Thinking About Thinking

Who Is Scott Kirsner?

Posted in Who Is by larrycheng on March 18, 2010

Today marks the first entry in a new series called “Who Is”.  This series will be about getting to know people in a slightly different light.  My favorite part of the work we do at Volition Capital is getting to know people.  So, I figured I take a little time each month and tell one person’s story.  Some people I profile will be known commodities to the readers of this blog and others might just be folks who have an interesting story.  We’ll see how it goes.  Today’s first entry is about Scott Kirsner.  Scott is a well known journalist in the greater Boston innovation economy, which is appropriately the name of his blog.  Arguably, he has interviewed more people in the Boston-area technology and entrepreneurial communities than anyone else.  So, I thought it’d be fun to turn the tables on him.  Here we go…

LC: The title of this post is going to be “Who is Scott Kirsner”.  So, who are you?

SK: Well, I think I’m a journalist who writes about innovation often in the Boston area but often in other places and other industries.  My main interest is in the Boston and New England ecosystems.  I have written a couple books and help organize a couple conferences like Nantucket and Future Forward.  And, I blog and do video and am interested in all sorts of new media ways of doing journalism. 

Can you give me your 60–second life story?

Grew up in Miami.  Always interested in technology.  I learned how to write Basic at a very young age, fell in love with my Apple IIE computer, and   briefly ran a BBS in the pre-web days.  Always really liked journalism and writing so I thought I’d have a career in that.  I briefly went to a school for the arts and studied saxophone, so I thought maybe I’d have a jazz music career, but then when I came up to Boston to go to BU, I noticed all of these Berklee School of Music kids were much more focused and better on the music front and gave up the idea of playing saxophone professionally.  Came up here to go to college and stuck around ever since, with the exception of 2.5 years that I spent living out in San Francisco to get a taste of the west coast scene. 

So you went to a performing arts high school?

Yes, I went to a performing arts high school.  I studied journalism at BU.  And then after college, I worked in management consulting for a couple of years just because there were no journalism jobs to be had.  I kind of worked at marketing, editorial issues, and started the first website for this management consulting firm.  Built in ground up in the days of Mosaic.  And that led me to my first job at the Globe which was helping to design, build and launch in 1995. 

What’s your family background?

I have one son and we live in Cambridge which is a great place to live.  Most of my life happens along the red-line.  I go long stretches without driving which I really like about Cambridge.  I grew up in Miami in the suburbs, in the years before Miami was a really hip place to be.  I go to South Beach now and I don’t have the right clothes, am not in good enough shape, I don’t have the tan.  I’m very out of place there. 

What are your other interests?

I’m playing a little more piano now more than saxophone.  Just trying to improve my piano playing skills which are not very good.  It’s fun to do sing-a-longs with my little son.  It’s better to do sing-a-longs with piano than saxophone.  Other interests – I collect some vintage posters, vintage movie travel posters.  I like to go to drive-in movie theaters in the summer.  There are still a few of those that exist.   

What’s the best one?

The best one people don’t know about is the Mendon Drive-In and it’s actually just out of 495.  Totally awesome.  The best one people do know about is up in Cape Cod in Wellfleet.  The Wellfleet Drive-In

So you wrote a book about movies, what’s your favorite movie?

I’m not sure I have a favorite.  My favorite movie would be something cheesy from my childhood in the 80’s like Back To The Future.  It’s from the love of technology and of tinkering and crazy science projects.  It’s not a really good movie.  I also get the chance to go to a lot of film festivals so I see a lot of independent film.  So the latest movie that I saw down at SXSW, there was a documentary about Saturday Night Live called Saturday Night.  I really enjoyed that. 

Tell me about your greatest achievement before your professional career?

I started an underground magazine when I was at BU called The Rumor – a humorous satire magazine.  That was my first experience trying to manage people, manage writers, manage salespeople and doing a start-up.  That and some other start-up business experiences have given me a good sense of just how challenging it is for a lot of the people I write about to get that first dollar of revenue.  As an aside, I actually sold the very first ad on because my manager told me we needed some ads before we launched.  Even though I had a mostly editorial job, I went hustling on Newbury Street to all the different stores because it was right around the corner from our office. 

