Hi, everyone, Semil Shah, filling in for Connie, who returns Monday. Hope you’ve enjoyed the last couple of weeks and that you’ll find today’s column — my personal take on what it’s like to jump into startup investing — at least a little bit useful. To talk about the column or anything else, you can find me at Haystack or on Twitter at @semil.
Top News in the A.M.
In a complaint filed with the FTC yesterday, a consumer watchdog is accusing 30 U.S. companies of violating an international privacy agreement and urging U.S. regulators to get involved.
What I’ve Learned in My First 18 Months of Investing
I’ve been investing for a year and a half, and I’ve learned more than I would’ve imagined by just jumping into the game. Now, I’m playing with very small amounts of capital, and whatever lessons I’ve gathered for myself aren’t necessarily “right” and aren’t generally applicable to everyone. With that disclaimer, I wanted to briefly share what the key learnings (so far) have been for me in this final column for my guest run with StrictlyVC:
Polite But Clear, Direct Language: When I’ve been talking to a founder and decide I’d like to invest, I will usually write in email: “I would love to invest in the company if you’d have me.” In a way, it is asking for permission. The investor is not in control; the founders grant access. For every investment, there are many “no’s” to deliver. I try to do these quickly over email or even in a meeting. I’ve received so many “no’s” before that it helps me deliver them, too — I hope. I also briefly describe how I expect to help once the check is deposited. As a small investor at the table, I generally ask founders to contact me anytime they need to, and I will proactively focus on helping set up the company up for future financings.
Following Founders Versus Predicting the Future: When I started, I thought: “Hey, I’ll pick some spaces I like.” Wrong. Founders define the future and dollars simply follow. Originally, I thought I’d take a portfolio approach and focus in some areas, but as things have evolved, I just focus on the people I get to meet and make sure I pay attention to every word, every pixel, and every slide. I cannot predict the future, so I try to find people who can invent it.
Pro Rata is a Privilege, Not a Right: Pro-rata rights are very important for small, early-stage investors. I don’t ask for them, because I don’t think I’d get them, and mostly because I don’t feel like I deserve them. Without pro rata, early-stage investments suffer quite a bit of dilution, so there’s extra pressure to be a “high-contact” hitter who hits for batting average. Over time, I hope I earn the right to ask for pro rata.
Dialogue Over Time Pressure: I will trade many emails with a founder to ask key questions and learn more. I like email as a medium. Most people would rather talk in person or at least on the phone, but my personal preference is to get up to speed via email and then engage in live conversation. This doesn’t work for everyone, and I’ll miss things because of that, but that’s one of the things I’ve just come to accept.
Tough Love Over Coddling: I don’t talk or write about it much, but I was a founder of a life sciences technology company before coming to the Bay Area. It was both a great and painful experience, and in part why I’ve held off starting something again. I kind of just fell into it, and I wasn’t ready. Back then, in the Boston area, there wasn’t anyone around to support or coddle us. Then, I came here and got my a__ kicked for 11 months straight. It was bad. All of these experiences make me think about existential risk. I see an early-stage company and think: “Hey, you’re awesome, but hey, you could run out of funds pretty quickly and then evaporate.” So, in the course of early-stage investing, yeah — at times, you sense existential risk for others, and then if you’re outspoken and direct like me, you have the delicate job of pointing out that existential risk. In those moments, I tend to be driven by tough love over coddling. It’s not right or wrong, and there’s always room to improve, but that’s how I’m wired, for better or worse.
FreshGrade, a two-year-old, Kelowna, British Columbia-based, cloud-based educational assessment tool that teachers can use to figure out how a student learns, has raised $4.3 million in seed funding fromNewSchools Venture Fund, Emerson Collective, Accel Partners and the Social + Capital Partnership. The WSJ has much more on the company — which was cofounded by Club Penguin founder Lane Merrifeld — here.
Helion Energy, a four-year-old, Redmond, Wa.-based company that’s developing an advanced engine that aims to make viable fusion technology a reality, has raised $1.5 million from Mithril Capital Management and Y Combinator, whose accelerator program Helion participated in this summer. The company had previously raised $5 million from the Department of Energy to help prove its technology in a series of small-scale prototypes. Helion tells the WSJ it will need $30 million to $50 million in future funding to create a larger-scale prototype.
Navent, a four-year-old, Latin American real estate and jobs classifieds company, has raised $20 million in Series C funding from global technology private equity firm Riverwood Capital. In November 2012, the company had raised a $30 million Series B round from Riverwood and Tiger Global Management. TechCrunch has more here.
Quinyx, a nine-year-old, Stockholm, Sweden-based maker of cloud-based workforce management software, has raised an undisclosed amount of funding from the private equity and venture capital firm Alfvén & Didrikson, which has acquired both direct and secondary shares in the company. TechCrunch has more here.
London has a new, $25 million pool of startup capital, shows a new SEC filing that lists Bessemer Venture Partners‘s longtime partner Rob Stavis and Silicon Valley Bank‘s chairman, Ken Wilcox, among others. The fund is called Columbia Lake Partners Growth Lending I.
Potential accounting problems have been discovered at Alibaba‘s recently acquired film division, raising new questions ahead of the company’s massive IPO.
The China Securities Regulatory Commission has canceled plans to review 129 companies out of 628 companies that have applied to go public, according to China Daily, meaning those companies (and their backers) now have to find another exit strategy.
SmartThings, a two-year-old, Washington, D.C.-based company whose smartphone app allows its users to monitor and control everyday things in their home, office, and car through sensors, has officially been acquired by Samsung for “about $200 million,” reports Recode. TechCrunch had originally reported that the deal was nearly closed in mid-July. Samsung says the company will continue to operate independently but that it will now do so from Palo Alto, Ca., where Samsung’s Open Innovation Center is situated.
Performer 50 Cent and Intel are pairing up to launch a pair of heart-rate-measuring headphones.
Meet 48-year-old Gavin Andresen, the “man who really built Bitcoin,” says Technology Review.
Tim Danford has joined Intel Capital as an investment director, reports Venture Capital Dispatch. Danford, an engineer by training, worked in M&A at Cisco in the late ‘90s and spent 12 years at Storm Ventures, where he was a managing director. Danford was most recently a venture partner at Lightspeed Venture Partners, where he worked for roughly one-and-a-half years.
Sam Lessin, Facebook‘s VP of product, will leave the company two weeks from today, he announced last night on his Facebook page. Business Insider has republished the letter here. In it, Lessin, whose file-sharing startup, Drop.io, was acquired by Facebook in 2010, says he doesn’t have his next move planned out just yet but that he intends to do some “kite-surfing, skiing, and general adventuring,” as well as to help wife Jessica Lessin at her news organization, “where I can and when she wants it.”
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USA Today has begun reporting on Silicon Valley’s struggling contract workers. Here’s its latest installment.
GE Capital is looking for a senior strategic analyst. The job is in Norwalk, Ct.
Piper Jaffray is looking for an investment banking associate to focus on healthcare and biotechnology. The job is in New York.
Take note: the gyroscopes in your phone could let apps eavesdrop on the conversations around you.
The power of adding a personal touch to e-commerce.
Researchers from Harvard have created a self-organizing thousand-robot flash mob.
It’s official: Chuck Todd is taking over “Meet the Press” from David Gregory.
How comedian and talk show host John Oliver beats apathy.
Film director Liz Goldwyn guest-edits the September issue of “Town & Country,” focusing attention on “34 of the boldest visionaries to represent the city’s seismic shift in fashion, food, and fine art.”
The very first Range Rover can be yours.