Nicely timed post. We're been doing exactly that(bringing back old band members), and I have to second your take on the equity issue. Ultimately, it's been a matter of acknowledging the worth of the relationship and the worth of the individual, NOT from the market's perspective.
preetam
· 11 months ago
i must add, though...the market provides excellent benchmarks, nonetheless.
DanBlank
· 11 months ago
Fred, I have been thinking about a similar topic for awhile: the value of staying together. EG: can a group of people create something greater and longer lasting than their individual efforts, despite the lack of personal satisfaction/freedom of going their own way? Music is a huge part of my life, and I have been looking for examples in the music world that can inform other aspects of life, such as business, family, etc.
While the Rolling Stones vs the Beatles is a tempting comparison, the example I keep coming back to is U2. Economically, they split all profits/royalties equally among not just the four band members, but include their manager as an equal share. Songwriting credits are split the same way.
There is a quote from Harry S. Truman that I heard a couple years back that really changed my outlook on life: "It is amazing what you can accomplish if you do not care who gets the credit."
While I hate to think that if Peter Gabriel hadn't left Genesis, that the world would be robbed of his solo music - I can't help but see far more examples of the incredible value of staying together. The recent trend of band reunion tours (Pixies!) is an indication of this. I recently read a quote from Billy Corgan where he bemoaned breaking up the Smashing Pumpkins - a band with a huge reputation of its singer feeling he was better than the whole.
Question for you from a VC's perspective, as part of your investment due diligence do you try and assess a founding team's ability to hire former colleagues and friends-of-friends? That is to say, is the ability to 'put the band back together' a positive indicator that will make you more comfortable investing, and conversely, if you see an early stage team that's going to depend on external hires for a number of key positions, does that give you pause with regard to team risk?
fredwilson
· 11 months ago
Hi Hunter
We make two kinds of investments at USV
1. where we are backing the service based on observed success/traction tumblr, etsy, and delicious would be good examples of this 2. where we are backing the team based on prior success indeed, zynga, clickable, feedburner, etc would be good examples of this
In the first category, we don¹t normally find a full team and we expect that we¹ll have to help a lot in the company building process
In the second category, we expect that the team can do most, if not all, of the leg work on team building and in fact we¹ve mostly found that to be true
We certainly do try to diligence that if we haven¹t worked with the team before
Hope that helps
Fred
Dave McClure
· 11 months ago
would be interesting to be able to do a 3rd type of investment that allows for discovery of the other two types. i know historically that hasn't really been possible with traditional VC structures, but feels like the angel / smaller VC market is now providing this.
fredwilson
· 11 months ago
Well I don¹t think you need the angel/small vc market to point you toward successful serial entrepreneurs. We¹ve got a group of about 20-30 in our ecosystem that we¹d be inclined to back every time they started something new. We do need to be comfortable with what they are doing (not going to back someone doing clean tech even though I¹d be very happy to see talented people tacking that problem)
The other category, services with traction, clearly needs capital that plays earlier than us. We¹ve been very happy with the role of Y Combinator and that style of investing and hope to do more with the companies that come out of those programs. We also work closely with the angel community to see the things they are investing in. and sometimes we¹ll invest alongside of angels. We did that in all three of the companies I mentioned (etsy, delicious, tumblr).
I can¹t emphasize enough the importance of angels in the venture system. Small VCs are good too, but there¹s simply not enough of them.
Michael
· 11 months ago
what about ringo?
fredwilson
· 11 months ago
He had a few moments too
Bob
· 11 months ago
Yeah, acting as the conductor on Thomas the Tank Engine kids' cartoon series was really a highlight!
Matt Meeker
· 11 months ago
Great post. We're also doing just what you suggest in bringing the band back together.
In 2002, three of us got together and started Meetup.com. Along the way we worked with many talented and smart people, who we mostly retained, but usually kept in touch with.
Last year, 2 of the 3 original founders (me and CTO Peter Kamali) got back together and started again. When we needed a strong developer, it was no accident we turned to another former Meetup developer. And when we wanted some marketing help...same thing.
This helps everything move faster and produces higher quality work. The interviews, equity, and compensation discussions were extremely fast and just the beginning. Some other benefits...
Now, we're always surprised about how quickly we complete projects. We don't have the need for long meetings to "get on the same page", we don't have to learn about our work styles, or tiptoe around when we disagree. Much of the difficult work to learn how everyone works and can work together has been done, and it's a huge benefit to us.
I'd add one thing though. From our experience, it's also good to mix in some new people. We were lucky to get some new band members and they help us break away from our shared thinking. They challenge us with new ideas and perspectives, when we probably would have just gone with what worked at Meetup.
Great post!
startupcfo
· 11 months ago
Prior success together is something I look for always when choosing a startup. I joined my current one (www.tungle.com) in large part because the CEO and CTO had a prior exit together. In fact, throughout the management team there were direct and indirect prior successes. ie. the CEO used to be a VC and invested in my 3rd startup which we sold for $47M. So, I'm in full agreement with you. Bringing the band back together is key.
