Mark Suster at Columbia

Last week I helped organize an 250+ person evening with Mark Suster at Columbia Business School.  Mark is a venture capitalist in Los Angeles and an active blogger at www.bothsidesofthetable.com.  In a sentence: Mark killed it.  I’m not going to attempt to add to the great commentary provided by David Lerner (who also served as “question master” for the evening), the recap Mark Davis wrote (Mark D. also gave the intro), or Tobin Schwaiger-Hastanan’s summary (Tobin was the all-star photographer).  As a result, you should really check out their posts at:

With that said, I do give a little thank you in the final minute that will mortify my mother because I dropped an f-bomb and employed other foul language (although, in my defense, I was quoting Mark’s first words to me when we met this past summer).  Anyway, check out the full video:

Side note: this is my first-ever blog post from an airplane.  WordPress is pretty much as slow as it is on the ground, but at least I’ve got a better view from up here.

My Interview with “The Wall Street Journal”

Yep, that really is Snooki from "Jersey Shore" featured in dots in The Wall Street Journal

An article I was interviewed for ran earlier today in The Wall Street Journal.  Check out the full text of Alex Hotz’s piece here: “Three Reasons Why Venture Capitalists Are Investing in New York Startups” (my quote is in the last paragraph of the “East/West Mentality” section).

The WSJ’s hedcut artists aren’t exactly asking to sketch my mug (although they did recently for the never classy Nicole “Snooki” Polizzi), but since I have the full transcript from the interview I figured I would publish it here for better context.

The WSJ’s questions are in bold and my answers are in italics.

First, do you think there’s a difference in the startup cultures in NYC and SV? If so what? How would you describe the differences?

There are absolutely differences – gigantic differences – but the nuisances seem more generational than fundamental. Specifically, today’s New Yorkers didn’t grow up in technology entrepreneurship and instead most “immigrated” into it. In other words, they haven’t always been tech people. This non-native “upbringing” means New York still has some learning to do about founding and growing startups. With that said, NYC’s naïveté is dissipating as an increasing percentage of New York’s workforce – especially in terms of engineering talent – has spent its entire career in tech entrepreneurship in NYC.

Do you think Valley VCs are more likely to accept an entrepreneur who has failed as long as their idea was new and interesting? Is New York less forgiving?

I don’t think there is any difference in how the two VC communities look at failed entrepreneurs, but there are profound differences socially. Friends and family in the Valley are more tolerant of a loved one whose startup just went under than New Yorkers are.

Are New York entrepreneurs and VCs more focused on the bottom line than SV? Is SV more invested in ideas…creating new platforms/products/etc?

I hear this a lot from my friends in Silicon Valley, but I don’t really understand their pejorative tone. I actually think the recession coupled with the decreased cost to get a business off the ground have pushed all VCs to be more focused on the bottom line. Consequently, this phenomenon is perhaps accentuated in New York because the city doesn’t have as long a history investing in ideas without fully baked business models.

Does NYC have the same sense of community as SF? Sure there’s the Ace Hotel and NY Tech Meetup, but is the scene as vibrant as SV?

The community in the Bay Area is more organic than in New York, but that doesn’t mean it’s more vibrant. NYC’s entrepreneurs and investors alike are double-booked almost every night between networking events, competitions, mentoring programs, and on and on. Additionally, the city government has focused on fostering the tech community here through NYC BigApps, a ~$20mm seed investing program, and other incentives for startups in terms of rent and taxes. Also, TechStars is opening an outlet in NYC, the TechCrunch Disrupt conference over the summer was a huge success, and our mayor is one of the most successful technology entrepreneurs of all time.

How does finance affect the startup ecosystem in NYC? Do you think Wall Street still poaches the best engineers? Are New York investors influenced by a Wall Street mentality?

Finance affects the entrepreneurial ecosystem in a variety of interesting ways. Sure, some engineers who are capable of creating new companies instead go write code for hedge funds, but the smartest and most intellectually curious engineers are joining or creating startups. Wall Street previously offered stability, but in the wake of what happened to Lehman Brothers, Bear Stearns, Merrill Lynch, etc., joining a startup is less risky than ever before.

Chris Dixon has written about creating a startup culture like SV in NYC…do you think that’s possible? What does NYC need that the Valley has? What should New York avoid….if anything?

