“Entrepreneur Friendly VC”=Suckup; “Hardass VC”=D*ck; Avoid Both

I’d like to propose that “entrepreneur friendly VC” is code for “suckup VC,” and “hardass VC” is code for “d*ck VC,”  and that you should avoid both. Here’s why.

I just retweeted a Twitter post which stated:

Avoid “entrepreneur friendly” VCs, instead choose “hardass, potentially will fire you, but WILL make your company successful” VCs.

I promptly got a reply from @Joshu saying:

Problem is, “entrepreneur friendly” is code for “tries not to be a dick,” you know the stories.

This was really timely for me, as it echoed conversations I have had a number of times over the past few weeks.

In one of these conversations, an entrepreneur I was in serious discussions with told me he that one of my portfolio entrepreneurs called me his toughest board member. And, the entrepreneur who I was in discussions with said he was attracted to that because he felt his current board, while comfortable, did not push him enough and he wanted a board that would force him to be better rather than suckup to him.

In another conversation, someone I know told me their VC board member was “a total d*ck.”

And just last night I had a great conversation with yet another entrepreneur, one who I currently work with, who honestly told me sometimes I could be pushy, and that occasionally annoyed him (especially when it was something I was a broken record on), but that overall he appreciated that I took stands and was willing to challenge him.

Which leads me to suggest to entrepreneurs that they pick their VC neither on the basis of being “entrepreneur friendly” nor “hardass.”  I think there are two fundamental questions to ask: will the VC be a good partner in good times and bad; and what are the tangible ways he or she will help me build my business?

Being a good partner means alot of different things, but it certainly includes challenging the entrepreneur in some instances and supporting them in others.  Everyone has different styles, but I think the important thing is to develop a meangingful, trust-based relationship with entrepreneurs, so that when you support them they put weight on the fact you are supportive; and, on the other hand, they will take note and give serious consideration when you disagree with them.   A good VC board member should work hard to support the entrepreneur any way he/she can, and, no question, it helps to have a good chemistry with an entrepreneur.   But by the same token the measure of a board member’s success is not whether the entrepreneur considers him a pal. Supportive is one thing; suckup or yes man is another.

On the other hand, being willing to take a stand is a far cry from being a “hardass.”  There are VCs out there with amazing track records who are known for being hardasses, and plenty of entrepreneurs are willing to endure the hardass because they think it is worth the value they will get.  That is a rational tradeoff, but it is not to say that the VC is valuable  because he is a hardass.  If you check around, trust me, you will find entrepreneurs who believe they have gotten tons of value from their VC, but did not have to put up with a hardass board member.

So, my advice is, try to find the VC who can be a great partner without being a suckup, and can add lots of value without being a  hardass.

From Toasters to Microwaves: When Users Redesign the Tools Themselves

Steven Johnson’s cover article in this month’s Time Magazine has a great insight:

“more significant [than the question whether Twitter sells to Google is] the fact that many of its core features and applications have been developed by people who are not on the Twitter payroll….This is not just a matter of people finding a new use for a tool designed to do something else. In Twitter’s case, the users have been redesigning the tool itself…. It’s like inventing a toaster oven and then looking around a year later and seeing that your customers have of their own accord figured out a way to turn it into a microwave.”

Johnson has honed in on one of the most striking and exciting things that is happening on the web today — user powered innovation.

Even if only in retrospect, I now realize this is an important theme running across many of Polaris’s consumer web investments over the last few years.

For starters, nowhere is the user community a more central force for product innovation than with WordPress, where literally thousands of users/third party developers provide a rich ecosystem of plug-ins, ad-ons and extensions, and gather in popular confabs called “Wordcamps” around the globe.

Sproutbuilder is all about bringing the power of flash development to the consumers of flash content.

And, only recently emerging from stealth, LOLApps provides tools that allow Facebook users to create their own customized apps.

Notwithstanding the economic stormclouds still hovering out there, I have never been more convinced than now that the web’s radical empowerment of users is ushering an unprecedented wave of innovation.

Great PMs Worth Their Weight in Gold

I can’t tell you how many times this point has surfaced in my life over the past year so. And it did again this morning.  Time and again, I see portfolio companies making sluggish progress then suddenly sprinting faster with the hiring of a great product manager or two.

