I’ve been thinking about two competing online ad trends:

1) Advertisers/publishers are getting better and better at targeting ads.

2) Consumers are getting better and better at ignoring ads.

Targeting improvements have come on multiple fronts.  Advertisers have an increasing understanding of who is consuming content, in what context, and what exactly is being consumed.  The behavioral ad engines (Tacoda, Aggregate Knowledge, Wunderloop, amongst others) are amassing massive datasets on user behavior to figure out consumer preferences.  Meanwhile, Facebook and other social networks literally hold such information under their nose, embedded in the profile of each of their members.  Content itself is better understood.  Think about the metadata around images or video.  Titles, tags, and comments largely drive ad targeting for these media today, but companies like Digitalsmiths (full disclosure: a Chrysalis portfolio company) are figuring out how to generate improved metadata for advertisers.

At the same time, though, consumers are tuning out.  Tivo/DVR usage is the obvious example, but there are plenty of others.  One can download browser extensions that block advertising while you surf the web.  Eyetracking research indicates that folks ignore banner advertising anyway.  And Starcom, Tacoda, and comScore say that 50% of display ad clicks come from only 6% of the Internet’s users,  folks that aren’t “representative of the general public” and don’t seem to be a particularly lucrative set.

This “sky is falling” backdrop abuts a pretty exciting long-term macro view, though.  Content consumption share continues to shift online (increasing as % of total consumption by medium) and there’s a massive discrepancy between that share and the medium’s share of ad dollars.  Presuming that online engagement can be monetized effectively through advertising, there’s lots of growth potential.  And sure, things could slow down in the short-term as a result of the economic environment, but again, a long-term look at ad spend equilibrium lends a bullish view. 

One would think that as advertisers and publishers get better and better at targeting a point is reached at which consumers stop ignoring.  I’d guess that this outcome requires a more integrated understanding of the consumer.  It requires not just gathering preferences but improved predictive analysis of upcoming consumption decisions.  Let’s call it “implicit search advertising.”  Traditional search advertising works because it catches the consumer with relevant information at the point of a consumption decision.  Surely advertisers will get better at doing this without needing an explicit search (i.e. entering a search into Google).  That future’s coming, and the privacy hounds will be barking at its heels.  Hopefully, “hyper-targeted” meets “opt-in” somewhere along the way.

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A friend introduced me to a noteworthy line of thinking recently.  It went something like this: “There are two types of entrepreneurs in this world: alpha entrepreneurs and beta entrepreneurs.  Alpha entrepreneurs are the guys that are naturally risk tolerant, even irrational dreamers; they’re charismatic and marshal folks around them to develop a company that’s viable. Alphas take the first step.  Beta entrepreneurs, on the other hand, are very execution focused, basically rational when it comes to risk, and bring to bear a learned skill set. They take problems and set about methodically solving them.  Betas make entrepreneurship work.”

So, my friend says, “We need to stop encouraging alpha entrepreneurship.  You can’t teach someone to be an alpha.  What we can do is teach folks to be betas.  A community doesn’t need a ton of alphas, but it needs lots of betas.”

For me, this classification and accompanying recommendation resonate in certain ways.  Execution builds businesses.  And loads of multi-million dollar businesses are built without a real visionary or need only a creative kick-start.

I do have a couple counterpoints, though: (1) lots of individuals have had their natural alpha suppressed by risk-averse upbringings and a little encouragement can go a long way; (2) a startup’s potential may turn on creative, risky adaptation (in other words it’s not just about a visionary getting the ball rolling; consider Facebook’s application API ingenuity).

Incidentally, the market tends to place a higher value on end-user execution than ingenuity.  Consider invention licensing contracts (pretty favorable to the licensee) or content creation vs aggregation/distribution value allocations (pretty favorable to the aggregator/distributor).  These examples are driven by monetization control but the point holds, I think.

I suspect that my friend has a strong argument from an economic development standpoint.  To “teach betas,” I’d add, “attract alphas.”  Creative juice and leaps of faith are integral aspects of the game, and I’d hate to lose sight of that.  Irrational risk compasses are a precious commodity.

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This whole Spitzer hullabaloo has me thinking about legacy.  The New York Times put up an interactive timeline, “Milestones in an Ambitious Career,” that curtly sums the New York Governor’s key career moments into a few pictures and captions.  Here’s the headlining snippet:

“Eliot Spitzer’s journey from Harvard Law School to the highest office in New York state was marked by drive, ambition and [sic] string of successful prosecutions as the state’s attorney general.  But as governor, he stumbled repeatedly and faced humiliation after being linked to a prostitution ring.”

