Recently in Entrepreneurial Success Category

Just yesterday I had breakfast with Rene Lacerte, the founder of PayCycle, and we discussed the power of great customer service. When Rene first pitched me on the idea of PayCycle, the service was not yet built. Nonetheless, he was already discussing how he would integrate the customer support experience into the overall service offering. He rightfully pointed out that every change you make to an online service will have implications for the customer support team -- whether it is training, navigation, speed to resolution, etc. So from its inception, PayCycle's product management and customer support went hand in hand. Rene is now building his second customer-focused service called Bill.com and it too has been built from the bottom up with customer support in mind.

As we ate breakfast yesterday, Rene and I had a long discussion about the fact that despite being called Software as a Service, very few SaaS organizations put any emphasis on the "service" piece. Sure, you could argue that the "service" in SaaS is all about delivery and not about customer support. But that would be a mistake. Service businesses live and die based upon the satisfaction of their customers. While it is conceivable that your software could be sufficiently foolproof that customer support is limited to receiving "thank you"s from your happy customers, so far no one has quite found that Holy Grail. Customer support remains a significant piece of all SaaS organizations and the more a company recognizes that going into building their service, the more likely they will succeed.

So what does that have to do with the Rosewood Hotel? I was reminded of the importance of customer service this morning as I experienced the Rosewood Hotel's stunning disregard for their customers. For those of you who have not yet been to the Rosewood Hotel (and I would not recommend that you go), it is the new "high-end" hotel that was just built on Sand Hill Road in Menlo Park. For those of us parked in VC-land here on Sand Hill Road, it was a welcomed new place for breakfasts and lunches and, in fact, I have eaten breakfast there 12 times in the little over a month that it has been open. But never again. (Warning: herein begins a rant -- a well-deserved rant, but a rant nonetheless.)

Three weeks ago, when parking for breakfast, I was surprised to see broken glass in one of the parking spaces. As I left breakfast, I pointed the glass out to a maintenance person driving his golf cart by. I assumed it would be cleaned up. Two weeks later, the glass had still not been picked up, so when the manager of the Madera restaurant came by to say hello to me (after all, I was there every other day), I pointed out to him that there was broken glass in the parking lot that had not been picked up despite the fact that I had pointed it out two weeks earlier. The restaurant manager apologized and assured me that it would be picked up. To my shock, it was not. Undaunted, I figured I'd give it a third try. Two days ago, on my way to an event in a conference room in the hotel, I asked to speak to the hotel manager. A nice young man named Daniel came to talk with me and I recounted my tale of woes. I explained to him that while the glass hadn't particularly inconvenience me, that I thought it didn't reflect well on his hotel and that he might want to take care of it. He assured me that it would be cleaned up by the next time I visited, which I told him would be two days later.

I must say I was surprised to see the glass still there two hours later when I got out of my meeting, but I figured I'd give him the benefit of the doubt and assumed that it would be picked up by my breakfast on Friday (today). I was wrong. To my horror, as I drove up to breakfast this morning, the glass was still there. Was I cut by the glass? No. Did I get a flat tire from the glass? No. So why do I care? Because I think that customer service matters. I think that if you care about your customers, you should do more than pretend to listen to them. So rather than park, I drove up to the front of the hotel and explained to them (amidst a fair amount of swearing) why it was that I would not be eating breakfast there any more. The same manager, Daniel, was there and fell on his sword, taking full responsibility for the incident. But as far as I am concerned, it is too little too late. Such blatant disregard for your customers maybe deserves a second chance. And, if you are feeing extremely generous, a third change (particularly when the restaurant is so convenient). But not a fourth chance. So I guess I'm heading back to Il Fornaio for breakfast.

Customer service matters. And it matters more than ever in this age of blogs, and Facebook and Twitter. If you search for PayCycle, you'll find a whole lot of happy customers. And if you search for Rosewood Hotel, I'm guessing you'll see a whole lot of dissatisfied customers. You'll certainly find me there.

Update: Shortly after I posted this rant about the Rosewood Hotel, I got a call from Managing Director of the hotel. Through the power of blogging, twitter and facebook, the Rosewood's MD had read my complaint moments after I had posted it and promptly called a staff meeting to address the situation. He then came over to my office to offer up his apologies for what had happened and his commitment to make customer service a priority of the hotel. While I wish it had not escalated to the point of needing such attention, I certainly appreciate that the hotel's MD took it seriously enough to come to my office and have the discussion.

A short time ago I wrote about my investment in Aardvark. As I said in that post, I believe that in many ways search is broken and getting worse. Not only are there voracious efforts at Search Engine Optimization (SEO) throughout the Web, but the scale of the Internet is monumental today and getting larger by leaps and bounds virtually every minute.

