A holiday update letter doesn’t do a great job with sharing a two dozen images from the year. So here are Photo Highlights of 2009.

1.5 t Salt
1 t Sugar
1 T Minced yellow onion
.5 t Dried Mustard
.5 T Fresh Rosemary Chopped

.25t Powdered Ginger
1 T Course Black Pepper
.25 C Lemon Juice
.5 C Olive Oil
1 Clove Garlic Minced
.25 C Soy Sauce
3 T Honey
2 T Red Wine Vinegar

Throw the whole lot in the blender, pour over steak in a Ziplock bag, refrigerate overnight.

• Much Much better lower light performance
• Bracketing (being able to shoot the same image at current settings + 1 and -1 f stop)
• Diopter adjustment on the view finder,? effectively reading glass settings for the viewfinder
• Very Sharp, large screen on the back, which supports video and live view shooting.

• The Book of Eli divx

Guess that was four.? I purchased the body and paired it with 18-200vr.? This lens covers 90% of my needs, only need a bigger lens occasionally for wildlife photography.? I am a regular reader of Thom Hogan’s Nikon review site, here are his reviews on the D90 and this lens.? For a moderate price by Digital SLR standards this is great camera.

For a complete review of the camera see: bythom.com D90 Review
For a review of the lens see : bythom.com 18-200vr “Super Zoom” Review

In the Investors Agreement

For purposes of the Section A, "Major Investor" means any Investor that holds at least ten percent (10%) of the shares of the Series A Preferred Stock or the Common Stock issued upon conversion thereof (subject to adjustment for stock splits, stock dividends, combinations, reclassifications or the like) originally issued to all Investors pursuant to the Purchase Agreement.  A Major Investor includes any general partners, managing members and affiliates of a Major Investor, including Affiliated Funds.

A._    Right of First Offer.  Subject to the terms and
conditions specified in this Section A._, the Company hereby grants to each Major Investor a right of first offer with respect to future sales by the Company of its Shares (as hereinafter defined).  For purposes of this Section A._, Major Investor includes any general partners, managing members and affiliates of a Major Investor, including Affiliated Funds.

madonna true blue download So "what is this all about?", he asked.  The thought that popped into my head was "angel poison".  Basically the Big Valley VC doesn’t want to share if this deal turns into a rocket ship, or their lawyer isn’t interested in chasing down a bunch of individual investors for signatures (which having done it multiple times, is in fact a pain in the neck).  Bottom line, unless you are a "Major Investor" you don’t get the guaranteed right to continue to invest in future rounds. 

What should the entrepreneur do. ?

daybreakers

1:  Ideally have multiple term sheets so you can quickly negotiate terms like this away.

2:  Have a frank discussion with the VC along the lines of:  "Look Mr. Big VC, my angel investors have been very good to this company.  I don’t expect most of them will play along in future rounds, but it really is kicking sand in their faces to tell them they can’t."   Regardless this dialog will tell you a lot about how your potential new partners are going to be to deal with down the road.  If they aren’t going to be unreasonable on a term such as this, you can bet on more difficult issues, they will be even more difficult.

3:  There are cases when a limit on future participation make sense, these primarily come into play when angels own a significant portion of the company when the first professional round is negotiated.  Nobody wants prior funding to block future rounds, this has to be worked out on a case by case basis, but requiring no participation is over the top.

The entrepreneur wanted to know what these "Affiliated Funds" were all about.  This is topic is worthy of a separate post, however the quick answer is most venture funds also have "side car" or "affiliate fund" where partners in the firm, and friends of the firm are committed to funding a portion of each of the fund’s investments (frequently with different internal economics which is why they are done in separate funds).  This arrangement doesn’t change the total committed capital a VC is putting into a deal, just provides a mechanism for meeting their contractual obligation to share an investment with their partners and friends… yes there is an irony here.

• The Book of Eli film

Last week, Katie and I were standing confused, and jet lagged after an overnight flight, in front of a ticket dispensing machine on a trolley in Amsterdam.  The ticket machine would only take euro coins, we only had bills, the trolley was rolling down the street, Katie was giving me that look of "Dad are we going to get arrested for not buying a ticket?"  With that a young man stepped up, inserted his ticket strip, explained how it worked, and said "I punched a ticket for you too".  A true "Travel Angel".

Venture bloggers occasionally write about our process,  This post continues on the theme, how do VCs really make decisions that result in investing in a company.

A core trait of human nature is pattern matching past experiences to predict future experience. Listening to Blink by Malcom Gladwell, on the way to and from skiing last weekend may be partly responsible for this post. When talking with my partners or potential syndication partners it is very common to define a deal in terms of comparative references. Company X, has a similar model to company A and we all know how that turned out… Whenever we evaluate an investment opportunity we are constantly pattern matching to our previous experiences (25 deals over 12 years) and countless (100s) of deals that we didn’t do, including a number we wish we had.

Don’t worry if your deal does or doesn’t fit the patterns of a particular venture investor.  Patterns don’t govern if an investment will be made, sometime themes do but that is a different topic.   Patterns can provide you with a convenient way to harvest valuable experience.   In the give and take discussion, explicitly ask "does my proposal pattern match, positively or negatively on other deals you have been involved with".  My prediction is you will learn things that will help your business regardless of the outcome of any particular investment discussion.   If you keep hearing about the same problem or challenge to the model or strategy you are pursuing you will have learned something very important.

daybreakers download A CEO of a recent potential investments was presented with a challenge by the input our patterns provided. If his deal follows the patterns we have seen in a number of similarly structured companies, we expect that it will take twice as long to meet his projections and take considerably more money to attain his goals then he currently is planning to raise. This of course puts the CEO in a difficult spot.  Going to other potential investors and saying "hey these guys think it is going to take twice as long and cost twice as much", is a problematic fund raising strategy. By asking leading questions in future investment discussion the CEO can validate or not the issues raised in our meeting.

