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Thoughts on Y-Combinator Demo Day

August 26, 2010

On Wednesday, we traveled up the road from our Palo Alto office to the Y-Combinator (YC) office in sunny Mountain View.  True has participated in YC Demo Day since 2006, and two of our portfolio companies, Rescue Time and BackType, came out of the 10-week YC program.

This trip was my first to Demo Day in Mountain View, and I was absolutely blown away by the energy and passion of all of the companies participating in this summer’s program.  For this event, each startup had only 2.5 minutes to tell their story, and each of them rocked it.

TechCrunch has a great write-up of the companies who presented, so I will skip ahead to some high level takeaways from my experience:

Quantity of Companies

The first cohort of YC startups in 2005 featured eight startups (two of which ended up joining Reddit.)  This year’s cohort launched 36 companies with live working products gaining traction and most generating revenue.  This is a true testament to the great program the YC team has built and been able to scale successfully.

Quality of Pitches

Kudos to every one of the graduates for an awesome job on their presentations.  By the end of their introduction, each startup had succinctly expressed their core value proposition and was able to spend the rest of the time showcasing what they had built over the short summer program. The YC team has done a great job coaching each of their startups in the methodology of how to tell their story.

Traction with Investors

Of the 35 startups that pitched yesterday, most had already secured part, if not their entire round of Seed financing.  Adam Smith, formerly of Xnobi, cited this as a function of Angel Investors who are simply looking to index across startups.  Even if that is the case, the strategy only works if investors are backing smart teams who can execute – something I believe that every YC Company that pitched yesterday has demonstrated.

Trends in the Market

I’m a believer that YC companies are a leading indicator for the next generation of technology for startups so the most interesting part of the day for me was learning what tools new startups are using to develop themselves.

Some of those trends this year included:

  • Entire websites built to function as a single page (Hipmunk)
  • A focus on human actions instead of data or graphs (inDinero, FutureAdvisor, AdGrok)
  • Innovative ways to leverage tablets outside of the technology market (Brushes, Teevox, Koduco)
  • Products that leverage email as a platform (Rapporative, OhLife)



Overall, I had a great experience and met a ton of interesting new entrepreneurs.  Following the Facebook announcement yesterday, I’m looking forward to the next YC Class and seeing how these companies can better integrate social and personalization into the online experience.

Removing the Change of Control Provision from our Seed Deals

August 19, 2010

We founded True Ventures with the premise that we would create a firm that entrepreneurial founders could trust. As such, we consistently review what terms are appropriate for the size and stage of our investments into new companies.

Recently, based on internal feedback from our team and our founders, we have decided to change a key term around change of control in our seed investments.  The specific language for this is usually tucked into a longish paragraph about Protective Provisions which states that a change of control cannot occur without the consent of a majority of the Preferred stockholders.

At the earliest of stages when we have made only a small, seed stage investment, we believe that it is appropriate for founders to control the decision about the potential sale of their business.  Since launching True in 2005, we have never enforced this term nor have we ever planned to in our seed stage deals.

In keeping with that theme, we have decided to remove the “Change of Control” provision from our seed stage deals moving forward.  We believe that entrepreneurs are our customers, and we believe this small word change exhibits the much larger issue of mutual trust that our Founders and True maintain.

On the Road with TechStars Boulder

August 6, 2010

Having a good experience when you were expecting one is nice, but having a great experience when you were expecting merely good is even better. Yesterday, I had my expectations exceeded in a big way as I spent the day in Boulder at the TechStars Demo Day. For the past four years, our friends David Cohen, Brad Feld and a host of others have devoted significant time and energy to recruiting and supporting talented groups of Founders for 13 weeks of  entrepreneurial boot camp. What began in Boulder has now spread to include annual programs in Boston and Seattle, and TechStars has spawned over 50 companies so far.

Watching the 11 companies from this TechStars class present was exciting on multiple levels. First, it was impossible not to be inspired by the enthusiasm the teams brought to their pitches. From the leadoff hitter, ScriptPad, to the final presenter, Kapost, it was clear that the Founders were jazzed not just to present, but even more so to build successful businesses in their target markets. The Boulder Theater was oozing energy from the presenters, the mentors, and the numerous friends of TechStars who came to support and cheer on these Founders.

