Brian Grey Blog

Growing up in Oregon I remember how adamant my dad was when it came to landscaping around our house.  His primary goal was to avoid having to mow a lawn at all costs.  I guess the fact that when he grew up he had to shove a push lawn mower around a pretty big yard left a negative yet indelible mark on him.  As a result, he opted for a barkdust yard covered with rose bushes, pine trees and other plants.

For me as a kid I never had to mow a lawn, yes.  But I can tell you that I spent a hell of a lot of time pulling weeds.  What I remember about those Saturday or Sunday weed pulling sessions was how some weeds were pretty easy to yank out, while others seemed to grow so fast and expansively that I never really could get ahead of them.  In some ways, “weeds” are a good metaphor for startups — maybe a way to think about how to assess startups in the current economic environment.

Take for instance the fact that some of the most successful weeds growing in our yard didn’t require us to water or feed them.  They just grew organically (no pun intended).  One could say that these weeds were very capital efficient.  A good lesson for startups today.  Get something going with your product and business concept with as little outside love and support as possible.  I personally love the stories of startups that took a few hundred thousand dollars of angel or friends & family money and were able to grow themselves in to a profitable business.  Maybe the folks at Survey Monkey fit this example?

Another characteristic of successful weeds from my Oregon days was whether a weed stayed low to the ground and expanded horizontally versus sprouting up vertically.  The most frustrating weeds to deal with were the ground huggers — they threw their roots down across a wide area, much like startups that grow fast by being applicable to a broad base of users or customers as opposed to a narrow or singular market.  Twitter is today’s marquee example of a weed that doesn’t have an overly complex root system (e.g. product feature set) but it appeals to an ever widening range of users and use cases.

And of course the most telling example of a successful weed was its persistence.  Some weeds I could yank out and pretty much know that I wouldn’t see them back around the yard ever again.  But the real sticklers were the ones that even after a full day of pulling them out came back within a couple days.  Startups need to be persistence in this way given that they’re always being yanked at by competitors and customers.  The teams that can take a few hits, pivot in a different direction and find a new patch of barkdust to grow in so to speak, are the weeds, I mean startups that are most interesting to back.

Maybe I should create a Facebook app called “If you were a startup company, why kind of plant would you be?”.  Anyone who answers:  “A weed”, might be worth meeting for coffee?

Today’s OpEd section of the WSJ has a piece by Michael Malone about the dangers of Washington bureaucracy stifling the lovefest between entrepreneurs and VCs.

Malone’s supports as his evidence that entrepreneurship is dying out the dearth of IPOs that occurred in 2008 compared to 10, 15 and 20 years ago, and he cites as culprits a bevy of new regulation that has — and will continue to — hamper startup activity going forward:

• Sarbanes-Oxley requirements that dampen the IPO market for venture funded companies
• FASB’s “mark to market” accounting and options expensing requirements that befuddle even the savviest of CEO’s
• SEC’s “full disclosure” requirements that scare off would be board members

So what’s missing in this analysis?

Well, a couple key data points:

• No mention of how many venture backed companies ended up exiting through acquisition during these different windows.  Granted 2008 will look ugly on both fronts, but I would expect that the regulation Malone references would have the effect of steering exits from IPOs to acquisitions.

• No mention of how many venture backed companies have been funded annually.  To me, this is the most salient point.  The desire of people to solve problems, disrupt incumbents and make money will necessarily override any Washington supported hurdles.

I suspect the two data points above will be lower on average in 2008 and likely will be low again in 2009, but that will be due to macro economic conditions, not government regulation related to public company operations.

My prognosis is that problems and opportunities will continue to arise and that people will be attracted to the challenges that are unique to starting a company.

At the same time, larger companies saddled with the rigor of quarterly earnings seasons will continue to look for innovation and growth from startups — and for this innovation they’ll be more than happy to take care of SOX compliance and the like for entrepreneurs after they buy their companies.

Day one of the O’Reilly Web2.0 conference in SF. A pretty healthy crowd, maybe a bit down from last couple years but hard to really tell.

Guy Kawasaki led interesting panel introducing 10 startups that all got going with very little capital. Not sure I buy the thesis that this means traditional VC model is obsolete for digital media startups.

A lot of these early companies will hopefully make it to the point where they need bigger capital investments to get on a higher trajectory towards a bigger topline revenue number and operating profits.

Another good panel with Ron Conway, Josh Koppelman, Jeff Clavier and Paul Graham. Again, these guys are on the frontline seeding early stage companies that ultimately will come in to the crosshairs of the next round of funders.