Last month, I decided to spend April with Microsoft, May with Yahoo, and June with Google.  As April comes to an end, I turn from Microsoft to Yahoo.  I already changed my search default within Firefox and am now sending traffic to Yahoo instead of Microsoft.

In hindsight, April was frustrating.  I started out by trying to switch all my software infrastructure to Microsoft, including IE7b2.  In addition to bonking hard, this attempt messed up enough other things on my desktop computer at home that I quickly backed off the “all Microsoft” and went to “online Microsoft only.”  The nice folks in the IE group tried to help, but the pre-release of the next version that I downloaded was too unstable (and – after one iteration – I decided I simply didn’t have the time to keep fighting with it) so I bailed and just kept using Firefox.

I dug into MSN and Live.com to try to switch from several of my web-only apps, including My.Yahoo.  I found that either (a) the switching costs were simply too high (I didn’t have the desire to spend the time setting things up to my liking) or (b) when I spent the time, I ran into walls that limited my desire to continue.  For example, I’m a heavy user of del.icio.us (Yahoo) and – as I tried to figure out how to stop using it and use a corresponding Microsoft tool, I couldn’t find one that was equivalent.  Or – when I tried to shift from Foxmarks (to synchronize my Firefox bookmarks across computers) to Windows Life Favorites, the service was unavailable the first time I tried, I got tangled up in Microsoft Passport login hell the second time, and finally got it working the third time, but then was frustrated that I couldn’t figure out how to sort the “Your Folders” view alphabetically and gave up. 

I had some positive experiences – I did two presentations where I used Live Image Search as my primary search for content and was pretty satisfied.  I didn’t have any fundamental problems with either MSN Search of Live Search – after using it a month I didn’t notice that I wasn’t using Google for search. 

Overall, I didn’t dig into too many non-Microsoft services that I wasn’t already using.  I’m a heavy client app user (Outlook, Office Apps, Trillian, FeedDemon, Picasa, Skype, Adobe, MotionBased, iTunes, and some other client apps) so I’ve got plenty of client stuff, including Microsoft – in my face all day.  However, I just couldn’t get the base under me to switch away on the web apps that I use.  I expect that being intensely busy in April and being on the road all month didn’t help matters as I had lower tolerance than usual for screwing around with new stuff.

I expect life with Yahoo will be easier since I’ve been a heavy My.Yahoo user since 1997.  However, I find that with RSS I use My.Yahoo less and less since I consume RSS in FeedDemon.  Let’s see what else – besides Yahoo Search – I find useful this month.

Last week, I wrote post on A Different View of China from a close friend of mine who is spending the year traveling around the world with his family (wife and 11 year old daughter).  I think he’s got a delightful rhythm to his thoughts and sent me another rant which I feel compelled to share with you.  Remember – my friend has been on the road with his family since the beginning of the year so his thoughts are certain to be tinged with facing “the travel wall.” If you want yet another view, Rick Segal is also blogging about his trip.

I’m sick – lost my voice and I’m sitting in a room at the cheng do sheraton – they’re all the same to me now. (Wife) is surfing the bet and (daughter) is bathing. I ran out of books a few weeks ago – I’m now reading agatha christie that I borrowed from one sheraton – Ill leave it at this one when I’m done. Its not stealing if I move it one sheraton to the next is it? The foreign book stores don’t have the best selection.

It’s not that china is bad – there are just so many other places better to visit.

I love chinese food – but every restaurant is chinese food – and service is something they haven’t quite nailed yet. There are few if any other types of restaurants.

No nice cafes on the boulevards – no al fresco dining – just store after store selling the same stuff. How do they make money – there is zero difference between storefronts and product mix.

The streets are all clean – but traffic is crazy – traffic lights are more of colorful decoration than guiding signals.

The solution to every problem seems to be – more people.  Want to seem like a swank hotel – put a dude in a basement mens room that no one goes to to turn on the water and push soap in your hands. No bulldozer to dig a ditch – 5 dudes with pick axes.  We went in a private car to a restaurant and we parked in a new underground lot with about 60 parking spaces – there were eight people working there (one to push the button to hand you the ticket, another 2 to direct you where to park – another to collect the ticket and run it to the cashier,  two cashiers, and 2 security guards – the rate was 30 cents an hour to park and it was 40% full.  Crazy stuff wherever you look – on one area a million people jammed selling the same dried fruit for 80 cents a kilo and across the street a sleek high rise of condos is going up for millions of dollars a unit.

