The nightmare that threw me into is probably best told over a beer - somehow I was one of the unlucky few where OSX Lion upgrade over an existing OSX Snow Leopard was just not possible and became unstable over a few days, leading to not being able to boot the Mac at all! I managed to roll back to OSX Snow Leopard (no little trick there!) and think I'm back in action.

But this post is not about my upgrade problems. It's about email. During that small window of time when OSX Lion was working, I opened up the new Mac Mail and saw....a visual makeover and the additions of grouping by conversation. In fact, it defaulted to conversation grouping. What a disappointment. Here was an opportunity to revolutionize email and the most innovative force in technology decided to just do a visual makeover and add what Gmail has had for a few years now?

Like I said, disappointing.

Email has not been innovated in decades. It's still the same old thing. Oh, people have tried, but then most fail miserably as startups. Some of the things people have tried or are doing:

1. Grouping and viewing messages by sender.

2. Turn email into a social network and view messages that way.

3. Adding windows to email to make it into a professional or personal CRM.

4. Graphical views of email that are beyond the rows of messages we see today.

5. Group email by conversation.

Perhaps item 5 is the most dominant innovation in email, and most notably through Google's Gmail. In fact, it is dominant because Google refuses to give you another interface. If you sign up for Gmail (or Google powered business email) and you use their web interfaceYou also see this in Facebook messaging, but I believe Facebook's implementation is subtly better because they always show the conversation that has the latest message in on top. If you use offline Mac mail and pop into Gmail occasionally, Gmail always shows the conversation that came in first on top that you have not read. It takes a few days of working in the Gmail interface before their sorting becomes somewhat effective. This is why I find the web interface to Gmail so annoying; since I go back and forth between Mac Mail and Gmail, Gmail never gets the chance to stay current to what I'm doing and when I do use Gmail in the browser, it's always sorted in the wrong way. And I always lose key messages because the little flags and bolding are the only signals that something new has come in. And it makes me read those messages in the conversation first before I get to the very last, most recent message. Contrast that to Facebook's conversational grouping and they are OK because they sort the recency of messages differently.

Which gets me to what I did next after I rolled back to OSX Snow Leopard. Fearing that my rollback was also corrupted, I ran it for about a week now but storing all changed files on Dropbox and only using the browser for email to minimize changes on the hard drive in case I had to start over again. It was also a rare opportunity for me to really see if I could adapt to the Gmail interface because I was now not switching back and forth between Mac Mail and Gmail.

After 7 days, Gmail (and Yahoo! Mail!) still annoyed the heck out of me. But after 7 days, my Snow Leopard Mac seemed stable, and I got my old Mac Mail back minus their conversation grouping which was the annoying part of Gmail to me anyways and I didn't miss it.

Here, Apple had an opportunity to leap email several levels and didn't take it. They just made the app look a little different and added what Gmail was doing, which I annoys me when I use it. Really disappointing.

Now follows my wish list for what I want or need in email, but hasn't been done yet or needs to be redone:

1. A better search.

Searching on Yahoo Mail is miserable. Searching on Gmail is pretty good which is to be expected from Google BUT is a poor solution for the original reason why I lost the email in the first place due to other UI problems. Searching on Mac Mail is pretty darn good but could use some tweaks.

What's missing in search is the time element. Often I know that an email came yesterday but somehow I can't find it. Can't I filter by only showing results from yesterday? No - I gotta wade through all the other crap that gets returned from the search just to get the one I want.

I believe people naturally use time as a memory aid. Where did I put my keys? I go back in time, retracing my steps through the house, and find that left it on the table by the door and not in my usual place. Or I know he sent me an email right after our meeting....last Tuesday. So I go back to last Tuesday and find the email.

Some searches have advanced filtering but they are all inconsistent. If I search on my boss Elon in Mac Mail, I can only pick 2 choices of where to search (All Mailboxes and my current mailbox) and From, To, Subject, and Entire Message. What if I only want to see messages from Elon that are about one of my companies and not any others? Can't do that. I start typing in the search box all that text and then select Entire Message and then I've got all sorts of random stuff showing up.

2. Taking huge blocks of email headers and using visual techniques to highlight or even remove them completely from view.

If we say that we like the email header view that's been around since the dawn of internet time, then I think this could be optimized further. One of the big problems here is that there is huge information overload. Trying to find something in the clutter is super hard. Spam filters have tried to help somewhat, creative filters which dump certain emails to relevant folders is another.

But one thing I have not seen tried is using some visual technique to highlight or remove completely from view. Well, not completely true. When I search, I remove all the non-relevant results from view. OK one case. Read/unread is now a blue dot in Mac Mail although some mail readers using greying out. So maybe two. I think, though, we need more cases where filtering causes email to either drop back in visual hierarchy or completely disappear from view.

Take my time example. Why can't I select only show me email from Tuesday? Then all other email would disappear and only Tuesday email would be shown? Or show me only email from my boss Elon. I can sort the column, but then I see everyone elses email also cluttering up my view. I can search, but I get every mention of Elon in every field of the email.

Even if this was to visually set back every email that was an advertising email, and bring to the foreground emails from real people - that would be valuable. Now why wouldn't I want to remove them? Because I'm a shopper and I still want to see some deal emails and not just see them completely. This is why I always go through my junk folder. Who knows what my computer decided to mark as spam? It makes a ton of mistakes.

3. Despite my lack of love for conversations, their OSX Lion Mac Mail visual implementation of conversations is pretty good.

I like how you can just scroll and then you can see conversations, each in its own block. This part I love. On Gmail, they are hidden behind each other once you've read them - now I can't scan them! I have to manually open them all up to refresh my memory on the thread.

I also hate sorting by header to see if the subject can generate conversations. That doesn't work. I'd love to see this combined with visual techniques to drop back other emails or remove them entirely from view, so you ONLY see emails from this thread and conversation.

4. Search by attachment media type.

Why can't I view all emails with pictures attached? Or PDFs? Or Excel docs, Word docs, etc.? If it's all pictures, then why not show them in a UX conducive to that media type, like in a slideshow or grid metaphor, or for docs I have a swipe-able (or equivalent) way of going through them quickly, and then also being able to easily return back to the email that it was attached to.

5. View by calendar.

OK back to my comments on time. Time can also be expressed as a calendar, as a grid with days of the week for any month or similar. If it's a monthly grid, then I can just pick on it and see only emails that came for that day. It could even have a cool graphical representation that abstracts the number of emails that came in on that day, or some other summary information like 3000 emails, 30 attachments, 12 pictures, etc. If it's zoomed in to a weekly via with 7 days, maybe the graphical view abstracts in more detail, like showing me a bar graph of emails that came in at each block of time. I could click on one of those blocks, and then it would show me all the emails that came in within, say, that hour. There would also be easy nav to jump to the next hour.

