I sent a tweet out last week that resulted in some healthy debate:

“three years ago, I was telling everyone I met to start companies. These days, I’m telling everyone to think twice”

Of course, it’s not fair to give general advice like that.  But what I meant was, 3-5 years ago, when I met someone who was thinking about starting a company, my bias was one of action. Today, my bias is one of caution.

What’s changed?  Couple thoughts:

1. First, part of my perspective is just driven by my natural instincts to be counter-cultural. When there seems to be a lot of hype around an area or activity, I find myself pretty un-attracted to it.  Bill Sahlman has a wonderful chart he shows students about the trends in the industries that HBS students tend to flock to, and the subsequent performance of those industries.  When a surge of students start pursuing an area, you can almost predict that a crash is coming. I can tell you that the surge of HBS students pursuing startups right now is at a new high.

I also tend to be attracted to founders who do are also contrarian.  I invested in David Vivero when he started RentJuice several years ago, before the trend in entrepreneurship in business schools was “hot”.  A couple years later, when most business school students were starting daily deal sites or fashion companies, we invested in Fred Shilmover who was building a company focused on business intelligence for SMB’s.  Not that great companies can’t be started right in the thick of a hot and crowded category. But it’s much easier to identify authentic entrepreneurs going after non-obvious opportunities.

2. The short term realities of starting a business are currently less favorable, in my opinion. Sure, there is more availability of seed capital in the past, although if you watch carefully, you will notice that most of the elite seed funds have slowed down their pace considerably over the last 12 months. But even still, the pace of new startups in the internet space is very high.  More volume has lots of repercussions, but it’s most simply just harder to stand out in all aspects of one’s business.  Hiring is ridiculously tough, and pools of talent and diffused across many companies.  Getting media and PR attention is tough, because there are hundreds of companies pitching the same people and trying to get them to tell their story. End users are getting inundated with more and more options, making it tougher to get traction.  We mainly read about the outliers of companies that are taking off, but it’s really easy to forget that 99% of startup efforts fail.  Plus, even the companies like look like overnight successes are actually many many years in the making, often going through several near death experiences.

3. I’m increasingly of the thought that we are in a place in the innovation cycle which isn’t particularly favorable to a) founders with limited prior startup or founding experience and b) founders without a deep tech background. I won’t get too deep into this now, but I see the world very similarly to what Mike Maples and Roger McNamee are articulating in their excellent blog. In many ways, we are at the end of one innovation cycle and at the beginning of a new one.  At the tail end of the last cycle, much of the innovation occurred at the application layer, which on balance is a bit more hit-driven and presents more of an opportunity for less experienced and less technical founders to build something that gets broad adoption.  But given that we are in the relatively early stages of this new innovation cycle (the “hypernet” or whatever it should be called) more opportunity will be found (in the short term) in enabling technologies and platforms.  And on balance, I think those types of businesses have a deeper technical component, and tend to lend themselves a bit more to founders that are more experienced.

So, those are my quick perspectives.  To summarize: I am increasingly cautioning folks thinking about taking the startups plunge to think twice.  I’m concerned about 1. Founders who are not contrarian but following the masses, 2. The hightened practical challenges of starting a business due to the difficulty of standing out, and 3. That we are at a stage in the innovation cycle that is not favorable to less experienced and less technical founders.

In my next post, I’ll share some thoughts on what I think would be worth doing instead, if you really are gung ho about entering into the entrepreneurial game (which I hope everyone is!).

A lot of ink has been spilled about how important it is as a startup to pitch the right person in the partnership. Rightfully, I generally agree that one should try as much as possible to pitch someone who is a decision-maker or “check-writer”, or, face the additional challenge of having to navigate the politics of a VC partnership with the help of your advocate.

But I wouldn’t take this advice too far.  There is often a question of whether it’s worthwhile to try to find the partner with the most mojo with the thought that that would be the best way to get to a successful outcome. The most mojo may be the partner with the most economics or control of the firm, or be the most experienced or “senior” partner, or just the one with the hottest hand at the moment.

