One of our investors recently mentioned to me the difference between “orthogonal” and “linear” thinking.

By the former, I think of it as: multi-dimensional, creative, having disruptive potential. By the latter, I think of: logical, incremental, thoughtful (but almost obvious).

I think entrepreneurs are predominantly orthogonal thinkers. My partners and I often mention how entrepreneurs truly do see the world differently. They see the same pieces of information that the rest of the world does, but for some reason, they’re able to project further into the future and see potential that others cannot.

The challenge with backing entrepreneurs is that the orthogonal point of view can often create blind spots and irrational exuberance  So, as a VC, you have to work hard at enabling entrepreneurs to “go for it,” but at the same time, give advice as to when you think they’re going off the reservation.

Believe it or not, VCs have very little day-to-day power. We can influence people and situations, but we aren’t at the companies every day. Sure, we can give up on companies and force a shut down, or we can fire people (I call these the “nuclear options”).  But, you in practice rarely use those options without the entrepreneur’s consent. There needs to be a lot of trust there in the relationship.

It’s ironic, but venture capital means you have power but that you rarely use it. You really in the end have to let entrepreneurs do what they want. And, if they fail, you have to give a helpful ear and give them a hand. And, when they succeed, you hope they stay humble and hungry.

We had our first annual New England VC Association (NEVCA) awards ceremony (called The NEVYs, about which I wrote previously). It was insanely joyous. I have a hangover but am still smiling.

I love working with people on ideas that matter. It’s awesome to see teamwork originate and execute such a fantastic event.

I remember a brainstorm session during which C.A. Webb, Chris Sheehan, Stephen Kraus and I discussed what events we could do for the start-up ecosystem. Frankly, I didn’t do much. But, I did voice a strong opinion that it would be lame to do anything formal, stuffy or boring. I was hoping we could do something really unifying, energizing and fun.

So, Stephen came up with the idea for an awards ceremony and a team comprised of C.A., entrepreneurs and VCs worked together. Here’s what C.A. wrote earlier today to the NEVCA Board:

Thanks to Steve for developing and pushing for the idea and leading the committee over these last 4 months. To [Mike Troiano] for his expert crafting of the message, design and strategy. And to [David Beisel] for contributing great thinking to our committee. These guys put in some serious time to make it great–as did Fred Destin, Michelle Dipp and Bob Hower in particular so please thank them when you see them. And I continue to marvel that [Casey Hogan] is just 21 and in college…we could not have pulled off this even without her.

I’m sure dozens of people worked on this project, and I’m sorry that I don’t know everyone by name. And, amazing sponsors helped support this event (see below).

I love this town. I love our start-up community. Last night, we as a group of entrepreneurs, VCs and service providers, truly were One Team.

I often tell our portfolio company founders the following: at Kepha, we’re playing a 20-year game.

I think having a long time horizon affects what we do, why we do it, and how we behave. It sets a very high bar to which we aspire. It’s not always easy, and we don’t often hit those ideals. But, we certainly try to.

Here’s how a long time horizon affects how we work: we’re OK if entrepreneurs fail, as long as they don’t lie to us. We know that most VC-backed companies do poorly. With its 33% success rate, VC is a lot like baseball, as I’ve written in the past. It’s all about home runs. So, we’re OK if entrepreneurs “strike out.” But, what we want to do is have earned the right to work with them again.

In one example, we worked with an entrepreneur on two seed ideas, neither of which got anywhere. But, we introduced him to a third opportunity because we really believed in him. That one is now doing well. Eric and I identified this person as someone with whom we want to work for 20 years. The first two seeds failed because of the market and not because of any shortcomings in the entrepreneur.

Having a long-time horizon also encourages us to say the hard things, rather than keeping quiet and writing off an entrepreneur in our minds.

For example, I yesterday had a tough conversation with one of our founders. I told him that we thought his company’s progress seemed slow, but that we wanted to help. That tough topic led to a very honest and very valuable exchange. I said that since we wanted to work with him for another 20 years, we needed to tell him what we really thought. It ended up being a very awesome conversation, and I feel more aligned than ever with this start-up.

Having a long time horizon can make for tough situations, but it’s how I want to live my life.

Pre-talk prep with Jamie (Sheryl’s friend) & Sheryl

C.A. Webb kicks us off (photo courtesy of Michelle Wu)

What a great talk today by Facebook Chief Operating Officer Sheryl Sandberg!  If you missed it, you can catch the whole video at the bottom of this post or by clicking here (please listen to C.A. Webb’s opening comments, and feel free to ignore my brief appearance).