The massive scale of the Web not only creates huge challenges for search, it also cripples discovery. Gone are the good old days in which fortuity would lead to the unearthing of interesting new Websites. Remember when Web directors would lead you to great sites on the topic of your choice (you may not recall but, in the early days, "Yahoo" stood for "Yet Another Hierarchical Officious Oracle" and Srinija Srinivasan, Yahoo's chief of ontology, was one of the most powerful people on the Web). Better yet, remember the good old days of browsing libraries -- the Dewey Decimal System created the propensity for discovering new and interesting books as a result of their being shelved next to related categories -- while looking at one book, other books in its general vicinity would likely pique your interest.

That sort of accidental discovery was driven out of the Web a long time ago. The only sorts of chance Internet encounters most of us have these days are a result of mistyped URLs -- not exactly a recipe for exciting new discoveries. Thankfully, one company has made it their mission to bring back discovery to the Web. StumbleUpon delivers nearly half a billion recommendations per month. Those recommendations can be across broad categories (e.g., photography, video, etc.) or in very focused niches (e.g., electric violins, VC blogs, Alice in Wonderland, etc.). The StumbleUpon experience brings the unforeseen and unexpected back to your browser. I like to think of StumbleUpon as a discovery engine bringing fortuity back to the Web.

Enthralled by what StumbleUpon was doing, a couple years ago I began chatting with the founders about their business. The more I learned, the more excited I got about the prospects for assisted discovery at StumbleUpon. But before I had an opportunity to propose financing the company, it was purchased by Ebay.

Nonetheless, I've stayed in touch with Garrett and Geoff and continued to talk with them about the power of StumbleUpon. So when they began discussing the possibility of spinning StumbleUpon out of Ebay, I was grateful to have the conversation. The need for discovery on the web has not gone away since Ebay bought StumbleUpon. To the contrary, the problem has continued to grow more acute. And StumbleUpon continues to be the best solution to the problem. Over 7.5 Million registered members discover, categorize and review Web pages, making StumbleUpon the Internet's most powerful recommendation engine.

I am thrilled to join the original StumbleUpon team in spinning the company out of Ebay. Along with Garrett and Geoff, Ram Shriram is reinvesting in the company and going back on the board. The primary financial backers of the spinout will be August Capital and Accel Partners and Sameer Gandhi and I will go on the board as well. I look forward to working with Garrett, Geoff, Ram and Sameer to continuing to build StumbleUpon into a large and important piece of the Web's infrastructure.

As one of the leading analysts and Web Strategists in the social computing space, Jeremiah Owyang meets with a lot of companies. He has the luxury of talking with big companies and small companies, public companies and private companies, venture-backed startups and bootstrapped companies. He is constantly looking at what makes one company successful and another one less so. Not only is Jeremiah a really smart guy, but he has a ton of data to support the conclusions he draws both in his day job with Forrester and in his role as confidant and advisor to numerous startups.

Given all that, I was thrilled to read Jeremiah's post "Beyond the Money: Some VCs Provide Startups With A Competitive Edge." In his post, Jeremiah asserts that VCs (at least the better VCs) are good for more than just money. What are we good for? Jeremiah lists a number of categories: Thought Leadership, Strategic Guidance, Being Part of the Family (e.g., Keiretsu), Ancillary Services (marketing, recruiting, etc.), Umbrella Branding (e.g., "an August Capital company"), and Networking. I would probably add to this high level list Recruiting and Capital Raising, both of which VCs can be very helpful with. Jeremiah concludes that "What [VCs] do beyond the investment makes a different - I can see it."

Thank you, Jeremiah! While I recognize that my job as a Venture Capitalist is to invest other people's money and, if all goes well, turn it into more money, I have a hard time thinking of Venture Capital as a "financial services" job. It is certainly the case that the financial services aspect of the job isn't what gets VCs up in the morning. What gets us up in the morning is the prospect of working with really smart people to build new and exciting businesses. And Jeremiah does a great job of listing the fun parts of our job -- advising, connecting, recruiting, etc.

All too often I fear that VCs are thought of as fungible -- one VC's as good as the next. It is certainly true that our money is fungible -- a dollar from any other VC will buy as much as a dollar from August Capital. But the aggregate value of taking money from another VC will be vastly different from taking money from an August Capital. My partners and I work hard to deliver value to our entrepreneurs on all the fronts Jeremiah describes. And those efforts can have a big impact for a company. VCs don't build companies, entrepreneurs do. But good VCs can do a whole lot more than simply write a check.

