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Sahil Gupta:

Great post by Semil Shah on our move out to California, enjoy!

Originally posted on TechCrunch:

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Editor’s note: TechCrunch contributor Semil Shah currently works at Votizen and lives in Palo Alto; you can follow him on twitter @semil

“In the Studio” at TechCrunch TV this week welcomes a former California resident and current investor back to the west coast, where he and his partners have embarked on a new journey to build out a physical presence in Silicon Valley and San Francisco for one of the most dynamic business groups in the world.

Ajay Agarwal, a managing director with Bain Capital Ventures (BCV), is leading the charge of building his firm’s west coast offices and unveiling a brand new $600m fund, announced a few weeks ago in The New York Times. That’s a whole lot of money to invest in new consumer, enterprise, and mobile opportunities. This is sort of a personal homecoming for Agarwal, who went to Stanford years ago as a…

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A year and a half into my life as a Venture Capitalist, what have I learned? Not much? A lot? Always tough to answer…The past year has been an adventure. I’ve met and spoken with hundreds of entrepreneurs, operators and startup enthusiasts. The energy through the ecosystem is contagious, and having the ability to become a more integral part of the community on the west coast is humbling. So, through all this I must have learned something, right? Depends who you ask…

After having spent over a year now on the “dark side” and witnessing both booms and busts, one lesson, however, has become increasingly apparent: don’t get caught up in the hype, find your niche as an entrepreneur. Sounds cryptic, but it is not, it is simple. The underlying tenant here is that success is ultimately relative; therefore, know not only what you are good at, but also you want to accomplish. Sounds obvious, but the complication stems from the fact that often we (as in society) let our definition of success be influenced by others.

For example, take the buzz and community that has been built around tech blogs. Blogs like are excellent resources and are vital parts of our ecosystem, but because of the hype that is created by each article and/or announcement, we often times judge a company by the number of press releases and subsequently, the amount of capital it has raised. In some circumstances, this may correlate with the companies and founders definition of success; in others, however, it may not. This is not a problem in it of itself. What is a problem is when an entrepreneur building a business geared toward short-term monetization and profitability (personal sustainability), not scale, switches her strategy toward building headlines and disrupts the balance of her organization.

Generally speaking, an entrepreneur sets out to build a business with both a personal and professional goal in mind. In my experience, these goals range from creating a “disruptive change agent” to building a “lifestyle business” that can sustainably operate, with an array of other options somewhere in between. Each startup is created with the founder’s goals as their central DNA; generally speaking a company embodies the aspirations of its leaders. Every decision along the way, therefore, must align with these goals and aspirations: “how many people should I hire? how much capital should I raise? do we focus on distribution or profitability?”

Every entrepreneur is different, and therefore, she will have a different response to each question and to every decision. The biggest pitfall, however, is when these decisions are dictated by perceived success, rather than internal purpose; this is especially applicable to first-time entrepreneurs where each decision tends to be the first of its kind (and yes, I’m guilty and not immune to this as well).

Two key examples come to mind here: both pitfalls in hiring and fundraising. Say for instance, I am trying to create a productivity application for SMBs. My goal is to build a lean and profitable business, where not only I can bootstrap my operations, but I can also grow my team, product and revenues sustainably (by the way, I love these businesses!). In this situation, my gut tells me I’d rather hire a small, but highly flexible team; while also minimizing burn and outside capital. Since the focus here is not to achieve venture returns, I’d ideally like to raise $1M from angel investors who are experts in the space and also can add value (through connections, introductions or product guidance). Now my peers are telling me for my business to be successful, I need to raise a lot of money, hire a large team and not worry about revenue, instead focus on short-term wins that create acquisition interest. Institutional investors, who are looking for companies to provide venture returns (i.e. big exits and liquidity events), are preaching scale and dangling the carrot of a big check. In some cases, these may be the right answers, but in others they are not. How do you know? Well, what are your personal aspirations…

Mark Zuckerberg spoke to YCombinator a few months back on the same issue. His point revolved around the short-term nature of entrepreneurs in Silicon Valley. Ultimately, he distinguishes between quick exits and long-term growth…again, results driven by the aspirations of entrepreneurs. At the end of the day neither are wrong (and entrepreneurs can be successful in each situation), but mistakes and complications arise are when we confuse one for the other, and are not ready or equipped (mentally or professionally) for the path.

Personally and professionally, I get extremely excited when I met an entrepreneur with a big vision, building a disruptive business. On the flip side, however, I have a lot of respect for an entrepreneur bootstrapping a business, focusing on profitability while also staying disciplined – they too are creating significant value, and fueling the economy through innovation and job growth. And while one may get more press and buzz than the other, both are extremely successful. Each company entrepreneur has their own niche, and matching your business to your goals is the quickest way to avoid pitfalls and become successful.

I won’t lie, today has been a tough day. I unfortunately never had the opportunity to meet Steve Jobs; but today it feels like I lost a major presence in my life, a mentor. I woke up, and it was clear things were different.

For most people outside of the Valley ecosystem, Steve Jobs will be most prominently known for bringing us our Macs, iPods, iPhones and iPads. He is the inventor and innovator behind much that drives our personal lives, our work lives and our social relationships. His legacy will be through Apple, and that alone is remarkable.

However, as I have grown up to “know” Steve Jobs, his legacy is so very different. Sure, much of the way I consume information is through his machinations, and many of the devices I use rest on his vision for the way we should interact with the world. But, as he would best put it, those are transient, those will change.

What really resonates about Steve Jobs was not what he created, but what his creations represented. He believed that what he built would (not could) change the world; and through hard work and imagination, he did just that. For a generation looking for a figure to inspire, he provided a real beacon of hope; a hope that our visions don’t have to be an illusion, they can become reality. And in our current society, where forward thinkers are deemed crazy and visionaries are met by cynics and naysayers, he reminded us that even though change is often times met with resistance, we can always accomplish the unthinkable…we just need a little imagination. It very rare that a man can think truly differently, but his work inspired us to all do the same.

In what I believe to be one of the best commencement speeches ever delivered, Jobs addressed Stanford’s 2005 graduating class and spoke to 3 key themes: 1) trust your instincts, 2) failure can be your greatest weapon, and 3) use death as a motivator to be great each and every day.

Every graduation speech has similar themes, but what made his speech so beautiful was the way his words coupled with his life’s story were able to liberate a generation. We now have a generation of thinkers and do’ers across all industries, who not only try to disrupt the old guard, but also strive tirelessly to create a positive impact, to change the world. He challenged us to be different and unlock genius; he led by example.

I’ve unfortunately never had the opportunity to meet Steve Jobs. But as I’ve grown up, his youthful optimism, his passion and drive have all been a guide-post. I have a firm belief that my instinct, my energy and my youthfulness are my greatest assets; and through his “mentorship”, he has given me the confidence to use these assets to accomplish my dreams, to make a difference. He liberated me. He has liberated a generation. And that is what makes him truly inspirational.

Stay Hungry. Stay Foolish. Thank you Steve, RIP.

SG in SF!

It is now official – I am moving to San Francisco in the summer!

As some of you may have heard, Bain Ventures is opening up an office in Palo Alto in July. Over the past few year, the team has worked hard to gain exposure out West, and now, we are excited to announce we are formalizing our presence with a full staff of investors in the Valley (including me!). Starting July, I will have the fortunate opportunity to join Ajay Agarwal, Indranil Guha and Adam Marchick in our attempt to partner with the world’s best entrepreneurs in order to create the next wave of disruptive businesses.

When I found out about the opportunity to move to SF my interest was immediately piqued (and not just because it was 5 degrees and snowing in Boston). First and foremost, the opportunity to open a new office and essentially start a fund in Silicon Valley has the unique feeling of a startup. We are very aware of the challenges ahead, but the thought of starting from scratch is extremely appealing. Second, the energy, the drive and the density of entrepreneurs in Silicon Valley is unmatched anywhere else in the world. As I pursue my career as both an entrepreneur and as an investor, I’m blessed with the chance to immerse myself into this fast-paced ecosystem.

Since my days with Zodah, I’ve long lusted to head west. Life, however, had other plans. Now, after a year experimenting with the scene in Boston, I now have a fantastic opportunity to not only move to the Bay Area, but also join a young and energetic team. Surprisingly, however, I am very saddened to be leaving behind Boston. I’ve been extremely happy with my experience in Boston– I’ve met a lot of really great entrepreneurs and investors and discovered a tech scene I completely underestimated before I moved here. On the personal front, I’ve had the humbling pleasure to have the company of great friends and co-workers (you all know who you are). Each time you move, you leave behind a family – this time is no exception.

