Men Say …

Men use similar tropes on why #MeToo may go too far. It’s time to break these down.

It’s time for more men to start saying, “enough is enough,” “I believe her,” and “I will step out of my comfort zone and speak up so that others feel empowered to follow me.”

Men will make mistakes. But mistakes are much better than silence. Mistakes are better than condoning misconduct, harassment, bias or abuse.

I find myself fighting indifference even on some company boards where misconduct has occurred, been identified and has been swept under the rug of being “a gray area.” As a board member, sadly you don’t always have the power alone to act on your own and your motives can be questioned, too. Founder CEOs can have more power than you might imagine.

In any event, I was reflected on Twitter tonight about the disappointing and SHOCKING (to me) stories I read tonight and this about Russell Simmons, Salma Hayeck’s op ed about Harvey Weinstein, potential misconduct by Tavis Smiley that follows Charlie Rose, Matt Lauer, Louis CK, Shervin Pishevar and so many others that my head is going to explode. The stories about Dustin Hoffman — so hard to read about how he tormented this young woman and made her life miserable.

Every day when I see names “trending on Twitter” I think to myself, “Oy. Did they die or harass?” That’s my starting point. Do you find yourself having the same thought?

I suppose all this has done is shine a light on what so many women have known their whole lives and with this cloud lifted I feel unable to shut up. So my rant on Twitter …

Why We Must Have Zero Tolerance for Sexual Misconduct in Venture Capital

Time Magazine published its “person of the year” edition today and honored “the silence breakers” for speaking up and forcing our society to confront its position towards men in power exploiting their power for sexual gain. Real change is clearly needed.

These brave women who have taken on personal risks and faced doubters to change the culture globally to stop sexual misconduct, harassment & gender bias deserve the recognition x1000 along with the many other women who have spoken up.

As I talked with my wife about it she tells me, “The problem is that every woman has had some bad experience in their lives or careers but it’s risky to speak up for fear of retribution or being labeled ‘a complainer.’” She sent me this very powerful article that talks about how men have viewed the #MeToo movement and I found this instructional.

Men must speak up, too. We must create space for women to have their voices be heard and respected and believed.

I titled this post “We Must Have Zero Tolerance in Venture Capital” but of course I could just say “zero tolerance anywhere” because that’s true. As a VC let me specifically just speak out for our industry.

As VCs we find ourselves in power relationships in nearly every interaction we have, which means we need a much higher standard of accountability for our actions. There are things that are never appropriate, like physically forcing yourself on another human who doesn’t want to be touched or groped. When you’re in a power situation you have to be extra conscious not to use your power in ways that are exploitative but where you feel you might be able to get away with it.

An absurd version of this is the comedian Louis C.K. who thought it was ok to pull out his junk and masturbate in front of women because he “asked permission.” We feel conflicted when hear about these actions by people that we had admired (like Louis C.K or Charlie Rose) and then later find out that he they were bad people. This is what Sarah Silverman wondered out loud when she said, “Can You Love Someone Who Did Bad Things?’.

I think the answer is yes. You can love them and want rehabilitation and perhaps one day redemption but when a person has exploited a position of power they don’t deserve our sympathy above that of the victims and they don’t deserve a free pass back into power. Victims must always deserve more respect than a flawed human being in search of redemption.

And of course this is how I have felt about Dave McClure because despite the fact that I

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What Happens When Startups Turn from Their Innovation Stage to Operational Excellence?

Nearly every successful tech startup I’ve observed over the past 20 years has gone through a similar growth pattern: Innovate, systematize then scale operations.

An alternate outcome that I also unfortunately observer in some cases are companies who had extreme early success with an initial product adoption but failed in key areas that limited the growth and therefore the ultimate financial outcomes. They made one or more of these grievous errors:

  • They didn’t build an experienced or well-rounded management team,
  • They didn’t establish a well-articulated strategy or source of differentiation so that when they had hundreds of employees joined they could all pull in the same direction and for a common purpose
  • They didn’t establish a strong culture or norms that allowed for great decision-making without the founders having to intervene
  • They didn’t devolve authority or decision-making outside of the founders or a tight-knit executive group leading to delays by indecision or lack of authority
  • They failed to invest in internal systems to support growth
  • They didn’t establish enduring processes to allow the broader company to have a roadmap for how to operate.

Understanding how your company will change as you move through these phases is critical if you hope to scale to a large business one day.

Innovate

In the early years of a startup there is a lot of kinetic energy of enthusiastic innovators looking to launch a product that changes how an industry works. There is excitement about the possibilities of real change and an infectious “naive optimism” about how everything is possible. Many of us who have launched our own startups have our fondest memories of these salad days of startup life.

There is nothing more pure than building a product, putting it out in the world and seeing paying customers using your product and in some cases loving it. As a startup in this phase you often raise capital, get press, hire staff and everything feels possible.

As an early-stage VC I love this phase. I truly enjoy working with innovators who dare to take on the system and I embrace the unknown with them. I know full well that the hardest work in solving problems will come from them, not me, but I enjoy being there for every moment — good and bad.

I will always remember fondly my coffee meeting 5 years ago with my friend Sam Rosen in New York City shortly after Hurricane Sandy. Sam began drawing out plans for a new way to provide storage after he had horrific experiences with traditional storage after the storm.

