Convenience trumps Fidelity

Smart phones and typing on no tactile keyboards. Sort ofcsamevthing

Sent from my iPhone

Why Do We Give Speeches?


This post is by Allen Morgan from allensblog

Now that we're neck-deep in the US Presidential campaign, one can't help see the two nominees giving political speeches every time one glances at a TV — at home, walking through an airport, in a restaurant or bar, etc.  The other day, it struck me for some reason how strange it is that, here in the 21st Century, the speech has survived as such an important form of communication.

The general idea of a speech-as-the-reading-of-a-text has always been odd, but it's especially odd in today's world of Teleprompters. Why would one read a prepared text out loud to an audience, instead of simply distributing the text, itself?  

On all dimensions of formal information theory, giving a speech is sub-optimal.  Slower data transfer rates. Lossy data transmission. No random access. No archival attributes or functions (so review is difficult, unless reversion to the text is available). And, unless the text, itself, is made available, all non-electronic recordings of the speech (e.g., written notes) will be highly lossy. And, finally, if you are going to record it for later review, why not just distribute the text in the first place (actually, in the political context, the text often is distributed prior to the speech, further mooting — from an information theory perspective — any benefit of reading the text off the TelePrompTer).

This was all true back when speeches were given from notes, and certainly true if the speaker simply read the prepared text of a speech. It's even stranger, and in some weird way, more fraudulent, when the speech is read from a TelePrompTer. Such a speech suffers from all the aforementioned defects of a speech that is read, word-for-word, from a text, but attempts to hide that fact (in plain sight) and, instead, give the illusion that the speech is extemporaneous. 

Of course, speeches have functions other than transmitting information. Indeed, transmitting information, at least truthfully or impartially, may intentionally not be any part of the purpose of a speech. Speeches, for better and worse, are often used as "motivational" tools, and, in those cases, the information-transmission defects of a speech are not as salient. Indeed, in such cases, they may not be defects at all. 

Except for the use of Teleprompters, all of this is also true for lectures (especially in academic settings). Perhaps even worse, since, unlike a political speech, the main function of a lecture (certainly an academic lecture) really is the transmission of information. 

Even from an information theory perspective, speeches probably did make sense hundreds of years ago, when writing and printing were expensive.  Back then, giving a speech probably was the way to most broadly and cost-effectively transmit information.  By conveying information, even poorly, in a one-to-many format, a speech was still more efficient than the only alternative of talking sequentially to one person at a time. 

Today, of course, not so much.

So why do we persist in giving lectures and speeches?

Why Do We Give Speeches?

Why Do We Give Speeches?


This post is by Allen Morgan from allensblog

Now that we're neck-deep in the US Presidential campaign, one can't help see the two nominees giving political speeches every time one glances at a TV — at home, walking through an airport, in a restaurant or bar, etc.  The other day, it struck me for some reason how strange it is that, here in the 21st Century, the speech has survived as such an important form of communication.

The general idea of a speech-as-the-reading-of-a-text has always been odd, but it's especially odd in today's world of Teleprompters. Why would one read a prepared text out loud to an audience, instead of simply distributing the text, itself?  

On all dimensions of formal information theory, giving a speech is sub-optimal.  Slower data transfer rates. Lossy data transmission. No random access. No archival attributes or functions (so review is difficult, unless reversion to the text is available). And, unless the text, itself, is made available, all non-electronic recordings of the speech (e.g., written notes) will be highly lossy. And, finally, if you are going to record it for later review, why not just distribute the text in the first place (actually, in the political context, the text often is distributed prior to the speech, further mooting — from an information theory perspective — any benefit of reading the text off the TelePrompTer).

This was all true back when speeches were given from notes, and certainly true if the speaker simply read the prepared text of a speech. It's Continue reading “Why Do We Give Speeches?”

Why Do We Give Speeches?


This post is by Allen Morgan from allensblog

Now that we're neck-deep in the US Presidential campaign, one can't help see the two nominees giving political speeches every time one glances at a TV — at home, walking through an airport, in a restaurant or bar, etc.  The other day, it struck me for some reason how strange it is that, here in the 21st Century, the speech has survived as such an important form of communication.

