Support your local farmer

Regular readers of this blog know we are proud members of the CSA at the Newton Community Farm, the last working farm in Newton, owned by the City and managed by a local non-profit. The annual benefit dinner is approaching, which is always a fabulous affair. Please consider attending (or otherwise supporting) this worthwhile cause ... and the food at Lumiere is always marvellous.

You are cordially invited to attend a dinner to benefit educational programs and site improvements at Newton Community Farm

Wednesday Evening, November 5, at 6:30pm

Lumière, 1293 Washington Street, West Newton

This four course dinner with wine pairings will feature locally grown produce from area farms prepared by award-winning chef Michael Leviton; vegetarian option available for each course

$150 per person

Sponsor tickets ($500 for 2 seats) and Patron tickets ($1000 for 4 seats) are also available

Please reply to Jon Regosin at

Please respond promptly as seating is limited.

The financial and economic crisis explained

My previous post was about the current economic crisis and its impact on the VC business. However that begs several questions... how did we get into this mess to start with?

Some very smart people have provided some help explaining how the finance crisis has become an economic crisis, and how it all started. To remind us, if we need it, of the gravity of the situation, I can't resist repeating this graphic that Guy sent me a few days ago.

Start with this great cartoon slideshow "A Subprime Primer" (adult language) explaining how the sub-prime mortgages made by some banks in the US spread financial toxicity all over the world.

Next listen to this episode of the This American Life with Ira Glass. This covers:
  1. the proximate cause of the bail-out: the seize-up of the commercial paper market (and why that happened)
  2. credit default swaps (CDSs) - like "buying insurance in a house you don't own"
  3. regulating (or not regulating) CDSs
  4. is the $700 billion bailout a good idea
To keep up with daily updates to what is clearly a fast-moving situation, subscribe to NPR's Planet Money blog and podcast.

What is going to happen?

Everyone is asking everyone: what kind of impact does the financial market mess have on your business? Certainly everyone is asking me what kind of impact it has on my business ... does it effect the VC world?

The answer is that it does, albeit not in the way many people think. At least I think that people think that somehow our money is running out, like all the banks; mostly that is not the case. Some VCs will have trouble when they make capital calls (asking their investors to send the next tranche of the investment money that they are contractually bound to send) ... some investors will not send their funds, despite the contracts, and those VC firms will have a major headache to manage.

Also, for VC firms who are raising new funds, especially from a broad base of investors, this is a tough time. (Think of a VC firm as similar to a mutual fund firm; every few years they start a new fund and need to "raise" - get those contracted commitments - for a certain aggregate amount from their investors. Those commitments are drawn down in the form of the capital calls I mention above.)

However, *all* VC firms have dropped any expectations, for a significant time, of any good exits. Even more immediately we worry about the ability of our portfolio companies to keep going through tough times. These startups will be trying to sell their products and services to consumers or businesses who are loathe to spend a single penny they don't absolutely have to spend.

Sequoia Capital, one of the most respected and well known VC firms in Silicon Valley very recently called a summit of all their company CEOs and ran through a doom-and-gloom presentation, now available online. It is well worth reading. There are others sharing similar thoughts all around the VC world.

There is at least one person offering what he considers an antidote to all this fear, and since he quotes my favorite Sci-Fi book (Dune), I provide this link to his thoughts here (tip of the hat to Greg Gretsch for the reference).

Certainly, pretty much any company that makes it through this tough period will emerge as a leader once the tide turns. We hope (and work hard to ensure) that some of those companies are in our portfolio, and that we can benefit when the time is right. We do not need a full-blown recovery to reap the benefits, just some semblance of normalcy in the markets. Industry or sector consolidations driven by difficult times can result in good outcomes for startups who are in the right place at the right time. Don't get me wrong, however, a full-blown recovery would be nice, too!

A little humor ... and bad Starbucks news

Starting off with the bad news: my favorite Starbucks is closing (despite my protests) in a week or two. I guess I will have to start frequenting Pie Cafe (nothing will get me regularly into the other Starbucks, or the Petes ... sorry).

Here are a couple of humorous items I have been saving up (with a tip of the hat to my step-father Michael Lewin, for a couple of these).

An updated version of Abbott and Costello's Who's on First is doing the rounds ... all about buying a new computer ... and don't call me Mac.