I had the good fortune of participating in the first (hopefully of many) AngelConf today. AngleConf was the brainchild of Paul Graham of YCombinator fame (although, you never know, it may well have been the brainchild of Jessica Livingston, so my apologies if that's the case Jessica). Not only is Paul a prolific angel investor, but he is also a thought leader and a mentor by nature. His AngelConf was an attempt to share the collective wisdom of the angel investor community with would-be angel investors.

The speakers at AngelConf were a veritable who's who of the angel world. Among those speaking were Ron Conway (Angel Investors, Baseline Ventures), Dave McClure (500Hats, Founders Fund), Paul Buchheit (Google, FriendFeed), Andrea Zurek (Google, XG Ventures), Naval Ravikant (The Hit Forge), Michael Dearing (Ebay, Stanford Design School), Mike Maples (Maples Investments), Ariel Poler (Textmarks, numerous startups), Aydin Senkut (Google, Felicis Ventures), Jeff Clavier (SoftechVC), and Jim Young (HotOrNot). Like YCombinator's rapid-fire demo days in which companies are given only a few minutes to present, each angel investor was given seven minutes to share his or her wisdom with the crowd. And this impressive group did not disappoint.

AngelConf was part training session, part confessional, part group therapy. Virtually all the speakers were in agreement that angel investing is not for the faint of heart. As one investor after the next stated, you have to be prepared to lose all your money. If losing your money is going to keep you up at night, perhaps angel investing isn't the thing for you to do. That said, there were plenty in the speakers lineup who have every intention of making money. Folks like Jeff Clavier and Mike Maples are investing other people's money. For them, the goal is assuredly to make money. For many of the others it was a fantastic mix of geeky pleasure at building great things, the need to stay engaged in the tech world, a desire to give back to the entrepreneurial community, etc. While for most of the speakers angel investing is essentially a full time job (even if they have another full time job), everyone in the room seemed to be there for the love of the game.

What was some of the most interesting advice imparted? Here are a few thoughts from the speakers:

* It's a small community -- if you screw one entrepreneur, you'll be out of the angel business because entrepreneurs talk (Conway)

* Angel investing is about learning on the job, which means that you can plan on screwing up your first 10 deals at least (McClure)

* If you assume that the money is gone once you've invested it -- that it is like a lottery ticket -- then you will have a better time angel investing (Buchheit)

* Work with other angel investors so that you can get the advantage of their expertise (Zurich)

* There is no rational way to arrive at valuation, so don't be overly concerned about getting it right (Graham)

* Don't worry if the idea seems crazy -- if it didn't seem crazy, it would be too late to invest as an angel (Graham)

* The lifeblood of angel investors is deal flow -- you need huge deal flow to find enough stuff that is worth investing in (Ravikant)

* The best deals come from other angels (Ravikant)

* Don't be afraid to throw a little dynamite into the status quo and see what comes out of it -- often times interesting stuff emerges (and sometimes nothing does) (Dearing)

* The Rule of 12 -- you need to invest in 12 companies to have statistical diversity -- invest in fewer than 12 deals and you run the risk of them all failing (Maples)

* Like in the movie "Oceans 11," you want to pull together the best team of angel specialists there are out there -- it increases the likelihood that the company will succeed (Maples)

* Help bring your entrepreneurs together so that they can learn from one another (Poler)

* By being a connector, you will see the most interesting stuff and work with the most interesting people (Senkut)

* Angel investing is all about the syndicate -- you can lead if you want to but it can be lonely until others join in the syndicate (Clavier)

* Angel investors need to distinguish themselves from others with money -- what do you bring to the table? Contacts. Experience. Advice. (Young)

* Only invest in stuff you actually know something about -- otherwise you're just buying a lottery ticket (Young)

All in all, a pretty jam packed few hours. The energy in the room was great. It felt very much like being in a room full of entrepreneurs. Because, in the end, like entrepreneurs, angel investors are company builders. They love technology. They love company creation. And, like me, they thrive on the fun and excitement of the startup world.

I hope that Paul will have another AngelConf some time in the future. It was a fantastic way to spend the afternoon.

I was deeply saddened to read Erick Schonfeld's post on TechCrunch entitled "DEMO Gets Desperate: Shipley Out, Marshall In." The feud between Mike Arrington and Chris Shipley has been well documented. Arrington has gone so far as to hope for the demise of the DEMO conference. He and Jason Calacanis have taken great pains to question the ethics of DEMO's business model.[1] They have lashed out at Chris Shipley repeatedly. And now Erick Schonfeld has jumped on the DEMO-bashing bandwagon.

