I remarked to a friend that Mark Suster’s entrepreneurial roots show in his approach to being a VC – he’s come out of nowhere and in short order aggressively pushed himself into being one of the most relevant voices out there. He seems to be working a lot harder than the others guys, exactly as you’d expect an entrepreneur to be. Not exactly what you’d expect of a VC.

His blog is fantastic, and I quite often agree with his advice.

That’s why I found it odd that his The Best Entrepreneurs Are Hyper Competitive & Hate Losing struck such a dissonant chord with me.

Shuffling through the successful business people I know and trying to gauge whether they would be the type of people who are obsessed with winning, even in a family game of scrabble, I don’t come to a clear conclusion. I know hyper competitive people, but I also know plenty of people who are able to separate their business behavior from their personal behavior. And not obsess with beating the competition.

Maybe that’s what’s not sitting well with me – Mark’s definition of winning seems to be beating the competition.

Some of the best entrepreneurs I know don’t obsess with the competition. They obsess with their own behavior.

Here’s a contrived example – look at Apple. Do you see Jobs competing with the others in the industries he enters, or do you see him trying create the best possible product, distinctly separate from what his competitors are doing?

Frankly I have a hard time picturing a lot of these guys stressing out over scrabble or Guitar Hero.

Mark’s a very successful guy and his approach has certainly worked for him, but I disagree that you need to be obsessed with winning in the way that Mark describes it.

Look at this way: you could destroy all your competitors and still not win. You could also win without destroying any of your competitors.

First, pick the right game. Then, pay attention to playing that game as best it can be played. Competing may be an important tactical part of playing the game, but it’s probably not the part to obsess over.

I’m noticing how much the practice of finding a candidate and interviewing them has changed over the years.

First step is to look up the person on the web. Since I’m looking for a technical person I’m expecting a blog, contributions to open source projects, a twitter presence, etc. If I don’t find them, the candidate becomes less attractive.

If I do find a blog or twitter feed, I take some time to read them. You can tell a lot about a person with just a short overview – for example, even a delicious feed can give you a very good feel for how good someone is technically.

Hopefully the person has an open source project or two they’ve contributed. If so you can dive right into the code and get a good sense of their skills at work. I love this – you can see great coders almost immediately. And of course bad ones.

If the person is still looking good it’s time for a review of the resume and their linkedin profile.

By the time I followup with the person I have a very good sense of who this person is, what they’ve done in the past, and what their real-world coding looks like. The people who make it to the interview are so well filtered you almost can’t go wrong.

It’s very time consuming, but if you’re as fanatical about hiring good people as I am it’s worth it.

Contrast this with the old pile-o-resumes approach, or the recruiter-filter-by-keyword approach, and I think we’re in a much better place.

Now if I could only find a recruiter I could trust to do the technical deep dive I’ve described here and be ingenious enough to find diamonds in the rough I’d be a very happy man.

My buddy Paul Kedrosky (disclosure: an advisor to my company) has an interesting piece on why he loves venture capitalists. I love them too, but mostly for a singular reason.

Paul’s posts starts with some excellent arguments, but alas, in the third paragraph he starts to lose me

To pick on a few things:

“the idea that anyone at all would build a business around funding startups is the remarkable thing”. Indeed. So is the fact that there exist professional gamblers. The odds are against them, most lose money, but a few end up with very good returns.

“Failure rates among venture-backed firms are lower in the first few years, but higher later on”. What we’re saying here is that companies who start out with more money take a longer amount of time to run out of money. Hmm. I don’t know if that says anything about the nature of VCs, other than they carry money.

“But that doesn’t mean VCs are quacks. Or that what they do isn’t hard. Or that it’s unimportant. Because it is important, and the good ones are smart, and what they do is very, very hard.” - I can almost make the same case for degenerate gamblers: what they do is hard, and the good ones are smart. Most are quacks though.

The difference is what they use their money for.

The saving grace of venture capitalists, god bless them all, is that they put their money to use in building business and innovation.

It’s not about loving venture capitalists. It’s about loving their money. And how they use their money.

Now think about it: hand somebody a big pile of money, pay them a handsome income, and have people begging them for money all day every day. What type of personality do think will emerge in them? Is it all possible they’ll start to think a little too highly of themselves?

So here’s to venture capital. I think it was Steve Martin who said something like: France is a  lovely country, except for all those damned French who live there. Well, venture capital is a lovely country too.

I kid, I kid. Particularly the VCs I’m talking to next week, plus all my VC friends, plus everyone I’m likely to raise money from in the future, I really don’t mean you guys. You guys bring a lot of value to the table besides money. You really do. I meant the other guys.

Seriously, I kid.

Let’s finish with a quote that made me laugh from an entrepreneur buddy of mine (who shall remain nameless): “I aspire to live a lifestyle where my hobbies are funded by other people’s money. Two ways I know to do that: get NSF funding or raise venture capital.”

