• Running Two Companies? Even Silicon Valley’s “Undertaker” is Doing It

    37 - Graveyard - HARMSSEN ANDREA - germanyEveryone in Silicon Valley seems to be wearing more than one hat these days. Venture capitalists are active startup founders. Active startup founders are raising venture funds

    Even Sherwood Partners  – a 30-person company that industry insiders long ago coined “the undertaker” because of its decades-long history of shuttering companies – has launched a second business. Called AgencyIP, it’s a platform for selling the patents, trademarks, and other intellectual property of failed startups that Sherwood unwinds.

    I caught up with Sherwood founder Marty Pichinson yesterday at his Mountain View office to learn more, as well as see how Sherwood is doing in these boom times.

    When we last talked a couple of years ago, people thought so-called “winter” was coming for startups. It did not. Has that been bad news for Sherwood?

    Not at all! After more than 20 years in the business, we now have VCs bringing us in earlier where they really want management to focus on tomorrow and let us take care of hiccups or financial problems that can take a company off track. We’ve been doing a lot more corporate restructuring.

    What kind of hiccups are you ridding companies of?

    It can be anything. Sometimes they made a bad deal for equipment, or they paid people to [take the company one direction] and now they’re going another way. VCs will bring us in before raising a new round so we can help reduce any unsecured debt first.

    Beyond renegotiating equipment leases and analyzing who to cut, what else can you do in this kind of roaring economy? Is it impossible to work out cheaper rent right now, given low vacancy rates?

    Nothing is impossible. We’re kind in what we do. If you’re a jerk in life, people don’t want to work with you. Even though we’re renegotiating debt, maybe you’re talking about a few months. If everyone pitches in a little, there’s a better chance that the company will make it.

    What’s the failure rate right now? Has it changed because of all the seed-funding we’ve been seeing?

    Nah. About 2,000 companies are funded per year and about 20 percent of those companies exit, meaning 1,600 [fail]. Maybe it’s because your customers aren’t coming in fast enough, or another player has beat you to market, or your board members don’t have the resources to re-up anymore and they’d sooner walk away and save their dry powder.

    Right now, I’m closing a 12-year-old company that raised $227 million. It needs $40 million more but its investors are tired. Do you put it in this company or put it another? It’s all about placing bets.

    Why launch AgencyIP?

    We probably sell more orphaned [intellectual property] than anyone around. We launched the company eight months ago and we already represent more than 1,800 patents, including from CBS and Showtime and other Fortune 500 companies. We’re like William Morris, negotiating the best deals possible for the IP we have [along with finding ways to repackage it]. We can take two patents that aren’t the best in the world, for example, and put them together and they can become better.

    Who’s buying what, and what’s the range of how much they are willing to pay? 

    Our offices are full of people all the time, so we have excellent relationships with everyone. And we’ve had IP sell for $500,000 and we’ve sold it for between $25 million and $30 million.

    You’ve seen plenty of cycles. Where are we in this one?

    To me, there’s never been storms or halos. Someone is always reinventing something. These young people can see through time. Who ever thought that Facebook would be what it is — or Amazon, or Google, or Twitter?

    Change is continuous and every four or five or six years, there’s a paradigm shift to where smart people think the new deals will be and as part of that readjustment, you get rid of the old things. Maybe you shouldn’t bail out. But you can’t hold on to everything forever.

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  • Dick Costolo’s Joke Bombs, on Twitter

    Dick-Costolo-002Over the weekend, Twitter CEO Dick Costolo finally did something that millions of Twitter users have done before him: He tweeted a comment that’s attracting unwanted attention

    The tweet was prompted by a New York Times report that Twitter has just one woman among its top officials. The story includes comments from academic Vivek Wadwha, who ascribed Twitter’s gender imbalance to “elite arrogance” and the “same male chauvinistic thinking” that permeates Silicon Valley. Costolo took to Twitter Friday night to call Wadwha the “Carrot Top of academic sources.”


    Coming from anyone else, the tweet might have been mildly amusing if a bit mean-spirited — typical Twitter fare, in short. Coming from Costolo, it was a surprising misstep. Twitter is in its quiet period. Within weeks, it will be a public company. So why not just keep quiet until then?

    In shooting the messenger and not addressing the message itself, Costolo also inadvertently helped feed people’s worst perceptions of Twitter, including that it’s not always a friendly place to hang out. As Josh Constine observed in a recent TechCrunch piece, many users already avoid or abandon Twitter because of its competitive undertones and the pressure they feel to be “thought leaders.”