There is no middle ground – dinner tonight I’m sure will suck if we eat in the hotel and cost 80 bucks – 50 feet from the hotel door we bought the best food we’ve had in 9 days for 70 cents (3 loaves of bread and 8 dumplings! – 4 people were working at the stand – our hotel costs 350 US a night). The problem of eating on the street is you don’t know what you’re gonna get and you’re pretty sure it wasn’t prepared using the most hygienic techniques.  So what’s a dude to do – pay up for crap or risk it.

The parts that are built up are very modern and seemingly well kept. People litter a lot but there are just as many working to pick it up.

English isn’t widely spoken outside of the hotels and tourist stops – and there is no way to fake your way into a word like in Spain or France.  If you speak English you can earn 3 times more money giving tours.

I don’t fear china’s economic might – yet. They have to address a serious class gap, energy and pollution issues, and an infrastructure that can’t keep pace with demand.

(Daughter) just found the complementary condom in our room and was playing with it. It was red. She was telling me what it was for – she got it wrong – I’ll have (wife) handle that part of her education.

On that note – I’ll stop rambling.

And – a few minutes later…

The condom wasn’t complementary – it was 11 dollars! But we also got some tampons and disposable underware for (daughter) to play with:)

We made some ergonomic upgrades to the Treadputer this week.

The main changes, compared to the last iteration, are:

• Mounted speakers
• Angled keyboard and mouse holder (the angle is very important)
• Much better stabilization for keyboard / mouse

We are still working on the headphone / microphone configuration.   Getting this right has proven to be a lot harder than we expected due to ambient noise, weight (it sucks to have real headphones on for two hours while you are running / walking), and modality (speakers and microphones don’t mix that well.)  It’s also time to put a better desktop background on those pretty monitors.

After a grueling week on the road (I started in Boulder and got to see the ocean off of both coasts and then ended up in Boulder), I just returned to my office at the end of the day to see a copy of 24: The Game running on the PlayStation 2 in my conference room.  In the words of Jack Bauer, “Damnit.”

If you’ve been a long time reader of my blog, you know my fascination with bathrooms.  Yesterday, I got an email with this link twice – I figured it was time to blog some new bathroom art.

Following is a question I got the other day.

We have some people who are currently interested in doing a Series A round with us.  They aren’t VC’s – they’re a company in our market who offer a pile of services complimentary to ours (they aren’t competitors, or substitutes.)  In our conversations with them, they’re asking for a Right of First Refusal – I know this is standard stuff, however, they’re asking for a ROFR for acquisition offers, as well.  Their reasoning (which is valid), is that they don’t want one of their competitors coming and buying us outright – they’d want to do it themselves. My question is, in an acquisition scenario, will this type of ROFR cause problems that make us a less appealing acquisition?  What type of issues might we run into in the future?  Any advice?

In our Term Sheet series, Jason and I talked about the Right of First Refusal (ROFR) in the context of a financing.  When a ROFR is requested for future financings, this is a standard term and one that isn’t usually worth negotiating much.  However, it’s an entirely different case if a ROFR is requested in a financing that will apply to acquisition.

While a rational request, it’s very dangerous to provide a ROFR on an acquisition to investors in a financing.  A VC will rarely request this (and – if he does – tilt your head sideways at him as say “huh – why?”)  However, corporate investors (also known as “strategic investors”) will often ask for this.  The theory is almost always the one posited in the question above – namely – we want to invest in you now but want first crack at acquiring you if one of our competitors starts sniffing around.

Good theory; bad implementation.  Giving an early investor a ROFR on an acquisition materially handicaps the company and disadvantages all shareholders, except the corporate investor that is getting the ROFR.  The corporate investor will already have visibility into your company and will likely have a variety of rights (including potentially a board seat) by virtue of their investment.  In some cases, they’ll be aware (by virtue of their board seat) of any potential acquisition activity.  If they aren’t, it’s likely that if you get into discussions with a potential acquirer, you’ll bring it up (carefully – of course) with your corporate investor and suggest that – if they are interested – that now would be the time to consider making an offer for the company.  So – the notion that they’d be left out in the cold completely – while possible – is unlikely.