The general idea of a speech-as-the-reading-of-a-text has always been odd, but it's especially odd in today's world of Teleprompters. Why would one read a prepared text out loud to an audience, instead of simply distributing the text, itself?  

On all dimensions of formal information theory, giving a speech is sub-optimal.  Slower data transfer rates. Lossy data transmission. No random access. No archival attributes or functions (so review is difficult, unless reversion to the text is available). And, unless the text, itself, is made available, all non-electronic recordings of the speech (e.g., written notes) will be highly lossy. And, finally, if you are going to record it for later review, why not just distribute the text in the first place (actually, in the political context, the text often is distributed prior to the speech, further mooting — from an information theory perspective — any benefit of reading the text off the TelePrompTer).

This was all true back when speeches were given from notes, and certainly true if the speaker simply read the prepared text of a speech. It's even stranger, and in some weird way, more fraudulent, when the speech is read from a TelePrompTer. Such a speech suffers from all the aforementioned defects of a speech that is read, word-for-word, from a text, but attempts to hide that fact (in plain sight) and, instead, give the illusion that the speech is extemporaneous. 

Of course, speeches have functions other than transmitting information. Indeed, transmitting information, at least truthfully or impartially, may intentionally not be any part of the purpose of a speech. Speeches, for better and worse, are often used as "motivational" tools, and, in those cases, the information-transmission defects of a speech are not as salient. Indeed, in such cases, they may not be defects at all. 

Except for the use of Teleprompters, all of this is also true for lectures (especially in academic settings). Perhaps even worse, since, unlike a political speech, the main function of a lecture (certainly an academic lecture) really is the transmission of information. 

Even from an information theory perspective, speeches probably did make sense hundreds of years ago, when writing and printing were expensive.  Back then, giving a speech probably was the way to most broadly and cost-effectively transmit information.  By conveying information, even poorly, in a one-to-many format, a speech was still more efficient than the only alternative of talking sequentially to one person at a time. 

Today, of course, not so much.

So why do we persist in giving lectures and speeches?

Why Do We Give Speeches?


This post is by Allen Morgan from allensblog

Now that we're neck-deep in the US Presidential campaign, one can't help see the two nominees giving political speeches every time one glances at a TV — at home, walking through an airport, in a restaurant or bar, etc.  The other day, it struck me for some reason how strange it is that, here in the 21st Century, the speech has survived as such an important form of communication.

The general idea of a speech-as-the-reading-of-a-text has always been odd, but it's especially odd in today's world of Teleprompters. Why would one read a prepared text out loud to an audience, instead of simply distributing the text, itself?  

On all dimensions of formal information theory, giving a speech is sub-optimal.  Slower data transfer rates. Lossy data transmission. No random access. No archival attributes or functions (so review is difficult, unless reversion to the text is available). And, unless the text, itself, is made available, all non-electronic recordings of the speech (e.g., written notes) will be highly lossy. And, finally, if you are going to record it for later review, why not just distribute the text in the first place (actually, in the political context, the text often is distributed prior to the speech, further mooting — from an information theory perspective — any benefit of reading the text off the TelePrompTer).

This was all true back when speeches were given from notes, and certainly true if the speaker simply read the prepared text of a speech. It's even stranger, and in some weird way, more fraudulent, when the speech is read from a TelePrompTer. Such a speech suffers from all the aforementioned defects of a speech that is read, word-for-word, from a text, but attempts to hide that fact (in plain sight) and, instead, give the illusion that the speech is extemporaneous. 

Of course, speeches have functions other than transmitting information. Indeed, transmitting information, at least truthfully or impartially, may intentionally not be any part of the purpose of a speech. Speeches, for better and worse, are often used as "motivational" tools, and, in those cases, the information-transmission defects of a speech are not as salient. Indeed, in such cases, they may not be defects at all. 

Except for the use of Teleprompters, all of this is also true for lectures (especially in academic settings). Perhaps even worse, since, unlike a political speech, the main function of a lecture (certainly an academic lecture) really is the transmission of information. 