    Half a day after Costolo published his tweet, one such thought leader, the blogger-entrepreneur Anil Dash, decided to challenge him on it. Tweeting to his 477,525 followers, Dash said that he was “sorely disappointed to see @dickc respond defensively to criticisms of industry sexism. Why not just lead, as Twitter does on free speech?”

    After a few defensive exchanges with Dash and others on the topic, Costolo suggested that he’s very mindful of the gender issue at Twitter, tweeting: “I *think* I have an acute understanding of the topic & host of related issues. Of course, proof is in deeds.”  (In a display of deference to Costolo that has also become de rigueur among Twitter’s most astute users, Dash “favorited” each of Costolo’s responses before responding to them.)


    Whether there will be lingering damage from Costolo’s tweet remains to be seen. Plenty of people have lost their jobs over less, but Twitter doesn’t seem inclined to ditch its star CEO any time soon.

    As for Carrot Top, a comic long known for his red hair and his use of props, no one yet knows how he feels about being dragged into the conversation. His publicity team didn’t respond to questions sent to them yesterday.

    It’s worth noting that Costolo himself once tried to be a stand-up comic, an effort that led to zero job offers, as he shared during an on-stage interview in May. “It was one part of [my career] strategy,” he’d said, as the crowd erupted with laughter.

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  • Todd Chaffee on IVP’s Twitter Stake: Fred Wilson Was “Instrumental”

    todd_chaffee_largeAny day now, it’s expected that Twitter will make its IPO filing public, revealing exactly who owns what.

    No one yet knows Institutional Venture Partners’s stake in Twitter, but based on the $35 million Series C round for the company that IVP led in January 2009, it’s clear the Sand Hill Road firm will generate a world-class return on its investment.

    Yesterday, as part of a longer conversation, Chaffee shared the story of how that Twitter funding came together. It’s a good reminder of the importance of relationships in this business:

    “One of the things we’re always doing is surveying the landscape for breakout companies, where they’re starting to gain traction…and their users and other metrics are starting to track up.  Twitter was classic case of company just starting to break out. 

    One variable for us is: What could this be in terms of potential? An early-stage company can be interesting and getting some traction, but when you run the profile, [you realize it has the potential] of making 3x to 5x your return, [which isn’t a compelling enough exception for IVP, which specializes in later-stage companies that already have meaningful revenue]. 

    Twitter fit our criteria [of being able to deliver a much bigger return]. And we had a view into that, so we called [early Twitter investor] Fred [Wilson] and asked if the Twitter guys would see us. 

    ‘We’re not raising money right now,’ Fred told us. ‘Go away.’ But we’re co-investors [with Union Square Ventures] in Comscore [which tracks Web and mobile usage]. And so [after another plea or two] Fred asked if the Twitter guys would see us, telling them, ‘Just meet with them, and when you’re ready to raise, [IVP] will be there.’ 

    So we had them come in [to our office] on a Monday in early January 2009, and when we heard them describe the company as the ‘pulse of the planet’ — those were their words — we could see this was much more than a microblogging service. Ev Williams and Biz Stone are sharp guys. Some entrepreneurs have a vision that’s clearly infectious and much bigger than everyone realizes, and [that was the case here], so it was pretty straightforward. In fact, you could see everyone around the table, thinking, This one could really go. Meanwhile, they [thought] IVP was asking all the right questions, [that we could] see opportunities and threats more clearly than anyone else, and they told Fred that they could see IVP as a partner.

    It was a hot deal for us, so we scrambled the jets and the next day I went up there [to San Francisco from Menlo Park] with [IVP colleagues] Dennis [Phelps] and Jules [Maltz] for a day of due diligence. This was a Tuesday. Wednesday night, I had dinner with Ev Williams. On Thursday, he was calling our CEOs to see what it’s like to work with IVP. And by Friday, we had a term sheet.

    Eventually, that news broke, and it brought everyone out of the weeds to outbid us. We asked [Williams and Stone], ‘Who do you like best of these groups?’ and they said Benchmark [Capital], so we dialed Benchmark into the deal.

    Fred was absolutely instrumental. Because Ev and Biz hadn’t done this many times, I [feel] like Fred was the one who really opened the door for us and said [to them], ‘Let’s do the IVP deal.’”

    (Look for the inside story behind IVP’s rise to the top — and how the firm plans to stay on top — on Friday. And if you haven’t signed up yet for StrictlyVC, you can that that right here.)

