Sometimes, companies must take a leap of faith and do something radical to slice through the competition. ‘Free’ has been a successful business model on the internet (look at Google or Facebook) but in the B2B market, it is rarely used. It is counter-intuitive since you are not selling directly, but the idea is to grow the user-base dramatically regardless of whether any of your customers become paying customers. If you grow the user-base large enough, you become a big player in the market and your competitors become scared. If you do end up growing to have the widest user-base, you may end up having the highest sales in the end since free users may grow and upgrade to the paid version. If you have the most widely used tool, you’ve got a name up there with the tool with the highest sales. With increased visibility, you have increased chance of a buyout or liquidity event. So never underestimate the value of Free.

Liquidity events (buyouts, mergers, IPOs) are important to VCs. They are when the investors (VCs or angels) and the cofounders get to cash out. Phil Black discussed the True Ventures Term Sheet and we compared it to others in the industry. The ‘term sheet’ establishes the terms of how the investment buys stock in the company, and, among other purposes, sets the rules for how the VC gets paid back at a liquidity event. But reaching liquidity events aren’t the only goals of VCs. There is more meaning and value than just pumping money in and spinning it off after 5 years to cash out. There is social, economic, and environmental value from the innovation that new companies bring to the world. I had a long conversation over lunch with Roy Russo, Loopfuse Cofounder, about the goals of VCs and the reason he choose True Ventures investment over another player on the block. The terms are really important. Some VCs will try to mold your company into their format, at their location, with their chosen CEO and management, with a LOT of their money, in exchange for a LOT of their ownership, control, and shareholder priority. True Ventures has a different approach to the game, Roy said. True wants your company to stay true to is roots, true to its founders, and true to its core values and mission. True did not force Loopfuse to change locations or hire people of their choosing, or change its culture or values. True puts in the right amount of money, not too much money to take as much ownership as possible. With term sheets, the fine print really does define the future of the company. It is important when choosing investors to ask whether the investment will allow you to stay true to yourself and true to your company.

Jared Kim who created WeGame is a true entrepreneur. His story convinced me that you are born an entrepreneur. His story of being a top golfer in China, then dropping it, starting a business, dropping that, and then coming up with an idea, getting a term sheet after uttering one phrase, and then getting an investment from True at age 19 is truly remarkable. Being an entrepreneur is all about being fearless. One has to be fearless in taking on the competition, managing a team of people, and diving into the unknown.
On the same token, being an investor is all about intuition. Naval sensed the fearlessness and confidence in Jared and didn’t need more after hearing “I want to make the YouTube of gaming”. So did True. It doesn’t matter how young you are or how much experience you have, its about whether you have the will to win. If you can build a better product and get it in the hands of everyone, then it doesn’t matter whether you are 15 or 50. We should all take a lesson from Jared’s story and never assume that no one will listen if you are too young.

Desperate to get a break from the computer screen and home, I impulsively agreed to go a on 4 day whitewater river trip with some friends from Brown and Colorado. I brought along my Clif Bar book, our assigned reading for the week. While on the river banks, it was very fulfilling to read about an entrepreneur who preaches about the outdoors and traveling the road less traveled. I was truly reliving Gary Erickson’s story in another world being an entrepreneur and wandering through the wilderness. In a way, both are one in the same. Entrepreneurs leave the world of certainty and consistency with conviction to explore the unknown and turbulent, yet far more exciting, world of starting companies. Its not that I just don’t want to have a boss; I crave the freedom to create and build something that is both new and mine. I am always weary of being thrown into the meat grinder that some people call capitalism. I would rather make my own meat processor that puts spices and cuts big pieces. I think of things from the view of a painter. How could I sacrifice my vision and creativity to toil away at someone else’s masterpiece? I’s rather dream the vision and paint the most beautiful painting there is!

It is truly an honor to join True Ventures for the TEC 2010 program. After hearing from Om Malik and the other True Partners, it is clear that True Ventures is on the cutting edge of VC industry. True is not like any other VC, it is the master of the ‘lean’ startup. By investing the right amount of capital, True has been able to grow a ton of companies in a rather short period of time even when the economy was in the hole. True believes in simple and fair term sheets and being the first investor. True was to be there at the start and is extremely mindful of culture. Culture is what inevitably shapes the success of a company and a founder must be able to stay true to its culture. True also maintains its own unique culture, being the envy of many old traditional VC firms.
True Ventures is definitely positioned for the future. Investing early in companies that represent the trends of the future is more than a prudent strategy. The last 10 years have made it a lot less expensive to start a technology company. The VC industry must also take this into account and invest accordingly. Nowadays, unlike 15 years ago, it is much better to invest $1 million in 10 companies than $10 in one. The technology scene has changed and True is one of the only VC firms that has taken this into full account. When it comes down to it, it’s not the money that matters, it’s about building great companies.