I have known Chris Shipley for many years. She is fair and honest. She is smart and thoughtful. And she has worked long and hard to build the DEMO conference into a premier outlet for startups. Chris Shipley is a believer in the power of technology and the value of emerging companies. She has helped launch many hundreds of great companies and products. And she is a powerful advocate for those companies that she has showcased on the DEMO stage.

Today it was announced that Chris is handing over DEMO to Matt Marshall of VentureBeat. My congratulations to Matt. I wish him the best of luck in his new role with DEMO. I have long been a fan of the DEMO conference and hope that it will continue to prosper. As Marshall Kirkpatrick writes in ReadWriteWeb, "We'd like to see a bunch of successful conferences thrive and bring great technology into the public eye." I couldn't agree with him more.

I look forward to attending this year's DEMO conference a little over two weeks from now. I am sure that I will see some compelling demos, meet many great entrepreneurs, and get a broad overview of the startup landscape. But, most of all, I look forward to seeing Chris Shipley on the DEMO stage one final time and to wishing her the best as she passes the torch to Matt Marshall. Chris has been a wonderful steward of the DEMO conference and her thoughtfulness will surely be missed.

[1] I personally believe that the suggestion that DEMO's business model is somehow less ethical because startups are charged to participate in the event is silly. It is, no doubt, a different model than Arrington and Calacanis's conference which makes its money through sponsorships and registration fees, rather than demonstration fees. But that does not make it less ethical. Is it unethical for Sprint to charge for 411 calls merely because 1-800-FREE411 will provide information for free? I don't think so. It's a shame that Chris Shipley has had such strong accusations leveled at her over these last couple years.

For almost a decade I've been enjoying the TED conference. For those of you who haven't heard of it, the TED conference is a mind-blowing gathering of deep thinkers from the worlds of Technology, Entertainment and Design (plus any number of fields in and around Technology, Entertainment and Design). Over the years, the audience has become almost as star studded as the speaker lineup -- folks like Matt Groening, Paul Simon, Al Gore, who once graced the stage now show up to listen and be a part of the broader TED community. The result is 4+ days of mental over-stimulation, followed by exhaustion and then a countdown until next year's TED.

This year marked the 25th anniversary of TED. The conference started as a small gathering back in 1984 and has grown over the years in both scale and notoriety. Up until a few years ago, TED grew by virtue of word of mouth. Folks like myself who had the good fortune of finding our way to TED would inevitably return signing its praises and bring a few friends with us the next year and the next year and the next year. That all changed when the TED organization decided to release videos of the TED talks into the World Wide Web. Since that time, TED talks have been viewed over 100 Million times and awareness of the TED conference has skyrocketed, as has demand for the conference.

In response to rising demand and the logistical challenges associated with TED's old venue in Monterey, California, the TED organization moved the conference this year to the Long Beach Convention Center. In many ways, Long Beach could not be further from the quaint, upscale TED tradition in Monterey. For one thing, the old Monterey theater held a mere 500 people, whereas the new Long Beach venue accommodates 1,700 in the orchestra alone. Long Beach is a city. Monterey, a town. For those of us making the transition from the TED of old to the TED of new, the contrasts were great and comparisons near impossible to avoid.

Given all that, it is not surprising that many of the TED old guard expressed deep concern about TED in Long Beach. They felt that it was too large, too impersonal, too lacking in community. They objected to the new, bigger theater. They complained about the impersonal character of the city of Long Beach. And they weren't too fond of the food either.

So why am I not surprised by these complaints? And why do I think that the TED organization should not be too concerned? Those of us in the startup world have seen this play before. When companies succeed, prosper and grow, there inevitably comes a time when they need to move out of their quaint, nostalgic offices and into new, bigger, often less-personal digs. The employees who have been with the company since its inception bemoan the change, pointing to it as evidence that the company has lost its bearing. They are certain that the company will not survive the transition intact. And while some of those early employees may not make the transition themselves, the growing and prospering company usually does.

Those companies that manage to transition best from small, gutsy startups to large, established companies are the ones with the strongest corporate cultures. While growing companies inevitably have to make certain adjustments to their traditions to accommodate their increased scale and trajectory, the heart of their corporate cultures remains vibrant and continues to support the companies' expansion.

So too with TED. The TED culture is a powerful one. Indeed, the culture of TED has continued to grow over the two and a half decades it has been in existence. That powerful culture has been reinforced by the philanthropic bent of Chris Anderson, who has been TED's "curator" for almost a decade now. People attend TED, not only to have their minds expanded, but with high hopes for helping build a better planet. And with that overarching goal, the TED culture remains vibrant.