If you have a ROFR in place, you are in a bad position with regard to a potential acquirer that is not the corporate investor.  Depending on how the ROFR is written, you’ll likely have a difficult time signing an LOI with a potential acquirer without first notifying the corporate investor and giving them a ROFR.  In the extreme case, you’ll need to disclose the terms to them so that they have an opportunity to match or exceed the offer.  In the mean time, you will lose major deal momentum with your new potential acquirer.  In addition, since your discussion with your potential acquirer is likely governed by a confidentiality agreement, you’ll have to tread carefully as to what you discuss or disclose.  This gets even more difficult when you are balancing multiple potential offers and buyers – the logistics of managing the ROFR can get very challenging.

In all scenarios, unless you have developed a negative relationship with your corporate investor, it’s all probably unnecessary anyway.  Since the corporate investor already owns a percentage of your company (typically less than 20%), they have a built in discount on the acquisition based on the ownership position they already have.  While they’d of course love to buy the company at the lowest price possible, the ROFR probably won’t help them accomplish this as any savvy seller will be able to manage the buying process to get the best offer on the table before exposing the ROFR.  All the ROFR does is jeopardize the deal, which doesn’t do anyone any good (e.g. your corporate investor decides not to proceed with acquiring the company but the intervening time has caused the buyer to get cold feet and back off.)

While it’s conceivable the ROFR will reduce the number of companies potentially interested in acquiring your company, this can be managed.  It’s often said that buyers won’t pursue a company that has a ROFR – in practice I’ve found it relatively easy to “trip” the ROFR early in the process and get that out of the way.  I have run into aggressively written ROFR’s that cause me to shake my head as it is possible for the ROFR to completely tie up the seller – but I attribute this to poor negotiation on the part of the attorney’s for the seller that negotiated the ROFR in the first place.

The bottom line is that a ROFR on an acquisition is never helpful to the investee and rarely accomplishes what the investor that insisted on it wants.  My simple recommendation is to negotiate hard on this term – it’s not worth having it hanging around.

NPR had a great segment over the weekend on the secret to happiness about this year’s most popular class at Harvard is Psych 1504, also known as “how to get happy.”  Apparently the most popular class – until recently – was an economics class also known as “how to get rich.”

While watching the Sopranos tonight, I saw the magic manilla envelope stuffed with cash get passed to Tony and thought “what would a good deal be without some fees?”  Remember – it is important to make sure that the lawyers and bankers can afford their fancy sports cars. 

A letter of intent will usually be explicit about who pays for which costs and what limits exist for the seller to run up transaction costs in the merger. The transaction cost associated with an agent or banker, the legal bill, and any other seller-side costs are typically included in the transaction fee section. While it’s conceivable that the buyer will punt on worrying about who covers transaction fees, in today’s M&A world most savvy buyers are very focused on making sure the seller ends up eating these, especially if they are meaningful amounts.

Occasionally the concept of a break up fee if the deal doesn’t close, or the seller executes a deal with another buyer, comes up. This is rare in the context of private company VC-backed M&A but prevalent in the context of public company M&A deals (where one public company is acquiring another public company.) We generally fight any request of an buyer to institute a break up fee and tell the potential buyer to rely on the no shop clause instead. Most buyers of VC-backed companies are much larger and more resource rich than the seller it seeks to acquire, so it strikes us as odd why the buyer would receive a cash windfall if the deal does not close, especially since both parties will have costs incurred in the process.

No matter how you structure things, most fees end up coming out of the seller’s proceeds, so tread carefully.

If you were interested in my post earlier this week about the closing of the Colorado Institute of Technology, you’ll find Al Lewis’s weekend column – which is a sharp commentary on the Colorado Institute of Technology – a useful compliment, both in terms of some of the details of the events around CIT as well as the spin from Mark Holtzman, current Republican gubernatorial candidate and the effective co-founder of CIT with Colorado Governor Bill Owens when he was Colorado Secretary of Technology.

I’ve got to know Ben Casnocha well over the past few years.  He’s a remarkable kid – and I say “kid” respectfully even though he recently turned 18.  Ben visited me and Amy a few weeks ago and we had a great time – one of the things we talked about were the colleges that Ben has been accepted to and his plan to take a “gap year” (a year between high school and college) to go travel around the world.  He just launched a new blog called Ben’s Gap Year Travel Adventures – I expect this will be a fascinating and incredibly educational blog.  Europe is up first in June and July.

