Good morning, All,
First off, our October Breakfast with an Angel will be on Wednesday, October 15th, and our guest investor is Jason Klein. We keep the group small, so everyone will have a chance to talk to Jason, 1-on-1 and always worth the price of admission and remember: our guest investors are always well-connected – and are always happy to make introductions for people who make it a point to show up.
Jason Klein has a background in media, consulting, and healthcare. He is founder and CEO of On Grid Ventures, an advisory and investment firm specializing in digital media and marketing. He is also Chairman of the Harvard Business School Alumni Angels (the second largest angel group in NY, with more than $4 million invested across 25 companies), and a member of the New York Angels, the largest angel group in NY. Register here, and hope to see you there!
Of course, George Mallory (no, it was not Sir Edmund Hillary) uttered that famous line in our subject line today, in reference to why it was that he wanted to climb Mt. Everest. It’s often the answer founders give when asked why they are taking insane amounts of investor money that they don’t necessarily need. To paraphrase Mark Suster, just because it’s there, doesn’t mean that you should take it.
There has been a lot of online discussion lately from some powerful investors, discussing burn rate and how it’s out of control. We were personally involved in the industry in the 90s, and through the dot bubble. Everyone was focused on eyeballs back then and the term ‘profits’ was considered quaint. This was the New Economy and people just didn’t understand it. And then came the correction. Often times the dot bomb era is blamed on inexperienced investors trying to cash in big time. That was part of it. As we’ve said before, it was too much money being thrown at too much inexperience. And as we watch from the mosh pit now, it’s again too much money being thrown at the race for eyeballs. It’s not about capturing the hearts and minds. It’s about whether or not you’ve got something for which consumers will reach into their pockets or as Mark Suster again says, Ring the Freaking Cash Register.
We mention this because we were at an industry event this past week, and ran into a very well known VC, whom we’ve known since the web 1.0 days, and who has been investing since the days of hardware. “I feel like it’s 1999,” he said, and he was not referring to the song by Prince. There was great trepidation in his voice. When someone with his street cred and juice says something like that out loud, be very worried. All this talk of burn rate is subterfuge/code for what this investor said in no uncertain terms. Yes, he did go on to talk about insane valuations, and burn rates on the part of companies who had no pathway to revenue.
If you follow funding reports, you might have noticed, more and more, that companies are being acquired for undisclosed amounts. Which is a euphemism for no more going back to the well: the investors have arranged for the most face-saving exit possible for all parties concerned.
We will also remind you that amazing companies tend to rise in down times. Google is one. It’s the best time to find great engineering talent. So keep your eyes on your balance sheet, and remember that there’s a reason why it’s called a balance sheet, and make sure to save for a rainy day. It’s part of the systole and diastole of this industry, it seems – heady days followed by a nuclear winter. And we only mention it, because it’s there. Onward and forward.