Sam’s enthusiasm was infectious and his plans were bold. He came to work in our offices at Upfront Ventures as an EIR and immediately began building software to improve how storage was picked up,

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One Small Change I Made That Improved My Daily Mental State

We all have a pretty good idea about things that drag down our productivity or suck up time that would be better spent on more fulfilling activities.

Two years ago I made a commitment to stop bringing my mobile phone into my bedroom and with like a 95% compliance rate this made a big improvement. At nighttime I don’t check my email or social feed right before bed, which helps me from having last-minute anxiety before going to sleep. But more concerning for me is that I often found myself checking email or social feeds in bed in the morning and this is a TOTAL waste.

  1. I prefer to have peacefulness in the morning and time to think / chill out / zone out. This is critical to peace of mine, but …
  2. If I DO need to get work done I’m infinitely more productive if I come to my computer with a big screen and keyboard.

So my goal was to either have more time to just think or relax OR admit that I have work to do and do it more productively. I’m happy to say that this has been a huge improvement in my life and productivity and I notice the downside of this behavior when I travel and have my mobile phone in my hotel room. I sink back into old habits and regret the wasted time.

But.

I had a more important breakthrough about 90 days ago.

I deleted Facebook and Twitter from my phone. This has been game changing. I’m not a connected-all-the-time social media user anyways so it wasn’t immediately obvious to me how profoundly positive this would be but I’ll explain why it’s been such a positive experience. Let me start by telling you I didn’t stop using Facebook or Twitter entirely — I just deleted them off of my mobile phone.

Why did I delete Facebook and Twitter?

For starters I must tell you that I’m not a Facebook or Twitter mobile “power user” — I mostly used them to fill downtime. Maybe I’d be at a sports match or concert and was between plays or songs or I’d be on public transportation. I might use them if I showed up to a coffee meeting and the other party wasn’t there yet. Or at a school function where the speaker was boring me. I guess you could say that it was fuel to my ADD and need to be distracted.

Like many of you intuitively I knew it wasn’t good for me. I felt I had less time to allow my brain to react and the more I checked social feeds the more I felt the need to check social feeds. Of course when you’re looking at your feed you are

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Why the Former President of Nickelodeon Joined mitú as CEO.

Why the Former President of Nickelodeon Joined mitú as CEO. (Hint: 60 million US Latinos driving US growth engine)

I am beyond excited to announce the Herb Scannell has agreed to move from NYC to Los Angeles to take on the role of CEO at mitú, the fast growing Latino digital media company, serving more than 100 million monthly unique viewers.

Herb is a Puerto-Rican American media executive who was previously the President of Nickelodeon. He oversaw the launch of iconic properties including Dora the Explorer, SpongeBob & Rugrats — all multi-billion-dollar global powerhouses. Nickelodeon under Herb was the top-rated network in cable for 10 straight years. He was also Vice Chairman of MTV Networks and oversaw adult brands Spike and TV Land.

He left traditional media at the top of his game to be the founding CEO of Next New Networks, one of the first digital video startups, backed by Spark Capital and bought by YouTube in 2011. After a stint as the President of North America at BBC Worldwide, Herb is returning to his roots in both digital and Latino.

But why?

Latino is the Next Big Break Out

At this year’s recent Emmy awards Stephen Colbert rightly pointed out that there had been a marked increase in the number of successes by creators with diverse backgrounds and then proceeded to name several prominent African-American actors, directors and writers that were present.

The obvious slight he made that went largely unnoticed was the lack of Latino representation and it’s a big freaking market gap that is set to explode. We believe that mitú is positioned at the forefront of this because we represent the next generation of Latinos who are young, digital, largely American born and predominantly speak English (94%).

Large groups that are cut out of traditional representation are precisely the groups that achieve breakout successes by getting around the system and giving the market what they want directly. So while not one single Latino actor, director, writer or producer was nominated for the major awards in 2017 and the last major acting Latina win was 10 years ago and acting Latino win was 27 years ago — audiences are craving content that resonates with their experiences.

What Hollywood hasn’t been able to deliver in film or television has seen generational break-out successes like Lin Manuel Miranda’s “Hamilton” or the astounding success of Despacito, now the all-time most viewed video on YouTube approaching 4 billion views. Yes, with a “B.” I’m not sure what it takes to get through to people who green light traditional media. There is no more Latino-only market. This isn’t your grandmother’s Univision or telenovelas. We* are now the mainstream market and we’re bringing more to your mobile phones and living rooms.

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Want to Really Understand What all the Hype of Cryptocurrency is About?

If you read the headlines you may well think cryptocurrencies are a either a radically new way of paying that is our savior from ossified, corrupt governments or on the other side that they are speculative Ponzi schemes. The reality of course is that cryptocurrencies can be both and can be liberating and corrupting at the same time.

My goal with this post is to lay out a simple framework for anybody unsure whom to listen to orient your own views and develop a healthy skepticism for arguments lacking merit often by friends telling you how much money they’ve made.

I’ll lay out the cases for and against cryptocurrencies:

A. The Simple Case for Cryptocurrencies

Currency is something most of us take for granted in our daily lives and don’t give much thought as to where money came from, how it became accepted and trusted and how it’s evolved over time. It’s pretty tough to have a view on cryptocurrency if you don’t have a history of currency.

Currencies only began in earnest about 2,500 years ago and ever since have been a great enabler of democracy and social mobility, not the other way around. By making it easier to capture value for goods & services that ordinary people provide and by creating a means of storing value today that can be used in the future — currencies have literally changed society and the world.

Currencies enabled the creation of the first modern corporation (around 400 years ago to allow groups of shipping merchants to pool together risk), the modern stock markets (so that people could own a portion of a merchant ship & sell this when they needed more cash) and then spawned regulators that oversaw all of this because the minute you have markets you have people who manipulate them unsophisticated new traders out to make money that they hear everybody else is making. Sound familiar?

Currencies also begat debt markets and this credit has lifted millions out of poverty by allowing people to invest in capital equipment that they otherwise couldn’t afford today that can yields profits tomorrow.

(There is a short reading list in the Appendix if you want to learn more.)

The strongest cases for the existence of cryptocurrencies in my mind include:

  1. Allowing for a decentralized Internet in which value is accrued to infrastructure, protocols and applications that serve market needs
  2. Allowing electronic trade across actors who may not know or trust each other without middlemen who take a heavy toll / tax on the transaction
  3. Allowing for (the potential of) a more stable currency than one’s own government for citizens who may live under despotic or irresponsible regimes

1. Decentralized Internet —

This is perhaps the most unsexy part of cryptocurrency

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Finding My Tribe — The Upside of the Downcast Year

It’s been a tough year globally. Many feel the division in our families and societies. It has been heart-breaking to see progress reversed and social & racial tensions exacerbated unnecessarily.

Much of the focus on the public discourse has been how social media and the polarization of information sources has worsened the problem. We seem to be stuck on the narrative that our angst is tied to the arguments we’re having on Facebook, Twitter or the Thanksgiving dinner table.

I feel the weight of these differences, too. There was a period of time where we were encouraged to open up our horizons and make sure we were listening to the viewpoints of others. I did much reflecting and listening and reading.

I wanted to better understand the African American journey and anxiety better so I read “Between the World and Me” which was important to me even if its conclusions were sometimes hard to read. I watched 13th and cried.

I was touched by the messages of J.D. Vance and his poignant comment that white liberals go so far to try and remove any racial & religious prejudices from their minds & hearts yet still condescend and show prejudice against poor, white, working class populations of what we call “fly over states” or areas like Appalachia. It was hard for me to disagree with this view when I heard it so I read his biography “Hillbilly Elegy” and recommend it highly. The first step of understanding is reading an informed narrative of lives lived differently than yours.

I read books like where a professor in moral philosophy — Jonathan Haidt — discusses how humans make decisions in daily life and how they rationalize the choices they make. His book “The Righteous Mind — Why Good People are Divided by Politics and Religion” literally changed my views about how human decision-making and gave me a framework for understanding why some people may be wired to view the world differently than I do. He made me realize that people in industrial areas weren’t necessarily irrational people stupidly voting against their own economic interests but rather were making choices that supported different moral foundations than those that I thought were important to them. He made me think hard and realize that of course I personally vote against my own economic interest by supporting higher taxes and spending on programs to create equality and fairness so it might be understandable that others vote against their perceived economic interests on the other side, too.

I continue to go on a path of self discovery. But in the past year I’ve also realized something very important that I think gets missed in our anger about the blatant racism and anti-semitism and muslim

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11 Quick Tips to Get More Value out of Your Board

Many board meetings are bored meetings. Management teams whisk through slides trying to get through a presentation to share how great things are going and they are eager to get through the meeting so they can get back to their real jobs. This is a shame since the value that the right board could add is immense if you select the right board members and manage them effectively.

Yesterday I wrote a blog post about what the role of a board actually is. In short the board is there to represent the interest of all shareholders (big & small) of the company and all other stakeholders (debt, creditors, employees, etc.). The board’s job is to review the company’s financial performance and strategy and help provide counsel to the executive team.

Some boards are highly functional, many are not. Sometimes dysfunctional boards are a result of having investors who don’t really understand their role on the board or have the right skills or experiences to be helpful. Sometimes poorly run boards are a function of the executive team not knowing how to get the most out their boards (and also their investors).

I can’t change who your board members are so let me offer some thoughts on how to make your interactions with your board more productive.

Communicate frequently and proactively

The most effective CEOs that I’ve observed send regular, short, board update emails every few weeks or monthly just to give the board a sense of what is going on. Of course it’s not required and many don’t do it. But I find that the more informed your board is and the more you’re staying on their radar screen the more effective they’ll be for you.

As a starting point the more you’re on their mind the more likely they’re out advocating on your behalf when they are out talking with senior executives at potential customers, future potential investors, potential employees, biz dev partners, journalists and all of the other constituencies where investors should be helping you.

The more you keep investors update the more likely they will respond and try to be helpful for problems you’re trying to solve. The most updated they are the more prepared they are when they do turn up at board meetings. And the more informed they are (thus the less surprised they are if things aren’t going to plan) the more they feel bought in to your company’s successes or setbacks and the more productive they will become.

Keep your updates short and to the point or they run the risk of not being read and also don’t waste your time on too long of updates.

I wrote a much longer post a while back on

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What Do Boards Actually Do?

There’s a lot of mystique about what happens at board meetings and a lot of imagined board-room drama. I read commentary or Twitter or blogs and realize that there are also strongly held convictions that there are these evil VCs who do terrible things to mostly altruistic founders.

The image of boards and of investors vs. founder conflicts has been so at odds with my experiences on dozens of boards over the past 20 years that I thought it was worth sharing what I actually see.

As a starting point the board is intended to have legal and financial responsibilities to a few key constituencies: shareholders, debt holders, creditors, employees, government and major parties with whom the business operates.

In some ways being a board member is like how I’ve heard people describe learning to become a pilot: Many hours of boredom followed by some brief moments of absolute panic and fear. In fact, as one Twitter commenter observed to what do board do, “Often, not much.” That’s true. Executives run the day-to-day so often the board is more involved as a sparring partner at key intervals.

The administrative work we actually do at board meetings?

  • Agreeing an annual budget
  • Setting a 409a valuation used to price stock options
  • Agreeing stock option allocations
  • Reviewing financial performance
  • Talking about the organizational structure and where we need to bolster things
  • Discussing sales & marketing strategies, product launches, technical challenges
  • Talking about law suits (patents, trademarks, employee disputes)
  • And so forth

Between board meetings we do calls to discuss performance or major initiatives. Often we are asked to get involved in executive-level recruiting. And of course we help with business development introductions and with fund raising events.

Board work does involve a lot of conflict at moments throughout the company. Sometimes conflict comes because a company isn’t hitting its expected targets and investors vs. executives have different views in the causes or the consequences of under-performance. Sometimes conflict comes because executives want to increase personal compensation and investors aren’t in favor of this. Sometimes it comes because investors believe the company needs more experienced leadership to run the company or more often to help run the company.

But unlike the popular press reporting of this conflict — 80% of the time it is founder-to-founder conflict and not investor-to-founder conflict. The overwhelming majority of conflicts that I’ve seen on boards over the years are a result of the tensions of either:

  • underperformance of a company in which executives blame the action of each other or specific individuals
  • founders or senior executives in a company upset that they don’t have the right role, title or compensation
  • organizational changes in a company initiated by the CEO that leaves somebody in the company being unhappy
  • different risk
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What Does it Mean to be American? Why Trump is Just a Blip on the Radar

Starting back in 2015 and throughout much of 2016 people started commenting that my blog had become a lot more political. I guess I didn’t see it quite that way. My blog has always been a mixture of what was on my mind and a blend of venture, startup life, tech views and current society events that related to my interests: Venture, startup & tech. So as societal movements had impacts on startups affecting LGBTQ issues, for example, I was public about my support. In fact, I originally spoke out publicly in favor of gay rights when it was somehow still controversial to do so back in 2010 after California had made some bad political choices. I felt it was both a business issue and a human issue and deserved to have support of non-gay leaders. And when the tides turned towards more inclusiveness I cheered it on whether it was on this blog or through Twitter / Facebook / Snapchat. Being transparent in 2010 felt like more of an anomaly but being transparent in 2017 feels like more of a requirement to me. So as the election of 2016 swung into full gear with the entrance of Donald Trump and the threats I felt that posed to anybody who wasn’t white, Christian, male, heterosexual and born in the US — my voice got a bit louder until just after the inauguration and which point I moved my blogging onto other topics. But I figure that if people remain silent or tire of defending ourselves against the onslaught of normalizing anti-democratic norms or normalizing hate based on race, religion, sexual orientation or gender then the other side gets stronger. So I’ve been spending more time thinking about an issue that I’m passionate about — immigration. You may have noticed that the Trump Administration is delaying Obama approved immigration policies to allow more startup entrepreneurs born in foreign countries to work legally in the US that was due to be enacted starting today. It doesn’t take a rocket scientist to realize that not every great rocket scientist will be American born. Our most famous current rocket entrepreneur — Elon Musk — was from South Africa. The co-founder of Google wasn’t born in America nor was the co-founder of Sun Microsystems, WhatsApp, Yahoo! and the founder of eBay and many others. And what of our most revered tech founder — Steve Jobs? Yeah, he was born in San Francisco. But his biological father was Abdul Fattah Jandali — a migrant who came to America fleeing political oppression in his native country of …. Syria. As you no doubt know, Muslims born in countries targeted by the Trump administration — including political refugees fighting for survival — are being banned from traveling or seeking political refugee status in the US. America has always been the
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What Does it Mean to be American? Why Trump is Just a Blip on the Radar

Starting back in 2015 and throughout much of 2016 people started commenting that my blog had become a lot more political. I guess I didn’t see it quite that way. My blog has always been a mixture of what was on my mind and a blend of venture, startup life, tech views and current society events that related to my interests: Venture, startup & tech. So as societal movements had impacts on startups affecting LGBTQ issues, for example, I was public about my support. In fact, I originally spoke out publicly in favor of gay rights when it was somehow still controversial to do so back in 2010 after California had made some bad political choices. I felt it was both a business issue and a human issue and deserved to have support of non-gay leaders. And when the tides turned towards more inclusiveness I cheered it on whether it was on this blog or through Twitter / Facebook / Snapchat. Being transparent in 2010 felt like more of an anomaly but being transparent in 2017 feels like more of a requirement to me. So as the election of 2016 swung into full gear with the entrance of Donald Trump and the threats I felt that posed to anybody who wasn’t white, Christian, male, heterosexual and born in the US — my voice got a bit louder until just after the inauguration and which point I moved my blogging onto other topics. But I figure that if people remain silent or tire of defending ourselves against the onslaught of normalizing anti-democratic norms or normalizing hate based on race, religion, sexual orientation or gender then the other side gets stronger. So I’ve been spending more time thinking about an issue that I’m passionate about — immigration. You may have noticed that the Trump Administration is delaying Obama approved immigration policies to allow more startup entrepreneurs born in foreign countries to work legally in the US that was due to be enacted starting today. It doesn’t take a rocket scientist to realize that not every great rocket scientist will be American born. Our most famous current rocket entrepreneur — Elon Musk — was from South Africa. The co-founder of Google wasn’t born in America nor was the co-founder of Sun Microsystems, WhatsApp, Yahoo! and the founder of eBay and many others. And what of our most revered tech founder — Steve Jobs? Yeah, he was born in San Francisco. But his biological father was Abdul Fattah Jandali — a migrant who came to America fleeing political oppression in his native country of …. Syria. As you no doubt know, Muslims born in countries targeted by the Trump administration — including political refugees fighting for survival — are being banned from traveling or seeking political refugee status in the US. America has always been the
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I Only Have 7 Trips Left. On Managing Work / Life Balance, Love & Family

Like many people these days, I spent much of my 20’s and early 30’s thinking about work & fun and not too much about “the future.” Like characters from one of my favorite novels “The Unbearable Lightness of Being” life seemed very light. My first son was born the day before my 35th birthday so the decade that followed was very heavy and consequential. Life mattered for more than my pure enjoyment — I had to be responsible for the futures of these two lovable, little boys. I still worked hard and the balance of my time and energy went into family. My relationships narrowed to a smaller set of people who really mattered to me, my number of frivolous hobbies dwindled to only the most valuable and time became my scarcest commodity. If you’ve lived a decade with young children you know that it’s both unbelievably rewarding and also physically and emotionally exhausting. Many of my friends and colleagues also find themselves in the “sandwich years” of aging parents where responsibilities increase for your elders at the same time as for your kids and mortality becomes a reality. During this decade we lost a close family member we loved to cancer and realized that life is too short and if we didn’t take advantage of the blessings we had to spend time together we would be shortchanging ourselves and our children. So for the past 7 years we have ramped up the amount of sibling, cousin, grandparent, extended family time we could and we have loved every minute of this. I started thinking about “how many Thanksgivings, July 4ths or holidays we really had all together” and when you do the math it is daunting. I already had a sense of the heaviness (in a good way) of my forties when I came across this excellent post on one of my favorite blogs WaitButWhy entitled “The Tail End,” in which the author uses pictographs to bring the succinctness of life and family time to reality. The author was 34 when he wrote this and estimated that if he’s REALLY lucky he has at best 60 Super Bowls left
If I assume that I’m 10 years less lucky (and live to 84) and I happen to be 49 years old now that means the Eagles have only about 35 more tries to win their first Super Bowl. Now you can see the urgency of Carson Wentz fulfilling his full expectations! It’s on you, Carson. I’ll do my best to make it to 90 but I’m still counting on you. But seriously I sent this Tail End article recently to my brothers and sister recently to remind them why it was
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Details of Upfront Ventures New $400 Million Fund

I am so proud and humbled to be able to formally announce that Upfront Ventures has raised its 6th venture capital fund in the past 21 years. Upfront VI is our latest core fund and is $400 million to invest in early stage entrepreneurs. This brings our combined funds under management to nearly $2 billion.
A huge thank you to all of the Limited Partners who have entrusted us with your capital, time and reputations. We take this commitment and relationship very seriously and expect a great decade ahead. So what does one actually do with $400,000,000?

Upfront’s Base

As you probably know we are based in Santa Monica and as my partner Greg Bettinelli coined, we’re #LongLA. If you watch the short video below you’ll have a great sense on what is uniquely LA in 2017 — hearing from Mayor Garcetti, Kobe Bryant, Tyra Banks, Baron Davis and so many great advocates for the uniqueness of our city and some of our key stats. There’s no doubt in my mind that “LA is having a moment” and both VCs and LPs realize it. LPs (the people who invest in VC firms) have clearly voted in favor of LA with the creation of 15+ new early-stage venture firms and the continued growth is size and team of the great larger firms that are well established. Increasingly local entrepreneurs are finding they don’t have to “take the trip up North” quite as often because on a weekly basis venture firms are down in LA — it’s only an hour’s flight. But there is clear evidence that the overwhelming majority of startups will raise their first dollars from LA-based venture capital funds. We hope that having a larger fund ourself will mean that fewer need to take the trip even as their capital needs grow.

Upfront’s Mission

We built a brand that we thought would represent our values - who and what we are in a way that would hold us accountable. For us Upfront means

  • We are direct and give open & honest feedback
  • What you see is what you get (WYSIWYG)
  • We invest early
  • We have strong views and take strong positions
  • We are based in Los Angeles

Upfront’s Stage

As our brand makes clear, we’re early stage venture capital investors. 88% of the deals we do are Seed or A-Round investments and our median check size is $2.8 million. We don’t mind investing earlier if the situation warrants and we don’t mind leading a B-Round if we know the team well or the market. We’ll invest in about 15 new companies every year or just over 2 per partner. Overall we write about $100 million of investment checks every year.

Upfront’s Team

At Upfront we’re six full-time investment partners and

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One Simple Way You Can Make an Actual Difference in Somebody’s Life

Fresno State students receive supplies for school with help from Renaissance Scholars staff John Hunt, Jr. (left) and Kizzy Lopez (right).
We’re all bombarded with social media campaigns asking for us to Tweet, share, like, change our badge, use a hashtag or generally show outrage at a topic du jour. We jump in when we feel compelled or want to support the person who enlisted us. Today I’d like to ask you to consider a small additional gesture that will make a tangible impact on the life of an 18-year-old in need of some love and assistance. Please watch this very short 2-minute video that talks about children who are going into their freshman year of college and are either homeless or graduating from the foster care system.

I learned about the Renaissance Program from my wife, Tania, who has been working on a few causes related to helping children who age out of foster care. It never occurred to us that there would be this large group of ambitious people entering college with literally no support system. Of course it makes sense once it’s brought to your attention and once you know about it, it’s hard to do nothing. So my wife sprung into action and contacted our nearest university, UCLA, to see whether they had a need for “dorm move-in kits” for incoming students who had no parents or support system. Her goal was to donate pillows, sheets, towels, bedspreads, soap, laundry detergent, school supplies, and other basic necessities most of our parents provided lovingly as we entered our first year of college. It turned out that UCLA had a Guardian Scholar program set up since they have around 100 students entering this year out of foster care / homelessness.

The Ask

Tania set up a few ways people who may feel moved can donate — and truly any amount would be meaningful — from $25 — $1,000. Every dollar given goes directly to the students and my wife is so focused on that that she set up multiple ways of donating with no fees (crowdfunding sites take up to 9%). So there’s a Paypal page, a Venmo page or you can buy gift cards directly from Bed, Bath & Beyond (if you do the latter please don’t buy items directly because they started mailing each package individually to us so we want to limit this and get one bulk order — thus gift cards). We need to raise at least $35,000 to get these deserving students the most basic resources they need for college. And since today is my wife’s birthday I thought the best present I could possibly offer is my assistance in the work she’s truly passionate about. So I plan to match every contribution given dollar-for-dollar up to the first $10,000. If you feel moved to donate — thank you! If you’ve given to other causes and are tapped out, don’t worry. But I’d at least appreciate your help in spreading this message to other people. You can start by clicking on the heart below so more people on Medium see and and then share across Twitter, Facebook, etc. Tania, I love you for caring. I love you even more for doing something about it. Happy Birthday.

Huge thank you to our portfolio company Parachute who kindly donated sheets. I’m super grateful for your support. And while this isn’t an ad, I should tell you that Parachute products (bedding, towels, tabletop) are simply fantastic. I know this as a happy customer who paid full price for his.

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  • Every day in the US there are around 428,000 children in foster care. The average age is 9 year’s old.
  • On average they stay for 2 years but many stay 5+ years
  • More than half of the children are people of color
  • Every year > 20,000 foster children “age out” and these are some of our most vulnerable youth. One of the greatest organizations making an impact in helping people graduating is LA Kitchen, where my wife also donates her time. If you want to know more about this great program watch this 60-second video.

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If you know companies that want to donate, UCLA is a public, nonprofit institution exempt under section 501(c)(3) of the IRS code under the Regents of the University of California. IRS Tax ID (TIN) 956006143

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Photo courtesy of Kleenex Brand video ad campaign. You’ll need one if you dare watch that amazing video above ;)


One Simple Way You Can Make an Actual Difference in Somebody’s Life was originally published in Both Sides of the Table on Medium, where people are continuing the conversation by highlighting and responding to this story.

What is the Right Burn Rate for your Startup?

One of the hardest decisions entrepreneurs make when they start a company and raise outside capital is figuring out what an acceptable “burn rate” is. That is, how much should your company be willing to lose in cash every month as you make investments in staff and equipment that funds technology, sales, marketing and management. Of course there is no right answer but it’s a function of how much capital you have raised, your prospects for raising more capital in the future, your growth rate and your company’s risk tolerance. As a VC, burn rate is one of the most discussed topics I have with teams who are pitching me for raising capital and it is one of the most common discussions points I have with founders in companies that I’ve backed. So let me walk you through the discussion points I have with founders.

The Basics

The starting point — the 101 — is knowing the difference between gross burn and net burn. Gross burn is your cost base and net burn is the difference between your revenue and costs. In short, it’s the amount of cash you’re burning every month (vs. GAAP Net Income, which at times isn’t a good reflection of cash burn). The main reason to know your burn is to arrive at a quick calculation of how many months cash you have before you run out of cash. Usually when an investor is asking you your burn rate he or she is referring to net burn — what cash are you consuming.

Growth vs. Profits

Yesterday I wrote about the trade-off between growth and profits. I wasn’t advocating for any specific actions because sometimes the right action is for companies to accept short-term losses in exchange for faster growth and capturing market share and many times it makes sense to grow more pragmatically or even profitably. In the article I made the point that VC investors seldom value profitability if it comes with slow growth so forcing yourself to be profitable is wise in three specific scenarios:
  1. You have a business that never wants to raise (more) venture capital
  2. You can be profitable and growing at a steady enough clip to attract (more) venture capital
  3. You don’t believe you can raise venture capital so your best strategy is to become profitable so you can “control your own destiny”
But a certain amount of burn rate in startups is often desirable if it comes with commensurate growth and if ones prospects for either raising capital or failing that cutting costs and hitting profitability seem achievable.

