Seth Levine's VC Adventure

A day in the life of a VC

One of the most common questions I get asked from people outside the VC industry is “what’s a typical day like?” It’s a good question, but a hard one to answer – my days are extremely varied (this is one of the things I really like about my job, in fact). The type of work I do on any given day is very dependant on what’s going on with the companies that I work with (financing, m&a, planning, putting in place a bank line, rolling out new products, etc.), and every day (or hour) seems to bring something different.

I’ve tried a few approaches to answering this question – typically some variant of “on average I spend x% of my time on sourcing new deals; y% on financings; z% working with portfolio companies on operations; etc.). The problem with this is that, while it may provide some insight into how I spend my time in a typical month (or quarter), it doesn’t really answer the question, nor give much of a real flavor of what I do day to day.

Since one of my goals with this blog is to write about the experience of being a VC I thought I’d try to do a better job of answering this question by writing about a couple of different days that I think typify the VC experience. The idea here is not to generalize, but rather to report on a couple of days that feel are ‘typical’. I had one recently (that inspired me to try to tackle this question) – it went something like this:

Early Morning: Spent the morning working up a term sheet for an investment that had recently been approved by the firm. It actually wasn’t my deal, but the principal who had sponsored it was on a business trip and I was helping out by pulling the term sheet together. To do this I had to work up a version of the company’s cap table that I could play around with (I had one from the company, but the structure of it didn’t allow me to manipulate it in the way that I wanted to). I also spent quite a bit of time with the financing docs from their last round – Series A term sheets are much easier to write than term sheets for follow-on financings where I need to account for the existing cap structure as well as understand what terms I want to keep the same vs. change from previous rounds. The whole process took several hours, after which I sent it off to the partner involved in the deal and our general counsel to take a quick look before sending it to the company.

Late Morning: We were closing on an investment today as well. I had already reviewed the deal docs, but took a last look through the schedules this morning and double checked the numbers again. After a couple of points of clarification with the lawyers, all looked good, so we sent a note to our operations group to initiate the wire transfers.

I also spent about 45 minutes on the phone with the VP of BD of a public technology business that is in a space in which we’ve made several investments. I was interested in his impressions of trends in the industry and specifically his company’s key initiatives for 2005. The company is also a potential partner/acquirer of a few of our investments and I wanted to be sure he was aware of some of the companies in the portfolio.

Lunch: I had lunch with two entrepreneurs who were the founders of a business we invested in several years ago. Their company was sold relatively quickly and all involved (investors and founders) were pretty pleased with the outcome. After working for the acquirer for a while they were ready to get back to something more entrepreneurial and had been floating around some ideas together. They’d settled on something they wanted to pursue and wanted to bring me up to speed on their thoughts/get some feedback. We’re supporting them in their early efforts both by being a sounding board for ideas as well as by giving them some space in our office to use while they get started.

Afternoon: My afternoon was pretty open of meetings, so I returned a couple of phone calls (the most interesting of which was talking to one of the CEO’s I work with about his funding strategy – we’re looking to put a debt line in place at his business and needed to pull together some information before deciding exactly how much we wanted and how we were going to approach lenders). I also talked with an old friend of mine who works for a VC in Boston. We catch up periodically to get a pulse on what each of us is looking at, as well as to keep up personally (he and I worked together at Morgan Stanley back in the mid-90’s). I also had some time to sort through the day's e-mail – something I hadn’t been able to do in the morning (I get about 200 e-mails a day, so keeping on top of incoming messages is important for staying current).

So there you have it. Not particularly glamorous, but pretty typical of what I spend my time doing. Term sheets, cap tables, financing docs, lots of time on the phone – all in all a relatively usual work day.

For another perspective on a typical VC day, see David Hornik’s post on the subject here.  His extremely funny follow up post to that is here (a copy of parody of VC life that became very well traveled in the VC and legal circles).

How do you view your news?

As an investor in an RSS aggregator (Newsgator - far and away the best of the reader platforms out there; although I suppose I'm biased) I pay attention to how people use syndication services and how they use, manage, manipulate and read their news and blog feeds. I’ve played around with some of the different technologies in the space – most of which are variations of the same theme (very effective for reading individual posts, not as effective for sorting through large amounts of information).

Today Adam Rentschler sent me links (here and here) to a couple of sites that use RSS feeds (and a Google-like measure of what certain news sources are reporting on) to create a visual map of the news and events that are being reported on/talked about. The technology behind this was created by the Hive Group.

To borrow from Adam’s note to me “creative data representation is cool stuff”

True, but what would be even cooler would be the ability to create custom data representations. What if you could pick the source data for the honeycombs (The Hive Group’s term for their way of representing information)? Have one for your favorite news sources. Another for blogs. Better yet, one for the hundreds of blogs that you want to read but never have the chance to. How about a map of all the speech in the blogsphere (Dave S? Howard K?). It’d be a fast and effective way to see what people are talking about.

Yup – that really would be cool . . .

Is this the future?

Is this what the future will look like?  You tell me . ..

http://oak.psych.gatech.edu/~epic/

On VC Suckage

Only hours away from posting a link to this great article by Paul Graham on why VCs suck (A Unified Theory of VC Suckage), when both Brad and Fred beat me to it.

That didn’t keep me from sending the link directly to a couple of people who I thought would get a kick out of it (and wouldn’t necessarily see those blog entries). This list included my father – Randy Levine – who is the founder, initial CEO and now a director of a venture-backed start-up. Dad and I regularly trade stories about the relationships between VCs and their investors – comparing notes on our experiences from different sides of the table.