It is true that partners in a firm are not all created equal. There end up being lots of variation in influence, and it’s true that some partners are generally in “prove it” mode and others are essentially the “kings” of their firm.  But I think trying to get to the “king” is less and less important, as I’m finding that even VC’s with a lot of economic influence are realizing that in certain sectors (especially in web applications and services) their judgement is not nearly as sharp as some younger or less experienced partners. Besides, those are most likely the partners that you are likely to resonate the best with as an entrepreneur, and will likely be most helpful on a regular basis.  I think you actually see that less experienced partners and investors often are the ones that catch the highest flyers in this space.  Some examples:

Matt Cohler – Instagram (true, Benchmark is an equal partnership, but Matt was definitely in “prove it” mode relative to more experienced partners)

Roelof Botha – YouTube

Jeremy Levine – Yelp (special mention to Bessemer with some really excellent associates like Sarah Tavel who brought them Pinterest)

Bijan Sabet – Twitter, Tumblr

Now, it may seem really silly to think of some of these folks as “junior” or “less experienced” partners.  But the reality is that when each of these folks led these blockbuster investments, their tenure at their respective firms (and in venture in general) was relatively short.  Yet, they proved to make terrific investments and serve as impactful investors and board members.

All to say, I appreciate some of the concern in the market about focusing on decision-makers or the most influential partners in a firm.  And it is indeed a risk that a less senior partner might leave the partnership for a variety of reasons. But I wouldn’t overthink it, and I would certainly take my time in cultivating a relationship and figuring out who you want helping you to build your company, regardless of the investor’s current mojo or star power.

I had the pleasure of spending a few hours last night at the Boston Technovation event at MIT.

It was a lot of fun, and a really impressive, nationwide effort. Their mission from their website is as follows:

“The mission of the Technovation Challenge is to promote women in technology by giving girls the skills and confidence they need to be successful in computer science and entrepreneurship. We aim to inspire girls to see themselves not just as users of technology, but as inventors, designers, builders and entrepreneurs”

As the father of two girls, I was just so proud (yes, strange word I guess) to see the dedicated work and enthusiasm of these young women on their projects. It’s a reminder of why I do what I do. I genuinely believe that the problems of this world are going to be solved through entrepreneurial minds leveraging technology towards ambitious goals. And I love programs that kindle the interest of youth in this direction (especially for groups under-represented in technology).

We have one portfolio that is led by a female founder, with hopefully many more in the not too distant future.

What’s the value of PR for a startup?

You hear different schools of thought.

Many (probably most) investors say that it’s not that important, especially early on. Funding announcements especially are great for one’s ego, but not a big deal. Some companies do a great job making a splash, others don’t. Who cares.

But many founders do invest time and energy in early PR.  They take a lot of care into crafting an announcement and making sure it is heard. Of course, those founders know that PR doesn’t matter if your product stinks.  They also know that it only ups the ante a bit among the tech crowd when a company is heavily hyped.

I’ve been thinking about this a bit recently. I have three disconnected thoughts.

1. Objectively, there is value to funding announcements. It helps mainly with recruiting, establishing credibility with potential partners,etc. It’s a small but not massive benefit.  There is also a small benefit of getting awareness among the investor or tech community who might be your early adopters, or at least the kind of folks who might spread the good or bad word about your product once they try it.

2. Overall, I think PR matters. It doesn’t matter as much as it might seem when you make a splash in a major publication or blog. But I don’t believe that it’s not important. It is a tool in a marketer’s arsenal, and it’s potentially a very cheap and powerful one. It’s good hygiene to pay attention to it, just like it’s good hygiene to set up a good analytics and reporting infrastructure or to be methodical about online marketing experiments.  Sometimes, a company can get a lot of mileage from flashy things like writing a book, dressing up in a monkey suit, or rickshaws at SXSW. But often, it’s much smaller stuff that keeps the ball rolling each day.