The New England VC Association hosted the event, and as I’ve written before, C.A. made it happen.  500+ folks were packed in the room (unfortunately, another 540 folks were on the wait list–this event sold out in 8 hours!).  There was a ton of eagerness and energy there when I walked in.

I was really impressed with Sheryl’s message and how she delivered her points with insights and humor.  As I’ve written in the past (see here), the lack of senior female business leaders is an issue that concerns me, and Sheryl really laid out the root causes. I’ve read her book, but it was really awesome to hear her speak in person.

Another point: it was a great day for the entrepreneurial community.  So many people pulled together to make this event:

• C.A. raised the money to underwrite the event, and partnered with MITX and TechStars. She attracted a great list of sponsors in just one morning of intense phone calls after getting off a flight from the U.K.: Silicon Valley Bank, Cooley, KPMG, Hubspot, Brightcove, BzzAgent, Communispace, Digitas, InkHouse Media + Marketing, Nanigans and Pearl Meyer
• Some individuals agreed to financially “back stop” the event, in case the fundraising fell short
• Brightcove streamed the event live

It was a fun, energizing and uplifting morning.

Thank you, Sheryl, for squeezing us in as one of the 20 speeches you’re giving in 12 days!

Jeff Bussgang wrote a great post about grit. It’s a word that I’ve been thinking about since reading it.

It’s an important topic, as I’ve seen that the teams that persevere the most tend to do better. Having grit does not guarantee success, but it certainly ups the odds.

I’ve also seen many examples of personal grit. For me, “grit” is:

• My friend Andrew Lau and his wife, who are getting up a few times each and every night to nurse their newborn
• Facebook COO Sheryl Sandberg giving 20 speeches in 12 days, and then, flying to Europe to do the same (she is speaking this Friday in Boston; her speech starts 8.30 am ET, and there will be a live stream here)
• Our founders at OwnerIQ, led by Jay Habegger, who overcame many skeptics, including a few on his Board, to pivot the company and is now on a roll
• People battling addictions, anxiety disorders, depression, discrimination and difficult childhoods

The more I think about it, the more I think we all have been, are, or will be in situations that require grit.

Challenges are inevitable. It is how we choose to respond to them that will make all the difference.

Fred Wilson has another awesome post today about how hard it is to create real companies.  He wrote:

I have said many times that early stage VC is a lot like baseball, if you get a hit one out of every three times, you are headed to the hall of fame. And if I look back over my career, and also over the track records of the firms and funds I have helped manage, that is pretty much the hit rate I have seen.

It’s a very honest post, and something we in VC know. Most of our companies do not produce great returns, and that’s true for all, including VC super-stars.

Here are sobering data from Cambridge Associates. It shows IT & digital media start-ups from 2001 to 2011 and their multiples.  Yup, over 60% of them don’t return capital. They’re losses. Just 7% of companies generate >5x returns.

Fred’s comments and this data match what I’ve heard from many of our investors: the “loss ratios” for the good and bad VCs are the same. The difference between the groups is that the good ones have some super-winners.

So, VC is not about minimizing losses. It is about working with great entrepreneurs who can overcome obstacles and, in the end, create real businesses. In other words, you have to be really “go for it.” If not, your returns will suck.

Similarly, entrepreneurship is also hard. Creating real companies is usually a grind. It’s one thing to build a cool product. It’s another thing to build a real company.

There really is no free lunch.

I wrote a few days ago about Passover and how it’s an important story about freedom and one that I wanted to share with my children (more here).

Though I’m not Jewish, the “feast of freedom” and its recounting of sacrifice and emancipation is a story that my family, in a smaller way, experienced. In particular, I wanted to let my children know that freedom is not free and past family members paid a high price.

So, I made a special brisket recipe, and we talked over the meal.

I later received the following email, from a non-Jewish friend. After reading my blog post, he too decided to cook a special meal and share stories from the past. I found his story very moving, and so, I want to share it:

Chag Sameach! Decided to start our own Passover tradition…. Over dinner, I shared with the girls my story of how my parents and their families fled China to Taiwan, losing everything in the process.  And then how my parents sacrificed everything to bring May and me to America, to afford us the opportunities that this GREAT country offers. I told them about how we were effectively poor (sleeping on sheets on flooring, because we didn’t even have mattresses, much less a bed); how I was thrust into school despite not speaking nor reading a single word of English; how learning was held important above all else; how my parent’s first thought was always the future of their children.