Who bought the first ad?

This second hand clothing store called Second Time Around.  Of course, this was in 1995, selling an ad also meant building a website.  It was not a really profitable endeavor.  “Yeah, we’ll buy an ad on your website, but we don’t have a website to link to so can you help us with that.”

What’s the political or social issue you most care about?

The Start-Up Visa thing is really important.  All of my political issues are linked to entrepreneurship.  I think it’s important to help people who want to start companies here, wherever they’re from.  In the state, getting rid of non-compete agreements would be really positive for the innovation economy here. 

Your pet peeves?

I don’t have a lot of pet peeves about other people.  My personal pet peeve is running late.  That drives me crazy.  One that has been surfacing lately is people who leave you a phone message and say, “Hey, this is Scott Kirsner, I’d love to talk to you, can you call me back at this number?”  And you don’t know what it’s about.  And you’re playing this long game of phone tag.  And they don’t put any information in the phone message.  Whenever you try and email them they just want to schedule a phone call.  I’m done with the we need to have a phone call about everything mode of interaction.  It’s very 20th century.

Your house is burning down, your family is OK, what’s the one item you take with you?

I think my wife would be mad if I didn’t say the cats.  But, if they’re part of the family, to be honest, I have a framed marriage contract.  In Judaism you often have a nicer, decorative marriage contract sign.  We have a really nice one at the bottom of our stairs.  I think that’d be a good thing to take both from my perspective, and my wife’s perspective. 

What’s something you’re wrestling with?

I’m wrestling with what makes a good newspaper column to print on Sunday, and what makes a good blog post.  I think of my blog readers as being a little more insidery and participants in the ecosystem here, and the Sunday column readers as being a general newspaper reader who may not know or care about venture capital or start-ups and trying to find interesting stories for them that don’t feel very insidery. 

Do you have different journalistic standards for both?

Yeah, I’m trying to get things accurate.  The great thing about blog posts is you screw up and you can instantly correct it and strike thru the words where you made a mistake and update it.  In a way, it feels a little bit less damaging when you make a mistake as opposed to having half a million copies of the Boston Globe that you can never correct.

Right now, you’re writing books, your hosting conferences, you’re writing for The Globe, you’re blogging – can you rank order them in terms of your personal enjoyment?

Right now I’m doing a lot of conference organizing, so I’m a little bit overwhelmed by the sheer amount of that.  So, that’s not my highest level of enjoyment right now.  Although ordinarily, I do enjoy that a lot.  And certainly when the conferences roll around, I just enjoy seeing a mix of interesting people talking about fun stuff often without powerpoint in an unstructured way.  For me it’s about being out and about, not so much writing the column, sitting in front of my laptop or writing a blog post.  It’s more about being out and about, hearing what people are working on.  Meeting entrepreneurs at conferences or little get togethers whether it’s OpenCoffee or webinno.  I like being around the entrepreneurial energy.

You’re known as the innovation guy, you’re pushing innovation here.  When did that start, how did you get onto that theme, where did it come from?

I left full-time employment at The Globe in 1997.  I started doing a lot of freelance writing for Wired Magazine, Wired’s website, Fast Company, and a bunch of other places, CIO magazine.  Then in 2000, at the height of the dot com, The Globe asked me to do a weekly column on Internet stuff in Boston because I had helped launch their website and had been doing this freelance writing.  Over time that expanded, as Internet stuff stopped happening as much in 2001, and in 2002, I started expanding to other areas of technology – life sciences, energy, any kind of start-up enterprise.  When I got back from CA in 2007, I just really felt like no one in California talks much about Massachusetts, or knows what’s happening here, and that was a little troubling.  I wanted to take a more of an activist role with the column.  What are the issues that we ought to think about, work on, and talk on that are holding us back, not just in a Boston versus Silicon Valley way, but let’s be a globally competitive place that attracts people to work in all kinds of innovative industries. 

