Eating Dinner Alone

Kasa SushiI arrived home from Boston last night at 5:30pm and realized I had no plans for dinner. Amy was still in Boston since her Wellesley board meeting doesn’t end until mid-day today so I voxed Seth, Ryan, and Jason to see if any of them were around for dinner. Seth was just landing from Vermont where he had been at Ello for the past few days, Jason was in NY at dinner, and Ryan was already at home having dinner with his family.

I thought about who else I might want to have dinner with, since I rarely eat dinner alone. I love eating dinner with Amy or one other person. Four people is my natural limit – me / Amy / another couple, or a small-ish business dinner. Six is my max – I can handle it – but I always feel at my limit. Once we get over six people at dinner, I end up focusing on the person to the left of me and the person to the right of me and that’s it.

I realized I just wanted to be alone for dinner last night. As I got to downtown Boulder, I pondered where I wanted to eat. The TV show Cheers popped into my head and I realized that the closest place in Boulder I have to Cheers is Kasa Sushi. I adore the owner Mimi and think her husband Mr. Kim is great. I know most of the wait-staff at this point and recognize the sushi chefs. Their specials are unique and outstanding and there is often something off menu for me. When I don’t feel like ordering, they just do Omakase and bring me whatever they feel like.

I wandered into Kasa, gave Mimi a hug, said hello to everyone (they responded with konbanwa), and was ushered to the sushi bar. They know which sake I like so a flask of it showed up. I asked for a few things and the food started coming. I’d brought my Kindle to read, but one of the sushi chef’s was new so we started talking about his first two months in Boulder (he was from New York and was loving Boulder.) The conversation expanded to including everyone around, since I was the only person in the restaurant for the first 20 minutes.

I had a small-ish dinner but big conversations. I felt completely comfortable “dining alone” and was more in the moment during the meal than I often am. I as walked home, I felt lightness in my step, probably some from the sake, but a lot from the conversation at Kasa.

As I walked Brooks the Wonder Dog around Boulder’s Central Park for his nighttime walk, I thought about how I rarely spend my alone time in the context of others but without electronic devices. When I’m truly alone – in the car, on a run, meditating – I’m alone. But when I’m on a plane, on a train, or waiting in a busy place for someone I’m almost always buried in my laptop or my phone as a way to avoid all the humans. But last night, just being alone, with others, where I felt comfortable, with no electronics, was really nice.

Mimi, Mr. Kim, and everyone else at Kasa – thanks for making we feel at home whenever I’m with you. It’s nice to go somewhere for dinner where everyone knows your name.

The Trap of Relative Value

Yesterday, at The Calloway Way event at MIT, I ran into Joe Caruso. I’ve known Joe for a while – we met through Techstars Boston, where he’s been a great mentor and very active angel investor.

He had just read my post on being uncomfortable with the phase of the current cycle and told me an anecdote from the great Internet bubble of 2001 that I hadn’t heard.

A guy came up to me and said “I just sold my dog for $12 million.”

I responded, “WTF – who would ever buy a dog for $12 million? That dog must have gold plated teeth!”

The guy responded, “Nope – but it’s a normal dog. But I was able to get two $6 million cats for it.”

When I got back to my room last night, I noticed Fred Wilson’s post from yesterday Averaging In And Averaging Out. In it, he talks about how he handles public company stocks that he ends up with either via an IPO or a sale of a company he’s involved in to a public company. We have somewhat different strategies, but we each have a strategy, which is key.

This morning I woke up to an email thread from a founder of a company I’m an investor in. He’d gotten a random note asking about his valuation when we invested relative to another financing that was just announced. When we made our investment, the company got about 3.5x ARR. The other company, which was much smaller at the point of investment, got an 11x ARR valuation.

My response to the specific situation was:

Valuations have increased on a relative basis.

They raised relatively little so probably had supply / demand on their side – which drove competition and enabled a higher price.

VCs are currently living in FOMO land so they’ll overpay for aspirational value in the future if they see growth.

There’s a lot of inefficiencies at these price levels. 

A “good price” is when you have a willing buyer and a willing seller, both happy, and willing to work together on whatever path you are on!

Each of these examples got me thinking about the relative valuation trap.

In the first case, we’ve got a dog and two cats. Who knows what they are worth – you can get a dog for free at the pound and as far as I can tell cats believe they belong to themselves and do whatever they want. But trading one dog for two cats, where the person owning the cats values them at $6 million each, means you can “mark your dog to market” which is currently $12 million. Now, if you can find someone to give you $12 million in cash for the dog, you have a $12 million dog. But you can carry it at a value of $12 million for as long as you want if you don’t want to sell it. Granted Rule 157 says that you need to mark it to market every quarter, but that’s a different messed up issue.

In Fred’s example, he does a great job distinguishing between optimizing and satisficing. Two weeks ago Twitter stock hit $54 / share. Today it is trading at $42 / share. Should you have sold it at $54? How about $52? How about $49? Or, now that it’s fallen to $42, maybe it’s time to sell it at $42. If you have it at $42 and believe you should hold it because it was recently worth $54, you are falling into the relative value trap. You should hold it because you think it will be worth more, but not because it was recently worth $54. It could be worth more or it could be worth less – making your decision on what it used to be relative to what it is today is a trap.

In the financing discussion, it’s easy to look back in time and say “wow – we got too low a valuation.” It’s just as easy to look at valuation in current terms and say “that’s not high enough” because you heard of someone else, relative to you, that got a higher valuation. Or it’s easy to feel smug because you got a higher valuation than someone. Unless we are talking about the final exit of the company for cash or public company stock that is fully tradable, this is a trap. It’s like the $6 million cat and the $12 million dog. How did someone come up with the valuation?

