gordon’s posterous

Why Your Best Ideas Come In The Shower

Dave McClure on His Investment Philosophy

The End of the Mouse. The Beginning of Touch.

I've written before about how the next big thing in computing is touch and the ways in which Apple was leading that charge. Well this week Apple made another move toward touch computing with their new Magic Trackpad.

Here's Macworld's first look and review. Essentially, with the Magic Trackpad, you’ll be able to use all the same multi-touch gestures you’re used to on any Macbook, i.e. the two-finger scroll, swipe, rotate, etc.  

My favorite tech blogger right now is MG Siegler of TechCrunch (mainly because of his clever and hilarious headlines). Yesterday MG wrote about the Magic Trackpad and caused quite a stir in the tech world by saying that it signals the end of the mouse era. Then due to controversy on this post, he followed up with further clarification on why he thinks mouse is dead.

Here are some of MG's main points:

"What I am saying is that the Magic Trackpad is the device that is signaling the end of the mouse era. It’s a harbinger, if you will.

I believe that we’re going to start seeing more devices like this (and obviously, not just from Apple) which focus on touch as a way of interacting with desktop machines. But even if we don’t, the desktop machines are slowly fading out as the primary computers in most peoples’ lives. Some people will think that’s absurd, but ask yourself if you already use your notebook or netbook more than your desktop? I know I do. It’s not even close.

That’s exactly what Apple spoke to today with the unveiling of this new peripheral. Most Mac users are now using trackpads as their main point of interaction with their machines. Going forward, this trend is going to continue.

And that’s not even including devices like the iPad and yes, the iPhone, which are also computers. Going forward, tablets and smartphones are also going to be the computing devices that people use much more than desktops.

The mouse is a desktop device. Sure, you can bring a portable one to hook up to your laptop on the go — but just look at young people, kids in college and high school. They don’t do that. The only reason some of us do that is because we’re accustomed to the mouse."

We always have to take what MG says about Apple products with a grain of salt because, well, he is an Apple fanboy after all. However, I agree with MG here that touch will be the main method of input in the future.

Again, back to my earlier post, KP's John Doerr may have said it best when he wrote the issue:

"We’re going from the Old World to a brave New World. From the Old World of the traditional, tired window interfaces… to the wonderful new world of TOUCH. From the Old World of Point and Click to the new SWOOSH of Fluidity."

I, personally, can't wait. Bring on the Minority Report-style computers please.

 

How VCs Look At Term Sheets

Mark Suster is on a roll. Yesterday he wrote a great post on how VCs calculate valuation differently from founders. I spent a lot of time researching term sheets and valuation 3 years ago when raising money for my last company. I wish I had read this post back then; it would have saved me a lot of time. So go read it. Or better yet, watch the video:

In the video, Mark and Kelly Hwang walk through a very useful cap table spreadsheet. If you are an entrepreneur or interested in VC, go download it. Play around with the formulas. Run through different scenarios in your head. Or better yet, create your own from scratch. That's what I did and I think that's the best way to learn it on your own.

Other great resources for learning about term sheets are:

• VentureHacks' archive (specifically Nivi's article on how to make a cap table)
• Brad Feld's “term sheet series” 
• Justin Fishner-Wolfson's Term Sheets 101 presentation

Chris Sacca mentioned in a video interview recently that VCs are being much more transparent than they used to be. And that's a good thing. This is complicated stuff and the more transparency, awareness, and overall education we have on the subject the better.  

Chris Sacca on Helping Founders Take Money Off The Table

In my last post on the many changes happening in the venture capital industry, I mentioned the growing angel and seed fund phenomenon.

Well last night I came across this GigaOm video of my favorite in this class of "super angel" investors, Chris Sacca.

Sacca recently closed an $8.5 million fund to make seed-stage investments through his firm Lowercase Capital. While he is most famous around the Valley for these early stage investments, turns out he also has another fund solely dedicated to buying out the shares of early stage founders. The idea is similar to the later stage funding rounds now common among large tech companies like Facebook and Zynga; it allows founders to take money off the table and continue to grow their business instead of selling it. Yet, Sacca is taking this a step further and is doing it at a much earlier stage.

Here's part of his rationale:

"I think what we're starting to realize is that founders need some kind of comfort, a little bit of a hedge, to make sure that this isn't an all or nothing ... In a big VC fund, you need these massive billion dollar outcomes in order to move the needle. But I feel like if they really want their entrepreneurs to push to that level, they have to give them opportunities to take a little bit of money off the table."  

