Football fans will recognize the title as talking about the difference between fundamentals and creative razzle dazzle. Both styles, properly mastered, win games. Which brings me to my two new favorite reads.
Bill Payne’s blog discusses the fundamentals of angel investing, with the wisdom gained from a grind-it-out veteran. In contrast, Tom Eisenmann’s HBS class blog “Launching Tech Ventures,” frequently dazzles, scoring often based on the surprise factor. I’ve already noted my admiration for Professor Eisenmann’s posting of the readings for his class, and I’m dutifully working my way through the homework.
The student blogs come from HBS students who on average must still be new to the startup game. Not that this is bad: I often find that the most productive and creative time for any new employee is somewhere between month 1 and month 6–they’ve been around long enough to be exposed to the issues, but have not yet become brainwashed into buying into the conventional solutions, often bringing a novel approach borrowed from another sector. The (for me, literally) other-worldly comparison of arranged marriages to startup success was the most recent example of a blogpost that made me smile and think. There’s the added bonus of a killer blogroll on the bottom right to check out (some overlap with mine on the lower right hand side of this page.) There are occasional guest blogs by alums Rob Go and Jeff Bussgang, as well as the peerless Fred Wilson, but hey, I read those guys’ pages anyway. It’s the student take I’m interested in seeing. What established blogger would have dissed “pivot” orthodoxy through discussion of Rachel’s haircut in Friends?
But you have to start with blocking and tackling to be competitive in football games. I value the vantage point of someone who’s probably forgotten more than I’ve ever learned, long-time angel Bill Payne. As you can see by his valuations link, he’s seen and tried dozens of ways to make sense of the question “What is this company worth?”. (A quick side story: When I worked as a bond trader at Lehman Brothers, my favorite finance professor from Wharton called me to ask me to help get him a price on a junk bond for a project he was doing. “The trader is quoting me ’42 bid, 45 ask'”, he said. “So,” I said, “what’s the problem? That sounds right.” The professor explained that it was impossible for him to perform his cost of capital calculations to his desired accuracy with anything wider than a 1/8th of a point market…not realizing that a 3 point market on a thinly traded bond at that time was heroic. His theory was great, but built on untenable assumptions.) Bill is someone who knows how things have worked out in real life, how to separate fashion from substance, and when risk-return relationships get out of whack. In other words, he has mastered all the blocking and tackling that one needs to play successfully.
I’m looking forward to the upcoming Angel Capital Association conference in Boston where Bill will lead a seminar in that blackest of the black arts, startup valuations. It will be interesting to see who comes up with what appropriate value when a hundred angels all blindly submit what they think each case study company is worth. And while in Cambridge, where I find myself generally 1-2x a month, I hope perhaps to run into Tom Eisenmann or some of his students. Voltage Cafe for Open Coffee someday?
May both sides, from the HBS dissection of product-market fit to Bill’s blunt discussion on the Frank Peters Show of why uncapped convertible debt is bad for angels and ultimately for companies, keep the lessons coming. I’m happy to be a student of both of you via the blogs.
- MBA Tuesday- A Visit to HBS (myventurepad.com)