David Lee

Trying to bring something to the table.

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Ten Things I Think I Think

If I could do it all over again, I’d be a sportswriter. Growing up in the mid-80’s, my favorite thing was to wake up and get the paper-delivered Boston Globe and open the sports pages (an anachronism for anyone born after 1975, probably). I wrote for the town newspaper and it’s the one thing (other than playing sports) that I truly enjoyed as a kid.

I still read some columns today. One column in particular is Peter King of Sports Illustrated. He covers the NFL and mixes reporting, insight and locker-room gossip. He has the best access to teams, key personnel and leaders like an old school Peter Gammons, Will McDonough or Bob Ryan.

One of his features that I love is his weekly “Ten Things I Think I Think” which are quick hit snippets where he humbly pontificates about football and other stuff. With a hat tip to him, here goes my first installment on tech, startups and other stuff:

  1. ...

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You need to prepare, listen and engage.
-Charlie Rose

I’ve met a lot of incredibly successful, accomplished and well-known people. In some cases, I’ve even worked with them. This is one of the huge perks of working with Ron Conway, who I put in this bucket. (Incidentally, this sounds like a nested humblebrag but just because I met these folks obviously doesn’t put me in that bucket.)

For me, one skill that really stands out among some of these folks is their ability and willingness to listen. I’m not just talking about the level of listening where you remember what the other person said. And not the pollyannish notion of “I feel your pain.” I’m talking about the deeper level of listening that requires a mastery of body language, a genuine level of empathy and most important, a genuine interest and curiousity in the speaker or subject matter, or both. They are curious in either the...

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Cheap Data

I went to a tech talk last night called “Genomics at Web Scale.” at Counsyl. [SV Angel is an investor in Counsyl.]

The following is above my pay grade to critique but here goes. There’s a strain of thought in computer science that “data beats algorithms.” That is, having more data is better than having a superior algorithm. For example, some contend that the winners of the Netflix Prize had a relatively simple algorithm but won because they had more data.

Imran Haque, Counsyl’s Director of Research, tweaked this claim. He said that cheap, abundant data leads algorithms. And by doing that, they can lead to technological (mainly software) breakthroughs.

In the mid 1990’s, cheap text created by the Web led to better machine learning, machine translation technologies, AI technologies, PageRank and other breakthroughs. In the mid 2000’s, cheap image data created by cell phones, digital...

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It’s business, man

Yesterday was a depressing day for me. I’ve been a fan of the New England Patriots (and other Boston sports teams) for over 30 years. And I just can’t root for them anymore. [Endnote]

Putting aside the fact that no grown-ass man should be this depressed about a sporting event, it’s a cold, hard reminder that professional sports is a business. It’s run by billionaires who happen to be (in most cases) die-hard sports fans. I’m pissed off at him and the ownership now, but Robert Kraft, the owner of the Patriots is not only the best owner in all of sports but also a die-hard Patriots fan. His decision to buy the Patriots was a dumb business decision (at the time) driven by his inner sports fan. Every Patriots fan is grateful for what he did.

I’ve written and talked before about the parallels between engineers and athletes. Others have made the same points so I won’t rehash them here. I...

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Operating Leverage

I’m not a finance guy. Which is pretty scary given that I’m theoretically in the “finance profession.” I didn’t even take a single economics class in college. I faked-it-until-I-maked-it and just tried to learn on the job.

Probably the useful concept for me in the context of tech was the notion of “operating leverage.” It basically measures your marginal profit - is your revenue leading to growth or are you just running standing still? One way of looking at this is your fixed costs relative to your variable costs. A business that has high fixed costs relative to lower variable costs has high operating leverage. They make more profit (and not just money) as they get more customers. The classic examples are hotels, restaurants and airlines. The beauty of a business with high operating leverage is that you get a lot of leverage from your customers or users (sorry for circular statement).


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Making Decisions

I’m not a big believer in post-mortem analysis. It’s very hard to do it without infecting analysis with what you know now. For example, when it comes to “misses” in startup investing, one often looks at where “things went wrong.” But maybe nothing went wrong. Maybe you created a systematic plan and process, executed the process based on the facts that you had at the time and made a decision based on the probabilities. Your decision wasn’t wrong or a “miss”; the probabilities just played themselves out.

Put another way:

[D]ecisions are about probabilities is that decisions should not be judged by outcomes but by the quality of the decision-making, though outcomes are certainly one useful input in that evaluation. Any individual decisions can be badly thought through, and yet be successful, or exceedingly well thought through, but be unsuccessful, because the recognized possibility of...

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What is the business model of SV Angel?

My answer to that Quora question reprinted here:

SV Angel invests in and advises startups. We make money when these startups have a “liquidity event,” which is historically an acquisition or public offering. We invest other people’s money. We invest our own money too–this is called a “capital contribution”, which is required of most funds. When there’s a liquidity event, the other investors get paid 80% of the profit and we get 20%.

This is the structure of a traditional venture capital firm (VC). But we aren’t a traditional VC firm. Traditional VCs invest in 10-20 companies per year. We may invest in 100+. Many VCs need to own a certain percentage of each company and invest more money in the companies that are doing well (i.e., “pro rata” in VC jargon). We don’t, and we rarely do our pro rata. Many VCs have a ‘higher touch’ approach with the company post-investment. Because we invest...

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Warren Buffett’s Definition of Investing

From the Berkshire Hathaway 2011 Letter to Shareholders: with my edits. Read the whole thing here: (link)

Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire we take a more demanding approach, defining investing as the transfer to
others of purchasing power now with the reasoned expectation of receiving more purchasing power – after taxes have been paid on nominal gains – in the future.

More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date. From our definition there flows an important corollary: The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability – the reasoned probability – of that investment causing its owner a loss of...

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Updating Your Investors

This post is for companies in their first year or so and have angel/seed investors.

You should update your investors. Even if they don’t have a legal right to updates (i.e., “information rights”). It can help you more than it benefits them. I learned this from Ron Conway - updates are a sign of a good entrepreneur. Even and especially if things aren’t going well.

Josh Hannah of Matrix has a good post on why updating investors is a good idea. The points I’d add to Josh’s post:

  • Updating others can foster accountability
  • Doing them as frequently as possible is only good thing but monthly is fine.
  • Doing them frequently also keeps them shorter. The most painful are the 2 page emails.
  • Use more numbers than words.
  • You can even try to create a template where you just plug in the numbers.
  • Also include a qualitative paragraph but it doesn’t have to be exhaustive.
  • Always include amount of...

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Scar Tissue

When I first started investing in 2007, I heard some investors turn down opportunities because of “scar tissue.” They had previous brutal (and usually money-losing) experiences with an idea/sector/market and this prevented them from doing it again. The canonical example for us is Ron Conway and music. Ron spent the better part of a decade “dealing with” the music industry with Napster and Snocap. After that experience, he didn’t make a music-related investment for awhile.

I started relatively late in my career as a start-up investor. There are obviously some disadvantages to being a late-starter. But one advantage is that you don’t have any scar tissue built up. You have a beginner’s mind. (The same can obviously be said for ‘first-timers’ - they can ask ‘Why not?’ without feeling self-conscious). Scar tissue is like any other cognitive bias - it shades your judgment subconsciously...

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