Articles by Fred Wilson
Some Thoughts On Checking ReferencesFred believes that reference checks are important when hiring people. He prefers speaking to references directly rather than emailing them as people are more likely to share negative details honestly over the phone. He finds it useful to speak to people who know the candidate well but are not directly involved in their work to get an unbiased perspective. Fred also thinks it is important to uncover both strengths and weaknesses of candidates to ensure they are a good fit for the role. He advocates a conversational approach to reference checks rather than a checklist of questions.
- VP Finance vs CFO
A VP Finance and a CFO have different roles and responsibilities in an organization. A VP Finance focuses on ensuring accurate and timely financial reporting, controls and processes, and managing the finance team. A CFO, in addition to the VP Finance's duties, provides strategic financial insight, manages major transactions like M&A and financings, and oversees investor relations. Fred recommends companies wait as long as possible to hire a CFO as they are rare and the role needs an interesting business and scope. Companies should hire a VP Finance first, as they are more common and can provide stability, then get a CFO when ready to grow and expand.
- What Happens When A Founder Is Fully Vested?
When a startup founder and CEO becomes fully vested in their stock options after four years, there are many issues to consider, including whether the founder is still the best person to lead the company and if they should receive a new equity grant. There is no standard practice and each situation is unique. A new grant is more likely if the founder owns a small stake and the company is doing well. However, founders with over 25% ownership rarely receive new grants. Fred suggests founders raise the issue carefully with investors and the board to find a compromise that works best for the company.
- The Double Opt-In Introduction
Fred proposes email introduction etiquette of asking both parties to opt-in before making an introduction. He and his friends receive many email introductions they do not want to follow up on. They either ignore the emails or respond in a way that is not ideal. Fred does not like responding that he does not want to meet but often takes meetings he does not really want. He believes asking for permission before making an introduction is good form and wishes more people would do it.
- Saying No
Very short article with a nice anecdote from Fred about the importance of being focused and saying no.
- M&A Issues: Price
Fred summarizes pricing in M&A: do the work upfront to get to a target price that makes sense to you, your senior team, your investors, and will make sense to the universe of buyers you want to target. Then figure out how to get multiple bidders to the table to get the best price. And make sure you want to sell the business before you go through with all of that. Because getting a great price for your business is not easy and when you've accomplished that, you'll want to be able to say yes comfortably.
- M&A Fundamentals
Fred explains what a merger is vs. what an acquisition is, the two types of payment (cash and stock), and the standard structures (full company purchase vs. asset deal).
- Some Thoughts On Burn Rates
Fred creates an interesting rule of thumb to calculate how much to burn: 1. Calculate how much your company valuation will go up by in the next year (which will be mostly driven by revenue growth) 2. Divide that number by 5
- Grit
This article is a powerful endorsement for the book Grit by Angela Duckworth. Fred states that: • Some people have grit and others don't; for those that do, there are ways to recognize it • Grit is more important than talent in many cases
- MBA Mondays: Revenue Models
Fred crowd-sourced a somewhat exhaustive list of revenue models, and digs into each one with its own article: • Advertising – the service is free to use, marketers pay to reach your users via advertising • Commerce / one-time transaction – sell something to your users, keep some or all of the proceeds • Subscription – charge your users monhtly or annually for the opportunity to use your service • Marketplace / Peer to Peer – connect people together in a network, take a small piece of the activity that ensues • Transaction Processing – settle transactions and take a small piece of the transaction for doing so • Licensing – charge users once upfront for the opportunity to use your technology • Data – sell the data your service generates
- DIY vs Delegate
Fred provides practical tips on how early-stage founders can get better at delegation, such as: ask investors and other founders for help when you hit 50 team members, and hire a "utility infielder" as your first business hire.
- Planning For Next Year
Fred uses his vantage point of seeing annual planning processes across portfolio companies to provide 6 key tips, covering timelines, collaboration, where strategy adjustments fit in, and how many big bets to make.
- What A CEO Does
While a CEO can do more than these, Fred identifies 3 skills a CEO must do well: 1) Set the overall vision and strategy of the company, and communicate it to all stakeholders 2) Hire and retain the best talent 3) Make sure there is always enough cash in the bank