Full stop.  I sure hope Governor Spitzer gets a shot at a third sentence to his legacy.

It’s worth thinking about how one gets described and how we describe ourselves.  The venture industry is pretty unique in that almost every investment professional’s bio is online and readily available.  Ultimately, of course, these are sales pitches (primarily to entrepreneurs).  But some of them hint at or even nail down a legacy; consider John Doerr’s inclusion that his and his partners’ investments have created 150,000 new jobs(!).

What role does the self-described legacy, though, have on the impression of others?  Well, perhaps it’s a guideline (and sometimes a revelation of where one stands on the ego continuum).  Doerr frames himself as a champion of economic development rather than an all-star VC.

The venture industry teaches us to distill a company’s offering into one or two sentences.  How many more does an individual get?  Amazingly, even as our lives become more and more “discoverable” with traces of us digitally archived all over, one’s legacy is, with rare exception, going to be a couple simple sound bites.  One might say, “Tread carefully.”  But I guess I’m more a fan of “give it your damndest and stick to your values.”  What will your two (or three) sentences be?  Worth pondering…

Somehow the concept of transparency made its way into both my lunch and dinner conversations yesterday. It’s a worn topic, really, usually focused on privacy concerns and reputation (for the individual) or business opportunity, competitive pressure, or again, reputation (for the enterprise).  

At dinner, though, with a good friend, we briefly touched on what’s a rarely discussed downside to the transparency march: peer success comparison. Research indicates that happiness hinges to some extent on one’s evaluation of status relative to one’s friend group. Career guru Penelope Trunk moved from New York City to Madison, Wisconsin at least in part to earn what her neighbors earn. But I doubt one’s mental calculus finishes at the end of the block. It’s so easy now to stay on top of peers’ accomplishments, to know folks largely through virtual mechanisms but for the relationship to feel present, enough so to figure into one’s world view and introspective analysis.

Such broad-based comparisons are nothing new, of course.  Another friend religiously reads the New York Times’ wedding announcements and gets a kick out of scanning pedigrees. Unusual maybe, but I’d argue, too, that the public fixation on celebrities’ daily lives is part voyeurism, part vicarious living, and part self-soothing in witnessing the foibles and faults of a glorified peer group.

What’s different about today’s peer success comparison is its targeted scope. Tools have emerged to pretty easily monitor, and even interact with, a wide swath of acquaintances. And it’s only getting easier - consider Big Sight, an online “people directory” which allows one to slice affiliated peers by industry, location, graduation year, etc. The major social networks offer similar, albeit less facile, functionality.

I bring up the above because I think it’s particularly impacting entrepreneurs, for whom immense strength of will and determination at sticking through the tough times is often critical for success. And I think it’s harder to stick it out at times when you’re left wondering why an acquaintance got funding or hit it big. A feeling of being left behind looms in the wake of constant acquaintance success news. And sometimes that leads to risk-averse behavior.

There’s a counterpoint, here, of course, that targeted success comparison breeds motivation. It’s a fine line to ride, though, between motivation to push harder on your current tack and motivation to switch gears altogether, and sometimes onto a much less passion-centered and exciting path (scribe’s bias shining through).

So stick it out. Celebrate transparency but don’t get lost in it.

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I’ve heard famed inventor Ray Kurzweil give his “Acceleration of Innovation” talk twice now and each time he tickled the audience with a rather fantastic notion: live another 20 years or so, and you’ll live forever.

Recently, the concept has received some business press: first in Portfolio’s “Never Say Die” (December 2007), then again in The Economist’s “How to Live Forever” (January 3, 2008). According to Kurzweil, “Our lives will extend exponentially,” assisted largely, perhaps, by advances in artificial intelligence.  Essentially, he argues that the work of life extension scales.  In the context of an individual life, each additional moment of life expectancy that innovation yields allows more time for anti-aging efforts; at some point, assuming accelerating progress, one expects each incremental interval to yield an additional equal interval (then more) of life expectancy. And immortality ensues.

The concept has also led to a neat turn of phrase, this one from the bearded and hopeful researcher Aubrey de Grey: “longevity escape velocity.” Here it is in context:

Dr de Grey’s reason for thinking that some people now alive may see their lives extended indefinitely is based on the hope that those few extra years will see further discoveries and improved life-extension technologies based on them—a process he describes as achieving “longevity escape velocity”.

Dr. de Grey cleverly ties the challenge of defying death to that of defying gravity. Appropriate, I’d say.

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In the vein of napkin-drawn business plans, enjoy this index card argument for exercising your inner child, courtesy of Jessica Hagy:

An analysis: Heaps of imagination at a startup yields heaps of money. Or is it heaps of imagination and heaps of money yield a startup?

