fredwilson

we haven't seen that yet although i suspect you are right. we tend to stick with our portfolio companies longer than we maybe should so it will take a while before we see what the failure rates are. in our 2004 fund, which is pretty mature now, the failure rate was about 33%, which is what we model it out to be at the start of a fund

you can put those investors on your advisory board and give them some options, explicitly recognizing them as valuable. this makes your round a lot less complicated and also allows you to be more concrete that you expect certain investors to give you value back

i may be living in the past, but rounds/syndicates are held together by the glue of price and terms. when you don't have that, there is no round. just a bunch of investors, like you have in the public markets. you might want the private markets to behave like the public markets. but be careful what you wish for.

we don't invest in public companies at USV

we would have made 10x or more on airbnb. apple has only gone up about 6.7x since 2009. and i only had a couple hundred thousand at work in apple. we would have invested millions in airbnb.

but we've made plenty of great investments at USV since 2009 including Kickstarter, Foursquare, Stack, SoundCloud, etc, etc

so i doubt Apple would even be in the top five in our 2008 fund when its all said and done.

wow. you really went through hell. respect!

aha. thanks for that explanation. makes total sense to me now. but they really shouldn't include the button if they haven't fully implemented the feature

great stuff. i think as a standalone app, its is very well done. but as you say, the potential is so much greater and they have punted on almost all of that.

it might make sense to just focus on the google and samsung phones at first

yes, exactly

exactly https://twitter.com/fredwilson/status/226047103867170816

me too

i should have cropped that out. oh well.

i got a playbook. i tried to use it. i found the OS very frustrating. we put it in our reception area at USV and 9 out of ten people (and these are tech types for the most part) couldn't figure out how to use it.

i hadn't read your post until now. but it is very good and covers a lot of the same ground. thanks for pointing it out.

yup.

i don't care. i am not going to hire anyone (or invest in anyone) without making phone calls. i don't think anyone should. but the quid pro quo, as you suggest, is don't call the current employer. great point on that.

that is great advice. thanks!

great comment. this is part of a series of MBA Mondays posts i called "People". earlier in the series I wrote about cultural fit. http://www.avc.com/a_vc/2012/05/mba-mondays-culture-and-fit....

i am an early stage "guy" and I can assure you i never "convinced" a later stage investor of anything. they did all the convincing to themselves. it was like feeding pigs at a trough.

you nailed it inclined plane

they are generally accepted by the accounting profession. but not by investors. investors tend to focus on cash flow. at least the smart ones do.

we are not investors in groupon. ugh. yuck.

we raised a fund in 2003. i remember it well. it took us a year to raise that fund. nobody wanted to invest in internet startups. that fund will go down in history as one of the best VC funds raised. certainly one of the best of that decade. price matters. environment matters. that was a much better time to invest than now.

GAAP is nonsense. cash flow is what matters. i suggest you go look at all of those non cash charges and see if you think they are really expenses of the business.

here's the math. it is not wonky.

market cap = ~$6bn, cash = $1.5bn, enterprise value = ~$4.5bn, pre-tax earnings/EBTIDA in Q1 = $87mm, annualized = $358mm, enterprise value/annualized ebitda = ~13

i don't benefit from the bubble. it drives up the cost we have to pay to invest in companies. i pray for the day the markets tumble.

zynga has earnings. $87mm of pre-tax cash flow in the first quarter that was just reported. Zynga has had earnings/profits/cash flow for years.

rational investors care about their reputation because that is what gets them into the good deals. maximizing profits over a career may require different actions than you think

yes, exactly. that is the thing that many people are missing about the elegance of this hack