How would you assess how you are doing?

Well, I think there are a lot of people who are more influential at it than I am.  I think Bill Warner, the founder of Avid, is very involved with the Mass Tech Leadership Counsel.  I think what David Beisel has done with webinno has been very powerful for the community.  I don’t think I’ve been a major influencer, but probably in an annoying way, I try and write about things that would move the needle and would make Massachusetts and New England a better place for entrepreneurs and just encouraging people here to be a little louder and prouder about what we do here – be more self-promotional and be more promotional of the region.

How many people do you think you’ve interviewed in your career?

I’m so bad at math.  If you just talk about the Globe column – this is my 10th year of writing the weekly column.  That’s 50 columns per year, and on average I interview 7 people for every column.  So, that’s 350 people a year times 10.  So, let’s say 3,000–3,500 people just for the Globe column.

What’s your most memorable interview for whatever reason?

I’ve had the chance to interview lots of interesting people for books.  One really fun interview is I interviewed Morgan Freeman in a trailer of the set of a movie for one of my books.  It was just a really interesting conversation oddly about movies being delivered over the Internet which he was really an early promoter of.  That would be one that stands out for me.  Another one was interviewing Chad Hurley from YouTube very early in the days of YouTube in 2005.  I was writing a piece for the NY Times.  It was very hard to tell at that time that YouTube was going to be the winner in online video. 

What do you consider your best piece of reporting ever?  And conversely, where did you really screw it up?

I feel like occasionally I have an article that doesn’t turn out the way I hope.  For me, the thing that is really successful is having a central story or anecdote about an interesting people that you can really relate to – like a famous column that I wrote about you once.  So often I do feel like I fall short.  Nothing comes to mind as being egregious like I wish I could take that column back.  I don’t know if I want to judge what the best piece of reporting I’ve ever done.  There are a couple of columns that have illustrated conflicts between entrepreneurs and VCs that I got really good response from – not from the VCs usually, but just the entrepreneurs.  Because I think the power dynamic entrepreneurs in a lot of cases being supplicant and needing the money and needing it from VCs, and the VCs having the ability to look at every company in the space and decide where they’re going to invest. 

What do you think would be the words that a typical Boston-area VC would use to describe you if I asked them, “What do you think of Scott Kirsner”?

“Who?”.  I don’t think everyone knows me.  Maybe they know who I am.  Probably annoying, inaccurate, irrelevant.  I don’t think most VCs feel like I have that much of an impact and they probably think what I’m doing is constantly just needling them for insignificant stuff.  Which is sort of true.  The VC’s main job is to make money for their LPs and everything else is secondary.  That’s the way I look at the bottom line.  It’s not to maximize the return for entrepreneurs or team members or do great things for the community.  When I’m needling them about doing more stuff for the community, you should be blogging, sharing your thinking and your vision – a lot of them think that’s just annoying and maybe obnoxious too.

For the VCs that do think that, what would you want to say to them?

That my job is to be annoying and needle people and write about the issues that could be holding back the regional economy and could improve it.  You may not agree.  I am interested in hearing from people when they don’t agree.  I love when people tweet their rebuttals or email me or do a blog post about it.  I think everything is a conversation.  The thing that is great about social media, the people that disagree with you and the people I write about, have a big platform now to share their viewpoint.  It’s not just the big media having the only platform and I think that’s a really positive thing. 

What do you think an average Boston-area entrepreneur would say?

“How come you haven’t written about me?”  I hired this expensive PR firm, they’re pitching you all the time, why haven’t you written about me?  My response is I’m just one person.  I try to write about the stuff that feels the most interesting and relevant at the moment.  It’s not my agenda to write about every company.  In a way, I’m a little bit frightened about the TechCrunch approach to journalism, or a lot of blogs, where every company that gets $0.5M in funding is worth writing about even if it’s the 36th company in the location-based check-in game space.  To me it’s not interesting to write about that 36th company getting funded to take on FourSquare. 

