Class V

Sense and Sensibility

Been watching the HBO miniseries John Adams on DVD this week,  which is a great biopic for those who are interested in the founding years of the American republic.  One thing (of many) of which I was unaware was the extent to which Adams' thinking was influenced by his appreciation for the powers of strong, central government, even monarchy.  The series paints a less than flattering picture of the first Cabinet, with Jefferson and Hamilton constantly at odds with each other.  The words of Hamilton, in discussing how to establish the financial infrastructure of a new country, were particularly resonant given the recent events of the worldwide financial system (see Hamilton's First Report on the Public Credit).

As much as American independence marked a political separation from Britain, there is no doubt that our culture - and all institutions which support it, including government - have been greatly influenced by our former enemy.  And during this current global economic crisis, the United Kingdom has stepped up to demonstrate its wisdom and hopefully, once again, influence the direction of the US government.

I am specifically writing about Wednesday's announcement from the Treasury of the United Kingdom.  Instead of focusing primarily on removing toxic assets from the balance sheets of financial institutions - which had been the favored approach of American lawmakers and government officials - the UK is primarily addressing the issue of liquidity.  Purchasing preferred shares of banks for cash.  Sound familiar?  This was the approach Warren Buffett chose in late September, when he injected $5B into Goldman Sachs and in return, received an ownership interest in the form of preferred shares.  There is no doubt that owning a piece of a bank can only prove profitable in the long run if the bank's balance sheets are cleaned up.  But the fundamental issue in this current global economic crisis is one of liquidity.

Finally, our own government and in particular, Henry Paulson, seems to be acting upon this reality.  Friday's press announcement indicates that Paulson has at last broken free of his bias to protect his former banking colleagues from government ownership.  Paulson indicated he will use some of the $700B authorized under the "Emergency Economic Stabilization Act" to purchase with cash, equity interests in financial institutions.  Which, as this New York Times editorial piece suggests, is clearly a better use of my (and all US taxpayers') money than scooping up a bunch of Collateralized Debt Obligations ("CDO's") that were recently proven to be worth only nine cents on the dollar.

Technorati Tags: bailout, John Adams, Alexander Hamilton, Henry Paulson, CDO

Reducing Waste

Those who know me well in real life, and perhaps those who have read this blog for the last few years, know that I have always been passionate about the fields of organizational behavior and organizational development.  Probably stems from my extended and deep involvement in team sports, and how readily many of those lessons have translated into my management career.  The reasons teams fail (or succeed) in the pool are remarkably similar to the reasons why teams fail (or succeed) in the board room.

This appreciation for the complex issues of organizational development only deepened over the last several years, while I was a venture capitalist.  One of my mentors advised me early on in my career as an investment professional that nothing wastes an entire round of funding more effectively than the wrong management team hire.  I could not agree with this statement more.

And yet, I would see this mistake being made over and over and over again.  By very intelligent and extraordinarily talented individuals, whether they were investors or operators.  My observation is that these repeated mistakes had little to do with capability and more to do with, quite simply, a lack of prioritization.  Saying that building an effective team is critical is one thing.  But actually taking the opportunity of a job spec to do a thorough assessment of a current team's granular strengths and weaknesses, or spending the financial resources to find an extraordinary individual outside of one's familiar network ... well, that is another thing altogether, of course.

Not being one to simply identify a problem, I have now taken a step with my career to focus exclusively on addressing it.  Initially, this focus will be applied to an area with which I have a great degree of familiarity.  I will be partnering with VC firms throughout the US to build world-class investment teams, helping them hire investment professionals ranging from Managing Director to Analyst.  The firm I am joining as "Senior Vice President and Head of the Venture Capital Practice" will be doing a targeted PR announcement in the coming weeks, so I will keep mum on any additional details for now.

Technorati Tags: organizational development, executive recruiting, venture capital

More Time for Riding

And more time for blog entries because last week, I said goodbye to an online community of which I was a member since 2003.

Message boards are strange phenomena to begin with, and my time with this particular community was marked not only by strange phenomena but by cyberstalking, disruption of my life in the real world, and even a Federal lawsuit.  Friends and family IRL ("in real life") asked me repeatedly why I bothered with this online community.  Truth be told, the answer - more often than not - was boredom.

That answer just isn't good enough anymore.  This community held some real value for me at a couple of key milestones during my life over the last five years, and for that I am incredibly grateful.  But the reality is, is that there are far fewer moments of boredom in my life at this point.  And while I cannot prove in a legal sense that the same person (or people) who were behind much of the grief my family, colleagues and I went through is (are) still strangely obsessed with me ... I suspect as much. 

So the purpose of this blog post is to let my many friends, family and colleagues who have been giving me the side eye for years now about this whole message board thing, know that they can rest easy now.  I have finally come to my senses.  It's long time that I took the minutes spent on this message board and applied them to real life relationships, reading a good book, snowboarding (the picture above is from Kirkwood earlier this month) or running, or 476 other activities or interests that could be seen as healthier diversions from boredom.

Note: I will be curious to see how much traffic this post generates.  As an example of how strange online communities can be, I have never shared this blog's address with the online community of which I write (except for a handful of trusted community members via off-board channels) and yet I suspect that somehow this wall of privacy has already been broken.  I am purposely withholding the name of this online community, because I do not want it picked up by the search engines and my comments have less to do with the specific online community than with message boards in general.

