Trying and trying again.

Higher Resolution Fundraising in a Founders’ Market

“Markets always evolve towards higher resolution.” -Paul Graham - High Resolution Fundraising

I’d call this quote incomplete.  Markets evolve toward higher resolution until the return on increased resolution is no longer worth the effort to achieve it.  PG argues that “different terms for different investors is clearly the way of the future,” but that seems to be the way of the past as well, except in the past such differentiation was reserved for sophisticated investors with larger checkbooks and a more exclusive Rolodex.  With the rise of social networking and entrepreneur-oriented tools like Angelist, VentureHacks and TheFunded, the early-stage fundraising market is now sufficiently transparent to justify the work required to raise money on differentiated terms in the early rounds.  But being easy to do isn’t a justification for doing.  

Capping convertible notes at different levels for different investors sounds great—what techie doesn’t love the chance to optimize?—but it may have significant negative consequences in later rounds, especially when things aren’t flying up and to the right. I can easily imagine an A round scenario where semi-institutional super-angels fight over valuation because of the strange dynamics created by a cap table filled with differently capped notes.  Suddenly, issues that were historically the bane of later-round financings are moving up the chain. Not good.  I’ve yet to meet the founder who says “man, what I’d really like to do is make this whole fundraising process more complicated and time-intensive!”  The more time you spend negotiating with angels over where their note’s cap sits relative to your other notes, the less time you’re spending on your product.

What I think it comes down to is this: it’s a founders’ market (at least at YC).  As such, founders get to dictate terms to their angels, including such contrivances as “high resolution” caps.  But I hardly believe that high resolution financing in the angel round is here to stay.  It will be here for a while, sure, and then it won’t be a founders’ market anymore and the pendulum will swing the other direction.  At that point, we’ll be left with a collection of founders searching for their next round while trying to placate a host of debtholders who all have a slightly different idea of what an optimal term sheet looks like.  And don’t kid yourself about the lack of control rights in these converts.  If there’s money, there’s control.  What we need isn’t higher resolution, it’s optimal resolution.  I tend to think that differentiated caps go too far, overly complicating what should optimally be a clean infusion of cash at a risky phase of business by a wealthy investor to a trusted entrepreneur.  

As an attorney, I always seek to push contractual complexity into the future—I know that each additional term I put in a contract will result in 50 headaches I could never have predicted.  Clean terms, clear language, aligned incentives: that’s always the goal.  Why mess with that before it’s absolutely necessary?  Of course, I’m very new to this.  I could easily be wrong.

How to Move A Blog from TypePad to Tumblr (Spoiler Alert: It Sucks)

I spent an embarrassing amount of time in the last few months porting Roger’s blog (http://informationarbitrage.com) from TypePad to Tumblr.  As much as I love Tumblr, this was not an easy process.  My eventual workflow was:

Blog Content

• Export from TypePad
• Convert Typepad file to Blogger format (note: although this app claims a 1MB file size limit, it handled my 6MB file just fine)
• Create a Blogger account and upload the converted file
• Import from Blogger to Tumblr via a 3rd party site (thank you Terry Hung!)
• Use some nifty scripting hacks cobbled together by the team at IAV/Kinetic to crawl informationarbitrage.com, collecting a txt file of every link on the site
• Convert the txt file to csv
• Create a job on Mechanical Turk that asks Turks to go to a given link (the old TypePad link) and note the post title and date. Then, using Google or the Tumblr archive feature, search for the post on our Tumblr domain with the same date and title, and then feed us the corresponding URL.  We paid $0.10/link, which given the uncanny speed of the MT workforce amounted to an effective hourly rate of $18/hour.  It took all of 3 days to map ~600 links.  For those who are interested, here’s what the HIT (human intelligence task, in MT-speak) looked like:
• Next, do some data munging to make sure the newly created linkmap (TypePad > Tumblr) is clean
• Make friends with the (current and former) Tumblr team. This was by far the easiest step. those guys/girls are all sorts of awesome.  On that note, try GroupMe (like BBM, but cross-platform) and Instapaper (take your unread web pages with you)
• Ask said friends to bulk upload a file consisting of some 614 redirects
• Breathe out

Blog Comments

Disqus was easy enough. Luckily, they had just released some migration tools right around the time I was doing this (although the documentation was not at all clear enough to a non-programmer like myself).  Of course, I ran into problems, but Daniel Ha and his team swooped in to save the day.  But what about the older, pre-Disqus comments?  Well, if you have a way to do that, please, please, for the love of god, let me know.

Parting Thoughts

• While I think it’s short-sighted to choose your blogging platform by ease of import (sorry Posterous), I wouldn’t fault someone for not wanting to go through this hellish process.  I love Tumblr.  I think Roger’s enjoying it too.  But man, this just sucked.
• It’s possible that Tumblr consciously de-prioritized building a tool to import old blog content. Their platform is decidedly different from traditional blogging, and encouraging people to pipe in their old content might also encourage them to continue blogging in their traditional manner.  If that’s the case, I sympathize with the motivation, but I think they’d get desired behavior and customer acquisition if they offered the tool wrapped in fun documentation explaining how Tumblr is different and why that makes it so engaging.
• In adding legacy TypePad comments to older posts, I came across an incredibly frustrating bug in Tumblr.  There is an undocumented (so far as I can tell) size limit on text posts.  When you try to post an over-length post, you don’t get a warning, you get a heart attack, because Tumblr will simply delete your body text and save the post as empty.  Hitting the back button will not recover your text. It’s just gone.  This isn’t a CSS/HTML issue; it occurs on the default Tumblr theme.  Nor is it a browser issue; it occurs on Safari, Chrome and Firefox alike. Here are some screenshots to demonstrate: