Are you the master of your domain?


This post is by seth levine from VC Adventure


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The title of this post is meant to be taken literally, not metaphorically. Do you control your domain?

Last Friday one of our portfolio companies briefly lost control of its domain. It wasn’t the fist time we’ve seen this happen and, as you can imagine, the result could have been disastrous (in this case we were able to lock down the domain before anything nefarious happened, but people don’t steal control of your domain for anything other than doing bad things, so it was lucky that we were able to avoid a serious issue). Different registrars have different rules for transferring domains around. In this case all it apparently took was someone writing the registrar and claiming the domain was in fact theirs. We believe (but aren’t positive) that the registrar did send an email to the contact listed in our account stating that the domain was to be transferred unless action was taken by us (that the process is that simple is a matter for another post altogether). But this email either didn’t get to us or was not acted upon promptly enough to prevent the transfer. The company then jumped through hoops for several hours to get the domain first locked down (so the party who stole it from us couldn’t redirect it) and ultimately transferred back.

We rarely (really never) talk about domain security when we’re talking about other security measures that companies take to lock down their data, transact securely, etc. But clearly it’s extremely important to make sure that you have (and always maintain) control over your domain. This starts with making sure your domain is a corporate asset – meaning that it’s not in the account of a founder but in an account that is owned and controlled by the company itself. It’s also extremely important to make sure the contact information in this account is up to date. And that you pay attention to any notices that your registrar might send you (in a timely mannor).

So seriously. Make sure you are the master of your domain.

Trends in M&A Deal Terms


This post is by seth levine from VC Adventure


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For the past several years Shareholder Representative Services (SRS) has been publishing aggregate data on trends in M&A. These aren’t just high level observations, but rather are nitty gritty, details around the some of the most important terms contained in purchase agreements. As a self proclaimed M&A geek, I live for this stuff. And if information is power, this study dishes out plenty. And as a result helps level the playing field for companies (who transact very infrequently), their investors (who transact a bit more often) and buyers (who often have dedicated M&A practices who do nothing but execute transactions).

I’ve been fortunate to be involved in a number of Foundry related transactions in the past year. Knowing market trends (and in some cases – and here’s where your VC may really be able to help you – knowing details of a specific buyer’s historic willingness to negotiate around certain terms) is extraordinarily valuable.

You’ll find the full SRS report here. There’s a brief statement about their methodology at the beginning that’s worth taking a quick perusal through before you dig in (the data are based on the 196 transactions on which SRS acted as representative).

A couple of trends that stood out to me:

– 86% of all transactions were all cash. With a favorable borrowing environment and many companies holding on to large cash reserves an increasing number of deals are all cash.
– 24% of transactions contained an earn-out. I’m generally not a fan of earn-outs and the continued relatively frequent use of them is a little surprising to me (this figure was 25% last year).
– Average Escrow period was 15 months. The detail here is pretty interesting. The most common escrow period was 18 months (44% of deals), and 12 months was the 2nd most common period (24% of deals).
– Escrow size averaged just under 13%. This is always a hotly debated issue in transactions. Interestingly the median escrow size was over a point lower at 11.7%. There’s a chart below showing the distribution of escrow size.

One item that wasn’t covered in the study but which I think would be interesting is to see the % of transactions where there is a buyer initiated management incentive plan of size (say above 10% of the total consideration). We’re seeing more and more buyers use this tactic to either incent management (nice view) or separate management from their investors (the not nice view). Either way, they can be significant and I’d love to see how common they are and what percentage of deal proceeds are set aside for this purpose.

The First Round BOT


This post is by HLM from WayTooEarly


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The dictionary defines a bot as “an autonomous computer program that performs time-consuming tasks, esp on the internet”.  Those of you who know First Round Capital have learned that we are fanatics about measurement and metrics.  We believe that it is easier to improve something when you have a metric, and can tell objectively when things get better.  Analytics are at the heart of web based businesses, and we’ve also made them at the heart of our FRC culture. This past week, we held our Annual meeting with our investors.  We have been collecting data almost since day one about every aspect of our business – deal flow, voting habits, performance of companies, performance of our portfolio, etc. 

To make sense of all this data we are fortunate to have built an outstanding BOT.  This one is not a computer, but our Back Office Team.   Led by Jeff Donnon, our CFO, this group of five people did yeoman’s work, both on and off the computer, to put together the charts, graphs and data analyses that help us provide strong transparency to our investors. When you look at almost 3,000 deals each year, and tens of funding events, there is a huge amount of data to make sense of.  Yet our BOT, which I doubt we could automate into a “bot”, has done this work quarter after quarter to make sense of our investment pace, decision timing, reserve planning and so many other factors. They are helping us to find the signals in all this noisy data.  While the business of judging entrepreneurs and ideas will always require some key human judgments, having our BOT adds analytics that let us focus our attention on the people part of the equation, while adding the quantitative view to our process.

So kudos to the team, and I’d encourage any of you who want to adhere to the high standards of transparency that we do, to build a BOT that can not only crunch numbers, but also help make sense out of them.

 

Brad Feld Sings! (sort of)


This post is by seth levine from VC Adventure


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Remember when I said that Brad can’t sing? Here’s the proof – a recording session in Jason’s studio for our I’m a VC video (Brad is wearing headphones with the music track piped in – all the better for us to clearly hear Brad himself in this outtake). Enjoy!

Never give up but move on quickly


This post is by Ed Sim from BeyondVC


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As a young kid, I was always taught the valuable lesson of never giving up or quitting.  No matter how many times you get knocked down, you have to stand up and keep moving.  That is the same trait that I also admire in many of the entrepreneurs that I have funded over the years.  This mentality is what carries many great entrepreneurs from near death experiences to ultimate success.  However, I do caution that entrepreneurs should temper this “never give up” attitude with a “move on quickly” one as well.

Let me explain.  Many entrepreneurs will take this same “never give up” attitude with the sales process or raising financing.  On the one hand this attitude is what is absolutely necessary to get things done but on the other hand it can be quite detrimental.  What entrepreneurs need to do is learn how to qualify their leads and to do it quickly.  The worst outcome for an entrepreneur i to spend countless cycles on trying to close a deal that is not closable or spending way to much time on a lead only to end up giving away the farm to make it happen.  Never giving up may actually prevent you from finding the next great customer or funder.  I have seen this time and time again from many companies and what is problematic is that time is precious for a startup.  You only have so much time to hit your milestones so use it wisely.  When you are meeting with potential prospects make sure to qualify them in  the first meeting and understand if they really do have a need for what you are selling, the decision making process, the timeframe in which a decision is made, and ultimately the potential budget.  If the information does not meet your needs, move on quickly.  You can take your “never give up” attitude by trying to qualify as many prospects as possible rather than “never giving up” on one or two.

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Never give up but move on quickly


This post is by Ed Sim from BeyondVC


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What monks, chefs, lugers, singers, graffiti artists and actors all have in common


This post is by seth levine from VC Adventure


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There’s a wealth of experience and expertise around us every day. We probably don’t give most people we pass running around our respective busy cities a second look, but rushing by you are people with interesting expertise and experience. Artists and actors; olympic athletes and monks; sailors and graffiti artists.

SideTour looks to unlock this community and enable them to market and generate income off of their unique expertise. These experts – “hosts” in SideTour’s terminology – use the SideTour platform to advertise their experiences. SideTour helps them market these experiences and handles bookings, billing, refunds, etc. on their behalf. SideTour events are designed to be shared in groups – often people who haven’t met each other before the experience (although the platform does allow for group booking). And the entire experience ultimately becomes about the event, about the host and about the participants. The results so far have been fantastic.

Importantly, SideTour isn’t just a listing service for events, as some other companies pursuing similar models are. And SideTour heavily curates the experiences hosted on its site to ensure that they are both unique and that the hosts have true expertise. The variety of experience on SideTour really show the effect of this curation (and you thought I was kidding about luging and monks).

I met the SideTour team at the beginning of TechStars NYC and immediately loved what they were up to. And I love the story of four founders, friends and colleagues for over a decade, coming together to form a business (sounds like the Foundry story). They’ve made incredible progress over the summer at TechStars.

The company announced today a $1.5M seed financing led by Foundry and RRE (there’s a great write-up on TechCrunch here). This money will help the company further build out the functionality of the SideTour platform and begin expansion to markets beyond its launch market of New York City.

It’s great to have the chance to work with them!

Can product "disruption" become a new paradigm?


This post is by Sarah Tavel from Sarah Tavel / Adventurista


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Facebook is an incredible company, and it’s incredible for many, many reasons. But one of the things that most impresses and amazes me is Facebook’s relentless reinvention. The company has disrupted its product, and therefore its users, on multiple occasions. I’m sure everyone remembers the backlash Facebook weathered when it launched its newsfeed. And of course, we’re still less than a month into Facebook’s newest disruption, this time to its profile page.

Facebook is in rare company. Microsoft, to its credit, disrupted its Office product suite by introducing the ribbon (which was probably a great change for my mom, but drives me a bit crazy), and more recently disrupted its Windows suite. But I’m having trouble thinking of other companies that have taken their core product and fundamentally changed it in a way that is both disruptive to its end users and unavoidable.

Recently, I’ve started to use Salesforce.com’s CRM. Although Salesforce is a huge step up from the other CRM I was using, it’s clear that the application was designed several years ago and has since evolved but hasn’t fundamentally gone through any disruptions. While the UI/UX must have been a dramatic, disruptive improvement upon other legacy CRMs when it launched, as it continues to evolve, it might one day find itself surprised by a new, shiny startup that takes advantage of the last five years of technology innovation (both technically and UI/UX-wise).

Obviously, there’s a reason why you don’t see a lot of disruption. It’s incredibly difficult to execute, and unbelievably risky. Large companies aren’t known for pursuing risky strategies.  But could a Marc Benioff look to Mark Zuckerberg as a disruptive role model?  Crazier things have happened. Facebook is leading the way not only by example, but by lowering the riskiness of disruption by forcing its 800m+ users to better embrace change.

We’ve gotten used to hearing about struggling startups “pivoting”. It would be pretty incredible if we soon found ourselves getting used to hearing about companies with market dominance “disrupt” their products and leap from the past to the future.  

Is there age bias in VC investing?


This post is by seth levine from VC Adventure


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I recently waked into a pitch meeting for a social networking related business and was surprised by what I saw. I had interacted with the entrepreneur over email – taking a look at the initial business plan and setting up the meeting – but we hadn’t met in person before. In front of me were three guys in suits, each in their late 40’s or early 50’s, with an older Dell laptop and a paper print-out of some product ideas. And as I sat there listening to their pitch I couldn’t help but think about how differently I might have reacted if this team was in their 20’s or 30’s, dressed in full tech/nerd hipster outfits (or at least jeans and sneakers), and whether there is a negative age bias in venture capital. Here were three guys with 20-30 years of business experience, but I was having trouble getting past my expectation of what they were going to look and act like, versus what was in front of me.

An LP of ours once asked a question that dealt with a similar subject (ironically, although we were in our Boulder office and the LP in question was in jeans, my partners and I were all in sport coats, as we always are when presenting to our investors). I can’t remember exactly how he phrased it but it was something like: “When do you guys get to be too old to do this? To relate to the younger entrepreneurs who are starting companies in the investment areas in which you guys focus.” To be quite frank, this question had never actually occurred to me before. Likely because I still think of my self as young and hip (although I am neither). And because I figured that as long as we are passionate about what we’re doing, we’ll relate to entrepreneurs who have that similar passion (some variant of that is how we answered our investor at the time).

But actually it’s true. Certainly there is some amount of age bias in venture. Early stage tech is considered somewhat of a young person’s game. And while I’ve worked with many very experienced entrepreneurs who were and are fantastic, I wonder if the initial pangs of question I felt on entering a room with 3 middle aged guys in suits pitching me their business plan is something that is deeper than a momentary hesitation.

I’d love your thoughts on this.

Too Lijit


This post is by seth levine from VC Adventure


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NewImage

This morning Federated Media announced that it has acquired Lijit Networks in a private stock deal.

I’m incredibly proud of what the Lijit team has accomplished in the almost 4 years we’ve been investors in the business – charting a course that wasn’t exactly always a straight line, but one that has always placed publishers first. As a result of this never wavering focus on web publishers, Lijit has built a large and ultimately very valuable company.

I’ve always thought that Federated was the natural acquirer for Lijit (and we’ve been partners with Federated for some time now). Federated shares Lijit’s focus on publishers (“the best of the independent web”), but unlike Lijit, who helps publishers generate revenue through better monitizing their non-premium inventory, Federated sells unique, high value premium inventory across their federated group of publishers. For a time, Lijit pursued a similar model and having bumped into Federated in many a sales process we can attest to the strength of the Federated sales team. Ultimately Lijit chose a different path – integrating with over 30 buying channels and standing up their own RTB exchange. All the while, Lijit has been rapidly growing the list of publishers they work with by providing not only an advertising channel, but search, analytics and insight tools to help Lijit publishers better understand and engage with their audience.

The fit is a natural one. Federated brings to the combined entity a large and established sales force and the ability for Lijit publishers to access premium content relationships and advertising. Lijit brings a strong technology background, a rapidly scaling publisher base and the ability of both Federated and Lijit publishers to place their inventory to auction through the Lijit exchange.

As part of the acquisition I’ll be joining the Federated Media board of directors (along with Federated founder, John Battelle, FM’s CEO Deanna Brown, FM’s early investor from Panorama Capital Chris Albinson and Fred Harmon of Oak Investment Partners, who led the large Federated financing in 2008). I’m thrilled to be working with such an accomplished group and to continue my close relationship with Lijit through my continued role at Federated Media.

I’d also note that, while the financial details of this transaction haven’t been released, this is a significant win not only for Lijit and its investors, but also a nice outcome for Boulder (Lijit’s offices are in the heart of downtown – just upstairs from the Foundry office, in fact). While ultimately the exit will be measured by the outcome of the combined Lijit/Federated business, based just on this deal’s value alone this ranks as one of the larger transactions for a Denver or Boulder based business in the last decade.

You

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Startups getting caught in No Man’s Land


This post is by Ed Sim from BeyondVC


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“No Man’s Land” is traditionally known as the area between two trenches.  This is a reference to World War I and the vicious trench warfare and hand-to-hand combat that characterized that war. In “No Man’s Land” lay a wasteland of dead bodies and other debris and shrapnel.  Increasingly I am seeing many startups who were ably seed funded get caught in “No Man’s Land” between the seed round and a true Series A round led by a venture capitalist.

This is happening because there are way too many companies raising seed capital but not enough executing their way to a Series A.  This can happen for many reasons including not raising enough capital in the seed round to begin with and of course not getting your product out the door.  So what does an entrepreneur do when caught in this predicament?  Many try to do an additional seed round or add-on to the prior round.  While not a bad idea, this is rarely successful because many seed funded startups have way too many investors who are more apt to write off the investment then to bridge more seed money.  Secondly many angel investors would rather invest in that shiny new car or first seed round then add more capital to a used car or startup that did not “get there” on its first seed financing.  Smarter entrepreneurs are increasingly doing two things to make sure they don’t caught in “No Man’s Land.”  First, rather than getting 20 great names as seed investors, they are making sure to get at least 3/4 or more of the round invested by a couple institutional seed folks that may have deeper pockets and more ownership in the startup to really care about what happens in the future.  Secondly, the smarter entrepreneurs are really thinking carefully about what milestones need to be hit to raise that first Series A round and work backwards to determine how much financing they need to get there.  While not an exact science, it is imperative to think like this as you don’t want to be one of the many seed-funded companies that will linger in “No Man’s Land.”

The post Startups getting caught in No Man’s Land appeared first on BeyondVC.

Startups getting caught in No Man’s Land


This post is by Ed Sim from BeyondVC


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Mike “launches” Uncrunched


This post is by Opinionated! from Opinionated!


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My good pal Mike has a new blog at uncrunched.com. Check it out.

Efficiency


This post is by seth levine from VC Adventure


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Like you, I’m a pretty busy guy. I’ve always been high energy and (I hope) high velocity. My job requires me to be in many places at one time (and at any one time have a few dozen different things spinning around in my head). It’s tiring and doesn’t always leave time for the kind of balance I look for in my life. There’s always someone else to talk with, some other conference or “it” even to attend; another great idea to look at investing in. But in the last 6 months or so I’ve really hit a different stride that’s allowed me to both feel more productive and more balanced. Given that every one I know struggles with this I thought it would be worth putting a few ideas down on paper in hopes that others will pile in with what’s worked for them.

Gmail: Gmail is simply fantastic. Sitting here it’s hard to even contemplate the number of years I spent in the purgatory known as Outlook/Exchange. It was a strange purgatory – I didn’t really know I was in it, but at the same time always had an uneasy feeling about it. You’re probably already on Gmail (what hipster tech person isn’t?), but just in case – it’s at the top of my list of things I’ve done in the past year that have really impacted my time. Plus Gmail enables a bunch of other productivity enhancing apps (see immediately below for a few of them).

Unsubscribe.com: If you don’t have Unsubscribe.com run, don’t walk, to get the plug-in. It’s free now, which makes the bar to install it even lower (although as I posted previously, I’d gladly pay for this functionality). The key here is to actually use it. And use it often. I’m absolutely relentless about my use of Unsubscribe. I’ve had the same email address for at least a decade and over the years the newsletters and lists have piled up. At some point I tried to unsubscribe myself from them, but it was impossible to stay on top of. Now with a click of the Unsubcribe.com button they’re gone. I’m not joking when I say that I’ve cut back my email traffic by 150 emails A DAY by my relentless (and continued) use of this tool.

SaneBox: Here’s one you may not of heard of. I understand that messing with people’s email is a recipe for disaster. And everyone has their thing in terms of how they like to have their email sorted. For me that wasn’t any of the other email productivity tools I tried and it definitely wasn’t Priority Inbox from Google. SaneBox uses information

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I’m a VC – Behind the Music


This post is by seth levine from VC Adventure


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Yesterday we released a video written, produced and directed by my partner Jason, that attempts to capture “the human struggle of four venture capitalists trying to make the world a better place.” From the response on Twitter, Facebook and elsewhere on the web it seems to have hit a chord with people; and I hope has been taken for what it was intended – a parody of lives as VCs (certainly no one can accuse the four of us of taking ourselves too seriously!).

It was for me a unique experience, not just creating the video but also recording in Jason’s studio and watching the editing and finishing process. For 5:56 of video (including outtakes) we spend hours recording and filming (not to mention all the time Jason spent mixing, re-recording and editing). It was a blast. Especially the day we spent running around Boulder in full costume(s) filming. We turned quite a few heads and at a couple of points had a full audience watching us perform. I learned a few important things that I thought I’d share:

I can’t sing. Like most people I think I have a pretty good singing voice. I sing in the car, sing along to my iPod, occasionally sing in the shower. And I thought I really had it. So when I got to the studio I belted it out like I was feeling it (and I was). And then Jason played it back for me and it turns out that I suck at singing. It’s disappointing to admit, but it’s true. Alas, I better stick to my day job.

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Brad sings even worse than I do. If I can take any solice in the fact that I can’t really sing, it’s that Brad can’t sing either. And he’s even worse than I am. So at least there’s that.

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Go big or go home. There was no question for the four of us that if we were going to do this, we were going to go all out. For me that was the beard (thanks to my wife Greeley for shaving it down to JT perfection the night before the shoot!). And for all of us (thanks to the internets) the costumes. If it’s worth doing, it’s worth doing as embarrassingly as possible!

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Impromptu can work (sort of). Most of our shoots were meticulously planned out by Jason in advance of the crew arriving, but the scene we shot in the shower (which I’m a bit mixed on, actually) was completely impromptu. Like “hey – do you think we could all fit in the shower?!” kind of impromptu. Sometimes you just need to go with it!

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I love my

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Blurtt joins Archimedes accelerator program


This post is by editor from archimedes labs


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Blurtt – an Austin, Texas based startup has joined the Archimedes accelerator program. The company is in stealth and will launch in early 2012. We are pleased to welcome CEO Jeanette Cajide and her team to the Archimedes family.