6. Better personal information tool integration.

My Mac Mail is always open. I have often written notes, keep key information like lists of designers I've worked with, and even written whole blog posts in draft emails. On the Mac, I don't really have a good place to take notes. I'd have to start using Evernote to really get some power but that is a separate thing. And Word just blows for that. Every time MSFT releases a new Word version, it takes that much longer to launch. Sucks!

Maybe notes can be treated like Mail that you never send - you just can file them away, you can search on them, attach them to calendar events, or associate them with emails.

Scheduling often comes with an attached invite.ics which, upon clicking, opens up my calendar and presents the opportunity to reply to the invite. At least on the iPhone, Mail has some nice features where you can auto-create calendar events and the iPhone is smart enough to link some text that seem like dates. But I want more than that. When I create a calendar event, I want it linked back to the email that created it, and I want that email accessible so that when the day of the meeting comes, I can quickly go back and review the purpose of the meeting before the meeting starts.

And I want to only see that as a self contained context; don't show me all the other crap around it. Just show me the emails associated with that calendar event and that's it.

7. Better view by person, and info about that person.

Again, email UIs fail here. You sort in the sender column and then try to find the send there. Man that sucks. Try doing that in Yahoo Mail when your inbox is huge. Their paging eventually stopped working for me.

I should have a way of searching by person, and then having all the time and visual filtering that I have, only I'm acting only on one person's emails with me.

It would be nice to be able to pull up additional info about someone, especially those I don't know. I think this is potentially a more advanced business CRM function than for personal use.

8. Better integration with address book.

Mac Mail's integration with Address Book is pretty good. But it could be better. When I find a contact, I want to be able to easily get to all meetings and emails with this person, perhaps even getting back to the first email or email introduction I had with this person. Right now, when I meet someone new, I always type it in the notes. This is because later, I often forget the person, but I remember I met that person through another person. I search on my friend's name and pull him up because I put that in the notes field.

9. Search the SPAM folder.

This is so simple but ignored. Why can't I search my Spam folder too? At least once a week I always open up my Spam folder because I don't trust the filter to grab and hide stuff I wanted to see. I have to remind myself to do it regularly because there are always emails that get stuffed in there that I want. And it seems that even if I say this is not spam, eventually they get caught again. What's up with that? Woe be to the guy who has a new domain; he'll get tossed in there for sure. Or woe to me for starting a new business with a new name; I have to prove to the spam filters out there that I'm not spam.

10. Better Spam filtering.

No matter what we do, Spam manages to always get through. And non-Spam seems to get caught also. Somebody needs to do this better.

11. Local and location integration.

Everyone else is doing location based services, so why not email? If I knew where an email was sent, that would enhance searching a great deal. Sometimes I remember where I sent an email, as a way to find an old email. Perhaps I was on a business trip in NYC, or at a conference. Speaking of conferences, if I was emailed from someone I didn't recognize and I looked up from where and saw it was at a conference that I was at, it could help jog my memory of who this person was and why he was contacting me.

What other innovations on email are out there? Here are two I recently encountered:

LookAcross - magically, they are able to determine when someone is most likely to respond to various communication modes, like email!

Tout App - templated emails, email management and analytics, plus connection with CRMs.

There is a plethora of email clients on Wikipedia but seems like the dominant ones are the ones we all know and love according to this report from Campaign Monitor.

Anything else interesting out there?

In any case, history has shown that email is hard to create to a successful separate business out of. This is why my disappointment with Apple was so acute; they had the chance to release something really innovative with Mail and didn't do it, AND didn't need to worry about survival as a startup.

In the meantime, I will have my decades old, time sorted, header interface that I've come to know, love, and hate....

When I meet startups, I mentally run their product or service through this test, which is the test of frequency of product usage by their customers. Simply put, if the frequency is high, then their product idea stands a greater chance of surviving in the marketplace. If the frequency is low, then the probability of dying is much much higher.

What do I mean by frequency of product usage?

When a user uses a product tens or hundreds of times a day, this is the dream - to work on a product that is so necessary by a large customer base that they need to use it that much! An example of this would be email - too bad it was created and set free to the world because someone could have made a lot of money on that, or at least in the early days.

Once a day is not bad either. Once every few days still OK. I read the New York Times email digest and website once a day generally, so I can remember to go there. What about the other news sites? Hard for me to remember which ones I do read when I visit them so infrequently.

Once a week - hmmm - getting to that limit. Once every 2 or more weeks and I think you're in trouble.

That's because people forget very easily what services and products they use, especially in this crowded world of me-too products. When your memory is sketchy, it's easy for someone else to hop in there and supplant you.

Take travel services for example. How often do people really go on vacation? Normals tend to go maybe once a year, if that. If I find your site, use it to plan a vacation, and don't worry about going on vacation until next year, do you think I would remember to come back to you? If you're a startup, the odds are against you that you'll even be alive by then.

This goes for both consumers or enterprise customers - if a business customer doesn't find a daily or constant use for your product, then how can it find some justification for buying your service?

That doesn't mean that what you're working on shouldn't exist, or couldn't become a big business. The big problem is that you're a startup with limited resources and survivability and some lower frequency services should really be done by more established companies. You, on the other hand, need traction and revenue as fast as possible before you run out of money. This is why frequency of usage is critical at early stage; if you have a product that people only occasionally want or want at special situations, you'll never be able to build enough customers before you die.

So you have three choices. Either you must work on something that has a high frequency of usage, enough to attract users who find you useful enough to use often enough to keep coming back; OR you must find a way to buckle down and exist long enough for enough customers to sign up and generate enough traction and revenue for you to survive as a company. There is one other possibility and that is to add some high frequency elements to your low frequency of usage service to keep interest in and around your main service, despite the fact they may actually use the main service only intermittently.

Any of these could work and convince me to invest but working only on a low frequency of usage service in today's super crowded marketplace definitely will not.

I thought back over the last year about the many other board meetings I've attended. I thought about why some of them took much longer than 1.5 hours and seemed to drag on and on. One thing I could think of that did stand out was the presentation of product screen shots and the subsequent discussion about the product.

Now I'm not against all discussion of products in the board meeting. You should present the product development pipeline over the next few months or quarters. You can give an overview of the important major products, features, and services you'll be launching (or killing). You can talk about holes in your offering and what competitors are doing that you are not and to have board level approval of a given direction.

But almost always, what derails a board meeting for some lengthy period of time has been the presentation of a product, some deeper dive into features, and the dreaded product screen shots throughout.

When this happens, then the comments come out. And ideas. Lots of them. Innovative ones, some good, some terrible. Everyone wants to chime in and make the product better. They start commenting on the design - the colors, the interface, the copy - everything.

Why not? It's up there on the wall projected for all to see.

Is this bad?

At a high level, no. We should have these discussions about the product. They should involve all the important people they should.

But I would argue that this should not happen at a board meeting.