Second, these weren’t just ideas. Many of the groups had been hard at work building their businesses long before joining TechStars, and the traction they have already achieved is a testament to their efforts. Adstruc has $5 million in monthly inventory in its online marketplace for outdoor advertising. RoundPegg has signed seven paying customers since the beginning of June. Omniar is working with organizations like Coldwell Banker and the SF MOMA to use its visual recognition platform to make the real world clickable. Real companies, real businesses, real potential.

Third, no matter how seriously the Founders were devoting themselves to creating compelling products, they weren’t taking themselves too seriously. Adam Wilson from Gearbox got a laugh as he closed his pitch by inviting the audience to come find him afterwards to play with his balls. An important note: Adam and his co-founder Ian Bernstein are building robotic smart toys that can be controlled by mobile phones, and their first product is a three inch ball that they were eagerly demoing during lunch.

Finally, there was a real roar of approval from the crowd when the “yellow shirts” were introduced. Special yellow t-shirts were given to TechStars alums who had achieved exits, and those in the audience included Matt Galligan from SocialThing and Ari Newman from FiltrBox. We were especially proud of Ari, who sold the company he and Tom Chikoore founded to Jive Software earlier this year after partnering with us at True in 2008. TechStars has done wonderful work seeding a number of promising companies, and it’s exciting to see the Founders of some of these companies achieve nice exits—and, in Matt and Ari’s case, get right back to work. Best of luck to yesterday’s presenters in their quest to someday sport their own yellow shirts as well.

Steve Blank is Right About the Need for Lean VCs

August 5, 2010

I met Steve Blank for the first time a few weeks ago when he came to visit the Women 2.0 group at Pier 38. As someone who has long believed in the value of engaging one on one with customers, I have long respected and admired his work in customer development. In fact, we give his must-read book, The Four Steps to the Epiphany, to all True Founders when they join the True family. In the room with the Women 2.0 group, Steve was quick to offer candid, non-academic advice, and he drew his students quickly into thinking through the issues. I can see why he is such an engaging professor as well as talented entrepreneur.

I enjoyed telling Steve about True, because we have applied many of his customer development methodologies to the venture business.  Perhaps that is why I was excited to read his blog post today describing the need and the rise of the Lean VCs.

We believe that small initial rounds designed to demonstrate initial product traction are the right approach to funding in today’s capital efficient market.  True’s first few deals of Automattic, Meebo, Sphere were tiny amount of capital that succeed in creating very large and successful products and customer ecosystems. Our portfolio is now 67 companies strong executing on this belief.

Though we initially thought that this worked well only in consumer segments, over the past few years our thinking has evolved. Our portfolio companies like Socialcast, Assistly and Syncplicity have shown us that these lean funding models apply to a new generation of web-centric enterprise software companies. Same goes for the web infrastructure related software providers, as shown by Puppet and Loggly. A few years ago we developed a thesis that devices were becoming more capital efficient, so we funded Fitbit, Sifteo, Valencell and another one yet-to-be announced startup.

The bottom line for Founders is that now is an incredible time to start a company across a wide range of industries. Capital efficiency, newer methods and approaches to product development, and new, effective, robust global distribution channels enable Founders to minimize downside but still maximize the chance to build a product that can change the world.  The good news is that the venture market is responding, and more options for capital exist now than ever.

It is good to be a lean VC.

Women 2.0 Labs Demo Event Tonight

August 5, 2010

Tonight, we are looking forward to hosting the first Women 2.0 Labs demo event here at True SF on Pier 38. The chairs are being arranged, the guests are beginning to arrive, the teams are finalizing their presentations, and there is excitement in the air!

These twenty people have been working overtime, literally. After working a full day at their day jobs, they gather at True’s San Francisco office each night and start the second shift – this time on an idea of their own. That is commitment. That is dedication. That is entrepreneurship.

In keeping with our mission to help make the world a better place for entrepreneurs, we wanted to host Women 2.0 Labs to support this kind of initiative & energy. We are super impressed with the participants drive & passion and want to do what we can to foster that.

