Sisyph.us - Erik's personal blogs

There's and article in the Times today about the state of Venture Capital. The gist is the economy is tight and things are bleak. They see a shakeout coming in the VC industry and amongst startups.

There's no question that times are challenging.

I can't even describe the roller coaster week we've had and it's only Wednesday.

But bad times can build great companies that build value for investors. Buy low/sell high is far more lucrative and less risky than buy high/sell higher.

I started in the technology business in 1989. 1989 was a bleak time in the sector, you had to love what you were doing and believe in your product to work for a start up then. Jump forward until the late 1990s, I'm working at Yahoo! in the epicenter of the internet revolution. A different kind of person came to came to work at Y! in '98 and '99. They came not because they believed in what we were doing, but to stick around long enough to vest, flip their shares and cash out a million or two. The same thing happened in the VC industry, in a bubble all kinds of new VC firms show up to try to ride the wave. Most of them fail.

I do a little surfing (funny I write that as we're getting another foot of snow). To get on a wave you need to paddle before the wave starts to break, once a wave is breaking, it's too late to ride.

If you're for real, now is the best time to do a start up. It's a lousy time for wannabes to do a start up. It's also a lousy time for wannabe VCs and investors (and there are as many of them as there are wannabe startups).

This is not the time for a quick flip. This is the time to identify a business problem and solve it. This is a time for patient founders and investors to build important companies.

Foneshow raised a venture capital round last summer. We're starting to think about our next round.

It feels kind of like this:

You want to be going as fast as you can, but you need to make sure you don't run out of runway.

You're trying to avoid this:

I'm going to be in the Bay Area the week of August 4th. I'm on a panel entitled "Personalized Mobile Experience – Social Networking: Breakthroughs in Search, Messaging, Entertainment, Video Capabilities & Advertising" at the Digital Hollywood Building Blocks conference in San Jose. My panel is Wednesday the 6th from 3:50-5PM. If you're there, say hello.

I'm also setting some meetings with partners, friends and VC's.

Foneshow had a great response at NAB. We launched our tool for local TV and radio stations to break news quickly to mobile. The whole team did great. My panel was fun, we had a good conversation, and I met some great people. We called in some friends of Foneshow to help cover booth hours. Liza totally rocked everything, we could not have done it without her.

I'm at the McCarran airport now headed to SJC. I'll spend the weekend hanging out with friends and family in the bay area. On Tuesday and Wednesday I'll be at Dow Jones Wireless Innovations 2008 (presenting on Wednesday).

After I get in to the bay area I'll post some photos from NAB and write more about Foneshow Breaking News.

Found/Read has a post about what it's like to raise money.

It's pretty much right on.

We're in race car mode now, approaching head exploding mode.

What's our burn rate?

Can we hold off on a certain hire until Q2?

Don't want to try to raise series B in July/August.

...and execute, execute, execute.

After a year of bootstrapping, we've, closed a (slightly oversubscribed) series A round of venture funding. Our investors include CEI Community Ventures, Masthead Venture Partners, the Small Enterprise Growth Fund of Maine. They're joined by some angels and other private equity. Mike Gurau from CCVI and Steve Smith from MVP will be joining our board. There's a ton of people to thank and I know I'll forget some, so I'm not going to try to name everyone. There is one person I do want to particularly thank, my old friend and Yahoo! colleague, Matt Rightmire. Matt made the introductions for us to CCVI, MVP, and SEGF; all three invested (thanks Matt!).

Also we're hiring (and we can actually pay). More detailed descriptions will be available soon. But broadly speaking we need;

BizDev, particularly with experience in the news/talk radio space, or working with political campaigns.

Podcast community liaisons. People with contacts/cred in the podcast space to evangelize the power of what we're doing.

A product manager to lead Foneshow Groups efforts

Engineers with mason, perl and/or asterisk experience.

Really bright people who can bring things to the table that we don't see yet.

We've got a ton of work ahead of us and we're really looking forward to building out the team and executing the plan.

You don't have to be in the valley to raise Venture Capital.

Never try to close a VC round during the summer.