A few new definitions in this new economic climate:
P/E RATIO -- The percentage of investors wetting their pants as the market keeps crashing.
BROKER -- What my broker has made me.
STANDARD & POOR -- Your life in a nutshell.
INSTITUTIONAL INVESTOR -- Past year investor who's now locked up in a nuthouse.
PROFIT -- An archaic word no longer in use.

... and on the same note ... next week's Economist cover (thanks Guy!):

My daughter Hannah, sometimes (like many Hannah's I am sure) called Hannah Banana, is actually fond of said fruit, and will let us know that when there is only one left.

Finally, two fun tee-shirts I saw for sale on Venice Beach this summer.

Big Ideas are not rare

We all, but perhaps especially VC types, are always in search of "the next big idea." The next big idea is brilliant, simple (or complex) and original (or perhaps a slight twist on something familiar). Think AOL crossed with Wonder Bread, or Facebook crossed with automatic car washes.

I have a new idea: think video conferencing crossed with fine business dining.
A hotel chain (or perhaps an international celebrity chef like Todd English) should take this up immediately. Each restaurant in the chain, in business cities around the world, should install a high-end video conferencing system in a private dining room for up to 6 or 8 people. The system would be at one end of the room, and the dining table would be placed right up against the very large screen. When connected to one of the other private dining rooms through the magic of video-conferencing you see the table in the other location as if it were an extension of your own table.
Now you just go ahead and arrange to have a business meal with colleagues (or customers) in distant locations without anyone having to fly anywhere. In such a setup you can have optimal lighting and sound systems because you know people will sit down (and sit still), because they are eating. You can be having lunch in London with colleagues having breakfast in New York. Given the two locations are part of the same business you can arrange for the food to be served at the same moment in each location, and certainly you (as host) can pay for the meal in both locations with one credit card slip.
The current high-end video conference solution is Cisco's Telepresence. I understand it costs about $250,000 per location (including network costs). Assuming this is a good proxy for the costs of a great system, a restaurant chain would need to charge say $5000 per event (assuming an event is two cities only - not sure of the logistics for multiple cities), and ensure at least 100 events per location (on average) each year to cover costs. Given you could be using the facilities for a couple of meals a day, this seems doable, and much cheaper than business class air fares (no-one using this system flies coach).
I will surely make millions from my brilliant idea. I made it up a while ago, and am just waiting for the check to arrive in the mail. After all, big ideas are what we need... or are they?

Malcolm Gladwell wrote a great article in the New Yorker earlier in the year (In the Air, 5/12/08) documenting the counter-intuitive fact that big ideas are not, in fact, rare. Get a group of creative people together and they can generate lots of good ideas, some great ideas and even a few brilliant ideas. Even the big inventions of the industrial revolution were more about hard work by people who knew what was needed than about a brilliant idea occurring to someone one day, according to the later chapters of The Logic of Life: The Rational Economics of an Irrational World by Tim Harford.

What is really hard is that hard work: what the VC world calls, in shorthand, "execution" (executing the plan, not the entrepreneur!). The ability to actually deliver on a great idea is in much shorter supply than ideas themselves. That ability starts with mere willingness ... am I ready to drop everything to put my video-conference-dining-experience into action? The next factor is relevant experience ... even if willing to do so, do I have experience in video-conference businesses, or restaurants? Next on the list is a good team ... if willing and able, do I have a team of folks with the right specialty knowledge to be able to conceive, produce, package and sell a product and service that meets market needs? Does the team have what it takes to respond to market changes, competitive pressures, problematic partners? Finally we need resources ... can I find someone willing to invest so I can pay my team, buy the equipment, set up the system and so forth? Execution demands willingness, experience, energy, resources, and commitment from many people over an extended period, and the ability to conduct the orchestra invariably involved when executing on a great idea.

This is just as much the case in my life as a venture cyclist and a volunteer in the non-profit world (last chance to support my participation in the 2008 NY Jewish Environmental Bike ride). There are a million great ideas out there for any non-profit. The issue is the ability to execute... the professional staff, the volunteers, the resources, the plans, the follow-through... the hard work!

If you are involved in a non-profit, you know this already.
If you want to be involved in a non-profit, then go right ahead, but don't just expect to contribute great ideas ... I am sure yours are fabulous, but they will go into the pot like everyone else ... no, you have to get involved with your commitment to do the hard work of making ideas into reality.