Last night, TechCrunchTV stopped by to catch these folks hard at work. You can see a few people present their ideas here. Women 2.0 Co-Founder Shaherose articulated the spirit of the initiative well:
“Real innovation comes from diversity – diversity of experience, of context, of vision. Gender diversity and even ethnic diversity opens up a creative environment for innovation and different ways of thinking to emerge,” says co-founder of Women 2.0, Shaherose Charania. “We want[ed] to create realistic scenarios – if a women goes out in the world today to meet her future founder, she’ll likely work with a man and that’s reality since less than 5% of women are founders of tech companies. We aren’t afraid of it, we embrace it.”

Follow the event in real-time tonight by following #w2labs on Twitter & check out TechCrunchTV tomorrow for some of the final presentations.

Next Week: Heading up to Stinson

July 9, 2010

Each year our team heads up to Stinson Beach for a 4 day offsite. It’s a highlight of the year for our team for a lot of reasons. We genuinely have fun together, and four days gives us the chance to have countless conversations and ample time to think through ideas that are broader than just deals and portfolio. This annual ritual is essential for our team and our culture.

Stinson also gives us time to reflect and ruminate on the past year. Each year we ask ourselves whether or not we are living up to “the promise” we made when starting True. The promise was something we talked about at our original Stinson offsite. The time was 2006 and we had just closed Fund I at $165 million. We had the opportunity to create a new kind of venture firm that really did stand first for Founders and the entrepreneur. We really did have an opportunity to re-align (true) the venture industry to shift more power and value to the people creating value (the entrepreneur). We really did have the chance to change the relationship between investor and entrepreneur through better practices and communication, and appropriate structuring to create true alignment. And we really did have a chance to create a new kind of partnership in our firm.

We promised each other that we’d make this happen, and it wasn’t just b/c we are nice people. We are, nice people, (☺), but all we hold a core belief that tremendous value and innovation existed in the talents of the early stage entrepreneur, and we saw it as our job to unlock it. We saw the chance to create a much bigger pie.

So each year we check our progress.

We also do a deep dive product review. No, not of our portfolio companies, but literally a review of our own products. True is a startup just like any other. We have a customer (the Founding entrepreneur) and we build a product (a deal, or in our case three types of deals: Super Seed, Seed, Real). We think long and hard about product, and we’re all dedicated to making ours the best ones in the marketplace. We frequently talk to our customers about how our deals are working for them, and when we see problems in how a product is working, we’re quick to improve it.

We’ve done a lot of product development at and after Stinson. Two quick examples: our “$10K both sides legal docs” that make it easy and inexpensive to get a seed round done with the appropriate structure. There’s been a lot of great attention on this area in the past 6 months, but we’ve been doing this for 4 years at True.

Example 2 is last year’s launch of our $250K “Super-Seed” deal. We noticed tremendously talented Founders who just wanted a tiny bit of money to either engage in early customer development or testing. Raising even $500K or $1mm made little sense to these customers, so we launched the Super Seed. Our process is lightning fast, but our criteria no different. This product “flew off the shelves,” because it hit a sweet spot for many entrepreneurs, and a year ago there weren’t many options in this category. A year later there are many, many options in the $250K category thanks to the proliferation of the super-angels. This is an incredibly good thing, because it offers Founders more choice.

I’m not sure what we’ll conclude next week at Stinson relative to our product set. We have a few ideas for some adjustments to make our deals more competitive. We haven’t noticed a ton of “bugs” in the existing set, but we’re interested in staying ahead of the market, so we’ll be engaged in a deep dive.

If you know of ways we can build better deals for Founders, please comment here, tweet or email us. We’d love your help improving.

More to come from Stinson, and please do let us know any thoughts or suggestions on stuff you’d like us to tackle as a group.

True Ventures Featured on Mark Suster’s This Week in VC

June 21, 2010

True Ventures was featured in back-to-back week of Mark Suster’s This Week in VC.

In week 9, Mark Suster interviewed Mo Koyfman about Spark Capital, trends in technology, and the startup eco-system in NYC.

During Mo and Mark’s discussion of Spark Capital’s new website, they used True Ventures’ Service Recommendation page as a great part of a website – one that they both plan to copy in the short-term.

Then in week 10, Mark interviewed True Venture Partner Om Malik.  The interview discusses True’s emphasis on being friendly to entrepreneurs, Om’s work with Red Herring and Business 2.0, and True’s funding of GigaOM in 2005.