The single largest thing the Valley has that NYC doesn’t is a dearth of technical talent. This is changing, however, as more and more college graduates realize commuting to a nondescript office park is a distant second place to the New York lifestyle.

In your blog post you suggested that New York needs some big exits to cement its ecosystem. What companies do you think stand the best chance of doing that?

Just to name a few: Buddy Media, Conductor, Etsy, FourSquare, Gilt Groupe, RecycleBank, and SecondMarket. The companies themselves are less important than having employees of those firms see a startup from creation to exit and then leverage this knowledge to do it again and again. In the Valley, Paypal, Google, and now Facebook all have former employees who have left to start exciting new businesses; this is what New York needs to cement the ecosystem.

Anything else you’d like to add?

There are two other noteworthy phenomena:

First, the prevalence of Boston investors seemingly spending half their time in NYC (and likely the other half on the Acela). Polaris set up a Dogpatch Labs outpost here, Matrix Partners has made several investments in NYC, and others such as Spark Capital and General Catalyst have been particularly active. I keep hearing rumors from the folks that track this sort of stuff that New York will soon pass Boston as the second largest recipient of VC investment dollars…

Second, media/marketing is a huge driver of NYC entrepreneurship (and an important differentiator from Silicon Valley). Most of the largest advertising agencies are based in New York and these folks are constantly exploring new ways to reach and engage with their end customer. This mindset is why companies like Buddy Media and Conductor (both mentioned above) thrive in NYC. To put it another way, everyone in New York may not understand tech entrepreneurship, but everyone certainly understands marketing and how important doing it well is to growing a company.

Scutinizing a Seed Investment Bubble

A few days ago, the Center for Venture Research released its Q1Q2 2010 Angel Market Analysis Report.  This study was subsequently covered by a number of media outlets (including The New York Times, The Wall Street Journal, and VentureBeat).  The report’s subtitle asks “where have all the seed investors gone?” and goes on to assert that the total dollar amount of angel investments in the first half of 2010 decreased by 6.5% over the same time in the prior year.  Additionally, the report claims there was only a 3% increase in the number of deals during the same period.  I’m not going to argue the seed/angel/super-angel sector isn’t potentially overheated, but this single report at first seemed to contradict sentiment in the market as well as a few other sources.

Contradicting CVR's 3%: seed deals (<$1mm) as reported by CrunchBase

Specifically, CrunchBase, the database maintained by TechCrunch (Silicon Valley’s most widely read technology and investing site), tells a slightly different story.  Sure, CrunchBase has some shortcomings because the data is user-reported, relies heavily on SEC Form D filings, and contains other systemic errors, but this source still tends to be directionally significant for what is happening within the investment community.

Unlike the CVR study which shows a 3% gain from 1H09 to 1H10, CrunchBase indicates an increase of a whopping 135%.  Additionally, the number of deals cataloged in CB climbed by 44% from 2H09 to 1H10.  Some of this discrepancy is explained by reporting biases, but this difference is so substantial that there are likely much deeper problems with one – or both – of the sources.  CrunchBase seems more consistent with the conventional “gut feeling” of those actively investing in technology startups, but the methodology employed by the Center for Venture Research is more statistically sound.

Maybe the bubble has indeed burst: seed deals (<$1mm) by quarter as reported by CrunchBase. Note that 3Q10 is -58% from 1Q10

Nonetheless, looking at more granular CrunchBase data seems to suggest that the overall theme of a slowing/contracting seed investing environment articulated in the CVR report is in fact accurate.  It’s difficult to measure this precisely (namely because of the issues mentioned above), but the chart to the right shows seed deals by quarter – as opposed to half – in CrunchBase.  Although Q1 of this year was particularly strong,  the fervor has seemingly died down and returned to near the historic average.

I’m confident strong founders with good ideas will always be able to find angels willing to back them in the most nascent stages of company formation.  However, the bubble-like environment of the past several quarters appears to have subsided even if disparate sources don’t agree on the timing and extent of the decline.

Note:  CrunchBase data is as of October 31, 2010 at 12:39pm EDT.  The analyzed portion of this database includes: (1) only U.S. based companies, (2) deals where investment amounts for the entire round were less than $1 million, and (3) companies with data for geographic location, investment date, and round size.  Black and orange colors are in support of the Giants trying to win their third game of the World Series later today (oh, and I guess for Halloween too).