Presumably the latter, under the assumption that a dearth of imagination in the hands of a bore rarely equates to heaps of money. A tongue-in-cheek answer: It depends on investor sentiment. Or even bolder: It depends on your fund’s vintage year (the bubble’s fanciful imagination and heaps of money sometimes yielded a startup and not much more). Hagy’s card (dated 11/20/07), of course, comes a mere two weeks before the Bubble 2.0 video.

In all seriousness, I like that this piece highlights the gap between “bore” and “startup.” It’s rare to run across someone in the business who’s boring.  Crazy, sure - a prerequisite for success (I’m sure there’s another funny index card in there). But boring? Nope.

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“So you want to be a venture capitalist?”*

A number of my colleagues have posted discussions of how to find such work. It’s worth perusing the thoughts of: Charlie O’Donnell, Seth Levine (reprinted at Ask The VC), Vineet Buch, Fred Wilson, and Praveen Sahay.

But with friends tackling the search and PE Hub announcing its annual summer internship roundup, I thought I’d pull together a set of relevant resources with the hope that they help match talent with opportunity. This post will focus on finding openings.

As you might suspect, there’s not a ton of them. A good friend of mine who is attending business school was recently told, “Good luck. Every year there’s five spots on the east coast and ten on the west coast.” Stark terms, but not too far off for post-MBA early stage venture work in my experience. Of course there are a couple spots between the coasts and a growing set of international ones as well.

So how does one go about unearthing the opportunities?

Some subset of open venture positions are publicly or semi-publicly announced. They hit job boards, recruiter sites, or blogs.  Here’s where to look:

1. Job Boards

• Private Equity Job Search Digest touts itself as “The Definitive Source for Private Equity Jobs.” The site offers both “basic” (free) and “premium” ($60/quarter) subscription options.  If you’re actively in the hunt with few relevant contacts, sign up for the premium service if only to gain access to information on recruiters. It’s their job to take your call and will help start you down the road.  An upstart service operating in the same space that’s worth keeping an eye on is VC-Jobs.
• Doostang is “an invite-only career community” that has garnered a surprising number of VC position postings, perhaps a result of either its own venture-backed status or the buzz around its membership.  I first heard of Doostang this spring when asking a colleague in the industry how he’d found a new Analyst for the firm.  The site lists Bessemer Venture Partners, Spark Capital, DFJ Element, TA Associates and Summit Partners as firms that have made offers to candidates found via Doostang. Impressive.
• The PE Hub Summer Internship Rodeo (accessed via their MBA Forum) kicked off last Monday. In its fifth year, this service connects first-year MBA students with summer internships in the field. I’m told there are almost 90 job postings up right now, a fair number of which are in venture capital.
• Others - Indeed, Simply Hired, and Jobster offer nice meta job engines, culling posts from around the web. It’s worth playing with these to make sure you’re not missing an opportunity. Craigslist, which offers loads of startup positions but rarely an investing role, has notoriously evaded such “scraping.” If you want to comprehensively search Craigslist’s many city sites, try Craig’s Helper. And Monstertrak, Monster’s school-specific posting service, tends to house venture positions from time to time in my experience with Princeton’s sub-site.

2. Recruiter Sites

• The two recruiters that I’ve seen most active in the space are Glocap Search and Pinnacle Group International. Glocap is currently listing 12 VC positions and Pinnacle has two VC spots. Consider contacting these or other recruiters directly as well.  Hammer Haley and Forrer and Associates are two that tend to send me opportunities.

3. Blogs

• It’s rare for a venture opening to show up on a blog, but I’ve seen it happen a couple times, and posted myself once. I love that Union Square Ventures’ Andrew Parker applied for his position at the firm, advertised on Fred’s and the firm’s blog, with a single field: “web presence” (see third comment here) - evidence that Baris Karadogan’s assertion that blogs are the next resume carries some weight. If you’re interested in catching these opportunities, never mind that jobs may occasionally pop up.  Reading venture blogs will better prepare you for discussions and interviews than any other resource and offer unprecedented access to the professionals themselves. You can find lists of venture blogs here, here, here, and here.