Board meetings are time to touch on all the major strategic, high level initiatives of the company. It provides oversight and governance, and drives the strategic direction of the company. You get a lot of experienced people in the room who have run companies before and they tell you where you are doing well, where you are doing better, and where you are heading towards danger.

And you take care of board level business like approving acquisitions, key hires, option grants, etc.

I just don't think a board meeting is where you'd want to also have a big product discussion.

Then everyone jumps into the fray, and these discussions go every which way. The discussion is good, but the clock is ticking. All the while I'm glancing at my watch wondering when we're going to get back to the main agenda since we're off on a tangent now and have no idea when we're getting back on track.

Eventually we do, but now a 1.5 hour board meeting has turned into a 3 hour affair. I look back and always note that if we didn't have that product deep dive and discussion, this meeting would have been less than 2 hours.

There is a time and place for product reviews and discussions. Let's schedule a separate meeting to do a focused presentation on it. We can ask for specific feedback, ask people to try it out, present research and findings on why we're doing things a certain way or not.

Board meetings just aren't the time to do this. Every time, inevitably the board meeting drifts and valuable time is used up when it shouldn't be. So please, let's just let board meetings be board meetings, and if you want to have a great product review, let's set up a separate meeting for that where we can be prepared and have a great focused discussion on it, and not waste valuble board meeting time with it.

- How to Develop Your Fund Raising Strategy by Mark Suster

Every year, I meet entrepreneurs who say they hate fund raising. They don't want to do it, they want to get it over with, they wish they could go back and build their business, doing the coding/designing/etc.

I hate it when they say that.

Fund raising is a necessary evil. YOU MUST DO IT. Without it, your company can't survive. You need the money to get to the next level.

But I hear that nobody wants to do it.

Yes it sucks. Begging for money sucks. From the first time you begged your mom for money to buy that comic book to now when your begging investors for money, it still sucks.

I'm sorry but I'm tired of hearing it. As Mark Suster says in that quote from his latest blog post, it is something every founder needs to do and do well. If you aren't good at it, then there is no better time to start learning how to do it then when you're raising money for your startup.

It never stops. It seems like it does, but as Mark points out, it really never stops. As a founder, you are always out there selling yourself and your company. You need to start building these relationships early, as soon as possible after raising your first round. Big money is best gotten through familiarity over time, not social proof, not a quick glance at a deck, not an emotional reaction to the coolness of your screen shots. So you better get good at selling yourself so that you can get needed money later when you need it.

Raising money is a rite of passage to being a real entrepreneur. Yes it's uncomfortable. Yes it seems like it wastes your time. But it IS a big part of building any business.

So get over it. Get comfortable with it. Use this time to figure out how to sell your startup and get people to invest in you and your venture. Go out and raise your round whether it takes 1 week or 12 months and stop complaining about how much it sucks. The future is filled with things you'll have to do for your startup that suck - you need to get used to doing things that you don't like and get good at all of them if you're going to excel as an entrepreneur.

It was when I first heard someone (my graphic arts professor Matt Kahn) say that designers need to travel more in order to broaden their horizons and in increasing their worldliness and knowledge, they could create better designs and become better designers.

Back then, I wasn't very worldly. I didn't care much for traveling or seeing other places. I was from Poughkeepsie, NY and led a pretty sheltered, enclosed life. I hadn't traveled much as a kid and didn't really understand why I might want to travel other than to hang out on a beach. Besides, it cost money which I didn't have at the time.

Time went on, and I got the opportunity to travel more, and slowly but surely seeing other cultures and meeting the people in their broadened my perspective greatly as it related to design. Somehow the expansion of consciousness made me more effective as a designer.

After that, I sought to learn about as much about the world as possible in all aspects. I read everything. I devoured books and magazines on not only design but technology as well. Later, I expanded this to all sorts of topics, ranging from news to economics to everything. I knew enough about a lot of things to be dangerous but it was extremely effective for making me a better designer (and also helped me to be a better conversationalist!).

Which brings me back to science fiction.

Before my consciousness expanding realization, I have always read a lot. But that was limited to almost exclusively science fiction. But now my science fiction reading had another benefit.

As Cory Doctorow wrote in his post, A Vocabulary for Speaking about the Future, science fiction authors are great at painting pictures of the future. Perhaps they are terrible at predicting what the future really might bring; still, they are great at showing us what the future could potentially hold and thus can be extremely useful in expanding our consciousness for creativity in design...or in venture capital.

VCs need to have some intuition about how the world will be in the future as they are betting on things now that will hopefully be big later. In order to do that, you have to be creative and imaginative; you can't analyze what the future brings - look at how Wall Street experts did back in 2010 predicting what would happen in 2011. You can only imagine what the world will be like and then make your bet.

To beef up your intuition, you need to expand your consciousness through travel and experiencing other peoples and cultures and expand your knowledge base to cut across as many disciplines as you can handle. In doing so, you will release all the negativity that only comes with analysis of the future which is unknown and can't really be analyzed. And what better way to increase your creativity of vision of the future than to have people lay it out for you in the form of novels and short stories?

My issue with the proliferation of startups boils down to 2 problems in dire need of solutions. Here they are:

Entrepreneurs are to the rest of the workforce, as Navy Seals are to the rest of the sailors in the Navy

In meeting with many entrepreneurs, I find that many lack a lot of the crucial characteristics of really making it as an entrepeneur. Everybody wants the good outcomes, but they are unwilling or lack the ability to gut through the bad parts. They lack the essential personality traits, like adaptability, able to deal with chaos, a never quit attitude, the ability to keep going no matter what even if it means their lifestyle is threatened. Or they have some notion of what it takes to build a company from scratch - maybe they took a seminar or read some books - but they did not actually take the time to work in a startup or build a business from scratch with someone more experienced to see what it is like and learn (by the way, one of those things they may learn is that they are not cut out to be entrepreneurs!). They all want to be entrepreneurs, but for some reason do not have the right characteristics or training.

This where I liken entrepreneurs to Navy Seals. We've probably all read about the crazy training that Navy Seals go through. According to Wikipedia's Navy Seal page, the drop out rate is over 90%. And that's after being selected from the normal soldier ranks for having the *potential* for becoming a Navy Seal. Not everyone can become a Navy Seal and their training is designed to weed out those who lack the essential traits that every Navy Seal must exhibit or else they put their mission and their lives in danger.

Entrepreneurs experience of their job is exponentially more intense than that of someone who has a normal day to day job. Like Navy Seals, not everyone is cut out to be an entrepeneur. But yet we set 1000s of people each year off thinking that they can become entrepreneurs.

We desperately need some better training systems and systems to help people determine whether they have the right personality make-up to be great entrepreneurs. What we have today is not enough. Book learning at college is not enough, and neither is a day long seminar.

Perhaps there are those of us who would say that setting them off into the real world building companies is the right way to go. Yes that may be true, but I would love to find a way to do it that does not require investors to put up their hard earned capital just so people can learn how to do it better, or learn that they weren't cut out to be entrepreneurs in the first place.

