vc monster

Saw a very interesting interview with a gentleman by the name of Rob Monster, who heads up Monster Venture Partners in the US. Mr. Monster is a well-heeled entrepreneur who has had considerable success as such. In the story, he outlines his particular investment strategy and the reasons for it:

In an interview this week, Monster said he plans to invest in about three to five companies each year in the healthcare services and online marketing sectors, with investments ranging in size from $250,000 to $1.2 million. That’s a hefty amount for an individual investor, but Monster – who has been investing since he was 12 years old and started working at the American Stock Exchange at 17 – is experimenting with a new approach he dubs “angel (investing) on steroids.”

“There is a middle ground between angel investing and venture investing and that sweet spot is woefully underserved,” said Monster.

As well as his perception of the existing VC market:

MONSTER: “Venture has earned, deservedly, a bad rap for being not forward looking in its approach to creating value in partnership with the entrepreneur. (Venture capitalists) have become short sighted … and tend to design financing structures in a way that biases toward preferences that are not aligned with the objectives of the common shareholders. And they can optimize certain outcomes in favor of the preferred shareholder, none of which, per se, is wrong. But from the standpoint of the entrepreneur they have figured it out…. Entrepreneurs are kind of backlashing a little bit… There is now an accountability for VCs to behave and to follow through on their commitments of being a partner of building a company. But a lot of times VCs get involved and say they have all of these strategic relationships and will make all of these introductions and then it doesn’t happen. This is the universal rant of most entrepreneurs that have interacted with VCs.”

MVP plans to invest through simple common shares, rather than the typical preferred shares with minimum returns and liquidation preferences, anti-dilution rights and so on. His reasons:

“Whatever happened to investing and being right there in the trenches with the fellow company builder, as opposed to baking in a preference whereby I can win and you can lose? My personal view is that the guys who back a company have a responsibility to help the company be successful.”

I recall giving a speech (an admittedly poor one to be perfectly honest) a couple of years ago about how the use of common shares seemed to be increasing as a financing vehicle for not only angel type rounds, but also early stage VC rounds. It didn’t quite ring with some of the VCs that were also presenting, so its interesting to now see a fund specifically and deliberately adopting common shares as its primary investment vehicle.

I’ve had the pleasure of some (very limited) interaction with MVP – quick, straightforward and candid. However, he’s not without his detractors (see for example some of the rather stinging comments in the above article). It will be very interesting to see how things work out.

taking the fun out of blogging

As a lawyer, I understand the need for policies, procedures, practices, etc. when running a business, managing vendors, employees, etc. Of course. Sure. That’s part of work – both my work and the work of my clients. But when I see an article entitled “Blogging Policies and Best Practices for Lawyers and Law Firms” well, gotta say, my eyes start glazing over.

Not that there’s anything particularly bad or wrong about the article. In fact, it offers some good advice on avoiding “ethical minefields”, creating “powerful marketing tools” and ensuring you realize a good return on your “investment”.

Ugh. To be perfectly honest one of the primary reasons I blog is not to realize a return on investment, or to create a powerful marketing tool, but rather just to offer casual observations (or ruminations) on my work or things related to my work. In other words, its a bit of fun, as compared, for example, to writing a formal research paper, journal article, or a 100 page outsourcing contract. For those types of writing, there are many, many rules, requirements and policies to remember and adhere to, amongst other considerations. And relatively speaking, its not quite as much writing that stuff as it is posting what are ostensibly meandering ramblings about the next new thing. Don’t get me wrong, its certainly interesting and challenging work, but its not the type of thing one typically does to relax.