A simple answer is “well – public SaaS companies are currently trading at 6x average multiples so we should get a 6x ARR valuation.” There are so many things wrong with this statement (including what’s the median valuation, how do it index against growth rates or market segment?, what is your liquidity discount for being able to trade in and out of the stock), but the really interesting dynamic is the relative value trap. What happens when public SaaS companies go up to an 8x average valuation? Or what happens when they go down to a 3x valuation? And, is multiple of revenue really the correct long term metric?

As I said in my email this morning, A “good price” is when you have a willing buyer and a willing seller, both happy, and willing to work together on whatever path you are on! I deeply believe this – my goal is not to get the best price, but a fair price. I don’t subscribe to the philosophy that both parties should feel slightly bad about the terms of the deal, meaning that each had to compromise on things they didn’t want to in order to get the deal done. Instead I’m a deep believer that both parties should feel great about the deal – the terms, the participants, and the dynamics.

Ultimately, whatever stage you are in, you should be focusing on building long term value. It’s always a mistake to optimize for the short term, and when you do, you’ll often confuse relative value as justification for specific behavior.

NewCo Boulder: Open House Tour of Innovative Companies in Boulder

Forget those business conferences with long speeches and boring panel discussions. On November 18, Boulder’s most innovative businesses will open their doors to the public to celebrate Boulder companies who drive the networked economy. NewCo Boulder is a city-wide event that takes you right into the corporate offices of over 40 of the most innovative and successful companies around Boulder, offering attendees a tour rather than a company description packet.

At NewCo, attendees will sign up for a free pass to visit any of the participating organizations, from software companies, to restaurants, to non-profits and more. During the event attendees will check out the offices of the some of the most interesting and inventive companies around the city and take part in an interactive presentation about what each organization is doing to make an impact on the global landscape.

I am proud to serve on the Board of Advisors alongside Nicole Glaros, Larry Gold, Walter Knapp, Seth Levine, Sean Maher, Jane Miller, and Kimbal Musk. Boulder’s NewCo team, Rich Maloy and Tim O’Shea, have pulled together an impressive group of organizations across a wide range of industries in the community.

It’s an opportunity to see what Boulder businesses are doing and where it actually takes place: offices, breweries, bakeries etc.  Attendees can learn from their strategies and executions, gain some insights from their successes, maybe even drop off a business card or resume. The event is open to everyone and it’s free for the Boulder community.

For more information on NewCo Boulder including the companies participating, please visit: http://bdr.newco.co

Have questions about NewCo Boulder 2014? Contact Rich Maloy, Engage Colorado: rich@engagecolorado.com

What’s Old Is New Again

I know I’m getting old. I remember in 2007 when the idea of a super angel appeared, where successful entrepreneurs were suddenly angel investors making 10 or more seed investments a year. This was a “new” innovation that was celebrated with much fanfare.

Between 1994 and 1996 I made 40 angel investments with the money I made from the sale of my first company. I was referred to as an “angel investor” – I didn’t get the super angel moniker back in the 1990s, but I was often referred to as promiscuous.

Every day I’m reading about a new thing in the startup world. Big corporations are splitting in two or spinning off divisions that are being funded by VC firms. The amount of VC investment each quarter is growing, with us now in the $10 billion / quarter zone, rather than the $10 billion a year zone. Strategic investment is in vogue again, with virtually every large public company trying to figure out how to fund startups. Hedge funds are once again allocating big money to private companies and lots of cross-over public company investors are trying to get large dollars into private companies pre-IPO.

What’s old is new again. As we know from BSG, “All this has happened before, and all this will happen again.”

There are definitely new and interesting things happening this time around. If you haven’t noticed AngelList, you are missing what I think is one of the most interesting phenomenons around. And I’m deep in another one, Techstars, which has helped spread the mentor-driven accelerator model around the world.

Every cycle has a different tempo. We are in a very positive part of the current cycle. But it’s a cycle, and we know that by definition we are likely to have too much, and then a correction, and then too little. Welcome to life.

This part of the cycle always makes me uncomfortable. I love innovation, but when things that have been done before get talked about as though they are new, and no one bothers to try to remember what happened, why it happened, and what went off the rails, that’s uncomfortable to me.

Don’t live history, but study it. Remember it. And make better decisions and choices the next time around.

Book: Innovating Women

Suddenly, there’s a lot of constructive conversation about women in technology and entrepreneurship. I’m glad, as there is a continuous mess of sexism, misogyny, hatred, anger, specious assertions, and general weirdness. This mess is from men to women, from women to women, from men to men, and from women to men. Basically, there’s gender equality in the awful parts of this.

As chair of the National Center for Women & Information Technology, I’ve seen all sides of this, including plenty aimed at me. I’m an enormous believer in the power of being a male advocate so I’ll continue to be outspoken, supportive, and thoughtful on the issues and engagement of women in technology.

I was very excited to get a chance to read the book Innovating Women by Vivek Wadhwa and Farai Chideya. It’s an excellent combination of stories from powerful female innovators, along with analysis and research supporting the context. I enjoyed the book a lot, heard some new stories, and got a few new ideas.

As I read through some of the Amazon reviews and threads that spiraled out from them, I once again saw a continuous mess of sexism, misogyny, hatred, anger, specious assertions, and general weirdness. This mess is from men to women, from women to women, from men to men, and from women to men. Basically, there’s gender equality in the awful parts of this.

In my fantasy, humans would learn how to be constructive participants in a conversation. I recognize this is a fantasy, but I’ll keep trying, especially around this issue.