If you could theoretically have stock in the company of any entrepreneur that you’ve interviewed, which company would you want?

That would be a real conflict obviously.  If only in theory, to be honest the company that is most promising right now just because they so own the business model is Zipcar.  They’re not really a pure technology company at all.  I just feel like Robin Chase and her co-founder Antje Danielson were just so brilliant in bringing that business model over from Europe.  They and Scott Griffith have been so great at expanding it.  That just feels like a company is poised to be a nationally or globally relevant and really successful company to me.  It’s changing the way people live in a fundamental way.  The only thing I’d disclose is I’m a Zipcar member so I use it and have that experience of wow, this has stopped us from buying a $15,000 second car that has insurance costs and gas costs and registration costs. 

When you look down the road 10–20 years, where do you hope to be, what do you hope your legacy is, what will you be doing?

I’d like to transition by then to being a snowboard instructor in the winters and take my summers off.  But, in terms of impact, there are a lot of great initiatives that are trying to shape Boston and New England.  I think this is one of the most innovative corners of the world and I want to help spotlight what people are doing here.  The analogy I use a lot, because I grew up in Miami, I think of South Beach.  I grew up in South Beach in the 1980’s – I didn’t grow up in South Beach, I grew up in Miami, but when you would go to South Beach, it was a totally abandoned place.  Two kinds of people lived there – senior citizens and the muggers who preyed on senior citizens.  In 10 years, it totally changed.  All the New Yorkers want to have a second house there and go there on vacation.  You have giant art festivals.  I do think you can really change the culture of a place in a short period of time, and I’m hopeful that’s happening in New England.  I think a good achievement would be to spotlight, write about, and help bring attention to the work that other people are doing to really change the culture of this place.  Change the way that we think about ourselves and change the way the rest of the world thinks about us. 


Cortera – Crowdsourcing Business Credit Ratings

Posted in Volition Capital by larrycheng on March 16, 2010


Congrats to Volition portfolio company, Cortera, which launched their new website yesterday.  Cortera has a pretty simple mission in life – bring great financial and credit information on businesses to users at their fingertips for free or nearly free.  Cortera also allows any business to rate any other business on how they pay their bills.  It’s crowdsourcing for credit. 

It may not be obvious, but business credit ratings are driven by a few thousand large companies.  They contribute accounts receivable data (information on how their customers are paying them) to companies like Cortera and others.  That data is sliced and diced to produce credit ratings that businesses use for every day decisions like extending payment terms and credit decisions.

The flaw with the model is that if you are not one of those large companies, the experience of how your customers pay you never enters into the calculus of credit ratings.  On the flipside, if you aren’t a customer of one of those large companies, you may never be rated for your credit worthiness, even if you pay your bills in a timely fashion.  Millions of small businesses are left out of the credit equation today.

The only way to address this problem is to democratize the inputs for credit ratings.  Allow any business to rate any other business on how they get paid.  Expand the data contributors from a few thousand companies to a few million companies.  And then make credit and financial data easily accessible and very inexpensive.  Better data for everyone is the result – that’s the aim for Cortera.  It’s a grand and worthy goal that we’re proud to be working with them on. 



Why Do Some Relationships Fail?

Posted in Books, Pop Culture by larrycheng on March 13, 2010

I like to blog about different, random, more personal things on the weekends.  Hence, I’m starting a series on books that I think directly or indirectly answer an interesting question with an interesting point of view.  The first installment last weekend was Why Are 80% of Harvard Students First-Borns?.  Today is the second installment and is about one of my favorite relationship books – The 5 Love Languages by Gary Chapman

If we look around – it’s pretty undeniable that there are broken relationships within marriages, families, and friends.  What’s underlying some of the challenged relationships between spouses, parent/children, etc.?  Clearly, there’s not one simple answer.  Yet, Gary Chapman lays out a relatively simple but profound theory based on a very straight forward framework that may have broad relevance.  First the framework:

He believes that there are 5 primary love languages and everybody has a primary (usually one, maybe two) love language which makes them feel loved.  Importantly, their primary love language is not necessarily the way they communicate love to others – but it’s how they feel loved by others.  The 5 languages are:

  1. Physical Touch – hugs, kisses, physical play, affection, etc.
  2. Words of Affirmation – words of praise, encouragement, adoration, admiration, etc.
  3. Quality Time – focused, attentive time in a joint activity, conversation, etc.
  4. Gifts – self explanatory: meaningful, thoughtful gifts
  5. Acts of Service – helping out with projects, responsibilities, homework, tasks, etc. 