I guess what I’m getting at is along the same lines as the previous post about making blogging part of someone’s job. Its kind of like saying that its part of your job to chat up your friends at work on a regular basis. Its kind of like saying that there should be internal policies governing who you go to lunch with, and what you talk about over lunch. In other words, to me, it seems to take all the fun out of it. It makes it seem like work. It puts you in the mindset that it is work. And, to be perfectly honest, I think it makes it less interesting, because you’re too worried about the time being put into it. Too worried about whether you’re writing for your “target market”. Too worried about “visualizing and addressing your market”. Too worried on making your blog sound “informal and conversational”. Too worried about this, that and the other thing, none of which have much to do with the subject matter of what you’re writing about.

Of course, this is just my take on blogging and what I hope to achieve (or perhaps rather not to achieve) by doing it.

Pretexting, Canadian Style

From one of my very smart colleagues at the firm – a recent Canadian case involving “pretexting” like activity a la HP.

The short story: A company hires an investigator to see what some former employees are up to, since they’ve started a competing business. Based on what they find out, they sue the employees. In discovery (in rough terms, the process through which each party gets to look at the information that the other side has supporting their case), the employees find out that the investigator has obtained their phone records and also has recorded them on video at their business premises, in both cases without their consent and without a court order.

Sound somewhat familiar?

So the employees countersue the company and the investigator. It turns our that the company wasn’t aware of the methods used by the investigator and so is left off the hook, but the action against the investigators is given the green light.

Whether or not the claim of the employees will succeed remains to be seen. In the meantime, folks thinking of using investigators, for whatever purpose, would be wise to give serious consideration to the nature of information that they want to collect.

Pretexting, Ethics and Clients

Still catching up a bit – very quick post on the HP “pretexting” thing. As you may recall, HP asserted that its practice of pretexting – i.e. pretending to be someone else to get confidential telephone records – was legal. They were investigated leaks to the press by one of their board members and had resorted to this practice to try and find the leak. I had commented elsewhere long ago when this story first broke that even if it were illegal, very few (if anyone) could consider such actions the least bit ethical.

As most of you know apparently there was some disagreement as to legality and a few folks at HP were charged. Then I read this recent story about how HP was ending its special ties to Larry Sonsini, of the California powerhouse firm of Wilson Sonsini:

Sonsini – famous for decades in these parts – gained national fame in September during HP’s spy scandal hearings in front of Congress. Emails between the lawyer, HP executives and former director Tom Perkins raised serious questions about how sound Sonsini’s advice was around the practice of pretexting. He seemed to indicate that phone record fraud sounded like fair game, after being nudged in that direction by HP’s internal lawyers.

My emphasis. Its unfortunate to hear of something like this. I don’t doubt that he took the time and effort to research the law to come to a reasonable opinion on the matter before advising his client – obviously it was a very grey area of the law. In those circumstances its unfortunate that he didn’t perhaps suggest, notwithstanding the black letter of the law, that it would be unwise do take the course of action they were contemplating. That as good corporate citizens with a significant public profile, that such a practice is not something they should even consider. But then again, maybe he did and they didn’t listen (and of course he would surely have the good sense never to say that in public and embarrass a major client) or maybe he thought that such comments were not for legal counsel to make. Who knows.

The situation is not unfamiliar to many lawyers – particularly when it comes to giving opinions – lawyers are sometimes subjected to pressure to deliver the opinion that a client wants to hear rather than the one they should probably be delivering. By this I’m certainly not suggesting lawyers are delivering bad or incorrect opinions. What I am saying is that there are often grey areas of the law (which tend to be the areas on which legal expertise are sought) and in respect of which opinions can go one of two or more ways. And sometimes, the client will want to hear a certain outcome – for example, in the case of HP, I’m sure they would have liked the comfort to hear from their external counsel that their actions were legal – it would serve as some evidence that they took some degree of diligence and could serve to mitigate consequences if it turned out governmental authorities differed. If he, on the other hand, refused, or proffered a legal opinion that it was fine but qualified with a recommendation not to take such actions, HP likely would have not been very happy with him. And everyone knows what happens when clients aren’t happy.

Its an unfortunate situation to be in. Particuarly in this case, where, at the end of the day, HP still, obviously, isn’t happy with him.