blog.payne.org

In this post from Official Google Blog, David Drummond writes:

So Microsoft’s hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It’s about preserving the underlying principles of the Internet: openness and innovation.

(from: Yahoo! and the future of the Internet)

While I appreciate Google’s openness (certainly relative to Microsoft’s historical behavior) and innovation,  I’m enthusiastically applauding any effort that challenges them.

Google’s building an on-line position of dominance not unlike Microsoft’s off-line monopoly.  And they’ve earned it:  they’ve executed well, they have good technology, they’re incredibly profitable, they’re hiring the best people, and they’re investing heavily in R&D.

But the system works best when there’s competition.  Yahoo and Microsoft certainly each have their issues, but anything that’s a threat to Google’s dominance…..it’s all good.

We’re in the middle of building a team for a venture-funded NewCo, and we’re talking to the usual range of candidates to find the first 10 hires.
In addition to the specific skills, we’re also looking for people that can thrive in the startup environment.  The easiest folks to consider have been in an early-stage startup before, and the best (in this regard) were #10 or #15 last time around, and are hungry to be #5.

The tougher scenario is someone who’s been at much larger companies.  Startups are more intense, riskier and more ambiguous:  the chance to change the world and create wealth is balanced by the chance that you’ll be out of business next month.   Plans change with opportunities, and the team needs faith and trust in themselves and each other that they’ll figure it out along the way.

Folks that haven’t seen this movie before can find it very stressful, and it may take a lot of management time to keep their head in the game.   The core issue is almost always psychological (and irrational).  Shutting down the company or cutting back is a real risk, but job loss isn’t — in today’s hot market, good folks can leave on Friday and have a new job on Monday.   There’s also a general fear of failure, but you need to accept failure (it’s OK, you know) if you want to succeed.

If you’re thinking about raising money, you may have some friends that want to co-invest.  Or, you may have a few folks that you want to recruit as investors.

A carefully chosen set of individual investors can be really helpful at various company stages.  They can be mini-advisors, providing help at key junctures:  funding, acquisition, strategy, etc.  Also, a commitment from “rock star” individuals can give you some additional credibility in raising the main funding round.

If you’re thinking about individuals, it’s important to build it into VC discussion from the beginning.  When you’re talking about the size of the round, you should say you intend carve out x% or $y of the Series A for individuals.  (Adding individuals at the end of the process is a pain.  I just went through this for a company I recently co-founded:  the resulting cap-table jostling is energy that should be spent elsewhere. )

Other things to keep in mind:

• $25k to $100k is a typical individual investor amount.
• Individuals may have to be accredited investors ($1m net worth).  Check with your attorney.
• Figure out how any pay-to-play provisions will apply to individuals.  Will they have to participate in future funding rounds?
• Your investor may take some time to figure out if s/he can invest.  Individuals at venture firms, law firms, and large companies may have to get approval that your company isn’t conflicted with their existing business.

Finally, get all of the details to the attorneys well before closing, including entity names (many individuals invest through an LLC or a estate planning trust).  Nothing kills the excitement of closing a round of funding like a holdup from a $25k investor.