We desperately need a way to fund startups that become small to medium sized businesses

Suppose you find a way to become a Navy Seal like entrepeneur or something close, and you work on an idea that seemed awesome at the start, but resulted in something less so. Instead of generating 10os of millions of dollars a year, it only generates a few 100K/year, or maybe millions.

At that level of progress and revenue, the company is doing great. It is generating money, paying real people to work for them so that they can support their families, and outputting useful products and services to others who need them.

For the record, I LOVE THIS. Our economy is in shambles and we need more businesses that simply employ more people. If you walk down the streets of Palo Alto, you see so many small shops that are now closed; so many For Lease signs even in a place like Palo Alto. Our country needs to fix this. The banks aren't helping and new business creation requires other avenues for funding.

These companies don't need to IPO, they don't need to be acquired. They have great reasons to exist in their current state forever and generate enough money to support all their workers and the products and services they provide.

The problem is that we are funding startups like they all are going to IPO or get acquired for tons of money. We are not accounting for the case where the business levels out at a much lower place where IPO is not possible, and the likelihood of M&A is also very low. If a startup reaches a much lower place, we investors' money is essentially trapped within the company; the company has no real way of repaying the investors unless they are making a lot of cash.

We often meet startups which are really cool and interesting, but when we look at the team, product, vision, and the macro factors, we sometimes can tell pretty early that this company is heading towards small business status. Sometimes the startup is cool enough for us to really want to put money in but cannot simply because we do not know how to get our money back, or make money when the deal is structured like a traditional startup financing and we are trying to make money from equity ownership. So if something smells like it won't get big, often we won't invest simply because of that.

Having said that, and despite the fact that we investors think we know everything (HA!), we really sometimes don't know if a startup will end up as a small business or grow to IPO or M&A greatness. But I would argue that the immense proliferation of startups makes it highly unlikely probability wise that someone you meet will get huge; on the other hand, the probability that they will make it to some smaller state of revenue generation is much much higher.

Thus, it is my belief that our ecosystem desperately needs some way of financing startups that takes into account success at IPO/M&A greatness or success as a sustainable, smaller, revenue generating business. If we have this, then we should be more comfortable investing in more startups since we have greater comfort that we can get our money back or even make some money on our investment, versus seeing it essentially static within a company where we can never extract it.

Today, we see the transcendance of Apple and the amazing things that Steve Jobs has done for the worlds of computing and mobile. He took two very slow innovating, mediocre to bad UX, nearly commoditized industries and transformed them into new engines of growth for creativity, innovation, and monetization. His rabid focus on what's crappy for users before and creating the ultimate solution has served him and Apple well. Thus, I think for those of us in this generation, we like to ask, "what would Steve Jobs do?"

What would Steve Jobs do?

Jobs is not with us any more, but his methods are well discussed and documented. To oversimplify dramatically, he simply takes something that exists today, looks at what is frustrating and crappy about it, and makes it into the ultimate whatever from a user experience standpoint AND makes it delightful and desirable on top of that.

This is now my new favorite thing to ask startups that pitch me.

Are you creating the Apple of [fill in the blank]?

I think this is worthwhile to apply to anything that a startup works on. Startups are the perfect place to envision, create, and execute the ultimate product or solution to anything. Big organizations have so many barriers to doing that; being small and nimble gives you a lot of advantages.

In today's startup ecosystem, I am beginning to think that now you have no choice but to create the Apple of [fill in the blank]. Why? It's because there is SO much competition that being great isn't good enough. You have to do better than even that to get noticed by consumers who are getting way too many things that are great and to rise above the noise of all the crap that is preventing us from discovering the right thing. If you want to win, the bar has risen so frickin' high that you have no choice but to pull off the hardest feat possible, which is to build something that eliminates all frustration and crap in the user experience and is the ultimate solution for that product or service and, oh by the way, it needs to be something so desirable that people want it for what it is, what it can do, how it makes them feel, and elevates their personal status by having it.

So you, the entrepreneur, should be asking yourself:

Why am I not creating the Apple of [fill in the blank]?

We spoke about a lot of things but one thing we talked about encouraged me to get going on this post, which was about becoming an Entrepreneur In Residence, or EIR at a venture fund. Oren related to me how that, before starting his startup, that he went through an interesting process to become an EIR. My conversation with him allowed me to fill in some needed information about what I had already observed with EIRs. Also, I thought that this would be a perfect follow on to a recent post by Rob Go of Nextview Ventures titled So You Want to be a VC... and my resultant post The Path to Becoming a VC. After all, becoming an EIR is yet another way to get hired by a venture fund right?

What is an EIR?

First, what does that E stand for? I have seen E to stand for Entrepreneur, which seems the most popular. However, I have seen E stand for Executive (ie. "Executive in Residence") and also the E has turned to D, standing for Designer (ie. "Designer in Residence" - see Jason Putorti who is most likely the person who became the first ever DIR at Bessemer). This does suggest some different functions that these folks do. So let's discuss them first as xIRs, where x can equal any of the 3 meanings.

What does an xIR do?

There are many things that a venture fund might expect an xIR to do:

1. Discover/experiment/develop some next big idea for a startup - You are given an office space, phone, internet, maybe even a computer and then you spend time thinking up new business ideas. You then are given some time to work on them, and hopefully one of those develops into something that the venture fund will invest in.

2. You park until you find your next gig - Venture funds like to have smart people around. You might not have any real expectations although there may be some underlying ones, like they hope that you might join one of their existing portfolio companies and leverage your talent. So you becoming an xIR may actually be a recruiting tool. Or not - you might find a job elsewhere, but hopefully there was some goodwill generated for the venture fund by letting you park there for a while.

3. Due diligence help - Your areas of expertise may be of great help to the venture fund in helping to look at deals. You may be able to help them with due diligence and evaluating whether something is a great opportunity or not. .

4. Help their existing portfolio companies - You may be asked to go around to all their portfolio companies and help them if possible in your areas of expertise. I've known at least one Executive in Residence whose role was chiefly to help portfolio companies.

5. Sourcing more deal flow - It is well known that entrepreneurs hang out with other entrepreneurs. It may be hoped that you will bring some deal flow to the venture fund.

6. Any combination of the above.

What are the terms?

1. Compensation ranges from zero dollars to up to $250K/year.

2. Carry in the fund's returns doesn't seem to be something that is offered.

3. This arrangement can last from about 6 months to 1-2 years to until they let you go or as long as you need.

What else do you get?

1. You get to see the inner workings of a venture fund. Often you will get invited to sit in on deal meetings and board meetings.

2. Hang out in a posh Sand Hill Road office, or hopefully still posh but in a different location.

3. Get an office, phone, maybe computer in addition to pay. You will probably get business cards which improves your notoriety.