And, one of the things that has me really excited these days is not just the number of promising new startups we are seeing, but also the flow of talented young PMs into startups.

Though, as I just tweeted, a number of my companies are looking for PMs, so if any of you know of any out there send em my way!

“Luckily You Didn’t Give Us Enough Capital”

Yes, this is a direct quote, and it came from one of my portfolio CEOs who I was speaking with this morning.

The topic was product strategy, and a debate the CEO had been having within the company. Some camps wanted to have a longer dev cycle to build out a fully formed, fully functional version of the entertainment experience they are pursuing.  Others preferred a much more iterative “lean starup” approach whereby they built everything in small bite-sizes and then tested.

The CEO, who in retrospect appreciates the virtue of the “build, test, iterate” approach as opposed to the “big bang” approach, made the comment to me that, since his lameass investors had provided the company with so little capital, they had no choice but to go small and iterate rapidly.

It is a rare day when an entrepreneur actually confesses that his VC actually was right about something, so, even if we were only right by accident, I am going to enjoy this one.

WordPress One of 8 Most Successful Open Source Products Ever

Congrats to photomatt and the entire wordpress team/community!

The list is here and also includes:

Linux;

Ubuntu;

MySQL;

Apache;

Firefox;

BIND.

The Billion Dollar Question

Fred Wilson has a typically intelligent post on the ’social media stack.’

Most interesting to me was his concluding observation that “As the primary social media channels (including blogs and blog comments) become fully open platforms, I believe we are going to see a host of interesting (and valuable) services get built.”

I couldn’t agree more. But, as I asked in my comment to Fred’s post, are the most valuable services going to be offered by the platform companies or 3d party app companies? My hunch is that the answer is both.  The challenge for the platform companies –whether it be Facebook, Twitter, Automattic (yes, I had to throw them in) — is figuring out, before getting it wrong too many times, how to best strike the balance between encouraging a thriving ecosystem on the one hand, and claiming some fair share of the value creation (ie, PROFITS) on the other hand.

Tweeting vs. Blogging

Much to my family and friends’ consternation, I have become somewhat of a Twitter addict. Along the way, especially since I am an investor in Automattic, I have been wondering about how my Twitter addiction would impact my blogging.

Here is my initial take: I blog less frequently but when I do blog there is more substance to what I want to say.  Many of the very quick “observation” or “just read a good post” notes go to Twitter, whereas things I have actually been thinking about and/or mulling over end up as blog posts.

We’ll see whether this balance persists. But it feels right to me, and a pretty natural balance between “updates” I stream and “posts” I publish.

Navigating the “CEO Question”

One of the most nettlesome questions for both VCs and entrepreneurs is when a founder should be the CEO and when he/she shouldn’t.  Particularly when, as now, so many of the best entrepreneurs with the best ideas are very young, the question comes up with great frequency.  And, it ends up being the source of tension and conflict with nearly equal frequency.

One lesson I’ve learned over 10 years worth of mistakes is that one of the best ways to smother a small young startup is too quickly bringing in either a senior “been there done that” CEO, or  a host of VPs.  There are a whole bunch of reasons why during its first two or three years a startup should remain really lean, focused and hungry, where the primary driving force should be the founders’ vision, passion and energy.

But the very founders most likely to possess that vision, drive and energy are also likely to be inexperienced in a whole bunch of areas that are crucial to going from a great idea and perhaps initial product to a ramping business that either is profitable or able to attract later stage funding.

What to do?

As it turns out I have been having this conversation recently with no fewer than three of my portfolio companies, (probably as a result of a spurt of very early stage investments during the back half of 2007 and first half of 2008). Each of these conversations is taking place in a very different context than the others, so it is hard to generalize; but I thought I’d share snippets from each which I find instructive.