Quixey Raises $3.8m from USVP and WI Harper


This post is by editor from archimedes labs


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From TechCrunch:

Quixey, the Palo Alto-based startup that’s building a functional search engine for apps, today announced that it has closed a $3.8 million series A funding round. The investment was led by U.S. Venture Partners and WI Harper Group, with participation from Webb Investment Network alongside follow-on investment by Eric Schmidt’s Innovation Endeavors. The series A round adds to the $400K Quixey raised in April from Innovation Endeavors, bringing total investment to $4.2 million.

We’ve all heard (and perhaps even mocked) the quip “there’s an app for that”. It’s actually a wonderful quality of the mobile revolution: There really is an app for just about everything you can think of, from calling a taxi to managing your schedule to scanning for skin cancer or heart murmors. But, it’s also overwhelming, and searching for the app that you want isn’t easy. There’s a lot Continue reading “Quixey Raises $3.8m from USVP and WI Harper”

Cloud based services – the future of the Internet


This post is by Opinionated! from Opinionated!


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Fred Wilson has a response today to Eric Schmidt’s declaration in Edinburgh that Google+ is an “identity service”. He asks and answers his own question.

“whom Google built this service for? You or them. And the answer to why you need to use your real name in the service is because they need you to.”

Of course Facebook is also an identity service. Facebook Connect is the means of distributing it. And of course Facebook too is built using real names because “they need you to”.

At this level FaceBook and Google have much in common, and both are vying for us to use them for online authentication. Facebook is far ahead of course.

Late yesterday I posted an opinion piece as a guest author on TechCrunch. It is about the uncertain future of web services as mobile devices proliferate globally. We will soon all have awesome identity machines Continue reading “Cloud based services – the future of the Internet”

Should the current market environment change your fundraising strategy?


This post is by seth levine from VC Adventure


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With the performance of the public markets looking like an EKG read-out, I’ve been asked frequently in the past two weeks what effect this will have on the venture financing market. How tied are private company valuations to the public markets? If you’re planning on raising money in a few months would it be better to go out now or better to keep your original plans? Should companies be altering their cash burn projections to become more capital efficient in the face of potential funding challenges?

Here are a few thoughts:

Generally it takes some time for public market declines to make their way down to the venture market. And while I’m sure you have an opinion about the current state of valuations in the private market (who doesn’t?), there’s not a direct correlation between public market valuations and private market ones (ie., when the Dow drops 10% it’s not like term sheets headed out the door that week do the same). That said, a prolonged period of decline in the public markets, eventually has some effect on private markets as I outline below. In addition, I’d note that in this case we’re not talking about a a shock to the system but rather the natural movements of the market (shocks – such as 9/11 – tend to have more immediate effects across all market segments both public and private).

Different firms will react differently based on where they are in their fund cycle, the perceived strength of their portfolio, how well funded that portfolio is, and their view of how deep and long a downturn is likely to be. It’s worth thinking about all of these potential effects on your fundraising.

A downturn of any length of time is likely to have some effect on the fundraising market for venture capitalists themselves. This market has already been relatively difficult (with a complete bifurcation of funds into a category of “haves” who appear to be able to raise funds at will, and “have nots” who just can’t seem to get any attention from LPs) and a down market will both exacerbate this existing trend as well as perhaps move a few firms from the “have” category to “have not”. And of course there’s the well discussed “denominator” problem (which is really a numerator problem) whereby the actual dollars allocated to alternative asset classes (i.e,. venture) by the large LPs shrinks as the overall value of their portfolio decreases (they tend to allocate based on a % of assets). None of this is likely to be of any immediate concern to a company raising money in the next number of months, and because a large number of funds

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GroupMe to be acquired by Skype – what a birthday present


This post is by HLM from WayTooEarly


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Last night, GroupMe announced their acquisition by Skype, a great outcome for Jared Hecht and Steve Martocci, and for their investors, First Round Capital included. It was announced a few days after their first anniverary party.   I"ve had a great time working with Jared and Steve – their enthusiasm and work ethic are first rate. I've also had a great time using the product, which has made keeping in touch with my family and friends much easier. I'd write more, but my colleague, Charlie O'Donnell (@CEONYC), who brought this deal in, has said it very well here.  And our coinvestor, David Tisch (@DaveTisch) shows that the focus on investing in people works.

All the best to @jared and @Smart  as they build Skype's NYC Social Media presence.