A version of this article previously appeared on Entrepreneur.com. Did I passed on Uber’s seed round? No. It’s worse than that. I never even bothered to listen to Travis’ pitch, even though I was repeatedly offered the opportunity. I then passed on Uber’s A Round as well, which I thought was valued too high, in light of the company’s progress. Too bad, as the initial funding round has increased over 4,000 times in value, making a $250,000 investment worth more than $1,100,000,000. Nope, that’s not a typo. Two hundred and fifty thousand would have netted my firm more than one billion dollars. As discussed in Why I Passed On Twilio, VC's love to talk about their successes, but seldom publicly acknowledge their mistakes. However, passing on a killer investment is not the worst error an investor can make. It is far more detrimental to one’s returns to make investments in companies which fail to return capital. A VC has done their job when their funds include enough great companies to generate an industry-leading outcome. Thus, while it is painful for a great investment to pass you by, the pain is wistful, not acute.
A version of this article previously appeared Forbes. Professional investors do not fund great ideas. Instead, they fund proven businesses. The reality is that most venture capitalists are not very venturesome. Thus, it is incumbent on entrepreneurs to turn their ideas into viable businesses before seeking venture funding.
A version of this article previously appeared Forbes. A very good friend of mine has heard me tell many a tale of trips in which I have scored free drinks, gratis hotel and car rental upgrades and various travel freebies. However, without experiencing my stories first hand, he always suspected there was a degree of embellishment involved to make my stories a bit more entertaining. We recently had the opportunity to travel to Hawaii together and I was able to show demonstrate the power of a little respect and an authentic smile.
A version of this article previously appeared on Forbes. It is no secret that the number of private companies with valuations in excess of one billion dollars has skyrocketed since the start of 2014. As show in CBInsight’s chart, the number of such “unicorns” created during the first half of 2014 was roughly equivalent to the number created during the prior three years. The duct tape securing the faux unicorns’ horns won’t hold up to the market’s scrutiny forever. The inevitable outcome will be the collapse of the weakest companies, while those with sound underlying business models will be recapitalized with reasonable valuations. If such write-downs only impacted the faux unicorns and their avaricious investors, there would be little need for alarm. Unfortunately, the coming market correction will reverberate to all stages of venture investing.
A version of this article previously appeared Forbes. Long before author Stephen King sold over 350 million books, he was a budding entrepreneur. In order to pay his college tuition, young Stephen created a sole proprietor startup with a very entrepreneurial pricing structure. Leveraging his core competency, Stephen cranked out term papers for his fellow students. Papers that resulted in an “A” grade earned him $20, “B” papers cost his customers $10. There was no charge for “C” level papers. The most enterprising aspect of King’s business model was his promise to pay his customers $20 for any paper that didn’t earn at least a C grade. According to King, “I made sure I would never have to pay, because I couldn’t afford it.”
A version of this article previously appeared in Forbes. It was a decade ago that I led the sale of Expertcity (creator of GoToMeeting) to Citrix. During the early 2000’s, my team grew the company to one of the largest SaaS businesses of its day, with sales of $70 million. In November of 2015, Citrix announced that it will spin out the “GoTo” Division, of which GoToMeeting remains the flagship product, as a standalone public company. At approximately $600 million in recurring, annual revenue, the new GoTo Company will rank as one of the largest pure SaaS companies on the planet.
A version of this article previously appeared Forbes. One of the reasons I know way more about online sales taxes than I ever thought I would is due to Rincon Venture Partners’ investment in TaxJar, one of the leaders in this emerging space. Taxes may not be fun, but I am proud to be affiliated with a company that takes much of the pain out of the process. January is coming up and you know what that means. Did you immediately think “a relaxing post-Q4 break?” Hopefully you’ll get plenty of rest during the Holidays because soon after the New Year starts, online retailers must begin contemplating sales tax deadlines.
Photo courtesy of Santa Barbara Independent’s recent Techtopia Issue A version of this article previously appeared in Forbes. Serial entrepreneurs agree that it is best to communicate with investors on an eighth grade level. To illustrate this point, former DoubleClick Founder and current CEO of Graphiq Kevin O’Connor often begins his talks to entrepreneurial students by asking the following question. Select the real software product from this list. A. Assimilated, zero-administration, standard database-queuing schema B. Open-architected, workforce-neutral, productivity assimilator C. Modularly reduced Graphical User Interface heuristic D. Profit-focused, fault-tolerant encoding interface
A version of this article previously appeared in Forbes. Who makes more money, entrepreneurs or venture capitalists? I recently came across an interesting Quora response from a friend and one of my favorite co-investors, Jason Lemkin.
A version of this article previously appeared on Forbes. There are a number of reasons why Rincon Venture Partners passed on Twilio’s Seed Round. In retrospect, our decision was both perfectly rational and completely lame. VC's love to talk about their successes. However, they seldom acknowledge their mistakes. Exceptions exist, such as the highly self-aware Paige Craig, who recently described how he missed out becoming Airbnb's first investor. Yet most VC's bury their failures under six feet of denial. Twilio has now raised around $235 million, including a July 2015 round totaling $130 million. This latest round valued the company in excess of a billion dollars, entering them into the overly-hyped Unicorn Club.