We Will Never Forget

I am unfortunately no stranger to the terror of terrorism. Nine years ago today as a college student, I solemnly noticed smoke rising from the Pentagon while I stood on the opposite bank of the Potomac. Eight months later, I interned for a company directly adjacent to Ground Zero and then joined them full-time after graduation (and have remained a New Yorker ever since).

These experiences have hardened me to be perpetually cautious and vigilant, but have also deepened my appreciation for the freedoms that are the bedrock of America. This is not a nation founded by “Christians” as some observe in order to distract certain debates, but rather a country established by patriots who longed for a place where the government would protect all religious freedoms. In the words of President Obama, “the principle that people of all faiths are welcome in this country and that they will not be treated differently by their government is essential to who we are.”

Although roughly two-thirds of Americans oppose the proposed mosque several blocks from Ground Zero, I proudly stand with the President, Mayor Bloomberg, and other brave Americans willing to take an unpopular stance in defense of what’s right.

On all days – but especially today, September 11th – it’s essential for us to remember not only the innocent people who lost their lives to terrorism, but also those who have sacrificed to shape this country into a beacon of freedom and tolerance. If we start suggesting that it’s “not appropriate” or “too soon” for certain Americans to enjoy their religious freedoms as equally as others then we have allowed terrorists to uproot us from our most fundamental founding beliefs.

What I Did on My Summer Vacation

This coming fall, a significant number of American school children will surely participate in the seminal back-to-school exercise of describing what they did on their summer vacations.  Since I’m concluding my last summer vacation ever (sniff, sniff), I figured I would put together some of the highlights of my venture capital internship with Greycroft Partners.  Here’s some of what I did – in no particular order:

Met a ton of people

Just based on the business cards I’ve amassed, I had meetings with over 200 people in about 50 business days.  It’s been crazy, but really fun.  This stack of cards (pictured is the real pile) includes everyone from aspiring entrepreneurs to CEOs of Fortune 500 companies and all sorts of folks in between.

Got entangled with Russian Spies

Okay, okay.  That’s a picture of one of the other Russian spies, but it sure makes for a better image than dowdy Cynthia Murphy‘s mug shot.  Alas, Cynthia Murphy became a very important person in my life not for spying on Greycroft partner Alan Patricof, but because she was nabbed by the U.S. authorities the day before she was supposed to process my payroll paperwork.  When you’re a graduate student in the country’s most expensive city, getting paid on time is a big deal.  Anyway, her arrest meant I got paid two weeks late, but at least it makes for a decent story.

Partied with rap stars

This is embarrassing to admit, but MC Hammer’s album “Please Hammer Don’t Hurt ‘Em” was the first CD I ever bought with my own money.  Weeks of saved allowances went into that purchase, and it was so worth it.  MC Hammer was rad when I was nine years old (oh, and I *might* have also owned a pair of “hammer pants” – awful).  Anyway, since the height of his music career he had a very public decline only to rise again as, in the words of my brother Tim, “the king of Twitter.”  This picture was taken last night at the Ink Hotel and despite MC Hammer’s attire (nobody had a suit jacket on except him and will.i.am), he was very down-to-earth and personable.  I’m glad I liked him because the nine year old me would have been devastated if MC Hammer wasn’t a good guy.

Learned Los Angeles is actually pretty cool

Having grown up in northern California, hating LA is in my blood.  However, spending some time with Greycroft’s Santa Monica-based team when they visited NYC has me realizing there are some awesome people out there.  I still hate the Dodgers and the fact Los Angelenos insist on driving everywhere, but other than that they’re pretty cool.  Here’s Dan “The Danimal” Murillo buying a miniature cupcake.  I wanted to use the much better photo I have of Josh Yang (the LA summer intern and ninja extraordinaire) from a conference, but that pic has been “intentionally misplaced.”

Witnessed @alanjpatricof‘s first tweet

He threw me under the bus and claimed I “forced” him to get on Twitter (not true!), but I still witnessed Alan setting up his account and composing his debut tweet.  I hope he becomes a regular user because if there’s anyone who can maximize the hilarity of 140 characters, it’s him.  Sorry @marissa_alex!