  • The Case for More Transparency on AngelList

    angellist-logoLast week, AngelList, the hugely popular platform that connects entrepreneurs with accredited investors, introduced what many have heralded as a game-changing new twist to its business. Called its Syndicate program, AngelList now allows angel investors to syndicate investments themselves, work for which they will receive carry. (An angel who syndicates a deal will earn 15 percent of any upside, while AngelList will collect 5 percent.) 

    If some of these syndicates involve the same groups of investors, and those groups morph into venture funds, don’t be surprised. As some angels have said on social media since AngelList announced its new program, it might allow many of the “best” angels to strengthen their brands and, potentially, move up the investing food chain.

    And there’s no reason why angels shouldn’t be able to extract more leverage from their investments, particularly if they’re willing to manage a big syndicate or serve on a company’s board.

    Still, while the syndicate program seems like a well-considered start, AngelList might think about providing some public accounting of the track records of its various syndicate leaders. As the gossip site Valleywag pointed out in its inimitable way yesterday, without a structure that manages to disclose something about the investors’ IRRs, the program seems likely to degenerate into a popularity contest. Much of AngelList’s matchmaking still rests on “social proof,” which isn’t quite the same thing as cash on cash returns.

    Last week, for example, author and entrepreneur Tim Ferriss raised $350,000 for a logistics startup called Shyp in 53 minutes. Ferriss’ fundraising prowess is impressive, and nobody is prejudging Shyp, but it’s hard not to be skeptical about investments that are closed in less than an hour.

    Most VCs wouldn’t wish their fundraising process on their worst enemy, but it does help them demonstrate their qualifications and commitment to the investment process to both their investors and their fellow partners. Through vetting their PPMs with Cambridge Associates, undergoing lengthy and arduous roadshows with family offices and pension funds, and sacrificing a large amount of their own capital – typically 3 percent – in order to launch their funds, venture investors let it all hang out. (Yes, there are top-tier funds that are able to raise funds by picking up the phone a few times, but that’s the exception not the norm.) By the time a firm has raised a fund, they have left a trail of evidence testifying to the work they will put into an investment. Can the same be said of Ferriss?

    Obviously, AngelList doesn’t need to replicate the venture business – it’s large enough as it is. But in the interests of both entrepreneurs and the syndicates themselves, it might be time for AngelList to adopt an objective ratings process, one that would provide everyone with more insight into an investor’s qualifications than just his or her Klout score. No doubt it would make an already promising initiative even better.

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  • Series A Investors Take the Gloves Off

    bio-joshfelserIn recent years, there’s been a lot of talk about the symbiotic relationship between seed-stage and Series A investors.

    But things are becoming a little less symbiotic of late, suggests Josh Felser, co-founder of Freestyle Capital, a San Francisco-based seed-stage firm that recently closed on a second, $40 million fund. Felser says that he has encountered a number of Series A deals recently that “pitted the entrepreneur against the seed investors.”

    Here’s the scene that Felser has seen playing out more and more: A VC agrees to invest $5 million into a company with a $20 million pre-money valuation, giving the startup a post-money valuation of $25 million. The company’s seed investors, presumably holding convertible notes, ask to invest an additional $2 million in the Series A round to maintain their pro rata rights. But the VC refuses to go above the $25 million post money, telling the entrepreneur that if he or she wants to make room for those seed investors, the company will have to accept a lower pre-money valuation.

    It isn’t a new tactic. It’s always been the case that some VCs don’t play nice with seed-stage investors. In certain situations, too, there are simply too many seed-stage investors to accommodate; if everyone maintains their pro rata rights going into the Series A, it doesn’t give the VC firm enough of an ownership stake to make the investment worth its while.

    Still, in recent years, some Series A investors have either left room for seed investors or at least been upfront about their designs to maintain specific ownership levels, thus giving entrepreneurs the opportunity to look elsewhere.

    That’s changing, says Felser, who has been involved with two recent investment rounds where VCs have put entrepreneurs and their seed backers in precarious positions by not disclosing their true intentions until very late in the game.

    Felser tells me of one startup raising a Series A round that asked Freestyle to invest less than the $750,000 it had planned after the Series A investor laid down some inflexible terms. Felser and Freestyle co-founder Dave Samuel — successful founders themselves — reminded the entrepreneur of how much work they had poured into the startup. (As Felser jokingly tells it, for effect, they refreshed the entrepreneur’s memory over lunch in a darkly lit nightclub that opens out into an alley.)