The irony in this discussion is we passed on the deal with the strongest pattern match in the set, it took twice as long, it cost twice as much and handsomely rewarded early investors…

1: Go Light
We worked very hard to keep pack weights to a minimum. Our equipment list is available here:Troop 15 Philmont Equipment List . With four days of food and four liters of water all our crew member packs weighed out under 44 pounds, except one dad pack at 50lb. In our experience going light is much more important the going overboard on training. Our Dad’s trained hard, 25 to 50 miles of day hikes with lots of elevation, the crew members joined us on some of our training hikes, we weren’t hard core on this. We did a challenging 50 miler the summer before with 7 of our 8 crew members so we were confident in their hiking ability.

2: Use Philmont Tents for Crew, Rotate Tent Mates every night.
The number one suggestion for crew cohesion, is to eliminate all the “who is bunking with who” drama. The crew leader set up a random bunking rotation before the trek. Using Philmont tents made managing dividing up the gear simple. We started the rotation first night at base camp and carried it through the last night of base camp. Such a simple idea, don’t remember where we found it, but this completely worked.

3: Carry One Good Camera, No Electronics
We included in our common gear one digital SLR, my Nikon D50 and a couple of pocket digital cameras, we got great shots and were very glad we had the “big camera”. Philmont prohibits MP3 Players etc. we also prohibited cell phones except for one adult only outbound emergency phone. We sent word out of our progress with exiting crews for relay to a designated Mom who would then email status to crew families. Being offline for two weeks was hard for the kids and their parents, but this is part of the point. This generation is never unplugged, it is good for them to try it.

4: Get Good Pack Covers
Being from the Northwest we are used to rain, Philmont rain, like everything at Philmont it is larger than life, when it rains at Philmont it really rains. A dry crew is a happy crew or at least a crew with dry items to change into at camp is a happier crew.

5: Stop over at the NRA Shooting Center in Raton
If your crew is into shooting, and you are transporting yourself. Spend the night before you arrive up the road at the NRA National Shooting Center see: NRA Whittington Center. Pre-arrange a skeet shooting session for the morning you are going to arrive at camp. The trainers were great, and the boys got to shoot as much as they wanted (not something that happens at Philmont given the numbers of scouts).

If you haven’t found it, here is one of the best lists of Philmont links on the web: Selden’s List of Philmont Links

Trek trail memories, the top of Baldy and the Tooth of Time will be moments to be savored forever.

Enjoy your trek,

• daybreakers movie trailer

.  Helping build a hyper-local community site has been a great learning exercise.  Last year Lake Wenatchee froze for the first time in 12 years, which provided lots of entertainment and some angst for dock owners with pilings.  We had a local email list which we used to run an ice break contest:

Ice + Flag + Webcam + Email = $ for local charities. 

The lake has refrozen this year, so we are running the contest again, with the added benefit of having a website where participants can track both the state of the ice, current entrants and the all the lake news that is fit to publish.

Like the famous Ted Stevens earmarked bridge in Alaska, a bridge to nowhere can cost a lot of money with the added pain it is your money, not just some tax payers from the lower 48.

Bridge to Nowhere Symptom #1: Not Enough Capital Being Raised

Every investment round should have enough money in it (with buffer for unanticipated shortfalls) to fund a company to the next funding milestone. This is not a precise science. There are many ways these milestones can be cast, but regardless they need to be able to answer positively the question “will the accomplishments be sufficient” to motivate new investors to join the party. In a company without professional investors, this can be a big hurdle. This involves real on the ground accomplishments (beyond spending the cash on hand). Putting 1M into a deal that is going to require 5M – 8M to generate enough traction to attract a deep pocketed professional investor isn’t wise.

Bridge to Nowhere Symptom #2: Terms That Spoil the Deal

We have always been advocates of using the cleanest term sheet possible. Avoid special preferences, ratchets, punitive clauses we are definitely out of the build the company and good things will follow school of investing, others make good money by financial engineering.

Bridge to Nowhere Symptom #3: A Badly Priced Round

This one is a bit of an oxymoron, but bear with me. We recently saw a deal where the company had set a price for a small angel round. The price was, needless to say, very company friendly. This has bridge qualities, these funds will carry the company until it needs a larger professional round or the company becomes self sustaining. This next round has four potential pricing outcomes:

1. No additional funds are needed. The angels now own a small illiquid piece of a small business.
2. All is incredibly great and new investors are willing to do an up round.
3. More money is raised at the current price, which means todays money overpaid.
4. The only way to raise money is in a down round. Down rounds are bad for the current investors and cast a negative light on the company.

Is it ever prudent to invest in a bridge round. Absolutely.

1. When the funding source for the next round has been identified and has a high likelihood of completing the deal.
2. When there are deep pockets already at the table who believe in the deal and are willing to continue funding the company.

As a smaller fund, we frequently take bridge positions so we have a seat at the table. Good deals are a bit like musical chairs and small $ tend to get shoved off the last chair by bigger dollars.