Sacca then references the Foursquare deal and how Dennis Crowley and the other founders took $4 million off the table out of the $20 million that was raised. He speculates that doing so puts those guys in a place where they're more relaxed and in a position where they can really focus on going out and building the next multi-billion dollar company.

I also love that he refutes the idea behind the phrase "Pulling a Patzer," which is a reference to the story of Mint.com's Aaron Patzer who sold Mint to Intuit for $173mm and is now common Valley parlance for selling too early. He calls the notion "bananas" and I couldn't agree more.  

The whole interview is worth watching, but the part about his fund to buy founder stock starts at around 4:30.  

Again from my vantage point, the benefits of helping entrepreneurs take money off the table are many:

• Allows them to pay off their credit card bills and get to positive net worth
• Gives them a bit of a hedge so they can cover their risks 
• Rewards them for their hard work and sweat equity
• Makes them less likely to sell their company
• Lets them retain control so they continue to grow the business
• And most importantly ... let's them actually enjoy life a bit

I couldn't be more impressed with the strategy and hope it's a trend that continues.  

The Times They Are A-Changin' For VC

One of my favorite VC blogs to follow is Mark Suster. Last week he wrote what may be his best post yet on the many changes going on in the technology venture capital industry.

I agree with the post entirely. One of the most interesting aspects within tech VC right now is the growing angel and seed fund phenomenon. Recently there has been a lot of buzz about on the subject, starting with Paul Kedrosky saying that a super-seed crash is coming. Chris Dixon then responded that the bubble in early stage investing is really due to entrepreneurs getting smarter. Fred Wilson followed with his thoughts in a great post saying the total capital needed to scale a business is still the same (~$20mm) but can now come after the business has traction: 

What has changed in technology venture capital is not so much the total capital requirements, but when they are required. This is very good news for everyone involved. It means entrepreneurs that don't have to take expensive dilution early on in the development of their business. And it means that entrepreneurs can raise the big money later on when their business is worth more. It means that entrepreneurs should be able to keep more of the companies they start. That is good for everyone.

It also means that VCs don't have to take big risks early on. They can write checks in $250k and $500k sizes. It means that when the businesses develop into winners or likely winners, they can write the bigger checks like $3mm or $5mm or even $10mm. This is good for the VC business. Less writeoffs, more capital deployed into the winners and less into the losers. 

Finally, Mark in his post on in the changes in the VC industry, laid out his thoughts on the seed fund phenomenon in the following points:

8. So super angel and seed funds are proliferating – As a result there has been an explosion in the number of amazing early-stage investors such as Softtech VC, Floodgate, Felicis Ventures, K9 Ventures, OATV, Lowercase Capital, Founder Collective, and many, many more.  There are also super angels that are so numerous I’d rather just link to the best list out there, which is VentureHacks’ AngelList.

 9. And VC’s are doing earlier stage deals – And we all know that VCs are doing earlier stage deals.  The most notable is First Round Capital who built their entire fund and model around this type of investment and the notion that exit values in the future will be lower than they were 10 years ago.  They are  also the most innovative new fund to enter the market in the past 10 years in my opinion.  There is also True Ventures that does early stage, seed investments.  And of course Foundry Group, Union Square and a whole host of other firms including my own.  I have written more in depth on this topic in the past.

10. This is producing a “boomlet” or a bubble in early-stage investing.  That’s OK. – This massive increase in seed & angel funding caused Paul Kedrosky to predict that there is a coming seed fund crash.  I don’t know whether there is a “crash” coming per se but I do believe that too much money is going into angel and seed companies too quickly.  I’m OK with this – it feels fairly benign.  But one problem it is causing is that early-stage deal prices are creeping up again higher than historic norms.  This smells like classic froth to me.  So IMHO it’s probably more of a mini “bubble” than an impending crash.

11. But it takes the same amount of money to scale a big business and this is where outsized returns are earned – If you want to build a big business you still need big bucks.  Fred Wilson wrote a great piece on this. He acknowledged the importance of the growing seed fund movement in creating a new wave of cost-effective innovation.  He then profiled his portfolio company FourSquare who started with a very small investment.  But now that it’s time for them to scale they need a lot more capital and therefore just raised $20 million from Andreessen Horowitz.  Think about it – while FourSquare has established itself as the clear market leader it is unquestionable that Facebook, Yelp, CityGrid and many more well capitalized companies will be gunning for them.  Staying “lean” is not an option.  If FourSquare wants to dominate it’s market it’s time to GO FAT.