    Ultimately, the founder made room for Freestyle, accepting a lower pre-money valuation in the process. But Felser says the trend is “something [for early investors] to be worried about” and calls relations between seed and Series A investors “symbiotic still, but tense.”

    Says Felser, “We depend on each other.” He acknowledges that “fixing the post-money [valuation of a startup] can make a ton of sense,” too. But he doesn’t like that some VCs are starting to play hardball, or that it’s happening “sneakily deep in the process” all of a sudden.

    “It’s something we’re mindful of,” he says.

    Photo courtesy of Freestyle Capital.

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  • Can Jack Hidary Hack New York’s Mayoral Race?

    Jack HidaryJack Hidary is a wealthy tech entrepreneur who wants to be mayor of New York City and is running as an independent. At first blush, he seems to have much in common with New York’s billionaire mayor Mike Bloomberg, a Democrat turned Republican turned independent.

    But Bloomberg spent $73 million of his own money to get himself elected the first time around. Hidary has so far raised $450,000. Bloomberg began campaigning early. Hidary, 45, announcing he was running just two months ago. Bloomberg courted nearly everyone; Hidary has been doing more “targeted” campaigning. As told me in a phone call last week, “I have increased name recognition in the core communities that we need.”

    In Hidary’s view, there’s an opportunity to hack the election by leveraging both his tech base and his background. Born in Brooklyn to a Spanish-speaking Columbian mother, Hidary went on to cofound two companies. The first, EarthWeb, an IT information and jobs site, went public in 1998, four years after opening for business. (It was taken private in 2000 and sold again in 2005 as Dice.com to private equity investors.) Hidary also cofounded the financial information company Vista Research, which sold to Standard & Poor in 2005.

    Since entering the race in mid-July, Hidary has attracted support from many who like his biggest promise: to champion entrepreneurship and create jobs across all five of New York’s boroughs. Among those who’ve lent their support, says Hidary, are Albert Wenger of Union Square Ventures; investors Joanne and Fred Wilson (also of USV); Jim Robinson of RRE Ventures; and Charlie Kim, the founder and CEO Next Jump, a New York-based tech company that powers reward programs.

    Still, it’s far from clear that Hidary’s concentrated tactics are working. His team is using CampaignGrid, a venture-backed, data-driven ad platform to deliver pre-roll online video to “specific target markets.” Hidary has also begun running Spanish-language TV ads on various cable channels, including Telemundo. Says Hidary, “We’re using a combination of channels in a more efficient way” than Republican nominee Joseph Lhota and Democratic front-runner Bill de Blasio.

    But being efficient has its costs. Hidary is still being called “the New York mayoral candidate you probably haven’t heard of.” Even sources in New York’s tech community tell me they’re waiting for him to gather more traction outside of his insular tech circle before more publicly getting behind him.

    Long shot as Hidary may seem, stranger things have happened, particularly in a race where the current leading candidate, de Blasio, is widely seen as part-time populist — and not a terribly tech friendly one at that.

    As Charlie O’Donnell of Brooklyn Bridge Ventures puts it: “How friendly will Bill de Blasio be to companies like Uber and Halio when he’s taking money from the taxi lobby?  Will he support consumers who rent their rooms on Airbnb or side with the hotels?”

  • Dropcam, the $50M Startup That Should Keep ADT Awake at Night


    Dropcam is watching you.

    To date, the four-year-old startup has raised $47.8 million for its HD wireless home-monitoring cameras that allow consumers to watch the kids from the office, glimpse which neighbor isn’t picking up after his dog, or catch break-ins.

    Greg Duffy, Dropcam’s 26-year-old cofounder and CEO, won’t disclose how many of the company’s $150 cameras the company has sold, but he will say that the company is enjoying “5x” year-over-year revenue growth from a “significant sample of users” that “cut across nearly every demographic.”

    That’s a lot of video. The company claims that it uploads more video each day than YouTube.

    What Dropcam plans to do with all that video is where things get interesting. At Dropcam’s San Francisco offices, where 45 people are now employed, Duffy hints that Dropcam will soon dip its toe into the lucrative realm of home security.

    It makes perfect sense. It also puts the company’s funding into perspective.

    Right now, 40 percent of Dropcam’s customers pay $9.99 or $99 per year to save up to seven days of video footage, partly for home security purposes.

    Duffy believes Dropcam can capture a much larger piece of the home security pie because, in his view, it’s a market that’s just waiting to be disrupted  Not only are the “ADTs of the world” “generally stuck in past eras of technology,” but “they charge you insanely high prices for a very simple service,” he notes.