So, that’s the framework.  The theory on why some relationships are strained is pretty straight forward: 

  • Everyone has a primary love language – which is how they receive love.
  • People tend to communicate love to others with their own primary love language.
  • But, if the other person has a different primary love language, they will not feel loved.

For example – your primary love language may be words of affirmation.  But, if your child’s love language is physical touch – no amount of verbal praise will replace your child’s need for hugs, physical play, and so forth.  Or your love language may be physical touch, but your spouse’s may be acts of service.  So, no amount of affection will replace the love communicated through service acts like cleaning up the house, cooking a meal, or taking out the garbage.  That’s why two people in a relationship can be trying hard but not communicating love to each other because they don’t recognize the distinction in each person’s primary love languages.

Though it’s a relatively simple framework – I recommend getting the book if it’s at all interesting to you.  The book gives more insight into how to determine someone’s primary love language, practical ideas around each love language, and more insight and detail on what each love language means.  OK, I never thought I’d write a blog post with the word “love” in it 25 times.  I think my next post will have to be about ultimate fighting or something. 

The Tension Between An Optimistic CEO And A Conservative CFO

Posted in Growth Equity, Organizations, Venture Capital by larrycheng on March 12, 2010

From what I can tell, in nearly every Volition portfolio company, the CEO is more optimistic than the CFO – and usually by a wide margin.  Certainly, part of this structure is by design.  But in reality, you just don’t find a lot of optimistic CFOs to hire, and a conservative CEO probably doesn’t inspire investment.  So, there is some self selection far before we get involved. 

But, there is a natural and necessary tension that exists when the CEO and CFO, with completely different risk orientations, have to report to a single board of directors. 

  • What if the CFO thinks the CEO is being way too optimistic on the budget?
  • What if the CEO thinks the CFO isn’t selling enough to get investors interested?
  • What if the Board is holding the CFO accountable for spending, but the CEO is pushing hard on the accelerator?
  • What if the CFO disagrees with the CEO in front of the Board, is that considered disloyal and a career limiting move?
  • What if the CFO drags down the energy inside the company by always focusing on the downside? 
  • What if the CEO’s financing plan presumes everything is going to go right, when the CFO doesn’t think that will take place?

These types of questions and dynamics take place in many of the companies we’re involved with.  There aren’t easy answers, but there are some principles involved to help make things work. 

1.  There has to be mutual respect between the CEO and CFO. 

Young companies need optimistic CEOs.  Every young company will have its dark days when you wonder if things will work.  Every young company has to believe it can defy the odds, and build something great from nothing.  Employees who work at young companies trade off cash compensation for equity – they only do this if they believe their equity is worth something.  Someone needs to inspire them with the vision of the company – with the upside.  In fact, in many ways, the optimism of the CEO for a young company is the spirit of the company.  It’s absolutely necessary.  You never do great things if you don’t believe you are great.   

Good businesses need conservative CFOs.  Optimism doesn’t meet payroll.  Optimism doesn’t make the financial covenants on debt.  Weak balance sheets aren’t made up by optimism.  Every company has a downside scenario, and someone needs to think about it to prevent it from happening.  Someone needs to point out the warts, so they can be fixed.  If great ideas don’t translate into numbers, then it’s a great idea that doesn’t work.  A CFOs conservatism is critical to a success of the business.  Good CEO/CFO combinations appreciate the different perspectives that are brought to the table.  Not only do they appreciate it, they insist on it.