Even from an information theory perspective, speeches probably did make sense hundreds of years ago, when writing and printing were expensive.  Back then, giving a speech probably was the way to most broadly and cost-effectively transmit information.  By conveying information, even poorly, in a one-to-many format, a speech was still more efficient than the only alternative of talking sequentially to one person at a time. 

Today, of course, not so much.

So why do we persist in giving lectures and speeches?

Politics, Language and Collectives

Politics, Language and Collectives


This post is by Allen Morgan from allensblog

As many are, I'm reflecting on the recent political conventions.  Probably because each of the main parties is so divided (compared to broad historical norms — with exceptions), it has highlighted for me the dangers of speaking about collectives (e.g., "Americans", "Democrats", "Republicans", "sports fans", "men", "women", etc.) using terms that are applicable most accurately to individuals.

For example, on almost any issue, it's almost certainly wildly inaccurate to say that "Americans" feel X, think X, are X, etc.  As a proxy for this, consider that most U.S. Presidential elections are decided by less than 3% – 4% of the vote.  In fact, 12 Presidential elections have been decided by voting margins of less than 1%.  So, it's probably safe to say that, on many, if not most, issues, "Americans" or "the People" don't think, feel any one thing, or otherwise have a consensus position.

As with any complicated issue, however, there are nuances.  In certain, narrower circumstances, it's probably not inaccurate to ascribe an attribute to a collective and have it apply to all or most of the members of that collective.  For example, in the fourth quarter of the seventh game of the 2016 NBA Finals, it would have probably been accurate to say that "Cleveland fans were aching for the Cavaliers to win", and have that literally be true of all members of the class of Cavalier fans.

But, once one goes outside that narrow domain, things break down.  For example, if one assumes that Cleveland Cavalier fans are similar to Ohio voters in general, Cav's fans are divided pretty evenly on most other issues.  Using the presidential vote in Ohio as a proxy, the margin of victory in the Ohio Presidential vote since 1996 has varied between 2% –  5%.  That's a pretty even split.

After thinking about it, there seem to me to be three main dimensions along which one should analyze this:

  1. Nature and Strength of the Group's Affinity Bond
  2. Breadth of Issues
  3. Context

Using this analytical framework on the above example, it's probably accurate to talk about (1) Cav's fans (nature of the affinity bond) as a monolith when it comes to issues of (2)  Cav's vs. Warriors (breadth of issues) and it's (3) the fourth quarter of the final game of the NBA Championships (context).  As those constraints are relaxed, however, it becomes less accurate to ascribe any attribute to Cav's fans (or any other collective) as if they were monoliths.  If they're like other Ohioans, Cav's fans are pretty evenly split on most political issues, so statements like "Cav's fans are X", "feel X", or "think X" should be used very sparingly.

This, obviously, is more starkly true the larger and more varied the collective is to which one is ascribing an attribute, such as "Americans" or "the People".  No surprise, this has long been understood by politicians of all stripes, and widely misused in furtherance of getting elected.  Disturbingly, because it plays into the atavistic, "tribal" aspects of human nature, it forms the core of "identity" politics right across the entire political spectrum.

The lesson, I suppose, is to be on your guard whenever you hear someone ascribe an "individual" or categorical attribute to a collective.  Use the three above-referenced dimensions to analyze the accuracy of the claim.  Usually, it'll be wildly inaccurate.

Politics, Language and Collectives


This post is by Allen Morgan from allensblog

As many are, I'm reflecting on the recent political conventions.  Probably because each of the main parties is so divided (compared to broad historical norms — with exceptions), it has highlighted for me the dangers of speaking about collectives (e.g., "Americans", "Democrats", "Republicans", "sports fans", "men", "women", etc.) using terms that are applicable most accurately to individuals.

For example, on almost any issue, it's almost certainly wildly inaccurate to say that "Americans" feel X, think X, are X, etc.  As a proxy for this, consider that most U.S. Presidential elections are decided by less than 3% – 4% of the vote.  In fact, 12 Presidential elections have been decided by voting margins of less than 1%.  So, it's probably safe to say that, on many, if not most, issues, "Americans" or "the People" don't think, feel any one thing, or otherwise have a consensus position.