How Much Capital You Have Raised / Your Runway

In general I recommend that in early-stage startups you try to raise at least 15-18 months of runway. In general you should allow yourself
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Should Startups Care About Profitability?

There are certain topics that even some of the smartest people I talk with who aren’t startup oriented can’t fully grok. One of them is whether profitability matters.
It’s common cocktail party chatter to hear people confidently pronounce that some well known startup is sure to blow up because, “How could they succeed when they’re not even profitable!” Or you know the other one — the one where Snapchat lost $2 billion in just one quarter. Two-fucking-billion! What a disaster! Except that they didn’t actually lose $2 billion in cash. It was a stock option incentive related “expense” but I bet you didn’t know that because in an era where we only read the headlines — they must be a train wreck losing billions. (They actually lost about $175 million in cash in that quarter, FWIW. See appendix if you want to know more on this.) In any tech startup there is a healthy tension between profits & growth. To grow faster businesses need resources in today to fund growth that may not come for 6 months to a year. The most obvious way to explain this is with sales people. If you hire 6 senior sales reps in January at $120,000 / year salary then you’ve taken on an extra $60,000 per month in costs yet these sales people might not close new business 6 months. Your profitability will go down for 2 quarters while your growth may increase dramatically in quarters 3–12. I know this seems obvious but I promise you that even smart people forget this when talking about profitability. 70–80% of the costs of most startups are employee costs so what you’re really talking about when a company is unprofitable is that they are growing their staff ahead of their revenue. If you don’t have a strong balance sheet and can’t hire more people that’s fine — but understand this may lead to slower growth. Thus the trade off between profits & growth. I often ask entrepreneurs to consider, “What’s your objective? Are you looking to potentially sell the company in the next year or two? Do you plan to run this as a smaller business but maintain healthy profits? Do you imagine eventually raising VC and trying to build a faster growing company?” Venture capital isn’t right for many business but if you do want to raise from a VC at some point you need to understand that often investors care more about growth than profits. They don’t want high burn rates but they will never fund slow growth.

Revenue

When I look at an income statement I start by focusing on the revenue line. I want to understand how many units the company is selling, whether this is increasing over time and how
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Why You Shouldn’t Be Fooled by Your Own Expertise

I am wired to discount people who have total assuredness in their point-of-view, have dogmatic positions or use data as a crutch or substitute for logic. I appreciate people who have strong opinions or conviction but expect them to constantly be testing their opinions and refining their approaches as they encounter new people, facts or logic. I have long believed that humans (myself included) err on the side of over-confidence in their own abilities and thoughts. Thus one of my favorite idioms is
“Strong opinions, weakly held”
Years ago when I worked with my dear friend Carlo Gagliardi he used to say that “it took three bullets to kill you, Mark.” He told me I was stubborn and opinionated and if he brought me a weak argument but didn’t have enough evidence to support his position he would get pushed back. He would then bring some basic facts to prove that I wasn’t seeing things correctly but I wouldn’t budge without compelling logic. But he knew that if he had real conviction, if the facts were on his side and if he could build enough logic with his data or facts he could eventually win. Three bullets. Weak-sauce arguments fall on deaf ears with me and sloppy logic annoys me to the point of frustration. A well-mounted case and I drop my defenses and embrace what I hadn’t seen before. Coming back with an empty chamber for the third battle is much worse than not coming back. I was influenced heavily before my career even began because in my undergraduate work I took a ton of statistics classes that showed how easily we human brains fall prey to easy biases and slights of data and try to draw conclusions that don’t exist. Thus when I read “A Random Walk Down Wall Street” in my early 20’s it reinforced my belief about how people are fooled by data. Given enough performance over time any number of random people will be proven “right” about a market and if you look back in time you can believe that they had a method to their outcomes. If you have hundreds of millions of people and you do 20 rounds of coin flips in a row there will be some people who were right every time and we can be quick to ascribe these people as geniuses rather than being right by chance. Even worse, when I was a strategy consultant I learned how easily data could be manipulated to prove just about any reasonable thesis and how a well-structured argument lined with data or pseudoscience could persuade large groups of people of dubious conclusions. I wrote about these experiences 7 years ago in a post I titled
73.
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The Surest Sign You’re Winning is When Goliath Takes a Swing at You

