Twitter Client, which also includes the instructions for my Twitter/Facebook workflow.)
I recommend a fan page if you’re serious about blogging and tweeting. Facebook already accounts for 5% of the clicks on my bit.ly links:
The top two sources are Twitter of course.
Finally, I like to say that Twitter is my continuous deployment tool. If I build something, I release it that day on Twitter. That’s what I did with our fan page. Even though it took me a few more months to improve it and get around to blogging about it.
Scott Edward Walker’s sponsor post, Top 10 reasons why entrepreneurs hate lawyers, created a lot of awesome discussion about startup lawyers. See the comments to that post and the comments to Bram Cohen’s follow-up, “Lawyers can’t tell you you can’t do something”.
Scott’s post also generated a lot of positive comments from lawyers who blog, tweet, and comment. So let’s start a list of “social” startup lawyers: lawyers who blog, tweet, Facebook, etc.
Here’s a first draft, in alphabetical order, including a link to the comments they left on Bram and Scott’s posts. I’ve included info on how I know each one.
Matt Bartus (comment). Matt Mullenweg (Automattic’s founder) works with him and introduced us. Matt Bartus is sponsoring Venture Hacks in a few weeks.
George Grellas (comment). George has lots of good advice on his website and he’s active on Hacker News.
Rob Hyndman (Toronto) (comment). Rob has left a lot of comments on Venture Hacks if I remember correctly.
Antone Johnson (comment). I really liked his comment and Twitter bio.
Nathan Roach (IP focus) (comment). Former programmer — always a bonus.
Yokum Taku (comment). Yokum’s blog is one of the best startup law resources on the web.
Scott Edward Walker. The sponsor who started this all.
(Apologies if you left a comment and you’re not on this list — please add yourself in the comments here.)
Update: Giff Constable has his own list of Great startup lawyers.
Update 2: See the comments for more recommendations, including my legal friend Andre Gharakhanian.
Update 3: Mark Suster and True Ventures also have their own lists.
I’ve never met any of the lawyers on this list in person — except Yokum, who I’ve met once. That’s the way it usually goes with startup lawyers. You meet them once and then phone/email them for the next few years.
Obviously, a startup lawyer doesn’t need to be social to be good. Venture Hacks works with Jorge del Calvo and Tom Thomas. Neither one is social and they both rock.
Please add your favorite startup-focused lawyers in the comments. They can be social or not — but tell us why you like them, e.g. have you worked with them? And if you’re a startup lawyer, feel free to add yourself — especially if you’re social.
Naval here. I’ll be on a panel about “The Growth of Small Firms” at The Future of Funding on Feb 17. Matt Marshall, Mike Maples, Rob Hayes, Reid Hoffman are all on the panel with me.
The conference is full of accessible early-stage investors like Chris Dixon, Mike Maples, George Zachary, Jeff Clavier, Tim Draper, Dave McClure… I’m leaving out a ton of great names — it’ll be a who’s who of early stage investors.
The tickets aren’t cheap but the organizers have kindly given us a 25% discount to share with you. If you’re a Venture Hacks reader, please come introduce yourself to me at the conference.
Yesterday, we published Top 10 reasons why entrepreneurs hate lawyers, a sponsor post by Scott Edward Walker. Scott’s a lawyer.
First, I thought other lawyers would hate it. I was totally wrong — we got a bunch of nice comments from lawyers like well-known Silicon Valley folks Yokum Taku, Josh King, and Matt Bartus.
Second, Bram Cohen, the inventor of BitTorrent, left an awesome comment that I’m reproducing here with added emphasis:
“Thanks for the link to my tweet, Scott.
“You cover the problems very well. My particular gripe in that tweet had to do with the practice of billing up several hours to answer a question asked in email, when all that was really wanted was the answer *if* the lawyer knew it off the top of their head. Next time I start a small company I’m going to have a policy that any hours billed need to be approved in advance, after estimates of how many they will be are given.
“You’re very right about the over-lawyering, and the NVCA docs in particular. There’s no reason in principle why one couldn’t take an NVCA document verbatim and simply fill in the blanks and do a round of funding without needing a lawyer at all. The contracts which people go into when they buy a candy bar are equivalently complex, but they’re implicit and contained in the uniform commercial code, and always going with the boilerplate works for everybody.
“Associates doing work is a real problem. I’ve found that insisting that all work be done by partners results in better work for less money in the end, even though the nominal hourly rate is much higher, because an associate will bill for several hours researching a subject which the partner already knows off the top of their head.
“Not only is the biggest problem with lawyers them being deal-killers, but being general activity killers. Too many inexperienced entrepeneurs get into ‘The lawyers say we can’t do X” disease. Lawyers can’t tell you you can’t do something. They can warn you about risks, and in extreme cases tell you that something is such a bad idea you’ll need to get someone other than them to do it (although I’ve never personally been told that) but the judgment call of whether the risk is worth it is the entrepreneur’s. Since lawyers are trained in risks and don’t generally even think about the business, they always advocate being overly conservative, sometimes to ridiculous excess.
“All this sounds much more negative on lawyers than I generally feel. I view lawyers as performing a necessary function, but their costs can easily skyrocket and need to be contained, and their advice needs to be taken with a very large grain of salt. I don’t have the deep distrust for them that I have of, say, sysadmins and HR directors, who who are entrusted with running the core systems for a company and can easily get away with all kinds of stuff if they’re of dubious ethics.”
Bram, if you’re reading this, can you share more lawyer hacks and maybe tell us about your experiences with sysadmins and HR directors?
Comments of the week: Legal fees, financial projections, and fit
Nivi · January 25th, 2010
We’re determined to have the best comment section of any blog the universe. Comments that are really worth reading.
One of the tactics we use to improve comments is tweeting about the good ones. Another tactic is highlighting good comments on this blog. Here are three comments from last week that really rocked (among many other excellent ones).
Jae Chung from goBalto comments:
Please keep the awesome comments coming. We read every single one.