Many of the venture slots, though, never see the light of day. They’re offered to folks that have been operating “in the network” for years, via a portfolio company, another venture firm, a large player in the firm’s investment sector, or simply via a referral. The best way to ensure you get the underground news is to be in the network, something you can work your way towards. Charlie’s advice along these lines is excellent. I’ll offer a couple useful resources to start networking:

• Venture Capital Conferences lists upcoming events. Head to the Advanced Search page of the site to find venture-related gatherings in your neck of the woods (or elsewhere). Not all of these have a high sticker price and meeting VCs at such get-togethers can help start the ball rolling.  Perhaps such a connection leads to a position at a portfolio company, and then down the road, at a venture firm.
• Angel Capital Association offers a directory of angel investor groups by region. As a prospective VC, it’s worth reaching out to angels for a couple reasons: (1) they tend to know the VCs in their region because they introduce VCs to their promising investments and end up as co-investors, and (2) they’ll have their own startup-related network, and may have more time to give than the average VC. Hopefully, you’re offering something too: a perspective on investments they’re considering, talent which lends them relationship brokering “currency,” and/or investment leads.

Lastly, consider applying for the Kauffman Fellows Program (KFP).  Though incredibly competitive, KFP offers two-year focused apprenticeships at venture firms with high retention rates thereafter, a great entrance to the field and worth a shot.

Good luck with your search! I’d appreciate hearing about additional resources you’ve found useful.  Leave a comment.

And once you’re “in,” don’t miss VCComp for industry compensation data.

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*Credit to Sierra’s Quest for Glory: So You Want to Be a Hero? for inspiring the lead-in, or so I thought until re-running across Rob Hayes’ aptly titled blog post from about a year ago which must have stuck in my head.

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There’s an old college admissions question that goes something like this: “Is it better for my kid to get a B in the advanced math class or an A in the standard track?” Well, it’s better to get an A in the advanced math class, the admissions officer will tell you.

Entrepreneurs, if they’re good, are experts at optimizing the allocation of scarce resources to hit goals. They don’t respond well to the above answer because it’s in some ways an irrational one. And yet, unfortunately, investors offer an analogous demand. An entrepreneur might ask, “Is it better for my business to have moderate potential with a very simple value proposition and execution path or have huge potential and require multiple lines of business with a complex growth pattern?”  The answer is that it’s better to have huge potential and a very simple value proposition and execution path. Something “big and clear.”

This is why not all businesses are a good fit for venture financing. One of a number of reasons. And of course, investors have a range of appetites for business model complexity just as we have a range of appetites for stage. (Our appetites for potential, unfortunately, range from large to empire status in order to meet return expectations across a portfolio of risky investments.)

If you have complex growth assumptions, consider the following:

1. Investors will give you real credit for existing lines of business with proven value and potential; similarly, obvious opportunity (e.g. ability to layer advertising into content consumption) will lend credibility to projections. On the other hand, theoretical/in-process business lines without market validation will often be heavily discounted. If you’re reliant on such business lines to arrive at large potential, do everything in your bootstrapped power to validate the market opportunity (make calls, cull research, pre-sell, etc).
2. Investors value focus because its relentless pursuit tends to yield positive results. Question whether there are ways to focus your business model and simplify.
3. Don’t be tempted to outline in depth the 15 untrod, optional paths to success, each utilizing a different model. While business model evolution is a key part of successful entrepreneurship, it takes an exceptionally reasoned entrepreneur to pull off this kind of a pitch and an exceptionally patient investor. Evidence the capacity to adapt and you will have made the appropriate point. If the objective is to indicate opportunity, point out the most attractive avenues, indicate that others exist, and allow for questioning to suss out the details if there is interest.

There’s good news under the expectations header, and that’s that rising operating efficiencies in many businesses are allowing for slightly lower top-line (revenue) expectations. Ultimately, that means it’s easier to work under a simple value proposition and execution path. It’s still hard to build something big and clear.

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At DrJays, I remember feeling surprised when mainstream publications printed material that demonstrated blatant misunderstanding of the industry. More seasoned folks in the room shrugged. We were relatively “under the radar” anyway, and quietly benefiting from some decent market trends. (Lesson: misunderstanding breeds opportunity.)

So when, in the unfortunately named pop movie A Lot Like Love, starring Ashton Kutcher and Amanda Peet, Ashton heads to New York City to seek venture funding for his e-tail diaper company, I knew we might be in for some misunderstanding. There was no way Hollywood would nail it in a romantic comedy.

Here’s the pitch, from script-o-rama, with my supplemental brackets and speaker denotations pulled from memory (read, not perfect):

Ashton Kutcher [CEO]: So…the baby…The…Client. The client inputs the child’s data and the baby [a graphical display of one’s child] actually tracks its growth. So when it’s time to move up to a bigger size…There it is. Bam. Just on your doorstep. No hassle, no fuss.

VC 1: Does the baby have a name?

Ashton: Does the baby have a name? [pregnant pause] Yes. What were we saying for the baby’s name?

Kal Penn [Business Partner]: Freddy.