As with any complicated issue, however, there are nuances.  In certain, narrower circumstances, it's probably not inaccurate to ascribe an attribute to a collective and have it apply to all or most of the members of that collective.  For example, in the fourth quarter of the seventh game of the 2016 NBA Finals, it would have probably been accurate to say that "Cleveland fans were aching for the Cavaliers to win", and have that literally be true of all members of the class of Cavalier fans.

But, once one goes outside that narrow domain, things Continue reading “Politics, Language and Collectives”

Politics, Language and Collectives


This post is by Allen Morgan from allensblog

As many are, I'm reflecting on the recent political conventions.  Probably because each of the main parties is so divided (compared to broad historical norms — with exceptions), it has highlighted for me the dangers of speaking about collectives (e.g., "Americans", "Democrats", "Republicans", "sports fans", "men", "women", etc.) using terms that are applicable most accurately to individuals.

For example, on almost any issue, it's almost certainly wildly inaccurate to say that "Americans" feel X, think X, are X, etc.  As a proxy for this, consider that most U.S. Presidential elections are decided by less than 3% – 4% of the vote.  In fact, 12 Presidential elections have been decided by voting margins of less than 1%.  So, it's probably safe to say that, on many, if not most, issues, "Americans" or "the People" don't think, feel any one thing, or otherwise have a consensus position.

As with any complicated issue, however, there are nuances.  In certain, narrower circumstances, it's probably not inaccurate to ascribe an attribute to a collective and have it apply to all or most of the members of that collective.  For example, in the fourth quarter of the seventh game of the 2016 NBA Finals, it would have probably been accurate to say that "Cleveland fans were aching for the Cavaliers to win", and have that literally be true of all members of the class of Cavalier fans.

But, once one goes outside that narrow domain, things break down.  For example, if one assumes that Cleveland Cavalier fans are similar to Ohio voters in general, Cav's fans are divided pretty evenly on most other issues.  Using the presidential vote in Ohio as a proxy, the margin of victory in the Ohio Presidential vote since 1996 has varied between 2% –  5%.  That's a pretty even split.

After thinking about it, there seem to me to be three main dimensions along which one should analyze this:

  1. Nature and Strength of the Group's Affinity Bond
  2. Breadth of Issues
  3. Context

Using this analytical framework on the above example, it's probably accurate to talk about (1) Cav's fans (nature of the affinity bond) as a monolith when it comes to issues of (2)  Cav's vs. Warriors (breadth of issues) and it's (3) the fourth quarter of the final game of the NBA Championships (context).  As those constraints are relaxed, however, it becomes less accurate to ascribe any attribute to Cav's fans (or any other collective) as if they were monoliths.  If they're like other Ohioans, Cav's fans are pretty evenly split on most political issues, so statements like "Cav's fans are X", "feel X", or "think X" should be used very sparingly.

This, obviously, is more starkly true the larger and more varied the collective is to which one is ascribing an attribute, such as "Americans" or "the People".  No surprise, this has long been understood by politicians of all stripes, and widely misused in furtherance of getting elected.  Disturbingly, because it plays into the atavistic, "tribal" aspects of human nature, it forms the core of "identity" politics right across the entire political spectrum.

The lesson, I suppose, is to be on your guard whenever you hear someone ascribe an "individual" or categorical attribute to a collective.  Use the three above-referenced dimensions to analyze the accuracy of the claim.  Usually, it'll be wildly inaccurate.

The "Vig" Working Its Way into VC Financings


This post is by Allen Morgan from allensblog

This post in Techcrunch raises interesting issues around what seems to be a trend in VC financings for "lead" investors to get a better deal than "follower" investors in the same round.  The article asserts that this is typically effected by issuing the "lead" investor shares from the equity incentive pool (called the "ESOP" in the article).