Company 1 was one of those rare cases where I woke up six months after investing to observe that the company actually was ahead of the projections they made while fundraising; in fact way ahead. This tiny pre-adolescent startup was spinning off cash at a greater rate than many of our mature “growth equity” portfolio companies. That said, both management and the board had a foreboding sense that the factors allowing this might not be sustainable, and that the company had to develop a strategy to convert their early growth and success into a model we felt would be more durable and protectable. While we agreed on the objective, the founding team struggled mightily with the task of finding a longer term model, in the process prompting the board to conclude they should hire a CEO who could help with the task. To their credit, the founders pushed back, and instead made a “first business hire” not senior enough to be a C-level exec, but who had great experience as a PM at Google, got along very well with the founders, and was a good “athlete” who would be able to help across a number of areas during this next phase of the business.  It is early days, but the initial results seem to be exceptionally promising. At a recent board meeting the team did a fantastic job articulating the next phase of the business, and a previously skeptical and nervous board is now excited.  Over a drink the night after the board meeting, I gave the founder/CEO kudos for pushing the board back on the CEO search idea…and meant it.

Company two has taken a different tack. When we invested, the founding team had built and launched a very compelling product and was experimenting with the right long term model.  Neither the team’s intial business model, nor the model which supported our investment thesis, ultimately panned out. In the meantime, we had an ongoing dialogue with the founder about management team needs; and also recruited two stellar industry execs to the board.  Both of these execs had attended our Digital Media Summit in January, and, much to the founder’s credit, he hunted them down, pitched them on his business, and recruited them to his board. And, even before they had joined the board, both became drawn into the challenge of figuring out how to turn a really compelling product into a really compelling business. Over the course of the ensuing four months, armed with insights from two of the smartest guys in the biz, the founder honed in on a really exciting model, hired a sales guy, and has been able to claim some very impressive early customer wins with marquee names. With clarity around the model, we now understand much more clearly what the company’s needs look like; these needs, though, are in areas very far from the founder’s skill and experience set, and so with his support we have decided to launch a search to look for a very specific CEO candidate who can help the company achieve scale.  And, the entrepreneur in this instance properly views this decision as the ultimate (albeit backhanded) compliment: his success has earned him the right to be replaced. The good news, for the entrepreneur, is that he will be able to focus on what he views as the fun of the business, driving the product and evangelizing the market, while the CEO is stuck with the operational tasks of hitting the numbers and making all our stock more valuable.

My third instance currently has less clear resolution. Here, the company had a fairly bad miss on the runway from its first funding round, with the founding CEO miscalculating on some product and product leadership fronts. That said, the founder/CEO recognized the mistakes fairly quickly, took all the right steps to effectuate a reset, including what appears to be a great new product lead, and successfully persuaded his insiders to provide another year’s worth of capital. I recently had a long conversation with the founder about what his “2.0″ team should look like, including the question of whether he should be the long term CEO. Particularly on the CEO question, we had a surprisingly candid, unemotional conversation. The great thing about this conversation was that we were both able to lay all of the relevant considerations on the table, then discuss the different dimensions of each consideration in a really open and, I thought,  objective way.  There is nothing more refreshing than when a founder/CEO really thinks like a shareholder. In the end, I think we both came out with a clearer sense of what the path to success looks like, and a clearer sense how to jointly evaluate along the way whether he is the best CEO to lead the effort.  Rather than forcing a decision before either of us knew the right answer, we agreed to set up some checkpoints along the way to revisit the question.

The biggest lesson I take away from these vignettes is that there simply isn’t a “textbook” answer. The knee-jerk VC response of bringing in a hired-gun been-there-done-that CEO often is far easier in theory than in practice (what isn’t?), and needs to be thought through pretty closely and, frankly, resisted in some instances. Most importantly, the crucial thing is the conversation along the way. The odds of success go way up, I think, when both founders and investors/board members can really listen to each other.

Dog Patch Labs “Outted”

I’ve spent a healthy chunk of the last year launching “Dog Patch Lab,” a Polaris-backed startup lab in San Francisco.  I haven’t really blogged about it not so much because it is “stealth,” but more because I haven’t had time.

Xconomy has a nice post more or less doing the job for me.

The Synchronous Web

Last week YouTube rolled out a realtime app that allowed users to see what their friends are doing on the site. A number of us, myself included, Twittered that this was another indication that the synchronous web is coming.

The next day I had breakfast with Hangout CEO Pano Anthos, who pointed out that I had blogged on the synchronous web a few months ago.  At the time, I raised the question whether the web would become more synchronous. Now I’ll go further. There’s something afoot here, and I’ll put a stake in the ground: the rise of the social web wil usher in a wave of synchronous web behavior.