2.  The CEO needs to support the CFO having a direct and structured line to the Board. 

It’s presumed that the CEO has a direct and regular line to the Board.  But, that does not negate the need for CFOs to have a structured channel to the Board.  Why?  The CFO has a unique and personal fiduciary obligation to the shareholders.  The CFO uniquely reports to the CEO and to the Board.  I often think of the CFO as the “CEO of the finances” – and to execute that responsibility, board access is necessary – and expected by the Board.  For some CEOs, they are comfortable with the CFO talking with the Board on an as-needed basis.  Certain CEOs find this threatening.  If that’s the case, a structured email or call, on a predetermined interval, is appropriate.  I often receive an email directly from the CFOs of my companies after the month-end to report financials.  This should be used to raise any issues worth noting.  The structure of it should give the CEO confidence that the CFO is not lurking behind his/her back talking to the Board, which is counterproductive.

3.  The CFO needs to be loyal to the CEO. 

Loyalty doesn’t mean agreement.  Loyalty doesn’t mean blindly following every course – e.g. a loyal friend doesn’t let their friend drive their car 100 mph off a cliff.  Loyalty, in this case, simply means openness and honesty in all circumstances.  Loyalty means always trying to make the company and the CEO successful. 

The dynamic between a CEO and CFO is a delicate balance between people often with very different DNA.  It’s a necessary balance that if managed well is often the basis for very successful companies.  I’d appreciate other ideas on how others have made this work as it’s clearly an art, not a science. 

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Single Unit Value Is More Important Than Growth

Posted in Growth Equity, Venture Capital by larrycheng on March 11, 2010

The pressure for revenue growth has hurt a lot of young companies.  It starts with an entrepreneur representing a growth story to an investor.  Then the investor represents the growth story to his firm to gain support for the investment.  And then the investment happens.  Then the company takes the investment, invests in sales and marketing, and the company grows.  Everyone is committed to growth, gets used to growth, and expects more growth in the future.

This is all well and good – if and only if – the single unit value is there, especially in mass market companies that service consumers or small/medium size businesses.  There are two aspects to single unit value: (1) single unit satisfaction and (2) single unit economics. 

Single Unit Satisfaction

The fundamental question is if you take a single customer, do they derive sufficient value from using your product or service? 

  • For a consumer social web service, maybe the key value measure is whether a user will tell two friends about it. 
  • For a SAAS company, the key value measure might be renewal. 
  • For a transactional company, the key value measure might be a repeat transaction rate. 

This is not intended to be rocket science.  Companies need to focus on a single customer, that is in their target market, and make sure they can deliver sufficient value to that customer to drive the right behaviors (referral, renewal, repeat usage).  It goes without saying, trying to build a great business on the backs of customers that don’t perceive sufficient value in your product or service is impossible. 

Single Unit Economics

The fundamental question now is if you now take that satisfied customer, can you make money based on your business model?  Companies need to fully burden the cost of servicing a single customer to understand single unit profitability.  This includes marketing, sales, cost of goods, capex, servicing, overhead, etc.  The question therein is whether that single satisfied customer is profitable given all that it costs to acquire and service them?

  • Many online video sites excelled at single unit satisfaction, but they got hammered on the economics because they didn’t generate enough ad revenue to cover  a single cost component such as bandwidth to deliver the videos. 
  • Some mass market companies that can cover sales and marketing costs, get caught up in the cost to service customers on the back-end.  The old local food delivery service, had this issue. 
  • Infrastructure oriented companies, like wireless service providers, that have up front capex to deploy new customers, need to be crystal clear on lifetime value of customers – to cover capex.  Otherwise growth is in fact detrimental.
  • It goes without saying that if your selling your product for less than what it costs you – some of the early online retailers like faced this.  You can’t make up negative gross margins with volume.

Sometimes the pressure for growth obscures the importance of single unit value.  In reality, there is no reason to invest for growth if the single unit value is not there.  It’s more prudent to wait, get customer satisfaction and economics nailed right, and then push for growth.  Pushing for growth prematurely at best will waste money unnecessarily, and at worst, will accelerate the demise of the company.  On the flip side, if the economics and value are there, rather than tiptoe forward on the growth plans, it’s prudent to invest aggressively for growth.  That’s when great companies are built, but it often requires patience in the early days. 