Ashton: Freddy.

[VC 1 shakes his head, expresses disapproval]

Ashton: Doesn’t have to be Fred.  Gabe…was another choice that we came up with.

Kal: Gabe the babe.

Ashton: My point is, is that there are [10,000] babies born every hour. That’s [254,000] babies a day. And somebody’s gotta figure out where to put all that shit. I wanna be that guy.

VC 2: [10,000] babies an hour. Wouldn’t that be [240,000] babies a day?

Ashton: Yes.

[break scene]

Kal: It was good, Ollie. You were great. I mean there was that one little thing, but I don’t think it was a big deal.

So of course, they were funded.  Only in the bubble…I mean, Hollywood. I’m not saying that e-tail diapers are a bad idea. In fact, some respected investors think otherwise. The pitch left something to be desired, though, as did the VC temperament on display. In case you were wondering, it’s considered bad manners to openly scoff at highly subjective business ideas, even marketing ones, without so much as a “here’s why” as VC 1 does to the notion of “Freddy” the baby. Poor form, but entertaining on the big screen. And ironically, Fred might not be a terrible name to pitch to one of the clutch of early stage VCs in NYC.

I love that there’s actually an online business lesson framed around this movie.

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In recent weeks, I’ve been chatting a bunch with peers that are looking to raise money for their businesses. It’s been an instructive experience in many ways, but first and foremost it’s driven home the need for talking points. We’d all like to think that we can walk into a meeting and impress the socks off someone without much forethought but it’s rarely an effective strategy. And we’re all guilty, but when you see prep work done right, it’s transformative. Some of the better venture conferences actually schedule time for pitching entrepreneurs to receive coaching from seasoned peers and investors. It’s time well spent.

Politics offers an extreme example of talking points in action. The current roster of presidential candidates have gone over with staff time and again their positions on every issue, their mollifying answers to questions of personal misstep, the points with which they’ll differentiate their message from competitors. They hold a grab-bag of premeditated discussion threads with which to sew a consistent and compelling story of their candidacy. Sometimes they sound canned, but it’s better to sound canned than to sound incapable.

Seasoned CEOs, public speakers, and others have mastered this practice, too. It’s not always in the toolset of the early stage entrepreneur, and understandably so. Mavericks don’t like outlines.

In the interest of improving one’s fundraising odds, however, below are a few talking point lead-offs to consider. I’m no expert, but I’ve seen plenty of missed opportunities.

Keep in mind that an investor is broadly considering the following: (1) one’s offering and its chances for success in the context of (2) team, (3) market, and (4) financial picture, including unit economics, projections, and capital requirements. Talking points should get at these core issues but more than anything, I’d expect them to help convince an investor of the entrepreneur’s capabilities. To that end, anticipate the following broad topics, admittedly a subset, that given preparation offer ample opportunity to toot your horn:

1. Tell me more about your background. A natural that will come up in 90% of investment discussions. You’ve offered a short bio in your deck and expanded on it in your pitch (perhaps with some humility). When an investor asks to hear more, s/he’s offering an open lead to talk about additional relevant experience and/or perspective. Answer the question, “Why are you here?” Display your commitment to a long road. Imagine your prospective investor is writing a paragraph in his investment memo justifying investment behind you (whether he goes through such documentation or not).  If you can’t write that paragraph yourself, consider his difficulty.

2. What have been your roadblocks/learning points/etc. to date? To me, this one’s key. Entrepreneurship requires constant testing and incremental iteration. It requires learning from mistakes and adjusting. Make sure your examples have impacted the company in a meaningful way.

3. What are the important growth drivers for your business? Amazingly, it’s rare to hear the following: “I’m concerned with x, y, and z, and these are the things to which I hold myself/team accountable. Every week/month/day, I’m monitoring them” (that sounds robotic, but you get the idea). Maybe it’s recurring revenue vs. one-off contracts. Maybe it’s sales leads that pass a probability threshold. Different stages of business require different metric monitoring but the practice of distilling many data points into a few key drivers enables clarity and focus. My absolute favorite pitch comment: “Let me show you how we measure this and demonstrate its impact to the business.” The resultant dashboard, spreadsheet, whatever is often a beaut. Sometimes too detailed for a short pitch, but a fantastic follow-up to questioning.

In other words, don’t just hone an elevator pitch which will simply get you in the door. Develop a set of discussion points surrounding yourself and your business, and you’ll rarely be caught off guard. Better yet, you can drive the conversation where you’d like it to go. You’ll be able to realistically explain to friends and family why you’re tackling such a monstrous venture, and the clarity will pay dividends in your actual ops.

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