A close friend of mine is spending a year traveling around with world with his wife and 11 year old daughter.  They are in China right now and he’s been sending me missives from the front lines of his trip.  Most of what I read these days about China is either highly political, technology-oriented, or about the venture capital industry’s fascination with China.  My friend’s emails have been decidedly different (while he’s a successful technology entrepreneur, his trip is about a personal adventure that his family has embarked upon.)  I confirmed with him that I could blog some of his rants – enjoy.

China is wild – definitely glad I came so I never have to come back.

It is so polluted in the air that I feel like I’m sucking on an exhaust pipe while in a middle of a sand storm. Beijing gets these sand storms off the gobi since all the forests have been cut down and everything is covered in a layer of dust that just won’t go away – add in coal burning power plants, no emissions on cars and 15 million people and you simply can’t breathe.  So after 4 days in the capital we went to Xi’an (the ancient capital now 5.4 million people) and it’s just the same – you can’t tell if it’s day or night – it’s almost comical, but sad.

Prices are at both extremes – for western brand stuff in legitimate stores its 40% more than the states – everywhere else it’s cheaper (and there is no shame in selling whatever brand will make them money).  I think communism works well for the Chinese – there are so many people if they had too much freedom I’m sure there would be greater civil unrest.

Internet access has been fine – Skyping everyone without problems and it’s cheap.  Every now and then I can’t get a Yahoo new article on China to load – but if I’m persistent I can get it.  The English China Press newspaper is like reading Soviet era propaganda – it’s just funny their view on world events.

People aren’t as friendly as in other countries we visited – lots of shoving and pushing – not many smiles – everywhere you go it’s packed with people.  Most tourists are Chinese – funny I would have never guessed.  China produces 20% of the worlds cigarettes and consumes 30% – they probably just don’t care with all the other stuff in the air.

We all have sore throats and are dying for some fresh air and blue skies.  The sites are amazing – actually all the tourist locations we’ve visited so far are very clean and well run.  we saw one old lady have all her trinkets taken away from her by a soldier after she sold us a kite in front of a historic statue (she almost cried – I think the kite we bought cost us 75 cents – about 3 dollars of goods was taken from her – I wanted to go up and give her some cash but the guard was watching).  Most people fall into the category of have nots but talking to one of our guides at the Imperial Palace in Beijing – he said that young people will take an entire month’s salary just to buy the new Motorola Razr phone or Nike shoes.

Hey 1.3 billion people can do a lot of stuff – but you’ve got to take care of 1.3 billion people and that’s not gonna be easy – I don’t think China has it in the bag to dominate the global economy in 50 years – plus they might have a peasant revolt in the meantime…

I finally got around to downloading my Boston Marathon data from my Garmin 301.  I thought the GPS based data was extremely interesting, especially when compared to the official course elevation map.  Following is the official elevation map:

Following is the map from my GPS post race:

Notice all the hills that get smoothed out in the official map, especially between miles 15 and 23.

Since it’s a Saturday morning, I thought I’d cover a topic in our Letter of Intent series that my wife Amy would never agree to. Signing a letter of intent starts a serious and expensive process – for both the buyer and seller – as you both work to consumate a deal.  As a result, you should expect that a buyer will insist on a no shop provision similar to the one that we discussed in our term sheet series.  In the case of an acquisition, no shop provisions are almost always unilateral, especially if you are dealing with an acquisitive buyer. 

As the seller you should be able to negotiate the length of time into a reasonable zone (45 to 60 days). If the buyer is asking for more than 60 days, you should push back hard as it’s never in a seller’s interest to be locked up, especially for an extended period of time.  In addition, most deals should be able to be closed within 60 days from signing of the LOI, so having a reasonable deadline forces everyone to be focused on the actual goal (e.g. closing the deal.)

Since most no shops will be unilateral – the buyer has the right but not the obligation to cancel the no shop if they decide to go forward with the deal – this time window is particularly important since the seller is likely to be tied up for the length of the no shop even if the deal doesn’t proceed. Rather than fight the no shop, we’ve found it more effective to carve out specific events – most notably financings (at the minimum financings done by the existing syndicate) to keep some pressure on the buyer.

I haven’t been out to see a movie in a while (I don’t know why – Amy and I love movies at the theater.)  Last night we saw Thank You For Smoking.  It was brilliant.

I thought the Christopher Buckley book Thank You for Smoking was an absolute riot when it came out.  The movie is based on the book and does a superb job of telling the same story while updating it a little.  Aaron Eckhart was phenomenal as the main character (a cigarette lobbyist) and William H. Macy continues to be the sleeper actor of the universe for his portrayal of the Vermont senator who wants to put poison labels on cigarettes.

