The Raging Insterno

I watched Man on Wire last night, the compelling documentary chronicling the successful and criminal wire walking exploits of Phillipe Petit, his 6 years of planning for,  and his crossing of the World Trade Center Towers in 1974.  While watching the movie, which by the way I highly recommend, I was most struck by two things. The first was the clear and utter genius of Phillipe Petit. The second was the degree to which his “posse” would go to support his ambition.

To be sure, genius comes in many forms. But it is often much harder to define, than to just experience and know.  For some, genius was the first time they listened to Beethoven’s Symphony Number 9 or watched Michael Jordan beat the Utah Jazz in the NBA Finals or Rafael Nadal beat Roger Federer for his first Wimbledon championship. For others, perhaps it was watching Steve Wiebe get to the kill screen on Donkey Kong. For Phillipe Petit, his genius, his extraordinary creative power, was in not only daring to believe that the seemingly impossible, was possible, not only daring to believe that the undoable was worth doing, but also in doing it.

While the documentary is a revealing insight into the capacity of the human mind to dream beyond, and the human spirit to achieve those dreams, it also got me thinking about genius in a more relevant setting, that of a venture capital investor on Sand Hill Road.

As someone who sees 10 new entrepreneurs per week on average, pitching new business ideas, I’m quite aware that genius is the siren song of the venture capitalist. They, or the companies they represent,  stand out, like true works of art. And while many times it is hard to articulate why they stand out, like Justice Potter Stewart said about pornography,  ”you know it when you see it”. And so we chase them, and fund them. And often, they work out fantastically well.

But that is only half the story. Yes, we often are attracted, like a moth to light, to genius, and we are often shackled by our own needs to believe–our own blind love for the genius. Like Petit, to accomplish the impossible, to scale the towers that had just been built, required immense surreptitious coordination and support.  And coordination that would require its crew be both willing and able to take on the obvious legal risk involved, but also the immense personal risk knowing that their actions could quite possibly lead directly to the death of Petit. But therein lies the power of genius. It attracts and reels in sycophants willing to go to inordinate lengths ignoring fact and truth, to support the ambition of genius. Such is the power over its followers.

So what again does this have to do with venture capital? It has everything to do with venture capital. Because like the sycophants that helped Petit achieve his dream, however strange it was, Sand Hill Road is the sycophant of genius. And like Petit’s love interest in the movie, who subjugated her dreams to help Petit reach his, only to find him immediately abandoning her after his conquest, genius in Silicon Valley can also be the kryptonite of venture capitalists (no, i’m not implying in ANY way that VC’s are supermen!) if they don’t take great lengths to focus intensely on the realities of building businesses  rather than the glare of the white hot light of the genius. And that, that is the genius of the best venture capitalists!

First the Washington Post, now the NY Times with NY Times Open. First it is about political transparency, tomorrow it will be about the free flowing of most if not all content, freely around the web.  An interesting trend to be sure, with major implications and opportunities for those that are able to organize, protect, deliver, manage and report on this flow of content. In the moment content is cool, useful, and anti-google.

The more I talk to premium publishers, the more I’m hearing that a once symbiotic relationship is turning a bit more parasitic, or so it is being perceived. I wonder what my once favorite hometown newspaper, the about to be defunct Seattle-PI, thinks about it. Perhaps they should have turned the Guest Guesser game into a web-based social gaming site?

Restating my avowed love for Manu Chao today by listening to Clandestino. If there has ever been a song that makes you want to get up and dance more than Bongo Bong (click for full song), please turn me on to it.  I wish he played the U.S. more often. Thanks to Andrew Campion by way of Harv,  for bringing this, instead of a slew of  berets and that fashion sense back from France in ‘98. Anytime an artist delivers music that sounds as good as this, and conveys such deep thought on the issues of our times it deserves airtime in our house.

The Repair Pal iPhone app is rocketing up the charts. Nice work, Rob Sturtz.

Love that Lance Armstrong is a Twitterer!

Affiliate marketers drove massive revenues on the web (much thanks from Google, eBay, amazon et al). Will they also drive the location-web? It is amazing to me how many companies come to pitch having no knowledge of the power of affiliate marketers to move mountains…and create markets. 