Dad and I had the following exchange about this story which I found extremely amusing and worth sharing:

seth: dad - I think you’ll find this amusing [link to story]
dad: Everybody's situation is different, but he captures a lot of common experience.
seth: I thought it was pretty funny
dad: That's the difference between dealing with VCs and being a VC.
seth: which is to say that you didn’t find it amusing ?  just scary . . . ?
dad: I guess it depends on which end of the cavity search you're on . . . 

So I guess one’s amusement at the post varies based on where you sit; which in itself is pretty amusing . . .

On

Moving right along

Fred Wilson had a great post recently on the problem of analysis paralysis. I completely agree. One of the challenges of business (and entrepreneurship) is that companies constantly have to make decisions based on incomplete information. That’s just part of the game. Successful entrepreneurs recognize that, take in as much information as makes sense, make a decision and then move on. While it’s helpful to look back at these decisions, I completely agree with Fred’s assertion that it’s not really fair to second guess them (although its important to learn from them). So, how do you avoid the analysis paralysis trap? Here are a couple of thoughts

1. on subjects that you are deeply familiar with, your first or gut instinct is often the best

2. set a finite amount of time to gather information and stick to that time frame

3. the amount of time and energy you spend gathering information on a decision should be proportionate to the importance of the decision you are making

4. recognize what is in your control and what is not (and don’t try to change the latter)

5. don’t sweat the small stuff

6. see number 3

7. be convicted in your decision making – don’t keep rehashing your logic

8. information gathering typically follows the 80/20 rule – learn to recognize that inflection point which is the point of diminishing returns where the incremental time you spend gathering more information about something is greater than the benefit you are getting from that information.

9. re-read number 3 one more time (heck – just post it at your desk)

Quova and geo-location in the news.

I’ve written a couple of posts in the past 2 months on the power of location (read them here and here). Quova – the leading player in the geo-location space - has had a couple of articles published about them in the past week that I wanted to pass along. I particularly like the article about how MLB is using the technology (not because it describes the origin of the Quova name – which I’m embarrassed to say that I never knew – but because it speaks to ways that companies are using geo-location information to create new and significant sources of revenue).

Baseline - Major League Baseball Struggles to Reach Fans Online

Bank Director – Keeping Online Banking Safe: Why Banks Need Geolocation and Other New Techniques Right Now

The company has also announced a bunch of partnerships this year – including four in the past three weeks (you can find links to them in the Quova press room here). The partnerships range from Corillian (to prevent banking fraud) to 41^st Parameter (for more general internet fraud) to NextLinx (for global trading compliance/patriot act compliance, etc.). They highlight the point I was making in my prior posts on geo-location about why companies should care about where their web-site visitors are coming from. I think it’s clear that we’re going to see more and more companies and industries adopting the technology.

 

Jarbarish

Fred Wilson has done a very amusing series of posts on VC Clichés (see the latest here)

Terry Gold takes this to another level with what he has termed Jarbarish (a blend of jargon and gibberish).  Here he posts an absolutely hilarious bit that he used at a recent company meeting.  Thanks Terry for lightening the mood!

Things I learned on vacation - part II (the vacation curve)

I was writing a post before I left on vacation about balance. I struggle with this a lot – the real (and perceived) pressures of my job, travel, time with my family, etc. I was writing about how difficult is can be to balance the business and personal aspects of your life, but now that I read it, it sounds kind of ‘woe is me’ rather than particularly profound (so I’ll spare you and not post it). That said, the spirit of the post is right on – and there’s nothing like vacation to remind you how important it is to find this balance. There’s also nothing quite like a vacation to remind you how important it is to actually take vacation.

I’ve noticed that there seems to be a real ‘need to take vacation’ curve, which if you graphed it would look something like this:

 

 

Under this theory, your need for vacation (where the X axis is the time since your last vacation and the Y axis is your need for another vacation) first rises relatively linearly, then hits a plateau of some sorts and then rises exponentially. The key if to know when you’re at your plateau and then take time off (rather than wait until your vacation need starts to escalate rapidly). The curve changes based on what’s going on in your life, how good your last vacation was, how much you are able to step away on weekends, etc.; but I think it follows this general pattern and has roughly the same shape.

Just before I left, I wrote a post saying that I was going on vacation. Dave Jilk commented on the difference between taking a trip and actually taking a vacation (see the comment here). While I disagree with the bringing the kids along part of the comment (he thinks that’s because our daughter is still very young), I completely agree with the distinction (and have been quoting him liberally when talking about my vacation).

So don’t forget to take some time off, and definitely don’t confuse trips with real vacation. You deserve it.

The commonly confused words test

I thought I should post this after making such a stink about data being plural and all.  Here's a link to a little word test for those of you (like me) who are interested in seeing if you really have a clue about these things (turns out I have only a partial clue - I scored 93% on each of the beginner and intermediate, 100% on advanced and a paltry 66% on expert).

You can take the test here (the direct url in case the link doesn't work is http://www.okcupid.com/tests/take?testid=14457200288064322170).

Thanks to Dave Jilk for sending this over to me.

Let me know how smart you are . . .

The Last Days of Enron

The New York Times is running a series of articles on the last days of the Enron crisis (actually excerpts from Times writer Kurt Eichenwald's forthcoming book on the subject).   It reads like a soap opera (by both design and because that's really what this story amounts to).  The amazing take-away for me was just how far Enron had strayed from the most basic forms of financial management (they didn't track their cash balance, nor did they track when their debt came due - so they had no idea either what they owed or how much they had available to cover that debt). 

Take a look at the article here  (in case the link doesn't work the url is http://www.nytimes.com/2005/03/13/business/yourmoney/13enron.html?) .  It's worth a read.