4. You get to attend firm events and parties, perhaps even speaking engagements.

How does the process start?

Venture funds are a highly relationship driven business (see Christine Tsai's comment and my reply on my Path to Becoming a VC post). The probability of you getting an EIR job without knowing the VC beforehand is pretty low. So getting to know some folks in venture funds makes the process a lot easier than if you didn't know any. They will want to have the most confidence that you can be valuable to the fund. Knowing you beforehand helps with that.

Part of knowing you is about what you have done, how well you have done it, and your expertise. I have never heard of someone coming out of college to become an EIR. Perhaps it has happened but I think very rarely. You don't have enough experience or a track record behind you yet. I could see it happening from a Ph.D program where someone may have been working on something while at school and then is ready to commercialize it. More likely, you will be known to the venture fund through a portfolio company or through your notoriety in another company.

If you get noticed by a venture fund, you'll probably get invited to come in for an interview. Most likely these positions aren't advertised so venture funds tend to be able to choose the candidates; it would be a rare circumstance if you were able to interview for EIR positions at multiple venture funds.

How do you make a decision?

There are the usual considerations like compensation and health insurance, the poshness of the office, the reputation of the fund as you leverage it, and fringe benefits like free food in their fridge. However, the most important considerations are:

1. You like the people you will be working with, and they like you. Relationship is everything. If they offer you a job, obviously they like you, but do you like them?

2. The expectations and goals of the venture fund in your role as EIR match yours. If you are thinking that you just want to park somewhere until your next gig shows up and the venture fund is expecting you to build something so they can fund it, that's bad! You could leave the fund with them thinking you're not able to execute or are just a slacker. Make sure the reasons for you becoming an EIR there match theirs as closely as possible.

By the way, it does not appear that becoming an EIR is a good way to becoming an investor. Yes you'll be working for a venture fund and see a lot of the inner workings of one; however, the expectation is not to train you to become an investor but rather to work on startups and startup ideas. That does not mean that you could not jump on the path to becoming a VC later on (see my post, 3 effective ways to jumping on the path, especially path 3).

I thought I'd repost and expand on part of my comment there as I thought it was complementary to his post. So how does one get on the path to becoming a VC?

Getting a job at a venture fund is one way to start your path to becoming a VC. But trying to work your way up through the ranks of a venture fund is tough and there aren't that many jobs to go around.

Becoming an associate or principal is a great way to get introduced to the inner workings of a venture fund. However, your path to becoming a partner or someone of decision making power is very difficult - after all, most funds require their current partners to work on them for many years, including maintaining their control (ie. "we investors bet on this person's skill for making great investments") and incentives (ie. carry on the investments). It's not likely that a partner is willing to give up any of that on their current funds, or even on future funds that they raise. More than likely you will have to work your way to becoming part of a team that raises a new fund in order for you to start gaining some independence and the incentives that come with it.

Some of the more effective ways are:

1) First angel invest and then raise money. In true startup fashion, you put up your own resources to make the bet that you're on to something (your own skill as investor). Others notice you and then invest in you to invest their money. Putting up your own money, investing it, and making money proves more than anything you can do this work. Of course, losing it all is also in the cards so make sure this is not a substantial part of whatever wealth you have.

2) Get wealthy people to know and trust you. Investing is very much a trust based business. Who do you trust with your money? If you have connections and relationships with wealthy individuals and build their trust with respect to investing their money responsibly and with integrity, you could begin your venture career that way.

3) Start as an operator. The four big places I see this work are: CEO of a company, Corp Dev person, entrepreneur with big exit, and engineer at a "celebrity" firm like Google or FB. These positions can give you credibility to raise your own fund or get hired by an existing firm. More likely, the $ outcome results in you being able to start the path with step 1 above.

But given the lack of available positions, and the lessened ability to woo wealthy potential limited partners in today's competitive and economic environment, you still have to exhibit something *really* special. There are too many people out there who are competing for that attention and their cash, and you really have to do better than "I want to become a VC". More than ever, you have to answer "I am the best up and coming VC because...."

Also you're going to have to let go of any arrogance about how great you are right now. I learned this back in 2006 when I tried to raise my own venture fund. I was just out of Yahoo and thought I had enough skills to pick companies and make money through investing in them. I had 9 years of work experience at Yahoo, 1.5 at frogdesign, and 3.5 at Apple before that, and a Stanford degree to boot. How could anyone NOT give me money to invest?

However, the investor community all said that my partner and I had great skills as operators, but they had no confidence in us to manage investments. After 4 months of raising, I got frustrated with hearing the same message over and over again. I stopped fund raising, set aside some personal funds and started angel investing to build up some investing track record. After 5 years of doing that, I realized I didn't know diddly about venture investing back then and only now I'm starting to build some confidence that I know a little about what I'm doing. Through time and on multiple fronts, I've built some credibility as an investor in world full of investors who have a lot more celebrity and notoriety than I do (this alone is probably worth a post in itself). Thankfully, earlier this year, Launch Capital has taken a chance on me and I can begin learning more as an investor of someone elses money besides my own.

So even though I had that wonderful resume and education, about 14 years of work and a BS and MS from top schools, it has taken me 5 more years to *begin* to learn about a business I really knew nothing about, even though I thought I knew.

In the comment I left on Rob's post, I mentioned talking people out of becoming a VC. I talk to them about my journey and all the really hard parts of the business underneath all the glamour and press. After I tell them all that, I look them in the eye and see what their reaction is, my intuition perking up to detect any sign of understanding or lack thereof. It's usually at this point where I can see if they will *really* give it go and stick with it, or just quit in frustration because they couldn't raise a fund fast enough.

Looking back on my path, it was a LOT harder and took a lot more time to build up to becoming a VC than I thought. There will always be people who happen to fall into it via luck or circumstance; awesome for them but they are definitely in the minority. Most of us have to spend a lot of time working at it AND proving that we actually can do this, and it will take a lot longer than you think.

Steve Jobs by Walter Issacson

Like the rest of the world, I've been reading the new Steve Jobs book by Walter Issacson. I came upon the passage above and it hit a nerve.

One of the long standing debates is how to integrate design into large organizations, and how to use design more effectively. When I read that passage above, it resonated in a big way with respect to why design is so dysfunctional in companies both big and small.

I read all the time that companies are trying to be more design-centric. They bring in consultants, read all sorts of books about people like Steve Jobs, hire design firms - they get all sorts of roadmaps and then try to implement them....and fail.

While I could go into the multitude of reasons on why design fails in companies, I'd like to focus on those brought out by Steve's quote.

Explicit Authority vs. Implied Authority

It is well known that Steve Jobs uses design like an expert swordsman yields a fine blade. However, he's not a designer himself; he just has incredible design sensibilities. So he needs help in the form of Jony Ive in whom he has found a kindred spirit in executing his design initiatives.