The Google Shift In Enterprise IT

Posted in Technology by larrycheng on March 9, 2010

Through our portfolio companies, we have a view into how Google is perceived for both large enterprise and small/medium enterprise computing needs.  In some board meetings, I find myself exhorting management teams not to underestimate the impact of Google.  In other board meetings, I find myself cautioning management teams not to overestimate Google.  This dynamic is best portrayed in a recent Goldman Sachs IT Spending Survey.

When IT execs are asked about their top 3 strategic IT vendors today, the top three are:

  1. Microsoft
  2. Cisco
  3. HP

Google ranks 13th out of 18 large IT vendors.  This lends credence to the “don’t overestimate Google” refrain.  Arguably, Google’s lone successful product is still search.  For example, Chrome, Google Apps, Mobile Phones, and Gmail are not close to being market share leaders in any of their respective segments. 

But when IT execs are asked about their top 3 strategic IT vendors in 3 years, the top three are:

  1. VMWare
  2. Google
  3. EMC

Surprisingly enough, HP and Microsoft go from the top 3 to the bottom two.  This lends credence to the “don’t underestimate Google” refrain.  Infinite resources, sheer determination, and a business model that turns industries upside down is the type of competitor not to underestimate. 

I’m not sure it matters if Google succeeds in winning certain product categories.  Through the process of trying to win, Google will upset traditional business and delivery models which will in and of itself have a material impact on enterprise computing.  Even if Google “loses”, their impact will be far-reaching.  That’s the reality enterprise IT companies have to prepare for. 

Just How Profitable are Healthcare Insurers?

Posted in Economy by larrycheng on March 8, 2010

After reading this blog post on healthcare and hearing the rising volume against healthcare insurers – I wanted to understand more clearly the profitability of healthcare insurers.  So, I went to Google Finance, searched for Aetna, got a list of their competitors – and researched their net profit margins.  Here they are:

2009 Net Profit Margin of Healthcare Insurers

I’m not here to defend or attack healthcare insurers.  But, 3.7% median net margins seems relatively pedestrian to me – not obviously indicative of an industry gouging its customers.  For example, if you look at the profitability of Google and its competitive set, here’s what it looks like:

2009 Net Profit Margin of Internet/Tech Companies

Given all of the noise around healthcare insurers being the bad actor in the healthcare delivery equation – I would have thought they’d be more profitable.  But, to be fair, profitability margins are only one variable in the complex analysis on our healthcare challenges.  We hope that our portfolio companies like Redbrick Health and Ventana can help be part of the solution. 

Why Are 80% of Harvard Students First-Borns?

Posted in Books, Pop Culture by larrycheng on March 6, 2010

That’s my estimate anyways.  I remember it like it was yesterday.  It was my freshman year at Harvard, and I was going to the first lecture of “Justice” – one of the most popular classes on campus.  The lectures took place in Sanders Theater packed by over a thousand students since it’s only offered once every three years.  The first question the professor asked – please stand up if you’re the first born child in your family (inclusive of only children).  I literally felt like everyone in the entire theater stood up – except me since I’m a youngest child.  Why is it that such a high majority of Harvard students are first borns or only children?

Because birth order matters according to Dr. Kevin Leman, author of The Birth Order Book – Why You Are the Way You Are.  I’ve been reading it – here’s his framework on how the different orders generally are (noting that not every characteristic applies to every child):

First Child: perfectionist, reliable, conscientious, a list maker, well organized, hard driving, a natural leader, critical, serious, scholarly, logical, doesn’t like surprises, a techie.

Middle Child: mediator, compromising, diplomatic, avoids conflict, independent, loyal to peers, has many friends, a maverick, secretive, used to not having attention.

Youngest Child: manipulative, charming, blames others, attention seeker, tenacious, people person, natural salesperson, precocious, engaging, affectionate, loves surprises.