The problem is magnified if you're using a syndicate of several firms. The timing issues are a nightmare. Your VC will go on vacation (times however many VC firms are in the deal). Your lawyer will go on vacation. The VC's lawyers will go on vacation. Things that should take days, take weeks instead.

I'll be making a number of posts over the next few weeks detailing how we put together a VC investment.

Marc Andreesen continues to hit blog home runs.

His piece today on the nuances of "No" is another must read.

Nic and I are off to California this week. We're meeting with some strategic partners (we might have an announcement soon) and advisors. We might stop by eTel (or at least hang out in the bar). We've also got some meetings up on Sand Hill road.

We're flying JetBlue, I hope they don't let me down again.

If you want to get together while we're out there drop me a note.

"If I have seen further it is by standing upon the shoulders of giants."

-Isaac Newton, February 5, 1675

Jason Calacanis has an interesting post about ideas and their evolution.

It brings up the larger issues of the defensibility of ideas, IP protection and the evolutionary nature of technology.

Every VC who asks about software patents should read this.

I'm off to NYC for a few meetings. I'll be back in Maine on Thursday morning (depending on the impending storm)

A VC asked us for some screen shots of a cellular handset using Foneshow for their binder. I thought the blog readers might find them interesting. Click for larger (ie legible).

This is a notification SMS with a dynamically allocated embedded phone number.

From almost every handset made it's trivial to dial an embedded phone number. We used my Treo 700P for the pictures because it has a big bright screen. In fact it's even easier to dial a phone number embedded in an SMS with my usual demo phone (Nokia 2128i). With my demo Nokia I just hit send twice while reading the SMS and it dials the proper number.

This is a picture of my SMS archive. Notice how it essentially becomes an "RSS" reader for programming you're subscribed to. It becomes a menu of your currently available content. Kind of like bloglines for your Foneshows.

If you want to get SMS's like this and get Foneshows on your cell phone, you need to get into the beta. To get into the beta just email me with you name, cell number and cellular carrier and I'll set you up.

Back at the end of August, when Nic and I started Foneshow, I wrote a business plan. It was PDOOMA, and I knew that when I wrote it.

All pre-beta business plans are a shot in the dark. Every VC in the world knows it. Most entrepreneurs know it. The point of writing the early plan is to see if you understand what the factors in your business are. The point is to see if you've got the right fields in your spreadsheet, not to pretend you're entering accurate values in those fields. The point is not to make revenue predictions and do break even analysis.

We didn't know enough then to write a business plan that was an accurate forecast of our business. Our assumptions were wrong. We hadn't talked to enough podcasters. We hadn't written any software yet (other than a quick hack demo). There was no back end at all. We had no idea what the operational requirements of the system were. We didn't know anything about the business realities of telephony or mobile.

Since then we've actually built a product (which is very different than the product we talked about in August). We've been talking to everyone we can to learn about the mobile world. We've talked to podcasters about their needs. We've launched to users, gotten their feedback and integrated the feedback into the product. We've watched how real people use the system.

Now that we have some empirical data it's time to take another crack at the business plan. I'll be immersed in Excel until the New Year.

Truly great companies aren't built by the greedy, but by the passionate.

-J. William Gurley

From a CNET perspective piece, November 20, 2000.

Things may be a bit bubblicious right now, but this lesson of the crash era is still rings true.

I've got a busy week coming up...

Wednesday afternoon I fly down to New York. I've got several meetings on Thursday. Nic and I are going to the TechCrunch NYC party on Thursday night. Friday morning (at 6:45 AM, ouch) I'm off to to California for Podcamp West in San Francisco. We've got bunches of meetings set up with podcasters who want to use the platform (although we're always looking to talk to more...). At the un-conference we're going to be slowly opening up the beta to the public.

I'll be out in California for T-Giving with the family, and then spending the week after the turkey feast catching up with my SiliValley friends.

We've been getting a fair amount of attention from VCs recently. While we love to expand our network and chat about the product, we're really focused on execution right now. Our capital needs are minimal and the focus is on the product; we're trying to avoid distractions. We're not really looking for a large investment at this time. So outside of a quite small investment (100-200K), we're not currently in the market.

If you want to get together in the bay area, drop me an e-mail (if you want to get together in NYC, we can try, but the schedule is really tight).