I suspect that some long-time TEDsters will drift away as a result of the move to Long Beach. But there will be plenty of eager participants ready to take their place. And those of us who remain will continue to be treated to a dizzying mental carnival, surrounded by an eclictic community of friends, old and new alike.

A huge number of web startups were funded over the last five years. Anyone who reads TechCrunch has seen them chronicled; the Web 2.0 menagarie was dizzying. And, like in the late '90s before, the hopes (if not expectation) for each and every company were high. So why do I believe that we will see a big number of web businesses shuttered in 2009? Because the change in economic climate has made it more difficult for Venture Capitalists to suspend disbelief.

Early stage venture investors have relatively little information upon which to based our investments. We certainly have the most important clue as to the likely success of a company -- we know who the founders are. But otherwise we are necessarily making predictions about user growth, market expansion, monetization, etc. And in order to invest, we need to suspend disbelief about all of these metrics and assume growth, adoption, monetization....

At each stage of investment, VCs need to suspend disbelief about some criteria or other. Initially it may be the ability to build a product with universal appeal. The next investor may see a product with universal appeal but need to suspend disbelief about the company's ability to monetize that audience. The next investor may see a product with a big audience that is in the early stages of monetization but need to suspend disbelief about the ability to scale the scope of the business and the economics. Even expansion stage investors ultimately have to suspend disbelief that even with a working product and monetization that a company will be able to maintain growth and ultimately reach liquidity. So the investment lifecycle of a startup necessarily requires a fair amount of faith.

What happens in a down economy? Investors become less willing to suspend disbelief. Entrepreneurs need to make more progress between financing events before they are able to find investors willing to bet on their ultimate success. And while some startups will be able to manage that transition, others will not be able to reach this heightened bar. I suspect the end result will be a large number of web startups funded in the mid-2000's will run out of money and, unable to find investors who are willing to suspend disbelief, will have to close their doors.

I don't think that this is necessarily an indictment of those startups or the venture process. It is just a byproduct of a system that necessarily involves a huge amount of risk. In up economies, the system is more forgiving. In down economies, less so. But, in the end, the strongest startups survive and thrive.

So, will I continue to suspend disbelief? You bet. Early stage venture investors have no choice but to believe and build. Otherwise, we will invest in nothing. I realize it is a challenging environment out there for company building. But the best antidote to disbelief is real progress. The startup world is always a meritocracy but never more so than in a tough economy. Those companies that show results will continue to get funded. Those that don't, won't. My hope is to continue to invest in those that do. And then work hard to bridge the disbelief gap.

I have just finished reading Seth Godin's latest book, "Tribes." The book tells many a tale of how out-of-the box thinkers, undaunted by conventional wisdom or fear of failing (or falling, for that matter), have changed the world in big ways and small alike. But it is not a tale of super heros who stand alone against the forces of evil. It is a tale of countless leaders who manufactured outcomes by inspiring others to lock arms with them in the quest for results -- fewer euthanized pets, a collective encyclopedia, deeper understanding of wine, etc. [1] The message is a simple one: you too can inspire a tribe to collective action, so get on it.

So what does it take to create a tribe? What does it take to inspire a team, or a club, or a movement? The question is certainly of interest to anyone building a startup. As Seth points out, there is a big difference between employees and followers. Employees do what they are told because it is their job. Followers do what they can because they believe. Great companies bear out this distinction. Look at the faithful at Apple or Google or Amazon. They are true believers. These companies don't recruit, they inspire. And the influence of great companies reaches far beyond the ranks of their employees. Bloggers become evangelists. End users become customer support agents. These companies become tribes, growing their influence and mindshare by leaps and bounds.

According to Seth, tribes are started by heretics of sorts. They are not blinded by the status quo. They are not afraid of failure. They are true believers in what they are doing. And they barrel forward without concern for the potential consequences of the decisions they are making. They lead by example. And they are unendingly generous to their communities -- giving of their time, their ideas, their selves. In short, these heretics are great entrepreneurs!

One need look no further than Seth's seven elements of leadership to appreciate that he is talking about entrepreneurs.

• Leaders challenge the status quo.
• Leaders create a culture around their goal and involve others in that culture.
• Leaders have an extraordinary amount of curiosity about the world they're trying to change.
• Leaders use charisma (in a variety of forms) to attract and motivate followers.
• Leaders communicate their vision of the future.
• Leaders commit to a vision and make decisions based on that commitment.
• Leaders connect their followers to one another.