I want my daughters to understand, in a similar way to how Jews want their children to understand, the importance of tradition, of family, of escaping and traveling to new lands for freedom, for opportunity, and for the future of their children.  Fighting back the tears, I managed to get it all out.  And I hope that this will be a tradition we repeat every year on Passover.  To my mom and (late) dad — thank you.

I hope that you too are celebrating freedom and remembering family members from the past who gave you freedom.

I meet with many people, but a meeting last week really stays with me.

I met up with a young entrepreneur, who had started a company and is now working on a new idea. His previous company has gone through some ups and downs. They received great venture funding and were off to the races.

The company received an early offer to sell, but the “more senior” founder didn’t want to exit. Since then, their space has been flooded with competitors. At the same time, the company has gone through some culture issues. So, the early group of founders and developers have all left.

It was a pretty dramatic story to hear.

But, what stays with me is this entrepreneur’s sense of “authenticity.” Now, I’ve blogged about this in the past (here and here). I define “authenticity” for me in this way:

• Living life in a way that is real and meaningful in all areas and at all times
• No spin, no masks
• Being the same person at work as you are at home
• Living your values consistently

It took me many years to get to that definition, and, to have the courage to strive for it and not compromise. But, this entrepreneur, in his early-20s, has already figured it out.

He talked about how he had worked at a private equity firm one summer, and in spite of the huge dollars they dangled in front of him, he declined their offer for a full-time job.

He talked about the decisions that he made at his first start-up. It was clear that he was willing to buck conventional wisdom, but they were based on deep values, and not just well thought-out plans.

Also, his personal authenticity made him unpopular with some at his start-up. This person said that it put him in some lonely situations. He was in fear at times. But, he was cool with it all. He felt he did the right things in the end.

It was a great meeting. How do you define personal authenticity?

You hear a lot as a VC. Often, conversations turn to family backgrounds. Very often, founders talk about their families’ past journeys for, and towards, freedom:

“My father’s family bribed their way out of Poland when the borders closed. They eventually made it out of Europe. My Dad returned to fight as a member of the Polish Free Army.”

“I’m one of eight children. We left Vietnam and our family separated into two groups when we got to America.”

“I grew up in a prisoner camp in Cambodia under the Khmer Rouge.”

These are stories to which I can relate. We’re an ethnic Chinese family from Indonesia. There is a lot of discrimination and violence there. So, it was one reason we left for the U.S.

So, as we approach Passover, which really is a “feast of freedom,” I think of all those who risk everything to get out. I think about Israel, thousands of years ago. I think of Haitians, trying to leave crushing poverty. Sudanese, who are shot at, on their way to Church.

I’m making a brisket this morning for dinner (see above photo). We’re not Jewish and I know that the feasting doesn’t start until Monday night. But, I want to do something to tell my children about their own family’s journey towards freedom, and how in that same quest for liberty, we are united with our Jewish friends and all immigrants.

I also want to tell my children that freedom is not free. Someone, at some time, sacrificed a great deal to achieve freedom for his/her family. To me, liberty truly is precious.

Chag Pesach Same’ach!

I’m working closely with some founders as they seek to add a co-founder. We’ve been interviewing candidates together and just finished a call to review the folks with whom we’ve met.

The founders talked about one person whom they like but with whom they couldn’t make the numbers work. This person is divorced. His salary needs are high because he maintains two homes and also is on the hook for child and ex-spouse support. So, a start-up salary unfortunately doesn’t work for him.

It made me wonder about “windows of opportunity” for entrepreneurship.  I know some founders who are in their 20s and have very low cash burn rates. They’re in a great position to start a company. I also know of older founders who have some financial cushion which they can use to develop a new company idea. They too are in a great position.

So, we often hear about these types of entrepreneurs: the younger and the older. But, is there another segmentation: single, married and divorced? I don’t have the answer, but does divorce prevent many people from starting companies?

It’s true. The New England VC Association is about to party.

During a small rump session, Steve Kraus, with a gleam in his eye, proposed awards with voting to come from the entrepreneurial community. After hooting from the gang, we talked about The Dundies from “The Office” TV show (see above). And, everyone was enthusiastic about doing something different and fun.  NEVCA Exec. Dir. C.A. Webb, as usual, jumped all over it. So, we’re off to the races.