3. Most importantly, PR isn’t about a press release or getting an article in Techcrunch. It’s also not about crazy stunts or clever splash pages. It’s about telling your company’s story repeatedly to the people who need to hear it.  If your company’s story doesn’t matter, maybe your company doesn’t either. Seriously. And if you can’t tell your story in a way that compels people to act, I think you should ask yourself why. And if no one is paying attention (especially if you are in a secondary market) make people pay attention.

I really try to only invest in a company if I believe the founders have a story to tell that their customers are dying to hear.  You have to build a product that delivers on that story, but you also need to make sure the message reaches someone, and that they care.

Note: I started this post thinking about PR, but I’m probably talking about something more broad, which is akin to brand marketing or something similar.

I’m excited to announce today our latest investment in Wander.  You can read about details of the financing here.

I first met Wander’s CEO Jeremy Fisher many months ago while he was building Dinevore, a service he created to explore his passion around restaurants. Those of you who know Jeremy will know he is insanely passionate about discovering amazing places to eat, and sharing that passion with those around him. He is also an extremely active user of all things social and local.  But he found (and we agree) that there is something missing that impairs our ability to really explore the world around us in a way that is fun, aspirational and also useful. That’s what Wander looks to achieve.

The service is pre-launch, but is coming very soon. You can reserve your username at http://onwander.com/.

Wander is a member of the most recent NYC TechStars class, which seems to be going from strength to strength. We’re joined in this investment by friends old and new at Softech, SV Angel, Google, and others.

Check it out, it will be a fun journey.  Congrats on Jeremy, Keenan and the team!

My friend Greg Bettinelli posed an interesting question on Twitter today about whether the iPad should be considered “mobile”.

He makes an interesting point. Compared to a phone, consumption of the web on tablets isn’t nearly as mobile. It’s not happening “in car after kid drop off”. It’s more often on the couch, at least as far as commerce is concerned.

But even if that continues to be true, I think that much of the computing consumers do on tablets is different than what happens in traditionally “non” mobile environments of the desktop or laptop. Hard to explain, but I find that tablet browsing at home is often:

1. More bite sized
2. More “browse” oriented
3. More recreational

There are certain activities that are enhanced on the tablet, both by virtue of the UI but as well as the context under which the computing actually happens. That’s why I think entrepreneurs are so bullish on the tablet for commerce (especially experiential categories), gaming, and publishing. I think we will find that many of the most exciting applications that are heavily consumed on tablets are perfectly do-able on the desktop, but the tablet changes the consumers mindset.

But this is actually true for mobile phones too. It’s increasingly the computing device of choice even at home, but for some of the applications above. Most of mobile gaming is actually happening at home, not at the bus stop.

That’s why I think that “mobile” is a pretty bad term for the amazing innovation we are seeing in web consumption on phones and tablets.  It’s really more than mobility and more about seamless integration in our lives.  I think that’s a much better mindset to have when thinking about next-generation consumer web experiences.

I read an article the other day that I think typifies the way startups and entrepreneurs are portrayed in the media today.

http://gigaom.com/2012/03/03/whats-love-got-to-do-with-it-for-startups-everything/

The currents of the story are pretty familiar.   In many ways, the way startup founders are portrayed is very similar to the way love is portrayed in hollywood.  It’s all about passion and emotion.  The ups and downs add suspense, but love triumphs at the end.

I agree that love and passion are often integral in an entrepreneur’s founding story.  We have a real preference for founders who are scratching their own itch, or pursuing an authentic desire to solve problems that they have a unique insight into.  But building a company over many years and many incarnations is a different sort of labor of love.

I was reminded of this as I was spending some time with my Dad a few weeks ago.  He has been an entrepreneur his whole career.  But funny enough, he never refers to himself in that way.  The heroic image of the entrepreneur in the US would be pretty foreign to him anyway. He always refers to himself as a “hustler”, but not in the hipster tech founder sense of the word.