The one liners were awesome.  Following are a few better ones to give you a taste.

• Michael Jordan plays ball. Charlie Manson kills people. I talk.
• My other interviews have pinned you as a mass murderer, blood sucker, pimp, profiteer and my personal favorite, yuppie mephistopheles.
• My job requires a certain . . . moral flexibility.
• You know the guy who can pick up any girl? I’m him on crack.
• Don’t forget, I’m his father, you’re just the guy who fucks his mom.
• We don’t sell Tic Tacs, we sell cigarettes. And they’re cool, available, and *addictive*. The job is almost done for us.

At 92 minutes in length, it also nicely broke the mold of movies that are 25 minutes too long.

Roger Fillion has a very instructive article in this week’s Rocky Mountain News about the closing of the Colorado Institute of Technology.  I remember when CIT was launched in 1999 with great fanfare by Colorado Governor Bill Owens with the vision of creating “the next Caltech or MIT.”  I remember feeling that while the vision was huge – it was nonsensical and not particularly well informed about what created the underlying and sustainable basis for something like Caltech or MIT.

Roger’s sidebar on “Looking back at CIT” has a very focused set of quotes that puts it all in historical context.

• Lewis O. Wilks, president of Internet and multimedia markets for Qwest Communications, on Sept. 30, 1999, as Gov. Bill Owens launches his new Science and Technology Commission: “There is an absolutely consistent awareness across the world today that Denver is becoming the next Silicon Valley.”
• Gov. Bill Owens, in a telephone interview from Seattle after meeting with Microsoft founder Bill Gates on Dec. 14, 1999. Owens touted his vision for the Colorado Institute of Technology during the meeting: “I walked him through a sales pitch so that when he or his company starts to look for a new campus or research facility, they’ll consider Colorado.”
• John Hansen, then-CIT president, on Aug. 9, 2001, discussing a lack of funding for the institute as the high-tech bubble burst: “If your stock is down 80 percent, you’re not inclined to spend on this right now . . . it’s hard to go in and raise funds from a company that just laid off 500 people.”
• Margaret Cozzens, during her time as CEO at CIT, discussing lack of funding: “Collecting on the pledges (from companies) was nothing short of impossible.”

Now, Colorado has always had a vibrant technology and entrepreneurial community, but the idea that in 1999 that there was “absolutely consistent awareness across the world today that Denver is becoming the next Silicon Valley” made no sense to me at the time, nor does it in hindsight.  Having spent a lot of time and been involved in creating a lot of companies in both places, Denver has never been on the path of becoming the next Silicon Valley (in fact, Boulder is probably a more vibrant entrepreneurial ecosystem than Denver – so at the minimum it should be Boulder / Denver, although there’s still no real similarity to Silicon Valley.)

Rather than try to be “the next Silicon Valley” or “the next MIT”, it seems a lot more sensible for Colorado to focus on its unique characteristics, embrace its differences, and take advantage of that dynamic.  Having been in a few meetings of a group of technology executives and entrepreneurs discussing Colorado and technology for Bill Ritter’s gubernatorial campaign, I’ve seen the same thinking come up – “how can we be more like Silicon Valley.”  I’ve been consistent in my strong opinion that that is simply the wrong goal.

Education is at the core of creating a great, long term, entrepreneurial environment.  While a few people in Colorado – such as Jared Polis – are doing great things, our state government and business leaders should look at the failure of CIT as a major wake up call that we are simply not doing “enough”, or “the right things”, or “managing them effectively.”  I wasn’t involved in CIT – so it’s hard to be specifically critical – as I’ve spent most of my Colorado-based entrepreneurial / education activity working with CU Boulder Deming Center for Entrepreneurship and the CU Denver Bard Center for Entrepreneurship, but I’d hypothesize that if the companies that invested energy and money into CIT had channeled the same energy and money into these two institutions, there would have been a better outcome.

Industry needs to make a fundamental, long term investment in education in Colorado, as does the state and local government, rather than try to create “the next great thing” in times of abundance (such as in 1999.)  We need to take a 25 – 50 year view – this is not a short term game.  Unfortunately many of the people and companies that were involved in CIT appear to have had a short term time horizon and when things stumbled weren’t able or willing to invest for the long term.