    ADT’s most basic plan — which includes a motion detector, two wireless door or window sensors, and a wireless key fob that enables users to control the system – costs $42.99 per month, a $300 installation fee and requires a three-year commitment. More “advanced” services — including stored video footage and email alerts — cost $57.99 a month, with a $500 installation fee and a three-year contract.

    That’s big business: ADT has a market cap of $8.7 billion dollars.

    Companies like ADT “make you think that to keep your family safe, you need to pay for something that’s essentially as expensive as a cell phone and requires [an even longer] contract,” Duffy says. “But it costs them nothing to deliver the service, and using today’s technology, you could deliver [the same service] for a fraction of the price.”

    Dropcam’s investors — Institutional Venture Partners, Accel Partners, and Kleiner Perkins, among others — evidently think so, too.

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  • Stewart Alsop on His Firm’s “Kid VCs”

    Stewart AlsopLongtime VC Stewart Alsop believes “people in their 30s and 40s should work.” And by work, he means outside of venture capital. “You should be in a company,” Alsop, 61, explains over breakfast in San Franciso’s Hayes Valley neighborhood. “Your value comes from your work experience. If you sit around a board of directors’ table, and you don’t have experience and a network and a point of view and a domain that you know, you don’t bring any value.”

    The stance is somewhat ironic, given that Alsop and his partners at Alsop-Louie Partners have been introducing exceedingly young people into the world of VC since shortly after the firm’s 2006 founding. It was then that the firm begin working with college students, transforming them into part-time campus spies and calling them “associates.”

    “The [students] are all, generally speaking, 18 or older,” Alsop tells me, dipping into his eggs. “But they’re younger than the drinking age, so we consider them our kids, and we take care of them,” including “teaching them about employment and taxes and stuff like that.”

    Alsop-Louie is hardly alone in bringing college students into the fold. Though the firm is well known for tapping students to help them identify talent, a growing number of venture firms are finding creative ways to identify the next Mark Zuckerberg. Andreessen Horowitz employs an in-house “college talent manager.” Insight Venture Partners employs students as analysts on a full-time basis during the summer. Meanwhile, numerous firms, including Highland Capital Partner and Lerer Ventures, have student-focused summer programs. (Lerer Ventures even calls its program Summer School VC.)

    It’s become so competitive on college campuses that Alsop-Louie had to remove a Stanford student who was a finalist for their program after it learned the candidate was already involved in another venture firm’s student program. (“We wouldn’t want someone in our firm out talking with other people,” explains Alsop.)

    The question is what impact such programs are having on students involved in these programs. Alsop-Louie hires college students as sophomores, so they can spend three years playing VC. It’s enough time to figure out who’s who on campus, says Alsop. Yet it’s also enough time to begin envisioning a career in venture capital, an industry that’s shrinking, not growing. Is exposing them to a life that most can’t have fair?

    Alsop tells me about the numerous former associates – out of 13 to date – who remain close to the firm. Corey Reese, the firm’s first recruit at UC Berkeley, is today CEO of Ness Computing, a personalized search engine that was incubated at Alsop-Louie. It has since raised $20 million from an investor group including Singapore Telecom, American Express, and NTB Docomo. (Notably, Reese found five deals for Alsop-Louie’s first fund.)

    Another former campus associate, Eli Chait, is the cofounder and CEO of Copilot Labs in San Francisco. The company, which provides real-time marketing intelligence information to restaurants, raised $2 million last summer from undisclosed investors.

    Yet another recent UC graduate is working as an engineer at one of Alsop-Louie’s portfolio companies. And the list goes on.

    “They each have an innate interest in tech and in venture,” says Alsop.

    And yes, some of them hope to become venture capitalists out of college. “They do think that,” Alsop acknowledges. But he says that the firm quickly “beats it out of them” and pushes them to think instead about what else they really want to do.

    “We make it clear that this isn’t a job that teaches you anything,” he adds with a laugh.

    Photo courtesy of Joi Ito.

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  • By Paying Employees to Be Closer, Startups Take a Risk

    riskPaying employees to live closer to the office may seem like a smart idea, but employment attorneys say startups should steer clear of the small but persistent practice.

    Before it was acquired by Microsoft in 2008, semantic search engine Powerset offered financial incentives to employees to live close to its office. At one point, Facebook also reportedly offered a housing subsidy to employees who moved nearer to its Palo Alto headquarters.