I’ve been involved with several startups where a giant incumbent attacks you and tries to sue you out of existence. When you first receive the threat it feels like the local pizza shop when they first get a call from the local mafia boss and you can feel the shake-down coming. The first instinct is fear, then dread, then panic. You begin to think about how hard it will be to fund raise, sign customers, hire employees, etc. with the cloud of a lawsuit hanging over you. That’s what bullies want. They are trying to intimidate you. It’s like the big kid at school who realizes you’re smarter, nimbler or more charming and their only defense is to punch you in the nose quickly hoping you’ll shrink slowly into a corner. Every time I’ve been in this situation, I’ve talked with founders and said the simplest line,
“We finally know we’re winning.”
You see no large corporate ever bothers trying to squash you like a bug until the fear that you are actually a threat to their business. And I seldom see big players who fear their core business is under attack who don’t resort to bully tactics. So you now know you’re winning.
“Once somebody realizes that your business has a strong chance of taking food off of their table their first reaction is to grab for the knife.”
That doesn’t mean life will be easy. You have to devote time, attention and money to fight with somebody several times your size and financial capabilities. But if somebody isn’t trying hard to kill you then I ask you whether you are really, truly, having an impact in your industry. Yesterday a company that Upfront backed since its earliest days, Ring, announced that it won’t be bullied by the industry giant ADT who has filed a baseless lawsuit against the company to try and impede our progress. This Goliath imposed fight by ADT is particularly annoying for me because Ring is literally my family’s single favorite tech innovation of the past several years. It is a security doorbell (and now floodlight!) where for just $3 / month you can watch all video footage of people who come to the outside of your house including delivery people, solicitors or people in the neighborhood who perhaps shouldn’t be there. For my family Ring has become a way that we joke and communicate with each other when I’m on the road. The boys or my wife will step in front of the camera on the way to school and if I’m in NY or SF or London my phone rings and I see them waving on their way.
Just how threatened in ADT? Ring is now arguably the
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Getting Your Head in the Game for Fund Raising

When you run a startup you’re always on borrowed time. You have cash in the bank, a monthly burn rate and a “cash out” date that few in the company truly comprehend. I’ve never met a founder who wasn’t acutely aware of his or her ticking time bomb and the sense that failure and humiliation is a real possibility. It’s why so few can really start a business from scratch. It’s the ultimate in accountability and public judgment. It’s why raising a round of capital often feels like a hollow victory because it almost feels like a temporary reprieve from the Grim Reaper and in a way every new round just sets the bar higher to clear for the next round of financing or the hope of reaching profitability. If you have existing investors of course you feel a degree of comfort knowing that they would likely have your back in tough times — but of course you never really know. I remember my VCs telling me they would be supportive yet I knew the ultimate decision would only come if I were truly out of cash and needed more money. As the end date nears and the cash-out date becomes more predictable the pressure mounts and every decisions becomes more consequential. There is no way to run a startup business without accepting at least a little bit of cognitive dissonance as you persuade yourself that one way or the other you’ll find a way to make it work while suppressing the very real possibility that you may not. Fund raising is hard for everybody. Very, very few founders have an easy time despite what you read in the press. Knowing that now will help you greatly in your dark moments to know that you’re not the only one struggling. The perverse nature of raising capital is that “no’s” almost always precede “yeses” because it’s very easy for a VC to tell you that you’re not a good fit without doing any real work to evaluate your company so you hear “no” far before others start doing more work. I’ve seen many founders lose confidence in the earliest parts of the process rather than accept that it’s a numbers game where you’re just not a fit for everybody. Fund raising is like a funnel where you need a bunch of potential leads in the top end and only a few will reach the bottom. Because I’ve observed this process dozens and dozens of times both as somebody who has had to raise capital for nearly 20 years himself and as an investor on the board of companies where we’re raising money — I thought I’d jot down some thoughts for those who will raise in the years ahead.

1.
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How MakeSpace Recently Closed $30 million in New Funding

Just over a year ago I wrote about how MakeSpace had raised $17.5 million in capital to build out it’s operations in 4 cities: New York City, Los Angeles, Chicago and Washington D.C. I pointed out that the storage market in the US alone is ~$30 billion / year and there is no dominate provider — the largest player has < 10% market share. If you have a storage need in one of these cities please consider checking out MakeSpace. Today I’m excited to announce we’ve recently raised $30 million in growth finance led by 8VC, with Kimmy Scotti joining our board. We’ve been delighted with 8VC as a co-investor. So how did a company that provides storage grow so fast (we’ll exit 2017 with 10’s of millions in recurring revenue), why is it so defensible and is it really a tech startup? In short — how the hell did we raise $30 million? If you buy that Amazon is a tech startup then essentially you’ve already answered the question. Amazon took a consumer value proposition (buying books, then all retail products) and made the consumer experience significantly better, faster & cheaper. They didn’t do this by selling better books or electronics, they did it by building a logistics & warehouse powerhouse.
  1. Amazon didn’t need physical retail so it didn’t have an expensive cost structure
  2. Amazon put its distribution centers centrally located in cheap locations and can store significantly more inventory due to cheaper square footage and they can stack products high because you don’t visit the Amazon warehouse
  3. Amazon delivers the product to your house, which costs them money but due to large volumes of delivery, route density and large purchase volumes they make more than enough margin to cover their additional logistics costs
Essentially Amazon invested in being the world’s best logistics, warehouse and inventory management company. In the early days this is expensive because the logistics & warehouses are amortized over a small customer base but with scale this infrastructure and the technology that drives it becomes a powerful moat and hard for new entrants to compete. MakeSpace is building the exact same systems but in reverse.
  1. MakeSpace doesn’t need large numbers of local storage facilities near your house, so it has a greatly reduced cost structure for its facilities. Today our physical costs are less than 50% of traditional storage providers and that’s trending towards 20% with volume.
  2. MakeSpace puts its distribution centers outside of expensive commercial zones near where customers live and given our warehouses don’t need to visited by humans we can stack our customers storage much more efficiently, driving higher yields
  3. MakeSpace will pick up your goods and bring them back to you so it is a vastly
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