I am often asked what it is I look for in an entrepreneur and this list isn't a bad starting point. Great entrepreneurs care deeply about what they are doing and are able to convince others to join their cause (i.e. their tribe). Their followers include employees, customers, journalists, partners and, on occasion, VCs.

For those of you starting companies out there (or trying to strengthen your corporate culture), "Tribes" is worth a read. It is certainly not prescriptive. But it has many nuggets of wisdom that will help you inspire and lead.

[1] While I was in college I ran a speakers bureau that brought a eclectic group of brilliant individuals to campus. One of my speakers was Chuck Jones, the creator of the Road Runner, Pepe LePew and Wile E. Coyote. I remember vividly listening to Chuck Jones' rail against the cartoons of the time, which he said gave kids the wrongheaded message that no one could do anything on his own -- everything required a team or a group or a tribe (his favorite example were the Smurfs, which he viewed as a tiny blue scourge on the cartoon world). I wonder if Chuck Jones would have taken issue with "Tribes" and its call to collective action.

I just flew back from Europe and boy are my arms tired [insert rimshot here]. Actually, I just flew back from Europe and boy are my eyes tired. I have this bad habit of accumulating magazines until I have a long plane flight then powering through 30 pounds worth of reading.

My typical airplane reading starts out with a zillion of those alumni magazines we all get. If you can wade your way past the inevitable articles on anthropology, sociology and pop psychology, you can often get a first glimpse into some really interesting scientific and technical innovation in these magazines. I'm tempted to go get a masters degree in anything from Carnegie Mellon just so I can get their alumni magazine.

But the magazine I probably spend my most time reading, en route to wherever, is Wired. It is such a great combination of entertainment, info-porn, and deep dives into things that really matter. This trip I had managed to accumulate 5 months worth of Wired's -- good thing I was flying to Europe, there's no way I would have gotten through them by Denver or Chicago. (The other great thing about reading your way through so many accumulated magazines is that it is a little bit like eating your provisions on a long hiking trip -- my load gets noticeably lighter with each magazine I've finished and discarded in the seat back pocket in front of me.) While I don't always act on it, I often times find myself reading something in Wired on which I want to blog. I'll rip out the pages and then forget about them or just never find the time to write. But not this time. This time I'm going to remedy that by writing this post on the plane flight back home. Right now (Jeesh, I'm three paragraphs into the post and I haven't really written about anything yet -- my apologies to those of you who are looking for pithy commentary on technology and the venture community -- I seem less and less capable of pithy these days).

How to score venture capital.

August's issue of Wired this year was the "How To" issue. How to stop a fight. How to crash a party. How to twitter an event you're not even at. . . . One of Wired's how to's was "How to score venture capital." Now there's a topic near and dear to my heart. So I read on with great anticipation and discovered that whoever wrote this did not, in fact, know how to score venture capital -- at least not from me. So here is Wired's advice with my commentary.

1. "HAVE AN IDEA. We'd say it has to be good, but many Web startups demonstrate otherwise."

Despite Wired's snark about Web startups, there is a reasonable point in here. It is true that you need to have an idea -- you've got to build something and, eventually, you even have to sell something. But "good" is in the eye of the beholder. I think you would be hard pressed to find a single startup that managed to get a term sheet from every VC they pitched. One VC's next Google is another's wasted hour. That doesn't mean one idea is good and the other is bad. It just means that venture capital is still more art than science. Trying to pick winners is what we do for a living and some of us are better at it than others.

2. "STICK WITH what you know. If you've spent the past few years building MySpace plug-ins, don't propose launching a chain of bowling alleys."

On the one hand, it is true that VCs love the idea of "domain expertise." On the other hand, it is silly to say that you need to stick to only what you know. What if there isn't a business to be built from MySpace Plug-Ins? Are you doomed to never create an interesting startup just because that's what you know? Look at Joshua Schacter. What did Joshua know before creating Delicious? He knew how to build huge scale, high performance, enterprise applications for the financial services sector. Does that mean the VCs were foolish to invest in Delicious? Should they have urged him to start an enterprise software company? VCs love passion and energy more than expertise. I probably wouldn't fund Joshua to create the next generation nuclear power plant. Then again, he's a really smart guy -- if he spent enough time getting himself familiar with the space and thinking differently about the problem, you never know.

3. "SPEND an inordinate amount of time crafting your business plan's executive summary. It's the first thing VCs read -- and the last if it's poorly written or long-winded."