My Dad started many different businesses.  His first job was operating a family owned bowling alley.  Then he had some success in the Philippines with an insurance business.  But that all went down the tubes during the Philippine Revolution.  He basically moved to Hong Kong, started over, and ran a few fast food franchises before starting his own chain of indoor amusement centers (think Chuck-e-cheese without the food) called “Whimsy”.  It got to be pretty big – he had dozens of locations across Asia, and the company was acquired by Yaohan, a large Japanese retailer that subsequently went bankrupt during the Asian Financial Crisis (here’s a link to an old old article about the business.  He then started a candy business that manufactured and exported hand-made lollipops in Europe and North America, which he ran until he retired several years ago.

Recounting some of his stories, it was funny to see how the realities of his life as an entrepreneur was so contrary to the romantic myth of startups we read about.  His companies were borne out of opportunities and gaps he saw in the market, not out of a love to entertain.  He spent most of his time obsessing over financial metrics, cash flow, negotiating with suppliers, etc and no time doing the 1980′s equivalent of speaking at conferences, blogging, talking to press, going to SXSW, etc.  The day to day was also incredibly messy – if you’ve ever watched Hong Kong crime dramas, you know that the types of businesses my Dad ran would often have to deal with the local mafia or “triads” (some of these folks actually visited our home once). There were good times, and bad times.  Times of tons of stress.  Whimsy was a success, but in other cases, he had to fight and claw his way to a sale so that he could just recover some of his own and his investors money.

Bringing this back to the present – when I see up close the efforts of founders that I work with, it looks a lot more like what my Dad went through than what I read about in blogs.  Pivots sometimes happen because you are pursuing a discovered business opportunity, not because you found your true love and started pursuing that. When you “lose interest” in a space, many great founders persist for years and try to get to a good outcome for the sake of their investors, employees, and their own reputation. Even rocket ship companies aren’t all about lunchtime guest speakers, whiteboarding, and “designing for yourself”.  There’s a lot that goes into building a valuable and sustainable business.  I do believe there has to be some undercurrent of love – either of the problem, product, company, or process.  But it’s more like the real love, not the stuff of romance films.

When I grew up, my family owned a set of encyclopedia britannica’s. They were great – and saved me many times when writing papers or just satisfying my curiosity as a kid.

But about 15 years ago, encyclopedias become obsolete. The internet changed everything. In short order, we had access to more information, more viewpoints, and in more formats than a thousand encyclopedias could ever offer.  I love those old encyclopedias, but the human race at large was better off because we had something better. Namely, boundless information at our fingertips thanks to the open web.

But in the main halls of learning, you still see the equivalent of Britannica used every day.  Watch students walk around any college campus today, and you see heavy bags full of dead trees. It’s a strange conundrum. Those textbooks are still assigned and are still needed for the vast majority of courses.  But ask any student and it’s clear that the open web is a far more valuable resource for them.

Don’t understand a concept as explained in the text? Go find hundreds of alternatives online.

Need to quickly refer to a concept on the go? Just type into a search box, don’t search a TOC.

Want a different viewpoint on an ethical debate? Go to the web, or your social graph.

Want to learn in a different modality? There is a video for you on the web. Or a different diagram. Or an online tutorial.

Have a question or need help? Find help online too.

The reason we invested in Boundless is because we believe that the open web is the most powerful educational force the world has seen since the printing press.  Everything you could ever want to know is right there, and it’s there for free.  Someone just needs to unlock this information for learners everywhere.

You would think I’m crazy to buy a set of encyclopedias today (unless they are a decorative item purchased on fab). But we buy virtually the same for our kids every day. Boundless is changing that, and if they are successful, we’ll be better off.

As expected, large publishers are not too happy about this. They’ve seen it coming for years, and are working hard to make sure they maintain their monster margins while navigating a shift to digital. It’s too bad that they have followed the path of Yahoo, and others in pursuing a litigation strategy in defense of their old business models.  But I suppose that’s expected.

The folks at Boundless have shared their point of view – check it out here. The data is compelling, and I’m proud that the company is standing their ground just like the transformative companies that have come before them like Facebook, Paypal, YouTube, Google, and others.

I’m all for boundless information for learners everywhere. I hope you are too.