Dan Weinreb
· 11 months ago
When we started Object Design, four of the five technical founders (including me) had worked together at Symbolics before. So we were all "known quantities" to each other, not to mention friends.
I was the only one who had been a co-founder of Symbolics. It didn't make any difference at all. My boss (one of the other Symbolics guys) got more equity than me, and the CEO got more than him, and I thought that was fair and had no trouble with it. Object Design was very successful and went public. (It's now a subsidiary of Progress Software, 20 years later.)
fredwilson
· 11 months ago
Another great proof point. Thanks for sharing it
Aruni
· 11 months ago
It's really great to work with people you've worked with before. But you do also have to be careful of group think. As they say past performance doesn't always predict future performance so it's sometimes good to have someone with a different perspective on the team because, afterall, it's a different company, often a different market, and different times. So many variables. The trick is to have the team that has worked together be open minded enough to listen to others with different perspectives...be open to change.
Good luck in 2009 with your companies and your vetted teams!
All Comments
I have been thinking about a similar topic for awhile: the value of staying together. EG: can a group of people create something greater and longer lasting than their individual efforts, despite the lack of personal satisfaction/freedom of going their own way? Music is a huge part of my life, and I have been looking for examples in the music world that can inform other aspects of life, such as business, family, etc.
While the Rolling Stones vs the Beatles is a tempting comparison, the example I keep coming back to is U2. Economically, they split all profits/royalties equally among not just the four band members, but include their manager as an equal share. Songwriting credits are split the same way.
There is a quote from Harry S. Truman that I heard a couple years back that really changed my outlook on life:
"It is amazing what you can accomplish if you do not care who gets the credit."
While I hate to think that if Peter Gabriel hadn't left Genesis, that the world would be robbed of his solo music - I can't help but see far more examples of the incredible value of staying together. The recent trend of band reunion tours (Pixies!) is an indication of this. I recently read a quote from Billy Corgan where he bemoaned breaking up the Smashing Pumpkins - a band with a huge reputation of its singer feeling he was better than the whole.
Thanks, have a great day.
-Dan
Question for you from a VC's perspective, as part of your investment due diligence do you try and assess a founding team's ability to hire former colleagues and friends-of-friends? That is to say, is the ability to 'put the band back together' a positive indicator that will make you more comfortable investing, and conversely, if you see an early stage team that's going to depend on external hires for a number of key positions, does that give you pause with regard to team risk?
We make two kinds of investments at USV
1. where we are backing the service based on observed success/traction
tumblr, etsy, and delicious would be good examples of this
2. where we are backing the team based on prior success indeed, zynga,
clickable, feedburner, etc would be good examples of this
In the first category, we don¹t normally find a full team and we expect that
we¹ll have to help a lot in the company building process
In the second category, we expect that the team can do most, if not all, of
the leg work on team building and in fact we¹ve mostly found that to be true
We certainly do try to diligence that if we haven¹t worked with the team
before
Hope that helps
Fred
successful serial entrepreneurs. We¹ve got a group of about 20-30 in our
ecosystem that we¹d be inclined to back every time they started something
new. We do need to be comfortable with what they are doing (not going to
back someone doing clean tech even though I¹d be very happy to see talented
people tacking that problem)
The other category, services with traction, clearly needs capital that plays
earlier than us. We¹ve been very happy with the role of Y Combinator and
that style of investing and hope to do more with the companies that come out
of those programs. We also work closely with the angel community to see the
things they are investing in. and sometimes we¹ll invest alongside of
angels. We did that in all three of the companies I mentioned (etsy,
delicious, tumblr).
I can¹t emphasize enough the importance of angels in the venture system.
Small VCs are good too, but there¹s simply not enough of them.
In 2002, three of us got together and started Meetup.com. Along the way we worked with many talented and smart people, who we mostly retained, but usually kept in touch with.
Last year, 2 of the 3 original founders (me and CTO Peter Kamali) got back together and started again. When we needed a strong developer, it was no accident we turned to another former Meetup developer. And when we wanted some marketing help...same thing.
This helps everything move faster and produces higher quality work. The interviews, equity, and compensation discussions were extremely fast and just the beginning. Some other benefits...
Now, we're always surprised about how quickly we complete projects. We don't have the need for long meetings to "get on the same page", we don't have to learn about our work styles, or tiptoe around when we disagree. Much of the difficult work to learn how everyone works and can work together has been done, and it's a huge benefit to us.
I'd add one thing though. From our experience, it's also good to mix in some new people. We were lucky to get some new band members and they help us break away from our shared thinking. They challenge us with new ideas and perspectives, when we probably would have just gone with what worked at Meetup.
Great post!
I was the only one who had been a co-founder of Symbolics. It didn't make any difference at all. My boss (one of the other Symbolics guys) got more equity than me, and the CEO got more than him, and I thought that was fair and had no trouble with it. Object Design was very successful and went public. (It's now a subsidiary of Progress Software, 20 years later.)
Good luck in 2009 with your companies and your vetted teams!