Go Big or Go Home

Venture Capitalist Gone Wild: the Sequel

Like everyone else, I've been watching the pundits and politicians try to explain to us how this financial bubble could have possibly happened.  Every one is pointing the finger and everyone in search for who is really to blame.  In America when something really bad happens, "someone" has to be to blame.  Reflecting back to the 2000 Internet bubble the answer is that no one is to blame, but "everyone" is.  Bubbles are caused by the systematic proliferation of poor incentives combined with a fear-greed imbalance.  Looking back on the Internet bubble, I should have sold my entire stock portfolio in 2000 when my cab driver was suddenly an expert in U.S. equities. Or investment bankers bidding on my business were telling me my burn rate was too low. Likewise in 2008, I should have been smart enough to sell when systematic (governmental and commercial) incentives were put in place for everyone to own a home.  No money down, 4ish% interest only loans should have been a hint for all of us that something was systematically wrong and a bubble was just over the horizon.

After the 2000 bubble, I lectured often on what I thought happened.  I lived and operated through the heart of the bubble.  I have numerous tales to tell that epitomized that period of history - like watching the valuation of my Internet company skyrocket from $25 million to $250 million in 9 months or an IPO in April of 2000 that was predicted to be worth over $1 billion.  Back then the investment bankers were planning your secondary offering long before you were even public -- just as long as your burn rate could justify it of course.  Messed up incentives from the greedy consumer investors that could now buy stocks cheaply on line to the over funded venture capitalists.   I can appreciate why over the last couple of days that Sequoia Capital has been marketing its end of world presentations.  I'm sure many of their companies have $1+ million per month burn rates and the capital markets doors are shut.  For many of those companies the end of world is near.  If your burn rate is at that level and you have no money, and no business model, your probability of surviving is close to zero.  That is the high risk game of west coast venture capital.  Timing is everything.

Below is a slide from the lecture I gave from 2001-2005ish.  After 2005 or so everyone had forgotten about the Internet bubble, therefore it was less interesting (plus the students I talk to were too young to remember).  Given where we are now with the Nasdaq back around 1500 and Dow around 8200, I thought it was appropriate to pull out the old slide.  The story is the same, but the characters are different.  You'll get the point.

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This Will Never Happen Again

At three minutes and four seconds after 2 AM on the 6th of May this year, the time and date will be 02:03:04 05/06/07. This will never happen again.

The H-1b Visa Debacle

Our immigration policy makers need to wake up and shape policy around what made this country great.  Our country's innovative, entrepreneurial culture was built by immigrants that left their home countries for opportunity and a better life. It was not the lazy, comfortable bureaucrats that left, but the risk takers that had a vision for the future. There were no classes of people, everyone, for the most part was on a level playing field.  Flash forward a few hundred years and we now are becoming what our fore fathers left.  Our culture on the whole is at risk of losing the edge that made us great. 

Students that come over on visas are much like our early forefathers;  they are seeking education and skills to give them a better life.  A large portion of our engineering students, PhD students are foreign, I have heard numbers like 40-45%.  University's have limitless ability to issue visas to educate the world.  Once these students graduate, many of them would like to stay and work.  Unfortunately, our immigration policy does not allow this.  It only allows 60,000 H1-b work visas and another 20,000 exemptions for PhD students.  Every year around this time applications for H1-b visas are due.  This year within the first day 120,000 foreigners applied for the 60,000 slots.  So, we will send at least 60,000 foreign guests home.  These are people that we educated and that have the spirit which made this country great. This make no sense.  New start-up lose this most by this misguided policy.  The Microsoft's and Google's of the world have a well oiled machines to suck up most of the available visas.  New tech start-ups that are based on the unique expertise of a few, struggle because they can't keep critical employees in the country.  One of my start-up had to send a key employee home to work from India because the H1 application process did not line up with the expiration of his student visa.  These people are not taking jobs from US citizens, but rather posses unique, critical skills that our educational system gave them.  We are in the midst of engineering shortage.  Many of our largest engineering oriented companies like Boeing have testified so.  As our world globalizes, customer service, manufacturing, and software programming will continue to go off shore.  Our companies must continue to innovate to stay on top.  The foreign engineering students that the US educates can fill that gap.  Wake up policy makers and let them stay, maybe even require them to!

Giving Back to Society

Great entrepreneurs by their very nature are programed to want to give back to society, revolutionize, disrupt and institute massive change.   As a venture investor, I look for those attributes in the eye and heart of the entrepreneur.   I also look for huge, difficult, billion dollar problems to solve and and entrepreneurs that are capable and hell bent on solving them. I see some amazing inventions coming out of Universities that will definitely impact the lives of many. Flexible electronics may make big screen TVs available to many.  Microelectronic fuel cells may take you off the grid so you never have to plug your cell phone in again.  Self healing computing systems that never crash.  Highly parallel cell sorting machines that may enable cell therapy.  All incredible endeavors that will make some societies better off.  We are also trained as entrepreneurs to focus on one customer at a time and that by doing so, we can transform an industry.  Hold that thought.

Reality check.  If you are reading this blog right now, you are likely among the luckiest humans in the world.  You don't need to worry about the basic necessities of life like food, water, medicine, clothing, and shelter.  Instead, we worry about things like portfolio management, gross margins, viral marketing, AJAX, podcasts, etc.  These things don't mean anything to  the people that are fighting to survive in places like poverty/famine/AIDS saturated Africa.  If you are reading this blog right now you have been given the gift to help do something about it, without even a whole lot of effort.  World Vision is a a relief and development organization dedicated to helping children and their communities(regardless of their religion) worldwide reach their full potential by tackling the causes of poverty.  You can sponsor a child for 35 bucks a month which is enough to feed, clothe and shelter that child.  Think about how meaningless 35 bucks is to you, but you can literally give hope to the life of a child.  6,000 new kids a day are orphaned by AIDS every day. 

I just checked my Linked In network and it told me that 678,600 people are within 3 degrees of separation from me.  A huge impact could be made if each very capable person in my network sponsored just one child.  Folks, impacting poverty is a ginormous, difficult problems to solve.  As entrepreneurs, we should be drooling over the opportunity.  Just like in building your business it starts with one life.   Like industries, societies are changed one life at a time.