Technorati Tags: message board, boredom

Update / Professional

So last week I wrote that there would be two update blog posts during the week.  Well, the fact that it's taken me a bit longer than a week to get to this more work-oriented update out is an update in and of itself: I'm busy.  Especially in comparison to my previous firm.

I've contemplated the reasons for this, and believe they are the following (in order of importance):

1. Smaller investment professional team means fewer resources to do the work.
2. Dramatic increase in high quality deal flow.

Thought hard about (2) over the last 45 days, and so want to be careful about how I phrase the following.  I still believe strongly that there is tremendous potential in Texas, especially with regard to outstanding technical talent and a generally strong entrepreneurial spirit that is imbued in the culture (think Dell, Inc. or Southwest Airlines).  But the lack of real diversity among capital sources to support that entrepreneurial ecosystem ... essentially represents a drought that is preventing a true blooming from taking place.

What it comes down to, is that any given organization develops its own syntax, unwritten rules, jargon and shorthand, etc.  That is natural.  Dominant organizations influence the systems around them as much as they influence their members inside: outsiders may be unwilling to question or challenge what is effectively the status quo.  While this may be the correct decision from an immediate survival perspective to the individual or outsider, it is unlikely best for the larger ecosystem over the long run. 

With a process as challenging as picking the right teams / markets / solutions, and then nurturing those investments into large sustainable companies ... it is simply my opinion that there is more than one way to do this well.  Monopolies generally do not benefit consumers, and monopolies among capital sources similarly do not benefit entrepreneurs.

For example, here in Northern California, it is to the ecosystem's benefit that some VC firms emphasize people when evaluating potential investments, and others emphasize markets.  It is also to the ecosystem's benefit that an entrepreneur could utterly fail in her first startup, but know that there are several other firms who would be willing to give her a second chance (assuming she can demonstrate her ability to learn from mistakes.)  An entrepreneur could burn one set of bridges, and at least not find himself stranded on his own island.

Something as qualitative as chemistry or compatibility is impossible to define.  Organizations have their own unique chemistry or culture, as do individuals.  And it is inevitable that some organizations and some individuals will simply not click, just as two individuals may not connect nor may two organizations.  It is to the ecosystem's detriment if an individual must leave the ecosystem simply because he or she did not gel with a single organization and its naturally unique culture.  (And by "individual" I am decidedly not referring to myself, but rather thinking of any given entrepreneur.)

Fundamentally, an ecosystem's vibrancy in part is determined by its diversity.   I believe there is great potential for large entrepreneurial successes in Texas.  But I am also of the equally strong opinion that this vision will be unrealized until there is greater diversity among the capital sources (and by capital sources, I mean locally present, institutionally funded VC's).  I would love to be proven wrong on this second assertion, but so far the data only confirms my hypothesis.  Here are the 2007 Q1 IPO's of VC-backed companies, and note the companies' locations:

Accuray (Sunnyvale, CA)
Aruba Networks (Sunnyvale, CA)
BigBand Networks, Inc. (Redwood City, CA)
Glu Mobile (San Mateo, CA)
GSI Technology (Santa Clara, CA)
Mellanox Technologies Inc. (Santa Clara, CA)
Molecular Insight Pharmaceuticals (Cambridge, MA)
Oculus (Petaluma, CA)
Optimer Pharmaceuticals Corp. (San Diego, CA)
Salary.com (Waltham, MA)
SenoRx (Aliso Viejo, CA)
Sourcefire (Columbia, MD)
Switch & Data Facilities Co. (Tampa, FL)
Synta Pharmceuticals (Lexington, MA)
Xtent (Menlo Park, CA)

Of course, where there is a problem, there is an opportunity.  The good news is that there is truly an awesome opening here for the right institutional investors who have the vision and the risk tolerance to support new firms and new funds that address this drought issue.

Technorati Tags: venture capital, organizations, monopolies, ecosystem

The Blogelite

Heading back to the US shortly, after throughly enjoying myself in Paris and at Les Blogs 2.0 (and associated side events).

I would like to particularly thank Jeff Clavier and Rodrigo Sepulveda for allowing a non French speaking, American girl such as myself to attend their CGS 3.0 dinner this evening ... which I found to be stimulating, similar to a classic French salon.

After the dinner, I was video iChat'ing with my dear husband when he forwarded the following Slashdot thread: "Bloggers the Tech World's New Elite?"

The Slashdot thread refers to the following Wall Street Journal ("WSJ") article from yesterday: "Tech Blogs Produce New Elite to Help Track The Industry's Issues".

Two quick opinions:

1. Many bloggers cringe at the thought of an elite - characterized in the WSJ article as "the A-List bloggers" - within their midst. At the same time, there is no doubt that such an elite exists in both overt and subtle ways. This has proven to be true both in the physical world, e.g., conferences, and in the virtual one, e.g., blogosphere.
2. That being said, in my opinion, those in the elite have a responsibility to use their influence - however unwillingly they may have earned it - for the common good. Why am I repeating something that likely seems obvious to most? Those who know me well know of my fascination with organizational behavior, and it is my belief that the blogosphere will ultimately follow - and not redefine in some earth shattering manner - the norms of virtually all large social organizations that have existed throughout history. Such norms include ethics and classes. And inevitably, class conflict.

   Technorati Tags: blogosphere, Slashdot