Yes, as my daughter says, things are rather “suckish” right now, but these are wonderful times for the “players”.   To borrow the phrase, these are times when the “players play”.  I might be shallow and missing the bigger picture, but factors like when you started a company rather than whether it was successful or not, whether you put any of your own money into your company or not, and whether you’ve left your current job matter to me. I was always much more impressed by entrepreneurs who started companies in ‘01-’02.

Great time to be in the lead arbitrage game. If you have a relationship or two with folks whose job it is to acquire customers, a good sense of creative optimization and media buying, you’ll be cleaning up in a very short period of time with the price of good quality inventory plummeting.  I’ll bet the VP of Customer Acquisition at your regional solar panel installer would love to hear from you! As would your leading SEO lawyers!

Who thought cutbacks and shortfalls would hit so close to home. Not my favorites….girl scout cookies? C’mon!

Saw Doubt this weekend. And have many!

Congratulations are in order for the Rubicon Project team again.

It has been less than two years since we first started incubating the Rubicon Project in our Santa Monica offices. My how they have built an amazing culture of repeatable excellence and success. And my how they have grown. Congratulations to Frank and the team, who continue to execute to perfection and have now been named the overall winner as the top private company in online media.

I keep hearing and reading how VC’s shut off the spigots in Q4 and plan on shutting them off further in Q1.  Go spend a few hours eavesdropping at the Sharon Heights Starbucks or at Buck’s in Woodside (or equivalent holes in Seattle and Los Angeles), and you’ll hear what a prozac moment we’re all in. And by “all”, I mean you the entrepreneur, the proverbial men in the arena, and I, the often wrong, but sometimes right, funding source for your companies.  And the fact is, they are mostly right. 

Yes, it is true, many of us  are doing their extra diligence right now, on our own portfolio companies and aren’t listening to as many pitches as we may have two quarters ago. Yes, it is true, that we’re right now making VERY hard decision, decisions that are many times not driven as much by the belief of the ultimate value an entrepreneur has created, but by the realities of our own operating issues.  And yes, there will be many GREAT companies, cut off arbitrarily, and before they’ve had a chance to fulfill their destiny, sometimes because firms need the money they were planning on contributing to those companies, for their clear winners, or even for themselves to fund their own operations.  

But it is also true that some of us, in the midst of what feels like the apocalypse, are aggressively making very early stage investments.  Despite many of my entrepreneur friends’ protestations that the VC species is the most risk averse kind, we’re still seeing great opportunity to deploy what is clearly “riskier capital”.  After all, you can’t argue with the success of many of the bust-created companies of the early 2000’s!

As two 4th quarter, series A funded companies will shortly attest (we’re about to announce them), I’ve led two deals, as aggressively as we did before reality changed for all of us.  So don’t give up hope. While the faucets of capital aren’t flowing as they were, they are still flowing.

At the AIPAC dinner last night (a great event, I might add), I saw an old friend in a tricky situation.  Like an incredibly large number of venture funded companies these days, and a number that is only going to increase, the Company  is facing  a very tough financing climate and had been rejected by 5 firms for its series B over the last 4 months.

With the prospect of not being able to make payroll in 30 days staring him in the face, the entrepreneur looked to his insiders, who insisted that they would only support the Company with an infusion, at 50% of the post money valuation of the last round, if at all. He asked me what I thought his investors were thinking about in making the decision.

Many friends are facing similar situations. And many more will too. And what many don’t realize is that for board members, especially those with controlling interests in the companies, down rounds present some very murky legal areas, that aren’t taken lightly. And these consequences do affect our decision-making.

It is sad, often, that the resolution of a very complex decision, can come down to something very simple…and emotional. So I asked him whether he knew whether his board members had ever been sued before.  I was only half joking. Why? Well, the reality on the ground is that when interested investors and board members think about these decisions and assess the relative merits of all solutions, and the liability that can attach to some of these situations, it is often the case that an investor will choose to shut down a company rather than deal with the headaches of operating in the legal gray area of a messy down road led by insiders.  (By “messy”, I mean situations where it isn’t clear that actions that reduce the risk of litigation clearly do so, e.g. rights offerings, independent board approval, etc). Sad, and simple, but true.