The two things that I look at when first getting up to speed on a company are either an executive summary or a PowerPoint. So it is certainly the case that you would be well served by a concise and compelling executive summary. On the other hand, you may well want to stop there. A full blown business plan is rarely necessary to raise venture capital. VCs tend not to read business plans because a) they are too long and b) your business will likely have changed by the time anyone gets around to reading your business plan So focus on the things that matter -- understanding your competition, building great products, innovating on your business model, etc.

4. "SEARCH FOR VC firms that have recently funded startups similar to yours. Then hit those firms' Web sites, where they'll likely have instructions for submitting business plans. Don't worry -- the best do actually mine their slush pile."

If Wired's advice falls on a spectrum from "sort of right" to "way off the money," this one is deep in "way off the money" territory. It doesn't start off terribly wrong. You should definitely do a lot of research on the VCs that you will approach for funding. And the ones who have funded related businesses in the past are potentially good targets for your business as well. But not always. Imagine you are building a gaming startup. Some VCs who have invested in the gaming space may be signaling to you that they are excited about the gaming sector and would be happy to fund other gaming companies in the future. Other VCs may feel that they have made their bet in the gaming space and will be hard pressed to invest in another gaming company. So previous investment can be a double-edged sword.

The place where this advice goes far afield is the suggestion that you should go to a Web site, find instructions on how to submit a business plan, and "drop it in the mail." Wired claims that "the best" VCs actually look at unsolicited business plans. It may be true that many venture capital firms look at unsolicited business plans. But rest assured that it isn't Mike Moritz or Dave Marquardt or John Dooer reading these plans -- it is the most junior person at the firm. More importantly, the way to get your executive summary read is to have it passed on to a VC by someone he or she trusts. This is a referral business. Your credibility as an entrepreneur will be bolstered by the credibility of those individuals who vouch for you. So rather than spending time writing a business plan, go spend time pitching your business to technology influencers who can help you build a business and can introduce you to the right people to fund your business. My advice would be to never ever submit a business plan through a Web site -- if you can't get it directly to the person who you want to read it, don't bother.

5. "ONCE INVITED to present your plan, remember that brevity is a virtue: Use no more than 30 PowerPoint slides, and keep your presentation under 45 minutes."

Yikes. 30 slides. Unless you are Lawrence Lessig, I don't think the words "30 slides" and "brevity" can possibly be used in the same sentence. I completely agree that you should aim to keep your presentation to about 45 minutes. If a VC gets excited about what you're working on, they'll spend more time with you in future meetings. But, as with entertainment, you are way better off leaving them begging for more. Get in. Pitch. Get out. There is no way that should take anywhere near 30 slides. I've blogged here before about the 6 -- yes, 6 -- slides you need to pitch your business. Even if you feel that 6 slides is too spartan, don't confuse quantity for quality. The fewer the slides and the more discussion the better.

6. "KNOW EXACTLY how much cash you need."

They waited until the final piece of advice to nail it. I just wrote a whole post about this. Don't just ask for a specific amount of money, explain precisely what it is you intend to do with that money and why it is the right amount of money. This should be the last slide of your PowerPoint presentation and is your chance to summarize the strengths of your company: you're building something important; you understand the competitive pressures and how they impact how much money your are raising and how quickly you are spending it; you have the right team to build it (or know where to find the right people to add to the team); and you can make meaningful progress on the very reasonable amount of money you are seeking to raise.

Those of you who are still reading have incredible endurance and I appreciate that. My apologies for further testing that endurance. (But have no fear, there will be no pop quiz at the end.)

How to get a plug on TechCrunch.

In the very same issue of Wired, there is a blurb on "How to get a plug on TechCrunch." The thing that I think is interesting about Wired's advice for enticing Mike Arrington into writing about you, is that it is better advice on how to get funded by a VC than Wired's missive directly on that topic. It isn't perfect advice for either getting VC money or getting written up in TechCrunch, but it makes some reasonable points.

1. "Casually mention you hold the women's record for javelin in Tajikistan. People (especially women and minorities) with unusual backgrounds pique his interest -- maybe enough to propel him past paragraph one."

The simple fact is that both Mike and the typical VC get pitched on a lot of businesses in any given year. So anything you can do to stand out is helpful. Maybe I shouldn't say "anything." There are all sorts of ways that you can stand out in a bad way. But if there are things that you have done that are both interesting and demonstrate major commitment to achieving a crazy goal, they will help get you noticed and give you a certain amount of credibility as a go-getter (you'd be surprised how many successful entrepreneurs are triathletes or have climbed Mt. Everest).

2. "Cozy up to his friends. Comment on their blogs. Meet them at industry events. An introduction from someone he trusts wins you a few extra seconds."