    Among the venture-backed startups that continue to provide location-based financial incentives is San Francisco-based Famo.us, whose Javascript framework is helping to fuel faster smartphone, tablet, and PC applications; and Imo, a messaging company in Palo Alto, Calif.

    It’s easy to understand the companies’ rationale. Employees are more accessible when they’re nearby. Presumably, the less time that employees have to spend commuting, the happier and more productive they are. There’s also a strong case to be made that proximity to the office is better for the environment. If your employees are walking or biking to work, they aren’t polluting the air with car exhaust.

    Still, attorneys say that dangling proximity-related incentives is risky for numerous reasons.

    Though DLA Piper attorney Margaret Keane doesn’t think there is “a person alive who thinks it’s life-enhancing to spend time commuting,” she can envision, for example, a “scenario where you’re [viewed as] favoring one [economic] class over another.”

    It’s a concern echoed by Dan McCoy, an employment attorney with Fenwick & West. He observes that offering incentives to employees to live closer to a company, particularly in an expensive city like San Francisco, could be seen as having a “discriminatory impact” on those who live in cities such as Freemont or South Jose, where housing prices are lower.

    The appearance of age discrimination is another potential pitfall.

    “San Francisco tends to have a younger population as older workers get married, have kids, and leave the city for the suburbs,” says McCoy. “You can imagine an age claim by someone who says, ‘You’re better compensating a twenty-something than me — who has more experience — because they live in this loft by the ballpark.”

    Even if it’s impossible to prove that a company’s policies have an adverse impact, startups should probably think twice about anticipating what’s in their employees’ best interest.

    Assumptions about people and their commutes will inevitably “be misleading or partly inaccurate, just because that’s life,” says McCoy. Think of the person who lives farther away but gets to work faster because of public transportation, he says, or the couple that likes to drive into the city together.

    “Unfair doesn’t necessarily equal lawful,” McCoy notes. “But at a minimum, you’re going to engender a lot of bad will.” And why take that risk?

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  • Tony Conrad to Founders: VC Is “Not as Easy as It Looks”

    Tony Conrad

    Tony Conrad doesn’t doubt for a second that the worlds of founders and venture capitalists are “highly symbiotic.” But it’s easier to succeed in both worlds if you’re a venture capitalist first, he says.

    Conrad is speaking from his own experience, having worn both hats for the last seven years. Before Conrad cofounded the first of two companies — including the identity startup About.me, where he is CEO — he was a VC. (He’s still a VC, working as a venture partner with True Ventures in San Francisco.)

    As he tells me enthusiastically over coffee near About.me’s offices in the city’s startup-studded Mission District, once he became a founder, he became a much better investor. Among other reasons why: “My ability to gain access to some of the highest quality founders was exponentially improved because they saw me as one of them.”

    Conrad’s juggling act has also benefitted About.me, which sold to AOL just days after publicly launching in 2010 and was bought back by Conrad and True Ventures earlier this year. Among the biggest perks he enjoys as a CEO with continuing VC ties is sitting on several boards for True, where he’s privy to instructive conversations, including about conversion marketing metrics. Such insights “totally inform everything we do at About.me,” he says.

    Given the advantages of straddling both spheres, it’s no wonder that more founders have begun dabbling in venture capital. Andy Dunn, for example, the cofounder and CEO of the venture-backed men’s clothing company Bonobos, also helps run an angel investment firm called Red Swan Ventures.

    Still, Conrad suggests that the path from entrepreneur to investor is a bit trickier than the reverse path.

    For example, founder-investors tend to be a little too entrepreneur-friendly at times. (Conrad notes that when True Ventures makes an initial investment, typically in the range of $1.25 million, it expects 20 percent ownership in exchange. Founders without extensive investing experience often ask for far less equity, even when writing similar-size checks.)

    Pointing to individuals like LinkedIn founder Reid Hoffman and Workday co-CEO Aneel Bhusri — both partners at Greylock Partners — Conrad says another big benefit to launching a startup as an experienced investor is not having to learn every last thing on the fly. “We already understand the nuances [around] ownership. I didn’t have to learn how to operate on a board, or [the difference between] participating preferred [shares] versus just a straight-up liquidation preference. I already know that.”

    It isn’t that every VC is suited to be a strong founder, says Conrad. But the opposite is also true. “You’re seeing a lot of founders who say, ‘Oh, I’m going to go do a fund. It’s easy.’ But it’s not easy. How many of them are killing it? It’s not as easy as it looks.”

    Photo courtesy of True Ventures

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