I was fortunate enough to attend both TC50 (thank you Heather, Michael, and Jason) and Demo (thank you Matt and Chris) and have a booth at one. Thoughts:

If you’re presenting or have a booth,

Have something to say. Don’t look confused, wondering how to describe your company – you should’ve practiced this ad nauseum by the time you get to the show. That goes for everybody at your booth – if they’re at the booth, they should know what to say.

Say it. Briefly. Tell me what you do and why I should care in 30 seconds. Have a 3 minute version. Give me a chance to escape after 3 minutes. If I still care, delve into details and exchange contact info.

Have a Hollywood pitch. Nivi of Venture Hacks came up with ours – the first time I described Xpenser to him he said “cool – Tripit for expenses”. I’ve been using it since. You want to be “the something of something”. Sounds silly but it really works – Jason Calacanis, for example, told me he got what we did the moment I told him our hollywood pitch.

Pick one thing. You’re three people. You can’t possibly be solving all of the world’s problems. Pick one problem, present a solution for it. If you find yourself saying “or, we could do XYZ”, then you’re probably screwing up.

Demo. Don’t talk about it, show it. Both Demo and TC50 companies have been very good with this actually.

Explain how you will make money. Maybe you haven’t figured it out yet; that’s probably ok. But you will be asked, so have something to say.

Address the competition, particularly if they’re 900 pound gorillas. If your product is a better facebook, google reader, twitter, yelp, etc, at least acknowledge the competitor. If you’re showing me a page that looks just like facebook updates, I’m going to be thinking you’re competing with facebook. Tell me how you are not, of if you are how you’ll beat them.

Don’t look glum. I don’t care if you’ve had a bad day. I was having a particularly rough day when we had our booth at TC50, and was derailed from my plans to mope all day only by my partner’s persistent professionalism. Suck it up and present. I did and we ended up getting some fantastic coverage for Xpenser.

Don’t look bored. If you’re bored how do you expect people to be interested?

Don’t be shy. If you see someone wandering around and somewhat receptive, grab them. If you’re sitting in your chair as people walk by you’re doing it wrong.

Attendees and presenters alike:

Network. Meet someone new, shake a few hands. This is the main reason you’re at the conference. Some conferences do a good job of providing you with opportunities – O’Reilly conferences, for example, include an online app that allows you to find other attendees and connect with them. All conferences should do this. Demo in particular would be a great candidate for this, since the attendees are likely to be interesting to each other.

At the last Hadoop conference, for example, where I was actually very interested in the presentations, I ended up catching only 4 presentations in person. The rest of the time I was talking to people in the hallway, catching up with old colleagues, etc. Best conference I’ve been to in a while.

VCs and investors working booths: good on you. I’ve been impressed by the number of investors actually putting in real work. Henry Oh, for example, was absolutely a machine and left me very impressed. If you’re an investor, what better opportunity to see your investment in action, gauge feedback, and see how your team interacts with people? Take the time to show up and man a booth; the golf course will still be there tomorrow.

…

So how would I compare TC50 and Demo? Bottom line is they’re both excellent shows and you should do your very best to get into either. If you get accepted to either you can’t lose. Each reflects the personality of its founders; TC50 is louder and has more ambient energy, Demo is more professional and structured. TC50 is very web/online focused, Demo has a broader range of technologies.

I preferred TC50’s approach to the presentations. After each company presents they get immediate feedback from a panel of experts. At Demo the feedback comes in a lump after all of the session’s companies have presented. Having the immediate feedback helps complete the story on each company and provides a natural break.

I preferred Demo’s scheduling and focus on the booths. At Demo attendees spend  a good bit of time at the Pavilion where the presenter booths are. This is a very good thing – they get a chance to actually interact with and touch the products. At TC50 the booths seemed a bit more like an obstacle on the way to and from the main presentation area.

The power of Linkedin: I changed my profile info and got a flood of emails asking if I had left Yahoo, and I realized I hadn’t really announced it. So here it is.

A little while ago I left Yahoo! to go full time on yet another startup, Xpenser. Xpenser is expense tracking and management simplified: record and manage your expenses from any device, any time. As soon as you get out of the taxi, call and say “Taxi $27 office to San Jose airport”. Your expense is recorded and you can forget about it.

Or you can email “Lunch $35.13 with Jack”. Or SMS it. Or iPhone it. IM it (Yahoo, AIM, MSN, GTalk). Twitter it. Use the browser search box. The FireFox plugin. Or, believe it or not, the Web.

As you can imagine this was born of personal need – I travel a lot, and expense reports have been the bane of my life for as long as I’ve worked.

Xpenser is an expense management tool built by someone who hates wasting time on expense reports.

The site has been growing wonderfully, with a bit overy 20k users, and in Nov/Dec was featured in Consumerist, Mashable, Lifehacker, Stepcase Lifehack, BNet, and even briefly in the Motley fool. The users are passionate, the feedback is great, and all the metrics are off the charts. 

In short, it was an obvious move.

My 4 years at Yahoo! were fantastic – I was fortunate enough to work on make-or-break projects with a group of very smart, very dedicated people. I learned a lot, am very thankful, and continue to root for Yahoo! to make its way back to the top. Keep fighting guys!