Here’s the event description:

No squirming in your seat or polite clapping here.  The NEVYs are a night for non-stop cocktails, awesome food and a killer crowd of hard charging entrepreneurs and VCs who are building the next generation of companies that matter–right here in our back yard.

So, come and hang.  Vote for the best VC, best entrepreneur, etc. here. And, buy a ticket here for the May 1 event (use promo code “earlyadopter” to save $10).

Should be a fun time. I don’t know about you, but I can’t wait for May Day.

Well, it’s Saturday morning. The sun is shining brilliantly. It’s a welcome change, for the east coast has had winter snow storms during each of the past three weekends.

I grabbed the above morning croissant and cappuccino at this awesome coffee place in my town.  As I read from my iPad, I noticed that the place filled up quickly, which is unusual.

And, people were smiling and chatty, even with strangers. Then, I wondered: is this all because of the sun?  IMO, I think it has a lot to do with it.

Then, I wondered: does sunshine and the good ensuing mood foster innovation? I think starting a company is easy, but making it successful is really hard. There are many joys, but also, many dark moments.

So, I wonder if places like Silicon Valley have a lot of innovation because the weather creates a mood of optimism? Or, is the rate of innovation seasonal in places like Boston, NYC and Seattle? I’d be interested in any data, if people have run across any.

In the meantime, hope you’re enjoying a sunny Saturday.

I’m really happy to write that Facebook Chief Operating Officer Sheryl Sandberg is coming to Boston to speak. The New England VC Association (NEVCA) is hosting the event (more details here). We found out that Sheryl was going to be in town, and so, we asked if she could spare some time.

NEVCA announced the event this morning.  As of 4 pm today, 95% of the tickets already have sold.

Sheryl will be speaking mostly about her new book and there will also be a Q&A session. As I’ve blogged in the past (and have linked to her TED talk there), she has an important message to deliver: why aren’t there more women executives and entrepreneurs?

Also, many people don’t realize that NEVCA Exec. Director C.A. Webb did an incredible amount of heavy lifting in just a few days while on vacation in the U.K.  She got the NEVCA board’s approval, secured sponsors, found back-up funding, worked with Sheryl’s team, and pre-sold a bunch of event tickets.

Look out, Boston: C.A. Webb is in town!

Congratulations on being selected!

I’m really excited to meet you all. Katie, Reed and Rohit do such a great job. Members of our firm have been Mentors since the program’s inaugural class, and we look forward to working with you.

After seeing other entrepreneurs progress through the program, here are 5 suggestions:

• Be honest. Raising VC money may not be the right thing for your company at this time. Avoid the false impression that if you have not locked up VC funding by Demo Day, you suck
• Seek authenticity. Chemistry with Mentors is critical. You must find someone with whom you can be totally honest and have really meaningful conversations. They can’t be mentoring sessions disguised as fundraising pitches
• Find an alum. Critical. Find someone from a prior TechStars class. Ask for lessons learned. Find best practices
• Make Mentors work. Have a specific “ask”. You want an intro to X. You need help with Y. Do not be shy
• Understand the varying VC strategies. Multiple approaches work in VC. But, they differ.  And, you have to find the one that best fits your needs at that time. More at “A VC’s Strategy and ‘Kill Rate’”.  To better understand VCs, you might also find helpful: “How Are VCs Paid?”.  For one person’s view on raising VC money, here is a blog series here.

I look forward to meeting you. Congrats again!

Another busy day today.

One of my morning meetings was with an entrepreneur I know. I read his materials before he arrived and sent him an email saying we were unlikely to be a funding source, as we don’t know that space (selling hardware through waste management companies to hospitals). But, I said I was happy to meet him.

As I’ve written in the past, I try to give a clear answer when I meet with an entrepreneur. In this case, I frankly had reservations. He is someone I know and was referred to me by someone whom I know very well. I was worried about insulting him or our mutual friend.

The first few minutes, he did what most good entrepreneurs do: he tried to convince me otherwise. I heard him out, but again, told him we weren’t a fit. And, then, something magical happened. The conversation became very personal and very real. Once he got out of “sell mode” and I got out of “buy mode,” we had a very authentic discussion.

Also, we brainstormed about some options, and I think we ended up with some interesting ideas regarding next steps for him. He also shared some touching stories about his son, as well as a summer gig he did in Poland in 1974, during which he met the future Pope John Paul II, back when he was a largely unknown guy.

So, it was a good meeting.