When I started working on VC financings as a lawyer in the (very) early 80's, one of the first things I noticed was that "lead" investors, who did all, or certainly most, of the work on VC financings (e.g., the due diligence, negotiating the term sheet, determining the appropriate valuation, assigning a partner to sit on the board, etc.) didn't get anything extra for it.  They got exactly the same deal as the passive "follower" investors, who did none (or a lot less) of the work. 

This struck me as odd, but, when I asked more senior people why the practice existed, I was told either (1) "hmmm…I never thought about it…"; or (2) the "…VC community is small, and most VCs know that, next time, they're likely to be the "lead" and have to do all the work, without getting anything else for it…".  That is, the principle of reciprocity drove the practice.

Nowadays, the VC community is so much larger, it's not uncommon for a VC to have a long career and never c0-invest more than once with any particular other VC firm — so, one would think that the principle of reciprocity can't continue to be the driving force (if it ever was).

This "nothing-extra-for-the-lead-investor" practice in the VC world has always contrasted starkly with the common practice in the world of later-stage, bigger-deal private equity/buy-outs, where "lead" investors get significantly better terms, sometimes to the point of outrageous excess (IMHO), than the passive investors who just put money in.  The additional compensation is justified by claims of the additional time, energy, work and attention that the lead investor focuses on the deal –i.e. the same things that "lead" VCs do in early-stage financings.

So, if the Techcrunch article is accurate, and the practice of "value added" (lead) investors asking for terms better than those offered to the follower investors is growing,  I think it's interesting to ask the question, especially in today's much larger VC world (large, and diverse, enough that it's hard to call it a "community"):  if the "lead" VC investor is to get a better deal than the passive, follower investors, who should pay for it?

There are only three possibilities.  The "extra" dilution attributable to the "lead" investor can be borne by (1) the existing shareholders, (2) the new investors or (3) shared in some way by the existing shareholders and new investors.

So, it matters to the existing shareholders of a company where any additional shares issued to the "lead" (or, in the Techcrunch article "value added") investor come from.  If they come out of the ESOP, then, in the ordinary course, the dilution is suffered by the existing shareholders, not the new investors (whether "lead" or "follower").  One wonders whether that's the fairest outcome?  Then, again, when it's a negotiation among a willing buyer (the VC) and a willing seller (the Company), what role does (abstract) "fairness" play?

The "Vig" Working Its Way into VC Financings


This post is by Allen Morgan from allensblog

This post in Techcrunch raises interesting issues around what seems to be a trend in VC financings for "lead" investors to get a better deal than "follower" investors in the same round.  The article asserts that this is typically effected by issuing the "lead" investor shares from the equity incentive pool (called the "ESOP" in the article).

When I started working on VC financings as a lawyer in the (very) early 80's, one of the first things I noticed was that "lead" investors, who did all, or certainly most, of the work on VC financings (e.g., the due diligence, negotiating the term sheet, determining the appropriate valuation, assigning a partner to sit on the board, etc.) didn't get anything extra for it.  They got exactly the same deal as the passive "follower" investors, who did none (or a lot less) of the work. 

This struck me as odd, but, when I asked more senior people why the practice existed, I was told either (1) "hmmm…I never thought about it…"; or (2) the "…VC community is small, and most VCs know that, next time, they're likely to be the "lead" and have to do all the work, without getting anything else for it…".  That is, the principle of reciprocity drove the practice.

Nowadays, the VC community is so much larger, it's not uncommon for a VC to have a long career and never c0-invest more than once with any particular other VC firm — so, one would think that the principle of reciprocity can't continue to be the driving force (if it ever was).

This "nothing-extra-for-the-lead-investor" practice in the VC world has always contrasted starkly with the common practice in the world of later-stage, bigger-deal private equity/buy-outs, where "lead" investors get significantly better terms, sometimes to the point of outrageous excess (IMHO), than the passive investors who just put money in.  The additional compensation is justified by claims of the additional time, energy, work and attention that the lead investor focuses on the deal –i.e. the same things that "lead" VCs do in early-stage financings.