BUT - Steve was smart enough to understand that in order to make sure Jony Ive could function, he made it organizationally explicit what power he had. This is a big problem faced by many orgs. They say design is important. They say they want it integrated into everything they do. But organizationally, designers are not given explicit authority in the org to be able to make it happen. Their managers may be given the authority, but they do not know how to advance design themselves and so they just say "make it happen." But they do not know how to argue for support or resources; designers have the best knowledge about their own discipilne to argue for it. Thus Jony Ive reported directly to Steve and was his right hand man and everyone knew it, and knew not to mess with him.

Therefore, the first message of this post is, if you really believe design is important to your company, then make it explicit, through the organization (ex. design has C-level representation, reports to CEO, etc.), and through explicit, constant vocal support by tthe CEO (ex. "why are you asking me? I said, the designer has complete responsibility and I trust him to make the right decisions on this matter.").

The worst thing you can do is give weak, implicit responsibility. You push designers far down the reporting chain, make them work with those who have more responsibility and power in the org, and then expect them to advance design? You give lip service to its importance but you have setup the organization to fail. So what's the problem? Trust? Naive knowledge? Unsure of exactly how to proceed? If you're the leader, you need to figure out what the problem is in you and solve it.

Ability Needs to be Demonstrated and Authority Earned

BUT (another but!) - great power wields great responsibility. You cannot give such power to just any designer. In this passage, Steve describes Jony:

He is a wickedly intelligent person in all ways. He understands business concepts, marketing concepts. He picks stuff up just like that, click. He understands what we do at our core better than anyone. If I had a spiritual partner at Apple, it’s Jony. Jony and I think up most of the products together and then pull others in and say, “Hey, what do you think about this?” He gets the big picture as well as the most infinitesimal details about each product. And he understands that Apple is a product company.

This is the second message: designers, if you expect to get authority in your company, you have to demonstrate that you are worthy of it. It was clear that Steve trusted Jony in all aspects of his abilities to be able to entrust him with the authority. That means you need to build up your abilities too. You need to understand not only design and user experience, but also a multitude of aspects, like engineering, marketing, business development, strategy - everything - and its relationship to design. You need to demonstrate that you understand it fully and gain the trust of company management in order to earn at least the capacity to wield such authority with some level of confidence of not messing up.

With the ascendance of Apple through design, everyone is talking about how to integrate design into their strategies better. Both management and designers need to change and grow in order to make this really happen.

As I get to know entrepreneurs and get a sense for what they know, who they are, and where their strengths are, I get a sense for what they are capable of. At the seed stage where Launch Capital plays, we don't have the luxury of being able to spend a long time getting to know founders than perhaps someone who invests at later stages. So I've had to hone my intuition and my interrogative skills to ferret out what I can at the time of investment. Later, I can watch them and see how they react and act and build up my knowledge about them. Unfortunately, if something problematic comes up at that point, it is somewhat late since my investment has already been committed. So the goal is to be able to get as much information about them before I invest, although a lot of that info needs to be gleaned from only one or two encounters prior to an investment decision.

I meet someone and then build some intuitive and informational view of a person. It's pretty straightforward to ask them questions about their past and what they've done. But not only are their answers important but how they say them.

For example, I might ask an entrepreneur what their experience is with design. They may say they have a lot of experience designing, talk about what they've designed, and how they've managed a lot of design resources. This is all great. But as I listen to the language he uses and probe further, I realize there is an insensitivity to users' needs and the words that he uses implies an attitude towards designers that is condescending and disrespectful. This is what I mean by paying attention to how it's said as well as what's being said.

The intuitive view is less certain, encompassing subtle, non-verbal cues which are coupled with what they say and how they say it. Books have been written about body language and detecting lies and surfacing their true feelings and intentions; these are all relevant. I try to take it all in and this builds the intuitive view of a person.

All this informational and intuitive probing are geared towards not only type of person they are (hopefully they have integrity, honesty, and the whole host of other positive entrepreneurial characteristics), but also how far they can take the startup idea they are working on.

For example, every time I meet an entrepreneur, I always bring up the vision discussion. One case that may happen is that I know a lot about the space he is working in and already have some formed opinions about where they should take their business. They ask me what those opinions are and of course I start ranting or spouting ideas. Then I gauge their reaction to my words.

Sometimes they have blank stares on their faces; I can tell they have little idea what I am talking about, or they have some sense but don't have the depth of that knowledge. Sometimes they say they agree with me, but something in their body language or the way they say it tells me it is just talk and I cannot see any depth in understanding.

And the best reaction is when they actually know something about what I say and we have a bromance discussion about how geeky we are in that we both share knowledge and are big fans of this area.

However, if that bromance geek discussion doesn't happen, then I begin to worry. I start to form the limitations of where this team can take a concept. Either they must learn this themselves (first the interest, then the ability to learn it) or they must have the awareness that they must hire the talent to fulfill the bigger vision and not the vision to the limits of their current abilities.

Not many people have the ability to change into new areas of growth, whether it's physical, emotional or intellectual. It is the rare individual that can. Most likely, what we see by the time they are adults, and by the time they are working on this startup, is what we're gonna get.

Believe me, I have tried to get people to do things outside their current areas of interest or strength. But most of the time, it is futile, especially as an outside entity to a startup. If I am not there day to day 24/7, it is really hard to get an initiative going that is not familiar to the personnel there already. This is why I try to be as creative as possible in providing a multitude of ideas and see which stick and which do not, and also try to be as creative as possible within the constraints of the team's abilities and skills. But I have given up trying to make them someone other than who they are today unless they are willing or able to make the change in themselves.

The trick therefore, is to get a sense of these people through information gathering and through intuition, form a picture of their capabilities into the future, and then make the call. Building your sensitivity to determining who people are is an important part of investing; at early stage, however, we need to be able to make that determination as fast as possible since we don't have the luxury of getting to know them over time before we invest.

Running More Effective Board Meetings at Startups by Mark Suster

Here are some favorites from Brad Feld's blog:

Ideal Board Meetings

Board of Directors: The Agenda

Great Board Meetings

Board Meetings - Do The Formal Stuff First

Sample Board Meeting Minutes

I also had this outline of a typical board meeting. Here are some of the usual topics discussed:

1. Administrative and Legal (Chairman & Atty)
   1. Status of Prior Minutes.
   2. Status of Prior Consents.
2. Financials - Review & Update (CFO/CEO)

3. Operations Update (CEO)

4. Sales Update (CEO)

5. Marketing Update (CEO)

6. Staffing Update (CEO)

7. [Status of any Company Disputes] (CEO, VP, Atty)

8. Compensation Considerations (CEO, CFO)

9. Strategic/Business Alliance and General Business Update (CEO)

10. Calendar
    
    
    
    1. Board and Committee Calendar Review.
       
    2. Annual Shareholders Meeting.
       
    
    
11. Other Business (All)

12. Adjourn
    

I have found that data always follows this path:

1. Measure the data - Some mechanism appears which allows us measure the data. The insertion of a tracking pixel on a web page, the creation of new type of sensor - these are just examples of activating the ability to measure data.