Check out the week 9 video and the week 10 video at This Week in Venture Capital Online.

Thanks, Mark!

Women 2.0 Summer Labs Program Hosted at True Ventures’ San Francisco Pier 38 Office

June 17, 2010

Have an idea that you are looking to start or validate?  Curious about starting a new venture?

Our friends at Women 2.0 have started a new initiative called Women 2.0 Labs, which is a 5-week program (July 6 – August 5, 2010) for engineers, designers, biz dev, and marketing mavens to develop high-growth technology ventures in San Francisco, CA.

Over the course of five weeks, selected participants will moonlight in teams at the Women 2.0 Labs co-working space and, every Thursday night, demo the latest startup prototype. Industry leaders, serving as visiting advisors, will join participants each week to help in the building process.

This year, the summer program will be hosted in True Ventures’ San Francisco offices at Pier 38.

If you’re interested, check out their website to find more details.  The deadline to apply is June 20, 2010.

Simplicity, Clarity, Alignment: Welcome Series Seed

March 1, 2010

With today’s launch of Series Seed Legal Documents, the early stage venture industry just got a lot simpler, and a lot better.

Our good friend Ted Wang from Fenwick and West has been working on this initiative for a very long time, and Ted has long been passionate about innovating and streamlining the process of closing Seed and A-round financings. The new documents are a universal, “open-source” set of deal closing documents, and importantly they are supported by the top attorneys and legal professionals at multiple firms across the valley.

The docs are all that’s required to close a standard Seed/Series A venture capital financing. They include the most important provisions of legal docs for early stage companies, plant the flag on issues squarely in the clear and fair category, and (importantly) throw out much of the un-necessary provisions found in most legal docs. Because the docs are simpler and cleaner, the legal costs for closing a standard, clean Seed/Series A round will drop dramatically. This is good for Founders and investors alike, and it’s good for our industry. Ted and his group call these “Series Seed” legal documents, and True and a handful of other early stage investors have joined on to help launch this initiative. You can find the docs here.

At True, we’re committed to simplicity, clarity and alignment. Since we started our firm in 2005, we’ve designed and led over 45 Seed and Series A financings with these principles in mind. Since day one, all of our docs are clean and simple: no tricks, no onerous voting provisions, no multiples on liquidation preference, no participation, no board control, yes generous founder vesting and yes ample acceleration for Founders upon change of control. One of our Founders eloquently told a roomful of our LPs that True “doesn’t do any of that sneaky VC sh%t.” They might have been surprised by the word choice, but believe me they liked the sentiment ☺.

We’ve been practicing the principles of the Series Seed for the 4.5 years, so our actions speak much louder than our words, but both action and words greatly support this initiative because it’s good for Founders.

Ted and his team have taken a complicated set of documents and applied good legal judgment and pragmatic business thinking to them. Broad adoption of Series Seed documents will result in lower legal costs for the early stage market, more efficiency and much greater value creation because more of a deal’s proceeds will be used for company building. At True we’ve aggressively pushed the legal costs of closing a small seed round ($250K) to $10K total (i.e. $10K for both sides). Normally these costs total over $30,000, which is ludicrous in the context of a $250K raise.

We’re proud of this innovation and these savings, but there are more important benefits than cost. Simplicity re-affirms trust. Clarity lets everyone see in the plain light of day how a deal works in all scenarios. Alignment creates value for Founders and investors alike, and a set of standardized docs helps our industry focus more of our time on what counts: engaging phenomenally talented people to build products that change the world.

We’re very pleased to support Ted and the Series Seed, and we encourage Founders everywhere to consider forming their Seed/A round deals with this simple, Founder-friendly approach.

  • Looking Back on 2009

    January 5, 2010

    It was the worst of times. It was the best of times. 2009 was a year to remember.

    We’ve been reflecting a lot during the past few days on 2009, and the past year was by far our busiest and most impactful year in our firm’s four-year life. Like the rest of the industry, we entered early 2009 with questions and doubt. It was a scary, unnerving time with venture firms publicly announcing no new investments, and everywhere you looked were reminders or admonishments to let “good times rest in peace.”