So, if the Techcrunch article is accurate, and the practice of "value added" (lead) investors asking for terms better than those offered to the follower investors is growing,  I think it's interesting to ask the question, especially in today's much larger VC world (large, and diverse, enough that it's hard to call it a "community"):  if the "lead" VC investor is to get a better deal than the passive, follower investors, who should pay for it?

There are only three possibilities.  The "extra" dilution attributable to the "lead" investor can be borne by (1) the existing shareholders, (2) the new investors or (3) shared in some way by the existing shareholders and new investors.

So, it matters to the existing shareholders of a company where any additional shares issued to the "lead" (or, in the Techcrunch article "value added") investor come from.  If they come out of the ESOP, then, in the ordinary course, the dilution is suffered by the existing shareholders, not the new investors (whether "lead" or "follower").  One wonders whether that's the fairest outcome?  Then, again, when it's a negotiation among a willing buyer (the VC) and a willing seller (the Company), what role does (abstract) "fairness" play?

The "Vig" Working Its Way into VC Financings


This post is by Allen Morgan from allensblog

This post in Techcrunch raises interesting issues around what seems to be a trend in VC financings for "lead" investors to get a better deal than "follower" investors in the same round.  The article asserts that this is typically effected by issuing the "lead" investor shares from the equity incentive pool (called the "ESOP" in the article).

When I started working on VC financings as a lawyer in the (very) early 80's, one of the first things I noticed was that "lead" investors, who did all, or certainly most, of the work on VC financings (e.g., the due diligence, negotiating the term sheet, determining the appropriate valuation, assigning a partner to sit on the board, etc.) didn't get anything extra for it.  They got exactly the same deal as the passive "follower" investors, who did none (or a lot less) of the work. 

This struck me as odd, but, when I asked more senior people why the practice existed, I was told either (1) "hmmm…I never thought about it…"; or (2) the "…VC community is small, and most VCs know that, next time, they're likely to be the "lead" and have to do all the work, without getting anything else for it…".  That is, the principle of reciprocity drove the practice.

Nowadays, the VC community is so much larger, it's not uncommon for a VC to have a long career and never c0-invest more than once with any particular other VC firm — so, one would think that the principle of reciprocity can't continue to be the driving force (if it ever was).

This "nothing-extra-for-the-lead-investor" practice in the VC world has always contrasted starkly with the common practice in the world of later-stage, bigger-deal private equity/buy-outs, where "lead" investors get significantly better terms, sometimes to the point of outrageous excess (IMHO), than the passive investors who just put money in.  The additional compensation is justified by claims of the additional time, energy, work and attention that the lead investor focuses on the deal –i.e. the same things that "lead" VCs do in early-stage financings.

So, if the Techcrunch article is accurate, and the practice of "value added" (lead) investors asking for terms better than those offered to the follower investors is growing,  I think it's interesting to ask the question, especially in today's much larger VC world (large, and diverse, enough that it's hard to call it a "community"):  if the "lead" VC investor is to get a better deal than the passive, follower investors, who should pay for it?

There are only three possibilities.  The "extra" dilution attributable to the "lead" investor can be borne by (1) the existing shareholders, (2) the new investors or (3) shared in some way by the existing shareholders and new investors.

So, it matters to the existing shareholders of a company where any additional shares issued to the "lead" (or, in the Techcrunch article "value added") investor come from.  If they come out of the ESOP, then, in the ordinary course, the dilution is suffered by the existing shareholders, not the new investors (whether "lead" or "follower").  One wonders whether that's the fairest outcome?  Then, again, when it's a negotiation among a willing buyer (the VC) and a willing seller (the Company), what role does (abstract) "fairness" play?

The "Vig" Working Its Way into VC Financings


This post is by Allen Morgan from allensblog

This post in Techcrunch raises interesting issues around what seems to be a trend in VC financings for "lead" investors to get a better deal than "follower" investors in the same round.  The article asserts that this is typically effected by issuing the "lead" investor shares from the equity incentive pool (called the "ESOP" in the article).

