Investment contracts, whether for debt or equity, cannot possibly cover all foreseeable future contingencies. This means at varying points in the life of a company there will be bargaining situations. How well everyone does in this depends on the possibility of a hold-up, which allows one party to extract better economics for itself. The term hold-up comes from crime, meaning a robbery, but in economics it used for entirely legal situations, which might still leave you feeling as in “we were ...

Investment contracts, whether for debt or equity, cannot possibly cover all foreseeable future contingencies. This means at varying points in the life of a company there will be bargaining situations. How well everyone does in this depends on the possibility of a hold-up, which allows one party to extract better economics for itself. The term hold-up comes from crime, meaning a robbery, but in economics it used for entirely legal situations, which might still leave you feeling as in “we were ...

At startups events I am often asked about important qualities in the character of founders. Persistence strikes me as crucial. Startups have many setbacks along the way and possibly even near death experiences. Only someone with persistence will be able to come back from those and keep plugging away. A great story in our portfolio in this regard is the team at Soundcloud. Yesterday, Soundcloud launched their premium service Soundcloud Go, which combines an offline ad-free experience, the cata...

At startups events I am often asked about important qualities in the character of founders. Persistence strikes me as crucial. Startups have many setbacks along the way and possibly even near death experiences. Only someone with persistence will be able to come back from those and keep plugging away. A great story in our portfolio in this regard is the team at Soundcloud. Yesterday, Soundcloud launched their premium service Soundcloud Go, which combines an offline ad-free experience, the cata...

Have you ever been in a super stressful situation that afterwards, when things had calmed down, possibly weeks or months later felt like it was part of a dream or a movie? Well startups can be a lot like that especially around critical events such as a potential financing or sale of a company or a product launch. I have been calling it the “Fog of Startups” after the expression the “Fog of War” but as I will point out in a minute that analogy is problematic. Why did I think of this analogy in...

Have you ever been in a super stressful situation that afterwards, when things had calmed down, possibly weeks or months later felt like it was part of a dream or a movie? Well startups can be a lot like that especially around critical events such as a potential financing or sale of a company or a product launch. I have been calling it the “Fog of Startups” after the expression the “Fog of War” but as I will point out in a minute that analogy is problematic. Why did I think of this analogy in...

Yesterday, Twitter laid off about 8 percent of its employees or roughly 1 in 12 people. Most entrepreneurs dread a moment like that more than anything else. It takes the pain of firing an individual employee and massively amplifies it. And yet it is often unavoidable on the path to building a company and sustaining it for the long term. Some of the criticism of Twitter’s layoffs took the form of arguing that Twitter shouldn’t have hired those employees in the first place. That criticism amoun...

Yesterday, Twitter laid off about 8 percent of its employees or roughly 1 in 12 people. Most entrepreneurs dread a moment like that more than anything else. It takes the pain of firing an individual employee and massively amplifies it. And yet it is often unavoidable on the path to building a company and sustaining it for the long term. Some of the criticism of Twitter’s layoffs took the form of arguing that Twitter shouldn’t have hired those employees in the first place. That criticism amoun...

I have not been blogging much because I have been working on my book, but many people have asked me about the markets. So here are my thoughts. Much of the recovery in the labor market since 2008 had been driven by jobs in the oil and gas industry. These were high paying jobs that went into parts of the country that otherwise are struggling economically. A lot of US production, however, is profitable only at oil prices of $60/barrel and above (some are saying $80/barrel). Crude oil is current...

I have not been blogging much because I have been working on my book, but many people have asked me about the markets. So here are my thoughts. Much of the recovery in the labor market since 2008 had been driven by jobs in the oil and gas industry. These were high paying jobs that went into parts of the country that otherwise are struggling economically. A lot of US production, however, is profitable only at oil prices of $60/barrel and above (some are saying $80/barrel). Crude oil is current...

Fred had a great post yesterday about why investors in private companies experience more anxiety than those in public ones (can’t sell) together with some spot on recommendations for entrepreneurs on how to deal with anxious investors. I have been an occasionally anxious investor myself. Based on that here are some recommendation for the other side: how to be less anxious as an investor. 1. Remind yourself that you have a portfolio whereas the entrepreneur has just his or her company. 2. Reme...

Fred had a great post yesterday about why investors in private companies experience more anxiety than those in public ones (can’t sell) together with some spot on recommendations for entrepreneurs on how to deal with anxious investors. I have been an occasionally anxious investor myself. Based on that here are some recommendation for the other side: how to be less anxious as an investor. 1. Remind yourself that you have a portfolio whereas the entrepreneur has just his or her company. 2. Reme...

Quite a few companies are finding themselves in a situation roughly as follows: they have raised a lot of money at high valuations on a fast growth story, have real customers and the beginning of revenues, but growth has slowed down; they have money in the bank for 12-24 months and now need to decide between a strategy of rekindling growth or trying to push to profitability. This is a complicated decision to make and I see a lot of teams struggling with it. There is no easy answer and only on...

Quite a few companies are finding themselves in a situation roughly as follows: they have raised a lot of money at high valuations on a fast growth story, have real customers and the beginning of revenues, but growth has slowed down; they have money in the bank for 12-24 months and now need to decide between a strategy of rekindling growth or trying to push to profitability. This is a complicated decision to make and I see a lot of teams struggling with it. There is no easy answer and only on...

Even as recently as Web Summit at the beginning of November I was asked about a Bubble as part of a panel. It has since occurred to me that the problem with using that word to denote possibly overextended valuations is that is suggests a sudden correction in the form of a “popping” or “bursting” of a bubble. That’s pretty much what we experienced at the end of the actual Internet Bubble when many companies disappeared entirely and others were down 90% or more. So I want to propose a new word:...

Even as recently as Web Summit at the beginning of November I was asked about a Bubble as part of a panel. It has since occurred to me that the problem with using that word to denote possibly overextended valuations is that is suggests a sudden correction in the form of a “popping” or “bursting” of a bubble. That’s pretty much what we experienced at the end of the actual Internet Bubble when many companies disappeared entirely and others were down 90% or more. So I want to propose a new word:...

One of the questions that I get asked a fair bit is what characteristics help a founder to be successful. I have often answered “being stubborn but not too stubborn.” I then elaborate stubborn as sticking to a vision even as others say it can’t be done and the inevitable setbacks occur, and not too stubborn as being able to take some input from others. It is a delicate balance. To this characteristic, I want to add a learnable skill: being a great communicator. Yesterday we held our annual “i...

One of the questions that I get asked a fair bit is what characteristics help a founder to be successful. I have often answered “being stubborn but not too stubborn.” I then elaborate stubborn as sticking to a vision even as others say it can’t be done and the inevitable setbacks occur, and not too stubborn as being able to take some input from others. It is a delicate balance. To this characteristic, I want to add a learnable skill: being a great communicator. Yesterday we held our annual “i...

Six years ago I wrote three tips on making your board effective (tip #1, tip #2 and tip #3). Since then there is a lesson that I keep on relearning and so I am writing this tip #4 as much as a reminder to myself as anything: your board cannot be effective if it only talks to you, the CEO. Instead, you should make sure that members of your board also have relationships with execs on your senior team. Now I have a feeling that quite a few VCs/board members and also CEOs will disagree with this....

Six years ago I wrote three tips on making your board effective (tip #1, tip #2 and tip #3). Since then there is a lesson that I keep on relearning and so I am writing this tip #4 as much as a reminder to myself as anything: your board cannot be effective if it only talks to you, the CEO. Instead, you should make sure that members of your board also have relationships with execs on your senior team. Now I have a feeling that quite a few VCs/board members and also CEOs will disagree with this....