Mark also talked through these points on video on the latest episode of This Week in Venture Capital. The whole video is worth watching but I've embedded it right at the point where they start talking about seed funding:  

It is a fascinating time for technology VC to say the least. One thing is for sure, it is an industry that is evolving rapidly. I think Mark is right that we'll start to see more natural selection of the industry over the next couple of years where each segment – seed, super seed, A round VC, B round VC, and growth equity – is right-sized given its total market size.

As for the innovation engine, I agree with Fred Wilson that this is good news for everyone. The companies that don't work will fail faster. For the companies that do work, the entrepreneurs will be able raise more money at a later time when the business is worth more, thus they'll be better able to keep control of their company. The seed investors will fail a lot too but will get handsomely rewarded for their big risks when a few of the companies become winners. Lastly, the VCs don't have to make as many early bets so they eliminate more risks and can better deploy capital to the likely winners. Again, good news for everyone.

 

Iain Tait, global interactive creative director at Wieden+Kennedy, on the Old Spice campaign

Some Thoughts on the Old Spice campaign

Old Spice is on an absolute tear with their current online campaign. Props to Proctor & Gamble for having the cojones to let Wieden+Kennedy run with it. The creative team at Wieden+Kennedy continues to impress (see previous). 

The idea behind it is pretty simple. The beefy Old Spice Guy from the TV spots responds to users on Twitter and from elsewhere around the Web with hilarious YouTube videos of TV spot-like quality. The videos then get watched, re-tweeted, Facebooked and otherwise shared out all over.

It's genius in its simplicity. But the execution is what is really impresses me. According to the ReadWriteWeb article on the topic, here's how the videos are being made:

Iain Tait, Global Interactive Creative Director at Wieden ... says that the primary differentiator between this campaign and others is how closely technical and social media specialists are working with the creative team ...

"We brought social media experts right into the creative process," he told me. "In the room there are two social media guys and a tech guy who built a system pulling in comments from around the web all together in real time," Tait says. 

"We're looking at who's written those comments, what their influence is and what comments have the most potential for helping us create new content. The social media guys and script writers are collaborating to make that call in real time. We have people shooting and we're editing it as it happens. Then the social media guys are looking at how to get that back out around the web...in real time."

Smartly, part of their strategy is also to reach out to users with a significant amount of social influence. They have responded to people such as Kevin Rose, Ashton Kutcher, Alyssa Milano, and more. Their replies then get re-tweeted by these influencers and seen by their many followers.

Here's one of my favorites, a reply to Biz Stone, the founder of Twitter:

  

The other key to this campaign's succes I think is the real time aspect of it all. The fact that the team can crank these high quality videos out in real time is just stunning and I think that is part of the fascination. "You mean they responded to a user with 25 followers with a video two hours later?"

The steady stream of content also provides a latest-and-greatest effect, where every time a new one comes out people want to be the first among their friends to tweet or share it.

In what appears to be their last tweet and video, the Old Spice guy says that “like all great things this too must end.”

As it does, I imagine other advertisers will be looking to this as a case study in how to leverage a successful TV campaign into a highly viral online one. As Old Spice has shown here, it can be a very powerful combination.

Old Spice and Wieden+Kennedy have set the standard in the age of social media and real time. And we can only be left in awe of its manliness.

Top 10 Startup Neighborhoods in San Francisco

View Garry's SF Guide to Where Your Startup Should Be in a larger map

Garry Tan, of Posterous fame, recently made a map of the top 10 neighborhoods for startups in the Bay Area.

Here's Garry in describing what you really want in a neighborhood:

"What you really want is: a) closeness to startup community, b) easy access to food, and c) easy transit (notice all the areas are right next to the SF transit corridor) so you don't need a car."

Specifically to San Francisco, Garry suggests three areas: expensive SoMa, affordable SoMa and The Mission. Check out his commentary on all of these.

I agree with both of his points on affordable SoMa and The Mission. He's especially spot on that The Mission has some of the absolute best food in the city. To me, it's best to start in either one of these and move into the expensive part of SoMa as you grow and scale.

All in all, a great resource for any startup entrepreneurs looking to move to the Bay Area.

Garry is also on Twitter here. Go follow him because he's got plenty of other good gems like this. 

An ominous fog rolling over Sausalito