2. Collect the data - Once we can measure the data, we can collect it. So it gets dumped into a database or similar. For example, the tracking pixel's loads from a server are saved in log files, or we connect a data collection device to the new sensor which takes readings at regular time intervals and saves them.

3. Display the data - After collecting the data, we can display it, usually in its most primitive form, which is often rows and columns of numbers.

4. Visualize the data - When we display data in raw form, it's not optimal. Visualizing the data via graphing or through further number crunching can bring better interpretation of large data sets than scrolling through endless rows/columns of numbers.

5. Derive insight and action from the data - After we analyze the data, we can determine what happened and then what to do next.

Usually, people get through steps 1 through 4 very quickly. We see what I call the "Mint-ifying" of the data collected. But I contend that this is not good enough. It's nice to see the data in some easily digestible form but always the next question is, "what do I do next?"

Almost no one ever gets to 5. It's always up to the viewer to take a look and then figure out what to do next. But this is hard. Some people can figure it out and some people cannot. Some people could figure it out if they took the time to go deeper but they don't have the time.

That's why I think the ability to generate insights and what to do next is the holy grail. It can seem exceedingly difficult to create a system that not only displays data but also tells you what to do next.

Some observations here:

1. If you don't have deep knowledge and experience in the area in which you're building a data system for, you'll never get there. Either that or you'll never realize the full potential of the data.

2. If you are not a current user of the data in a real world application, you'll never know what another person might want to do with the same set of data.

3. You might want to hire someone to help. The number of people who know how to use real, measurable data and figure out what to do next with it is very, very small. So trying to find someone in your area of operation may be very difficult. Or you will require a lot of time and experimentation to get there, maybe more time than you have.

I've met many startups over the years trying to exploit the data they are collecting. But as far as I can tell, virtually none of them have produced systems that can tell you what to do next from the data they display. These days I always ask the data startups how and when are they going to generate insight and action and I look for some glimmer of hope there. This is because I truly believe that if you can produce insight and action, you will have real gold in your business.

In Mark Suster's post Stock Market Drops. Then It Rallies. What Happens Next for Funding?, he mentions that when he first got to GRP, he did some analysis to find some interesting markets to go into. Having met Mark before, I pinged him and we got together and had an interesting hour long chat about thesis development.

This led me to embark on some thesis work at Launch Capital. We are fortunate to have some research resources internally and I petitioned for some time to use them on looking forward. And after talking to Mark, I had a better picture on how to do this myself, and to guide some researchers to help.

Here are some thoughts on developing a thesis:

1. Look at your own personal interests and areas of expertise. Understanding and insight is maximized when you can meld the research with what you know already. When you look at some future research data, you will look at it with the lens of your own experiences and can spot opportunities that only you will spot.

Without experience in other areas, you will inevitably miss what someone else might see, who is more experienced in those areas. For example, if you're not a biotech guy, you may not see the effect of health trends from a medical perspective, but you're an internet guy may see opportunities in mobile and tech.

Expanding your experiences can help greatly. When I entered what is now the d.school at Stanford way back in 1989, my art professor would always talk about traveling and increasing ones exposure to art, culture, and experiences in other places. I never understood that until many years later when I was able to travel a lot. It brings a critical widening of your own eyes when you realize the world is much bigger and different than you originally thought.

2. What else is unique about you? These can be things like:

a. Do you have a flow of proprietary deals from some source(s)? The presence of proprietary deal flow in some area or industry means you can more effectively imploy a thesis strategy in that area. Lack of proprietary deal flow can mean you may never ever get the best investments and may be a reason to not execute against that thesis, no matter how attractive it is.

b. Can you influence outcomes based on your experience, contacts, expertise, etc.? For me, I'm a product/UX person so I try to find investments where I can really give them an early leg up on their product strategy. Others might have extensive high level contacts in an industry which can help them generate exits more effectively.

c. Where are you based? It is widely reported that VCs like to only invest in startups that are within an hour's driving distance from them. So if you are close to your businesses, you can more effectively manage and help them. So examine those strengths that are particular to where you live. If you live in Silicon Valley, you have a breadth of industries to choose from. If you live in Boston, there is a concentration of biotech and clean tech. In Los Angeles, the entertainment industry is entrenched there. But trying to encourage a type of business to start in an area that does not have an ecosystem to support that industry is very tough and provides a disadvantage to those who try, relative to those who are doing similar things in a place where there is a lot of support. (Unfortunately for most of the hot industries, I still think Silicon Valley is the place to be.)

3. Following on 2c, if you decide to build an investment operation in wherever you live, then what are the geographic advantages of your area, that will support whatever theses you decide to go after? (...and hopefully you won't realize that you'll have to move to do that!)

Existing industries, centers of innovation like research hubs or universities, availability of talent, or even natural resources (would you fund an ocean energy project that was created in the middle of the US?).

4. Now, we move into lots of data...The idea is to examine this data and to identify not only just trends but those that are secular, or those that seem to be persistent and not just lasting for a short amount of time. As startup building folks, we need secular trends because investing in fads can be extremely dangerous as the trend that occurs may die out unexpectedly. (NOTE: that's not to say that you couldn't create a business that deals effectively in fad-like trends; for example, the fashion industry thrives on this.)

Typical data sources to examine are:

a. Demographic Trends - Yes we all know are population is aging and that we are all living longer than before. But what other shifts are there? Movement to cities? More or less divorces? Sentiment? Poverty?

b. Economic Trends - We went through a big reset in 2008 and now that reset is hitting the world. Unemployment doesn't seem to be going down. Is there a bubble in the tech startup markets? Who is getting affected by government stimulus? A very obvious one that has spawned the creation of a plethora of startups is the fact that the government is giving all medical providers $10K to switch to digital records - what a great way to cause a fast shift in your userbase without having to do it yourself?

c. Political Trends and the Legal and Regulatory Environment - Lots of debates going on about the US Patent Office and the need for reform. Will there be import tariffs on certain goods? Are we extending capital gains taxes for another year?

d. Specific Industry Trends - My area is generally internet, tech, and mobile. For example, nice to see iPads and tablet computing be so popular, dominating in all usage metrics and climbing. However, the ease at which businesses get created means competition pops up quick and can stifle growth of any one business, in a given group of similar businesses.