    Both sides of the venture capital equation, investors (limited partners) and entrepreneurs, were under tremendous financial stress as the world around us all had changed. For True, the timing of the meltdown created opportunity and significant risk, because we had just successfully closed our second fund in September 2008, literally 48 hours before Lehman Brothers failed. Although we were incredibly lucky because we were in a position to invest, expectations and tensions were high given that the financial world had changed so dramatically.

    As a young start-up ourselves, we knew that the path of least resistance would be to follow the crowd and play it safe while the downturn worked its way through the economy, but what would be the opportunity cost for that strategy? In order to figure this out, we went straight to the very heart our model: our Founders. After spending considerable time with each of our Founders and their teams, it became abundantly clear that despite the global economic turmoil, our sector (very early stage technology) was undergoing a fundamental resurgence. The largest trends in technology were creating substantial new markets, in which start-ups had significant opportunity, and these trends were minimally impacted by the global credit/liquidity crisis.

    Core innovations in internet-based technologies over the previous ten years were beginning to manifest themselves into large segments. These segments included the social and real-time web, cloud computing infrastructure, mobile products and services, enterprise 2.0 and even new computing devices and hardware. Though a prolonged recession and curtailed consumer spending would eventually impact these segments, in reality these markets were extremely nascent, and, in our view, it was time to build for the future.

    We thought 2009 was particularly timely for True because of our very early stage strategy. It’s basic, but it’s true: early stage venture capital has a 5-10 year investment period, which means today’s investments are not directly correlated with current market conditions. The idea of an early stage venture firm cutting its investment in 2009 made no sense to us. For example, it just didn’t stand to reason that because the world was reeling from a (severe) housing and credit crunch, enterprise IT wouldn’t undergo massive re-architecting over the next six years.

    As we concluded our research, we formed a thesis: our strategy of investing behind truly great entrepreneurs in early stage technology businesses who are highly capital efficient was well timed for the 2009 market.

    We took a deep breath and decided to double down. In January 2009, we doubled our forecast for new deals, and we encouraged our portfolio to become more aggressive in the downturn.

    For new deals, True closed 21 new investments in 2009, which compares to 14 in 2008 and 10 in 2007. We can be judged by the company that we keep, and we are fortunate to have invested with an incredible group of entrepreneurs such as Tim Young at SocialCast, Peter Rojas & Ryan Block at GDGT, Howard Lindzon & Soren Macbeth at StockTwits and Jack Abraham at Milo.
    (Click here to see a full list of our portfolio.)

    Simply making more new investments, however, was not enough. We also had a large portfolio of existing companies that could use our dollars to make the downturn their advantage. We set aside approximately $20 million of our reserve capital to invest in the existing portfolio with an emphasis on making the strong stronger. We believed 2009 would be a good time for our break-out companies to further their lead. Many of these companies took advantage of our reserve capital to acquire competitors (who were distressed), grow market share, deepen product teams, and hire sales folks. We structured our investments as friendly bridges to future rounds, as our intent was not to take advantage of the timing to buy more equity but rather enable our strong companies to get stronger.

    We’ll know the real results from our actions in 2009 over the next 5+ years, but the early results of these moves look incredibly promising.

    To cap off a big year for the firm, we were recently nominated for the Crunchies for Best VC Firm of 2009, and two of our portfolio companies, Milo and StockTwits were nominated for Best Startup or Product and Best Social App, respectively. We are honored to have been nominated by the industry, and we think this is really a reflection of the great entrepreneurs in the True family. Our mission at True is to help make an entrepreneur’s dream come true, and we founded our firm on the core belief that all power, creativity, and energy in the venture capital ecosystem starts (and ends) with the entrepreneur. We have a total of 51 investments in the portfolio, which equates to 92 Founders and 483 employees. This is an incredible group of people, and each of them has endowed us with their faith and confidence. Our Founders are our biggest source of inspiration for our firm, and their efforts and energies are most responsible for our success.

    Thank you to everyone who helped our efforts in 2009. It was a very busy year, and as entrepreneurs ourselves, building True has been and continues to be incredibly gratifying.

    Now is not the time to rest on our laurels. Venture capital needs more innovation, and we have an ambitious agenda for the years ahead.

    We look forward to working hard for you in 2010 and beyond.

    Happy company building!

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