So, back to the startup world for me, and I couldn’t be more excited. I’m also advising a few other startups and investors here and there, so I’m fully in it. This is actually a fantastic time to do a startup if you’re planning to build a real business.

Needless to say, if you see opportunities for Xpenser in your network, do let me know ( parand at xpenser dot com ). And if you’re around San Diego or LA drop me a line and we’ll grab coffee and catch up.

2009 here we come!!!

Interesting data on impact of VC investment on startups with angel investment, based on a Kauffman Foundation study.

Couple of interesting nuggets:

• Angel investors are generating 27% Internal Rate of Return (2.6x investment in 3.5 years)
• However, average return is fairly meaningless; 52% of investments returned less than the investment amount, while 7% returned > 10x, accounting for 75% of the total investment returns.
• Startups that take VC money after taking angel money descrease their chances for a 1x to 5x exit by ~20%. They increase chances for a 5x to 10x exit by ~7%, however. 

Informative study of compensation and equity for various positions at various stages of a startup.

I am an incredibly cheap bastard frugal. I don’t like to pay for things.

Yet I just paid for Flickr without hesitation or a moment of doubt. Odd.

Here’s why, I think:

• Cheap: $25/year is not a lot of money.
• Excellent service. I’ve never had a problem with the service; they’re always available and fast.
• Nice, easy to use product.
• Trust. I trust that Flickr won’t do anything bad with my account, with my photos, with my credit card, or with anything else. I trust them because I believe they respect their customers:
  • They don’t automatically charge renewals your account – you have to take an action each time you have to pay them, so you know they’re not going behind your back to charge your credit card.
  • If you decide not to pay, they still provide a reasonable product (only your most recent 200 photos are available) instead of leaving you high and dry. If you decide to pay at a later time you get your full account back.
  • They provide full, easy access to all your data via a variety of APIs and tools at all times. They’re not trying to tie you down by trapping your data.

I feel comfortable spending money on Flickr in the same way I feel comfortable spending at Costco – I feel they’ll make things right for me without giving me a lot of trouble. So I spend.

This is the way to build a sustainable fremium business – make gaining your customer’s trust your top priority.

As the “computer guy” for my wife, various friends, and my own activities, I often see a need for a very simple “CRM” system. But it’s not really CRM; it’s more of a contact management system together with a way to send emails to various groups of friends / customers, a way to catalog past exchanges, and perhaps a simple to-do system.

Periodically I look at the various available options (there are many), give one or more of them a try, and give up, generally because they’re too complex and too capable.

The most promising is High Rise, but I don’t think it provides a way to send emails, so it doesn’t qualify.

Here are my requirements for my imaginary Pony CRM:

• Simple. Must be simple enough that my wife will actually use it.
• Integration with Yahoo Mail / GMail. This should be generalized to POP/IMAP integration, but I find almost everyone uses one of the large providers, either Yahoo or Gmail.
• Automatic synchronization with Yahoo/Gmail. There shouldn’t be an “import” option – it should always be sync’d automatically. A contact in Gmail should be immediately available in Pony CRM, and vice versa.
• Easy cataloging / collection of emails. It’d be good to be able to catalog and tag email exchanges.
• Easy mass email. This is the most important feature – without exception, the most common use case is: I want to email a subset of contacts and I want to track who replied, looked at what I sent, etc. For example, all of your clients that have certain investments, or all customers who’ve requested feature X, all customers who signed up before date X, and so forth, should receive a nice email.
• Easy graphical email composition. Everyone wants to send a nicely formated email with graphics that’s readable in the majority of email readers, but no one can figure out how. This should be built in to the CRM tool in some way. There should be a way to store the email templates for future use.
• History and Audit Trails. You should be able to figure out who you sent what to, when.
• Extensibility. APIs for access to the CRM system as well as a way to integrate external feeds/ APIs/ widgets into the CRM system.
• Free/Cheap Hosting with Simple Full Export. If it’s cheap enough, I can push everyone to pay the monthly fee and get the support issue off of my back. However, there must be a simple full-export option as well as an alternative means of using the exported data – eg. an open source version that could be deployed should the hosted version go out of business. Can’t have lock-in if your business depends on the data.

I think this covers just about everything needed. Someone please either build or point me to Pony CRM so I can be happy.

This is one of the most frequent questions I get about the startup world, and Chris Michel covers it well in this F|R interview, so I’m quoting here:

Typically VPs of early-stage companies get between 1 percent and 1.7 percent of a company. That’s just the benchmark, but it’s what investors will expect to see. The equity structure of a VC-backed company looks like this: The investors own 40 percent; the founder(s) own 40 percent; 20 percent is set aside in an employee option pool. After a round of additional funding, your senior managers may each be diluted from 1.5 percent to 0.75 percent. If you sell the company for $100 million — a very good outcome for a startup — the managers each get $750,000. If you toiled away for five years to build the company, is that worth giving up five years of a great salary? Maybe not.