Bill Gurley had a great post about the advantage of youth, and it got me thinking about the advantages of age and youth. I came to a pretty exciting conclusion:

We are entering a golden age of internet founders!

We hear about young tech founders a lot these days.  We invest in young founders at NextView all the time, and I’m proud of it.

But I do think the trend towards young founders in the internet space is driven somewhat by our moment in time.  While young founders may lack experience, what they have is an innate sense of how the internet is evolving and how people want to use their services.  They are digital natives.  There is something advantageous about growing up with no memory of a time when the internet wasn’t an intimate part of the world. Older founders have a hard time competing against this.

Most of these folks are the founders who were born in the early/mid 80′s. Today, they are in their mid-late 20′s.

But I’ve also found that it’s terrific working with slightly older founders.  A great sweet spot are folks in their early to mid 30′s.  At this point, one has over a decade of experience and is more seasoned as a leader. One also probably has more experience to draw from when thinking about what opportunities to pursue, some of which may be much more non-obvious.  These folks also have more credibility to sell into enterprises, and have stronger networks within those enterprises. But folks at this age are still in their early primes and can be very hungry and ambitious as they try to make their dent in the world.

What we are going to see the next few years is the digital natives hitting this awesome age. You’ll see those “kids” that tried to start crazy companies (many of which failed) resurface, way more seasoned, ready to start their next one.  The acquihires will emerge from big companies with a whole host of new problems to solve that they never knew about before working in a big company. The “Tom Brady Entrepreneurs” will have learned at the side of Zuck, Andrew Mason, Jack Dorsey, Drew Houston etc.  It’s truly the start of a golden age of internet founders.

That said, the young will still have their own advantages.  Technology and markets change so fast.  But I think it’s less of a divide than the pre/post internet era.  But what we might see is the rise of “mobile internet natives” – folks who grew up in a time when it was assumed that the web was at their fingertips wherever they were.  I think that will be pretty exciting as well.

I’ve been thinking about something that will seem completely backward to some. That is that old fashioned business planning has fallen too far out of favor and needs to be brought back to the forefront. I’m not talking about written business plans per se, but I’m talking about the process of planning a business and analyzing an opportunity and market in a way that delivers unique insight and a real strategy for a business.

This trend away from business planning started with very positive roots with the concepts behind Steve Blank’s work and later with the Lean Startup movement. A few other developments have followed in their wake, for example:

• Numerous, high-flying companies that started really by accident or as side projects (Twitter for example).  This has led to a myth that great companies are not born out of an intentional effort to solve concrete problems, but through trial and error. The reality is that stories like Twitter are the exception, not the rule.  Moreover, in order for a company like Twitter to become truly successful, its business value needs to ultimately catch up to its hype and impressive user numbers.
• Angelist and other seed investors popularizing the emphasis on social proof. Check out the standardized pitch “deck” that is being experimented with at Angelist. Notice the emphasis on social proof points – the companies the founders have been at, prior investors, “supporters” and “references”.  All good things that investors should consider.  But you don’t see a serious discussion about market dynamics, competition, value chain, etc.
• The surge in popular media surrounding internet startups, which focus primarily on bursts in “traction” and shine spotlights on seemingly overnight successes vs. sound business planning.

My fear from all this (and I’m seeing it in my interactions with founders) is that a whole crop of young founders are starting companies with a far too little planning and analysis about their businesses, and too simplistic a view about what it will take to win.  It leads to thoughts like:

• We are a startup – of course we’ll beat the big incumbents (except sometimes, you can’t)
• We will win by simplicity and design (know of any companies dethroning Tripadvisor anytime soon?)
• Sure we don’t have a business model. But we’re generating huge amounts of valuable data (and so is every other internet business with scale)
• We are an excellent team of hackers and hustlers (but for certain products and types of customers, hackers and hustlers won’t cut it)
• etc.

What I rarely see from younger teams these days is really insightful analysis about the industry they are playing in.  Usually, when I invest, I look for some unique insight into a market that others miss.  And hopefully, some reason why that insight will lead to a differentiated strategy that incumbents and imitators will have a hard time copying.