When I started working on VC financings as a lawyer in the (very) early 80's, one of the first things I noticed was that "lead" investors, who did all, or certainly most, of the work on VC financings (e.g., the due diligence, negotiating the term sheet, determining the appropriate valuation, assigning a partner to sit on the board, etc.) didn't get anything extra for it.  They got exactly the same deal as the passive "follower" investors, who did none (or a lot less) of the work. 

This struck me as odd, but, when I asked more senior people why the practice existed, I was told either (1) "hmmm…I never thought about it…"; or (2) the "…VC community is small, and most VCs know that, next time, they're likely to be the "lead" and have to do all the work, without getting anything else for it…".  That is, the principle of reciprocity drove the practice.

Nowadays, the VC community is so much larger, it's not uncommon for a VC to have a long career and never c0-invest more than once with any particular Continue reading “The "Vig" Working Its Way into VC Financings”

The "Vig" Working Its Way into VC Financings

The "Vig" Working Its Way into VC Financings


This post is by Allen Morgan from allensblog

This post in Techcrunch raises interesting issues around what seems to be a trend in VC financings for "lead" investors to get a better deal than "follower" investors in the same round.  The article asserts that this is typically effected by issuing the "lead" investor shares from the equity incentive pool (called the "ESOP" in the article).

When I started working on VC financings as a lawyer in the (very) early 80's, one of the first things I noticed was that "lead" investors, who did all, or certainly most, of the work on VC financings (e.g., the due diligence, negotiating the term sheet, determining the appropriate valuation, assigning a partner to sit on the board, etc.) didn't get anything extra for it.  They got exactly the same deal as the passive "follower" investors, who did none (or a lot less) of the work. 

This struck me as odd, but, when I asked more senior people why the practice existed, I was told either (1) "hmmm…I never thought about it…"; or (2) the "…VC community is small, and most VCs know that, next time, they're likely to be the "lead" and have to do all the work, without getting anything else for it…".  That is, the principle of reciprocity drove the practice.

Nowadays, the VC community is so much larger, it's not uncommon for a VC to have a long career and never c0-invest more than once with any particular other VC firm — so, one would think that the principle of reciprocity can't continue to be the driving force (if it ever was).

This "nothing-extra-for-the-lead-investor" practice in the VC world has always contrasted starkly with the common practice in the world of later-stage, bigger-deal private equity/buy-outs, where "lead" investors get significantly better terms, sometimes to the point of outrageous excess (IMHO), than the passive investors who just put money in.  The additional compensation is justified by claims of the additional time, energy, work and attention that the lead investor focuses on the deal –i.e. the same things that "lead" VCs do in early-stage financings.

So, if the Techcrunch article is accurate, and the practice of "value added" (lead) investors asking for terms better than those offered to the follower investors is growing,  I think it's interesting to ask the question, especially in today's much larger VC world (large, and diverse, enough that it's hard to call it a "community"):  if the "lead" VC investor is to get a better deal than the passive, follower investors, who should pay for it?

There are only three possibilities.  The "extra" dilution attributable to the "lead" investor can be borne by (1) the existing shareholders, (2) the new investors or (3) shared in some way by the existing shareholders and new investors.

So, it matters to the existing shareholders of a company where any additional shares issued to the "lead" (or, in the Techcrunch article "value added") investor come from.  If they come out of the ESOP, then, in the ordinary course, the dilution is suffered by the existing shareholders, not the new investors (whether "lead" or "follower").  One wonders whether that's the fairest outcome?  Then, again, when it's a negotiation among a willing buyer (the VC) and a willing seller (the Company), what role does (abstract) "fairness" play?

Entrepreneurs, Don’t Forget the Deep, Hidden Competition


This post is by Allen Morgan from allensblog

In a separate post here,  I wrote about an overall framework that entrepreneurs could use to think about competition — and how to handle the issue in your VC pitch.

I think the framework is still good for the intended purpose, and I continue to dispense this advice to my "Sherpa" companies today.

There is, however, an additional set of competitors that I didn't mention, which is also very important — although entrepreneurs will never mention them in pitch decks.   For any particular VC whom an entrepreneur is soliciting, this set of competitors is all the other startups seeking funding  from that VC.

