Monthly Archives: September 2010

game mechanics applied to angel investing

What I know about angel investing I learned from Ron Conway. Once you
have access to capital (which is hard), it isn’t that complicated.
It’s basically about building up karma points by helping people out.
When you invest in companies, always return calls and emails and help
them out. Help out companies you didn’t get to invest in. Help out
VCs who might invest in your investments later. Meet with promising
people who are trying to raise money and try to help them even if you
don’t want to invest. Help out big company people who might do deals
with or acquire companies you invest in. Have meet ups and do other
things to help the startup community. Blog about stuff you learn. (If
you happen to also be running a startup like I am, this stuff also
helps your own company.) As you get more karma points you level up.
As you level up, helping out gets easier and your time scales better
and you get karma points faster. Entrepreneurs talk constantly. It’s
a small community. If you have karma points they’ll let you invest –
often on good terms. If you aren’t they won’t. That’s about it.
There aren’t any shortcuts or tricks.

Hunch data: people who like movies Hackers vs War Games

From Hunch.com data.

***
Top correlations of people who like the movie “Hackers”:

Fear of commitment? Yes, that’s me all right
Would you say that you’re: Fashion conscious, but somewhere in between
blessed and challenged
What are you most likely to do while waiting in a long line? Make a phone call
How many open bottles of shampoo would you say you have in your
primary shower? 4 or more
Is it ever ok to wear socks with open sandals? No, that’s cause for
immediate fashion arrest

***
Top correlations for people who like the movie “War Games”:

What do you think of net neutrality? I support it
When waiting for a slow elevator, do you tend to: Wait patiently,
since the button has already been pressed once
Are you male or female? Male
Could you name at least 10 letters of the Greek alphabet? Yes
What are you most likely to do while waiting in a long
line? Check/respond to email
Do you know how to say ‘truth’ in Latin? Yeah
Be honest: do you sometimes secretly use wireless devices on planes at
times that you’re really not allowed to do so? Yes, my communication
is very important, and how can it really hurt?
Can you name the presidents or prime ministers of at least 5
countries? Yes, I can

regret minimization

A common method for thinking about decisions is to ask “in the future which decision am I likely to regret more?”   I was thinking about why this regret minimization method is so useful and came up with a couple of reasons:

– It reverses time’s “discount rate”.  There is a natural cognitive bias to overweight near term over long term events.  Thinking from the perspective of the future looking backwards helps you remove and even reverse this bias.

– It encourages action over inaction.  You tend to regret the things you didn’t do.  You’ll forget about the times you got rejected and remember the times you risked rejection and got accepted.
– It encourages (judicious) risk taking.  Risk taking leads to a life of higher ups and lower downs.  Regret minimization optimizes for higher peaks instead of our natural tendency to seek out comfortable averages.  (Regret minimization doesn’t mean doing stupid things – you’ll regret driving drunk far more than you’ll regret missing a party).

College kid I met at Columbia last week:  you won’t regret not working at Goldman Sachs, but you will likely regret not pursuing the startup idea you’ve been working on the past year.  Friend who has already sold a past startup and thinking about selling his current one:  you’ll more likely regret never giving this company a proper try before selling it.  

I think regret minimization is one of the reasons I love NYC so much.  It’s a city that is all about trial and error and requires an attitude of maximizing the serendipity around you.

Some tidbits from Joel Spolsky’s talk last night on recruiting programmers

Joel was kind enough to speak last night to Hunch and a bunch of other startups.  For me it was like being a teenager at a Justin Beiber concert – Joel’s blog is perhaps my all time favorite.  Some tidbits I recall:

– Sept is critical month for recruiting interns and college grads.  Big companies all have representatives at top schools but startups almost never do.  this is something where startups could get together and benefit from economies of scale.

– Internship programs are critical for recruiting.  Joel recommend 1:1.5 ratio of summer interns to full time devs.  (My advice: even if you are super tiny company start this now – one VP Eng at the meeting said even when he was between jobs he was recruiting so when he got a job he could bring a network with him).

– Great programmers are 5-10x more productive than ok ones yet only get paid 2x or so more.  (Perhaps this is why many leave to start companies?)

– Joel is super strong advocate of : 1) private offices for each programmer, 2) free, nicely catered lunch every day (everyone eats together and bonds), 3) usual internet stuff – comfortable office, dogs, flexible schedules etc.

– Bad yield at Stanford (too much competition) and MIT (too many go on to graduate school)

– GPA is really good predictor of good programmers (this surprised me).  You can have great programmers who have bad GPA but that often means they are great only when working on super interesting projects which won’t always be the case in real life.

– Wall street (and to lesser extent big tech companies) offer a very different “product” than startup:  Lots of money but crappy environment, dull projects etc.  You can’t compete on $ so differentiate your “product” even more by emphasizing what is different.

– One guest suggested giving every programmer a monthly dinner budget to take out programmer friends.  No obligation but this turned out to attract some of their friends to join the company.

– Screening process:  Resume screen, phone screen, web based Etherpad code test, then fly/bus in and day of interviews and whiteboard code test.

– Programmers with motivation problems:  Joel has rarely seen successful “turnarounds”.  

Tons more that I’m forgetting (maybe other attendees can add some in comments?).  If you haven’t read Joel on Software, it is a MUST read blog (go back and read all the old articles).

 

 

Things I’d do if I ran a big VC firm

– lower management fees so that they cover necessary expenses an reasonable salaries (e.g. 200K, not 3M).  basically be like a startup and only make real money when your investors make money.

– keep a database of every employee of every company I invested in.  so for example when a company goes under, you can help their employees and your investments by finding jobs for the best employees.

– negotiate group discounts with the best vendors (lawyers, accountants, cleaning services, SEO services, real estate brokers) and give every company a list of those vendors

– have everyone at the firm blog/tweet and let them do so authentically, even if it means sometimes criticizing the firm.  

– have regular discussion groups where companies discuss very tactical issues and share solutions.

– stop kidding yourself that you add a lot of value beyond recruiting/intros/governance/financing/selling companies.  this let’s you relax your “need to own X% of the company” rule and also lets you focus on things you really help with.

– have offices that look and cost like startup offices.  or better yet, don’t have offices at all – spend your time visiting companies.

– kill the partner presentation.  too much emphasis placed on presentation skills.  instead go spend a day working with the CEO before you invest to get to know them in their real habitat.

– change the accounting so you can start caring about IRR more than just amount of money returned.

– spend lots of time networking with press & potential bizdev partners so you can make valuable intros when needed.

– have far fewer meetings with startups – screen them better beforehand (the “kissing lots of frogs” problem)

– have far fewer meetings in general

– don’t talk/tweet/blog about your vineyard, yachting, golfing etc while you tell your CEOs to work non-stop and be frugal etc. 

– use your brand (and/or join together with other VCs) to recruit top talent (particularly engineers) from top schools.  tell top students they are guaranteed a job in your portfolio even if the one they join goes under. 

– have standardized, simple legal documents to keep seed and Series A financing costs under $10K.

– say no to companies.  saying “come back later” feels like a free option to you but actually hurts you and the startup in the long run.

– never miss a meeting or show up late without apologizing

– no smart phones in meetings.  better to just not take the meeting or make it 15-30 minutes but actually listen.

update:
– i’d hire some female investors (and maybe some male receptionists).