5. What Character Traits Does the Thesis Developer Need to Exhibit?

One thing that Mark and I talked about was, what kind of skills do you need to have to do thesis development? What kind of character traits? Some of the ones we talked about were:

a. Futurist, Big Thinker, Philosopher. I put all these into a similar bucket. You meet some people who seem to be able to look far into the future and paint broad visions of what that would look like. They are creative, sometimes wacky, and generally very intelligent. They are able to synthesize large amounts of information and generate convincing arguments on their future visions. Generally, they have to be fantastic communicators and can wow an audience with their persuasiveness.

b. Imagination - Somewhere along the line as we grow older, we lose the ability to be imaginative. However, you have to be imaginative in order to paint a vision for the future in a certain area.

c. Active intuition - Someone who is in tune with their intuition will have an easier time letting their brain put together disparate sources of data to generate something interesting and unique.

d. Wide Variety of Interests - If you know a little, or a lot, about a lot of things, I think this is much better than knowing only a few things. Being inquisitive and interested in a lot of the world will enable your intuition to function better. The trick is to not let too much information destroy your ability to imagine.

e. Increasing your Information Sources - One of my favorites is to read a lot of science fiction. What better way to imagine the future than to have someone else create a whole fictional world around them? Other sources are reading a breadth of magazines and books, across a wide range of subjects.

After gathering and examining the data, I believe it can be used in two ways: to build theses to invest against, or to measure your deals against what you know about the future.

1. Investing Against Theses - Say you're able to synthesize a thesis after looking at all your data. Then you go looking for startups that fit within those theses. For example, I currently am looking at startups in these 3 areas:

a. E-commerce
b. Unsexy traditional businesses newly powered by the Internet
c. Hardware + software + Internet

Each one of these has some thesis thinking behind it and why I think these are opportunities that will become big in the coming years. So I tend to actively look for startups in these 3 areas.

2. Measuring Deals Against What You Know - This is perhaps simpler than trying to create specific investment theses. You gather the data and then every time you meet a startup, you match up their idea, objectives, plan, etc. against the data that you know. Will it survive in the coming years in the environment that the best trend experts depict?

For example, a business that thinks it can make big money by selling DVDs may look great now, but the data shows that DVD sales are quickly being displaced by digital downloads. So this would be something that looks like it would not survive in the future, or be subject to a shrinking market which is very bad. (Ex. Think Netflix's recent changes in strategy, moving from DVD rentals to streaming.)

Right now, the Launch Capital research team and I are pulling a multitude of data from all sorts of sources. Over the next few weeks, we will be going through it slowly and hopefully developing some insights that will allow us to better spot opportunities. As we progress, I hope to post about what we found, the processes we used, what we derived from the data, and how we're going to use it.

In polling my startups, I was hoping to find a solution to help combat the problem that people are always having problems hiring and that finding great people was near impossible. Certainly hiring a good recruiter to expand one's networks would be a good thing, if it could be made workable.

The email I sent out was:

hey all,

today i had lunch with a recruiter who helps VCs find personnel for their startups. we talked about recruiting for early stage and how hard it was, but also that it was nearly impossible for them to justify engaging traditional recruiters due to cost mostly, but many also don't deliver very well either. this guy has worked with some top VC firms in the valley so i somewhat believe him that his network of personnel to reach is pretty good, probably better than most recruiting firms.

but this recruiter wanted to help out early stagers and wanted to find a way to do it that made sense. to that end, i told him i would throw out a quick survey to my cos and contacts to see if something might work out.

one issue is paying them for their services. he was willing to back off that for early stagers, because he had normal contracts with bigger companies who could pay the bills but he had time to help out startups and also wanted to do that personally.

if anyone has worked with recruiters before, that can be anywhere from 10% to 33% the hired person's salary which is too much for early stagers.

we talked about accepting equity potentially but the risk of taking early stage startup stock or options is pretty high and most will fail, leaving him with nothing for his efforts if that is the only payment for his services.

so my question to you would be, what would you be willing to pay for their services? maybe something like 5% salary + 5000 options perhaps? or flat fee $5000 + 5000 options? would love to hear your honest thoughts, noting that you won't get their services for free but you must pay something either in equity and/or cash...

thanks in advance!

I have an email list of all my contacts at the startups. There are 62 people on the list, representing 25+ startups and companies.

Of those 62 people, 9 people responded. Here were the results:

1 would not pay cash at all
3 would never pay options for recruiting.
1 suggest deferring payment either until financial position better or next funding round.
2 would pay up to $5K, preferably less.
1 would pay 5% of salary but not more.
1 would pay options if there were future services/longer relationship
1 would pay options with no expectation of future services/longer relationship
1 would be happy to pay the normal recruiting rate 10-33% of salary

All are concerned that recruiters would deliver good candidates at all. Their experience with many recruiting firms was that they were not able to deliver great candidates. Also, there could be conflict of interest in that if recruiter is compensated on % of salary, a recruiter may negotiate for higher salaries. Or they just find you any candidate whether they are good or not, just to get paid.

2 suggested - was there a way to reward recruiters more for a good hire (ie. lasts longer than a year, and performing well) and rewarded little for a poor hire (ie. let go within a year).

One person suggested, could recruiter fees be paid by VC firms as part of their services or use of funds?

In looking at the responses, the consistent message was that startups were very cash strapped and did not want to, or could not, pay any cash at all. Or they did not want to pay until later. Everyone had a different opinion on whether or not they were willing to pay options and what paying options meant.

Looking at it from the recruiter side, there are definitely issues with working with startups:

1. For startups, many times it's low salary and high equity for the new hire. If a recruiter is getting 10-33% of hiring salary, then how does recruiter make money if the new hire salary is much lower than what they would get at a traditional company?

2. Startup equity is notoriously risky. If a recruiter only takes equity for payment, much of that payment will be forfeit since most early stage startups fail.

3. Recruiting is a cash based business like other consulting services. You need upfront cash to survive but startups are reluctant to give you any cash at all.

Given what I found out here, I am not sure that the current recruiter model can work. Some other comments and options I have found interesting that are out there:

1. Incubators and VCs already have recruiters on staff. Some of them are contractors paid through venture funds but some of them are actually on staff so they are not compensated like external, independent contractors.

2. StartupDigest is an email digest focused on startups, but there is a recruiting model hidden inside. It's an application driven, VIP only members list of both startups and key individuals who get matched to each other.

3. Codeeval allows those seeking to hire engineers to post coding challenges and a place to upload solutions. You set potential coding hires to your section of the site and they solve problems that you create. They write code and upload the code to the server where it runs the code and publishes the output and the code for the hiring manager to evaluate.

4. Ovia HR is video based recruiting, but in an asynchronous manner. You upload videos of the hiring manager/recruiter asking interview questions and interviewees come and answer via video. Actual interview situations are mimicked because there is a time limit to answering a question so you don't get time to prepare answers; you have to answer on the fly, just like in a real interview.

Still, in today's world, hiring is a big problem for startups and likely to remain that way for a long time. The explosion of startups means that there are too many choices for prospective new hires to join. Using new technology to help find candidates is nice, but there is no substitute for the power of getting out there and networking yourself. Ultimately, people join your startup not only for the cool idea and opportunity, but for the opportunity to work with smart people whom they respect and can learn from.