So these are just some of the highlights from a fantastic summer.  I also spent time digging into exciting new sectors, conducting diligence on active deals, and working with portfolio companies, but those activities don’t make for as lively a blog post.  Nonetheless, Greycroft is an awesome place to work.  I learned much more than I ever could have anticipated and picked up a great new crew of friends/colleagues.  Greycroft is also hiring a pre-MBA associate so be sure to apply if you want to join a great team.

Finding New Nerds

Me crossing the finish line of the Rhode Island Ironman 70.3 (my age group started an hour after that clock so my official time was just under eight hours; I'm in the red shorts)

A nerd and a triathlete might seem like unlikely bedfellows, but this past weekend in Providence taught me otherwise.  On Sunday, I raced in the Rhode Island Ironman 70.3 triathlon which entails a rough 1.2 mile ocean swim, followed by a brutal 56 mile bike, and concludes with a hilly 13.1 mile run.  The professional competitors finished in four hours which is about twice as long as it took Samuel Wanjiru of Kenya to win the Beijing Olympic’s marathon.  In fact, most endurance athletes consider a half Ironman to be about as challenging as two back-to-back marathons.  Needless to say, this isn’t a place one would expect to find many nerds.

Wrong.

Despite the field of 1400 competitors consisting almost entirely of former high school and college athletic stars, this wasn’t the typical crowd of jocks.  Instead, the field of 1400 was really a collection of extreme nerds who lack pocket protectors and Dungeons & Dragons t-shirts, but don high-tech wetsuits and NASA-inspired racing helmets.  There are a number of different theories for the nerdiness found in triathletes, but I think it’s because of the diverse knowledgebase required to even get to the start line.  During training, triathletes need to acquire an advanced understanding of a wide range of nerdy subjects including biological chemistry, meteorology, aero and hydrodynamics, mechanical engineering, and game theory.

In the starting area, I overheard a heated argument around the merits of different models of heart rate monitors (reminiscent of a Wii vs. PS3 vs. Xbox debate), chatted with a woman more loyal to her Cytomax sports drink than even the most diehard MacHeads are to Apple (she even says it helps her “reboot” better), and then there was the guy sketching (in the sand with his toe) how to leverage Bernoulli’s principle to be best positioned in a pack of swimmers.

Congrats computer geeks – some of those jocks that once crammed you into a locker are now envious of your nerdy knowledge.

A Little Press & Lessons Learned

Andy Warhol, "Marilyn Monroe", 1962

If Andy Warhol was right in asserting “everyone will be famous for 15 minutes,” my time is officially up.  About a week and a half ago, I traded emails with Henry Blodget and before I knew it, Business Insider had re-blogged my analysis of NYC entrepreneurship.  The last time I was in any sort of publication was at least a decade ago in The Country Almanac, my tiny home town newspaper (which incidentally doesn’t even exist in the same format I grew up with).  Needless to say, I was pretty surprised and somewhat encouraged that this whole blogging experiment might be worthwhile.

Then, The New York Times linked to this blog, and provided their own summary of my thesis (see the third paragraph from the bottom).  Unfortunately, I disagree with their distillation of my original post, but I was pleased that anyone – let alone the NYT – was reading this website so I chalked it up as a net win.

From there, however, it was basically all downhill.  I didn’t appreciate two major elements of online publishing, and quickly found myself in a very foreign place.

The first is that comments, not the articles themselves, are everything for news-oriented sites.  Gawker learned this early on and has cultivated a fantastically clever – and awesomely snarky – community that’s consistent with the content their editors create (some of the contributors are so active and loyal that the company offers them full-time jobs).  In my case, thoughtful remarks started flowing in a few hours after being posted on Business Insider and they were provocative enough that I felt compelled to generate comments of my own in response.   I am confident in defending my point of view (especially when broadcasting it in as public a forum as the Internet), but I didn’t previously understand how time-consuming written rebuttals would be.

That gets me to the second factor of online publishing I didn’t appreciate: cogent concision.   Fred Wilson was the first person to comment on the post, and his note centered on a specific detail which I covered in the original version on this blog, but didn’t get copied to Business Insider.   Ultimately, we were able to get on the same page, but had I been more concise, I likely could have avoided needing to defend myself altogether.

Anyway, getting some press for this website was fun and there was a 10x uptick in traffic versus the historical average for several days.  However, since then traffic has leveled off again so I suppose Warhol was right after all.