Know When to Hold 'em, Know When to Fold 'em

I had a tough call with an entrepreneur this morning.  His company raised a fair amount of seed financing but did not hit the milestones it needed to in order to raise a real round of venture capital.  The product is nice but they took too long iterating and releasing a subsequent version while the market around it moved much quicker.  In the process, the company ramped up too quickly before it knew exactly what the core value proposition was and to whom.  Net net, the entrepreneur was left with a few choices: skinny the company down and try to get to breakeven, look to existing Angel investors for a bridge, shut the company down, or try to sell the business.  I am not going to go through each one of the above decision trees in this post, but given the market dynamics today and the overflow of angel funding, I am sure that this is a conversation that many an angel and entrepreneur are having right now.  Net net, way too many companies have received angel funding and many of these companies will not raise subsequent rounds of funding.

That is ok as that is how markets work.  If you are in this position, all I can say is don't give up but also be honest with yourself and team.  Assess your strengths and weaknesses, dive into the market and opportunity, and be as lean as possible to give you as much time to get to where you want to go.  If you decide to fight through it and pivot and have the support of your existing investor base then great.  Many companies have been successful that way.  If you decide it is time to move on and capture whatever value you can for the assets then great as well.  Just make sure that you have this conversation with your investors earlier rather than later to ensure you have enough time to execute on the new path. In the end, this process is not unlike what The Gambler from  Kenny Rogers song had to go through at the table.

You got to know when to hold `em, know when to fold `em,
Know when to walk away and know when to run.
You never count your money when you`re sittin` at the table.
There`ll be time enough for countin` when the dealin`s done.

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Put your users first!

As a VC who invests in seed and first rounds, I love revenue just as much as the next guy.  However, the focus on revenue should play second fiddle to a user/customer first experience.  Over the years, how many times have we seen companies grow from next to nothing in user base and somehow forget […]

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2 horse race in mobile – iphone and android

I just caught this blog post from Seth Weintraub from Fortune on Android: Andy Rubin just Tweeted that Google (GOOG) is activating 300,000 phones a day. That passes Apple’s (AAPL) iOS, that passes Blackberry (RIMM). That even matches any figures that Symbian has ever put up. Google is closing in on an astounding 10 million […]

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Standard investor update for startups

I remember when we hired a new CEO for one of our portfolio companies and my tip to him was to overcommunicate.  We had a few large VCs on the board and a number of high-profile angels that could also help in various ways.  His job was to keep everyone up-to-date but also to know […]

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Don't build an empire overnight – lessons from FreshDirect and Webvan

The other day I received a direct mail piece from FreshDirect, the online delivery service based out of New York.  What struck me is that the service has been around for years in NYC, and it is now getting out to some of the suburbs in New Jersey.  In fact, after having done a little […]

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Scaling your management style

After meeting with a number of entrepreneurs I recently seed funded, it was clear to me that one of the major challenges founders face is how to continue to scale their management style.  My preferred seed investment is in an engineering driven/product focused team who can code and get product out the door under the […]

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The consumer Internet business is not easy

It's not easy to build a service that everyone loves and even harder to build one that gets 3000 new users a day on an installed base of 2 million users.  Once there you may think of yourself in the drivers seat as having built a successful company.  Unfortunately, this is where the need for […]

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EMC buys portfolio company Greenplum – more behind the story

Congratulations to Greenplum and Scott Yara, Bill Cook, and Luke Lonergan in particular! It has been quite a roller coaster ride over the last 10 years and there were a number of times we stared at the abyss only to come back stronger.  This is a story of great people and incredible perseverance.  The great […]

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4 Types of CEO Behavior when Dealing with Boards

As I have stressed over the years, it is imperative for board members and their management teams to have open dialogue.  If you are a CEO, I encourage you to share more rather than less information.  One of the best tools that a number of our CEOs use is a weekly email summarizing by department […]

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The Ongoing Data Revolution

In early 2006, I wrote a post titled "The next generation web, scaling and data mining will matter."  In it, I highlighted some thoughts on the future:I truly believe the next battleground will be based on scaling the back end and more importantly mining all of that clickstream data to offer a better service to […]

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