As always, I look at each new chapter of my life as a great opportunity and a new adventure. I’m anxiously excited to see what San Francisco has in store for the next chapter in my life.

We have officially begun 2011, and rightfully so, with much optimism. As I documented previously, 2010 was an extremely exciting year for both entrepreneurs and investors, and we are now entering a new year with an extreme tailwind at our back. With innovations in flash sales, location-based services, internet television and the tablet, the table is now set for an even bigger, and potentially more disruptive year.

There have been many predictions and prognostications on which companies will succeed, which companies will IPO, etc. I’m not going to try to make such predictions; instead, I’d just like to share with you a few areas in which I’m very excited about, in order to (hopefully) get us all prepared for the upcoming year in technology:

  1. The merger of social and ecommerce. The two most popular trends in the consumer internet world are merging at a fast pace. The emergence of social as a readily acceptable form of social discovery is not only allowing people to find new things tailored to their interests, but also is allowing retailers and advertisers to target and find more valuable customers with less effort. As commerce online and through mobile devices increases, it is inevitable that social will be used to customize shopping experiences. Currently, there are many different niche sites focused on social commerce discovery; this year, however, I believe we are ready to see a big player emerge as a platform to form social shopping identities. Once these profiles become easily accessible and indexable, social shopping and targeting will implicitly begin to replicate offline activity. That is exciting!
  2. The saturation of the coupon and the emergence of loyalty. Okay, so maybe that is an exaggeration, coupons will never become saturated. However, now that Groupon (and its competitors) have given local retailers a new medium in which to effectively sell leftover inventory and bring new customers to the door, the next step will be to help merchants retain loyal customers. Current loyalty programs are ineffective, decentralized and hard to redeem. I believe given the effectiveness of group sales to promote new expenditure, retailers will more readily look to the startup community to offer more effective loyalty offerings. Shopkick, Offermatic and CheckPoints represent a new breed of deal platforms; however, I believe these only begin to touch the tip of the iceberg. Once entrepreneurs realize the amount of dollars retailers (especially the big national brands) are willing to spend to retain loyalty customers, things are bound to heat up very quickly.
  3. NFC will FINALLY enable the mobile wallet. Personally, I am extremely excited to witness the beginning of the mobile wallet revolution (anyone who spend any time with me knows how much I hate carrying cash and my wallet around). With rumors that Apple and Google will place RFID chips in their new smartphones, the boom of near field communication (NFC) is inevitable. All major payment networks (both banks and credit cards networks), and new payment platforms such as Paypal and Zong, know this day is near and are fast gearing up for the day the flip is switched on NFC. Soon, smartphone owners will be able to open up an app for each specific credit card, scan their phone, and checkout at a store. Now imagine if location-based services were smart enough to team up with mobile payment services…

Forgive my enthusiasm, but as you can tell, there is a lot to be excited about in the upcoming year. After last year’s successes, we are now on the precipice of even greater innovation and disruption. Disruption, however, does not come about without hard work; so now that everyone has returned from holiday after some fine Christmas Ale, it is time to innovate! Seasons Greetings and good luck to all in the new year!

As always, I appreciate comments and discussions on each of these posts. I don’t profess to always be right, but I hope my thoughts can be used as a springboard for further discourse.

Heading into 2010, the country was in the depths of a great recession. A year later, the triumphs of technology have begun to pave the way for a new wave of optimism; and now, entrepreneurs and investors alike are using the momentum of this past year to springboard the community into the new, and potentially, more exciting year.

Before we get lost, however, in the new and exciting innovations that are bound to arise in the new year, I wanted to take this chance to reflect on the past year to not only highlight the successes, but also, to recognize the patterns that will carry us into the new year. Below is my recap of the key accomplishments from 2010:

  1. Boom of group deals and flash sales. No doubt, the emergence of these deals tops the list with the runaway success of Groupon and Gilt Groupe. Within a year, these sites went from intriguing (but not popular) sites, to billion-dollar, cash-flow generating machines. Furthermore, each of the companies, within their respective niche, have spawned a new generation of clones and derivatives that, in total, have only begun to tap the ever-growing online to offline commerce market. As local merchants and retailers realize the connection in point of sale from offline to online, these businesses will only continue to grow as they provide businesses new ways to advertise and promote.
  2. Proliferation of social location-based services. The adoption of the “check-in” by the masses (i.e. Facebook) is a huge win for location-based services, namely Foursquare, Loopt, SCVNGR and Gowalla. At the beginning of the year, the check-in was still a mere fad amongst early-adopters and an interesting way to share location. Now, these services are being used by millions of people, and have begun to turn the smartphone into an easier way for local retailers and merchants to connect to their customers. The fast adoption of mobile devices, LBS and mobile retail could be one of the most exciting spaces for the next few years…a big win in 2010, and potentially an even bigger win in 2011.
  3. Emergence of internet television. Okay, I agree this might be a stretch, but the emergence of internet-enabled television devices and apps has finally begun to put pressure on traditional cable establishments. Services like Hulu, Netflix and devices like Roku, Apple TV and Boxee, although not enough in their current form to completely replace cable, have started knocking hard enough on traditional models of consumption that cable providers have begun to seriously consider how to combat (or, I hope, adapt to) new pressures. This story is still yet to play out, but the emergence of these technologies over the past year have sure set the table for an interesting, and I hope beneficial, transformation over the upcoming years. Let’s just hope net neutrality wins out…
  4. Breakthrough of the tablet (ahem, the iPad). I’m not a huge gadget freak (although, yes, I am an Apple Fanboy), but the release of the iPad has begun to transform the netbook (and even mobile and laptop) markets. iPads to date have been flying off the shelves, even with some noticeable flaws, and now that the new iPad is set to be released, along with various versions of an Andriod enabled tablet, a RIM tablet, a Microsoft tablet, etc., it is clear, there is a very clear market segment for these devices…congratulations Steve Jobs (yes, I’m smiling)!

Now, this list is obviously not exhaustive; however, what it begins to demonstrate is that there are some key trends that are beginning to drive innovation and change in technology. Each of these successes in the industry reveals a few key drivers that will only remain prevalent in the future:

  1. Mobile is not just important, it is vital. The smartphone has been around for a few years now, but this past year demonstrated the overarching theme that smartphones are now becoming a crucial medium in which owners consume information. This chart below (courtesy of my colleague from BCV) only begins to demonstrate how vital mobile will be in the future of technology.
  2. Social is here to stay. Facebook has redefined the web. At its root, Facebook is changing the way we consume information, and through the use of Facebook Connect, is allowing every website to tap into our personal network to customize the web. Social discovery is the key to creating more efficient markets and easier access to information, Facebook Connect is only the first step.
  3. Convenience and savings are better than tradition. This is not a new trend, but as group deals and cheaper mediums in which to consume information begin to become more easily accessible, traditional establishments of retail and information consumption will be challenged. The biggest value proposition to a consumer is time and dollar savings; if traditional models cannot compete, disruption is inevitable.

So yes, 2010 was an exciting year. As a tech junkie, I was amazed at the constant pace of disruptive innovation. Now though, the past is the past – what will the new year bring? In my next post I will preview 2011, and provide my personal perspective on why 2011 will be even more exciting. But for now, enjoy the last few days of the year, take the time to reflect and prepare for what is bound to be an even more exciting year!

As always, I appreciate comments and discussions on each of these posts. I don’t profess to always be right, but I hope my thoughts can be used as a springboard for further discourse.

The rage lately has been to debate whether or not there is a tech bubble. Everyone from the most prolific of venture investors to my college drinking buddies all have offered to share their opinion on the situation. Like everyone else, I also have an opinion…but I know I’m not an expert, so I could easily be as right as I am wrong about what is going to happen. But to be a good entrepreneur or investor, it is not necessarily important to be an expert, it is important to understand, adapt and prepare. Therefore, given my hopefully relevant perspective of both sides of the table, I’ve decided that instead of writing an academic paper on the economics of the current situation, I’d rather try and translate what I see to what I think it means for the ecosystem moving forward.

So to start and get it out of the way, do I think there is a bubble? Yes I do. But, is this bubble as bad it was in 2000? Nowhere near it.