This is the best advice by far. But it sounds far more cynical than it really is. Don't confuse Wired's advice about "cozying up" to mean that you should suck up to Mike and his friends. VCs and journalists alike hate suck ups. But, as I said above, getting to know the right people who can help you build your business is essential to your success. That isn't "cozying up" in some cynical sense. It is about convincing other smart people that what you are building is meaningful and that they want to be involved in that success. Those people will then sing your praises to Mike and the VC community -- not because they're your buddy, but because they believe in what you are building.

3. "Get a pro to write your pitch. Arrington hearts good writing and catching intros. Sometimes all it takes is one great sentence."

Who doesn't like good writing? So much about building a startup is selling your vision. The better you are at doing that in person and on paper, the more likely you'll be successful. But don't trade your ability to articulate your vision for the ability of a professional scribe to do so. If you can't pitch your own business anywhere, any time, any how, you will not succeed.

4. "Minimize the chitchat. 'it's not like we're going to be BFF,' [Mike] says, 'Just get to the point.'"

This is where Mike and I may differ. Mike is going to talk with you long enough to understand what you're building so that he can write in an informed way about your business. But that's about it. He doesn't need to be your BFF. On the other hand, if a VC funds you, he or she could be working with you for the next decade and beyond (My partner Dave has been on the Microsoft board for 25 years -- after that much time, Gates is legitimately one of his BFFs). So the "chit chat" is important. We don't need to be your BFFs, but we do need to feel that we can have a great working relationship with you for many years to come.

5. "Then back off. If he doesn't respond, don't 'check in' again and again. He's just not that into you. Come back when you have a better idea."

This one is a delicate balance. I agree that Mike doesn't want to be bugged by an entrepreneur when he decides not to write about that business. The same is true to a point with the venture community. "No" really does mean "no" when a VC passes on investing in your company. And arguing the point will do you little good. On a number of occasions, I have passed on investing in a company only to get an angry response from the entrepreneur explaining to me why I was wrong to do so. Even if the entrepreneur is correct, that tactic will not likely get him or her funded. On the other hand, there are two sorts of "No's" in the VC community -- there is the "no, I am not interested in investing in your company" and there is the "no, I am not interested in investing in your company ." I will often say that I am not interested in investing in a company because of X, Y or Z, but if they make progress on any of those fronts, I'd love to hear the story again. When I hear back from those entrepreneurs it is very much welcomed. In fact, on more than one occasion, I have passed on the company in the first instance, only to give them a term sheet at a later date. So don't make a pest of yourself, but don't be sheepish about being persistent when the door is left open.

Well, I guess I've come to the end of this unruly post. Thanks for slogging through it. I hope it's useful. And I hope I haven't crossed the "fair use" line with Wired. I really have tried to use no more of their original article than necessary for my commentary (you worry about these things when you teach IP Law). Thanks to Wired for occupying my long plane flight and giving me such useful food for thought. I look forward to my next journey when I can again catch up on my magazine reading.

(Pop Quiz! Ok, I know I said there wouldn't be a quiz at the end of this post, but since you made it all the way through, don't you want to test your comprehension skills? Here's the question. Who is one of my partner Dave Maquardt's BFF's? :) Answer below in the comments.)

I was having breakfast this morning with Salil Deshpande from Bay Partners. Salil and I were talking about assessing company progress and how best to measure that progress. Salil invests in super early-stage deals and has his companies report to him on their progress on a frequent basis. He said that he had one CEO who would report on his progress in such florid language that eventually Salil had to forbid his use of adjectives in his progress reports. Salil said that he didn't want to hear that things were going great. He wanted to hear precisely how things were going.

I nearly jumped out of my seat. Salil had articulated one of my biggest pet peeves when it comes to company pitches (and board meetings for that matter). I hate adjectives. I don't want to hear that one of the company founders is a "fantastic sales exec." I want to hear that she was Presidents Club the last twelve years running. I don't want to hear that the product is "revolutionary and paradigm-shifting." I want to hear about the specific features of the product that are differentiated and how. I don't want to hear that the company has "massive market traction." I want to see a graph of progressive quarterly sales and a giant sales pipeline.

Adjectives are not convincing. Facts are convincing. I may not agree with the conclusions a company draws from those facts. But I will at least be in a position to appropriately assess those conclusions. Whereas adjectives are all about conclusions without the underlying facts. As an entrepreneur, you are far better off having me determine that your market is "massive," your founders are "brilliant," and your product is "elegant," than to tell me that your company has "an elegant solution serving a massive market designed by brilliant founders." So reread your pitch and remove all of the adjectives. It will go massively, monumentally, gargantuanly. colossally better that way.