Only Child: little adult by age seven, very thorough, deliberate, high achiever, self-motivated, fearful, cautious, voracious reader, black-and-white thinker, talks in extremes, can’t bear to fail, has very high expectations for self, more comfortable with people who are older or younger.

[Related Post: The Letter Given to the Valedictorian of Harvard]

Independent Firms With Single Limited Partner Histories

Posted in Venture Capital by larrycheng on March 5, 2010

A breakfast conversation with Fred Wilson this morning prompted the thought of how many independent venture firms come directly or indirectly from firms that had a single or captive limited partner structure (one source of capital).  Just thinking out loud:

  • Union Square Ventures was formed by Fred Wilson and Brad Burnham.  Fred came from Flatiron which at the time was all J.P. Morgan money.  Brad came from AT&T Ventures which was all AT&T money.
  • Bessemer Venture Partners through most of its history was Phipps family money through Bessemer Trust.
  • Venrock was historically all Rockefeller family money.
  • Norwest Venture Partners was and may still be Wells Fargo money (not sure). 
  • Flybridge Venture Partners came from IDG Ventures previously captive to IDG.
  • Fairhaven used to be TD Fund which was captive to TD Banknorth.
  • Scale used to be BofA Ventures which was captive to Bank of America. 
  • And, of course, Volition Capital was formed by the U.S. team of Fidelity Ventures. 

I am sure there are many others if I just thought about it more.  I think if I continued to think about it – I’d probably be surprised at how many independent firms today have some roots in the single LP model, and I’d also probably be surprised at the consistent quality of the independent firms once they are formed.  We can only hope and expect that Volition will follow in the footsteps of some of these fine firms.  If there are others firms you know of, I’d be interested to hear about it. 

Volition Capital And Cue Ball Capital Lead Stylesight Financing

Posted in Founder-Owned Businesses, Growth Equity by larrycheng on March 4, 2010

We are very pleased to partner with Cue Ball Capital on a $10 million investment in Stylesight which was announced yesterday.  Stylesight is the leading style information service and SAAS platform for the global design ecosystem.  Thousands of retailers, brands and manufacturers are using the subscription service to be inspired by real-time design images from around the world and leverage that content into a web-based design process. 

Want to know what kind of black, above knee, modern black skirts women were wearing on the streets of Sao Paolo – yesterday?  Stylesight can tell you.  Want to take those high resolution images, zoom in on the stitching, and create a story board for the front end of your Spring lineup design process?  Stylesight can do that for you as well.  In millions of different derivations, Stylesight brings the world of design to your fingertips in real-time.  As their tag line goes: “Images that Inspire.  Tools to Get the Job Done.” 

What I love about Stylesight is when prospects see the product – there is such a huge “wow” factor.  I was at a launch party for their latest release – and the expressions of amazement on prospects faces tells it all.  The conversion rate to customer after seeing the demo is pretty staggering.  With customers that love the service and a wide open market, Stylesight is becoming the industry standard, which is why they the grew so aggressively through a terrible economy last year.  Stylesight’s ambition for global leadership are firmly in place, and we’re pleased to support them.   

We are also very pleased to partner with Cue Ball Capital for the first time.  It is a privilege to be working with Tony Tjan and Dick Harrington at Cue Ball.  I personally view Cue Ball as a rising star in the Boston venture capital scene.  They have a wealth of knowledge on recurring revenue, information services businesses – and the Cue Ball Collective is for real.  There was substantial interest from different financial parties for this round, but Cue Ball stood above the rest given their expertise, value and enthusiasm.

Stylesight also happens to be the type of company we love at Volition.  When we first came across Stylesight – it was and is a high growth, founder-owned, principally bootstrapped company with a strong recurring revenue base and a diversified, very satisfied customer base.   Given our investment, it is no longer a bootstrapped company, but we all expect that the capital and partnership will lead to a much larger end outcome for all involved. 

Exciting times for Stylesight, Cue Ball and Volition.  Onwards and upwards.