Now why? Well first I think it is important to understand the current environment from two perspectives: the early-stage and the late-stage. On the early-side, two trends are the most prevalent: 1) the reduction in cost to launch and the rise of the angel investor have led to increased volume of startups and funded startups, while 2) the increase in supply of early dollars and price-insensitive investors have created an increase in price of early stage deals. These are both bubbles. But, according to Eric Paley, this is not necessarily a bad thing. The more early stage companies that are funded, the higher the likelihood an entrepreneur creates the next Google, Facebook, or on a smaller level, Mint, Milo, etc.; and for VCs, based on simple Darwinism principles, more competition will drive to a better pool of companies from which to fund. Sounds familiar? Sure. But what makes this less worrisome than last time is that ultimately the amount of dollars flowing into this sector is only ~$500M, the size of a mid-cap VC fund. Downside here: entrepreneurs fail, prices are too high, some investors lose money – this time though it isn’t dangerous, it is just the reality of our ecosystem and the game we play.

On the later-stage, the recent flurry of so-called “inflated valuations” (see Facebook at $50B, Groupon at $6B and Twitter at $4B) has started to create a scare. Furthermore, due to the stockpile of cash at behemoths like Google, Apple, Facebook, eBay and Amazon there has been a flood of M&A activity, and resulting, price speculation. The fear here is that this is not sustainable – what happens when cash runs out, or these companies IPO? Last time it was not good. This time, I think it will be very different. First, other than Twitter, I truly believe the aforementioned valuations are very reasonable. All these businesses have not only built a solid user base with a lot of eyeballs, but also a profitable business generating significant cash. If these companies IPO, unlike last time, they can become sustainable businesses (see Google) – and therefore, these valuations may not be absurd. Second, the flood of new startups almost certainly mandates that every once in a while, there will be a new company to join the ranks of Facebook, Zynga and Groupon. If this is true, continued disruption will only drive more cash flow and therefore, M&A. Plus, does anyone realistically believes Google or Apple will run out of cash anytime soon? High cash flow business continue to grow their cash stockpiles, even if some dry powder is being used…

Regardless of whether or not I’m right or wrong, what does this mean to us as entrepreneurs and investors? For starters, we all must realize that the early stage bubble will drastically increase the number of companies in the ecosystem. There will be many new ideas and opportunities, but there will also be an even larger number of failures. In order to prepare for this, entrepreneurs must focus on iterating quickly in order to stay as competitive as possible. Furthermore, failures must be embraced; otherwise, the ability for young entrepreneurs to take big, disruptive risks will be stymied. Both entrepreneurs and  investors must be accordingly cognizant that there are many stages to a startup – getting funded early on doesn’t mean you will be successful. Therefore, being mindful of not only how to build a business from a product, but also how to fail gracefully, exit appropriately or find the next opportunity is crucial.

Next given the flurry of high valuations and M&A activity, it is important for both startups and investors to realize each company’s place in the ecosystem – i.e. not every company can be a standalone $B business. Every entrepreneur should focus on being disruptive; but as her business grows, she must also begin to focus on the strategic vs. standalone value. There are exits to be had, but can you create a standalone business ala Facebook, or have you created a disruptive technology that will drive value for an acquirer ala Milo? Understanding the reality of each model will not only drive the most value, but also prevent an unnecessary burst. If startups can continue to innovate around new and disruptive business models, or help large companies execute around current business models, a doomsday scenario is far less likely.

As an investor, these facts must be applied to not only their investment thesis but also their approach with their portfolio companies. Small bets and small wins shouldn’t be frowned upon, especially if you believe there is an impending bubble (as opposed to Fred Wilson’s comment re: Hot Potato and drop.io), because these small victories still provide marginal value to the ecosystem. Furthermore, even though early seed deals and large late stage deals are hot, investors should try and focus on the new crop of early growth deals that are springing up. After seed companies get funded, all the companies that have enough stamina to raise another round (Darwin will no doubt reduce this pool) will be better tested for future success. Again, as I alluded to earlier, if funds are proactive, they will realize (although some of these deals might be overpriced), these companies will be better positioned for success.

So, again, do I think there is a bubble? Sure. But things are different this time, and lessons have and can be learned from last time. As a forward thinking ecosystem, we must be constantly focused on avoiding past mistakes…but only time will tell.  My guess is we learn, people will succeed, but there will also be some pain. Isn’t that what we all signed up for though?

As always, I appreciate comments and discussions on each of these posts. I don’t profess to always be right, but I hope my thoughts can be used as a springboard for further discourse. If you disagree, please let me know, I look forward to your opinions!

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