Due to this, VCs with good deal flow (i.e., the one's you want to pitch) have overloaded attention spans.  As a VC, it's easy to feel overwhelmed with the number of "interesting" pitches on one's desk.  Triage on early-stage companies is hard to do, and FOMO is alive and well.  Accordingly, the takeaway for entrepreneurs is that, to get funded, the first thing they must do is get the VC to even pay attention to their pitch materials.

So, make sure your prepare your pitch materials with this in mind: your reader is getting barraged with pitches from other startups.  You need to find a way to stand out from the crowd.  Don't bury the lede.

Entrepreneurs, Don’t Forget the Deep, Hidden Competition


This post is by Allen Morgan from allensblog

In a separate post here,  I wrote about an overall framework that entrepreneurs could use to think about competition — and how to handle the issue in your VC pitch.

I think the framework is still good for the intended purpose, and I continue to dispense this advice to my "Sherpa" companies today.

There is, however, an additional set of competitors that I didn't mention, which is also very important — although entrepreneurs will never mention them in pitch decks.   For any particular VC whom an entrepreneur is soliciting, this set of competitors is all the other startups seeking funding  from that VC.

Due to this, VCs with good deal flow (i.e., the one's you want to pitch) have overloaded attention spans.  As a VC, it's easy to feel overwhelmed with the number of "interesting" pitches on one's desk.  Triage on early-stage companies is hard to do, and FOMO is alive and well.  Accordingly, the takeaway for entrepreneurs is that, to get funded, the first thing they must do is get the VC to even pay attention to their pitch materials.

So, make sure your prepare your pitch materials with this in mind: your reader is getting barraged with pitches from other startups.  You need to find a way to stand out from the crowd.  Don't bury the lede.

Entrepreneurs, Don’t Forget the Deep, Hidden Competition


This post is by Allen Morgan from allensblog

In a separate post here,  I wrote about an overall framework that entrepreneurs could use to think about competition — and how to handle the issue in your VC pitch.

I think the framework is still good for the intended purpose, and I continue to dispense this advice to my "Sherpa" companies today.

There is, however, an additional set of competitors that I didn't mention, which is also very important — although entrepreneurs will never mention them in pitch decks.   For any particular VC whom an entrepreneur is soliciting, this set of competitors is all the other startups seeking funding  from that VC.

Due to this, VCs with good deal flow (i.e., the one's you want to pitch) have overloaded attention spans.  As a VC, it's easy to feel overwhelmed with the number of "interesting" pitches on one's desk.  Triage on early-stage companies is hard to do, and FOMO is alive and well.  Accordingly, the takeaway for entrepreneurs is that, to get funded, the first thing they must do is get the VC to even pay attention to their pitch materials.

So, make sure your prepare your pitch materials with this in mind: your reader is getting barraged with pitches from other startups.  You need to find a way to stand out from the crowd.  Don't bury the lede.

Entrepreneurs, Don’t Forget the Deep, Hidden Competition


This post is by Allen Morgan from allensblog

In a separate post here,  I wrote about an overall framework that entrepreneurs could use to think about competition — and how to handle the issue in your VC pitch.

I think the framework is still good for the intended purpose, and I continue to dispense this advice to my "Sherpa" companies today.

There is, however, an additional set of competitors that I didn't mention, which is also very important — although entrepreneurs will never mention them in pitch decks.   For any particular VC whom an entrepreneur is soliciting, this set of competitors is all the other startups seeking funding  from that VC.

Due to this, VCs with good deal flow (i.e., the one's you want to pitch) have overloaded attention spans.  As a VC, it's easy to feel overwhelmed with the number of "interesting" pitches on one's desk.  Triage on early-stage companies is hard to do, and FOMO is alive and well.  Accordingly, the takeaway for entrepreneurs is that, to get funded, the first thing they must do is get the VC to even pay attention to their pitch materials.

So, make sure your prepare your pitch materials with this in mind: your reader is getting barraged with pitches from other startups.  You need to find a way to stand out from the crowd.  Don't bury the lede.